10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 10, 2016

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-35882

BLACKHAWK NETWORK HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	43-2099257
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
6220 Stoneridge Mall Road Pleasanton, CA	94588
(Address of Principal Executive Offices)	(Zip Code)

(925) 226-9990

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	ý	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý

As of October 12, 2016, there were 55,377,000 shares of the Registrant’s common stock outstanding.

Blackhawk Network Holdings, Inc.

FORM 10-Q

Table of Contents

		Page
PART I. FINANCIAL STATEMENTS
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of September 10, 2016, January 2, 2016 and September 12, 2015	1
	Condensed Consolidated Statements of Income (Loss) for the 12 and 36 weeks ended September 10, 2016 and September 12, 2015	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the 12 and 36 weeks ended September 10, 2016 and September 12, 2015	4
	Condensed Consolidated Statements of Cash Flows for the 36 weeks ended September 10, 2016 and September 12, 2015	5
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	45
Signatures		46

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BLACKHAWK NETWORK HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(Unaudited)

	September 10, 2016		January 2, 2016		September 12, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	300,349	$	914,576	$	214,722
Restricted cash	2,500		3,189		43,043
Settlement receivables, net	275,471		626,077		240,273
Accounts receivable, net	199,552		241,729		188,912
Other current assets	123,919		103,319		107,950
Total current assets	901,791		1,888,890		794,900
Property, equipment and technology, net	168,865		159,357		154,085
Intangible assets, net	293,034		240,898		230,213
Goodwill	508,607		402,489		382,803
Deferred income taxes	352,683		339,558		361,284
Other assets	69,039		81,764		78,294
TOTAL ASSETS	$	2,294,019	$	3,112,956	$	2,001,579
See accompanying notes to condensed consolidated financial statements

1

BLACKHAWK NETWORK HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (continued) (In thousands, except par value) (Unaudited)
	September 10, 2016			January 2, 2016			September 12, 2015
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Settlement payables	$	522,133		$	1,605,021		$	469,590
Consumer and customer deposits	115,085			84,761			102,633
Accounts payable and accrued operating expenses	103,920			119,087			112,753
Deferred revenue	113,867			113,458			91,474
Note payable, current portion	9,846			37,296			37,378
Notes payable to Safeway	3,239			4,129			13,129
Bank line of credit	—			—			100,000
Other current liabilities	48,630			57,342			43,320
Total current liabilities	916,720			2,021,094			970,277
Deferred income taxes	19,930			18,652			14,735
Note payable	137,848			324,412			325,151
Convertible notes payable	425,833			—			—
Other liabilities	25,429			14,700			4,867
Total liabilities	1,525,760			2,378,858			1,315,030
Commitments and contingencies (see Note 9)
Stockholders’ equity:
Preferred stock: $0.001 par value; 10,000 shares authorized; no shares outstanding	—			—			—
Common stock: $0.001 par value; 210,000 shares authorized; 55,368, 55,794 and 54,641 shares outstanding, respectively	55			56			55
Additional paid-in capital	594,739			561,939			547,230
Accumulated other comprehensive loss	(34,398		)	(40,195		)	(31,535		)
Retained earnings	203,791			207,973			166,370
Total Blackhawk Network Holdings, Inc. equity	764,187			729,773			682,120
Non-controlling interests	4,072			4,325			4,429
Total stockholders’ equity	768,259			734,098			686,549
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	2,294,019		$	3,112,956		$	2,001,579

See accompanying notes to condensed consolidated financial statements

2

BLACKHAWK NETWORK HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(In thousands, except for per share amounts)

(Unaudited)

	12 weeks ended						36 weeks ended
	September 10, 2016			September 12, 2015			September 10, 2016			September 12, 2015
OPERATING REVENUES:
Commissions and fees	$	248,138		$	231,492		$	750,693		$	709,339
Program and other fees	64,857			61,416			207,718			171,942
Marketing	17,943			16,311			52,098			59,112
Product sales	30,622			43,446			108,719			104,251
Total operating revenues	361,560			352,665			1,119,228			1,044,644
OPERATING EXPENSES:
Partner distribution expense	178,363			161,852			541,749			494,193
Processing and services	75,090			68,246			224,331			198,272
Sales and marketing	52,327			49,954			166,176			156,653
Costs of products sold	29,122			40,577			103,163			97,593
General and administrative	22,501			22,136			70,130			62,186
Transition and acquisition	2,574			5,275			4,160			6,091
Amortization of acquisition intangibles	10,376			6,875			35,533			18,352
Change in fair value of contingent consideration	1,300			—			2,100			(7,567		)
Total operating expenses	371,653			354,915			1,147,342			1,025,773
OPERATING INCOME (LOSS)	(10,093		)	(2,250		)	(28,114		)	18,871
OTHER INCOME (EXPENSE):
Interest income and other income (expense), net	2,360			(1,421		)	3,258			(1,938		)
Interest expense	(5,684		)	(3,231		)	(13,868		)	(8,566		)
INCOME (LOSS) BEFORE INCOME TAX EXPENSE	(13,417		)	(6,902		)	(38,724		)	8,367
INCOME TAX EXPENSE (BENEFIT)	(8,357		)	(3,290		)	(18,884		)	4,435
NET INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS	(5,060		)	(3,612		)	(19,840		)	3,932
Loss (income) attributable to non-controlling interests, net of tax	(42		)	(3		)	(152		)	63
NET INCOME (LOSS) ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC.	$	(5,102	)	$	(3,615	)	$	(19,992	)	$	3,995
EARNINGS (LOSS) PER SHARE:
Basic	$	(0.09	)	$	(0.07	)	$	(0.36	)	$	0.07
Diluted	$	(0.09	)	$	(0.07	)	$	(0.36	)	$	0.07
Weighted average shares outstanding—basic	55,668			54,467			55,851			53,941
Weighted average shares outstanding—diluted	55,668			54,467			55,851			55,994

See accompanying notes to condensed consolidated financial statements

3

BLACKHAWK NETWORK HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)

	12 weeks ended						36 weeks ended
	September 10, 2016			September 12, 2015			September 10, 2016			September 12, 2015
NET INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS	$	(5,060	)	$	(3,612	)	$	(19,840	)	$	3,932
Other comprehensive income (loss):
Currency translation adjustments	(2,504		)	(7,104		)	5,547			(12,386		)
COMPREHENSIVE INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS	(7,564		)	(10,716		)	(14,293		)	(8,454		)
Comprehensive loss (income) attributable to non-controlling interests, net of tax	129			361			98			384
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC.	$	(7,435	)	$	(10,355	)	$	(14,195	)	$	(8,070	)

See accompanying notes to condensed consolidated financial statements

4

BLACKHAWK NETWORK HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	36 weeks ended
	September 10, 2016			September 12, 2015
OPERATING ACTIVITIES:
Net income (loss) before allocation to non-controlling interests	$	(19,840	)	$	3,932
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization of property, equipment and technology	33,096			27,765
Amortization of intangibles	38,988			21,634
Amortization of deferred program and contract costs	18,805			20,032
Employee stock-based compensation expense	24,865			19,856
Change in fair value of contingent consideration	2,100			(7,567		)
Deferred income taxes	—			13,371
Other	5,780			5,496
Changes in operating assets and liabilities:
Settlement receivables	359,398			274,941
Settlement payables	(1,091,151		)	(906,181		)
Accounts receivable, current and long-term	44,585			(3,573		)
Other current assets	3,940			(20,562		)
Other assets	(9,299		)	(9,996		)
Consumer and customer deposits	13,963			(31,140		)
Accounts payable and accrued operating expenses	(28,775		)	(9,695		)
Deferred revenue	2,703			(8,105		)
Other current and long-term liabilities	(24,912		)	4,385
Income taxes, net	(13,883		)	(15,492		)
Net cash used in operating activities	(639,637		)	(620,899		)
INVESTING ACTIVITIES:
Expenditures for property, equipment and technology	(33,522		)	(37,310		)
Business acquisitions, net of cash acquired	(144,284		)	(78,394		)
Investment in unconsolidated entities	(3,901		)	—
Change in restricted cash	689			(38,043		)
Other	4,000			(561		)
Net cash used in investing activities	(177,018		)	(154,308		)
See accompanying notes to condensed consolidated financial statements

5

BLACKHAWK NETWORK HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (In thousands) (Unaudited)
	36 weeks ended
	September 10, 2016			September 12, 2015
FINANCING ACTIVITIES:
Payments for acquisition liability	—			(1,811		)
Repayment of debt assumed in business acquisitions	(8,964		)	—
Proceeds from issuance of note payable	250,000			—
Repayment of note payable	(463,750		)	(11,250		)
Payments of financing costs	(15,926		)	(724		)
Borrowings under revolving bank line of credit	1,959,749			1,536,083
Repayments on revolving bank line of credit	(1,959,749		)	(1,436,083		)
Proceeds from convertible debt	500,000			—
Payments for bond hedges	(75,750		)	—
Proceeds from warrants	47,000			—
Repayment on notes payable to Safeway	(890		)	(6,320		)
Proceeds from issuance of common stock from exercise of employee stock options and employee stock purchase plans	4,491			8,055
Other stock-based compensation related	(2,135		)	(675		)
Repurchase of common stock	(34,845		)	—
Other	(155		)	(1,494		)
Net cash provided by financing activities	199,076			85,781
Effect of exchange rate changes on cash and cash equivalents	3,352			(7,467		)
Decrease in cash and cash equivalents	(614,227		)	(696,893		)
Cash and cash equivalents—beginning of period	914,576			911,615
Cash and cash equivalents—end of period	$	300,349		$	214,722
NONCASH FINANCING AND INVESTING ACTIVITIES
Net deferred tax assets recognized for tax basis step-up with offset to Additional paid-in capital	$	—		$	366,306
Note payable to Safeway contributed to Additional paid-in capital	$	—		$	8,229
Financing of business acquisition with contingent consideration	$	20,100		$	—
Intangible assets recognized for warrants issued	$	—		$	3,147

See accompanying notes to condensed consolidated financial statements

6

BLACKHAWK NETWORK HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. The Company and Significant Accounting Policies

The Company

Blackhawk Network Holdings, Inc., together with its subsidiaries (we, us, our, the Company), is a leading prepaid payment network utilizing proprietary technology to offer a broad range of prepaid gift, telecom and debit cards, in physical and electronic forms, as well as related prepaid products and payment services in the United States and 23 other countries. Our product offerings include single-use gift cards; loyalty, incentive and reward products and services; prepaid telecom products and prepaid financial services products, including general purpose reloadable (GPR) cards, and our reload network (collectively, prepaid products). We offer gift cards from leading consumer brands (known as closed loop) as well as branded gift and incentive cards from leading payment network card associations such as American Express, Discover, MasterCard and Visa (known as open loop) and prepaid telecom products offered by prepaid wireless telecom carriers. We also distribute GPR cards and operate a proprietary reload network named Reloadit, which allows consumers to reload funds onto their previously purchased GPR cards. We distribute these prepaid products across multiple high-traffic channels such as grocery, convenience, specialty and online retailers (referred to as retail distribution partners) in the Americas, Europe, Africa, Australia and Asia and provide these prepaid products and related services to business clients for their loyalty, incentive and reward programs.

Basis of Presentation

The accompanying condensed consolidated financial statements of Blackhawk Network Holdings, Inc. are unaudited. We have prepared our unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. We have condensed or omitted certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP pursuant to such rules and regulations. Accordingly, our interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K, filed with the SEC on March 2, 2016 (the Annual Report). We have prepared our condensed consolidated financial statements on the same basis as our annual audited consolidated financial statements and, in the opinion of management, have reflected all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position and results of operations for the interim periods presented. Our results for the interim periods are not necessarily reflective of the results to be expected for the year ending December 31, 2016 or for any other interim period or other future year. Our condensed consolidated balance sheet as of January 2, 2016, included herein was derived from our audited consolidated financial statements as of that date but does not include all disclosures required by GAAP for annual financial statements, including notes to the financial statements.

Seasonality

A significant portion of gift card sales occurs in late December of each year during the holiday selling season. As a result, we earn a significant portion of revenues, net income and cash inflows during the fourth fiscal quarter of each year and remit the majority of the cash, less commissions, to our content providers in January of the following year. The timing of our fiscal year-end, December holiday sales and the related January cash settlement with content providers significantly increases our Cash and cash equivalents, Settlement receivables and Settlement payables balances at the end of each fiscal year relative to normal daily balances. The cash settlement with our content providers in January accounts for the majority of the use of cash from operating activities in our condensed consolidated statements of cash flows during our first three fiscal quarters. Additionally, our operating income may fluctuate significantly during our first three fiscal quarters due to lower revenues and timing of certain expenses during such fiscal periods. As a result, quarterly financial results are not necessarily reflective of the results to be expected for the year, any other interim period or other future year.

Recently Issued or Adopted Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides additional guidance on the presentation and classification of certain items in the statement of cash flows. Early adoption is permitted and the standard shall be applied retrospectively. We early adopted ASU 2016-15 during our third quarter of 2016. Adoption did not result in significant changes to our existing accounting policies or presentation.

7

In April and May 2016, the FASB issued ASU 2016-10, and ASU 2016-12, Revenue from Contracts with Customers (Topic 606), which provides additional guidance, narrow-scope improvements and practical expedients to the new revenue standard (Topic 606) that will be applicable for reporting periods beginning after December 15, 2017. Early adoption is not permitted. Management is evaluating the impact of this guidance on our financial statements.

In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in DebtInstruments, which clarifies the requirements for assessing certain contingent put or call options in debt instruments. Early adoption is permitted and the standard shall be applied using a modified retrospective basis. We early adopted ASU 2016-06 during our third quarter of 2016 in conjunction with our issuance of the Convertible Senior Notes (see Note 3—Financing). Adoption did not result in significant changes to our existing accounting policies.

In March 2016, the FASB issued ASU 2016-04 Liabilities—Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Cards, effective for fiscal years beginning after December 15, 2017. ASU 2016-04 defines liabilities related to the sale of certain prepaid stored-value cards as financial liabilities and provides guidance for the derecognition of liabilities and recognition of revenue related to the portion of the stored value that ultimately is not redeemed by customers (breakage). Early adoption is permitted and the standard shall be applied using either a modified retrospective basis or a retrospective basis. We early adopted ASU 2016-04 during our first quarter of 2016 on a modified retrospective basis because we believe that derecognition of these liabilities more accurately reflects the economics of such transactions. Accordingly, we recognized a cumulative adjustment benefit of $6.1 million, net of income taxes, to beginning Retained earnings as of January 3, 2016.

In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718). The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. We early adopted ASU 2016-09 during our first quarter of 2016 on a modified retrospective basis for the income statement impact of forfeitures and income taxes and have retrospectively applied ASU 2016-09 to our condensed consolidated statements of cash flows for the impact of excess tax benefits. Accordingly, we recognized a cumulative adjustment charge of $0.3 million for the adoption of the impact of forfeitures, net of income taxes, and a cumulative adjustment benefit of $10.1 million for the excess tax benefit for the exercise of warrants from prior fiscal years to beginning Retained earnings as of January 3, 2016.

Significant Accounting Policies

There have been no material changes to our significant accounting policies, as compared to the significant accounting policies described in the audited consolidated financial statements and related notes included in the Annual Report. As a result of early adopting ASU 2016-04 and ASU 2016-09 (discussed above), we provide below our policies with respect to breakage and stock-based compensation.

Breakage Revenue

We refer to the portion of the dollar value of prepaid-stored value cards that consumers do not ultimately redeem as breakage. Where we expect to be entitled to a breakage amount, we recognize revenue using estimated breakage rates ratably over the estimated card life, provided that a significant reversal of the amount of breakage revenue recognized is not probable and record adjustments to such estimates when redemption is remote or we are legally defeased of the obligation, if applicable. We estimate breakage rates based on historical redemption patterns, market-specific trends, escheatment rules and existing economic conditions for each program. In card programs where we do not expect to be entitled to a breakage amount, we recognize breakage revenue when we consider redemption remote or we are legally defeased of the obligation, if applicable.

Stock-based Compensation

As a result of our adoption of ASU 2016-09, we recognize the impact of forfeitures when they occur with no adjustment for estimated forfeitures and recognize excess tax benefits as a reduction of income tax expense regardless of whether the benefit reduces income taxes payable. Additionally, we recognize the cash flow impact of such excess tax benefits in operating activities in our condensed consolidated statements of cash flows.

Reclassification

In our condensed consolidated statements of income (loss), we have reclassified Marketing revenue to a separate line item, previously reported in Program, interchange, marketing and other fees and have renamed such line as Program and other fees.

8

As a result of our retrospective adoption ASU 2015-17 in the fourth quarter of 2015 to classify all deferred income taxes as long-term assets or liabilities, we have retrospectively applied the guidance to our deferred income taxes as of September 12, 2015.

2. Business Acquisitions

2016 Acquisitions

Omni Prepaid

On January 5, 2016, we acquired Omni Prepaid, LLC and its subsidiaries GiftCards.com, LLC, which sells digital and physical prepaid gift card solutions to consumers through a high-trafficked gift card U.S. website, and OmniCard, LLC, which sells customized prepaid incentive and reward solutions for business clients (collectively, GiftCards). The new sites and customers will expand our e-commerce businesses.

The purchase consideration totaled $103.9 million in cash which we funded using a combination of cash on hand and borrowings under our Credit Agreement. The following table presents our initial estimates of the purchase price allocation, and we may make adjustments to these amounts through the one year measurement period as we finalize information regarding our forecasts, valuation assumptions, income taxes and contingencies (in thousands):

Cash	$	3,985
Consumer and customer deposits	(5,429		)
Accounts payable and accrued operating expenses	(9,860		)
Other tangible assets, net	893
Debt	(5,807		)
Identifiable technology and intangible assets	52,460
Goodwill	67,706
Total purchase consideration	$	103,948

At closing, we repaid the assumed debt, which we present in financing activities in our condensed consolidated statements of cash flows, and paid $8.1 million of GiftCards' transaction expenses included above within accounts payable and accrued operating expenses, which we present in operating activities in our condensed consolidated statements of cash flows.

Goodwill primarily represents the value of cash flows from future customers. We expect to deduct goodwill and the identifiable technology and intangible assets for tax purposes.

The following table presents the components of the identifiable technology and intangible assets and the estimated useful lives (in thousands):

	Fair Value		Useful Life
Customer relationships	$	27,570	10 years
Backlog	10,780		3 years
Domain name	10,520		10 years
Technology	3,590		5 years
Total identifiable technology and intangible assets	$	52,460

Customer relationships represent the estimated fair value of the underlying relationships and agreements with GiftCards' business clients and consumers. Backlog represents the estimated fair value resulting from cards issued before the acquisition date, resulting from revenues, including interchange and account service fees. Domain name represents the estimated fair value of the giftcards.com domain name. Technology represents internal-use software used for the order, fulfillment and management of customer orders.

We valued customer relationships, backlog and domain name using the income approach and the technology using the cost approach. Significant assumptions include forecasts of revenues, costs of revenue, development costs and sales, general and administrative expenses and estimated attrition rates for business clients and consumers. We discounted the cash flows at various rates from 6.0% to 11.0%, reflecting the different risk profiles of the assets.

Acquisition-related expenses totaled $0.4 million, which we report in Transition and acquisition expense.

9

Other 2016 Acquisitions

During the first quarter of 2016, we also acquired NimbleCommerce, a digital commerce platform and network for promotions. NimbleCommerce also allows merchants and brands to manage their own prepaid offer and gift card programs, or resell through a network of retailer and publisher branded sites. During the second quarter of 2016, we acquired substantially all of the net assets of Extrameasures, a prepaid consumer promotions and incentives company. Through its customized rebate programs, Extrameasures offers Visa prepaid cards and private label merchant-specific reward and gift cards with a proprietary platform to help businesses drive consumer acquisition, engagement and loyalty.

The purchase consideration for NimbleCommerce and Extrameasures totaled $78.6 million, consisting of $58.5 million in cash and $20.1 million in the estimated fair value of contingent consideration. Contingent consideration resulting from our acquisition of Extrameasures consists of three cash payments of up to $15 million each, based on the financial performance of Extrameasures for each of the three annual post-acquisition periods. Approximately 10% of the earnout payments will be allocated to employees. Accordingly, we exclude such amounts from the estimated fair value of the contingent consideration and accrue estimated amounts due over the service period. We estimated the fair value of contingent consideration using the income approach at a discount rate of 17%.

The following table presents our initial estimates of the purchase price allocation, and we may make adjustments to these amounts through the one year measurement period as we finalize information regarding our forecasts, valuation assumptions, income taxes and contingencies (in thousands):

Cash	$	14,191
Settlement receivables	4,884
Settlement payables	(3,272		)
Consumer and customer deposits	(18,009		)
Other tangible liabilities, net	(1,155		)
Debt	(3,157		)
Deferred income taxes	2,066
Identifiable technology and intangible assets	45,540
Goodwill	37,525
Total purchase consideration	$	78,613

At closing, we repaid the assumed debt, which we present in financing activities in our condensed consolidated statements of cash flows, and paid $1.0 million of transaction expenses, which we present in operating activities in our condensed consolidated statements of cash flows.

Goodwill primarily represents the value of cash flows from future customers. We expect to deduct approximately $1.4 million of the total $10.4 million goodwill from our acquisition of NimbleCommerce for tax purposes and may currently deduct up to $2.3 million of the total $27.2 million goodwill from our acquisition of Extrameasures for tax purposes. For Extrameasures, we will be able to deduct additional goodwill based on the actual payments made under the contingent earnout and settlement of contingent liabilities.

The following table presents the components of the identifiable technology and intangible assets and the estimated useful lives (in thousands):

	Fair Value		Useful Life
Customer relationships	$	39,230	10 years
Backlog	1,610		3 years
Technology	4,700		5 years
Total identifiable technology and intangible assets	$	45,540

We valued customer relationships, backlog and certain technology using the income approach and certain technology using the cost approach. Significant assumptions include forecasts of revenues, costs of revenue, development costs and sales, general and administrative expenses and estimated attrition rates for business clients. We discounted the cash flows at various rates from 9.0% to 16.0%, reflecting the different risk profiles of the assets.

Acquisition-related expenses totaled $0.9 million, which we include in Transition and acquisition expense.

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Pro Forma Financial Information

The following pro forma financial information summarizes the combined results of operations of us, GiftCards and Extrameasures as though we had been combined as of the beginning of fiscal 2015 (in thousands, except per share amounts):

	12 weeks ended						36 weeks ended
	September 10, 2016			September 12, 2015			September 10, 2016			September 12, 2015
Total revenues	$	364,129		$	364,400		$	1,127,178		$	1,068,882
Net income (loss) attributable to Blackhawk Network Holdings, Inc.	(3,626		)	(3,959		)	(14,469		)	(1,124		)
Pro forma EPS—Basic	$	(0.07	)	$	(0.07	)	$	(0.26	)	$	(0.02	)
Pro forma EPS—Diluted	$	(0.07	)	$	(0.07	)	$	(0.26	)	$	(0.02	)

The pro forma financial information includes adjustments to reclassify acquisition-related costs from 2016 to 2015, to amortize technology and intangible assets starting at the beginning of 2015, and to reflect the impact on revenue resulting from the step-down in basis of consumer and customer deposits from its book value to its fair value as of the beginning of 2015.

We have not presented separate results of operations since closing for GiftCards because its integration with our existing operations makes it impractical to do so. In addition, results of operations for Extrameasures and NimbleCommerce are immaterial, both individually and in the aggregate.

Subsequent Event

On October 6, 2016, we acquired the outstanding common stock of Grass Roots Group Holdings, Ltd. and its subsidiaries, a leading provider of employee and customer engagement solutions, for purchase consideration of £93.7 million, or $119.1 million based on the exchange rate on the acquisition date. The acquisition broadens the global capabilities of our incentives and engagement business. We are in the process of gathering the information to allocate the purchase price and accordingly are unable to provide initial allocation estimates nor provide pro forma financial information.

2015 Acquisitions

During the 36 weeks endedSeptember 10, 2016, we recorded a measurement period adjustment for Achievers, acquired in June 2015, which decreased deferred revenue by $3.6 million, intangible assets by $1.9 million, goodwill by $1.2 million and deferred income tax assets by $0.5 million. The measurement periods for Achievers and Didix are now closed.

3. Financing

Credit Agreement

On January 25, 2016, we exercised our option to draw down an incremental $100 million term loan under our Credit Agreement.

On July 27, 2016, in conjunction with the issuance of the Convertible Senior Notes, as described below, we entered into an amendment and restatement to our Credit Agreement (the Restated Credit Agreement). We repaid all amounts outstanding under our revolving line of credit and $276 million of the $426 million outstanding under our term loan such that $150 million remained outstanding under our term loan. The Restated Credit Agreement provides for the extension of credit in an aggregate principal amount up to $700 million, consisting of revolving loans up to $400 million (the Revolving Credit Facility) and term loans up to $300 million (the Term Loan Facility). The term loan has $150 million outstanding with a delayed draw option for up to an additional $150 million. The Restated Credit Agreement also includes an ability to increase aggregate commitments by up to an incremental $300 million if certain criteria are met and lenders choose to participate. The Restated Credit Agreement extended the term of the Credit Agreement to July 2021 and made certain modifications to the financial and other covenants to add operating flexibility, including modification of the leverage covenant and removal of the net worth covenant and the dollar limitation on acquisitions.

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Convertible Senior Notes

On July 27, 2016, we issued $500 million aggregate principal amount of 1.50% Convertible Senior Notes due in January 2022 (the Notes), in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933 (the Securities Act). The Notes have not been registered under the Securities Act, or applicable state securities laws or blue sky laws, and may not be offered or sold in the United States absent registration under the Securities Act and applicable state securities laws or available exemptions from the registration requirements.

The Notes are senior unsecured obligations and rank equally in right of payment with all of our future senior unsecured indebtedness and are junior to our existing and future secured indebtedness. The Notes pay interest in cash semi-annually (January and July) at a rate of 1.50% per annum.

On or after September 15, 2021, until the second scheduled trading day immediately preceding the maturity date, the Notes may be converted at the option of the holders. Holders may convert the Notes at their option prior to September 15, 2021 only under the following circumstances:

1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2016 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

2) during the five business day period after any five consecutive trading day period (the measurement period) in which the “trading price” per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; or

3) upon the occurrence of specified corporate events, including if there is a fundamental change.

Upon conversion, we will pay or deliver cash, shares of our own common stock or a combination, at our election.

The conversion rate is initially 20.0673 shares of common stock per $1,000 principal amount of the Notes (equivalent to an initial conversion price of approximately $49.83 per share of common stock), subject to certain adjustments.

We may not redeem the Notes prior to the maturity date. At an event of default, holders may, upon satisfaction of certain conditions, accelerate the principal amount of the Notes plus accrued and unpaid interest. If we undergo a fundamental change, a holder may require us to repurchase for cash all or any portion of its Notes at a price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest.

We separately account for the liability and equity components of the Notes. The initial debt component of the Notes was valued at $436.6 million based on the contractual cash flows discounted at an appropriate comparable market non-convertible debt borrowing rate at the date of issuance of 4.1%, with the equity component representing the residual amount of the proceeds which was recorded as a debt discount. We allocated the issuance costs pro-rata based on the relative initial carrying amounts of the debt and equity components, including the Note Hedges and Warrants transactions described below. As a result, $1.8 million of the issuance costs were allocated to the equity component of the Notes and $12.3 million of issuance costs were allocated to the liability component of the Notes and accounted for as a debt discount. We amortize the issuance costs allocated to the liability component as additional interest expense over the term of the Notes using the effective interest method. The effective interest rate of the Notes is 4.65% per annum (1.50% coupon rate plus 3.15% of non-cash accretion expense).

Convertible Note Hedges and Warrants

Concurrent with the pricing of the Notes, we purchased call options for our own common stock to hedge the Notes (the Note Hedges) and sold call options for our own common stock (the Warrants). We structured the Note Hedges to reduce potential dilution to our common stock upon any conversion of Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be. However, the Warrants could separately have a dilutive effect to the extent that the market value per share of our common stock exceeds the strike price of the Warrants.

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The Note Hedges—On July 21 and 22, 2016, we purchased Note Hedges from certain counterparties for an aggregate price of approximately $75.8 million. The Note Hedges are exercisable upon conversion of the Notes for cash, a number of shares of our common stock or a combination of cash and shares of our common stock generally based on the amount by which the market price per share of our common stock, as measured under the terms of the Note Hedges during the relevant valuation period, is greater than the strike price of the Note Hedges. The strike price of the Note Hedges initially corresponds to the conversion price of the Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the Notes, subject to certain exceptions. Under the terms of the Note Hedges, we will receive cash, shares or a combination of cash and shares that offsets share dilution caused by conversion of the Notes.

Warrants—On July 21 and 22, 2016, we sold call options to the same counterparties for approximately $47.0 million, which give the counterparties the right to buy from us up to approximately 10.0 million shares of our common stock, subject to adjustments, at an exercise price of $61.20 per share, subject to adjustments, over a series of days commencing on April 18, 2022 and ending August 9, 2022. Upon each exercise of the Warrants, we will be obligated to deliver shares of our common stock having a value equal to the difference between the market price on the exercise date and the strike price of the Warrants.

The Note Hedges and Warrants are classified in stockholders’ equity on our condensed consolidated balance sheets. We also recognized a $5.2 million deferred tax asset with an offset to Additional paid-in capital for excess tax interest deductions relating to the Notes and Note Hedges.

Maturities of Long-Term Debt

As a result of the Amendment and the Notes, the following table presents the amounts due by year of maturity for our term loan and the Notes (in thousands):

	As of July 27, 2016
2017	$	10,000
2018	7,500
2019	7,500
2020	15,000
2021	110,000
2022	500,000
Total long-term debt	$	650,000

Share Repurchase

In conjunction with the issuance of the Notes, on July 27, 2016, we repurchased approximately 1.0 million shares of our common stock for $34.8 million.

