Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Oct. 22, 2020 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2020 | |
Entity File Number | 001-15749 | |
Entity Registrant Name | ALLIANCE DATA SYSTEMS CORP | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 31-1429215 | |
Entity Address, Address Line One | 3075 Loyalty Circle | |
Entity Address, City or Town | Columbus | |
Entity Address, State or Province | OH | |
Entity Address, Postal Zip Code | 43219 | |
City Area Code | 614 | |
Local Phone Number | 729-4000 | |
Title of 12(b) Security | Common stock, par value $0.01 per share | |
Trading Symbol | ADS | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 47,721,784 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Entity Central Index Key | 0001101215 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
ASSETS | ||
Cash and cash equivalents | $ 3,078.4 | $ 3,874.4 |
Accounts receivable, net, less allowance for doubtful accounts ($3.9 and $3.4 at September 30, 2020 and December 31, 2019, respectively) | 376.9 | 451.1 |
Credit card and loan receivables: | ||
Credit card receivables - restricted for securitization investors | 10,536.2 | 13,504.2 |
Other credit card and loan receivables | 5,062.5 | 5,958.9 |
Total credit card and loan receivables | 15,598.7 | 19,463.1 |
Allowance for loan loss | (2,080.9) | (1,171.1) |
Credit card and loan receivables, net | 13,517.8 | 18,292 |
Credit card receivables held for sale | 408 | |
Inventories, net | 202.8 | 218 |
Other current assets | 843.7 | 268.4 |
Redemption settlement assets, restricted | 641.7 | 600.8 |
Total current assets | 18,661.3 | 24,112.7 |
Property and equipment, net | 251.7 | 282.3 |
Right of use assets - operating | 247.2 | 264.3 |
Deferred tax asset, net | 285.1 | 45.2 |
Intangible assets, net | 89.3 | 153.3 |
Goodwill | 969.4 | 954.9 |
Other non-current assets | 608.9 | 682.1 |
Total assets | 21,112.9 | 26,494.8 |
LIABILITIES AND STOCKHOLDERS' EQUITY | ||
Accounts payable | 276.7 | 300.8 |
Accrued expenses | 401.2 | 327.8 |
Current operating lease liabilities | 21.9 | 22.6 |
Current portion of deposits | 6,753.5 | 6,942.4 |
Current portion of non-recourse borrowings of consolidated securitization entities | 2,120.4 | 3,030.8 |
Current portion of long-term and other debt | 76 | 101.4 |
Other current liabilities | 255.7 | 338.3 |
Deferred revenue | 835.7 | 807.9 |
Total current liabilities | 10,741.1 | 11,872 |
Deferred revenue | 101.4 | 114.1 |
Deferred tax liability, net | 80 | |
Long-term operating lease liabilities | 275.8 | 291.7 |
Deposits | 3,395 | 5,209.3 |
Non-recourse borrowings of consolidated securitization entities | 2,223.9 | 4,253.2 |
Long-term and other debt | 2,727.2 | 2,748.5 |
Other liabilities | 325.9 | 337.7 |
Total liabilities | 19,790.3 | 24,906.5 |
Commitments and contingencies (Note 15) | ||
Stockholders' equity: | ||
Common stock, $0.01 par value; authorized, 200.0 shares; issued, 115.1 and 115.0 shares at September 30, 2020 and December 31, 2019, respectively | 1.2 | 1.1 |
Additional paid-in capital | 3,272.7 | 3,257.7 |
Treasury stock, at cost, 67.4 shares at each of September 30, 2020 and December 31, 2019, respectively | (6,733.9) | (6,733.9) |
Retained earnings | 4,830.3 | 5,163.3 |
Accumulated other comprehensive loss | (47.7) | (99.9) |
Total stockholders' equity | 1,322.6 | 1,588.3 |
Total liabilities and stockholders' equity | $ 21,112.9 | $ 26,494.8 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Millions, $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, net, allowance for doubtful accounts (in dollars) | $ 3.9 | $ 3.4 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized shares | 200 | 200 |
Common stock, issued shares | 115.1 | 115 |
Treasury stock, shares | 67.4 | 67.4 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($) shares in Millions, $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Revenues | ||||
Services | $ 24.7 | $ 57.9 | $ 109.2 | $ 197.6 |
Redemption, net | 113.1 | 143.9 | 318.6 | 409.5 |
Finance charges, net | 912.7 | 1,235.8 | 2,983.7 | 3,513.2 |
Total revenue | 1,050.5 | 1,437.6 | 3,411.5 | 4,120.3 |
Operating expenses | ||||
Cost of operations (exclusive of depreciation and amortization disclosed separately below) | 482.7 | 687.5 | 1,474.7 | 1,982.6 |
Provision for loan loss | 207.7 | 297.3 | 1,113.7 | 806.8 |
General and administrative | 29 | 31.8 | 73.2 | 127.4 |
Depreciation and other amortization | 18.4 | 19.9 | 56.2 | 59.8 |
Amortization of purchased intangibles | 21.7 | 25 | 64.1 | 73.4 |
Loss on extinguishment of debt | 71.9 | 71.9 | ||
Total operating expenses | 759.5 | 1,133.4 | 2,781.9 | 3,121.9 |
Operating income | 291 | 304.2 | 629.6 | 998.4 |
Interest expense | ||||
Securitization funding costs | 37.5 | 51.4 | 130.1 | 160.3 |
Interest expense on deposits | 52.9 | 62.5 | 172.1 | 164.4 |
Interest expense on long-term and other debt, net | 24.7 | 26.1 | 79.1 | 102.7 |
Total interest expense, net | 115.1 | 140 | 381.3 | 427.4 |
Income from continuing operations before income taxes | 175.9 | 164.2 | 248.3 | 571 |
Provision for income taxes | 42.6 | 42.6 | 46.6 | 128.8 |
Income from continuing operations | 133.3 | 121.6 | 201.7 | 442.2 |
Loss from discontinued operations, net of taxes | (229.2) | (261.7) | ||
Net income (loss) | $ 133.3 | $ (107.6) | $ 201.7 | $ 180.5 |
Basic income (loss) per share (Note 3): | ||||
Income from continuing operations (in dollars per share) | $ 2.79 | $ 2.47 | $ 4.23 | $ 8.49 |
Loss from discontinued operations (in dollars per share) | (4.69) | (5.12) | ||
Net income (loss) per share (in dollars per share) | 2.79 | (2.22) | 4.23 | 3.37 |
Diluted income (loss) per share (Note 3): | ||||
Income from continuing operations (in dollars per share) | 2.79 | 2.41 | 4.23 | 8.50 |
Loss from discontinued operations (in dollars per share) | (4.54) | (5.03) | ||
Net income (loss) per share (in dollars per share) | $ 2.79 | $ (2.13) | $ 4.23 | $ 3.47 |
Weighted average shares (Note 3): | ||||
Basic (in shares) | 47.7 | 48.8 | 47.7 | 51.1 |
Diluted (in shares) | 47.8 | 50.4 | 47.7 | 52.1 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||
Net income (loss) | $ 133.3 | $ (107.6) | $ 201.7 | $ 180.5 |
Other comprehensive income (loss): | ||||
Unrealized gain on securities available-for-sale | 3.9 | 0.3 | 20.1 | 16.5 |
Tax benefit (expense) | 0.1 | (0.5) | (1.1) | (2.3) |
Unrealized gain (loss) on securities available-for-sale, net of tax | 4 | (0.2) | 19 | 14.2 |
Unrealized gain on cash flow hedges | 0.7 | 0.9 | 0.7 | |
Tax expense | (0.2) | (0.2) | (0.2) | |
Unrealized gain on cash flow hedges, net of tax | 0.5 | 0.7 | 0.5 | |
Unrealized gain on net investment hedge | 6.5 | |||
Tax expense | (1.6) | |||
Unrealized gain on net investment hedge, net of tax | 4.9 | |||
Foreign currency translation adjustments (inclusive of deconsolidation of $26.8 million for the three and nine months ended September 30, 2019 and $3.8 million for the nine months ended September 30, 2020 related to sale of a business) | 35.3 | (0.8) | 33.2 | (3.5) |
Other comprehensive income (loss), net of tax | 39.8 | (0.3) | 52.2 | 16.1 |
Total comprehensive income (loss), net of tax | $ 173.1 | $ (107.9) | $ 253.9 | $ 196.6 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||
Deconsolidation related to sale of business | $ 26.8 | $ 3.8 | $ 26.8 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Millions, $ in Millions | Common Stock | Preferred Stock | Additional Paid-In Capital | Treasury Stock | Retained EarningsPeriod of Adoption AdjustmentAdjustment | Retained Earnings | Accumulated Other Comprehensive Loss | Period of Adoption AdjustmentAdjustment | Total |
Balance at Dec. 31, 2018 | $ 1.1 | $ 3,172.4 | $ (5,715.7) | $ 5,012.4 | $ (138.1) | $ 2,332.1 | |||
Balance (in shares) at Dec. 31, 2018 | 113 | ||||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Net income (loss) | 180.5 | 180.5 | |||||||
Recognition of foreign currency translation adjustments upon sale of business | 26.8 | 26.8 | |||||||
Other comprehensive income (loss) | 16.1 | ||||||||
Other comprehensive income (loss) | (10.7) | (10.7) | |||||||
Stock-based compensation | 54 | 54 | |||||||
Issuance of preferred stock | 42.1 | (42.1) | |||||||
Issuance of preferred stock (in shares) | 0.2 | ||||||||
Repurchases of common stock | (975.9) | (975.9) | |||||||
Dividends and dividend equivalent rights declared | (97) | (97) | |||||||
Other | (12.9) | (12.9) | |||||||
Other (in shares) | 0.5 | ||||||||
Balance at Sep. 30, 2019 | $ 1.1 | 3,255.6 | (6,733.7) | 5,095.9 | (122) | 1,496.9 | |||
Balance (in shares) at Sep. 30, 2019 | 113.5 | 0.2 | |||||||
Balance at Jun. 30, 2019 | $ 1.1 | 3,259.6 | (5,980.6) | 5,233.3 | (121.7) | 2,391.7 | |||
Balance (in shares) at Jun. 30, 2019 | 113.3 | 0.2 | |||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Net income (loss) | (107.6) | (107.6) | |||||||
Recognition of foreign currency translation adjustments upon sale of business | 26.8 | 26.8 | |||||||
Other comprehensive income (loss) | (0.3) | ||||||||
Other comprehensive income (loss) | (27.1) | (27.1) | |||||||
Stock-based compensation | 2.7 | 2.7 | |||||||
Repurchases of common stock | (753.1) | (753.1) | |||||||
Dividends and dividend equivalent rights declared | (29.8) | (29.8) | |||||||
Other | (6.7) | (6.7) | |||||||
Other (in shares) | 0.2 | ||||||||
Balance at Sep. 30, 2019 | $ 1.1 | 3,255.6 | (6,733.7) | 5,095.9 | (122) | 1,496.9 | |||
Balance (in shares) at Sep. 30, 2019 | 113.5 | 0.2 | |||||||
Balance at Dec. 31, 2019 | $ 1.1 | 3,257.7 | (6,733.9) | 5,163.3 | (99.9) | 1,588.3 | |||
Balance (in shares) at Dec. 31, 2019 | 115 | ||||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Net income (loss) | 201.7 | 201.7 | |||||||
Recognition of foreign currency translation adjustments upon sale of business | 3.8 | 3.8 | |||||||
Other comprehensive income (loss) | 52.2 | ||||||||
Other comprehensive income (loss) | 48.4 | 48.4 | |||||||
Stock-based compensation | 16.2 | 16.2 | |||||||
Dividends and dividend equivalent rights declared | (49.7) | (49.7) | |||||||
Other | $ 0.1 | (1.2) | (1.1) | ||||||
Other (in shares) | 0.1 | ||||||||
Balance at Sep. 30, 2020 | $ 1.2 | 3,272.7 | (6,733.9) | $ (485) | 4,830.3 | (47.7) | $ (485) | 1,322.6 | |
Balance (in shares) at Sep. 30, 2020 | 115.1 | ||||||||
Balance at Jun. 30, 2020 | $ 1.2 | 3,267.7 | (6,733.9) | 4,707.1 | (87.5) | 1,154.6 | |||
Balance (in shares) at Jun. 30, 2020 | 115.1 | ||||||||
Increase (Decrease) in Stockholders' Equity | |||||||||
Net income (loss) | 133.3 | 133.3 | |||||||
Other comprehensive income (loss) | 39.8 | 39.8 | |||||||
Stock-based compensation | 5.3 | 5.3 | |||||||
Dividends and dividend equivalent rights declared | (10.1) | (10.1) | |||||||
Other | (0.3) | (0.3) | |||||||
Balance at Sep. 30, 2020 | $ 1.2 | $ 3,272.7 | $ (6,733.9) | $ (485) | $ 4,830.3 | $ (47.7) | $ (485) | $ 1,322.6 | |
Balance (in shares) at Sep. 30, 2020 | 115.1 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares | Oct. 29, 2020 | Jul. 23, 2020 | Apr. 23, 2020 | Jan. 30, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2019 |
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY | |||||||||
Common Stock dividends and dividend equivalent rights declared (in dollars per share) | $ 0.21 | $ 0.21 | $ 0.21 | $ 0.63 | $ 0.21 | $ 0.21 | $ 0.63 | $ 0.63 | $ 0.63 |
CONDENSED CONSOLIDATED STATEM_6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 201.7 | $ 180.5 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 120.3 | 206.4 |
Deferred income taxes | (157.7) | (187) |
Provision for loan loss | 1,113.7 | 806.8 |
Non-cash stock compensation | 16.2 | 54.3 |
Amortization of deferred financing costs | 26.6 | 32.6 |
Gain on sale of business | (13.7) | (512.2) |
Loss on extinguishment of debt | 71.9 | |
Asset impairment charges | 34.2 | 49.3 |
Change in operating assets and liabilities, net of sale of business | 121.6 | 611.8 |
Other | 25.7 | 215.8 |
Net cash provided by operating activities | 1,488.6 | 1,530.2 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Change in redemption settlement assets | (31.3) | (7) |
Change in credit card and loan receivables | 3,107.8 | (678.2) |
Proceeds from sale of business | 26.7 | 4,369.6 |
Proceeds from sale of credit card portfolios | 289.5 | 980 |
Purchase of credit card portfolios | (924.8) | |
Payments for acquired businesses, net of cash | (6.7) | |
Capital expenditures | (37.9) | (119.2) |
Purchases of other investments | (22.5) | (13.8) |
Maturities/sales of other investments | 57.5 | 46.7 |
Other | (25) | 3.9 |
Net cash provided by investing activities | 3,364.8 | 3,650.5 |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Borrowings under debt agreements | 1,150 | 2,092.3 |
Repayments of borrowings | (1,194.5) | (4,979.8) |
Non-recourse borrowings of consolidated securitization entities | 435 | 3,576.8 |
Repayments/maturities of non-recourse borrowings of consolidated securitization entities | (3,380) | (4,332.2) |
Net (decrease) increase in deposits | (2,012) | 709.4 |
Payment of debt extinguishment costs | (46.1) | |
Payment of deferred financing costs | (16.2) | (27.1) |
Dividends paid | (50.5) | (97.4) |
Purchase of treasury shares | (975.9) | |
Other | 3.9 | (16.1) |
Net cash used in financing activities | (5,064.3) | (4,096.1) |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 3.7 | (0.6) |
Change in cash, cash equivalents and restricted cash | (207.2) | 1,084 |
Cash, cash equivalents and restricted cash at beginning of period | 3,958.1 | 3,967.7 |
Cash, cash equivalents and restricted cash at end of period | 3,750.9 | 5,051.7 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ||
Interest paid | 379.5 | 519.1 |
Income taxes paid, net | $ 108.4 | $ 224 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The unaudited condensed consolidated financial statements included herein have been prepared by Alliance Data Systems Corporation (“ADSC” or, including its consolidated subsidiaries and variable interest entities (“VIEs”), the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 28, 2020. The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal, recurring adjustments) which are, in the opinion of management, necessary to state fairly the results for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the fiscal year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (1) the reported amounts of assets; (2) liabilities and disclosure of contingent assets and liabilities at the date of the financial statements; and (3) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Effective March 31, 2019, the Company’s divested Epsilon segment met the criteria set forth in Accounting Standards Codification (“ASC”) 205-20, “Presentation of Financial Statements — Discontinued Operations,” and was subsequently sold on July 1, 2019. The Company’s products and services are reported under two segments—LoyaltyOne ® Recently Issued Accounting Standards In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, “Simplifying the Accounting for Income Taxes.” ASU 2019-12 eliminates certain exceptions within ASC 740, “Income Taxes,” and clarifies certain aspects of ASC 740 to promote consistency among reporting entities. ASU 2019-12 is effective for interim and annual reporting periods beginning after December 15, 2020, with early adoption permitted. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company does not expect the adoption of ASU 2019-12 to have a material impact on its consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts and hedging relationships that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. This ASU is elective and is effective upon issuance for all entities. The Company is evaluating the impact that adoption of ASU 2020-04 will have on its consolidated financial statements. Recently Adopted Accounting Standards In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” or ASC 326. This standard, referred to as Current Expected Credit Loss (“CECL”), required entities to utilize a financial instrument impairment model to establish an allowance based on expected losses over the life of the exposure rather than a model based on an incurred loss approach. Estimates of expected credit losses under the CECL model are based on relevant information about past events, current conditions, and reasonable and supportable forward-looking forecasts regarding the collectability of the loan portfolio. The Company adopted CECL on January 1, 2020 and recorded an increase in its allowance for loan loss at adoption of $644.0 million, which was recorded through a cumulative-effect adjustment to retained earnings, net of taxes. CECL also expanded the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating its allowance for loan loss. See Note 6, “Credit Card and Loan Receivables,” for the Company’s CECL disclosures. In addition, CECL modified the impairment model for available-for-sale debt securities and provided for a simplified accounting model for purchased financial assets with credit deterioration since their origination. CECL impacts the Company’s valuation of its accounts receivable and available-for-sale debt securities, with respect to which the Company’s adoption did not have a material impact on its consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, “Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the disclosure requirements on fair value measurements from Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement.” The Company’s adoption of this standard on January 1, 2020 did not have a material impact on its consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” ASU 2018-15 requires customers in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40, “Intangibles—Goodwill and Other—Internal-Use Software,” to determine which implementation costs may be capitalized. The amendments in ASU 2018-15 can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted ASU 2018-15 on January 1, 2020 on a prospective basis and the adoption did not have a material impact on its consolidated financial statements. |
REVENUE
REVENUE | 9 Months Ended |
Sep. 30, 2020 | |
REVENUE | |
REVENUE | 2. REVENUE The Company’s products and services are reported under two segments—LoyaltyOne and Card Services, as shown below. The following tables present revenue disaggregated by major source: Corporate/ Three Months Ended September 30, 2020 LoyaltyOne Card Services Other Total (in millions) Disaggregation of Revenue by Major Source: Coalition loyalty program $ 63.0 $ — $ — $ 63.0 Short-term loyalty programs 117.4 — — 117.4 Servicing fees, net — (47.0) — (47.0) Other 1.1 — — 1.1 Revenue from contracts with customers $ 181.5 $ (47.0) $ — $ 134.5 Finance charges, net — 912.7 — 912.7 Investment income 3.3 — — 3.3 Total $ 184.8 $ 865.7 $ — $ 1,050.5 Corporate/ Three Months Ended September 30, 2019 LoyaltyOne Card Services Other Total (in millions) Disaggregation of Revenue by Major Source: Coalition loyalty program $ 72.0 $ — $ — $ 72.0 Short-term loyalty programs 144.2 — — 144.2 Servicing fees, net — (43.8) — (43.8) Other 26.1 — 0.1 26.2 Revenue from contracts with customers $ 242.3 $ (43.8) $ 0.1 $ 198.6 Finance charges, net — 1,235.8 — 1,235.8 Investment income 3.2 — — 3.2 Total $ 245.5 $ 1,192.0 $ 0.1 $ 1,437.6 Corporate/ Nine Months Ended September 30, 2020 LoyaltyOne Card Services Other Total (in millions) Disaggregation of Revenue by Major Source: Coalition loyalty program $ 195.9 $ — $ — $ 195.9 Short-term loyalty programs 322.5 — — 322.5 Servicing fees, net — (106.2) — (106.2) Other 5.9 — 0.1 6.0 Revenue from contracts with customers $ 524.3 $ (106.2) $ 0.1 $ 418.2 Finance charges, net — 2,983.7 — 2,983.7 Investment income 9.6 — — 9.6 Total $ 533.9 $ 2,877.5 $ 0.1 $ 3,411.5 Corporate/ Nine Months Ended September 30, 2019 LoyaltyOne Card Services Other Total (in millions) Disaggregation of Revenue by Major Source: Coalition loyalty program $ 214.8 $ — $ — $ 214.8 Short-term loyalty programs 406.9 — — 406.9 Servicing fees, net — (93.9) — (93.9) Other 69.7 — 0.3 70.0 Revenue from contracts with customers $ 691.4 $ (93.9) $ 0.3 $ 597.8 Finance charges, net — 3,513.2 — 3,513.2 Investment income 9.3 — — 9.3 Total $ 700.7 $ 3,419.3 $ 0.3 $ 4,120.3 The following tables present revenue disaggregated by geographic region based on the location of the subsidiary that generally correlates with the location of the customer: Corporate/ Three Months Ended September 30, 2020 LoyaltyOne Card Services Other Total (in millions) Disaggregation of Revenue by Geographic Region: United States $ 3.3 $ 865.7 $ — $ 869.0 Canada 70.3 — — 70.3 Europe, Middle East and Africa 76.9 — — 76.9 Asia Pacific 12.6 — — 12.6 Other 21.7 — — 21.7 Total $ 184.8 $ 865.7 $ — $ 1,050.5 Corporate/ Three Months Ended September 30, 2019 LoyaltyOne Card Services Other Total (in millions) Disaggregation of Revenue by Geographic Region: United States $ 12.3 $ 1,192.0 $ 0.1 $ 1,204.4 Canada 88.9 — — 88.9 Europe, Middle East and Africa 77.0 — — 77.0 Asia Pacific 40.0 — — 40.0 Other 27.3 — — 27.3 Total $ 245.5 $ 1,192.0 $ 0.1 $ 1,437.6 Corporate/ Nine Months Ended September 30, 2020 LoyaltyOne Card Services Other Total (in millions) Disaggregation of Revenue by Geographic Region: United States $ 9.6 $ 2,877.5 $ 0.1 $ 2,887.2 Canada 214.1 — — 214.1 Europe, Middle East and Africa 196.2 — — 196.2 Asia Pacific 63.0 — — 63.0 Other 51.0 — — 51.0 Total $ 533.9 $ 2,877.5 $ 0.1 $ 3,411.5 Corporate/ Nine Months Ended September 30, 2019 LoyaltyOne Card Services Other Total (in millions) Disaggregation of Revenue by Geographic Region: United States $ 28.2 $ 3,419.3 $ 0.3 $ 3,447.8 Canada 263.3 — — 263.3 Europe, Middle East and Africa 276.0 — — 276.0 Asia Pacific 81.6 — — 81.6 Other 51.6 — — 51.6 Total $ 700.7 $ 3,419.3 $ 0.3 $ 4,120.3 Contract Liabilities The Company records a contract liability when cash payments are received in advance of its performance, which applies to the service and redemption of an AIR MILES ® A reconciliation of contract liabilities for the AIR MILES Reward Program is as follows: Deferred Revenue Service Redemption Total (in millions) Balance at January 1, 2020 $ 258.6 $ 663.4 $ 922.0 Cash proceeds 124.7 206.7 331.4 Revenue recognized (1) (140.8) (153.6) (294.4) Other — 0.5 0.5 Effects of foreign currency translation (6.8) (15.6) (22.4) Balance at September 30, 2020 $ 235.7 $ 701.4 $ 937.1 Amounts recognized in the consolidated balance sheets: Deferred revenue (current) $ 134.3 $ 701.4 $ 835.7 Deferred revenue (non-current) $ 101.4 $ — $ 101.4 (1) Reported on a gross basis herein. The deferred redemption obligation associated with the AIR MILES Reward Program is effectively due on demand from the collector base, thus the timing of revenue recognition is based on the redemption by the collector. Service revenue is amortized over the expected life of a mile, with the deferred revenue balance expected to be recognized into revenue in the amount of $44.2 million in 2020 2021 2022 2023 Additionally, contract liabilities for the Company’s short-term loyalty programs are recognized in other current liabilities in the Company’s unaudited condensed consolidated balance sheets. The beginning balance as of January 1, 2020 was $122.8 million and the closing balance as of September 30, 2020 was $95.6 million, with the change due to revenue recognized of approximately $234.9 million during the nine months ended September 30, 2020, offset in part by cash payments received in advance of program performance. Contract Costs The Company recognizes an asset for the incremental costs of obtaining or fulfilling a contract with the retailer for a credit card program agreement to the extent it expects to recover those costs, in accordance with ASC 340-40, “Other Assets and Deferred Costs.” Contract costs are deferred and amortized on a straight-line basis over the respective term of the agreement, which represents the period of service. Depending on the nature of the contract costs, the amortization is recorded as a reduction to revenue, or costs of operations, in the Company’s unaudited condensed consolidated statements of income. As of December 31, 2019, the remaining unamortized contract costs were $406.8 million and are included in other current assets and other non-current assets in the Company’s unaudited condensed consolidated balance sheets. The Company performs an impairment assessment when events or changes in circumstances indicate that the carrying amount of contract costs may not be recoverable. Due to deteriorated economic conditions from COVID-19 resulting in retail store closures and a significant decline in credit sales, the Company’s impairment assessment for certain of its deferred contract costs resulted in an asset impairment charge within its Card Services segment of $31.1 million in the second quarter of 2020 that is included in cost of operations in its unaudited condensed consolidated statements of income for the nine months ended September 30, 2020. As of September 30, 2020, the remaining unamortized contract costs were $332.3 million and are included in other current assets and other non-current assets in the Company’s unaudited condensed consolidated balance sheets. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2020 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 3. EARNINGS PER SHARE The following table sets forth the computation of basic and diluted net income per share of common stock: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 (in millions, except per share amounts) Basic income per share: Numerator: Income from continuing operations $ 133.3 $ 121.6 $ 201.7 $ 442.2 Less: Dividends declared on preferred stock — 0.9 — 2.8 Less: Allocation of undistributed earnings (1) — — — 5.8 Income from continuing operations - basic 133.3 120.7 201.7 433.6 Loss from discontinued operations, net of tax — (229.2) — (261.7) Net income (loss) - basic $ 133.3 $ (108.5) $ 201.7 $ 171.9 Denominator: Weighted average shares, basic 47.7 48.8 47.7 51.1 Basic income (loss) attributable to common stockholders per share: Income from continuing operations $ 2.79 $ 2.47 $ 4.23 $ 8.49 Loss from discontinued operations $ — $ (4.69) $ — $ (5.12) Net income (loss) per share $ 2.79 $ (2.22) $ 4.23 $ 3.37 Diluted income per share (2) : Numerator: Income from continuing operations $ 133.3 $ 121.6 $ 201.7 $ 442.2 Loss from discontinued operations, net of tax — (229.2) — (261.7) Net income (loss) $ 133.3 $ (107.6) $ 201.7 $ 180.5 Denominator: Weighted average shares, basic 47.7 48.8 47.7 51.1 Weighted average effect of dilutive securities: Shares from assumed conversion of preferred stock — 1.5 — 0.9 Net effect of dilutive stock options and unvested restricted stock (3) 0.1 0.1 — 0.1 Denominator for diluted calculation 47.8 50.4 47.7 52.1 Diluted income (loss) attributable to common stockholders per share: Income from continuing operations $ 2.79 $ 2.41 $ 4.23 $ 8.50 Loss from discontinued operations $ — $ (4.54) $ — $ (5.03) Net income (loss) per share $ 2.79 $ (2.13) $ 4.23 $ 3.47 (1) In accordance with ASC 260, “Earnings Per Share,” in the period of net loss, the loss was not allocated to the participating security as it does not have a contractual obligation to share in the losses. (2) Computed using the if-converted method, as the result was more dilutive. (3) For both the three and nine months ended September 30, 2020, 0.3 million of restricted stock units were excluded from each calculation of weighted average dilutive common shares as the effect would have been anti-dilutive. For both the three and nine months ended September 30, 2019, 0.2 million of restricted stock units were excluded from each calculation of weighted average dilutive common shares as the effect would have been anti-dilutive. On April 25, 2019, the Company entered into an exchange agreement with ValueAct Holdings, L.P. pursuant to which ValueAct exchanged an aggregate of 1,500,000 shares of the Company’s common stock for an aggregate of 150,000 shares of Series A Non-Voting Convertible Preferred Stock (“preferred stock”). In October 2019, ValueAct exchanged all 150,000 shares of preferred stock back to common stock. For the three and nine months ended September 30, 2019, the Company’s calculation of basic and diluted EPS was computed using the two-class method for those periods in which participating securities were outstanding. The two-class method is an earnings allocation that determines EPS for each class of common stock and participating securities according to dividends declared and participation rights in undistributed earnings. |
