UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

 

Commission File Number: 001-15749

ALLIANCE DATA SYSTEMS CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

7500 Dallas Parkway, Suite 700

Plano, Texas 75024

(Address of principal executive office, including zip code)

 

(214) 494-3000

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant: (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☑     No  ☐  

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☑     No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

	Large accelerated filer ☑	Accelerated filer  ☐
	Non-accelerated filer ☐	Emerging growth company ☐
	Smaller reporting company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐ 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ☐     No ☑

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class	Trading symbol	Name of each exchange on which registered
Common stock, par value $0.01 per share	ADS	New York Stock Exchange

 

As of April 24, 2019, 52,383,506 shares of common stock were outstanding.

 

 

 

 

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ALLIANCE DATA SYSTEMS CORPORATION

INDEX

 

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PART I

Item 1.    Financial Statements.

ALLIANCE DATA SYSTEMS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

		March 31,			December 31,
		2019			2018
		(in millions, except per share amounts)
ASSETS
Cash and cash equivalents		$	3,685.0		$	3,817.4
Accounts receivable, net, less allowance for doubtful accounts ($0.3 and $0.4 at March 31, 2019 and December 31, 2018, respectively)			354.2			404.0
Credit card and loan receivables:
Credit card receivables – restricted for securitization investors			12,550.5			13,418.3
Other credit card and loan receivables			4,300.0			4,436.7
Total credit card and loan receivables			16,850.5			17,855.0
Allowance for loan loss			(1,021.1)			(1,038.3)
Credit card and loan receivables, net			15,829.4			16,816.7
Credit card receivables held for sale			1,848.9			1,951.6
Inventories, net			242.3			248.0
Other current assets			275.3			293.2
Redemption settlement assets, restricted			576.1			558.6
Current assets of discontinued operations			4,224.7			622.2
Total current assets			27,035.9			24,711.7
Property and equipment, net			289.8			288.2
Right of use assets - operating			271.2			—
Deferred tax asset, net			45.5			44.0
Intangible assets, net			189.6			217.4
Goodwill			950.0			954.8
Other non-current assets			651.1			636.4
Long-term assets of discontinued operations			—			3,535.2
Total assets		$	29,433.1		$	30,387.7
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable		$	548.4		$	486.2
Accrued expenses			333.9			279.3
Current operating lease liabilities			21.4			—
Current portion of deposits			5,922.6			6,537.7
Current portion of non-recourse borrowings of consolidated securitization entities			2,185.6			2,717.6
Current portion of long-term and other debt			161.5			138.9
Other current liabilities			262.4			291.8
Deferred revenue			768.8			766.1
Current liabilities of discontinued operations			392.1			266.4
Total current liabilities			10,596.7			11,484.0
Deferred revenue			108.5			109.2
Deferred tax liability, net			230.5			256.5
Long-term operating lease liabilities			299.8			—
Deposits			5,369.4			5,256.0
Non-recourse borrowings of consolidated securitization entities			4,589.9			4,934.1
Long-term and other debt			5,720.0			5,586.5
Other liabilities			278.8			390.0
Long-term liabilities of discontinued operations			—			39.3
Total liabilities			27,193.6			28,055.6
Common stock, $0.01 par value; authorized, 200.0 shares; issued, 113.2 shares and 113.0 shares at March 31, 2019 and December 31, 2018, respectively			1.1			1.1
Additional paid-in capital			3,177.0			3,172.4
Treasury stock, at cost, 60.9 shares and 59.6 shares at March 31, 2019 and December 31, 2018, respectively			(5,938.5)			(5,715.7)
Retained earnings			5,127.8			5,012.4
Accumulated other comprehensive loss			(127.9)			(138.1)
Total stockholders’ equity			2,239.5			2,332.1
Total liabilities and stockholders' equity		$	29,433.1		$	30,387.7

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

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ALLIANCE DATA SYSTEMS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

