Attached files
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| 8-K - 8-K - BLACKHAWK NETWORK HOLDINGS, INC | blackhawkq42014earningsrel.htm |
Exhibit 99.1
News Release
INVESTORS/ANALYSTS: | MEDIA: |
Patrick Cronin | Teri Llach |
(925) 226-9973 | (925) 226-9028 |
investor.relations@bhnetwork.com | teri.llach@bhnetwork.com |
Blackhawk Announces Fourth Quarter and Full Year 2014 Financial Results
Full Year Adjusted Operating Revenues Rise 31%; Full Year Adjusted Net Income Increases 20% excluding, or 63% including, a $27 million reduction in cash taxes payable
Pleasanton, California, February 26, 2015— Blackhawk Network Holdings, Inc. (NASDAQ: HAWK and HAWKB) today announced financial results for the fourth quarter and full year ended January 3, 2015.
"Our existing businesses performed very well in 2014", commented CEO Bill Tauscher. "Excluding acquisitions, transaction dollar volume growth was 25% in the fourth quarter and 26% for full year 2014, a strong acceleration from 2013 where transaction dollar volume growth excluding acquisitions was 13% in the fourth quarter and 15% for the full year. This was driven by strong sales of open loop gift cards in the U.S. and international sales of digital media products. International accounted for 20% of total transaction dollar volume during the fourth quarter and 21% of total transaction dollar volume for fiscal 2014. Our full year adjusted operating revenue growth of 31% was bolstered by the InteliSpend and Retailo acquisitions which added a combined $61 million of adjusted operating revenues in fiscal 2014. GAAP operating revenues for fiscal 2014 totaled $1.44 billion, a 27% increase over 2013."
CFO Jerry Ulrich added, "Our bottom line results for the year slightly exceeded our expectations. Excluding the $27 million reduction in cash taxes payable, full year 2014 adjusted net income was $69.2 million, up 20% from 2013, and full year 2014 adjusted diluted EPS was $1.27, up 17% from 2013. We had originally projected that our late 2014 acquisition of Parago would contribute an additional $0.02 of adjusted diluted EPS in the fourth quarter, however, actual Parago results were virtually earnings neutral, net of final acquisition costs and interest expense. Including the $27 million reduction in cash taxes payable, full year 2014 Adjusted Net Income totaled $96.5 million, or $1.77 per diluted share, an increase of 63% compared to 2013. GAAP net income was $45.5 million for the year, a 16% decline from 2013 due mainly to various acquisition-related, non-cash items."
Pro forma free cash flow which excludes certain tax deposits made by Blackhawk and reimbursable by Safeway totaled $49 million in 2014. A reconciliation table of GAAP cash flow to pro forma free cash flow is provided in Table 3 of this press release.
The fourth quarter and full year 2014 include an additional fiscal week compared to the fourth quarter and full year 2013. This additional fiscal week had an immaterial impact to the Company's financial results.
The Company will provide additional details on its 2014 financial results during a conference call scheduled for 8a.m. Eastern Time on February 26, 2015. The Company will provide a 2015 financial outlook during its investor conference webcast that follows the earnings call. Details on the times and methods to participate in these events are provided near the end of this release.
