Harland Clarke Holdings Corp. to Participate in M & F Worldwide Corp. Conference Call on August 13, 2008 DECATUR, Ga., Aug. 8
DECATUR, Ga., Aug. 8 /PRNewswire/ -- Harland Clarke Holdings Corp.
("Harland Clarke Holdings" or the "Company"), formerly known as Clarke
American Corp., today reported results for the second quarter and six months
ended June 30, 2008. In addition to the Harland Clarke Holdings 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 Corp. (NYSE: MFW), which is the
indirect parent company of Harland Clarke Holdings.
M & F Worldwide Corp. will host a conference call to discuss its second
quarter and six months ended June 30, 2008 results, including results for
Harland Clarke Holdings, on August 13, 2008, at 9:00 a.m. (EDT). The
conference call will be accessible by dialing (888) 423-3275 in the U.S. and
(612) 332-0725 internationally. For those unable to listen live, a replay of
the call will be available by dialing (800) 475-6701 in the U.S. and (320)
365-3844 internationally; Access Code: 954347. The replay will be available
from 11:00 a.m. (EDT), Wednesday, August 13, 2008, through 11:59 p.m. (EDT),
Wednesday, August 27, 2008.
As previously announced, on May 1, 2007, M & F Worldwide Corp. completed
the acquisition of John H. Harland Company ("Harland") and related financing
transactions. Upon the completion of the acquisition, Harland became a wholly
owned subsidiary of Clarke American Corp., which was then renamed Harland
Clarke Holdings Corp. As a result of the acquisition of Harland ("Harland
Acquisition"), Harland Clarke Holdings now has three business segments --
Harland Clarke (which is the combination of Clarke American Corp.'s check
printing, contact center and direct marketing capabilities with Harland's
corresponding businesses), Harland Financial Solutions and Scantron.
As previously announced, on February 22, 2008, the Company's wholly owned
subsidiary, Scantron Corporation, purchased all of the limited liability
membership interests of Data Management I LLC ("Data Management"), from NCS
Pearson for $218.7 million in cash, after giving effect to working capital
adjustments of $1.6 million, which were paid to the Company in July 2008 (the
"Data Management Acquisition"). Data Management designs, manufactures and
services scannable data collection products, including printed forms, scanning
equipment and related software, and provides survey consulting and tracking
services, including medical device tracking, as well as field maintenance
services to corporate and governmental clients. Data Management's results of
operations have been included in the Company's results of operations since
February 22, 2008.
Through June 30, 2008 Harland Clarke Holdings has taken actions to achieve
approximately $102.3 million of its Harland Acquisition related synergy
targets, on an annual basis. As a result of these actions, Harland Clarke
Holdings has realized approximately $19.6 million and $36.9 million of EBITDA
improvement in the second quarter and six months ended June 30, 2008,
respectively. Harland Clarke Holdings believes that it is on track to achieve
cost reduction targets previously disclosed in connection with the financing
for the Harland Acquisition.
Second Quarter 2008 Performance
Consolidated Results
Consolidated net revenues increased by $117.8 million to $457.4 million in
the second quarter of 2008 from $339.6 million in the second quarter of 2007,
primarily as a result of the Harland Acquisition which accounted for $82.1
million of the increase and the Data Management Acquisition which accounted
for $25.8 million of the increase. Net income for the second quarter of 2008
was $14.6 million, as compared to a net loss of $37.5 million for the second
quarter of 2007. The net income for the second quarter of 2008 includes
pre-tax charges of $0.6 million ($0.4 million after tax) for non-cash fair
value purchase accounting adjustments to deferred revenue and inventory
related to the Harland and Data Management Acquisitions and $3.9 million
($2.4 million after tax) for restructuring costs. The net loss for the second
quarter of 2007 includes a non-recurring pre-tax loss on early extinguishment
of debt of $54.6 million ($34.1 million after tax) related to refinancing
transactions completed in connection with the Harland Acquisition. The net
loss for the second quarter of 2007 also includes pre-tax charges of $8.6
million ($5.2 million after tax) for non-cash fair value purchase accounting
adjustments to deferred revenue and inventory related to the Harland
Acquisition and $1.7 million ($1.0 million after tax) for restructuring costs.
