Document and Entity Information
Document and Entity Information - USD ($) $ in Billions | 12 Months Ended | ||
Dec. 31, 2018 | Feb. 20, 2019 | Jun. 30, 2018 | |
Document and Entity Information | |||
Entity Registrant Name | ALLIANCE DATA SYSTEMS CORP | ||
Entity Central Index Key | 1,101,215 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $ 12.5 | ||
Entity Common Stock, Shares Outstanding | 52,997,685 | ||
Document Fiscal Year Focus | 2,018 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
ASSETS | ||
Cash and cash equivalents | $ 3,863.1 | $ 4,190 |
Accounts receivable, net, less allowance for doubtful accounts ($5.3 and $6.7 at December 31, 2018 and 2017, respectively) | 923.9 | 822.3 |
Credit card and loan receivables: | ||
Credit card receivables – restricted for securitization investors | 13,418.3 | 14,293.9 |
Other credit card and loan receivables | 4,436.7 | 4,319.9 |
Total credit card and loan receivables | 17,855 | 18,613.8 |
Allowance for loan loss | (1,038.3) | (1,119.3) |
Credit card and loan receivables, net | 16,816.7 | 17,494.5 |
Credit card and loan receivables held for sale | 1,951.6 | 1,026.3 |
Inventories, net | 251.9 | 234.1 |
Other current assets | 345.9 | 348.9 |
Redemption settlement assets, restricted | 558.6 | 589.5 |
Total current assets | 24,711.7 | 24,705.6 |
Property and equipment, net | 595.1 | 613.9 |
Deferred tax asset, net | 47 | 28.1 |
Intangible assets, net | 539.7 | 800.6 |
Goodwill | 3,841 | 3,880.1 |
Other non-current assets | 653.2 | 656.5 |
Total assets | 30,387.7 | 30,684.8 |
LIABILITIES AND EQUITY | ||
Accounts payable | 558.3 | 651.2 |
Accrued expenses | 421 | 442.8 |
Current portion of deposits | 6,537.7 | 6,366.2 |
Current portion of non-recourse borrowings of consolidated securitization entities | 2,717.6 | 1,339.9 |
Current portion of long-term and other debt | 144.5 | 131.3 |
Other current liabilities | 338.8 | 368.7 |
Deferred revenue | 766.1 | 846.6 |
Total current liabilities | 11,484 | 10,146.7 |
Deferred revenue | 109.2 | 120.3 |
Deferred tax liability, net | 256.6 | 211.2 |
Deposits | 5,256 | 4,564.7 |
Non-recourse borrowings of consolidated securitization entities | 4,934.1 | 7,467.4 |
Long-term and other debt | 5,593.4 | 5,948.3 |
Other liabilities | 422.3 | 370.9 |
Total liabilities | 28,055.6 | 28,829.5 |
Stockholders’ equity: | ||
Common stock, $0.01 par value; authorized, 200.0 shares; issued, 113.0 shares and 112.8 shares at December 31, 2018 and 2017, respectively | 1.1 | 1.1 |
Additional paid-in capital | 3,172.4 | 3,099.8 |
Treasury stock, at cost, 59.6 shares and 57.4 shares at December 31, 2018 and 2017, respectively | (5,715.7) | (5,272.5) |
Retained earnings | 5,012.4 | 4,167.1 |
Accumulated other comprehensive loss | (138.1) | (140.2) |
Total stockholders’ equity | 2,332.1 | 1,855.3 |
Total liabilities and equity | $ 30,387.7 | $ 30,684.8 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Millions, $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, net, allowance for doubtful accounts (in dollars) | $ 5.3 | $ 6.7 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized shares | 200 | 200 |
Common stock, issued shares | 113 | 112.8 |
Treasury stock, shares | 59.6 | 57.4 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Millions, $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Revenues | |||
Services | $ 2,420 | $ 2,612.2 | $ 2,504.8 |
Redemption, net | 676.3 | 935.3 | 993.6 |
Finance charges, net | 4,694.9 | 4,171.9 | 3,639.7 |
Total revenue | 7,791.2 | 7,719.4 | 7,138.1 |
Operating expenses | |||
Cost of operations (exclusive of depreciation and amortization disclosed separately below) | 4,220.9 | 4,269.9 | 4,276.8 |
Provision for loan loss | 1,016 | 1,140.1 | 940.5 |
General and administrative | 172.7 | 166.3 | 143.2 |
Depreciation and other amortization | 196.1 | 183.1 | 167.1 |
Amortization of purchased intangibles | 291.2 | 314.5 | 345 |
Total operating expenses | 5,896.9 | 6,073.9 | 5,872.6 |
Operating income | 1,894.3 | 1,645.5 | 1,265.5 |
Interest expense | |||
Securitization funding costs | 220.2 | 156.6 | 125.6 |
Interest expense on deposits | 165.7 | 125.1 | 84.7 |
Interest expense on long-term and other debt, net | 284.7 | 282.7 | 218.2 |
Total interest expense, net | 670.6 | 564.4 | 428.5 |
Income before income taxes | 1,223.7 | 1,081.1 | 837 |
Provision for income taxes | 260.6 | 292.4 | 319.4 |
Net income | 963.1 | 788.7 | 517.6 |
Less: Net income attributable to non-controlling interest | 1.8 | ||
Net income attributable to common stockholders | $ 963.1 | $ 788.7 | $ 515.8 |
Net income attributable to common stockholders per share: | |||
Basic (in dollars per share) (Note 2) | $ 17.56 | $ 14.17 | $ 7.37 |
Diluted (in dollars per share) (Note 2) | $ 17.49 | $ 14.10 | $ 7.34 |
Weighted average shares: | |||
Basic (in shares) (Note 2) | 54.9 | 55.7 | 58.6 |
Diluted (in shares) (Note 2) | 55.1 | 55.9 | 58.9 |
Dividends declared per share: | $ 2.28 | $ 2.08 | $ 0.52 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||
Net income | $ 963.1 | $ 788.7 | $ 517.6 |
Other comprehensive income (loss): | |||
Unrealized loss on securities available-for-sale | (3.1) | (7.3) | (1.7) |
Tax benefit | 1.1 | 0.2 | 0.2 |
Unrealized loss on securities available-for-sale, net of tax | (2) | (7.1) | (1.5) |
Unrealized loss on cash flow hedges | (0.1) | (0.7) | (1.3) |
Tax benefit | 0.2 | 0.4 | |
Unrealized loss on cash flow hedges, net of tax | (0.1) | (0.5) | (0.9) |
Unrealized gain (loss) on net investment hedges | 39.1 | (72.3) | 10.3 |
Tax benefit (expense) | (9.5) | 26.2 | (2.4) |
Unrealized gain (loss) on net investment hedges, net of tax | 29.6 | (46.1) | 7.9 |
Foreign currency translation adjustments | (25.4) | 64.2 | (18.9) |
Other comprehensive income (loss), net of tax | 2.1 | 10.5 | (13.4) |
Total comprehensive income, net of tax | 965.2 | 799.2 | 504.2 |
Less: Comprehensive income attributable to non-controlling interest | 1.2 | ||
Comprehensive income attributable to common stockholders | $ 965.2 | $ 799.2 | $ 503 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Millions, $ in Millions | Common Stock | Additional Paid-In Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Income. | Total |
Balance at Dec. 31, 2015 | $ 1.1 | $ 2,981.1 | $ (3,927.4) | $ 3,092.5 | $ (137.3) | $ 2,010 |
Balance (in shares) at Dec. 31, 2015 | 112.1 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income attributable to common stockholders | 515.8 | 515.8 | ||||
Accretion of non-controlling interest | (83.5) | (83.5) | ||||
Other comprehensive (loss) income | (13.4) | (13.4) | ||||
Stock-based compensation | 76.5 | 76.5 | ||||
Repurchases of common stock | (805.7) | (805.7) | ||||
Dividends and dividend equivalent rights declared | (30) | (30) | ||||
Other | (11.5) | (11.5) | ||||
Other (in shares) | 0.4 | |||||
Balance at Dec. 31, 2016 | $ 1.1 | 3,046.1 | (4,733.1) | 3,494.8 | (150.7) | 1,658.2 |
Balance (in shares) at Dec. 31, 2016 | 112.5 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income attributable to common stockholders | 788.7 | 788.7 | ||||
Other comprehensive (loss) income | 10.5 | 10.5 | ||||
Stock-based compensation | 75.1 | 75.1 | ||||
Repurchases of common stock | (14.3) | (539.4) | (553.7) | |||
Dividends and dividend equivalent rights declared | (116.4) | (116.4) | ||||
Other | (7.1) | (7.1) | ||||
Other (in shares) | 0.3 | |||||
Balance at Dec. 31, 2017 | $ 1.1 | 3,099.8 | (5,272.5) | 4,167.1 | (140.2) | 1,855.3 |
Balance (in shares) at Dec. 31, 2017 | 112.8 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Net income attributable to common stockholders | 963.1 | 963.1 | ||||
Other comprehensive (loss) income | 2.1 | 2.1 | ||||
Stock-based compensation | 80.8 | 80.8 | ||||
Repurchases of common stock | (443.2) | (443.2) | ||||
Dividends and dividend equivalent rights declared | (125.9) | (125.9) | ||||
Other | (8.2) | (8.2) | ||||
Other (in shares) | 0.2 | |||||
Balance at Dec. 31, 2018 | $ 1.1 | $ 3,172.4 | $ (5,715.7) | 5,012.4 | $ (138.1) | 2,332.1 |
Balance (in shares) at Dec. 31, 2018 | 113 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||
Cumulative effect adjustment to retained earnings | Accounting Standards Update ASC 606 | 9.6 | 9.6 | ||||
Cumulative effect adjustment to retained earnings | Accounting Standards Update ASU 2016-01 | $ (1.5) | $ (1.5) |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||
Net income | $ 963.1 | $ 788.7 | $ 517.6 |
Adjustments to reconcile net income to net cash provided by operating activities: | |||
Depreciation and amortization | 487.3 | 497.6 | 512.1 |
Deferred income taxes | 16.3 | (113.8) | (30.8) |
Provision for loan loss | 1,016 | 1,140.1 | 940.5 |
Non-cash stock compensation | 80.8 | 75.1 | 76.5 |
Amortization of deferred financing costs | 47.3 | 44 | 34.7 |
Change in breakage rate estimate | 284.5 | ||
Change in other operating assets and liabilities | |||
Change in deferred revenue | (17.5) | (27) | (222.7) |
Change in accounts receivable | (93) | (10.3) | (95.6) |
Change in accounts payable and accrued expenses | (93.7) | 167.4 | (9.6) |
Change in other assets | (29.8) | (20.9) | (158.2) |
Change in other liabilities | 49.8 | (24.9) | 138.5 |
Originations of credit card and loan receivables held for sale | (4,799) | (8,709.4) | (7,366.3) |
Sales of credit card and loan receivables held for sale | 4,928.8 | 8,651.9 | 7,362.8 |
Other | 198.5 | 140.6 | 143.2 |
Net cash provided by operating activities | 2,754.9 | 2,599.1 | 2,127.2 |
CASH FLOWS FROM INVESTING ACTIVITIES: | |||
Change in redemption settlement assets | (42.2) | (231.3) | (74.9) |
Change in credit card and loan receivables | (2,749.6) | (3,600.2) | (3,505.4) |
Purchase of credit card portfolios | (1,008.1) | ||
Proceeds from sale of credit card and loan portfolios | 1,153.5 | 797.7 | 486 |
Payments for acquired businesses, net of cash | (945.6) | ||
Capital expenditures | (199.8) | (225.4) | (207) |
Purchases of other investments | (89.5) | (101.4) | (18.4) |
Maturities/sales of other investments | 47.4 | 42.5 | 39.2 |
Other | 8.2 | (4.4) | (2.9) |
Net cash used in investing activities | (1,872) | (4,268.1) | (4,291.5) |
CASH FLOWS FROM FINANCING ACTIVITIES: | |||
Borrowings under debt agreements | 4,575.3 | 7,696.7 | 3,823.7 |
Repayments of borrowings | (4,893) | (7,341.4) | (3,222.8) |
Non-recourse borrowings of consolidated securitization entities | 3,714.6 | 5,172.5 | 4,404.4 |
Repayments/maturities of non-recourse borrowings of consolidated securitization entities | (4,871) | (3,320.3) | (3,930) |
Net increase in deposits | 864.1 | 2,543.2 | 2,789.9 |
Acquisition of non-controlling interest | (360.7) | ||
Payment of deferred financing costs | (25.8) | (65.7) | (33.9) |
Proceeds from issuance of common stock | 17.6 | 18.4 | 18.4 |
Dividends paid | (125.2) | (115.5) | (30) |
Purchase of treasury shares | (443.2) | (553.7) | (798.8) |
Other | (31.3) | (29.3) | (22.8) |
Net cash (used in) provided by financing activities | (1,217.9) | 4,004.9 | 2,637.4 |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (12) | 10.3 | 14 |
Change in cash, cash equivalents and restricted cash | (347) | 2,346.2 | 487.1 |
Cash, cash equivalents and restricted cash at beginning of period | 4,314.7 | 1,968.5 | 1,481.4 |
Cash, cash equivalents and restricted cash at end of period | 3,967.7 | 4,314.7 | 1,968.5 |
SUPPLEMENTAL CASH FLOW INFORMATION: | |||
Interest paid | 719.8 | 551.4 | 405.1 |
Income taxes paid, net | $ 234 | $ 344.1 | $ 466.6 |
DESCRIPTION OF BUSINESS AND BAS
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 12 Months Ended |
Dec. 31, 2018 | |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 1. DESCRIPTION OF BUSINES Description of the Business —Alliance Data Systems Corporation (“ADSC” or, including its consolidated subsidiaries and variable interest entities, the “Company”) is a leading global provider of data-driven marketing and loyalty solutions serving large, consumer-based businesses in a variety of industries. The Company offers a comprehensive portfolio of integrated outsourced marketing solutions, including customer loyalty programs, database marketing services, end-to-end marketing services, analytics and creative services, direct marketing services and private label and co-brand retail credit card programs. The Company focuses on facilitating and managing interactions between its clients and their customers through all consumer marketing channels, including in-store, online, email, social media, mobile, direct mail and telephone. The Company captures and analyzes data created during each customer interaction, leveraging the insight derived from that data to enable clients to identify and acquire new customers and enhance customer loyalty. The Company operates in the following reportable segments: LoyaltyOne ® , Epsilon ® , and Card Services. LoyaltyOne provides coalition and short-term loyalty programs through the Canadian AIR MILES ® Reward Program and BrandLoyalty Group B.V. (“BrandLoyalty”). Epsilon provides end-to-end, integrated direct marketing solutions that leverage transactional data to help clients more effectively acquire and build stronger relationships with their customers. Card Services encompasses credit card processing, billing and payment processing, customer care and collections services for private label retailers as well as private label and co-brand retail credit card and loan receivables financing, including securitization of certain credit card receivables that it underwrites from its private label and co-brand retail credit card programs. Basis of Presentation —For purposes of comparability, certain prior period amounts have been reclassified to conform to the current year presentation in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Specifically, certain statement of cash flows 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 consolidated statements of cash flows: December 31, December 31, December 31, 2018 2017 2016 (In millions) Cash and cash equivalents $ 3,863.1 $ 4,190.0 $ 1,859.2 Restricted cash included within other current assets (1) 60.7 50.4 51.2 Restricted cash included within redemption settlement assets, restricted (2) 43.9 74.3 58.1 Total cash, cash equivalents and restricted cash $ 3,967.7 $ 4,314.7 $ 1,968.5 (1) Includes cash restricted for interest repayments of non-recourse borrowings of consolidated securitized debt and other restricted cash within other current assets. (2) See Note 2, “Summary of Significant Accounting Policies,” for additional information regarding nature of restrictions on redemption settlement assets. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation —The accompanying consolidated financial statements include the accounts of ADSC and all subsidiaries in which the Company has a controlling financial interest. Controlling financial interest is determined by a majority ownership interest and the absence of substantive third party participating rights. All intercompany transactions have been eliminated. In accordance with Accounting Standards Codification (“ASC”) 860, “Transfers and Servicing,” and ASC 810, “Consolidation,” the Company is the primary beneficiary of World Financial Network Credit Card Master Trust (“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 Master Note Trust (the “WFC Trust”). The Company is deemed to be the primary beneficiary for the WFN Trusts and the WFC Trust, as it is the servicer for each of the trusts and is a holder of the residual interest. The Company, through its involvement in the activities of these trusts, has the power to direct the activities that most significantly impact the economic performance of such trusts, and the obligation (or right) to absorb losses (or receive benefits) of the trusts that could potentially be significant. As such, the Company consolidates these trusts in its consolidated financial statements. For investments in any entities in which the Company owns 50% or less of the outstanding voting stock but in which the Company has significant influence over operating and financial decisions, the Company applies the equity method of accounting. In cases where the Company's equity investment is less than 20% and significant influence does not exist, such investments are carried at cost. Cash and Cash Equivalents —The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Accounts Receivable, net —Accounts receivable, net consist primarily of amounts receivable from customers, which are recorded at the invoiced amount and do not bear interest. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable. The Company analyzes the appropriateness of its allowance for doubtful accounts based on its assessment of various factors, including historical experience, the age of the accounts receivable balance, customer creditworthiness, current economic trends, and changes in its customer payment terms and collection trends. Account balances are charged-off against the allowance after all reasonable means of collection have been exhausted and the potential for recovery is considered remote. Credit Card and Loan Receivables — The Company sells a majority of the credit card receivables originated by Comenity Bank to WFN Credit Company, LLC, which in turn sells them to the WFN Trusts as part of a securitization program. The Company also sells certain of its credit card receivables originated by Comenity Capital Bank to World Financial Capital Credit Company, LLC which in turn sells them to the WFC Trust. The credit card receivables sold to each of the trusts are restricted for securitization investors. Credit card and loan receivables consist of credit card and loan receivables held for investment. All new originations of credit card and loan receivables are deemed to be held for investment at origination because management has the intent and ability to hold them for the foreseeable future. Management makes judgments about the Company’s ability to fund these credit card and loan receivables through means other than securitization, such as money market deposits, certificates of deposit and other borrowings. In determining what constitutes the foreseeable future, management considers the short average life and homogenous nature of the Company’s credit card and loan receivables. In assessing whether these credit card and loan receivables continue to be held for investment, management also considers capital levels and scheduled maturities of funding instruments used. Management believes that the assertion regarding its intent and ability to hold credit card and loan receivables for the foreseeable future can be made with a high degree of certainty given the maturity distribution of the Company’s money market deposits, certificates of deposit and other funding instruments; the historic ability to replace maturing certificates of deposits and other borrowings with new deposits or borrowings; and historic credit card payment activity. Due to the homogenous nature of the Company’s credit card and loan receivables, amounts are classified as held for investment on an individual client portfolio basis. Credit Card and Loan Receivables Held for Sale —Credit card and loan receivables held for sale are determined on an individual client portfolio basis. The Company carries these assets at the lower of aggregate cost or fair value. The fair value of the credit card and loan receivables held for sale is determined on an aggregate homogeneous portfolio basis. The Company continues to recognize finance fees on these credit card and loan receivables on the accrual basis. Cash flows associated with credit card portfolios that are purchased with the intent to sell are included in cash flows from operating activities. Cash flows associated with credit card and loan receivables originated or purchased for investment are classified as investing cash flows, regardless of a subsequent change in intent. Transfers of Financial Assets —The Company accounts for transfers of financial assets under ASC 860, “Transfers and Servicing,” as either sales or financings. Transfers of financial assets that result in sales accounting are those in which (1) the transfer legally isolates the transferred assets from the transferor, (2) the transferee has the right to pledge or exchange the transferred assets and no condition both constrains the transferee’s right to pledge or exchange the assets and provides more than a trivial benefit to the transferor and (3) the transferor does not maintain effective control over the transferred assets. If the transfer of financial assets does not meet these criteria, the transfer is accounted for as a financing. Transfers of financial assets that are treated as sales are removed from the Company’s accounts with any realized gain or loss reflected in earnings during the period of sale. 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 estimate of the allowance for loan loss covers 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. Redemption Settlement Assets, Restricted —The cash and investments related to the redemption fund for the AIR MILES Reward Program are subject to a security interest which is held in trust for the benefit of funding redemptions by collectors. These assets are restricted to funding rewards for the collectors by certain of the Company’s sponsor contracts. The investments are stated at fair value, with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive loss, as the investments are classified as available-for-sale. As a result of the adoption of ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” on January 1, 2018, the changes in the fair value of equity securities are recognized through net income. Property and Equipment —Furniture, equipment, computer software and development, buildings and leasehold improvements are carried at cost, less accumulated depreciation and amortization. Land is carried at cost and is not depreciated. Depreciation and amortization for furniture, equipment and buildings, including capital leases, are computed on a straight-line basis, using estimated lives ranging from two to twenty-one years. Software development is capitalized in accordance with ASC 350-40, “Intangibles – Goodwill and Other – Internal–Use Software,” and is amortized on a straight-line basis over the expected benefit period, which ranges from two to seven years. Leasehold improvements are amortized over the remaining lives of the respective leases or the remaining useful lives of the improvements, whichever is shorter. Long-lived assets are tested for impairment when events or conditions indicate that the carrying value of an asset may not be fully recoverable from future cash flows. Goodwill and Other Intangible Assets —Goodwill and indefinite lived intangible assets are not amortized, but are reviewed at least annually for impairment or more frequently if circumstances indicate that an impairment is probable, using the market comparable and discounted cash flow methods. Separable intangible assets that have finite useful lives are amortized over those useful lives. The Company also defers costs related to the acquisition or licensing of data for the Company’s proprietary databases that are used in providing data products and services to customers. These costs are amortized over the useful life of the data, which ranges from one to five years. Derivative Instruments —The Company uses derivatives to manage its exposure to various financial risks. The Company does not enter into derivatives for trading or other speculative purposes. Certain derivatives used to manage the Company’s exposure to foreign currency exchange rate movements are not designated as hedges and do not qualify for hedge accounting. Derivatives Designated as Hedging Instruments —The Company assesses both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in the hedging transaction, including net investment hedges, have been highly effective in offsetting changes in the cash flows or remeasurement of the hedged items and whether the derivatives may be expected to remain highly effective in future periods. The Company discontinues hedge accounting prospectively when (1) it determines that the derivative is no longer highly effective in offsetting changes in cash flow of the hedged item; (2) the derivative expires or is sold, terminated, or exercised; (3) it is no longer probable that the forecasted transaction will occur; or (4) it determines that designating the derivative as a hedging instrument is no longer appropriate. Changes in the fair value of derivative instruments designated as hedging instruments, excluding any ineffective portion, are recorded in other comprehensive income (loss) until the hedged transactions affect net income. The ineffective portion of this hedging instrument is recognized through net income when the ineffectiveness occurs. Derivatives not Designated as Hedging Instruments —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 consolidated statements of income as they occur. Net Investment Hedges —The Company uses Euro-denominated debt to hedge a portion of its net investment in foreign subsidiaries against adverse movements in exchange rates. The effective portion of the foreign currency gains and losses related to the Euro-denominated debt is reported in accumulated other comprehensive loss in the Company’s consolidated balance sheets. The gains or losses will be subsequently reclassified into net income when the hedged net investment is either sold or substantially liquidated. 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 consolidated balance sheets. The investments are classified as available-for-sale and are stated at fair value, with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive loss. As a result of the adoption of ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” on January 1, 2018, the changes in the fair value of equity securities are recognized through net income. Revenue Recognition —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. The Company recognizes revenues 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. In that determination, under ASC 606, the Company follows a five-step model that includes: (1) determination of whether a contract, an agreement between two or more parties that creates legally enforceable rights and obligations, exists; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when (or as) the performance obligation is satisfied. 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. See Note 3, “Revenue,” for more information about the Company’s revenue and the associated timing and basis of revenue recognition. Earnings Per Share —Basic earnings per share is based only on the weighted average number of common shares outstanding, excluding any dilutive effects of options or other dilutive securities. Diluted earnings per share are based on the weighted average number of common and potentially dilutive common shares (dilutive stock options, unvested restricted stock and other dilutive securities outstanding during the year). The following table sets forth the computation of basic and diluted net income per share for the periods indicated: Years Ended December 31, 2018 2017 2016 (In millions, except per share amounts) Numerator: Net income attributable to common stockholders $ 963.1 $ 788.7 $ 515.8 Less: Accretion of redeemable non-controlling interest — — 83.5 Net income attributable to common stockholders after accretion of redeemable non-controlling interest $ 963.1 $ 788.7 $ 432.3 Denominator: Weighted average shares, basic 54.9 55.7 58.6 Weighted average effect of dilutive securities: Net effect of dilutive stock options and unvested restricted stock 0.2 0.2 0.3 Denominator for diluted calculation 55.1 55.9 58.9 Net income attributable to common stockholders per share Basic $ 17.56 $ $ 7.37 Diluted $ 17.49 $ $ 7.34 For the year ended December 31, 2016, the Company adjusted the carrying amount of the redeemable non-controlling interest by $83.5 million. Effective April 1, 2016, the Company acquired the remaining 20% interest in BrandLoyalty to bring its ownership percentage to 100%. For the years ended December 31, 2018, 2017 and 2016, 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. Currency Translation —The assets and liabilities of the Company’s subsidiaries outside the U.S. are translated into U.S. dollars at the rates of exchange in effect at the balance sheet dates, primarily from Canadian dollars and Euros. Income and expense items are translated at the average exchange rates prevailing during the period. Gains and losses resulting from currency transactions are recognized currently in income and those resulting from translation of financial statements are included in accumulated other comprehensive loss. The Company recognized $0.3 million and $9.7 million in net foreign currency transaction losses for the years ended December 31, 2018 and 2017, respectively. Additionally, the Company recognized $1.9 million in net foreign currency transaction gains for the year ended December 31, 2016. Leases —Rent expense on operating leases is recorded on a straight-line basis over the term of the lease agreement and includes executory costs. Effective January 1, 2019, the Company adopted ASC 842, “Leases.” For additional information regarding the impact of the new leases standard, see "Recently Issued Accounting Standards.” Marketing and Advertising Costs —The Company participates in various marketing and advertising programs, including collaborative arrangements with certain clients. The cost of marketing and advertising programs is expensed in the period incurred. The Company has recognized marketing and advertising expenses, including on behalf of its clients, of $253.2 million, $263.2 million and $277.0 million for the years ended December 31, 2018, 2017 and 2016, respectively. Stock Compensation Expense —The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation.” Under the fair value recognition provisions, stock-based compensation expense is measured at the grant date based on the fair value of the award and is recognized ratably over the requisite service period. Management Estimates —The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Recently Issued Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, “Leases,” ASC 842, that replaces existing lease guidance and requires lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. Companies will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statements of income. Companies may adopt ASC 842 using a modified retrospective approach or transition relief provided by ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” that removes certain comparative period requirements and requires a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted the standard on January 1, 2019 using the transition relief provided by ASU 2018-11. During 2018, the Company completed its evaluation of ASC 842, including the impact on its policies, processes, systems and controls. As a result, the Company identified changes to and modified certain of its accounting policies and practices, including the implementation of new lease accounting software. Although there were no significant changes to the Company’s accounting systems or controls upon adoption of ASC 842, the Company modified certain of its existing controls and added new controls to incorporate the revisions made to its accounting policies and practices. The Company elected the transition practical expedients permitted under ASC 842-10-65-1 under which it was not required to reassess (i) whether expired or existing contracts were or contained leases as defined by ASC 842, (ii) the classification of such leases, and (iii) whether previously capitalized initial direct costs qualified for capitalization under ASC 842. The Company also elected the practical expedient to use hindsight in determining the lease term. Additionally, the Company made the accounting policy election to account for lease and nonlease components as a single lease component for its identified asset classes. The cumulative effect of the changes made to the consolidated January 1, 2019 balance sheet for the adoption of ASC 842 resulted in the following: Balance at Adjustments Balance at December 31, due to January 1, 2018 ASC 842 2019 Consolidated Balance Sheet (In millions) Right of use asset - operating $ — $ 451.0 $ 451.0 Intangible assets, net 539.7 (2.1) 537.6 Other non-current assets 653.2 (0.8) 652.4 1,192.9 448.1 1,641.0 Accrued expenses 421.0 (3.1) 417.9 Current operating lease liability — 64.7 64.7 Other current liabilities 338.8 (5.6) 333.2 Long-term operating lease liability — 468.5 468.5 Other liabilities 422.3 (76.4) 345.9 1,182.1 448.1 1,630.2 Additionally, as part of the adoption of ASC 842, the Company’s capital leases were recognized as finance leases at their existing carrying amounts effective January 1, 2019, and the accounting remained substantially unchanged. As of December 31, 2018, capital leases included within property and equipment, net in the Company’s consolidated balance sheets totaled $13.0 million, and capital leases included within long-term and other debt totaled $12.6 million, including the current portion of $5.6 million. The Company’s adoption of ASC 842 had no significant impact to our consolidated statements of income or consolidated statements of cash flows. Based on the evaluation of ASC 842, the Company does not expect it to have a material impact on its results of operations or cash flows in the periods after adoption. ASC 842 also requires expanded qualitative and quantitative disclosure regarding the Company’s leasing activities. These disclosures will be reflected beginning in the Company’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2019. In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires entities to utilize a financial instrument impairment model to establish an allowance based on expected losses over the life of the exposure rather than a model based on an incurred loss approach. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance. In addition, ASU 2016-13 modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted beginning after December 15, 2018. The Company has formed a cross-functional implementation team and is in the process of determining key accounting interpretations, data requirements and necessary changes to its credit loss estimation methods, processes and systems as well as 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 does not expect the adoption of ASU 2017-12 to have a material impact on its consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” ASU 2018-02 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 does not intend to reclassify the stranded tax effects to retained earnings pursuant to ASU 2018-02 as these amounts do not have a material impact on its consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, “Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the disclosure requirements on fair value measurements from Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement.” ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The Company is evaluating the impact that adoption of ASU 2018-13 will have on its consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” ASU 2018-15 requires customers in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40, “Intangibles—Goodwill and Other—Internal-Use Software,” to determine which implementation costs may be capitalized. ASU 2018-15 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The amendments in ASU 2018-15 can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is evaluating the impact that adoption of ASU 2018-15 will have on its consolidated financial statements. Recently Adopted Accounting Standards In 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 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 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. This impact reduced both redemption revenue and cost of operations by $283.4 million for the year ended December 31, 2018. · ASC 606 also requires expanded disclosure regarding the nature, timing, and uncertainty of revenue transactions. See Note 3, “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. The Company adopted this standard on January 1, 2018, resulting in a cumulative-effect adjustment of $1.5 million, net of tax, 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. 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. 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 in the beginning-of-period and end-of-period cash and cash equivalents totals. See Note 1, “Description of Business and Basis of Presentation,” for a reconciliation of cash and cash equivalents to the total of the amounts reported in the consolidated statements of cash |
