(Mark One)
|
|
R
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended June 30, 2015 | |
OR
|
|
£
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to |
Delaware
|
31-1429215
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
Large accelerated filer R
|
Accelerated filer £
|
|
Non-accelerated filer £ (Do not check if a smaller reporting company)
|
Smaller reporting company £
|
Page
Number
|
|||
Part I: FINANCIAL INFORMATION
|
|||
Item 1.
|
Financial Statements (unaudited)
|
||
3
|
|||
4
|
|||
5
|
|||
6
|
|||
7
|
|||
Item 2.
|
34
|
||
Item 3.
|
46
|
||
Item 4.
|
46
|
||
Part II: OTHER INFORMATION
|
|||
Item 1.
|
47
|
||
Item 1A.
|
47
|
||
Item 2.
|
47
|
||
Item 3.
|
47
|
||
Item 4.
|
47
|
||
Item 5.
|
47
|
||
Item 6.
|
48
|
||
50
|
Item 1.
|
Financial Statements.
|
June 30,
2015
|
December 31,
2014
|
|||||||
(In thousands, except per share amounts)
|
||||||||
ASSETS
|
||||||||
Cash and cash equivalents
|
$
|
822,314
|
$
|
1,077,152
|
||||
Trade receivables, less allowance for doubtful accounts ($4,158 and $3,811 at June 30, 2015 and December 31, 2014, respectively)
|
563,533
|
743,294
|
||||||
Credit card and loan receivables:
|
||||||||
Credit card receivables – restricted for securitization investors
|
8,315,489
|
8,312,291
|
||||||
Other credit card and loan receivables
|
2,971,108
|
2,931,589
|
||||||
Total credit card and loan receivables
|
11,286,597
|
11,243,880
|
||||||
Allowance for loan loss
|
(623,316
|
)
|
(570,171
|
)
|
||||
Credit card and loan receivables, net
|
10,663,281
|
10,673,709
|
||||||
Credit card and loan receivables held for sale
|
113,314
|
125,060
|
||||||
Deferred tax asset, net
|
225,535
|
218,872
|
||||||
Other current assets
|
477,152
|
456,349
|
||||||
Redemption settlement assets, restricted
|
491,979
|
520,340
|
||||||
Total current assets
|
13,357,108
|
13,814,776
|
||||||
Property and equipment, net
|
548,255
|
559,628
|
||||||
Deferred tax asset, net
|
162
|
164
|
||||||
Cash collateral, restricted
|
6,341
|
22,511
|
||||||
Intangible assets, net
|
1,338,956
|
1,515,994
|
||||||
Goodwill
|
3,811,689
|
3,865,484
|
||||||
Other non-current assets
|
484,931
|
485,420
|
||||||
Total assets
|
$
|
19,547,442
|
$
|
20,263,977
|
||||
LIABILITIES AND EQUITY
|
||||||||
Accounts payable
|
$
|
387,078
|
$
|
455,656
|
||||
Accrued expenses
|
289,623
|
457,472
|
||||||
Contingent consideration
|
—
|
326,023
|
||||||
Deposits
|
2,542,668
|
2,645,995
|
||||||
Non-recourse borrowings of consolidated securitization entities
|
1,650,000
|
1,058,750
|
||||||
Current debt
|
200,635
|
208,164
|
||||||
Other current liabilities
|
248,104
|
306,123
|
||||||
Deferred revenue
|
755,552
|
846,370
|
||||||
Deferred tax liability, net
|
91
|
930
|
||||||
Total current liabilities
|
6,073,751
|
6,305,483
|
||||||
Deferred revenue
|
160,035
|
166,807
|
||||||
Deferred tax liability, net
|
647,571
|
690,175
|
||||||
Deposits
|
2,035,660
|
2,127,546
|
||||||
Non-recourse borrowings of consolidated securitization entities
|
3,573,166
|
4,133,166
|
||||||
Long-term and other debt
|
4,649,259
|
4,001,082
|
||||||
Other liabilities
|
215,192
|
207,772
|
||||||
Total liabilities
|
17,354,634
|
17,632,031
|
||||||
Commitments and contingencies (Note 12)
|
||||||||
Redeemable non-controlling interest
|
233,655
|
235,566
|
||||||
Stockholders' equity:
|
||||||||
Common stock, $0.01 par value; authorized, 200,000 shares; issued, 112,050 shares and 111,686 shares at June 30, 2015 and December 31, 2014, respectively
|
1,120
|
1,117
|
||||||
Additional paid-in capital
|
2,937,187
|
2,905,563
|
||||||
Treasury stock, at cost, 50,328 shares and 47,874 shares at June 30, 2015 and December 31, 2014, respectively
|
(3,674,458
|
)
|
(2,975,795
|
)
|
||||
Retained earnings
|
2,819,650
|
2,540,948
|
||||||
Accumulated other comprehensive loss
|
(124,346
|
)
|
(75,453
|
)
|
||||
Total stockholders' equity
|
1,959,153
|
2,396,380
|
||||||
Total liabilities and equity
|
$
|
19,547,442
|
$
|
20,263,977