DISPOSITION
DISPOSITION | 9 Months Ended |
Sep. 30, 2020 | |
DISPOSITION | |
DISPOSITION | 4. DISPOSITION On January 10, 2020, the Company sold Precima ® January 10, 2020 (in millions) Total consideration (1) $ 43.8 Net carrying value of assets and liabilities (including other comprehensive income) 26.8 Allocation of goodwill 3.2 Strategic transaction costs 5.8 Pre-tax gain on sale of business, net of strategic transaction costs $ 8.0 (1) Consideration as defined included cash associated with the sold Precima entities, which was $10.8 million. |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 9 Months Ended |
Sep. 30, 2020 | |
DISCONTINUED OPERATIONS | |
DISCONTINUED OPERATIONS | 5. DISCONTINUED OPERATIONS Effective March 31, 2019, the Company’s divested Epsilon segment met the criteria set forth in ASC 205-20, “Presentation of Financial Statements — Discontinued Operations,” and was subsequently sold on July 1, 2019. The following table summarizes the results of discontinued operations for the three and nine months ended September 30, 2019: Three Months Ended Nine Months Ended September 30, 2019 September 30, 2019 (in millions) (in millions) Revenue $ — $ 999.6 Cost of operations (exclusive of depreciation and amortization disclosed separately below) 45.1 953.9 Depreciation and other amortization — 29.7 Amortization of purchased intangibles — 43.5 Interest expense (1) — 64.1 Gain on sale of Epsilon (512.2) (512.2) Income before provision for income taxes 467.1 420.6 Provision for income taxes 696.3 682.3 Loss from discontinued operations, net of taxes $ (229.2) $ (261.7) (1) On April 30, 2019, the Company amended its credit agreement, which among other items, provided that upon consummation of the sale of Epsilon, a mandatory payment of $500.0 million of the revolving credit facility was required and all of the Company’s outstanding senior notes was required to be redeemed. As such, for the three and nine months ended September 30, 2019, interest expense has been allocated to discontinued operations on the basis of the Company’s $500.0 million mandatory repayment of its revolving line of credit and $1.9 billion in senior notes outstanding. Depreciation and amortization and capital expenditures from discontinued operations for the three and nine months ended September 30, 2019 are as follows: Three Months Ended Nine Months Ended September 30, 2019 September 30, 2019 (in millions) (in millions) Depreciation and amortization $ — $ 73.2 Capital expenditures $ — $ 55.8 |
CREDIT CARD AND LOAN RECEIVABLE
CREDIT CARD AND LOAN RECEIVABLES | 9 Months Ended |
Sep. 30, 2020 | |
CREDIT CARD AND LOAN RECEIVABLES | |
CREDIT CARD AND LOAN RECEIVABLES | 6. CREDIT CARD AND LOAN RECEIVABLES The Company’s credit card and loan receivables are the only portfolio segment or class of financing receivables. Quantitative information about the components of credit card and loan receivables is presented in the table below: September 30, December 31, 2020 2019 (in millions) Principal receivables $ 14,806.8 $ 18,413.1 Billed and accrued finance charges 730.0 977.3 Other 61.9 72.7 Total credit card and loan receivables 15,598.7 19,463.1 Less: Credit card receivables – restricted for securitization investors 10,536.2 13,504.2 Other credit card and loan receivables $ 5,062.5 $ 5,958.9 Allowance for Loan Loss Effective January 1, 2020, the Company adopted ASC 326 on a modified retrospective approach and applied a CECL model to determine its allowance for loan loss. The allowance for loan loss is an estimate of expected credit losses, measured over the estimated life of its credit card and loan receivables that considers forecasts of future economic conditions in addition to information about past events and current conditions. The estimate under the CECL model is significantly influenced by the composition, characteristics and quality of the Company’s portfolio of credit card and loan receivables, as well as the prevailing economic conditions and forecasts utilized. The estimate of the allowance for loan loss includes an estimate for uncollectible principal as well as unpaid interest and fees. Charge-offs of principal amounts, net of recoveries are deducted from the allowance. The allowance is maintained through an adjustment to the provision for loan loss and is evaluated for appropriateness. Prior to January 1, 2020, the Company’s allowance for loan loss was determined utilizing an incurred loss model under ASC 450, “Contingencies.” ASC 326 requires entities to use a “pooled” approach to estimate expected credit losses for financial assets with similar risk characteristics. As part of its CECL implementation, the Company evaluated multiple risk characteristics of its credit card and loan receivables portfolio, and determined delinquency status and credit quality to be the most significant characteristics for estimating expected credit losses. To estimate its allowance for loan loss, the Company segregates its credit card and loan receivables into four groups with similar risk characteristics, on the basis of delinquency status and credit quality risk score. These risk characteristics are evaluated on at least an annual basis, or more frequently as facts and circumstances warrant. The Company’s credit card and loan receivables do not have stated maturities and therefore prepayments are not factored into the determination of the estimated life of the credit card and loan receivables. In determining the estimated life of a credit card and loan receivable, payments were applied to the measurement date balance with no payments allocated to future purchase activity. The Company uses a combination of First In First Out (“FIFO”) and the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (“CARD Act”) methodology to model balance paydown. The Company’s groups of pooled financial assets with similar risk characteristics and their estimated life is as follows: Estimated Life (in months) Group A (Current, risk score - high) 14 Group B (Current, risk score - low) 19 Group C (Delinquent, risk score - high) 17 Group D (Delinquent, risk score - low) 26 In estimating its allowance for loan loss, for each identified group, management utilizes various models and estimation techniques based on historical loss experience, current conditions, reasonable and supportable forecasts and other relevant factors. These models utilize historical data and applicable macroeconomic variables with statistical analysis and behavioral relationships with credit performance. The Company’s quantitative estimate of expected credit losses under CECL is impacted by certain forecasted economic factors. Management utilizes a third party service to analyze a number of scenarios, but uses one scenario to determine the macroeconomic variables over the forecast period. The Company considers the forecast used to be reasonable and supportable over the estimated life of the credit card and loan receivables, with no reversion period. In addition to the quantitative estimate of expected credit losses, the Company also incorporates qualitative adjustments for certain factors such as Company-specific risks, changes in current economic conditions that may not be captured in the quantitatively derived results, or other relevant factors to ensure the allowance for loan loss reflects the Company’s best estimate of current expected credit losses. As permitted by ASC 326, the Company excludes unbilled finance charges from its amortized cost basis of credit card and loan receivables. At September 30, 2020, unbilled finance charges were $221.0 million and included in other credit card and loan receivables in the Company’s unaudited condensed consolidated balance sheet. The following table presents the Company’s allowance for loan loss for the periods indicated: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in millions) Balance at beginning of period $ 2,096.3 $ 1,010.9 $ 1,171.1 $ 1,038.3 Adoption of ASC 326 (1) — — 644.0 — Provision for loan loss 207.7 297.3 1,113.7 806.8 Change in estimate for uncollectible unpaid interest and fees — — — (10.0) Recoveries 45.5 53.4 170.3 169.9 Principal charge-offs (268.6) (296.1) (1,018.2) (939.5) Balance at end of period $ 2,080.9 $ 1,065.5 $ 2,080.9 $ 1,065.5 (1) Recorded January 1, 2020 through a cumulative-effect adjustment to retained earnings, net of taxes. During the three months ended September 30, 2020, there was not a significant change in the allowance for loan loss, as the allowance for loan loss as a percentage of end of period credit card and loan receivables remained constant at 13.3% from June 30, 2020 to September 30, 2020. During the nine months ended September 30, 2020, the increase in the allowance for loan loss was due to a $644.0 million cumulative-effect adjustment for the adoption of ASC 326 as well as deterioration of the macroeconomic outlook due to COVID-19. Additionally, the worsening macroeconomic environment also increased the principal charge-offs for the nine months ended September 30, 2020 as compared to the prior year. Net Charge-offs Net charge-offs include the principal amount of losses from credit cardholders unwilling or unable to pay their account balances, as well as bankrupt and deceased credit cardholders, less recoveries and exclude charged-off interest, fees and fraud losses. Charged-off interest and fees reduce finance charges, net while fraud losses are recorded as a cost of operations expense. Credit card and loan receivables, including unpaid interest and fees, are charged-off in the month during which an account becomes 180 days contractually past due, except in the case of customer bankruptcies or death. Credit card and loan receivables, including unpaid interest and fees, associated with customer bankruptcies or death are charged-off in each month subsequent to 60 days after the receipt of notification of the bankruptcy or death, but in any case, not later than the 180-day contractual time frame. Charge-offs for unpaid interest and fees were $142.3 million and $173.6 million for the three months ended September 30, 2020 and 2019, respectively, and $571.9 million and $586.2 million for the nine months ended September 30, 2020 and 2019, respectively. Delinquencies A credit card account is contractually delinquent if the Company does not receive the minimum payment by the specified due date on the cardholder’s statement. It is the Company’s policy to continue to accrue interest and fee income on all credit card accounts, except in limited circumstances, until the credit card account balance and all related interest and other fees are paid or charged-off, typically at 180 days delinquent. When an account becomes delinquent, a message is printed on the credit cardholder’s billing statement requesting payment. After an account becomes 30 days past due, a proprietary collection scoring algorithm automatically scores the risk of the account becoming further delinquent. The collection system then recommends a collection strategy for the past due account based on the collection score and account balance and dictates the contact schedule and collections priority for the account. If the Company is unable to make a collection after exhausting all in-house collection efforts, the Company may engage collection agencies and outside attorneys to continue those efforts. The following table presents the amortized cost basis of the aging analysis of the Company’s credit card and loan receivables portfolio: Aging Analysis of Delinquent Amortized Cost 31 to 60 days 61 to 90 days 91 or more days delinquent Total Current Total (in millions) As of September 30, 2020 $ 262.3 $ 185.8 $ 451.7 $ 899.8 $ 14,401.0 $ 15,300.8 As of December 31, 2019 $ 399.1 $ 293.9 $ 698.4 $ 1,391.4 $ 17,656.4 $ 19,047.8 Modified Credit Card Receivables Forbearance Programs In response to the COVID-19 pandemic, the Company offered forbearance programs to affected cardholders, which provide for short-term modifications in the form of payment deferrals and late fee waivers to borrowers who were current with their payments prior to any relief. Specifically, the Company provided for late fee waivers and payment deferrals for up to two months for approximately $2.0 billion of credit card and loan receivables, based on the balance in the month of enrollment, through September 30, 2020 and the extension of certain promotional plans of approximately $89.0 million for up to three months. As of September 30, 2020, the credit card and loan receivables in these deferral forbearance programs was approximately $202.9 million. Additionally, the Company instituted two short-term programs with durations of three As these short-term modifications were made in response to COVID-19 to borrowers who were current prior to any relief, these are not considered troubled debt restructurings under the Interagency Statement guidance on certain loan modifications and an interpretation of ASC 310-40, “Receivables—Troubled Debt Restructurings by Creditors.” Troubled Debt Restructurings The Company holds certain credit card receivables for which the terms have been modified. The Company’s modified credit card receivables include credit card receivables for which temporary hardship concessions have been granted and credit card receivables in permanent workout programs. These modified credit card receivables include concessions consisting primarily of a reduced minimum payment and an interest rate reduction. The temporary programs’ concessions remain in place for a period no longer than twelve months, while the permanent programs remain in place through the payoff of the credit card receivables if the credit cardholder complies with the terms of the program. Additionally, the Company instituted two temporary hardship programs with durations of three Troubled debt restructuring concessions do not include the forgiveness of unpaid principal, but may involve the reversal of certain unpaid interest or fee assessments. In the case of the temporary hardship programs, at the end of the concession period, credit card receivable terms revert to standard rates. These arrangements are automatically terminated if the customer fails to make payments in accordance with the terms of the program, at which time their account reverts back to its original terms. Credit card receivables for which temporary hardship and permanent concessions were granted are each considered troubled debt restructurings and are collectively evaluated for impairment. The Company had $480.1 million and $308.7 million, respectively, as a recorded investment in impaired credit card receivables as of September 30, 2020 and December 31, 2019, respectively, which represented less than 4% of the Company’s total credit card receivables. The average recorded investment in impaired credit card receivables was $459.7 million and $289.5 million for the three months ended September 30, 2020 and 2019, respectively, and $387.3 million and $292.6 million for the nine months ended September 30, 2020 and 2019, respectively. Interest income on these modified credit card receivables is accounted for in the same manner as other accruing credit card receivables. Cash collections on these modified credit card receivables are allocated according to the same payment hierarchy methodology applied to credit card receivables that are not in such programs. The Company recognized $8.5 million and $5.4 million for the three months ended September 30, 2020 and 2019, respectively, and $21.0 million and $17.1 million for the nine months ended September 30, 2020 and 2019, respectively, in interest income associated with modified credit card receivables during the period that such credit card receivables were impaired. The following table provides information on credit card receivables that are considered troubled debt restructurings as described above, which entered into a modification program during the specified periods: Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020 Pre-modification Post-modification Pre-modification Post-modification Number of Outstanding Outstanding Number of Outstanding Outstanding Restructurings Balance Balance Restructurings Balance Balance (Dollars in millions) Troubled debt restructurings – credit card receivables 131,919 $ 170.3 $ 169.0 302,438 $ 439.3 $ 437.6 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Pre-modification Post-modification Pre-modification Post-modification Number of Outstanding Outstanding Number of Outstanding Outstanding Restructurings Balance Balance Restructurings Balance Balance (Dollars in millions) Troubled debt restructurings – credit card receivables 65,819 $ 94.1 $ 94.0 194,323 $ 285.1 $ 284.7 The table below summarizes troubled debt restructurings that have defaulted in the specified periods where the default occurred within 12 months of their modification date: Three Months Ended Nine Months Ended September 30, 2020 September 30, 2020 Number of Outstanding Number of Outstanding Restructurings Balance Restructurings Balance (Dollars in millions) Troubled debt restructurings that subsequently defaulted – credit card receivables 28,724 $ 37.8 82,000 $ 113.1 Three Months Ended Nine Months Ended September 30, 2019 September 30, 2019 Number of Outstanding Number of Outstanding Restructurings Balance Restructurings Balance (Dollars in millions) Troubled debt restructurings that subsequently defaulted – credit card receivables 25,815 $ 36.0 105,710 $ 141.3 Credit Quality The Company uses proprietary scoring models developed specifically for the purpose of monitoring the Company’s obligor credit quality. The proprietary scoring models are used as a tool in the underwriting process and for making credit decisions. Information regarding customer performance is factored into these proprietary scoring models to determine the probability of an account becoming 91 or more days past due at any time within the next 12 months. The following table reflects the composition of the Company’s credit card and loan receivables on an amortized cost basis by obligor credit quality as of September 30, 2020 and December 31, 2019: Amortized Cost Revolving Credit Card and Loan Receivables September 30, 2020 December 31, 2019 Percentage of Percentage of Amortized Amortized Probability of an Account Becoming 91 or More Days Past Amortized Cost Basis Amortized Cost Basis Due or Becoming Charged-off (within the next 12 months) Cost Basis Outstanding Cost Basis Outstanding (in millions, except percentages) No Score $ 178.1 1.2 % $ 298.4 1.6 % 27.1% and higher 1,395.0 9.1 1,648.8 8.7 17.1% - 27.0% 833.5 5.4 1,108.5 5.8 12.6% - 17.0% 888.4 5.8 1,171.7 6.2 3.7% - 12.5% 6,687.0 43.7 8,292.1 43.5 1.9% - 3.6% 2,688.4 17.6 3,375.3 17.7 Lower than 1.9% 2,630.4 17.2 3,153.0 16.5 Total $ 15,300.8 100.0 % $ 19,047.8 100.0 % Note: The Company’s credit card and loan receivables are revolving receivables as they do not have stated maturities and are exempted from certain vintage disclosures required under ASC 326. The proprietary scoring models are based on historical data and require various assumptions about future performance, which the Company updates periodically. Obligor credit quality is monitored at least monthly during the life of an account. Portfolios Held for Sale The Company had certain credit card portfolios held for sale, which are carried at the lower of cost or fair value, of $408.0 million as of December 31, 2019. As of September 30, 2020, there were no credit card portfolios held for sale. During the nine months ended September 30, 2020, the Company sold a During the nine months ended September 30, 2019, the Company sold six credit card portfolios for cash consideration of approximately $980.0 million and recognized approximately $21.1 million in net gains on the transactions, which were recorded in cost of operations in the Company’s unaudited condensed consolidated statements of income. Additionally, during the nine months ended September 30, 2019, the Company transferred one credit card portfolio totaling approximately $510.3 million into credit card receivables held for sale. The Company recorded portfolio valuation adjustments, which are reflected in cost of operations in the Company’s unaudited condensed consolidated statements of income, of $1.2 million and $61.2 million for the three months ended September 30, 2020 and 2019, respectively, and $7.5 million and $161.1 million for the nine months ended September 30, 2020 and 2019, respectively. Portfolio Acquisitions During the nine months ended September 30, 2019, the Company acquired four credit card portfolios for purchase prices totaling approximately $924.8 million. No portfolio acquisitions were made during the nine months ended September 30, 2020. Securitized Credit Card Receivables The Company regularly securitizes its credit card receivables through its credit card securitization trusts, consisting of World Financial Network Credit Card Master Trust, World Financial Network Credit Card Master Note Trust (“Master Trust I”) and World Financial Network Credit Card Master Trust III (“Master Trust III”) (collectively, the “WFN Trusts”), and World Financial Capital Credit Card Master Note Trust (the “WFC Trust”). The Company continues to own and service the accounts that generate credit card receivables held by the WFN Trusts and the WFC Trust. In its capacity as a servicer, each of the respective banks earns a fee from the WFN Trusts and the WFC Trust to service and administer the credit card receivables, collect payments and charge-off uncollectible receivables. These fees are eliminated and therefore not reflected in the Company’s unaudited condensed consolidated statements of income for the three and nine months ended September 30, 2020 and 2019. The WFN Trusts and the WFC Trust are VIEs and the assets of these consolidated VIEs include certain credit card receivables that are restricted to settle the obligations of those entities and are not expected to be available to the Company or its creditors. The liabilities of the consolidated VIEs include non-recourse secured borrowings and other liabilities for which creditors or beneficial interest holders do not have recourse to the general credit of the Company. The tables below present quantitative information about the components of total securitized credit card receivables, delinquencies and net charge-offs: September 30, December 31, 2020 2019 (in millions) Total credit card receivables – restricted for securitization investors $ 10,536.2 $ 13,504.2 Principal amount of credit card receivables – restricted for securitization investors, 91 days or more past due $ 202.3 $ 321.8 Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in millions) Net charge-offs of securitized principal $ 148.1 $ 206.0 $ 602.7 $ 670.1 |
INVENTORIES, NET
INVENTORIES, NET | 9 Months Ended |
Sep. 30, 2020 | |
INVENTORIES, NET | |