GAAP financial results for the fourth quarter of 2014 compared to the fourth quarter of 2013
• | Operating revenues totaled $658.9 million, an increase of 26% from $521.2 million for the quarter ended December 28, 2013. This increase was due to a 20% increase in commissions and fees driven primarily by higher closed loop gift card sales, a 59% increase in program, interchange, marketing and other fees due to strong open loop gift card sales in the U.S. and the acquisition of InteliSpend in October 2013, and a 44% increase in product sales primarily due to growth at Cardpool. |
• | Net income totaled $42.7 million compared to net income of $49.3 million for the quarter ended December 28, 2013. The decline was driven primarily by Cardpool's non-cash contingent consideration credit from Q4 2013 that did not repeat in Q4 2014, amortization of intangibles and interest expense related to the late 2013 acquisitions of InteliSpend and Retailo and the acquisition of Parago in October 2014. |
• | Earnings per diluted share was $0.77 compared to earnings per diluted share of $0.92 for the quarter ended December 28, 2013. Diluted shares outstanding increased 3% to 55.0 million. |
Non-GAAP financial results for the fourth quarter of 2014 compared to the fourth quarter of 2013 (see Table 2 for Reconciliation of Non-GAAP Measures)
• | Adjusted operating revenues totaled $311.9 million, an increase of 32% from $237.2 million for the quarter ended December 28, 2013. |
• | Adjusted EBITDA totaled $96.4 million, an increase of 26% from $76.8 million for the quarter ended December 28, 2013. |
• | Adjusted net income totaled $64.1 million, an increase of 44% from $44.4 million for the quarter ended December 28, 2013. Excluding the impact of the reduction in cash taxes payable, adjusted net income was $51.5 million, an increase over 2013 of 20%, which was less than the Adjusted EBITDA growth rate primarily due to higher depreciation from Parago and interest expense related to debt incurred for all acquisitions. |
• | Adjusted diluted EPS was $1.16, an increase of 40% from $0.83 for the quarter ended December 28, 2013. Excluding the impact of the reduction in cash taxes payable, adjusted diluted EPS increased 15% to $0.93. |
GAAP financial results for the full year 2014 compared to the full year 2013
• | Operating revenues totaled $1,445.0 million, an increase of 27% from $1,138.1 million for the year ended December 28, 2013. This increase was due to a 22% increase in commissions and fees driven primarily by higher closed loop gift card sales, a 55% increase in program, interchange, marketing and other fees due to strong open loop gift card sales in the U.S., issuing bank contract amendments and the acquisition of InteliSpend, and a 28% increase in product sales primarily due to growth at Cardpool. |
• | Net income totaled $45.5 million compared to net income of $54.1 million for the year ended December 28, 2013. The decline was driven primarily by Cardpool's non-cash contingent consideration credit from Q4 2013 that did not repeat in Q4 2014, amortization of intangibles and interest expense related to the late 2013 acquisitions of InteliSpend and Retailo and the acquisition of Parago in October 2014. |
• | Earnings per diluted share was $0.83 compared to earnings per diluted share of $1.02 for the year ended December 28, 2013. Diluted shares outstanding increased 4% to 54.3 million. |
Non-GAAP financial results for the full year 2014 compared to the full year 2013 (see Table 2 for Reconciliation of Non-GAAP Measures)
• | Adjusted operating revenues totaled $682.7 million, an increase of 31% from $519.6 million for the year ended December 28, 2013. |
• | Adjusted EBITDA totaled $144.6 million, an increase of 27% from $114.2 million for the year ended December 28, 2013. |
• | Adjusted net income totaled $96.5 million, an increase of 63% from $59.1 million for the year ended December 28, 2013. Excluding the impact of the reduction in cash taxes payable, adjusted net income increased over 2013 by 20% to $69.2 million. |
• | Adjusted diluted EPS was $1.77, an increase of 60% from $1.11 for the year ended December 28, 2013. Excluding the impact of the reduction in cash taxes payable, adjusted diluted EPS increased 17% to $1.27. |
Reduction in Cash Taxes Payable
The completion of the Albertsons and Safeway merger transaction on January 30, 2015, together with the tax election made under the tax-sharing agreement between Safeway and Blackhawk, will result in a stepped up tax basis to $1.3 billion for Blackhawk related to Safeway’s previous spin-off of Blackhawk. The tax-effected amount of the step-up of $429 million will be amortized as an offset to Blackhawk’s taxes otherwise payable in the U.S. and certain states over a 15-year period beginning April 14, 2014, the effective date of Safeway’s spin-off of Blackhawk.
The reduction in cash taxes payable will be reflected in the Company’s Adjusted Net Income and Adjusted Diluted Earnings per Share in each reporting period. For 2014, the reduction in cash taxes payable pro-rated from the spin-off date is expected to be approximately $23 million. For 2015 and future years through the amortization period, the annual reduction in cash taxes payable is estimated at approximately $28 million depending on statutory tax rates in effect during the reporting period. Future revaluations of the deferred tax asset resulting from any such rate changes will be a non-cash tax expense or benefit during the reporting period for GAAP purposes and reflected in Net Income, but will be excluded from Adjusted Net Income.
In addition, the Company acquired net operating losses (NOLs) in connection with certain acquisitions completed in each of 2013 and 2014. Blackhawk expects to realize a cash tax benefit when these NOLs are utilized to offset taxable income in certain jurisdictions. The Company also expects to realize a reduction in cash taxes payable from the amortization of intangible assets recorded in connection with certain acquisitions. The combined reduction in cash taxes payable from these items is estimated to be approximately $5 million in 2014 and is expected to be $12 million in each of 2015 and 2016, $5 million in 2017 and $2 million in 2018.