|
|
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
||||||||||||
2015
|
2014
|
2015
|
2014
|
||||||||||||
(In thousands, except per share amounts)
|
|||||||||||||||
Revenues
|
|
|
|||||||||||||
Transaction
|
|
$ |
86,784
|
$
|
80,248
|
$ |
180,069
|
|
$
|
164,228
|
|||||
Redemption
|
|
218,125
|
268,504
|
|
526,270
|
|
512,194
|
||||||||
Finance charges, net
|
|
683,980
|
538,186
|
|
1,363,442
|
|
1,074,447
|
||||||||
Marketing services
|
|
465,369
|
339,819
|
|
936,565
|
|
668,288
|
||||||||
Other revenue
|
|
46,360
|
38,401
|
|
95,429
|
|
78,901
|
||||||||
Total revenue
|
|
1,500,618
|
1,265,158
|
|
3,101,775
|
|
2,498,058
|
||||||||
Operating expenses
|
|||||||||||||||
Cost of operations (exclusive of depreciation and amortization disclosed separately below)
|
|
896,543
|
783,369
|
|
1,886,406
|
|
1,555,795
|
||||||||
Provision for loan loss
|
|
155,337
|
96,652
|
|
290,266
|
|
167,234
|
||||||||
General and administrative
|
|
40,909
|
28,302
|
|
71,102
|
|
62,329
|
||||||||
Depreciation and other amortization
|
|
34,895
|
25,973
|
|
68,533
|
|
51,485
|
||||||||
Amortization of purchased intangibles
|
|
87,211
|
48,322
|
|
175,201
|
|
96,883
|
||||||||
Total operating expenses
|
|
1,214,895
|
982,618
|
|
2,491,508
|
|
1,933,726
|
||||||||
Operating income
|
|
285,723
|
282,540
|
|
610,267
|
|
564,332
|
||||||||
Interest expense
|
|||||||||||||||
Securitization funding costs
|
|
24,553
|
22,300
|
|
48,366
|
|
45,211
|
||||||||
Interest expense on deposits
|
|
11,642
|
8,228
|
|
23,380
|
|
16,462
|
||||||||
Interest expense on long-term and other debt, net
|
|
44,520
|
32,404
|
|
86,976
|
|
69,006
|
||||||||
Total interest expense, net
|
|
80,715
|
62,932
|
|
158,722
|
|
130,679
|
||||||||
Income before income tax
|
$ |
205,008
|
$ |
219,608
|
$ |
451,545
|
$ |
433,653
|
|||||||
Provision for income taxes
|
|
74,969
|
80,419
|
|
156,674
|
|
158,717
|
||||||||
Net income
|
|
$ |
130,039
|
$
|
139,189
|
$
|
294,871
|
|
$
|
274,936
|
|||||
Less: Net (loss) income attributable to non-controlling interest
|
|
(1,298
|
)
|
1,745
|
|
975
|
|
97
|
|||||||
Net income attributable to common stockholders
|
|
$ |
131,337
|
$
|
137,444
|
$ |
293,896
|
|
$ |
274,839
|
|||||
Net income attributable to common stockholders per share:
|
|||||||||||||||
Basic
|
|
$ |
2.12
|
$
|
2.54
|
$ |
4.46
|
|
$ |
5.13
|
|||||
Diluted
|
|
$ |
2.11
|
$
|
2.19
|
$ |
4.43
|
|
$ |
4.27
|
|||||
Weighted average shares:
|
|||||||||||||||
Basic
|
|
61,928
|
54,154
|
62,501
|
|
53,600
|
|||||||||
Diluted
|
|
62,325
|
62,637
|
|
62,959
|
|
64,354
|
||||||||
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
||||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Net income
|
$
|
130,039
|
$
|
139,189
|
$
|
294,871
|
$
|
274,936
|
||||||||
Other comprehensive income (loss), net of tax
|
||||||||||||||||
Net unrealized (loss) gain on securities available-for-sale, net of tax (benefit) expense of $(580), $514, $(128) and $916 for the three and six months ended June 30, 2015 and 2014, respectively
|
(2,371
|
)
|
71
|
(1,454
|
)
|
556
|
||||||||||
Net unrealized loss on cash flow hedges, net of tax benefit of $162 and $916 for the three and six months ended June 30, 2015
|
(478
|
)
|
—
|
(2,881
|
)
|
—
|
||||||||||
Foreign currency translation adjustments
|
18,056
|
(5,857
|
)
|
(44,558
|
)
|
3,476
|
||||||||||
Other comprehensive income (loss)
|
15,207
|
(5,786
|
)
|
(48,893
|
)
|
4,032
|
||||||||||
Total comprehensive income, net of tax
|
$
|
145,246
|
$
|
133,403
|
$
|
245,978
|
$
|
278,968
|
||||||||
Less: comprehensive (loss) income attributable to non-controlling interest
|
(1,765
|
)
|
1,846
|
997
|
263
|
|||||||||||
Comprehensive income attributable to common
stockholders
|
$
|
147,011
|
$
|
131,557
|
$
|
244,981
|
$
|
278,705
|
||||||||
|
Six Months Ended
June 30,
|
|||||||
|
2015
|
2014
|
||||||
|
(In thousands)
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net income
|
$
|
294,871
|
$
|
274,936
