Good Day Ladies and gentlemen and welcome to the Q3 2009 Deluxe Corporation Earnings Call. My name is [Kiana] and I will be your operator for today. At this time all participants are in a listen-only mode. We will conduct a question and answer session towards the end of this conference. (Operator Instructions). I would now like to turn the call over to Mr. Terry Peterson, Vice President of Investor Relations and Chief Accounting Officer. You may proceed.

Welcome to Deluxe Corporation's 2009 third 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 managements 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 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 in the company's Form 10-K for the year ended December 31st 2009. 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 the 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 to Lee Schram, Deluxe's CEO.

Terry and good morning everyone. In a continued challenging economic environment with more bank failures, we had another strong quarter and we’re 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. Revenue shortfalls at the high end of our range were driven somewhat by small business and financial institution checks, but also by a slow start in seasonal holiday cards, promotional products and tax forms. However, loyalty and retention, fraud and security, and new business services revenue continued to grow, and we had strong execution against our cost reduction program and spending controls, all of which drove better than expected adjusted earnings per share, and operating cash flow. 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 our turn around plan. In a few minutes, I will discuss more details around our recent progress in [excerpts], but first Rick will cover our financial performance.

Thanks, Lee. Earlier today, we reported diluted earnings per share for the third quarter of $0.56, which included restructuring and transaction related costs of $0.04. Excluding the restructuring and transaction costs, adjusted EPS of $0.60 was $0.01 favorable to the upper end of our previous outlook. Revenue for the quarter came in at $332.3 million, in the middle of the range of our previous outlook and leveled off on a sequential quarterly basis. Operating margins for the quarter were above our expectations, with favorability coming from stronger performance on our cost reduction initiatives and our continued focus on spending controls. Operating cash flow in the quarter of $64.3 million also exceeded our expectations, driven by the favorable operating results. In the third quarter of 2008, we reported diluted earnings per share of $0.27, which include $0.38 of restructuring and impairment related charges. Adjusted earnings per share of $0.65 last year benefited from higher revenue levels, and the associated margin flow-through, plus an approximate $0.07 per share benefit related to lower performance based incentive compensation expense. Companywide, revenue was down 8% from 2008. Continued weakness in the economy, primarily in SBS, as well as the impact on our personal check businesses have declined in check writing and turmoil in the financial services industry contributed to the year-over-year reduction. Revenue from recent acquisitions partially offset these declines. Gross margin for the quarter was 63.3% of revenue, up 4.7 points from 2008. Restructuring related costs were higher in 2008, reducing the 2008 gross margin by 3.6 percentage points. Benefits from improvements in manufacturing productivity, plant consolidations and delivery initiatives, were partly offset by increases in performance based compensation expense, materials cost, and delivery rates. Selling, General and Administrative expense decreased $9 million in the quarter and was 46.4% of revenue, compared to 45%…

I'll continue my comments with an update on what we are focused on at the enterprise level, then highlight each of our three segments, provide an update on our cost reduction program, and close with a perspective on where we are heading as we wind down 2009 and look towards 2010. At the enterprise level, our strategic intent remains the same, becoming the best at helping small businesses and financial institutions grow. We continue to target our three customer segments, small businesses, financial services, and consumers. Over this strategic period, we intend to drive the revenue mix of our business from 2008, 65% checks, 31% business products, and 4% business services, to approximately 45% checks, 30% business products, and 25% business services. We plan to remain focused on our strong check businesses. However, the overall mix of checks will change due to their expected continuing secular decline and growth in business services. Revenue growth is expected to increasingly come from higher gross business services, using a scalable, unified web-enabled platform, and this delivery platform positions us to provide pull through for printed products including checks, forms, business cards, full color, imaging, and other printed products. Growth is also expected to come from product and services offerings that help financial institutions grow core deposits and improve customer loyalty and retention. Finally, we expect to provide our financial institution and small business customers with market intelligence, collaborative forms, and private label business networks. Repositioning Deluxe's brand continues to be an important growth enabler. In a nutshell, we want to be viewed by our customers as an indispensable partner in getting and keeping customers, guaranteed. Now shifting to our segments. In small business services, as expected, economic softness continue to impact our business. We had small revenue shortfalls in the third quarter to…

