NEW YORK, May 5, 2011 /PRNewswire/ -- M & F Worldwide
Corp. ("M & F Worldwide" or the "Company") (NYSE: MFW) today
reported results for the first quarter ended March 31, 2011. 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 2011 results on May 9,
2011, at 9:00 a.m. (EDT).
The conference call will be accessible by dialing (800)
230-1085 in the United States and
(612) 288-0329 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: 202674. The
replay will be available from 11:00 a.m.
(EDT) Monday, May 9, 2011, through 11:59 p.m. (EDT) Monday, May 23, 2011.
First Quarter 2011 Highlights
- The Company continued to expand Scantron's web-based education
solutions through the acquisition of GlobalScholar, which was
completed on January 3, 2011.
- Net revenues of $433.4 million,
down $23.8 million, or 5.2%, as
compared to first quarter of 2010.
- Operating income of $65.6
million, down $22.4 million,
or 25.5%, as compared to the first quarter of 2010, in part due to
costs associated with Scantron's recent acquisitions of
GlobalScholar and Spectrum K12 including investments in growth
initiatives and product development.
- Net income of $12.9 million, down
$20.7 million, or 61.6%, as compared
to the first quarter of 2010, in part due to a $20.0 million ($12.8
million after tax) one-time charge associated with the
disposition of the Company's former non-operating subsidiary,
Pneumo Abex LLC.
First Quarter 2011 Performance
Consolidated Results
Consolidated net revenues decreased by $23.8 million, or 5.2%, to $433.4 million for the first quarter of 2011 from
$457.2 million for the first quarter
of 2010. The decrease was primarily due to volume declines in
checks and related products and decreased revenues per unit at the
Harland Clarke segment, partially offset by increases in revenues
at the Harland Financial Solutions, Licorice Products and Scantron
segments.
Operating income decreased by $22.4
million, or 25.5%, to $65.6
million for the first quarter of 2011 from $88.0 million for the first quarter of 2010.
The decrease was primarily due to costs incurred at the
Scantron segment related to the acquisitions of KUE Digital Inc.,
KUED Sub I LLC and KUED Sub II LLC (collectively referred to as
"GlobalScholar") in January 2011 and
Spectrum K12 School Solutions, Inc. ("Spectrum K12") in
July 2010, as further described in
Segment Results below. Volume declines in check and related
products and decreased revenues per unit at the Harland Clarke
segment also contributed to the decrease in operating income.
Net income decreased by $20.7
million, or 61.6%, to $12.9
million for the first quarter of 2011 from $33.6 million for the first quarter of 2010.
The decrease was primarily due to the $22.4 million ($13.7
million after tax) decrease in operating income, as well as
a one-time charge of $20.0 million
($12.8 million after tax) associated
with the disposition of the Company's former non-operating
subsidiary, Pneumo Abex LLC, partially offset by a decline in
interest expense and a lower effective tax rate.
Adjusted EBITDA decreased by $22.0
million, or 16.6%, to $110.5
million for the first quarter of 2011 from $132.5 million for the first quarter of 2010.
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
$30.3 million, or 9.8%, to
$279.4 million for the first quarter
of 2011 from $309.7 million for the
first quarter of 2010. The decrease was primarily due to
volume declines in check and related products, and decreased
revenues per unit. Operating income for the Harland Clarke
segment decreased by $9.8 million, or
14.9%, to $55.8 million for the first
quarter of 2011 from $65.6 million
for the first quarter of 2010. The decrease in operating
income was primarily due to volume declines and decreased revenues
per unit, partially offset by labor cost reductions resulting from
restructuring activities and lower depreciation and travel
expenses. Operating income for the first quarters of 2011 and
2010 includes restructuring costs of $2.6
million and $1.7 million,
respectively.
