Harland Clarke Featured in San Antonio Express-News

Monday, July 9, 2007

By: Meena Thiruvengadam
San Antonio Express-News Business Writer

San Antonio Express-News (TX) -- As Harland Clarke Chief Executive Chuck Dawson entered the check-printing business in 1975, he crossed paths with a magazine ad touting a soon-to-be check-free society.

More than 30 years later, that society hasn't materialized, but it's coming. And San Antonio-based Harland Clarke -- America's largest check printer -- is preparing for the day it arrives.

"We want to print the last check that's ever printed," Dawson said. "We just don't want it to be the only thing we do that day."

Since peaking in the 1990s, check writing has been on a steady decline.

"The United States is in the midst of a significant shift away from the use of paper checks and toward the much greater use of electronic payments," Louise Roseman, director of the Federal Reserve's Division of Bank Operations and Payment Systems, said during congressional testimony in 2005.

Each year, Americans write 4 percent fewer checks than they did the previous year, according to a report prepared for the Fed. It's a trend that's expected to continue, perhaps until the very last check is written.

Dawson doesn't expect that to happen in his lifetime, but he has a plan to ensure that his company survives.

Born in San Antonio in 1874 as the Maverick-Clarke Litho Co., Harland Clarke is now one of two major check printers left in the United States. The company prints billions of checks and deposit slips each year.

Until last month, Harland Clarke was two check makers -- San Antonio-based Clarke American Checks Inc. and Atlanta-based John H. Harland Co. Clarke parent M&F Worldwide Corp. -- a holding company that is 37 percent controlled by billionaire Ronald Perelman, a legendary 1980s corporate raider -- paid $1.7 billion to buy Harland.

The move is expected to make it more economical to be in the check-printing business.
"It's not so much 'let's grow this business together' as it is 'let's be more efficient together,"' D.A. Davidson & Co. analyst John Kraft said. "The combination enables some pretty significant cost savings."

The acquisition pushed Minnesota-based Deluxe Corp. out of its spot as America's largest check maker. It also brought the company a financial software business and Scantron, the most widely known name in multiple-choice testing.

Combined, Harland and Clarke last year generated a total of $1.67 billion in revenue and $87.6 million in net income. About 65 percent of Harland Clarke's revenue is generated by printing checks. That will change, Dawson promises.

"I want to make sure none of our associates have to worry about having their futures tied just to the check," he said, hinting at potential acquisitions of businesses unrelated to checks.

Harland Clarke already does direct-marketing and answers consumer phone calls and e-mails through its contact center business. The company sells debit and credit cards, creates welcome packages destined for new account holders, and answers requests to stop payments, check balances and transfer funds.

"Checks are still a majority of the business, but what we've done over the last decade is look at other areas of need within the financial-services industry," said Steve Albright, executive vice president and general manager of Harland Clarke's marketing and contact center divisions.

Historically focused on manufacturing, Harland Clarke has shifted its gaze toward customer service. Fewer employees staff production plants as more are working on such tasks as crafting specific messages to persuade consumers to try new services from their respective financial institutions.

Using customer-specific information obtained through financial institutions, Harland Clarke can send consumers information on mortgages, auto loans, savings accounts and CDs by using their past banking habits to predict future needs.

But as two of the nation's largest check printers transition into one, several facilities will close and fewer Americans will work in the check business.

Combined, Harland Clarke has 21 manufacturing centers and 11 contact centers, including two contact centers in San Antonio. Of those facilities, seven are slated to close and an undisclosed number of the company's 6,200 total employees will have their positions eliminated.

It's not clear which operations will close or when, but Dawson said changes likely would occur within 18 to 24 months. Harland Clarke's headquarters are slated to stay in San Antonio.

"We've got deep roots here," Dawson said. "A lot of clients as well as other businesses see San Antonio as a very attractive place to be. We've always found it to be that way."

Contact Information:

Meena Thiruvengadam,

By the numbers

Checks used in U.S., 1990s: about 50 billion a year
Checks used in U.S., 2003: about 37 billion
Electronic payments in the 1990s: 15 billion a year
Electronic payments in 2003: about 45 billion
When electronic payments surpassed payments by check: 2003

SOURCE: April 2005 congressional testimony of Louise Roseman, director of the Federal Reserve's Division of Reserve Bank Operations and Payment Systems.