STRATEGIC PARTNERS
NCR adds weight to the rumors of financial woes at Credit Card Center with its announcement that it expects to take a $42 million charge in first-quarter earnings related to its 'preferred provider' deal with CCC.
January 29, 2002
Some of Credit Card Center's latest woes may be a case of too much, too soon.
The Philadelphia-based ISO's star seemed to be rising when it entered into a "preferred provider" agreement with NCR last October. As part of the agreement, NCR provided $16 million of financing intended to help CCC improve its infrastructure. NCR also provided about 5,000 ATMs to CCC over the past few months, the first of 50,000 units that CCC agreed to sell over a 3 1/2-year period.
NCR announced yesterday that it expects to take a $42 million charge in 2001's first quarter for loans and receivables related to its business with CCC.
Responding to the news, Credit Card Center CEO Andy Kallok blamed a lack of lease financing for his company's problems. He said that his company's inventories became inflated when it began receiving the ATMs from NCR while also attempting to honor its prior commitments to other manufacturers.
"At the same time, wholesale money to the small ticket leasing arena was reduced significantly, forcing several companies out of business and inflating our receivables," Kallok said in a written statement. "Despite this occurrence, Credit Card Center closed the year 2000 with over $100 million in hardware sales."
NCR CFO David Bearman also mentioned leasing problems in a conference call to investors. He said CCC agreed to arrange lease financing to help its retail customers pay for their ATMs, but that the financing hadn't materialized.
Bearman said NCR has worked with CCC "to develop stronger customer leasing support and a more stable capital structure." However, CCC's ability to satisfy its financial obligations to NCR has become a "significant concern."
While CCC made payments to NCR in the last few months of 2000, "it all unrolled rather quickly in the latter part of February and early March," Bearman said.
According to NCR, the charge will impact its first quarter earnings by about $28 million, or 28 cents a share, after tax. NCR assured its investors that it doesn't believe there will be any additional negative impact to its revenue and earnings in 2001 because of strong growth in its ATM business in Europe and Asia.
NCR isn't the only ATM manufacturer whose earnings have been impacted by a relationship with CCC. In its latest financial results, released last month, Tidel reported that CCC owes $26.7 million to Tidel through credit facilities.
"Credit Card Center began as a concept. It has grown very quickly and part of the current situation is a result of that rapid growth," Kallok said. "Credit Card Center is confident that it has the resources available to continue to provide ATMs to its target population in the market. Cost savings measures have been implemented."
He added, "The company is committed to honor its obligations to those with whom it does business, its customers and its employees."
CCC "just outgrew itself," Bearman said, adding that "no further ATM shipments to CCC are expected" in 2001.
