Check Volume

Despite shrinking share, the overall volume of checks written by consumers to pay bills continues to rise, according to the study released this morning. Checks account for 75% of total annual household bill payment volume, down from 79% in 1998, and a decline in share of 6%. According to the study by ESP Consulting, over that same period, the volume of checks written for bill payments rose by 25%. ESP found that cash is used to pay 6% of household bills, while credit cards and money orders each account for another 2% of payment volume. Credit card bills are most likely to be paid by check (88%), followed by utility bills (80%), communications bills (77%) and contributions (76%). Insurance bill payments (50%) are least likely to be paid by check. Just over one-half (52%) of households use some type of electronic bill payment method to pay at least one of their monthly bills. Of the 52% of households that use some type of electronic bill payment, 81% use ACH payments.

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Heartland Signs HSS Deal

Recently, Hotel Software Systems, LTD and Heartland Payment Systems Inc. completed an exclusive agreement to offer HPS credit card processing services to HSS customers through expanded interface technology.

Currently, HPS’ newly developed credit card processing interface, which resides on a VisaNet platform, is being used by a select group of HSS merchants. Additionally, the HPS interface allows HSS to offer its customers a choice of credit card processing interfaces in addition to their existing card processing modules operating on the Paymentech and First Data platforms. An acknowledged leader in the transaction processing industry, Heartland has extensive experience with clients specializing in the lodging, restaurant and food service industries, and is an endorsed provider of services to numerous state hospitality associations.

“Our heritage is in the hospitality industry, and our commitment is to develop innovative products and services to meet the needs of our hotel and restaurant partners,” said Sanford Brown, senior vice president Hospitality Market, HPS. “The relationship between HSS and HPS will help us both better service our customers by offering HSS merchants more choices in a card processing service provider.

“This strategic partnership allows both companies to better serve the needs of our existing hotel customers and provides us with additional opportunities to expand our product offerings to each other’s merchant base.” Heartland is committed to the success of the lodging industry and partnering in their success. The HPS and HSS partnership offers customers of both organizations a product offering that has not been previously available, which includes expanded customer service with local, statewide representation from an established company that focuses on credit card and payroll processing. HSS customers benefit by gaining more personalized service, competitive pricing, and additional options when selecting a credit card processor. Ken Fuller, SVP, HSS, stated, “HPS has demonstrated that it is a leading, established player in the hospitality industry. We are excited about this partnership and look forward to the increased choices it will provide to all of our hotel customers. Our customers have been requesting this new credit card interface for some time, and this is an answer to that request. “We have every confidence that Heartland is the right company to provide these services to our customers. Heartland’s innovative technology, national distribution channel, and commitment to customer service are appealing to us as we seek new ways to introduce additional products to our customers and expand our position in the marketplace.”

About HSS

Hotel Software Systems, LTD was acquired by a group of investors including the current chief executive officer and partners of AdVantage Management Fund in November 1997. HSS main corporate offices are in Portland, Ore. Sales offices are located in Scottsdale, Ariz. and Baltimore. HSS sells, installs, and services property management software systems (PMS) used by hotels with less than 300 rooms for functions such as check-in, check-out, reservations, and related functions. HSS’ leading PMS product, Front Clerk, also provides interfaces to third-party systems such as central reservation systems, voice mail, phone call accounting, in-room movies, electronic key cards, and credit card transactions. Currently, HSS serves more than 5,000 hotel properties nationally. For more information about HSS, please visit them online at [www.hssltd.com][1] or contact Ken Fuller at 800/634-9248

About Heartland

Heartland Payment Systems Inc. (HPS) is a full-service payment systems solutions provider, handling merchant card and payroll processing services for over 50,000 merchants of all types and sizes. Using a strategically located national sales force, HPS builds long-term business relationships in local sales territories providing merchants with enhanced technology tools that assist them in more effectively operating their businesses. For more information about HPS, please visit them online at [http://www.heartlandpaymentsystems.com][2] or [http://www.e-hps.com][3] or contact Sanford C. Brown at 888/472-0065.

