SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
January 31, 2007
January 31, 2007
ALLIANCE DATA SYSTEMS CORPORATION
(Exact Name of Registrant as Specified in Charter)
| DELAWARE (State or Other Jurisdiction of Incorporation) |
001-15749 (Commission File Number) |
31-1429215 (IRS Employer Identification No.) |
17655 WATERVIEW PARKWAY
DALLAS, TEXAS 75252
(Address and Zip Code of Principal Executive Offices)
DALLAS, TEXAS 75252
(Address and Zip Code of Principal Executive Offices)
(972) 348-5100
(Registrant’s Telephone Number, including Area Code)
(Registrant’s Telephone Number, including Area Code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing
obligation of the Registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
ITEM 2.02. Results of Operations and Financial Condition
On January 31, 2007 Alliance Data Systems Corporation issued a press release regarding its
results of operations for the fourth quarter and year ended December 31, 2006. A copy of this
press release is furnished as Exhibit 99.1.
ITEM 7.01. Regulation FD Disclosure
On January 31, 2007 Alliance Data Systems Corporation issued a press release regarding its
results of operations for the fourth quarter and year ended December 31, 2006. A copy of this
press release is furnished as Exhibit 99.1.
ITEM 9.01. Financial Statements and Exhibits
(d) Exhibits
| EXHIBIT | ||
| NUMBER | DESCRIPTION | |
99.1
|
Press Release dated January 31, 2007 announcing the results of operations for the fourth quarter and year ended December 31, 2006. |
Note: The information contained in this report (including Exhibit 99.1) shall not be deemed
“filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise
subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any
filing under the Securities Act of 1933, as amended, except as expressly set forth by specific
reference in such a filing.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Alliance Data Systems Corporation |
||||
| Date: January 31, 2007 | By: | /s/ Edward J. Heffernan | ||
| Edward J. Heffernan | ||||
| Executive Vice President and Chief Financial Officer |
||||
3
EXHIBIT INDEX
| EXHIBIT | ||
| NUMBER | DESCRIPTION | |
99.1
|
Press Release dated January 31, 2007 announcing the results of operations for the fourth quarter and year ended December 31, 2006. |
4
Exhibit 99.1
CONTACT: |
Edward Heffernan | |
| Chief Financial Officer | ||
| Alliance Data | ||
| Tel: 972-348-5191 | ||
| Julie Prozeller / Christina Corcoran | ||
| Financial Dynamics | ||
| Tel: 212-850-5608 | ||
| Media: Shelley Whiddon |
||
| Tel: 972-348-4310 |
ALLIANCE DATA ANNOUNCES RECORD
FOURTH QUARTER AND YEAR-END RESULTS
FOURTH QUARTER AND YEAR-END RESULTS
* $2 Billion in Revenue
* Company Raises Guidance for 2007
* Company Raises Guidance for 2007
Dallas, TX, January 31, 2007 — Alliance Data Systems Corporation (NYSE: ADS), a leading provider
of marketing services, credit services and transaction services, today announced record results for
its fourth quarter and year ended December 31, 2006. The Company also raised its guidance for
2007.
Total fourth-quarter revenue increased 25 percent to $524.5 million compared to $421.2 million for
the fourth quarter of 2005. Net income increased 27 percent to $39.6 million for the fourth quarter
of 2006, or $0.48 per diluted share, compared to $31.3 million, or $0.38 per diluted share, for the
fourth quarter of 2005. On a pro forma basis, net income per diluted share increased 45 percent to
$0.48 per diluted share for the fourth quarter of 2006 compared to $0.33 per diluted share for the
fourth quarter of 2005. Net income per diluted share on a pro forma basis takes into account stock
compensation expense in the fourth quarter of 2005 that would have been recorded under SFAS No.
123.
Adjusted EBITDA for the fourth quarter of 2006 increased 31 percent to $120.7 million compared to
$92.3 million for the fourth quarter of 2005. Cash earnings for the fourth quarter of 2006
increased 31 percent to $57.6 million compared to $44.1 million for the fourth quarter of 2005.
Cash earnings per diluted share for the fourth quarter of 2006 increased 30 percent to $0.70 per
diluted share compared to $0.54 per diluted share for the fourth quarter of 2005. (See “Financial
Measures” below for a discussion of adjusted EBITDA, cash earnings and cash earnings per diluted
share.)
