Business News

M & F Worldwide Corp. Reports Fourth Quarter and Full Year 2007 Results

Monday 03. March 2008 - M & F Worldwide Corp. to Hold Conference Call on March 5, 2008

M & F Worldwide Corp. (NYSE:MFW), today reported results for the fourth quarter and year ended December 31, 2007. As previously announced, on May 1, 2007, M & F Worldwide (the “Company”) completed the acquisition of John H. Harland Company (“Harland”) and related financing transactions. M & F Worldwide’s results for the year ended December 31, 2007 reflect Harland results from and after May 1, 2007. As a result of the acquisition of Harland, M & F Worldwide now has four business segments, which are operated by Harland Clarke (which is the combination of Clarke American’s check printing, contact center and direct marketing capabilities with Harland’s corresponding businesses), Harland Financial Solutions, Scantron and Mafco Worldwide.

M & F Worldwide will host a conference call to discuss its fourth quarter and fiscal 2007 results on March 5, 2008, at 9:30 a.m. (EST). The conference call will be accessible by dialing (800) 230-1093 in the US and (612) 332-0107 internationally. For those unable to listen live, a replay of the call will be available by dialing (800) 475-6701 in the US and (320) 365-3844 internationally; Access Code: 913357. The replay will be available 12:00 p.m. EST, Wednesday, March 5, 2008, through 12:00 p.m. EDT, Wednesday, March 19, 2008.

Fourth Quarter Performance

Consolidated Results


Consolidated net revenues for the fourth quarter of 2007 were $458.8 million, as compared to $174.6 million for the fourth quarter of 2006. The Company’s revenues increased by $284.2 million in the fourth quarter of 2007 primarily as a result of the acquisition of Harland, which accounted for $261.1 million of the increase. Net income for the fourth quarter of 2007 was $11.5 million, as compared to $6.6 million for the fourth quarter of 2006. The net income for the fourth quarter of 2007 includes pre-tax charges of $4.0 million ($2.4 million after tax) for non-cash fair value purchase accounting adjustments to deferred revenue and $0.7 million ($0.4 million after tax) for restructuring costs. For the fourth quarter of 2007, Adjusted EBITDA increased by $74.6 million to $116.7 million as compared to $42.1 million for the fourth quarter of 2006 primarily as a result of the acquisition of Harland, which accounted for $73.3 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.

Basic earnings per common share was $0.54 for the fourth quarter of 2007 compared to $0.33 for the fourth quarter of 2006. Diluted earnings per common share was $0.54 for the fourth quarter of 2007 compared to $0.32 for the fourth quarter of 2006.

Segment Results

Net revenues from the Harland Clarke segment increased by $181.7 million to $331.2 million for the fourth quarter of 2007 from $149.5 million in the fourth quarter of 2006, primarily as a result of the Harland acquisition which accounted for $159.4 million of the increase. Operating income for the Harland Clarke segment was $58.3 million for the fourth quarter of 2007 as compared to $18.4 million for the fourth quarter of 2006, primarily as a result of the Harland acquisition which accounted for $35.0 million of the increase. The remaining $4.9 million was largely related to the increase in revenues per unit and cost reductions, partially offset by increased incentive compensation expense and restructuring and integration costs.

Net revenues and operating income from the Harland Financial Solutions segment for the fourth quarter of 2007 were $80.8 million and $8.7 million, respectively. Net revenues and operating income from the Scantron segment for the fourth quarter of 2007 were $21.4 million and $5.4 million, respectively. Operating income for the Harland Financial Solutions segment includes pre-tax charges of $3.9 million for non-cash fair value purchase accounting adjustments to deferred revenue.

Net revenues from the Licorice Products segment, operated by Mafco Worldwide, increased by $0.8 million, or 3.2%, to $25.9 million in the fourth quarter of 2007 from $25.1 million in the fourth quarter of 2006. Operating income was $9.4 million for the fourth quarter of 2007 as compared to $9.0 million for the fourth quarter of 2006. The increase in operating income of $0.4 million was mainly due to the increase in net revenues, offset in part by an increase in manufacturing costs, especially raw materials.