[1]: http://www.hssltd.com/
[2]: http://www.heartlandpaymentsystems.com/
[3]: http://www.e-hps.com/

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Ann Taylor Sells Cards

AnnTaylor Stores Corporation announced sales for the five weeks ended January 5, 2002, increased 7.7 percent to $167,094,000 from $155,224,000 for the five weeks ended December 30, 2000.

Comparable store sales decreased 2.4 percent for the fiscal month compared with a comparable store sales decrease of 0.3 percent for the same five-week period last year. By division, comparable store sales for fiscal December 2001 were down 5.2 percent for the Ann Taylor division and up 5.3 percent for the new concept Ann Taylor Loft division.

Due to the early Thanksgiving holiday this year versus last, the Company is providing December and nine weeks ended January 5, 2002 comparable store sales on a shifted calendar basis. Comparable store sales on a shifted calendar basis for the month of December increased 6.6 percent, while comparable store sales on a shifted calendar basis for the nine-week period increased 2.9 percent. By division, shifted calendar comparable store sales for the month of December were up 4.7 percent for the Ann Taylor division and up 12.3 percent for the new concept Ann Taylor Loft division. By division, shifted calendar comparable store sales for the nine week period ended January 5, 2002 were up 0.3 percent for the Ann Taylor division and up 10.3 percent for the new concept Ann Taylor Loft division.

Ann Taylor Chairman J. Patrick Spainhour said, “Although we are pleased with December’s better than expected comparable store sales results, the fourth quarter environment continues to prove to be extremely promotional. However, early sales results on January transitional product, which accounts for less than 10 percent of the current month’s in-store inventory, have been satisfactory. Due to the ongoing aggressive promotional environment of the quarter that is resulting in reduced margin opportunity, we still continue to be comfortable with fourth quarter earnings guidance in the range of $0.25 – $0.30 per share on a diluted basis excluding the charge described below.”

Inventory levels at the end of December were down approximately 10 percent on a per square foot basis, compared to the prior year. This follows an approximate 9 percent decrease in inventory levels on a per square foot basis, at the end of November 2001, compared to the prior year. Both comparisons exclude inventory attributable to Ann Taylor Global Sourcing.

From a national perspective, the Company continues to be most negatively impacted in downtown and tourist locations. For fiscal December, comparable store sales in downtown and tourist locations decreased approximately 14 percent, following an 11 percent decrease in these same locations for November. Geographically, the results in the West and South regions continue to lag in comparison to the rest of the country. This performance was consistent across both the Ann Taylor and Ann Taylor Loft divisions.

The Company did not open or close any stores during December. The total store count at month end was 342 Ann Taylor stores, 168 Ann Taylor Loft stores, 18 Ann Taylor Loft Outlet stores and 13 Ann Taylor Factory stores. Total store square footage at the end of the month increased 13.9 percent over the year before.

Year-to-date sales of $1,214,536,000 for the 48 weeks ended January 5, 2002 represent an increase of 5.6 percent over sales of $1,149,795,000 for the 48 weeks ended December 30, 2000. The Company’s year-to-date comparable stores sales decreased 7.3 percent over the same period last year. Comparable store sales by division for the fiscal year-to-date period were down 10.2 percent for Ann Taylor and up 3.4 percent for new concept Ann Taylor Loft.

AnnTaylor Stores Corporation also announced today a pre-tax charge to earnings in the fourth quarter of 2001 of approximately $17 million or an earnings per share impact of $0.33. This charge is comprised of approximately $7 million for the writedown of certain assets associated with AnnTaylor.com, approximately $3.3 million for the settlement of a class action lawsuit, as well as charges related to the discontinuation of the Ann Taylor Cosmetics line, costs associated with canceling certain Fall 2001 and Spring 2002 merchandise orders and severance costs associated with reductions made in Ann Taylor’s store and home office workforce. Going forward, the projected annual pre-tax savings will be approximately $3.5 million or $0.06 per share on a diluted basis.