INVENTORIES, NET | 7. INVENTORIES, NET Inventories, net of $202.8 million and $218.0 million at September 30, 2020 and December 31, 2019, respectively, primarily consist of finished goods to be utilized as rewards in the Company’s loyalty programs. Inventories, net are stated at the lower of cost and net realizable value and valued primarily on a first-in-first-out basis. The Company records valuation adjustments to its inventories if the cost of inventory exceeds the amount it expects to realize from the ultimate sale or disposal of the inventory. These estimates are based on management’s judgment regarding future market conditions and an analysis of historical experience. |
OTHER INVESTMENTS
OTHER INVESTMENTS | 9 Months Ended |
Sep. 30, 2020 | |
OTHER INVESTMENTS | |
OTHER INVESTMENTS | 8. OTHER INVESTMENTS Other investments consist of marketable securities and U.S. Treasury bonds and are included in other current assets and other non-current assets in the Company’s unaudited condensed consolidated balance sheets. Marketable securities include available-for-sale debt securities, mutual funds and domestic certificate of deposit investments. The principal components of other investments, which are carried at fair value, are as follows: September 30, 2020 December 31, 2019 Amortized Unrealized Unrealized Amortized Unrealized Unrealized Cost Gains Losses Fair Value Cost Gains Losses Fair Value (in millions) Marketable securities $ 221.3 $ 6.8 $ — $ 228.1 $ 257.2 $ 3.0 $ (0.4) $ 259.8 Total $ 221.3 $ 6.8 $ — $ 228.1 $ 257.2 $ 3.0 $ (0.4) $ 259.8 There were no unrealized losses at September 30, 2020, and the following table shows the unrealized losses and fair value for those investments that were in an unrealized loss position as of December 31, 2019, aggregated by investment category and the length of time that individual securities have been in a continuous loss position: December 31, 2019 Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (in millions) Marketable securities $ 18.8 $ (0.2) $ 13.1 $ (0.2) $ 31.9 $ (0.4) Total $ 18.8 $ (0.2) $ 13.1 $ (0.2) $ 31.9 $ (0.4) The amortized cost and estimated fair value of the marketable securities and U.S. Treasury bonds at September 30, 2020 by contractual maturity are as follows: Amortized Estimated Cost Fair Value (in millions) Due in one year or less $ 43.7 $ 43.7 Due after one year through five years 1.1 1.1 Due after five years through ten years — — Due after ten years 176.5 183.3 Total $ 221.3 $ 228.1 Market values were determined for each individual security in the investment portfolio. Effective January 1, 2020, the Company adopted ASC 326, which replaced the other-than-temporary impairment model for available-for-sale debt securities. For available-for-sale debt securities in which fair value is less than cost, ASC 326 requires that credit-related impairment, if any, be recognized through an allowance for credit losses and adjusted each period for changes in credit risk. The Company typically invests in highly-rated securities with low probabilities of default and has the intent and ability to hold the investments until maturity, and the Company performs an assessment each period for credit-related impairment. As of September 30, 2020, the Company does not consider its investments to be impaired. There were no realized gains or losses from the sale of investment securities for the three or nine months ended September 30, 2020 and 2019. |
REDEMPTION SETTLEMENT ASSETS
REDEMPTION SETTLEMENT ASSETS | 9 Months Ended |
Sep. 30, 2020 | |
REDEMPTION SETTLEMENT ASSETS | |
REDEMPTION SETTLEMENT ASSETS | 9. REDEMPTION SETTLEMENT ASSETS Redemption settlement assets consist of restricted cash and securities available-for-sale and are designated for settling redemptions by collectors of the AIR MILES Reward Program in Canada under certain contractual relationships with sponsors of the AIR MILES Reward Program. The principal components of redemption settlement assets, which are carried at fair value, are as follows: September 30, 2020 December 31, 2019 Amortized Unrealized Unrealized Amortized Unrealized Unrealized Cost Gains Losses Fair Value Cost Gains Losses Fair Value (in millions) Restricted cash $ 45.4 $ — $ — $ 45.4 $ 39.3 $ — $ — $ 39.3 Mutual funds 25.4 — — 25.4 25.1 — — 25.1 Corporate bonds 554.6 16.5 (0.2) 570.9 536.0 2.4 (2.0) 536.4 Total $ 625.4 $ 16.5 $ (0.2) $ 641.7 $ 600.4 $ 2.4 $ (2.0) $ 600.8 The following tables show the unrealized losses and fair value for those investments that were in an unrealized loss position as of September 30, 2020 and December 31, 2019, aggregated by investment category and the length of time that individual securities have been in a continuous loss position: September 30, 2020 Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (in millions) Corporate bonds $ 15.3 $ (0.1) $ 9.9 $ (0.1) $ 25.2 $ (0.2) Total $ 15.3 $ (0.1) $ 9.9 $ (0.1) $ 25.2 $ (0.2) December 31, 2019 Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (in millions) Corporate bonds $ 166.6 $ (1.3) $ 155.1 $ (0.7) $ 321.7 $ (2.0) Total $ 166.6 $ (1.3) $ 155.1 $ (0.7) $ 321.7 $ (2.0) The amortized cost and estimated fair value of the securities at September 30, 2020 by contractual maturity are as follows: Amortized Estimated Cost Fair Value (in millions) Due in one year or less $ 114.7 $ 115.3 Due after one year through five years 453.5 469.1 Due after five year through ten years 11.8 11.9 Total $ 580.0 $ 596.3 Market values were determined for each individual security in the investment portfolio. Effective January 1, 2020, the Company adopted ASC 326, which replaced the other-than-temporary impairment model for available-for-sale debt securities. For available-for-sale debt securities in which fair value is less than cost, ASC 326 requires that credit-related impairment, if any, be recognized through an allowance for credit losses and adjusted each period for changes in credit risk. The Company typically invests in highly-rated securities with low probabilities of default and has the intent and ability to hold the investments until maturity, and the Company performs an assessment each period for credit-related impairment. As of September 30, 2020, the Company does not consider its investments to be impaired. There were no realized gains or losses from the sale of investment securities for the three and nine months ended September 30, 2020. Realized losses from the sale of investment securities for the three and nine months ended September 30, 2019 were de minimis. |
LEASES
LEASES | 9 Months Ended |
Sep. 30, 2020 | |
LEASES | |
LEASES | 10. LEASES The Company has operating leases for general office properties, warehouses, data centers, call centers, automobiles and certain equipment. As of September 30, 2020, the Company’s leases have remaining lease terms of less than 1 year to 18 years, some of which may include renewal options. For leases in which the implicit rate is not readily determinable, the Company uses its incremental borrowing rate as of the lease commencement date to determine the present value of the lease payments. The incremental borrowing rate is based on the Company’s specific rate of interest to borrow on a collateralized basis, over a similar term and in a similar economic environment as the lease. Leases with an initial term of 12 months or less are not recognized on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. Additionally, the Company accounts for lease and nonlease components as a single lease component for its identified asset classes. The components of lease expense were as follows: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in millions) Operating lease cost $ 10.0 $ 10.2 $ 30.2 $ 30.9 Short-term lease cost 0.2 0.7 0.7 1.9 Variable lease cost 1.3 2.0 4.4 5.6 Total $ 11.5 $ 12.9 $ 35.3 $ 38.4 Other information related to leases was as follows: September 30, September 30, 2020 2019 Weighted-average remaining lease term (in years): Operating leases 11.0 11.5 Weighted-average discount rate: Operating leases 5.2% 5.2% Supplemental cash flow information related to leases was as follows: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in millions) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 10.0 $ 9.0 $ 35.7 $ 34.6 Right of use assets obtained in exchange for lease obligations: Operating leases $ 0.5 $ 4.0 $ 3.3 $ 13.8 Maturities of the lease liabilities as of September 30, 2020 were as follows: Operating Year Leases (in millions) 2020 (excluding the nine months ended September 30, 2020) $ 6.6 2021 40.3 2022 39.2 2023 37.4 2024 35.3 Thereafter 240.0 Total undiscounted lease liabilities 398.8 Less: Amount representing interest (101.1) Total present value of minimum lease payments $ 297.7 Amounts recognized in the September 30, 2020 consolidated balance sheet: Current operating lease liabilities $ 21.9 Long-term operating lease liabilities 275.8 Total $ 297.7 The Company evaluates its right of use assets for impairment in accordance with ASC 360, “Property, Plant and Equipment,” when events or changes in circumstances indicate that a right of use asset’s carrying amount may not be recoverable. The Company performed an impairment assessment for the right of use asset associated with one of its locations where it ceased use with the intent to sublease. As a result, the Company recorded an asset impairment charge within its Card Services segment of $3.1 million in the second quarter of 2020, which is included in cost of operations in its unaudited condensed consolidated statements of income for the nine months ended September 30, 2020. As a result of COVID-19 and expense management measures in 2020, the Company is evaluating potential office consolidations or closures, which could result in circumstances whereby the asset’s carrying amount may not be recoverable. |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL | 9 Months Ended |
Sep. 30, 2020 | |
INTANGIBLE ASSETS AND GOODWILL | |
INTANGIBLE ASSETS AND GOODWILL | 11. INTANGIBLE ASSETS AND GOODWILL Intangible Assets Intangible assets consist of the following: September 30, 2020 Gross Accumulated Assets Amortization Net Amortization Life and Method (in millions) Finite Lived Assets Customer contracts and lists $ 339.9 $ (327.7) $ 12.2 7 years—straight line Premium on purchased credit card portfolios 176.4 (105.7) 70.7 1-13 years—straight line Collector database 52.4 (51.9) 0.5 5 years—straight line Tradenames 33.3 (28.6) 4.7 8-15 years—straight line $ 602.0 $ (513.9) $ 88.1 Indefinite Lived Assets Tradename 1.2 — 1.2 Indefinite life Total intangible assets $ 603.2 $ (513.9) $ 89.3 December 31, 2019 Gross Accumulated Assets Amortization Net Amortization Life and Method (in millions) Finite Lived Assets Customer contracts and lists $ 325.1 $ (278.7) $ 46.4 7 years—straight line Premium on purchased credit card portfolios 192.6 (93.2) 99.4 1-13 years—straight line Collector database 53.9 (52.9) 1.0 5 years—straight line Tradenames 31.8 (26.5) 5.3 8-15 years—straight line $ 603.4 $ (451.3) $ 152.1 Indefinite Lived Assets Tradename 1.2 — 1.2 Indefinite life Total intangible assets $ 604.6 $ (451.3) $ 153.3 The estimated amortization expense related to intangible assets for the next five years and thereafter is as follows: For the Years Ending December 31, (in millions) 2020 (excluding the nine months ended September 30, 2020) $ 18.9 2021 22.3 2022 17.5 2023 12.9 2024 10.7 Thereafter 5.8 Goodwill The changes in the carrying amount of goodwill are as follows: LoyaltyOne Card Services Total (in millions) Balance at January 1, 2020 $ 690.9 $ 264.0 $ 954.9 Goodwill related to sale of Precima (3.2) — (3.2) Effects of foreign currency translation 17.7 — 17.7 Balance at September 30, 2020 $ 705.4 $ 264.0 $ 969.4 Approximately $3.2 million of LoyaltyOne goodwill was allocated to Precima upon sale in January 2020, based on a relative fair value allocation of the businesses. The Company tests goodwill for impairment annually, or when events and circumstances change that would indicate the carrying value may not be recoverable. On July 1, 2020, the Company voluntarily changed its annual goodwill impairment testing date from July 31 to July 1 to allow additional time for testing due to the COVID-19 pandemic and current uncertainty in the macroeconomic environment. Accordingly, management determined that the change in accounting principle is preferable under the circumstance. This change has been applied prospectively from July 1, 2020, as retrospective application is deemed impracticable due to the inability to objectively determine the assumptions and significant estimates used in earlier periods without the benefit of hindsight. This change was not material to the Company’s consolidated financial statements as it did not delay, accelerate, or avoid any potential goodwill impairment charge. As of September 30, 2020, the Company does not believe it is more likely than not that the fair value of any reporting unit is less than its carrying amount. However, due to the COVID-19 pandemic and continuing uncertainty in the macroeconomic environment, future deterioration in the economy could adversely impact the Company’s reporting units and result in a goodwill impairment. |
RESTRUCTURING AND OTHER CHARGES
RESTRUCTURING AND OTHER CHARGES | 9 Months Ended |
Sep. 30, 2020 | |
RESTRUCTURING AND OTHER CHARGES | |
RESTRUCTURING AND OTHER CHARGES | 12. RESTRUCTURING AND OTHER CHARGES In 2019, the Company, under the direction of the Board of Directors, evaluated the cost structure and executed on certain cost saving initiatives at each segment. These charges included restructuring and other exit activities related to reductions in force, terminations of certain product lines, reduction or closure of certain leased office space, asset impairments, changes in management structure and fundamental reorganizations that affect the nature and focus of operations. Restructuring and other charges incurred at the Corporate segment were recorded to general and administrative expense in the Company’s unaudited condensed consolidated statements of income, and restructuring and other charges incurred in the LoyaltyOne and Card Services segments were recorded to cost of operations in the Company’s unaudited condensed consolidated statements of income. These charges related to actions taken in 2019 are not expected to continue in 2020. The restructuring and other charges incurred in 2020 relate to changes in the Company’s original estimate and consisted of adjustments to the Company’s liability. The following tables summarize the restructuring and other charges incurred by reportable segment for all restructuring activities for the periods presented; however, there were no restructuring and other charges incurred for the three months ended September 30, 2020. Termination Asset Lease Other Three Months Ended September 30, 2019 Benefits Impairments Termination Costs Exit Costs Total (in millions) Corporate/Other $ 3.3 $ — $ 6.8 $ 0.7 $ 10.8 LoyaltyOne 8.1 33.5 0.2 0.2 42.0 Card Services — 0.2 1.9 — 2.1 Total $ 11.4 $ 33.7 $ 8.9 $ 0.9 $ 54.9 Termination Asset Lease Other Nine Months Ended September 30, 2020 Benefits Impairments Termination Costs Exit Costs Total (in millions) Corporate/Other $ — $ — $ — $ — $ — LoyaltyOne 0.1 — — — 0.1 Card Services (7.8) — — — (7.8) Total $ (7.7) $ — $ — $ — $ (7.7) Termination Asset Lease Other Nine Months Ended September 30, 2019 Benefits Impairments Termination Costs Exit Costs Total (in millions) Corporate/Other $ 14.5 $ 11.1 $ 6.8 $ 0.7 $ 33.1 LoyaltyOne 9.4 38.0 0.2 2.3 49.9 Card Services — 0.2 1.9 — 2.1 Total $ 23.9 $ 49.3 $ 8.9 $ 3.0 $ 85.1 The Company’s liability for restructuring and other charges is recognized in accrued expenses and other liabilities in its unaudited condensed consolidated balance sheets. The following table summarizes the activities related to the restructuring and other charges, as discussed above, for the three and nine months ended September 30, 2020: Termination Asset Lease Other Three Months Ended September 30, 2020 Benefits Impairments Termination Costs Exit Costs Total (in millions) Liability as of June 30, 2020 $ 9.3 $ — $ — $ — $ 9.3 Adjustments for non-cash charges — — — — — Cash payments (4.3) — — — (4.3) Liability as of September 30, 2020 $ 5.0 $ — $ — $ — $ 5.0 Termination Asset Lease Other Nine Months Ended September 30, 2020 Benefits Impairments Termination Costs Exit Costs Total (in millions) Liability as of January 1, 2020 $ 34.7 $ — $ — $ 0.1 $ 34.8 Adjustments for non-cash charges (7.7) — — — (7.7) Cash payments (22.0) — — (0.1) (22.1) Liability as of September 30, 2020 $ 5.0 $ — $ — $ — $ 5.0 The Company’s outstanding liability related to restructuring and other charges is expected to be settled by the end of 2021, with the majority settled in 2020. |
DEBT
DEBT | 9 Months Ended |
Sep. 30, 2020 | |
DEBT | |
DEBT | 13. DEBT Debt consists of the following: September 30, December 31, Description 2020 2019 Maturity Interest Rate (Dollars in millions) Long-term and other debt: 2017 revolving line of credit $ — $ — December 2022 (1) 2017 term loans 1,484.3 2,028.8 December 2022 (2) BrandLoyalty credit agreement — — April 2023 (3) Senior notes due 2024 850.0 850.0 December 2024 4.750% Senior notes due 2026 500.0 — January 2026 7.000% Total long-term and other debt 2,834.3 2,878.8 Less: Unamortized debt issuance costs 31.1 28.9 Less: Current portion 76.0 101.4 Long-term portion $ 2,727.2 $ 2,748.5 Deposits: Certificates of deposit $ 6,257.4 $ 8,585.2 Various – Oct 2020 to Sep 2025 0.60% to 4.00% Money market deposits 3,905.6 3,589.8 Non-maturity (4) Total deposits 10,163.0 12,175.0 Less: Unamortized debt issuance costs 14.5 23.3 Less: Current portion 6,753.5 6,942.4 Long-term portion $ 3,395.0 $ 5,209.3 Non-recourse borrowings of consolidated securitization entities: Fixed rate asset-backed term note securities $ 4,016.0 $ 4,891.0 Various – Oct 2020 to Sep 2022 2.03% to 3.95% Conduit asset-backed securities 335.0 2,405.0 Various – Apr 2022 to Oct 2022 (5) Total non-recourse borrowings of consolidated securitization entities 4,351.0 7,296.0 Less: Unamortized debt issuance costs 6.7 12.0 Less: Current portion 2,120.4 3,030.8 Long-term portion $ 2,223.9 $ 4,253.2 (1) The interest rate is based upon LIBOR plus an applicable margin. (2) The interest rate is based upon LIBOR plus an applicable margin. The weighted average interest rate for the term loans was 1.90% and 3.30% at September 30, 2020 and December 31, 2019, respectively. (3) The interest rate is based upon the Euro Interbank Offered Rate plus an applicable margin. (4) The interest rates are based on the Federal Funds rate plus an applicable margin. At September 30, 2020, the interest rates ranged from 0.34% to 3.50% . At December 31, 2019, the interest rates ranged from 1.84% to 3.50% . (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 September 30, 2020, the interest rates ranged from 1.40% to 1.95% . At December 31, 2019, the interest rates ranged from 2.79% to 2.96% . At September 30, 2020, the Company was in compliance with its financial covenants. Long-term and Other Debt Senior Notes In September 2020, the Company issued and sold $500.0 million aggregate principal amount of 7.000% senior notes due January 15, 2026 (the “Senior Notes due 2026”). The Senior Notes due 2026 accrue interest on the principal amount at the rate of 7.000% per annum from September 22, 2020, payable semi-annually in arrears, on March 15 and September 15 of each year, beginning on March 15, 2021. The Senior Notes due 2026 will mature on January 15, 2026, subject to earlier repurchase or redemption. The Senior Notes due 2026 are governed by an indenture that includes usual and customary negative covenants and events of default. The Senior Notes due 2026 are guaranteed on a senior unsecured basis by each of the Company’s existing and future domestic restricted subsidiaries that incurs or in any other manner becomes liable for any debt under the Company’s domestic credit facilities, including the credit agreement. Credit Agreement In September 2020, the Company amended its credit agreement to (a) increase the maximum total leverage ratio, (b) decrease the minimum interest coverage ratio, and (c) increase the maximum permitted average delinquency ratios, for the periods ending March 31, 2021 through June 30, 2022, and to make certain other amendments. The amendment also required the Company to prepay the term loans upon consummation of the offering of the Senior Notes due 2026 with a prepayment in an amount equal to the net proceeds from the offering, which obligation was satisfied in full with a prepayment of $493.8 million. As of September 30, 2020, the Company had $1,484.3 million in term loans outstanding with $750.0 million total availability under the revolving line of credit. BrandLoyalty Credit Agreement In April 2020, BrandLoyalty and certain of its subsidiaries, as borrowers and guarantors, terminated its existing facility and entered into a new credit agreement (the “2020 BrandLoyalty Credit Agreement”) that provides for a committed revolving line of credit of €30.0 million ($35.2 million as of September 30, 2020), an uncommitted revolving line of credit of €30.0 million ($35.2 million as of September 30, 2020), and an accordion feature permitting BrandLoyalty to request an increase in either the committed or uncommitted line of credit up to €80.0 million ($93.8 million as of September 30, 2020) in aggregate. Each of the committed and uncommitted revolving line of credit are scheduled to mature on April 3, 2023, subject to BrandLoyalty’s request to extend for two additional one-year terms at the absolute discretion of the lenders at the time of such requests. All advances under the 2020 BrandLoyalty Credit Agreement are denominated in Euros. The interest rate fluctuates and is equal to EURIBOR, as defined in the 2020 BrandLoyalty Credit Agreement, plus an applicable margin based on BrandLoyalty’s senior net leverage ratio. The 2020 BrandLoyalty Credit Agreement contains financial covenants, including a senior net leverage ratio, as well as usual and customary negative covenants, representations, general and information undertakings and events of default. As of September 30, 2020, there were no amounts outstanding under the 2020 BrandLoyalty Credit Agreement. Non-Recourse Borrowings of Consolidated Securitization Entities Asset-Backed Term Notes In May 2020, $450.7 million of Series 2017-A asset-backed term notes, $50.7 million of which were retained by the Company and eliminated from the Company’s unaudited condensed consolidated balance sheets, matured and were repaid. In August 2020, $625.0 million of Series 2015-B asset-backed term notes, $150.0 million of which were retained by the Company and eliminated from the Company’s unaudited condensed consolidated balance sheets, matured and were repaid. As of September 30, 2020, the Company collected $603.1 million of principal payments made by its credit cardholders during the accumulation period for the repayment of the Series 2017-C notes, which matured in October 2020. The cash is restricted to the securitization investors and is reflected in other current assets in the Company’s unaudited condensed consolidated balance sheet as of September 30, 2020. Conduit Facilities The Company has access to committed undrawn capacity through three conduit facilities to support the funding of its credit card receivables through Master Trust I, Master Trust III and the WFC Trust. In April 2020, Master Trust I amended its 2009-VFN conduit facility, decreasing the capacity from $1.18 billion to $1.0 billion and extending the maturity to July 2021. In April 2020, Master Trust III amended its 2009-VFC conduit facility, decreasing the capacity from $1.3 billion to $1.0 billion and extending the maturity to July 2021. In September 2020, Master Trust I amended its 2009-VFN conduit facility, extending the maturity to October 2022. In September 2020, Master Trust III amended its 2009-VFC conduit facility, decreasing the capacity from $1.0 billion to $700.0 million and extending the maturity to April 2022. In September 2020, the WFC Trust amended its 2009-VFN conduit facility, decreasing the capacity from $2.2 billion to $1.5 billion and extending the maturity to April 2022. As of September 30, 2020, total capacity under the conduit facilities was $3.2 billion, of which $335.0 million had been drawn and was included in non-recourse borrowings of consolidated securitization entities in the unaudited condensed consolidated balance sheets. |
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS | 9 Months Ended |
Sep. 30, 2020 | |
DERIVATIVE INSTRUMENTS | |
