This spreadsheet supports STUDENT analysis of the

case, "Deluxe Corporation" (Case 35).

Please note:

This is a working model. Assumptions / Inputs presented

can be changed to vary the results. Please press F9 to
recalculate results after changing assumptions.
This model contains an intentional circularity. To
resolve this circularity, please set Excel to recalculate the
model a number of times (20 to 50). See
TOOLS/OPTIONS/CALCULATION, and check
ITERATION.

Copyright 2005, by the University of Virginia Darden School Foundation.

Exh. 1

Selected Income Statement Information

Net sales
Operating expenses
Profit from operations
Interest expense
Net earnings
Common shares, end of year (000s)
Common shares repurchased (000s)
Common shares issued (000s)
Earnings per share1
Dividend per share
Selected Balance Sheet Information
Working capital
Net property, plant, & equipment
Total assets
Long-term debt
Common stockholders' equity
Book value: LT debt/capital
Market value: LT debt/capital
Selected Valuation Information
(year-end)
Deluxe Corp. stock price
S&P 500 Composite Index
Deluxe Corp. average P/E2
S&P 500 Composite average P/E
Deluxe Corp. market/book ratio
Deluxe Corp. Beta
Yield on 20 year T-bonds
Yield on 90-day T-bills
Total annual ret. on large co. stocks
2

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

$1,534.4
$722.2
$812.2
$15.4
$202.8

$1,581.8
$739.5
$842.3
$10.3
$141.9

$1,747.9
$797.3
$950.6
$11.3
$140.9

$1,858.0
$819.4
$1,038.6
$14.7
$87.0

$1,895.7
$862.4
$1,033.3
$12.0
$65.5

$1,919.4
$806.7
$1,112.7
$9.7
$44.7

$1,931.8
$805.9
$1,125.9
$9.7
$143.1

$1,650.5
$688.9
$961.6
$9.5
$203.0

$1,262.7
$417.9
$844.8
$10.8
$161.9

$1,278.4
$421.1
$857.2
$5.6
$185.9

83,797
(2,197)
949

82,549
(1,341)
1,167

82,375
(1,191)
1,181

82,364
(1,414)
1,106

82,056
(1,715)
985

81,326
(1,833)
988

80,481
(9,573)
1,112

72,020
(48)
583

72,555
(11,332)
2,890

64,102
(3,898)
1,255

$2.42
$1.34

$2.09
$1.42

$1.71
$1.46

$1.15
$1.48

$1.65
$1.48

$2.15
$1.48

$2.34
$1.48

$2.64
$1.48

$2.34
$1.48

$2.70
$1.48

$330.9
$389.0
$1,199.6
$115.5
$829.8

$386.9
$401.6
$1,252.0
$110.8
$801.2

$224.5
$461.8
$1,256.3
$110.9
$814.4

$130.4
$494.2
$1,295.1
$111.0
$780.4

$12.3
$446.9
$1,176.4
$108.9
$712.9

$108.1
$415.0
$1,148.4
$110.0
$610.2

$131.0
$340.1
$1,171.5
$106.3
$606.6

$167.8
$294.8
$992.6
$115.5
$417.3

$14.0
$174.0
$649.5
$10.2
$262.8

$116.6
$149.6
$537.7
$10.1
$78.6

12.2%
2.9%

12.1%
3.6%

12.0%
4.9%

12.5%
4.4%

13.3%
3.9%

15.3%
3.8%

14.9%
3.5%

21.7%
5.5%

3.7%
0.6%

11.4%
0.4%

46.75 $ 36.25 $ 26.38 $ 29.00 $ 32.75 $ 34.50 $ 36.56 $ 27.44 $ 25.27 $ 41.58
418.17
464.30
462.62
576.70
700.92
941.64
1,072.32
1,281.91
1,364.44
1,104.61
17.60x

19.00x

17.40x

25.90x

20.60x

15.40x

14.30x

12.70x

10.20x

11.01x

24.38x
4.72x
1.00
7.67%
3.08%
7.67%

24.11x
3.73x
1.00
6.48%
3.01%
9.99%

18.36x
2.67x
1.00
8.02%
5.53%
1.31%

16.92x
3.06x
0.95
6.01%
4.96%
37.43%

20.26x
3.77x
0.90
6.73%
5.07%
23.07%

23.88x
4.60x
0.95
6.02%
5.22%
33.36%

27.45x
4.85x
0.85
5.39%
4.37%
28.58%

31.43x
4.74x
0.90
6.83%
5.17%
21.04%

26.29x
6.98x
0.90
5.59%
5.73%
-9.11%

29.50x
33.91x
0.85
5.74%
1.71%
-11.88%

Notes:

