Good day ladies and gentlemen. And welcome to the Second Quarter 2009 Deluxe Corporation Earnings Conference Call. My name is Keisha I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct the question-and-answer session towards the end of this conference. (Operator Instructions). I would now like to turn the call over to Terry Peterson, Vice President of Investor Relations and Chief Accounting Officer. Please proceed.

Thank you, Keisha. Welcome to Deluxe Corporation's 2009 second quarter earnings call. I am Terry Peterson, Deluxe's Vice President of Investor Relations and Chief Accounting Officer. Joining me on the call today are Lee Schram, Deluxe's Chief Executive Officer, and Rick Greene, Deluxe's Chief Financial Officer. Lee, Rick and I will take questions from analysts after the prepared comments. At that time, the operator will instruct you how to ask a question. In accordance with Regulation FD, this call is open to all interested parties. A replay of the call will be available via telephone and Deluxe's website. I will provide instructions for accessing the replay at the conclusion of our teleconference. Before I begin, let me make this brief cautionary statement. Comments made today regarding financial estimates and projections and any other statements addressing management's intentions and expectations regarding the company's future performance are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. As such, these comments are subject to risks and uncertainties which could cause actual future results to differ materially from those projected. Additional information about various factors that could cause actual results to differ from those projected are contained in the news release that we issued this morning and on the company's Form 10-K for the year ended December 31, 2008. In addition, the financial and statistical information that will be reviewed during this call is addressed in greater detail in today's press release which is posted in the News and Investor Relations section of our website, www.deluxe.com, and was furnished to the SEC on Form 8-K filed this morning. In particular, any non-GAAP financial measures are reconciled to the comparable GAAP financial measures in the press release. Now, I'll turn the call over the Lee Schram, Deluxe's CEO.

Thank you, Terry and good morning everyone. Yet another strong quarter and despite a very challenging economy, we were able to deliver on our financial commitments. We reported revenue in the middle of our expected range while adjusted earnings per share was above the high end of our range. Although individual segment revenues were inline with our outlook, we continued to experience greater weakness than expected in more discretionary products such as lower margin imaging, apparel, retail packaging products and full color while revenue in our higher margin personal check businesses came in close to the top of our expected range. We continued our strong execution against the cost reduction program, implemented spending controls and maintain a disciplined approach to deploying capital. We saw growth and loyalty, retention, fraud and security and new business services. We made further progress strategically and expanding our higher growth business services with the early July announcement of a definitive agreement to purchase Aplus.net's shared hosting customer base and the acquisition of MerchEngines adding small businesses and new technology to our already growing base and capability. We continue to prudently manage our company, closely monitor the small business and financial institution markets. Invest in future growth areas and focus on strong free cash flow generation, as we continue to transform Deluxe and execute on our turnaround plan. In a few minutes, I'll discuss more details around our recent progress and next steps. But first, Rick will cover our financial performance.

Thanks, Lee. Earlier today, we reported diluted earnings per share for the second quarter of $0.54, which included restructuring and transaction related costs of $0.03. Transaction related costs include customer migration expenses directly attributable to transferring customers from recently announced acquisitions on to our existing unified web hosting platforms in Hostopia plus direct professional services fees associated with the acquisitions. Excluding the restructuring and transaction costs, adjusted EPS of $0.57 was $0.06 favorable to the upper end of our outlook communicated in April. Revenue for the quarter came in at $332.1 million as the difficult economic environment continued to impact small business services, particularly in several of the more discretionary lower margin product lines. Revenues from our personal check businesses came in near to top end of our expectations. Operating margins for the quarter were well above our expectations with favorability coming from better than expected results in our cost reduction initiatives, favorable product mix and continued focus on spending controls. Earnings per share also benefited from a lower than expected tax rate given several one time benefits. Operating cash flow in the quarter of $22.9 million also exceeded our expectations due to benefit from working capital initiatives and the favorable operating results. In the second quarter of 2008, we've reported diluted earnings per share on $0.63, which included benefits from higher revenue levels and the associated margin flow through plus an approximate $0.11 per share benefit related to lower performance based incentive compensation expense. Companywide revenue was down 9% from 2008. Continued weakness in the economy, primarily in SPS as well as impact on our personal check businesses of declines in check writing and turmoil in the financial services industry contributed to the year-over-year reduction. Revenue from the Hostopia acquisition completed in August 2008, partially offset these declines. Gross…