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4. Fair Value Measurements

We measure certain assets and liabilities at fair value on a recurring basis. The table below summarizes the fair values of these assets and liabilities as of September 10, 2016, January 2, 2016 and September 12, 2015 (in thousands):

	September 10, 2016
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents
Money market mutual funds	$	5,112	$	—	$	—	$	5,112
Liabilities
Contingent consideration	$	—	$	—	$	22,200	$	22,200

	January 2, 2016
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents
Money market mutual funds	$	370,070	$	—	$	—	$	370,070
Liabilities
Contingent consideration	$	—	$	—	$	—	$	—

	September 12, 2015
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents
Money market mutual funds	$	5,070	$	—	$	—	$	5,070
Liabilities
Contingent consideration	$	—	$	—	$	—	$	—

Level 1— Unadjusted quoted prices in active markets for identical assets or liabilities. Level 1 investments include money market mutual funds.

Level 2— Inputs other than quoted prices included in Level 1 that are either directly or indirectly observable. Level 2 investments include commercial paper.

In the 36 weeks endedSeptember 10, 2016, there were no transfers between Level 1 and Level 2.

Level 3— Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the inputs that market participants would use in pricing. Level 3 includes the estimated fair value of our contingent consideration liabilities.

Contingent Consideration—We estimate the fair value of the contingent consideration based on our estimates of the probability of achieving the relevant targets and discount rates reflecting the risk of meeting these targets.

Term loan —As of September 10, 2016, using Level 2 inputs, we estimate the fair value of our term loan to be approximately $150.0 million.

Convertible notes payable—As of September 10, 2016, using Level 2 inputs, we estimate the fair value of our convertible notes payable to be approximately $490.6 million.

14

The changes in fair value of contingent consideration for the 36 weeks endedSeptember 10, 2016 and September 12, 2015 are as follows (in thousands):

	36 weeks ended
	September 10, 2016		September 12, 2015
Contingent Consideration
Balance, beginning of period	$	—	$	7,567
Issuance of contingent consideration	20,100		—
Change in fair value of contingent consideration	2,100		(7,567		)
Balance, end of period	$	22,200	$	—

We present the change in the fair value of contingent consideration in Change in fair value of contingent consideration and as a non-cash adjustment to net income in our condensed consolidated statements of cash flows. The decrease in fair value of contingent consideration related to our acquisition of CardLab for the 36 weeks endedSeptember 12, 2015 resulted from the projected failure of financial targets to be met relating to the launch of incentive programs during the contingent earn-out measurement period. Such measurement period concluded during the 36 weeks endedSeptember 10, 2016 with no amounts due. The issuance and increase in fair value of contingent consideration during the 36 weeks endedSeptember 10, 2016 related to our acquisition of Extrameasures (see Note 2—Business Acquisitions). The increase in fair value reflects the passage of time and increases in our projections of the payment of portions of the earn-out. As of September 10, 2016, we estimated the fair value of the remaining contingent consideration based on our estimates of the amounts payable for and probability of achieving the relevant targets and a discount rate of 17%. A significant increase (decrease) in our estimates of the amounts payable for and probability of achieving the relevant targets or a significant decrease (increase) in the discount rate could materially increase (decrease) the estimated fair value of contingent consideration.

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5. Consolidated Financial Statement Details

The following tables represent the components of Other current assets, Other assets, Other current liabilities and Other liabilities as of September 10, 2016, January 2, 2016 and September 12, 2015 consisted of the following (in thousands):

	September 10, 2016		January 2, 2016		September 12, 2015
Other current assets:
Inventory	$	35,634	$	36,528	$	47,272
Deferred expenses	12,099		18,182		10,854
Income tax receivables	38,427		14,831		20,632
Other	37,759		33,778		29,192
Total other current assets	$	123,919	$	103,319	$	107,950
Other assets:
Deferred program and contract costs	$	44,388	$	50,717	$	52,428
Other receivables	1,390		2,281		4,734
Income taxes receivable	—		6,155		6,368
Deferred financing costs	2,871		2,100		2,002
Other	20,390		20,511		12,762
Total other assets	$	69,039	$	81,764	$	78,294
Other current liabilities:
Payroll and related liabilities	$	25,425	$	34,530	$	23,103
Income taxes payable	3,158		3,216		2,122
Acquisition liability	11,250		—		607
Other payables and accrued liabilities	8,797		19,596		17,488
Total other current liabilities	$	48,630	$	57,342	$	43,320
Other liabilities:
Acquisition liability	$	10,950	$	—	$	—
Payable to content provider	—		—		825
Income taxes payable	6,213		4,249		2,418
Deferred income and other liabilities	8,266		10,451		1,624
Total other liabilities	$	25,429	$	14,700	$	4,867

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6. Goodwill

We have assigned goodwill to our US Retail, International Retail and Incentives & Rewards segments. To date, we have not recorded any impairment charges against or disposed of any reporting units with goodwill. During the first quarter of 2016, as a result of changes in reporting financial results to our Chief Operating Decision Maker, we concluded that we should split our historical e-Commerce operating segment, which we had reported in Incentives & Rewards reportable segment, into two operating segments: e-Commerce Retail, which we now report in US Retail reportable segment, and e-Commerce Incentives, which we continue to report in Incentives & Rewards reportable segment. Accordingly, we allocated the goodwill from the historical e-Commerce segment between these two segments based on their relative fair values. We allocated the goodwill from our acquisition of GiftCards between these two segments. A summary of changes in goodwill during the 36 weeks endedSeptember 10, 2016 is as follows (in thousands):

	September 10, 2016
	US Retail		International Retail		Incentives & Rewards			Total
Balance, beginning of period	$	42,729	$	49,156	$	310,604		$	402,489
Re-allocation of e-Commerce goodwill	2,671		—		(2,671		)	—
Acquisition of GiftCards	34,427		—		33,279			67,706
Acquisition of NimbleCommerce	10,365		—		—			10,365
Acquisition of Extrameasures	—		—		27,160			27,160
Measurement period adjustment	—		—		(1,234		)	(1,234		)
Foreign currency translation adjustments	—		1,639		482			2,121
Balance, end of period	$	90,192	$	50,795	$	367,620		$	508,607

7. Stockholders’ Equity and Stock Based Compensation

Stockholders’ Equity

During the 36 weeks endedSeptember 10, 2016, the issuance of our Convertible Senior Notes, the purchase of the Note Hedges, the sale of the Warrants (see Note 3—Financing) and our adoption of ASU 2016-04 and 2016-09 on a modified retrospective basis had a significant impact on Additional paid-in capital and Retained earnings. Accordingly, we present in the tables below a reconciliation of such balances from January 2, 2016 to September 10, 2016.

The following table presents the changes within Additional paid-in capital during the 36 weeks endedSeptember 10, 2016 (in thousands except average price per share):

BALANCE—January 2, 2016	$	561,939
Cumulative adjustment upon modified retrospective adoption of ASU 2016-09 (see Note 1—The Company and Significant Accounting Policies)	650
Employee-related stock-based activity	28,940
Equity component of convertible notes issuance (see Note 3—Financing)	63,434
Equity component of convertible notes issuance costs (see Note 3—Financing)	(1,792		)
Purchase of convertible notes hedges (see Note 3—Financing)	(75,750		)
Proceeds from sale of warrants (see Note 3—Financing)	47,000
Deferred tax assets recognized for convertible notes (see Note 3—Financing)	5,161
Repurchase of common stock (996 shares at an average price of $34.98 per share)	(34,843		)
BALANCE— September 10, 2016	$	594,739

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The following table presents the changes within Retained earnings during the 36 weeks endedSeptember 10, 2016 (in thousands):

BALANCE—January 2, 2016	$	207,973
Cumulative adjustment upon modified retrospective adoption of ASU 2016-04 and 2016-09 (see Note 1—The Company and Significant Accounting Policies)	15,854
Net loss	(19,992		)
Dividends paid	(44		)
BALANCE— September 10, 2016	$	203,791

Stock Based Compensation

During the 36 weeks endedSeptember 10, 2016, our Board of Directors granted 1,129,019 restricted stock units, 172,300 performance stock units and 584,350 stock options at a weighted-average exercise price of $37.90 per share.

The following table presents total stock-based compensation expense according to the income statement line in our condensed consolidated statements of income (loss) for the 12 and 36 weeks endedSeptember 10, 2016 and September 12, 2015 (in thousands):

	12 weeks ended				36 weeks ended
	September 10, 2016		September 12, 2015		September 10, 2016		September 12, 2015
Processing and services	$	1,364	$	1,530	$	4,259	$	4,366
Sales and marketing	2,759		2,038		8,600		5,523
Cost of products sold	31		13		89		25
General and administrative	4,139		3,536		11,917		9,942
Total stock-based compensation expense	$	8,293	$	7,117	$	24,865	$	19,856

8. Income Taxes

Our effective tax rates were 62.3% and 47.7% for the 12 weeks endedSeptember 10, 2016 and September 12, 2015, respectively, and 48.8% and 53.0% for the 36 weeks endedSeptember 10, 2016 and September 12, 2015, respectively. The effective rate for the 12 weeks ended September 10, 2016 was higher due to a discrete tax benefit for a tax return to provision true-up, resulting in an increase to the effective tax rate due to pre-tax loss, and permanent tax adjustments from deemed foreign income and nondeductible acquisition expenses. The effective rate for the 36 weeks ended September 10, 2016 was lower due to a net reduction in 2015 in the value of our deferred tax assets from changes in certain state tax apportionment laws (which resulted in an increase to the effective tax rate for the 36 weeks ended September 12, 2015), partially offset by a discrete tax benefit for a tax return to provision true-up and excess tax benefits for employee stock based compensation, both increasing the effective tax rate due to pre-tax loss.

9. Commitments and Contingencies

Contingencies

From time to time, we enter into contracts containing provisions that require us to indemnify various parties against certain potential claims from third parties. Under contracts with certain issuing banks, we are responsible to the banks for any unrecovered overdrafts on cardholders’ accounts. Under contracts with certain content providers, retail distribution partners and issuing banks, we are responsible for potential losses resulting from certain claims from third parties. Because the indemnity amounts associated with these agreements are not explicitly stated, the maximum amount of the obligation cannot be reasonably estimated. Historically, we have paid immaterial amounts pursuant to these indemnification provisions.

We are subject to audits related to various indirect taxes, including, but not limited to, sales and use taxes, value-added tax, and goods and services tax, in various foreign and state jurisdictions. We evaluate our exposure related to these audits and potential audits and do not believe that it is probable that any audit would hold us liable for any material amounts due.

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Legal Matters

There are various claims and lawsuits arising in the normal course of business pending against us, including the matters described below, some of which seek damages and other relief which, if granted, may require future cash expenditures. Management does not believe that it is probable that the resolution of these matters would result in any liability that would materially affect our results of operations or financial condition.

On March 30, 2015, Greg Haney in his capacity as Seller Representative for CardLab, Inc. filed a lawsuit against us in the Delaware Chancery Court (CardLab, Inc. v. Blackhawk Network Holdings, Inc., Case No. 10851). The complaint generally alleges that we failed to disclose material information relating to a potential earn-out payment in connection with our acquisition of CardLab, Inc. in 2014. We believe that the suit is without merit, and are vigorously defending ourselves against these claims. On June 8, 2015, we filed a motion to dismiss the complaint. On June 22, 2015, the plaintiff filed an amended complaint. On July 7, 2015, we filed a motion to dismiss the case in its entirety. On February 26, 2016, the Court granted the motion to dismiss in part, dismissing two claims of the amended complaint. On March 25, 2016 we filed our answer denying the remaining claims and a counterclaim for attorneys’ fees pursuant to the merger agreement between the parties. On June 22, 2016, the plaintiff filed a motion to dismiss our counterclaim for indemnification. On July 22, 2016, we filed an amended counterclaim in response. The litigation is in the early stage of discovery. We believe the likelihood of loss is remote.

In addition, we transact business in non-U.S. markets and may, from time to time, be subject to disputes and tax audits by foreign tax authorities related to indirect taxes typically on commissions or fees we receive from non-resident content providers. As a result of an indemnification that we received, our exposure has decreased from $12 million as reported in our Annual Report to approximately $5 million, primarily in a single jurisdiction. In that jurisdiction, we have lost an appeal over a dispute related to a specific period. Even if we were to be assessed for other periods, which we currently estimate could be up to approximately $5 million, we believe it is more likely than not that we will prevail upon appeal.

10. Segment Reporting

Our three reportable segments are US Retail, International Retail and Incentives & Rewards. During the first quarter of 2016, as a result of changes in reporting financial results to our Chief Operating Decision Maker (CODM), we concluded that we should split our historical e-Commerce segment, which we had reported in Incentives & Rewards, into two segments: e-Commerce Retail, which we report in US Retail, and e-Commerce Incentives, which we report in Incentives & Rewards. We have not retroactively adjusted 2015 segment information as the results of the e-Commerce Retail segment were immaterial.

We do not assess performance based on assets and do not provide information on the assets of our reportable segments to our CODM. The key metrics used by our CODM to assess segment performance include Operating revenues, Operating revenues, net of Partner distribution expense and segment profit.

We exclude from the determination of segment profit and report in Corporate and Unallocated: i) certain US operations, account management and marketing personnel who primarily support our US Retail segment (as these costs are not included in segment profit reviewed by the CODM), ii) the substantial majority of our technology personnel and related depreciation and amortization of technology and related hardware which support our US Retail and International Retail segments, iii) US accounting, finance, legal, human resources and other administrative functions which may support all segments and iv) noncash charges including amortization of acquisition intangibles, stock-based compensation and change in fair value of contingent consideration, as we do not include these costs in segment profit reviewed by our CODM. Segment profit for our International Retail segment includes all sales and marketing personnel and the substantial majority of operations, legal, accounting, finance and other administrative personnel in such international regions, and segment profit for our Incentives & Rewards segment includes all sales, marketing, technology, operations, legal, certain accounting, finance and other administrative personnel supporting that segment, as well as substantially all depreciation and amortization specifically related to that segment.

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The following tables present the key metrics used by our CODM for the evaluation of segment performance, including certain significant noncash charges (consisting of certain depreciation and amortization of property, equipment and technology and distribution partner stock-based compensation expense) which have been deducted from the segment profit amounts shown below, and reconciliations of these amounts to our consolidated financial statements (in thousands):

	12 weeks ended
	September 10, 2016
	US Retail		International Retail		Incentives & Rewards		Corporate and Unallocated			Consolidated
Total operating revenues	$	197,081	$	100,069	$	64,410	$	—		$	361,560
Partner distribution expense	103,601		69,841		4,921		—			178,363
Operating revenues, net of Partner distribution expense	93,480		30,228		59,489		—			183,197
Other operating expenses	58,192		25,158		50,779		59,161			193,290
Segment profit (loss) / Operating income (loss)	$	35,288	$	5,070	$	8,710	$	(59,161	)	(10,093		)
Other income (expense)										(3,324		)
Loss before income tax expense										$	(13,417	)
Non-cash charges	$	1,570	$	772	$	7,562	26,715

	12 weeks ended
	September 12, 2015
	US Retail		International Retail		Incentives & Rewards		Corporate and Unallocated			Consolidated
Total operating revenues	$	214,941	$	83,671	$	54,053	$	—		$	352,665
Partner distribution expense	101,890		56,972		2,990		—			161,852
Operating revenues, net of Partner distribution expense	113,051		26,699		51,063		—			190,813
Other operating expenses	69,877		22,751		46,674		53,761			193,063
Segment profit (loss) / Operating income (loss)	$	43,174	$	3,948	$	4,389	$	(53,761	)	(2,250		)
Other income (expense)										(4,652		)
Income before income tax expense										$	(6,902	)
Non-cash charges	$	1,270	$	431	$	6,233	22,934

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	36 weeks ended
	September 10, 2016
	US Retail		International Retail		Incentives & Rewards		Corporate and Unallocated			Consolidated
Total operating revenues	$	652,359	$	279,311	$	187,558	$	—		$	1,119,228
Partner distribution expense	330,283		198,703		12,763		—			541,749
Operating revenues, net of Partner distribution expense	322,076		80,608		174,795		—			577,479
Other operating expenses	202,384		69,134		154,796		179,279			605,593
Segment profit (loss) / Operating income (loss)	$	119,692	$	11,474	$	19,999	$	(179,279	)	(28,114		)
Other income (expense)										(10,610		)
Loss before income tax expense										$	(38,724	)
Non-cash charges	$	4,976	$	3,441	$	20,932	80,680

	36 weeks ended
	September 12, 2015
	US Retail		International Retail		Incentives & Rewards		Corporate and Unallocated			Consolidated
Total operating revenues	$	659,984	$	251,249	$	133,411	$	—		$	1,044,644
Partner distribution expense	313,628		169,578		10,987		—			494,193
Operating revenues, net of Partner distribution expense	346,356		81,671		122,424		—			550,451
Other operating expenses	209,856		73,665		110,462		137,597			531,580
Segment profit (loss) / Operating income (loss)	$	136,500	$	8,006	$	11,962	$	(137,597	)	18,871
Other income (expense)										(10,504		)
Income before income tax expense										$	8,367
Non-cash charges	$	3,741	$	860	$	11,488	51,423

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11. Earnings Per Share

The following table provides reconciliations of net income and shares used in calculating basic EPS to those used in calculating diluted EPS (in thousands, except per share amounts):

	12 weeks ended
	September 10, 2016						September 12, 2015
	Basic			Diluted			Basic			Diluted
Net income (loss) attributable to Blackhawk Network Holdings, Inc.	$	(5,102	)	$	(5,102	)	$	(3,615	)	$	(3,615	)
Distributed and undistributed earnings allocated to participating securities	—			—			—			—
Net income (loss) attributable to common stockholders	$	(5,102	)	$	(5,102	)	$	(3,615	)	$	(3,615	)
Weighted-average common shares outstanding	55,668			55,668			54,467			54,467
Common share equivalents				—						—
Weighted-average shares outstanding				55,668						54,467
Earnings (loss) per share	$	(0.09	)	$	(0.09	)	$	(0.07	)	$	(0.07	)

	36 weeks ended
	September 10, 2016						September 12, 2015
	Basic			Diluted			Basic			Diluted
Net income (loss) attributable to Blackhawk Network Holdings, Inc.	$	(19,992	)	$	(19,992	)	$	3,995		$	3,995
Distributed and undistributed earnings allocated to participating securities	(15		)	(15		)	(46		)	(46		)
Net income (loss) attributable to common stockholders	$	(20,007	)	$	(20,007	)	$	3,949		$	3,949
Weighted-average common shares outstanding	55,851			55,851			53,941			53,941
Common share equivalents				—						2,053
Weighted-average shares outstanding				55,851						55,994
Earnings (loss) per share	$	(0.36	)	$	(0.36	)	$	0.07		$	0.07

The weighted-average common shares outstanding for diluted EPS excluded approximately 4,416,000 and 5,020,000 potential common shares outstanding for the 12 weeks endedSeptember 10, 2016 and September 12, 2015 and 4,329,000 for the 36 weeks endedSeptember 10, 2016 due to the net loss attributable to common shareholders. Also excluded were approximately 1,850,000 and 576,000 potential common stock outstanding for the 12 weeks endedSeptember 10, 2016 and September 12, 2015, respectively, and 1,642,000 and 555,000 for the 36 weeks endedSeptember 10, 2016 and September 12, 2015, respectively, because the effect would have reduced weighted-average shares outstanding. Potential common stock outstanding results in fewer common share equivalents as a result of the treasury stock method.

22

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q (the Quarterly Report) and our Annual Report filed on Form 10-K filed with the Securities and Exchange Commission on March 2, 2016 (the Annual Report). This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. You should review the “Risk Factors” of our Annual Report and “Special Note regarding Forward-Looking Statements” section and the “Risk Factors” section of this Quarterly Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Special Note regarding Forward Looking Statements

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are indicated by words or phrases such as “guidance,” “believes,” “expects,” “intends,” “can,” “could,” “may,” “anticipates,” “estimates,” “plans,” “projects,” “seeks,” “should,” “targets,” “will,” “would” “continuing,” “ongoing,” and similar words or phrases and the negative of such words and phrases. Forward-looking statements are based on our current plans and expectations and involve risks and uncertainties which are, in many instances, beyond our control, and which could cause actual results to differ materially from those included in or contemplated or implied by the forward-looking statements. Such risks and uncertainties include the following:

•our ability to grow adjusted operating revenues as anticipated,

•our ability to grow at historic rates or at all,

•the consequences should we lose one or more of our top distribution partners or fail to attract new distribution partners to our network or if the financial performance of our distribution partners’ businesses decline,

•our reliance on our content providers, the demand for their products and our exclusivity arrangements with them,

•our reliance on relationships with card issuing banks,

•the consequences to our future growth if our distribution partners fail to actively and effectively promote our products and services,

•the ability of our distribution partners to implement EMV compliance within their expected timeline and lift the measures they may have taken prior to such compliance to limit or control their exposure to liability for fraud losses,

•the timing and manner that our distribution partners remove the limits or controls implemented by them during the period before they achieve EMV compliance,

• changes in consumer behavior away from our distribution partners or our products resulting from limits or controls implemented by our distribution partners during their transition to EMV compliance,

•our ability to successfully integrate our acquisitions,

•our ability to generate adequate taxable income to enable us to fully utilize our deferred income tax assets,

•changes in applicable tax law that preclude us from fully utilizing our deferred income tax assets,

•the requirement that we comply with applicable laws and regulations, including increasingly stringent money-laundering rules and regulations, and

• other risks and uncertainties described in our reports and filings with the Securities and Exchange Commission, including the risks and uncertainties set forth in Item 1A under the heading Risk Factors in our Annual Report, this Quarterly Report and other subsequent periodic reports we file with the Securities and Exchange Commission.

Furthermore, such forward-looking statements speak only as of the date of this Quarterly Report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

23

Quarterly Results of Operations and Seasonality

Seasonal consumer spending habits, which are most pronounced in December of each year as a result of the holiday selling season, significantly affect our business. We believe this seasonality is important to understanding our quarterly operating results. A significant portion of gift card sales occurs in late December of each year during the holiday selling season. As a result, we earn a significant portion of our revenues, net income and cash flows during the fourth quarter of each year. We also experience an increase in revenues, net income and cash flows during the second quarter of each year, which we primarily attribute to the Mother’s Day, Father’s Day and graduation gifting season and the Easter holiday. Depending on when the Easter holiday occurs, the associated increase could occur in either the first or second quarter. Additionally, operating income may fluctuate significantly during the first three fiscal quarters due to lower revenues and timing of certain expenses during such fiscal periods. As a result, quarterly financial results are not necessarily reflective of the results to be expected for the year, any other interim period or other future year.

24

Key Operating Statistics

The following table sets forth key operating statistics that directly affect our financial performance, a reconciliation of Commissions and fees and Program and other fees to Prepaid and processing revenues and a reconciliation of Total operating revenues to Adjusted operating revenues for the 12 and 36 weeks ended September 10, 2016 and September 12, 2015:

	12 weeks ended						36 weeks ended
	September 10, 2016			September 12, 2015			September 10, 2016			September 12, 2015
	(in thousands, except percentages and per share amounts)
Transaction dollar volume	$	3,212,272		$	3,167,719		$	9,770,803		$	9,660,243
Prepaid and processing revenues	$	312,995		$	292,908		$	958,411		$	881,281
Prepaid and processing revenues as a % of transaction dollar volume	9.7		%	9.2		%	9.8		%	9.1		%
Partner distribution expense as a % of prepaid and processing revenues	57.0		%	55.3		%	56.5		%	56.1		%
Adjusted operating revenues (1)	$	168,920		$	177,108		$	537,256		$	493,945
Prepaid and processing revenues:
Commissions and fees	$	248,138		$	231,492		$	750,693		$	709,339
Program and other fees	64,857			61,416			207,718			171,942
Prepaid and processing revenues	$	312,995		$	292,908		$	958,411		$	881,281
Adjusted operating revenues:
Total operating revenues	$	361,560		$	352,665		$	1,119,228		$	1,044,644
Revenue adjustment from purchase accounting (2)	3,666			2,606			11,875			2,606
Marketing revenue	(17,943		)	(16,311		)	(52,098		)	(59,112		)
Partner distribution expense	(178,363		)	(161,852		)	(541,749		)	(494,193		)
Adjusted operating revenues	$	168,920		$	177,108		$	537,256		$	493,945

______________________

(1) Our Adjusted operating revenues is a non-GAAP financial measure. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. This measure, however, should be considered in addition to, and not as a substitute for or superior to, operating revenues, operating income, operating margin, cash flows, or other measures of the financial performance prepared in accordance with GAAP.

(2) Impact on revenues recognized resulting from the step down in basis of deferred revenue from its carrying value to fair value in a business combination at the acquisition date.

Transaction Dollar Volume—Represents the total dollar amount of value loaded onto any of our prepaid products, rebates processed during the period and gross billings to Achievers’ business clients. The dollar amount and volume of card sales and rebates processed directly affect the amount of our revenues and direct costs. We measure and monitor Transaction dollar volume by retail distribution partner channel, content provider program and business client program.

Prepaid and Processing Revenues as a Percentage of Transaction Dollar Volume—Represents the total amount of Commissions and fees and Program and other fees recognized during the period as a percentage of Transaction dollar volume for the same period. Our prepaid product revenues vary among our various product offerings: closed loop gift and prepaid telecom cards generate the highest rates due to the content provider commissions; open loop gift cards and incentive and reward products and services also generate high rates due to program management fees, interchange and other fees included in Program and other fees in addition to the consumer and client purchase fees included in Commissions and fees; financial services products generate the lowest rates due to higher average transaction values; for Achievers, the gross billings are recorded as deferred revenue and recognized as the products are delivered or services are rendered, and we only include the portion of revenue related to software inProgram and other feesin this metric, as we present revenue from the redemption of employee rewards inProduct sales. This metric helps us understand and manage overall margins from our product offerings.

25

Partner Distribution Expense as a Percentage of Prepaid and Processing Revenues—Represents partner distribution expense divided by Prepaid and processing revenues (as defined above under Prepaid and processing revenues as a percentage of transaction dollar volume) during the period. This metric represents the expense recognized for the portion of content provider commissions and purchase or load fees shared with our retail distribution partners (known as distribution partner commissions), as well as other compensation we pay our retail business partners and certain business clients, including certain program development payments to our retail distribution partners, compensation for the distribution of our open loop products and expense recognized for equity awards issued to certain retail distribution partners. We present this expense as a percentage of prepaid and processing revenues to present the overall portion of our revenues from the sale of our prepaid products and services that we share with our retail distribution partners and business clients. The substantial majority of this expense is distribution partner commissions which are based on a percentage of the gross content provider commissions and consumer purchase fees. These percentages are individually negotiated with our retail distribution partners and are independent of the commission rates negotiated between us and our content providers. Partner distribution expense percentage is affected by changes in the proportion of Transaction dollar volume i) among our various products (as we share significantly lower amounts of revenues included in Program and other fees generated by our open loop gift, open loop incentive and financial services products), ii) among our various regions (as commission share percentages differ from region to region, particularly those with sub-distributor relationships) and iii) among retail distribution partners (as the commission share percentage is individually negotiated with each retail distribution partner).

Adjusted Operating Revenues—We regard Adjusted operating revenues as a useful measure of operational and financial performance of the business. Adjusted operating revenues are prepared and presented to offset the distribution commissions paid and other compensation to our distribution partners and business clients, to remove marketing revenues which have offsetting marketing expenses included in Sales and marketing expense and to remove the impact that the step down in basis of deferred revenue from its book value to its fair value in purchase accounting. Our Adjusted operating revenues may not be comparable to similarly titled measures of other organizations because other organizations may not calculate these measures in the same manner as we do. You are encouraged to evaluate our adjustments and the reasons we consider them appropriate.

We believe Adjusted operating revenues is useful to evaluate our operating performance for the following reasons:

• adjusting our operating revenues for distribution commissions paid and other compensation to our retail distribution partners and business clients is useful to understanding our operating margin;

• adjusting our operating revenues for marketing revenue, which has offsetting marketing expense, is useful for understanding our operating margin;

• in a business combination, a company records an adjustment to reduce the carrying value of deferred revenue to its fair value and reduces the company’s revenues from what it would have recorded otherwise, and as such we do not believe is indicative of our core operating performance.

26

Results of Operations

Comparison of the 12 and 36 Weeks Ended September 10, 2016 and September 12, 2015.

The fiscal periods presented in the accompanying tables below and throughout this Results of Operations section consist of the 12-week and 36-week periods ended September 10, 2016 and September 12, 2015 (the 12 weeks endedSeptember 10, 2016 is referred to as the second quarter of 2016, the 36 weeks endedSeptember 10, 2016 is referred to as the first 36 weeks of 2016 , the 12 weeks endedSeptember 12, 2015 is referred to as the second quarter of 2015, and the 36 weeks endedSeptember 12, 2015 is referred to as the first 36 weeks of 2015 ).

The following tables set forth the revenue and expense amounts as a percentage of total operating revenues by the line items in our condensed consolidated statements of income (loss) for the 12-week and 36-week period ended September 10, 2016 and September 12, 2015.

