Exhibit 99.1
![]() | Public Lenders' Presentation Confidential May 2011 1 |
![]() | Forward Looking Statements Certain information in this presentation may be considered forward-looking information within the definition of the Private Securities Litigation Reform Act of 1995. This information is based on the Company's current expectations and actual results could vary materially depending on risks and uncertainties that may affect the Company's operations, markets, services, prices and other factors as discussed in filings with the Securities and Exchange Commission. These risks and uncertainties include, but are not limited to, general and economic conditions and declines in the industries in which we participate. There is no assurance that the Company's expectations will be realized. All forward looking statements speak only as of the date of this presentation. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are qualified by the cautionary statements in this section. The Company assumes no obligation to update any forward-looking information contained in this presentation. 2 |
![]() | Table of Contents I. Company Overview Chuck Dawson Chief Executive Officer II. Key Credit Highlights Chuck Dawson Chief Executive Officer III. Financial Overview Peter Fera Chief Financial Officer IV. Transaction Terms and Timing Credit Suisse Appendix 3 |
![]() | Transaction Overview Harland Clarke Holdings Corp. ("Harland" or the "Company") is seeking to amend and extend its current senior secured term loan [] The proposed transaction includes: [] $1,200 million or more new senior secured term loan tranche [] New senior secured term loan tranche extended three years to June 2017 [] $529 million non-extended senior secured term loan [] $100 million non-extended revolving credit facility [] The Company believes the proposed transaction would be beneficial to lenders as it would: [] Address the majority of the Company's near-term maturities by extending the maturity profile [] Provide management with operating flexibility and enhance overall credit quality of the Company [] Address term loan maturity before other issuers while preserving flexibility for future secured debt issuance if warranted [] Create the opportunity to seek certain other modifications to the credit agreement as part of the amendment 4 |
![]() | Transaction Summary Pro Forma Capitalization ($ in millions) =================================== ========== =========== =========== =========== Current Pro forma Indicativ 3/31/11A 3/31/11A Rate Maturity =================================== ========== =========== =========== =========== Cash $107 $9 Revolver -- -- L+250 June-13 Senior secured term loan 1,729 529 L+250 June-14 (1) June-17 Extended senior secured term loan -- 1,200 L+375 Total senior secured debt $1,729 $1,729 (2) Senior floating rate notes 207 207 L+475 May-15 Senior fixed rate notes 271 271 9.50% May-15 Capital lease obligations and other 4 4 =================================== ========== =========== =========== =========== Total debt $2,211 $2,21 Adjusted Compliance Cash Adjusted Compliance Cash ========== ============ ======= ========== ============ ======= LTM 3/31/11 Adjusted EBITDA $464 $494 $467 $464 $494 $46 GlobalScholar and Spectrum K12 Adjustment (9) (9) 6 (9) (9) 6 ========================================== ========== ============ ======= ========== ============ ======= LTM 3/31/11 Pro Forma EBITDA $455 $485 $473 $455 $485 $47 First Lien Leverage / Pro Forma EBITDA 3.8x 3.6x 3.7x 3.8x 3.6x 3.7x Senior Secured Leverage / Pro Forma EBITDA 3.8x 3.6x 3.7x 3.8x 3.6x 3.7x Total Leverage / Pro Forma EBITDA 4.9x 4.6x 4.7x 4.9x 4.6x 4.7x (1) The earlier of June 2017 or 90 days prior to the maturity of the senior floating rate notes and senior fixed rates notes (i.e. May 2015) (2) LIBOR floor of 1.25% 5 |
![]() | Management Presenters Chuck Dawson Chief Executive Officer [] Over 34 years of experience in the financial services and security printing industry [] Over 18 years with Clarke American / Harland Clarke [] Former Chief Executive Officer of Rocky Mountain Bank Note; began career at IBM [] B. A. in Marketing and an MBA from Lamar University Peter Fera Executive Vice President and Chief Financial Officer [] 17 years of experience with Harland Clarke, Honeywell, and GE in various financial and operational leadership roles [] Appointed Executive Vice President and Chief Financial Officer in May 2007 [] Former Chief Financial Officer of Honeywell's Aircraft Landing Systems business from October 2003 to April 2005 [] B. A. in Mechanical Engineering from University of Pennsylvania, an M. A. in Mechanical Engineering from MIT and an MBA in Management from MIT's Sloan School of Management 6 |
