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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
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Delaware
|
|
43-2099257
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(State or Other Jurisdiction of
Incorporation or Organization)
|
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(I.R.S. Employer
Identification No.)
|
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||
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6220 Stoneridge Mall Road
Pleasanton, CA
|
|
94588
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(Address of Principal Executive Offices)
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(Zip Code)
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Large accelerated filer
|
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ý
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Accelerated filer
|
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¨
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
|
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¨
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Emerging growth company
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¨
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Page
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PART I. FINANCIAL STATEMENTS
|
|
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Item 1.
|
||
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||
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Item 2.
|
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Item 3.
|
||
Item 4.
|
||
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PART II. OTHER INFORMATION
|
|
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Item 1.
|
||
Item 1A.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
Item 5.
|
||
Item 6.
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||
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September 9, 2017
|
|
December 31, 2016
|
|
September 10, 2016
|
||||||
ASSETS
|
|
|
|
|
|
||||||
Current assets:
|
|
|
|
|
|
||||||
Cash and cash equivalents
|
$
|
304,904
|
|
|
$
|
1,008,125
|
|
|
$
|
300,349
|
|
Restricted cash
|
66,509
|
|
|
10,793
|
|
|
2,500
|
|
|||
Settlement receivables, net
|
429,494
|
|
|
641,691
|
|
|
275,471
|
|
|||
Accounts receivable, net
|
226,126
|
|
|
262,672
|
|
|
199,552
|
|
|||
Other current assets
|
191,691
|
|
|
131,375
|
|
|
123,919
|
|
|||
Total current assets
|
1,218,724
|
|
|
2,054,656
|
|
|
901,791
|
|
|||
Property, equipment and technology, net
|
180,554
|
|
|
172,381
|
|
|
168,865
|
|
|||
Intangible assets, net
|
418,046
|
|
|
350,185
|
|
|
293,034
|
|
|||
Goodwill
|
656,266
|
|
|
570,398
|
|
|
508,607
|
|
|||
Deferred income taxes
|
351,760
|
|
|
362,302
|
|
|
352,683
|
|
|||
Other assets
|
86,610
|
|
|
85,856
|
|
|
69,039
|
|
|||
TOTAL ASSETS
|
$
|
2,911,960
|
|
|
$
|
3,595,778
|
|
|
$
|
2,294,019
|
|
|
|
|
|
|
|
||||||
See accompanying notes to condensed consolidated financial statements
|
BLACKHAWK NETWORK HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(In thousands, except par value)
(Unaudited)
|
|||||||||||
|
September 9, 2017
|
|
December 31, 2016
|
|
September 10, 2016
|
||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
||||||
Current liabilities:
|
|
|
|
|
|
||||||
Settlement payables
|
$
|
646,160
|
|
|
$
|
1,626,827
|
|
|
$
|
522,133
|
|
Consumer and customer deposits
|
267,642
|
|
|
173,344
|
|
|
115,085
|
|
|||
Accounts payable and accrued operating expenses
|
142,029
|
|
|
153,885
|
|
|
103,920
|
|
|||
Deferred revenue
|
151,425
|
|
|
150,582
|
|
|
113,867
|
|
|||
Note payable, current portion
|
9,890
|
|
|
9,856
|
|
|
9,846
|
|
|||
Notes payable to Safeway
|
4,201
|
|
|
3,163
|
|
|
3,239
|
|
|||
Bank line of credit
|
115,000
|
|
|
—
|
|
|
—
|
|
|||
Other current liabilities
|
74,804
|
|
|
51,176
|
|
|
48,630
|
|
|||
Total current liabilities
|
1,411,151
|
|
|
2,168,833
|
|
|
916,720
|
|
|||
Deferred income taxes
|
30,516
|
|
|
27,887
|
|
|
19,930
|
|
|||
Note payable
|
178,048
|
|
|
137,984
|
|
|
137,848
|
|
|||
Convertible notes payable
|
437,769
|
|
|
429,026
|
|
|
425,833
|
|
|||
Other liabilities
|
26,644
|
|
|
39,653
|
|
|
25,429
|
|
|||
Total liabilities
|
2,084,128
|
|
|
2,803,383
|
|
|
1,525,760
|
|
|||
Commitments and contingencies (see Note 9)
|
|
|
|
|
|
||||||
Stockholders’ equity:
|
|
|
|
|
|
||||||
Preferred stock: $0.001 par value; 10,000 shares authorized; no shares outstanding
|
—
|
|
|
—
|
|
|
—
|
|
|||
Common stock: $0.001 par value; 210,000 shares authorized; 56,777, 55,667 and 55,368 shares outstanding, respectively
|
57
|
|
|
56
|
|
|
55
|
|
|||
Additional paid-in capital
|
638,008
|
|
|
608,568
|
|
|
594,739
|
|
|||
Accumulated other comprehensive loss
|
(14,934
|
)
|
|
(48,877
|
)
|
|
(34,398
|
)
|
|||
Retained earnings
|
200,484
|
|
|
228,451
|
|
|
203,791
|
|
|||
Total Blackhawk Network Holdings, Inc. equity
|
823,615
|
|
|
788,198
|
|
|
764,187
|
|
|||
Non-controlling interests
|
4,217
|
|
|
4,197
|
|
|
4,072
|
|
|||
Total stockholders’ equity
|
827,832
|
|
|
792,395
|
|
|
768,259
|
|
|||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
2,911,960
|
|
|
$
|
3,595,778
|
|
|
$
|
2,294,019
|
|
|
12 weeks ended
|
|
36 weeks ended
|
||||||||||||
|
September 9, 2017
|
|
September 10, 2016
|
|
September 9, 2017
|
|
September 10, 2016
|
||||||||
OPERATING REVENUES:
|
|
|
|
|
|
|
|
||||||||
Commissions and fees
|
$
|
269,737
|
|
|
$
|
248,138
|
|
|
$
|
807,576
|
|
|
$
|
750,693
|
|
Program and other fees
|
95,592
|
|
|
64,857
|
|
|
304,416
|
|
|
207,718
|
|
||||
Marketing
|
14,348
|
|
|
17,943
|
|
|
53,454
|
|
|
52,098
|
|
||||
Product sales
|
39,582
|
|
|
30,622
|
|
|
124,195
|
|
|
108,719
|
|
||||
Total operating revenues
|
419,259
|
|
|
361,560
|
|
|
1,289,641
|
|
|
1,119,228
|
|
||||
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
||||||||
Partner distribution expense
|
196,633
|
|
|
178,363
|
|
|
577,634
|
|
|
541,749
|
|
||||
Processing and services
|
93,877
|
|
|
75,818
|
|
|
303,829
|
|
|
226,634
|
|
||||
Sales and marketing
|
58,711
|
|
|
52,327
|
|
|
199,218
|
|
|
166,176
|
|
||||
Costs of products sold
|
37,148
|
|
|
29,122
|
|
|
117,882
|
|
|
103,163
|
|
||||
General and administrative
|
24,122
|
|
|
21,773
|
|
|
78,710
|
|
|
67,827
|
|
||||
Transition and acquisition
|
665
|
|
|
2,574
|
|
|
2,021
|
|
|
4,160
|
|
||||
Amortization of acquisition intangibles
|
13,904
|
|
|
10,376
|
|
|
40,577
|
|
|
35,533
|
|
||||
Change in fair value of contingent consideration
|
(2,100
|
)
|
|
1,300
|
|
|
(5,097
|
)
|
|
2,100
|
|
||||
Goodwill impairment
|
9,000
|
|
|
—
|
|
|
9,000
|
|
|
—
|
|
||||
Total operating expenses
|
431,960
|
|
|
371,653
|
|
|
1,323,774
|
|
|
1,147,342
|
|
||||
OPERATING INCOME (LOSS)
|
(12,701
|
)
|
|
(10,093
|
)
|
|
(34,133
|
)
|
|
(28,114
|
)
|
||||
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
||||||||
Interest income and other income (expense), net
|
631
|
|
|
2,360
|
|
|
2,134
|
|
|
3,258
|
|
||||
Interest expense
|
(7,374
|
)
|
|
(5,684
|
)
|
|
(21,368
|
)
|
|
(13,868
|
)
|
||||
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)
|
(19,444
|
)
|
|
(13,417
|
)
|
|
(53,367
|
)
|
|
(38,724
|
)
|
||||
INCOME TAX EXPENSE (BENEFIT)
|
(11,858
|
)
|
|
(8,357
|
)
|
|
(26,224
|
)
|
|
(18,884
|
)
|
||||
NET INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS
|
(7,586
|
)
|
|
(5,060
|
)
|
|
(27,143
|
)
|
|
(19,840
|
)
|
||||
Loss (income) attributable to non-controlling interests, net of tax
|
(180
|
)
|
|
(42
|
)
|
|
(460
|
)
|
|
(152
|
)
|
||||
NET INCOME (LOSS) ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC.
|
$
|
(7,766
|
)
|
|
$
|
(5,102
|
)
|
|
$
|
(27,603
|
)
|
|
$
|
(19,992
|
)
|
EARNINGS (LOSS) PER SHARE:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.14
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.49
|
)
|
|
$
|
(0.36
|
)
|
Diluted
|
$
|
(0.14
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.49
|
)
|
|
$
|
(0.36
|
)
|
Weighted average shares outstanding—basic
|
56,709
|
|
|
55,668
|
|
|
56,355
|
|
|
55,851
|
|
||||
Weighted average shares outstanding—diluted
|
56,709
|
|
|
55,668
|
|
|
56,355
|
|
|
55,851
|
|
|
12 weeks ended
|
|
36 weeks ended
|
||||||||||||
|
September 9, 2017
|
|
September 10, 2016
|
|
September 9, 2017
|
|
September 10, 2016
|
||||||||
NET INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS
|
$
|
(7,586
|
)
|
|
$
|
(5,060
|
)
|
|
$
|
(27,143
|
)
|
|
$
|
(19,840
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Currency translation adjustments
|
19,764
|
|
|
(2,504
|
)
|
|
33,503
|
|
|
5,547
|
|
||||
COMPREHENSIVE INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS
|
12,178
|
|
|
(7,564
|
)
|
|
6,360
|
|
|
(14,293
|
)
|
||||
Comprehensive loss (income) attributable to non-controlling interests, net of tax
|
15
|
|
|
129
|
|
|
(20
|
)
|
|
98
|
|
||||
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC.