		Three Months Ended
		March 31,
		2019			2018
		(in millions, except per share amounts)
Revenues
Services		$	73.3		$	92.6
Redemption, net			111.9			131.9
Finance charges, net			1,149.0			1,157.2
Total revenue			1,334.2			1,381.7
Operating expenses
Cost of operations (exclusive of depreciation and amortization disclosed separately below)			640.5			591.7
Provision for loan loss			252.1			337.7
General and administrative			38.3			31.3
Depreciation and other amortization			20.6			19.3
Amortization of purchased intangibles			25.8			29.4
Total operating expenses			977.3			1,009.4
Operating income			356.9			372.3
Interest expense
Securitization funding costs			57.3			52.1
Interest expense on deposits			48.7			35.5
Interest expense on long-term and other debt, net			43.5			44.2
Total interest expense, net			149.5			131.8
Income from continuing operations before income taxes			207.4			240.5
Provision for income taxes			33.1			64.0
Income from continuing operations		$	174.3		$	176.5
Loss from discontinued operations, net of taxes			(25.2)			(12.6)
Net income		$	149.1		$	163.9
Basic income (loss) per share (Note 3):
Income from continuing operations		$	3.29		$	3.19
Loss from discontinued operations		$	(0.48)		$	(0.23)
Net income per share		$	2.81		$	2.96
Diluted income (loss) per share (Note 3):
Income from continuing operations		$	3.28		$	3.17
Loss from discontinued operations		$	(0.48)		$	(0.22)
Net income per share		$	2.80		$	2.95
Weighted average shares (Note 3):
Basic			53.0			55.4
Diluted			53.2			55.7

See accompanying notes to unaudited condensed consolidated financial statements.

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ALLIANCE DATA SYSTEMS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

		Three Months Ended
		March 31,
		2019			2018
		(in millions)
Net income		$	149.1		$	163.9
Other comprehensive income (loss):
Unrealized gain (loss) on securities available-for-sale			10.0			(3.0)
Tax (expense) benefit			(1.0)			1.0
Unrealized gain (loss) on securities available-for-sale, net of tax			9.0			(2.0)
Unrealized loss on cash flow hedges			(0.1)			(0.1)
Tax benefit (expense)			—			—
Unrealized loss on cash flow hedges, net of tax			(0.1)			(0.1)
Unrealized gain (loss) on net investment hedges			16.1			(15.4)
Tax (expense) benefit			(3.9)			3.7
Unrealized gain (loss) on net investment hedges, net of tax			12.2			(11.7)
Foreign currency translation adjustments			(10.9)			17.5
Other comprehensive income, net of tax			10.2			3.7
Total comprehensive income, net of tax		$	159.3		$	167.6

See accompanying notes to unaudited condensed consolidated financial statements.

 

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ALLIANCE DATA SYSTEMS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

 

																Accumulated
							Additional									Other			Total
		Common Stock					Paid-In			Treasury			Retained			Comprehensive			Stockholders’
Three Months Ended March 31, 2019		Shares		Amount			Capital			Stock			Earnings			Loss			Equity
		(in millions)
Balance at December 31, 2018		113.0		$	1.1		$	3,172.4		$	(5,715.7)		$	5,012.4		$	(138.1)		$	2,332.1
Net income		—			—			—			—			149.1			—			149.1
Other comprehensive income		—			—			—			—			—			10.2			10.2
Stock-based compensation		—			—			20.1			—			—			—			20.1
Repurchases of common stock		—			—			—			(222.8)			—			—			(222.8)
Dividends and dividend equivalent rights declared ($0.63 per share)		—			—			—			—			(33.7)			—			(33.7)
Other		0.2			—			(15.5)			—			—			—			(15.5)
Balance at March 31, 2019		113.2		$	1.1		$	3,177.0		$	(5,938.5)		$	5,127.8		$	(127.9)		$	2,239.5

 

 

																Accumulated
							Additional									Other			Total
		Common Stock					Paid-In			Treasury			Retained			Comprehensive			Stockholders’
Three Months Ended March 31, 2018		Shares		Amount			Capital			Stock			Earnings			Loss			Equity
		(in millions)
Balance at December 31, 2017		112.8		$	1.1		$	3,099.8		$	(5,272.5)		$	4,167.1		$	(140.2)		$	1,855.3
Net income		—			—			—			—			163.9			—			163.9
Other comprehensive income		—			—			—			—			—			3.7			3.7
Stock-based compensation		—			—			24.5			—			—			—			24.5
Dividends and dividend equivalent rights declared ($0.57 per share)		—			—			—			—			(31.5)			—			(31.5)
Cumulative effect adjustment to retained earnings in accordance with ASC 606		—			—			—			—			9.6			—			9.6
Cumulative effect adjustment to retained earnings in accordance with ASU 2016-01		—			—			—			—			(1.5)			—			(1.5)
Other		0.1			—			(22.6)			—			—			—			(22.6)
Balance at March 31, 2018		112.9		$	1.1		$	3,101.7		$	(5,272.5)		$	4,307.6		$	(136.5)		$	2,001.4

