Form 10-K
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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2012
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
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Delaware
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31-1429215
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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7500 Dallas Parkway, Suite 700
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Plano, Texas
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75024
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $0.01 per share
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New York Stock Exchange
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Item No.
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Form 10-K
Report
Page
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1
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PART I
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1.
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2
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1A.
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9
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1B.
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18
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2.
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18
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3.
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18
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4.
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18
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PART II
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|||||
5.
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19
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6.
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22
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7.
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24
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7A.
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43
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8.
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43
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9.
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44
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9A.
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44
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9B.
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44
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PART III
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10.
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45
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11.
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45
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12.
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45
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13.
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45
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14.
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45
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PART IV
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15.
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46
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Business.
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•
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Capitalize on our Leadership in Highly Targeted and Data-Driven Consumer Marketing. As consumer-based businesses shift their marketing spend to transaction-based marketing strategies, we believe we are well-positioned to acquire new clients and sell additional services to existing clients based on our extensive experience in capturing and analyzing our clients’ customer transaction data to develop targeted marketing programs. We believe our comprehensive portfolio of high-quality targeted marketing and loyalty solutions provides a competitive advantage over other marketing services firms with more limited service offerings. We seek to extend our leadership position in the transaction-based and targeted marketing services sector by continuing to improve the breadth and quality of our products and services. We intend to enhance our leadership position in loyalty programs by expanding the scope of the Canadian AIR MILES® Reward Program, by continuing to develop stand-alone loyalty programs such as the Hilton HHonors® Program, and by increasing our penetration in the retail sector with our integrated marketing and credit services offering.
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•
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Sell More Fully Integrated End-to-End Marketing Solutions. In our Epsilon® segment, we have assembled what we believe is the industry’s most comprehensive suite of targeted and data-driven marketing services, including marketing strategy consulting, data services, database development and management, marketing analytics, creative design and delivery services such as email communications. We offer an end-to-end solution to clients, providing a significant opportunity to expand our relationships with existing clients, the majority of whom do not currently purchase our full suite of services. In addition, we further intend to integrate our product and service offerings so that we can provide clients with a comprehensive portfolio of targeted marketing solutions, including both coalition and individual loyalty programs, private label retail credit card programs and other transaction-based marketing solutions. By selling integrated solutions across our entire client base, we have a significant opportunity to maximize the value of our long-standing client relationships.
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•
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Continue to Expand our Global Footprint. We plan to grow our business by leveraging our core competencies in the North American marketplace to further penetrate international markets. We intend to expand in new markets where a burgeoning middle class has consumer-facing businesses in those geographical regions needing marketing solutions that can help them acquire new customers and increase customer loyalty. Our investment in CBSM-Companhia Brasileira De Servicos De Marketing, the operator
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of the dotz coalition loyalty program in Brazil, is 37%. In 2012, dotz expanded the number of regions in Brazil in which it operates by entering into three additional regions and now operates in five markets with more than six million customers enrolled in the program. We expect to enter into five additional markets in Brazil during 2013. We also have a 34% ownership interest in Direxions Global Solutions Private Ltd., a loyalty, CRM solutions and data analytics provider in India. Global reach is also increasingly important as our clients grow into new markets, and we are well positioned to cost-effectively increase our global presence. We believe continued international expansion will provide us with strong revenue growth opportunities.
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•
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Optimize our Business Portfolio. We intend to continue to evaluate our products and services given our strategic direction and demand trends. While we are focused on realizing organic revenue growth and margin expansion, we will consider select acquisitions of complementary businesses that would enhance our product portfolio, market positioning or geographic presence. In November 2012, we acquired the Hyper Marketing group of companies, or HMI, a marketing services agency. This acquisition expanded Epsilon’s agency depth and capabilities; additionally, it added key verticals such as energy, fitness, quick service restaurants and technology.
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Segment
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Products and Services
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||
LoyaltyOne
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•
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AIR MILES Reward Program
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•
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Loyalty Services
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—Loyalty consulting
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—Customer analytics
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—Creative services
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Epsilon
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•
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Marketing Services
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—Agency services
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—Database design and management
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—Data services
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—Analytical services
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—Traditional and digital communications
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Private Label Services and Credit
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•
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Receivables Financing
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—Underwriting and risk management
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—Receivables funding
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•
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Processing Services
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—New account processing
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—Bill processing
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—Remittance processing
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—Customer care
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•
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Marketing Services
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Risk Factors.
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•
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the difficulty and expense that we incur in connection with the acquisition or new business opportunity;
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•
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the potential for adverse consequences when conforming the acquired company’s accounting policies to ours;
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•
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the diversion of management’s attention from other business concerns;
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•
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the potential loss of customers or key employees of the acquired company;
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•
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the impact on our financial condition due to the timing of the acquisition or new business implementation or the failure of the acquired or new business to meet operating expectations; and
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•
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the assumption of unknown liabilities of the acquired company.
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•
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conditions in the securities markets in general and the asset-backed securitization market in particular;
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•
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conformity in the quality of our private label credit card receivables to rating agency requirements and changes in that quality or those requirements; and
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•
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ability to fund required overcollateralizations or credit enhancements, which are routinely utilized in order to achieve better credit ratings to lower borrowing cost.
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•
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make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations under any of our debt instruments, including restrictive covenants, could result in an event of default under our credit agreement, the indentures governing our convertible senior notes, the indentures governing our senior notes and the agreements governing our other indebtedness;
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•
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require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions and other purposes;
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•
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increase our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage;
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•
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limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate;
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•
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limit our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for working capital, capital expenditures, acquisitions and other corporate purposes;
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•
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reduce or delay investments and capital expenditures;
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•
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cause any refinancing of our indebtedness to be at higher interest rates and require us to comply with more onerous covenants, which could further restrict our business operations; and
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•
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prevent us from raising the funds necessary to repurchase all notes tendered to us upon the occurrence of certain changes of control, which would constitute a default under the indentures governing the convertible senior notes.
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•
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it engages only in credit card operations;
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•
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it does not accept demand deposits or deposits that the depositor may withdraw by check or similar means for payment to third parties;
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•
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it does not accept any savings or time deposits of less than $100,000, except for deposits pledged as collateral for its extensions of credit;
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•
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it maintains only one office that accepts deposits; and
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•
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it does not engage in the business of making commercial loans (except small business loans). |
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•
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it is an institution organized under the laws of a state which, on March 5, 1987, had in effect or had under consideration in such state’s legislature a statute which required or would require such institution to obtain insurance under the Federal Deposit Insurance Act; and
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•
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it does not accept demand deposits that the depositor may withdraw by check or similar means for payment to third parties.
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•
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a board of directors classified into three classes of directors with the directors of each class having staggered, three-year terms;
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•
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our board’s authority to issue shares of preferred stock without further stockholder approval;
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•
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provisions of Delaware law providing that directors serving on staggered boards of directors, such as ours, may be removed only for cause; and
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•
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fundamental change purchase rights of our convertible senior notes, which allow such note holders to require us to purchase all or a portion of their convertible senior notes upon the occurrence of a fundamental change, as well as provisions requiring an increase to the conversion rate for conversions in connection with make-whole fundamental changes.
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Unresolved Staff Comments.
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Properties.
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Location
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Segment
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Approximate Square
Footage
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Lease Expiration Date
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|||||
Plano, Texas
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Corporate
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96,749
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June 29, 2021
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|||||
Columbus, Ohio
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Corporate, Private Label Services and Credit
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199,112
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November 30, 2017
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Toronto, Ontario, Canada
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LoyaltyOne
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194,018
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September 30, 2017
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|||||
Mississauga, Ontario, Canada
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LoyaltyOne
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50,908
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November 30, 2019
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|||||
Wakefield, Massachusetts
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Epsilon
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184,411
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December 31, 2020
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|||||
Irving, Texas
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Epsilon
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150,232
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June 30, 2018
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|||||
Lewisville, Texas
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Epsilon
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10,000
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January 15, 2017
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|||||
Earth City, Missouri
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Epsilon
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116,783
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December 31, 2014
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|||||
West Chicago, Illinois
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Epsilon
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155,412
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December 31, 2024
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|||||
Columbus, Ohio
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Private Label Services and Credit
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103,161
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January 31, 2014
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Westerville, Ohio
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Private Label Services and Credit
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100,800
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July 31, 2014
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|||||
Wilmington, Delaware
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Private Label Services and Credit
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5,198
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November 30, 2020
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|||||
Salt Lake City, Utah
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Private Label Services and Credit
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6,488
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January 31, 2018
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Legal Proceedings.
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Mine Safety Disclosures.
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PART II
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
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High
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Low
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||||||
Year Ended December 31, 2012
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|||||||
First quarter
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$
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127.55
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$
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100.42
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|||
Second quarter
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135.49
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119.56
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|||||
Third quarter
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144.34
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123.11
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|||||
Fourth quarter
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148.41
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135.91
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|||||
Year Ended December 31, 2011
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|||||||
First quarter
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$
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86.10
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$
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69.67
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|||
Second quarter
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97.00
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80.31
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|||||
Third quarter
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101.51
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80.38
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|||||
Fourth quarter
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107.33
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84.91
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Period
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Total Number of Shares Purchased (1)
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Average Price Paid
per Share
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Total Number of
Shares Purchased as
Part of Publicly Announced Plans or Programs
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Approximate Dollar
Value of Shares that
May Yet Be
Purchased Under the
Plans or Programs (2)
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|||||||||||
(In millions)
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|||||||||||||||
During 2012:
|
|||||||||||||||
October 1-31
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139,695
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$
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138.95
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137,200
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$
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315.6
|
|||||||||
November 1-30
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275,972
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140.08
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273,300
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277.3
|
|||||||||||
December 1-31
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104,698
|
143.63
|
102,381
|
262.6
|
|||||||||||
Total
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520,365
|
$
|
140.49
|
512,881
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$
|
262.6
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|||||||||
(1)
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During the period represented by the table, 7,484 shares of our common stock were purchased by the administrator of our 401(k) and Retirement Saving Plan for the benefit of the employees who participated in that portion of the plan.
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(2)
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On December 13, 2011, our Board of Directors authorized a stock repurchase program to acquire up to $400.0 million of our outstanding common stock from January 1, 2012 through December 31, 2012. On January 2, 2013, our Board of Directors authorized a stock repurchase program to acquire up to $400.0 million of our outstanding common stock from January 2, 2013 through December 31, 2013, subject to any restrictions pursuant to the terms of our credit agreements, indentures, applicable securities laws or otherwise.
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![]() |
Alliance Data
Systems
Corporation
|
S&P 500
|
Old Peer
Group Index
|
New Peer
Group Index
|
||||||||||
December 31, 2007
|
$
|
100.00
|
$
|
100.00
|
$
|
100.00
|
$
|
100.00
|
|||||
December 31, 2008
|
62.05
|
63.00
|
53.65
|
51.91
|
|||||||||
December 31, 2009
|
86.13
|
79.67
|
89.34
|
88.78
|
|||||||||
December 31, 2010
|
94.72
|
91.67
|
97.12
|
102.21
|
|||||||||
December 31, 2011
|
138.47
|
93.61
|
116.35
|
108.39
|
|||||||||
December 31, 2012
|
193.04
|
108.59
|
148.91
|
137.10
|
Selected Financial Data.
|
Years Ended December 31,
|
|||||||||||||||||
2012
|
2011
|
2010
|
2009
|
2008
|
|||||||||||||
(In thousands, except per share amounts)
|
|||||||||||||||||
Income statement data (1)
|
|||||||||||||||||
Total revenue
|
$
|
3,641,390
|
$
|
3,173,287
|
$
|
2,791,421
|
$
|
1,964,341
|
$
|
2,025,254
|
|||||||
Cost of operations (exclusive of amortization and depreciation disclosed
separately below) (2)
|
2,106,612
|
1,811,882
|
1,545,380
|
1,354,138
|
1,341,958
|
||||||||||||
Provision for loan loss
|
285,479
|
300,316
|
387,822
|
—
|
—
|
||||||||||||
General and administrative (2)
|
108,059
|
95,256
|
85,773
|
99,823
|
82,804
|
||||||||||||
Depreciation and other amortization
|
73,802
|
70,427
|
67,806
|
62,196
|
68,505
|
||||||||||||
Amortization of purchased intangibles
|
93,074
|
82,726
|
75,420
|
63,090
|
67,291
|
||||||||||||
Gain on acquisition of a business
|
—
|
—
|
—
|
(21,227
|
)
|
—
|
|||||||||||
Loss on the sale of assets
|
—
|
—
|
—
|
—
|
1,052
|
||||||||||||
Merger (reimbursements) costs
|
—
|
—
|
—
|
(1,436
|
)
|
3,053
|
|||||||||||
Total operating expenses
|
2,667,026
|
2,360,607
|
2,162,201
|
1,556,584
|
1,564,663
|
||||||||||||
Operating income
|
974,364
|
812,680
|
629,220
|
407,757
|
460,591
|
||||||||||||
Interest expense, net
|
291,460
|
298,585
|
318,330
|
144,811
|
80,440
|
||||||||||||
Income from continuing operations before income taxes
|
682,904
|
514,095
|
310,890
|
262,946
|
380,151
|
||||||||||||
Provision for income taxes
|
260,648
|
198,809
|
115,252
|
86,227
|
147,599
|
||||||||||||
Income from continuing operations
|
422,256
|
315,286
|
195,638
|
176,719
|
232,552
|
||||||||||||
Loss from discontinued operations, net of taxes
|
—
|
—
|
(1,901
|
)
|
(32,985
|
)
|
(26,150
|
)
|
|||||||||
Net income
|
$
|
422,256
|
$
|
315,286
|
$
|
193,737
|
$
|
143,734
|
$
|
206,402
|
|||||||
Income from continuing operations per share—basic
|
$
|
8.44
|
$
|
6.22
|
$
|
3.72
|
$
|
3.17
|
$
|
3.25
|
|||||||
Income from continuing operations per share—diluted
|
$
|
6.58
|
$
|
5.45
|
$
|
3.51
|
$
|
3.06
|
$
|
3.16
|
|||||||
Net income per share—basic
|
$
|
8.44
|
$
|
6.22
|
$
|
3.69
|
$
|
2.58
|
$
|
2.88
|
|||||||
Net income per share—diluted
|
$
|
6.58
|
$
|
5.45
|
$
|
3.48
|
$
|
2.49
|
$
|
2.80
|
|||||||
Weighted average shares used in computing per share amounts—basic
|
50,008
|
50,687
|
52,534
|
55,765
|
71,502
|
||||||||||||
Weighted average shares used in computing per share amounts—diluted
|
64,143
|
57,804
|
55,710
|
57,706
|
73,640
|
||||||||||||
(1)
|
The selected financial data for the years ended December 31, 2012, 2011, and 2010 reflects a change in accounting principle as a result of the consolidation of the credit card securitization trusts. Selected financial data for historical periods prior to January 1, 2010 have not been retrospectively adjusted to reflect the change in accounting principle and therefore continue to reflect the accounting standards that were applicable during those historical periods.
|
(2)
|
Included in cost of operations is stock compensation expense of $32.7 million, $25.8 million, $27.6 million, $29.3 million, and $29.8 million for the years ended December 31, 2012, 2011, 2010, 2009, and 2008, respectively. Included in general and administrative is stock compensation expense of $17.8 million, $17.7 million, $22.5 million, $24.3 million, and $18.9 million for the years ended December 31, 2012, 2011, 2010, 2009, and 2008, respectively.
|
Years Ended December 31,
|
|||||||||||||||||
2012
|
2011
|
2010
|
2009
|
2008
|
|||||||||||||
(In thousands, except per share amounts)
|
|||||||||||||||||
Adjusted EBITDA (1) (3)
|
|||||||||||||||||
Adjusted EBITDA
|
$
|
1,191,737
|
$
|
1,009,319
|
$
|
822,540
|
$
|
590,077
|
$
|
655,229
|
|||||||
Other financial data
|
|||||||||||||||||
Cash flows from operating activities
|
$
|
1,134,190
|
$
|
1,011,347
|
$
|
902,709
|
$
|
358,414
|
$
|
451,019
|
|||||||
Cash flows from investing activities
|
$
|
(2,671,350
|
)
|
$
|
(1,040,710
|
)
|
$
|
(340,784
|
)
|
$
|
(888,022
|
)
|
$
|
(512,518
|
)
|
||
Cash flows from financing activities
|
$
|
2,209,019
|
$
|
109,250
|
$
|
(715,675
|
)
|
$
|
570,189
|
$
|
(20,306
|
)
|
|||||
Segment Operating data
|
|||||||||||||||||
Private label statements generated
|
166,091
|
142,064
|
142,379
|
130,176
|
125,197
|
||||||||||||
Credit sales
|
$
|
12,523,632
|
$
|
9,636,053
|
$
|
8,773,436
|
$
|
7,968,125
|
$
|
7,242,422
|
|||||||
Average credit card receivables
|
$
|
5,927,562
|
$
|
4,962,503
|
$
|
5,025,915
|
$
|
4,359,625
|
$
|
3,915,658
|
|||||||
AIR MILES reward miles issued
|
5,222,887
|
4,940,364
|
4,584,384
|
4,545,774
|
4,463,181
|
||||||||||||
AIR MILES reward miles redeemed
|
4,040,876
|
3,633,921
|
3,634,821
|
3,326,307
|
3,121,799
|
||||||||||||
(3)
|
See “Use of Non-GAAP Financial Measures” set forth in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of our use of adjusted EBITDA and a reconciliation to net income, the most directly comparable GAAP financial measure.
|
As of December 31,
|
||||||||||||||||
2012
|
2011
|
2010
|
2009
|
2008
|
||||||||||||
(In thousands)
|
||||||||||||||||
Balance sheet data (1)
|
||||||||||||||||
Credit card receivables, net
|
$
|
6,697,674
|
$
|
5,197,690
|
$
|
4,838,354
|
$
|
616,298
|
$
|
430,512
|
||||||
Redemption settlement assets, restricted
|
492,690
|
515,838
|
472,428
|
574,004
|
531,594
|
|||||||||||
Total assets
|
12,000,139
|
8,980,249
|
8,272,152
|
5,225,667
|
4,341,989
|
|||||||||||
Deferred revenue
|
1,249,061
|
1,226,436
|
1,221,242
|
1,146,146
|
995,634
|
|||||||||||
Deposits
|
2,228,411
|
1,353,775
|
859,100
|
1,465,000
|
688,900
|
|||||||||||
Asset-backed securities debt – owed to securitization investors
|
4,130,970
|
3,260,287
|
3,660,142
|
—
|
—
|
|||||||||||
Long-term and other debt, including current maturities
|
2,854,839
|
2,183,474
|
1,869,772
|
1,782,352
|
1,491,275
|
|||||||||||
Total liabilities
|
11,471,652
|
8,804,283
|
8,249,058
|
4,952,891
|
3,794,691
|
|||||||||||
Total stockholders’ equity
|
528,487
|
175,966
|
23,094
|
272,776
|
547,298
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
|
•
|
AIR MILES reward miles issued: The number of AIR MILES reward miles issued reflects the buying activity of the collectors at our participating sponsors, who pay us a fee per AIR MILES reward mile issued. The fees collected from sponsors for the issuance of AIR MILES reward miles represent future revenue and earnings for us. The service element consists of marketing and administrative services. Revenue related to the service element is determined in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU, 2009-13, “Multiple-Deliverable Revenue Arrangements.” It is initially deferred and then amortized pro rata over the estimated life of an AIR MILES reward mile, or a period of 42 months, beginning with the issuance of the AIR MILES reward mile and ending upon its expected redemption. There have been no changes to management’s estimate of the life of an AIR MILES reward mile in the period presented. With the adoption of ASU 2009-13, the residual method is no longer utilized for new sponsor agreements entered into or existing sponsor agreements that are materially modified; for these agreements, we measure the service element at its estimated selling price.
|
|
•
|
AIR MILES reward miles redeemed: Redemptions show that collectors are redeeming AIR MILES reward miles to collect the rewards that are offered through our programs, which is an indicator of the success of the program. We recognize revenue from the redemptions of AIR MILES reward miles by collectors. The revenue related to the redemption element is based on the estimated fair value and is deferred until the collector redeems the AIR MILES reward miles or over the estimated life of an AIR MILES reward mile in the case of AIR MILES reward miles that we estimate will go unused by the collector base or “breakage.” The estimate of breakage changed from 28% to 27% as of December 31, 2012. See "Discussion of Critical Accounting Policies and Estimates" and Note 11, “Deferred Revenue,” of the Notes to Consolidated Financial Statements for additional information.
|
|
•
|
Private Label Credit Sales: This represents the dollar value of private label credit card sales that occur at our clients’ point of sale terminals or through catalogs or web sites. Generally, we are paid a percentage of these sales, referred to as merchant discount, from the retailers that utilize our program. Increases in private label credit sales typically lead to higher portfolio balances as cardholders finance their purchases through our bank subsidiaries.
|
|
•
|
Average Credit Card Receivables: This represents the average balance of outstanding receivables from our cardholders at the beginning of each month during the period in question. Customers are assessed a finance charge based on their outstanding balance at the end of a billing cycle. There are many factors that impact the outstanding balances, such as payment rates, charge-offs, recoveries and delinquencies. Management actively monitors all of these factors.
|
|
•
|
Redemption element. The redemption element is the larger of the two components. Revenue related to the redemption element is based on the estimated fair value. For this component, we recognize revenue at the time an AIR MILES reward mile is redeemed, or for those AIR MILES reward miles that we estimate will go unredeemed by the collector base, known as “breakage,” over the estimated life of an AIR MILES reward mile.
|
|
•
|
Service element. For this component, which consists of marketing and administrative services, revenue is determined in accordance with ASU 2009-13. It is initially deferred and then amortized pro rata over the estimated life of an AIR MILES reward mile. With the adoption of ASU 2009-13, the residual method is no longer utilized for new sponsor agreements entered into or existing sponsor agreements that are materially modified after January 1, 2011; for these agreements, we measure the service element at its estimated selling price. Should one of the AIR MILES Reward Program's top five sponsors materially modify or renew its agreement, it could shift the allocation of deferred revenue between the service element and redemption element.
|
Years Ended December 31,
|
|||||||||||||||||
2012
|
2011
|
2010
|
2009
|
2008
|
|||||||||||||
(In thousands)
|
|||||||||||||||||
Income from continuing operations
|
$
|
422,256
|
$
|
315,286
|
$
|
195,638
|
$
|
176,719
|
$
|
232,552
|
|||||||
Stock compensation expense
|
50,497
|
43,486
|
50,094
|
53,612
|
48,734
|
||||||||||||
Provision for income taxes
|
260,648
|
198,809
|
115,252
|
86,227
|
147,599
|
||||||||||||
Interest expense, net
|
291,460
|
298,585
|
318,330
|
144,811
|
80,440
|
||||||||||||
Loss on the sale of assets
|
—
|
—
|
—
|
—
|
1,052
|
||||||||||||
Merger and other costs (1)
|
—
|
—
|
—
|
3,422
|
9,056
|
||||||||||||
Depreciation and other amortization
|
73,802
|
70,427
|
67,806
|
62,196
|
68,505
|
||||||||||||
Amortization of purchased intangibles
|
93,074
|
82,726
|
75,420
|
63,090
|
67,291
|
||||||||||||
Adjusted EBITDA
|
$
|
1,191,737
|
$
|
1,009,319
|
$
|
822,540
|
$
|
590,077
|
$
|
655,229
|
|||||||
(1)
|
Represents investment banking, legal and accounting costs directly associated with the proposed merger with an affiliate of The Blackstone Group. Other costs represent compensation charges related to the departure of certain employees resulting from cost saving initiatives and other non-routine costs associated with the disposition of certain businesses.
|
Year Ended December 31,
|
Change
|
|||||||||||||
2012
|
2011
|
$
|
%
|
|||||||||||
(in thousands, except percentages)
|
||||||||||||||
Revenue:
|
||||||||||||||
LoyaltyOne
|
$
|
919,041
|
$
|
844,774
|
$
|
74,267
|
8.8
|
%
|
||||||
Epsilon
|
996,210
|
847,136
|
149,074
|
17.6
|
||||||||||
Private Label Services and Credit
|
1,732,160
|
1,488,998
|
243,162
|
16.3
|
||||||||||
Corporate/Other
|
372
|
1,136
|
(764
|
)
|
(67.3
|
)
|
||||||||
Eliminations
|
(6,393
|
)
|
(8,757
|
)
|
2,364
|
nm
|
*
|
|||||||
Total
|
$
|
3,641,390
|
$
|
3,173,287
|
$
|
468,103
|
14.8
|
%
|
||||||
Adjusted EBITDA (1):
|
||||||||||||||
LoyaltyOne
|
$
|
236,094
|
$
|
217,083
|
$
|
19,011
|
8.8
|
%
|
||||||
Epsilon
|
222,253
|
195,397
|
26,856
|
13.7
|
||||||||||
Private Label Services and Credit
|
823,241
|
678,334
|
144,907
|
21.4
|
||||||||||
Corporate/Other
|
(89,851
|
)
|
(76,407
|
)
|
(13,444
|
)
|
17.6
|
|||||||
Eliminations
|
—
|
(5,088
|
)
|
5,088
|
nm
|
*
|
||||||||
Total
|
$
|
1,191,737
|
$
|
1,009,319
|
$
|
182,418
|
18.1
|
%
|
||||||
Stock compensation expense:
|
||||||||||||||
LoyaltyOne
|
$
|
9,311
|
$
|
7,202
|
$
|
2,109
|
29.3
|
%
|
||||||
Epsilon
|
14,414
|
11,816
|
2,598
|
22.0
|
||||||||||
Private Label Services and Credit
|
8,930
|
6,748
|
2,182
|
32.3
|
||||||||||
Corporate/Other
|
17,842
|
17,720
|
122
|
0.7
|
||||||||||
Total
|
$
|
50,497
|
$
|
43,486
|
$
|
7,011
|
16.1
|
%
|
||||||
Depreciation and amortization:
|
||||||||||||||
LoyaltyOne
|
$
|
19,614
|
$
|
20,253
|
$
|
(639
|
)
|
(3.2
|
)%
|
|||||
Epsilon
|
101,684
|
90,111
|
11,573
|
12.8
|
||||||||||
Private Label Services and Credit
|
42,464
|
35,480
|
6,984
|
19.7
|
||||||||||
Corporate/Other
|
3,114
|
7,309
|
(4,195
|
)
|
(57.4
|
)
|
||||||||
Total
|
$
|
166,876
|
$
|
153,153
|
$
|
13,723
|
9.0
|
%
|
||||||
Operating income from continuing operations:
|
||||||||||||||
LoyaltyOne
|
$
|
207,169
|
$
|
189,628
|
$
|
17,541
|
9.3
|
%
|
||||||
Epsilon
|
106,155
|
93,470
|
12,685
|
13.6
|
||||||||||
Private Label Services and Credit
|
771,847
|
636,106
|
135,741
|
21.3
|
||||||||||
Corporate/Other
|
(110,807
|
)
|
(101,436
|
)
|
(9,371
|
)
|
9.2
|
|||||||
Eliminations
|
—
|
(5,088
|
)
|
5,088
|
nm
|
*
|
||||||||
Total
|
$
|
974,364
|
$
|
812,680
|
$
|
161,684
|
19.9
|
%
|
||||||
Adjusted EBITDA margin (2):
|
||||||||||||||
LoyaltyOne
|
25.7
|
%
|
25.7
|
%
|
—
|
%
|
||||||||
Epsilon
|
22.3
|
23.1
|
(0.8
|
)
|
||||||||||
Private Label Services and Credit
|
47.5
|
45.6
|
1.9
|
|||||||||||
Total
|
32.7
|
%
|
31.8
|
%
|
0.9
|
%
|
||||||||
Segment operating data:
|
||||||||||||||
Private label statements generated
|
166,091
|
142,064
|
24,027
|
16.9
|
%
|
|||||||||
Credit sales
|
$
|
12,523,632
|
$
|
9,636,053
|
$
|
2,887,579
|
30.0
|
%
|
||||||
Average credit card receivables
|
$
|
5,927,562
|
$
|
4,962,503
|
$
|
965,059
|
19.4
|
%
|
||||||
AIR MILES reward miles issued
|
5,222,887
|
4,940,364
|
282,523
|
5.7
|
%
|
|||||||||
AIR MILES reward miles redeemed
|
4,040,876
|
3,633,921
|
406,955
|
11.2
|
%
|
|||||||||
(1)
|
Adjusted EBITDA is equal to income from continuing operations, plus stock compensation expense, provision for income taxes, interest expense, net, depreciation and amortization and amortization of purchased intangibles. For a reconciliation of adjusted EBITDA to income from continuing operations, the most directly comparable GAAP financial measure, see “Use of Non-GAAP Financial Measures” included in this report.
|
(2)
|
Adjusted EBITDA margin is adjusted EBITDA divided by revenue. Management uses adjusted EBITDA margin to analyze the operating performance of the segments and the impact revenue growth has on operating expenses.
|
*
|
not meaningful.
|
|
•
|
Transaction. Revenue increased $10.2 million, or 3.5%, to $300.8 million for the year ended December 31, 2012 due to an increase of $13.5 million in AIR MILES reward miles issuance fees, for which we provide marketing and administrative services, as a result of increases in the number of AIR MILES reward miles issued over the previous several quarters. Other servicing fees charged to our credit cardholders also increased transaction revenue by $20.5 million. These increases were offset by a decrease of $20.8 million in lower merchant fees, which are transaction fees charged to the retailer, primarily due to increased profit sharing and royalty payments associated with the signing of new clients.
|
|
•
|
Redemption. Revenue increased $63.0 million, or 11.0%, to $635.5 million for the year ended December 31, 2012 due to an 11.2% increase in AIR MILES reward miles redeemed. The introduction of a five-year expiry policy to the AIR MILES Reward Program in December 2011 stimulated redemption activity through the first half of 2012.
|
|
•
|
Finance charges, net. Revenue increased $241.4 million, or 17.2%, to $1.6 billion for the year ended December 31, 2012. This increase was driven by a 19.4% increase in average credit card receivables due to strong credit cardholder spending, the stabilization of customer payment rates, as well as recent client signings and credit card portfolio acquisitions, offset in part by a 50 basis point decline in gross yield related to the recent credit card portfolio acquisitions.
|
|
•
|
Database marketing fees and direct marketing. Revenue increased $125.1 million, or 15.5%, to $931.5 million for the year ended December 31, 2012. The increase in revenue was driven primarily by our acquisitions of HMI and Aspen, which added $30.8 million and $92.9 million, respectively.
|
|
•
|
Other revenue. Revenue increased $28.4 million, or 27.9%, to $130.1 million for the year ended December 31, 2012 due to increased revenue associated with strategic consulting initiatives. The Aspen acquisition contributed $19.0 million of this increase.
|
|
•
|
Within the LoyaltyOne segment, cost of operations increased $57.4 million due to a $19.8 million increase in the cost of fulfillment for the AIR MILES Reward Program as a result of an 11.2% increase in the number of AIR MILES reward miles redeemed. In addition, marketing expenses increased $12.1 million due to costs associated with the launch and promotion of AIR MILES Cash, and payroll and benefit costs increased $16.2 million to support new growth initiatives, including international expansion activities.
|
|
•
|
Within the Epsilon segment, cost of operations increased $124.8 million due to the acquisitions of HMI and Aspen, which added $26.7 million and $96.9 million, respectively. Cost of operations also increased as a result of enhancements to infrastructure and security as well as a relocation of a data center to support future growth, which were mitigated by cost-saving initiatives and operational efficiencies implemented in 2012.
|
|
•
|
Within the Private Label Services and Credit segment, cost of operations increased $115.3 million due to growth in the segment. Payroll and benefits increased $39.6 million due to an increase in the number of associates and marketing expenses increased $21.2 million due to growth in credit sales. Credit card and other expenses increased $28.4 million due to higher volumes and growth, and legal and consulting expenses also increased $8.1 million due to new initiatives.
|
|
•
|
Securitization funding costs. Securitization funding costs decreased $33.9 million due to lower interest rates for the year ended December 31, 2012 as compared to the year ended December 31, 2011.
|
|
•
|
Interest expense on deposits. Interest on deposits increased $2.1 million as increases from higher borrowings were offset by lower average interest rates.
|
|
•
|
Interest expense on long-term and other debt, net. Interest expense on long-term and other debt, net increased $24.7 million due in part to an increase in borrowings resulting from the issuance of senior notes in 2012 which added $26.5 million in interest expense. In addition, the amortization of imputed interest associated with the convertible senior notes increased $8.6 million as compared to the prior year. These increases were offset by a decline in interest expense associated with our credit facility and a decline in the amortization of debt issuance costs resulting from a $2.6 million write-off in unamortized debt costs associated with the early extinguishment of certain previous term loans in the second quarter of 2011.
|
|
•
|
LoyaltyOne. Revenue increased $74.3 million, or 8.8%, to $919.0 million for the year ended December 31, 2012. Redemption revenue increased $63.0 million, or 11.0%, due to higher collector redemptions compared to the year ended December 31, 2011. The introduction of a five-year expiry policy to the AIR MILES Reward Program on December 31, 2011 stimulated redemption activity in the first half of 2012. Revenue from issuance fees, for which we provide marketing and administrative services, increased $13.5 million due to increases in the total number of AIR MILES reward miles issued over the previous several quarters. An unfavorable Canadian foreign currency exchange rate impacted revenue by $10.9 million.
|
|
•
|
Epsilon. Revenue increased $149.1 million, or 17.6%, to $996.2 million for the year ended December 31, 2012. The acquisition of HMI contributed $31.0 million to revenue, while the acquisition of Aspen contributed $111.9 million to revenue. In addition, marketing technology revenue increased $8.4 million, or 2.0%, due to the expansion of services to its clients while data revenue decreased $2.7 million, or 1.4%, due to softness in consumer demographic data offerings.
|
|
•
|
Private Label Services and Credit. Revenue increased $243.2 million, or 16.3%, to $1.7 billion for the year ended December 31, 2012. Finance charges and late fees increased by $241.4 million, driven by a 19.4% increase in average credit card receivables due to strong credit cardholder spending, the stabilization of customer payment rates, recent new client signings and recent credit card portfolio acquisitions. Other servicing fees charged to our credit cardholders increased by $20.5 million. These increases were offset by a decrease of $20.8 million in lower merchant fees, which are transaction fees charged to the retailer, primarily due to increased profit sharing and royalty payments associated with the signing of new clients.
|
|
•
|
LoyaltyOne. Adjusted EBITDA increased $19.0 million, or 8.8%, to $236.1 million for the year ended December 31, 2012. Adjusted EBITDA was positively impacted by the increase in AIR MILES reward miles redeemed, partially offset by marketing expenses associated with the launch and promotion of AIR MILES Cash and increases in costs associated with our international initiatives.
|
|
•
|
Epsilon. Adjusted EBITDA increased $26.9 million, or 13.7%, to $222.3 million for the year ended December 31, 2012. Adjusted EDITDA was positively impacted by the HMI acquisition, Aspen’s marketing services product lines and growth in marketing technology. The positive impacts to adjusted EBITDA were somewhat offset by higher payroll and benefit costs, costs associated with a data center relocation and incremental spending on infrastructure and security to support future growth. Adjusted EBITDA margin decreased to 22.3% for the year ended December 31, 2012 from 23.1% for the prior year. The negative impact to adjusted EBITDA margin was due to a shift in revenue mix, as agency products typically carry lower adjusted EBITDA margins, and additional costs to support future growth, as discussed above.
|
|
•
|
Private Label Services and Credit. Adjusted EBITDA increased $144.9 million, or 21.4%, to $823.2 million for the year ended December 31, 2012. Adjusted EBITDA was positively impacted by the increase in finance charges, net and a decline in the provision for loan loss, each as described above, offset by higher operating costs such as payroll and benefits, marketing expenses and credit card and other expenses attributable to growth in the segment.
|
|
•
|
Corporate/Other. Adjusted EBITDA decreased $13.4 million to a loss of $89.9 million for the year ended December 31, 2012. Payroll and benefit costs increased $10.5 million as a result of higher medical costs and an increase in expenses for our retirement savings plans. In addition, in 2011, we recognized $1.2 million in the amortization of deferred gains in 2011 associated with sale-leaseback transactions that were fully amortized in April 2011.
|
Year Ended December 31,
|
Change
|
|||||||||||||
2011
|
2010
|
$
|
%
|
|||||||||||
(in thousands, except percentages)
|
||||||||||||||
Revenue:
|
||||||||||||||
LoyaltyOne
|
$
|
844,774
|
$
|
799,534
|
$
|
45,240
|
5.7
|
%
|
||||||
Epsilon
|
847,136
|
613,374
|
233,762
|
38.1
|
||||||||||
Private Label Services and Credit
|
1,488,998
|
1,386,274
|
102,724
|
7.4
|
||||||||||
Corporate/Other
|
1,136
|
1,866
|
(730
|
)
|
(39.1
|
)
|
||||||||
Eliminations
|
(8,757
|
)
|
(9,627
|
)
|
870
|
nm
|
*
|
|||||||
Total
|
$
|
3,173,287
|
$
|
2,791,421
|
$
|
381,866
|
13.7
|
%
|
||||||
Adjusted EBITDA (1):
|
||||||||||||||
LoyaltyOne
|
$
|
217,083
|
$
|
204,554
|
$
|
12,529
|
6.1
|
%
|
||||||
Epsilon
|
195,397
|
152,304
|
43,093
|
28.3
|
||||||||||
Private Label Services and Credit
|
678,334
|
530,021
|
148,313
|
28.0
|
||||||||||
Corporate/Other
|
(76,407
|
)
|
(57,875
|
)
|
(18,532
|
)
|
32.0
|
|||||||
Eliminations
|
(5,088
|
)
|
(6,464
|
)
|
1,376
|
nm
|
*
|
|||||||
Total
|
$
|
1,009,319
|
$
|
822,540
|
$
|
186,779
|
22.7
|
%
|
||||||
Stock compensation expense:
|
||||||||||||||
LoyaltyOne
|
$
|
7,202
|
$
|
10,266
|
$
|
(3,064
|
)
|
(29.8
|
)%
|
|||||
Epsilon
|
11,816
|
9,481
|
2,335
|
24.6
|
||||||||||
Private Label Services and Credit
|
6,748
|
7,861
|
(1,113
|
)
|
(14.2
|
)
|
||||||||
Corporate/Other
|
17,720
|
22,486
|
(4,766
|
)
|
(21.2
|
)
|
||||||||
Total
|
$
|
43,486
|
$
|
50,094
|
$
|
(6,608
|
)
|
(13.2
|
)%
|
|||||
Depreciation and amortization:
|
||||||||||||||
LoyaltyOne
|
$
|
20,253
|
$
|
23,823
|
$
|
(3,570
|
)
|
(15.0
|
)%
|
|||||
Epsilon
|
90,111
|
77,743
|
12,368
|
15.9
|
||||||||||
Private Label Services and Credit
|
35,480
|
35,164
|
316
|
0.9
|
||||||||||
Corporate/Other
|
7,309
|
6,496
|
813
|
12.5
|
||||||||||
Total
|
$
|
153,153
|
$
|
143,226
|
$
|
9,927
|
6.9
|
%
|
||||||
Operating income from continuing operations:
|
||||||||||||||
LoyaltyOne
|
$
|
189,628
|
$
|
170,465
|
$
|
19,163
|
11.2
|
%
|
||||||
Epsilon
|
93,470
|
65,080
|
28,390
|
43.6
|
||||||||||
Private Label Services and Credit
|
636,106
|
486,996
|
149,110
|
30.6
|
||||||||||
Corporate/Other
|
(101,436
|
)
|
(86,857
|
)
|
(14,579
|
)
|
16.8
|
|||||||
Eliminations
|
(5,088
|
)
|
(6,464
|
)
|
1,376
|
nm
|
*
|
|||||||
Total
|
$
|
812,680
|
$
|
629,220
|
$
|
183,460
|
29.2
|
%
|
||||||
Adjusted EBITDA margin (2):
|
||||||||||||||
LoyaltyOne
|
25.7
|
%
|
25.6
|
%
|
0.1
|
%
|
||||||||
Epsilon
|
23.1
|
24.8
|
(1.7
|
)
|
||||||||||
Private Label Services and Credit
|
45.6
|
38.2
|
7.4
|
|||||||||||
Total
|
31.8
|
%
|
29.5
|
%
|
2.3
|
%
|
||||||||
Segment operating data:
|
||||||||||||||
Private label statements generated
|
142,064
|
142,379
|
(315
|
)
|
(0.2
|
)%
|
||||||||
Credit sales
|
$
|
9,636,053
|
$
|
8,773,436
|
$
|
862,617
|
9.8
|
%
|
||||||
Average credit card receivables
|
$
|
4,962,503
|
$
|
5,025,915
|
$
|
(63,412
|
)
|
(1.3
|
)%
|
|||||
AIR MILES reward miles issued
|
4,940,364
|
4,584,384
|
355,980
|
7.8
|
%
|
|||||||||
AIR MILES reward miles redeemed
|
3,633,921
|
3,634,821
|
(900
|
)
|
—
|
%
|
||||||||
(1)
|
Adjusted EBITDA is equal to income from continuing operations, plus stock compensation expense, provision for income taxes, interest expense, net, depreciation and amortization and amortization of purchased intangibles. For a reconciliation of adjusted EBITDA to income from continuing operations, the most directly comparable GAAP financial measure, see “Use of Non-GAAP Financial Measures” included in this report.
|
(2)
|
Adjusted EBITDA margin is adjusted EBITDA divided by revenue. Management uses adjusted EBITDA margin to analyze the operating performance of the segments and the impact revenue growth has on operating expenses.
|
*
|
not meaningful.
|
•
|
Transaction. Revenue increased $4.9 million, or 1.7%, to $290.6 million for the year ended December 31, 2011 due to the following:
|
•
|
AIR MILES reward mile issuance fees, for which we provide marketing and administrative services, increased $20.6 million. Of this increase, $7.3 million was attributable to an increase in the Canadian foreign currency exchange rate, and $13.3 million was attributable to increases in AIR MILES reward miles issued over the past several quarters.
|
•
|
Servicing fees decreased $15.7 million primarily due to a decline in merchant fees of $20.3 million due to increased profit sharing and royalty payments to certain private label services and credit clients.
|
•
|
Redemption. Revenue increased $28.9 million, or 5.3%, to $572.5 million for the year ended December 31, 2011. A favorable foreign currency exchange rate contributed $23.8 million, supplemented by higher breakage revenue attributable to an increase in AIR MILES reward miles issued.
|
•
|
Finance charges, net. Revenue increased $117.6 million, or 9.2%, to $1.4 billion for the year ended December 31, 2011. This increase was driven by improvement in our gross yield of 270 basis points, offset in part by a 1.3% decline in average credit card receivables as a result of higher payment rates. The expansion in our gross yield was in part due to changes in cardholder terms made throughout 2010.
