Harland Clarke Holdings reported a first-quarter loss of $22.9 million, compared with a profit of $23.4 million a year earlier, because of charges related to its parent company’s merger with MacAndrews & Forbes Holdings.
In December, M & F Worldwide merged with an indirect subsidiary of MacAndrews & Forbes, which has investments in range of public and private companies. Because of this, Harland Clarke had to revalue its assets and liabilities using a different method of accounting.
Harland Clarke recorded decreased revenue as a result of fair value adjustments to deferred revenue, increased depreciation and amortization and increased noncash interest expense. The quarter included after-tax net charges of $44.7 million for noncash fair value adjustments related to the deal.
The San Antonio, Texas, company said Friday that net revenue totaled $413.8 million, up more than 2% from a year earlier. This increase was related to revenue from its Faneuil business line and stronger revenue per unit. These gains were partially offset by charges from noncash fair value adjustments related to the MacAndrews acquisition.
Harland Clarke acquired Faneuil in March for $70 million in cash from affiliates of MacAndrews & Forbes. Faneuil provides business process outsourcing services such as call center and back-office operations, staffing services and toll collection services to government and regulated commercial clients in the U.S.
Charges related to the Harland Clarke’s merger with MacAndrews, including an $11.3 million increase in depreciation and amortization expense, also contributed to the company’s operating income dropping by 62%, to $23.4 million, year over year. Interest expense totaled $58.5 million, up 115% from a year earlier.