The estimated cash tax benefits described above assume, among other things, no change in applicable law and that the Company will generate sufficient taxable income to absorb these tax benefits fully in the years they become available.
By end-of-day February 26 the Company will post to its investor relations website restated Adjusted Net Income and Adjusted Diluted EPS by quarter reflecting the reduction in cash taxes payable.
Change in Key Metrics
Following the acquisition of Parago the Company has decided to redefine several key metrics that better reflect changes to its evolving business model, including the acquisition of Parago. The revised metric descriptions and definitions are provided below.
• | The metric “load value” has changed to “transaction dollar volume.” Transaction dollar volume represents the total dollar amount of value loaded onto prepaid products as well as the dollar value of incentives and rewards processed during a period, but not fulfilled with a Blackhawk prepaid product. For example, some rebates are fulfilled by paper checks, merchandise or by a third party provider, but Blackhawk still earns fees for processing the original rebate transaction. |
• | The metric “commissions and fees as a percentage of load value” has changed to “prepaid and processing revenues as a percentage of transaction dollar volume.” Prepaid and processing revenues represents the sum of the first two revenue lines of the Company's income statement excluding marketing revenues. The Company believes prepaid and processing revenues as a percentage of transaction dollar volume is a better representation of the Company’s overall revenue yield driven due to the increasing proportion of open loop products versus closed loop products in its retail network and the growth of its incentives and rewards business. Marketing revenues are excluded from this metric as marketing revenue is generally a pass through with dollar for dollar offset in sales and marketing expense related to promotions the Company coordinates through its distribution partners. |
• | The metric “distribution partner commissions paid as a percentage of commissions and fees” has changed to “partner distribution expense as a percentage of prepaid and processing revenues.” The numerator still includes commissions paid to distribution partners, but the revised metric now includes other non-commission and fee revenue sharing arrangements and equity award expense with certain partners. The denominator has been changed to prepaid and processing revenues as described above since both of the first two revenue lines have revenue components that may be shared with distribution partners. |
• | The metric “number of load transactions” has changed to “transaction count” to be consistent with the inclusion of non-prepaid incentives and rewards processing volume in our transaction dollar volume metric. |
Reclassification of Certain Expenses
The Company has reclassified amounts within operating expenses to conform with its current presentation, including compensation to certain retail distribution partners from sales and marketing to partner distribution expense. The Company has revenue sharing arrangements with certain distribution partners and equity awards granted to certain distribution partners that are now categorized as partner distribution expense and not sales and marketing expense.
Conference Call
The Company will host a conference call to discuss fourth quarter and full year 2014 financial results on Thursday, February 26 at 5:00 a.m. PST / 8:00 a.m. EST. Hosting the call will be Bill Tauscher, Chief Executive Officer; Talbott Roche, President; and Jerry Ulrich, Chief Financial & Administrative Officer. Participants may listen to a real time audio webcast of the call by visiting the Company’s investor relations website located at ir.blackhawknetwork.com. Following the call, an archived webcast will be available on the Company’s investor relations website, or the replay can be accessed by dialing (888) 286-8010 and entering the participant passcode 67368125. The replay will be available until Thursday, March 12, 2015.
Investor Conference
The Company also will host an investor conference on February 26, 2015 from 7:00 a.m. to 9:00 a.m. PST / 10:00 a.m. to 12:00 p.m. EST to discuss management’s strategic focus and financial outlook for 2015. A video webcast of the conference can be accessed by visiting the Company’s investor relations website located at ir.blackhawknetwork.com. A replay of the webcast will be available on the Company’s investor relations website until Thursday, March 12, 2015.
About Blackhawk Network
Blackhawk Network Holdings, Inc. (NASDAQ: HAWK and HAWKB) is a leading prepaid and payments global company that supports the program management and distribution of gift cards, prepaid telecom products and financial service products in a number of different retail, digital and incentive channels. Blackhawk’s digital platform supports prepaid across a network of digital distribution partners including retailers, financial service providers, and mobile wallets. For more information, please visit www.blackhawknetwork.com and www.giftcardmall.com.
Use of Non-GAAP Financial Measures
Blackhawk regards the non-GAAP financial measures provided in this press release as useful measures of the operational and financial performance of its business. Reconciliations of non-GAAP financial measures to Blackhawk’s financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data. The use of non-GAAP financial measures has certain limitations as they do not reflect all items of income, expense, or cash flows that affect Blackhawk’s financial performance under GAAP. These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP. In addition, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore comparability may be limited. Blackhawk encourages investors and others to review Blackhawk’s financial information in its entirety and not rely on any single financial measure.