REVENUE
REVENUE | 12 Months Ended |
Dec. 31, 2018 | |
REVENUE | |
REVENUE | 3. REVENUE 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 table presents revenue disaggregated by major source, as well as geographic region based on the location of the subsidiary that generally correlates with the location of the customer: Corporate/ Year Ended December 31, 2018 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Disaggregation of Revenue by Major Source: Coalition loyalty program $ 352.3 $ — $ — $ — $ — $ 352.3 Short-term loyalty programs 613.8 — — — — 613.8 Technology services — 1,048.1 — — (24.7) 1,023.4 Digital Media services — 792.1 — — (20.1) 772.0 Agency services — 334.9 — — (5.2) 329.7 Servicing fees, net — — (97.3) — — (97.3) Other 90.7 — — 0.6 (0.5) 90.8 Revenue from contracts with customers $ 1,056.8 $ 2,175.1 $ (97.3) $ 0.6 $ (50.5) $ 3,084.7 Finance charges, net — — 4,694.9 — — 4,694.9 Investment income 11.6 — — — — 11.6 Total $ 1,068.4 $ 2,175.1 $ 4,597.6 $ 0.6 $ (50.5) $ 7,791.2 Corporate/ Year Ended December 31, 2018 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Disaggregation of Revenue by Geographic Region: United States $ 23.1 $ 2,083.8 $ 4,597.6 $ 0.6 $ (48.0) $ 6,657.1 Canada 411.3 16.3 — — (0.3) 427.3 Europe, Middle East and Africa 463.2 63.9 — — (0.4) 526.7 Asia Pacific 122.0 11.1 — — (1.8) 131.3 Other 48.8 — — — — 48.8 Total $ 1,068.4 $ 2,175.1 $ 4,597.6 $ 0.6 $ (50.5) $ 7,791.2 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. Because the standalone selling price is not directly observable for the three performance obligations, the Company estimates the standalone selling price for the redemption and the service performance obligations based on cost plus a reasonable margin. The Company estimates the standalone selling price of the brand performance obligation 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 December 31, 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 194.7 324.8 519.5 Revenue recognized (1) (209.2) (328.4) (537.6) Other — 0.7 0.7 Effects of foreign currency translation (21.3) (52.9) (74.2) Balance at December 31, 2018 $ 248.0 $ 627.3 $ 875.3 Amounts recognized in the consolidated balance sheets: Deferred revenue (current) $ 138.8 $ 627.3 $ 766.1 Deferred revenue (non-current) $ 109.2 $ — $ 109.2 (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 $138.8 million in 2019, $76.0 million in 2020, $32.1 million in 2021, and $1.1 million in 2022. Additionally, contract liabilities for the Company’s short-term loyalty programs are recognized in other current liabilities in the Company’s consolidated balance sheets. The beginning balance as of January 1, 2018 was $87.5 million and the closing balance as of December 31, 2018 was $110.2 million, with the change due to cash payments received in advance of program performance revenue, offset in part by revenue recognized of approximately $506.5 million during the year ended December 31, 2018. 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, included in services revenue in the Company’s consolidated statements of income are as follows: 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, included in services revenue in the Company’s consolidated statements of income 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 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 consolidated balance sheets. The beginning balance as of January 1, 2018 was $22.8 million and the closing balance as of December 31, 2018 was $19.7 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 December 31, 2018, the remaining unamortized contract costs were $4.8 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, that drive 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, which are within the scope of ASC 310, “Receivables.” 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, in the month during which an account becomes 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. As of December 31, 2018 and 2017, the remaining unamortized deferred costs related to loan origination were $40.6 million and $45.5 million, respectively. 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 December 31, 2018, the remaining unamortized contract costs were $372.5 million and are included in other current assets and other non-current assets in the Company’s 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 consolidated statements of income. Amortization of contract costs recorded as a reduction to revenue totaled $68.7 million for the year ended December 31, 2018. Amortization of contract costs recorded to cost of operations expense totaled $9.8 million for the year ended December 31, 2018. 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 consolidated statements of income. |
ACQUISITIONS
ACQUISITIONS | 12 Months Ended |
Dec. 31, 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 | 12 Months Ended |
Dec. 31, 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: December 31, December 31, 2018 2017 (In millions) Principal receivables $ 16,869.9 $ 17,705.1 Billed and accrued finance charges 898.3 887.0 Other 86.8 21.7 Total credit card and loan receivables 17,855.0 18,613.8 Less: Credit card receivables – restricted for securitization investors 13,418.3 14,293.9 Other credit card and loan receivables $ 4,436.7 $ 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 estimate of the allowance for loan loss covers uncollectible principal as well as unpaid interest and fees. The allowance for loan loss is evaluated monthly for appropriateness. The following table presents the Company’s allowance for loan loss for the years indicated: Years Ended December 31, 2018 2017 2016 (In millions) Balance at beginning of year $ 1,119.3 $ 948.0 $ 741.6 Provision for loan loss 1,016.0 1,140.1 940.5 Allowance associated with credit card and loan receivables transferred (54.8) (27.9) (31.1) Change in estimate for uncollectible unpaid interest and fees 25.0 30.0 20.0 Recoveries 214.2 196.6 255.5 Principal charge-offs (1,281.4) (1,167.5) (978.5) Balance at end of year $ 1,038.3 $ 1,119.3 $ 948.0 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. For the years ended December 31, 2018, 2017 and 2016, actual charge-offs for unpaid interest and fees were $803.1 million, $653.2 million and $511.7 million, 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, in the month during which an account becomes 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: December 31, % of December 31, % of 2018 Total 2017 Total (In millions, except percentages) Receivables outstanding - principal $ 16,869.9 100.0 % $ 17,705.1 100.0 % Principal receivables balances contractually delinquent: 31 to 60 days 303.2 1.8 % 301.5 1.7 % 61 to 90 days 207.9 1.3 191.3 1.1 91 or more days 443.4 2.6 409.6 2.3 Total $ 954.5 5.7 % $ 902.4 5.1 % The practice of re-aging an account may affect credit card loan delinquencies and charge-offs. A re-age of an account is intended to assist delinquent cardholders who have experienced financial difficulties but who demonstrate both an ability and willingness to repay the amounts due. Accounts meeting specific defined criteria are re-aged when the cardholder makes one or more consecutive payments aggregating a certain pre-defined amount of their account balance. With re-aging, the outstanding balance of a delinquent account is returned to a current status. For the years ended December 31, 2018, 2017 and 2016, the Company’s re-aged accounts represented 2.1%, 1.4% and 1.4%, respectively, of total credit card and loan receivables for each period and thus do not have a significant impact on the Company’s delinquencies or net charge-offs. The Company’s re-aging practices comply with regulatory guidelines. 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 $292.4 million and $260.2 million, respectively, as a recorded investment in impaired credit card receivables with an associated allowance for loan loss of $101.3 million and $56.1 million, respectively, as of December 31, 2018 and 2017. These modified credit card receivables represented less than 2% of the Company’s total credit card receivables as of both December 31, 2018 and 2017. The average recorded investment in the impaired credit card receivables was $340.9 million and $230.4 million for the years ended December 31, 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 $27.9 million, $19.7 million and $18.9 million for the years ended December 31, 2018, 2017 and 2016, 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: Year Ended December 31, 2018 Year Ended December 31, 2017 Pre- Post- Pre- Post- modification modification modification modification Number of Outstanding Outstanding Number of Outstanding Outstanding Restructurings Balance Balance Restructurings Balance Balance (Dollars in millions) (Dollars in millions) Troubled debt restructurings – credit card receivables 501,906 $ 621.4 $ 620.7 201,772 $ 261.1 $ 260.7 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: Year Ended December 31, 2018 Year Ended December 31, 2017 Number of Outstanding Number of Outstanding Restructurings Balance Restructurings Balance (Dollars in millions) Troubled debt restructurings that subsequently defaulted – credit card receivables 293,591 $ 340.5 98,863 $ 120.0 Age of Credit Card and Loan Receivable Accounts The following tables set forth, as of December 31, 2018 and 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: December 31, 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 6.5 26.7 % $ 4,099.9 24.3 % 13-24 Months 4.2 17.1 2,887.8 17.1 25-36 Months 3.1 13.0 2,428.9 14.4 37-48 Months 2.2 9.1 1,795.0 10.7 49-60 Months 1.7 7.1 1,367.2 8.1 Over 60 Months 6.5 27.0 4,291.1 25.4 Total 24.2 100.0 % $ 16,869.9 100.0 % 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 December 31, 2018 and 2017: December 31, 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 $ 249.0 1.5 % $ 210.6 1.2 % 27.1% and higher 1,394.0 8.2 1,330.5 7.5 17.1% - 27.0% 770.1 4.6 850.5 4.8 12.6% - 17.0% 1,047.6 6.2 1,137.7 6.4 3.7% - 12.5% 6,877.6 40.8 7,449.7 42.1 1.9% - 3.6% 3,060.7 18.1 3,286.9 18.6 Lower than 1.9% 3,470.9 20.6 3,439.2 19.4 Total $ 16,869.9 100.0 % $ 17,705.1 100.0 % Transfer of Financial Assets The Company originated loan receivables under one previous client agreement, and after origination, these loan receivables were sold to the client at par value plus accrued interest. These transfers qualified for sale treatment as they met the conditions established in ASC 860-10, “Transfers and Servicing.” Following the sale, the client owned the loan receivables, assumed the risk of loss in the event of loan defaults and was responsible for all servicing functions related to the loan receivables. Effective July 2, 2018, the Company no longer originates loan receivables for this client. The loan receivables originated by the Company that had not yet been sold to the client were $0.0 million and $126.9 million at December 31, 2018 and 2017, respectively, and were included in credit card and loan receivables held for sale in the Company’s consolidated balance sheets and carried at the lower of cost or fair value. The carrying value of these loan receivables approximated fair value due to the short duration between the date of origination and sale. Originations and sales of these loan receivables held for sale were reflected as operating activities in the Company’s consolidated statements of cash flows. 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, and were $1,951.6 million and $899.4 million as of December 31, 2018 and 2017, respectively. During the year ended December 31, 2018, the Company transferred 11 credit card portfolios totaling approximately $2.3 billion into credit card and loan receivables held for sale. The portfolios were transferred at the net carrying amount, which approximates the lower of cost or fair value and which is the measurement basis until the sale of the portfolios. The Company recorded valuation adjustments of $101.6 million to reduce the value of certain portfolios within credit card and loan receivables held for sale for the year ended December 31, 2018. During the year ended December 31, 2018, the Company sold six credit card portfolios for cash consideration of approximately $1,153.5 million and recognized approximately $29.2 million in net gains on the transactions as follows: · In June 2018, the Company sold one credit card portfolio for final cash consideration of approximately $55.4 million and recognized a de minimis gain on the transaction. · In October 2018, the Company sold two credit card portfolios for preliminary cash consideration of approximately $246.4 million, subject to customary sale price adjustments, and recognized approximately $4.6 million in gains on the transactions. · In December 2018, the Company sold three credit card portfolios for preliminary cash consideration of approximately $851.7 million, subject to customary sale price adjustments, and recognized approximately $24.5 million in net gains on the transactions. During the year ended December 31, 2017, the Company transferred seven credit card portfolios and one loan portfolio totaling approximately $1.4 billion into credit card and loan receivables held for sale. The portfolios were transferred at the net carrying amount, which approximates the lower of cost or fair value and which is the measurement basis until the sale of the portfolios. The Company received cash consideration of approximately $797.7 million from the sale of two credit card and loan portfolios, and the Company recognized total gains of $23.3 million for the year ended December 31, 2017. Portfolio Acquisitions During the year ended December 31, 2017, the Company acquired approximately $906.3 million of credit card receivables in connection with the Signet acquisition. For more information, see Note 4, “Acquisitions.” Securitized Credit Card Receivables The Company regularly securitizes its credit card receivables through its credit card securitization trusts, consisting of the WFN Trusts and 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 consolidated statements of income for the years ended December 31, 2018, 2017 and 2016. 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. During the initial phase of a securitization reinvestment period, the Company generally retains principal collections in exchange for the transfer of additional credit card receivables into the securitized pool of assets. During the amortization or accumulation period of a securitization, the investors’ share of principal collections (in certain cases, up to a maximum specified amount each month) is either distributed to the investors or held in an account until it accumulates to the total amount due, at which time it is paid to the investors in a lump sum. The Company is required to maintain minimum interests ranging from 4% to 10% of the securitized credit card receivables. This requirement is met through seller’s interest and is supplemented through excess funding deposits. Excess funding deposits represent cash amounts deposited with the trustee of the securitizations. Cash collateral, restricted deposits are generally released proportionately as investors are repaid, although some cash collateral, restricted deposits are released only when investors have been paid in full. None of the cash collateral, restricted deposits were required to be used to cover losses on securitized credit card receivables in the years ended December 31, 2018, 2017 and 2016, respectively. The tables below present quantitative information about the components of total securitized credit card receivables, delinquencies and net charge-offs: December 31, December 31, 2018 2017 (In millions) Total credit card receivables – restricted for securitization investors $ 13,418.3 $ 14,293.9 Principal amount of credit card receivables – restricted for securitization investors, 91 days or more past due $ 301.6 $ 295.0 Years Ended December 31, 2018 2017 2016 (In millions) Net charge-offs of securitized principal $ 927.0 $ 741.1 $ 583.8 |
INVENTORIES, NET
INVENTORIES, NET | 12 Months Ended |
Dec. 31, 2018 | |
INVENTORIES, NET | |
INVENTORIES, NET | 6. INVENTORIES, NET Inventories, net of $251.9 million and $234.1 million at December 31, 2018 and 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 | 12 Months Ended |
Dec. 31, 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 consolidated balance sheets. The principal components of other investments, which are carried at fair value, are as follows: December 31, 2018 December 31, 2017 Amortized Unrealized Unrealized Amortized Unrealized Unrealized Cost Gains Losses Fair Value Cost Gains Losses Fair Value (In millions) Marketable securities $ 272.8 $ 0.1 $ (6.5) $ 266.4 $ 207.3 $ 0.2 $ (2.5) $ 205.0 U.S. Treasury bonds 25.0 — (0.1) 24.9 50.0 — (0.1) 49.9 Total $ 297.8 $ 0.1 $ (6.6) $ 291.3 $ 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 December 31, 2018 and 2017, aggregated by investment category and the length of time that individual securities have been in a continuous loss position: December 31, 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 $ 57.3 $ (0.5) $ 164.0 $ (6.0) $ 221.3 $ (6.5) U.S. Treasury bonds — — 24.9 (0.1) 24.9 (0.1) Total $ 57.3 $ (0.5) $ 188.9 $ (6.1) $ 246.2 $ (6.6) 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 December 31, 2018 by contractual maturity are as follows: Amortized Cost Fair Value (In millions) Due in one year or less $ 54.5 $ 54.4 Due after one year through five years 2.2 2.2 Due after five years through ten years — — Due after ten years 241.1 234.7 Total $ 297.8 $ 291.3 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 December 31, 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 years ended December 31, 2018, 2017 and 2016. |
REDEMPTION SETTLEMENT ASSETS
REDEMPTION SETTLEMENT ASSETS | 12 Months Ended |
Dec. 31, 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: December 31, 2018 December 31, 2017 Amortized Unrealized Unrealized Amortized Unrealized Unrealized Cost Gains Losses Fair Value Cost Gains Losses Fair Value (In millions) Restricted cash $ 43.9 $ — $ — $ 43.9 $ 74.3 $ — $ — $ 74.3 Mutual funds 23.2 — — 23.2 27.3 — (1.3) 26.0 Corporate bonds 497.5 0.1 (6.1) 491.5 495.0 — (5.8) 489.2 Total $ 564.6 $ 0.1 $ (6.1) $ 558.6 $ 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 December 31, 2018 and 2017, respectively, aggregated by investment category and the length of time that individual securities have been in a continuous loss position: December 31, 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 $ 31.2 $ (0.1) $ 414.4 $ (6.0) $ 445.6 $ (6.1) Total $ 31.2 $ (0.1) $ 414.4 $ (6.0) $ 445.6 $ (6.1) 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 December 31, 2018 by contractual maturity are as follows: Amortized Estimated Cost Fair Value (In millions) Due in one year or less $ 118.4 $ 117.9 Due after one year through five years 402.3 396.8 Total $ 520.7 $ 514.7 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 December 31, 2018, the Company does not consider the investments to be other-than-temporarily impaired. For the years ended December 31, 2018 and 2017, realized gains and losses from the sale of investment securities were de minimis. There were no realized gains or losses from the sale of investment securities for the year ended December 31, 2016. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2018 | |
PROPERTY AND EQUIPMENT | |
PROPERTY AND EQUIPMENT | 9. PROPERTY AND EQUIPMENT Property and equipment consist of the following: December 31, 2018 2017 (In millions) Computer software and development $ 921.6 $ 823.0 Furniture and equipment 422.8 387.3 Land, buildings and leasehold improvements 191.6 177.7 Capital leases 22.4 13.1 Construction in progress 63.5 76.5 Total 1,621.9 1,477.6 Accumulated depreciation and amortization (1,026.8) (863.7) Property and equipment, net $ 595.1 $ 613.9 Depreciation expense totaled $98.2 million, $101.2 million and $97.7 million for the years ended December 31, 2018, 2017 and 2016, respectively, and includes purchased software and amortization of capital leases. Amortization expense on capitalized software totaled $131.5 million, $115.5 million and $104.9 million for the years ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018 and 2017, the net amount of unamortized capitalized software costs included in the consolidated balance sheets was $210.3 million and $229.5 million, respectively. |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL | 12 Months Ended |
Dec. 31, 2018 | |
INTANGIBLE ASSETS AND GOODWILL | |
INTANGIBLE ASSETS AND GOODWILL | 10. INTANGIBLE ASSETS AND GOODWILL Intangible Assets Intangible assets consist of the following: December 31, 2018 Gross Accumulated Assets Amortization Net Amortization Life and Method (In millions) Finite Lived Assets Customer contracts and lists $ 1,126.4 $ (773.9) $ 352.5 3-12 years—straight line Premium on purchased credit card portfolios 286.0 (172.9) 113.1 3-13 years—straight line Collector database 51.3 (49.9) 1.4 5 years—straight line Publisher networks 140.2 (112.0) 28.2 5-7 years—straight line Tradenames 75.8 (50.3) 25.5 8-15 years—straight line Purchased data lists 10.7 (6.2) 4.5 1-5 years—straight line, accelerated Favorable lease 6.0 (3.9) 2.1 6-10 years—straight line $ 1,696.4 $ (1,169.1) $ 527.3 Indefinite Lived Assets Tradenames 12.4 — 12.4 Indefinite life Total intangible assets $ 1,708.8 $ (1,169.1) $ 539.7 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 As part of the Signet acquisition in October 2017, the Company acquired $52.3 million of intangible assets, consisting of $35.9 million of customer relationships being amortized over a life of 3.0 years and $16.4 million of marketing relationships being amortized over a life of 7.0 years. For more information on this acquisition, see Note 4, “Acquisitions.” Amortization expense related to the intangible assets was approximately $257.6 million, $280.9 million and $309.5 million for the years ended December 31, 2018, 2017 and 2016, respectively. 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) 2019 $ 204.6 2020 141.6 2021 79.3 2022 69.4 2023 14.3 Thereafter 18.1 Goodwill The changes in the carrying amount of goodwill for the years ended December 31, 2018 and 2017, respectively, are as follows: LoyaltyOne ® Epsilon ® Card Services Corporate/ Other Total (In millions) Balance at January 1, 2017 $ 653.3 $ 2,885.7 $ 261.7 $ — $ 3,800.7 Effects of foreign currency translation 77.8 1.6 — — 79.4 Balance at December 31, 2017 $ 731.1 $ 2,887.3 $ 261.7 $ — $ 3,880.1 Effects of foreign currency translation (37.9) (1.2) — — (39.1) Balance at December 31, 2018 $ 693.2 $ 2,886.1 $ 261.7 $ — $ 3,841.0 The Company completed annual impairment tests for goodwill on July 31, 2018, 2017 and 2016 and determined at each date that no impairment exists. No further testing of goodwill impairments will be performed until July 31, 2019, unless events occur or circumstances indicate an impairment is probable. |
ACCRUED EXPENSES
ACCRUED EXPENSES | 12 Months Ended |
Dec. 31, 2018 | |
ACCRUED EXPENSES | |
ACCRUED EXPENSES | 11. ACCRUED EXPENSES Accrued expenses consist of the following: December 31, 2018 2017 (In millions) Accrued payroll and benefits $ 242.2 $ 247.2 Accrued taxes 24.0 64.6 Accrued other liabilities 154.8 131.0 Accrued expenses $ 421.0 $ 442.8 |
DEBT
DEBT | 12 Months Ended |
Dec. 31, 2018 | |
DEBT | |
DEBT | 12. DEBT Debt consists of the following: December 31, December 31, Description 2018 2017 Maturity Interest Rate (Dollars in millions) Long-term and other debt: 2017 revolving line of credit $ 740.0 $ 475.0 June 2022 (1) 2017 term loans 2,938.1 3,014.4 June 2022 (1) BrandLoyalty credit agreement 183.7 198.0 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) 458.8 479.9 March 2022 4.500% Senior notes due 2023 (€300.0 million) 344.1 359.9 November 2023 5.250% Capital lease obligations and other debt 12.6 8.8 Various – Jan 2019 – Aug 2022 2.90% to 4.98% Total long-term and other debt 5,777.3 6,136.0 Less: Unamortized debt issuance costs 39.4 56.4 Less: Current portion 144.5 131.3 Long-term portion $ 5,593.4 $ 5,948.3 Deposits: Certificates of deposit $ 8,395.1 $ 7,526.0 Various – Jan 2019 – Dec 2023 1.25% to 4.00% Money market deposits 3,424.3 3,429.4 Non-maturity (3) Total deposits 11,819.4 10,955.4 Less: Unamortized debt issuance costs 25.7 24.5 Less: Current portion 6,537.7 6,366.2 Long-term portion $ 5,256.0 $ 4,564.7 Non-recourse borrowings of consolidated securitization entities: Fixed rate asset-backed term note securities $ 4,893.3 $ 4,704.7 Various – Mar 2019 – Oct 2021 1.72% to 3.95% Floating rate asset-backed term note securities — 360.0 — — Conduit asset-backed securities 2,770.0 3,755.0 Various – Nov 2019 – Sept 2020 (4) Total non-recourse borrowings of consolidated securitization entities 7,663.3 8,819.7 Less: Unamortized debt issuance costs 11.6 12.4 Less: Current portion 2,717.6 1,339.9 Long-term portion $ 4,934.1 $ 7,467.4 (1) The interest rate is based upon the London Interbank Offered Rate (“LIBOR”) plus an applicable margin. At December 31, 2018, the weighted average interest rate was 4.22% and 4.27% 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 December 31, 2018, the weighted average interest rate was 1.22% 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 December 31, 2018, the interest rates ranged from 1.90% to 2.71%. (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 December 31, 2018, the interest rates ranged from 3.48% to 3.79%. At December 31, 2018, the Company was in compliance with its financial covenants. Long-term and Other Debt Credit Agreement In June 2017, the Company, as borrower, and ADS Alliance Data Systems, Inc., ADS Foreign Holdings, Inc., Alliance Data Foreign Holdings, Inc., Aspen Marketing Services, LLC, Commission Junction LLC, Conversant LLC, Epsilon Data Management, LLC, Comenity LLC and Comenity Servicing LLC, as guarantors, entered into a credit agreement with various agents and lenders dated June 14, 2017 (the “2017 Credit Agreement”), replacing in its entirety the Company’s credit agreement dated July 10, 2013 (the “2013 Credit Agreement”), which was concurrently terminated, and amended the 2017 Credit Agreement on June 16, 2017 to increase the total amount of the borrowings. At December 31, 2018, the 2017 Credit Agreement, as amended, provided for a $3,052.6 million term loan (the “2017 Term Loan”), subject to certain principal repayments, and a $1,572.4 million revolving credit facility (the “2017 Credit Facility”) with a U.S. $65.0 million sublimit for Canadian dollar borrowings and a $65.0 million sublimit for swing line loans. The 2017 Credit Agreement includes an uncommitted accordion feature of up to $750.0 million in the aggregate allowing for future incremental borrowings, subject to certain conditions. Total availability under the 2017 Credit Facility at December 31, 2018 was $832.4 million. The loans under the 2017 Credit Agreement are scheduled to mature on June 14, 2022. The 2017 Term Loan provides for aggregate principal payments of 2.5% of the initial term loan amount in each of the first and second year and 5% of the initial term loan amount in each of the third, fourth, and fifth year, payable in equal quarterly installments beginning on September 30, 2017. The 2017 Credit Agreement is unsecured. The 2017 Credit Agreement contains the usual and customary negative covenants for transactions of this type, including, but not limited to, restrictions on the Company’s ability and in certain instances, its subsidiaries’ ability to consolidate or merge; substantially change the nature of its business; sell, lease, or otherwise transfer any substantial part of its assets; create or incur indebtedness; create liens; and make acquisitions. The negative covenants are subject to certain exceptions as specified in the 2017 Credit Agreement. The 2017 Credit Agreement also requires the Company to satisfy certain financial covenants, including a maximum total leverage ratio and a minimum ratio of consolidated operating EBITDA to consolidated interest expense, each as determined in accordance with the 2017 Credit Agreement. The 2017 Credit Agreement also includes customary events of default. BrandLoyalty Credit Agreement BrandLoyalty and certain of its subsidiaries, as borrower and guarantors, are parties to a credit agreement that provides for an A-1 term loan facility of €90.0 million and an A-2 term loan facility of €100.0 million, subject to certain principal repayments, a committed revolving line of credit of €62.5 million and an uncommitted revolving line of credit of €62.5 million, all of which mature in June 2020. The BrandLoyalty credit agreement provided for a reduction in commitment on each of the uncommitted and committed revolving lines of credit of €25.0 million in August 2018, for a committed revolving line of credit of €37.5 million and an uncommitted revolving line of credit of €37.5 million as of December 31, 2018. As of December 31, 2018, amounts outstanding under the revolving lines of credit and the term loans under the BrandLoyalty credit agreement were €37.6 million and €122.5 million ($43.2 million and $140.5 million), respectively. Senior Notes The senior notes set forth below are each governed by their respective indenture that includes usual and customary negative covenants and events of default for transactions of these types. These senior notes are unsecured and are guaranteed on a senior unsecured basis by certain of the Company’s existing and future domestic subsidiaries that guarantee its Credit Agreement, as amended, as described above. Due 2020 In April 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. Due 2021 In October 2016, the Company issued and sold $500.0 million aggregate principal amount of 5.875% senior notes due November 1, 2021 (the “Senior Notes due 2021”). The Senior Notes due 2021 accrue interest on the principal amount at the rate of 5.875% per annum from October 27, 2016, payable semiannually in arrears, on May 1 and November 1 of each year, beginning on May 1, 2017. Due 2022 In July 2014, the Company issued and sold $600.0 million aggregate principal amount of 5.375% senior notes due August 1, 2022 (the “Senior Notes due 2022”). The Senior Notes due 2022 accrue interest on the principal amount at the rate of 5.375% per annum from July 29, 2014, payable semi-annually in arrears, on February 1 and August 1 of each year, beginning on February 1, 2015. In March 2017, the Company issued and sold €400.0 million aggregate principal amount of 4.500% senior notes due March 15, 2022 (the “Senior Notes due 2022 (€400.0 million)”). Interest is payable semiannually in arrears, on March 15 and September 15 of each year, beginning on September 15, 2017. The Senior Notes due 2022 (€400.0 million) were admitted for listing on the Official List of the Irish Stock Exchange and are trading on the Global Exchange Market. The amount outstanding under the Senior Notes due 2022 (€400.0 million) was €400.0 million ($458.8 million) as of December 31, 2018. Due 2023 In November 2015, the Company issued and sold €300.0 million aggregate principal amount of 5.2500% senior notes due November 15, 2023 (the “Senior Notes due 2023”). The Senior Notes due 2023 accrue interest on the principal amount at the rate of 5.25% per annum from November 19, 2015, payable semiannually in arrears, on May 15 and November 15 of each year, beginning on May 15, 2016. The Senior Notes due 2023 were admitted for listing on the Official List of the Irish Stock Exchange and are trading on the Global Exchange Market. The amount outstanding under the Senior Notes due 2023 was €300.0 million ($344.1 million) as of December 31, 2018. Deposits Comenity Bank and Comenity Capital Bank issue certificates of deposit in denominations of at least $100,000 and $1,000, respectively, in various maturities ranging between January 2019 and December 2023 and with effective annual interest rates ranging from 1.25% to 4.00%, with a weighted average interest rate of 2.44%, at December 31, 2018. At December 31, 2017, interest rates ranged from 1.00% to 2.80%, with a weighted average interest rate of 1.86%. Interest is paid monthly and at maturity. Comenity Bank and Comenity Capital Bank offer non-maturity deposit programs through contractual arrangements with various financial counterparties. Money market deposits are redeemable on demand by the customer and, as such, have no scheduled maturity date. As of December 31, 2018, Comenity Bank and Comenity Capital Bank had $3.4 billion in money market deposits outstanding with annual interest rates ranging from 1.90% to 2.71%, with a weighted average interest rate of 2.59%. As of December 31, 2017, Comenity Bank and Comenity Capital Bank had $3.4 billion in money market deposits outstanding with annual interest rates ranging from 1.26% to 2.37%, with a weighted average interest rate of 1.82%. Non-Recourse Borrowings of Consolidated Securitization Entities An asset-backed security is a security whose value and income payments are derived from and collateralized (or “backed”) by a specified pool of underlying assets. The sale of the pool of underlying assets to general investors is accomplished through a securitization process. The Company regularly sells its credit card receivables to its credit card securitization trusts, the WFN Trusts and the WFC Trust, which are consolidated on the balance sheets of the Company under ASC 860 and ASC 810. The liabilities of the consolidated VIEs include asset-backed securities for which creditors or beneficial interest holders do not have recourse to the general credit of the Company. Asset-Backed Term Notes For the year ended December 31, 2018, the following asset-backed term notes were issued by Master Trust I: · In February 2018, the Company 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 consolidated balance sheets. · In September 2018, the Company issued $337.5 million of Series 2018-B asset-backed term notes, which mature in September 2021. The offering consisted of $300.0 million of Class A notes with a fixed interest rate of 3.46% per year, $22.3 million of Class M notes with a fixed interest rate of 3.81% per year and $15.2 million of notes which were retained by the Company and eliminated from the Company’s consolidated balance sheets. · In November 2018 , the Company issued $337.5 million of Series 2018-C asset-backed term notes, which mature in October 2021. The offering consisted of $300.0 million of Class A notes with a fixed interest rate of 3.55% per year, $22.3 million of Class M notes with a fixed interest rate of 3.95% per year and $15.2 million of notes which were retained by the Company and eliminated from the Company’s consolidated balance sheets. For the year ended December 31, 2018, the following asset-backed term notes matured and were repaid: · 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 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 consolidated balance sheets . · In August 2018, $460.5 million of Series 2016-B asset-backed term notes, $110.5 million of which were retained by the Company and eliminated from the Company’s consolidated balance sheets . · In October 2018, $266.7 million of Series 2012-C asset-backed term notes, $10.7 million of which were retained by the Company and eliminated from the Company’s consolidated balance sheets . In February 2019, Master Trust I issued $562.5 million of Series 2019-A asset-backed term notes, which mature in February 2022. The offering consisted of $500.0 million of Class A notes with a fixed interest rate of 3.14% per year, $37.2 million of Class M notes with a fixed interest rate of 3.61% per year and $25.3 million of notes that were retained by the Company and eliminated from the Company’s consolidated balance sheets. 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. Borrowings outstanding under each facility bear interest at a margin above LIBOR or the asset-backed commercial paper costs of each individual conduit provider. The conduits have varying maturities from November 2019 to September 2020 with variable interest rates ranging from 3.48% to 3.79% as of December 31, 2018. In August 2018, Master Trust I amended its 2009-VFN conduit facility, increasing the capacity from $800.0 million to $1,180.0 million and extending the maturity to September 2020. In August 2018, Master Trust III amended its 2009-VFC conduit facility, decreasing the capacity from $1,680.0 million to $1,300.0 million and extending the maturity to September 2020. As of December 31, 2018, total capacity under the conduit facilities was $4.5 billion, of which $2.8 billion had been drawn and was included in non-recourse borrowings of consolidated securitization entities in the consolidated balance sheets. Maturities The future principal payments for the Company’s debt as of December 31, 2018 are as follows: Non-Recourse Borrowings of Long-Term Consolidated and Securitization Year Other Debt Deposits Entities (In millions) 2019 $ 144.6 $ 6,540.2 $ 2,719.0 2020 315.1 2,220.1 3,092.2 2021 655.4 1,473.9 1,852.1 2022 4,318.1 1,057.4 — 2023 344.1 527.8 — Thereafter — — — Total maturities 5,777.3 11,819.4 7,663.3 Unamortized debt issuance costs (39.4) (25.7) (11.6) $ 5,737.9 $ 11,793.7 $ 7,651.7 |
