Exhibit 99.1
Harland News Release John H. Harland Company
PO Box 105250, Atlanta, GA 30348
(770) 981-9460
www.harland.net
For More Information, Contact:
Investors
Henry R. Bond
Treasurer and Vice President, Investor Relations
770-593-5697
hbond@harland.net
Media
John Pensec
Vice President, Corporate Communications
770-593-5443
jpensec@harland.net
HARLAND REPORTS RESULTS FOR THE FOURTH QUARTER
AND FULL-YEAR 2006
ATLANTA (February 7, 2007) - John H. Harland Company (NYSE: JH) today reported
results for the fourth quarter and full year of 2006. On December 20, 2006,
Harland announced that it had signed a definitive merger agreement with M&F
Worldwide Corp. by which M&F Worldwide would acquire John H. Harland Company for
$52.75 per share in cash. The merger is expected to close in the second half of
2007, subject to the satisfaction of customary closing conditions, including
expiration or termination of the applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act and approval by Harland
shareholders.
Consolidated sales for the quarter were $263.8 million, a 0.6% decrease from
2005 fourth-quarter sales of $265.3 million. Consolidated net income for the
fourth quarter decreased 34.7% year-over-year to $13.6 million, compared to
$20.9 million for the fourth quarter of 2005. Diluted earnings per share for the
quarter were $0.52, a 30.7% decrease from 2005 fourth-quarter diluted earnings
per share of $0.75.
The decrease in fourth-quarter net income and diluted earnings per share was
more than explained by pre-tax costs of $12.6 million, or $0.34 per diluted
share, associated with the company's pending merger with M&F Worldwide; a
pre-tax impairment charge of $3.5 million, or $0.14 per diluted share, resulting
from the company's decision to dispose of its Printed Products operations in
Mexico, which are now reported as discontinued operations; and pre-tax
compensation costs of $1.8 million, or $0.04 per diluted share, related to the
implementation of FASB 123R. These costs were partially offset by tax credits of
$0.09 per diluted share recognized during the quarter.
"The fourth quarter marked a milestone for Harland," said Timothy C. Tuff,
chairman and chief executive officer of Harland. "The proposed merger with M&F
Worldwide will combine both companies' complementary products and services to
create a more effective and efficient strategic partner for financial
institutions."
For the 12 months ended December 31, 2006, consolidated sales increased 7.5%
year-over-year to $1.05 billion, compared to $976.6 million a year earlier.
Consolidated net income for the year decreased 9.8% year-over-year to $68.1
million, compared to 2005 net income of $75.5 million. Diluted earnings per
share for the year decreased 5.2% to $2.55 compared to 2005 diluted earnings per
share of $2.69.
The decrease in full-year net income and diluted earnings per share was more
than explained by pre-tax costs of $12.6 million, or $0.33 per diluted share,
associated with the company's pending merger with M&F Worldwide; a pre-tax
impairment charge of $3.5 million, or $0.13 per diluted share, associated with
the company's decision to dispose of its Printed Products operations in Mexico;
and pre-tax compensation costs of $6.4 million, or $0.15 per diluted share,
related to the implementation of FASB 123R. These costs were partially offset by
tax credits of $0.08 per diluted share. The full year per diluted share
equivalents for transaction-related expenses, the impairment charge and tax
credits were slightly lower than the fourth quarter per diluted share
equivalents due to lower weighted average diluted shares for the fourth quarter
than for the full year.
Segment Reporting
Harland reports results for three segments: Printed Products, Software and
Services and Scantron.
Sales for the quarter from Harland's Printed Products segment decreased 3.9%
year-over-year to $158.3 million, compared to $164.7 million a year earlier.
Segment income from Printed Products increased 23.7% in the quarter
year-over-year to $30.0 million, compared to $24.3 million in 2005.
"Margins improved year-over-year, driven by improved operating performance in
all businesses," said Tuff. "While overall segment sales decreased in the
quarter, sales in our Business Solutions and Integrated Client Solutions
businesses increased significantly."
Software and Services sales in the quarter increased 4.4% year-over-year to
$85.4 million, compared to $81.8 million in 2005. Segment income from Software
and Services decreased 6.6% in the quarter year-over-year to $15.3 million,
compared to $16.3 million in 2005.
