Delaware (State or Other Jurisdiction of Incorporation or Organization) | ||
001-35882 | 43-2099257 | |
(Commission File Number) | (I.R.S. Employer Identification No.) | |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Exhibit No. | Description | |
99.1 | Press release for the fourth quarter and full year ended December 31, 2016. |
BLACKHAWK NETWORK HOLDINGS, INC. | |||||
Date: February 15, 2017 | By: | /s/ Jerry Ulrich | |||
Name: | Jerry Ulrich | ||||
Title: | Chief Financial Officer and Chief Administrative Officer |
Exhibit No. | Description | |
99.1 | Press release for the fourth quarter and full year ended December 31, 2016. |
INVESTORS/ANALYSTS: | MEDIA: |
Patrick Cronin | Teri Llach |
(925) 226-9973 | (925) 226-9028 |
investor.relations@bhnetwork.com | teri.llach@bhnetwork.com |
GAAP Results | Q4'16 | Q4'15 | FY'16 | FY'15 | |
$ in millions except per share amounts | |||||
Operating Revenues | $780.6 | $756.4 | $1,899.8 | $1,801.1 | |
Net Income | $24.7 | $41.6 | $4.7 | $45.6 | |
Diluted Earnings per Share | $0.43 | $0.73 | $0.08 | $0.81 |
Non-GAAP Results | Q4'16 | Q4'15 | FY'16 | FY'15 | |
$ in millions except per share amounts | |||||
Adjusted Operating Revenues | $352.0 | $335.3 | $889.3 | $829.2 | |
Adjusted EBITDA | $107.3 | $107.6 | $189.2 | $193.9 | |
Adjusted Net Income | $57.1 | $58.6 | $82.0 | $89.7 | |
Adjusted Diluted Earnings per Share | $1.00 | $1.03 | $1.43 | $1.59 |
• | Operating revenues totaled $780.6 million, an increase of 3% from $756.4 million for the quarter ended January 2, 2016. This increase was due to a 20% increase in operating revenues from the international segment driven, in part, by the acquisition of Grass Roots in October 2016, and a 29% increase in operating revenues from our incentives segment, which included the results from the acquisitions of Giftcards.com and Extrameasures in early 2016. These increases were offset by the decline in operating revenues in our U.S. retail segment due to the EMV impact described earlier and a 30% decrease in product sales primarily due to Cardpool exchange. |
• | Net income totaled $24.7 million compared to net income of $41.6 million for the quarter ended January 2, 2016. The decline was driven primarily by the impact of EMV described earlier, higher amortization expenses related to intangibles assets from acquisitions, higher depreciation and increased interest expense related to 2016 acquisitions and technology asset write-offs due to platform consolidation. |
• | Earnings per diluted share was $0.43 compared to earnings per diluted share of $0.73 for the quarter ended January 2, 2016. Diluted shares outstanding increased 0.1% to 57 million. |
• | Adjusted operating revenues totaled $352.0 million, an increase of 5% from $335.3 million for the quarter ended January 2, 2016. The increase was driven by growth in both the international and incentives segments, partially offset by a decline in U.S. retail due to the EMV impact. |
• | Adjusted EBITDA totaled $107.3 million, a decline of 0.3% from $107.6 million for the quarter ended January 2, 2016. The growth in the international and incentives segments was offset by a decline in U.S. retail due to the EMV impact which caused a decline in adjusted operating revenues in addition to increased net marketing expense and inventory reserves. |
• | Adjusted net income totaled $57.1 million, a decline of 3% from $58.6 million for the quarter ended January 2, 2016. |
