John H. Harland Company
John H. Harland Company
P.O. Box 105250
Atlanta, Georgia 30348
Sales: $561.6 million (1995)
Stock Exchanges: New York
SICs: 2759 Commercial Printing, Not Elsewhere Classified; 2752 Commercial Printing Lithographic; 3577 Computer Peripheral Equipment, Not Elsewhere Classified
John H. Harland Company, an S&P 500 company, provides the financial industry with marketing and strategic planning services, checks and forms, and loan automation and compliance software. Harland is the world’s second-largest check printer and the major collector of demographic consumer information for financial institutions. The company operates primarily in the United States and Puerto Rico, and has a joint venture, Galas Harland, with Mexico’s largest check printer. Harland’s subsidiary Scantron provides education technology and produces optical mark reading and optical character recognition forms and equipment. These are used in grading standardized tests, surveying hotel customers, inventorying warehouse contents, and selecting meals in hospitals. In 1995 Harland had sales of $561.6 million, 90 percent of which was to the financial services market. Its primary customers are banks, credit unions, brokerage firms, and personal financial software companies.
John Harland, a school dropout, came to the United States from Ireland at the turn of the century. After working in Providence and New York, he moved to Atlanta in 1906 and began his career as an office boy. He was promoted to cashier, and eventually to company treasurer. In 1922 he married Wilhelmina Drummond, who had repaired ambulances in France during World War I and delivered hospital beds to Belgrade after the Armistice. It was Wilhelmina who convinced Harland to start his own company in 1923.
The new John H. Harland Company consisted of a printing plant, which produced stationary and business forms on a second-hand lithography press, and an office supply store. During the first year, Harland employed ten men and women and recorded sales of $113,000.
Business was good, and in 1926, the company moved to a new building. But the stock market crash and the business failures that followed nearly killed the young company. In his history of the company, Chairman Robert Woodson related that in 1931 profits were only $1,400. Things got worse: in 1932, the company made a profit of 31 cents.
In 1993 John Harland and his employees took advantage of an opportunity that eventually set the company on a new course. The banks in the Atlanta Clearing House had decided to issue emergency certificates, or scrip, to be used in case people panicked and tried to withdraw their money. The Clearing House awarded the contract for three million certificates to the John H. Harland Company—if they could deliver the certificates in one week.
Employees worked day and night, as armed guards (hired by the government) protected the plant and armored trucks lined up at the loading dock. The company met the deadline. Although the emergency certificates were never used, the banks were impressed. They soon asked Harland to add check printing to its office supplies and form printing businesses.
By the late 1940’s, factions within the company were debating which segment of the business to concentrate on. One group wanted to stay with office supplies. A second thought the company should put more effort in the check printing business. The third segment wanted to concentrate on jobs that paid the most, preparing insurance policies and large contracts. According to Woodson, the check-printing group won out by convincing the others that with enough $2 and $3 dollar check orders, the company would have sales in the thousands.
1950’s and 1960’s—Concentrating on Checks
With the decision made, the company expanded during the early 1950’s, opening check printing plants in Orlando, Nashville, Greensboro, and New Orleans. During this period, the banking industry (and much of the rest of the corporate world) became interested in automation. The American Bankers Association (ABA) set out to automate the reading and processing of checks, using a process called Magnetic Ink Character Recognition (MICR).
Harland was one of a few printing companies selected by the ABA to work on developing MICR. To implement the automation, a new typestyle, called E-13B, was designed. (These are the strange characters now common across the bottom of all checks.) However, once the MICR process was ready, check printers had to decide whether they wanted to meet the very stringent standards required to print MICR-encoded documents. Most of the companies that did not move into that technology disappeared. John H. Harland Company decided to go with MICR printing, and by the mid-1960’s, the company had sales of more than $10 million and 750 employees running ten plants. In 1964 Robert Woodson joined the company, as comptroller. He had been an accountant with the firm of Haskins and Sells, and performed the annual audit of the Harland Company.
Much of the company’s success appeared to come from its responsiveness to consumer demands, as in its introduction of scenic checks, which included designs and photography. Soon people were paying their bills with checks portraying their pets, flowers, views of mountains, and sea shells. As Chairman Woodson wrote, “Scenic checks transformed a dull transaction into an entertaining event, and checks became mini-billboards which people could distribute about town.”
The company offered customers even more self-expression through its ability to print customized checks. Woodson described checks depicting Hollywood starlets and the Spruce Goose designed for the estate of Howard Hughes; a farmer’s prize cow; and a man kissing his second wife, on checks with which to pay alimony to his first wife.
In 1969 Harland named William Robinson president and CEO. Robinson took the company public that year.
