NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1
. The Company and Significant Accounting Policies
The Company
Blackhawk Network Holdings, Inc., together with its subsidiaries (we, us, our, the Company), is a leading prepaid payment network utilizing proprietary technology to offer a broad range of prepaid gift, telecom and debit cards, in physical and electronic forms, as well as related prepaid products and payment services in
the United States and 23 other countries
. Our product offerings include single-use gift cards; loyalty, incentive and reward products and services; prepaid telecom products and prepaid financial services products, including general purpose reloadable (GPR) cards, and our reload network (collectively, prepaid products). We offer gift cards from leading consumer brands (known as closed loop) as well as branded gift and incentive cards from leading payment network card associations such as American Express, Discover, MasterCard and Visa (known as open loop) and prepaid telecom products offered by prepaid wireless telecom carriers. We also distribute GPR cards and operate a proprietary reload network named Reloadit, which allows consumers to reload funds onto their previously purchased GPR cards. We distribute these prepaid products across multiple high-traffic channels such as grocery, convenience, specialty and online retailers (referred to as retail distribution partners) in the Americas, Europe, Africa, Australia and Asia and provide these prepaid products and related services to business clients for their loyalty, incentive and reward programs.
Basis of Presentation
The accompanying condensed consolidated financial statements of Blackhawk Network Holdings, Inc. are unaudited. We have prepared our unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. We have condensed or omitted certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP pursuant to such rules and regulations. Accordingly, our interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K, filed with the SEC on
March 2, 2016
(the Annual Report). We have prepared our condensed consolidated financial statements on the same basis as our annual audited consolidated financial statements and, in the opinion of management, have reflected all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position and results of operations for the interim periods presented. Our results for the interim periods are not necessarily reflective of the results to be expected for the year ending
December 31, 2016
or for any other interim period or other future year. Our condensed consolidated balance sheet as of
January 2, 2016
, included herein was derived from our audited consolidated financial statements as of that date but does not include all disclosures required by GAAP for annual financial statements, including notes to the financial statements.
Seasonality
A significant portion of gift card sales occurs in late December of each year during the holiday selling season. As a result, we earn a significant portion of revenues, net income and cash inflows during the fourth fiscal quarter of each year and remit the majority of the cash, less commissions, to our content providers in January of the following year. The timing of our fiscal year-end, December holiday sales and the related January cash settlement with content providers significantly increases our
Cash and cash equivalents
,
Settlement receivables
and
Settlement payables
balances at the end of each fiscal year relative to normal daily balances. The cash settlement with our content providers in January accounts for the majority of the use of cash from operating activities in our condensed consolidated statements of cash flows during our first three fiscal quarters. Additionally, our operating income may fluctuate significantly during our first three fiscal quarters due to lower revenues and timing of certain expenses during such fiscal periods. As a result, quarterly financial results are not necessarily reflective of the results to be expected for the year, any other interim period or other future year.
Recently Issued or Adopted Accounting Pronouncements
In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,
which provides additional guidance on the presentation and classification of certain items in the statement of cash flows
.
Early adoption is permitted and the standard shall be applied retrospectively. We early adopted ASU 2016-15 during our third quarter of 2016. Adoption did not result in significant changes to our existing accounting policies or presentation.
In April and May 2016, the FASB issued ASU 2016-10, and ASU 2016-12,
Revenue from Contracts with Customers (Topic 606),
which provides additional guidance, narrow-scope improvements and practical expedients to the new revenue standard (Topic 606) that will be applicable for reporting periods beginning after December 15, 2017. Early adoption is not permitted. Management is evaluating the impact of this guidance on our financial statements.
In March 2016, the FASB issued ASU 2016-06,
Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt
Instruments,
which clarifies the requirements for assessing certain contingent put or call options in debt instruments. Early adoption is permitted and the standard shall be applied using a modified retrospective basis. We early adopted ASU 2016-06 during our third quarter of 2016 in conjunction with our issuance of the Convertible Senior Notes (see
Note 3
—
Financing
). Adoption did not result in significant changes to our existing accounting policies.
In March 2016, the FASB issued ASU 2016-04
Liabilities—Extinguishment of Liabilities (Subtopic 405-20)
: Recognition of Breakage for Certain Prepaid Stored-Value Cards, effective for fiscal years beginning after December 15, 2017. ASU 2016-04 defines liabilities related to the sale of certain prepaid stored-value cards as financial liabilities and provides guidance for the derecognition of liabilities and recognition of revenue related to the portion of the stored value that ultimately is not redeemed by customers (breakage). Early adoption is permitted and the standard shall be applied using either a modified retrospective basis or a retrospective basis. We early adopted ASU 2016-04 during our first quarter of 2016 on a modified retrospective basis because we believe that derecognition of these liabilities more accurately reflects the economics of such transactions. Accordingly, we recognized a cumulative adjustment benefit of
$6.1 million
, net of income taxes, to beginning
Retained earnings
as of January 3, 2016.
In March 2016, the FASB issued ASU 2016-09,
Compensation—Stock Compensation (Topic 718).
The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016, and early adoption is permitted. We early adopted ASU 2016-09 during our first quarter of 2016 on a modified retrospective basis for the income statement impact of forfeitures and income taxes and have retrospectively applied ASU 2016-09 to our condensed consolidated statements of cash flows for the impact of excess tax benefits. Accordingly, we recognized a cumulative adjustment charge of
$0.3 million
for the adoption of the impact of forfeitures, net of income taxes, and a cumulative adjustment benefit of
$10.1 million
for the excess tax benefit for the exercise of warrants from prior fiscal years to beginning
Retained earnings
as of January 3, 2016.
Significant Accounting Policies
There have been no material changes to our significant accounting policies, as compared to the significant accounting policies described in the audited consolidated financial statements and related notes included in the Annual Report. As a result of early adopting ASU 2016-04 and ASU 2016-09 (discussed above), we provide below our policies with respect to breakage and stock-based compensation.