(Operator Instructions) Our first question comes from the line of Jamie Clement of Sidoti. You may proceed. Jamie Clement - Sidoti & Company LLC: Lee, can you run us through some of the economics of the flat packaging? I think you laid out a timeline of other facilities where you would have that rolled out, and I know that cost you some money earlier this year. Are you still spending money on that, or from a savings perspective, are you in net positive territory now?

We have started the complete automation of the process. It's an amazing thing to watch for having a company [during] this 90 plus years one way, it's amazing to watch this process, and it's just a very impressive technology. So we started it, and what we're doing, Jamie, is continuing to improve the amount of throughput literally every day at this point in time, and we're getting exactly what we're looking for at this point. It's just real exciting for us. What we're then doing is beginning the build out of the other sites that we're going to be put in the flat packaging solution. So the answer is we're still investing in it. We're still building that out. The real benefits on this thing are going to become really as we, as I mentioned as we get this all in placement first half, you'll start to see a lot of nice improvements in terms of our cost structure as we get into the second half of next year. Jamie Clement - Sidoti & Company LLC: Can you give us a sense historically, how much shipping has been sort of as a percentage of cost in the check business?

What we like to say, and we've said this publicly many times, I mean, if you look at the cost structure, so the cost to get to the gross margin line, roughly a third of the cost is the material, the ink, printing the paper. About a third is the labor and the fulfillment we call imprinting here and the overhead, and then about a third is the delivery of a piece of it. What we also have been public about in the past is that because of the increasing rates in the postal service, the delivery portion of that is becoming a higher mix than even that third today. So the opportunity for us to really get focused on. As you know, we've been taking down a number of our fulfillment plans and doing a good job on that. As this all comes in to play, the ability to get our cost structure down more in that delivery space with the automated flat packaging is a real positive opportunity for us.

Our next question comes from the line of Mike Hamilton of RBC. You may proceed.

Wondering on the check side if you could give any picture you've got on what's happening in a number of accounts per household.

I don't have any information on that. I guess what we're trying to do, Mike, we have stepped up probably six months ago our focus with literally every one of our large national banks, but also a lot of our community banks, just creating a better understanding of demand deposit accounts, holders, checking accounts, and so on and so forth. I think we're getting smarter and smarter at this point. What I would tell you is that it's still difficult to completely spot all the right trends on when you see a demand deposit account holder increase and you see a checking account holding, how do you line all of those up, the ability for us to become more predictive on where we see check at this point, but what I would tell you is we're not yet ready to be prime time in public with all of that, because again we're just getting stronger and stronger to understanding all that right now, but what I like about it, and I like the work that Tom Morefield who runs my segment and his team are doing, is this is getting us more clarity and creating a deeper relationship with the [FI's] in understanding this and then how do we drive the right programs in terms of what we're doing on check and then in the non-check space to be able to understand how all that stuff plays out, but I can't give you, Mike, a specific household number.

Thanks. Could you give a picture of your assessment of organic growth in small business in the quarter, what kind of decline we're getting once we strip out acquisitions?

I don't have that number off the top of my head. I would just tell you that, again, if you look at the expectation of a $100 million this year in all new business services, you can't divide it by four because of the acquisitions, Mike, as you know, they play out like that but clearly you would have seen a small double digit decline in the core rest of the business. Remember, a lot of that is in the more discretionary type of promotional products, apparel, retail packaging, and supplies that are, you know, clearly much more economic oriented or dependent than our other traditional more checks and forms related products.