Year-to-Date Performance

Consolidated Results


Consolidated net revenues for the year ended December 31, 2007 were $1,472.8 million, as compared to $722.0 million for the year ended December 31, 2006. The Company’s revenues increased by $750.8 million in the 2007 period primarily as a result of the Harland acquisition, which accounted for $699.2 million of the increase. Net loss for the year ended December 31, 2007 period was $4.2 million, as compared to $36.2 million of net income for the 2006 period. The net loss for the year ended December 31, 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 2007 also includes pre-tax charges of $16.6 million ($10.1 million after tax) for non-cash fair value purchase accounting adjustments to inventory and deferred revenue, $2.4 million ($1.4 million after tax) for acquisition-related retention bonuses, $5.6 million ($3.4 million after tax) for restructuring costs, and $3.1 million ($1.9 million after tax) due to impairment of Alcott Routon intangible assets. For 2007, Adjusted EBITDA increased by $193.1 million to $373.7 million, as compared to $180.6 million for 2006, primarily as a result of the Harland acquisition, which accounted for $186.5 million of the increase.

Basic loss per common share was $0.20 for the year ended December 31, 2007 compared to basic earnings per share of $1.82 for 2006. Diluted loss per common share was $0.20 for the year ended December 31, 2007 compared to diluted earnings per share of $1.78 for the year ended December 31, 2006.

Segment Results

Net revenues from the Harland Clarke segment increased by $480.6 million to $1,104.5 million for the year ended December 31, 2007 from $623.9 million in the year ended December 31, 2006, primarily as a result of the Harland acquisition which accounted for $433.8 million of the increase. The remaining $46.8 million of the increase was primarily due to an increase in revenues from a large client and higher revenues per unit, partially offset by a decline in units. Operating income for the Harland Clarke segment was $181.1 million for the year ended December 31, 2007 as compared to $87.0 million for 2006, primarily as a result of the Harland acquisition which accounted for $83.1 million of the increase. The remaining $11.0 million was largely related to the increase in revenues per unit and cost reductions, partially offset by increased incentive compensation expense and restructuring and integration costs.

Net revenues and operating income from the Harland Financial Solutions segment for the period from May 1, 2007, the date of the Harland acquisition, through December 31, 2007 were $211.9 million and $22.2 million, respectively. Net revenues and operating income from the Scantron segment for the same period were $54.7 million and $7.0 million, respectively. Operating income for the Harland Financial Solutions and Scantron segments reflect pre-tax charges of $10.2 million and $4.4 million, respectively, for non-cash fair value purchase accounting adjustments to deferred revenue and inventory.

Net revenues from the Licorice Products segment, operated by Mafco Worldwide, increased by $4.8 million, or 4.9%, to $102.9 million for the year ended December 31, 2007 from $98.1 million for the year ended December 31, 2006. Operating income was $35.5 million for the year ended December 31, 2007 as compared to $35.7 million for 2006. The decrease in operating income of $0.2 million was mainly due to an increase in manufacturing costs, especially raw materials, and higher professional fees, which more than offset the increase in net revenues.

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 Clarke American Corp. (“Clarke American”), a wholly-owned subsidiary of the Company. Clarke American was renamed Harland Clarke Holdings Corp. (“Harland Clarke Holdings”) after completion of the Harland acquisition. In connection with the Harland acquisition, Clarke American’s prior senior secured credit facility, Harland’s then outstanding credit facility and Clarke American’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%.

Subsequent Events

On February 22, 2008, M & F Worldwide completed its previously announced acquisition of all of the limited liability company membership interests of Data Management I LLC, a wholly-owned subsidiary of NCS Pearson Inc., pursuant to the terms of the Membership Interest Purchase Agreement, dated as of February 13, 2008, by and among M & F Worldwide, NCS Pearson and Pearson Inc. Data Management designs, manufactures and services scannable data collection products, including printed forms, scanners and related software, and provides survey consulting and tracking services, including medical device tracking, to corporate and government clients. 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 purchase price, paid at closing, was $225 million in cash, subject to post-closing adjustments. M & F Worldwide financed the Data Management acquisition and related fees and expenses with available cash from Harland Clarke Holdings. In connection with the Data Management acquisition, Harland Clarke Holdings paid $2.0 million to MacAndrews & Forbes Holdings Inc. on February 22, 2008 for services in sourcing, analyzing, negotiating and executing the Data Management acquisition.