|
|
|
ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
|
Delaware
|
|
43-2099257
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
|
(I.R.S. Employer
Identification No.)
|
|
||
|
|
|
6220 Stoneridge Mall Road
Pleasanton, CA
|
|
94588
|
(Address of Principal Executive Offices)
|
|
(Zip Code)
|
|
Large accelerated filer
|
|
¨
|
|
Accelerated filer
|
|
ý
|
|
|
|
|
|
|
|
Non-accelerated filer
|
|
¨
(Do not check if a smaller reporting company)
|
|
Smaller reporting company
|
|
¨
|
|
|
|
Page
|
PART I. FINANCIAL INFORMATION
|
|
|
|
|
|
Item 1.
|
|
|
|
||
|
||
|
||
|
||
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
|
|
PART II. OTHER INFORMATION
|
|
|
|
|
|
Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 5.
|
||
Item 6.
|
||
|
June 14,
2014 |
|
December 28,
2013 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
299,727
|
|
|
$
|
550,380
|
|
Settlement receivables, net
|
276,447
|
|
|
813,448
|
|
||
Accounts receivable, net
|
121,766
|
|
|
126,369
|
|
||
Deferred income taxes
|
20,145
|
|
|
20,145
|
|
||
Prepaid expenses and other current assets
|
59,030
|
|
|
67,474
|
|
||
Total current assets
|
777,115
|
|
|
1,577,816
|
|
||
Property, equipment and technology, net
|
84,703
|
|
|
79,663
|
|
||
Intangible assets, net
|
87,972
|
|
|
98,689
|
|
||
Goodwill
|
133,088
|
|
|
133,521
|
|
||
Deferred income taxes
|
727
|
|
|
727
|
|
||
Other assets
|
83,358
|
|
|
90,678
|
|
||
TOTAL ASSETS
|
$
|
1,166,963
|
|
|
$
|
1,981,094
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Settlement payables
|
$
|
538,707
|
|
|
$
|
1,484,047
|
|
Consumer and customer deposits
|
57,423
|
|
|
54,915
|
|
||
Accounts payable and accrued operating expenses
|
81,890
|
|
|
99,499
|
|
||
Current portion of note payable
|
8,705
|
|
|
—
|
|
||
Other current liabilities
|
41,161
|
|
|
81,270
|
|
||
Total current liabilities
|
727,886
|
|
|
1,719,731
|
|
||
Deferred income taxes
|
24,376
|
|
|
24,488
|
|
||
Note payable
|
165,393
|
|
|
—
|
|
||
Other liabilities
|
9,629
|
|
|
8,711
|
|
||
Total liabilities
|
927,284
|
|
|
1,752,930
|
|
||
Commitments and contingencies (see Note 8)
|
—
|
|
|
—
|
|
||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock: $0.001 par value; 10,000 shares authorized; no shares outstanding
|
—
|
|
|
—
|
|
||
Class A common stock: $0.001 par value; 125,000 shares authorized; 12,598 and 12,188 shares outstanding, respectively
|
12
|
|
|
12
|
|
||
Class B common stock: $0.001 par value; 125,000 shares authorized; 40,142 and 40,252 shares outstanding, respectively
|
41
|
|
|
41
|
|
||
Additional paid-in capital
|
117,457
|
|
|
107,139
|
|
||
Treasury stock
|
(472
|
)
|
|
(126
|
)
|
||
Accumulated other comprehensive loss
|
(3,396
|
)
|
|
(2,873
|
)
|
||
Retained earnings
|
119,177
|
|
|
116,975
|
|
||
Total Blackhawk Network Holdings, Inc. equity
|
232,819
|
|
|
221,168
|
|
||
Non-controlling interests
|
6,860
|
|
|
6,996
|
|
||
Total stockholders’ equity
|
239,679
|
|
|
228,164
|
|
||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
1,166,963
|
|
|
$
|
1,981,094
|
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
June 14, 2014
|
|
June 15, 2013
|
|
June 14, 2014
|
|
June 15, 2013
|
||||||||
OPERATING REVENUES:
|
|
|
|
|
|
|
|
||||||||
Commissions and fees
|
$
|
216,341
|
|
|
$
|
176,819
|
|
|
$
|
394,436
|
|
|
$
|
321,294
|
|
Program, interchange, marketing and other fees
|
40,421
|
|
|
28,907
|
|
|
76,086
|
|
|
53,265
|
|
||||
Product sales
|
27,182
|
|
|
20,136
|
|
|
46,537
|
|
|
36,353
|
|
||||
Total operating revenues
|
283,944
|
|
|
225,862
|
|
|
517,059
|
|
|
410,912
|
|
||||
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
||||||||
Distribution partner commissions
|
144,023
|
|
|
118,153
|
|
|
262,617
|
|
|
214,135
|
|
||||
Processing and services
|
45,314
|
|
|
34,258
|
|
|
86,939
|
|
|
66,394
|
|
||||
Sales and marketing
|
45,779
|
|
|
39,932
|
|
|
84,570
|
|
|
68,257
|
|
||||
Costs of products sold
|
25,495
|
|
|
18,509
|
|
|
44,799
|
|
|
34,359
|
|
||||
General and administrative
|
10,934
|
|
|
11,015
|
|
|
25,537
|
|
|
22,795
|
|
||||
Business acquisition expense (benefit) and amortization of acquisition intangibles
|
3,458
|
|
|
(1,384
|
)
|
|
7,869
|
|
|
(707
|
)
|
||||
Total operating expenses
|
275,003
|
|
|
220,483
|
|
|
512,331
|
|
|
405,233
|
|
||||
OPERATING INCOME
|
8,941
|
|
|
5,379
|
|
|
4,728
|
|
|
5,679
|
|
||||
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
||||||||
Interest income and other income (expense), net
|
353
|
|
|
96
|
|
|
(56
|
)
|
|
373
|
|
||||
Interest expense
|
(956
|
)
|
|
—
|
|
|
(1,001
|
)
|
|
—
|
|
||||
INCOME BEFORE INCOME TAX EXPENSE
|
8,338
|
|
|
5,475
|
|
|
3,671
|
|
|
6,052
|
|
||||
INCOME TAX EXPENSE
|
3,275
|
|
|
3,470
|
|
|
1,492
|
|
|
3,788
|
|
||||
NET INCOME BEFORE ALLOCATION TO NON-CONTROLLING INTEREST
|
5,063
|
|
|
2,005
|
|
|
2,179
|
|
|
2,264
|
|
||||
Add: Net loss attributable to non-controlling interests (net of tax)
|
53
|
|
|
126
|
|
|
96
|
|
|
213
|
|
||||
NET INCOME ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC.
|
$
|
5,116
|
|
|
$
|
2,131
|
|
|
$
|
2,275
|
|
|
$
|
2,477
|
|
EARNINGS PER SHARE:
|
|
|
|
|
|
|
|
||||||||
Basic – Class A and Class B
|
$
|
0.10
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.05
|
|
Diluted – Class A and Class B
|
$
|
0.09
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.05
|
|
Weighted average shares outstanding—basic
|
52,307
|
|
|
51,056
|
|
|
52,201
|
|
|
50,713
|
|
||||
Weighted average shares outstanding—diluted
|
53,740
|
|
|
52,240
|
|
|
53,725
|
|
|
51,746
|
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
June 14, 2014
|
|
June 15, 2013
|
|
June 14, 2014
|
|
June 15, 2013
|
||||||||
NET INCOME BEFORE ALLOCATION TO NON-CONTROLLING INTEREST
|
$
|
5,063
|
|
|
$
|
2,005
|
|
|
$
|
2,179
|
|
|
$
|
2,264
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Currency translation adjustments
|
3
|
|
|
(507
|
)
|
|
(519
|
)
|
|
(1,815
|
)
|
||||
COMPREHENSIVE INCOME BEFORE ALLOCATION TO NON-CONTROLLING INTEREST
|
5,066
|
|
|
1,498
|
|
|
1,660
|
|
|
449
|
|
||||
Add: Comprehensive loss attributable to non-controlling interest (net of tax)
|
51
|
|
|
126
|
|
|
92
|
|
|
213
|
|
||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC.
