DECATUR, Ga., Feb. 26 /PRNewswire/ -- Harland Clarke Holdings Corp.
("Harland Clarke Holdings" or the "Company") today reported results
for the fourth quarter and year ended December 31, 2009. In
addition to the Harland Clarke Holdings Annual Report on Form 10-K
filed with the Securities and Exchange Commission today, Harland
Clarke Holdings' financial results are also consolidated in the
Annual Report on Form 10-K filed today by M & F Worldwide Corp.
("M & F Worldwide") , which is the indirect parent company of
Harland Clarke Holdings. M & F Worldwide will host a conference
call to discuss its fourth quarter and full year 2009 results on
March 4, 2010, at 9:00 a.m. (EST). The conference call will be
accessible by dialing (800) 230-1096 in the United States and (612)
332-0335 internationally. For those unable to listen live, a replay
of the call will be available by dialing (800) 475-6701 in the
United States and (320) 365-3844 internationally; Access Code:
146498. The replay will be available from 11:00 a.m. (EST)
Thursday, March 4, 2010, through 11:59 p.m. (EST) Thursday, March
18, 2010. 2009 Highlights -- Net revenues of $1,712.3 million, down
$82.3 million, or 4.6%, as compared to 2008. -- Operating income of
$250.3 million, down $14.5 million, or 5.5%, as compared to 2008.
Operating income for 2009 includes the impact of a $44.2 million
non-cash write-down of the value of the Harland Clarke tradename.
-- Net income of $112.1 million, up $64.9 million, or 137.5%, as
compared to 2008. Net income for 2009 includes the impact of a
$65.0 million ($40.1 million after tax) gain on early
extinguishment of debt, partially offset by a $44.2 million ($27.0
million after tax) non-cash write-down of the value of the Harland
Clarke tradename. Full Year 2009 Performance Consolidated Results
Consolidated net revenues decreased by $82.3 million, or 4.6%, to
$1,712.3 million for 2009 from $1,794.6 million for 2008. The
decrease was primarily due to a decrease in net revenues for each
of Harland Clarke Holdings' three business segments, partially
offset by an increase in net revenues of $14.6 million due to the
acquisition of Data Management I LLC by the Scantron segment on
February 22, 2008. Net income increased by $64.9 million, or
137.5%, to $112.1 million for 2009 from $47.2 million for 2008. Net
income for 2009 includes a $65.0 million ($40.1 million after tax)
gain on early extinguishment of debt related to the purchase of
$136.9 million principal amount of the Company's Senior Notes for
aggregate consideration of $67.6 million. The increase in net
income also reflects $58.5 million ($35.7 million after tax)
decrease in selling general and administrative expenses, a $49.5
million ($30.2 million after tax) decrease in interest expense due
to lower interest rates on variable rate debt and lower debt
balances, partially offset by a $42.0 million ($25.6 million after
tax) increase in asset impairment charges primarily related to a
non-cash write-down of the value of the Harland Clarke tradename in
2009, and a $17.9 million ($10.9 million after tax) increase in
restructuring charges. Adjusted EBITDA increased by $38.0 million,
or 8.3%, to $493.1 million for 2009 from $455.1 million for 2008.
Adjusted EBITDA is a non-GAAP measure that is defined in the
footnotes to this release and reconciled to net income, the most
directly comparable GAAP measure, in the accompanying financial
tables. Segment Results Net revenues for the Harland Clarke segment
decreased by $64.4 million, or 5.0%, to $1,226.0 million for 2009
from $1,290.4 million for 2008. The decrease was primarily due to
volume declines from check and related products, which the Company
believes was partially affected by the economic downturn. Declines
in volumes were partially offset by increased revenues per unit.
Operating income for the Harland Clarke segment decreased by $21.3
million, or 9.8%, to $195.8 million for 2009 from $217.1 million
for 2008. The decrease in operating income was primarily due to a
$33.4 million non-cash write-down of the value of the Harland
Clarke tradename in 2009, a $17.4 million increase in restructuring
costs, volume declines and inflation in delivery and materials
costs, which were partially offset by increased revenues per unit,
reductions in labor, general overhead and integration-related
costs, and a decrease in depreciation and amortization. Operating
income for 2009 and 2008 includes restructuring costs of $25.7
million and $8.3 million, respectively. Net revenues for the
Harland Financial Solutions segment decreased by $14.8 million, or
5.0%, to $278.9 million for 2009 from $293.7 million for 2008. The
decrease was primarily due to volume declines in license, hardware
and professional services revenues as well as in mortgage products,
partially offset by increases in lending products. The Company
believes the declines were partially affected by the economic
downturn, which has negatively affected financial institution
purchases. Operating income for the Harland Financial Solutions
segment decreased by $1.3 million, or 3.8%, to $32.8 million for
2009 from $34.1 million for 2008. The decrease in operating income
was primarily due to a $10.6 million non-cash write-down of the
value of the Harland Clarke tradename in 2009 and the decrease in
net revenues, mostly offset by labor cost reductions, decreases in
general overhead costs and a $4.6 million decrease in compensation
expense related to an incentive agreement for an acquisition.
