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Alliance Data Reports Record Full-Year 2012 Results; Raises Guidance for 2013
-- Revenue Increases 15 Percent to $3.6 Billion
-- Core EPS Increases 14 Percent to $8.71

DALLAS, Jan. 31, 2013 /PRNewswire/ -- Alliance Data Systems Corporation (NYSE: ADS), a leading provider of loyalty and marketing solutions derived from transaction-rich data, today announced results for the year ended December 31, 2012.

SUMMARY

Quarter Ended December 31,

Year Ended December 31,

(in millions, except per share amounts)

2012

2011

% Change

2012

2011

% Change








Revenue

$  972

$  848

15%

$ 3,641

$ 3,173

15%

Net income

$    84

$    66

27%

$    422

$    315

34%

Net income per diluted share

$ 1.27

$ 1.12

13%

$   6.58

$   5.45

21%

Diluted shares outstanding

66.0

59.1

12%

64.1

57.8

11%

*******************************







Supplemental Non-GAAP Metrics (a):







  Adjusted EBITDA

$  277

$  231

20%

$ 1,192

$ 1,009

18%

  Adjusted EBITDA, net of funding costs

$  245

$  194

26%

$ 1,074

$    860

25%

  Core earnings per diluted share

$ 1.84

$ 1.70

8%

$   8.71

$   7.63

14%



(a)   

See "Financial Measures" below for a discussion of adjusted EBITDA, adjusted EBITDA, net of funding costs, adjusted EBITDA margin, core earnings per diluted share and other non-GAAP financial measures.

(Logo:  http://photos.prnewswire.com/prnh/20051024/ADSLOGO)

CONSOLIDATED RESULTS

FULL YEAR

Revenue increased 15 percent to $3.6 billion and adjusted EBITDA increased 18 percent to $1.2 billion for 2012. Net income per diluted share (EPS) increased 21 percent to $6.58, and core earnings per diluted share (core EPS) increased 14 percent to $8.71 for 2012, exceeding the Company's guidance of $8.60. The acquisition of the Hyper Marketing group of companies (HMI), which closed on November 30, 2012, added approximately $0.04 to core EPS for 2012.  

Diluted shares outstanding were 64.1 million for 2012, an increase of 6.3 million dilutive shares as compared to 2011. The increase was primarily attributable to a 4.0 million increase in 'phantom shares,' which are shares that the Company does not have to economically settle, and a 3.2 million share increase in convertible debt warrants, partially offset by share repurchases over the last 12 months.

Ed Heffernan, president and chief executive officer, commented, "2012 was another heck of a year for Alliance Data, culminating in another year of record results. Looking at the final scorecard for 2012, it shows a balanced year with strong contributions from all three segments. LoyaltyOne organically grew both its revenue and adjusted EBITDA by 9 percent. In addition, LoyaltyOne's joint venture in Brazil is really starting to ramp up. While it is currently unconsolidated, which means we do not record any revenue, dotz's revenue increased 176 percent to $69 million in 2012. Epsilon grew its revenue by 18 percent and adjusted EBITDA by 14 percent. While by Epsilon's standards 2012 was an off-year in terms of organic growth, it was still positive with organic revenue growth of 4 percent and adjusted EBITDA growth of 10 percent, excluding non-recurring items. Finally, Private Label had a blow-out year with revenue growth of 16 percent and adjusted EBITDA (net of funding costs) growth of 33 percent. Most importantly, in a stagnant market, our portfolio of credit card receivables ended the year up over 30 percent, which sets the stage for a robust 2013."  

Heffernan continued, "Throughout 2012, we continued to execute our long-term strategy of driving strong organic growth, coupled with tuck-in acquisitions and targeted share repurchases designed to further enhance shareholder value. That is the Alliance Data three-pronged model. Our execution of the model was excellent as we achieved all three of our key goals. First, organically, we grew revenue about 9 percent in 2012 – about 3 times GDP growth. Second, we acquired HMI to expand digital capabilities at Epsilon. Strategically, it filled a gap at Epsilon, plus the valuation was compelling as it was accretive to core EPS from Day 1. Third, we continued to execute our share repurchase program, which further maximizes shareholder value, and spent over $137 million to acquire more than 1 million Alliance Data shares in 2012. Continuing our belief in the value of such a program, on January 8, 2013, we announced that our board of directors approved a new stock repurchase program to acquire up to $400 million of the Company's common stock during 2013. With over $1.8 billion of liquidity at the end of 2012, we have more than sufficient funds to continue our three-pronged strategy in 2013, which we believe will continue to drive long-term value for our shareholders."

