EXHIBIT 99.1
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P R E S S R E L E A S E
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CLARKE AMERICAN ANNOUNCES
SECOND QUARTER 2006 RESULTS AND CONFERENCE CALL INFORMATION
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SAN ANTONIO, TX - August 4, 2006 - Clarke American Corp. ("Clarke
American") today reported results for the second quarter and six months ended
June 30, 2006 in its Quarterly Report filed on Form 10-Q with the SEC, and
will hold a conference call to discuss these results on Wednesday, August 16,
2006 at 9:30 a.m. EDT (8:30 a.m. CDT). Clarke American's financial results for
the quarter are also included in the Quarterly Report filed on Form 10-Q with
the SEC today by M & F Worldwide Corp. (NYSE: MFW), which is the indirect
parent company of Clarke American. For more information about the business of
M & F Worldwide and Clarke American, please see their other filings with the
SEC, including Clarke American's prospectus filed on May 2, 2006 and M & F
Worldwide's Annual Report on Form 10-K for the year ended December 31, 2005.
For the three months ended June 30, 2006, Clarke American's
consolidated revenues increased to $156.2 million, compared with $152.8
million in the second quarter of 2005. This improvement reflected a 3.3%
increase in revenues per unit, partially offset by a 1.0% decrease in unit
volume. Clarke American's net income(1) decreased to $3.9 million from $6.9
million in the 2005 period. The decrease in net income was primarily due to
increased interest expense due to acquisition-related financing resulting from
Clarke American being acquired by M & F Worldwide. Adjusted EBITDA(2)
increased 4.1% to $35.7 million, compared to $34.3 million in the 2005 period.
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.
For the six months ended June 30, 2006, Clarke American's consolidated
revenues increased to $319.1 million, compared with $307.2 million in the pro
forma 2005 period. The 3.9% increase in revenues for the six months ended June
30, 2006 was primarily attributable to a 3.5% increase in revenues per unit
and a 0.3% increase in unit volume. Net income decreased to $10.3 million from
$17.9 million in the pro forma 2005 period. The decrease in net income was
primarily due to increased interest expense due to acquisition-related
financing and increases in non-cash expenses that resulted from the purchase
accounting adjustments (increases in depreciation and amortization) resulting
from Clarke American being acquired by M & F Worldwide. Adjusted EBITDA
increased 12.8% to $75.7 million, compared to $67.1 million in the pro forma
2005 period.
Revenues from the Financial Institution division increased 2.2% to
$131.9 million in the three months ended June 30, 2006, compared to $129.1
million in the 2005 period. This growth was driven by a 2.9% increase in
revenues per unit, partially offset by a 0.7% decrease in unit volume.
Operating income increased 35.0% to $18.9 million, compared to $14.0 million
in the 2005 period. The improvement to operating income is primarily
attributable to a $4.2 million decrease in non-cash expenses related to fair
value adjustments as a result of being acquired.
Revenues from the Direct to Consumer division increased 2.5% to $24.3
million in the three months ended June 30, 2006, compared to $23.7 million in
the 2005 period. This improvement was driven by a 7.1% increase in revenues
per unit, partially offset by a 4.2% decline in unit volume. Operating income
increased to $2.1 million, compared to a loss of $0.1 million in the 2005
period. The improvement to operating income is primarily attributable to a
$1.8 million decrease in non-cash expenses related to fair value adjustments
as a result of being acquired.
For the six months ended June 30, 2006, revenues from the Financial
Institution division increased 3.8% to $268.5 million, compared to $258.7
million in the pro forma 2005 period. Operating income increased to $41.0
million, compared to $34.7 million in the pro forma 2005 period. Revenues from
the Direct to Consumer division increased 4.3% to $50.6 million in the period,
compared to $48.5 million in the pro forma 2005 period. Operating income
increased to $5.1 million, compared to $3.3 million in the pro forma 2005
period.
1
Clarke American will hold a conference call to discuss its second
quarter 2006 results on Wednesday, August 16, 2006 at 9:30 a.m. EDT (8:30 a.m.
