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Alliance Data Reports Record Full-Year 2012 Results; Raises Guidance for 2013

Alliance Data Reports Record Full-Year 2012 Results; Raises Guidance for 2013

-- Revenue Increases 15 Percent to $3.6 Billion

-- Core EPS Increases 14 Percent to $8.71

PR Newswire

DALLAS, Jan. 31, 2013

DALLAS, Jan. 31, 2013 /PRNewswire/ --Alliance Data Systems Corporation (NYSE:
ADS), a leading provider of loyalty and marketing solutions derived from
transaction-rich data, today announced results for the year ended December 31,
2012.

SUMMARY                               Quarter Ended        Year Ended December
                                      December 31,         31,
(in millions, except per share        2012   2011   %      2012   2011  %
amounts)                                            Change              Change
Revenue                               $ 972 $ 848 15%    $      $     15%
                                                           3,641  3,173
Net income                            $     $     27%    $     $    34%
                                      84    66           422   315
Net income per diluted share          $ 1.27 $ 1.12 13%    $     $    21%
                                                           6.58   5.45
Diluted shares outstanding            66.0   59.1   12%    64.1   57.8  11%
*******************************
Supplemental Non-GAAP Metrics (a):
 Adjusted EBITDA                     $ 277 $ 231 20%    $      $     18%
                                                           1,192  1,009
 Adjusted EBITDA, net of funding     $ 245 $ 194 26%    $      $    25%
costs                                                      1,074  860
 Core earnings per diluted share     $ 1.84 $ 1.70 8%     $     $    14%
                                                           8.71   7.63

       See "Financial Measures" below for a discussion of adjusted EBITDA,
(a) adjusted EBITDA, net of funding costs, adjusted EBITDA margin, core
       earnings per diluted share and other non-GAAP financial measures.

(Logo: http://photos.prnewswire.com/prnh/20051024/ADSLOGO)

CONSOLIDATED RESULTS

FULL YEAR

Revenue increased 15 percent to $3.6 billion and adjusted EBITDA increased 18
percent to $1.2 billion for 2012. Net income per diluted share (EPS) increased
21 percent to $6.58, and core earnings per diluted share (core EPS) increased
14 percent to $8.71 for 2012, exceeding the Company's guidance of $8.60. The
acquisition of the Hyper Marketing group of companies (HMI), which closed on
November 30, 2012, added approximately $0.04 to core EPS for 2012. 

Diluted shares outstanding were 64.1 million for 2012, an increase of 6.3
million dilutive shares as compared to 2011. The increase was primarily
attributable to a 4.0 million increase in 'phantom shares,' which are shares
that the Company does not have to economically settle, and a 3.2 million share
increase in convertible debt warrants, partially offset by share repurchases
over the last 12 months.

Ed Heffernan, president and chief executive officer, commented, "2012 was
another heck of a year for Alliance Data, culminating in another year of
record results. Looking at the final scorecard for 2012, it shows a balanced
year with strong contributions from all three segments. LoyaltyOne organically
grew both its revenue and adjusted EBITDA by 9 percent. In addition,
LoyaltyOne's joint venture in Brazil is really starting to ramp up. While it
is currently unconsolidated, which means we do not record any revenue, dotz's
revenue increased 176 percent to $69 million in 2012. Epsilon grew its revenue
by 18 percent and adjusted EBITDA by 14 percent. While by Epsilon's standards
2012 was an off-year in terms of organic growth, it was still positive with
organic revenue growth of 4 percent and adjusted EBITDA growth of 10 percent,
excluding non-recurring items. Finally, Private Label had a blow-out year with
revenue growth of 16 percent and adjusted EBITDA (net of funding costs) growth
of 33 percent. Most importantly, in a stagnant market, our portfolio of credit
card receivables ended the year up over 30 percent, which sets the stage for a
robust 2013." 

Heffernan continued, "Throughout 2012, we continued to execute our long-term
strategy of driving strong organic growth, coupled with tuck-in acquisitions
and targeted share repurchases designed to further enhance shareholder value.
That is the Alliance Data three-pronged model. Our execution of the model was
excellent as we achieved all three of our key goals. First, organically, we
grew revenue about 9 percent in 2012 – about 3 times GDP growth. Second, we
acquired HMI to expand digital capabilities at Epsilon. Strategically, it
filled a gap at Epsilon, plus the valuation was compelling as it was accretive
to core EPS from Day 1. Third, we continued to execute our share repurchase
program, which further maximizes shareholder value, and spent over $137
million to acquire more than 1 million Alliance Data shares in 2012.
Continuing our belief in the value of such a program, on January 8, 2013, we
announced that our board of directors approved a new stock repurchase program
to acquire up to $400 million of the Company's common stock during 2013. With
over $1.8 billion of liquidity at the end of 2012, we have more than
sufficient funds to continue our three-pronged strategy in 2013, which we
believe will continue to drive long-term value for our shareholders."