![]() | I. Company Overview Chuck Dawson, Chief Executive Officer 7 |
![]() | Harland Clarke Holdings Snapshot [] Leading Industry Positions -- Leading provider of checks, marketing and information services, and customized business and home office products -- Leading provider of software and services to financial institutions -- Leading provider of technology-enabled data management and testing / assessment solutions -- $1.7 billion in revenues [] Broad Product and Service offerings -- Harland Clarke: Checks and related products, business forms / stationery, fraud prevention products and direct marketing services -- Harland Financial Solutions: Technology services and solutions for the financial services industry -- Scantron: Technology-enabled data management and testing / assessment solutions for educational, commercial, healthcare and governmental markets [] Strong Long-Term Client Relationships -- Trust, integration and partnership drive client relationships supported by long-term contracts -- Harland Clarke: 15,000+ financial and commercial institutions -- Harland Financial Solutions: 6,500+ financial institutions -- Scantron: 50,000+ educational and commercial accounts [] Strong profit margins and robust cash flow generation -- 2010 Adjusted EBITDA: $485 million (29.0% margin) -- 2010 Cash flow from operations: $273 million Revenue by Business Segment [GRAPHIC OMITTED] 2010 Consolidated GAAP Revenues: $1,671 million Revenue by Product Line [GRAPHIC OMITTED] 2010 Consolidated GAAP Revenues: $1,671 million 8 |
![]() | Segment Overview: Description of Products and Services Description [] Leading provider of checks, office products and marketing and contact center services [] Strong, long-term customer relationships [] 15,000+ financial and commercial institution clients [] 85%+ of revenues under long-term contract [] Trusted partner with a proven business model operating in a highly secure network Products [] Checks and related products [] Marketing services [] Business and home office products [] Financial and business forms [] Security solutions Facilities [] 5 contact centers and 10 plants, supported by a national sales organization Current Strategic Initiatives [] Maximize financial institution relationships through value added solutions [] Optimize customer-preferred channels [] Accelerate growth through retail clients [] Effectively manage cost structure (1) Adjusted Revenue ($ in millions) [GRAPHIC OMITTED] (1) Revenue is adjusted to add back acquisition accounting fair value adjustments of deferred revenue. Adjusted EBITDA and Margins ($ in millions) [GRAPHIC OMITTED] Adjusted EBITDA Reconciliation ($ in millions) -------------------------------------------- ----- ------ ------ ------ ----------- 2007 2008 2009 2010 LTM 3/31/11 ============================================ ===== ====== ====== ====== =========== Operating income $181 $217 $196 $238 $22 D and A 98 113 109 103 99 Restructuring 6 8 26 12 13 Asset impairments 3 2 33 4 4 Impact of acquisition accounting adjustments 2 -- -- 1 -- Transaction related expenses 2 -- -- -- -- ============================================ ===== ====== ====== ====== =========== Adjusted EBITDA $292 $340 $364 $358 $34 9 |
![]() | Segment Overview: Description of Products and Services Description [] Leading supplier of software and services to financial institutions [] Sell to 6,500+ financial institutions in U. S. Products [] Core processing systems [] Internet and mobile banking applications [] Risk management solutions [] Branch automation solutions [] Lending origination and compliance [] Business intelligence solutions [] Host processing systems on both an in-house and outsourced basis [] Proprietary loan and deposit origination and compliance software Facilities [] 18 fully networked facilities focused on customer support and enhancement of software solutions [] 30+ offshore IT professionals for software development and support resulting from Parsam acquisition Current Strategic Initiatives [] Cross-sell core and point solutions to existing clients to achieve revenue and earnings growth targets [] Create enhanced new sales of enterprise banking, branch banking, internet banking, credit risk management and compliance solutions [] Integrate newly acquired uBanking[] self-service offerings available from Parsam capabilities [] Start build-out of newly acquired India development center to enhance software development and technical implementation capacity (1) Adjusted Revenue [GRAPHIC OMITTED] Adjusted EBITDA and Margins [GRAPHIC OMITTED] Adjusted EBITDA Reconciliation ($ in millions) -------------------------------------------- ------ ------ ----- ------ ----------- 2007 2008 2009 2010 LTM 3/31/11 ============================================ ====== ====== ===== ====== =========== Operating income $17 $34 $33 $49 $5 D and A 17 29 26 28 28 Restructuring -- 4 4 3 3 Asset impairments -- -- 11 -- -- Deferred purchase price 3 8 4 1 1 Impact of acquisition accounting adjustments 10 1 0 -- -- ============================================ ====== ====== ===== ====== =========== Adjusted EBITDA $47 $76 $78 $81 $8 10 |