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
243,734
|
148,368
|
||||||
Deferred income tax (benefit) expense
|
(42,891
|
)
|
13,221
|
|||||
Provision for loan loss
|
290,266
|
167,234
|
||||||
Non-cash stock compensation
|
51,530
|
31,497
|
||||||
Fair value gain on interest rate derivatives
|
(72
|
)
|
(113
|
)
|
||||
Amortization of discount on debt
|
428
|
12,293
|
||||||
Amortization of deferred financing costs
|
15,548
|
11,301
|
||||||
Change in deferred revenue
|
(27,152
|
)
|
(41,175
|
)
|
||||
Change in contingent consideration
|
(99,601
|
)
|
—
|
|||||
Change in other operating assets and liabilities, net of acquisitions
|
(106,622
|
)
|
(8,292
|
)
|
||||
Originations of credit card and loan receivables held for sale
|
(2,888,589
|
)
|
(2,343,434
|
)
|
||||
Sales of credit card and loan receivables held for sale
|
2,856,891
|
2,342,091
|
||||||
Excess tax benefits from stock-based compensation
|
(20,750
|
)
|
(26,926
|
)
|
||||
Other
|
(3,771
|
)
|
6,797
|
|||||
Net cash provided by operating activities
|
563,820
|
587,798
|
||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Change in redemption settlement assets
|
(8,623
|
)
|
(57,530
|
)
|
||||
Change in cash collateral, restricted
|
16,500
|
—
|
||||||
Change in credit card and loan receivables
|
(272,062
|
)
|
(151,078
|
)
|
||||
Proceeds from the sale of a credit card portfolio
|
26,900
|
—
|
||||||
Payment for acquired business, net of cash
|
—
|
(259,514
|
)
|
|||||
Capital expenditures
|
(88,085
|
)
|
(77,260
|
)
|
||||
Purchases of other investments
|
(17,614
|
)
|
(105,911
|
)
|
||||
Maturities/sales of other investments
|
4,815
|
3,209
|
||||||
Other
|
(1,159
|
)
|
(4,058
|
)
|
||||
Net cash used in investing activities
|
(339,328
|
)
|
(652,142
|
)
|
||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Borrowings under debt agreements
|
1,751,102
|
1,121,834
|
||||||
Repayments of borrowings
|
(1,102,334
|
)
|
(788,805
|
)
|
||||
Proceeds from convertible note hedge counterparties
|
—
|
1,519,833
|
||||||
Settlement of convertible note borrowings
|
—
|
(1,864,803
|
)
|
|||||
Payment of acquisition-related contingent consideration
|
(205,928
|
)
|
—
|
|||||
Acquisition of non-controlling interest
|
(87,376
|
)
|
—
|
|||||
Issuances of deposits
|
1,010,225
|
1,194,448
|
||||||
Repayments of deposits
|
(1,205,439
|
)
|
(1,000,783
|
)
|
||||
Non-recourse borrowings of consolidated securitization entities
|
1,620,000
|
760,000
|
||||||
Repayments/maturities of non-recourse borrowings of consolidated securitization entities
|
(1,588,750
|
)
|
(1,040,000
|
)
|
||||
Payment of deferred financing costs
|
(7,328
|
)
|
(6,671
|
)
|
||||
Excess tax benefits from stock-based compensation
|
20,750
|
26,926
|
||||||
Proceeds from issuance of common stock
|
8,698
|
8,202
|
||||||
Purchase of treasury shares
|
(676,668
|
)
|
(201,759
|
)
|
||||
Other
|
—
|
(1,461
|
)
|
|||||
Net cash used in financing activities
|
(463,048
|
)
|
(273,039
|
)
|
||||
Effect of exchange rate changes on cash and cash equivalents
|
(16,282
|
)
|
(1,272
|
)
|
||||
Change in cash and cash equivalents
|
(254,838
|
)
|
(338,655
|
)
|
||||
Cash and cash equivalents at beginning of period
|
1,077,152
|
969,822
|
||||||
Cash and cash equivalents at end of period
|
$
|
822,314
|
$
|
631,167
|
||||
SUPPLEMENTAL CASH FLOW INFORMATION:
|
||||||||
Interest paid
|
$
|
152,718
|
$
|
114,986
|
||||
Income taxes paid, net
|
$
|
131,741
|
$
|
69,028
|
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||
|
2015
|
2014
|
2015
|
2014
|
|||||||||
(In thousands, except per share amounts)
|
|||||||||||||
Numerator:
|
|||||||||||||
Net income attributable to common stockholders
|
|
$ |
131,337
|
$
|
137,444
|
$ |
293,896
|
$
|
274,839
|
||||
Less: accretion of redeemable non-controlling interest
|
—
|
—
|
15,194
|
—
|
|||||||||
Net income attributable to common stockholders after accretion of redeemable non-controlling interest
|
|
$ |
131,337
|
$
|
137,444
|
$ |
278,702
|
$
|