Operating income for 2009 includes charges of $3.5 million for
compensation expense related to an incentive agreement from an
acquisition and $3.8 million for restructuring costs. Operating
income for 2008 includes charges of $8.1 million for compensation
expense related to an incentive agreement from an acquisition and
$3.9 million for restructuring costs. Net revenues for the Scantron
segment decreased by $3.3 million, or 1.6%, to $208.0 million for
2009 from $211.3 million for 2008. The Data Management acquisition
accounted for an increase of $14.6 million. The remaining $17.9
million decrease was a result of volume declines in hardware and
forms products, partially offset by organic growth in software
products. The Company believes the hardware and forms product lines
were partially affected by the economic downturn. Operating income
for the Scantron segment increased by $6.1 million, or 21.5%, to
$34.5 million for 2009 from $28.4 million for 2008. The increase in
operating income was partially due to the Data Management
acquisition, which accounted for an increase of $1.9 million. The
remaining $4.2 million increase was primarily due to cost
reductions and a decrease in integration-related costs from the
Data Management acquisition and other restructuring activities,
partially offset by volume declines. Fourth Quarter 2009
Performance Consolidated Results Consolidated net revenues
decreased by $17.1 million, or 3.9%, to $421.6 million for the
fourth quarter of 2009 from $438.7 million for the fourth quarter
of 2008. Net income decreased by $6.4 million, or 64.6%, to $3.5
million for the fourth quarter of 2009 from $9.9 million for the
fourth quarter of 2008. The decrease in net income was primarily
due to a $44.2 million ($27.0 million after tax) non-cash
write-down of the value of the Harland Clarke tradename, partially
offset by a $16.1 million ($9.8 million after tax) decrease in
interest expense due to lower interest rates on variable rate debt
and lower debt balances, and a $10.0 million ($6.1 million after
tax) decrease in selling, general and administrative expenses.
Adjusted EBITDA increased by $11.5 million, or 10.2%, to $124.2
million for the fourth quarter of 2009 from $112.7 million for the
fourth quarter of 2008. Adjusted EBITDA is a non-GAAP measure that
is defined in the footnotes to this release and reconciled to net
income, the most directly comparable GAAP measure, in the
accompanying financial tables. Segment Results Net revenues for the
Harland Clarke segment decreased by $7.0 million, or 2.3%, to
$299.6 million for the fourth quarter of 2009 from $306.6 million
for the fourth quarter of 2008. The decrease was primarily due to
volume declines from check and related products, which the Company
believes was partially affected by the economic downturn. Declines
in volumes were partially offset by increased revenues per unit.
Operating income for the Harland Clarke segment decreased by $20.5
million, or 46.9%, to $23.2 million for the fourth quarter of 2009
from $43.7 million for the fourth quarter of 2008. The decrease in
operating income was primarily due to a $33.4 million non-cash
write-down of the value of the Harland Clarke tradename in 2009,
volume declines and inflation in delivery and material costs, which
were partially offset by increased revenues per unit, reductions in
labor, general overhead and integration-related costs, and a $3.0
million decrease in restructuring costs. Operating income for the
fourth quarter of 2009 and 2008 includes restructuring costs of
$3.9 million and $6.9 million, respectively. Net revenues for the
Harland Financial Solutions segment decreased by $3.7 million, or
4.9%, to $72.1 million for the fourth quarter of 2009 from $75.8
million for the fourth quarter of 2008. The decrease was primarily
due to volume declines in license, hardware and professional
services revenues as well as in mortgage products, partially offset
by increases in lending products. The Company believes the declines
were partially affected by the economic downturn, which has
negatively affected financial institution purchases. Operating
income for the Harland Financial Solutions segment decreased by
$8.6 million, or 64.7%, to $4.7 million for the fourth quarter of
2009 from $13.3 million for the fourth quarter of 2008. The
decrease in operating income was primarily due to a $10.6 million
non-cash write-down of the value of the Harland Clarke tradename in
2009, and the decrease in net revenues, partially offset by labor
cost reductions, decreases in general overhead costs and a $1.2
million reduction in restructuring costs. Net revenues for the
Scantron segment decreased by $6.4 million, or 11.3%, to $50.0
million for the fourth quarter of 2009 from $56.4 million for the
fourth quarter of 2008. The decrease in net revenues was primarily
due to volume declines in hardware and forms products lines and a
decrease in service and maintenance revenues. The Company believes
these product lines and services were partially affected by the
economic downturn. Operating income for the Scantron segment
increased by $0.7 million, or 7.6%, to $9.9 million in the fourth
quarter of 2009 from $9.2 million in the fourth quarter of 2008.