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS | 12 Months Ended |
Dec. 31, 2018 | |
DERIVATIVE INSTRUMENTS | |
DERIVATIVE INSTRUMENTS | 13. 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 December 31, 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 December 31, 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 11 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 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 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 consolidated balance sheets as of December 31, 2018 and 2017: December 31, 2018 Notional Amount Fair Value Balance Sheet Location Maturity (In millions) Designated as hedging instruments: Foreign currency exchange hedges $ 5.2 $ 0.3 Other current assets January 2019 to April 2019 Foreign currency exchange hedges $ 20.3 $ 0.3 Other current liabilities March 2019 to November 2019 Not designated as hedging instruments: Foreign currency exchange forward contract $ 61.6 $ 3.5 Other current assets January 2019 to February 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 For the year ended December 31, 2018, losses of $0.1 million, net of tax, were recognized in other comprehensive income related to foreign currency exchange hedges designated as effective, gains of $0.2 million, net of tax, were reclassified from accumulated other comprehensive income into net income (cost of operations), and a de minimis amount of ineffectiveness was recorded. Changes in the fair value of these hedges, excluding any ineffective portion are recorded in other comprehensive income (loss) until the hedged transactions affect net income. The ineffective portion of these cash flow hedges impacts net income when the ineffectiveness occurs. At December 31, 2018, $0.2 million is expected to be reclassified from accumulated other comprehensive income into net income in the coming 12 months. For the year ended December 31, 2017, losses of $0.5 million, net of tax, were recognized in other comprehensive income related to foreign currency exchange hedges designated as effective. For the year ended December 31, 2017, gains of $0.2 million, net of tax, were reclassified from accumulated other comprehensive income into net income (cost of operations), and $0.1 million of ineffectiveness was recorded. For the year ended December 31, 2016, losses of $0.9 million, net of tax, were recognized in other comprehensive income related to foreign currency exchange hedges designated as effective, losses of $0.6 million, net of tax, were reclassified from accumulated other comprehensive income into net income (cost of operations), and $0.1 million of ineffectiveness was recorded. Derivatives Not Designated as Hedging Instruments For the years ended December 31, 2018, 2017 and 2016, the Company recognized gains of $10.6 million, gains of $12.5 million, and losses of $0.1 million, respectively, related to foreign currency exchange forward contracts not designated as hedging instruments in general and administrative expense in the Company’s 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 years ended December 31, 2018, 2017 and 2016, the Company recorded unrealized gains of $29.6, losses of $46.1 million, and gains of $7.9 million, net of tax, respectively, in other comprehensive income and no ineffectiveness was recorded on the net investment hedges. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2018 | |
COMMITMENTS AND CONTINGENCIES. | |
COMMITMENTS AND CONTINGENCIES | 14. COMMITMENTS AND CONTINGENCIES AIR MILES Reward Program The Company has entered into contractual arrangements with certain AIR MILES Reward Program sponsors that result in fees being billed to those sponsors upon the redemption of AIR MILES reward miles issued by those sponsors. The Company has obtained letters of credit and other assurances from those sponsors for the Company’s benefit that expire at various dates. These letters of credit and other assurances totaled $128.7 million at December 31, 2018, which exceeds the amount of the Company’s estimate of its obligation to provide travel and other rewards upon the redemption of the AIR MILES reward miles issued by those sponsors. The Company currently has an obligation to provide AIR MILES Reward Program collectors with travel and other rewards upon the redemption of AIR MILES reward miles. The Company believes that the redemption settlement assets, including the letters of credit and other assurances mentioned above, are sufficient to meet that obligation. The Company has entered into certain long-term arrangements with airlines and other suppliers in connection with reward redemptions under the AIR MILES Reward Program. These long-term arrangements allow the Company to retain preferred pricing subject to meeting agreed upon annual volume commitments for rewards purchased. Leases The Company leases certain office facilities and equipment under noncancellable operating leases and is generally responsible for property taxes and insurance related to such facilities. Lease expense was $111.8 million, $128.7 million and $111.3 million for the years ended December 31, 2018, 2017 and 2016, respectively. Future annual minimum rental payments required under noncancellable operating and capital leases, some of which contain renewal options, as of December 31, 2018, are: Operating Capital Year Leases Leases (In millions) 2019 $ 91.7 $ 6.0 2020 85.4 3.5 2021 72.0 2.9 2022 63.2 1.0 2023 58.5 — Thereafter 324.7 — Total $ 695.5 13.4 Less: Amount representing interest (0.8) Total present value of minimum lease payments $ 12.6 Regulatory Matters Comenity Bank is regulated, supervised and examined by the State of Delaware and the Federal Deposit Insurance Corporation (“FDIC”). Comenity Bank remains subject to regulation by the Board of the Governors of the Federal Reserve System. The Company’s industrial bank, Comenity Capital Bank, is regulated, supervised and examined by the State of Utah and the FDIC. As of October 1, 2016, both Comenity Bank and Comenity Capital Bank are under the supervision of the Consumer Financial Protection Bureau (“CFPB”), a federal consumer protection regulator with authority to make further changes to the federal consumer protection laws and regulations, and the CFPB may, from time to time, conduct reviews of their practices. Quantitative measures established by regulations to ensure capital adequacy require Comenity Bank and Comenity Capital Bank (collectively, the “Banks”) to maintain minimum amounts and ratios of Common Equity Tier 1, Tier 1 and total capital to risk weighted assets and of Tier 1 capital to average assets. Based on these guidelines, the Banks are considered well capitalized. The actual capital ratios and minimum ratios as of December 31, 2018 are as follows: Minimum Ratio to be Minimum Ratio for Well Capitalized under Actual Capital Adequacy Prompt Corrective Ratio Purposes Action Provisions Comenity Bank Tier 1 capital to average assets 13.1 % 4.0 % 5.0 % Common Equity Tier 1 capital to risk-weighted assets 14.6 4.5 6.5 Tier 1 capital to risk-weighted assets 14.6 6.0 8.0 Total capital to risk-weighted assets 15.9 8.0 10.0 Comenity Capital Bank Tier 1 capital to average assets 12.1 % 4.0 % 5.0 % Common Equity Tier 1 capital to risk-weighted assets 14.4 4.5 6.5 Tier 1 capital to risk-weighted assets 14.4 6.0 8.0 Total capital to risk-weighted assets 15.7 8.0 10.0 The actual capital ratios and minimum ratios as of December 31, 2017 are as follows: Minimum Ratio to be Minimum Ratio for Well Capitalized under Actual Capital Adequacy Prompt Corrective Ratio Purposes Action Provisions Comenity Bank Tier 1 capital to average assets 12.3 % 4.0 % 5.0 % Common Equity Tier 1 capital to risk-weighted assets 13.5 4.5 6.5 Tier 1 capital to risk-weighted assets 13.5 6.0 8.0 Total capital to risk-weighted assets 14.8 8.0 10.0 Comenity Capital Bank Tier 1 capital to average assets 12.4 % 4.0 % 5.0 % Common Equity Tier 1 capital to risk-weighted assets 14.0 4.5 6.5 Tier 1 capital to risk-weighted assets 14.0 6.0 8.0 Total capital to risk-weighted assets 15.3 8.0 10.0 Cardholders The Company’s Card Services segment is active in originating private label and co-brand credit cards in the United States. The Company reviews each potential customer’s credit application and evaluates the applicant’s financial history and ability and perceived willingness to repay. Credit card loans are made primarily on an unsecured basis. Cardholders reside throughout the United States and are not significantly concentrated in any one area. Holders of credit cards issued by the Company have available lines of credit, which vary by cardholder. These lines of credit represent elements of risk in excess of the amount recognized in the financial statements. The lines of credit are subject to change or cancellation by the Company. At December 31, 2018, the Company had 59.4 million total accounts, including both active and inactive, having unused lines of credit averaging $2,210 per account. Legal Proceedings From time to time the Company is involved in various claims and lawsuits arising in the ordinary course of business that it believes will not have a material effect on its business, financial condition or cash flows, including claims and lawsuits alleging breaches of the Company’s contractual obligations. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2018 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | 15. STOCKHOLDERS’ EQUITY Stock Repurchase Programs In January 2016, the Company’s Board of Directors authorized a stock repurchase program to acquire up to $500.0 million of the Company’s outstanding common stock from January 1, 2016 through December 31, 2016. In February 2016, the Board of Directors authorized an increase to the stock repurchase program originally approved on January 1, 2016 to acquire an additional $500.0 million of the Company’s outstanding common stock through December 31, 2016, for a total authorization of $1.0 billion. In January 2017, the Company’s Board of Directors authorized a stock repurchase program to acquire up to $500.0 million of the Company’s outstanding common stock from January 1, 2017 through December 31, 2017. In July 2017, the Company's Board of Directors authorized an increase to the stock repurchase program originally approved on January 1, 2017 to acquire an additional $500.0 million of the Company’s outstanding common stock through July 31, 2018, for a total stock repurchase authorization of up to $1.0 billion. At July 31, 2018, $280.3 million of this program expired unused. On July 26, 2018, the Company’s Board of Directors authorized a new stock repurchase program to acquire up to $500.0 million of the Company’s outstanding common stock from August 1, 2018 through July 31, 2019. For the year ended December 31, 2018, the Company acquired approximately 2.2 million shares of its common stock for $443.2 million under its respective stock repurchase programs. The Company acquired approximately 0.8 million shares of its common stock for $166.0 million under its previous stock repurchase program and acquired approximately 1.4 million shares of its common stock for $277.2 million under its current stock repurchase program. As of December 31, 2018, the Company had $222.8 million remaining under its current stock repurchase program. During the years ended December 31, 2017 and 2016, the Company repurchased approximately 2.3 million and 3.8 million shares of its common stock, respectively, for an aggregate amount of $553.7 million and $805.7 million, respectively. Stock Compensation Plans The Company has adopted equity compensation plans to advance the interests of the Company by rewarding certain employees for their contributions to the financial success of the Company and thereby motivating them to continue to make such contributions in the future. The 2010 Omnibus Incentive Plan became effective July 1, 2010 and reserved 3,000,000 shares of common stock for grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance share awards, cash incentive awards, deferred stock units, and other stock-based and cash-based awards to selected officers, employees, non-employee directors and consultants who performed services for the Company or its affiliates, with only employees eligible to receive incentive stock options. The 2010 Omnibus Incentive Plan expired on June 30, 2015. In March 2015, the Company’s Board of Directors adopted the 2015 Omnibus Incentive Plan (the “2015 Plan”), which was subsequently approved by the Company’s stockholders on June 3, 2015. The 2015 Plan became effective July 1, 2015 and expires on June 30, 2020. The 2015 Plan reserves 5,100,000 shares of common stock for grants of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance share awards, cash incentive awards, deferred stock units, and other stock-based and cash-based awards to selected officers, employees, non-employee directors and consultants performing services for the Company or its affiliates, with only employees being eligible to receive incentive stock options. On June 5, 2015, the Company registered 5,100,000 shares of its common stock for issuance in accordance with the 2015 Plan pursuant to a Registration Statement on Form S-8, File No. 333-204758. Beginning February 15, 2017, the restricted stock unit award agreements under the 2015 Plan provide for dividend equivalent rights (“DERs”), which entitle holders of restricted stock units to the same dividend value per share as holders of common stock. DERs are subject to the same vesting and other terms and conditions as the corresponding unvested restricted stock units. DERs are paid only when the underlying shares vest. Terms of all awards under the 2015 Plan are determined by the Board of Directors or the compensation committee of the Board of Directors or its designee at the time of award. Stock Compensation Expense Under the fair value recognition provisions, stock-based compensation expense is measured at the grant date based on the fair value of the award and is recognized ratably over the requisite service period. Total stock-based compensation expense recognized in the Company’s consolidated statements of income for the years ended December 31, 2018, 2017 and 2016, is as follows: Years Ended December 31, 2018 2017 2016 (In millions) Cost of operations $ 57.5 $ 50.3 $ 56.0 General and administrative 23.3 24.8 20.5 Total $ 80.8 $ 75.1 $ 76.5 The income tax benefits related to stock-based compensation expense for the years ended December 31, 2018, 2017 and 2016 were $15.4 million, $15.6 million and $22.7 million, respectively. As the amount of stock-based compensation expense recognized is based on awards ultimately expected to vest, the amount recognized in the Company’s results of operations has been reduced for estimated forfeitures. In connection with the Company’s adoption of ASU 2016-09, the Company elected to continue to estimate forfeitures at each grant date, with forfeiture estimates to be revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on the Company’s historical experience. The Company’s forfeiture rate was 5% for the years ended December 31, 2018, 2017 and 2016. As of December 31, 2018, there was approximately $88.6 million of Restricted Stock Unit Awards During 2018, the Company awarded service-based, performance-based and market-based restricted stock units. In accordance with ASC 718, the Company recognizes the estimated stock-based compensation expense, net of estimated forfeitures, over the applicable service period. For service-based and performance-based awards, the fair value of the restricted stock units was estimated using the Company’s closing share price on the date of grant. Service-based restricted stock unit awards typically vest ratably over a three year period. Performance-based restricted stock unit awards typically vest ratably over a three year period if specified performance measures tied to the Company’s financial performance are met. For the market-based award granted in 2018, the fair value of the restricted stock units was estimated utilizing Monte Carlo simulations of the Company’s stock price correlation (0.43), expected volatility (27.1%) and risk-free rate (2.2%) 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. The following table summarizes restricted stock unit activity under the Company’s equity compensation plans: Weighted Market- Performance- Service- Average Based Based Based Total Fair Value Balance at January 1, 2016 — 446,366 275,538 721,904 $ 238.37 Shares granted — 277,036 175,456 452,492 195.97 Shares vested — (233,604) (95,829) (329,433) 230.21 Shares forfeited — (45,479) (22,787) (68,266) 246.28 Balance at December 31, 2016 — 444,319 332,378 776,697 $ 216.89 Shares granted 28,172 282,311 126,051 436,534 229.37 Shares vested — (188,929) (96,723) (285,652) 248.70 Shares forfeited (1) — (87,122) (32,647) (119,769) 211.69 Balance at December 31, 2017 28,172 450,579 329,059 807,810 $ 207.45 Shares granted 28,057 263,542 138,160 429,759 233.98 Shares vested — (188,680) (130,823) (319,503) 224.62 Shares forfeited — (102,199) (18,955) (121,154) 227.66 Balance at December 31, 2018 56,229 423,242 317,441 796,912 $ 218.81 Outstanding and Expected to Vest 703,186 $ 239.98 (1) Includes the cancellation of 50,215 performance-based shares granted in 2016 and accounted for as such under ASC 718. The total fair value of restricted stock units vested was $71.8 million, $71.0 million and $75.8 million for the years ended December 31, 2018, 2017 and 2016, respectively. The aggregate intrinsic value of restricted stock units outstanding and expected to vest was $105.5 million at December 31, 2018. The weighted-average remaining contractual life for unvested restricted stock units was 1.4 years at December 31, 2018. Stock Options Stock option awards are granted with an exercise price equal to the market price of the Company’s stock on the date of grant. Options typically vest ratably over three years and expire ten years after the date of grant. The following table summarizes stock option activity under the Company’s equity compensation plans: Outstanding Exercisable Weighted Weighted Average Average Options Exercise Price Options Exercise Price Balance at January 1, 2016 73,360 $ 49.84 73,053 $ 49.96 Options granted — — Options exercised (54,275) 54.21 Options forfeited (219) 20.16 Balance at December 31, 2016 18,866 $ 37.60 18,864 $ 37.60 Options granted — — Options exercised (7,004) 60.85 Options forfeited (3) 35.56 Balance at December 31, 2017 11,859 $ 23.87 11,859 $ 23.87 Options granted — — Options exercised (886) 12.70 Options forfeited (119) 2.74 Balance at December 31, 2018 10,854 $ 25.01 10,854 $ 25.01 Vested and Expected to Vest 10,854 $ 25.01 Based on the market value on their respective exercise dates, the total intrinsic value of stock options exercised was approximately $0.2 million, $1.2 million and $8.5 million for the years ended December 31, 2018, 2017 and 2016, respectively. The aggregate intrinsic value of the outstanding and exercisable stock options as of December 31, 2018 was approximately $1.4 million. The weighted average remaining contractual life of stock options vested and exercisable as of December 31, 2018 was approximately 2.1 years. The Company received a de minimis amount of cash proceeds from stock options exercised during the year ended December 31, 2018. Dividends During the year ended December 31, 2018, the Company declared quarterly cash dividends of $0.57 per share, for a total of $125.9 million. The Company paid cash dividends and dividend equivalents aggregating $125.2 million for the year ended December 31, 2018, and $0.7 million of dividend equivalents were accrued but not yet paid at December 31, 2018. During the year ended December 31, 2017, the Company declared quarterly cash dividends of $0.52 per share, for a total of $116.4 million. The Company paid cash dividends aggregating $115.5 million for the year ended December 31, 2018, and $0.9 million of dividend equivalents were accrued but not yet paid at December 31, 2017. On February 7, 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.63 per share on the Company’s common stock, payable on March 19, 2019 to stockholders of record at the close of business on February 21, 2019. |
EMPLOYEE BENEFIT PLANS
EMPLOYEE BENEFIT PLANS | 12 Months Ended |
Dec. 31, 2018 | |
EMPLOYEE BENEFIT PLANS | |
EMPLOYEE BENEFIT PLANS | 16. EMPLOYEE BENEFIT PLANS Employee Stock Purchase Plan In March 2015, the Company’s Board of Directors adopted the 2015 Employee Stock Purchase Plan (the “2015 ESPP”), which was subsequently approved by the Company’s stockholders on June 3, 2015. The 2015 ESPP became effective July 1, 2015 with no definitive expiration date. The Company’s Board of Directors may at any time and for any reason terminate or amend the 2015 ESPP. No employee may purchase more than $25,000 in stock under the 2015 ESPP in any calendar year, and no employee may purchase stock under the 2015 ESPP if such purchase would cause the employee to own more than 5% of the voting power or value of the Company’s common stock. The 2015 ESPP provides for six month offering periods, commencing on the first trading day of the first and third calendar quarter of each year and ending on the last trading day of each subsequent calendar quarter. The purchase price of the common stock upon exercise shall be 85% of the fair market value of shares on the applicable purchase date as determined by averaging the high and low trading prices of the last trading day of the six-month period. An employee may elect to pay the purchase price of such common stock through payroll deductions. The 2015 ESPP provides for the issuance of any remaining shares available for issuance under the 2005 ESPP, which were 441,327 shares at June 30, 2015. The 2015 ESPP reserved an additional 1,000,000 shares of the Company’s common stock for issuance under the 2015 Plan, bringing the maximum number of shares reserved for issuance under the 2015 ESPP to 1,441,327 shares, subject to adjustment as provided in the 2015 ESPP. On June 5, 2015, the Company registered 1,441,327 shares of its common stock for issuance in accordance with the 2015 ESPP pursuant to a Registration Statement on Form S-8, File No. 333-204759. During the year ended December 31, 2018, the Company issued 109,414 shares of common stock under the 2015 ESPP at a weighted-average issue price of $160.41. Since its adoption on July 1, 2015, 341,515 shares of common stock have been issued, with 1,099,812 shares available for issuance under the 2015 ESPP. 2015 Omnibus Incentive Plan The 2015 Omnibus Incentive Plan authorizes the compensation committee to grant cash-based and other equity-based or equity-related awards, including deferred stock units. The maximum cash amount that may be awarded to any single participant in any one calendar year may not exceed $7.5 million. See Note 15, “Stockholders’ Equity,” for more information about the 2015 Plan. 401(k) Retirement Savings Plan The Alliance Data Systems 401(k) and Retirement Savings Plan is a defined contribution plan that is qualified under Section 401(k) of the Internal Revenue Code of 1986. The Company amended its 401(k) and Retirement Savings Plan effective December 10, 2014. The 401(k) and Retirement Savings Plan is an IRS-approved safe harbor plan design that eliminates the need for most discrimination testing. Eligible employees can participate in the 401(k) and Retirement Savings Plan immediately upon joining the Company and after 180 days of employment begin receiving company matching contributions. In addition, “seasonal” or “on-call” employees must complete a year of eligibility service before they may participate in the 401(k) and Retirement Savings Plan. The 401(k) and Retirement Savings Plan permits eligible employees to make Roth elective deferrals, effective November 1, 2012, which are included in the employee’s taxable income at the time of contribution, but not when distributed. Regular, or Non-Roth, elective deferrals made by employees, together with contributions by the Company to the 401(k) and Retirement Savings Plan, and income earned on these contributions, are not taxable to employees until withdrawn from the 401(k) and Retirement Savings Plan. The 401(k) and Retirement Savings Plan covers U.S. employees, who are at least 18 years old, of ADS Alliance Data Systems, Inc., one of the Company’s wholly-owned subsidiaries, and any other subsidiary or affiliated organization that adopts this 401(k) and Retirement Savings Plan. Employees of the Company, and all of its U.S. subsidiaries, are currently covered under the 401(k) and Retirement Savings Plan. The Company matches an employee’s contribution dollar-for-dollar up to five percent of the employee’s eligible compensation. All company matching contributions are immediately vested. Company matching contributions for the years ended December 31, 2018, 2017 and 2016 were $44.8 million, $41.6 million and $38.0 million, respectively. The participants in the plan can direct their contributions and the Company’s matching contribution to numerous investment options, including the Company’s common stock. On July 20, 2001, the Company registered 1,500,000 shares of its common stock for issuance in accordance with its 401(k) and Retirement Savings Plan pursuant to a Registration Statement on Form S-8, File No. 333-65556. As of December 31, 2018, 518,604 of such shares remain available for issuance. Group Retirement Savings Plan and Deferred Profit Sharing Plan (LoyaltyOne) The Company provides for its Canadian employees the Group Retirement Savings Plan of the Loyalty Group (“GRSP”), which is a group retirement savings plan registered with the Canada Revenue Agency. Contributions made by Canadian employees on their behalf or on behalf of their spouse to the GRSP, and income earned on these contributions, are not taxable to employees until withdrawn from the GRSP. Employee contributions eligible for company match may not exceed the overall maximum allowed by the Income Tax Act (Canada); the maximum tax-deductible GRSP contribution is set by the Canada Revenue Agency each year. The Deferred Profit Sharing Plan (“DPSP”) is a legal trust registered with the Canada Revenue Agency. Eligible full-time employees can participate in the GRSP after three months of employment and eligible part-time employees after six months of employment. Employees become eligible to receive company matching contributions into the DPSP on the first day of the calendar quarter following twelve months of employment. Based on the eligibility guidelines, the Company matches an employee’s contribution dollar-for-dollar up to five percent of the employee’s eligible compensation. Contributions made to the DPSP reduce an employee’s maximum contribution amounts to the GRSP under the Income Tax Act (Canada) for the following year. All company matching contributions into the DPSP vest after receipt of one continuous year of DPSP contributions. LoyaltyOne matching and discretionary contributions were $1.7 million, $1.9 million and $1.8 million for the years ended December 31, 2018, 2017 and 2016, respectively. Executive Deferred Compensation Plan and the Canadian Supplemental Executive Retirement Plan The Company also maintains an Executive Deferred Compensation Plan (“EDCP”). The EDCP permits a defined group of management and highly compensated employees to defer on a pre-tax basis a portion of their base salary and incentive compensation (as defined in the EDCP) payable for services rendered. Deferrals under the EDCP are unfunded and subject to the claims of the Company’s creditors. Each participant in the EDCP is 100% vested in their account, and account balances accrue interest at a rate established and adjusted periodically by the committee that administers the EDCP. The Company provides a Canadian Supplemental Executive Retirement Plan for a defined group of management and highly compensated employees of LoyaltyOne, Co., one of the Company’s wholly-owned subsidiaries. Similar to the EDCP, participants may defer on a pre-tax basis a portion of their compensation and bonuses payable for services rendered and to receive certain employer contributions. As of December 31, 2018 and 2017, the Company’s outstanding liability related to these plans and included in accrued expenses in the Company’s consolidated balance sheets was $63.2 million and $55.3 million, respectively. |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE LOSS | 12 Months Ended |
Dec. 31, 2018 | |
ACCUMULATED OTHER COMPREHENSIVE LOSS. | |
ACCUMULATED OTHER COMPREHENSIVE LOSS | 17. ACCUMULATED OTHER COMPREHENSIVE LOSS The changes in each component of accumulated other comprehensive loss, net of tax effects, are as follows: Accumulated Net Unrealized Net Unrealized Net Unrealized Foreign Currency Other Gains (Losses) on Gains (Losses) on Gains (Losses) on Translation Comprehensive Securities Cash Flow Hedges Net Investment Hedges Adjustments (1) Loss (In millions) Balance as of January 1, 2016 $ (0.1) $ 1.3 $ (3.8) $ (134.7) $ (137.3) Changes in other comprehensive income (loss) (1.5) (0.9) 7.9 (18.9) (13.4) Balance at December 31, 2016 $ (1.6) $ 0.4 $ 4.1 $ (153.6) $ (150.7) Changes in other comprehensive income (loss) (7.1) (0.5) (46.1) 64.2 10.5 Balance at December 31, 2017 $ (8.7) $ (0.1) $ (42.0) $ (89.4) $ (140.2) Changes in other comprehensive income (loss) (2.0) (0.1) 29.6 (25.4) 2.1 Balance at December 31, 2018 $ (10.7) $ (0.2) $ (12.4) $ (114.8) $ (138.1) (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, net of tax, 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 2, “Summary of Significant Accounting Policies.” |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2018 | |