	12 Weeks Ended September 10, 2016			% of Total Operating Revenues		12 Weeks Ended September 12, 2015			% of Total Operating Revenues
	(in thousands, except percentages)
OPERATING REVENUES:
Commissions and fees	$	248,138		68.6	%	$	231,492		65.6	%
Program and other fees	64,857			17.9	%	61,416			17.4	%
Marketing	17,943			5.0	%	16,311			4.6	%
Product sales	30,622			8.5	%	43,446			12.3	%
Total operating revenues	361,560			100.0	%	352,665			100.0	%
OPERATING EXPENSES:
Partner distribution expense	178,363			49.2	%	161,852			45.9	%
Processing and services	75,090			20.8	%	68,246			19.4	%
Sales and marketing	52,327			14.5	%	49,954			14.2	%
Costs of products sold	29,122			8.1	%	40,577			11.5	%
General and administrative	22,501			6.2	%	22,136			6.3	%
Transition and acquisition	2,574			0.7	%	5,275			1.5	%
Amortization of acquisition intangibles	10,376			2.9	%	6,875			1.9	%
Change in fair value of contingent consideration	1,300			0.4	%	—			—	%
Total operating expenses	371,653			102.8	%	354,915			100.6	%
OPERATING INCOME (LOSS)	(10,093		)	(2.8	)%	(2,250		)	(0.6	)%
OTHER INCOME (EXPENSE):
Interest income and other income (expense), net	2,360			0.7	%	(1,421		)	(0.4	)%
Interest expense	(5,684		)	(1.6	)%	(3,231		)	(0.9	)%
INCOME (LOSS) BEFORE INCOME TAX EXPENSE	(13,417		)	(3.7	)%	(6,902		)	(2.0	)%
INCOME TAX EXPENSE (BENEFIT)	(8,357		)	(2.3	)%	(3,290		)	(0.9	)%
NET INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS	(5,060		)	(1.4	)%	(3,612		)	(1.0	)%
Loss (income) attributable to non-controlling interests, net of tax	(42		)	—	%	(3		)	—	%
NET INCOME (LOSS) ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC.	$	(5,102	)	(1.4	)%	$	(3,615	)	(1.0	)%

27

	36 Weeks Ended September 10, 2016			% of Total Operating Revenues		36 Weeks Ended September 12, 2015			% of Total Operating Revenues
	(in thousands, except percentages)
OPERATING REVENUES:
Commissions and fees	$	750,693		67.1	%	$	709,339		67.9	%
Program and other fees	207,718			18.6	%	171,942			16.4	%
Marketing	52,098			4.7	%	59,112			5.7	%
Product sales	108,719			9.7	%	104,251			10.0	%
Total operating revenues	1,119,228			100.1	%	1,044,644			100.0	%
OPERATING EXPENSES:
Partner distribution expense	541,749			48.3	%	494,193			47.3	%
Processing and services	224,331			20.0	%	198,272			19.0	%
Sales and marketing	166,176			14.8	%	156,653			15.0	%
Costs of products sold	103,163			9.2	%	97,593			9.3	%
General and administrative	70,130			6.3	%	62,186			6.0	%
Transition and acquisition	4,160			0.4	%	6,091			0.6	%
Amortization of acquisition intangibles	35,533			3.2	%	18,352			1.8	%
Change in fair value of contingent consideration	2,100			0.2	%	(7,567		)	(0.7	)%
Total operating expenses	1,147,342			102.4	%	1,025,773			98.3	%
OPERATING INCOME (LOSS)	(28,114		)	(2.5	)%	18,871			1.8	%
OTHER INCOME (EXPENSE):
Interest income and other income (expense), net	3,258			0.3	%	(1,938		)	(0.2	)%
Interest expense	(13,868		)	(1.2	)%	(8,566		)	(0.8	)%
INCOME (LOSS) BEFORE INCOME TAX EXPENSE	(38,724		)	(3.5	)%	8,367			0.8	%
INCOME TAX EXPENSE (BENEFIT)	(18,884		)	(1.7	)%	4,435			0.4	%
NET INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS	(19,840		)	(1.8	)%	3,932			0.4	%
Loss (income) attributable to non-controlling interests, net of tax	(152		)	—	%	63			—	%
NET INCOME (LOSS) ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC.	$	(19,992	)	(1.8	)%	$	3,995		0.4	%

Although our Chief Operating Decision Maker (CODM) reviews information regarding segment profit for our three reportable segments of US Retail, International Retail and Incentives & Rewards, segment profit for US Retail excludes certain sales, marketing and operations personnel costs used by that segment in generating revenues, whereas such costs are included in segment profit for International Retail and Rewards & Incentives. Additionally, US Retail and International Retail utilize shared costs for technology personnel and related depreciation and amortization of developed technology and related hardware, which we do not include in the determination of segment profit, but we do include such costs in the determination of segment profit for Incentives & Rewards (see Note 10—Segment Reporting for additional information). Accordingly, in the following detailed discussions of our operating results, we discuss Total operating revenues, Partner distribution expense and Operating revenues, net of Partner distribution expense for our three reportable segments and discuss our remaining operating expenses at the consolidated level.

28

Operating Revenues, Partner Distribution Expense and Operating Revenues, net of Partner Distribution Expense

The following tables set forth our consolidated Total operating revenues, Partner distribution expense and Operating revenues, net of Partner distribution expense for the 12-week and 36-week periods ended September 10, 2016 and September 12, 2015.

	12 weeks ended
	September 10, 2016		September 12, 2015		Change
	(in thousands, except percentages)
OPERATING REVENUES:
Commissions and fees	$	248,138	$	231,492	$	16,646		7.2	%
Program and other fees	64,857		61,416		3,441			5.6	%
Marketing	17,943		16,311		1,632			10.0	%
Product sales	30,622		43,446		(12,824		)	(29.5	)%
Total operating revenues	$	361,560	$	352,665	$	8,895		2.5	%
Partner distribution expense	178,363		161,852		16,511			10.2	%
Operating revenues, net of Partner distribution expense	$	183,197	$	190,813	$	(7,616	)	(4.0	)%

	36 weeks ended
	September 10, 2016		September 12, 2015		Change
	(in thousands, except percentages)
OPERATING REVENUES:
Commissions and fees	$	750,693	$	709,339	$	41,354		5.8	%
Program and other fees	207,718		171,942		35,776			20.8	%
Marketing	52,098		59,112		(7,014		)	(11.9	)%
Product sales	108,719		104,251		4,468			4.3	%
Total operating revenues	$	1,119,228	$	1,044,644	$	74,584		7.1	%
Partner distribution expense	541,749		494,193		47,556			9.6	%
Operating revenues, net of Partner distribution expense	$	577,479	$	550,451	$	27,028		4.9	%

US Retail Segment

The following tables set forth our Total operating revenues, Partner distribution expense and Operating revenues, net of Partner distribution expense and related key operating statistics for our US Retail segment for the 12-week and 36-week periods ended September 10, 2016 and September 12, 2015.

	12 weeks ended
	September 10, 2016			September 12, 2015			Change
	(in thousands, except percentages)
Total operating revenues	$	197,081		$	214,941		$	(17,860	)	(8.3	)%
Partner distribution expense	103,601			101,890			1,711			1.7	%
Operating revenues, net of Partner distribution expense	$	93,480		$	113,051		$	(19,571	)	(17.3	)%
Transaction dollar volume	$	1,844,666		$	2,040,745		$	(196,079	)	(9.6	)%
Prepaid and processing revenues as a percentage of transaction dollar volume	9.2		%	8.5		%	0.7		%	8.2	%
Partner distribution expense as a percentage of prepaid and processing revenues	61.1		%	58.6		%	2.5		%	4.3	%

29

	36 weeks ended
	September 10, 2016			September 12, 2015			Change
	(in thousands, except percentages)
Total operating revenues	$	652,359		$	659,984		$	(7,625	)	(1.2	)%
Partner distribution expense	330,283			313,628			16,655			5.3	%
Operating revenues, net of Partner distribution expense	$	322,076		$	346,356		$	(24,280	)	(7.0	)%
Transaction dollar volume	$	5,904,531		$	6,310,610		$	(406,079	)	(6.4	)%
Prepaid and processing revenues as a percentage of transaction dollar volume	9.3		%	8.6		%	0.7		%	8.1	%
Partner distribution expense as a percentage of prepaid and processing revenues	60.4		%	57.9		%	2.5		%	4.3	%

Our Operating revenues, net of partner distribution expense decreased for the third quarter and first 36 weeks of 2016 due to a decrease in Transaction dollar volume and an increase in Partner distribution expense as a percentage of prepaid and processing revenue, partially offset by an increase in Prepaid and processing revenue as a percentage of transaction dollar volume:

• Transaction dollar volume—On October 1, 2015, the payment card industry shifted liability for certain debit and credit card transactions to retailers who do not accept EMV chip technology transactions. As a result, some of our non-EMV compliant retail distribution partners have taken restrictive measures around the sale of gift cards, in particular higher denomination open loop gift cards and some closed loop gift cards. These measures include establishing lower limits on credit card purchases of gift cards and removing higher denomination products from displays in impacted markets to mitigate their liability for fraudulent credit card activity in their stores, which decreased our transaction dollar volume. Although EMV implementation at these retail distribution partners is not under our control, based on our most current information provided by such non-EMV compliant retail distribution partners, we expect that our top U.S. distribution partners for our open loop gift products will have completed their EMV implementations in the vast majority of their store locations by the end of October 2016. We expect that the distributions partners would continue to remove the limits and controls implemented by them before they were EMV compliant and finish restoring our products to their displays during our fourth quarter. We expect the negative impact of restricted sales of high-denomination open loop gift cards to continue while they take these steps and message to their customers that such products are once again available for purchase using credit cards. Additionally, we discontinued certain low-margin financial services programs, including certain co-branded GPR products, which also decreased transaction dollar volume. These decreases were partially offset by higher sales of other prepaid products through our retail distribution partner network as well as an increase in sales through our online distribution channels, partially as a result of our acquisition of GiftCards in the first quarter of 2016.

• Prepaid and processing revenues as a percentage of transaction dollar volume—Increased for the third quarter and first 36 weeks of 2016 due to the discontinuation of certain low-margin financial services programs. Additionally, the prepaid and processing revenue rate for open loop gift increased due to i) a higher commissions and fees rate and ii) revenue from interchange and deferred revenue from sales in prior periods that were proportionately higher. The higher commission and fees rate resulted from shift in mix from higher denomination cards to lower denomination cards as a result of the restrictions at non-EMV compliant distribution partners. The increase in the prepaid and processing revenue rate for open loop gift cards was partially offset by a lower program management fees rate that will continue to decrease as a result of a contract amendment with one of our issuing banks based on changing redemption patterns for open loop gift products. The prepaid and processing revenue rate for closed loop gift decreased slightly for the third quarter and first 36 weeks of 2016. Our adoption of ASU 2016-04 in the first 36 weeks of 2016 also did not have a material impact on our prepaid and processing revenue rate for the third quarter and first 36 weeks of 2016 (see Note 1—Recently Issued or Adopted Accounting Pronouncements in the notes to our condensed consolidated financial statements).

• Partner distribution expense as a percentage of prepaid and processing revenues—Increased for the third quarter and first 36 weeks of 2016 due to i) an increase in the proportion of sales through retail distribution partners with higher commission share rates and ii) partially offset by a decrease in the proportion of open loop gift products sold as we share a smaller portion of our total revenues with our retail distribution partners for our program-managed Visa gift products. These impacts were partially offset by an increase in sales through our online distribution channels since we do not incur such expense for sales through our proprietary websites.

30

Our Operating revenues and Operating revenues, net of Partner distribution expense were also impacted by an increase of $2.7 million in marketing revenue for first 36 weeks of 2016, with minimal impact for the third quarter of 2016, and decreases of $13.6 million and $14.5 million in sales from Cardpool for the third quarter and first 36 weeks of 2016, respectively, due to the reduced number of retail kiosk for acquisition of its inventory.

In the second quarter of 2016, we entered into an agreement with NetSpend, whose GPR card products we already distribute, to exit our U.S program-managed GPR business under the PayPower brand, to assign the PayPower programs with our issuing bank to NetSpend and to provide the fixture space previously provided to PayPower to NetSpend. As a result of these agreements, we recognized a $4 million gain as a reduction in General and administrative expense which was substantially offset by the write-off of certain GPR technology assets. Additionally, we have agreed to provide NetSpend with certain transition services worth approximately $6 million, which we will recognize as revenue or a reduction of expense over the service period during 2016. During the third quarter and first 36 weeks of 2016, we recognized $1.3 million and $1.7 million in revenue, respectively, and $1.4 million and $2.2 million as a reduction in expense, respectively. We do not expect our exit from the program management of GPR cards to have a significant impact on our results of operations.

International Retail

The following tables set forth our Total operating revenues, Partner distribution expense and Operating revenues, net of Partner distribution expense and related key operating statistics for our International Retail segment for the 12-week and 36-week periods ended September 10, 2016 and September 12, 2015.

	12 weeks ended
	September 10, 2016			September 12, 2015			Change
	(in thousands, except percentages)
Total operating revenues	$	100,069		$	83,671		$	16,398		19.6	%
Partner distribution expense	69,841			56,972			12,869			22.6	%
Operating revenues, net of Partner distribution expense	$	30,228		$	26,699		$	3,529		13.2	%
Transaction dollar volume	$	826,746		$	661,890		$	164,856		24.9	%
Prepaid and processing revenues as a percentage of transaction dollar volume	10.8		%	11.2		%	(0.4		)%	(3.6	)%
Partner distribution expense as a percentage of prepaid and processing revenues	78.4		%	77.2		%	1.2		%	1.6	%

	36 weeks ended
	September 10, 2016			September 12, 2015			Change
	(in thousands, except percentages)
Total operating revenues	$	279,311		$	251,249		$	28,062		11.2	%
Partner distribution expense	198,703			169,578			29,125			17.2	%
Operating revenues, net of Partner distribution expense	$	80,608		$	81,671		$	(1,063	)	(1.3	)%
Transaction dollar volume	$	2,325,476		$	1,966,692		$	358,784		18.2	%
Prepaid and processing revenues as a percentage of transaction dollar volume	10.9		%	11.0		%	(0.1		)%	(0.9	)%
Partner distribution expense as a percentage of prepaid and processing revenues	78.3		%	78.0		%	0.3		%	0.4	%

Our Operating revenues, net of Partner distribution expense had a significant impact from pass-through marketing revenues (for which we have offsetting expense in Sales and marketing), which increased $1.7 millionfor thethird quarter 2016 but decreased $9.2 millionfor the first 36 weeks of 2016. Excluding marketing revenue, Operating revenues, net of Partner distribution expense increased by $1.8 million, or 9.9%, for the third quarter of 2016 and $8.1 million, or 15.8%, for the first 36 weeks of 2016, primarily due to the increase in our Transaction dollar volume, partially offset by a decrease in Prepaid and processing revenue as a percentage of transaction dollar volume and an increase in Partner distribution expense as a percentage of prepaid and processing revenue.

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• Transaction dollar volume—Increased for both the third quarter and first 36 weeks of 2016 primarily due to increases in sales in Canada and Europe, primarily Germany and our acquisition of Didix in the fourth quarter of 2015, and through our sub-distributor relationships in Japan and South Korea, partially offset by decreases in Australia. Transaction dollar volume for the first 36 weeks of 2016 also decreased in Mexico and our sub-distributor relationship in South Africa but increased and remained flat for the third quarter of 2016 for these countries, respectively. On a constant currency basis, transaction dollar volume increased 17.1% and 16.1% for the third quarter and first 36 weeks of 2016, respectively.

• Prepaid and processing revenues as a percentage of transaction dollar volume—As a result of our adoption of ASU 2016-04, we recognized $1.4 and $4.0 million of breakage revenue in the third quarter and first 36 weeks of 2016, respectively. Excluding this benefit, the prepaid and processing revenue rates were 10.6% and 10.7% for the third quarter and first 36 weeks of 2016, respectively. The prepaid and processing revenue rate decreased due to an increase in the proportion of products sold in Germany which generates a lower prepaid and processing revenue rate.

• Partner distribution expense as a percentage of prepaid and processing revenues—The adoption of ASU 2016-04 decreased the partner distribution expense rate for both third quarter and first 36 weeks of 2016, since certain cards for which we record breakage revenue are higher margin products. Excluding this benefit, the partner distribution expense rate increased to 79.7% and 79.6% for the third quarter and first 36 weeks of 2016, respectively, due to an increase in the proportion of sales through sub-distributor relationships, primarily Japan (which have higher commission share arrangements but for which we incur minimal other operating expenses), partially offset by increase in proportion of sales in Germany where we have lower commission sharing arrangements.

Changes in product sales had minimal impacts on Operating revenues and Operating revenues, net of Partner distribution expense.

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Incentives & Rewards

The following tables set forth our Total operating revenues, Partner distribution expense and Operating revenues, net of Partner distribution expense and related key operating statistics for our Incentives & Rewards segment for the 12-week and 36-week periods ended September 10, 2016 and September 12, 2015.

	12 weeks ended
	September 10, 2016			September 12, 2015			Change
	(in thousands, except percentages)
Total operating revenues	$	64,410		$	54,053		$	10,357		19.2	%
Partner distribution expense	4,921			2,990			1,931			64.6	%
Operating revenues net of Partner distribution expense	$	59,489		$	51,063		$	8,426		16.5	%
Transaction dollar volume	$	540,860		$	465,084		$	75,776		16.3	%
Prepaid and processing revenues as a percentage of transaction dollar volume	10.1		%	9.7		%	0.4		%	4.1	%
Partner distribution expense as a percentage of prepaid and processing revenues	9.0		%	6.6		%	2.4		%	36.4	%

	36 weeks ended
	September 10, 2016			September 12, 2015			Change
	(in thousands, except percentages)
Total operating revenues	$	187,558		$	133,411		$	54,147		40.6	%
Partner distribution expense	12,763			10,987			1,776			16.2	%
Operating revenues net of Partner distribution expense	$	174,795		$	122,424		$	52,371		42.8	%
Transaction dollar volume	$	1,540,796		$	1,382,941		$	157,855		11.4	%
Prepaid and processing revenues as a percentage of transaction dollar volume	10.3		%	8.8		%	1.5		%	17.0	%
Partner distribution expense as a percentage of prepaid and processing revenues	8.1		%	9.0		%	(0.9		)%	(10.0	)%

Our Operating revenues, net of Partner distribution expense increased for the third quarter and first 36 weeks of 2016 primarily due to increases in Prepaid and processing revenue as a percentage of transaction dollar volume and an increase in Transaction dollar volume. The change in Partner distribution expense as a percentage of prepaid and processing revenue had a negative impact for the third quarter of 2016 and a positive impact for the first 36 weeks of 2016:

• Transaction dollar volume—Increased for the third quarter and first 36 weeks of 2016 due to our acquisition and growth of Achievers in the third quarter of 2015 and increases in e-Commerce sales, primarily due to our acquisition of GiftCards in the first quarter of 2016 and Extrameasures in the second quarter of 2016, partially offset by the loss of certain business clients which had lower margin programs.

• Prepaid and processing revenues as a percentage of transaction dollar volume—In the first quarter of 2016, we entered into a contractual amendment with one of our issuing banks to settle our right to receive future fees for cards issued under a legacy contract. The amendment resulted in a one-time benefit of $4.3 million which we recognized in Program and other fees. Excluding this benefit, our prepaid and processing revenue rate was 10.0% for the first 36 weeks of 2016, and our prepaid and processing revenue rate increased for both third quarter and first 36 weeks of 2016 due to our acquisition of Achievers, which generates a higher prepaid and processing revenue rate from its software revenue and the loss of certain business clients which had lower margin programs.

• Partner distribution expense as a percentage of prepaid and processing revenue—Changes in the partner distribution expense rate reflect changes in transaction volume sold through business clients for which we recognize net pricing discounts as an expense.

Our Operating revenues and Operating revenues net of Partner distribution expense also increased for the third quarter and first 36 weeks of 2016 due to increases in product sales of $1.1 million and $18.7 million, respectively, primarily from our acquisition of Achievers.

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Operating Expenses

The following tables set forth our consolidated operating expenses for the 12-week and 36-week periods ended September 10, 2016 and September 12, 2015.

	12 weeks ended
	September 10, 2016		September 12, 2015		Change
	(in thousands, except percentages)
OPERATING EXPENSES:
Partner distribution expense	178,363		161,852		16,511			10.2	%
Processing and services	75,090		68,246		6,844			10.0	%
Sales and marketing	52,327		49,954		2,373			4.8	%
Costs of products sold	29,122		40,577		(11,455		)	(28.2	)%
General and administrative	22,501		22,136		365			1.6	%
Transition and acquisition	2,574		5,275		(2,701		)	(51.2	)%
Amortization of acquisition intangibles	10,376		6,875		3,501			50.9	%
Change in fair value of contingent consideration	1,300		—		1,300			N/M
Total operating expenses	$	371,653	$	354,915	$	16,738		4.7	%

	36 weeks ended
	September 10, 2016		September 12, 2015			Change
	(in thousands, except percentages)
OPERATING EXPENSES:
Partner distribution expense	541,749		494,193			47,556			9.6	%
Processing and services	224,331		198,272			26,059			13.1	%
Sales and marketing	166,176		156,653			9,523			6.1	%
Costs of products sold	103,163		97,593			5,570			5.7	%
General and administrative	70,130		62,186			7,944			12.8	%
Transition and acquisition	4,160		6,091			(1,931		)	(31.7	)%
Amortization of acquisition intangibles	35,533		18,352			17,181			93.6	%
Change in fair value of contingent consideration	2,100		(7,567		)	9,667			N/M
Total operating expenses	$	1,147,342	$	1,025,773		$	121,569		11.9	%

Partner distribution expense—Please see our discussion of Operating revenues, net of Partner distribution expense and Partner distribution expense as a percentage of prepaid and processing revenues for our reportable segments above.

Processing and Services

Processing and services expenses increased for both third quarter and first 36 weeks of 2016 due to increases in Prepaid and processing revenues of 6.9% and 8.8% for the third quarter and first 36 weeks of 2016, respectively, or 6.3% and 7.7%, respectively, when excluding the revenue benefits from contract amendments and breakage recognized for the adoption of ASU 2016-04. Excluding such benefits, Processing and services expenses as a percentage of Prepaid and processing revenues increased to 24.1% from 23.3% and to 23.6% from 22.5% for the third quarter and first 36 weeks of 2016, respectively, primarily due to increases in employee compensation and depreciation and amortization expenses, reflecting our continued expected growth with the short-term negative impact on revenues derived from our non-EMV compliant retail distribution partners.

The increases of $6.8 million for the third quarter ($26.1 million for the first 36 weeks of 2016) reflect:

• $1.6 million increase for technology and operations personnel costs ($12.8 million for the first 36 weeks of 2016), including employee and contractor compensation, benefits and travel related costs;

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• $3.7 million increase for our technology infrastructure ($7.9 million for the first 36 weeks of 2016), including depreciation of capitalized software and related hardware, data center lease, hosting and connectivity, activation transaction processing and other equipment costs;

• $1.3 million increase for our program management services ($3.3 million for the first 36 weeks of 2016), including card production, redemption transaction processing and customer care primarily for our Visa gift and open loop incentive cards, reflecting the increase in open loop cards sold in our Incentives & Rewards segment, partially offset by the decrease in the US Retail segment due to restrictions at our non-EMV compliant retail distribution partners;

• $1.2 million increase in other net costs ($3.7 million for the first 36 weeks of 2016);

• $0.5 million decrease in costs for maintaining our distribution network ($1.6 million for the first 36 weeks of 2016), including fulfillment and merchandising expenses.

Sales and Marketing

The changes in Sales and marketing expenses reflect increases in personnel costs, including employee compensation, benefits and travel related costs, as well as changes in program marketing and development expenses, which increased for the third quarter of 2016 but decreased for the first 36 weeks of 2016. Personnel costs increased by $0.5 million and $11.9 million for the third quarter and first 36 weeks of 2016, respectively, primarily from our acquisition of Achievers in the third quarter of 2015 and increases of $0.7 million and $3.1 million, respectively, in stock-based compensation. Program marketing and development expenses increased by $1.9 million for the third quarter, reflecting the increase of $1.6 million in marketing revenue, and such expenses decreased by $4.3 million for the first 36 weeks of 2016, reflecting a decrease of $7.0 million in marketing revenue (including $9.2 million in our International Retail segment). Sales and marketing expenses also reflect increases in other costs of $1.0 million and $3.5 million for the third quarter of 2016 and first 36 weeks of 2016, respectively, partially offset by the reduction in expense from transition services provided to NetSpend of $0.9 million and $1.6 million, respectively.

Costs of Products Sold

Costs of products sold decreased for the third quarter of 2016 due to the decrease in Product sales, primarily due to a decrease in sales from Cardpool, partially offset by an increase in sales for Achievers. Costs of products sold increased for the first 36 weeks of 2016due to an increase in sales for Achievers, partially offset by a decrease in sales from Cardpool. Gross margin decreased for both third quarter and first 36 weeks of 2016 due to a decrease in the gross margin for Cardpool, partially offset by our acquisition of Achievers in the third quarter of 2015, which generates higher gross margins.

General and Administrative

General and administrative expenses increased primarily due to increases of $1.2 million and $5.8 million for the third quarter and first 36 weeks of 2016, respectively, in personnel costs, including employee compensation, benefits and travel related costs. Other costs decreased $0.3 million for the third quarter of 2016 and increased $3.5 million for the first 36 weeks of 2016. The increases in other costs includes increases of $1.0 million and $3.4 million in rent expense, reflecting our new lease agreement for our corporate offices and our acquisition of Achievers. These expenses were partially offset by $0.5 million and $1.4 million for the third quarter and first 36 weeks of 2016, respectively, for the services and the gain on our U.S GPR business to NetSpend, net of related write-offs of GPR technology assets.

Transition and Acquisition

Transition and acquisition expense for 2016 reflects our on-going acquisition activity, including our acquisitions of GiftCards and NimbleCommerce in the first quarter of 2016, Extrameasures in the second quarter of 2016 and Grass Roots in the fourth quarter. Transition and acquisition expense for 2015 reflects our acquisitions of Achievers in the third quarter of 2015 and Didix early in fourth quarter of 2015.

Amortization of Acquisition Intangibles

Amortization expense increased for both the third quarter and first 36 weeks of 2016 due to continued acquisition activity, including Achievers and Didix in the third quarter of 2015, GiftCards and NimbleCommerce in the first quarter of 2016 and Extrameasures in the second quarter of 2016.

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Change in Fair Value of Contingent Consideration

The decrease in the estimated fair value of contingent consideration for the first 36 weeks of 2015 relates to our CardLab contingent consideration liability, reflecting the projected failure of financial targets to be met relating to the launch of incentive programs during the contingent earn-out measurement period. The increase in the estimated fair value of contingent consideration for the third quarter and first 36 weeks of 2016 reflects the accretion of the discount on estimated earnout and improvements on our projections of the earnout.

Other Income (Expense) and Income Tax Expense (Benefit)

The following tables set forth our consolidated other income (expense), and income tax expense (benefit) and effective tax rates for 12-week and 36-week periods ended September 10, 2016 and September 12, 2015

	12 weeks ended
	September 10, 2016			September 12, 2015			Change
	(in thousands, except percentages)
OTHER INCOME (EXPENSE):
Interest income and other income (expense), net	$	2,360		$	(1,421	)	$	3,781		(266.1	)%
Interest expense	(5,684		)	(3,231		)	(2,453		)	75.9	%
Total other income (expense)	$	(3,324	)	$	(4,652	)	$	1,328		(28.5	)%
INCOME TAX EXPENSE (BENEFIT)	$	(8,357	)	$	(3,290	)	$	(5,067	)	154.0	%
EFFECTIVE TAX RATE	62.3		%	47.7		%	14.6		%

	36 weeks ended
	September 10, 2016			September 12, 2015			Change
	(in thousands, except percentages)
OTHER INCOME (EXPENSE):
Interest income and other income (expense), net	$	3,258		$	(1,938	)	$	5,196		(268.1	)%
Interest expense	(13,868		)	(8,566		)	(5,302		)	61.9	%
Total other income (expense)	$	(10,610	)	$	(10,504	)	$	(106	)	1.0	%
INCOME TAX EXPENSE (BENEFIT)	$	(18,884	)	$	4,435		$	(23,319	)	(525.8	)%
EFFECTIVE TAX RATE	48.8		%	53.0		%	(4.2		)%

Other Income (Expense)

Interest income and other income (expense), net increased for both the third quarter and first 36 weeks of 2016 primarily due to a $1.9 million from the gain on the sale of our member interest in Visa Europe and foreign exchange gains on intercompany transactions in 2016, as compared to losses in 2015.

Interest expense increased for both the third quarter and first 36 weeks of 2016 due to a higher applicable margin under our Credit Agreement and higher amounts of outstanding debt in 2016 resulting from increases in our term loan and higher use of our revolving line of credit, as well as the issuance of our convertible notes payable in the third quarter of 2016.

Income Tax Expense (Benefit)

Our effective tax rates were 62.3% and 47.7% for the 12 weeks endedSeptember 10, 2016 and September 12, 2015, respectively, and 48.8% and 53.0% for the 36 weeks endedSeptember 10, 2016 and September 12, 2015, respectively. The effective rate for the 12 weeks ended September 10, 2016 was higher due to a discrete tax benefit for a tax return to provision true-up, resulting in an increase to the effective tax rate due to pre-tax loss, and permanent tax adjustments from deemed foreign income and nondeductible acquisition expenses. The effective rate for the 36 weeks ended September 10, 2016 was lower due to a net reduction in 2015 in the value of our deferred tax assets from changes in certain state tax apportionment laws (which resulted in an increase to the effective tax rate for the 36 weeks ended September 12, 2015), partially offset by a discrete tax benefit for a tax return to provision true-up and excess tax benefits for employee stock based compensation, both increasing the effective tax rate due to pre-tax loss.

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Liquidity and Capital Resources

The following table sets forth the major sources and uses of cash for the 36 weeks endedSeptember 10, 2016 and September 12, 2015.

	36 weeks ended
	September 10, 2016			September 12, 2015
	(in thousands)
Net cash used in operating activities	$	(639,637	)	$	(620,899	)
Net cash used in investing activities	(177,018		)	(154,308		)
Net cash provided by financing activities	199,076			85,781
Effect of exchange rate changes on cash and cash equivalents	3,352			(7,467		)
Net decrease in cash and cash equivalents	$	(614,227	)	$	(696,893	)

Cash Flows from Operating Activities

Our use of cash during both 36 weeks endedSeptember 10, 2016 and September 12, 2015 primarily reflects the timing of cash settlement of Settlement receivables, Settlement payables and Consumer and customer deposits which are significantly impacted by the portion of gift card sales that occur in late December. Excluding the impact of these settlement related items, net cash provided by operating activities increased by $36.7 million to a source of cash of $78.2 million for the 36 weeks endedSeptember 10, 2016 from a source of cash of $41.5 million for the 36 weeks endedSeptember 12, 2015. This cash reduction reflects:

• pre-tax income, adjusted for noncash reconciling items (excluding deferred income taxes), decreased $10.7 million, or 11.2%, to $84.9 million from $95.6 million, reflecting higher operating expenses relative to our increase in operating revenues due to the impact on revenue derived at non-EMV compliant retail distribution partners;

• offset by a decrease of $11.4 million in our income tax payments to $5.0 million in net refunds for the 36 weeks endedSeptember 10, 2016 from $6.4 million payment for the 36 weeks endedSeptember 12, 2015, which include refunds of $0.9 million and $6.3 million for the 36 weeks endedSeptember 10, 2016 and the 36 weeks endedSeptember 12, 2015, respectively, for overpayments for Spin-Off taxes to certain states which we repaid to Safeway and present such repayment in financing activities. Excluding these refunds, our net income tax payments decreased by $16.8 million from a net refund of $4.1 million for the 36 weeks endedSeptember 10, 2016 from a net payment of $12.7 million36 weeks endedSeptember 12, 2015, due to settlement of income tax receivables from Safeway related to periods before our initial public offering and our use of net operating loss carryforwards.

