NEW YORK, May 5 /PRNewswire-FirstCall/ -- M & F
Worldwide Corp. ("M & F Worldwide" or the "Company") (NYSE:
MFW) today reported results for the first quarter ended
March 31, 2010. Additionally, M
& F Worldwide filed its quarterly report on Form 10-Q with the
Securities and Exchange Commission today.
M & F Worldwide will host a conference call to discuss its
first quarter 2010 results on May 13,
2010, at 9:00 a.m. (EDT).
The conference call will be accessible by dialing (800)
230-1074 in the United States and
(612) 234-9960 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: 154441. The
replay will be available from 11:00 a.m.
(EDT) Thursday, May 13, 2010, through 11:59 p.m. (EDT) Thursday, May 27, 2010.
First Quarter 2010 Highlights
- Net revenues of $457.2 million,
down $7.1 million, or 1.5%, as
compared to the first quarter of 2009.
- Operating income of $88.0
million, up $19.7 million, or
28.8%, as compared to the first quarter of 2009.
- Net income of $33.6 million, down
$17.7 million, or 34.5%, as compared
to the first quarter of 2009. Net income for the first
quarter of 2009 includes the impact of a $52.6 million ($32.5
million after tax) gain on early extinguishment of
debt.
First Quarter 2010 Performance
Consolidated Results
Consolidated net revenues decreased by $7.1 million, or 1.5%, to $457.2 million for the first quarter of 2010 from
$464.3 million for the first quarter
of 2009. The decrease was primarily due to volume declines at
Harland Clarke and Scantron, partially offset by increased revenues
per unit and revenues related to the SubscriberMail and Protocol
IMS acquisitions completed in the fourth quarter of 2009 at the
Harland Clarke segment and an increase in revenues at the Licorice
Products segment.
Operating income increased by $19.7
million, or 28.8%, to $88.0
million for the first quarter of 2010 from $68.3 million for the first quarter of 2009.
The increase was primarily due to labor cost reductions
resulting from restructuring activities, increased revenues per
unit in the Harland Clarke segment, and a $7.9 million decrease in restructuring costs.
These increases were partially offset by volume declines in
the Harland Clarke and Scantron segments and increased raw material
costs in the Licorice Products segment.
Net income decreased by $17.7
million, or 34.5%, to $33.6
million, or $1.73 per diluted
share, for the first quarter of 2010 from $51.3 million, or $2.64 per diluted share, for the first quarter of
2009. The decrease in net income was due to a $52.6 million ($32.5
million after tax) gain on early extinguishment of debt
related to the purchase of $90.5
million principal amount of the Harland Clarke Holdings'
Senior Notes for aggregate consideration of $35.1 million in the first quarter of 2009.
The decrease in net income was partially offset by
improvements in operating income, which increased $19.7 million ($12.0
million after tax), and interest expense, which declined
$8.0 million ($4.9 million after tax) as compared to the first
quarter of 2009.
Adjusted EBITDA increased by $10.2
million, or 8.3%, to $132.5
million for the first quarter of 2010 from $122.3 million for the first quarter of 2009.
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
$5.4 million, or 1.7%, to
$309.7 million for the first quarter
of 2010 from $315.1 million for the
first quarter of 2009. The decrease was primarily a result of
volume declines in check and related products, partially offset by
increased revenues per unit and revenues from the 2009
acquisitions. Operating income for the Harland Clarke segment
increased by $14.7 million, or 28.9%,
to $65.6 million for the first
quarter of 2010 from $50.9 million
for the first quarter of 2009. The increase in operating
income was primarily due to labor cost reductions resulting from
restructuring activities, increased revenues per unit, and a
$5.6 million decrease in
restructuring costs, partially offset by volume declines.
Operating income for the first quarters of 2010 and 2009
includes restructuring costs of $1.7
million and $7.3 million,
respectively.