DERIVATIVE INSTRUMENTS | 14. DERIVATIVE INSTRUMENTS The Company uses derivatives to manage risks associated with certain assets and liabilities arising from the potential adverse impact of fluctuations in interest rates and foreign currency exchange rates. The Company limits its exposure on derivatives by entering into contracts with institutions that are established dealers who maintain certain minimum credit criteria established by the Company. At September 30, 2020, the Company does not maintain any derivative instruments subject to master agreements that would require the Company to post collateral or that contain any credit-risk related contingent features. The Company enters into foreign currency derivatives to reduce the volatility of the Company’s cash flows resulting from changes in foreign currency exchange rates associated with certain inventory transactions, some of which are designated as cash flow hedges. The Company generally hedges foreign currency exchange rate risks for periods of 12 months or less. As of September 30, 2020, the maximum term over which the Company is hedging its exposure to the variability of future cash flows associated with certain inventory transactions is 12 months. Certain foreign currency exchange forward contracts are not designated as hedges as they do not meet the specific hedge accounting requirements of ASC 815, “Derivatives and Hedging.” Changes in the fair value of the derivative instruments not designated as hedging instruments are recorded in the unaudited condensed consolidated statements of income as they occur. Gains and losses on derivatives not designated as hedging instruments are included in other operating activities in the unaudited condensed consolidated statements of cash flows for all periods presented. The following tables present the fair values of the derivative instruments included within the Company’s unaudited condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019: September 30, 2020 Notional Amount Fair Value Balance Sheet Location Maturity (in millions) Designated as hedging instruments: Foreign currency exchange hedges $ 47.8 $ 1.4 Other current assets October 2020 - September 2021 Foreign currency exchange hedges $ 28.5 $ 1.4 Other current liabilities October 2020 - July 2021 Not designated as hedging instruments: Foreign currency exchange forward contracts $ 10.1 $ 0.2 Other current assets October 2020 - September 2021 Foreign currency exchange forward contracts $ 2.2 $ 0.1 Other current liabilities October 2020 - September 2021 December 31, 2019 Notional Amount Fair Value Balance Sheet Location Maturity (in millions) Designated as hedging instruments: Foreign currency exchange hedges $ 5.5 $ 0.2 Other current assets January 2020 to February 2020 Foreign currency exchange hedges $ 7.8 $ 0.3 Other current liabilities February 2020 to July 2020 Derivatives Designated as Hedging Instruments Gains of $0.5 million and de minimis, net of tax, were recognized in other comprehensive income for the three and nine months ended September 30, 2020, respectively, and gains of $0.7 million and $0.5 million, net of tax, were recognized in other comprehensive income for the three and nine months ended September 30, 2019, respectively, related to foreign currency exchange hedges designated as effective. Changes in the fair value of these hedges are recorded in other comprehensive income until the hedged transactions affect net income. Reclassifications from accumulated other comprehensive loss into net income (cost of operations) for each of the periods presented were not material. At September 30, 2020, $0.1 million is expected to be reclassified from accumulated other comprehensive income into net income in the coming 12 months. Derivatives Not Designated as Hedging Instruments For the three and nine months ended September 30, 2020, gains and losses related to foreign currency exchange forward contracts not designated as hedging instruments were de minimis. For the three and nine months ended September 30, 2019, gains of $1.0 million and losses of $1.4 million, respectively, related to foreign currency exchange forward contracts not designated as hedging instruments were recognized in general and administrative expense in the Company’s unaudited condensed consolidated statements of income. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2020 | |
COMMITMENTS AND CONTINGENCIES. | |
COMMITMENTS AND CONTINGENCIES | 15. COMMITMENTS AND CONTINGENCIES Regulatory Matters On September 10, 2019, Comenity Capital Bank submitted a bank merger application to the Federal Deposit Insurance Corporation (“FDIC”) seeking the FDIC’s approval to merge Comenity Bank with and into Comenity Capital Bank as the surviving bank entity. On the same date, Comenity Capital Bank and Comenity Bank each submitted counterpart bank merger applications to the Utah Department of Financial Institutions and the Delaware Office of the State Bank Commissioner, respectively, in connection with the proposed merger. The merger application remains subject to regulatory review and approval and no guarantee can be provided as to the outcome or timing of such review. Indemnification On July 1, 2019, the Company completed the sale of its Epsilon segment to Publicis Groupe S.A. (“Publicis”). Under the terms of the agreement governing that transaction, the Company agreed to indemnify Publicis and its affiliates from and against any losses arising out of or related to a Department of Justice (“DOJ”) investigation. The DOJ investigation relates to third-party marketers who sent, or allegedly sent, deceptive mailings and the provision of data and services to those marketers by Epsilon’s data practice. Epsilon has actively cooperated with the DOJ in connection with its ongoing investigation. The Company records a loss contingency when a loss is probable and an amount can be reasonably estimated. For the year ended December 31, 2019, the Company recorded a loss contingency of $32.9 million, net of tax, which was included in loss from discontinued operations. As these estimates are initially developed substantially earlier than when the ultimate loss is known, no assurance can be given that the investigation will be resolved on these, or other, terms. Therefore, this loss contingency may be refined each period as additional information becomes available. As of September 30, 2020, there was no change to the Company’s estimate of loss contingency. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2020 | |
STOCKHOLDERS' EQUITY | |
STOCKHOLDERS' EQUITY | 16. STOCKHOLDERS’ EQUITY Stock Repurchase Program In July 2019, the Company’s Board of Directors authorized a new stock repurchase program to acquire up to $1.1 billion of its outstanding common stock from July 5, 2019 through June 30, 2020. As of December 31, 2019, the Company had $347.8 million remaining under its authorized stock repurchase program. On April 23, 2020, the Company announced that it has suspended its stock repurchase program. The stock repurchase program expired on June 30, 2020, and $347.8 million of this program expired unused. During 2020, the Company did not repurchase any shares of its outstanding common stock under its authorized stock repurchase program. Stock Compensation Expense During the nine months ended September 30, 2020, the Company awarded 180,017 service-based restricted stock units with a weighted average grant date fair value per share of $83.08 as determined on the date of grant. Service-based restricted stock units typically vest ratably over three years provided that the participant is employed by the Company on each such vesting date. During the nine months ended September 30, 2020, the Company awarded 219,186 performance-based restricted stock units with a weighted average grant date fair value per share of $100.50 as determined on the date of grant with pre-defined vesting criteria that typically permit a range from 0% to 150% to be earned. If the performance targets are met, the restrictions will lapse with respect to 33% of the award on February 18, 2021, an additional 33% of the award on February 18, 2022 and the final 34% of the award on February 18, 2023, provided that the participant is employed by the Company on each such vesting date. As of September 30, 2020, the Company believes the probable achievement is 0%, and therefore has not recognized any expense related to these awards for the three and nine months ended September 30, 2020. During the nine months ended September 30, 2020, the Company also awarded 20,770 restricted stock units with a market-based condition subject to pre-defined vesting criteria that permit a range from 0% to 175% to be earned. The fair market value of these awards is $78.92 and was estimated utilizing Monte Carlo simulations of the Company’s stock price correlation, expected volatility and risk-free rate over two-year time horizons matching the performance period. Upon determination of the market condition, the restrictions will lapse with respect to the entire award on February 18, 2022, provided that the participant is employed by the Company on such vesting date. Stock-based compensation expense recognized in the Company’s unaudited condensed consolidated statements of income for the three and nine months ended September 30, 2020 and 2019 is as follows: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in millions) Cost of operations $ 3.4 $ 3.1 $ 9.4 $ 16.2 General and administrative 1.9 (0.1) 6.8 8.4 Total $ 5.3 $ 3.0 $ 16.2 $ 24.6 No stock-based compensation expense was recorded to discontinued operations for the three months ended September 30, 2019. For the nine months ended September 30, 2019, an additional $29.7 million of stock-based compensation expense related to associates from the Company’s divested Epsilon segment was recorded to discontinued operations. Dividends On January 30, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.63 per share on the Company’s common stock to stockholders of record at the close of business on February 14, 2020, resulting in a dividend payment of $30.0 million on March 19, 2020. On April 23, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.21 per share on the Company’s common stock to stockholders of record at the close of business on May 14, 2020, resulting in a dividend payment of $10.0 million on June 18, 2020. On July 23, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.21 per share on the Company’s common stock to stockholders of record at the close of business on August 14, 2020, resulting in a dividend payment of $10.0 million on September 18, 2020. On October 29, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $0.21 per share on the Company’s common stock to stockholders of record at the close of business on November 13, 2020, with a dividend payment date of December 18, 2020. Additionally, the Company paid $0.5 million in cash related to dividend equivalent rights for the nine months ended September 30, 2020. |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE LOSS | 9 Months Ended |
Sep. 30, 2020 | |
ACCUMULATED OTHER COMPREHENSIVE LOSS. | |
ACCUMULATED OTHER COMPREHENSIVE LOSS | 17. ACCUMULATED OTHER COMPREHENSIVE LOSS The changes in each component of accumulated other comprehensive loss, net of tax effects, are as follows: Net Net Unrealized Net Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Three Months Ended September 30, 2020 on Securities Flow Hedges Investment Hedge Adjustments (1) Loss (in millions) Balance at June 30, 2020 $ 17.5 $ (0.6) $ (7.5) $ (96.9) $ (87.5) Changes in other comprehensive income (loss) 4.0 0.5 — 35.3 39.8 Balance at September 30, 2020 $ 21.5 $ (0.1) $ (7.5) $ (61.6) $ (47.7) Net Net Unrealized Net Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Three Months Ended September 30, 2019 on Securities Flow Hedges Investment Hedge Adjustments (1) Loss (in millions) Balance at June 30, 2019 $ 3.7 $ (0.4) $ (7.5) $ (117.5) $ (121.7) Recognition resulting from the sale of Epsilon's foreign subsidiaries — — — 26.8 26.8 Changes in other comprehensive income (loss) (0.2) 0.7 — (27.6) (27.1) Balance at September 30, 2019 $ 3.5 $ 0.3 $ (7.5) $ (118.3) $ (122.0) Net Net Unrealized Net Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Nine Months Ended September 30, 2020 on Securities Flow Hedges Investment Hedge Adjustments (1) Loss (in millions) Balance at December 31, 2019 $ 2.5 $ (0.1) $ (7.5) $ (94.8) $ (99.9) Recognition resulting from the sale of Precima's foreign subsidiaries — — — 3.8 3.8 Changes in other comprehensive income (loss) 19.0 — — 29.4 48.4 Balance at September 30, 2020 $ 21.5 $ (0.1) $ (7.5) $ (61.6) $ (47.7) Net Net Unrealized Net Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Nine Months Ended September 30, 2019 on Securities Flow Hedges Investment Hedge Adjustments (1) Loss (in millions) Balance at December 31, 2018 $ (10.7) $ (0.2) $ (12.4) $ (114.8) $ (138.1) Recognition resulting from the sale of Epsilon's foreign subsidiaries — — — 26.8 26.8 Changes in other comprehensive income (loss) 14.2 0.5 4.9 (30.3) (10.7) Balance at September 30, 2019 $ 3.5 $ 0.3 $ (7.5) $ (118.3) $ (122.0) (1) Primarily related to the impact of changes in the Canadian dollar and Euro foreign currency exchange rates. In accordance with ASC 830, “Foreign Currency Matters,” upon the sale of Precima on January 10, 2020, $3.8 million of accumulated foreign currency translation adjustments attributable to Precima’s foreign subsidiaries sold were reclassified from accumulated other comprehensive loss and included in the calculation of the gain on sale of Precima. Upon the sale of Epsilon on July 1, 2019, $26.8 million of accumulated foreign currency translation adjustments attributable to Epsilon’s foreign subsidiaries sold were reclassified from accumulated other comprehensive loss and included in the calculation of the gain/loss on sale of the Epsilon segment. Other reclassifications from accumulated other comprehensive loss into net income for each of the periods presented were not material. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2020 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 18. FAIR VALUE MEASUREMENTS In accordance with ASC 825, “Financial Instruments,” the Company is required to disclose the fair value of financial instruments for which it is practical to estimate fair value. To obtain fair values, observable market prices are used if available. In some instances, observable market prices are not readily available and fair value is determined using present value or other techniques appropriate for a particular financial instrument. These techniques involve judgment and as a result are not necessarily indicative of the amounts the Company would realize in a current market exchange. The use of different assumptions or estimation techniques may have a material effect on the estimated fair value amounts. Fair Value of Financial Instruments — September 30, 2020 December 31, 2019 Carrying Fair Carrying Fair Amount Value Amount Value (in millions) Financial assets Credit card and loan receivables, net $ 13,517.8 $ 16,081.6 $ 18,292.0 $ 19,126.0 Credit card receivables held for sale — — 408.0 436.2 Redemption settlement assets, restricted 641.7 641.7 600.8 600.8 Other investments 228.1 228.1 259.8 259.8 Derivative instruments 1.6 1.6 0.2 0.2 Financial liabilities Derivative instruments 1.5 1.5 0.3 0.3 Deposits 10,148.5 10,404.4 12,151.7 12,303.6 Non-recourse borrowings of consolidated securitization entities 4,344.3 4,427.2 7,284.0 7,333.6 Long-term and other debt 2,803.2 2,778.7 2,849.9 2,878.8 The following techniques and assumptions were used by the Company in estimating fair values of financial instruments as disclosed herein: Credit card and loan receivables, net — . Credit card receivables held for sale — Redemption settlement assets, restricted — Other investments Deposits Non-recourse borrowings of consolidated securitization entities Long-term and other debt Derivative instruments Financial Assets and Financial Liabilities Fair Value Hierarchy ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: ● Level 1, defined as observable inputs such as quoted prices in active markets; ● Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and ● Level 3, defined as unobservable inputs where little or no market data exists, therefore requiring an entity to develop its own assumptions. Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. Level 3 financial instruments also include those for which the determination of fair value requires significant management judgment or estimation. The use of different techniques to determine fair value of these financial instruments could result in different estimates of fair value at the reporting date. The following tables provide information for the assets and liabilities carried at fair value measured on a recurring basis as of September 30, 2020 and December 31, 2019: Fair Value Measurements at September 30, 2020 Using Balance at September 30, 2020 Level 1 Level 2 Level 3 (in millions) Mutual funds (1) $ 25.4 $ 25.4 $ — $ — Corporate bonds (1) 570.9 — 570.9 — Marketable securities (2) 228.1 34.1 194.0 — Derivative instruments (3) 1.6 — 1.6 — Total assets measured at fair value $ 826.0 $ 59.5 $ 766.5 $ — Derivative instruments (3) $ 1.5 $ — $ 1.5 $ — Total liabilities measured at fair value $ 1.5 $ — $ 1.5 $ — Fair Value Measurements at December 31, 2019 Using Balance at December 31, 2019 Level 1 Level 2 Level 3 (in millions) Mutual funds (1) $ 25.1 $ 25.1 $ — $ — Corporate bonds (1) 536.4 — 536.4 — Marketable securities (2) 259.8 26.2 233.6 — Derivative instruments (3) 0.2 — 0.2 — Total assets measured at fair value $ 821.5 $ 51.3 $ 770.2 $ — Derivative instruments (3) $ 0.3 $ — $ 0.3 $ — Total liabilities measured at fair value $ 0.3 $ — $ 0.3 $ — (1) Amounts are included in redemption settlement assets in the unaudited condensed consolidated balance sheets. (2) Amounts are included in other current assets and other non-current assets in the unaudited condensed consolidated balance sheets. (3) Amounts are included in other current assets and other current liabilities in the unaudited condensed consolidated balance sheets. Financial Instruments Disclosed but Not Carried at Fair Value The following tables provide assets and liabilities disclosed but not carried at fair value as of September 30, 2020 and December 31, 2019: Fair Value Measurements at September 30, 2020 Total Level 1 Level 2 Level 3 (in millions) Financial assets: Credit card and loan receivables, net $ 16,081.6 $ — $ — $ 16,081.6 Total $ 16,081.6 $ — $ — $ 16,081.6 Financial liabilities: Deposits $ 10,404.4 $ — $ 10,404.4 $ — Non-recourse borrowings of consolidated securitization entities 4,427.2 — 4,427.2 — Long-term and other debt 2,778.7 — 2,778.7 — Total $ 17,610.3 $ — $ 17,610.3 $ — Fair Value Measurements at December 31, 2019 Total Level 1 Level 2 Level 3 (in millions) Financial assets: Credit card and loan receivables, net $ 19,126.0 $ — $ — $ 19,126.0 Credit card receivables held for sale 436.2 — — 436.2 Total $ 19,562.2 $ — $ — $ 19,562.2 Financial liabilities: Deposits $ 12,303.6 $ — $ 12,303.6 $ — Non-recourse borrowings of consolidated securitization entities 7,333.6 — 7,333.6 — Long-term and other debt 2,878.8 — 2,878.8 — Total $ 22,516.0 $ — $ 22,516.0 $ — Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain assets and liabilities are recognized or disclosed at fair value on a nonrecurring basis, including property and equipment, right of use assets, deferred contract assets, goodwill, and intangible assets. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, including when there is evidence of impairment. For the nine months ended September 30, 2020, the Company recorded asset impairment charges of $34.2 million related to deferred contract costs and certain right of use assets. The fair value was determined utilizing discounted cash flow models over the estimated life of each asset. The principal assumptions used in the Company’s impairment analysis were forecasted future cash flows and the discount rate, which are considered Level 3 inputs. See Note 2, “Revenue,” and Note 10, “Leases,” for more information regarding asset impairments. For the three and nine months ended September 30, 2019, as part of restructuring and other charges, the Company recorded asset impairments of $33.7 million and $49.3 million, respectively. See Note 12, “Restructuring and Other Charges,” for more information. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2020 | |
INCOME TAXES | |
INCOME TAXES | 19. INCOME TAXES For the three months ended September 30, 2020 and 2019, the Company utilized an effective tax rate of 24.2% and 26.0%, respectively, to calculate its provision for income taxes. For the nine months ended September 30, 2020 and 2019, the Company utilized an effective tax rate of 18.8% and 22.6%, respectively, to calculate its provision for income taxes. The decrease in the effective tax rate for the three months ended September 30, 2020 as compared to the three months ended September 30, 2019 resulted primarily from final regulations addressing the high tax exception related to Global Intangible Low-Taxed Income (“GILTI”). The decrease in the effective tax rate for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019 resulted primarily from discrete tax benefits from a reduction of tax reserves related to the statute of limitations expiration in the second quarter of 2020 as well as a favorable settlement with a state tax authority in the first quarter of 2020. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 9 Months Ended |
Sep. 30, 2020 | |
SEGMENT INFORMATION | |
SEGMENT INFORMATION | 20. SEGMENT INFORMATION Operating segments are defined by ASC 280, “Segment Reporting,” as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The operating segments are reviewed separately because each operating segment represents a strategic business unit that generally offers different products and services. The Company operates in the LoyaltyOne and Card Services reportable segments, which consist of the following: ● LoyaltyOne provides coalition and short-term loyalty programs through the Company’s Canadian AIR MILES Reward Program and BrandLoyalty; and ● Card Services provides risk management solutions, account origination, funding, transaction processing, customer care, collections and marketing services for the Company’s private label and co-brand credit card programs. Corporate and other immaterial businesses are reported collectively as an “all other” category labeled “Corporate/Other.” Income taxes are not allocated to the segments in the computation of segment operating profit for internal evaluation purposes and have also been included in “Corporate/Other.” Corporate/ Three Months Ended September 30, 2020 LoyaltyOne Card Services Other Total (in millions) Revenues $ 184.8 $ 865.7 $ — $ 1,050.5 Income (loss) before income taxes $ 18.3 $ 212.1 $ (54.5) $ 175.9 Interest expense, net (0.2) 90.4 24.9 115.1 Operating income (loss) 18.1 302.5 (29.6) 291.0 Depreciation and amortization 20.3 19.2 0.6 40.1 Stock compensation expense 1.6 1.8 1.9 5.3 Strategic transaction costs 0.1 — 3.4 3.5 Adjusted EBITDA (1) 40.1 323.5 (23.7) 339.9 Less: Securitization funding costs — 37.5 — 37.5 Less: Interest expense on deposits — 52.9 — 52.9 Adjusted EBITDA, net (1) $ 40.1 $ 233.1 $ (23.7) $ 249.5 Corporate/ Three Months Ended September 30, 2019 LoyaltyOne Card Services Other Total (in millions) Revenues $ 245.5 $ 1,192.0 $ 0.1 $ 1,437.6 (Loss) income before income taxes $ (5.2) $ 300.0 $ (130.6) $ 164.2 Interest expense, net 0.8 113.9 25.3 140.0 Operating (loss) income (4.4) 413.9 (105.3) 304.2 Depreciation and amortization 19.8 23.5 1.6 44.9 Stock compensation expense 0.7 2.4 (0.1) 3.0 Strategic transaction costs 0.1 — 2.2 2.3 Restructuring and other charges 42.0 2.1 10.8 54.9 Loss on extinguishment of debt — — 71.9 71.9 Adjusted EBITDA (1) 58.2 441.9 (18.9) 481.2 Less: Securitization funding costs — 51.4 — 51.4 Less: Interest expense on deposits — 62.5 — 62.5 Adjusted EBITDA, net (1) $ 58.2 $ 328.0 $ (18.9) $ 367.3 Corporate/ Nine Months Ended September 30, 2020 LoyaltyOne Card Services Other Total (in millions) Revenues $ 533.9 $ 2,877.5 $ 0.1 $ 3,411.5 Income (loss) before income taxes $ 88.9 $ 314.5 $ (155.1) $ 248.3 Interest expense, net (0.5) 302.2 79.6 381.3 Operating income (loss) 88.4 616.7 (75.5) 629.6 Depreciation and amortization 56.9 61.0 2.4 120.3 Stock compensation expense 4.1 5.3 6.8 16.2 Gain on sale of business, net of strategic transaction costs (8.0) — — (8.0) Strategic transaction costs 0.3 — 6.5 6.8 Asset impairments — 34.2 — 34.2 Restructuring and other charges 0.1 (7.8) — (7.7) Adjusted EBITDA (1) 141.8 709.4 (59.8) 791.4 Less: Securitization funding costs — 130.1 — 130.1 Less: Interest expense on deposits — 172.1 — 172.1 Adjusted EBITDA, net (1) $ 141.8 $ 407.2 $ (59.8) $ 489.2 Corporate/ Nine Months Ended September 30, 2019 LoyaltyOne Card Services Other Total (in millions) Revenues $ 700.7 $ 3,419.3 $ 0.3 $ 4,120.3 Income (loss) before income taxes $ 45.2 $ 829.8 $ (304.0) $ 571.0 Interest expense, net 2.7 324.7 100.0 427.4 Operating income (loss) 47.9 1,154.5 (204.0) 998.4 Depreciation and amortization 59.7 68.5 5.0 133.2 Stock compensation expense 6.5 9.7 8.4 24.6 Strategic transaction costs 0.3 — 4.7 5.0 Restructuring and other charges 49.9 2.1 33.1 85.1 Loss on extinguishment of debt — — 71.9 71.9 Adjusted EBITDA (1) 164.3 1,234.8 (80.9) 1,318.2 Less: Securitization funding costs — 160.3 — 160.3 Less: Interest expense on deposits — 164.4 — 164.4 Adjusted EBITDA, net (1) $ 164.3 $ 910.1 $ (80.9) $ 993.5 (1) Adjusted EBITDA is a non-GAAP financial measure equal to income from continuing operations, the most directly comparable financial measure based on GAAP plus stock compensation expense, provision for income taxes, interest expense, net, depreciation and other amortization and amortization of purchased intangibles. Adjusted EBITDA also excludes the gain on the sale of Precima, strategic transaction costs, which represent costs for professional services associated with strategic initiatives, asset impairments, restructuring and other charges, and loss related to the Company’s extinguishment of debt in July 2019. Adjusted EBITDA, net is also a non-GAAP financial measure equal to adjusted EBITDA less securitization funding costs and interest expense on deposits. Adjusted EBITDA and adjusted EBITDA, net are presented in accordance with ASC 280 as they are the primary performance metrics utilized to assess performance of the segments. |
SUPPLEMENTAL CASH FLOW INFORMAT
SUPPLEMENTAL CASH FLOW INFORMATION | 9 Months Ended |
Sep. 30, 2020 | |
SUPPLEMENTAL CASH FLOW INFORMATION | |