|
$
|
12,193
|
|
|
$
|
(7,435
|
)
|
|
$
|
6,340
|
|
|
$
|
(14,195
|
)
|
|
36 weeks ended
|
|
||||||
|
September 9, 2017
|
|
September 10, 2016
|
|
||||
OPERATING ACTIVITIES:
|
|
|
|
|
||||
Net income (loss) before allocation to non-controlling interests
|
$
|
(27,143
|
)
|
|
$
|
(19,840
|
)
|
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
|
||||
Depreciation and amortization of property, equipment and technology
|
37,518
|
|
|
33,096
|
|
|
||
Goodwill impairment
|
9,000
|
|
|
—
|
|
|
||
Amortization of intangibles
|
44,416
|
|
|
38,988
|
|
|
||
Amortization of deferred program and contract costs
|
21,706
|
|
|
18,805
|
|
|
||
Amortization of deferred financing costs and debt discount
|
9,546
|
|
|
2,984
|
|
|
||
Loss on property, equipment and technology disposal/write-down
|
660
|
|
|
2,758
|
|
|
||
Employee stock-based compensation expense
|
24,560
|
|
|
24,865
|
|
|
||
Change in fair value of contingent consideration
|
(5,097
|
)
|
|
2,100
|
|
|
||
Other
|
(3,388
|
)
|
|
38
|
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
|
||||
Settlement receivables
|
233,441
|
|
|
359,398
|
|
|
||
Settlement payables
|
(1,003,220
|
)
|
|
(1,091,151
|
)
|
|
||
Accounts receivable, current and long-term
|
35,179
|
|
|
44,585
|
|
|
||
Other current assets
|
16,807
|
|
|
3,940
|
|
|
||
Other assets
|
(12,172
|
)
|
|
(9,299
|
)
|
|
||
Consumer and customer deposits
|
12,330
|
|
|
13,963
|
|
|
||
Accounts payable and accrued operating expenses
|
(17,426
|
)
|
|
(28,775
|
)
|
|
||
Deferred revenue
|
4,948
|
|
|
2,703
|
|
|
||
Other current and long-term liabilities
|
5,334
|
|
|
(24,912
|
)
|
|
||
Income taxes, net
|
(28,276
|
)
|
|
(13,883
|
)
|
|
||
Net cash (used in) provided by operating activities
|
(641,277
|
)
|
|
(639,637
|
)
|
|
||
INVESTING ACTIVITIES:
|
|
|
|
|
||||
Expenditures for property, equipment and technology
|
(43,484
|
)
|
|
(33,522
|
)
|
|
||
Business acquisitions, net of cash acquired
|
(170,773
|
)
|
|
(144,284
|
)
|
|
||
Investment in unconsolidated entities
|
(5,801
|
)
|
|
(3,901
|
)
|
|
||
Change in restricted cash
|
2,500
|
|
|
689
|
|
|
||
Other
|
(3,245
|
)
|
|
4,000
|
|
|
||
Net cash (used in) provided by investing activities
|
(220,803
|
)
|
|
(177,018
|
)
|
|
||
|
|
|
|
|
||||
|
|
|
|
|
||||
See accompanying notes to condensed consolidated financial statements
|
BLACKHAWK NETWORK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
(Unaudited)
|
||||||||
|
36 weeks ended
|
|
||||||
|
September 9, 2017
|
|
September 10, 2016
|
|
||||
FINANCING ACTIVITIES:
|
|
|
|
|
||||
Payments for acquisition liability
|
(5,503
|
)
|
|
—
|
|
|
||
Repayment of debt assumed in business acquisitions
|
(8,585
|
)
|
|
(8,964
|
)
|
|
||
Proceeds from issuance of note payable
|
50,000
|
|
|
250,000
|
|
|
||
Repayment of note payable
|
(10,000
|
)
|
|
(463,750
|
)
|
|
||
Payments of financing costs
|
(1,025
|
)
|
|
(15,926
|
)
|
|
||
Borrowings under revolving bank line of credit
|
1,771,381
|
|
|
1,959,749
|
|
|
||
Repayments on revolving bank line of credit
|
(1,656,381
|
)
|
|
(1,959,749
|
)
|
|
||
Proceeds from convertible debt
|
—
|
|
|
500,000
|
|
|
||
Payments for note hedges
|
—
|
|
|
(75,750
|
)
|
|
||
Proceeds from warrants
|
—
|
|
|
47,000
|
|
|
||
Repayment on notes payable to Safeway
|
(254
|
)
|
|
(890
|
)
|
|
||
Proceeds from issuance of common stock from exercise of employee stock options and employee stock purchase plans
|
13,286
|
|
|
4,491
|
|
|
||
Other stock-based compensation related
|
(10,157
|
)
|
|
(2,135
|
)
|
|
||
Repurchase of common stock
|
—
|
|
|
(34,845
|
)
|
|
||
Other
|
—
|
|
|
(155
|
)
|
|
||
Net cash (used in) provided by financing activities
|
142,762
|
|
|
199,076
|
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
16,097
|
|
|
3,352
|
|
|
||
Decrease in cash and cash equivalents
|
(703,221
|
)
|
|
(614,227
|
)
|
|
||
Cash and cash equivalents—beginning of period
|
1,008,125
|
|
|
914,576
|
|
|
||
Cash and cash equivalents—end of period
|
$
|
304,904
|
|
|
$
|
300,349
|
|
|
|
|
|
|
|
||||
NONCASH FINANCING AND INVESTING ACTIVITIES:
|
|
|
|
|
||||
Financing of business acquisition with contingent consideration
|
$
|
1,640
|
|
|
$
|
20,100
|
|
|
Cash and cash equivalents
|
$
|
14,469
|
|
Restricted cash
|
7,820
|
|
|
Settlement receivables, net
|
2,815
|
|
|
Identifiable technology and intangible assets
|
89,132
|
|
|
Goodwill
|
95,387
|
|
|
Other tangible assets, net
|
1,570
|
|
|
Settlement payables
|
(7,852
|
)
|
|
Consumer and customer deposits
|
(11,779
|
)
|
|
Accounts payable and accrued operating expenses
|
(7,025
|
)
|
|
Debt assumed
|
(8,285
|
)
|
|
Deferred income taxes
|
(10,256
|
)
|
|
Total purchase consideration
|
$
|
165,996
|
|
|
Fair Value
|
|
Useful Life
|
||
Customer relationships
|
$
|
87,132
|
|
|
5 years
|
Technology
|
2,000
|
|
|
1.5 years
|
|
Total identifiable technology and intangible assets
|
$
|
89,132
|
|
|
|
|
36 weeks ended
|
||||||
|
September 9, 2017
|
|
September 10, 2016
|
||||
|
(Unaudited)
|
||||||
Total revenues
|
$
|
1,317,226
|
|
|
$
|
1,139,796
|
|
Net loss attributable to Blackhawk Network Holdings, Inc.