• use of cash for non-settlement related operating assets and liabilities totaled $11.8 million and $47.5 million, for the 36 weeks endedSeptember 10, 2016 and September 12, 2015, respectively, reflecting a significantly greater use of cash from accounts receivable for the 36 weeks endedSeptember 12, 2015.

Cash Flows from Investing Activities

The net cash used in investing activities for 36 weeks endedSeptember 10, 2016 totaled $177.0 million, which primarily included $144.3 million for our acquisitions of GiftCards, NimbleCommerce and Extrameasures, and $33.5 million for expenditures for property, equipment and technology. The net cash used in investing activities for the 36 weeks endedSeptember 12, 2015 included $116.4 million related to our acquisitions of Achievers and Didix (as we had remitted the cash consideration of $38.0 million to the exchange agent prior to the end of the third quarter of 2015 but did not close until early fourth quarter) and expenditures for property, equipment and technology of $37.3 million.

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Cash Flows from Financing Activities

In January 2016, we exercised our option to draw down an additional $100 million under our term loan, which we used to finance our acquisition of GiftCards. In March 2016, we made our scheduled term loan repayment of $37.5 million. In July 2016, we entered into an amendment and restatement to our Credit Agreement (the Restated Credit Agreement). We repaid all amounts outstanding under our revolving line of credit and $276 million of the $426 million outstanding under our term loan such that $150 million remained outstanding. Additionally, we issued $500 million of aggregate principal amount of 1.50% Convertible Senior Notes due in January 2022. Concurrently with the pricing of the Notes, we purchased call options for our own common stock to hedge the Notes for $75.8 million, sold call options for our own common stock for $47.0 million and repurchased $34.8 million of our common stock. Collectively, these activities, net of debt issuance costs, provided us with $206.7 million during the 36 weeks endedSeptember 10, 2016. Significant additional cash flows from financing activities during the 36 weeks endedSeptember 10, 2016 include repayments $9.0 million for debt assumed from business acquisitions and net proceeds of $2.4 million from employee stock-related activities. For additional information on the terms of these agreements, including the total capacity of our Restated Credit Agreement, repayment terms of Restated Credit Agreement and significant terms of our Convertible Senior Notes, purchased call options and sold call options, see Note 3—Financing.

The net cash provided by financing activities for the 36 weeks endedSeptember 12, 2015 totaled $85.8 million, including a $100.0 million net increase in our revolving line of credit, $11.3 million scheduled repayment of our term loan and repayments of $6.3 million on our notes payable to Safeway related to Spin-Off tax refunds, as described in cash flows from operating activities.

Off-Balance Sheet Arrangements

None.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to our market risk position from the information provided under “Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk,” in our Annual Report filed on Form 10-K filed with the Securities and Exchange Commission on March 2, 2016.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of September 10, 2016. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of September 10, 2016, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fiscal quarter ended September 10, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more persons or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved from time to time in various legal proceedings arising in the ordinary course of business, including the matters described below. Although the outcome of any pending matters, including the matters described below, and the amount, if any, of our ultimate liability and any other forms of remedies with respect to these matters, cannot be determined or predicted with certainty, we currently do not believe that it is probable that the resolution of any of these matters would result in any liability that would have a material adverse effect on our results of operations or financial condition.

On March 30, 2015, Greg Haney in his capacity as Seller Representative for CardLab, Inc. filed a lawsuit against us in the Delaware Chancery Court (CardLab, Inc. v. Blackhawk Network Holdings, Inc., Case No. 10851). The complaint generally alleges that we failed to disclose material information relating to a potential earn-out payment in connection with our acquisition of CardLab, Inc. in 2014. We believe that the suit is without merit, and we are vigorously defending ourselves against these claims. On June 8, 2015, we filed a motion to dismiss the complaint. On June 22, 2015, the plaintiff filed an amended complaint.  On July 7, 2015, we filed a motion to dismiss the case in its entirety. On February 26, 2016, the Court granted the motion to dismiss in part, dismissing two claims of the amended complaint. On March 25, 2016, we filed our answer denying the remaining claims and a counterclaim for attorneys’ fees pursuant to the merger agreement contemplating the acquisition of CardLab, Inc. between the parties. On June 22, 2016, the plaintiff filed a motion to dismiss our counterclaim for indemnification. On July 22, 2016, we filed an amended counterclaim in response. The litigation is in the early stage of discovery.

In addition, we transact business in non-U.S. markets and may, from time to time, be subject to disputes and tax audits by foreign tax authorities related to indirect or other value added taxes typically on commissions or fees received from non-residents content providers. 

ITEM 1A. RISK FACTORS

Our business faces significant risks, some of which are set forth below to enable readers to assess, and be appropriately apprised of, many of the risks and uncertainties applicable to the forward-looking statements made in this Quarterly Report on Form 10-Q. You should carefully consider these risk factors as each of these risks could adversely affect our business, operating results, cash flows and financial condition. If any of the events or circumstances described in the following risks actually occurs, our business may suffer, the trading price of our common stock and our 2022 Notes could decline and our financial condition or results of operations could be harmed. Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. These risks should be read in conjunction with the other information set forth in this Quarterly Report on Form 10-Q. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us, or that we currently believe to be immaterial, may also adversely affect our business. Risks facing our business have not changed substantively from those discussed in our Annual Report on Form 10-K for the year ended January 2, 2016, except those set forth below.

Our retail distribution partners’ noncompliance or delays in complying with industry security standards related to credit and debit cards could negatively impact sales of our products, results of operations and financial condition.

Technological changes continue to significantly impact the financial services and payment services industries, such as continuing development of technologies in the areas of smart cards, radio frequency and proximity payment devices, electronic wallets and mobile commerce, among others. The payment networks’ rules and regulations are generally subject to change, and they may modify their rules and regulations from time to time. Our retail distribution partners’ inability to react timely to changes in the rules and regulations or their interruption or application, may result in substantial disruption to our business and negatively impact our results of operations.

For examples, payment processors Europay, MasterCard and Visa, or EMV, set a deadline of October 2015 for retailers to install and implement in their point-of-sale systems new terminals that would accept credit and debit cards that have an embedded chip on them. The chip is used in the transaction checkout instead of the magnetic strip and has information about the card holder and a unique transaction identification number that can only be used once. This chip-on-card technology prohibits fraudulent duplication of credit and debit cards and helps eliminate one of the primary sources of fraud at point of sale.

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There are significant risks in delayed application of the EMV chip card standards to our retail distribution partners, which may have adverse implications for our business. Namely, if a retailer did not achieve EMV-compliance by October 2015, all liability for payment fraud losses incurred by such retailer shifted from the banks issuing the credit and debit cards to the EMV-non-compliant retailers. In response, some of our EMV-non-compliant retail distribution partners have taken measures in their stores to limit their exposure to liability for fraud losses by limiting or controlling the sales of higher denomination gift cards. While we have been assisting retailers in implementing alternative fraud prevention practices such as identity verification and credit card authentication, the actions taken by retailers to limit their liability for fraud losses during a transition to EMV compliance have had a material adverse impact on our results of operations and financial condition. In addition, consumers may have changed their shopping behavior away from our distribution partners or our products resulting from limits or controls implemented by our distribution partners during their transition to EMV compliance. We cannot guarantee the timing and manner that our distribution partners remove the limits or controls implemented by them during the period before they achieve EMV compliance. Either of these factors could have an adverse impact on our results of operations and financial condition.

Our credit and security agreements with Wells Fargo Bank, National Association, and other financial institutions contain certain restrictions that limit our flexibility in operating our business and, in the event of a default, could have a material adverse impact on our business and results of operations.

On July 27, 2016, we entered into an Amended and Restated Credit Agreement (the Restated Credit Agreement) with the lenders party thereto and Wells Fargo Bank, National Association as administrative agent (the Administrative Agent). The Restated Credit Agreement amends and restates our Credit Agreement dated as of March 28, 2014 with the Administrative Agent and the financial institutions party thereto as lenders. The Restated Credit Agreement provides for the extension of credit in an aggregate principal amount of up to $700 million, consisting of revolving loans in an aggregate principal amount not to exceed $400 million (the Revolving Credit Facility) and term loans in an aggregate principal amount not to exceed $300 million (the Term Loan Facility). We have the ability from time to time to increase the commitments under the Revolving Credit Facility and/or the Term Loan Facility (subject to compliance with specified conditions), with the aggregate amount of all such Revolving Credit Facility and/or Term Loan Facility increases not to exceed an incremental $300 million. The Revolving Credit Facility and the Term Loan Facility are scheduled to mature on July 27, 2021. The Restated Credit Agreement and other related agreements contain customary restrictions on us and our subsidiaries. Subject to a number of important exceptions, these limitations include covenants that limit or restrict us and our subsidiaries from:

•incurring additional indebtedness or modifying subordinated indebtedness;

•granting liens on or with respect to any of our property;

•making investments;

•consolidating or merging with, or acquiring, another business;

•selling or otherwise disposing of our assets;

•paying dividends and making other distributions to our stockholders;

•entering into certain transactions with our affiliates;

•redeeming our stock;

•amending our charter documents;

•changing the nature of our business;

•entering into sale-leaseback agreements; and

•disposing of our interests in certain subsidiaries.

Our obligations under the Restated Credit Agreement are secured by security interests in all of our present and future personal property and those of certain current and future subsidiaries (other than our regulated assets). In addition, the Restated Credit Agreement contains financial covenants that require us to maintain specified financial ratios and satisfy certain financial condition tests. This may require that we take action to reduce our debt or to act in a manner contrary to our business objectives.

The breach of any of these covenants would result in a default under the Restated Credit Agreement. Any default, if not waived, could result in our lenders terminating commitments to make loans or extend other credit to us. In the event of a default, the lenders also could accelerate and declare all or any obligations immediately due, and could take possession of or liquidate collateral. If any of these events occur, we may be unable to refinance the Restated Credit Agreement on favorable terms, if at all, which could have a material adverse effect on our business, results of operations and financial condition. In addition, the termination of the Restated Credit Agreement may adversely affect our ability to maintain our relationships with our content providers or adversely affect our cash flows.

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Our debt could adversely impact our operating income and growth prospects and make us vulnerable to adverse economic and industry conditions.

Our indebtedness could make it more challenging for us to obtain additional financing to fund our business strategy, acquisitions, debt service requirements, capital expenditures and working capital. It could also increase our vulnerability to interest rate changes and general adverse economic and industry conditions. This could limit our flexibility in planning for or reacting to changes in our business and our markets and place us at a competitive disadvantage relative to our competitors that have less debt.

Future economic and credit market conditions may limit our access to additional capital, at a time when the Restated Credit Agreement would otherwise permit additional financing, or may preclude our ability to refinance our existing indebtedness. If our lenders suffer from declining financial conditions, their ability to fund their commitments may be adversely affected, in which case we could be required yet unable to obtain replacement financing on similar or acceptable terms, if at all. A deterioration in the credit markets generally could further affect our ability to access sufficient financing or capital. Such limitations could have a material adverse impact on our operations and thus on our operating income, growth prospects and financial condition.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.

On July 21, 2016, we completed an offering of $500 million principal amount of our 2022 Notes. The 2022 Notes bear interest at a rate of 1.5% per year, payable semiannually in arrears on January 15 and July 15 of each year, beginning on January 15, 2017, and mature on January 15, 2022. In addition, on July 27, 2016, we entered into the Restated Credit Agreement for a $700.0 million credit facility, to replace our prior credit facility. Please see the Risk Factor titled “Our credit and security agreements with Wells Fargo Bank, National Association, and other financial institutions contain certain restrictions that limit our flexibility in operating our business and, in the event of a default, could have a material adverse impact on our business and results of operations” for additional information. Our ability to make scheduled payments of the principal of, to pay interest on or to refinance our indebtedness, including the notes and our Restated Credit Agreement, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

Despite our current debt levels, we may still incur substantially more debt or take other actions which would intensify the risks discussed above.

Despite our current consolidated debt levels, we and our subsidiaries may be able to incur substantial additional debt in the future, subject to the restrictions contained in our debt instruments, some of which may be secured debt. We will not be restricted under the terms of the indenture governing the 2022 Notes from incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of other actions that are not limited by the terms of the indenture governing the 2022 Notes that could have the effect of diminishing our ability to make payments on the notes when due. Our new credit facility restricts our ability to incur additional indebtedness, including secured indebtedness, but if the facility matures or is repaid, we may not be subject to such restrictions under the terms of any subsequent indebtedness.

We may not have the ability to raise the funds necessary to settle conversions of the 2022 Notes or to repurchase the 2022 Notes upon a fundamental change, and our future debt may contain limitations on our ability to pay cash upon conversion or repurchase of the 2022 Notes.

Holders of our 2022 Notes have the right to require us to repurchase their notes upon the occurrence of a fundamental change at a fundamental change repurchase price equal to 100% of the principal amount of our notes to be repurchased, plus accrued and unpaid interest, if any. In addition, upon conversion of the notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the notes being converted. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of notes surrendered or notes being converted. In addition, our ability to repurchase the notes or to pay cash upon conversions of the notes may be limited by law, by regulatory authority or by agreements governing our future indebtedness. Our failure to repurchase notes at a time when the repurchase is required by

42

the indenture or to pay any cash payable on future conversions of the notes as required by the indenture would constitute a default under the indenture. A default under the indenture or the fundamental change itself could also lead to a default under agreements governing our future indebtedness. If the repayment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the indebtedness and repurchase the 2022 Notes or make cash payments upon conversions of the 2022 Notes.

The conditional conversion feature of the 2022 Notes, if triggered, may adversely affect our financial condition and operating results.

If the conditional conversion feature of the 2022 Notes is triggered, holders of the notes will be entitled to convert them at any time during specified periods at their option. If one or more holders elect to convert their notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

The accounting method for convertible debt securities that may be settled in cash, such as the 2022 Notes, could have a material effect on our reported financial results.

In May 2008, the Financial Accounting Standards Board, which we refer to as FASB, issued FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement), which has subsequently been codified as Accounting Standards Codification 470-20, Debt with Conversion and Other Options, which we refer to as ASC 470-20. Under ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments (such as the notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The effect of ASC 470-20 on the accounting for the notes is that the equity component is required to be included in the additional paid-in capital section of stockholders’ equity on our consolidated balance sheet, and the value of the equity component would be treated as original issue discount for purposes of accounting for the debt component of the notes. As a result, we will be required to record a greater amount of non-cash interest expense in current periods presented as a result of the amortization of the discounted carrying value of the notes to their face amount over the term of the notes. We will report lower net income in our financial results because ASC 470-20 will require interest to include both the current period’s amortization of the debt discount and the instrument’s coupon interest, which could adversely affect our reported or future financial results, the trading price of our common stock and the trading price of the notes.

In addition, under certain circumstances, convertible debt instruments (such as the notes) that may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of the notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the notes exceeds their principal amount. Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued. We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method. If we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of the notes, then our diluted earnings per share would be adversely affected.

The convertible note hedge and warrant transactions related to our 2022 Notes may affect the value of our common stock.

In connection with the 2022 Notes offering, we entered into convertible note hedge transactions with affiliates of the initial purchasers of the 2022 Notes, which we refer to as the “option counterparties.” The convertible note hedge transactions are expected generally to reduce the potential dilution upon conversion of the 2022 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes, as the case may be. We also entered into warrant transactions with the option counterparties. The warrant transactions could separately have a dilutive effect on our common stock to the extent that the market price per share of our common stock exceeds the applicable strike price of the warrants.

We are subject to counterparty risk with respect to the convertible note hedge transactions.

We are subject to the risk that the option counterparties may default under the convertible note hedge transactions. Our exposure to the credit risk of the option counterparties will not be secured by any collateral. In the past, economic conditions have resulted in the actual or perceived failure or financial difficulties of a number of financial institutions. If the option counterparties become subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a

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claim equal to our exposure at that time under our transactions with such counterparties. Our exposure will depend on many factors but, generally, the increase in our exposure will be correlated to the increase in the market price and in the volatility of our common stock. In addition, upon a default by the option counterparties, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of the option counterparties.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table summarizes purchases of our ordinary shares made by or on behalf of us or any of our “affiliated purchasers” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, during each fiscal period during the 12 weeks endedSeptember 10, 2016:

Period	Total Number of Shares Purchased (1)		Average Price Paid per Share (4)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(5)	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
June 19, 2016 to July 16, 2016	45	(2)	$	33.29	—	$	—
July 17, 2016 to August 13, 2016	996,400	(3)	$	34.97	—	$	—
August 14, 2016 to September 10, 2016	—		$	—	—	$	—
Total	996,445		$	—	—	$	—

_________________________

(1) This table does not include shares of Common Stock that we withheld in order to satisfy minimum tax withholding requirements in connection with the vesting of restricted stock units or exercise of options or stock appreciation rights.

(2) The number represents the shares of Common Stock that we withheld in order to satisfy minimum tax withholding requirements in connection with the vesting of restricted stock awards.

(3) In conjunction with the issuance of the 2022 Notes, following a press release announcement of July 20, 2016, we repurchased shares of our common stock for $34.8 million (out of an approved amount of $35 million) at a price per share of $34.97 on July 27, 2016. There will be no further repurchases in connection with this transaction.

(4) Average price paid per share of Common Stock does not include brokerage commissions.

(5) The Company does not currently have a share repurchase program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION.

Not applicable.

ITEM 6. EXHIBITS

A list of exhibits filed with this report or incorporated herein by reference is found in the Index to Exhibits immediately following the signature page of this report and is incorporated into this Item 6 by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Blackhawk Network Holdings, Inc.

/s/ Jerry Ulrich

Jerry Ulrich

Chief Financial Officer and Chief Administrative Officer

(Principal Financial Officer and Duly Authorized Signatory)

Date: October 18, 2016

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INDEX TO EXHIBITS

		Incorporated by Reference				Filed Herewith
Exhibit No	Description of Exhibit	Form	File No.	Exhibit(s)	Filing Date
4.1	Indenture related to the 1.50% Convertible Senior Notes due 2022, dated as of July 27, 2016, among Blackhawk Network Holdings, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee	8-K	001-35882	4.1	July 28, 2016
4.2	Form of 1.50% Convertible Senior Note due 2022 (included with Exhibit 4.1)	8-K	001-35882	4.2	July 28, 2016
10.1	Letter Agreement, dated July 21, 2016, between the Company and Wells Fargo Bank, National Association, regarding Note Hedge Transaction	8-K	001-35882	10.1	July 28, 2016
10.2	Letter Agreement, dated July 21, 2016, between the Company and Bank of America, N.A., regarding Note Hedge Transaction	8-K	001-35882	10.2	July 28, 2016
10.3	Letter Agreement, dated July 21, 2016, between the Company and Bank of Montreal, regarding Note Hedge Transaction	8-K	001-35882	10.3	July 28, 2016
10.4	Letter Agreement, dated July 21, 2016, between the Company and Wells Fargo Bank, National Association, regarding Warrant Transaction	8-K	001-35882	10.4	July 28, 2016
10.5	Letter Agreement, dated July 21, 2016, between the Company and Bank of America, N.A., regarding Warrant Transaction	8-K	001-35882	10.5	July 28, 2016
10.6	Letter Agreement, dated July 21, 2016, between the Company and Bank of Montreal, regarding Warrant Transaction	8-K	001-35882	10.6	July 28, 2016
10.7	Letter Agreement, dated July 22, 2016, between the Company and Wells Fargo Bank, National Association, regarding Note Hedge Transaction	8-K	001-35882	10.7	July 28, 2016
10.8	Letter Agreement, dated July 22, 2016, between the Company and Bank of America, N.A., regarding Note Hedge Transaction	8-K	001-35882	10.8	July 28, 2016
10.9	Letter Agreement, dated July 22, 2016, between the Company and Bank of Montreal, regarding Note Hedge Transaction	8-K	001-35882	10.9	July 28, 2016
10.10	Letter Agreement, dated July 22, 2016, between the Company and Wells Fargo Bank, National Association, regarding Warrant Transaction	8-K	001-35882	10.10	July 28, 2016
10.11	Letter Agreement, dated July 22, 2016, between the Company and Bank of America, N.A., regarding Warrant Transaction	8-K	001-35882	10.11	July 28, 2016
10.12	Letter Agreement, dated July 22, 2016, between the Company and Bank of Montreal, regarding Warrant Transaction	8-K	001-35882	10.12	July 28, 2016

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		Incorporated by Reference				Filed Herewith
Exhibit No	Description of Exhibit	Form	File No.	Exhibit(s)	Filing Date
10.13	Amended and Restated Credit Agreement dated as of July 27, 2016, by and among the Company and the lenders identified on the signature pages thereto, including Wells Fargo Bank, National Association, as both lender and administrative agent	8-K	001-35882	10.1	August 1, 2016
10.14	Reaffirmation Agreement dated as of July 27, 2016, executed by the Company and certain of its subsidiaries in favor of Wells Fargo Bank, National Association, as administrative agent	8-K	001-35882	10.2	August 1, 2016
10.15	First Amendment to Lease Agreement, effective as of September 22, 2016, between Blackhawk Network, Inc. and 6200 Stoneridge Mall Road Investors LLC					X
10.16	Separation Agreement, dated as of October 17, 2016, by and between Blackhawk Network, Inc. and Christopher Crum					X
31.1	Certification Required Under Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended					X
31.2	Certification Required Under Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended					X
32.1*	Certification Required Under Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section §1350					X
101.INS	XBRL Instance Document					X
101.SCH	XBRL Taxonomy Extension Schema					X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase					X
101.DEF	XBRL Taxonomy Extension Definition Linkbase					X
101.LAB	XBRL Taxonomy Extension Label Linkbase					X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase					X

______________________

* The certification attached as Exhibit 32.1 to this Quarterly Report is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of this Quarterly Report), irrespective of any general incorporation language contained in such filing.

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EX-10.15

Exhibit 10.15

FIRST AMENDMENT TO LEASE AGREEMENT

THIS FIRST AMENDMENT TO LEASE AGREEMENT (this “Amendment”) is made effective as of September 22, 2016 (the “Effective Date”), and is entered into by and between 6200 STONERIDGE MALL ROAD INVESTORS LLC, a Delaware limited liability company (“Landlord”) and BLACKHAWK NETWORK, INC., an Arizona corporation (“Tenant”).

RECITALS

A.Landlord and Tenant entered into that certain Lease Agreement dated effective as of December 1, 2015 (the “Existing Lease”), pursuant to which Tenant leases approximately 148,902 rentable square feet located at 6220 Stoneridge Mall Road, Pleasanton, California (the “Premises”).

B.Section 61 of the Existing Lease provides for a Termination Option in favor of Tenant and contemplates that the Termination Fee payable in connection with an exercise of such option will be calculated and agreed to between Landlord and Tenant promptly following the mutual execution of the Existing Lease.

C.Landlord and Tenant have agreed on the amount of the Termination Fee and now desire to amend the Existing Lease to, among other things, (i) acknowledge the determination of the Termination Fee, and (ii) provide for an adjustment in the location of certain of the Building’s parking spaces, subject to and in accordance with the following terms and conditions.

AGREEMENT

NOW THEREFORE, in consideration of the agreements of Landlord and Tenant herein contained and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

1. RECITALS

Landlord and Tenant agree the above recitals are true and correct and are hereby incorporated herein as though set forth in full.

2. DEFINITIONS

As of the date hereof, unless context clearly indicates otherwise, all references to "the Lease" or "this Lease" in the Existing Lease or in this Amendment shall be deemed to refer to the Existing Lease, as amended by this Amendment. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Existing Lease unless context clearly indicates otherwise.

3. OPTION TO TERMINATE

Landlord and Tenant acknowledge and agree that the Termination Fee, as contemplated by Paragraph 61 of the Existing Lease, is an amount equal to Six Million Eight Hundred Twenty- One Thousand Nine Hundred Ninety-Seven and 62/100 Dollars ($6,821,997.62). Landlord represents and warrants that it incurred and paid in connection with the Existing Lease brokerage commissions in the amount of $3,176,028.26 and attorneys’ fees in the amount of $30,883.75, amortized portions of which amounts make up a part of the Termination Fee.

4. PARKING AND SITE PLAN

Exhibit A-2 to the Existing Lease is hereby deleted and replaced in its entirety with Exhibit A to this Amendment, and Section 43(a) of the Existing Lease is hereby changed such that the number of parking spaces designated as “Visitor” is reduced from fifteen (15) to twelve (12), and the three parking spaces formerly designated as “Visitor” are now designated as “6220 Stoneridge” parking spaces.

5. GENERAL PROVISIONS

(a)Ratification and Entire Agreement. Except as expressly amended by this Amendment, the Existing Lease shall remain unmodified and in full force and effect. As modified by this Amendment, the Existing Lease is hereby ratified and confirmed in all respects. In the event of any inconsistencies between the terms of this Amendment and the Existing Lease, the terms of this Amendment shall prevail. The Existing Lease as amended by this Amendment constitutes the entire understanding and agreement of Landlord and Tenant with respect to the subject matter hereof, and all prior agreements, representations, and understandings between Landlord and Tenant with respect to the subject matter hereof, whether oral or written, are or should be deemed to be null and void, all of the foregoing having been merged into this Amendment. Landlord and Tenant do each hereby acknowledge that it and/or its counsel have reviewed and revised this Amendment, and agree that no rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall be employed in the interpretation of this Amendment. This Amendment may be amended or modified only by an instrument in writing signed by each of the Landlord and Tenant.

(b)Brokerage. Tenant hereby represents and warrants to Landlord that Tenant has not retained the services of any real estate broker, finder or any other person whose services would form the basis for any claim for any commission or fee in connection with this Amendment or the transactions contemplated hereby. Tenant hereby agrees to save, defend, indemnify and hold Landlord free and harmless from all losses, liabilities, damages, and costs and expenses arising from any breach of its warranty and representation as set forth in the preceding sentence, including Landlord’s reasonable attorneys’ fees.

(c)Authority; Applicable Law; Successors Bound. Landlord and Tenant do each hereby represent and warrant to the other that this Amendment has been duly authorized by all necessary action on the part of such party and that such party has full power and authority to execute, deliver and perform its obligations under this Amendment. This Amendment shall be governed by and construed under the laws of the State of California, without giving effect to any principles of conflicts of law that would result in the application of the laws of any other jurisdiction. This Amendment shall inure to the benefit of and be binding upon Landlord and Tenant and their respective successors and permitted assigns with respect to the Existing Lease.

(d)Counterparts. This Amendment may be executed in one or more counterparts, including any “PDF” or other electronic version of same, each of which shall be deemed an original, but all of which when taken together shall constitute one agreement. Any “PDF” or other electronic signature shall constitute a valid and binding method for executing this Amendment. Executed counterparts of this Amendment exchanged by email or other electronic means shall be fully enforceable.

IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment to be effective as of the Effective Date.

LANDLORD:	6200 STONERIDGE MALL ROAD INVESTORS, LLC,
	a Delaware limited liability company
	By:	TPF Equity REIT Operating Partnership
		LP, a Delaware limited partnership,
		its sole member
		By:	TPF Equity REIT Operating Partnership GP
			LLC, a Delaware limited liability company,
			its general partner
			By:	/s/ Thomas Enger
			Name:	Thomas Enger
			Title:	Managing Director
			Date:	September 30, 2016
			By:	/s/ Andrew Wietstock
			Name:	Andrew Wietstock
			Title:	Associate Director
			Date:	September 30, 2016
TENANT:	BLACKHAWK NETWORK, INC.,
	an Arizona corporation
	By:	/s/ Jerry N. Ulrich
	Name:	Jerry N. Ulrich
	Title:	Chief Financial Officer and Chief Administrative Officer
	Date:	September 28, 2016
	By:	/s/ Suzanne Kinner
	Name:	Suzanne Kinner
	Title:	General Vice President
	Date:	September 28, 2016

EXHIBIT A

SITE PLAN

EX-10.16

Exhibit 10.16

SEPARATION AGREEMENT, GENERAL RELEASE OF CLAIMS

AND COVENANT NOT TO SUE

This Separation Agreement, General Release of Claims and Covenant Not to Sue (sometimes referred to herein as “Release Agreement”) is made on the date signed by Blackhawk Network, Inc., and is made by and between Blackhawk Network, Inc., an Arizona corporation, on the one hand, and Christopher Crum, on the other hand.

“Releasor,” “you”, “your” and similar pronouns as used herein, refers to Christopher Crum, and his marital community, heirs, executors, administrators and assigns.

“Blackhawk Network, Inc.” and “Blackhawk”, as used herein, refers to Blackhawk Network, Inc. and its successors and assigns, parents, subsidiaries, affiliates, divisions, partners, directors, officers, managers, agents and employees, and each of them.