SUPPLEMENTAL CASH FLOW INFORMATION | 21. SUPPLEMENTAL CASH FLOW INFORMATION The unaudited condensed consolidated statements of cash flows are presented with the combined cash flows from discontinued operations with cash flows from continuing operations within each cash flow statement category. The following table provides a reconciliation of cash and cash equivalents to the total of the amounts reported in the unaudited condensed consolidated statements of cash flows: September 30, September 30, 2020 2019 (in millions) Cash and cash equivalents $ 3,078.4 $ 4,512.5 Restricted cash included within other current assets (1) 627.1 493.8 Restricted cash included within redemption settlement assets, restricted (2) 45.4 45.4 Total cash, cash equivalents and restricted cash $ 3,750.9 $ 5,051.7 (1) Includes cash restricted for principal and interest repayments of non-recourse borrowings of consolidated securitized debt and other restricted cash within other current assets. At September 30, 2020 and 2019, restricted cash included $603.1 million and $460.5 million, respectively, in principal accumulation for the repayment of non-recourse borrowings of consolidated securitized debt that matured in October 2020 and 2019, respectively. (2) See Note 9, “Redemption Settlement Assets,” for additional information regarding the nature of restrictions on redemption settlement assets. There were no significant non-cash investing or financing activities for the nine months ended September 30, 2020. Non-cash investing activities for the nine months ended September 30, 2019 included a $40.1 million receivable from Publicis Groupe S.A. related to customary post-closing adjustments, as provided for in the Epsilon purchase agreement. The receivable was collected in full in October 2019. Non-cash financing activities for the nine months ended September 30, 2019 included an exchange agreement with ValueAct Holdings, L.P. pursuant to which ValueAct exchanged an aggregate of 1,500,000 shares of the Company’s common stock for an aggregate of 150,000 shares of preferred stock. For more information, see Note 3, “Earnings Per Share.” |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 9 Months Ended |
Sep. 30, 2020 | |
SUBSEQUENT EVENT. | |
SUBSEQUENT EVENT | 22. SUBSEQUENT EVENT In October 2020, the Company entered into a definitive merger agreement with Lon Inc. (“Bread”) to acquire Bread in its entirety. Bread provides technology solutions for merchants to provide digital purchase financing options to customers in the form of installment credit as well as credit and debit multi-pay solutions. The transaction is subject to regulatory approval and satisfaction or waiver of other customary closing conditions. The Company will acquire Bread for an estimated purchase price of $450.0 million, subject to customary purchase price adjustments, with consideration consisting of cash, stock and a deferred payment. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation The unaudited condensed consolidated financial statements included herein have been prepared by Alliance Data Systems Corporation (“ADSC” or, including its consolidated subsidiaries and variable interest entities (“VIEs”), the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 28, 2020. The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal, recurring adjustments) which are, in the opinion of management, necessary to state fairly the results for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the fiscal year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (1) the reported amounts of assets; (2) liabilities and disclosure of contingent assets and liabilities at the date of the financial statements; and (3) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Effective March 31, 2019, the Company’s divested Epsilon segment met the criteria set forth in Accounting Standards Codification (“ASC”) 205-20, “Presentation of Financial Statements — Discontinued Operations,” and was subsequently sold on July 1, 2019. The Company’s products and services are reported under two segments—LoyaltyOne ® |
Recently Issued and Adopted Accounting Standards | Recently Issued Accounting Standards In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12, “Simplifying the Accounting for Income Taxes.” ASU 2019-12 eliminates certain exceptions within ASC 740, “Income Taxes,” and clarifies certain aspects of ASC 740 to promote consistency among reporting entities. ASU 2019-12 is effective for interim and annual reporting periods beginning after December 15, 2020, with early adoption permitted. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company does not expect the adoption of ASU 2019-12 to have a material impact on its consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts and hedging relationships that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. This ASU is elective and is effective upon issuance for all entities. The Company is evaluating the impact that adoption of ASU 2020-04 will have on its consolidated financial statements. Recently Adopted Accounting Standards In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments,” or ASC 326. This standard, referred to as Current Expected Credit Loss (“CECL”), required entities to utilize a financial instrument impairment model to establish an allowance based on expected losses over the life of the exposure rather than a model based on an incurred loss approach. Estimates of expected credit losses under the CECL model are based on relevant information about past events, current conditions, and reasonable and supportable forward-looking forecasts regarding the collectability of the loan portfolio. The Company adopted CECL on January 1, 2020 and recorded an increase in its allowance for loan loss at adoption of $644.0 million, which was recorded through a cumulative-effect adjustment to retained earnings, net of taxes. CECL also expanded the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating its allowance for loan loss. See Note 6, “Credit Card and Loan Receivables,” for the Company’s CECL disclosures. In addition, CECL modified the impairment model for available-for-sale debt securities and provided for a simplified accounting model for purchased financial assets with credit deterioration since their origination. CECL impacts the Company’s valuation of its accounts receivable and available-for-sale debt securities, with respect to which the Company’s adoption did not have a material impact on its consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, “Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the disclosure requirements on fair value measurements from Accounting Standards Codification (“ASC”) 820, “Fair Value Measurement.” The Company’s adoption of this standard on January 1, 2020 did not have a material impact on its consolidated financial statements. In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” ASU 2018-15 requires customers in a cloud computing arrangement that is a service contract to follow the internal-use software guidance in ASC 350-40, “Intangibles—Goodwill and Other—Internal-Use Software,” to determine which implementation costs may be capitalized. The amendments in ASU 2018-15 can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted ASU 2018-15 on January 1, 2020 on a prospective basis and the adoption did not have a material impact on its consolidated financial statements. |
REVENUE (Tables)
REVENUE (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
REVENUE | |
Schedule of disaggregation of revenue by major source and geographic region | Corporate/ Three Months Ended September 30, 2020 LoyaltyOne Card Services Other Total (in millions) Disaggregation of Revenue by Major Source: Coalition loyalty program $ 63.0 $ — $ — $ 63.0 Short-term loyalty programs 117.4 — — 117.4 Servicing fees, net — (47.0) — (47.0) Other 1.1 — — 1.1 Revenue from contracts with customers $ 181.5 $ (47.0) $ — $ 134.5 Finance charges, net — 912.7 — 912.7 Investment income 3.3 — — 3.3 Total $ 184.8 $ 865.7 $ — $ 1,050.5 Corporate/ Three Months Ended September 30, 2019 LoyaltyOne Card Services Other Total (in millions) Disaggregation of Revenue by Major Source: Coalition loyalty program $ 72.0 $ — $ — $ 72.0 Short-term loyalty programs 144.2 — — 144.2 Servicing fees, net — (43.8) — (43.8) Other 26.1 — 0.1 26.2 Revenue from contracts with customers $ 242.3 $ (43.8) $ 0.1 $ 198.6 Finance charges, net — 1,235.8 — 1,235.8 Investment income 3.2 — — 3.2 Total $ 245.5 $ 1,192.0 $ 0.1 $ 1,437.6 Corporate/ Nine Months Ended September 30, 2020 LoyaltyOne Card Services Other Total (in millions) Disaggregation of Revenue by Major Source: Coalition loyalty program $ 195.9 $ — $ — $ 195.9 Short-term loyalty programs 322.5 — — 322.5 Servicing fees, net — (106.2) — (106.2) Other 5.9 — 0.1 6.0 Revenue from contracts with customers $ 524.3 $ (106.2) $ 0.1 $ 418.2 Finance charges, net — 2,983.7 — 2,983.7 Investment income 9.6 — — 9.6 Total $ 533.9 $ 2,877.5 $ 0.1 $ 3,411.5 Corporate/ Nine Months Ended September 30, 2019 LoyaltyOne Card Services Other Total (in millions) Disaggregation of Revenue by Major Source: Coalition loyalty program $ 214.8 $ — $ — $ 214.8 Short-term loyalty programs 406.9 — — 406.9 Servicing fees, net — (93.9) — (93.9) Other 69.7 — 0.3 70.0 Revenue from contracts with customers $ 691.4 $ (93.9) $ 0.3 $ 597.8 Finance charges, net — 3,513.2 — 3,513.2 Investment income 9.3 — — 9.3 Total $ 700.7 $ 3,419.3 $ 0.3 $ 4,120.3 Corporate/ Three Months Ended September 30, 2020 LoyaltyOne Card Services Other Total (in millions) Disaggregation of Revenue by Geographic Region: United States $ 3.3 $ 865.7 $ — $ 869.0 Canada 70.3 — — 70.3 Europe, Middle East and Africa 76.9 — — 76.9 Asia Pacific 12.6 — — 12.6 Other 21.7 — — 21.7 Total $ 184.8 $ 865.7 $ — $ 1,050.5 Corporate/ Three Months Ended September 30, 2019 LoyaltyOne Card Services Other Total (in millions) Disaggregation of Revenue by Geographic Region: United States $ 12.3 $ 1,192.0 $ 0.1 $ 1,204.4 Canada 88.9 — — 88.9 Europe, Middle East and Africa 77.0 — — 77.0 Asia Pacific 40.0 — — 40.0 Other 27.3 — — 27.3 Total $ 245.5 $ 1,192.0 $ 0.1 $ 1,437.6 Corporate/ Nine Months Ended September 30, 2020 LoyaltyOne Card Services Other Total (in millions) Disaggregation of Revenue by Geographic Region: United States $ 9.6 $ 2,877.5 $ 0.1 $ 2,887.2 Canada 214.1 — — 214.1 Europe, Middle East and Africa 196.2 — — 196.2 Asia Pacific 63.0 — — 63.0 Other 51.0 — — 51.0 Total $ 533.9 $ 2,877.5 $ 0.1 $ 3,411.5 Corporate/ Nine Months Ended September 30, 2019 LoyaltyOne Card Services Other Total (in millions) Disaggregation of Revenue by Geographic Region: United States $ 28.2 $ 3,419.3 $ 0.3 $ 3,447.8 Canada 263.3 — — 263.3 Europe, Middle East and Africa 276.0 — — 276.0 Asia Pacific 81.6 — — 81.6 Other 51.6 — — 51.6 Total $ 700.7 $ 3,419.3 $ 0.3 $ 4,120.3 |
Schedule of reconciliation of contract liabilities for the AIR MILES Reward Program | Deferred Revenue Service Redemption Total (in millions) Balance at January 1, 2020 $ 258.6 $ 663.4 $ 922.0 Cash proceeds 124.7 206.7 331.4 Revenue recognized (1) (140.8) (153.6) (294.4) Other — 0.5 0.5 Effects of foreign currency translation (6.8) (15.6) (22.4) Balance at September 30, 2020 $ 235.7 $ 701.4 $ 937.1 Amounts recognized in the consolidated balance sheets: Deferred revenue (current) $ 134.3 $ 701.4 $ 835.7 Deferred revenue (non-current) $ 101.4 $ — $ 101.4 (1) Reported on a gross basis herein. |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
EARNINGS PER SHARE | |
Schedule of computation of basic and diluted net income per share | Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 (in millions, except per share amounts) Basic income per share: Numerator: Income from continuing operations $ 133.3 $ 121.6 $ 201.7 $ 442.2 Less: Dividends declared on preferred stock — 0.9 — 2.8 Less: Allocation of undistributed earnings (1) — — — 5.8 Income from continuing operations - basic 133.3 120.7 201.7 433.6 Loss from discontinued operations, net of tax — (229.2) — (261.7) Net income (loss) - basic $ 133.3 $ (108.5) $ 201.7 $ 171.9 Denominator: Weighted average shares, basic 47.7 48.8 47.7 51.1 Basic income (loss) attributable to common stockholders per share: Income from continuing operations $ 2.79 $ 2.47 $ 4.23 $ 8.49 Loss from discontinued operations $ — $ (4.69) $ — $ (5.12) Net income (loss) per share $ 2.79 $ (2.22) $ 4.23 $ 3.37 Diluted income per share (2) : Numerator: Income from continuing operations $ 133.3 $ 121.6 $ 201.7 $ 442.2 Loss from discontinued operations, net of tax — (229.2) — (261.7) Net income (loss) $ 133.3 $ (107.6) $ 201.7 $ 180.5 Denominator: Weighted average shares, basic 47.7 48.8 47.7 51.1 Weighted average effect of dilutive securities: Shares from assumed conversion of preferred stock — 1.5 — 0.9 Net effect of dilutive stock options and unvested restricted stock (3) 0.1 0.1 — 0.1 Denominator for diluted calculation 47.8 50.4 47.7 52.1 Diluted income (loss) attributable to common stockholders per share: Income from continuing operations $ 2.79 $ 2.41 $ 4.23 $ 8.50 Loss from discontinued operations $ — $ (4.54) $ — $ (5.03) Net income (loss) per share $ 2.79 $ (2.13) $ 4.23 $ 3.47 (1) In accordance with ASC 260, “Earnings Per Share,” in the period of net loss, the loss was not allocated to the participating security as it does not have a contractual obligation to share in the losses. (2) Computed using the if-converted method, as the result was more dilutive. (3) For both the three and nine months ended September 30, 2020, 0.3 million of restricted stock units were excluded from each calculation of weighted average dilutive common shares as the effect would have been anti-dilutive. For both the three and nine months ended September 30, 2019, 0.2 million of restricted stock units were excluded from each calculation of weighted average dilutive common shares as the effect would have been anti-dilutive. |
DISPOSITION (Tables)
DISPOSITION (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
DISPOSITION | |
Schedule of information related to disposition of business | January 10, 2020 (in millions) Total consideration (1) $ 43.8 Net carrying value of assets and liabilities (including other comprehensive income) 26.8 Allocation of goodwill 3.2 Strategic transaction costs 5.8 Pre-tax gain on sale of business, net of strategic transaction costs $ 8.0 (1) Consideration as defined included cash associated with the sold Precima entities, which was $10.8 million. |
DISCONTINUED OPERATIONS (Tables
DISCONTINUED OPERATIONS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
DISCONTINUED OPERATIONS | |
Schedule of financial statement information for discontinued operations | Three Months Ended Nine Months Ended September 30, 2019 September 30, 2019 (in millions) (in millions) Revenue $ — $ 999.6 Cost of operations (exclusive of depreciation and amortization disclosed separately below) 45.1 953.9 Depreciation and other amortization — 29.7 Amortization of purchased intangibles — 43.5 Interest expense (1) — 64.1 Gain on sale of Epsilon (512.2) (512.2) Income before provision for income taxes 467.1 420.6 Provision for income taxes 696.3 682.3 Loss from discontinued operations, net of taxes $ (229.2) $ (261.7) (1) On April 30, 2019, the Company amended its credit agreement, which among other items, provided that upon consummation of the sale of Epsilon, a mandatory payment of $500.0 million of the revolving credit facility was required and all of the Company’s outstanding senior notes was required to be redeemed. As such, for the three and nine months ended September 30, 2019, interest expense has been allocated to discontinued operations on the basis of the Company’s $500.0 million mandatory repayment of its revolving line of credit and $1.9 billion in senior notes outstanding. Three Months Ended Nine Months Ended September 30, 2019 September 30, 2019 (in millions) (in millions) Depreciation and amortization $ — $ 73.2 Capital expenditures $ — $ 55.8 |
CREDIT CARD AND LOAN RECEIVAB_2
CREDIT CARD AND LOAN RECEIVABLES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
CREDIT CARD AND LOAN RECEIVABLES | |
Schedule of components of total credit card and loan receivables | September 30, December 31, 2020 2019 (in millions) Principal receivables $ 14,806.8 $ 18,413.1 Billed and accrued finance charges 730.0 977.3 Other 61.9 72.7 Total credit card and loan receivables 15,598.7 19,463.1 Less: Credit card receivables – restricted for securitization investors 10,536.2 13,504.2 Other credit card and loan receivables $ 5,062.5 $ 5,958.9 |
Schedule of Company's group similar risk characteristics and estimated life | Estimated Life (in months) Group A (Current, risk score - high) 14 Group B (Current, risk score - low) 19 Group C (Delinquent, risk score - high) 17 Group D (Delinquent, risk score - low) 26 |
Schedule of Company's allowance for loan loss | Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in millions) Balance at beginning of period $ 2,096.3 $ 1,010.9 $ 1,171.1 $ 1,038.3 Adoption of ASC 326 (1) — — 644.0 — Provision for loan loss 207.7 297.3 1,113.7 806.8 Change in estimate for uncollectible unpaid interest and fees — — — (10.0) Recoveries 45.5 53.4 170.3 169.9 Principal charge-offs (268.6) (296.1) (1,018.2) (939.5) Balance at end of period $ 2,080.9 $ 1,065.5 $ 2,080.9 $ 1,065.5 (1) Recorded January 1, 2020 through a cumulative-effect adjustment to retained earnings, net of taxes. |
Schedule of aging analysis of total credit card and loan receivables at amortized cost basis | Aging Analysis of Delinquent Amortized Cost 31 to 60 days 61 to 90 days 91 or more days delinquent Total Current Total (in millions) As of September 30, 2020 $ 262.3 $ 185.8 $ 451.7 $ 899.8 $ 14,401.0 $ 15,300.8 As of December 31, 2019 $ 399.1 $ 293.9 $ 698.4 $ 1,391.4 $ 17,656.4 $ 19,047.8 |
Schedule of information on credit card and loan receivables that are considered troubled debt restructurings, which entered into a modification program | Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020 Pre-modification Post-modification Pre-modification Post-modification Number of Outstanding Outstanding Number of Outstanding Outstanding Restructurings Balance Balance Restructurings Balance Balance (Dollars in millions) Troubled debt restructurings – credit card receivables 131,919 $ 170.3 $ 169.0 302,438 $ 439.3 $ 437.6 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019 Pre-modification Post-modification Pre-modification Post-modification Number of Outstanding Outstanding Number of Outstanding Outstanding Restructurings Balance Balance Restructurings Balance Balance (Dollars in millions) Troubled debt restructurings – credit card receivables 65,819 $ 94.1 $ 94.0 194,323 $ 285.1 $ 284.7 The table below summarizes troubled debt restructurings that have defaulted in the specified periods where the default occurred within 12 months of their modification date: Three Months Ended Nine Months Ended September 30, 2020 September 30, 2020 Number of Outstanding Number of Outstanding Restructurings Balance Restructurings Balance (Dollars in millions) Troubled debt restructurings that subsequently defaulted – credit card receivables 28,724 $ 37.8 82,000 $ 113.1 Three Months Ended Nine Months Ended September 30, 2019 September 30, 2019 Number of Outstanding Number of Outstanding Restructurings Balance Restructurings Balance (Dollars in millions) Troubled debt restructurings that subsequently defaulted – credit card receivables 25,815 $ 36.0 105,710 $ 141.3 |
Schedule of composition of obligor credit quality | Amortized Cost Revolving Credit Card and Loan Receivables September 30, 2020 December 31, 2019 Percentage of Percentage of Amortized Amortized Probability of an Account Becoming 91 or More Days Past Amortized Cost Basis Amortized Cost Basis Due or Becoming Charged-off (within the next 12 months) Cost Basis Outstanding Cost Basis Outstanding (in millions, except percentages) No Score $ 178.1 1.2 % $ 298.4 1.6 % 27.1% and higher 1,395.0 9.1 1,648.8 8.7 17.1% - 27.0% 833.5 5.4 1,108.5 5.8 12.6% - 17.0% 888.4 5.8 1,171.7 6.2 3.7% - 12.5% 6,687.0 43.7 8,292.1 43.5 1.9% - 3.6% 2,688.4 17.6 3,375.3 17.7 Lower than 1.9% 2,630.4 17.2 3,153.0 16.5 Total $ 15,300.8 100.0 % $ 19,047.8 100.0 % |
Schedule of securitized credit card receivables, delinquencies and net charge-offs | September 30, December 31, 2020 2019 (in millions) Total credit card receivables – restricted for securitization investors $ 10,536.2 $ 13,504.2 Principal amount of credit card receivables – restricted for securitization investors, 91 days or more past due $ 202.3 $ 321.8 Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in millions) Net charge-offs of securitized principal $ 148.1 $ 206.0 $ 602.7 $ 670.1 |
OTHER INVESTMENTS (Tables)
OTHER INVESTMENTS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
OTHER INVESTMENTS | |
Schedule of principal components of other investments, which are carried at fair value | September 30, 2020 December 31, 2019 Amortized Unrealized Unrealized Amortized Unrealized Unrealized Cost Gains Losses Fair Value Cost Gains Losses Fair Value (in millions) Marketable securities $ 221.3 $ 6.8 $ — $ 228.1 $ 257.2 $ 3.0 $ (0.4) $ 259.8 Total $ 221.3 $ 6.8 $ — $ 228.1 $ 257.2 $ 3.0 $ (0.4) $ 259.8 |
Schedule of unrealized losses and fair value for investments that were in an unrealized loss position, aggregated by investment category and the length of time that individual securities have been in a continuous loss position | December 31, 2019 Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (in millions) Marketable securities $ 18.8 $ (0.2) $ 13.1 $ (0.2) $ 31.9 $ (0.4) Total $ 18.8 $ (0.2) $ 13.1 $ (0.2) $ 31.9 $ (0.4) |
Schedule of securities by contractual maturity date | Amortized Estimated Cost Fair Value (in millions) Due in one year or less $ 43.7 $ 43.7 Due after one year through five years 1.1 1.1 Due after five years through ten years — — Due after ten years 176.5 183.3 Total $ 221.3 $ 228.1 |
REDEMPTION SETTLEMENT ASSETS (T
REDEMPTION SETTLEMENT ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
REDEMPTION SETTLEMENT ASSETS | |
Schedule of redemption settlement assets | September 30, 2020 December 31, 2019 Amortized Unrealized Unrealized Amortized Unrealized Unrealized Cost Gains Losses Fair Value Cost Gains Losses Fair Value (in millions) Restricted cash $ 45.4 $ — $ — $ 45.4 $ 39.3 $ — $ — $ 39.3 Mutual funds 25.4 — — 25.4 25.1 — — 25.1 Corporate bonds 554.6 16.5 (0.2) 570.9 536.0 2.4 (2.0) 536.4 Total $ 625.4 $ 16.5 $ (0.2) $ 641.7 $ 600.4 $ 2.4 $ (2.0) $ 600.8 |
Schedule of unrealized losses and fair value for investments that were in an unrealized loss position, aggregated by investment category and the length of time that individual securities have been in a continuous loss position | September 30, 2020 Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (in millions) Corporate bonds $ 15.3 $ (0.1) $ 9.9 $ (0.1) $ 25.2 $ (0.2) Total $ 15.3 $ (0.1) $ 9.9 $ (0.1) $ 25.2 $ (0.2) December 31, 2019 Less than 12 months 12 Months or Greater Total Unrealized Unrealized Unrealized Fair Value Losses Fair Value Losses Fair Value Losses (in millions) Corporate bonds $ 166.6 $ (1.3) $ 155.1 $ (0.7) $ 321.7 $ (2.0) Total $ 166.6 $ (1.3) $ 155.1 $ (0.7) $ 321.7 $ (2.0) |
Schedule of redemption settlement assets by contractual maturity date | Amortized Estimated Cost Fair Value (in millions) Due in one year or less $ 114.7 $ 115.3 Due after one year through five years 453.5 469.1 Due after five year through ten years 11.8 11.9 Total $ 580.0 $ 596.3 |
LEASES (Tables)
LEASES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
LEASES | |
Schedule of lease cost | Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in millions) Operating lease cost $ 10.0 $ 10.2 $ 30.2 $ 30.9 Short-term lease cost 0.2 0.7 0.7 1.9 Variable lease cost 1.3 2.0 4.4 5.6 Total $ 11.5 $ 12.9 $ 35.3 $ 38.4 Other information related to leases was as follows: September 30, September 30, 2020 2019 Weighted-average remaining lease term (in years): Operating leases 11.0 11.5 Weighted-average discount rate: Operating leases 5.2% 5.2% Supplemental cash flow information related to leases was as follows: Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in millions) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 10.0 $ 9.0 $ 35.7 $ 34.6 Right of use assets obtained in exchange for lease obligations: Operating leases $ 0.5 $ 4.0 $ 3.3 $ 13.8 |
Schedule of maturities of lease liabilities | Operating Year Leases (in millions) 2020 (excluding the nine months ended September 30, 2020) $ 6.6 2021 40.3 2022 39.2 2023 37.4 2024 35.3 Thereafter 240.0 Total undiscounted lease liabilities 398.8 Less: Amount representing interest (101.1) Total present value of minimum lease payments $ 297.7 Amounts recognized in the September 30, 2020 consolidated balance sheet: Current operating lease liabilities $ 21.9 Long-term operating lease liabilities 275.8 Total $ 297.7 |
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
INTANGIBLE ASSETS AND GOODWILL | |
Schedule of intangible assets | September 30, 2020 Gross Accumulated Assets Amortization Net Amortization Life and Method (in millions) Finite Lived Assets Customer contracts and lists $ 339.9 $ (327.7) $ 12.2 7 years—straight line Premium on purchased credit card portfolios 176.4 (105.7) 70.7 1-13 years—straight line Collector database 52.4 (51.9) 0.5 5 years—straight line Tradenames 33.3 (28.6) 4.7 8-15 years—straight line $ 602.0 $ (513.9) $ 88.1 Indefinite Lived Assets Tradename 1.2 — 1.2 Indefinite life Total intangible assets $ 603.2 $ (513.9) $ 89.3 December 31, 2019 Gross Accumulated Assets Amortization Net Amortization Life and Method (in millions) Finite Lived Assets Customer contracts and lists $ 325.1 $ (278.7) $ 46.4 7 years—straight line Premium on purchased credit card portfolios 192.6 (93.2) 99.4 1-13 years—straight line Collector database 53.9 (52.9) 1.0 5 years—straight line Tradenames 31.8 (26.5) 5.3 8-15 years—straight line $ 603.4 $ (451.3) $ 152.1 Indefinite Lived Assets Tradename 1.2 — 1.2 Indefinite life Total intangible assets $ 604.6 $ (451.3) $ 153.3 |