|
•
|
Database marketing fees and direct marketing. Revenue increased $204.0 million, or 33.9%, to $806.5 million for the year ended December 31, 2011. The increase in revenue was driven by our acquisitions of Aspen in 2011 and the Direct Marketing Services and Database Marketing divisions of Equifax, Inc., collectively referred to as DMS, in 2010 as well as double digit growth in our marketing technology division. Marketing technology continues to build from recent client signings and expansion of services to existing clients with revenue increasing $58.8 million, or 16.2%. The Aspen acquisition contributed $135.8 million to database marketing fees and direct marketing revenue and, within our targeting sector, the DMS acquisition added $19.2 million to revenue.
|
•
|
Other revenue. Revenue increased $26.5 million, or 35.3%, to $101.7 million for the year ended December 31, 2011, due to the Aspen acquisition, which added $26.8 million in revenue associated with strategic consulting initiatives.
|
•
|
Within the LoyaltyOne segment, cost of operations increased $29.6 million, of which $25.3 million relates to the increase in the foreign currency exchange rate to $1.01 for the year ended December 31, 2011 from $0.97 for the year ended December 31, 2010. Excluding the impact of foreign currency exchange, cost of operations increased $4.3 million due to increases in costs associated with our international initiatives in 2011, offset in part by certain gains in securities realized in 2010 but not in 2011.
|
•
|
Within the Epsilon segment, cost of operations increased $193.0 million due to the Aspen and DMS acquisitions, which added $137.1 million and $15.0 million to cost of operations, respectively. Excluding these acquisitions, cost of operations increased $40.9 million, which was associated with the growth of the marketing technology business where payroll related costs increased $43.5 million.
|
•
|
Within the Private Label Services and Credit segment, cost of operations increased by $40.8 million from increases in payroll and benefits of $17.0 million resulting from growth and an increase in incentive compensation due to over-performance of the segment. Credit card expenses, including marketing and collection fees and other costs increased $11.3 million and $2.9 million, respectively, due to an increase in credit sales and volumes.
|
•
|
Securitization funding costs. Securitization funding costs decreased $28.4 million to $126.7 million primarily as a result of changes in the valuation in our interest rate swaps. In the year ended December 31, 2011, we incurred a gain of $31.7 million in the valuation of our interest rate swaps as compared to a gain of $8.7 million in the prior year, which resulted in a net benefit of $23.0 million from the valuation of our interest rate swaps. Interest on asset-backed securities debt decreased $9.8 million due to lower average borrowings for 2011 versus 2010.
|
•
|
Interest expense on deposits. Interest on deposits decreased $6.4 million to $23.1 million due to lower average rates and lower average borrowings for the year ended December 31, 2011 as compared to the year ended December 31, 2010.
|
•
|
Interest expense on long-term and other debt, net. Interest expense on long-term and other debt, net increased $15.0 million to $148.8 million due to a $7.7 million increase in the amortization of imputed interest associated with the convertible senior notes as compared to 2010, an increase in amortization of debt issuance costs of $4.0 million, in part due to a $2.6 million write-off of unamortized debt costs associated with the early extinguishment of term loans, and increased borrowings associated in part with the Aspen acquisition.
|
•
|
LoyaltyOne. Revenue increased $45.2 million, or 5.7%, to $844.8 million for the year ended December 31, 2011. Revenue benefited from a favorable foreign currency exchange rate, which represented $34.7 million of the increase. In Canadian dollars, revenue for the AIR MILES Reward Program increased CAD $12.8 million, or 1.6%. Revenue from issuance fees, for which we provide marketing and administrative services, increased CAD $13.3 million due to increases in the total number of AIR MILES reward miles issued. Redemption revenue increased a net CAD $6.8 million, or 1.2%. Although AIR MILES reward miles redeemed were flat, issuance growth over the past several quarters has increased revenue associated with breakage. These increases were offset by (1) a decline in investment revenue of CAD $4.5 million due to lower interest earned on investments and (2) a decrease in other consulting revenue.
|
•
|
Epsilon. Revenue increased $233.8 million, or 38.1%, to $847.1 million for the year ended December 31, 2011. Marketing technology revenue continues to build from client signings in 2010 and 2011 and the expansion of services to new and existing clients, growing $58.8 million, or 16.2%. Additionally, the Aspen and DMS acquisitions added $162.6 million and $19.3 million to revenue, respectively.
|
•
|
Private Label Services and Credit. Revenue increased $102.7 million, or 7.4%, to $1.5 billion for the year ended December 31, 2011. Finance charges and late fees increased by $117.6 million driven by an increase in our gross yield of 270 basis points, offset in part by a 1.3% decline in average credit card receivables. The expansion in our gross yield was in part due to changes in cardholder terms made throughout 2010, which positively impacted our gross yield for the year ended December 31, 2011. This increase was partially offset by a $15.0 million reduction in transaction revenue as a result of lower merchant fees.
|
•
|
Corporate/Other. Revenue decreased slightly to $1.1 million for the year ended December 31, 2011, as we are currently earning a nominal amount of revenue related to sublease agreements.
|
•
|
LoyaltyOne. Adjusted EBITDA increased $12.5 million, or 6.1%, to $217.1 million for the year ended December 31, 2011, helped by a favorable foreign currency exchange rate, which added $9.6 million to adjusted EBITDA. Adjusted EBITDA in local currency (CAD) for the AIR MILES Reward Program increased CAD $9.3 million, or 4.2%, with adjusted EBITDA margin increasing to 25.7% from 25.6%. Adjusted EBITDA benefited from the growth in AIR MILES reward miles issued and increased margins on redemptions, which were offset by both the runoff of amortized revenue and increases in international expansion costs.
|
•
|
Epsilon. Adjusted EBITDA increased $43.1 million, or 28.3%, to $195.4 million for the year ended December 31, 2011. Adjusted EDITDA was positively impacted by double digit growth in our strategic database business and the Aspen acquisition, which added $23.2 million to adjusted EBITDA. Adjusted EBITDA margin decreased to 23.1% for the year ended December 31, 2011 from 24.8% for the year ended December 31, 2010 due to a shift in revenue mix attributable to the Aspen acquisition.
|
•
|
Private Label Services and Credit. Adjusted EBITDA increased $148.3 million, or 28.0%, to $678.3 million for the year ended December 31, 2011 and adjusted EBITDA margin increased to 45.6% for the year ended December 31, 2011 compared to 38.2% for the year ended December 31, 2010. Adjusted EBITDA was positively impacted by the increase in our gross yield as described above and a decline in the provision for loan loss. The net charge-off rate for the year ended December 31, 2011 was 6.9% as compared to 8.9% in 2010. The decline in the net charge-off rate reflected the continued improvement in credit quality of the credit card receivables. Net charge-off rates continue to trend lower and delinquency rates, historically a good predictor of future losses, improved to 4.4% of principal credit card receivables at December 31, 2011 from 5.4% at December 31, 2010.
|
•
|
Corporate/Other. Adjusted EBITDA decreased $18.5 million to a loss of $76.4 million for the year ended December 31, 2011 related to increases in medical and benefit costs, incentive compensation and legal and consulting costs.
|
December 31,
2012
|
% of
Total
|
December 31,
2011
|
% of
Total
|
||||||||||
(In thousands, except percentages)
|
|||||||||||||
Receivables outstanding - principal
|
$
|
7,097,951
|
100
|
%
|
$
|
5,408,862
|
100
|
%
|
|||||
Principal receivables balances contractually delinquent:
|
|||||||||||||
31 to 60 days
|
100,479
|
1.4
|
%
|
78,272
|
1.4
|
%
|
|||||||
61 to 90 days
|
62,546
|
0.9
|
51,709
|
1.0
|
|||||||||
91 or more days
|
120,163
|
1.7
|
105,626
|
2.0
|
|||||||||
Total
|
$
|
283,188
|
4.0
|
%
|
$
|
235,607
|
4.4
|
%
|
Year Ended December 31,
|
|||||||||||
2012
|
2011
|
2010
|
|||||||||
(In thousands, except percentages)
|
|||||||||||
Average credit card receivables
|
$
|
5,927,562
|
$
|
4,962,503
|
$
|
5,025,915
|
|||||
Net charge-offs of principal receivables
|
282,842
|
340,064
|
448,587
|
||||||||
Net charge-offs as a percentage of average credit card receivables (1)
|
4.8
|
%
|
6.9
|
%
|
8.9
|
%
|
|||||
(1)
|
|
We acquired the credit card receivables of The Bon-Ton Stores, Inc. and The Talbots, Inc. in July 2012 and August 2012, respectively. Under GAAP, losses associated with purchased credit card receivables are reflected in the fair value of the purchased credit card receivables and not reported as net charge-offs. The net charge-off rate would have been 5.0% for the year ended December 31, 2012 if losses associated with the acquired credit card receivables had been reported as net charge-offs.
|
|
•
|
Credit Card Receivables Funding. Cash decreased $1.4 billion for the year ended December 31, 2012 due to growth in our credit card receivables as compared to $578.1 million in the prior year.
|
|
•
|
Purchase of Credit Card Portfolios. Cash decreased $780.0 million for the year ended December 31, 2012 due to the acquisition of existing private label credit card portfolios from Pier 1 Imports, Premier Designs, The Bon-Ton Stores, Inc. and The Talbots, Inc. During the year ended December 31, 2011, cash decreased $68.6 million due to the acquisition of existing private label credit card portfolios from J.Jill and Marathon.
|
|
•
|
Cash Collateral, Restricted. Cash increased $99.0 million for the year ended December 31, 2012 as compared to $22.0 million for the year ended December 31, 2011 due to the maturing of asset-backed securities debt, as the restricted cash is released upon repayment and a decrease in excess funding deposits in 2012.
|
|
•
|
Payments for Acquired Businesses, Net of Cash. For the year ended December 31, 2012, we utilized cash of $451.8 million for the HMI acquisition, which was completed on November 30, 2012, and $12.2 million for the Advecor acquisition, which was completed on December 31, 2012. For the year ended December 31, 2011, we utilized $359.1 million for the Aspen acquisition, which was completed on May 31, 2011.
|
|
•
|
Capital Expenditures. Our capital expenditures increased for the year ended December 31, 2012 to $116.5 million as compared to $73.5 million for 2011 due to investments in technology, including enhancements to support future growth. We anticipate capital expenditures not to exceed approximately 3.0% of annual revenue for the foreseeable future.
|
2013
|
2014
|
2015
|
2016
|
2017 and Thereafter
|
Total
|
||||||||||||||||
(In thousands)
|
|||||||||||||||||||||
Term notes
|
$
|
822,339
|
$
|
250,000
|
$
|
393,750
|
$
|
100,000
|
$
|
1,383,166
|
$
|
2,949,255
|
|||||||||
Conduit facilities (1)
|
705,000
|
1,200,000
|
—
|
—
|
—
|
1,905,000
|
|||||||||||||||
Total (2)
|
$
|
1,527,339
|
$
|
1,450,000
|
$
|
393,750
|
$
|
100,000
|
$
|
1,383,166
|
$
|
4,854,255
|
|||||||||
(1)
|
Amount represents borrowing capacity, not outstanding borrowings.
|
(2)
|
Total amounts do not include $1.0 billion of debt issued by the credit card securitization trusts, which was retained by us and has been eliminated in the consolidated financial statements.
|
2013
|
2014 & 2015
|
2016 & 2017
|
2018 &
Thereafter
|
Total
|
|||||||||||||
(In thousands)
|
|||||||||||||||||
Deposits (1)
|
$
|
1,113,143
|
$
|
753,248
|
$
|
343,666
|
$
|
72,152
|
$
|
2,282,209
|
|||||||
Asset-backed securities debt (1)
|
1,557,109
|
1,275,208
|
488,157
|
1,085,211
|
4,405,685
|
||||||||||||
2011 Credit Facility (1)
|
—
|
—
|
—
|
—
|
—
|
||||||||||||
2011 Term Loan (1)
|
53,868
|
127,819
|
781,615
|
—
|
963,302
|
||||||||||||
Senior notes (1)
|
52,875
|
105,750
|
505,750
|
571,697
|
1,236,072
|
||||||||||||
Convertible senior notes (1)
|
829,100
|
351,053
|
—
|
—
|
1,180,153
|
||||||||||||
Operating leases
|
63,532
|
100,397
|
73,798
|
56,737
|
294,464
|
||||||||||||
Capital leases
|
14
|
—
|
—
|
—
|
14
|
||||||||||||
Software licenses
|
2,281
|
—
|
—
|
—
|
2,281
|
||||||||||||
ASC 740 obligations (2)
|
—
|
—
|
—
|
—
|
—
|
||||||||||||
Purchase obligations (3)
|
109,184
|
77,900
|
73,694
|
49,187
|
309,965
|
||||||||||||
$
|
3,781,106
|
$
|
2,791,375
|
$
|
2,266,680
|
$
|
1,834,984
|
$
|
10,674,145
|
||||||||
(1)
|
The deposits, asset-backed securities debt, 2011 Credit Facility, 2011 Term Loan, senior notes and convertible senior notes represent our estimated debt service obligations, including both principal and interest. Interest was based on the interest rates in effect as of December 31, 2012, applied to the contractual repayment period.
|
(2)
|
Does not reflect unrecognized tax benefits of $89.0 million, of which the timing remains uncertain.
|
(3)
|
Purchase obligations are defined as an agreement to purchase goods or services that is enforceable and legally binding and specifying all significant terms, including the following: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and approximate timing of the transaction. The purchase obligation amounts disclosed above represent estimates of the minimum for which we are obligated and the time period in which cash outflows will occur. Purchase orders and authorizations to purchase that involve no firm commitment from either party are excluded from the above table. Purchase obligations include purchase commitments under our AIR MILES Reward Program, minimum payments under support and maintenance contracts and agreements to purchase other goods and services.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
|
•
|
have multi-year supply agreements with several Canadian, U.S. and international airlines;
|
|
•
|
are seeking new supply agreements with additional airlines;
|
|
•
|
periodically alter the total mix of rewards available to collectors with the introduction of new merchandise rewards, which are typically lower cost per AIR MILES reward mile than air travel;
|
|
•
|
allow collectors to obtain certain travel rewards using a combination of AIR MILES reward miles and cash or cash alone in addition to using AIR MILES reward miles alone; and
|
|
•
|
periodically adjust the number of AIR MILES reward miles required to be redeemed to obtain a reward.
|
Financial Statements and Supplementary Data.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
|
Controls and Procedures.
|
Other Information.
|
Directors, Executive Officers and Corporate Governance.
|
Executive Compensation.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
|
Certain Relationships and Related Transactions, and Director Independence.
|
Principal Accounting Fees and Services.
|
Exhibits, Financial Statement Schedules.
|
|
a)
|
The following documents are filed as part of this report:
|
|
(1)
|
Financial Statements
|
|
(2)
|
Financial Statement Schedule
|
|
(3)
|
The following exhibits are filed as part of this Annual Report on Form 10-K or, where indicated, were previously filed and are hereby incorporated by reference.
|
Exhibit No.
|
Description
|
||
3.1
|
Second Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit No. 3.1 to our Registration Statement on Form S-1 filed with the SEC on March 3, 2000, File No. 333-94623).
|
||
3.2
|
Third Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit No. 3.1 to our Current Report on Form 8-K, filed with the SEC on December 19, 2011, File No. 001-15749).
|
||
4
|
Specimen Certificate for shares of Common Stock of the Registrant (incorporated by reference to Exhibit No. 4 to our Quarterly Report on Form 10-Q, filed with the SEC on August 8, 2003, File No. 001-15749).
|
||
10.1
|
Office Lease between Nodenble Associates, LLC and ADS Alliance Data Systems, Inc., dated as of October 1, 2009 (incorporated by reference to Exhibit No. 10.1 to our Annual Report on Form 10-K, filed with the SEC on March 1, 2010, File No. 001-15749).
|
||
10.2
|
Fourth Amendment to Office Lease between FSP One Legacy Circle LLC (as successor-in-interest to Nodenble Associates, LLC) and ADS Alliance Data Systems, Inc. dated as of June 15, 2011 (incorporated by reference to Exhibit No. 10.2 to our Annual Report on Form 10-K, filed with the SEC on February 27, 2012, File No. 001-15749).
|
||
10.3
|
Lease Agreement, dated as of May 19, 2010 between Brandywine Operating Partnership, L.P. and ADS Alliance Data Systems, Inc. (incorporated by reference to Exhibit No. 10.13 to our Quarterly Report on Form 10-Q, filed with the SEC on August 9, 2010, File No. 001-15749).
|
||
10.4
|
Office Lease between Office City, Inc. and World Financial Network National Bank, dated December 24, 1986, and amended January 19, 1987, May 11, 1988, August 4, 1989 and August 18, 1999 (incorporated by reference to Exhibit No. 10.17 to our Registration Statement on Form S-1 filed with the SEC on January 13, 2000, File No. 333-94623).
|
||
10.5
|
Fifth Amendment to Office Lease between Office City, Inc. and World Financial Network National Bank, dated March 29, 2004 (incorporated by reference to Exhibit 10.6 to our Annual Report on Form 10-K, filed with the SEC on February 28, 2008, File No. 001-15749).
|
||
10.6
|
Lease Agreement by and between Continental Acquisitions, Inc. and World Financial Network National Bank, dated July 2, 1990, and amended September 11, 1990, November 16, 1990 and February 18, 1991 (incorporated by reference to Exhibit No. 10.18 to our Registration Statement on Form S-1 filed with the SEC on January 13, 2000, File No. 333-94623).
|
||
10.7
|
Fourth Amendment to Lease Agreement by and between Continental Acquisitions, Inc. and World Financial Network National Bank, dated June 1, 2000 (incorporated by reference to Exhibit No. 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on May 14, 2003, File No. 001-15749).
|
||
10.8
|
Fifth Amendment to Lease Agreement by and between Continental Acquisitions, Inc. and World Financial Network National Bank, dated June 30, 2001 (incorporated by reference to Exhibit No. 10.10 to our Annual Report on Form 10-K filed with the SEC on March 3, 2006, File No. 001-15749).
|
||
10.9
|
Sixth Amendment to Lease Agreement by and between Continental Acquisitions, Inc. and World Financial Network National Bank, dated January 27, 2006 (incorporated by reference to Exhibit 10.10 to our Annual Report on Form 10-K, filed with the SEC on February 28, 2008, File No. 001-15749).
|
||
10.10
|
Letter Agreement by and between Continental Realty, Ltd. and ADS Alliance Data Systems, Inc., dated as of October 29, 2009 (incorporated by reference to Exhibit No. 10.10 to our Annual Report on Form 10-K, filed with the SEC on March 1, 2010, File No. 001-15749).
|
Exhibit No.
|
Description
|
10.11
|
Seventh Amendment to Lease Agreement by and among JEL/220 W. Schrock, LLC, FEK/220 W. Schrock, LLC, CP/220 W. Schrock, LLC, NRI 220 Schrock, LLC, ADS Alliance Data Systems, Inc. and Alliance Data Systems Corporation, dated as of January 14, 2010 (incorporated by reference to Exhibit No. 10.10 to our Annual Report on Form 10-K, filed with the SEC on February 28, 2011, File No. 001-15749).
|
||
10.12
|
Lease Agreement by and between 601 Edgewater LLC and Epsilon Data Management, Inc., dated July 30, 2002 (incorporated by reference to Exhibit No. 10.17 to our Annual Report on Form 10-K filed with the SEC on March 4, 2005, File No. 001-15749).
|
||
10.13
|
First Amendment to Lease Agreement by and between 601 Edgewater LLC and Epsilon Data Management, Inc., dated August 29, 2007 (incorporated by reference to Exhibit 10.13 to our Annual Report on Form 10-K, filed with the SEC on February 28, 2008, File No. 001-15749).
|
||
10.14
|
Second Amendment to Lease Agreement by and between 601 Edgewater LLC and Epsilon Data Management, LLC, dated October 3, 2008 (incorporated by reference to Exhibit 10.13 to our Annual Report on Form 10-K, filed with the SEC on March 2, 2009, File No. 001-15749).
|
||
10.15
|
Third Amendment to Lease Agreement by and between 601 Edgewater LLC and Epsilon Data Management, LLC, dated November 10, 2009 (incorporated by reference to Exhibit No. 10.14 to our Annual Report on Form 10-K, filed with the SEC on March 1, 2010, File No. 001-15749).
|
||
10.16
|
Lease Agreement by and between Sterling Direct, Inc. and Sterling Properties, L.L.C., dated September 22, 1997, as subsequently assigned (incorporated by reference to Exhibit No. 10.18 to our Annual Report on Form 10-K filed with the SEC on March 4, 2005, File No. 001-15749).
|
||
10.17
|
First Amendment to Lease by and between Bekins Properties LLC (as successor in interest to Sterling Properties LLC) and Epsilon Data Management, LLC (as successor in interest to Sterling Direct, Inc.), dated as of September 1, 2011 (incorporated by reference to Exhibit No. 10.17 to our Annual Report on Form 10-K, filed with the SEC on February 27, 2012, File No. 001-15749).
|
||
10.18
|
Lease Agreement by and between KDC-Regent I Investments, LP and Epsilon Data Management, Inc., dated May 31, 2005 (incorporated by reference to Exhibit No. 10.17 to our Annual Report on Form 10-K filed with the SEC on March 3, 2006, File No. 001-15749).
|
||
10.19
|
Second Amendment to Lease Agreement by and between KDC-Regent I Investments, LP and Epsilon Data Management, Inc., dated May 11, 2007 (incorporated by reference to Exhibit 10.17 to our Annual Report on Form 10-K, filed with the SEC on February 28, 2008, File No. 001-15749).
|
||
10.20
|
Lease between 592423 Ontario Inc. and Loyalty Management Group Canada, Inc., dated November 14, 2005 (incorporated by reference to Exhibit No. 10.18 to our Annual Report on Form 10-K filed with the SEC on February 26, 2007, File No. 001-15749).
|
||
10.21
|
Lease Amending Agreement by and between Dundeal Canada (GP) Inc. (as successor in interest to 592423 Ontario Inc.) and LoyaltyOne, Inc., dated as of May 21, 2009 (incorporated by reference to Exhibit No. 10.19 to our Annual Report on Form 10-K, filed with the SEC on March 1, 2010, File No. 001-15749).
|
||
10.22
|
Lease Agreement by and between ADS Place Phase I, LLC and ADS Alliance Data Systems, Inc. dated August 25, 2006 (incorporated by reference to Exhibit No. 10.20 to our Annual Report on Form 10-K filed with the SEC on February 26, 2007, File No. 001-15749).
|
||
10.23
|
Third Lease Amendment by and between ADS Place Phase I, LLC and ADS Alliance Data Systems, Inc. dated as of November 1, 2007 (incorporated by reference to Exhibit No. 10.21 to our Annual Report on Form 10-K, filed with the SEC on March 1, 2010, File No. 001-15749).
|
||
10.24
|
Lease between 2725312 Canada Inc. and Loyalty Management Group Canada Inc. dated as of February 26, 2008, as amended (incorporated by reference to Exhibit No. 10.29 to our Annual Report on Form 10-K, filed with the SEC on February 27, 2012, File No. 001-15749).
|
Exhibit No.
|
Description
|
10.25
|
Industrial Building Lease between Aspen Marketing Services, Inc. (as successor-in-interest to Aspen Marketing, Inc.) and A. & A. Conte Joint Venture Limited Partnership dated June 3, 2003, as amended (incorporated by reference to Exhibit No. 10.30 to our Annual Report on Form 10-K, filed with the SEC on February 27, 2012, File No. 001-15749).
|
||
*10.26
|
Fourth Amendment to Industrial Building Lease between Aspen Marketing Services, LLC (as successor-in-interest to Aspen Marketing Services, Inc.) and A. & A. Conte Joint Venture Limited Partnership dated March 26, 2012.
|
||
*10.27
|
Co-Location Agreement between Epsilon Data Management, LLC and Cyrus Networks, LLC d/b/a CyrusOne dated November 15, 2011.
|
||
*10.28
|
Lease Agreement between NOP Cottonwood 2795, LLC and ADS Alliance Data Systems, Inc. dated as of September 21, 2010, as amended.
|
||
+10.29
|
Alliance Data Systems Corporation Amended and Restated Executive Deferred Compensation Plan effective January 1, 2008 (incorporated by reference to Exhibit No. 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on May 11, 2009, File No. 001-15749).
|
||
+10.30
|
Amended and Restated Alliance Data Systems Corporation and its Subsidiaries Stock Option and Restricted Stock Plan (incorporated by reference to Exhibit No. 10.34 to our Registration Statement on Form S-1 filed with the SEC on May 4, 2001, File No. 333-94623).
|
||
+10.31
|
Form of Alliance Data Systems Corporation Incentive Stock Option Agreement under the Amended and Restated Alliance Data Systems Corporation and its Subsidiaries Stock Option and Restricted Stock Plan (incorporated by reference to Exhibit No. 10.35 to our Registration Statement on Form S-1 filed with the SEC on January 13, 2000, File No. 333-94623).
|
||
+10.32
|
Form of Alliance Data Systems Corporation Non-Qualified Stock Option Agreement under the Amended and Restated Alliance Data Systems Corporation and its Subsidiaries Stock Option and Restricted Stock Plan (incorporated by reference to Exhibit No. 10.36 to our Registration Statement on Form S-1 filed with the SEC on January 13, 2000, File No. 333-94623).
|
||
+10.33
|
Alliance Data Systems Corporation 2003 Long-Term Incentive Plan (incorporated by reference to Exhibit No. 4.6 to our Registration Statement on Form S-8 filed with the SEC on June 18, 2003, File No. 333-106246).
|
||
+10.34
|
Alliance Data Systems Corporation 2005 Long-Term Incentive Plan (incorporated by reference to Exhibit A to our Definitive Proxy Statement filed with the SEC on April 29, 2005, File No. 001-15749).
|
||
+10.35
|
Amendment Number One to the Alliance Data Systems Corporation 2005 Long Term Incentive Plan, dated as of September 24, 2009 (incorporated by reference to Exhibit No. 10.8 to our Quarterly Report on Form 10-Q filed with the SEC on November 9, 2009, File No. 001-15749).
|
||
+10.36
|
Alliance Data Systems Corporation 2010 Omnibus Incentive Plan (incorporated by reference to Exhibit A to our Definitive Proxy Statement, filed with the SEC on April 20, 2010, File No. 001-15749).
|
||
+10.37
|
Form of Nonqualified Stock Option Agreement for awards under the Alliance Data Systems Corporation 2005 Long Term Incentive Plan (incorporated by reference to Exhibit No. 10.4 to our Current Report on Form 8-K filed with the SEC on August 4, 2005, File No. 001-15749).
|
||
+10.38
|
Form of Canadian Nonqualified Stock Option Agreement for awards under the Alliance Data Systems Corporation 2005 Long Term Incentive Plan (incorporated by reference to Exhibit No. 10.101 to our Annual Report on Form 10-K filed with the SEC on February 26, 2007, File No. 001-15749).
|
||
+10.39
|
Form of Performance-Based Restricted Stock Unit Award Agreement under the 2005 Long Term Incentive Plan (2010 grant) (incorporated by reference to Exhibit No. 10.61 to our Annual Report on Form 10-K, filed with the SEC on March 1, 2010, File No. 001-15749).
|
||
+10.40
|
Form of Canadian Performance-Based Restricted Stock Unit Award Agreement under the 2005 Long Term Incentive Plan (2010 grant) (incorporated by reference to Exhibit No. 10.62 to our Annual Report on Form 10-K, filed with the SEC on March 1, 2010, File No. 001-15749).
|
Exhibit No.
|
Description
|
+10.41
|
Form of Time-Based Restricted Stock Unit Award Agreement under the Alliance Data Systems Corporation 2010 Omnibus Incentive Plan (2011 grant) (incorporated by reference to Exhibit No. 10.1 to our Quarterly Report on Form 10-Q, filed with the SEC on May 9, 2011, File No. 001-15749).
|
||
+10.42
|
Form of Performance-Based Restricted Stock Unit Award Agreement under the Alliance Data Systems Corporation 2010 Omnibus Incentive Plan (2011 grant) (incorporated by reference to Exhibit No. 10.2 to our Quarterly Report on Form 10-Q, filed with the SEC on May 9, 2011, File No. 001-15749).
|
||
+10.43
|
Form of Canadian Time-Based Restricted Stock Unit Award Agreement under the Alliance Data Systems Corporation 2010 Omnibus Incentive Plan (2011 grant) (incorporated by reference to Exhibit No. 10.3 to our Quarterly Report on Form 10-Q, filed with the SEC on May 9, 2011, File No. 001-15749).
|
||
+10.44
|
Form of Canadian Performance-Based Restricted Stock Unit Award Agreement under the Alliance Data Systems Corporation 2010 Omnibus Incentive Plan (2011 grant) (incorporated by reference to Exhibit No. 10.4 to our Quarterly Report on Form 10-Q, filed with the SEC on May 9, 2011, File No. 001-15749).
|
||
+10.45
|
Form of Time-Based Restricted Stock Unit Award Agreement under the Alliance Data Systems Corporation 2010 Omnibus Incentive Plan (2012 grant) (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on February 23, 2012, File No. 001-15749).
|
||
+10.46
|
Form of Performance-Based Restricted Stock Unit Award Agreement under the Alliance Data Systems Corporation 2010 Omnibus Incentive Plan (2012 grant) (incorporated by reference to Exhibit No. 10.2 to our Current Report on Form 8-K filed with the SEC on February 23, 2012, File No. 001-15749).
|
||
+10.47
|
Form of Time-Based Restricted Stock Unit Award Agreement under the Alliance Data Systems Corporation 2010 Omnibus Incentive Plan (2013 grant) (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on February 25, 2013, File No. 001-15749).
|
||
+10.48
|
Form of Performance-Based Restricted Stock Unit Award Agreement under the Alliance Data Systems Corporation 2010 Omnibus Incentive Plan (2013 grant) (incorporated by reference to Exhibit No. 10.2 to our Current Report on Form 8-K filed with the SEC on February 25, 2013, File No. 001-15749).
|
||
+10.49
|
Form of Non-Employee Director Nonqualified Stock Option Agreement (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on June 13, 2005, File No. 001-15749).
|
||
+10.50
|
Form of Non-Employee Director Share Award Letter (incorporated by reference to Exhibit No. 10.2 to our Current Report on Form 8-K filed with the SEC on June 13, 2005, File No. 001-15749).
|
||
+10.51
|
Form of Non-Employee Director Restricted Stock Unit Award Agreement under the Alliance Data Systems Corporation 2005 Long Term Incentive Plan (2008 grant) (incorporated by reference to Exhibit No. 10.10 to our Quarterly Report on Form 10-Q filed with the SEC on August 8, 2008, File No. 001-15749).
|
||
*+10.52
|
Form of Non-employee Director Restricted Stock Unit Award Agreement under the Alliance Data Systems Corporation 2010 Omnibus Incentive Plan.
|
||
+10.53
|
Alliance Data Systems Corporation Non-Employee Director Deferred Compensation Plan (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on June 9, 2006, File No. 001-15749).
|
||
+10.54
|
Form of Alliance Data Systems Associate Confidentiality Agreement (incorporated by reference to Exhibit No. 10.24 to our Annual Report on Form 10-K filed with the SEC on March 12, 2003, File No. 001-15749).
|
||
+10.55
|
Form of Alliance Data Systems Corporation Indemnification Agreement for Officers and Directors (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K filed with the SEC on February 1, 2005, File No. 001-15749).
|
||
*+10.56
|
Amended and Restated Alliance Data Systems 401(k) and Retirement Savings Plan, effective January 1, 2013.
|
Exhibit No.
|
Description
|
+10.57
|
LoyaltyOne, Inc. Registered Retirement Savings Plan, as amended (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q, filed with the SEC on May 7, 2010, File No. 001-15749).
|
||
+10.58
|
LoyaltyOne, Inc. Deferred Profit Sharing Plan, as amended (incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10-Q, filed with the SEC on May 7, 2010, File No. 001-15749).
|
||
+10.59
|
LoyaltyOne, Inc. Canadian Supplemental Executive Retirement Plan, effective as of January 1, 2009 (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q, filed with the SEC on May 7, 2010, File No. 001-15749).
|
||
+10.60
|
Form of Change in Control Agreement, dated as of September 25, 2003, by and between ADS Alliance Data Systems, Inc. and Edward J. Heffernan (incorporated by reference to Exhibit No. 10.1 to our Registration Statement on Form S-3 filed with the SEC on October 15, 2003, File No. 333-109713).
|
||
10.61
|
Amended and Restated License to Use the Air Miles Trade Marks in Canada, dated as of July 24, 1998, by and between Air Miles International Holdings N.V. and Loyalty Management Group Canada Inc. (incorporated by reference to Exhibit No. 10.43 to our Registration Statement on Form S-1 filed with the SEC on January 13, 2000, File No. 333-94623) (assigned by Air Miles International Holdings N.V. to Air Miles International Trading B.V. by a novation agreement dated as of July 18, 2001).
|
||
10.62
|
Amended and Restated License to Use and Exploit the Air Miles Scheme in Canada, dated July 24, 1998, by and between Air Miles International Trading B.V. and Loyalty Management Group Canada Inc. (incorporated by reference to Exhibit No. 10.44 to our Registration Statement on Form S-1 filed with the SEC on January 13, 2000, File No. 333-94623).
|
||
10.63
|
Amended and Restated Program Participation Agreement, dated as of January 1, 2013, by and between LoyaltyOne, Inc. and Bank of Montreal (incorporated by reference to Exhibit 10.1 to our Current report on Form 8-K filed with the SEC on January 14, 2013, File No. 001-15749).
|
||
10.64
|
Second Amended and Restated Pooling and Servicing Agreement, dated as of January 17, 1996 as amended and restated as of September 17, 1999 and August 1, 2001, by and among WFN Credit Company, LLC, World Financial Network National Bank, and BNY Midwest Trust Company (incorporated by reference to Exhibit No. 4.6 to the Registration Statement on Form S-3 of world financial network credit card master trust filed with the SEC on July 5, 2001, File No. 333-60418).
|
||
10.65
|
Omnibus Amendment, dated as of March 31, 2003, among WFN Credit Company, LLC, World Financial Network Credit Card Master Trust, World Financial Network National Bank and BNY Midwest Trust Company (incorporated by reference to Exhibit No. 4 to the Current Report on Form 8-K filed by WFN Credit Company, LLC and World Financial Network Credit Card Master Trust on April 22, 2003, File Nos. 333-60418 and 333-60418-01).
|
||
10.66
|
Second Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of May 19, 2004, among World Financial Network National Bank, WFN Credit Company, LLC and BNY Midwest Trust Company (incorporated by reference to Exhibit No. 4.1 to the Current Report on Form 8-K filed by WFN Credit Company, LLC, World Financial Network Credit Card Master Trust and World Financial Network Credit Card Master Note Trust on August 4, 2004, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
||
10.67
|
Third Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of March 30, 2005, among World Financial Network National Bank, WFN Credit Company, LLC and BNY Midwest Trust Company (incorporated by reference to Exhibit No. 4.1 to the Current Report on Form 8-K filed by World Financial Network Credit Card Master Trust and World Financial Network Credit Card Master Note Trust on April 4, 2005, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
||
10.68
|
Fourth Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of June 13, 2007, among World Financial Network National Bank, WFN Credit Company, LLC and BNY Midwest Trust Company (incorporated by reference to Exhibit No. 4.1 to the Current Report on Form 8-K filed by WFN Credit Company, LLC and World Financial Network Credit Card Master Note Trust on June 15, 2007, File Nos. 333-60418 and 333-113669).
|
Exhibit No.
|
Description
|
10.69
|
Fifth Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of October 26, 2007, among World Financial Nwork National Bank, WFN Credit Company, LLC and BNY Midwest Trust Company (incorporated by reference to Exhibit No. 4.1 to the Current Report on Form 8-K filed by WFN Credit Company, LLC, World Financial Network Credit Card Master Trust and World Financial Network Credit Card Master Note Trust on October 31, 2007, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
||
10.70
|
Sixth Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of May 27, 2008, among World Financial Network National Bank, WFN Credit Company, LLC, and The Bank of New York Trust Company, N.A. (incorporated by reference to Exhibit No. 4.1 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC and World Financial Network Credit Card Master Note Trust on May 29, 2008, File Nos. 333-60418 and 333-113669).
|
||
10.71
|
Seventh Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of June 28, 2010, among World Financial Network National Bank, WFN Credit Company, LLC, and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit No. 4.2 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC and World Financial Network Credit Card Master Note Trust on June 30, 2010, File Nos. 333-60418 and 333-113669).
|
||
10.72
|
Supplemental Agreement to Second Amended and Restated Pooling and Servicing Agreement, dated as of August 9, 2010, among World Financial Network National Bank, WFN Credit Company, LLC, and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit No. 4.1 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC and World Financial Network Credit Card Master Note Trust on August 12, 2010, File Nos. 333-60418 and 333-113669).
|
||
10.73
|
Eighth Amendment to the Second Amended and Restated Pooling and Servicing Agreement, dated as of November 9, 2011, among World Financial Network Bank, WFN Credit Company, LLC, and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit No. 4.1 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC, World Financial Network Credit Card Master Trust and World Financial Network Credit Card Master Note Trust on November 14, 2011, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
||
10.74
|
Transfer and Servicing Agreement, dated as of August 1, 2001, between WFN Credit Company, LLC, World Financial Network National Bank, and World Financial Network Credit Card Master Note Trust (incorporated by reference to Exhibit No. 4.3 to the Registration Statement on Form S-3 of World Financial Network Credit Card Master Trust filed with the SEC on July 5, 2001, File No. 333-60418).
|
||
10.75
|
First Amendment to the Transfer and Servicing Agreement, dated as of November 7, 2002, among WFN Credit Company, LLC, World Financial Network National Bank and World Financial Network Credit Card Master Note Trust (incorporated by reference to Exhibit No. 4.2 to the Current Report on Form 8-K filed by WFN Credit Company, LLC and World Financial Network Credit Card Master Trust on November 20, 2002, File Nos. 333-60418 and 333-60418-01).
|
||
10.76
|
Third Amendment to the Transfer and Servicing Agreement, dated as of May 19, 2004, among WFN Credit Company, LLC, World Financial Network National Bank and World Financial Network Credit Card Master Note Trust (incorporated by reference to Exhibit No. 4.2 of the Current Report on Form 8-K filed by WFN Credit Company, LLC, World Financial Network Credit Card Master Trust and World Financial Network Credit Card Master Note Trust on August 4, 2004, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
||
10.77
|
Fourth Amendment to the Transfer and Servicing Agreement, dated as of March 30, 2005, among WFN Credit Company, LLC, World Financial Network National Bank and World Financial Network Credit Card Master Note Trust (incorporated by reference to Exhibit No. 4.2 to the Current Report on Form 8-K filed by World Financial Network Credit Card Master Trust and World Financial Network Credit Card Master Note Trust on April 4, 2005, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
||
10.78
|
Fifth Amendment to the Transfer and Servicing Agreement, dated as of June 13, 2007, among WFN Credit Company, LLC, World Financial Network National Bank and World Financial Network Credit Card Master Note Trust (incorporated by reference to Exhibit No. 4.2 to the Current Report on Form 8-K filed by WFN Credit Company, LLC and World Financial Network Credit Card Master Note Trust on June 15, 2007, File Nos. 333-60418 and 333-113669).
|
Exhibit No.
|
Description
|
10.79
|
Sixth Amendment to the Transfer and Servicing Agreement, dated as of October 26, 2007, among WFN Credit Company, LLC, World Financial Network National Bank and World Financial Network Credit Card Master Note Trust (incorporated by reference to Exhibit No. 4.2 to the Current Report on Form 8-K filed by WFN Credit Company, LLC, World Financial Network Credit Card Master Trust and World Financial Network Credit Card Master Note Trust on October 31, 2007, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
||
10.80
|
Seventh Amendment to Transfer and Servicing Agreement, dated as of June 28, 2010, among World Financial Network National Bank, WFN Credit Company, LLC, and World Financial Network Credit Card Master Note Trust (incorporated by reference to Exhibit No. 4.4 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC and World Financial Network Credit Card Master Note Trust on June 30, 2010, File Nos. 333-60418 and 333-113669).
|
||
10.81
|
Supplemental Agreement to Transfer and Servicing Agreement, dated as of August 9, 2010, among World Financial Network National Bank, WFN Credit Company, LLC, and World Financial Network Credit Card Master Note Trust (incorporated by reference to Exhibit No. 4.3 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC and World Financial Network Credit Card Master Note Trust on August 12, 2010, File Nos. 333-60418 and 333-113669).
|
||
10.82
|
Eighth Amendment to Transfer and Servicing Agreement, dated as of June 15, 2011, among World Financial Network National Bank, WFN Credit Company, LLC, and World Financial Network Credit Card Master Note Trust (incorporated by reference to Exhibit No. 4.1 to the Current Report on Form 8-K filed with the SEC by World Financial Network Credit Card Master Note Trust and WFN Credit Company, LLC on June 15, 2011, File Nos. 333-113669 and 333-60418).
|
||
10.83
|
Ninth Amendment to Transfer and Servicing Agreement, dated as of November 9, 2011, among World Financial Network Bank, WFN Credit Company, LLC, and World Financial Network Credit Card Master Note Trust (incorporated by reference to Exhibit No. 4.3 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC, World Financial Network Credit Card Master Trust and World Financial Network Credit Card Master Note Trust on November 14, 2011, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
||
10.84
|
Receivables Purchase Agreement, dated as of August 1, 2001, between World Financial Network National Bank and WFN Credit Company, LLC (incorporated by reference to Exhibit No. 4.8 to the Registration Statement on Form S-3 of World Financial Network Credit Card Master Trust filed with the SEC on July 5, 2001, File No. 333-60418).
|
||
10.85
|
First Amendment to Receivables Purchase Agreement, dated as of June 28, 2010, between World Financial Network National Bank and WFN Credit Company, LLC (incorporated by reference to Exhibit No. 4.3 to the Current Report on Form 8-K filed with the SEC by World Financial Network Credit Card Master Note Trust and WFN Credit Company, LLC on June 30, 2010, File Nos. 333-113669 and 333-60418).
|
||
10.86
|
Second Amendment to Receivables Purchase Agreement, dated as of November 9, 2011, between World Financial Network Bank and WFN Credit Company, LLC (incorporated by reference to Exhibit No. 4.2 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC, World Financial Network Credit Card Master Trust and World Financial Network Credit Card Master Note Trust on November 14, 2011, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
||
10.87
|
Supplemental Agreement to Receivables Purchase Agreement, dated as of August 9, 2010, between World Financial Network National Bank and WFN Credit Company, LLC (incorporated by reference to Exhibit No. 4.2 to the Current Report on Form 8-K filed with the SEC by World Financial Network Credit Card Master Note Trust and WFN Credit Company, LLC on August 12, 2010, File Nos. 333-113669 and 333-60418).