|
$
|
5,117
|
|
|
$
|
1,624
|
|
|
$
|
1,752
|
|
|
$
|
662
|
|
|
24 Weeks Ended
|
||||||
|
June 14, 2014
|
|
June 15, 2013
|
||||
OPERATING ACTIVITIES:
|
|
|
|
||||
Net income before allocation to non-controlling interests
|
$
|
2,179
|
|
|
$
|
2,264
|
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
||||
Depreciation and amortization
|
21,688
|
|
|
10,651
|
|
||
Program development cost amortization
|
11,551
|
|
|
8,748
|
|
||
Provision for doubtful accounts and sales adjustments
|
1,252
|
|
|
1,682
|
|
||
Employee stock-based compensation expense
|
6,090
|
|
|
3,462
|
|
||
Distribution partner mark-to-market expense
|
(88
|
)
|
|
6,995
|
|
||
Change in fair value of contingent consideration
|
—
|
|
|
(903
|
)
|
||
Reversal of reserve for patent litigation
|
(3,852
|
)
|
|
—
|
|
||
Excess tax benefit from stock-based awards
|
(1,024
|
)
|
|
(398
|
)
|
||
Other
|
1,134
|
|
|
—
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Settlement receivables
|
534,315
|
|
|
284,260
|
|
||
Settlement payables
|
(942,572
|
)
|
|
(775,899
|
)
|
||
Accounts receivable, current and long-term
|
14,061
|
|
|
20,626
|
|
||
Prepaid expenses and other current assets
|
4,224
|
|
|
7,420
|
|
||
Other assets
|
(12,259
|
)
|
|
(10,119
|
)
|
||
Consumer and customer deposits
|
(1,409
|
)
|
|
(61
|
)
|
||
Accounts payable and accrued operating expenses
|
(17,808
|
)
|
|
(13,278
|
)
|
||
Other current and long-term liabilities
|
(15,496
|
)
|
|
(17,662
|
)
|
||
Income taxes, net
|
(13,363
|
)
|
|
(16,457
|
)
|
||
Net cash used in operating activities
|
(411,377
|
)
|
|
(488,669
|
)
|
||
INVESTING ACTIVITIES:
|
|
|
|
||||
Change in overnight cash advances to Safeway
|
—
|
|
|
430,000
|
|
||
Expenditures for property, equipment and technology
|
(18,241
|
)
|
|
(15,110
|
)
|
||
Payment for working capital adjustment for business acquisitions, net
|
(1,366
|
)
|
|
—
|
|
||
Cash received for assumption of liabilities from prior business acquisition
|
3,917
|
|
|
—
|
|
||
Change in restricted cash
|
—
|
|
|
8,968
|
|
||
Other
|
—
|
|
|
(250
|
)
|
||
Net cash provided by (used in) investing activities
|
(15,690
|
)
|
|
423,608
|
|
||
|
|
|
|
||||
See accompanying notes to condensed consolidated financial statements
|
BLACKHAWK NETWORK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
(Unaudited)
|
|||||||
|
24 Weeks Ended
|
||||||
|
June 14, 2014
|
|
June 15, 2013
|
||||
FINANCING ACTIVITIES:
|
|
|
|
||||
Proceeds from issuance of note payable
|
175,000
|
|
|
—
|
|
||
Payments of costs for issuance of note payable
|
(2,452
|
)
|
|
—
|
|
||
Payments for acquisition liability
|
—
|
|
|
(1,881
|
)
|
||
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
|
3,620
|
|
|
235
|
|
||
Excess tax benefit from stock-based awards
|
1,024
|
|
|
398
|
|
||
Other
|
(694
|
)
|
|
(484
|
)
|
||
Net cash provided by (used in) financing activities
|
176,498
|
|
|
(886
|
)
|
||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
|
(84
|
)
|
|
(2,335
|
)
|
||
DECREASE IN CASH AND CASH EQUIVALENTS
|
(250,653
|
)
|
|
(68,282
|
)
|
||
CASH AND CASH EQUIVALENTS—Beginning of year
|
550,380
|
|
|
172,665
|
|
||
CASH AND CASH EQUIVALENTS—End of period
|
$
|
299,727
|
|
|
$
|
104,383
|
|
|
12 Weeks
Ended June 15, 2013 |
24 Weeks
Ended
June 15,
2013
|
||||
Total revenues
|
$
|
240,741
|
|
$
|
442,921
|
|
Net income attributable to Blackhawk Network Holdings, Inc.
|
1,029
|
|
1,267
|
|
|
June 14, 2014
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
|
|
|
|
|
|
|
||||||||
Money market mutual funds
|
$
|
125,150
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
125,150
|
|
Commercial paper
|
$
|
—
|
|
|
$
|
56,000
|
|
|
$
|
—
|
|
|
$
|
56,000
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Contingent consideration
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
December 28, 2013
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
|
|
|
|
|
|
|
||||||||
Money market mutual funds
|
$
|
379,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
379,000
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Contingent consideration
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
24 Weeks Ended
|
||||||
|
June 14,
2014 |
|
June 15,
2013 |
||||
Contingent Consideration
|
|
|
|
||||
Balance – Year-end
|
$
|
—
|
|
|
$
|
18,947
|
|
Decrease in fair value of contingent consideration
|
—
|
|
|
(903
|
)
|
||
Settlements
|
—
|
|
|
(895
|
)
|
||
Balance – End of period
|
$
|
—
|
|
|
$
|
17,149
|
|
|
June 14,
2014 |
||
Due March 21, 2015
|
$
|
8,750
|
|
Due March 21, 2016
|
17,500
|
|
|
Due March 21, 2017
|
26,250
|
|
|
Due March 28, 2018
|
122,500
|
|
|
Total amount due
|
$
|
175,000
|
|
Unamortized discount
|
(902
|
)
|
|
Note payable, net of discount, as of June 14, 2014
|
$
|
174,098
|
|
|
June 14,
2014 |
|
December 28,
2013 |
||||
Card stock
|
$
|
16,333
|
|
|
$
|
13,342
|
|
Deferred expenses
|
7,146
|
|
|
10,126
|
|
||
Program development costs
|
3,120
|
|
|
5,767
|
|
||
Prepaid load value
|
6,321
|
|
|
10,631
|
|
||
Income tax receivables
|
4,314
|
|
|
8,344
|
|
||
Other prepaids
|
21,796
|
|
|
19,264
|
|
||
Total prepaid expenses and other current assets
|
$
|
59,030
|
|
|
$
|
67,474
|
|
|
24 Weeks
Ended
June 14,
2014
|
||
Balance – December 28, 2013
|
$
|
133,521
|
|
Retailo purchase price adjustment
|
78
|
|
|
Foreign currency translation adjustments
|
(511
|
)
|
|
Balance – June 14, 2014
|
$
|
133,088
|
|
|
June 14,
2014 |
|
December 28, 2013
|
||||
Program development costs
|
$
|
56,544
|
|
|
$
|
58,029
|
|
Other receivables
|
9,308
|
|
|
19,905
|
|
||
Income taxes receivable
|
6,391
|
|
|
5,555
|
|
||
Deferred financing costs
|
1,417
|
|
|
—
|
|
||
Other
|
9,698
|
|
|
7,189
|
|
||
Total other assets
|
$
|
83,358
|
|
|
$
|
90,678
|
|
|
June 14,
2014 |
|
December 28, 2013
|
||||
Deferred revenue
|
$
|
23,067
|
|
|
$
|
30,540
|
|
Income taxes payable
|
2,596
|
|
|
21,167
|
|
||
Payroll and related liabilities
|
12,900
|
|
|
20,949
|
|
||
Acquisition liabilities
|
—
|
|
|
2,279
|
|
||
Other payables and accrued liabilities
|
2,598
|
|
|
6,335
|
|
||
Total other current liabilities
|
$
|
41,161
|
|
|
$
|
81,270
|
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
June 14,
2014 |
|
June 15,
2013 |
|
June 14,
2014 |
|
June 15,
2013 |
||||||||
Change in fair value of Cardpool contingent consideration liability (See
Note 3—Fair Value Measurements
)
|
$
|
—
|
|
|
$
|
(1,481
|
)
|
|
$
|
—
|
|
|
$
|
(903
|
)
|
Amortization of intangible assets acquired in business combination
|
3,425
|
|
|
97
|
|
|
7,835
|
|
|
196
|
|
||||
Acquisition related expenses
|
33
|
|
|
—
|
|
|
34
|
|
|
—
|
|
||||
Total business acquisition expense (benefit) and amortization of acquisition intangibles
|
$
|
3,458
|
|
|
$
|
(1,384
|
)
|
|
$
|
7,869
|
|
|
$
|
(707
|
)
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
June 14,
2014 |
|
June 15,
2013 |
|
June 14,
2014 |
|
June 15,
2013 |
||||||||
OPERATING REVENUES:
|
|
|
|
|
|
|
|
||||||||
Commissions and fees
|
$
|
175
|
|
|
$
|
518
|
|
|
$
|
710
|
|
|
$
|
1,117
|
|