![]() | Segment Overview: Description of Products and Services Description [] Provider of web-based education technology with unmatched portfolio of services and products [] Strong brand recognition across multiple verticals (40+ year operating history) [] Large and loyal customer base (80% of the largest school districts and 65,000+ scanning machines) [] Broad network of international distributors Products [] Integrated technology solutions for education [] Web-based assessment products [] Response to intervention products [] Scanners, forms and survey services [] Safety data capture [] Installation, maintenance and repair service [] Managed print and network services Facilities [] 14 facilities, which include manufacturing, technology and services [] 200+ offshore IT professionals for software development and support services Current Strategic Initiatives [] First to market with a comprehensive end-to-end education technology solution [] Integrate GlobalScholar, Spectrum K12 and Scantron solutions and capabilities [] Leverage Indian development center resources obtained through GlobalScholar acquisition [] Evolve from data capture products to vertically- focused data solutions (1) Adjusted Revenue [GRAPHIC OMITTED] Adjusted EBITDA and Margins [GRAPHIC OMITTED] Adjusted EBITDA Reconciliation ($ in millions) -------------------------------------------- ------ ------ ------ ------ ----------- 2007 2008 2009 2010 LTM 3/31/11 ============================================ ====== ====== ====== ====== =========== Operating income $12 $28 $35 $25 $1 D and A 11 24 26 27 30 Restructuring -- 2 3 7 6 Asset impairments -- -- 0 -- 1 Deferred purchase price -- -- -- -- (3) Impact of acquisition accounting adjustments 5 2 0 2 5 ============================================ ====== ====== ====== ====== =========== Adjusted EBITDA $28 $56 $64 $61 $5 11 |
![]() | Segment Overview: Acquisition of GlobalScholar Business description GlobalScholar delivers the technical innovations that meet the needs of today's evolving data-driven educational system [] Dedicated to building a bridge to change for education by offering powerful, leading edge solutions and viable transformational opportunities at all levels of the education community [] End-to-end solution, Pinnacle Suite[], increases teacher effectiveness, improves communication and empowers educators to transform practices that improve student learning [] Customers that benefit from the GlobalScholar solution: [] K-12 and Higher Education -- benefit from learning-centric tools integrating all the data sources for each student -- student information, standards-based curriculum, assessment and gradebook [] Professional Development -- improves teacher effectiveness, develops 21st Century teaching skills, delivers research-based practices on school improvement, and brings real value to the hands of teachers [] Tutoring and Test Preparation -- provide tutoring companies and institutions of all sizes with an end-to-end, web-based solution for efficiently managing existing tutoring services and expanding their business into an online/offline/hybrid education vertical Transaction Rationale [] GlobalScholar's instructional management platform supports all aspects of managing education at K-12 schools [] Complements Scantron's testing and assessment, response to intervention, student achievement management and special education software solutions [] Adding GlobalScholar's product offering and customer base to a larger, well-run company like Scantron creates significant revenue and cost synergies On January 3, 2011 Scantron completed the acquisition of GlobalScholar 12 |