FOURTH QUARTER

Revenue increased 15 percent to $972 million and adjusted EBITDA increased 20 percent to $277 million for the fourth quarter of 2012. Net income per diluted share (EPS) increased 13 percent to $1.27, and core earnings per diluted share (core EPS) increased 8 percent to $1.84 for the fourth quarter of 2012, exceeding the Company's guidance of $1.73. The acquisition of HMI added approximately $0.04 to core EPS for the fourth quarter of 2012.

Diluted shares outstanding were 66.0 million for the fourth quarter of 2012, an increase of 6.9 million dilutive shares as compared to the fourth quarter of 2011. The increase was primarily attributable to a 3.5 million increase in 'phantom shares,' which are shares that the Company does not have to economically settle, and a 3.7 million share increase in convertible debt warrants, partially offset by share repurchases over the last 12 months.

SEGMENT REVIEW

LoyaltyOne: Revenue for the segment increased $2 million, or 1 percent, to $216 million for the fourth quarter of 2012. Excluding the benefit of favorable exchange rates, revenue decreased 2 percent for the fourth quarter of 2012 due to lower redemption revenue. Adjusted EBITDA was $57 million, up 24 percent compared to the fourth quarter of 2011. Excluding the impact of favorable Canadian exchange rates ($2 million), adjusted EBITDA increased 20 percent for the fourth quarter of 2012. The drag from international expansion efforts was essentially consistent with the fourth quarter of 2011.   

AIR MILES® reward miles issued were up 6 percent, while AIR MILES reward miles redeemed decreased 8 percent compared to the fourth quarter of 2011. Redemption activity steadily moderated during 2012, with redemption rates of 102 percent, 78 percent, 73 percent and 60 percent in the first, second, third and fourth quarters, respectively. This unusual trend was prompted by the announcement of a five-year expiry policy at the end of 2011, which accelerated redemptions that would likely have occurred somewhat ratably in 2012 into the first-half of the year – essentially a 'pull-forward' of redemptions. The Company believes this effect has abated and expects redemption activity to return to more normal levels, approximating 72 percent, in 2013.  

A new instant reward program, AIR MILES Cash, was added to the AIR MILES Reward Program during the first quarter of 2012. To date, approximately one million collectors have enrolled in the program, which is being offered at seven sponsors. The Company expects to expand the program in 2013, with a focus on high-frequency retail sponsors. The timing of sponsors joining the program is usually dictated by required point of sale programming changes on the part of the sponsors.

During the quarter, LoyaltyOne signed General Motors of Canada Limited (GMCL) to issue AIR MILES reward miles during key promotional periods for new vehicle purchase and leases at Canadian dealerships. Importantly, Bank of Montreal, the largest sponsor in the AIR MILES program, and American Express, a top 5 sponsor in the AIR MILES program, recently signed long-term renewals. International expansion efforts continue on track as the dotz coalition loyalty program in Brazil, in which the Company has a 37-percent ownership interest, ended the fourth quarter with over 6 million collectors, ahead of the Company's year-end target. Currently operating in 5 markets, dotz plans to enter 5 additional markets in 2013. 

Epsilon: Revenue for the segment increased $37 million, or 15 percent, to $292 million for the fourth quarter of 2012. Organic revenue growth was approximately 3 percent compared to the fourth quarter of 2011, driven by double-digit organic growth in the agency/analytics line of business.

By line of business, database/email revenue decreased 3 percent to $112 million for the fourth quarter of 2012, primarily due to weakness in the healthcare/pharmaceutical vertical. This weakness would normally have been offset by new signings, but Epsilon experienced delays in closing pipeline opportunities early in the year. Signings have since increased, leading to a stronger year-to-date backlog than the same period last year. Data revenue was down 2 percent to $51 million for the fourth quarter of 2012, with solid performance in compiled offerings offset by some softness in the cooperative data offering for the B-to-B vertical. Agency/analytics revenue increased 48 percent to $129 million for the fourth quarter of 2012, driven by strength in the auto and telco verticals, and the acquisition of HMI.