Page 2

Exh. 2

Exhibit 2
Deluxe Corp.
Consolidated Statement of Income
(in U.S. $ millions)
Years ended December 31
2001
2000
Revenue

$1,278.4

$1,262.7

453.8
514.4
6.2
2.1
976.4
302.0

453.0
518.2
5.2
7.3
983.8
278.9

2.4
(1.2)
(5.6)
297.6
111.6
$185.9

4.8
1.2
(11.4)
273.4
104.0
(7.5)
$161.9

Cost of goods sold

Selling, general, and admin. expense
Goodwill amortization expense
Asset impairment and disposition losses
Total costs
Profit/(loss) from operations
Interest income
Other income
Interest expense
Earnings/(loss) before taxes
Tax expense
Discontinued operations income/(loss)
Net earnings/(loss)

Source of data: Company regulatory filings.

Page 3

Exh. 3

Exhibit 3
Deluxe Corp.
Consolidated Balance Sheets
(in U.S. $ millions)

Assets
Current assets
Cash and cash equivalents
Marketable securities
Trade accounts receivable net
Inventories
Supplies
Deferred income taxes
Prepaid expenses and other
Total current assets
Long-term investments
Property, plant, and equipment net
Intangibles net
Goodwillnet
Other noncurrent assets
Total assets
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable
Accrued liabilities
Short-term debt
Long-term debt due within one year
Total current liabilities
Long-term debt
Deferred income taxes
Other long-term liabilities
Total liabilities
Common stockholders' equity
Common shares
Additional paid-in capital
Retained earnings
Unearned compensation
Accum. other comprehensive income
Total common stockholders' equity
Total liabilities and stockholders' equity

Source of data: Company regulatory filings.

Page 4

2001

2000

$9.6
37.7
11.2
11.1
4.6
9.9
84.0
37.7
151.1
115.0
82.2
67.9
$537.8

$80.7
18.5
46.0
11.3
11.8
7.4
12.0
187.8
35.6
174.0
134.5
88.4
36.2
$656.4

$52.8
162.9
150.0

$44.7
148.5
-

1.4
367.1
10.1
44.9
37.0
459.1

100.7
293.9
10.2
51.1
38.3
393.5

64.1
14.6
0.1
78.7
$537.8

72.6
44.2
146.2
0.1
(0.2)
262.9
$656.4

Exh. 4

Exhibit 4
Deluxe Corp. Financial Forecast, 2002-2006
(values in U.S. $ millions)
Actual
2001
1.2%
23.6%
37.0%
9.1%

Annual increase in sales

Operating profit/sales
Tax rate
Working capital/sales
Dividend payout ratio
Income Statement
Net sales
Operating profit
Interest expense, net
Pretax income
Tax expense
Net income
Dividends
Retentions to earnings
Balance Sheet
Cash
Working capital (without debt)
Net fixed assets
Total assets
Debt (long- and short-term)
Other long-term liabilities
Equity
Total capital
Free Cash Flows
EBIT
Less taxes on EBIT
Plus depreciation
Less capital expenditures
Less additions to/plus reductions in workng capital
Free cash flow

2002
1.4%
26.6%
38.0%
9.1%
52.0%

Projected
2003
2004
1.6%
2.0%
26.7%
26.7%

$1,278.4
302.0
3.2
298.8
111.6
187.1
94.9
$92.2

$1,296.3
344.8
4.0
340.8
129.5
211.3
94.9
$116.4

$1,317.0
351.6
4.0
347.6
132.1
215.5
94.9
$120.7

$1,343.4
358.7
4.0
354.7
134.8
219.9
94.9
$125.0

$9.6
116.6
151.1
277.2

$124.3
118.2
151.1
393.6

$243.1
120.1
151.1
514.3

$365.8
122.5
151.1
639.3

161.5
37.0
78.7
$277.2

161.5
37.0
195.2
$393.6

161.5
37.0
315.8
$514.3

161.5
37.0
440.9
$639.3

$344.8
(131.0)
50.0
(50.0)
(1.6)
$212.2

$351.6
(133.6)
50.0
(50.0)
(1.9)
$216.1

$358.7
(136.3)
50.0
(50.0)
(2.4)
$220.0

Source: Case writers' analysis, consistent with forecast expectations of securities analysts.

