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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 29, 1998
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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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 28, 1998 By: /s/ Russell J. Bonaguidi
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Russell J. Bonaguidi
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EXHIBIT INDEX
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Exhibit
Number Description of Exhibits
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20.1 Second Quarter Press Release of the Registrant dated July 29,
1998
Item 7. Financial Statements and Exhibits.
(c) Exhibits
20.1 Second Quarter Press Release of the Registrant dated July 29, 1998.
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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 INCREASE IN SECOND QUARTER PROFITS
RIVERWOODS, IL, July 29, 1998 -- SPS Transaction Services, Inc. (NYSE:PAY) today
reported net income of $9.8 million or 36 cents per share on a diluted basis for
the quarter ended June 30, 1998, a 9 percent increase as compared to 33 cents
per share for the same period last year. Net operating revenues for the second
quarter were $85.5 million, down 3 percent from $87.8 million in 1997.
Net income for the first half of 1998 was $19.7 million, or 72 cents per
share, as compared to 60 cents for the same period in 1997. Net operating
revenues for the six months ended June 30 decreased 6 percent to $167.8 million.
"This is our fifth consecutive quarter with a year-over-year earnings
increase," said Robert L. Wieseneck, SPS president and chief executive officer.
"We remain focused on achieving our 1998 performance goals while effecting a
smooth transition to our new ownership."
In April, SPS announced an agreement to sell substantially all of its assets
to Associates First Capital Corporation (NYSE:AFS). The sale, which is pending,
is subject to certain closing conditions and approval by SPS' stockholders, and
is expected to close in 1998.
SPS reported a 15 percent increase in electronic transactions processed for
the second quarter, from 109 million to 126 million. Active commercial accounts
at June 30, 1998 were 1,004,000, up 6 percent from 945,000 a year ago. Due to a
change in service to a major client, service minutes processed by the
TeleServices business group during the period decreased 20 percent to 10.6
million.
Total loans outstanding, which represent both owned and securitized credit
card loans, declined and were $1.7 billion at June 30, 1998, down from $1.9
billion at the end of the same period last year. Active consumer private label
credit card accounts, both owned and managed, decreased 8 percent to 2.8
million, compared to the second quarter in 1997.
SPS Transaction Services, Inc., a 73.2 percent-owned subsidiary of Morgan
Stanley Dean Witter & Co., is a leading provider 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)
1998 1997 % Change
--------- --------- --------
<S> <C> <C> <C>
Net Operating Revenues $ 85,489 $ 87,817 (3%)
Net Income $ 9,830 $ 8,984 9%
Basic Earnings Per Common Share $ 0.36 $ 0.33 9%
Diluted Earnings Per Common Share $ 0.36 $ 0.33 9%
Basic Weighted Average Common
Shares Outstanding 27,289 27,209 --
Diluted Weighted Average Common
Shares Outstanding 27,538 27,386 --
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------------
(Unaudited)
1998 1997 % Change
--------- --------- --------
<S> <C> <C> <C>
Net Operating Revenues $ 167,753 $ 178,247 (6%)
Net Income $ 19,727 $ 16,375 20%
Basic Earnings Per Common Share $ 0.72 $ 0.60 20%
Diluted Earnings Per Common Share $ 0.72 $ 0.60 20%
Basic Weighted Average Common
Shares Outstanding 27,269 27,203 --
Diluted Weighted Average Common
Shares Outstanding 27,494 27,376 --
</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,
------------------ -------------------
1998 1997 1998 1997
------- ------- -------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Processing and service revenues $63,966 $67,264 $132,108 $142,573
Merchant discount revenue 3,083 3,678 6,049 6,816
------- ------- -------- --------
67,049 70,942 138,157 149,389
Interest revenue 54,421 62,401 109,627 126,477
Interest expense 15,020 19,444 32,059 39,826
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Net interest income 39,401 42,957 77,568 86,651
Provision for loan losses 20,961 26,082 47,972 57,793
------- ------- -------- --------
Net credit income 18,440 16,875 29,596 28,858
NET OPERATING REVENUES 85,489 87,817 167,753 178,247
Salaries and employee benefits 27,159 28,274 55,346 57,797
Processing and service expenses 24,568 24,369 46,959 52,696
Other expenses 18,205 20,543 34,231 41,084
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Total operating expenses 69,932 73,186 136,536 151,577
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Income before income taxes 15,557 14,631 31,217 26,670
Income tax expense 5,727 5,647 11,490 10,295
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NET INCOME $ 9,830 $ 8,984 $ 19,727 $ 16,375
======= ======= ======== ========
Basic Earnings Per Common Share $ 0.36 $ 0.33 $ 0.72 $ 0.60
Diluted Earnings Per Common Share $ 0.36 $ 0.33 $ 0.72 $ 0.60
Basic Weighted Average Common
Shares Outstanding 27,289 27,209 27,269 27,203
Diluted Weighted Average Common
Shares Outstanding 27,538 27,386 27,494 27,376
</TABLE>
SPS TRANSACTION SERVICES, INC.