"Our Lending and Retail businesses and the Financialware acquisition accounted
for the increased segment sales in the quarter, partially offset by weaker sales
in our Mortgage, Bank Core and Technology Services businesses," said Tuff. "The
sales decreases in our Mortgage and Bank Core businesses negatively impacted
margins. Backlog increased significantly in the quarter."
Scantron's sales for the quarter increased 8.5% to $20.4 million, compared to
$18.8 million in 2005. Segment income from Scantron decreased 8.0% in the
quarter year-over-year to $5.1 million, compared to $5.6 million in 2005.
"Testing and Assessment software sales continued to do well in the quarter,"
said Tuff. "But margins for Scantron were weaker, which was more than accounted
for by higher legal and severance expenses."
Harland's board of directors declared a quarterly dividend of $0.175 per share,
payable February 23, 2007 to shareholders of record as of February 14, 2007.
Due to the pending transaction, Harland will not be issuing earnings guidance
for 2007.
Harland will hold a conference call February 8, 2007 at 10:00 a.m. EST to
discuss the results of the fourth quarter and full year. Interested parties may
listen in by accessing a live webcast in the investor relations section of
Harland's Web site at www.harland.net. The live conference call can also be
accessed by calling 1-719-457-2629 and using the access code #8582014.
A replay of the conference call will be available in the investor relations
section of Harland's Web site (www.harland.net) beginning approximately two
hours after the call. The rebroadcast will also be available until February 16,
2007 via telephone by calling 1-719-457-0820 and using the access code #8582014.
###
About Harland
Harland is a leading provider of printed products and software and related
services sold to the financial institution market, including banks, credit
unions, thrifts, brokerage houses and financial software companies. Harland's
printed products operations are conducted through Harland Printed Products which
includes checks operations, direct marketing and analytical services businesses
and Harland's computer checks and forms businesses. Its software operations are
conducted through Harland Financial Solutions which includes core processing,
retail and lending solutions as well as maintenance services to financial and
other institutions. Harland's Scantron division is a leading provider of data
collection and testing and assessment products sold primarily to the
educational, financial institution and commercial markets.
About M & F Worldwide Corp.
M & F Worldwide has two business lines, which are operated by Mafco Worldwide
and Clarke American Corp. Mafco Worldwide's business is the production of
licorice products for sale to the tobacco, food, pharmaceutical and
confectionery industries (which is the Company's Licorice Products segment).
Clarke American's business provides direct marketing services, customer contact
solutions, and checks and check-related products and services. Clarke American's
Checks in the Mail division supplies checks and other financial documents
directly to over 3.5 million consumers, and Clarke American's B2Direct division
offers customized business kits and treasury management services to businesses.
Risk Factors and Cautionary Statements
This press release contains statements, which may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Those statements include statements regarding the intent, belief or
current expectations of John H. Harland Company and members of its management,
as well as the assumptions on which such statements are based. Prospective
investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties and that
the actual results may differ materially from those contemplated by such
forward-looking statements. Such differences could be material and adverse.
The forward-looking statements in this press release include statements
regarding the Company's expectations with respect to the pending merger pursuant
to which M&F Worldwide would acquire Harland. Such statements relate to the
Company's expectations regarding, among other things, the timing of certain
events related to the merger, including closing of the transaction. The timing
of such events and the closing of the merger are subject to factors beyond the
Company's control.
The Company is subject to federal regulations implementing the information
security requirements of the Gramm-Leach-Bliley Act and other federal
regulations and state laws regarding the privacy and confidentiality of consumer
information. These laws and regulations require the Company to develop,
implement and maintain a comprehensive information security program designed to
protect the security and confidentiality of consumers' nonpublic personal
information and to define requirements for notification in the event of improper
disclosure. The Company cannot be certain that advances in criminal
capabilities, new discoveries in the field of cryptography or other developments
will not compromise or breach the technology protecting the networks that
utilize consumers' nonpublic personal information.
Many variables will impact the ability to achieve sales levels, improve service
quality, achieve production efficiencies and reduce expenses in Printed
Products. These include, but are not limited to, the successful implementation
of new accounts, the continuing upgrade of our customer care infrastructure and
systems used in the Company's manufacturing, sales, marketing, customer service
and call center operations.
