SAN ANTONIO, Texas, Nov.
3, 2011 /PRNewswire/ -- Harland Clarke Holdings Corp.
("Harland Clarke Holdings" or the "Company") today reported results
for the third quarter and nine months ended September 30, 2011. In addition to the
Harland Clarke Holdings Quarterly Report on Form 10-Q filed with
the Securities and Exchange Commission today, Harland Clarke
Holdings' financial results are also consolidated in the Quarterly
Report on Form 10-Q filed today by M & F Worldwide ("M & F
Worldwide") (NYSE: MFW), which is the indirect parent company of
Harland Clarke Holdings.
M & F Worldwide will host a conference call to discuss its
third quarter 2011 results on November 10,
2011, at 9:00 a.m. (EST).
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: 221553. The
replay will be available from 11:00 a.m.
(EST) Thursday, November 10, 2011, through 11:59 p.m. (EST) Thursday, November 24, 2011.
Third Quarter 2011 Highlights
- Net revenues of $407.7 million,
down $3.8 million, or 0.9%, as
compared to the third quarter of 2010.
- Operating income of $87.6
million, up $18.4 million, or
26.6%, as compared to the third quarter of 2010, due to a
$19.5 million non-cash gain for the
changes in fair value of contingent consideration arrangements
related to recent acquisitions primarily as a result of a reduction
in anticipated revenues for 2011.
- Net income of $46.6 million, up
$19.0 million, or 68.8%, as compared
to the third quarter of 2010. Net income for the third quarter of
2011 includes a $19.5 million
non-cash gain for changes in the fair value of contingent
consideration arrangements, of which $19.2
million is not subject to income taxes.
Third Quarter 2011 Performance
Consolidated Results
Consolidated net revenues decreased by $3.8 million, or 0.9%, to $407.7 million for the third quarter of 2011 from
$411.5 million for the third quarter
of 2010. The decrease was due to lower net revenues at the Harland
Clarke and Scantron segments, in part due to volume declines of
certain products and services, partially of offset by an increase
in net revenues of $1.5 million for
the Harland Financial Solutions segment, as further described
below.
Operating income increased by $18.4
million, or 26.6%, to $87.6
million for the third quarter of 2011 from $69.2 million for the third quarter of 2010. The
increase was primarily due to decreases in the fair value of
accrued contingent consideration related to the GlobalScholar
acquisition at the Scantron segment and the Parsam acquisition at
the Harland Financial Solutions segment that resulted in a non-cash
gain of $19.5 million. The reduction
in the fair value of accrued contingent consideration was the
result of revenue projections that fall below the threshold amount
that would trigger a payment. In addition, an increase in operating
income for the Harland Clarke segment of $14.8 million was substantially offset by
additional costs incurred at the Scantron segment, which were
primarily associated with the GlobalScholar and Spectrum K12
acquisitions, and deferral of revenue as further described in
Segment Results for Scantron below.
Net income increased by $19.0
million, or 68.8%, to $46.6
million for the third quarter of 2011 from $27.6 million for the third quarter of 2010. The
increase was primarily due to a $19.5
million non-cash gain for changes in the fair value of
contingent consideration arrangements, of which $19.2 million is not subject to income taxes.
Adjusted EBITDA decreased by $3.2
million, or 2.7%, to $113.2
million for the third quarter of 2011 from $116.4 million for the third 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
$6.7 million, or 2.3%, to
$283.2 million for the third quarter
of 2011 from $289.9 million for the
third quarter of 2010. The decrease was primarily due to volume
declines, net of client additions and losses, in check and related
products that reduced net revenues by $6.4
million, as well as a decline in non-check revenues,
primarily resulting from a decline in sales of a survey solution to
assist financial institutions with the implementation of new
federal regulations in 2010 that also reduced net revenues by
$6.1 million. The decline was
partially offset by an increase in revenues per unit, which
increased net revenues by $6.7
million. Operating income for the Harland Clarke segment
increased by $14.8 million, or 29.0%,
to $65.8 million for the third
quarter of 2011 from $51.0 million
for the third quarter of 2010. The increase in operating income was
primarily due to labor cost reductions resulting from restructuring
activities, increased revenues per unit and lower restructuring
costs, asset impairment charges and depreciation and amortization,
partially offset by volume declines in checks and related products.