Thank you, Rick. And I'll continue my comments with an updated prospective on where we are strategically positioning the company, then highlight each of our three segments and describe how the new acquisitions stood in close with the progress update on our cost take out program. At the enterprise level, our strategic intent remains the same; becoming the best at helping small business and financial institutions grow. We will continue to target three customer segments including small business, financial services and consumers where we offer a suite of lifecycle driven solutions including personalized printed products and our growing suite of business services including logo design and payroll, all designed to help helped customers operate their business. Fraud monitoring and security solutions to protect our business partners and their customers and hosting web promotional loyalty, market intelligence, business networking and e-commerce services to help our customers grow their business. Over the strategic period, we see the revenues mix of our business changing from 2008 65% checks, 31% business products and 4%, business services to approximately 45% checks, 30% business products and 25% business services. While we plan to remain focused in our strong check businesses, the overall mix of checks will change due to their expected continuing secular decline and growth in business services. Overall, growth will come from fulfilling underserved needs by leading with higher growth business services using a scalable, unified, web enabled platform as a cornerstone of our strategy to drive a greater portion of revenue from annuity based services. This unified services delivery platform will better position us to provide a pull through for printed products including checks, forms, business cards, full color, imaging and other printed products. We also aim to help financial institutions grow core deposits and improve customer loyalty and retention. Finally, we will…

(Operator Instructions). Our first question comes from the line of Charlie Strauzer, with CJS Securities. Please proceed.

Hi, good morning.

Hi, Charlie. Good morning.

Hey, just a couple of quick questions. One is, when you talk about 6% decline of checks, what are you kind of assuming for kind of volume, underlying those numbers there?

That is the expected unit decline, Charlie, is the 6 to 7%.

Got you. So I was sure of decline -- that's a volume decline number.

That is the volume.

Order volume decline the way we look at it.

Got it. Okay. And how can we extrapolate the rate and sales decline number for when we kind of look at those per segment there?

The best way to look at it, you got to remember, timing all plays into this and early in the year we announced that we're going to have price increase and then, now we're basically telling you, that's going to start here in the third quarter. So you got to look at timing of all that and also you got to look at mix of products. So, the best way I can tell to look at, the way to look at is, we expect to see, single digit decline as year collectively when you add all these pieces together.

Got it. Okay, great. And then, if you can talk a little bit more about the competitive plans in some of the upcoming re-bids from -- potentially from your competitors. Anything changing there?

No, we still see as I mentioned, in my prepared comments, we saw our first RFP that we actually responded on and one thing you got to remember about these, Charlie, as they take a long time, they take a long time to review and they take a long time to go through their process. So, that one is not settled in the side as yet and we believe there's other one's that will still come out yet this year. And then we also believe there will more that will come in the in 2010 timeframe.

Got it. And thank you very much.

Welcome, Charlie.

And your next question comes from the line of John Kraft with DA Davidson. Please proceed.

Hey, guys.

Hey, John.

Good morning.

Just to kind of follow up on that last question, Lee, the price increase in Q3, is that across the board or specific to certain bank segments?

It's in the -- the way to look at it, John, is it's in the financial services business, and its not -- the way our contracts work, is -- when there are material, or there are delivery increases, we have the opportunity to adjust our price depending on where those changes are. And we've mentioned this on previous calls, John, it's not the same in every segment, meeting the same and every national or community or credit union space. So, you can't necessarily given a one sized fiscal price increase across the board. That's the best I can do in trying to explain it.

Okay. Well, and then I guess, almost along those lines, Rick, and you, Lee both mentioned turmoil, obvious turmoil in the financial services side. And it may be hard to dig into this, but at one point I thought you had said that you were seeing attrition from some of the bigger banks towards more of the community banks. Is that something you're seeing right now?