Net revenues for the Harland Financial Solutions segment
increased by $0.1 million, or 0.1%,
to $69.3 million for the first
quarter of 2010 from $69.2 million
for the first quarter of 2009. Increases in maintenance
revenues and outsourced host processing revenues were substantially
offset by decreases in early termination fees and hardware sales.
Operating income for the Harland Financial Solutions segment
increased by $4.0 million, or 54.1%,
to $11.4 million for the first
quarter of 2010 from $7.4 million for
the first quarter of 2009. The increase in operating income
was primarily due to labor cost reductions resulting from
restructuring activities and a $2.2
million decrease in restructuring costs. Operating
income for the first quarter of 2010 includes charges of
$0.4 million for compensation expense
related to an incentive agreement from an acquisition and
$0.2 million for restructuring costs.
Operating income for the first quarter of 2009 includes
charges of $1.0 million for
compensation expense related to an incentive agreement from an
acquisition and $2.4 million for
restructuring costs.
Net revenues for the Scantron segment decreased by $3.3 million, or 6.1%, to $51.1 million for the first quarter of 2010 from
$54.4 million for the first quarter
of 2009. The decrease was primarily due to declines in service
maintenance, forms and hardware revenues, which the Company
believes were negatively affected by the economic downturn. These
declines were partially offset by increases in revenues from
web-based products and services. Operating income for the
Scantron segment increased by $2.5
million, or 36.8%, to $9.3
million for the first quarter of 2010 from $6.8 million for the first quarter of 2009.
The increase in operating income was primarily due to a
reduction in integration expenses, labor cost reductions resulting
from restructuring activities, and a $1.3
million one-time expense related to a contractual obligation
owing to a former employee upon termination of employment that
occurred in the first quarter of 2009, which were partially offset
by volume declines. Operating income for the first quarters
of 2010 and 2009 includes restructuring costs of $1.3 million and $1.4
million, respectively.
Net revenues for the Licorice Products segment increased by
$1.5 million, or 5.8%, to
$27.2 million for the first quarter
of 2010 from $25.7 million for the
first quarter of 2009. Sales of licorice extract to non-tobacco
customers increased by $1.6 million
as a result of an increase in shipment volumes to confectionary
customers and the favorable impact of the U.S. dollar translation
of Mafco Worldwide's Euro denominated sales due to the weaker
dollar in 2010 versus 2009. Magnasweet and pure licorice
derivative sales increased by $0.7
million primarily as the result of an increase in shipment
volumes of pure licorice derivatives. Sales of licorice extract to
the worldwide tobacco industry decreased by $0.8 million as the result of a decline in
shipment volumes due to continued worldwide consumption declines in
tobacco products using licorice, a shift in the strategy of
worldwide cigarette manufacturers which placed a greater emphasis
on product changes and cost reductions and the continued
rationalization of inventories by Altria, Inc. which affected order
timing. Operating income for the Licorice Products segment
decreased by $1.5 million, or 17.9%,
to $6.9 million for the first quarter
of 2010 from $8.4 million for the
first quarter of 2009. The decrease in operating income was
primarily due to a change in the mix of products sold resulting in
lower revenue per unit and increased raw material costs as a
percentage of sales.
About M & F Worldwide
M & F Worldwide has four business segments, which are
operated by Harland Clarke, Harland Financial Solutions, Scantron
and Mafco Worldwide. 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. Mafco
Worldwide produces licorice products for sale to the tobacco, food,
pharmaceutical and confectionery industries.