Operating income for the third quarters of 2011 and 2010 includes
restructuring costs of $0.4 million
and $4.2 million, respectively.
Net revenues for the Harland Financial Solutions segment
increased by $1.5 million, or 2.1%,
to $72.4 million for the third
quarter of 2011 from $70.9 million
for the third quarter of 2010. The increase was primarily due to
revenues from the Parsam acquisition completed in December 2010, which increased net revenues by
$1.6 million, as well as a
$1.2 million increase in services
revenues resulting from new customers. The increases were partially
offset by a $1.0 million decrease in
maintenance revenues due to customers converting to perpetual
license agreements, as well as industry trends to hosted versus
in-house solutions. Operating income for the Harland Financial
Solutions segment decreased by $0.6
million, or 4.3%, to $13.2
million for the third quarter of 2011 from $13.8 million for the third quarter of 2010. The
decrease in operating income was due to an increase in selling,
general and administrative expenses as a result of costs associated
with the Parsam acquisition completed in December 2010, increased foreign currency
transaction losses, higher incentive compensation accruals and
higher travel costs due to expanded selling efforts.
Net revenues for the Scantron segment decreased by $0.9 million, or 1.7%, to $52.4 million for the third quarter of 2011 from
$53.3 million for the third quarter
of 2010. The decrease was primarily driven by a decline in sales of
a survey solution to assist financial institutions with
implementation of new federal regulations in 2010 that reduced net
revenues by $2.3 million, as well as
a $1.2 million reduction in net
revenues from volume declines in sales of forms. The revenue
decreases were partially offset by $2.5
million of revenues resulting from the acquisitions of
GlobalScholar and Spectrum K12. Net revenues for the third quarter
of 2011 also included charges of $1.5
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,
with the exception of direct implementation costs, are recognized
in the current period. Deferred revenues related to GlobalScholar
and Spectrum K12 increased by $6.5
million during the third quarter of 2011. Operating income
for the Scantron segment increased by $4.2
million, or 53.2%, to $12.1
million for the third quarter of 2011 from $7.9 million for the third quarter of 2010. The
increase in operating income was primarily due to a decrease in the
fair value of accrued contingent consideration related to the
GlobalScholar acquisition that resulted in a non-cash gain of
$19.2 million and cost reductions.
These decreases were partially offset by costs associated with
GlobalScholar and Spectrum K12 including a $4.4 million increase in amortization expense,
the impact of the revenue acquisition accounting adjustments and
volume declines, as well as investments in growth initiatives and a
$1.3 million increase in
restructuring costs. Operating income for the third quarters of
2011 and 2010 includes restructuring costs of $1.9 million and $0.6
million, respectively.
Year-to-date 2011 Performance
Consolidated Results
Consolidated net revenues decreased by $47.5 million, or 3.8%, to $1,217.3 million for the nine months ended
September 30, 2011 from $1,264.8
million for the nine months ended September 30, 2010. The decrease was due to lower
net revenues at the Harland Clarke and Scantron segments in part
due to volume declines of certain products and services, partially
offset by an increase in net revenues of $9.4 million for the Harland Financial Solutions
segment, as further described below.
Operating income decreased by $14.1
million, or 6.2%, to $214.4
million for the nine months ended September 30, 2011 from $228.5 million for the nine months ended
September 30, 2010. The decrease was
primarily due to costs associated with the GlobalScholar and
Spectrum K12 acquisitions, including a $13.2
million increase in amortization expense, and deferral of
revenue as further described in Segment Results for Scantron below.
