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Tax Rule Spikes Vendor's Profit
The Chantilly, Va., banking software vendor Online Resources Corp. says the fact that it expects to remain profitable for the foreseeable future has triggered a tax regulation that forced it to raise its fourth-quarter and full-year earnings.
The company said Friday that the tax rule, known as rule 109, has created a $13.7 million deferred tax asset, which it added to its fourth-quarter and full-year earnings.
Catherine Graham, Online Resources' chief financial officer, said in an interview that it has carried forward an operating loss of $81 million for tax benefits, but federal regulations require companies that attain profitability to pull some of that asset on to the balance sheet. "When it looks like we are in the black to stay, we must forecast how much of that asset we will use."
Over the next two years Online Resources expects to generate profits of $36 million, which will be offset by the operating losses, she said. It calculated the $13.7 deferred tax asset by using its tax rate of 38% and the anticipated profits.
As Online Resources generates taxable income, it will draw down on that asset, but it was required to add all of it to the fourth-quarter balance sheet, she said.
"This is a positive statement to the market, that the company will be profitable for the next few years," Ms. Graham said.
The adjustment raised the company's fourth-quarter income to $16.5 million, from the $2.9 million that it reported in February. The full-year income rose to $22.7 million, from $9 million.
Online Resources reiterated its revenue guidance for the first quarter ($16.5 million to $17 million) and the full year ($72 million to $75 million), but it lowered its earnings guidance, because of the tax calculations. It had previously predicted first-quarter earnings of $1.3 million to $1.7 million, but now it expects to earn $800,000 to $1.1 million. For the year, it expects earnings of $6.1 million to $6.7 million, instead of $9.8 million to $10.8 million.
Citic of China Buying NCR ATMs
Citic Bank of Beijing has agreed to purchase automated teller machines from NCR Corp. of Dayton, Ohio.
NCR announced last week that Citic would install its Personas M Series machines and its Aptra Edge software, which lets banks operate ATMs from multiple vendors on the same network. The deal also includes servicing.
NCR did not say how many machines Citic would buy. The bank owns more than 1,000.
"We are pleased to help Citic meet its retail banking development initiative, particularly in its goal to provide customers with 24-hour cash deposit and withdrawal services," said Jeff Lutz, the vice president of global sales and marketing for NCR's financial solutions division, in a press release.
