National Processing Inc. said Wednesday that its chief executive officer had resigned and that first-quarter earnings would be lower than anticipated.
Robert E. Showalter, 60, succeeded Tony G. Holcombe, 47, as CEO. Mr. Holcombe had held the job since 1994. Mr. Showalter was chief executive officer of National City Corp.'s Akron bank; National City owns most of National Processing.
Analysts had predicted that National Processing, the nation's second- largest merchant processor would earn 12 cents a share in the quarter and 73 cents in the full year. But the Louisville, Ky., company said first- quarter earnings would be as much as a third lower than analysts' expected.
Trading of National Processing stock was suspended for more than an hour Wednesday morning. When it resumed at midday, shares fell 26%, to $7.87, below the 52-week low of $9.25. By the end of the day, 822,600 shares had changed hands, 10 times the daily average. The stock closed at $8.75.
Two other senior National Processing managers resigned last Thursday: Kurt S. Knipp, executive vice president for merchant card services, and Richard Alston, executive vice president for finance and corporate development. They too left the company suddenly.
Consultants and analysts said Cleveland-based National City is trying to take control of a grave situation. Earlier this week they speculated that Mr. Knipp and Mr. Alston had been fired; they said Mr. Holcombe probably resigned because of enormous pressure.
National Processing has not been faring well since its initial public offering in August. While other merchant processing companies have hit stock prices 50 to 70 times earnings, National Processing has struggled with multiples in the low teens.
"It's a tough business," said Richard Speer, chairman and chief executive of Speer & Associates, Atlanta, in a recent interview; National Processing's investors "are not mom-and-pops investing in mutual funds."
"The market has treated other processors extremely well," Mr. Speer observed. "These guys got hammered."
Thomas A. Richlovsky, senior vice president and treasurer of National City Corp., said it was "necessary to communicate to the investment community" that "consensus expectations of earnings did not reflect the current environment of the (merchant processing) business, which was more competitive than we had thought."
"As prices were cut, margins tightened," he said.
Mr. Richlvosky fended off suggestions that National Processing would be sold, saying National City owns 85% of the company.
"We have a strong stake in its success and want both the majority and minority owners to do well," he said. "We evaluate and continue to evaluate every possible alternative."