1970’s and 1980’s—Bank Deregulation
Harland died in 1976, but the company continued to move into new markets. By 1979, John H. Harland employed over 3,000 people in 32 plants, and had sales of $94 million. However, the check-printing business was about to go wild.
In 1980 Congress deregulated the financial industry. Suddenly everyone—large banks, small banks, credit unions—was offering checking accounts and wanted checks. At the San Diego plant, check orders jumped from 3,000 to 15,000 overnight. In keeping with the company’s ability to recognize early shifts in market demand, Harland was the first company to provide checks to brokerage houses, and eventually became the check supplier for the majority of U.S. brokerage firms.
Checks were a high-profit item for banks and other financial institutions, who marked up the price by 20-30 percent. By 1988, consumers were turning to mail-order check printers whose checks were much less expensive. When appropriate, according to the company’s annual report, Harland provided these high-margin checks through direct mail and specialized retail outlets.
Another new distribution channel was providing checks in conjunction with personal financial software programs. With personal computers becoming more affordable, small businesses and individuals liked the idea of printing out checks from the computer. Harland pioneered the strategy of marketing checks through financial software companies such as Peachtree Software, Solomon, and RealWorld.
Harland was also exploring other printing options, and in 1988 bought Scantron Corporation as a wholly owned subsidiary. This California company produced scannable answer forms for schools and other educational institutions and manufactured an electronic scanner that read and graded the tests. Scantron’s strategy was to sell a school system the test forms and, if it couldn’t afford to buy a scanner, to lend it for free, for as long as the customer kept ordering Scantron’s forms.
In 1989 the check printing business was growing at about three percent, and Harland was printing 23 percent of the checks in the country, second only to Deluxe Corporation, which had 50 percent of the check printing business. That year, for the 40th year in a row, Harland increased its sales, to $344.7 million. For the 36th year in a row it had profit and dividend growth, which was the longest record of any company on either the New York or American stock exchanges.
The 1990’s saw increased competition in the check printing business as banks consolidated, becoming regional and even national institutions, and electronic money transfers became more prevalent. Harland, along with Deluxe Corporation and Clarke American, Inc., dominated an industry that had far fewer participants than ten years before.
For over 70 years, John H. Harland Company has built its reputation on providing premier products and services to the financial services marketplace. Our services are designed to increase the profitability of financial institutions, while serving the changing needs of their customers. We have built valuable relationships with the nation’s leading banks, credit unions, brokerage firms and financial software companies. These relationships, based on mutual trust and experience, provide a franchise and foundation for introducing additional value-added products and services.
The process of printing checks had changed as well, with companies switching from letterpress to less labor-intensive offset printing. Printers upgraded their plants and invested in computer technology. Harland spent millions upgrading or building new plants, training employees, and creating computerized networks that connected their customers to their facilities. In 1990 the company experienced its best productivity gains in four years, according to graphic arts monthly.
At the same time, banks were competing for customers’ deposits and looking for ways to keep existing checking accounts or to attract new ones. In March 1990 Harland’s sales representatives began selling the company’s new Viewpoints line of checks. For no additional charge, customers could choose from 21 political messages, such as “Farmers Feed America,” “Save Our Earth,” “World Freedom,” “Black Pride,” or “Just Say No.” In October, with American military units stationed in Saudi Arabia as part Operation Desert Shield, the company introduced checks with an American flag theme and the message, “Love the USA.” The company also offered a line of checks endorsed by John Denver’s environmental group, the Windstar Foundation, which received a portion of the order price.
In late 1990 the company announced plans to purchase Courier Dispatch Group, Inc.; however, the following spring, Courier’s board took the air and ground courier private in a management buy-out to avoid the takeover by Harland.
In 1991 Bill Robinson retired and Robert Woodson was named president and CEO. Woodson continued strengthening the company’s core check printing business. In 1992 Harland acquired Interchecks, Inc., of Seattle, the fifth-largest check printer in the country, with sales of $70 million. The move gave Harland a larger presence on the West Coast and brought with it a piece of BankAmerica Corporation’s business. In 1993 the company bought Rocky Mountain Bank Note Co. Harland also produced new check designs, including those with the logos of major league football and baseball teams. At the end of that year, the printing of checks and forms accounted for 80 percent of the company’s revenues.
Woodson also moved Harland into the financial software and services arena. In order to differentiate itself from other check printers and to provide more services to its retail banking customers, Harland built alliances with a variety of companies. Through its alliance with and investment in Bottomline Technologies, which produced hardware and software for encoding checks with magnetic ink, the company offered banks the Smarter Starter, a desktop printing system which made it possible for a bank branch to provide new customers personalized checks the minute they opened an account. Working with Telecheck Services, Inc., Harland offered check cashing services, account screening, debt referral and recovery, and lost and stolen check services to its financial customers. Through Cardpro Services Inc., a maker of magnetic stripe cards, Harland could provide automated teller machine (ATM) cards.