Forward Looking Statements
This press release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are indicated by words or phrases such as "guidance," "believes," "expects," "anticipates," "estimates," "plans," "continuing," "ongoing," and similar words or phrases and the negative of such words and phrases. Forward-looking statements are based on our current plans and expectations and involve risks and uncertainties which are, in many instances, beyond our control, and which could cause actual results to differ materially from those included in or contemplated or implied by the forward-looking statements. Such risks and uncertainties include the following: our ability to generate adequate taxable income to enable us to fully utilize the cash tax benefits referred to in this release, changes in applicable tax law that preclude us from fully utilizing the cash tax benefits referred to in this release, our ability to grow adjusted operating revenues and adjusted net income as anticipated, our ability to grow at historic rates or at all, the consequences should we lose one or more of our top distribution partners or fail to attract new distribution partners to our network or if the financial performance of our distribution partners' businesses decline, our reliance on our content providers, the demand for their products and our exclusivity arrangements with them, our reliance on relationships with card issuing banks, the consequences to our future growth if our distribution partners fail to actively and effectively promote our products and services, the requirement that we comply with applicable laws and regulations, including increasingly stringent money-laundering rules and regulations, and other risks and uncertainties described in our reports and filings with the Securities and Exchange Commission, including the risks and uncertainties set forth in Item 1A under the heading Risk Factors in our Annual Report on Form 10-K and other subsequent periodic reports we have filed with the Securities and Exchange Commission. We undertake no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof and disclaim any obligation to do so other than as may be required by law.
BLACKHAWK NETWORK HOLDINGS, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited) | |||||||||||||||
13 Weeks Ended | 12 Weeks Ended | 53 Weeks Ended | 52 Weeks Ended | ||||||||||||
January 3, 2015 | December 28, 2013 | January 3, 2015 | December 28, 2013 | ||||||||||||
OPERATING REVENUES: | |||||||||||||||
Commissions and fees | $ | 511,458 | $ | 425,232 | $ | 1,107,782 | $ | 904,796 | |||||||
Program, interchange, marketing and other fees | 100,276 | 63,118 | 220,257 | 141,735 | |||||||||||
Product sales | 47,143 | 32,830 | 116,924 | 91,557 | |||||||||||
Total operating revenues | 658,877 | 521,180 | 1,444,963 | 1,138,088 | |||||||||||
OPERATING EXPENSES: | |||||||||||||||
Partner distribution expense | 346,968 | 283,965 | 762,245 | 618,490 | |||||||||||
Processing and services | 85,020 | 56,547 | 218,674 | 157,868 | |||||||||||
Sales and marketing | 78,288 | 66,802 | 189,408 | 150,516 | |||||||||||
Costs of products sold | 44,172 | 30,575 | 110,917 | 86,357 | |||||||||||
General and administrative | 25,156 | 17,715 | 66,856 | 50,830 | |||||||||||
Transition and acquisition | 1,774 | 2,111 | 2,134 | 2,111 | |||||||||||
Amortization of acquisition intangibles | 8,866 | 3,056 | 19,705 | 3,349 | |||||||||||
Change in fair value of contingent consideration | (3,722 | ) | (13,485 | ) | (3,722 | ) | (14,740 | ) | |||||||
Total operating expenses | 586,522 | 447,286 | 1,366,217 | 1,054,781 | |||||||||||
OPERATING INCOME | 72,355 | 73,894 | 78,746 | 83,307 | |||||||||||
OTHER INCOME (EXPENSE): | |||||||||||||||