|
$
|
(35,782
|
)
|
|
$
|
(30,846
|
)
|
Pro forma EPS—Basic
|
$
|
(0.63
|
)
|
|
$
|
(0.55
|
)
|
Pro forma EPS—Diluted
|
$
|
(0.63
|
)
|
|
$
|
(0.55
|
)
|
|
September 9, 2017
|
||
2018
|
$
|
10,000
|
|
2019
|
10,000
|
|
|
2020
|
20,000
|
|
|
2021
|
150,000
|
|
|
2022
|
500,000
|
|
|
Total long-term debt
|
$
|
690,000
|
|
|
September 9, 2017
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
|
|
|
|
|
|
|
||||||||
Money market mutual funds
|
$
|
75
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
75
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Contingent consideration
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14,792
|
|
|
$
|
14,792
|
|
|
December 31, 2016
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
|
|
|
|
|
|
|
||||||||
Money market mutual funds
|
$
|
300,015
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
300,015
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Contingent consideration
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
23,752
|
|
|
$
|
23,752
|
|
|
September 10, 2016
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
|
|
|
|
|
|
|
||||||||
Money market mutual funds
|
$
|
5,112
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,112
|
|
Liabilities
|
|
|
|
|
|
|
|
||||||||
Contingent consideration
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
22,200
|
|
|
$
|
22,200
|
|
|
36 weeks ended
|
||||||
|
September 9, 2017
|
|
September 10, 2016
|
||||
Balance, beginning of period
|
$
|
23,752
|
|
|
$
|
—
|
|
Additions from acquisitions (see
Note 2—Business Acquisitions
)
|
1,640
|
|
|
20,100
|
|
||
Change in fair value of contingent consideration
|
(5,097
|
)
|
|
2,100
|
|
||
Settlement
|
(5,503
|
)
|
|
—
|
|
||
Balance, end of period
|
$
|
14,792
|
|
|
$
|
22,200
|
|
|
September 9, 2017
|
|
December 31, 2016
|
|
September 10, 2016
|
||||||
Other current assets:
|
|
|
|
|
|
||||||
Inventory
|
$
|
40,124
|
|
|
$
|
43,950
|
|
|
$
|
35,634
|
|
Deferred expenses
|
19,194
|
|
|
22,148
|
|
|
12,099
|
|
|||
Income tax receivables
|
41,393
|
|
|
13,599
|
|
|
38,427
|
|
|||
Other
|
44,159
|
|
|
51,678
|
|
|
37,759
|
|
|||
Assets held for sale
|
46,821
|
|
|
—
|
|
|
—
|
|
|||
Total other current assets
|
$
|
191,691
|
|
|
$
|
131,375
|
|
|
$
|
123,919
|
|
Other assets:
|
|
|
|
|
|
||||||
Deferred program and contract costs
|
$
|
38,820
|
|
|
$
|
48,066
|
|
|
$
|
44,388
|
|
Other receivables
|
1,646
|
|
|
2,713
|
|
|
1,390
|
|
|||
Income tax receivables
|
2,270
|
|
|
2,358
|
|
|
—
|
|
|||
Deferred financing costs
|
2,999
|
|
|
2,688
|
|
|
2,871
|
|
|||
Other
|
40,875
|
|
|
30,031
|
|
|
20,390
|
|
|||
Total other assets
|
$
|
86,610
|
|
|
$
|
85,856
|
|
|
$
|
69,039
|
|
Other current liabilities:
|
|
|
|
|
|
||||||
Payroll and related liabilities
|
$
|
28,920
|
|
|
$
|
24,944
|
|
|
$
|
25,425
|
|
Income taxes payable
|
4,994
|
|
|
4,199
|
|
|
3,158
|
|
|||
Acquisition liability
|
5,983
|
|
|
6,672
|
|
|
11,250
|
|
|||
Other payables and accrued liabilities
|
10,509
|
|
|
15,361
|
|
|
8,797
|
|
|||
Liabilities held for sale
|
24,398
|
|
|
—
|
|
|
—
|
|
|||
Total other current liabilities
|
$
|
74,804
|
|
|
$
|
51,176
|
|
|
$
|
48,630
|
|
Other liabilities:
|
|
|
|
|
|
||||||
Contingent consideration
|
$
|
9,800
|
|
|
$
|
17,080
|
|
|
$
|
10,950
|
|
Income taxes payable
|
4,595
|
|
|
6,957
|
|
|
6,213
|
|
|||
Deferred income and other liabilities
|
12,249
|
|
|
15,616
|
|
|
8,266
|
|
|||
Total other liabilities
|
$
|
26,644
|
|
|
$
|
39,653
|
|
|
$
|
25,429
|
|
|
September 9, 2017
|
||
Other current assets
|
$
|
5,708
|
|
Property, equipment and technology, net
|
7,097
|
|
|
Goodwill
|
31,491
|
|
|
Intangible assets, net
|
431
|
|
|
Total assets
|
$
|
44,727
|
|
|
|
||
Accounts payable and accrued operating expenses
|
$
|
1,479
|
|
Other current liabilities
|
503
|
|
|
Deferred revenue
|
167
|
|
|
Total liabilities
|
$
|
2,149
|
|
|
September 9, 2017
|
||
Accounts receivable, net
|
$
|
9,737
|
|
Other current assets
|
3,002
|
|
|
Property, equipment and technology, net
|
490
|
|
|
Intangible assets, net
|
6,173
|
|
|
Goodwill
|
26,303
|
|
|
Deferred income taxes
|
1,116
|
|
|
Total assets held for sale
|
$
|
46,821
|
|
|
|
||
Settlement payables
|
$
|
7,061
|
|
Consumer and customer deposits
|
1,812
|
|
|
Accounts payable and accrued operating expenses
|
3,135
|
|
|
Deferred revenue
|
1,784
|
|
|
Other current liabilities
|
10,493
|
|
|
Deferred income taxes
|
113
|
|
|
Total liabilities held for sale
|
$
|
24,398
|
|
|
September 9, 2017
|
||||||||||||||
|
U.S. Retail
|
|
Incentives & Rewards
|
|
International
|
|
Total
|
||||||||
Balance, beginning of period
|
$
|
99,685
|
|
|
$
|
366,508
|
|
|
$
|
104,205
|
|
|
$
|
570,398
|
|
Goodwill impairment
|
(9,000
|
)
|
|
—
|
|
|
—
|
|
|
(9,000
|
)
|
||||
Re-allocation of international Incentives goodwill
|
—
|
|
|
(7,152
|
)
|
|
7,152
|
|
|
—
|
|
||||
Re-allocation of e-commerce goodwill
|
(10,505
|
)
|
|
10,505
|
|
|
—
|
|
|
—
|
|
||||
Acquisitions (see
Note 2—Business Acquisitions
)
|
—
|
|
|
105,306
|
|
|
3,153
|
|
|
108,459
|
|
||||
Measurement period of adjustments for 2016 acquisitions
|
338
|
|
|
—
|
|
|
(1,384
|
)
|
|
(1,046
|
)
|
||||
Asset held for sale (see
Note 5—Consolidated Financial Statement Details
)
|
—
|
|
|
—
|
|
|
(26,303
|
)
|
|
(26,303
|
)
|
||||
Foreign currency translation adjustments
|
—
|
|
|
2,344
|
|
|
11,414
|
|
|
13,758
|
|
||||
Balance, end of period
|
$
|
80,518
|
|
|
$
|
477,511
|
|
|
$
|
98,237
|
|
|
$
|
656,266
|
|
|
12 weeks ended
|
|
36 weeks ended
|
||||||||||||
|
September 9, 2017
|
|
September 10, 2016
|
|
September 9, 2017
|
|
September 10, 2016
|
||||||||
Processing and services
|
$
|
1,681
|
|
|
$
|
1,401
|
|
|
$
|
5,181
|
|
|
$
|
4,365
|
|
Sales and marketing
|
2,705
|
|
|
2,759
|
|
|
8,401
|
|
|
8,600
|
|
||||
Cost of products sold
|
14
|
|
|
31
|
|
|
35
|
|
|
89
|
|
||||
General and administrative
|
3,709
|
|
|
4,102
|
|
|
10,943
|
|
|
11,811
|
|
||||
Total stock-based compensation expense
|
$
|
8,109
|
|
|
$
|
8,293
|
|
|
$
|
24,560
|
|
|
$
|
24,865
|
|
|
12 weeks ended
|
||||||||||||||
|
September 9, 2017
|
||||||||||||||
|
U.S. Retail
|
|
Incentives & Rewards
|
|
International
|
|
Consolidated
|
||||||||
Total operating revenues
|
$
|
204,420
|
|
|
$
|
80,671
|
|
|
$
|
134,168
|
|
|
$
|
419,259
|
|
Partner distribution expense
|
115,565
|
|
|
5,521
|
|
|
75,547
|
|
|
196,633
|
|
||||
Operating revenues, net of Partner distribution expense
|
88,855
|
|
|
75,150
|
|
|
58,621
|
|
|
222,626
|
|
||||
Other operating expenses
|
100,527
|
|
|
76,382
|
|
|
58,418
|
|
|
235,327
|
|
||||
Segment profit (loss) / Operating income (loss)
|
$
|
(11,672
|
)
|
|
$
|
(1,232
|
)
|
|
$
|
203
|
|
|
$
|
(12,701
|
)
|
Other income (expense)
|
|
|
|
|
|
|
(6,743
|
)
|
|||||||
Income (loss) before income tax expense
|
|
|
|
|
|
|
$
|
(19,444
|
)
|
||||||
Noncash charges
|
$
|
22,324
|
|
|
$
|
12,953
|
|
|
$
|
8,377
|
|
|
|
|
|
12 weeks ended
|
||||||||||||||
|
September 10, 2016
|
||||||||||||||
|
U.S. Retail
|
|
Incentives & Rewards
|
|
International
|
|
Consolidated
|
||||||||
Total operating revenues
|
$
|
195,878
|
|
|
$
|
63,803
|
|
|
$
|
101,879
|
|
|
$
|
361,560
|
|
Partner distribution expense
|
103,473
|
|
|
4,996
|
|
|
69,894
|
|
|
178,363
|
|
||||
Operating revenues, net of Partner distribution expense
|
92,405
|
|
|
58,807
|
|
|
31,985
|
|
|
183,197
|
|
||||
Other operating expenses
|
89,768
|
|
|
65,981
|
|
|
37,541
|
|
|
193,290
|
|
||||
Segment profit (loss) / Operating income (loss)
|
$
|
2,637
|
|
|
$
|
(7,174
|
)
|
|
$
|
(5,556
|
)
|
|
$
|
(10,093
|
)
|
Other income (expense)
|
|
|
|
|
|
|
(3,324
|
)
|
|||||||
Income (loss) before income tax expense
|
|
|
|
|
|
|
$
|
(13,417
|
)
|
||||||
Noncash charges
|
$
|
10,070
|
|
|
$
|
22,148
|
|
|
$
|
4,402
|
|
|
|
|
36 weeks ended
|
||||||||||||||
|
September 9, 2017
|
||||||||||||||
|
U.S. Retail
|
|
Incentives & Rewards
|
|
International
|
|
Consolidated
|
||||||||
Total operating revenues
|
$
|
649,763
|
|
|
$
|
224,598
|
|
|
$
|
415,280
|
|
|
$
|
1,289,641
|
|
Partner distribution expense
|
342,041
|
|
|
16,257
|
|
|
219,336
|
|
|
577,634
|
|
||||
Operating revenues, net of Partner distribution expense
|
307,722
|
|
|
208,341
|
|
|
195,944
|
|
|
712,007
|
|
||||
Other operating expenses
|
321,138
|
|
|
219,130
|
|
|
205,872
|
|
|
746,140
|
|
||||
Segment profit (loss) / Operating income (loss)
|
$
|
(13,416
|
)
|
|
$
|
(10,789
|
)
|
|
$
|
(9,928
|
)
|
|
$
|
(34,133
|
)
|
Other income (expense)
|
|
|
|
|
|
|
(19,234
|
)
|
|||||||
Income (loss) before income tax expense
|
|
|
|
|
|
|
$
|
(53,367
|
)
|
||||||
Noncash charges
|
$
|
49,600
|
|
|
$
|
40,652
|
|
|
$
|
24,902
|
|
|
|
|
36 weeks ended
|
||||||||||||||
|
September 10, 2016
|
||||||||||||||
|
U.S. Retail
|
|
Incentives & Rewards
|
|
International
|
|
Consolidated
|
||||||||
Total operating revenues
|
$
|
648,982
|
|
|
$
|
184,576
|
|
|
$
|
285,670
|
|
|
$
|
1,119,228
|
|
Partner distribution expense
|
329,827
|
|
|
13,045
|
|
|
198,877
|
|
|
541,749
|
|
||||
Operating revenues, net of Partner distribution expense
|
319,155
|
|
|
171,531
|
|
|
86,793
|
|
|
577,479
|
|
||||
Other operating expenses
|
304,212
|
|
|
196,122
|
|
|
105,259
|
|
|
605,593
|
|
||||
Segment profit (loss) / Operating income (loss)
|
$
|
14,943
|
|
|
$
|
(24,591
|
)
|
|
$
|
(18,466
|
)
|
|
$
|
(28,114
|
)
|
Other income (expense)
|
|
|
|
|
|
|
(10,610
|
)
|
|||||||
Income (loss) before income tax expense
|
|
|
|
|
|
|
$
|
(38,724
|
)
|
||||||
Noncash charges
|
$
|
35,313
|
|
|
$
|
60,449
|
|
|
$
|
14,267
|
|
|
|
|
12 weeks ended
|
||||||||||||||
|
September 9, 2017
|
|
September 10, 2016
|
||||||||||||
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
||||||||
Net income (loss) attributable to Blackhawk Network Holdings, Inc.
