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Form 8-K

 

 

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): November 9, 2010

 

 

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.)

7500 DALLAS PARKWAY, SUITE 700

PLANO, TEXAS 75024

(Address and Zip Code of Principal Executive Offices)

(214) 494-3000

(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 as Exhibit 99.1 is a 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
NUMBER

  

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: November 9, 2010     By:  

/s/ Charles L. Horn

      Charles L. Horn
      Executive Vice President and
      Chief Financial Officer

 

3

 

EXHIBIT INDEX

 

EXHIBIT
NUMBER

  

DESCRIPTION

      
99.1   Investor Presentation Materials.   

 

4

Investor Presentation
©2010 ADS Alliance Data Systems, Inc.
Confidential and Proprietary
Alliance Data
NYSE: ADS
Q4 2010
Exhibit 99.1

NYSE: ADS  |  Q4 2010
2
©2010 ADS Alliance Data Systems, Inc.
Confidential and Proprietary
Alliance Data is the largest and most comprehensive provider
of transaction-based marketing and loyalty solutions.
A Unique Business Model.
Advantages over traditional marketing channels:
-
Transaction-based
programs
allow
micro-segmentation
of
clients’
customer
data
-
Provide
high,
measurable
ROIs
for
our
clients
Comprehensive suite of products that
target the $190 billion direct and digital marketing
channel:
-
Multi-channel marketing strategy
-
Data products
-
Database design and build
-
Analytics
-
Permission-based email
-
Customer care
-
Processing
-
Credit

NYSE: ADS  |  Q4 2010
3
©2010 ADS Alliance Data Systems, Inc.
Confidential and Proprietary
Designs and executes
ROI-based marketing
programs that deliver
measurable results
Designs, delivers and
manages a suite of
loyalty marketing
programs and services
to profitably change
customer behavior
Drives sales for our
clients by providing
marketing driven
branded credit
programs that build
customer loyalty
Three Businesses.  One Focus.
The largest and most comprehensive provider of 
transaction-based marketing and loyalty solutions. These
solutions are delivered through 3 businesses:
Private Label
YTD  adj. EBITDA:  $159mm
YTD adj. EBITDA: $103mm
YTD adj. EBITDA, net
of funding costs: $265mm
*******
*******
*******

NYSE: ADS  |  Q4 2010
4
©2010 ADS Alliance Data Systems, Inc.
Confidential and Proprietary
2010:  A Final Look –
Top Questions
1.
Epsilon: 
•
Q3 reported topline
growth 29%; organic 19%
2.
Epsilon: 
•
Visa -
Top 5 Epsilon client; typical margin; large future growth
opportunity
3.
LoyaltyOne: 
•
Miles issued soft (2 clients); anniversary Q1 2011; 5% growth 2011
4.
LoyaltyOne:
•
Substantial runway before hitting ultimate redemption rate of 72%
5.
Private Label:
•
Sept. delinquencies 6.1%; tracking to sub-6% by year-end despite
small bubble from CARD Act
6. 
Private Label:
•
Q4 losses tracking to high 8% -
typical seasonality + small bubble
7.
Private Label:
•
Solid loan loss reserve (reserve rate % > actual charge-off %)
8.
Guidance:
•
Min. $5.70 core eps
(2010) v. $4.64 (2009 normalized) = 23% growth
•
Includes ($0.30) hit from Card Act
•
Focused
on
“pristine”
quality
of
earnings
•
2011:  20% growth less additional int’l investments = 18% net

NYSE: ADS  |  Q4 2010
5
©2010 ADS Alliance Data Systems, Inc.
Confidential and Proprietary
2011 Guidance
($MM, except per share data)
2010
Guidance
2011
Guidance
%
Change
Revenue
$2,800
$3,000
8%
Core EPS
$5.70
$6.75
18%
EPS
$3.48
$4.66
34%
(Assumes Flat Share Count)

NYSE: ADS  |  Q4 2010
6
©2010 ADS Alliance Data Systems, Inc.
Confidential and Proprietary
Free
Cash
Flow
(MM,
except
per
share)
2011
Adjusted EBITDA
900
$               
LoyaltyOne adjustment
50
                   
950
$               
Private Label funding costs
(200)
               
Core interest expense/capital expenditures/
  cash taxes/regulatory capital
(350)
               
Free cash flow
400
$               
Free cash flow per share
7.15
$              

NYSE: ADS  |  Q4 2010
7
©2010 ADS Alliance Data Systems, Inc.
Confidential and Proprietary
(+)
(-)
LoyaltyOne:
New sponsors/renewals
Brazil
Epsilon:
Database/Digital
Abacus/Data
Private Label:
Yield
Credit losses
Funding costs
Pipeline
ADS:
Liquidity
Debt levels
Free cash flow
Buyback
Issuance growth
Canceled/bankrupt client burn-off
New client ramp-up timing
Optimism for 2011 Outweighs the Risks

NYSE: ADS  |  Q4 2010
8
©2010 ADS Alliance Data Systems, Inc.
Confidential and Proprietary
The Business Model: Units Cycle Differently
Strong Growth and Consistency Regardless of Macro
Macro
$3.88
The Great Recession
*Excludes infrequently occurring items
The Great Macro “Muddle Through”
2012
2008
2009
2010
2007
2011
Good
Liquidity Crisis
Massive Layoffs
Weakened Consumer Confidence
No Double-dip, But Only 2 -3% GDP
Slow Employment Recovery:    
Unemployment 9.6%
9.2%
8.7% in 2012
$4.42
$4.64*
$5.70
Alliance Data
Core EPS
~$8.00
$6.75
Balanced
Growth Across
All Businesses
LoyaltyOne
and Epsilon’s
Performance, Plus Buyback
Outpace Decline in Private Label 
Double
-digit
Topline
Across
All 3 Businesses
EBITDA Growth
Across All 3
Businesses
Balanced
Growth Across
All Businesses
Restored
2007-12
CAGR
16%
-----Strong ADS Performance-----

NYSE: ADS  |  Q4 2010
9
©2010 ADS Alliance Data Systems, Inc.
Confidential and Proprietary
Alliance Data’s Safe Harbor Statement and 
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 the anticipated
effects of the CARD Act and 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. 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.

NYSE: ADS  |  Q4 2010
10
©2010 ADS Alliance Data Systems, Inc.
Confidential and Proprietary
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 constant currency financial
measures,
adjusted
EBITDA,
adjusted
EBITDA
margin,
core
earnings
and
core
earnings
per
diluted
share.
These non-GAAP financial measures exclude costs associated with the terminated merger with affiliates of
The Blackstone Group and other costs. The Company believes that these non-GAAP financial measures,
viewed in addition to and not in lieu of the Company’s reported GAAP results, provide useful information to
investors regarding the Company’s 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 financial measures are
available in the accompanying schedules and on the Company’s website. The financial measures presented
are consistent with the Company’s historical financial reporting practices. Core earnings and core earnings per
diluted share represent performance measures and are not intended to represent liquidity measures. The non-
GAAP financial measures presented herein may not be comparable to similarly titled measures presented by
other
companies,
and
are
not
identical
to
corresponding
measures
used
in
other
various
agreements
or
public
filings.