“We are very pleased with our record fourth-quarter and full-year 2006 results,” said Mike Parks,
Alliance Data chairman and chief executive officer. “Through the steadfast execution of our
strategy, we generated $2 billion in revenue in 2006, driven by strong growth balanced across all
of our business segments. As a result of our strong performance to date, the planned acquisition of
Abacus, and increased visibility into 2007, we are raising guidance for the full
Alliance Data Systems Corp. January 31, 2007 |
Page 2 |
year
2007.” said Mr. Parks. Please refer to the outlook section for the Company’s full-year 2007 guidance.
Fourth quarter results were driven by continued overperformance in the Company’s Marketing Services
segment, which had solid performances from both Epsilon® and the Canadian loyalty
business.
The AIR MILES® Reward Program further extended its track record of more than 20 percent organic
growth over the prior year period, and the Company added Budget Rent a Car, one of the world’s
leading car rental brands, to its impressive list of AIR MILES sponsors through the signing of a
multi-year, Canada-wide agreement.
Epsilon — the Company’s fastest growth engine — had an outstanding fourth quarter, with a
combination of organic growth, new client signings and acquisitions. During the quarter, Epsilon
signed a multi-year agreement to provide integrated email and marketing solutions for MyFamily.com,
Inc., the leading online network for connecting families. The Company also recently announced it
had reached agreement to acquire Abacus, a leading provider of data, data management and analytical
services for the retail and catalog industry. The addition of Abacus will complement, expand and
strengthen Epsilon’s comprehensive suite of services. It exemplifies the Company’s continued
strategic focus on providing its customers with a truly unique, integrated loyalty and marketing
services offering based on transaction-rich data.
The private label business was also an essential driver of the Company’s fourth quarter results, as
it continued to benefit from strong core client results as well as strong results from newer client
vintages. Fourth quarter momentum continued with the signings of long-term agreements with Cruise
Management International LLC, North America’s largest retailer of cruise vacations, Pamida Stores
Operating Co., LLC, one of the nation’s top rural general merchandise retailers, and The Dunlap
Company, a privately-held specialty retailer operating across the Southern and Southwestern United
States. Signings from earlier in 2006 included Bealls and Burke’s Outlet Stores, Friedman’s
Jewelers, and co-branded programs for Goody’s and New York & Co.
The utility services business continued to invest in operational efficiencies and prepare for first
quarter conversions of recently signed clients. The year’s highlights included new client wins
Green Mountain, WPS Resources, Sacramento Municipal Utility District, and New England Gas.
Segment Review
Marketing Services revenue increased 40 percent in the fourth quarter to $245.4 million compared to
the prior year. Adjusted EBITDA increased 86 percent in the fourth quarter to $49.9 million
compared to the prior year with a 500 basis point increase in margin. For the full year, margins
for the segment increased by 250 basis points from the prior year despite a relatively flat margin
in the first half of 2006. Results were driven by continued overperformance of the AIR MILES
Reward Program related to the ongoing successful rollout of sponsors’ major national programs
combined with overall firm pricing. In the fourth quarter of 2006, AIR MILES reward miles issued
increased 11 percent and AIR MILES
Alliance Data Systems Corp. January 31, 2007 |
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reward miles redeemed increased 30 percent. Epsilon also had an exceptional quarter marked
by considerable new business success. The Company expects continued outstanding performance from
Marketing Services in 2007, in both AIR MILES and Epsilon as marketing dollars continue to shift
from general marketing channels toward targeted transaction-based programs — Alliance Data’s
specialty.
Credit Services revenue increased 22 percent in the fourth quarter to $173.9 million compared to
the prior year. Adjusted EBITDA increased 19 percent to $48.5 million in the fourth quarter
compared to the prior year. The Company experienced strong double-digit growth in private label
sales and average managed receivables, with 10 percent and 14 percent growth, respectively,
compared to the fourth quarter of 2005. On the expense side, funding costs increased during the
quarter as a very favorable funding source on $450 million matured and was replaced with higher
market rate funding. This will be mitigated in 2007 as a large portion of the Company’s funding
book continues to step down to lower rates. As such, 2007 funding rates will be consistent with
2005 and 2006 funding rates. Finally, credit quality continues to be excellent. Credit losses are
now fully normalized at a run rate of approximately six percent and are expected to stabilize at
that level throughout 2007.