Interest income and other income (expense), net | (310 | ) | (191 | ) | (184 | ) | 241 | ||||||||
Interest expense | (3,566 | ) | — | (5,647 | ) | — | |||||||||
INCOME BEFORE INCOME TAX EXPENSE | 68,479 | 73,703 | 72,915 | 83,548 | |||||||||||
INCOME TAX EXPENSE | 25,646 | 24,530 | 27,490 | 29,862 | |||||||||||
NET INCOME BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS | 42,833 | 49,173 | 45,425 | 53,686 | |||||||||||
Add: Net (income) loss attributable to non-controlling interests (net of tax) | (116 | ) | 99 | 122 | 418 | ||||||||||
NET INCOME ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC. | $ | 42,717 | $ | 49,272 | $ | 45,547 | $ | 54,104 | |||||||
EARNINGS PER SHARE: | |||||||||||||||
Basic – Class A and Class B | $ | 0.80 | $ | 0.95 | $ | 0.86 | $ | 1.04 | |||||||
Diluted – Class A and Class B | $ | 0.77 | $ | 0.92 | $ | 0.83 | $ | 1.02 | |||||||
Weighted average shares outstanding—basic | 52,979 | 51,810 | 52,531 | 51,164 | |||||||||||
Weighted average shares outstanding—diluted | 55,001 | 53,206 | 54,309 | 52,402 | |||||||||||
BLACKHAWK NETWORK HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) | |||||||
Year-end 2014 | Year-end 2013 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 911,615 | $ | 550,380 | |||
Restricted cash | 5,000 | — | |||||
Settlement receivables, net | 526,587 | 813,448 | |||||
Accounts receivable, net | 181,431 | 126,369 | |||||
Deferred income taxes | 38,456 | 20,145 | |||||
Other current assets | 95,658 | 67,474 | |||||
Total current assets | 1,758,747 | 1,577,816 | |||||
Property, equipment and technology, net | 130,008 | 79,663 | |||||
Intangible assets, net | 170,957 | 98,689 | |||||
Goodwill | 331,265 | 133,521 | |||||
Deferred income taxes | 1,678 | 727 | |||||
Other assets | 93,086 | 90,678 | |||||
TOTAL ASSETS | $ | 2,485,741 | $ | 1,981,094 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Settlement payables | $ | 1,383,481 | $ | 1,484,047 | |||
Consumer and customer deposits | 133,772 | 54,915 | |||||
Accounts payable and accrued operating expenses | 117,118 | 99,499 | |||||
Current portion of note payable | 11,211 | — | |||||
Notes payable to Safeway | 27,678 | — | |||||
Other current liabilities | 102,352 | 81,270 | |||||
Total current liabilities | 1,775,612 | 1,719,731 | |||||
Deferred income taxes | 45,375 | 24,488 | |||||
Note payable | 362,543 | — | |||||
Other liabilities | 14,432 | 8,711 | |||||
Total liabilities | 2,197,962 | 1,752,930 | |||||
Stockholders’ equity: | |||||||
Preferred Stock | — | — | |||||
Class A common stock | 13 | 12 | |||||
Class B common stock | 41 | 41 | |||||
Additional paid-in capital | 137,916 | 107,139 | |||||
Treasury stock | — | (126 | ) | ||||
Accumulated other comprehensive loss | (19,470 | ) | (2,873 | ) | |||
Retained earnings | 162,439 | 116,975 | |||||
Total Blackhawk Network Holdings, Inc. equity | 280,939 | 221,168 | |||||
Non-controlling interests | 6,840 | 6,996 | |||||
Total stockholders’ equity | 287,779 | 228,164 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 2,485,741 | $ | 1,981,094 | |||
BLACKHAWK NETWORK HOLDINGS, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) | |||||||
53 Weeks Ended | 52 Weeks Ended | ||||||
January 3, 2015 | December 28, 2013 | ||||||
OPERATING ACTIVITIES: | |||||||
Net income before allocation to non-controlling interests | $ | 45,425 | $ | 53,686 | |||
Adjustments to reconcile net income to net cash used in operating activities: | |||||||
Depreciation and amortization of property, equipment and technology | 28,548 | 21,662 | |||||
Amortization of intangibles | 24,371 | 6,817 | |||||
Amortization of program development costs | 24,451 | 21,039 | |||||
Employee stock-based compensation expense | 15,365 | 8,524 | |||||