274,839
|
||||
Denominator:
|
|||||||||||||
Weighted average shares, basic
|
|
61,928
|
|
54,154
|
62,501
|
|
53,600
|
||||||
Weighted average effect of dilutive securities:
|
|||||||||||||
Shares from assumed conversion of convertible senior notes
|
|
—
|
|
2,715
|
—
|
|
4,224
|
||||||
Shares from assumed exercise of convertible note warrants
|
|
—
|
|
5,247
|
—
|
|
6,009
|
||||||
Net effect of dilutive stock options and unvested restricted stock
|
|
397
|
|
521
|
458
|
|
521
|
||||||
Denominator for diluted calculations
|
|
62,325
|
|
62,637
|
62,959
|
|
64,354
|
||||||
|
|
|
|||||||||||
Net income attributable to common stockholders per share:
|
|||||||||||||
Basic
|
|
$
|
2.12
|
$ |
2.54
|
$ |
4.46
|
$
|
5.13
|
||||
Diluted
|
|
$
|
2.11
|
$ |
2.19
|
$ |
4.43
|
$
|
4.27
|
|
As of January 2, 2014
|
|||
(In thousands)
|
||||
Current assets, net of cash acquired
|
|
$ |
246,769
|
|
Deferred tax asset
|
|
3,509
|
||
Property and equipment
|
|
19,719
|
||
Other non-current assets
|
|
3,994
|
||
Intangible assets
|
|
423,832
|
||
Goodwill
|
|
565,015
|
||
Total assets acquired
|
|
1,262,838
|
||
Current liabilities
|
|
146,559
|
||
Current portion of long-term debt
|
|
34,180
|
||
Deferred tax liability
|
105,512
|
|||
Long-term debt (net of current portion)
|
126,323
|
|||
Other liabilities
|
142
|
|||
Total liabilities assumed
|
|
412,716
|
||
Redeemable non-controlling interest
|
|
341,907
|
||
Net assets acquired
|
|
$ |
508,215
|
|
As of December 10, 2014
|
||||
(In thousands)
|
|||||
Current assets, net of cash acquired
|
|
$
|
180,030
|
||
Deferred tax asset
|
|
11,905
|
|||
Property and equipment
|
|
25,555
|
|||
Developed technology
|
|
182,500
|
|||
Other non-current assets
|
|
1,744
|
|||
Intangible assets
|
|
755,600
|
|||
Goodwill
|
|
1,650,299
|
|||
Total assets acquired
|
|
2,807,633
|
|||
Current liabilities
|
|
177,585
|
|||
Deferred tax liability
|
344,081
|
||||
Other liabilities
|
26,933
|
||||
Total liabilities assumed
|
|
548,599
|
|||
Net assets acquired
|
|
$
|
2,259,034
|
|
Three Months Ended
June 30, 2014
|
Six Months Ended
June 30, 2014
|
||||||
|
(In thousands, except per share amounts)
|
|||||||
Total revenue
|
$
|
1,402,538
|
$
|
2,781,351
|
||||
Net income
|
$
|
129,741
|
$
|
259,555
|
||||
Net income attributable to common stockholders
|
$
|
127,996
|
$
|
259,458
|
||||
Net income attributable to common stockholders per share:
|
||||||||
Basic
|
$
|
2.18
|
$
|
4.46
|
||||
Diluted
|
$
|
1.90
|
$
|
3.76
|
|
June 30,
2015
|
December 31,
2014
|
||||||
|
(In thousands)
|
|||||||
Principal receivables
|
$
|
10,821,510
|
$
|
10,762,498
|
||||
Billed and accrued finance charges
|
440,546
|
422,838
|
||||||
Other credit card and loan receivables
|
24,541
|
58,544
|
||||||
Total credit card and loan receivables
|
11,286,597
|
11,243,880
|
||||||
Less credit card receivables – restricted for securitization investors
|
8,315,489
|
8,312,291
|
||||||
Other credit card and loan receivables
|
$
|
2,971,108
|
$
|
2,931,589
|
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
||||||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Balance at beginning of period
|
$
|
586,678
|
$
|
482,658
|
$
|
570,171
|
$
|
503,169
|
||||||||
Provision for loan loss
|
155,337
|
96,652
|
290,266
|
167,234
|
||||||||||||
Change in estimate for uncollectible unpaid interest and fees
|
3,000
|
(5,000
|
)
|
4,500
|
500
|
|||||||||||
Recoveries
|
41,360
|
38,066
|
80,856
|
76,474
|
||||||||||||
Principal charge-offs
|
(163,059
|
)
|
(128,796
|
)
|
(322,477
|
)
|
(263,797
|
)
|
||||||||
Balance at end of period
|
$
|
623,316
|
$
|
483,580
|
$
|
623,316
|
$
|
483,580
|
|
June 30,
2015
|
% of
Total
|
December 31,
2014
|
% of
Total
|
||||||||||||
|
(In thousands, except percentages)
|
|||||||||||||||
Receivables outstanding – principal
|
$
|
10,821,510
|
100.0
|
%
|
$
|
10,762,498
|
100.0
|
%
|
||||||||
Principal receivables balances contractually delinquent:
|
||||||||||||||||
31 to 60 days
|
159,460
|