The $7 million write-off associated with the Company’s Online Store, was based upon projected cash flows, which were not deemed adequate to support the value of the assets associated with this ongoing business. The Online Store failed to achieve the sales volume that it was expected to perform prior to its launch in November of 2000.

The Company has reached an agreement in principle to settle the class action lawsuit pending in the United States District Court for the Southern District of New York against the Company, its wholly-owned subsidiary and certain former officers and directors, alleging that the defendants made false and misleading statements about the Company and its subsidiary from February 3, 1994 through May 4, 1995. The net cost to the Company, after application of insurance proceeds, will be approximately $3.3 million. The decision to settle this action was not an admission of any wrong-doing, but reflected the significant legal fees, other expenses and management time that would have to be devoted to continue to vigorously defend it in the courts. Finalization of the settlement is subject to Court approval.

In addition, Ann Taylor announced it has reached an agreement in principle to sell its proprietary credit card portfolio. The sale is subject to entering into a definitive agreement and receiving all necessary approvals and consents. Depending on the level of receivables as of the signing date, the Company expects to receive cash of approximately $55 million upon the completion of the sale. The Company anticipates that the sale of the proprietary credit card portfolio will provide the means for strategic growth of the Ann Taylor credit card.

The Company also announced today an amendment to its existing $175 million credit facility primarily consisting of revisions to its financial covenants and specifically excludes the pre-tax charge from covenant calculations.

Ann Taylor is one of the country’s leading women’s specialty retailers, operating 541 stores in 42 states, the District of Columbia and Puerto Rico, and also an Online Store at [http://www.anntaylor.com][1].

[1]: http://www.anntaylor.com/

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Blackstone POS Patent

Blackstone (http://www.blackstoneonline.com), one of the nation’s leading electronic providers of prepaid telecommunications products and services, announced the approval of the first of many anticipated US and worldwide patents for its revolutionary Blackstone POS.

Blackstone has developed a truly innovative point-of-sale system utilizing customized applications and software supported on the Hypercom ICE 5500 point of sale platform. By successfully integrating the processing of all major credit cards (MasterCard, Visa, American Express & Discover Card) and ATM/Debit/EBT cards with the sale of prepaid products and bill payment services, into one, easy-to-use POS terminal, Blackstone POS, is revolutionizing the electronic transaction industry.

According to John Marshall, Blackstone’s Prepaid Systems Division president, “Today is the first of many exciting days for Blackstone. In recognition of the Blackstone POS terminal and system’s novelty, the United States Patent Office has agreed to grant Blackstone broad rights to protect its exclusive technology against market copyists, including those who sell essential components of the terminal and system.”

Peter Matos, Malloy & Malloy, PA added, “Blackstone has and will continue to make substantial strides to continue securing a broad foundation of United States and foreign patent and other intellectual property protection. Moreover, this foundation of intellectual property extends to Blackstone proprietary hardware, software and methodology, all of which set the Blackstone POS apart.”

Blackstone has rapidly become one of the country’s largest providers of prepaid telecommunications products and services with over 300,000 retail locations nationwide. Established and headquartered in Miami, Florida since 1995, Blackstone is privately owned, and managed by a team of executives experienced in payment processing, information technologies, networking, retailing and prepaid telecommunications. Today, Blackstone is successfully merging two industries, prepaid telecommunications and electronic transactions, into one terminal to the benefit of both consumers and merchants across the United States.

For more information on Blackstone’s products and services, call 1-800-639-9590 or visit .

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724 4Q/01

724 Solutions, a leading provider of secure mobile transaction infrastructure, reported preliminary results for its fourth quarter and fiscal year ended December 31, 2001 (all figures in U.S. dollars).