Distribution partner mark-to-market expense | 1,312 | 8,598 | |||||
Change in fair value of contingent consideration | (3,722 | ) | (14,740 | ) | |||
Reversal of reserve for patent litigation | (3,852 | ) | — | ||||
Excess tax benefit from stock-based awards | (2,730 | ) | (2,411 | ) | |||
Deferred income taxes | (11,825 | ) | (1,053 | ) | |||
Other | 5,048 | 4,317 | |||||
Changes in operating assets and liabilities: | |||||||
Settlement receivables | 276,413 | (289,974 | ) | ||||
Settlement payables | (86,005 | ) | 239,667 | ||||
Accounts receivable, current and long-term | (33,998 | ) | (21,327 | ) | |||
Prepaid expenses and other current assets | (2,280 | ) | (4,827 | ) | |||
Other assets | (28,379 | ) | (37,160 | ) | |||
Consumer and customer deposits | 35,096 | 714 | |||||
Accounts payable and accrued operating expenses | 942 | 27,235 | |||||
Other current and long-term liabilities | 18,976 | 11,148 | |||||
Income taxes, net | (16,852 | ) | (3,665 | ) | |||
Net cash provided by operating activities | 286,304 | 28,250 | |||||
INVESTING ACTIVITIES: | |||||||
Change in overnight cash advances to Safeway | — | 495,000 | |||||
Expenditures for property, equipment and technology | (39,709 | ) | (30,010 | ) | |||
Business acquisitions, net of cash received | (237,605 | ) | (149,370 | ) | |||
Sale of trading securities | — | 29,749 | |||||
Change in restricted cash | (5,000 | ) | 8,968 | ||||
Other | (499 | ) | (650 | ) | |||
Net cash provided by (used in) investing activities | (282,813 | ) | 353,687 | ||||
Continued on next page | |||||||
BLACKHAWK NETWORK HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) | |||||||
53 Weeks Ended | 52 Weeks Ended | ||||||
January 3, 2015 | December 28, 2013 | ||||||
FINANCING ACTIVITIES: | |||||||
Dividends paid | (83 | ) | (145 | ) | |||
Proceeds from issuance of note payable | 375,000 | — | |||||
Payments of costs for issuance of note payable | (3,783 | ) | — | ||||
Borrowings under revolving line of credit | 215,000 | — | |||||
Repayments on revolving line of credit | (215,000 | ) | — | ||||
Proceeds from note payable to Safeway | 27,678 | — | |||||
Repayment of debt assumed in business acquisitions | (41,984 | ) | — | ||||
Payments for acquisition liability | — | (5,615 | ) | ||||
Payments for initial public offering costs | — | (4,694 | ) | ||||
Reimbursements for initial public offering costs | — | 5,540 | |||||
Proceeds from issuance of common stock from exercise of employee stock options and employee stock purchase plans | 9,080 | 3,548 | |||||
Other stock-based compensation related | (863 | ) | (1,023 | ) | |||
Excess tax benefit from stock-based awards | 2,730 | 2,411 | |||||
Other | (44 | ) | 435 | ||||
Net cash provided by financing activities | 367,731 | 457 | |||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (9,987 | ) | (4,679 | ) | |||
DECREASE IN CASH AND CASH EQUIVALENTS | 361,235 | 377,715 | |||||
CASH AND CASH EQUIVALENTS—Beginning of year | 550,380 | 172,665 | |||||
CASH AND CASH EQUIVALENTS—End of year | $ | 911,615 | $ | 550,380 | |||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | |||||||
Cash payments during the year for: | |||||||
Interest paid (net of amounts capitalized) | $ | 4,596 | $ | — | |||
Income taxes paid | $ | 28,828 | $ | 29,658 | |||
Spin-Off income taxes paid funded by Safeway | $ | 27,678 | $ | — | |||
Noncash investing and financing activities: | |||||||
Financing of business acquisition with stock | $ | 1,595 | $ | — | |||
Financing of business acquisition with contingent consideration | $ | 13,100 | $ | — | |||
Conversion of income tax payable and deferred taxes to additional paid-in capital | $ | 1,807 | $ | 2,172 | |||
BLACKHAWK NETWORK HOLDINGS, INC.