Adjusted EBITDA increased 9 percent to $69 million for the fourth quarter of 2012. Organic adjusted EBITDA growth was approximately 2 percent, or 10 percent excluding certain restructuring charges, compared to the fourth quarter of 2011. Excluding HMI, adjusted EBITDA margins were consistent between quarters at approximately 25 percent. Including HMI, adjusted EBITDA margins were down 1 percent compared to the fourth quarter of 2011, as agency products typically carry lower EBITDA margins.   

Of significance during the quarter, Epsilon closed the acquisition of HMI on November 30, 2012. HMI brings a full breadth of ROI-based marketing services to Epsilon including: digital user experience design technology, specializing in websites, social media platforms and mobility; customer relationship marketing; consumer promotions marketing; direct and digital shopper marketing; distributed and local area marketing; and analytical services that include brand planning and consumer insights. These products give Epsilon expanded access into the "C" suite and should aid in cross-sale/up-sale opportunities in the future.

During the quarter, Epsilon announced a new multi-year agreement to provide loyalty marketing services to Walgreens, the nation's largest drug store chain and a new multi-year agreement to provide a comprehensive email marketing platform to Regis Corporation, the global leader in the beauty industry.  In addition, Epsilon announced a multi-year renewal agreement to continue to provide direct marketing strategy, direct mail production, email strategy and analytics to KeyCorp, one of the nation's largest bank-based financial services companies.

Private Label Services and Credit: Revenue for the segment increased $86 million, or 23 percent, to $466 million for the fourth quarter of 2012. Net finance charge income increased $93 million, or 26 percent, driven by a 31 percent increase in average credit card receivables, while transaction revenue decreased $7 million, or 36 percent, due in part to rebates paid to certain clients. Gross yield for the fourth quarter of 2012 was 26.7 percent, down 120 basis points from the prior year quarter due to the on-boarding of new portfolios and their associated accounting treatment.

Adjusted EBITDA, net of funding costs, increased 38 percent to $147 million for the fourth quarter of 2012, boosted by strong revenue growth and lower funding costs. Provision for loan loss expense was $102 million, consistent with the fourth quarter of 2011, as declining principal charge-off rates offset the substantial build in credit card receivables. Portfolio funding costs decreased $6 million to $31 million for the fourth quarter of 2012. Excluding non-cash mark-to-market gains on interest rate derivatives, the cash funding rate was 2 percent for the fourth quarter of 2012, down from 3 percent for the fourth quarter of 2011. 

Credit sales increased 38 percent compared to the fourth quarter of 2011, a result of double-digit increases in core cardholder spending coupled with new programs added over the last 12 months. Credit card receivables were $7.5 billion at December 31, 2012, up 31 percent compared to December 31, 2011. The allowance for loan loss reserve was $482 million, or 6.5 percent of ending receivables, at December 31, 2012 compared to $468 million, or 8.3 percent of ending receivables, at December 31, 2011. Credit trends improved during the fourth quarter of 2012 as the principal charge-off rate dropped to 4.7 percent compared to 6.3 percent in the prior year quarter. Delinquency rates also improved to 4.0 percent of principal receivables at December 31, 2012, down from 4.4 percent at December 31, 2011.

Private Label recently reached agreements to provide private label credit card services with dots, a national women's apparel and accessories retailer, and RainSoft, an international company focused on water and air purification products.

2013 Outlook

First Quarter: The Company expects approximately 17 percent growth in revenue and 12 percent growth in core earnings for the first quarter of 2013. Core EPS is expected to increase approximately 5 percent to $2.50, less than the growth in core earnings due to an expected 8 percent increase in diluted share count. A higher expected average ADS share price compared to 2012 is expected to create incremental share dilution – both phantom and real – from the convertible notes.  

Full Year: The Company's detailed guidance for 2013 was given in its third quarter 2012 earnings release. Guidance will be refined as necessary during 2013. Based upon its strong fourth-quarter performance and the acquisition of HMI, the Company is raising its 2013 guidance.