WHEREAS, Releasor desires to compromise, settle and fully release any and all claims which he may have against Blackhawk related in any way to his employment with Blackhawk, any term or condition of that employment, or the termination of that employment, Releasor freely and voluntarily enters into and executes this Release Agreement in consideration of Blackhawk's agreement as follows:

A. Severance. Subject to and in accordance with the terms of this Release Agreement, Blackhawk agrees to pay to Releasor One Hundred Seventy-Nine Thousand Four Hundred Seventy-Seven Dollars and Sixty-One cents ($179,477.61), which represents Twenty-Six (26) weeks of severance pay at his final base salary. These payments shall be made after the Effective Date and during the Severance Period, as defined below, paid as follows: bi-weekly installments will be made for the first Eight (8) weeks according to Blackhawk’s existing pay periods; and a lump sum payment will be made for the Eighteen (18) weeks which is the remainder of the severance pay. Provided that Releasor does not exercise the right of revocation provided for in Paragraph 10(c) below, then (i) the installment severance payment will begin within five (5) business days of the pay period following the expiration of the seven (7) day revocation period described in Paragraph 10(c), and (ii) the lump sum severance payment will be made within ten (10) business days following the expiration of the seven (7) day revocation period described in Paragraph 10(c). If Releasor becomes employed in any other position with Blackhawk during the period the severance payment is paid, the employment will begin promptly, at which time the Severance Period and severance payments will end. The period during which Releasor is entitled to receive severance pay per the terms of this Release Agreement shall be referred to herein as the “Severance Period.”

B. Employee Benefits. Except as otherwise provided in this Release Agreement, Releasor’s employee benefits as a regular employee of Blackhawk shall terminate on the last day of the month of the Effective Date, in accordance with their respective terms and conditions. Blackhawk will reimburse Releasor for six (6) month(s) of COBRA insurance premiums upon Releasor’s submission of evidence of payment of such premiums.

C. Severance Allocation. You agree that the severance payments described in Paragraph A are allocated as follows: (1) ninety percent (90%) of the payments are allocated as consideration for your fulfillment of the obligations needed to avoid termination of payments under Paragraph 2 below, and (2) ten percent (10%) of the payments are allocated as consideration for the Release Agreement’s remaining Releasor obligations.

General Release and Settlement of Claims-Blackhawk Christopher Crum	Page 1 of 6
Blackhawk Confidential

D. Accelerated Vesting. As further consideration for Releasor’s promises made and obligations under this Agreement, Blackhawk shall obtain necessary approval from the appropriate governance body to cause seven thousand one hundred fifty-five (7,155) shares which represent fifty percent (50%) of the Performance Shares that have Performance-Vested (as defined in the 2014 PSU) prior to the Effective Date (as defined below) pursuant to the 2014 Performance Share Agreement (the “2014 PSU”) entered into by Releasor under the Blackhawk Network Holdings, Inc. 2013 Equity Incentive Award Plan to become Vested (as defined in the 2014 PSU) as of the Effective Date. For the avoidance of doubt, Blackhawk shall cause one share of common stock to be paid for each such Vested Performance Share as soon as administrative practicable following the Effective Date, in accordance with the 2014 PSU, and the remaining Performance Shares under the 2014 PSU shall be forfeited.

E. Tax Withholding. Releasor shall be responsible, and agrees to hold harmless and indemnify Blackhawk, for any tax liabilities that he incurs as a result of the severance payment, any other consideration provided by Blackhawk under this Agreement and the issuance of other equity to the Releasor pursuant to the equity award agreements to which the Releasor is a party. Any payments made to Releasor under Sections A-D above shall be less any tax withholdings required by law.

F. Existing Equity Plans.     Except as set forth above in Section D, all of Releasor’s outstanding equity grants will be treated strictly in accordance with the terms of the respective grants and plans.    

In consideration of the foregoing and each payment made thereunder, Releasor agrees as follows:

1.    Termination Date: Releasor’s employment will terminate with Blackhawk effective September 30, 2016 (the “Effective Date”). For clarity, the parties acknowledge that the Effective Date is neither shortened nor extended based on the date when Releasor ceases to engage in work for Blackhawk.

2.    Termination of Severance Payments. As of the Execution Date and the Effective Date, Releasor's entitlement to any future payment under Paragraph A of this Release Agreement shall end, and Blackhawk shall have no further obligations to Releasor, immediately upon Releasor's commencement of employment with, or undertaking to provide any paid or unpaid consulting services to, any person or entity in the gift card payments business, including those listed on Schedule A (“Gift Card Payments Business Companies”)in any geographical location, regardless of whether that is the geographical location in which Releasor was, is or will be assigned to work. Blackhawk shall be entitled to recover (and Releasor shall be deemed to have forfeited) any payments made to Releasor under Paragraph A, if Releasor accepts any employment with such Gift Cards Payments Business Companies during the period equal to twelve (12) months following the Effective Date. Notwithstanding this Paragraph, Releasor shall be entitled to 10% of the total amount of severance payments under this Release Agreement as consideration for Releasor’s remaining obligations under the Release Agreement, including the Release of Claims in Paragraph 3.

3.    Release of Claims. As of the Execution Date and the Effective Date, Releasor hereby releases and forever discharges Blackhawk of and from any and all claims, demands, actions, causes of action, damages and liabilities (all hereinafter referred to as "Claims"), whether or not now known, suspected or claimed, which Releasor possesses from his employment with Blackhawk, and any status, term or condition of such employment or the termination of that employment (“Release”). This Release and Release Agreement is expressly intended to, and does, extend to and include, but is not limited to, Claims under the following (as amended): Title VII of the Civil Rights Act of 1964; the Civil Rights Acts of 1866 and 1867; the Equal Pay Act; the Fair Labor Standards Act; the Age Discrimination in Employment Act of 1967; the Americans With Disabilities Act; the Employee Retirement Income Security Act; the Older Workers Benefit Protection Act; the California Fair Employment & Housing Act; the California Labor Code; the Employee Retirement Income Security Act of 1974; the Civil Rights and Women’s Equity Act of 1991; Sections 1981 through 1988 of Title 42 of the United States Code; the Occupational Safety and Health Act of 1970; the Consolidated Omnibus Budget Reconciliation Act of 1985; the Family and Medical Leave Act of 1993; the Worker Adjustment and Retraining Notification Act of 1988; the Vocational Rehabilitation Act of 1973; the Equal Pay Act of 1963; the National Labor Relations Act; the California Unruh Civil Rights Act; the California Equal Pay Law; any similar or comparable statute or statutes in any state, including, without limitation, the civil rights laws of Arizona, California, Missouri, Nevada and Texas; and any other federal, state or local statutes, ordinances, constitutional provisions or regulations prohibiting any form or forms of discrimination in employment and/or relating to the payment of wages and benefits. This Release and Release Agreement also extends to and includes, but is not limited to, any Claims by Releasor for breach of any express or implied written or oral contract; intentional or negligent infliction of emotional distress;

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impairment or interference with economic activities or opportunities; unlawful interference with employment rights; defamation; wrongful termination; wrongful discharge in violation of public policy; breach of any express or implied covenant of good faith and fair dealing; and any and all other common law contract and/or tort Claims. Released claims shall include any claims for additional compensation, unvested benefits, including any form of unvested equity grants under any Blackhawk equity plan, and future bonus or commissions.

4.    Covenant Not to Sue. Releasor covenants and agrees never, individually or with any other person or entity or in any way, voluntarily to commence, aid in any way, prosecute or cause or permit to be commenced or prosecuted against Blackhawk any action or other proceeding based upon any Claim which is covered and released by this Release Agreement. Notwithstanding this Section, nothing in this Release Agreement prevents me from participating in any investigation or proceeding conducted by the EEOC, NLRB, SEC or comparable federal, state or local agency.

5.    Sole Right to Claims. Releasor represents and warrants that no other person or entity had or has any interest in the Claims referred to in this Release Agreement; that he has the sole right and exclusive authority to execute this Release Agreement; and that he has not sold, assigned, transferred, conveyed or otherwise disposed of any Claim or demand relating to any matter covered by this Release Agreement.

6.    No Admission of Liability. Releasor acknowledges and understands that the consideration referred to herein is provided without admission or concession by Blackhawk of any violation of any law or liability to Releasor; and that said consideration provides his with valuable benefits in addition to any to which he already is entitled under Blackhawk's employee benefit plans or otherwise.

7.    No Other Consideration. Releasor acknowledges and agrees that no consideration other than as provided for in this Release Agreement has been or will be paid or furnished by Blackhawk; that he will make no Claim and hereby waives any right he may now have or may hereafter have, based upon any alleged oral alteration, amendment, modification or any other alleged change in this Release Agreement; and that Releasor understands and has freely and voluntarily entered into and executed this Release Agreement.

8.    Agreement Is Confidential. Releasor and Blackhawk covenant and agree that each will maintain in confidence the terms of this Release Agreement and that, unless required to do so by subpoena or other lawful process, and then only to the extent so required, they will not disclose any information concerning the Release or Release Agreement, or any of its specific terms or provisions, to any person or entity other than Releasor’s attorneys, spouse, accountants or certified financial or tax advisors or Blackhawk’s officers, directors, attorneys, parents, subsidiaries, affiliates or certified or in-house accountants, financial or tax advisors, each of whom upon receipt of such information or this Release Agreement shall be bound by the terms of this Paragraph 8. Notwithstanding the foregoing or the provisions of Paragraph 11, nothing in this Release Agreement prohibits Releasor from exercising rights as specified in Paragraph 13 of this Release Agreement. Pursuant to the Defend Trade Secrets Act of 2016, Releasor understands that he shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made in confidence to a Federal, State, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law. He shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal; and does not disclose the trade secret, except pursuant to court order.

9.    Waiver of Civil Code Section 1542. Releasor expressly waives any right or benefit available in any capacity under the provisions of Section 1542 of the California Civil Code, which section provides:

“A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”

Releasor expressly waives any right or benefit available in any capacity under the provisions of any state, federal or local statute, ordinance, constitutional provision or regulation similar or comparable to the foregoing Section 1542 of the California Civil Code.

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10.    Releasor’s Rights. Releasor understands and agrees that:

(a)    he has a period of twenty-one (21) days to consider this Release Agreement and determine whether he wishes to execute the same (Releasor may waive this 21-day period);

(b)    any rights or claims that may arise after the Effective Date of this Release Agreement are not waived by his execution of the Release;

(c)    he has a non-waivable period of seven (7) days after the Execution Date (as defined in the signature block, below), within which he may revoke the Release Agreement and that the Release Agreement shall not become effective or enforceable until the seven-day revocation period has expired; and        

(d)    in the event that Releasor fails timely to execute this Release Agreement and return the executed original thereof to Blackhawk, or if Releasor timely exercises the right of revocation provided for in Paragraph 10(c), above, then Blackhawk shall be relieved of any and all obligations to Releasor under this Release Agreement.

To the extent Christopher Crum has executed this Release Agreement within less than twenty-one (21) days after its delivery to him; Christopher Crum hereby acknowledges that his decision to execute this Release Agreement before the expiration of such twenty-one (21) day period was entirely voluntary. This Release Agreement is delivered to Releasor on September 23, 2016.

11.    Confidential Information and Non-Solicitation. Releasor covenants and agrees that, without the express written consent of an executive officer of Blackhawk:

A.    He will not at any time, directly or indirectly, reveal or disclose to any person or entity, or otherwise use or exploit for the Releasor’s own benefit or for the benefit of any other person, any confidential, proprietary or trade secret information of or about Blackhawk, or any other Confidential Information, obtained during the course of his employment with Blackhawk; provided, however, that this paragraph shall not in any manner limit the protection of the Blackhawk’s trade secrets afforded by law, and, provided further, that Releasor’s obligations as to trade secrets shall continue indefinitely as provided by law. For purposes of this Paragraph 11, “Confidential Information” shall mean information and the compilation of information related to Blackhawk’s operation and business which derives economic value, actual or potential, from not being generally known to or readily ascertainable by other persons. Confidential Information includes, but is not limited to, the following: any information designated or labeled as ‘confidential’ or ‘proprietary’; any information which is of the type one would reasonably expect a business to maintain in confidence, including without limitation the following: legal or business development strategies, technical information, business information, contractual information, personnel information and information relating to innovative activities, confidential information of third parties to which Blackhawk owes a duty of confidentiality or non-use, financial information, procedures, prototypes and samples, proposals or quotes made to or prepared for customers or prospective customers, vendor and customer lists and pricing information, compilations of information concerning clients or customers and prospective clients or customers, the composition or description of any future products or services that are or may be provided by Blackhawk, Blackhawk marketing or sales information, know how (including but not limited to the unique manner in which Blackhawk conducts business), and payment arrangements with customers or business accounts.

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B.    He shall not, for a period ending one (1) year after the Effective Date hereof, directly or indirectly, for himself or for any other person or entity (i) employ, attempt to employ, or assist in the employment of any of Blackhawk’s current employees with whom Releasor had material contacts, unless such employee has not been employed by Blackhawk for a period in excess of six (6) months, and/or (ii) call on or solicit any of the actual vendors or suppliers (except for legal service vendors or suppliers), customers or targeted prospective customers or clients (including, without limitation, content providers and distribution partners) of Blackhawk with whom Releasor has had material contacts during Releasor’s employment with Blackhawk, for the purpose of providing the same or similar services which Releasor provided to Blackhawk, nor shall Releasor make known the names and addresses of such customers or clients, or any such information relating in any manner to Blackhawk’s trade or business relationships with such customers or clients. Releasor agrees that for purposes of this non-solicitation covenant and agreement, Releasor shall be reasonably considered to have had “material contact” if Releasor dealt on behalf of Blackhawk with the employee, customer or client, or if Releasor supervised any employee or contractor who dealt with the same.

12.    Cooperation in Legal Proceedings. Releasor covenants and agrees that he will cooperate fully when and as reasonably required by Blackhawk in the defense or prosecution of any claims, charges, complaints or lawsuits that have been or may hereafter be filed by or against Blackhawk, in which event Blackhawk will indemnify Releasor in the same manner and to the same extent as if he were still employed by Blackhawk. Such cooperation will include, but is not limited to, meeting with Blackhawk’s counsel and being available for deposition and/or trial testimony upon reasonable notice. Blackhawk agrees that indemnification shall include reimbursement of Releasor for reasonable expenses incurred by his in furnishing such cooperation.

13.    Non-Disparagement; Administrative Charges. Christopher Crum on his own behalf and on behalf of each Releasor covenants and agrees that for a period of one year after the Effective Date, he shall not, whether acting for Releasor or for any third party, disparage the image or reputation of Blackhawk or any of its subsidiaries or affiliates. Blackhawk covenants and agrees that for a period of one year after the Effective Date its officers, senior management employees and professional employees shall not disparage the image or reputation of Christopher Crum. Nothing in any provision of this Release Agreement shall affect Christopher Crum’s right to file a charge with the EEOC, the NLRB, SEC or any other federal, state or local administrative agency, waive his right to file an application for an award for original information submitted pursuant to Section 21F of the Securities Exchange Act of 1934, or limit Christopher Crum’s lawful opportunity to cooperate with or participate in any administrative proceeding or investigation. However, where this is not prohibited by applicable law, rule, or regulation, the severance payments paid to Christopher Crum by this Release Agreement shall be the sole monetary relief available to Christopher Crum for the Claims being released in this Release Agreement, and Christopher Crum will not be entitled to recover, and agrees to waive, any additional personal monetary relief that may be sought from or awarded against Blackhawk in the future without regard to who filed or brought such claim. In addition, nothing in this Agreement shall restrict any legal rights to engage in protected activities regarding the terms and conditions of employment. Notwithstanding this release of liability, nothing in this Release Agreement prevents me from filing any non-legally waivable claim (including a challenge to the validity of this Release Agreement) with the Equal Employment Opportunity Commission (“EEOC”), National Labor Relations Board (“NLRB”), the Securities and Exchange Commission (“SEC”) or comparable federal, state or local agency or participating in any investigation or proceeding conducted by the EEOC, NLRB, SEC or comparable state or local agency; however, I understand and agree that, where this is not prohibited by applicable law, rule, or regulation, I am waiving any and all rights to recover any monetary or personal relief or recovery as a result of such EEOC, NLRB, SEC or comparable federal, state or local agency proceeding or subsequent legal actions.

14.    Injunctive Relief. Releasor understands and agrees that a breach of any of the agreements, covenants, representations or warranties set forth in Paragraphs A, B, 2, 3, 4, 5, 8, 9, 11, 12 and 13 above, shall be a material breach of the Release Agreement, for which Blackhawk may, at its sole option: i) immediately cease providing to Releasor any of the benefits provided for in this Release Agreement; and/or ii) seek injunctive relief, reimbursement, damages, attorneys’ fees and costs.

15.    Governing Law. This Release Agreement shall be governed by the laws of the State of Arizona, without regard to the choice of law provisions thereof. Releasor hereby expressly consents to personal jurisdiction and venue in the State and federal courts located in Contra Costa county, California for any lawsuit arising from or relating to this Release Agreement, without regard to his then-current residence or domicile, and hereby expressly and irrevocably waives any objection to such jurisdiction and venue.

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16.    Attorneys’ Fees and Expenses. If an action is brought by either Party for breach of any provision of this Agreement, the non-breaching Party shall be entitled to recover all reasonable attorneys' fees and costs in defending or bringing such an action.

17.    Severability. In case any provision of this Release Agreement shall be determined to be invalid, illegal, or unenforceable for any reason, the remaining provisions of this Release Agreement shall be unaffected and unimpaired thereby and shall remain in full force and effect to the fullest extent permitted by law.

18.    Voluntary Execution of Agreement. This Release Agreement is executed voluntarily and without any duress or undue influence on the part or behalf of the parties hereto, with the full intent of releasing all claims. Christopher Crum hereby acknowledges that (a) he has read this Release Agreement, (b) he has been represented in the preparation, negotiation, and execution of this Release Agreement by legal counsel of his own choice or that he has voluntarily declined to seek such counsel, (c) he understands the terms and consequences of this Release Agreement and of the releases it contains, and (d) he is fully aware of the legal and binding effect of this Release Agreement.

19.    Counterparts. This Release Agreement may be signed in counterpart originals with the same force and effect as though a single original were executed.

20.    Entire Agreement. Except to the extent subject matter in this Release Agreement limits rights of Blackhawk (including its predecessors) in any prior agreements between the parties, this Release Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter of the Release Agreement, and the Release Agreement supersedes all prior agreements between the parties with respect to the subject matter covered herein, whether written or oral, except as otherwise expressly provided herein. Notwithstanding the foregoing, nothing herein is intended to supersede, limit or replace any prior non-competition, non-solicitation, and/or non-disclosure covenants or agreements, which shall continue and remain in full force and effect per the terms of those covenants/agreements. Where the subject matter in this Release Agreement would otherwise limit Blackhawk’s rights in any prior agreements between the parties, all Blackhawk rights related to such subject matter are incorporated herein and preserved to the fullest extent allowable by applicable law.

Dated:	October 13, 2016		/s/ Christopher Crum
	(“Execution Date”)		Christopher Crum
Dated:	October 17, 2016		Blackhawk Network Inc.
		By:	/s/ Suzanne Kinner
		Name:	Suzanne Kinner
		Its:	GVP, Human Resources

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EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Talbott Roche, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Blackhawk Network Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 18, 2016

/s/ Talbott Roche

Talbott Roche

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Jerry Ulrich, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Blackhawk Network Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 18, 2016

/s/ Jerry Ulrich

Jerry Ulrich

Chief Financial Officer and Chief Administrative Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350),Talbott Roche, Chief Executive Officer of Blackhawk Network Holdings, Inc. (the “Company”), and Jerry Ulrich, Chief Financial Officer of the Company, each hereby certifies that, to the best of her or his knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the period ended September 10, 2016, to which this Certification is attached as Exhibit 32.1 (this “Quarterly Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

2. The information contained in this Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

In Witness Whereof, the undersigned have set their hands hereto as of October 18, 2016.

/s/ Talbott Roche	/s/ Jerry Ulrich
Talbott Roche	Jerry Ulrich
President and Chief Executive Officer	Chief Financial Officer and Chief Administrative Officer
(Principal Executive Officer)	(Principal Financial Officer)

This certification accompanies this Quarterly Report to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of this Quarterly Report), irrespective of any general incorporation language contained in such filing.

XML

Document and Entity Information - shares	8 Months Ended
	Sep. 10, 2016	Oct. 12, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 10, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Entity Registrant Name	BLACKHAWK NETWORK HOLDINGS, INC
Entity Central Index Key	0001411488
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		55,377,000

XML

Condensed Consolidated Balance Sheets - Unaudited - USD ($) $ in Thousands	Sep. 10, 2016	Jan. 02, 2016	Sep. 12, 2015
Current assets:
Cash and cash equivalents	$ 300,349	$ 914,576	$ 214,722
Restricted cash	2,500	3,189	43,043
Settlement receivables, net	275,471	626,077	240,273
Accounts receivable, net	199,552	241,729	188,912
Other current assets	123,919	103,319	107,950
Total current assets	901,791	1,888,890	794,900
Property, equipment and technology, net	168,865	159,357	154,085
Intangible assets, net	293,034	240,898	230,213
Goodwill	508,607	402,489	382,803
Deferred income taxes	352,683	339,558	361,284
Other assets	69,039	81,764	78,294
TOTAL ASSETS	2,294,019	3,112,956	2,001,579
Current liabilities:
Settlement payables	522,133	1,605,021	469,590
Consumer and customer deposits	115,085	84,761	102,633
Accounts payable and accrued operating expenses	103,920	119,087	112,753
Deferred revenue	113,867	113,458	91,474
Note payable, current portion	9,846	37,296	37,378
Notes payable to Safeway	3,239	4,129	13,129
Bank line of credit	0	0	100,000
Other current liabilities	48,630	57,342	43,320
Total current liabilities	916,720	2,021,094	970,277
Deferred income taxes	19,930	18,652	14,735
Note payable	137,848	324,412	325,151
Convertible notes payable	425,833	0	0
Other liabilities	25,429	14,700	4,867
Total liabilities	1,525,760	2,378,858	1,315,030
Commitments and contingencies (see Note 9)
Stockholders’ equity:
Preferred stock: $0.001 par value; 10,000 shares authorized; no shares outstanding	0	0	0
Common stock: $0.001 par value; 210,000 shares authorized; 55,368, 55,794 and 54,641 shares outstanding, respectively	55	56	55
Additional paid-in capital	594,739	561,939	547,230
Accumulated other comprehensive loss	(34,398)	(40,195)	(31,535)
Retained earnings	203,791	207,973	166,370
Total Blackhawk Network Holdings, Inc. equity	764,187	729,773	682,120
Non-controlling interests	4,072	4,325	4,429
Total stockholders’ equity	768,259	734,098	686,549
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$ 2,294,019	$ 3,112,956	$ 2,001,579

XML

Condensed Consolidated Balance Sheets - Unaudited (Parenthetical) - $ / shares	Sep. 10, 2016	Jan. 02, 2016	Sep. 12, 2015
Statement of Financial Position [Abstract]
Preferred stock, par value (in usd per share)	$ 0.001	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000	10,000,000
Preferred stock, shares outstanding	0	0	0
Common stock, par value (in usd per share)	$ 0.001	$ 0.001	$ 0.001
Common stock, shares authorized	210,000,000	210,000,000	210,000,000
Common stock, shares outstanding	55,368,000	55,794,000	54,641,000

XML

Condensed Consolidated Statements of Income (Loss) - Unaudited - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		8 Months Ended
	Sep. 10, 2016	Sep. 12, 2015	Sep. 10, 2016	Sep. 12, 2015
OPERATING REVENUES:
Commissions and fees	$ 248,138	$ 231,492	$ 750,693	$ 709,339
Program and other fees	64,857	61,416	207,718	171,942
Marketing	17,943	16,311	52,098	59,112
Product sales	30,622	43,446	108,719	104,251
Total operating revenues	361,560	352,665	1,119,228	1,044,644
OPERATING EXPENSES:
Partner distribution expense	178,363	161,852	541,749	494,193
Processing and services	75,090	68,246	224,331	198,272
Sales and marketing	52,327	49,954	166,176	156,653
Costs of products sold	29,122	40,577	103,163	97,593
General and administrative	22,501	22,136	70,130	62,186
Transition and acquisition	2,574	5,275	4,160	6,091
Amortization of acquisition intangibles	10,376	6,875	35,533	18,352
Change in fair value of contingent consideration	1,300	0	2,100	(7,567)
Total operating expenses	371,653	354,915	1,147,342	1,025,773
OPERATING INCOME (LOSS)	(10,093)	(2,250)	(28,114)	18,871
OTHER INCOME (EXPENSE):
Interest income and other income (expense), net	2,360	(1,421)	3,258	(1,938)
Interest expense	(5,684)	(3,231)	(13,868)	(8,566)
INCOME (LOSS) BEFORE INCOME TAX EXPENSE	(13,417)	(6,902)	(38,724)	8,367
INCOME TAX EXPENSE (BENEFIT)	(8,357)	(3,290)	(18,884)	4,435
NET INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS	(5,060)	(3,612)	(19,840)	3,932
Loss (income) attributable to non-controlling interests, net of tax	(42)	(3)	(152)	63
NET INCOME (LOSS) ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC.	$ (5,102)	$ (3,615)	$ (19,992)	$ 3,995
EARNINGS (LOSS) PER SHARE:
Basic (in usd per share)	$ (0.09)	$ (0.07)	$ (0.36)	$ 0.07
Diluted (in usd per share)	$ (0.09)	$ (0.07)	$ (0.36)	$ 0.07
Weighted average shares outstanding—basic (in shares)	55,668	54,467	55,851	53,941
Weighted average shares outstanding—diluted (in shares)	55,668	54,467	55,851	55,994

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Condensed Consolidated Statements of Comprehensive Income (Loss) - Unaudited - USD ($) $ in Thousands	3 Months Ended		8 Months Ended
	Sep. 10, 2016	Sep. 12, 2015	Sep. 10, 2016	Sep. 12, 2015
Statement of Comprehensive Income [Abstract]
NET INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS	$ (5,060)	$ (3,612)	$ (19,840)	$ 3,932
Other comprehensive income (loss):
Currency translation adjustments	(2,504)	(7,104)	5,547	(12,386)
COMPREHENSIVE INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS	(7,564)	(10,716)	(14,293)	(8,454)
Comprehensive loss (income) attributable to non-controlling interests, net of tax	129	361	98	384
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC.	$ (7,435)	$ (10,355)	$ (14,195)	$ (8,070)

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Condensed Consolidated Statements of Cash Flows - Unaudited - USD ($) $ in Thousands	8 Months Ended
	Sep. 10, 2016	Sep. 12, 2015
OPERATING ACTIVITIES:
Net income (loss) before allocation to non-controlling interests	$ (19,840)	$ 3,932
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization of property, equipment and technology	33,096	27,765
Amortization of intangibles	38,988	21,634
Amortization of deferred program and contract costs	18,805	20,032
Employee stock-based compensation expense	24,865	19,856
Change in fair value of contingent consideration	2,100	(7,567)
Deferred income taxes	0	13,371
Other	5,780	5,496
Changes in operating assets and liabilities:
Settlement receivables	359,398	274,941
Settlement payables	(1,091,151)	(906,181)
Accounts receivable, current and long-term	44,585	(3,573)
Other current assets	3,940	(20,562)
Other assets	(9,299)	(9,996)
Consumer and customer deposits	13,963	(31,140)
Accounts payable and accrued operating expenses	(28,775)	(9,695)
Deferred revenue	2,703	(8,105)
Other current and long-term liabilities	(24,912)	4,385
Income taxes, net	(13,883)	(15,492)
Net cash used in operating activities	(639,637)	(620,899)
INVESTING ACTIVITIES:
Expenditures for property, equipment and technology	(33,522)	(37,310)
Business acquisitions, net of cash acquired	(144,284)	(78,394)
Investment in unconsolidated entities	(3,901)	0
Change in restricted cash	689	(38,043)
Other	4,000	(561)
Net cash used in investing activities	(177,018)	(154,308)
FINANCING ACTIVITIES:
Payments for acquisition liability	0	(1,811)
Repayment of debt assumed in business acquisitions	(8,964)	0
Proceeds from issuance of note payable	250,000	0
Repayment of note payable	(463,750)	(11,250)
Payments of financing costs	(15,926)	(724)
Borrowings under revolving bank line of credit	1,959,749	1,536,083
Repayments on revolving bank line of credit	(1,959,749)	(1,436,083)
Proceeds from convertible debt	500,000	0
Payments for bond hedges	(75,750)	0
Proceeds from warrants	47,000	0
Repayment on notes payable to Safeway	(890)	(6,320)
Proceeds from issuance of common stock from exercise of employee stock options and employee stock purchase plans	4,491	8,055
Other stock-based compensation related	(2,135)	(675)
Repurchase of common stock	(34,845)	0
Other	(155)	(1,494)
Net cash provided by financing activities	199,076	85,781
Effect of exchange rate changes on cash and cash equivalents	3,352	(7,467)
Decrease in cash and cash equivalents	(614,227)	(696,893)
Cash and cash equivalents—beginning of period	914,576	911,615
Cash and cash equivalents—end of period	300,349	214,722
NONCASH FINANCING AND INVESTING ACTIVITIES
Net deferred tax assets recognized for tax basis step-up with offset to Additional paid-in capital	0	366,306
Note payable to Safeway contributed to Additional paid-in capital	0	8,229
Financing of business acquisition with contingent consideration	20,100	0
Intangible assets recognized for warrants issued	$ 0	$ 3,147

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The Company and Significant Accounting Policies

8 Months Ended

Sep. 10, 2016

Accounting Policies [Abstract]

The Company and Significant Accounting Policies

The Company and Significant Accounting Policies

The Company

Blackhawk Network Holdings, Inc., together with its subsidiaries (we, us, our, the Company), is a leading prepaid payment network utilizing proprietary technology to offer a broad range of prepaid gift, telecom and debit cards, in physical and electronic forms, as well as related prepaid products and payment services in the United States and 23 other countries. Our product offerings include single-use gift cards; loyalty, incentive and reward products and services; prepaid telecom products and prepaid financial services products, including general purpose reloadable (GPR) cards, and our reload network (collectively, prepaid products). We offer gift cards from leading consumer brands (known as closed loop) as well as branded gift and incentive cards from leading payment network card associations such as American Express, Discover, MasterCard and Visa (known as open loop) and prepaid telecom products offered by prepaid wireless telecom carriers. We also distribute GPR cards and operate a proprietary reload network named Reloadit, which allows consumers to reload funds onto their previously purchased GPR cards. We distribute these prepaid products across multiple high-traffic channels such as grocery, convenience, specialty and online retailers (referred to as retail distribution partners) in the Americas, Europe, Africa, Australia and Asia and provide these prepaid products and related services to business clients for their loyalty, incentive and reward programs.

