<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 21, 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 Third Quarter Press Release of the Registrant dated October
22, 1997.
<PAGE>
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 21, 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 Third Quarter Press Release of the Registrant dated October 22,
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 76 PERCENT INCREASE
IN THIRD QUARTER PROFITS
RIVERWOODS, IL, Oct. 22, 1997 - SPS Transaction Services, Inc. (NYSE:PAY) today
reported net income of $9.8 million or 36 cents per share for the quarter ended
September 30, 1997, as compared to $5.6 million or 21 cents per share for the
same period last year. Third quarter net operating revenues were $82.4 million,
a 3 percent increase over $79.6 million in 1996.
Net income for the nine months ended September 30 was $26.2 million, or 96
cents per share, a 13 percent increase compared to 85 cents for the same period
in 1996. Net operating revenues for the first nine months have increased 3
percent to $260.6 million.
"We believe the increase in our earnings over the past two quarters is
confirmation that we are on the right track," said Robert L. Wieseneck, SPS
president and chief executive officer. "We continue to focus on improving the
profitability of our asset-based consumer credit card business while
emphasizing profitable growth in our fee-based businesses."
The company reported a 25 percent increase in active commercial accounts at
the end of the quarter to 955,000 from 764,000 a year ago. Electronic
transactions processed for the quarter were 118.5 million, an 8 percent
increase year over year. TeleServices average revenue per call increased while
third quarter customer contacts decreased 4 percent.
Total loans outstanding, which represent both owned and securitized credit
card loans, were $1.8 billion at September 30, 1997, down from $2.0 billion at
the end of the same period last year. Active consumer private label accounts,
both owned and managed, decreased to 3.0 million from 3.3 million at the end of
the third quarter last year.
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 September 30,
-----------------------------------------
(Unaudited)
1997 1996 % Change
--------- --------- --------
<S> <C> <C> <C>
Net Operating Revenues $ 82,351 $ 79,572 3%
Net Income $ 9,839 $ 5,598 76%
Net Income per Common Share $ 0.36 $ 0.21 71%
Weighted Average Common Shares
Outstanding 27,217 27,194 --
Nine Months Ended September 30,
-----------------------------------------
(Unaudited)
1997 1996 % Change
--------- --------- --------
Net Operating Revenues $ 260,598 $ 251,879 3%
Net Income $ 26,214 $ 23,226 13%
Net Income per Common Share $ 0.96 $ 0.85 13%
Weighted Average Common Shares
Outstanding 27,208 27,165 --
</TABLE>
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,
------------------ -------------------
1997 1996 1997 1996
------- ------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Processing and service revenues $66,507 $65,712 $209,080 $204,808
Merchant discount revenue 3,981 10,163 10,797 25,382
------- ------- -------- --------
70,488 75,875 219,877 230,190
Interest revenue 58,038 53,972 184,515 166,118
Interest expense 17,695 18,238 57,521 59,824
------- ------- -------- --------
Net interest income 40,343 35,734 126,994 106,294
Provision for loan losses 28,480 32,037 86,273 84,605
------- ------- -------- --------
Net credit income 11,863 3,697 40,721 21,689
NET OPERATING REVENUES 82,351 79,572 260,598 251,879
Salaries and employee benefits 27,064 23,736 84,861 72,407
Processing and service expenses 22,153 26,589 74,849 80,096
Other expenses 17,110 20,221 58,194 61,915
------- ------- -------- --------
Total operating expenses 66,327 70,546 217,904 214,418
------- ------- -------- --------
Income before income taxes 16,024 9,026 42,694 37,461
Income tax expense 6,185 3,428 16,480 14,235
------- ------- -------- --------
NET INCOME $ 9,839 $ 5,598 $ 26,214 $ 23,226
======= ======= ======== ========
NET INCOME PER COMMON SHARE $ 0.36 $ 0.21 $ 0.96 $ 0.85
Weighted Average Common Shares
Outstanding 27,217 27,194 27,208 27,165
</TABLE>
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SPS TRANSACTION SERVICES, INC.