|
||
10.88
|
Master Indenture, dated as of August 1, 2001, between World Financial Network Credit Card Master Note Trust and BNY Midwest Trust Company (incorporated by reference to Exhibit No. 4.1 to the Registration Statement on Form S-3 filed with the SEC by WFN Credit Company, LLC and World Financial Network Credit Card Master Trust on July 5, 2001, File Nos. 333-60418 and 333-60418-01).
|
||
10.89
|
Supplemental Indenture No. 1, dated as of August 13, 2003, between World Financial Network Credit Card Master Note Trust and BNY Midwest Trust Company (incorporated by reference to Exhibit No. 4.2 of the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC and World Financial Network Credit Card Master Trust on August 28, 2003, File Nos. 333-60418 and 333-60418-01).
|
Exhibit No.
|
Description
|
10.90
|
Supplemental Indenture No. 2, dated as of June 13, 2007, between World Financial Network Credit Card Master Note Trust and BNY Midwest Trust Company (incorporated by reference to Exhibit No. 4.3 to the Current Report on Form 8-K filed by WFN Credit Company, LLC and World Financial Network Credit Card Master Note Trust on June 15, 2007, File Nos. 333-60418 and 333-113669).
|
||
10.91
|
Supplemental Indenture No. 3, dated as of May 27, 2008, between World Financial Network Credit Card Master Note Trust and The Bank of New York Trust Company, N.A. (incorporated by reference to Exhibit No. 4.2 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC and World Financial Network Credit Card Master Note Trust on May 29, 2008, File Nos. 333-60418 and 333-113669).
|
||
10.92
|
Supplemental Indenture No. 4, dated as of June 28, 2010, between World Financial Network Credit Card Master Note Trust and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit No. 4.1 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC and World Financial Network Credit Card Master Note Trust on June 30, 2010, File Nos. 333-60418 and 333-113669).
|
||
10.93
|
Supplemental Indenture No. 5, dated as of February 20, 2013, between World Financial Network Credit Card Master Note Trust and Union Bank, N.A. (incorporated by reference to Exhibit No. 4.2 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC, World Financial Network Credit Card Master Trust and World Financial Network Credit Card Master Note Trust on February 22, 2013, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
||
10.94
|
Agreement of Resignation, Appointment and Acceptance, dated as of June 26, 2012, by and among World Financial Network Bank, World Financial Network Credit Card Master Note Trust, The Bank of New York Mellon Trust Company, N.A., and Union Bank, N.A. (incorporated by reference to Exhibit No. 4.1 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC, World Financial Network Credit Card Master Trust, and World Financial Network Credit Card Master Note Trust on June 26, 2012, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
||
10.95
|
Agreement of Resignation, Appointment and Acceptance, dated as of June 26, 2012, by and among WFN Credit Company, LLC, The Bank of New York Mellon Trust Company, N.A., and Union Bank, N.A. (incorporated by reference to Exhibit No. 4.2 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC, World Financial Network Credit Card Master Trust, and World Financial Network Credit Card Master Note Trust on June 26, 2012, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
||
10.96
|
Series 2009-D Indenture Supplement, dated as of August 13, 2009 (incorporated by reference to Exhibit No. 4.3 to the Current Report on Form 8-K filed by World Financial Network Credit Card Master Note Trust and WFN Credit Company, LLC with the SEC on August 17, 2009, File Nos. 333-113669 and 333-60418).
|
||
10.97
|
Series 2010-A Indenture Supplement, dated as of July 8, 2010, between World Financial Network Credit Card Master Note Trust and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit No. 4.1 to the Current Report on Form 8-K filed with the SEC by World Financial Network Credit Card Master Note Trust and WFN Credit Company, LLC on July 14, 2010, File Nos. 333-113669 and 333-60418).
|
||
10.98
|
Series 2011-A Indenture Supplement, dated as of November 9, 2011, between World Financial Network Credit Card Master Note Trust and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit No. 4.1 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC, World Financial Network Credit Card Master Trust and World Financial Network Credit Card Master Note Trust on November 14, 2011, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
||
10.99
|
Series 2011-B Indenture Supplement, dated as of November 9, 2011, between World Financial Network Credit Card Master Note Trust and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit No. 4.2 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC, World Financial Network Credit Card Master Trust and World Financial Network Credit Card Master Note Trust on November 14, 2011, File Nos. 333 -60418, 333-60418-01 and 333-113669).
|
||
10.100
|
Series 2012-A Indenture Supplement, dated as of April 12, 2012, between World Financial Network Credit Card Master Note Trust and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit No. 4.1 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC, World Financial Network Credit Card Master Trust and World Financial Network Credit Card Master Note Trust on April 16, 2012, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
Exhibit No.
|
Description
|
10.101
|
Series 2012-B Indenture Supplement, dated as of July 19, 2012, between World Financial Network Credit Card Master Note Trust and Union Bank, N.A. (incorporated by reference to Exhibit No. 4.1 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC, World Financial Network Credit Card Master Trust and World Financial Network Credit Card Master Note Trust on July 23, 2012, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
||
10.102
|
Series 2012-C Indenture Supplement, dated as of July 19, 2012, between World Financial Network Credit Card Master Note Trust and Union Bank, N.A. (incorporated by reference to Exhibit No. 4.2 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC, World Financial Network Credit Card Master Trust and World Financial Network Credit Card Master Note Trust on July 23, 2012, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
||
10.103
|
Series 2012-D Indenture Supplement, dated as of October 5, 2012, between World Financial Network Credit Card Master Note Trust and Union Bank, N.A. (incorporated by reference to Exhibit No. 4.1 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC, World Financial Network Credit Card Master Trust and World Financial Network Credit Card Master Note Trust on October 10, 2012, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
||
10.104
|
Series 2013-A Indenture Supplement, dated as of February 20, 2013, between World Financial Network Credit Card Master Note Trust and Union Bank, N.A. (incorporated by reference to Exhibit No. 4.1 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC, World Financial Network Credit Card Master Trust and World Financial Network Credit Card Master Note Trust on February 22, 2013, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
||
*10.105
|
Fourth Amended and Restated Service Agreement, dated as of March 1, 2011, between ADS Alliance Data Systems, Inc. and World Financial Network National Bank, as assigned to Comenity Servicing LLC effective January 1, 2013.
|
||
10.106
|
Assignment and Assumption of the Fourth Amended and Restated Service Agreement, dated as of January 1, 2013, ADS Alliance Data Systems, Inc., Comenity Servicing LLC and Comenity Bank, (incorporated by reference to Exhibit No. 99.1 to the Current Report on Form 8-K filed with the SEC by WFN Credit Company, LLC, World Financial Network Credit Card Master Trust and World Financial Network Credit Card Master Note Trust on January 4, 2013, File Nos. 333-60418, 333-60418-01 and 333-113669).
|
||
10.107
|
Receivables Purchase Agreement, dated as of September 28, 2001, between World Financial Network National Bank and WFN Credit Company, LLC (incorporated by reference to Exhibit 10.5 to our Quarterly Report on Form 10-Q, filed with the SEC on November 7, 2008, File No. 001-15749).
|
||
10.108
|
First Amendment to Receivables Purchase Agreement, dated as of June 24, 2008, between World Financial Network National Bank and WFN Credit Company, LLC. (incorporated by reference to Exhibit 10.94 to our Annual Report on Form 10-K, filed with the SEC on March 2, 2009, File No. 001-15749).
|
||
10.109
|
Second Amendment to Receivables Purchase Agreement, dated as of March 30, 2010, between World Financial Network National Bank and WFN Credit Company, LLC. (incorporated by reference to Exhibit No. 10.127 to our Annual Report on Form 10-K, filed with the SEC on February 28, 2011, File No. 001-15749).
|
||
10.110
|
Supplemental Agreement to Receivables Purchase Agreement, dated as of August 9, 2010, between World Financial Network National Bank and WFN Credit Company, LLC. (incorporated by reference to Exhibit No. 10.128 to our Annual Report on Form 10-K, filed with the SEC on February 28, 2011, File No. 001-15749).
|
||
10.111
|
Third Amendment to Receivables Purchase Agreement, dated as of September 30, 2011, between World Financial Network Bank and WFN Credit Company, LLC (incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q, filed with the SEC on November 7, 2011, File No. 001-15749).
|
||
10.112
|
World Financial Network Credit Card Master Trust III Amended and Restated Pooling and Servicing Agreement, dated as of September 28, 2001, among WFN Credit Company, LLC, World Financial Network National Bank, and The Chase Manhattan Bank, USA, National Association (incorporated by reference to Exhibit 10.6 to our Quarterly Report on Form 10-Q, filed with the SEC on November 7, 2008, File No. 001-15749).
|
||
10.113
|
First Amendment to the Amended and Restated Pooling and Servicing Agreement, dated as of April 7, 2004, among WFN Credit Company, LLC, World Financial Network National Bank, and The Chase Manhattan Bank, USA, National Association (incorporated by reference to Exhibit 10.7 to our Quarterly Report on Form 10-Q, filed with the SEC on November 7, 2008, File No. 001-15749).
|
Exhibit No.
|
Description
|
10.114
|
Second Amendment to the Amended and Restated Pooling and Servicing Agreement, dated as of March 23, 2005, among WFN Credit Company, LLC, World Financial Network National Bank, and The Chase Manhattan Bank, USA, National Association (incorporated by reference to Exhibit 10.8 to our Quarterly Report on Form 10-Q, filed with the SEC on November 7, 2008, File No. 001-15749).
|
||
10.115
|
Third Amendment to the Amended and Restated Pooling and Servicing Agreement, dated as of October 26, 2007, among WFN Credit Company, LLC, World Financial Network National Bank, and Union Bank of California, N.A. (successor to JPMorgan Chase Bank, N.A.) (incorporated by reference to Exhibit 10.9 to our Quarterly Report on Form 10-Q, filed with the SEC on November 7, 2008, File No. 001-15749).
|
||
10.116
|
Fourth Amendment to Amended and Restated Pooling and Servicing Agreement, dated as of March 30, 2010, among WFN Credit Company, LLC, World Financial Network National Bank, and Union Bank, N.A. (incorporated by reference to Exhibit 10.9 to our Quarterly Report on Form 10-Q, filed with the SEC on May 7, 2010, File No. 001-15749).
|
||
10.117
|
Fifth Amendment to Amended and Restated Pooling and Servicing Agreement, dated as of September 30, 2011, among WFN Credit Company, LLC, World Financial Network Bank, and Union Bank, N.A. (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q, filed with the SEC on November 7, 2011, File No. 001-15749).
|
||
10.118
|
Supplemental Agreement to Amended and Restated Pooling and Servicing Agreement, dated as of August 9, 2010, among WFN Credit Company, LLC, World Financial Network National Bank, and Union Bank, N.A (incorporated by reference to Exhibit No. 10.134 to our Annual Report on Form 10-K, filed with the SEC on February 28, 2011, File No. 001-15749).
|
||
10.119
|
Receivables Purchase Agreement, dated as of September 29, 2008, between World Financial Capital Bank and World Financial Capital Credit Company, LLC (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q, filed with the SEC on November 7, 2008, File No. 001-15749).
|
||
10.120
|
Amendment No. 1 to Receivables Purchase Agreement, dated as of June 4, 2010, between World Financial Capital Bank and World Financial Capital Credit Company, LLC (incorporated by reference to Exhibit 10.11 to our Quarterly Report on Form 10-Q, filed with the SEC on August 9, 2010, File No. 001-15749).
|
||
10.121
|
Transfer and Servicing Agreement, dated as of September 29, 2008, among World Financial Capital Credit Company, LLC, World Financial Capital Bank and World Financial Capital Master Note Trust (incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10-Q, filed with the SEC on November 7, 2008, File No. 001-15749).
|
||
10.122
|
Amendment No. 1 to Transfer and Servicing Agreement, dated as of June 4, 2010, among World Financial Capital Credit Company, LLC, World Financial Capital Bank and World Financial Capital Master Note Trust (incorporated by reference to Exhibit 10.12 to our Quarterly Report on Form 10-Q, filed with the SEC on August 9, 2010, File No. 001-15749).
|
||
10.123
|
Series 2006-A Indenture Supplement, dated as of April 28, 2006, among World Financial Network Credit Card Master Note Trust, World Financial Network National Bank, WFN Credit Company, LLC and BNY Midwest Trust Company (incorporated by reference to Exhibit No. 10.122 to our Annual Report on Form 10-K, filed with the SEC on March 1, 2010, File No. 001-15749).
|
||
10.124
|
Amended and Restated Series 2009-VFC1 Supplement, dated as of September 28, 2012, among WFN Credit Company, LLC, World Financial Network Bank and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit No. 10.5 to our Quarterly Report on Form 10-Q, filed with the SEC on November 5, 2012, File No. 001-15749).
|
||
10.125
|
Second Amended and Restated Series 2009-VFN Indenture Supplement, dated as of June 1, 2012, between World Financial Capital Master Note Trust and U.S. Bank National Association (incorporated by reference to Exhibit No. 10.3 to our Quarterly Report on Form 10-Q, filed with the SEC on November 5, 2012, File No. 001-15749).
|
||
10.126
|
Third Amended and Restated Series 2009-VFN Indenture Supplement, dated as of June 13, 2012, between World Financial Network Credit Card Master Note Trust and The Bank of New York Mellon Trust Company, N.A. (incorporated by reference to Exhibit No. 10.4 to our Quarterly Report on Form 10-Q, filed with the SEC on November 5, 2012, File No. 001-15749).
|
Exhibit No.
|
Description
|
10.127
|
Credit Agreement, dated as of May 24, 2011, by and among Alliance Data Systems Corporation, as borrower, and certain subsidiaries parties thereto, as guarantors, SunTrust Bank and Bank of Montreal, as Co-Administrative Agents, and various other agents and lenders (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K, filed with the SEC on May 26, 2011, File No. 001-15749).
|
||
10.128
|
First Amendment to Credit Agreement, dated as of September 20, 2011, by and among Alliance Data Systems Corporation, as borrower, and certain subsidiaries parties thereto, as guarantors, SunTrust Bank and Bank of Montreal, as Co-Administrative Agents, and various other agents and lenders (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K, filed with the SEC on September 23, 2011, File No. 001-15749).
|
||
10.129
|
Second Amendment to Credit Agreement, dated as of March 30, 2012, by and among Alliance Data Systems Corporation, as borrower, and certain subsidiaries parties thereto, as guarantors, SunTrust Bank and Wells Fargo Bank, N.A., as Co-Administrative Agents, and various other agents and lenders (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K, filed with the SEC on April 2, 2012, File No. 001-15749).
|
||
10.130
|
Indenture, dated as of July 29, 2008, by and among Alliance Data Systems Corporation and The Bank of New York Mellon Trust Company, National Association, as Trustee (including the form of the Company’s 1.75% Convertible Senior Note due August 1, 2013)(incorporated by reference to Exhibit No. 4.1 to our Current Report on Form 8-K filed with the SEC on July 29, 2008, File No. 001-15749).
|
||
10.131
|
Form of Hedge Confirmation dated July 23, 2008 between Alliance Data Systems Corporation and each of JPMorgan Chase Bank, National Association, London Branch (represented by J.P. Morgan Securities Inc., as its agent) and Bank of America, N.A. (incorporated by reference to Exhibit No. 10.2 to our Current Report on Form 8-K filed with the SEC on July 29, 2008, File No. 001-15749).
|
||
10.132
|
Form of Warrant Confirmation dated July 23, 2008 between Alliance Data Systems Corporation and each of JPMorgan Chase Bank, National Association, London Branch (represented by J.P. Morgan Securities Inc., as its agent) and Bank of America, N.A. (incorporated by reference to Exhibit No. 10.2 to our Current Report on Form 8-K filed with the SEC on July 29, 2008, File No. 001-15749).
|
||
10.133
|
Form of Warrant Confirmation Amendment dated August 4, 2008 between Alliance Data Systems Corporation and each of JPMorgan Chase Bank, National Association, London Branch (represented by J.P. Morgan Securities Inc., as its agent) and Bank of America, N.A. (incorporated by reference to Exhibit No. 10.27 to our Quarterly Report on Form 10-Q filed with the SEC on August 8, 2008, File No. 001-15749).
|
||
10.134
|
Indenture, dated June 2, 2009, between Alliance Data Systems Corporation and The Bank of New York Mellon Trust Company, National Association, as Trustee (including the form of the Company’s 4.75% Convertible Senior Note due May 15, 2014) (incorporated by reference to Exhibit No. 4.1 to our Current Report on Form 8-K, filed with the SEC on June 2, 2009, File No. 001-15749).
|
||
10.135
|
Form of Convertible Note Hedge confirmation, dated May 27, 2009, between Alliance Data Systems Corporation and each of J.P. Morgan Securities Inc., as agent for JPMorgan Chase Bank, National Association, Bank of America, N.A., and Barclays Capital Inc., as agent for Barclays Bank PLC (incorporated by reference to Exhibit No. 10.2 to our Current Report on Form 8-K, filed with the SEC on June 2, 2009, File No. 001-15749).
|
||
10.136
|
Form of Warrant confirmation, dated May 27, 2009, between Alliance Data Systems Corporation and each of J.P. Morgan Securities Inc., as agent for JPMorgan Chase Bank, National Association, London Branch, Bank of America, N.A., and Barclays Capital Inc., as agent for Barclays Bank PLC (incorporated by reference to Exhibit No. 10.3 to our Current Report on Form 8-K, filed with the SEC on June 2, 2009, File No. 001-15749).
|
||
10.137
|
Form of Forward Stock Purchase Transaction, dated May 27, 2009, between Alliance Data Systems Corporation and each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, as agent for Merrill Lynch International, and Barclays Capital Inc., as agent for Barclays Bank PLC (incorporated by reference to Exhibit No. 10.4 to our Current Report on Form 8-K, filed with the SEC on June 2, 2009, File No. 001-15749).
|
||
10.138
|
Form of Additional Convertible Note Hedge confirmation, dated June 4, 2009, between Alliance Data Systems Corporation and each of J.P. Morgan Securities Inc., as agent for JPMorgan Chase Bank, National Association, London Branch, Bank of America, N.A., and Barclays Capital Inc., as agent for Barclays Bank PLC (incorporated by reference to Exhibit No. 10.1 to our Current Report on Form 8-K, filed with the SEC on June 9, 2009, File No. 001-15749).
|
Exhibit No.
|
Description
|
10.139
|
Form of Additional Warrant confirmation, dated June 4, 2009, between Alliance Data Systems Corporation and each of J.P. Morgan Securities Inc., as agent for JPMorgan Chase Bank, National Association, London Branch, Bank of America, N.A., and Barclays Capital Inc., as agent for Barclays Bank PLC (incorporated by reference to Exhibit No. 10.2 to our Current Report on Form 8-K, filed with the SEC on June 9, 2009, File No. 001-15749).
|
||
10.140
|
Indenture, dated March 29, 2012, by and among Alliance Data Systems Corporation, as issuer, and certain subsidiaries parties thereto, as guarantors, and Wells Fargo Bank, N.A., as Trustee (including the form of the Company’s 6.375% Senior Note due April 1, 2010) (incorporated by reference to Exhibit No. 4.1 to our Current Report on Form 8-K filed with the SEC on April 2, 2012, File No. 001-15749).
|
||
10.141
|
Indenture, dated November 20, 2012, by and among Alliance Data Systems Corporation, as issuer, and certain subsidiaries parties thereto, as guarantors, and Wells Fargo Bank, N.A., as Trustee (including the form of the Company’s 5.250% Senior Note due December 1, 2017) (incorporated by reference to Exhibit No. 4.1 to our Current Report on Form 8-K filed with the SEC on November 27, 2012, File No. 001-15749).
|
||
*12.1
|
Statement re Computation of Ratios
|
||
*21
|
Subsidiaries of the Registrant
|
||
*23.1
|
Consent of Deloitte & Touche LLP
|
||
*31.1
|
Certification of Chief Executive Officer of Alliance Data Systems Corporation pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
|
||
*31.2
|
Certification of Chief Financial Officer of Alliance Data Systems Corporation pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended.
|
||
*32.1
|
Certification of Chief Executive Officer of Alliance Data Systems Corporation pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code.
|
||
*32.2
|
Certification of Chief Financial Officer of Alliance Data Systems Corporation pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code.
|
||
*101.INS
|
XBRL Instance Document
|
||
*101.SCH
|
XBRL Taxonomy Extension Schema Document
|
||
*101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
||
*101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
||
*101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
||
*101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
||
*
|
Filed herewith
|
+
|
Management contract, compensatory plan or arrangement
|
Page
|
||
ALLIANCE DATA SYSTEMS CORPORATION AND SUBSIDIARIES
|
||
F-2
|
||
F-4
|
||
F-5
|
||
F-6
|
||
F-7
|
||
F-8
|
||
F-9
|
December 31,
|
|||||||
2012
|
2011
|
||||||
(In thousands, except per share amounts)
|
|||||||
ASSETS
|
|||||||
Cash and cash equivalents
|
$
|
893,352
|
$
|
216,213
|
|||
Trade receivables, less allowance for doubtful accounts ($3,919 and $2,406 at December 31, 2012 and 2011, respectively)
|
370,110
|
300,895
|
|||||
Credit card receivables:
|
|||||||
Credit card receivables – restricted for securitization investors
|
6,597,120
|
4,886,168
|
|||||
Other credit card receivables
|
852,512
|
779,843
|
|||||
Total credit card receivables
|
7,449,632
|
5,666,011
|
|||||
Allowance for loan loss
|
(481,958
|
)
|
(468,321
|
)
|
|||
Credit card receivables, net
|
6,967,674
|
5,197,690
|
|||||
Deferred tax asset, net
|
237,268
|
252,303
|
|||||
Other current assets
|
171,049
|
121,589
|
|||||
Redemption settlement assets, restricted
|
492,690
|
515,838
|
|||||
Assets of discontinued operations
|
—
|
2,439
|
|||||
Total current assets
|
9,132,143
|
6,606,967
|
|||||
Property and equipment, net
|
253,028
|
195,397
|
|||||
Deferred tax asset, net
|
30,027
|
43,408
|
|||||
Cash collateral, restricted
|
65,160
|
158,727
|
|||||
Intangible assets, net
|
582,874
|
383,646
|
|||||
Goodwill
|
1,751,053
|
1,449,363
|
|||||
Other non-current assets
|
185,854
|
142,741
|
|||||
Total assets
|
$
|
12,000,139
|
$
|
8,980,249
|
|||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|||||||
Accounts payable
|
$
|
215,470
|
$
|
149,812
|
|||
Accrued expenses
|
274,625
|
206,621
|
|||||
Deposits
|
1,092,753
|
642,567
|
|||||
Asset-backed securities debt – owed to securitization investors
|
1,474,054
|
1,694,198
|
|||||
Current debt
|
803,269
|
19,834
|
|||||
Other current liabilities
|
117,283
|
105,888
|
|||||
Deferred revenue
|
1,055,323
|
1,036,251
|
|||||
Total current liabilities
|
5,032,777
|
3,855,171
|
|||||
Deferred revenue
|
193,738
|
190,185
|
|||||
Deferred tax liability, net
|
277,354
|
151,746
|
|||||
Deposits
|
1,135,658
|
711,208
|
|||||
Asset-backed securities debt – owed to securitization investors
|
2,656,916
|
1,566,089
|
|||||
Long-term and other debt
|
2,051,570
|
2,163,640
|
|||||
Other liabilities
|
123,639
|
166,244
|
|||||
Total liabilities
|
11,471,652
|
8,804,283
|
|||||
Commitments and contingencies (Note 12)
|
|||||||
Stockholders’ equity:
|
|||||||
Common stock, $0.01 par value; authorized, 200,000 shares; issued, 94,963 shares and 94,141 shares at December 31, 2012 and 2011, respectively
|
950
|
941
|
|||||
Additional paid-in capital
|
1,454,230
|
1,387,773
|
|||||
Treasury stock, at cost, 45,360 shares and 44,311 shares at December 31, 2012 and 2011, respectively
|
(2,458,092
|
)
|
(2,320,696
|
)
|
|||
Retained earnings
|
1,553,260
|
1,131,004
|
|||||
Accumulated other comprehensive loss
|
(21,861
|
)
|
(23,056
|
)
|
|||
Total stockholders’ equity
|
528,487
|
175,966
|
|||||
Total liabilities and stockholders’ equity
|
$
|
12,000,139
|
$
|
8,980,249
|
Years Ended December 31,
|
||||||||||
2012
|
2011
|
2010
|
||||||||
(In thousands, except per share amounts)
|
||||||||||
Revenues
|
||||||||||
Transaction
|
$
|
300,801
|
$
|
290,582
|
$
|
285,717
|
||||
Redemption
|
635,536
|
572,499
|
543,626
|
|||||||
Finance charges, net
|
1,643,405
|
1,402,041
|
1,284,432
|
|||||||
Database marketing fees and direct marketing services
|
931,533
|
806,470
|
602,500
|
|||||||
Other revenue
|
130,115
|
101,695
|
75,146
|
|||||||
Total revenue
|
3,641,390
|
3,173,287
|
2,791,421
|
|||||||
Operating expenses
|
||||||||||
Cost of operations (exclusive of depreciation and amortization disclosed separately below)
|
2,106,612
|
1,811,882
|
1,545,380
|
|||||||
Provision for loan loss
|
285,479
|
300,316
|
387,822
|
|||||||
General and administrative
|
108,059
|
95,256
|
85,773
|
|||||||
Depreciation and other amortization
|
73,802
|
70,427
|
67,806
|
|||||||
Amortization of purchased intangibles
|
93,074
|
82,726
|
75,420
|
|||||||
Total operating expenses
|
2,667,026
|
2,360,607
|
2,162,201
|
|||||||
Operating income
|
974,364
|
812,680
|
629,220
|
|||||||
Interest expense
|
||||||||||
Securitization funding costs
|
92,808
|
126,711
|
155,084
|
|||||||
Interest expense on deposits
|
25,181
|
23,078
|
29,456
|
|||||||
Interest expense on long-term and other debt, net
|
173,471
|
148,796
|
133,790
|
|||||||
Total interest expense, net
|
291,460
|
298,585
|
318,330
|
|||||||
Income from continuing operations before income taxes
|
682,904
|
514,095
|
310,890
|
|||||||
Provision for income taxes
|
260,648
|
198,809
|
115,252
|
|||||||
Income from continuing operations
|
$
|
422,256
|
$
|
315,286
|
$
|
195,638
|
||||
Loss from discontinued operations, net of taxes
|
—
|
—
|
(1,901
|
)
|
||||||
Net income
|
$
|
422,256
|
$
|
315,286
|
$
|
193,737
|
||||
Basic income (loss) per share:
|
||||||||||
Income from continuing operations
|
$
|
8.44
|
$
|
6.22
|
$
|
3.72
|
||||
Loss from discontinued operations
|
$
|
—
|
$
|
—
|
$
|
(0.03
|
)
|
|||
Net income per share
|
$
|
8.44
|
$
|
6.22
|
$
|
3.69
|
||||
Diluted income (loss) per share:
|
||||||||||
Income from continuing operations
|
$
|
6.58
|
$
|
5.45
|
$
|
3.51
|
||||
Loss from discontinued operations
|
$
|
—
|
$
|
—
|
$
|
(0.03
|
)
|
|||
Net income per share
|
$
|
6.58
|
$
|
5.45
|
$
|
3.48
|
||||
Weighted average shares:
|
||||||||||
Basic
|
50,008
|
50,687
|
52,534
|
|||||||
Diluted
|
64,143
|
57,804
|
55,710
|
Years Ended December 31,
|
||||||||||
2012
|
2011
|
2010
|
||||||||
(In thousands)
|
||||||||||
Net income
|
$
|
422,256
|
$
|
315,286
|
$
|
193,737
|
||||
Adoption of ASC 860 and ASC 810
|
—
|
—
|
55,881
|
|||||||
Other comprehensive income (loss), net of tax
|
||||||||||
Net unrealized gain (loss) on securities, net of tax (benefit) expense of $(377), $251 and $(3) for the years ended December 31, 2012, 2011 and 2010, respectively
|
3,368
|
27,035
|
(12,939
|
)
|
||||||
Foreign currency translation adjustments
|
(2,173
|
)
|
(15,591
|
)
|
(11,701
|
)
|
||||
Other comprehensive income (loss)
|
1,195
|
11,444
|
(24,640
|
)
|
||||||
Total comprehensive income, net of tax
|
$
|
423,451
|
$
|
326,730
|
$
|
224,978
|
||||
Common Stock
|
Additional
Paid-In
Capital
|
Treasury
Stock
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income (Loss)
|
Total
Stockholders’
Equity
|
|||||||||||||||||
Shares
|
Amount
|
|||||||||||||||||||||
(In thousands)
|
||||||||||||||||||||||
January 1, 2010
|
91,121
|
$
|
911
|
$
|
1,235,669
|
$
|
(1,931,102
|
)
|
$
|
1,033,039
|
$
|
(65,741
|
)
|
$
|
272,776
|
|||||||
Net income
|
—
|
—
|
—
|
—
|
193,737
|
—
|
193,737
|
|||||||||||||||
Effects of adoption of ASC 860 and ASC 810
|
—
|
—
|
—
|
—
|
(411,058
|
)
|
55,881
|
(355,177
|
)
|
|||||||||||||
Other comprehensive loss
|
—
|
—
|
—
|
—
|
—
|
(24,640
|
)
|
(24,640
|
)
|
|||||||||||||
Stock-based compensation
|
—
|
—
|
50,094
|
—
|
—
|
—
|
50,094
|
|||||||||||||||
Repurchases of common stock
|
—
|
—
|
—
|
(148,717
|
)
|
—
|
—
|
(148,717
|
)
|
|||||||||||||
Other common stock issued, including income
tax benefits
|
1,676
|
17
|
35,004
|
—
|
—
|
—
|
35,021
|
|||||||||||||||
December 31, 2010
|
92,797
|
$
|
928
|
$
|
1,320,767
|
$
|
(2,079,819
|
)
|
$
|
815,718
|
$
|
(34,500
|
)
|
$
|
23,094
|
|||||||
Net income
|
—
|
—
|
—
|
—
|
315,286
|
—
|
315,286
|
|||||||||||||||
Other comprehensive income
|
—
|
—
|
—
|
—
|
—
|
11,444
|
11,444
|
|||||||||||||||
Stock-based compensation
|
—
|
—
|
43,486
|
—
|
—
|
—
|
43,486
|
|||||||||||||||
Repurchases of common stock
|
—
|
—
|
—
|
(240,877
|
)
|
—
|
—
|
(240,877
|
)
|
|||||||||||||
Other common stock issued, including income
tax benefits
|
1,344
|
13
|
23,520
|
—
|
—
|
—
|
23,533
|
|||||||||||||||
December 31, 2011
|
94,141
|
$
|
941
|
$
|
1,387,773
|
$
|
(2,320,696
|
)
|
$
|
1,131,004
|
$
|
(23,056
|
)
|
$
|
175,966
|
|||||||
Net income
|
—
|
—
|
—
|
—
|
422,256
|
—
|
422,256
|
|||||||||||||||
Other comprehensive income
|
—
|
—
|
—
|
—
|
—
|
1,195
|
1,195
|
|||||||||||||||
Stock-based compensation
|
—
|
—
|
50,497
|
—
|
—
|
—
|
50,497
|
|||||||||||||||
Repurchases of common stock
|
—
|
—
|
—
|
(137,396
|
)
|
—
|
—
|
(137,396
|
)
|
|||||||||||||
Other common stock issued, including income tax benefits
|
822
|
9
|
15,960
|
—
|
—
|
—
|
15,969
|
|||||||||||||||
December 31, 2012
|
94,963
|
$
|
950
|
$
|
1,454,230
|
$
|
(2,458,092
|
)
|
$
|
1,553,260
|
$
|
(21,861
|
)
|
$
|
528,487
|
Years Ended December 31,
|
||||||||||
2012
|
2011
|
2010
|
||||||||
(In thousands)
|
||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||
Net income
|
$
|
422,256
|
$
|
315,286
|
$
|
193,737
|
||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
||||||||||
Depreciation and amortization
|
166,876
|
153,153
|
143,226
|
|||||||
Deferred income taxes
|
102,266
|
47,037
|
19,061
|
|||||||
Provision for loan loss
|
285,479
|
300,316
|
390,822
|
|||||||
Non-cash stock compensation
|
50,497
|
43,486
|
50,094
|
|||||||
Fair value gain on interest-rate derivatives
|
(29,592
|
)
|
(31,728
|
)
|
(8,725
|
)
|
||||
Amortization of discount on debt
|
82,452
|
73,787
|
66,131
|
|||||||
Change in operating assets and liabilities, net of acquisitions:
|
||||||||||
Change in trade accounts receivable
|
(49,219
|
)
|
(32,158
|
)
|
(44,040
|
)
|
||||
Change in other assets
|
21,751
|
35,045
|
32,524
|
|||||||
Change in accounts payable and accrued expenses
|
115,114
|
53,676
|
61,164
|
|||||||
Change in deferred revenue
|
(11,225
|
)
|
33,341
|
11,485
|
||||||
Change in other liabilities
|
(13,146
|
)
|
31,944
|
9,431
|
||||||
Excess tax benefits from stock-based compensation
|
(20,199
|
)
|
(15,028
|
)
|
(12,959
|
)
|
||||
Other
|
10,880
|
3,190
|
(9,242
|
)
|
||||||
Net cash provided by operating activities
|
1,134,190
|
1,011,347
|
902,709
|
|||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||||
Change in redemption settlement assets
|
37,232
|
(49,179
|
)
|
52,352
|
||||||
Change in restricted cash
|
(46,837
|
)
|
98,408
|
2,891
|
||||||
Change in credit card receivables
|
(1,371,352
|
)
|
(578,058
|
)
|
(239,433
|
)
|
||||
Purchase of credit card portfolios
|
(780,003
|
)
|
(68,554
|
)
|
—
|
|||||
Change in cash collateral, restricted
|
99,035
|
22,046
|
32,068
|
|||||||
Payments for acquired businesses, net of cash
|
(463,964
|
)
|
(359,076
|
)
|
(117,000
|
)
|
||||
Capital expenditures
|
(116,455
|
)
|
(73,502
|
)
|
(68,755
|
)
|
||||
Purchases of marketable securities
|
(34,069
|
)
|
(14,809
|
)
|
(4,965
|
)
|
||||
Maturities/sales of marketable securities
|
15,651
|
—
|
—
|
|||||||
Investments in the stock of investees
|
(921
|
)
|
(17,986
|
)
|
(500
|
)
|
||||
Other
|
(9,667
|
)
|
—
|
2,558
|
||||||
Net cash used in investing activities
|
(2,671,350
|
)
|
(1,040,710
|
)
|
(340,784
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||||
Borrowings under debt agreements
|
1,095,148
|
3,256,500
|
1,507,000
|
|||||||
Repayment of borrowings
|
(506,214
|
)
|
(3,012,682
|
)
|
(1,462,806
|
)
|
||||
Issuances of deposits
|
1,866,213
|
1,180,284
|
177,600
|
|||||||
Repayments of deposits
|
(991,577
|
)
|
(685,609
|
)
|
(783,500
|
)
|
||||
Borrowings from asset-backed securities
|
2,543,892
|
2,179,721
|
1,147,943
|
|||||||
Repayments/maturities of asset-backed securities
|
(1,673,209
|
)
|
(2,579,577
|
)
|
(1,173,735
|
)
|
||||
Payment of capital lease obligations
|
(22
|
)
|
(3,925
|
)
|
(23,171
|
)
|
||||
Payment of deferred financing costs
|
(40,267
|
)
|
(29,025
|
)
|
(3,102
|
)
|
||||
Excess tax benefits from stock-based compensation
|
20,199
|
15,028
|
12,959
|
|||||||
Proceeds from issuance of common stock
|
20,696
|
29,412
|
33,854
|
|||||||
Purchase of treasury shares
|
(125,840
|
)
|
(240,877
|
)
|
(148,717
|
)
|
||||
Net cash provided by (used in) financing activities
|
2,209,019
|
109,250
|
(715,675
|
)
|
||||||
Effect of exchange rate changes on cash and cash equivalents
|
5,280
|
(2,788
|
)
|
(2,067
|
)
|
|||||
Change in cash and cash equivalents
|
677,139
|
77,099
|
(155,817
|
)
|
||||||
Cash effect on adoption of ASC 860 and ASC 810
|
—
|
—
|
81,553
|
|||||||
Cash and cash equivalents at beginning of year
|
216,213
|
139,114
|
213,378
|
|||||||
Cash and cash equivalents at end of year
|
$
|
893,352
|
$
|
216,213
|
$
|
139,114
|
||||
SUPPLEMENTAL CASH FLOW INFORMATION:
|
||||||||||
Interest paid
|
$
|
215,708
|
$
|
231,049
|
$
|
241,357
|
||||
Income taxes paid, net
|
$
|
137,838
|
$
|
123,480
|
$
|
44,723
|
Years Ended December 31,
|
||||||||||
2012
|
2011
|
2010
|
||||||||
(In thousands, except per share amounts)
|
||||||||||
Numerator
|
||||||||||
Income from continuing operations
|
$
|
422,256
|
$
|
315,286
|
$
|
195,638
|
||||
Loss from discontinued operations
|
—
|
—
|
(1,901
|
)
|
||||||
Net income
|
$
|
422,256
|
$
|
315,286
|
$
|
193,737
|
||||
Denominator
|
||||||||||
Weighted average shares, basic
|
50,008
|
50,687
|
52,534
|
|||||||
Weighted average effect of dilutive securities:
|
||||||||||
Shares from assumed conversion of convertible senior notes
|
8,645
|
4,641
|
1,835
|
|||||||
Shares from assumed conversion of convertible note warrants
|
4,702
|
1,510
|
—
|
|||||||
Net effect of dilutive stock options and unvested restricted stock
|
788
|
966
|
1,341
|
|||||||
Denominator for diluted calculation
|
64,143
|
57,804
|
55,710
|
|||||||
Basic:
|
||||||||||
Income from continuing operations per share
|
$
|
8.44
|
$
|
6.22
|
$
|
3.72
|
||||
Loss from discontinued operations per share
|
$
|
—
|
$
|
—
|
$
|
(0.03
|
)
|
|||
Net income per share
|
$
|
8.44
|
$
|
6.22
|
$
|
3.69
|
||||
Diluted:
|
||||||||||
Income from continuing operations per share
|
$
|
6.58
|
$
|
5.45
|
$
|
3.51
|
||||
Loss from discontinued operations per share
|
$
|
—
|
$
|
—
|
$
|
(0.03
|
)
|
|||
Net income per share
|
$
|
6.58
|
$
|
5.45
|
$
|
3.48
|
As of
November 30, 2012
|
||||
(In thousands)
|
||||
Current assets
|
$
|
49,700
|
||
Deferred tax assets
|
12,050
|
|||
Property and equipment
|
6,907
|
|||
Other assets
|
118
|
|||
Intangible assets
|
194,751
|
|||
Goodwill
|
291,249
|
|||
Total assets acquired
|
554,775
|
|||
Current liabilities
|
33,928
|
|||
Deferred tax liabilities
|
68,624
|
|||
Other liabilities
|
420
|
|||
Total liabilities assumed
|
102,972
|
|||
Net assets acquired
|
$
|
451,803
|
As of
May 31, 2011
|
||||
(In thousands)
|
||||
Current assets
|
$
|
39,924
|
||
Property and equipment
|
4,829
|
|||
Other assets
|
1,600
|
|||
Capitalized software
|
24,000
|
|||
Intangible assets
|
140,000
|
|||
Goodwill
|
232,910
|
|||
Total assets acquired
|
443,263
|
|||
Current liabilities
|
30,099
|
|||
Other liabilities
|
3,904
|
|||
Deferred tax liabilities
|
50,184
|
|||
Total liabilities assumed
|
84,187
|
|||
Net assets acquired
|
$
|
359,076
|
As of
July 1, 2010
|
||||
(In thousands)
|
||||
Other current assets
|
$
|
893
|
||
Property and equipment
|
2,290
|
|||
Capitalized software
|
4,800
|
|||
Identifiable intangible assets
|
67,600
|
|||
Goodwill
|
43,874
|
|||
Non-current assets
|
165
|
|||
Total assets acquired
|
119,622
|
|||
Current liabilities
|
2,622
|
|||
Total liabilities assumed
|
2,622
|
|||
Net assets acquired
|
$
|
117,000
|
December 31,
2012
|
December 31,
2011
|
||||||
(In thousands)
|
|||||||
Principal receivables
|
$
|
7,097,951
|
$
|
5,408,862
|
|||
Billed and accrued finance charges
|
291,476
|
221,357
|
|||||
Other receivables
|
60,205
|
35,792
|
|||||
Total credit card receivables
|
7,449,632
|
5,666,011
|
|||||
Less credit card receivables – restricted for securitization investors
|
6,597,120
|
4,886,168
|
|||||
Other credit card receivables
|
$
|
852,512
|
$
|
779,843
|
Years Ended December 31,
|
||||||||||
2012
|
2011
|
2010
|
||||||||
(In thousands)
|
||||||||||
Balance at beginning of period
|
$
|
468,321
|
$
|
518,069
|
$
|
54,884
|
||||
Adoption of ASC 860 and ASC 810
|
—
|
—
|
523,950
|
|||||||
Provision for loan loss
|
285,479
|
300,316
|
387,822
|
|||||||
Change in estimate for uncollectible unpaid interest and fees
|
11,000
|
(5,000
|
)
|
—
|
||||||
Recoveries
|
97,131
|
89,764
|
79,605
|
|||||||
Principal charge-offs
|
(379,973
|
)
|
(429,828
|
)
|
(528,192
|
)
|
||||
Other
|
—
|
(5,000
|
)
|
—
|
||||||
Balance at end of period
|
$
|
481,958
|
$
|
468,321
|
$
|
518,069
|
December 31,
2012
|
% of
Total
|
December 31,
2011
|
% of
Total
|
|||||||||||
(In thousands, except percentages)
|
||||||||||||||
Receivables outstanding - principal
|
$
|
7,097,951
|
100
|
%
|
$
|
5,408,862
|
100
|
%
|
||||||
Principal receivables balances contractually delinquent:
|
||||||||||||||
31 to 60 days
|
100,479
|
1.4
|
%
|
78,272
|
1.4
|
%
|
||||||||
61 to 90 days
|
62,546
|
0.9
|
51,709
|
1.0
|
||||||||||
91 or more days
|
120,163
|
1.7
|
105,626
|
2.0
|
||||||||||
Total
|
$
|
283,188
|
4.0
|
%
|
$
|
235,607
|
4.4
|
%
|
Year Ended December 31, 2012
|
||||||||||
Number of
Restructurings
|
Pre-modification
Outstanding
Balance
|
Post-modification
Outstanding
Balance
|
||||||||
(Dollars in thousands)
|
||||||||||
Troubled debt restructurings – credit card receivables
|
134,187
|
$
|
119,985
|
$
|
119,856
|
|||||
Year Ended December 31, 2011
|
||||||||||
Number of
Restructurings
|
Pre-modification
Outstanding
Balance
|
Post-modification
Outstanding
Balance
|
||||||||
(Dollars in thousands)
|
||||||||||
Troubled debt restructurings – credit card receivables
|
157,930
|
$
|
138,288
|
$
|
136,213
|
|||||
Year Ended December 31, 2012
|
|||||||||||
Number of
Restructurings
|
Outstanding
Balance
|
||||||||||
(Dollars in thousands)
|
|||||||||||
Troubled debt restructurings that subsequently defaulted – credit card receivables
|
55,198
|
$
|
53,806
|
||||||||
Year Ended December 31, 2011
|
|||||||||||
Number of
Restructurings
|
Outstanding
Balance
|
||||||||||
(Dollars in thousands)
|
|||||||||||
Troubled debt restructurings that subsequently defaulted – credit card receivables
|
74,959
|
$
|
73,677
|
||||||||
Age Since Origination
|
Number of
Active Accounts
with Balances
|
Percentage of
Active Accounts
with Balances
|
Principal
Receivables
Outstanding
|
Percentage of
Principal Receivables
Outstanding
|
||||||||||
(In thousands, except percentages)
|
||||||||||||||
0-12 Months
|
4,287
|
25.1
|
%
|
$
|
1,545,955
|
21.8
|
%
|
|||||||
13-24 Months
|
2,216
|
12.9
|
867,230
|
12.2
|
||||||||||
25-36 Months
|
1,580
|
9.2
|
676,362
|
9.5
|
||||||||||
37-48 Months
|
1,297
|
7.6
|
616,296
|
8.7
|
||||||||||
49-60 Months
|
1,053
|
6.2
|
502,217
|
7.1
|
||||||||||
Over 60 Months
|
6,681
|
39.0
|
2,889,891
|
40.7
|
||||||||||
Total
|
17,114
|
100.0
|
%
|
$
|
7,097,951
|
100.0
|
%
|
Probability of an Account Becoming 90 or More Days Past
Due or Becoming Charged off (within the next 12 months)
|
Total Principal
Receivables
Outstanding
|
Percentage of
Principal Receivables
Outstanding
|
|||||||
(In thousands, except percentages)
|
|||||||||
No Score (1)
|
$
|
298,829
|
4.2
|
%
|
|||||
27.1% and higher
|
286,046
|
4.0
|
|||||||
17.1% - 27.0%
|
613,184
|
8.7
|
|||||||
12.6% - 17.0%
|
713,489
|
10.1
|
|||||||
3.7% - 12.5%
|
2,840,964
|
40.0
|
|||||||
1.9% - 3.6%
|
1,492,289
|
21.0
|
|||||||
Lower than 1.9%
|
853,150
|
12.0
|
|||||||
Total
|
$
|
7,097,951
|
100.0
|
%
|
|||||
(1)
|
Included in the No Score information is The Talbots, Inc. credit card portfolio, whose accounts have yet to be converted to the Company’s credit card processing system. The conversion is expected to be completed in the first quarter of 2013.