Several factors outside the Company's control could negatively impact check
revenues. These include the continuing expansion of alternative payment systems
such as credit cards, debit cards and other forms of electronic commerce or
online payment systems. Check revenues may continue to be adversely affected by
continued consolidation of financial institutions, competitive check pricing
including up-front contract incentive payments and customer rebates, and the
impact of governmental laws and regulations. There can be no assurances that the
Company will not lose customers or that any such loss could be offset by the
addition of new customers.
While the Company believes growth opportunities exist in the Software and
Services segment, there can be no assurances that the Company will achieve its
revenue or earnings growth targets. The Company believes there are many risk
factors inherent in its software business, including but not limited to the
retention of employee talent and customers. Also, variables exist in the
development of new software products, including the timing and costs of the
development effort, product performance, functionality, product acceptance,
competition, the Company's ability to integrate acquired companies, and general
changes in economic conditions or U.S. financial markets.
Several factors outside of the Company's control could affect results in the
Scantron segment. These include the rate of adoption of new electronic data
collection solutions, and testing and assessment methods, which could negatively
impact forms, scanner sales and related service revenue. The Company continues
to develop products and services that it believes offer state-of-the-art
electronic data collection, testing and assessment solutions. However, variables
exist in the development of new testing methods and technologies, including the
timing and costs of the development effort, product performance, functionality,
market acceptance, adoption rates, competition, and the funding of education at
the federal, state and local level, all of which could have an impact on the
Company's business.
Management believes these forward-looking statements are reasonable; however,
undue reliance should not be placed on any forward-looking statements, which are
based on current expectations and speak only as of the date of the statements.
Other important risk factors are discussed in detail in Section 1A of the
company's Form 10-K filed with the Securities and Exchange Commission on March
16, 2006. The risk factors discussed in the company's Form 10-K are incorporated
by reference in this press release.
Additional Information and Where to Find It
In connection with the previously announced proposed merger with M&F Worldwide
Corp. and required shareholder approval, Harland has filed a preliminary proxy
statement with the Securities and Exchange Commission and will file with the
Securities and Exchange Commission a definitive proxy statement. INVESTORS AND
SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT, AND ANY OTHER RELEVANT
MATERIALS FILED BY HARLAND, BECAUSE THEY CONTAIN, OR WILL CONTAIN, IMPORTANT
INFORMATION ABOUT HARLAND AND THE MERGER. Investors and security holders may
obtain free copies of these documents and other documents filed with the
Securities and Exchange Commission, at its website at www.sec.gov. In addition,
the documents filed by Harland with the Securities and Exchange Commission may
be obtained free of charge by contacting Harland at: John H. Harland Company,
Attn: Henry R. Bond, Vice President, Investor Relations, Box 105250, Atlanta,
Georgia 30348; Telephone: 770-593-5697. Harland's filings with the Securities
and Exchange Commission are also available on Harland's website at
www.harland.net.
Participants in the Solicitation
Harland and its officers and directors may be deemed to be participants in the
solicitation of proxies from Harland's shareholders with respect to the merger.
Information about Harland's executive officers and directors and their ownership
of Harland's shares is set forth in the proxy statement for Harland's 2006
annual meeting of shareholders, which was filed with the Securities and Exchange
Commission on March 27, 2006. Investors and security holders may obtain more
detailed information regarding the direct and indirect interests of Harland and
its respective executive officers and directors in the merger by reading the
preliminary proxy statement, as well as the definitive proxy statements
regarding the merger that Harland will file with the Securities and Exchange
Commission.
