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Blackhawk Announces First Quarter 2013 Financial Results Consistent With Estimates Provided in Prospectus

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
         investor.relations@bhnetwork.com
        
         MEDIA:
         Teri Llach
         (925) 226-9028
         Teri.llach@bhnetwork.com

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