SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
April 16, 2008
ALLIANCE DATA SYSTEMS CORPORATION
(Exact Name of Registrant as Specified in Charter)
| DELAWARE | 001-15749 | 31-1429215 | ||
| (State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
17655 WATERVIEW PARKWAY
DALLAS, TEXAS 75252
(Address and Zip Code of Principal Executive Offices)
(972) 348-5100
(Registrant’s Telephone Number, including Area Code)
NOT APPLICABLE
(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:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act |
| ITEM 7.01. | Regulation FD Disclosure |
Attached is a slide presentation to be given to investors and others by senior officers of Alliance Data Systems Corporation.
| ITEM 9.01. | Financial Statements and Exhibits |
(d) Exhibits
| EXHIBIT |
DESCRIPTION | |
| 99.1 | Investor Presentation Materials. | |
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.
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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: April 16, 2008 | By: | /s/ Edward J. Heffernan | ||||||||
| Edward J. Heffernan | ||||||||||
| Executive Vice President and Chief Financial Officer | ||||||||||
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EXHIBIT INDEX
| EXHIBIT |
DESCRIPTION | |
| 99.1 | Investor Presentation Materials. | |
4
 ©2008 ADS Alliance Data Systems, Inc. Alliance Data NYSE:ADS Q1 2008 Exhibit 99.1 |
 2008
Q1 ADS Roadshow 2 ©2008 ADS Alliance Data Systems, Inc. Alliance Data’s Safe Harbor Statement/Forward-Looking Statements • This presentation 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 presentation 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. These risks, uncertainties and assumptions include those made with respect to and any developments related to the proposed merger with an affiliate of The Blackstone Group, including the risk that conditions to closing, including the condition relating to OCC approval, may not be satisfied and that the proposed merger may not be consummated, as well as risks and uncertainties arising from actions that the respective parties to the merger agreement may take in connection therewith. The Company cannot provide any assurance that the conditions to closing the transaction will be satisfied or that the proposed merger will be completed. 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 presentation 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. |
 2008
Q1 ADS Roadshow 3 ©2008 ADS Alliance Data Systems, Inc. Financial Measures • In addition to the results presented 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 and cash
earnings per 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. Definitions of these financial terms and reconciliations of these financial measures to comparable GAAP measures are available
on the Company's website, except where, as in the case of adjusted EBITDA,
operating EBITDA and cash earnings per share, the appropriate GAAP
financial measure is not available on a forward-looking basis. The
financial measures presented are consistent with the Company's historical
financial reporting practices, except as noted with respect to the Company’s revised segment reporting. 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. |
 2008
Q1 ADS Roadshow 4 ©2008 ADS Alliance Data Systems, Inc. Alliance Data: A Unique Business Model • Highly sophisticated transaction-based programs are measurable, trackable and allow for micro-segmentation of clients’ customers. • Drives high ROIs for our clients and displaces traditional marketing channels, a $670 billion market. • Comprehensive nature of our programs cuts across many traditional industries. Largest and Most Comprehensive Provider of Transaction- based Marketing and Loyalty Solutions Very “sticky” programs: recession resistant and resilient pricing power • Multi-channel marketing strategy • Data products • Database design and build • Analytics • Permission-based email • Customer care • Processing • Credit |
 2008
Q1 ADS Roadshow 5 ©2008 ADS Alliance Data Systems, Inc. Compelling Growth Company – Four Financial Metrics 1. Double-digit Organic Growth 2. Strong Free Cash Flow Conversion • Double-digit organic business growth, plus • Margin expansion: 14% (2000) 32% (2007); >250bps a year • Capex improving from 5% 3% of top-line 3. Strong Visibility, Predictability and Transparency • 27 consecutive quarters since IPO • High recession resiliency 4. Excellent Liquidity • $3.8BN Capacity in Place $1.8BN Unused • Leverage <1x Comfort at 3x $2.0BN Available $3.8BN Unused/Available (“investment grade”) |
 2008
