Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Jul. 25, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | ALLIANCE DATA SYSTEMS CORP | |
Entity Central Index Key | 1,101,215 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 54,943,591 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
ASSETS | ||
Cash and cash equivalents | $ 3,449.2 | $ 4,190 |
Accounts receivable, net, less allowance for doubtful accounts ($5.7 and $6.7 at June 30, 2018 and December 31, 2017, respectively) | 691.6 | 822.3 |
Credit card and loan receivables: | ||
Credit card receivables – restricted for securitization investors | 13,524.9 | 14,293.9 |
Other credit card and loan receivables | 4,460 | 4,319.9 |
Total credit card and loan receivables | 17,984.9 | 18,613.8 |
Allowance for loan loss | (1,189) | (1,119.3) |
Credit card and loan receivables, net | 16,795.9 | 17,494.5 |
Credit card and loan receivables held for sale | 984.2 | 1,026.3 |
Inventories, net | 233.2 | 234.1 |
Other current assets | 352.6 | 348.9 |
Redemption settlement assets, restricted | 574.8 | 589.5 |
Total current assets | 23,081.5 | 24,705.6 |
Property and equipment, net | 620.9 | 613.9 |
Deferred tax asset, net | 82.6 | 28.1 |
Intangible assets, net | 667.8 | 800.6 |
Goodwill | 3,857.8 | 3,880.1 |
Other non-current assets | 640.3 | 656.5 |
Total assets | 28,950.9 | 30,684.8 |
LIABILITIES AND EQUITY | ||
Accounts payable | 532 | 651.2 |
Accrued expenses | 395.4 | 442.8 |
Current portion of deposits | 6,160.3 | 6,366.2 |
Current portion of non-recourse borrowings of consolidated securitization entities | 2,477.3 | 1,339.9 |
Current portion of long-term and other debt | 123 | 131.3 |
Other current liabilities | 291.8 | 368.7 |
Deferred revenue | 788.9 | 846.6 |
Total current liabilities | 10,768.7 | 10,146.7 |
Deferred revenue | 112 | 120.3 |
Deferred tax liability, net | 189.1 | 211.2 |
Deposits | 4,399 | 4,564.7 |
Non-recourse borrowings of consolidated securitization entities | 5,295.9 | 7,467.4 |
Long-term and other debt | 5,667.5 | 5,948.3 |
Other liabilities | 399.4 | 370.9 |
Total liabilities | 26,831.6 | 28,829.5 |
Commitments and contingencies | ||
Stockholders’ equity: | ||
Common stock, $0.01 par value; authorized, 200.0 shares; issued, 112.9 shares and 112.8 shares at June 30, 2018 and December 31, 2017, respectively | 1.1 | 1.1 |
Additional paid-in capital | 3,132.7 | 3,099.8 |
Treasury stock, at cost, 57.9 shares and 57.4 shares at June 30, 2018 and December 31, 2017, respectively | (5,371.7) | (5,272.5) |
Retained earnings | 4,493.6 | 4,167.1 |
Accumulated other comprehensive loss | (136.4) | (140.2) |
Total stockholders’ equity | 2,119.3 | 1,855.3 |
Total liabilities and equity | $ 28,950.9 | $ 30,684.8 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Millions, $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, net, allowance for doubtful accounts (in dollars) | $ 5.7 | $ 6.7 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized shares | 200 | 200 |
Common stock, issued shares | 112.9 | 112.8 |
Treasury stock, shares | 57.9 | 57.4 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Revenues | ||||
Services | $ 609.5 | $ 626.5 | $ 1,204.6 | $ 1,238.1 |
Redemption, net | 147.5 | 184.5 | 279.4 | 435.3 |
Finance charges, net | 1,146.9 | 1,010.8 | 2,304.1 | 2,027.4 |
Total revenue | 1,903.9 | 1,821.8 | 3,788.1 | 3,700.8 |
Operating expenses | ||||
Cost of operations (exclusive of depreciation and amortization disclosed separately below) | 1,001.6 | 1,014.4 | 2,015.5 | 2,056.5 |
Provision for loan loss | 311.9 | 288.1 | 649.6 | 603.2 |
General and administrative | 48.1 | 42.4 | 81.2 | 87 |
Depreciation and other amortization | 48.6 | 45.2 | 96.3 | 89.9 |
Amortization of purchased intangibles | 73.4 | 80.3 | 147.4 | 160.4 |
Total operating expenses | 1,483.6 | 1,470.4 | 2,990 | 2,997 |
Operating income | 420.3 | 351.4 | 798.1 | 703.8 |
Interest expense | ||||
Securitization funding costs | 55.2 | 36.6 | 107.3 | 71.8 |
Interest expense on deposits | 36.8 | 28.6 | 72.3 | 54.6 |
Interest expense on long-term and other debt, net | 73.7 | 72.3 | 145.3 | 136.3 |
Total interest expense, net | 165.7 | 137.5 | 324.9 | 262.7 |
Income before income taxes | 254.6 | 213.9 | 473.2 | 441.1 |
Provision for income taxes | 36.8 | 76.2 | 91.4 | 157 |
Net income | $ 217.8 | $ 137.7 | $ 381.8 | $ 284.1 |
Net income per share: | ||||
Basic (in dollars per share) (Note 3) | $ 3.94 | $ 2.48 | $ 6.90 | $ 5.07 |
Diluted (in dollars per share) (Note 3) | $ 3.93 | $ 2.47 | $ 6.87 | $ 5.05 |
Weighted average shares: | ||||
Basic (in shares) (Note 3) | 55.2 | 55.6 | 55.3 | 56 |
Diluted (in shares) (Note 3) | 55.4 | 55.8 | 55.5 | 56.3 |
Dividends declared per share: | $ 0.57 | $ 0.52 | $ 1.14 | $ 1.04 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Net income | $ 217.8 | $ 137.7 | $ 381.8 | $ 284.1 |
Other comprehensive income: | ||||
Unrealized loss on securities available-for-sale | (2.3) | (2.7) | (5.3) | (2) |
Tax benefit (expense) | 0.3 | (0.1) | 1.3 | (0.1) |
Unrealized loss on securities available-for-sale, net of tax | (2) | (2.8) | (4) | (2.1) |
Unrealized gain (loss) on cash flow hedges | 1.8 | (0.8) | 1.7 | (1.2) |
Tax benefit (expense) | (0.4) | 0.2 | (0.4) | 0.3 |
Unrealized gain (loss) on cash flow hedges, net of tax | 1.4 | (0.6) | 1.3 | (0.9) |
Unrealized gain (loss) on net investment hedges | 40.8 | (38.6) | 25.4 | (43.7) |
Tax benefit (expense) | (9.8) | 14.8 | (6.1) | 16.3 |
Unrealized gain (loss) on net investment hedges, net of tax | 31 | (23.8) | 19.3 | (27.4) |
Foreign currency translation adjustments | (30.3) | 34.5 | (12.8) | 39.5 |
Other comprehensive income, net of tax | 0.1 | 7.3 | 3.8 | 9.1 |
Total comprehensive income, net of tax | $ 217.9 | $ 145 | $ 385.6 | $ 293.2 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 381.8 | $ 284.1 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 243.7 | 250.3 |
Deferred income taxes | (82) | (61) |
Provision for loan loss | 649.6 | 603.2 |
Non-cash stock compensation | 46.3 | 45.2 |
Amortization of deferred financing costs | 25.5 | 21.2 |
Change in deferred revenue | (26) | (28.4) |
Change in other operating assets and liabilities | (61.1) | (162.7) |
Originations of credit card and loan receivables held for sale | (4,743.4) | (3,923.1) |
Sales of credit card and loan receivables held for sale | 4,791.9 | 3,920.7 |
Other | 95.5 | 73.1 |
Net cash provided by operating activities | 1,321.8 | 1,022.6 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Change in redemption settlement assets | (39.7) | (181.7) |
Change in credit card and loan receivables | (121.2) | (286.4) |
Proceeds from sale of credit card portfolio | 55.6 | |
Capital expenditures | (98.5) | (116.8) |
Purchases of other investments | (50.1) | (4.9) |
Maturities/sales of other investments | 10.6 | 33 |
Other | 7.1 | (4.2) |
Net cash used in investing activities | (236.2) | (561) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Borrowings under debt agreements | 2,399.1 | 5,856.9 |
Repayments of borrowings | (2,678.5) | (5,103.8) |
Non-recourse borrowings of consolidated securitization entities | 1,475 | 1,465 |
Repayments/maturities of non-recourse borrowings of consolidated securitization entities | (2,510) | (1,860) |
Net (decrease) increase in deposits | (373.2) | 332.1 |
Payment of deferred financing costs | (7.8) | (44.1) |
Dividends paid | (63.3) | (58) |
Purchase of treasury shares | (94.5) | (499.9) |
Other | (15.8) | (15.1) |
Net cash (used in) provided by financing activities | (1,869) | 73.1 |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (4.1) | 3.8 |
Change in cash, cash equivalents and restricted cash | (787.5) | 538.5 |
Cash, cash equivalents and restricted cash at beginning of period | 4,314.7 | 1,968.5 |
Cash, cash equivalents and restricted cash at end of period | 3,527.2 | 2,507 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ||
Interest paid | 347.5 | 251.1 |
Income taxes paid, net | $ 120.6 | $ 181.9 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The unaudited condensed consolidated financial statements included herein have been prepared by Alliance Data Systems Corporation (“ADSC” or, including its consolidated subsidiaries and variable interest entities (“VIEs”), the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on February 27, 2018. The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal, recurring adjustments) which are, in the opinion of management, necessary to state fairly the results for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the fiscal year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (1) the reported amounts of assets; (2) liabilities and disclosure of contingent assets and liabilities at the date of the financial statements; and (3) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. For purposes of comparability, certain prior period amounts have been reclassified to conform to the current year presentation in accordance with GAAP. Specifically, certain statement of cash flow reclassifications were made for the adoption of Accounting Standards Update (“ASU”) 2016-18, “Restricted Cash.” The following table provides a reconciliation of cash and cash equivalents to the total of the amounts reported in the unaudited condensed consolidated statements of cash flows: June 30, June 30, 2018 2017 (In millions) Cash and cash equivalents $ 3,449.2 $ 1,945.9 Restricted cash included within other current assets (1) 33.8 473.9 Restricted cash included within redemption settlement assets, restricted (2) 44.2 87.2 Total cash, cash equivalents and restricted cash $ 3,527.2 $ 2,507.0 (1) Includes $433.8 million in principal accumulation at June 30, 2017 for the repayment of non-recourse borrowings of consolidated securitized debt that matured in July 2017. (2) See Note 8, “Redemption Settlement Assets,” for additional information regarding nature of restrictions. Recently Issued Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, “Leases (Topic 842),” that replaces existing lease guidance. The new standard is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. The new guidance will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statements of income. ASU 2016-02 is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption and various optional practical expedients permitted. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements” that provides transition relief by removing certain comparative period requirements and recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, which is January 1, 2019 for the Company. The new standard may be applied using this additional transition method or a modified retrospective approach. The Company is evaluating the impact that adoption of ASU 2016-02 will have on its consolidated financial statements, but expects an increase in assets and liabilities on its consolidated balance sheets at adoption for the recording of right-of-use assets and corresponding lease liabilities. The Company continues to assess the impact of adoption of the new standard on its existing policies, processes, systems and controls in conjunction with its review of existing lease agreements. In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires entities to utilize a financial instrument impairment model to establish an allowance based on expected losses over the life of the exposure rather than a model based on an incurred loss approach. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance. In addition, ASU 2016-13 modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted beginning after December 15, 2018. The Company is evaluating the impact that adoption of ASU 2016-13 will have on its consolidated financial statements. In August 2017, the FASB issued ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities.” ASU 2017-12 expands and refines the hedge accounting model for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedged items in the financial statements, and makes certain targeted improvements to simplify the application of hedge accounting guidance related to the assessment of hedge effectiveness. ASU 2017-12 is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is evaluating the impact that adoption of ASU 2017-12 will have on its consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” ASU 2018-02 allows for reclassification of stranded tax effects on items resulting from the change in the corporate tax rate as a result of H.R. 1, originally known as the Tax Cuts and Jobs Act of 2017, from accumulated other comprehensive income to retained earnings. Tax effects unrelated to H.R. 1 are permitted to be released from accumulated other comprehensive income using either the specific identification approach or the portfolio approach, based on the nature of the underlying item. ASU 2018-02 is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company is evaluating the impact that adoption of ASU 2018-02 will have on its consolidated financial statements. Recently Adopted Accounting Standards In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” Accounting Standards Codification (“ASC”) 606, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Companies may adopt ASC 606 using a full retrospective or modified retrospective method. During 2017, the Company completed its evaluation of ASC 606, including the impact on its processes and controls, and differences in the timing and/or method of revenue recognition. As a result, the Company identified changes to and modified certain of its accounting policies and practices. Although there were no significant changes to the Company’s accounting systems or controls upon adoption of ASC 606, the Company modified certain of its existing controls to incorporate the revisions made to its accounting policies and practices. The Company adopted the standard on January 1, 2018 using the modified retrospective method. The Company’s adoption of this standard did not have a material impact on its consolidated results of operations or cash flows. ASC 606 does not apply to financial instruments and other contractual rights or obligations (for example, interest income and late fees from credit card and loan receivables), and therefore, the Company’s finance charges, net were not affected by the adoption of the standard. Most revenue streams are recorded consistently under both ASC 605, “Revenue Recognition” and the new standard; however, the Company noted the following impacts: · Upon the adoption of ASC 606, revenue associated with a database build was changed from recognizing revenue over the expected contract term upon client acceptance to over the build period in which the database is completed, because the Company’s performance does not create an asset with an alternative use and the Company has an enforceable right to payment for performance completed to date. The cumulative effect of the changes made to the consolidated January 1, 2018 balance sheet for the adoption of ASC 606 resulted in an increase in unbilled accounts receivable and accrued expenses, a reduction in deferred costs and deferred revenue and a net increase in retained earnings as follows: Balance at Adjustments Balance at December 31, due to January 1, 2017 ASC 606 2018 Consolidated Balance Sheet (In millions) Accounts receivable, net $ 822.3 $ 22.4 $ 844.7 Other current assets 348.9 (16.6) 332.3 Other non-current assets 656.5 (20.9) 635.6 Total Assets: 1,827.7 (15.1) 1,812.6 Accrued expenses 442.8 3.2 446.0 Other current liabilities 368.7 (14.3) 354.4 Other liabilities 370.9 (13.6) 357.3 Total Liabilities: 1,182.4 (24.7) 1,157.7 Retained earnings 4,167.1 9.6 4,176.7 · Further, ASC 606 impacted the presentation of revenue within the Company’s coalition loyalty program. Upon the adoption of ASC 606, for the fulfillment of certain rewards where the AIR MILES ® Reward Program does not control the goods or services before they are transferred to the collector, revenue is recorded on a net basis. · ASC 606 also requires expanded disclosure regarding the nature, timing, and uncertainty of revenue transactions. See Note 2, “Revenue,” for the Company’s ASC 606 disclosures. In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 requires that equity investments be measured at fair value with changes in fair value recognized in net income. For equity investments without readily determinable fair values, entities have the option to either measure these investments at fair value or at cost adjusted for changes in observable prices minus impairment. Additionally, ASU 2016-01 requires entities that elect the fair value option for financial liabilities to recognize changes in fair value related to instrument-specific credit risk in other comprehensive income. Finally, entities must assess valuation allowances for deferred tax assets related to available-for-sale debt securities in combination with their other deferred tax assets. ASU 2016-01 is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard on January 1, 2018, resulting in a cumulative-effect adjustment of $1.5 million that was reclassified from accumulated other comprehensive loss to retained earnings on the consolidated January 1, 2018 balance sheet. In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments.” ASU 2016-15 makes eight targeted changes to how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company’s adoption of this standard on January 1, 2018 did not have a material impact on its consolidated statements of cash flows. In November 2016, the FASB issued ASU 2016-18, “Restricted Cash.” ASU 2016-18 requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. ASU 2016-18 is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard on January 1, 2018. The effect of the adoption of the standard was to include restricted cash and restricted cash equivalents at the beginning-of-period and end-of-period cash and cash equivalents totals. |
REVENUE
REVENUE | 6 Months Ended |
Jun. 30, 2018 | |
REVENUE | |
REVENUE | 2. REVENUE Effective January 1, 2018, the Company adopted ASC 606, “Revenue from Contracts with Customers,” applying the modified retrospective method to those contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC 605. ASC 606 does not apply to financial instruments and other contractual rights or obligations. Under ASC 606, revenue is recognized when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company’s contracts with its customers state the terms of sale, including the description, quantity, and price of the product or service purchased. Payment terms can vary by contract, but the period between invoicing and when payment is due is not significant. Taxes assessed on revenue-producing transactions are excluded from revenues. The Company’s products and services are reported under three segments—LoyaltyOne, Epsilon and Card Services, and are listed below. The following presents revenue disaggregated by major source, as well as geographic region which is based on the location of the subsidiary that generally correlates with the location of the customer: Corporate/ Three Months Ended June 30, 2018 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Disaggregation of Revenue by Major Source: Coalition loyalty program $ 92.5 $ — $ — $ — $ — $ 92.5 Short-term loyalty programs 130.3 — — — — 130.3 Technology services — 255.1 — — (5.3) 249.8 Digital Media services — 179.3 — — (1.3) 178.0 Agency services — 79.8 — — (0.9) 78.9 Servicing fees, net — — 1.6 — — 1.6 Other 22.9 — — 0.2 (0.1) 23.0 Revenue from contracts with customers $ 245.7 $ 514.2 $ 1.6 $ 0.2 $ (7.6) $ 754.1 Finance charges, net — — 1,146.9 — — 1,146.9 Investment income 2.9 — — — — 2.9 Total $ 248.6 $ 514.2 $ 1,148.5 $ 0.2 $ (7.6) $ 1,903.9 Corporate/ Six Months Ended June 30, 2018 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Disaggregation of Revenue by Major Source: Coalition loyalty program $ 182.4 $ — $ — $ — $ — $ 182.4 Short-term loyalty programs 244.4 — — — — 244.4 Technology services — 501.1 — — (11.7) 489.4 Digital Media services — 357.5 — — (1.6) 355.9 Agency services — 165.0 — — (1.0) 164.0 Servicing fees, net — — (0.4) — — (0.4) Other 42.5 — — 0.3 (0.1) 42.7 Revenue from contracts with customers $ 469.3 $ 1,023.6 $ (0.4) $ 0.3 $ (14.4) $ 1,478.4 Finance charges, net — — 2,304.1 — — 2,304.1 Investment income 5.6 — — — — 5.6 Total $ 474.9 $ 1,023.6 $ 2,303.7 $ 0.3 $ (14.4) $ 3,788.1 Corporate/ Three Months Ended June 30, 2018 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Disaggregation of Revenue by Geographic Region: United States $ 6.3 $ 491.4 $ 1,148.5 $ 0.2 $ (7.4) $ 1,639.0 Canada 105.4 4.5 — — (0.1) 109.8 Europe, Middle East and Africa 91.1 16.2 — — (0.1) 107.2 Asia Pacific 28.9 2.1 — — — 31.0 Other 16.9 — — — — 16.9 Total $ 248.6 $ 514.2 $ 1,148.5 $ 0.2 $ (7.6) $ 1,903.9 Corporate/ Six Months Ended June 30, 2018 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Disaggregation of Revenue by Geographic Region: United States $ 12.0 $ 977.9 $ 2,303.7 $ 0.3 $ (14.2) $ 3,279.7 Canada 211.0 8.2 — — (0.1) 219.1 Europe, Middle East and Africa 188.1 33.0 — — (0.1) 221.0 Asia Pacific 45.5 4.5 — — — 50.0 Other 18.3 — — — — 18.3 Total $ 474.9 $ 1,023.6 $ 2,303.7 $ 0.3 $ (14.4) $ 3,788.1 LoyaltyOne LoyaltyOne provides coalition and short-term loyalty programs through the Company’s Canadian AIR MILES Reward Program and BrandLoyalty. The AIR MILES Reward Program is a coalition loyalty program for sponsors, who pay LoyaltyOne a fee per AIR MILES reward mile issued, in return for which LoyaltyOne provides all marketing, customer service, rewards and redemption management. BrandLoyalty designs, implements, conducts and evaluates innovative and tailor-made short-term loyalty programs for grocers worldwide. Total consideration from the issuance of AIR MILES reward miles is allocated to three performance obligations: redemption, service, and brand, based on a relative standalone selling price basis. The estimated standalone selling price for the redemption and the service performance obligations are based on cost plus a reasonable margin. The estimated standalone selling price of the brand performance obligation is determined using a relief from royalty approach. Accordingly, management determines the estimated standalone selling price by considering multiple inputs and methods, including discounted cash flows and available