Transaction Services revenue increased 6 percent in the fourth quarter to $195.5 million compared
to the prior year. Adjusted EBITDA decreased 9 percent in the fourth quarter to $22.3 million. The
vast majority of this segment consists of Alliance Data’s private label and utility services
businesses, two of the Company’s growth engines. Statement growth, a key driver for both private
label and utility services, grew at a double-digit pace, while segment revenue was tempered by
relatively flat performance in its non-core traditional bankcard business. As expected, the Company
also experienced an uptick in utility technology related expenses during the quarter to invest in
operational efficiencies and prepare for first quarter conversions of recently signed clients. For
the full year, the segment experienced margin expansion of 100 basis points compared to full year
2005 along with double digit growth in revenue and adjusted EBITDA. The Company anticipates private
label and utility services to continue to contribute to growth in 2007.
2006 Full-Year Results
For the year ended December 31, 2006, revenue increased 29 percent to $2.0 billion compared to $1.6
billion for the year ended December 31, 2005. Net income increased 37 percent to $189.6 million in
2006, or $2.32 per diluted share, compared to $138.7 million, or $1.64 per diluted share, in 2005.
Adjusted EBITDA for the year ended December 31, 2006 increased 47 percent to $515.4 million
compared to $350.4 million for the year ended December 31, 2005. Cash earnings per diluted share
increased 52 percent to $3.14 per share for the year ended December 31, 2006, compared to $2.06 per
share for the year ended December 31, 2005.
Capital Structure
During the fourth quarter of 2006, Alliance Data increased its share repurchase program by $600
million, bringing the aggregate to $900 million authorized through 2008. As of December 31, 2006,
$295 million has been utilized under the program.
Alliance Data Systems Corp. January 31, 2007 |
Page 4 |
Outlook
Based on Alliance Data’s strong performance to date, the announced acquisition of Abacus and
increased visibility into 2007, the Company is raising full-year guidance as follows:
| • | Revenue of at least $2.2 billion, up from the previous guidance of $2.1 billion; | ||
| • | Adjusted EBITDA of at least $610.0 million versus previous guidance of $575.0 million; | ||
| • | Cash earnings per share of at least $3.55 versus previous guidance of $3.50 per share; | ||
| • | Revenues will be driven by Marketing Services which is expected to post 20 percent plus growth, while Transaction and Credit Services are expected to generate single digit growth. On a consolidated basis, double digit growth is expected despite a challenging grow over; and | ||
| • | Cash earnings per share is anticipated to be $0.90 for the first quarter of 2007 |
Financial Measures
In addition to the results presented above in accordance with generally accepted accounting
principles, or GAAP, the Company presents financial measures that are non-GAAP measures, such as
adjusted EBITDA, operating EBITDA, cash earnings and cash earnings per diluted share. The Company
believes that these non-GAAP measures, viewed in addition to and not in lieu of the Company’s
reported GAAP results, provide useful information to investors regarding its performance and
overall results of operations. These metrics are an integral part of the Company’s internal
reporting to measure the performance of reportable segments and the overall effectiveness of senior
management. Reconciliations to comparable GAAP measures are available in the accompanying
schedules. The financial measures presented are consistent with the Company’s historical financial
reporting practices. The non-GAAP measures presented herein may not be comparable to similarly
titled measures presented by other companies, and are not identical to corresponding measures used
in our various agreements or public filings.
Conference Call
Alliance Data will host a conference call on January 31, 2007 at 5 p.m. (Eastern) to discuss the
Company’s fourth quarter and year-end results. The conference call will be available via the
Internet at www.AllianceData.com. There will be several slides accompanying the webcast. Please go
to the website at least 15 minutes prior to the call to register, download and install any
necessary software. The recorded webcast will also be available on the Company’s website.
About Alliance Data
Alliance Data (NYSE: ADS) is a leading provider of marketing services, credit services, and
transaction services, managing over 107 million consumer relationships for some of North America’s
most recognizable companies. Alliance Data creates and manages customized solutions that change
consumer behavior and that enable its clients to create and enhance customer loyalty to build
stronger, mutually beneficial relationships with their customers.