Q1 ADS Roadshow 6 ©2008 ADS Alliance Data Systems, Inc. 2008 Guidance • Reiterate Organic Growth Targets: • Operating EBITDA >$730MM • Adjusted EBITDA >$700MM • Cash EPS $4.30 Cash EPS: Mid-teens Organic Growth Q1: Flat (-) Lane Bryant Drag ($.98-1.00) (-) 2008’s Most Difficult Comps Q2: Low to Mid-teens (-) Lane Bryant Drag
(+) Private Label Ramp-ups ($1.00) (+) Funding Benefits Q3: Mid to High-teens (-) Lane Bryant
Drag (+) Private Label Ramp-ups ($1.15) (+) Funding Benefits (+) Loyalty & Epsilon Q4: Mid-20’s (+) Lane Bryant Anniv. (+) Private Label Ramp-ups (>$1.15) (+) Funding Benefits (+) Loyalty & Epsilon Note: Adjusted EBITDA Will Follow A Similar Distribution |
 2008
Q1 ADS Roadshow 7 ©2008 ADS Alliance Data Systems, Inc. 2008 Est. Free Cash Flow ($MM, Except per Share) Adjusted EBITDA > $700 Loyalty Adjustment 30 Operating EBITDA > $730 Less Capex/Int./Taxes (330) Free Cash Flow $400 Per Share $5.00 + Asset Sales / Other Initiatives TBD (11% yield) |
 2008
Q1 ADS Roadshow 8 ©2008 ADS Alliance Data Systems, Inc. One Business Model Drives Multiple Service Offerings We capture past and current consumer transactions Through our analysis over the past 25 years we know this is the best predictor of future behavior We develop, implement and drive complex marketing and loyalty programs Our micro- segmentation drives significant ROIs for clients |
 2008
Q1 ADS Roadshow 9 ©2008 ADS Alliance Data Systems, Inc. 2008 Outlook: Loyalty Services - Canada • AIR MILES ® Reward Program is the Largest Mass Consumer Coalition Loyalty Program in Canada • 70% of Canadian Households Active in the Program • One of Canada’s Most Recognizable Brands • Despite Name, Revenues are not Driven by Airline Industry. • Revenues Generated from Consumers’ Non-discretionary, High Frequency, Everyday Spend • Gas, Grocery, Pharmacy, Etc. • Long Term Contracts with High Renewal Rate • 2007 Operating EBITDA of $174MM • (Adjusted EBITDA plus Loyalty Adjustment) • Expect Mid-teens Adjusted EBITDA Growth in 2008 • 100% Organic; driven by network effect, new sponsors, and larger commitments from current sponsors Shell Oil of Canada |
 2008
Q1 ADS Roadshow 10 ©2008 ADS Alliance Data Systems, Inc. 2008 Outlook: Epsilon Marketing Services • Only Recognized Leader in Both Database Marketing and Email Marketing Services by Forrester • Most Comprehensive and Only Integrated Database Marketing Services Firm in the Industry • Marketing Strategy • Database Management • Proprietary Data Services • Analytical Services • Distribution (35 BN+ Permission-based Emails Sent Annually) • Coalition Programs: Abacus, Citi ThankYou Network • Individual Programs: Hilton HHonors, Barnes & Noble, Pfizer • Top 25 Clients have Average Tenure of 10 Years • 2007 Adjusted EBITDA of $118MM • Expect Mid-teens Adjusted EBITDA Growth in 2008 • $670BN Market: TV, radio, newspapers, magazines, outdoor, direct response & mail, events & promos • Massive Shift to ROI-based Programs • 100% Organic: Larger Commitments from Existing Clients and New Clients |
 2008
Q1 ADS Roadshow 11 ©2008 ADS Alliance Data Systems, Inc. 2008 Outlook: Private Label Services • Fully Integrated Loyalty-driven Private Label and Co-brand Programs • Loyalty & Marketing Programs • High-end Customer Care • Transaction Processing • Consumer’s Choice Driven by Loyalty and Relationship to Retailer, not a Need for Credit • 2 of 3 Services (Loyalty/Marketing and Customer Care) Provide “Special Sauce” That Makes the Business Unique • High Renewal Rate; Key Clients with Long Tenure • 2007 Adjusted EBITDA of $99MM • Expect Mid-single Digit Adjusted EBITDA Growth in 2008 • Grow-over from Lane Bryant • 280+ potential clients (50% have a program today) • Sign 4-5 new clients per year |
 2008
Q1 ADS Roadshow 12 ©2008 ADS Alliance Data Systems, Inc. 2008 Outlook: Private Label Credit • 11MM Active Households Each Month • 85% Female; Mid-to High-Income • Customer Views as Loyalty Program, not an Extension of Credit • 700 Average Bureau Score; Small Average Balances ($350/acct.) • No Sub-prime Targeting • 2007 Adjusted EBITDA of $350MM • Expect Mid-single Digit Adjusted EBITDA Growth in 2008 – It’s Not the Macro Issues; It’s Lane Bryant v. ramp-ups • (+) Yields Solid • (+) Portfolio Growth Solid – excl. Lane Bryant: 6%; including : flat • (+) Portfolio Sales Decent – excl. Lane Bryant: 5%; including: flat • (+) Funding Rates • (-) Slight Creep in Credit Losses – Master Trust Sep ‘07 Oct ‘07 Nov ‘07 Dec ‘07 Jan ‘08 Feb ‘08 Delinquencies 5.4% 5.5% 5.3% 5.1% 5.4% 5.3% Losses 5.7% 5.4% 6.2% 5.7% 6.5% 6.3% } Offset – Natural Hedge |
 2008
Q1 ADS Roadshow 13 ©2008 ADS Alliance Data Systems, Inc. 2003-2008e (in $MM, except per share) Adjusted EBITDA >$700 2003
2004 2005 2006 2007 2008e Cash EPS 2003
2004 2005 2006
2007 2008e $1.00 $1.54 $1.99 $3.14 $3.88 $4.30 $189 $255 $321 $498 $632 |