<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): July 15, 1997
SPS TRANSACTION SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-10993 36-3798295
- ---------------------------- ---------------------- ----------------------
(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 Second Quarter Press Release of the Registrant dated July
16, 1997.
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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: July 15, 1997 By: /s/ Russell J. Bonaguidi
----------------------------------- -----------------------------
Russell J. Bonaguidi
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EXHIBIT INDEX
------------------------
Exhibit
Number Description of Exhibits
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20.1 Second Quarter Press Release of the Registrant dated July 16,
1997
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EXHIBIT 20.1
NEWS RELEASE
For Release: Immediate
Contact: Jean Fargo Dave Rai
Corporate Communications Investor Relations
(847)405-3953 (847)405-4103
SPS REPORTS 36 PERCENT INCREASE
IN SECOND QUARTER PROFITS
RIVERWOODS, IL, July 16, 1997 - SPS Transaction Services, Inc. (NYSE:PAY) today
reported net income of $9.0 million or 33 cents per share for the quarter ended
June 30, 1997, as compared to $6.6 million or 24 cents per share for the same
period last year. Second quarter net operating revenues were $87.8 million, a 5
percent increase over $83.3 million in 1996.
Net income for the first half of 1997 was $16.4 million, or 60 cents per
share, compared to 65 cents for the same period in 1996. Net operating revenues
for the six months ended June 30 increased 3 percent to $178.2 million.
"We are very pleased with the results of the quarter," said Robert L.
Wieseneck, SPS president and chief executive officer. "Our focused efforts to
improve the performance of our asset-based consumer credit card business are
paying off. We are also continuing to emphasize profitable growth in our fee-
based businesses."
Actions taken over the past year to improve private label performance
contributed to an 8 percent decrease in active consumer private label accounts,
both owned and managed, to 3.1 million at June 30, 1997 from 3.3 million at
June 30, 1996. Total loans outstanding, which represent both owned and
securitized credit card loans, were $1.9 billion at June 30, 1997, down from
$2.0 billion at the end of the same period last year.
Active commercial accounts increased 30 percent to 945,000 from 727,000 a
year ago. Electronic transactions processed for the quarter were 109.1 million,
a 4 percent increase year over year. Reflecting a shift in the type and length
of calls handled, TeleServices average revenue per call increased while second
quarter customer contacts decreased 10 percent.
SPS also announced receipt of notice of termination of its System Access
Agreement with NOVUS Services, Inc., an affiliate company. The agreement will
continue under current terms until July 31, 2000.
SPS Transaction Services, Inc., a majority-owned subsidiary of Morgan
Stanley, 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 teleservices activities.
###
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SPS TRANSACTION SERVICES, INC.
Financial Highlights
<TABLE>
<CAPTION>
(In Thousands, Except Per Share Data)
Three Months Ended June 30,
-----------------------------------------
(Unaudited)
1997 1996 % Change
--------- --------- --------
<S> <C> <C> <C>
Net Operating Revenues $ 87,817 $ 83,296 5%
Net Income $ 8,984 $ 6,593 36%
Net Income per Common Share $ 0.33 $ 0.24 38%
Weighted Average Common Shares
Outstanding 27,209 27,183 --
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------------
(Unaudited)
1997 1996 % Change
--------- --------- --------
<S> <C> <C> <C>
Net Operating Revenues $ 178,247 $ 172,307 3%
Net Income $ 16,375 $ 17,628 (7%)
Net Income per Common Share $ 0.60 $ 0.65 (8%)
Weighted Average Common Shares
Outstanding 27,203 27,150 --
</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 Six Months Ended
June 30, June 30,
------------------ -------------------
1997 1996 1997 1996
------- ------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Processing and service revenues $67,264 $64,766 $142,573 $139,096
Merchant discount revenue 3,678 7,375 6,816 15,219
------- ------- -------- --------
70,942 72,141 149,389 154,315
Interest revenue 62,401 56,194 126,477 112,146
Interest expense 19,444 18,943 39,826 41,586
------- ------- -------- --------
Net interest income 42,957 37,251 86,651 70,560
Provision for loan losses 26,082 26,096 57,793 52,568
------- ------- -------- --------
Net credit income 16,875 11,155 28,858 17,992
NET OPERATING REVENUES 87,817 83,296 178,247 172,307
Salaries and employee benefits 28,274 24,471 57,797 48,671
Processing and service expenses 24,369 26,836 52,696 53,507
Other expenses 20,543 21,353 41,084 41,694
------- ------- -------- --------
Total operating expenses 73,186 72,660 151,577 143,872
------- ------- -------- --------
Income before income taxes 14,631 10,636 26,670 28,435
Income tax expense 5,647 4,043 10,295 10,807
------- ------- -------- --------
NET INCOME $ 8,984 $ 6,593 $ 16,375 $ 17,628
======= ======= ======== ========
NET INCOME PER COMMON SHARE $ 0.33 $ 0.24 $ 0.60 $ 0.65
Weighted Average Common Shares
Outstanding 27,209 27,183 27,203 27,150
</TABLE>
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SPS TRANSACTION SERVICES, INC.