market data in consideration of applicable margins and royalty rates to utilize. The number of AIR MILES reward miles issued and redeemed are factored into the estimates, as management estimates the standalone selling prices and volumes over the term of the respective agreements in order to determine the allocation of consideration to each performance obligation delivered. The redemption performance obligation incorporates the expected number of AIR MILES reward miles to be redeemed, and therefore, the amount of redemption revenue recognized is subject to management’s estimate of breakage, or those AIR MILES reward miles estimated to be unredeemed by the collector base. Redemption revenue is recognized at a point in time, as the AIR MILES reward miles are redeemed. For the fulfillment of certain rewards where the AIR MILES Reward Program does not control the goods or services before they are transferred to the collector, revenue is recorded on a net basis. Service revenue is recognized over time using a time-elapsed output method, the estimated life of an AIR MILES reward mile. Revenue from the brand is recognized over time, using an output method, when an AIR MILES reward mile is issued. Revenue associated with both the service and brand is included in service revenue in the Company’s consolidated statements of income. The amount of revenue recognized in a period is subject to the estimate of breakage and the estimated life of an AIR MILES reward mile. Breakage and the life of an AIR MILES reward mile are based on management’s estimate after viewing and analyzing various historical trends including vintage analysis, current run rates and other pertinent factors, such as the impact of macroeconomic factors and changes in the program structure. As of June 30, 2018, the breakage rate was 20% and the estimated life of an AIR MILES reward mile was 38 months. The short-term loyalty programs typically last between 12 and 20 weeks, depending on the nature of the program, with contract terms usually less than one year in length. These programs are tailored for the specific retailer client and are designed to reward key customer segments based on their spending levels during defined campaign periods. Revenue is recognized at the point in time control passes from BrandLoyalty to the retailer. Contract Liabilities . The Company records a contract liability when cash payments are received in advance of its performance, which applies to the service and redemption of an AIR MILES reward mile and the reward products for its short-term loyalty programs. A reconciliation of contract liabilities for the AIR MILES Reward Program is as follows: Deferred Revenue Service Redemption Total (In millions) Balance at January 1, 2018 $ 283.8 $ 683.1 $ 966.9 Cash proceeds 94.7 157.7 252.4 Revenue recognized (1) (109.5) (169.3) (278.8) Other — 0.5 0.5 Effects of foreign currency translation (11.6) (28.5) (40.1) Balance at June 30, 2018 $ 257.4 $ 643.5 $ 900.9 Amounts recognized in the consolidated balance sheets: Deferred revenue (current) $ 145.4 $ 643.5 $ 788.9 Deferred revenue (non-current) $ 112.0 $ — $ 112.0 (1) Reported on a gross basis herein. The deferred redemption obligation associated with the AIR MILES Reward Program is effectively due on demand from the collector base, thus the timing of revenue recognition is based on the redemption by the collector. Service revenue is amortized over the expected life of a mile, with the deferred revenue balance expected to be recognized into revenue in the amount of $86.8 million in 2018, $104.0 million in 2019, $55.1 million in 2020, and $11.5 million in 2021. Additionally, contract liabilities for the Company’s short-term loyalty programs are recognized in other current liabilities in the Company’s unaudited condensed consolidated balance sheets. The beginning balance as of January 1, 2018 was $87.5 million and the closing balance as of June 30, 2018 was $65.7 million, with the change due to revenue recognized of approximately $190.6 million during the six months ended June 30, 2018, offset in part by cash payments received in advance of program performance. Epsilon Epsilon is a leading marketing services firm providing end-to-end, integrated marketing solutions that leverage rich data, analytics, creativity and technology to help clients more effectively acquire, retain and grow relationships with their customers. The Company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each good or service that is distinct. Epsilon’s product offerings and the associated performance obligations for each product are as follows: Product Performance Obligation Recognition Basis of Revenue Recognition Technology services Professional services Over time Recognized over time as the services are performed. Email deployment Point in time Recognized at deployment. Customer lifecycle marketing Point in time Recognized at delivery. Digital Media services Digital campaign advertisement Over time Recognized on an output measure of the digital advertisement. Affiliate marketing advertisements Point in time Recognized at delivery. Data lists Point in time Recognized at delivery. Agency services Professional services Over time Recognized over time as the services are performed. Epsilon generally enters into multi-year agreements with its customers; however, these contracts provide for termination without penalty with prior written notice. Under ASC 606, this results in a contract term shorter than the stated contractual term. The Company’s contracts with customers may include multiple performance obligations. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. If the standalone selling price is not directly observable, the Company estimates the standalone selling price based on either the adjusted market assessment or cost plus a margin approach. Certain of Epsilon’s contracts may provide for returns or cash consideration payable to its customers, which is accounted for as variable consideration. The Company estimates these amounts based on either the expected amount or most likely amount to be provided to the customer to determine the transaction price for the contract. The estimation method is consistent for contracts with similar terms and is applied consistently throughout each contract. The estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of the anticipated performance and all information that is reasonably available. The Company generates revenue from commission fees for transactions occurring on the Company’s affiliate marketing networks. Commission fee revenue is recognized on a net basis as the Company acts as an agent. Contract Liabilities. The Company records a contract liability when cash payments are received or due in advance of its performance. Contract liabilities for Epsilon are recognized in other current liabilities and other liabilities in the Company’s unaudited condensed consolidated balance sheets. The beginning balance as of January 1, 2018 was $22.8 million and the closing balance as of June 30, 2018 was $23.7 million. Contract Costs . The Company recognizes an asset for the direct costs incurred to fulfill its contracts with customers to the extent it expects to recover those costs in accordance with ASC 340-40, “Other Assets and Deferred Costs – Contracts with Customers.” As of June 30, 2018, the remaining unamortized contract costs were $6.1 million. Contract fulfillment costs are generally deferred and amortized on a straight-line basis through the period in which the future performance obligation is satisfied. No impairment was recognized during the periods presented. Card Services Card Services is a provider of branded credit card programs, both private label and co-brand, which drives sales for its brand partners. For these private label and co-brand programs, Card Services provides risk management solutions, account origination, funding, transaction processing, customer care, collections and marketing services. Finance charges, net . Finance charges, net represents revenue earned on customer accounts owned by the Company, and is recognized in the period in which it is earned. The Company recognizes earned finance charges, interest income and fees on credit card and loan receivables in accordance with the contractual provisions of the credit arrangements. Interest and fees continue to accrue on all credit card accounts beyond 90 days, except in limited circumstances, until the credit card account balance and all related interest and other fees are paid or charged-off, typically at 180 days delinquent. Charge-offs for unpaid interest and fees as well as any adjustments to the allowance associated with unpaid interest and fees are recorded as a reduction to finance charges, net. Pursuant to ASC 310-20, “Receivables - Nonrefundable Fees and Other Costs,” direct loan origination costs on credit card and loan receivables are deferred and amortized on a straight-line basis over a one-year period and recorded as a reduction to finance charges, net. Servicing fees, net . Servicing fees, net represents revenue earned from retailers and cardholders from processing and servicing accounts, and is recognized as such services are performed. Revenue earned from retailers primarily consists of merchant and interchange fees, which are transaction fees charged to the merchant for the processing of credit card transactions. Merchant and interchange fees are recognized at a point in time upon the cardholder purchase. Our credit card program agreements may also provide for payments to the retailer based on purchased volume or if certain contractual incentives are met, such as if the economic performance of the program exceeds a contractually defined threshold. These amounts are recorded as a reduction of revenue. Revenue earned from cardholders primarily consists of monthly fees from the purchase of certain payment protection products purchased by our cardholders. The fees are based on the average cardholder account balance, and these products can be cancelled at any time by the cardholder. Revenue is recognized over time using a time-elapsed output method. Contract Costs. The Company recognizes an asset for the incremental costs of obtaining or fulfilling a contract with the retailer for a credit card program agreement to the extent it expects to recover those costs, in accordance with ASC 340-40. As of June 30, 2018, the remaining unamortized contract costs were $386.8 million and are included in other current assets and other non-current assets in the Company’s unaudited condensed consolidated balance sheets. Contract costs are deferred and amortized on a straight-line basis over the respective term of the agreement, which represents the period of service. Depending on the nature of the contract costs, the amortization is recorded as a reduction to revenue, or costs of operations, in the Company’s unaudited condensed consolidated statements of income. Amortization of contract costs recorded as a reduction to revenue totaled $15.4 million and $32.6 million for the three and six months ended June 30, 2018, respectively. Amortization of contract costs recorded to cost of operations expense totaled $2.1 million and $4.6 million for the three and six months ended June 30, 2018, respectively. No impairment was recognized during the periods presented. Practical Expedients The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which the Company has the right to invoice for services performed. The Company has elected the practical expedient from ASC 340-40 with respect to contract costs, and expenses the incremental costs as incurred for those costs that would otherwise be recognized with an amortization period of one year or less. These costs are primarily related to sales commissions, and such expensed incremental costs are recorded to cost of operations expense in the Company’s unaudited condensed consolidated statements of income. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 6 Months Ended |
Jun. 30, 2018 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 3. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted net income per share for the periods indicated: Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 (In millions except per share amounts) Numerator: Net income $ 217.8 $ 137.7 $ 381.8 $ 284.1 Denominator: Weighted average shares, basic 55.2 55.6 55.3 56.0 Weighted average effect of dilutive securities: Net effect of dilutive stock options and unvested restricted stock 0.2 0.2 0.2 0.3 Denominator for diluted calculation 55.4 55.8 55.5 56.3 Basic net income per share $ 3.94 $ 2.48 $ 6.90 $ 5.07 Diluted net income per share $ 3.93 $ 2.47 $ 6.87 $ 5.05 For the three and six months ended June 30, 2018 and 2017, a de minimis amount of restricted stock units was excluded from each calculation of weighted average dilutive common shares as the effect would have been anti-dilutive. |
ACQUISITIONS
ACQUISITIONS | 6 Months Ended |
Jun. 30, 2018 | |
ACQUISITIONS | |
ACQUISITIONS | 4. ACQUISITIONS 2017 Acquisitions: On October 20, 2017, the Company acquired credit card receivables and the associated accounts and assumed a portion of an existing customer care operation, including a facility sublease agreement and approximately 250 employees, from Signet Jewelers Limited (“Signet”) for cash consideration of approximately $945.6 million. This acquisition increases the Company’s presence in the jewelry vertical. The Company determined these acquired activities and assets constituted a business under ASC 805, “Business Combinations,” based on the nature of the inputs, processes and outputs acquired from the transaction. In addition, the parties entered into a long-term agreement under which the Company became the primary issuer of private-label credit cards and related marketing services for Signet. The Company obtained control of the assets and assumed the liabilities on October 20, 2017, and the results of operations have been included since the date of acquisition in the Company’s Card Services segment. The Company engaged a third party specialist to assist it in the measurement of the fair value of the assets acquired. The fair value of the assets acquired exceeded the cost of the acquisition. Consequently, the Company reassessed the recognition and measurement of the identifiable assets acquired and liabilities assumed and concluded that the valuation procedures and resulting measures were appropriate. The excess value of the net assets acquired over the purchase price of $7.9 million was recorded as a bargain purchase gain, which was included in cost of operations in the Company’s consolidated statement of income for the year ended December 31, 2017. The following table summarizes the fair values of the assets acquired and the liabilities assumed in the Signet acquisition as of October 20, 2017: As of (In millions) Credit card receivables $ 906.3 Intangible assets 52.3 Total assets acquired 958.6 Other liabilities 0.2 Deferred tax liability 4.9 Total liabilities assumed 5.1 Net assets acquired $ 953.5 Total consideration paid 945.6 Gain on business combination $ 7.9 |
CREDIT CARD AND LOAN RECEIVABLE
CREDIT CARD AND LOAN RECEIVABLES | 6 Months Ended |
Jun. 30, 2018 | |
CREDIT CARD AND LOAN RECEIVABLES | |
CREDIT CARD AND LOAN RECEIVABLES | 5. CREDIT CARD AND LOAN RECEIVABLES The Company’s credit card and loan receivables are the only portfolio segment or class of financing receivables. Quantitative information about the components of credit card and loan receivables is presented in the table below: June 30, December 31, 2018 2017 (In millions) Principal receivables $ 17,072.4 $ 17,705.1 Billed and accrued finance charges 871.2 887.0 Other 41.3 21.7 Total credit card and loan receivables 17,984.9 18,613.8 Less: Credit card receivables – restricted for securitization investors 13,524.9 14,293.9 Other credit card and loan receivables $ 4,460.0 $ 4,319.9 Allowance for Loan Loss The Company maintains an allowance for loan loss at a level that is appropriate to absorb probable losses inherent in credit card and loan receivables. The allowance for loan loss covers forecasted uncollectible principal as well as unpaid interest and fees. The allowance for loan loss is evaluated monthly for appropriateness. In estimating the allowance for principal loan losses, management utilizes a migration analysis of delinquent and current credit card and loan receivables. Migration analysis is a technique used to estimate the likelihood that a credit card or loan receivable will progress through the various stages of delinquency and to charge-off. The allowance is maintained through an adjustment to the provision for loan loss. Charge-offs of principal amounts, net of recoveries are deducted from the allowance. In estimating the allowance for uncollectible unpaid interest and fees, the Company utilizes historical charge-off trends, analyzing actual charge-offs for the prior three months. The allowance is maintained through an adjustment to finance charges, net. In evaluating the allowance for loan loss for both principal and unpaid interest and fees, management also considers factors that may impact loan loss experience, including seasoning and growth, account collection strategies, economic conditions, bankruptcy filings, policy changes, payment rates and forecasting uncertainties. The following table presents the Company’s allowance for loan loss for the periods indicated: Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 (In millions) Balance at beginning of period $ 1,169.3 $ 1,020.2 $ 1,119.3 $ 948.0 Provision for loan loss 311.9 288.1 649.6 603.2 Allowance associated with credit card and loan receivables transferred to held for sale (5.2) — (11.8) — Change in estimate for uncollectible unpaid interest and fees (5.0) 5.0 10.0 10.0 Recoveries 48.8 53.9 80.1 101.8 Principal charge-offs (330.8) (297.9) (658.2) (593.7) Balance at end of period $ 1,189.0 $ 1,069.3 $ 1,189.0 $ 1,069.3 Net charge-offs include the principal amount of losses from credit cardholders unwilling or unable to pay their account balances, as well as bankrupt and deceased credit cardholders, less recoveries and exclude charged-off interest, fees and fraud losses. Charged‑off interest and fees reduce finance charges, net while fraud losses are recorded as an expense. Credit card and loan receivables, including unpaid interest and fees, are charged-off in the month during which an account becomes 180 days contractually past due, except in the case of customer bankruptcies or death. Credit card and loan receivables, including unpaid interest and fees, associated with customer bankruptcies or death are charged-off in each month subsequent to 60 days after the receipt of notification of the bankruptcy or death, but in any case, not later than the 180-day contractual time frame. The Company records the actual charge-offs for unpaid interest and fees as a reduction to finance charges, net. Actual charge-offs for unpaid interest and fees were $182.0 million and $160.7 million for the three months ended June 30, 2018 and 2017, respectively, and $381.5 million and $317.3 million for the six months ended June 30, 2018 and 2017, respectively. Delinquencies A credit card account is contractually delinquent if the Company does not receive the minimum payment by the specified due date on the cardholder’s statement. It is the Company’s policy to continue to accrue interest and fee income on all credit card accounts beyond 90 days, except in limited circumstances, until the credit card account balance and all related interest and other fees are paid or charged-off, typically at 180 days delinquent. When an account becomes delinquent, a message is printed on the credit cardholder’s billing statement requesting payment. After an account becomes 30 days past due, a proprietary collection scoring algorithm automatically scores the risk of the account becoming further delinquent. The collection system then recommends a collection strategy for the past due account based on the collection score and account balance and dictates the contact schedule and collections priority for the account. If the Company is unable to make a collection after exhausting all in-house collection efforts, the Company may engage collection agencies and outside attorneys to continue those efforts. The following table presents the delinquency trends of the Company’s credit card and loan receivables portfolio: June 30, % of December 31, % of 2018 Total 2017 Total (In millions, except percentages) Receivables outstanding - principal $ 17,072.4 100.0 % $ 17,705.1 100.0 % Principal receivables balances contractually delinquent: 31 to 60 days 304.3 1.8 % 301.5 1.7 % 61 to 90 days 210.9 1.2 191.3 1.1 91 or more days 419.9 2.5 409.6 2.3 Total $ 935.1 5.5 % $ 902.4 5.1 % Modified Credit Card Receivables The Company holds certain credit card receivables for which the terms have been modified. The Company’s modified credit card receivables include credit card receivables for which temporary hardship concessions have been granted and credit card receivables in permanent workout programs. These modified credit card receivables include concessions consisting primarily of a reduced minimum payment and an interest rate reduction. The temporary programs’ concessions remain in place for a period no longer than twelve months, while the permanent programs remain in place through the payoff of the credit card receivables if the credit cardholder complies with the terms of the program. These concessions do not include the forgiveness of unpaid principal, but may involve the reversal of certain unpaid interest or fee assessments. In the case of the temporary programs, at the end of the concession period, credit card receivable terms revert to standard rates. These arrangements are automatically terminated if the customer fails to make payments in accordance with the terms of the program, at which time their account reverts back to its original terms. Credit card receivables for which temporary hardship and permanent concessions were granted are each considered troubled debt restructurings and are collectively evaluated for impairment. Modified credit card receivables are evaluated at their present value with impairment measured as the difference between the credit