Deluxe Corp., the No. 1 check-printing company, said first-quarter income plunged as individuals and companies further reduced their use of checks.
The Shoreview, Minn., company is also due for changes in top management. Last Monday it announced the hiring of a new chief executive, and last Friday it said its chief financial officer was leaving to take a new job.
Lee Schram, 44, will become CEO next Monday, taking over from Ronald E. Eilers, who has held the job on an interim basis since November, when Lawrence J. Mosner retired as the chairman and chief executive. Mr. Schram was a senior vice president at the Dayton, Ohio, automated teller machine company NCR Corp.; he was responsible for its $1.3 billion retail solutions division.
Mr. Eilers said Tuesday during a conference call with analysts that Mr. Schram has the qualifications to guide Deluxe through the next phase of its evolution, from a check printer to a provider of more diverse products and services to small business.
“He has demonstrated his ability to transform a mature business beyond its core products,” Mr. Eilers said.
One early task for Mr. Schram will be to find a successor to CFO Douglas J. Treff, whose last day on the job will be next Friday. (A Deluxe spokesman would not name his new employer.)
Deluxe reported that first-quarter net income plunged 36% from a year earlier, to $25 million, and that revenue fell 9%, to $411 million.
Earnings per share of 48 cents came in at the low end of the company’s forecast. Deluxe said it expects second-quarter earnings of 52 cents to 56 cents and full-year earnings of $2.70 to $2.80.
Deluxe said Terry Peterson, its chief accounting officer, will act as interim CFO. Mr. Peterson, 41, will continue to hold his current title, as well as those of vice president and controller, all of which he has had since March 2005. He joined Deluxe in September 2004 as director of internal audit.
Mr. Eilers said that Deluxe will continue to compete for market share in the check-printing business, though that market is shrinking as consumers and businesses shift to payment cards and electronic payment systems.
Deluxe plans to close printing plants this quarter in Athens, Ohio, and Commerce, Calif., Mr. Eilers said.
In February it announced that it had won the check-printing contract of U.S. Bancorp of Minneapolis. That contract began contributing to revenue and profit in March.
Mr. Eilers said that though pricing for check-printing deals is very competitive, “I don’t think we’re seeing an acceleration in pricing declines.”
Deluxe made a strategy shift in June 2004 when it bought New England Business Service Inc. of Groton, Mass., an office supply catalog service and business printer. Before that deal, noncheck services produced about a fifth of Deluxe’s revenue; in the first quarter they brought in 57%.
“While we’re still in a period of transition at Deluxe, I believe we’re poised at the threshold of a place that will reward us with a payoff,” Mr. Eilers said.
John Kraft, an analyst at D.A. Davidson & Co., said Tuesday in a note to clients that Deluxe’s revenue and earnings were both weak, especially in the financial services segment.
“Business continues to suffer from lower response rates (as more banks give away checks) and unit volume,” said Mr. Kraft, who has a “neutral” rating on the company’s stock.
