Blackhawk Announces First Quarter 2013 Financial Results Consistent With Estimates Provided in Prospectus PLEASANTON, Calif., April 25, 2013 (GLOBE NEWSWIRE) -- Blackhawk Network Holdings, Inc. (Nasdaq:HAWK), a majority-owned subsidiary of Safeway Inc. (NYSE:SWY), today announced financial results for the first quarter ended March 23, 2013. The financial results are consistent with the estimates included in Blackhawk's prospectus filed with the Securities and Exchange Commission in connection with its initial public offering. GAAP financial results for the first quarter of 2013 compared to the first quarter of 2012 *Operating revenues totaled $185.1 million, an increase of 22.1% from $151.5 million for the quarter ended March 24, 2012. This increase was due primarily to an increase in load value of 23.0%, partially offset by a 20 basis point (0.2 percentage point) decline in commissions and fees as a percentage of load value, which is within the range of historical quarterly fluctuations experienced in fiscal year 2012. *Net income totaled $0.3 million compared to $2.9 million for the quarter ended March, 24, 2012. The change was due primarily to an increase in distribution partner commissions paid as a percentage of commissions and fees, increased marketing expenses net of marketing revenues and increased distribution partner program development expenses. *Earnings per basic and diluted share was $0.01 compared to $0.06 for the quarter ended March 24, 2012. Non-GAAP financial results for the first quarter of 2013 compared to the first quarter of 2012 *Adjusted operating revenues totaled $89.1 million compared to $73.8 million for the quarter ended March 24, 2012. *Adjusted EBITDA totaled $7.4 million compared to $9.9 million for the quarter ended March 24, 2012. *Adjusted net income totaled $1.9 million compared to $4.0 million for the quarter ended March 24, 2012. Distribution partner commissions paid as a percentage of commissions and fees for the quarter ended March 23, 2013 increased 190 basis points (1.9 percentage points) from distribution partner commissions paid as a percentage of commissions and fees for the quarter ended March 24, 2012. The majority of this increase (approximately 100 basis points or 1.0 percentage points) was the result of increased commissions paid to Safeway pursuant to the amendment of our distribution partner agreements with Safeway that eliminated the previous differential in commissions shared with Safeway as compared to other distribution partners. The remainder was due to changes to the distribution partner mix and the territories in which our products are sold. "Demand for our prepaid products was strong during the first quarter as load value reached $1.6 billion, up 23% year-over-year," said Bill Tauscher, CEO."Consumers continue to benefit from a broad selection of leading brands in a convenient, one-stop location.Our financial results were consistent with estimates previously provided in our prospectus." In compliance with the 25-day quiet period following an initial public offering, the Company will not host a conference call to discuss its Q1 2013 financial results. About Blackhawk Network Blackhawk is a leading prepaid payment network utilizing proprietary technology to offer a broad range of gift cards, other prepaid products and payment services in the United States and 18 other countries. Use of Non-GAAP Financial Measures Blackhawk regards the non-GAAP financial measures provided in this press release as useful measures of operational and financial performance of its business.Reconciliations of non-GAAP financial measures to Blackhawk's financial results as determined in accordance with GAAP are included at the end of this press release following the accompanying financial data.The use of non-GAAP financial measures has certain limitations as they do not reflect all items of income, expense, or cash flows that affect Blackhawk's financial performance under GAAP.These non-GAAP financial measures should be considered in addition to, not as a substitute for or in isolation from, measures prepared in accordance with GAAP.In addition, these non-GAAP measures may differ from the non-GAAP information used by other companies, including peer companies, and therefore comparability may be limited.Blackhawk encourages investors and others to review Blackhawk's financial information in its entirety and not rely on a single financial measure. Forward Looking Statements This press release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.Forward-looking statements are indicated by words or phrases such as "guidance," "believes," "expects," "anticipates," "estimates," "plans," "continuing," "ongoing," and similar words or phrases and the negative of such words and phrases. Forward-looking statements are based on our current plans and expectations and involve risks and uncertainties which are, in many instances, beyond our control, and which could cause actual results to differ materially from those included in or contemplated or implied by the forward-looking statements. Such risks and uncertainties include the following: our ability to grow at historic rates or at all, the consequences should we lose one or more of our top distribution partners or fail to attract new distribution partners to our network or if the financial performance of our distribution partners' businesses decline, our reliance on our content providers, the demand for their products and our exclusivity arrangements with them, our reliance