Schedule of estimated amortization expense related to intangible assets | For the Years Ending December 31, (in millions) 2020 (excluding the nine months ended September 30, 2020) $ 18.9 2021 22.3 2022 17.5 2023 12.9 2024 10.7 Thereafter 5.8 |
Schedule of changes in carrying amount of goodwill | LoyaltyOne Card Services Total (in millions) Balance at January 1, 2020 $ 690.9 $ 264.0 $ 954.9 Goodwill related to sale of Precima (3.2) — (3.2) Effects of foreign currency translation 17.7 — 17.7 Balance at September 30, 2020 $ 705.4 $ 264.0 $ 969.4 |
RESTRUCTURING AND OTHER CHARG_2
RESTRUCTURING AND OTHER CHARGES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
RESTRUCTURING AND OTHER CHARGES | |
Schedule of restructuring and other charges incurred by reportable segment | Termination Asset Lease Other Three Months Ended September 30, 2019 Benefits Impairments Termination Costs Exit Costs Total (in millions) Corporate/Other $ 3.3 $ — $ 6.8 $ 0.7 $ 10.8 LoyaltyOne 8.1 33.5 0.2 0.2 42.0 Card Services — 0.2 1.9 — 2.1 Total $ 11.4 $ 33.7 $ 8.9 $ 0.9 $ 54.9 Termination Asset Lease Other Nine Months Ended September 30, 2020 Benefits Impairments Termination Costs Exit Costs Total (in millions) Corporate/Other $ — $ — $ — $ — $ — LoyaltyOne 0.1 — — — 0.1 Card Services (7.8) — — — (7.8) Total $ (7.7) $ — $ — $ — $ (7.7) Termination Asset Lease Other Nine Months Ended September 30, 2019 Benefits Impairments Termination Costs Exit Costs Total (in millions) Corporate/Other $ 14.5 $ 11.1 $ 6.8 $ 0.7 $ 33.1 LoyaltyOne 9.4 38.0 0.2 2.3 49.9 Card Services — 0.2 1.9 — 2.1 Total $ 23.9 $ 49.3 $ 8.9 $ 3.0 $ 85.1 |
Schedule of liability and activities related to restructuring and other charges | Termination Asset Lease Other Three Months Ended September 30, 2020 Benefits Impairments Termination Costs Exit Costs Total (in millions) Liability as of June 30, 2020 $ 9.3 $ — $ — $ — $ 9.3 Adjustments for non-cash charges — — — — — Cash payments (4.3) — — — (4.3) Liability as of September 30, 2020 $ 5.0 $ — $ — $ — $ 5.0 Termination Asset Lease Other Nine Months Ended September 30, 2020 Benefits Impairments Termination Costs Exit Costs Total (in millions) Liability as of January 1, 2020 $ 34.7 $ — $ — $ 0.1 $ 34.8 Adjustments for non-cash charges (7.7) — — — (7.7) Cash payments (22.0) — — (0.1) (22.1) Liability as of September 30, 2020 $ 5.0 $ — $ — $ — $ 5.0 |
DEBT (Tables)
DEBT (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
DEBT | |
Schedule of debt | September 30, December 31, Description 2020 2019 Maturity Interest Rate (Dollars in millions) Long-term and other debt: 2017 revolving line of credit $ — $ — December 2022 (1) 2017 term loans 1,484.3 2,028.8 December 2022 (2) BrandLoyalty credit agreement — — April 2023 (3) Senior notes due 2024 850.0 850.0 December 2024 4.750% Senior notes due 2026 500.0 — January 2026 7.000% Total long-term and other debt 2,834.3 2,878.8 Less: Unamortized debt issuance costs 31.1 28.9 Less: Current portion 76.0 101.4 Long-term portion $ 2,727.2 $ 2,748.5 Deposits: Certificates of deposit $ 6,257.4 $ 8,585.2 Various – Oct 2020 to Sep 2025 0.60% to 4.00% Money market deposits 3,905.6 3,589.8 Non-maturity (4) Total deposits 10,163.0 12,175.0 Less: Unamortized debt issuance costs 14.5 23.3 Less: Current portion 6,753.5 6,942.4 Long-term portion $ 3,395.0 $ 5,209.3 Non-recourse borrowings of consolidated securitization entities: Fixed rate asset-backed term note securities $ 4,016.0 $ 4,891.0 Various – Oct 2020 to Sep 2022 2.03% to 3.95% Conduit asset-backed securities 335.0 2,405.0 Various – Apr 2022 to Oct 2022 (5) Total non-recourse borrowings of consolidated securitization entities 4,351.0 7,296.0 Less: Unamortized debt issuance costs 6.7 12.0 Less: Current portion 2,120.4 3,030.8 Long-term portion $ 2,223.9 $ 4,253.2 (1) The interest rate is based upon LIBOR plus an applicable margin. (2) The interest rate is based upon LIBOR plus an applicable margin. The weighted average interest rate for the term loans was 1.90% and 3.30% at September 30, 2020 and December 31, 2019, respectively. (3) The interest rate is based upon the Euro Interbank Offered Rate plus an applicable margin. (4) The interest rates are based on the Federal Funds rate plus an applicable margin. At September 30, 2020, the interest rates ranged from 0.34% to 3.50% . At December 31, 2019, the interest rates ranged from 1.84% to 3.50% . (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 September 30, 2020, the interest rates ranged from 1.40% to 1.95% . At December 31, 2019, the interest rates ranged from 2.79% to 2.96% . |
DERIVATIVE INSTRUMENTS (Tables)
DERIVATIVE INSTRUMENTS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
DERIVATIVE INSTRUMENTS | |
Schedule of fair value of derivative instruments | September 30, 2020 Notional Amount Fair Value Balance Sheet Location Maturity (in millions) Designated as hedging instruments: Foreign currency exchange hedges $ 47.8 $ 1.4 Other current assets October 2020 - September 2021 Foreign currency exchange hedges $ 28.5 $ 1.4 Other current liabilities October 2020 - July 2021 Not designated as hedging instruments: Foreign currency exchange forward contracts $ 10.1 $ 0.2 Other current assets October 2020 - September 2021 Foreign currency exchange forward contracts $ 2.2 $ 0.1 Other current liabilities October 2020 - September 2021 December 31, 2019 Notional Amount Fair Value Balance Sheet Location Maturity (in millions) Designated as hedging instruments: Foreign currency exchange hedges $ 5.5 $ 0.2 Other current assets January 2020 to February 2020 Foreign currency exchange hedges $ 7.8 $ 0.3 Other current liabilities February 2020 to July 2020 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
STOCKHOLDERS' EQUITY | |
Schedule of stock-based compensation expense | Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 (in millions) Cost of operations $ 3.4 $ 3.1 $ 9.4 $ 16.2 General and administrative 1.9 (0.1) 6.8 8.4 Total $ 5.3 $ 3.0 $ 16.2 $ 24.6 |
ACCUMULATED OTHER COMPREHENSI_2
ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
ACCUMULATED OTHER COMPREHENSIVE LOSS. | |
Schedule of changes in each component of accumulated comprehensive income (loss), net of tax effects | Net Net Unrealized Net Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Three Months Ended September 30, 2020 on Securities Flow Hedges Investment Hedge Adjustments (1) Loss (in millions) Balance at June 30, 2020 $ 17.5 $ (0.6) $ (7.5) $ (96.9) $ (87.5) Changes in other comprehensive income (loss) 4.0 0.5 — 35.3 39.8 Balance at September 30, 2020 $ 21.5 $ (0.1) $ (7.5) $ (61.6) $ (47.7) Net Net Unrealized Net Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Three Months Ended September 30, 2019 on Securities Flow Hedges Investment Hedge Adjustments (1) Loss (in millions) Balance at June 30, 2019 $ 3.7 $ (0.4) $ (7.5) $ (117.5) $ (121.7) Recognition resulting from the sale of Epsilon's foreign subsidiaries — — — 26.8 26.8 Changes in other comprehensive income (loss) (0.2) 0.7 — (27.6) (27.1) Balance at September 30, 2019 $ 3.5 $ 0.3 $ (7.5) $ (118.3) $ (122.0) Net Net Unrealized Net Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Nine Months Ended September 30, 2020 on Securities Flow Hedges Investment Hedge Adjustments (1) Loss (in millions) Balance at December 31, 2019 $ 2.5 $ (0.1) $ (7.5) $ (94.8) $ (99.9) Recognition resulting from the sale of Precima's foreign subsidiaries — — — 3.8 3.8 Changes in other comprehensive income (loss) 19.0 — — 29.4 48.4 Balance at September 30, 2020 $ 21.5 $ (0.1) $ (7.5) $ (61.6) $ (47.7) Net Net Unrealized Net Unrealized Foreign Accumulated Unrealized Gains (Losses) Gains (Losses) Currency Other Gains (Losses) on Cash on Net Translation Comprehensive Nine Months Ended September 30, 2019 on Securities Flow Hedges Investment Hedge Adjustments (1) Loss (in millions) Balance at December 31, 2018 $ (10.7) $ (0.2) $ (12.4) $ (114.8) $ (138.1) Recognition resulting from the sale of Epsilon's foreign subsidiaries — — — 26.8 26.8 Changes in other comprehensive income (loss) 14.2 0.5 4.9 (30.3) (10.7) Balance at September 30, 2019 $ 3.5 $ 0.3 $ (7.5) $ (118.3) $ (122.0) (1) Primarily related to the impact of changes in the Canadian dollar and Euro foreign currency exchange rates. |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
FAIR VALUE MEASUREMENTS | |
Schedule of estimated fair value of Company's financial instruments | September 30, 2020 December 31, 2019 Carrying Fair Carrying Fair Amount Value Amount Value (in millions) Financial assets Credit card and loan receivables, net $ 13,517.8 $ 16,081.6 $ 18,292.0 $ 19,126.0 Credit card receivables held for sale — — 408.0 436.2 Redemption settlement assets, restricted 641.7 641.7 600.8 600.8 Other investments 228.1 228.1 259.8 259.8 Derivative instruments 1.6 1.6 0.2 0.2 Financial liabilities Derivative instruments 1.5 1.5 0.3 0.3 Deposits 10,148.5 10,404.4 12,151.7 12,303.6 Non-recourse borrowings of consolidated securitization entities 4,344.3 4,427.2 7,284.0 7,333.6 Long-term and other debt 2,803.2 2,778.7 2,849.9 2,878.8 |
Schedule of assets and liabilities carried at fair value measured on recurring basis | Fair Value Measurements at September 30, 2020 Using Balance at September 30, 2020 Level 1 Level 2 Level 3 (in millions) Mutual funds (1) $ 25.4 $ 25.4 $ — $ — Corporate bonds (1) 570.9 — 570.9 — Marketable securities (2) 228.1 34.1 194.0 — Derivative instruments (3) 1.6 — 1.6 — Total assets measured at fair value $ 826.0 $ 59.5 $ 766.5 $ — Derivative instruments (3) $ 1.5 $ — $ 1.5 $ — Total liabilities measured at fair value $ 1.5 $ — $ 1.5 $ — Fair Value Measurements at December 31, 2019 Using Balance at December 31, 2019 Level 1 Level 2 Level 3 (in millions) Mutual funds (1) $ 25.1 $ 25.1 $ — $ — Corporate bonds (1) 536.4 — 536.4 — Marketable securities (2) 259.8 26.2 233.6 — Derivative instruments (3) 0.2 — 0.2 — Total assets measured at fair value $ 821.5 $ 51.3 $ 770.2 $ — Derivative instruments (3) $ 0.3 $ — $ 0.3 $ — Total liabilities measured at fair value $ 0.3 $ — $ 0.3 $ — (1) Amounts are included in redemption settlement assets in the unaudited condensed consolidated balance sheets. (2) Amounts are included in other current assets and other non-current assets in the unaudited condensed consolidated balance sheets. (3) Amounts are included in other current assets and other current liabilities in the unaudited condensed consolidated balance sheets. |
Schedule of assets and liabilities disclosed but not carried at fair value | Fair Value Measurements at September 30, 2020 Total Level 1 Level 2 Level 3 (in millions) Financial assets: Credit card and loan receivables, net $ 16,081.6 $ — $ — $ 16,081.6 Total $ 16,081.6 $ — $ — $ 16,081.6 Financial liabilities: Deposits $ 10,404.4 $ — $ 10,404.4 $ — Non-recourse borrowings of consolidated securitization entities 4,427.2 — 4,427.2 — Long-term and other debt 2,778.7 — 2,778.7 — Total $ 17,610.3 $ — $ 17,610.3 $ — Fair Value Measurements at December 31, 2019 Total Level 1 Level 2 Level 3 (in millions) Financial assets: Credit card and loan receivables, net $ 19,126.0 $ — $ — $ 19,126.0 Credit card receivables held for sale 436.2 — — 436.2 Total $ 19,562.2 $ — $ — $ 19,562.2 Financial liabilities: Deposits $ 12,303.6 $ — $ 12,303.6 $ — Non-recourse borrowings of consolidated securitization entities 7,333.6 — 7,333.6 — Long-term and other debt 2,878.8 — 2,878.8 — Total $ 22,516.0 $ — $ 22,516.0 $ — |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
SEGMENT INFORMATION | |
Schedule of segment information | Corporate/ Three Months Ended September 30, 2020 LoyaltyOne Card Services Other Total (in millions) Revenues $ 184.8 $ 865.7 $ — $ 1,050.5 Income (loss) before income taxes $ 18.3 $ 212.1 $ (54.5) $ 175.9 Interest expense, net (0.2) 90.4 24.9 115.1 Operating income (loss) 18.1 302.5 (29.6) 291.0 Depreciation and amortization 20.3 19.2 0.6 40.1 Stock compensation expense 1.6 1.8 1.9 5.3 Strategic transaction costs 0.1 — 3.4 3.5 Adjusted EBITDA (1) 40.1 323.5 (23.7) 339.9 Less: Securitization funding costs — 37.5 — 37.5 Less: Interest expense on deposits — 52.9 — 52.9 Adjusted EBITDA, net (1) $ 40.1 $ 233.1 $ (23.7) $ 249.5 Corporate/ Three Months Ended September 30, 2019 LoyaltyOne Card Services Other Total (in millions) Revenues $ 245.5 $ 1,192.0 $ 0.1 $ 1,437.6 (Loss) income before income taxes $ (5.2) $ 300.0 $ (130.6) $ 164.2 Interest expense, net 0.8 113.9 25.3 140.0 Operating (loss) income (4.4) 413.9 (105.3) 304.2 Depreciation and amortization 19.8 23.5 1.6 44.9 Stock compensation expense 0.7 2.4 (0.1) 3.0 Strategic transaction costs 0.1 — 2.2 2.3 Restructuring and other charges 42.0 2.1 10.8 54.9 Loss on extinguishment of debt — — 71.9 71.9 Adjusted EBITDA (1) 58.2 441.9 (18.9) 481.2 Less: Securitization funding costs — 51.4 — 51.4 Less: Interest expense on deposits — 62.5 — 62.5 Adjusted EBITDA, net (1) $ 58.2 $ 328.0 $ (18.9) $ 367.3 Corporate/ Nine Months Ended September 30, 2020 LoyaltyOne Card Services Other Total (in millions) Revenues $ 533.9 $ 2,877.5 $ 0.1 $ 3,411.5 Income (loss) before income taxes $ 88.9 $ 314.5 $ (155.1) $ 248.3 Interest expense, net (0.5) 302.2 79.6 381.3 Operating income (loss) 88.4 616.7 (75.5) 629.6 Depreciation and amortization 56.9 61.0 2.4 120.3 Stock compensation expense 4.1 5.3 6.8 16.2 Gain on sale of business, net of strategic transaction costs (8.0) — — (8.0) Strategic transaction costs 0.3 — 6.5 6.8 Asset impairments — 34.2 — 34.2 Restructuring and other charges 0.1 (7.8) — (7.7) Adjusted EBITDA (1) 141.8 709.4 (59.8) 791.4 Less: Securitization funding costs — 130.1 — 130.1 Less: Interest expense on deposits — 172.1 — 172.1 Adjusted EBITDA, net (1) $ 141.8 $ 407.2 $ (59.8) $ 489.2 Corporate/ Nine Months Ended September 30, 2019 LoyaltyOne Card Services Other Total (in millions) Revenues $ 700.7 $ 3,419.3 $ 0.3 $ 4,120.3 Income (loss) before income taxes $ 45.2 $ 829.8 $ (304.0) $ 571.0 Interest expense, net 2.7 324.7 100.0 427.4 Operating income (loss) 47.9 1,154.5 (204.0) 998.4 Depreciation and amortization 59.7 68.5 5.0 133.2 Stock compensation expense 6.5 9.7 8.4 24.6 Strategic transaction costs 0.3 — 4.7 5.0 Restructuring and other charges 49.9 2.1 33.1 85.1 Loss on extinguishment of debt — — 71.9 71.9 Adjusted EBITDA (1) 164.3 1,234.8 (80.9) 1,318.2 Less: Securitization funding costs — 160.3 — 160.3 Less: Interest expense on deposits — 164.4 — 164.4 Adjusted EBITDA, net (1) $ 164.3 $ 910.1 $ (80.9) $ 993.5 (1) Adjusted EBITDA is a non-GAAP financial measure equal to income from continuing operations, the most directly comparable financial measure based on GAAP plus stock compensation expense, provision for income taxes, interest expense, net, depreciation and other amortization and amortization of purchased intangibles. Adjusted EBITDA also excludes the gain on the sale of Precima, strategic transaction costs, which represent costs for professional services associated with strategic initiatives, asset impairments, restructuring and other charges, and loss related to the Company’s extinguishment of debt in July 2019. Adjusted EBITDA, net is also a non-GAAP financial measure equal to adjusted EBITDA less securitization funding costs and interest expense on deposits. Adjusted EBITDA and adjusted EBITDA, net are presented in accordance with ASC 280 as they are the primary performance metrics utilized to assess performance of the segments. |
SUPPLEMENTAL CASH FLOW INFORM_2
SUPPLEMENTAL CASH FLOW INFORMATION (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
SUPPLEMENTAL CASH FLOW INFORMATION | |
Schedule of reconciliation of cash and cash equivalents | September 30, September 30, 2020 2019 (in millions) Cash and cash equivalents $ 3,078.4 $ 4,512.5 Restricted cash included within other current assets (1) 627.1 493.8 Restricted cash included within redemption settlement assets, restricted (2) 45.4 45.4 Total cash, cash equivalents and restricted cash $ 3,750.9 $ 5,051.7 (1) Includes cash restricted for principal and interest repayments of non-recourse borrowings of consolidated securitized debt and other restricted cash within other current assets. At September 30, 2020 and 2019, restricted cash included $603.1 million and $460.5 million, respectively, in principal accumulation for the repayment of non-recourse borrowings of consolidated securitized debt that matured in October 2020 and 2019, respectively. (2) See Note 9, “Redemption Settlement Assets,” for additional information regarding the nature of restrictions on redemption settlement assets. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - 9 months ended Sep. 30, 2020 | segment | item |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||
Number of Reportable Segments | 2 | 2 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Recently Adopted Accounting Standards (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Jun. 30, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Dec. 31, 2018 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Allowance for loan loss | $ 2,080.9 | $ 2,096.3 | $ 1,171.1 | $ 1,065.5 | $ 1,010.9 | $ 1,038.3 |
ASU 2016-13 | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Allowance for loan loss | 644 | |||||
ASU 2016-13 | Adjustment | ||||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||||
Allowance for loan loss | $ 644 |
REVENUE (Details)
REVENUE (Details) $ in Millions | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2020segment | Sep. 30, 2020item | Sep. 30, 2019USD ($) | |
Disaggregation of revenue | ||||||
Number of segments | 2 | 2 | ||||
Revenue from contracts with customers | $ 134.5 | $ 198.6 | $ 418.2 | $ 597.8 | ||
Finance charges, net | 912.7 | 1,235.8 | 2,983.7 | 3,513.2 | ||
Investment income | 3.3 | 3.2 | 9.6 | 9.3 | ||
Total revenue | 1,050.5 | 1,437.6 | 3,411.5 | 4,120.3 | ||
Coalition loyalty program | ||||||
Disaggregation of revenue | ||||||
Revenue from contracts with customers | 63 | 72 | 195.9 | 214.8 | ||
Short-term loyalty programs | ||||||
Disaggregation of revenue | ||||||
Revenue from contracts with customers | 117.4 | 144.2 | 322.5 | 406.9 | ||
Servicing fees, net | ||||||
Disaggregation of revenue | ||||||
Revenue from contracts with customers | (47) | (43.8) | (106.2) | (93.9) | ||
Other | ||||||
Disaggregation of revenue | ||||||
Revenue from contracts with customers | 1.1 | 26.2 | 6 | 70 | ||
United States | ||||||
Disaggregation of revenue | ||||||
Total revenue | 869 | 1,204.4 | 2,887.2 | 3,447.8 | ||
Canada | ||||||
Disaggregation of revenue | ||||||
Total revenue | 70.3 | 88.9 | 214.1 | 263.3 | ||
Europe, Middle East and Africa | ||||||
Disaggregation of revenue | ||||||
Total revenue | 76.9 | 77 | 196.2 | 276 | ||
Asia Pacific | ||||||
Disaggregation of revenue | ||||||
Total revenue | 12.6 | 40 | 63 | 81.6 | ||
Other | ||||||
Disaggregation of revenue | ||||||
Total revenue | 21.7 | 27.3 | 51 | 51.6 | ||
Operating segment | LoyaltyOne | ||||||
Disaggregation of revenue | ||||||
Revenue from contracts with customers | 181.5 | 242.3 | 524.3 | 691.4 | ||
Investment income | 3.3 | 3.2 | 9.6 | 9.3 | ||
Total revenue | 184.8 | 245.5 | 533.9 | 700.7 | ||
Operating segment | LoyaltyOne | Coalition loyalty program | ||||||
Disaggregation of revenue | ||||||
Revenue from contracts with customers | 63 | 72 | 195.9 | 214.8 | ||
Operating segment | LoyaltyOne | Short-term loyalty programs | ||||||
Disaggregation of revenue | ||||||
Revenue from contracts with customers | 117.4 | 144.2 | 322.5 | 406.9 | ||
Operating segment | LoyaltyOne | Other | ||||||
Disaggregation of revenue | ||||||
Revenue from contracts with customers | 1.1 | 26.1 | 5.9 | 69.7 | ||
Operating segment | LoyaltyOne | United States | ||||||
Disaggregation of revenue | ||||||
Total revenue | 3.3 | 12.3 | 9.6 | 28.2 | ||
Operating segment | LoyaltyOne | Canada | ||||||
Disaggregation of revenue | ||||||
Total revenue | 70.3 | 88.9 | 214.1 | 263.3 | ||
Operating segment | LoyaltyOne | Europe, Middle East and Africa | ||||||
Disaggregation of revenue | ||||||
Total revenue | 76.9 | 77 | 196.2 | 276 | ||
Operating segment | LoyaltyOne | Asia Pacific | ||||||
Disaggregation of revenue | ||||||
Total revenue | 12.6 | 40 | 63 | 81.6 | ||
Operating segment | LoyaltyOne | Other | ||||||
Disaggregation of revenue | ||||||
Total revenue | 21.7 | 27.3 | 51 | 51.6 | ||
Operating segment | Card Services | ||||||
Disaggregation of revenue | ||||||
Revenue from contracts with customers | (47) | (43.8) | (106.2) | (93.9) | ||
Finance charges, net | 912.7 | 1,235.8 | 2,983.7 | 3,513.2 | ||
Total revenue | 865.7 | 1,192 | 2,877.5 | 3,419.3 | ||
Operating segment | Card Services | Servicing fees, net | ||||||
Disaggregation of revenue | ||||||
Revenue from contracts with customers | (47) | (43.8) | (106.2) | (93.9) | ||
Operating segment | Card Services | United States | ||||||
Disaggregation of revenue | ||||||
Total revenue | $ 865.7 | 1,192 | 2,877.5 | 3,419.3 | ||
Corporate/Other | ||||||
Disaggregation of revenue | ||||||
Revenue from contracts with customers | 0.1 | 0.1 | 0.3 | |||
Total revenue | 0.1 | 0.1 | 0.3 | |||
Corporate/Other | Other | ||||||
Disaggregation of revenue | ||||||
Revenue from contracts with customers | 0.1 | 0.1 | 0.3 | |||
Corporate/Other | United States | ||||||
Disaggregation of revenue | ||||||
Total revenue | $ 0.1 | $ 0.1 | $ 0.3 |
REVENUE - Contract Assets and L
REVENUE - Contract Assets and Liabilities (Details) - USD ($) $ in Millions | 9 Months Ended | ||
Sep. 30, 2020 | Jan. 01, 2020 | Dec. 31, 2019 | |
Change in Contract with Customer, Liability | |||
Deferred revenue | $ 937.1 | $ 922 | |
Cash proceeds | 331.4 | ||
Revenue recognized | (294.4) | ||
Other | 0.5 | ||
Effects of foreign currency translation | (22.4) | ||
Amounts recognized in the consolidated balance sheets: | |||
Deferred revenue (current) | 835.7 | 807.9 | |
Deferred revenue (non-current) | $ 101.4 | 114.1 | |
Period for which interest and fee income accrue until balance, interest and fees paid or charged off | 180 days | ||
LoyaltyOne | Other current liabilities | |||
Change in Contract with Customer, Liability | |||
Deferred revenue | $ 95.6 | $ 122.8 | |
Revenue recognized | (234.9) | ||
Service | |||
Change in Contract with Customer, Liability | |||
Deferred revenue | 235.7 | 258.6 | |
Cash proceeds | 124.7 | ||
Revenue recognized | (140.8) | ||
Effects of foreign currency translation | (6.8) | ||
Amounts recognized in the consolidated balance sheets: | |||
Deferred revenue (current) | 134.3 | ||
Deferred revenue (non-current) | 101.4 | ||
Redemption | |||
Change in Contract with Customer, Liability | |||
Deferred revenue | 701.4 | 663.4 | |
Cash proceeds | 206.7 | ||
Revenue recognized | (153.6) | ||
Other | 0.5 | ||
Effects of foreign currency translation | (15.6) | ||
Amounts recognized in the consolidated balance sheets: | |||
Deferred revenue (current) | 701.4 | ||
Card Services | |||
Amounts recognized in the consolidated balance sheets: | |||
Unamortized contract costs | 332.3 | $ 406.8 | |
Impairment of contract costs | $ 31.1 |
REVENUE - Performance Obligatio
REVENUE - Performance Obligation (Details) - LoyaltyOne $ in Millions | Sep. 30, 2020USD ($) |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-10-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | |
Revenue, expected timing of satisfaction of remaining performance | 3 months |
Revenue, remaining performance obligation | $ 44.2 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | |
Revenue, expected timing of satisfaction of remaining performance | 12 months |
Revenue, remaining performance obligation | $ 112.4 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | |
Revenue, expected timing of satisfaction of remaining performance | 12 months |
Revenue, remaining performance obligation | $ 61.3 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | |
Revenue, expected timing of satisfaction of remaining performance | 12 months |
Revenue, remaining performance obligation | $ 17.8 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Millions | Apr. 25, 2019 | Oct. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 |
Numerator: | ||||||
Income from continuing operations | $ 133.3 | $ 121.6 | $ 201.7 | $ 442.2 | ||
Less: Dividends declared on preferred stock | 0.9 | 2.8 | ||||
Less: Allocation of undistributed earnings (1) | 5.8 | |||||
Income from continuing operations - basic | 133.3 | 120.7 | 201.7 | 433.6 | ||
Loss from discontinued operations, net of taxes | (229.2) | (261.7) | ||||
Net income (loss) - basic | $ 133.3 | $ (108.5) | $ 201.7 | $ 171.9 | ||
Weighted average shares, basic | 47,700,000 | 48,800,000 | 47,700,000 | 51,100,000 | ||
Basic income (loss) attributable to common stockholders per share: | ||||||
Income from continuing operations (in dollars per share) | $ 2.79 | $ 2.47 | $ 4.23 | $ 8.49 | ||
Loss from discontinued operations (in dollars per share) | (4.69) | (5.12) | ||||
Net income (loss) per share (in dollars per share) | $ 2.79 | $ (2.22) | $ 4.23 | $ 3.37 | ||
Diluted income per share: | ||||||
Income from continuing operations | $ 133.3 | $ 121.6 | $ 201.7 | $ 442.2 | ||
Loss from discontinued operations, net of taxes | (229.2) | (261.7) | ||||
Net income (loss) | $ 133.3 | $ (107.6) | $ 201.7 | $ 180.5 | ||
Weighted average effect of dilutive securities: | ||||||
