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):
September 17, 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 (the “Company”).
| 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.
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: September 17, 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 Q3 2008 Exhibit 99.1 |
 2008
Q3 ADS Roadshow 2 ©2008 ADS Alliance Data Systems, Inc. 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 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 termination of the proposed merger with an
affiliate of The Blackstone Group, including risks and uncertainties arising from actions that the parties to the merger agreement or third parties may take in connection therewith. 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
Q3 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
Q3 ADS Roadshow 4 ©2008 ADS Alliance Data Systems, Inc. 2008 Update • Loyalty Services: - Continues to Outperform (Canada) • Epsilon: - On Track with Q3 Seasonal Revenue/EBITDA Surge - Macro: Retailers cutting marketing spend 20% - ADS: No impact seen; Retailers maintain spend on highest ROI programs • Private Label: - Tracking to a Record 9 -10 Signings - MasterTrust - Q3 delinquencies seasonally run 60-70 bps v. Q2 2008: 70 bps 2007: 60 bps 2006: 60 bps - Loss rates correlated with delinquency rates - Maintaining full-year guidance of mid-5’s delinquency rates & mid-6’s loss rates - ’09 Perspective: 50bps hit in loss rate only 3% hit to earnings • Guidance: - Existing Guidance of $1.15 Q3 & $4.35 Full-year - If upside, use for: - locking down term funding - future visibility - flow through to further overperformance |
 2008
Q3 ADS Roadshow 5 ©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
Q3 ADS Roadshow 6 ©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 • 29 consecutive quarters of meet/beat since IPO • High recession resiliency 4. Excellent Liquidity: • Announced $1.8 Billion Buyback • Expect to Maintain <3x Leverage |
 2008
Q3 ADS Roadshow 7 ©2008 ADS Alliance Data Systems, Inc. 2008 Guidance (increased on Q2 call) • Organic Growth Targets: • Operating EBITDA $730MM • Adjusted EBITDA $700MM • Cash EPS $4.35 Cash EPS: Mid-teens Organic Growth – Earnings Acceleration Q1: $1.00
Flat (-) Lane Bryant Drag (-) 2008’s Most Difficult Comps Q2: $1.04 +14% (-) Lane Bryant Drag (+) Private Label Ramp-ups (+) Funding Benefits (+) Loyalty Q3: $1.15 (-) Lane Bryant Drag (+) Private Label Ramp-ups (N) Funding (+) Loyalty & Epsilon Q4: >$1.15 (+) Lane Bryant Anniv. (+) Private Label Ramp-ups (N) Funding (+) Loyalty & Epsilon N = Neutral |
 2008
Q3 ADS Roadshow 8 ©2008 ADS Alliance Data Systems, Inc. 2008 Estimated Free Cash Flow ($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 per Share $1.60 $6.60 |
 2008
Q3 ADS Roadshow 9 ©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
Q3 ADS Roadshow 10 ©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 >25% Adjusted EBITDA Growth in 2008 • 100% Organic; driven by network effect, new sponsors, and larger commitments from current sponsors Shell Oil of Canada |
 2008
Q3 ADS Roadshow 11 ©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, CitiBank ® 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
Q3 ADS Roadshow 12 ©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: 9-10) |
 2008
Q3 ADS Roadshow 13 ©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 Negative Adjusted EBITDA in 2008 – It’s not the Macro Issues; It’s Lane Bryant; • Positive Growth Returns in Q4 |
 2008
Q3 ADS Roadshow 14 ©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 $4.35 $189 $255 $321 $498 $632 |