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Blackhawk Announces First Quarter 2018 Financial Results

PLEASANTON, Calif., May 01, 2018 (GLOBE NEWSWIRE) -- Blackhawk Network Holdings, Inc. (NASDAQ:HAWK) today announced financial results for the first quarter ended March 24, 2018.

Merger Agreement – On January 15, 2018, Silver Lake and P2 Capital Partners agreed to acquire Blackhawk in an all-cash transaction for a total consideration of approximately $3.5 billion, which includes Blackhawk’s debt. Under the terms of the merger agreement, Blackhawk stockholders will receive $45.25 per share in cash upon closing of the transaction.  Blackhawk currently expects the transaction, which is subject to stockholder and regulatory approvals, and other customary closing conditions, to close mid-2018. For further information on the transaction and related merger agreement, please refer to Blackhawk’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on January 16, 2018, and Blackhawk’s definitive proxy statement on Schedule 14A filed with the SEC on March 2, 2018 (the “Proxy Statement”).

             
$ in millions except per share amounts   Q1'18   Q1'17   % Change
(unaudited)            
Operating Revenues   $ 429.2     $ 386.4     11 %
Net Income (Loss)   $ (15.8 )   $ (17.5 )   (10 )%
Diluted Earnings (Loss) Per Share   $ (0.28 )   $ (0.31 )   (10 )%
                       

Non-GAAP Measures (see Table 2)

$ in millions except per share amounts   Q1'18   Q1'17   % Change
(unaudited)            
Adjusted Operating Revenues   $ 193.6     $ 195.9     (1 )%
Adjusted EBITDA   $ 22.3     $ 13.1     71 %
Adjusted Net Income (Loss)   $ 1.7     $ (2.8 )   N/M
Adjusted Diluted Earnings (Loss) Per Share   $ 0.03     $ (0.05 )   N/M
                     

GAAP and Non-GAAP results in the tables above include Cardpool for both Q1 2018 and Q1 2017 and include Grass Roots Meetings and Events results for Q1 2017.  In December 2017, the Grass Roots Meetings and Events business was sold for a total consideration of $45.2 million.  Cardpool remains an asset held for sale which the Company intends to divest in 2018.

Cardpool Results

For Q1 2018, Cardpool contributed $14.7 million of operating revenues, $1.8 million of pre-tax loss and a $1.8 million adjusted EBITDA loss. For Q1 2017, Cardpool contributed $20.0 million of operating revenues, $1.6 million of pre-tax loss and a $1.3 million adjusted EBITDA loss.

Grass Roots Meetings & Events Results

For Q1 2017, Grass Roots Meetings & Events contributed $15.1 million of operating revenues, $0.6 million of pre-tax loss and $0.5 million of adjusted EBITDA loss.

GAAP financial results for the first quarter of 2018 compared to the first quarter of 2017

  • Operating revenues totaled $429.2 million, an increase of 11% from $386.4 million for the quarter ended March 25, 2017.  This increase was due to a 17% increase in operating revenues from the U.S. Retail segment driven by the addition of Target as a distribution partner, the acquisition of CashStar and growth in original content; a 3% increase in operating revenues from the international segment driven by growth across all regions, partially offset by the lost revenue related to the sale of Grass Roots Meetings and Events; and an 8% increase in operating revenues from the incentives and rewards segment primarily due to growth in Achievers and the loyalty business.
  • Net loss totaled $15.8 million compared to net loss of $17.5 million for the quarter ended March 25, 2017.  The net loss was driven primarily by an increase in partner distribution expense related to transaction dollar volume generated by distribution partners with higher commission share and higher transition and acquisition costs, partially offset by processing and services expense savings.
  • Net loss per diluted share was $0.28 compared to a net loss per diluted share of $0.31 for the quarter ended March 25, 2017.  Diluted shares outstanding increased 1.0% to 56.5 million.