Alliance Data Systems Corp. January 31, 2007 |
Page 5 |
Headquartered in Dallas, Alliance Data employs approximately 9,300 associates at more than 60
locations worldwide. Alliance Data’s brands include AIR MILESÒ, North America’s premier
coalition loyalty program, and EpsilonÒ, a leading provider of multi-channel, data-driven
technologies and marketing services. For more information about the company, visit its web site,
www.AllianceData.com.
Alliance Data’s Safe Harbor Statement/Forward Looking Statements
This release may contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Such statements may use words such as “anticipate,” “believe,” “estimate,” “expect,”
“intend,” “predict,” “project” and similar expressions as they relate to us or our management. When
we make forward-looking statements, we are basing them on our management’s beliefs and assumptions,
using information currently available to us. Although we believe that the expectations reflected in
the forward-looking statements are reasonable, these forward-looking statements are subject to
risks, uncertainties and assumptions, including those discussed in our filings with the Securities
and Exchange Commission.
If one or more of these or other risks or uncertainties materialize, or if our underlying
assumptions prove to be incorrect, actual results may vary materially from what we projected. Any
forward-looking statements contained in this news release reflect our current views with respect to
future events and are subject to these and other risks, uncertainties and assumptions relating to
our operations, results of operations, growth strategy and liquidity. We have no intention, and
disclaim any obligation, to update or revise any forward-looking statements, whether as a result of
new information, future results or otherwise.
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Statements in
this press release regarding Alliance Data Systems Corporation’s business which are not historical
facts are “forward-looking statements” that involve risks and uncertainties. For a discussion of
such risks and uncertainties, which could cause actual results to differ from those contained in
the forward-looking statements, see “Risk Factors” in the Company’s Annual Report on Form 10-K for
the most recently ended fiscal year. Risk factors may be updated in Item 1A in each of the
company’s Quarterly Reports on Form 10-Q for each quarterly period subsequent to the Company’s most
recent Form 10-K.
Alliance Data Systems Corp. January 31, 2007 |
Page 6 |
ALLIANCE DATA SYSTEMS CORPORATION
SUMMARY FINANCIAL HIGHLIGHTS
(Unaudited) (In millions, except per share amounts)
SUMMARY FINANCIAL HIGHLIGHTS
(Unaudited) (In millions, except per share amounts)
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||||||
| 2006 | 2005 | Change | 2006 | 2005 | Change | |||||||||||||||||||
Revenue |
$ | 524.5 | $ | 421.2 | 25 | % | $ | 1,998.7 | $ | 1,552.4 | 29 | % | ||||||||||||
Net income |
$ | 39.6 | $ | 31.3 | 27 | % | $ | 189.6 | $ | 138.7 | 37 | % | ||||||||||||
Net income per share — diluted |
$ | 0.48 | $ | 0.38 | 26 | % | $ | 2.32 | $ | 1.64 | 41 | % | ||||||||||||
Pro Forma |
||||||||||||||||||||||||
Net income per share — diluted |
$ | 0.48 | $ | 0.33 | 45 | % | $ | 2.32 | $ | 1.47 | 58 | % | ||||||||||||
Adjusted EBITDA |
$ | 120.7 | $ | 92.3 | 31 | % | $ | 515.4 | $ | 350.4 | 47 | % | ||||||||||||
Operating EBITDA |
$ | 140.2 | $ | 99.5 | 41 | % | $ | 558.3 | $ | 382.0 | 46 | % | ||||||||||||
Cash earnings |
$ | 57.6 | $ | 44.1 | 31 | % | $ | 256.3 | $ | 174.7 | 47 | % | ||||||||||||
Cash earnings per share — diluted |
$ | 0.70 | $ | 0.54 | 30 | % | $ | 3.14 | $ | 2.06 | 52 | % | ||||||||||||
| As of | As of | |||||||
| December 31, | December 31, | |||||||
| 2006 | 2005 | |||||||
Cash and cash equivalents |
$ | 180.1 | $ | 143.2 | ||||
Seller’s interest and credit card
receivables |
569.4 | 479.1 | ||||||
