<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (date of earliest event reported): October 15, 1996
SPS TRANSACTION SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-10993 36-3798295
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(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
2500 Lake Cook Road, Riverwoods, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 405-3700
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Item 7. Financial Statements and Exhibits.
(c) Exhibits
20.1 Third Quarter Press Release of the Registrant dated October
16, 1996.
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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 hereunto duly authorized.
SPS TRANSACTION SERVICES, INC.
Date: October 15, 1996 By: /s/ Russell J. Bonaguidi
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Russell J. Bonaguidi
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EXHIBIT INDEX
------------------------
Exhibit
Number Description of Exhibits
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20.1 Third Quarter Press Release of the Registrant dated October 16,
1996
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EXHIBIT 20.1
NEWS RELEASE
For Release: Immediate
Contact: Jean Fargo Dave Rai
Corporate Communications Investor Relations
(847) 405-3400 (847) 405-4103
SPS REPORTS THIRD QUARTER RESULTS
RIVERWOODS, IL, October 16, 1996 - SPS Transaction Services, Inc. (NYSE:PAY)
today reported net income for the quarter ended September 30, 1996 was $5.6
million, a 52 percent decrease from the same period last year. Third quarter
earnings per share were 21 cents compared with 43 cents last year. Net
operating revenues for the quarter were $79.6 million, a slight decrease from
1995.
SPS, a provider of technology-based outsourcing services, also reported
net income for the nine months ended September 30 of $23.2 million, or $.85 per
share as compared to $1.17 in the same period in 1995. Net operating revenues
for the first nine months increased 11 percent to $251.9 million.
"Net income continued to be adversely impacted by an industry-wide
deterioration in consumer credit quality and the mix and pricing of promotional
payment plans offered to our private label credit cardholders," said Robert L.
Wieseneck, SPS president and chief executive officer. "We have taken aggressive
corrective measures to help mitigate the effects of the negative factors. These
actions include tightening credit policies, changing cardholder terms and
increasing pricing."
Wieseneck added, "The underlying potential of our overall business is
reflected in the continued strength of our business drivers." Electronic point-
of-sale transactions processed rose 15 percent to 110.1 million compared with
95.4 million during the third quarter last year. The company's active
commercial accounts increased 18 percent at September 30, 1996 to 764,000 from
647,000 a year ago. Customer contacts in the operational outsourcing segment
were 2.0 million, comparable to last year.
The company ended the quarter with 3.3 million active consumer private
label accounts, both owned and managed, a 5 percent increase over last year.
Credit card loans outstanding, including securitized loans, at September 30
were $2.0 billion compared with $1.9 billion a year ago.
The company stated that fourth quarter results will be affected by a
number of issues. Changes in client marketing strategies have caused a re-
evaluation of the company's position on recognition of merchant discount
revenues for promotional payment plans. This change in accounting estimate will
result in the deferral of $6 million to $9 million of fourth quarter merchant
discount revenues. Additionally, the company has decided to implement a change
reducing its estimate of loan loss allowances required for loans intended to be
securitized, as outlined in previous SEC filings. Any benefit of this change,
however, will be more than offset by an anticipated increase in the loan loss
allowance rate. Finally, as in any year, the fourth quarter will be impacted by
the strength of clients' holiday sales.
SPS Transaction Services, Inc., a majority-owned subsidiary of Dean
Witter, Discover & Co., provides a range of technology outsourcing services
including the processing of credit card transactions, private label credit card
programs, commercial accounts receivable processing, and call center customer
service activities.
-more-
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Statements contained in this press release which are not historical facts
are forward-looking statements as that phrase is defined in the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are
subject to risks and uncertainties which could cause actual results to differ
materially from those projected. Such risks and uncertainties include changes
in consumer credit payment patterns, fluctuations in consumer demand, loss or
addition of merchant clients, merchant/ cardholder response to price changes,
the mix of card sales generated under promotional payment plans, and general
economic conditions, as well as risks detailed in the company's filings with
the Securities and Exchange Commission.
###
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SPS TRANSACTION SERVICES, INC.