Non-GAAP financial results for the first quarter of 2018 compared to the first quarter of 2017 (see Table 2 for Reconciliation of Non-GAAP Measures)

  • Adjusted operating revenues totaled $193.6 million, a 1% decrease from $195.9 million for the quarter ended March 25, 2017.  The decline was driven by higher partner distribution expense related to transaction dollar volume generated by distribution partners with higher commission share, lost revenue related to the sale of Grass Roots Meetings and Events and lower Cardpool revenue.  These declines were partially offset by a $7.1 million one-time benefit due to a contractual amendment related to an open loop product, the addition of CashStar, growth in original content, as well as growth in Achievers and the loyalty business.
  • Adjusted EBITDA totaled $22.3 million, an increase of 71% from $13.1 million for the quarter ended March 25, 2017. The increase was primarily driven by a $7.1 million one-time benefit due to a contractual amendment related to an open loop product.
  • Adjusted net income totaled $1.7 million, compared to an adjusted net loss of $2.8 million for the quarter ended March 25, 2017.
  • Adjusted diluted EPS was $0.03, compared to an adjusted diluted loss per share of $0.05 for the quarter ended March 25, 2017.

Conference Call

As a result of the proposed merger, the Company will not host an earnings conference call, provide earnings guidance or publish supplemental earnings presentation slides.

About Blackhawk Network

Blackhawk Network Holdings, Inc. (NASDAQ:HAWK) is a global financial technology company and a leader in connecting brands and people through branded value solutions. Blackhawk platforms and solutions enable the management of stored value products, promotions and incentive programs in retail, ecommerce, financial services and mobile wallets. Blackhawk's Hawk Commerce division offers technology solutions to businesses and direct to consumers. The Hawk Incentives division offers enterprise, SMB and reseller partners an array of platforms and branded value products to incent and reward consumers, employees and sales channels. Headquartered in Pleasanton, Calif., Blackhawk operates in the United States and 26 other countries. For more information, please visit blackhawknetwork.com, hawkcommerce.com, hawkincentives.com or our product websites giftcards.com, giftcardmall.com, cardpool.com, giftcardlab.com, omnicard.com and CashStar.com.

Non-GAAP Financial Measures

Blackhawk regards the non-GAAP financial measures provided in this press release as useful measures of the operational and financial performance of its business. Adjusted EBITDA, Adjusted net income and Adjusted diluted earnings per share measures are prepared and presented to eliminate the effect of items from EBITDA, Net income and Diluted earnings per share that the Company does not consider indicative of its core operating performance within the period presented. Adjusted operating revenues are prepared and presented to offset the distribution commissions paid and other compensation to distribution partners and business clients. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of Adjusted operating revenues. Adjusted operating revenues, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income and Adjusted diluted earnings per share may not be comparable to similarly titled measures of other organizations because other organizations may not calculate these measures in the same manner as Blackhawk. Investors are encouraged to evaluate our adjustments and the reasons we consider them appropriate.

The Company believes Adjusted operating revenues, EBITDA, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted net income, Adjusted diluted earnings per share and Reduction in income taxes payable are useful to evaluate the Company's operating performance for the following reasons:

  • Adjusting operating revenues for distribution commissions paid and other compensation to retail distribution partners and business clients is useful to understanding the Company's operating margin;
  • Adjusting operating revenues for marketing revenue and other pass-through revenues, which has offsetting expense, is useful for understanding the Company's operating margin;
  • EBITDA and Adjusted EBITDA are widely used by investors and securities analysts to measure a company’s operating performance without regard to items that can vary substantially from company to company and from period to period depending upon their financing, accounting and tax methods, the book value of their assets, their capital structures and the method by which their assets were acquired;
  • Adjusted EBITDA margin provides a measure of operating efficiency based on Adjusted operating revenues and without regard to items that can vary substantially from company to company and from period to period depending upon their financing, accounting and tax methods, the book value of their assets, their capital structures and the method by which their assets were acquired;
  • in a business combination, a company records an adjustment to reduce the carrying values of deferred revenue and deferred expenses to their fair values and reduces the company’s revenues and expenses from what it would have recorded otherwise, and as such the Company does not believe is indicative of its core operating performance;
  • non-recurring expenses related to Blackhawk's pending merger with Silver Lake is not reflective of our core operating performance;
  • intangible asset amortization expenses can vary substantially from company to company and from period to period depending upon the applicable financing and accounting methods, the fair value and average expected life of the acquired intangible assets, the capital structure and the method by which the intangible assets were acquired and, as such, the Company does not believe that these adjustments are reflective of its core operating performance;
  • non-cash fair value adjustments to contingent business acquisition liability do not directly reflect how the Company is performing at any particular time and the related expense adjustment amounts are not key measures of the Company's core operating performance;
  • reduction in income taxes payable from the step-up in tax basis of our assets resulting from the Section 336(e) election due to our Spin-Off and the Safeway Merger and reduction in income taxes payable from amortization of goodwill and other intangibles or utilization of net operating loss carryforwards from business acquisitions represent significant tax savings that are useful for understanding the Company's overall operating results; and
  • reduction in income taxes payable resulting from the tax deductibility of stock-based compensation is useful for understanding the Company's overall operating results. The Company generally realizes these tax deductions when restricted stock vest, an option is exercised, and, in the case of warrants, after the warrant is exercised but amortized over remaining service period, and such timing differs from the GAAP treatment of expense recognition

Additional Information and Where to Find It

In connection with the proposed merger, the Company filed the Proxy Statement on March 2, 2018. The Proxy Statement and a form of proxy were mailed to the Company’s stockholders on or about March 2, 2018. The Company also plans to file other relevant materials with the SEC regarding the proposed merger. This communication is not a substitute for the Proxy Statement or any other document that the Company may file with the SEC or send to its stockholders in connection with the proposed merger. Investors and security holders will be able to obtain the documents (when available) free of charge at the SEC’s website, http://www.sec.gov, and the Company’s website, www.blackhawknetwork.com. In addition, the documents (when available) may be obtained free of charge by directing a request to Patrick Cronin by email at patrick.cronin@bhnetwork.com or by calling (925) 226-9939.

Cautionary Statements Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are indicated by words or phrases such as “guidance,” “believes,” “expects,” “intends,” “forecasts,” “can,” “could,” “may,” “anticipates,” “estimates,” “plans,”  “projects,” “seeks,” “should,” “targets,” “will,” “would,” “outlook,” “continuing,” “ongoing,” and similar words or phrases and the negative of such words and phrases. Forward-looking statements are based on our current plans and expectations and involve risks and uncertainties which are, in many instances, beyond our control, and which could cause actual results to differ materially from those included in or contemplated or implied by the forward-looking statements. Such risks and uncertainties include the following: the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement; the failure to obtain certain required regulatory approvals to the completion of the transaction or the failure to satisfy any of the other conditions to the completion of the transaction; the effect of the announcement of the transaction on our ability to retain and hire key personnel and maintain relationships with our partners, clients, customers, providers, advertisers, and others with whom we do business, or on our operating results and businesses generally; risks associated with the disruption of management’s attention from ongoing business operations due to the transaction; our ability to meet expectations regarding the timing and completion of the merger; our ability to grow adjusted operating revenues and adjusted net income as anticipated; our ability to grow at historic rates or at all; the consequences should we lose one or more of our top distribution partners, fail to maintain or renew existing relationships with our distribution partners on the same or similar economic terms or fail to attract new distribution partners to our network or if the financial performance of our distribution partners’ businesses decline; our reliance on our content providers; the demand for their products and our exclusivity arrangements with them; our reliance on relationships with card issuing banks; the consequences to our future growth if our distribution partners fail to actively and effectively promote our products and services; changes in consumer behavior away from our distribution partners or our products resulting from limits or controls implemented by our distribution partners during their transition to EMV compliance; our ability to successfully integrate our acquisitions; our ability to generate adequate taxable income to enable us to fully utilize the tax benefits referred to in this release; changes in applicable tax law that preclude us from fully utilizing the tax benefits referred to in this release; the requirement that we comply with applicable laws and regulations, including increasingly stringent anti-money laundering rules and regulations; and other risks and uncertainties described in our reports and filings with the SEC. These risks, as well as other risks associated with the proposed merger, are more fully discussed in Item 1A under the heading Risk Factors in our Annual Report on Form 10-K for the year ended December 30, 2017, our Quarterly Report on Form 10-Q for the fiscal quarter ended on March 24, 2018 which is expected to be filed on or prior to May 3, 2018 and other subsequent periodic reports we file with the SEC.  We undertake no obligation to update forward-looking statements to reflect developments or information obtained after the date hereof and disclaim any obligation to do so other than as may be required by law. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

 
  INVESTORS/ANALYSTS:
  Patrick Cronin
  (925) 226-9939
  patrick.cronin@bhnetwork.com
 


 
BLACKHAWK NETWORK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share amounts)
(Unaudited)
  12 weeks ended
  March 24,
 2018
  March 25,
 2017
OPERATING REVENUES:      
Commissions and fees $ 288,626     $ 249,525  
Program and other fees 101,402     95,865  
Marketing 14,367     14,281  
Product sales 24,813     26,741  
Total operating revenues 429,208     386,412  
OPERATING EXPENSES:      
Partner distribution expense 218,449     175,123  
Processing and services 92,949     101,021  
Sales and marketing 64,181     62,658  
Costs of products sold 24,256     27,849  
General and administrative 29,322     29,025  
Transition and acquisition 4,927     451  
Amortization of acquisition intangibles 14,107     12,562  
Change in fair value of contingent consideration 100     1,040  
Total operating expenses 448,291     409,729  
OPERATING INCOME (LOSS) (19,083 )   (23,317 )
OTHER INCOME (EXPENSE):      
Interest income and other income (expense), net (224 )   836  
Interest expense (7,786 )   (6,943 )
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT) (27,093 )   (29,424 )
INCOME TAX EXPENSE (BENEFIT) (11,505 )   (12,082 )
NET INCOME (LOSS) BEFORE ALLOCATION TO NON-CONTROLLING INTERESTS (15,588 )   (17,342 )
Loss (income) attributable to non-controlling interests, net of tax (179 )   (123 )
NET INCOME (LOSS) ATTRIBUTABLE TO BLACKHAWK NETWORK HOLDINGS, INC. $ (15,767 )   $ (17,465 )
EARNINGS (LOSS) PER SHARE:      
Basic $ (0.28 )   $ (0.31 )
Diluted $ (0.28 )   $ (0.31 )
Weighted average shares outstanding—basic 56,477     55,904  
Weighted average shares outstanding—diluted 56,477     55,904  
           


 
BLACKHAWK NETWORK HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
  March 24,
 2018
  December 30,
 2017
  March 25,
 2017
ASSETS          
Current assets:          
Cash and cash equivalents $ 351,099     $ 1,096,195     $ 214,536  
Restricted cash 69,781     135,345     56,832  
Settlement receivables, net 416,633     1,038,347     319,557  
Accounts receivable, net 152,262     185,741     259,138  
Other current assets 158,301     142,737     165,898  
Total current assets 1,148,076     2,598,365     1,015,961  
Property, equipment and technology, net 172,132     172,607     173,403  
Intangible assets, net 417,946     430,978     338,672  
Goodwill 565,913     563,405     570,313  
Deferred income taxes 235,860     235,797     361,981  
Other assets 185,739     121,667     91,166  
TOTAL ASSETS $ 2,725,666     $ 4,122,819     $ 2,551,496  
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Settlement payables $ 683,027     $ 2,074,673     $ 547,179  
Consumer and customer deposits 321,970     326,685     269,026  
Accounts payable and accrued operating expenses 125,073     156,182     143,430  
Contract liabilities 54,088     60,607     46,867  
Note payable, current portion 14,912     10,662     7,390  
Notes payable to Safeway 3,941     3,941     2,909  
Bank line of credit         14,415  
Other current liabilities 56,453     102,823     85,651  
Total current liabilities 1,259,464     2,735,573     1,116,867  
Deferred income taxes 29,648     29,085     28,796  
Note payable 258,315     202,441     130,560  
Convertible notes payable 444,707     441,655     431,941  
Other liabilities 44,967     38,877     53,635  
Total liabilities 2,037,101     3,447,631     1,761,799  
Stockholders’ equity:          
Preferred stock          
Common stock 57     56     56  
Additional paid-in capital 670,756     649,546     612,328  
Treasury stock (40,023 )   (40,023 )    
Accumulated other comprehensive loss (8,362 )   (16,121 )   (42,967 )
Retained earnings 62,097     77,864     216,001  
Total Blackhawk Network Holdings, Inc. equity 684,525     671,322     785,418  
Non-controlling interests 4,040     3,866     4,279  
Total stockholders’ equity 688,565     675,188     789,697  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,725,666     $ 4,122,819     $ 2,551,496  
                       


 
BLACKHAWK NETWORK HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
  12 weeks ended   52 weeks ended
  March 24,
 2018
  March 25,
 2017
  March 24,
 2018
  March 25,
 2017
OPERATING ACTIVITIES:              
Net income (loss) before allocation to non-controlling interests $ (15,588 )   $ (17,342 )   $ (152,990 )   $ (14,146 )
Adjustments to reconcile net income (loss) to net cash used in operating activities:              
Depreciation and amortization of property, equipment and technology 12,148     11,600     55,967     50,064  
Goodwill impairment         77,500      
Amortization of intangibles 15,951     13,755     68,174     58,534  
Amortization of deferred program and contract costs 7,905     7,397     31,092     29,246  
Amortization of deferred financing costs and debt discount 2,860     3,162     13,535     9,668  
Loss on property, equipment and technology disposal/write-down 16     108     6,710     9,946  
Employee stock-based compensation expense 8,062     8,401     32,369     32,993  
Change in fair value of contingent consideration 100     1,040     (15,877 )   3,140  
Deferred income taxes     (2,307 )   111,957     (14,660 )
Other 2,942     1,605     (468 )   6,219  
Changes in operating assets and liabilities:              
Settlement receivables 634,105     330,177     (46,210 )   24,531  
Settlement payables (1,401,302 )   (1,080,989 )   90,935     11,342  
Accounts receivable, current and long-term 29,788     (7,666 )   81,564     (38,731 )
Other current assets (3,273 )   (7,146 )   (4,899 )   (15,996 )
Other assets (63,174 )   (3,037 )   (101,421 )   (24,524 )
Consumer and customer deposits (13,424 )   32,018     16,699     19,396  
Accounts payable and accrued operating expenses (27,065 )   (4,645 )   (13,717 )   7,944  
Contract liabilities (6,673 )   2,980     (3,911 )   48,647  
Other current and long-term liabilities (21,820 )   635     21,249     6,254  
Income taxes, net (14,642 )   (9,944 )   599     2,869  
Net cash (used in) provided by operating activities (853,084 )   (720,198 )   268,857     212,736  
INVESTING ACTIVITIES:              
Expenditures for property, equipment and technology (15,819 )   (16,697 )   (63,721 )   (59,869 )
Business acquisitions, net of cash acquired     (10,881 )   (152,587 )   (118,372 )
Investments in unconsolidated entities     (5,200 )   (1,001 )   (15,741 )
Proceeds from divestiture in business         13,779      
Other (1,000 )       (4,244 )   1,408  
Net cash (used in) provided by investing activities (16,819 )   (32,778 )   (207,774 )   (192,574 )
FINANCING ACTIVITIES:              
Payments for acquisition liability (2,000 )       (7,503 )    
Repayment of debt assumed in business acquisitions         (8,585 )    
Proceeds from issuance of note payable 75,000         150,000     150,000  
Repayment of note payable (15,000 )   (10,000 )   (15,000 )   (436,250 )
Payments of financing costs         (1,025 )   (16,544 )
Borrowings under revolving bank line of credit 127,536     667,936     2,470,870     3,016,981  
Repayments on revolving bank line of credit (127,536 )   (653,521 )   (2,485,285 )   (3,117,238 )
Repayment on notes payable to Safeway     (254 )   1     (1,144 )
Proceeds from issuance of common stock from exercise of employee stock options and employee stock purchase plans 10,924     3,700     24,006     13,570  
Other stock-based compensation related (18,254 )   (8,897 )   (19,908 )   (9,429 )
Repurchase of common stock         (40,023 )   (34,843 )
Proceeds from convertible debt             500,000  
Payments for note hedges             (75,750 )
Proceeds from warrants             47,000  
Other         (343 )   (156 )
Net cash (used in) provided by financing activities 50,670     (1,036 )   67,205     36,197  
Effect of exchange rate changes on cash, cash equivalents and restricted cash 8,573     6,462     21,224     (1,126 )
Increase (decrease) in cash, cash equivalents and restricted cash (810,660 )   (747,550 )   149,512     55,233  
Cash, cash equivalents and restricted cash—beginning of period 1,231,540     1,018,918     271,368     216,135  
Cash, cash equivalents and restricted cash—end of period $ 420,880     $ 271,368     $ 420,880     $ 271,368  
               
NONCASH FINANCING AND INVESTING ACTIVITIES:              
Forgiveness of notes receivable and accrued interest as part of business acquisition $         $ 973     $ 5,445  
Financing of business acquisition with contingent consideration $     $ 2,000     $ (360 )   $ 2,000  
Intangible assets recognized for issuance of fully vested warrants $     $     $ 20,000     $ 20,000  
                               


 
BLACKHAWK NETWORK HOLDINGS, INC.
SUPPLEMENTAL INFORMATION
(Tables 1 & 2 in thousands except percentages and per share amounts)
(Unaudited)
 
TABLE 1: OTHER OPERATIONAL DATA
  12 weeks ended
  March 24,
2018
  March 25,
2017
Prepaid and processing revenues $ 390,028    $ 345,390 
Partner distribution expense as a % of prepaid and processing revenues 56.0%   50.7%


TABLE 2: RECONCILIATION OF NON-GAAP MEASURES
  12 weeks ended
  March 24,
2018
  March 25,
2017
Prepaid and processing revenues:      
Commissions and fees $ 288,626    $ 249,525 
Program and other fees 101,402    95,865 
Total prepaid and processing revenues $ 390,028    $ 345,390 
Adjusted operating revenues:      
Total operating revenues $ 429,208    $ 386,412 
Revenue adjustment from purchase accounting 520    1,574 
Marketing and other pass-through revenues (17,708)   (16,980)
Partner distribution expense (218,449)   (175,123)
Adjusted operating revenues $ 193,571    $ 195,883 
Adjusted EBITDA:      
Net income (loss) before allocation to non-controlling interests $ (15,588)   $ (17,342)
Interest and other (income) expense, net 224    (836)
Interest expense 7,786    6,943 
Income tax expense (benefit) (11,505)   (12,082)
Depreciation and amortization 28,099    25,356 
EBITDA 9,016    2,039 
Adjustments to EBITDA:      
Employee stock-based compensation 8,062    8,401 
Acquisition-related employee compensation expense 248    139 
Revenue adjustment from purchase accounting, net 490    1,467 
Merger-related expense 4,400    — 
Change in fair value of contingent consideration 100    1,040 
Adjusted EBITDA $ 22,316    $ 13,086 
Adjusted EBITDA margin:      
Total operating revenues 429,208    386,412 
Operating income (loss) (19,083)   (23,317)
Operating margin (4.4)%   (6.0)%
Adjusted operating revenues $ 193,571    $ 195,883 
Adjusted EBITDA $ 22,316    $ 13,086 
Adjusted EBITDA margin 11.5%   6.7%
       


TABLE 2:  RECONCILIATION OF NON-GAAP MEASURES (continued)
  12 weeks ended
  March 24,
2018
  March 25,
2017
Adjusted net income:      
Income (loss) before income tax expense $ (27,093 )   $ (29,424 )
Employee stock-based compensation 8,062     8,401  
Acquisition-related employee compensation expense 248     139  
Revenue adjustment from purchase accounting, net 490     1,467  
Merger-related expense 4,400      
Change in fair value of contingent consideration 100     1,040  
Amortization of intangibles 15,951     14,218  
Adjusted income (loss) before income tax expense $ 2,158     $ (4,159 )
Income tax expense (benefit) $ (11,505 )   $ (12,082 )
Tax expense on adjustments 11,817     10,648  
Adjusted income tax expense $ 312     $ (1,434 )
Adjusted net income before allocation to non-controlling interests $ 1,846     $ (2,725 )
Net loss (income) attributable to non-controlling interests, net of tax (179 )   (123 )
Adjusted net income attributable to Blackhawk Network Holdings, Inc. $ 1,667     $ (2,848 )
Adjusted diluted earnings per share:      
Net income (loss) available for common shareholders $ (15,767 )   $ (17,465 )
Diluted weighted average shares outstanding 56,477     55,904  
Diluted earnings (loss) per share $ (0.28 )   $ (0.31 )
Adjusted net income available for common shareholders $ 1,667     $ (2,848 )
Diluted weighted-average shares outstanding 56,477     55,904  
Increase in common share equivalents 1,613      
Adjusted diluted weighted-average shares outstanding 58,090     55,904  
Adjusted diluted earnings per share $ 0.03     $ (0.05 )
Reduction in income taxes payable:      
Reduction in income taxes payable resulting from amortization of spin-off tax basis step-up $ 4,077     $ 6,597  
Reduction in cash taxes payable from amortization of acquisition intangibles and utilization of acquired NOLs 1,017     2,592  
Reduction in cash taxes payable from deductible stock-based compensation and convertible debt 7,176     9,604  
Reduction in income taxes payable $ 12,270     $ 18,793  
Adjusted diluted weighted average shares outstanding 58,090     55,904  
Reduction in income taxes payable per share $ 0.21     $ 0.34  

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Source: Blackhawk Network Holdings, Inc.