Trend Bucker

While most issuers are reporting a first quarter decline in chargeoffs and delinquency, Providian Financial Corp. posted a significant increase in both benchmarks. Chargeoffs rose from 6.78% for first quarter ’98 to 7.62% for first quarter ’99. Delinquency also increased from 4.61% last year to 4.91% this year. Never the less, Providian reported record first quarter net income of $113.5 million, an increase of 102% over the first quarter of 1998. Providian says it added over 1 million accounts during the quarter, bringing total customer relationships to 9 million. Providian reported a return on average equity of 52.19% for the first quarter. For current and historical financials details on Providian visit CardData ([www.carddata.com][1]).

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

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Big Dog Card

Big Dog Holdings, Inc., a developer, marketer and retailer of branded, lifestyle consumer products, Thursday launched its 1999-2000 Brand Equity Expansion Plan, with the announcement of three of its initial Big Dog license agreements.

In addition to building an Internet Enterprise, the Brand Equity Expansion Plan calls for the licensing and entertainment division, which was established in 1998, to extend, through licensing and cross-promotion opportunities, the Big Dog brand, character and lifestyle appeal to a much broader universe of products and entertainment properties.

In exchange for the licenses, Big Dog Holdings will variously receive royalty/commissions, guarantees, the benefits of associated brand advertising campaigns and a vast expansion in retail presence. There are no material costs anticipated in connection with these incremental revenues.

The three new licensees include Golden West Specialty Foods, for a Big Dog brand line of hot sauces; Cadore Moda Optical Wear, for a Big Dog line of optical frames and sunglasses; and MBNA America Bank, N.A., for a customized Big Dog credit card.

These licensees have been granted the right to use the Big Dog character, image, name and logo, as applicable, in the development and marketing of agreed upon products, services and collateral materials. In effect, these licensees are buying access to the millions of Big Dog customers.

The combined U.S. retail distribution of Golden West Specialty Foods and Cadore Moda Optical Wear is approximately 4,000 outlets, a potential 2,000 percent increase over Big Dog’s current owned and wholesale network. The Cadore Moda Optical Wear program includes a planned advertising campaign of approximately $1.0 million by Cadore Moda, which is scheduled to commence in the third quarter 1999.

Golden West Specialty Foods’ License

The licensing agreement with Golden West Specialty Foods, a Northern California-based, producer and international marketer of gourmet foods, includes the right to use the Big Dog name and character in a line of four specialty sauces, “BIG DOG: THE BRAND WITH BITE,” including hot, barbecue and mustard preparations. These products began shipping in second quarter 1999 to a range of specialty and gourmet food shops, high-end department stores and gift shops.

Golden West Specialty Foods’ distribution network includes approximately 1,500 U.S. high-end retail stores, and selected outlets in Canada and the U.K.

Cadore Moda Optical Wear License

Cadore Moda Optical Wear, is a Miami, Florida-based, international manufacturer and distributor of designer optical frames and sunglasses for adults and children. The Big Dog license gives this high-quality manufacturer the right to use the Big Dog logo, character and name in the design of a collection of optical frames and sunglasses.

This product line is scheduled to be launched to the wholesale market in the fall of 1999, following a $1.0 million advertising campaign. The product line is expected to be in retail stores by second quarter 2000.

Cadore Moda is an optical wear manufacturer and distributor for many of the world’s finest designers. Its distribution network includes a wide range of high-end optical wear retailers, optical wear retail chains (Lens Crafters, Vista Optical, Pearl Vision), department stores and mass merchandisers. Its U.S. distribution alone includes approximately 2,500 retail outlets.

MBNA America Bank, N.A. License

MBNA America Bank, N.A., is the largest independent credit card lender in the world. Its Big Dog license includes the right to use the Big Dog name and logo on a customized Big Dog Visa(r) credit card. The card is scheduled to be launched in the third quarter 1999. Card applications will be available in all Big Dog retail stores in the United States and through the company’s catalog and Web site, [www.bigdogs.com][1].

In exchange for the license, Big Dog Holdings will receive a payment for each new cardholder as well as a royalty related to total card purchase transactions. The cardholder will accumulate loyalty points when the card is used for Big Dog retail, catalog and online purchases. These points, in turn, can be applied to future Big Dog merchandise purchases.

