M & F Worldwide Corp. News
M & F Worldwide Corp. Reports First Quarter 2008 Results
M & F Worldwide will host a conference call to discuss its first quarter 2008 results on
On
Through
First Quarter Performance
Consolidated Results
Consolidated net revenues for the first quarter of 2008 were
Basic earnings per common share was
Segment Results
Net revenues from the Harland Clarke segment increased by
Net revenues and operating income from the Harland Financial Solutions segment for the first quarter of 2008 were
Net revenues from the Licorice Products segment, operated by Mafco Worldwide, increased by
Harland Acquisition
As previously announced, on
Data Management Acquisition
As previously announced, on
About M & F Worldwide
Prior to the acquisition of Harland on
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) M & F Worldwide's substantial indebtedness; (6) covenant restrictions under M & F Worldwide's indebtedness that may limit its ability to operate its business and react to market changes; (7) 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; (8) consolidation among financial institutions and other adverse changes among the large clients on which M & F Worldwide depends, resulting in decreased revenues; (9) the ability to retain M & F Worldwide's clients; (10) the ability to retain M & F Worldwide's key employees and management; (11) lower than expected cash flow from operations; (12) significant increases in interest rates; (13) intense competition in all areas of M & F Worldwide's business; (14) interruptions or adverse changes in M & F Worldwide's supplier relationships, technological capacity, intellectual property matters, and applicable laws; (15) variations in contemplated brand strategies, business locations, management positions and other business decisions in connection with integrating Harland and Data Management; (16) M & F Worldwide's ability to successfully integrate Harland and Data Management into its business and manage future acquisitions; (17) 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 the Harland acquisition or from other acquisitions, including the recent acquisition of Data Management by Scantron; and (18) 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 M & F Worldwide's servicing its debt obligations.
You should read carefully the factors described in M & F Worldwide's Annual Report on Form 10-K for the year ended
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
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 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 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 further 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 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 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.
- tables to follow - M & F Worldwide Corp. and Subsidiaries Consolidated Statements of Income (in millions, except per share data) (Unaudited) Three Months Ended March 31, 2008 2007 Product revenues, net $402.3 $191.2 Service revenues, net 69.7 0.1 Total net revenues 472.0 191.3 Cost of products sold 247.0 114.9 Cost of services provided 36.0 0.1 Total cost of revenues 283.0 115.0 Gross profit 189.0 76.3 Selling, general and administrative expenses 118.5 43.6 Restructuring costs 1.4 1.2 Operating income 69.1 31.5 Interest income 2.2 0.8 Interest expense (51.5) (17.1) Other income, net 1.0 - Income before income taxes 20.8 15.2 Provision for income taxes 8.3 5.8 Net income $12.5 $9.4 Earnings per common share: Basic $0.58 $ 0.45 Diluted $0.58 $ 0.44 M & F Worldwide Corp. and Subsidiaries Business Segment Information (in millions) (Unaudited) Three Months Ended March 31, 2008 2007 Net revenues Harland Clarke segment $332.1 $164.6 Harland Financial Solutions segment(a) 71.2 - Scantron segment(a) 41.6 - Licorice Products segment 27.5 26.7 Eliminations (0.4) - Total net revenues $472.0 $191.3 Operating income Harland Clarke segment $53.3 $ 23.4 Harland Financial Solutions segment(a) 6.4 - Scantron segment(a) 5.7 - Licorice Products segment 9.9 10.3 Corporate (6.2) (2.2) Total operating income $69.1 $31.5 (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 March 31, 2008 2007 Net income $12.5 $9.4 Interest expense, net 49.3 16.3 Provision for income taxes 8.3 5.8 Depreciation and amortization 41.5 14.3 EBITDA 111.6 45.8 Adjustments: Restructuring (a) 1.4 1.2 Peldec deferred purchase price compensation (b) 2.5 - Impact of purchase accounting adjustments (c) 1.6 - Adjusted EBITDA $117.1 $47.0 (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 months ended March 31, 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 months ended March 31, 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 the negative effect on net income primarily from the non-cash fair value inventory and deferred revenue adjustments related to purchase accounting.
SOURCE M & F Worldwide Corp.
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