Mike, this is Terry. Hostopia has been our largest revenue production acquisition. In that acquisition we did start lapping this quarter. For about two to three months were lapped this time for the first time now.

By the way, that continues to go very well. It's just one of the things that is just very impressive for me to watch right now is Colin Campbell, who heads Hostopia, and it’s just getting these 80,000 customers migrated. We're doing quite well and for those of you who do understand, this web services space, there have been many companies that have tried to do this and have not been able to successfully bring customers over from multiple different platforms and put them on a single platform, and I got to tell you, it's just very impressive to see what Colin and his team are doing right now. It's coming along quite well, and it's just something I'm very proud of the company on.

Lastly, what’s your feeling on normalized SG&A run rate at this stage?

It's been tough this year, Mike, just simply because we’ve got last year, which we pretty much didn't have any performance incentive comp in there, and this year we have built that in because we've been delivering a lot stronger performance and more in line with what we would have -- expect the company to be doing. So as we move into 2010, that should be just an expectation that's going to be built into the model the same way, and kind of what I gave in my preliminary view in terms of where I think things are heading here. So I think that will level that big -- that thing that been more of a blip, and then you're down to we will get more cost and expense reductions next year, and the $65 million that we're now committed to, and depending on I don't know the exact ratio, we gave the 45, 30, 25% mix, I don't know what the exact ratio that will play out next year at this point, but I would expect that it will continue to decline just based on the fact that we're getting more and more costs out and expected to meet more in the back end of the sales and marketing operations and the G&A area. I can't give you a specific number right now, Mike, but I would expect that you're going to see, because of the leveling out year- on-year, or the performance incentive comp and then the improvements that we expect to get going forward, you're going to see a lower structures as we move into 2010.

Our next question comes from the line of Charlie Strauzer of CJS Securities. You may proceed.

One quick question. If you look at the initial 2010 guidance and the range of outcomes there, and if you take a look at the low end versus high end, what are you expecting in terms of economic kind of recovery in there, and also, if you think about potential new customer wins like you talk about the two large bank customers that are RFPs up there, are you baking any wins into that guidance yet?

I suspected this might come up in terms of questions. Here is the way I would think about where we're at right now. We are not expecting any improvement right now. I just think right now, just given where we are, you're starting to see some people come out and say, yes, maybe things are getting a little bit better on more of the business buying, more of the technology buying side there, but you're also seeing a lot saying, no, I'm not seeing it get better at this point. We are prudently saying right now that we're not expecting it to get better. That's what that range really identifies today. It also does not assume that any of these competitive decisions that we have out there right now and that I've been talk ting about on the FS side, are coming the Deluxe way. Are we working to do our best to get some share of that? Absolutely, but I think again, the prudent way to think about it is that we are not assuming that and what we put out initially. So the way I would look at it is assuming things stay where they are right now in terms of where the economy is right now, and in the fourth quarter, and we'll watch this, closely. There probably at this point in time is more upside than downside to what we're talking about, but again we need to be careful until we see how the rest of the year transpires, locking everything that we've got in terms of our initiatives, our investments, where we see the biggest growth opportunities in the business services and some of these other non-check areas in the financial institution space, but that's the way to think about it right now, and I think that probably gives you about as best of view as I can.

So basically it’s safe to say you're taking a somewhat conservative view with the potential for upside?

Yes. I think we have to right now. I think that's just the prudent thing for us to be doing, and again I think as I mentioned and Rick mentioned as well, I think we're seeing the bottoming out, but we're not yet seeing this, there's pockets where people are buying more things, but we're just overall, I think it's just more of a bottoming out, and a stabilization around that, and I think it's just prudent for us to be planning and thinking that way, as we move into the balance of the fourth quarter and into 2010. So it doesn't take my enthusiasm away for what we're working on, what we're investing in, the ability for us this year to have strategically added so many new business services play to our portfolio, and I think when as I mentioned in the comments, I think when the economy does start to come back, this is going to position Deluxe a lot better than where we had entering the year or even six months ago at this point.