Program, interchange, marketing and other fees
|
36
|
|
|
383
|
|
|
383
|
|
|
732
|
|
||||
Product sales
|
11
|
|
|
1,300
|
|
|
863
|
|
|
1,883
|
|
||||
Total operating revenues
|
222
|
|
|
2,201
|
|
|
1,956
|
|
|
3,732
|
|
||||
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
||||||||
Distribution partner commissions
|
3,182
|
|
|
11,772
|
|
|
11,821
|
|
|
21,086
|
|
||||
Processing and services
|
(32
|
)
|
|
(240
|
)
|
|
(212
|
)
|
|
(348
|
)
|
||||
Sales and marketing
|
—
|
|
|
(37
|
)
|
|
—
|
|
|
63
|
|
||||
Costs of products sold
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
General and administrative
|
196
|
|
|
699
|
|
|
786
|
|
|
1,338
|
|
||||
Total operating expenses
|
3,346
|
|
|
12,194
|
|
|
12,395
|
|
|
22,139
|
|
||||
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
||||||||
Interest income and other income (expense), net
|
—
|
|
|
16
|
|
|
—
|
|
|
176
|
|
||||
Interest expense
|
(5
|
)
|
|
—
|
|
|
(50
|
)
|
|
—
|
|
|
12 Weeks Ended
|
|
12 Weeks Ended
|
||||||||||||
|
June 14, 2014
|
|
June 15, 2013
|
||||||||||||
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
||||||||
Net income attributable to Blackhawk Network Holdings, Inc.
|
$
|
5,116
|
|
|
$
|
5,116
|
|
|
$
|
2,131
|
|
|
$
|
2,131
|
|
Distributed and undistributed earnings allocated to participating securities
|
(14
|
)
|
|
(13
|
)
|
|
(53
|
)
|
|
(52
|
)
|
||||
Net income attributable to common stockholders
|
$
|
5,102
|
|
|
$
|
5,103
|
|
|
$
|
2,078
|
|
|
$
|
2,079
|
|
Weighted-average common shares outstanding
|
52,307
|
|
|
52,307
|
|
|
51,056
|
|
|
51,056
|
|
||||
Common share equivalents
|
|
|
1,433
|
|
|
|
|
1,184
|
|
||||||
Weighted-average shares outstanding
|
|
|
|
53,740
|
|
|
|
|
|
52,240
|
|
||||
Earnings per share– Class A and Class B
|
$
|
0.10
|
|
|
$
|
0.09
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
24 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
June 14, 2014
|
|
June 15, 2013
|
||||||||||||
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
||||||||
Net income attributable to Blackhawk Network Holdings, Inc.
|
$
|
2,275
|
|
|
$
|
2,275
|
|
|
$
|
2,477
|
|
|
$
|
2,477
|
|
Distributed and undistributed earnings allocated to participating securities
|
(47
|
)
|
|
(47
|
)
|
|
(118
|
)
|
|
(118
|
)
|
||||
Net income attributable to common stockholders
|
$
|
2,228
|
|
|
$
|
2,228
|
|
|
$
|
2,359
|
|
|
$
|
2,359
|
|
Weighted-average common shares outstanding
|
52,201
|
|
|
52,201
|
|
|
50,713
|
|
|
50,713
|
|
||||
Common share equivalents
|
|
|
|
1,524
|
|
|
|
|
|
1,033
|
|
||||
Weighted-average shares outstanding
|
|
|
|
53,725
|
|
|
|
|
|
51,746
|
|
||||
Earnings per share– Class A and Class B
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.05
|
|
|
$
|
0.05
|
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||
|
June 14,
2014 |
|
June 15,
2013 |
|
June 14,
2014 |
|
June 15,
2013 |
||||
Employee stock options and stock appreciation rights
|
692
|
|
|
1,835
|
|
|
421
|
|
|
1,463
|
|
Employee restricted stock and restricted stock units
|
842
|
|
|
4
|
|
|
5
|
|
|
2
|
|
Warrants issued to distribution partners
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total excluded potential common stock outstanding
|
1,534
|
|
|
1,839
|
|
|
426
|
|
|
1,465
|
|
•
|
Content Provider Commissions—
We earn the majority of our revenues from commissions paid by content providers for the marketing and distribution of their prepaid cards, which we refer to as closed loop gift cards. For closed loop gift cards and prepaid telecom cards, our commissions are based on a contractual percentage of the aggregate load value of the cards recognized during a defined period. This contractual percentage is individually negotiated with each content provider and is generally a fixed percentage. After a closed loop gift card or telecom card is activated, we have no further service obligations and recognize the commissions received as revenue at the time of activation.
|
•
|
Purchase Fees—
We generate a portion of our revenue from fees related to open loop gift cards, including our proprietary Visa gift card, American Express and MasterCard network-branded gift cards and GPR cards provided by Green Dot and NetSpend, the industry leaders in this product category, as well as PayPower, our own GPR card. The consumer pays a purchase fee upon activation of a network-branded card or the initial load to the GPR cards. These purchase fees vary based on the type of card purchased and the dollar amount of the load transaction. We serve as the program manager, in conjunction with the issuing banks, for our proprietary Visa gift card and PayPower GPR card and have ongoing customer service obligations after card activation. We recognize revenue for our proprietary Visa gift card purchase fee ratably in proportion to the historical redemption patterns of the card portfolio over the estimated life of the card (currently 12 months), which presently results in the recognition of approximately 90% of the purchase fee within four months of card activation. We recognize the initial load fee on the PayPower GPR card on a straight-line basis over the estimated life of the card (currently four months). For the American Express and MasterCard network-branded gift cards and the Green Dot and NetSpend branded GPR cards, we receive a contractual percentage of the consumer purchase fee, which is recognized as revenue at the time of card activation as we have no future customer service obligations.
|
•
|
Reload Fees—
The consumer pays a purchase fee and we earn the fee when consumers reload funds onto their PayPower GPR card or another GPR card through our Reloadit network. Revenue is recognized when the reload is processed.
|
•
|
Incentive Program Fees
—We receive fees from our business partners for the activation of incentive cards and the overall management of our incentives and rewards business. Incentive cards include Visa and MasterCard network-branded cards, for which we serve as program manager in conjunction with issuing banks, and Discover network-branded cards that we issue. We defer initial program fees for incentive cards ratably over the estimated card life for single use cards (currently nine months) and on a straight-line basis for reloadable cards (currently 24 months), and we recognize fees for reloading cards when the reload is processed. We may grant price concessions to certain business partners for the purchase of incentive cards. Such concessions are presented as a reduction of
Commissions and fees
revenue. If such concessions exceed the revenues received from the business partner, we present the net amounts in
Operating expenses
in
Distribution partner commissions
|
•
|
Merchant Commissions
—Certain open-loop incentive cards are redeemable only at certain merchants utilizing our proprietary restricted authorization network technology. We receive commissions from such merchants based on a contractual percentage of the amount redeemed. Revenue is recognized when the cardholders make purchases.