For the second quarter of 2008, Adjusted EBITDA increased by $34.0 million to
$119.1 million as compared to $85.1 million for the second quarter of 2007
primarily as a result of the Harland Acquisition which accounted for $22.9
million of the increase and the Data Management Acquisition which accounted
for $4.9 million of the increase. Adjusted EBITDA is a non-GAAP measure that
is defined in the footnotes to this release and which is reconciled to net
income, the most directly comparable GAAP measure, in the accompanying
financial tables.
Segment Results
Net revenues from the Harland Clarke segment increased by $52.7 million to
$329.0 million for the second quarter of 2008 from $276.3 million in the
second quarter of 2007, primarily as a result of the Harland Acquisition which
accounted for $49.5 million of the increase. The remaining $3.2 million of
the increase was primarily due to higher revenues per unit, partially offset
by a decline in units. Operating income for the Harland Clarke segment
increased by $19.1 million to $63.1 million for the second quarter of 2008
from $44.0 million for the second quarter of 2007, of which the Harland
Acquisition accounted for $10.2 million of the increase. The remaining $8.9
million was largely related to growth in revenue and cost reductions in labor
and facilities expenses more than offsetting increased integration related
costs.
Net revenues from the Harland Financial Solutions segment increased by
$28.7 million to $73.9 million for the second quarter of 2008 from $45.2
million in the second quarter of 2007, primarily as a result of the Harland
Acquisition which accounted for $23.5 million of the increase. The remaining
$5.2 million of the increase was primarily due to a $2.9 million difference in
the fair value adjustment to deferred revenue and organic growth in the risk
management and enterprise solutions product lines. Operating income for the
Harland Financial Solutions segment increased by $3.8 million to $6.4 million
for the second quarter of 2008 from $2.6 million in the second quarter of
2007, partially as a result of the Harland Acquisition which accounted for
$1.8 million of the increase. Operating income for the Harland Financial
Solutions segment for the second quarter of 2008 includes pre-tax charges of
$0.2 million ($0.1 million after tax) for non-cash fair value purchase
accounting adjustments to deferred revenue related to the Harland Acquisition
and $2.6 million ($1.6 million after tax) for compensation expense related to
an incentive agreement for the Peldec assets purchase. Operating income for
the Harland Financial Solutions segment for the second quarter of 2007
includes pre-tax charges of $3.1 million ($1.9 million after tax) for non-cash
fair value purchase accounting adjustments to deferred revenue related to the
Harland Acquisition.
Net revenues from the Scantron segment increased by $36.4 million to $54.7
million for the second quarter of 2008 from $18.3 million in the second
quarter of 2007, primarily as a result of the Data Management Acquisition
which accounted for $25.8 million of the increase and the Harland Acquisition
which accounted for $9.3 million of the increase. The remaining $1.3 million
of the increase was primarily due to a $0.6 million difference in the fair
value adjustment of deferred revenues and organic growth, primarily in K-12
software. Operating income for the Scantron segment increased by $6.3 million
to $4.5 million in the second quarter of 2008 from an operating loss of $1.8
million in the second quarter of 2007, primarily as a result of the Harland
Acquisition which accounted for $1.1 million of the increase, and the Data
Management Acquisition which accounted for $1.8 million of the increase and
decrease in by non-cash purchase accounting adjustments, discussed below.
Operating income for the Scantron segment for the second quarter of 2008
includes pre-tax charges of $0.4 million ($0.3 million after tax) for non-cash
fair value purchase accounting adjustments to deferred revenue and inventory,
related to the Harland and Data Management Acquisitions. Operating income for
the Scantron segment for the second quarter of 2007 includes pre-tax charges
of $3.8 million ($2.3 million after tax) for non-cash fair value purchase
accounting adjustments to deferred revenue and inventory, related to the
Harland Acquisition.