Page 5

Exh. 4

2005
2.2%
26.7%

2006
2.4%
26.7%

$1,372.9
366.6
4.0
362.6
137.8
224.8
94.9
$129.9

$1,405.9
375.4
4.0
371.4
141.1
230.3
94.9
$135.4

$493.0
125.2
151.1
769.3

$625.4
128.2
151.1
904.6

161.5
37.0
570.8
$769.3

161.5
37.0
706.2
$904.6

$366.6
(139.3)
50.0
(50.0)
(2.7)
$224.6

$375.4
(142.6)
50.0
(50.0)
(3.0)
$229.7

Page 6

Exh. 6

Exhibit 6
Key Industrial Financial Ratios by Rating Categories

Credit Rati

Key Industrial Financial Ratios (Three-year medians 200002)

EBIT interest coverage (x)
EBITDA interest coverage (x)
Funds from operations/total debt (%)
Free operating cash flow/total debt (%)
Return on capital (%)
Operating income/sales (%)
Long-term debt/capital (%)
Total debt/capital, incl. short-term debt (%)

AAA
23.4
25.3
214.2
156.6
35.0
23.4
(1.1)
5.0

Investment grade
AA
13.3
16.9
65.7
33.6
26.6
24.0
21.1
35.9

Standard & Poor's defined these ratios based on the book value of these items as follows:
EBIT interest coverage = EBIT/interest expense.
EBITDA interest coverage = (EBIT plus depreciation and amortization)/interest expense
Long-term debt/capital = long-term debt/(long-term debt + stockholders' equity)
Total debt/capital, incl. short-term debt = (short-term debt + long-term debt)/(short-term debt + long-term debt + stockholders' eq
Source of data: Standard & Poor's CreditStats.

Page 7

Exh. 6

g Categories
Credit Rating
Investment grade
A

BBB

6.3
8.5
42.2
22.3
18.1
18.1
33.8
42.6

3.9
5.4
30.6
12.8
13.1
15.5
40.3
47.0

Noninvestment grade
BB
B
2.2
3.2
19.7
7.3
11.5
15.4
53.6
57.7

1.0
1.7
10.4
1.5
8.0
14.7
72.6
75.1

ong-term debt + stockholders' equity)

Page 8

60.0x

50.0x

40.0x
EBIT Divided by Interest

30.0x

55.2x

20.0x
32.4x

32.8x

27.3x
10.0x

21.0x

31.0x
26.3x

21.9x

20.7x
16.1x

0.0x
1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

Exhibit 8
Capital Costs by Rating Category
AAA

AA

BBB

BB

Cost of debt
(pretax)

5.47%

5.50%

5.70%

6.30%

9.00%

12.00%

Cost of
equity

10.25%

10.35%

10.50%

10.60%

12.00%

14.25%

Source of data: Hudson Bancorp

Exhibit 9
Capital Market Conditons
(as of July 31, 2002)

U.S. Treasury Obligations

90-day bills
180-day bills
2-year notes
3-year notes
5-year notes
10-year notes
30-year notes

Corporate Debt Obligations (10-year)

AAA
AA
A
BBB
BB
B

Yield
1.69%
1.68%
2.23%
2.79%
3.45%
4.46%
5.30%

Other Instruments
Discount Notes
Certificates of Deposit (3-month)
Commercial Paper (6-month)
Term Fed Funds

Yield
5.51%
5.52%
5.70%
6.33%
9.01%
11.97%

Source of data: Bloomberg LP, S&P's Research Insight, Value Line Investment Survey, Datastream Advance

Yield
1.70%
1.72%
1.75%
1.78%

Exhibit 7
Deluxe Corp.
EBIT Interest Coverage Ratios By Year

EBIT
Interest expense
Coverage ratio (x)