|
|
•
|
August 2012 – The Talbots, Inc., for a total purchase price of $163.3 million, which remains subject to customary purchase price adjustments and consists of $133.4 million of credit card receivables and $29.9 million of intangible assets;
|
•
|
July 2012 – The Bon-Ton Stores, Inc., for a total purchase price of $494.7 million, which consisted of $444.9 million of credit card receivables and $49.8 million of intangible assets;
|
•
|
May 2012 – Premier Designs, Inc., for a total purchase price of $24.3 million, which consisted of $22.9 million of credit card receivables and $1.4 million of intangible assets;
|
•
|
March 2012 – Pier 1 Imports, for a total purchase price of $97.7 million, which consisted of $96.2 million of credit card receivables and $1.5 million of intangible assets;
|
•
|
November 2011 – Marathon Petroleum Corporation, for a total purchase price of $25.9 million, which consisted entirely of credit card receivables; and
|
•
|
February 2011 – J.Jill, for a total purchase price of $42.7 million, which consisted of $37.9 million of credit card receivables and $4.8 million of intangible assets.
|
December 31,
2012
|
December 31,
2011
|
||||||
(In thousands)
|
|||||||
Total credit card receivables – restricted for securitization investors
|
$
|
6,597,120
|
$
|
4,886,168
|
|||
Principal amount of credit card receivables – restricted for securitization investors, 90 days or more past due
|
$
|
112,203
|
$
|
94,981
|
Years Ended December 31,
|
||||||||||
2012
|
2011
|
2010
|
||||||||
(In thousands)
|
||||||||||
Net charge-offs of securitized principal
|
$
|
265,305
|
$
|
306,301
|
$
|
398,926
|
December 31, 2012
|
December 31, 2011
|
||||||||||||||||||||||||
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair Value
|
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair Value
|
||||||||||||||||||
(In thousands)
|
|||||||||||||||||||||||||
Cash and cash equivalents
|
$
|
40,266
|
$
|
—
|
$
|
—
|
$
|
40,266
|
$
|
35,465
|
$
|
—
|
$
|
—
|
$
|
35,465
|
|||||||||
Government bonds
|
5,064
|
53
|
—
|
5,117
|
4,948
|
152
|
—
|
5,100
|
|||||||||||||||||
Corporate bonds
|
436,846
|
10,560
|
(99
|
)
|
447,307
|
468,894
|
7,416
|
(1,037
|
)
|
475,273
|
|||||||||||||||
Total
|
$
|
482,176
|
$
|
10,613
|
$
|
(99
|
)
|
$
|
492,690
|
$
|
509,307
|
$
|
7,568
|
$
|
(1,037
|
)
|
$
|
515,838
|
Less than 12 months
|
December 31, 2012
12 Months or Greater
|
Total
|
|||||||||||||||||
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
||||||||||||||
(In thousands)
|
|||||||||||||||||||
Corporate bonds
|
$
|
36,518
|
$
|
(99
|
)
|
$
|
—
|
$
|
—
|
$
|
36,518
|
$
|
(99
|
)
|
|||||
Total
|
$
|
36,518
|
$
|
(99
|
)
|
$
|
—
|
$
|
—
|
$
|
36,518
|
$
|
(99
|
)
|
Less than 12 months
|
December 31, 2011
12 Months or Greater
|
Total
|
|||||||||||||||||
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
||||||||||||||
(In thousands)
|
|||||||||||||||||||
Corporate bonds
|
$
|
65,043
|
$
|
(444
|
)
|
$
|
18,124
|
$
|
(593
|
)
|
$
|
83,167
|
$
|
(1,037
|
)
|
||||
Total
|
$
|
65,043
|
$
|
(444
|
)
|
$
|
18,124
|
$
|
(593
|
)
|
$
|
83,167
|
$
|
(1,037
|
)
|
Amortized
Cost
|
Estimated
Fair Value
|
||||||
(In thousands)
|
|||||||
Due in one year or less
|
$
|
114,362
|
$
|
115,265
|
|||
Due after one year through five years
|
367,814
|
377,425
|
|||||
Total
|
$
|
482,176
|
$
|
492,690
|
December 31,
|
|||||||
2012
|
2011
|
||||||
(In thousands)
|
|||||||
Computer software and development
|
$
|
293,727
|
$
|
282,225
|
|||
Furniture and equipment
|
225,062
|
202,268
|
|||||
Land, buildings and leasehold improvements
|
99,644
|
79,930
|
|||||
Capital leases
|
—
|
7,402
|
|||||
Construction in progress
|
59,417
|
26,373
|
|||||
Total
|
677,850
|
598,198
|
|||||
Accumulated depreciation
|
(424,822
|
)
|
(402,801
|
)
|
|||
Property and equipment, net
|
$
|
253,028
|
$
|
195,397
|
December 31, 2012
|
||||||||||||
Gross
Assets
|
Accumulated
Amortization
|
Net
|
Amortization Life and Method
|
|||||||||
(In thousands)
|
||||||||||||
Finite Lived Assets
|
||||||||||||
Customer contracts and lists
|
$
|
440,200
|
$
|
(124,351
|
)
|
$
|
315,849
|
3-12 years—straight line
|
||||
Premium on purchased credit card portfolios
|
237,800
|
(108,227
|
)
|
129,573
|
5-10 years—straight line, accelerated
|
|||||||
Customer database
|
161,700
|
(102,706
|
)
|
58,994
|
4-10 years—straight line
|
|||||||
Collector database
|
70,550
|
(63,980
|
)
|
6,570
|
30 years—15% declining balance
|
|||||||
Tradenames
|
59,102
|
(10,139
|
)
|
48,963
|
4-15 years—straight line
|
|||||||
Purchased data lists
|
14,540
|
(8,527
|
)
|
6,013
|
1-5 years—straight line, accelerated
|
|||||||
Favorable lease
|
3,291
|
(29
|
)
|
3,262
|
10 years—straight line
|
|||||||
Noncompete agreements
|
1,300
|
—
|
1,300
|
3 years—straight line
|
||||||||
$
|
988,483
|
$
|
(417,959
|
)
|
$
|
570,524
|
||||||
Indefinite Lived Assets
|
||||||||||||
Tradenames
|
12,350
|
—
|
12,350
|
Indefinite life
|
||||||||
Total intangible assets
|
$
|
1,000,833
|
$
|
(417,959
|
)
|
$
|
582,874
|
|||||
December 31, 2011
|
||||||||||||
Gross
Assets
|
Accumulated
Amortization
|
Net
|
Amortization Life and Method
|
|||||||||
(In thousands)
|
||||||||||||
Finite Lived Assets
|
||||||||||||
Customer contracts and lists
|
$
|
314,245
|
$
|
(140,622
|
)
|
$
|
173,623
|
3-12 years—straight line
|
||||
Premium on purchased credit card portfolios
|
156,203
|
(82,988
|
)
|
73,215
|
5-10 years—straight line, accelerated
|
|||||||
Customer databases
|
175,377
|
(96,363
|
)
|
79,014
|
4-10 years—straight line
|
|||||||
Collector database
|
68,652
|
(61,091
|
)
|
7,561
|
30 years—15% declining balance
|
|||||||
Tradenames
|
38,155
|
(7,411
|
)
|
30,744
|
5 -15 years—straight line
|
|||||||
Purchased data lists
|
23,776
|
(16,712
|
)
|
7,064
|
1-5 years— straight line, accelerated
|
|||||||
Noncompete agreements
|
1,045
|
(970
|
)
|
75
|
2 years—straight line
|
|||||||
$
|
777,453
|
$
|
(406,157
|
)
|
$
|
371,296
|
||||||
Indefinite Lived Assets
|
||||||||||||
Tradenames
|
12,350
|
—
|
12,350
|
Indefinite life
|
||||||||
Total intangible assets
|
$
|
789,803
|
$
|
(406,157
|
)
|
$
|
383,646
|
For Years Ending
December 31,
|
||||
(In thousands)
|
||||
2013
|
$
|
127,879
|
||
2014
|
117,254
|
|||
2015
|
93,360
|
|||
2016
|
76,799
|
|||
2017
|
51,160
|
|||
2018 & thereafter
|
104,072
|
LoyaltyOne
|
Epsilon
|
Private Label
Services and
Credit
|
Corporate/
Other
|
Total
|
||||||||||||
(In thousands)
|
||||||||||||||||
December 31, 2010
|
$
|
246,930
|
$
|
713,161
|
$
|
261,732
|
$
|
—
|
$
|
1,221,823
|
||||||
Goodwill acquired during year
|
—
|
232,910
|
—
|
—
|
232,910
|
|||||||||||
Effects of foreign currency translation
|
(5,233
|
)
|
(137
|
)
|
—
|
—
|
(5,370
|
)
|
||||||||
December 31, 2011
|
241,697
|
945,934
|
261,732
|
—
|
1,449,363
|
|||||||||||
Goodwill acquired during year
|
—
|
294,275
|
—
|
—
|
294,275
|
|||||||||||
Effects of foreign currency translation
|
6,373
|
1,042
|
—
|
—
|
7,415
|
|||||||||||
December 31, 2012
|
$
|
248,070
|
$
|
1,241,251
|
$
|
261,732
|
$
|
—
|
$
|
1,751,053
|
December 31,
|
|||||||
2012
|
2011
|
||||||
(In thousands)
|
|||||||
Accrued payroll and benefits
|
$
|
131,341
|
$
|
113,083
|
|||
Accrued taxes
|
48,202
|
30,447
|
|||||
Accrued marketing
|
28,876
|
17,255
|
|||||
Accrued other liabilities
|
66,206
|
45,836
|
|||||
Accrued expenses
|
$
|
274,625
|
$
|
206,621
|
Description
|
December 31,
2012
|
December 31,
2011
|
Maturity
|
Interest Rate
|
|||||||||
(Dollars in thousands)
|
|||||||||||||
Long-term and other debt:
|
|||||||||||||
2011 credit facility
|
$
|
—
|
$
|
410,000
|
May 2016
|
—
|
|||||||
2011 term loan
|
885,928
|
782,594
|
May 2016 or May 2017
|
(2)
|
|||||||||
Convertible senior notes due 2013
|
768,831
|
711,480
|
August 2013
|
1.75%
|
|||||||||
Convertible senior notes due 2014
|
304,333
|
279,365
|
May 2014
|
4.75%
|
|||||||||
Senior notes due 2017
|
395,734
|
—
|
December 2017
|
5.250%
|
|||||||||
Senior notes due 2020
|
500,000
|
—
|
April 2020
|
6.375%
|
|||||||||
Capital lease obligations and other debt
|
13
|
35
|
July 2013
|
7.10%
|
|||||||||
Total long-term and other debt
|
2,854,839
|
2,183,474
|
|||||||||||
Less: current portion
|
(803,269
|
)
|
(19,834
|
)
|
|||||||||
Long-term portion
|
$
|
2,051,570
|
$
|
2,163,640
|
|||||||||
Deposits:
|
|||||||||||||
Certificates of deposit
|
$
|
1,974,158
|
$
|
1,353,775
|
Various - January 2013 – December 2019
|
0.20% to 5.25%
|
|||||||
Money market deposits
|
254,253
|
—
|
On demand
|
0.01% to 0.26%
|
|||||||||
Total deposits
|
2,228,411
|
1,353,775
|
|||||||||||
Less: current portion
|
(1,092,753
|
)
|
(642,567
|
)
|
|||||||||
Long-term portion
|
$
|
1,135,658
|
$
|
711,208
|
|||||||||
Asset-backed securities debt – owed to securitization investors:
|
|||||||||||||
Fixed rate asset-backed term note securities
|
$
|
2,403,555
|
$
|
1,562,815
|
Various - January 2013 – June 2019
|
1.68% to 7.00%
|
|||||||
Floating rate asset-backed term note securities
|
545,700
|
703,500
|
Various - January 2013 – April 2013
|
(1)
|
|||||||||
Conduit asset-backed securities
|
1,181,715
|
993,972
|
Various - May 2013 – March 2014
|
1.20% to 1.70%
|
|||||||||
Total asset-backed securities – owed to securitization investors
|
4,130,970
|
3,260,287
|
|||||||||||
Less: current portion
|
(1,474,054
|
)
|
(1,694,198
|
)
|
|||||||||
Long-term portion
|
$
|
2,656,916
|
$
|
1,566,089
|
|||||||||
(1)
|
Interest rates include those for certain of the Company’s asset-backed securities – owed to securitization investors where floating rate debt is fixed through interest rate swap agreements. The interest rate for the floating rate debt is equal to the London Interbank Offered Rate (“LIBOR”) plus a margin of 0.1% to 2.5%, each as defined in the respective agreements. The weighted average interest rate of the fixed rate achieved through interest rate swap agreements is 5.58% at December 31, 2012.
|
(2)
|
At December 31, 2012, the weighted average interest rate for the 2011 Term Loan was 2.22%.
|
|
•
|
during any fiscal quarter (and only during such fiscal quarter) after the fiscal quarter ending December 31, 2008, if the last reported sale price of the Company’s common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is equal to or more than 130% of the conversion price of $78.50 of the Convertible Senior Notes due 2013 on the last day of such preceding fiscal quarter;
|
|
•
|
during the five business-day period after any five consecutive trading-day period, or the measurement period, in which the trading price per $1,000 principal amount of the Convertible Senior Notes due 2013 for each day of that measurement period was less than 98% of the product of the last reported sales price of the Company’s common stock and the conversion rate of the Convertible Senior Notes due 2013 on each such day; or
|
|
•
|
upon the occurrence of certain specified corporate transactions.
|
|
•
|
during any fiscal quarter (and only during such fiscal quarter) after the fiscal quarter ending December 31, 2009, if the last reported sale price of the Company’s common stock for at least 20 trading days in the period of 30 consecutive trading days ending on the last trading day of the immediately preceding fiscal quarter is equal to or more than 130% of the conversion price of $47.57 of the Convertible Senior Notes due 2014 on the last day of such preceding fiscal quarter;
|
|
•
|
during the five business-day period after any five consecutive trading-day period, or the measurement period, in which the trading price per $1,000 principal amount of the Convertible Senior Notes due 2014 for each day of that measurement period was less than 98% of the product of the last reported sales price of the Company’s common stock and the conversion rate of the Convertible Senior Notes due 2014 on each such day; or
|
|
•
|
upon the occurrence of certain specified corporate transactions.
|
December 31,
|
|||||||
2012
|
2011
|
||||||
(In millions)
|
|||||||
Carrying amount of equity component
|
$
|
368.7
|
$
|
368.7
|
|||
Principal amount of liability component
|
$
|
1,150.0
|
$
|
1,150.0
|
|||
Unamortized discount
|
(76.8
|
)
|
(159.2
|
)
|
|||
Net carrying value of liability component
|
$
|
1,073.2
|
$
|
990.8
|
|||
If-converted value of common stock
|
$
|
2,534.4
|
$
|
1,818.0
|
Years Ended December 31,
|
||||||||||
2012
|
2011
|
2010
|
||||||||
(In thousands, except percentages)
|
||||||||||
Interest expense calculated on contractual interest rate
|
$
|
30,475
|
$
|
30,475
|
$
|
30,475
|
||||
Amortization of discount on liability component
|
82,366
|
73,787
|
66,131
|
|||||||
Total interest expense on convertible senior notes
|
$
|
112,841
|
$
|
104,262
|
$
|
96,606
|
||||
Effective interest rate (annualized)
|
11.0
|
%
|
11.0
|
%
|
11.0
|
%
|
Year
|
Long-term and
Other Debt
|
Asset-backed
Securities Debt
and Deposits
|
Total
|
||||||||
(In thousands)
|
|||||||||||
2013 (1)
|
$
|
839,397
|
$
|
2,566,807
|
$
|
3,406,204
|
|||||
2014 (2)
|
390,893
|
1,250,662
|
1,641,555
|
||||||||
2015
|
45,900
|
652,532
|
698,432
|
||||||||
2016
|
80,775
|
274,409
|
355,184
|
||||||||
2017 (3)
|
1,078,928
|
486,139
|
1,565,067
|
||||||||
Thereafter
|
500,000
|
1,128,832
|
1,628,832
|
||||||||
Total maturities
|
2,935,893
|
6,359,381
|
9,295,274
|
||||||||
Unamortized discount (4)
|
(81,054
|
)
|
—
|
(81,054
|
)
|
||||||
$
|
2,854,839
|
$
|
6,359,381
|
$
|
9,214,220
|
||||||
(1)
|
Long-term and Other Debt includes $805.0 million representing the aggregate principal amount of the Convertible Senior Notes due 2013.
|
(2)
|
Long-term and Other Debt includes $345.0 million representing the aggregate principal amount of the Convertible Senior Notes due 2014.
|
(3)
|
Long-term and Other Debt includes $400.0 million representing the aggregate principal amount of the Senior Notes due 2017.
|
(4)
|
Unamortized discount consists of $76.8 million for the convertible senior notes and $4.3 million for the Senior Notes due 2017, respectively.
|
December 31, 2012
|
December 31, 2011
|
||||||||||||||
Notional Amount
|
Weighted Average Years to Maturity
|
Notional Amount
|
Weighted Average Years to Maturity
|
||||||||||||
(Dollars in thousands)
|
|||||||||||||||
Interest rate derivatives not designated as hedging instruments
|
$
|
545,700
|
0.51
|
$
|
703,500
|
1.37
|
|||||||||
December 31, 2012
|
December 31, 2011
|
|||||||||||||
Balance Sheet
Location
|
Fair Value
|
Balance Sheet
Location
|
Fair Value
|
|||||||||||
(In thousands)
|
||||||||||||||
Interest rate derivatives not designated as hedging instruments
|
Other assets
|
$
|
4
|
Other assets
|
$
|
—
|
||||||||
Interest rate derivatives not designated as hedging instruments
|
Other current liabilities
|
$
|
8,515
|
Other current liabilities
|
$
|
4,739
|
||||||||
Interest rate derivatives not designated as hedging instruments
|
Other liabilities
|
$
|
—
|
Other liabilities
|
$
|
33,364
|
|
•
|
Redemption element. The redemption element is the larger of the two components. Revenue related to the redemption element is based on the estimated fair value. For this component, revenue is recognized at the time an AIR MILES reward mile is redeemed, or for those AIR MILES reward miles that are estimated to go unredeemed by the collector base, known as “breakage,” over the estimated life of an AIR MILES reward mile, or a period of 42 months. The estimated life of an AIR MILES reward mile and breakage are actively monitored by the Company.
|
|
•
|
Service element. The service element consists of marketing and administrative services. Revenue related to the service element is determined in accordance with ASU 2009-13. It is initially deferred and then amortized pro rata over the estimated life of an AIR MILES reward mile. With the adoption of ASU 2009-13, the residual method is no longer utilized for new sponsor agreements entered into or existing sponsor agreements materially modified; for these agreements, the Company measures the service element at its estimated selling price.
|
Deferred Revenue
|
||||||||||
Service
|
Redemption
|
Total
|
||||||||
(In thousands)
|
||||||||||
December 31, 2010
|
$
|
339,514
|
$
|
881,728
|
$
|
1,221,242
|
||||
Cash proceeds
|
220,128
|
577,098
|
797,226
|
|||||||
Revenue recognized
|
(192,284
|
)
|
(572,499
|
)
|
(764,783
|
)
|
||||
Other
|
—
|
1,228
|
1,228
|
|||||||
Effects of foreign currency translation
|
(8,385
|
)
|
(20,092
|
)
|
(28,477
|
)
|
||||
December 31, 2011
|
358,973
|
867,463
|
1,226,436
|
|||||||
Cash proceeds
|
216,772
|
570,439
|
787,211
|
|||||||
Revenue recognized
|
(205,740
|
)
|
(593,679
|
)
|
(799,419
|
)
|
||||
Other
|
—
|
1,000
|
1,000
|
|||||||
Effects of foreign currency translation
|
10,008
|
23,825
|
33,833
|
|||||||
December 31, 2012
|
$
|
380,013
|
$
|
869,048
|
$
|
1,249,061
|
||||
Amounts recognized in the consolidated balance sheets:
|
||||||||||
Current liabilities
|
$
|
186,275
|
$
|
869,048
|
$
|
1,055,323
|
||||
Non-current liabilities
|
$
|
193,738
|
$
|
—
|
$
|
193,738
|
Year
|
Operating
Leases
|
Capital
Leases
|
|||||
(In thousands)
|
|||||||
2013
|
$
|
63,532
|
$
|
14
|
|||
2014
|
54,060
|
—
|
|||||
2015
|
46,337
|
—
|
|||||
2016
|
39,582
|
—
|
|||||
2017
|
34,216
|
—
|
|||||
Thereafter
|
56,737
|
—
|
|||||
Total
|
$
|
294,464
|
14
|
||||
Less amount representing interest
|
(1
|
)
|
|||||
Total present value of minimum lease payments
|
$
|
13
|
Years Ended December 31,
|
||||||||||
2012
|
2011
|
2010
|
||||||||
(In thousands)
|
||||||||||
Cost of operations
|
$
|
32,654
|
$
|
25,766
|
$
|
27,608
|
||||
General and administrative
|
17,843
|
17,720
|
22,486
|
|||||||
Total
|
$
|
50,497
|
$
|
43,486
|
$
|
50,094
|
Performance-
Based
|
Service-
Based
|
Total
|
|||||||||
Balance at January 1, 2010
|
1,726,757
|
1,139,011
|
2,865,768
|
||||||||
Shares granted
|
393,900
|
210,026
|
603,926
|
||||||||
Shares vested
|
(240,941
|
)
|
(544,093
|
)
|
(785,034
|
)
|
|||||
Shares cancelled
|
(92,243
|
)
|
(31,219
|
)
|
(123,462
|
)
|
|||||
Balance at December 31, 2010
|
1,787,473
|
773,725
|
2,561,198
|
||||||||
Shares granted
|
457,180
|
158,539
|
615,719
|
||||||||
Shares vested
|
(373,099
|
)
|
(543,643
|
)
|
(916,742
|
)
|
|||||
Shares cancelled (1)
|
(1,014,982
|
)
|
(43,432
|
)
|
(1,058,414
|
)
|
|||||
Balance at December 31, 2011
|
856,572
|
345,189
|
1,201,761
|
||||||||
Shares granted
|
527,080
|
127,646
|
654,726
|
||||||||
Shares vested
|
(505,335
|
)
|
(130,066
|
)
|
(635,401
|
)
|
|||||
Shares cancelled
|
(104,476
|
)
|
(27,618
|
)
|
(132,094
|
)
|
|||||
Balance at December 31, 2012
|
773,841
|
315,151
|
1,088,992
|
||||||||
Outstanding and Expected to Vest
|
926,499
|
||||||||||
(1)
|
In March 2009, the Company determined that it was no longer probable that the specified performance measures associated with certain performance-based restricted stock units that were granted during 2008 and January 2009 would be achieved. The Company did not recognize stock-based compensation expense related to those awards no longer probable to vest. A total of 939,190 shares related to these certain performance-based restricted stock units did not meet the specified performance criteria and thus did not vest, resulting in their cancellation during the year ended December 31, 2011.
|
Outstanding
|
Exercisable
|
|||||||||||||
Options
|
Weighted Average
Exercise Price
|
Options
|
Weighted Average
Exercise Price
|
|||||||||||
Balance at January 1, 2010
|
2,480,690
|
$
|
36.05
|
2,380,410
|
$
|
34.90
|
||||||||
Granted
|
—
|
—
|
||||||||||||
Exercised
|
(1,039,349
|
)
|
30.00
|
|||||||||||
Forfeited
|
(19,077
|
)
|
62.81
|
|||||||||||
Balance at December 31, 2010
|
1,422,264
|
$
|
40.12
|
1,422,264
|
$
|
40.12
|
||||||||
Granted
|
—
|
—
|
||||||||||||
Exercised
|
(669,712
|
)
|
37.24
|
|||||||||||
Forfeited
|
(12,535
|
)
|
31.46
|
|||||||||||
Balance at December 31, 2011
|
740,017
|
$
|
42.87
|
740,017
|
$
|
42.87
|
||||||||
Granted
|
—
|
—
|
||||||||||||
Exercised
|
(355,764
|
)
|
42.95
|
|||||||||||
Forfeited
|
—
|
—
|
||||||||||||
Balance at December 31, 2012
|
384,253
|
$
|
42.80
|
384,253
|
$
|
42.80
|
||||||||
Vested and Expected to Vest (1)
|
384,253
|
$
|
42.80
|
|||||||||||
(1)
|
All options outstanding at December 31, 2012 are vested and there were no remaining options expected to vest.
|
Net Unrealized
Gains (Losses)
on Securities
|
Foreign Currency
Translation
Adjustments (1)
|
Accumulated
Other Comprehensive
Income (Loss)
|
|||||||||
(In thousands)
|
|||||||||||
Balance as of January 1, 2010
|
$
|
(63,024
|
)
|
$
|
(2,717
|
)
|
$
|
(65,741
|
)
|
||
Adoption of ASC 860 and ASC 810
|
55,881
|
—
|
55,881
|
||||||||
Changes in other comprehensive income (loss)
|
(12,939
|
)
|
(11,701
|
)
|
(24,640
|
)
|
|||||
Balance as of December 31, 2010
|
(20,082
|
)
|
(14,418
|
)
|
(34,500
|
)
|
|||||
Changes in other comprehensive income (loss)
|
27,035
|
(15,591
|
)
|
11,444
|
|||||||
Balance as of December 31, 2011
|
6,953
|
(30,009
|
)
|
(23,056
|
)
|
||||||
Changes in other comprehensive income (loss)
|
3,368
|
(2,173
|
)
|
1,195
|
|||||||
Balance as of December 31, 2012
|
$
|
10,321
|
$
|
(32,182
|
)
|
$
|
(21,861
|
)
|
|||
(1)
|
Primarily related to the impact of changes in the Canadian currency exchange rate.
|
Years Ended December 31,
|
||||||||||
2012
|
2011
|
2010
|
||||||||
(In thousands)
|
||||||||||
Components of income from continuing operations before income taxes:
|
||||||||||
Domestic
|
$
|
481,243
|
$
|
332,010
|
$
|
159,227
|
||||
Foreign
|
201,661
|
182,085
|
151,663
|
|||||||
Total
|
$
|
682,904
|
$
|
514,095
|
$
|
310,890
|
||||
Components of income tax expense are as follows:
|
||||||||||
Current
|
||||||||||
Federal
|
$
|
143,695
|
$
|
71,843
|
$
|
17,940
|
||||
State
|
13,991
|
9,415
|
9,341
|
|||||||
Foreign
|
696
|
70,514
|
68,910
|
|||||||
Total current
|
158,382
|
151,772
|
96,191
|
|||||||
Deferred
|
||||||||||
Federal
|
28,267
|
46,459
|
20,354
|
|||||||
State
|
6,176
|
3,482
|
937
|
|||||||
Foreign
|
67,823
|
(2,904
|
)
|
(2,230
|
)
|
|||||
Total deferred
|
102,266
|
47,037
|
19,061
|
|||||||
Total provision for income taxes
|
$
|
260,648
|
$
|
198,809
|
$
|
115,252
|
Years Ended December 31,
|
||||||||||
2012
|
2011
|
2010
|
||||||||
(In thousands)
|
||||||||||
Expected expense at statutory rate
|
$
|
239,016
|
$
|
179,933
|
$
|
108,812
|
||||
Increase (decrease) in income taxes resulting from:
|
||||||||||
State income taxes, net of federal benefit
|
13,109
|
8,383
|
6,680
|
|||||||
Foreign earnings at other than U.S. rates
|
(4,328
|
)
|
(7,131
|
)
|
(6,320
|
)
|
||||
Canadian tax rate reductions
|
(7,128
|
)
|
7,188
|
11,209
|
||||||
U.S. tax on foreign dividends, net of credits
|
15,617
|
5,228
|
(3,156
|
)
|
||||||
Reduction of prior year tax positions
|
—
|
—
|
(7,326
|
)
|
||||||
Other
|
4,362
|
5,208
|
5,353
|
|||||||
Total
|
$
|
260,648
|
$
|
198,809
|
$
|
115,252
|
December 31,
|
|||||||
2012
|
2011
|
||||||
(In thousands)
|
|||||||
Deferred tax assets
|
|||||||
Deferred revenue
|
$
|
90,675
|
$
|
155,386
|
|||
Allowance for doubtful accounts
|
186,503
|
179,860
|
|||||
Net operating loss carryforwards and other carryforwards
|
51,603
|
129,449
|
|||||
Derivatives
|
4,456
|
15,230
|
|||||
Stock-based compensation and other employee benefits
|
27,205
|
20,196
|
|||||
Accrued expenses and other
|
44,267
|
40,506
|
|||||
Total deferred tax assets
|
404,709
|
540,627
|
|||||
Valuation allowance
|
(22,542
|
)
|
(82,517
|
)
|
|||
Deferred tax assets, net of valuation allowance
|
382,167
|
458,110
|
|||||
Deferred tax liabilities
|
|||||||
Deferred income
|
$
|
203,658
|
$
|
168,769
|
|||
Convertible note hedges
|
7,553
|
14,317
|
|||||
Depreciation
|
8,950
|
7,724
|
|||||
Intangible assets
|
172,065
|
123,335
|
|||||
Total deferred tax liabilities
|
392,226
|
314,145
|
|||||
Net deferred tax asset (liability)
|
$
|
(10,059
|
)
|
$
|
143,965
|
||
Amounts recognized in the consolidated balance sheets:
|
|||||||
Current assets
|
$
|
237,268
|
$
|
252,303
|
|||
Non-current assets
|
30,027
|
43,408
|
|||||
Non-current liabilities
|
(277,354
|
)
|
(151,746
|
)
|
|||
Total – Net deferred tax asset (liability)
|
$
|
(10,059
|
)
|
$
|
143,965
|
Balance at December 31, 2009
|
$
|
51,147
|
||
Increases related to prior years’ tax positions
|
2,391
|
|||
Decreases related to prior years’ tax positions
|
(2,337
|
)
|
||
Increases related to current year tax positions
|
5,957
|
|||
Settlements during the period
|
(2,026
|
)
|
||
Lapses of applicable statutes of limitation
|
(932
|
)
|
||
Balance at December 31, 2010
|
$
|
54,200
|
||
Increases related to prior years’ tax positions
|
14,509
|
|||
Decreases related to prior years’ tax positions
|
(5,497
|
)
|
||
Increases related to current year tax positions
|
9,581
|
|||
Settlements during the period
|
(2,569
|
)
|
||
Lapses of applicable statutes of limitation
|
(680
|
)
|
||
Balance at December 31, 2011
|
$
|
69,544
|
||
Increases related to prior years’ tax positions
|
4,188
|
|||
Decreases related to prior years’ tax positions
|
(7,424
|
)
|
||
Increases related to current year tax positions
|
11,703
|
|||
Settlements during the period
|
(1,253
|
)
|
||
Lapses of applicable statutes of limitation
|
(604
|
)
|
||
Balance at December 31, 2012
|
$
|
76,154
|
December 31,
|
|||||||||||||
2012
|
2011
|
||||||||||||
Carrying
Amount
|
Fair
Value
|
Carrying
Amount
|
Fair
Value
|
||||||||||
(In thousands)
|
|||||||||||||
Financial assets
|
|||||||||||||
Cash and cash equivalents
|
$
|
893,352
|
$
|
893,352
|
$
|
216,213
|
$
|
216,213
|
|||||
Trade receivables, net
|
370,110
|
370,110
|
300,895
|
300,895
|
|||||||||
Credit card receivables, net
|
6,967,674
|
6,967,674
|
5,197,690
|
5,197,690
|
|||||||||
Redemption settlement assets, restricted
|
492,690
|
492,690
|
515,838
|
515,838
|
|||||||||
Cash collateral, restricted
|
65,160
|
65,160
|
158,727
|
158,727
|
|||||||||
Other investment securities
|
91,972
|
91,972
|
26,772
|
26,772
|
|||||||||
Derivative instruments
|
4
|
4
|
—
|
—
|
|||||||||
Financial liabilities
|
|||||||||||||
Accounts payable
|
215,470
|
215,470
|
149,812
|
149,812
|
|||||||||
Deposits
|
2,228,411
|
2,255,089
|
1,353,775
|
1,372,670
|
|||||||||
Asset-backed securities debt – owed to securitization investors
|
4,130,970
|
4,225,745
|
3,260,287
|
3,302,687
|
|||||||||
Long-term and other debt
|
2,854,839
|
4,358,379
|
2,183,474
|
3,071,661
|
|||||||||
Derivative instruments
|
8,515
|
8,515
|
38,103
|
38,103
|
|
•
|
Level 1, defined as observable inputs such as quoted prices in active markets;
|
|
•
|
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
|
|
•
|
Level 3, defined as unobservable inputs where little or no market data exists, therefore requiring an entity to develop its own assumptions.
|
Fair Value Measurements at
December 31, 2012 Using
|
|||||||||||||
Balance at
December 31,
2012
|
Level 1
|
Level 2
|
Level 3
|
||||||||||
(In thousands)
|
|||||||||||||
Government bonds (1)
|
$
|
5,117
|
$
|
—
|
$
|
5,117
|
$
|
—
|
|||||
Corporate bonds (1)
|
447,307
|
6,165
|
441,142
|
—
|
|||||||||
Cash collateral, restricted
|
65,160
|
2,500
|
—
|
62,660
|
|||||||||
Other investment securities (2)
|
91,972
|
51,951
|
40,021
|
—
|
|||||||||
Derivative instruments (3)
|
4
|
—
|
4
|
—
|
|||||||||
Total assets measured at fair value
|
$
|
609,560
|
$
|
60,616
|
$
|
486,284
|
$
|
62,660
|
|||||
Derivative instruments (4)
|
$
|
8,515
|
$
|
—
|
$
|
8,515
|
$ |
—
|
|||||
Total liabilities measured at fair value
|
$
|
8,515
|
$
|
—
|
$
|
8,515
|
$
|
—
|
Fair Value Measurements at
December 31, 2011 Using
|
||||||||||||||
Balance at
December 31,
2011
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||
(In thousands)
|
||||||||||||||
Government bonds (1)
|
$
|
5,100
|
$
|
—
|
$
|
5,100
|
$
|
—
|
||||||
Corporate bonds (1)
|
475,273
|
21,346
|
453,927
|
—
|
||||||||||
Cash collateral, restricted
|
158,727
|
—
|
—
|
158,727
|
||||||||||
Other investment securities (2)
|
26,772
|
3,043
|
23,729
|
—
|
||||||||||
Total assets measured at fair value
|
$
|
665,872
|
$
|
24,389
|
$
|
482,756
|
$
|
158,727
|
||||||
Derivative instruments (4)
|
$
|
38,103
|
$
|
—
|
$
|
38,103
|
$ |
—
|
||||||
Total liabilities measured at fair value
|
$
|
38,103
|
$
|
—
|
$
|
38,103
|
$
|
—
|
||||||
(1)
|
Amounts are included in redemption settlement assets in the consolidated balance sheets.
|
(2)
|
Amounts are included in other current assets and other assets in the consolidated balance sheets.
|
(3)
|
Amount is included in other assets in the consolidated balance sheets.
|
(4)
|
Amounts are included in other current liabilities and other liabilities in the consolidated balance sheets.
|
Cash Collateral,
Restricted
|
||||
(In thousands)
|
||||
December 31, 2011
|
$
|
158,727
|
||
Total gains (realized or unrealized):
|
||||
Included in earnings
|
5,469
|
|||
Purchases
|
1,287
|
|||
Issuances
|
—
|
|||
Settlements
|
(102,823
|
)
|
||
Transfers in or out of Level 3
|
—
|
|||
December 31, 2012
|
$
|
62,660
|
||
Gains for the period included in earnings related to assets still held at December 31, 2012
|
$
|
5,469
|
Cash Collateral,
Restricted
|
||||
(In thousands)
|
||||
December 31, 2010
|
$
|
185,754
|
||
Total losses (realized or unrealized):
|
||||
Included in earnings
|
(5,227
|
)
|
||
Purchases
|
55,148
|
|||
Issuances
|
17,722
|
|||
Settlements
|
(94,670
|
)
|
||
Transfers in or out of Level 3
|
—
|
|||
December 31, 2011
|
$
|
158,727
|
||
Losses for the period included in earnings related to assets still held at December 31, 2011
|
$
|
(5,227
|
)
|
Fair Value Measurements at
December 31, 2012
|
||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Cash and cash equivalents
|
$
|
893,352
|
$
|
893,352
|
$
|
—
|
$
|
—
|
||||||||
Credit card receivables, net
|
6,967,674
|
—
|
—
|
6,967,674
|
||||||||||||
Total assets
|
$
|
7,861,026
|
$
|
893,352
|
$
|
—
|
$
|
6,967,674
|
||||||||
Deposits
|
$
|
2,255,089
|
$
|
—
|
$
|
2,255,089
|
$
|
—
|
||||||||
Asset-backed securities debt - owed to securitization investors
|
4,225,745
|
—
|
4,225,745
|
—
|
||||||||||||
Long-term and other debt
|
4,358,379
|
—
|
4,358,379
|
—
|
||||||||||||
Total liabilities
|
$
|
10,839,213
|
$
|
—
|
$
|
10,839,213
|
$
|
—
|
December 31,
|
|||||||
2012
|
2011
|
||||||
(In thousands)
|
|||||||
Assets:
|
|||||||
Cash and cash equivalents
|
$
|
247,478
|
$
|
25
|
|||
Investment in subsidiaries
|
2,813,219
|
1,938,769
|
|||||
Intercompany receivables
|
887,518
|
1,011,347
|
|||||
Other assets
|
61,222
|
56,496
|
|||||
Total assets
|
$
|
4,009,437
|
$
|
3,006,637
|
|||
Liabilities:
|
|||||||
Current debt
|
$
|
803,256
|
$
|
19,813
|
|||
Long-term debt
|
2,051,570
|
2,163,627
|
|||||
Intercompany payables
|
8,519
|
84,147
|
|||||
Other liabilities
|
617,605
|
563,084
|
|||||
Total liabilities
|
3,480,950
|
2,830,671
|
|||||
Stockholders’ equity
|
528,487
|
175,966
|
|||||
Total liabilities and stockholders’ equity
|
$
|
4,009,437
|
$
|
3,006,637
|
Years Ended December 31,
|
||||||||||
2012
|
2011
|
2010
|
||||||||
(In thousands)
|
||||||||||
Interest from loans to subsidiaries
|
$
|
10,248
|
$
|
10,197
|
$
|
11,058
|
||||
Dividends from subsidiaries
|
464,971
|
343,676
|
215,125
|
|||||||
Total revenue
|
475,219
|
353,873
|
226,183
|
|||||||
Interest expense, net
|
179,527
|
159,088
|
168,913
|
|||||||
Other expenses, net
|
533
|
646
|
281
|
|||||||
Total expenses
|
180,060
|
159,734
|
169,194
|
|||||||
Income before income taxes and equity in undistributed net income of subsidiaries
|
295,159
|
194,139
|
56,989
|
|||||||
Benefit for income taxes
|
73,106
|
34,127
|
37,811
|
|||||||
Income before equity in undistributed net income of subsidiaries
|
368,265
|
228,266
|
94,800
|
|||||||
Equity in undistributed net income of subsidiaries
|
53,991
|
87,020
|
98,937
|
|||||||
Net income
|
$
|
422,256
|
$
|
315,286
|
$
|
193,737
|
Years Ended December 31,
|
||||||||||
2012
|
2011
|
2010
|
||||||||
(In thousands)
|
||||||||||
Net cash used in operating activities
|
$
|
(224,835
|
)
|
$
|
(10,011
|
)
|
$
|
(43,096
|
)
|
|
Investing activities:
|
||||||||||
Payments for acquired businesses, net of cash acquired
|
—
|
(359,076
|
)
|
(117,000
|
)
|
|||||
Investment in subsidiaries
|
(475,000
|
)
|
—
|
—
|
|
|||||
Dividends received
|
464,971
|
343,676
|
215,125
|
|||||||
Net cash (used in) provided by investing activities
|
(10,029
|
)
|
(15,400
|
)
|
98,125
|
|||||
Financing activities:
|
||||||||||
Borrowings under debt agreements
|
1,095,148
|
3,256,500
|
1,507,000
|
|||||||
Repayment of borrowings
|
(506,214
|
)
|
(3,010,906
|
)
|
(1,458,000
|
)
|
||||
Excess tax benefits from stock-based compensation
|
20,199
|
15,028
|
12,959
|
|||||||
Payment of deferred financing costs
|
(21,672
|
)
|
(23,861
|
)
|
(2,360
|
)
|
||||
Purchase of treasury shares
|
(125,840
|
)
|
(240,877
|
)
|
(148,717
|
)
|
||||
Proceeds from issuance of common stock
|
20,696
|
29,412
|
33,854
|
|||||||
Net cash provided by (used in) financing activities
|
482,317
|
25,296
|
(55,264
|
)
|
||||||
Increase (decrease) in cash and cash equivalents
|
247,453
|
(115
|
)
|
(235
|
)
|
|||||
Cash and cash equivalents at beginning of year
|
25
|
140
|
375
|
|||||||
Cash and cash equivalents at end of year
|
$
|
247,478
|
$
|
25
|
$
|
140
|
|
•
|
LoyaltyOne includes the Company’s Canadian AIR MILES Reward Program;
|
|
•
|
Epsilon provides end-to-end, integrated direct marketing solutions that combine database marketing technology and analytics with a broad range of direct marketing services; and
|
|
•
|
Private Label Services and Credit provides risk management solutions, account origination, funding, transaction processing, customer care and collections services for the Company’s private label retail credit card programs.