INCOME TAXES | |
INCOME TAXES | 18. INCOME TAXES The Company files a consolidated federal income tax return. The components of income before income taxes and income tax expense are as follows: Years Ended December 31, 2018 2017 2016 (In millions) Components of income before income taxes: Domestic $ 1,046.6 $ 889.9 $ 864.1 Foreign 177.1 191.2 (27.1) Total $ 1,223.7 $ 1,081.1 $ 837.0 Components of income tax expense: Current Federal $ 130.2 $ 316.7 $ 269.8 State 61.1 30.3 42.2 Foreign 53.0 59.2 38.2 Total current 244.3 406.2 350.2 Deferred Federal 56.1 (96.7) 2.2 State 18.2 1.0 2.4 Foreign (58.0) (18.1) (35.4) Total deferred 16.3 (113.8) (30.8) Total provision for income taxes $ 260.6 $ 292.4 $ 319.4 A reconciliation of recorded federal provision for income taxes to the expected amount computed by applying the federal statutory rate for all periods to income before income taxes is as follows: Years Ended December 31, 2018 2017 2016 (In millions) Expected expense at statutory rate $ 257.0 $ 378.4 $ 292.9 Increase (decrease) in income taxes resulting from: State income taxes, net of federal benefit 62.6 19.5 29.0 Foreign rate differential 10.4 (27.5) (1.3) Foreign restructuring (48.0) — — Impact of 2017 Tax Reform (29.7) (64.9) — Non-deductible expenses (non-taxable income) 3.4 (5.8) 1.5 Other 4.9 (7.3) (2.7) Total $ 260.6 $ 292.4 $ 319.4 H.R. 1, originally known as the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Reform”) was enacted on December 22, 2017. The 2017 Tax Reform permanently reduced the corporate tax rate to 21% from 35%, effective January 1, 2018 and implemented a change from a system of worldwide taxation with deferral to a hybrid territorial system. For the year ended December 31, 2018, the Company recorded an income tax benefit of approximately $29.7 million related to the impact of the 2017 Tax Reform rate differential as a result of certain tax accounting method changes related to projects initiated in 2018. Deferred tax assets and liabilities consist of the following: December 31, 2018 2017 (In millions) Deferred tax assets Deferred revenue $ 10.6 $ 18.5 Allowance for doubtful accounts 267.0 282.4 Net operating loss carryforwards and other carryforwards 60.8 97.0 Stock-based compensation and other employee benefits 24.4 23.2 Accrued expenses and other 66.3 84.5 Total deferred tax assets 429.1 505.6 Valuation allowance (36.3) (76.4) Deferred tax assets, net of valuation allowance 392.8 429.2 Deferred tax liabilities Deferred income $ 409.8 $ 364.3 Depreciation 79.2 37.9 Intangible assets 113.4 210.1 Total deferred tax liabilities 602.4 612.3 Net deferred tax liability $ (209.6) $ (183.1) Amounts recognized in the consolidated balance sheets: Non-current assets $ 47.0 $ 28.1 Non-current liabilities (256.6) (211.2) Total – Net deferred tax liability $ (209.6) $ (183.1) At December 31, 2018, included in the Company’s U.S. tax returns are approximately $15.7 million of U.S. federal net operating loss carryovers (“NOLs”) and approximately $33.8 million of foreign tax credits that expire at various times through the year 2034. Pursuant to Section 382 of the Internal Revenue Code, the Company’s utilization of such NOLs is subject to an annual limitation. At December 31, 2018, the Company has state income tax NOLs of approximately $363.7 million and state credits of approximately $10.0 million available to offset future state taxable income. The state NOLs and credits will expire at various times through the year 2037. The Company has $128.1 million of foreign NOLs, $4.1 million of foreign capital losses, and $3.1 million of a foreign minimum alternative tax credit at December 31, 2018. The foreign NOLs and capital losses have an unlimited carryforward period and the foreign minimum alternative tax credit expires at various times through 2033. The Company does not believe it is more likely than not that the NOLs or capital losses will be utilized and has therefore, in accordance with ASC 740-10-30, “Income Taxes—Overall—Initial Measurement,” established a full valuation allowance against them. The Company’s valuation allowance decreased $40.1 million during the year ended December 31, 2018, due primarily to the utilization of a tax carryforward to offset an unrecognized tax benefit. The Company’s valuation allowance increased $31.7 million and $2.5 million during the years ended December 31, 2017 and 2016, respectively. U.S. income tax has not been recognized on the excess of the amount for financial reporting over the tax basis of investments in certain foreign subsidiaries that is indefinitely reinvested outside the United States. The Company intends to permanently reinvest the undistributed earnings of these foreign subsidiaries in its operations outside the United States to support its international growth. As of December 31, 2018, the excess is approximately $146.8 million. Generally, the taxes associated with the $146.8 million of undistributed earnings will not be subject to further U.S. income taxes and any additional state and local or foreign withholding taxes are immaterial. Should certain substantial changes in the Company’s ownership occur, there could be an annual limitation on the amount of carryovers and credits that can be utilized. The impact of such a limitation would likely not be significant. As a result of the adoption of ASU 2016-09 in 2017, the net tax benefit or expense resulting from the vesting of restricted shares and other employee stock programs is now recorded as a component of income tax expense. Prior to the adoption of ASU 2016-09, the net tax expense related to stock-based compensation recorded in additional paid-in capital was approximately $1.7 million for the year ended December 31, 2016. The net tax impact of the change in the carrying value of the Euro-denominated Senior Notes due 2022 and 2023 due to foreign exchange fluctuations that was recorded directly to other comprehensive income was an expense of $9.5 million, a benefit of $26.2 million and an expense of $2.4 million for the years ended December 31, 2018, 2017 and 2016, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions): Balance at January 1, 2016 $ 156.6 Increases related to prior years’ tax positions 22.5 Decreases related to prior years’ tax positions (12.1) Increases related to current year tax positions 31.4 Settlements during the period (3.1) Lapses of applicable statutes of limitation (3.3) Balance at December 31, 2016 $ 192.0 Increases related to prior years’ tax positions 9.3 Decreases related to prior years’ tax positions (15.7) Increases related to current year tax positions 33.0 Settlements during the period (6.7) Lapses of applicable statutes of limitation (3.6) Balance at December 31, 2017 $ 208.3 Increases related to prior years’ tax positions 41.3 Decreases related to prior years’ tax positions (9.6) Increases related to current year tax positions 61.5 Settlements during the period (1.0) Lapses of applicable statutes of limitation (4.2) Balance at December 31, 2018 $ 296.3 Included in the balance at December 31, 2018 are tax positions reclassified from deferred income taxes. Deductibility or taxability is highly certain for these tax positions but there is uncertainty about the timing of such deductibility or taxability. As a result of the passage of the 2017 Tax Reform, any rate differential between the reserved tax position and the related deferred tax asset or liability, along with interest and penalties, could impact the annual effective tax rate. This timing uncertainty could also accelerate the payment of cash to the taxing authority to an earlier period. The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company has potential cumulative interest and penalties with respect to unrecognized tax benefits of approximately $66.7 million, $41.6 million and $39.4 million at December 31, 2018, 2017 and 2016, respectively. For the years ended December 31, 2018, 2017 and 2016, the Company recorded approximately $24.4 million, $5.5 million and $8.1 million, respectively, in potential interest and penalties with respect to unrecognized tax benefits. At December 31, 2018, 2017 and 2016, the Company had unrecognized tax benefits of approximately $247.7 million, $170.0 million and $121.4 million, respectively that, if recognized, would impact the effective tax rate. It is likely that there will be a change in the amount of unrecognized tax benefits within the next 12 months related to a tax accounting method change in 2019. We estimate that this change in unrecognized tax benefits within the next 12 months could be a decrease of up to approximately $70 million, a significant portion of which relates to timing items that would not have an impact to the effective tax rate. The Company files income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions. With some exceptions, the tax returns filed by the Company are no longer subject to U.S. federal income tax examinations for the years before 2015, state and local examinations for years before 2014 or foreign income tax examinations for years before 2013. |
FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS | 12 Months Ended |
Dec. 31, 2018 | |
FINANCIAL INSTRUMENTS | |
FINANCIAL INSTRUMENTS | 19. 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: December 31, 2018 December 31, 2017 Carrying Fair Carrying Fair Amount Value Amount Value (In millions) Financial assets Credit card and loan receivables, net $ 16,816.7 $ 17,472.7 $ 17,494.5 $ 18,427.8 Credit card and loan receivables held for sale 1,951.6 1,995.5 1,026.3 1,067.6 Redemption settlement assets, restricted 558.6 558.6 589.5 589.5 Other investments 291.3 291.3 254.9 254.9 Derivative instruments 3.8 3.8 16.0 16.0 Financial liabilities Derivative instruments 0.3 0.3 3.8 3.8 Deposits 11,793.7 11,768.7 10,930.9 10,937.1 Non-recourse borrowings of consolidated securitization entities 7,651.7 7,626.9 8,807.3 8,805.3 Long-term and other debt 5,737.9 5,767.8 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 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 December 31, 2018 and 2017: Fair Value Measurements at December 31, 2018 Using Balance at December 31, 2018 Level 1 Level 2 Level 3 (In millions) Mutual funds (1) $ 23.2 $ 23.2 $ — $ — Corporate bonds (1) 491.5 — 491.5 — Marketable securities (2) 266.4 25.0 241.4 — U.S. Treasury bonds (2) 24.9 24.9 — — Derivative instruments (3) 3.8 — 3.8 — Total assets measured at fair value $ 809.8 $ 73.1 $ 736.7 $ — Derivative instruments (3) $ 0.3 $ — $ 0.3 $ — Total liabilities measured at fair value $ 0.3 $ — $ 0.3 $ — 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 consolidated balance sheets. (2) Amounts are included in other current assets and other non-current assets in the consolidated balance sheets. (3) Amounts are included in other current assets and other current liabilities in the consolidated balance sheets. There were no transfers between Levels 1 and 2 within the fair value hierarchy for the years ended December 31, 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 December 31, 2018 and 2017: Fair Value Measurements at December 31, 2018 Total Level 1 Level 2 Level 3 (In millions) Financial assets: Credit card and loan receivables, net $ 17,472.7 $ — $ — $ 17,472.7 Credit card and loan receivables held for sale 1,995.5 — — 1,995.5 Total $ 19,468.2 $ — $ — $ 19,468.2 Financial liabilities: Deposits $ 11,768.7 $ — $ 11,768.7 $ — Non-recourse borrowings of consolidated securitization entities 7,626.9 — 7,626.9 — Long-term and other debt 5,767.8 — 5,767.8 — Total $ 25,163.4 $ — $ 25,163.4 $ — 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 $ — |
PARENT-ONLY FINANCIAL STATEMENT
PARENT-ONLY FINANCIAL STATEMENTS | 12 Months Ended |
Dec. 31, 2018 | |
PARENT-ONLY FINANCIAL STATEMENTS | |
PARENT-ONLY FINANCIAL STATEMENTS | 20. PARENT-ONLY FINANCIAL STATEMENTS The following ADSC financial statements are provided in accordance with the rules of the Securities and Exchange Commission, which require such disclosure when the restricted net assets of consolidated subsidiaries exceed 25 percent of consolidated net assets. Certain of the Company’s subsidiaries may be restricted in distributing cash or other assets to ADSC, which could be utilized to service its indebtedness. The stand-alone parent-only financial statements are presented below. Balance Sheets December 31, 2018 2017 (In millions) Assets: Cash and cash equivalents $ 0.1 $ 0.1 Investment in subsidiaries 8,606.0 8,203.9 Other assets 20.1 95.3 Total assets $ 8,626.2 $ 8,299.3 Liabilities: Current debt $ 114.4 $ 76.2 Long-term debt 5,427.7 5,797.5 Intercompany liabilities 395.9 177.8 Other liabilities 356.1 392.5 Total liabilities 6,294.1 6,444.0 Stockholders’ equity 2,332.1 1,855.3 Total liabilities and stockholders’ equity $ 8,626.2 $ 8,299.3 Statements of Income Years Ended December 31, 2018 2017 2016 (In millions) Interest from loans to subsidiaries $ 17.9 $ 13.8 $ 11.8 Dividends from subsidiaries 810.1 360.6 438.4 Total revenue 828.0 374.4 450.2 Interest expense, net 281.2 278.9 214.9 Other expenses, net (0.4) 12.9 (1.3) Total expenses 280.8 291.8 213.6 Income before income taxes and equity in undistributed net income of subsidiaries 547.2 82.6 236.6 Benefit for income taxes 7.0 322.7 75.2 Income before equity in undistributed net income of subsidiaries 554.2 405.3 311.8 Equity in undistributed net income of subsidiaries 408.9 383.4 205.8 Net income $ 963.1 $ 788.7 $ 517.6 Statements of Comprehensive Income Years Ended December 31, 2018 2017 2016 (In millions) Net income $ 963.1 $ 788.7 $ 517.6 Other comprehensive (loss) income, net of tax 29.6 (46.1) 6.6 Total comprehensive income, net of tax $ 992.7 $ 742.6 $ 524.2 Statements of Cash Flows Years Ended December 31, 2018 2017 2016 (In millions) Net cash provided by operating activities $ 82.3 $ 72.3 $ 2.0 Investing activities: Loans to subsidiaries — — (102.0) Investment in subsidiaries — (164.0) — Dividends received 810.1 360.6 436.4 Net cash provided by investing activities 810.1 196.6 334.4 Financing activities: Borrowings under debt agreements 4,527.0 7,673.6 3,571.5 Repayments of borrowings (4,838.3) (7,232.4) (3,167.9) Payment of deferred financing costs (4.6) (33.7) (11.6) Purchase of treasury shares (443.2) (553.7) (798.8) Dividends paid (125.2) (115.5) (30.0) Proceeds from issuance of common stock 17.6 18.4 18.4 Other (25.7) (25.6) (21.9) Net cash used in financing activities (892.4) (268.9) (440.3) Change in cash, cash equivalents and restricted cash — — (103.9) Cash, cash equivalents and restricted cash at beginning of year 0.1 0.1 104.0 Cash, cash equivalents and restricted cash at end of year $ 0.1 $ 0.1 $ 0.1 The adoption of ASU 2016-18, “Restricted Cash,” on January 1, 2018 had no impact to the parent-only statements of cash flows. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 12 Months Ended |
Dec. 31, 2018 | |
SEGMENT INFORMATION | |
SEGMENT INFORMATION | 21. 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/ Year Ended December 31, 2018 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Revenues $ 1,068.4 $ 2,175.1 $ 4,597.6 $ 0.6 $ (50.5) $ 7,791.2 Income (loss) before income taxes $ 153.8 $ 147.0 $ 1,381.6 $ (458.7) $ — $ 1,223.7 Interest expense, net 5.6 0.2 385.9 278.9 — 670.6 Operating income (loss) 159.4 147.2 1,767.5 (179.8) — 1,894.3 Depreciation and amortization 84.8 293.7 101.1 7.7 — 487.3 Stock compensation expense 10.0 34.2 13.3 23.3 — 80.8 Strategic transaction costs — — — 3.3 — 3.3 Adjusted EBITDA (1) 254.2 475.1 1,881.9 (145.5) — 2,465.7 Less: Securitization funding costs — — 220.2 — — 220.2 Less: Interest expense on deposits — — 165.7 — — 165.7 Adjusted EBITDA, net (1) $ 254.2 $ 475.1 $ 1,496.0 $ (145.5) $ — $ 2,079.8 Capital expenditures $ 34.0 $ 106.5 $ 53.8 $ 5.5 $ — $ 199.8 Total assets $ 2,200.2 $ 4,159.0 $ 23,904.2 $ 124.3 $ — $ 30,387.7 Corporate/ Year Ended December 31, 2017 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Revenues $ 1,303.5 $ 2,272.1 $ 4,170.6 $ 0.6 $ (27.4) $ 7,719.4 Income (loss) before income taxes $ 161.6 $ 134.3 $ 1,235.7 $ (450.5) $ — $ 1,081.1 Interest expense, net 5.4 0.2 281.7 277.1 — 564.4 Operating income (loss) 167.0 134.5 1,517.4 (173.4) — 1,645.5 Depreciation and amortization 81.7 309.7 98.4 7.8 — 497.6 Stock compensation expense 8.0 31.5 10.8 24.8 — 75.1 Adjusted EBITDA (1) 256.7 475.7 1,626.6 (140.8) — 2,218.2 Less: Securitization funding costs — — 156.6 — — 156.6 Less: Interest expense on deposits — — 125.1 — — 125.1 Adjusted EBITDA, net (1) $ 256.7 $ 475.7 $ 1,344.9 $ (140.8) $ — $ 1,936.5 Capital expenditures $ 55.2 $ 107.2 $ 54.2 $ 8.8 $ — $ 225.4 Total assets $ 2,215.5 $ 4,391.8 $ 23,974.1 $ 103.4 $ — $ 30,684.8 Corporate/ Year Ended December 31, 2016 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Revenues $ 1,337.9 $ 2,155.2 $ 3,675.0 $ 0.3 $ (30.3) $ 7,138.1 Income (loss) before income taxes $ (27.3) $ 123.2 $ 1,108.0 $ (366.9) $ — $ 837.0 Interest expense, net 3.3 — 210.3 214.9 — 428.5 Operating income (loss) (24.0) 123.2 1,318.3 (152.0) — 1,265.5 Depreciation and amortization 86.6 325.2 91.2 9.1 — 512.1 Stock compensation expense 10.1 31.8 14.1 20.5 — 76.5 Impact of expiry 241.7 — — — 241.7 Adjusted EBITDA (1) 314.4 480.2 1,423.6 (122.4) — 2,095.8 Less: Securitization funding costs — — 125.6 — — 125.6 Less: Interest expense on deposits — — 84.7 — — 84.7 Less: Adjusted EBITDA attributable to non-controlling interest 5.5 — — — — 5.5 Adjusted EBITDA, net (1) $ 308.9 $ 480.2 $ 1,213.3 $ (122.4) $ — $ 1,880.0 Capital expenditures $ 31.9 $ 119.8 $ 49.4 $ 5.9 $ — $ 207.0 Total assets $ 1,901.7 $ 4,543.1 $ 18,949.7 $ 119.6 $ — $ 25,514.1 (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. In 2018, adjusted EBITDA excluded costs related to the exploration of strategic alternatives for our Epsilon segment. In 2016, adjusted EBITDA excluded the impact of the cancellation of the AIR MILES Reward Program’s five-year expiry policy on December 1, 2016. Adjusted EBITDA, net is also a non-GAAP financial measure equal to adjusted EBITDA less securitization funding costs, interest expense on deposits and adjusted EBITDA attributable to the non-controlling interest. Effective April 1, 2016, we acquired the remaining 20% interest in BrandLoyalty to bring our ownership percentage to 100%. 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. With respect to information concerning principal geographic areas, revenues are based on the location of the subsidiary that generally correlates with the location of the customer. 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. Information concerning principal geographic areas is as follows: Europe, United Middle East States Canada and Africa Asia Pacific Other Total (In millions) Revenues Year Ended December 31, 2018 $ 6,657.1 $ 427.3 (1) $ 526.7 $ 131.3 $ 48.8 $ 7,791.2 Year Ended December 31, 2017 $ 6,336.1 $ 742.8 $ 485.1 $ 140.4 $ 15.0 $ 7,719.4 Year Ended December 31, 2016 $ 5,730.3 $ 706.5 $ 537.4 $ 154.5 $ 9.4 $ 7,138.1 Long Lived Assets December 31, 2018 $ 4,693.1 $ 261.0 $ 698.6 $ 22.5 $ 0.8 $ 5,676.0 December 31, 2017 $ 4,910.5 $ 297.0 $ 750.2 $ 20.5 $ 1.0 $ 5,979.2 (1) Upon adoption of ASC 606, certain redemption revenue for which we do not control the good or service prior to transferring it to the collector is recorded on a net basis, which reduced both redemption revenue and cost of operations by $283.4 million for the year ended December 31, 2018. |
QUARTERLY RESULTS OF OPERATIONS
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) | 12 Months Ended |
Dec. 31, 2018 | |
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) | |
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) | 22. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) Unaudited quarterly results of operations for the years ended December 31, 2018 and 2017 are presented below. Quarter Ended March 31, June 30, September 30, December 31, 2018 2018 2018 2018 (In millions, except per share amounts) Revenues $ 1,884.2 $ 1,903.9 $ 1,947.2 $ 2,055.9 Operating expenses 1,506.4 1,483.6 1,425.2 1,481.7 Operating income 377.8 420.3 522.0 574.2 Interest expense, net 159.2 165.7 168.9 176.8 Income before income taxes 218.6 254.6 353.1 397.4 Provision for income taxes 54.7 36.8 56.6 112.5 Net income $ 163.9 $ 217.8 $ 296.5 $ 284.9 Net income attributable to common stockholders per share: Basic $ 2.96 $ 3.94 $ 5.41 $ 5.28 Diluted $ 2.95 $ 3.93 $ 5.39 $ 5.25 Quarter Ended March 31, June 30, September 30, December 31, 2017 2017 2017 2017 (In millions, except per share amounts) Revenues $ 1,879.0 $ 1,821.8 $ 1,912.4 $ 2,106.2 Operating expenses 1,526.6 1,470.4 1,433.5 1,643.4 Operating income 352.4 351.4 478.9 462.8 Interest expense, net 125.2 137.5 145.3 156.4 Income before income taxes 227.2 213.9 333.6 306.4 Provision for income taxes 80.8 76.2 100.4 35.0 Net income $ 146.4 $ 137.7 $ 233.2 $ 271.4 Net income attributable to common stockholders per share: Basic $ 2.60 $ 2.48 $ 4.21 $ 4.91 Diluted $ 2.58 $ 2.47 $ 4.20 $ 4.88 |
SCHEDULE II CONSOLIDATED VALUAT
SCHEDULE II CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS | 12 Months Ended |
Dec. 31, 2018 | |
SCHEDULE II CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS | |
SCHEDULE II CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS | SCHEDULE II ALLIANCE DATA SYSTEMS CORPORATION CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS Balance at Charged to Charged to Write-Offs Balance at Beginning of Costs and Other Net of End of Description Year Expenses Accounts Recoveries (1) Year (In millions) Allowance for Doubtful Accounts—Accounts receivable: Year Ended December 31, 2018 $ 6.7 $ 6.6 $ — $ (8.0) $ 5.3 Year Ended December 31, 2017 $ 4.5 $ 7.7 $ — $ (5.5) $ 6.7 Year Ended December 31, 2016 $ 4.0 $ 2.4 $ 0.8 $ (2.7) $ 4.5 (1) Accounts written off during the year, net of recoveries and |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Principles of Consolidation | Principles of Consolidation —The accompanying consolidated financial statements include the accounts of ADSC and all subsidiaries in which the Company has a controlling financial interest. Controlling financial interest is determined by a majority ownership interest and the absence of substantive third party participating rights. All intercompany transactions have been eliminated. In accordance with Accounting Standards Codification (“ASC”) 860, “Transfers and Servicing,” and ASC 810, “Consolidation,” the Company is the primary beneficiary of World Financial Network Credit Card Master Trust (“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 Master Note Trust (the “WFC Trust”). The Company is deemed to be the primary beneficiary for the WFN Trusts and the WFC Trust, as it is the servicer for each of the trusts and is a holder of the residual interest. The Company, through its involvement in the activities of these trusts, has the power to direct the activities that most significantly impact the economic performance of such trusts, and the obligation (or right) to absorb losses (or receive benefits) of the trusts that could potentially be significant. As such, the Company consolidates these trusts in its consolidated financial statements. For investments in any entities in which the Company owns 50% or less of the outstanding voting stock but in which the Company has significant influence over operating and financial decisions, the Company applies the equity method of accounting. In cases where the Company's equity investment is less than 20% and significant influence does not exist, such investments are carried at cost. |
Cash and Cash Equivalents | Cash and Cash Equivalents —The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. |
Accounts Receivable, net | Accounts Receivable, net —Accounts receivable, net consist primarily of amounts receivable from customers, which are recorded at the invoiced amount and do not bear interest. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable. The Company analyzes the appropriateness of its allowance for doubtful accounts based on its assessment of various factors, including historical experience, the age of the accounts receivable balance, customer creditworthiness, current economic trends, and changes in its customer payment terms and collection trends. Account balances are charged-off against the allowance after all reasonable means of collection have been exhausted and the potential for recovery is considered remote. |
Credit Card and Loan Receivables | Credit Card and Loan Receivables — The Company sells a majority of the credit card receivables originated by Comenity Bank to WFN Credit Company, LLC, which in turn sells them to the WFN Trusts as part of a securitization program. The Company also sells certain of its credit card receivables originated by Comenity Capital Bank to World Financial Capital Credit Company, LLC which in turn sells them to the WFC Trust. The credit card receivables sold to each of the trusts are restricted for securitization investors. Credit card and loan receivables consist of credit card and loan receivables held for investment. All new originations of credit card and loan receivables are deemed to be held for investment at origination because management has the intent and ability to hold them for the foreseeable future. Management makes judgments about the Company’s ability to fund these credit card and loan receivables through means other than securitization, such as money market deposits, certificates of deposit and other borrowings. In determining what constitutes the foreseeable future, management considers the short average life and homogenous nature of the Company’s credit card and loan receivables. In assessing whether these credit card and loan receivables continue to be held for investment, management also considers capital levels and scheduled maturities of funding instruments used. Management believes that the assertion regarding its intent and ability to hold credit card and loan receivables for the foreseeable future can be made with a high degree of certainty given the maturity distribution of the Company’s money market deposits, certificates of deposit and other funding instruments; the historic ability to replace maturing certificates of deposits and other borrowings with new deposits or borrowings; and historic credit card payment activity. Due to the homogenous nature of the Company’s credit card and loan receivables, amounts are classified as held for investment on an individual client portfolio basis. |
Credit Card and Loan Receivables Held for Sale | Credit Card and Loan Receivables Held for Sale —Credit card and loan receivables held for sale are determined on an individual client portfolio basis. The Company carries these assets at the lower of aggregate cost or fair value. The fair value of the credit card and loan receivables held for sale is determined on an aggregate homogeneous portfolio basis. The Company continues to recognize finance fees on these credit card and loan receivables on the accrual basis. Cash flows associated with credit card portfolios that are purchased with the intent to sell are included in cash flows from operating activities. Cash flows associated with credit card and loan receivables originated or purchased for investment are classified as investing cash flows, regardless of a subsequent change in intent. |
Transfers of Financial Assets | Transfers of Financial Assets —The Company accounts for transfers of financial assets under ASC 860, “Transfers and Servicing,” as either sales or financings. Transfers of financial assets that result in sales accounting are those in which (1) the transfer legally isolates the transferred assets from the transferor, (2) the transferee has the right to pledge or exchange the transferred assets and no condition both constrains the transferee’s right to pledge or exchange the assets and provides more than a trivial benefit to the transferor and (3) the transferor does not maintain effective control over the transferred assets. If the transfer of financial assets does not meet these criteria, the transfer is accounted for as a financing. Transfers of financial assets that are treated as sales are removed from the Company’s accounts with any realized gain or loss reflected in earnings during the period of sale. |
Allowance for Loan Loss | 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 estimate of the allowance for loan loss covers 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. |
Redemption Settlement Assets, Restricted | Redemption Settlement Assets, Restricted —The cash and investments related to the redemption fund for the AIR MILES Reward Program are subject to a security interest which is held in trust for the benefit of funding redemptions by collectors. These assets are restricted to funding rewards for the collectors by certain of the Company’s sponsor contracts. The investments are stated at fair value, with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive loss, as the investments are classified as available-for-sale. As a result of the adoption of ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” on January 1, 2018, the changes in the fair value of equity securities are recognized through net income. |
Property and Equipment | Property and Equipment —Furniture, equipment, computer software and development, buildings and leasehold improvements are carried at cost, less accumulated depreciation and amortization. Land is carried at cost and is not depreciated. Depreciation and amortization for furniture, equipment and buildings, including capital leases, are computed on a straight-line basis, using estimated lives ranging from two to twenty-one years. Software development is capitalized in accordance with ASC 350-40, “Intangibles – Goodwill and Other – Internal–Use Software,” and is amortized on a straight-line basis over the expected benefit period, which ranges from two to seven years. Leasehold improvements are amortized over the remaining lives of the respective leases or the remaining useful lives of the improvements, whichever is shorter. Long-lived assets are tested for impairment when events or conditions indicate that the carrying value of an asset may not be fully recoverable from future cash flows. |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets —Goodwill and indefinite lived intangible assets are not amortized, but are reviewed at least annually for impairment or more frequently if circumstances indicate that an impairment is probable, using the market comparable and discounted cash flow methods. Separable intangible assets that have finite useful lives are amortized over those useful lives. The Company also defers costs related to the acquisition or licensing of data for the Company’s proprietary databases that are used in providing data products and services to customers. These costs are amortized over the useful life of the data, which ranges from one to five years. |
Derivative Instruments | Derivative Instruments —The Company uses derivatives to manage its exposure to various financial risks. The Company does not enter into derivatives for trading or other speculative purposes. Certain derivatives used to manage the Company’s exposure to foreign currency exchange rate movements are not designated as hedges and do not qualify for hedge accounting. Derivatives Designated as Hedging Instruments —The Company assesses both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in the hedging transaction, including net investment hedges, have been highly effective in offsetting changes in the cash flows or remeasurement of the hedged items and whether the derivatives may be expected to remain highly effective in future periods. The Company discontinues hedge accounting prospectively when (1) it determines that the derivative is no longer highly effective in offsetting changes in cash flow of the hedged item; (2) the derivative expires or is sold, terminated, or exercised; (3) it is no longer probable that the forecasted transaction will occur; or (4) it determines that designating the derivative as a hedging instrument is no longer appropriate. Changes in the fair value of derivative instruments designated as hedging instruments, excluding any ineffective portion, are recorded in other comprehensive income (loss) until the hedged transactions affect net income. The ineffective portion of this hedging instrument is recognized through net income when the ineffectiveness occurs. Derivatives not Designated as Hedging Instruments —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 consolidated statements of income as they occur. Net Investment Hedges —The Company uses Euro-denominated debt to hedge a portion of its net investment in foreign subsidiaries against adverse movements in exchange rates. The effective portion of the foreign currency gains and losses related to the Euro-denominated debt is reported in accumulated other comprehensive loss in the Company’s consolidated balance sheets. The gains or losses will be subsequently reclassified into net income when the hedged net investment is either sold or substantially liquidated. |
Other Investments | 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 consolidated balance sheets. The investments are classified as available-for-sale and are stated at fair value, with the unrealized gains and losses, net of tax, reported as a component of accumulated other comprehensive loss. As a result of the adoption of ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” on January 1, 2018, the changes in the fair value of equity securities are recognized through net income. |
Revenue Recognition | Revenue Recognition —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. The Company recognizes revenues 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. In that determination, under ASC 606, the Company follows a five-step model that includes: (1) determination of whether a contract, an agreement between two or more parties that creates legally enforceable rights and obligations, exists; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when (or as) the performance obligation is satisfied. 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. See Note 3, “Revenue,” for more information about the Company’s revenue and the associated timing and basis of revenue recognition. |