![]() | Proven Management Team with Significant Industry Track Record [GRAPHIC OMITTED] [] Chuck Dawson -- President and Chief Executive Officer, Harland Clarke Holdings Corp. -- Over 18 years with Clarke American / Harland Clarke and over 34 years of experience in the financial services and security printing industry [] Peter Fera -- Chief Financial Officer, Harland Clarke Holdings Corp. -- 17 years of experience with Harland Clarke, Honeywell, and GE in various financial and operations leadership roles [] Dan Singleton -- President and Chief Operating Officer, Harland Clarke -- 26-year career in payment solutions industry having held positions at Xerox and Deluxe Checks [] Raju Shivdasani -- President, Harland Financial Solutions -- 30-year career in financial services technology having held positions at Fiserv and Citicorp [] William Hansen -- Chairman, Scantron -- Over 30 years of experience in education having held positions as Deputy Secretary of Education, President of Chartwell Education Group and President of Education Finance Council [] Kal Raman -- Chief Executive Officer, GlobalScholar -- 22 years of experience leading computer technology efforts of major corporations with focus on education, retail and online marketing. Held C-level positions with Amazon. com and Drugstore. com, and leadership roles with Nations Rent, Blockbuster, and Wal-Mart [] John Lawler -- President, Scantron Commercial -- Over 24 years of experience in information services, business services, software, and publishing services for the commercial, B2B, educational, legal, and governmental markets. Senior leadership roles, including global management experience, with Dun and Bradstreet, LexisNexis and Triumph Learning Multi-disciplinary expertise Extensive sales and marketing background / experience Long tenure / significant industry background Significant M and A execution and integration track record Strong public company reporting experience 13 |
![]() | II. Key Credit Highlights Chuck Dawson, Chief Executive Officer 14 |
![]() | [GRAPHIC OMITTED] Diversified Business Model with Industry Leading Positions Broad Range of Client-Focused Products and Services Long-Term Client Relationships with Significant Expansion Opportunities Growing Base of Technology-Enabled Services and Solutions Demonstrated History of Continuous Improvement Proven and Attractive Financial Model with Resilient Performance during Downturn Proven Management Team with Significant Industry Track Record 15 |
![]() | Diversified Business Model with Industry Leading Positions [] Unique business model characterized by industry leadership, diversity of products and services, long-term customer relationships and technology-enabled solutions [] Leading industry positions in checks, payment processing and data management and testing / assessment industries [] Balanced business mix between Harland Clarke's three business units provides an excellent platform to navigate through economic cycles. Significant investment in growth areas (Scantron) to further help mitigate cyclicality [] Diversity of end markets and customers, as well as diversity within each customer Client Diversity (2010) [GRAPHIC OMITTED] Growth of Non-Check Products [GRAPHIC OMITTED] Harland Clarke is well situated to continue capitalizing on its unique position to drive value for all stakeholders 16 |
![]() | Long-Term Client Relationships with Significant Expansion Opportunities Financial Institutions [GRAPHIC OMITTED] Education [GRAPHIC OMITTED] Direct to Consumer and Commercial [GRAPHIC OMITTED] ~85% of revenues are under long-term contracts. Top 10 customers on average utilize 5 or more products and services. 17 |
![]() | Growing Base of Technology-Enabled Services and Solutions An Integrated System Leveraging technology to provide an end-to-end educational software solution 18 |
![]() | Demonstrated History of Continuous Improvement Business Accomplishments Results Ongoing ============= -------------------------------------- --------------------------- ------------------------------------------ [] [] [] Consolidation of printing plants, 22 facility closures Managing costs, overhead and contact centers and SG and A functions since 2007 facilities to reflect decline in check [] unit volumes Exceeded synergy target [] [] Cost rationalization to mirror of $112.6M from the Continued improvements to Harland maturation of check industry John H. Harland operating efficiencies through Clarke acquisition technology investment and process [] improvement [] Improved adjusted Streamlined manufacturing process [] EBITDA margin by Establishing India based product 330bps since 2007 development resources ============= -------------------------------------- --------------------------- ------------------------------------------ [] Improved operating margins [] [] 29% improvement in Move from a product-centric [] revenue per FTE organization to a functional Consolidation