First Half 2008 Performance
Consolidated Results
Consolidated net revenues increased by $397.7 million to $901.9 million in
the six months ended June 30, 2008 from $504.2 million for the six months
ended June 30, 2007, primarily as a result of the Harland Acquisition which
accounted for $345.1 million of the increase and the Data Management
Acquisition which accounted for $36.6 million of the increase. Net income for
the six months ended June 30, 2008 was $21.8 million, as compared to a net
loss of $32.4 million for the six months ended June 30, 2007. The net income
for the six months ended June 30, 2008 includes pre-tax charges of $2.2
million ($1.3 million after tax) related to non-cash fair value purchase
accounting adjustments to deferred revenue and inventory related to the
Harland and Data Management Acquisitions and $5.3 million ($3.2 million after
tax) for restructuring costs. The net loss for the six months ended June 30,
2007 includes a non-recurring pre-tax loss on early extinguishment of debt of
$54.6 million ($34.1 million after tax) related to refinancing transactions
completed in connection with the Harland Acquisition. The net loss for the
six months ended June 30, 2007 also includes pre-tax charges of $8.6 million
($5.2 million after tax) for non-cash fair value purchase accounting
adjustments to deferred revenue and inventory related to the Harland
Acquisition and $2.9 million ($1.8 million after tax) for restructuring costs.
For the six months ended June 30, 2008, Adjusted EBITDA increased by $103.0
million to $226.5 million as compared to $123.5 million for the six months
ended June 30, 2007 primarily as a result of the Harland Acquisition which
accounted for $87.7 million of the increase and the Data Management
Acquisition which accounted for $7.8 million of the increase.
Segment Results
Net revenues from the Harland Clarke segment increased by $220.2 million
to $661.1 million for the six months ended June 30, 2008 from $440.9 million
in the six months ended June 30, 2007, primarily as a result of the Harland
Acquisition which accounted for $210.9 million of the increase. The remaining
$9.3 million of the increase was primarily due to higher revenues per unit,
partially offset by a decline in units. Operating income for the Harland
Clarke segment increased by $49.0 million to $116.4 million for the six months
ended June 30, 2008 from $67.4 million for the six months ended June 30, 2007,
of which the Harland Acquisition accounted for $38.1 million of the increase.
The remaining $10.9 million of the increase was largely related to growth in
revenue and cost reductions in labor, materials and facilities expenses more
than offsetting increased integration related expenses.
Net revenues from the Harland Financial Solutions segment increased by
$99.9 million to $145.1 million for the six months ended June 30, 2008 from
$45.2 million in the six months ended June 30, 2007, primarily as a result of
the Harland Acquisition which accounted for $94.8 million of the increase.
The remaining $5.1 million of the increase was primarily due to a $2.9 million
difference in the fair value adjustment to deferred revenue and organic growth
in risk management and enterprise solutions product lines. Operating income
for the Harland Financial Solutions segment increased by $10.2 million to
$12.8 million for the six months ended June 30, 2008 from $2.6 million in the
six months ended June 30, 2007, primarily as a result of the Harland
Acquisition which accounted for $8.2 million of the increase. Operating
income for the Harland Financial Solutions segment for the six months ended
June 30, 2008 includes pre-tax charges of $1.2 million ($0.7 million after
tax) for non-cash fair value purchase accounting adjustments to deferred
revenue related to the Harland Acquisition and $5.1 million ($3.1 million
after tax) for compensation expense related to an incentive agreement for the
Peldec assets purchase. Operating income for the Harland Financial Solutions
segment for the six months ended June 30, 2007 includes pre-tax charges of
$3.1 million ($1.9 million after tax) for non-cash fair value purchase
accounting adjustments to deferred revenue related to the Harland Acquisition.
Net revenues from the Scantron segment increased by $78.0 million to $96.3
million for the six months ended June 30, 2008 from $18.3 million in the six
months ended June 30, 2007, primarily as a result of the Harland Acquisition
which accounted for $40.0 million of the increase and the Data Management
Acquisition which accounted for $36.6 million of the increase. The remaining
$1.4 million of the increase was primarily due to a $0.3 million difference in
the fair value adjustment to deferred revenues and organic growth, primarily
in K-12 software. Operating income for the Scantron segment increased by
$12.0 million to $10.2 million in the six months ended June 30, 2008 from an
operating loss of $1.8 million in the six months ended June 30, 2007,
primarily as a result of the Harland Acquisition which accounted for $5.6
million of the increase, the Data Management Acquisition which accounted for
$3.1 million of the increase and a decrease in non-cash purchase accounting
adjustments, discussed below. Operating income for the Scantron segment for
the six months ended June 30, 2008 includes pre-tax charges of $1.0 million
($0.6 million after tax) for non-cash fair value purchase accounting
adjustments to deferred revenue and inventory related to the Harland and Data
Management Acquisitions. Operating income for the Scantron segment for the
six months ended June 30, 2007 includes pre-tax charges of $3.8 million ($2.3
million after tax) for non-cash fair value purchase accounting adjustments to
deferred revenue and inventory related to the Harland Acquisition.