Earnings Per Share | Earnings Per Share —Basic earnings per share is based only on the weighted average number of common shares outstanding, excluding any dilutive effects of options or other dilutive securities. Diluted earnings per share are based on the weighted average number of common and potentially dilutive common shares (dilutive stock options, unvested restricted stock and other dilutive securities outstanding during the year). The following table sets forth the computation of basic and diluted net income per share for the periods indicated: Years Ended December 31, 2018 2017 2016 (In millions, except per share amounts) Numerator: Net income attributable to common stockholders $ 963.1 $ 788.7 $ 515.8 Less: Accretion of redeemable non-controlling interest — — 83.5 Net income attributable to common stockholders after accretion of redeemable non-controlling interest $ 963.1 $ 788.7 $ 432.3 Denominator: Weighted average shares, basic 54.9 55.7 58.6 Weighted average effect of dilutive securities: Net effect of dilutive stock options and unvested restricted stock 0.2 0.2 0.3 Denominator for diluted calculation 55.1 55.9 58.9 Net income attributable to common stockholders per share Basic $ 17.56 $ $ 7.37 Diluted $ 17.49 $ $ 7.34 For the year ended December 31, 2016, the Company adjusted the carrying amount of the redeemable non-controlling interest by $83.5 million. Effective April 1, 2016, the Company acquired the remaining 20% interest in BrandLoyalty to bring its ownership percentage to 100%. For the years ended December 31, 2018, 2017 and 2016, 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. |
Currency Translation | Currency Translation —The assets and liabilities of the Company’s subsidiaries outside the U.S. are translated into U.S. dollars at the rates of exchange in effect at the balance sheet dates, primarily from Canadian dollars and Euros. Income and expense items are translated at the average exchange rates prevailing during the period. Gains and losses resulting from currency transactions are recognized currently in income and those resulting from translation of financial statements are included in accumulated other comprehensive loss. The Company recognized $0.3 million and $9.7 million in net foreign currency transaction losses for the years ended December 31, 2018 and 2017, respectively. Additionally, the Company recognized $1.9 million in net foreign currency transaction gains for the year ended December 31, 2016. |
Leases | Leases —Rent expense on operating leases is recorded on a straight-line basis over the term of the lease agreement and includes executory costs. Effective January 1, 2019, the Company adopted ASC 842, “Leases.” For additional information regarding the impact of the new leases standard, see "Recently Issued Accounting Standards.” |
Marketing and Advertising Costs | Marketing and Advertising Costs —The Company participates in various marketing and advertising programs, including collaborative arrangements with certain clients. The cost of marketing and advertising programs is expensed in the period incurred. The Company has recognized marketing and advertising expenses, including on behalf of its clients, of $253.2 million, $263.2 million and $277.0 million for the years ended December 31, 2018, 2017 and 2016, respectively. |
Stock Compensation Expense | Stock Compensation Expense —The Company accounts for stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation.” Under the fair value recognition provisions, stock-based compensation expense is measured at the grant date based on the fair value of the award and is recognized ratably over the requisite service period. |
Management Estimates | Management Estimates —The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Recently Issued and Adopted Accounting Standards | Recently Issued Accounting Standards In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, “Leases,” ASC 842, that replaces existing lease guidance and requires lessees to record right-of-use assets and corresponding lease liabilities on the balance sheet. Companies will continue to classify leases as either finance or operating, with classification affecting the pattern of expense recognition in the statements of income. Companies may adopt ASC 842 using a modified retrospective approach or transition relief provided by ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” that removes certain comparative period requirements and requires a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company adopted the standard on January 1, 2019 using the transition relief provided by ASU 2018-11. During 2018, the Company completed its evaluation of ASC 842, including the impact on its policies, processes, systems and controls. As a result, the Company identified changes to and modified certain of its accounting policies and practices, including the implementation of new lease accounting software. Although there were no significant changes to the Company’s accounting systems or controls upon adoption of ASC 842, the Company modified certain of its existing controls and added new controls to incorporate the revisions made to its accounting policies and practices. The Company elected the transition practical expedients permitted under ASC 842-10-65-1 under which it was not required to reassess (i) whether expired or existing contracts were or contained leases as defined by ASC 842, (ii) the classification of such leases, and (iii) whether previously capitalized initial direct costs qualified for capitalization under ASC 842. The Company also elected the practical expedient to use hindsight in determining the lease term. Additionally, the Company made the accounting policy election to account for lease and nonlease components as a single lease component for its identified asset classes. The cumulative effect of the changes made to the consolidated January 1, 2019 balance sheet for the adoption of ASC 842 resulted in the following: Balance at Adjustments Balance at December 31, due to January 1, 2018 ASC 842 2019 Consolidated Balance Sheet (In millions) Right of use asset - operating $ — $ 451.0 $ 451.0 Intangible assets, net 539.7 (2.1) 537.6 Other non-current assets 653.2 (0.8) 652.4 1,192.9 448.1 1,641.0 Accrued expenses 421.0 (3.1) 417.9 Current operating lease liability — 64.7 64.7 Other current liabilities 338.8 (5.6) 333.2 Long-term operating lease liability — 468.5 468.5 Other liabilities 422.3 (76.4) 345.9 1,182.1 448.1 1,630.2 Additionally, as part of the adoption of ASC 842, the Company’s capital leases were recognized as finance leases at their existing carrying amounts effective January 1, 2019, and the accounting remained substantially unchanged. As of December 31, 2018, capital leases included within property and equipment, net in the Company’s consolidated balance sheets totaled $13.0 million, and capital leases included within long-term and other debt totaled $12.6 million, including the current portion of $5.6 million. The Company’s adoption of ASC 842 had no significant impact to our consolidated statements of income or consolidated statements of cash flows. Based on the evaluation of ASC 842, the Company does not expect it to have a material impact on its results of operations or cash flows in the periods after adoption. ASC 842 also requires expanded qualitative and quantitative disclosure regarding the Company’s leasing activities. These disclosures will be reflected beginning in the Company’s Quarterly Report on Form 10-Q for the quarter ending March 31, 2019. In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires entities to utilize a financial instrument impairment model to establish an allowance based on expected losses over the life of the exposure rather than a model based on an incurred loss approach. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance. In addition, ASU 2016-13 modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted beginning after December 15, 2018. The Company has formed a cross-functional implementation team and is in the process of determining key accounting interpretations, data requirements and necessary changes to its credit loss estimation methods, processes and systems as well as 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 does not expect the adoption of ASU 2017-12 to have a material impact on its consolidated financial statements. In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” ASU 2018-02 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 does not intend to reclassify the stranded tax effects to retained earnings pursuant to ASU 2018-02 as these amounts do not have a material impact on its consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, “Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the disclosure requirements on fair value measurements from Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement.” ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The Company is evaluating the impact that adoption of ASU 2018-13 will have on its consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” ASU 2018-15 requires customers in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40, “Intangibles—Goodwill and Other—Internal-Use Software,” to determine which implementation costs may be capitalized. ASU 2018-15 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The amendments in ASU 2018-15 can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is evaluating the impact that adoption of ASU 2018-15 will have on its consolidated financial statements. Recently Adopted Accounting Standards In 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 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 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. This impact reduced both redemption revenue and cost of operations by $283.4 million for the year ended December 31, 2018. · ASC 606 also requires expanded disclosure regarding the nature, timing, and uncertainty of revenue transactions. See Note 3, “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. The Company adopted this standard on January 1, 2018, resulting in a cumulative-effect adjustment of $1.5 million, net of tax, 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. 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. 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 in the beginning-of-period and end-of-period cash and cash equivalents totals. See Note 1, “Description of Business and Basis of Presentation,” for a reconciliation of cash and cash equivalents to the total of the amounts reported in the consolidated statements of cash flows. |
DESCRIPTION OF BUSINESS AND B_2
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Standards Update 2016-18 | |
Reconciliation of cash and cash equivalents | Cash and cash equivalents $ 3,863.1 $ 4,190.0 $ 1,859.2 Restricted cash included within other current assets (1) 60.7 50.4 51.2 Restricted cash included within redemption settlement assets, restricted (2) 43.9 74.3 58.1 Total cash, cash equivalents and restricted cash $ 3,967.7 $ 4,314.7 $ 1,968.5 (1) Includes cash restricted for interest repayments of non-recourse borrowings of consolidated securitized debt and other restricted cash within other current assets. See Note 2, “Summary of Significant Accounting Policies,” for additional information regarding nature of restrictions on redemption settlement assets. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Schedule of computation of basic and diluted net income per share | Years Ended December 31, 2018 2017 2016 (In millions, except per share amounts) Numerator: Net income attributable to common stockholders $ 963.1 $ 788.7 $ 515.8 Less: Accretion of redeemable non-controlling interest — — 83.5 Net income attributable to common stockholders after accretion of redeemable non-controlling interest $ 963.1 $ 788.7 $ 432.3 Denominator: Weighted average shares, basic 54.9 55.7 58.6 Weighted average effect of dilutive securities: Net effect of dilutive stock options and unvested restricted stock 0.2 0.2 0.3 Denominator for diluted calculation 55.1 55.9 58.9 Net income attributable to common stockholders per share Basic $ 17.56 $ $ 7.37 Diluted $ 17.49 $ $ 7.34 |
Accounting Standards Update ASC 842 | |
Schedule of new accounting pronouncements and change in accounting principle | Balance at Adjustments Balance at December 31, due to January 1, 2018 ASC 842 2019 Consolidated Balance Sheet (In millions) Right of use asset - operating $ — $ 451.0 $ 451.0 Intangible assets, net 539.7 (2.1) 537.6 Other non-current assets 653.2 (0.8) 652.4 1,192.9 448.1 1,641.0 Accrued expenses 421.0 (3.1) 417.9 Current operating lease liability — 64.7 64.7 Other current liabilities 338.8 (5.6) 333.2 Long-term operating lease liability — 468.5 468.5 Other liabilities 422.3 (76.4) 345.9 1,182.1 448.1 1,630.2 |
Accounting Standards Update ASC 606 | |
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 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 1,182.4 (24.7) 1,157.7 Retained earnings 4,167.1 9.6 4,176.7 |
REVENUE (Tables)
REVENUE (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
REVENUE | |
Schedule of disaggregation of revenue by major source and geographic region | Corporate/ Year Ended December 31, 2018 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Disaggregation of Revenue by Major Source: Coalition loyalty program $ 352.3 $ — $ — $ — $ — $ 352.3 Short-term loyalty programs 613.8 — — — — 613.8 Technology services — 1,048.1 — — (24.7) 1,023.4 Digital Media services — 792.1 — — (20.1) 772.0 Agency services — 334.9 — — (5.2) 329.7 Servicing fees, net — — (97.3) — — (97.3) Other 90.7 — — 0.6 (0.5) 90.8 Revenue from contracts with customers $ 1,056.8 $ 2,175.1 $ (97.3) $ 0.6 $ (50.5) $ 3,084.7 Finance charges, net — — 4,694.9 — — 4,694.9 Investment income 11.6 — — — — 11.6 Total $ 1,068.4 $ 2,175.1 $ 4,597.6 $ 0.6 $ (50.5) $ 7,791.2 Corporate/ Year Ended December 31, 2018 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Disaggregation of Revenue by Geographic Region: United States $ 23.1 $ 2,083.8 $ 4,597.6 $ 0.6 $ (48.0) $ 6,657.1 Canada 411.3 16.3 — — (0.3) 427.3 Europe, Middle East and Africa 463.2 63.9 — — (0.4) 526.7 Asia Pacific 122.0 11.1 — — (1.8) 131.3 Other 48.8 — — — — 48.8 Total $ 1,068.4 $ 2,175.1 $ 4,597.6 $ 0.6 $ (50.5) $ 7,791.2 |
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 194.7 324.8 519.5 Revenue recognized (1) (209.2) (328.4) (537.6) Other — 0.7 0.7 Effects of foreign currency translation (21.3) (52.9) (74.2) Balance at December 31, 2018 $ 248.0 $ 627.3 $ 875.3 Amounts recognized in the consolidated balance sheets: Deferred revenue (current) $ 138.8 $ 627.3 $ 766.1 Deferred revenue (non-current) $ 109.2 $ — $ 109.2 (1) Reported on a gross basis herein. |
Schedule of product offerings and the associated performance obligations | 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, included in services revenue in the Company’s consolidated statements of income 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. |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 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 RECEIVAB_2
CREDIT CARD AND LOAN RECEIVABLES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
CREDIT CARD AND LOAN RECEIVABLES | |
Schedule of components of total credit card and loan receivables | December 31, December 31, 2018 2017 (In millions) Principal receivables $ 16,869.9 $ 17,705.1 Billed and accrued finance charges 898.3 887.0 Other 86.8 21.7 Total credit card and loan receivables 17,855.0 18,613.8 Less: Credit card receivables – restricted for securitization investors 13,418.3 14,293.9 Other credit card and loan receivables $ 4,436.7 $ 4,319.9 |
Schedule of Company's allowance for loan loss | Years Ended December 31, 2018 2017 2016 (In millions) Balance at beginning of year $ 1,119.3 $ 948.0 $ 741.6 Provision for loan loss 1,016.0 1,140.1 940.5 Allowance associated with credit card and loan receivables transferred (54.8) (27.9) (31.1) Change in estimate for uncollectible unpaid interest and fees 25.0 30.0 20.0 Recoveries 214.2 196.6 255.5 Principal charge-offs (1,281.4) (1,167.5) (978.5) Balance at end of year $ 1,038.3 $ 1,119.3 $ 948.0 |
Schedule of delinquency trends of the Company's credit card and loan receivables portfolio | December 31, % of December 31, % of 2018 Total 2017 Total (In millions, except percentages) Receivables outstanding - principal $ 16,869.9 100.0 % $ 17,705.1 100.0 % Principal receivables balances contractually delinquent: 31 to 60 days 303.2 1.8 % 301.5 1.7 % 61 to 90 days 207.9 1.3 191.3 1.1 91 or more days 443.4 2.6 409.6 2.3 Total $ 954.5 5.7 % $ 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 | Year Ended December 31, 2018 Year Ended December 31, 2017 Pre- Post- Pre- Post- modification modification modification modification Number of Outstanding Outstanding Number of Outstanding Outstanding Restructurings Balance Balance Restructurings Balance Balance (Dollars in millions) (Dollars in millions) Troubled debt restructurings – credit card receivables 501,906 $ 621.4 $ 620.7 201,772 $ 261.1 $ 260.7 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: Year Ended December 31, 2018 Year Ended December 31, 2017 Number of Outstanding Number of Outstanding Restructurings Balance Restructurings Balance (Dollars in millions) Troubled debt restructurings that subsequently defaulted – credit card receivables 293,591 $ 340.5 98,863 $ 120.0 |
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 | December 31, 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 6.5 26.7 % $ 4,099.9 24.3 % 13-24 Months 4.2 17.1 2,887.8 17.1 25-36 Months 3.1 13.0 2,428.9 14.4 37-48 Months 2.2 9.1 1,795.0 10.7 49-60 Months 1.7 7.1 1,367.2 8.1 Over 60 Months 6.5 27.0 4,291.1 25.4 Total 24.2 100.0 % $ 16,869.9 100.0 % 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 | December 31, 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 $ 249.0 1.5 % $ 210.6 1.2 % 27.1% and higher 1,394.0 8.2 1,330.5 7.5 17.1% - 27.0% 770.1 4.6 850.5 4.8 12.6% - 17.0% 1,047.6 6.2 1,137.7 6.4 3.7% - 12.5% 6,877.6 40.8 7,449.7 42.1 1.9% - 3.6% 3,060.7 18.1 3,286.9 18.6 Lower than 1.9% 3,470.9 20.6 3,439.2 19.4 Total $ 16,869.9 100.0 % $ 17,705.1 100.0 % |
Schedule of securitized credit card receivables, delinquencies and net charge-offs | December 31, December 31, 2018 2017 (In millions) Total credit card receivables – restricted for securitization investors $ 13,418.3 $ 14,293.9 Principal amount of credit card receivables – restricted for securitization investors, 91 days or more past due $ 301.6 $ 295.0 Years Ended December 31, 2018 2017 2016 (In millions) Net charge-offs of securitized principal $ 927.0 $ 741.1 $ 583.8 |
OTHER INVESTMENTS (Tables)
OTHER INVESTMENTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
OTHER INVESTMENTS | |
Schedule of principal components of other investments, which are carried at fair value | December 31, 2018 December 31, 2017 Amortized Unrealized Unrealized Amortized Unrealized Unrealized Cost Gains Losses Fair Value Cost Gains Losses Fair Value (In millions) Marketable securities $ 272.8 $ 0.1 $ (6.5) $ 266.4 $ 207.3 $ 0.2 $ (2.5) $ 205.0 U.S. Treasury bonds 25.0 — (0.1) 24.9 50.0 — (0.1) 49.9 Total $ 297.8 $ 0.1 $ (6.6) $ 291.3 $ 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 | December 31, 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 $ 57.3 $ (0.5) $ 164.0 $ (6.0) $ 221.3 $ (6.5) U.S. Treasury bonds — — 24.9 (0.1) 24.9 (0.1) Total $ 57.3 $ (0.5) $ 188.9 $ (6.1) $ 246.2 $ (6.6) 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 | The amortized cost and estimated fair value of the marketable securities and U.S. Treasury bonds at December 31, 2018 by contractual maturity are as follows: Amortized Cost Fair Value (In millions) Due in one year or less $ 54.5 $ 54.4 Due after one year through five years 2.2 2.2 Due after five years through ten years — — Due after ten years 241.1 234.7 Total $ 297.8 $ 291.3 |
REDEMPTION SETTLEMENT ASSETS (T
REDEMPTION SETTLEMENT ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
REDEMPTION SETTLEMENT ASSETS | |
Schedule of redemption settlement assets | December 31, 2018 December 31, 2017 Amortized Unrealized Unrealized Amortized Unrealized Unrealized Cost Gains Losses Fair Value Cost Gains Losses Fair Value (In millions) Restricted cash $ 43.9 $ — $ — $ 43.9 $ 74.3 $ — $ — $ 74.3 Mutual funds 23.2 — — 23.2 27.3 — (1.3) 26.0 Corporate bonds 497.5 0.1 (6.1) 491.5 495.0 — (5.8) 489.2 Total $ 564.6 $ 0.1 $ (6.1) $ 558.6 $ 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 | December 31, 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 $ 31.2 $ (0.1) $ 414.4 $ (6.0) $ 445.6 $ (6.1) Total $ 31.2 $ (0.1) $ 414.4 $ (6.0) $ 445.6 $ (6.1) 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 $ 118.4 $ 117.9 Due after one year through five years 402.3 396.8 Total $ 520.7 $ 514.7 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
PROPERTY AND EQUIPMENT | |
Schedule of property and equipment | December 31, 2018 2017 (In millions) Computer software and development $ 921.6 $ 823.0 Furniture and equipment 422.8 387.3 Land, buildings and leasehold improvements 191.6 177.7 Capital leases 22.4 13.1 Construction in progress 63.5 76.5 Total 1,621.9 1,477.6 Accumulated depreciation and amortization (1,026.8) (863.7) Property and equipment, net $ 595.1 $ 613.9 |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
INTANGIBLE ASSETS AND GOODWILL | |
Schedule of intangible assets | December 31, 2018 Gross Accumulated Assets Amortization Net Amortization Life and Method (In millions) Finite Lived Assets Customer contracts and lists $ 1,126.4 $ (773.9) $ 352.5 3-12 years—straight line Premium on purchased credit card portfolios 286.0 (172.9) 113.1 3-13 years—straight line Collector database 51.3 (49.9) 1.4 5 years—straight line Publisher networks 140.2 (112.0) 28.2 5-7 years—straight line Tradenames 75.8 (50.3) 25.5 8-15 years—straight line Purchased data lists 10.7 (6.2) 4.5 1-5 years—straight line, accelerated Favorable lease 6.0 (3.9) 2.1 6-10 years—straight line $ 1,696.4 $ (1,169.1) $ 527.3 Indefinite Lived Assets Tradenames 12.4 — 12.4 Indefinite life Total intangible assets $ 1,708.8 $ (1,169.1) $ 539.7 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) 2019 $ 204.6 2020 141.6 2021 79.3 2022 69.4 2023 14.3 Thereafter 18.1 |
Schedule of changes in carrying amount of goodwill | LoyaltyOne ® Epsilon ® Card Services Corporate/ Other Total (In millions) Balance at January 1, 2017 $ 653.3 $ 2,885.7 $ 261.7 $ — $ 3,800.7 Effects of foreign currency translation 77.8 1.6 — — 79.4 Balance at December 31, 2017 $ 731.1 $ 2,887.3 $ 261.7 $ — $ 3,880.1 Effects of foreign currency translation (37.9) (1.2) — — (39.1) Balance at December 31, 2018 $ 693.2 $ 2,886.1 $ 261.7 $ — $ 3,841.0 |
ACCRUED EXPENSES (Tables)
ACCRUED EXPENSES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
ACCRUED EXPENSES | |
Schedule of accrued expenses | December 31, 2018 2017 (In millions) Accrued payroll and benefits $ 242.2 $ 247.2 Accrued taxes 24.0 64.6 Accrued other liabilities 154.8 131.0 Accrued expenses $ 421.0 $ 442.8 |
DEBT (Tables)
DEBT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
DEBT | |
Schedule of debt | December 31, December 31, Description 2018 2017 Maturity Interest Rate (Dollars in millions) Long-term and other debt: 2017 revolving line of credit $ 740.0 $ 475.0 June 2022 (1) 2017 term loans 2,938.1 3,014.4 June 2022 (1) BrandLoyalty credit agreement 183.7 198.0 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) 458.8 479.9 March 2022 4.500% Senior notes due 2023 (€300.0 million) 344.1 359.9 November 2023 5.250% Capital lease obligations and other debt 12.6 8.8 Various – Jan 2019 – Aug 2022 2.90% to 4.98% Total long-term and other debt 5,777.3 6,136.0 Less: Unamortized debt issuance costs 39.4 56.4 Less: Current portion 144.5 131.3 Long-term portion $ 5,593.4 $ 5,948.3 Deposits: Certificates of deposit $ 8,395.1 $ 7,526.0 Various – Jan 2019 – Dec 2023 1.25% to 4.00% Money market deposits 3,424.3 3,429.4 Non-maturity (3) Total deposits 11,819.4 10,955.4 Less: Unamortized debt issuance costs 25.7 24.5 Less: Current portion 6,537.7 6,366.2 Long-term portion $ 5,256.0 $ 4,564.7 Non-recourse borrowings of consolidated securitization entities: Fixed rate asset-backed term note securities $ 4,893.3 $ 4,704.7 Various – Mar 2019 – Oct 2021 1.72% to 3.95% Floating rate asset-backed term note securities — 360.0 — — Conduit asset-backed securities 2,770.0 3,755.0 Various – Nov 2019 – Sept 2020 (4) Total non-recourse borrowings of consolidated securitization entities 7,663.3 8,819.7 Less: Unamortized debt issuance costs 11.6 12.4 Less: Current portion 2,717.6 1,339.9 Long-term portion $ 4,934.1 $ 7,467.4 (1) The interest rate is based upon the London Interbank Offered Rate (“LIBOR”) plus an applicable margin. At December 31, 2018, the weighted average interest rate was 4.22% and 4.27% 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 December 31, 2018, the weighted average interest rate was 1.22% 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 December 31, 2018, the interest rates ranged from 1.90% to 2.71%. (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 December 31, 2018, the interest rates ranged from 3.48% to 3.79%. |
Schedule of maturity of debt | The future principal payments for the Company’s debt as of December 31, 2018 are as follows: Non-Recourse Borrowings of Long-Term Consolidated and Securitization Year Other Debt Deposits Entities (In millions) 2019 $ 144.6 $ 6,540.2 $ 2,719.0 2020 315.1 2,220.1 3,092.2 2021 655.4 1,473.9 1,852.1 2022 4,318.1 1,057.4 — 2023 344.1 527.8 — Thereafter — — — Total maturities 5,777.3 11,819.4 7,663.3 Unamortized debt issuance costs (39.4) (25.7) (11.6) $ 5,737.9 $ 11,793.7 $ 7,651.7 |
DERIVATIVE INSTRUMENTS (Tables)
DERIVATIVE INSTRUMENTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
DERIVATIVE INSTRUMENTS | |
Schedule of fair value of derivative instruments | December 31, 2018 Notional Amount Fair Value Balance Sheet Location Maturity (In millions) Designated as hedging instruments: Foreign currency exchange hedges $ 5.2 $ 0.3 Other current assets January 2019 to April 2019 Foreign currency exchange hedges $ 20.3 $ 0.3 Other current liabilities March 2019 to November 2019 Not designated as hedging instruments: Foreign currency exchange forward contract $ 61.6 $ 3.5 Other current assets January 2019 to February 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 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
COMMITMENTS AND CONTINGENCIES. | |
Schedule of future minimum payments required under noncancellable operating and capital leases | Future annual minimum rental payments required under noncancellable operating and capital leases, some of which contain renewal options, as of December 31, 2018, are: Operating Capital Year Leases Leases (In millions) 2019 $ 91.7 $ 6.0 2020 85.4 3.5 2021 72.0 2.9 2022 63.2 1.0 2023 58.5 — Thereafter 324.7 — Total $ 695.5 13.4 Less: Amount representing interest (0.8) Total present value of minimum lease payments $ 12.6 |
Schedule of actual capital ratios and minimum ratios | The actual capital ratios and minimum ratios as of December 31, 2018 are as follows: Minimum Ratio to be Minimum Ratio for Well Capitalized under Actual Capital Adequacy Prompt Corrective Ratio Purposes Action Provisions Comenity Bank Tier 1 capital to average assets 13.1 % 4.0 % 5.0 % Common Equity Tier 1 capital to risk-weighted assets 14.6 4.5 6.5 Tier 1 capital to risk-weighted assets 14.6 6.0 8.0 Total capital to risk-weighted assets 15.9 8.0 10.0 Comenity Capital Bank Tier 1 capital to average assets 12.1 % 4.0 % 5.0 % Common Equity Tier 1 capital to risk-weighted assets 14.4 4.5 6.5 Tier 1 capital to risk-weighted assets 14.4 6.0 8.0 Total capital to risk-weighted assets 15.7 8.0 10.0 The actual capital ratios and minimum ratios as of December 31, 2017 are as follows: Minimum Ratio to be Minimum Ratio for Well Capitalized under Actual Capital Adequacy Prompt Corrective Ratio Purposes Action Provisions Comenity Bank Tier 1 capital to average assets 12.3 % 4.0 % 5.0 % Common Equity Tier 1 capital to risk-weighted assets 13.5 4.5 6.5 Tier 1 capital to risk-weighted assets 13.5 6.0 8.0 Total capital to risk-weighted assets 14.8 8.0 10.0 Comenity Capital Bank Tier 1 capital to average assets 12.4 % 4.0 % 5.0 % Common Equity Tier 1 capital to risk-weighted assets 14.0 4.5 6.5 Tier 1 capital to risk-weighted assets 14.0 6.0 8.0 Total capital to risk-weighted assets 15.3 8.0 10.0 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
STOCKHOLDERS' EQUITY | |
Schedule of stock-based compensation expense | Years Ended December 31, 2018 2017 2016 (In millions) Cost of operations $ 57.5 $ 50.3 $ 56.0 General and administrative 23.3 24.8 20.5 Total $ 80.8 $ 75.1 $ 76.5 |
Schedule of performance-based and service-based restricted stock unit awards | Weighted Market- Performance- Service- Average Based Based Based Total Fair Value Balance at January 1, 2016 — 446,366 275,538 721,904 $ 238.37 Shares granted — 277,036 175,456 452,492 195.97 Shares vested — (233,604) (95,829) (329,433) 230.21 Shares forfeited — (45,479) (22,787) (68,266) 246.28 Balance at December 31, 2016 — 444,319 332,378 776,697 $ 216.89 Shares granted 28,172 282,311 126,051 436,534 229.37 Shares vested — (188,929) (96,723) (285,652) 248.70 Shares forfeited (1) — (87,122) (32,647) (119,769) 211.69 Balance at December 31, 2017 28,172 450,579 329,059 807,810 $ 207.45 Shares granted 28,057 263,542 138,160 429,759 233.98 Shares vested — (188,680) (130,823) (319,503) 224.62 Shares forfeited — (102,199) (18,955) (121,154) 227.66 Balance at December 31, 2018 56,229 423,242 317,441 796,912 $ 218.81 Outstanding and Expected to Vest 703,186 $ 239.98 (1) Includes the cancellation of 50,215 performance-based shares granted in 2016 and accounted for as such under ASC 718. |
Summary of stock option activity | Outstanding Exercisable Weighted Weighted Average Average Options Exercise Price Options Exercise Price Balance at January 1, 2016 73,360 $ 49.84 73,053 $ 49.96 Options granted — — Options exercised (54,275) 54.21 Options forfeited (219) 20.16 Balance at December 31, 2016 18,866 $ 37.60 18,864 $ 37.60 Options granted — — Options exercised (7,004) 60.85 Options forfeited (3) 35.56 Balance at December 31, 2017 11,859 $ 23.87 11,859 $ 23.87 Options granted — — Options exercised (886) 12.70 Options forfeited (119) 2.74 Balance at December 31, 2018 10,854 $ 25.01 10,854 $ 25.01 Vested and Expected to Vest 10,854 $ 25.01 |
ACCUMULATED OTHER COMPREHENSI_2
ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
ACCUMULATED OTHER COMPREHENSIVE LOSS. | |
Schedule of changes in each component of accumulated comprehensive income (loss), net of tax effects | Accumulated Net Unrealized Net Unrealized Net Unrealized Foreign Currency Other Gains (Losses) on Gains (Losses) on Gains (Losses) on Translation Comprehensive Securities Cash Flow Hedges Net Investment Hedges Adjustments (1) Loss (In millions) Balance as of January 1, 2016 $ (0.1) $ 1.3 $ (3.8) $ (134.7) $ (137.3) Changes in other comprehensive income (loss) (1.5) (0.9) 7.9 (18.9) (13.4) Balance at December 31, 2016 $ (1.6) $ 0.4 $ 4.1 $ (153.6) $ (150.7) Changes in other comprehensive income (loss) (7.1) (0.5) (46.1) 64.2 10.5 Balance at December 31, 2017 $ (8.7) $ (0.1) $ (42.0) $ (89.4) $ (140.2) Changes in other comprehensive income (loss) (2.0) (0.1) 29.6 (25.4) 2.1 Balance at December 31, 2018 $ (10.7) $ (0.2) $ (12.4) $ (114.8) $ (138.1) (1) Primarily related to the impact of changes in the Canadian dollar and Euro foreign currency exchange rates. |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
INCOME TAXES | |
Schedule of components of income before income taxes and components of income tax expense | Years Ended December 31, 2018 2017 2016 (In millions) Components of income before income taxes: Domestic $ 1,046.6 $ 889.9 $ 864.1 Foreign 177.1 191.2 (27.1) Total $ 1,223.7 $ 1,081.1 $ 837.0 Components of income tax expense: Current Federal $ 130.2 $ 316.7 $ 269.8 State 61.1 30.3 42.2 Foreign 53.0 59.2 38.2 Total current 244.3 406.2 350.2 Deferred Federal 56.1 (96.7) 2.2 State 18.2 1.0 2.4 Foreign (58.0) (18.1) (35.4) Total deferred 16.3 (113.8) (30.8) Total provision for income taxes $ 260.6 $ 292.4 $ 319.4 |
Summary of reconciliation of recorded federal provision for income taxes to the expected amount computed by applying the federal statutory rate | Years Ended December 31, 2018 2017 2016 (In millions) Expected expense at statutory rate $ 257.0 $ 378.4 $ 292.9 Increase (decrease) in income taxes resulting from: State income taxes, net of federal benefit 62.6 19.5 29.0 Foreign rate differential 10.4 (27.5) (1.3) Foreign restructuring (48.0) — — Impact of 2017 Tax Reform (29.7) (64.9) — Non-deductible expenses (non-taxable income) 3.4 (5.8) 1.5 Other 4.9 (7.3) (2.7) Total $ 260.6 $ 292.4 $ 319.4 |
Summary of deferred tax assets and liabilities | December 31, 2018 2017 (In millions) Deferred tax assets Deferred revenue $ 10.6 $ 18.5 Allowance for doubtful accounts 267.0 282.4 Net operating loss carryforwards and other carryforwards 60.8 97.0 Stock-based compensation and other employee benefits 24.4 23.2 Accrued expenses and other 66.3 84.5 Total deferred tax assets 429.1 505.6 Valuation allowance (36.3) (76.4) Deferred tax assets, net of valuation allowance 392.8 429.2 Deferred tax liabilities Deferred income $ 409.8 $ 364.3 Depreciation 79.2 37.9 Intangible assets 113.4 210.1 Total deferred tax liabilities 602.4 612.3 Net deferred tax liability $ (209.6) $ (183.1) Amounts recognized in the consolidated balance sheets: Non-current assets $ 47.0 $ 28.1 Non-current liabilities (256.6) (211.2) Total – Net deferred tax liability $ (209.6) $ (183.1) |
Summary of reconciliation of unrecognized tax benefits | A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions): Balance at January 1, 2016 $ 156.6 Increases related to prior years’ tax positions 22.5 Decreases related to prior years’ tax positions (12.1) Increases related to current year tax positions 31.4 Settlements during the period (3.1) Lapses of applicable statutes of limitation (3.3) Balance at December 31, 2016 $ 192.0 Increases related to prior years’ tax positions 9.3 Decreases related to prior years’ tax positions (15.7) Increases related to current year tax positions 33.0 Settlements during the period (6.7) Lapses of applicable statutes of limitation (3.6) Balance at December 31, 2017 $ 208.3 Increases related to prior years’ tax positions 41.3 Decreases related to prior years’ tax positions (9.6) Increases related to current year tax positions 61.5 Settlements during the period (1.0) Lapses of applicable statutes of limitation (4.2) Balance at December 31, 2018 $ 296.3 |