When your call center people talk to the small business owners that are out there, and given some of the kind of new service enablers or marketing enablers that you guys have given to them as potential sales tools, what are you hearing back from, your general feedback in terms of just spot pooling from your operators? Are they seeing any resistance to them from these new service offerings at all or are they kind of embracing them?

I think the way you look at it is as follows, we are continuing to add customers to the, I call it the base Hostopia Telco wholesale platform. We also see more opportunities as we get stronger in developing some of the markets that we're in Europe, in that space as well. We position the Aplus.net customers on Colin’s Hostopia platform, Charlie, we also have the opportunity to start bringing more of our services that Aplus.net did not offer to those customers. So I think we're hearing some excitement about, that as well. We're also starting to see even ad sales on the PartnerUp networking, go out and look at it and see some of the ads that are out there. We're starting to see some more upside in that at this point in time. We're also seeing some of the large national banks very interested in the social networking or business networking, as we like to call it, PartnerUp platform, more on a private label basis. the MerchEngines, we're very excited about this, and we did as I said in my comments again, right in line with where we expected on that, so we're off to a good start. So I think we're looking at positive things right now that we just feel good about. Obviously, all of us would like a better economy to bring this all out in for that small business owner and that's just struggling with cash flow and trying to figure out where they want to position to spend their money right now, but again I think as things progress, you're going to see these things continuing to become a bigger percentage of our portfolio as again, I laid out.

(Operator Instructions). Our next question comes from the line of Jamie Clement of Sidoti. You may proceed. Jamie Clement - Sidoti & Company LLC: Hey, Lee, just a follow up, in terms of next year, you talked about a, sort of a general outlook. Are there any unusual capital projects that you would have next year that would dramatically at this point in your mind change your CapEx spending from ’09 to 2010?

I would tell you that Rick made the comment that we slightly increased from 40 to 45 million in 2009, and again some of this just gets some of these investments, and especially in technology areas that we think are going to help play out both in internal technology improvement needs, as well as some technology things for our more customer basing technology things. We just decided that we're going to get a little more ambitious this year to get some of these things done, and we just think the success of our information technology organization delivering projects on time, on budget, has been terrific. So we just thought now is the time to move it forward a little. What I would tell you right now, I'm not trying to give guidance on this specifically, but I would say that you'll see us come down a bit from the 45, as you go into next to year. So I think you'll see us spend less, and, again, I can't give you a specific how much less yet, but I do not expect us to spend the, something near to 45 as we get into next year. Jamie Clement - Sidoti & Company LLC: So in terms of other cash flow levers and that sort of thing, I mean depending on how the RFPs on the two banks you mentioned, I mean everything else to me sounds is pretty much in line, kind of next year with what you were seeing this year, I mean, right?

Very fair.

Our next question comes from the line of John Kraft of D.A. Davidson. You may proceed.

Just a few follow ups here. Lee, you've talked about the two banks that you might hear about, as far as the potential win by the end of the year. If you did win either of those, when would the revenue hit? Also when you’ve talked about 2010, you have suggested there is some others there as well, there are another two in 2010, or is the number bigger than that?

The way I would say, it's very difficult to predict exactly when cutover points are going to happen. I mean what I would clearly tell you is there will be a revenue stream that will be in 2010 on both those deals, John. Exactly when, we're asking those same questions as we work through this process, as well, everywhere time I feel like I've got it nailed down or understand it better, we get a little bit different answer. So I honestly can't give you a specific quarter or month when we expect it, but those will both roll in the 2010 timeframe. As far as other ones, I'm not going to give you a specific number, other than to say there are, as I said in my prepared comments, there are other opportunities on top of those that will come in 2010, and we expect to be there, and to do our best to try to, participate in those opportunities, as well.