• | Adjusted diluted EPS was $1.00, a decline of 3% from $1.03 for the quarter ended January 2, 2016. |
$ in millions except per share amounts | 2017 Guidance | 2016 Actual | % Change | |||||
Operating Revenues | $2,148 to $2,312 | $ | 1,900 | 13% to 22% | ||||
Net Income | $22 to $26 | $ | 5 | 337% to 416% | ||||
Diluted EPS | $0.35 to $0.44 | $ | 0.08 | 333% to 444% |
$ in millions except per share amounts | 2017 Guidance | 2016 Actual | % Change | ||||||||
Adjusted Operating Revenues | $1,028 to $1,141 | $ | 889 | 16% to 28% | |||||||
Adjusted EBITDA | $225 to $250 | $ | 189 | 19% to 32% | |||||||
Adjusted Net Income | $91 to $100 | $ | 82 | 11% to 22% | |||||||
Adjusted Diluted EPS | $1.56 to $1.70 | $ | 1.43 | 9% to 19% | |||||||
Reduction in income taxes payable | $ | 58 | $ | 58 | - | ||||||
Reduction in income taxes payable per share (diluted) | $ | 0.98 | $ | 1.02 | (3)% |
• | adjusting operating revenues for distribution commissions paid and other compensation to retail distribution partners and business clients is useful to understanding the Company's operating margin; |
• | adjusting operating revenues for marketing revenue, which has offsetting marketing expense, is useful for understanding the Company's 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; |
• | in a business combination, a company records an adjustment to reduce the carrying values of deferred revenue and deferred expenses to their fair values and reduces the company’s revenues and expenses from what it would have recorded otherwise, and as such the Company does not believe is indicative of its core operating performance; |
• | non-cash equity grants made to employees and distribution partners at a certain price and point in time do not necessarily reflect how the Company's business is performing at any particular time and the related expenses are not key measures of the Company's core operating performance; |
• | the net gain on the transaction to transition our program-managed GPR business to another program manager, the gain on the sale of our member interest in Visa Europe and other non-recurring gains / (losses) related to our acquisitions is not reflective of our core operating performance; |
• | asset impairment charges related to the write-down of technology assets as part of our post-acquisition integration efforts are not key measures of the Company's core operating performance; |
• | 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 |
• | non-cash fair value adjustments to contingent business acquisition liability do not directly reflect how the Company is performing at any particular time and the related expense adjustment amounts are not key measures of the Company's core operating performance; |
• | reduction in income taxes payable from the step up in tax basis of our assets resulting from the Section 336(e) election due to our Spin-Off and the Safeway Merger and reduction in income taxes payable from amortization of goodwill and other intangibles or utilization of net operating loss carryforwards from business acquisitions represent significant tax savings that are useful for understanding the Company's overall operating results; |