Harland Acquisition
As previously announced, on May 1, 2007, M & F Worldwide completed its
acquisition of Harland at a price per share of Harland common stock of $52.75,
contributing to an approximate transaction value of $1.7 billion. Upon the
completion of the transaction, Harland became a wholly owned subsidiary of the
Company. In connection with the Harland Acquisition, Clarke American's prior
senior secured credit facility, Harland's then outstanding credit facility and
Clarke American Corp.'s prior 11.75% senior notes due 2013 were repaid in
full. The acquisition and debt repayments were funded with new borrowings by
Harland Clarke Holdings, consisting of a $1.8 billion senior secured term loan
and an aggregate $615.0 million principal amount of senior notes due 2015,
composed of $310.0 million principal amount of 9.50% senior fixed rate notes
and $305.0 million principal amount of senior floating rate notes bearing
interest at LIBOR plus 4.75%.
Data Management Acquisition
As previously announced, on February 22, 2008, M & F Worldwide completed
its acquisition of all of the limited liability company membership interests
of Data Management, pursuant to the terms of the Membership Interest Purchase
Agreement, dated as of February 13, 2008, by and among M & F Worldwide, NCS
Pearson, Inc. and Pearson, Inc. Prior to the closing, M & F Worldwide
assigned the Purchase Agreement to its indirect wholly owned subsidiary,
Scantron Corporation, which upon closing became the direct parent company of
Data Management. The net purchase price was $218.7 million in cash, after
giving effect to working capital adjustments of $1.6 million which were paid
to the Company in July 2008. M & F Worldwide financed the Data Management
Acquisition and related fees and expenses with cash on hand at Harland Clarke
Holdings.
About Harland Clarke Holdings
Prior to the acquisition of Harland on May 1, 2007, Clarke American Corp.
provided checks and related products and direct marketing services through two
segments: the Financial Institution segment, which was focused on financial
institution clients and their customers, and the Direct to Consumer segment,
which was focused on individual customers. As a result of the Harland
Acquisition, Harland Clarke Holdings now has three business segments, which
are operated by Harland Clarke, Harland Financial Solutions, and Scantron.
Subsequent to the closing of the Harland Acquisition, Clarke American Corp.'s
check printing, contact center and direct marketing capabilities have been
combined with Harland's corresponding business and operate under the name
"Harland Clarke." The operations of Harland Financial Solutions include core
processing, retail and lending software solutions. Scantron is a leading
provider of data collection and testing and assessment products and services
sold primarily to educational and commercial customers.
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) covenant restrictions under
Harland Clarke Holdings' indebtedness that may limit its ability to operate
its business and react to market changes; 3) 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 and other factors; 4)
consolidation among financial institutions and other adverse changes among the
large clients on which Harland Clarke Holdings depends, resulting in decreased
revenues; 5) the ability to retain Harland Clarke Holdings' clients; 6) the
ability to retain Harland Clarke Holdings' key employees and management; 7)
lower than expected cash flow from operations; 8) significant increases in
interest rates; 9) intense competition in all areas of Harland Clarke
Holdings' business; 10) interruptions or adverse changes in Harland Clarke
Holdings' supplier relationships, technological capacity, intellectual
property matters, and applicable laws; 11) variations in contemplated brand
strategies, business locations, management positions and other business
decisions in connection with integrating Harland and Data Management; 12)
Harland Clarke Holdings' ability to successfully integrate Harland and Data
Management into its business and manage future acquisitions; 13) 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 the
Harland acquisition or from other acquisitions, including the recent
acquisition of Data Management by Scantron; and 14) the acquisitions of
Harland and Data Management 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.
You should read carefully the factors described in Harland Clarke
Holdings' Annual Report on Form 10-K for the year ended December 31, 2007 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 nonrecurring items.