1.5
|
%
|
157,760
|
1.4
|
%
|
||||||||||
61 to 90 days
|
104,146
|
1.0
|
93,175
|
0.9
|
||||||||||||
91 or more days
|
177,937
|
1.6
|
182,945
|
1.7
|
||||||||||||
Total
|
$
|
441,543
|
4.1
|
%
|
$
|
433,880
|
4.0
|
%
|
Three Months Ended June 30, 2015
|
Six Months Ended June 30, 2015
|
|||||||||||||||||
Number of
Restructurings
|
Pre-modification
Outstanding Balance
|
Post-modification
Outstanding Balance
|
Number of
Restructurings
|
Pre-modification
Outstanding Balance
|
Post-modification
Outstanding Balance
|
|||||||||||||
|
(Dollars in thousands)
|
|||||||||||||||||
Troubled debt restructurings – credit card receivables
|
36,105
|
$
|
39,204
|
$
|
39,171
|
75,119
|
$
|
81,687
|
$
|
81,613
|
||||||||
Three Months Ended June 30, 2014
|
Six Months Ended June 30, 2014
|
|||||||||||||||||
Number of
Restructurings
|
Pre-modification
Outstanding Balance
|
Post-modification
Outstanding Balance
|
Number of
Restructurings
|
Pre-modification
Outstanding Balance
|
Post-modification
Outstanding Balance
|
|||||||||||||
|
(Dollars in thousands)
|
|||||||||||||||||
Troubled debt restructurings – credit card receivables
|
28,602
|
$
|
28,922
|
$
|
28,896
|
65,154
|
$
|
64,708
|
$
|
64,651
|
||||||||
Three Months Ended
June 30, 2015
|
Six Months Ended
June 30, 2015
|
|||||||||||
Number of
Restructurings
|
Outstanding
Balance
|
Number of
Restructurings
|
Outstanding
Balance
|
|||||||||
|
(Dollars in thousands)
|
|||||||||||
Troubled debt restructurings that subsequently defaulted – credit card receivables
|
17,335
|
$ |
18,251
|
35,728
|
$ |
36,559
|
||||||
Three Months Ended
June 30, 2014
|
Six Months Ended
June 30, 2014
|
|||||||||||
Number of
Restructurings
|
Outstanding
Balance
|
Number of
Restructurings
|
Outstanding
Balance
|
|||||||||
|
(Dollars in thousands)
|
|||||||||||
Troubled debt restructurings that subsequently defaulted – credit card receivables
|
13,770
|
$ |
13,831
|
30,498
|
$ |
29,972
|
||||||
June 30, 2015
|
||||||||||||||||
Age of Accounts Since Origination
|
Number of Active
Accounts with Balances
|
Percentage of Active
Accounts with Balances
|
Principal
Receivables Outstanding
|
Percentage of Principal
Receivables Outstanding
|
||||||||||||
|
(In thousands, except percentages)
|
|||||||||||||||
0-12 Months
|
5,885
|
30.0
|
%
|
$
|
2,828,593
|
26.1
|
%
|
|||||||||
13-24 Months
|
2,890
|
14.7
|
1,652,669
|
15.3
|
||||||||||||
25-36 Months
|
2,030
|
10.4
|
1,186,065
|
11.0
|
||||||||||||
37-48 Months
|
1,465
|
7.5
|
865,706
|
8.0
|
||||||||||||
49-60 Months
|
1,088
|
5.5
|
650,697
|
6.0
|
||||||||||||
Over 60 Months
|
6,265
|
31.9
|
3,637,780
|
33.6
|
||||||||||||
Total
|
19,623
|
100.0
|
%
|
$
|
10,821,510
|
100.0
|
%
|
June 30, 2014
|
||||||||||||||||
Age of Accounts Since Origination
|
Number of Active
Accounts with Balances
|
Percentage of Active
Accounts with Balances
|
Principal
Receivables Outstanding
|
Percentage of Principal
Receivables Outstanding
|
||||||||||||
|
(In thousands, except percentages)
|
|||||||||||||||
0-12 Months
|
4,750
|
27.8
|
%
|
$
|
2,031,774
|
25.1
|
%
|
|||||||||
13-24 Months
|
2,467
|
14.5
|
1,148,807
|
14.2
|
||||||||||||
25-36 Months
|
1,714
|
10.0
|
838,573
|
10.4
|
||||||||||||
37-48 Months
|
1,245
|
7.3
|
623,665
|
7.7
|
||||||||||||
49-60 Months
|
988
|
5.8
|
520,428
|
6.4
|
||||||||||||
Over 60 Months
|
5,915
|
34.6
|
2,932,865
|
36.2
|
||||||||||||
Total
|
17,079
|
100.0
|
%
|
$
|
8,096,112
|
100.0
|
%
|
June 30, 2015
|
June 30, 2014
|
||||||||||||||||
Probability of an Account
Becoming 90 or More Days Past Due or
Becoming Charged-off (within the next 12 months)
|
Total Principal
Receivables Outstanding
|
Percentage of Principal
Receivables Outstanding
|
Total Principal
Receivables Outstanding
|
Percentage of Principal
Receivables Outstanding
|
|||||||||||||
(In thousands, except percentages)
|
|||||||||||||||||
No Score
|
$
|
191,438
|
1.8
|
%
|
$
|
144,270
|
1.8
|
%
|
|||||||||
27.1% and higher
|
601,641
|
5.6
|
391,005
|
4.8
|
|||||||||||||