Net revenues for the Harland Financial Solutions segment
increased by $2.7 million, or 3.9%,
to $72.0 million for the first
quarter of 2011 from $69.3 million
for the first quarter of 2010. The increase was primarily due
to revenues from the acquisition of Parsam Technologies, LLC
("Parsam") in December 2010 and
increases in software revenues and services revenues, partially
offset by decreases in maintenance fees. Operating income for
the Harland Financial Solutions segment increased by $2.6 million, or 22.8%, to $14.0 million for the first quarter of 2011 from
$11.4 million for the first quarter
of 2010. The increase in operating income was primarily due
to the increase in revenues, a decrease in amortization expense and
a decrease in compensation expense related to an incentive
agreement from an acquisition, partially offset by costs related to
the acquisition of Parsam.
Net revenues for the Scantron segment increased by $1.5 million, or 2.9%, to $52.6 million for the first quarter of 2011 from
$51.1 million for the first quarter
of 2010. The increase was primarily due to the acquisitions
of GlobalScholar and Spectrum K12, increases in field services
installations and increases in revenues from web-based products and
services for the education market. Revenue increases were
partially offset by declines in forms, systems hardware and survey
services revenues. Net revenues in the 2011 period included
charges of $2.9 million for non-cash
fair value acquisition accounting adjustments to deferred revenue
related to the GlobalScholar and Spectrum K12 acquisitions.
In addition, the current accounting for revenue recognition
for the recent acquisitions results in a substantial deferral of
revenue into future periods for amounts that are billed and
collected, while costs related to these sales are incurred and
recognized in the current period. Operating income (loss) for the
Scantron segment decreased by $13.7
million, or 147.3%, to an operating loss of $(4.4) million for the first quarter of 2011 from
operating income of $9.3 million for
the first quarter of 2010. The decrease in operating income
was primarily due to costs associated with Spectrum K12 and
GlobalScholar, including $4.4 million
of intangible asset amortization expense in the first quarter of
2011, the impact of the revenue acquisition accounting adjustments,
as well as investments in growth initiatives and product
development costs.
Net revenues for the Licorice Products segment increased by
$2.3 million, or 8.5%, to
$29.5 million in the first quarter of
2011 from $27.2 million in the first
quarter of 2010. Magnasweet and pure licorice
derivative sales increased by $1.7
million primarily due to increased shipment volumes of pure
licorice derivatives to international cosmetic, pharmaceutical,
food, and beverage customers as a result of focused marketing
efforts. Sales of licorice extract to the worldwide tobacco
industry increased by $0.7 million
and sales of licorice extract to non-tobacco customers declined by
$0.2 million primarily due to order
timing. Operating income for the Licorice Products segment
increased by $0.9 million, or 13.0%,
to $7.8 million for the first quarter
of 2011 from $6.9 million for the
first quarter of 2010, primarily due to the increase in 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 worldwide
including testing and assessment solutions, patient information
collection and tracking, and survey services. 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) additional government regulation of tobacco products,
tobacco industry litigation or enactment of new or increased taxes
on cigarettes or other tobacco products, to the extent any of the
foregoing curtail growth in or actually reduce consumption of
tobacco products in which licorice products are used or place
limitations on the use of licorice extracts as additives used in