Breakage Revenue
We refer to the portion of the dollar value of prepaid-stored value cards that consumers do not ultimately redeem as breakage. Where we expect to be entitled to a breakage amount, we recognize revenue using estimated breakage rates ratably over the estimated card life, provided that a significant reversal of the amount of breakage revenue recognized is not probable and record adjustments to such estimates when redemption is remote or we are legally defeased of the obligation, if applicable. We estimate breakage rates based on historical redemption patterns, market-specific trends, escheatment rules and existing economic conditions for each program. In card programs where we do not expect to be entitled to a breakage amount, we recognize breakage revenue when we consider redemption remote or we are legally defeased of the obligation, if applicable.
Stock-based Compensation
As a result of our adoption of ASU 2016-09, we recognize the impact of forfeitures when they occur with no adjustment for estimated forfeitures and recognize excess tax benefits as a reduction of income tax expense regardless of whether the benefit reduces income taxes payable. Additionally, we recognize the cash flow impact of such excess tax benefits in operating activities in our condensed consolidated statements of cash flows.
Reclassification
In our condensed consolidated statements of income (loss), we have reclassified
Marketing
revenue to a separate line item, previously reported in
Program, interchange, marketing and other fees
and have renamed such line as
Program and other fees
.
As a result of our retrospective adoption ASU 2015-17 in the fourth quarter of 2015 to classify all deferred income taxes as long-term assets or liabilities, we have retrospectively applied the guidance to our deferred income taxes as of
September 12, 2015
.
2
. Business Acquisitions
2016 Acquisitions
Omni Prepaid
On January 5, 2016, we acquired Omni Prepaid, LLC and its subsidiaries GiftCards.com, LLC, which sells digital and physical prepaid gift card solutions to consumers through a high-trafficked gift card U.S. website, and OmniCard, LLC, which sells customized prepaid incentive and reward solutions for business clients (collectively, GiftCards). The new sites and customers will expand our e-commerce businesses.
The purchase consideration totaled
$103.9 million
in cash which we funded using a combination of cash on hand and borrowings under our Credit Agreement. The following table presents our initial estimates of the purchase price allocation, and we may make adjustments to these amounts through the one year measurement period as we finalize information regarding our forecasts, valuation assumptions, income taxes and contingencies (in thousands):
|
|
|
|
|
|
|
|
Cash
|
$
|
3,985
|
|
|
Consumer and customer deposits
|
(5,429
|
)
|
|
Accounts payable and accrued operating expenses
|
(9,860
|
)
|
|
Other tangible assets, net
|
893
|
|
|
Debt
|
(5,807
|
)
|
|
Identifiable technology and intangible assets
|
52,460
|
|
|
Goodwill
|
67,706
|
|
|
Total purchase consideration
|
$
|
103,948
|
|
At closing, we repaid the assumed debt, which we present in financing activities in our condensed consolidated statements of cash flows, and paid
$8.1 million
of GiftCards' transaction expenses included above within accounts payable and accrued operating expenses, which we present in operating activities in our condensed consolidated statements of cash flows.
Goodwill primarily represents the value of cash flows from future customers. We expect to deduct goodwill and the identifiable technology and intangible assets for tax purposes.
The following table presents the components of the identifiable technology and intangible assets and the estimated useful lives (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Useful Life
|
|
Customer relationships
|
$
|
27,570
|
|
|
10 years
|
|
Backlog
|
10,780
|
|
|
3 years
|
|
Domain name
|
10,520
|
|
|
10 years
|
|
Technology
|
3,590
|
|
|
5 years
|
|
Total identifiable technology and intangible assets
|
$
|
52,460
|
|
|
|
Customer relationships represent the estimated fair value of the underlying relationships and agreements with GiftCards' business clients and consumers. Backlog represents the estimated fair value resulting from cards issued before the acquisition date, resulting from revenues, including interchange and account service fees. Domain name represents the estimated fair value of the giftcards.com domain name. Technology represents internal-use software used for the order, fulfillment and management of customer orders.
We valued customer relationships, backlog and domain name using the income approach and the technology using the cost approach. Significant assumptions include forecasts of revenues, costs of revenue, development costs and sales, general and administrative expenses and estimated attrition rates for business clients and consumers. We discounted the cash flows at various rates from
6.0%
to
11.0%
, reflecting the different risk profiles of the assets.
Acquisition-related expenses totaled
$0.4 million
, which we report in
Transition and acquisition
expense.
Other 2016 Acquisitions
During the first quarter of 2016, we also acquired NimbleCommerce, a digital commerce platform and network for promotions. NimbleCommerce also allows merchants and brands to manage their own prepaid offer and gift card programs, or resell through a network of retailer and publisher branded sites. During the second quarter of 2016, we acquired substantially all of the net assets of Extrameasures, a prepaid consumer promotions and incentives company. Through its customized rebate programs, Extrameasures offers Visa prepaid cards and private label merchant-specific reward and gift cards with a proprietary platform to help businesses drive consumer acquisition, engagement and loyalty.
The purchase consideration for NimbleCommerce and Extrameasures totaled
$78.6 million
, consisting of
$58.5 million
in cash and
$20.1 million
in the estimated fair value of contingent consideration. Contingent consideration resulting from our acquisition of Extrameasures consists of
three
cash payments of up to
$15 million
each, based on the financial performance of Extrameasures for each of the three annual post-acquisition periods. Approximately
10%
of the earnout payments will be allocated to employees. Accordingly, we exclude such amounts from the estimated fair value of the contingent consideration and accrue estimated amounts due over the service period. We estimated the fair value of contingent consideration using the income approach at a discount rate of
17%
.
The following table presents our initial estimates of the purchase price allocation, and we may make adjustments to these amounts through the one year measurement period as we finalize information regarding our forecasts, valuation assumptions, income taxes and contingencies (in thousands):
|
|
|
|
|
|
|
|
Cash
|
$
|
14,191
|
|
|
Settlement receivables
|
4,884
|
|
|
Settlement payables
|
(3,272
|
)
|
|
Consumer and customer deposits
|
(18,009
|
)
|
|
Other tangible liabilities, net
|
(1,155
|
)
|
|
Debt
|
(3,157
|
)
|
|
Deferred income taxes
|
2,066
|
|
|
Identifiable technology and intangible assets
|
45,540
|
|
|
Goodwill
|
37,525
|
|
|
Total purchase consideration
|
$
|
78,613
|
|
At closing, we repaid the assumed debt, which we present in financing activities in our condensed consolidated statements of cash flows, and paid
$1.0 million
of transaction expenses, which we present in operating activities in our condensed consolidated statements of cash flows.