The company anticipates revenues for the fourth fiscal quarter ended December 31, 2001 to be approximately $5.6-$6.0 million, which is below its previously stated expectations of $7.0-$8.0 million. Revenues for the fiscal year ended December 31, 2001 are expected to be $43.6-$44.0 million, compared to $21.2 million for the prior year.

Based upon these preliminary revenue results, the company currently estimates that pro forma loss per share for the fourth fiscal quarter will be $0.23-$0.25. Pro forma loss for the fiscal year is expected to be $1.06-$1.08 compared to $1.05 in the previous year. Pro forma loss is net loss for the period, adjusted for amortization of intangibles, equity in income (loss) of affiliate, stock-based compensation, write-down of intangibles, long-term investments and other assets, restructuring costs and certain non-recurring expenses. As of December 31, 2001, the company had cash, cash equivalents and short-term investments of $89.1 million.

The company also continued the restructuring activities which it began in the spring of 2001, resulting in an additional 20 percent reduction in annualized operating expense from previously announced levels. These additional restructuring activities, which will include reductions in employees, facilities and other operating expenses, will be implemented in Q1 2002.

About 724 Solutions Inc.

724 Solutions Inc. (Nasdaq:SVNX) (TSE:SVN) is a leading provider of mobile Internet infrastructure software and applications. It makes m-business happen globally by powering the delivery of secure mobile transactions for financial institutions and mobile operators. With dual headquarters in Toronto, Canada, and Austin, Texas, the company has development and sales offices around the world. For more information, visit www.724.com.

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MBNA 4Q/01

MBNA weathered a tough economic fourth quarter with strong earnings and solid account growth, in face of lower than expected non-interest income and rising delinquency and charge-offs. During the fourth quarter, MBNA signed up 2.8 million new customers representing 2.4 million new accounts. Delinquency hit 5.09% compared to approximately 4.94% one year ago, and charge-offs hit 4.86% for 4Q/01 compared to 3.87% for 4Q/00. Card volume for the fourth quarter was up 12.4% over 4Q/00, logging in at $39,201,482,000. MBNA’s net income for the quarter was $524.8 million compared with $423.8 million for 4Q/00. Total managed loans at Dec 31, were $97.5 billion, a $4.9 billion increase over the third quarter. MBNA signed 110 new affinity contracts during the quarter and renewed 300 deals. MBNA also reported that its Web site now serves more than 5.6 million customers and they have signed up 900,000 new customers via the Internet last year. For complete details on MBNA’s 4Q/01 report and historical data visit CardData ([www.carddata.com][1]).

[1]: http://www.carddata.com

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GCA Signs 22

Twenty-two gaming properties recently signed contracts to use the innovative products and services of Global Cash Access, the leading supplier of cash access, financial management and customer relationship marketing technologies to the gaming industry.

GCA offers an array of products and services ranging from the latest ATM technology in the gaming industry to guest development marketing services that help casinos understand their customers and increase traffic to the gaming floor and special events.

“GCA provides us with top-notch products, which is important both to us as property managers and to our customers who demand the convenience and security of the best cash access devices available,” said Ryan Robinson, director of financial operations for Pechanga Entertainment Center.

Several of the properties that signed contracts chose to use at least one of GCA’s newest products or services. Green Valley Ranch, Sunset Station and Miccosukee Indian Gaming are among the first casinos to use GCA’s QuikCredit product.

A gaming industry first, QuikCredit presents an alternative for patrons who have been denied cash advance or ATM transactions for any number of reasons and for casinos that don’t extend credit to middle-level ($100 to $5,000) patrons or don’t currently extend credit at all. In addition to authorizing and extending credit, GCA performs all debt collections, enabling casino managers to focus on hospitality and other customer service aspects of their business.