EBITDA has limitations as an analytical tool, and you should not consider
it in isolation or as substitutes 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 further 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, loss on early extinguishment of
debt, restructuring costs, deferred purchase price compensation related to the
Peldec assets purchase and non-recurring 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.
- tables to follow -
Harland Clarke Holdings Corp. and Subsidiaries
Consolidated Statements of Operations
(in millions)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
20082007 20082007
Product revenues, net$380.3 $299.5$755.1 $464.0
Service revenues, net 77.140.1 146.840.2
Total net revenues 457.4 339.6 901.9 504.2
Cost of products sold 227.7 186.1 459.9 287.3
Cost of services provided 40.225.2 76.225.3
Total cost of revenues 267.9 211.3 536.1 312.6
Gross profit 189.5 128.3 365.8 191.6
Selling, general and
administrative expenses 115.987.8 229.6 126.5
Restructuring costs 3.9 1.7 5.3 2.9
Operating income69.738.8 130.962.2
Interest income 0.2 1.3 1.6 1.3
Interest expense (44.3) (45.3)(94.5) (60.5)
Loss on early extinguishment
of debt- (54.6) - (54.6)
Other income (expense), net 0.1 0.1 (0.2)0.1
Income (loss) before
income taxes 25.7 (59.7) 37.8 (51.5)
Provision (benefit) for
income taxes 11.1 (22.2) 16.0 (19.1)
Net income (loss) $14.6 $(37.5)$21.8 $(32.4)
Harland Clarke Holdings Corp. and Subsidiaries
Business Segment Information
(in millions)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
20082007 20082007
Net revenues
Harland Clarke segment $329.0 $276.3$661.1 $440.9
Harland Financial Solutions
segment (a) 73.945.2 145.145.2
Scantron segment (a) 54.718.3 96.318.3
Eliminations (0.2) (0.2) (0.6) (0.2)
Total net revenues $457.4 $339.6$901.9 $504.2
Operating income
Harland Clarke segment $63.1 $44.0$116.4 $67.4
Harland Financial Solutions
segment (a) 6.4 2.6 12.8 2.6
Scantron segment (a) 4.5(1.8) 10.2(1.8)
Corporate(4.3) (6.0) (8.5) (6.0)
Total operating income$69.7 $38.8$130.9 $62.2
(a) During the first quarter of 2008, the Company transferred its field
maintenance services from the Harland Financial Solutions segment to
the Scantron segment.
Reconciliation of net income to EBITDA and EBITDA to Adjusted EBITDA (in
millions) (unaudited):
Three Months Ended Six Months Ended
June 30, June 30,
20082007 20082007
Net income (loss) $14.6 $(37.5)$21.8 $(32.4)
Interest expense, net 44.144.0 92.959.2
Provision (benefit) for
income taxes 11.1 (22.2) 16.0 (19.1)
Depreciation and amortization 41.733.5 82.747.3
EBITDA111.517.8 213.455.0
Adjustments:
Restructuring (a) 3.9 1.7 5.3 2.9
Peldec deferred purchase
price compensation (b) 2.6 - 5.1 -
Loss on early extinguishment
of debt (c) - 54.6 - 54.6
Impairment of intangible
assets (d) 0.5 - 0.5 -
Transaction related expenses (e) - 2.4 - 2.4
Impact of purchase accounting
adjustments (f) 0.6 8.6 2.2 8.6
Adjusted EBITDA $119.1 $85.1$226.5 $123.5
(a) Reflects restructuring expenses, 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. The expenses recorded in the three and six
months ended June 30, 2008 primarily relate to closures of facilities
and other restructuring activities in connection with the Harland and
Data Management Acquisitions. The expenses recorded in the three and
six months ended June 30, 2007 include expenses from restructuring
activities that were not related to the Harland or Data Management
Acquisitions.
(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 the 2007 purchase of the
Peldec assets.
(c) Reflects costs incurred to retire prior Clarke American Corp. debt as
a result of the Harland Acquisition.
(d) Reflects a non-cash impairment charge from the write-down of Alcott
Routon intangible assets.
(e) Reflects non-recurring employee retention bonuses incurred in
connection with the Harland Acquisition.
(f) Reflects the negative effect on net income primarily from the non-
cash fair value deferred revenue and inventory adjustments related to
purchase accounting.
SOURCE Harland Clarke Holdings Corp.