These items were partially offset by a decrease in the fair value
of accrued contingent consideration related to the GlobalScholar,
Spectrum K12, Parsam and SubscriberMail acquisitions that resulted
in a non-cash gain of $24.6 million,
as well as an $8.8 million increase
in operating income for the Harland Financial Solutions segment and
a $6.9 million decrease in
restructuring costs. The reduction in the fair value of accrued
contingent consideration was the result of revenue projections that
fall below the threshold amount that would trigger a payment.
Net income increased by $15.3
million, or 17.4%, to $103.1
million for the nine months ended September 30, 2011 from $87.8 million for the nine months ended
September 30, 2010. The increase was
primarily due to the $24.6 million
non-cash gain for changes in the fair value of contingent
consideration arrangements, of which $22.8
million is not subject to income taxes, as well as a
one-time gain of $13.2 million
($9.5 million after tax) on the sale
of marketable securities. These items were partially offset by the
decrease in operating income at the Scantron segment resulting from
costs incurred related to recent acquisitions and deferral of
revenue as further described in Segment Results below.
Adjusted EBITDA decreased by $37.5
million, or 10.2%, to $330.2
million for the nine months ended September 30, 2011 from $367.7 million for the nine months ended
September 30, 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
$61.6 million, or 6.8%, to
$845.3 million for the nine months
ended September 30, 2011 from
$906.9 million for the nine months
ended September 30, 2010. The
decrease was primarily due to volume declines, net of client
additions and losses, in check and related products that reduced
net revenues by $46.0 million, as
well as a decline in non-check revenues, primarily resulting from a
decline in sales of a survey solution to assist financial
institutions with the implementation of new federal regulations in
2010 that reduced net revenues by $12.2
million. In addition, a decrease in revenues per unit
reduced net revenues by $1.8 million.
The 2010 period also included revenue for a one-time payment of
$4.8 million resulting from the loss
of a client. The decline in net revenues was partially offset by
one additional workday in the 2011 period. Operating income for the
Harland Clarke segment increased by $2.5
million, or 1.4%, to $185.4
million for the nine months ended September 30, 2011 from $182.9 million for the nine months ended
September 30, 2010. The increase in
operating income was primarily due to labor cost reductions
resulting from restructuring activities, lower depreciation and
amortization, a decrease in restructuring costs, lower asset
impairment charges and declines in general overhead expenses. These
increases to operating income were partially offset by the impact
of the volume declines, lower revenues per unit in check and
related products and the one-time payment resulting from the loss
of a client that occurred in 2010. Operating income for the nine
months ended September 30, 2011 and
2010 includes restructuring costs of $3.7
million and $7.5 million,
respectively.
Net revenues for the Harland Financial Solutions segment
increased by $9.4 million, or 4.5%,
to $219.7 million for the nine months
ended September 30, 2011 from
$210.3 million for the nine months
ended September 30, 2010. The
increase was primarily due to revenues from the Parsam acquisition
completed in December 2010, which
increased net revenues by $4.4
million, as well as a $4.2
million increase in software revenues for perpetual license
agreements and a $2.6 million
increase in services revenues resulting from new clients. The
increases were partially offset by a $2.6
million decrease in maintenance revenues due to certain
customers converting to perpetual license agreements, industry
trends to hosted versus in-house solutions and customers converting
from enterprise to term agreements. Operating income for the
Harland Financial Solutions segment increased by $8.8 million, or 24.0%, to $45.4 million for the nine months ended
September 30, 2011 from $36.6 million for the nine months ended
September 30, 2010. The increase in
operating income was primarily due to the increase in revenues,
cost reductions resulting from restructuring and favorable pricing
and decreases in depreciation and amortization, which were
partially offset by increases in travel costs and selling expenses
due to expanded selling efforts.
