HARLAND CLARKE HOLDINGS CORP

CIK:0001354752|SEC Filings

Discontinued Operations

9 Months Ended

Sep. 30, 2013

Disposal Groups, Including Discontinued Operations, Disclosure [Text Block]

Discontinued Operations

On August 16, 2013, the Company completed the divestiture of HFS, which was previously reported as the Harland Financial Solutions business segment, and recognized an after tax gain on the divestiture. A total of approximately $1,200.0 of cash proceeds was received from the divestiture. In connection with the divestiture, the Company has reclassified the results of the Harland Financial Solutions segment as discontinued operations for all periods presented. As part of the purchase and sale agreement, the Company will perform and be compensated for customary transition services for a limited time related to certain administrative functions for HFS as performed for HFS prior to its divestiture and as set forth specifically in a transition services agreement. Cash flows from the transition services are considered to be indirect cash flows under applicable accounting guidance. The Company expects the transition services to be completed within one year from the date of the divestiture.

Operating results for discontinued operations are as follows:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Net revenues	$	45.7	$	64.7	$	205.7	$	173.2

Income from discontinued operations before gain on sale and income taxes	7.2		7.9		49.5		1.1
Gain on sale of discontinued operations	647.0		—		647.0		—
Income from discontinued operations before income taxes	654.2		7.9		696.5		1.1
Provision for income taxes on discontinued operations	241.9		2.2		257.3		0.4
Net income from discontinued operations	$	412.3	$	5.7	$	439.2	$	0.7

Consolidated Statements of Cash Flows (unaudited) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Operating activities
Net income (loss)	$ 411.1	$ (49.6)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation	44.3	57.3
Amortization of intangible assets	94.7	102.9
Amortization of debt fair value adjustments, original issue discount, original issue premium and deferred financing fees	62.2	92.0
Gain on sale of discontinued operations	(647.0)	0
Loss on early extinguishment of debt	61.0	34.2
Loss on sale of marketable securities	0	0.2
Deferred income taxes	(144.4)	(127.6)
Asset impairments	1.1	0.7
Changes in operating assets and liabilities, net of effect of business acquisitions and divestitures:
Accounts receivable	(23.0)	(21.6)
Inventories	(2.0)	13.7
Prepaid expenses and other assets	(2.3)	(12.5)
Contract acquisition payments, net	(5.9)	(13.7)
Accounts payable and accrued liabilities	(8.9)	8.6
Deferred revenues	0.5	70.0
Income and other taxes	88.2	8.6
Payable to parent	0	(0.2)
Other, net	7.6	1.5
Net cash (used in) provided by operating activities	(62.8)	164.5
Investing activities
Purchase of businesses, net of cash acquired	(35.2)	(36.2)
Proceeds from the sale of businesses included in discontinued operations, net of cash divested and costs to sell	1,181.9	0
Proceeds from sale of property, plant and equipment	0.9	0.1
Proceeds from sale of marketable securities	0	56.3
Capital expenditures	(53.8)	(47.0)
Capitalized interest	(0.5)	(0.4)
Computer software development	(8.1)	(10.6)
Net cash provided by (used in) investing activities	1,085.2	(37.8)
Financing activities
Dividend paid to parent	(29.2)	(25.8)
Acquisition of business from parent	0	(33.8)
Payments for derivative instruments	(1.3)	(8.7)
Issuance of notes	54.5	225.6
Redemption of notes	(50.0)	0
Borrowings on credit agreements	742.5	25.0
Repayments of credit agreements and other borrowings	(786.5)	(324.0)
Debt issuance costs	(16.6)	(12.3)
Net cash used in financing activities	(86.6)	(154.0)
Net increase (decrease) in cash and cash equivalents	935.8	(27.3)
Cash and cash equivalents at beginning of period	102.0	101.8
Cash and cash equivalents at end of period	1,037.8	74.5
Supplemental disclosure of cash paid for:
Interest, net of amounts capitalized	103.1	60.8
Income taxes, net of refunds	295.7	87.4
Non cash financing activities:
Extinguishment of Faneuil debt to parent	$ 0	$ 25.4

Consolidated Balance Sheets (USD $) In Millions, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 1,037.8	$ 102.0
Accounts receivable (net of allowances of $1.0 and $1.5)	111.1	132.1
Inventories	34.3	29.0
Income taxes receivable	0.4	23.7
Notes receivable - related party	30.0	30.0
Deferred tax assets	35.7	45.1
Prepaid expenses and other current assets	41.8	56.7
Total current assets	1,291.1	418.6
Property, plant and equipment	290.2	269.5
Less accumulated depreciation	(111.8)	(79.5)
Property, plant and equipment, net	178.4	190.0
Goodwill	483.0	761.6
Other intangible assets, net	1,189.0	1,535.6
Contract acquisition payments, net	23.3	17.6
Other assets	57.1	63.0
Total assets	3,221.9	2,986.4
Current liabilities:
Accounts payable	42.3	44.5
Deferred revenues	63.0	133.9
Current maturities of long-term debt	90.0	78.5
Accrued liabilities:
Salaries, wages and employee benefits	54.0	55.9
Income and other taxes payable	76.4	11.9
Customer incentives	49.5	52.0
Payable to parent	0.1	0.1
Other current liabilities	38.4	42.1
Total current liabilities	413.7	418.9
Long-term debt	1,839.3	1,769.3
Deferred tax liabilities	467.8	622.7
Deferred revenues	23.1	54.2
Other liabilities	61.8	86.1
Commitments and contingencies
Stockholder's equity:
Common stock — 200 shares authorized; par value $0.01; 100 shares issued and outstanding at September 30, 2013 and December 31, 2012	0	0
Additional paid-in capital	49.9	76.1
Retained earnings / (accumulated deficit)	367.5	(40.6)
Accumulated other comprehensive (loss) income:
Foreign currency translation adjustments	(0.5)	0.4
Unrecognized amounts included in postretirement obligations, net of taxes	(0.7)	(0.7)
Total accumulated other comprehensive loss, net of taxes	(1.2)	(0.3)
Total stockholder's equity	416.2	35.2
Total liabilities and stockholder's equity	$ 3,221.9	$ 2,986.4