The increase in operating income was primarily due to cost
reductions and a decrease in integration-related costs from the
Data Management acquisition and other restructuring activities,
partially offset by volume declines. About Harland Clarke Holdings
Harland Clarke Holdings has three business segments, which are
operated by Harland Clarke, Harland Financial Solutions and
Scantron. Harland Clarke is a provider of checks and related
products, direct marketing services and customized business and
home office products. Harland Financial Solutions provides
technology products and related services to financial institutions.
Scantron is a leading provider of data management solutions and
related services to educational, healthcare, commercial and
governmental entities. Forward-Looking Statements This press
release contains forward-looking statements that reflect
management's current assumptions and estimates of future
performance and economic conditions, which are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements are subject to a number of
risks and uncertainties, many of which are beyond Harland Clarke
Holdings' control. All statements other than statements of
historical facts included in this press release, including those
regarding Harland Clarke Holdings' strategy, future operations,
financial position, estimated revenues, projected costs,
projections, prospects, plans and objectives of management, are
forward-looking statements. When used in this press release, the
words "believes," "anticipates," "plans," "expects," "intends,"
"estimates" or similar expressions are intended to identify
forward-looking statements, although not all forward-looking
statements contain such identifying words. All forward-looking
statements speak only as of the date of this press release.
Although Harland Clarke Holdings believes that its plans,
intentions and expectations reflected in or suggested by the
forward-looking statements made in this press release are
reasonable, such plans, intentions or expectations may not be
achieved. In addition to factors described in Harland Clarke
Holdings' Securities and Exchange Commission filings and others,
the following factors may cause Harland Clarke Holdings' actual
results, performance or achievements to be materially different
from any future results, performance or achievements expressed or
implied by the forward-looking statements contained in this press
release include: (1) Harland Clarke Holdings' substantial
indebtedness; (2) difficult conditions in financial markets, the
downturn in and potential worsening of general economic and market
conditions and the impact of the credit crisis; (3) covenant
restrictions under Harland Clarke Holdings' indebtedness that may
limit its ability to operate its business and react to market
changes; (4) the maturity of the principal industry in which the
Harland Clarke segment operates and trends in the paper check
industry, including a faster than anticipated decline in check
usage due to increasing use of alternative payment methods, a
decline in consumer confidence and/or checking account openings and
other factors, and our ability to grow non-check-related product
lines; (5) consolidation among or failure of financial
institutions, decreased spending by financial institutions on our
products and services and other adverse changes among the large
clients on which Harland Clarke Holdings depends, resulting in
decreased revenues and/or pricing pressure; (6) the ability to
retain Harland Clarke Holdings' clients; (7) the ability to retain
Harland Clarke Holdings' key employees and management; (8) lower
than expected cash flow from operations; (9) significant increases
in interest rates; (10) intense competition in all areas of Harland
Clarke Holdings' business; (11) interruptions or adverse changes in
Harland Clarke Holdings' supplier relationships, technological
capacity, intellectual property matters, and applicable laws; (12)
decreases to educational budgets as a result of the continued
general economic downturn and the resulting impact on Scantron's
customers; (13) variations in contemplated brand strategies,
business locations, management positions and other business
decisions in connection with integrating acquisitions; (14) Harland
Clarke Holdings' ability to successfully integrate and manage
future acquisitions; (15) Harland Clarke Holdings' ability to
implement any or all components of its business strategy or realize
all of its expected cost savings or synergies from acquisitions;
(16) acquisitions otherwise not being successful from a financial
point of view, including, without limitation, due to any
difficulties with Harland Clarke Holdings servicing its debt
obligations; and (17) weak economic conditions and declines in the
financial performance of our businesses that may result in material
impairment charges. You should read carefully the factors described
in Harland Clarke Holdings' Annual Report on Form 10-K for the year
ended December 31, 2009 for a description of risks that could,
among other things, cause actual results to differ from these
forward looking statements. Non-GAAP Financial Measures In this
release, Harland Clarke Holdings presents certain adjusted
financial measures that are not calculated according to generally
accepted accounting principles in the United States ("GAAP"). These
non-GAAP financial measures are designed to complement the GAAP
financial information presented in this release because management
believes they present information regarding Harland Clarke Holdings
that management believes is useful to investors. The non-GAAP
financial measures presented should not be considered in isolation
from or as a substitute for the comparable GAAP financial measure.