Basis of Presentation

The accompanying condensed consolidated financial statements of Blackhawk Network Holdings, Inc. are unaudited. We have prepared our unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. We have condensed or omitted certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP pursuant to such rules and regulations. Accordingly, our interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K, filed with the SEC on March 2, 2016 (the Annual Report). We have prepared our condensed consolidated financial statements on the same basis as our annual audited consolidated financial statements and, in the opinion of management, have reflected all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position and results of operations for the interim periods presented. Our results for the interim periods are not necessarily reflective of the results to be expected for the year ending December 31, 2016 or for any other interim period or other future year. Our condensed consolidated balance sheet as of January 2, 2016, included herein was derived from our audited consolidated financial statements as of that date but does not include all disclosures required by GAAP for annual financial statements, including notes to the financial statements.

Seasonality

A significant portion of gift card sales occurs in late December of each year during the holiday selling season. As a result, we earn a significant portion of revenues, net income and cash inflows during the fourth fiscal quarter of each year and remit the majority of the cash, less commissions, to our content providers in January of the following year. The timing of our fiscal year-end, December holiday sales and the related January cash settlement with content providers significantly increases our Cash and cash equivalents, Settlement receivables and Settlement payables balances at the end of each fiscal year relative to normal daily balances. The cash settlement with our content providers in January accounts for the majority of the use of cash from operating activities in our condensed consolidated statements of cash flows during our first three fiscal quarters. Additionally, our operating income may fluctuate significantly during our first three fiscal quarters due to lower revenues and timing of certain expenses during such fiscal periods. As a result, quarterly financial results are not necessarily reflective of the results to be expected for the year, any other interim period or other future year.

Recently Issued or Adopted Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides additional guidance on the presentation and classification of certain items in the statement of cash flows. Early adoption is permitted and the standard shall be applied retrospectively. We early adopted ASU 2016-15 during our third quarter of 2016. Adoption did not result in significant changes to our existing accounting policies or presentation.

In April and May 2016, the FASB issued ASU 2016-10, and ASU 2016-12, Revenue from Contracts with Customers (Topic 606), which provides additional guidance, narrow-scope improvements and practical expedients to the new revenue standard (Topic 606) that will be applicable for reporting periods beginning after December 15, 2017. Early adoption is not permitted. Management is evaluating the impact of this guidance on our financial statements.

In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in DebtInstruments, which clarifies the requirements for assessing certain contingent put or call options in debt instruments. Early adoption is permitted and the standard shall be applied using a modified retrospective basis. We early adopted ASU 2016-06 during our third quarter of 2016 in conjunction with our issuance of the Convertible Senior Notes (see Note 3—Financing). Adoption did not result in significant changes to our existing accounting policies.

In March 2016, the FASB issued ASU 2016-04 Liabilities—Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Cards, effective for fiscal years beginning after December 15, 2017. ASU 2016-04 defines liabilities related to the sale of certain prepaid stored-value cards as financial liabilities and provides guidance for the derecognition of liabilities and recognition of revenue related to the portion of the stored value that ultimately is not redeemed by customers (breakage). Early adoption is permitted and the standard shall be applied using either a modified retrospective basis or a retrospective basis. We early adopted ASU 2016-04 during our first quarter of 2016 on a modified retrospective basis because we believe that derecognition of these liabilities more accurately reflects the economics of such transactions. Accordingly, we recognized a cumulative adjustment benefit of $6.1 million, net of income taxes, to beginning Retained earnings as of January 3, 2016.

In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718). The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. We early adopted ASU 2016-09 during our first quarter of 2016 on a modified retrospective basis for the income statement impact of forfeitures and income taxes and have retrospectively applied ASU 2016-09 to our condensed consolidated statements of cash flows for the impact of excess tax benefits. Accordingly, we recognized a cumulative adjustment charge of $0.3 million for the adoption of the impact of forfeitures, net of income taxes, and a cumulative adjustment benefit of $10.1 million for the excess tax benefit for the exercise of warrants from prior fiscal years to beginning Retained earnings as of January 3, 2016.

Significant Accounting Policies

There have been no material changes to our significant accounting policies, as compared to the significant accounting policies described in the audited consolidated financial statements and related notes included in the Annual Report. As a result of early adopting ASU 2016-04 and ASU 2016-09 (discussed above), we provide below our policies with respect to breakage and stock-based compensation.

Breakage Revenue

We refer to the portion of the dollar value of prepaid-stored value cards that consumers do not ultimately redeem as breakage. Where we expect to be entitled to a breakage amount, we recognize revenue using estimated breakage rates ratably over the estimated card life, provided that a significant reversal of the amount of breakage revenue recognized is not probable and record adjustments to such estimates when redemption is remote or we are legally defeased of the obligation, if applicable. We estimate breakage rates based on historical redemption patterns, market-specific trends, escheatment rules and existing economic conditions for each program. In card programs where we do not expect to be entitled to a breakage amount, we recognize breakage revenue when we consider redemption remote or we are legally defeased of the obligation, if applicable.

Stock-based Compensation

As a result of our adoption of ASU 2016-09, we recognize the impact of forfeitures when they occur with no adjustment for estimated forfeitures and recognize excess tax benefits as a reduction of income tax expense regardless of whether the benefit reduces income taxes payable. Additionally, we recognize the cash flow impact of such excess tax benefits in operating activities in our condensed consolidated statements of cash flows.

Reclassification

In our condensed consolidated statements of income (loss), we have reclassified Marketing revenue to a separate line item, previously reported in Program, interchange, marketing and other fees and have renamed such line as Program and other fees.

As a result of our retrospective adoption ASU 2015-17 in the fourth quarter of 2015 to classify all deferred income taxes as long-term assets or liabilities, we have retrospectively applied the guidance to our deferred income taxes as of September 12, 2015.

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Business Acquisitions

8 Months Ended

Sep. 10, 2016

Business Combinations [Abstract]

Business Acquisitions

Business Acquisitions

2016 Acquisitions

Omni Prepaid

On January 5, 2016, we acquired Omni Prepaid, LLC and its subsidiaries GiftCards.com, LLC, which sells digital and physical prepaid gift card solutions to consumers through a high-trafficked gift card U.S. website, and OmniCard, LLC, which sells customized prepaid incentive and reward solutions for business clients (collectively, GiftCards). The new sites and customers will expand our e-commerce businesses.

The purchase consideration totaled $103.9 million in cash which we funded using a combination of cash on hand and borrowings under our Credit Agreement. The following table presents our initial estimates of the purchase price allocation, and we may make adjustments to these amounts through the one year measurement period as we finalize information regarding our forecasts, valuation assumptions, income taxes and contingencies (in thousands):

Cash	$	3,985
Consumer and customer deposits	(5,429		)
Accounts payable and accrued operating expenses	(9,860		)
Other tangible assets, net	893
Debt	(5,807		)
Identifiable technology and intangible assets	52,460
Goodwill	67,706
Total purchase consideration	$	103,948

At closing, we repaid the assumed debt, which we present in financing activities in our condensed consolidated statements of cash flows, and paid $8.1 million of GiftCards' transaction expenses included above within accounts payable and accrued operating expenses, which we present in operating activities in our condensed consolidated statements of cash flows.

Goodwill primarily represents the value of cash flows from future customers. We expect to deduct goodwill and the identifiable technology and intangible assets for tax purposes.

The following table presents the components of the identifiable technology and intangible assets and the estimated useful lives (in thousands):

	Fair Value		Useful Life
Customer relationships	$	27,570	10 years
Backlog	10,780		3 years
Domain name	10,520		10 years
Technology	3,590		5 years
Total identifiable technology and intangible assets	$	52,460

Customer relationships represent the estimated fair value of the underlying relationships and agreements with GiftCards' business clients and consumers. Backlog represents the estimated fair value resulting from cards issued before the acquisition date, resulting from revenues, including interchange and account service fees. Domain name represents the estimated fair value of the giftcards.com domain name. Technology represents internal-use software used for the order, fulfillment and management of customer orders.

We valued customer relationships, backlog and domain name using the income approach and the technology using the cost approach. Significant assumptions include forecasts of revenues, costs of revenue, development costs and sales, general and administrative expenses and estimated attrition rates for business clients and consumers. We discounted the cash flows at various rates from 6.0% to 11.0%, reflecting the different risk profiles of the assets.

Acquisition-related expenses totaled $0.4 million, which we report in Transition and acquisition expense.

Other 2016 Acquisitions

During the first quarter of 2016, we also acquired NimbleCommerce, a digital commerce platform and network for promotions. NimbleCommerce also allows merchants and brands to manage their own prepaid offer and gift card programs, or resell through a network of retailer and publisher branded sites. During the second quarter of 2016, we acquired substantially all of the net assets of Extrameasures, a prepaid consumer promotions and incentives company. Through its customized rebate programs, Extrameasures offers Visa prepaid cards and private label merchant-specific reward and gift cards with a proprietary platform to help businesses drive consumer acquisition, engagement and loyalty.

The purchase consideration for NimbleCommerce and Extrameasures totaled $78.6 million, consisting of $58.5 million in cash and $20.1 million in the estimated fair value of contingent consideration. Contingent consideration resulting from our acquisition of Extrameasures consists of three cash payments of up to $15 million each, based on the financial performance of Extrameasures for each of the three annual post-acquisition periods. Approximately 10% of the earnout payments will be allocated to employees. Accordingly, we exclude such amounts from the estimated fair value of the contingent consideration and accrue estimated amounts due over the service period. We estimated the fair value of contingent consideration using the income approach at a discount rate of 17%.

The following table presents our initial estimates of the purchase price allocation, and we may make adjustments to these amounts through the one year measurement period as we finalize information regarding our forecasts, valuation assumptions, income taxes and contingencies (in thousands):

Cash	$	14,191
Settlement receivables	4,884
Settlement payables	(3,272		)
Consumer and customer deposits	(18,009		)
Other tangible liabilities, net	(1,155		)
Debt	(3,157		)
Deferred income taxes	2,066
Identifiable technology and intangible assets	45,540
Goodwill	37,525
Total purchase consideration	$	78,613

At closing, we repaid the assumed debt, which we present in financing activities in our condensed consolidated statements of cash flows, and paid $1.0 million of transaction expenses, which we present in operating activities in our condensed consolidated statements of cash flows.

Goodwill primarily represents the value of cash flows from future customers. We expect to deduct approximately $1.4 million of the total $10.4 million goodwill from our acquisition of NimbleCommerce for tax purposes and may currently deduct up to $2.3 million of the total $27.2 million goodwill from our acquisition of Extrameasures for tax purposes. For Extrameasures, we will be able to deduct additional goodwill based on the actual payments made under the contingent earnout and settlement of contingent liabilities.

The following table presents the components of the identifiable technology and intangible assets and the estimated useful lives (in thousands):

	Fair Value		Useful Life
Customer relationships	$	39,230	10 years
Backlog	1,610		3 years
Technology	4,700		5 years
Total identifiable technology and intangible assets	$	45,540

We valued customer relationships, backlog and certain technology using the income approach and certain technology using the cost approach. Significant assumptions include forecasts of revenues, costs of revenue, development costs and sales, general and administrative expenses and estimated attrition rates for business clients. We discounted the cash flows at various rates from 9.0% to 16.0%, reflecting the different risk profiles of the assets.

Acquisition-related expenses totaled $0.9 million, which we include in Transition and acquisition expense.

Pro Forma Financial Information

The following pro forma financial information summarizes the combined results of operations of us, GiftCards and Extrameasures as though we had been combined as of the beginning of fiscal 2015 (in thousands, except per share amounts):

	12 weeks ended						36 weeks ended
	September 10, 2016			September 12, 2015			September 10, 2016			September 12, 2015
Total revenues	$	364,129		$	364,400		$	1,127,178		$	1,068,882
Net income (loss) attributable to Blackhawk Network Holdings, Inc.	(3,626		)	(3,959		)	(14,469		)	(1,124		)
Pro forma EPS—Basic	$	(0.07	)	$	(0.07	)	$	(0.26	)	$	(0.02	)
Pro forma EPS—Diluted	$	(0.07	)	$	(0.07	)	$	(0.26	)	$	(0.02	)

The pro forma financial information includes adjustments to reclassify acquisition-related costs from 2016 to 2015, to amortize technology and intangible assets starting at the beginning of 2015, and to reflect the impact on revenue resulting from the step-down in basis of consumer and customer deposits from its book value to its fair value as of the beginning of 2015.

We have not presented separate results of operations since closing for GiftCards because its integration with our existing operations makes it impractical to do so. In addition, results of operations for Extrameasures and NimbleCommerce are immaterial, both individually and in the aggregate.

Subsequent Event

On October 6, 2016, we acquired the outstanding common stock of Grass Roots Group Holdings, Ltd. and its subsidiaries, a leading provider of employee and customer engagement solutions, for purchase consideration of £93.7 million, or $119.1 million based on the exchange rate on the acquisition date. The acquisition broadens the global capabilities of our incentives and engagement business. We are in the process of gathering the information to allocate the purchase price and accordingly are unable to provide initial allocation estimates nor provide pro forma financial information.

2015 Acquisitions

During the 36 weeks endedSeptember 10, 2016, we recorded a measurement period adjustment for Achievers, acquired in June 2015, which decreased deferred revenue by $3.6 million, intangible assets by $1.9 million, goodwill by $1.2 million and deferred income tax assets by $0.5 million. The measurement periods for Achievers and Didix are now closed.

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Financing

8 Months Ended

Sep. 10, 2016

Debt Disclosure [Abstract]

Financing

Financing

Credit Agreement

On January 25, 2016, we exercised our option to draw down an incremental $100 million term loan under our Credit Agreement.

On July 27, 2016, in conjunction with the issuance of the Convertible Senior Notes, as described below, we entered into an amendment and restatement to our Credit Agreement (the Restated Credit Agreement). We repaid all amounts outstanding under our revolving line of credit and $276 million of the $426 million outstanding under our term loan such that $150 million remained outstanding under our term loan. The Restated Credit Agreement provides for the extension of credit in an aggregate principal amount up to $700 million, consisting of revolving loans up to $400 million (the Revolving Credit Facility) and term loans up to $300 million (the Term Loan Facility). The term loan has $150 million outstanding with a delayed draw option for up to an additional $150 million. The Restated Credit Agreement also includes an ability to increase aggregate commitments by up to an incremental $300 million if certain criteria are met and lenders choose to participate. The Restated Credit Agreement extended the term of the Credit Agreement to July 2021 and made certain modifications to the financial and other covenants to add operating flexibility, including modification of the leverage covenant and removal of the net worth covenant and the dollar limitation on acquisitions.

Convertible Senior Notes

On July 27, 2016, we issued $500 million aggregate principal amount of 1.50% Convertible Senior Notes due in January 2022 (the Notes), in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933 (the Securities Act). The Notes have not been registered under the Securities Act, or applicable state securities laws or blue sky laws, and may not be offered or sold in the United States absent registration under the Securities Act and applicable state securities laws or available exemptions from the registration requirements.

The Notes are senior unsecured obligations and rank equally in right of payment with all of our future senior unsecured indebtedness and are junior to our existing and future secured indebtedness. The Notes pay interest in cash semi-annually (January and July) at a rate of 1.50% per annum.

On or after September 15, 2021, until the second scheduled trading day immediately preceding the maturity date, the Notes may be converted at the option of the holders. Holders may convert the Notes at their option prior to September 15, 2021 only under the following circumstances:

1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2016 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;

2) during the five business day period after any five consecutive trading day period (the measurement period) in which the “trading price” per $1,000 principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; or

3) upon the occurrence of specified corporate events, including if there is a fundamental change.

Upon conversion, we will pay or deliver cash, shares of our own common stock or a combination, at our election.

The conversion rate is initially 20.0673 shares of common stock per $1,000 principal amount of the Notes (equivalent to an initial conversion price of approximately $49.83 per share of common stock), subject to certain adjustments.

We may not redeem the Notes prior to the maturity date. At an event of default, holders may, upon satisfaction of certain conditions, accelerate the principal amount of the Notes plus accrued and unpaid interest. If we undergo a fundamental change, a holder may require us to repurchase for cash all or any portion of its Notes at a price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest.

We separately account for the liability and equity components of the Notes. The initial debt component of the Notes was valued at $436.6 million based on the contractual cash flows discounted at an appropriate comparable market non-convertible debt borrowing rate at the date of issuance of 4.1%, with the equity component representing the residual amount of the proceeds which was recorded as a debt discount. We allocated the issuance costs pro-rata based on the relative initial carrying amounts of the debt and equity components, including the Note Hedges and Warrants transactions described below. As a result, $1.8 million of the issuance costs were allocated to the equity component of the Notes and $12.3 million of issuance costs were allocated to the liability component of the Notes and accounted for as a debt discount. We amortize the issuance costs allocated to the liability component as additional interest expense over the term of the Notes using the effective interest method. The effective interest rate of the Notes is 4.65% per annum (1.50% coupon rate plus 3.15% of non-cash accretion expense).

Convertible Note Hedges and Warrants

Concurrent with the pricing of the Notes, we purchased call options for our own common stock to hedge the Notes (the Note Hedges) and sold call options for our own common stock (the Warrants). We structured the Note Hedges to reduce potential dilution to our common stock upon any conversion of Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be. However, the Warrants could separately have a dilutive effect to the extent that the market value per share of our common stock exceeds the strike price of the Warrants.

The Note Hedges—On July 21 and 22, 2016, we purchased Note Hedges from certain counterparties for an aggregate price of approximately $75.8 million. The Note Hedges are exercisable upon conversion of the Notes for cash, a number of shares of our common stock or a combination of cash and shares of our common stock generally based on the amount by which the market price per share of our common stock, as measured under the terms of the Note Hedges during the relevant valuation period, is greater than the strike price of the Note Hedges. The strike price of the Note Hedges initially corresponds to the conversion price of the Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the Notes, subject to certain exceptions. Under the terms of the Note Hedges, we will receive cash, shares or a combination of cash and shares that offsets share dilution caused by conversion of the Notes.

Warrants—On July 21 and 22, 2016, we sold call options to the same counterparties for approximately $47.0 million, which give the counterparties the right to buy from us up to approximately 10.0 million shares of our common stock, subject to adjustments, at an exercise price of $61.20 per share, subject to adjustments, over a series of days commencing on April 18, 2022 and ending August 9, 2022. Upon each exercise of the Warrants, we will be obligated to deliver shares of our common stock having a value equal to the difference between the market price on the exercise date and the strike price of the Warrants.

The Note Hedges and Warrants are classified in stockholders’ equity on our condensed consolidated balance sheets. We also recognized a $5.2 million deferred tax asset with an offset to Additional paid-in capital for excess tax interest deductions relating to the Notes and Note Hedges.

Maturities of Long-Term Debt

As a result of the Amendment and the Notes, the following table presents the amounts due by year of maturity for our term loan and the Notes (in thousands):

	As of July 27, 2016
2017	$	10,000
2018	7,500
2019	7,500
2020	15,000
2021	110,000
2022	500,000
Total long-term debt	$	650,000

Share Repurchase

In conjunction with the issuance of the Notes, on July 27, 2016, we repurchased approximately 1.0 million shares of our common stock for $34.8 million.

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Fair Value Measurements

8 Months Ended

Sep. 10, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

We measure certain assets and liabilities at fair value on a recurring basis. The table below summarizes the fair values of these assets and liabilities as of September 10, 2016, January 2, 2016 and September 12, 2015 (in thousands):

	September 10, 2016
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents
Money market mutual funds	$	5,112	$	—	$	—	$	5,112
Liabilities
Contingent consideration	$	—	$	—	$	22,200	$	22,200

	January 2, 2016
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents
Money market mutual funds	$	370,070	$	—	$	—	$	370,070
Liabilities
Contingent consideration	$	—	$	—	$	—	$	—

	September 12, 2015
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents
Money market mutual funds	$	5,070	$	—	$	—	$	5,070
Liabilities
Contingent consideration	$	—	$	—	$	—	$	—

Level 1— Unadjusted quoted prices in active markets for identical assets or liabilities. Level 1 investments include money market mutual funds.

Level 2— Inputs other than quoted prices included in Level 1 that are either directly or indirectly observable. Level 2 investments include commercial paper.

In the 36 weeks endedSeptember 10, 2016, there were no transfers between Level 1 and Level 2.

Level 3— Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the inputs that market participants would use in pricing. Level 3 includes the estimated fair value of our contingent consideration liabilities.

Contingent Consideration—We estimate the fair value of the contingent consideration based on our estimates of the probability of achieving the relevant targets and discount rates reflecting the risk of meeting these targets.

Term loan —As of September 10, 2016, using Level 2 inputs, we estimate the fair value of our term loan to be approximately $150.0 million.

Convertible notes payable—As of September 10, 2016, using Level 2 inputs, we estimate the fair value of our convertible notes payable to be approximately $490.6 million.

The changes in fair value of contingent consideration for the 36 weeks endedSeptember 10, 2016 and September 12, 2015 are as follows (in thousands):

	36 weeks ended
	September 10, 2016		September 12, 2015
Contingent Consideration
Balance, beginning of period	$	—	$	7,567
Issuance of contingent consideration	20,100		—
Change in fair value of contingent consideration	2,100		(7,567		)
Balance, end of period	$	22,200	$	—

We present the change in the fair value of contingent consideration in Change in fair value of contingent consideration and as a non-cash adjustment to net income in our condensed consolidated statements of cash flows. The decrease in fair value of contingent consideration related to our acquisition of CardLab for the 36 weeks endedSeptember 12, 2015 resulted from the projected failure of financial targets to be met relating to the launch of incentive programs during the contingent earn-out measurement period. Such measurement period concluded during the 36 weeks endedSeptember 10, 2016 with no amounts due. The issuance and increase in fair value of contingent consideration during the 36 weeks endedSeptember 10, 2016 related to our acquisition of Extrameasures (see Note 2—Business Acquisitions). The increase in fair value reflects the passage of time and increases in our projections of the payment of portions of the earn-out. As of September 10, 2016, we estimated the fair value of the remaining contingent consideration based on our estimates of the amounts payable for and probability of achieving the relevant targets and a discount rate of 17%. A significant increase (decrease) in our estimates of the amounts payable for and probability of achieving the relevant targets or a significant decrease (increase) in the discount rate could materially increase (decrease) the estimated fair value of contingent consideration.

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Consolidated Financial Statement Details

8 Months Ended

Sep. 10, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Consolidated Financial Statement Details

Consolidated Financial Statement Details

The following tables represent the components of Other current assets, Other assets, Other current liabilities and Other liabilities as of September 10, 2016, January 2, 2016 and September 12, 2015 consisted of the following (in thousands):

	September 10, 2016		January 2, 2016		September 12, 2015
Other current assets:
Inventory	$	35,634	$	36,528	$	47,272
Deferred expenses	12,099		18,182		10,854
Income tax receivables	38,427		14,831		20,632
Other	37,759		33,778		29,192
Total other current assets	$	123,919	$	103,319	$	107,950
Other assets:
Deferred program and contract costs	$	44,388	$	50,717	$	52,428
Other receivables	1,390		2,281		4,734
Income taxes receivable	—		6,155		6,368
Deferred financing costs	2,871		2,100		2,002
Other	20,390		20,511		12,762
Total other assets	$	69,039	$	81,764	$	78,294
Other current liabilities:
Payroll and related liabilities	$	25,425	$	34,530	$	23,103
Income taxes payable	3,158		3,216		2,122
Acquisition liability	11,250		—		607
Other payables and accrued liabilities	8,797		19,596		17,488
Total other current liabilities	$	48,630	$	57,342	$	43,320
Other liabilities:
Acquisition liability	$	10,950	$	—	$	—
Payable to content provider	—		—		825
Income taxes payable	6,213		4,249		2,418
Deferred income and other liabilities	8,266		10,451		1,624
Total other liabilities	$	25,429	$	14,700	$	4,867

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Goodwill

8 Months Ended

Sep. 10, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill

We have assigned goodwill to our US Retail, International Retail and Incentives & Rewards segments. To date, we have not recorded any impairment charges against or disposed of any reporting units with goodwill. During the first quarter of 2016, as a result of changes in reporting financial results to our Chief Operating Decision Maker, we concluded that we should split our historical e-Commerce operating segment, which we had reported in Incentives & Rewards reportable segment, into two operating segments: e-Commerce Retail, which we now report in US Retail reportable segment, and e-Commerce Incentives, which we continue to report in Incentives & Rewards reportable segment. Accordingly, we allocated the goodwill from the historical e-Commerce segment between these two segments based on their relative fair values. We allocated the goodwill from our acquisition of GiftCards between these two segments. A summary of changes in goodwill during the 36 weeks endedSeptember 10, 2016 is as follows (in thousands):

	September 10, 2016
	US Retail		International Retail		Incentives & Rewards			Total
Balance, beginning of period	$	42,729	$	49,156	$	310,604		$	402,489
Re-allocation of e-Commerce goodwill	2,671		—		(2,671		)	—
Acquisition of GiftCards	34,427		—		33,279			67,706
Acquisition of NimbleCommerce	10,365		—		—			10,365
Acquisition of Extrameasures	—		—		27,160			27,160
Measurement period adjustment	—		—		(1,234		)	(1,234		)
Foreign currency translation adjustments	—		1,639		482			2,121
Balance, end of period	$	90,192	$	50,795	$	367,620		$	508,607

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Stockholders' Equity and Stock Based Compensation

8 Months Ended

Sep. 10, 2016

Equity [Abstract]

Stockholders' Equity and Stock Based Compensation

Stockholders’ Equity and Stock Based Compensation

Stockholders’ Equity

During the 36 weeks endedSeptember 10, 2016, the issuance of our Convertible Senior Notes, the purchase of the Note Hedges, the sale of the Warrants (see Note 3—Financing) and our adoption of ASU 2016-04 and 2016-09 on a modified retrospective basis had a significant impact on Additional paid-in capital and Retained earnings. Accordingly, we present in the tables below a reconciliation of such balances from January 2, 2016 to September 10, 2016.

The following table presents the changes within Additional paid-in capital during the 36 weeks endedSeptember 10, 2016 (in thousands except average price per share):

BALANCE—January 2, 2016	$	561,939
Cumulative adjustment upon modified retrospective adoption of ASU 2016-09 (see Note 1—The Company and Significant Accounting Policies)	650
Employee-related stock-based activity	28,940
Equity component of convertible notes issuance (see Note 3—Financing)	63,434
Equity component of convertible notes issuance costs (see Note 3—Financing)	(1,792		)
Purchase of convertible notes hedges (see Note 3—Financing)	(75,750		)
Proceeds from sale of warrants (see Note 3—Financing)	47,000
Deferred tax assets recognized for convertible notes (see Note 3—Financing)	5,161
Repurchase of common stock (996 shares at an average price of $34.98 per share)	(34,843		)
BALANCE— September 10, 2016	$	594,739

The following table presents the changes within Retained earnings during the 36 weeks endedSeptember 10, 2016 (in thousands):

BALANCE—January 2, 2016	$	207,973
Cumulative adjustment upon modified retrospective adoption of ASU 2016-04 and 2016-09 (see Note 1—The Company and Significant Accounting Policies)	15,854
Net loss	(19,992		)
Dividends paid	(44		)
BALANCE— September 10, 2016	$	203,791

Stock Based Compensation

During the 36 weeks endedSeptember 10, 2016, our Board of Directors granted 1,129,019 restricted stock units, 172,300 performance stock units and 584,350 stock options at a weighted-average exercise price of $37.90 per share.

The following table presents total stock-based compensation expense according to the income statement line in our condensed consolidated statements of income (loss) for the 12 and 36 weeks endedSeptember 10, 2016 and September 12, 2015 (in thousands):

	12 weeks ended				36 weeks ended
	September 10, 2016		September 12, 2015		September 10, 2016		September 12, 2015
Processing and services	$	1,364	$	1,530	$	4,259	$	4,366
Sales and marketing	2,759		2,038		8,600		5,523
Cost of products sold	31		13		89		25
General and administrative	4,139		3,536		11,917		9,942
Total stock-based compensation expense	$	8,293	$	7,117	$	24,865	$	19,856

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Income Taxes

8 Months Ended

Sep. 10, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Our effective tax rates were 62.3% and 47.7% for the 12 weeks endedSeptember 10, 2016 and September 12, 2015, respectively, and 48.8% and 53.0% for the 36 weeks endedSeptember 10, 2016 and September 12, 2015, respectively. The effective rate for the 12 weeks ended September 10, 2016 was higher due to a discrete tax benefit for a tax return to provision true-up, resulting in an increase to the effective tax rate due to pre-tax loss, and permanent tax adjustments from deemed foreign income and nondeductible acquisition expenses. The effective rate for the 36 weeks ended September 10, 2016 was lower due to a net reduction in 2015 in the value of our deferred tax assets from changes in certain state tax apportionment laws (which resulted in an increase to the effective tax rate for the 36 weeks ended September 12, 2015), partially offset by a discrete tax benefit for a tax return to provision true-up and excess tax benefits for employee stock based compensation, both increasing the effective tax rate due to pre-tax loss.

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Commitments and Contingencies

8 Months Ended

Sep. 10, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Contingencies

From time to time, we enter into contracts containing provisions that require us to indemnify various parties against certain potential claims from third parties. Under contracts with certain issuing banks, we are responsible to the banks for any unrecovered overdrafts on cardholders’ accounts. Under contracts with certain content providers, retail distribution partners and issuing banks, we are responsible for potential losses resulting from certain claims from third parties. Because the indemnity amounts associated with these agreements are not explicitly stated, the maximum amount of the obligation cannot be reasonably estimated. Historically, we have paid immaterial amounts pursuant to these indemnification provisions.

We are subject to audits related to various indirect taxes, including, but not limited to, sales and use taxes, value-added tax, and goods and services tax, in various foreign and state jurisdictions. We evaluate our exposure related to these audits and potential audits and do not believe that it is probable that any audit would hold us liable for any material amounts due.

Legal Matters

There are various claims and lawsuits arising in the normal course of business pending against us, including the matters described below, some of which seek damages and other relief which, if granted, may require future cash expenditures. Management does not believe that it is probable that the resolution of these matters would result in any liability that would materially affect our results of operations or financial condition.