|
$
|
(7,766
|
)
|
|
$
|
(7,766
|
)
|
|
$
|
(5,102
|
)
|
|
$
|
(5,102
|
)
|
Distributed and undistributed earnings allocated to participating securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net income (loss) attributable to common stockholders
|
$
|
(7,766
|
)
|
|
$
|
(7,766
|
)
|
|
$
|
(5,102
|
)
|
|
$
|
(5,102
|
)
|
Weighted-average common shares outstanding
|
56,709
|
|
|
56,709
|
|
|
55,668
|
|
|
55,668
|
|
||||
Common share equivalents
|
|
|
—
|
|
|
|
|
|
—
|
|
|||||
Weighted-average shares outstanding
|
|
|
56,709
|
|
|
|
|
55,668
|
|
||||||
Earnings (loss) per share
|
$
|
(0.14
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.09
|
)
|
|
36 weeks ended
|
||||||||||||||
|
September 9, 2017
|
|
September 10, 2016
|
||||||||||||
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
||||||||
Net income (loss) attributable to Blackhawk Network Holdings, Inc.
|
$
|
(27,603
|
)
|
|
$
|
(27,603
|
)
|
|
$
|
(19,992
|
)
|
|
$
|
(19,992
|
)
|
Distributed and undistributed earnings allocated to participating securities
|
—
|
|
|
—
|
|
|
(15
|
)
|
|
(15
|
)
|
||||
Net income (loss) attributable to common stockholders
|
$
|
(27,603
|
)
|
|
$
|
(27,603
|
)
|
|
$
|
(20,007
|
)
|
|
$
|
(20,007
|
)
|
Weighted-average common shares outstanding
|
56,355
|
|
|
56,355
|
|
|
55,851
|
|
|
55,851
|
|
||||
Common share equivalents
|
|
|
—
|
|
|
|
|
—
|
|
||||||
Weighted-average shares outstanding
|
|
|
56,355
|
|
|
|
|
55,851
|
|
||||||
Earnings (loss) per share
|
$
|
(0.49
|
)
|
|
$
|
(0.49
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
(0.36
|
)
|
|
12 weeks ended
|
|
36 weeks ended
|
||||||||||||
|
September 9, 2017
|
|
September 10, 2016
|
|
September 9, 2017
|
|
September 10, 2016
|
||||||||
|
|
|
|
|
|
|
|
||||||||
|
(in thousands, except percentages and per share amounts)
|
||||||||||||||
Prepaid and processing revenues
|
$
|
365,329
|
|
|
$
|
312,995
|
|
|
$
|
1,111,992
|
|
|
$
|
958,411
|
|
Partner distribution expense as a % of prepaid and processing revenues
|
53.8
|
%
|
|
57.0
|
%
|
|
51.9
|
%
|
|
56.5
|
%
|
||||
Prepaid and processing revenues:
|
|
|
|
|
|
|
|
||||||||
Commissions and fees
|
$
|
269,737
|
|
|
$
|
248,138
|
|
|
$
|
807,576
|
|
|
$
|
750,693
|
|
Program and other fees
|
95,592
|
|
|
64,857
|
|
|
304,416
|
|
|
207,718
|
|
||||
Prepaid and processing revenues
|
$
|
365,329
|
|
|
$
|
312,995
|
|
|
$
|
1,111,992
|
|
|
$
|
958,411
|
|
Total operating revenues
|
$
|
419,259
|
|
|
$
|
361,560
|
|
|
$
|
1,289,641
|
|
|
$
|
1,119,228
|
|
Revenue adjustment from purchase accounting (2)
|
965
|
|
|
3,666
|
|
|
4,454
|
|
|
11,875
|
|
||||
Marketing revenue and other pass-through revenue
|
(15,336
|
)
|
|
(17,943
|
)
|
|
(59,969
|
)
|
|
(52,098
|
)
|
||||
Partner distribution expense
|
(196,633
|
)
|
|
(178,363
|
)
|
|
(577,634
|
)
|
|
(541,749
|
)
|
||||
Adjusted operating revenues (1)
|
$
|
208,255
|
|
|
$
|
168,920
|
|
|
$
|
656,492
|
|
|
$
|
537,256
|
|
(1)
|
Our Adjusted operating revenues is a non-GAAP financial measure. 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, operating revenues, operating income, operating margin, cash flows, or other measures of the financial performance prepared in accordance with GAAP.
|
(2)
|
Impact on revenues recognized resulting from the step down in basis of deferred revenue from its carrying value to fair value in a business combination at the acquisition date.
|
•
|
adjusting our operating revenues for distribution commissions paid and other compensation to our retail distribution partners and business clients is useful to understanding our operating margin;
|
•
|
adjusting our operating revenues for marketing and other pass-through revenue, which has offsetting expense, is useful for understanding our operating margin;
|
•
|
in a business combination, a company records an adjustment to reduce the carrying value of deferred revenue to its fair value and reduces the company’s revenues from what it would have recorded otherwise, and as such we do not believe is indicative of our core operating performance.
|
|
12 weeks ended September 9, 2017
|
|
% of Total Operating Revenues
|
|
12 weeks ended September 10, 2016
|
|
% of Total Operating Revenues
|
||||||
|
(in thousands, except percentages)
|
||||||||||||
OPERATING REVENUES:
|
|
|
|
|
|
|
|
||||||
Commissions and fees
|
$
|
269,737
|
|
|
64.3
|
%
|
|
$
|
248,138
|
|
|
68.6
|
%
|
Program and other fees
|
95,592
|
|
|
22.8
|
%
|
|
64,857
|
|
|
17.9
|
%
|
||
Marketing
|
14,348
|
|
|
3.4
|
%
|
|
17,943
|
|
|
5.0
|
%
|
||
Product sales
|
39,582
|
|
|
9.5
|
%
|
|
30,622
|
|
|
8.5
|
%
|
||
Total operating revenues
|
419,259
|
|
|
100.0
|
%
|
|
361,560
|
|
|
100.0
|
%
|
||
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
||||||
Partner distribution expense
|
196,633
|
|
|
46.9
|
%
|
|
178,363
|
|
|
49.2
|
%
|
||
Processing and services
|
93,877
|
|
|
22.3
|
%
|
|
75,818
|
|
|
21.0
|
%
|
||
Sales and marketing
|
58,711
|
|
|
14.0
|
%
|
|
52,327
|
|
|
14.5
|
%
|
||
Costs of products sold
|
37,148
|
|
|
8.9
|
%
|
|
29,122
|
|
|
8.1
|
%
|
||
General and administrative
|
24,122
|
|
|
5.8
|
%
|
|
21,773
|
|
|
6.0
|
%
|
||
Transition and acquisition
|
665
|
|
|
0.2
|
%
|
|
2,574
|
|
|
0.7
|
%
|
||
Amortization of acquisition intangibles
|
13,904
|
|
|
3.3
|
%
|
|
10,376
|
|
|
2.9
|
%
|
||
Change in fair value of contingent consideration
|
(2,100
|
)
|
|
(0.5
|
)%
|
|
1,300
|
|
|
0.4
|
%
|
||
Goodwill impairment
|
9,000
|
|
|
2.1
|
%
|
|
—
|
|
|
—
|
%
|
||
Total operating expenses
|
431,960
|
|
|
103.0
|
%
|
|
371,653
|
|
|
102.8
|
%
|
||
OPERATING INCOME (LOSS)
|
(12,701
|
)
|
|
(3.0
|
)%
|
|
(10,093
|
)
|
|
(2.8
|
)%
|
||
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
||||||
Interest income and other income (expense), net
|
631
|
|
|
0.2
|
%
|
|
2,360
|
|
|
0.7
|
%
|
||
Interest expense
|
(7,374
|
)
|
|
(1.8
|
)%
|
|
(5,684
|
)
|
|
(1.6
|
)%
|
||
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT)
|
(19,444
|
)
|
|
(4.6
|
)%
|
|
(13,417
|
)
|
|
(3.7
|
)%
|
||
INCOME TAX EXPENSE (BENEFIT)
|
(11,858
|
)
|
|
(2.8
|
)%
|
|
(8,357
|
)
|
|
(2.3
|
)%
|
||
NET INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS
|
(7,586
|
)
|
|
(1.8
|
)%
|
|
(5,060
|
)
|
|
(1.4
|
)%
|
||
Loss (income) attributable to non-controlling interests, net of tax
|
(180
|
)
|
|
(0.1
|
)%
|
|
(42
|
)
|
|
—
|
%
|
||
NET INCOME (LOSS) ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC.