|
•
|
Transaction-Based and Other Fees—
We receive transaction-based fees from certain telecom partners related to the use of our proprietary network. These fees vary with usage or volumes and are recognized at the time our network is accessed. We also receive fees for certain services related to our local, regional and sports team card programs such as balance tracking, customer service calls and financial settlement. Revenue is recognized in the period the services are performed.
|
•
|
Post-Activation Program Management Fees—
We receive a program management fee from certain of our issuing banks related to our proprietary Visa gift card and certain open-loop incentive cards. This fee is based on a contractually stated percentage of load value and represents a portion of our compensation for the overall management and customer support of our proprietary Visa gift and incentive card programs. The fees are deferred and recognized
|
•
|
Interchange Fees—
We earn payment network fees related to the cardholder’s usage of our proprietary Visa gift, PayPower GPR and open loop incentive cards. Merchants are charged at varying rates established by Visa, MasterCard and Discover. These fees are contractually passed through to us by the issuing banks net of any fees paid to Visa or MasterCard, or paid directly to us by Discover for the cards that we issue. We recognize revenues when cardholders make purchases.
|
•
|
Marketing Revenue—
We receive funds from our content providers to promote their prepaid cards throughout our retail distribution partner network. We generally recognize revenue ratably over the period of the related marketing campaign.
|
•
|
Account Service Fees
—We earn a monthly fee and other transaction-based service fees on the PayPower GPR card and earn monthly fees for certain Visa gift and incentive cards, which we charge only after a predetermined amount of time has transpired since card activation. These consumer-paid service fees are collected by reducing card balances and are recognized as revenue at the time the card balance is reduced. For certain incentive cards, we earn these fees only to the extent that the fees exceed post-activation program management fees paid to us for such cards.
|
•
|
Fund Expiration Revenue
—We serve as issuer of Discover network-branded incentive cards and present the cardholder liability in
Consumer and Customer Deposits
in our consolidated balance sheets. When funds expire, we recognize revenue and derecognize the liability.
|
•
|
Fund Expiration Fees
—We receive fees from our issuing banks for certain Visa gift and Visa and MasterCard incentive cards, based on a contractual percentage of the unredeemed funds when the funds expire. We recognize revenue when the funds expire. For certain incentive cards, we earn these fees only to the extent that the fees exceed post-activation program management fees paid to us for such cards.
|
•
|
Other Fees—
In some instances, we may receive a portion of other fees such as account maintenance, interchange or referral fees for open loop cards and GPR cards other than our proprietary Visa gift card and PayPower GPR card. We also receive fees related to Safeway-branded gift cards and local, regional and sports team card programs. Typically, these fees are recognized when earned. For one open loop content provider, we receive a fee, under deferred payment terms, based on a percentage of load value and pay the content provider a fee (a portion of which is also under deferred payment terms) for meeting certain activation targets. We recognize the net amount of these fees upon activation.
|
•
|
Card Production—
We provide card design, development and third-party production services for certain content providers that are separate from the standard content provider contract. We outsource the physical card production to a third party and charge the content provider actual cost plus a margin for managing this process. Revenue is recognized when the cards are received by our content providers, at our distribution partners’ locations or by us at our third-party warehouse.
|
•
|
Secondary Card Market—
We generate revenue through our wholly owned subsidiary, Cardpool, by acquiring previously owned closed loop gift cards at a discount from the remaining value on the card and then selling them at a mark-up over our costs (but still at a discount to the value on the card) to consumers. Revenue is recognized when the cards are delivered to the purchaser.
|
•
|
Telecom Handsets—
We earn revenue from the sale of telecom handsets to our distribution partners to facilitate and supplement the sale of our prepaid telecom content providers’ airtime cards. Revenue is generally recognized upon handset shipment to or receipt by the distribution partner based upon the shipping terms, net of estimated returns. We may grant price discounts to distribution partners to increase sales of the distribution partners’ remaining inventory, which we recognize as a reduction of revenue.
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
June 14, 2014
|
|
June 15, 2013
|
|
June 14, 2014
|
|
June 15, 2013
|
||||||||
|
(in thousands, except percentages and average load transaction value)
|
||||||||||||||
Load value
|
$
|
2,619,658
|
|
|
$
|
1,919,384
|
|
|
$
|
4,807,362
|
|
|
$
|
3,529,225
|
|
Commissions and fees as a % of load value
|
8.3
|
%
|
|
9.2
|
%
|
|
8.2
|
%
|
|
9.1
|
%
|
||||
Distribution partner commissions paid as a % of commissions and fees
|
66.6
|
%
|
|
66.8
|
%
|
|
66.6
|
%
|
|
66.6
|
%
|
||||
Number of load transactions
|
57,538
|
|
|
46,640
|
|
|
102,176
|
|
|
83,446
|
|
||||
Average load transaction value
|
$
|
45.53
|
|
|
$
|
41.15
|
|
|
$
|
47.05
|
|
|
$
|
42.29
|
|
Adjusted operating revenues(1)
|
$
|
138,596
|
|
|
$
|
107,709
|
|
|
$
|
254,442
|
|
|
$
|
196,777
|
|
Adjusted EBITDA(1)
|
$
|
21,096
|
|
|
$
|
18,528
|
|
|
$
|
32,418
|
|
|
$
|
25,884
|
|
Adjusted EBITDA margin(1)
|
15.2
|
%
|
|
17.2
|
%
|
|
12.7
|
%
|
|
13.2
|
%
|
||||
Adjusted net income(1)
|
$
|
8,940
|
|
|
$
|
8,737
|
|
|
$
|
12,334
|
|
|
$
|
10,698
|
|
Adjusted diluted earnings per share(1)
|
$
|
0.17
|
|
|
$
|
0.16
|
|
|
$
|
0.23
|
|
|
$
|
0.20
|
|
(1)
|
Our Adjusted operating revenues, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted diluted earnings per share are non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. These measures, however, should be considered in addition to, and not as a substitute for or superior to, operating revenues, operating income, operating margin, cash flows, or other measures of the financial performance prepared in accordance with GAAP.
|
•
|
adjusting our operating revenues for the issuing bank contract amendment and the commissions paid to our distribution partners is useful to understanding our operating margin;
|
•
|
EBITDA and Adjusted EBITDA are widely used by investors and securities analysts to measure a company’s operating performance without regard to items that can vary substantially from company to company and from period to period depending upon their financing, accounting and tax methods, the book value of their assets, their capital structures and the method by which their assets were acquired;
|
•
|
Adjusted EBITDA margin provides a measure of operating efficiency based on Adjusted operating revenues and without regard to items that can vary substantially from company to company and from period to period depending upon their financing, accounting and tax methods, the book value of their assets, their capital structures and the method by which their assets were acquired;
|
•
|
non-cash equity grants made to employees and distribution partners at a certain price and point in time do not necessarily reflect how our business is performing at any particular time and the related expenses are not key measures of our core operating performance;
|
•
|
the issuing bank contract amendment fee adjustments are necessary to adjust operating revenues, EBITDA and
Net income
to recognize the revenues from these fees as if the contract amendments had been in place as of the beginning of the fiscal year, which we believe better reflects our core operating performance during those periods;
|
•
|
intangible asset amortization expenses can vary substantially from company to company and from period to period depending upon the applicable financing and accounting methods, the fair value and average expected life of the acquired intangible assets, the capital structure and the method by which the intangible assets were acquired and, as such, we do not believe that these adjustments are reflective of our core operating performance; and
|
•
|
non-cash fair value adjustments to contingent business acquisition liability do not directly reflect how our business is performing at any particular time and the related expense adjustment amounts are not key measures of our core operating performance.
