Discover Financial Services To Record Non-cash Charge Related To Credit Card Bus
www .ino.com 2007-12-4
Monday morning, Discover Financial Services (DFS), a leading credit card issuer and electronic payment services company, announced that it expects to record a non-cash impairment charge related to its credit card business, Goldfish MasterCard and Visa Credit Card business, for the quarter ended 30 November 2007, in the UK.
The Riverwoods, Illinois based company has stated that the estimated impairment charge will be equal to or substantially equal to all of the goodwill and other intangible assets of the Goldfish business. As at 31 August 2007, the value of goodwill and other intangible assets were equivalent to approximately $422 million.
The non-cash impairment charge results from a review of goodwill and other intangible assets in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets." The company expects to provide a refined estimate of the impairment charge in its fourth quarter earnings release, tentatively scheduled for Dec. 20, 2007.
Commenting on the decision to record non-cash impairment charges, David Nelms, Chief Executive Officer of the company said, "We have concluded that continued disruption in the UK financial markets, higher interest rates and our decision to reduce our loan exposure to the UK market have negatively affected the book value of our Goldfish business. While the UK credit card market remains very challenging, our efforts to refocus this business have begun to produce positive results. We will continue implementation of significant actions to improve the performance of our UK business, and will continuously monitor our progress and assess options to maximize shareholder returns."
In a separate communiqué, the company noted that the Board of Directors has approved a share repurchase program, authorizing the management to purchase, from time to time over the period extending up to November 2010, from the market, up to $1 billion of its common stock. The management has been authorized to terminate the share repurchase program as and when it deems fit. It has also been mentioned that the share purchases, made from time to time based on market conditions and other factors and subject to securities laws, will be available for general corporate purposes.
Commenting on the share repurchase program, David Nelms said, "The share repurchase program reflects our commitment to be efficient managers of our shareholders' capital over the long term. We are taking significant actions to improve returns on capital in our UK business and we continue to generate significant excess capital from our profitable and growing US businesses. We also are pleased with the results of our continued focus on risk management, as charge-offs for the US Card segment are expected to remain below 4 percent in the fourth quarter."
The share price of the company, which was trading in the broad range between $15.72 and $32.17 during the past 52-week period, is presently quoted at $17.17, down 20 cents, or 1.15%, on a volume of 973 thousand shares.
(editor : jane)