FOURTH QUARTER

Revenue increased 15 percent to $972 million and adjusted EBITDA increased 20
percent to $277 million for the fourth quarter of 2012. Net income per diluted
share (EPS) increased 13 percent to $1.27, and core earnings per diluted share
(core EPS) increased 8 percent to $1.84 for the fourth quarter of 2012,
exceeding the Company's guidance of $1.73. The acquisition of HMI added
approximately $0.04 to core EPS for the fourth quarter of 2012.

Diluted shares outstanding were 66.0 million for the fourth quarter of 2012,
an increase of 6.9 million dilutive shares as compared to the fourth quarter
of 2011. The increase was primarily attributable to a 3.5 million increase in
'phantom shares,' which are shares that the Company does not have to
economically settle, and a 3.7 million share increase in convertible debt
warrants, partially offset by share repurchases over the last 12 months.

SEGMENT REVIEW

LoyaltyOne: Revenue for the segment increased $2 million, or 1 percent, to
$216 million for the fourth quarter of 2012. Excluding the benefit of
favorable exchange rates, revenue decreased 2 percent for the fourth quarter
of 2012 due to lower redemption revenue. Adjusted EBITDA was $57 million, up
24 percent compared to the fourth quarter of 2011. Excluding the impact of
favorable Canadian exchange rates ($2 million), adjusted EBITDA increased 20
percent for the fourth quarter of 2012. The drag from international expansion
efforts was essentially consistent with the fourth quarter of 2011. 

AIR MILES® reward miles issued were up 6 percent, while AIR MILES reward miles
redeemed decreased 8 percent compared to the fourth quarter of 2011.
Redemption activity steadily moderated during 2012, with redemption rates of
102 percent, 78 percent, 73 percent and 60 percent in the first, second, third
and fourth quarters, respectively. This unusual trend was prompted by the
announcement of a five-year expiry policy at the end of 2011, which
accelerated redemptions that would likely have occurred somewhat ratably in
2012 into the first-half of the year – essentially a 'pull-forward' of
redemptions. The Company believes this effect has abated and expects
redemption activity to return to more normal levels, approximating 72 percent,
in 2013. 

A new instant reward program, AIR MILES Cash, was added to the AIR MILES
Reward Program during the first quarter of 2012. To date, approximately one
million collectors have enrolled in the program, which is being offered at
seven sponsors. The Company expects to expand the program in 2013, with a
focus on high-frequency retail sponsors. The timing of sponsors joining the
program is usually dictated by required point of sale programming changes on
the part of the sponsors.

During the quarter, LoyaltyOne signed General Motors of Canada Limited (GMCL)
to issue AIR MILES reward miles during key promotional periods for new vehicle
purchase and leases at Canadian dealerships. Importantly, Bank of Montreal,
the largest sponsor in the AIR MILES program, and American Express, a top 5
sponsor in the AIR MILES program, recently signed long-term renewals.
International expansion efforts continue on track as the dotz coalition
loyalty program in Brazil, in which the Company has a 37-percent ownership
interest, ended the fourth quarter with over 6 million collectors, ahead of
the Company's year-end target. Currently operating in 5 markets, dotz plans to
enter 5 additional markets in 2013.

Epsilon: Revenue for the segment increased $37 million, or 15 percent, to $292
million for the fourth quarter of 2012. Organic revenue growth was
approximately 3 percent compared to the fourth quarter of 2011, driven by
double-digit organic growth in the agency/analytics line of business.

By line of business, database/email revenue decreased 3 percent to $112
million for the fourth quarter of 2012, primarily due to weakness in the
healthcare/pharmaceutical vertical. This weakness would normally have been
offset by new signings, but Epsilon experienced delays in closing pipeline
opportunities early in the year. Signings have since increased, leading to a
stronger year-to-date backlog than the same period last year. Data revenue was
down 2 percent to $51 million for the fourth quarter of 2012, with solid
performance in compiled offerings offset by some softness in the cooperative
data offering for the B-to-B vertical. Agency/analytics revenue increased 48
percent to $129 million for the fourth quarter of 2012, driven by strength in
the auto and telco verticals, and the acquisition of HMI.