In January 1994 Harland switched from developing alliances to buying companies. Harland’s strategy was to sell the software systems and services offered by these companies to Harland’s customers as individual products or packaged with Harland’s check printing services.
The first acquisition was Marketing Profiles Inc., a Florida company with 1993 revenues of approximately $13 million. Bankers used MPI’s database software system and consulting services to track customer data and build a marketing customer information file (MCIF). The system collected customer, product, and account-level information from a bank’s pertinent data centers, and the results could be used to market the bank’s products. In March Harland bought FormAtion Technologies, a Denver company. With FormAtion’s loan origination software, a bank branch could instantly produce loan forms that complied with federal, state, and local regulations. Harland’s subsidiary Scantron purchased Omaha-based Financial Products Corporation. The new subsidiary, Scantron-FPC, provided installation, maintenance, and repair services for computers, peripherals, networks, and operating systems. Harland also formed The Check Store to sell checks directly to customers.
That same year, the company introduced its Smart Document Series™, to help reduce the counterfeiting of checks on photocopies and laser printers. Banks could choose from eight security features, such as a microprint signature line whose words “authorized signature” appeared as a broken line if copied; ink that dissolved on contact with organic solvents; the appearance of the word “void” across the bottom of a photocopied document; and a three-dimensional holostripe which was almost impossible to reproduce. As William Borkland, a Harland executive, told American Banker, “We specialize in serving small to mid-sized banks so we wanted to create a product offering with pricing and feature flexibility.”
Following the signing of the North American Free Trade Agreement (NAFTA), Harland moved into the international market. The company formed a joint venture, Galas Harland, with the Mexico City printing company, Miguel Galas S.A., to print personal and commercial checks for the Mexican market. Within a year Harland was providing checks and specialty printing for markets in Central and South America and throughout the Caribbean.
In 1995 the company signed a five-year exclusive contract with Intuit, Inc., becoming its sole provider of checks and forms. Intuit was the country’s largest provider of personal financial software, with seven million people using its Quicken software. To meet this demand, Harland purchased dataPRINT of Seattle, which produced computer-compatible forms and was a major supplier to Intuit. Continuing to expand its educational technology division, the company bought Quality Computers& Applications. The new company, Scantron QCA, developed and distributed educational hardware and software such as theLINQ, the first filtered access system to the Internet.
Harland also developed and began testing a self-service interactive kiosk, using its SuperLink™ technology. Customers could simply go up to the stand-alone unit, touch the screen, and be able to get information about an account, apply .for a loan, and order checks. The same technology also allowed customers to order checks through automatic teller machines (ATMs) and banks’ automated telephone systems or Voice Response Units. The company began making its products available on banks’ Internet sites and was the sole supplier of checking products to First Security Network Bank, the first all-Internet bank.
Continuing to enhance its core check business, Harland introduced new check designs, including drawings from the Monopoly® board game, Mighty Mouse®, and comic strip characters, and designed customized check packages for customers, such as the Charles Schwab& Co.’s “e.Schwab Online Investing”™account. Customers could also order checks to support such causes as the National Association for Sickle Cell Disease and the Humane Society of the United States.
In October 1995 Robert J. Amman was selected as the new president and CEO of Harland. Amman was president of Western Union and vice chairman of its parent company, First Financial Mortgage Corp. Woodson continued to serve as chairman.
Total sales for 1995 were $561.6 million, an increase of 7.7 percent from 1994. However, net income decreased, largely due to rising paper prices and the cost of the acquisitions. In January 1996, for the first time in 41 years, the company announced that it would not raise quarterly dividends.
In 1996 the company announced that it would begin an extensive review of its business. After first-quarter earnings fell 34 percent, Amman announced he would close some plants and lay off employees. The Atlanta Journal Constitution reported in April that Amman was considering selling Scantron, since it did not fit with the company’s focus on the financial market. In June the company merged Formation Technologies, its compliance software subsidiary, into its Financial Markets segment. With that move, all the company’s various financial service functions became a single operation under the Harland name.
The same month, Harland purchased OKRA Marketing Corporation, a Tampa-based database marketing service, for $25 million. OKRA’s mainframe system was designed for large financial institutions and complimented the PC-based system of MPI which served mid-sized institutions. With the acquisition, Harland had the top two companies in that market.
Scantron Corporation; Scantron FPC; Scantron QCA; The Check Store, Inc.; Galas Harland, S.A. (50%).
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—, “Harland Signs Pact with Intuit to Supply Checks for Quicken,” American Banker, September 11, 1995, p. 38.
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—Ellen D. Wernick