|
$
|
(7,766
|
)
|
|
(1.9
|
)%
|
|
$
|
(5,102
|
)
|
|
(1.4
|
)%
|
|
36 weeks ended September 9, 2017
|
|
% of Total Operating Revenues
|
|
36 weeks ended September 10, 2016
|
|
% of Total Operating Revenues
|
||||||
|
(in thousands, except percentages)
|
||||||||||||
OPERATING REVENUES:
|
|
|
|
|
|
|
|
||||||
Commissions and fees
|
$
|
807,576
|
|
|
62.6
|
%
|
|
$
|
750,693
|
|
|
67.1
|
%
|
Program and other fees
|
304,416
|
|
|
23.6
|
%
|
|
207,718
|
|
|
18.6
|
%
|
||
Marketing
|
53,454
|
|
|
4.2
|
%
|
|
52,098
|
|
|
4.6
|
%
|
||
Product sales
|
124,195
|
|
|
9.6
|
%
|
|
108,719
|
|
|
9.7
|
%
|
||
Total operating revenues
|
1,289,641
|
|
|
100.0
|
%
|
|
1,119,228
|
|
|
100.0
|
%
|
||
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
||||||
Partner distribution expense
|
577,634
|
|
|
44.8
|
%
|
|
541,749
|
|
|
48.4
|
%
|
||
Processing and services
|
303,829
|
|
|
23.6
|
%
|
|
226,634
|
|
|
20.2
|
%
|
||
Sales and marketing
|
199,218
|
|
|
15.4
|
%
|
|
166,176
|
|
|
14.8
|
%
|
||
Costs of products sold
|
117,882
|
|
|
9.1
|
%
|
|
103,163
|
|
|
9.2
|
%
|
||
General and administrative
|
78,710
|
|
|
6.1
|
%
|
|
67,827
|
|
|
6.1
|
%
|
||
Transition and acquisition
|
2,021
|
|
|
0.2
|
%
|
|
4,160
|
|
|
0.4
|
%
|
||
Amortization of acquisition intangibles
|
40,577
|
|
|
3.1
|
%
|
|
35,533
|
|
|
3.2
|
%
|
||
Change in fair value of contingent consideration
|
(5,097
|
)
|
|
(0.4
|
)%
|
|
2,100
|
|
|
0.2
|
%
|
||
Goodwill impairment
|
9,000
|
|
|
0.7
|
%
|
|
—
|
|
|
—
|
|
||
Total operating expenses
|
1,323,774
|
|
|
102.6
|
%
|
|
1,147,342
|
|
|
102.5
|
%
|
||
OPERATING INCOME (LOSS)
|
(34,133
|
)
|
|
(2.6
|
)%
|
|
(28,114
|
)
|
|
(2.5
|
)%
|
||
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
||||||
Interest income and other income (expense), net
|
2,134
|
|
|
0.2
|
%
|
|
3,258
|
|
|
0.3
|
%
|
||
Interest expense
|
(21,368
|
)
|
|
(1.7
|
)%
|
|
(13,868
|
)
|
|
(1.3
|
)%
|
||
INCOME (LOSS) BEFORE INCOME TAX EXPENSE
|
(53,367
|
)
|
|
(4.1
|
)%
|
|
(38,724
|
)
|
|
(3.5
|
)%
|
||
INCOME TAX EXPENSE (BENEFIT)
|
(26,224
|
)
|
|
(2.0
|
)%
|
|
(18,884
|
)
|
|
(1.7
|
)%
|
||
NET INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS
|
(27,143
|
)
|
|
(2.1
|
)%
|
|
(19,840
|
)
|
|
(1.8
|
)%
|
||
Loss (income) attributable to non-controlling interests, net of tax
|
(460
|
)
|
|
—
|
%
|
|
(152
|
)
|
|
—
|
%
|
||
NET INCOME (LOSS) ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC.
|
$
|
(27,603
|
)
|
|
(2.1
|
)%
|
|
$
|
(19,992
|
)
|
|
(1.8
|
)%
|
•
|
U.S. Retail - sale of prepaid cards to consumers in the U.S. through our physical retail distribution partners as well as through our various online distribution channels.
|
•
|
Incentives & Rewards - our incentives businesses in the U.S., which provide software, services and prepaid products to business clients for their loyalty, incentive and reward programs, our e-commerce incentives business, as well as our Achievers business in Canada.
|
•
|
International - our retail and incentives businesses outside of the United States, except for our Achievers business in Canada, which is reported in the Incentives & Rewards segment.
|
|
12 weeks ended
|
|
|
|
|
|||||||||
|
September 9, 2017
|
|
September 10, 2016
|
|
Change
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
OPERATING REVENUES:
|
|
|
|
|
|
|
|
|||||||
Commissions and fees
|
$
|
269,737
|
|
|
$
|
248,138
|
|
|
$
|
21,599
|
|
|
8.7
|
%
|
Program and other fees
|
95,592
|
|
|
64,857
|
|
|
30,735
|
|
|
47.4
|
%
|
|||
Marketing
|
14,348
|
|
|
17,943
|
|
|
(3,595
|
)
|
|
(20.0
|
)%
|
|||
Product sales
|
39,582
|
|
|
30,622
|
|
|
8,960
|
|
|
29.3
|
%
|
|||
Total operating revenues
|
$
|
419,259
|
|
|
$
|
361,560
|
|
|
$
|
57,699
|
|
|
16.0
|
%
|
Partner distribution expense
|
196,633
|
|
|
178,363
|
|
|
18,270
|
|
|
10.2
|
%
|
|||
Operating revenues, net of Partner distribution expense
|
$
|
222,626
|
|
|
$
|
183,197
|
|
|
$
|
39,429
|
|
|
21.5
|
%
|
|
36 weeks ended
|
|
|
|
|
|||||||||
|
September 9, 2017
|
|
September 10, 2016
|
|
Change
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
OPERATING REVENUES:
|
|
|
|
|
|
|
|
|||||||
Commissions and fees
|
$
|
807,576
|
|
|
$
|
750,693
|
|
|
$
|
56,883
|
|
|
7.6
|
%
|
Program and other fees
|
304,416
|
|
|
207,718
|
|
|
96,698
|
|
|
46.6
|
%
|
|||
Marketing
|
53,454
|
|
|
52,098
|
|
|
1,356
|
|
|
2.6
|
%
|
|||
Product sales
|
124,195
|
|
|
108,719
|
|
|
15,476
|
|
|
14.2
|
%
|
|||
Total operating revenues
|
$
|
1,289,641
|
|
|
$
|
1,119,228
|
|
|
$
|
170,413
|
|
|
15.2
|
%
|
Partner distribution expense
|
577,634
|
|
|
541,749
|
|
|
35,885
|
|
|
6.6
|
%
|
|||
Operating revenues, net of Partner distribution expense
|
$
|
712,007
|
|
|
$
|
577,479
|
|
|
$
|
134,528
|
|
|
23.3
|
%
|
|
12 weeks ended
|
|
|
|
|
|||||||||
|
September 9, 2017
|
|
September 10, 2016
|
|
Change
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
Total operating revenues
|
$
|
204,420
|
|
|
$
|
195,878
|
|
|
$
|
8,542
|
|
|
4.4
|
%
|
Partner distribution expense
|
115,565
|
|
|
103,473
|
|
|
12,092
|
|
|
11.7
|
%
|
|||
Operating revenues, net of Partner distribution expense
|
$
|
88,855
|
|
|
$
|
92,405
|
|
|
$
|
(3,550
|
)
|
|
(3.8
|
)%
|
Transaction dollar volume (1)
|
$
|
2,052,745
|
|
|
$
|
1,816,665
|
|
|
$
|
236,080
|
|
|
13.0
|
%
|
Prepaid and processing revenues
|
$
|
186,187
|
|
|
$
|
168,242
|
|
|
$
|
17,945
|
|
|
10.7
|
%
|
Prepaid and processing revenues as a percentage of transaction dollar volume (2)
|
9.1
|
%
|
|
9.3
|
%
|
|
(0.2
|
)%
|
|
(2.2
|
)%
|
|||
Partner distribution expense as a percentage of prepaid and processing revenues
|
62.1
|
%
|
|
61.5
|
%
|
|
0.6
|
%
|
|
1.0
|
%
|
|
36 weeks ended
|
|
|
|
|
|||||||||
|
September 9, 2017
|
|
September 10, 2016
|
|
Change
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
Total operating revenues
|
$
|
649,763
|
|
|
$
|
648,982
|
|
|
$
|
781
|
|
|
0.1
|
%
|
Partner distribution expense
|
342,041
|
|
|
329,827
|
|
|
12,214
|
|
|
3.7
|
%
|
|||
Operating revenues, net of Partner distribution expense
|
$
|
307,722
|
|
|
$
|
319,155
|
|
|
$
|
(11,433
|
)
|
|
(3.6
|
)%
|
Transaction dollar volume (1)
|
$
|
6,114,300
|
|
|
$
|
5,822,170
|
|
|
$
|
292,130
|
|
|
5.0
|
%
|
Prepaid and processing revenues
|
$
|
569,588
|
|
|
$
|
543,437
|
|
|
$
|
26,151
|
|
|
4.8
|
%
|
Prepaid and processing revenues as a percentage of transaction dollar volume (2)
|
9.3
|
%
|
|
9.3
|
%
|
|
—
|
%
|
|
—
|
%
|
|||
Partner distribution expense as a percentage of prepaid and processing revenues
|
60.1
|
%
|
|
60.7
|
%
|
|
(0.6
|
)%
|
|
(1.0
|
)%
|
(1)
|
Transaction dollar volume
represents the total dollar amount of value loaded onto any of our prepaid products. The dollar amount and volume of card sales and rebates processed directly affect the amount of our revenues and direct costs. We measure and monitor
Transaction dollar volume
by retail distribution partner channel and content provider program.
