Safecard Services Inc., the leading provider of credit card registration services, has reported a decline in net income for the second quarter in a row, but said its higher expenses reflect "actions taken to reposition the company for the future."
While net income declined by more than 50% in the three months ended April 30, to $3.8 million, net subscription revenue, the company's top-line measure of gross income, hit a record $42.6 million.
In the comparable quarter of 1993, the second of Safecard's fiscal year, it earned $8.5 million on subscription revenue of $39.1 million.
For the first six months of the fiscal year, revenue was up 9% to $83. million, and net earnings fell 38% to $14.4 million.
Costly Court Fight
A protracted legal battle between Safecard and its founder and former chief executive, Peter Halmos, has been a major cause of higher operating costs. Legal fees were $2.1 million in the latest quarter and $4.8 million for the six months, compared with $1.3 million and $1.8 million in the year-earlier periods.
But Safecard said its legal costs are on the way down. On May 26, the same day it announced earnings, the Cheyenne, Wyo.-based marketing company said it reached a $4.4 million settlement with Steven Halmos, Peter Halmos' brother and a Safecard co-founder.
Also incurred in the second qu0rter was a $3.5 million restructuring charge, mainly for severance packages announced in April for eight veteran senior officers who left the company. Those departures allowed Paul G. Kahn, the current chairman and chief executive, to restructure with a team entirely of his choosing.
$4.3 Million Gain
Offsetting the one-time charges, which in effect wipe away sizable consulting and payroll expenses, was a gain of $4.3 million from litigation settlements, including one with American Express Co.
Mr. Kahn, who made his mark as chief executive of AT&T Universal Card Services until he resigned 1993, said he wants to transform Safecard into a broad-based consumer marketing and servicing organization with many lines of business.
"With a new management team in peace, the company is revitalizing the credit card registration business, the core business of the company for over 20 years, and strategically respositioning itelf to enter new markets with existing and new products and services," Mr. Kahn said.
Controller Hired
Mr. Kahn, who dipped into AT&T, American Express, and MasterCard International to put his senior team together, has added another member with an American Express background: David C. Thompson.
Mr. Thompson, 38, was named senior vice president and controller, reporting to G. Thomas Frankland, vice chairman and chief financial officer.
Mr. Thompson spent nine years with the American Express Travel Related Services Co. operation in Jacksonville, Fla., and most recently was treasurer and chief financial officer of Fidelity Trust Co. in Salt Lake City, the credit card arm of Fedility Investments.
Safecard also said that Lynn C. Torrent, the former chief financial officer who stayed on through the April purge of top executives, has resigned.
