<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): January 27, 1998
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 Fourth Quarter Press Release of the Registrant dated
January 28, 1998.
<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: January 27, 1998 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 Fourth Quarter Press Release of the Registrant dated
January 28, 1998.
<PAGE>
EXHIBIT 20.1
NEWS RELEASE
For Release: Immediate
Contact: Jean Fargo Dave Rai
Corporate Communications Investor Relations
(847) 405-3953 (847) 405-4103
SPS YEAR-END PROFITS UP 66 PERCENT
RIVERWOODS, IL, Jan. 28, 1998 - SPS Transaction Services, Inc. (NYSE:PAY) today
reported record net income of $12.3 million or 45 cents per share on a diluted
basis for the quarter ended December 31, 1997, as compared to a break-even
fourth quarter in 1996. Fourth-quarter net operating revenues were $86.3
million, a 25 percent increase over $69.0 million last year.
SPS, a provider of technology-based outsourcing services, also reported a
66 percent increase in net income for the year ended December 31, 1997 to $38.5
million, or $1.41 per share from $0.85 per share on a diluted basis, in 1996.
Net operating revenues for 1997 increased 8 percent to a record $346.9 million.
"This has been an especially rewarding quarter and year, validating the
initiatives we took to operate more profitably in a difficult credit
environment," said Robert L. Wieseneck, SPS president and chief executive
officer. "1997 was also an outstanding year for our fee-based businesses. We
will continue to focus on revenue growth and improving the performance of our
asset-based consumer credit card business."
The company reported a nine percent increase in electronic transactions
processed for the quarter, from 112 million to 122 million. Active commercial
accounts at December 31, 1997 were 979,000, up nine percent from 898,000 a year
ago. Due to a shift in the mix toward technical help desk calls in
TeleServices, fourth-quarter service minutes increased 14 percent to 14.8
million from 13.0 million in 1996, while customer contacts decreased 10 percent
to 2.7 million.
As anticipated, total loans outstanding, which represent both owned and
securitized credit card loans, were $1.9 billion at December 31, 1997, down
from $2.2 billion at the end of last year. Active consumer private label
accounts, both owned and managed, decreased 11 percent to 3.1 million, compared
to 3.5 million during fourth quarter 1996.
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 December 31,
-----------------------------------------
(Unaudited)
1997 1996 % Change
--------- --------- --------
<S> <C> <C> <C>
Net Operating Revenues $ 86,287 $ 69,041 25%
Net Income $ 12,286 $ 20 --
Basic Earnings Per Common Share $ 0.45 $ 0.00 --
Diluted Earnings Per Common Share $ 0.45 $ 0.00 --
Basic Weighted Average Common
Shares Outstanding 27,221 27,190 --
Diluted Weighted Average Common
Shares Outstanding 27,430 27,349 --
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1997 1996 % Change
--------- --------- --------
<S> <C> <C> <C>
Net Operating Revenues $ 346,885 $ 320,920 8%
Net Income $ 38,500 $ 23,246 66%
Basic Earnings Per Common Share $ 1.41 $ 0.86 64%
Diluted Earnings Per Common Share $ 1.41 $ 0.85 66%
Basic Weighted Average Common
Shares Outstanding 27,211 27,171 --
Diluted Weighted Average Common
Shares Outstanding 27,399 27,375 --
</TABLE>
<PAGE>
SPS TRANSACTION SERVICES, INC.
