Second-quarter earnings at John H. Harland Co. fell 12% despite a 9.1% sales gain, because of a writedown from a year-old acquisition, staff reductions, and lower sales in its check printing business.

The Atlanta-based provider of software and printed products reported consolidated net income of $10.9 million, or 36 cents a share, against $12.4 million or 43 cents a share in the year-earlier period.

It said its August 2000 acquisition of Concentrux Inc. has helped it boost sales but at the same time has pulled down its earnings. It spent about $141 million to buy the Portland, Ore., company.

Thanks in part to Concentrux, a provider of banking software, sales in Harland’s software and services division rose to $31.3 million, from $6.3 million in the second quarter of 2000. The division accounted for 16.7% of the company’s total sales of $187.1 million in the three months, against 3.6% a year earlier.

The lion’s share of the earnings difference resulted from “acquisition-related goodwill” involved in the Concentrux deal, which cost the company 7 cents a share in the quarter.

In addition, the software and services division had a pretax loss of $1.7 million, compared with $826,000 in the 2000 quarter, because it included a $1.5 million severance charge for personnel cutbacks. In all, the company took a charge of $2 million or 4 cents a share for severance costs.

Sales from printed products, including checks, direct marketing material, and financial forms, fell about 7%, to $132.8 million. Including a pretax charge of nearly $500,000 for severance costs, printed products contributed 5% less profit than last year.

Check printing had a particularly poor showing, its revenues falling about 12% compared with the second quarter of 2000. John Stakel, vice president and treasurer, said 20% of that decline was caused by a nonfinancial institution check seller’s moving its printing operations in-house.

Business also was hurt by lower volumes of checks ordered by its financial institution customers — more bank customers ordered their checks directly — and by business lost to consolidation in the banking industry.

John Pensec, director of corporate communications, said the company expects that check volume will remain depressed for the rest of this year but pick up in 2002.

Harland’s earnings, which were announced last week, beat by 1 cent the projection of the only analyst covering the company, Nik Fisken, vice president of research at Stephens Inc. in Little Rock.

In a research note Mr. Fisken noted that Harland’s operating margins for printed products improved in the quarter to 18.2%, from 17.4% in the year-ago period.

But it still trailed its largest competitor, Deluxe Corp. of Shoreview, Minn., which has pretax margins of 22.5%.

The analyst cited innovations at the company’s printing plants. Harland went digital with two of its nine check printing plants this year and hopes to convert two more by yearend.

“It’s a much more efficient process,” he said of digital printing. Compared with traditional offset printing, “you can get check orders in and out much quicker, which means it gets to the consumer much quicker. It improves quality and flexibility, being able to do some customization of orders.” Harland plans to convert at least one more factory next year.

The stock closed Friday at $21, down 2% on the week.

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