|
Year Ended December 31, 2012
|
LoyaltyOne
|
Epsilon
|
Private Label
Services and
Credit
|
Corporate/
Other
|
Eliminations
|
Total
|
||||||||||||
(In thousands)
|
||||||||||||||||||
Revenues
|
$
|
919,041
|
$
|
996,210
|
$
|
1,732,160
|
$
|
372
|
$
|
(6,393
|
)
|
$
|
3,641,390
|
|||||
Adjusted EBITDA (1)
|
236,094
|
222,253
|
823,241
|
(89,851
|
)
|
—
|
1,191,737
|
|||||||||||
Stock compensation expense
|
9,311
|
14,414
|
8,930
|
17,842
|
—
|
50,497
|
||||||||||||
Depreciation and amortization
|
19,614
|
101,684
|
42,464
|
3,114
|
—
|
166,876
|
||||||||||||
Operating income (loss)
|
207,169
|
106,155
|
771,847
|
(110,807
|
)
|
—
|
974,364
|
|||||||||||
Interest expense, net
|
(1,560
|
)
|
(67
|
)
|
114,193
|
178,894
|
—
|
291,460
|
||||||||||
Income (loss) from continuing operations before income taxes
|
208,729
|
106,222
|
657,654
|
(289,701
|
)
|
—
|
682,904
|
|||||||||||
Capital expenditures
|
$
|
19,424
|
$
|
60,065
|
$
|
28,295
|
$
|
8,671
|
$
|
—
|
$
|
116,455
|
Year Ended December 31, 2011
|
LoyaltyOne
|
Epsilon
|
Private Label
Services and
Credit
|
Corporate/
Other
|
Eliminations
|
Total
|
||||||||||||
(In thousands)
|
||||||||||||||||||
Revenues
|
$
|
844,774
|
$
|
847,136
|
$
|
1,488,998
|
$
|
1,136
|
$
|
(8,757
|
)
|
$
|
3,173,287
|
|||||
Adjusted EBITDA (1)
|
217,083
|
195,397
|
678,334
|
(76,407
|
)
|
(5,088
|
)
|
1,009,319
|
||||||||||
Stock compensation expense
|
7,202
|
11,816
|
6,748
|
17,720
|
—
|
43,486
|
||||||||||||
Depreciation and amortization
|
20,253
|
90,111
|
35,480
|
7,309
|
—
|
153,153
|
||||||||||||
Operating income (loss)
|
189,628
|
93,470
|
636,106
|
(101,436
|
)
|
(5,088
|
)
|
812,680
|
||||||||||
Interest expense, net
|
(383
|
)
|
(68
|
)
|
145,580
|
158,544
|
(5,088
|
)
|
298,585
|
|||||||||
Income (loss) from continuing operations before income taxes
|
190,011
|
93,538
|
490,526
|
(259,980
|
)
|
—
|
514,095
|
|||||||||||
Capital expenditures
|
$
|
18,331
|
$
|
35,600
|
$
|
13,485
|
$
|
6,086
|
$
|
—
|
$
|
73,502
|
Year Ended December 31, 2010
|
LoyaltyOne
|
Epsilon
|
Private Label
Services and
Credit
|
Corporate/
Other
|
Eliminations
|
Total
|
|||||||||||||
(In thousands)
|
|||||||||||||||||||
Revenues
|
$
|
799,534
|
$
|
613,374
|
$
|
1,386,274
|
$
|
1,866
|
$
|
(9,627
|
)
|
$
|
2,791,421
|
||||||
Adjusted EBITDA (1)
|
204,554
|
152,304
|
530,021
|
(57,875
|
)
|
(6,464
|
)
|
822,540
|
|||||||||||
Stock compensation expense
|
10,266
|
9,481
|
7,861
|
22,486
|
—
|
50,094
|
|||||||||||||
Depreciation and amortization
|
23,823
|
77,743
|
35,164
|
6,496
|
—
|
143,226
|
|||||||||||||
Operating income (loss)
|
170,465
|
65,080
|
486,996
|
(86,857
|
)
|
(6,464
|
)
|
629,220
|
|||||||||||
Interest expense, net
|
226
|
(33
|
)
|
155,323
|
169,278
|
(6,464
|
)
|
318,330
|
|||||||||||
Income (loss) from continuing operations before income taxes
|
170,239
|
65,113
|
331,673
|
(256,135
|
)
|
—
|
310,890
|
||||||||||||
Capital expenditures
|
$
|
16,049
|
$
|
27,405
|
$
|
19,681
|
$
|
5,620
|
$
|
—
|
$
|
68,755
|
|||||||
(1)
|
Adjusted EBITDA is a non-GAAP financial measure equal to income (loss) from continuing operations, the most directly comparable GAAP financial measure, plus stock compensation expense, provision for income taxes, interest expense, net, depreciation and other amortization and amortization of purchased intangibles. Adjusted EBITDA is presented in accordance with ASC 280 as it is the primary performance metric utilized to assess performance of the segment.
|
United
States
|
Canada
|
Other
|
Total
|
||||||||||
(In thousands)
|
|||||||||||||
Revenues
|
|||||||||||||
Year Ended December 31, 2012
|
$
|
2,655,506
|
$
|
913,188
|
$
|
72,696
|
$
|
3,641,390
|
|||||
Year Ended December 31, 2011
|
$
|
2,264,336
|
$
|
833,427
|
$
|
75,524
|
$
|
3,173,287
|
|||||
Year Ended December 31, 2010
|
$
|
1,931,660
|
$
|
785,549
|
$
|
74,212
|
$
|
2,791,421
|
|||||
Long-lived assets
|
|||||||||||||
December 31, 2012
|
$
|
2,379,536
|
$
|
350,122
|
$
|
138,338
|
$
|
2,867,996
|
|||||
December 31, 2011
|
$
|
1,957,094
|
$
|
367,324
|
$
|
48,864
|
$
|
2,373,282
|
|
•
|
elimination of $74 million in redemption settlement assets for those interests retained in the WFN Trusts,
|
|
•
|
elimination of $775 million in retained interests classified in due from securitizations,
|
|
•
|
consolidation of $4.1 billion in credit card receivables, and
|
|
•
|
consolidation of $3.7 billion in asset-backed securities.
|
Quarter Ended
|
|||||||||||||
March 31,
2012
|
June 30,
2012
|
September 30,
2012
|
December 31,
2012
|
||||||||||
(In thousands, except per share amounts)
|
|||||||||||||
Revenues
|
$
|
891,569
|
$
|
866,485
|
$
|
911,492
|
$
|
971,844
|
|||||
Operating expenses
|
638,950
|
625,942
|
647,021
|
755,113
|
|||||||||
Operating income
|
252,619
|
240,543
|
264,471
|
216,731
|
|||||||||
Interest expense, net
|
65,652
|
73,067
|
74,365
|
78,376
|
|||||||||
Income before income taxes
|
186,967
|
167,476
|
190,106
|
138,355
|
|||||||||
Provision for income taxes
|
71,738
|
63,655
|
70,561
|
54,694
|
|||||||||
Net income
|
$
|
115,229
|
$
|
103,821
|
$
|
119,545
|
$
|
83,661
|
|||||
Net income per share—basic
|
$
|
2.30
|
$
|
2.07
|
$
|
2.39
|
$
|
1.68
|
|||||
Net income per share—diluted
|
$
|
1.86
|
$
|
1.63
|
$
|
1.84
|
$
|
1.27
|
Quarter Ended
|
|||||||||||||
March 31,
2011
|
June 30,
2011
|
September 30,
2011
|
December 31,
2011
|
||||||||||
(In thousands, except per share amounts)
|
|||||||||||||
Revenues
|
$
|
740,436
|
$
|
740,458
|
$
|
844,844
|
$
|
847,549
|
|||||
Operating expenses
|
528,528
|
548,667
|
617,165
|
666,247
|
|||||||||
Operating income
|
211,908
|
191,791
|
227,679
|
181,302
|
|||||||||
Interest expense, net
|
71,459
|
78,794
|
74,356
|
73,976
|
|||||||||
Income before income taxes
|
140,449
|
112,997
|
153,323
|
107,326
|
|||||||||
Provision for income taxes
|
54,073
|
43,974
|
59,342
|
41,420
|
|||||||||
Net income
|
$
|
86,376
|
$
|
69,023
|
$
|
93,981
|
$
|
65,906
|
|||||
Net income per share—basic
|
$
|
1.69
|
$
|
1.35
|
$
|
1.86
|
$
|
1.31
|
|||||
Net income per share—diluted
|
$
|
1.56
|
$
|
1.19
|
$
|
1.60
|
$
|
1.11
|
ALLIANCE DATA SYSTEMS CORPORATION
|
||
By:
|
/S/ EDWARD J. HEFFERNAN
|
|
Edward J. Heffernan
|
||
President and Chief Executive Officer
|
Name
|
Title
|
Date
|
||
/S/ EDWARD J. HEFFERNAN
|
President, Chief Executive
|
February 28, 2013
|
||
Edward J. Heffernan
|
Officer and Director
|
|||
/S/ CHARLES L. HORN
|
Executive Vice President and
|
February 28, 2013
|
||
Charles L. Horn
|
Chief Financial Officer
|
|||
/S/ LAURA SANTILLAN
|
Senior Vice President and
|
February 28, 2013
|
||
Laura Santillan
|
Chief Accounting Officer
|
|||
/S/ BRUCE K. ANDERSON
|
Director
|
February 28, 2013
|
||
Bruce K. Anderson
|
||||
/S/ ROGER H. BALLOU
|
Director
|
February 28, 2013
|
||
Roger H. Ballou
|
||||
/S/ LAWRENCE M. BENVENISTE, PH.D.
|
Director
|
February 28, 2013
|
||
Lawrence M. Benveniste, Ph.D.
|
||||
/S/ D. KEITH COBB
|
Director
|
February 28, 2013
|
||
D. Keith Cobb
|
||||
/S/ E. LINN DRAPER, JR., PH.D.
|
Director
|
February 28, 2013
|
||
E. Linn Draper, Jr., Ph.D.
|
||||
/S/ KENNETH R. JENSEN
|
Director
|
February 28, 2013
|
||
Kenneth R. Jensen
|
||||
/S/ ROBERT A. MINICUCCI
|
Chairman of the Board, Director
|
February 28, 2013
|
||
Robert A. Minicucci
|
Description
|
Balance at
Beginning of
Period
|
Charged to
Costs and
Expenses
|
Charged to
Other
Accounts (1)
|
Write-Offs
Net of
Recoveries
|
Balance at
End of
Period
|
||||||||||||
(In thousands)
|
|||||||||||||||||
Allowance for Doubtful Accounts —Trade receivables:
|
|||||||||||||||||
Year Ended December 31, 2012
|
$
|
2,406
|
$
|
2,270
|
$
|
384
|
$
|
(1,141
|
)
|
$
|
3,919
|
||||||
Year Ended December 31, 2011
|
$
|
4,350
|
$
|
2,141
|
$
|
547
|
$
|
(4,632
|
)
|
$
|
2,406
|
||||||
Year Ended December 31, 2010
|
$
|
6,736
|
$
|
1,939
|
$
|
16
|
$
|
(4,341
|
)
|
$
|
4,350
|
||||||
Allowance for Loan Loss —Credit card receivables:
|
|||||||||||||||||
Year Ended December 31, 2012
|
$
|
468,321
|
$
|
285,479
|
$
|
11,000
|
$
|
(282,842
|
)
|
$
|
481,958
|
||||||
Year Ended December 31, 2011
|
$
|
518,069
|
$
|
300,316
|
$
|
(10,000
|
)
|
$
|
(340,064
|
)
|
$
|
468,321
|
|||||
Year Ended December 31, 2010
|
$
|
54,884
|
$
|
387,822
|
$
|
524,215
|
$
|
(448,852
|
)
|
$
|
518,069
|
||||||
(1)
|
For the year ended December 31, 2010, a charge of $523,950 due to the adoption of ASC 860 and ASC 810 is included in the Allowance for Loan Loss – Credit card receivables.
|
LANDLORD:
|
TENANT:
|
A. & A. Conte Joint Venture Limited
Partnership, an Illinois limited partnership
|
Aspen Marketing Services, LLC
a Delaware limited liability corporation
|
By: Conte Family Corporation, its General Partner
|
By: /s/ Charles L. Horn
Name: Charles L. Horn
Title: CFO
|
By: /s/ Arturo J. Conte
Arturo J. Conte, President
|
|
1.
|
Provider Representations, Warranties, and Obligations.
|
|
a.
|
Provider shall provide to Epsilon the following:
|
|
i.
|
Physical space as set forth in Exhibit A for the Equipment ("Equipment Space").
|
|
ii.
|
Uninterrupted HVAC and power as set forth in the SLA, and grounding for the Equipment and Equipment Space as required pursuant to this Agreement and as may further be described in any SOW.
|
|
iii.
|
Sufficient back-up generator capabilities and capacity to ensure an uninterrupted power supply as required by this Agreement.
|
|
iv.
|
Access to the Premises, including the Equipment Space, during normal business hours so that Epsilon may perform installation, operation, maintenance, replacement and repair functions in the Equipment Space, all in accordance with the terms of this Agreement, including the Exhibits, Appendices and Schedules.
|
|
v.
|
Provider agrees to provide the services set forth in this Agreement, as modified or enhanced by any agreed and executed Statement of Work (“SOW”) between the parties (the “Services”). Unless otherwise specifically set forth in writing, the terms of this Agreement shall prevail in the event of any inconsistency between it and any SOW.
|
|
vi.
|
Provider shall make commercially reasonable efforts to install a DWDM network between Building 7 of the Premises and any future Provider buildings in the Dallas Ft. Worth area. In such event, Epsilon shall have the option to use the DWDM network, at cost to Epsilon, as a method to interconnect Provider facilities in which Epsilon has space. The addition of DWDM services shall require a Project Change Request, which shall be consistent with the terms of this Section 1(a) (vi).
|
|
b.
|
Provider will adhere to the Service Levels (“SLA”) set forth in Exhibit B. Exhibit B sets out the SLA’s and the methodology for the reduction in Fees for any SLA failure.
|
|
c.
|
Provider will provide and adhere to the Customer Support Guide as developed from the outline attached hereto as Exhibit E.
|
|
d.
|
Provider shall maintain Data Center Tier IV certification for Mechanical and Electrical with TIA 942 or the then preferred industry standard certification supplier of Provider.
|
|
e.
|
Provider has the authority to enter into this Agreement and has obtained (or will obtain) and will maintain, at its sole expense, all consents, inspections, permits, licenses, or other approvals required for Provider to fulfill its obligations under this Agreement.
|
|
f.
|
Provider is responsible for all Premises utilities including but not limited to electricity and water and, if applicable, other utilities as described in any SOW executed pursuant to this Agreement.
|
|
g.
|
Provider will engineer the space for the minimum megawatt (MW) of critical load power based on Epsilon’s requirements as set forth in Appendix I, approximately 150W/RFSF on the Go-Live Date scaling up to 300W/RFSF as necessary to meet Epsilon requirements.
|
|
h.
|
Provider shall reimburse Epsilon $ per day for each day of delay from the mutually agreed upon Go-Live Date, provided that Provider shall only reimburse Epsilon in the event the delay is caused by Provider and is not related to a force majeure event. For avoidance of doubt, Provider shall not be responsible for any delays caused by Epsilon’s failure to provide timely information or otherwise assist in the implementation of Services.
|
|
i.
|
Provider will not grant a security interest in, include the Equipment on any UCC financing statement, or otherwise encumber or allow any of the Equipment to become subject to a lien. Provider does not gain any ownership interest in the Equipment by means of this Agreement.
|
|
j.
|
Provider is currently engaged in the certification process with the Uptime Institute to obtain Tier III certification with regard to the Premises. Provider shall use commercially reasonable efforts to complete this process and obtain the Tier III Certification. In addition, Provider shall provide monthly updates to Epsilon regarding the status of Provider’s certification.
|
|
2.
|
Epsilon Representations and Warranties.
|
|
a.
|
Epsilon represents and warrants that it has the authority to enter this Agreement and perform its obligations hereunder.
|
|
b.
|
Epsilon represents and warrants that in connection with the exercise of its rights and performance of its obligations under this Agreement, Epsilon shall at all times comply with the terms and conditions of this Agreement including without limitation all exhibits and attachments, Provider’s Acceptable Use Policy (the “AUP”), and all applicable Laws. Epsilon further represents and warrants that it will not interfere with any other occupant of the Premises.
|
|
c.
|
Epsilon represents and warrants that as of the Effective Date, and at all times during the Term, it shall own or have the legal right to place and use the Equipment as contemplated herein, and that it shall exercise its rights and perform its obligations under this Agreement without infringing, misappropriating or otherwise violating any intellectual property rights of Provider, any third party or any applicable Law. Epsilon further represents and warrants that its placement and use of the Equipment will not pose a physical threat to Provider, the Premises, or customers of Provider and comply with all policies, procedures, and security requirements provided by Provider. Epsilon further represents and warrants that as of the Effective Date, and at all times during the Term, it has obtained (or will obtain) and will maintain, at its sole expense, all consents, inspection, permits, licenses, or other approvals required for Epsilon to fulfill its obligations under the Agreement and to utilize the Equipment Space and Services as contemplated hereunder.
|
|
3.
|
Term and Termination.
|
|
a.
|
This Agreement is effective as of the Effective Date and, unless terminated earlier as otherwise permitted under this Agreement, will remain effective for sixty (60) months from the Go-Live Date (the “Initial Term”). Epsilon shall have the right to renew this Agreement for two (2) one (1) year renewal terms (each a “Renewal Term”). At least one hundred and twenty (120) days prior to the end of the Initial Term, or any Renewal Term, Provider shall notify Epsilon of the impending term expiration. Within thirty (30) days of receiving such notice Epsilon shall provide written notice indicating whether it intends to renew the Agreement. In the event Epsilon does not give notice of its intent to renew, Epsilon shall be deemed to have elected to renew and any Renewal Term shall require the consent of Provider. The Initial Term and the Renewal Term may be referred to herein as the “Term.”
|
|
b.
|
This Agreement may be terminated for convenience by Epsilon before the 5th year of the Term upon ninety (90) days written notice, provided Epsilon pays the scheduled Termination for Convenience Fee as follows:
|
|
i.
|
Should Epsilon exercise this right of termination for convenience, Epsilon shall be obligated to pay the following Termination for Convenience Fee, in addition to any unamortized broker fees or additional termination for convenience fees set forth in future SOWs or Order Forms: Epsilon has committed to operating at least 300 Customer Cabinets with an average monthly power consumption of 3.2kW per Customer Cabinet for at least 36 months (the “Full Ramp Period”). The monetary value of this minimum commitment is equal to US $ (the “Full Ramp Minimum Commitment”). The Termination for Convenience Fee shall be equal to that portion of the Full Ramp Minimum Commitment that has not been paid by Epsilon on the date it gives notice of its intent to terminate for convenience, without any credit for (A) amounts paid by Epsilon outside the Full Ramp Period, or (B) amounts paid during the Full Ramp Period for (1) Customer Cabinets or power usage in excess of the Minimum Commitment, or (2) amounts not attributable to the MRC for Customer Cabinets (i.e. Smart Hands Services, Pass-throughs, cross-connects, etc.) All amounts due under this Section 3(b) shall be paid immediately upon notice from Epsilon of its intent to terminate for convenience, subject to Section 3(b) (ii) below.
|
|
ii.
|
Should Epsilon notify Provider of its intent to exercise its Termination for Convenience in accordance with subsection (i) above within one hundred eighty (180) days (instead of the 90 day notice required above), Provider agrees that upon such notice it shall use reasonable efforts to offer the Equipment Space to potential customers with the same requirements as Epsilon before other space on the Premises in order to reduce the amount of Termination for Convenience Fee due by Epsilon to Provider. Should Provider execute an agreement with another customer regarding the Equipment Space prior to the Termination for Convenience date, the Termination for Convenience Fee shall be reduced in an amount equal to the amount of monthly recurring fees (not including amounts attributable to pass-throughs, cross-connects, smart hands services or other non-recurring charges) to be paid by the other customer during the remaining Term.
|
|
4.
|
Payment Terms.
|
|
a.
|
Epsilon shall provide payment to Provider of all undisputed amounts due no later than forty-five (45)days after Epsilon’s receipt of an invoice reflecting any applicable SLA credits as further described in Exhibit B. All payments shall be made in US dollars. Epsilon may reasonably and in good faith dispute invoices by providing notice in writing to Provider. The pricing shall be as set out in Appendix 1 (the “Fees”). Restrictive endorsements or other statements on checks will not apply to Provider. Epsilon will reimburse Provider for its costs and expenses (including reasonable attorneys’ fees) associated with collecting past due amounts. Provider reserves the right to discontinue Services in the event of non-payment of undisputed amounts by Epsilon. A service disruption notice will be sent to Epsilon via email when an invoice has not been paid sixty (60) days past its invoice date.
|
|
b.
|
If Epsilon reasonably disputes any portion of an invoice, Epsilon must pay the undisputed portion of the invoice in accordance with the terms and conditions of this Agreement and submit a written claim with adequate detail to Provider for the disputed amount. All claims must be submitted to Provider within one hundred twenty (120) days from the invoice date for those Services. Epsilon waives the right to dispute any Fees not disputed within this one hundred twenty (120) day time frame. The parties will negotiate in good faith to try to resolve any such dispute with respect to such claims within sixty (60) days after the respective invoice date. In the event the dispute is resolved against Epsilon, Epsilon shall pay such amounts within five (5) business days of resolution. Provider shall have one hundred eighty (180) days from the date the charges were incurred to include any charges on an invoice to Epsilon.
|
|
c.
|
Except for taxes based on Provider’s net income and ad valorem, personal and real property taxes imposed on Provider’s owned or leased property, Epsilon is responsible for payment of all property, sales, use, gross receipts, and excise taxes, imposed on or based upon the provision of Services, Epsilon’s use of the Premises, or the location of Equipment in the Premises (collectively “Taxes). Provider will timely invoice Epsilon for any and all Taxes payable by Epsilon under the terms of this Agreement. In the event that Epsilon is tax exempt, Epsilon shall provide Provider with a copy of a valid tax exemption certificate from the applicable taxing authority before invoicing for Services begins. Epsilon is responsible for updating such certificates upon expiration. Provider shall not recognize exempt status unless it has on file a valid tax exemption certificate.
|
|
5.
|
Use of the Premises and Equipment Space.
|
|
a.
|
Epsilon shall be permitted to use the Equipment Space only for the operation of its data center and related activities, unless Provider in its sole discretion gives written consent to other uses. Epsilon shall also have a non-exclusive right to use the Common Space, so long as such areas are used for their intended and customary purposes. Epsilon’s use of the Equipment Space and Common Space shall be subject to Provider’s reasonable policies and procedures, adopted and amended from time to time, including without limitation Provider’s AUP, as set out in Exhibit G. Epsilon shall ensure that the Epsilon Representatives comply with such policies and procedures and shall monitor such persons to ensure their compliance. Epsilon agrees to pay for the cost associated with any damage to the Premises caused by Epsilon or any of Epsilon Representatives, including the clean up, removal and remediation of any hazardous materials. Notwithstanding Epsilon’s right to use the Equipment Space, Provider retains the right to access any and all of the Equipment Space for any legitimate business purpose, including without limitation verification of compliance with the terms and conditions of this Agreement provided that Epsilon shall be notified of such access and such access shall be in accordance with Section 7. All other non-emergency access to the Equipment Space by Provider shall require no less than ten (10) business days prior notice. To the extent an emergency arises that involves the potential loss of life, personal injury, or substantial damage to property Provider shall be permitted to immediately access the Equipment Space and take appropriate measures, without regard to any security/access policy or procedure. Provider will promptly give Epsilon notice of such actions.
|
|
b.
|
Changes. Epsilon may make any material alterations, improvements or installations (collectively, “Alterations”) to the Equipment Space upon prior written approval of the Provider.
|
|
c.
|
Liens. Epsilon shall not suffer or permit any mechanic's, laborer's, or material man’s lien to be filed against the Premises or any part thereof by reason of work, labor, services, or materials requested and/or supplies claimed to have been requested by Epsilon; and if such lien shall at any time be so filed, Epsilon shall cause it to be canceled and discharged of record (by bonding or otherwise), within thirty (30) days after notice of the filing thereof, and Epsilon shall indemnify and hold harmless Provider from any loss or expense incurred in connection therewith.
|
|
e.
|
Provider shall have no right to relocate Epsilon during the Term of the Agreement or any renewal periods.
|
|
6.
|
Maintenance.
|
|
a.
|
During the Term, except as provided below, Provider will be responsible for the condition, operation, repairs, replacements, maintenance and management of the Premises, including all Technical Infrastructure, except to the extent caused by Epsilon, any Epsilon Representative or the Equipment. All repairs shall be completed in a prompt and workmanlike manner. However, should Provider not make repairs in a prompt and workmanlike manner resulting in a material impact to Epsilon’s operations, Epsilon shall have the right to complete any necessary repair, without harming any other tenant in the Premises, and offset such actual costs of repair against Fees owed to Provider, provided that any such repairs shall be performed by a qualified contractor that is familiar with the architecture of the Premises and agrees to comply with the provisions of this Agreement related to Epsilon contractors. All such repairs shall be performed in a diligent, competent and workmanlike manner and in a manner which will not impair the proper functioning of the Data Hall or Premises or void any manufacturers or installation warranties of equipment in the Premises.
|
|
b.
|
Provider will clean and carry out normal maintenance in the Premises provided that Epsilon shall maintain the Equipment Space as provided below. Epsilon assumes full and sole responsibility for the condition, operation, repair, replacement, maintenance and management of the Equipment including the building, maintenance and repair of the cages. Epsilon at its sole expense shall clean the Equipment Space, provided that Provider shall retain responsibility for sub-floor cleaning in the Equipment Space, which it shall perform annually. In the event Epsilon desires to use a janitorial service or other similar contractor in the Equipment Space, Epsilon shall use a vendor approved in writing by Provider, such approval not to be unreasonably withheld.
|
|
7.
|
Security.
|
|
a.
|
Provider shall be responsible for developing and maintaining physical security measures for the Premises as set forth herein. Such measures shall comply with all current regulatory requirements applicable to Provider’s business. Such security measures shall at a minimum, adhere to the security access procedures set forth in this
|
|
b.
|
Provider shall restrict access to the Equipment Space to its Staff or contractors who have a business need for access to the Equipment Space. If at any time either party becomes aware that any of the security measures in place for any portion of the Premises are compromised or otherwise violated or may not adhere to the requirements of this Agreement, such party shall provide notice of such event as soon as reasonably practicable to the other party and Provider shall restore such security to a standard consistent with its obligations under this Agreement. Provider shall also design an incident response policy whereby notice is given to Epsilon upon any potential, threatened, or successful security incident or breach of the Equipment Space. Provider shall provide Epsilon with immediate notice upon any material change to its security operations that affect Epsilon’s use of the Equipment Space. In the event of a failure of the security measures, Provider shall permit Epsilon to inspect those portions of the automatic security logs for the Equipment Space upon the receipt of such notice.
|
|
c.
|
Provider shall use commercially reasonable efforts to assist Epsilon in compliance with third party physical security obligations that may be imposed upon Epsilon by its clients from time to time provided that the cost of additional security measures shall be paid by Epsilon.
|
|
d.
|
Provider shall ensure that the following physical and environmental safeguards are implemented:
|
|
i.
|
Restrict entry to the Premises to Provider’s Staff authorized for such access, authorized contractors of Provider or other clients, authorized visitors of Provider or Provider’s other clients, Provider’s other clients, Epsilon, Epsilon Representatives and law enforcement;
|
|
ii.
|
Restrict entry to the Equipment Space solely to Provider’s Staff ,or contractors authorized for such access on a need to know basis, Epsilon and Epsilon Representatives, all of whom shall be included on the Access List;
|
|
iii.
|
Implement and maintain for the infrastructure systems, including smoke and heat detection, fire extinguishing, and suppression, zoned sprinkler systems, cooling, power (including redundancy and diversity), leak detection, emergency systems, and employee safety in a manner consistent with its obligations under this Agreement. In addition, Provider shall use commercially reasonable efforts to maintain such systems in a manner consistent with prevailing industry-standard best practices;
|
|
iv.
|
Provide physical entry controls for all areas where Confidential Information is stored, accessed, or processed on the Premises; each of Provider’s Staff accessing these areas must employ one or more unique, individually identifiable entry controls (such as card keys and biometric scans) that provide an audit trail of each entry; and all visitors who enter these areas must be logged and escorted by one of Provider’s Staff who are authorized to access such area or by Epsilon;
|
|
v.
|
Regularly monitor areas around and in the Premises and Equipment Space, such as with cameras and closed circuit recording, at least on guard monitoring the Premises 24 hours of the day, 7 days of the week, entry logs, and response center monitoring of key Premises metrics;
|
|
vi.
|
Dispose equipment, physical documents and files, and physical media in a manner that prevents subsequent retrieval of Confidential Information originally stored in them. All printed material containing Confidential Information shall be shredded prior to disposal;
|
|
vii.
|
All access and security logs shall be maintained in accordance with Provider’s standard practices and procedures as set out in Exhibit C.
|
|
8.
|
Insurance.
|
|
a.
|
As of the Effective Date and during the term of this Agreement, Provider agrees to keep in place at least the levels of insurance coverage as specified in (b) below. In addition, Provider shall maintain a Cyber policy which provides coverage for loss of data due to a physical or other access breach to the Epsilon space and/or systems in an amount not less than $20 million each occurrence.
|
|
b.
|
Prior to use of the Premises and during the Term, Epsilon shall procure and maintain the following minimum insurance coverage:
|
|
i.
|
Workers’ Compensation in an amount not less than that prescribed by statutory limits
|
|
ii.
|
Automobile liability Bodily Injury and Property Damage with limits of $1,000,000 each accident Employer’s Liability with limits of $1,000,000 each occurrence
|
|
iii.
|
Commercial General Liability with combined single limits of $10,000,000 each occurrence
|
|
iv.
|
“All Risk” Property insurance covering the Equipment
|
|
c.
|
All required insurance must be from companies with at least an A.M. Best rating of “A:XII”.
|
|
9.
|
Personnel.
|
|
a.
|
Epsilon acknowledges and agrees that Provider may use third party contractors in the operation of the Premises provided, however, that Provider shall remain responsible for the Services to Epsilon and to perform its responsibilities and obligations under this Agreement. Provider shall, at its sole expense, perform all Services through such contractors or by its employees or agents (“Staff”).
|
|
b.
|
Provider shall, at its sole expense, retain Staff with all proper qualifications, licenses, certificates, and any other approvals to perform activities related to the Services.
|
|
c.
|
Provider shall require its Staff to be bound by confidentiality restrictions at least as stringent as those contained in Section 13.
|
|
d.
|
Provider shall ensure that its Staff that have access to the Premises shall have at least passed the background screening check as set out on Exhibit D and will use commercially reasonable efforts to include in its contractor contracts a requirement that its contractors conduct similar background checks on its employees.
|
|
e.
|
Epsilon shall have the right to hire sub contractors at its sole discretion, including but not limited to equipment vendors, network services and fiber providers. Such service providers shall be considered Epsilon Representatives and will be allowed access to the Equipment Space subject to the terms and conditions of this Agreement, including without limitation adherence to the AUP as set out in Exhibit G. In addition such contractors shall be subject to all safety, access, insurance and other reasonable requirements imposed by Provider and Epsilon shall remain responsible for all activities of its contractors on the Premises. All such service providers shall be subject to the prior written approval of Provider, such approval not to be unreasonably withheld.
|
|
f.
|
Neither party shall hire or attempt to hire or employ any of the other’s personnel during the Term of this Agreement and for a period of one (1) year thereafter. Notwithstanding the foregoing, nothing herein shall be construed to prohibit either party from placing general opportunity advertisements not targeted at the other party’s employees.
|
|
10.
|
Indemnification.
|
|
a.
|
Provider shall indemnify and hold Epsilon and any of its successors or permitted assigns harmless from and against all third party claims, causes of action, disputes, damages, costs, charges and expenses, including reasonable attorneys’ fees and costs (collectively, “Losses”), arising from or related to death or injuries to any persons or any damages to any physical property caused by or arising out of any negligent, grossly negligent or illegal conduct of Provider and/or its employees, agents, including Provider’s contractors or personnel.
|
|
b.
|
Epsilon shall indemnify and hold Provider and any of its successors or permitted assigns harmless from and against all Losses directly arising from or related to (i) death or injuries to any persons or any damages to any physical property caused by or arising out of any negligent, grossly negligent or illegal conduct of Epsilon, and/or its employees, agents or personnel, or (ii) death or injuries or any damages to any physical property made by or on behalf of any Epsilon Representative, including all contractors.
|
|
c.
|
A party seeking indemnity (an “Indemnified Party”) from the other party (an “Indemnifying Party”) shall not be exonerated, indemnified or held harmless to the extent of any Losses caused by (a) the negligence, gross negligence or willful misconduct of the Indemnified Party, its agents or affiliates or (b) a material breach by the Indemnified Party of its warranties, representations or obligations herein.
|
|
d.
|
If a claim, action, suit or proceeding by a third party (a “Third Party Claim”) is made against an Indemnified Party, and if such Indemnified Party intends to seek indemnity with respect thereto, such Indemnified Party shall promptly notify the Indemnifying Party of such Third Party Claim; provided that the failure to so notify shall not relieve the Indemnifying Party of its obligations hereunder except to the extent that the Indemnifying Party is actually and materially prejudiced thereby. The Indemnifying Party shall have thirty (30) days after receipt of such notice to assume the conduct and control, through counsel reasonably acceptable to the Indemnified Party and at the expense of Indemnifying Party, of the settlement or defense thereof, and the Indemnified Party shall cooperate with the Indemnifying Party in connection therewith. So long as the Indemnifying Party is reasonably contesting any such Third Party Claim in good faith, the Indemnified Party shall not pay or settle any such Third Party Claim. Notwithstanding the foregoing, the Indemnified Party shall have the right to pay or settle any such
|
|
11.
|
Limitations of Liability.
|
|
a.
|
To the maximum extent permitted by law, the limitations set forth in this Section 11 will apply to any and all claims, actions, suits and proceedings, regardless of whether any such claim, action, suit or proceeding arise in contract, tort (including without limitation negligence), strict liability or any other legal theory. Furthermore, Epsilon acknowledges that Provider has agreed to the applicable pricing and negotiated this Agreement in reliance upon the limitations of liability and disclaimers of warranties contained in this Agreement and that such limitations and disclaimers form an essential basis of the bargain between the Parties. The Parties agree that such limitations and disclaimers shall survive and apply even if found to have failed of their essential purpose.
|
|
b.
|
EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, BOTH PROVIDER AND EPSILON MAKE NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, STATUTORY OR OTHERWISE, INCLUDING WARRANTIES OF MERCHANTABILITY, NONINFRINGEMENTOR FITNESS FOR A PARTICULAR USE.
|
|
c.
|
EXCEPT FOR AMOUNTS PAID WITH RESPECT TO THIRD PARTY CLAIMS THAT ARE SUBJECT TO INDEMNIFICATION UNDER THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, CONSEQUENTIAL, EXEMPLARY OR PUNITIVE DAMAGES OF ANY KIND OR NATURE (INDLUCING BUT NOT LIMITED TO DAMAGES FOR LOST PROFITS, LOST REVENUES, LOST OPPORTUNITY OR LOSS OF ‘GOODWILL’) WHETHER OR NOT CAUSED BY THE ACTS OR OMISSIONS OR NEGLIGENCE OF ITS EMPLOYEES OR AGENTS, AND/OR REGARDLESS OF WHETHER SUCH PARTY HAS BEEN INFORMED OF THE POSSIBLITY OR LIKELIHOOD OF SUCH DAMAGES.
|
|
d.
|
Notwithstanding anything herein to the contrary, the Parties agree as follows:
|
|
i.
|
General.
|
|
ii.
|
Service Level Credits. Service Level Credits, to the extent provided for in the SLA shall be the sole and exclusive remedy for Epsilon for interruptions, suspensions, failures, defects, impairment or any other inadequacy with respect to the Services which are the subject of the SLA;
|
|
iii.
|
Limited Recourse and Responsibility. Epsilon shall have no recourse against any assets of any person or entity other than Provider and no personal liability or personal responsibility shall attach with regard to any claim made by Epsilon related in any way to this Agreement.
|
|
12.
|
Force Majeure.
|
|
a.
|
A Party’s obligations shall be suspended during the period and to the extent that such Party is prevented or hindered from complying therewith by any event arising from a cause beyond its reasonable control including, without limitation: (a) acts of God; (b) weather, fire or explosion; (c) war, invasion, riot or other civil unrest; (d) governmental laws, orders or restrictions; (e) embargoes or blockades in effect on or after the date of this Agreement; (f) action by any regulatory authority; (g) national or regional emergency; (h) strikes or labor stoppages or slowdowns or other industrial disturbances; or (i) shortage of adequate power or transportation
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13.
|
Confidentiality.
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a.
|
Confidential Information. For purposes of this Agreement, “Confidential Information” means confidential and proprietary information of either party or its corporate clients or Providers, affiliates, subsidiaries, or parent companies disclosed by either party to the other party, either directly or indirectly, in writing, orally or by inspection of tangible objects (including, without limitation, documents, prototypes, samples, plant and equipment). Confidential Information includes, by way of example, but without limitation, the Business Information, Technical Information, and Personal Information described below.
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i.
|
Examples of “Business Information” are: products and services, employee information, business models, know-how, strategies, designs, reports, data, research, financial information, pricing information, corporate client information, market definitions and information, and business inventions and ideas.
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ii.
|
Examples of “Technical Information” are: software, algorithms, developments, inventions, processes, ideas, designs, drawings, engineering, hardware configuration, and technical specifications, including, but not limited to, computer terminal specifications, the source code developed from such specifications, all derivative and reverse-engineered works of the specifications, and the documentation and software related to the source code, the specifications and the derivative works.
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iii.
|
Examples of “Personal Information” are: all non-public personal information of or related to individual credit applicants, customers or consumers of either party, employee and vendor information, including but not limited to names, addresses, telephone numbers, account numbers, customer lists, credit scores, and account, financial, transaction information, consumer reports and information derived from consumer reports, that is subject to protection from publication under applicable law.
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b.
|
Agreement to Protect Confidential Information. Each party shall maintain the Technical Information in confidence for five (5) years from the date of termination or expiration of this Agreement, the Business Information for two (2) years from the date of termination or expiration of this Agreement, and the Personal Information, trade secrets and source code forever, and shall not, without the prior written consent of the disclosing party, disclose any of the Confidential Information except as permitted herein. Each party will protect the Confidential Information and will not copy, use, disclose to any third party, or access such Confidential Information without the prior written consent of disclosing party. Each party shall disclose Confidential Information only to employees, contractors, clients or agents on a need-to-know basis and only as necessary for the performance of this Agreement. Each party will use at least the same degree of care to protect the Confidential Information as it uses in protecting its proprietary, confidential and trade secret information. Confidential Information belongs to disclosing party. The obligations set forth in this Section will survive the termination or expiration of this Agreement.
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c.
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Ownership and Use. Each party agrees that all Confidential Information contains trade secrets and that portions of the Confidential Information are copyrighted works. Accordingly, disclosing party owns all rights, title and interest in and to the Confidential Information and any and all modifications to such Confidential Information. Receiving party may not reverse-engineer any software or other materials embodying the Confidential Information. Each party acknowledges that Confidential Information may be provided for limited use internally, and each Party agrees to use the Confidential Information only in accordance with the terms and conditions of this Agreement and shall not disclose the Confidential Information to any third parties without the prior written approval of a duly authorized officer of the disclosing party.
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d.
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No License. No right or license whatsoever is granted with respect to the Confidential Information or otherwise.
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e.
|
Control of Confidential Information. Copies of the Confidential Information shall be made only as necessary and such copies shall be subject to the same restrictions as the original Confidential Information. Receiving party shall reproduce the proprietary rights notices on any copies produced, in the same manner in which such notices were set forth on the original.
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f.
|
Exclusions. Notwithstanding the foregoing, the obligations of this Section 13 will not apply to Confidential Information that is (i) already in the public domain; (ii) disclosed to a party by a third party with the right to disclose it in good faith; (iii) specifically exempted in writing from the applicability of this Section; (iv) in the
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g.
|
Disclosure Required by Law. Notwithstanding anything to the contrary in this Agreement or an attachment, each party is authorized to make any disclosure required of by it by any applicable law, rule, or regulation, after providing the other party with prior written notice (provided such notice is not prohibited by applicable Law) and an opportunity to respond prior to such disclosure.