of facilities and organization to enhance customer workforce support Harland [] [] Improved adjusted Reduction in SG and A expense by [] Financial Make products more compatible with EBITDA margin by leveraging the Company's shared existing operating systems and Solutions 470bps since 2007 services capabilities applications that achieve popularity [] Established India based product within the business application development resources marketplace ============= -------------------------------------- --------------------------- ------------------------------------------ [] [] [] Consolidation of manufacturing and Exceeded synergy Integrate and leverage new printing operations targets for Data acquisitions profitably Management acquisition [] Established India based product development resources with [] Investment in digital printing [] GlobalScholar acquisition Closed Irvine facility technology to improve efficiencies Scantron [] Reduction of duplicative SG and A expenses through workforce rationalization [] Reduction of redundant consulting and other professional services Strong history of cost reductions and operating margin expansion 19 |
![]() | Proven and Attractive Financial Model with Resilient Performance during Downturn Impact of the Severe Economic / Industry Downturn [] Increasing unit decline in check business [] Overall customer spending down which hampered up-sell and cross-sell opportunities [] Pressure on financial institutions due to banking / financial crisis [] Educational budget constraints [] Reduction in corporate IT spend How did we address these issues? [] Enhanced focus on driving check revenues through cross-sell efforts and increased revenue per unit [] Additional focus on cost rationalization efforts and facilities closures [] Acquisitions in high growth areas, such as education (GlobalScholar and Spectrum K12) Adjusted EBITDA and Margin [GRAPHIC OMITTED] Capital Expenditures as % of Sales [GRAPHIC OMITTED] Cash Flow from Operations [GRAPHIC OMITTED] Adjusted EBITDA Reconciliation ($ in millions) --------------------------------------------- ------- ------ ------- ------ ----------- 2007 2008 2009 2010 LTM 3/31/11 ============================================= ======= ====== ======= ====== =========== Net income (loss) ($15) $47 $112 $114 $10 Interest expense, net 160 184 136 115 112 Provision (benefit) for income taxes (6) 33 67 68 58 D and A 126 165 162 158 158 Restructuring 6 15 33 22 22 Deferred purchase price 3 8 4 1 (2) Asset impairments 3 2 44 4 5 (Gain) / loss on early extinguishment of debt 55 -- (65) -- -- Impact of acquisition accounting adjustments 17 3 0 3 6 Transaction related expenses 2 -- -- -- -- ============================================= ======= ====== ======= ====== =========== Adjusted EBITDA $351 $457 $493 $485 $46 Our financial model is characterized by strong historical performance, high EBITDA margins, low working capital requirements and significant cash flow generation 20 |
![]() | III. Financial Overview Peter Fera, Chief Financial Officer 21 |
![]() | Solid, Long-term Historical Performance [GRAPHIC OMITTED] [GRAPHIC OMITTED] [] High recurring revenue stream []Broad customer base and ~85% of revenues under long- term contract (3-5 years) [] Demonstrated ability to integrate acquisitions [] Diversified revenue base (2) Adjusted EBITDA [GRAPHIC OMITTED] [] Demonstrated track record of margin improvement [] Margin expansion of 270bps since 2007 [] 26 facility closures since 2007 [] Exceeded synergy target of $112.6M from the John H. Harland acquisition Cash Flow from Operations [GRAPHIC OMITTED] [] Strong cash flow generation and conversions [] Minimal capital expenditures requirements (1) Revenue is adjusted to add back acquisition accounting fair value adjustments of deferred revenue (2) See Adjusted EBITDA reconciliation on slide 19 22 |
![]() | Review of 2010 Financial Performance Delivered strong financial performance despite continued recession and market environment [] Adjusted revenue of $1,674 million [] Decrease primarily due to volume declines for the Harland Clarke and Scantron segments [] Gross profit margin of 42.6% in 2010 compared to 41.7% in 2009 [] Adjusted EBITDA margin increased to 29.0% in 2010 from 28.8% in 2009 [] Cash flow from operations of $273 million, an increase of $68 million from 2009 [] Spent $61 million on acquisitions and $39 million (2.3% of revenue) on capital expenditures [] Upgraded and expanded key service and product offerings 23 |
