National Processing 10-Q 2000 Q1 Quarterly report

TABLE OF CONTENTS

INDEX
National Processing, Inc. Consolidated Balance Sheets
National Processing, Inc. Consolidated Statements of Operations
National Processing, Inc. Consolidated Statements of Changes in Shareholders’ Equity
National Processing, Inc. Consolidated Statements of Cash Flows
NATIONAL PROCESSING, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Part II — Other Information
	Item 1. Legal Proceedings
	Item 2. Changes in Securities and Use of Proceeds (None)
	Item 3. Defaults Upon Senior Securities (None)
	Item 4. Submission of Matters to a Vote of Security Holders (None)
	Item 5. Other Information (None)
	Item 6. Exhibits and Reports on Form 8-K:
		a. Exhibits
		b. Reports on Form 8-K
SIGNATURES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

/X/	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange of 1934
For the quarterly period ended March 31, 2000
or
/ /	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from________________to___________

Commission File Number: 1-11905

National Processing, Inc.
(Exact name of Registrant as specified in its charter)

Ohio	61-1303983
(State or other jurisdiction	(I.R.S. Employer Identification No.)
of incorporation or organization)
1231 Durrett Lane
Louisville, Kentucky	40213-2008
(Address of principal executive offices)	(Zip Code)

(502) 315-2000
(Registrant’s telephone number, including area code)

      Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO

The number of shares outstanding of the Registrant’s Common Stock as of April 30, 2000 was 50,786,986.

NATIONAL PROCESSING, INC.

INDEX

Part I	Financial Information
		Page No.
Item 1.	Consolidated Financial Statements (unaudited)
	Consolidated Balance Sheets – March 31, 2000 and
	December 31, 1999		3
	Consolidated Statements of Operations –
	Three Months Ended March 31, 2000 and 1999		4
	Consolidated Statements of Changes in Shareholders’ Equity –
	Three Months Ended March 31, 2000		5
	Consolidated Statements of Cash Flows –
	Three Months Ended March 31, 2000 and 1999		6
	Notes to Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of
	Financial Condition and Results of Operations		10
Item 3.	Quantitative and Qualitative Disclosure About Market Risk		14
Part II	Other Information
Item 1.	Legal Proceedings (None)
Item 2.	Changes in Securities and Use of Proceeds (None)
Item 3.	Defaults Upon Senior Securities (None)
Item 4.	Submission of Matters to a Vote of Security Holders (None)
Item 5.	Other Information (None)
Item 6.	Exhibits and Reports on Form 8-K		15
Signatures			15

2

National Processing, Inc.
Consolidated Balance Sheets
Unaudited
(Dollars in thousands)

		March 31		December 31
		2000		1999
Assets
Current assets:
	Cash and cash equivalents	$	60,952	$	32,042
	Securities available for sale		60,000		60,000
	Accounts receivable — trade		73,526		104,486
	Restricted deposits — customer funds		23,066		22,177
	Deferred tax assets		546		812
	Other current assets		10,370		11,743
Total current assets			228,460		231,260
Property and equipment:
	Furniture and equipment		81,009		81,439
	Building and leasehold improvements		21,377		21,006
	Software		19,237		18,027
	Property leased from affiliate		4,173		4,173
	Land and improvements		2,859		2,851
			128,655		127,496
Accumulated depreciation and amortization			64,377		62,408
			64,278		65,088
Other assets:
	Goodwill, net of accumulated amortization of $5,624 in 2000 and $5,040 in 1999		87,847		88,431
	Other intangible assets		33,304		34,628
	Deferred tax assets		4,126		3,698
	Other assets		6,421		6,109
Total other assets			131,698		132,866
Total assets		$	424,436	$	429,214
Liabilities and shareholders’ equity
Current liabilities:
	Restricted deposits — client funds	$	23,066	$	22,177
	Accounts payable — trade		8,697		12,262
	Accrued bankcard assessments		16,881		20,122
	Income tax payable		12,836		16,318
	Other accrued liabilities		31,021		35,963
Total current liabilities			92,501		106,842
Obligation under property leased from affiliate			2,090		2,123
Other long-term liabilities			563		796
Deferred tax liabilities			3,316		3,047
Total liabilities			98,470		112,808
Shareholders’ equity:
	Preferred stock, without par value; 5,000,000 shares authorized; no shares issued or outstanding		—		—
	Common stock, without par value; 95,000,000 shares authorized; 50,786,986 and 50,644,651 shares issued and outstanding in 2000 and 1999, respectively		1		1
	Contributed capital		176,976		176,964
	Retained earnings		148,989		139,441
Total shareholders’ equity			325,966		316,406
Total liabilities and shareholders’ equity		$	424,436	$	429,214