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

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ALLIANCE DATA SYSTEMS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		Three Months Ended
		March 31,
		2019			2018
		(in millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	149.1		$	163.9
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			118.9			121.7
Deferred income taxes			(35.0)			(16.2)
Provision for loan loss			252.1			337.7
Non-cash stock compensation			21.1			25.5
Amortization of deferred financing costs			11.0			11.4
Change in other operating assets and liabilities			8.7			(108.0)
Originations of credit card and loan receivables held for sale			—			(2,271.7)
Sales of credit card and loan receivables held for sale			—			2,312.8
Other			84.9			72.8
Net cash provided by operating activities			610.8			649.9
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in redemption settlement assets			(0.1)			(14.5)
Change in credit card and loan receivables			758.2			470.5
Payments for acquired businesses, net of cash			(6.7)			—
Capital expenditures			(38.7)			(44.7)
Purchases of other investments			(5.0)			(25.0)
Maturities/sales of other investments			6.4			6.0
Other			3.4			0.6
Net cash provided by investing activities			717.5			392.9
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under debt agreements			1,045.1			685.0
Repayments of borrowings			(870.9)			(706.5)
Non-recourse borrowings of consolidated securitization entities			1,122.2			905.0
Repayments/maturities of non-recourse borrowings of consolidated securitization entities			(1,997.5)			(1,590.0)
Net decrease in deposits			(502.6)			(448.4)
Payment of deferred financing costs			(5.4)			(3.5)
Dividends paid			(33.9)			(31.7)
Purchase of treasury shares			(222.8)			—
Other			(17.2)			(23.7)
Net cash used in financing activities			(1,483.0)			(1,213.8)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			3.0			(1.7)
Change in cash, cash equivalents and restricted cash			(151.7)			(172.7)
Cash, cash equivalents and restricted cash at beginning of year			3,967.7			4,314.7
Cash, cash equivalents and restricted cash at end of year		$	3,816.0		$	4,142.0
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid		$	206.7		$	159.2
Income taxes paid, net		$	20.4		$	56.7

The unaudited condensed consolidated statements of cash flows are presented with the combined cash flows from discontinued operations with cash flows from continuing operations within each cash flow statement category.

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited condensed consolidated financial statements included herein have been prepared by Alliance Data Systems Corporation (“ADSC” or, including its consolidated subsidiaries and variable interest entities (“VIEs”), the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 26, 2019.

The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal, recurring adjustments) which are, in the opinion of management, necessary to state fairly the results for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the fiscal year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (1) the reported amounts of assets; (2) liabilities and disclosure of contingent assets and liabilities at the date of the financial statements; and (3) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

For purposes of comparability, certain prior period amounts have been reclassified to conform to the current year presentation in accordance with GAAP. The Company’s unaudited condensed consolidated financial statements have been presented with its Epsilon ® segment as a discontinued operation. See Note 5, “Discontinued Operations,” for more information.

 

Recently Issued Accounting Standards

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires entities to utilize a financial instrument impairment model to establish an allowance based on expected losses over the life of the exposure rather than a model based on an incurred loss approach. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance. In addition, ASU 2016-13 modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted beginning after December 15, 2018. The Company has formed a cross-functional implementation team and is finalizing the development of loss forecasting models, technological solutions and processes to satisfy the requirements of ASU 2016-13. Management is assessing key accounting interpretations and continues to evaluate the impact of the new standard on its consolidated financial statements. Any adjustments to the change in the allowance for loan loss at adoption would be recorded through a cumulative-effect adjustment to retained earnings. The extent of the impact upon adoption will depend on the asset quality of the Company’s credit card and loan receivables portfolio, and economic conditions and forecasts at adoption.

In August 2018, the FASB issued ASU 2018-13, “Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the disclosure requirements on fair value measurements from Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement.” ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The Company is evaluating the impact that adoption of ASU 2018-13 will have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” ASU 2018-15 requires customers in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40, “Intangibles—

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Goodwill and Other—Internal-Use Software,” to determine which implementation costs may be capitalized. ASU 2018-15 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The amendments in ASU 2018-15 can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is evaluating the impact that adoption of ASU 2018-15 will have on its consolidated financial statements.