CDT). The conference call will be accessible by dialing 800-553-0329 or
651-291-0618 or via live webcast at www.clarkeamerican.com. To access the
webcast, click on "Company Information" and then "Earnings Call." A copy of
this press release will be available under the "Press Releases" section of the
Clarke American website at www.clarkeamerican.com. For those unable to listen
live, a replay of the call will be available by dialing 800-475-6701 (access
code 838532) or 320-365-3844 (access code 838532) after 12:00 p.m. CDT,
Wednesday, August 16th through Wednesday, August 23rd.
ABOUT CLARKE AMERICAN
Clarke American Corp. is one of the three leading providers of checks,
related products and services in the United States based on revenues, and is a
leading provider of direct marketing services to financial institutions.
Clarke American Corp. serves financial institutions through the Clarke
American and Alcott Routon brands and serves consumers and businesses directly
through the Checks In The Mail and B(2)Direct brands. Clarke American Corp. is
an indirect wholly owned subsidiary of M & F Worldwide Corp., a holding
company that, in addition to Clarke American, wholly owns Mafco Worldwide
Corporation, which is the world's largest producer of licorice extracts and
related products.
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
Clarke American's control. All statements other than statements of historical
facts included in this press release, including those regarding Clarke
American'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 Clarke American 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. The factors which may cause Clarke
American'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) Clarke American's substantial indebtedness; 2) covenant
restrictions under Clarke American's indebtedness that may limit its ability
to operate its business and react to market changes; 3) the maturity of the
principal industry in which Clarke American 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; 5) adverse changes among the large
financial institution clients on which Clarke American depends, resulting in
decreased revenues; 6) intense competition in all areas of Clarke American's
business; 7) Clarke American's costs as a stand-alone company; and 8)
interruptions or adverse changes in Clarke American's supplier relationships,
technological capacity, intellectual property matters, and applicable laws.
You should read carefully the factors described in Item 1A of the
Annual Report (which is included as an exhibit to M & F Worldwide's Current
Report on Form 8-K furnished to the SEC on April 3, 2006 and the Clarke
American's Prospectus filed with the SEC on May 2, 2006) 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, Clarke American 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 Clarke
American 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.
2
EBITDA represents net income before interest income and expense,
income taxes, depreciation and amortization (other than amortization related
to prepaid rebates). Clarke American 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 Clarke American's industry.
Clarke American 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, Clarke
American utilizes EBITDA when interpreting operating trends and results of
operations of its business.
Clarke American also uses EBITDA for the following purposes: Clarke
American's senior credit facilities use EBITDA (with additional adjustments)
to measure compliance with covenants such as interest coverage and debt
incurrence. Clarke American's executive compensation is based on EBITDA (with
additional adjustments) performance measured against targets. EBITDA is also
widely used by Clarke American and others in its industry to evaluate and
price potential acquisition candidates. EBITDA has limitations as an
analytical tool, and it should not be considered 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 Clarke
American to invest in the growth of its business.
In addition, in evaluating EBITDA, you should be aware that in the
future Clarke American may incur expenses such as those excluded in
calculating it. Clarke American'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 it should not be
considered in isolation or as substitutes for analysis of our results as
reported under GAAP. Some of these limitations are:
o it does not reflect Clarke American's cash expenditures,
future requirements for capital expenditures or contractual
commitments;
o it does not reflect changes in, or cash requirements for,
Clarke American's working capital needs;
o it does not reflect the significant interest expense or the
cash requirements necessary to service interest or principal
payments on Clarke American's debt;
o although depreciation and amortization are noncash 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;
o it is not adjusted for all non-cash income or expense items
that are reflected in Clarke American's statements of cash
flows; and
o other companies in Clarke American's industry may calculate
EBITDA differently from Clarke American, limiting its
usefulness as a comparative measure.