card receivable balance and the discounted present value of cash flows expected to be collected. Consistent with the Company’s measurement of impairment of modified credit card receivables on a pooled basis, the discount rate used for credit card receivables is the average current annual percentage rate the Company applies to non-impaired credit card receivables, which approximates what would have been applied to the pool of modified credit card receivables prior to impairment. In assessing the appropriate allowance for loan loss, these modified credit card receivables are included in the general pool of credit card receivables with the allowance determined under the contingent loss model of ASC 450-20, “Loss Contingencies.” If the Company applied accounting under ASC 310-40, “Troubled Debt Restructurings by Creditors,” to the modified credit card receivables in these programs, there would not be a material difference in the allowance for loan loss. The Company had $347.9 million and $260.2 million, respectively, as a recorded investment in impaired credit card receivables with an associated allowance for loan loss of $97.3 million and $56.1 million, respectively, as of June 30, 2018 and December 31, 2017. These modified credit card receivables represented less than 2% of the Company’s total credit card receivables as of both June 30, 2018 and December 31, 2017. The average recorded investment in impaired credit card receivables was $423.3 million and $219.2 million for the three months ended June 30, 2018 and 2017, respectively, and $359.8 million and $216.7 million for the six months ended June 30, 2018 and 2017, respectively. Interest income on these modified credit card receivables is accounted for in the same manner as other accruing credit card receivables. Cash collections on these modified credit card receivables are allocated according to the same payment hierarchy methodology applied to credit card receivables that are not in such programs. The Company recognized $9.3 million and $4.8 million for the three months ended June 30, 2018 and 2017, respectively, and $15.3 million and $9.5 million for the six months ended June 30, 2018 and 2017, respectively, in interest income associated with modified credit card receivables during the period that such credit card receivables were impaired. The following tables provide information on credit card receivables that are considered troubled debt restructurings as described above, which entered into a modification program during the specified periods: Three Months Ended June 30, 2018 Six Months Ended June 30, 2018 Pre-modification Post-modification Pre-modification Post-modification Number of Outstanding Outstanding Number of Outstanding Outstanding Restructurings Balance Balance Restructurings Balance Balance (Dollars in millions) Troubled debt restructurings – credit card receivables 70,236 $ 101.8 $ 101.6 350,308 $ 414.3 $ 413.8 Three Months Ended June 30, 2017 Six Months Ended June 30, 2017 Pre-modification Post-modification Pre-modification Post-modification Number of Outstanding Outstanding Number of Outstanding Outstanding Restructurings Balance Balance Restructurings Balance Balance (Dollars in millions) Troubled debt restructurings – credit card receivables 47,624 $ 60.9 $ 60.9 92,872 $ 119.6 $ 119.5 The tables below summarize troubled debt restructurings that have defaulted in the specified periods where the default occurred within 12 months of their modification date: Three Months Ended Six Months Ended June 30, 2018 June 30, 2018 Number of Outstanding Number of Outstanding Restructurings Balance Restructurings Balance (Dollars in millions) Troubled debt restructurings that subsequently defaulted – credit card receivables 174,835 $ 192.5 203,595 $ 227.5 Three Months Ended Six Months Ended June 30, 2017 June 30, 2017 Number of Outstanding Number of Outstanding Restructurings Balance Restructurings Balance (Dollars in millions) Troubled debt restructurings that subsequently defaulted – credit card receivables 24,060 $ 29.5 50,681 $ 61.6 Age of Credit Card and Loan Receivable Accounts The following tables set forth, as of June 30, 2018 and December 31, 2017, the number of active credit card and loan receivable accounts with balances and the related principal balances outstanding, based upon the age of the active credit card and loan receivable accounts from origination: June 30, 2018 Percentage of Number of Percentage of Principal Principal Active Accounts Active Accounts Receivables Receivables Age of Accounts Since Origination with Balances with Balances Outstanding Outstanding (In millions, except percentages) 0-12 Months 6.4 26.8 % $ 3,735.3 21.9 % 13-24 Months 4.2 17.9 3,049.4 17.9 25-36 Months 2.8 11.9 2,243.3 13.1 37-48 Months 2.3 9.6 1,948.9 11.4 49-60 Months 1.5 6.5 1,276.9 7.5 Over 60 Months 6.5 27.3 4,818.6 28.2 Total 23.7 100.0 % $ 17,072.4 100.0 % December 31, 2017 Percentage of Number of Percentage of Principal Principal Active Accounts Active Accounts Receivables Receivables Age of Accounts Since Origination with Balances with Balances Outstanding Outstanding (In millions, except percentages) 0-12 Months 7.4 27.3 % $ 4,110.0 23.2 % 13-24 Months 4.5 16.4 3,011.3 17.0 25-36 Months 3.2 11.7 2,357.1 13.3 37-48 Months 2.4 8.8 1,837.0 10.4 49-60 Months 1.7 6.3 1,280.8 7.2 Over 60 Months 8.1 29.5 5,108.9 28.9 Total 27.3 100.0 % $ 17,705.1 100.0 % Credit Quality The Company uses proprietary scoring models developed specifically for the purpose of monitoring the Company’s obligor credit quality. The proprietary scoring models are used as a tool in the underwriting process and for making credit decisions. The proprietary scoring models are based on historical data and require various assumptions about future performance, which the Company updates periodically. Information regarding customer performance is factored into these proprietary scoring models to determine the probability of an account becoming 91 or more days past due at any time within the next 12 months. Obligor credit quality is monitored at least monthly during the life of an account. The following table reflects the composition of the Company’s credit card and loan receivables by obligor credit quality as of June 30, 2018 and December 31, 2017: June 30, 2018 December 31, 2017 Percentage of Percentage of Total Principal Principal Total Principal Principal Probability of an Account Becoming 91 or More Days Past Receivables Receivables Receivables Receivables Due or Becoming Charged-off (within the next 12 months) Outstanding Outstanding Outstanding Outstanding (In millions, except percentages) No Score $ 174.6 1.0 % $ 210.6 1.2 % 27.1% and higher 1,409.3 8.3 1,330.5 7.5 17.1% - 27.0% 833.0 4.9 850.5 4.8 12.6% - 17.0% 1,106.0 6.5 1,137.7 6.4 3.7% - 12.5% 6,953.3 40.7 7,449.7 42.1 1.9% - 3.6% 3,125.4 18.3 3,286.9 18.6 Lower than 1.9% 3,470.8 20.3 3,439.2 19.4 Total $ 17,072.4 100.0 % $ 17,705.1 100.0 % Transfer of Financial Assets The Company originates loans under an agreement with one of its clients, and after origination, these loan receivables are sold to the client at par value plus accrued interest. These transfers qualify for sale treatment as they meet the conditions established in ASC 860-10, “Transfers and Servicing.” Following the sale, the client owns the loan receivables, bears the risk of loss in the event of loan defaults and is responsible for all servicing functions related to the loan receivables. The loan receivables originated by the Company that have not yet been sold to the client were $78.8 million and $126.9 million at June 30, 2018 and December 31, 2017, respectively, and are included in credit card and loan receivables held for sale in the Company’s unaudited condensed consolidated balance sheets and carried at the lower of cost or fair value. The carrying value of these loan receivables approximates fair value due to the short duration between the date of origination and sale. Originations and sales of these loan receivables held for sale are reflected as operating activities in the Company’s unaudited condensed consolidated statements of cash flows. Effective July 2, 2018, the Company no longer originates loan receivables for this client. Portfolios Held for Sale The Company has certain credit card portfolios held for sale, which are carried at the lower of cost or fair value, of $905.4 million and $899.4 million as of June 30, 2018 and December 31, 2017, respectively. In the first quarter of 2018, the Company transferred one credit card portfolio totaling approximately $82.4 million out of credit card and loan receivables held for sale and into credit card and loan receivables, and transferred one credit card portfolio totaling approximately $90.1 million into credit card and loan receivables held for sale. The portfolio was transferred into credit card and loan receivables held for sale at the net carrying amount, inclusive of the related reserves for losses, as the fair value was estimated to be greater than the net carrying amount, and such amount will be the measurement basis until the sale of the portfolio. In the second quarter of 2018, the Company transferred one credit card portfolio totaling approximately $54.6 million into credit card and loan receivables held for sale. The portfolio was transferred at the net carrying amount, inclusive of the related reserves for losses, as the fair value was estimated to be greater than the net carrying amount, and which was the measurement basis until the portfolio was sold in June 2018. The Company received preliminary cash consideration of approximately $55.6 million from the sale of the credit card portfolio, and the Company recognized a de minimis gain on the transaction. Additionally, for the three and six months ended June 30, 2018, the Company recorded valuation adjustments of $14.2 million and $35.9 million, respectively, to reduce the value of certain portfolios within credit card and loan receivables held for sale. The Company carries its credit card and loan receivables held for sale at the lower of cost or fair value. Securitized Credit Card Receivables The Company regularly securitizes its credit card receivables through its credit card securitization trusts, consisting of World Financial Network Credit Card Master Trust, World Financial Network Credit Card Master Note Trust (“Master Trust I”) and World Financial Network Credit Card Master Trust III (“Master Trust III”) (collectively, the “WFN Trusts”), and World Financial Capital Credit Card Master Note Trust (the “WFC Trust”). The Company continues to own and service the accounts that generate credit card receivables held by the WFN Trusts and the WFC Trust. In its capacity as a servicer, each of the respective banks earns a fee from the WFN Trusts and the WFC Trust to service and administer the credit card receivables, collect payments and charge-off uncollectible receivables. These fees are eliminated and therefore are not reflected in the Company’s unaudited condensed consolidated statements of income for the three and six months ended June 30, 2018 and 2017. The WFN Trusts and the WFC Trust are VIEs and the assets of these consolidated VIEs include certain credit card receivables that are restricted to settle the obligations of those entities and are not expected to be available to the Company or its creditors. The liabilities of the consolidated VIEs include non-recourse secured borrowings and other liabilities for which creditors or beneficial interest holders do not have recourse to the general credit of the Company. The tables below present quantitative information about the components of total securitized credit card receivables, delinquencies and net charge-offs: June 30, December 31, 2018 2017 (In millions) Total credit card receivables – restricted for securitization investors $ 13,524.9 $ 14,293.9 Principal amount of credit card receivables – restricted for securitization investors, 91 days or more past due $ 307.2 $ 295.0 Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 (In millions) Net charge-offs of securitized principal $ 240.3 $ 176.4 $ 485.3 $ 362.4 |
INVENTORIES, NET
INVENTORIES, NET | 6 Months Ended |
Jun. 30, 2018 | |
INVENTORIES, NET | |
INVENTORIES, NET | 6. INVENTORIES, NET Inventories, net of $233.2 million and $234.1 million at June 30, 2018 and December 31, 2017, respectively, primarily consist of finished goods to be utilized as rewards in the Company’s loyalty programs. Inventories, net are stated at the lower of cost and net realizable value and valued primarily on a first-in-first-out basis. The Company records valuation adjustments to its inventories if the cost of inventory exceeds the amount it expects to realize from the ultimate sale or disposal of the inventory. These estimates are based on management’s judgment regarding future market conditions and an analysis of historical experience. |
OTHER INVESTMENTS
OTHER INVESTMENTS | 6 Months Ended |
Jun. 30, 2018 | |
OTHER INVESTMENTS | |
OTHER INVESTMENTS | 7. OTHER INVESTMENTS Other investments consist of marketable securities and U.S. Treasury bonds and are included in other current assets and other non-current assets in the Company’s unaudited condensed consolidated balance sheets. The principal components of other investments, which are carried at fair value, are as follows: June 30, 2018 December 31, 2017 Amortized Unrealized Unrealized Amortized Unrealized Unrealized Cost Gains Losses Fair Value Cost Gains Losses Fair Value (In millions) Marketable securities $ 245.8 $ — $ (7.4) $ 238.4 $ 207.3 $ 0.2 $ (2.5) $ 205.0 U.S. Treasury bonds 50.0 — (0.2) 49.8 50.0 — (0.1) 49.9 Total $ 295.8 $ — $ (7.6) $ 288.2 $ 257.3 $ 0.2 $ (2.6) $ 254.9 The following tables show the unrealized losses and fair value for those investments that were in an unrealized loss position as of June 30, 2018 and December 31, 2017, aggregated by investment category and the length of time that individual securities have been in a continuous loss position: June 30, 2018 Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (In millions) Marketable securities $ 148.8 $ (4.6) $ 57.5 $ (2.8) $ 206.3 $ (7.4) U.S. Treasury bonds 24.8 (0.2) — — 24.8 (0.2) Total $ 173.6 $ (4.8) $ 57.5 $ (2.8) $ 231.1 $ (7.6) December 31, 2017 Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (In millions) Marketable securities $ 104.5 $ (0.9) $ 67.3 $ (1.6) $ 171.8 $ (2.5) U.S. Treasury bonds 49.9 (0.1) — — 49.9 (0.1) Total $ 154.4 $ (1.0) $ 67.3 $ (1.6) $ 221.7 $ (2.6) The amortized cost and estimated fair value of the marketable securities and U.S. Treasury bonds at June 30, 2018 by contractual maturity are as follows: Amortized Cost Fair Value (In millions) Due in one year or less $ 79.3 $ 79.1 Due after one year through five years 2.6 2.6 Due after five years through ten years — — Due after ten years 213.9 206.5 Total $ 295.8 $ 288.2 Market values were determined for each individual security in the investment portfolio. When evaluating the investments for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the security’s issuer, and the Company’s intent to sell the security and whether it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. The Company typically invests in highly-rated securities with low probabilities of default and has the intent and ability to hold the investments until maturity. As of June 30, 2018, the Company does not consider the investments to be other-than-temporarily impaired. There were no realized gains or losses from the sale of investment securities for the three and six months ended June 30, 2018 and 2017. |
REDEMPTION SETTLEMENT ASSETS
REDEMPTION SETTLEMENT ASSETS | 6 Months Ended |
Jun. 30, 2018 | |
REDEMPTION SETTLEMENT ASSETS | |
REDEMPTION SETTLEMENT ASSETS | 8. REDEMPTION SETTLEMENT ASSETS Redemption settlement assets consist of restricted cash and securities available-for-sale and are designated for settling redemptions by collectors of the AIR MILES Reward Program in Canada under certain contractual relationships with sponsors of the AIR MILES Reward Program. The principal components of redemption settlement assets, which are carried at fair value, are as follows: June 30, 2018 December 31, 2017 Amortized Unrealized Unrealized Amortized Unrealized Unrealized Cost Gains Losses Fair Value Cost Gains Losses Fair Value (In millions) Restricted cash $ 44.2 $ — $ — $ 44.2 $ 74.3 $ — $ — $ 74.3 Mutual funds 24.5 — — 24.5 27.3 — (1.3) 26.0 Corporate bonds 513.3 — (7.2) 506.1 495.0 — (5.8) 489.2 Total $ 582.0 $ — $ (7.2) $ 574.8 $ 596.6 $ — $ (7.1) $ 589.5 The following tables show the unrealized losses and fair value for those investments that were in an unrealized loss position as of June 30, 2018 and December 31, 2017, aggregated by investment category and the length of time that individual securities have been in a continuous loss position: June 30, 2018 Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (In millions) Corporate bonds $ 120.1 $ (0.9) $ 376.5 $ (6.3) $ 496.6 $ (7.2) Total $ 120.1 $ (0.9) $ 376.5 $ (6.3) $ 496.6 $ (7.2) December 31, 2017 Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (In millions) Mutual funds $ 26.0 $ (1.3) $ — $ — $ 26.0 $ (1.3) Corporate bonds 328.0 (3.7) 161.2 (2.1) 489.2 (5.8) Total $ 354.0 $ (5.0) $ 161.2 $ (2.1) $ 515.2 $ (7.1) The amortized cost and estimated fair value of the securities at June 30, 2018 by contractual maturity are as follows: Amortized Estimated Cost Fair Value (In millions) Due in one year or less $ 62.4 $ 62.4 Due after one year through five years 475.4 468.2 Total $ 537.8 $ 530.6 Market values were determined for each individual security in the investment portfolio. When evaluating the investments for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the security’s issuer, and the Company’s intent to sell the security and whether it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis. The Company typically invests in highly-rated securities with low probabilities of default and has the intent and ability to hold the investments until maturity. As of June 30, 2018, the Company does not consider the investments to be other-than-temporarily impaired. Realized gains and losses on the sale of investment securities for each of the three and six months ended June 30, 2018 and 2017 were de minimis. |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL | 6 Months Ended |
Jun. 30, 2018 | |
INTANGIBLE ASSETS AND GOODWILL | |
INTANGIBLE ASSETS AND GOODWILL | 9. INTANGIBLE ASSETS AND GOODWILL Intangible Assets Intangible assets consist of the following: June 30, 2018 Gross Accumulated Assets Amortization Net Amortization Life and Method (In millions) Finite Lived Assets Customer contracts and lists $ 1,132.7 $ (699.0) $ 433.7 3-12 years—straight line Premium on purchased credit card portfolios 316.3 (173.6) 142.7 3-13 years—straight line Collector database 53.3 (51.5) 1.8 5 years—straight line Publisher networks 140.2 (98.2) 42.0 5-7 years—straight line Tradenames 76.4 (48.5) 27.9 8-15 years—straight line Purchased data lists 11.1 (6.3) 4.8 1-5 years—straight line, accelerated Favorable lease 6.0 (3.5) 2.5 6-10 years—straight line $ 1,736.0 $ (1,080.6) $ 655.4 Indefinite Lived Assets Tradenames 12.4 — 12.4 Indefinite life Total intangible assets $ 1,748.4 $ (1,080.6) $ 667.8 December 31, 2017 Gross Accumulated Assets Amortization Net Amortization Life and Method (In millions) Finite Lived Assets Customer contracts and lists $ 1,143.5 $ (625.5) $ 518.0 3-12 years—straight line Premium on purchased credit card portfolios 321.6 (147.8) 173.8 3-13 years—straight line Customer databases 63.6 (63.6) — 3 years—straight line Collector database 55.6 (53.5) 2.1 5 years—straight line Publisher networks 140.2 (84.4) 55.8 5-7 years—straight line Tradenames 77.3 (46.8) 30.5 8-15 years—straight line Purchased data lists 11.3 (6.2) 5.1 1-5 years—straight line, accelerated Favorable lease 6.0 (3.1) 2.9 6-10 years—straight line $ 1,819.1 $ (1,030.9) $ 788.2 Indefinite Lived Assets Tradenames 12.4 — 12.4 Indefinite life Total intangible assets $ 1,831.5 $ (1,030.9) $ 800.6 The estimated amortization expense related to intangible assets for the next five years and thereafter is as follows: For the Years Ending December 31, (In millions) 2018 (excluding the six months ended June 30, 2018) $ 126.5 2019 205.8 2020 142.1 2021 78.9 2022 69.7 Thereafter 32.4 Goodwill The changes in the carrying amount of goodwill are as follows: LoyaltyOne ® Epsilon ® Card Services Corporate/ Other Total (In millions) Balance at December 31, 2017 $ 731.1 $ 2,887.3 $ 261.7 $ — $ 3,880.1 Effects of foreign currency translation (21.8) (0.5) — — (22.3) Balance at June 30, 2018 $ 709.3 $ 2,886.8 $ 261.7 $ — $ 3,857.8 |
DEBT
DEBT | 6 Months Ended |
Jun. 30, 2018 | |
DEBT | |