![]() | Review of Q1 2011 Financial Performance Variance Variance (March 31, 2011 v. March 31, March 31, December 31, (March 31, 2011 v. 2010) Dec. 31, 2010) Quarter ended, 2011 2010 2010 $ % $ % Net Revenues Harland Clarke Segment $279 $310 $284 ($31) (10.0%) ($5) (1.8%) Harland Financial Solutions Segment 72 69 73 3 4.3% (1) (1.4%) Scantron Segment 53 51 50 2 3.9% 3 6.0% Eliminations (0) (0) (1) -- NM 1 NM Total Net Revenues $404 $430 $406 ($26) (6.0%) ($2) (0.5%) Gross Profit $167 $182 $176 ($15) (8.2%) ($9) (5.1%) % margin 41.3% 42.3% 43.3% Adjusted EBITDA Harland Clarke Segment 81 95 87 ($14) (14.7%) ($6) (6.9%) Harland Financial Solutions Segment 22 19 22 3 15.8% -- -- Scantron Segment 7 17 14 (10) (58.8%) ($7) (50.0%) Corporate (4) (3) (6) (1) NM $2 NM Adjusted EBITDA (1) $106 $128 $117 ($22) (17.2%) ($11) (9.4%) % margin 26.2% 29.8% 28.8% Capital Expenditures $11 $7 $15 $4 57.1% ($4) (26.7%) % of revenue 2.7% 1.6% 3.7% Adjusted EBITDA -- Capital Expenditures $95 $121 $102 ($26) (21.5%) ($7) (6.9%) % of Adj. EBITDA 89.6% 94.5% 87.2% Source: Company filings (1) Adjusted for restructuring costs, deferred purchase price compensation, asset impairment charges and impact of purchase accounting First Quarter 2011 Consolidated Highlights: [] On January 3, 2011, GlobalScholar was acquired for $134.9 million [] The acquisition further expands Scantron's web-based education solutions platform while diversifying Harland Clarke's revenue stream and complementing Scantron's testing and assessment, response to intervention, student achievement management and special education software solutions [] Net revenues -- decreased by $2 million, or 0.5%, to $404 million for Q1 2011 from $406 million for Q4 2010 [] Adjusted EBITDA -- decreased by $11 million, or 9.4%, to $106 million for Q1 2011 from $117 million for Q4 2010 [] Driven by decrease in Scantron segment which incurred expenses resulting from GlobalScholar acquisition and from investments in the legacy Scantron business 24 |
![]() | Segment Financial Performance (2009--2011) (1) Adjusted Revenues Harland Clarke (71% of revenue; (1) 72% of EBITDA ) [GRAPHIC OMITTED] Harland Financial Solutions (17% of revenue; (1) 17% of EBITDA ) [GRAPHIC OMITTED] Scantron (12% of revenue; (1) 11% of EBITDA ) [GRAPHIC OMITTED] Adjusted EBITDA (% margin) [GRAPHIC OMITTED] [GRAPHIC OMITTED] [GRAPHIC OMITTED] Note: Sum of individual segments may not equal consolidated amounts due to intersegment eliminations and corporate expenses (1) Revenue is adjusted to add back acquisition accounting fair value adjustments of deferred revenue. (2) EBITDA not adjusted for corporate expenses 25 |
![]() | Historical Adjusted-to-Cash Reconciliation [] Harland Clarke is unable to recognize certain revenue streams until vendor specific objective evidence of fair value ("VSOE") is established under GAAP [] With the acquisitions of Spectrum K12 and GlobalScholar, a significant amount of revenue is deferred beyond 2011, although upfront cash payments have been received and costs related to the deferred revenue were recognized in 2011 ($ in millions) Historical EBITDA 2008 2009 2010 Q1 2011 ============================= === ========== ================== ========== ============= (1 Total HCHC -- Adjusted EBITDA $457 $493 $485 $106 Harland Clarke -- -- -- -- Legacy HFS -- -- -- -- Parsam -- -- -- -- ============================= === ========== ================== ========== ============= HFS -- -- -- - Legacy Scantron -- -- -- -- Spectrum K12 -- -- 2 1 Global Scholar -- -- -- 1 ============================= === ========== ================== ========== ============= Scantron -- -- 2 ============================= === ========== ================== ========== ============= Corporate -- -- -- - ============================= === ========== ================== ========== ============= Total HCHC Adjustments -- -- 2 1 ============================= === ========== ================== ========== ============= Total HCHC -- Cash EBITDA $457 $493 $487 $107 (1) See Adjusted EBITDA reconciliation on slide 19 26 |
![]() | IV. Transaction Terms and Timing Credit Suisse 27 |
![]() | Key Amendment Terms Existing Term Loan Proposed Extended Term Loan ------------- ------------- ---------------------------- ------------------------------------------------------------------------ [] [] $1,729 million senior secured term loan $1,200 million extended senior secured term loan tranche Term loan tranches ============= ------------- ---------------------------- ------------------------- ---------------------------------------------- [] [] Term loan: June 2014 New term loan tranche: June 2017 Maturity [] With springing maturity 90 days before the Senior Notes maturity date ============= ------------- ---------------------------- ------------------------------------------------------------------------ [] [] Term loan: LIBOR + 2.50% New term loan tranche: LIBOR + 3.75% (+125 bps) Interest rate ============= ------------- ---------------------------- ------------------------- ---------------------------------------------- [] [] N/A Amendment fee: 10 bps Amendment fee Note: Term loan balance as of March 31, 2011 28 |
