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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of report (Date of earliest event reported): October 14, 1998
NATIONAL PROCESSING, INC.
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(Exact name of registrant as specified in charter)
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<S> <C> <C>
Ohio 1-11905 61-1303983
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(State or other jurisdiction of incorporation) (Commission File No.) (IRS Employer Identification No.)
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One Oxmoor Place, 101 Bullitt Lane, Suite 450 Louisville, Kentucky 40222
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(Address of Principal Executive Offices) (Zip Code)
1231 Durrett Lane, Louisville, Kentucky
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(Former Name or Former Address, if Changed Since Last Report)
Registrant's telephone number, including area code: (502) 326-7000
Page 1 of 3
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ITEM 5. OTHER EVENTS
On October 14, 1998, the Registrant issued a Press Release
announcing that net income for the three months ended September 30, 1998, was
$3,381,000 or $.06 per share. Included in net income was a one-time settlement
fee of $2,400,000 (after tax) received for the cancellation of a merchant card
processing contract. Absent this settlement, net income would have been
$981,000 or $.02 per share, compared to $7,637,000 or $.15 per share for the
corresponding period in 1997. Revenues were $121,430,000, compared to
$100,780,000 the previous year.
For the nine months ended September 30, 1998, net income was
$9,861,000 or $.19 per share, compared to $15,164,000 or $.30 per share for
the corresponding period in 1997. Revenues increased 25%, to $354,257,000.
The decline in third quarter and nine-month 1998 net income
was due primarily to continued shortfalls in the Corporate Services Division,
which, as previously disclosed, has been experiencing severe operating problems
in the remittance product area during a lengthy and difficult conversion to a
new operating environment. The cumulative effect of these problems has
substantially increased costs and reduced margins. Continued difficulties
are likely for the foreseeable future. Additionally, the third-quarter 1998
results were unexpectedly weak in the Merchant Services Division, due to higher
operating expenses.
Given the lower third-quarter results and unsettled outlook,
the Registrant indicated that full-year 1998 earnings could fall short of
analysts' consensus expectations by as much as one-third. According to First
Call, consensus earnings estimates for the full year 1998 were $.42 per share
as of September 30, 1998.
Reference is made to the Press Release, dated October 14,
1998, a copy of which is filed as Exhibit 99.1 to this Current Report on Form
8-K and is incorporated herein by reference.
ITEM 7 FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
a) Financial Statements of business acquired:
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None.
b) Pro forma financial information:
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None.
c) Exhibits.
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99.1 Press Release, dated October 14, 1998, incorporated
herein by reference.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
NATIONAL PROCESSING, INC.
By: /s/ Carlton E. Langer
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Name: Carlton E. Langer
Title: Assistant Secretary
Dated: October 22, 1998
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Exhibit 99.1
NPC
Consultants in Transaction Technology
FOR INFORMATION CONTACT:
Jim Cate Thomas A. Richlovsky
Executive Vice President Senior Vice President
Chief Financial Officer Investor Relations
(502) 326-7050 (216) 575-2126
For Immediate Release
NATIONAL PROCESSING REPORTS THIRD QUARTER RESULTS; UPDATES
EARNINGS ESTIMATE
LOUISVILLE, Kentucky -- October 14, 1998 -- National Processing, Inc.
(NYSE:NAP) today reported that net income for the three months ended September
30, 1998, was $3,381,000 or $.06 per share. Included in net income was a
one-time settlement fee of $2.4 million (after-tax) received for the
cancellation of a merchant card processing contract. Absent this settlement, net
income would have been $981,000 or $.02 per share, compared to $7,637,000 or
$.15 per share for the corresponding period in 1997. Revenues were $121,430,000,
compared to $100,780,000 the previous year.
For the nine months ended September 30, 1998, net income was $9,861,000
or $.19 per share, compared to $15,164,000 or $.30 per share in 1997. Revenues
increased 25%, to $354,257,000.
The decline in third quarter and nine-month 1998 net income was due
primarily to continued shortfalls in the Corporate Services Division, which, as
previously disclosed, has been experiencing severe operating problems in the
remittance product area during a lengthy and difficult conversion to a new
operating environment. The cumulative effect of these problems has substantially
increased costs and reduced margins. Continued difficulties are likely for the
foreseeable future. Additionally, the third quarter 1998 results were
unexpectedly weak in the Merchant Services Division, due to higher operating
expenses.
(more)
One Oxmoor Place
101 Bullitt Lane, Suite 450 Telephone 502 326.7000
Louisville, KY 40222 Facsimile 502 326.7100
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-2-
Given the lower third-quarter results and unsettled outlook, the
company indicated that full-year 1998 earnings could fall short of analysts'
consensus expectations by as much as one third. According to First Call,
consensus earnings estimates for the full year 1998 were $.42 per share as of
September 30, 1998.
National Processing is a provider of transaction processing services
and customized processing solutions. Deploying technology and applications
software, the Company provides products and value-added services which include
processing of card and check transactions for merchants, outsourcing of
administrative and financial functions, and ticket processing and settlement for
providers of travel-related services. National Processing is 88% owned by
National City Corporation (NYSE: NCC - news), a bank and financial services
company based in Cleveland, Ohio.
This press release contains forward-looking statements involving risks
and uncertainties which could cause actual results to differ materially. Such
risks and uncertainties include the company's ability to retain and attract
profitable customer accounts, its ability to timely resolve the aforementioned
operating problems, competitive factors generally, and other risks detailed from
time to time in its SEC reports.
(more)
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National Processing, Inc.
Financial Summary
(In thousands, except per share amounts)
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<CAPTION>
Percent
THREE MONTHS ENDED SEPTEMBER 30: 1998 1997 Change
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<S> <C> <C> <C>
Revenues $121,430 $100,780 20%
Other income 4,000 -- --
Operating expenses 64,642 47,929 35
Wages and other personnel expenses 31,977 24,702 29
General and administrative expenses:
Recurring 16,760 12,856 30
Restructuring -- -- --
Depreciation and amortization 6,718 4,194 60
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OPERATING PROFIT 5,333 11,099 (52)
Net interest income 116 1,214 (90)
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Income before income taxes 5,449 12,313 (56)
Provision for income taxes 2,068 4,676 (56)
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NET INCOME $ 3,381 $7,637 (56)
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NET INCOME PER SHARE -- DILUTED $ 0.06 $0.15 (60)
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Shares used in computation 50,691 50,764 --
NINE MONTHS ENDED SEPTEMBER 30:
Revenues $354,257 $284,169 25%
Other income 4,000 -- --
Operating expenses 176,717 136,543 29
Wages and other personnel expenses 96,576 70,639 37
General and administrative expenses:
Recurring 49,308 38,625 28
Restructuring -- 6,340 --
Depreciation and amortization 19,789 12,171 63
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OPERATING PROFIT 15,867 19,851 (20)
Net interest income 589 3,527 (83)
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Income before income taxes 16,456 23,378 (30)
Provision for income taxes 6,595 8,214 (20)
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NET INCOME $ 9,861 $ 15,164 (35)
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NET INCOME PER SHARE -- DILUTED $ 0.19 $0.30 (37)
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Shares used in computation 50,777 50,680 --
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