1354752--2/26/2010--HARLAND_CLARKE_HOLDINGS

related topics

{product, market, service}

{system, service, information}

{regulation, government, change}

{condition, economic, financial}

{debt, indebtedness, cash}

{property, intellectual, protect}

{cost, regulation, environmental}

{personnel, key, retain}

{tax, income, asset}

{product, candidate, development}

{cost, operation, labor}

{stock, price, operating}

{acquisition, growth, future}

{customer, product, revenue}

Our ability to make payments on our indebtedness depends on our ability to generate sufficient cash in the future. Despite our current indebtedness levels, we may still be able to incur substantially more debt. Additional indebtedness could exacerbate the risks associated with our substantial leverage. Covenant restrictions under our indebtedness may limit our ability to operate our business. Risks Related to Our Business Weak economic conditions and further acceleration of check unit declines may continue to have an adverse effect on the Company s revenues and profitability and could result in additional impairment charges. Difficult conditions in the financial markets and a general economic downturn may adversely affect the business and results of operations of the Company and we cannot determine if these conditions will improve or worsen in the near future. Account data breaches involving stored client data or misuse of such data could adversely affect our reputation, revenues, profits and growth. Legislation and contracts relating to protection of personal data could limit or harm our future business. We may experience processing errors or software defects that could harm our business and reputation. We may not successfully implement any or all components of our business strategies or realize all of our continued cost savings, which could reduce our revenues and profitability. We may be unable to protect our rights in intellectual property, and third-party infringement or misappropriation may materially adversely affect our profitability. We may be unable to maintain our licenses to use third-party intellectual property on favorable terms. Third parties may claim we infringe on their intellectual property rights. We are dependent upon third-party providers for significant information technology needs, and an interruption of services from these providers could materially and adversely affect our operations. We depend upon the talents and contributions of a limited number of individuals, many of whom would be difficult to replace, and the loss or interruption of their services could materially and adversely affect our business, financial condition and results of operations. We face uncertainty with respect to future acquisitions, and unsuitable or unsuccessful acquisitions could materially and adversely affect our business, prospects, results of operations and financial condition. Our business is exposed to changes in interest rates. We are dependent on the success of our research and development and the failure to develop new and improved products could adversely affect our business. We may be subject to sales and other taxes, which could have adverse effects on our business. We may be subject to environmental risks, and liabilities for environmental compliance or cleanup could have a material, adverse effect on our profitability. M F Worldwide, our indirect parent company, and its principal stockholder have significant influence over us. Risks Related to our Harland Clarke Segment The paper check industry overall is a mature industry and check usage is declining. Our business will be harmed if check usage declines faster than expected. Consolidation among financial institutions may adversely affect our relationships with our clients and our ability to sell our products and may therefore result in lower revenues and profitability. We are dependent on a few large clients, and adverse changes in our relationships with these highly concentrated clients may adversely affect our revenues and profitability. We face intense competition and pricing pressures in certain areas of our business, which could result in lower revenues, higher costs and lower profitability. Interruptions or adverse changes in our vendor or supplier relationships or delivery services could have a material adverse effect on our business. Increased production and delivery costs, such as fluctuations in paper costs, could materially adversely affect our profitability. Softness in direct mail response rates could have an adverse impact on our operating results. Risks Related to our Harland Financial Solutions and Scantron Segments If we fail to continually improve our Harland Financial Solutions and Scantron products, effectively manage our product offerings and introduce new products and service offerings, our business may suffer. The revenues, cash flows and results of operations of our Harland Financial Solutions segment may be reduced if we need to lower prices or offer other favorable terms on our products and services to meet competitive pressures in the software industry. Consolidation among financial institutions may adversely affect our relationships with Harland Financial Solutions clients and our ability to sell our products and may therefore result in lower revenues and profitability. Downturns in general economic and industry conditions, enhanced regulatory burdens and reductions in information technology budgets could cause decreases in demand for our software and related services which could negatively affect our revenues, cash flows and results of operations. As our software offerings increase in number, scope and complexity, our need to prevent any undetected errors and to correct any identified errors may increase our costs, slow the introduction of new products and we may become subject to warranty or product liability claims which could be costly to resolve and result in negative publicity. Errors, defects or other performance problems of our products could result in harm or damage to our clients and expose us to liability, which may adversely affect our business and operating results. Failure to hire and retain a sufficient number of qualified information technology professionals could have a material adverse effect on our business, results of operations and financial condition. We may not receive significant revenues from our current research and development efforts. Our Harland Financial Solutions segment provides services to clients that are subject to government regulations that could constrain its operations. We may not be able to successfully develop new products and services for our Scantron segment, and those products and services may not receive widespread acceptance. As a result, the business, prospects, results of operations and financial condition of Scantron could be materially and adversely affected.

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1354752--2/26/2010--HARLAND_CLARKE_HOLDINGS_CORP