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 THIRD QUARTER 2006 RESULTS
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SAN ANTONIO, TX - November 7, 2006 - Clarke American Corp. ("Clarke
American") today reported results for the third quarter and nine months ended
September 30, 2006 in its quarterly report filed with the SEC on Form 10-Q.
Clarke American's financial results for the quarter are also included in the
quarterly report filed with the SEC today on Form 10-Q 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 September 30, 2006, Clarke American's
consolidated revenues were $155.3 million, compared with $158.6 million in the
three months of 2005. This decrease was primarily due to a decrease in unit
volume, substantially offset by an increase in revenues per unit. Clarke
American's net income(1) decreased to $7.3 million from $12.3 million in the
three months of 2005. The decrease in net income was primarily due to increased
interest expense and expenses that resulted from the purchase accounting
adjustments (primarily depreciation and amortization) related to Clarke
American being acquired by M & F Worldwide. Adjusted EBITDA(2) increased 0.8%
to $37.5 million, compared to $37.2 million in the three months of 2005.
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 nine months ended September 30, 2006, Clarke American's
consolidated revenues increased to $474.4 million, compared with $465.8 million
in the nine months pro forma 2005 period. Net income decreased to $17.6 million
from $30.2 million in the nine months pro forma 2005 period. Adjusted EBITDA
increased 8.5% to $113.3 million, compared to $104.4 million in the nine months
pro forma 2005 period.
Revenues from the Financial Institution division were $130.6 million in
the three months ended September 30, 2006, compared to $134.2 million in the
three months of 2005. This was attributable to a decrease in unit volume,
partially offset by an increase in revenue per unit. Operating income increased
3.1% to $20.0 million, compared to $19.4 million in the three months of 2005.
Revenues from the Direct to Consumer division increased 1.2% to $24.7
million in the three months ended September 30, 2006, compared to $24.4 million
in the three months of 2005. This improvement was driven by an increase in
revenue per unit, partially offset by a decline in unit volume. Operating
income increased to $2.5 million, compared to $1.6 million in the three months
of 2005.
For the nine months ended September 30, 2006, revenues from the Financial
Institution division increased 1.6% to $399.1 million, compared to $392.9
million in pro forma 2005. Operating income increased to $61.0 million,
compared to $54.1 million in the nine months pro forma 2005 period. Revenues
from the Direct to Consumer division increased 3.3% to $75.3 million in the
period, compared to $72.9 million in 2005. Operating income increased to $7.6
million, compared to $4.9 million in the nine months pro forma 2005 period.
Clarke American will hold a conference call to discuss its third quarter
2006 results on Wednesday, November 15, 2006 at 9:30 a.m. EST (8:30 a.m. CST).
The conference call will be available by dialing 866-254-5939 or 651-224-7497
(International) 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 Release 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 846766) or 320-365-3844 (International) (access code 846766) after 12:00
p.m. CST, Wednesday, November 15th through Wednesday, November 22th.
ABOUT CLARKE AMERICAN
Clarke American Corp. is a leading provider of checks, related products and
services, and marketing services. 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.
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 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 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 you should not consider
it 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.
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:
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
nine months ended September 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 nine months ended
September 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 nine
months ended September 30, 2006, the six months ended September 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
CONSOLIDATION STATEMENTS OF INCOME
(IN MILLIONS)
(UNAUDITED)
PREDECESSOR
SUCCESSOR (HONEYWELL)
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THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2006 2005
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Net revenues......................................... $ 155.3 $ 158.6
Cost of revenues..................................... 96.7 102.0
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Gross profit......................................... 58.6 56.6
Selling, general and administrative expenses......... 36.1 35.6
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Operating income..................................... 22.5 21.0
Interest income...................................... -- 0.6
Interest expense..................................... (15.4) (0.8)
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Income before income taxes........................... 7.1 20.8
Benefit (Provision) for income taxes................. 0.2 (8.5)
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Net income........................................... $ 7.3 $ 12.3
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PREDECESSOR PREDECESSOR PREDECESSOR
SUCCESSOR (COMBINED) (HONEYWELL) (NOVAR)
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NINE MONTHS NINE MONTHS
ENDED ENDED APRIL 1 - JANUARY 1 -
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, MARCH 31,
2006 2005 2005 2005
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Net revenues................................... $ 474.4 $ 465.8 $ 311.4 $ 154.4
Cost of revenues............................... 294.1 295.7 204.6 91.1
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Gross profit................................... 180.3 170.1 106.8 63.3
Selling, general and administrative expenses... 111.7 111.1 71.9 39.2
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Operating income............................... 68.6 59.0 34.9 24.1
Interest income................................ -- 0.9 0.8 0.1
Interest expense............................... (44.6) (9.1) (3.4) (5.7)
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Income before income taxes..................... 24.0 50.8 32.3 18.5
Provision for income taxes..................... (6.4) (20.6) (13.1) (7.5)
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Net income..................................... $ 17.6 $ 30.2 $ 19.2 $ 11.0
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(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
SEPTEMBER 30, SEPTEMBER 30,
2006 2005
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(UNAUDITED, IN MILLIONS)
Net income........................................... $ 7.3 $ 12.3
Interest expense, net................................ 15.4 0.2
(Benefit) Provision for income taxes................. (0.2) 8.5
Depreciation and amortization........................ 13.5 14.8
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EBITDA............................................... $ 36.0 $ 35.8
Adjustments:
Restructuring (a).................................... 1.0 1.1
Group management fees (b)............................ 0.3 0.2
Stand-alone costs (c)................................ -- (0.7)
Alcott Routon earnout (d)............................ 0.3 0.9
Amortization of tenant finish-out allowances (e)..... -- --
Impact of purchase accounting adjustments (f)........ (0.1) (0.1)
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Adjusted EBITDA...................................... $ 37.5 $ 37.2
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PREDECESSOR PREDECESSOR PREDECESSOR
SUCCESSOR (COMBINED) (HONEYWELL (NOVAR)
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NINE MONTHS NINE MONTHS
ENDED ENDED APRIL 1 - JANUARY 1 -
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, MARCH 31,
2006 2005 2005 2005
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(UNAUDITED, IN MILLIONS)
Net income............................ $ 17.6 $ 30.2 $ 19.2 $ 11.0
Interest expense, net................. 44.6 8.2 2.6 5.6
Provision for income taxes............ 6.4 20.6 13.1 7.5
Depreciation and amortization......... 40.7 35.3 29.6 5.7
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EBITDA................................ $ 109.3 $ 94.3 $ 64.5 $ 29.8
Adjustments:
Restructuring (a)..................... 1.9 1.9 1.5 0.4
Group management fees (b)............. 0.3 0.5 0.5 --
Stand-alone costs (c)................. -- (2.1) (1.4) (0.7)
Alcott Routon earnout (d)............. 0.7 1.8 1.8 --
Amortization of tenant finish out
allowances (e)..................... -- (0.3) -- (0.3)
Impact of purchase accounting
adjustments (f).................... 1.1 4.7 4.7 --
Non-operational items (g)............. -- 0.2 -- 0.2
Stock-based compensation (h).......... -- 3.4 -- 3.4
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Adjusted EBITDA....................... $ 113.3 $ 104.4 $ 71.6 $ 32.8
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(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 charged for services rendered by parent company.
(c) The adjustment to the nine months ended September 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 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 accrued under an earnout arrangement recorded as SG&A
expense resulting from the 2004 purchase of Alcott Routon, Inc. The terms
of the agreement call for all earned amounts, to a maximum of $3.0
million, 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.