• | reduction in income taxes payable resulting from the tax deductibility of stock-based compensation is useful for understanding the Company's overall operating results. The Company generally realizes these tax deductions when restricted stock vest, an option is exercised, and, in the case of warrants, after the warrant is exercised but amortized over remaining service period, and such timing differs from the GAAP treatment of expense recognition; and |
• | Adjusted free cash flow - the Company receives funds from consumers or business clients for prepaid products that the Company issues or holds on their behalf prior to the issuance of prepaid products. The Company views this cash flow as temporary and not indicative of the cash flows generated by its operating activity, and therefore excludes it from calculations of Adjusted free cash flow. Adjusted free cash flow provides information regarding the cash that the Company generates without the fluctuations resulting from the timing of cash inflows and outflows from these settlement activities, which is useful to understanding the Company's business and its ability to fund capital expenditures and repay amounts borrowed under its term loan. The Company also may use Adjusted free cash flow for, among other things, making investment decisions and managing its capital structure. |
BLACKHAWK NETWORK HOLDINGS, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited) | |||||||||||||||
16 Weeks Ended | 16 Weeks Ended | 52 Weeks Ended | 52 Weeks Ended | ||||||||||||
December 31, 2016 | January 2, 2016 | December 31, 2016 | January 2, 2016 | ||||||||||||
OPERATING REVENUES: | |||||||||||||||
Commissions and fees | $ | 565,062 | $ | 550,462 | $ | 1,315,755 | $ | 1,259,801 | |||||||
Program and other fees | 128,599 | 96,719 | 336,317 | 268,661 | |||||||||||
Marketing | 42,200 | 45,759 | 94,298 | 104,871 | |||||||||||
Product sales | 44,689 | 63,494 | 153,408 | 167,745 | |||||||||||
Total operating revenues | 780,550 | 756,434 | 1,899,778 | 1,801,078 | |||||||||||
OPERATING EXPENSES: | |||||||||||||||
Partner distribution expense | 391,393 | 379,850 | 933,142 | 874,043 | |||||||||||
Processing and services | 128,634 | 103,901 | 355,268 | 304,232 | |||||||||||
Sales and marketing | 108,623 | 103,985 | 274,799 | 260,638 | |||||||||||
Costs of products sold | 40,104 | 57,032 | 143,267 | 154,625 | |||||||||||
General and administrative | 31,601 | 32,045 | 99,428 | 92,172 | |||||||||||
Transition and acquisition | 7,305 | 1,548 | 11,465 | 7,639 | |||||||||||
Amortization of acquisition intangibles | 21,527 | 9,198 | 57,060 | 27,550 | |||||||||||
Change in fair value of contingent consideration | — | — | 2,100 | (7,567 | ) | ||||||||||
Total operating expenses | 729,187 | 687,559 | 1,876,529 | 1,713,332 | |||||||||||
OPERATING INCOME | 51,363 | 68,875 | 23,249 | 87,746 | |||||||||||
OTHER INCOME (EXPENSE): | |||||||||||||||
Interest income and other income (expense), net | (3,707 | ) | (32 | ) | (449 | ) | (1,970 | ) | |||||||
Interest expense | (7,996 | ) | (4,605 | ) | (21,864 | ) | (13,171 | ) | |||||||
INCOME BEFORE INCOME TAX EXPENSE (BENEFIT) | 39,660 | 64,238 | 936 | 72,605 | |||||||||||
INCOME TAX EXPENSE (BENEFIT) | 14,782 | 22,361 | (4,102 | ) | 26,796 | ||||||||||
NET INCOME BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS | 24,878 | 41,877 | 5,038 | 45,809 | |||||||||||
Income attributable to non-controlling interests, net of tax | (228 | ) | (263 | ) | (380 | ) | (200 | ) | |||||||
NET INCOME ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC. | $ | 24,650 | $ | 41,614 | $ | 4,658 | $ | 45,609 | |||||||
