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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: pezz who wrote (22530)	8/11/2002 4:20:37 PM
From: Snowshoe	Read Replies (1) \| Respond to of 74559

Total usage of checks has peaked, but current volume is higher than I expected... Deluxe Sees Benefits As Consumers Stick With Checks biz.yahoo.com By Erik Ahlberg, Of DOW JONES NEWSWIRES CHICAGO -(Dow Jones)- As more and more people opt for Internet banking and the swipes of credit and debit cards at checkout counters, who still cares about the antiquated paper check? The answer, it seems, is everyone. "People truly like the check - they trust the check," said Chief Executive Lawrence J. Mosner in an interview with Dow Jones Newswires. Though he conceded that checks are a no-growth industry, Mosner said Deluxe can continue to find growth within its own business. The key is increasing the amount of money Deluxe earns per transaction, he said. Another is non-check revenue from other products such as stationery, business cards and envelopes. Deluxe prints about half of the 50 billion checks written every year, producing more than 100 million check orders a year. The company has been profitable in every year but one since it was founded in 1915. The one exception came during the Great Depression, when Deluxe recorded a $14,000 loss. Though the number of electronic transactions posted every year continues its dramatic rise, U.S consumers still write about 50 billion checks a year - a dollar value of $47.7 trillion, according to a study published earlier this year by the Federal Reserve. By comparison, about 29.5 billion electronic transactions in 2000 had a value of about $7.3 trillion. "While checks, we believe, will account for a decreasing portion of total payments, they will continue to be around for some time," according to the study. That's good news for Deluxe Corp. , the world's largest printer of checks for businesses and consumers. Known for its inserts in newspaper weeklies and its rectangular red-and-black boxes, the company has found success this year through a focus on its core check-printing operations. Deluxe has sold more than 20 mostly catalog-related businesses over the last 10 years, including the June 2000 spinoff and initial public offering of eFunds Corp. , and kick-started several efficiency and productivity programs. The moves, combined with the impact of share buybacks, are beginning to show up in the company's results. Deluxe, Shoreview, Minn. , said its second-quarter net income rose 23.4% to $ 54.7 million, or 85 cents a share, up from $44.3 million, or 63 cents a share, a year ago. Revenue rose 3.1% to $328.5 million from $318.6 million. Company Weighs Strategic Options Deluxe has three business divisions. Its largest, financial services, provides check-printing products and services to more than 10,000 financial institutions in the U.S. Direct checks sells checks directly to consumers through the advertising inserts and other related means. Business services supplies business checks, forms and computer checks to small businesses and home offices. Having completed a 14-million share buyback program during the second quarter, Mosner said Deluxe's board and its finance committee, outside consultants and executives were in the process of reviewing the company's capital structure. A decision about the direction of the business could be made over the next several months. Among the options the company is considering is a new stock buyback program or possibly a green light for new acquisitions. Mosner declined to comment on any of these options specifically, but did say that the company "would seriously consider" any buys that would add to the bottom line within 12 months of closing. After setting a 52-week high of $50.12 on March 20 , shares have steadily declined. The stock recently traded at $36.38 - a few dollars above its 52-week low. Chief Financial Officer Douglas J. Treff attributed the drop to the declines in the broader market and the effects of program trading. The company said in its second-quarter earnings release that it doesn't expect the second half of the year to be as strong as the first half. Deluxe attributed the weakness to tough comparisons, planned investments in revenue-generating and cost-savings initiatives, high postal rates and the earlier-than-expected effect of a non-recurring contract buyout. "That being said, we still expect 2002 to be a record year for net income and earnings per share," the company said in the release. Deluxe expects its third- quarter earnings would come in at between 76 cents to 79 cents a share and full- year "at least" $3.15 a share. Deluxe earned 75 cents a share and $2.69 a share for the third quarter and full year last year, respectively. The only analyst to report earnings figures to Thomson First Call, Lee Schafer of Bluefire Research in Minneapolis , expects the company to earn 75 cents in the third quarter and $3.18 for the year. -By Erik Ahlberg; Dow Jones Newswires; 312-750-4141 erik.ahlberg@dowjones.com