![]() | Key Amendment Terms (cont'd) Proposed Amendment to Existing Credit Facilities Other terms [] Add incremental term loan capacity to be used to repay the non-extended term loan, subject to 50 bps MFN [] Provide the ability to complete revolver extensions in the future [] Provide the ability to incur 2nd Lien Debt or Unsecured Debt so long as proceeds are used to repay term loans [] Refresh the $25mm general restricted payments basket [] Increase the annual restricted payments basket from $20mm to $25mm [] Permit an EBITDA add-back for earnings deferred as a result of the Vendor Specific Objective Evidence ("VSOE") method for revenue recognition. Revenue for multi-element contracts at Scantron due to Spectrum K12 and GlobalScholar operations are deferred until VSOE is established. The proposed add-back will modify the credit agreement definition of EBITDA to reflect Cash EBITDA amounts for Scantron versus GAAP EBITDA [] Modify the definition of Similar Businesses (for purposes of investments and acquisitions) to reflect the current diversification of the Company's business lines [] Allow for borrower debt buybacks through tender offers to prepay, subject to customary restrictions including, but not limited to: [] All loans prepaid are immediately cancelled [] The revolver is undrawn at the time of the buyback 29 |
![]() | Summary Amendment Timetable [GRAPHIC OMITTED] Date Event May 12th Announce transaction May 13th Lenders' Call May 13th Distribute amendment documentation May 20th Deadline for consents May 27th Amendment becomes effective 30 |
![]() | Transaction Contacts Title Phone E-mail Harland Clarke Peter Fera Executive Vice President and Chief Financial Officer (210) 697-1208 peter.fera@harlandclarke.com Martin Wexler Vice President and Treasurer (210) 697-6251 martin.wexler@harlandclarke.com Credit Suisse David Miller Managing Director, (212) 538-7443 david.miller@credit-suisse.com Co-Head of U.S. Leveraged Finance Capital Markets Co Head of U.S. Syndicated Loan Group Carly Baxter Director, (212) 538-3933 carly.baxter@credit-suisse.com Syndicated Loan Group Robert Hetu Managing Director, (212) 325-4542 robert.hetu@credit-suisse.com Corporate Banking Michael Spaight Associate, (212) 325-7039 michael.spaight@credit-suisse.com Corporate Banking 31 |
![]() | Conclusion 32 |
![]() | Key Credit Considerations Diversified Business Model with Industry Leading Positions Broad Range of Client-Focused Products and Services Long-Term Client Relationships with Significant Expansion Opportunities Growing Base of Technology-Enabled Services and Solutions Demonstrated History of Continuous Improvement Proven and Attractive Financial Model with Resilient Performance during Downturn Proven Management Team with Significant Industry Track Record 33 |
![]() | Public Q and A 34 |
![]() | Appendix 35 |
![]() | Compliance EBITDA Reconciliation ($ in millions) ========================================================= ======= ======= ======= ======= =========== LT FYE December 31, 2007 2008 2009 2010 3/31/2011 ========================================================= ======= ======= ======= ======= =========== Adjusted EBITDA $351 $457 $493 $485 $46 Adjustments: Amortization of Up-Front Contract Payments (1) 48 43 41 29 31 EBITDA from Acquisitions -- Pro Forma (41) 9 2 -- -- Franchise Taxes -- 1 -- -- 1 Deferred Purchase Price Compensation (3) (8) (4) (1) 2 Impact of Purchase Accounting (17) (3) -- (3) (6) Acquisition Expenses 117 -- -- 3 2 Unrealized Synergy Add-Back 113 88 4 -- -- ========================================================= ======= ======= ======= ======= =========== Compliance EBITDA (2) $568 $587 $536 $513 $494 (1) 2007 -- John H. Harland Acquisition; 2008 -- Data Management Acquisition; 2009 -- SubscriberMail Acquisition (2) EBITDA as defined by the credit agreement 36 |
![]() | Corporate Structure (Summarized) M and F Worldwide Corp. (DE corporation) CA Acquisition Holdings Inc. (DE corporation) Harland Clarke Holdings Corp. (DE corporation) Revolving Credit Facility Senior Secured Term Loan Harland Clarke Corp. (DE corporation) Other Operating Subsidiaries 37 |
![]() | [HARLAND CLARKE HOLDINGS CORP.] |