  • Revenue is expected to increase to $4.2 billion for 2013 - up $300 million due to the acquisition of HMI - a 15 percent increase compared to 2012;  
  • EPS and core EPS are expected to increase to $7.35 and $9.65, respectively, representing increases of approximately 12 percent and 11 percent, respectively, compared to 2012;
  • Using a $155 average share price, diluted share count is projected to be 65.6 million for 2013. Diluted share count is projected to be 67.1 million, 67.6 million, 64.6 million and 63.0 million for Q1, Q2, Q3 and Q4, respectively.   

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, adjusted EBITDA net of funding costs, core earnings and core earnings per diluted share (core EPS). 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.

Conference Call

Alliance Data will host a conference call on Thursday, January 31, 2013 at 8:00 a.m. (Eastern Time) to discuss the Company's 2012 fourth-quarter and full-year results. The conference call will be available via the Internet at www.AllianceData.com. There will be several slides accompanying the webcast. Please go to the website at least 15 minutes prior to the call to register, download and install any necessary software. The recorded webcast will also be available on the Company's website.

If you are unable to participate in the conference call, a replay will be available. To access the replay, please dial (855) 859-2056 or (404) 537-3406 and enter "85790610". The replay will be available from two hours after the end of the call until 11:59 P.M. (Eastern Time) on February 14, 2013.

About Alliance Data

Alliance Data® (NYSE: ADS) and its combined businesses is North America's largest and most comprehensive provider of transaction-based, data-driven marketing and loyalty solutions serving large, consumer-based industries. The Company creates and deploys customized solutions, enhancing the critical customer marketing experience; the result is measurably changing consumer behavior while driving business growth and profitability for some of today's most recognizable brands. Alliance Data helps its clients create and increase customer loyalty through solutions that engage millions of customers each day across multiple touch points using traditional, digital, mobile and other emerging technologies. Headquartered in Dallas, Alliance Data and its three businesses employ approximately 11,000 associates at more than 70 locations worldwide.

Alliance Data consists of three businesses: Alliance Data Retail Services, a leading provider of marketing-driven credit solutions; Epsilon®, a leading provider of multichannel, data-driven technologies and marketing services; and LoyaltyOne®, which owns and operates the AIR MILES® Reward Program, Canada's premier coalition loyalty program. For more information about the company, visit our web site, www.AllianceData.com, or you can follow us on Twitter at www.Twitter.com/AllianceData.

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. 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, except as required by law.

"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.


 

 

ALLIANCE DATA SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions, except per share amounts)

(Unaudited)




Three Months Ended

December 31,



Year Ended

December 31,



2012


2011



2012


2011











Revenue

$

971.9

$

847.6


$

3,641.4

$

3,173.3

Operating expenses:










       Cost of operations


605.8


526.2



2,214.7


1,907.2

       Provision for loan loss


102.4


101.6



285.5


300.3

       Depreciation and amortization


47.0


38.5



166.9


153.1

Total operating expenses


755.2


666.3



2,667.1


2,360.6

Operating income


216.7


181.3



974.3


812.7

Interest expense, net:










       Securitization funding costs


24.7


30.4



92.8


126.7

       Interest expense on deposits


6.5


6.3



25.2


23.1

       Interest expense on long-term and other debt, net


47.3


37.3



173.5


148.8

Total interest expense, net


78.5


74.0



291.5


298.6

Income before income taxes


138.2


107.3



682.8


514.1

Income tax expense


54.6


41.4



260.6


198.8

Net income

$

83.6

$

65.9


$

422.2

$

315.3











Per share data:










Basic – Net income

$

1.68

$

1.32


$

8.44

$

6.22











Diluted – Net income

$

1.27

$

1.12


$

6.58

$

5.45











Weighted average shares outstanding – basic


49.8


49.9



50.0


50.7

Weighted average shares outstanding – diluted


66.0


59.1



64.1


57.8

 

 

 

ALLIANCE DATA SYSTEMS CORPORATION


CONDENSED CONSOLIDATED BALANCE SHEETS


(In millions)


(Unaudited)






 

As of

December 31,

2012



 