Properties that recently signed agreements with GCA are:

— Bordertown Casino Restaurant – Reno, Nev. — Carson Valley Inn – Minden, Nev. — Casino Niagara – Niagara Falls, Ontario Canada — Club Cal Neva – Reno, Nev. — Grand Victoria Casino and Resort – Elgin, Ill. — Green Valley Ranch – Henderson, Nev. — Hacienda Hotel and Casino – Boulder City, Nev. — Harvey’s Casino and Resort – Lake Tahoe – Stateline, Nev. — Hurricane Harry’s – Las Vegas — Hyatt Lake Las Vegas – Henderson, Nev. — Hyatt Regency Aruba – Palm Beach, Aruba, Dutch West Indies — Hyatt Regency Lake Tahoe Resort and Casino – Incline Village, Nev. — Jerry’s Nugget – Las Vegas — Miccosukee Indian Gaming – Miami, Fla. — Nassau Regional Off Track Betting Corp. – Hempstead, N.Y. — Pechanga Entertainment Center – Temecula, Calif. — Saddle West Hotel and Casino – Pahrump, Nev. — Silver Legacy Resort Casino – Reno, Nev. — Silverton Hotel Casino & RV Park – Las Vegas — Sunset Station – Henderson, Nev. — St. Jo Frontier Casino – St. Joseph, Mo. — Texas Treasure II – Freeport, Texas

About Global Cash Access

Global Cash Access is a joint venture of First Data Corp. and M&C International, Inc. Providing access to the gaming industry’s largest patron database, Global Cash Access uses Internet technologies to deliver funds transfer, financial management and customer relationship marketing services to more than 1,000 gaming properties in the US, Canada, Caribbean and Europe. More information on the company is available at [www.globalcashaccess.com][1].

[1]: http://www.globalcashaccess.com

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Charge-off Uptick

Charge-offs continued to soar in November hitting a record 6.42% as some analysts continue to predict that losses may approach the 8.0% level this year. According to RAM Research’s Bankcard Barometer, charge-offs rose 40% last year.

CHARGE-OFFS 12-MONTH TRACK RECORD
(based on previous month’s experience)
Dec 00: 4.58% Jul 01: 5.31%
Jan 01: 4.65% Aug 01: 5.52%
Feb 01: 4.70% Sep 01: 5.60%
Mar 01: 4.74% Oct 01: 6.01%
Apr 01: 4.83% Nov 01: 6.33%
May 01 4.93% Dec 01: 6.42%
Jun 01: 5.10%
Source: RAM Research’s Bankcard Barometer

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Online Marketing

Credit card marketing on the Internet has collapsed over the past six months as five major players have either totally pulled banner ads or dramatically curtailed online marketing. This week Providian, the most active online marketer of credit cards, has pulled the plug on all online marketing activities for its Getsmart VISA and its new smart VISA. In November, the pioneer of Internet-centric credit cards and one of the most prolific advertisers of credit cards online, NextCard, began pulling banner ads from Web sites. Also in November, CompuCredit, the issuer of the Aspire VISA card, stopped taking applications online and cut marketing according to CardTrak ([www.cardtrak.com][1]). In September Capital One also began reducing its online marketing activities, and Bank of America pulled all of its online credit card ads in mid-August. Providian, Capital One, and NextCard consistently ranked among the 25 most active on-line advertisers to the at-work and at-home Internet audience, according to Nielsen//NetRatings. Boston-based Compete says NextCard and Providian each received about 260,000 online credit card applications monthly.

[1]: http://www.cardtrak.com

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CardData 4Q/01

OH-based National City reported a 2.7% drop in 4Q/01 receivables compared to the end of 2000. According to CardData’s 4Q/01 portfolio survey, NC’s charge volume for the fourth quarter was also off, by 7%, at $1,186,310,138. National City’s card receivables stood at $2,203,055,593 as of 12/31/01. Other issuers reporting this week continue to report mixed results for 4Q/01.