17.1% - 27.0% |
1,067,106
|
9.8
|
748,356
|
9.2
|
|||||||||||||
12.6% - 17.0% |
|
1,280,255
|
11.8
|
886,078
|
11.0
|
||||||||||||
3.7% - 12.5% |
|
4,423,378
|
40.9
|
3,298,009
|
40.7
|
||||||||||||
1.9% - 3.6% |
|
2,124,921
|
19.6
|
1,681,968
|
20.8
|
||||||||||||
Lower than 1.9%
|
1,132,771
|
10.5
|
946,426
|
11.7
|
|||||||||||||
Total
|
$
|
10,821,510
|
100.0
|
%
|
$
|
8,096,112
|
100.0
|
%
|
|
June 30,
2015
|
December 31,
2014
|
|||||
|
(In thousands)
|
||||||
Total credit card receivables – restricted for securitization investors
|
$ |
8,315,489
|
$
|
8,312,291
|
|||
Principal amount of credit card receivables – restricted for securitization investors, 90 days or more past due
|
$ |
134,978
|
$
|
145,768
|
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
||||||||||
2015
|
2014
|
2015
|
2014
|
|||||||||
(In thousands)
|
||||||||||||
Net charge-offs of securitized principal
|
$ |
97,616
|
$ |
79,947
|
$ |
196,455
|
$ |
165,661
|
||||
|
June 30, 2015
|
December 31, 2014
|
|||||||||||||||||||||||||||||
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair Value
|
Amortized
Cost
|
Unrealized
Gains
|
Unrealized
Losses
|
Fair Value
|
|||||||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||
Restricted cash
|
$ |
26,851
|
$
|
—
|
$
|
—
|
$
|
26,851
|
$
|
22,611
|
$
|
—
|
$
|
—
|
$
|
22,611
|
|||||||||||||||
Marketable securities
|
107,835
|
290
|
(1,995
|
)
|
106,130
|
95,669
|
520
|
(1,322
|
)
|
94,867
|
|||||||||||||||||||||
U.S. Treasury bonds
|
100,058
|
604
|
—
|
100,662
|
100,072
|
66
|
(33
|
)
|
100,105
|
||||||||||||||||||||||
Total
|
$ |
234,744
|
$
|
894
|
$
|
(1,995
|
)
|
$
|
233,643
|
$
|
218,352
|
$
|
586
|
$
|
(1,355
|
)
|
$
|
217,583
|
June 30, 2015
|
||||||||||||||||||
Less than 12 months
|
12 Months or Greater
|
Total
|
||||||||||||||||
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
|||||||||||||
(In thousands)
|
||||||||||||||||||
Marketable securities
|
$
|
41,097
|
$
|
(569
|
)
|
$
|
44,892
|
$
|
(1,426
|
)
|
$
|
85,989
|
$
|
(1,995
|
)
|
|||
Total
|
$
|
41,097
|
$
|
(569
|
)
|
$
|
44,892
|
$
|
(1,426
|
)
|
$
|
85,989
|
$
|
(1,995
|
)
|
December 31, 2014
|
||||||||||||||||||
Less than 12 months
|
12 Months or Greater
|
Total
|
||||||||||||||||
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
|||||||||||||
(In thousands)
|
||||||||||||||||||
Marketable securities
|
$
|
8,757
|
$
|
(27
|
)
|
$
|
48,961
|
$
|
(1,295
|
)
|
$
|
57,718
|
$
|
(1,322
|
)
|
|||
U.S. Treasury bonds
|
75,043
|
(33
|
)
|
—
|
—
|
75,043
|
(33
|
)
|
||||||||||
Total
|
$
|
83,800
|
$
|
(60
|
)
|
$
|
48,961
|
$
|
(1,295
|
)
|
$
|
132,761
|
$
|
(1,355
|
)
|
|
Amortized Cost
|
Fair Value
|
||||||
|
(In thousands)
|
|||||||
Due in one year or less
|
$
|
31,685
|
$
|
31,620
|
||||
Due after one year through five years
|
75,046
|
75,621
|
||||||
Due after five years through ten years
|
5,105
|
5,201
|
||||||
Due after ten years
|
96,057
|
94,350
|
||||||
Total
|
$
|
207,893
|
$
|
206,792
|
|
June 30, 2015
|
December 31, 2014
|
|||||||||||||||||||||||||||||
|
Cost
|
Unrealized Gains
|
Unrealized Losses
|
Fair Value
|
Cost
|
Unrealized Gains
|
Unrealized Losses
|
Fair Value
|
|||||||||||||||||||||||
|
(In thousands)
|
||||||||||||||||||||||||||||||
Cash and cash equivalents
|
$
|
258,809
|
$
|
—
|
$
|
—
|
$
|
258,809
|
$
|
237,127
|
$
|
—
|
$
|
—
|
$
|
237,127
|
|||||||||||||||
Mutual funds
|
20,006
|
—
|
(513
|
)
|
19,493
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||
Corporate bonds
|
211,254
|
2,423
|
—
|
213,677
|
280,053
|
3,160
|
—
|
283,213
|
|||||||||||||||||||||||
Total
|
$
|
490,069
|
$
|
2,423
|
$
|
(513
|
)
|
$
|
491,979
|
$
|
517,180
|
$
|
3,160
|
$
|
—
|
$
|
520,340
|
June 30, 2015
|
||||||||||||||||||
Less than 12 months
|
12 Months or Greater
|
Total
|
||||||||||||||||
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
|||||||||||||
(In thousands)
|
||||||||||||||||||
Mutual funds
|
$
|
19,493
|
$
|
(513
|
)
|
$
|
—
|
$
|
—
|
$
|
19,493
|
$
|
(513
|
)
|
||||
Total
|
$
|