FINANCIAL INSTRUMENTS (Tables)
FINANCIAL INSTRUMENTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
FINANCIAL INSTRUMENTS | |
Schedule of estimated fair value of Company's financial instruments | December 31, 2018 December 31, 2017 Carrying Fair Carrying Fair Amount Value Amount Value (In millions) Financial assets Credit card and loan receivables, net $ 16,816.7 $ 17,472.7 $ 17,494.5 $ 18,427.8 Credit card and loan receivables held for sale 1,951.6 1,995.5 1,026.3 1,067.6 Redemption settlement assets, restricted 558.6 558.6 589.5 589.5 Other investments 291.3 291.3 254.9 254.9 Derivative instruments 3.8 3.8 16.0 16.0 Financial liabilities Derivative instruments 0.3 0.3 3.8 3.8 Deposits 11,793.7 11,768.7 10,930.9 10,937.1 Non-recourse borrowings of consolidated securitization entities 7,651.7 7,626.9 8,807.3 8,805.3 Long-term and other debt 5,737.9 5,767.8 6,079.6 6,186.4 |
Schedule of assets and liabilities carried at fair value measured on recurring basis | Fair Value Measurements at December 31, 2018 Using Balance at December 31, 2018 Level 1 Level 2 Level 3 (In millions) Mutual funds (1) $ 23.2 $ 23.2 $ — $ — Corporate bonds (1) 491.5 — 491.5 — Marketable securities (2) 266.4 25.0 241.4 — U.S. Treasury bonds (2) 24.9 24.9 — — Derivative instruments (3) 3.8 — 3.8 — Total assets measured at fair value $ 809.8 $ 73.1 $ 736.7 $ — Derivative instruments (3) $ 0.3 $ — $ 0.3 $ — Total liabilities measured at fair value $ 0.3 $ — $ 0.3 $ — 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 consolidated balance sheets. (2) Amounts are included in other current assets and other non-current assets in the consolidated balance sheets. (3) Amounts are included in other current assets and other current liabilities in the consolidated balance sheets. |
Schedule of assets and liabilities disclosed but not carried at fair value | Fair Value Measurements at December 31, 2018 Total Level 1 Level 2 Level 3 (In millions) Financial assets: Credit card and loan receivables, net $ 17,472.7 $ — $ — $ 17,472.7 Credit card and loan receivables held for sale 1,995.5 — — 1,995.5 Total $ 19,468.2 $ — $ — $ 19,468.2 Financial liabilities: Deposits $ 11,768.7 $ — $ 11,768.7 $ — Non-recourse borrowings of consolidated securitization entities 7,626.9 — 7,626.9 — Long-term and other debt 5,767.8 — 5,767.8 — Total $ 25,163.4 $ — $ 25,163.4 $ — 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 $ — |
PARENT-ONLY FINANCIAL STATEME_2
PARENT-ONLY FINANCIAL STATEMENTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
PARENT-ONLY FINANCIAL STATEMENTS | |
Schedule of balance sheets | December 31, 2018 2017 (In millions) Assets: Cash and cash equivalents $ 0.1 $ 0.1 Investment in subsidiaries 8,606.0 8,203.9 Other assets 20.1 95.3 Total assets $ 8,626.2 $ 8,299.3 Liabilities: Current debt $ 114.4 $ 76.2 Long-term debt 5,427.7 5,797.5 Intercompany liabilities 395.9 177.8 Other liabilities 356.1 392.5 Total liabilities 6,294.1 6,444.0 Stockholders’ equity 2,332.1 1,855.3 Total liabilities and stockholders’ equity $ 8,626.2 $ 8,299.3 |
Schedule of statements of income | Years Ended December 31, 2018 2017 2016 (In millions) Interest from loans to subsidiaries $ 17.9 $ 13.8 $ 11.8 Dividends from subsidiaries 810.1 360.6 438.4 Total revenue 828.0 374.4 450.2 Interest expense, net 281.2 278.9 214.9 Other expenses, net (0.4) 12.9 (1.3) Total expenses 280.8 291.8 213.6 Income before income taxes and equity in undistributed net income of subsidiaries 547.2 82.6 236.6 Benefit for income taxes 7.0 322.7 75.2 Income before equity in undistributed net income of subsidiaries 554.2 405.3 311.8 Equity in undistributed net income of subsidiaries 408.9 383.4 205.8 Net income $ 963.1 $ 788.7 $ 517.6 |
Schedule of statements of comprehensive income | Statements of Comprehensive Income Years Ended December 31, 2018 2017 2016 (In millions) Net income $ 963.1 $ 788.7 $ 517.6 Other comprehensive (loss) income, net of tax 29.6 (46.1) 6.6 Total comprehensive income, net of tax $ 992.7 $ 742.6 $ 524.2 |
Schedule of statements of cash flows | Statements of Cash Flows Years Ended December 31, 2018 2017 2016 (In millions) Net cash provided by operating activities $ 82.3 $ 72.3 $ 2.0 Investing activities: Loans to subsidiaries — — (102.0) Investment in subsidiaries — (164.0) — Dividends received 810.1 360.6 436.4 Net cash provided by investing activities 810.1 196.6 334.4 Financing activities: Borrowings under debt agreements 4,527.0 7,673.6 3,571.5 Repayments of borrowings (4,838.3) (7,232.4) (3,167.9) Payment of deferred financing costs (4.6) (33.7) (11.6) Purchase of treasury shares (443.2) (553.7) (798.8) Dividends paid (125.2) (115.5) (30.0) Proceeds from issuance of common stock 17.6 18.4 18.4 Other (25.7) (25.6) (21.9) Net cash used in financing activities (892.4) (268.9) (440.3) Change in cash, cash equivalents and restricted cash — — (103.9) Cash, cash equivalents and restricted cash at beginning of year 0.1 0.1 104.0 Cash, cash equivalents and restricted cash at end of year $ 0.1 $ 0.1 $ 0.1 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
SEGMENT INFORMATION | |
Schedule of segment information | Corporate/ Year Ended December 31, 2018 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Revenues $ 1,068.4 $ 2,175.1 $ 4,597.6 $ 0.6 $ (50.5) $ 7,791.2 Income (loss) before income taxes $ 153.8 $ 147.0 $ 1,381.6 $ (458.7) $ — $ 1,223.7 Interest expense, net 5.6 0.2 385.9 278.9 — 670.6 Operating income (loss) 159.4 147.2 1,767.5 (179.8) — 1,894.3 Depreciation and amortization 84.8 293.7 101.1 7.7 — 487.3 Stock compensation expense 10.0 34.2 13.3 23.3 — 80.8 Strategic transaction costs — — — 3.3 — 3.3 Adjusted EBITDA (1) 254.2 475.1 1,881.9 (145.5) — 2,465.7 Less: Securitization funding costs — — 220.2 — — 220.2 Less: Interest expense on deposits — — 165.7 — — 165.7 Adjusted EBITDA, net (1) $ 254.2 $ 475.1 $ 1,496.0 $ (145.5) $ — $ 2,079.8 Capital expenditures $ 34.0 $ 106.5 $ 53.8 $ 5.5 $ — $ 199.8 Total assets $ 2,200.2 $ 4,159.0 $ 23,904.2 $ 124.3 $ — $ 30,387.7 Corporate/ Year Ended December 31, 2017 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Revenues $ 1,303.5 $ 2,272.1 $ 4,170.6 $ 0.6 $ (27.4) $ 7,719.4 Income (loss) before income taxes $ 161.6 $ 134.3 $ 1,235.7 $ (450.5) $ — $ 1,081.1 Interest expense, net 5.4 0.2 281.7 277.1 — 564.4 Operating income (loss) 167.0 134.5 1,517.4 (173.4) — 1,645.5 Depreciation and amortization 81.7 309.7 98.4 7.8 — 497.6 Stock compensation expense 8.0 31.5 10.8 24.8 — 75.1 Adjusted EBITDA (1) 256.7 475.7 1,626.6 (140.8) — 2,218.2 Less: Securitization funding costs — — 156.6 — — 156.6 Less: Interest expense on deposits — — 125.1 — — 125.1 Adjusted EBITDA, net (1) $ 256.7 $ 475.7 $ 1,344.9 $ (140.8) $ — $ 1,936.5 Capital expenditures $ 55.2 $ 107.2 $ 54.2 $ 8.8 $ — $ 225.4 Total assets $ 2,215.5 $ 4,391.8 $ 23,974.1 $ 103.4 $ — $ 30,684.8 Corporate/ Year Ended December 31, 2016 LoyaltyOne Epsilon Card Services Other Eliminations Total (In millions) Revenues $ 1,337.9 $ 2,155.2 $ 3,675.0 $ 0.3 $ (30.3) $ 7,138.1 Income (loss) before income taxes $ (27.3) $ 123.2 $ 1,108.0 $ (366.9) $ — $ 837.0 Interest expense, net 3.3 — 210.3 214.9 — 428.5 Operating income (loss) (24.0) 123.2 1,318.3 (152.0) — 1,265.5 Depreciation and amortization 86.6 325.2 91.2 9.1 — 512.1 Stock compensation expense 10.1 31.8 14.1 20.5 — 76.5 Impact of expiry 241.7 — — — 241.7 Adjusted EBITDA (1) 314.4 480.2 1,423.6 (122.4) — 2,095.8 Less: Securitization funding costs — — 125.6 — — 125.6 Less: Interest expense on deposits — — 84.7 — — 84.7 Less: Adjusted EBITDA attributable to non-controlling interest 5.5 — — — — 5.5 Adjusted EBITDA, net (1) $ 308.9 $ 480.2 $ 1,213.3 $ (122.4) $ — $ 1,880.0 Capital expenditures $ 31.9 $ 119.8 $ 49.4 $ 5.9 $ — $ 207.0 Total assets $ 1,901.7 $ 4,543.1 $ 18,949.7 $ 119.6 $ — $ 25,514.1 (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. In 2018, adjusted EBITDA excluded costs related to the exploration of strategic alternatives for our Epsilon segment. In 2016, adjusted EBITDA excluded the impact of the cancellation of the AIR MILES Reward Program’s five-year expiry policy on December 1, 2016. Adjusted EBITDA, net is also a non-GAAP financial measure equal to adjusted EBITDA less securitization funding costs, interest expense on deposits and adjusted EBITDA attributable to the non-controlling interest. Effective April 1, 2016, we acquired the remaining 20% interest in BrandLoyalty to bring our ownership percentage to 100%. 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. |
Schedule of information concerning principal geographic areas | Europe, United Middle East States Canada and Africa Asia Pacific Other Total (In millions) Revenues Year Ended December 31, 2018 $ 6,657.1 $ 427.3 (1) $ 526.7 $ 131.3 $ 48.8 $ 7,791.2 Year Ended December 31, 2017 $ 6,336.1 $ 742.8 $ 485.1 $ 140.4 $ 15.0 $ 7,719.4 Year Ended December 31, 2016 $ 5,730.3 $ 706.5 $ 537.4 $ 154.5 $ 9.4 $ 7,138.1 Long Lived Assets December 31, 2018 $ 4,693.1 $ 261.0 $ 698.6 $ 22.5 $ 0.8 $ 5,676.0 December 31, 2017 $ 4,910.5 $ 297.0 $ 750.2 $ 20.5 $ 1.0 $ 5,979.2 (1) Upon adoption of ASC 606, certain redemption revenue for which we do not control the good or service prior to transferring it to the collector is recorded on a net basis, which reduced both redemption revenue and cost of operations by $283.4 million for the year ended December 31, 2018. |
QUARTERLY RESULTS OF OPERATIO_2
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) | |
Summary of unaudited quarterly results of operations | Quarter Ended March 31, June 30, September 30, December 31, 2018 2018 2018 2018 (In millions, except per share amounts) Revenues $ 1,884.2 $ 1,903.9 $ 1,947.2 $ 2,055.9 Operating expenses 1,506.4 1,483.6 1,425.2 1,481.7 Operating income 377.8 420.3 522.0 574.2 Interest expense, net 159.2 165.7 168.9 176.8 Income before income taxes 218.6 254.6 353.1 397.4 Provision for income taxes 54.7 36.8 56.6 112.5 Net income $ 163.9 $ 217.8 $ 296.5 $ 284.9 Net income attributable to common stockholders per share: Basic $ 2.96 $ 3.94 $ 5.41 $ 5.28 Diluted $ 2.95 $ 3.93 $ 5.39 $ 5.25 Quarter Ended March 31, June 30, September 30, December 31, 2017 2017 2017 2017 (In millions, except per share amounts) Revenues $ 1,879.0 $ 1,821.8 $ 1,912.4 $ 2,106.2 Operating expenses 1,526.6 1,470.4 1,433.5 1,643.4 Operating income 352.4 351.4 478.9 462.8 Interest expense, net 125.2 137.5 145.3 156.4 Income before income taxes 227.2 213.9 333.6 306.4 Provision for income taxes 80.8 76.2 100.4 35.0 Net income $ 146.4 $ 137.7 $ 233.2 $ 271.4 Net income attributable to common stockholders per share: Basic $ 2.60 $ 2.48 $ 4.21 $ 4.91 Diluted $ 2.58 $ 2.47 $ 4.20 $ 4.88 |
DESCRIPTION OF BUSINESS AND B_3
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
ASSETS | ||||
Cash and cash equivalents | $ 3,863.1 | $ 4,190 | $ 1,859.2 | |
Total cash, cash equivalents and restricted cash | 3,967.7 | 4,314.7 | 1,968.5 | $ 1,481.4 |
Other current assets | ||||
ASSETS | ||||
Restricted cash | 60.7 | 50.4 | 51.2 | |
Redemption settlement assets, restricted | ||||
ASSETS | ||||
Restricted cash | $ 43.9 | $ 74.3 | $ 58.1 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Allowance for Loan Loss (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Allowance for Loan Loss | |
Period considered for charge-off trends utilized for analyzing actual charge-offs | 3 months |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Property and Equipment (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Property, plant and equipment other than software development and conversion cost | Minimum | |
Property and Equipment | |
Estimated useful life | 2 years |
Property, plant and equipment other than software development and conversion cost | Maximum | |
Property and Equipment | |
Estimated useful life | 21 years |
Software Development and Conversion Costs | Minimum | |
Property and Equipment | |
Estimated useful life | 2 years |
Software Development and Conversion Costs | Maximum | |
Property and Equipment | |
Estimated useful life | 7 years |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Goodwill and Other Intangible Assets (Details) - Purchased data lists | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Minimum | ||
Goodwill and Other Intangible Assets | ||
Useful life | 1 year | 1 year |
Maximum | ||
Goodwill and Other Intangible Assets | ||
Useful life | 5 years | 5 years |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue Recognition and Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions | 3 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Apr. 01, 2016 | |
Numerator: | ||||||||||||
Net income attributable to common stockholders | $ 963.1 | $ 788.7 | $ 515.8 | |||||||||
Less: Accretion of redeemable non-controlling interest | 83.5 | |||||||||||
Net income attributable to common stockholders after accretion of redeemable non-controlling interest | $ 963.1 | $ 788.7 | $ 432.3 | |||||||||
Denominator: | ||||||||||||
Weighted average shares, basic | 54.9 | 55.7 | 58.6 | |||||||||
Weighted average effect of dilutive securities: | ||||||||||||
Net effect of dilutive stock options and unvested restricted stock (in shares) | 0.2 | 0.2 | 0.3 | |||||||||
Denominator for diluted calculations (in shares) | 55.1 | 55.9 | 58.9 | |||||||||
Net income attributable to common stockholders per share | ||||||||||||
Basic (in dollars per share) (Note 2) | $ 5.28 | $ 5.41 | $ 3.94 | $ 2.96 | $ 4.91 | $ 4.21 | $ 2.48 | $ 2.60 | $ 17.56 | $ 14.17 | $ 7.37 | |
Diluted (in dollars per share) (Note 2) | $ 5.25 | $ 5.39 | $ 3.93 | $ 2.95 | $ 4.88 | $ 4.20 | $ 2.47 | $ 2.58 | $ 17.49 | $ 14.10 | $ 7.34 | |
Currency Translation | ||||||||||||
Foreign currency transaction (losses) gains recognized | $ (0.3) | $ (9.7) | $ 1.9 | |||||||||
Marketing and Advertising Costs | ||||||||||||
Marketing and advertising expense | $ 253.2 | $ 263.2 | $ 277 | |||||||||
Brand Loyalty | ||||||||||||
Net income attributable to common stockholders per share | ||||||||||||
Ownership interest acquired (as a percent) | 20.00% | |||||||||||
Ownership percentage | 100.00% |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Recently Issued Accounting Standards - Leases (Details) - USD ($) $ in Millions | Jan. 01, 2019 | Dec. 31, 2018 | Jan. 01, 2018 | Dec. 31, 2017 |
ASSETS | ||||
Right of use asset - operating | $ 451 | |||
Intangible assets, net | 537.6 | $ 539.7 | $ 800.6 | |
Other non-current assets | 652.4 | 653.2 | $ 635.6 | 656.5 |
Assets impacted by the adoption of ASC 842 | 1,641 | 1,192.9 | ||
Liabilities: | ||||
Accrued expenses | 417.9 | 421 | 446 | 442.8 |
Current operating lease liability | 64.7 | |||
Other current liabilities | 333.2 | 338.8 | 354.4 | 368.7 |
Long-term operating lease liability | 468.5 | |||
Other liabilities | 345.9 | 422.3 | $ 357.3 | $ 370.9 |
Liabilities impacted by the adoption of ASC 842 | 1,630.2 | 1,182.1 | ||
Accounting Standards Update ASC 842 | ||||
Liabilities: | ||||
Capital leases included within property and equipment, net | $ 13 | |||
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List] | ads:PropertyAndEquipmentMember | |||
Capital leases included within long-term and other debt | $ 12.6 | |||
Finance Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List] | ads:LongTermAndOtherDebtMember | |||
Capital lease liability current portion | $ 5.6 | |||
Adjustment | Accounting Standards Update ASC 842 | ||||
ASSETS | ||||
Right of use asset - operating | 451 | |||
Intangible assets, net | (2.1) | |||
Other non-current assets | (0.8) | |||
Assets impacted by the adoption of ASC 842 | 448.1 | |||
Liabilities: | ||||
Accrued expenses | (3.1) | |||
Current operating lease liability | 64.7 | |||
Other current liabilities | (5.6) | |||
Long-term operating lease liability | 468.5 | |||
Other liabilities | (76.4) | |||
Liabilities impacted by the adoption of ASC 842 | $ 448.1 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Recently Adopted Accounting Standards (Details) - USD ($) $ in Millions | 12 Months Ended | ||||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Jan. 01, 2019 | Jan. 01, 2018 | |
ASSETS | |||||
Accounts receivable, net | $ 923.9 | $ 822.3 | $ 844.7 | ||
Other current assets | 345.9 | 348.9 | 332.3 | ||
Other non-current assets | 653.2 | 656.5 | $ 652.4 | 635.6 | |
Assets impacted by the adoption of ASC 606 | 1,827.7 | 1,812.6 | |||
LIABILITIES AND EQUITY | |||||
Accrued expenses | 421 | 442.8 | 417.9 | 446 | |
Other current liabilities | 338.8 | 368.7 | 333.2 | 354.4 | |
Other liabilities | 422.3 | 370.9 | $ 345.9 | 357.3 | |
Liabilities impacted by the adoption of ASC 606 | 1,182.4 | 1,157.7 | |||
Redemption revenue | 676.3 | 935.3 | $ 993.6 | ||
Cost of operations | 4,220.9 | 4,269.9 | $ 4,276.8 | ||
Retained earnings | 5,012.4 | $ 4,167.1 | 4,176.7 | ||
Accounting Standards Update ASC 606 | |||||
LIABILITIES AND EQUITY | |||||
Cumulative effect adjustment to retained earnings | 9.6 | ||||
Accounting Standards Update ASC 606 | Adjustments | |||||
ASSETS | |||||
Accounts receivable, net | 22.4 | ||||
Other current assets | (16.6) | ||||
Other non-current assets | (20.9) | ||||
Assets impacted by the adoption of ASC 606 | (15.1) | ||||
LIABILITIES AND EQUITY | |||||
Accrued expenses | 3.2 | ||||
Other current liabilities | (14.3) | ||||
Other liabilities | (13.6) | ||||
Liabilities impacted by the adoption of ASC 606 | (24.7) | ||||
Redemption revenue | (283.4) | ||||
Cost of operations | (283.4) | ||||
Retained earnings | 9.6 | ||||
Accounting Standards Update ASU 2016-01 | |||||
LIABILITIES AND EQUITY | |||||
Cumulative effect adjustment to retained earnings | $ (1.5) | (1.5) | |||
Accounting Standards Update ASU 2016-01 | Adjustment | |||||
LIABILITIES AND EQUITY | |||||
Cumulative effect adjustment to retained earnings | $ 1.5 |
REVENUE (Details)
REVENUE (Details) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Sep. 30, 2017USD ($) | Jun. 30, 2017USD ($) | Mar. 31, 2017USD ($) | Dec. 31, 2018USD ($)segmentitem | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | |
Disaggregation of revenue | |||||||||||
Number of segments | segment | 3 | ||||||||||
Revenue from contracts with customers | $ 3,084.7 | ||||||||||
Finance charges, net | 4,694.9 | $ 4,171.9 | $ 3,639.7 | ||||||||
Investment income | 11.6 | ||||||||||
Total revenue | $ 2,055.9 | $ 1,947.2 | $ 1,903.9 | $ 1,884.2 | $ 2,106.2 | $ 1,912.4 | $ 1,821.8 | $ 1,879 | $ 7,791.2 | 7,719.4 | 7,138.1 |
Number of performance obligations | item | 3 | ||||||||||
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 | $ 352.3 | ||||||||||
Short-term loyalty programs | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | 613.8 | ||||||||||
Technology services | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | 1,023.4 | ||||||||||
Digital Media services | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | 772 | ||||||||||
Agency services | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | 329.7 | ||||||||||
Servicing fees, net | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | (97.3) | ||||||||||
Other | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | 90.8 | ||||||||||
United States | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | 6,657.1 | 6,336.1 | 5,730.3 | ||||||||
Canada | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | 427.3 | 742.8 | 706.5 | ||||||||
Europe, Middle East and Africa | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | 526.7 | 485.1 | 537.4 | ||||||||
Asia Pacific | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | 131.3 | 140.4 | 154.5 | ||||||||
Other | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | 48.8 | ||||||||||
Operating segment | LoyaltyOne | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | 1,056.8 | ||||||||||
Investment income | 11.6 | ||||||||||
Total revenue | 1,068.4 | 1,303.5 | 1,337.9 | ||||||||
Operating segment | LoyaltyOne | Coalition loyalty program | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | 352.3 | ||||||||||
Operating segment | LoyaltyOne | Short-term loyalty programs | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | 613.8 | ||||||||||
Operating segment | LoyaltyOne | Other | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | 90.7 | ||||||||||
Operating segment | LoyaltyOne | United States | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | 23.1 | ||||||||||
Operating segment | LoyaltyOne | Canada | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | 411.3 | ||||||||||
Operating segment | LoyaltyOne | Europe, Middle East and Africa | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | 463.2 | ||||||||||
Operating segment | LoyaltyOne | Asia Pacific | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | 122 | ||||||||||
Operating segment | LoyaltyOne | Other | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | 48.8 | ||||||||||
Operating segment | Epsilon | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | 2,175.1 | ||||||||||
Total revenue | 2,175.1 | 2,272.1 | 2,155.2 | ||||||||
Operating segment | Epsilon | Technology services | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | 1,048.1 | ||||||||||
Operating segment | Epsilon | Digital Media services | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | 792.1 | ||||||||||
Operating segment | Epsilon | Agency services | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | 334.9 | ||||||||||
Operating segment | Epsilon | United States | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | 2,083.8 | ||||||||||
Operating segment | Epsilon | Canada | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | 16.3 | ||||||||||
Operating segment | Epsilon | Europe, Middle East and Africa | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | 63.9 | ||||||||||
Operating segment | Epsilon | Asia Pacific | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | 11.1 | ||||||||||
Operating segment | Card Services | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | (97.3) | ||||||||||
Finance charges, net | 4,694.9 | ||||||||||
Total revenue | 4,597.6 | 4,170.6 | 3,675 | ||||||||
Operating segment | Card Services | Servicing fees, net | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | (97.3) | ||||||||||
Operating segment | Card Services | United States | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | 4,597.6 | ||||||||||
Corporate/Other | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | 0.6 | ||||||||||
Total revenue | 0.6 | 0.6 | 0.3 | ||||||||
Corporate/Other | Other | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | 0.6 | ||||||||||
Corporate/Other | United States | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | 0.6 | ||||||||||
Eliminations | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | (50.5) | ||||||||||
Total revenue | (50.5) | $ (27.4) | $ (30.3) | ||||||||
Eliminations | Technology services | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | (24.7) | ||||||||||
Eliminations | Digital Media services | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | (20.1) | ||||||||||
Eliminations | Agency services | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | (5.2) | ||||||||||
Eliminations | Other | |||||||||||
Disaggregation of revenue | |||||||||||
Revenue from contracts with customers | (0.5) | ||||||||||
Eliminations | United States | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | (48) | ||||||||||
Eliminations | Canada | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | (0.3) | ||||||||||
Eliminations | Europe, Middle East and Africa | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | (0.4) | ||||||||||
Eliminations | Asia Pacific | |||||||||||
Disaggregation of revenue | |||||||||||
Total revenue | $ (1.8) |
REVENUE - Contract Assets and L
REVENUE - Contract Assets and Liabilities (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Jan. 01, 2018 | Dec. 31, 2017 | |
Amounts recognized in the consolidated balance sheets: | |||
Deferred revenue (current) | $ 766.1 | $ 846.6 | |
Deferred revenue (non-current) | $ 109.2 | 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 | ||
LoyaltyOne | |||
Change in Contract with Customer, Liability | |||
Deferred revenue | $ 875.3 | 966.9 | |
Cash proceeds | 519.5 | ||
Revenue recognized | (537.6) | ||
Other | 0.7 | ||
Effects of foreign currency translation | (74.2) | ||
Amounts recognized in the consolidated balance sheets: | |||
Deferred revenue (current) | 766.1 | ||
Deferred revenue (non-current) | 109.2 | ||
Service | |||
Change in Contract with Customer, Liability | |||
Deferred revenue | 248 | 283.8 | |
Cash proceeds | 194.7 | ||
Revenue recognized | (209.2) | ||
Effects of foreign currency translation | (21.3) | ||
Amounts recognized in the consolidated balance sheets: | |||
Deferred revenue (current) | 138.8 | ||
Deferred revenue (non-current) | 109.2 | ||
Redemption | |||
Change in Contract with Customer, Liability | |||
Deferred revenue | 627.3 | 683.1 | |
Cash proceeds | 324.8 | ||
Revenue recognized | (328.4) | ||
Other | 0.7 | ||
Effects of foreign currency translation | (52.9) | ||
Amounts recognized in the consolidated balance sheets: | |||
Deferred revenue (current) | 627.3 | ||
Epsilon | |||
Change in Contract with Customer, Liability | |||
Deferred revenue | 19.7 | $ 22.8 | |
Amounts recognized in the consolidated balance sheets: | |||
Unamortized contract costs | 4.8 | ||
Impairment of contract costs | 0 | ||
Card Services | |||
Amounts recognized in the consolidated balance sheets: | |||
Unamortized contract costs | 372.5 | ||
Amortization of contract costs | 68.7 | ||
Impairment of contract costs | $ 0 | ||
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 | ||
Amortization term of direct loan amortization costs | 1 year | ||
Unamortized deferred costs related to loan origination | $ 40.6 | $ 45.5 | |
Card Services | Cost of operations | |||
Amounts recognized in the consolidated balance sheets: | |||
Amortization of contract costs | 9.8 | ||
Other current liabilities | LoyaltyOne | |||
Change in Contract with Customer, Liability | |||
Deferred revenue | 110.2 | $ 87.5 | |
Revenue recognized | $ 506.5 |
REVENUE - Performance Obligatio
REVENUE - Performance Obligation (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2018USD ($) | |
REVENUE | |
Initial application and transition, completed contract, same reporting period | true |
Incremental Cost of Obtaining Contract | true |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01 | |
REVENUE | |
Revenue, remaining performance obligation | $ 138.8 |
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 | $ 76 |
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 | $ 32.1 |
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]: 2022-01-01 | |
REVENUE | |
Revenue, remaining performance obligation | $ 1.1 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period 1 | 12 months |
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 RECEIVAB_3
CREDIT CARD AND LOAN RECEIVABLES - Allowance for Loan Loss and Delinquencies (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
CREDIT CARD AND LOAN RECEIVABLES | |||
Principal receivables | $ 16,869.9 | $ 17,705.1 | |
Billed and accrued finance charges | 898.3 | 887 | |
Other | 86.8 | 21.7 | |
Total credit card and loan receivables | 17,855 | 18,613.8 | |
Less: Credit card receivables - restricted for securitization investors | 13,418.3 | 14,293.9 | |
Other credit card and loan receivables | 4,436.7 | 4,319.9 | |
Allowance for Loan Loss | |||
Balance at beginning of period | 1,119.3 | 948 | $ 741.6 |
Provision for loan loss | 1,016 | 1,140.1 | 940.5 |
Allowance associated with credit card and loan receivables transferred to held for sale | (54.8) | (27.9) | (31.1) |
Change in estimate for uncollectible unpaid interest and fees | 25 | 30 | 20 |
Recoveries | 214.2 | 196.6 | 255.5 |
Principal charge-offs | (1,281.4) | (1,167.5) | (978.5) |
Balance at end of period | $ 1,038.3 | 1,119.3 | 948 |
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 | $ 803.1 | 653.2 | $ 511.7 |
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 | $ 16,869.9 | 17,705.1 | |
Principal receivables balances contractually delinquent: | |||
31 to 60 days | 303.2 | 301.5 | |
61 to 90 days | 207.9 | 191.3 | |
91 or more days | 443.4 | 409.6 | |
Total | $ 954.5 | $ 902.4 | |
Percentage Principal receivables balances contractually delinquent : | |||
Receivables outstanding - principal (as a percent) | 100.00% | 100.00% | |
Principal receivables balances contractually delinquent: | |||
31 to 60 days (as a percent) | 1.80% | 1.70% | |
61 to 90 days (as a percent) | 1.30% | 1.10% | |
91 or more days (as a percent) | 2.60% | 2.30% | |
Total (as a percent) | 5.70% | 5.10% | |
Re-aged accounts as percentage of total credit card and loan receivables | 2.10% | 1.40% | 1.40% |
Modified Credit Card Receivables | |||
Maximum period of time temporary programs' concessions remain in place | 12 months | ||
Impaired credit card and loan receivables | $ 292.4 | $ 260.2 | |
Allowance for loan loss on impaired credit card receivables | $ 101.3 | $ 56.1 | |
Maximum percentage of credit card receivables to total portfolio | 2.00% | 2.00% | |
Average recorded investment in impaired credit card receivables | $ 340.9 | $ 230.4 | |
Interest income on modified credit card receivables | $ 27.9 | $ 19.7 | $ 18.9 |
CREDIT CARD AND LOAN RECEIVAB_4
CREDIT CARD AND LOAN RECEIVABLES - Troubled Debt Restructurings (Details) - Consumer Portfolio $ in Millions | 12 Months Ended | |
Dec. 31, 2018USD ($)item | Dec. 31, 2017USD ($)item | |
Troubled debt restructurings - credit card receivables | ||
Modifications related to troubled debt restructurings within credit card and loan receivables | ||
Number of Restructurings | item | 501,906 | 201,772 |
Pre-modification Outstanding Balance | $ 621.4 | $ 261.1 |
Post-modification Outstanding Balance | $ 620.7 | $ 260.7 |
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 | 293,591 | 98,863 |
Outstanding Balance | $ 340.5 | $ 120 |
CREDIT CARD AND LOAN RECEIVAB_5
CREDIT CARD AND LOAN RECEIVABLES - Age of Credit Card and Loan Receivable Accounts (Details) item in Millions, $ in Millions | Dec. 31, 2018USD ($)item | Dec. 31, 2017USD ($)item |
Age of Accounts Since Origination | ||
Number of Active Accounts with Balances | item | 24.2 | 27.3 |
Percentage of Active Accounts with Balances | 100.00% | 100.00% |
Principal Receivables Outstanding | $ | $ 16,869.9 | $ 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 | 6.5 | 7.4 |
Percentage of Active Accounts with Balances | 26.70% | 27.30% |
Principal Receivables Outstanding | $ | $ 4,099.9 | $ 4,110 |
Percentage of Principal Receivables Outstanding | 24.30% | 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 | 17.10% | 16.40% |
Principal Receivables Outstanding | $ | $ 2,887.8 | $ 3,011.3 |
Percentage of Principal Receivables Outstanding | 17.10% | 17.00% |
25-36 Months | ||
Age of Accounts Since Origination | ||
Number of Active Accounts with Balances | item | 3.1 | 3.2 |
Percentage of Active Accounts with Balances | 13.00% | 11.70% |
Principal Receivables Outstanding | $ | $ 2,428.9 | $ 2,357.1 |
Percentage of Principal Receivables Outstanding | 14.40% | 13.30% |
37-48 Months | ||
Age of Accounts Since Origination | ||
Number of Active Accounts with Balances | item | 2.2 | 2.4 |
Percentage of Active Accounts with Balances | 9.10% | 8.80% |
Principal Receivables Outstanding | $ | $ 1,795 | $ 1,837 |
Percentage of Principal Receivables Outstanding | 10.70% | 10.40% |
49-60 Months | ||
Age of Accounts Since Origination | ||
Number of Active Accounts with Balances | item | 1.7 | 1.7 |
Percentage of Active Accounts with Balances | 7.10% | 6.30% |
Principal Receivables Outstanding | $ | $ 1,367.2 | $ 1,280.8 |
Percentage of Principal Receivables Outstanding | 8.10% | 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 | 27.00% | 29.50% |
Principal Receivables Outstanding | $ | $ 4,291.1 | $ 5,108.9 |
Percentage of Principal Receivables Outstanding | 25.40% | 28.90% |
CREDIT CARD AND LOAN RECEIVAB_6
CREDIT CARD AND LOAN RECEIVABLES - Credit Quality (Details) - USD ($) $ in Millions | Dec. 31, 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 | $ 16,869.9 | $ 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 | $ 0 | $ 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 | $ 249 | $ 210.6 |
Percentage of Principal Receivables Outstanding | 1.50% | 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 | $ 1,394 | $ 1,330.5 |
Percentage of Principal Receivables Outstanding | 8.20% | 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 | $ 770.1 | $ 850.5 |
Percentage of Principal Receivables Outstanding | 4.60% | 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 | $ 1,047.6 | $ 1,137.7 |
Percentage of Principal Receivables Outstanding | 6.20% | 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 | $ 6,877.6 | $ 7,449.7 |
Percentage of Principal Receivables Outstanding | 40.80% | 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 | $ 3,060.7 | $ 3,286.9 |
Percentage of Principal Receivables Outstanding | 18.10% | 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 | $ 3,470.9 | $ 3,439.2 |
Percentage of Principal Receivables Outstanding | 20.60% | 19.40% |
CREDIT CARD AND LOAN RECEIVAB_7
CREDIT CARD AND LOAN RECEIVABLES - Securitized Credit Card Receivables (Details) $ in Millions | 1 Months Ended | 12 Months Ended | ||||
Dec. 31, 2018USD ($)item | Oct. 31, 2018USD ($)item | Jun. 30, 2018USD ($)item | Dec. 31, 2018USD ($)item | Dec. 31, 2017USD ($)item | Dec. 31, 2016USD ($) | |
Portfolio Held For Sale | ||||||
Carrying value of the credit card portfolios held for sale | $ 1,951.6 | $ 1,951.6 | $ 899.4 | |||
Number of credit card portfolios transferred to held for sale | item | 11 | 7 | ||||
Number of loan portfolios transferred to held for sale | item | 1 | |||||
Carrying value of the loan and credit card portfolios transferred to held for sale | $ 2,300 | $ 1,400 | ||||
Valuation adjustment on credit card and loan portfolios held for sale | $ 101.6 | |||||
Number of credit card portfolios sold | item | 3 | 2 | 1 | 6 | 2 | |
Sale of credit card portfolio | $ 851.7 | $ 246.4 | $ 55.4 | $ 1,153.5 | $ 797.7 | |