ISSUER 4Q/01 RECV CHG 4Q/01 ACTIVES CHG
CU of Texas (TX) $44,313,906 -0.4% 16,270 +0.6%
Provident Central CU (CA) $36,817,131 -8.1% 19,441 -7.1%
Max FCU (AL) $30,600,430 +5.6% 14,459 -4.0%
Sikorsky FCU (CT) $28,391,020 +17.4% 13,383 +1.9%
La Capital CU (LA) $20,234,761 +13.0% 6,162 +0.6%
Source: CardData (www.carddata.com) CHG- compared to 4Q/00

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Cap One Bonds

Capital One is gearing up to market $738 million in credit card-backed bonds. The $609 million AAA-rated class tranche may come in around one-month Libor plus 20 bps. A $75 million single-A rated class bond may fetch one-month Libor plus 60 bps. Last week, Robertson Stephens cut its investment ratings on Capital One to a “buy” from a “strong buy”, and set a price target of $71 per share. Cap One closed at $53.45 yesterday. The issuer will release its 4Q/01 earnings report next Tuesday after the market close. For complete details on Cap One’s and historical data visit CardData ([www.carddata.com][1]).

[1]: http://www.carddata.com

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CHIP DESIGN

Cadence Design Systems, Inc., the world’s leading supplier of electronic design products and services, announced that it has entered into an agreement to supply design technologies to Gemplus, the world’s leading smart card solutions provider, for a complete front-to-back design solution.

Under the license agreement, electronic designers at Gemplus have access to the complete range of Cadence design technologies. This will enable Gemplus to address its demanding design needs for customized chips and reduce time-to-market for its smart card products. Design technologies included are Cadence NC-Sim for simulation, BuildGates Synthesis, FormalCheck Model Checker, Verification Cockpit, Cadence Analog Design Environment, Virtuoso custom layout, and Diva physical verification and extraction.

Gemplus selected the comprehensive Cadence technology suite to assist it in meeting the target window in the highly competitive smart card market.

“The complete design technology portfolio offered by Cadence gave us a one-stop shop with the flexibility to work with a wider range of chip manufacturers,” commented Jean-Luc Ledys, director of Silicon Technologies, Gemplus. “In addition, to help us maintain our competitive edge we were looking for a tool that would allow us to design the smallest die size possible. After several evaluations the Cadence solution delivered superior performance and productivity benefits.”

“Gemplus is a key player in a market that is fast growing and leading advanced electronic design,” said Tom Brigiotta, vice president European sales and marketing. “By utilizing the Cadence integrated IC design environment, Gemplus was able to ramp up rapidly and concentrate on the development of its complex chip technology.”

About Gemplus

Gemplus is the world’s leading smart card solutions provider. Since its creation in 1988, Gemplus International S.A (Euronext:Sicovam 5768 and Nasdaq:GEMP) has driven the global marketing and deployment of smart card-based applications for telecommunications, financial services and e-business security. For more than a decade, Gemplus has pioneered applications that enable network operators around the world to answer the changing needs of their customers. Gemplus was first to market with a 3G card and supplies a product range compliant with new and emerging transmission standards — 2.5G and 3G. In 2000, revenue was 1.205 BE, up 57% from the previous year’s 767 ME. Net income was 99 ME. Gemplus employs more than 7800 people in 37 countries worldwide. Since December 11, 2000, Gemplus shares have been trading on the Euronext Paris S.A. First Market and on the NASDAQ Stock Market in the form of ADSs. For more information, visit the Gemplus website at www.gemplus.com.

About Cadence

Cadence is the largest supplier of electronic design technologies, methodology services, and design services. Cadence solutions are used to accelerate and manage the design of semiconductors, computer systems, networking and telecommunications equipment, consumer electronics, and a variety of other electronics-based products. With approximately 5,700 employees and 2000 revenues of approximately $1.3 billion, Cadence has sales offices, design centers, and research facilities around the world. The company is headquartered in San Jose, California, and traded on the New York Stock Exchange under the symbol CDN. More information about the company, its products, and services is available at www.cadence.com.

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