EARNINGS PER SHARE: | |||||||||||||||
Basic | $ | 0.44 | $ | 0.75 | $ | 0.08 | $ | 0.84 | |||||||
Diluted | $ | 0.43 | $ | 0.73 | $ | 0.08 | $ | 0.81 | |||||||
Weighted average shares outstanding—basic | 55,474 | 55,087 | 55,734 | 54,294 | |||||||||||
Weighted average shares outstanding—diluted | 56,966 | 56,900 | 57,260 | 56,313 |
BLACKHAWK NETWORK HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) | |||||||
Year-end 2016 | Year-end 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,008,125 | $ | 914,576 | |||
Restricted cash | 10,793 | 3,189 | |||||
Settlement receivables, net | 641,691 | 626,077 | |||||
Accounts receivable, net | 262,672 | 241,729 | |||||
Other current assets | 131,375 | 103,319 | |||||
Total current assets | 2,054,656 | 1,888,890 | |||||
Property, equipment and technology, net | 172,381 | 159,357 | |||||
Intangible assets, net | 350,185 | 240,898 | |||||
Goodwill | 570,398 | 402,489 | |||||
Deferred income taxes | 362,302 | 339,558 | |||||
Other assets | 85,856 | 81,764 | |||||
TOTAL ASSETS | $ | 3,595,778 | $ | 3,112,956 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Settlement payables | $ | 1,626,827 | $ | 1,605,021 | |||
Consumer and customer deposits | 173,344 | 84,761 | |||||
Accounts payable and accrued operating expenses | 153,885 | 119,087 | |||||
Deferred revenue | 150,582 | 113,458 | |||||
Note payable, current portion | 9,856 | 37,296 | |||||
Notes payable to Safeway | 3,163 | 4,129 | |||||
Other current liabilities | 51,176 | 57,342 | |||||
Total current liabilities | 2,168,833 | 2,021,094 | |||||
Deferred income taxes | 27,887 | 18,652 | |||||
Note payable | 137,984 | 324,412 | |||||
Convertible notes payable | 429,026 | — | |||||
Other liabilities | 39,653 | 14,700 | |||||
Total liabilities | 2,803,383 | 2,378,858 | |||||
Stockholders’ equity: | |||||||
Preferred stock | — | — | |||||
Common stock | 56 | 56 | |||||
Additional paid-in capital | 608,568 | 561,939 | |||||
Accumulated other comprehensive loss | (48,877 | ) | (40,195 | ) | |||
Retained earnings | 228,451 | 207,973 | |||||
Total Blackhawk Network Holdings, Inc. equity | 788,198 | 729,773 | |||||
Non-controlling interests | 4,197 | 4,325 | |||||
Total stockholders’ equity | 792,395 | 734,098 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 3,595,778 | $ | 3,112,956 |
BLACKHAWK NETWORK HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) | |||||||
52 Weeks Ended | 52 Weeks Ended | ||||||
December 31, 2016 | January 2, 2016 | ||||||
OPERATING ACTIVITIES: | |||||||
Net income before allocation to non-controlling interests | $ | 5,038 | $ | 45,809 | |||
Adjustments to reconcile net income to net cash used in operating activities: | |||||||
Depreciation and amortization of property, equipment and technology | 48,379 | 40,983 | |||||
Amortization of intangibles | 62,045 | 32,366 | |||||
Amortization of deferred program and contract costs | 29,015 | 28,991 | |||||
Amortization of deferred financing costs and debt discount | 6,506 | 1,187 | |||||
Employee stock-based compensation expense | 32,592 | 30,130 | |||||
Change in fair value of contingent consideration | 2,100 | (7,567 | ) | ||||
Loss on property, equipment and technology disposal / write-down | 9,838 | 1,761 | |||||
Deferred income taxes | (8,899 | ) | 29,810 | ||||
Other | 5,093 | 4,800 | |||||
Changes in operating assets and liabilities: | |||||||