Gain (loss) on sales of credit card portfolio | 24.5 | $ 4.6 | 29.2 | 23.3 | ||
Portfolio Acquisitions | ||||||
Purchase price of credit card receivables portfolio | 906.3 | |||||
Securitized Credit Card Receivables | ||||||
Cash collateral, restricted deposits which are required to be used to cover losses on securitized credit card receivable | 0 | 0 | 0 | $ 0 | ||
Total credit card receivables - restricted for securitization investors | 13,418.3 | 13,418.3 | 14,293.9 | |||
Principal amount of credit card receivables - restricted for securitization investors, 90 days or more past due | $ 301.6 | 301.6 | 295 | |||
Net charge-offs of securitized principal | $ 927 | $ 741.1 | $ 583.8 | |||
Minimum | ||||||
Securitized Credit Card Receivables | ||||||
Minimum interests requirement (as a percent) | 4.00% | |||||
Maximum | ||||||
Securitized Credit Card Receivables | ||||||
Minimum interests requirement (as a percent) | 10.00% |
INVENTORIES, NET (Details)
INVENTORIES, NET (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
INVENTORIES, NET | ||
Inventories, net | $ 251.9 | $ 234.1 |
OTHER INVESTMENTS (Details)
OTHER INVESTMENTS (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Marketable securities | |||
Amortized Cost | $ 272.8 | $ 207.3 | |
Unrealized Gains | 0.1 | 0.2 | |
Unrealized Losses | (6.5) | (2.5) | |
Fair Value | 266.4 | 205 | |
U.S. Treasury bonds | |||
Amortized Cost | 25 | 50 | |
Unrealized Losses | (0.1) | (0.1) | |
Fair Value | 24.9 | 49.9 | |
Other Investments, Total | |||
Amortized Cost | 297.8 | 257.3 | |
Unrealized Gains | 0.1 | 0.2 | |
Unrealized Losses | (6.6) | (2.6) | |
Fair Value | 291.3 | 254.9 | |
Fair Value, Marketable securities | |||
Less than 12 months | 57.3 | 104.5 | |
12 Months or Greater | 164 | 67.3 | |
Total | 221.3 | 171.8 | |
Unrealized Losses, Marketable securities | |||
Less than 12 months | (0.5) | (0.9) | |
12 Months or Greater | (6) | (1.6) | |
Total | (6.5) | (2.5) | |
Fair Value, U.S. Treasury bonds | |||
Less than 12 months | 49.9 | ||
12 Months or Greater | 24.9 | ||
Total | 24.9 | 49.9 | |
Unrealized Losses, U.S. Treasury bonds | |||
Less than 12 months | (0.1) | ||
12 Months or Greater | (0.1) | ||
Total | (0.1) | (0.1) | |
Fair Value, Total | |||
Less than 12 months | 57.3 | 154.4 | |
12 Months or Greater | 188.9 | 67.3 | |
Total | 246.2 | 221.7 | |
Unrealized Losses, Total | |||
Less than 12 months | (0.5) | (1) | |
12 Months or Greater | (6.1) | (1.6) | |
Total | (6.6) | (2.6) | |
Amortized Cost | |||
Due in one year or less | 54.5 | ||
Due after one year through five years | 2.2 | ||
Due after ten years | 241.1 | ||
Total | 297.8 | ||
Fair Value | |||
Due in one year or less | 54.4 | ||
Due after one year through five years | 2.2 | ||
Due after ten years | 234.7 | ||
Fair Value | 291.3 | ||
Realized gains or losses | |||
Realized gains or losses from the sale of investment securities | $ 0 | $ 0 | $ 0 |
REDEMPTION SETTLEMENT ASSETS (D
REDEMPTION SETTLEMENT ASSETS (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2018 | Dec. 31, 2017 | |
REDEMPTION SETTLEMENT ASSETS | |||
Amortized Cost | $ 564.6 | $ 596.6 | |
Unrealized Gains | 0.1 | ||
Unrealized Losses | (6.1) | (7.1) | |
Fair Value | 558.6 | 589.5 | |
Fair Value | |||
Less than 12 months | 31.2 | 354 | |
12 Months or Greater | 414.4 | 161.2 | |
Total | 445.6 | 515.2 | |
Unrealized Losses | |||
Less than 12 months | (0.1) | (5) | |
12 Months or Greater | (6) | (2.1) | |
Total | (6.1) | (7.1) | |
Amortized cost of the redemption settlement assets by contractual maturity | |||
Due in one year or less | 118.4 | ||
Due after one year through five years | 402.3 | ||
Total | 520.7 | ||
Estimated fair value of the redemption settlement assets by contractual maturity | |||
Due in one year or less | 117.9 | ||
Due after one year through five years | 396.8 | ||
Total | 514.7 | ||
Realized gains or losses from the sale of investment securities | $ 0 | ||
Restricted cash | |||
REDEMPTION SETTLEMENT ASSETS | |||
Amortized Cost | 43.9 | 74.3 | |
Fair Value | 43.9 | 74.3 | |
Mutual funds | |||
REDEMPTION SETTLEMENT ASSETS | |||
Amortized Cost | 23.2 | 27.3 | |
Unrealized Losses | (1.3) | ||
Fair Value | 23.2 | 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 | 497.5 | 495 | |
Unrealized Gains | 0.1 | ||
Unrealized Losses | (6.1) | (5.8) | |
Fair Value | 491.5 | 489.2 | |
Fair Value | |||
Less than 12 months | 31.2 | 328 | |
12 Months or Greater | 414.4 | 161.2 | |
Total | 445.6 | 489.2 | |
Unrealized Losses | |||
Less than 12 months | (0.1) | (3.7) | |
12 Months or Greater | (6) | (2.1) | |
Total | $ (6.1) | $ (5.8) |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Property and equipment | |||
Total | $ 1,621.9 | $ 1,477.6 | |
Accumulated depreciation | (1,026.8) | (863.7) | |
Property and equipment, net | 595.1 | 613.9 | |
Depreciation | |||
Depreciation | 98.2 | 101.2 | $ 97.7 |
Amortization on capitalized software | 131.5 | 115.5 | $ 104.9 |
Unamortized capitalized software costs | 210.3 | 229.5 | |
Computer software and development | |||
Property and equipment | |||
Total | 921.6 | 823 | |
Furniture and equipment | |||
Property and equipment | |||
Total | 422.8 | 387.3 | |
Land, buildings and leasehold improvements | |||
Property and equipment | |||
Total | 191.6 | 177.7 | |
Capital leases | |||
Property and equipment | |||
Total | 22.4 | 13.1 | |
Construction in progress | |||
Property and equipment | |||
Total | $ 63.5 | $ 76.5 |
INTANGIBLE ASSETS AND GOODWIL_2
INTANGIBLE ASSETS AND GOODWILL - Finite Lived Assets and Indefinite Lived Assets (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Jan. 01, 2019 | |
Schedule of Finite and Indefinite-lived Intangible Assets | |||
Finite lived assets, gross | $ 1,696.4 | $ 1,819.1 | |
Accumulated Amortization | (1,169.1) | (1,030.9) | |
Finite lived assets, net | 527.3 | 788.2 | |
Total Intangible Assets | |||
Gross Assets | 1,708.8 | 1,831.5 | |
Accumulated Amortization | (1,169.1) | (1,030.9) | |
Net | 539.7 | 800.6 | $ 537.6 |
Tradenames | |||
Indefinite Lived Assets | |||
Indefinite lived assets | 12.4 | 12.4 | |
Total Intangible Assets | |||
Net | 12.4 | 12.4 | |
Customer contracts and lists | |||
Schedule of Finite and Indefinite-lived Intangible Assets | |||
Finite lived assets, gross | 1,126.4 | 1,143.5 | |
Accumulated Amortization | (773.9) | (625.5) | |
Finite lived assets, net | 352.5 | 518 | |
Total Intangible Assets | |||
Accumulated Amortization | $ (773.9) | $ (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 | $ 286 | $ 321.6 | |
Accumulated Amortization | (172.9) | (147.8) | |
Finite lived assets, net | 113.1 | 173.8 | |
Total Intangible Assets | |||
Accumulated Amortization | $ (172.9) | $ (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 | $ 51.3 | $ 55.6 | |
Accumulated Amortization | (49.9) | (53.5) | |
Finite lived assets, net | $ 1.4 | $ 2.1 | |
Amortization Life and Method | |||
Useful life | 5 years | 5 years | |
Total Intangible Assets | |||
Accumulated Amortization | $ (49.9) | $ (53.5) | |
Publisher networks | |||
Schedule of Finite and Indefinite-lived Intangible Assets | |||
Finite lived assets, gross | 140.2 | 140.2 | |
Accumulated Amortization | (112) | (84.4) | |
Finite lived assets, net | 28.2 | 55.8 | |
Total Intangible Assets | |||
Accumulated Amortization | $ (112) | $ (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 | $ 75.8 | $ 77.3 | |
Accumulated Amortization | (50.3) | (46.8) | |
Finite lived assets, net | 25.5 | 30.5 | |
Total Intangible Assets | |||
Accumulated Amortization | $ (50.3) | $ (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 | $ 10.7 | $ 11.3 | |
Accumulated Amortization | (6.2) | (6.2) | |
Finite lived assets, net | 4.5 | 5.1 | |
Total Intangible Assets | |||
Accumulated Amortization | $ (6.2) | $ (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 | (3.9) | (3.1) | |
Finite lived assets, net | 2.1 | 2.9 | |
Total Intangible Assets | |||
Accumulated Amortization | $ (3.9) | $ (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 GOODWIL_3
INTANGIBLE ASSETS AND GOODWILL - Maturity Schedule (Details) - USD ($) $ in Millions | 1 Months Ended | 12 Months Ended | ||
Oct. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Intangible assets | ||||
Amortization expense | $ 257.6 | $ 280.9 | $ 309.5 | |
Estimated amortization expense related to intangible assets for the next five years and thereafter | ||||
2,019 | 204.6 | |||
2,020 | 141.6 | |||
2,021 | 79.3 | |||
2,022 | 69.4 | |||
2,023 | 14.3 | |||
Thereafter | $ 18.1 | |||
Signet | ||||
Intangible assets | ||||
Acquired intangible assets | $ 52.3 | |||
Signet | Customer relationships | ||||
Intangible assets | ||||
Acquired intangible assets | $ 35.9 | |||
Weighted average life | 3 years | |||
Signet | Marketing relationships | ||||
Intangible assets | ||||
Acquired intangible assets | $ 16.4 | |||
Weighted average life | 7 years |
INTANGIBLE ASSETS AND GOODWIL_4
INTANGIBLE ASSETS AND GOODWILL - Goodwill Information (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Goodwill | |||
Beginning Balance | $ 3,880.1 | $ 3,800.7 | |
Effects of foreign currency translation | (39.1) | 79.4 | |
Ending Balance | 3,841 | 3,880.1 | $ 3,800.7 |
Goodwill impairment | 0 | 0 | 0 |
LoyaltyOne | |||
Goodwill | |||
Beginning Balance | 731.1 | 653.3 | |
Effects of foreign currency translation | (37.9) | 77.8 | |
Ending Balance | 693.2 | 731.1 | 653.3 |
Epsilon | |||
Goodwill | |||
Beginning Balance | 2,887.3 | 2,885.7 | |
Effects of foreign currency translation | (1.2) | 1.6 | |
Ending Balance | 2,886.1 | 2,887.3 | 2,885.7 |
Card Services | |||
Goodwill | |||
Beginning Balance | 261.7 | 261.7 | |
Ending Balance | $ 261.7 | $ 261.7 | $ 261.7 |
ACCRUED EXPENSES (Details)
ACCRUED EXPENSES (Details) - USD ($) $ in Millions | Jan. 01, 2019 | Dec. 31, 2018 | Jan. 01, 2018 | Dec. 31, 2017 |
ACCRUED EXPENSES | ||||
Accrued payroll and benefits | $ 242.2 | $ 247.2 | ||
Accrued taxes | 24 | 64.6 | ||
Accrued other liabilities | 154.8 | 131 | ||
Accrued expenses | $ 417.9 | $ 421 | $ 446 | $ 442.8 |
DEBT (Details)
DEBT (Details) € in Millions | Apr. 02, 2018USD ($) | Feb. 28, 2019USD ($) | Nov. 30, 2018USD ($) | Oct. 31, 2018USD ($) | Sep. 30, 2018USD ($) | Aug. 31, 2018USD ($) | Apr. 30, 2018USD ($) | Feb. 28, 2018USD ($) | Jun. 30, 2016EUR (€) | Dec. 31, 2018USD ($)item | Dec. 31, 2017USD ($) | Dec. 31, 2018EUR (€) | Dec. 31, 2018USD ($) | Aug. 31, 2018EUR (€) | Aug. 31, 2018USD ($) | Jul. 31, 2018USD ($) | Mar. 31, 2017EUR (€) | Oct. 31, 2016USD ($) | Nov. 30, 2015EUR (€) | Jul. 31, 2014USD ($) |
Debt | ||||||||||||||||||||
Total long-term and other debt | $ 5,777,300,000 | |||||||||||||||||||
Less: Unamortized discount and debt issuance costs | 39,400,000 | |||||||||||||||||||
Less: Current portion | $ 131,300,000 | 144,500,000 | ||||||||||||||||||
Long-term and other debt | 5,948,300,000 | 5,593,400,000 | ||||||||||||||||||
Less: Current portion | 6,366,200,000 | 6,537,700,000 | ||||||||||||||||||
Long-term portion | 4,564,700,000 | 5,256,000,000 | ||||||||||||||||||
Less: Current portion | 1,339,900,000 | 2,717,600,000 | ||||||||||||||||||
Long-term portion | 7,467,400,000 | 4,934,100,000 | ||||||||||||||||||
Maturities of long-term and other debt | ||||||||||||||||||||
2,019 | 144,600,000 | |||||||||||||||||||
2,020 | 315,100,000 | |||||||||||||||||||
2,021 | 655,400,000 | |||||||||||||||||||
2,022 | 4,318,100,000 | |||||||||||||||||||
2,023 | 344,100,000 | |||||||||||||||||||
Long-Term and Other Debt | 5,737,900,000 | |||||||||||||||||||
Maturities Of Deposits | ||||||||||||||||||||
2,019 | 6,540,200,000 | |||||||||||||||||||
2,020 | 2,220,100,000 | |||||||||||||||||||
2,021 | 1,473,900,000 | |||||||||||||||||||
2,022 | 1,057,400,000 | |||||||||||||||||||
2,023 | 527,800,000 | |||||||||||||||||||
Total maturities | 11,819,400,000 | |||||||||||||||||||
Unamortized discount | (25,700,000) | |||||||||||||||||||
Total Deposits | 11,793,700,000 | |||||||||||||||||||
Maturities Of Non Recourse Borrowings Of Consolidated Securitization Entities | ||||||||||||||||||||
2,017 | 2,719,000,000 | |||||||||||||||||||
2,018 | 3,092,200,000 | |||||||||||||||||||
2,019 | 1,852,100,000 | |||||||||||||||||||
Total maturities | 7,663,300,000 | |||||||||||||||||||
Unamortized discount | (11,600,000) | |||||||||||||||||||
Total non-recourse borrowings of consolidated securitization entities | 7,651,700,000 | |||||||||||||||||||
Committed revolving credit facility | Brand Loyalty | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Maximum borrowing capacity | € | € 62.5 | € 37.5 | ||||||||||||||||||
Total long-term and other debt | 37.6 | 43,200,000 | ||||||||||||||||||
Reduction in Credit Facility | € | € 25 | |||||||||||||||||||
Uncommitted revolving credit facility | Brand Loyalty | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Maximum borrowing capacity | € | 62.5 | 37.5 | ||||||||||||||||||
Reduction in Credit Facility | € | € 25 | |||||||||||||||||||
A-1 Term loan facility | Brand Loyalty | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Amount borrowed | € | 90 | |||||||||||||||||||
A-2 term loan facility | Brand Loyalty | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Amount borrowed | € | € 100 | |||||||||||||||||||
Term loans | Brand Loyalty | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Total long-term and other debt | € 122.5 | 140,500,000 | ||||||||||||||||||
Series 2016-B asset backed term notes | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Debt repaid by the company | $ 460,500,000 | |||||||||||||||||||
Retained amount of subordinated class of notes | $ 110,500,000 | |||||||||||||||||||
Series 2015-A asset backed term notes | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Debt repaid by the company | $ 500,000,000 | |||||||||||||||||||
Retained amount of subordinated class of notes | $ 140,000,000 | |||||||||||||||||||
Series 2012-C asset backed term notes | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Debt repaid by the company | $ 266,700,000 | |||||||||||||||||||
Retained amount of subordinated class of notes | $ 10,700,000 | |||||||||||||||||||
Series 2013-A asset backed term notes | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Debt repaid by the company | $ 500,000,000 | |||||||||||||||||||
Retained amount of subordinated class of notes | 125,000,000 | |||||||||||||||||||
Total deposits | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Less: Unamortized discount and debt issuance costs | 24,500,000 | 25,700,000 | ||||||||||||||||||
Deposits | 10,955,400,000 | 11,819,400,000 | ||||||||||||||||||
Less: Current portion | 6,366,200,000 | 6,537,700,000 | ||||||||||||||||||
Long-term portion | 4,564,700,000 | 5,256,000,000 | ||||||||||||||||||
Certificates of deposit | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Deposits | $ 7,526,000,000 | $ 8,395,100,000 | ||||||||||||||||||
Certificates of deposit | Comenity Bank and Comenity Capital Bank | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Weighted average interest rate (as a percent) | 1.86% | 2.44% | 2.44% | |||||||||||||||||
Money market deposits | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Money market deposits | $ 3,429,400,000 | $ 3,424,300,000 | ||||||||||||||||||
Debt instrument description of Variable rate basis | Federal Funds rate | |||||||||||||||||||
Money market deposits | Comenity Bank and Comenity Capital Bank | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Money market deposits | $ 3,400,000 | $ 3,400,000,000 | ||||||||||||||||||
Weighted average interest rate (as a percent) | 1.82% | 2.59% | 2.59% | |||||||||||||||||
Non-recourse borrowings of consolidated securitization entities | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Less: Unamortized discount and debt issuance costs | $ 12,400,000 | $ 11,600,000 | ||||||||||||||||||
Total non-recourse borrowings of consolidated securitization entities | 8,819,700,000 | 7,663,300,000 | ||||||||||||||||||
Less: Current portion | 1,339,900,000 | 2,717,600,000 | ||||||||||||||||||
Long-term portion | 7,467,400,000 | 4,934,100,000 | ||||||||||||||||||
Fixed rate asset-backed term note securities | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Total non-recourse borrowings of consolidated securitization entities | 4,704,700,000 | 4,893,300,000 | ||||||||||||||||||
Floating rate asset-backed term note securities | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Total non-recourse borrowings of consolidated securitization entities | 360,000,000 | |||||||||||||||||||
Conduit asset-backed securities | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Maximum borrowing capacity | 4,500,000,000 | |||||||||||||||||||
Total non-recourse borrowings of consolidated securitization entities | $ 3,755,000,000 | 2,770,000,000 | ||||||||||||||||||
Line of credit amount outstanding | 2,800,000,000 | |||||||||||||||||||
Debt instrument description of Variable rate basis | LIBOR | LIBOR | ||||||||||||||||||
Number of facilities | item | 3 | |||||||||||||||||||
Conduit facility under Master Trust I | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Maximum borrowing capacity | $ 1,180,000,000 | $ 800,000,000 | ||||||||||||||||||
Master Trust I | Series 2019-A asset backed term notes | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Principal amount of debt | $ 562,500,000 | |||||||||||||||||||
Retained amount of subordinated class of notes | 25,300,000 | |||||||||||||||||||
Master Trust I | Series 2018-A asset backed term notes | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Principal amount of debt | 591,500,000 | |||||||||||||||||||
Master Trust I | Series 2018-B asset backed term notes | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Principal amount of debt | $ 337,500,000 | |||||||||||||||||||
Retained amount of subordinated class of notes | 15,200,000 | |||||||||||||||||||
Master Trust I | Series 2018-C asset backed term notes | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Principal amount of debt | $ 337,500,000 | |||||||||||||||||||
Retained amount of subordinated class of notes | 15,200,000 | |||||||||||||||||||
Master Trust I | Class A notes | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Principal amount of debt | $ 500,000,000 | $ 300,000,000 | $ 300,000,000 | $ 525,000,000 | ||||||||||||||||
Interest Rate (as a percent) | 3.14% | 3.55% | 3.46% | 3.07% | ||||||||||||||||
Retained amount of subordinated class of notes | $ 66,500,000 | |||||||||||||||||||
Master Trust I | Class M notes | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Principal amount of debt | $ 37,200,000 | $ 22,300,000 | $ 22,300,000 | |||||||||||||||||
Interest Rate (as a percent) | 3.61% | 3.95% | 3.81% | |||||||||||||||||
Conduit facility under Master Trust III | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Maximum borrowing capacity | $ 1,300,000,000 | $ 1,680,000,000 | ||||||||||||||||||
Long-term and other debt | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Total long-term and other debt | $ 6,136,000,000 | 5,777,300,000 | ||||||||||||||||||
Less: Unamortized discount and debt issuance costs | 56,400,000 | 39,400,000 | ||||||||||||||||||
Less: Current portion | 131,300,000 | 144,500,000 | ||||||||||||||||||
Long-term and other debt | 5,948,300,000 | 5,593,400,000 | ||||||||||||||||||
Senior Notes Due 2020 | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Total long-term and other debt | 500,000,000 | |||||||||||||||||||
Interest Rate (as a percent) | 6.375% | |||||||||||||||||||
Debt repaid by the company | $ 500,000,000 | |||||||||||||||||||
Senior Notes Due 2021 | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Principal amount of debt | $ 500,000,000 | |||||||||||||||||||
Total long-term and other debt | 500,000,000 | $ 500,000,000 | ||||||||||||||||||
Interest Rate (as a percent) | 5.875% | 5.875% | 5.875% | |||||||||||||||||
Senior Notes Due August 2022 | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Total long-term and other debt | 600,000,000 | $ 600,000,000 | $ 600,000,000 | |||||||||||||||||
Interest Rate (as a percent) | 5.375% | 5.375% | 5.375% | |||||||||||||||||
Senior Notes Due March 2022 | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Principal amount of debt | € | € 400 | |||||||||||||||||||
Total long-term and other debt | 479,900,000 | € 400 | $ 458,800,000 | € 400 | ||||||||||||||||
Interest Rate (as a percent) | 4.50% | 4.50% | 4.50% | |||||||||||||||||
Senior Notes Due 2023 | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Principal amount of debt | € | € 300 | |||||||||||||||||||
Total long-term and other debt | 359,900,000 | € 300 | $ 344,100,000 | € 300 | ||||||||||||||||
Interest Rate (as a percent) | 5.25% | 5.25% | 5.25% | |||||||||||||||||
2017 revolving line of credit | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Maximum borrowing capacity | $ 1,572,400,000 | |||||||||||||||||||
Total long-term and other debt | 475,000,000 | $ 740,000,000 | ||||||||||||||||||
Weighted average interest rate (as a percent) | 4.22% | 4.22% | ||||||||||||||||||
Total availability under Credit Facility | $ 832,400,000 | |||||||||||||||||||
Debt instrument description of Variable rate basis | LIBOR | |||||||||||||||||||
2017 Credit Agreement, U.S. sublimit for Canadian Dollar Borrowings | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Maximum borrowing capacity | 65,000,000 | |||||||||||||||||||
2017 Credit Agreement, sublimit for swing line loans | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Maximum borrowing capacity | 65,000,000 | |||||||||||||||||||
2017 Credit Agreement, uncommitted accordion feature | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Maximum borrowing capacity | 750,000,000 | |||||||||||||||||||
2017 Term Loans | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Principal amount of debt | 3,052,600,000 | |||||||||||||||||||
Total long-term and other debt | 3,014,400,000 | $ 2,938,100,000 | ||||||||||||||||||
Weighted average interest rate (as a percent) | 4.27% | 4.27% | ||||||||||||||||||
Aggregate principal payments as a percentage of the initial term loan amount in each of the first and second year payable in equal quarterly installments | 2.50% | |||||||||||||||||||
Aggregate principal payments as a percentage of the initial term loan amount in each of the third, fourth and fifth year of the term loan equal quarterly installments | 5.00% | |||||||||||||||||||
Capital lease obligations and other debt | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Total long-term and other debt | 8,800,000 | $ 12,600,000 | ||||||||||||||||||
BrandLoyalty credit facility | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Total long-term and other debt | $ 198,000,000 | $ 183,700,000 | ||||||||||||||||||
Weighted average interest rate (as a percent) | 1.22% | 1.22% | ||||||||||||||||||
Debt instrument description of Variable rate basis | Euro Interbank Offered Rate | |||||||||||||||||||
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) | 1.25% | 1.25% | ||||||||||||||||||
Minimum | Certificates of deposit | Comenity Bank and Comenity Capital Bank | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Interest Rate (as a percent) | 1.00% | 1.25% | 1.25% | |||||||||||||||||
Denomination amount of certificate of deposits | $ 1,000 | |||||||||||||||||||
Minimum | Money market deposits | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Interest Rate (as a percent) | 1.90% | 1.90% | ||||||||||||||||||
Minimum | Money market deposits | Comenity Bank and Comenity Capital Bank | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Interest Rate (as a percent) | 1.26% | 1.90% | 1.90% | |||||||||||||||||
Minimum | Fixed rate asset-backed term note securities | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Interest Rate (as a percent) | 1.72% | 1.72% | ||||||||||||||||||
Minimum | Conduit asset-backed securities | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Interest Rate (as a percent) | 3.48% | 3.48% | ||||||||||||||||||
Minimum | Capital lease obligations and other debt | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Interest Rate (as a percent) | 2.90% | 2.90% | ||||||||||||||||||
Maximum | Certificates of deposit | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Interest Rate (as a percent) | 4.00% | 4.00% | ||||||||||||||||||
Maximum | Certificates of deposit | Comenity Bank and Comenity Capital Bank | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Interest Rate (as a percent) | 2.80% | 4.00% | 4.00% | |||||||||||||||||
Denomination amount of certificate of deposits | $ 100,000 | |||||||||||||||||||
Maximum | Money market deposits | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Interest Rate (as a percent) | 2.71% | 2.71% | ||||||||||||||||||
Maximum | Money market deposits | Comenity Bank and Comenity Capital Bank | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Interest Rate (as a percent) | 2.37% | 2.71% | 2.71% | |||||||||||||||||
Maximum | Fixed rate asset-backed term note securities | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Interest Rate (as a percent) | 3.95% | 3.95% | ||||||||||||||||||
Maximum | Conduit asset-backed securities | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Interest Rate (as a percent) | 3.79% | 3.79% | ||||||||||||||||||
Maximum | Capital lease obligations and other debt | ||||||||||||||||||||
Debt | ||||||||||||||||||||
Interest Rate (as a percent) | 4.98% | 4.98% |
DERIVATIVE INSTRUMENTS - Design
DERIVATIVE INSTRUMENTS - Designated and Not Designated Instruments (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 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 | |
Maximum length of time hedged in cash flow hedge | 11 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 | $ 5.2 | $ 2.9 |
Fair Value | 0.3 | 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 | 20.3 | 19.3 |
Fair Value | 0.3 | 0.3 |
Not 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 | 61.6 | 168 |
Fair Value | $ 3.5 | 15.9 |
Not 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 | 65.8 | |
Fair Value | $ 3.5 |
DERIVATIVE INSTRUMENTS - Activi
DERIVATIVE INSTRUMENTS - Activity and Location of Outstanding Derivatives (Details) € in Millions, $ in Millions | 12 Months Ended | ||||||
Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Dec. 31, 2018EUR (€) | Feb. 28, 2018EUR (€) | Mar. 31, 2017 | Nov. 30, 2015 | |
Activity related to company's outstanding derivative contracts and location | |||||||
Gains (losses) related to foreign exchange hedges designated as effective | $ (0.1) | $ (0.5) | $ (0.9) | ||||
Ineffectiveness recorded | 0.1 | 0.1 | |||||
Amount expected to be reclassified in the coming 12 months | 0.2 | ||||||
Unrealized gain (loss) on net investment hedges | 29.6 | (46.1) | 7.9 | ||||
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% | 5.25% | |||||
Senior Notes Due March 2022 | |||||||
Activity related to company's outstanding derivative contracts and location | |||||||
Principal amount of debt | € | € 400 | ||||||
Interest Rate (as a percent) | 4.50% | 4.50% | |||||
Not designated as hedging instrument. | BrandLoyalty term loans | |||||||
Activity related to company's outstanding derivative contracts and location | |||||||
Hedged amount | € | € 500 | ||||||
Cost of operations | |||||||
Activity related to company's outstanding derivative contracts and location | |||||||
Reclassifications out of accumulated other comprehensive income (loss) into net income | 0.2 | 0.2 | 0.6 | ||||
Net investment hedge | |||||||
Activity related to company's outstanding derivative contracts and location | |||||||
Ineffectiveness recorded | 0 | 0 | 0 | ||||
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 | $ 10.6 | $ 12.5 | $ (0.1) |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Cardholders (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
AIR MILES Reward Program | |||
Letters of credit and other assurances | $ 128.7 | ||
Leases | |||
Lease expense | 111.8 | $ 128.7 | $ 111.3 |
Operating Leases - Future Minimum Payments | |||
2,019 | 91.7 | ||
2,020 | 85.4 | ||
2,021 | 72 | ||
2,022 | 63.2 | ||
2,023 | 58.5 | ||
Thereafter | 324.7 | ||
Total | 695.5 | ||
Capital Leases - Future Minimum Payments | |||
2,019 | 6 | ||
2,020 | 3.5 | ||
2,021 | 2.9 | ||
2,022 | 1 | ||
Total | 13.4 | ||
Less Amount representing interest | (0.8) | ||
Total present value of minimum lease payments | $ 12.6 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES - Litigation and Regulatory Matters (Details) item in Millions | Dec. 31, 2018USD ($)item | Dec. 31, 2017 |
Cardholders | ||
Approximate number of cardholders | item | 59.4 | |
Average unused lines of credit per account | $ | $ 2,210 | |
Comenity Bank | ||
Tier 1 capital to average assets | ||
Tier 1 capital to average assets, Actual Ratio (as a prcent) | 13.10% | 12.30% |
Tier 1 capital to average assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 4.00% | 4.00% |
Tier 1 capital to average assets, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions | 5.00% | 5.00% |
Common Equity Tier 1 capital to risk-weighted assets | ||
Common Equity Tier 1 capital to risk-weighted assets, Actual Ratio (as a percent) | 14.60% | 13.50% |
Common Equity Tier 1 capital to risk-weighted assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 4.50% | 4.50% |
Common Equity Tier 1 capital to risk-weighted assets, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent) | 6.50% | 6.50% |
Risk Based Ratios [Abstract] | ||
Tier 1 capital to risk-weighted assets, Actual Ratio (as a percent) | 14.60% | 13.50% |
Tier 1 capital to risk-weighted assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 6.00% | 6.00% |
Tier 1 capital to risk-weighted assets, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent) | 8.00% | 8.00% |
Total capital to risk-weighted assets, Actual Ratio (as a percent) | 15.90% | 14.80% |
Total capital to risk-weighted assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 8.00% | 8.00% |
Total capital to risk-weighted assets, Minimum Ratio to be Well Capitalized under prompt Corrective Action Provisions (as a percent) | 10.00% | 10.00% |
Comenity Capital Bank | ||
Tier 1 capital to average assets | ||
Tier 1 capital to average assets, Actual Ratio (as a prcent) | 12.10% | 12.40% |
Tier 1 capital to average assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 4.00% | 4.00% |
Tier 1 capital to average assets, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions | 5.00% | 5.00% |
Common Equity Tier 1 capital to risk-weighted assets | ||
Common Equity Tier 1 capital to risk-weighted assets, Actual Ratio (as a percent) | 14.40% | 14.00% |
Common Equity Tier 1 capital to risk-weighted assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 4.50% | 4.50% |
Common Equity Tier 1 capital to risk-weighted assets, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent) | 6.50% | 6.50% |
Risk Based Ratios [Abstract] | ||
Tier 1 capital to risk-weighted assets, Actual Ratio (as a percent) | 14.40% | 14.00% |
Tier 1 capital to risk-weighted assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 6.00% | 6.00% |
Tier 1 capital to risk-weighted assets, Minimum Ratio to be Well Capitalized under Prompt Corrective Action Provisions (as a percent) | 8.00% | 8.00% |
Total capital to risk-weighted assets, Actual Ratio (as a percent) | 15.70% | 15.30% |
Total capital to risk-weighted assets, Minimum Ratio for Capital Adequacy Purposes (as a percent) | 8.00% | 8.00% |
Total capital to risk-weighted assets, Minimum Ratio to be Well Capitalized under prompt Corrective Action Provisions (as a percent) | 10.00% | 10.00% |
STOCKHOLDERS' EQUITY - Stock Re
STOCKHOLDERS' EQUITY - Stock Repurchase Programs (Details) - USD ($) $ in Millions | 1 Months Ended | 12 Months Ended | |||||||||
Jul. 31, 2017 | Feb. 29, 2016 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Jul. 31, 2018 | Jul. 26, 2018 | Jan. 31, 2017 | Jan. 31, 2016 | Jul. 01, 2015 | Jul. 01, 2010 | |
Stock Repurchase Programs | |||||||||||
Number of shares repurchased | 2,200,000 | 2,300,000 | 3,800,000 | ||||||||
Total cost of shares repurchased | $ 443.2 | $ 553.7 | $ 805.7 | ||||||||
2016 Stock Repurchase Program | |||||||||||
Stock Repurchase Programs | |||||||||||
Amount of company's outstanding common stock authorized to be repurchased | $ 1,000 | $ 500 | |||||||||
Increase to authorized amount under stock repurchase program | $ 500 | ||||||||||
2017 Stock Repurchase Program | |||||||||||
Stock Repurchase Programs | |||||||||||
Amount of company's outstanding common stock authorized to be repurchased | $ 1,000 | $ 500 | |||||||||
Increase to authorized amount under stock repurchase program | $ 500 | ||||||||||
Number of shares repurchased | 800,000 | ||||||||||
Total cost of shares repurchased | $ 166 | ||||||||||
Amount remaining of a stock repurchase plan that expired | $ 280.3 | ||||||||||
2018 Stock Repurchase Program | |||||||||||
Stock Repurchase Programs | |||||||||||
Amount of company's outstanding common stock authorized to be repurchased | $ 500 | ||||||||||
Number of shares repurchased | 1,400,000 | ||||||||||
Total cost of shares repurchased | $ 277.2 | ||||||||||
Unused balance under stock repurchase program | $ 222.8 | ||||||||||
2010 Omnibus Incentive Plan | |||||||||||
Stock Compensation Plans | |||||||||||
Shares of common stock reserved for grant | 3,000,000 | ||||||||||
2015 Omnibus Incentive Plan | |||||||||||
Stock Compensation Plans | |||||||||||
Shares of common stock reserved for grant | 5,100,000 |
STOCKHOLDERS' EQUITY - Stock Co
STOCKHOLDERS' EQUITY - Stock Compensation Plans (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs | |||
Stock-based compensation expense | $ 80.8 | $ 75.1 | $ 76.5 |
Forfeiture rate (as a percent) | 5.00% | 5.00% | 5.00% |
Unrecognized expenses | $ 88.6 | ||
Approximate weighted average period for recognizing expenses | 1 year 4 months 24 days | ||
Income tax benefits related to stock-based compensation expense | $ 15.4 | $ 15.6 | $ 22.7 |
Cost of operations. | |||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs | |||
Stock-based compensation expense | 57.5 | 50.3 | 56 |
General and administrative | |||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs | |||
Stock-based compensation expense | $ 23.3 | $ 24.8 | $ 20.5 |
STOCKHOLDERS' EQUITY - Restrict
STOCKHOLDERS' EQUITY - Restricted Stock Unit Awards and Stock Options (Details) - USD ($) $ / shares in Units, $ in Millions | Feb. 07, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Weighted Average Exercise Price | |||||||
Outstanding beginning of period (in dollars per share) | $ 23.87 | $ 37.60 | $ 49.84 | ||||