Recently Adopted Accounting Standards

In February 2016, the FASB issued ASU 2016-02, “Leases,” ASC 842, that replaced previous lease guidance and required lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. Companies continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statements of income. Companies were permitted to adopt ASC 842 using a modified retrospective approach or transition relief provided by ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” that removed certain comparative period requirements and required a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted the standard on January 1, 2019 using the transition relief provided by ASU 2018-11.

 

During 2018, the Company completed its evaluation of ASC 842, including the impact on its policies, processes, systems and controls. As a result, the Company identified changes to and modified certain of its accounting policies and practices, including the implementation of new lease accounting software. Although there were no significant changes to the Company’s accounting systems or controls upon adoption of ASC 842, the Company modified certain of its existing controls and added new controls to incorporate the revisions made to its accounting policies and practices.

 

The Company elected the transition practical expedients permitted under ASC 842-10-65-1 under which it was not required to reassess (i) whether expired or existing contracts were or contained leases as defined by ASC 842, (ii) the classification of such leases, and (iii) whether previously capitalized initial direct costs qualified for capitalization under ASC 842. The Company also elected the practical expedient to use hindsight in determining the lease term. Additionally, the Company made the accounting policy election to account for lease and nonlease components as a single lease component for its identified asset classes.

 

The cumulative effect of the changes made to the consolidated January 1, 2019 balance sheet for the adoption of ASC 842 established operating lease liabilities of approximately $324.5 million and corresponding right-of-use assets of approximately $269.9 million, based upon the operating lease liabilities adjusted for deferred rent and lease incentives, which resulted in the reclassification of approximately $54.6 million in liabilities to the right-of-use asset. There was no cumulative-effect adjustment to retained earnings as a result of the adoption of ASC 842.

 

Additionally, the cumulative effect of the changes made to the consolidated January 1, 2019 balance sheet for the adoption of ASC 842 for the Epsilon segment, presented as a discontinued operation for the periods presented, established operating lease liabilities of approximately $208.7 million and corresponding right-of-use assets of approximately $181.1 million, based upon the operating lease liabilities adjusted for prepaid and deferred rent, unamortized initial direct costs, and lease incentives, which resulted in the reclassification of approximately $30.5 million in liabilities and $2.9 million in assets to the right-of-use asset. As part of the adoption of ASC 842, capital leases were recognized as finance leases at their existing carrying amounts effective January 1, 2019, and the accounting remained substantially unchanged, with capital lease assets totaling $13.0 million and capital lease liabilities totaling $12.6 million.

 

The Company’s adoption of ASC 842 had no significant impact to our consolidated statements of income or consolidated statements of cash flows. Based on the evaluation of ASC 842, the Company does not expect it to have a material impact on its results of operations or cash flows in the periods after adoption.

 

ASC 842 also requires expanded qualitative and quantitative disclosure regarding the Company’s leasing activities. See Note 10, “Leases,” for the Company’s ASC 842 disclosures.

 

In August 2017, the FASB issued ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” ASU 2017-12 expanded and refined the hedge accounting model for both financial and non-financial risk components, aligned the recognition and presentation of the effects of hedging instruments and hedged items in the financial

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statements, and made certain targeted improvements to simplify the application of hedge accounting guidance related to the assessment of hedge effectiveness. The Company’s adoption of this standard on January 1, 2019 did not have a material impact on its consolidated financial statements.

 

In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” ASU 2018-02 allowed for reclassification of stranded tax effects on items resulting from the change in the corporate tax rate as a result of H.R. 1, originally known as the Tax Cuts and Jobs Act of 2017, from accumulated other comprehensive income to retained earnings. Tax effects unrelated to H.R. 1 were permitted to be released from accumulated other comprehensive income using either the specific identification approach or the portfolio approach, based on the nature of the underlying item. The Company adopted this standard on January 1, 2019 using the portfolio approach and did not reclassify the stranded tax effects to retained earnings as these amounts did not have a material impact on its consolidated financial statements.