Goodwill primarily represents the value of cash flows from future customers. We expect to deduct approximately
$1.4 million
of the total
$10.4 million
goodwill from our acquisition of NimbleCommerce for tax purposes and may currently deduct up to
$2.3 million
of the total
$27.2 million
goodwill from our acquisition of Extrameasures for tax purposes. For Extrameasures, we will be able to deduct additional goodwill based on the actual payments made under the contingent earnout and settlement of contingent liabilities.
The following table presents the components of the identifiable technology and intangible assets and the estimated useful lives (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
Useful Life
|
|
Customer relationships
|
$
|
39,230
|
|
|
10 years
|
|
Backlog
|
1,610
|
|
|
3 years
|
|
Technology
|
4,700
|
|
|
5 years
|
|
Total identifiable technology and intangible assets
|
$
|
45,540
|
|
|
|
We valued customer relationships, backlog and certain technology using the income approach and certain technology using the cost approach. Significant assumptions include forecasts of revenues, costs of revenue, development costs and sales, general and administrative expenses and estimated attrition rates for business clients. We discounted the cash flows at various rates from
9.0%
to
16.0%
, reflecting the different risk profiles of the assets.
Acquisition-related expenses totaled
$0.9 million
, which we include in
Transition and acquisition
expense.
Pro Forma Financial Information
The following pro forma financial information summarizes the combined results of operations of us, GiftCards and Extrameasures as though we had been combined as of the beginning of fiscal 2015 (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 weeks ended
|
|
36 weeks ended
|
|
|
September 10, 2016
|
|
September 12, 2015
|
|
September 10, 2016
|
|
September 12, 2015
|
|
Total revenues
|
$
|
364,129
|
|
|
$
|
364,400
|
|
|
$
|
1,127,178
|
|
|
$
|
1,068,882
|
|
|
Net income (loss) attributable to Blackhawk Network Holdings, Inc.
|
(3,626
|
)
|
|
(3,959
|
)
|
|
(14,469
|
)
|
|
(1,124
|
)
|
|
Pro forma EPS—Basic
|
$
|
(0.07
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.02
|
)
|
|
Pro forma EPS—Diluted
|
$
|
(0.07
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.02
|
)
|
The pro forma financial information includes adjustments to reclassify acquisition-related costs from 2016 to 2015, to amortize technology and intangible assets starting at the beginning of 2015, and to reflect the impact on revenue resulting from the step-down in basis of consumer and customer deposits from its book value to its fair value as of the beginning of 2015.
We have not presented separate results of operations since closing for GiftCards because its integration with our existing operations makes it impractical to do so. In addition, results of operations for Extrameasures and NimbleCommerce are immaterial, both individually and in the aggregate.
Subsequent Event
On October 6, 2016, we acquired the outstanding common stock of Grass Roots Group Holdings, Ltd. and its subsidiaries, a leading provider of employee and customer engagement solutions, for purchase consideration of
£93.7 million
, or
$119.1 million
based on the exchange rate on the acquisition date. The acquisition broadens the global capabilities of our incentives and engagement business. We are in the process of gathering the information to allocate the purchase price and accordingly are unable to provide initial allocation estimates nor provide pro forma financial information.
2015 Acquisitions
During the
36 weeks ended
September 10, 2016
, we recorded a measurement period adjustment for Achievers, acquired in June 2015, which decreased deferred revenue by
$3.6 million
, intangible assets by
$1.9 million
, goodwill by
$1.2 million
and deferred income tax assets by
$0.5 million
. The measurement periods for Achievers and Didix are now closed.
3
. Financing
Credit Agreement
On January 25, 2016, we exercised our option to draw down an incremental
$100 million
term loan under our Credit Agreement.
On July 27, 2016, in conjunction with the issuance of the Convertible Senior Notes, as described below, we entered into an amendment and restatement to our Credit Agreement (the Restated Credit Agreement). We repaid all amounts outstanding under our revolving line of credit and
$276 million
of the
$426 million
outstanding under our term loan such that
$150 million
remained outstanding under our term loan. The Restated Credit Agreement provides for the extension of credit in an aggregate principal amount up to
$700 million
, consisting of revolving loans up to
$400 million
(the Revolving Credit Facility) and term loans up to
$300 million
(the Term Loan Facility). The term loan has
$150 million
outstanding with a delayed draw option for up to an additional
$150 million
. The Restated Credit Agreement also includes an ability to increase aggregate commitments by up to an incremental
$300 million
if certain criteria are met and lenders choose to participate. The Restated Credit Agreement extended the term of the Credit Agreement to July 2021 and made certain modifications to the financial and other covenants to add operating flexibility, including modification of the leverage covenant and removal of the net worth covenant and the dollar limitation on acquisitions.
Convertible Senior Notes
On July 27, 2016, we issued
$500 million
aggregate principal amount of
1.50%
Convertible Senior Notes due in January 2022 (the Notes), in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933 (the Securities Act). The Notes have not been registered under the Securities Act, or applicable state securities laws or blue sky laws, and may not be offered or sold in the United States absent registration under the Securities Act and applicable state securities laws or available exemptions from the registration requirements.
The Notes are senior unsecured obligations and rank equally in right of payment with all of our future senior unsecured indebtedness and are junior to our existing and future secured indebtedness. The Notes pay interest in cash semi-annually (January and July) at a rate of
1.50%
per annum.