As of

December 31, 2011


ASSETS







Cash and cash equivalents

$

893.4


$

216.2


Credit card receivables, net


6,967.7



5,197.7


Redemption settlement assets


492.7



515.8


Intangible assets, net


582.9



383.6


Goodwill


1,751.1



1,449.4


Other assets


1,312.3



1,217.5


     Total assets

$

12,000.1


$

8,980.2









LIABILITIES AND STOCKHOLDERS' EQUITY







Deferred revenue

$

1,249.1


$

1,226.4


Deposits


2,228.4



1,353.8


Asset-backed securities debt – owed to securitization investors


4,131.0



3,260.3


Debt


2,854.8



2,183.5


Other liabilities


1,008.3



780.2


     Total liabilities


11,471.6



8,804.2


     Stockholders' equity


528.5



176.0


     Total liabilities and stockholders' equity

$

12,000.1


$

8,980.2


 

 

 

ALLIANCE DATA SYSTEMS CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)




Year Ended

December 31,



2012


2011






CASH FLOWS FROM OPERATING ACTIVITIES:





Net income

$

422.2

$

315.3

Adjustments to reconcile net income to net cash provided by operating activities:





       Depreciation and amortization


166.9


153.1

       Deferred income taxes


102.3


47.0

       Provision for loan loss


285.5


300.3

       Non-cash stock compensation


50.5


43.5

       Amortization of discount on convertible senior notes


82.4


73.7

Change in operating assets and liabilities, net of acquisitions


63.3


121.9

Other


(38.9)


(43.4)

       Net cash provided by operating activities


1,134.2


1,011.4






CASH FLOWS FROM INVESTING ACTIVITIES:





Change in redemption settlement assets


37.2


(49.2)

Change in restricted cash


(46.8)


98.4

Change in credit card receivables


(1,371.4)


(578.1)

Purchase of credit card receivables


(780.0)


(68.5)

Capital expenditures


(116.4)


(73.5)

Payments for acquired businesses, net of cash acquired


(463.9)


(359.1)

Change in cash collateral, restricted


99.0


22.1

Other


(29.0)


(32.8)

       Net cash used in investing activities


(2,671.3)


(1,040.7)






CASH FLOWS FROM FINANCING ACTIVITIES:





Borrowings under debt agreements


1,095.1


3,256.5

Repayments of borrowings


(506.2)


(3,012.7)

Issuances of deposits


1,866.2


1,180.3

Repayments of deposits


(991.6)


(685.6)

Borrowings from asset-backed securities


2,543.9


2,179.7

Repayments/maturities of asset-backed securities


(1,673.2)


(2,579.6)

Proceeds from issuance of common stock


20.7


29.4

Purchase of treasury shares


(125.8)


(240.9)

Other


(20.1)


(17.9)

       Net cash provided by financing activities


2,209.0


109.2

Effect of exchange rate changes on cash and cash equivalents


5.3


(2.8)

Change in cash and cash equivalents


677.2


77.1

Cash and cash equivalents at beginning of period


216.2


139.1

       Cash and cash equivalents at end of period

$

893.4

$

216.2






 

 

 

ALLIANCE DATA SYSTEMS CORPORATION




SUMMARY FINANCIAL HIGHLIGHTS




(In millions)




(Unaudited)










Three Months Ended






Year Ended






December 31,






December 31,






2012


2011


Change




2012


2011


Change


Segment Revenue:
















LoyaltyOne

$

216.0

$

214.3


1

%


$

919.0

$

844.8


9

%

Epsilon


292.0


254.6


15

%



996.2


847.1


18

%

Private Label Services and Credit


466.4


380.3


23

%



1,732.2


1,489.0


16

%

Corporate/Other



0.2


nm




0.4


1.1


nm


Intersegment Eliminations


(2.5)


(1.8)


nm




(6.4)


(8.7)


nm



$

971.9

$

847.6


15

%


$

3,641.4

$

3,173.3


15

%

















Segment Adjusted EBITDA:
















LoyaltyOne

$

56.8

$

46.0


24

%


$

236.1

$

217.1


9

%

Epsilon


69.4


63.9


9

%



222.3


195.4


14

%

Private Label Services and Credit


178.3


143.6


24

%



823.2


678.3


21

%

Corporate/Other


(27.9)


(21.9)


27

%



(89.9)


(76.4)


18

%

Intersegment Eliminations



(0.8)


nm





(5.1)


nm



$

276.6

$

230.8


20

%


$

1,191.7

$

1,009.3


18

%

















































Key Performance Indicators:
