STATISTICAL SUMMARY
<TABLE>
<CAPTION>
Three Months
Three Months Ended Ended Nine Months Ended
September 30, June 30, September 30,
------------------- ---------- ------------------
1997 1996 1997 1997 1996
-------- -------- ---------- -------- --------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Income Statement Data (thousands)
Transaction processing services $ 22,771 $ 20,698 $ 24,169 $ 71,402 $ 62,787
Managed Programs 21,296 21,074 22,328 67,019 66,312
HSB Programs 12,310 13,107 11,576 37,905 36,308
Servicing fees on securitized loans 10,130 10,833 9,191 32,754 39,401
-------- -------- -------- -------- --------
Processing and service revenues $ 66,507 $ 65,712 $ 67,264 $209,080 $204,808
======== ======== ======== ======== ========
Balance Sheet Data (millions)
End-of-period
Total loans* $1,825.1 $2,013.4 $1,918.6 $1,825.1 $2,013.4
Owned loans $1,245.1 $1,433.4 $1,338.6 $1,245.1 $1,433.4
Average
Total loans* $1,875.4 $2,003.7 $2,007.6 $2,017.8 $2,099.7
Owned loans $1,295.4 $1,423.7 $1,427.6 $1,437.8 $1,517.0
Operating Data (thousands)
Electronic point-of-sale
transactions processed 118,548 110,136 109,064 329,494 312,103
TeleServices customer
contacts processed** 1,946 2,023 2,117 6,613 6,762
Active consumer private label
accounts(end-of-period) 2,966 3,337 3,075 2,966 3,337
Active commercial
accounts(end-of-period) 955 764 945 955 764
Asset Quality
Average
Net charge-off %(Total loans)* 9.4% 8.4% 8.8% 9.0% 7.3%
Net charge-off %(Owned) 9.9% 8.9% 8.8% 9.2% 7.4%
End-of-period
30-89 days delinquency %(Total loans)* 5.7% 5.3% 5.0% 5.7% 5.3%
30-89 days delinquency %(Owned) 6.2% 5.7% 5.4% 6.2% 5.7%
90-179 days delinquency %(Total loans)*4.1% 3.8% 3.7% 4.1% 3.8%
90-179 days delinquency %(Owned) 4.6% 4.1% 4.0% 4.6% 4.1%
Allowance for loan losses (Owned)
(thousands) $ 75,236 $ 65,648 $ 79,120 $ 75,236 $ 65,648
Allowance for loan losses %(Owned) 6.0% 4.6% 5.9% 6.0% 4.6%
</TABLE>
[FN]
* Total loans represents both
owned and securitized credit
card loans.
**Reflects a correction to previously released 1997 contacts processed.
Contacts processed increased by 121 thousand and 216 thousand for the
first and second quarter of 1997, respectively.
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SPS TRANSACTION SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
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(In thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash and due from banks $ 15,169 $ 15,205
Investments held to maturity - at amortized cost 41,576 41,675
Credit card loans 1,245,080 1,637,507
Allowance for loan losses (75,236) (88,397)
---------- ----------
Credit card loans, net 1,169,844 1,549,110
Accrued interest receivable 18,512 21,141
Accounts receivable 29,551 42,202
Due from affiliated companies 8,115 9,900
Amounts due from asset securitizations 56,915 --
Premises and equipment, net 29,431 25,294
Deferred income taxes 33,409 38,266
Prepaid expenses and other assets 14,672 17,992
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TOTAL ASSETS $1,417,194 $1,760,785
========== ==========
LIABILITIES:
Deposits:
Noninterest-bearing $ 4,500 $ 9,012
Interest-bearing 531,332 454,423
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Total deposits 535,832 463,435
Accounts payable, accrued expenses and other 47,016 50,019
Income taxes payable 3,383 17,756
Due to affiliated companies 557,262 982,547
Accrued recourse obligation 22,636 22,636
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Total liabilities 1,166,129 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; 27,270,663 and
27,242,207 shares issued; 27,220,277 and
27,187,462 shares outstanding at September 30,
1997 and December 31, 1996, respectively 273 272
Capital in excess of par value 81,493 81,096
Retained earnings 170,559 144,345
Common stock held in treasury, at cost, $.01
par value, 50,386 and 54,745 shares at
September 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 (18) (49)
---------- ----------
Total stockholders' equity 251,065 224,392
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,417,194 $1,760,785
========== ==========
</TABLE>