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 M & F
Worldwide's control. All statements other than statements of
historical facts included in this press release, including those
regarding M & F Worldwide's 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 M & F Worldwide 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 M & F
Worldwide's Securities and Exchange Commission filings and others,
the following factors may cause M & F Worldwide's 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) economic, climatic or political
conditions in countries in which Mafco Worldwide sources licorice
root; (2) economic, regulatory or political conditions that have an
impact on the worldwide tobacco industry or on the consumption of
tobacco products in which licorice products are used; (3) the
failure of third parties to make full and timely payment to M &
F Worldwide for environmental, asbestos, tax and other matters for
which M & F Worldwide is entitled to indemnification; (4)
unfavorable foreign currency fluctuations; (5) difficult conditions
in financial markets, the downturn in and potential worsening of
general economic and market conditions and the impact of the credit
crisis; (6) M & F Worldwide's substantial indebtedness; (7)
covenant restrictions under M & F Worldwide's indebtedness that
may limit its ability to operate its business and react to market
changes; (8) 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; (9) 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 M & F Worldwide depends, resulting in
decreased revenues and/or pricing pressure; (10) the ability to
retain M & F Worldwide's clients; (11) the ability to retain M
& F Worldwide's key employees and management; (12) lower than
expected cash flow from operations; (13) significant increases in
interest rates; (14) intense competition in all areas of M & F
Worldwide's business; (15) interruptions or adverse changes in M
& F Worldwide's supplier relationships, technological capacity,
intellectual property matters, and applicable laws; (16) decreases
to educational budgets as a result of the continued general
economic downturn and the resulting impact on Scantron's customers;
(17) variations in contemplated brand strategies, business
locations, management positions and other business decisions in
connection with integrating acquisitions; (18) M & F
Worldwide's ability to successfully integrate and manage future
acquisitions; (19) M & F Worldwide's ability to implement any
or all components of its business strategy or realize all of its
expected cost savings or synergies from acquisitions; (20)
acquisitions otherwise not being successful from a financial point
of view, including, without limitation, due to any difficulties
with M & F Worldwide's servicing its debt obligations; and (21)
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 M & F
Worldwide's 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, M & F Worldwide 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 M & F Worldwide 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). M
& F Worldwide 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 M & F Worldwide's
industries.
M & F Worldwide 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, M & F Worldwide
utilizes EBITDA when interpreting operating trends and results of
operations of its business.
M & F Worldwide also uses EBITDA for the following purposes:
Mafco Worldwide's and Harland Clarke Holdings' senior credit
facilities use EBITDA (with additional adjustments) to measure
compliance with financial covenants such as debt incurrence.
M & F Worldwide's subsidiaries executive compensation is
based on EBITDA (with additional adjustments) performance measured
against targets. EBITDA is also widely used by M & F
Worldwide 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 M & F Worldwide to invest in
the growth of its business.
In addition, in evaluating EBITDA, you should be aware that in
the future M & F Worldwide may incur expenses such as those
excluded in calculating it. M & F Worldwide's
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 M & F Worldwide's cash expenditures and
future requirements for capital expenditures or contractual
commitments;
- it does not reflect changes in, or cash requirements for, M
& F Worldwide's working capital needs;
- it does not reflect the significant interest expense or the
cash requirements necessary to service interest or principal
payments on M & F Worldwide's 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 M & F Worldwide's statements of cash
flows; and
- other companies in M & F Worldwide's industries may
calculate EBITDA differently from M & F Worldwide, 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 M & F Worldwide's business or as a measure of cash that will
be available to M & F Worldwide to meet its obligations.
You should compensate for these limitations by relying
primarily on M & F Worldwide's GAAP results and using EBITDA
only supplementally.
M & F Worldwide presents Adjusted EBITDA as a supplemental
measure of its performance. M & F Worldwide prepares Adjusted
EBITDA by adjusting EBITDA to reflect the impact of a number of
items it does not consider indicative of M & F Worldwide's
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 acquisition
accounting adjustments. You are encouraged to evaluate each
adjustment and the reasons M & F Worldwide 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, M & F Worldwide may incur
expenses, including cash expenses, similar to the adjustments in
this presentation. M & F Worldwide's presentation of
Adjusted EBITDA should not be construed as an inference that its
future results will be unaffected by unusual or non-recurring
items.