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
June 14, 2014
|
|
June 15, 2013
|
|
June 14, 2014
|
|
June 15, 2013
|
||||||||
|
(in thousands, except percentages and per share amounts)
|
||||||||||||||
Adjusted operating revenues:
|
|
|
|
|
|
|
|
||||||||
Total operating revenues
|
$
|
283,944
|
|
|
$
|
225,862
|
|
|
$
|
517,059
|
|
|
$
|
410,912
|
|
Issuing bank contract amendment fee adjustment (b)
|
(1,325
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Distribution partner commissions
|
(144,023
|
)
|
|
(118,153
|
)
|
|
(262,617
|
)
|
|
(214,135
|
)
|
||||
Adjusted operating revenues
|
$
|
138,596
|
|
|
$
|
107,709
|
|
|
$
|
254,442
|
|
|
$
|
196,777
|
|
Adjusted EBITDA:
|
|
|
|
|
|
|
|
||||||||
Net income before allocation to non-controlling interest
|
$
|
5,063
|
|
|
$
|
2,005
|
|
|
$
|
2,179
|
|
|
$
|
2,264
|
|
Interest income and other income (expense), net
|
(353
|
)
|
|
(96
|
)
|
|
56
|
|
|
(373
|
)
|
||||
Interest expense
|
956
|
|
|
—
|
|
|
1,001
|
|
|
—
|
|
||||
Income tax expense
|
3,275
|
|
|
3,470
|
|
|
1,492
|
|
|
3,788
|
|
||||
Depreciation and amortization
|
10,770
|
|
|
5,924
|
|
|
21,688
|
|
|
10,651
|
|
||||
EBITDA
|
19,711
|
|
|
11,303
|
|
|
26,416
|
|
|
16,330
|
|
||||
Adjustments to EBITDA:
|
|
|
|
|
|
|
|
||||||||
Employee stock-based compensation
|
3,420
|
|
|
1,828
|
|
|
6,090
|
|
|
3,462
|
|
||||
Distribution partner mark-to-market expense(a)
|
(710
|
)
|
|
6,878
|
|
|
(88
|
)
|
|
6,995
|
|
||||
Issuing bank contract amendment fee adjustment (b)
|
(1,325
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Change in fair value of contingent consideration(c)
|
—
|
|
|
(1,481
|
)
|
|
—
|
|
|
(903
|
)
|
||||
Adjusted EBITDA
|
$
|
21,096
|
|
|
$
|
18,528
|
|
|
$
|
32,418
|
|
|
$
|
25,884
|
|
Adjusted EBITDA margin:
|
|
|
|
|
|
|
|
||||||||
Total operating revenues
|
$
|
283,944
|
|
|
$
|
225,862
|
|
|
$
|
517,059
|
|
|
$
|
410,912
|
|
Operating income
|
$
|
8,941
|
|
|
$
|
5,379
|
|
|
$
|
4,728
|
|
|
$
|
5,679
|
|
Operating margin
|
3.1
|
%
|
|
2.4
|
%
|
|
0.9
|
%
|
|
1.4
|
%
|
||||
Adjusted operating revenues
|
$
|
138,596
|
|
|
$
|
107,709
|
|
|
$
|
254,442
|
|
|
$
|
196,777
|
|
Adjusted EBITDA
|
$
|
21,096
|
|
|
$
|
18,528
|
|
|
$
|
32,418
|
|
|
$
|
25,884
|
|
Adjusted EBITDA margin
|
15.2
|
%
|
|
17.2
|
%
|
|
12.7
|
%
|
|
13.2
|
%
|
||||
Adjusted net income:
|
|
|
|
|
|
|
|
||||||||
Income before income tax expense
|
$
|
8,338
|
|
|
$
|
5,475
|
|
|
$
|
3,671
|
|
|
$
|
6,052
|
|
Employee stock-based compensation
|
3,420
|
|
|
1,828
|
|
|
6,090
|
|
|
3,462
|
|
||||
Distribution partner mark-to-market expense(a)
|
(710
|
)
|
|
6,878
|
|
|
(88
|
)
|
|
6,995
|
|
||||
Issuing bank contract amendment fee adjustment (b)
|
(1,325
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Change in fair value of contingent consideration(c)
|
—
|
|
|
(1,481
|
)
|
|
—
|
|
|
(903
|
)
|
||||
Amortization of intangibles(d)
|
4,585
|
|
|
897
|
|
|
10,117
|
|
|
1,078
|
|
||||
Adjusted income before income tax expense
|
14,308
|
|
|
13,597
|
|
|
19,790
|
|
|
16,684
|
|
||||
Income tax expense
|
3,275
|
|
|
3,470
|
|
|
1,492
|
|
|
3,788
|
|
||||
Tax expense on adjustments(e)
|
2,146
|
|
|
1,516
|
|
|
6,060
|
|
|
2,411
|
|
||||
Adjusted income tax expense
|
5,421
|
|
|
4,986
|
|
|
7,552
|
|
|
6,199
|
|
||||
Adjusted net income before allocation to non-controlling interest
|
8,887
|
|
|
8,611
|
|
|
12,238
|
|
|
10,485
|
|
||||
Add: Net loss attributable to non-controlling interests (net of tax)
|
53
|
|
|
126
|
|
|
96
|
|
|
213
|
|
||||
Adjusted net income attributable to Blackhawk Network Holdings, Inc.
|
$
|
8,940
|
|
|
$
|
8,737
|
|
|
$
|
12,334
|
|
|
$
|
10,698
|
|
|
12 Weeks Ended
|
|
24 Weeks Ended
|
||||||||||||
|
June 14, 2014
|
|
June 15, 2013
|
|
June 14, 2014
|
|
June 15, 2013
|
||||||||
|
(in thousands, except percentages and per share amounts)
|
||||||||||||||
Adjusted diluted earnings per share:
|
|
|
|
|
|
|
|
||||||||
Net income attributable to Blackhawk Network Holdings, Inc.
|
$
|
5,116
|
|
|
$
|
2,131
|
|
|
$
|
2,275
|
|
|
$
|
2,477
|
|
Distributed and undistributed income allocated to participating securities
|
(13
|
)
|
|
(52
|
)
|
|
(47
|
)
|
|
(118
|
)
|
||||
Net income attributable to common shareholders
|
$
|
5,103
|
|
|
$
|
2,079
|
|
|
$
|
2,228
|
|
|
$
|
2,359
|
|
Diluted weighted-average shares outstanding
|
53,740
|
|
|
52,240
|
|
|
53,725
|
|
|
51,746
|
|
||||
Diluted earnings per share
|
$
|
0.09
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.05
|
|
Adjusted net income attributable to Blackhawk Network Holdings, Inc.
|
$
|
8,940
|
|
|
$
|
8,737
|
|
|
$
|
12,334
|
|
|
$
|
10,698
|
|
Adjusted distributed and undistributed income allocated to participating securities
|
(21
|
)
|
|
(138
|
)
|
|
(68
|
)
|
|
(267
|
)
|
||||
Adjusted net income attributable to common shareholders
|
$
|
8,919
|
|
|
$
|
8,599
|
|
|
$
|
12,266
|
|
|
$
|
10,431
|
|
Diluted weighted average shares outstanding
|
53,740
|
|
|
52,240
|
|
|
53,725
|
|
|
51,746
|
|
||||
Adjusted diluted earnings per share
|
$
|
0.17
|
|
|
$
|
0.16
|
|
|
$
|
0.23
|
|
|
$
|
0.20
|
|
(a)
|
Distribution partner equity instruments are generally marked to market at each reporting date to fair value until the instrument is vested.
|
(b)
|
In June 2014, we entered into a contractual amendment with one of our issuing banks that substituted a program management fee for account service fees or card expiration fees for certain open-loop incentive cards. A portion of the fees related to cards sold in the 12 weeks ended March 22, 2014. Adjusted operating revenues, Adjusted EBITDA and Adjusted net income for the 12 weeks ended June 14, 2014 have been adjusted to recognized the revenues as if the contract amendment had been in force at the beginning of the fiscal year.
