Circuit City to Sell Private-Label Credit Card Operation to Bank One RICHMOND, Va. and CHICAGO, Jan. 20, 2004 - Circuit City Stores, Inc. (NYSE:CC) has agreed to sell its private-label credit card operation, including both its private-label Circuit City credit card accounts and its co-branded Circuit City Plus Visa credit card accounts, to Bank One Corporation (NYSE:ONE) for the par value of the receivables, and Circuit City and Bank One will enter into an ongoing arrangement under which Bank One will offer private-label and co-branded credit cards to both new and existing customers. As part of the ongoing relationship, Bank One will compensate Circuit City for each new account opened and provide special financing terms for Circuit City customers. The two companies also plan to jointly develop and introduce new features, products and services to drive additional sales at Circuit City. At Nov. 30, 2003, the private-label operation included receivables and related cash reserves of $1.8 billion and approximately 1.5 million active customers. "This sale further simplifies the investment picture for Circuit City shareholders and allows us to focus our attention on the needed improvements in our retail business," said W. Alan McCollough, chairman, president and chief executive officer of Circuit City Stores, Inc. "At the same time, the agreement with Bank One recognizes the strategic importance of the private-label credit programs to our retail success and the need to ensure a seamless transition for our customers. Bank One supports our commitment to superior customer service and will support special promotional financing programs for qualified customers. Equally important, we are pleased that this agreement with Bank One will provide continued employment for a large number of our finance operation Associates." "This purchase allows us to add receivables while efficiently acquiring the expertise and operating systems associated with private-label credit card lending," said William I. Campbell, chief executive officer of Bank One's Card Services unit. "We look forward to working closely with Circuit City to offer its customers products and services of compelling value." Circuit City anticipates that the ongoing relationship with Bank One, with an initial term of seven years, will generate a pretax earnings contribution similar to the finance income the company would generate if the retailer maintained ownership of its private-label finance operation. Under the terms of the agreement, Circuit City would sell the private-label receivables to Bank One at par value. The retailer expects to incur an after-tax loss of approximately $10 million, or approximately 5 cents per share, primarily driven by transition- and transaction-related expenses. Circuit City previously estimated that it would incur an after-tax loss related to the sale of its bankcard operation announced in November. Approximately $4.2 million of that estimated loss related primarily to lease termination and was expected to be incurred in next fiscal year's first quarter. Bank One's expected use of Circuit City's real estate would eliminate that portion of the estimated loss. Circuit City's net cash proceeds from the sale of the private-label operation will depend upon the retailer's retained interest in the receivables at the time of closing. Based upon receivable balances at Nov. 30, 2003, the after-tax net cash proceeds from the sale would be approximately $355 million. Bank One expects that the transaction, when completely integrated, will be slightly accretive to earnings in 2004. The companies expect to close the transaction, which is subject to regulatory approvals and other consents, in the second calendar quarter of 2004. At closing, Bank One expects to assume control of the portfolio and the private-label credit card operation, including all of the operating center in Atlanta and part of the center in Richmond, Va. First Annapolis Capital, Inc. is acting as advisor to Circuit City in connection with the transaction. link: http://www.shareholder.com/one/news/20040120-126867.cfm?categoryis= Ron.