DEBT | 10. DEBT Debt consists of the following: June 30, December 31, Description 2018 2017 Maturity Interest Rate (Dollars in millions) Long-term and other debt: 2017 revolving line of credit $ 752.0 $ 475.0 June 2022 (1) 2017 term loans 2,976.3 3,014.4 June 2022 (1) BrandLoyalty credit agreement 175.1 198.0 June 2020 (2) Senior notes due 2020 — 500.0 — — Senior notes due 2021 500.0 500.0 November 2021 5.875% Senior notes due 2022 600.0 600.0 August 2022 5.375% Senior notes due 2022 (€400.0 million) 467.4 479.9 March 2022 4.500% Senior notes due 2023 (€300.0 million) 350.5 359.9 November 2023 5.250% Capital lease obligations and other debt 15.1 8.8 Various – Jan 2019 – May 2022 2.24% to 4.91% Total long-term and other debt 5,836.4 6,136.0 Less: Unamortized discount and debt issuance costs 45.9 56.4 Less: Current portion 123.0 131.3 Long-term portion $ 5,667.5 $ 5,948.3 Deposits: Certificates of deposit $ 7,210.5 $ 7,526.0 Various – July 2018 – July 2023 1.13% to 4.00% Money market deposits 3,371.7 3,429.4 Non-maturing (3) Total deposits 10,582.2 10,955.4 Less: Unamortized discount and debt issuance costs 22.9 24.5 Less: Current portion 6,160.3 6,366.2 Long-term portion $ 4,399.0 $ 4,564.7 Non-recourse borrowings of consolidated securitization entities: Fixed rate asset-backed term note securities $ 4,854.7 $ 4,704.7 Various – August 2018 – June 2021 1.44% to 4.55% Floating rate asset-backed term note securities — 360.0 — — Conduit asset-backed securities 2,930.0 3,755.0 Various – Jan 2019 – Dec 2019 (4) Total non-recourse borrowings of consolidated securitization entities 7,784.7 8,819.7 Less: Unamortized discount and debt issuance costs 11.5 12.4 Less: Current portion 2,477.3 1,339.9 Long-term portion $ 5,295.9 $ 7,467.4 (1) The interest rate is based upon the London Interbank Offered Rate (“LIBOR”) plus an applicable margin. At June 30, 2018, the weighted average interest rate was 4.16% and 4.09% for the revolving line of credit and term loans, respectively. (2) The interest rate is based upon the Euro Interbank Offered Rate plus an applicable margin. At June 30, 2018, the weighted average interest rate was 1.10% and 1.65% for the BrandLoyalty revolving line of credit and term loans, respectively. (3) The interest rates are based on the Federal Funds rate plus an applicable margin. At June 30, 2018, the interest rates ranged from 1.48% to 2.60%. (4) The interest rate is based upon LIBOR or the asset-backed commercial paper costs of each individual conduit provider plus an applicable margin. At June 30, 2018, the interest rates ranged from 3.05% to 3.28%. At June 30, 2018, the Company was in compliance with its financial covenants. Long-term and Other Debt Credit Agreement As of June 30, 2018, the Company’s credit agreement, as amended, provided for a $3,052.6 million in term loans subject to certain principal repayments and a $1,572.4 million revolving line of credit, with $820.4 million total availability. BrandLoyalty Credit Agreement As of June 30, 2018, amounts outstanding under the revolving lines of credit and the term loans under the BrandLoyalty credit agreement were €19.8 million and €130.0 million ($23.2 million and $151.9 million), respectively. The entire amount outstanding under the revolving lines of credit was uncommitted. Senior Notes due 2020 On April 2, 2018, the Company redeemed its $500.0 million outstanding 6.375% senior notes due April 1, 2020 at par plus accrued interest. The Company funded the redemption with borrowings under its revolving line of credit. Non-Recourse Borrowings of Consolidated Securitization Entities Asset-Backed Term Notes In February 2018, $500.0 million of Series 2013-A asset-backed term notes, $125.0 million of which were retained by the Company and eliminated from the Company’s unaudited condensed consolidated balance sheets, matured and were repaid. In February 2018, Master Trust I issued $591.5 million of Series 2018-A asset-backed term notes, which mature in February 2021. The offering consisted of $525.0 million of Class A notes with a fixed interest rate of 3.07% per year and $66.5 million of notes that were retained by the Company and eliminated from the Company’s unaudited condensed consolidated balance sheets. In April 2018, $500.0 million of Series 2015-A asset-backed term notes, $140.0 million of which were retained by the Company and eliminated from the Company’s unaudited condensed consolidated balance sheets, matured and were repaid. Conduit Facilities The Company has access to committed undrawn capacity through three conduit facilities to support the funding of its credit card receivables through Master Trust I, Master Trust III and the WFC Trust. As of June 30, 2018, total capacity under the conduit facilities was $4.5 billion, of which $2.9 billion had been drawn and was included in non-recourse borrowings of consolidated securitization entities in the unaudited condensed consolidated balance sheets. |
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS | 6 Months Ended |
Jun. 30, 2018 | |
DERIVATIVE INSTRUMENTS | |
DERIVATIVE INSTRUMENTS | 11. DERIVATIVE INSTRUMENTS The Company uses derivatives to manage risks associated with certain assets and liabilities arising from the potential adverse impact of fluctuations in interest rates and foreign currency exchange rates. The Company limits its exposure on derivatives by entering into contracts with institutions that are established dealers who maintain certain minimum credit criteria established by the Company. At June 30, 2018, the Company does not maintain any derivative instruments subject to master agreements that would require the Company to post collateral or that contain any credit-risk related contingent features. The Company enters into foreign currency derivatives to reduce the volatility of the Company’s cash flows resulting from changes in foreign currency exchange rates associated with certain inventory transactions, some of which are designated as cash flow hedges. The Company generally hedges foreign currency exchange rate risks for periods of 12 months or less. As of June 30, 2018, the maximum term over which the Company is hedging its exposure to the variability of future cash flows associated with certain inventory transactions is 12 months. Certain foreign currency exchange forward contracts are not designated as hedges as they do not meet the specific hedge accounting requirements of ASC 815, “Derivatives and Hedging.” Changes in the fair value of the derivative instruments not designated as hedging instruments are recorded in the unaudited condensed consolidated statements of income as they occur. Gains and losses on derivatives not designated as hedging instruments are included in other operating activities in the unaudited condensed consolidated statements of cash flows for all periods presented. The following tables present the fair values of the derivative instruments included within the Company’s unaudited condensed consolidated balance sheets as of June 30, 2018 and December 31, 2017: June 30, 2018 Notional Amount Fair Value Balance Sheet Location Maturity (In millions) Designated as hedging instruments: Foreign currency exchange hedges $ 60.3 $ 2.5 Other current assets July 2018 to June 2019 Foreign currency exchange hedges $ 28.2 $ 0.4 Other current liabilities July 2018 to January 2019 Not designated as hedging instruments: Foreign currency exchange forward contract $ 63.1 $ 1.1 Other current assets January 2019 December 31, 2017 Notional Amount Fair Value Balance Sheet Location Maturity (In millions) Designated as hedging instruments: Foreign currency exchange hedges $ 2.9 $ 0.1 Other current assets August 2018 to October 2018 Foreign currency exchange hedges $ 19.3 $ 0.3 Other current liabilities January 2018 to October 2018 Not designated as hedging instruments: Foreign currency exchange forward contracts $ 168.0 $ 15.9 Other current assets February 2018 Foreign currency exchange forward contract $ 65.8 $ 3.5 Other current liabilities March 2018 Derivatives Designated as Hedging Instruments Gains of $1.4 million and $1.3 million, net of tax, were recognized in other comprehensive income for the three and six months ended June 30, 2018, respectively, related to foreign currency exchange hedges designated as effective. Losses of $0.6 million and $0.9 million, net of tax, were recognized in other comprehensive income for the three and six months ended June 30, 2017, respectively, related to foreign currency exchange hedges designated as effective. Changes in the fair value of these hedges, excluding any ineffective portion are recorded in other comprehensive income until the hedged transactions affect net income. The ineffective portion of these cash flow hedges impacts net income when ineffectiveness occurs. Reclassifications from accumulated other comprehensive loss into net income (cost of operations) for each of the periods presented were not material. At June 30, 2018, $1.2 million is expected to be reclassified from accumulated other comprehensive loss into net income in the coming 12 months. Derivatives Not Designated as Hedging Instruments For the three and six months ended June 30, 2018, gains of $1.2 million and $8.2 million, respectively, related to foreign currency exchange forward contracts not designated as hedging instruments were recognized in general and administrative expense in the Company’s unaudited condensed consolidated statements of income. For the three and six months ended June 30, 2017, gains of $9.1 million and $6.4 million, respectively, related to foreign currency exchange forward contracts not designated as hedging instruments were recognized in general and administrative expense in the Company’s unaudited condensed consolidated statements of income. Net Investment Hedges The Company designated its Euro-denominated 5.250% senior notes due 2023 ( €300.0 million) and €200.0 million of its Euro-denominated 4.500% senior notes due 2022 (€400.0 million) as a net investment hedge of its investment in BrandLoyalty, on a pre-tax basis. The net investment hedge is intended to reduce the volatility in stockholders’ equity caused by the changes in foreign currency exchange rates of the Euro with respect to the U.S. dollar. In February 2018, the Company de-designated its €500.0 million net investment hedge and re-designated €640.0 million of Euro-denominated senior notes as a net investment hedge of its investment in BrandLoyalty on an after-tax basis. The change in fair value of the net investment hedges due to remeasurement of the effective portion is recorded in other comprehensive income. The ineffective portion of this hedging instrument impacts net income when the ineffectiveness occurs. For the three and six months ended June 30, 2018, gains of $31.0 million and $19.3 million, net of tax, respectively, were recognized in other comprehensive income and no ineffectiveness was recorded on the net investment hedges. For the three and six months ended June 30, 2017, losses of $23.8 million and $27.4 million, net of tax, respectively, were recognized in other comprehensive income and no ineffectiveness was recorded on the net investment hedges. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 6 Months Ended |
Jun. 30, 2018 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | 12. STOCKHOLDERS’ EQUITY Stock Repurchase Program The Company has an authorized stock repurchase program to acquire up to $1.0 billion of the Company’s outstanding common stock through July 31, 2018. For the six months ended June 30, 2018 , the Company acquired a total of 0.5 million shares of its common stock for $99.2 million. As of June 30, 2018, the Company had $347.2 million remaining under the stock repurchase program. On July 26, 2018, the Company’s Board of Directors authorized a new share repurchase program to acquire up to $500.0 million of the Company’s outstanding common stock from August 1, 2018 through July 31, 2019. Stock Compensation Expense Total stock-based compensation expense recognized in the Company’s unaudited condensed consolidated statements of income for the three and six months ended June 30, 2018 and 2017 is as follows: Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 (In millions) Cost of operations $ 13.8 $ 14.9 $ 33.1 $ 28.8 General and administrative 7.0 6.8 13.2 16.4 Total $ 20.8 $ 21.7 $ 46.3 $ 45.2 During the six months ended June 30, 2018 , the Company awarded 89,387 service-based restricted stock units with a weighted average grant date fair value per share of $239.32 as determined on the date of grant. Service-based restricted stock units typically vest ratably over three years provided that the participant is employed by the Company on each such vesting date. During the six months ended June 30, 2018 , the Company awarded 263,542 performance-based restricted stock units with a weighted average grant date fair value per share of $240.65 as determined on the date of grant with pre-defined vesting criteria that permit a range from 0% to 150% to be earned. If the performance targets are met, the restrictions will lapse with respect to 33% of the award on February 15, 2019, an additional 33% of the award on February 15, 2020 and the final 34% of the award on February 18, 2021, provided that the participant is employed by the Company on each such vesting date. During the six months ended June 30, 2018 , the Company also awarded 28,057 restricted stock units with a market-based condition subject to pre-defined vesting criteria that permit a range from 0% to 175% to be earned. The fair market value of these awards is $220.56 and was estimated utilizing Monte Carlo simulations of the Company’s stock price correlation, expected volatility and risk-free rate over two-year time horizons matching the performance period. Upon determination of the market condition, the restrictions will lapse with respect to the entire award on February 15, 2020, provided that the participant is employed by the Company on such vesting date. Dividends On January 25, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.57 per share on the Company’s common stock to stockholders of record at the close of business on February 14, 2018, resulting in a dividend payment of $31.5 million on March 20, 2018. Additionally, the Company paid $0.2 million in cash related to dividend equivalent rights for the three months ended March 31, 2018. On April 19, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.57 per share on the Company’s common stock, payable on June 19, 2018, to stockholders of record at the close of business on May 14, 2018, resulting in a dividend payment of $31.5 million on June 19, 2018. Additionally, the Company paid $0.1 million in cash related to dividend equivalent rights for the three months ended June 30, 2018. On July 19, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.57 per share on the Company’s common stock, payable on September 19, 2018, to stockholders of record at the close of business on August 14, 2018. |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 6 Months Ended |
Jun. 30, 2018 | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS). | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 13. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The changes in each component of accumulated other comprehensive income (loss), net of tax effects, are as follows: Net Unrealized Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Three Months Ended June 30, 2018 on Securities Flow Hedges Investment Hedges Adjustments (1) Income (Loss) (In millions) Balance at March 31, 2018 $ (10.7) $ (0.2) $ (53.7) $ (71.9) $ (136.5) Changes in other comprehensive income (loss) (2.0) 1.4 31.0 (30.3) 0.1 Balance at June 30, 2018 $ (12.7) $ 1.2 $ (22.7) $ (102.2) $ (136.4) Net Unrealized Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Three Months Ended June 30, 2017 on Securities Flow Hedges Investment Hedges Adjustments (1) Income (Loss) (In millions) Balance at March 31, 2017 $ (0.9) $ 0.1 $ 0.5 $ (148.6) $ (148.9) Changes in other comprehensive income (loss) (2.8) (0.6) (23.8) 34.5 7.3 Balance at June 30, 2017 $ (3.7) $ (0.5) $ (23.3) $ (114.1) $ (141.6) Net Unrealized Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Six Months Ended June 30, 2018 on Securities Flow Hedges Investment Hedges Adjustments (1) Income (Loss) (In millions) Balance at December 31, 2017 $ (8.7) $ (0.1) $ (42.0) $ (89.4) $ (140.2) Changes in other comprehensive income (loss) (4.0) 1.3 19.3 (12.8) 3.8 Balance at June 30, 2018 $ (12.7) $ 1.2 $ (22.7) $ (102.2) $ (136.4) Net Unrealized Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Six Months Ended June 30, 2017 on Securities Flow Hedges Investment Hedges Adjustments (1) Income (Loss) (In millions) Balance at December 31, 2016 $ (1.6) $ 0.4 $ 4.1 $ (153.6) $ (150.7) Changes in other comprehensive income (loss) (2.1) (0.9) (27.4) 39.5 9.1 Balance at June 30, 2017 $ (3.7) $ (0.5) $ (23.3) $ (114.1) $ (141.6) (1) Primarily related to the impact of changes in the Canadian dollar and Euro foreign currency exchange rates. Reclassifications from accumulated other comprehensive loss into net income for each of the periods presented were not material. Additionally, as of January 1, 2018, a cumulative-effect adjustment of $1.5 million was reclassified from accumulated other comprehensive loss to retained earnings related to the adoption of ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities.” For more information, see Note 1, “Summary of Significant Accounting Policies.” |
FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS | 6 Months Ended |
Jun. 30, 2018 | |
FINANCIAL INSTRUMENTS | |
FINANCIAL INSTRUMENTS | 14. FINANCIAL INSTRUMENTS In accordance with ASC 825, “Financial Instruments,” the Company is required to disclose the fair value of financial instruments for which it is practical to estimate fair value. To obtain fair values, observable market prices are used if available. In some instances, observable market prices are not readily available and fair value is determined using present value or other techniques appropriate for a particular financial instrument. These techniques involve judgment and as a result are not necessarily indicative of the amounts the Company would realize in a current market exchange. The use of different assumptions or estimation techniques may have a material effect on the estimated fair value amounts. Fair Value of Financial Instruments — The estimated fair values of the Company’s financial instruments are as follows: June 30, 2018 December 31, 2017 Carrying Fair Carrying Fair Amount Value Amount Value (In millions) Financial assets Credit card and loan receivables, net $ 16,795.9 $ 17,715.1 $ 17,494.5 $ 18,427.8 Credit card and loan receivables held for sale 984.2 1,081.9 1,026.3 1,067.6 Redemption settlement assets, restricted 574.8 574.8 589.5 589.5 Other investments 288.2 288.2 254.9 254.9 Derivative instruments 3.6 3.6 16.0 16.0 Financial liabilities Derivative instruments 0.4 0.4 3.8 3.8 Deposits 10,559.3 10,504.7 10,930.9 10,937.1 Non-recourse borrowings of consolidated securitization entities 7,773.2 7,728.0 8,807.3 8,805.3 Long-term and other debt 5,790.5 5,876.0 6,079.6 6,186.4 The following techniques and assumptions were used by the Company in estimating fair values of financial instruments as disclosed herein: Credit card and loan receivables, net — The Company utilizes a discounted cash flow model using unobservable inputs, including estimated yields (interest and fee income), loss rates, payment rates and discount rates to estimate the fair value measurement of the credit card and loan receivables . Credit card and loan receivables held for sale — The Company utilizes a discounted cash flow model using unobservable inputs, including forecasted yields and net charge-off estimates to estimate the fair value measurement of the credit card portfolios held for sale. Loan receivables held for sale are recorded at the lower of cost or fair value, and their carrying amount approximates fair value due to the short duration of the holding period of the loan receivables prior to sale. Redemption settlement assets, restricted — Redemption settlement assets, restricted are recorded at fair value based on quoted market prices for the same or similar securities. Other investments — Other investments consist of marketable securities and U.S. Treasury bonds and are included in other current assets and other non-current assets in the unaudited condensed consolidated balance sheets. Other investments are recorded at fair value based on quoted market prices for the same or similar securities. Deposits — The fair value is estimated based on the current observable market rates available to the Company for similar deposits with similar remaining maturities. Non-recourse borrowings of consolidated securitization entities — The fair value is estimated based on the current observable market rates available to the Company for similar debt instruments with similar remaining maturities or quoted market prices for the same transaction. Long-term and other debt — The fair value is estimated based on the current observable market rates available to the Company for similar debt instruments with similar remaining maturities or quoted market prices for the same transaction. Derivative instruments — The Company’s foreign currency cash flow hedges are recorded at fair value based on a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflected the contractual terms of the derivatives, including the period to maturity, and used observable market-based inputs. The fair value of the foreign currency forward contracts is estimated based on published quotations of spot foreign currency rates and forward points which are converted into implied foreign currency rates. Financial Assets and Financial Liabilities Fair Value Hierarchy ASC 820, “Fair Value Measurements and Disclosures,” establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs where little or no market data exists, therefore requiring an entity to develop its own assumptions. Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. Level 3 financial instruments also include those for which the determination of fair value requires significant management judgment or estimation. The use of different techniques to determine fair value of these financial instruments could result in different estimates of fair value at the reporting date. The following tables provide information for the assets and liabilities carried at fair value measured on a recurring basis as of June 30, 2018 and December 31, 2017: Fair Value Measurements at June 30, 2018 Using Balance at June 30, 2018 Level 1 Level 2 Level 3 (In millions) Mutual funds (1) $ 24.5 $ 24.5 $ — $ — Corporate bonds (1) 506.1 — 506.1 — Marketable securities (2) 238.4 24.8 213.6 — U.S. Treasury bonds (2) 49.8 49.8 — — Derivative instruments (3) 3.6 — 3.6 — Total assets measured at fair value $ 822.4 $ 99.1 $ 723.3 $ — Derivative instruments (3) $ 0.4 $ — $ 0.4 $ — Total liabilities measured at fair value $ 0.4 $ — $ 0.4 $ — Fair Value Measurements at December 31, 2017 Using Balance at December 31, 2017 Level 1 Level 2 Level 3 (In millions) Mutual funds (1) $ 26.0 $ 26.0 $ — $ — Corporate bonds (1) 489.2 — 489.2 — Marketable securities (2) 205.0 10.1 194.9 — U.S. Treasury bonds (2) 49.9 49.9 — — Derivative instruments (3) 16.0 — 16.0 — Total assets measured at fair value $ 786.1 $ 86.0 $ 700.1 $ — Derivative instruments (3) $ 3.8 $ — $ 3.8 $ — Total liabilities measured at fair value $ 3.8 $ — $ 3.8 $ — (1) Amounts are included in redemption settlement assets in the unaudited condensed consolidated balance sheets. (2) Amounts are included in other current assets and other non-current assets in the unaudited condensed consolidated balance sheets. (3) Amounts are included in other current assets and other current liabilities in the unaudited condensed consolidated balance sheets. There were no transfers between Levels 1 and 2 within the fair value hierarchy for the three and six months ended June 30, 2018 and 2017. Financial Instruments Disclosed but Not Carried at Fair Value The following tables provide assets and liabilities disclosed but not carried at fair value as of June 30, 2018 and December 31, 2017: Fair Value Measurements at June 30, 2018 Total Level 1 Level 2 Level 3 (In millions) Financial assets: Credit card and loan receivables, net $ 17,715.1 $ — $ — $ 17,715.1 Credit card and loan receivables held for sale 1,081.9 — — 1,081.9 Total $ 18,797.0 $ — $ — $ 18,797.0 Financial liabilities: Deposits $ 10,504.7 $ — $ 10,504.7 $ — Non-recourse borrowings of consolidated securitization entities 7,728.0 — 7,728.0 — Long-term and other debt 5,876.0 — 5,876.0 — Total $ 24,108.7 $ — $ 24,108.7 $ — Fair Value Measurements at December 31, 2017 Total Level 1 Level 2 Level 3 (In millions) Financial assets: Credit card and loan receivables, net $ 18,427.8 $ — $ — $ 18,427.8 Credit card and loan receivables held for sale 1,067.6 — — 1,067.6 Total $ 19,495.4 $ — $ — $ 19,495.4 Financial liabilities: Deposits $ 10,937.1 $ — $ 10,937.1 $ — Non-recourse borrowings of consolidated securitization entities 8,805.3 — 8,805.3 — Long-term and other debt 6,186.4 — 6,186.4 — Total $ 25,928.8 $ — $ 25,928.8 $ — |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2018 | |