|
(c)
|
Adjustments to reflect a contingent business acquisition liability at its estimated fair value.
|
(d)
|
Non-cash expense resulting from the amortization of intangible assets, including the amortization of distribution partner relationships resulting from the issuance of fully vested warrants, recorded in
Sales and marketing
expense, and the amortization of intangible assets from business acquisitions, recorded in
Business acquisition expense (benefit) and amortization of acquisition intangibles
.
|
(e)
|
Assumes our statutory tax rate adjusted for certain amounts that are not deductible for tax purposes.
|
|
12 Weeks
Ended
June 14,
2014
|
|
% of Total
Operating
Revenues
|
|
12 Weeks
Ended
June 15,
2013
|
|
% of Total
Operating
Revenues
|
||||||
|
(in thousands, except percentages)
|
||||||||||||
OPERATING REVENUES:
|
|
|
|
|
|
|
|
||||||
Commissions and fees
|
$
|
216,341
|
|
|
76.2
|
%
|
|
$
|
176,819
|
|
|
78.3
|
%
|
Program, interchange, marketing and other fees
|
40,421
|
|
|
14.2
|
%
|
|
28,907
|
|
|
12.8
|
%
|
||
Product sales
|
27,182
|
|
|
9.6
|
%
|
|
20,136
|
|
|
8.9
|
%
|
||
Total operating revenues
|
283,944
|
|
|
100.0
|
%
|
|
225,862
|
|
|
100.0
|
%
|
||
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
||||||
Distribution partner commissions
|
144,023
|
|
|
50.7
|
%
|
|
118,153
|
|
|
52.3
|
%
|
||
Processing and services
|
45,314
|
|
|
16.0
|
%
|
|
34,258
|
|
|
15.2
|
%
|
||
Sales and marketing
|
45,779
|
|
|
16.1
|
%
|
|
39,932
|
|
|
17.7
|
%
|
||
Costs of products sold
|
25,495
|
|
|
9.0
|
%
|
|
18,509
|
|
|
8.2
|
%
|
||
General and administrative
|
10,934
|
|
|
3.9
|
%
|
|
11,015
|
|
|
4.9
|
%
|
||
Business acquisition expense (benefit) and amortization of acquisition intangibles
|
3,458
|
|
|
1.2
|
%
|
|
(1,384
|
)
|
|
(0.6
|
)%
|
||
Total operating expenses
|
275,003
|
|
|
96.9
|
%
|
|
220,483
|
|
|
97.6
|
%
|
||
OPERATING INCOME
|
8,941
|
|
|
3.1
|
%
|
|
5,379
|
|
|
2.4
|
%
|
||
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
||||||
Interest income and other income (expense), net
|
353
|
|
|
0.1
|
%
|
|
96
|
|
|
—
|
%
|
||
Interest expense
|
(956
|
)
|
|
(0.3
|
)%
|
|
—
|
|
|
—
|
%
|
||
INCOME BEFORE INCOME TAX EXPENSE
|
8,338
|
|
|
2.9
|
%
|
|
5,475
|
|
|
2.4
|
%
|
||
INCOME TAX EXPENSE
|
3,275
|
|
|
1.2
|
%
|
|
3,470
|
|
|
1.5
|
%
|
||
NET INCOME BEFORE ALLOCATION TO NON-CONTROLLING INTEREST
|
5,063
|
|
|
1.8
|
%
|
|
2,005
|
|
|
0.9
|
%
|
||
Add: Net loss attributable to non-controlling interests (net of tax)
|
53
|
|
|
—
|
%
|
|
126
|
|
|
—
|
%
|
||
NET INCOME ATTRIBUTABLE TO BLACKHAWK
|
$
|
5,116
|
|
|
1.8
|
%
|
|
$
|
2,131
|
|
|
0.9
|
%
|
|
12 Weeks Ended
|
|
|
|||||||||||
|
June 14, 2014
|
|
June 15, 2013
|
|
Change
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
OPERATING REVENUES:
|
|
|
|
|
|
|
|
|||||||
Commissions and fees
|
$
|
216,341
|
|
|
$
|
176,819
|
|
|
$
|
39,522
|
|
|
22.4
|
%
|
Program, interchange, marketing and other fees
|
40,421
|
|
|
28,907
|
|
|
11,514
|
|
|
39.8
|
%
|
|||
Product sales
|
27,182
|
|
|
20,136
|
|
|
7,046
|
|
|
35.0
|
%
|
|||
Total operating revenues
|
$
|
283,944
|
|
|
$
|
225,862
|
|
|
$
|
58,082
|
|
|
25.7
|
%
|
|
12 Weeks Ended
|
|
|
|||||||||||
|
June 14, 2014
|
|
June 15, 2013
|
|
Change
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|||||||
Distribution partner commissions
|
$
|
144,023
|
|
|
$
|
118,153
|
|
|
$
|
25,870
|
|
|
21.9
|
%
|
Processing and services
|
45,314
|
|
|
34,258
|
|
|
11,056
|
|
|
32.3
|
%
|
|||
Sales and marketing
|
45,779
|
|
|
39,932
|
|
|
5,847
|
|
|
14.6
|
%
|
|||
Costs of products sold
|
25,495
|
|
|
18,509
|
|
|
6,986
|
|
|
37.7
|
%
|
|||
General and administrative
|
10,934
|
|
|
11,015
|
|
|
(81
|
)
|
|
(0.7
|
)%
|
|||
Business acquisition expense (benefit) and amortization of acquisition intangibles
|
3,458
|
|
|
(1,384
|
)
|
|
4,842
|
|
|
(349.9
|
)%
|
|||
Total operating expenses
|
$
|
275,003
|
|
|
$
|
220,483
|
|
|
$
|
54,520
|
|
|
24.7
|
%
|
|
12 Weeks Ended
|
||||||
|
June 14, 2014
|
|
June 15, 2013
|
||||
Change in fair value of Cardpool contingent consideration liability (See
Note 3—Fair Value Measurements
in the notes to our condensed consolidated financial statements)
|
$
|
—
|
|
|
$
|
(1,481
|
)
|
Amortization of intangible assets acquired in business combination
|
3,425
|
|
|
97
|
|
||
Acquisition related expenses
|
33
|
|
|
—
|
|
||
Total business acquisition expense (benefit) and amortization of acquisition intangibles
|
$
|
3,458
|
|
|
$
|
(1,384
|
)
|
|
12 Weeks Ended
|
|
|
|||||||||||
|
June 14, 2014
|
|
June 15, 2013
|
|
Change
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|||||||
Interest income and other income (expense), net
|
$
|
353
|
|
|
$
|
96
|
|
|
$
|
257
|
|
|
267.7
|
%
|
Interest expense
|
(956
|
)
|
|
—
|
|
|
(956
|
)
|
|
—
|
%
|
|||
Total other income (expense)
|
$
|
(603
|
)
|
|
$
|
96
|
|
|
$
|
(699
|
)
|
|
(728.1
|
)%
|
INCOME TAX EXPENSE
|
$
|
3,275
|
|
|
$
|
3,470
|
|
|
$
|
(195
|
)
|
|
(5.6
|
)%
|
EFFECTIVE TAX RATE
|
39.3
|
%
|
|
63.4
|
%
|
|
(24.1
|
)%
|
|
|
|
12 Weeks Ended
|
||||||
|
June 14, 2014
|
|
June 15, 2013
|
||||
|
(in thousands, except percentages)
|
||||||
Income before income tax expense
|
$
|
8,338
|
|
|
$
|
5,475
|
|
Income tax expense
|
$
|
3,275
|
|
|
$
|
3,470
|
|
Effective income tax rate
|
39.3
|
%
|
|
63.4
|
%
|
||
Adjusted income before income tax expense
|
$
|
14,308
|
|
|
$
|
13,597
|
|
Adjusted income tax expense
|
$
|
5,421
|
|
|
$
|
4,986
|
|
Adjusted effective income tax rate
|
37.9
|
%
|
|
36.7
|
%
|
|
24 Weeks
Ended
June 14,
2014
|
|
% of Total
Operating
Revenues
|
|
24 Weeks
Ended
June 15,
2013
|
|
% of Total
Operating
Revenues
|
||||||
|
(in thousands, except percentages)
|
||||||||||||
OPERATING REVENUES:
|
|
|
|
|
|
|
|
||||||
Commissions and fees
|
$
|
394,436
|
|
|
76.3
|
%
|
|
$
|
321,294
|
|
|
78.2
|
%
|
Program, interchange, marketing and other fees
|
76,086
|
|
|
14.7
|
%
|
|
53,265
|
|
|
13.0
|
%
|
||
Product sales
|
46,537
|
|
|
9.0
|
%
|
|
36,353
|
|
|
8.8