Net revenues for the Scantron segment decreased by $0.6 million, or 0.4%, to $152.9 million for the nine months ended
September 30, 2011 from $153.5 million for the nine months ended
September 30, 2010. The decrease in
net revenues was primarily due to a decline in sales of a survey
solution to assist financial institutions with the implementation
of new federal regulations in 2010 that reduced net revenues by
$5.1 million, as well as a
$2.4 million reduction in net
revenues from volume declines in sales of forms. The revenue
decrease was substantially offset by $7.2
million of revenues resulting from the acquisitions of
GlobalScholar and Spectrum K12. Net revenues for the nine months
ended September 30, 2011 also
included charges of $6.8 million for
non-cash fair value acquisition accounting adjustments to deferred
revenues 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, with the
exception of direct implementation costs, are recognized in the
current period. Deferred revenues related to GlobalScholar and
Spectrum K12 increased by $17.3
million during the nine months ended September 30, 2011. Operating income for the
Scantron segment decreased by $23.6
million to an operating loss of $4.6
million for the nine months ended September 30, 2011 from operating income of
$19.0 million for the nine months
ended September 30, 2010. The
decrease in operating income was primarily due costs associated
with GlobalScholar and Spectrum K12 including a $13.2 million increase in amortization expense,
volume declines and the impact of the revenue acquisition
accounting adjustments. These decreases were partially offset by a
reduction in the fair value of accrued contingent consideration
related to the GlobalScholar and Spectrum K12 acquisitions that
resulted in a non-cash gain of $22.8
million, as well as cost reductions related to restructuring
activities. Operating income for the nine months ended September 30, 2011 and 2010 includes
restructuring costs of $4.3 million
and $7.1 million, respectively.
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 worldwide including testing and assessment
solutions, patient information collection and tracking, and survey
services.
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 recent acquisitions as well as future acquisitions;
(15) Harland Clarke Holdings' 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; (16) 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; (17) 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; (18) weak economic conditions and
declines in the financial performance of our businesses that may
result in material impairment charges and (19) the failure of M
& F Worldwide Corp. and MacAndrews & Forbes Holdings Inc.
to consummate the transaction contemplated by the merger agreement
entered into by the parties thereto on September 12, 2011.
You should read carefully the factors described in Harland
Clarke Holdings' 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, 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
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, restructuring costs, asset impairment
charges, deferred purchase price compensation related to an
acquisition, changes in fair value of contingent consideration,
gains on the sale of certain marketable securities and certain
acquisition 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.
- tables to follow -
Harland
Clarke Holdings Corp. and Subsidiaries
Consolidated
Statements of Income
(in
millions)
|
|
|
(unaudited)
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
Product revenues, net
|
$
|
326.2
|
|
$
|
325.4