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h.
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Proprietary Rights. Each party regards and hereby identifies as Confidential Information its equipment, any information contained in or on the Equipment, and the existence of this Agreement and the terms herein, provided that Provider may ,with prior written consent from Epsilon, disclose in advertisements or verbally the fact that Epsilon is a customer of Provider. Each party also identifies as Confidential Information those methods and processes it employs in collecting, decoding, assembling, updating, accessing, enhancing, and modeling such data associated source and object codes and documentation, all of which, with the Equipment, are and will remain the sole and exclusive property of the disclosing party.
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i.
|
Provider shall notify Epsilon if there has been any unauthorized physical intrusion in or access to the Premises of which Provider has knowledge.
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14.
|
Audit.
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a.
|
Once per year, Epsilon shall have the right to audit Provider’s security policies and practices as set forth in this Agreement in addition to compliance with the privacy policies and procedures applicable to the provision of the Services. Epsilon shall notify Provider in writing ten (10) business days in advance of the date it will audit Provider and the name of any representative, if other than Epsilon employees, who will perform the audit. Such audits shall be performed during the hours of 8:00am to 5:00pm, Monday through Friday and be non-disruptive to Provider’s normal operations. Epsilon or its representatives shall abide by the Confidentiality provisions set out in Section 13 when conducting such audit. If Epsilon determines that there is a reasonable basis for a problem with Provider’s compliance, including but not limited to failing to provide a SSAE 16 report as required by subsection b, with its obligations, Epsilon may, upon ten (10) business day prior written notice to Provider, conduct another audit.
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b.
|
Provider shall provide to Epsilon a SSAE 16 for each year during the Term. Such SSAE 16 shall be unqualified. If such report is qualified, Provider shall give Epsilon a plan to make corrections. Provider shall make commercially reasonable efforts to carry out such plan within ninety (90) days, provided that if such plan cannot be completed within the 90 day time period despite diligent efforts, Provider shall have a reasonable period of time to complete the plan. Failure to comply with this subsection 14(b) shall be considered an Event of Default.
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15.
|
Assignment.
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a.
|
Epsilon may assign this Agreement to (i) an Affiliate of Epsilon; or (ii) in connection with the sale of substantially all of its assets. All other assignments of any or all of this Agreement or Equipment Space by Epsilon require the prior written consent of Provider, such consent not to be unreasonably withheld. For the avoidance of doubt, any proposed assignee that is of equal or greater financial strength as Epsilon as reasonable determined by Provider shall be deemed reasonable provided that the proposed assignee is not a competitor of Provider and such assignment would not violate any Law or contractual obligation of Provider. Any assignment in violation of this Section shall be null and void. For purposes of this Agreement, “Affiliate of Epsilon” means any entity that is owned or controlled by Epsilon, Alliance Data Systems Corporation, or any entity that is wholly owned by Alliance Data Systems Corporation.
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b.
|
The term “control” as used in this Agreement (i) in the case of a corporation shall mean ownership of more than fifty (50%) percent of the outstanding capital stock of that corporation, (ii) in the case of a general or limited liability partnership, shall mean more than fifty (50%) percent of the general partnership or membership interests of the partnership, (iii) in the case of a limited partnership, shall mean more than fifty (50%) percent of the general partnership interests of such limited partnership, and (iv) in the case of a limited liability company, shall mean more than fifty (50%) percent of the membership interests of such limited liability company.
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c.
|
Users of the Services.
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i.
|
The Services may be received and used not only by Epsilon, but also by any of its Designated Entities to the same extent as Epsilon.
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1.
|
“Designated Entities” mean any persons or entities that have a business relationship with Epsilon, and which are authorized by Epsilon to receive and/or use the Services. (For example, at Epsilon’s option, servers of an Epsilon customer may be installed and maintained on the racks provided by Provider to Epsilon under the applicable
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|
SOW.) In addition, Designated Entities may not have a business relationship with Epsilon but may be authorized by Epsilon to receive and/or use the Services. (For example, Epsilon may execute an agreement to use some of the Equipment Space, not needed by Epsilon during the Term.) Designated Entities are sometimes referred to herein as “permitted users".
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ii.
|
For purposes of this Agreement, Services provided to Epsilon’s permitted users will be deemed to be Services provided to Epsilon. Only Epsilon (and not permitted users) may order Services under this Agreement or seek to enforce the Agreement, which it may do on behalf of such permitted users. As between Provider and Epsilon, Epsilon shall be responsible for permitted users’ use of the Services as if they were Epsilon. Epsilon shall be responsible for ensuring that its permitted users and their contractors adhere to the terms and conditions of this Agreement, including without limitation those obligations and restrictions contained in Sections 2, 5, 8, 9 and 13.
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iii.
|
Epsilon shall indemnify and hold Provider and any of its successors or permitted assigns harmless from and against all claims, causes of action, disputes, damages, costs, charges and expenses, including reasonable attorneys’ fees and costs arising from or related to the provision of or use of Services by permitted users, including the presence of their equipment, personnel or contractors on the Premises. Any amounts recoverable under this indemnification shall not be subject to the limitations contained in Section 11.
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iv.
|
All permitted users shall be required to maintain insurance as required under Section 8 of this Agreement and their contractors shall be subject, without limitation, to the provisions of Section 9(e).
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v.
|
Notwithstanding anything in this Agreement to the contrary, permitted users shall not be deemed to be third party beneficiaries under this Agreement. Damages incurred by a permitted user shall be subject to, and count toward, the limitations of liability set forth in this Agreement.
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16.
|
Surrender of Premises/Holding Over.
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a.
|
Upon the expiration or other termination of this Agreement (and subject to any extensions of Service provided by this Section), Epsilon shall have the right and obligation to remove from the Premises all Equipment and any other Epsilon property located on the Premises. Within thirty (30) days, Epsilon shall quit and surrender the Equipment Space to Provider, vacant, broom clean and in good order and condition, reasonable wear and tear excepted and shall remove all of its furniture, furnishings, Equipment and trade fixtures (“Move Out Date”). Any property that Epsilon shall be required to remove pursuant to the preceding sentence and that it shall fail to remove (including by failure to pay outstanding Fees) as of the Move Out Date shall be deemed abandoned and shall become the property of Provider and may be removed and disposed of by Provider without accountability to Epsilon. In addition, Provider may bill Epsilon for the cost of transportation, and disposal.
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b.
|
Termination Assistance Services/Extension of Services.
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i.
|
Upon written request, Provider will provide the following termination assistance services in connection with any termination or expiration of this Agreement, provided if the Agreement was terminated for an Event of Default caused by Epsilon Provider may condition termination assistance and any extension of Services on Epsilon’s cure of such Event of Default.
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ii.
|
Availability; Plan. Provider shall provide to Epsilon or Epsilon’s designee the assistance described below in subsection (iv), as requested by Epsilon, to allow the Services to continue without interruption or adverse effect and to facilitate the orderly transfer of the Services to Epsilon or its designee.
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iii.
|
Extension of Services. Epsilon may request and Provider shall extend the provision of Services for a period not to exceed twelve (12) months beyond the earlier of the effective date of termination or expiration of the Agreement under the terms and conditions in effect as of the date of the request provided that Epsilon shall continue to make payments in accordance with the Agreement. This Agreement shall continue to govern until the end of the Service extension.
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iv.
|
Termination Assistance. Upon request, Termination Assistance shall commence: (1) ninety (90) days prior to the end of the then current Term or on such earlier date as Epsilon may request; or (2) upon any notice of termination or of non-renewal of the Initial Term or any Renewal Term. Such Termination Assistance shall continue from the commencement through the end of the Initial Term or applicable Renewal Term (including any extension of time pursuant to subsection iii above). In providing Termination Assistance Provider shall (a) assist Epsilon in developing a written transition plan for the transition of Services to Epsilon or Epsilon's
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|
designee; (b) perform consulting services as requested and are offered generally by Provider to its customers to assist in implementing the transition plan; and (c) provide other technical assistance as reasonably requested by Epsilon.
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v.
|
Payment. Provider shall invoice Epsilon monthly in arrears for the termination assistance services at the prevailing then-current rates for similar Services or, if no Services are similar, at Provider’s standard rates or, in either case, rates in this Agreement, whichever is lower. This payment shall be in addition to all amounts due pursuant to this Agreement. Notwithstanding the foregoing, if Provider has terminated this Agreement based upon Epsilon nonpayment and Provider has agreed to provide termination assistance services or an extension of Services, Provider may condition its performance of the termination assistance services on Epsilon’s payment for such services, monthly in advance.
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17.
|
Subordination; Estoppel Certificate.
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|
a.
|
The rights granted under this Agreement to Epsilon are subject and subordinate to any present or future Security Document applicable to all or any part of the Premises and to all matters to which such Security Document may be subordinate.
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|
b.
|
At any time and from time to time within twenty (20) days after notice to Epsilon by Provider or a lessor or mortgagee, Epsilon shall, without charge, execute, acknowledge and deliver a statement in writing addressed to such party as Provider, lessor or mortgagee, as the case may be, may designate, in form satisfactory to Provider, lessor or mortgagee, as the case may be, certifying all or any of the following: (i) that this Agreement is unmodified and in full force and effect (or if there have been modifications, that this Agreement is in full force and effect as modified and stating the modifications); (ii) whether the Term has commenced and have become payable hereunder and, if so, the dates to which they have been paid; (iii) whether or not, to the best knowledge of the signer of such certificate, Provider is in default in performance of any of the terms of this Agreement and, if so, specifying each such default of which the signer may have knowledge; (iv) whether Epsilon has accepted possession of the Premises; (v) whether Epsilon has made any claim against Provider under this Agreement and, if so, the nature thereof and the dollar amount, if any, of such claim; (vi) either that Epsilon does not know of any default in the performance of any provision of this Agreement or specifying the details of any default of which Epsilon may have knowledge and stating what action Epsilon is taking or proposes to take with respect thereto; (vii) that, to the knowledge of Epsilon, there are no proceedings pending or threatened against Epsilon before or by any court or administrative agency which, if adversely decided, would materially and adversely affect the financial condition or operations of Epsilon, or, if any such proceedings are pending or threatened to the knowledge of Epsilon, specifying and describing the same; and (viii) such further information with respect to this Agreement or the Premises as Provider may reasonably request or lessor or mortgagee may require; it being intended that any such statement delivered pursuant hereto may be relied upon by any prospective purchaser of the Premises or any part thereof or of the interest of Provider in any party thereof, by any mortgagee or prospective mortgagee, by any lessor or prospective lessor, by any tenant or prospective tenant of the Premises or any part thereof, or by any prospective assignee of any Security Document.
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|
c.
|
The Premises are currently subject to an existing subordination, nondisturbance and attornment agreement between Provider and the Premises landlord and lender (the "SNDA"). Provider shall use commercially reasonable efforts to assert its rights under the SNDA such that Epsilon’s use of the Premises and access to Services in accordance with this Agreement are not disturbed. If there is a new lender covering the Premises, Provider will seek an SNDA from the new lender.
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18.1
|
If one third or more of the Equipment Space, or the use or occupancy thereof, or any portion of the Premises required for the reasonable and proper use of the Equipment Space, shall be taken or condemned by any governmental or quasi governmental authority for any public or quasi public use or purpose or sold under threat of such a taking or condemnation (collectively, "condemned"), then this Agreement shall terminate on the day prior to the date title thereto vests in such authority and Fees shall be apportioned as of such date. If less than one third of the Equipment Space or occupancy thereof or portions of the Equipment Space not required for the proper use of the Equipment Space, is condemned, then this Agreement shall continue in full force and effect as to the part of the Equipment Space not so condemned, except that as of the date title vests in such authority Epsilon shall not be required to pay Fees with respect to the part of the Equipment Space so condemned. Provider shall notify Epsilon of any condemnation contemplated by this Section 18.1 promptly after Provider receives notice thereof. Within ten (10) days after receipt of such notice, Epsilon shall have the right to terminate this Agreement with respect to the remainder of the Equipment Space not so condemned as of the date title vests in such authority, but only if such condemnation renders said remainder of the Equipment Space totally unsuitable for their intended purpose.
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18.2
|
All awards, damages and other compensation paid by the condemning authority on account of such taking or condemnation (or sale under threat of such a taking) shall belong to Provider, and Epsilon hereby assigns to Provider all rights to such awards, damages and compensation. Epsilon agrees not to make any claim against Provider or Provider’s lessoror the condemning authority for any portion of such award or compensation attributable to damages to the Equipment Space , the value of the unexpired term of this Agreement, the loss of profits or goodwill, leasehold improvements or severance damages. Nothing contained herein, however, shall prevent Epsilon from pursuing a separate claim against the condemning authority for the value of furnishings, equipment and trade fixtures installed in the Equipment Space at Epsilon's expense and for relocation expenses, provided that such claim does not in any way diminish the award or compensation payable to or recoverable by Provider in connection with such taking or condemnation.
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19.
|
Default.
|
|
19.1
|
Each of the following shall constitute an "Event of Default" by Epsilon or the Provider, respectively, under this Agreement:
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|
a.
|
Epsilon's failure to make when due any payment of Fees or other sum, which failure shall continue for a period of thirty (30) days after receipt by Epsilon of written notice thereof, provided, however, that Provider shall not be required to give Epsilon more than two (2) such written notices during any year of the Term and if Epsilon is late in making a payment of Fees or other sum when due on more than five (5) occasions in one year, then no such thirty (30) cure period will apply;
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|
b.
|
Either Party’s failure to perform or observe any material covenant or condition of this Agreement, whether or not described in the paragraph 19, which failure shall continue for a period of thirty (30) days after receipt by such defaulting Party of written notice thereof; provided, however, that if such cure cannot reasonably be effected within such thirty (30) day period and such defaulting Party begins such cure promptly within such thirty (30) day period and is pursuing such cure in good faith and with diligence and continuity during such thirty (30) day period, then, except in the event of an emergency, such defaulting Party shall have such additional time as is reasonably necessary to effect such cure (this Section 19.1b shall not apply to any failure, event, breach or occurrence described in Sections 19.1a, 19.1c, 19.1d, or 19.1e);
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c.
|
an Event of Bankruptcy as specified in Section 20 hereof;
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|
d.
|
Either Party’s dissolution or liquidation; or
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|
e.
|
any sublease, assignment or mortgage not permitted by Section 15 hereof.
|
|
19.2
|
If there shall be an Event of Default (even if prior to the Effective Date), then the applicable provisions of this Section 19.2 shall apply subject to the limitations set forth in Section 11 (d) (ii). The non-defaulting party shall have the right, at its sole option, to terminate this Agreement upon delivery of written notice to the other party. In addition, with or without terminating this Agreement, Provider, if Epsilon has defaulted and failed to cure such breach, may re-enter, terminate Epsilon's right of possession and take possession of, the Equipment Space all in accordance with section 16. If necessary, Provider may proceed to recover possession of the Equipment Space under applicable Laws, or by such other proceedings, including re-entry and possession, as may be applicable. If Provider elects to terminate this Agreement and/or elects to terminate Epsilon's right of possession, everything contained in this Agreement on the part of Provider to be done and performed shall cease without prejudice, provided that nothing contained herein shall be deemed as limiting Epsilon's liability to pay Provider for all Fees and other sums specified herein. Whether or not this Agreement and/or Epsilon's right of possession is terminated, Provider shall have the right, at its sole option, to terminate any renewal or expansion right contained in this Agreement and to grant or withhold any consent or approval pursuant to this Agreement in its sole and absolute discretion. If an Event of Default has occurred under this Agreement and Epsilon has vacated the Equipment Space, and if Provider has terminated this Agreement as a result of such Event of Default, then Provider shall thereafter use reasonable efforts to market the Equipment Space taking into consideration other data center space owned by Provider that is currently available. Epsilon hereby expressly waives, for itself and all persons claiming by, through or under it, any right of redemption, re-entry or restoration of the operation of this Agreement under any present or future law, including without limitation any such right
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|
which Epsilon would otherwise have in case Epsilon shall be dispossessed for any cause, or in case Provider shall obtain possession of the Premises as herein provided. Provider may market the Equipment Space or any part thereof, alone or together with other portions of the Premises, for such term(s) (which may extend beyond the date on which the Agreement Term would have expired but for Epsilon's default) and on such terms and conditions (which may include any concessions or allowances granted by Provider) as Provider, in its reasonable discretion, may determine, but Provider shall not be liable for, nor shall Epsilon's obligations hereunder be diminished by reason of, any failure by Provider to license all or any portion of the Premises or to collect any Fees due upon such license. Whether or not this Agreement is terminated or any suit is instituted, Epsilon shall be liable for any Fees or other sum which may be due or sustained prior to such Event of Default and for the remaining Term only to the extent Epsilon would have been liable if the termination was for convenience – for avoidance of doubt, this limitation only applies with respect to damages associated with unpaid Fees not for any other type of damage. The breaching party shall also be liable for all costs, fees and expenses (including, but not limited to, attorneys' fees and costs brokerage fees (to the extent proportionately allocable to the remaining Agreement Term), expenses incurred in placing the Premises in first-class condition, advertising expenses, and any concessions or allowances granted by Provider and actions taken by Epsilon pursuant to Section 6) incurred by the non-breaching party in pursuit of its remedies hereunder and/or in case of Provider recovering possession of the Premises and licensing the Premises to others from time to time until the date the Agreement Term would have expired but for the other’s default. In addition, the non-breaching party may pursue any other remedies available at law or equity, subject to the limitations contained in Section 11 and hereinabove.
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|
19.3
|
Except as provided in Section 11 and subject to the limitations of Section 11, all rights and remedies of the non defaulting Party set forth herein are cumulative and in addition to all other rights and remedies available to the non defaulting Party at law or in equity including those available for anticipatory breach and the exercise by the non-defaulting Party of any such right or remedy shall not prevent the concurrent or subsequent exercise of any other right or remedy. No delay in the enforcement or exercise of any right or remedy by Provider or Epsilon shall constitute a waiver of any default by the other party hereunder or of such party’s rights or remedies in connection therewith. Neither party hereto shall be deemed to have waived any default by the other party hereunder unless such waiver is set forth in a written instrument signed by the party against whom such waiver is asserted. If either party waives in writing any default by the defaulting Party, such waiver shall not be construed as a waiver of any covenant, condition or agreement set forth in this Agreement except as to specific circumstances described in such written waiver.
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19.4
|
If the non defaulting Party shall institute proceedings against the other and a compromise or settlement thereof shall be made, the same shall not constitute a waiver of default or of any other covenant, condition or agreement set forth herein, nor of any of the non defaulting Party 's rights hereunder, except to the extent agreed by the non defaulting Party in writing in connection with such compromise or settlement. Neither the payment by Epsilon of a lesser amount than the installments of Fees or of any sums due hereunder nor any endorsement or statement on any check or letter accompanying a check for payment of Fees or other sums payable hereunder shall be deemed an accord and satisfaction, and Provider, in its position as the non defaulting Party may accept such check or payment without prejudice to Provider 's right to recover the balance of such Fees or other sums or to pursue any other remedy available to the non defaulting Party . Notwithstanding any request or designation by Epsilon, Provider may apply any payment received from Epsilon to any payment then due. No re-entry by Provider, and no acceptance by Provider of keys from Epsilon, shall be considered an acceptance of a surrender of this Agreement.
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|
19.5
|
If Epsilon defaults in the making of any payment or in the doing of any act herein required to be made or done by Epsilon, then Provider may, but shall not be required to, make such payment or do such act after Provider delivers written notice to Epsilon. If Provider elects to make such payment or do such act, all costs incurred by Provider, shall constitute additional sums owed by Epsilon to Provider hereunder and shall be immediately paid by Epsilon to Provider. The taking of such action by Provider shall not be considered as a cure of such default by Epsilon or prevent Provider from pursuing any remedy it is otherwise entitled to in connection with such default.
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20.
|
Bankruptcy.
|
|
20.1
|
An "Event of Bankruptcy" is the occurrence with respect to either Party of any of the following: (a) appointment of a receiver or custodian for any property of such person, or the institution of a foreclosure or attachment action upon any property of such person; (b) filing by such person of a voluntary petition under the provisions of the Bankruptcy Code or Insolvency Laws; (c) filing of an involuntary petition against such person as the subject debtor under the Bankruptcy Code or Insolvency Laws, which either (1) is not dismissed within sixty (60) days after filing, or (2) results in the issuance of an order for relief against the debtor; (d) such person making or consenting to an assignment for the benefit of creditors or a composition of creditors; or an admission by such Party of its inability to pay debts as they become due. At any time (but in no event more than one (1) time during any calendar year unless non-bankrupt Party reasonably and in good faith believes that a substantial change in the bankrupt Party’s financial condition shall have occurred) upon not less than ten (10) days' prior written notice, the bankrupt Party shall submit such information concerning the financial condition of any such person as Provider may reasonably request. Epsilon warrants that all such information heretofore and hereafter submitted is and shall be correct and complete.
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|
20.2
|
Upon occurrence of an Event of Bankruptcy, the bankrupt Party shall have all rights and remedies available pursuant to Section 19 above; provided, however, that while a case (the "Case") in which the bankrupt Party is the subject debtor under the Bankruptcy Code is pending, non-bankrupt Party’s right to terminate this Agreement shall be subject, to the extent required by the Bankruptcy Code, to any rights of the bankrupt Party or its trustee in bankruptcy (collectively, "Trustee") to assume or assume and assign this Agreement pursuant to the Bankruptcy Code. After the commencement of a Case: (i) Trustee shall perform all post-petition obligations of the bankrupt Party under this Agreement; and (ii) if non-bankrupt Party is entitled to damages (including, without limitation, unpaid rent) pursuant to the terms of this Agreement, then all such damages shall be entitled to administrative expense priority pursuant to the Bankruptcy Code. Any person or entity to which this Agreement is assigned pursuant to the Bankruptcy Code shall be deemed without further act or deed to have assumed all of the obligations arising under this Agreement on and after the date of assignment, and any such assignee shall upon request execute and deliver to Provider an instrument confirming such assumption. Trustee shall not have the right to assume or assume and assign this Agreement unless Trustee promptly (a) cures all defaults under this Agreement, (b) compensates non-bankrupt Party for damages incurred as a result of such defaults, (c) provides adequate assurance of future performance on the part of Trustee as debtor in possession or Trustee's assignee, and (d) complies with all other requirements of the Bankruptcy Code. If Trustee desires to assume and assign this Agreement to any person who shall have made a bona fide offer, then Trustee shall give non-bankrupt Party written notice of such proposed assignment (which notice shall set forth the name and address of such person, all of the terms and conditions of such offer, and the adequate assurance to be provided non-bankrupt Party to assure such person's future performance under this Agreement) no later than fifteen (15) days after receipt by Trustee of such offer, but in no event later than thirty (30) days prior to the date Trustee shall make application to the appropriate court for authority and approval to enter into such assignment and assumption, and non-bankrupt Party shall thereupon have the prior right and option, to be exercised by notice to Trustee given at any time prior to the effective date of such proposed assignment, to accept (or to cause non-bankrupt Party’s designee to accept) an assignment of this Agreement upon the same terms and conditions and for the same consideration, if any, as the bona fide offer made by such person, less any brokerage commissions which may be payable out of the consideration to be paid by such person for the assignment of this Agreement. If Trustee fails to assume or assume and assign this Agreement in accordance with the requirements of the Bankruptcy Code within sixty (60) days after the initiation of the Case (or such other period as may be provided by the Bankruptcy Code or allowed by the United States Bankruptcy Court for same), then Trustee shall be deemed to have rejected this Agreement. If this Agreement is rejected or deemed rejected, then non-bankrupt Party shall have all rights and remedies available to it pursuant to Section 19 above.
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|
21.
|
Parking.
|
From and after the Effective Date, Provider shall make up to three (3) parking spaces (“Epsilon’s Parking Spaces”) available to Epsilon in such areas (the “Parking Areas”) of the Premises as Provider shall periodically
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|
22.
|
Change Requests.
|
24.
|
General Terms.
|
|
a.
|
Counterparts. These Agreement and the Attachment(s) may be executed in two or more counterparts, each of which will take effect as an original, and all of which, together, will evidence one and same instrument.
|
|
b.
|
Entire Agreement. The parties hereto agree that this Agreement, the Attachment(s) and SOWs executed hereunder represent the complete statement of the agreement between the parties, and supersede all prior understandings, oral or written, relating to the subject matter of this Agreement, the Attachment(s).
|
|
c.
|
Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Texas without application of its choice of law provisions. The Parties agree that the exclusive venue and jurisdiction for purposes of any and all lawsuits, causes of action, arbitrations, or other disputes shall be in a court of competent jurisdiction in Dallas County, Texas.
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|
d.
|
Modification, Waiver. This Agreement, the Attachment(s) and any SOW’s executed hereunder may be modified only by a writing executed by the parties hereto. Failure by either party to enforce any provision of this Agreement, an Attachment will not be deemed a waiver of that provision or of any other provision of this Agreement, such Attachment and any SOW’s.
|
|
e.
|
Notices. Any notices required or permitted pursuant to this Agreement, an Attachment and any SOWs must be in writing and will be deemed to have been sufficiently given when presented personally or sent by overnight delivery service or registered mail to:
|
|
f.
|
Prevailing Party. The prevailing party in any suit or action under this Agreement, an Attachment or any SOWs will be entitled to reasonable attorney’s fees, expenses and costs.
|
|
g.
|
Public Statements, Use of Marks, Disclosure of Source. Provider may not issue any public statements, press
|
|
h.
|
Relationship of Parties. The relationship of the parties is that of independent contractors. Nothing herein will be construed to create any partnership, joint venture, or similar relationship.
|
|
i.
|
Severability. Subject to Section 1a(v), should any provision of this Agreement, an Attachment and any SOW’s be determined inconsistent with or contrary to applicable law, such provision shall be deemed amended or omitted to conform therewith. All other provisions of the Agreement, an Attachment and any SOW’s shall remain in full force and effect. Further, the term or condition that is held to be illegal or unenforceable will remain in effect as far as possible in accordance with the intention of the parties.
|
|
j.
|
Injunctive Relief. Each of the parties acknowledges that any breach of Section 13 (Confidentiality) of this Agreement may result in irreparable and continuing damage to the other party and, therefore, in addition to any other remedy which may be afforded by law, any breach or threatened breach of such section may be prohibited by restraining order and/or injunction or any other equitable remedies of any court.
|
|
k.
|
Survival. The provisions of Sections 3, 4, 8, 9, 10, 11, 12, 13, 15, 16, 19 and 23 will survive any termination or expiration of this Agreement.
|
Epsilon Data Management, LLC
|
Cyrus Networks, LLC
|
|
By: /s/ Edward J. Heffernan
|
By: /s/ Dottie Spruce
|
|
Print Name: Edward J. Heffernan
|
Print Name: Dottie Spruce
|
|
Title: Vice President
|
Title: VP of Sales
|
By: /s/Keith Morrow
|
Printed Name: Keith Morrow
|
Title: Chief Information Officer
|
By: /s/Dottie Spruce
|
Printed Name: Dottie Spruce
|
Title: VP of Sales
|
Period of Lease Term
|
Monthly Base Rent
|
Annual Base Rent
|
Base Rental Rate Per Square Foot of Rentable Area of Premises
|
Commencement Date - 9/30/10
|
|||
10/1/10 - 9/30/11
|
|||
10/1/11 - 9/30/12
|
|||
10/1/12 - 9/30/13
|
|||
10/1/13 - 9/30/14
|
|||
10/1/14 – 10/31/14
|
|
(a)
|
Before Commencement Date:
|
|
(b)
|
After Commencement Date:
|
|
By:
|
NOP Cottonwood Holdings LLC,
|
|
a Delaware limited liability company,
|
|
its sole member
|
|
By:
|
National Office Partners Limited Partnership,
|
|
a Delaware limited partnership,
|
|
its Sole Member
|
|
By:
|
Hines National Office Partners Limited Partnership,
|
|
a Texas limited partnership
|
|
By:
|
Hines Fund Management, L.L.C.,
|
|
a Delaware limited liability company,
|
|
general partner
|
|
By:
|
Hines Interests Limited Partnership,
|
|
a Delaware limited partnership
|
|
By:
|
Hines Holdings, Inc.,
|
|
a Texas corporation,
|
|
its general partner
|
Period of
Expansion Space Term
|
Annual
Base Rent
|
Monthly Installment of Base Rent
|
Annual Base Rent Rate Per Square Foot of Rentable Area of Existing Premises and Expansion Space
|
Expansion Space Commencement Date – 03/31/14
|
|||
04/01/14 – 03/31/15
|
|||
04/01/15 – 03/31/16
|
|||
04/01/16 – 03/31/17
|
|||
04/01/17 – 1/31/18
|
|
"Tenant shall throughout the Term of the Lease (as extended), lease from Landlord a total of eighteen (18) automobile spaces in the Parking Facility, of which total Tenant may elect to lease up to four (4) assigned and covered automobile spaces at the then-prevailing market rate pursuant to Section 5.5 below."
|
|
NOP Cottonwood 2795, LLC
|
|
c/o CommonWealth Partners Management LLC
|
|
515 South Flower Street, Floor 32
|
|
Los Angeles, CA 90071
|
|
Attention: Asset Manager – Cottonwood Corporate Center
|
|
With a copy to:
|
|
NOP Cottonwood 2795, LLC
|
|
2795 E. Cottonwood Parkway, Suite 155
|
|
Salt Lake City, Utah 84121
|
|
Attention: Property Manager
|
|
[SIGNATURES ON FOLLOWING PAGE]
|
|
1.1 Account
|
|
1.2 Accrued Benefit
|
|
1.3 Actual Deferral Percentage
|
|
1.4 Adjustment Factor
|
|
1.5 Annuity Commencement Date
|
|
1.6 Average Actual Deferral Percentage
|
|
1.7 Average Contribution Percentage
|
|
1.8 Benefits Administration Committee
|
|
1.9 Beneficiary
|
|
1.10 Board of Directors
|
|
1.11 Catch-Up Contributions
|
|
1.12 Code
|
|
1.13 Company
|
|
1.14 Company Account
|
|
1.15 Compensation
|
|
(A)
|
For purposes of determining the amount of any (i) Deposits; (ii) Employer Matching Contributions; (iii) Retirement Contributions; and (iv) Discretionary Profit Sharing Contributions, “Compensation” shall mean the regular wages (i.e., base pay), overtime, commissions, leave cashouts, and cash incentives paid to an Employee by an Employer for the applicable Plan Year while a Participant in the Plan, but excluding sign-on bonuses, disability pay, workers compensation, severance pay, service related cash awards, any amounts which constitute tax gross ups of taxable amounts, any amounts deferred under, or contributed to, a non-qualified deferred compensation plan, and referral awards.
|
|
(B)
|
For purposes of the limitations imposed by Section 415 of the Code, the Top-Heavy plan minimum contribution requirements of Section 416 of the Code, and the determination of Highly Compensated Employees pursuant to Section 414(q) of the Code, "Compensation" means wages within the meaning of Section 3401(a) and all other payments of compensation to an Employee by the Employer (in the course of the Employer's trade or business) for which the Employer is required to furnish the Employee a written statement under Code Sections 6041(d), 6051(a)(3) and 6052, but determined without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code Section 3401(a)(21). Thus, Compensation shall include "differential wage payments" within the meaning of section 3401(h)(2) of the Code to a Participant who is performing qualified military service described in section 414(u)(5) of the Code.
|
|
(C)
|
For purposes of determining a Participant's Actual Deferral Percentage used in performing the average deferral percentage nondiscrimination test described in Section 401(k)(3) of the Code and the Contribution Percentage used in performing the average contribution percentage nondiscrimination test described in Section 401(m)(2) of the Code, "Compensation" shall mean compensation as defined in Section 414(s) of the Code and the regulations thereunder.
|
|
(D)
|
For purposes of defining "Key Employee" under Section 416 of the Code, "Compensation" shall mean Compensation as defined in Paragraph (B) paid to the eligible Employee other than compensation in the form of qualified or previously qualified deferred compensation that is currently includible in the gross income of the eligible Employee for Federal income tax purposes. In addition, for purposes of this Paragraph (D), Compensation shall include amounts withheld from a Participant's earnings pursuant to a salary reduction agreement entered into by the Participant in accordance with Sections 401(k) or 125 of the Code. Compensation shall also include amounts withheld from a Participant's earnings pursuant to a salary reduction agreement entered into by the Participant in accordance with Code Section 132(f).
|
|
(E)
|
Notwithstanding anything herein to the contrary, Compensation shall be limited annually to $255,000 (adjusted in future years as provided under Code section 401(a)(17)).
|
|
1.16 Contribution Percentage
|
|
1.17 Deposit Election
|
|
1.18 Deposits
|
|
1.19 Effective Date
|
|
1.20 Eligibility Computation Period
|
|
1.21 Employee
|
|
1.22 Employer
|
|
1.23 Employer Matching Contributions
|
|
1.24 Employment Commencement Date
|
|
1.25 Entry Date
|
|
1.26 ERISA
|
|
1.27 Excess Aggregate Contributions
|
|
1.28 Excess Contributions
|
|
1.29 Excess Deferrals
|
|
1.30 Forfeiture Account
|
|
1.31 Highly Compensated Employee
|
|
1.32 Hour of Service
|
|
(A)
|
Each hour for which an Employee is directly or indirectly paid or entitled to payment for the performance of duties for an Employer; these hours shall be credited to the computation period in which the duties are performed, and
|
|
(B)
|
Each hour for which an Employee is directly or indirectly entitled to payment on account of a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) due to vacation, holiday, illness, incapacity, disability, pregnancy, or in connection with adoption of a child, layoff, jury duty, Period of Military Service or leave of absence; except that
|
|
(1)
|
not more than five hundred and one (501) Hours of Service shall be credited in each single computation period during which the Employee performs no duties, and
|
|
(2)
|
Hours of Service shall not be counted where such payment is made or is due:
|
|
(a)
|
under a plan maintained solely for the purpose of complying with applicable workmen's compensation, unemployment or disability insurance laws, or
|
|
(b)
|
solely to reimburse an Employee for medical or medically-related expenses; (hours credited under this Paragraph (B) shall be credited to the computation period(s) in which the period during which no duties were performed occurred), and
|
|
(C)
|
Each hour for which back pay, irrespective of payment due to mitigation of damages, is either awarded or agreed to by the Employer; these hours shall be credited to the computation period(s) to which the award or agreement for back pay pertains rather than to the computation period in which the award, agreement or payment is made; provided, however, that the limits under Paragraph (B) above are applicable and that an Employee shall not be entitled to additional Hours of Service under this Paragraph (C) for the same Hours of Service credited under Paragraphs (A) or (B) above.
|
|
(1)
|
if the Employer continues to maintain an employee benefit plan of such Predecessor Company ("Predecessor Plan");
|
|
(2)
|
if, and to the extent, such employment with the Predecessor Company is required to be treated as employment with the Employer under regulations prescribed by the Secretary of the Treasury; or
|
|
(3)
|
if, and to the extent, provided in Appendix A
|
|
1.33 Investment Fund(s)
|
|
1.34 Leased Employee
|
|
1.35 Leave of Absence
|
|
1.36 Nonhighly Compensated Employee
|
|
1.37 Normal Retirement Age
|
|
1.38 One Year Break in Service
|
|
1.39 Participant
|
|
1.40 Period of Military Service
|
|
1.41 Personal Accounts
|
|
1.42 Plan
|
|
1.43 Plan Year
|
|
1.44 Reemployment Commencement Date
|
|
1.45 Retirement Contributions
|
|
1.46 Rollover Account
|
|
1.47 Rollover Contribution
|
|
1.48 Roth Elective Deferral
|
|
1.49 Roth Elective Deferral Account
|
|
1.50 Senior Associate
|
|
1.51 Separation from Service
|
|
1.52 Spouse
|
|
1.53 Tax Deferred Deposits
|
|
1.54 Taxed Deposits
|
|
1.55 Total and Permanent Disability
|
|
1.56 Trust Agreement
|
|
1.57 Trust Fund
|
|
1.58 Trustee
|
|
1.59 Valuation Date
|
|
1.60 Vesting Computation Period
|
|
1.61 World Financial Network Plan
|
|
1.62 Year of Eligibility Service
|
|
1.63 Year of Vesting Service
|
|
(A)
|
A Vesting Computation Period in which the Employee is credited with five hundred (500) or more Hours of Service. In addition, Year(s) of Vesting Service shall include service credited pursuant to Appendix A.
|
|
2.1 Plan Entry Date
|
|
2.2 Participation Requirement(s)
|
|
2.3 Ineligible Employee
|
|
(A)
|
He performs services for an Employer solely as a "Leased Employee," is employed on a temporary basis, or is classified by an Employer as an independent contractor, regardless of whether any such person is subsequently reclassified as having been a common law employee of an Employer while performing such services;
|
|
(B)
|
He is covered by a collective bargaining agreement that does not expressly provide for participation in the Plan;
|
|
(D)
|
He is employed by a subsidiary or affiliated company that has not adopted the Plan; or
|
|
(E)
|
He is a United States citizen whose compensation for services is paid by a foreign affiliate of an Employer (within the meaning of Code Section 406), unless the Employer has entered into an agreement described in Code Section 3121(l) with respect to the payment of Social Security taxes on behalf of the Employee that applies to any other funded plan of deferred compensation (other than a qualified plan sponsored by the Employer) with respect to the compensation paid by the foreign affiliate.
|
|
2.4 Enrollment
|
|
2.5 Reemployed Participants
|
|
2.6 Reemployed Non-Participants
|
|
(A)
|
An Employee who terminates employment after meeting the requirements of Section 2.2 and again becomes an Employee will become a Participant on the first Entry Date following the date of such reemployment, if he is not otherwise excluded from active participation in the Plan.
|
|
(B)
|
An Employee who terminates employment before meeting the requirements of Section 2.2 and who again becomes an Employee will become a Participant on the first Entry Date following the date in which he meets the requirements of Section 2.2, if he is not otherwise excluded from active participation in the Plan.
|
|
2.7 Change of Status of Participants
|
|
(A)
|
If a Participant secures a Leave of Absence or is temporarily laid off, he shall continue to be a Participant in the Plan, but he shall not be permitted to make any Deposits under the Plan during such absence or layoff, except as to Compensation previously earned. Such a Participant shall share in any Employer Matching
|
|
(B)
|
Any Participant in the Plan who becomes a participant in any other qualified retirement plan to which the Company or any Employer makes contributions shall be precluded from making any Deposits or receiving Employer Matching Contributions, Discretionary Profit Sharing Contributions, or Retirement Contributions under the Plan for as long as he is a participant in such other plan. If he ceases to be a participant in such other plan and is otherwise eligible to participate in the Plan, he may resume making Deposits under the Plan on any subsequent Entry Date by making an election to that effect and shall be eligible to receive Employer Matching Contributions and Retirement Contributions (based on the Compensation earned while not participating in the other plan) as otherwise provided herein.
|
|
(C)
|
If a Participant shall commence employment with an employer designated by the Benefits Administration Committee for this purpose, assets representing such Participant's Account balances in this Plan shall be transferred to the trust forming part of such employer's qualified defined contribution plan provided that the trust to which such asset transfer is to be made permits such transfer. All such asset transfers with respect to a Plan Year shall be made as of December 31st of such year and shall be valued as of such date. All such asset transfers shall be subject to Section 15.3 and shall comply with Section 414(l) of the Code and the regulations thereunder.
|
|
2.8 Breaks in Service
|
|
3.1 Rate of Deposits
|
|
3.2 Type of Deposits
|
|
3.3 Change in Deposit Rates
|
|
3.4 Payments to Trust
|
|
3.5 Annual Limit on Tax Deferred Deposits
|
|
3.6 Deferral Percentage Limitation
|
|
(A)
|
The Average Actual Deferral Percentage for such Participants who are Highly Compensated Employees for the Plan Year shall not exceed the Average Actual Deferral Percentage for such Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 1.25; or
|
|
(B)
|
The Average Actual Deferral Percentage for such Participants who are Highly Compensated Employees for the Plan Year shall not exceed the Average Actual Deferral Percentage for such Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 2, provided that the Average Actual Deferral Percentage for such Participants who are Highly Compensated Employees does not exceed the Average Actual Deferral Percentage for such Participants who are Nonhighly Compensated Employees for the Plan Year by more than two (2) percentage points.
|
|
3.7 Special Rules on Deferral Percentage Limitations
|
|
(A)
|
For purposes of this Article, the Actual Deferral Percentage for any Participant who is a Highly Compensated Employee for the Plan Year and who is eligible to have Tax Deferred Deposits allocated to his account under two or more plans or arrangements described in Section 401(k) of the Code that are maintained by an Employer shall be determined as if all such Tax Deferred Deposits were made under a single arrangement. If a Highly Compensated Employee participates in two or more plans or arrangements described in Section 401(k) of the Code that have different plan years, all such arrangements ending with or within the same calendar year shall be treated as a single arrangement.
|
|
(B)
|
In the event that this Plan satisfies the requirements of Sections 401(k), 401(a)(4) or 410(b) of the Code only if aggregated with one or more other plans, or if one or more plans satisfy the requirements of such sections of the Code only if aggregated with this Plan, then this section shall be applied by determining the Actual Deferral Percentage of Employees as if all such plans were a single plan. Plans may be aggregated in order to satisfy Section 401(k) of the Code only if they have the same plan year, but the Plan may only be aggregated with a plan that uses the "current year" testing method.
|
|
(C)
|
The Plan may be disaggregated into two or more plans or the Plan may be aggregated with one or more other plans, to the extent permitted by Sections 401(k), 401(a)(4) and 410(b) of the Code and the regulations thereunder.
|
|
(D)
|
For purposes of determining a Participant's Actual Deferral Percentage, Tax Deferred Deposits must be made before the last day of the twelve month period immediately following the Plan Year to which those contributions relate.
|
|
(E)
|
Excess Annual Additions distributed to Participants in accordance with Section 4.6 shall be disregarded for purposes of applying the tests of Section 3.6.
|
|
(F)
|
Excess Deferrals of Nonhighly Compensated Employees shall be disregarded to the extent such Excess Deferrals are prohibited under Code Section 401(a)(30).
|
|
(G)
|
The determination and treatment of the Actual Deferral Percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury.