|
(2)
|
Prepaid and processing revenues as a percentage of transaction dollar volume
—
Represents the total amount of
Commissions and fees
and
Program and other fees
recognized during the period as a percentage of
Transaction dollar volume
for the same period. Our prepaid product revenues vary among our various product offerings: closed loop gift and prepaid telecom cards generate the highest rates due to the content provider commissions; open loop gift cards also generate high rates due to program management fees, interchange and other fees included in
Program and other fees
in addition to the consumer purchase fees included in
Commissions and fees
; financial services products generate the lowest rates due to
higher average transaction values
. This metric helps us understand and manage overall margins from our product offerings.
|
•
|
Transaction dollar volume
—On October 1, 2015, the payment industry shifted liability for certain debit and credit card transactions to retailers who do not accept EMV chip technology transactions. During 2016, our non-EMV compliant distribution partners placed restrictions on the sale of open loop gift cards and some closed loop gift cards until they completed their EMV implementation. By the end of 2016, most of our distribution partner locations were EMV compliant and had lifted those restrictions. In 2017, the negative impact of restricted sales has gradually decreased which is reflected in higher transaction dollar volume in the third quarter and first 36 weeks of 2017. These increases were partially offset by the discontinuation of certain low-margin financial services programs, including certain co-branded general-purpose reloadable (“GPR”) cards.
|
•
|
Prepaid and processing revenues as a percentage of transaction dollar volume
—Decreased for the third quarter of 2017 due to a lower prepaid and processing revenue rate for open loop gift products, which resulted from a shift in mix from lower denomination cards to higher denomination cards due to the reduction of the impact from EMV restrictions. Prepaid and processing revenues as a percentage of transaction dollar volume was also impacted by a lower program management fee rate that will continue to decrease as a result of a contract amendment with MetaBank, our primary issuing bank, based on changing redemption patterns for open loop products. Prepaid and processing revenues as a percentage of transaction dollar volume for the first 36 weeks of 2017 did not change compared to the same period in 2016 primarily due to increased sales of higher-margin products and the discontinuation of certain low-margin financial services programs, offset by a lower prepaid and processing revenue rate for open loop gift cards and increased sales of lower-margin closed gift products.
|
•
|
Partner distribution expense as a percentage of prepaid and processing revenues
—Partner distribution expense as a percentage of prepaid and processing revenues increased for the third quarter of 2017 due to an increase in the proportion of closed loop sales through retail distribution partners with higher commission share rates. This impact was partially offset by higher sales of open loop gift cards which have a lower partner distribution expense as a percentage of prepaid and processing revenues. For the first 36 weeks of 2017, partner distribution expense as a percentage of prepaid and processing revenues decreased due to higher sales of open loop gift cards as well as an increase in sales through our online distribution channels which we do not incur partner distribution expense. This decrease was partially offset by a higher partner distribution expense as a percentage of prepaid and processing revenues on sales of our closed loop gift cards. The Company has recently experienced increasing competitive
|
|
12 weeks ended
|
|
|
|
|
|||||||||
|
September 9, 2017
|
|
September 10, 2016
|
|
Change
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
Total operating revenues
|
$
|
80,671
|
|
|
$
|
63,803
|
|
|
$
|
16,868
|
|
|
26.4
|
%
|
Partner distribution expense
|
5,521
|
|
|
4,996
|
|
|
525
|
|
|
10.5
|
%
|
|||
Operating revenues, net of Partner distribution expense
|
$
|
75,150
|
|
|
$
|
58,807
|
|
|
$
|
16,343
|
|
|
27.8
|
%
|
Prepaid and processing revenues
|
$
|
55,359
|
|
|
$
|
54,071
|
|
|
$
|
1,288
|
|
|
2.4
|
%
|
Partner distribution expense as a percentage of prepaid and processing revenues
|
10.0
|
%
|
|
9.2
|
%
|
|
0.8
|
%
|
|
8.7
|
%
|
|
36 weeks ended
|
|
|
|
|
|||||||||
|
September 9, 2017
|
|
September 10, 2016
|
|
Change
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
Total operating revenues
|
$
|
224,598
|
|
|
$
|
184,576
|
|
|
$
|
40,022
|
|
|
21.7
|
%
|
Partner distribution expense
|
16,257
|
|
|
13,045
|
|
|
3,212
|
|
|
24.6
|
%
|
|||
Operating revenues, net of Partner distribution expense
|
$
|
208,341
|
|
|
$
|
171,531
|
|
|
$
|
36,810
|
|
|
21.5
|
%
|
Prepaid and processing revenues
|
$
|
159,594
|
|
|
$
|
155,927
|
|
|
$
|
3,667
|
|
|
2.4
|
%
|
Partner distribution expense as a percentage of prepaid and processing revenues
|
10.2
|
%
|
|
8.4
|
%
|
|
1.8
|
%
|
|
21.4
|
%
|
•
|
Prepaid and processing revenues
—Prepaid and processing revenues increased
$1.3 million
in the third quarter of 2017, driven by the growth in our employee engagement business. Prepaid and processing revenues grew
$3.7 million
for the first 36 weeks of 2017 primarily due to an increase of
$5.9 million
in our employee engagement business and an increase of
$2.1 million
in our rebate and incentives processing business. This increase was partially offset by a one-time benefit of
$4.3 million
in the first 36 weeks of 2016 as a result of a contractual amendment with one of our issuing banks that did not repeat in 2017.
|
•
|
Partner distribution expense as a percentage of prepaid and processing revenues
—Increased for the third quarter and first 36 weeks of 2017 due to higher proportion of sales through business clients for which we recognize net pricing discounts as an expense.
|
|
12 weeks ended
|
|
|
|
|
|||||||||
|
September 9, 2017
|
|
September 10, 2016
|
|
Change
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
Total operating revenues
|
$
|
134,168
|
|
|
$
|
101,879
|
|
|
$
|
32,289
|
|
|
31.7
|
%
|
Partner distribution expense
|
75,547
|
|
|
69,894
|
|
|
5,653
|
|
|
8.1
|
%
|
|||
Operating revenues, net of Partner distribution expense
|
$
|
58,621
|
|
|
$
|
31,985
|
|
|
$
|
26,636
|
|
|
83.3
|
%
|
Prepaid and processing revenues
|
$
|
123,783
|
|
|
$
|
90,682
|
|
|
$
|
33,101
|
|
|
36.5
|
%
|
Partner distribution expense as a percentage of prepaid and processing revenues
|
61.0
|
%
|
|
77.1
|
%
|
|
(16.1
|
)%
|
|
(20.9
|
)%
|
|
36 weeks ended
|
|
|
|
|
|||||||||
|
September 9, 2017
|
|
September 10, 2016
|
|
Change
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
Total operating revenues
|
$
|
415,280
|
|
|
$
|
285,670
|
|
|
$
|
129,610
|
|
|
45.4
|
%
|
Partner distribution expense
|
219,336
|
|
|
198,877
|
|
|
20,459
|
|
|
10.3
|
%
|
|||
Operating revenues, net of Partner distribution expense
|
$
|
195,944
|
|
|
$
|
86,793
|
|
|
$
|
109,151
|
|
|
125.8
|
%
|
Prepaid and processing revenues
|
$
|
382,810
|
|
|
$
|
259,047
|
|
|
$
|
123,763
|
|
|
47.8
|
%
|
Partner distribution expense as a percentage of prepaid and processing revenues
|
57.3
|
%
|
|
76.8
|
%
|
|
(19.5
|
)%
|
|
(25.4
|
)%
|
•
|
Prepaid and processing revenues
—Our acquisition of The Grass Roots Group Holdings Limited and its subsidiaries (collectively, “Grass Roots”) in the fourth quarter of 2016 accounted for increases of
$21.7 million
and
$89.3 million
in prepaid and processing revenues for the
third
quarter and the first 36 weeks of
2017
, respectively, of which
$7.5 million
for the third quarter and
$42.9 million
for the first 36 weeks of 2017 related to the Meetings & Events business (see
Note 5
—
Consolidated Financial Statement Details
—Assets held for sale
). Prepaid and processing revenues also increased
$11.4 million
for the third quarter of 2017 due to increased sales volume in all regions, primarily Germany, South Korea, Brazil and Australia. Prepaid and processing revenues increased
$35.2 million
for the first 36 weeks of 2017, due to increased sales volume in all regions, primarily Germany, South Korea, Mexico and Australia.
|
•
|
Partner distribution expense as a percentage of prepaid and processing revenues
—Decreased mainly due to our acquisition of Grass Roots, which did not incur any partner distribution expense. Excluding Grass Roots, our partner distribution expense as a percentage of prepaid and processing revenue decreased from
77.1%
to
74.0%
for the third quarter and from
77.1%
to
74.7%
for the first 36 weeks of 2017. The decrease for both the third quarter and first 36 weeks of 2017 is due to higher sales of products which have lower partner distribution expense along with a decrease in proportion of sales through our sub-distributor relationships, primarily in Japan (for which we share a higher portion of commission but for which we incur minimal other operating expenses).
