Question-and-Answer Session
Operator
(Operator Instructions)Your first question comes from Adam Spielman - PPM America.
Adam Spielman – PPM America
First, on the Harland Clarke business, specifically in the check-printing segment, it looked like the growth rate, while positive, slowed down some from prior quarters. Could you confirm this and then maybe explain if there are any reasons behind it?
Peter A. Fera, Jr.
I think if you look on a sequential period for Harland Clarke, the revenue, it was fairly consistent. Just some things to keep in mind as you look back to the third quarter of last year that the third quarter traditionally is one of the stronger quarters of the year. And then also the third quarter has an extra day in it that would contribute to some of what you’re seeing there. I think, overall, the business continues to perform very well, and we’re very pleased with the results.
Adam Spielman – PPM America
When you talk about higher revenues per unit offset by a decline in units, when we read the industry literature, it sounds like a decline in check volumes of 4-6% a year. Is that appropriate? Is that the right way to think about your business? And then on the increase in revenue per units, what’s actually driving that?
Charles T. Dawson
Yes, we continue to see the industry volume declines for number of checks written in the 5% range, consistent with the most recent Federal Reserve studies in the industry, so that’s staying pretty consistent.
As far as our revenue per order, we continue to introduce new products. We launched a brand new catalog. We continue to offer expedited and trackable delivery, fraud opportunities, to help people there. So there are just a number of things that we continue to leverage for our banks and for their customers to continue to bring value to them.
Adam Spielman – PPM America
For purposes of calculating your leverage covenants for the banks, what’s the EBITDA number that we use or how much EBITDA are you adding in for Data Management?
Peter A. Fera, Jr.
We haven’t disclosed, say, the forward-looking EBITDA for Data Management, but a couple of places that I’ll bring your attention to. In an 8-K that we recently filed under Harland Clarke Holdings, we did show pro forma results for Data Management. In the results there, we showed op income of about $23.3 million. And then we have talked about synergies. We do expect to generate a substantial amount of synergies given the relative size of Data Management and Scantron. And overall, we feel very good about the progress to date there.
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