Settlement receivables | 6,076 | (111,678 | ) | ||||
Settlement payables | 19,907 | 231,662 | |||||
Accounts receivable, current and long-term | (13,012 | ) | (57,171 | ) | |||
Other current assets | (13,891 | ) | (17,210 | ) | |||
Other assets | (24,690 | ) | (20,434 | ) | |||
Consumer and customer deposits | 13,772 | (54,402 | ) | ||||
Accounts payable and accrued operating expenses | (14,835 | ) | (2,988 | ) | |||
Deferred revenue | 33,362 | 14,363 | |||||
Other current and long-term liabilities | (21,707 | ) | 16,877 | ||||
Income taxes, net | 8,542 | (2,609 | ) | ||||
Net cash provided by operating activities | 185,231 | 204,680 | |||||
INVESTING ACTIVITIES: | |||||||
Expenditures for property, equipment and technology | (52,332 | ) | (52,738 | ) | |||
Business acquisitions, net of cash acquired | (220,605 | ) | (115,481 | ) | |||
Investments in unconsolidated entities | (10,541 | ) | (5,877 | ) | |||
Change in restricted cash | (7,691 | ) | 1,811 | ||||
Other | 1,408 | (98 | ) | ||||
Net cash used in investing activities | (289,761 | ) | (172,383 | ) | |||
Continued on next page |
BLACKHAWK NETWORK HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) | |||||||
52 Weeks Ended | 52 Weeks Ended | ||||||
December 31, 2016 | January 2, 2016 | ||||||
FINANCING ACTIVITIES: | |||||||
Payments for acquisition liability | — | (1,811 | ) | ||||
Proceeds from issuance of note payable | 250,000 | — | |||||
Repayment of note payable | (463,750 | ) | (11,250 | ) | |||
Payments of financing costs | (16,544 | ) | (2,063 | ) | |||
Borrowings under revolving bank line of credit | 2,985,490 | 2,473,529 | |||||
Repayments on revolving bank line of credit | (2,985,490 | ) | (2,473,529 | ) | |||
Repayments on notes payable to Safeway | (890 | ) | (14,285 | ) | |||
Repayment of debt assumed in business acquisitions | (8,964 | ) | — | ||||
Proceeds from convertible debt | 500,000 | — | |||||
Payments for note hedges | (75,750 | ) | — | ||||
Proceeds from warrants | 47,000 | — | |||||
Proceeds from issuance of common stock from exercise of employee stock options and employee stock purchase plans | 10,302 | 13,817 | |||||
Other stock-based compensation related | (2,284 | ) | (1,729 | ) | |||
Repurchase of common stock | (34,843 | ) | — | ||||
Other | (156 | ) | (1,494 | ) | |||
Net cash provided by (used in) financing activities | 204,121 | (18,815 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (6,042 | ) | (10,521 | ) | |||
Increase in cash and cash equivalents | 93,549 | 2,961 | |||||
Cash and cash equivalents—beginning of year | 914,576 | 911,615 | |||||
Cash and cash equivalents—end of year | $ | 1,008,125 | $ | 914,576 | |||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | |||||||
Cash payments during the year for: | |||||||
Interest paid (net of amounts capitalized) | $ | 12,756 | $ | 11,691 | |||
Income taxes paid (refunds received) | $ | (2,854 | ) | $ | 13,880 | ||
Spin-Off income taxes paid (refunds received) funded by (remitted to) Safeway | $ | (890 | ) | $ | (14,285 | ) | |
Noncash investing and financing activities: | |||||||
Net deferred tax assets recognized for tax basis step-up with offset to Additional paid-in capital | $ | — | $ | 363,889 | |||
Notes payable to Safeway contributed to Additional paid-in capital | $ | — | $ | 8,229 | |||
Financing of business acquisition with contingent consideration | $ | 21,652 | $ | — | |||