STATISTICAL SUMMARY
<TABLE>
<CAPTION>
Three Months
Three Months Ended Ended Six Months Ended
June 30, March 31, June 30,
------------------- ---------- ------------------
1998 1997 1998 1998 1997
-------- -------- ---------- -------- --------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Income Statement Data (thousands)
Transaction processing services $ 22,300 $ 24,169 $ 22,254 $ 44,554 $ 48,631
Managed Programs 21,411 22,328 22,765 44,176 45,723
HSB Programs 11,695 11,576 11,109 22,804 25,595
Servicing fees on securitized loans 8,560 9,191 12,014 20,574 22,624
-------- -------- -------- -------- --------
Processing and service revenues $ 63,966 $ 67,264 $ 68,142 $132,108 $142,573
======== ======== ======== ======== ========
Balance Sheet Data (millions)
End-of-period
Total loans* $1,653.9 $1,918.6 $1,749.7 $1,653.9 $1,918.6
Owned loans $1,073.9 $1,338.6 $1,169.7 $1,073.9 $1,338.6
Average
Total loans* $1,705.8 $2,007.6 $1,832.5 $1,768.8 $2,090.2
Owned loans $1,125.8 $1,427.6 $1,252.5 $1,188.8 $1,510.2
Operating Data (thousands)
Electronic point-of-sale
transactions processed 125,507 109,064 113,681 239,188 210,946
TeleServices service
minutes processed 10,604 13,233 12,416 23,020 30,255
TeleServices customer
contacts processed 2,258 2,117 2,154 4,412 4,667
Active consumer private label
accounts(end-of-period) 2,836 3,075 2,898 2,836 3,075
Active commercial
accounts(end-of-period) 1,004 945 1,003 1,004 945
Asset Quality
Average
Net charge-off %(Total loans)* 8.6% 8.8% 9.7% 9.2% 8.9%
Net charge-off %(Owned) 8.5% 8.8% 10.3% 9.5% 9.0%
End-of-period
30-89 days delinquency %(Total loans)* 5.0% 5.0% 5.0% 5.0% 5.0%
30-89 days delinquency %(Owned) 5.4% 5.4% 5.3% 5.4% 5.4%
90-179 days delinquency %(Total loans)*3.6% 3.7% 3.9% 3.6% 3.7%
90-179 days delinquency %(Owned) 4.1% 4.0% 4.2% 4.1% 4.0%
Allowance for loan losses (Owned)
(thousands) $ 73,969 $ 79,120 $ 74,822 $ 73,969 $ 79,120
Allowance for loan losses %(Owned) 6.9% 5.9% 6.4% 6.9% 5.9%
* 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,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash and due from banks $ 13,808 $ 14,730
Investments held to maturity - at amortized cost 36,753 36,617
Credit card loans 1,073,914 1,295,787
Allowance for loan losses (73,969) (79,726)
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Credit card loans, net 999,945 1,216,061
Accrued interest receivable 15,264 21,847
Accounts receivable 23,572 29,349
Due from affiliated companies 12,534 9,921
Amounts due from asset securitizations 90,489 93,260
Premises and equipment, net 30,904 32,895
Deferred income taxes 38,252 43,059
Prepaid expenses and other assets 14,483 14,664
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TOTAL ASSETS $1,276,004 $1,512,403
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LIABILITIES:
Deposits:
Noninterest-bearing $ 7,354 $ 6,206
Interest-bearing 556,480 504,088
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Total deposits 563,834 510,294
Accounts payable, accrued expenses and other 75,963 80,283
Income taxes payable 19,057 19,725
Due to affiliated companies 332,303 639,066
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Total liabilities 991,157 1,249,368
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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; 27,338,694 and
27,276,269 shares issued; 27,311,030 and
27,206,883 shares outstanding at June 30, 1998
and December 31, 1997, respectively 273 273
Capital in excess of par value 82,725 81,586
Retained earnings 202,510 182,845
Common stock held in treasury, at cost, $.01
par value, 27,664 and 69,386 shares at June 30,
1998 and December 31, 1997, respectively (611) (1,662)
Stock compensation related adjustments (50) (7)
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Total stockholders' equity 284,847 263,035
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,276,004 $1,512,403
========== ==========
</TABLE>