On March 30, 2015, Greg Haney in his capacity as Seller Representative for CardLab, Inc. filed a lawsuit against us in the Delaware Chancery Court (CardLab, Inc. v. Blackhawk Network Holdings, Inc., Case No. 10851). The complaint generally alleges that we failed to disclose material information relating to a potential earn-out payment in connection with our acquisition of CardLab, Inc. in 2014. We believe that the suit is without merit, and are vigorously defending ourselves against these claims. On June 8, 2015, we filed a motion to dismiss the complaint. On June 22, 2015, the plaintiff filed an amended complaint. On July 7, 2015, we filed a motion to dismiss the case in its entirety. On February 26, 2016, the Court granted the motion to dismiss in part, dismissing two claims of the amended complaint. On March 25, 2016 we filed our answer denying the remaining claims and a counterclaim for attorneys’ fees pursuant to the merger agreement between the parties. On June 22, 2016, the plaintiff filed a motion to dismiss our counterclaim for indemnification. On July 22, 2016, we filed an amended counterclaim in response. The litigation is in the early stage of discovery. We believe the likelihood of loss is remote.

In addition, we transact business in non-U.S. markets and may, from time to time, be subject to disputes and tax audits by foreign tax authorities related to indirect taxes typically on commissions or fees we receive from non-resident content providers. As a result of an indemnification that we received, our exposure has decreased from $12 million as reported in our Annual Report to approximately $5 million, primarily in a single jurisdiction. In that jurisdiction, we have lost an appeal over a dispute related to a specific period. Even if we were to be assessed for other periods, which we currently estimate could be up to approximately $5 million, we believe it is more likely than not that we will prevail upon appeal.

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Segment Reporting

8 Months Ended

Sep. 10, 2016

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

Our three reportable segments are US Retail, International Retail and Incentives & Rewards. During the first quarter of 2016, as a result of changes in reporting financial results to our Chief Operating Decision Maker (CODM), we concluded that we should split our historical e-Commerce segment, which we had reported in Incentives & Rewards, into two segments: e-Commerce Retail, which we report in US Retail, and e-Commerce Incentives, which we report in Incentives & Rewards. We have not retroactively adjusted 2015 segment information as the results of the e-Commerce Retail segment were immaterial.

We do not assess performance based on assets and do not provide information on the assets of our reportable segments to our CODM. The key metrics used by our CODM to assess segment performance include Operating revenues, Operating revenues, net of Partner distribution expense and segment profit.

We exclude from the determination of segment profit and report in Corporate and Unallocated: i) certain US operations, account management and marketing personnel who primarily support our US Retail segment (as these costs are not included in segment profit reviewed by the CODM), ii) the substantial majority of our technology personnel and related depreciation and amortization of technology and related hardware which support our US Retail and International Retail segments, iii) US accounting, finance, legal, human resources and other administrative functions which may support all segments and iv) noncash charges including amortization of acquisition intangibles, stock-based compensation and change in fair value of contingent consideration, as we do not include these costs in segment profit reviewed by our CODM. Segment profit for our International Retail segment includes all sales and marketing personnel and the substantial majority of operations, legal, accounting, finance and other administrative personnel in such international regions, and segment profit for our Incentives & Rewards segment includes all sales, marketing, technology, operations, legal, certain accounting, finance and other administrative personnel supporting that segment, as well as substantially all depreciation and amortization specifically related to that segment.

The following tables present the key metrics used by our CODM for the evaluation of segment performance, including certain significant noncash charges (consisting of certain depreciation and amortization of property, equipment and technology and distribution partner stock-based compensation expense) which have been deducted from the segment profit amounts shown below, and reconciliations of these amounts to our consolidated financial statements (in thousands):

	12 weeks ended
	September 10, 2016
	US Retail		International Retail		Incentives & Rewards		Corporate and Unallocated			Consolidated
Total operating revenues	$	197,081	$	100,069	$	64,410	$	—		$	361,560
Partner distribution expense	103,601		69,841		4,921		—			178,363
Operating revenues, net of Partner distribution expense	93,480		30,228		59,489		—			183,197
Other operating expenses	58,192		25,158		50,779		59,161			193,290
Segment profit (loss) / Operating income (loss)	$	35,288	$	5,070	$	8,710	$	(59,161	)	(10,093		)
Other income (expense)										(3,324		)
Loss before income tax expense										$	(13,417	)
Non-cash charges	$	1,570	$	772	$	7,562	26,715

	12 weeks ended
	September 12, 2015
	US Retail		International Retail		Incentives & Rewards		Corporate and Unallocated			Consolidated
Total operating revenues	$	214,941	$	83,671	$	54,053	$	—		$	352,665
Partner distribution expense	101,890		56,972		2,990		—			161,852
Operating revenues, net of Partner distribution expense	113,051		26,699		51,063		—			190,813
Other operating expenses	69,877		22,751		46,674		53,761			193,063
Segment profit (loss) / Operating income (loss)	$	43,174	$	3,948	$	4,389	$	(53,761	)	(2,250		)
Other income (expense)										(4,652		)
Income before income tax expense										$	(6,902	)
Non-cash charges	$	1,270	$	431	$	6,233	22,934

	36 weeks ended
	September 10, 2016
	US Retail		International Retail		Incentives & Rewards		Corporate and Unallocated			Consolidated
Total operating revenues	$	652,359	$	279,311	$	187,558	$	—		$	1,119,228
Partner distribution expense	330,283		198,703		12,763		—			541,749
Operating revenues, net of Partner distribution expense	322,076		80,608		174,795		—			577,479
Other operating expenses	202,384		69,134		154,796		179,279			605,593
Segment profit (loss) / Operating income (loss)	$	119,692	$	11,474	$	19,999	$	(179,279	)	(28,114		)
Other income (expense)										(10,610		)
Loss before income tax expense										$	(38,724	)
Non-cash charges	$	4,976	$	3,441	$	20,932	80,680

	36 weeks ended
	September 12, 2015
	US Retail		International Retail		Incentives & Rewards		Corporate and Unallocated			Consolidated
Total operating revenues	$	659,984	$	251,249	$	133,411	$	—		$	1,044,644
Partner distribution expense	313,628		169,578		10,987		—			494,193
Operating revenues, net of Partner distribution expense	346,356		81,671		122,424		—			550,451
Other operating expenses	209,856		73,665		110,462		137,597			531,580
Segment profit (loss) / Operating income (loss)	$	136,500	$	8,006	$	11,962	$	(137,597	)	18,871
Other income (expense)										(10,504		)
Income before income tax expense										$	8,367
Non-cash charges	$	3,741	$	860	$	11,488	51,423

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Earnings Per Share

8 Months Ended

Sep. 10, 2016

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

The following table provides reconciliations of net income and shares used in calculating basic EPS to those used in calculating diluted EPS (in thousands, except per share amounts):

	12 weeks ended
	September 10, 2016						September 12, 2015
	Basic			Diluted			Basic			Diluted
Net income (loss) attributable to Blackhawk Network Holdings, Inc.	$	(5,102	)	$	(5,102	)	$	(3,615	)	$	(3,615	)
Distributed and undistributed earnings allocated to participating securities	—			—			—			—
Net income (loss) attributable to common stockholders	$	(5,102	)	$	(5,102	)	$	(3,615	)	$	(3,615	)
Weighted-average common shares outstanding	55,668			55,668			54,467			54,467
Common share equivalents				—						—
Weighted-average shares outstanding				55,668						54,467
Earnings (loss) per share	$	(0.09	)	$	(0.09	)	$	(0.07	)	$	(0.07	)

	36 weeks ended
	September 10, 2016						September 12, 2015
	Basic			Diluted			Basic			Diluted
Net income (loss) attributable to Blackhawk Network Holdings, Inc.	$	(19,992	)	$	(19,992	)	$	3,995		$	3,995
Distributed and undistributed earnings allocated to participating securities	(15		)	(15		)	(46		)	(46		)
Net income (loss) attributable to common stockholders	$	(20,007	)	$	(20,007	)	$	3,949		$	3,949
Weighted-average common shares outstanding	55,851			55,851			53,941			53,941
Common share equivalents				—						2,053
Weighted-average shares outstanding				55,851						55,994
Earnings (loss) per share	$	(0.36	)	$	(0.36	)	$	0.07		$	0.07

The weighted-average common shares outstanding for diluted EPS excluded approximately 4,416,000 and 5,020,000 potential common shares outstanding for the 12 weeks endedSeptember 10, 2016 and September 12, 2015 and 4,329,000 for the 36 weeks endedSeptember 10, 2016 due to the net loss attributable to common shareholders. Also excluded were approximately 1,850,000 and 576,000 potential common stock outstanding for the 12 weeks endedSeptember 10, 2016 and September 12, 2015, respectively, and 1,642,000 and 555,000 for the 36 weeks endedSeptember 10, 2016 and September 12, 2015, respectively, because the effect would have reduced weighted-average shares outstanding. Potential common stock outstanding results in fewer common share equivalents as a result of the treasury stock method.

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The Company and Significant Accounting Policies (Policies)

8 Months Ended

Sep. 10, 2016

Accounting Policies [Abstract]

The Company

The Company

Blackhawk Network Holdings, Inc., together with its subsidiaries (we, us, our, the Company), is a leading prepaid payment network utilizing proprietary technology to offer a broad range of prepaid gift, telecom and debit cards, in physical and electronic forms, as well as related prepaid products and payment services in the United States and 23 other countries. Our product offerings include single-use gift cards; loyalty, incentive and reward products and services; prepaid telecom products and prepaid financial services products, including general purpose reloadable (GPR) cards, and our reload network (collectively, prepaid products). We offer gift cards from leading consumer brands (known as closed loop) as well as branded gift and incentive cards from leading payment network card associations such as American Express, Discover, MasterCard and Visa (known as open loop) and prepaid telecom products offered by prepaid wireless telecom carriers. We also distribute GPR cards and operate a proprietary reload network named Reloadit, which allows consumers to reload funds onto their previously purchased GPR cards. We distribute these prepaid products across multiple high-traffic channels such as grocery, convenience, specialty and online retailers (referred to as retail distribution partners) in the Americas, Europe, Africa, Australia and Asia and provide these prepaid products and related services to business clients for their loyalty, incentive and reward programs.

Basis of Presentation

Basis of Presentation

The accompanying condensed consolidated financial statements of Blackhawk Network Holdings, Inc. are unaudited. We have prepared our unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. We have condensed or omitted certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP pursuant to such rules and regulations. Accordingly, our interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K, filed with the SEC on March 2, 2016 (the Annual Report). We have prepared our condensed consolidated financial statements on the same basis as our annual audited consolidated financial statements and, in the opinion of management, have reflected all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position and results of operations for the interim periods presented. Our results for the interim periods are not necessarily reflective of the results to be expected for the year ending December 31, 2016 or for any other interim period or other future year. Our condensed consolidated balance sheet as of January 2, 2016, included herein was derived from our audited consolidated financial statements as of that date but does not include all disclosures required by GAAP for annual financial statements, including notes to the financial statements.

Seasonality

Seasonality

A significant portion of gift card sales occurs in late December of each year during the holiday selling season. As a result, we earn a significant portion of revenues, net income and cash inflows during the fourth fiscal quarter of each year and remit the majority of the cash, less commissions, to our content providers in January of the following year. The timing of our fiscal year-end, December holiday sales and the related January cash settlement with content providers significantly increases our Cash and cash equivalents, Settlement receivables and Settlement payables balances at the end of each fiscal year relative to normal daily balances. The cash settlement with our content providers in January accounts for the majority of the use of cash from operating activities in our condensed consolidated statements of cash flows during our first three fiscal quarters. Additionally, our operating income may fluctuate significantly during our first three fiscal quarters due to lower revenues and timing of certain expenses during such fiscal periods. As a result, quarterly financial results are not necessarily reflective of the results to be expected for the year, any other interim period or other future year.

Recently Issued or Adopted Accounting Pronouncements

Recently Issued or Adopted Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides additional guidance on the presentation and classification of certain items in the statement of cash flows. Early adoption is permitted and the standard shall be applied retrospectively. We early adopted ASU 2016-15 during our third quarter of 2016. Adoption did not result in significant changes to our existing accounting policies or presentation.

In April and May 2016, the FASB issued ASU 2016-10, and ASU 2016-12, Revenue from Contracts with Customers (Topic 606), which provides additional guidance, narrow-scope improvements and practical expedients to the new revenue standard (Topic 606) that will be applicable for reporting periods beginning after December 15, 2017. Early adoption is not permitted. Management is evaluating the impact of this guidance on our financial statements.

In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in DebtInstruments, which clarifies the requirements for assessing certain contingent put or call options in debt instruments. Early adoption is permitted and the standard shall be applied using a modified retrospective basis. We early adopted ASU 2016-06 during our third quarter of 2016 in conjunction with our issuance of the Convertible Senior Notes (see Note 3—Financing). Adoption did not result in significant changes to our existing accounting policies.

In March 2016, the FASB issued ASU 2016-04 Liabilities—Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Cards, effective for fiscal years beginning after December 15, 2017. ASU 2016-04 defines liabilities related to the sale of certain prepaid stored-value cards as financial liabilities and provides guidance for the derecognition of liabilities and recognition of revenue related to the portion of the stored value that ultimately is not redeemed by customers (breakage). Early adoption is permitted and the standard shall be applied using either a modified retrospective basis or a retrospective basis. We early adopted ASU 2016-04 during our first quarter of 2016 on a modified retrospective basis because we believe that derecognition of these liabilities more accurately reflects the economics of such transactions. Accordingly, we recognized a cumulative adjustment benefit of $6.1 million, net of income taxes, to beginning Retained earnings as of January 3, 2016.

In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation (Topic 718). The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. We early adopted ASU 2016-09 during our first quarter of 2016 on a modified retrospective basis for the income statement impact of forfeitures and income taxes and have retrospectively applied ASU 2016-09 to our condensed consolidated statements of cash flows for the impact of excess tax benefits. Accordingly, we recognized a cumulative adjustment charge of $0.3 million for the adoption of the impact of forfeitures, net of income taxes, and a cumulative adjustment benefit of $10.1 million for the excess tax benefit for the exercise of warrants from prior fiscal years to beginning Retained earnings as of January 3, 2016.

Breakage Revenue

Breakage Revenue

We refer to the portion of the dollar value of prepaid-stored value cards that consumers do not ultimately redeem as breakage. Where we expect to be entitled to a breakage amount, we recognize revenue using estimated breakage rates ratably over the estimated card life, provided that a significant reversal of the amount of breakage revenue recognized is not probable and record adjustments to such estimates when redemption is remote or we are legally defeased of the obligation, if applicable. We estimate breakage rates based on historical redemption patterns, market-specific trends, escheatment rules and existing economic conditions for each program. In card programs where we do not expect to be entitled to a breakage amount, we recognize breakage revenue when we consider redemption remote or we are legally defeased of the obligation, if applicable.

Stock-based Compensation

Stock-based Compensation

As a result of our adoption of ASU 2016-09, we recognize the impact of forfeitures when they occur with no adjustment for estimated forfeitures and recognize excess tax benefits as a reduction of income tax expense regardless of whether the benefit reduces income taxes payable. Additionally, we recognize the cash flow impact of such excess tax benefits in operating activities in our condensed consolidated statements of cash flows.

Reclassification

Reclassification

In our condensed consolidated statements of income (loss), we have reclassified Marketing revenue to a separate line item, previously reported in Program, interchange, marketing and other fees and have renamed such line as Program and other fees.

As a result of our retrospective adoption ASU 2015-17 in the fourth quarter of 2015 to classify all deferred income taxes as long-term assets or liabilities, we have retrospectively applied the guidance to our deferred income taxes as of September 12, 2015.

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Business Acquisitions (Tables)

8 Months Ended

Sep. 10, 2016

Business Combinations [Abstract]

Schedule of Initial Purchase Price Allocation

The following table presents our initial estimates of the purchase price allocation, and we may make adjustments to these amounts through the one year measurement period as we finalize information regarding our forecasts, valuation assumptions, income taxes and contingencies (in thousands):

Cash	$	14,191
Settlement receivables	4,884
Settlement payables	(3,272		)
Consumer and customer deposits	(18,009		)
Other tangible liabilities, net	(1,155		)
Debt	(3,157		)
Deferred income taxes	2,066
Identifiable technology and intangible assets	45,540
Goodwill	37,525
Total purchase consideration	$	78,613

The following table presents our initial estimates of the purchase price allocation, and we may make adjustments to these amounts through the one year measurement period as we finalize information regarding our forecasts, valuation assumptions, income taxes and contingencies (in thousands):

Cash	$	3,985
Consumer and customer deposits	(5,429		)
Accounts payable and accrued operating expenses	(9,860		)
Other tangible assets, net	893
Debt	(5,807		)
Identifiable technology and intangible assets	52,460
Goodwill	67,706
Total purchase consideration	$	103,948

Summary of Identifiable Technology and Intangible Assets at Date of Acquisition

The following table presents the components of the identifiable technology and intangible assets and the estimated useful lives (in thousands):

	Fair Value		Useful Life
Customer relationships	$	39,230	10 years
Backlog	1,610		3 years
Technology	4,700		5 years
Total identifiable technology and intangible assets	$	45,540

The following table presents the components of the identifiable technology and intangible assets and the estimated useful lives (in thousands):

	Fair Value		Useful Life
Customer relationships	$	27,570	10 years
Backlog	10,780		3 years
Domain name	10,520		10 years
Technology	3,590		5 years
Total identifiable technology and intangible assets	$	52,460

Summary of Pro Forma Financial Information

The following pro forma financial information summarizes the combined results of operations of us, GiftCards and Extrameasures as though we had been combined as of the beginning of fiscal 2015 (in thousands, except per share amounts):

	12 weeks ended						36 weeks ended
	September 10, 2016			September 12, 2015			September 10, 2016			September 12, 2015
Total revenues	$	364,129		$	364,400		$	1,127,178		$	1,068,882
Net income (loss) attributable to Blackhawk Network Holdings, Inc.	(3,626		)	(3,959		)	(14,469		)	(1,124		)
Pro forma EPS—Basic	$	(0.07	)	$	(0.07	)	$	(0.26	)	$	(0.02	)
Pro forma EPS—Diluted	$	(0.07	)	$	(0.07	)	$	(0.26	)	$	(0.02	)

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Financing (Tables)

8 Months Ended

Sep. 10, 2016

Debt Disclosure [Abstract]

Schedule of Maturities of Long-term Debt

As a result of the Amendment and the Notes, the following table presents the amounts due by year of maturity for our term loan and the Notes (in thousands):

	As of July 27, 2016
2017	$	10,000
2018	7,500
2019	7,500
2020	15,000
2021	110,000
2022	500,000
Total long-term debt	$	650,000

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Fair Value Measurements (Tables)

8 Months Ended

Sep. 10, 2016

Fair Value Disclosures [Abstract]

Summary of Fair Value of Assets, Liabilities and Equity Instruments on Recurring Basis

The table below summarizes the fair values of these assets and liabilities as of September 10, 2016, January 2, 2016 and September 12, 2015 (in thousands):

	September 10, 2016
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents
Money market mutual funds	$	5,112	$	—	$	—	$	5,112
Liabilities
Contingent consideration	$	—	$	—	$	22,200	$	22,200

	January 2, 2016
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents
Money market mutual funds	$	370,070	$	—	$	—	$	370,070
Liabilities
Contingent consideration	$	—	$	—	$	—	$	—

	September 12, 2015
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents
Money market mutual funds	$	5,070	$	—	$	—	$	5,070
Liabilities
Contingent consideration	$	—	$	—	$	—	$	—

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation

The changes in fair value of contingent consideration for the 36 weeks endedSeptember 10, 2016 and September 12, 2015 are as follows (in thousands):

	36 weeks ended
	September 10, 2016		September 12, 2015
Contingent Consideration
Balance, beginning of period	$	—	$	7,567
Issuance of contingent consideration	20,100		—
Change in fair value of contingent consideration	2,100		(7,567		)
Balance, end of period	$	22,200	$	—

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Consolidated Financial Statement Details (Tables)

8 Months Ended

Sep. 10, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Other Current Assets

The following tables represent the components of Other current assets, Other assets, Other current liabilities and Other liabilities as of September 10, 2016, January 2, 2016 and September 12, 2015 consisted of the following (in thousands):

	September 10, 2016		January 2, 2016		September 12, 2015
Other current assets:
Inventory	$	35,634	$	36,528	$	47,272
Deferred expenses	12,099		18,182		10,854
Income tax receivables	38,427		14,831		20,632
Other	37,759		33,778		29,192
Total other current assets	$	123,919	$	103,319	$	107,950
Other assets:
Deferred program and contract costs	$	44,388	$	50,717	$	52,428
Other receivables	1,390		2,281		4,734
Income taxes receivable	—		6,155		6,368
Deferred financing costs	2,871		2,100		2,002
Other	20,390		20,511		12,762
Total other assets	$	69,039	$	81,764	$	78,294
Other current liabilities:
Payroll and related liabilities	$	25,425	$	34,530	$	23,103
Income taxes payable	3,158		3,216		2,122
Acquisition liability	11,250		—		607
Other payables and accrued liabilities	8,797		19,596		17,488
Total other current liabilities	$	48,630	$	57,342	$	43,320
Other liabilities:
Acquisition liability	$	10,950	$	—	$	—
Payable to content provider	—		—		825
Income taxes payable	6,213		4,249		2,418
Deferred income and other liabilities	8,266		10,451		1,624
Total other liabilities	$	25,429	$	14,700	$	4,867

Schedule of Other Assets

The following tables represent the components of Other current assets, Other assets, Other current liabilities and Other liabilities as of September 10, 2016, January 2, 2016 and September 12, 2015 consisted of the following (in thousands):

	September 10, 2016		January 2, 2016		September 12, 2015
Other current assets:
Inventory	$	35,634	$	36,528	$	47,272
Deferred expenses	12,099		18,182		10,854
Income tax receivables	38,427		14,831		20,632
Other	37,759		33,778		29,192
Total other current assets	$	123,919	$	103,319	$	107,950
Other assets:
Deferred program and contract costs	$	44,388	$	50,717	$	52,428
Other receivables	1,390		2,281		4,734
Income taxes receivable	—		6,155		6,368
Deferred financing costs	2,871		2,100		2,002
Other	20,390		20,511		12,762
Total other assets	$	69,039	$	81,764	$	78,294
Other current liabilities:
Payroll and related liabilities	$	25,425	$	34,530	$	23,103
Income taxes payable	3,158		3,216		2,122
Acquisition liability	11,250		—		607
Other payables and accrued liabilities	8,797		19,596		17,488
Total other current liabilities	$	48,630	$	57,342	$	43,320
Other liabilities:
Acquisition liability	$	10,950	$	—	$	—
Payable to content provider	—		—		825
Income taxes payable	6,213		4,249		2,418
Deferred income and other liabilities	8,266		10,451		1,624
Total other liabilities	$	25,429	$	14,700	$	4,867

Schedule of Other Current Liabilities

The following tables represent the components of Other current assets, Other assets, Other current liabilities and Other liabilities as of September 10, 2016, January 2, 2016 and September 12, 2015 consisted of the following (in thousands):

	September 10, 2016		January 2, 2016		September 12, 2015
Other current assets:
Inventory	$	35,634	$	36,528	$	47,272
Deferred expenses	12,099		18,182		10,854
Income tax receivables	38,427		14,831		20,632
Other	37,759		33,778		29,192
Total other current assets	$	123,919	$	103,319	$	107,950
Other assets:
Deferred program and contract costs	$	44,388	$	50,717	$	52,428
Other receivables	1,390		2,281		4,734
Income taxes receivable	—		6,155		6,368
Deferred financing costs	2,871		2,100		2,002
Other	20,390		20,511		12,762
Total other assets	$	69,039	$	81,764	$	78,294
Other current liabilities:
Payroll and related liabilities	$	25,425	$	34,530	$	23,103
Income taxes payable	3,158		3,216		2,122
Acquisition liability	11,250		—		607
Other payables and accrued liabilities	8,797		19,596		17,488
Total other current liabilities	$	48,630	$	57,342	$	43,320
Other liabilities:
Acquisition liability	$	10,950	$	—	$	—
Payable to content provider	—		—		825
Income taxes payable	6,213		4,249		2,418
Deferred income and other liabilities	8,266		10,451		1,624
Total other liabilities	$	25,429	$	14,700	$	4,867

Schedule of Other Liabilities

The following tables represent the components of Other current assets, Other assets, Other current liabilities and Other liabilities as of September 10, 2016, January 2, 2016 and September 12, 2015 consisted of the following (in thousands):

	September 10, 2016		January 2, 2016		September 12, 2015
Other current assets:
Inventory	$	35,634	$	36,528	$	47,272
Deferred expenses	12,099		18,182		10,854
Income tax receivables	38,427		14,831		20,632
Other	37,759		33,778		29,192
Total other current assets	$	123,919	$	103,319	$	107,950
Other assets:
Deferred program and contract costs	$	44,388	$	50,717	$	52,428
Other receivables	1,390		2,281		4,734
Income taxes receivable	—		6,155		6,368
Deferred financing costs	2,871		2,100		2,002
Other	20,390		20,511		12,762
Total other assets	$	69,039	$	81,764	$	78,294
Other current liabilities:
Payroll and related liabilities	$	25,425	$	34,530	$	23,103
Income taxes payable	3,158		3,216		2,122
Acquisition liability	11,250		—		607
Other payables and accrued liabilities	8,797		19,596		17,488
Total other current liabilities	$	48,630	$	57,342	$	43,320
Other liabilities:
Acquisition liability	$	10,950	$	—	$	—
Payable to content provider	—		—		825
Income taxes payable	6,213		4,249		2,418
Deferred income and other liabilities	8,266		10,451		1,624
Total other liabilities	$	25,429	$	14,700	$	4,867

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Goodwill (Tables)

8 Months Ended

Sep. 10, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of Changes in Goodwill

A summary of changes in goodwill during the 36 weeks endedSeptember 10, 2016 is as follows (in thousands):

	September 10, 2016
	US Retail		International Retail		Incentives & Rewards			Total
Balance, beginning of period	$	42,729	$	49,156	$	310,604		$	402,489
Re-allocation of e-Commerce goodwill	2,671		—		(2,671		)	—
Acquisition of GiftCards	34,427		—		33,279			67,706
Acquisition of NimbleCommerce	10,365		—		—			10,365
Acquisition of Extrameasures	—		—		27,160			27,160
Measurement period adjustment	—		—		(1,234		)	(1,234		)
Foreign currency translation adjustments	—		1,639		482			2,121
Balance, end of period	$	90,192	$	50,795	$	367,620		$	508,607

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Stockholers' Equity and Stock Based Compensation (Tables)

8 Months Ended

Sep. 10, 2016

Equity [Abstract]

Schedule of Changes in Additional Paid-In Capital

The following table presents the changes within Additional paid-in capital during the 36 weeks endedSeptember 10, 2016 (in thousands except average price per share):

BALANCE—January 2, 2016	$	561,939
Cumulative adjustment upon modified retrospective adoption of ASU 2016-09 (see Note 1—The Company and Significant Accounting Policies)	650
Employee-related stock-based activity	28,940
Equity component of convertible notes issuance (see Note 3—Financing)	63,434
Equity component of convertible notes issuance costs (see Note 3—Financing)	(1,792		)
Purchase of convertible notes hedges (see Note 3—Financing)	(75,750		)
Proceeds from sale of warrants (see Note 3—Financing)	47,000
Deferred tax assets recognized for convertible notes (see Note 3—Financing)	5,161
Repurchase of common stock (996 shares at an average price of $34.98 per share)	(34,843		)
BALANCE— September 10, 2016	$	594,739

Schedule of Changes in Retained Earnings

The following table presents the changes within Retained earnings during the 36 weeks endedSeptember 10, 2016 (in thousands):

BALANCE—January 2, 2016	$	207,973
Cumulative adjustment upon modified retrospective adoption of ASU 2016-04 and 2016-09 (see Note 1—The Company and Significant Accounting Policies)	15,854
Net loss	(19,992		)
Dividends paid	(44		)
BALANCE— September 10, 2016	$	203,791

Schedule of Stock-Based Compensation Expense

The following table presents total stock-based compensation expense according to the income statement line in our condensed consolidated statements of income (loss) for the 12 and 36 weeks endedSeptember 10, 2016 and September 12, 2015 (in thousands):

	12 weeks ended				36 weeks ended
	September 10, 2016		September 12, 2015		September 10, 2016		September 12, 2015
Processing and services	$	1,364	$	1,530	$	4,259	$	4,366
Sales and marketing	2,759		2,038		8,600		5,523
Cost of products sold	31		13		89		25
General and administrative	4,139		3,536		11,917		9,942
Total stock-based compensation expense	$	8,293	$	7,117	$	24,865	$	19,856

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Segment Reporting (Tables)

8 Months Ended

Sep. 10, 2016

Segment Reporting [Abstract]

Schedule of Segment Reporting Information

The following tables present the key metrics used by our CODM for the evaluation of segment performance, including certain significant noncash charges (consisting of certain depreciation and amortization of property, equipment and technology and distribution partner stock-based compensation expense) which have been deducted from the segment profit amounts shown below, and reconciliations of these amounts to our consolidated financial statements (in thousands):

	12 weeks ended
	September 10, 2016
	US Retail		International Retail		Incentives & Rewards		Corporate and Unallocated			Consolidated
Total operating revenues	$	197,081	$	100,069	$	64,410	$	—		$	361,560
Partner distribution expense	103,601		69,841		4,921		—			178,363
Operating revenues, net of Partner distribution expense	93,480		30,228		59,489		—			183,197
Other operating expenses	58,192		25,158		50,779		59,161			193,290
Segment profit (loss) / Operating income (loss)	$	35,288	$	5,070	$	8,710	$	(59,161	)	(10,093		)
Other income (expense)										(3,324		)
Loss before income tax expense										$	(13,417	)
Non-cash charges	$	1,570	$	772	$	7,562	26,715

