Deluxe Corp. has a market cap of $1.04 billion; its shares were traded at around $20.46 with a P/E ratio of 7.7 and P/S ratio of 0.8. The dividend yield of Deluxe Corp. stocks is 4.9%.DLX is in the portfolios of Bill Frels of Mairs & Power Inc. , Murray Stahl of Horizon Asset Management.
Highlight of Business Operations:During April 2010, we acquired all of the outstanding stock of Custom Direct, Inc. (Custom Direct), a leading provider of direct-to-consumer checks, in a cash transaction for $97.9 million, net of cash acquired. We funded the acquisition with our credit facility. The results of operations of this business from its acquisition date are included in our Direct Checks segment. We expect the acquisition of Custom Direct to contribute to our strategy of optimizing cash flows in this segment. During 2010, the acquisition is expected to generate approximately $60 million in revenue and more than $15 million of operating cash flow, including cash tax savings of approximately $10 million from certain acquired tax attributes, although we have not completed our analysis of these income tax positions. We expect the acquisition to be neutral to earnings per share in 2010, including $2.5 million of severance benefits and other transaction-related costs, as well as approximately $12 million of acquisition-related amortization.
As discussed in the Management s Discussion and Analysis of Financial Condition and Results of Operations section of the 2009 Form 10-K, we are pursuing aggressive cost reduction and business simplification initiatives which we expect to collectively reduce our annual cost structure by at least $325 million, net of required investments, by the end of 2010. The baseline for these anticipated savings is the estimated cost structure for 2006, which was reflected in the earnings guidance reported in our press release on July 27, 2006 regarding second quarter 2006 results. We estimate that we realized approximately $260 million of the $325 million target through the end of 2009, and we are currently on track to realize the remaining $65 million in 2010. To date, most of our savings are from sales and marketing, information technology and fulfillment, including manufacturing and supply chain.
We anticipate that consolidated revenue from continuing operations for 2010 will be between $1.397 billion and $1.405 billion, as compared to $1.344 billion for 2009, including approximately $60 million of revenue from the Custom Direct acquisition. Excluding $12.1 million of the contract settlement executed in the third quarter of 2010, we expect Small Business Services revenue to be roughly flat compared to 2009 as declines in core business products are expected to be offset by benefits from our e-commerce investments, price increases and growth in business service offerings, including 2009 acquisitions. In Financial Services, excluding $12.5 million of the contract settlement, we expect the revenue decline percentage to be in the mid to upper single digits. We estimate that the decline in our check orders will be approximately eight percent compared to 2009, given the increases in electronic payments and the continued weak economy. The eight percent estimated decline in our check orders may not necessarily correspond to our reported decline in orders, as this estimate excludes the impact of client additions and losses. We expect these declines to be partially offset by a second quarter 2010 price increase, the amortization of a past contract settlement and continued contributions from non-check revenue streams. Direct Checks revenue is expected to increase approximately thirty percent driven by the Custom Direct acquisition and improved reorder volumes stemming from past quantity reductions, partially offset by check usage declines and the continued weak economy.
We expect that 2010 diluted earnings per share will be between $2.93 and $3.00, which includes a $0.31 per diluted share impact of the $24.6 million third quarter contract settlement, as well a $0.10 per share impact of a first quarter charge to income tax expense due to recent health care reform legislation and 2010 restructuring-related costs. Earnings per share for 2009 was $1.94, which included a $0.50 per share impact of impairment charges, restructuring and transaction-related costs, and gains on debt repurchases. We expect that continued execution of our cost reduction initiatives will be offset by the revenue decline, excluding the Custom Direct acquisition, continued investments in revenue growth opportunities and increases in delivery and materials rates. Our outlook reflects a merit wage freeze in 2010, leaving base salary levels consistent with 2009. We estimate that our annual effective tax rate for 2010 will be approximately 34%, excluding a first quarter charge of $3.4 million related to recent health care reform legislation, compared to 35.9% in 2009.
We anticipate that net cash provided by operating activities of continuing operations will be between $220 million and $226 million in 2010, compared to $206 million in 2009. We anticipate that the increase will be driven by the third quarter contract settlement, cash flow generated by the operations of Custom Direct, stronger earnings and continued progress on working capital initiatives. These increases will be partly offset by higher performance-based compensation payments for all employee levels in 2010. We estimate that capital spending will be a little over $40 million in 2010 as we continue to invest in key revenue growth initiatives, complete automation of our flat check packaging process and invest in order fulfillment, delivery productivity and information technology infrastructure.
The increase in revenue for the third quarter of 2010, as compared to the third quarter of 2009, was primarily due to revenue of $24.6 million from a contract settlement executed during the third quarter of 2010 and a revenue contribution of $20.5 million from the acquisition of Custom Direct in April 2010 discussed under Executive Overview. In addition, revenue benefited from price increases in Financial Services and Small Business Services, growth in business services, and a favorable currency exchange rate impact of $0.9 million. The contract settlement revenue related to a contract settlement with a large financial institution that previously acquired one of our clients and recently chose to consolidate its check printing business with another provider. We had been producing checks for a minority portion of this client s customers. This business transitioned during the third quarter of 2010 and we received contract termination payments of $24.6 million, which were included in revenue in our Small Business Services and Financial Services segments. We expect revenue from a new contract acquisition which began generating revenue during the third quarter of 2010 will offset the revenue lost from this contract termination. Partially offsetting these revenue increases were lower order volume and continued pricing pressure when executing contracts with financial institutions.
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