10-K405: Annual report [Sections 13 and 15(d), S-K Item 405]

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.

For the fiscal year ended December 31, 1995.

Commission file number 1-7945.

DELUXE CORPORATION

(Exact name of registrant as specified in its charter)

Minnesota 41-0216800

(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)


3680 Victoria St. N., Shoreview, Minnesota 55126-2966
(Address of principal executive offices) (ZIP Code)


Registrant's telephone number: (612) 483-7111.

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value $1.00 per share New York Stock Exchange

(Title of Class) (Name of each exchange on which
registered)


Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. X Yes No
---- ----

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ x ]

The aggregate market value of the voting stock held by non-affiliates of the
registrant is $2,674,816,268 based on the average bid and asked prices of the
stock on the New York Stock Exchange on March 11, 1996. The number of
outstanding shares of the registrant's common stock as of March 11, 1996, is
82,454,607.


Documents Incorporated by Reference:
1. Portions of the registrant's annual report to shareholders for the
fiscal year ended December 31, 1995, are incorporated by reference in
Parts I, II and IV.

2. Portions of the registrant's proxy statement dated March 27, 1996, are
incorporated by reference in Part III.


DELUXE CORPORATION

PART I

ITEM 1. DESCRIPTION OF BUSINESS

Deluxe Corporation provides products and services primarily to the financial
payment systems industry and also markets specialty products to small businesses
and consumers. The Company began business in 1915 in St. Paul, Minnesota,
printing checks for banks and their customers. The Company today is
headquartered in Shoreview, Minnesota, and has facilities in the United States,
Puerto Rico, Canada and the United Kingdom. The Company's products and services
are sold primarily in the United States. Unless the context otherwise requires,
the term the "Company" refers to Deluxe Corporation and its subsidiaries.

The Company's operations are conducted by Deluxe Corporation and 14 wholly
owned subsidiaries. The marketing operations of the Company are divided between
two market-serving units: Deluxe Financial Services and Deluxe Direct.

DELUXE FINANCIAL SERVICES

Deluxe Financial Services provides check printing, electronic funds transfer,
software and related services to the financial industry; payment systems
protection services, including check authorization, account verification, and
collection services, to financial institutions and retailers; credit card
processing services to retailers; and electronic benefit transfer services to
state governments. Deluxe Financial Services had net sales of approximately $1.2
billion in 1995, accounting for approximately 63 percent of the Company's total
sales.

CHECK PRINTING

Deluxe prints and sells to financial institutions and depositors checks and
related banking forms. The Company is the nation's leading printer of checks for
financial institutions, having an approximately 50 percent share of the
estimated $1.6 billion U.S. financial institution check market. During 1995, the
Company made gross sales of checks and related banking forms in excess of
$100,000 to approximately 1,907 financial institutions (not including branches
as separate entities).

Depositors commonly submit initial check orders and reorders to their
financial institutions, which forward them to one of the Company's printing
plants. Printed checks are shipped directly by the Company to the depositors,
typically on the business day after receipt of the order. The Company's charges
are paid by the financial institutions, which in turn usually deduct the charges
from the depositors' accounts. The Company endeavors to produce and ship all
financial institution check orders within two days after receipt of order. In
1995, the Company delivered 99.81 percent of such check orders error-free.

Payment systems and methods have been changing in the United States in recent
years as banking and other industries have introduced alternatives to the
traditional check, including charge cards, credit cards, debit cards and
electronic payments, among others. Sales of checks to


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financial institutions have been subject to increased competition and consequent
pressure on prices. In addition, the direct mail segment of the check market is
growing rapidly as a lower-priced alternative to financial institution checks
and in 1995 represented an estimated 17 percent of the personal check market.
These developments have produced a mature market for checks and have accelerated
pricing pressure on the Company's check sales. As a result, financial
institution check printing revenues have declined in recent years.

The Company believes that revenues from traditional pocket and deskbook size
check sales to financial institutions will likely continue to decline in the
future. To stabilize check printing operations and improve profitability, the
Company has focused on controlling expenses and increasing efficiency (see
"Recent Developments"), and on higher margin products and services, such as
specially designed checks and licensed check designs. At the same time, the
growing direct mail check segment has been an opportunity for the Company's
Current, Inc., subsidiary, the nation's largest supplier of direct mail personal
checks. See "Deluxe Direct."

The Company also sells personalized plastic automated teller machine (ATM)
cards and credit and debit cards to financial institutions and retailers, and
driver's licenses and other identification cards to government agencies. In
addition, the Company prints direct communications products, such as letter
checks and other personalized marketing products used by financial institutions.

ELECTRONIC FUNDS TRANSFER

Deluxe Data Systems, Inc., provides electronic funds transfer processing and
software and is the nation's largest third-party transaction processor for
regional ATM networks. Deluxe Data processed approximately 1.7 billion
transactions in 1995. Deluxe Data also provides services in emerging debit
markets, including electronic benefit transfer (EBT) and retail point-of-sale
(POS) transaction processing. EBT programs use ATM and POS terminals to deliver
food stamps and welfare assistance. Deluxe Data currently supports EBT programs
for the state governments of Maryland, New Jersey, Utah and Kansas and has
recently been awarded contracts to serve the Southern Alliance of States and the
Northeast Coalition of States.