INCOME TAXES | |
INCOME TAXES | 15. INCOME TAXES For the three and six months ended June 30, 2018, the Company utilized an effective tax rate of 14.4% and 19.3%, respectively, to calculate its provision for income taxes. For each of the three and six months ended June 30, 2017, the Company utilized an effective tax rate of 35.6%. The decrease in the effective tax rate was due to the reduction in the federal statutory rate pursuant to tax reform enacted in December 2017 and a tax benefit associated with foreign restructuring in the current year quarter, offset in part by the negative impact of the Supreme Court’s recent decision in South Dakota v. Wayfair, Inc. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 6 Months Ended |
Jun. 30, 2018 | |
SEGMENT INFORMATION | |
SEGMENT INFORMATION | 16. SEGMENT INFORMATION Operating segments are defined by ASC 280, “Segment Reporting,” as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the President and Chief Executive Officer. The operating segments are reviewed separately because each operating segment represents a strategic business unit that generally offers different products. The Company operates in the following reportable segments: LoyaltyOne, Epsilon, and Card Services. Segment operations consist of the following: LoyaltyOne provides coalition and short-term loyalty programs through the Company’s Canadian AIR MILES Reward Program and BrandLoyalty; Epsilon provides end-to-end, integrated marketing solutions that leverage rich data, analytics, creativity and technology to help clients more effectively acquire, retain and grow relationships with their customers; and Card Services provides risk management solutions, account origination, funding, transaction processing, customer care, collections and marketing services for the Company’s private label and co-brand credit card programs. Corporate and other immaterial businesses are reported collectively as an “all other” category labeled “Corporate/Other.” Income taxes are not allocated to the segments in the computation of segment operating profit for internal evaluation purposes and have also been included in “Corporate/Other.” Corporate/ Three Months Ended June 30, 2018 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Revenues $ 248.6 $ 514.2 $ 1,148.5 $ 0.2 $ (7.6) $ 1,903.9 Income (loss) before income taxes $ 44.3 $ 25.3 $ 307.3 $ (122.3) $ — $ 254.6 Interest expense, net 1.3 — 92.0 72.4 — 165.7 Operating income (loss) 45.6 25.3 399.3 (49.9) — 420.3 Depreciation and amortization 21.5 73.3 25.3 1.9 — 122.0 Stock compensation expense 2.4 8.3 3.1 7.0 — 20.8 Adjusted EBITDA (1) 69.5 106.9 427.7 (41.0) — 563.1 Less: Securitization funding costs — — 55.2 — — 55.2 Less: Interest expense on deposits — — 36.8 — — 36.8 Adjusted EBITDA, net (1) $ 69.5 $ 106.9 $ 335.7 $ (41.0) $ — $ 471.1 Corporate/ Three Months Ended June 30, 2017 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Revenues $ 280.0 $ 543.8 $ 1,005.0 $ — $ (7.0) $ 1,821.8 Income (loss) before income taxes $ 33.5 $ 19.9 $ 276.1 $ (115.6) $ — $ 213.9 Interest expense, net 1.0 0.1 65.2 71.2 — 137.5 Operating income (loss) 34.5 20.0 341.3 (44.4) — 351.4 Depreciation and amortization 19.5 77.9 26.1 2.0 — 125.5 Stock compensation expense 2.7 8.9 3.3 6.8 — 21.7 Adjusted EBITDA (1) 56.7 106.8 370.7 (35.6) — 498.6 Less: Securitization funding costs — — 36.6 — — 36.6 Less: Interest expense on deposits — — 28.6 — — 28.6 Adjusted EBITDA, net (1) $ 56.7 $ 106.8 $ 305.5 $ (35.6) $ — $ 433.4 Corporate/ Six Months Ended June 30, 2018 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Revenues $ 474.9 $ 1,023.6 $ 2,303.7 $ 0.3 $ (14.4) $ 3,788.1 Income (loss) before income taxes $ 71.4 $ 32.5 $ 596.6 $ (227.3) $ — $ 473.2 Interest expense, net 2.6 0.1 179.6 142.6 — 324.9 Operating income (loss) 74.0 32.6 776.2 (84.7) — 798.1 Depreciation and amortization 43.5 146.3 50.1 3.8 — 243.7 Stock compensation expense 5.9 19.6 7.6 13.2 — 46.3 Adjusted EBITDA (1) 123.4 198.5 833.9 (67.7) — 1,088.1 Less: Securitization funding costs — — 107.3 — — 107.3 Less: Interest expense on deposits — — 72.3 — — 72.3 Adjusted EBITDA, net (1) $ 123.4 $ 198.5 $ 654.3 $ (67.7) $ — $ 908.5 Corporate/ Six Months Ended June 30, 2017 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Revenues $ 613.0 $ 1,073.1 $ 2,028.2 $ — $ (13.5) $ 3,700.8 Income (loss) before income taxes $ 69.9 $ 18.3 $ 577.9 $ (225.0) $ — $ 441.1 Interest expense, net 2.1 0.1 126.4 134.1 — 262.7 Operating income (loss) 72.0 18.4 704.3 (90.9) — 703.8 Depreciation and amortization 38.6 155.8 51.9 4.0 — 250.3 Stock compensation expense 4.8 17.6 6.4 16.4 — 45.2 Adjusted EBITDA (1) 115.4 191.8 762.6 (70.5) — 999.3 Less: Securitization funding costs — — 71.8 — — 71.8 Less: Interest expense on deposits — — 54.6 — — 54.6 Adjusted EBITDA, net (1) $ 115.4 $ 191.8 $ 636.2 $ (70.5) $ — $ 872.9 (1) Adjusted EBITDA is a non-GAAP financial measure equal to net income, the most directly comparable financial measure based on GAAP plus stock compensation expense, provision for income taxes, interest expense, net, depreciation and other amortization and amortization of purchased intangibles. Adjusted EBITDA, net is also a non-GAAP financial measure equal to adjusted EBITDA less securitization funding costs and interest expense on deposits. Adjusted EBITDA and adjusted EBITDA, net are presented in accordance with ASC 280 as they are the primary performance metrics utilized to assess performance of the segments. |
SUMMARY OF SIGNIFICANT ACCOUN23
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Standards Update 2016-18 | |
Schedule of new accounting pronouncements and change in accounting principle | June 30, June 30, 2018 2017 (In millions) Cash and cash equivalents $ 3,449.2 $ 1,945.9 Restricted cash included within other current assets (1) 33.8 473.9 Restricted cash included within redemption settlement assets, restricted (2) 44.2 87.2 Total cash, cash equivalents and restricted cash $ 3,527.2 $ 2,507.0 (1) Includes $433.8 million in principal accumulation at June 30, 2017 for the repayment of non-recourse borrowings of consolidated securitized debt that matured in July 2017. (2) See Note 8, “Redemption Settlement Assets,” for additional information regarding nature of restrictions. |
Accounting Standards Update 2014-09 | |
Schedule of new accounting pronouncements and change in accounting principle | Balance at Adjustments Balance at December 31, due to January 1, 2017 ASC 606 2018 Consolidated Balance Sheet (In millions) Accounts receivable, net $ 822.3 $ 22.4 $ 844.7 Other current assets 348.9 (16.6) 332.3 Other non-current assets 656.5 (20.9) 635.6 Total Assets: 1,827.7 (15.1) 1,812.6 Accrued expenses 442.8 3.2 446.0 Other current liabilities 368.7 (14.3) 354.4 Other liabilities 370.9 (13.6) 357.3 Total Liabilities: 1,182.4 (24.7) 1,157.7 Retained earnings 4,167.1 9.6 4,176.7 |
REVENUE (Tables)
REVENUE (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
REVENUE | |
Schedule of disaggregation of revenue by major source and geographic region | Corporate/ Three Months Ended June 30, 2018 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Disaggregation of Revenue by Major Source: Coalition loyalty program $ 92.5 $ — $ — $ — $ — $ 92.5 Short-term loyalty programs 130.3 — — — — 130.3 Technology services — 255.1 — — (5.3) 249.8 Digital Media services — 179.3 — — (1.3) 178.0 Agency services — 79.8 — — (0.9) 78.9 Servicing fees, net — — 1.6 — — 1.6 Other 22.9 — — 0.2 (0.1) 23.0 Revenue from contracts with customers $ 245.7 $ 514.2 $ 1.6 $ 0.2 $ (7.6) $ 754.1 Finance charges, net — — 1,146.9 — — 1,146.9 Investment income 2.9 — — — — 2.9 Total $ 248.6 $ 514.2 $ 1,148.5 $ 0.2 $ (7.6) $ 1,903.9 Corporate/ Six Months Ended June 30, 2018 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Disaggregation of Revenue by Major Source: Coalition loyalty program $ 182.4 $ — $ — $ — $ — $ 182.4 Short-term loyalty programs 244.4 — — — — 244.4 Technology services — 501.1 — — (11.7) 489.4 Digital Media services — 357.5 — — (1.6) 355.9 Agency services — 165.0 — — (1.0) 164.0 Servicing fees, net — — (0.4) — — (0.4) Other 42.5 — — 0.3 (0.1) 42.7 Revenue from contracts with customers $ 469.3 $ 1,023.6 $ (0.4) $ 0.3 $ (14.4) $ 1,478.4 Finance charges, net — — 2,304.1 — — 2,304.1 Investment income 5.6 — — — — 5.6 Total $ 474.9 $ 1,023.6 $ 2,303.7 $ 0.3 $ (14.4) $ 3,788.1 Corporate/ Three Months Ended June 30, 2018 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Disaggregation of Revenue by Geographic Region: United States $ 6.3 $ 491.4 $ 1,148.5 $ 0.2 $ (7.4) $ 1,639.0 Canada 105.4 4.5 — — (0.1) 109.8 Europe, Middle East and Africa 91.1 16.2 — — (0.1) 107.2 Asia Pacific 28.9 2.1 — — — 31.0 Other 16.9 — — — — 16.9 Total $ 248.6 $ 514.2 $ 1,148.5 $ 0.2 $ (7.6) $ 1,903.9 Corporate/ Six Months Ended June 30, 2018 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Disaggregation of Revenue by Geographic Region: United States $ 12.0 $ 977.9 $ 2,303.7 $ 0.3 $ (14.2) $ 3,279.7 Canada 211.0 8.2 — — (0.1) 219.1 Europe, Middle East and Africa 188.1 33.0 — — (0.1) 221.0 Asia Pacific 45.5 4.5 — — — 50.0 Other 18.3 — — — — 18.3 Total $ 474.9 $ 1,023.6 $ 2,303.7 $ 0.3 $ (14.4) $ 3,788.1 |
Schedule of reconciliation of contract liabilities for the AIR MILES Reward Program | Deferred Revenue Service Redemption Total (In millions) Balance at January 1, 2018 $ 283.8 $ 683.1 $ 966.9 Cash proceeds 94.7 157.7 252.4 Revenue recognized (1) (109.5) (169.3) (278.8) Other — 0.5 0.5 Effects of foreign currency translation (11.6) (28.5) (40.1) Balance at June 30, 2018 $ 257.4 $ 643.5 $ 900.9 Amounts recognized in the consolidated balance sheets: Deferred revenue (current) $ 145.4 $ 643.5 $ 788.9 Deferred revenue (non-current) $ 112.0 $ — $ 112.0 (1) Reported on a gross basis herein. |
Schedule of product offerings and the associated performance obligations | Product Performance Obligation Recognition Basis of Revenue Recognition Technology services Professional services Over time Recognized over time as the services are performed. Email deployment Point in time Recognized at deployment. Customer lifecycle marketing Point in time Recognized at delivery. Digital Media services Digital campaign advertisement Over time Recognized on an output measure of the digital advertisement. Affiliate marketing advertisements Point in time Recognized at delivery. Data lists Point in time Recognized at delivery. Agency services Professional services Over time Recognized over time as the services are performed. |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
EARNINGS PER SHARE | |
Schedule of computation of basic and diluted net income per share | Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 (In millions except per share amounts) Numerator: Net income $ 217.8 $ 137.7 $ 381.8 $ 284.1 Denominator: Weighted average shares, basic 55.2 55.6 55.3 56.0 Weighted average effect of dilutive securities: Net effect of dilutive stock options and unvested restricted stock 0.2 0.2 0.2 0.3 Denominator for diluted calculation 55.4 55.8 55.5 56.3 Basic net income per share $ 3.94 $ 2.48 $ 6.90 $ 5.07 Diluted net income per share $ 3.93 $ 2.47 $ 6.87 $ 5.05 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Signet | |
Acquisition | |
Summary of the fair values of the assets acquired and liabilities assumed | As of (In millions) Credit card receivables $ 906.3 Intangible assets 52.3 Total assets acquired 958.6 Other liabilities 0.2 Deferred tax liability 4.9 Total liabilities assumed 5.1 Net assets acquired $ 953.5 Total consideration paid 945.6 Gain on business combination $ 7.9 |
CREDIT CARD AND LOAN RECEIVAB27
CREDIT CARD AND LOAN RECEIVABLES (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
CREDIT CARD AND LOAN RECEIVABLES | |
Schedule of components of total credit card and loan receivables | June 30, December 31, 2018 2017 (In millions) Principal receivables $ 17,072.4 $ 17,705.1 Billed and accrued finance charges 871.2 887.0 Other 41.3 21.7 Total credit card and loan receivables 17,984.9 18,613.8 Less: Credit card receivables – restricted for securitization investors 13,524.9 14,293.9 Other credit card and loan receivables $ 4,460.0 $ 4,319.9 |
Schedule of Company's allowance for loan loss | Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 (In millions) Balance at beginning of period $ 1,169.3 $ 1,020.2 $ 1,119.3 $ 948.0 Provision for loan loss 311.9 288.1 649.6 603.2 Allowance associated with credit card and loan receivables transferred to held for sale (5.2) — (11.8) — Change in estimate for uncollectible unpaid interest and fees (5.0) 5.0 10.0 10.0 Recoveries 48.8 53.9 80.1 101.8 Principal charge-offs (330.8) (297.9) (658.2) (593.7) Balance at end of period $ 1,189.0 $ 1,069.3 $ 1,189.0 $ 1,069.3 |
Schedule of delinquency trends of the Company's credit card and loan receivables portfolio | June 30, % of December 31, % of 2018 Total 2017 Total (In millions, except percentages) Receivables outstanding - principal $ 17,072.4 100.0 % $ 17,705.1 100.0 % Principal receivables balances contractually delinquent: 31 to 60 days 304.3 1.8 % 301.5 1.7 % 61 to 90 days 210.9 1.2 191.3 1.1 91 or more days 419.9 2.5 409.6 2.3 Total $ 935.1 5.5 % $ 902.4 5.1 % |
Schedule of information on credit card and loan receivables that are considered troubled debt restructurings, which entered into a modification program | Three Months Ended June 30, 2018 Six Months Ended June 30, 2018 Pre-modification Post-modification Pre-modification Post-modification Number of Outstanding Outstanding Number of Outstanding Outstanding Restructurings Balance Balance Restructurings Balance Balance (Dollars in millions) Troubled debt restructurings – credit card receivables 70,236 $ 101.8 $ 101.6 350,308 $ 414.3 $ 413.8 Three Months Ended June 30, 2017 Six Months Ended June 30, 2017 Pre-modification Post-modification Pre-modification Post-modification Number of Outstanding Outstanding Number of Outstanding Outstanding Restructurings Balance Balance Restructurings Balance Balance (Dollars in millions) Troubled debt restructurings – credit card receivables 47,624 $ 60.9 $ 60.9 92,872 $ 119.6 $ 119.5 The tables below summarize troubled debt restructurings that have defaulted in the specified periods where the default occurred within 12 months of their modification date: Three Months Ended Six Months Ended June 30, 2018 June 30, 2018 Number of Outstanding Number of Outstanding Restructurings Balance Restructurings Balance (Dollars in millions) Troubled debt restructurings that subsequently defaulted – credit card receivables 174,835 $ 192.5 203,595 $ 227.5 Three Months Ended Six Months Ended June 30, 2017 June 30, 2017 Number of Outstanding Number of Outstanding Restructurings Balance Restructurings Balance (Dollars in millions) Troubled debt restructurings that subsequently defaulted – credit card receivables 24,060 $ 29.5 50,681 $ 61.6 |
Schedule of number of active credit card and loan accounts with balances and the related principal balances outstanding, based upon the age of the active credit card accounts from origination | June 30, 2018 Percentage of Number of Percentage of Principal Principal Active Accounts Active Accounts Receivables Receivables Age of Accounts Since Origination with Balances with Balances Outstanding Outstanding (In millions, except percentages) 0-12 Months 6.4 26.8 % $ 3,735.3 21.9 % 13-24 Months 4.2 17.9 3,049.4 17.9 25-36 Months 2.8 11.9 2,243.3 13.1 37-48 Months 2.3 9.6 1,948.9 11.4 49-60 Months 1.5 6.5 1,276.9 7.5 Over 60 Months 6.5 27.3 4,818.6 28.2 Total 23.7 100.0 % $ 17,072.4 100.0 % December 31, 2017 Percentage of Number of Percentage of Principal Principal Active Accounts Active Accounts Receivables Receivables Age of Accounts Since Origination with Balances with Balances Outstanding Outstanding (In millions, except percentages) 0-12 Months 7.4 27.3 % $ 4,110.0 23.2 % 13-24 Months 4.5 16.4 3,011.3 17.0 25-36 Months 3.2 11.7 2,357.1 13.3 37-48 Months 2.4 8.8 1,837.0 10.4 49-60 Months 1.7 6.3 1,280.8 7.2 Over 60 Months 8.1 29.5 5,108.9 28.9 Total 27.3 100.0 % $ 17,705.1 100.0 % |
Schedule of composition of obligor credit quality | June 30, 2018 December 31, 2017 Percentage of Percentage of Total Principal Principal Total Principal Principal Probability of an Account Becoming 91 or More Days Past Receivables Receivables Receivables Receivables Due or Becoming Charged-off (within the next 12 months) Outstanding Outstanding Outstanding Outstanding (In millions, except percentages) No Score $ 174.6 1.0 % $ 210.6 1.2 % 27.1% and higher 1,409.3 8.3 1,330.5 7.5 17.1% - 27.0% 833.0 4.9 850.5 4.8 12.6% - 17.0% 1,106.0 6.5 1,137.7 6.4 3.7% - 12.5% 6,953.3 40.7 7,449.7 42.1 1.9% - 3.6% 3,125.4 18.3 3,286.9 18.6 Lower than 1.9% 3,470.8 20.3 3,439.2 19.4 Total $ 17,072.4 100.0 % $ 17,705.1 100.0 % |
Schedule of securitized credit card receivables, delinquencies and net charge-offs | June 30, December 31, 2018 2017 (In millions) Total credit card receivables – restricted for securitization investors $ 13,524.9 $ 14,293.9 Principal amount of credit card receivables – restricted for securitization investors, 91 days or more past due $ 307.2 $ 295.0 Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 (In millions) Net charge-offs of securitized principal $ 240.3 $ 176.4 $ 485.3 $ 362.4 |
OTHER INVESTMENTS (Tables)
OTHER INVESTMENTS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
OTHER INVESTMENTS | |
Schedule of principal components of other investments, which are carried at fair value | June 30, 2018 December 31, 2017 Amortized Unrealized Unrealized Amortized Unrealized Unrealized Cost Gains Losses Fair Value Cost Gains Losses Fair Value (In millions) Marketable securities $ 245.8 $ — $ (7.4) $ 238.4 $ 207.3 $ 0.2 $ (2.5) $ 205.0 U.S. Treasury bonds 50.0 — (0.2) 49.8 50.0 — (0.1) 49.9 Total $ 295.8 $ — $ (7.6) $ 288.2 $ 257.3 $ 0.2 $ (2.6) $ 254.9 |
Schedule of unrealized losses and fair value for investments that were in an unrealized loss position, aggregated by investment category and the length of time that individual securities have been in a continuous loss position | June 30, 2018 Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (In millions) Marketable securities $ 148.8 $ (4.6) $ 57.5 $ (2.8) $ 206.3 $ (7.4) U.S. Treasury bonds 24.8 (0.2) — — 24.8 (0.2) Total $ 173.6 $ (4.8) $ 57.5 $ (2.8) $ 231.1 $ (7.6) December 31, 2017 Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (In millions) Marketable securities $ 104.5 $ (0.9) $ 67.3 $ (1.6) $ 171.8 $ (2.5) U.S. Treasury bonds 49.9 (0.1) — — 49.9 (0.1) Total $ 154.4 $ (1.0) $ 67.3 $ (1.6) $ 221.7 $ (2.6) |
Schedule of securities by contractual maturity date | Amortized Cost Fair Value (In millions) Due in one year or less $ 79.3 $ 79.1 Due after one year through five years 2.6 2.6 Due after five years through ten years — — Due after ten years 213.9 206.5 Total $ 295.8 $ 288.2 |
REDEMPTION SETTLEMENT ASSETS (T
REDEMPTION SETTLEMENT ASSETS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
REDEMPTION SETTLEMENT ASSETS | |
Schedule of redemption settlement assets | June 30, 2018 December 31, 2017 Amortized Unrealized Unrealized Amortized Unrealized Unrealized Cost Gains Losses Fair Value Cost Gains Losses Fair Value (In millions) Restricted cash $ 44.2 $ — $ — $ 44.2 $ 74.3 $ — $ — $ 74.3 Mutual funds 24.5 — — 24.5 27.3 — (1.3) 26.0 Corporate bonds 513.3 — (7.2) 506.1 495.0 — (5.8) 489.2 Total $ 582.0 $ — $ (7.2) $ 574.8 $ 596.6 $ — $ (7.1) $ 589.5 |
Schedule of unrealized losses and fair value for investments that were in an unrealized loss position, aggregated by investment category and the length of time that individual securities have been in a continuous loss position | June 30, 2018 Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (In millions) Corporate bonds $ 120.1 $ (0.9) $ 376.5 $ (6.3) $ 496.6 $ (7.2) Total $ 120.1 $ (0.9) $ 376.5 $ (6.3) $ 496.6 $ (7.2) December 31, 2017 Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (In millions) Mutual funds $ 26.0 $ (1.3) $ — $ — $ 26.0 $ (1.3) Corporate bonds 328.0 (3.7) 161.2 (2.1) 489.2 (5.8) Total $ 354.0 $ (5.0) $ 161.2 $ (2.1) $ 515.2 $ (7.1) |
Schedule of redemption settlement assets by contractual maturity date | Amortized Estimated Cost Fair Value (In millions) Due in one year or less $ 62.4 $ 62.4 Due after one year through five years 475.4 468.2 Total $ 537.8 $ 530.6 |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
INTANGIBLE ASSETS AND GOODWILL | |