manufacturing tobacco products; (3) the failure of third parties to
make full and timely payment to M & F Worldwide for
environmental, 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 recent acquisitions as well as
future acquisitions; (19) M & F Worldwide's ability to achieve
vendor-specific objective evidence for software businesses we have
acquired or will acquire, which could affect the timing of
recognition of revenue; (20) 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;
(21) 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 (22) 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, 2010 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
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, restructuring costs, asset impairment charges,
settlement of certain contingent claims, 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)
|
|
|
|
|
|
|
(unaudited)
Three Months
Ended
March
31,
|
|
|
2011
|
2010
|
|
Product revenues, net
|
$ 353.5
|
$ 377.4
|
|
Service revenues, net
|
79.9
|
79.8
|
|
Total net revenues
|
433.4
|
457.2
|
|
Cost of products sold
|
215.6
|
223.5
|
|
Cost of services
provided
|
39.7
|
40.9
|
|
Total cost of
revenues
|
255.3
|
264.4
|
|
Gross profit
|
178.1
|
192.8
|
|
Selling, general and
administrative expenses
|
108.9
|
101.6
|
|
Asset impairment
charges
|
1.3
|
—
|
|
Restructuring costs
|
2.3
|
3.2
|
|
Operating income
|
65.6
|
88.0
|
|
Interest income
|
0.1
|
0.3
|
|
Interest expense
|
(27.4)
|
(30.6)
|
|
Settlement of contingent
claims
|
(20.0)
|
—
|
|
Other expense, net
|
—
|
(0.2)
|
|
Income before income
taxes
|
18.3
|
57.5
|
|
Provision for income
taxes
|
5.4
|
23.9
|
|
Net income
|
$
12.9
|
$
33.6
|
|
|
|
|
|
Earnings per common
share
|
|
|
|
Basic
|
$
0.67
|
$
1.74
|
|
Diluted
|
$
0.66
|
$
1.73
|
|
Weighted average number of
shares used in per share calculations:
|
|
|
|
Basic shares
|
19.3
|
19.3
|
|
Diluted shares
|
19.5
|
19.4
|
|
|
|
|
|
|
|
|
|
|
M & F
Worldwide Corp. and Subsidiaries
Business
Segment Information
(in
millions)
|
|
|
(unaudited)
Three Months
Ended
March
31,
|
|
|
2011
|
2010
|
|
Net revenues
|
|
|
|
Harland Clarke
segment
|
$ 279.4
|
$ 309.7
|
|
Harland Financial Solutions
segment
|
72.0
|
69.3
|
|
Scantron segment
|
52.6
|
51.1
|
|
Licorice Products
segment
|
29.5
|
27.2
|
|
Eliminations
|
(0.1)
|
(0.1)
|
|
Total net revenues
|
$
433.4
|
$
457.2
|
|
|
|
|
|
Operating income
|
|
|
|
Harland Clarke
segment
|
$ 55.8
|
$ 65.6
|
|
Harland Financial Solutions
segment
|
14.0
|
11.4
|
|
Scantron segment
|
(4.4)
|
9.3
|
|
Licorice Products
segment
|
7.8
|
6.9
|
|
Corporate
|
(7.6)
|
(5.2)
|
|
Total operating
income
|
$
65.6
|
$
88.0
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net income to
EBITDA and EBITDA to Adjusted EBITDA (in millions):
|
|
|
(unaudited)
|
|
|
Three Months
Ended
March
31,
|
|
|
2011
|
2010
|
|
Net income
|
$ 12.9
|
$ 33.6
|
|
Interest expense, net
|
27.3
|
30.3
|
|
Provision for income
taxes
|
5.4
|
23.9
|
|
Depreciation and
amortization
|
40.8
|
40.7
|
|
EBITDA
|
86.4
|
128.5
|
|
Adjustments:
|
|
|
|
Restructuring costs
(a)
|
2.3
|
3.2
|
|
Acquisition-related deferred
compensation and
|
|
|
|
changes in
contingent consideration (b)
|
(2.7)
|
0.4
|
|
Asset impairment charges
(c)
|
1.3
|
—
|
|
Impact of purchase accounting
adjustments (d)
|
3.2
|
0.4
|
|
Settlement of contingent claims
(e)
|
20.0
|
—
|
|
Adjusted EBITDA
|
$
110.5
|
$
132.5
|
|
(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 deferred purchase price agreements and changes in
estimates of contingent
consideration related to
acquisitions.
(c) Reflects non-cash
impairment charges from the write-down of assets.
(d) Reflects the non-cash
fair value deferred revenue adjustments related to acquisition
accounting.
(e) Reflects a one-time
charge associated with the disposition of the Company's former
non-operating subsidiary,
Pneumo Abex LLC.
|
|
|
|
|
SOURCE M & F Worldwide Corp.