STATISTICAL SUMMARY
<TABLE>
<CAPTION>
Three Months
Three Months Ended Ended Six Months Ended
June 30, March 31, June 30,
------------------- ---------- ------------------
1997 1996 1997 1997 1996
-------- -------- ---------- -------- --------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Income Statement Data (thousands)
Transaction processing services $ 24,169 $ 20,655 $ 24,462 $ 48,631 $ 42,089
Managed Programs 22,328 22,117 23,395 45,723 45,238
HSB Programs 11,576 11,561 14,019 25,595 23,201
Servicing fees on securitized loans 9,191 10,433 13,433 22,624 28,568
-------- -------- -------- -------- --------
Processing and service revenues $ 67,264 $ 64,766 $ 75,309 $142,573 $139,096
======== ======== ======== ======== ========
Balance Sheet Data (millions)
End-of-period
Total loans* $1,918.6 $2,001.6 $2,078.4 $1,918.6 $2,001.6
Owned loans $1,338.6 $1,421.6 $1,498.4 $1,338.6 $1,421.6
Average
Total loans* $2,007.6 $2,074.8 $2,173.8 $2,090.2 $2,148.2
Owned loans $1,427.6 $1,494.8 $1,593.8 $1,510.2 $1,564.1
Operating Data (thousands)
Electronic point-of-sale
transactions processed 109,064 104,767 101,882 210,946 201,967
TeleServices customer
contacts processed 1,901 2,108 2,429 4,330 4,739
Active consumer private label
accounts(end-of-period) 3,075 3,346 3,246 3,075 3,346
Active commercial
accounts(end-of-period) 945 727 951 945 727
Asset Quality
Average
Net charge-off %(Total loans)* 8.8% 7.3% 8.9% 8.9% 6.8%
Net charge-off %(Owned) 8.8% 7.3% 9.1% 9.0% 6.8%
End-of-period
30-89 days delinquency %(Total loans)* 5.0% 4.9% 4.7% 5.0% 4.9%
30-89 days delinquency %(Owned) 5.4% 5.2% 5.0% 5.4% 5.2%
90-179 days delinquency %(Total loans)*3.7% 3.4% 3.6% 3.7% 3.4%
90-179 days delinquency %(Owned) 4.0% 3.8% 3.8% 4.0% 3.8%
Allowance for loan losses (Owned)
(thousands) $ 79,120 $ 65,304 $ 84,394 $ 79,120 $ 65,304
Allowance for loan losses %(Owned) 5.9% 4.6% 5.6% 5.9% 4.6%
* Total loans represents both
owned and securitized credit
card loans.
</TABLE>
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SPS TRANSACTION SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
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(In thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash and due from banks $ 25,112 $ 15,205
Investments held to maturity - at amortized cost 49 507 41,675
Credit card loans 1,338,600 1,637,507
Allowance for loan losses (79,120) (88,397)
---------- ----------
Credit card loans, net 1,259,480 1,549,110
Accrued interest receivable 20,349 21,141
Accounts receivable 32,786 42,202
Due from affiliated companies 7,495 9,900
Amounts due from asset securitizations 56,915 --
Premises and equipment, net 26,732 25,294
Deferred income taxes 33,463 38,266
Prepaid expenses and other assets 15,007 17,992
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TOTAL ASSETS $1,526,846 $1,760,785
========== ==========
LIABILITIES:
Deposits:
Noninterest-bearing $ 3,884 $ 9,012
Interest-bearing 490,180 454,423
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Total deposits 494,064 463,435
Accounts payable, accrued expenses and other 48,817 50,019
Income taxes payable 8,034 17,756
Due to affiliated companies 712,194 982,547
Accrued recourse obligation 22,636 22,636
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Total liabilities 1,285,745 1,536,393
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STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value, 100,000
shares authorized; none issued or outstanding
Common stock, $.01 par value, 40,000,000 and
40,000,000 shares authorized; 27,262,894 and
27,242,207 shares issued; 27,212,508 and
27,187,462 shares outstanding at June 30, 1997
and December 31, 1996, respectively 273 272
Capital in excess of par value 81,381 81,096
Retained earnings 160,720 144,345
Common stock held in treasury, at cost, $.01
par value, 50,386 and 54,745 shares at June 30,
1997 and December 31, 1996, respectively (1,242) (1,312)
Stock compensation plan 483 453
Employee stock benefit trust (483) (413)
Unearned stock compensation (31) (49)
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Total stockholders' equity 241,101 224,392
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,526,846 $1,760,785
========== ==========
</TABLE>