On or after September 15, 2021, until the second scheduled trading day immediately preceding the maturity date, the Notes may be converted at the option of the holders. Holders may convert the Notes at their option prior to September 15, 2021 only under the following circumstances:
1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2016 (and only during such calendar quarter), if the last reported sale price of the common stock for at least
20
trading days (whether or not consecutive) during a period of
30
consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to
130%
of the conversion price on each applicable trading day;
2) during the
five
business day period after any
five
consecutive trading day period (the measurement period) in which the “trading price” per $1,000 principal amount of Notes for each trading day of the measurement period was less than
98%
of the product of the last reported sale price of our common stock and the conversion rate on each such trading day; or
3) upon the occurrence of specified corporate events, including if there is a fundamental change.
Upon conversion, we will pay or deliver cash, shares of our own common stock or a combination, at our election.
The conversion rate is initially 20.0673 shares of common stock per $1,000 principal amount of the Notes (equivalent to an initial conversion price of approximately
$49.83
per share of common stock), subject to certain adjustments.
We may not redeem the Notes prior to the maturity date. At an event of default, holders may, upon satisfaction of certain conditions, accelerate the principal amount of the Notes plus accrued and unpaid interest. If we undergo a fundamental change, a holder may require us to repurchase for cash all or any portion of its Notes at a price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest.
We separately account for the liability and equity components of the Notes. The initial debt component of the Notes was valued at
$436.6 million
based on the contractual cash flows discounted at an appropriate comparable market non-convertible debt borrowing rate at the date of issuance of
4.1%
, with the equity component representing the residual amount of the proceeds which was recorded as a debt discount. We allocated the issuance costs pro-rata based on the relative initial carrying amounts of the debt and equity components, including the Note Hedges and Warrants transactions described below. As a result,
$1.8 million
of the issuance costs were allocated to the equity component of the Notes and
$12.3 million
of issuance costs were allocated to the liability component of the Notes and accounted for as a debt discount
.
We amortize the issuance costs allocated to the liability component as additional interest expense over the term of the Notes using the effective interest method. The effective interest rate of the Notes is
4.65%
per annum (
1.50%
coupon rate plus
3.15%
of non-cash accretion expense).
Convertible Note Hedges and Warrants
Concurrent with the pricing of the Notes, we purchased call options for our own common stock to hedge the Notes (the Note Hedges) and sold call options for our own common stock (the Warrants). We structured the Note Hedges to reduce potential dilution to our common stock upon any conversion of Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Notes, as the case may be. However, the Warrants could separately have a dilutive effect to the extent that the market value per share of our common stock exceeds the strike price of the Warrants.
The Note Hedges
—On July 21 and 22, 2016, we purchased Note Hedges from certain counterparties for an aggregate price of approximately
$75.8 million
. The Note Hedges are exercisable upon conversion of the Notes for cash, a number of shares of our common stock or a combination of cash and shares of our common stock generally based on the amount by which the market price per share of our common stock, as measured under the terms of the Note Hedges during the relevant valuation period, is greater than the strike price of the Note Hedges. The strike price of the Note Hedges initially corresponds to the conversion price of the Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the Notes, subject to certain exceptions. Under the terms of the Note Hedges, we will receive cash, shares or a combination of cash and shares that offsets share dilution caused by conversion of the Notes.
Warrants
—On July 21 and 22, 2016, we sold call options to the same counterparties for approximately
$47.0 million
, which give the counterparties the right to buy from us up to approximately
10.0 million
shares of our common stock, subject to adjustments, at an exercise price of
$61.20
per share, subject to adjustments, over a series of days commencing on April 18, 2022 and ending August 9, 2022. Upon each exercise of the Warrants, we will be obligated to deliver shares of our common stock having a value equal to the difference between the market price on the exercise date and the strike price of the Warrants.
The Note Hedges and Warrants are classified in stockholders’ equity on our condensed consolidated balance sheets. We also recognized a
$5.2 million
deferred tax asset with an offset to
Additional paid-in capital
for excess tax interest deductions relating to the Notes and Note Hedges.
Maturities of Long-Term Debt
As a result of the Amendment and the Notes, the following table presents the amounts due by year of maturity for our term loan and the Notes (in thousands):
|
|
|
|
|
|
|
|
|
As of July 27, 2016
|
|
2017
|
$
|
10,000
|
|
|
2018
|
7,500
|
|
|
2019
|
7,500
|
|
|
2020
|
15,000
|
|
|
2021
|
110,000
|
|
|
2022
|
500,000
|
|
|
Total long-term debt
|
$
|
650,000
|
|
Share Repurchase
In conjunction with the issuance of the Notes, on July 27, 2016, we repurchased approximately
1.0 million
shares of our common stock for
$34.8 million
.
4
. Fair Value Measurements
We measure certain assets and liabilities at fair value on a recurring basis. The table below summarizes the fair values of these assets and liabilities as of
September 10, 2016
,
January 2, 2016
and
September 12, 2015
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 10, 2016
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
Money market mutual funds
|
$
|
5,112
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,112
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Contingent consideration
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
22,200
|
|
|
$
|
22,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 2, 2016
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
Money market mutual funds
|
$
|
370,070
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
370,070
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Contingent consideration
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 12, 2015
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
Money market mutual funds
|
$
|
5,070
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,070
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Contingent consideration
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Level 1
— Unadjusted quoted prices in active markets for identical assets or liabilities. Level 1 investments include money market mutual funds.
Level 2
— Inputs other than quoted prices included in Level 1 that are either directly or indirectly observable. Level 2 investments include commercial paper.
In the
36 weeks ended
September 10, 2016
, there were no transfers between Level 1 and Level 2.
Level 3
— Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the inputs that market participants would use in pricing. Level 3 includes the estimated fair value of our contingent consideration liabilities.
Contingent Consideration
—We estimate the fair value of the contingent consideration based on our estimates of the probability of achieving the relevant targets and discount rates reflecting the risk of meeting these targets.
Term loan
—As of
September 10, 2016
, using Level 2 inputs, we estimate the fair value of our term loan to be approximately
$150.0 million
.
Convertible notes payable
—As of
September 10, 2016
, using Level 2 inputs, we estimate the fair value of our convertible notes payable to be approximately
$490.6 million
.