Private Label statements generated


47.1


37.3


26

%



166.1


142.1


17

%

Average receivables 

$

6,799.8

$

5,173.4


31

%


$

5,927.6

$

4,962.5


19

%

Credit sales

$

4,160.7

$

3,011.3


38

%


$

12,523.6

$

9,636.1


30

%

AIR MILES reward miles issued


1,464.2


1,387.5


6

%



5,222.9


4,940.4


6

%

AIR MILES reward miles redeemed


880.7


958.5


(8)

%



4,040.9


3,633.9


11

%

































nm-not meaningful
















 

 

 

ALLIANCE DATA SYSTEMS CORPORATION

RECONCILIATION OF NON-GAAP INFORMATION

(In millions, except per share amounts)

(Unaudited)




 

Three Months Ended



 

Year Ended



December 31,



December 31,

Adjusted EBITDA and Adjusted EBITDA, net of funding costs:


2012


2011



2012


2011

Net income

$

83.6

$

65.9


$

422.2

$

315.3

Income tax expense


54.6


41.4



260.6


198.8

Total interest expense, net


78.5


74.0



291.5


298.6

Depreciation and other amortization


18.9


16.5



73.8


70.4

Amortization of purchased intangibles


28.1


22.0



93.1


82.7

EBITDA


263.7


219.8



1,141.2


965.8

Stock compensation expense


12.9


11.0



50.5


43.5

Adjusted EBITDA

$

276.6

$

230.8


$

1,191.7

$

1,009.3

Less: funding costs (1)


(31.2)


(36.7)



(118.0)


(149.8)

Adjusted EBITDA, net of funding costs

$

245.4

$

194.1


$

1,073.7

$

859.5











Core Earnings:










Net income

$

83.6

$

65.9


$

422.2

$

315.3

Add back non-cash non-operating items:










Stock compensation expense


12.9


11.0



50.5


43.5

Amortization of purchased intangibles


28.1


22.0



93.1


82.7

Non-cash interest expense (2)


26.5


30.1



98.9


104.9

Non-cash mark-to-market gain on interest rate derivatives


(6.9)


(8.6)



(29.6)


(31.7)

Income tax effect (3)


(22.6)


(20.1)



(76.6)


(73.4)

Core earnings

$

121.6

$

100.3


$

558.5

$

441.3











Weighted average shares outstanding – diluted


66.0


59.1



64.1


57.8

Core earnings per share – diluted

$

1.84

$

1.70


$

8.71

$

7.63











                               

(1)   

Represents interest expense on deposits and securitization funding costs.

(2)    

Represents amortization of imputed interest expense associated with our convertible debt and amortization of debt issuance costs.

(3)    

Represents the tax effect for the related non-GAAP measure adjustments (tax deductible stock compensation expense, amortization of purchased intangibles, non-cash interest expense) using the Company's effective tax rate for each respective period.


 

 

 

ALLIANCE DATA SYSTEMS CORPORATION

RECONCILIATION OF SEGMENT ADJUSTED EBITDA

(In millions)

(Unaudited)




Three Months Ended December 31, 2012



Operating Income


Depreciation and Amortization


Stock Compensation Expense


Adjusted

EBITDA (1)

LoyaltyOne

$

49.6

$

4.7

$

2.5

$

56.8

Epsilon


37.9


27.7


3.8


69.4

Private Label Services and Credit


162.0


13.9


2.4


178.3

Corporate/Other


(32.8)


0.7


4.2


(27.9)

Intersegment Eliminations






$

216.7

$

47.0

$

12.9

$

276.6






Three Months Ended December 31, 2011



Operating Income


Depreciation and Amortization


Stock Compensation Expense


Adjusted EBITDA (1)

LoyaltyOne

$

39.4

$

4.8

$

1.8

$

46.0

Epsilon


36.3


24.6


3.0


63.9

Private Label Services and Credit


133.7


8.7


1.2


143.6

Corporate/Other


(27.3)


0.4


5.0


(21.9)

Intersegment Eliminations


(0.8)




(0.8)


$

181.3

$

38.5

$

11.0

$

230.8






Year Ended December 31, 2012



Operating Income


Depreciation and Amortization


Stock Compensation Expense


Adjusted EBITDA (1)

