<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): April 21, 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 First Quarter Press Release of the Registrant dated
April 22, 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: April 21, 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 First Quarter Press Release of the Registrant dated
April 22, 1998.
<PAGE>
NEWS RELEASE EXHIBIT 20.1
For Release: Immediate
Contact: Jean Fargo Dave Rai
Corporate Communications Investor Relations
(847) 405-3953 (847) 405-4103
SPS REPORTS 33 PERCENT INCREASE IN
FIRST QUARTER PROFITS
RIVERWOODS, IL, April 22, 1998 - SPS Transaction Services, Inc. (NYSE:PAY)
today reported net income of $9.9 million or 36 cents per share on a diluted
basis for the quarter ended March 31, 1998, a 33 percent increase as compared
to 27 cents per share for the same period last year. Net operating revenues for
the first quarter were $82.3 million, down nine percent from $90.4 million in
1997.
"It's been a significant week for us. First, the announcement of our sale
agreement with The Associates and now announcing our fourth consecutive quarter
with year over year earnings increases. It's a great beginning to 1998," said
Robert L. Wieseneck, SPS president and chief executive officer. "For the
balance of the year, we will work toward effecting a smooth transition to The
Associates and continue our focus on increasing revenues while maintaining our
profit margin."
The company reported a 12 percent increase in electronic transactions
processed for the quarter, from 102 million to 114 million. Active commercial
accounts at March 31, 1998 were 1,003,000, up five percent from 951,000 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 27 percent to 12.4
million.
Total loans outstanding, which represent both owned and securitized credit
card loans, declined and were $1.7 billion at March 31, 1998, down from $1.9
billion at the end of last year. Active consumer private label credit card
accounts, both owned and managed, decreased 11 percent to 2.9 million, compared
to the first quarter in 1997.
SPS Transaction Services, Inc. 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. SPS, a 73.3 percent-owned subsidiary
of Morgan Stanley Dean Witter & Co., recently announced the sale of
substantially all of its assets to Associates First Capital Corporation. The
transaction is expected to close later this year.
###
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SPS TRANSACTION SERVICES, INC.
Financial Highlights
<TABLE>
<CAPTION>
(In thousands, except per share data)
Three Months Ended March 31,
-----------------------------------------
(Unaudited)
1998 1997 % Change
--------- --------- --------
<S> <C> <C> <C>
Net Operating Revenues $ 82,264 $ 90,430 (9%)
Net Income $ 9,897 $ 7,391 34%
Basic Earnings Per Common Share $ 0.36 $ 0.27 33%
Diluted Earnings Per Common Share $ 0.36 $ 0.27 33%
Basic Weighted Average Common
Shares Outstanding 27,249 27,197 --
Diluted Weighted Average Common
Shares Outstanding 27,465 27,367 --
</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
March 31,
-------------------
1998 1997
-------- --------
(Unaudited)
<S> <C> <C>
Processing and service revenues $ 68,142 $ 75,309
Merchant discount revenue 2,966 3,138
-------- --------
71,108 78,447
Interest revenue 55,206 64,076
Interest expense 17,039 20,382
-------- --------
Net interest income 38,167 43,694
Provision for loan losses 27,011 31,711
-------- --------
Net credit income 11,156 11,983
NET OPERATING REVENUES 82,264 90,430
Salaries and employee benefits 28,187 29,523
Processing and service expenses 22,391 28,327
Other expenses 16,026 20,541
-------- --------
Total operating expenses 66,604 78,391
-------- --------
Income before income taxes 15,660 12,039
Income tax expense 5,763 4,648
-------- --------
NET INCOME $ 9,897 $ 7,391
======== ========
Basic Earnings Per Common Share $ 0.36 $ 0.27
Diluted Earnings Per Common Share $ 0.36 $ 0.27
Basic Weighted Average Common
Shares Outstanding 27,249 27,197
Diluted Weighted Average Common
Shares Outstanding 27,465 27,367
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SPS TRANSACTION SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
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(In thousands, except share data)
</TABLE>
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS:
Cash and due from banks $ 15,384 $ 14,730
Investments held to maturity - at amortized cost 36,896 36,617
Credit card loans 1,169,727 1,295,787
Allowance for loan losses (74,822) (79,726)
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Credit card loans, net 1,094,905 1,216,061
Accrued interest receivable 14,221 21,847
Accounts receivable 25,666 29,349
Due from affiliated companies 16,561 9,921
Amounts due from asset securitizations 97,715 93,260
Premises and equipment, net 31,951 32,895
Deferred income taxes 41,603 43,059
Prepaid expenses and other assets 14,851 14,664
---------- ----------
TOTAL ASSETS $1,389,753 $1,512,403
========== ==========
LIABILITIES:
Deposits:
Noninterest-bearing $ 4,513 $ 6,206
Interest-bearing 540,195 504,088
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Total deposits 544,708 510,294
Accounts payable, accrued expenses and other 78,215 80,283
Income taxes payable 18,215 19,725
Due to affiliated companies 474,539 639,066
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Total liabilities 1,115,677 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; 27,305,021 and
27,276,269 shares issued; 27,277,357 and
27,206,883 shares outstanding at March 31,
1998 and December 31, 1997, respectively 273 273
Capital in excess of par value 81,792 81,586
Retained earnings 192,680 182,845
Common stock held in treasury, at cost, $.01
par value, 27,644 and 69,386 shares at
March 31, 1998 and December 31, 1997,
respectively (611) (1,662)
Stock compensation related adjustments (58) (7)
---------- ----------
Total stockholders' equity 274,076 263,035
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,389,753 $1,512,403
========== ==========
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SPS TRANSACTION SERVICES, INC.
STATISTICAL SUMMARY
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------
March 31, March 31, December 31,
1998 1997 1997
-------- --------- -----------
(Unaudited)
<S> <C> <C> <C>
Income Statement Data (thousands)
Transaction processing services $ 22,254 $ 24,462 $ 26,415
Managed Programs 22,765 23,395 21,686
HSB Programs 11,109 14,019 12,769
Servicing fees on securitized loans 12,014 13,433 9,563
-------- -------- --------
Processing and service revenues $ 68,142 $ 75,309 $ 70,433
======== ======== ========
Balance Sheet Data (millions)
End-of-period
Total loans* $1,749.7 $2,078.4 $1,875.8
Owned loans $1,169.7 $1,498.4 $1,295.8
Average
Total loans* $1,832.5 $2,173.8 $1,832.0
Owned loans $1,252.5 $1,593.8 $1,252.0
Operating Data (thousands)
Electronic point-of-sale
transactions processed 113,681 101,882 121,950
TeleServices service
minutes processed 12,416 17,022 14,848
TeleServices customer
contacts processed 2,154 2,550 2,685
Active consumer private label
accounts(end-of-period) 2,898 3,246 3,080
Active commercial
accounts(end-of-period) 1,003 951 979
Asset Quality
Average
Net charge-off % (Total loans)* 9.7% 8.9% 9.6%
Net charge-off % (Owned) 10.3% 9.1% 10.0%
End-of-period
30-89 days delinquency %(Total loans)* 5.0% 4.7% 5.4%
30-89 days delinquency %(Owned) 5.3% 5.0% 5.7%
90-179 days delinquency %(Total loans)* 3.9% 3.6% 4.2%
90-179 days delinquency %(Owned) 4.2% 3.8% 4.7%
Allowance for loan losses (Owned)
(thousands) $ 74,822 $ 84,394 $ 79,726
Allowance for loan losses % (Owned) 6.4% 5.6% 6.2%
* Total loans represents both owned and securitized credit card loans.
</TABLE>