In commenting on these licenses, Andrew Feshbach, president and CEO, Big Dog Holdings, said: “These licenses are integral to our 1999-2000 business objective, which is to build brand equity by leveraging the Big Dog name, character and lifestyle appeal in a universe that is far greater than the one enjoyed by the Company today.

“To accomplish this, we are looking to like-minded licensees, entertainment partners and cross-promotional opportunities. In effect, these relationships will allow us to build Big Dog brand awareness, advertise and market, and expand revenues with little direct cost to the company. The value to be captured in this next generation of our company is what truly distinguishes Big Dog from most other retailers.”

Big Dog Holdings, Inc. develops, markets and retails a branded, lifestyle collection of unique, high-quality, popular-priced consumer products, including activewear, casual sportswear, accessories and gifts. The Big Dog brand image is one of quality, fun and a sense of humor.

BIG DOGS brand is designed to appeal to people of all ages and demographics, particularly baby boomers and their kids, big and tall customers, and pet owners. The company is in the process of extending its brand equity through selective licensing, cross promotions and the building of an Internet enterprise for its market. In addition to its 177 retail stores, Big Dogs markets its products through its catalog, better wholesale accounts and Internet sales.

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

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Strongest Quarter

Household International reported that loan growth in its consumer finance business, improved efficiency, and higher income from its tax refund loan business led to the strongest first quarter in Household’s 120 year history. The company reported net operating income rose 34% to $320.8 million, compared to $239.3 million a year ago. However Household’s VISA/MasterCard portfolio decreased $4.1 billion over the past twelve months due to the company’s restructuring of its domestic credit card business. At March 31, the managed delinquency ratio (60+days) increased to 4.81% from 4.65% one year ago. The annualized managed net chargeoff ratio for the first quarter was 4.37%, compared to 4.17% in the year-ago quarter. For current and historical financials details on Household visit CardData ([www.carddata.com][1]).

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

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Cubic Card Deal

The Singapore Land Transport Authority yesterday awarded Cubic Transportation Systems a $23.6 million contract to provide smart card-vending ticketing machines for use at all LTA rail and bus stations. Under terms of the contract CTS will design, build and deliver 370 advanced ticketing units called the ‘General Ticketing Machine’. The new ticketing machine integrates advanced contactless smart card technology, including the capability to vend, revalue, retrieve, and recycle smart cards. At the same time passengers return cards for recycling, the ‘GTMs’ will refund passenger deposits which are required at the time of purchase. Other features include credit/debit card payment capability. Delivery of the first 100 ‘GTMs’ is scheduled for October 2000.

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Credit Drives Earnings

Sears, Roebuck and Co. reported first-quarter 1999 net income of $146 million compared to $133 million last year. Earnings soared 36%. The earnings increase was primarily due to improved performance of the credit business, which benefited from a lower provision for uncollectible accounts, a result of continuing favorable trends in portfolio quality. However credit revenues decreased 6.8%, primarily attributable to reduced late fee income and a lower level of owned credit card receivables. At the end of the first quarter Sears held $26.8 billion in card loans. Chargeoffs dropped during the past twelve months, from 8.12% to 7.08%. For full financials details on Sears visit CardData ([www.carddata.com][1]).

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

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Y2K Fraud

In testimony this week before a joint hearing of the House Subcommittee on Consumer Protection, and the House Subcommittee on Finance, the Federal Trade Commission said that identity theft is becoming more sophisticated as fraud artists prey on consumers’ fears about Year 2000 computer bugs. The FTC says an emerging ruse is for someone to claim they represent the consumer’s bank and instructing the consumer to reveal personal information and account information about the consumer’s account in order to ensure the bank can comply with Year 2000 requirements. The FTC testified that identity thieves also use personal information to open a new credit card account under someone else’s name, take over an existing credit card account, take out loans in another person’s name, and write fraudulent checks or transfer money from another person’s bank or brokerage account.

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Fair Isaac Beats Expectations

Fair, Isaac and Company, Incorporated reported quarterly net income of $7.46 million or $.51 per share (diluted) for the three months ended March 31, 1999, compared with the $5.49 million or $.38 per share recorded in the same period last year. Consolidated revenues of $68.9 million, an all-time high, were up 15 percent over the $59.7 million posted in last year’s March quarter.