Shares from assumed conversion of preferred stock (in shares) | 1,500,000 | 900,000 | ||||
Net effect of dilutive stock options and unvested restricted stock (in shares) | 100,000 | 100,000 | 100,000 | |||
Denominator for diluted calculations (in shares) | 47,800,000 | 50,400,000 | 47,700,000 | 52,100,000 | ||
Diluted income (loss) attributable to common stockholders per share: | ||||||
Income from continuing operations (in dollars per share) | $ 2.79 | $ 2.41 | $ 4.23 | $ 8.50 | ||
Loss from discontinued operations (in dollars per share) | (4.54) | (5.03) | ||||
Net income (loss) per share (in dollars per share) | $ 2.79 | $ (2.13) | $ 4.23 | $ 3.47 | ||
Restricted stock units | ||||||
Weighted average effect of dilutive securities: | ||||||
Anti-dilutive shares excluded from the calculation of net income per share (in shares) | 300,000 | 200,000 | 300,000 | 200,000 | ||
Value Act Holdings, L.P. | Series A Non-Voting Convertible Preferred Stock | ||||||
Diluted income (loss) attributable to common stockholders per share: | ||||||
Conversion of stock, shares converted | 150,000 | |||||
Conversion of stock, shares issued | 150,000 | |||||
Value Act Holdings, L.P. | Common Stock | ||||||
Diluted income (loss) attributable to common stockholders per share: | ||||||
Conversion of stock, shares converted | 1,500,000 |
DISPOSITION (Details)
DISPOSITION (Details) $ in Millions | Jan. 10, 2020USD ($)item | Sep. 30, 2020USD ($) |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Pre-tax gain on sale of business, net of strategic transaction costs | $ 8 | |
Disposal Group, Proceeds | 5 | |
posal Group, Estimated | $ 1.5 | |
Disposal Group, Disposed of by Sale, Not Discontinued Operations | Precima | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Total consideration | $ 43.8 | |
Contingent consideration | $ 10 | |
Number of earnout determination dates | item | 2 | |
Net carrying value of assets and liabilities (including other comprehensive income) | $ 26.8 | |
Allocation of goodwill | 3.2 | |
Strategic transaction costs | 5.8 | |
Pre-tax gain on sale of business, net of strategic transaction costs | 8 | |
Cash associated with Precima, included in total consideration | $ 10.8 |
DISCONTINUED OPERATIONS (Detail
DISCONTINUED OPERATIONS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2019 | Apr. 30, 2019 | |
Disposal Group, Including Discontinued Operation, Additional Disclosures | |||
Mandatory payment per credit agreement | $ 500 | ||
Senior Notes | |||
Disposal Group, Including Discontinued Operation, Additional Disclosures | |||
Long-term Debt | $ 1,900 | ||
Discontinued Operations, Held-for-sale | |||
Disposal Group, Including Discontinued Operation, Income Statement Disclosures | |||
Revenue | $ 999.6 | ||
Cost of operations (exclusive of depreciation and amortization) | $ 45.1 | 953.9 | |
Depreciation and other amortization | 29.7 | ||
Amortization of purchased intangibles | 43.5 | ||
Interest expense | 64.1 | ||
Gain on sale of Epsilon | (512.2) | (512.2) | |
Income before provision for income taxes | 467.1 | 420.6 | |
Provision for income taxes | 696.3 | 682.3 | |
Loss from discontinued operations, net of taxes | $ (229.2) | (261.7) | |
Disposal Group, Including Discontinued Operation, Additional Disclosures | |||
Depreciation and amortization | 73.2 | ||
Capital expenditures | $ 55.8 |
CREDIT CARD AND LOAN RECEIVAB_3
CREDIT CARD AND LOAN RECEIVABLES - Allowance for Loan Loss and Delinquencies (Details) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020USD ($)item | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)item | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) | |
Billed and accrued finance charges | $ 730 | $ 730 | $ 977.3 | ||
Total credit card and loan receivables | 15,598.7 | 15,598.7 | 19,463.1 | ||
Less: Credit card receivables - restricted for securitization investors | 10,536.2 | 10,536.2 | 13,504.2 | ||
Other credit card and loan receivables | 5,062.5 | 5,062.5 | 5,958.9 | ||
Unbilled finance charges | $ 221 | $ 221 | |||
Allowance for Loan Loss | |||||
Number of credit card and loan receivable groups | item | 4 | 4 | |||
Payments allocated to future purchase activity | $ 0 | $ 0 | |||
Balance at beginning of period | 2,096.3 | $ 1,010.9 | 1,171.1 | $ 1,038.3 | |
Provision for loan loss | 207.7 | 297.3 | 1,113.7 | 806.8 | |
Change in estimate for uncollectible unpaid interest and fees | (10) | ||||
Recoveries | 45.5 | 53.4 | 170.3 | 169.9 | |
Principal charge-offs | (268.6) | (296.1) | (1,018.2) | (939.5) | |
Balance at end of period | 2,080.9 | 1,065.5 | $ 2,080.9 | 1,065.5 | |
Number of days a loan is contractually past due before resulting in charge-off | 180 days | ||||
Number of days after notification of creditor's bankruptcy or death when an account is charged-off | 60 days | ||||
Actual charge-offs for unpaid interest and fees | 142.3 | 173.6 | $ 571.9 | 586.2 | |
Period for which interest and fee income accrue until balance, interest and fees paid or charged off | 180 days | ||||
Period an account becomes past due before a proprietary collection scoring algorithm automatically scores the risk of an account becoming further delinquent | 30 days | ||||
Amortized cost of receivables balances contractually delinquent: | |||||
Total delinquent | 899.8 | $ 899.8 | 1,391.4 | ||
Modified Credit Card Receivables | |||||
Impaired credit card and loan receivables | $ 480.1 | $ 480.1 | $ 308.7 | ||
Maximum percentage of credit card receivables to total portfolio | 4.00% | 4.00% | 4.00% | ||
Average recorded investment in impaired credit card receivables | $ 459.7 | 289.5 | $ 387.3 | 292.6 | |
Interest income on modified credit card receivables | 8.5 | $ 5.4 | $ 21 | $ 17.1 | |
Maximum | |||||
Allowance for Loan Loss | |||||
Number of days after notification of creditor's bankruptcy or death when an account is charged-off | 180 days | ||||
ASU 2016-13 | |||||
Allowance for Loan Loss | |||||
Balance at beginning of period | $ 644 | ||||
Adjustment | ASU 2016-13 | |||||
Allowance for Loan Loss | |||||
Balance at beginning of period | $ 644 | ||||
Group A (Current, risk score - high) | |||||
Allowance for Loan Loss | |||||
Estimated Life (in months) | 14 months | ||||
Group B (Current, risk score - low) | |||||
Allowance for Loan Loss | |||||
Estimated Life (in months) | 19 months | ||||
Group C (Delinquent, risk score - high) | |||||
Allowance for Loan Loss | |||||
Estimated Life (in months) | 17 months | ||||
Group D (Delinquent, risk score - low) | |||||
Allowance for Loan Loss | |||||
Estimated Life (in months) | 26 months | ||||
Credit Card and Loan Receivables | |||||
Principal receivables | $ 14,806.8 | $ 14,806.8 | $ 18,413.1 | ||
Allowance for Loan Loss | |||||
Allowance For Loan Loss | 13.30% | 13.30% | |||
Modified Credit Card Receivables | |||||
Period for which late fee waivers and payment deferrals were made for credit card receivables | 2 months | ||||
Late fee waivers and payment deferrals | $ 2,000 | $ 2,000 | |||
Extension of certain promotional plans | 89 | $ 89 | |||
Number of short term forbearance programs | item | 2 | ||||
Short-term forbearance programs | 71.2 | $ 71.2 | |||
Deferred forbearance programs | $ 202.9 | $ 202.9 | |||
Period for which certain promotional plans were extended for credit card receivables | 3 months | ||||
Duration of short term program one | 3 months | ||||
Duration of short term program two | 6 months | ||||
Outstanding Balance | $ 36.6 | $ 36.6 | |||
Maximum period of time temporary programs' concessions remain in place | 12 months | ||||
Other | |||||
Principal receivables | $ 61.9 | $ 61.9 | $ 72.7 |
CREDIT CARD AND LOAN RECEIVAB_4
CREDIT CARD AND LOAN RECEIVABLES - Amortized Cost Basis Credit Card and Loan Receivables (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Financing Receivable, Past Due [Line Items] | ||
Total delinquent | $ 899.8 | $ 1,391.4 |
Current | 14,401 | 17,656.4 |
Amortized cost of credit card and loan receivables | 15,300.8 | 19,047.8 |
31 to 60 days delinquent | ||
Financing Receivable, Past Due [Line Items] | ||
Total delinquent | 262.3 | 399.1 |
61 to 90 days delinquent | ||
Financing Receivable, Past Due [Line Items] | ||
Total delinquent | 185.8 | 293.9 |
91 or more days delinquent | ||
Financing Receivable, Past Due [Line Items] | ||
Total delinquent | $ 451.7 | $ 698.4 |
CREDIT CARD AND LOAN RECEIVAB_5
CREDIT CARD AND LOAN RECEIVABLES - Troubled Debt Restructurings (Details) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020USD ($)item | Sep. 30, 2019USD ($)item | Sep. 30, 2020USD ($)item | Sep. 30, 2019USD ($)item | |
Credit Card Receivables | ||||
Modifications related to troubled debt restructurings within credit card and loan receivables | ||||
Number of Restructurings | item | 131,919 | 65,819 | 302,438 | 194,323 |
Pre-modification Outstanding Balance | $ 170.3 | $ 94.1 | $ 439.3 | $ 285.1 |
Post-modification Outstanding Balance | $ 169 | $ 94 | $ 437.6 | $ 284.7 |
Troubled debt restructurings that subsequently defaulted - credit card receivables | ||||
Modifications related to troubled debt restructurings within credit card and loan receivables | ||||
Number of Restructurings | item | 28,724 | 25,815 | 82,000 | 105,710 |
Post-modification Outstanding Balance | $ 37.8 | $ 36 | $ 113.1 | $ 141.3 |
CREDIT CARD AND LOAN RECEIVAB_6
CREDIT CARD AND LOAN RECEIVABLES - Credit Quality on Amortized Cost Basis (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Probability of an Account Becoming 91 or More Days Past Due or Becoming Charged-off (within the next 12 months) | ||
Amortized Cost Basis of Receivables Outstanding | $ 15,300.8 | $ 19,047.8 |
Percentage of Amortized Cost Basis of Receivables Outstanding | 100.00% | 100.00% |
No Score | ||
Probability of an Account Becoming 91 or More Days Past Due or Becoming Charged-off (within the next 12 months) | ||
Amortized Cost Basis of Receivables Outstanding | $ 178.1 | $ 298.4 |
Percentage of Amortized Cost Basis of Receivables Outstanding | 1.20% | 1.60% |
27.1% and higher | ||
Probability of an Account Becoming 91 or More Days Past Due or Becoming Charged-off (within the next 12 months) | ||
Amortized Cost Basis of Receivables Outstanding | $ 1,395 | $ 1,648.8 |
Percentage of Amortized Cost Basis of Receivables Outstanding | 9.10% | 8.70% |
17.1% - 27.0% | ||
Probability of an Account Becoming 91 or More Days Past Due or Becoming Charged-off (within the next 12 months) | ||
Amortized Cost Basis of Receivables Outstanding | $ 833.5 | $ 1,108.5 |
Percentage of Amortized Cost Basis of Receivables Outstanding | 5.40% | 5.80% |
12.6% - 17.0% | ||
Probability of an Account Becoming 91 or More Days Past Due or Becoming Charged-off (within the next 12 months) | ||
Amortized Cost Basis of Receivables Outstanding | $ 888.4 | $ 1,171.7 |
Percentage of Amortized Cost Basis of Receivables Outstanding | 5.80% | 6.20% |
3.7% - 12.5% | ||
Probability of an Account Becoming 91 or More Days Past Due or Becoming Charged-off (within the next 12 months) | ||
Amortized Cost Basis of Receivables Outstanding | $ 6,687 | $ 8,292.1 |
Percentage of Amortized Cost Basis of Receivables Outstanding | 43.70% | 43.50% |
1.9% - 3.6% | ||
Probability of an Account Becoming 91 or More Days Past Due or Becoming Charged-off (within the next 12 months) | ||
Amortized Cost Basis of Receivables Outstanding | $ 2,688.4 | $ 3,375.3 |
Percentage of Amortized Cost Basis of Receivables Outstanding | 17.60% | 17.70% |
Lower than 1.9% | ||
Probability of an Account Becoming 91 or More Days Past Due or Becoming Charged-off (within the next 12 months) | ||
Amortized Cost Basis of Receivables Outstanding | $ 2,630.4 | $ 3,153 |
Percentage of Amortized Cost Basis of Receivables Outstanding | 17.20% | 16.50% |
CREDIT CARD AND LOAN RECEIVAB_7
CREDIT CARD AND LOAN RECEIVABLES - Securitized Credit Card Receivables (Details) $ in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020USD ($)Asset | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)Asset | Sep. 30, 2019USD ($)Asset | Dec. 31, 2019USD ($) | |
Portfolio Held For Sale | ||||||
Carrying value of the credit card portfolios held for sale | $ 0 | $ 0 | $ 0 | $ 408 | ||
Number of loan portfolios transferred to held for sale | Asset | 1 | |||||
Number of credit card portfolios transferred from held for sale to receivables | Asset | 1 | |||||
Carring value of the loan and credit card portfolios transferred out of held for sale to receivables | $ 81.9 | |||||
Carrying value of the loan and credit card portfolios transferred to held for sale | $ 510.3 | |||||
Valuation adjustment on credit card and loan portfolios held for sale | 1.2 | $ 61.2 | $ 7.5 | $ 161.1 | ||
Number of credit card portfolios sold | Asset | 1 | 6 | ||||
Proceeds from sale of credit card portfolios | $ 289.5 | $ 980 | ||||
Gain (loss) on sales of credit card portfolio | $ 20.4 | $ 21.1 | ||||
Portfolio Acquisitions | ||||||
Number of credit card portfolios acquired | Asset | 0 | 4 | ||||
Purchase price of credit card portfolio | $ 924.8 | |||||
Securitized Credit Card Receivables | ||||||
Total credit card receivables - restricted for securitization investors | 10,536.2 | 10,536.2 | $ 10,536.2 | 13,504.2 | ||
Principal amount of credit card receivables - restricted for securitization investors, 91 days or more past due | $ 202.3 | 202.3 | 202.3 | $ 321.8 | ||
Net charge-offs of securitized principal | $ 148.1 | $ 206 | $ 602.7 | $ 670.1 |
INVENTORIES, NET (Details)
INVENTORIES, NET (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
INVENTORIES, NET | ||
Inventories, net | $ 202.8 | $ 218 |
OTHER INVESTMENTS (Details)
OTHER INVESTMENTS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Marketable securities | |||||
Amortized Cost | $ 221.3 | $ 221.3 | $ 257.2 | ||
Unrealized Gains | 6.8 | 6.8 | 3 | ||
Unrealized Losses | (0.4) | ||||
Fair Value | 228.1 | 228.1 | 259.8 | ||
Other Investments, Total | |||||
Amortized Cost | 221.3 | 221.3 | 257.2 | ||
Unrealized Gains | 6.8 | 6.8 | 3 | ||
Unrealized Losses | 0 | 0 | (0.4) | ||
Fair Value | 228.1 | 228.1 | 259.8 | ||
Fair Value, Marketable securities | |||||
Less than 12 months | 18.8 | ||||
12 Months or Greater | 13.1 | ||||
Total | 31.9 | ||||
Unrealized Losses, Marketable securities | |||||
Less than 12 months | (0.2) | ||||
12 Months or Greater | (0.2) | ||||
Total | (0.4) | ||||
Fair Value, Total | |||||
Less than 12 months | 18.8 | ||||
12 Months or Greater | 13.1 | ||||
Total | 31.9 | ||||
Unrealized Losses, Total | |||||
Less than 12 months | (0.2) | ||||
12 Months or Greater | (0.2) | ||||
Total | $ (0.4) | ||||
Amortized Cost | |||||
Due in one year or less | 43.7 | 43.7 | |||
Due after one year through five years | 1.1 | 1.1 | |||
Due after ten years | 176.5 | 176.5 | |||
Total | 221.3 | 221.3 | |||
Fair Value | |||||
Due in one year or less | 43.7 | 43.7 | |||
Due after one year through five years | 1.1 | 1.1 | |||
Due after ten years | 183.3 | 183.3 | |||
Fair Value | 228.1 | 228.1 | |||
Realized gains or losses | |||||
Realized gains or losses from the sale of investment securities | $ 0 | $ 0 | $ 0 | $ 0 |
REDEMPTION SETTLEMENT ASSETS (D
REDEMPTION SETTLEMENT ASSETS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2020 | Dec. 31, 2019 | |
REDEMPTION SETTLEMENT ASSETS | |||
Amortized Cost | $ 625.4 | $ 625.4 | $ 600.4 |
Unrealized Gains | 16.5 | 16.5 | 2.4 |
Unrealized Losses | (0.2) | (0.2) | (2) |
Fair Value | 641.7 | 641.7 | 600.8 |
Fair Value | |||
Less than 12 months | 15.3 | 15.3 | 166.6 |
12 Months or Greater | 9.9 | 9.9 | 155.1 |
Total | 25.2 | 25.2 | 321.7 |
Unrealized Losses | |||
Less than 12 months | (0.1) | (0.1) | (1.3) |
12 Months or Greater | (0.1) | (0.1) | (0.7) |
Total | (0.2) | (0.2) | (2) |
Amortized cost of the redemption settlement assets by contractual maturity | |||
Due in one year or less | 114.7 | 114.7 | |
Due after one year through five years | 453.5 | 453.5 | |
Due after five year through ten years | 11.8 | 11.8 | |
Total | 580 | 580 | |
Estimated fair value of the redemption settlement assets by contractual maturity | |||
Due in one year or less | 115.3 | 115.3 | |
Due after one year through five years | 469.1 | 469.1 | |
Due after five year through ten years | 11.9 | 11.9 | |
Total | 596.3 | 596.3 | |
Realized gains or losses from the sale of investment securities | 0 | 0 | |
Restricted cash | |||
REDEMPTION SETTLEMENT ASSETS | |||
Amortized Cost | 45.4 | 45.4 | 39.3 |
Fair Value | 45.4 | 45.4 | 39.3 |
Mutual funds | |||
REDEMPTION SETTLEMENT ASSETS | |||
Amortized Cost | 25.4 | 25.4 | 25.1 |
Fair Value | 25.4 | 25.4 | 25.1 |
Corporate bonds | |||
REDEMPTION SETTLEMENT ASSETS | |||
Amortized Cost | 554.6 | 554.6 | 536 |
Unrealized Gains | 16.5 | 16.5 | 2.4 |
Unrealized Losses | (0.2) | (0.2) | (2) |
Fair Value | 570.9 | 570.9 | 536.4 |
Fair Value | |||
Less than 12 months | 15.3 | 15.3 | 166.6 |
12 Months or Greater | 9.9 | 9.9 | 155.1 |
Total | 25.2 | 25.2 | 321.7 |
Unrealized Losses | |||
Less than 12 months | (0.1) | (0.1) | (1.3) |
12 Months or Greater | (0.1) | (0.1) | (0.7) |
Total | $ (0.2) | $ (0.2) | $ (2) |
LEASES (Details)
LEASES (Details) | 9 Months Ended |
Sep. 30, 2020 | |
Minimum | |
Lessee, Lease, Description [Line Items] | |
Remaining lease terms | 1 year |
Maximum | |
Lessee, Lease, Description [Line Items] | |
Remaining lease terms | 18 years |
LEASES - Lease expense (Details
LEASES - Lease expense (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Lease expense | ||||
Operating lease cost | $ 10 | $ 10.2 | $ 30.2 | $ 30.9 |
Short-term lease cost | 0.2 | 0.7 | 0.7 | 1.9 |
Variable lease cost | 1.3 | 2 | 4.4 | 5.6 |
Total | $ 11.5 | $ 12.9 | $ 35.3 | $ 38.4 |
Remaining lease term - operating leases | 11 years | 11 years 6 months | 11 years | 11 years 6 months |
Discount rate - operating leases | 5.20% | 5.20% | 5.20% | 5.20% |
Supplemental cash flow information related to leases was as follows: | ||||
Operating cash flows from operating leases | $ 10 | $ 9 | $ 35.7 | $ 34.6 |
Operating leases - Right-of-use assets obtained in exchange for lease obligations | $ 0.5 | $ 4 | $ 3.3 | $ 13.8 |
LEASES - Maturities of lease li
LEASES - Maturities of lease liabilities (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | |
Lease liabilities | ||
2020 (excluding the nine months ended September 30, 2020) | $ 6.6 | |
2021 | 40.3 | |
2022 | 39.2 | |
2023 | 37.4 | |
2024 | 35.3 | |
Thereafter | 240 | |
Total undiscounted lease liabilities | 398.8 | |
Less: Amount representing interest | (101.1) | |
Total present value of minimum lease payments | 297.7 | |
Amounts recognized in the September 30, 2020 consolidated balance sheet: | ||
Current operating lease liabilities | 21.9 | $ 22.6 |
Long-term operating lease liabilities | 275.8 | $ 291.7 |
Total present value of minimum lease payments | 297.7 | |
Asset impairment charge | $ 3.1 |
INTANGIBLE ASSETS AND GOODWIL_2
INTANGIBLE ASSETS AND GOODWILL - Finite Lived Assets and Indefinite Lived Assets (Details) - USD ($) $ in Millions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Schedule of Finite and Indefinite-lived Intangible Assets | ||
Finite lived assets, gross | $ 602 | $ 603.4 |
Accumulated Amortization | (513.9) | (451.3) |
Finite lived assets, net | 88.1 | 152.1 |
Total Intangible Assets | ||
Gross Assets | 603.2 | 604.6 |
Accumulated Amortization | (513.9) | (451.3) |
Net | 89.3 | 153.3 |
Tradenames | ||
Indefinite Lived Assets | ||
Indefinite lived assets | 1.2 | 1.2 |
Customer contracts and lists | ||
Schedule of Finite and Indefinite-lived Intangible Assets | ||
Finite lived assets, gross | 339.9 | 325.1 |
Accumulated Amortization | (327.7) | (278.7) |
Finite lived assets, net | $ 12.2 | $ 46.4 |
Amortization Life and Method | ||
Useful life | 7 years | 7 years |
Total Intangible Assets | ||
Accumulated Amortization | $ (327.7) | $ (278.7) |
Premium on purchased credit card portfolios | ||
Schedule of Finite and Indefinite-lived Intangible Assets | ||
Finite lived assets, gross | 176.4 | 192.6 |
Accumulated Amortization | (105.7) | (93.2) |
Finite lived assets, net | 70.7 | 99.4 |
Total Intangible Assets | ||
Accumulated Amortization | $ (105.7) | $ (93.2) |
Premium on purchased credit card portfolios | Minimum | ||
Amortization Life and Method | ||
Useful life | 1 year | 1 year |
Premium on purchased credit card portfolios | Maximum | ||
Amortization Life and Method | ||
Useful life | 13 years | 13 years |
Collector database | ||
Schedule of Finite and Indefinite-lived Intangible Assets | ||
Finite lived assets, gross | $ 52.4 | $ 53.9 |
Accumulated Amortization | (51.9) | (52.9) |
Finite lived assets, net | $ 0.5 | $ 1 |
Amortization Life and Method | ||
Useful life | 5 years | 5 years |
Total Intangible Assets | ||
Accumulated Amortization | $ (51.9) | $ (52.9) |
Tradenames | ||
Schedule of Finite and Indefinite-lived Intangible Assets | ||
Finite lived assets, gross | 33.3 | 31.8 |
Accumulated Amortization | (28.6) | (26.5) |
Finite lived assets, net | 4.7 | 5.3 |
Total Intangible Assets | ||
Accumulated Amortization | $ (28.6) | $ (26.5) |
Tradenames | Minimum | ||
Amortization Life and Method | ||
Useful life | 8 years | 8 years |
Tradenames | Maximum | ||
Amortization Life and Method | ||
Useful life | 15 years | 15 years |
INTANGIBLE ASSETS AND GOODWIL_3
INTANGIBLE ASSETS AND GOODWILL - Maturity Schedule (Details) $ in Millions | Sep. 30, 2020USD ($) |
Estimated amortization expense related to intangible assets for the next five years and thereafter | |
2020 (excluding the nine months ended September 30, 2020) | $ 18.9 |
2021 | 22.3 |
2022 | 17.5 |
2023 | 12.9 |
2024 | 10.7 |
Thereafter | $ 5.8 |
INTANGIBLE ASSETS AND GOODWIL_4
INTANGIBLE ASSETS AND GOODWILL - Goodwill Information (Details) - USD ($) $ in Millions | 1 Months Ended | 9 Months Ended |
Jan. 31, 2020 | Sep. 30, 2020 | |
Goodwill | ||
Beginning Balance | $ 954.9 | $ 954.9 |
Goodwill related to sale of Precima | (3.2) | |
Effects of foreign currency translation | 17.7 | |
Ending Balance | 969.4 | |
Operating segment | LoyaltyOne | ||
Goodwill | ||
Beginning Balance | 690.9 | 690.9 |
Goodwill related to sale of Precima | (3.2) | (3.2) |
Effects of foreign currency translation | 17.7 | |
Ending Balance | 705.4 | |
Operating segment | Card Services | ||
Goodwill | ||
Beginning Balance | $ 264 | 264 |
Ending Balance | $ 264 |
RESTRUCTURING AND OTHER CHARG_3
RESTRUCTURING AND OTHER CHARGES (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Restructuring costs and reserve | |||
Restructuring charges | $ 54.9 | $ 85.1 | |
Restructuring, adjustment | $ (7.7) | ||
Asset impairment charges | 33.7 | 34.2 | 49.3 |
Termination Benefits | |||
Restructuring costs and reserve | |||
Restructuring charges | 11.4 | 23.9 | |
Restructuring, adjustment | (7.7) | ||
Asset Impairments | |||
Restructuring costs and reserve | |||
Restructuring charges | 33.7 | 49.3 | |
Lease Termination Costs | |||
Restructuring costs and reserve | |||
Restructuring charges | 8.9 | 8.9 | |
Other Exit Costs | |||
Restructuring costs and reserve | |||
Restructuring charges | 0.9 | 3 | |
Corporate/Other | |||
Restructuring costs and reserve | |||
Restructuring charges | 10.8 | 33.1 | |
Corporate/Other | Termination Benefits | |||
Restructuring costs and reserve | |||
Restructuring charges | 3.3 | 14.5 | |
Corporate/Other | Asset Impairments | |||
Restructuring costs and reserve | |||
Restructuring charges | 11.1 | ||
Corporate/Other | Lease Termination Costs | |||
Restructuring costs and reserve | |||
Restructuring charges | 6.8 | 6.8 | |
Corporate/Other | Other Exit Costs | |||
Restructuring costs and reserve | |||
Restructuring charges | 0.7 | 0.7 | |
LoyaltyOne | |||
Restructuring costs and reserve | |||
Restructuring charges | 42 | 49.9 | |
Restructuring, adjustment | 0.1 | ||
LoyaltyOne | Termination Benefits | |||
Restructuring costs and reserve | |||
Restructuring charges | 8.1 | 9.4 | |
Restructuring, adjustment | 0.1 | ||
LoyaltyOne | Asset Impairments | |||
Restructuring costs and reserve | |||
Restructuring charges | 33.5 | 38 | |
LoyaltyOne | Lease Termination Costs | |||
Restructuring costs and reserve | |||
Restructuring charges | 0.2 | 0.2 | |
LoyaltyOne | Other Exit Costs | |||
Restructuring costs and reserve | |||
Restructuring charges | 0.2 | 2.3 | |
Card Services | |||
Restructuring costs and reserve | |||
Restructuring charges | 2.1 | 2.1 | |
Restructuring, adjustment | (7.8) | ||
Card Services | Termination Benefits | |||
Restructuring costs and reserve | |||
Restructuring, adjustment | $ (7.8) | ||
Card Services | Asset Impairments | |||
Restructuring costs and reserve | |||
Restructuring charges | 0.2 | 0.2 | |
Card Services | Lease Termination Costs | |||
Restructuring costs and reserve | |||
Restructuring charges | $ 1.9 | $ 1.9 |
RESTRUCTURING AND OTHER CHARG_4
RESTRUCTURING AND OTHER CHARGES - Liability (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended |
Sep. 30, 2020 | Sep. 30, 2020 | |
Restructuring Reserve | ||
Restructuring Reserve, Beginning Balance | $ 9.3 | $ 34.8 |
Adjustments for non-cash charges | (7.7) | |
Cash payments | (4.3) | (22.1) |
Restructuring Reserve, Ending Balance | 5 | 5 |
LoyaltyOne | ||
Restructuring Reserve | ||
Adjustments for non-cash charges | 0.1 | |
Card Services | ||
Restructuring Reserve | ||
Adjustments for non-cash charges | (7.8) | |
Termination Benefits | ||
Restructuring Reserve | ||
Restructuring Reserve, Beginning Balance | 9.3 | 34.7 |
Adjustments for non-cash charges | (7.7) | |
Cash payments | (4.3) | (22) |
Restructuring Reserve, Ending Balance | $ 5 | 5 |
Termination Benefits | LoyaltyOne | ||
Restructuring Reserve | ||
Adjustments for non-cash charges | 0.1 | |
Termination Benefits | Card Services | ||
Restructuring Reserve | ||
Adjustments for non-cash charges | (7.8) | |
Other Exit Costs | ||
