DELAWARE
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001-15749
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31-1429215
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(State or Other Jurisdiction
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(Commission
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(IRS Employer
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of Incorporation)
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File Number)
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Identification No.)
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Written communications pursuant to Rule 425 under the Securities Act
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
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Exhibit No.
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Document Description
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99.1
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Press Release dated April 17, 2014 announcing the results of operations for the first quarter ended March 31, 2014.
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Alliance Data Systems Corporation
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Date: April 17, 2014
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By:
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/s/ Charles L. Horn
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Charles L. Horn
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Executive Vice President and
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Chief Financial Officer
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Exhibit No.
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Document Description
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99.1
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Press Release dated April 17, 2014 announcing the results of operations for the first quarter ended March 31, 2014.
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Contacts:
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Investors/Analysts
Tiffany Louder
Alliance Data
214-494-3048
Tiffany.Louder@alliancedata.com
Media
Shelley Whiddon
Alliance Data
214-494-3811
Shelley.Whiddon@alliancedata.com
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·
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Revenue Increases 17 Percent to $1.23 Billion
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Strong Organic Revenue Growth of 8 Percent
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Core EPS Increases 9 Percent to $2.79
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·
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Raises Guidance
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SUMMARY
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Quarter Ended March 31,
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(in millions, except per share amounts)
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2014
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2013
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% Change
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Revenue
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$ | 1,233 | $ | 1,053 | 17 | % | |||||||
Net income attributable to Alliance Data stockholders per diluted share (“EPS”) (a)
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$ | 2.08 | $ | 1.92 | 8 | % | |||||||
Diluted shares outstanding
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66.1 | 67.3 | -2 | % | |||||||||
******************************* | |||||||||||||
Supplemental Non-GAAP Metrics (b):
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Adjusted EBITDA, net of funding costs and non-controlling interest (“adjusted EBITDA, net”) (a)
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$ | 335 | $ | 326 | 3 | % | |||||||
Core earnings attributable to Alliance Data stockholders per diluted share (“core EPS”) (a)
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$ | 2.79 | $ | 2.55 | 9 | % |
(a)
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Alliance Data acquired 60 percent of Netherlands-based BrandLoyalty on January 2, 2014. Profitability measures shown above are net of amounts attributable to the 40 percent not acquired, referred to as ‘non-controlling interest”.
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(b)
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See “Financial Measures” below for a discussion of non-GAAP financial measures.
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Private Label started the year strong with mid-teens growth in its key metrics: 17 percent growth in credit sales, 15 percent growth in credit card receivables and 13 percent growth in revenue. Notably, we continue to gain tender share as card sales at our retail clients increased about 7 percent for the first quarter, more than double the retailers’ comparable sales growth. New signings - Virgin America, Venus, DSW and IDD - have us on track for another $2 billion vintage year following a record 2013.
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Epsilon had mixed performance for the quarter. Organic revenue growth was strong at 9 percent, but the flow-through to adjusted EBITDA, net was only 1 percent. Some of the incremental costs support the ramp-up of new clients, which makes sense given our record backlog. However, for the remainder of 2014, we hope to see more leveraging of the revenue growth.
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For LoyaltyOne, some areas are working well, but others need some work. The core AIR MILES® business is expected to face a couple of headwinds during the year. The first, and biggest challenge, is the Canadian dollar, down about 8 percent from a year ago. Ouch. The lower translation rate reduced revenue and core EPS by about $19 million and 5 cents, respectively, for the quarter. The second is weak consumer spending. AIR MILES reward miles issued started the year weak, down about 4 percent compared to last year. But, while issuance by quarter may be choppy, we still expect low single-digit growth for 2014. Putting AIR MILES aside, other LoyaltyOne businesses are looking good. BrandLoyalty started strong, and we now have a sight-line to $550 million in revenue for the year versus the $500 million originally expected. And, in Brazil, Dotz added over one million collectors during the quarter, which was good to see.