Because of these limitations, EBITDA should not be considered as a
measure of discretionary cash available to us to invest in the growth of
Clarke American's business or as a measure of cash that will be available to
Clarke American to meet its obligations. You should compensate for these
limitations by relying primarily on Clarke American's GAAP results and using
EBITDA only supplementally.
3
Clarke American presents Adjusted EBITDA as a further supplemental
measure of its performance. Clarke American prepares Adjusted EBITDA by
adjusting EBITDA to reflect the impact of a number of items it does not
consider indicative of Clarke American's ongoing operating performance. Such
items include restructuring costs, certain non-operational items, stock-based
compensation, group management fees charged by our former parents, certain
stand-alone costs, an earnout related to our Alcott Routon acquisition and
other non-cash adjustments. You are encouraged to evaluate each adjustment and
the reasons Clarke American 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, Clarke American may incur expenses,
including cash expenses, similar to the adjustments in this presentation.
Clarke American'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.
FOR ADDITIONAL INFORMATION CONTACT:
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Media: Investor Relations:
LaRhesa Pollock Ben Cosby
210-690-6498 210-694-1189
lpollock@clarkeamerican.com bcosby@clarkeamerican.com
NOTES
(1) Although Clarke American was not a separate stand-alone company during the
six months ended June 30, 2005, the accompanying financial statements have
been prepared as if Clarke American had existed as a separate stand-alone
company for such period. The financial information presented may not
reflect the combined financial position, operating results and cash flows
of Clarke American had it been a separate stand-alone entity during the six
months ended June 30, 2005. As a result of the acquisition by M & F
Worldwide and the resulting change in ownership, Clarke American's
operating results for the six months ended June 30, 2006, the three months
ended June 30, 2005 and the three months ended March 31, 2005 are presented
as "Successor", "Predecessor (Honeywell)" and "Predecessor (Novar)"
respectively:
CLARKE AMERICAN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS)
(UNAUDITED)
PREDECESSOR
SUCCESSOR (HONEYWELL)
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THREE MONTHS THREE MONTHS
ENDED ENDED
JUNE 30, 2006 JUNE 30, 2005
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Net revenues......................................... $ 156.2 $ 152.8
Cost of revenues..................................... 96.7 102.6
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Gross profit......................................... 59.5 50.2
Selling, general and administrative expenses......... 38.5 36.3
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Operating income..................................... 21.0 13.9
Interest income...................................... -- 0.2
Interest expense..................................... (14.6) (2.6)
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Income before income taxes........................... 6.4 11.5
Provision for income taxes........................... (2.5) (4.6)
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Net income........................................... $ 3.9 $ 6.9
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4
PREDECESSOR PREDECESSOR PREDECESSOR
SUCCESSOR (COMBINED) (HONEYWELL) (NOVAR)
--------------- --------------- --------------- ----------------
SIX MONTHS SIX MONTHS
ENDED ENDED APRIL 1 - JANUARY 1 -
JUNE 30, 2006 JUNE 30, 2005 JUNE 30, 2005 MARCH 31, 2005
--------------- --------------- --------------- ----------------
Net revenues................................... $ 319.1 $ 307.2 $ 152.8 $ 154.4
Cost of revenues............................... 197.4 193.7 102.6 91.1
--------------- --------------- --------------- ----------------
Gross profit................................... 121.7 113.5 50.2 63.3
Selling, general and administrative expenses... 75.6 75.5 36.3 39.2
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Operating income............................... 46.1 38.0 13.9 24.1
Interest income................................ -- 0.3 0.2 0.1
Interest expense............................... (29.2) (8.3) (2.6) (5.7)
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Income before income taxes..................... 16.9 30.0 11.5 18.5
Provision for income taxes..................... (6.6) (12.1) (4.6) (7.5)