19,493
|
$
|
(513
|
)
|
$
|
—
|
$
|
—
|
$
|
19,493
|
$
|
(513
|
)
|
|
Amortized Cost
|
Fair Value
|
|||||
|
(In thousands)
|
||||||
Due in one year or less
|
$
|
157,311
|
$
|
157,872
|
|||
Due after one year through five years
|
73,949
|
75,298
|
|||||
Total
|
$
|
231,260
|
$
|
233,170
|
June 30, 2015
|
|||||||||||||
Gross
Assets |
Accumulated
Amortization |
Net
|
Amortization Life and Method
|
||||||||||
(In thousands)
|
|||||||||||||
Finite Lived Assets
|
|||||||||||||
Customer contracts and lists
|
$
|
1,196,775
|
$
|
(275,854
|
)
|
$
|
920,921
|
4-12 years—straight line
|
|||||
Premium on purchased credit card portfolios
|
251,447
|
(99,423
|
)
|
152,024
|
3-10 years—straight line, accelerated
|
||||||||
Customer database
|
210,300
|
(144,644
|
)
|
65,656
|
3-10 years—straight line
|
||||||||
Collector database
|
56,032
|
(52,625
|
)
|
3,407
|
30 years—15% declining balance
|
||||||||
Publisher networks
|
140,200
|
(15,450
|
)
|
124,750
|
5-7 years – straight line
|
||||||||
Tradenames
|
85,015
|
(36,626
|
)
|
48,389
|
2-15 years—straight line
|
||||||||
Purchased data lists
|
12,150
|
(6,479
|
)
|
5,671
|
1-5 years—straight line, accelerated
|
||||||||
Favorable lease
|
6,891
|
(1,320
|
)
|
5,571
|
3-10 years—straight line
|
||||||||
Noncompete agreements
|
1,300
|
(1,083
|
)
|
217
|
3 years—straight line
|
||||||||
$
|
1,960,110
|
$
|
(633,504
|
)
|
$
|
1,326,606
|
|||||||
Indefinite Lived Assets
|
|||||||||||||
Tradenames
|
12,350
|
—
|
12,350
|
Indefinite life
|
|||||||||
Total intangible assets
|
$
|
1,972,460
|
$
|
(633,504
|
)
|
$
|
1,338,956
|
December 31, 2014
|
|||||||||||||
Gross
Assets |
Accumulated
Amortization |
Net
|
Amortization Life and Method
|
||||||||||
(In thousands)
|
|||||||||||||
Finite Lived Assets
|
|||||||||||||
Customer contracts and lists
|
$
|
1,328,056
|
$
|
(295,263
|
)
|
$
|
1,032,793
|
4-12 years—straight line
|
|||||
Premium on purchased credit card portfolios
|
289,173
|
(114,923
|
)
|
174,250
|
3-10 years—straight line, accelerated
|
||||||||
Customer database
|
210,300
|
(126,157
|
)
|
84,143
|
3-10 years—straight line
|
||||||||
Collector database
|
60,238
|
(56,239
|
)
|
3,999
|
30 years—15% declining balance
|
||||||||
Publisher networks
|
140,200
|
(1,662
|
)
|
138,538
|
5-7 years – straight line
|
||||||||
Tradenames
|
86,934
|
(29,408
|
)
|
57,526
|
2-15 years—straight line
|
||||||||
Purchased data lists
|
12,335
|
(6,497
|
)
|
5,838
|
1-5 years—straight line, accelerated
|
||||||||
Favorable lease
|
6,891
|
(767
|
)
|
6,124
|
3-10 years—straight line
|
||||||||
Noncompete agreements
|
1,300
|
(867
|
)
|
433
|
3 years—straight line
|
||||||||
$
|
2,135,427
|
$
|
(631,783
|
)
|
$
|
1,503,644
|
|||||||
Indefinite Lived Assets
|
|||||||||||||
Tradenames
|
12,350
|
—
|
12,350
|
Indefinite life
|
|||||||||
Total intangible assets
|
$
|
2,147,777
|
$
|
(631,783
|
)
|
$
|
1,515,994
|
For the Years Ending
December 31, |
||||
(In thousands)
|
||||
2015 (excluding the six months ended June 30, 2015)
|
$
|
159,430
|
||
2016
|
300,259
|
|||
2017
|
260,017
|
|||
2018
|
199,892
|
|||
2019
|
162,823
|
|||
2020 & thereafter
|
244,185
|
|
LoyaltyOne
|
Epsilon
|
Card Services
|
Corporate/Other
|
Total
|
||||||||||||||
|
(In thousands)
|
||||||||||||||||||
December 31, 2014
|
$
|
713,457
|
$
|
2,890,295
|
$
|
261,732
|
$
|
—
|
$
|
3,865,484
|
|||||||||
Effects of foreign currency translation
|
(53,847
|
)
|
52
|
—
|
—
|
(53,795
|
)
|
||||||||||||
June 30, 2015
|
$
|
659,610
|
$
|
2,890,347
|
$
|
261,732
|
$
|
—
|
$
|
3,811,689
|
Description
|
June 30,
2015
|
December 31,
2014
|
Maturity
|
Interest Rate
|
||||||||
(Dollars in thousands)
|
||||||||||||
Long-term and other debt:
|
|
|||||||||||
2013 credit facility
|
|
$
|
714,000
|
$
|
—
|
July 2018 and December 2019
|
(1) |
|
||||
2013 term loan
|
|
2,570,000
|
|
2,603,125
|
July 2018 and December 2019
|
(1) |
|
|||||
BrandLoyalty credit facility
|
68,135
|
108,789
|
December 2015
|
(2) |
|
|||||||
Senior notes due 2017