EBITDA represents net income before interest income and expense,
income taxes, depreciation and amortization (other than
amortization related to contract acquisition payments). Harland
Clarke Holdings presents EBITDA because it believes it is an
important measure of its performance and believes it is frequently
used by securities analysts, investors and other interested parties
in the evaluation of companies in Harland Clarke Holdings'
industries. Harland Clarke Holdings believes EBITDA provides useful
information with respect to its ability to meet its future debt
service, capital expenditures, working capital requirements and
overall operating performance, although EBITDA should not be
considered as a measure of liquidity. In addition, Harland Clarke
Holdings utilizes EBITDA when interpreting operating trends and
results of operations of its business. Harland Clarke Holdings also
uses EBITDA for the following purposes: Harland Clarke Holdings'
senior credit facilities use EBITDA (with additional adjustments)
to measure compliance with financial covenants such as debt
incurrence. Harland Clarke Holdings' executive compensation is
based on EBITDA (with additional adjustments) performance measured
against targets. EBITDA is also widely used by Harland Clarke
Holdings and others in its industry to evaluate and value potential
acquisition candidates. EBITDA has limitations as an analytical
tool, and you should not consider it in isolation or as a
substitute for analysis of our results as reported under GAAP. See
below for a description of these limitations. Because of these
limitations, EBITDA should not be considered as a measure of
discretionary cash available to Harland Clarke Holdings to invest
in the growth of its business. In addition, in evaluating EBITDA,
you should be aware that in the future Harland Clarke Holdings may
incur expenses such as those excluded in calculating it. Harland
Clarke Holdings' presentation of this measure should not be
construed as an inference that its future results will be
unaffected by unusual or non-recurring items. EBITDA has
limitations as an analytical tool, and you should not consider it
in isolation or as a substitute for analysis of our results as
reported under GAAP. Some of these limitations are: -- it does not
reflect Harland Clarke Holdings' cash expenditures and future
requirements for capital expenditures or contractual commitments;
-- it does not reflect changes in, or cash requirements for,
Harland Clarke Holdings' working capital needs; -- it does not
reflect the significant interest expense or the cash requirements
necessary to service interest or principal payments on Harland
Clarke Holdings' debt; -- although depreciation and amortization
are non-cash charges, the assets being depreciated and amortized
will often have to be replaced in the future, and EBITDA does not
reflect any cash requirements for such replacements; -- it is not
adjusted for all non-cash income or expense items that are
reflected in Harland Clarke Holdings' statements of cash flows; and
-- other companies in Harland Clarke Holdings' industries may
calculate EBITDA differently from Harland Clarke Holdings, limiting
its usefulness as a comparative measure. Because of these
limitations, EBITDA should not be considered as a measure of
discretionary cash available to invest in the growth of Harland
Clarke Holdings' business or as a measure of cash that will be
available to Harland Clarke Holdings to meet its obligations. You
should compensate for these limitations by relying primarily on
Harland Clarke Holdings' GAAP results and using EBITDA only
supplementally. Harland Clarke Holdings presents Adjusted EBITDA as
a supplemental measure of its performance. Harland Clarke Holdings
prepares Adjusted EBITDA by adjusting EBITDA to reflect the impact
of a number of items it does not consider indicative of Harland
Clarke Holdings' ongoing operating performance. Such items include,
but are not limited to, gain on early extinguishment of debt,
restructuring costs, intangible asset impairment charges, deferred
purchase price compensation related to an acquisition and certain
purchase accounting adjustments. You are encouraged to evaluate
each adjustment and the reasons Harland Clarke Holdings considers
them appropriate for supplemental analysis. As an analytical tool,
Adjusted EBITDA is subject to all of the limitations applicable to
EBITDA. In addition, in evaluating Adjusted EBITDA, you should be