Schedule of intangible assets | June 30, 2018 Gross Accumulated Assets Amortization Net Amortization Life and Method (In millions) Finite Lived Assets Customer contracts and lists $ 1,132.7 $ (699.0) $ 433.7 3-12 years—straight line Premium on purchased credit card portfolios 316.3 (173.6) 142.7 3-13 years—straight line Collector database 53.3 (51.5) 1.8 5 years—straight line Publisher networks 140.2 (98.2) 42.0 5-7 years—straight line Tradenames 76.4 (48.5) 27.9 8-15 years—straight line Purchased data lists 11.1 (6.3) 4.8 1-5 years—straight line, accelerated Favorable lease 6.0 (3.5) 2.5 6-10 years—straight line $ 1,736.0 $ (1,080.6) $ 655.4 Indefinite Lived Assets Tradenames 12.4 — 12.4 Indefinite life Total intangible assets $ 1,748.4 $ (1,080.6) $ 667.8 December 31, 2017 Gross Accumulated Assets Amortization Net Amortization Life and Method (In millions) Finite Lived Assets Customer contracts and lists $ 1,143.5 $ (625.5) $ 518.0 3-12 years—straight line Premium on purchased credit card portfolios 321.6 (147.8) 173.8 3-13 years—straight line Customer databases 63.6 (63.6) — 3 years—straight line Collector database 55.6 (53.5) 2.1 5 years—straight line Publisher networks 140.2 (84.4) 55.8 5-7 years—straight line Tradenames 77.3 (46.8) 30.5 8-15 years—straight line Purchased data lists 11.3 (6.2) 5.1 1-5 years—straight line, accelerated Favorable lease 6.0 (3.1) 2.9 6-10 years—straight line $ 1,819.1 $ (1,030.9) $ 788.2 Indefinite Lived Assets Tradenames 12.4 — 12.4 Indefinite life Total intangible assets $ 1,831.5 $ (1,030.9) $ 800.6 |
Schedule of estimated amortization expense related to intangible assets | For the Years Ending December 31, (In millions) 2018 (excluding the six months ended June 30, 2018) $ 126.5 2019 205.8 2020 142.1 2021 78.9 2022 69.7 Thereafter 32.4 |
Schedule of changes in carrying amount of goodwill | LoyaltyOne ® Epsilon ® Card Services Corporate/ Other Total (In millions) Balance at December 31, 2017 $ 731.1 $ 2,887.3 $ 261.7 $ — $ 3,880.1 Effects of foreign currency translation (21.8) (0.5) — — (22.3) Balance at June 30, 2018 $ 709.3 $ 2,886.8 $ 261.7 $ — $ 3,857.8 |
DEBT (Tables)
DEBT (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
DEBT | |
Schedule of debt | June 30, December 31, Description 2018 2017 Maturity Interest Rate (Dollars in millions) Long-term and other debt: 2017 revolving line of credit $ 752.0 $ 475.0 June 2022 (1) 2017 term loans 2,976.3 3,014.4 June 2022 (1) BrandLoyalty credit agreement 175.1 198.0 June 2020 (2) Senior notes due 2020 — 500.0 — — Senior notes due 2021 500.0 500.0 November 2021 5.875% Senior notes due 2022 600.0 600.0 August 2022 5.375% Senior notes due 2022 (€400.0 million) 467.4 479.9 March 2022 4.500% Senior notes due 2023 (€300.0 million) 350.5 359.9 November 2023 5.250% Capital lease obligations and other debt 15.1 8.8 Various – Jan 2019 – May 2022 2.24% to 4.91% Total long-term and other debt 5,836.4 6,136.0 Less: Unamortized discount and debt issuance costs 45.9 56.4 Less: Current portion 123.0 131.3 Long-term portion $ 5,667.5 $ 5,948.3 Deposits: Certificates of deposit $ 7,210.5 $ 7,526.0 Various – July 2018 – July 2023 1.13% to 4.00% Money market deposits 3,371.7 3,429.4 Non-maturing (3) Total deposits 10,582.2 10,955.4 Less: Unamortized discount and debt issuance costs 22.9 24.5 Less: Current portion 6,160.3 6,366.2 Long-term portion $ 4,399.0 $ 4,564.7 Non-recourse borrowings of consolidated securitization entities: Fixed rate asset-backed term note securities $ 4,854.7 $ 4,704.7 Various – August 2018 – June 2021 1.44% to 4.55% Floating rate asset-backed term note securities — 360.0 — — Conduit asset-backed securities 2,930.0 3,755.0 Various – Jan 2019 – Dec 2019 (4) Total non-recourse borrowings of consolidated securitization entities 7,784.7 8,819.7 Less: Unamortized discount and debt issuance costs 11.5 12.4 Less: Current portion 2,477.3 1,339.9 Long-term portion $ 5,295.9 $ 7,467.4 (1) The interest rate is based upon the London Interbank Offered Rate (“LIBOR”) plus an applicable margin. At June 30, 2018, the weighted average interest rate was 4.16% and 4.09% for the revolving line of credit and term loans, respectively. (2) The interest rate is based upon the Euro Interbank Offered Rate plus an applicable margin. At June 30, 2018, the weighted average interest rate was 1.10% and 1.65% for the BrandLoyalty revolving line of credit and term loans, respectively. (3) The interest rates are based on the Federal Funds rate plus an applicable margin. At June 30, 2018, the interest rates ranged from 1.48% to 2.60%. (4) The interest rate is based upon LIBOR or the asset-backed commercial paper costs of each individual conduit provider plus an applicable margin. At June 30, 2018, the interest rates ranged from 3.05% to 3.28%. |
DERIVATIVE INSTRUMENTS (Tables)
DERIVATIVE INSTRUMENTS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
DERIVATIVE INSTRUMENTS | |
Schedule of fair value of derivative instruments | June 30, 2018 Notional Amount Fair Value Balance Sheet Location Maturity (In millions) Designated as hedging instruments: Foreign currency exchange hedges $ 60.3 $ 2.5 Other current assets July 2018 to June 2019 Foreign currency exchange hedges $ 28.2 $ 0.4 Other current liabilities July 2018 to January 2019 Not designated as hedging instruments: Foreign currency exchange forward contract $ 63.1 $ 1.1 Other current assets January 2019 December 31, 2017 Notional Amount Fair Value Balance Sheet Location Maturity (In millions) Designated as hedging instruments: Foreign currency exchange hedges $ 2.9 $ 0.1 Other current assets August 2018 to October 2018 Foreign currency exchange hedges $ 19.3 $ 0.3 Other current liabilities January 2018 to October 2018 Not designated as hedging instruments: Foreign currency exchange forward contracts $ 168.0 $ 15.9 Other current assets February 2018 Foreign currency exchange forward contract $ 65.8 $ 3.5 Other current liabilities March 2018 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
STOCKHOLDERS' EQUITY | |
Schedule of stock-based compensation expense | Three Months Ended Six Months Ended June 30, June 30, 2018 2017 2018 2017 (In millions) Cost of operations $ 13.8 $ 14.9 $ 33.1 $ 28.8 General and administrative 7.0 6.8 13.2 16.4 Total $ 20.8 $ 21.7 $ 46.3 $ 45.2 |
ACCUMULATED OTHER COMPREHENSI34
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS). | |
Schedule of changes in each component of accumulated comprehensive income (loss), net of tax effects | Net Unrealized Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Three Months Ended June 30, 2018 on Securities Flow Hedges Investment Hedges Adjustments (1) Income (Loss) (In millions) Balance at March 31, 2018 $ (10.7) $ (0.2) $ (53.7) $ (71.9) $ (136.5) Changes in other comprehensive income (loss) (2.0) 1.4 31.0 (30.3) 0.1 Balance at June 30, 2018 $ (12.7) $ 1.2 $ (22.7) $ (102.2) $ (136.4) Net Unrealized Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Three Months Ended June 30, 2017 on Securities Flow Hedges Investment Hedges Adjustments (1) Income (Loss) (In millions) Balance at March 31, 2017 $ (0.9) $ 0.1 $ 0.5 $ (148.6) $ (148.9) Changes in other comprehensive income (loss) (2.8) (0.6) (23.8) 34.5 7.3 Balance at June 30, 2017 $ (3.7) $ (0.5) $ (23.3) $ (114.1) $ (141.6) Net Unrealized Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Six Months Ended June 30, 2018 on Securities Flow Hedges Investment Hedges Adjustments (1) Income (Loss) (In millions) Balance at December 31, 2017 $ (8.7) $ (0.1) $ (42.0) $ (89.4) $ (140.2) Changes in other comprehensive income (loss) (4.0) 1.3 19.3 (12.8) 3.8 Balance at June 30, 2018 $ (12.7) $ 1.2 $ (22.7) $ (102.2) $ (136.4) Net Unrealized Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Six Months Ended June 30, 2017 on Securities Flow Hedges Investment Hedges Adjustments (1) Income (Loss) (In millions) Balance at December 31, 2016 $ (1.6) $ 0.4 $ 4.1 $ (153.6) $ (150.7) Changes in other comprehensive income (loss) (2.1) (0.9) (27.4) 39.5 9.1 Balance at June 30, 2017 $ (3.7) $ (0.5) $ (23.3) $ (114.1) $ (141.6) (1) Primarily related to the impact of changes in the Canadian dollar and Euro foreign currency exchange rates. |
FINANCIAL INSTRUMENTS (Tables)
FINANCIAL INSTRUMENTS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
FINANCIAL INSTRUMENTS | |
Schedule of estimated fair value of Company's financial instruments | June 30, 2018 December 31, 2017 Carrying Fair Carrying Fair Amount Value Amount Value (In millions) Financial assets Credit card and loan receivables, net $ 16,795.9 $ 17,715.1 $ 17,494.5 $ 18,427.8 Credit card and loan receivables held for sale 984.2 1,081.9 1,026.3 1,067.6 Redemption settlement assets, restricted 574.8 574.8 589.5 589.5 Other investments 288.2 288.2 254.9 254.9 Derivative instruments 3.6 3.6 16.0 16.0 Financial liabilities Derivative instruments 0.4 0.4 3.8 3.8 Deposits 10,559.3 10,504.7 10,930.9 10,937.1 Non-recourse borrowings of consolidated securitization entities 7,773.2 7,728.0 8,807.3 8,805.3 Long-term and other debt 5,790.5 5,876.0 6,079.6 6,186.4 |
Schedule of assets and liabilities carried at fair value measured on recurring basis | Fair Value Measurements at June 30, 2018 Using Balance at June 30, 2018 Level 1 Level 2 Level 3 (In millions) Mutual funds (1) $ 24.5 $ 24.5 $ — $ — Corporate bonds (1) 506.1 — 506.1 — Marketable securities (2) 238.4 24.8 213.6 — U.S. Treasury bonds (2) 49.8 49.8 — — Derivative instruments (3) 3.6 — 3.6 — Total assets measured at fair value $ 822.4 $ 99.1 $ 723.3 $ — Derivative instruments (3) $ 0.4 $ — $ 0.4 $ — Total liabilities measured at fair value $ 0.4 $ — $ 0.4 $ — Fair Value Measurements at December 31, 2017 Using Balance at December 31, 2017 Level 1 Level 2 Level 3 (In millions) Mutual funds (1) $ 26.0 $ 26.0 $ — $ — Corporate bonds (1) 489.2 — 489.2 — Marketable securities (2) 205.0 10.1 194.9 — U.S. Treasury bonds (2) 49.9 49.9 — — Derivative instruments (3) 16.0 — 16.0 — Total assets measured at fair value $ 786.1 $ 86.0 $ 700.1 $ — Derivative instruments (3) $ 3.8 $ — $ 3.8 $ — Total liabilities measured at fair value $ 3.8 $ — $ 3.8 $ — (1) Amounts are included in redemption settlement assets in the unaudited condensed consolidated balance sheets. (2) Amounts are included in other current assets and other non-current assets in the unaudited condensed consolidated balance sheets. (3) Amounts are included in other current assets and other current liabilities in the unaudited condensed consolidated balance sheets. |
Schedule of assets and liabilities disclosed but not carried at fair value | Fair Value Measurements at June 30, 2018 Total Level 1 Level 2 Level 3 (In millions) Financial assets: Credit card and loan receivables, net $ 17,715.1 $ — $ — $ 17,715.1 Credit card and loan receivables held for sale 1,081.9 — — 1,081.9 Total $ 18,797.0 $ — $ — $ 18,797.0 Financial liabilities: Deposits $ 10,504.7 $ — $ 10,504.7 $ — Non-recourse borrowings of consolidated securitization entities 7,728.0 — 7,728.0 — Long-term and other debt 5,876.0 — 5,876.0 — Total $ 24,108.7 $ — $ 24,108.7 $ — Fair Value Measurements at December 31, 2017 Total Level 1 Level 2 Level 3 (In millions) Financial assets: Credit card and loan receivables, net $ 18,427.8 $ — $ — $ 18,427.8 Credit card and loan receivables held for sale 1,067.6 — — 1,067.6 Total $ 19,495.4 $ — $ — $ 19,495.4 Financial liabilities: Deposits $ 10,937.1 $ — $ 10,937.1 $ — Non-recourse borrowings of consolidated securitization entities 8,805.3 — 8,805.3 — Long-term and other debt 6,186.4 — 6,186.4 — Total $ 25,928.8 $ — $ 25,928.8 $ — |
SUMMARY OF SIGNIFICANT ACCOUN36
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Basis of Presentation (Details) - USD ($) $ in Millions | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
ASSETS | ||||
Cash and cash equivalents | $ 1,945.9 | $ 3,449.2 | $ 4,190 | |
Total cash, cash equivalents and restricted cash | 2,507 | 3,527.2 | $ 4,314.7 | $ 1,968.5 |
Other current assets | ||||
ASSETS | ||||
Restricted cash | 473.9 | 33.8 | ||
Redemption settlement assets, restricted | ||||
ASSETS | ||||
Restricted cash | 87.2 | $ 44.2 | ||
Asset backed term notes | Other current assets | ||||
ASSETS | ||||
Principal payments collected during accumulation period | $ 433.8 |
SUMMARY OF SIGNIFICANT ACCOUN37
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Recently Adopted Accounting Standards (Details) - USD ($) $ in Millions | Jun. 30, 2018 | Jan. 01, 2018 | Dec. 31, 2017 |
ASSETS | |||
Accounts receivable, net | $ 691.6 | $ 844.7 | $ 822.3 |
Other current assets | 352.6 | 332.3 | 348.9 |
Other non-current assets | 640.3 | 635.6 | 656.5 |
Total assets | 28,950.9 | 1,812.6 | 30,684.8 |
LIABILITIES AND EQUITY | |||
Accrued expenses | 395.4 | 446 | 442.8 |
Other current liabilities | 291.8 | 354.4 | 368.7 |
Other liabilities | 399.4 | 357.3 | 370.9 |
Total liabilities | 26,831.6 | 1,157.7 | 28,829.5 |
Retained earnings | $ 4,493.6 | 4,176.7 | 4,167.1 |
Previous reported | |||
ASSETS | |||
Accounts receivable, net | 822.3 | ||
Other current assets | 348.9 | ||
Other non-current assets | 656.5 | ||
Total assets | 1,827.7 | ||
LIABILITIES AND EQUITY | |||
Accrued expenses | 442.8 | ||
Other current liabilities | 368.7 | ||
Other liabilities | 370.9 | ||
Total liabilities | 1,182.4 | ||
Retained earnings | $ 4,167.1 | ||
Accounting Standards Update 2014-09 | Adjustment | |||
ASSETS | |||
Accounts receivable, net | 22.4 | ||
Other current assets | (16.6) | ||
Other non-current assets | (20.9) | ||
Total assets | (15.1) | ||
LIABILITIES AND EQUITY | |||
Accrued expenses | 3.2 | ||
Other current liabilities | (14.3) | ||
Other liabilities | (13.6) | ||
Total liabilities | (24.7) | ||
Retained earnings | 9.6 | ||
Accounting Standards Update 2016-01 | Adjustment | |||
LIABILITIES AND EQUITY | |||
Cumulative-effect adjustment | $ 1.5 |
REVENUE (Details)
REVENUE (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Disaggregation of revenue | ||||
Revenue from contracts with customers | $ 754.1 | $ 1,478.4 | ||
Finance charges, net | 1,146.9 | $ 1,010.8 | 2,304.1 | $ 2,027.4 |
Investment income | 2.9 | 5.6 | ||
Total revenue | $ 1,903.9 | 1,821.8 | $ 3,788.1 | 3,700.8 |
Estimated breakage rate | 20.00% | 20.00% | ||
Estimated Life of an AIR MILES reward mile | 38 months | |||
Coalition loyalty program | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | $ 92.5 | $ 182.4 | ||
Short-term loyalty programs | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | 130.3 | 244.4 | ||
Technology services | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | 249.8 | 489.4 | ||
Digital media services | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | 178 | 355.9 | ||
Agency services | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | 78.9 | 164 | ||
Servicing fees, net | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | 1.6 | (0.4) | ||
Other | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | 23 | 42.7 | ||
United States | ||||
Disaggregation of revenue | ||||
Total revenue | 1,639 | 3,279.7 | ||
Canada | ||||
Disaggregation of revenue | ||||
Total revenue | 109.8 | 219.1 | ||
Europe, Middle East and Africa | ||||
Disaggregation of revenue | ||||
Total revenue | 107.2 | 221 | ||
Asia Pacific | ||||
Disaggregation of revenue | ||||
Total revenue | 31 | 50 | ||
Other | ||||
Disaggregation of revenue | ||||
Total revenue | 16.9 | 18.3 | ||
Operating segment | LoyaltyOne | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | 245.7 | 469.3 | ||
Investment income | 2.9 | 5.6 | ||
Total revenue | 248.6 | 280 | 474.9 | 613 |
Operating segment | LoyaltyOne | Coalition loyalty program | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | 92.5 | 182.4 | ||
Operating segment | LoyaltyOne | Short-term loyalty programs | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | 130.3 | 244.4 | ||
Operating segment | LoyaltyOne | Other | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | 22.9 | 42.5 | ||
Operating segment | LoyaltyOne | United States | ||||
Disaggregation of revenue | ||||
Total revenue | 6.3 | 12 | ||
Operating segment | LoyaltyOne | Canada | ||||
Disaggregation of revenue | ||||
Total revenue | 105.4 | 211 | ||
Operating segment | LoyaltyOne | Europe, Middle East and Africa | ||||
Disaggregation of revenue | ||||
Total revenue | 91.1 | 188.1 | ||
Operating segment | LoyaltyOne | Asia Pacific | ||||
Disaggregation of revenue | ||||
Total revenue | 28.9 | 45.5 | ||
Operating segment | LoyaltyOne | Other | ||||
Disaggregation of revenue | ||||
Total revenue | 16.9 | 18.3 | ||
Operating segment | Epsilon | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | 514.2 | 1,023.6 | ||
Total revenue | 514.2 | 543.8 | 1,023.6 | 1,073.1 |
Operating segment | Epsilon | Technology services | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | 255.1 | 501.1 | ||
Operating segment | Epsilon | Digital media services | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | 179.3 | 357.5 | ||
Operating segment | Epsilon | Agency services | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | 79.8 | 165 | ||
Operating segment | Epsilon | United States | ||||
Disaggregation of revenue | ||||
Total revenue | 491.4 | 977.9 | ||
Operating segment | Epsilon | Canada | ||||
Disaggregation of revenue | ||||
Total revenue | 4.5 | 8.2 | ||
Operating segment | Epsilon | Europe, Middle East and Africa | ||||
Disaggregation of revenue | ||||
Total revenue | 16.2 | 33 | ||
Operating segment | Epsilon | Asia Pacific | ||||
Disaggregation of revenue | ||||
Total revenue | 2.1 | 4.5 | ||
Operating segment | Card Services | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | 1.6 | (0.4) | ||
Finance charges, net | 1,146.9 | 2,304.1 | ||
Total revenue | 1,148.5 | 1,005 | 2,303.7 | 2,028.2 |
Operating segment | Card Services | Servicing fees, net | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | 1.6 | (0.4) | ||
Operating segment | Card Services | United States | ||||
Disaggregation of revenue | ||||
Total revenue | 1,148.5 | 2,303.7 | ||
Corporate/Other | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | 0.2 | 0.3 | ||
Total revenue | 0.2 | 0.3 | ||
Corporate/Other | Other | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | 0.2 | 0.3 | ||
Corporate/Other | United States | ||||
Disaggregation of revenue | ||||
Total revenue | 0.2 | 0.3 | ||
Eliminations | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | (7.6) | (14.4) | ||
Total revenue | (7.6) | $ (7) | (14.4) | $ (13.5) |
Eliminations | Technology services | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | (5.3) | (11.7) | ||
Eliminations | Digital media services | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | (1.3) | (1.6) | ||
Eliminations | Agency services | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | (0.9) | (1) | ||
Eliminations | Other | ||||
Disaggregation of revenue | ||||
Revenue from contracts with customers | (0.1) | (0.1) | ||
Eliminations | United States | ||||
Disaggregation of revenue | ||||
Total revenue | (7.4) | (14.2) | ||
Eliminations | Canada | ||||
Disaggregation of revenue | ||||
Total revenue | (0.1) | (0.1) | ||
Eliminations | Europe, Middle East and Africa | ||||
Disaggregation of revenue | ||||
Total revenue | $ (0.1) | $ (0.1) | ||
Minimum | ||||
Disaggregation of revenue | ||||
Typical term of short-term loyalty programs | 84 days | |||
Maximum | ||||
Disaggregation of revenue | ||||
Typical term of short-term loyalty programs | 140 days |
REVENUE - Contract Assets and L
REVENUE - Contract Assets and Liabilities (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2018 | Jan. 01, 2018 | Dec. 31, 2017 | |
Change in Contract with Customer, Liability | ||||
Deferred revenue | $ 900.9 | $ 900.9 | $ 966.9 | |
Cash proceeds | 252.4 | |||
Revenue recognized | (278.8) | |||
Other | 0.5 | |||
Effects of foreign currency translation | (40.1) | |||
Amounts recognized in the consolidated balance sheets: | ||||
Deferred revenue (current) | 788.9 | 788.9 | $ 846.6 | |
Deferred revenue (non-current) | 112 | $ 112 | $ 120.3 | |
Period beyond which interest and fee income accrue on credit card accounts | 90 days | |||
Period for which interest and fee income accrue until balance, interest and fees paid or charged off | 180 days | |||
Service | ||||
Change in Contract with Customer, Liability | ||||
Deferred revenue | 257.4 | $ 257.4 | 283.8 | |
Cash proceeds | 94.7 | |||
Revenue recognized | (109.5) | |||
Effects of foreign currency translation | (11.6) | |||
Amounts recognized in the consolidated balance sheets: | ||||
Deferred revenue (current) | 145.4 | 145.4 | ||
Deferred revenue (non-current) | 112 | 112 | ||
Redemption | ||||
Change in Contract with Customer, Liability | ||||
Deferred revenue | 643.5 | 643.5 | 683.1 | |
Cash proceeds | 157.7 | |||
Revenue recognized | (169.3) | |||
Other | 0.5 | |||
Effects of foreign currency translation | (28.5) | |||
Amounts recognized in the consolidated balance sheets: | ||||
Deferred revenue (current) | 643.5 | 643.5 | ||
Epsilon | ||||
Change in Contract with Customer, Liability | ||||
Deferred revenue | 23.7 | 23.7 | 22.8 | |
Amounts recognized in the consolidated balance sheets: | ||||
Unamortized contract costs | 6.1 | 6.1 | ||
Impairment of contract costs | 0 | |||
Card Services | ||||
Amounts recognized in the consolidated balance sheets: | ||||
Unamortized contract costs | 386.8 | 386.8 | ||
Impairment of contract costs | 0 | |||
Card Services | Revenue | ||||
Amounts recognized in the consolidated balance sheets: | ||||
Amortization of contract costs | 15.4 | 32.6 | ||
Card Services | Cost of operations | ||||
Amounts recognized in the consolidated balance sheets: | ||||
Amortization of contract costs | 2.1 | 4.6 | ||
Other current liabilities | LoyaltyOne | ||||
Change in Contract with Customer, Liability | ||||
Deferred revenue | $ 65.7 | 65.7 | $ 87.5 | |
Revenue recognized | $ (190.6) |
REVENUE - Performance Obligatio
REVENUE - Performance Obligation (Details) - LoyaltyOne $ in Millions | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-04-01 | |
REVENUE | |
Revenue, remaining performance obligation | $ 86.8 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 | 6 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01 | |
REVENUE | |
Revenue, remaining performance obligation | $ 104 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 | 12 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01 | |
REVENUE | |
Revenue, remaining performance obligation | $ 55.1 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 | 12 months |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | |
REVENUE | |
Revenue, remaining performance obligation | $ 11.5 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 | 12 months |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Numerator: | ||||