John H. Harland Company
Financial Highlights (Unaudited)
4th Quarter 2006
(in 000's)
Three Months ended
December 31, December 31, %
2006 2005
----- ------
Sales $ 263,824 $ 265,322 -0.6%
Cost of sales 126,326 131,238 -3.7%
Pct of Sales 47.9% 49.5%
--------- ---------
Gross profit 137,498 134,084 2.5%
Pct of Sales 52.1% 50.5%
Selling, general and administrative
expenses 105,844 92,828 14.0%
Pct of Sales 40.1% 35.0%
Amortization of intangibles 3,913 4,057 -3.5%
Pct of Sales 1.5% 1.5%
--------- ---------
Operating Income 27,741 37,199 -25.4%
Pct of Sales 10.5% 14.0%
Other Income (Expense):
Interest expense (3,819) (3,431) 11.3%
Pct of Sales -1.4% -1.3%
Other - net 492 140 251.4%
Pct of Sales 0.2% 0.1%
--------- ---------
Income from Continuing Operations and
before Income Taxes 24,414 33,908 -28.0%
Pct of Sales 9.3% 12.8%
Income taxes 6,830 12,582 -45.7%
Pct of Sales 2.6% 4.7%
--------- ---------
Income from Continuing Operations 17,584 21,326 -17.5%
Pct of Sales 6.7% 8.0%
Loss from Discontinued Operations,
Net of Tax (3,966) (463) 756.6%
--------- ---------
Net Income $ 13,618 $ 20,863 -34.7%
========= =========
Pct of Sales 5.2% 7.9%
Effective Tax Rate for Continuing
Operations 28.0% 37.1%
John H. Harland Company
Financial Highlights (Unaudited)
4th Quarter 2006
(in 000's)
Three Months ended
December 31, December 31,
2006 2005 %
----- ------
Earnings per Share-Basic
Income from Continuing Operations $ 0.69 $ 0.79 -12.7%
Discontinued Operations $ (0.16) $ (0.02) -700.0%
Net Income $ 0.54 $ 0.77 -29.9%
Earnings per Share - Diluted
Income from Continuing Operations $ 0.67 $ 0.76 -11.8%
Discontinued Operations $ (0.15) $ (0.02) -650.0%
Net Income $ 0.52 $ 0.75 -30.7%
Weighted Average Shares (000)
Basic 25,329 27,110 -6.6%
Diluted 26,079 27,979 -6.8%
Shares O/S at end of period (000) 25,772 27,200 -5.3%
Return on Equity 17.7% 25.5% -7.8 pct pts
Depreciation and Amortization (000) $ 21,029 $ 23,105 -9.0%
Capital Expenditures (000) $ 6,896 $ 7,389 -6.7%
Number of Employees
(includes temporary employees) 5,360 5,686 -5.7%
Segment Information
Printed Products
Sales $ 158,303 $ 164,722 -3.9%
Depreciation & Amortization $ 15,626 $ 17,470 -10.6%
Segment Income $ 30,003 $ 24,253 23.7%
Software and Services
Sales $ 85,392 $ 81,820 4.4%
Depreciation & Amortization $ 4,395 $ 4,568 -3.8%
Segment Income $ 15,265 $ 16,336 -6.6%
Scantron
Sales $ 20,399 $ 18,808 8.5%
Depreciation & Amortization $ 824 $ 733 12.4%
Segment Income $ 5,110 $ 5,557 -8.0%
Corporate
Sales $ (270) $ (28) 864.3%
Depreciation & Amortization $ 122 $ 127 -3.9%
Segment Income (Loss) $ (25,964) $ (12,238) 112.2%
<FN>
Segment income (loss) is defined as income before income taxes.