2. REVENUE

As discussed in Note 5, “Discontinued Operations,” in the first quarter of 2019, the Company’s Epsilon segment has been classified as a discontinued operation. As such, beginning with the first quarter of 2019, the Company’s products and services are reported under two segments—LoyaltyOne ® and Card Services, as shown below.

The following tables present revenue disaggregated by major source:

								Corporate/
Three Months Ended March 31, 2019		LoyaltyOne			Card Services			Other			Total
		(in millions)
Disaggregation of Revenue by Major Source:
Coalition loyalty program		$	71.4		$	—		$	—		$	71.4
Short-term loyalty programs			109.6			—			—			109.6
Servicing fees, net			—			(18.6)			—			(18.6)
Other			19.8			—			—			19.8
Revenue from contracts with customers		$	200.8		$	(18.6)		$	—		$	182.2
Finance charges, net			—			1,149.0			—			1,149.0
Investment income			3.0			—			—			3.0
Total		$	203.8		$	1,130.4		$	—		$	1,334.2

 

								Corporate/
Three Months Ended March 31, 2018		LoyaltyOne			Card Services			Other			Total
		(in millions)
Disaggregation of Revenue by Major Source:
Coalition loyalty program		$	89.9		$	—		$	—		$	89.9
Short-term loyalty programs			114.2			—			—			114.2
Servicing fees, net			—			(2.0)			—			(2.0)
Other			19.5			—			0.2			19.7
Revenue from contracts with customers		$	223.6		$	(2.0)		$	0.2		$	221.8
Finance charges, net			—			1,157.2			—			1,157.2
Investment income			2.7			—			—			2.7
Total		$	226.3		$	1,155.2		$	0.2		$	1,381.7

 

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The following tables present revenue disaggregated by geographic region based on the location of the subsidiary that generally correlates with the location of the customer:

								Corporate/
Three Months Ended March 31, 2019		LoyaltyOne			Card Services			Other			Total
		(in millions)
Disaggregation of Revenue by Geographic Region:
United States		$	6.4		$	1,130.4		$	—		$	1,136.8
Canada			89.0			—			—			89.0
Europe, Middle East and Africa			81.4			—			—			81.4
Asia Pacific			17.5			—			—			17.5
Other			9.5			—			—			9.5
Total		$	203.8		$	1,130.4		$	—		$	1,334.2

 

								Corporate/
Three Months Ended March 31, 2018		LoyaltyOne			Card Services			Other			Total
		(in millions)
Disaggregation of Revenue by Geographic Region:
United States		$	5.7		$	1,155.2		$	0.2		$	1,161.1
Canada			105.6			—			—			105.6
Europe, Middle East and Africa			97.0			—			—			97.0
Asia Pacific			16.6			—			—			16.6
Other			1.4			—			—			1.4
Total		$	226.3		$	1,155.2		$	0.2		$	1,381.7

 

Contract Liabilities

The Company records a contract liability when cash payments are received in advance of its performance, which applies to the service and redemption of an AIR MILES ® reward mile and the reward products for its short-term loyalty programs.

A reconciliation of contract liabilities for the AIR MILES Reward Program is as follows:

		Deferred Revenue
		Service			Redemption			Total
		(in millions)
Balance at January 1, 2019		$	248.0		$	627.3		$	875.3
Cash proceeds			41.7			67.5			109.2
Revenue recognized (1)			(48.9)			(77.8)			(126.7)
Other			—			0.4			0.4
Effects of foreign currency translation			5.4			13.7			19.1
Balance at March 31, 2019		$	246.2		$	631.1		$	877.3
Amounts recognized in the consolidated balance sheets:
Deferred revenue (current)		$	137.7		$	631.1		$	768.8
Deferred revenue (non-current)		$	108.5		$	—		$	108.5

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(1)

Reported on a gross basis herein.

 

The deferred redemption obligation associated with the AIR MILES Reward Program is effectively due on demand from the collector base, thus the timing of revenue recognition is based on the redemption by the collector. Service revenue is amortized over the expected life of a mile, with the deferred revenue balance expected to be recognized into revenue in the amount of $111.7 million in 2019, $87.5 million in 2020, $42.7 million in 2021, and $4.3 million in 2022.

 

Additionally, contract liabilities for the Company’s short-term loyalty programs are recognized in other current liabilities in the Company’s unaudited condensed consolidated balance sheets. The beginning balance as of January 1,