First USA Inc. said Thursday that its earnings would fall short of expectations as the company aligns its accounting policies with those of its prospective parent, Banc One Corp.
The Dallas credit card specialist said earnings for its fiscal third quarter fell short of expectations by about $59 million, and it projected a $176 million shortfall from expected earnings for calendar 1997.
In the quarter ended March 31, earnings came in at $24.1 million, or 17 cents a share, down from a restated $85 million, or 63 cents, a year earlier.
The investment community, still reeling from a card-driven loss reported at Advanta Corp., was momentarily shocked by First USA's statement.
"I had a heart attack for a few seconds when I read their announcement," said David S. Berry, director of research and credit card analyst at Keefe, Bruyette & Woods Inc. "But I've gotten over it."
Analysts came to agree that the restatements merely reflected First USA's aim to comply with accounting rules.
Banc One issued a statement Thursday saying it was aware of First USA's accounting changes and emphasizing that the acquisition, scheduled for completion in June, is not in jeopardy. The banking company has told analysts that charges related to completing the merger may be "substantially higher" than originally estimated.
"We remain extremely pleased with the operating trends and business prospects of First USA," said Banc One chairman John B. McCoy.
First USA has altered its accounting for marketing costs and asset securitizations. It did so now to conform to Banc One's practices, said First USA spokesman David C. Webster.
The Financial Accounting Standards Board issued a rule this year that First USA interprets to mean it must book gains immediately from asset securitizations.
Previously, the company had booked no gains after selling receivables to investors and collected income as cardholders paid their bills.
First USA added that the revised accounting did not affect fiscal year 1995 or 1996 earnings totals but caused an increase of $47.4 million in fiscal 1994 earnings.
To analysts like Mr. Berry, that's much ado about not very much. "If you add all the earnings up over the years, we've lost maybe 4 cents per share," he said.
Accounting matters aside, he said, First USA's third-quarter performance was "pretty good" overall.
The company shows solid growth in receivables, he said; chargeoffs are below the industry average; and delinquencies did not rise.
First USA stock rose 37.5 cents, to $46.625. Shares of Banc One fell 25 cents, to $40.875.