on relationships with card issuing banks, the consequences to our future growth if our distribution partners fail to actively and effectively promote our products and services, the requirement that we comply with applicable laws and regulations, the requirement that we comply with increasingly stringent money-laundering rules and regulations, reputational harm that could be caused by abuse of our prepaid products, failure to comply with, or further expansion of, consumer protection regulations, failure by us to comply with federal banking regulation, costs of compliance with or changes in state unclaimed property laws and regulations and tax codes, failure to maintain our existing money transmitter licenses or permits or failure to obtain new licenses or permits in a timely manner, other changes in laws and regulations to which we are subject or to which we become subject in the future, the intense competitive pressure faced by our business, fluctuations in our financial results from quarter to quarter, season fluctuations in our business, any decline in the attractiveness of gift cards to consumers, our ability to increase our revenues from prepaid products or services, including GPR cards, declines in consumer confidence, any interruption in the efficient operation of our transaction processing systems, any data security breach, litigation, investigations or regulatory examinations, fraudulent or other illegal activity involving our products and services, changes in card association rule or standards, any inability to operate and scale our technology, our failure to keep pace with the rapid technological developments in our industry and the greater electronic payments industry, changes in the telecom industry, assertions by third parties of infringement by us, our distribution partners or our content providers, our inability to adequately protect our brands and other intellectual property rights, settlement risk from retailers that sell our products and services, disruption caused by replacing any third party vendor, future acquisitions or investments, our ability to attract and retain key personnel, risks related to our international operations, and risks related to our ongoing relationship with Safeway.We undertake no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof and disclaim any obligation to do so. Please refer to our reports and filings with the Securities and Exchange Commission, including the registration statement filed in connection with our initial public offering. BLACKHAWK NETWORK HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited) Twelve Weeks Ended March 23, 2013 March 24, 2012 OPERATING REVENUES: Commissions and fees $144,475 $120,459 Program, interchange, marketing and other fees 24,358 19,406 Product sales 16,217 11,634 Total operating revenues 185,050 151,499 OPERATING EXPENSES: Distribution partner commissions 95,982 77,704 Processing and services 32,136 26,115 Sales and marketing 28,341 21,826 Costs of products sold 15,921 11,528 General and administrative 12,370 9,917 Total operating expenses 184,750 147,090 OPERATING INCOME 300 4,409 OTHER INCOME (EXPENSE): Interest and other income 277 407 Interest expense -- (1) INCOME BEFORE INCOME TAX EXPENSE 577 4,815 INCOME TAX EXPENSE 318 1,940 NET INCOME BEFORE ALLOCATION TO NON-CONTROLLING 259 2,875 INTEREST Add non-controlling interest (net of tax) 87 -- NET INCOME ATTRIBUTABLE TO BLACKHAWK NETWORK $346 $2,875 HOLDINGS, INC. EARNINGS PER SHARE: Basic $0.01 $0.06 Diluted $0.01 $0.06 Weighted average shares outstanding - basic 50,011 50,039 Weighted average shares outstanding - diluted 50,920 50,693 BLACKHAWK NETWORK HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) (Unaudited) March 23, 2013 December 29, 2012 ASSETS Current assets: Cash and cash equivalents $75,027 $172,665 Overnight cash advances to Parent 40,000 495,000 Settlement receivables, net 150,335 510,853 Accounts receivable, net 88,266 101,001 Deferred income taxes 10,499 10,499 Prepaid expenses and other current assets 43,882 53,968 Total current assets 408,009 1,343,986 Property, equipment and technology, net 67,130 66,998 Intangible assets, net 1,518 1,699 Goodwill 42,729 42,729 Restricted cash 8,968 8,968 Deferred income taxes 983 1,937 Other assets 60,570 67,394 TOTAL ASSETS $589,907 $1,533,711 LIABILITIES, REDEEMABLE EQUITY AND STOCKHOLDERS' EQUITY Current liabilities: Settlement payables $324,257 $1,231,429 Accounts payable and accrued liabilities 114,413 154,542 Total current liabilities 438,670 1,385,971 Warrant and common stock liabilities 27,121 26,675 Deferred income taxes 7,432 266 Other liabilities 19,407 23,152 Total liabilities 492,630 1,436,064 Redeemable equity 36,196 34,997 Stockholders' equity: Preferred stock -- -- Common stock 51 51 Additional paid-in capital 32,847 31,542 Accumulated other comprehensive income (1,010) 298 (loss) Retained earnings 29,190 30,669 Total Blackhawk Network Holdings, Inc. 61,078 62,560 equity Non-controlling interest 3 90 Total stockholders' equity 61,081 62,650 TOTAL LIABILITIES, REDEEMABLE EQUITY AND $589,907 $1,533,711 STOCKHOLDERS' EQUITY BLACKHAWK NETWORK HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Twelve Weeks Ended March 23, 2013 March 24, 2012 OPERATING ACTIVITIES: Net income before allocation to non-controlling $259 $2,875 interest Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 4,727 3,939 Program development cost amortization 4,178 3,915 Change in allowance for doubtful accounts and (184) (961) sales allowances Employee