For the first six months of its fiscal year, Fair, Isaac earned $14.51 million or $1.00 per share (diluted), compared with $9.46 million or $.66 per share posted in the first half of 1998. Six-month revenues rose 21 percent, to $136.9 million.

President & CEO Larry E. Rosenberger said, “Fair, Isaac’s results for the first half of our 1999 fiscal year are somewhat better than we had anticipated at the beginning of the year. The market environment has been and continues to be difficult: Y2K issues on the part of our clients, consolidation in financial services and turmoil in international markets have slowed our growth. Nevertheless, continuing attention to controlling expense growth and increases in the percentage of credit and insurance revenues coming from usage-priced services have allowed us to maintain good margins despite a slower rate of revenue growth and the resources devoted to implementing the new strategic plan we announced last month.”

On March 8, 1999, Fair, Isaac announced that it was forming new business units to pursue opportunities in the electronic commerce and telecommunications industries. At the same time, existing business and service units are being realigned to support these new initiatives, to provide a more cohesive and comprehensive array of products and services to the financial services industry, and to continue the company’s ventures in healthcare information services.

Rosenberger added, “We are making good progress under our new strategic plan. Both employees and clients are enthusiastic about the new opportunities it holds. At the same time, the big increases in our R&D spending in fiscal 1997 and 1998 have resulted in an extensive list of new or enhanced products and services that have been introduced or will be introduced in fiscal 1999. The combination of external market forces and internal changes has, to be sure, injected some uncertainty into our immediate future, but we remain very optimistic about Fair, Isaac’s long-term prospects.”

Since 1956, Fair, Isaac has helped businesses maximize the value of data for strategic decision making. The company pioneered the commercial development of empirically derived predictive models for the credit industry and popularized their use in lending decisions. Today, Fair, Isaac and its subsidiaries provide data-driven decision support solutions to a variety of industries, worldwide, including financial services, direct marketing, personal lines insurance, retail, health care, and telecommunications. Primary areas of focus include customer and operational data management and modeling, information analysis, strategy design, and software. Headquartered in San Rafael, California, Fair, Isaac employs nearly 1,600 people and has offices throughout the United States and Europe as well as in Canada, Mexico, Brazil, South Africa, and Japan.

FOR MORE 1Q/99 DETAILS PLEASE VISIT CARDDATA ([www.carddata.com][1])

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

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Cash America 1Q/99

Cash America International, Inc. announced Thursday that consolidated net earnings for the first quarter ended March 31, 1999 increased 6% to $4,800,000 (18 cents per share) compared to $4,534,000 (18 cents per share) for the same period in 1998. Included in the consolidated earnings is an after tax loss from the Company’s check cashing subsidiary, Mr. Payroll Corporation, of a net $1.4 million in the first quarter of 1999 and $1.1 million in the first quarter of 1998. Consolidated total revenue increased 14% to $95.7 million for the three months ended March 31, 1999 versus $84.2 million in the prior year.

Cash America completed a strategic alliance during the first quarter of 1999, which included the sale of an equity interest in its subsidiary Mr. Payroll Corporation to Wells Fargo Bank (NYSE: WFC). The terms of the transaction called for Wells Fargo’s contribution of cash and assets in exchange for an ownership interest in the subsidiary. Cash America recognized a gain net of tax on the transaction of $1.1 million that effectively reduced the net loss after taxes from activities of Mr. Payroll Corporation from $2.5 million to $1.4 million in the first quarter of 1999.

Earnings from Cash America’s lending operations increased 10% in the first three months to $6.2 million in 1999 compared to $5.7 million in 1998. Commenting on the results for the first quarter of 1999, Chairman and Chief Executive Officer, Jack R. Daugherty said, “Our lending operations posted an increase in year over year comparisons against a first quarter in 1998 that was up 44% over 1997. The investment Cash America made in additional lending locations during the previous year led to a 13% increase in our average loan portfolio that drove the improvement in earnings in 1999.”

Additionally, the Company announced that the Board of Directors, at its regularly scheduled quarterly meeting, declared a $0.0125 (1.25 cents) per share cash dividend on common stock outstanding. The dividend will be paid to shareholders of record on May 4, 1999 and will be paid at the close of business on May 18, 1999.