|
|
3.8 Adjustment of Deferrals
|
|
(A)
|
In the event the Benefits Administration Committee determines that one of the tests set forth in Section 3.6 is not satisfied at the time of its review hereunder, or is likely not to be satisfied by the end of the Plan Year, it may require, in accordance with Section 3.2, that one or more Participants adjust their Deposit Election as of the first pay period in the month next following receipt of the test results, in order that one of the tests set forth in Section 3.6 is thereafter satisfied, or, to the extent permitted by law, the Benefits Administration Committee shall have the power and authority to return all or any part of the Tax Deferred Deposits of one or more Participants in cash within two and one-half months after the end of the Plan Year but in no instance later than the last day of the Plan Year following the Plan Year for which the Excess Contributions were made, solely to the extent necessary to satisfy one of the tests set forth in Section 3.6.
|
|
(B)
|
The Excess Contributions shall be adjusted for gain or loss. The gain or loss allocable to Excess Contributions for the Plan Year shall be determined by multiplying the gain or loss allocable to the Participant's Tax Deferred Deposits and amounts treated as Tax Deferred Deposits for the Plan Year by a fraction, the numerator of which is the Excess Contributions on behalf of the Participant for the Plan Year and the denominator of which is the sum of (1) the Participant's Account attributable to Tax Deferred Deposits and amounts treated as Tax Deferred Deposits as of the beginning of the Plan Year plus (2) the Participant's Tax Deferred Deposits and amounts treated as Tax Deferred Deposits for the Plan Year.
|
|
(C)
|
Any distribution of Excess Contributions for any Plan Year shall be made to Highly Compensated Employees in accordance with Code Section 401(k)(8)(C) and the rulings and regulations thereunder. If, after performance of the two tests in Section 3.6, the deferral percentage test would still be violated as of the end of the Plan Year, then notwithstanding any other provision hereof, every Tax Deferred Deposit included in the Actual Deferral Percentage for a Participant who is a Highly Compensated Employee and whose Actual Deferral Percentage is greater than the permitted maximum shall be revoked to the extent necessary to comply with such deferral percentage limitation of Section 3.6 and the amount of such Tax Deferred Deposits, to the extent revoked, shall constitute an Excess Contribution to be distributed to such Participant (with earnings thereon as calculated in Section 3.8(B)) no later than the last day of the Plan Year following the Plan Year for which such contribution was made. Excess Contributions are allocated to the Highly Compensated Employees with the largest amounts of Tax Deferred Deposits (and Employer contributions, as applicable), which are taken into account in calculating the deferral percentage limitation for the Plan Year in which the excess arose, beginning with the Highly Compensated Employee with the largest amount of such Tax Deferred Deposits (and Employer contributions, as applicable), and continuing in descending order until all Excess Contributions have been allocated. For purposes of the preceding sentence, the “largest” amount is determined after distribution of any amounts distributed hereunder pursuant to Section 3.5 hereof.
|
|
3.9 Qualified Military Service
|
|
(A)
|
Notwithstanding any other provision of the Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with section 414(u) of the Code.
|
|
(B)
|
The designated beneficiary of a Participant who dies while performing qualified military service (as defined under section 414(u) of the Code) shall be entitled to any additional benefits (other than benefit accruals relating to the period of qualified military service) that would be provided under the Plan had the Participant died as an Employee, in accordance with section 401(a)(37) of the Code.
|
|
3.10 Catch-Up Contributions
|
|
4.1 Employer Matching Contributions
|
|
(A)
|
Each Employer shall contribute an Employer Matching Contribution for its Senior Associates who have elected to make Deposits. The amount of the Employer Matching Contribution made pursuant to this Section shall be equal to the sum of (i) one hundred percent (100%) of the Deposits made by the Senior Associate up to three percent (3%) of Compensation, and (ii) fifty percent (50%) of the Deposits made by the Senior Associate that exceed three percent (3%), up to a maximum of five percent (5%) of Compensation. For this purpose, Compensation shall mean the Compensation used to determine the contributions made by, or on behalf of, the Senior Associate for the same period. If a Senior Associate makes Tax Deferred Deposits, Catch-Up Contributions, and/or Taxed Deposits in a pay period, Tax Deferred Deposits shall be matched first, Catch-Up Contributions next, and Taxed Deposits last.
|
|
(B)
|
All Employer Matching Contributions shall be made in cash and invested in accordance with the provisions of Article 6 and shall be made in cash.
|
|
(C)
|
Employer Matching Contributions shall be nonforfeitable when made and shall be subject to the same distribution requirements as Tax Deferred Deposits, except that such contributions may not be distributed as a hardship withdrawal.
|
|
(D)
|
For purposes of this Section, the amount of the Employer Matching Contribution to be allocated to a Participant initially shall be determined for each separate pay period, based solely on the Compensation, Tax Deferred Deposits, Catch-up Contributions, and Taxed Deposits of the Participant in that pay period. Then, as of the end of the Plan Year, the Participant may become eligible for an additional allocation of Employer Matching Contributions, based on the Participant’s Compensation, Tax Deferred Deposits, Catch-up Contributions, and Taxed Deposits in that Plan Year.
|
|
4.2 Percentage Limitation on Taxed Deposits
|
|
(A)
|
The Average Contribution Percentage for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the Average Contribution Percentage for Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 1.25; or
|
|
(B)
|
The Average Contribution Percentage for Participants who are Highly Compensated Employees for the Plan Year shall not exceed the Average Contribution Percentage for Participants who are Nonhighly Compensated Employees for the Plan Year multiplied by 2, provided that the Average Contribution Percentage for Participants who are Highly Compensated Employees does not exceed the Average Contribution Percentage for Participants who are Nonhighly Compensated Employees for the Plan Year by more than two (2) percentage points.
|
|
4.3 Special Rules for Contribution Percentage Limit Testing
|
|
(A)
|
The Plan may be disaggregated into two or more plans or the Plan may be aggregated with one or more other plans, to the extent permitted by Sections 401(m), 401(a)(4) and 410(b) of the Code and the regulations thereunder.
|
|
(B)
|
Excess Annual Additions distributed to Participants in accordance with Section 4.6 shall be disregarded in applying the tests of Section 4.2.
|
|
(C)
|
The determination and treatment of the Contribution Percentage of any Participant shall satisfy such other requirements as may be prescribed by the Secretary of the Treasury.
|
|
4.4 Adjustments To Excess Aggregate Contributions
|
|
(A)
|
Excess Aggregate Contributions, plus any gain and minus any loss allocable thereto, shall be forfeited, if forfeitable, or if not forfeitable, shall be distributed in cash to Highly Compensated Employees within two and one-half months after the end of the Plan Year but in no instance later than the last day of the Plan Year following the Plan Year for which the Excess Aggregate Contributions were made.
|
|
(B)
|
The Excess Aggregate Contributions shall be adjusted for gain or loss. The gain or loss allocable to Excess Aggregate Contributions for the Plan Year shall be determined by multiplying the gain or loss allocable to the Participant's Taxed Deposits for the Plan Year by a fraction, the numerator of which is the Excess Aggregate Contributions on behalf of the Participant for the Plan Year and the denominator of which is the sum of (1) the Participant’s Account attributable to Taxed Deposits as of the beginning of the Plan Year plus (2) the Participant’s Taxed Deposits for the Plan Year.
|
|
(C)
|
Any distribution of Excess Aggregate Contributions for any Plan Year shall be made to Highly Compensated Employees in accordance with Code Section 401(m)(6)(C) and the rulings and regulations thereunder. If, after performance of the percentage limitation in Section 4.2, the contribution percentage test would still be violated as of the end of the Plan Year, then notwithstanding any other provision hereof, every Employer Matching Contribution and Taxed Deposit included in the Average Contribution Percentage for a Highly Compensated Participant whose Average Contribution Percentage is greater than the permitted maximum shall automatically be revoked to the extent necessary to comply with such contribution percentage test of Section 4.2 and the amount of such contribution, to the extent revoked, shall constitute an Excess Aggregate Contribution to be distributed to such Participant (with earnings thereon as calculated in Section 4.4(B)) or forfeited, if applicable, no later than the last day of the Plan Year following the Plan Year for which such contribution was made. Excess Aggregate Contributions are allocated to the Highly Compensated Employees with the largest amounts of Employer Matching Contributions and Taxed Deposits (and Employer contributions, as applicable), taken into account in calculating the contribution percentage test for the Plan Year in which the excess arose, beginning with the Highly Compensated Employee with the largest amount of such Employer Matching Contributions and Taxed Deposits (and Employer contributions, as applicable), and continuing in descending order until all excess Aggregate Contributions have been allocated. For purposes of the preceding sentence, the “largest amount” is determined after first determining required distributions under Section 3.5 hereof, and then determining Excess Contributions under Section 3.8(C).
|
|
4.5 Retirement Contributions
|
|
(A)
|
For the Plan Year beginning on January 1, 2003, each Employer shall make, on behalf of its Employees who are Participants eligible to share hereunder and subject to the otherwise applicable limitations of the Plan, a nondiscretionary
|
Participant’s
Age
|
Allocable
Points
|
Participant’s Years of
Vesting Service
|
Allocable
Points
|
|
40-44
|
1
|
0-9
|
1
|
|
45-49
|
2
|
10-14
|
2
|
|
50-54
|
3
|
15-19
|
3
|
|
55-59
|
4
|
20-24
|
4
|
|
60 and up
|
5
|
25-29
|
5
|
|
30 - 34
|
6
|
|||
35 and up
|
7
|
|
(B)
|
In the event the allocation of Retirement Contributions would result in a discriminatory allocation in violation of Treasury Regulation 1.401(a)(4)-1(b), or any other applicable tax qualification requirement, the Benefits Administration Committee shall reduce, in any manner it determines in its discretion to be equitable, the amount of Retirement Contributions which would otherwise be allocated to Participants who are Highly Compensated Employees for such Plan Year, in order to satisfy such requirements.
|
|
(C)
|
All Retirement Contributions shall be made in cash and invested in accordance with the provisions of Article 6.
|
|
(D)
|
All Retirement Contributions shall be conditioned on their deductibility under Section 404 of the Code. Retirement Contributions shall be made when directed by the Board of Directors, but not later than the time prescribed by law, including extensions, for filing the income tax return of the Employer for the Employer’s taxable year for which such contributions are deductible.
|
|
(E)
|
For the Plan Year beginning January 1, 2004, a Retirement Contribution determined as provided above, reduced, but not below zero, by the amount, if any of the Discretionary Profit Sharing Contribution allocated to a Participant, shall be made to each Participant who satisfies each of the following conditions: (i) the Participant was a Participant on December 31, 2003, (ii) the Participant remained an Employee continuously from that date through and including December 31, 2004, and (iii) the Participant was never a Highly Compensated Employee during that Plan Year.
|
|
(F)
|
No Retirement Contribution shall be made for any Plan Year beginning on or after January 1, 2005.
|
|
4.6 Overall Limitation on Annual Additions
|
|
4.7 Timing of Employer Contributions
|
|
4.8 Discretionary Profit Sharing Contributions
|
|
4.9 Qualified Non-Elective Contributions
|
|
5.1 Separate Accounts
|
|
5.2 Valuation of Funds
|
|
5.3 Investment Election
|
|
5.4 Timing of Investment Election
|
|
5.5 Transfer Between Investment Funds
|
|
5.6 Special Valuation Date
|
|
6.1 Trust Agreement
|
|
(A)
|
The Company has entered or will enter into a Trust Agreement which shall be a part of the Plan. All contributions made pursuant to the provisions of the Plan shall be paid into the Trust Fund. All such payments and increments thereon shall be held and disbursed in accordance with the provisions of the Plan and Trust Agreement, as each shall be applicable under the circumstances. No person shall have any interest in, or right to, any part of the funds so held, except as expressly provided in the Plan or Trust Agreement.
|
|
(B)
|
The Trustee shall have the exclusive authority and discretion to invest, manage and control the assets of the Plan, except to the extent that Participants have been given authority to direct their Accounts, to the extent the Investment Committee has allocated the authority to manage Plan assets to one or more investment managers (within the meaning of Section 3(38) of ERISA), or to the extent that the Investment Committee has given the Trustee direction with regard to the investment of Plan assets. Any investment manager appointed by the Investment Committee shall have the exclusive authority to manage, including the power to direct the acquisition and disposition of, the Plan assets assigned to it by the Investment Committee.
|
|
6.2 Establishment of Investment Fund(s)
|
|
6.3 Voting and Tender of Shares
|
|
6.4 Assumption of Risk by Participant
|
|
7.1 Death Benefits
|
|
(A)
|
When a Participant has a Separation from Service by reason of death or dies after Separation from Service but before receiving benefits, the benefits shall be payable to the Beneficiary determined pursuant to Section 7.2.
|
|
(B)
|
The payment of benefits shall be in lump sum payment and shall be made as soon as practicable after the Benefits Administration Committee receives a completed application that includes proof of the Participant's death.
|
|
(C)
|
In no event, however, shall the payment of such benefits to a Beneficiary be made later than the date permitted under Section 401(a)(9) of the Code.
|
|
7.2 Designation of Beneficiary
|
|
8.1 Vesting in Personal Account and Rollover Account
|
|
8.2 Vesting in Company Account
|
Years of Vesting Service
|
Percentage Vested
|
|
Less than 1
|
0%
|
|
1 but less than 2
|
20%
|
|
2 but less than 3
|
40%
|
|
3 but less than 4
|
60%
|
|
4 but less than 5
|
80%
|
|
5 or more
|
100%
|
Years of Vesting Service
|
Percentage Vested
|
|
Less than 3
|
0%
|
|
3 or more
|
100%
|
|
8.3 Vesting After Specified Events
|
|
8.4 Distributions With Less Than 100% Vesting
|
|
8.5 Forfeitures
|
|
(1)
|
the Participant repays to the Plan the full amount of the distribution previously made to him, and
|
|
(2)
|
the repayment is effected within five (5) years of the date on which he is credited with an Hour of Service for the performance of duties for an Employer.
|
|
8.6 Distribution of Vested Benefits
|
|
8.7 Forfeiture Account
|
|
8.8 Service Upon Reemployment
|
|
9.1 Vested Benefits
|
|
(A)
|
A Participant who has a Separation from Service shall be entitled to a benefit equal to the vested interest in the balance in his Personal and Company Accounts determined pursuant to Article 8.
|
|
(B)
|
Pursuant to the operation of Section 4.1, Section 4.5 and/or Section 4.8, a Participant may be entitled to receive an additional allocation after Separation from Service. The Participant's vested interest in such amount shall be subject to distribution pursuant to this Article 9 as of the Valuation Date coincident with or next following the Allocation Date as of which such amount is allocated to the Participant's Account.
|
|
(C)
|
A Participant who incurs a Separation from Service (or the surviving Spouse of such Participant) and who has not given written consent to a distribution of benefits may elect a distribution from the Plan of all or any portion of his Account at any time. Each distribution request is to be made in accordance with procedures and rules promulgated by the Benefits Administration Committee. All such withdrawal requests are subject to the approval of the Benefits Administration Committee.
|
|
9.2 Valuation Date
|
|
(A)
|
For purposes of distributions, the value of a Participant's Account shall be determined on the Valuation Date following authorization of the distribution of such Account or a portion thereof by the Benefits Administration Committee.
|
|
(B)
|
Except as otherwise provided in Section 9.3 hereof, or unless a Participant otherwise elects, in no event shall the payment of benefits to a Participant who has a Separation from Service begin later than the 60th day after the latest of the close of the Plan Year in which (1) the Participant attains Normal Retirement Age, (2) occurs the 10th anniversary of the year in which the Participant commenced participation in the Plan or (3) occurs the Participant’s Separation from Service.
|
|
9.3 Consent to Distribution of Benefits
|
|
9.4 Deferral of Benefits
|
|
(A)
|
The benefits of a Participant who has a Separation from Service other than because of death may be deferred to a date not later than that permitted under Section 401(a)(9) of the Code ("Deferred Distribution Date"). During such deferral period, the Participant shall not make any Deposits or, except as otherwise provided under the Loan Program, apply for a loan after his Separation from Service.
|
|
(B)
|
In the event of the death of a Participant during the deferral period prior to distribution of all Plan benefits, the surviving Spouse shall have the right to defer all or any portion of the benefits payable to the surviving Spouse and shall be permitted to designate a Beneficiary to receive benefits in the event of such Spouse's death. If the Spouse fails to designate a Beneficiary or if the Beneficiary designated by the Spouse fails to survive the Spouse, any benefits payable because of the Spouse's death shall be paid to the Spouse's estate.
|
|
9.5 Required Minimum Distributions
|
|
9.6 Notices to Participants; Distributions Within 30 Days
|
|
10.1 Limits on Withdrawals
|
|
10.2 Withdrawal of Taxed Deposits and Rollover Accounts
|
|
10.3 Withdrawal After Attainment of Age 59½
|
|
10.4 Withdrawal to Alleviate Financial Hardship
|
|
(A)
|
the distribution is not in excess of the amount of the immediate and heavy financial need;
|
|
(B)
|
the Participant has obtained all distributions, other than hardship distributions, and all nontaxable loans currently available under all plans maintained by the Employer;
|
|
(C)
|
the Plan, and all other plans maintained by the Employer, provide that the Participant's Tax Deferred Deposits and Taxed Deposits, if any, (except for mandatory after-tax employee contributions to a defined benefit plan) will be suspended for a six-month period after receipt of the hardship distribution; and
|
|
(D)
|
the Plan, and all other plans maintained by the Employer, provide that the Participant may not make Tax Deferred Deposits for the Participant's taxable year immediately following the taxable year of the hardship distribution in excess of the applicable limit under Section 402(g) of the Code for such next taxable year less the amount of such Participant's Tax Deferred Deposits for the taxable year of the hardship distribution.
|
|
10.5 Loans Prior to Hardship Withdrawals
|
|
10.6 In-Service Withdrawals
|
|
10.7 Withdrawal on Account of Disability
|
|
12.1 General Application
|
|
(A)
|
Effective as of November 1, 2012, the Plan will accept Roth Elective Deferrals made on behalf of Participants. A Participant's Roth Elective Deferrals will be allocated to his or her Roth Elective Deferral Account.
|
|
(B)
|
Except as specifically stated otherwise, Roth Elective Deferrals will be treated as Tax Deferred Deposits for all purposes under the Plan.
|
|
12.2 Separate Accounting
|
|
(A)
|
Contributions and withdrawals of Roth Elective Deferrals will be credited and debited to the Roth Elective Deferral Account maintained for each Participant. No contributions other than Roth Elective Deferrals and properly attributable earnings will be credited to each Participant's Roth Elective Deferral Account.
|
|
(B)
|
The Plan will maintain a record of the amount of Roth Elective Deferrals in each Participant's account.
|
|
(C)
|
Gains, losses, and other credits or charges must be separately allocated on a reasonable and consistent basis to each Participant's Roth Elective Deferral Account and the Participant's other accounts under the Plan.
|
|
12.3 Direct Rollovers
|
|
(A)
|
Notwithstanding Article 19, a direct rollover of a distribution from a Roth Elective Deferral Account will only be made to another Roth Elective Deferral Account under an applicable retirement plan described in §402A(e)(1) or to a Roth IRA described in §408A, and only to the extent the rollover is permitted under the rules of §402(c).
|
|
(B)
|
Notwithstanding Article 16, the Plan will accept a rollover contribution to a Roth Elective Deferral Account only if it is a direct rollover from another Roth Elective Deferral Account under an applicable retirement plan described in §402A(e)(1) and only to the extent the rollover is permitted under the rules of §402(c).
|
|
(C)
|
The Plan will not provide for a direct rollover (including an automatic rollover) for distributions from a Participant's Roth Elective Deferral Account if the amount of the distributions that are eligible rollover distributions are reasonably expected to total less than $200 during a year. In addition, any distribution from a Participant's Roth Elective Deferral Account is not taken into account in determining whether distributions from a Participant's other accounts are reasonably expected to total less than $200 during a year. However, eligible rollover distributions from a Participant's Roth Elective Deferral Account are taken into account in determining whether the total amount of the Participant's account balances under the Plan exceeds $1,000 for purposes of mandatory distributions from the Plan.
|
|
(D)
|
The provisions of the Plan that allow a Participant to elect a direct rollover of only a portion of an eligible rollover distribution but only if the amount rolled over is at least $500 is applied by treating any amount distributed from the Participant's Roth Elective Deferral Account as a separate distribution from any amount distributed from the Participant's other accounts in the Plan, even if the amounts are distributed at the same time.
|
|
12.4 Correction of Excess Contributions and Excess Deferrals
|
|
13.1 Investment Committee
|
|
13.2 Operation of Investment Committee
|
|
(A)
|
allocate among its members, and designate other persons to carry out, fiduciary and nonfiduciary responsibilities with respect to the control and management of Plan assets (other than trustee responsibilities as defined in Section 405(c)(3) of ERISA); and
|
|
(B)
|
consult with legal counsel, who may be counsel to the Company.
|
|
13.3 Records of Investment Committee
|
|
13.4 Rights and Powers of Investment Committee
|
|
(A)
|
to establish and implement overall investment objectives, philosophy, and policy relating to asset investment mix or to new investments for the Plan;
|
|
(B)
|
to recommend to the Board of Directors adoption of significant investment-related amendments to the Plan;
|
|
(C)
|
to appoint or remove the Trustees;
|
|
(D)
|
to appoint, review the actions of, and remove the custodians and investment management consultants for the Plan;
|
|
(E)
|
to appoint, review the actions of, and remove investment managers for the Plan, approve related fee arrangements (including estimated annual budget and controls relating to such expenses and fees), investment guidelines, and restrictions applicable to such managers;
|
|
(F)
|
to approve, ratify, or oversee all investments made by investment managers who may be Employees or which may be subsidiaries or affiliates;
|
|
(G)
|
to approve investment arrangements with insurance carriers, banks or financial institutions under the Plan;
|
|
(H)
|
to approve all matters related to investment related transactions between the Plan and a party in interest (as defined in ERISA), where such approval is required by ERISA;
|
|
(I)
|
to exercise such additional powers as are necessary in the judgment of the Investment Committee to carry out the above-mentioned responsibilities or as may from time to time be delegated to the Investment Committee by the Board of Directors.
|
|
13.5 Benefits Administration Committee
|
|
13.6 Operation of Benefits Administration Committee
|
|
13.7 Records of Benefits Administration Committee
|
|
13.8 Rights and Powers of Benefits Administration Committee
|
|
(A)
|
to interpret the provisions of the Plan;
|
|
(B)
|
to adopt such rules and regulations with regard to the administration of the Plan as are consistent with the terms of the Plan and of the trust agreement or agreements establishing the Trust and to determine the terms and provisions of the forms of statements, acceptances, consents, authorizations, elections, designations, and any other instruments to be executed and delivered by Participants as a condition of, or in order -to exercise, any rights under the Plan, and generally, to take all action which it is herein contemplated shall be taken by the Benefits Administration Committee;
|
|
(C)
|
to determine the eligibility of Employees (including, whether an Employee is active, and the dates by which an eligible Employee shall be required to consent to the making of payroll deductions or reductions as a condition to commencing his or her participation in the Plan as of any specified date) and their Periods of Service, including, but without limitation, Hours of Service, One-Year Periods of Severance, Periods of Military Service, Years of Eligibility Service and Years of Vesting Service, and to require such proof from any Participant as it considers necessary to determine that such Participant has a condition of Total and Permanent Disability;
|
|
(D)
|
to determine what constitutes Compensation;
|
|
(E)
|
subject to the specific provisions of the Plan, to determine the times at which amounts shall be credited to the Company Accounts and Personal Accounts of Participants;
|
|
(F)
|
to administer the Loan Program and to determine whether or not a withdrawal request of a Participant on the basis of financial hardship should be approved, and to require such proof from a Participant as it considers necessary to make any such determination;
|
|
(G)
|
to determine the percentage of Compensation which a Participant may deposit under the Plan in respect of a Plan Year as provided in Section 3.2 of Article 3;
|
|
(H)
|
to determine whether or not to suspend, limit or retroactively reduce the percentage of Tax Deferred or Taxed Deposits elected by any or all Participants who are "highly compensated employees" within the meaning of Section 414(q) of the Code and the duration of any such limitation imposed;
|
|
(I)
|
to determine the disposition (including, in its discretion, whether to charge the amount against the amount of shares and cash in the Forfeiture Account) of clerical, arithmetical, and other errors made under the Plan or to resolve any claim filed under the Plan;
|
|
(J)
|
to determine how the Plan should be administered to conform with law or to meet special circumstances not anticipated or not covered in the Plan; and
|
|
(K)
|
to establish and administer procedures to determine whether domestic relations orders are qualified under Section 414(p) of the Code;
|
|
(L)
|
to designate an Employer for purposes of Section 2.7(C) and arrange for a transfer of assets as provided therein;
|
|
(M)
|
to direct the Trustee to return contributions as provided in Section 15.9; and
|
|
(N)
|
to delegate to one or more persons other than members of the Benefits Administration Committee, or to authorize one or more members of the Benefits Administration Committee to act on its behalf to carry out, any duty or power which would otherwise be a responsibility, including a fiduciary responsibility, of the Benefits Administration Committee under the Plan and any reference in the Plan to tile Benefits Administration Committee shall include a reference to such delegatee(a) as is appropriate to the context.
|
|
13.9 Claims Procedures
|
|
13.10 Indemnification
|
|
14.1 Right to Amend
|
|
(A)
|
The Board of Directors reserves the right, by duly authorized resolution, at any time and from time to time (and retroactively if deemed necessary or appropriate to meet the requirements of the Code, ERISA, or any similar laws, or the rules and regulations from time to time in effect under any of such laws or to conform with governmental regulations or other policies), to modify or amend, in whole or in part, any or all of the provisions of the Plan.
|
|
(B)
|
No such modification or amendment, however, shall make it possible for any part of the corpus or income of the fund to be used for, or diverted to, purposes other than for the exclusive benefit of Participants and their beneficiaries under the Plan prior to the satisfaction of all liabilities with respect thereto. Moreover, no amendment or modification shall make it possible to deprive any Participant of a previously accrued benefit, except to the extent permitted by Section 412(c)(8) of the Code.
|
|
(C)
|
Notwithstanding anything herein to the contrary, a representative of the Benefits Administration Committee may, at its direction, execute any amendment to the Plan that (1) reflects the terms of any agreements entered into by the Company relating to prior employee service required to be taken into account under the Plan pursuant to such agreements, or (2) which does not add materially to the cost of maintaining the Plan or affect Participants’ rights under the Plan in a material way.
|
|
14.2 Right of Adoption and Termination
|
|
14.3 Obligations Upon Merger, Consolidation or Transfer
|
|
14.4 Obligations Upon Termination, Partial Termination or Discontinuance
|
|
(A)
|
While each Employer intends to continue the Plan indefinitely, nevertheless it assumes no contractual obligation as to the Plan's continuance. In the case of any termination, partial termination or complete discontinuance of contributions, each Participant who is then an Employee and who is affected by the termination, partial termination or complete discontinuance of contributions shall have a one hundred percent (100%) nonforfeitable interest in the value of all amounts credited to his Participant's Account.
|
|
(B)
|
Upon a complete or partial termination of the Plan, whether in writing or in operation, subject to the right of the Board of Directors to amend the Plan to provide for a liquidation and distribution of the assets of the Plan
|
|
14.5 Continued Funding After Plan Termination
|
|
14.6 Distribution Upon Disposition of Assets
|
|
14.7 Conversion Period
|
|
15.1 No Contract of Employment
|
|
15.2 Incapacity
|
|
15.3 Payment Satisfies Claims
|
|
15.4 Prescribed Forms
|
|
15.5 Telephonic Voice Response Service or Electronic Systems
|
|
15.6 Temporary Investment of Assets
|
|
15.7 Attainment of Age
|
|
15.8 Alienation of Benefits
|
|
15.9 No Guarantee of Benefits by Company
|
|
15.10 Payment of Expenses
|
|
15.11 Statement of Accounting
|
|
15.12 Plan May be Sued
|
|
15.13 Inability to Find Payee
|
|
15.14 State Law
|
|
15.15 Construction
|
|
16.1 Rollover of Funds from Other Plans
|
|
16.2 Rollover of Funds from Conduit Individual Retirement Account (IRA)
|
|
(A)
|
becomes an Employee other than an Employee described in Section 2.3, and
|
|
(B)
|
has established an Individual Retirement Account or Individual Retirement Annuity (hereinafter collectively referred to as "IRA") described in Sections 408(a) and 408(b), respectively, of the Code, which IRA is comprised solely of amounts constituting a rollover contribution of an eligible rollover distribution, as defined in Section 402(c)(4) of the Code, from an employer's plan described in Section 401(a) of the Code, which is exempt from tax under Section 501(a) of the Code, or an annuity plan described in Section 403(a) of the Code, and
|
|
(C)
|
received from such IRA the entire amount of the account or the entire value of the annuity, including any earnings on such sums, pursuant to Section 408(d)(3)(A)(ii) of the Code, then, with the consent of the Benefits Administration Committee, the eligible Employee may transfer the entire amount received in such distribution to this Plan (for the benefit of such individual) on or before the sixtieth (60th) day after the day on which he received such payment or distribution, and upon receipt by the Plan, such amount shall be credited to the Rollover Account established hereunder pursuant to Article 5. Such transfer may be made even though such Employee has not satisfied the age and service requirements for Plan participation at such time.
|
|
16.3 Transfers Directly from Other Plans
|
|
16.4 Mistaken Rollover
|
|
(A)
|
segregated from all other Plan assets,
|
|
(B)
|
treated as a non-qualified trust established by and for the benefit of the Participant, and
|
|
(C)
|
distributed to the Participant.
|
|
17.1 Top-Heavy Plan Defined
|
|
(A)
|
The sum of (i) the present value of an Employee's accrued retirement income in each defined benefit plan which is included in the Required Aggregation Group determined as of the most recent valuation date within the twelve (12) month period ending on the Determination Date and as if the Employee had terminated service as of such valuation date and (ii) the aggregate distribution made with respect to such Employee during the five-year period ending on the Determination Date from all defined benefit plans included in the Required Aggregation Group and not reflected in the value of his accrued retirement income as of the most recent valuation date. In determining present value for all plans in the Required
|
|
(B)
|
The sum of (i) the aggregate balance of his accounts in all defined contribution plans which are part of the Required Aggregation Group as of the most recent valuation date within the twelve (12) month period ending on the Determination Date, (ii) any contributions allocated to such an account after the valuation date and on or before the Determination Date and (iii) the aggregate distributions made with respect to such Employee during the five-year period ending on the Determination Date from all defined contribution plans which are part of the Required Aggregation Group and not reflected in the value of his account(s) as of the most recent valuation date.
|
|
17.2 Other Definitions
|
|
(A)
|
"Determination Date" means the last day of the preceding Plan Year except that in the case of the first Plan Year, the term "Determination Date" shall mean the last day of the Plan Year.
|
|
(B)
|
"Employee" means (i) a current employee or (ii) a former employee who performed services for the Employer during the Plan Year containing the Determination Date or any of the four (4) preceding Plan Years.
|
|
(C)
|
"Key Employee" means any employee or former employee (including any deceased employee) who at any time during the plan year that includes the determination date was an officer of the Employer having annual compensation greater than $165,000 (as adjusted under section 416(i)(1) of the Code for Plan Years beginning after December 31, 2002), a 5-percent owner of the Employer, or a 1- percent owner of the Employer having annual compensation of more than $150,000. For this purpose, annual compensation means compensation within the meaning of section 415(c)(3) of the Code. The determination of who is a Key Employee will be made in accordance with Section 416(i)(1) of the Code and the applicable regulations and other guidance of general applicability issued thereunder.
|
|
(D)
|
"Non-Key Employee" means an Employee who is not a Key Employee.
|
|
(E)
|
"Required Aggregation Group" means
|
|
(1)
|
Each qualified plan of the Employer in which a Key Employee participates or participated (regardless of whether the Plan has terminated); and
|
|
(2)
|
Each other such qualified plan of an Employer which enables any plan in which a Key Employee participates to meet the requirements of Section 401(a)(4) or Section 410 of the Code.
|
|
17.3 Top-Heavy Contributions
|
|
(A)
|
Three percent (3%) of such Participant's Compensation in the Plan Year, or
|
|
(B)
|
The percentage of such Participant's Compensation in the Plan Year which is equal to the percentage at which contributions and forfeitures are made to the Key Employee for whom such percentage is the highest for the year.
|
|
18.1 Terms of a QDRO
|
|
18.2 Notification of Receipt of Order
|
|
19.1 Application of Article
|
|
19.2 Definitions
|
|
(A)
|
Eligible Rollover Distribution
|
|
(B)
|
Eligible Retirement Plan
|
|
(C)
|
Distributee
|
|
(D)
|
Direct Rollover
|
Employing Company
|
Years of Eligibility
|
Years of Vesting
|
||
Abacus and Data Management Divisions of DoubleClick Inc. (“Abacus”)
|
All service recognized for this purpose under the 401(k) plan previously sponsored by Abacus, but only if employed by the Company as of February 1, 2007.
|
All service recognized for this purpose under the 401(k) plan previously sponsored by Abacus, but only if employed by the Company as of February 1, 2007.
|
||
Advecor, Inc. (“Advecor”)
|
All service recognized for this purpose under Advecor’s 401(k) Plan, but only if employed by Advecor as of 12/31/2012
|
All service recognized for this purpose under Advecor’s 401(k) Plan, but only if employed by Advecor as of 12/31/2012
|
||
AEP, Inc. (“AEP”)*
|
Date of hire by AEP, but only if employed by the Company as of 03/01/2003
|
Date of hire by AEP, but only if employed by the Company as of 03/01/2003
|
||
Aspen Marketing Holdings, Inc (“Aspen”)
|
All service recognized for this purpose under Aspen’s 401(k) Plan, but only if hired by the Company as of June 1, 2011
|
All service recognized for this purpose under Aspen’s 401(k) Plan, but only if hired by the Company as of June 1, 2011
|
||
Atrana Solutions, Inc. (“Atrana”)
|
Date of hire by Atrana, but only if employed by the Company as of May 14, 2005.
|
Date of hire by Atrana, but only if employed by the Company as of May 14, 2005.
|
||
Big Designs, Inc. (“Big”)
|
Date of hire by Big, but only if employed by the Company as of August 15, 2006.
|
Date of hire by Big, but only if employed by the Company as of August 15, 2006.
|
Employing Company
|
Years of Eligibility
|
Years of Vesting
|
||
Bigfoot Interactive, Inc. (“Bigfoot”)
|
Date of hire by Bigfoot, but only if employed by the Company as of September 24, 2005.
|
Date of hire by Bigfoot, but only if employed by the Company as of September 24, 2005.
|
||
Capstone Consulting Partners, Inc. (“Capstone”)*
|
Date of hire by Capstone if employed by Capstone on 11/1/2004 and hired by the Company on or before 11/2/2004.
|
Date of hire by Capstone if employed by Capstone on 11/1/2004 and hired by the Company on or before 11/2/2004.
|
||
ConneXt
|
Date of hire with ConneXt if employed by ConneXt on 08/23/2001
|
Date of hire with ConneXt if employed by ConneXt on 08/23/2001
|
||
CPC Associates, Inc. (“CPC”)
|
Date of hire by CPC, but only if employed by the Company as of October 1, 2006.
|
Date of hire by CPC, but only if employed by the Company as of October 1, 2006.
|
||
Conservation Billing Services, Inc. (“CBSI”)*
|
Date of hire by CBSI, but only if employed by the Company as of 09/16/2003
|
Date of hire by CBSI, but only if employed by the Company as of 09/16/2003
|
||
Dresser Industries
(“Dresser”)
|
Date of hire with Dresser if employed by Dresser on 07/15/1997
|
Date of hire with Dresser if employed by Dresser on 07/15/1997
|
||
DoubleClick, Inc. (“DoubleClick”)
|
Date of hire by DoubleClick, but only if employed by the Company as of April 3, 2006.
|
Date of hire by DoubleClick, but only if employed by the Company as of April 3, 2006.
|
||
Epsilon Marketing Services, Inc. (“Epsilon”)*
|
Date of hire by Epsilon if employed by Epsilon on 10/31/2004 and hired by the Company on 11/1/2004 or if employed by Epsilon’s affiliate on 12/31/2004 and hired by the Company on or before 1/1/2005, but no less than one Year of Eligibility Service.
|
Date of hire by Epsilon if employed by Epsilon on 10/31/2004 and hired by the Company on 11/1/2004 or if employed by Epsilon’s affiliate on 12/31/2004 and hired by the Company on or before 1/1/2005.
|
Employing Company
|
Years of Eligibility
|
Years of Vesting
|
||
Acquired Subsidiaries of Equifax, Inc. (“Equifax”)
|
All service recognized for this purpose under the 401(k) plan previously sponsored by Equifax, but only if hired by the Company as of July 1, 2010, or such later date provided in the Purchase Agreement
|
All service recognized for this purpose under the 401(k) plan previously sponsored by Equifax, but only if hired by the Company as of July 1, 2010, or such later date provided in the Purchase Agreement
|
||
ExoLink, Inc. (“ExoLink”)
|
Date of hire with ExoLink, but only if employed by the Company as of 01/01/2003
|
Date of hire with ExoLink, but only if employed by the Company as of 01/01/2003
|
||
Frequency Marketing, Inc. (“FMI”)
|
Date of hire with FMI if employed with FMI on 12/31/2001
|
Date of hire with FMI if employed with FMI on 12/31/2001
|
||
Harmonic Systems
|
Date of hire with Harmonic Systems if employed by Harmonic Systems on 08/11/1998
|
Date of hire with Harmonic Systems if employed by Harmonic Systems on 08/11/1998
|
||
HMI Holdings, LLP (“HMI”)
|
All service recognized for this purpose under the HMI 401(k) Plan in which the employee participated, but only if employed by HMI as of 12/01/2012
|
All service recognized for this purpose under the HMI 401(k) Plan in which the employee participated, but only if employed by HMI as of 12/01/2012
|
||
Huntington National Bank
(“HNB”)
|
Date of hire with HNB if employed by HNB on 07/19/1998
|
Date of hire with HNB if employed by HNB on 07/19/1998
|
||
iCom Information & Communications L.P. (“iCom”)
|
Date of hire by iCom, but only if employed by the Company as of February 6, 2006.
|
Date of hire by iCom, but only if employed by the Company as of February 6, 2006.
|
Employing Company
|
Years of Eligibility
|
Years of Vesting
|
||
Limited Brands, Inc.
|
All service recognized for this purpose under the 401(k) plan sponsored by Limited Brands, but only if hired by the Company (1) in connection with an asset purchase and (2) either on September 15, 2012, or within 90 days afterwards
|
All service recognized for this purpose under the 401(k) plan sponsored by Limited Brands, but only if hired by the Company (1) in connection with an asset purchase and (2) either on September 15, 2012, or within 90 days afterwards
|
||
Loyalty RealTime, Inc. (formerly d/b/a Loyalty RealTime, LLC (“LRI”)
|
Date of hire with LRI if employed with LRI on 12/31/2001
|
Date of hire with LRI if employed with LRI on 12/31/2001
|
||
Mail Box Capital Corporation
(“Mail Box”)
|
Date of hire with Mail Box if employed by Mail Box on 09/24/2001
|
Date of hire with Mail Box if employed by Mail Box on 09/24/2001
|
||
National City Card Services Division of National City Bank Columbus (“NBCC”)
|
Date of hire with NBCC if employed with NBCC on 11/22/1996
|
Date of hire with NBCC if employed with NBCC on 11/22/1996
|
||
Orcom Solutions, Inc. (“Orcom”)*
|
Date of hire by Orcom, but only if employed by the Company as of 12/02/2003, or within 30 days thereafter
|
Date of hire by Orcom, but only if employed by the Company as of 12/02/2003, or within 30 days thereafter
|
||
Specialty Retailers (TX), LP (“Specialty”) *
|
Date of hire by Specialty, but only if employed by the Company as of 09/12/2003
|
Date of hire by Specialty, but only if employed by the Company as of 09/12/2003
|
||
SPS (The Associates) (“SPS”)
|
Date of hire with SPS if employed with SPS on 07/14/1999
|
Date of hire with SPS if employed with SPS on 07/14/1999
|
||
SPS Fleetshare (The Associates) (“SPS”)
|
Date of hire with SPS if employed by SPS on 07/14/1999 and on 06/30/2000
|
Date of hire with SPS if employed by SPS on 07/14/1999 and on 06/30/1999
|
Employing Company
|
Years of Eligibility
|
Years of Vesting
|
||
Utilipro
|
Date of hire with Utilipro if employed by Utilipro on 02/28/2001
|
Date of hire with Utilipro if employed by Utilipro on 02/28/2001
|
||
Milford and Bensalem Divisions of Charming Shoppes Receivables Corporation (“Charming”)
|
All service recognized for this purpose under the 401(k) plan previously sponsored by Charming, but only if hired by the Company as of October 30, 2009, or such later date provided in the Purchase Agreement.
|
All service recognized for this purpose under the 401(k) plan previously sponsored by Charming, but only if hired by the Company as of October 30, 2009, or such later date provided in the Purchase Agreement.
|
|
–
|
Receipt and processing of applications received via mail/fax/electronic.
|
|
–
|
Credit scoring and adjudication in accordance with Bank credit criteria.
|
|
–
|
Application exceptions will be referred to appropriate Bank representative.
|
|
–
|
Approved accounts will be established on account processing platform.
|
|
–
|
Declined accounts will be sent adverse action letters.
|
|
–
|
Processing of all customer inquires (received via telephone/mail/fax/electronic).
|
|
–
|
Includes toll free customer inquiry number.
|
|
–
|
Responds to billing inquiries, account disputes and adjustments, billing error resolution, provision of duplicate copies of billing documentation (as requested).
|
|
–
|
Serves as a liaison between customers and clients for communication of product/service disputes.
|
|
–
|
Manages collection of overdue accounts from initial delinquency through charge-off.
|
|
–
|
Manages special account processing including bankruptcy, deceased & fraud.
|
|
–
|
Collection exceptions, including but not limited to settlement offers will be referred to appropriate Bank representative for approval.
|
|
–
|
Management of all aspects of processing platform(s), including day to day operation, backups and maintenance, and disaster recovery.
|
|
–
|
Includes provision of a 24 X 7 control center/help desk facility to monitor and manage data processing operations on behalf of Bank.
|
|
–
|
Includes availability of the Enterprise Data Warehouse (“EDW”). The EDW is used by Alliance Data to compile and store all retail transaction and cardholder account data.
|
|
–
|
Includes management and maintenance of processing applications, including new feature development, product enhancements and problem resolution.
|
|
–
|
Includes provision of development staff with specialized knowledge of Bank processing applications.
|
|
–
|
Manages the marketing of services to bank customers through periodic communications mediums such as billing statements & telephone communications.
|
|
–
|
Co-develop with third party vendors targeted marketing campaigns that provide offers of complimentary products to Bank’s customers.
|
|
–
|
Partners with Bank and clients to develop and execute marketing programs to acquire new customers, increase sales from existing customers, or activate customers who have become inactive.
