News

Tidel reports $1.7M loss

May 15, 2002

HOUSTON -- Tidel Technologies (Nasdaq: ATMS) reported a net loss of $1.7 million, or 10 cents a share, for the quarter ended March 31, an improvement from a net loss of $2.4 million, or 14 cents a share, reported in the previous quarter.

Revenues for the most recent quarter were $4.7 million, an increase of $102,140 over the previous quarter, and a decrease of $3.4 million from the same quarter a year ago.

According to a news release, a decline in the shipment of ATMs accounted for the majority of the current quarter's decrease in revenues in relation to last year's results. Tidel says it shipped 657 units in the quarter ended March 31, 2002, compared to 1,360 units in the quarter ended March 31, 2001.

Approximately half of the total decline was attributable to one of Tidel's major customers who reduced purchases during the most recent quarter. Based on recent conversations with the customer's senior management, Tidel believes that the customer will resume purchasing at an increased level later this year, according to the release.

For the six months ended March 31, 2002, Tidel reported a net loss of $4.1 million, down from net income of $1.9 million for the year-earlier period. Revenues decreased $15.4 million, or 62 percent, from the same period in the previous year, which included sales of $11.7 million to the now-bankrupt Credit Card Center (CCC), Tidel's onetime largest customer.

According to the release, Tidel has reduced its staff by more than 10 percent and cut other costs and expenses, but the reductions were offset by increases in legal and accounting fees and the accrual of penalty interest on Tidel's subordinated indebtedness.

Legal and accounting fees increased approximately $200,000 and $500,000, respectively, for the three months and six months periods ended March 31, 2002, primarily due to the CCC bankruptcy and four subsequent class-action lawsuits filed against Tidel.

In addition, Tidel has incurred interest expense of $675,000 per quarter, including penalty interest of $405,000 per quarter, on its subordinated debentures since the debt was "put" back to Tidel in June 2001. Tidel has made no cash payments of interest to the debenture holders since June 2001, according to the news release.

Effective as of April 30, Tidel extended its revolving credit facility with JP Morgan Chase through Aug. 30. Pursuant to an amendment to the credit agreement, the revolving commitment was reduced to $2 million. Tidel provided a pledge of a $2.2 million money market account as additional collateral, and the bank waived application of certain financial covenants.

In April 2002, Tidel received a $4.8 million federal income tax refund, which it used to reduce the outstanding principal on the revolving credit facility and to provide the additional collateral in connection with the extension with JP Morgan Chase, according to the release.

In the previous quarter, Tidel had reduced its debt in the JP Morgan Chase facility to $4.7 million. The facility topped $5.2 million at the end of June. According to the release, Tidel is presently in discussions to place the facility with another lender prior to Aug. 30.

Management continues to negotiate with the holders of Tidel's subordinated convertible debentures to seek to restructure the obligations. In addition, according to the release, discussions are also underway with other lenders and equity investors for the purpose of obtaining capital to restructure and/or refinance the debentures. Tidel has made no cash payments of interest to the debenture holders since June 2001.

"We do not believe that Tidel's recent results of operations are indicative of our future performance," said Mark Levenick in the release. Levenick continues to serve as the interim chief executive officer during James Rash's medical leave of absence.

Levenick said he expects a previously announced investment in CashWorks, providers of an automated check-cashing system used in tandem with ATMs, (see related story Low overhead is key to profitable check cashing) to have a favorable effect on Tidel's ATM sales over the next two quarters and into the next fiscal year.

Also, Levenick said in the release, Tidel has contracted with a petroleum c-store retailer to develop a new retail cash management product which combines its Timed Access Cash Controller (TACC) platform with networking technology.

"In addition to the business anticipated with this nationwide retailer, we expect to market this product to the owners of the installed base for the 130,000 TACCs that we have sold in 36 countries," Levenick said, noting that roduction of the new product is expected to commence in the last quarter of 2002. "Preliminary input from the prospective customers indicates that these sales could represent a meaningful portion of our overall revenues in fiscal 2003 and beyond."