Forgiveness of notes receivable and accrued interest as part of business acquisition | $ | 5,445 | $ | — | |||
Intangible assets recognized for the issuance of fully vested warrants | $ | — | $ | 3,147 | |||
Conversion of income tax payable and deferred taxes to (from) additional paid-in capital | $ | — | $ | (882 | ) |
TABLE 1: OTHER OPERATIONAL DATA | |||||||||||||||
16 Weeks Ended | 16 Weeks Ended | 52 Weeks Ended | 52 Weeks Ended | ||||||||||||
December 31, 2016 | January 2, 2016 | December 31, 2016 | January 2, 2016 | ||||||||||||
Transaction dollar volume | $ | 6,947,031 | $ | 6,964,390 | $ | 16,717,834 | $ | 16,624,633 | |||||||
Prepaid and processing revenues | $ | 693,661 | $ | 647,181 | $ | 1,652,072 | $ | 1,528,462 | |||||||
Prepaid and processing revenues as a % of transaction dollar volume | 10.0 | % | 9.3 | % | 9.9 | % | 9.2 | % | |||||||
Partner distribution expense as a % of prepaid and processing revenues | 56.4 | % | 58.7 | % | 56.5 | % | 57.2 | % |
TABLE 2: RECONCILIATION OF NON-GAAP MEASURES | |||||||||||||||
16 Weeks Ended | 16 Weeks Ended | 52 Weeks Ended | 52 Weeks Ended | ||||||||||||
December 31, 2016 | January 2, 2016 | December 31, 2016 | January 2, 2016 | ||||||||||||
Prepaid and processing revenues: | |||||||||||||||
Commissions and fees | $ | 565,062 | $ | 550,462 | $ | 1,315,755 | $ | 1,259,801 | |||||||
Program and other fees | 128,599 | 96,719 | 336,317 | 268,661 | |||||||||||
Total prepaid and processing revenues | $ | 693,661 | $ | 647,181 | $ | 1,652,072 | $ | 1,528,462 | |||||||
Adjusted operating revenues: | |||||||||||||||
Total operating revenues | $ | 780,550 | $ | 756,434 | $ | 1,899,778 | $ | 1,801,078 | |||||||
Partner distribution expense | (391,393 | ) | (379,850 | ) | (933,142 | ) | (874,043 | ) | |||||||
Marketing revenues | (42,200 | ) | (45,759 | ) | (94,298 | ) | (104,871 | ) | |||||||
Revenue adjustments from purchase accounting | 5,055 | 4,467 | 16,930 | 7,073 | |||||||||||
Adjusted operating revenues | $ | 352,012 | $ | 335,292 | $ | 889,268 | $ | 829,237 | |||||||
Adjusted EBITDA: | |||||||||||||||
Net income before allocation to non-controlling interests | $ | 24,878 | $ | 41,877 | $ | 5,038 | $ | 45,809 | |||||||
Interest and other (income) expense, net | 3,707 | 32 | 449 | 1,970 | |||||||||||
Interest expense | 7,996 | 4,605 | 21,864 | 13,171 | |||||||||||
Income tax expense | 14,782 | 22,361 | (4,102 | ) | 26,796 | ||||||||||
Depreciation and amortization | 38,340 | 23,950 | 110,424 | 73,349 | |||||||||||
EBITDA | 89,703 | 92,825 | 133,673 | 161,095 | |||||||||||
Adjustments to EBITDA: | |||||||||||||||
Employee stock-based compensation | 7,727 | 10,274 | 32,592 | 30,130 | |||||||||||
Acquisition-related employee compensation expense | (155 | ) | — | 465 | 3,218 | ||||||||||
Asset impairment | 5,500 | — | 5,500 | ||||||||||||
Revenue adjustments from purchase accounting | 4,510 | 4,467 | 15,624 | 7,073 | |||||||||||
Change in fair value of contingent consideration | — | — | 2,100 | (7,567 | ) | ||||||||||
Other (gains)/losses, net | — | — | (754 | ) | — | ||||||||||
Adjusted EBITDA | $ | 107,285 | $ | 107,566 | $ | 189,200 | $ | 193,949 | |||||||
Adjusted EBITDA margin: | |||||||||||||||
Total operating revenues | $ | 780,550 | $ | 756,434 | $ | 1,899,778 | $ | 1,801,078 | |||||||
Operating income | $ | 51,363 | $ | 68,875 | $ | 23,249 | $ | 87,746 | |||||||
Operating margin | 6.6 | % | 9.1 | % | 1.2 | % | 4.9 | % | |||||||