What we see is the banks that have been acquired, so who is some of those are, that are -- that we have. And that they've acquired by another one of our bank's, you see -- often you see spikes in the numbers in terms of check volumes and its just, its hard for us to exactly gauge is that things that they're doing within their migration conversions, is it people that are leaving, consumers that are leaving those collective banks as before, is it the economy that's impacting it, or is it more electronic payments there, things are moving. So we try to dial-in with our large banks and get clarity as best we can, but sometimes even the banks obviously are challenged with understanding exactly what those pieces are. So that's the comments that we made and yeah we have for a while we were seeing a little bit more of a movement in terms of our mix to the community market, what I would tell you right now is that's pretty stable at this point. We haven't seen a further movement from, kind of national to the community. Other than places where we're winning, and continuing to win in the community, and the credit union market.

Sure, okay that's helpful. And then moving on to the business services side of things, can you update us on your target margin for the business services and I guess, both kind of later this year is it reasonable to get to kind of that 14% we saw last year in longer term?

That's true for Small Business Services. Yeah, I think while the challenge we've got in there John, as you know, in the short-term is, as we're bringing these on and going through some of the migration work, and also as we have to leave the purchase accounting, we got to work our way through that. But, the goal here is clearly to get into that, that low to mid, double-digit as a percent of operating margin, and we think we're very comfortable with the moves that we're making here. And, as we build these things in, and as they become larger scale opportunities, we see that playing on quite nicely.

And then my lastly, I haven't heard you talking too much about the business of the Deluxe Business Advantage Program. Is it that you're focusing less on the referral and the leverage to the bank channels to generate those new customers, or is it just, can you talk about that?

No, it's not less of a focus. In fact, it remain a very strong focus and the program has gone quite well for us. We're very pleased with the way the program's working. For some of the people out there, basically what we do is we wrap our small business link to the financial services market and bring those clients through with our check and our other forms of programs. But no John, we haven't commented on it specific. But we continue to focus on and the program's actually going quite well.

Okay, good to hear. That's all I have. Thanks guys.

Thank you, John.

Your next question comes from the line of Jamie Clement with Sidoti. Please proceed.

Lee, good morning. What I was curious about and I was wondering if you could kind of give us a sense of how this is going to play out over the next year or so. Now, that you have the vast majority of your products and services more integrated on your e-commerce platform. What is the marketing of these products going to start to look like? To make sure that small business customers know that you have all the stuff?

The way I mentioned in my prepared comments, again, what we're trying to do Jamie is balance -- historically Deluxe has been a very paper catalog intensive company and when you compare to that with the acquisition and it worked quite well for a number of years but what's happening now as you know is customers are looking on the web and through the internet to make their purchases and so what we're doing is we're having to be very smart because we still have a customer base that likes to get the catalogs and so we're constantly looking to turn the dials as I call between what do we want to do as far as paper catalog, online and then search engine marketing. And so what clearly you're going to see though is that we will increase the penetration of online and search engine marketing. And another nice thing about the MerchEngines' acquisition is now we've got something that's going to help our small business customers to do that better for them, in terms of program that we're trying put out there. We also it is tremendous learning for us and allowing us to get somebody in our company who is an expert at doing this, so that we can get better doing this as well. So what you're going to see is us showing up there with our Deluxe brand and you've seen some of the announcements we've come out with recently, the EasyContact by Deluxe, we're going to hit the market with the brand more online. The other that I will, I think is a plus of us Jamie is the PartnerUp. PartnerUp, getting PartnerUp out there more and with small businesses and we basically have taken the 60,000 members that we had at the end of the year to now a 120,000. The viral marketing and the ability from them to speak to each other and then to introduce the company more through that capability is a powerful one for us as well. So, there's many things that, that we're trying to piece together to really get better at this. And what I would tell you is that, I'm learning, it's a real art, not a science. Its hard to figure out which dials exactly you have to turn in all those to make up a -- the most lucrative way to attract and build customers and that's what we're just working on, as I mentioned in my comments trying to get better at.

Okay. And just, you eluded this in the prepared remarks. The flat package check distribution, I think you said, you'd hope to have that conversion of that process wrapped up in early 2010. Is that something, is that process costing you money right now, or do you feel that you'll be more efficient next year, from a packaging and distribution standpoint?