|
%
|
||
Total operating revenues
|
517,059
|
|
|
100.0
|
%
|
|
410,912
|
|
|
100.0
|
%
|
||
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
||||||
Distribution partner commissions
|
262,617
|
|
|
50.8
|
%
|
|
214,135
|
|
|
52.1
|
%
|
||
Processing and services
|
86,939
|
|
|
16.8
|
%
|
|
66,394
|
|
|
16.2
|
%
|
||
Sales and marketing
|
84,570
|
|
|
16.4
|
%
|
|
68,257
|
|
|
16.6
|
%
|
||
Costs of products sold
|
44,799
|
|
|
8.7
|
%
|
|
34,359
|
|
|
8.4
|
%
|
||
General and administrative
|
25,537
|
|
|
4.9
|
%
|
|
22,795
|
|
|
5.5
|
%
|
||
Business acquisition expense (benefit) and amortization of acquisition intangibles
|
7,869
|
|
|
1.5
|
%
|
|
(707
|
)
|
|
(0.2
|
)%
|
||
Total operating expenses
|
512,331
|
|
|
99.1
|
%
|
|
405,233
|
|
|
98.6
|
%
|
||
OPERATING INCOME
|
4,728
|
|
|
0.9
|
%
|
|
5,679
|
|
|
1.4
|
%
|
||
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
||||||
Interest income and other income (expense), net
|
(56
|
)
|
|
—
|
%
|
|
373
|
|
|
0.1
|
%
|
||
Interest expense
|
(1,001
|
)
|
|
(0.2
|
)%
|
|
—
|
|
|
—
|
%
|
||
INCOME BEFORE INCOME TAX EXPENSE
|
3,671
|
|
|
0.7
|
%
|
|
6,052
|
|
|
1.5
|
%
|
||
INCOME TAX EXPENSE
|
1,492
|
|
|
0.3
|
%
|
|
3,788
|
|
|
0.9
|
%
|
||
NET INCOME BEFORE ALLOCATION TO NON-CONTROLLING INTEREST
|
2,179
|
|
|
0.4
|
%
|
|
2,264
|
|
|
0.6
|
%
|
||
Add: Net loss attributable to non-controlling interests (net of tax)
|
96
|
|
|
—
|
%
|
|
213
|
|
|
—
|
%
|
||
NET INCOME ATTRIBUTABLE TO BLACKHAWK
|
$
|
2,275
|
|
|
0.4
|
%
|
|
$
|
2,477
|
|
|
0.6
|
%
|
|
24 Weeks Ended
|
|
|
|||||||||||
|
June 14, 2014
|
|
June 15, 2013
|
|
Change
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
OPERATING REVENUES:
|
|
|
|
|
|
|
|
|||||||
Commissions and fees
|
$
|
394,436
|
|
|
$
|
321,294
|
|
|
$
|
73,142
|
|
|
22.8
|
%
|
Program, interchange, marketing and other fees
|
76,086
|
|
|
53,265
|
|
|
22,821
|
|
|
42.8
|
%
|
|||
Product sales
|
46,537
|
|
|
36,353
|
|
|
10,184
|
|
|
28.0
|
%
|
|||
Total operating revenues
|
$
|
517,059
|
|
|
$
|
410,912
|
|
|
$
|
106,147
|
|
|
25.8
|
%
|
|
24 Weeks Ended
|
|
|
|||||||||||
|
June 14, 2014
|
|
June 15, 2013
|
|
Change
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|||||||
Distribution partner commissions
|
$
|
262,617
|
|
|
$
|
214,135
|
|
|
$
|
48,482
|
|
|
22.6
|
%
|
Processing and services
|
86,939
|
|
|
66,394
|
|
|
20,545
|
|
|
30.9
|
%
|
|||
Sales and marketing
|
84,570
|
|
|
68,257
|
|
|
16,313
|
|
|
23.9
|
%
|
|||
Costs of products sold
|
44,799
|
|
|
34,359
|
|
|
10,440
|
|
|
30.4
|
%
|
|||
General and administrative
|
25,537
|
|
|
22,795
|
|
|
2,742
|
|
|
12.0
|
%
|
|||
Business acquisition expense (benefit) and amortization of acquisition intangibles
|
7,869
|
|
|
(707
|
)
|
|
8,576
|
|
|
(1,213.0
|
)%
|
|||
Total operating expenses
|
$
|
512,331
|
|
|
$
|
405,233
|
|
|
$
|
107,098
|
|
|
26.4
|
%
|
|
24 Weeks Ended
|
||||||
|
June 14,
2014 |
|
June 15,
2013 |
||||
Change in fair value of Cardpool contingent consideration liability (See
Note 3 – Fair Value Measurements
in the notes to our condensed consolidated financial statements)
|
$
|
—
|
|
|
$
|
(903
|
)
|
Amortization of intangible assets acquired in business combination
|
7,835
|
|
|
196
|
|
||
Acquisition related expenses
|
34
|
|
|
—
|
|
||
Total business acquisition expense (benefit) and amortization of acquisition intangibles
|
$
|
7,869
|
|
|
$
|
(707
|
)
|
|
24 Weeks Ended
|
|
|
|||||||||||
|
June 14, 2014
|
|
June 15, 2013
|
|
Change
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|||||||
Interest income and other income (expense), net
|
$
|
(56
|
)
|
|
$
|
373
|
|
|
$
|
(429
|
)
|
|
(115.0
|
)%
|
Interest expense
|
(1,001
|
)
|
|
—
|
|
|
(1,001
|
)
|
|
—
|
%
|
|||
Total other income (expense)
|
$
|
(1,057
|
)
|
|
$
|
373
|
|
|
$
|
(1,430
|
)
|
|
(383.4
|
)%
|
INCOME TAX EXPENSE
|
$
|
1,492
|
|
|
$
|
3,788
|
|
|
$
|
(2,296
|
)
|
|
(60.6
|
)%
|
EFFECTIVE TAX RATE
|
40.6
|
%
|
|
62.6
|
%
|
|
(22.0
|
)%
|
|
|
|
24 Weeks Ended
|
||||||
|
June 14, 2014
|
|
June 15, 2013
|
||||
|
(in thousands, except percentages)
|
||||||
Income before income tax expense
|
$
|
3,671
|
|
|
$
|
6,052
|
|
Income tax expense
|
$
|
1,492
|
|
|
$
|
3,788
|
|
Effective income tax rate
|
40.6
|
%
|
|
62.6
|
%
|
||
Adjusted income before income tax expense
|
$
|
19,790
|
|
|
$
|
16,684
|
|
Adjusted income tax expense
|
$
|
7,552
|
|
|
$
|
6,199
|
|
Adjusted effective income tax rate
|
38.2
|
%
|
|
37.2
|
%
|
|
24 Weeks Ended
|
||||||
|
June 14, 2014
|
|
June 15, 2013
|
||||
|
(in thousands)
|
||||||
Net cash used in operating activities
|
$
|
(411,377
|
)
|
|
$
|
(488,669
|
)
|
Net cash provided by (used in) investing activities
|
(15,690
|
)
|
|
423,608
|
|
||
Net cash provided by (used in) financing activities
|
176,498
|
|
|
(886
|
)
|
||
Effect of exchange rates on cash
|
(84
|
)
|
|
(2,335
|
)
|
||
Net decrease in cash and cash equivalents
|
$
|
(250,653
|
)
|
|
$
|
(68,282
|
)
|
Adjusted for Change in overnight cash advances to Safeway
|
—
|
|
|
(430,000
|
)
|
||
Net decrease in cash and cash equivalents and overnight cash advances to Safeway
|
$
|
(250,653
|
)
|
|
$
|
(498,282
|
)
|
|
24 Weeks Ended
|
||||||
|
June 14, 2014
|
|
June 15, 2013
|
||||
|
(in thousands)
|
||||||
Net cash used in operating activities
|
$
|
(411,377
|
)
|
|
$
|
(488,669
|
)
|
Decrease in settlement payables, net of settlement receivables
|
408,257
|
|
|
491,639
|
|
||
Adjusted net cash provided by (used in) operating activities (1)
|
(3,120
|
)
|
|
2,970
|
|
||
Expenditures for property, equipment and technology
|
(18,241
|
)
|
|
(15,110
|
)
|
||
Free cash flow (1)
|
$
|
(21,361
|
)
|
|
$
|
(12,140
|
)
|
(1)
|
Our Adjusted net cash flow provided by (used in) operating activities and Free cash flow are non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP. This measure, however, should be considered in addition to, and not as a substitute for or superior to cash flows or other measures of the financial performance prepared in accordance with GAAP.
