- The Washington Times - Monday, September 13, 2004

Tier Technologies Inc.’s recent contract success signals that the Reston software company is rebounding after a string of lost deals, analysts say.

The company last week won a five-year, $85 million contract, its largest to date, to operate the child-support-payment processing center for Michigan’s Family Independence Agency.

Tier handles $3.2 billion worth of transactions for child-support agencies in nine other states. The company also has prospective contracts for child-support-payment work in California, Texas and New Jersey.

Chairman and Chief Executive Officer Jim Weaver said the company will be notified about those contracts by December.

The Michigan contract is a much needed balm for Tier, said Matthew McKay, an analyst with New York investment bank Jefferies & Co. Inc.

Tier was dropped in June as a subcontractor for Affiliated Computer Services Inc., a Dallas information-technology company, for a contract to support Ohio’s state child-support central collection and disbursement system. Tier had expected the Ohio contract to bring in $1.6 million in sales in its fourth quarter ended Sept. 30.

The company’s sales dropped 5 percent in the third quarter ended June 30 to $40.7 million from $42.7 million last year. Profits also tumbled 56 percent to $914,000 (5 cents per diluted share) from $2.1 million (11 cents) a year earlier.

While Tier still is a subcontractor for Affiliated Computer in New York and Illinois, Mr. Weaver said Tier has no plans for future work with the company.

Tier last month settled a lawsuit it filed against the California Public Employees Retirement System in November 2003 for prematurely ending a system-integration project with the company. Terms of the settlement were not disclosed.

Mr. McKay advised investors to hold their stock, at least until Tier’s recent issues no longer affect its balance sheet.

Mr. McKay does not own any stock and Jefferies has no banking relationship with Tier.

Tier shares on the Nasdaq Stock Market closed yesterday at $10.01, up 8 cents or 1 percent from Friday’s price of $9.93.

The stock has had a 12-month low of $6.97 and a high of $11.63.

Charles Strauzer, with CJS Securities Inc., said the company has restructured its operations in the past year to focus on its core services by selling some business units and relocating to Reston from Walnut Creek, Calif.

“Tier’s potential to win more contracts like this Michigan one has greatly improved,” said Mr. Strauzer, managing director of the White Plains, N.Y., independent research firm.

Mr. Strauzer, who rated the stock as “market outperform,” owns about 200 shares of Tier stock and CJS is pursuing business with Tier.


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