Adjusted EBITDA increased 9 percent to $69 million for the fourth quarter of
2012. Organic adjusted EBITDA growth was approximately 2 percent, or 10
percent excluding certain restructuring charges, compared to the fourth
quarter of 2011. Excluding HMI, adjusted EBITDA margins were consistent
between quarters at approximately 25 percent. Including HMI, adjusted EBITDA
margins were down 1 percent compared to the fourth quarter of 2011, as agency
products typically carry lower EBITDA margins. 

Of significance during the quarter, Epsilon closed the acquisition of HMI on
November 30, 2012. HMI brings a full breadth of ROI-based marketing services
to Epsilon including: digital user experience design technology, specializing
in websites, social media platforms and mobility; customer relationship
marketing; consumer promotions marketing; direct and digital shopper
marketing; distributed and local area marketing; and analytical services that
include brand planning and consumer insights. These products give Epsilon
expanded access into the "C" suite and should aid in cross-sale/up-sale
opportunities in the future.

During the quarter, Epsilon announced a new multi-year agreement to provide
loyalty marketing services to Walgreens, the nation's largest drug store chain
and a new multi-year agreement to provide a comprehensive email marketing
platform to Regis Corporation, the global leader in the beauty industry. In
addition, Epsilon announced a multi-year renewal agreement to continue to
provide direct marketing strategy, direct mail production, email strategy and
analytics to KeyCorp, one of the nation's largest bank-based financial
services companies.

Private Label Services and Credit: Revenue for the segment increased $86
million, or 23 percent, to $466 million for the fourth quarter of 2012. Net
finance charge income increased $93 million, or 26 percent, driven by a 31
percent increase in average credit card receivables, while transaction revenue
decreased $7 million, or 36 percent, due in part to rebates paid to certain
clients. Gross yield for the fourth quarter of 2012 was 26.7 percent, down 120
basis points from the prior year quarter due to the on-boarding of new
portfolios and their associated accounting treatment.

Adjusted EBITDA, net of funding costs, increased 38 percent to $147 million
for the fourth quarter of 2012, boosted by strong revenue growth and lower
funding costs. Provision for loan loss expense was $102 million, consistent
with the fourth quarter of 2011, as declining principal charge-off rates
offset the substantial build in credit card receivables. Portfolio funding
costs decreased $6 million to $31 million for the fourth quarter of 2012.
Excluding non-cash mark-to-market gains on interest rate derivatives, the cash
funding rate was 2 percent for the fourth quarter of 2012, down from 3 percent
for the fourth quarter of 2011.

Credit sales increased 38 percent compared to the fourth quarter of 2011, a
result of double-digit increases in core cardholder spending coupled with new
programs added over the last 12 months. Credit card receivables were $7.5
billion at December 31, 2012, up 31 percent compared to December 31, 2011. The
allowance for loan loss reserve was $482 million, or 6.5 percent of ending
receivables, at December 31, 2012 compared to $468 million, or 8.3 percent of
ending receivables, at December 31, 2011. Credit trends improved during the
fourth quarter of 2012 as the principal charge-off rate dropped to 4.7 percent
compared to 6.3 percent in the prior year quarter. Delinquency rates also
improved to 4.0 percent of principal receivables at December 31, 2012, down
from 4.4 percent at December 31, 2011.

Private Label recently reached agreements to provide private label credit card
services with dots, a national women's apparel and accessories retailer, and
RainSoft, an international company focused on water and air purification
products.

2013 Outlook

First Quarter: The Company expects approximately 17 percent growth in revenue
and 12 percent growth in core earnings for the first quarter of 2013. Core EPS
is expected to increase approximately 5 percent to $2.50, less than the growth
in core earnings due to an expected 8 percent increase in diluted share count.
A higher expected average ADS share price compared to 2012 is expected to
create incremental share dilution – both phantom and real – from the
convertible notes. 