Cash America International, Inc. is a diversified provider of specialty finance services to individuals in the United States, United Kingdom and Sweden. Cash America is the largest provider of secured non-recourse loans to individuals commonly referred to as pawn loans, through 461 locations in 16 states and two foreign countries. In addition, the Company provides check cashing services through 135 franchised and company owned “Mr. Payroll” manned check cashing centers and rental services through its wholly owned subsidiary, Rent-A-Tire, Inc.

FOR MORE 1Q/99 DETAILS PLEASE VISIT CARDDATA ([www.carddata.com][1])

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

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Paymentech 1Q/99

Paymentech reported first quarter net income of $5.9 million compared to $4.3 million last year. For the first quarter, Paymentech processed approximately $15.9 billion in bankcard sales volume and approximately 617 million total transactions, including third-party authorization and capture transactions. Bankcard sales volume increased 35% and total transaction volume increased 33% over the prior-year quarter.

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GS Buys ATTM Card

GS Telecom, Ltd. announced it has received an executed definitive Agreement with World Netcom Services, Inc, thereby acquiring all intellectual property, including patents pending, proprietary hardware and software – and all current business relationships surrounding – the ATTM Universal Card, for a consideration of 333,333 restricted shared of GS Telecom, Ltd. common stock.

The Agreement is subject to a 28-day “due diligence,” during which GS Telecom, Ltd. retains the right to cancel.

World Netcom Service, Inc. will act under an exclusive licensing agreement as a distributor of ATTM Universal Card products to network marketing companies in the United States only.

The ATTM Universal Card technology can be used to create a preloaded hybrid “Smart-Card,” that may enable transactions in 53 currencies, throughout the world, including the Pacific Rim and the Former Soviet Union. The card can also be used as an anonymous currency card, designed to make possible instantaneous, anonymous transactions over the Internet.

The execution of the final agreement was delayed from an expected date in late March, due to a redrafting as a technology acquisition instead of a simple marketing and development license. Andrew Castle, GS Telecom President, explains.

“Initial negotiations for this acquisition focused on only the licensing and marketing rights (of the ATTM Universal Card.) When the opportunity presented itself to acquire the exclusive IP, we were pleased to restructure the final document to take advantage of the offered acquisition of the proprietary technology and in-place distribution agreements.

“We look forward to developing these alliances, and to forming new strategic partnerships to enhance and deliver ATTM technology- based products to a global market.”

GS Telecom, Ltd. is a U.S. high-tech development and marketing company with offices in San Francisco and London. For more information on the company’s vision, visit GS Telecom, Ltd. on the web, at [www.gs-tele.com][1].

Please note: GS Telecom, Ltd. is not affiliated in any way with GST Telecommunications, Inc. of Vancouver, Washington and no inference of any relationship is suggested in any area of industry.

[1]: http://www.gs-tele.com

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GM Price Hike

The nation’s second largest co-branded program, the ‘General Motors MasterCard’, is beefing up pricing next month, according to CardWatch (www.cardwatch.com). Household Bank, the card’s issuer, has notified U.S. cardholders, that effective May 1, it is adding an annual fee for closed accounts with outstanding balances, raising the minimum cash advance fee and increasing its punitive interest rate. Cardholders opting to close an account but continuing to make payments on an existing balance will now face a $29 annual fee. Household also increased the minimum cash advance fee from $3.00 to $15.00. The ‘GM MasterCard’ cash advance fee is 3% with no maximum. Household has also ratcheted up the punitive interest rate from prime +12.4% to prime +15.4%. Household states it has expanded its punitive interest rate policy to include cardholders who have become delinquent on other non-related accounts and cardholders with a significant change in credit worthiness. The Household punitive rate policy mirrors the current policies of other major players, notably Capital One and Discover.

PRICING SAMPLER

ISSUER CAF MIN CAF PUNITIVE APR
B of A 2.5% $20.00 Prime +12.99%
Household 3.0% $15.00 Prime +15.4%
Wells Fargo 4.0% $10.00 23.90%
First USA 2.0% $10.00 22.99%
Wachovia 4.0% $ 5.00 Prime +12.9%
Citibank 3.0% $ 5.00 Prime +12.9%
Fleet 4.0% $ 5.00 Libor +16.302%
Providian 5.0% $ 3.00 23.99%
Capital One 2.5% $ 2.50 24.99%
Chase 3.0% $ 3.00 Prime +13.99%

CAF-cash advance fee; MIN CAF-minimum cash advance fee;
Source: CardWatch (www.cardwatch.com)

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