See notes to consolidated financial statements

3

National Processing, Inc.
Consolidated Statements of Operations
Unaudited
(In thousands, except per share amounts)

	Three Months Ended
	March 31
	2000		1999
Revenue	$	97,867	$	124,463
Operating expenses		47,464		60,497
Wages and other personnel expenses		19,218		31,096
General and administrative expenses		12,181		16,807
Depreciation and amortization		5,373		7,086
Impairment, restructuring and related expenses		—		76,166
Operating profit (loss)		13,631		(67,189	)
Net interest income		1,815		18
Income (loss) before provision for income taxes		15,446		(67,171	)
Provision for income taxes		5,898		1,014
Net income (loss)	$	9,548	$	(68,185	)
Basic and diluted net income (loss) per common share	$	0.19	$	(1.35	)

See notes to consolidated financial statements

4

National Processing, Inc.
Consolidated Statements of Changes in Shareholders’ Equity
Unaudited
(In thousands)

	Common		Contributed		Retained
	Stock		Capital		Earnings		Total
Balance at January 1, 2000	$	1	$	176,964	$	139,441	$	316,406
Net income		—		—		9,548		9,548
Stock options exercised		—		12		—		12
Balance at March 31, 2000	$	1	$	176,976	$	148,989	$	325,966

See notes to consolidated financial statements

5

National Processing, Inc.
Consolidated Statements of Cash Flows
Unaudited
(In thousands)

				Three Months Ended
				March 31
				2000			1999
Operating activities
	Net income (loss)			$	9,548		$	(68,185	)
	Items not requiring cash currently:
			Depreciation and amortization		5,373			7,086
			Impairment, restructuring and related expenses		—			76,166
			Deferred income taxes		107			845
			Loss (gain) on disposition of fixed assets		5			(8	)
	Change in current assets and liabilities:
			Accounts receivable — trade		30,960			21,399
			Accounts payable — trade		(1,565	)		238
			Accrued bankcard assessments		(3,241	)		(3,262	)
			Income taxes payable		(3,482	)		(203	)
			Other current assets/liabilities		(3,016	)		2,941
			Other, net		(545	)		154
	Net cash provided by operating activities				34,144			37,171
Investing Activities
	Capital expenditures				(3,249	)		(3,219	)
	Proceeds from sale of fixed assets				36			150
	Purchase of securities available for sale				(20,000	)		—
	Proceeds from maturities of securities available for sale				20,000			—
	Other investing activities				(2,000	)		—
	Net cash used by investing activities				(5,213	)		(3,069	)
Financing Activities
	Principal payments under property leased from affiliate				(33	)		(43	)
	Exercise of stock options				12			—
	Net cash used by financing activities				(21	)		(43	)
Net increase in cash and cash equivalents					28,910			34,059
Cash and cash equivalents, beginning of period					32,042			7,254
Cash and cash equivalents, end of period				$	60,952		$	41,313
Supplemental cash flow information:
		Taxes paid		$	7,735		$	2,364

See notes to consolidated financial statements

6

NATIONAL PROCESSING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

1. ACCOUNTING POLICIES

      The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, although the balance sheet at December 31, 1999 has been derived from the audited consolidated financial statements at that date, the accompanying consolidated financial statements do not include all the information and footnotes required by generally accepted accounting principles. These financial statements should be read in conjunction with National Processing, Inc.’s (the “Company”) audited consolidated financial statements for the year ended December 31, 1999 which include full disclosure of relevant financial policies and information.

      In the opinion of management, the accompanying consolidated financial statements have been prepared on a basis consistent with accounting principles applied in the prior periods and include all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period.