Financial Highlights
<TABLE>
<CAPTION>
(In Thousands, Except Per Share Data)
Three Months Ended September 30,
-----------------------------------------
(Unaudited)
1996 1995 % Change
--------- --------- --------
<S> <C> <C> <C>
Net Operating Revenues $ 79,572 $ 80,691 (1%)
Net Income $ 5,598 $ 11,777 (52%)
Net Income per Common Share $ 0.21 $ 0.43 (51%)
Weighted Average Common Shares
Outstanding 27,194 27,105 -
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-----------------------------------------
(Unaudited)
1996 1995 % Change
--------- --------- --------
<S> <C> <C> <C>
Net Operating Revenues $ 251,879 $ 226,423 11%
Net Income $ 23,226 $ 31,839 (27%)
Net Income per Common Share $ 0.85 $ 1.17 (27%)
Weighted Average Common Shares
Outstanding 27,165 27,099 -
</TABLE>
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SPS TRANSACTION SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
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(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -------------------
1996 1995 1996 1995
------- ------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Processing and service revenues $65,712 $58,754 $204,808 $172,951
Merchant discount revenue 10,163 9,760 25,382 26,723
------- ------- -------- --------
75,875 68,514 230,190 199,674
Interest revenue 53,972 48,978 166,118 104,510
Interest expense 18,238 17,809 59,824 43,176
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Net interest income 35,734 31,169 106,294 61,334
Provision for loan losses 32,037 18,992 84,605 34,585
------- ------- -------- --------
Net credit income 3,697 12,177 21,689 26,749
NET OPERATING REVENUES 79,572 80,691 251,879 226,423
Salaries and employee benefits 23,736 22,213 72,407 64,710
Processing and service expenses 26,589 23,147 80,096 65,064
Other expenses 20,221 16,638 61,915 44,804
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Total operating expenses 70,546 61,998 214,418 174,578
------- ------- -------- --------
Income before income taxes 9,026 18,693 37,461 51,845
Income tax expense 3,428 6,916 14,235 20,006
------- ------- -------- --------
NET INCOME $ 5,598 $11,777 $ 23,226 $ 31,839
======= ======= ======== ========
NET INCOME PER COMMON SHARE $ 0.21 $ 0.43 $ 0.85 $ 1.17
Weighted Average Common Share
Outstanding 27,194 27,105 27,165 27,099
</TABLE>
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SPS TRANSACTION SERVICES, INC.
STATISTICAL SUMMARY
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income Statement Data (thousands)
Transaction processing services $ 20,698 $ 19,719 $ 62,787 $ 57,019
Managed Programs 21,074 17,121 66,312 55,987
HSB Programs 13,107 7,631 36,308 16,988
Servicing fees on securitized loans 10,833 14,283 39,401 42,957
-------- -------- -------- --------
Processing and service revenues $ 65,712 $ 58,754 $204,808 $172,951
======== ======== ======== ========
Balance Sheet Data (millions)
End-of-period
Credit card loans outstanding,
including securitized loans $2,013.4 $1,850.4 $2,013.4 $1,850.4
Securitized loans $580.0 $516.2 $580.0 $516.2
Average
Credit card loans outstanding,
including securitized loans $2,003.7 $1,793.8 $2,099.7 $1,570.0
Securitized loans $580.0 $549.9 $582.7 $537.2
Operating Data (thousands)
Electronic point-of-sale
transactions processed 110,136 95,371 312,103 270,744
Operational outsourcing customer
contacts processed 2,023 2,033 6,762 6,248
Active consumer credit card
accounts(end-of-period) 3,337 3,186 3,337 3,186
Active commercial credit card
accounts(end-of-period) 764 647 764 647
Asset Quality
Average
Net charge-off % (Managed)* 8.4% 5.4% 7.3% 4.6%
Net charge-off % (Owned) 8.9% 4.8% 7.4% 3.8%
End-of-period
30-89 days delinquency % (Managed)* 5.3% 4.6% 5.3% 4.6%
30-89 days delinquency % (Owned) 5.7% 4.6% 5.7% 4.6%
90-179 days delinquency % (Managed)* 3.8% 2.7% 3.8% 2.7%
90-179 days delinquency % (Owned) 4.1% 2.7% 4.1% 2.7%
* Includes securitized loans.
</TABLE>