Adjusted operating revenues | $ | 352,012 | $ | 335,292 | $ | 889,268 | $ | 829,237 | |||||||
Adjusted EBITDA | $ | 107,285 | $ | 107,566 | $ | 189,200 | $ | 193,949 | |||||||
Adjusted EBITDA margin | 30.5 | % | 32.1 | % | 21.3 | % | 23.4 | % | |||||||
Adjusted net income: | |||||||||||||||
Income before income tax expense | $ | 39,660 | $ | 64,238 | $ | 936 | $ | 72,605 | |||||||
Employee stock-based compensation | 7,727 | 10,274 | 32,592 | 30,130 | |||||||||||
Acquisition-related employee compensation | (155 | ) | — | 465 | 3,218 | ||||||||||
Asset impairment | 5,500 | — | 5,500 | — | |||||||||||
Revenue adjustments from purchase accounting | 4,510 | 4,467 | 15,624 | 7,073 | |||||||||||
Change in fair value of contingent consideration | — | — | 2,100 | (7,567 | ) | ||||||||||
Amortization of intangibles | 23,057 | 10,732 | 62,045 | 32,366 | |||||||||||
Other (gains)/losses, net | 2,375 | — | (323 | ) | — | ||||||||||
Adjusted income before income tax expense | 82,674 | 89,711 | 118,939 | 137,825 | |||||||||||
Income tax expense (benefit) | 14,782 | 22,361 | (4,102 | ) | 26,796 | ||||||||||
Tax expense on adjustments | 10,586 | 8,519 | 40,691 | 21,144 | |||||||||||
Adjusted income tax expense | 25,368 | 30,880 | 36,589 | 47,940 | |||||||||||
Adjusted net income before allocation to non-controlling interests | 57,306 | 58,831 | 82,350 | 89,885 | |||||||||||
Net loss (income) attributable to non-controlling interests, net of tax | (228 | ) | (263 | ) | (380 | ) | (200 | ) | |||||||
Adjusted net income attributable to Blackhawk Network Holdings, Inc. | $ | 57,078 | $ | 58,568 | $ | 81,970 | $ | 89,685 |
TABLE 2: RECONCILIATION OF NON-GAAP MEASURES (continued) | |||||||||||||||
16 Weeks Ended | 16 Weeks Ended | 52 Weeks Ended | 52 Weeks Ended | ||||||||||||
December 31, 2016 | January 2, 2016 | December 31, 2016 | January 2, 2016 | ||||||||||||
Adjusted diluted earnings per share: | |||||||||||||||
Net income attributable to Blackhawk Network Holdings, Inc. | $ | 24,650 | $ | 41,614 | $ | 4,658 | $ | 45,609 | |||||||
Distributed and undistributed earnings allocated to participating securities | (27 | ) | (85 | ) | (28 | ) | (147 | ) | |||||||
Net income available for common shareholders | $ | 24,623 | $ | 41,529 | $ | 4,630 | $ | 45,462 | |||||||
Diluted weighted average shares outstanding | 56,966 | 56,900 | 57,260 | 56,313 | |||||||||||
Diluted earnings per share | $ | 0.43 | $ | 0.73 | $ | 0.08 | $ | 0.81 | |||||||
Adjusted net income attributable to Blackhawk Network Holdings, Inc. | $ | 57,078 | $ | 58,568 | $ | 81,970 | $ | 89,685 | |||||||
Adjusted distributed and undistributed earnings allocated to participating securities | (51 | ) | (117 | ) | (108 | ) | (247 | ) | |||||||
Adjusted net income available for common shareholders | $ | 57,027 | $ | 58,451 | $ | 81,862 | $ | 89,438 | |||||||
Diluted weighted average shares outstanding | 56,966 | 56,900 | 57,260 | 56,313 | |||||||||||
Increase in common share equivalents | — | — | — | — | |||||||||||
Adjusted diluted weighted-average shares outstanding | 56,966 | 56,900 | 57,260 | 56,313 | |||||||||||
Adjusted diluted earnings per share | $ | 1.00 | $ | 1.03 | $ | 1.43 | $ | 1.59 | |||||||
Reduction in income taxes payable: | |||||||||||||||
Reduction in income taxes payable resulting from amortization of spin-off tax basis step-up | $ | 9,424 | $ | 9,448 | $ | 29,191 | $ | 29,587 | |||||||