2. IMPAIRMENT, RESTRUCTURING AND RELATED EXPENSES

      During the quarter ended March 31, 1999, the Company recorded nonrecurring restructuring charges of $2.2 million, including $1.9 million for severance pay for approximately 540 employees and $0.3 million for other costs. These charges related to two of the Company’s operating facilities which have been or are in the process of being closed and consolidated into the Company’s other current facilities. These charges decreased net income and earnings per share by approximately $1.8 million and $.04, respectively. At March 31, 2000, the remaining liability was $0.6 million and related primarily to future severance payments for approximately 90 remaining employees.

      During the first quarter of 1999, the Company committed to a formal plan to dispose of its Freight, Payables, Remittance and Check Services business lines and recorded impairment losses and related expenses of $73.9 million related to the sale and wind-down of these business lines. The charges decreased first quarter 1999 net income and earnings per share by $72.0 million and $1.42, respectively. Effective April 1, 1999, the Company sold its Freight and Payables business lines for $18.3 million. Effective June 1, 1999, the Company sold its Remittance and Check business lines for $44.3 million. At March 31, 2000, the Company had $3.2 million remaining related to the final obligations of these dispositions recorded in other accrued liabilities. The remaining obligations are primarily for future severance payments, rent subsidies and processing subsidies. For the first quarter of 1999, these divested business units had revenues of $39.7 million.

7

3. RECLASSIFICATIONS

      Certain 1999 amounts have been reclassified to conform with the 2000 presentation.

4. COMMITMENTS AND CONTINGENCIES

      In the normal course of business, the Company is involved in litigation from time to time. In the opinion of management, the ultimate liability, if any, arising from this litigation is not expected to have a material adverse effect on the Company’s financial condition, results of operations or liquidity.

5. NET INCOME PER COMMON SHARE

      The calculation of net income per common share follows (in thousands, except per share amounts):

		Three Months Ended
		March 31
		2000		1999
BASIC
	Net income (loss)	$	9,548	$	(68,185	)
	Average common shares outstanding		50,786		50,645
	Net income (loss) per common share — basic	$	0.19	$	(1.35	)
DILUTED
	Net income (loss)	$	9,548	$	(68,185	)
	Average common shares outstanding		50,786		50,645
	Stock option adjustment		58		—
	Average common shares outstanding - diluted		50,844		50,645
	Net income (loss) per common share - diluted	$	0.19	$	(1.35	)

6. SEGMENT REPORTING

      National Processing, Inc. operates two business segments – Merchant Services and Corporate Services. Merchant Services authorizes, processes and settles credit and debit card transactions for a variety of merchants. Revenues from Corporate Services are derived from corporate outsourcing, transaction processing and settlement services, as well as other customized processing solutions. Corporate Services also settles airline ticket purchases made through travel agents on behalf of airlines and derives a portion of its revenue from an exclusive contract with the Airlines Reporting Corporation (“ARC”). The Company is compensated on a “cost plus” basis under this contract.

      During the first half of 1999, the Company sold its Check business line (formerly part of the Merchant Services segment) and its Remittance, Payables and Freight business lines (all formerly part of the Corporate Services segment). The Company identifies business segments by the services they offer. The accounting policies of the reportable segments are the same as those of the Company. Prior period amounts were classified to conform to the current line of business reporting structure. The segment previously defined as Travel Services is now included in the Corporate Services segment.

8

      The reported results reflect the underlying economics of the segments. General and administrative expenses, other than direct Corporate expenses, are allocated to the segments based upon various methods determined by the nature of the expenses. There are no intersegment revenues. Impairment, restructuring and related expenses are reflected in the business segments to which they relate. Depreciation expense for corporate fixed assets is allocated to the segments. Corporate net operating assets are comprised primarily of cash, securities available for sale and income tax balances.