The changes in fair value of contingent consideration for the
36 weeks ended
September 10, 2016
and
September 12, 2015
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
36 weeks ended
|
|
|
September 10, 2016
|
|
September 12, 2015
|
|
Contingent Consideration
|
|
|
|
|
Balance, beginning of period
|
$
|
—
|
|
|
$
|
7,567
|
|
|
Issuance of contingent consideration
|
20,100
|
|
|
—
|
|
|
Change in fair value of contingent consideration
|
2,100
|
|
|
(7,567
|
)
|
|
Balance, end of period
|
$
|
22,200
|
|
|
$
|
—
|
|
We present the change in the fair value of contingent consideration in
Change in fair value of contingent consideration
and as a non-cash adjustment to net income in our condensed consolidated statements of cash flows. The decrease in fair value of contingent consideration related to our acquisition of CardLab for the
36 weeks ended
September 12, 2015
resulted from the projected failure of financial targets to be met relating to the launch of incentive programs during the contingent earn-out measurement period. Such measurement period concluded during the
36 weeks ended
September 10, 2016
with no amounts due. The issuance and increase in fair value of contingent consideration during the
36 weeks ended
September 10, 2016
related to our acquisition of Extrameasures (see
Note 2
—
Business Acquisitions
). The increase in fair value reflects the passage of time and increases in our projections of the payment of portions of the earn-out. As of
September 10, 2016
, we estimated the fair value of the remaining contingent consideration based on our estimates of the amounts payable for and probability of achieving the relevant targets and a discount rate of
17%
. A significant increase (decrease) in our estimates of the amounts payable for and probability of achieving the relevant targets or a significant decrease (increase) in the discount rate could materially increase (decrease) the estimated fair value of contingent consideration.
5
. Consolidated Financial Statement Details
The following tables represent the components of
Other current assets
,
Other assets
,
Other current liabilities
and
Other liabilities
as of
September 10, 2016
,
January 2, 2016
and
September 12, 2015
consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 10, 2016
|
|
January 2, 2016
|
|
September 12, 2015
|
|
Other current assets:
|
|
|
|
|
|
|
Inventory
|
$
|
35,634
|
|
|
$
|
36,528
|
|
|
$
|
47,272
|
|
|
Deferred expenses
|
12,099
|
|
|
18,182
|
|
|
10,854
|
|
|
Income tax receivables
|
38,427
|
|
|
14,831
|
|
|
20,632
|
|
|
Other
|
37,759
|
|
|
33,778
|
|
|
29,192
|
|
|
Total other current assets
|
$
|
123,919
|
|
|
$
|
103,319
|
|
|
$
|
107,950
|
|
|
Other assets:
|
|
|
|
|
|
|
Deferred program and contract costs
|
$
|
44,388
|
|
|
$
|
50,717
|
|
|
$
|
52,428
|
|
|
Other receivables
|
1,390
|
|
|
2,281
|
|
|
4,734
|
|
|
Income taxes receivable
|
—
|
|
|
6,155
|
|
|
6,368
|
|
|
Deferred financing costs
|
2,871
|
|
|
2,100
|
|
|
2,002
|
|
|
Other
|
20,390
|
|
|
20,511
|
|
|
12,762
|
|
|
Total other assets
|
$
|
69,039
|
|
|
$
|
81,764
|
|
|
$
|
78,294
|
|
|
Other current liabilities
:
|
|
|
|
|
|
|
Payroll and related liabilities
|
$
|
25,425
|
|
|
$
|
34,530
|
|
|
$
|
23,103
|
|
|
Income taxes payable
|
3,158
|
|
|
3,216
|
|
|
2,122
|
|
|
Acquisition liability
|
11,250
|
|
|
—
|
|
|
607
|
|
|
Other payables and accrued liabilities
|
8,797
|
|
|
19,596
|
|
|
17,488
|
|
|
Total other current liabilities
|
$
|
48,630
|
|
|
$
|
57,342
|
|
|
$
|
43,320
|
|
|
Other liabilities:
|
|
|
|
|
|
|
Acquisition liability
|
$
|
10,950
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Payable to content provider
|
—
|
|
|
—
|
|
|
825
|
|
|
Income taxes payable
|
6,213
|
|
|
4,249
|
|
|
2,418
|
|
|
Deferred income and other liabilities
|
8,266
|
|
|
10,451
|
|
|
1,624
|
|
|
Total other liabilities
|
$
|
25,429
|
|
|
$
|
14,700
|
|
|
$
|
4,867
|
|
6
. Goodwill
We have assigned goodwill to our US Retail, International Retail and Incentives & Rewards segments. To date, we have not recorded any impairment charges against or disposed of any reporting units with goodwill. During the first quarter of 2016, as a result of changes in reporting financial results to our Chief Operating Decision Maker, we concluded that we should split our historical e-Commerce operating segment, which we had reported in Incentives & Rewards reportable segment, into
two
operating segments: e-Commerce Retail, which we now report in US Retail reportable segment, and e-Commerce Incentives, which we continue to report in Incentives & Rewards reportable segment. Accordingly, we allocated the goodwill from the historical e-Commerce segment between these
two
segments based on their relative fair values. We allocated the goodwill from our acquisition of GiftCards between these
two
segments. A summary of changes in goodwill during the
36 weeks ended
September 10, 2016
is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 10, 2016
|
|
|
US Retail
|
|
International Retail
|
|
Incentives & Rewards
|
|
Total
|
|
Balance, beginning of period
|
$
|
42,729
|
|
|
$
|
49,156
|
|
|
$
|
310,604
|
|
|
$
|
402,489
|
|
|
Re-allocation of e-Commerce goodwill
|
2,671
|
|
|
—
|
|
|
(2,671
|
)
|
|
—
|
|
|
Acquisition of GiftCards
|
34,427
|
|
|
—
|
|
|
33,279
|
|
|
67,706
|
|
|
Acquisition of NimbleCommerce
|
10,365
|
|
|
—
|
|
|
—
|
|
|
10,365
|
|
|
Acquisition of Extrameasures
|
—
|
|
|
—
|
|
|
27,160
|
|
|
27,160
|
|
|
Measurement period adjustment
|
—
|
|
|
—
|
|
|
(1,234
|
)
|
|
(1,234
|
)
|
|
Foreign currency translation adjustments
|
—
|
|
|
1,639
|
|
|
482
|
|
|
2,121
|
|
|
Balance, end of period
|
$
|
90,192
|
|
|
$
|
50,795
|
|
|
$
|
367,620
|
|
|
$
|
508,607
|
|
7
. Stockholders’ Equity and Stock Based Compensation
Stockholders’ Equity
During the
36 weeks ended
September 10, 2016
, the issuance of our Convertible Senior Notes, the purchase of the Note Hedges, the sale of the Warrants (see
Note 3
—
Financing
) and our adoption of ASU 2016-04 and 2016-09 on a modified retrospective basis had a significant impact on
Additional paid-in capital
and
Retained earnings
. Accordingly, we present in the tables below a reconciliation of such balances from January 2, 2016 to
September 10, 2016
.