1992
322.2
15.4
21.0x

1993
280.8
10.3
27.3x

1994
233.7
11.3
20.7x

1995
236.3
14.7
16.1x

1996
262.8
12.0
21.9x

1997
315.9
9.7
32.4x

1998
316.6
9.7
32.8x

1999
293.8
9.5
31.0x

2000
284.7
10.8
26.3x

2001
308.2
5.6
55.2x

DELUXE CORP
TICKER: DLX
SIC: 2780
GICS: 20201010
Sales
Cost of Sales
Gross Profit
EBITDA
EBIT
Interest Expense
Total Taxes
Depreciation
Net Income
Com Shares Outstanding
Treasury Stock-# Com Shares
Treasury Stock-Total $ Amt
Earnings Per Share (Value Line)
Div. Per Share (Value Line)

Sources of data:
S&P's Research Insight, Value Line Investment Survey, Datast

Dec92
1534.351
722.155
812.1959
388.834
322.219
15.371
121.999
66.615
202.784

Dec93
1581.767
739.493
842.274
353.147
280.827
10.276
94.052
72.32
141.861

Dec94
1747.92
797.314
950.606
320.075
233.659
11.305
100.02
86.416
140.866

Dec95
1857.981
819.408
1038.573
339.587
236.284
14.714
74.885
103.303
87.021

Dec96
1895.664
862.358
1033.306
329.078
262.809
11.978
53.302
66.269
65.463

83.797
0
0
2.42
1.34

82.549
0
0
2.09
1.42

82.375
0
0
1.71
1.46

82.364
0
0
1.15
1.48

82.056
0
0
1.65
1.48

Working Capital (Value Line)

PP&E-Total Net
Assets-Total
LT Debt-Total
Preferred Stock
Common Equity-Total

330.9
386.9
224.5
130.4
12.3
389.017 401.641 461.818 494.158 446.858
1199.556 1251.994 1256.272 1295.095 1176.44
115.522 110.755 110.867 110.997 108.937
0
0
0
0
0
829.808 801.249 814.393 780.374 712.916

Long-Term Debt/Total Capital

12.22028 12.14413 11.98225 12.45239 13.25505

Price-Close Fiscal Year

Avg. Annl. P/E (Value Line)
Price to Book Fiscal Yr End
Beta
Gov Bonds-20 Year
T-Bill-3 Month
S&P 500 (Datastream)
S&P 500 P/E (Datastream)

46.75
36.25 26.375
29
32.75
17.6
19
17.4
25.9
20.6
4.720983 3.734671 2.667804 3.060783 3.769496
7.67
3.08
418.17
24.38

6.48
3.01
464.30
24.11

8.02
5.53
462.62
18.36

6.01
4.96
576.70
16.92

6.73
5.07
700.92
20.26

Line Investment Survey, Datastream Advance

Dec97
1919.366
806.671
1112.695
384.729
315.913
9.742
70.478
68.816
44.672

Dec98
1931.796
805.874
1125.922
375.541
316.61
9.664
99.852
58.931
143.063

Dec99
1650.5
688.936
961.564
348.099
293.794
9.479
121.633
54.305
203.022

Dec00
1262.712
417.882
844.83
318.054
284.679
10.837
103.957
33.375
161.936

Dec01
1278.375
421.149
857.226
345.857
308.2
5.583
111.634
37.657
185.9

81.326
0
0
2.15
1.48

80.481
0
0
2.34
1.48

72.02
0
0
2.64
1.48

72.555
0
0
2.34
1.48

64.102
0
0
2.70
1.48

108.1
415.008
1148.364
109.986
0
610.248

131
167.8
14
116.6
340.077 294.785 173.956 149.552
1171.519 992.643 649.469 537.721
106.321 115.542 10.201 10.084
0
0
0
0
606.565 417.308 262.808 78.605

15.27087 14.91417 21.68378 3.736507 11.37007

34.5 36.5625 27.4375
25.27
41.58
15.4
14.3
12.7
10.2
11.01
4.597716
4.849 4.984877 6.976538 35.10112
0.90
0.90
0.85
6.02
5.39
6.83
5.59
5.74
5.22
4.37
5.17
5.73
1.71
941.64 1072.32 1281.91 1364.44 1104.61
23.88
27.45
31.43
26.29
29.50