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Three Months Ended
March 31,
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2014
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2013
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Revenue
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$ | 1,232.9 | $ | 1,053.4 | ||||
Operating expenses:
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Cost of operations
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772.4 | 620.4 | ||||||
Provision for loan loss
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70.6 | 66.6 | ||||||
General and administrative
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34.0 | 22.3 | ||||||
Depreciation and amortization
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74.1 | 52.9 | ||||||
Total operating expenses
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951.1 | 762.2 | ||||||
Operating income
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281.8 | 291.2 | ||||||
Interest expense, net:
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Securitization funding costs
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22.9 | 24.5 | ||||||
Interest expense on deposits
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8.3 | 7.0 | ||||||
Interest expense on long-term and other debt, net
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36.6 | 51.0 | ||||||
Total interest expense, net
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67.8 | 82.5 | ||||||
Income before income taxes
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214.0 | 208.7 | ||||||
Income tax expense
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78.3 | 79.7 | ||||||
Net income
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$ | 135.7 | $ | 129.0 | ||||
Less: net loss attributable to non-controlling interest
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(1.7 | ) | – | |||||
Net income attributable to Alliance Data Systems Corporation stockholders
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$ | 137.4 | $ | 129.0 | ||||
Per share data:
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Basic – Net income attributable to Alliance Data Systems Corporation stockholders
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$ | 2.59 | $ | 2.59 | ||||
Diluted – Net income attributable to Alliance Data Systems Corporation stockholders
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$ | 2.08 | $ | 1.92 | ||||
Weighted average shares outstanding – basic
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53.0 | 49.8 | ||||||
Weighted average shares outstanding – diluted
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66.1 | 67.3 |
As of
March 31,
2014
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As of December 31, 2013
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ASSETS
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Cash and cash equivalents
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$ | 706.6 | $ | 969.8 | ||||
Credit card receivables, net
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7,606.1 | 8,069.7 | ||||||
Redemption settlement assets
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568.6 | 510.3 | ||||||
Intangible assets, net
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840.1 | 460.4 | ||||||
Goodwill
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2,296.3 | 1,735.7 | ||||||
Other assets
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1,739.6 | 1,498.4 | ||||||
Total assets
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$ | 13,757.3 | $ | 13,244.3 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
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Deferred revenue
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$ | 1,066.2 | $ | 1,137.2 | ||||
Deposits
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2,673.9 | 2,816.4 | ||||||
Non-recourse borrowings of consolidated securitization entities
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4,171.9 | 4,591.9 | ||||||
Debt
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2,960.2 | 2,800.3 | ||||||
Other liabilities
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1,592.4 | 1,042.7 | ||||||
Total liabilities
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12,464.6 | 12,388.5 | ||||||
Redeemable non-controlling interest
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342.8 | – | ||||||
Stockholders' equity
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949.9 | 855.8 | ||||||
Total liabilities and equity
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$ | 13,757.3 | $ | 13,244.3 |
Three Months Ended
March 31,
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2014
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2013
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net income
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$ | 135.7 | $ | 129.0 | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation and amortization
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74.1 | 52.9 | ||||||
Deferred income taxes
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25.3 | 14.6 | ||||||
Provision for loan loss
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70.6 | 66.6 | ||||||
Non-cash stock compensation
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15.6 | 13.0 | ||||||
Amortization of discount on debt
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8.1 | 22.2 | ||||||
Change in operating assets and liabilities
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10.6 | (17.7 | ) | |||||
Originations of loan receivables held for sale
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(1,114.6 | ) | – | |||||
Sales of loan receivables held for sale
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1,114.2 | – | ||||||
Other
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(6.5 | ) | (1.6 | ) | ||||
Net cash provided by operating activities
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333.1 | 279.0 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
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Change in redemption settlement assets
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(77.8 | ) | (52.9 | ) | ||||
Change in restricted cash
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0.3 | (463.1 | ) | |||||
Change in credit card receivables
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384.0 | 371.4 | ||||||
Purchase of credit card receivables
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– | (37.1 | ) | |||||
Capital expenditures
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(43.5 | ) | (28.3 | ) | ||||
Payments for acquired businesses, net of cash acquired
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(259.5 | ) | – | |||||
Other
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(3.9 | ) | (48.0 | ) | ||||
Net cash used in investing activities
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(0.4 | ) | (258.0 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES:
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Borrowings under debt agreements
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496.8 | – | ||||||
Repayments of borrowings
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(484.8 | ) | (6.1 | ) | ||||
Proceeds from convertible note hedge counterparties
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93.4 | – | ||||||
Repayments of convertible note borrowings
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(115.1 | ) | – | |||||
Issuances of deposits
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341.3 | 326.9 | ||||||
