Deluxe Corp., a check-printing giant that had expanded into electronic processing, is shedding noncore businesses and streamlining operations.
With its 83-year-old check-printing business acting as a "cash cow" to fund expansion, Deluxe had broadened into areas such as check verification, data base marketing, and electronic benefits transfer. It also is building a bureau to detect fraud in demand-deposit accounts.
Narrowing its focus, Deluxe is expected to close on sales of three noncore businesses in the fourth quarter. It will sell its greeting card unit, Social Expressions, and its specialty printing unit, PaperDirect, to Taylor Corp., a privately held printing and marketing company. Terms of the deals were not disclosed, but revenues of the two businesses were $231 million in 1997. Deluxe is also selling its data base marketing unit, Deluxe Direct Response, to an undisclosed buyer.
In addition, the company is taking steps to lower its unusually high overhead of 40 cents on every revenue dollar, said J.A. Blanchard, president and chief executive officer.
Deluxe, which has about 18,000 employees, said it would cut 2,500 jobs by the end of 2000. It expects to lower its workforce by another 1,700 with the sales of its business units.
Many layoffs have come as the company cut check production facilities, from 62 sites in 1993 to just 14. The cuts also would eliminate redundant finance, human resources, marketing, and administrative groups, which are a legacy of Deluxe's acquisition binge in the late 1980s and early 1990s.
"It finally became inevitable and highly desirable that we go through some standardization," Mr. Blanchard said.
The St. Paul-based company reported a slight increase in third-quarter revenues, to $469.8 million from $466.9 million the previous year.
Net income was $73.3 million, up slightly from $72.4 million the year before. Deluxe exceeded First Call's per-share earnings estimate of 57 cents by a penny.
The cost-cutting prompted Deluxe to boost fourth-quarter profit expectations by 5 cents a share, to as much as 71 cents. The company also said it expects earnings to rise 11% to 15% in 1999 and 2000, up from previous forecasts of 5% to 9%.
Deluxe's stock rose 68.75 cents for the week, to $31.0625.
Joel Krasner, an analyst at First Albany Corp., maintained his "buy" rating on Deluxe, saying the moves are "constructive" and should help the company boost profits.
"I think it is a good first step in terms of further eliminating some operations that are not contributing to the bottom line," he said.
Heather Bellini, an analyst at Lehman Brothers, said her firm would keep its neutral rating on the stock because of Deluxe's unusually high quarterly dividends. She said the company pays out more than 60% of its net income to shareholders. A better use of its capital, she said, would be to "cut the dividend rate and buy back stock."
"We think there is a flaw in the dividend strategy," she said.