PAYMENT SYSTEMS PROTECTION SERVICES

CHECK AUTHORIZATION
Electronic Transaction Corporation (ETC) is the nation's largest check
authorization service for retailers. Through its Shared Check Authorization
Network (SCAN), ETC maintains a database of individuals who have outstanding
dishonored checks. In addition, it provides closed account data supplied by
ChexSystems, Inc., a Deluxe subsidiary, and other parties. Using SCAN,
participating retailers authorized more than 2.1 billion checks in 1995.

ACCOUNT VERIFICATION
ChexSystems, Inc., provides account verification services for financial
institutions and served more than 64,000 financial institution office locations
in 1995. ChexSystems maintains a database of individuals who previously have had
checking accounts closed for cause. It also provides SCAN data relating to
dishonored checks to financial institutions. Financial institutions access this
data in considering whether to open checking accounts for individual applicants.
ChexSystems also performs collection services for financial institutions.

COLLECTION SERVICES
National Revenue Corporation (NRC) and its affiliates provide collection and
accounts receivable management services to retail, financial, medical and
commercial credit grantors. NRC has 32 sales offices nationwide and conducts
collection activity for approximately 25,000 business, government and
professional clients.


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CREDIT CARD PROCESSING
Financial Alliance Processing Services, Inc., which was acquired during
January, 1995, is a full-service credit card processor enabling retailers to
accept payment by credit card. In 1995, Financial Alliance processed
approximately 27 million credit card transactions and provided services to more
than 270 financial institutions and 60,000 retailers.

DELUXE DIRECT

Deluxe Direct provides direct mail checks to households and small businesses.
It also markets forms, record-keeping systems, specialty papers, and other
products to small businesses; provides tax forms and electronic tax filing
services to tax preparers; and sells direct mail greeting cards, gift wrap, and
related products to households. Deluxe Direct had net sales of approximately
$678.5 million in 1995, accounting for approximately 37 percent of the Company's
total sales.

Deluxe Direct markets its products primarily through Current, Inc.,
PaperDirect, Inc., and the General Business Forms and Health Care Forms
divisions of Deluxe Corporation.

Current is the nation's leading direct mail supplier of checks and social
expression products, including greeting cards, gift wrap, small gifts and
related products. Current is the largest supplier among the approximately 30
companies engaged in selling checks by direct mail. Current's social expression
business is seasonal and based on holidays. Historically, more than one-third of
Current's annual sales have been made in the fourth quarter.

General Business Forms produces and markets short-run computer and business
forms and record-keeping systems for small businesses and professional
practices. Health Care Forms produces and markets forms to medical and dental
offices. Both product lines are sold primarily through direct mail and telephone
marketing.

PaperDirect, Inc., is a direct mail marketer of specialty papers, presentation
products and pre-designed forms for laser printing and desktop publishing.
Deluxe Direct also includes Nelco, Inc., a supplier of tax forms, tax forms
software, and electronic tax filing services; and T/Maker Company, a publisher
of image content software, including clip art (see "Recent Developments").

Many of Deluxe Direct's products are sold internationally by Deluxe United
Kingdom Limited and Deluxe Canada Inc.

RECENT DEVELOPMENTS

In early 1996, the Company announced that it had initiated a major
consolidation program, which includes closing 26 of the Company's 41 printing
and warehousing facilities over the 1996-1997 period and significantly reducing
the number of its staff and production employees. In addition, the Company
announced that it is re-evaluating its plans for various businesses and that it
will discontinue or dispose of certain business units and products that are not
closely related to the market focus of Deluxe Financial Services and Deluxe
Direct.

The units to be discontinued or sold include the Company's ink manufacturing
division, its financial institution forms production unit, and T/Maker's
ClickArt and Vroombooks product groups. Additional dispositions are being
considered, but the Company currently has no binding commitments to make any
acquisitions or other dispositions.

The Company was incorporated under the laws of the State of Minnesota in 1920.
From 1920 until 1988, the Company was named Deluxe Check Printers, Incorporated.
The Company's principal executive offices are located at 3680 Victoria St. N.,
Shoreview, Minnesota 55126-2966, telephone (612) 483-7111.


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EMPLOYEES

Including its subsidiaries, the Company has approximately 19,300 full- and
part-time employees. It has a number of employee benefit plans, including
retirement, medical and hospitalization plans. The Company has never experienced
a work stoppage or strike and considers its employee relations to be good.

EXECUTIVE OFFICERS OF THE COMPANY

The executive officers of the Company are elected by the board of directors
each year. The term of office of each executive officer will expire at the
annual meeting of the board after the annual shareholders meeting on May 6,
1996. The principal occupation of each executive officer is with the Company,
and their positions are as follows: