Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 25, 2017 | Apr. 25, 2017 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 25, 2017 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q1 | |
Entity Registrant Name | BLACKHAWK NETWORK HOLDINGS, INC | |
Entity Central Index Key | 1,411,488 | |
Current Fiscal Year End Date | --12-30 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 56,330,000 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 25, 2017 | Dec. 31, 2016 | Mar. 26, 2016 |
Current assets: | |||
Cash and cash equivalents | $ 214,536 | $ 1,008,125 | $ 212,950 |
Restricted cash | 56,832 | 10,793 | 3,189 |
Settlement receivables, net | 319,557 | 641,691 | 317,585 |
Accounts receivable, net | 259,138 | 262,672 | 224,559 |
Other current assets | 177,463 | 131,375 | 100,361 |
Total current assets | 1,027,526 | 2,054,656 | 858,644 |
Property, equipment and technology, net | 173,403 | 172,381 | 166,223 |
Intangible assets, net | 340,846 | 350,185 | 278,734 |
Goodwill | 570,313 | 570,398 | 486,472 |
Deferred income taxes | 361,404 | 362,302 | 351,161 |
Other assets | 85,647 | 85,856 | 80,083 |
TOTAL ASSETS | 2,559,139 | 3,595,778 | 2,221,317 |
Current liabilities: | |||
Settlement payables | 547,179 | 1,626,827 | 532,419 |
Consumer and customer deposits | 199,822 | 173,344 | 97,100 |
Accounts payable and accrued operating expenses | 143,858 | 153,885 | 105,492 |
Deferred revenue | 140,834 | 150,582 | 110,560 |
Note payable, current portion | 7,390 | 9,856 | 155,851 |
Notes payable to Safeway | 2,909 | 3,163 | 4,129 |
Bank line of credit | 14,415 | 0 | 114,672 |
Other current liabilities | 85,651 | 51,176 | 40,583 |
Total current liabilities | 1,142,058 | 2,168,833 | 1,160,806 |
Deferred income taxes | 28,200 | 27,887 | 19,534 |
Note payable | 130,560 | 137,984 | 268,584 |
Convertible notes payable | 431,941 | 429,026 | 0 |
Other liabilities | 37,745 | 39,653 | 15,062 |
Total liabilities | 1,770,504 | 2,803,383 | 1,463,986 |
Commitments and contingencies (see Note 9) | |||
Stockholders’ equity: | |||
Preferred stock: $0.001 par value; 10,000 shares authorized; no shares outstanding | 0 | 0 | 0 |
Common stock: $0.001 par value; 210,000 shares authorized; 56,290, 55,667 and 56,131 shares outstanding, respectively | 56 | 56 | 57 |
Additional paid-in capital | 612,328 | 608,568 | 569,728 |
Accumulated other comprehensive loss | (42,861) | (48,877) | (35,139) |
Retained earnings | 214,833 | 228,451 | 218,258 |
Total Blackhawk Network Holdings, Inc. equity | 784,356 | 788,198 | 752,904 |
Non-controlling interests | 4,279 | 4,197 | 4,427 |
Total stockholders’ equity | 788,635 | 792,395 | 757,331 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 2,559,139 | $ 3,595,778 | $ 2,221,317 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Mar. 25, 2017 | Dec. 31, 2016 | Mar. 26, 2016 |
Statement of Financial Position [Abstract] | |||
Preferred stock, par value (in usd per share) | $ 0.001 | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | 10,000,000 |
Preferred stock, shares outstanding | 0 | 0 | 0 |
Common stock, par value (in usd per share) | $ 0.001 | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 210,000,000 | 210,000,000 | 210,000,000 |
Common stock, shares outstanding | 56,290,000 | 55,667,000 | 56,131,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income (Loss) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 25, 2017 | Mar. 26, 2016 | |
OPERATING REVENUES: | ||
Commissions and fees | $ 255,206 | $ 239,624 |
Program and other fees | 100,910 | 75,442 |
Marketing | 14,281 | 13,459 |
Product sales | 36,839 | 37,937 |
Total operating revenues | 407,236 | 366,462 |
OPERATING EXPENSES: | ||
Partner distribution expense | 179,476 | 172,155 |
Processing and services | 102,272 | 73,941 |
Sales and marketing | 62,785 | 53,338 |
Costs of products sold | 36,193 | 35,732 |
General and administrative | 29,025 | 23,497 |
Transition and acquisition | 451 | 945 |
Amortization of acquisition intangibles | 13,025 | 9,898 |
Change in fair value of contingent consideration | 1,040 | 0 |
Total operating expenses | 424,267 | 369,506 |
OPERATING INCOME (LOSS) | (17,031) | (3,044) |
OTHER INCOME (EXPENSE): | ||
Interest income and other income (expense), net | 836 | 412 |
Interest expense | (6,943) | (4,066) |
INCOME (LOSS) BEFORE INCOME TAX EXPENSE | (23,138) | (6,698) |
INCOME TAX EXPENSE (BENEFIT) | (9,775) | (3,237) |
NET INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS | (13,363) | (3,461) |
Loss (income) attributable to non-controlling interests, net of tax | (123) | (92) |
NET INCOME (LOSS) ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC. | $ (13,486) | $ (3,553) |
EARNINGS (LOSS) PER SHARE: | ||
Basic (in usd per share) | $ (0.24) | $ (0.06) |
Diluted (in usd per share) | $ (0.24) | $ (0.06) |
Weighted average shares outstanding—basic (in shares) | 55,904 | 55,752 |
Weighted average shares outstanding—diluted (in shares) | 55,904 | 55,752 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 25, 2017 | Mar. 26, 2016 | |
Statement of Comprehensive Income [Abstract] | ||
NET INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS | $ (13,363) | $ (3,461) |
Other comprehensive income (loss): | ||
Currency translation adjustments | 5,975 | 5,066 |
COMPREHENSIVE INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS | (7,388) | 1,605 |
Comprehensive loss (income) attributable to non-controlling interests, net of tax | (82) | (102) |
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC. | $ (7,470) | $ 1,503 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 25, 2017 | Mar. 26, 2016 | |
OPERATING ACTIVITIES: | ||
Net income (loss) before allocation to non-controlling interests | $ (13,363) | $ (3,461) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Depreciation and amortization of property, equipment and technology | 11,600 | 9,915 |
Amortization of intangibles | 14,218 | 11,048 |
Amortization of deferred program and contract costs | 7,397 | 7,166 |
Amortization of deferred financing costs and debt discount | 3,162 | 440 |
Loss on property, equipment and technology disposal/write-down | 108 | 5 |
Employee stock-based compensation expense | 8,401 | 8,000 |
Change in fair value of contingent consideration | 1,040 | 0 |
Other | 1,605 | 34 |
Changes in operating assets and liabilities: | ||
Settlement receivables | 330,177 | 311,722 |
Settlement payables | (1,080,989) | (1,072,424) |
Accounts receivable, current and long-term | (7,666) | 18,053 |
Other current assets | (2,215) | 7,355 |
Other assets | (3,158) | (4,476) |
Consumer and customer deposits | (24,484) | 14,690 |
Accounts payable and accrued operating expenses | (4,218) | (27,404) |
Deferred revenue | 3,585 | (7,745) |
Other current and long-term liabilities | (1,403) | (16,332) |
Income taxes, net | (9,944) | (4,271) |
Net cash (used in) provided by operating activities | (766,147) | (747,685) |
INVESTING ACTIVITIES: | ||
Expenditures for property, equipment and technology | (16,697) | (9,160) |
Business acquisitions, net of cash acquired | (10,881) | (113,114) |
Investment in unconsolidated entities | (5,200) | 0 |
Net cash (used in) provided by investing activities | (32,778) | (122,274) |
FINANCING ACTIVITIES: | ||
Repayment of debt assumed in business acquisitions | 0 | (8,964) |
Proceeds from issuance of note payable | 0 | 100,000 |
Repayment of note payable | (10,000) | (37,500) |
Borrowings under revolving bank line of credit | 667,936 | 636,445 |
Repayments on revolving bank line of credit | (653,521) | (521,773) |
Repayment on notes payable to Safeway | (254) | 0 |
Proceeds from issuance of common stock from exercise of employee stock options and employee stock purchase plans | 3,700 | 432 |
Other stock-based compensation related | (8,897) | (1,752) |
Net cash (used in) provided by financing activities | (1,036) | 166,888 |
Effect of exchange rate changes on cash and cash equivalents | 6,372 | 1,445 |
Decrease in cash and cash equivalents | (793,589) | (701,626) |
Cash and cash equivalents—beginning of period | 1,008,125 | 914,576 |
Cash and cash equivalents—end of period | 214,536 | 212,950 |
NONCASH FINANCING AND INVESTING ACTIVITIES: | ||
Financing of business acquisition with contingent consideration | $ 2,000 | $ 0 |
The Company and Significant Acc
The Company and Significant Accounting Policies | 3 Months Ended |
Mar. 25, 2017 | |
Accounting Policies [Abstract] | |
The Company and Significant Accounting Policies | The Company and Significant Accounting Policies The Company Blackhawk Network Holdings, Inc., together with its subsidiaries (“we”, “us”, “our”, the “Company”), is a leading prepaid payment network utilizing proprietary technology to offer consumers and businesses a broad selection of prepaid cards in physical and electronic forms, as well as complementary prepaid products, payment services and incentives solutions. We currently offer our products and/or solutions directly or through commercial relationships in the United States and 25 other countries and can deliver solutions in over 100 countries. Our product offerings include single-use gift cards; loyalty, incentive and reward products and services; prepaid telecom products and prepaid financial services products, including general purpose reloadable (“GPR”) cards, and our reload network (collectively, “prepaid products”). We offer gift cards from leading consumer brands (known as “closed loop”) as well as branded gift and incentive cards from leading payment network card associations such as American Express, Discover, MasterCard and Visa (known as “open loop”) and prepaid telecom products offered by prepaid wireless telecom carriers. We also distribute GPR cards and operate a proprietary reload network named Reloadit, which allows consumers to reload funds onto their previously purchased GPR cards. We distribute these prepaid products across multiple high-traffic channels such as grocery, convenience, specialty and online retailers (referred to as “retail distribution partners”) in the Americas, Europe, Africa, Australia and Asia and provide these prepaid products and related services to business clients for their loyalty, incentive and reward programs. Basis of Presentation The accompanying condensed consolidated financial statements of Blackhawk Network Holdings, Inc. are unaudited. We have prepared our unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. We have condensed or omitted certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP pursuant to such rules and regulations. Accordingly, our interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K, filed with the SEC on February 27, 2017 (the “Annual Report”). We have prepared our condensed consolidated financial statements on the same basis as our annual audited consolidated financial statements and, in the opinion of management, have reflected all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position and results of operations for the interim periods presented. Our results for the interim periods are not necessarily reflective of the results to be expected for the year ending December 30, 2017 or for any other interim period or other future year. Our condensed consolidated balance sheet as of December 31, 2016 , included herein was derived from our audited consolidated financial statements as of that date but does not include all disclosures required by GAAP for annual financial statements, including notes to the financial statements. Seasonality For our retail business, a significant portion of gift card sales occurs in late December each year during the holiday selling season. As a result, we earn a significant portion of our revenues, net income and cash flows during the fourth quarter of each year and remit the majority of the cash, less commissions, to our content providers in January of the following year. The timing of our fiscal year-end, December holiday sales and the related January cash settlement with content providers significantly increases our Cash and cash equivalents, Settlement receivables and Settlement payables balances at the end of each fiscal year relative to normal daily balances. The cash settlement with our content providers in January accounts for the majority of the use of cash from operating activities in our condensed consolidated statements of cash flows during our first three fiscal quarters. We also experience an increase in revenues, net income and cash flows during the second quarter of each year, which we primarily attribute to the Mother’s Day, Father’s Day and graduation gifting season and the Easter holiday. Depending on when the Easter holiday occurs, the associated increase is in either the first or second quarter. As a result, quarterly financial results are not necessarily reflective of the results to be expected for the year or any other interim or future period. Seasonality also impacts our incentives businesses, but such impact is smaller in comparison to our retail business. Recently Issued or Adopted Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (Topic 606), which along with amendments issued in 2015 and 2016, will replace nearly all current U.S. GAAP guidance on this topic with a comprehensive revenue measurement and recognition standard and expanded disclosure requirements. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This new guidance is to be applied retrospectively either to each reporting period presented (full retrospective method) or with the cumulative effect of initially applying the guidance at the date of initial application for reporting periods beginning after December 15, 2017. Early adoption is not permitted. We currently anticipate adopting this standard using the full retrospective method in the first quarter of fiscal 2018, and we are currently evaluating the impact of this guidance on our condensed financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment , which simplifies the existing two-step guidance for goodwill impairment testing by eliminating the second step resulting in a write-down to goodwill equal to the initial amount of impairment determined in step one. The ASU is to be applied prospectively for reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. We have early-adopted this standard in the first quarter of 2017, however, it has no impact on our financial statements unless we determine in the future that goodwill is impaired at one of our reporting units. Significant Accounting Policies There have been no material changes to our significant accounting policies, as compared to the significant accounting policies described in the audited consolidated financial statements and related notes included in the Annual Report. |
Business Acquisitions
Business Acquisitions | 3 Months Ended |
Mar. 25, 2017 | |
Business Combinations [Abstract] | |
Business Acquisitions | Business Acquisitions 2017 Acquisition During the current quarter, we completed an acquisition of a rebates and incentives business for total consideration of approximately $19.0 million , which includes $17.0 million cash on hand and approximately $2.0 million related to contingent consideration, which is a cash payment of up to $2.0 million based on the performance of the acquired business through December 31, 2017. In aggregate, $6.1 million cash was acquired, and based on our initial estimates of the purchase price allocation, $9.1 million was attributed to intangible assets, $9.1 million was attributed to goodwill, and $5.3 million was attributed to net tangible liabilities acquired. We expect to deduct goodwill and identifiable technology and intangible assets for tax purposes, a portion of which will commence upon settlement of contingent consideration and contingent liabilities. Pro forma results of operations have not been presented because they are not material to the condensed consolidated results of operations. For the intangible assets acquired during the current quarter, customer relationships have an average useful life of 10 years. We have not presented separate results of operations since closing or combined pro forma financial information of us and the acquisition since the beginning of fiscal 2016, as results of operations for the acquisition are immaterial. Acquisition-related expenses totaled $0.2 million , which we include in Transition and acquisition expense. 2016 Acquisitions There were no measurement period adjustments made during the first quarter of 2017. The measurement period for IMShopping, Inc. and its subsidiary (collectively, “NimbleCommerce”) is now closed. |
Financing
Financing | 3 Months Ended |
Mar. 25, 2017 | |
Debt Disclosure [Abstract] | |
Financing | Financing Credit Agreement In March 2017, we repaid $10.0 million of the term loan outstanding under our Credit Agreement, as amended and restated (the “Restated Credit Agreement”). On April 20, 2017, we borrowed an additional $50.0 million of term loans under the Restated Credit Agreement. The terms of the new term loans are substantially similar to the outstanding term loan. The following table presents the amounts due by maturity date of our term loan and convertible notes as of the date we drew down the additional $50.0 million (in thousands): As of April 20, 2017 2018 $ 10,000 2019 10,000 2020 20,000 2021 150,000 2022 500,000 Total long-term debt $ 690,000 On April 25, 2017, we entered into a First Amendment to the Restated Credit Agreement to extend our term loan commitments to January 12, 2018 and made certain modifications to the financial and other covenants to add operating flexibility, including modification of the leverage covenant and increasing the dollar limitation on dividends, stock repurchases and other restricted payments under certain conditions. As a result of the covenants in our Restated Credit Agreement which require us to maintain certain leverage ratios of total debt to adjusted EBITDA (as defined in the Restated Credit Agreement), and depending on our levels of adjusted EBITDA, we are limited in our ability to incur additional indebtedness either under the Restated Credit Agreement or through other debt facilities. These limitations also affect the amount of capital we can allocate to acquisitions, internal capital developments and capital returned to stockholders. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 25, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Fair Value Measurements We measure certain assets and liabilities at fair value on a recurring basis. The table below summarizes the fair values of these assets and liabilities as of March 25, 2017 , December 31, 2016 and March 26, 2016 (in thousands): March 25, 2017 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents Money market mutual funds $ 4,073 $ — $ — $ 4,073 Liabilities Contingent consideration $ — $ — $ 21,096 $ 21,096 December 31, 2016 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents Money market mutual funds $ 300,015 $ — $ — $ 300,015 Liabilities Contingent consideration $ — $ — $ 23,752 $ 23,752 March 26, 2016 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents Money market mutual funds $ 5,100 $ — $ — $ 5,100 Liabilities Contingent consideration $ — $ — $ — $ — Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities. Level 1 investments include money market mutual funds. Level 2 — Inputs other than quoted prices included in Level 1 that are either directly or indirectly observable. Level 2 investments include commercial paper. During the 12 weeks ended March 25, 2017 , there were no transfers between levels. Level 3 — Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the inputs that market participants would use in pricing. Level 3 includes the estimated fair value of our contingent consideration liabilities. Term loan —As of March 25, 2017 , using Level 2 inputs, we estimate the fair value of our term loan to be approximately $140.0 million . Convertible notes payable —As of March 25, 2017 , using Level 2 inputs, we estimate the fair value of our convertible notes payable to be approximately $520.0 million . Contingent Consideration —We estimate the fair value of the contingent consideration based on our estimates of the probability of achieving the relevant targets and discount rates reflecting the risk of meeting these targets. The changes in fair value of contingent consideration for the 12 weeks ended March 25, 2017 and March 26, 2016 are as follows (in thousands): 12 weeks ended March 25, 2017 March 26, 2016 Balance, beginning of period $ 23,752 $ — Addition from acquisition (see Note 2—Business Acquisitions ) 2,000 — Change in fair value of contingent consideration 1,040 — Settlements (5,696 ) — Balance, end of period $ 21,096 $ — We present the change in the fair value of contingent consideration in Change in fair value of contingent consideration and as a noncash adjustment to net income in our condensed consolidated statements of cash flows. The increase in fair value reflects the passage of time on the contingent consideration. As of March 25, 2017 , related to our acquisition of 888extramoney.com LLC (“Extrameasures”), $5.7 million was estimated to be payable for achieving relevant targets during the first earn-out year, and we estimated the fair value of the remaining contingent consideration based on our estimates of the amounts payable for and probability of achieving the relevant targets and a discount rate of 17% . A significant increase (decrease) in our estimates of the amounts payable for and probability of achieving the relevant targets or a significant decrease (increase) in the discount rate could materially increase (decrease) the estimated fair value of contingent consideration. |
Consolidated Financial Statemen
Consolidated Financial Statement Details | 3 Months Ended |
Mar. 25, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Consolidated Financial Statement Details | Consolidated Financial Statement Details The following tables represent the components of Other current assets , Other assets , Other current liabilities and Other liabilities as of March 25, 2017 , December 31, 2016 and March 26, 2016 consisted of the following (in thousands): March 25, 2017 December 31, 2016 March 26, 2016 Other current assets: Inventory $ 48,683 $ 43,950 $ 40,506 Deferred expenses 16,556 22,148 11,833 Income tax receivables 22,960 13,599 18,259 Other 44,313 51,678 29,763 Assets held for sale 44,951 — — Total other current assets $ 177,463 $ 131,375 $ 100,361 Other assets: Deferred program and contract costs $ 43,677 $ 48,066 $ 46,103 Other receivables 1,475 2,713 3,239 Income taxes receivable 2,358 2,358 6,155 Deferred financing costs 2,552 2,688 1,888 Other 35,585 30,031 22,698 Total other assets $ 85,647 $ 85,856 $ 80,083 Other current liabilities: Payroll and related liabilities $ 28,198 $ 24,944 $ 23,444 Income taxes payable 3,860 4,199 1,822 Acquisition liability 9,047 6,672 — Other payables and accrued liabilities 9,836 15,361 15,317 Liabilities held for sale 34,710 — — Total other current liabilities $ 85,651 $ 51,176 $ 40,583 Other liabilities: Acquisition liability $ 17,744 $ 17,080 $ — Income taxes payable 7,056 6,957 4,839 Deferred income and other liabilities 12,945 15,616 10,223 Total other liabilities $ 37,745 $ 39,653 $ 15,062 Assets held for sale During the first quarter of 2017, management approved a plan to sell all assets and liabilities related to The Grass Roots Group Holdings Limited and its subsidiaries (collectively, “Grass Roots”) Meetings & Events (“M&E”) business. It is probable that such sale will occur within one year. As a result, beginning from the time the plan was approved, each of the relevant asset and liability balances will be accounted for as held for sale and measured at the lower of its carrying value or fair value less cost to sell. Based on the purchase price allocation performed in the fourth quarter of 2016, we believe that the carrying value of all the relevant assets and liabilities does not exceed fair value less cost to sell. The following table presents the aggregate carrying amounts of the major classes of assets and liabilities related to the M&E business as of March 25, 2017 (in thousands): March 25, 2017 Accounts receivable, net $ 14,677 Other current assets 11,478 Property, equipment and technology, net 992 Goodwill 11,267 Intangible assets, net 5,483 Deferred income taxes 1,054 Total assets held for sale $ 44,951 Settlement payables $ 11,141 Accounts payable and accrued operating expenses 4,243 Consumer and customer deposits 1,712 Other current liabilities 3,536 Deferred revenue 13,965 Deferred income taxes 113 Total liabilities held for sale $ 34,710 During the first quarter of 2017, the M&E business incurred a pre-tax loss of $0.2 million during the period it was accounted for as asset held for sale. |
Goodwill
Goodwill | 3 Months Ended |
Mar. 25, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | Goodwill We have assigned goodwill to our U.S. Retail, International and Incentives & Rewards segments. To date, we have not recorded any impairment charges against or disposed of any reporting units with goodwill. During the first quarter of 2017, as a result of changes in reporting financial results to our Chief Operating Decision Maker (“CODM”), we concluded that we would report the international incentives businesses within the International reportable segment. Accordingly, we re-allocated a portion of the goodwill from the historical Incentives & Rewards segment to the International segment based on their relative fair values. A summary of changes in goodwill during the 12 weeks ended March 25, 2017 is as follows (in thousands): March 25, 2017 U.S. Retail Incentives & Rewards International Total Balance, beginning of period $ 99,685 $ 366,508 $ 104,205 $ 570,398 Re-allocation of goodwill to International — (7,152 ) 7,152 — Acquisition (see Note 2—Business Acquisitions ) — 9,098 — 9,098 Asset held for sale (see Note 5—Consolidated Financial Statement Details ) — — (11,267 ) (11,267 ) Foreign currency translation adjustments — 103 1,981 2,084 Balance, end of period $ 99,685 $ 368,557 $ 102,071 $ 570,313 |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 25, 2017 | |
Equity [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation During the 12 weeks ended March 25, 2017 , our Board of Directors granted 876,001 restricted stock units and 200,700 performance stock units. The following table presents total stock-based compensation expense according to the income statement line in our condensed consolidated statements of income (loss) for the 12 weeks ended March 25, 2017 and March 26, 2016 (in thousands): 12 weeks ended March 25, 2017 March 26, 2016 Processing and services $ 1,702 $ 1,409 Sales and marketing 2,812 2,814 Cost of products sold 17 16 General and administrative 3,870 3,761 Total stock-based compensation expense $ 8,401 $ 8,000 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 25, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Our effective tax rates were 42.2% and 48.3% for the 12 weeks ended March 25, 2017 and March 26, 2016 , respectively. The effective rate for the 12 weeks ended March 25, 2017 was lower primarily due to a decreased rate benefit for excess tax benefits of employee stock-based compensation as a result of higher pre-tax loss for the 12 weeks ended March 25, 2017 . |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 25, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Contingencies From time to time, we enter into contracts containing provisions that require us to indemnify various parties against certain potential claims from third parties. Under contracts with certain issuing banks, we are responsible to the banks for any unrecovered overdrafts on cardholders’ accounts. Under contracts with certain content providers, retail distribution partners and issuing banks, we are responsible for potential losses resulting from certain claims from third parties. Because the indemnity amounts associated with these agreements are not explicitly stated, the maximum amount of the obligation cannot be reasonably estimated. Historically, we have paid immaterial amounts pursuant to these indemnification provisions. We are subject to audits related to various indirect taxes, including, but not limited to, sales and use taxes, value-added tax, and goods and services tax, in various foreign and state jurisdictions. We evaluate our exposure related to these audits and potential audits and do not believe that it is probable that any audit would hold us liable for any material amounts due. Legal Matters There are various claims and lawsuits arising in the normal course of business pending against us, including the matters described below, some of which seek damages and other relief which, if granted, may require future cash expenditures. Management does not believe that it is probable that the resolution of these matters would result in any liability that would materially affect our results of operations or financial condition. On March 30, 2015, Greg Haney in his capacity as Seller Representative for CardLab, Inc. filed a lawsuit against us in the Delaware Chancery Court (CardLab, Inc. v. Blackhawk Network Holdings, Inc., Case No. 10851). The complaint generally alleges that we failed to disclose material information relating to a potential earn-out payment in connection with our acquisition of CardLab, Inc. in 2014. We believe that the suit is without merit, and are vigorously defending ourselves against these claims. On June 8, 2015, we filed a motion to dismiss the complaint. On June 22, 2015, the plaintiff filed an amended complaint. On July 7, 2015, we filed a motion to dismiss the case in its entirety. On February 26, 2016, the Court granted the motion to dismiss in part, dismissing two claims of the amended complaint. On March 25, 2016 we filed our answer denying the remaining claims and a counterclaim for attorneys’ fees pursuant to the merger agreement between the parties. On June 22, 2016, the plaintiff filed a motion to dismiss our counterclaim for indemnification. On July 22, 2016, we filed an amended counterclaim in response. The litigation is in the early stage of discovery. We believe the likelihood of loss is remote. In addition, we transact business in non-U.S. markets and may, from time to time, be subject to disputes and tax audits by foreign tax authorities related to indirect taxes typically on commissions or fees we receive from non-resident content providers. After the application of third party indemnities, our present exposure is approximately $5.6 million , primarily in a single jurisdiction. If we were to be assessed for this exposure, we believe it is probable that we will prevail. |
Segment Reporting
Segment Reporting | 3 Months Ended |
Mar. 25, 2017 | |
Segment Reporting [Abstract] | |
Segment Reporting | Segment Reporting Our three reportable segments are U.S. Retail, International and Incentives & Rewards. During the first quarter of 2017, as a result of changes in reporting financial results to our CODM, we concluded that we would report the international incentives businesses within the International reportable segment. We also determined that it would be appropriate to allocate all costs that have been previously reported within Corporate and Unallocated: i) account management and marketing personnel, ii) the substantial majority of our technology personnel and related depreciation and amortization of technology and related hardware, iii) accounting, finance, legal, human resources and other administrative functions and iv) noncash charges including amortization of acquisition intangibles, stock-based compensation and change in fair value of contingent consideration, to the respective reportable segments. We do not assess performance based on assets and do not provide information on the assets of our reportable segments to our CODM. The key metrics used by our CODM to assess segment performance include Operating revenues , Operating revenues, net of Partner distribution expense and segment profit. The following tables present the key metrics used by our CODM for the evaluation of segment performance, including certain significant noncash charges (consisting of certain depreciation and amortization of property, equipment and technology and distribution partner stock-based compensation expense) which have been deducted from the segment profit amounts shown below, and reconciliations of these amounts to our condensed consolidated financial statements (in thousands): 12 weeks ended March 25, 2017 U.S. Retail Incentives & Rewards International Consolidated Total operating revenues $ 207,638 $ 63,225 $ 136,373 $ 407,236 Partner distribution expense 101,713 4,086 73,677 179,476 Operating revenues, net of Partner distribution expense 105,925 59,139 62,696 227,760 Other operating expenses 108,287 67,182 69,322 244,791 Segment profit (loss) / Operating income (loss) $ (2,362 ) $ (8,043 ) $ (6,626 ) (17,031 ) Other income (expense) (6,107 ) Loss before income tax expense $ (23,138 ) Noncash charges $ 14,084 $ 15,598 $ 7,593 12 weeks ended March 26, 2016 U.S. Retail Incentives & Rewards International Consolidated Total operating revenues $ 216,271 $ 61,276 $ 88,915 $ 366,462 Partner distribution expense 105,684 2,792 63,679 172,155 Operating revenues, net of Partner distribution expense 110,587 58,484 25,236 194,307 Other operating expenses 102,062 63,971 31,318 197,351 Segment profit (loss) / Operating income (loss) $ 8,525 $ (5,487 ) $ (6,082 ) (3,044 ) Other income (expense) (3,654 ) Income (loss) before income tax expense $ (6,698 ) Noncash charges $ 12,085 $ 16,448 $ 3,515 |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Mar. 25, 2017 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | 11 . Earnings Per Share The following table provides reconciliations of net income (loss) and shares used in calculating basic earnings (loss) per share (“EPS”) to those used in calculating diluted EPS (in thousands, except per share amounts): 12 weeks ended March 25, 2017 March 26, 2016 Basic Diluted Basic Diluted Net income (loss) attributable to Blackhawk Network Holdings, Inc. $ (13,486 ) $ (13,486 ) $ (3,553 ) $ (3,553 ) Distributed and undistributed earnings allocated to participating securities — — (15 ) (15 ) Net income (loss) attributable to common stockholders $ (13,486 ) $ (13,486 ) $ (3,568 ) $ (3,568 ) Weighted-average common shares outstanding 55,904 55,904 55,752 55,752 Common share equivalents — — Weighted-average shares outstanding 55,904 55,752 Earnings (loss) per share $ (0.24 ) $ (0.24 ) $ (0.06 ) $ (0.06 ) The weighted-average common shares outstanding for diluted EPS for the 12 weeks ended March 25, 2017 and March 26, 2016 , excluded approximately 5,307,000 and 5,110,000 , respectively, of total potential common stock outstanding because the effect would have been anti-dilutive. |
The Company and Significant A18
The Company and Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 25, 2017 | |
Accounting Policies [Abstract] | |
The Company | The Company Blackhawk Network Holdings, Inc., together with its subsidiaries (“we”, “us”, “our”, the “Company”), is a leading prepaid payment network utilizing proprietary technology to offer consumers and businesses a broad selection of prepaid cards in physical and electronic forms, as well as complementary prepaid products, payment services and incentives solutions. We currently offer our products and/or solutions directly or through commercial relationships in the United States and 25 other countries and can deliver solutions in over 100 countries. Our product offerings include single-use gift cards; loyalty, incentive and reward products and services; prepaid telecom products and prepaid financial services products, including general purpose reloadable (“GPR”) cards, and our reload network (collectively, “prepaid products”). We offer gift cards from leading consumer brands (known as “closed loop”) as well as branded gift and incentive cards from leading payment network card associations such as American Express, Discover, MasterCard and Visa (known as “open loop”) and prepaid telecom products offered by prepaid wireless telecom carriers. We also distribute GPR cards and operate a proprietary reload network named Reloadit, which allows consumers to reload funds onto their previously purchased GPR cards. We distribute these prepaid products across multiple high-traffic channels such as grocery, convenience, specialty and online retailers (referred to as “retail distribution partners”) in the Americas, Europe, Africa, Australia and Asia and provide these prepaid products and related services to business clients for their loyalty, incentive and reward programs. |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements of Blackhawk Network Holdings, Inc. are unaudited. We have prepared our unaudited interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. We have condensed or omitted certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP pursuant to such rules and regulations. Accordingly, our interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K, filed with the SEC on February 27, 2017 (the “Annual Report”). We have prepared our condensed consolidated financial statements on the same basis as our annual audited consolidated financial statements and, in the opinion of management, have reflected all adjustments, which include only normal recurring adjustments, necessary to present fairly our financial position and results of operations for the interim periods presented. Our results for the interim periods are not necessarily reflective of the results to be expected for the year ending December 30, 2017 or for any other interim period or other future year. Our condensed consolidated balance sheet as of December 31, 2016 , included herein was derived from our audited consolidated financial statements as of that date but does not include all disclosures required by GAAP for annual financial statements, including notes to the financial statements. |
Seasonality | Seasonality For our retail business, a significant portion of gift card sales occurs in late December each year during the holiday selling season. As a result, we earn a significant portion of our revenues, net income and cash flows during the fourth quarter of each year and remit the majority of the cash, less commissions, to our content providers in January of the following year. The timing of our fiscal year-end, December holiday sales and the related January cash settlement with content providers significantly increases our Cash and cash equivalents, Settlement receivables and Settlement payables balances at the end of each fiscal year relative to normal daily balances. The cash settlement with our content providers in January accounts for the majority of the use of cash from operating activities in our condensed consolidated statements of cash flows during our first three fiscal quarters. We also experience an increase in revenues, net income and cash flows during the second quarter of each year, which we primarily attribute to the Mother’s Day, Father’s Day and graduation gifting season and the Easter holiday. Depending on when the Easter holiday occurs, the associated increase is in either the first or second quarter. As a result, quarterly financial results are not necessarily reflective of the results to be expected for the year or any other interim or future period. Seasonality also impacts our incentives businesses, but such impact is smaller in comparison to our retail business. |
Recently Issued or Adopted Accounting Pronouncements | Recently Issued or Adopted Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (Topic 606), which along with amendments issued in 2015 and 2016, will replace nearly all current U.S. GAAP guidance on this topic with a comprehensive revenue measurement and recognition standard and expanded disclosure requirements. Under the new standard, revenue is recognized when a customer obtains control of promised goods or services and is recognized in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. This new guidance is to be applied retrospectively either to each reporting period presented (full retrospective method) or with the cumulative effect of initially applying the guidance at the date of initial application for reporting periods beginning after December 15, 2017. Early adoption is not permitted. We currently anticipate adopting this standard using the full retrospective method in the first quarter of fiscal 2018, and we are currently evaluating the impact of this guidance on our condensed financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment , which simplifies the existing two-step guidance for goodwill impairment testing by eliminating the second step resulting in a write-down to goodwill equal to the initial amount of impairment determined in step one. The ASU is to be applied prospectively for reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. We have early-adopted this standard in the first quarter of 2017, however, it has no impact on our financial statements unless we determine in the future that goodwill is impaired at one of our reporting units. |
Financing (Tables)
Financing (Tables) | 3 Months Ended |
Mar. 25, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Maturities of Long-term Debt | The following table presents the amounts due by maturity date of our term loan and convertible notes as of the date we drew down the additional $50.0 million (in thousands): As of April 20, 2017 2018 $ 10,000 2019 10,000 2020 20,000 2021 150,000 2022 500,000 Total long-term debt $ 690,000 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 25, 2017 | |
Fair Value Disclosures [Abstract] | |
Summary of Fair Value of Assets, Liabilities and Equity Instruments on Recurring Basis | The table below summarizes the fair values of these assets and liabilities as of March 25, 2017 , December 31, 2016 and March 26, 2016 (in thousands): March 25, 2017 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents Money market mutual funds $ 4,073 $ — $ — $ 4,073 Liabilities Contingent consideration $ — $ — $ 21,096 $ 21,096 December 31, 2016 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents Money market mutual funds $ 300,015 $ — $ — $ 300,015 Liabilities Contingent consideration $ — $ — $ 23,752 $ 23,752 March 26, 2016 Level 1 Level 2 Level 3 Total Assets Cash and cash equivalents Money market mutual funds $ 5,100 $ — $ — $ 5,100 Liabilities Contingent consideration $ — $ — $ — $ — |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation | The changes in fair value of contingent consideration for the 12 weeks ended March 25, 2017 and March 26, 2016 are as follows (in thousands): 12 weeks ended March 25, 2017 March 26, 2016 Balance, beginning of period $ 23,752 $ — Addition from acquisition (see Note 2—Business Acquisitions ) 2,000 — Change in fair value of contingent consideration 1,040 — Settlements (5,696 ) — Balance, end of period $ 21,096 $ — |
Consolidated Financial Statem21
Consolidated Financial Statement Details (Tables) | 3 Months Ended |
Mar. 25, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Other Current Assets | The following tables represent the components of Other current assets , Other assets , Other current liabilities and Other liabilities as of March 25, 2017 , December 31, 2016 and March 26, 2016 consisted of the following (in thousands): March 25, 2017 December 31, 2016 March 26, 2016 Other current assets: Inventory $ 48,683 $ 43,950 $ 40,506 Deferred expenses 16,556 22,148 11,833 Income tax receivables 22,960 13,599 18,259 Other 44,313 51,678 29,763 Assets held for sale 44,951 — — Total other current assets $ 177,463 $ 131,375 $ 100,361 Other assets: Deferred program and contract costs $ 43,677 $ 48,066 $ 46,103 Other receivables 1,475 2,713 3,239 Income taxes receivable 2,358 2,358 6,155 Deferred financing costs 2,552 2,688 1,888 Other 35,585 30,031 22,698 Total other assets $ 85,647 $ 85,856 $ 80,083 Other current liabilities: Payroll and related liabilities $ 28,198 $ 24,944 $ 23,444 Income taxes payable 3,860 4,199 1,822 Acquisition liability 9,047 6,672 — Other payables and accrued liabilities 9,836 15,361 15,317 Liabilities held for sale 34,710 — — Total other current liabilities $ 85,651 $ 51,176 $ 40,583 Other liabilities: Acquisition liability $ 17,744 $ 17,080 $ — Income taxes payable 7,056 6,957 4,839 Deferred income and other liabilities 12,945 15,616 10,223 Total other liabilities $ 37,745 $ 39,653 $ 15,062 |
Schedule of Other Assets | The following tables represent the components of Other current assets , Other assets , Other current liabilities and Other liabilities as of March 25, 2017 , December 31, 2016 and March 26, 2016 consisted of the following (in thousands): March 25, 2017 December 31, 2016 March 26, 2016 Other current assets: Inventory $ 48,683 $ 43,950 $ 40,506 Deferred expenses 16,556 22,148 11,833 Income tax receivables 22,960 13,599 18,259 Other 44,313 51,678 29,763 Assets held for sale 44,951 — — Total other current assets $ 177,463 $ 131,375 $ 100,361 Other assets: Deferred program and contract costs $ 43,677 $ 48,066 $ 46,103 Other receivables 1,475 2,713 3,239 Income taxes receivable 2,358 2,358 6,155 Deferred financing costs 2,552 2,688 1,888 Other 35,585 30,031 22,698 Total other assets $ 85,647 $ 85,856 $ 80,083 Other current liabilities: Payroll and related liabilities $ 28,198 $ 24,944 $ 23,444 Income taxes payable 3,860 4,199 1,822 Acquisition liability 9,047 6,672 — Other payables and accrued liabilities 9,836 15,361 15,317 Liabilities held for sale 34,710 — — Total other current liabilities $ 85,651 $ 51,176 $ 40,583 Other liabilities: Acquisition liability $ 17,744 $ 17,080 $ — Income taxes payable 7,056 6,957 4,839 Deferred income and other liabilities 12,945 15,616 10,223 Total other liabilities $ 37,745 $ 39,653 $ 15,062 |
Schedule of Other Current Liabilities | The following tables represent the components of Other current assets , Other assets , Other current liabilities and Other liabilities as of March 25, 2017 , December 31, 2016 and March 26, 2016 consisted of the following (in thousands): March 25, 2017 December 31, 2016 March 26, 2016 Other current assets: Inventory $ 48,683 $ 43,950 $ 40,506 Deferred expenses 16,556 22,148 11,833 Income tax receivables 22,960 13,599 18,259 Other 44,313 51,678 29,763 Assets held for sale 44,951 — — Total other current assets $ 177,463 $ 131,375 $ 100,361 Other assets: Deferred program and contract costs $ 43,677 $ 48,066 $ 46,103 Other receivables 1,475 2,713 3,239 Income taxes receivable 2,358 2,358 6,155 Deferred financing costs 2,552 2,688 1,888 Other 35,585 30,031 22,698 Total other assets $ 85,647 $ 85,856 $ 80,083 Other current liabilities: Payroll and related liabilities $ 28,198 $ 24,944 $ 23,444 Income taxes payable 3,860 4,199 1,822 Acquisition liability 9,047 6,672 — Other payables and accrued liabilities 9,836 15,361 15,317 Liabilities held for sale 34,710 — — Total other current liabilities $ 85,651 $ 51,176 $ 40,583 Other liabilities: Acquisition liability $ 17,744 $ 17,080 $ — Income taxes payable 7,056 6,957 4,839 Deferred income and other liabilities 12,945 15,616 10,223 Total other liabilities $ 37,745 $ 39,653 $ 15,062 |
Schedule of Other Liabilities | The following tables represent the components of Other current assets , Other assets , Other current liabilities and Other liabilities as of March 25, 2017 , December 31, 2016 and March 26, 2016 consisted of the following (in thousands): March 25, 2017 December 31, 2016 March 26, 2016 Other current assets: Inventory $ 48,683 $ 43,950 $ 40,506 Deferred expenses 16,556 22,148 11,833 Income tax receivables 22,960 13,599 18,259 Other 44,313 51,678 29,763 Assets held for sale 44,951 — — Total other current assets $ 177,463 $ 131,375 $ 100,361 Other assets: Deferred program and contract costs $ 43,677 $ 48,066 $ 46,103 Other receivables 1,475 2,713 3,239 Income taxes receivable 2,358 2,358 6,155 Deferred financing costs 2,552 2,688 1,888 Other 35,585 30,031 22,698 Total other assets $ 85,647 $ 85,856 $ 80,083 Other current liabilities: Payroll and related liabilities $ 28,198 $ 24,944 $ 23,444 Income taxes payable 3,860 4,199 1,822 Acquisition liability 9,047 6,672 — Other payables and accrued liabilities 9,836 15,361 15,317 Liabilities held for sale 34,710 — — Total other current liabilities $ 85,651 $ 51,176 $ 40,583 Other liabilities: Acquisition liability $ 17,744 $ 17,080 $ — Income taxes payable 7,056 6,957 4,839 Deferred income and other liabilities 12,945 15,616 10,223 Total other liabilities $ 37,745 $ 39,653 $ 15,062 |
Schedule of Assets Held-for-sale | The following table presents the aggregate carrying amounts of the major classes of assets and liabilities related to the M&E business as of March 25, 2017 (in thousands): March 25, 2017 Accounts receivable, net $ 14,677 Other current assets 11,478 Property, equipment and technology, net 992 Goodwill 11,267 Intangible assets, net 5,483 Deferred income taxes 1,054 Total assets held for sale $ 44,951 Settlement payables $ 11,141 Accounts payable and accrued operating expenses 4,243 Consumer and customer deposits 1,712 Other current liabilities 3,536 Deferred revenue 13,965 Deferred income taxes 113 Total liabilities held for sale $ 34,710 |
Goodwill (Tables)
Goodwill (Tables) | 3 Months Ended |
Mar. 25, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Summary of Changes in Goodwill | A summary of changes in goodwill during the 12 weeks ended March 25, 2017 is as follows (in thousands): March 25, 2017 U.S. Retail Incentives & Rewards International Total Balance, beginning of period $ 99,685 $ 366,508 $ 104,205 $ 570,398 Re-allocation of goodwill to International — (7,152 ) 7,152 — Acquisition (see Note 2—Business Acquisitions ) — 9,098 — 9,098 Asset held for sale (see Note 5—Consolidated Financial Statement Details ) — — (11,267 ) (11,267 ) Foreign currency translation adjustments — 103 1,981 2,084 Balance, end of period $ 99,685 $ 368,557 $ 102,071 $ 570,313 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Mar. 25, 2017 | |
Equity [Abstract] | |
Schedule of Stock-Based Compensation Expense | The following table presents total stock-based compensation expense according to the income statement line in our condensed consolidated statements of income (loss) for the 12 weeks ended March 25, 2017 and March 26, 2016 (in thousands): 12 weeks ended March 25, 2017 March 26, 2016 Processing and services $ 1,702 $ 1,409 Sales and marketing 2,812 2,814 Cost of products sold 17 16 General and administrative 3,870 3,761 Total stock-based compensation expense $ 8,401 $ 8,000 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
Mar. 25, 2017 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information | The following tables present the key metrics used by our CODM for the evaluation of segment performance, including certain significant noncash charges (consisting of certain depreciation and amortization of property, equipment and technology and distribution partner stock-based compensation expense) which have been deducted from the segment profit amounts shown below, and reconciliations of these amounts to our condensed consolidated financial statements (in thousands): 12 weeks ended March 25, 2017 U.S. Retail Incentives & Rewards International Consolidated Total operating revenues $ 207,638 $ 63,225 $ 136,373 $ 407,236 Partner distribution expense 101,713 4,086 73,677 179,476 Operating revenues, net of Partner distribution expense 105,925 59,139 62,696 227,760 Other operating expenses 108,287 67,182 69,322 244,791 Segment profit (loss) / Operating income (loss) $ (2,362 ) $ (8,043 ) $ (6,626 ) (17,031 ) Other income (expense) (6,107 ) Loss before income tax expense $ (23,138 ) Noncash charges $ 14,084 $ 15,598 $ 7,593 12 weeks ended March 26, 2016 U.S. Retail Incentives & Rewards International Consolidated Total operating revenues $ 216,271 $ 61,276 $ 88,915 $ 366,462 Partner distribution expense 105,684 2,792 63,679 172,155 Operating revenues, net of Partner distribution expense 110,587 58,484 25,236 194,307 Other operating expenses 102,062 63,971 31,318 197,351 Segment profit (loss) / Operating income (loss) $ 8,525 $ (5,487 ) $ (6,082 ) (3,044 ) Other income (expense) (3,654 ) Income (loss) before income tax expense $ (6,698 ) Noncash charges $ 12,085 $ 16,448 $ 3,515 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Mar. 25, 2017 | |
Earnings Per Share [Abstract] | |
Reconciliations of Net Income and Shares Used in Calculating Basic and Diluted EPS | The following table provides reconciliations of net income (loss) and shares used in calculating basic earnings (loss) per share (“EPS”) to those used in calculating diluted EPS (in thousands, except per share amounts): 12 weeks ended March 25, 2017 March 26, 2016 Basic Diluted Basic Diluted Net income (loss) attributable to Blackhawk Network Holdings, Inc. $ (13,486 ) $ (13,486 ) $ (3,553 ) $ (3,553 ) Distributed and undistributed earnings allocated to participating securities — — (15 ) (15 ) Net income (loss) attributable to common stockholders $ (13,486 ) $ (13,486 ) $ (3,568 ) $ (3,568 ) Weighted-average common shares outstanding 55,904 55,904 55,752 55,752 Common share equivalents — — Weighted-average shares outstanding 55,904 55,752 Earnings (loss) per share $ (0.24 ) $ (0.24 ) $ (0.06 ) $ (0.06 ) |
The Company and Significant A26
The Company and Significant Accounting Policies (Detail) | Mar. 25, 2017country |
United States | |
Description of Business [Line Items] | |
Number of countries in which entity operates | 1 |
Foreign Countries | |
Description of Business [Line Items] | |
Number of countries in which entity operates | 25 |
Business Acquisitions (Details)
Business Acquisitions (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 25, 2017 | Mar. 26, 2016 | |
Business Acquisition | ||
Total consideration transferred | $ 19,000 | |
Purchase consideration | 17,000 | |
Contingent consideration transferred | 2,000 | |
Potential contingent consideration payment | 2,000 | |
Cash acquired | 6,100 | |
Intangible assets acquired | 9,100 | |
Goodwill acquired during period | 9,098 | |
Net tangible liabilities acquired | (5,300) | |
Acquisition related expenses | $ 451 | $ 945 |
Customer Relationships [Member] | ||
Business Acquisition | ||
Weighted average useful lives of acquired intangible assets | 10 years | |
Touch Point [Member] | ||
Business Acquisition | ||
Acquisition related expenses | $ 200 |
Financing - Credit Agreement (D
Financing - Credit Agreement (Details) - USD ($) $ in Thousands | Apr. 20, 2017 | Mar. 25, 2017 | Mar. 26, 2016 |
Debt Instrument [Line Items] | |||
Term loan, repayments | $ 10,000 | $ 37,500 | |
Term Loan | Restated Credit Agreement | |||
Debt Instrument [Line Items] | |||
Term loan, repayments | $ 10,000 | ||
Subsequent Event | Term Loan | Restated Credit Agreement | |||
Debt Instrument [Line Items] | |||
Term loan borrowings | $ 50,000 |
Financing - Maturities of Conve
Financing - Maturities of Convertible Notes (Details) - Subsequent Event $ in Thousands | Apr. 20, 2017USD ($) |
Debt Instrument [Line Items] | |
2,018 | $ 10,000 |
2,019 | 10,000 |
2,020 | 20,000 |
2,021 | 150,000 |
2,022 | 500,000 |
Total long-term debt | $ 690,000 |
Fair Value Measurements - Summa
Fair Value Measurements - Summary of Fair Value of Assets, Liabilities and Equity Instruments on Recurring Basis (Detail) - Fair Value Measurements, Recurring - USD ($) $ in Thousands | Mar. 25, 2017 | Dec. 31, 2016 | Mar. 26, 2016 |
Liabilities | |||
Contingent consideration | $ 21,096 | $ 23,752 | $ 0 |
Money Market Mutual Funds | |||
Assets | |||
Cash and cash equivalents | 4,073 | 300,015 | 5,100 |
Level 1 | |||
Liabilities | |||
Contingent consideration | 0 | 0 | 0 |
Level 1 | Money Market Mutual Funds | |||
Assets | |||
Cash and cash equivalents | 4,073 | 300,015 | 5,100 |
Level 2 | |||
Liabilities | |||
Contingent consideration | 0 | 0 | 0 |
Level 2 | Money Market Mutual Funds | |||
Assets | |||
Cash and cash equivalents | 0 | 0 | 0 |
Level 3 | |||
Liabilities | |||
Contingent consideration | 21,096 | 23,752 | 0 |
Level 3 | Money Market Mutual Funds | |||
Assets | |||
Cash and cash equivalents | $ 0 | $ 0 | $ 0 |
Fair Value Measurements - Sum31
Fair Value Measurements - Summary of Changes in Fair Value of Contingent Consideration Classified as Level 3 (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 25, 2017 | Mar. 26, 2016 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation | ||
Balance - beginning of period | $ 23,752 | $ 0 |
Addition from acquisition (see Note 2—Business Acquisitions) | 2,000 | 0 |
Change in fair value of contingent consideration | 1,040 | 0 |
Settlements | (5,696) | 0 |
Balance - end of period | $ 21,096 | $ 0 |
Fair Value Measurements (Detail
Fair Value Measurements (Detail) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 25, 2017 | Mar. 26, 2016 | |
Business Acquisition | ||
Settlements | $ (5,696) | $ 0 |
Fair value inputs, discount rate percentage | 17.00% | |
Level 2 | Term Loan | ||
Business Acquisition | ||
Fair value of debt instrument | $ 140,000 | |
Level 2 | Convertible Notes Payable [Member] | ||
Business Acquisition | ||
Fair value of debt instrument | $ 520,000 |
Consolidated Financial Statem33
Consolidated Financial Statement Details - Components of Other Assets, Other Current Liabilities, and Other Liabilities (Detail) - USD ($) $ in Thousands | Mar. 25, 2017 | Dec. 31, 2016 | Mar. 26, 2016 |
Other current assets: | |||
Inventory | $ 48,683 | $ 43,950 | $ 40,506 |
Deferred expenses | 16,556 | 22,148 | 11,833 |
Income tax receivables | 22,960 | 13,599 | 18,259 |
Other | 44,313 | 51,678 | 29,763 |
Total other current assets | 177,463 | 131,375 | 100,361 |
Other assets: | |||
Deferred program and contract costs | 43,677 | 48,066 | 46,103 |
Other receivables | 1,475 | 2,713 | 3,239 |
Income taxes receivable | 2,358 | 2,358 | 6,155 |
Deferred financing costs | 2,552 | 2,688 | 1,888 |
Other | 35,585 | 30,031 | 22,698 |
Assets held for sale | 44,951 | 0 | 0 |
Total other assets | 85,647 | 85,856 | 80,083 |
Other current liabilities: | |||
Payroll and related liabilities | 28,198 | 24,944 | 23,444 |
Income taxes payable | 3,860 | 4,199 | 1,822 |
Acquisition liability | 9,047 | 6,672 | 0 |
Other payables and accrued liabilities | 9,836 | 15,361 | 15,317 |
Liabilities held for sale | 34,710 | 0 | 0 |
Total other current liabilities | 85,651 | 51,176 | 40,583 |
Other liabilities: | |||
Acquisition liability | 17,744 | 17,080 | 0 |
Income taxes payable | 7,056 | 6,957 | 4,839 |
Deferred income and other liabilities | 12,945 | 15,616 | 10,223 |
Total other liabilities | $ 37,745 | $ 39,653 | $ 15,062 |
Consolidated Financial Statem34
Consolidated Financial Statement Details - Assets Held for Sale (Details) - USD ($) $ in Thousands | Mar. 25, 2017 | Dec. 31, 2016 | Mar. 26, 2016 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Total assets held for sale | $ 44,951 | $ 0 | $ 0 |
Total liabilities held for sale | 34,710 | $ 0 | $ 0 |
Grass Roots, Inc., M&E Business [Member] | Assets Held-for-sale | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Accounts receivable, net | 14,677 | ||
Other current assets | 11,478 | ||
Property, equipment and technology, net | 992 | ||
Goodwill | 11,267 | ||
Intangible assets, net | 5,483 | ||
Deferred income taxes | 1,054 | ||
Total assets held for sale | 44,951 | ||
Settlement payables | 11,141 | ||
Accounts payable and accrued operating expenses | 4,243 | ||
Consumer and customer deposits | 1,712 | ||
Other current liabilities | 3,536 | ||
Deferred revenue | 13,965 | ||
Deferred income taxes | 113 | ||
Total liabilities held for sale | $ 34,710 |
Consolidated Financial Statem35
Consolidated Financial Statement Details (Details) $ in Millions | 3 Months Ended |
Mar. 25, 2017USD ($) | |
Grass Roots, Inc. | Assets Held-for-sale | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |
Loss from operations, before tax | $ 0.2 |
Goodwill - Summary of Changes i
Goodwill - Summary of Changes in Goodwill (Detail) $ in Thousands | 3 Months Ended |
Mar. 25, 2017USD ($) | |
Goodwill | |
Balance, beginning of period | $ 570,398 |
Transfers of goodwill | 0 |
Acquisition (see Note 2—Business Acquisitions) | 9,098 |
Foreign currency translation adjustments | 2,084 |
Balance, end of period | 570,313 |
U.S. Retail | |
Goodwill | |
Balance, beginning of period | 99,685 |
Transfers of goodwill | 0 |
Acquisition (see Note 2—Business Acquisitions) | 0 |
Foreign currency translation adjustments | 0 |
Balance, end of period | 99,685 |
Incentives & Rewards | |
Goodwill | |
Balance, beginning of period | 366,508 |
Transfers of goodwill | (7,152) |
Acquisition (see Note 2—Business Acquisitions) | 9,098 |
Foreign currency translation adjustments | 103 |
Balance, end of period | 368,557 |
International | |
Goodwill | |
Balance, beginning of period | 104,205 |
Transfers of goodwill | 7,152 |
Acquisition (see Note 2—Business Acquisitions) | 0 |
Foreign currency translation adjustments | 1,981 |
Balance, end of period | 102,071 |
Assets Held-for-sale | |
Goodwill | |
Transfers of goodwill | (11,267) |
Assets Held-for-sale | U.S. Retail | |
Goodwill | |
Transfers of goodwill | 0 |
Assets Held-for-sale | Incentives & Rewards | |
Goodwill | |
Transfers of goodwill | 0 |
Assets Held-for-sale | International | |
Goodwill | |
Transfers of goodwill | $ (11,267) |
Stock-Based Compensation (Detai
Stock-Based Compensation (Detail) | 3 Months Ended |
Mar. 25, 2017shares | |
Restricted Stock Units | |
Share-based Compensation Arrangement by Share-based Payment Award | |
Stock awards and stock units granted during period (in shares) | 876,001 |
Performance Stock Units | |
Share-based Compensation Arrangement by Share-based Payment Award | |
Stock awards and stock units granted during period (in shares) | 200,700 |
Stock-Based Compensation - Sche
Stock-Based Compensation - Schedule of Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 25, 2017 | Mar. 26, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | ||
Stock-based compensation expense | $ 8,401 | $ 8,000 |
Processing and services | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | ||
Stock-based compensation expense | 1,702 | 1,409 |
Sales and marketing | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | ||
Stock-based compensation expense | 2,812 | 2,814 |
Cost of products sold | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | ||
Stock-based compensation expense | 17 | 16 |
General and administrative | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost | ||
Stock-based compensation expense | $ 3,870 | $ 3,761 |
Income Taxes (Detail)
Income Taxes (Detail) | 3 Months Ended | |
Mar. 25, 2017 | Mar. 26, 2016 | |
Income Tax Disclosure [Abstract] | ||
Effective income tax rate (percentage) | 42.20% | 48.30% |
Commitments and Contingencies (
Commitments and Contingencies (Details) $ in Millions | Feb. 26, 2016claim | Mar. 25, 2017USD ($) |
Foreign Tax Jurisdiction | ||
Loss Contingencies [Line Items] | ||
Estimate of possible loss, tax liability | $ | $ 5.6 | |
Pending Litigation | CardLab, Inc. v. Blackhawk Network Holdings, Inc., Case No. 10851 | ||
Loss Contingencies [Line Items] | ||
Number of claims dismissed | claim | 2 |
Segment Reporting - Schedule of
Segment Reporting - Schedule of Segment Reporting Information (Detail) $ in Thousands | 3 Months Ended | |
Mar. 25, 2017USD ($)segment | Mar. 26, 2016USD ($) | |
Segment Reporting Information | ||
Number of reportable segments | segment | 3 | |
Total operating revenues | $ 407,236 | $ 366,462 |
Partner distribution expense | 179,476 | 172,155 |
Operating revenues, net of Partner distribution expense | 227,760 | 194,307 |
Other operating expenses | 244,791 | 197,351 |
OPERATING INCOME (LOSS) | (17,031) | (3,044) |
Other income (expense) | (6,107) | (3,654) |
INCOME (LOSS) BEFORE INCOME TAX EXPENSE | (23,138) | (6,698) |
U.S. Retail | ||
Segment Reporting Information | ||
Total operating revenues | 207,638 | 216,271 |
Partner distribution expense | 101,713 | 105,684 |
Operating revenues, net of Partner distribution expense | 105,925 | 110,587 |
Other operating expenses | 108,287 | 102,062 |
OPERATING INCOME (LOSS) | (2,362) | 8,525 |
Noncash charges | 14,084 | 12,085 |
Incentives & Rewards | ||
Segment Reporting Information | ||
Total operating revenues | 63,225 | 61,276 |
Partner distribution expense | 4,086 | 2,792 |
Operating revenues, net of Partner distribution expense | 59,139 | 58,484 |
Other operating expenses | 67,182 | 63,971 |
OPERATING INCOME (LOSS) | (8,043) | (5,487) |
Noncash charges | 15,598 | 16,448 |
International | ||
Segment Reporting Information | ||
Total operating revenues | 136,373 | 88,915 |
Partner distribution expense | 73,677 | 63,679 |
Operating revenues, net of Partner distribution expense | 62,696 | 25,236 |
Other operating expenses | 69,322 | 31,318 |
OPERATING INCOME (LOSS) | (6,626) | (6,082) |
Noncash charges | $ 7,593 | $ 3,515 |
Earnings Per Share - Reconcilia
Earnings Per Share - Reconciliations of Net Income and Shares Used in Calculating Basic and Diluted EPS (Detail) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 25, 2017 | Mar. 26, 2016 | |
Earnings Per Share [Abstract] | ||
Net income (loss) attributable to Blackhawk Network Holdings, Inc. | $ (13,486) | $ (3,553) |
Distributed and undistributed earnings allocated to participating securities, Basic | 0 | (15) |
Distributed and undistributed earnings allocated to participating securities, Diluted | 0 | (15) |
Net income (loss) attributable to common stockholders, basic | (13,486) | (3,568) |
Net income (loss) attributable to common stockholders, diluted | $ (13,486) | $ (3,568) |
Weighted-average common shares outstanding-basic (in shares) | 55,904 | 55,752 |
Basic loss per share (in usd per share) | $ (0.24) | $ (0.06) |
Common share equivalents (in shares) | 0 | 0 |
Weighted-average common shares outstanding-diluted (in shares) | 55,904 | 55,752 |
Diluted loss per share (in usd per share) | $ (0.24) | $ (0.06) |
Earnings Per Share (Detail)
Earnings Per Share (Detail) - shares | 3 Months Ended | |
Mar. 25, 2017 | Mar. 26, 2016 | |
Earnings Per Share [Abstract] | ||
Antidilutive securities excluded from computation of earnings per share (in shares) | 5,307,000 | 5,110,000 |