The following table presents the changes within
Additional paid-in capital
during the
36 weeks ended
September 10, 2016
(in thousands except average price per share):
|
|
|
|
|
|
|
|
BALANCE—January 2, 2016
|
$
|
561,939
|
|
|
Cumulative adjustment upon modified retrospective adoption of ASU 2016-09 (see
Note 1—The Company and Significant Accounting Policies)
|
650
|
|
|
Employee-related stock-based activity
|
28,940
|
|
|
Equity component of convertible notes issuance (see
Note 3—Financing)
|
63,434
|
|
|
Equity component of convertible notes issuance costs (see
Note 3—Financing)
|
(1,792
|
)
|
|
Purchase of convertible notes hedges (see
Note 3—Financing)
|
(75,750
|
)
|
|
Proceeds from sale of warrants (see
Note 3—Financing)
|
47,000
|
|
|
Deferred tax assets recognized for convertible notes (see
Note 3—Financing)
|
5,161
|
|
|
Repurchase of common stock (996 shares at an average price of $34.98 per share)
|
(34,843
|
)
|
|
BALANCE— September 10, 2016
|
$
|
594,739
|
|
The following table presents the changes within
Retained earnings
during the
36 weeks ended
September 10, 2016
(in thousands):
|
|
|
|
|
|
|
|
BALANCE—January 2, 2016
|
$
|
207,973
|
|
|
Cumulative adjustment upon modified retrospective adoption of ASU 2016-04 and 2016-09 (see
Note 1—The Company and Significant Accounting Policies)
|
15,854
|
|
|
Net loss
|
(19,992
|
)
|
|
Dividends paid
|
(44
|
)
|
|
BALANCE— September 10, 2016
|
$
|
203,791
|
|
Stock Based Compensation
During the
36 weeks ended
September 10, 2016
, our Board of Directors granted
1,129,019
restricted stock units,
172,300
performance stock units and
584,350
stock options at a weighted-average exercise price of
$37.90
per share.
The following table presents total stock-based compensation expense according to the income statement line in our condensed consolidated statements of income (loss) for the
12
and
36 weeks ended
September 10, 2016
and
September 12, 2015
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 weeks ended
|
|
36 weeks ended
|
|
|
September 10, 2016
|
|
September 12, 2015
|
|
September 10, 2016
|
|
September 12, 2015
|
|
Processing and services
|
$
|
1,364
|
|
|
$
|
1,530
|
|
|
$
|
4,259
|
|
|
$
|
4,366
|
|
|
Sales and marketing
|
2,759
|
|
|
2,038
|
|
|
8,600
|
|
|
5,523
|
|
|
Cost of products sold
|
31
|
|
|
13
|
|
|
89
|
|
|
25
|
|
|
General and administrative
|
4,139
|
|
|
3,536
|
|
|
11,917
|
|
|
9,942
|
|
|
Total stock-based compensation expense
|
$
|
8,293
|
|
|
$
|
7,117
|
|
|
$
|
24,865
|
|
|
$
|
19,856
|
|
8
. Income Taxes
Our effective tax rates were
62.3%
and
47.7%
for the
12 weeks ended
September 10, 2016
and
September 12, 2015
, respectively, and
48.8%
and
53.0%
for the
36 weeks ended
September 10, 2016
and
September 12, 2015
, respectively. The effective rate for the
12
weeks ended
September 10, 2016
was higher due to a discrete tax benefit for a tax return to provision true-up, resulting in an increase to the effective tax rate due to pre-tax loss, and permanent tax adjustments from deemed foreign income and nondeductible acquisition expenses. The effective rate for the
36
weeks ended
September 10, 2016
was lower due to a net reduction in 2015 in the value of our deferred tax assets from changes in certain state tax apportionment laws (which resulted in an increase to the effective tax rate for the 36 weeks ended September 12, 2015), partially offset by a discrete tax benefit for a tax return to provision true-up and excess tax benefits for employee stock based compensation, both increasing the effective tax rate due to pre-tax loss.
9
. Commitments and Contingencies
Contingencies
From time to time, we enter into contracts containing provisions that require us to indemnify various parties against certain potential claims from third parties. Under contracts with certain issuing banks, we are responsible to the banks for any unrecovered overdrafts on cardholders’ accounts. Under contracts with certain content providers, retail distribution partners and issuing banks, we are responsible for potential losses resulting from certain claims from third parties. Because the indemnity amounts associated with these agreements are not explicitly stated, the maximum amount of the obligation cannot be reasonably estimated. Historically, we have paid immaterial amounts pursuant to these indemnification provisions.
We are subject to audits related to various indirect taxes, including, but not limited to, sales and use taxes, value-added tax, and goods and services tax, in various foreign and state jurisdictions. We evaluate our exposure related to these audits and potential audits and do not believe that it is probable that any audit would hold us liable for any material amounts due.
Legal Matters
There are various claims and lawsuits arising in the normal course of business pending against us, including the matters described below, some of which seek damages and other relief which, if granted, may require future cash expenditures. Management does not believe that it is probable that the resolution of these matters would result in any liability that would materially affect our results of operations or financial condition.