Repayments of deposits
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(483.8 | ) | (378.2 | ) | ||||
Non-recourse borrowings of consolidated securitization entities
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530.0 | 500.0 | ||||||
Repayments/maturities of non-recourse borrowings of consolidated securitization entities
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(950.0 | ) | (547.4 | ) | ||||
Purchase of treasury shares
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(44.6 | ) | (51.7 | ) | ||||
Other
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24.5 | 9.2 | ||||||
Net cash used in financing activities
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(592.3 | ) | (147.3 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents
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(3.6 | ) | (3.0 | ) | ||||
Change in cash and cash equivalents
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(263.2 | ) | (129.3 | ) | ||||
Cash and cash equivalents at beginning of period
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969.8 | 893.4 | ||||||
Cash and cash equivalents at end of period
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$ | 706.6 | $ | 764.1 | ||||
Three Months Ended
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March 31,
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2014
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2013
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Change
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Segment Revenue:
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LoyaltyOne
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$ | 329.0 | $ | 240.9 | 37 | % | ||||||
Epsilon
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347.5 | 317.9 | 9 | % | ||||||||
Private Label Services and Credit
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561.8 | 497.3 | 13 | % | ||||||||
Corporate/Other
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– | – |
nm
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Intersegment Eliminations
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(5.4 | ) | (2.7 | ) |
nm
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$ | 1,232.9 | $ | 1,053.4 | 17 | % | |||||||
Segment Adjusted EBITDA, net:
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LoyaltyOne
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$ | 65.2 | $ | 62.6 | 4 | % | ||||||
Epsilon
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55.2 | 54.4 | 1 | % | ||||||||
Private Label Services and Credit
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243.5 | 226.8 | 7 | % | ||||||||
Corporate/Other
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(29.3 | ) | (18.2 | ) | 61 | % | ||||||
Intersegment Eliminations
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– | – |
nm
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$ | 334.6 | $ | 325.6 | 3 | % | |||||||
Key Performance Indicators:
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Private Label statements generated
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50.9 | 46.6 | 9 | % | ||||||||
Average receivables
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$ | 8,022.7 | $ | 6,963.6 | 15 | % | ||||||
Credit sales
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$ | 3,614.2 | $ | 3,095.6 | 17 | % | ||||||
AIR MILES reward miles issued
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1,146.9 | 1,191.5 | (4 | )% | ||||||||
AIR MILES reward miles redeemed
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1,056.2 | 1,104.3 | (4 | )% | ||||||||
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nm-not meaningful
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ALLIANCE DATA SYSTEMS CORPORATION
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Three Months Ended
March 31,
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Adjusted EBITDA and Adjusted EBITDA, net:
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2014
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2013
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Net income
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$ | 135.7 | $ | 129.0 | ||||
Income tax expense
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78.3 | 79.7 | ||||||
Total interest expense, net
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67.8 | 82.5 | ||||||
Depreciation and other amortization
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25.5 | 19.6 | ||||||
Amortization of purchased intangibles
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48.6 | 33.3 | ||||||
Stock compensation expense
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15.6 | 13.0 | ||||||
Adjusted EBITDA
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$ | 371.5 | $ | 357.1 | ||||
Less: adjusted EBITDA attributable to non-controlling interest
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5.8 | – | ||||||
Adjusted EBITDA, net of non-controlling interest
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$ | 365.7 | $ | 357.1 | ||||
Less: funding costs (1)
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31.1 | 31.5 | ||||||
Adjusted EBITDA, net of funding costs and non-controlling interest
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$ | 334.6 | $ | 325.6 | ||||
Core Earnings:
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Net income
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$ | 135.7 | $ | 129.0 | ||||
Add back non-cash non-operating items:
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Stock compensation expense
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15.6 | 13.0 | ||||||
Amortization of purchased intangibles
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48.6 | 33.3 | ||||||
Non-cash interest expense (2)
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12.2 | 27.3 | ||||||
Non-cash mark-to-market gain on interest rate derivatives
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(0.1 | ) | (6.3 | ) | ||||
Income tax effect (3)
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(23.9 | ) | (24.5 | ) | ||||
Core earnings
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$ | 188.1 | $ | 171.8 | ||||
Less: core earnings attributable to non-controlling interest
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3.6 | – | ||||||
Core earnings attributable to Alliance Data Systems Corporation stockholders
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$ | 184.5 | $ | 171.8 | ||||
Weighted average shares outstanding – diluted
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66.1 | 67.3 | ||||||
Core earnings attributable to Alliance Data Systems Corporation stockholders per share – diluted
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$ | 2.79 | $ | 2.55 | ||||
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(1)
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Represents interest expense on deposits and securitization funding costs.
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(2)
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Represents amortization of imputed interest expense associated with our convertible debt and amortization of debt issuance costs.
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(3)
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Represents the tax effect for the related non-GAAP measure adjustments (tax deductible stock compensation expense, amortization of purchased intangibles, non-cash interest expense) using the effective tax rate for each respective period.
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