Redemption settlement assets |
261.0 | 261.0 | ||||||
Intangible assets, net |
263.9 | 265.0 | ||||||
Goodwill |
970.0 | 858.5 | ||||||
Total assets |
3,404.0 | 2,926.1 | ||||||
Deferred revenue |
651.5 | 610.5 | ||||||
Certificates of deposit |
299.0 | 379.1 | ||||||
Core debt |
745.4 | 457.8 | ||||||
Total liabilities |
2,332.5 | 2,005.0 | ||||||
Stockholders’ equity |
1,071.5 | 921.1 | ||||||
Alliance Data Systems Corp. January 31, 2007 |
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ALLIANCE DATA SYSTEMS CORPORATION
SUMMARY FINANCIAL HIGHLIGHTS
(Unaudited) (In millions)
SUMMARY FINANCIAL HIGHLIGHTS
(Unaudited) (In millions)
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||||||
| 2006 | 2005 | Change | 2006 | 2005 | Change | |||||||||||||||||||
Segment Revenue: |
||||||||||||||||||||||||
Marketing Services |
$ | 245.4 | $ | 175.6 | 40 | % | $ | 849.2 | $ | 604.1 | 41 | % | ||||||||||||
Credit Services |
173.9 | 142.2 | 22 | % | 731.3 | 561.4 | 30 | % | ||||||||||||||||
Transaction Services |
195.5 | 184.6 | 6 | % | 776.0 | 699.9 | 11 | % | ||||||||||||||||
Intersegment |
(90.3 | ) | (81.2 | ) | 11 | % | (357.8 | ) | (313.0 | ) | 14 | % | ||||||||||||
| $ | 524.5 | $ | 421.2 | 25 | % | $ | 1,998.7 | $ | 1,552.4 | 29 | % | |||||||||||||
Segment adjusted EBITDA: |
||||||||||||||||||||||||
Marketing Services |
$ | 49.9 | $ | 26.8 | 86 | % | $ | 159.2 | $ | 97.9 | 63 | % | ||||||||||||
Credit Services |
48.5 | 40.9 | 19 | % | 248.2 | 162.4 | 53 | % | ||||||||||||||||
Transaction Services |
22.3 | 24.6 | (9 | %) | 108.0 | 90.1 | 20 | % | ||||||||||||||||
| $ | 120.7 | $ | 92.3 | 31 | % | $ | 515.4 | $ | 350.4 | 47 | % | |||||||||||||
Key Performance Indicators: |
||||||||||||||||||||||||
Statements generated |
54.9 | 49.1 | 12 | % | 211.7 | 190.9 | 11 | % | ||||||||||||||||
Average managed receivables |
$ | 3,819.1 | $ | 3,359.1 | 14 | % | $ | 3,640.1 | $ | 3,170.5 | 15 | % | ||||||||||||
Private label credit sales |
$ | 2,302.7 | $ | 2,097.9 | 10 | % | $ | 7,444.3 | $ | 6,582.8 | 13 | % | ||||||||||||
AIR MILES Reward Miles issued |
984.9 | 889.0 | 11 | % | 3,741.8 | 3,246.6 | 15 | % | ||||||||||||||||
AIR MILES Reward Miles
redeemed |
743.8 | 574.1 | 30 | % | 2,456.9 | 2,023.2 | 21 | % | ||||||||||||||||
Alliance Data Systems Corp. January 31, 2007 |
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ALLIANCE DATA SYSTEMS CORPORATION
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Unaudited) (In millions, except per share amounts)
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Unaudited) (In millions, except per share amounts)
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
Total revenue |
$ | 524.5 | $ | 421.2 | $ | 1,998.7 | $ | 1,552.4 | ||||||||
Total operating expenses |
449.0 | 364.0 | 1,651.4 | 1,315.8 | ||||||||||||
Operating income |
75.5 | 57.2 | 347.3 | 236.6 | ||||||||||||
Interest expense, net |
11.8 | 7.0 | 41.0 | 14.5 | ||||||||||||
Income before income taxes |
63.7 | 50.2 | 306.3 | 222.1 | ||||||||||||
Income tax expense |
24.1 | 18.9 | 116.7 | 83.4 | ||||||||||||
Net income |
$ | 39.6 | $ | 31.3 | $ | 189.6 | $ | 138.7 | ||||||||
Net income per share — basic |
$ | 0.50 | $ | 0.39 | $ | 2.38 | $ | 1.69 | ||||||||
Net income per share — diluted |
$ | 0.48 | $ | 0.38 | $ | 2.32 | $ | 1.64 | ||||||||
Weighted average shares outstanding — basic |
79.3 | 81.0 | 79.7 | 82.2 | ||||||||||||
Weighted average shares outstanding — diluted(1) |
81.7 | 82.4 | 81.7 | 84.6 | ||||||||||||
| (1) | The Company announced two stock repurchase programs in 2005 to acquire up to a total of $300.0 million of its outstanding common stock. On October 3, 2006, the Company announced a new stock repurchase program to acquire up to an additional $600.0 million of its outstanding common stock through 2008. As of December 31, 2006, the Company has purchased $294.8 million under these plans at an average price of $43.35. |
Alliance Data Systems Corp.