Full Year: The Company's detailed guidance for 2013 was given in its third
quarter 2012 earnings release. Guidance will be refined as necessary during
2013. Based upon its strong fourth-quarter performance and the acquisition of
HMI, the Company is raising its 2013 guidance.

  oRevenue is expected to increase to $4.2 billion for 2013 - up $300 million
    due to the acquisition of HMI - a 15 percent increase compared to 2012; 
  oEPS and core EPS are expected to increase to $7.35 and $9.65,
    respectively, representing increases of approximately 12 percent and 11
    percent, respectively, compared to 2012;
  oUsing a $155 average share price, diluted share count is projected to be
    65.6 million for 2013. Diluted share count is projected to be 67.1
    million, 67.6 million, 64.6 million and 63.0 million for Q1, Q2, Q3 and
    Q4, respectively. 

Financial Measures

In addition to the results presented in accordance with generally accepted
accounting principles, or GAAP, the Company presents financial measures that
are non-GAAP measures, such as constant currency financial measures, adjusted
EBITDA, adjusted EBITDA margin, adjusted EBITDA net of funding costs, core
earnings and core earnings per diluted share (core EPS). The Company believes
that these non-GAAP financial measures, viewed in addition to and not in lieu
of the Company's reported GAAP results, provide useful information to
investors regarding the Company's performance and overall results of
operations. These metrics are an integral part of the Company's internal
reporting to measure the performance of reportable segments and the overall
effectiveness of senior management. Reconciliations to comparable GAAP
financial measures are available in the accompanying schedules and on the
Company's website. The financial measures presented are consistent with the
Company's historical financial reporting practices. Core earnings and core
earnings per diluted share represent performance measures and are not intended
to represent liquidity measures. The non-GAAP financial measures presented
herein may not be comparable to similarly titled measures presented by other
companies, and are not identical to corresponding measures used in other
various agreements or public filings.

Conference Call

Alliance Data will host a conference call on Thursday, January 31, 2013 at
8:00 a.m. (Eastern Time) to discuss the Company's 2012 fourth-quarter and
full-year results. The conference call will be available via the Internet at
www.AllianceData.com. There will be several slides accompanying the webcast.
Please go to the website at least 15 minutes prior to the call to register,
download and install any necessary software. The recorded webcast will also be
available on the Company's website.

If you are unable to participate in the conference call, a replay will be
available. To access the replay, please dial (855) 859-2056 or (404) 537-3406
and enter "85790610". The replay will be available from two hours after the
end of the call until 11:59 P.M. (Eastern Time) on February 14, 2013.

About Alliance Data

Alliance Data® (NYSE: ADS) and its combined businesses is North America's
largest and most comprehensive provider of transaction-based, data-driven
marketing and loyalty solutions serving large, consumer-based industries. The
Company creates and deploys customized solutions, enhancing the critical
customer marketing experience; the result is measurably changing consumer
behavior while driving business growth and profitability for some of today's
most recognizable brands. Alliance Data helps its clients create and increase
customer loyalty through solutions that engage millions of customers each day
across multiple touch points using traditional, digital, mobile and other
emerging technologies. Headquartered in Dallas, Alliance Data and its three
businesses employ approximately 11,000 associates at more than 70 locations
worldwide.

Alliance Data consists of three businesses: Alliance Data Retail Services, a
leading provider of marketing-driven credit solutions; Epsilon®, a leading
provider of multichannel, data-driven technologies and marketing services; and
LoyaltyOne®, which owns and operates the AIR MILES® Reward Program, Canada's
premier coalition loyalty program. For more information about the company,
visit our web site, www.AllianceData.com, or you can follow us on Twitter at
www.Twitter.com/AllianceData.

Alliance Data's Safe Harbor Statement/Forward Looking Statements

This release may contain forward-looking statements within the meaning of
Section27A of the Securities Act of 1933, as amended, and Section21E of the
Securities Exchange Act of 1934, as amended. Such statements may use words
such as "anticipate," "believe," "estimate," "expect," "intend," "predict,"
"project" and similar expressions as they relate to us or our management. When
we make forward-looking statements, we are basing them on our management's
beliefs and assumptions, using information currently available to us. Although
we believe that the expectations reflected in the forward-looking statements
are reasonable, these forward-looking statements are subject to risks,
uncertainties and assumptions, including those discussed in our filings with
the Securities and Exchange Commission.