Reduction in income taxes payable from amortization of acquisition intangibles, utilization of acquired NOLs, deductible stock-based compensation and convertible debt | 5,094 | 7,250 | 29,103 | 25,591 | |||||||||||
Reduction in income taxes payable | $ | 14,518 | $ | 16,698 | $ | 58,294 | $ | 55,178 | |||||||
Adjusted diluted weighted average shares outstanding | 56,966 | 56,900 | 57,260 | 56,313 | |||||||||||
Reduction in income taxes payable per share | $ | 0.25 | $ | 0.29 | $ | 1.02 | $ | 0.98 |
52 Weeks Ended | 52 Weeks Ended | ||||||
December 31, 2016 | January 2, 2016 | ||||||
Net cash flow provided by operating activities | $ | 185,231 | $ | 204,680 | |||
Changes in settlement payables and consumer and customer deposits, net of settlement receivables | (39,755 | ) | (65,582 | ) | |||
Benefit from settlement timing | 16,995 | 41,035 | |||||
Adjust for: Safeway cash tax payment (refunded) | (890 | ) | (14,285 | ) | |||
Adjusted net cash flow provided by operating activities | 161,581 | 165,848 | |||||
Expenditures for property, equipment and technology | (52,332 | ) | (52,738 | ) | |||
Adjusted free cash flow | $ | 109,249 | $ | 113,110 | |||
Reconciliation of Adjusted EBITDA to Adjusted free cash flow: | |||||||
Adjusted EBITDA | $ | 189,200 | $ | 193,949 | |||
Less: Expenditures for property, equipment and technology | (52,332 | ) | (52,738 | ) | |||
Less: Interest paid | (12,756 | ) | (11,691 | ) | |||
Less: Cash taxes (paid)/refunded | 2,854 | (13,880 | ) | ||||
Less: Revenue adjustments from purchase price accounting, net | (15,624 | ) | (7,073 | ) | |||
Change in working capital and other | (19,088 | ) | (36,492 | ) | |||
Cash benefit from settlement timing | 16,995 | 41,035 | |||||
Adjusted free cash flow | $ | 109,249 | $ | 113,110 | |||
TABLE 4: FULL YEAR 2017 GUIDANCE - RECONCILIATION OF NON-GAAP MEASURES | |||||||
(In millions except per share amounts) | |||||||
Adjusted operating revenues: | Low | High | |||||
Total operating revenues | $ | 2,148 | $ | 2,312 | |||
Partner distribution expense | (1,052 | ) | (1,095 | ) | |||
Marketing revenues | (72 | ) | (80 | ) | |||
Revenue adjustments from purchase accounting | 4 | 4 | |||||
Adjusted operating revenues | $ | 1,028 | $ | 1,141 | |||
Adjusted EBITDA: | |||||||
Net income before allocation to non-controlling interests | $ | 22 | $ | 26 | |||
Interest and other (income) expense, net | 32 | 41 | |||||
Income tax expense | 13 | 17 | |||||
Depreciation and amortization | 116 | 121 | |||||
EBITDA | 183 | 205 | |||||
Adjustments to EBITDA: | |||||||
Employee stock-based compensation | 38 | 41 | |||||
Other adjustments | 4 | 4 | |||||
Adjusted EBITDA | $ | 225 | $ | 250 | |||
Adjusted net income: | |||||||
Income before income tax expense | $ | 33 | $ | 43 | |||
Employee stock-based compensation | 38 | 41 | |||||
Amortization of intangibles | 62 | 64 | |||||
Other | 4 | 4 | |||||
Adjusted income before income tax expense | 137 | 152 | |||||
Income tax expense | 13 | 17 | |||||
Tax expense on adjustments | 33 | 35 | |||||
Adjusted income tax expense | 46 | 52 | |||||
Adjusted net income | $ | 91 | $ | 100 | |||
Adjusted diluted earnings per share: | |||||||
Diluted earnings per share | $ | 0.35 | $ | 0.44 | |||
Employee stock-based compensation | 0.46 | 0.50 | |||||
Amortization of intangibles | 0.71 | 0.72 | |||||
Other | 0.04 | 0.04 | |||||
Adjusted diluted earnings per share | $ | 1.56 | $ | 1.70 |