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January 31, 2007 |
ALLIANCE DATA SYSTEMS CORPORATION
RECONCILIATION OF NON-GAAP INFORMATION
(Unaudited) (In millions, except per share amounts)
RECONCILIATION OF NON-GAAP INFORMATION
(Unaudited) (In millions, except per share amounts)
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2006 | 2005 | 2006 | 2005 | |||||||||||||
Adjusted EBITDA and Operating EBITDA: |
||||||||||||||||
Net income (GAAP measure) |
$ | 39.6 | $ | 31.3 | $ | 189.6 | $ | 138.7 | ||||||||
Income tax expense |
24.1 | 18.9 | 116.7 | 83.4 | ||||||||||||
Interest expense, net |
11.8 | 7.0 | 41.0 | 14.5 | ||||||||||||
Stock compensation expense — restricted stock related |
6.6 | 8.9 | 21.2 | 14.1 | ||||||||||||
Stock compensation expense — stock option related (2) |
5.0 | — | 21.9 | — | ||||||||||||
Depreciation and other amortization |
17.5 | 15.4 | 65.4 | 58.6 | ||||||||||||
Amortization of purchased intangibles |
16.1 | 10.8 | 59.6 | 41.1 | ||||||||||||
Adjusted EBITDA |
120.7 | 92.3 | 515.4 | 350.4 | ||||||||||||
Change in deferred revenue |
(26.9 | ) | 12.2 | 41.0 | 63.4 | |||||||||||
Change in redemption settlement assets |
29.0 | (3.6 | ) | — | (17.4 | ) | ||||||||||
Foreign currency impact |
17.4 | (1.4 | ) | 1.9 | (14.4 | ) | ||||||||||
Operating EBITDA |
$ | 140.2 | $ | 99.5 | $ | 558.3 | $ | 382.0 | ||||||||
Cash Earnings: |
||||||||||||||||
Net income (GAAP measure) |
$ | 39.6 | $ | 31.3 | $ | 189.6 | $ | 138.7 | ||||||||
Add back non-cash non-operating items: |
||||||||||||||||
Amortization of purchased intangibles |
16.1 | 10.8 | 59.6 | 41.1 | ||||||||||||
Stock compensation expense — restricted
stock related |
6.6 | 8.9 | 21.2 | 14.1 | ||||||||||||
Stock compensation expense — stock
option related (2) |
5.0 | — | 21.9 | — | ||||||||||||
Income tax effect (3) |
(9.7 | ) | (6.9 | ) | (36.0 | ) | (19.2 | ) | ||||||||
Cash earnings |
$ | 57.6 | $ | 44.1 | $ | 256.3 | $ | 174.7 | ||||||||
Weighted average shares outstanding — diluted (1) |
81.7 | 82.4 | 81.7 | 84.6 | ||||||||||||
Cash earnings per share — diluted |
$ | 0.70 | $ | 0.54 | $ | 3.14 | $ | 2.06 | ||||||||
Pro Forma: |
||||||||||||||||
Net income per share — diluted |
$ | 0.48 | $ | 0.38 | $ | 2.32 | $ | 1.64 | ||||||||
Stock compensation expense (4) |
— | (0.05 | ) | — | (0.17 | ) | ||||||||||
Pro Forma net income per share — diluted |
$ | 0.48 | $ | 0.33 | $ | 2.32 | $ | 1.47 | ||||||||
| (1) | The Company announced two stock repurchase programs in 2005 to acquire up to a total of $300.0 million of its outstanding common stock. On October 3, 2006, the Company announced a new stock repurchase program to acquire up to an additional $600.0 million of its outstanding common stock through 2008. As of December 31, 2006, the Company has purchased $294.8 million under these plans at an average price of $43.35. | |
| (2) | For the three and twelve months ended December 31, 2005, the Company would have recorded a total of $6.0 million and $22.4 million, respectively, of stock compensation expense related to stock options under SFAS No. 123. | |
| (3) | Represents income tax adjustment for the related tax benefit or expense for the non-GAAP measure adjustments. | |
| (4) | For the three and twelve months ended December 31, 2005, the Company would have recorded an incremental $3.7 million and $14.0 million, net of tax, respectively, of stock compensation expense under SFAS No. 123. |
Alliance Data Systems Corp.