If one or more of these or other risks or uncertainties materialize, or if our
underlying assumptions prove to be incorrect, actual results may vary
materially from what we projected. Any forward-looking statements contained in
this presentation reflect our current views with respect to future events and
are subject to these and other risks, uncertainties and assumptions relating
to our operations, results of operations, growth strategy and liquidity. We
have no intention, and disclaim any obligation, to update or revise any
forward-looking statements, whether as a result of new information, future
results or otherwise, except as required by law.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: Statements in this presentation regarding Alliance Data Systems
Corporation's business which are not historical facts are "forward-looking
statements" that involve risks and uncertainties. For a discussion of such
risks and uncertainties, which could cause actual results to differ from those
contained in the forward-looking statements, see "Risk Factors" in the
Company's Annual Report on Form 10-K for the most recently ended fiscal year.
Risk factors may be updated in Item1A in each of the Company's Quarterly
Reports on Form 10-Q for each quarterly period subsequent to the Company's
most recent Form 10-K.





ALLIANCE DATA SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share amounts)
(Unaudited)
                                       Three Months Ended    Year Ended

                                       December 31,          December 31,
                                       2012        2011      2012      2011
Revenue                              $ 971.9   $   847.6   $ 3,641.4 $ 3,173.3
Operating expenses:
 Cost of operations              605.8       526.2     2,214.7   1,907.2
 Provision for loan loss         102.4       101.6     285.5     300.3
 Depreciation and amortization   47.0        38.5      166.9     153.1
Total operating expenses               755.2       666.3     2,667.1   2,360.6
Operating income                       216.7       181.3     974.3     812.7
Interest expense, net:
 Securitization funding costs    24.7        30.4      92.8      126.7
 Interest expense on deposits    6.5         6.3       25.2      23.1
 Interest expense on long-term   47.3        37.3      173.5     148.8
and other debt, net
Total interest expense, net            78.5        74.0      291.5     298.6
Income before income taxes             138.2       107.3     682.8     514.1
Income tax expense                     54.6        41.4      260.6     198.8
Net income                           $ 83.6    $   65.9    $ 422.2   $ 315.3
Per share data:
Basic – Net income                   $ 1.68    $   1.32    $ 8.44    $ 6.22
Diluted – Net income                 $ 1.27    $   1.12    $ 6.58    $ 5.45
Weighted average shares outstanding    49.8        49.9      50.0      50.7
– basic
Weighted average shares outstanding    66.0        59.1      64.1      57.8
– diluted







ALLIANCE DATA SYSTEMS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
                                            
                                                            
                                            As of
                                                            As of
                                            December 31,
                                                            December 31, 2011
                                            2012
ASSETS
Cash and cash equivalents                 $ 893.4         $ 216.2
Credit card receivables, net                6,967.7         5,197.7
Redemption settlement assets                492.7           515.8
Intangible assets, net                      582.9           383.6
Goodwill                                    1,751.1         1,449.4
Other assets                                1,312.3         1,217.5
 Total assets                         $ 12,000.1      $ 8,980.2
LIABILITIES AND STOCKHOLDERS' EQUITY
Deferred revenue                          $ 1,249.1       $ 1,226.4
Deposits                                    2,228.4         1,353.8
Asset-backed securities debt – owed to      4,131.0         3,260.3
securitization investors
Debt                                        2,854.8         2,183.5
Other liabilities                           1,008.3         780.2
 Total liabilities                      11,471.6        8,804.2
 Stockholders' equity                   528.5           176.0
 Total liabilities and stockholders'  $ 12,000.1      $ 8,980.2
equity







ALLIANCE DATA SYSTEMS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
                                                         Year Ended