|
|
$
|
975.3
|
|
$
|
1,015.8
|
|
Service revenues, net
|
81.5
|
|
86.1
|
|
242.0
|
|
249.0
|
|
Total net revenues
|
407.7
|
|
411.5
|
|
1,217.3
|
|
1,264.8
|
|
Cost of products sold
|
196.5
|
|
193.2
|
|
591.5
|
|
596.9
|
|
Cost of services
provided
|
41.5
|
|
46.0
|
|
120.8
|
|
131.0
|
|
Total cost of
revenues
|
238.0
|
|
239.2
|
|
712.3
|
|
727.9
|
|
Gross profit
|
169.7
|
|
172.3
|
|
505.0
|
|
536.9
|
|
Selling, general and
administrative expenses
|
99.2
|
|
95.9
|
|
304.5
|
|
290.5
|
|
Revaluation of contingent
consideration
|
(19.5)
|
|
0.3
|
|
(24.6)
|
|
0.2
|
|
Asset impairment
charges
|
0.1
|
|
1.9
|
|
2.4
|
|
2.5
|
|
Restructuring costs
|
2.3
|
|
5.0
|
|
8.3
|
|
15.2
|
|
Operating income
|
87.6
|
|
69.2
|
|
214.4
|
|
228.5
|
|
Interest income
|
0.1
|
|
0.1
|
|
0.3
|
|
0.5
|
|
Interest expense
|
(27.4)
|
|
(27.7)
|
|
(82.0)
|
|
(87.9)
|
|
Other income, net
|
—
|
|
—
|
|
13.2
|
|
0.1
|
|
Income before income
taxes
|
60.3
|
|
41.6
|
|
145.9
|
|
141.2
|
|
Provision for income
taxes
|
13.7
|
|
14.0
|
|
42.8
|
|
53.4
|
|
Net income
|
$
|
46.6
|
|
$
|
27.6
|
|
$
|
103.1
|
|
$
|
87.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Harland
Clarke Holdings Corp. and Subsidiaries
Business
Segment Information
(in
millions)
|
|
|
(unaudited)
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
|
|
|
|
|
|
|
Harland Clarke
segment
|
$
|
283.2
|
|
$
|
289.9
|
|
$
|
845.3
|
|
$
|
906.9
|
|
Harland Financial
Solutions segment
|
72.4
|
|
70.9
|
|
219.7
|
|
210.3
|
|
Scantron
segment
|
52.4
|
|
53.3
|
|
152.9
|
|
153.5
|
|
Eliminations
|
(0.3)
|
|
(2.6)
|
|
(0.6)
|
|
(5.9)
|
|
Total net revenues
|
$
|
407.7
|
|
$
|
411.5
|
|
$
|
1,217.3
|
|
$
|
1,264.8
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
|
|
|
|
|
|
|
|
Harland Clarke
segment
|
$
|
65.8
|
|
$
|
51.0
|
|
$
|
185.4
|
|
$
|
182.9
|
|
Harland Financial
Solutions segment
|
13.2
|
|
13.8
|
|
45.4
|
|
36.6
|
|
Scantron segment
(a)
|
12.1
|
|
7.9
|
|
(4.6)
|
|
19.0
|
|
Corporate
|
(3.5)
|
|
(3.5)
|
|
(11.8)
|
|
(10.0)
|
|
Total operating
income
|
$
|
87.6
|
|
$
|
69.2
|
|
$
|
214.4
|
|
$
|
228.5
|
|
|
|
(a) Reflects the impact of a
decrease in the fair value of accrued contingent consideration
related to the
GlobalScholar and Spectrum K12
acquisitions that resulted in a non-cash gain of $19.2 million and
$22.8 million for the three and nine months ended September 30,
2011, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net income to
EBITDA and EBITDA to Adjusted EBITDA (in millions):
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
46.6
|
|
$
|
27.6
|
|
$
|
103.1
|
|
$
|
87.8
|
|
Interest expense, net
|
27.3
|
|
27.6
|
|
81.7
|
|
87.4
|
|
Provision for income
taxes
|
13.7
|
|
14.0
|
|
42.8
|
|
53.4
|
|
Depreciation and
amortization
|
41.0
|
|
38.7
|
|
122.0
|
|
118.5
|
|
EBITDA
|
128.6
|
|
107.9
|
|
349.6
|
|
347.1
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Restructuring costs
(a)
|
2.3
|
|
5.0
|
|
8.3
|
|
15.2
|
|
Acquisition-related
deferred compensation and changes in contingent consideration
(b)
|
(19.5)
|
|
0.6
|
|
(24.6)
|
|
1.3
|
|
Asset impairment charges
(c)
|
0.1
|
|
1.9
|
|
2.4
|
|
2.5
|
|
Impact of purchase
accounting adjustments (d)
|
1.7
|
|
1.0
|
|
7.7
|
|
1.6
|
|
Gain on sale of marketable
securities (e)
|
—
|
|
—
|
|
(13.2)
|
|
—
|
|
Adjusted EBITDA
|
$
|
113.2
|
|
$
|
116.4
|
|
$
|
330.2
|
|
$
|
367.7
|
|
|
|
____________
(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 the fair value 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 gain on the sale of marketable securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOURCE Harland Clarke Holdings Corp.