Net income | $ 217.8 | $ 137.7 | $ 381.8 | $ 284.1 |
Denominator: | ||||
Weighted average shares, basic | 55.2 | 55.6 | 55.3 | 56 |
Weighted average effect of dilutive securities: | ||||
Net effect of dilutive stock options and unvested restricted stock (in shares) | 0.2 | 0.2 | 0.2 | 0.3 |
Denominator for diluted calculations (in shares) | 55.4 | 55.8 | 55.5 | 56.3 |
Net income per share: | ||||
Basic (in dollars per share) | $ 3.94 | $ 2.48 | $ 6.90 | $ 5.07 |
Diluted (in dollars per share) | $ 3.93 | $ 2.47 | $ 6.87 | $ 5.05 |
ACQUISITIONS (Details)
ACQUISITIONS (Details) - Signet $ in Millions | Oct. 20, 2017USD ($)item |
Acquisition | |
Number of employees | item | 250 |
Components of consideration | |
Total consideration paid | $ 945.6 |
Gain on business combination | 7.9 |
Fair values of assets acquired and liabilities assumed in acquisition | |
Credit card receivables | 906.3 |
Intangible assets | 52.3 |
Total assets acquired | 958.6 |
Other liabilities | 0.2 |
Deferred tax liability | 4.9 |
Total liabilities assumed | 5.1 |
Net assets acquired | $ 953.5 |
CREDIT CARD AND LOAN RECEIVAB43
CREDIT CARD AND LOAN RECEIVABLES - Allowance for Loan Loss and Delinquencies (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
CREDIT CARD AND LOAN RECEIVABLES | |||||
Principal receivables | $ 17,072.4 | $ 17,072.4 | $ 17,705.1 | ||
Billed and accrued finance charges | 871.2 | 871.2 | 887 | ||
Other credit card receivables | 41.3 | 41.3 | 21.7 | ||
Total credit card and loan receivables | 17,984.9 | 17,984.9 | 18,613.8 | ||
Less: Credit card receivables - restricted for securitization investors | 13,524.9 | 13,524.9 | 14,293.9 | ||
Other credit card and loan receivables | 4,460 | 4,460 | 4,319.9 | ||
Allowance for Loan Loss | |||||
Balance at beginning of period | 1,169.3 | $ 1,020.2 | 1,119.3 | $ 948 | |
Provision for loan loss | 311.9 | 288.1 | 649.6 | 603.2 | |
Allowance associated with credit card and loan receivables transferred to held for sale | (5.2) | (11.8) | |||
Change in estimate for uncollectible unpaid interest and fees | (5) | 5 | 10 | 10 | |
Recoveries | 48.8 | 53.9 | 80.1 | 101.8 | |
Principal charge-offs | (330.8) | (297.9) | (658.2) | (593.7) | |
Balance at end of period | 1,189 | 1,069.3 | $ 1,189 | 1,069.3 | |
Number of days a loan is contractually past due before resulting in charge-off | 180 days | ||||
Number of days after notification of creditor's bankruptcy or death when an account is charged-off | 60 days | ||||
Actual charge-offs for unpaid interest and fees | 182 | 160.7 | $ 381.5 | 317.3 | |
Period beyond which interest and fee income accrue on credit card accounts | 90 days | ||||
Period for which interest and fee income accrue until balance, interest and fees paid or charged off | 180 days | ||||
Period an account becomes past due before a proprietary collection scoring algorithm automatically scores the risk of an account becoming further delinquent | 30 days | ||||
Credit card and loan receivables portfolio delinquency trend | |||||
Receivables outstanding - principal | 17,072.4 | $ 17,072.4 | 17,705.1 | ||
Principal receivables balances contractually delinquent: | |||||
31 to 60 days | 304.3 | 304.3 | 301.5 | ||
61 to 90 days | 210.9 | 210.9 | 191.3 | ||
91 or more days | 419.9 | 419.9 | 409.6 | ||
Total | $ 935.1 | $ 935.1 | $ 902.4 | ||
Percentage Principal receivables balances contractually delinquent : | |||||
Receivables outstanding - principal (as a percent) | 100.00% | 100.00% | 100.00% | ||
Principal receivables balances contractually delinquent: | |||||
31 to 60 days (as a percent) | 1.80% | 1.80% | 1.70% | ||
61 to 90 days (as a percent) | 1.20% | 1.20% | 1.10% | ||
91 or more days (as a percent) | 2.50% | 2.50% | 2.30% | ||
Total (as a percent) | 5.50% | 5.50% | 5.10% | ||
Modified Credit Card Receivables | |||||
Maximum period of time temporary programs' concessions remain in place | 12 months | ||||
Impaired credit card and loan receivables | $ 347.9 | $ 347.9 | $ 260.2 | ||
Allowance for loan loss on impaired credit card receivables | $ 97.3 | $ 97.3 | $ 56.1 | ||
Maximum percentage of credit card receivables to total portfolio | 2.00% | 2.00% | 2.00% | ||
Average recorded investment in impaired credit card receivables | $ 423.3 | 219.2 | $ 359.8 | 216.7 | |
Interest income on modified credit card receivables | $ 9.3 | $ 4.8 | $ 15.3 | $ 9.5 |
CREDIT CARD AND LOAN RECEIVAB44
CREDIT CARD AND LOAN RECEIVABLES - Troubled Debt Restructurings (Details) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018USD ($)item | Jun. 30, 2017USD ($)item | Jun. 30, 2018USD ($)item | Jun. 30, 2017USD ($)item | |
Troubled debt restructurings - credit card receivables | ||||
Modifications related to troubled debt restructurings within credit card and loan receivables | ||||
Number of Restructurings | item | 70,236 | 47,624 | 350,308 | 92,872 |
Pre-modification Outstanding Balance | $ 101.8 | $ 60.9 | $ 414.3 | $ 119.6 |
Post-modification Outstanding Balance | $ 101.6 | $ 60.9 | $ 413.8 | $ 119.5 |
Troubled debt restructurings that subsequently defaulted - credit card receivables | ||||
Modifications related to troubled debt restructurings within credit card and loan receivables | ||||
Number of Restructurings | item | 174,835 | 24,060 | 203,595 | 50,681 |
Outstanding Balance | $ 192.5 | $ 29.5 | $ 227.5 | $ 61.6 |
CREDIT CARD AND LOAN RECEIVAB45
CREDIT CARD AND LOAN RECEIVABLES - Age of Credit Card and Loan Receivable Accounts (Details) item in Millions, $ in Millions | Jun. 30, 2018USD ($)item | Dec. 31, 2017USD ($)item |
Age of Accounts Since Origination | ||
Number of Active Accounts with Balances | item | 23.7 | 27.3 |
Percentage of Active Accounts with Balances | 100.00% | 100.00% |
Principal Receivables Outstanding | $ | $ 17,072.4 | $ 17,705.1 |
Percentage of Principal Receivables Outstanding | 100.00% | 100.00% |
0-12 Months | ||
Age of Accounts Since Origination | ||
Number of Active Accounts with Balances | item | 6.4 | 7.4 |
Percentage of Active Accounts with Balances | 26.80% | 27.30% |
Principal Receivables Outstanding | $ | $ 3,735.3 | $ 4,110 |
Percentage of Principal Receivables Outstanding | 21.90% | 23.20% |
13-24 Months | ||
Age of Accounts Since Origination | ||
Number of Active Accounts with Balances | item | 4.2 | 4.5 |
Percentage of Active Accounts with Balances | 17.90% | 16.40% |
Principal Receivables Outstanding | $ | $ 3,049.4 | $ 3,011.3 |
Percentage of Principal Receivables Outstanding | 17.90% | 17.00% |
25-36 Months | ||
Age of Accounts Since Origination | ||
Number of Active Accounts with Balances | item | 2.8 | 3.2 |
Percentage of Active Accounts with Balances | 11.90% | 11.70% |
Principal Receivables Outstanding | $ | $ 2,243.3 | $ 2,357.1 |
Percentage of Principal Receivables Outstanding | 13.10% | 13.30% |
37-48 Months | ||
Age of Accounts Since Origination | ||
Number of Active Accounts with Balances | item | 2.3 | 2.4 |
Percentage of Active Accounts with Balances | 9.60% | 8.80% |
Principal Receivables Outstanding | $ | $ 1,948.9 | $ 1,837 |
Percentage of Principal Receivables Outstanding | 11.40% | 10.40% |
49-60 Months | ||
Age of Accounts Since Origination | ||
Number of Active Accounts with Balances | item | 1.5 | 1.7 |
Percentage of Active Accounts with Balances | 6.50% | 6.30% |
Principal Receivables Outstanding | $ | $ 1,276.9 | $ 1,280.8 |
Percentage of Principal Receivables Outstanding | 7.50% | 7.20% |
Over 60 Months | ||
Age of Accounts Since Origination | ||
Number of Active Accounts with Balances | item | 6.5 | 8.1 |
Percentage of Active Accounts with Balances | 27.30% | 29.50% |
Principal Receivables Outstanding | $ | $ 4,818.6 | $ 5,108.9 |
Percentage of Principal Receivables Outstanding | 28.20% | 28.90% |
CREDIT CARD AND LOAN RECEIVAB46
CREDIT CARD AND LOAN RECEIVABLES - Credit Quality (Details) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
Probability of an Account Becoming 91 or More Days Past Due or Becoming Charged-off (within the next 12 months) | ||
Principal Receivables Outstanding | $ 17,072.4 | $ 17,705.1 |
Percentage of Principal Receivables Outstanding | 100.00% | 100.00% |
Transfer of Financial Assets | ||
Loan receivables originated that have not yet been sold to the client | $ 78.8 | $ 126.9 |
No Score | ||
Probability of an Account Becoming 91 or More Days Past Due or Becoming Charged-off (within the next 12 months) | ||
Principal Receivables Outstanding | $ 174.6 | $ 210.6 |
Percentage of Principal Receivables Outstanding | 1.00% | 1.20% |
27.1% and higher | ||
Probability of an Account Becoming 91 or More Days Past Due or Becoming Charged-off (within the next 12 months) | ||
Principal Receivables Outstanding | $ 1,409.3 | $ 1,330.5 |
Percentage of Principal Receivables Outstanding | 8.30% | 7.50% |
17.1% - 27.0% | ||
Probability of an Account Becoming 91 or More Days Past Due or Becoming Charged-off (within the next 12 months) | ||
Principal Receivables Outstanding | $ 833 | $ 850.5 |
Percentage of Principal Receivables Outstanding | 4.90% | 4.80% |
12.6% - 17.0% | ||
Probability of an Account Becoming 91 or More Days Past Due or Becoming Charged-off (within the next 12 months) | ||
Principal Receivables Outstanding | $ 1,106 | $ 1,137.7 |
Percentage of Principal Receivables Outstanding | 6.50% | 6.40% |
3.7% - 12.5% | ||
Probability of an Account Becoming 91 or More Days Past Due or Becoming Charged-off (within the next 12 months) | ||
Principal Receivables Outstanding | $ 6,953.3 | $ 7,449.7 |
Percentage of Principal Receivables Outstanding | 40.70% | 42.10% |
1.9% - 3.6% | ||
Probability of an Account Becoming 91 or More Days Past Due or Becoming Charged-off (within the next 12 months) | ||
Principal Receivables Outstanding | $ 3,125.4 | $ 3,286.9 |
Percentage of Principal Receivables Outstanding | 18.30% | 18.60% |
Lower than 1.9% | ||
Probability of an Account Becoming 91 or More Days Past Due or Becoming Charged-off (within the next 12 months) | ||
Principal Receivables Outstanding | $ 3,470.8 | $ 3,439.2 |
Percentage of Principal Receivables Outstanding | 20.30% | 19.40% |
CREDIT CARD AND LOAN RECEIVAB47
CREDIT CARD AND LOAN RECEIVABLES - Securitized Credit Card Receivables (Details) $ in Millions | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2018USD ($)item | Mar. 31, 2018USD ($)item | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($) | |
Portfolio Held For Sale | ||||||
Carrying value of the credit card portfolios held for sale | $ 905.4 | $ 905.4 | $ 899.4 | |||
Number of credit card portfolios transferred to held for sale | item | 1 | 1 | ||||
Number of credit card portfolios transferred from held for sale to receivables | item | 1 | |||||
Carring value of the loan and credit card portfolios transferred out of held for sale to receivables | $ 82.4 | |||||
Carrying value of the loan and credit card portfolios transferred to held for sale | $ 54.6 | $ 90.1 | ||||
Valuation adjustment on credit card and loan portfolios held for sale | 14.2 | 35.9 | ||||
Sale of credit card portfolio | 55.6 | 55.6 | ||||
Securitized Credit Card Receivables | ||||||
Total credit card receivables - restricted for securitization investors | 13,524.9 | 13,524.9 | 14,293.9 | |||
Principal amount of credit card receivables - restricted for securitization investors, 91 days or more past due | 307.2 | 307.2 | $ 295 | |||
Net charge-offs of securitized principal | $ 240.3 | $ 176.4 | $ 485.3 | $ 362.4 |
INVENTORIES, NET (Details)
INVENTORIES, NET (Details) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
INVENTORIES, NET | ||
Inventories, net | $ 233.2 | $ 234.1 |
OTHER INVESTMENTS (Details)
OTHER INVESTMENTS (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Marketable securities | |||||
Amortized Cost | $ 245.8 | $ 245.8 | $ 207.3 | ||
Unrealized Gains | 0.2 | ||||
Unrealized Losses | (7.4) | (7.4) | (2.5) | ||
Fair Value | 238.4 | 238.4 | 205 | ||
U.S. Treasury bonds | |||||
Amortized Cost | 50 | 50 | 50 | ||
Unrealized Losses | (0.2) | (0.2) | (0.1) | ||
Fair Value | 49.8 | 49.8 | 49.9 | ||
Other Investments, Total | |||||
Amortized Cost | 295.8 | 295.8 | 257.3 | ||
Unrealized Gains | 0.2 | ||||
Unrealized Losses | (7.6) | (7.6) | (2.6) | ||
Fair Value | 288.2 | 288.2 | 254.9 | ||
Fair Value, Marketable securities | |||||
Less than 12 months | 148.8 | 148.8 | 104.5 | ||
12 Months or Greater | 57.5 | 57.5 | 67.3 | ||
Total | 206.3 | 206.3 | 171.8 | ||
Unrealized Losses, Marketable securities | |||||
Less than 12 months | (4.6) | (4.6) | (0.9) | ||
12 Months or Greater | (2.8) | (2.8) | (1.6) | ||
Total | (7.4) | (7.4) | (2.5) | ||
Fair Value, U.S. Treasury bonds | |||||
Less than 12 months | 24.8 | 24.8 | 49.9 | ||
Total | 24.8 | 24.8 | 49.9 | ||
Unrealized Losses, U.S. Treasury bonds | |||||
Less than 12 months | (0.2) | (0.2) | (0.1) | ||
Total | (0.2) | (0.2) | (0.1) | ||
Fair Value, Total | |||||
Less than 12 months | 173.6 | 173.6 | 154.4 | ||
12 Months or Greater | 57.5 | 57.5 | 67.3 | ||
Total | 231.1 | 231.1 | 221.7 | ||
Unrealized Losses, Total | |||||
Less than 12 months | (4.8) | (4.8) | (1) | ||
12 Months or Greater | (2.8) | (2.8) | (1.6) | ||
Total | (7.6) | (7.6) | $ (2.6) | ||
Amortized Cost | |||||
Due in one year or less | 79.3 | 79.3 | |||
Due after one year through five years | 2.6 | 2.6 | |||
Due after ten years | 213.9 | 213.9 | |||
Total | 295.8 | 295.8 | |||
Fair Value | |||||
Due in one year or less | 79.1 | 79.1 | |||
Due after one year through five years | 2.6 | 2.6 | |||
Due after ten years | 206.5 | 206.5 | |||
Fair Value | 288.2 | 288.2 | |||
Realized gains or losses | |||||
Realized gains or losses from the sale of investment securities | $ 0 | $ 0 | $ 0 | $ 0 |
REDEMPTION SETTLEMENT ASSETS (D
REDEMPTION SETTLEMENT ASSETS (Details) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
REDEMPTION SETTLEMENT ASSETS | ||
Amortized Cost | $ 582 | $ 596.6 |
Unrealized Losses | (7.2) | (7.1) |
Fair Value | 574.8 | 589.5 |
Fair Value | ||
Less than 12 months | 120.1 | 354 |
12 Months or Greater | 376.5 | 161.2 |
Total | 496.6 | 515.2 |
Unrealized Losses | ||
Less than 12 months | (0.9) | (5) |
12 Months or Greater | (6.3) | (2.1) |
Total | (7.2) | (7.1) |
Amortized cost of the redemption settlement assets by contractual maturity | ||
Due in one year or less | 62.4 | |
Due after one year through five years | 475.4 | |
Total | 537.8 | |
Estimated fair value of the redemption settlement assets by contractual maturity | ||
Due in one year or less | 62.4 | |
Due after one year through five years | 468.2 | |
Total | 530.6 | |
Restricted cash | ||
REDEMPTION SETTLEMENT ASSETS | ||
Amortized Cost | 44.2 | 74.3 |
Fair Value | 44.2 | 74.3 |
Mutual funds | ||
REDEMPTION SETTLEMENT ASSETS | ||
Amortized Cost | 24.5 | 27.3 |
Unrealized Losses | (1.3) | |
Fair Value | 24.5 | 26 |
Fair Value | ||
Less than 12 months | 26 | |
Total | 26 | |
Unrealized Losses | ||
Less than 12 months | (1.3) | |
Total | (1.3) | |
Corporate bonds | ||
REDEMPTION SETTLEMENT ASSETS | ||
Amortized Cost | 513.3 | 495 |
Unrealized Losses | (7.2) | (5.8) |
Fair Value | 506.1 | 489.2 |
Fair Value | ||
Less than 12 months | 120.1 | 328 |
12 Months or Greater | 376.5 | 161.2 |
Total | 496.6 | 489.2 |
Unrealized Losses | ||
Less than 12 months | (0.9) | (3.7) |
12 Months or Greater | (6.3) | (2.1) |
Total | $ (7.2) | $ (5.8) |
INTANGIBLE ASSETS AND GOODWIL51
INTANGIBLE ASSETS AND GOODWILL - Finite Lived Assets and Indefinite Lived Assets (Details) - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Schedule of Finite and Indefinite-lived Intangible Assets | ||
Finite lived assets, gross | $ 1,736 | $ 1,819.1 |
Accumulated Amortization | (1,080.6) | (1,030.9) |
Finite lived assets, net | 655.4 | 788.2 |
Total Intangible Assets | ||
Gross Assets | 1,748.4 | 1,831.5 |
Accumulated Amortization | (1,080.6) | (1,030.9) |
Net | 667.8 | 800.6 |
Tradenames | ||
Indefinite Lived Assets | ||
Indefinite lived assets | 12.4 | 12.4 |
Customer contracts and lists | ||
Schedule of Finite and Indefinite-lived Intangible Assets | ||
Finite lived assets, gross | 1,132.7 | 1,143.5 |
Accumulated Amortization | (699) | (625.5) |
Finite lived assets, net | 433.7 | 518 |
Total Intangible Assets | ||
Accumulated Amortization | $ (699) | $ (625.5) |
Customer contracts and lists | Minimum | ||
Amortization Life and Method | ||
Useful life | 3 years | 3 years |
Customer contracts and lists | Maximum | ||
Amortization Life and Method | ||
Useful life | 12 years | 12 years |
Premium on purchased credit card portfolios | ||
Schedule of Finite and Indefinite-lived Intangible Assets | ||
Finite lived assets, gross | $ 316.3 | $ 321.6 |
Accumulated Amortization | (173.6) | (147.8) |
Finite lived assets, net | 142.7 | 173.8 |
Total Intangible Assets | ||
Accumulated Amortization | $ (173.6) | $ (147.8) |
Premium on purchased credit card portfolios | Minimum | ||
Amortization Life and Method | ||
Useful life | 3 years | 3 years |
Premium on purchased credit card portfolios | Maximum | ||
Amortization Life and Method | ||
Useful life | 13 years | 13 years |
Customer databases | ||
Schedule of Finite and Indefinite-lived Intangible Assets | ||
Finite lived assets, gross | $ 63.6 | |
Accumulated Amortization | (63.6) | |
Total Intangible Assets | ||
Accumulated Amortization | $ (63.6) | |
Customer databases | Minimum | ||
Amortization Life and Method | ||
Useful life | 3 years | |
Collector database | ||
Schedule of Finite and Indefinite-lived Intangible Assets | ||
Finite lived assets, gross | $ 53.3 | $ 55.6 |
Accumulated Amortization | (51.5) | (53.5) |
Finite lived assets, net | $ 1.8 | $ 2.1 |
Amortization Life and Method | ||
Useful life | 5 years | 5 years |
Total Intangible Assets | ||
Accumulated Amortization | $ (51.5) | $ (53.5) |
Publisher networks | ||
Schedule of Finite and Indefinite-lived Intangible Assets | ||
Finite lived assets, gross | 140.2 | 140.2 |
Accumulated Amortization | (98.2) | (84.4) |
Finite lived assets, net | 42 | 55.8 |
Total Intangible Assets | ||
Accumulated Amortization | $ (98.2) | $ (84.4) |
Publisher networks | Minimum | ||
Amortization Life and Method | ||
Useful life | 5 years | 5 years |
Publisher networks | Maximum | ||
Amortization Life and Method | ||
Useful life | 7 years | 7 years |
Tradenames | ||
Schedule of Finite and Indefinite-lived Intangible Assets | ||
Finite lived assets, gross | $ 76.4 | $ 77.3 |
Accumulated Amortization | (48.5) | (46.8) |
Finite lived assets, net | 27.9 | 30.5 |
Total Intangible Assets | ||
Accumulated Amortization | $ (48.5) | $ (46.8) |
Tradenames | Minimum | ||
Amortization Life and Method | ||
Useful life | 8 years | 8 years |
Tradenames | Maximum | ||
Amortization Life and Method | ||
Useful life | 15 years | 15 years |
Purchased data lists | ||
Schedule of Finite and Indefinite-lived Intangible Assets | ||
Finite lived assets, gross | $ 11.1 | $ 11.3 |
Accumulated Amortization | (6.3) | (6.2) |
Finite lived assets, net | 4.8 | 5.1 |
Total Intangible Assets | ||
Accumulated Amortization | $ (6.3) | $ (6.2) |
Purchased data lists | Minimum | ||
Amortization Life and Method | ||
Useful life | 1 year | 1 year |
Purchased data lists | Maximum | ||
Amortization Life and Method | ||
Useful life | 5 years | 5 years |
Favorable lease | ||
Schedule of Finite and Indefinite-lived Intangible Assets | ||
Finite lived assets, gross | $ 6 | $ 6 |
Accumulated Amortization | (3.5) | (3.1) |
Finite lived assets, net | 2.5 | 2.9 |
Total Intangible Assets | ||
Accumulated Amortization | $ (3.5) | $ (3.1) |
Favorable lease | Minimum | ||
Amortization Life and Method | ||
Useful life | 6 years | 6 years |
Favorable lease | Maximum | ||
Amortization Life and Method | ||
Useful life | 10 years | 10 years |
INTANGIBLE ASSETS AND GOODWIL52
INTANGIBLE ASSETS AND GOODWILL Maturity Schedule (Details) $ in Millions | Jun. 30, 2018USD ($) |
Estimated amortization expense related to intangible assets for the next five years and thereafter | |
2018 (excluding the six months ended June 30, 2018) | $ 126.5 |
2,019 | 205.8 |
2,020 | 142.1 |
2,021 | 78.9 |
2,022 | 69.7 |
Thereafter | $ 32.4 |
INTANGIBLE ASSETS AND GOODWIL53
INTANGIBLE ASSETS AND GOODWILL - Goodwill Information (Details) $ in Millions | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Goodwill | |
Beginning Balance | $ 3,880.1 |
Effects of foreign currency translation | 22.3 |
Ending Balance | 3,857.8 |
LoyaltyOne | |
Goodwill | |
Beginning Balance | 731.1 |
Effects of foreign currency translation | 21.8 |
Ending Balance | 709.3 |
Epsilon | |
Goodwill | |
Beginning Balance | 2,887.3 |
Effects of foreign currency translation | 0.5 |
Ending Balance | 2,886.8 |
Card Services | |
Goodwill | |
Beginning Balance | 261.7 |
Ending Balance | $ 261.7 |
DEBT (Details)
DEBT (Details) € in Millions, $ in Millions | Apr. 02, 2018USD ($) | Apr. 30, 2018USD ($) | Feb. 28, 2018USD ($) | Jun. 30, 2018EUR (€)item | Jun. 30, 2018USD ($) | Jun. 30, 2018USD ($)item | Dec. 31, 2017USD ($) | Mar. 31, 2017EUR (€) |
Debt | ||||||||
Less: Current portion | $ 123 | $ 131.3 | ||||||
Long-term and other debt | 5,667.5 | 5,948.3 | ||||||
Less: Current portion | 6,160.3 | 6,366.2 | ||||||
Long-term portion | 4,399 | 4,564.7 | ||||||
Less: Current portion | 2,477.3 | 1,339.9 | ||||||
Long-term portion | $ 5,295.9 | 7,467.4 | ||||||
Number of conduit facilities | item | 3 | 3 | ||||||
Term loans | Brand Loyalty | ||||||||
Debt | ||||||||
Amount borrowed | € 130 | $ 151.9 | ||||||
Series 2018-A asset backed term notes | Master Trust I | ||||||||
Debt | ||||||||
Principal amount of debt | $ 591.5 | |||||||
Series 2015-A asset backed term notes | ||||||||
Debt | ||||||||
Debt repaid by the company | $ 500 | |||||||
Retained amount of subordinated class of notes | $ 140 | |||||||
Series 2013-A asset backed term notes | ||||||||
Debt | ||||||||
Debt repaid by the company | 500 | |||||||
Retained amount of subordinated class of notes | 125 | |||||||
Class A notes | Master Trust I | ||||||||
Debt | ||||||||
Principal amount of debt | $ 525 | |||||||
Interest Rate (as a percent) | 3.07% | |||||||
Retained amount of subordinated class of notes | $ 66.5 | |||||||
Total deposits | ||||||||
Debt | ||||||||
Deposits | $ 10,582.2 | 10,955.4 | ||||||
Less: Unamortized debt issuance costs | 22.9 | 24.5 | ||||||
Less: Current portion | 6,160.3 | 6,366.2 | ||||||
Long-term portion | 4,399 | 4,564.7 | ||||||