                                                         December 31,
                                                         2012        2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                             $ 422.2     $ 315.3
Adjustments to reconcile net income to net cash
provided by operating activities:
 Depreciation and amortization                     166.9       153.1
 Deferred income taxes                             102.3       47.0
 Provision for loan loss                           285.5       300.3
 Non-cash stock compensation                       50.5        43.5
 Amortization of discount on convertible senior    82.4        73.7
notes
Change in operating assets and liabilities, net of       63.3        121.9
acquisitions
Other                                                    (38.9)      (43.4)
 Net cash provided by operating activities         1,134.2     1,011.4
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in redemption settlement assets                   37.2        (49.2)
Change in restricted cash                                (46.8)      98.4
Change in credit card receivables                        (1,371.4)   (578.1)
Purchase of credit card receivables                      (780.0)     (68.5)
Capital expenditures                                     (116.4)     (73.5)
Payments for acquired businesses, net of cash acquired   (463.9)     (359.1)
Change in cash collateral, restricted                    99.0        22.1
Other                                                    (29.0)      (32.8)
 Net cash used in investing activities             (2,671.3)   (1,040.7)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under debt agreements                         1,095.1     3,256.5
Repayments of borrowings                                 (506.2)     (3,012.7)
Issuances of deposits                                    1,866.2     1,180.3
Repayments of deposits                                   (991.6)     (685.6)
Borrowings from asset-backed securities                  2,543.9     2,179.7
Repayments/maturities of asset-backed securities         (1,673.2)   (2,579.6)
Proceeds from issuance of common stock                   20.7        29.4
Purchase of treasury shares                              (125.8)     (240.9)
Other                                                    (20.1)      (17.9)
 Net cash provided by financing activities         2,209.0     109.2
Effect of exchange rate changes on cash and cash         5.3         (2.8)
equivalents
Change in cash and cash equivalents                      677.2       77.1
Cash and cash equivalents at beginning of period         216.2       139.1
 Cash and cash equivalents at end of period      $ 893.4     $ 216.2







ALLIANCE DATA SYSTEMS CORPORATION
SUMMARY FINANCIAL HIGHLIGHTS
(In millions)
(Unaudited)
                   Three Months                   Year Ended
                   Ended
                   December 31,                   December 31,
                   2012      2011     Change      2012       2011     Change
Segment Revenue:
LoyaltyOne       $ 216.0   $ 214.3    1      %  $ 919.0    $ 844.8    9      %
Epsilon            292.0     254.6    15     %    996.2      847.1    18     %
Private Label
Services and       466.4     380.3    23     %    1,732.2    1,489.0  16     %
Credit
Corporate/Other    –         0.2      nm          0.4        1.1      nm
Intersegment       (2.5)     (1.8)    nm          (6.4)      (8.7)    nm
Eliminations
                 $ 971.9   $ 847.6    15     %  $ 3,641.4  $ 3,173.3  15     %
Segment Adjusted
EBITDA:
LoyaltyOne       $ 56.8    $ 46.0     24     %  $ 236.1    $ 217.1    9      %
Epsilon            69.4      63.9     9      %    222.3      195.4    14     %
Private Label
Services and       178.3     143.6    24     %    823.2      678.3    21     %
Credit
Corporate/Other    (27.9)    (21.9)   27     %    (89.9)     (76.4)   18     %
Intersegment       –         (0.8)    nm          –          (5.1)    nm
Eliminations
                 $ 276.6   $ 230.8    20     %  $ 1,191.7  $ 1,009.3  18     %
Key Performance
Indicators:
Private Label
statements         47.1      37.3     26     %    166.1      142.1    17     %
generated
Average          $ 6,799.8 $ 5,173.4  31     %  $ 5,927.6  $ 4,962.5  19     %
receivables
Credit sales     $ 4,160.7 $ 3,011.3  38     %  $ 12,523.6 $ 9,636.1  30     %
AIR MILES reward   1,464.2   1,387.5  6      %    5,222.9    4,940.4  6      %
miles issued
AIR MILES reward   880.7     958.5    (8)    %    4,040.9    3,633.9  11     %
miles redeemed
nm-not
meaningful







ALLIANCE DATA SYSTEMS CORPORATION
RECONCILIATION OF NON-GAAP INFORMATION
(In millions, except per share amounts)
(Unaudited)
                                                            

                                       Three Months Ended    Year Ended
                                       December 31,          December 31,
Adjusted EBITDA and Adjusted EBITDA,   2012       2011       2012      2011
net of funding costs:
Net income                           $ 83.6    $  65.9     $ 422.2   $ 315.3
Income tax expense                     54.6       41.4       260.6     198.8
Total interest expense, net            78.5       74.0       291.5     298.6
Depreciation and other amortization    18.9       16.5       73.8      70.4
Amortization of purchased              28.1       22.0       93.1      82.7
intangibles
EBITDA                                 263.7      219.8      1,141.2   965.8
Stock compensation expense             12.9       11.0       50.5      43.5
Adjusted EBITDA                      $ 276.6   $  230.8    $ 1,191.7 $ 1,009.3
Less: funding costs ^(1)               (31.2)     (36.7)     (118.0)   (149.8)
Adjusted EBITDA, net of funding      $ 245.4   $  194.1    $ 1,073.7 $ 859.5
costs
Core Earnings:
Net income                           $ 83.6    $  65.9     $ 422.2   $ 315.3
Add back non-cash non-operating
items:
Stock compensation expense             12.9       11.0       50.5      43.5
Amortization of purchased              28.1       22.0       93.1      82.7
intangibles
Non-cash interest expense ^(2)         26.5       30.1       98.9      104.9
Non-cash mark-to-market gain on        (6.9)      (8.6)      (29.6)    (31.7)
interest rate derivatives
Income tax effect ^(3)                 (22.6)     (20.1)     (76.6)    (73.4)
Core earnings                        $ 121.6   $  100.3    $ 558.5   $ 441.3
Weighted average shares outstanding    66.0       59.1       64.1      57.8
– diluted
Core earnings per share – diluted    $ 1.84    $  1.70     $ 8.71    $ 7.63