M & F Worldwide Corp. and
Subsidiaries
Consolidated Statements of
Income
(in millions, except per share
data)
|
|
|
(unaudited)
Three Months
Ended
March
31,
|
|
|
2010
|
2009
|
|
|
|
|
|
Product revenues, net
|
$
382.8
|
$
388.8
|
|
Service revenues, net
|
74.4
|
75.5
|
|
Total
net revenues
|
457.2
|
464.3
|
|
Cost
of products sold
|
226.7
|
235.2
|
|
Cost
of services provided
|
37.7
|
39.9
|
|
Total
cost of revenues
|
264.4
|
275.1
|
|
Gross
profit
|
192.8
|
189.2
|
|
Selling, general and administrative
expenses
|
101.6
|
109.8
|
|
Restructuring costs
|
3.2
|
11.1
|
|
Operating income
|
88.0
|
68.3
|
|
Interest income
|
0.3
|
0.5
|
|
Interest expense
|
(30.6)
|
(38.6)
|
|
Gain
on early extinguishment of debt
|
-
|
52.6
|
|
Other
(expense) income, net
|
(0.2)
|
0.9
|
|
Income
before income taxes
|
57.5
|
83.7
|
|
Provision for income taxes
|
23.9
|
32.4
|
|
Net
income
|
$
33.6
|
$
51.3
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
Basic
|
$
1.74
|
$
2.65
|
|
Diluted
|
$
1.73
|
$
2.64
|
|
Weighted average number of shares used
in per share calculations:
|
|
|
|
Basic
shares
|
19.3
|
19.3
|
|
Diluted shares
|
19.4
|
19.3
|
|
|
|
|
|
|
M & F Worldwide Corp. and
Subsidiaries
Business Segment
Information
(in millions)
|
|
|
(unaudited)
Three Months
Ended
March
31,
|
|
|
2010
|
2009
|
|
|
|
|
|
Net
revenues
|
|
|
|
Harland Clarke segment
|
$
309.7
|
$
315.1
|
|
Harland Financial Solutions
segment
|
69.3
|
69.2
|
|
Scantron segment
|
51.1
|
54.4
|
|
Licorice Products segment
|
27.2
|
25.7
|
|
Eliminations
|
(0.1)
|
(0.1)
|
|
Total
net revenues
|
$
457.2
|
$
464.3
|
|
|
|
|
|
Operating income
|
|
|
|
Harland Clarke segment
|
$
65.6
|
$
50.9
|
|
Harland Financial Solutions
segment
|
11.4
|
7.4
|
|
Scantron segment
|
9.3
|
6.8
|
|
Licorice Products segment
|
6.9
|
8.4
|
|
Corporate
|
(5.2)
|
(5.2)
|
|
Total
operating income
|
$
88.0
|
$
68.3
|
|
|
|
|
|
|
Reconciliation of net income to EBITDA and EBITDA to Adjusted
EBITDA (in millions):
|
|
|
|
|
|
|
|
(unaudited)
Three Months
Ended
March
31,
|
|
|
2010
|
2009
|
|
|
|
|
|
Net
income
|
$
33.6
|
$
51.3
|
|
Interest expense, net
|
30.3
|
38.1
|
|
Provision for income taxes
|
23.9
|
32.4
|
|
Depreciation and
amortization
|
40.7
|
40.8
|
|
EBITDA
|
128.5
|
162.6
|
|
Adjustments:
|
|
|
|
Restructuring costs (a)
|
3.2
|
11.1
|
|
Deferred purchase price compensation
(b)
|
0.4
|
1.0
|
|
Gain
on early extinguishment of debt (c)
|
—
|
(52.6)
|
|
Impact
of acquisition accounting adjustments (d)
|
0.4
|
0.2
|
|
Adjusted EBITDA
|
$
132.5
|
$
122.3
|
|
|
|
|
|
|
____________
(a) Reflects restructuring costs, including adjustments,
recorded in accordance with GAAP, consisting primarily of
severance, post-closure facility expenses and other related
expenses.
(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 gains from the purchase of Harland Clarke Holdings
bonds at less than their principal amount.
(d) Reflects the non-cash fair value deferred revenue
adjustments related to acquisition accounting.
SOURCE M & F Worldwide Corp.