|
•
|
impair or eliminate our ability to conduct certain aspects of our business;
|
•
|
increase our compliance and other costs of doing business;
|
•
|
require significant product redesign or systems redevelopment;
|
•
|
render our products or services less profitable, obsolete or less attractive compared to competing products;
|
•
|
affect our distribution partners’ or content providers’ willingness to do business with us or operate in our industry;
|
•
|
reduce the amount of revenues that we derive from unredeemed prepaid products; and
|
•
|
discourage distribution partners from offering, and consumers from purchasing, our prepaid products.
|
•
|
incurring additional indebtedness or modifying subordinated indebtedness;
|
•
|
granting liens on or with respect to any of our property or that of certain of our subsidiaries;
|
•
|
making investments;
|
•
|
consolidating or merging with, or acquiring, another business;
|
•
|
selling or disposing of our assets;
|
•
|
paying dividends and making other distributions to our stockholders;
|
•
|
entering into certain transactions with our affiliates;
|
•
|
redeeming our stock;
|
•
|
amending our charter documents;
|
•
|
changing the nature of our business;
|
•
|
entering into sale-leaseback agreements; and
|
•
|
disposing of our interests in certain subsidiaries.
|
•
|
an amount equal to the product of (i) two (Mr. Tauscher), one and one half (Messrs. Ulrich and Durant and Ms. Roche) or one (Messrs. Tate and Crum), multiplied by (ii) the sum of the executive’s base salary and target annual cash bonus opportunity for the fiscal year of termination, payable in substantially equal installments, in accordance with the Company’s normal payroll procedures, over the 24-month (Mr. Tauscher), 18-month (Messrs. Ulrich and Durant and Ms. Roche) or 12-month (Messrs. Tate and Crum) period following the termination date;
|
•
|
an additional lump sum payment equal to a prorated portion of the executive’s target annual cash bonus opportunity for the fiscal year of termination;
|
•
|
payment or reimbursement of COBRA premiums during the 18-month period (or, with respect to Messrs. Tate and Crum, the 12-month period) following the termination date; and
|
•
|
full accelerated vesting of the executive’s time-based equity awards and accelerated vesting of the executive’s performance-based equity awards with respect to 100% of the “target” number of shares subject to such performance-based equity awards.
|
Blackhawk Network Holdings, Inc.
|
|
/s/ Jerry Ulrich
|
Chief Financial Officer and Chief Administrative Officer
|
(Principal Financial Officer and Duly Authorized Signatory)
|
|
|
|
|
Incorporated by Reference
|
|
Filed
Herewith
|
||||||
Exhibit No.
|
|
Description of Exhibit
|
|
Form
|
|
File No.
|
|
Exhibit(s)
|
|
Filing Date
|
|
|
10.1+
|
|
Executive Change in Control Severance Policy
|
|
|
|
|
|
|
|
|
|
X
|
10.2†
|
|
Amendment No. 3 to Servicing Agreement, dated as of June 13, 2014, between Blackhawk Network, Inc. and MetaBank, dba Meta Payment Systems.
|
|
|
|
|
|
|
|
|
|
X
|
31.1
|
|
Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
X
|
31.2
|
|
Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
X
|
32.1
|
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
X
|
32.2
|
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
|
|
|
|
101.INS††
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
|
|
X
|
101.SCH††
|
|
XBRL Taxonomy Extension Schema
|
|
|
|
|
|
|
|
|
|
X
|
101.CAL††
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
|
|
|
|
|
|
|
|
|
X
|
101.DEF††
|
|
XBRL Taxonomy Extension Definition Linkbase
|
|
|
|
|
|
|
|
|
|
X
|
101.LAB††
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
|
|
|
|
|
|
|
X
|
101.PRE††
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
|
|
|
|
|
|
|
|
X
|
|
+
|
Indicates a management contract or compensatory plan.
|
†
|
Certain portions have been omitted pursuant to a confidential treatment request. Omitted information has been filed separately with the SEC.
|
††
|
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not otherwise subject to liability under these Sections.
|
ADMINISTRATIVE INFORMATION
|
|
Name of Plan:
|
Blackhawk Network Holdings, Inc. Executive Change in Control Severance Plan
|
Plan Administrator and Sponsor:
|
Board of Directors
Blackhawk Network Holdings, Inc. 6220 Stoneridge Mall Road Pleasanton, CA 94588 Tel: (925) 226-9990 Fax: (925) 226-9083 |
Type of Administration:
|
Self-Administered
|
Type of Plan:
|
Severance Pay Employee Welfare Benefit Plan
|
Employer Identification Number:
|
43-2099257
|
Direct Questions Regarding the Plan to:
|
Board of Directors
Blackhawk Network Holdings, Inc. 6220 Stoneridge Mall Road Pleasanton, CA 94588 Tel: (925) 226-9990 Fax: (925) 226-9083 |
Agent for Service of Legal Process:
|
Secretary
Blackhawk Network Holdings, Inc. 6220 Stoneridge Mall Road Pleasanton, CA 94588
Tel: (925) 226-9990
Fax: (925) 226-9083 Service of Legal Process may also be made upon the Plan Administrator. |
Plan Year End:
|
Saturday closest to December 31
|
(i)
|
[***]
|
(ii)
|
[***]
|
(iii)
|
[***]
|
(iv)
|
[***]
|
(v)
|
[***]
|
Blackhawk Network, Inc.
|
|
MetaBank, dba Meta Payment Systems
|
||
By:
|
/s/ Jerry Ulrich
|
|
By:
|
/s/ Brad Hanson
|
Name:
|
Jerry Ulrich
|
|
Name:
|
Brad Hanson
|
Title:
|
CFO
|
|
Title:
|
President
|
Date:
|
6/13/14
|
|
Date:
|
6/13/2014
|
/s/ William Tauscher
|
William Tauscher
|
Chief Executive Officer and Chairman of the Board
|
Date: July 22, 2014
|
/s/ Jerry Ulrich
|
Jerry Ulrich
|
Chief Financial Officer and Chief Administrative Officer
|
Date: July 22, 2014
|
/s/ William Tauscher
|
William Tauscher
|
Chief Executive Officer and Chairman of the Board
|
(Principal Executive Officer)
|
Date: July 22, 2014
|
/s/ Jerry Ulrich
|
Jerry Ulrich
|
Chief Financial Officer and Chief Administrative Officer
|
(Principal Financial Officer)
|
Date: July 22, 2014
|