LoyaltyOne

$

207.2

$

19.6

$

9.3

$

236.1

Epsilon


106.2


101.7


14.4


222.3

Private Label Services and Credit


771.8


42.5


8.9


823.2

Corporate/Other


(110.9)


3.1


17.9


(89.9)

Intersegment Eliminations






$

974.3

$

166.9

$

50.5

$

1,191.7






Year Ended December 31, 2011



Operating Income


Depreciation and Amortization


Stock Compensation Expense


Adjusted EBITDA (1)

LoyaltyOne

$

189.6

$

20.3

$

7.2

$

217.1

Epsilon


93.5


90.1


11.8


195.4

Private Label Services and Credit


636.1


35.5


6.7


678.3

Corporate/Other


(101.4)


7.2


17.8


(76.4)

Intersegment Eliminations


(5.1)




(5.1)


$

812.7

$

153.1

$

43.5

$

1,009.3

                               

(1)  

Represents segment adjusted EBITDA and is equal to operating income plus depreciation, amortization and stock compensation expense.

 

SOURCE Alliance Data Systems Corporation

Investors/Analysts: Julie Prozeller, FTI Consulting, +1-212-850-5721, alliancedata@fticonsulting.com; or Media: Shelley Whiddon, Alliance Data, +1-214-494-3811, Shelley.Whiddon@AllianceData.com

 
ABOUT ALLIANCE DATA
We're a leading provider of marketing, loyalty, and credit solutions that uses the power of data to achieve results for our clients. Together, our three lines of business manage more than 100 MILLION consumer relationships for some of the world's leading brands.
  • Know more. Sell more. is our commitment - we deliver branded credit programs that drive sales and customer loyalty for our partners.
    26M
    More than 26 million cardholder customers.
    25+
    Over 25 years experience in driving sales for our partners.
    120M
    Managing more than 100 credit
    programs for leading brands.
    3100 Easton Square Place Columbus / OH 43219
  • LoyaltyOne is a global leader in the design and implementation of coalition loyalty programs, customer analytics and loyalty management solutions.
    2/3
    of Canadian households with active AIR MILES accounts.
    20+
    years of global coalition loyalty leadership.
    120M
    120 million customer relationships influenced.
    438 University Avenue / Toronto ON M5G 2L1
  •      
    1-800-309-0505 /info@epsilon.com
    Epsilon is the global leader in making connections between people and brands.
    42B
    Over 42 billion permission-based emails annually.
    #1
    Ad Age's 2014 top-ranked U.S. agency from all disciplines.
    150+
    Over 150 marketing databases.
    6021 Connection Drive / Irving, TX 75039
  • OUR BUSINESSES
    valuedcustomers
    Alliance Data is made up of three successful businesses:
    Alliance Data Retail Services, LoyaltyOne, and Epsilon.
LoyaltyOne:
Privacy, Profit And The New Paradigm
OUR LEADERSHIP
ED HEFFERNAN
Ed's contrarian approach and bold moves has helped Alliance Data rank in the top 1% of companies in terms of shareholder return.
ADS
Tracking our stock?
follow ADS on the
NYSE.
$4.3B
Stellar performance
led to record revenue
in 2012.
12,000
Our 12,000 associates
are the reasons for our
ongoing success.
OUR
RESPONSIBILITIES
Corporate Responsibility
All for Good.
Alliance Data has always operated responsibly. It?s part of the foundation of our success and has allowed us to maintain our record performance. It?s part of what makes us a great place to work and a great company to partner with. Our corporate responsibility report signifies our commitment to doing business responsibly and efficiently while continuing to increase our level of excellence.

All for good. Good for all.


Want to become an Alliance Data supplier?
LOCATION
Alliance Data Corporate headquarters
7500 Dallas Parkway, Suite 700
Plano, TX 75024
214-494-3000
MEDIA CONTACT
Shelley Whiddon
Vice President, Public Affairs
214-494-3811
shelley.whiddon@alliancedata.com
INVESTOR RELATIONS
CONTACT
Tiffany Louder
Investor Relations
Alliance Data
214-494-3048
InvestorRelations@alliancedata.com
Julie Prozeller
FTI Consulting
(212) 850-5721
alliancedata@fticonsulting.com