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News and Information Article
ST. PAUL, Minn., June 30 /-FirstCall/ -- Deluxe Corporation
(NYSE: DLX) will record a pre-tax impairment charge of approximately $45
million, or $0.56 per diluted share, in the second quarter of 2006 related
to the abandonment of a software project.
The Company was investing in a project to replace major portions of its
existing order capture, billing and pricing systems within the Financial
Services (FS) segment and a portion of the Small Business Services (SBS)
segment. Business complexities have led to cost overruns and project
delays. The Company is developing a plan to simplify its business model and
has determined that the current software project will not meet future
business requirements and customer needs in a cost-effective manner.
"Our decision to cancel this project was an extremely difficult one to
make," said Lee Schram, CEO of Deluxe Corporation. "It is clear that in
order to continue meeting the needs of our customers, we must simplify our
business processes before we make further large scale investments in
automation. We also need to free up resources so that we can pursue other
important initiatives that will help us meet our financial goals more
quickly."
The Company also announced that it is lowering its earnings outlook for
2006. Earnings for the year are now expected to be in the range of $1.37 to
$1.47 per diluted share. With the impairment charge, the Company expects to
report a second quarter loss ranging from $(0.09) to $(0.11) per diluted
share. The earnings shortfall, excluding the impairment charge, is expected
to have a corresponding impact on operating cash flows for the year.
The Companys updated outlook reflects the impairment charge,
performance shortfalls in each segment, as well as initiatives to improve
its cost structure. "We are extremely disappointed in how the second
quarter is coming in," said Schram. Going forward, the Company said SBS is
focusing on refining its business model, improving how it goes to market
and rationalizing the level and pace of investment. FS is focusing on
simplifying its core business model and reducing its cost structure while
investing in new products and services. In the Direct Checks segment, the
Company plans to modestly increase its marketing investment. Lastly, the
Company said it is focusing greater efforts on cost management and pursuing
aggressive reductions in its shared services cost structure, some of which
are expected to take hold later this year.
"Even with these challenges, we are excited about the opportunities
ahead of us. We have market leading brands and a great group of people
focused on and committed to succeeding. At this point, it is all about
improving the core business, proving the SBS strategy, and executing and
delivering against our commitments," said Schram.
On July 27, 2006, the Company intends to release its financial results
for the quarter ended June 30, 2006 and will provide additional commentary
about its full year outlook and performance improvement plans at that time.
In addition, the Company will hold an open-access teleconference call to
review the quarters results and outlook. The dial-in number for the
teleconference call will be announced shortly before the release of the
Companys second quarter financial results.
About Deluxe
Deluxe Corporation, through its industry-leading businesses and brands,
helps financial institutions and small businesses better manage, promote,
and grow their businesses. The Company uses direct marketing, distributors,
and a North American sales force to provide a wide range of customized
products and services: personalized printed items (checks, forms, business
cards, stationery, greeting cards, labels, and shipping/packaging
supplies), promotional products and merchandising materials, fraud
prevention services, and customer retention programs. The Company also
sells personalized checks and accessories directly to consumers. For more
information about Deluxe, visit http://www.deluxe.com .
Forward-Looking Statements
Statements made in this release concerning the Companys or
managements intentions, expectations, or predictions about future results
or events are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements reflect
managements current expectations or beliefs, and are subject to risks and
uncertainties that could cause actual results or events to vary from stated
expectations, which variations could be material and adverse. Factors that
could produce such a variation include, but are not limited to, the
following: the inherent unreliability of earnings, revenue and cash flow
predictions due to numerous factors, many of which are beyond the Companys
control; declining demand for the Companys check and check-related
products and services due to increasing use of alternative payment methods;
intense competition in the check printing business: continued consolidation
of financial institutions, thereby reducing the number of potential
customers and referral sources and increasing downward pressure on our
revenues and gross margins; risks that our Small Business Services segment
strategies to increase its pace of new customer acquisition and average
annual sales to existing customers, while at the same time increase its
operating margins, are not successful or are delayed; performance
shortfalls by the Companys major suppliers, licensors or service
providers; unanticipated delays, costs and expenses in the development and
marketing of new products and services; risks and costs associated with the
Companys growth initiatives; and the impact of governmental laws and
regulations. Our forward-looking statements speak only as of the time made,
and we assume no obligation to publicly update any such statements.
Additional information concerning these and other factors that could cause
actual results and events to differ materially from the Companys current
expectations are contained in the Companys Form 10-K for the year ended
December 31, 2005.
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