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January 31, 2007 |
ALLIANCE DATA SYSTEMS CORPORATION
RECONCILIATION OF SEGMENT ADJUSTED EBITDA
(Unaudited) (In millions)
RECONCILIATION OF SEGMENT ADJUSTED EBITDA
(Unaudited) (In millions)
| Three months ended December 31, 2006 | ||||||||||||||||
| Stock | ||||||||||||||||
| Operating | Depreciation & | compensation | Adjusted | |||||||||||||
| income | amortization | expense (2) | EBITDA(5) | |||||||||||||
Marketing Services |
$ | 26.7 | $ | 18.3 | $ | 4.9 | $ | 49.9 | ||||||||
Credit Services |
41.1 | 5.0 | 2.4 | 48.5 | ||||||||||||
Transaction Services |
7.7 | 10.3 | 4.3 | 22.3 | ||||||||||||
| $ | 75.5 | $ | 33.6 | $ | 11.6 | $ | 120.7 | |||||||||
| Three months ended December 31, 2005 | ||||||||||||||||
| Stock | ||||||||||||||||
| Operating | Depreciation & | compensation | Adjusted | |||||||||||||
| income | amortization | expense (2) | EBITDA(5) | |||||||||||||
Marketing Services |
$ | 13.0 | $ | 10.8 | $ | 3.0 | $ | 26.8 | ||||||||
Credit Services |
37.1 | 0.9 | 2.9 | 40.9 | ||||||||||||
Transaction Services |
7.1 | 14.5 | 3.0 | 24.6 | ||||||||||||
| $ | 57.2 | $ | 26.2 | $ | 8.9 | $ | 92.3 | |||||||||
| Twelve months ended December 31, 2006 | ||||||||||||||||
| Stock | ||||||||||||||||
| Operating | Depreciation & | compensation | Adjusted | |||||||||||||
| income | amortization | expense (2) | EBITDA(5) | |||||||||||||
Marketing Services |
$ | 82.3 | $ | 58.7 | $ | 18.2 | $ | 159.2 | ||||||||
Credit Services |
226.1 | 13.6 | 8.5 | 248.2 | ||||||||||||
Transaction Services |
38.9 | 52.7 | 16.4 | 108.0 | ||||||||||||
| $ | 347.3 | $ | 125.0 | $ | 43.1 | $ | 515.4 | |||||||||
| Twelve months ended December 31, 2005 | ||||||||||||||||
| Stock | ||||||||||||||||
| Operating | Depreciation & | compensation | Adjusted | |||||||||||||
| income | amortization | expense (2) | EBITDA(5) | |||||||||||||
Marketing Services |
$ | 56.7 | $ | 36.5 | $ | 4.7 | $ | 97.9 | ||||||||
Credit Services |
151.1 | 6.6 | 4.7 | 162.4 | ||||||||||||
Transaction Services |
28.8 | 56.6 | 4.7 | 90.1 | ||||||||||||
| $ | 236.6 | $ | 99.7 | $ | 14.1 | $ | 350.4 | |||||||||
| (2) | For the three and twelve months ended December 31, 2005, the Company would have recorded a total of $6.0 million and $22.4 million, respectively, of stock compensation expense related to stock options under SFAS No. 123. | |
| (5) | Represents segment Adjusted EBITDA and is equal to operating income plus depreciation and amortization and stock compensation expense. |
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