</FN>
John H. Harland Company
Financial Highlights (Unaudited)
4th Quarter 2006
(in 000's)
Twelve Months ended
December 31, December 31, %
2006 2005
------ -----
Sales $1,050,179 $ 976,630 7.5%
Cost of sales 520,788 491,264 6.0%
Pct of Sales 49.6% 50.3%
--------- ---------
Gross profit 529,391 485,366 9.1%
Pct of Sales 50.4% 49.7%
Selling, general and administrative
expenses 383,686 342,446 12.0%
Pct of Sales 36.5% 35.1%
Amortization of intangibles 15,974 11,590 37.8%
Pct of Sales 1.5% 1.2%
--------- ---------
Operating Income 129,731 131,330 -1.2%
Pct of Sales 12.4% 13.4%
Other Income (Expense):
Interest expense (16,050) (9,994) 60.6%
Pct of Sales -1.5% -1.0%
Other - net 936 1,117 -16.2%
Pct of Sales 0.1% 0.1%
--------- ---------
Income from Continuing Operations and
before Income Taxes And Cumulative
Effect of Change in Accounting Principle 114,617 122,453 -6.4%
Pct of Sales 10.9% 12.5%
Income taxes 41,688 46,201 -9.8%
Pct of Sales 4.0% 4.7%
--------- ---------
Income from Continuing Operations and
Before Cumulative Effect of Change in
Accounting Principle 72,929 76,252 -4.4%
Pct of Sales 6.9% 7.8%
Cumulative Effect of Change in
Accounting Principle, Net of Tax 345 0
Loss from Discontinued Operations,
Net of Tax (5,176) (774) 568.7%
--------- ---------
Net Income $ 68,098 $ 75,478 -9.8%
========== =========
Pct of Sales 6.5% 7.7%
Effective Tax Rate for Continuing
Operations 36.4% 37.7%
John H. Harland Company
Financial Highlights (Unaudited)
4th Quarter 2006
(in 000's)
Twelve Months ended
December 31, December 31,
2006 2005 %
----- -----
Earnings per Share-Basic
Income from Continuing Operations and
Before Accounting Change and
Discontinued Operations $ 2.81 $ 2.80 0.4%
Accounting Change $ 0.01 $ -
Discontinued Operations $ (0.20) $ (0.03) -604.0%
Net Income $ 2.62 $ 2.77 -5.4%
Earnings per Share - Diluted
Income from Continuing Operations and
Before Accounting Change and
Discontinued Operations $ 2.73 $ 2.71 0.6%
Accounting Change 0.01 -
Discontinued Operations $ (0.19) $ (0.03) -589.5%
Net Income $ 2.55 $ 2.69 -5.2%
Weighted Average Shares (000)
Basic 25,955 27,244 -4.7%
Diluted 26,703 28,090 -4.9%
Shares O/S at end of period (000) 25,772 27,200 -5.3%
Return on Equity 21.6% 25.4% -3.8 pct pts
Depreciation and Amortization (000) $ 88,074 $ 87,196 1.0%
Capital Expenditures (000) $ 23,451 $ 23,917 -1.9%
Number of Employees
(includes temporary employees) 5,360 5,686 -5.7%
Segment Information
Printed Products
Sales $ 648,397 $ 615,565 5.3%
Depreciation & Amortization $ 65,676 $ 66,797 -1.7%
Segment Income $ 112,393 $ 98,545 14.1%
Software and Services
Sales $ 324,583 $ 286,946 13.1%
Depreciation & Amortization $ 17,916 $ 16,404 9.2%
Segment Income $ 43,792 $ 42,242 3.7%
Scantron
Sales $ 77,885 $ 74,483 4.6%
Depreciation & Amortization $ 3,271 $ 2,926 11.8%
Segment Income $ 21,905 $ 20,264 8.1%
Corporate
Sales $ (686) $ (364) 88.5%
Depreciation & Amortization $ 834 $ 542 53.9%
Segment Income (Loss) $ (63,473) $ (38,598) 64.4%
<FN>
Segment income (loss) is defined as income before income taxes.
</FN>
John H. Harland Company
Financial Highlights - 4th Quarter 2006
Condensed Statements of Cash Flows (Unaudited)
(in 000's)
Twelve Months ended
December 31, December 31,
2006 2005
- -----------------------------------------------------------------------------
Operating Activities:
Net Income $ 68,098 $ 75,478
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 88,074 87,196
Contract payments (22,204) (25,231)
All other 19,224 16,314
--------- ---------
Net cash provided by operating activities 153,192 153,757
--------- ---------
Investing Activities:
Purchases of property, plant and equipment (23,451) (23,917)
Payments for acquisition of businesses,
net of cash acquired (10,296) (239,756)
All other 1,176 1,565
--------- ---------
Net cash (used in) investing activities (32,571) (262,108)
--------- ---------
Financing Activities:
Repurchases of stock (75,434) (45,052)
Long-term debt - net (43,963) 153,294
All other (1,064) 1,193
--------- ---------
Net cash provided by (used in) financing
activities (120,461) 109,435
--------- ---------
Increase (decrease) in cash and cash equivalents 160 1,084
Cash and cash equivalents at beginning of period 10,298 9,214
--------- ---------
Cash and cash equivalents at end of period $ 10,458 $ 10,298
========= =========