	12 weeks ended
	September 12, 2015
	US Retail		International Retail		Incentives & Rewards		Corporate and Unallocated			Consolidated
Total operating revenues	$	214,941	$	83,671	$	54,053	$	—		$	352,665
Partner distribution expense	101,890		56,972		2,990		—			161,852
Operating revenues, net of Partner distribution expense	113,051		26,699		51,063		—			190,813
Other operating expenses	69,877		22,751		46,674		53,761			193,063
Segment profit (loss) / Operating income (loss)	$	43,174	$	3,948	$	4,389	$	(53,761	)	(2,250		)
Other income (expense)										(4,652		)
Income before income tax expense										$	(6,902	)
Non-cash charges	$	1,270	$	431	$	6,233	22,934

	36 weeks ended
	September 10, 2016
	US Retail		International Retail		Incentives & Rewards		Corporate and Unallocated			Consolidated
Total operating revenues	$	652,359	$	279,311	$	187,558	$	—		$	1,119,228
Partner distribution expense	330,283		198,703		12,763		—			541,749
Operating revenues, net of Partner distribution expense	322,076		80,608		174,795		—			577,479
Other operating expenses	202,384		69,134		154,796		179,279			605,593
Segment profit (loss) / Operating income (loss)	$	119,692	$	11,474	$	19,999	$	(179,279	)	(28,114		)
Other income (expense)										(10,610		)
Loss before income tax expense										$	(38,724	)
Non-cash charges	$	4,976	$	3,441	$	20,932	80,680

	36 weeks ended
	September 12, 2015
	US Retail		International Retail		Incentives & Rewards		Corporate and Unallocated			Consolidated
Total operating revenues	$	659,984	$	251,249	$	133,411	$	—		$	1,044,644
Partner distribution expense	313,628		169,578		10,987		—			494,193
Operating revenues, net of Partner distribution expense	346,356		81,671		122,424		—			550,451
Other operating expenses	209,856		73,665		110,462		137,597			531,580
Segment profit (loss) / Operating income (loss)	$	136,500	$	8,006	$	11,962	$	(137,597	)	18,871
Other income (expense)										(10,504		)
Income before income tax expense										$	8,367
Non-cash charges	$	3,741	$	860	$	11,488	51,423

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Earnings Per Share (Tables)

8 Months Ended

Sep. 10, 2016

Earnings Per Share [Abstract]

Reconciliations of Net Income and Shares Used in Calculating Basic and Diluted EPS

The following table provides reconciliations of net income and shares used in calculating basic EPS to those used in calculating diluted EPS (in thousands, except per share amounts):

	12 weeks ended
	September 10, 2016						September 12, 2015
	Basic			Diluted			Basic			Diluted
Net income (loss) attributable to Blackhawk Network Holdings, Inc.	$	(5,102	)	$	(5,102	)	$	(3,615	)	$	(3,615	)
Distributed and undistributed earnings allocated to participating securities	—			—			—			—
Net income (loss) attributable to common stockholders	$	(5,102	)	$	(5,102	)	$	(3,615	)	$	(3,615	)
Weighted-average common shares outstanding	55,668			55,668			54,467			54,467
Common share equivalents				—						—
Weighted-average shares outstanding				55,668						54,467
Earnings (loss) per share	$	(0.09	)	$	(0.09	)	$	(0.07	)	$	(0.07	)

	36 weeks ended
	September 10, 2016						September 12, 2015
	Basic			Diluted			Basic			Diluted
Net income (loss) attributable to Blackhawk Network Holdings, Inc.	$	(19,992	)	$	(19,992	)	$	3,995		$	3,995
Distributed and undistributed earnings allocated to participating securities	(15		)	(15		)	(46		)	(46		)
Net income (loss) attributable to common stockholders	$	(20,007	)	$	(20,007	)	$	3,949		$	3,949
Weighted-average common shares outstanding	55,851			55,851			53,941			53,941
Common share equivalents				—						2,053
Weighted-average shares outstanding				55,851						55,994
Earnings (loss) per share	$	(0.36	)	$	(0.36	)	$	0.07		$	0.07

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The Company and Significant Accounting Policies (Detail) $ in Thousands	Sep. 10, 2016 USD ($) country	Jan. 02, 2016 USD ($)
United States
New Accounting Pronouncement, Early Adoption [Line Items]
Number of countries in which entity operates | country	1
Foreign Countries
New Accounting Pronouncement, Early Adoption [Line Items]
Number of countries in which entity operates | country	23
Retained Earnings
New Accounting Pronouncement, Early Adoption [Line Items]
Cumulative adjustment upon modified retrospective adoption of ASU 2016-04 and 2016-09	$ 15,854
Retained Earnings | New Accounting Pronouncement, Early Adoption, Effect | Accounting Standards Update 2016-04
New Accounting Pronouncement, Early Adoption [Line Items]
Cumulative adjustment upon modified retrospective adoption of ASU 2016-04 and 2016-09		$ 6,100
Retained Earnings | New Accounting Pronouncement, Early Adoption, Effect | Accounting Standards Update 2016-09, Forfeiture Rate Component
New Accounting Pronouncement, Early Adoption [Line Items]
Cumulative adjustment upon modified retrospective adoption of ASU 2016-04 and 2016-09		(300)
Retained Earnings | New Accounting Pronouncement, Early Adoption, Effect | Accounting Standards Update 2016-09, Tax Benefits Of Warrants
New Accounting Pronouncement, Early Adoption [Line Items]
Cumulative adjustment upon modified retrospective adoption of ASU 2016-04 and 2016-09		$ 10,100

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Business Acquisitions (Details) £ in Millions				3 Months Ended				6 Months Ended	8 Months Ended
	Oct. 06, 2016 USD ($)	Oct. 06, 2016 GBP (£)	Jan. 05, 2016 USD ($)	Sep. 10, 2016 USD ($)	Jun. 18, 2016 USD ($) payment	Mar. 26, 2016 USD ($)	Sep. 12, 2015 USD ($)	Jun. 18, 2016 USD ($)	Sep. 10, 2016 USD ($)	Sep. 12, 2015 USD ($)	Jan. 02, 2016 USD ($)
Business Acquisition
Discount rate									17.00%
Transition and acquisition expenses				$ 2,574,000			$ 5,275,000		$ 4,160,000	$ 6,091,000
Goodwill				508,607,000			$ 382,803,000		508,607,000	$ 382,803,000	$ 402,489,000
Omni Prepaid
Business Acquisition
Purchase consideration			$ 103,900,000
Repayment of acquisition-related transaction expenses						$ 8,100,000
Transition and acquisition expenses									400,000
Goodwill			$ 67,706,000
NimbleCommerce and Extrameasures
Business Acquisition
Purchase consideration								$ 58,500,000
Repayment of acquisition-related transaction expenses								1,000,000
Transition and acquisition expenses									900,000
Total consideration transferred								78,600,000
Contingent consideration transferred								20,100,000
Goodwill					$ 37,525,000			37,525,000
Extrameasures
Business Acquisition
Contingent consideration, number of cash payments | payment					3
Contingent earnout payable					$ 15,000,000			$ 15,000,000
Contingent earnout percentage for employees								10.00%
Achievers
Business Acquisition
Business combination, measurement period adjustment, deferred revenue									3,600,000
Business combination, measurement period adjustment, intangibles									1,900,000
Business combination, measurement period adjustment, goodwill									1,200,000
Business combination, measurement period adjustment, deferred tax assets									500,000
Grass Roots, Inc. | Subsequent Event
Business Acquisition
Purchase consideration	$ 119,100,000	£ 93.7
Operating Segments
Business Acquisition
Goodwill				508,607,000					508,607,000		402,489,000
Operating Segments | US Retail
Business Acquisition
Goodwill				90,192,000					90,192,000		42,729,000
Operating Segments | US Retail | NimbleCommerce
Business Acquisition
Goodwill, expected tax deductible amount					1,400,000			$ 1,400,000
Goodwill					10,400,000			10,400,000
Operating Segments | Incentives and Rewards
Business Acquisition
Goodwill				$ 367,620,000					$ 367,620,000		$ 310,604,000
Operating Segments | Incentives and Rewards | Extrameasures
Business Acquisition
Goodwill, expected tax deductible amount					2,300,000			2,300,000
Goodwill					$ 27,200,000			$ 27,200,000
Income Approach Valuation Technique | Extrameasures
Business Acquisition
Discount rate								17.00%
Income Approach Valuation Technique | Finite-Lived Intangible Assets | Minimum | Omni Prepaid
Business Acquisition
Discount rate			6.00%
Income Approach Valuation Technique | Finite-Lived Intangible Assets | Minimum | NimbleCommerce and Extrameasures
Business Acquisition
Discount rate								9.00%
Income Approach Valuation Technique | Finite-Lived Intangible Assets | Maximum | Omni Prepaid
Business Acquisition
Discount rate			11.00%
Income Approach Valuation Technique | Finite-Lived Intangible Assets | Maximum | NimbleCommerce and Extrameasures
Business Acquisition
Discount rate								16.00%

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Business Acquisitions - Schedule of Initial Purchase Price Allocation (Details) - USD ($) $ in Thousands	Sep. 10, 2016	Jun. 18, 2016	Jan. 05, 2016	Jan. 02, 2016	Sep. 12, 2015
Business Acquisition
Goodwill	$ 508,607			$ 402,489	$ 382,803
Omni Prepaid
Business Acquisition
Cash			$ 3,985
Consumer and customer deposits			(5,429)
Accounts payable and accrued operating expenses			(9,860)
Other tangible assets, net			893
Debt			(5,807)
Identifiable technology and intangible assets			52,460
Goodwill			67,706
Total purchase consideration			$ 103,948
NimbleCommerce and Extrameasures
Business Acquisition
Cash		$ 14,191
Settlement receivables		4,884
Settlement payables		(3,272)
Consumer and customer deposits		(18,009)
Other tangible liabilities, net		(1,155)
Debt		(3,157)
Deferred income taxes		2,066
Identifiable technology and intangible assets		45,540
Goodwill		37,525
Total purchase consideration		$ 78,613

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Business Acquisitions - Summary of Identifiable Technology and Intangible Assets at Date of Acquisition (Details) - USD ($) $ in Thousands		6 Months Ended
	Jan. 05, 2016	Jun. 18, 2016
Omni Prepaid
Business Acquisition
Total identifiable technology and intangible assets	$ 52,460
NimbleCommerce and Extrameasures
Business Acquisition
Total identifiable technology and intangible assets		$ 45,540
Customer relationships | Omni Prepaid
Business Acquisition
Total identifiable technology and intangible assets	$ 27,570
Weighted average useful life (in years)	10 years
Customer relationships | NimbleCommerce and Extrameasures
Business Acquisition
Total identifiable technology and intangible assets		$ 39,230
Weighted average useful life (in years)		10 years
Backlog | Omni Prepaid
Business Acquisition
Total identifiable technology and intangible assets	$ 10,780
Weighted average useful life (in years)	3 years
Backlog | NimbleCommerce and Extrameasures
Business Acquisition
Total identifiable technology and intangible assets		$ 1,610
Weighted average useful life (in years)		3 years
Domain name | Omni Prepaid
Business Acquisition
Total identifiable technology and intangible assets	$ 10,520
Weighted average useful life (in years)	10 years
Technology | Omni Prepaid
Business Acquisition
Total identifiable technology and intangible assets	$ 3,590
Weighted average useful life (in years)	5 years
Technology | NimbleCommerce and Extrameasures
Business Acquisition
Total identifiable technology and intangible assets		$ 4,700
Weighted average useful life (in years)		5 years

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Business Acquisitions - Summary of Pro Forma Financial Information (Details) - Giftcards and Extrameasures - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		8 Months Ended
	Sep. 10, 2016	Sep. 12, 2015	Sep. 10, 2016	Sep. 12, 2015
Business Acquisition
Total revenues	$ 364,129	$ 364,400	$ 1,127,178	$ 1,068,882
Net income (loss) attributable to Blackhawk Network Holdings, Inc.	$ (3,626)	$ (3,959)	$ (14,469)	$ (1,124)
Pro forma EPS—Basic (in usd per share)	$ (0.07)	$ (0.07)	$ (0.26)	$ (0.02)
Pro forma EPS—Diluted (in usd per share)	$ (0.07)	$ (0.07)	$ (0.26)	$ (0.02)

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Financing - Credit Agreement (Details) - USD ($)			8 Months Ended
	Jul. 27, 2016	Jan. 25, 2016	Sep. 10, 2016	Sep. 12, 2015	Jul. 26, 2016
Debt Instrument [Line Items]
Proceeds from issuance of note payable		$ 100,000,000	$ 250,000,000	$ 0
Term loan, repayments			$ 463,750,000	$ 11,250,000
Restated Credit Agreement
Debt Instrument [Line Items]
Restated credit agreement, maximum borrowing capacity	$ 700,000,000
Term loan, incremental borrowing capacity	300,000,000
Restated Credit Agreement | Revolving Credit Facility
Debt Instrument [Line Items]
Revolving credit facility, current borrowing capacity	400,000,000
Term Loan
Debt Instrument [Line Items]
Term loan, repayments	276,000,000
Term loan, balance outstanding	150,000,000				$ 426,000,000
Term loan, incremental borrowing capacity	150,000,000
Term Loan | Restated Credit Agreement
Debt Instrument [Line Items]
Term loan, maximum borrowing capacity	$ 300,000,000

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Financing - Convertible Senior Notes (Details) - Convertible Debt	Jul. 27, 2016 USD ($) day $ / shares
Debt Instrument [Line Items]
Debt instrument, face amount	$ 500,000,000
Debt instrument, stated interest rate	1.50%
Debt instrument, initial conversion rate per $1,000 principal amount of notes	0.0200673
Debt instrument, conversion price (in usd per share) | $ / shares	$ 49.83
Debt instrument, initial debt component of the notes	$ 436,600,000
Debt instrument, estimated non-convertible debt borrowing rate	4.10%
Debt instrument, interest rate, effective percentage	4.65%
Debt instrument, non-cash accretion expense, percentage	3.15%
Convertible Senior Notes, Equity Component
Debt Instrument [Line Items]
Debt issuance costs	$ 1,800,000
Convertible Senior Notes, Debt Component
Debt Instrument [Line Items]
Debt issuance costs	$ 12,300,000
Debt Instrument, Redemption Option One
Debt Instrument [Line Items]
Debt instrument, trading days threshold | day	20
Debt instrument, consecutive trading days threshold	30 days
Debt instrument, redemption price	130.00%
Debt Instrument, Redemption Option Two
Debt Instrument [Line Items]
Debt instrument, consecutive trading days threshold	5 days
Debt instrument, redemption price	98.00%
Debt instrument, number of business days | day	5

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Financing - Convertible Note Hedges and Warrants (Details) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions			8 Months Ended
	Jul. 22, 2016	Jul. 21, 2016	Sep. 10, 2016	Sep. 12, 2015
Debt Instrument [Line Items]
Aggregate payment for note hedges			$ 75,750	$ 0
Proceeds from warrants			47,000	$ 0
Deferred tax asset, related to note hedges and warrants			5,200
Additional Paid-in Capital
Debt Instrument [Line Items]
Aggregate payment for note hedges			75,750
Adjustments to additional paid in capital, deferred tax assets, convertible notes			$ 5,161
Call Option
Debt Instrument [Line Items]
Aggregate payment for note hedges	$ 75,800	$ 75,800
Call Option Warrants
Debt Instrument [Line Items]
Proceeds from warrants	$ 47,000	$ 47,000
Shares issuable under warrant (in shares)	10.0	10.0
Exercise price (in usd per share)	$ 61.20	$ 61.20

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Financing - Maturities of Long-Term Debt (Details) $ in Thousands	Jul. 27, 2016 USD ($)
Long-term Debt, Fiscal Year Maturity [Abstract]
2017	$ 10,000
2018	7,500
2019	7,500
2020	15,000
2021	110,000
2022	500,000
Total long-term debt	$ 650,000

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Financing - Shares Repurchased (Details) - USD ($) shares in Thousands, $ in Millions		3 Months Ended	8 Months Ended
	Jul. 27, 2016	Sep. 10, 2016	Sep. 10, 2016
Debt Disclosure [Abstract]
Stock repurchased during period (in shares)	1,000		996
Stock repurchased during period		$ 34.8

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Fair Value Measurements - Summary of Fair Value of Assets, Liabilities and Equity Instruments on Recurring Basis (Detail) - Fair Value Measurements, Recurring - USD ($) $ in Thousands	Sep. 10, 2016	Jan. 02, 2016	Sep. 12, 2015
Liabilities
Contingent consideration	$ 22,200	$ 0	$ 0
Money Market Mutual Funds
Assets
Cash and cash equivalents	5,112	370,070	5,070
Level 1
Liabilities
Contingent consideration	0	0	0
Level 1 | Money Market Mutual Funds
Assets
Cash and cash equivalents	5,112	370,070	5,070
Level 2
Liabilities
Contingent consideration	0	0	0
Level 2 | Money Market Mutual Funds
Assets
Cash and cash equivalents	0	0	0
Level 3
Liabilities
Contingent consideration	22,200	0	0
Level 3 | Money Market Mutual Funds
Assets
Cash and cash equivalents	$ 0	$ 0	$ 0

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Fair Value Measurements - Summary of Changes in Fair Value of Contingent Consideration Classified as Level 3 (Details) - USD ($) $ in Thousands	8 Months Ended
	Sep. 10, 2016	Sep. 12, 2015
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation
Balance - beginning of period	$ 0	$ 7,567
Issuance of contingent consideration	20,100	0
Change in fair value of contingent consideration	2,100	(7,567)
Balance - end of period	$ 22,200	$ 0

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Fair Value Measurements (Detail) $ in Millions	8 Months Ended
	Sep. 10, 2016 USD ($)
Business Acquisition
Fair value inputs, discount rate percentage	17.00%
Level 2 | Term Loan
Business Acquisition
Fair value of debt instrument	$ 150.0
Level 2 | Convertible Notes Payable [Member]
Business Acquisition
Fair value of debt instrument	$ 490.6

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Consolidated Financial Statement Details (Detail) - USD ($) $ in Thousands	Sep. 10, 2016	Jan. 02, 2016	Sep. 12, 2015
Other current assets:
Inventory	$ 35,634	$ 36,528	$ 47,272
Deferred expenses	12,099	18,182	10,854
Income tax receivables	38,427	14,831	20,632
Other	37,759	33,778	29,192
Total other current assets	123,919	103,319	107,950
Other assets:
Deferred program and contract costs	44,388	50,717	52,428
Other receivables	1,390	2,281	4,734
Income taxes receivable	0	6,155	6,368
Deferred financing costs	2,871	2,100	2,002
Other	20,390	20,511	12,762
Total other assets	69,039	81,764	78,294
Other current liabilities:
Payroll and related liabilities	25,425	34,530	23,103
Income taxes payable	3,158	3,216	2,122
Acquisition liability	11,250	0	607
Other payables and accrued liabilities	8,797	19,596	17,488
Total other current liabilities	48,630	57,342	43,320
Other liabilities:
Acquisition liability	10,950	0	0
Payable to content provider	0	0	825
Accrued Income Taxes, Noncurrent	6,213	4,249	2,418
Deferred income and other liabilities	8,266	10,451	1,624
Total other liabilities	$ 25,429	$ 14,700	$ 4,867

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Goodwill - Summary of Changes in Goodwill (Detail) $ in Thousands	3 Months Ended	8 Months Ended
	Mar. 26, 2016 USD ($) segment	Sep. 10, 2016 USD ($)
Goodwill
Balance, beginning of period	$ 402,489	$ 402,489
Balance, end of period		508,607
Operating Segments
Goodwill
Balance, beginning of period	402,489	402,489
Re-allocation of e-Commerce goodwill		0
Measurement period adjustment		(1,234)
Foreign currency translation adjustments		2,121
Balance, end of period		508,607
Operating Segments | GiftCards
Goodwill
Goodwill acquired during period		67,706
Operating Segments | NimbleCommerce
Goodwill
Goodwill acquired during period		10,365
Operating Segments | Extrameasures
Goodwill
Goodwill acquired during period		27,160
Operating Segments | US Retail
Goodwill
Balance, beginning of period	42,729	42,729
Re-allocation of e-Commerce goodwill		2,671
Measurement period adjustment		0
Foreign currency translation adjustments		0
Balance, end of period		90,192
Operating Segments | US Retail | GiftCards
Goodwill
Goodwill acquired during period		34,427
Operating Segments | US Retail | NimbleCommerce
Goodwill
Goodwill acquired during period		10,365
Operating Segments | US Retail | Extrameasures
Goodwill
Goodwill acquired during period		0
Operating Segments | International Retail
Goodwill
Balance, beginning of period	49,156	49,156
Re-allocation of e-Commerce goodwill		0
Measurement period adjustment		0
Foreign currency translation adjustments		1,639
Balance, end of period		50,795
Operating Segments | International Retail | GiftCards
Goodwill
Goodwill acquired during period		0
Operating Segments | International Retail | NimbleCommerce
Goodwill
Goodwill acquired during period		0
Operating Segments | International Retail | Extrameasures
Goodwill
Goodwill acquired during period		0
Operating Segments | Incentives and Rewards
Goodwill
Balance, beginning of period	$ 310,604	310,604
Re-allocation of e-Commerce goodwill		(2,671)
Measurement period adjustment		(1,234)
Foreign currency translation adjustments		482
Balance, end of period		367,620
Operating Segments | Incentives and Rewards | GiftCards
Goodwill
Goodwill acquired during period		33,279
Operating Segments | Incentives and Rewards | NimbleCommerce
Goodwill
Goodwill acquired during period		0
Operating Segments | Incentives and Rewards | Extrameasures
Goodwill
Goodwill acquired during period		$ 27,160
ECommerce
Goodwill
Number of operating segments | segment	2

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Stockholders' Equity and Stock Based Compensation - Schedule of Changes in Additional Paid-in Capital (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		3 Months Ended	8 Months Ended
	Jul. 27, 2016	Sep. 10, 2016	Sep. 10, 2016	Sep. 12, 2015
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance			$ 561,939
Payments for bond hedges			(75,750)	$ 0
Repurchase of common stock (996 shares at an average price of $34.98 per share)		$ (34,800)
Ending balance		594,739	$ 594,739	$ 547,230
Stock repurchased during period (in shares)	1,000		996
Average price per share of repurchased shares (in usd per share)			$ 34.98
Additional Paid-in Capital
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance			$ 561,939
Cumulative adjustment upon modified retrospective adoption of ASU 2016-09		650	650
Employee-related stock-based activity			28,940
Equity component of convertible notes issuance			63,434
Equity component of convertible notes issuance costs		(1,792)	(1,792)
Payments for bond hedges			(75,750)
Proceeds from sale of warrants			47,000
Deferred tax assets recognized for convertible notes			5,161
Repurchase of common stock (996 shares at an average price of $34.98 per share)			(34,843)
Ending balance		$ 594,739	$ 594,739

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Stockholders' Equity and Stock Based Compensation - Schedule of Changes in Retained Earnings (Details) - USD ($) $ in Thousands	3 Months Ended		8 Months Ended
	Sep. 10, 2016	Sep. 12, 2015	Sep. 10, 2016	Sep. 12, 2015
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance			$ 207,973
Net income (loss) attributable to Blackhawk Network Holdings, Inc.	$ (5,102)	$ (3,615)	(19,992)	$ 3,995
Ending balance	203,791	$ 166,370	203,791	$ 166,370
Retained Earnings
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Beginning balance			207,973
Cumulative adjustment upon modified retrospective adoption of ASU 2016-04 and 2016-09	15,854		15,854
Net income (loss) attributable to Blackhawk Network Holdings, Inc.			(19,992)
Dividends paid			(44)
Ending balance	$ 203,791		$ 203,791

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Stockholders' Equity and Stock Based Compensation (Detail)	8 Months Ended
	Sep. 10, 2016 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award
Weighted average exercise price (in usd per share) | $ / shares	$ 37.90
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award
Stock awards and stock units granted during period (in shares)	1,129,019
Performance Stock Units
Share-based Compensation Arrangement by Share-based Payment Award
Stock awards and stock units granted during period (in shares)	172,300
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award
Stock options granted during period (in shares)	584,350

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Stockholders' Equity and Stock Based Compensation - Schedule of Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		8 Months Ended
	Sep. 10, 2016	Sep. 12, 2015	Sep. 10, 2016	Sep. 12, 2015
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost
Stock-based compensation expense	$ 8,293	$ 7,117	$ 24,865	$ 19,856
Processing and services
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost
Stock-based compensation expense	1,364	1,530	4,259	4,366
Sales and marketing
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost
Stock-based compensation expense	2,759	2,038	8,600	5,523
Cost of products sold
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost
Stock-based compensation expense	31	13	89	25
General and administrative
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost
Stock-based compensation expense	$ 4,139	$ 3,536	$ 11,917	$ 9,942

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Income Taxes (Detail)	3 Months Ended		8 Months Ended
	Sep. 10, 2016	Sep. 12, 2015	Sep. 10, 2016	Sep. 12, 2015
Income Tax Disclosure [Abstract]
Effective income tax rate (percentage)	62.30%	47.70%	48.80%	53.00%

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Commitments and Contingencies (Details) $ in Millions	Feb. 26, 2016 claim	Sep. 10, 2016 USD ($)	Jan. 02, 2016 USD ($)
Foreign Tax Jurisdiction
Loss Contingencies [Line Items]
Estimate of possible loss, tax liability | $		$ 5	$ 12
Pending Litigation | CardLab, Inc. v. Blackhawk Network Holdings, Inc., Case No. 10851
Loss Contingencies [Line Items]
Number of claims dismissed | claim	2

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Segment Reporting - Schedule of Segment Reporting Information (Detail) $ in Thousands	3 Months Ended			8 Months Ended
	Sep. 10, 2016 USD ($)	Mar. 26, 2016 segment	Sep. 12, 2015 USD ($)	Sep. 10, 2016 USD ($) segment	Sep. 12, 2015 USD ($)
Segment Reporting Information
Number of reportable segments | segment				3
Total operating revenues	$ 361,560		$ 352,665	$ 1,119,228	$ 1,044,644
Partner distribution expense	178,363		161,852	541,749	494,193
Operating revenues, net of Partner distribution expense	183,197		190,813	577,479	550,451
Other operating expenses	193,290		193,063	605,593	531,580
OPERATING INCOME (LOSS)	(10,093)		(2,250)	(28,114)	18,871
Other income (expense)	(3,324)		(4,652)	(10,610)	(10,504)
INCOME (LOSS) BEFORE INCOME TAX EXPENSE	(13,417)		(6,902)	(38,724)	8,367
Operating Segments | US Retail
Segment Reporting Information
Total operating revenues	197,081		214,941	652,359	659,984
Partner distribution expense	103,601		101,890	330,283	313,628
Operating revenues, net of Partner distribution expense	93,480		113,051	322,076	346,356
Other operating expenses	58,192		69,877	202,384	209,856
OPERATING INCOME (LOSS)	35,288		43,174	119,692	136,500
Non-cash charges	1,570		1,270	4,976	3,741
Operating Segments | International Retail
Segment Reporting Information
Total operating revenues	100,069		83,671	279,311	251,249
Partner distribution expense	69,841		56,972	198,703	169,578
Operating revenues, net of Partner distribution expense	30,228		26,699	80,608	81,671
Other operating expenses	25,158		22,751	69,134	73,665
OPERATING INCOME (LOSS)	5,070		3,948	11,474	8,006
Non-cash charges	772		431	3,441	860
Operating Segments | Incentives and Rewards
Segment Reporting Information
Total operating revenues	64,410		54,053	187,558	133,411
Partner distribution expense	4,921		2,990	12,763	10,987
Operating revenues, net of Partner distribution expense	59,489		51,063	174,795	122,424
Other operating expenses	50,779		46,674	154,796	110,462
OPERATING INCOME (LOSS)	8,710		4,389	19,999	11,962
Non-cash charges	7,562		6,233	20,932	11,488
Corporate and Unallocated
Segment Reporting Information
Total operating revenues	0		0	0	0
Partner distribution expense	0		0	0	0
Operating revenues, net of Partner distribution expense	0		0	0	0
Other operating expenses	59,161		53,761	179,279	137,597
OPERATING INCOME (LOSS)	(59,161)		(53,761)	(179,279)	(137,597)
Non-cash charges	$ 26,715		$ 22,934	$ 80,680	$ 51,423
ECommerce
Segment Reporting Information
Number of operating segments | segment		2

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Earnings Per Share - Reconciliations of Net Income and Shares Used in Calculating Basic and Diluted EPS (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		8 Months Ended
	Sep. 10, 2016	Sep. 12, 2015	Sep. 10, 2016	Sep. 12, 2015
Earnings Per Share [Abstract]
Net income (loss) attributable to Blackhawk Network Holdings, Inc.	$ (5,102)	$ (3,615)	$ (19,992)	$ 3,995
Basic
Distributed and undistributed earnings allocated to participating securities - basic	0	0	(15)	(46)
Net income (loss) attributable to common stockholders, basic	$ (5,102)	$ (3,615)	$ (20,007)	$ 3,949
Weighted-average common shares outstanding-basic (in shares)	55,668	54,467	55,851	53,941
Basic earnings (loss) per share (in usd per share)	$ (0.09)	$ (0.07)	$ (0.36)	$ 0.07
Diluted
Distributed and undistributed earnings allocated to participating securities - diluted	$ 0	$ 0	$ (15)	$ (46)
Net Income (Loss) attributable to common stockholders, diluted	$ (5,102)	$ (3,615)	$ (20,007)	$ 3,949
Weighted-average common shares outstanding-basic (in shares)	55,668	54,467	55,851	53,941
Common share equivalents (in shares)	0	0	0	2,053
Weighted-average common shares outstanding-diluted (in shares)	55,668	54,467	55,851	55,994
Diluted earnings (loss) per share (in usd per share)	$ (0.09)	$ (0.07)	$ (0.36)	$ 0.07

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Earnings Per Share (Detail) - shares shares in Thousands	3 Months Ended		8 Months Ended
	Sep. 10, 2016	Sep. 12, 2015	Sep. 10, 2016	Sep. 12, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	1,850	576	1,642	555
Potential Common Shares Excluded Due to Net Loss
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share (in shares)	4,416	5,020	4,329