On March 30, 2015, Greg Haney in his capacity as Seller Representative for CardLab, Inc. filed a lawsuit against us in the Delaware Chancery Court (CardLab, Inc. v. Blackhawk Network Holdings, Inc., Case No. 10851). The complaint generally alleges that we failed to disclose material information relating to a potential earn-out payment in connection with our acquisition of CardLab, Inc. in 2014. We believe that the suit is without merit, and are vigorously defending ourselves against these claims. On June 8, 2015, we filed a motion to dismiss the complaint. On June 22, 2015, the plaintiff filed an amended complaint. On July 7, 2015, we filed a motion to dismiss the case in its entirety. On February 26, 2016, the Court granted the motion to dismiss in part, dismissing
two
claims of the amended complaint. On March 25, 2016 we filed our answer denying the remaining claims and a counterclaim for attorneys’ fees pursuant to the merger agreement between the parties. On June 22, 2016, the plaintiff filed a motion to dismiss our counterclaim for indemnification. On July 22, 2016, we filed an amended counterclaim in response. The litigation is in the early stage of discovery. We believe the likelihood of loss is remote.
In addition, we transact business in non-U.S. markets and may, from time to time, be subject to disputes and tax audits by foreign tax authorities related to indirect taxes typically on commissions or fees we receive from non-resident content providers. As a result of an indemnification that we received, our exposure has decreased from
$12 million
as reported in our Annual Report to approximately
$5 million
, primarily in a single jurisdiction. In that jurisdiction, we have lost an appeal over a dispute related to a specific period. Even if we were to be assessed for other periods, which we currently estimate could be up to approximately
$5 million
, we believe it is more likely than not that we will prevail upon appeal.
10
. Segment Reporting
Our
three
reportable segments are US Retail, International Retail and Incentives & Rewards. During the first quarter of 2016, as a result of changes in reporting financial results to our Chief Operating Decision Maker (CODM), we concluded that we should split our historical e-Commerce segment, which we had reported in Incentives & Rewards, into
two
segments: e-Commerce Retail, which we report in US Retail, and e-Commerce Incentives, which we report in Incentives & Rewards. We have not retroactively adjusted 2015 segment information as the results of the e-Commerce Retail segment were immaterial.
We do not assess performance based on assets and do not provide information on the assets of our reportable segments to our CODM. The key metrics used by our CODM to assess segment performance include
Operating revenues
,
Operating revenues, net of Partner distribution expense
and segment profit.
We exclude from the determination of segment profit and report in Corporate and Unallocated: i) certain US operations, account management and marketing personnel who primarily support our US Retail segment (as these costs are not included in segment profit reviewed by the CODM), ii) the substantial majority of our technology personnel and related depreciation and amortization of technology and related hardware which support our US Retail and International Retail segments, iii) US accounting, finance, legal, human resources and other administrative functions which may support all segments and iv) noncash charges including amortization of acquisition intangibles, stock-based compensation and change in fair value of contingent consideration, as we do not include these costs in segment profit reviewed by our CODM. Segment profit for our International Retail segment includes all sales and marketing personnel and the substantial majority of operations, legal, accounting, finance and other administrative personnel in such international regions, and segment profit for our Incentives & Rewards segment includes all sales, marketing, technology, operations, legal, certain accounting, finance and other administrative personnel supporting that segment, as well as substantially all depreciation and amortization specifically related to that segment.
The following tables present the key metrics used by our CODM for the evaluation of segment performance, including certain significant noncash charges (consisting of certain depreciation and amortization of property, equipment and technology and distribution partner stock-based compensation expense) which have been deducted from the segment profit amounts shown below, and reconciliations of these amounts to our consolidated financial statements (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 weeks ended
|
|
|
September 10, 2016
|
|
|
US Retail
|
|
International Retail
|
|
Incentives & Rewards
|
|
Corporate and Unallocated
|
|
Consolidated
|
|
Total operating revenues
|
$
|
197,081
|
|
|
$
|
100,069
|
|
|
$
|
64,410
|
|
|
$
|
—
|
|
|
$
|
361,560
|
|
|
Partner distribution expense
|
103,601
|
|
|
69,841
|
|
|
4,921
|
|
|
—
|
|
|
178,363
|
|
|
Operating revenues, net of Partner distribution expense
|
93,480
|
|
|
30,228
|
|
|
59,489
|
|
|
—
|
|
|
183,197
|
|
|
Other operating expenses
|
58,192
|
|
|
25,158
|
|
|
50,779
|
|
|
59,161
|
|
|
193,290
|
|
|
Segment profit (loss) / Operating income (loss)
|
$
|
35,288
|
|
|
$
|
5,070
|
|
|
$
|
8,710
|
|
|
$
|
(59,161
|
)
|
|
(10,093
|
)
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
(3,324
|
)
|
|
Loss before income tax expense
|
|
|
|
|
|
|
|
|
$
|
(13,417
|
)
|
|
Non-cash charges
|
$
|
1,570
|
|
|
$
|
772
|