	Merchant			Corporate						Consolidated
(Dollars in thousands)	Services			Services			Corporate			Total
For the quarter ended March 31, 2000
Revenue from external customers	$	70,911		$	26,956		$	—		$	97,867
Operating profit (loss)		12,209			3,559			(2,137	)		13,631
Depreciation and amortization		3,532			1,841			—			5,373
Net interest income		1,419			396			—			1,815
Net operating assets		106,338			48,959			170,619			325,966
For the quarter ended March 31, 1999
Revenue from external customers	$	73,792		$	50,671		$	—		$	124,463
Impairment loss and related expenses		30,450			43,482						73,932
Operating loss		(24,124	)		(41,315	)		(1,750	)		(67,189	)
Depreciation and amortization		3,305			3,781			—			7,086
Net interest income (expense)		29			(11	)		—			18
Net operating assets		141,033			79,449			63,992			284,474

9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations

Components of Revenue and Expenses

      Revenues. The Company’s Merchant Services revenue is primarily derived from fees paid by merchants for the authorization and settlement of credit and debit card transactions. Revenue is recorded net of interchange fees charged by the credit card associations. Corporate Services revenue is derived from corporate outsourcing, transaction processing and settlement services, as well as other customized processing solutions. A portion of Corporate Services revenue is also derived from an exclusive long-term contract with the Airlines Reporting Corporation (ARC) under which the Company is compensated on a “cost plus” basis. A small portion of revenue is derived from earnings on cash balances, which are maintained by customers pursuant to contract terms. Revenue derived from services provided to affiliates is immaterial.

      Expenses. Operating expenses include all direct costs of providing services to customers including wages and other personnel expenses. The most significant components of operating expenses are assessment fees, authorization fees, data processing expenses, wages and benefits, and general and administrative expenses.

Results of Operations

      The Company divested certain business units during 1999 in order to focus on its core business lines. Accordingly, the segment results presented below for the comparison of 2000 to 1999 segregate the operating performance for the remaining core business lines versus those that were divested. The segment profits for 1999 as presented herein differ from the operating profits presented in Note 6 in the accompanying consolidated financial statements due to the segregation of nonrecurring items and divested business lines.

10

Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999

				2000					1999						Change
						% of						% of
(Dollars in thousands)				Amount		Revenues			Amount			Revenues			Amount			%
Revenue:
	Merchant Services			$	70,911		72	%	$	58,970			47	%	$	11,941			20	%
	Corporate Services				26,956		28			25,744			21			1,212			5
			Total Core Revenue		97,867		100			84,714			68			13,153			16
	Divested Business Lines				—		—			39,749			32			(39,749	)		(100	)
			Total Revenue		97,867		100			124,463			100			(26,596	)		(21	)
Operating Expenses:
	Merchant Services				58,702		83			52,668			89			6,034			11
	Corporate Services				23,397		87			21,233			82			2,164			10
			Core Operating Expenses		82,099		84			73,901			87			8,198			11
	Divested Business Lines				—		—			39,835			100			(39,835	)		(100	)
			Total Operating Expenses		82,099		84			113,736			91			(31,637	)		(28	)
Segment Profit (Loss):
	Merchant Services				12,209		17			6,302	(1)		11			5,907			94
	Corporate Services				3,559		13			4,511	(2)		18			(952	)		(21	)
			Total Core Segment Profit		15,768		16			10,813			13			4,955			46
	Divested Business Lines				—		—			(86	)(3)		—			86			(100	)
Total Segment Profit					15,768		16			10,727			9			5,041			47
Other General and Administrative Expenses					2,137		2			1,750			1			387			22
Net Interest Income					1,815		2			18			—			1,797			NM
Income Before Taxes and Nonrecurring Items					15,446		16			8,995			7			6,451			36
Nonrecurring Items:
		Impairment, Restructuring and Related Expenses			—		—			(76,166	)		(61	)		76,166			NM
Income (Loss) Before Taxes					15,446		16			(67,171	)		(54	)		82,617			NM
Provision for Income Taxes					5,898		6			1,014			1			4,884			NM
Net Income (Loss)				$	9,548		10		$	(68,185	)		(55	)	$	77,733			NM
NM – Not meaningful

(1)	Excludes $0.5 million of restructuring charges related to facility closing.
(2)	Excludes $1.7 million of restructuring charges related to facility closing.
(3)	Excludes $73.9 million of impairment and related expenses for the business lines divested in the first half of 1999 (Freight, Payables, Remittance and Check Services).