^(1)  Represents interest expense on deposits and securitization funding
         costs.
^(2) Represents amortization of imputed interest expense associated with
         our convertible debt and amortization of debt issuance costs.
         Represents the tax effect for the related non-GAAP measure
^(3) adjustments (tax deductible stock compensation expense, amortization
         of purchased intangibles, non-cash interest expense) using the
         Company's effective tax rate for each respective period.







ALLIANCE DATA SYSTEMS CORPORATION
RECONCILIATION OF SEGMENT ADJUSTED EBITDA
(In millions)
(Unaudited)
                            Three Months Ended December 31, 2012
                                        Depreciation   Stock          Adjusted
                            Operating   and            Compensation
                            Income      Amortization   Expense        EBITDA
                                                                      ^(1)
LoyaltyOne                $ 49.6      $ 4.7          $ 2.5          $ 56.8
Epsilon                     37.9        27.7           3.8            69.4
Private Label Services      162.0       13.9           2.4            178.3
and Credit
Corporate/Other             (32.8)      0.7            4.2            (27.9)
Intersegment Eliminations   –           –              –              –
                          $ 216.7     $ 47.0         $ 12.9         $ 276.6
                            Three Months Ended December 31, 2011
                            Operating   Depreciation   Stock          Adjusted
                            Income      and            Compensation   EBITDA
                                        Amortization   Expense        ^(1)
LoyaltyOne                $ 39.4      $ 4.8          $ 1.8          $ 46.0
Epsilon                     36.3        24.6           3.0            63.9
Private Label Services      133.7       8.7            1.2            143.6
and Credit
Corporate/Other             (27.3)      0.4            5.0            (21.9)
Intersegment Eliminations   (0.8)       –              –              (0.8)
                          $ 181.3     $ 38.5         $ 11.0         $ 230.8
                            Year Ended December 31, 2012
                            Operating   Depreciation   Stock          Adjusted
                            Income      and            Compensation   EBITDA
                                        Amortization   Expense        ^(1)
LoyaltyOne                $ 207.2     $ 19.6         $ 9.3          $ 236.1
Epsilon                     106.2       101.7          14.4           222.3
Private Label Services      771.8       42.5           8.9            823.2
and Credit
Corporate/Other             (110.9)     3.1            17.9           (89.9)
Intersegment Eliminations   –           –              –              –
                          $ 974.3     $ 166.9        $ 50.5         $ 1,191.7
                            Year Ended December 31, 2011
                            Operating   Depreciation   Stock          Adjusted
                            Income      and            Compensation   EBITDA
                                        Amortization   Expense        ^(1)
LoyaltyOne                $ 189.6     $ 20.3         $ 7.2          $ 217.1
Epsilon                     93.5        90.1           11.8           195.4
Private Label Services      636.1       35.5           6.7            678.3
and Credit
Corporate/Other             (101.4)     7.2            17.8           (76.4)
Intersegment Eliminations   (5.1)       –              –              (5.1)
                          $ 812.7     $ 153.1        $ 43.5         $ 1,009.3



^(1) Represents segment adjusted EBITDA and is equal to operating income
       plus depreciation, amortization and stock compensation expense.



SOURCE Alliance Data Systems Corporation

Website: http://www.AllianceData.com
Contact: Investors/Analysts: Julie Prozeller, FTI Consulting, +1-212-850-5721,
alliancedata@fticonsulting.com; or Media: Shelley Whiddon, Alliance Data,
+1-214-494-3811, Shelley.Whiddon@AllianceData.com
 
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