SUPPLEMENTAL INFORMATION
(In thousands except percentages, average transaction value and per share amounts)
(Unaudited)
TABLE 1: OTHER OPERATIONAL DATA | |||||||||||||||
13 Weeks Ended | 12 Weeks Ended | 53 Weeks Ended | 52 Weeks Ended | ||||||||||||
January 3, 2015 | December 28, 2013 | January 3, 2015 | December 28, 2013 | ||||||||||||
Transaction dollar volume | $ | 6,217,572 | $ | 4,657,425 | $ | 13,539,495 | $ | 9,914,403 | |||||||
Transaction count | 142,607 | 117,426 | 297,163 | 241,801 | |||||||||||
Average transaction value | $ | 43.60 | $ | 39.66 | $ | 45.56 | $ | 41.00 | |||||||
Prepaid and processing revenues as a % of transaction dollar volume | 9.3 | % | 9.8 | % | 9.3 | % | 10.0 | % | |||||||
Partner distribution expense as a % of prepaid and processing revenues | 59.8 | % | 62.0 | % | 60.3 | % | 62.5 | % | |||||||
TABLE 2: RECONCILIATION OF NON-GAAP MEASURES | |||||||||||||||
13 Weeks Ended | 12 Weeks Ended | 53 Weeks Ended | 52 Weeks Ended | ||||||||||||
January 3, 2015 | December 28, 2013 | January 3, 2015 | December 28, 2013 | ||||||||||||
Adjusted operating revenues: | |||||||||||||||
Total operating revenues | $ | 658,877 | $ | 521,180 | $ | 1,444,963 | $ | 1,138,088 | |||||||
Issuing bank contract amendment | — | — | — | — | |||||||||||
Partner distribution expense | (346,968 | ) | (283,965 | ) | (762,245 | ) | (618,490 | ) | |||||||
Adjusted operating revenues | $ | 311,909 | $ | 237,215 | $ | 682,718 | $ | 519,598 | |||||||
Adjusted EBITDA: | |||||||||||||||
Net income before allocation to non-controlling interests | $ | 42,833 | $ | 49,173 | $ | 45,425 | $ | 53,686 | |||||||
Interest and other income | 310 | 191 | 184 | (241 | ) | ||||||||||
Interest expense | 3,566 | — | 5,647 | — | |||||||||||
Income tax expense | 25,646 | 24,530 | 27,490 | 29,862 | |||||||||||
Depreciation and amortization | 20,766 | 11,516 | 52,919 | 28,479 | |||||||||||
EBITDA | 93,121 | 85,410 | 131,665 | 111,786 | |||||||||||
Adjustments to EBITDA: | |||||||||||||||
Employee stock-based compensation | 5,596 | 3,245 | 15,365 | 8,524 | |||||||||||
Distribution partner mark-to-market expense | 1,400 | 1,637 | 1,312 | 8,598 | |||||||||||
Issuing bank contract amendment adjustment | — | — | — | — | |||||||||||
Change in fair value of contingent consideration | (3,722 | ) | (13,485 | ) | (3,722 | ) | (14,740 | ) | |||||||
Adjusted EBITDA | $ | 96,395 | $ | 76,807 | $ | 144,620 | $ | 114,168 | |||||||
Adjusted EBITDA margin: | |||||||||||||||
Total operating revenues | $ | 658,877 | $ | 521,180 | $ | 1,444,963 | $ | 1,138,088 | |||||||
Operating income | $ | 72,355 | $ | 73,894 | $ | 78,746 | $ | 83,307 | |||||||
Operating margin | 11.0 | % | 14.2 | % | 5.4 | % | 7.3 | % | |||||||
Adjusted operating revenues | $ | 311,909 | $ | 237,215 | $ | 682,718 | $ | 519,598 | |||||||
Adjusted EBITDA | $ | 96,395 | $ | 76,807 | $ | 144,620 | $ | 114,168 | |||||||
Adjusted EBITDA margin | 30.9 | % | 32.4 | % | 21.2 | % | 22.0 | % | |||||||
Adjusted net income: | |||||||||||||||
Income before income tax expense | $ | 68,479 | $ | 73,703 | $ | 72,915 | $ | 83,548 | |||||||
Employee stock-based compensation | 5,596 | 3,245 | 15,365 | 8,524 | |||||||||||
Distribution partner mark-to-market expense | 1,400 | 1,637 | 1,312 | 8,598 | |||||||||||
Issuing bank contract amendment adjustment | — | — | — | — | |||||||||||
Change in fair value of contingent consideration | (3,722 | ) | (13,485 | ) | (3,722 | ) | (14,740 | ) | |||||||
Amortization of intangibles | 10,169 | 4,533 | 24,371 | 6,817 | |||||||||||
Adjusted income before income tax expense | 81,922 | 69,633 | 110,241 | 92,747 | |||||||||||
Income tax expense | 25,646 | 24,530 | 27,490 | 29,862 | |||||||||||
Tax expense on adjustments | 4,664 | 2,128 | 13,684 | 5,526 | |||||||||||
Adjusted tax expense before realization of cash tax benefits | 30,310 | 26,658 | 41,174 | 35,388 | |||||||||||
Reduction in cash taxes payable from amortization of spin-off tax basis step-up | (10,004 | ) | — | (22,510 | ) | — | |||||||||
Reduction in cash taxes payable from amortization of acquisition intangibles and utilization of acquired NOLs | (2,600 | ) | (1,331 | ) | (4,831 | ) | (1,331 | ) | |||||||