Certificates of deposit | ||||||||
Debt | ||||||||
Deposits | 7,210.5 | 7,526 | ||||||
Money market deposits | ||||||||
Debt | ||||||||
Money market deposits | 3,371.7 | 3,429.4 | ||||||
Non-recourse borrowings of consolidated securitization entities | ||||||||
Debt | ||||||||
Less: Unamortized debt issuance costs | 11.5 | 12.4 | ||||||
Total non-recourse borrowings of consolidated securitization entities | 7,784.7 | 8,819.7 | ||||||
Less: Current portion | 2,477.3 | 1,339.9 | ||||||
Long-term portion | 5,295.9 | 7,467.4 | ||||||
Fixed rate asset-backed term note securities | ||||||||
Debt | ||||||||
Total non-recourse borrowings of consolidated securitization entities | 4,854.7 | 4,704.7 | ||||||
Floating rate asset-backed term note securities | ||||||||
Debt | ||||||||
Total non-recourse borrowings of consolidated securitization entities | 0 | 360 | ||||||
Conduit asset-backed securities | ||||||||
Debt | ||||||||
Maximum borrowing capacity | 4,500 | |||||||
Total non-recourse borrowings of consolidated securitization entities | 2,930 | 3,755 | ||||||
Line of credit amount outstanding | 2,900 | |||||||
Long-term and other debt | ||||||||
Debt | ||||||||
Total long-term and other debt | 5,836.4 | 6,136 | ||||||
Less: Unamortized discount and debt issuance costs | 45.9 | 56.4 | ||||||
Less: Current portion | 123 | 131.3 | ||||||
Long-term and other debt | 5,667.5 | 5,948.3 | ||||||
Senior Notes Due 2020 | ||||||||
Debt | ||||||||
Total long-term and other debt | 0 | 500 | ||||||
Interest Rate (as a percent) | 6.375% | |||||||
Debt repaid by the company | $ 500 | |||||||
Senior Notes Due 2021 | ||||||||
Debt | ||||||||
Total long-term and other debt | $ 500 | 500 | ||||||
Interest Rate (as a percent) | 5.875% | 5.875% | ||||||
Senior Notes Due August 2022 | ||||||||
Debt | ||||||||
Total long-term and other debt | $ 600 | 600 | ||||||
Interest Rate (as a percent) | 5.375% | 5.375% | ||||||
Senior Notes Due March 2022 | ||||||||
Debt | ||||||||
Principal amount of debt | € | € 400 | € 400 | ||||||
Total long-term and other debt | $ 467.4 | 479.9 | ||||||
Interest Rate (as a percent) | 4.50% | 4.50% | ||||||
Senior Notes Due 2023 | ||||||||
Debt | ||||||||
Principal amount of debt | € | € 300 | |||||||
Total long-term and other debt | $ 350.5 | 359.9 | ||||||
Interest Rate (as a percent) | 5.25% | 5.25% | ||||||
2017 Credit Agreement | ||||||||
Debt | ||||||||
Total availability under Credit Facility | $ 820.4 | |||||||
2017 revolving line of credit | ||||||||
Debt | ||||||||
Maximum borrowing capacity | 1,572.4 | |||||||
Total long-term and other debt | $ 752 | 475 | ||||||
Weighted average interest rate (as a percent) | 4.16% | 4.16% | ||||||
2017 Term Loans | ||||||||
Debt | ||||||||
Principal amount of debt | $ 3,052.6 | |||||||
Total long-term and other debt | $ 2,976.3 | 3,014.4 | ||||||
Weighted average interest rate (as a percent) | 4.09% | 4.09% | ||||||
Capital lease obligations and other debt | ||||||||
Debt | ||||||||
Total long-term and other debt | $ 15.1 | 8.8 | ||||||
BrandLoyalty credit facility | ||||||||
Debt | ||||||||
Total long-term and other debt | $ 175.1 | $ 198 | ||||||
Weighted average interest rate (as a percent) | 1.10% | 1.10% | ||||||
Lines of credit | Brand Loyalty | ||||||||
Debt | ||||||||
Line of credit amount outstanding | € 19.8 | $ 23.2 | ||||||
BrandLoyalty term loans | ||||||||
Debt | ||||||||
Weighted average interest rate (as a percent) | 1.65% | 1.65% | ||||||
Minimum | Certificates of deposit | ||||||||
Debt | ||||||||
Interest Rate (as a percent) | 1.13% | 1.13% | ||||||
Minimum | Money market deposits | ||||||||
Debt | ||||||||
Interest Rate (as a percent) | 1.48% | 1.48% | ||||||
Minimum | Fixed rate asset-backed term note securities | ||||||||
Debt | ||||||||
Interest Rate (as a percent) | 1.44% | 1.44% | ||||||
Minimum | Conduit asset-backed securities | ||||||||
Debt | ||||||||
Interest Rate (as a percent) | 3.05% | 3.05% | ||||||
Minimum | Capital lease obligations and other debt | ||||||||
Debt | ||||||||
Interest Rate (as a percent) | 2.24% | 2.24% | ||||||
Maximum | Certificates of deposit | ||||||||
Debt | ||||||||
Interest Rate (as a percent) | 4.00% | 4.00% | ||||||
Maximum | Money market deposits | ||||||||
Debt | ||||||||
Interest Rate (as a percent) | 2.60% | 2.60% | ||||||
Maximum | Fixed rate asset-backed term note securities | ||||||||
Debt | ||||||||
Interest Rate (as a percent) | 4.55% | 4.55% | ||||||
Maximum | Conduit asset-backed securities | ||||||||
Debt | ||||||||
Interest Rate (as a percent) | 3.28% | 3.28% | ||||||
Maximum | Capital lease obligations and other debt | ||||||||
Debt | ||||||||
Interest Rate (as a percent) | 4.91% | 4.91% |
DERIVATIVE INSTRUMENTS - Design
DERIVATIVE INSTRUMENTS - Designated and Not Designated Instruments (Details) - USD ($) $ in Millions | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Notional amount, fair value and classification of the company's outstanding derivative contracts | ||
Maximum length of time, foreign currency cash flow hedge | 12 months | |
Designated as hedging instrument | Foreign currency exchange hedges | Other current assets | ||
Notional amount, fair value and classification of the company's outstanding derivative contracts | ||
Notional Amount | $ 60.3 | $ 2.9 |
Fair Value | 2.5 | 0.1 |
Designated as hedging instrument | Foreign currency exchange hedges | Other current liabilities | ||
Notional amount, fair value and classification of the company's outstanding derivative contracts | ||
Notional Amount | 28.2 | 19.3 |
Fair Value | 0.4 | 0.3 |
Not designated as hedging instrument | Foreign currency exchange forward contracts | Other current assets | ||
Notional amount, fair value and classification of the company's outstanding derivative contracts | ||
Notional Amount | 63.1 | 168 |
Fair Value | $ 1.1 | 15.9 |
Not designated as hedging instrument | Foreign currency exchange forward contracts | Other current liabilities | ||
Notional amount, fair value and classification of the company's outstanding derivative contracts | ||
Notional Amount | 65.8 | |
Fair Value | $ 3.5 |
DERIVATIVE INSTRUMENTS - Activi
DERIVATIVE INSTRUMENTS - Activity and Location of Outstanding Derivatives (Details) € in Millions, $ in Millions | 3 Months Ended | 6 Months Ended | ||||||
Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2018EUR (€) | Feb. 28, 2018EUR (€) | Mar. 31, 2017EUR (€) | Nov. 30, 2015EUR (€) | |
Activity related to company's outstanding derivative contracts and location | ||||||||
Unrealized gain (loss) on net investment hedges | $ 31 | $ (23.8) | $ 19.3 | $ (27.4) | ||||
Gains (losses) related to foreign exchange hedges designated as effective | 1.4 | (0.6) | 1.3 | (0.9) | ||||
Amount expected to be reclassified in the coming 12 months | 1.2 | |||||||
Senior Notes Due 2023 | ||||||||
Activity related to company's outstanding derivative contracts and location | ||||||||
Principal amount of debt | € | € 300 | |||||||
Interest Rate (as a percent) | 5.25% | |||||||
Senior Notes Due March 2022 | ||||||||
Activity related to company's outstanding derivative contracts and location | ||||||||
Principal amount of debt | € | € 400 | € 400 | ||||||
Interest Rate (as a percent) | 4.50% | |||||||
Not designated as hedging instrument. | BrandLoyalty term loans | ||||||||
Activity related to company's outstanding derivative contracts and location | ||||||||
Hedged amount | € | € 500 | |||||||
Net investment hedge | ||||||||
Activity related to company's outstanding derivative contracts and location | ||||||||
Ineffectiveness recorded | 0 | 0 | 0 | 0 | ||||
Gains (losses) on derivative instruments | 31 | (23.8) | 19.3 | (27.4) | ||||
Net investment hedge | Senior Notes Due 2023 | ||||||||
Activity related to company's outstanding derivative contracts and location | ||||||||
Hedged amount | € | € 300 | |||||||
Net investment hedge | Senior Notes Due March 2022 | ||||||||
Activity related to company's outstanding derivative contracts and location | ||||||||
Hedged amount | € | € 200 | |||||||
Net investment hedge | BrandLoyalty term loans | ||||||||
Activity related to company's outstanding derivative contracts and location | ||||||||
Hedged amount | € | € 640 | |||||||
Foreign currency exchange forward contracts | General and administrative | ||||||||
Activity related to company's outstanding derivative contracts and location | ||||||||
Gains (losses) on derivative instruments | 1.2 | 9.1 | 8.2 | 6.4 | ||||
Foreign currency exchange hedges | ||||||||
Activity related to company's outstanding derivative contracts and location | ||||||||
Gains (losses) related to foreign exchange hedges designated as effective | $ 1.4 | $ (0.6) | $ 1.3 | $ (0.9) |
STOCKHOLDERS' EQUITY - Stock Re
STOCKHOLDERS' EQUITY - Stock Repurchase Programs (Details) - USD ($) shares in Millions, $ in Millions | 6 Months Ended | ||
Jun. 30, 2018 | Jul. 26, 2018 | Jan. 01, 2017 | |
Stock Repurchase Programs | |||
Amount of company's outstanding common stock authorized to be repurchased | $ 500 | $ 1,000 | |
Number of shares repurchased | 0.5 | ||
Total cost of shares repurchased | $ 99.2 | ||
Unused balance under stock repurchase program | $ 347.2 |
STOCKHOLDERS' EQUITY Stock Comp
STOCKHOLDERS' EQUITY Stock Compensation Plans (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs | ||||
Stock-based compensation expense | $ 20.8 | $ 21.7 | $ 46.3 | $ 45.2 |
Cost of operations. | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs | ||||
Stock-based compensation expense | 13.8 | 14.9 | 33.1 | 28.8 |
General and administrative | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs | ||||
Stock-based compensation expense | $ 7 | $ 6.8 | $ 13.2 | $ 16.4 |
STOCKHOLDERS' EQUITY Restricted
STOCKHOLDERS' EQUITY Restricted Stock Unit Awards and Stock Options (Details) - USD ($) $ / shares in Units, $ in Millions | Jul. 19, 2018 | Jun. 19, 2018 | Apr. 19, 2018 | Mar. 20, 2018 | Jan. 25, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 |
Stock Compensation Plans | ||||||||||
Dividends declared per share | $ 0.57 | $ 0.57 | $ 0.57 | $ 0.57 | $ 0.52 | $ 1.14 | $ 1.04 | |||
Dividends paid | $ 31.5 | $ 31.5 | $ 63.3 | $ 58 | ||||||
Payments related to dividend equivalent rights | $ 0.1 | $ 0.2 | ||||||||
Performance-based restricted stock unit awards | Awards with final restrictions lapsing February 2021 | ||||||||||
Stock Compensation Plans | ||||||||||
Shares granted (in shares) | 263,542 | |||||||||
Weighted average grant-date fair value (in dollars per share) | $ 240.65 | $ 240.65 | ||||||||
Percentage of stock units for which restrictions lapse in February 2019 | 33.00% | |||||||||
Percentage of stock units for which restrictions lapse on February 2020 | 33.00% | |||||||||
Percentage of stock units for which restrictions lapse on February 2021 | 34.00% | |||||||||
Performance-based restricted stock unit awards | Minimum | Awards with final restrictions lapsing February 2021 | ||||||||||
Stock Compensation Plans | ||||||||||
Percentage of stock units to vest | 0.00% | |||||||||
Performance-based restricted stock unit awards | Maximum | Awards with final restrictions lapsing February 2021 | ||||||||||
Stock Compensation Plans | ||||||||||
Percentage of stock units to vest | 150.00% | |||||||||
Service-based restricted stock unit awards | ||||||||||
Stock Compensation Plans | ||||||||||
Shares granted (in shares) | 89,387 | |||||||||
Weighted average grant-date fair value (in dollars per share) | 239.32 | $ 239.32 | ||||||||
Award vesting period | 3 years | |||||||||
Market-based restricted stock unit awards | ||||||||||
Stock Compensation Plans | ||||||||||
Shares granted (in shares) | 28,057 | |||||||||
Weighted average grant-date fair value (in dollars per share) | $ 220.56 | $ 220.56 | ||||||||
Percentage of stock units for which restrictions lapse on February 2020 | 100.00% | |||||||||
Award vesting period | 2 years | |||||||||
Market-based restricted stock unit awards | Minimum | ||||||||||
Stock Compensation Plans | ||||||||||
Percentage of stock units to vest | 0.00% | |||||||||
Market-based restricted stock unit awards | Maximum | ||||||||||
Stock Compensation Plans | ||||||||||
Percentage of stock units to vest | 175.00% |
ACCUMULATED OTHER COMPREHENSI60
ACCUMULATED OTHER COMPREHENSIVE INCOME (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Jan. 01, 2018 | |
Accumulated Other Comprehensive Income | |||||
Balance at the beginning of the period | $ (140.2) | ||||
Changes in other comprehensive income (loss) | $ 0.1 | $ 7.3 | 3.8 | $ 9.1 | |
Balance at the end of the period | (136.4) | (136.4) | |||
Accounting Standards Update 2016-01 | Adjustment | |||||
Accumulated Other Comprehensive Income | |||||
Cumulative-effect adjustment | $ 1.5 | ||||
Net Unrealized Gains (Losses) on Securities | |||||
Accumulated Other Comprehensive Income | |||||
Balance at the beginning of the period | (10.7) | (0.9) | (8.7) | (1.6) | |
Changes in other comprehensive income (loss) | (2) | (2.8) | (4) | (2.1) | |
Balance at the end of the period | (12.7) | (3.7) | (12.7) | (3.7) | |
Unrealized Gains (Losses) on Cash Flow Hedges | |||||
Accumulated Other Comprehensive Income | |||||
Balance at the beginning of the period | (0.2) | 0.1 | (0.1) | 0.4 | |
Changes in other comprehensive income (loss) | 1.4 | (0.6) | 1.3 | (0.9) | |
Balance at the end of the period | 1.2 | (0.5) | 1.2 | (0.5) | |
Unrealized Gains (Losses) on Net Investment Hedge. | |||||
Accumulated Other Comprehensive Income | |||||
Balance at the beginning of the period | (53.7) | 0.5 | (42) | 4.1 | |
Changes in other comprehensive income (loss) | 31 | (23.8) | 19.3 | (27.4) | |
Balance at the end of the period | (22.7) | (23.3) | (22.7) | (23.3) | |
Foreign Currency Translation Adjustments | |||||
Accumulated Other Comprehensive Income | |||||
Balance at the beginning of the period | (71.9) | (148.6) | (89.4) | (153.6) | |
Changes in other comprehensive income (loss) | (30.3) | 34.5 | (12.8) | 39.5 | |
Balance at the end of the period | (102.2) | (114.1) | (102.2) | (114.1) | |
Accumulated Other Comprehensive Income (Loss) | |||||
Accumulated Other Comprehensive Income | |||||
Balance at the beginning of the period | (136.5) | (148.9) | (140.2) | (150.7) | |
Changes in other comprehensive income (loss) | 0.1 | 7.3 | 3.8 | 9.1 | |
Balance at the end of the period | $ (136.4) | $ (141.6) | $ (136.4) | $ (141.6) |
FINANCIAL INSTRUMENTS Fair Valu
FINANCIAL INSTRUMENTS Fair Value of Instruments (Details) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
Financial assets | ||
Credit card and loan receivables, net | $ 16,795.9 | $ 17,494.5 |
Credit card and loan receivables held for sale | 984.2 | 1,026.3 |
Redemption settlement assets, restricted | 574.8 | 589.5 |
Other investments | 288.2 | 254.9 |
Financial liabilities | ||
Deposits | 10,504.7 | 10,937.1 |
Non-recourse borrowings of consolidated securitization entities | 7,728 | 8,805.3 |
Long-term and other debt | 5,876 | 6,186.4 |
Carrying Amount | ||
Financial assets | ||
Credit card and loan receivables, net | 16,795.9 | 17,494.5 |
Credit card and loan receivables held for sale | 984.2 | 1,026.3 |
Redemption settlement assets, restricted | 574.8 | 589.5 |
Other investments | 288.2 | 254.9 |
Derivative instruments | 3.6 | 16 |
Financial liabilities | ||
Derivative instruments | 0.4 | 3.8 |
Deposits | 10,559.3 | 10,930.9 |
Non-recourse borrowings of consolidated securitization entities | 7,773.2 | 8,807.3 |
Long-term and other debt | 5,790.5 | 6,079.6 |
Fair Value. | ||
Financial assets | ||
Credit card and loan receivables, net | 17,715.1 | 18,427.8 |
Credit card and loan receivables held for sale | 1,081.9 | 1,067.6 |
Redemption settlement assets, restricted | 574.8 | 589.5 |
Other investments | 288.2 | 254.9 |
Derivative instruments | 3.6 | 16 |
Financial liabilities | ||
Derivative instruments | 0.4 | 3.8 |
Deposits | 10,504.7 | 10,937.1 |
Non-recourse borrowings of consolidated securitization entities | 7,728 | 8,805.3 |
Long-term and other debt | $ 5,876 | $ 6,186.4 |
FINANCIAL INSTRUMENTS Fair Va62
FINANCIAL INSTRUMENTS Fair Value Level Disclosure (Details) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
Assets disclosed at fair value | ||
Marketable securities | $ 238.4 | $ 205 |
U.S. Treasury bonds | 49.8 | 49.9 |
Total assets measured at fair value | 18,797 | 19,495.4 |
Liabilities disclosed at fair value | ||
Total liabilities measured at fair value | 24,108.7 | 25,928.8 |
Level 2 | ||
Liabilities disclosed at fair value | ||
Total liabilities measured at fair value | 24,108.7 | 25,928.8 |
Level 3 | ||
Assets disclosed at fair value | ||
Total assets measured at fair value | 18,797 | 19,495.4 |
Recurring | ||
Assets disclosed at fair value | ||
Mutual funds | 24.5 | 26 |
Corporate bonds | 506.1 | 489.2 |
Marketable securities | 238.4 | 205 |
U.S. Treasury bonds | 49.8 | 49.9 |
Derivative instruments | 3.6 | 16 |
Total assets measured at fair value | 822.4 | 786.1 |
Liabilities disclosed at fair value | ||
Derivative instruments | 0.4 | 3.8 |
Total liabilities measured at fair value | 0.4 | 3.8 |
Recurring | Level 1 | ||
Assets disclosed at fair value | ||
Mutual funds | 24.5 | 26 |
Marketable securities | 24.8 | 10.1 |
U.S. Treasury bonds | 49.8 | 49.9 |
Total assets measured at fair value | 99.1 | 86 |
Recurring | Level 2 | ||
Assets disclosed at fair value | ||
Corporate bonds | 506.1 | 489.2 |
Marketable securities | 213.6 | 194.9 |
Derivative instruments | 3.6 | 16 |
Total assets measured at fair value | 723.3 | 700.1 |
Liabilities disclosed at fair value | ||
Derivative instruments | 0.4 | 3.8 |
Total liabilities measured at fair value | $ 0.4 | $ 3.8 |
FINANCIAL INSTRUMENTS - Signifi
FINANCIAL INSTRUMENTS - Significant Unobservable Input Information (Details) - USD ($) $ in Millions | Jun. 30, 2018 | Jun. 30, 2017 |
Changes in fair value of the Company's asset and liability measured on a recurring basis using significant unobservable inputs (Level 3) | ||
Fair value assets amount transfer from level 1 to level 2 | $ 0 | $ 0 |
Fair value assets amount transfer from level 2 to level 1 | 0 | 0 |
Fair value liabilities amount transfer from level 1 to level 2 | $ 0 | $ 0 |
FINANCIAL INSTRUMENTS - Assets
FINANCIAL INSTRUMENTS - Assets and Liabilities Not Carried at Fair Value (Details) - USD ($) $ in Millions | Jun. 30, 2018 | Dec. 31, 2017 |
Financial assets | ||
Credit card and loan receivables, net | $ 17,715.1 | $ 18,427.8 |
Credit card and loan receivables held for sale | 1,081.9 | 1,067.6 |
Total assets measured at fair value | 18,797 | 19,495.4 |
Financial liabilities | ||
Deposits | 10,504.7 | 10,937.1 |
Non-recourse borrowings of consolidated securitization entities | 7,728 | 8,805.3 |
Long-term and other debt | 5,876 | 6,186.4 |
Total liabilities measured at fair value | 24,108.7 | 25,928.8 |
Level 2 | ||
Financial liabilities | ||
Deposits | 10,504.7 | 10,937.1 |
Non-recourse borrowings of consolidated securitization entities | 7,728 | 8,805.3 |
Long-term and other debt | 5,876 | 6,186.4 |
Total liabilities measured at fair value | 24,108.7 | 25,928.8 |
Level 3 | ||
Financial assets | ||
Credit card and loan receivables, net | 17,715.1 | 18,427.8 |
Credit card and loan receivables held for sale | 1,081.9 | 1,067.6 |
Total assets measured at fair value | $ 18,797 | $ 19,495.4 |
INCOME TAXES (Details)
INCOME TAXES (Details) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
INCOME TAXES | ||||
Effective tax rate utilized (as a percent) | 14.40% | 35.60% | 19.30% | 35.60% |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Segment information | ||||
Revenues | $ 1,903.9 | $ 1,821.8 | $ 3,788.1 | $ 3,700.8 |
Income (loss) before income taxes | 254.6 | 213.9 | 473.2 | 441.1 |
Interest expense, net | 165.7 | 137.5 | 324.9 | 262.7 |
Operating income (loss) | 420.3 | 351.4 | 798.1 | 703.8 |
Depreciation and amortization | 122 | 125.5 | 243.7 | 250.3 |
Stock compensation expense | 20.8 | 21.7 | 46.3 | 45.2 |
Adjusted EBITDA | 563.1 | 498.6 | 1,088.1 | 999.3 |
Less: Securitization funding costs | 55.2 | 36.6 | 107.3 | 71.8 |
Less: Interest expense on deposits | 36.8 | 28.6 | 72.3 | 54.6 |
Adjusted EBITDA, net | 471.1 | 433.4 | 908.5 | 872.9 |
Operating segment | LoyaltyOne | ||||
Segment information | ||||
Revenues | 248.6 | 280 | 474.9 | 613 |
Income (loss) before income taxes | 44.3 | 33.5 | 71.4 | 69.9 |
Interest expense, net | 1.3 | 1 | 2.6 | 2.1 |
Operating income (loss) | 45.6 | 34.5 | 74 | 72 |
Depreciation and amortization | 21.5 | 19.5 | 43.5 | 38.6 |
Stock compensation expense | 2.4 | 2.7 | 5.9 | 4.8 |
Adjusted EBITDA | 69.5 | 56.7 | 123.4 | 115.4 |
Adjusted EBITDA, net | 69.5 | 56.7 | 123.4 | 115.4 |
Operating segment | Epsilon | ||||
Segment information | ||||
Revenues | 514.2 | 543.8 | 1,023.6 | 1,073.1 |
Income (loss) before income taxes | 25.3 | 19.9 | 32.5 | 18.3 |
Interest expense, net | 0.1 | 0.1 | 0.1 | |
Operating income (loss) | 25.3 | 20 | 32.6 | 18.4 |
Depreciation and amortization | 73.3 | 77.9 | 146.3 | 155.8 |
Stock compensation expense | 8.3 | 8.9 | 19.6 | 17.6 |
Adjusted EBITDA | 106.9 | 106.8 | 198.5 | 191.8 |
Adjusted EBITDA, net | 106.9 | 106.8 | 198.5 | 191.8 |
Operating segment | Card Services | ||||
Segment information | ||||
Revenues | 1,148.5 | 1,005 | 2,303.7 | 2,028.2 |
Income (loss) before income taxes | 307.3 | 276.1 | 596.6 | 577.9 |
Interest expense, net | 92 | 65.2 | 179.6 | 126.4 |
Operating income (loss) | 399.3 | 341.3 | 776.2 | 704.3 |
Depreciation and amortization | 25.3 | 26.1 | 50.1 | 51.9 |
Stock compensation expense | 3.1 | 3.3 | 7.6 | 6.4 |
Adjusted EBITDA | 427.7 | 370.7 | 833.9 | 762.6 |
Less: Securitization funding costs | 55.2 | 36.6 | 107.3 | 71.8 |
Less: Interest expense on deposits | 36.8 | 28.6 | 72.3 | 54.6 |
Adjusted EBITDA, net | 335.7 | 305.5 | 654.3 | 636.2 |
Corporate/Other | ||||
Segment information | ||||
Revenues | 0.2 | 0.3 | ||
Income (loss) before income taxes | (122.3) | (115.6) | (227.3) | (225) |
Interest expense, net | 72.4 | 71.2 | 142.6 | 134.1 |
Operating income (loss) | (49.9) | (44.4) | (84.7) | (90.9) |
Depreciation and amortization | 1.9 | 2 | 3.8 | 4 |
Stock compensation expense | 7 | 6.8 | 13.2 | 16.4 |
Adjusted EBITDA | (41) | (35.6) | (67.7) | (70.5) |
Adjusted EBITDA, net | (41) | (35.6) | (67.7) | (70.5) |
Eliminations | ||||
Segment information | ||||
Revenues | $ (7.6) | $ (7) | $ (14.4) | $ (13.5) |