			2000					1999						Change
(Dollars in thousands, except per share amounts)			Amount		%			Amount			%			Amount		%
Excluding Nonrecurring Items:
	Pre-Tax Income		$	15,446		100	%	$	8,995			100	%	$	6,451		72	%
	Taxes			5,898		38			3,321			37			2,577		78
		Net Income	$	9,548		62		$	5,674			63		$	3,874		68
		Per Share — Diluted	$	0.19				$	0.11					$	0.08		68
Nonrecurring Items:
	Pre-Tax Income (Loss)		$	—		—		$	(76,166	)		100	%	$	76,166		NM
	Taxes			—		—			(2,307	)		3			2,307		NM
		Net Income (Loss)	$	—		—		$	(73,859	)		97		$	73,859		NM
		Per Share — Diluted	$	—		—		$	(1.46	)		97		$	1.46		NM
Total:
	Pre-Tax Income (Loss)		$	15,446		100	%	$	(67,171	)		100	%	$	82,617		NM
	Taxes			5,898		38			1,014			(2	)		4,884		NM
		Net Income (Loss)	$	9,548		62		$	(68,185	)		102		$	77,733		NM
		Per Share — Diluted	$	0.19				$	(1.35	)				$	1.54		NM
NM — Not meaningful

11

Merchant Services

      Revenue for the core business line increased 20% to $70.9 million from $59.0 million. Processing volume increased 27% primarily due to new customer accounts, including the acquisition of a merchant processing portfolio from Heartland Payment Systems LLC on December 31, 1999, and increased volumes from existing customers. Operating expenses for the core business line increased 11% to $58.7 million from $52.7 million primarily due to the customer base expansion and increased volumes. Operating margins as a percentage of revenue increased to 17% from 11% as a result of improved efficiencies and operating leverage. Segment profits increased 94% to $12.2 million in 2000 from $6.3 million in 1999.

Corporate Services

      Revenue for the core business lines increased 5% to $27.0 million from $25.7 million. This increase was due to volume growth in the Financial Services and Healthcare Claims Processing Services business lines. These increases were offset primarily by decreases in the Travel business line resulting from the continuing conversion from paper to electronic ticketing and reporting. This conversion decreases the need for the Company’s data capture services and thus decreases the revenue generated under the “cost plus” ARC contract and various other processing contracts. Operating expenses for the core business lines increased 10% to $23.4 million from $21.2 million due primarily to increased volumes, as well as severance expense of $0.5 million recorded in the first quarter of 2000. Exclusive of severance expense, operating expenses increased 8%. As a result of the items discussed above, segment profit decreased 21% to $3.6 million in 2000 from $4.5 million in 1999.

Other General and Administrative Expense

      Other general and administrative expenses are comprised of corporate charges that are not included in the determination of segment profit for the business segments. These expenses increased 22%, to $2.1 million in 2000 from $1.8 million in 1999, due primarily to a new performance incentive program instituted for certain exempt employees who were not previously included under the Company’s other performance incentive programs.

Divested Business Lines

      Divested business lines are comprised of the Remittance, Payables, Freight (all formerly part of the Corporate Services segment) and Check Services (formerly part of the Merchant Services segment) business lines that were sold by the Company in the first half of 1999. Segment loss for the divested business lines was $0.1 million in the first quarter of 1999.

12

Net Interest Income

      Net interest income increased $1.8 million due to the increased level of cash and investments during the first quarter of 2000 compared to 1999. The increased levels of cash and investments were due primarily to the receipt of sale proceeds from the business lines that were divested in the second quarter of 1999, as well as internal cash flow generated primarily from the Merchant Services segment.

Nonrecurring Items

      During the quarter ended March 31, 1999, the Company recorded nonrecurring restructuring charges of $2.2 million, including $1.9 million for severance pay for approximately 540 employees and $0.3 million for other costs. These charges related to two of the Company’s operating facilities which have been or are in the process of being closed and consolidated into the Company’s other current facilities. These charges decreased net income and earnings per share by approximately $1.8 million and $.04, respectively. At March 31, 2000, the remaining liability was $0.6 million and related primarily to future severance payments for approximately 90 remaining employees.