|
|
$
|
7,562
|
|
|
26,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 weeks ended
|
|
|
September 12, 2015
|
|
|
US Retail
|
|
International Retail
|
|
Incentives & Rewards
|
|
Corporate and Unallocated
|
|
Consolidated
|
|
Total operating revenues
|
$
|
214,941
|
|
|
$
|
83,671
|
|
|
$
|
54,053
|
|
|
$
|
—
|
|
|
$
|
352,665
|
|
|
Partner distribution expense
|
101,890
|
|
|
56,972
|
|
|
2,990
|
|
|
—
|
|
|
161,852
|
|
|
Operating revenues, net of Partner distribution expense
|
113,051
|
|
|
26,699
|
|
|
51,063
|
|
|
—
|
|
|
190,813
|
|
|
Other operating expenses
|
69,877
|
|
|
22,751
|
|
|
46,674
|
|
|
53,761
|
|
|
193,063
|
|
|
Segment profit (loss) / Operating income (loss)
|
$
|
43,174
|
|
|
$
|
3,948
|
|
|
$
|
4,389
|
|
|
$
|
(53,761
|
)
|
|
(2,250
|
)
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
(4,652
|
)
|
|
Income before income tax expense
|
|
|
|
|
|
|
|
|
$
|
(6,902
|
)
|
|
Non-cash charges
|
$
|
1,270
|
|
|
$
|
431
|
|
|
$
|
6,233
|
|
|
22,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36 weeks ended
|
|
|
September 10, 2016
|
|
|
US Retail
|
|
International Retail
|
|
Incentives & Rewards
|
|
Corporate and Unallocated
|
|
Consolidated
|
|
Total operating revenues
|
$
|
652,359
|
|
|
$
|
279,311
|
|
|
$
|
187,558
|
|
|
$
|
—
|
|
|
$
|
1,119,228
|
|
|
Partner distribution expense
|
330,283
|
|
|
198,703
|
|
|
12,763
|
|
|
—
|
|
|
541,749
|
|
|
Operating revenues, net of Partner distribution expense
|
322,076
|
|
|
80,608
|
|
|
174,795
|
|
|
—
|
|
|
577,479
|
|
|
Other operating expenses
|
202,384
|
|
|
69,134
|
|
|
154,796
|
|
|
179,279
|
|
|
605,593
|
|
|
Segment profit (loss) / Operating income (loss)
|
$
|
119,692
|
|
|
$
|
11,474
|
|
|
$
|
19,999
|
|
|
$
|
(179,279
|
)
|
|
(28,114
|
)
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
(10,610
|
)
|
|
Loss before income tax expense
|
|
|
|
|
|
|
|
|
$
|
(38,724
|
)
|
|
Non-cash charges
|
$
|
4,976
|
|
|
$
|
3,441
|
|
|
$
|
20,932
|
|
|
80,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36 weeks ended
|
|
|
September 12, 2015
|
|
|
US Retail
|
|
International Retail
|
|
Incentives & Rewards
|
|
Corporate and Unallocated
|
|
Consolidated
|
|
Total operating revenues
|
$
|
659,984
|
|
|
$
|
251,249
|
|
|
$
|
133,411
|
|
|
$
|
—
|
|
|
$
|
1,044,644
|
|
|
Partner distribution expense
|
313,628
|
|
|
169,578
|
|
|
10,987
|
|
|
—
|
|
|
494,193
|
|
|
Operating revenues, net of Partner distribution expense
|
346,356
|
|
|
81,671
|
|
|
122,424
|
|
|
—
|
|
|
550,451
|
|
|
Other operating expenses
|
209,856
|
|
|
73,665
|
|
|
110,462
|
|
|
137,597
|
|
|
531,580
|
|
|
Segment profit (loss) / Operating income (loss)
|
$
|
136,500
|
|
|
$
|
8,006
|
|
|
$
|
11,962
|
|
|
$
|
(137,597
|
)
|
|
18,871
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
(10,504
|
)
|
|
Income before income tax expense
|
|
|
|
|
|
|
|
|
$
|
8,367
|
|
|
Non-cash charges
|
$
|
3,741
|
|
|
$
|
860
|
|
|
$
|
11,488
|
|
|
51,423
|
|
|
|
11
. Earnings Per Share
The following table provides reconciliations of net income and shares used in calculating basic EPS to those used in calculating diluted EPS (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12 weeks ended
|
|
|
September 10, 2016
|
|
September 12, 2015
|
|
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
|
Net income (loss) attributable to Blackhawk Network Holdings, Inc.
|
$
|
(5,102
|
)
|
|
$
|
(5,102
|
)
|
|
$
|
(3,615
|
)
|
|
$
|
(3,615
|
)
|
|
Distributed and undistributed earnings allocated to participating securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net income (loss) attributable to common stockholders
|
$
|
(5,102
|
)
|
|
$
|
(5,102
|
)
|
|
$
|
(3,615
|
)
|
|
$
|
(3,615
|
)
|
|
Weighted-average common shares outstanding
|
55,668
|
|
|
55,668
|
|
|
54,467
|
|
|
54,467
|
|
|
Common share equivalents
|
|
|
—
|
|
|
|
|
|
—
|
|
|
Weighted-average shares outstanding
|
|
|
55,668
|
|
|
|
|
54,467
|
|
|
Earnings (loss) per share
|
$
|
(0.09
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36 weeks ended
|
|
|
September 10, 2016
|
|
September 12, 2015
|
|
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
|
Net income (loss) attributable to Blackhawk Network Holdings, Inc.
|
$
|
(19,992
|
)
|
|
$
|
(19,992
|
)
|
|
$
|
3,995
|
|
|
$
|
3,995
|
|
|
Distributed and undistributed earnings allocated to participating securities
|
(15
|
)
|
|
(15
|
)
|
|
(46
|
)
|
|
(46
|
)
|
|
Net income (loss) attributable to common stockholders
|
$
|
(20,007
|
)
|
|
$
|
(20,007
|
)
|
|
$
|
3,949
|
|
|
$
|
3,949
|
|
|
Weighted-average common shares outstanding
|
55,851
|
|
|
55,851
|
|
|
53,941
|
|
|
53,941
|
|
|
Common share equivalents
|
|
|
—
|
|
|
|
|
|
2,053
|
|
|
Weighted-average shares outstanding
|
|
|
55,851
|
|
|
|
|
55,994
|
|
|
Earnings (loss) per share
|
$
|
(0.36
|
)
|
|
$
|
(0.36
|
)
|
|
$
|
0.07
|
|
|
$
|
0.07
|
|
The weighted-average common shares outstanding for diluted EPS excluded approximately
4,416,000
and
5,020,000
potential common shares outstanding for the
12 weeks ended
September 10, 2016
and
September 12, 2015
and
4,329,000
for the
36 weeks ended
September 10, 2016
due to the net loss attributable to common shareholders. Also excluded were approximately
1,850,000
and
576,000
potential common stock outstanding for the
12 weeks ended
September 10, 2016
and
September 12, 2015
, respectively, and
1,642,000
and
555,000
for the
36 weeks ended
September 10, 2016
and
September 12, 2015
, respectively, because the effect would have reduced weighted-average shares outstanding. Potential common stock outstanding results in fewer common share equivalents as a result of the treasury stock method.