In your prepared remarks Lee, you suggested that the goal for sort of the breakdown of the business segment wise, 45% checks, and 25% of the business services, and so on, is there a target date for that?

The way we've been public about this, it's basically, think of a strategic period. So think three plus years at this point, and I think that's the best way to describe our vision for where we see that unfolding, and what I would tell you is progress, along the way. because I'm not yet going to give you, what that split might look like for next year until we do our work and get our planning process finalized for this year, but I would expect us, to progress. I've been clear, we've been asked, give us some indication, so we've kind of said, well, 55 is, closer to a hundred now, this year. So I would expect us to have again the double-digit growth next year in this, and therefore contributing a bigger piece of the pie, and I think John right now it’s probably the best I can do to help you frame that.

Regarding this Q4 Hostopia migration, is there material costs involved in doing them?

That's some of what you see in some of the transaction-related, I think there's a penny in the forecast, and it's not all that. There is some other things that are transaction-related that we're working through, but there is some cost to do that, and, by the way, the great news is we expect to get that done in the quarter, and by the way, on track with exactly what, we thought when we bought Aplus.net, we'll have it behind us and we'll have 80,000 more customers, that will give us, almost 400,000 web services customers, that the company can call their own, so to speak. So we're excited about it, we'll have that work behind us and start being able to bring on other products and services to those customers as we move into 2010.

Rick and Lee, both of you guys talked about this, as sort of a bigger picture question, and that is round the 8 or so percent declines in check you expect in Q4, I guess. First of all, what was it in Q3? Also, if you could just talk a little bit more about that. You said that is obviously the current environment with failures and bank branch closures and so on, but it just seems to me intuitively that those customers still have a book of checks and still are writing checks. Are you a net loser here in all of the consolidation and the bank failures, or am I just missing this?

The way I would look ate it, yeah, it was roughly there in the third quarter as well, John. Again it's back to Mike's question earlier, it getting hard to exactly predict all of this stuff, but what we are seeing is some of the nationals that we have that have been acquired, and some of them are acquired by our own banks and some of them are acquired by others that we're still, producing checks for, it's just been hard. There's some spikes, and it's hard for us to understand exactly why all that even though we are asking all the right questions, to the financial institutions at this point, and we have seen an increase in failures. What I would say is yes there has been some that going against us, but I'll give you a great example. We had one literally after we got ourselves prepared for this call. We got and it's now public, we got an inside right as it was coming out from them, but US bank just picked up a bunch of branches from BB&T, part of the colonial bank changeover, and, that we're excited about that because, that will be additional, checks that we'll be able to provide those customers, through our relationship with US Bank. So, you know, it's just hard, John, everyday to I would not say it's kind of net wash at this point. It's hard everyday to tell exactly where this thing is going to play out, and then the timing of people leaving there, or they run into somebody else. Some of them they just go to a community bank or go someplace else, or go to a national that we have, as well. It's just hard to get an exact read on that, and, therefore, we saw the rate just pop up just slightly. We just think it's prudent again where we are, to just, forecast this way right now.

Just to clarify further, you do expect that this is somewhat elevated, and that maybe we'll see some slowing of the decline rate in out years?

Yeah, I don't, right now, again, we're not expecting something to get wildly crazy at this point, other than what we're seeing today, but, again, hard to tell, right? I mean how many more banks are going to fail, all that. It's just difficult for us to predict. I would say right now prudently, we plan where we are. We think it's the right thing to do, and we think there's good stability around that right now, but again, we got to keep a watchful eye on it. That's obviously part of what we do as leaders here.

With no further questions in the queue, I would like to turn the call back to Mr. Lee Schram for closing remarks. You may proceed.

I just want to again thank everybody for participating in the questions today, and we're going to get back to work here. We do look forward to providing another positive progress report on our next earnings call.

This is a reminder that a replay of this call will be available until October 29th by dialing 888-286-8010. When instructed, provide the access code 15299747. The accompanying 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. Good day.