|
|
–
|
Provision of all Sales development and support on behalf of Bank.
|
|
–
|
A National Sales team will be deployed to market new client relationships on behalf of Bank, working in close partnership with Bank executive management.
|
|
–
|
Includes development of advertising materials and marketing collateral materials.
|
|
–
|
Provides relationship management staff to support day to day management of Bank’s client relationships.
|
|
–
|
Provides strategic credit operations support for all call center operations and includes interfaces with third party partners including credit reporting agencies and collection agencies.
|
|
–
|
Includes plastics and end-to-end processing of card embossing requests, either from initial account set-up or for replacement cards.
|
|
–
|
Provides secure processing of customer remittances at Alliance Data’s national remittance center facility.
|
|
–
|
Includes exception item processing and deposit of funds into Bank-specified account(s).
|
|
–
|
Includes production and mailing of all customer communications from Bank; including not only periodic statements but also dunning letters, customer service correspondence, adverse action letters and change of terms notices.
|
|
–
|
Provision of network and telecommunications access to the Alliance Data systems.
|
|
–
|
Provision of PC hardware, software and support to ensure continuous functioning.
|
|
–
|
Provision of technologies to protect client/customer data from illegal acquisition. Specifically, this shall include but not be limited to becoming, within the Initial Term of this Agreement, what is commonly referred to as PCI Compliant with regard to the transmission, receipt, storage and use of non-public personal information.
|
|
–
|
Assist management in planning for a shut down or disruption in business, as requested by Bank.
|
|
–
|
All services and support deemed reasonable as compared to similar financial services provided by an internal accounting department, including but not limited to daily posting of transactions, daily general ledger production, timely account reconciliation within an acceptable materiality factor as determined by Bank and timely preparation of monthly financial and quarterly regulatory reports.
|
|
–
|
Providing all services deemed reasonable as compared to similar tax related services provided by an internal tax department, including but not limited to computing, paying, and recording all tax obligations of Bank, making appropriate filings in the appropriate taxing jurisdictions, and advising Bank on how to lawfully reduce its tax obligations.
|
|
–
|
Provision of services related to timely payment of invoices.
|
|
–
|
Provision of services related to the interpretation and application of federal, state and local rules, laws and regulations to activities conducted by Bank and proactive monitoring of proposed rules, laws and regulations, and on-going implementation.
|
|
–
|
Provision of audit services in accordance with Bank’s policies.
|
|
–
|
Provision of physical security for the buildings owned or occupied by Bank.
|
|
–
|
Provision of certificate of deposit administration, cash management, funds transfer, and related investment activities and advice as requested by Bank. ADS shall retain reputable broker-dealers, and Bank shall have the right to replace any broker-dealer whose performance does not meet Bank’s satisfaction.
|
|
–
|
Assistance in the recruiting, management of staff and management of benefits available to Bank associates.
|
|
–
|
Support in setting the direction of the Bank, as requested.
|
|
–
|
Support in setting the business to be offered by the Bank, as requested.
|
|
–
|
Assist with management of the premises and its contents.
|
|
–
|
Access to inter-company mail with all other Alliance Data facilities.
|
|
–
|
Access to the Alliance Data policies and procedures regarding safety.
|
|
–
|
Assistance in the purchase of miscellaneous office supplies and materials reasonably necessary to conduct Bank’s business.
|
|
–
|
assistance in and provide discounts on airfare, cars and lodging related to business travel.
|
|
–
|
General services as requested by Bank.
|
|
–
|
Assistance in managing media contacts and disclosures to the public.
|
1.
|
Alliance Data will process mailed-in applications five days per week. Alliance Data will process one hundred percent (100%) of such applications within six (6) business days of receipt.
|
2.
|
Alliance Data will process “instant” and “quick” applications from 9:00 am to 12:30 (Eastern Time) Monday through Saturday and from 10:00 am to 9:30 pm (Eastern Time) Sunday (“Normal Store Hours”). Alliance Data will process at least ninety percent (90%) of such applications within five (5) minutes of receipt. Alliance Data will establish “downtime” procedures for application processing.
|
3.
|
Alliance Data will issue new and replacement credit cards within four (4) business days of embossing tape output; provided that schedules for issuance of additional cards pursuant to reactivation programs will be established on a program-by-program basis.
|
4.
|
Alliance Data will answer at least eighty percent (80%) of incoming calls within twenty-five (25) seconds and not permit the abandoned call rate to exceed five percent (5%) measured on a monthly basis. Alliance Data will provide authorization service during Normal Store Hours and customer service from 9:00 am to 9:00 pm (Eastern Time) Monday through Saturday.
|
5.
|
Alliance Data will provide electronic authorization services to be available at least ninety-nine and one-half percent (99.5%) of Normal Store Hours. Alliance Data will provide batch authorization means for catalogue sales. Alliance Data will establish “downtime” procedures for authorization.
|
6.
|
Alliance Data will post valid transactions to the customer’s account within twenty-four (24) to thirty-six (36) hours of receipt of a transaction file received on a business day.
|
7.
|
Alliance Data will bill and mail account statements within four (4) business days of the scheduled billing date.
|
8.
|
Alliance Data will process at least ninety-six percent (96%) of payments (based on monthly average) made in accordance with the instructions of Bank and at locations or addresses specified by Bank within twenty-four (24) hours of receipt. In the event any payment is not processed within twenty-four (24) hours of receipt, such payment shall be backdated to the date of receipt.
|
9.
|
Alliance Data will respond to at least ninety percent (90%) of mailed-in customer inquiries within eight (8) business days and one hundred percent (100%) within thirty-one (31) days of receipt.
|
10.
|
Within five (5) business days of receipt of any “NG” check notification, Alliance Data will debit the customer’s account at face value plus any applicable NG check fee and, if payment was originally accepted by Bank and a corresponding payment made to Alliance Data, reimburse the Bank the face value of the check.
|
11.
|
The EDW data will be delivered by Alliance Data on a daily basis and made available based on the EDW end of day marker within forty eight (48) hours. Sunday EDW data will be made available no later than the following Tuesday.
|
12.
|
For Local Area Network, PC Support and Telecommunications Support, reports which track service requests will be provided by Alliance Data to ensure that these services are provided in accordance with agreed upon targets.
|
13.
|
All Administrative Services, as defined above in Appendix A (with the exception of Local Area Network, PC Support and Telecommunications Support which are to be provided pursuant to Section 12 above), shall be provided by Alliance Data in accordance with best industry practices.
|
14.
|
Alliance Data will track Alliance Data performance of these standards on a weekly basis, and will report results to Bank as agreed upon.
|
·
|
All standards are expressed as simple monthly averages for the Alliance Data service center and are measured on a monthly calendar basis based on Bank client.
|
·
|
Telephone service factors are reported and tracked based on Alliance Data’s department averages.
|
·
|
Response time for credit application inquiries means those applicants which Bank has approved or declined. Applicants which Bank is reviewing under special circumstances, such as a suspected fraudulent application, shall not be included in the measurement of the standard.
|
|
1.
|
Outside Legal and Auditor Fees
|
|
2.
|
Regulatory Assessments
|
|
3.
|
Postage Increases not already accounted for in the Fee Per Statement
|
Year Ended December 31,
|
||||||||||||||||||||
2012
|
2011
|
2010
|
2009
|
2008
|
||||||||||||||||
(In thousands, except per share amounts)
|
||||||||||||||||||||
Income from continuing operations
|
$ | 682,904 | $ | 514,095 | $ | 310,890 | $ | 262,946 | $ | 380,151 | ||||||||||
Plus
|
||||||||||||||||||||
Fixed charges
|
318,148 | 320,978 | 338,609 | 164,413 | 114,186 | |||||||||||||||
Total
|
$ | 1,001,052 | $ | 835,073 | $ | 649,499 | $ | 427,359 | $ | 494,337 | ||||||||||
Earnings to fixed charges ratio
|
3.2 | 2.6 | 1.9 | 2.6 | 4.3 | |||||||||||||||
Fixed charges:
|
||||||||||||||||||||
Interest expense, including the amortization of debt issuance costs
|
$ | 295,175 | $ | 300,816 | $ | 320,469 | $ | 146,589 | $ | 96,041 | ||||||||||
Estimate of interest component of rent expense(1)
|
22,973 | 20,162 | 18,140 | 17,824 | 18,145 | |||||||||||||||
Total fixed charges
|
$ | 318,148 | $ | 320,978 | $ | 338,609 | $ | 164,413 | $ | 114,186 | ||||||||||
(1)
|
Estimated at 1/3 of total rent expense
|
Subsidiary
|
Jurisdiction of Organization
|
Other Business Names
|
Acorn Direct Marketing Limited
|
Ireland
|
None
|
ADI, LLC
|
Delaware
|
None
|
ADS Alliance Data Systems, Inc.
|
Delaware
|
None
|
ADS Foreign Holdings, Inc.
|
Delaware
|
None
|
ADS Reinsurance Ltd.
|
Bermuda
|
None
|
Abacus Direct Europe BV
|
Netherlands
|
None
|
Alliance Data FHC, Inc.
|
Delaware
|
Epsilon International
|
Alliance Data Foreign Holdings, Inc.
|
Delaware
|
None
|
Alliance Data Luxembourg S.àr.l.
|
Luxembourg
|
None
|
Alliance Data Pte. Ltd.
|
Singapore
|
None
|
AMGI Holdings, LLC
|
Delaware
|
None
|
Aspen ListCo Acquisitions LLC
|
Delaware
|
None
|
Aspen Marketing Holdings, LLC
|
Delaware
|
None
|
Aspen Marketing Services, LLC
|
Delaware
|
None
|
Catapult Integrated Services, LLC
|
Delaware
|
CatapultRPM
|
Catapult Action Biased Marketing
|
||
Catapult Marketing
|
||
ClickGreener Inc.
|
Ontario, Canada
|
None
|
Comenity LLC
|
Delaware
|
None
|
Comenity Bank
|
Delaware
|
None
|
Comenity Capital Bank
|
Utah
|
None
|
Comenity Servicing LLC
|
Texas
|
None
|
Coupons, LLC
|
Delaware
|
GetMembers
|
Advecor
|
||
CPC Associates, LLC
|
Delaware
|
None
|
D. L. Ryan Companies, LLC
|
Delaware
|
Pinball
|
DNCE LLC
|
Delaware
|
None
|
Eindia, LLC
|
Delaware
|
None
|
Epsilon Data Management, LLC
|
Delaware
|
None
|
Epsilon Email Marketing India Private Limited
|
India
|
None
|
Epsilon FMI, Inc.
|
Ohio
|
None
|
Epsilon Interactive, LLC
|
Delaware
|
None
|
Epsilon Interactive CA Inc.
|
Ontario, Canada
|
Abacus Canada
|
Enterprises Abacus Canada
|
||
Aspen of West Chicago Marketing Services
|
||
Aspen Marketing Services
|
||
Epsilon International, LLC
|
Delaware
|
None
|
Epsilon International Consulting Services Private Limited
|
India
|
None
|
Epsilon International UK Ltd.
|
England
|
None
|
Epsilon Marketing Services, LLC
|
Delaware
|
None
|
Epsilon Software Technology Consulting (Shanghai) Co., Ltd.
|
Shanghai, People’s Republic of China
|
None
|
Haggin Marketing, Inc.
|
California
|
None
|
HMI Holding Corp.
|
Delaware
|
None
|
Hyper Marketing Inc. International Holdings Limited
|
Ireland
|
None
|
I-Centrix Services, LLC
|
Delaware
|
None
|
ICOM Ltd.
|
Ontario, Canada
|
None
|
iCom Information & Communications, Inc.
|
Delaware
|
None
|
Subsidiary
|
Jurisdiction of Organization
|
Other Business Names
|
ICOM Information & Communications L.P.
|
Ontario, Canada
|
Shopper’s Voice
|
Smart Shopper Stop
|
||
Interact Connect LLC
|
Delaware
|
None
|
LMGC Holdings 1, ULC
|
Nova Scotia, Canada
|
None
|
LMGC Holdings 2, ULC
|
Nova Scotia, Canada
|
None
|
LMGC Luxembourg S.àr.l.
|
Luxembourg
|
None
|
LoyaltyOne, Inc.
|
Ontario, Canada
|
AIR MILES
|
airmilesshops.ca
|
||
AIR MILES Corporate Incentives
|
||
AIR MILES For Business
|
||
AIR MILES Incentives
|
||
AIR MILES My Planet
|
||
AIR MILES Reward Program
|
||
Alliance Data
|
||
Direct Antidote
|
||
Loyalty & Marketing Services
|
||
LoyaltyOne
|
||
LoyaltyOne Canada
|
||
My Planet
|
||
LoyaltyOne Participacoes Ltda
|
Brazil
|
None
|
LoyaltyOne Rewards Private Limited
|
India
|
None
|
LoyaltyOne SPB, Inc.
|
Ontario, Canada
|
None
|
LoyaltyOne US, Inc.
|
Delaware
|
Colloquy
|
LoyaltyOne Consulting
|
||
Precima
|
||
LoyaltyOne Travel Services Inc.
|
Ontario, Canada
|
AIR MILES Travel Services
|
Panavista, LLC
|
Delaware
|
None
|
RPM Connect, LLC
|
Delaware
|
None
|
Ryan Next, LLC
|
Delaware
|
None
|
Ryan Partnership, LLC
|
Delaware
|
Nsight Connect
|
Etailing Solutions
|
||
SolutionSet Holding Corp.
|
Delaware
|
None
|
SolutionSet, Inc.
|
Delaware
|
None
|
SolutionSet., LLC
|
California
|
None
|
Spyglass Publishing Group, Inc.
|
California
|
None
|
S.R.I. Analytics, Inc.
|
Georgia
|
None
|
The Retail Zone, LLC
|
Delaware
|
None
|
WFC Card Services L.P.
|
Ontario, Canada
|
None
|
WFC Card Services Holdings Inc.
|
Ontario, Canada
|
None
|
WFN Credit Company, LLC
|
Delaware
|
None
|
WFN Operating Co., LLC
|
Delaware
|
None
|
World Financial Capital Credit Company, LLC
|
Delaware
|
None
|
/S/ EDWARD J. HEFFERNAN
|
|
Edward J. Heffernan
|
|
Chief Executive Officer
|
/S/ CHARLES L. HORN
|
|
Charles L. Horn
|
|
Chief Financial Officer
|
/S/ EDWARD J. HEFFERNAN
|
|
Edward J. Heffernan
|
|
Chief Executive Officer
|
/S/ JANE BAEDKE
|
|
Name: Jane Baedke
|
|
Title: Notary Public
|
/S/ CHARLES L. HORN
|
|
Charles L. Horn
|
|
Chief Financial Officer
|
/S/ JANE BAEDKE
|
|
Name: Jane Baedke
|
|
Title: Notary Public
|
ACCRUED EXPENSES (Tables)
|
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACCRUED EXPENSES | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accrued expenses |
|
DISCONTINUED OPERATIONS (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | |
---|---|---|
Dec. 31, 2010
|
Dec. 31, 2011
|
|
Assets : | ||
Credit card receivables, net | $ 2.4 | |
Pre-tax loss | 3.0 | |
After-tax loss | $ 1.9 |
SEGMENT INFORMATION (Tables)
|
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Dec. 31, 2012
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SEGMENT INFORMATION | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of segment information |
(1) Adjusted EBITDA is a non-GAAP financial measure equal to income (loss) from continuing operations, the most directly comparable GAAP financial measure, plus stock compensation expense, provision for income taxes, interest expense, net, depreciation and other amortization and amortization of purchased intangibles. Adjusted EBITDA is presented in accordance with ASC 280 as it is the primary performance metric utilized to assess performance of the segment. |
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Schedule of information concerning principal geographic areas |
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COMMITMENTS AND CONTINGENCIES (Details 2) (USD $)
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Dec. 31, 2012
cardholder
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Cardholders | |
Approximate number of cardholders | 37,900,000 |
Average unused lines of credit per account | $ 1,278 |
FINANCIAL INSTRUMENTS (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2012
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FINANCIAL INSTRUMENTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of estimated fair value of Company's financial instruments |
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Schedule of assets and liabilities carried at fair value measured on recurring basis |
(1) Amounts are included in redemption settlement assets in the consolidated balance sheets. (2) Amounts are included in other current assets and other assets in the consolidated balance sheets. (3) Amount is included in other assets in the consolidated balance sheets. (4) Amounts are included in other current liabilities and other liabilities in the consolidated balance sheets.
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Summary of changes in fair value of the Company's assets measured on a recurring basis using significant unobservable inputs (Level 3) |
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Schedule of gains included in earings related to assets still held |
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Assets and liabilities disclosed but not carried at fair value |
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
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Dec. 31, 2012
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of computation of basic and diluted net income per share |
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SCHEDULE II CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS (Details) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended | ||
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Dec. 31, 2012
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Dec. 31, 2011
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Dec. 31, 2010
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Movement in valuation and qualifying accounts | |||
Charge due to the adoption of ASC 860 and ASC 810 | $ 523,950 | ||
Allowance for Doubtful Accounts -Trade receivables
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Movement in valuation and qualifying accounts | |||
Balance at Beginning of Period | 2,406 | 4,350 | 6,736 |
Charged to Costs and Expenses | 2,270 | 2,141 | 1,939 |
Charged to Other Accounts | 384 | 547 | 16 |
Write-Offs Net of Recoveries | (1,141) | (4,632) | (4,341) |
Balance at End of Period | 3,919 | 2,406 | 4,350 |
Allowance for Loan Loss -Credit card receivables
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Movement in valuation and qualifying accounts | |||
Balance at Beginning of Period | 468,321 | 518,069 | 54,884 |
Charged to Costs and Expenses | 285,479 | 300,316 | 387,822 |
Charged to Other Accounts | 11,000 | (10,000) | 524,215 |
Write-Offs Net of Recoveries | (282,842) | (340,064) | (448,852) |
Balance at End of Period | $ 481,958 | $ 468,321 | $ 518,069 |
INCOME TAXES (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 12 Months Ended | |||||||||
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Dec. 31, 2012
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Sep. 30, 2012
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Jun. 30, 2012
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Mar. 31, 2012
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Dec. 30, 2011
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Sep. 30, 2011
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Jun. 30, 2011
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Mar. 31, 2011
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Dec. 31, 2012
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Dec. 31, 2011
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Dec. 31, 2010
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Components of income from continuing operations before income taxes | |||||||||||
Domestic | $ 481,243 | $ 332,010 | $ 159,227 | ||||||||
Foreign | 201,661 | 182,085 | 151,663 | ||||||||
Income from continuing operations before income taxes | 138,355 | 190,106 | 167,476 | 186,967 | 107,326 | 153,323 | 112,997 | 140,449 | 682,904 | 514,095 | 310,890 |
Current | |||||||||||
Federal | 143,695 | 71,843 | 17,940 | ||||||||
State | 13,991 | 9,415 | 9,341 | ||||||||
Foreign | 696 | 70,514 | 68,910 | ||||||||
Total current | 158,382 | 151,772 | 96,191 | ||||||||
Deferred | |||||||||||
Federal | 28,267 | 46,459 | 20,354 | ||||||||
State | 6,176 | 3,482 | 937 | ||||||||
Foreign | 67,823 | (2,904) | (2,230) | ||||||||
Total deferred | 102,266 | 47,037 | 19,061 | ||||||||
Income Tax Expense (Benefit) | 54,694 | 70,561 | 63,655 | 71,738 | 41,420 | 59,342 | 43,974 | 54,073 | 260,648 | 198,809 | 115,252 |
Federal statutory rate (as a percent) | 35.00% | 35.00% | 35.00% | ||||||||
Reconciliation of recorded federal provision for income taxes to the expected amount computed by applying the federal statutory rate | |||||||||||
Expected expense at statutory rate | 239,016 | 179,933 | 108,812 | ||||||||
Increase (decrease) in income taxes resulting from: | |||||||||||
State income taxes, net of federal benefit | 13,109 | 8,383 | 6,680 | ||||||||
Foreign earnings at other than U.S. rates | (4,328) | (7,131) | (6,320) | ||||||||
Canadian tax rate reductions | (7,128) | 7,188 | 11,209 | ||||||||
U.S. tax on foreign dividends, net of credits | 15,617 | 5,228 | (3,156) | ||||||||
Reduction of prior year tax positions | (7,326) | ||||||||||
Other | 4,362 | 5,208 | 5,353 | ||||||||
Income Tax Expense (Benefit) | 54,694 | 70,561 | 63,655 | 71,738 | 41,420 | 59,342 | 43,974 | 54,073 | 260,648 | 198,809 | 115,252 |
Deferred tax assets | |||||||||||
Deferred revenue | 90,675 | 90,675 | 155,386 | ||||||||
Allowance for doubtful accounts | 186,503 | 186,503 | 179,860 | ||||||||
Net operating loss carryforwards and other carryforwards | 51,603 | 51,603 | 129,449 | ||||||||
Derivatives | 4,456 | 4,456 | 15,230 | ||||||||
Stock-based compensation and other employee benefits | 27,205 | 27,205 | 20,196 | ||||||||
Accrued expenses and other | 44,267 | 44,267 | 40,506 | ||||||||
Total deferred tax assets | 404,709 | 404,709 | 540,627 | ||||||||
Valuation allowance | (22,542) | (22,542) | (82,517) | ||||||||
Deferred tax assets, net of valuation allowance | 382,167 | 382,167 | 458,110 | ||||||||
Deferred tax liabilities | |||||||||||
Deferred income | 203,658 | 203,658 | 168,769 | ||||||||
Convertible note hedges | 7,553 | 7,553 | 14,317 | ||||||||
Depreciation | 8,950 | 8,950 | 7,724 | ||||||||
Intangible assets | 172,065 | 172,065 | 123,335 | ||||||||
Total deferred tax liabilities | 392,226 | 392,226 | 314,145 | ||||||||
Net deferred tax asset (liability) | (10,059) | (10,059) | 143,965 | ||||||||
Amounts recognized in the consolidated balance sheets: | |||||||||||
Current assets | 237,268 | 237,268 | 252,303 | ||||||||
Non-current assets | 30,027 | 30,027 | 43,408 | ||||||||
Non-current liabilities | (277,354) | (277,354) | (151,746) | ||||||||
Net deferred tax asset (liability) | $ (10,059) | $ (10,059) | $ 143,965 |
NON-CASH FINANCING AND INVESTING ACTIVITIES (Details) (USD $)
Share data in Millions, unless otherwise specified |
12 Months Ended | |
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Dec. 31, 2012
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Dec. 31, 2010
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NON-CASH FINANCING AND INVESTING ACTIVITIES | ||
Elimination of redemption settlement assets for those interests retained in the WFN Trusts, from adoption of ASC 860 and ASC 810 | $ 74,000,000 | |
Elimination of retained interests classified in due from securitizations, from adoption of ASC 860 and ASC 810 | 775,000,000 | |
Consolidation of credit card receivables, from adoption of ASC 860 and ASC 810 | 4,100,000,000 | |
Consolidation of asset-backed securities, from adoption of ASC 860 and ASC 810 | 3,700,000,000 | |
Treasury shares purchased (in shares) | 0.1 | |
Treasury shares purchased | $ 11,600,000 |
FINANCIAL INSTRUMENTS (Details 4) (USD $)
In Thousands, unless otherwise specified |
Dec. 31, 2012
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Dec. 31, 2011
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Assets measured at fair value | ||
Cash and cash equivalents | $ 893,352 | |
Credit card receivables, net | 6,967,674 | 5,197,690 |
Total assets measured at fair value | 7,861,026 | |
Liabilities measured at fair value | ||
Deposits | 2,255,089 | |
Asset-backed securities debt - owed to securitization investors | 4,225,745 | |
Long-term and other debt | 4,358,379 | |
Total liabilities measured at fair value | 10,839,213 | |
Level 1
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Assets measured at fair value | ||
Cash and cash equivalents | 893,352 | |
Total assets measured at fair value | 893,352 | |
Level 2
|
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Liabilities measured at fair value | ||
Deposits | 2,255,089 | |
Asset-backed securities debt - owed to securitization investors | 4,225,745 | |
Long-term and other debt | 4,358,379 | |
Total liabilities measured at fair value | 10,839,213 | |
Level 3
|
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Assets measured at fair value | ||
Credit card receivables, net | 6,967,674 | |
Total assets measured at fair value | $ 6,967,674 |
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
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Sep. 30, 2012
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Jun. 30, 2012
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Mar. 31, 2012
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Dec. 30, 2011
|
Sep. 30, 2011
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Jun. 30, 2011
|
Mar. 31, 2011
|
Dec. 31, 2012
|
Dec. 31, 2011
|
Dec. 31, 2010
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QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) | |||||||||||
Revenues | $ 971,844 | $ 911,492 | $ 866,485 | $ 891,569 | $ 847,549 | $ 844,844 | $ 740,458 | $ 740,436 | $ 3,641,390 | $ 3,173,287 | $ 2,791,421 |
Operating expenses | 755,113 | 647,021 | 625,942 | 638,950 | 666,247 | 617,165 | 548,667 | 528,528 | 2,667,026 | 2,360,607 | 2,162,201 |
Operating income | 216,731 | 264,471 | 240,543 | 252,619 | 181,302 | 227,679 | 191,791 | 211,908 | 974,364 | 812,680 | 629,220 |
Interest expense, net | 78,376 | 74,365 | 73,067 | 65,652 | 73,976 | 74,356 | 78,794 | 71,459 | 291,460 | 298,585 | 318,330 |
Income from continuing operations before income taxes | 138,355 | 190,106 | 167,476 | 186,967 | 107,326 | 153,323 | 112,997 | 140,449 | 682,904 | 514,095 | 310,890 |
Provision for income taxes | 54,694 | 70,561 | 63,655 | 71,738 | 41,420 | 59,342 | 43,974 | 54,073 | 260,648 | 198,809 | 115,252 |
Net income | $ 83,661 | $ 119,545 | $ 103,821 | $ 115,229 | $ 65,906 | $ 93,981 | $ 69,023 | $ 86,376 | $ 422,256 | $ 315,286 | $ 193,737 |
Net income per share-basic | $ 1.68 | $ 2.39 | $ 2.07 | $ 2.30 | $ 1.31 | $ 1.86 | $ 1.35 | $ 1.69 | $ 8.44 | $ 6.22 | $ 3.69 |
Net income per share-diluted | $ 1.27 | $ 1.84 | $ 1.63 | $ 1.86 | $ 1.11 | $ 1.60 | $ 1.19 | $ 1.56 | $ 6.58 | $ 5.45 | $ 3.48 |
STOCKHOLDERS' EQUITY (Details) (USD $)
In Millions, except Share data, unless otherwise specified |
0 Months Ended | 1 Months Ended | 12 Months Ended | ||||||
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Jan. 02, 2013
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Dec. 13, 2011
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Sep. 30, 2010
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Jan. 31, 2010
|
Dec. 31, 2012
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Dec. 31, 2011
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Dec. 31, 2010
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Jul. 01, 2005
Long Term Incentive Plan
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Jul. 01, 2010
2010 Omnibus Incentive Plan
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Stock Repurchase Programs | |||||||||
Amount of company's outstanding common stock authorized to be repurchased | $ 400.0 | $ 400.0 | $ 400.0 | $ 275.1 | |||||
Number of Shares | 1,000,000 | 2,900,000 | 2,500,000 | ||||||
Total | 137.4 | 240.9 | 148.7 | ||||||
Unused balance under stock repurchase program | $ 262.6 | ||||||||
Stock Compensation Plans | |||||||||
Shares of common stock reserved for grant | 4,750,000 | 3,000,000 |
FINANCIAL INSTRUMENTS
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Dec. 31, 2012
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FINANCIAL INSTRUMENTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FINANCIAL INSTRUMENTS | 17. FINANCIAL INSTRUMENTS
In accordance with ASC 825, “Financial Instruments,” the Company is required to disclose the fair value of financial instruments for which it is practical to estimate fair value. To obtain fair values, observable market prices are used if available. In some instances, observable market prices are not readily available and fair value is determined using present value or other techniques appropriate for a particular financial instrument. These techniques involve judgment and as a result are not necessarily indicative of the amounts the Company would realize in a current market exchange. The use of different assumptions or estimation techniques may have a material effect on the estimated fair value amounts.
Fair Value of Financial Instruments—The estimated fair values of the Company’s financial instruments are as follows:
Fair Value of Assets and Liabilities Held at December 31, 2012 and 2011
The following techniques and assumptions were used by the Company in estimating fair values of financial instruments as disclosed herein:
Cash and cash equivalents, trade receivables, net and accounts payable — The carrying amount approximates fair value due to the short maturity and the relatively liquid nature of these assets and liabilities.
Credit card receivables, net — The carrying amount of credit card receivables, net approximates fair value due to the short maturity, and the average interest rates approximate current market origination rates.
Redemption settlement assets, restricted — Redemption settlement assets, restricted consists of cash and cash equivalents and marketable securities. The fair value for securities is based on quoted market prices for the same or similar securities.
Cash collateral, restricted — The spread deposits are recorded at their fair value based on discounted cash flow models. The Company uses a valuation model that calculates the present value of estimated cash flows for each asset. The fair value is based on the term of the underlying securities and a discount rate. The carrying amount of excess funding deposits approximates its fair value due to the relatively short maturity period and average interest rates, which approximate current market rates.
Other investment securities — Other investment securities consist primarily of restricted cash and marketable securities. The fair value is based on quoted market prices for the same or similar securities.
Market values were determined for each individual security in the investment portfolio. When evaluating the investments for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the security’s issuer, and the Company’s intent to sell the security and whether it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. The Company typically invests in highly-rated securities with low probabilities of default and has the ability to hold the investments until maturity. As of December 31, 2012, the Company does not consider the investments to be other-than-temporarily impaired.
Deposits — The fair value is estimated based on the current observable market rates available to the Company for similar deposits with similar remaining maturities.
Asset-backed securities debt — owed to securitization investors — The fair value is estimated based on the current observable market rates available to the Company for similar debt instruments with similar remaining maturities or quoted market prices for the same transaction.
Long-term and other debt — The fair value is estimated based on the current observable market rates available to the Company for similar debt instruments with similar remaining maturities or quoted market prices for the same transaction.
Derivative instruments —The valuation of these instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and option volatility.
Financial Assets and Financial Liabilities Fair Value Hierarchy
ASC 825 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
· Level 1, defined as observable inputs such as quoted prices in active markets;
· Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and
· Level 3, defined as unobservable inputs where little or no market data exists, therefore requiring an entity to develop its own assumptions.
Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. Level 3 financial instruments also include those for which the determination of fair value requires significant management judgment or estimation. The use of different techniques to determine fair value of these financial instruments could result in different estimates of fair value at the reporting date.
The following table provides information for the assets and liabilities carried at fair value measured on a recurring basis as of December 31, 2012 and 2011:
(1) Amounts are included in redemption settlement assets in the consolidated balance sheets. (2) Amounts are included in other current assets and other assets in the consolidated balance sheets. (3) Amount is included in other assets in the consolidated balance sheets. (4) Amounts are included in other current liabilities and other liabilities in the consolidated balance sheets.
The following tables summarize the changes in fair value of the Company’s assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as defined in ASC 825 as of December 31, 2012 and 2011:
There were no transfers between Levels 1 and 2 within the fair value hierarchy for the years ended December 31, 2012 and 2011.
The spread deposits included in cash collateral, restricted are recorded at their fair value based on discounted cash flow models, utilizing the respective term of each instrument which ranged from four to 46 months, with a weighted average term of 18 months. The unobservable input used to calculate the fair value was the discount rate of 3.2%, which was based on an interest rate curve that is observable in the market as adjusted for a credit spread. Significant increases (decreases) in the term or the discount rate would result in a lower (higher) fair value.
For the years ended December 31, 2012 and 2011, gains and losses included in earnings attributable to cash collateral, restricted are included in interest in the consolidated statements of income.
Financial Instruments Disclosed but Not Carried at Fair Value
The following table provides assets and liabilities disclosed but not carried at fair value as of December 31, 2012:
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)
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12 Months Ended |
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Dec. 31, 2012
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Allowance for Loan Loss | |
Period considered for charge-off trends utilized for analyzing actual charge-offs | 3 months |
Property, plant and equipment other than software development and conversion cost | Maximum
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Property and Equipment | |
Estimated useful life | 21 years |
Property, plant and equipment other than software development and conversion cost | Minimum
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Property and Equipment | |
Estimated useful life | 1 year |
Software Development and Conversion Costs | Maximum
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Property and Equipment | |
Estimated useful life | 5 years |
Software Development and Conversion Costs | Minimum
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Property and Equipment | |
Estimated useful life | 3 years |
COMMITMENTS AND CONTINGENCIES (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2012
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COMMITMENTS AND CONTINGENCIES: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of future minimum payments required under noncancellable operating and capital leases |
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ACCUMULATED OTHER COMPREHENSIVE INCOME (Details) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended | ||
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Dec. 31, 2012
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Dec. 31, 2011
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Dec. 31, 2010
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Balance at the beginning of the period | $ (23,056) | ||
Adoption of ASC 860 and ASC 810 | (355,177) | ||
Changes in other comprehensive income (loss) | 1,195 | 11,444 | (24,640) |
Balance at the end of the period | (21,861) | (23,056) | |
Net Unrealized Gains (Losses) on Securities
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Balance at the beginning of the period | 6,953 | (20,082) | (63,024) |
Adoption of ASC 860 and ASC 810 | 55,881 | ||
Changes in other comprehensive income (loss) | 3,368 | 27,035 | (12,939) |
Balance at the end of the period | 10,321 | 6,953 | (20,082) |
Foreign Currency Translation Adjustments
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Balance at the beginning of the period | (30,009) | (14,418) | (2,717) |
Changes in other comprehensive income (loss) | (2,173) | (15,591) | (11,701) |
Balance at the end of the period | (32,182) | (30,009) | (14,418) |
Accumulated Other Comprehensive Income (Loss)
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Balance at the beginning of the period | (23,056) | (34,500) | (65,741) |
Adoption of ASC 860 and ASC 810 | 55,881 | ||
Changes in other comprehensive income (loss) | 1,195 | 11,444 | (24,640) |
Balance at the end of the period | $ (21,861) | $ (23,056) | $ (34,500) |
PROPERTY AND EQUIPMENT (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2012
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PROPERTY AND EQUIPMENT | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of property and equipment |
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) (USD $)
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3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | |||||||||
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Dec. 31, 2012
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Sep. 30, 2012
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Jun. 30, 2012
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Mar. 31, 2012
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Dec. 30, 2011
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Sep. 30, 2011
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Jun. 30, 2011
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Mar. 31, 2011
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Dec. 31, 2012
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Dec. 31, 2011
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Dec. 31, 2010
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Sep. 30, 2008
Convertible senior notes due 2013
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Dec. 31, 2012
Convertible senior notes due 2013
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Jun. 30, 2009
Convertible senior notes due 2014
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Dec. 31, 2012
Convertible senior notes due 2014
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Revenue Recognition | |||||||||||||||
Estimated Life of an AIR MILES Reward Mile | 42 months | ||||||||||||||
Estimated unredeemed percentage of AIR MILES | 27.00% | 27.00% | 28.00% | ||||||||||||
Period beyond which interest and fee income accrue on credit card accounts | 90 days | ||||||||||||||
Period for which interest and fee income accrue until balance, interest and fees paid or charged off | 180 days | ||||||||||||||
Amortization term of direct loan amortization costs | 1 year | ||||||||||||||
Numerator | |||||||||||||||
Income from continuing operations | $ 422,256,000 | $ 315,286,000 | $ 195,638,000 | ||||||||||||
Loss from discontinued operations | (1,901,000) | ||||||||||||||
Net income | 83,661,000 | 119,545,000 | 103,821,000 | 115,229,000 | 65,906,000 | 93,981,000 | 69,023,000 | 86,376,000 | 422,256,000 | 315,286,000 | 193,737,000 | ||||
Denominator | |||||||||||||||
Weighted average shares, basic | 50,008,000 | 50,687,000 | 52,534,000 | ||||||||||||
Weighted average effect of dilutive securities: | |||||||||||||||
Shares from assumed conversion of convertible senior notes | 8,645,000 | 4,641,000 | 1,835,000 | ||||||||||||
Shares from assumed conversion of convertible note warrants | 4,702,000 | 1,510,000 | |||||||||||||
Net effect of dilutive stock options and unvested restricted stock (in shares) | 788,000 | 966,000 | 1,341,000 | ||||||||||||
Denominator for diluted calculations (in shares) | 64,143,000 | 57,804,000 | 55,710,000 | ||||||||||||
Basic: | |||||||||||||||
Income from continuing operations per share | $ 8.44 | $ 6.22 | $ 3.72 | ||||||||||||
Loss from discontinued operations per share | $ (0.03) | ||||||||||||||
Net income per share (in dollars per share) | $ 1.68 | $ 2.39 | $ 2.07 | $ 2.30 | $ 1.31 | $ 1.86 | $ 1.35 | $ 1.69 | $ 8.44 | $ 6.22 | $ 3.69 | ||||
Diluted: | |||||||||||||||
Income from continuing operations per share | $ 6.58 | $ 5.45 | $ 3.51 | ||||||||||||
Loss from discontinued operations per share | $ (0.03) | ||||||||||||||
Net income per share (in dollars per share) | $ 1.27 | $ 1.84 | $ 1.63 | $ 1.86 | $ 1.11 | $ 1.60 | $ 1.19 | $ 1.56 | $ 6.58 | $ 5.45 | $ 3.48 | ||||
Prepaid forward contracts (in shares) | 1,857,400 | ||||||||||||||
Anti-dilutive warrants excluded from the calculation of net income per share (in shares) | 10,300,000 | 17,500,000 | |||||||||||||
Currency Translation | |||||||||||||||
Foreign currency (losses) gains recognized | 600,000 | (2,700,000) | 3,000,000 | ||||||||||||
Advertising Costs | |||||||||||||||
Advertising expenses | 166,100,000 | 129,000,000 | 115,500,000 | ||||||||||||
Debt | |||||||||||||||
Amount borrowed | $ 805,000,000 | $ 805,000,000 | $ 345,000,000 | $ 345,000,000 |
DEBT (Details 3) (Not designated as hedging instrument, Interest rate derivatives, Securitization funding costs, USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
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Dec. 31, 2012
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Dec. 31, 2011
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Dec. 31, 2010
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Not designated as hedging instrument | Interest rate derivatives | Securitization funding costs
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Activity related to company's outstanding interest rate contracts and location | |||
Gain on Derivative Contracts | $ 29.6 | $ 31.7 | $ 8.7 |
PARENT-ONLY FINANCIAL STATEMENTS (Tables)
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Dec. 31, 2012
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PARENT-ONLY FINANCIAL STATEMENTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of stand alone parent-only financial statements |
Balance Sheets
Statements of Income
Statements of Cash Flows
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DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
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12 Months Ended |
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Dec. 31, 2012
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DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of the Business—Alliance Data Systems Corporation (“ADSC” or, including its wholly-owned subsidiaries and its consolidated variable interest entities, the “Company”) is a leading provider of transaction-based data-driven marketing and loyalty solutions. The Company offers a comprehensive portfolio of integrated outsourced marketing solutions, including customer loyalty programs, database marketing services, marketing strategy consulting, analytics and creative services, direct marketing services and private label and co-brand retail credit card programs. The Company focuses on facilitating and managing interactions between its clients and their customers through all consumer marketing channels, including in-store, on-line, catalog, mail, telephone and email, and emerging channels such as mobile and social media. The Company captures and analyzes data created during each customer interaction, leveraging the insight derived from that data to enable clients to identify and acquire new customers and enhance customer loyalty.
The Company operates in the following reportable segments: LoyaltyOne®, Epsilon®, and Private Label Services and Credit.
LoyaltyOne includes the Company’s Canadian AIR MILES® Reward Program. Epsilon provides end-to-end, integrated direct marketing solutions that combine database marketing technology and analytics with a broad range of direct marketing services, including email marketing campaigns. Private Label Services and Credit encompasses credit card processing, billing and payment processing, customer care and collections services for private label retailers as well as private label retail credit card receivables financing, including securitization of the credit card receivables that it underwrites from its private label retail credit card programs.
Effective October 1, 2012, the Company’s subsidiaries World Financial Network Bank and World Financial Capital Bank changed their names to Comenity Bank and Comenity Capital Bank, respectively. These name changes have been reflected in the Notes to the Consolidated Financial Statements.
For purposes of comparability, certain prior period amounts have been reclassified to conform to the current year presentation in accordance with accounting principles generally accepted in the United States of America (“GAAP”). |
INTANGIBLE ASSETS AND GOODWILL (Details 2) (USD $)
|
12 Months Ended | 0 Months Ended | 0 Months Ended | 1 Months Ended | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2012
|
Dec. 31, 2011
|
Dec. 31, 2010
|
Dec. 31, 2012
Customer relationship
|
Dec. 31, 2011
Customer relationship
|
Dec. 31, 2012
Marketing relationship
|
Dec. 31, 2011
Marketing relationship
|
Nov. 30, 2012
HMI
|
Nov. 30, 2012
HMI
Customer relationship
|
Nov. 30, 2012
HMI
Trade names
|
Nov. 30, 2012
HMI
Favorable lease
|
Dec. 31, 2012
Advecor
|
Dec. 31, 2012
Advecor
Customer relationship
|
Dec. 31, 2012
Advecor
Noncompete agreements
|
May 31, 2011
Aspen
|
May 31, 2011
Aspen
Customer relationship
|
May 31, 2011
Aspen
Trade names
|
|
Intangible assets | |||||||||||||||||
Acquired intangible assets | $ 82,600,000 | $ 4,800,000 | $ 44,500,000 | $ 2,600,000 | $ 38,100,000 | $ 2,200,000 | $ 194,800,000 | $ 170,000,000 | $ 21,500,000 | $ 3,300,000 | $ 8,800,000 | $ 7,500,000 | $ 1,300,000 | $ 140,000,000 | $ 116,000,000 | $ 24,000,000 | |
Weighted average life | 5 years | 7 years | 6 years 7 months 6 days | 7 years | 6 years 4 months 24 days | 8 years 8 months 12 days | 9 years 6 months | 3 years 6 months | 3 years | 8 years 3 months 18 days | 15 years | ||||||
Amortization expense | 90,300,000 | 78,700,000 | 73,500,000 | ||||||||||||||
Estimated amortization expense related to intangible assets for the next five years and thereafter | |||||||||||||||||
2013 | 127,879,000 | ||||||||||||||||
2014 | 117,254,000 | ||||||||||||||||
2015 | 93,360,000 | ||||||||||||||||
2016 | 76,799,000 | ||||||||||||||||
2017 | 51,160,000 | ||||||||||||||||
2018 & thereafter | $ 104,072,000 |