|
|
12 weeks ended
|
|
|
|
|
|||||||||
|
September 9, 2017
|
|
September 10, 2016
|
|
Change
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|||||||
Partner distribution expense
|
$
|
196,633
|
|
|
$
|
178,363
|
|
|
$
|
18,270
|
|
|
10.2
|
%
|
Processing and services
|
93,877
|
|
|
75,818
|
|
|
18,059
|
|
|
23.8
|
%
|
|||
Sales and marketing
|
58,711
|
|
|
52,327
|
|
|
6,384
|
|
|
12.2
|
%
|
|||
Costs of products sold
|
37,148
|
|
|
29,122
|
|
|
8,026
|
|
|
27.6
|
%
|
|||
General and administrative
|
24,122
|
|
|
21,773
|
|
|
2,349
|
|
|
10.8
|
%
|
|||
Transition and acquisition
|
665
|
|
|
2,574
|
|
|
(1,909
|
)
|
|
(74.2
|
)%
|
|||
Amortization of acquisition intangibles
|
13,904
|
|
|
10,376
|
|
|
3,528
|
|
|
34.0
|
%
|
|||
Change in fair value of contingent consideration
|
(2,100
|
)
|
|
1,300
|
|
|
(3,400
|
)
|
|
N/M
|
||||
Goodwill impairment
|
9,000
|
|
|
—
|
|
|
9,000
|
|
|
N/M
|
||||
Total operating expenses
|
$
|
431,960
|
|
|
$
|
371,653
|
|
|
$
|
60,307
|
|
|
16.2
|
%
|
|
36 weeks ended
|
|
|
|
|
|||||||||
|
September 9, 2017
|
|
September 10, 2016
|
|
Change
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|||||||
Partner distribution expense
|
$
|
577,634
|
|
|
$
|
541,749
|
|
|
$
|
35,885
|
|
|
6.6
|
%
|
Processing and services
|
303,829
|
|
|
226,634
|
|
|
77,195
|
|
|
34.1
|
%
|
|||
Sales and marketing
|
199,218
|
|
|
166,176
|
|
|
33,042
|
|
|
19.9
|
%
|
|||
Costs of products sold
|
117,882
|
|
|
103,163
|
|
|
14,719
|
|
|
14.3
|
%
|
|||
General and administrative
|
78,710
|
|
|
67,827
|
|
|
10,883
|
|
|
16.0
|
%
|
|||
Transition and acquisition
|
2,021
|
|
|
4,160
|
|
|
(2,139
|
)
|
|
(51.4
|
)%
|
|||
Amortization of acquisition intangibles
|
40,577
|
|
|
35,533
|
|
|
5,044
|
|
|
14.2
|
%
|
|||
Change in fair value of contingent consideration
|
(5,097
|
)
|
|
2,100
|
|
|
(7,197
|
)
|
|
N/M
|
||||
Goodwill impairment
|
9,000
|
|
|
—
|
|
|
9,000
|
|
|
N/M
|
||||
Total operating expenses
|
$
|
1,323,774
|
|
|
$
|
1,147,342
|
|
|
$
|
176,432
|
|
|
15.4
|
%
|
|
12 weeks ended
|
|
|
|
|
|||||||||
|
September 9, 2017
|
|
September 10, 2016
|
|
Change
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|||||||
Interest income and other income (expense), net
|
$
|
631
|
|
|
$
|
2,360
|
|
|
$
|
(1,729
|
)
|
|
(73.3
|
)%
|
Interest expense
|
(7,374
|
)
|
|
(5,684
|
)
|
|
(1,690
|
)
|
|
29.7
|
%
|
|||
Total other income (expense)
|
$
|
(6,743
|
)
|
|
$
|
(3,324
|
)
|
|
$
|
(3,419
|
)
|
|
102.9
|
%
|
INCOME TAX EXPENSE (BENEFIT)
|
$
|
(11,858
|
)
|
|
$
|
(8,357
|
)
|
|
$
|
(3,501
|
)
|
|
41.9
|
%
|
EFFECTIVE TAX RATE
|
61.0
|
%
|
|
62.3
|
%
|
|
(1.3
|
)%
|
|
|
|
36 weeks ended
|
|
|
|
|
|||||||||
|
September 9, 2017
|
|
September 10, 2016
|
|
Change
|
|||||||||
|
(in thousands, except percentages)
|
|||||||||||||
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|||||||
Interest income and other income (expense), net
|
$
|
2,134
|
|
|
$
|
3,258
|
|
|
$
|
(1,124
|
)
|
|
(34.5
|
)%
|
Interest expense
|
(21,368
|
)
|
|
(13,868
|
)
|
|
(7,500
|
)
|
|
54.1
|
%
|
|||
Total other income (expense)
|
$
|
(19,234
|
)
|
|
$
|
(10,610
|
)
|
|
$
|
(8,624
|
)
|
|
81.3
|
%
|
INCOME TAX EXPENSE (BENEFIT)
|
$
|
(26,224
|
)
|
|
$
|
(18,884
|
)
|
|
$
|
(7,340
|
)
|
|
38.9
|
%
|
EFFECTIVE TAX RATE
|
49.1
|
%
|
|
48.8
|
%
|
|
0.3
|
%
|
|
|
|
36 weeks ended
|
||||||
|
September 9, 2017
|
|
September 10, 2016
|
||||
|
(in thousands)
|
||||||
Net cash (used in) provided by operating activities
|
$
|
(641,277
|
)
|
|
$
|
(639,637
|
)
|
Net cash (used in) provided by investing activities
|
(220,803
|
)
|
|
(177,018
|
)
|
||
Net cash (used in) provided by financing activities
|
142,762
|
|
|
199,076
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
16,097
|
|
|
3,352
|
|
||
Decrease in cash and cash equivalents
|
$
|
(703,221
|
)
|
|
$
|
(614,227
|
)
|
•
|
an increase of
$44.4 million
cash provided by non-settlement related operating assets and liabilities for the
36 weeks ended
September 9, 2017
compared to the
36 weeks ended
September 10, 2016
, due to an increase in our operating liabilities; partially offset by
|
•
|
a decrease of
$7.1 million
cash provided by income tax related receivables and payables for the
36 weeks ended
September 9, 2017
compared to the
36 weeks ended
September 10, 2016
, due to a non-recurring income tax refund of $7.5 million received in the
36 weeks ended
September 10, 2016
.
|
Period
|
|
Total Number of Shares Purchased (1)
|
|
Average Price Paid per Share (2)
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
|
||||||
June 18, 2017 to July 15, 2017
|
|
45
|
|
|
$
|
43.60
|
|
|
—
|
|
|
$
|
—
|
|
July 16, 2017 to August 12, 2017
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
August 13, 2017 to September 09, 2017
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Total
|
|
45
|
|
|
$
|
43.60
|
|
|
—
|
|
|
$
|
—
|
|
(1)
|
This table does not include shares of common stock that we withheld in order to satisfy minimum tax withholding requirements in connection with the vesting of restricted stock units or exercise of options or stock appreciation rights. The numbers represent the shares of common stock that we withheld in order to satisfy minimum tax withholding requirements in connection with the vesting of restricted stock awards.
|
(2)
|
Average price paid per share of common stock does not include brokerage commissions.
|
Blackhawk Network Holdings, Inc.
|
|
/s/ Jerry Ulrich
|
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
|
|
|
|
|
|
|
|
|
|
|
|
X
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
X
|
10.3†
|
|
|
|
|
|
|
|
|
|
|
|
X
|
31.1
|
|
|
|
|
|
|
|
|
|
|
|
X
|
31.2
|
|
|
|
|
|
|
|
|
|
|
|
X
|
32.1*
|
|
|
|
|
|
|
|
|
|
|
|
X
|
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
|
†
|
Certain portions have been omitted pursuant to a confidential treatment request. Omitted information has been filed separately with the SEC.
|
*
|
The certification attached as Exhibit 32.1 to this Quarterly Report is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of this Quarterly Report), irrespective of any general incorporation language contained in such filing.
|
By:
|
/s/ Brian Buck
|
By:
|
/s/ Russell McClymont
|
By:
|
/s/ Tyler Stephens
|
By:
|
/s/ Fabio Lauro
|
By:
|
/s/ Christina Boyle
|
By:
|
/s/ Scott W Miller
|
By:
|
/s/ Suzanne M. Rode
|
By:
|
/s/ Scott Bruni
|
By:
|
/s/ Daniel Packham
|
By:
|
/s/ Daniel Gendron
|
By:
|
/s/ Dirk Price
|
1.
|
Consolidated Total Indebtedness
|
By:
|
/s/ Jerry N. Ulrich
|
Name:
|
Jerry N. Ulrich
|
Title:
|
Chief Financial Officer
|
By:
|
/s/ Jerry N. Ulrich
|
Name:
|
Jerry N. Ulrich
|
Title:
|
Chief Financial Officer
|
By:
|
/s/ Jerry N. Ulrich
|
Name:
|
Jerry N. Ulrich
|
Title:
|
Chief Financial Officer and Chief Administrative Officer
|
By:
|
/s/ Jerry N. Ulrich
|
Name:
|
Jerry N. Ulrich
|
Title:
|
Chief Financial Officer
|
By:
|
/s/ Jerry N. Ulrich
|
Name:
|
Jerry N. Ulrich
|
Title:
|
Chief Financial Officer
|
By:
|
/s/ Jerry N. Ulrich
|
Name:
|
Jerry N. Ulrich
|
Title:
|
Chief Financial Officer
|
By:
|
/s/ Jerry N. Ulrich
|
Name:
|
Jerry N. Ulrich
|
Title:
|
Chief Financial Officer
|
By:
|
/s/ Jerry N. Ulrich
|
Name:
|
Jerry N. Ulrich
|
Title:
|
Director
|
By:
|
/s/ Jerry N. Ulrich
|
Name:
|
Jerry N. Ulrich
|
Title:
|
Chief Financial Officer
|
By:
|
/s/ Jerry N. Ulrich
|
Name:
|
Jerry N. Ulrich
|
Title:
|
Chief Financial Officer
|
By:
|
/s/ Jerry N. Ulrich
|
Name:
|
Jerry N. Ulrich
|
Title:
|
Chief Financial Officer
|
By:
|
/s/ Jerry N. Ulrich
|
Name:
|
Jerry N. Ulrich
|
Title:
|
Chief Financial Officer
|
By:
|
/s/ Jerry N. Ulrich
|
Name:
|
Jerry N. Ulrich
|
Title:
|
Chief Financial Officer
|
1.
|
Section 1.1 of the Agreement is amended by adding or amending the following definitions:
|
2.
|
In Section 3.3(a) of the Agreement, the words “and System(s) enabled on” are added after the words “The design of” and before the words “each Card issued.”
|
3.
|
The first sentence of Section 3.3(b) of the Agreement is deleted and replaced with the following:
|
4.
|
The language added to Section II(b) of Schedule A to the Agreement by Amendment No. 7 is hereby deleted. The following language is added as a separate paragraph after the remainder of the first paragraph of Section II(b) of Schedule A (as amended by Amendment No. 3) and before the current second paragraph of Section II(b) of Schedule A (which now becomes the third paragraph of the Section):
|
(1)
|
For [**] other than [**], the [**] shall be [**] of the
[**] of all [**] that were [**] during the [**] that is [**] prior to the [**].
