Harland restructures to avoid blank spaces Checks: John H. Harland Co., the nation's No. 2 check printer, is consolidating its eastern operations at a new Maryland plant, and is diversifying its services.

September 30, 1997|By Jay Hancock | Jay Hancock,SUN STAFF

Bank checks, invented in the Middle Ages, aren't dead yet. John H. Harland Co. printed billions of them last year, on green safety paper, in perforated books, with and without carbons, with wilderness scenes, Dilbert motifs.

But banks are sufficiently wired to electronic services for some investors to worry that paper checks aren't exactly the wave of the future.

The stock of Harland, which has a new factory in Glen Burnie, sells for only 12 times the company's earnings per share.

That's far less than U.S. stocks generally, prompting a restructuring that has closed printing plants across the country, caused more than 2,000 layoffs and made the Atlanta-based company view itself as much as a financial marketing company as a printer.

Even though "we still have a sizable part of the population that likes having a check," said company spokesman John Pensec, check printing "is a mature industry."

Led by Robert J. Amman, named chief executive nearly two years ago and chairman in April, Harland is aggressively pushing its ability to help financial institutions identify marketing opportunities.

Harland has developed special software, now used by 1,300 banks and other institutions, that lets the financial companies crunch their own computer records to find selling opportunities.

Say your car loan is coming due. Harland's program alerts your bank to pitch a refinancing deal. The bank might call you at home -- but it also might hire Harland to print car-loan literature and stuff it in your box the next time you order checks.

Banks "have got a lot of information, but in a lot of institutions, it's not located in one place," Pensec said. "Once you have the information, you can do an awful lot with that little box."

Surprisingly, many banks aren't especially knowledgeable about their own customer databases.

"Most of these guys are not very sophisticated about it," says one Wall Street analyst who follows Harland. "There's a lot of waste with small banks, where they send [information on] an annuity to an 80-year-old woman" -- who has no use for a 10- or 20-year financial product.

Founded in 1923, Harland is the No. 2 check printer in the country, with $609 million in revenue last year and $86 million in operating income. Shoreview, Minn.-based Deluxe Corp. is No. 1.

Harland's net result for last year came to a loss of $13.9 million after one-time restructuring charges were factored in.

There's a lot of restructuring to account for.

Harland, for a long time an amalgam of smaller plants, including some obtained in mergers, is shrinking from a total of 58 facilities to 20. Its printing division is slimming from 40 plants to nine.

The company has had a check plant in Howard County since 1975. But when it decided to retrench into bigger, regional plants, it needed more space.

"We're closing down a lot of facilities, and we felt like the Maryland area was geographically close to where we needed to be," said Don Voshall, Harland's former senior vice president for real estate. "I guess the only other site that we seriously considered at the same time was a facility in the Wilkes-Barre area" of Pennsylvania.

Retired now, Voshall acted as a consultant in the restructuring.

Harland settled on a site in Anne Arundel County, at the Park 100 Business Center near Baltimore-Washington International Airport.

The company received financial incentives from the state of Maryland, including a $1 million loan that turns into a grant if the company keeps promises to build employment from 150 before the move to 400 eventually.

The Glen Burnie facility has 200 people. Harland also employs 127 in a small-order facility in Baltimore County.

"We've been very pleased with the work force in Maryland," said Richard Edwards, vice president and general manager of Harland's regional operations. Plus, "we're at the end of the runway" at the new site, which started operation Aug. 4. "It's good for us. It's good for our customers who want to visit us."

Now, Harland has to get its new plants up to speed, continue to cut check-making costs and develop its consulting business.

In the new facilities, automation is helping reduce printing costs, helping workers sort more quickly through maze of check variables such as paper color, monograms and checkbook style. At the same time, distribution efficiencies are expected to reduce transportation expense.

"The post office is now bar coding its mail, so you can get it to customers more quickly," said Edwards, 44, who was based in Howard County previously. Harland tries to get checks to customers within seven to 10 days from when they order them.

In Glen Burnie, they print personal checks, business checks and deposit slips.

When it's up to speed, the $9.5 million, 120,000-square-foot plant will be able to fill almost 35,000 check orders a day, in an around-the-clock operation.

The facility will do the work formerly performed by not only the Howard County plant but also by factories elsewhere, including Wilkes-Barre, Boston, Cleveland, Hartford, Conn., and Rochester, N.Y.

Paper check use in the United States actually is still growing -- by 1 percent or 2 percent a year, Pensec said.

Population growth and the fact that many families have more than one bank account these days take care of that.

But at the same time, more people are paying their utility and mortgage bills by electronic funds transfer. Most grocery stores accept credit or debit cards now; a decade ago, if you didn't have cash you had to write a check.

Even the Internal Revenue Service is dealing less with checks.

But with lower costs and improved service, Harland managers think there's a lot of business yet in paper bank drafts.

"Saying it's a mature product," Pensec said, "is not saying the check is going away."

Pub Date: 9/30/97

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