      During the first quarter of 1999, the Company committed to a formal plan to dispose of its Freight, Payables, Remittance and Check Services business lines and recorded impairment losses and related expenses of $73.9 million related to the sale and wind-down of these business lines. The charges decreased first quarter 1999 net income and earnings per share by $72.0 million and $1.42, respectively. Effective April 1, 1999, the Company sold its Freight and Payables business lines for $18.3 million. Effective June 1, 1999, the Company sold its Remittance and Check business lines for $44.3 million. At March 31, 2000, the Company had $3.2 million remaining related to the final obligations of these dispositions recorded in other accrued liabilities. The remaining obligations are primarily for future severance payments, rent subsidies and processing subsidies. For the first quarter of 1999, these divested business units had revenues of $39.7 million.

Provision for Income Taxes

      Excluding the impact of nonrecurring items, the effective tax rate was 38.2% for the first quarter of 2000 compared to 36.9% for the same period a year ago. This increase was due primarily to an increase in U.S. income, which is additionally subject to state and local taxation. The increase in the effective tax rate in the first quarter of 2000 was partially offset by $0.3 million due to a reduction in the state net operating loss carry forward valuation allowance.

      The overall effective tax rate for 1999 included the effect of the write-off of $65.7 million of nondeductible goodwill related to the divested business lines.

13

Seasonality

      The Company experiences seasonality in its businesses. The Company typically realizes higher revenues in the third and fourth calendar quarters and lower revenues in the first calendar quarter, reflecting increased transaction volumes and travel in the summer and holiday months and decreased transaction volume during the quarter immediately following the holiday season.

Liquidity and Capital Resources

      The Company’s primary uses of capital include capital expenditures, working capital and acquisitions. Future business acquisitions may be funded through current liquidity, borrowed funds, and/or issuances of common stock.

      The Company’s capital expenditures include amounts for computer systems hardware and software, scanning and other document processing equipment as well as buildings and leasehold improvements to its various operating facilities. During the three month period ended March 31, 2000, the Company’s capital expenditures totaled $3.2 million. Such expenditures were principally financed from operating cash flow, which totaled approximately $34.2 million for the three month period. Operating cash flow during the three month period ended March 31, 1999 totaled $37.2 million and capital expenditures were $3.2 million. The Company expects capital expenditures for the remainder of 2000 to be approximately $16 million principally to enhance merchant card processing capabilities. It is anticipated that these expenditures will be funded with operating cash flows.

      As the Company does not carry significant amounts of inventory and historically has experienced short collection periods for its accounts receivable, it does not require substantial working capital to support its revenue growth. Working capital requirements will vary depending upon future acquisition activity. Increases in working capital needs are expected to be financed through operating cash flow and current cash balances.

      The Company maintains restricted cash balances held on behalf of clients pending distribution to vendors which are shown on the balance sheet as assets and equivalent offsetting liabilities. These cash balances totaled approximately $23.1 million and $22.2 million as of March 31, 2000 and December 31, 1999, respectively.

Forward Looking Statements

      The section entitled “Business Segment Review” contains certain forward-looking statements (as defined in the Private Securities Litigation Reform Act of 1995). These forward-looking statements involve significant risks and uncertainties, including changes in general economic and financial market conditions and the Company’s ability to execute its business plans. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

      There have been no material changes in market risk as disclosed in the Company’s 1999 Form 10-K.

14

Part II — Other Information

Item 1. Legal Proceedings (None)

Item 2. Changes in Securities and Use of Proceeds (None)

Item 3. Defaults Upon Senior Securities (None)

Item 4. Submission of Matters to a Vote of Security Holders (None)

Item 5. Other Information (None)

Item 6. Exhibits and Reports on Form 8-K:

a. Exhibits

27.1 Financial Data Schedule.

b. Reports on Form 8-K

      January 20, 2000: On January 18, 2000, the Registrant issued a press release reporting earnings for the quarter and year ended December 31, 1999.

SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	NATIONAL PROCESSING, INC.
Date: May 8, 2000	By: /s/ Thomas A. Wimsett
	Thomas A. Wimsett
	President and Chief Executive Officer
	(Duly Authorized Signer)
	By: /s/ David E. Fountain
	David E. Fountain
	Senior Vice President and Chief Financial Officer
	(Principal Financial Officer)

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