The applicable [**] for these [**] are set forth in Attachment 2 to Amendment No. 7.
|
(2)
|
For [**], the [**]
shall be calculated and paid pursuant to Schedule F.
|
(3)
|
For [**], the [**] shall not be applied to [**].
|
5.
|
The following shall be added as Section II(e)(iv) of Schedule A to the Agreement:
|
6.
|
The following shall be added as Section II(g) of Schedule A to the Agreement:
|
(g)
|
In addition to any other compensation set forth in this Agreement, Servicer shall earn further compensation for Private Label Cards as set forth in Schedule F.
|
7.
|
Schedule E to the Agreement is amended by adding the following language:
|
8.
|
Schedule F to this Amendment No. 8 is added to the Agreement as Schedule F to the Agreement.
|
9.
|
This Amendment No. 8 will terminate in its entirety effective March 1, 2018.
|
10.
|
Except as specifically modified by this Amendment No. 8, the Agreement shall remain in full force and effect. This Amendment No. 8 may not be amended or modified except pursuant to a written agreement signed by each of the Parties hereto. This Amendment shall bind, and inure to the benefit of, Servicer and Bank and their successors and permitted assigns. This Amendment No. 8 may be executed in counterparts, which execution may be by facsimile or other electronic means, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.
|
Blackhawk Network, Inc.
|
MetaBank, dba Meta Payment Systems
|
By: /s/ Talbott Roche
|
By: /s/ Brad C. Hanson
|
Name: Talbott Roche
|
Name: Brad C. Hanson
|
Title: CEO
|
Title: President
|
Date: August 18, 2017
|
Date: August 18, 2017
|
I.
|
Definitions: The following definitions will apply for purposes of this Schedule F:
|
A.
|
“
Breakage Differential
” has the meaning set forth in Section VI of this Schedule F.
|
B.
|
“
Breakage Overpayment Amount
” is the running total that starts at zero and to which amounts will be added or subtracted as described in Section VI of this Schedule F.
|
C.
|
“
Final Breakage Estimate
” has the meaning set forth in Section III of this Schedule F.
|
D.
|
“
Final Breakage Estimate Value
” means, for each PL Vintage, the Final Breakage Estimate multiplied by the PL Vintage Load Value.
|
E.
|
“
Guaranteed Amount
” means, for each PL Vintage, the Guaranteed Payment Rate multiplied by the Initial Breakage Estimate Value.
|
F.
|
“Guaranteed Payment Rate”
means, for each PL Vintage, that portion of the Initial Breakage Estimate Value that Bank must pay Servicer as Supplemental Fees and shall be [**]
unless otherwise agreed upon by the Parties.
|
G.
|
“
Initial Breakage Estimate
” has the meaning set forth in Section III of this Schedule F.
|
H.
|
“
Initial Breakage Estimate Value
” means, for each PL Vintage, the Initial Breakage Estimate multiplied by the PL Vintage Load Value.
|
I.
|
“PL Vintage Initial Quarter”
means the calendar quarter in which a PL Vintage began.
|
J.
|
“PL Vintage Load Value”
means, for each Vintage, the total dollar value Loaded to Cards in that PL Vintage.
|
K.
|
“Quarterly Private Label Vintage”
or
“PL Vintage”
means the Private Label Cards in a particular Private Label Card Plan that were Loaded during a particular calendar quarter. As an example, if there were a Merchant X Plan, then the Private Label Cards for that Plan Loaded between January 1, 2018 and March 31, 2018 would be the Q1 2018 PL Vintage for that Plan; the Private Label Cards for that Plan Loaded between April 1, 2018 and June 30, 2018 would be the Q2 2018 PL Vintage for that Plan; and so forth.
|
L.
|
“[**]
Aging Date
” is the last day of the month that is [**]
following the end of the PL Vintage Initial Quarter.
|
II.
|
Servicer has entered into an agreement (the “Breakage Calculation Agreement”) with a third party service provider (the “Breakage Calculation Service Provider” or “BCSP”) pursuant to which Servicer has retained the Breakage Calculation Service Provider to provide,
inter alia,
the services set forth in this Schedule F to be responsibilities of the BCSP. [**].
All fees and expenses of the BSCP pursuant to this Schedule F shall be paid by Servicer.
|
III.
|
BCSP’s Duties : For each PL Vintage of each Private Label Card Plan, the BSCP will calculate the following:
|
A.
|
An initial estimate of the portion of the balances of that PL Vintage that will never be redeemed (as a decimal, the “
Initial Breakage Estimate
”). The Initial Breakage Estimate for each PL Vintage generally will be made before the first Card in that PL Vintage is Loaded and will always be made before the payment of the Guaranteed Amount is due.
|
B.
|
A final estimate of the portion of the balances of that PL Vintage that will never be redeemed (as a decimal, the “
Final Breakage Estimate
”). The Final Breakage Estimate will be made shortly after [**] have passed since the end of the PL Vintage Initial Quarter.
|
IV.
|
Bank to Remit Discount to Face Amount; Servicer May Offset
|
A.
|
As set forth in Section I(a) of Schedule A, Servicer will initially remit to Bank the amount initially Loaded to a Private Label Card.
|
B.
|
Bank will remit to Servicer the Discount to Face Amount on the same time frame as Servicer remits to Bank the amount initially Loaded to the Card under Section IV.A above.
|
C.
|
Servicer may offset Bank’s remittance to Servicer against Servicer’s remittance to Bank. Thus, Servicer may elect to remit to Bank only the amount initially loaded to the Card less the Discount to Face Amount. Servicer will retain the Discount to Face Percentage of such amount.
|
V.
|
Payment of Supplemental Fees After PL Vintage is [**]
Old
|
A.
|
For each PL Vintage, Servicer will compute the Guaranteed Amount after the end of the PL Vintage Initial Quarter (at which point, the PL Vintage Load Value will be finalized), and Bank will validate the Guaranteed Amount based on reporting from the BCSP.
|
B.
|
Following the date that is [**]
following the last day of the PL Vintage Initial Quarter, Servicer will invoice Bank for the Guaranteed Amount, and Bank will remit the Guaranteed Amount to Servicer as Supplemental Fees within thirty (30) days of Servicer’s invoice.
|
VI.
|
Additional Payment of Supplemental Fees After PL Vintage is [**]
Old;
|
A.
|
Following the date that is [**]
following the last day of the PL Vintage Initial Quarter, Servicer will compute the Final Breakage Estimate Value, and Bank shall validate the Final Breakage Estimate Value based on reporting from the BCSP.
|
B.
|
If the Final Breakage Estimate Value is less than the Guaranteed Amount, the difference will be added to the Breakage Overpayment Amount, and no payment under this Section VI will be made.
|
C.
|
If the Final Breakage Estimate Value is greater than the Guaranteed Amount, the difference is the “
Breakage Differential
”:
|
1.
|
If the Breakage Differential is less than the Breakage Overpayment Amount, the Breakage Overpayment Amount will be reduced by the amount of the Breakage Differential and no payment under this Section VI will be made.
|
2.
|
If the Breakage Differential is greater than the Breakage Overpayment Amount, the Breakage Differential will be reduced by the Breakage Overpayment Amount (if any), and the Breakage Overpayment Amount will be reset to zero.
|
3.
|
Servicer will invoice Bank for the Breakage Differential (as reduced by Section VI.C.2), and Bank will remit such amount to Servicer as supplemental fees
within thirty (30) days of Servicer’s invoice.
|
VII.
|
Discount to Face True-Ups
:
|
A.
|
Upon Card Transactions:
|
1.
|
For Transactions Through the [**] Aging Date:
|
a.
|
For each PL Vintage, after the [**] Aging Date, Servicer will compute the following amount:
|
b.
|
Servicer will remit the amount in VII.A.1.a above to Bank within thirty (30) days after the [**] Aging Date.
|
c.
|
Prior to the [**] Aging Date, if the Total Transaction value of the PL Vintage is greater than the total Load amount of the PL Vintage less the Discount to Face Amount for the PL Vintage, the parties will meet promptly and resolve the issue in good faith.
|
2.
|
Subsequent Payments
|
a.
|
For each PL Vintage, at the end of each calendar quarter ending after the [**] Aging Date, Servicer will compute the following amount:
|
b.
|
Servicer will remit the amount in Section VII.A.2.a above to Bank within thirty (30) days after the end of the applicable calendar quarter.
|
B.
|
Upon Payment of Supplemental Fees:
|
1.
|
For each PL Vintage, whenever Bank pays Servicer Supplemental Fees
under Sections V or VI of this Schedule F, Servicer will pay Bank a Discount to Face True-Up equal to the amount of Supplemental Fees paid multiplied by the Discount to Face Rate for the Plan that applies to the PL Vintage.
|
2.
|
Servicer will remit the amount in Section VII.B.1 above to Bank within thirty (30) days after Bank receives the invoice for the applicable Supplemental Fees.
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Blackhawk Network Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: October 17, 2017
|
|
/s/ Talbott Roche
|
Talbott Roche
|
President and Chief Executive Officer
|
(Principal Executive Officer)
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Blackhawk Network Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: October 17, 2017
|
|
/s/ Jerry Ulrich
|
Jerry Ulrich
|
Chief Financial Officer and Chief Administrative Officer
|
(Principal Financial Officer)
|
1.
|
The Company’s Quarterly Report on Form 10-Q for the period ended
September 9, 2017
, to which this Certification is attached as Exhibit 32.1 (this “Quarterly Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and
|
2.
|
The information contained in this Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Talbott Roche
|
|
/s/ Jerry Ulrich
|
Talbott Roche
|
|
Jerry Ulrich
|
President and Chief Executive Officer
|
|
Chief Financial Officer and Chief Administrative Officer
|
(Principal Executive Officer)
|
|
(Principal Financial Officer)
|