|
|
397,759
|
|
397,332
|
December 2017
|
5.250%
|
|
|||||
Senior notes due 2020
|
|
500,000
|
|
500,000
|
April 2020
|
6.375%
|
|
|||||
Senior notes due 2022
|
600,000
|
600,000
|
August 2022
|
5.375%
|
|
|||||||
Total long-term and other debt
|
|
4,849,894
|
|
4,209,246
|
|
|||||||
Less: current portion
|
|
200,635
|
|
208,164
|
|
|||||||
Long-term portion
|
|
$
|
4,649,259
|
$
|
4,001,082
|
|
||||||
Deposits:
|
||||||||||||
Certificates of deposit
|
|
$
|
3,373,167
|
$
|
3,934,906
|
Various – July 2015 – November 2021
|
0.25% to 2.80%
|
|||||
Money market deposits
|
|
1,205,161
|
|
838,635
|
On demand
|
(3) |
|
|||||
Total deposits
|
4,578,328
|
4,773,541
|
||||||||||
Less: current portion
|
|
2,542,668
|
|
2,645,995
|
|
|||||||
Long-term portion
|
|
$
|
2,035,660
|
$
|
2,127,546
|
|
||||||
Non-recourse borrowings of consolidated securitization entities:
|
|
|
|
|||||||||
Fixed rate asset-backed term note securities
|
|
$
|
2,983,166
|
$
|
3,376,916
|
Various - September 2015 – June 2019
|
0.61% to 4.55%
|
|||||
Floating rate asset-backed term note securities
|
|
810,000
|
|
450,000
|
February 2016 and April 2018
|
(4) |
|
|||||
Conduit asset-backed securities
|
|
1,430,000
|
|
1,365,000
|
Various - May 2016 – May 2017
|
(5) |
|
|||||
Total non-recourse borrowings of consolidated securitization entities
|
5,223,166
|
5,191,916
|
||||||||||
Less: current portion
|
|
1,650,000
|
|
1,058,750
|
|
|||||||
Long-term portion
|
|
$
|
3,573,166
|
$
|
4,133,166
|
|
||||||
(1) | The interest rate is based upon the London Interbank Offered Rate ("LIBOR") plus an applicable margin. At June 30, 2015, the weighted average interest rate was 2.23% and 2.19% for the 2013 Credit Facility and 2013 Term Loan, respectively. |
(2) | The interest rate is based upon the Euro Interbank Offered Rate plus an applicable margin. At June 30, 2015, the weighted average interest rate was 2.02%. |
(3) | The interest rates are based on the Federal Funds rate. At June 30, 2015, the interest rates ranged from 0.01% to 0.43%. |
(4) | The interest rates are based upon LIBOR plus an applicable margin. At June 30, 2015, the interest rates ranged from 0.57% to 0.67%. |
(5) | The interest rate is based upon LIBOR or the asset-backed commercial paper costs of each individual conduit provider plus an applicable margin. At June 30, 2015, the interest rates ranged from 1.08% to 1.73%. |
June 30, 2015
|
||||||||||
Balance Sheet Location
|
Notional Amount
|
Maturity
|
Fair Value
|
|||||||
(In thousands)
|
||||||||||
Designated as hedging instruments:
|
||||||||||
Foreign currency exchange hedges
|
Other current assets
|
$
|
5,456
|
July 2015 to September 2015
|
$
|
87
|
||||
Foreign currency exchange hedges
|
Other current liabilities
|
$
|
55,630
|
July 2015 to March 2016
|
$
|
1,755
|
||||
Not designated as hedging instruments:
|
||||||||||
Foreign currency exchange hedges
|
Other current liabilities
|
$
|
6,162
|
September 2015 to January 2016
|
$
|
105
|
||||
Interest rate derivatives
|
Other current liabilities
|
$
|
47,959
|
December 2015
|
$
|
120
|
||||
December 31, 2014
|
||||||||||
Balance Sheet Location
|
Notional Amount
|
Maturity
|
Fair Value
|
|||||||
(In thousands)
|
||||||||||
Designated as hedging instruments:
|
||||||||||
Foreign currency exchange hedges
|
Other current assets
|
$
|
50,908
|
January 2015 to September 2015
|
$
|
3,528
|
||||
Not designated as hedging instruments:
|
||||||||||
Foreign currency exchange hedges
|
Other current assets
|
$
|
3,125
|
January 2015 to March 2015
|
$
|
343
|
||||
Foreign currency exchange forward contract
|
Other current liabilities
|
$
|
236,578
|
January 2015
|
$
|
16,990
|
||||
Interest rate derivatives
|
Other current liabilities
|
$
|
79,429
|
December 2015 to August 2016
|
$
|
330
|
||||
|
2015
|
2014
|
|||||||||
For the three months ended June 30,
|
Income Statement Location
|
Gain on
Derivative
Instruments
|
Income Statement Location
|
Gain on
Derivative
Instruments
|