Adjusted tax expense | 17,706 | 25,327 | 13,833 | 34,057 | |||||||||||
Adjusted net income before allocation to non-controlling interests | 64,216 | 44,306 | 96,408 | 58,690 | |||||||||||
Add: Net (income) loss attributable to non-controlling interests (net of tax) | (116 | ) | 99 | 122 | 418 | ||||||||||
Adjusted net income attributable to Blackhawk Network Holdings, Inc. | $ | 64,100 | $ | 44,405 | $ | 96,530 | $ | 59,108 | |||||||
TABLE 2: RECONCILIATION OF NON-GAAP MEASURES (continued) | |||||||||||||||
13 Weeks Ended | 12 Weeks Ended | 53 Weeks Ended | 52 Weeks Ended | ||||||||||||
January 3, 2015 | December 28, 2013 | January 3, 2015 | December 28, 2013 | ||||||||||||
Adjusted EPS: | |||||||||||||||
Net income attributable to Blackhawk Network Holdings, Inc. | $ | 42,717 | $ | 49,272 | $ | 45,547 | $ | 54,104 | |||||||
Income allocated to participating securities | (151 | ) | (271 | ) | (226 | ) | (692 | ) | |||||||
Net income available for common shareholders | $ | 42,566 | $ | 49,001 | $ | 45,321 | $ | 53,412 | |||||||
Diluted weighted average shares outstanding | 55,001 | 53,206 | 54,309 | 52,402 | |||||||||||
Diluted earnings per share | $ | 0.77 | $ | 0.92 | $ | 0.83 | $ | 1.02 | |||||||
Adjusted net income attributable to Blackhawk Network Holdings, Inc. | $ | 64,100 | $ | 44,405 | $ | 96,530 | $ | 59,108 | |||||||
Adjusted income attributable to participating securities | (226 | ) | (243 | ) | (429 | ) | (749 | ) | |||||||
Adjusted net income available for common shareholders | $ | 63,874 | $ | 44,162 | $ | 96,101 | $ | 58,359 | |||||||
Diluted weighted average shares outstanding | 55,001 | 53,206 | 54,309 | 52,402 | |||||||||||
Adjusted diluted earnings per share | $ | 1.16 | $ | 0.83 | $ | 1.77 | $ | 1.11 | |||||||
TABLE 3: RECONCILIATION OF GAAP CASH FLOW TO FREE CASH FLOW
A significant portion of gift card sales occurs in late December of each year as a result of the holiday selling season. The timing of December holiday sales, cash inflows from our distribution partners and cash outflows to our content providers results in significant but temporary increases in our Cash, cash equivalents and restricted cash, Settlement receivables and Settlement payables balances at the end of each fiscal year relative to normal daily balances. As a result, the year over year comparison of cash generated by operating activities and total changes in cash can vary significantly. In light of this effect on interim periods, set forth below is a calculation of “free cash flow” which we calculate as the net cash flow from operating activities adjusted to exclude the impact from changes in Settlement payables and Settlement receivables, less expenditures for property, equipment and technology. Cash from the sale of prepaid products is held for a short period of time and then remitted, less our commissions, to our content providers, and is significantly impacted by the portion of gift card sales that occur in late December. Because this cash flow is temporary and highly seasonal, it is not available for other uses, and it is therefore excluded from our calculation of free cash flow. Free cash flow provides information regarding the cash that our business generates in interim periods without the fluctuations resulting from the timing of cash inflows and outflows from gift card sales in late December, which we believe is useful to understanding our business.
53 Weeks Ended | 52 Weeks Ended | ||||||
January 3, 2015 | December 28, 2013 | ||||||
Net cash flow provided by operating activities, as reported | $ | 286,304 | $ | 28,250 | |||
Changes in settlement payables and consumer and customer deposits, net of settlement receivables | (225,504 | ) | 49,593 | ||||
Net cash flow from operating activities, as adjusted | 60,800 | 77,843 | |||||
Expenditures for property, equipment and technology | (39,709 | ) | (30,010 | ) | |||
Free cash flow | 21,091 | 47,833 | |||||
Add back: Safeway cash tax payment reimbursed | 27,678 | — | |||||
Pro forma free cash flow | $ | 48,769 | $ | 47,833 | |||