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Net income..................................... $ 10.3 $ 17.9 $ 6.9 $ 11.0
=============== =============== =============== ================
(2) The following tables are a reconciliation of net income to EBITDA and
EBITDA to Adjusted EBITDA for the periods indicated (unaudited):
PREDECESSOR
SUCCESSOR (HONEYWELL)
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THREE MONTHS THREE MONTHS
ENDED ENDED
JUNE 30, 2006 JUNE 30, 2005
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(UNAUDITED, IN MILLIONS)
Net income........................................... $ 3.9 $ 6.9
Interest expense, net................................ 14.6 2.4
Provision for income taxes........................... 2.5 4.6
Depreciation and amortization........................ 13.6 14.7
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EBITDA............................................... $ 34.6 $ 28.6
Adjustments:
Restructuring (a).................................... 0.9 0.4
Group management fees (b)............................ -- 0.3
Stand-alone costs (c)................................ -- (0.7)
Alcott Routon earnout (d)............................ 0.2 0.9
Impact of purchase accounting adjustments (f)........ -- 4.8
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Adjusted EBITDA...................................... $ 35.7 $ 34.3
PREDECESSOR PREDECESSOR PREDECESSOR
SUCCESSOR (COMBINED) (HONEYWELL) (NOVAR)
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SIX MONTHS SIX MONTHS
ENDED ENDED APRIL 1 - JANUARY 1 -
JUNE 30, 2006 JUNE 30, 2005 JUNE 30, 2005 MARCH 31, 2005
--------------- --------------- --------------- ----------------
(UNAUDITED, IN MILLIONS)
Net income................................ $ 10.3 $ 17.9 $ 6.9 $ 11.0
Interest expense, net..................... 29.2 8.0 2.4 5.6
Provision for income taxes................ 6.6 12.1 4.6 7.5
Depreciation and amortization............. 27.2 20.4 14.7 5.7
--------------- --------------- --------------- ----------------
EBITDA.................................... $ 73.3 $ 58.4 $ 28.6 $ 29.8
Adjustments:
Restructuring (a)......................... 0.9 0.8 0.4 0.4
Group management fees (b)................. -- 0.3 0.3 --
Stand-alone costs (c)..................... -- (1.4) (0.7) (0.7)
Alcott Routon earnout (d)................. 0.4 0.9 0.9 --
Amortization of tenant finishout
allowances (e)......................... -- (0.3) -- (0.3)
Impact of purchase accounting adjustments
(f).................................... 1.1 4.8 4.8 --
Non-operational items (g)................. -- 0.2 -- 0.2
Stock-based compensation (h).............. -- 3.4 -- 3.4
--------------- --------------- --------------- ----------------
Adjusted EBITDA........................... $ 75.7 $ 67.1 $ 34.3 $ 32.8
5
(a) Reflects restructuring expenses, including adjustments, recorded in
accordance with GAAP, consisting primarily of severance, post-closure
facility expenses and other related expenses.
(b) Group management fees were charged for services rendered by previous
parent company.
(c) The adjustment to the three and six month periods ended June 30, 2005
reflects management estimates of additional costs as if Clarke American
had operated as a separate, stand-alone entity during such period
including costs to operate as a stand-alone public entity, replace the
legal, tax, risk management and other services provided by Clarke
American's former parent companies and adjust the compensation of
certain executives who, in connection with the acquisition by M&F
Worldwide, have entered into employment agreements that became effective
upon the completion of such acquisition.
(d) Reflects charges incurred under an earnout arrangement recorded as SG&A
expense resulting from the 2004 purchase of Alcott Routon, Inc.
Approximately $1.9 million out of a maximum $3.0 million was accrued but
not paid in 2005. Management estimates the remainder to be accrued in
2006 and 2007. The terms of the agreement call for all earned amounts to
be paid in 2007.
(e) Reflects the amortization of deferred liabilities resulting from
capitalized leasehold improvements paid for by landlords.
(f) Reflects the negative effect on net income primarily from the fair value
inventory adjustment related to purchase accounting.
(g) Reflects gain/loss on non-ordinary course sales of fixed assets and
sublease income related to facilities Clarke American has closed.
(h) Reflects non-cash charges incurred due to the accelerated vesting of
stock options held by certain members of senior management under a plan
terminated in March 2005. No officer or director currently owns any
options or shares of Clarke American.
6