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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):

February 9, 2011

 

 

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: February 9, 2011     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
Q1 2011
Exhibit 99.1

NYSE: ADS  |  Q1 2011
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:

NYSE: ADS  |  Q1 2011
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
2010 Revenue: $800mm
2010 EBITDA:   $205mm
2010 Revenue: $613mm
2010 EBITDA:   $152mm
2010 Revenue: $1.4bn
2010  EBITDA, net
of funding costs: $346mm
*******
*******
*******

NYSE: ADS  |  Q1 2011
4
©2010 ADS Alliance Data Systems, Inc.
Confidential and Proprietary
We work with the biggest brands in North America.

NYSE: ADS  |  Q1 2011
5
©2010 ADS Alliance Data Systems, Inc.
Confidential and Proprietary
2010 Operating Results
($MM, except per share data)
2009
Actual
2009
Adjusted¹
2010
Actual
% Change
10/09 Adjusted
Revenue
$1,964
$2,485
$2,791
12%
Income from
continuing
operations per
diluted share
$3.06
$2.54
$3.51
38%
Adjusted EBITDA
$590
$717
$823
15%
Core EPS
$5.16
$4.64
$5.86
26%
Year Ended December 31,
1 
See Reconciliation in Appendix

NYSE: ADS  |  Q1 2011
6
©2010 ADS Alliance Data Systems, Inc.
Confidential and Proprietary
Corporate:
•
$500 million in
available liquidity
•
Debt levels remain
moderate (leverage
ratio 2.3x at
December 31, 2010)
Liquidity and Capital at December 31, 2010
Bank Liquidity:
•
$2.9 billion of available
liquidity
•
Diversified funding
sources:  conduits, bank
issued CDs and term
ABS
•
Approximately 90%
fixed rate
Bank Capital:
WFNNB Regulatory
Ratios at Dec. 31,
2010:
•
Tier 1: 13%
•
Leverage: 12%
•
Total risk based: 19%
Liquidity and Capital

NYSE: ADS  |  Q1 2011
7
©2010 ADS Alliance Data Systems, Inc.
Confidential and Proprietary
2011 Guidance
Adjusted
2009 ¹
Actual
2010
%
Increase
Guidance
2011
%
Increase
Revenue
$
2.5 bn
$
2.8  bn
12%
$
3.0bn
8%
Adjusted EBITDA
$
717 mm
$
823 mm
15%
$
900 mm
10%
Income from continuing
ops per share
$
2.54
$
3.51
38%
$
4.66
33%
Core EPS
$
4.64
$
5.86
26%
$
6.75
15%
1
See reconciliation in appendix

NYSE: ADS  |  Q1 2011
8
©2010 ADS Alliance Data Systems, Inc.
Confidential and Proprietary
2011 Outlook
•
Over $400 million in free cash flow or $7.22 per diluted share in 2011
LoyaltyOne:
•Single-digit growth in both
revenue and adj. EBITDA
•Miles issued increase
approximately 5%
•Increased international
investment
•National launch of dotz
in
Brazil
Epsilon:
•Strongest growth rates in
the Company
•Double-digit organic growth
in revenue
•Mid-teens growth in
adjusted EBITDA
•Backlog of wins and DMS
acquisition drive above
average growth
•Focus on tuck-in
acquisition
Private Label:
•Moderate portfolio growth
-
5% increase in ending A/R        
•Continued divergence
between unemployment and
credit loss rates; 70 basis
point improvement in credit
loss rate
•High single-digit growth in
revenue and double-digit
growth in adj. EBITDA
•Bank dividends will resume
•4 -
5 new clients
Revenue and Core EPS Growth of at Least 8% and 15%, Respectively

NYSE: ADS  |  Q1 2011
9
©2010 ADS Alliance Data Systems, Inc.
Confidential and Proprietary
Strong Growth and Consistency Regardless of Macro Environment
The Business Model: Units Cycle Differently
Macro
$3.88
The Great Recession
*Excludes infrequently occurring items
Moderate Macro Recovery
2012
2008
2009
2010
2007
2011
Good
Liquidity Crisis
Massive Layoffs
Weakened Consumer Confidence
----
Strong ADS Performance----
$4.42
$4.64*
$5.86
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%

NYSE: ADS  |  Q1 2011
10
©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  |  Q1 2011
11
©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.

NYSE: ADS  |  Q1 2011
12
©2010 ADS Alliance Data Systems, Inc.
Confidential and Proprietary
*
*
*
*
*
*
*
*
*
*
*
*
*
*
*

NYSE: ADS  |  Q1 2011
13
©2010 ADS Alliance Data Systems, Inc.
Confidential and Proprietary
Adjusted 2009 (MM, except per share)
Loan Loss
Securitization
Divested
Bankruptcy
Bargain
Foreign
Tax Reserve
As Reported
Expense
Funding Costs
Operations
Change
Purchase Gain
Currency Loss
Release
Adjusted
Revenue
LoyaltyOne
715
$         
715
$    
Epsilon
514
514
Private Label
708
404
144
1,256
Corp
27
-
-
(27)
-
-
-
-
-
1,964
$      
404
$      
144
$             
(27)
$        
-
$         
-
$              
-
$              
-
$          
2,485
$ 
Adjusted EBITDA
LoyaltyOne
201
$         
11
$               
212
$    
Epsilon
128
128
Private Label
315
144
(7)
(21)
431
Corp
(54)
-
-
-
-
-
-
-
(54)
590
$         
-
$       
144
$             
-
$        
(7)
$           
(21)
$              
11
$               
-
$          
717
$    
Income from continuing operations
177
$         
(4)
$           
(21)
$              
7
$                 
(11)
$          
147
$    
Income from continuing operations
per diluted share
3.06
$        
(0.09)
$      
(0.37)
$          
0.14
$           
(0.20)
$       
2.54
$   
Core EPS
5.16
$        
(0.09)
$      
(0.37)
$          
0.14
$           
(0.20)
$       
4.64
$   
Year Ended December 31, 2009