stock-based compensation expense 1,634 1,020 Distribution partner mark-to-market expense 117 463 Change in fair value of contingent consideration 578 78 Other 1 (136) Changes in operating assets and liabilities: Settlement receivables 359,178 139,140 Settlement payables (903,987) (720,329) Accounts receivable 12,728 (1,153) Prepaid expenses and other current assets 10,145 4,276 Other assets 7,146 4,658 Accounts payable and accrued liabilities (35,185) (29,503) Other liabilities (838) (1,144) Income taxes, net (2,302) (103) Net cash used in operating activities (541,805) (592,965) INVESTING ACTIVITIES: Change in overnight cash advances to Parent 454,845 470,932 Expenditures for property, equipment and (6,092) (3,711) technology Other -- (100) Net cash provided by investing activities 448,753 467,121 FINANCING ACTIVITIES: Dividends paid (83) -- Payment of acquisition liability (1,394) -- Payments for initial public offering costs (298) -- Purchase of surrendered stock options (80) (18) Purchase of restricted stock units (210) -- Repurchase of common stock (253) (69) Net cash used in financing activities (2,318) (87) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH (2,268) 1,078 EQUIVALENTS DECREASE IN CASH AND CASH EQUIVALENTS (97,638) (124,853) CASH AND CASH EQUIVALENTS - Beginning of year 172,665 153,674 CASH AND CASH EQUIVALENTS - End of period $75,027 $28,821 BLACKHAWK NETWORK HOLDINGS, INC. SUPPLEMENTAL INFORMATION (In thousands except percentages and average transaction value) (Unaudited) TABLE 1: OTHER OPERATIONAL DATA Twelve Weeks Ended March 23, 2013 March 24, 2012 Load value $1,609,841 $1,308,380 Commissions and fees as a % of load 9.0% 9.2% value Distribution partner commissions 66.4% 64.5% paid as a % of commissions and fees Number of load transactions 36,806 32,696 Average load transaction value $43.74 $40.02 TABLE 2: RECONCILIATION OF NON-GAAP MEASURES Twelve Weeks Ended March 23, 2013 March 24, 2012 Adjusted operating revenues: Total operating revenues $185,050 $151,499 Distribution partner commissions (95,982) (77,704) Adjusted operating revenues $89,068 $73,795 Adjusted EBITDA: Net income $259 $2,875 Interest and other income (277) (407) Interest expense -- 1 Income tax expense 318 1,940 Depreciation and amortization 4,727 3,939 EBITDA 5,027 8,348 Adjustments to EBITDA: Employee stock-based compensation 1,634 1,020 Distribution partner mark-to-market 117 463 expense Change in the fair value of 578 78 contingent consideration Adjusted EBITDA $7,356 $9,909 Adjusted EBITDA margin: Total operating revenues $185,050 $151,499 Operating income $300 $4,409 Operating margin 0.2% 2.9% Adjusted operating revenues $89,068 $73,795 Adjusted EBITDA $7,356 $9,909 Adjusted EBITDA margin 8.3% 13.4% Adjusted net income: Net income $259 $2,875 Employee stock-based compensation 1,634 1,020 Distribution partner mark-to-market 117 463 expense Change in the fair value of 578 78 contingent consideration Amortization of intangibles 181 182 Total pre tax adjustments 2,510 1,743 Tax expense on adjustments (895) (610) Adjusted net income $1,874 $4,008 TABLE 3:RECONCILIATION OF GAAP CASH FLOW TO FREE CASH FLOW A significant portion of gift card sales occurs in late December of each year as a result of the holiday selling season.The timing of December holiday sales, cash inflows from our distribution partners and cash outflows to our content providers results in significant but temporary increases in our Cash, cash equivalents and restricted cash, Overnight cash advances to Parent, Settlement receivables and Settlement payables balances at the end of each fiscal year relative to normal daily balances.As a result, the year over year comparison of cash generated by operating activities and total changes in cash can vary significantly.In light of this effect on interim periods, set forth below is a calculation of "free cash flow" which we calculate as the net cash flow from operating activities adjusted to exclude the impact from changes in Settlement payables and Settlement receivables, less expenditures for property, equipment and technology.Cash from the sale of prepaid products is held for a short period of time and then remitted, less our commissions, to our content providers, and is significantly impacted by the portion of gift card sales that occur in late December.Because this cash flow is temporary and highly seasonal, it is not available for other uses, and it is therefore excluded from our calculation of free cash flow.Free cash flow provides information regarding the cash that our business generates in interim periods without the fluctuations resulting from the timing of cash inflows and outflows from gift card sales in late December, which we believe is useful to understanding our business. Twelve Weeks Ended March 23, 2013 March 24, 2012 Net cash flow used in operating $(541,805) $(592,965) activities Increase in settlement payables net 544,809 581,189 of settlement receivables Net cash flow from (used in) 3,004 (11,776) operating activities, as adjusted Expenditures for property, (6,092) (3,711) equipment and technology Free cash flow $(3,088) $(15,487) CONTACT: INVESTORS/ANALYSTS: Patrick Cronin (925) 226-9939 firstname.lastname@example.org MEDIA: Teri Llach (925) 226-9028 Teri.email@example.com Blackhawk Network Holdings, Inc. logo
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Blackhawk Announces First Quarter 2013 Financial Results Consistent With Estimates Provided in Prospectus
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