Options exercised (in dollars per share) | 12.70 | 60.85 | 54.21 | ||||
Options forfeited (in dollars per share) | 2.74 | 35.56 | 20.16 | ||||
Balance at end of period (in dollars per share) | $ 25.01 | $ 23.87 | 25.01 | 23.87 | 37.60 | ||
Vested and Expected to Vest (in dollars per share) | 25.01 | 25.01 | |||||
Dividends | |||||||
Dividends declared per share | $ 0.63 | $ 0.57 | $ 0.52 | $ 2.28 | $ 2.08 | $ 0.52 | |
Dividends declared | $ 125.9 | $ 116.4 | $ 125.9 | $ 116.4 | $ 30 | ||
Dividends paid | 125.2 | 115.5 | 125.2 | 115.5 | $ 30 | ||
Dividend equivalents accrued but not yet paid | $ 0.7 | $ 0.9 | $ 0.7 | $ 0.9 | |||
Restricted stock units | |||||||
Fair Value Assumptions | |||||||
Price correlation | 0.43% | 0.43% | |||||
Expected volatility | 27.10% | ||||||
Risk-free interest rate | 2.20% | ||||||
Risk-free interest rate time period | 2 years | ||||||
Number of Shares | |||||||
Balance at the beginning of the period (in shares) | 807,810 | 776,697 | 721,904 | ||||
Shares granted (in shares) | 429,759 | 436,534 | 452,492 | ||||
Shares vested (in shares) | (319,503) | (285,652) | (329,433) | ||||
Shares forfeited (in shares) | (121,154) | (119,769) | (68,266) | ||||
Balance at the end of the period (in shares) | 796,912 | 807,810 | 796,912 | 807,810 | 776,697 | ||
Outstanding and Expected to Vest (in shares) | 703,186 | 703,186 | |||||
Weighted Average Fair Value | |||||||
Balance at the beginning of the period (in dollars per share) | $ 207.45 | $ 216.89 | $ 238.37 | ||||
Shares granted (in dollars per share) | 233.98 | 229.37 | 195.97 | ||||
Shares vested (in dollars per share) | 224.62 | 248.70 | 230.21 | ||||
Shares forfeited (in dollars per share) | 227.66 | 211.69 | 246.28 | ||||
Balance at the end of the period (in dollars per share) | $ 218.81 | $ 207.45 | 218.81 | $ 207.45 | $ 216.89 | ||
Outstanding and Expected to Vest (in dollars per share) | $ 239.98 | $ 239.98 | |||||
Restricted stock, additional disclosures | |||||||
Total fair value of units vested | $ 71.8 | $ 71 | $ 75.8 | ||||
Aggregate intrinsic value of units outstanding and expected to vest | $ 105.5 | $ 105.5 | |||||
Weighted-average remaining contractual life | 1 year 4 months 24 days | ||||||
Market-based restricted stock unit awards | |||||||
Number of Shares | |||||||
Balance at the beginning of the period (in shares) | 28,172 | ||||||
Shares granted (in shares) | 28,057 | 28,172 | |||||
Balance at the end of the period (in shares) | 56,229 | 28,172 | 56,229 | 28,172 | |||
Performance-based restricted stock unit awards | |||||||
Number of Shares | |||||||
Balance at the beginning of the period (in shares) | 450,579 | 444,319 | 446,366 | ||||
Shares granted (in shares) | 263,542 | 282,311 | 277,036 | ||||
Shares vested (in shares) | (188,680) | (188,929) | (233,604) | ||||
Shares forfeited (in shares) | (102,199) | (87,122) | (45,479) | ||||
Balance at the end of the period (in shares) | 423,242 | 450,579 | 423,242 | 450,579 | 444,319 | ||
Restricted stock, additional disclosures | |||||||
Number of cancelled 2016 performance-based shares | 50,215 | ||||||
Stock Compensation Plans, Additional Disclosures | |||||||
Award vesting period | 3 years | ||||||
Service-based restricted stock unit awards | |||||||
Number of Shares | |||||||
Balance at the beginning of the period (in shares) | 329,059 | 332,378 | 275,538 | ||||
Shares granted (in shares) | 138,160 | 126,051 | 175,456 | ||||
Shares vested (in shares) | (130,823) | (96,723) | (95,829) | ||||
Shares forfeited (in shares) | (18,955) | (32,647) | (22,787) | ||||
Balance at the end of the period (in shares) | 317,441 | 329,059 | 317,441 | 329,059 | 332,378 | ||
Stock Compensation Plans, Additional Disclosures | |||||||
Award vesting period | 3 years | ||||||
Employee Stock Options | |||||||
Stock Compensation Plans, Additional Disclosures | |||||||
Award vesting period | 3 years | ||||||
Expiration period for awards granted | 10 years | ||||||
Stock option activity | |||||||
Balance at the beginning of the period (in shares) | 11,859 | 18,866 | 73,360 | ||||
Options exercised (in shares) | (886) | (7,004) | (54,275) | ||||
Options forfeited (in shares) | (119) | (3) | (219) | ||||
Balance at the end of the period (in shares) | 10,854 | 11,859 | 10,854 | 11,859 | 18,866 | ||
Vested and Expected to vest (in shares) | 10,854 | 10,854 | |||||
Exercisable, Options (in shares) | 10,854 | 11,859 | 10,854 | 11,859 | 18,864 | 73,053 | |
Weighted Average Exercise Price | |||||||
Exercisable (in dollars per share) | $ 25.01 | $ 23.87 | $ 25.01 | $ 23.87 | $ 37.60 | $ 49.96 | |
Stock options activity, additional disclosures | |||||||
Total intrinsic value of stock options exercised | $ 0.2 | $ 1.2 | $ 8.5 | ||||
Aggregate intrinsic value of stock options outstanding | $ 1.4 | $ 1.4 | |||||
Weighted average remaining contractual life of stock options vested and exercisable | 2 years 1 month 6 days |
EMPLOYEE BENEFIT PLANS (Details
EMPLOYEE BENEFIT PLANS (Details) - USD ($) | Jun. 05, 2015 | Jun. 30, 2015 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Jul. 01, 2015 | Jul. 20, 2001 |
2015 Omnibus Incentive Plan | |||||||
Maximum cash amount that may be awarded to any single participant | $ 7,500,000 | ||||||
Retirement Savings Plan | |||||||
Retirement Plans | |||||||
Number of shares registered for issuance | 1,500,000 | ||||||
Number of shares available for issuance | 518,604 | ||||||
Minimum age limit of employees covered by the plan | 18 years | ||||||
Service period after which seasonal employees begin receiving employer matching contribution | 12 months | ||||||
Service period after which employees begin receiving employer matching contribution | 180 days | ||||||
Percentage of employees' contribution matched by dollar-to-dollar contribution by employer | 5.00% | ||||||
Company's matching and discretionary contributions | $ 44,800,000 | $ 41,600,000 | $ 38,000,000 | ||||
Group Retirement Savings Plan And Deferred Profit Sharing Plan | LoyaltyOne | |||||||
Retirement Plans | |||||||
Company's matching and discretionary contributions | $ 1,700,000 | 1,900,000 | 1,800,000 | ||||
Group Retirement Savings Plan | LoyaltyOne | |||||||
Retirement Plans | |||||||
Service period after which full-time employees begin receiving company matching contribution | 3 months | ||||||
Service period after which part-time employees begin receiving company matching contribution | 6 months | ||||||
Deferred Profit Sharing Plan | LoyaltyOne | |||||||
Retirement Plans | |||||||
Service period after which contributions vest | 1 year | ||||||
Service period after which employees begin receiving employer matching contribution | 12 months | ||||||
Percentage of employees' contribution matched by dollar-to-dollar contribution by employer | 5.00% | ||||||
Executive Deferred Compensastion Plan | |||||||
Retirement Plans | |||||||
Deferred compensation liability | $ 63,200,000 | $ 55,300,000 | |||||
2005 Employee Stock Purchase Plan | Retirement Savings Plan | |||||||
Retirement Plans | |||||||
Number of shares available for issuance | 441,327 | ||||||
2015 Employee Stock Purchase Plan | |||||||
Employee Stock Purchase Plan | |||||||
Maximum amount of common stock permitted to be purchased annually per employee | $ 25,000 | ||||||
Maximum percentage of voting power after purchase of common stock under ESPP | 5.00% | ||||||
Offering period under ESPP | 6 months | ||||||
Purchase price of common stock as a percentage of fair market value of shares | 85.00% | ||||||
Maximum number of shares reserved for issuance under the ESPP | 1,441,327 | ||||||
Number of shares registered for issuance | 1,441,327 | ||||||
Number of shares issued under the ESPP | 109,414 | ||||||
Weighted-average issue price of shares issued under the ESPP (in dollars per share) | $ 160.41 | ||||||
Number of shares issued under the ESPP since the inception of the plan | 341,515 | ||||||
Retirement Plans | |||||||
Number of shares available for issuance | 1,099,812 | 1,000,000 |
ACCUMULATED OTHER COMPREHENSI_3
ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Jan. 01, 2018 | |
Accumulated Other Comprehensive Income | ||||
Balance at the beginning of the period | $ (140.2) | |||
Changes in other comprehensive income (loss) | 2.1 | $ 10.5 | $ (13.4) | |
Balance at the end of the period | (138.1) | (140.2) | ||
Accounting Standards Update ASU 2016-01 | ||||
Accumulated Other Comprehensive Income | ||||
Cumulative effect adjustment to retained earnings | (1.5) | $ (1.5) | ||
Net Unrealized Gains (Losses) on Securities. | ||||
Accumulated Other Comprehensive Income | ||||
Balance at the beginning of the period | (8.7) | (1.6) | (0.1) | |
Changes in other comprehensive income (loss) | (2) | (7.1) | (1.5) | |
Balance at the end of the period | (10.7) | (8.7) | (1.6) | |
Unrealized Gains (Losses) on Cash Flow Hedges. | ||||
Accumulated Other Comprehensive Income | ||||
Balance at the beginning of the period | (0.1) | 0.4 | 1.3 | |
Changes in other comprehensive income (loss) | (0.1) | (0.5) | (0.9) | |
Balance at the end of the period | (0.2) | (0.1) | 0.4 | |
Unrealized Gains (Losses) on Net Investment Hedge. | ||||
Accumulated Other Comprehensive Income | ||||
Balance at the beginning of the period | (42) | 4.1 | (3.8) | |
Changes in other comprehensive income (loss) | 29.6 | (46.1) | 7.9 | |
Balance at the end of the period | (12.4) | (42) | 4.1 | |
Foreign Currency Translation Adjustments. | ||||
Accumulated Other Comprehensive Income | ||||
Balance at the beginning of the period | (89.4) | (153.6) | (134.7) | |
Changes in other comprehensive income (loss) | (25.4) | 64.2 | (18.9) | |
Balance at the end of the period | (114.8) | (89.4) | (153.6) | |
Accumulated Other Comprehensive Income. | ||||
Accumulated Other Comprehensive Income | ||||
Balance at the beginning of the period | (140.2) | (150.7) | (137.3) | |
Changes in other comprehensive income (loss) | 2.1 | 10.5 | (13.4) | |
Balance at the end of the period | $ (138.1) | $ (140.2) | $ (150.7) |
INCOME TAXES - Components of In
INCOME TAXES - Components of Income Tax and Reconciliation and Deferred Taxes (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Components of income before income taxes: | |||||||||||
Domestic | $ 1,046.6 | $ 889.9 | $ 864.1 | ||||||||
Foreign | 177.1 | 191.2 | (27.1) | ||||||||
Income before income taxes | $ 397.4 | $ 353.1 | $ 254.6 | $ 218.6 | $ 306.4 | $ 333.6 | $ 213.9 | $ 227.2 | 1,223.7 | 1,081.1 | 837 |
Current | |||||||||||
Federal | 130.2 | 316.7 | 269.8 | ||||||||
State | 61.1 | 30.3 | 42.2 | ||||||||
Foreign | 53 | 59.2 | 38.2 | ||||||||
Total current | 244.3 | 406.2 | 350.2 | ||||||||
Deferred | |||||||||||
Federal | 56.1 | (96.7) | 2.2 | ||||||||
State | 18.2 | 1 | 2.4 | ||||||||
Foreign | (58) | (18.1) | (35.4) | ||||||||
Total deferred | 16.3 | (113.8) | (30.8) | ||||||||
Total provision for income taxes | 112.5 | 56.6 | 36.8 | 54.7 | 35 | 100.4 | 76.2 | 80.8 | $ 260.6 | $ 292.4 | 319.4 |
Federal statutory rate (as a percent) | 21.00% | 35.00% | |||||||||
Reconciliation of recorded federal provision for income taxes to the expected amount computed by applying the federal statutory rate | |||||||||||
Expected expense at statutory rate | $ 257 | $ 378.4 | 292.9 | ||||||||
Increase (decrease) in income taxes resulting from: | |||||||||||
State income taxes, net of federal benefit | 62.6 | 19.5 | 29 | ||||||||
Foreign rate differential | 10.4 | (27.5) | (1.3) | ||||||||
Foreign restructuring | (48) | ||||||||||
Impact of 2017 Tax Reform | (29.7) | (64.9) | |||||||||
Non-deductible expenses (non-taxable income) | 3.4 | (5.8) | 1.5 | ||||||||
Other | 4.9 | (7.3) | (2.7) | ||||||||
Total provision for income taxes | 112.5 | $ 56.6 | $ 36.8 | $ 54.7 | 35 | $ 100.4 | $ 76.2 | $ 80.8 | 260.6 | 292.4 | $ 319.4 |
Deferred tax assets | |||||||||||
Deferred revenue | 10.6 | 18.5 | 10.6 | 18.5 | |||||||
Allowance for doubtful accounts | 267 | 282.4 | 267 | 282.4 | |||||||
Net operating loss carryforwards and other carryforwards | 60.8 | 97 | 60.8 | 97 | |||||||
Stock-based compensation and other employee benefits | 24.4 | 23.2 | 24.4 | 23.2 | |||||||
Accrued expenses and other | 66.3 | 84.5 | 66.3 | 84.5 | |||||||
Total deferred tax assets | 429.1 | 505.6 | 429.1 | 505.6 | |||||||
Valuation allowance | (36.3) | (76.4) | (36.3) | (76.4) | |||||||
Deferred tax assets, net of valuation allowance | 392.8 | 429.2 | 392.8 | 429.2 | |||||||
Deferred tax liabilities | |||||||||||
Deferred income | 409.8 | 364.3 | 409.8 | 364.3 | |||||||
Depreciation | 79.2 | 37.9 | 79.2 | 37.9 | |||||||
Intangible assets | 113.4 | 210.1 | 113.4 | 210.1 | |||||||
Total deferred tax liabilities | 602.4 | 612.3 | 602.4 | 612.3 | |||||||
Total - Net deferred tax liability | (209.6) | (183.1) | (209.6) | (183.1) | |||||||
Amounts recognized in the consolidated balance sheets: | |||||||||||
Non-current assets | 47 | 28.1 | 47 | 28.1 | |||||||
Non-current deferred tax liabilities | (256.6) | (211.2) | (256.6) | (211.2) | |||||||
Total - Net deferred tax liability | (209.6) | (183.1) | (209.6) | (183.1) | |||||||
Recently Adopted Accounting Standards | |||||||||||
Deferred tax asset, net | 47 | 28.1 | 47 | 28.1 | |||||||
Non-current deferred tax liabilities | $ 256.6 | $ 211.2 | $ 256.6 | $ 211.2 |
INCOME TAXES - Operating Loss C
INCOME TAXES - Operating Loss Carryforward (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Operating Loss, Carryforwards | |||
Foreign tax credit carryforwards | $ 3.1 | ||
Foreign net operating loss carryforwards | 128.1 | ||
Tax impact resulting from exercise of employee stock options and other employee stock program | $ (1.7) | ||
Increase (decrease) in valuation allowance | (40.1) | $ 31.7 | 2.5 |
Undistributed earnings of foreign subsidiaries | 146.8 | ||
Reconciliation of unrecognized tax benefits | |||
Balance at the beginning of the period | 208.3 | 192 | 156.6 |
Increases related to prior years' tax positions | 41.3 | 9.3 | 22.5 |
Decreases related to prior years' tax positions | (9.6) | (15.7) | (12.1) |
Increases related to current year tax positions | 61.5 | 33 | 31.4 |
Settlements during the period | (1) | (6.7) | (3.1) |
Lapses of applicable statutes of limitation | (4.2) | (3.6) | (3.3) |
Balance at the end of the period | 296.3 | 208.3 | 192 |
Cumulative interest and penalties with respect to unrecognized tax benefits | 66.7 | 41.6 | 39.4 |
Potential interest and penalties with respect to unrecognized tax benefits | 24.4 | 5.5 | 8.1 |
Unrecognized tax benefits, if recognized, would impact effective tax rate | 247.7 | 170 | 121.4 |
Senior Notes Due 2022 and 2023 | |||
Operating Loss, Carryforwards | |||
Income tax expenses (benefit) related to foreign rate changes | 9.5 | $ (26.2) | $ 2.4 |
Maximum | |||
Reconciliation of unrecognized tax benefits | |||
Decrease in unrecognized tax benefits within the next 12 months | 70 | ||
Capital losses | |||
Operating Loss, Carryforwards | |||
Foreign net operating loss carryforwards | 4.1 | ||
Federal | |||
Operating Loss, Carryforwards | |||
Net operating loss carryovers | 15.7 | ||
Foreign | |||
Operating Loss, Carryforwards | |||
Tax credits | 33.8 | ||
State | |||
Operating Loss, Carryforwards | |||
Net operating loss carryovers | 363.7 | ||
Tax credits | $ 10 |
FINANCIAL INSTRUMENTS - Fair Va
FINANCIAL INSTRUMENTS - Fair Value of Instruments (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Financial assets | ||
Credit card and loan receivables, net | $ 16,816.7 | $ 17,494.5 |
Credit card and loan receivables held for sale | 1,951.6 | 1,026.3 |
Redemption settlement assets, restricted | 558.6 | 589.5 |
Other investments | 291.3 | 254.9 |
Financial liabilities | ||
Deposits | 11,768.7 | 10,937.1 |
Non-recourse borrowings of consolidated securitization entities | 7,626.9 | 8,805.3 |
Long-term and other debt | 5,767.8 | 6,186.4 |
Carrying Amount | ||
Financial assets | ||
Credit card and loan receivables, net | 16,816.7 | 17,494.5 |
Credit card and loan receivables held for sale | 1,951.6 | 1,026.3 |
Redemption settlement assets, restricted | 558.6 | 589.5 |
Other investments | 291.3 | 254.9 |
Derivative instruments | 3.8 | 16 |
Financial liabilities | ||
Derivative instruments | 0.3 | 3.8 |
Deposits | 11,793.7 | 10,930.9 |
Non-recourse borrowings of consolidated securitization entities | 7,651.7 | 8,807.3 |
Long-term and other debt | 5,737.9 | 6,079.6 |
Fair Value. | ||
Financial assets | ||
Credit card and loan receivables, net | 17,472.7 | 18,427.8 |
Credit card and loan receivables held for sale | 1,995.5 | 1,067.6 |
Redemption settlement assets, restricted | 558.6 | 589.5 |
Other investments | 291.3 | 254.9 |
Derivative instruments | 3.8 | 16 |
Financial liabilities | ||
Derivative instruments | 0.3 | 3.8 |
Deposits | 11,768.7 | 10,937.1 |
Non-recourse borrowings of consolidated securitization entities | 7,626.9 | 8,805.3 |
Long-term and other debt | $ 5,767.8 | $ 6,186.4 |
FINANCIAL INSTRUMENTS - Fair _2
FINANCIAL INSTRUMENTS - Fair Value Level Disclosure (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Assets disclosed at fair value | ||
Marketable securities | $ 266.4 | $ 205 |
U.S. Treasury bonds | 24.9 | 49.9 |
Total assets measured at fair value | 19,468.2 | 19,495.4 |
Liabilities disclosed at fair value | ||
Total liabilities measured at fair value | 25,163.4 | 25,928.8 |
Level 2 | ||
Liabilities disclosed at fair value | ||
Total liabilities measured at fair value | 25,163.4 | 25,928.8 |
Level 3 | ||
Assets disclosed at fair value | ||
Total assets measured at fair value | 19,468.2 | 19,495.4 |
Recurring | ||
Assets disclosed at fair value | ||
Mutual funds | 23.2 | 26 |
Corporate bonds | 491.5 | 489.2 |
Marketable securities | 266.4 | 205 |
U.S. Treasury bonds | 24.9 | 49.9 |
Derivative instruments | 3.8 | 16 |
Total assets measured at fair value | 809.8 | 786.1 |
Liabilities disclosed at fair value | ||
Derivative instruments | 0.3 | 3.8 |
Total liabilities measured at fair value | 0.3 | 3.8 |
Recurring | Level 1 | ||
Assets disclosed at fair value | ||
Mutual funds | 23.2 | 26 |
Marketable securities | 25 | 10.1 |
U.S. Treasury bonds | 24.9 | 49.9 |
Total assets measured at fair value | 73.1 | 86 |
Recurring | Level 2 | ||
Assets disclosed at fair value | ||
Corporate bonds | 491.5 | 489.2 |
Marketable securities | 241.4 | 194.9 |
Derivative instruments | 3.8 | 16 |
Total assets measured at fair value | 736.7 | 700.1 |
Liabilities disclosed at fair value | ||
Derivative instruments | 0.3 | 3.8 |
Total liabilities measured at fair value | $ 0.3 | $ 3.8 |
FINANCIAL INSTRUMENTS - Signifi
FINANCIAL INSTRUMENTS - Significant Unobservable Input Information (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 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 |
Fair value liabilities amount transfer from level 2 to level 1 | $ 0 | $ 0 |
FINANCIAL INSTRUMENTS - Assets
FINANCIAL INSTRUMENTS - Assets and Liabilities Not Carried at Fair Value (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Financial assets | ||
Credit card and loan receivables, net | $ 17,472.7 | $ 18,427.8 |
Credit card and loan receivables held for sale | 1,995.5 | 1,067.6 |
Total assets measured at fair value | 19,468.2 | 19,495.4 |
Financial liabilities | ||
Deposits | 11,768.7 | 10,937.1 |
Non-recourse borrowings of consolidated securitization entities | 7,626.9 | 8,805.3 |
Long-term and other debt | 5,767.8 | 6,186.4 |
Total liabilities measured at fair value | 25,163.4 | 25,928.8 |
Level 2 | ||
Financial liabilities | ||
Deposits | 11,768.7 | 10,937.1 |
Non-recourse borrowings of consolidated securitization entities | 7,626.9 | 8,805.3 |
Long-term and other debt | 5,767.8 | 6,186.4 |
Total liabilities measured at fair value | 25,163.4 | 25,928.8 |
Level 3 | ||
Financial assets | ||
Credit card and loan receivables, net | 17,472.7 | 18,427.8 |
Credit card and loan receivables held for sale | 1,995.5 | 1,067.6 |
Total assets measured at fair value | $ 19,468.2 | $ 19,495.4 |
PARENT-ONLY FINANCIAL STATEME_3
PARENT-ONLY FINANCIAL STATEMENTS (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Assets: | ||||||||||||
Cash and cash equivalents | $ 3,863.1 | $ 4,190 | $ 3,863.1 | $ 4,190 | $ 1,859.2 | |||||||
Total assets | 30,387.7 | 30,684.8 | 30,387.7 | 30,684.8 | 25,514.1 | |||||||
Liabilities: | ||||||||||||
Current portion of long-term and other debt | 144.5 | 131.3 | 144.5 | 131.3 | ||||||||
Total liabilities | 28,055.6 | 28,829.5 | 28,055.6 | 28,829.5 | ||||||||
Stockholders' equity | 2,332.1 | 1,855.3 | 2,332.1 | 1,855.3 | 1,658.2 | $ 2,010 | ||||||
Total liabilities and equity | 30,387.7 | 30,684.8 | 30,387.7 | 30,684.8 | ||||||||
Statements of Income | ||||||||||||
Total revenue | 2,055.9 | $ 1,947.2 | $ 1,903.9 | $ 1,884.2 | 2,106.2 | $ 1,912.4 | $ 1,821.8 | $ 1,879 | 7,791.2 | 7,719.4 | 7,138.1 | |
Interest expense, net | 176.8 | 168.9 | 165.7 | 159.2 | 156.4 | 145.3 | 137.5 | 125.2 | 670.6 | 564.4 | 428.5 | |
Income (loss) before income taxes and equity in undistributed net income of subsidiaries | 397.4 | 353.1 | 254.6 | 218.6 | 306.4 | 333.6 | 213.9 | 227.2 | 1,223.7 | 1,081.1 | 837 | |
Benefit for income taxes | (112.5) | (56.6) | (36.8) | (54.7) | (35) | (100.4) | (76.2) | (80.8) | (260.6) | (292.4) | (319.4) | |
Net income | 284.9 | 296.5 | 217.8 | 163.9 | 271.4 | 233.2 | 137.7 | 146.4 | 963.1 | 788.7 | 517.6 | |
Other comprehensive income (loss): | ||||||||||||
Net income | 284.9 | $ 296.5 | $ 217.8 | 163.9 | 271.4 | $ 233.2 | $ 137.7 | 146.4 | 963.1 | 788.7 | 517.6 | |
Other comprehensive (loss) income | 2.1 | 10.5 | (13.4) | |||||||||
Total comprehensive income, net of tax | 965.2 | 799.2 | 504.2 | |||||||||
Statements of Cash Flows | ||||||||||||
Cash flows from operating activities | 2,754.9 | 2,599.1 | 2,127.2 | |||||||||
Investing activities: | ||||||||||||
Payments for acquired businesses, net of cash acquired | (945.6) | |||||||||||
Net cash used in investing activities | (1,872) | (4,268.1) | (4,291.5) | |||||||||
Financing activities: | ||||||||||||
Borrowings under debt agreements | 4,575.3 | 7,696.7 | 3,823.7 | |||||||||
Repayments of borrowings | (4,893) | (7,341.4) | (3,222.8) | |||||||||
Payment of deferred financing costs | (25.8) | (65.7) | (33.9) | |||||||||
Purchase of treasury shares | (443.2) | (553.7) | (798.8) | |||||||||
Dividends paid | (125.2) | (115.5) | (125.2) | (115.5) | (30) | |||||||
Proceeds from issuance of common stock | 17.6 | 18.4 | 18.4 | |||||||||
Other | (31.3) | (29.3) | (22.8) | |||||||||
Net cash (used in) provided by financing activities | (1,217.9) | 4,004.9 | 2,637.4 | |||||||||
Change in cash, cash equivalents and restricted cash | (347) | 2,346.2 | 487.1 | |||||||||
Cash, cash equivalents and restricted cash at beginning of period | 4,314.7 | 1,968.5 | 4,314.7 | 1,968.5 | 1,481.4 | |||||||
Cash, cash equivalents and restricted cash at end of period | 3,967.7 | 4,314.7 | 3,967.7 | 4,314.7 | 1,968.5 | |||||||
Parent company | ||||||||||||
Assets: | ||||||||||||
Cash and cash equivalents | 0.1 | 0.1 | 0.1 | 0.1 | ||||||||
Investment in subsidiaries | 8,606 | 8,203.9 | 8,606 | 8,203.9 | ||||||||
Other assets | 20.1 | 95.3 | 20.1 | 95.3 | ||||||||
Total assets | 8,626.2 | 8,299.3 | 8,626.2 | 8,299.3 | ||||||||
Liabilities: | ||||||||||||
Current portion of long-term and other debt | 114.4 | 76.2 | 114.4 | 76.2 | ||||||||
Long-term debt | 5,427.7 | 5,797.5 | 5,427.7 | 5,797.5 | ||||||||
Intercompany liabilities | 395.9 | 177.8 | 395.9 | 177.8 | ||||||||
Other liabilities | 356.1 | 392.5 | 356.1 | 392.5 | ||||||||
Total liabilities | 6,294.1 | 6,444 | 6,294.1 | 6,444 | ||||||||
Stockholders' equity | 2,332.1 | 1,855.3 | 2,332.1 | 1,855.3 | ||||||||
Total liabilities and equity | 8,626.2 | 8,299.3 | 8,626.2 | 8,299.3 | ||||||||
Statements of Income | ||||||||||||
Interest from loans to subsidiaries | 17.9 | 13.8 | 11.8 | |||||||||
Dividends from subsidiaries | 810.1 | 360.6 | 438.4 | |||||||||
Total revenue | 828 | 374.4 | 450.2 | |||||||||
Interest expense, net | 281.2 | 278.9 | 214.9 | |||||||||
Other expenses, net | (0.4) | 12.9 | (1.3) | |||||||||
Total expenses | 280.8 | 291.8 | 213.6 | |||||||||
Income (loss) before income taxes and equity in undistributed net income of subsidiaries | 547.2 | 82.6 | 236.6 | |||||||||
Benefit for income taxes | 7 | 322.7 | 75.2 | |||||||||
Income before equity in undistributed net income of subsidiaries | 554.2 | 405.3 | 311.8 | |||||||||
Equity in undistributed net income of subsidiaries | 408.9 | 383.4 | 205.8 | |||||||||
Net income | 963.1 | 788.7 | 517.6 | |||||||||
Other comprehensive income (loss): | ||||||||||||
Net income | 963.1 | 788.7 | 517.6 | |||||||||
Other comprehensive (loss) income | 29.6 | (46.1) | 6.6 | |||||||||
Total comprehensive income, net of tax | 992.7 | 742.6 | 524.2 | |||||||||
Statements of Cash Flows | ||||||||||||
Cash flows from operating activities | 82.3 | 72.3 | 2 | |||||||||
Investing activities: | ||||||||||||
Loans to subsidiaries | (102) | |||||||||||
Investment in subsidiaries | (164) | |||||||||||
Dividends received | 810.1 | 360.6 | 436.4 | |||||||||
Net cash used in investing activities | 810.1 | 196.6 | 334.4 | |||||||||
Financing activities: | ||||||||||||
Borrowings under debt agreements | 4,527 | 7,673.6 | 3,571.5 | |||||||||
Repayments of borrowings | (4,838.3) | (7,232.4) | (3,167.9) | |||||||||
Payment of deferred financing costs | (4.6) | (33.7) | (11.6) | |||||||||
Purchase of treasury shares | (443.2) | (553.7) | (798.8) | |||||||||
Dividends paid | (125.2) | (115.5) | (30) | |||||||||
Proceeds from issuance of common stock | 17.6 | 18.4 | 18.4 | |||||||||
Other | (25.7) | (25.6) | (21.9) | |||||||||
Net cash (used in) provided by financing activities | (892.4) | (268.9) | (440.3) | |||||||||
Change in cash, cash equivalents and restricted cash | (103.9) | |||||||||||
Cash, cash equivalents and restricted cash at beginning of period | $ 0.1 | $ 0.1 | 0.1 | 0.1 | 104 | |||||||
Cash, cash equivalents and restricted cash at end of period | $ 0.1 | $ 0.1 | $ 0.1 | $ 0.1 | $ 0.1 |
SEGMENT INFORMATION - Financial
SEGMENT INFORMATION - Financial Information (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Apr. 01, 2016 | |
Segment information | ||||||||||||
Revenues | $ 2,055.9 | $ 1,947.2 | $ 1,903.9 | $ 1,884.2 | $ 2,106.2 | $ 1,912.4 | $ 1,821.8 | $ 1,879 | $ 7,791.2 | $ 7,719.4 | $ 7,138.1 | |
Income (loss) before income taxes | 397.4 | 353.1 | 254.6 | 218.6 | 306.4 | 333.6 | 213.9 | 227.2 | 1,223.7 | 1,081.1 | 837 | |
Interest expense, net | 176.8 | 168.9 | 165.7 | 159.2 | 156.4 | 145.3 | 137.5 | 125.2 | 670.6 | 564.4 | 428.5 | |
Operating income (loss) | 574.2 | $ 522 | $ 420.3 | $ 377.8 | 462.8 | $ 478.9 | $ 351.4 | $ 352.4 | 1,894.3 | 1,645.5 | 1,265.5 | |
Depreciation and amortization | 487.3 | 497.6 | 512.1 | |||||||||
Stock compensation expense | 80.8 | 75.1 | 76.5 | |||||||||
Impact of expiry | 241.7 | |||||||||||
Strategic acquisition costs | 3.3 | |||||||||||
Adjusted EBITDA | 2,465.7 | 2,218.2 | 2,095.8 | |||||||||
Less: Securitization funding costs | 220.2 | 156.6 | 125.6 | |||||||||
Less: Interest expense on deposits | 165.7 | 125.1 | 84.7 | |||||||||
Less: Adjusted EBITDA attributable to non-controlling interest | 5.5 | |||||||||||
Adjusted EBITDA, net | 2,079.8 | 1,936.5 | 1,880 | |||||||||
Capital expenditures | 199.8 | 225.4 | 207 | |||||||||
Total assets | 30,387.7 | 30,684.8 | 30,387.7 | 30,684.8 | 25,514.1 | |||||||
Brand Loyalty | ||||||||||||
Segment information | ||||||||||||
Ownership interest acquired (as a percent) | 20.00% | |||||||||||
Ownership percentage | 100.00% | |||||||||||
Operating segment | LoyaltyOne | ||||||||||||
Segment information | ||||||||||||
Revenues | 1,068.4 | 1,303.5 | 1,337.9 | |||||||||
Income (loss) before income taxes | 153.8 | 161.6 | (27.3) | |||||||||
Interest expense, net | 5.6 | 5.4 | 3.3 | |||||||||
Operating income (loss) | 159.4 | 167 | (24) | |||||||||
Depreciation and amortization | 84.8 | 81.7 | 86.6 | |||||||||
Stock compensation expense | 10 | 8 | 10.1 | |||||||||
Impact of expiry | 241.7 | |||||||||||
Adjusted EBITDA | 254.2 | 256.7 | 314.4 | |||||||||
Less: Adjusted EBITDA attributable to non-controlling interest | 5.5 | |||||||||||
Adjusted EBITDA, net | 254.2 | 256.7 | 308.9 | |||||||||
Capital expenditures | 34 | 55.2 | 31.9 | |||||||||
Total assets | 2,200.2 | 2,215.5 | 2,200.2 | 2,215.5 | 1,901.7 | |||||||
Operating segment | Epsilon | ||||||||||||
Segment information | ||||||||||||
Revenues | 2,175.1 | 2,272.1 | 2,155.2 | |||||||||
Income (loss) before income taxes | 147 | 134.3 | 123.2 | |||||||||
Interest expense, net | 0.2 | 0.2 | ||||||||||
Operating income (loss) | 147.2 | 134.5 | 123.2 | |||||||||
Depreciation and amortization | 293.7 | 309.7 | 325.2 | |||||||||
Stock compensation expense | 34.2 | 31.5 | 31.8 | |||||||||
Adjusted EBITDA | 475.1 | 475.7 | 480.2 | |||||||||
Adjusted EBITDA, net | 475.1 | 475.7 | 480.2 | |||||||||
Capital expenditures | 106.5 | 107.2 | 119.8 | |||||||||
Total assets | 4,159 | 4,391.8 | 4,159 | 4,391.8 | 4,543.1 | |||||||
Operating segment | Card Services | ||||||||||||
Segment information | ||||||||||||
Revenues | 4,597.6 | 4,170.6 | 3,675 | |||||||||
Income (loss) before income taxes | 1,381.6 | 1,235.7 | 1,108 | |||||||||
Interest expense, net | 385.9 | 281.7 | 210.3 | |||||||||
Operating income (loss) | 1,767.5 | 1,517.4 | 1,318.3 | |||||||||
Depreciation and amortization | 101.1 | 98.4 | 91.2 | |||||||||
Stock compensation expense | 13.3 | 10.8 | 14.1 | |||||||||
Adjusted EBITDA | 1,881.9 | 1,626.6 | 1,423.6 | |||||||||
Less: Securitization funding costs | 220.2 | 156.6 | 125.6 | |||||||||
Less: Interest expense on deposits | 165.7 | 125.1 | 84.7 | |||||||||
Adjusted EBITDA, net | 1,496 | 1,344.9 | 1,213.3 | |||||||||
Capital expenditures | 53.8 | 54.2 | 49.4 | |||||||||
Total assets | 23,904.2 | 23,974.1 | 23,904.2 | 23,974.1 | 18,949.7 | |||||||
Corporate/Other | ||||||||||||
Segment information | ||||||||||||
Revenues | 0.6 | 0.6 | 0.3 | |||||||||
Income (loss) before income taxes | (458.7) | (450.5) | (366.9) | |||||||||
Interest expense, net | 278.9 | 277.1 | 214.9 | |||||||||
Operating income (loss) | (179.8) | (173.4) | (152) | |||||||||
Depreciation and amortization | 7.7 | 7.8 | 9.1 | |||||||||
Stock compensation expense | 23.3 | 24.8 | 20.5 | |||||||||
Strategic acquisition costs | 3.3 | |||||||||||
Adjusted EBITDA | (145.5) | (140.8) | (122.4) | |||||||||
Adjusted EBITDA, net | (145.5) | (140.8) | (122.4) | |||||||||
Capital expenditures | 5.5 | 8.8 | 5.9 | |||||||||
Total assets | $ 124.3 | $ 103.4 | 124.3 | 103.4 | 119.6 | |||||||
Eliminations | ||||||||||||
Segment information | ||||||||||||
Revenues | $ (50.5) | $ (27.4) | $ (30.3) |
SEGMENT INFORMATION - Geographi
SEGMENT INFORMATION - Geographic Information (Details) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Information concerning principal geographic areas | |||||||||||
Revenues | $ 2,055.9 | $ 1,947.2 | $ 1,903.9 | $ 1,884.2 | $ 2,106.2 | $ 1,912.4 | $ 1,821.8 | $ 1,879 | $ 7,791.2 | $ 7,719.4 | $ 7,138.1 |
Long-lived assets | 5,676 | 5,979.2 | 5,676 | 5,979.2 | |||||||
Recently Adopted Accounting Standards | |||||||||||
Redemption revenue | 676.3 | 935.3 | 993.6 | ||||||||
Cost of operations | 4,220.9 | 4,269.9 | 4,276.8 | ||||||||
United States | |||||||||||
Information concerning principal geographic areas | |||||||||||
Revenues | 6,657.1 | 6,336.1 | 5,730.3 | ||||||||
Long-lived assets | 4,693.1 | 4,910.5 | 4,693.1 | 4,910.5 | |||||||
Canada | |||||||||||
Information concerning principal geographic areas | |||||||||||
Revenues | 427.3 | 742.8 | 706.5 | ||||||||
Long-lived assets | 261 | 297 | 261 | 297 | |||||||
Canada | Accounting Standards Update ASC 606 | Adjustment | |||||||||||
Recently Adopted Accounting Standards | |||||||||||
Redemption revenue | (283.4) | ||||||||||
Cost of operations | (283.4) | ||||||||||
Europe, Middle East and Africa | |||||||||||
Information concerning principal geographic areas | |||||||||||
Revenues | 526.7 | 485.1 | 537.4 | ||||||||
Long-lived assets | 698.6 | 750.2 | 698.6 | 750.2 | |||||||
Asia Pacific | |||||||||||
Information concerning principal geographic areas | |||||||||||
Revenues | 131.3 | 140.4 | 154.5 | ||||||||
Long-lived assets | 22.5 | 20.5 | 22.5 | 20.5 | |||||||
Other | |||||||||||
Information concerning principal geographic areas | |||||||||||
Revenues | 48.8 | 15 | $ 9.4 | ||||||||
Long-lived assets | $ 0.8 | $ 1 | $ 0.8 | $ 1 |
QUARTERLY RESULTS OF OPERATIO_3
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (Details) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 12 Months Ended | |||||||||
Dec. 31, 2018 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) | |||||||||||
Revenues | $ 2,055.9 | $ 1,947.2 | $ 1,903.9 | $ 1,884.2 | $ 2,106.2 | $ 1,912.4 | $ 1,821.8 | $ 1,879 | $ 7,791.2 | $ 7,719.4 | $ 7,138.1 |
Operating expenses | 1,481.7 | 1,425.2 | 1,483.6 | 1,506.4 | 1,643.4 | 1,433.5 | 1,470.4 | 1,526.6 | 5,896.9 | 6,073.9 | 5,872.6 |
Operating income | 574.2 | 522 | 420.3 | 377.8 | 462.8 | 478.9 | 351.4 | 352.4 | 1,894.3 | 1,645.5 | 1,265.5 |
Interest expense, net | 176.8 | 168.9 | 165.7 | 159.2 | 156.4 | 145.3 | 137.5 | 125.2 | 670.6 | 564.4 | 428.5 |
Income before income taxes | 397.4 | 353.1 | 254.6 | 218.6 | 306.4 | 333.6 | 213.9 | 227.2 | 1,223.7 | 1,081.1 | 837 |
Provision for income taxes | 112.5 | 56.6 | 36.8 | 54.7 | 35 | 100.4 | 76.2 | 80.8 | 260.6 | 292.4 | 319.4 |
Net income | $ 284.9 | $ 296.5 | $ 217.8 | $ 163.9 | $ 271.4 | $ 233.2 | $ 137.7 | $ 146.4 | 963.1 | 788.7 | 517.6 |
Less: Net income attributable to non-controlling interest | 1.8 | ||||||||||
Net income | $ 963.1 | $ 788.7 | $ 515.8 | ||||||||
Net income attributable to common stockholders per share: | |||||||||||
Basic (in dollars per share) (Note 2) | $ 5.28 | $ 5.41 | $ 3.94 | $ 2.96 | $ 4.91 | $ 4.21 | $ 2.48 | $ 2.60 | $ 17.56 | $ 14.17 | $ 7.37 |
Diluted (in dollars per share) (Note 2) | $ 5.25 | $ 5.39 | $ 3.93 | $ 2.95 | $ 4.88 | $ 4.20 | $ 2.47 | $ 2.58 | $ 17.49 | $ 14.10 | $ 7.34 |
Recently Issued Accounting Standards | |||||||||||
Estimated breakage rate | 20.00% | 20.00% |
SCHEDULE II CONSOLIDATED VALU_2
SCHEDULE II CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS (Details) - Allowance for Doubtful Accounts -Trade receivables - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Movement in valuation and qualifying accounts | |||
Balance at Beginning of Year | $ 6.7 | $ 4.5 | $ 4 |
Charged to Costs and Expenses | 6.6 | 7.7 | 2.4 |
Charged to Other Accounts | 0.8 | ||
Write-Offs Net of Recoveries | (8) | (5.5) | (2.7) |
Balance at End of Year | $ 5.3 | $ 6.7 | $ 4.5 |