CONSOLIDATED STATEMENTS OF INCOME
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(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
December 31, December 31,
------------------ -------------------
1997 1996 1997 1996
------- ------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Processing and service revenues $70,433 $71,937 $279,513 $276,745
Merchant discount revenue 4,492 8,771 15,289 34,153
------- ------- -------- --------
74,925 80,708 294,802 310,898
Interest revenue 60,679 60,148 245,194 226,266
Interest expense 17,227 19,305 74,748 79,129
------- ------- -------- --------
Net interest income 43,452 40,843 170,446 147,137
Provision for loan losses 32,090 52,510 118,363 137,115
------- ------- -------- --------
Net credit income 11,362 (11,667) 52,083 10,022
NET OPERATING REVENUES 86,287 69,041 346,885 320,920
Salaries and employee benefits 26,909 24,710 111,770 97,117
Processing and service expenses 23,775 28,448 98,624 108,544
Other expenses 15,997 15,851 74,191 77,766
------- ------- -------- --------
Total operating expenses 66,681 69,009 284,585 283,427
------- ------- -------- --------
Income before income taxes 19,606 32 62,300 37,493
Income tax expense 7,320 12 23,800 14,247
------- ------- -------- --------
NET INCOME $12,286 $ 20 $ 38,500 $ 23,246
======= ======= ======== ========
Basic Earnings Per Common Share $ 0.45 $ 0.00 $ 1.41 $ 0.86
Diluted Earnings Per Common Share $ 0.45 $ 0.00 $ 1.41 $ 0.85
Basic Weighted Average Common
Shares Outstanding 27,221 27,190 27,211 27,171
Diluted Weighted Average Common
Shares Outstanding 27,430 27,349 27,399 27,375
</TABLE>
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SPS TRANSACTION SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
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(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash and due from banks $ 14,730 $ 15,205
Investments held to maturity - at amortized cost 36,617 41,675
Credit card loans 1,295,787 1,637,507
Allowance for loan losses (79,726) (88,397)
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Credit card loans, net 1,216,061 1,549,110
Accrued interest receivable 21,847 21,141
Accounts receivable 29,349 42,202
Due from affiliated companies 9,921 9,900
Amounts due from asset securitizations 93,260 --
Premises and equipment, net 32,895 25,294
Deferred income taxes 43,059 38,266
Prepaid expenses and other assets 14,664 17,992
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TOTAL ASSETS $1,512,403 $1,760,785
========== ==========
LIABILITIES:
Deposits:
Noninterest-bearing $ 6,206 $ 9,012
Interest-bearing 504,088 454,423
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Total deposits 510,294 463,435
Accounts payable, accrued expenses and other 61,647 50,019
Income taxes payable 19,725 17,756
Due to affiliated companies 639,066 982,547
Accrued recourse obligation 18,636 22,636
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Total liabilities 1,249,368 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; 27,276,269 and
27,242,207 shares issued; 27,206,883 and
27,187,462 shares outstanding at December 31,
1997 and December 31, 1996, respectively
273 272
Capital in excess of par value 81,586 81,096
Retained earnings 182,845 144,345
Common stock held in treasury, at cost, $.01
par value, 69,386 and 54,745 shares at
December 31, 1997 and December 31, 1996,
respectively (1,662) (1,312)
Stock compensation plan 483 453
Employee stock benefit trust (483) (413)
Unearned stock compensation (7) (49)
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Total stockholders' equity 263,035 224,392
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,512,403 $1,760,785
========== ==========
</TABLE>
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SPS TRANSACTION SERVICES, INC.
STATISTICAL SUMMARY
<TABLE>
<CAPTION>
Three Months
Three Months Ended Ended Year Ended
December 31, September 30, December 31,
------------------ ------------- ------------------
1997 1996 1997 1997 1996
-------- -------- ------------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Income Statement Data (thousands)
Transaction processing services $ 26,415 $ 24,971 $ 22,771 $ 97,817 $ 87,758
Managed Programs 21,686 22,286 21,296 88,705 88,598
HSB Programs 12,769 15,436 12,310 50,674 51,744
Servicing fees on securitized loans 9,563 9,244 10,130 42,317 48,645
-------- -------- --------- -------- --------
Processing and service revenues $ 70,433 $ 71,937 $ 66,507 $279,513 $276,745
======== ======== ========= ======== ========
Balance Sheet Data (millions)
End-of-period
Total loans* $1,875.8 $2,217.5 $1,825.1 $1,875.8 $2,217.5
Owned loans $1,295.8 $1,637.5 $1,245.1 $1,295.8 $1,637.5
Average
Total loans* $1,832.0 $2,081.2 $1,875.4 $1,971.0 $2,095.0
Owned loans $1,252.0 $1,501.2 $1,295.4 $1,391.0 $1,513.0
Operating Data (thousands)
Electronic point-of-sale
transactions processed 121,950 111,966 118,548 451,444 424,069
TeleServices customer
contacts processed 2,685 2,983 1,946 9,298 9,745
TeleServices service
minutes processed 14,848 13,005 11,936 57,039 48,484
Active consumer private label
accounts(end-of-period) 3,080 3,466 2,966 3,080 3,466
Active commercial
accounts(end-of-period) 979 898 955 979 898
Asset Quality
Average
Net charge-off % (Total loans)* 9.6% 8.8% 9.4% 9.2% 7.7%
Net charge-off % (Owned) 10.0% 8.9% 9.9% 9.4% 7.8%
End-of-period
30-89 days delinquency %(Total loans)* 5.4% 4.9% 5.7% 5.4% 4.9%
30-89 days delinquency %(Owned) 5.7% 5.0% 6.2% 5.7% 5.0%
90-179 days delinquency %(Total loans)* 4.2% 3.9% 4.1% 4.2% 3.9%
90-179 days delinquency %(Owned) 4.7% 4.2% 4.6% 4.7% 4.2%
Allowance for loan losses (Owned)
(thousands) $ 79,726 $ 88,397 $ 75,236 $ 79,726 $ 88,397
Allowance for loan losses % (Owned) 6.2% 5.4% 6.0% 6.2% 5.4%
</TABLE>
[FN]
* Total loans represents both owned and securitized credit card loans.