aware that in the future, Harland Clarke Holdings may incur
expenses, including cash expenses, similar to the adjustments in
this presentation. Harland Clarke Holdings' presentation of
Adjusted EBITDA should not be construed as an inference that its
future results will be unaffected by unusual or non-recurring
items. Harland Clarke Holdings Corp. and Subsidiaries Consolidated
Statements of Income (in millions) (unaudited) Three Months Ended
Year Ended December 31, December 31, -------------------
------------------ 2009 2008 2009 2008 ---- ---- ---- ---- Product
revenues, net $348.5 $360.4 $1,417.8 $1,491.8 Service revenues, net
73.1 78.3 294.5 302.8 ------ ------ -------- -------- Total net
revenues 421.6 438.7 1,712.3 1,794.6 Cost of products sold 206.6
220.5 846.6 910.4 Cost of services provided 36.8 39.6 151.1 156.5
------ ------ -------- -------- Total cost of revenues 243.4 260.1
997.7 1,066.9 ------ ------ -------- -------- Gross profit 178.2
178.6 714.6 727.7 Selling, general and administrative expenses 96.0
106.0 387.4 445.9 Asset impairment charges 44.2 1.6 44.4 2.4
Restructuring costs 3.5 7.9 32.5 14.6 Operating income 34.5 63.1
250.3 264.8 Interest income 0.2 0.3 1.0 2.2 Interest expense (30.6)
(46.7) (136.9) (186.4) Gain on early extinguishment of debt 3.0 -
65.0 - Other income (expense), net 0.1 (0.2) 0.1 (0.4) ------
------ -------- -------- Income before income taxes 7.2 16.5 179.5
80.2 Provision for income taxes 3.7 6.6 67.4 33.0 Net income $3.5
$9.9 $112.1 $47.2 ====== ====== ======== ======== Harland Clarke
Holdings Corp. and Subsidiaries Business Segment Information (in
millions) (unaudited) Three Months Ended Year Ended December 31,
December 31, ------------------ ------------------ 2009 2008 2009
2008 ---- ---- ---- ---- Net revenues Harland Clarke segment $299.6
$306.6 $1,226.0 $1,290.4 Harland Financial Solutions segment 72.1
75.8 278.9 293.7 Scantron segment 50.0 56.4 208.0 211.3
Eliminations (0.1) (0.1) (0.6) (0.8) ------- ------- ---------
--------- Total net revenues $421.6 $438.7 $1,712.3 $1,794.6
======= ======= ======== ========= Operating income (a) Harland
Clarke segment $23.2 $43.7 $195.8 $217.1 Harland Financial
Solutions segment 4.7 13.3 32.8 34.1 Scantron segment 9.9 9.2 34.5
28.4 Corporate (3.3) (3.1) (12.8) (14.8) ------- ------- ---------
--------- Total operating income $34.5 $63.1 $250.3 $264.8 =======
======= ======== ========= (a) Includes the impact of a non-cash
write-down of the value of the Harland Clarke tradename of $44.2 in
the fourth quarter of 2009 ($33.4 related to the Harland Clarke
segment, $10.6 related to the Harland Financial Solutions segment
and $0.2 related to the Scantron segment). Reconciliation of net
income to EBITDA and EBITDA to Adjusted EBITDA (in millions):
(unaudited) ------------------------------------------- Three
Months Ended Year Ended December 31, December 31, ------------
------------ 2009 2008 2009 2008 ---- ---- ---- ---- Net income
$3.5 $9.9 $112.1 $47.2 Interest expense, net 30.4 46.4 135.9 184.2
Provision for income taxes 3.7 6.6 67.4 33.0 Depreciation and
amortization 41.3 40.6 162.1 164.5 ---- ---- ----- ----- EBITDA
78.9 103.5 477.5 428.9 Adjustments: Restructuring costs (a) 3.5 7.9
32.5 14.6 Deferred purchase price compensation (b) 0.6 0.9 3.5 8.1
Impairment of intangible assets (c) 44.2 - 44.2 0.5 Gain on early
extinguishment of debt (d) (3.0) - (65.0) - Impact of purchase
accounting adjustments (e) - 0.4 0.4 3.0 --- --- --- --- Adjusted
EBITDA $124.2 $112.7 $493.1 $455.1 ====== ====== ====== ====== (a)
Reflects restructuring costs, including adjustments, recorded in
accordance with GAAP, consisting primarily of severance,
post-closure facility expenses and other related expenses, which
were not recorded in purchase accounting. (b) Reflects charges
accrued under a deferred purchase price agreement required to be
recorded as compensation expense in selling, general and
administrative expense resulting from an acquisition. (c) Reflects
non-cash impairment charges from the write-down of the value of the
Harland Clarke tradename in 2009 and Alcott Routon intangible
assets in 2008. (d) Reflects gains from the purchase of Harland
Clarke Holdings bonds at less than their principal amount. (e)
Reflects the non-cash fair value deferred revenue and inventory
adjustments related to purchase accounting. DATASOURCE: Harland
Clarke Holdings Corp. CONTACT: Pete Fera, Harland Clarke Holdings
Corp., +1-210-697-1208
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