Restructuring Reserve | ||
Restructuring Reserve, Beginning Balance | 0.1 | |
Cash payments | $ (0.1) |
DEBT (Details)
DEBT (Details) € in Millions, $ in Millions | Apr. 03, 2020EUR (€)item | Aug. 31, 2020USD ($) | May 31, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)item | Sep. 30, 2019USD ($) | Apr. 30, 2020USD ($) | Mar. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Apr. 30, 2019USD ($) |
Debt | ||||||||||
Less: Current portion | $ 6,753.5 | $ 6,942.4 | ||||||||
Long-term portion | 3,395 | 5,209.3 | ||||||||
Less: Current portion | 2,120.4 | 3,030.8 | ||||||||
Long-term portion | $ 2,223.9 | 4,253.2 | ||||||||
Mandatory payment per credit agreement | $ 500 | |||||||||
Loss from extinguishment of debt | $ (71.9) | $ (71.9) | ||||||||
Number of conduit facilities | item | 3 | |||||||||
Series 2017-A asset backed term notes | ||||||||||
Debt | ||||||||||
Debt repaid by the company | $ 450.7 | |||||||||
Retained amount of subordinated class of notes | $ 50.7 | |||||||||
Principal payments collected during accumulation period | $ 603.1 | |||||||||
Series 2015-B asset-backed term notes | ||||||||||
Debt | ||||||||||
Debt repaid by the company | $ 625 | |||||||||
Retained amount of subordinated class of notes | 150 | |||||||||
Senior notes seven percent due 2026 | ||||||||||
Debt | ||||||||||
Principal amount of debt | $ 500 | |||||||||
Interest Rate (as a percent) | 7.00% | |||||||||
Total deposits | ||||||||||
Debt | ||||||||||
Deposits | $ 10,163 | 12,175 | ||||||||
Less: Unamortized debt issuance costs | 14.5 | 23.3 | ||||||||
Less: Current portion | 6,753.5 | 6,942.4 | ||||||||
Long-term portion | 3,395 | 5,209.3 | ||||||||
Certificates of deposit | ||||||||||
Debt | ||||||||||
Deposits | 6,257.4 | 8,585.2 | ||||||||
Money market deposits | ||||||||||
Debt | ||||||||||
Money market deposits | 3,905.6 | 3,589.8 | ||||||||
Non-recourse borrowings of consolidated securitization entities | ||||||||||
Debt | ||||||||||
Less: Unamortized debt issuance costs | 6.7 | 12 | ||||||||
Total non-recourse borrowings of consolidated securitization entities | 4,351 | 7,296 | ||||||||
Less: Current portion | 2,120.4 | 3,030.8 | ||||||||
Long-term portion | 2,223.9 | 4,253.2 | ||||||||
Fixed rate asset-backed term note securities | ||||||||||
Debt | ||||||||||
Total non-recourse borrowings of consolidated securitization entities | 4,016 | 4,891 | ||||||||
Conduit asset-backed securities | ||||||||||
Debt | ||||||||||
Maximum borrowing capacity | 3,200 | |||||||||
Total non-recourse borrowings of consolidated securitization entities | 335 | 2,405 | ||||||||
Line of credit amount outstanding | 335 | |||||||||
Conduit asset-backed securities | Master Trust I | ||||||||||
Debt | ||||||||||
Maximum borrowing capacity | 2,200 | 1,500 | ||||||||
Conduit facility under Master Trust I | ||||||||||
Debt | ||||||||||
Maximum borrowing capacity | $ 1,000 | $ 1,180 | ||||||||
Conduit facility under Master Trust III | ||||||||||
Debt | ||||||||||
Maximum borrowing capacity | $ 1,000 | 700 | $ 1,000 | $ 1,300 | ||||||
Long-term and other debt | ||||||||||
Debt | ||||||||||
Total long-term and other debt | 2,834.3 | 2,878.8 | ||||||||
Less: Unamortized discount and debt issuance costs | 31.1 | 28.9 | ||||||||
Less: Current portion | 76 | 101.4 | ||||||||
Long-term and other debt | 2,727.2 | 2,748.5 | ||||||||
Senior Notes | ||||||||||
Maturities of long-term and other debt | ||||||||||
Long-Term and Other Debt | $ 1,900 | |||||||||
Senior Notes Due 2024 | ||||||||||
Debt | ||||||||||
Total long-term and other debt | $ 850 | $ 850 | ||||||||
Interest Rate (as a percent) | 4.75% | 4.75% | ||||||||
Senior Notes Due 2026 | ||||||||||
Debt | ||||||||||
Total long-term and other debt | $ 500 | |||||||||
Interest Rate (as a percent) | 7.00% | |||||||||
Debt repaid by the company | $ 493.8 | |||||||||
2017 Credit Agreement | ||||||||||
Debt | ||||||||||
Total availability under Credit Facility | 750 | |||||||||
2017 revolving line of credit | ||||||||||
Debt | ||||||||||
Total long-term and other debt | 0 | |||||||||
2017 Term Loans | ||||||||||
Debt | ||||||||||
Total long-term and other debt | $ 1,484.3 | $ 2,028.8 | ||||||||
Weighted average interest rate (as a percent) | 1.90% | 3.30% | ||||||||
BrandLoyalty credit agreement | ||||||||||
Debt | ||||||||||
Total long-term and other debt | $ 0 | |||||||||
Number of requests for one-year extensions | item | 2 | |||||||||
Term of individual extensions | 1 year | |||||||||
BrandLoyalty revolving line of credit | ||||||||||
Debt | ||||||||||
Maximum borrowing capacity | € 30 | 35.2 | ||||||||
BrandLoyalty uncommitted line of credit | ||||||||||
Debt | ||||||||||
Maximum borrowing capacity | 30 | 35.2 | ||||||||
BrandLoyalty uncommitted line of credit | Credit Facility, Accordion Feature | ||||||||||
Debt | ||||||||||
Maximum borrowing capacity | € 80 | $ 93.8 | ||||||||
Minimum | Certificates of deposit | ||||||||||
Debt | ||||||||||
Interest Rate (as a percent) | 0.60% | |||||||||
Minimum | Money market deposits | ||||||||||
Debt | ||||||||||
Interest Rate (as a percent) | 0.34% | 1.84% | ||||||||
Minimum | Fixed rate asset-backed term note securities | ||||||||||
Debt | ||||||||||
Interest Rate (as a percent) | 2.03% | |||||||||
Minimum | Conduit asset-backed securities | ||||||||||
Debt | ||||||||||
Interest Rate (as a percent) | 1.40% | 2.79% | ||||||||
Maximum | Certificates of deposit | ||||||||||
Debt | ||||||||||
Interest Rate (as a percent) | 4.00% | |||||||||
Maximum | Money market deposits | ||||||||||
Debt | ||||||||||
Interest Rate (as a percent) | 3.50% | 3.50% | ||||||||
Maximum | Fixed rate asset-backed term note securities | ||||||||||
Debt | ||||||||||
Interest Rate (as a percent) | 3.95% | |||||||||
Maximum | Conduit asset-backed securities | ||||||||||
Debt | ||||||||||
Interest Rate (as a percent) | 1.95% | 2.96% |
DERIVATIVE INSTRUMENTS - Design
DERIVATIVE INSTRUMENTS - Designated and Not Designated Instruments (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | |
Notional amount, fair value and classification of the company's outstanding derivative contracts | ||
Maximum length of time, foreign currency cash flow hedge | 12 months | |
Maximum length of time hedged in cash flow hedge | 12 months | |
Designated as hedging instrument | Foreign currency exchange hedges | Other current assets | ||
Notional amount, fair value and classification of the company's outstanding derivative contracts | ||
Notional Amount | $ 47.8 | $ 5.5 |
Fair Value | 1.4 | 0.2 |
Designated as hedging instrument | Foreign currency exchange hedges | Other current liabilities | ||
Notional amount, fair value and classification of the company's outstanding derivative contracts | ||
Notional Amount | 28.5 | 7.8 |
Fair Value | 1.4 | $ 0.3 |
Not designated as hedging instrument | Foreign currency exchange hedges | Other current assets | ||
Notional amount, fair value and classification of the company's outstanding derivative contracts | ||
Notional Amount | 10.1 | |
Fair Value | 0.2 | |
Not designated as hedging instrument | Foreign currency exchange hedges | Other current liabilities | ||
Notional amount, fair value and classification of the company's outstanding derivative contracts | ||
Notional Amount | 2.2 | |
Fair Value | $ 0.1 |
DERIVATIVE INSTRUMENTS - Activi
DERIVATIVE INSTRUMENTS - Activity and Location of Outstanding Derivatives (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Activity related to company's outstanding derivative contracts and location | ||||
Unrealized gain on cash flow hedges, net of tax | $ 0.5 | $ 0.7 | $ 0.5 | |
Gains on net investment hedge | 4.9 | |||
Amount expected to be reclassified in the coming 12 months | $ 0.1 | |||
Foreign currency exchange forward contracts | Not designated as hedging instrument. | General and administrative | ||||
Activity related to company's outstanding derivative contracts and location | ||||
Gains (losses) on derivative instruments | (1) | $ 1.4 | ||
Foreign currency exchange hedges | Designated as hedging instrument | ||||
Activity related to company's outstanding derivative contracts and location | ||||
Unrealized gain on cash flow hedges, net of tax | $ 0.5 | $ 0.7 | $ 0.5 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Litigation and Regulatory Matters (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Epsilon | Discontinued Operations, Disposed of by Sale | Indemnification Agreement | |
Contingencies | |
Loss contingency | $ 32.9 |
STOCKHOLDERS' EQUITY - Stock Re
STOCKHOLDERS' EQUITY - Stock Repurchase Programs (Details) - 2019 Stock Repurchase Program - USD ($) $ in Millions | Jun. 30, 2020 | Dec. 31, 2019 | Jul. 31, 2019 |
Stock Repurchase Programs | |||
Amount of company's outstanding common stock authorized to be repurchased | $ 1,100 | ||
Available balance under stock repurchase program | $ 347.8 | ||
Amount remaining of a stock repurchase plan that expired | $ 347.8 |
STOCKHOLDERS' EQUITY - Restrict
STOCKHOLDERS' EQUITY - Restricted Stock Unit Awards and Stock Options (Details) - USD ($) $ / shares in Units, $ in Millions | Oct. 29, 2020 | Aug. 14, 2020 | Jul. 23, 2020 | Jun. 18, 2020 | Apr. 23, 2020 | Mar. 19, 2020 | Jan. 30, 2020 | Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 |
Stock Compensation Plans | |||||||||||||
Common Stock dividends and dividend equivalent rights declared (in dollars per share) | $ 0.21 | $ 0.21 | $ 0.21 | $ 0.63 | $ 0.21 | $ 0.21 | $ 0.63 | $ 0.63 | $ 0.63 | ||||
Dividends paid | $ 10 | $ 10 | $ 30 | $ 50.5 | $ 97.4 | ||||||||
Payments related to dividend equivalent rights | $ 0.5 | ||||||||||||
Performance-based restricted stock unit awards | |||||||||||||
Stock Compensation Plans | |||||||||||||
Shares granted (in shares) | 219,186 | ||||||||||||
Weighted average grant-date fair value (in dollars per share) | $ 100.50 | $ 100.50 | |||||||||||
Probable achievement of meeting vesting criteria, as a percent | 0.00% | 0.00% | |||||||||||
Percentage of stock units on which restrictions will lapse in February 2021 | 33.00% | ||||||||||||
Percentage of stock units on which restrictions will lapse in February 2022 | 33.00% | ||||||||||||
Percentage of stock units on which restrictions will lapse in February 2023 | 34.00% | ||||||||||||
Performance-based restricted stock unit awards | Minimum | |||||||||||||
Stock Compensation Plans | |||||||||||||
Percentage of stock units to vest | 0.00% | ||||||||||||
Performance-based restricted stock unit awards | Maximum | |||||||||||||
Stock Compensation Plans | |||||||||||||
Percentage of stock units to vest | 150.00% | ||||||||||||
Service-based restricted stock unit awards | |||||||||||||
Stock Compensation Plans | |||||||||||||
Shares granted (in shares) | 180,017 | ||||||||||||
Weighted average grant-date fair value (in dollars per share) | $ 83.08 | $ 83.08 | |||||||||||
Award vesting period | 3 years | ||||||||||||
Market-based restricted stock unit awards | |||||||||||||
Stock Compensation Plans | |||||||||||||
Shares granted (in shares) | 20,770 | ||||||||||||
Weighted average grant-date fair value (in dollars per share) | $ 78.92 | $ 78.92 | |||||||||||
Percentage of stock units on which restrictions will lapse in February 2022 | 100.00% | ||||||||||||
Award vesting period | 2 years | ||||||||||||
Market-based restricted stock unit awards | Minimum | |||||||||||||
Stock Compensation Plans | |||||||||||||
Percentage of stock units to vest | 0.00% | ||||||||||||
Market-based restricted stock unit awards | Maximum | |||||||||||||
Stock Compensation Plans | |||||||||||||
Percentage of stock units to vest | 175.00% |
STOCKHOLDERS' EQUITY Stock - Co
STOCKHOLDERS' EQUITY Stock - Compensation Plans (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs | ||||
Stock-based compensation expense | $ 5.3 | $ 3 | $ 16.2 | $ 24.6 |
Cost of operations. | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs | ||||
Stock-based compensation expense | 3.4 | 3.1 | 9.4 | 16.2 |
General and administrative | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs | ||||
Stock-based compensation expense | $ 1.9 | (0.1) | $ 6.8 | 8.4 |
Discontinued Operations, Held-for-sale | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs | ||||
Stock-based compensation expense | $ 0 | |||
Discontinued Operations, Held-for-sale | Epsilon | ||||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs | ||||
Stock-based compensation expense | $ 29.7 |
ACCUMULATED OTHER COMPREHENSI_3
ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Accumulated Other Comprehensive Income | ||||
Balance | $ 1,154.6 | $ 2,391.7 | $ 1,588.3 | $ 2,332.1 |
Recognition of foreign currency translation adjustments upon sale of business | 26.8 | 3.8 | 26.8 | |
Changes in other comprehensive income (loss) | 39.8 | (0.3) | 52.2 | 16.1 |
Changes in other comprehensive income (loss) | (27.1) | 48.4 | (10.7) | |
Balance | 1,322.6 | 1,496.9 | 1,322.6 | 1,496.9 |
Epsilon | ||||
Accumulated Other Comprehensive Income | ||||
Recognition of foreign currency translation adjustments upon sale of business | 26.8 | 26.8 | ||
Precima | ||||
Accumulated Other Comprehensive Income | ||||
Recognition of foreign currency translation adjustments upon sale of business | 3.8 | |||
Net Unrealized Gains (Losses) on Securities | ||||
Accumulated Other Comprehensive Income | ||||
Balance | 17.5 | 3.7 | 2.5 | (10.7) |
Changes in other comprehensive income (loss) | 4 | |||
Changes in other comprehensive income (loss) | (0.2) | 19 | 14.2 | |
Balance | 21.5 | 3.5 | 21.5 | 3.5 |
Unrealized Gains (Losses) on Cash Flow Hedges | ||||
Accumulated Other Comprehensive Income | ||||
Balance | (0.6) | (0.4) | (0.1) | (0.2) |
Changes in other comprehensive income (loss) | 0.5 | |||
Changes in other comprehensive income (loss) | 0.7 | 0.5 | ||
Balance | (0.1) | 0.3 | (0.1) | 0.3 |
Unrealized Gains (Losses) on Net Investment Hedge. | ||||
Accumulated Other Comprehensive Income | ||||
Balance | (7.5) | (7.5) | (7.5) | (12.4) |
Changes in other comprehensive income (loss) | 4.9 | |||
Balance | (7.5) | (7.5) | (7.5) | (7.5) |
Foreign Currency Translation Adjustments | ||||
Accumulated Other Comprehensive Income | ||||
Balance | (96.9) | (117.5) | (94.8) | (114.8) |
Changes in other comprehensive income (loss) | 35.3 | |||
Changes in other comprehensive income (loss) | (27.6) | 29.4 | (30.3) | |
Balance | (61.6) | (118.3) | (61.6) | (118.3) |
Foreign Currency Translation Adjustments | Epsilon | ||||
Accumulated Other Comprehensive Income | ||||
Recognition of foreign currency translation adjustments upon sale of business | 26.8 | 26.8 | ||
Foreign Currency Translation Adjustments | Precima | ||||
Accumulated Other Comprehensive Income | ||||
Recognition of foreign currency translation adjustments upon sale of business | 3.8 | |||
Accumulated Other Comprehensive Income (Loss) | ||||
Accumulated Other Comprehensive Income | ||||
Balance | (87.5) | (121.7) | (99.9) | (138.1) |
Changes in other comprehensive income (loss) | 39.8 | |||
Changes in other comprehensive income (loss) | (27.1) | 48.4 | (10.7) | |
Balance | (47.7) | (122) | (47.7) | (122) |
Accumulated Other Comprehensive Income (Loss) | Epsilon | ||||
Accumulated Other Comprehensive Income | ||||
Recognition of foreign currency translation adjustments upon sale of business | 26.8 | 26.8 | ||
Accumulated Other Comprehensive Income (Loss) | Precima | ||||
Accumulated Other Comprehensive Income | ||||
Recognition of foreign currency translation adjustments upon sale of business | 3.8 | |||
Accumulated Other Comprehensive Loss | ||||
Accumulated Other Comprehensive Income | ||||
Balance | (87.5) | (121.7) | (99.9) | (138.1) |
Recognition of foreign currency translation adjustments upon sale of business | 26.8 | 3.8 | 26.8 | |
Changes in other comprehensive income (loss) | 39.8 | |||
Changes in other comprehensive income (loss) | (27.1) | 48.4 | (10.7) | |
Balance | $ (47.7) | $ (122) | $ (47.7) | $ (122) |
FAIR VALUE MEASUREMENTS - Fair
FAIR VALUE MEASUREMENTS - Fair Value of Instruments (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Financial assets | ||
Credit card and loan receivables, net | $ 13,517.8 | $ 18,292 |
Credit card receivables held for sale | 408 | |
Redemption settlement assets, restricted | 641.7 | 600.8 |
Other investments | 228.1 | 259.8 |
Financial liabilities | ||
Deposits | 10,404.4 | 12,303.6 |
Non-recourse borrowings of consolidated securitization entities | 4,427.2 | 7,333.6 |
Long-term and other debt | 2,778.7 | 2,878.8 |
Carrying Amount | ||
Financial assets | ||
Credit card and loan receivables, net | 13,517.8 | 18,292 |
Credit card receivables held for sale | 408 | |
Redemption settlement assets, restricted | 641.7 | 600.8 |
Other investments | 228.1 | 259.8 |
Derivative instruments | 1.6 | 0.2 |
Financial liabilities | ||
Derivative instruments | 1.5 | 0.3 |
Deposits | 10,148.5 | 12,151.7 |
Non-recourse borrowings of consolidated securitization entities | 4,344.3 | 7,284 |
Long-term and other debt | 2,803.2 | 2,849.9 |
Fair Value. | ||
Financial assets | ||
Credit card and loan receivables, net | 16,081.6 | 19,126 |
Credit card receivables held for sale | 436.2 | |
Redemption settlement assets, restricted | 641.7 | 600.8 |
Other investments | 228.1 | 259.8 |
Derivative instruments | 1.6 | 0.2 |
Financial liabilities | ||
Derivative instruments | 1.5 | 0.3 |
Deposits | 10,404.4 | 12,303.6 |
Non-recourse borrowings of consolidated securitization entities | 4,427.2 | 7,333.6 |
Long-term and other debt | $ 2,778.7 | $ 2,878.8 |
FAIR VALUE MEASUREMENTS - Fai_2
FAIR VALUE MEASUREMENTS - Fair Value Level Disclosure (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Assets disclosed at fair value | ||
Marketable securities | $ 228.1 | $ 259.8 |
Total assets measured at fair value | 16,081.6 | 19,562.2 |
Liabilities disclosed at fair value | ||
Total liabilities measured at fair value | 17,610.3 | 22,516 |
Level 2 | ||
Liabilities disclosed at fair value | ||
Total liabilities measured at fair value | 17,610.3 | 22,516 |
Level 3 | ||
Assets disclosed at fair value | ||
Total assets measured at fair value | 16,081.6 | 19,562.2 |
Recurring | ||
Assets disclosed at fair value | ||
Mutual funds | 25.4 | 25.1 |
Corporate bonds | 570.9 | 536.4 |
Marketable securities | 228.1 | 259.8 |
Derivative instruments | 1.6 | 0.2 |
Total assets measured at fair value | 826 | 821.5 |
Liabilities disclosed at fair value | ||
Derivative instruments | 1.5 | 0.3 |
Total liabilities measured at fair value | 1.5 | 0.3 |
Recurring | Level 1 | ||
Assets disclosed at fair value | ||
Mutual funds | 25.4 | 25.1 |
Marketable securities | 34.1 | 26.2 |
Total assets measured at fair value | 59.5 | 51.3 |
Recurring | Level 2 | ||
Assets disclosed at fair value | ||
Corporate bonds | 570.9 | 536.4 |
Marketable securities | 194 | 233.6 |
Derivative instruments | 1.6 | 0.2 |
Total assets measured at fair value | 766.5 | 770.2 |
Liabilities disclosed at fair value | ||
Derivative instruments | 1.5 | 0.3 |
Total liabilities measured at fair value | $ 1.5 | $ 0.3 |
FAIR VALUE MEASUREMENTS - Asset
FAIR VALUE MEASUREMENTS - Assets and Liabilities Not Carried at Fair Value (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Financial assets | ||
Credit card and loan receivables, net | $ 16,081.6 | $ 19,126 |
Credit card receivables held for sale | 436.2 | |
Total assets measured at fair value | 16,081.6 | 19,562.2 |
Financial liabilities | ||
Deposits | 10,404.4 | 12,303.6 |
Non-recourse borrowings of consolidated securitization entities | 4,427.2 | 7,333.6 |
Long-term and other debt | 2,778.7 | 2,878.8 |
Total liabilities measured at fair value | 17,610.3 | 22,516 |
Level 2 | ||
Financial liabilities | ||
Deposits | 10,404.4 | 12,303.6 |
Non-recourse borrowings of consolidated securitization entities | 4,427.2 | 7,333.6 |
Long-term and other debt | 2,778.7 | 2,878.8 |
Total liabilities measured at fair value | 17,610.3 | 22,516 |
Level 3 | ||
Financial assets | ||
Credit card and loan receivables, net | 16,081.6 | 19,126 |
Credit card receivables held for sale | 436.2 | |
Total assets measured at fair value | $ 16,081.6 | $ 19,562.2 |
FAIR VALUE MEASUREMENTS - Ass_2
FAIR VALUE MEASUREMENTS - Assets and Liabilities Measured at Fair Value on Nonrecurring Basis (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
FAIR VALUE MEASUREMENTS | |||
Asset Impairment Charges | $ 33.7 | $ 34.2 | $ 49.3 |
INCOME TAXES (Details)
INCOME TAXES (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
INCOME TAXES | ||||
Effective tax rate utilized (as a percent) | 24.20% | 26.00% | 18.80% | 22.60% |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Segment information | ||||
Revenues | $ 1,050.5 | $ 1,437.6 | $ 3,411.5 | $ 4,120.3 |
Income (loss) before income taxes | 175.9 | 164.2 | 248.3 | 571 |
Interest expense, net | 115.1 | 140 | 381.3 | 427.4 |
Operating income (loss) | 291 | 304.2 | 629.6 | 998.4 |
Depreciation and amortization | 40.1 | 120.3 | 206.4 | |
Stock compensation expense | 5.3 | 16.2 | 54.3 | |
Gain on sale of business, net of strategic transaction costs | (8) | |||
Strategic transaction costs | 3.5 | 6.8 | ||
Asset impairments | 33.7 | 34.2 | 49.3 | |
Restructuring and other charges | (7.7) | |||
Loss on extinguishment of debt | 71.9 | 71.9 | ||
Adjusted EBITDA | 339.9 | 791.4 | ||
Less: Securitization funding costs | 37.5 | 51.4 | 130.1 | 160.3 |
Less: Interest expense on deposits | 52.9 | 62.5 | 172.1 | 164.4 |
Adjusted EBITDA, net | 249.5 | 489.2 | ||
Continuing Operations | ||||
Segment information | ||||
Revenues | 1,437.6 | 4,120.3 | ||
Income (loss) before income taxes | 164.2 | 571 | ||
Interest expense, net | 140 | 427.4 | ||
Operating income (loss) | 304.2 | 998.4 | ||
Depreciation and amortization | 44.9 | 133.2 | ||
Stock compensation expense | 3 | 24.6 | ||
Strategic transaction costs | 2.3 | 5 | ||
Restructuring and other charges | 54.9 | 85.1 | ||
Loss on extinguishment of debt | 71.9 | 71.9 | ||
Adjusted EBITDA | 481.2 | 1,318.2 | ||
Less: Securitization funding costs | 51.4 | 160.3 | ||
Less: Interest expense on deposits | 62.5 | 164.4 | ||
Adjusted EBITDA, net | 367.3 | 993.5 | ||
Operating segment | LoyaltyOne | ||||
Segment information | ||||
Revenues | 184.8 | 245.5 | 533.9 | 700.7 |
Income (loss) before income taxes | 18.3 | (5.2) | 88.9 | 45.2 |
Interest expense, net | (0.2) | 0.8 | (0.5) | 2.7 |
Operating income (loss) | 18.1 | (4.4) | 88.4 | 47.9 |
Depreciation and amortization | 20.3 | 56.9 | ||
Stock compensation expense | 1.6 | 4.1 | ||
Gain on sale of business, net of strategic transaction costs | (8) | |||
Strategic transaction costs | 0.1 | 0.1 | 0.3 | 0.3 |
Restructuring and other charges | 42 | 0.1 | 49.9 | |
Adjusted EBITDA | 40.1 | 58.2 | 141.8 | 164.3 |
Adjusted EBITDA, net | 40.1 | 58.2 | 141.8 | 164.3 |
Operating segment | LoyaltyOne | Continuing Operations | ||||
Segment information | ||||
Depreciation and amortization | 19.8 | 59.7 | ||
Stock compensation expense | 0.7 | 6.5 | ||
Operating segment | Card Services | ||||
Segment information | ||||
Revenues | 865.7 | 1,192 | 2,877.5 | 3,419.3 |
Income (loss) before income taxes | 212.1 | 300 | 314.5 | 829.8 |
Interest expense, net | 90.4 | 113.9 | 302.2 | 324.7 |
Operating income (loss) | 302.5 | 413.9 | 616.7 | 1,154.5 |
Depreciation and amortization | 19.2 | 61 | ||
Stock compensation expense | 1.8 | 5.3 | ||
Asset impairments | 34.2 | |||
Restructuring and other charges | 2.1 | (7.8) | 2.1 | |
Adjusted EBITDA | 323.5 | 441.9 | 709.4 | 1,234.8 |
Less: Securitization funding costs | 37.5 | 51.4 | 130.1 | 160.3 |
Less: Interest expense on deposits | 52.9 | 62.5 | 172.1 | 164.4 |
Adjusted EBITDA, net | 233.1 | 328 | 407.2 | 910.1 |
Operating segment | Card Services | Continuing Operations | ||||
Segment information | ||||
Depreciation and amortization | 23.5 | 68.5 | ||
Stock compensation expense | 2.4 | 9.7 | ||
Corporate/Other | ||||
Segment information | ||||
Revenues | 0.1 | 0.1 | 0.3 | |
Income (loss) before income taxes | (54.5) | (130.6) | (155.1) | (304) |
Interest expense, net | 24.9 | 25.3 | 79.6 | 100 |
Operating income (loss) | (29.6) | (105.3) | (75.5) | (204) |
Depreciation and amortization | 0.6 | 2.4 | ||
Stock compensation expense | 1.9 | 6.8 | ||
Strategic transaction costs | 3.4 | 2.2 | 6.5 | 4.7 |
Restructuring and other charges | 10.8 | 33.1 | ||
Loss on extinguishment of debt | 71.9 | 71.9 | ||
Adjusted EBITDA | (23.7) | (18.9) | (59.8) | (80.9) |
Adjusted EBITDA, net | $ (23.7) | (18.9) | $ (59.8) | (80.9) |
Corporate/Other | Continuing Operations | ||||
Segment information | ||||
Depreciation and amortization | 1.6 | 5 | ||
Stock compensation expense | $ (0.1) | $ 8.4 |
SUPPLEMENTAL CASH FLOW INFORM_3
SUPPLEMENTAL CASH FLOW INFORMATION (Details) - USD ($) $ in Millions | Apr. 25, 2019 | Oct. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Cash and cash equivalents | $ 4,512.5 | $ 3,078.4 | ||||
Restricted cash included within other current assets (1) | 493.8 | 627.1 | ||||
Restricted cash included within redemption settlement assets, restricted | 45.4 | 45.4 | ||||
Total cash, cash equivalents and restricted cash | 5,051.7 | 3,750.9 | $ 3,958.1 | $ 3,967.7 | ||
Restricted cash in principal accumulation for repayment | 460.5 | $ 603.1 | ||||
Epsilon | ||||||
Receivable associated with post-closing adjustments | $ 40.1 | |||||
Value Act Holdings, L.P. | Common Stock | ||||||
Conversion of stock, shares converted | 1,500,000 | |||||
Value Act Holdings, L.P. | Series A Non-Voting Convertible Preferred Stock | ||||||
Conversion of stock, shares converted | 150,000 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) $ in Millions | 1 Months Ended |
Oct. 31, 2020USD ($) | |
Subsequent event | Bread member | |
Subsequent Events | |
Business Combination, Consideration Transferred | $ 450 |