We are really excited about this. We go little longer than we would have liked to have got. I call it the technology out of our provider. They've done great job. It's just a work to try get that done right now. But now we will start here in the third quarter and put it into our first location and then again we expect to get into the -- all the locations where we're going to put it in their early 2010. It will absolutely give us a benefit at some of the $55 million, Jamie, that's coming in the 2010 timeframe, once we get this thing fully in. But we're really excited, I mean, picture yourself as one of our great employees that builds checks everyday, to be able to do something that's so technologically innovative for us. It's a real thrill for the whole fulfillment team and the leadership and obviously the people are going to have an opportunity to use the new technology as we go forward.

Okay, great. Thanks a lot for your time.

Welcome.

Your next question comes from the line of Austin Lu with Lost Oak Capital. Please proceed.

Good morning.

Good morning. Austin.

I wanted to -- I was just curious. Is there a scenario in which the -- I guess its 90% or so of your business that is printing be it checks, forms or otherwise. Is there scenario in which you could see that actually growing?

The way I would look at it is -- let me break it down into pieces Austin. Right now, clearly just based on the comments we've made, there is an opportunity to get some share in the check space. Not only through the work that we're doing in the community and the credit union space, its kind of an ongoing but looking at some of these bigger contracts. How successful we'll be with all that, we can't predict at this point in time. But, we're pointing it out as obviously, there's an opportunity for us there. The second opportunity is the balance of really what we call business products, within the Small Business Services space. And, the opportunity for us, really is, can we get the mix of how we use our inbound, outbound and then our Internet or our e-commerce channel to work to be more effective for us. And the introduction of Shop Deluxe, which is our common one single platform to pull all those products and services together on, and this is the huge thing for us, because historically we haven't been able to have everything, all the different brands that came with nebs weren't all on one platform. So, we think, there is an opportunity to cross-sell and use that platform more efficiently, along with the use of our call center reps both from an inbound and outbound perspective. So, you're on to the right perspective, can we grow it or not, that remains to be seen at this point in time. Obviously, there is lot of things will the economy and where small businesses will go, will they move faster away from those more printed products to more the services side, that's anybody's guess. Obviously, we're trying and also position ourselves on the business services side where we see much bigger potential growth based on our -- on all the conversation that we with the small business owner. So I think we have opportunities in all those, but clearly what and I think the focus is clearly there how all that stuff will play out, that's a little tough for us to predict in the kind of markets that we're -- the kind of economy we're dealing with right now.

The -- I guess the constant migration to electronic payments has been challenging for checks obviously. I was just curious if the shift that is seen is as consumers tighten their belts from credit to debit, if you see that as a further challenge to printed checks?

Look, I think, the challenge has always been out there. There are people that are going to still writing checks, want to write checks. And there is all sorts of different media to pay other than checks obviously that have been out there. But I don't think we see a more -- much more significant leap from credit to debit at this point in time. There are some people who now want the float of the check. We hear comments from -- you'll hear more on the consumer side when you're selling direct to the consumer, you'll hear comments on that. So I would -- I cannot tell that we see more of that shift occurring to-date.

Okay. And then lastly, just on the -- some of the key strategic areas that you noted, the one I guess not related to new business services, loyalty attention, security and fraud offerings. Are those tied to the printed checks, or are there opportunities to expand those businesses that are unrelated to printed checks?

Unrelated. There are some that are tied, if we have a fraud protection on some of these checking accounts, but we also have ID self protection services that we sell, we sell a Deluxe Protect product, which helps financial institutions. But I would say the bigger opportunities for us are going to be in -- and again non-check spaces there. We have our Deluxe calling solution which we featured on previous calls which is -- we're continuing to see a nice ramp there. We have our on-boarding, welcome home toolkit solution which we continue to see advances in. So it's really again I mentioned in the prepared comments, it's really more than non-check space where we see opportunities.

Okay. Thank you.

You're welcome.

(Operator Instructions). There's no further question submissions in the queue. I would now like to turn the call back over to Lee Schram for his closing remarks. Please proceed.

Just want to thank everybody for your participation and again your questions today. We're going to get back to work now and we look forward to providing another positive progress report of our earnings, next earnings call.

Thank you, Lee. This is a reminder that a replay of this call will be available until August 7th by dialing 888-286-8010. When instructed, provide the access code 897-155-61. The company's slides are archived in the News and Investor Relations section of Deluxe's website at www.deluxe.com. Again thank you for joining us and have a good afternoon.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Great day everyone.