The following is a description of certain components of projected adjusted net income and the resulting impact on projected adjusted diluted earnings per share for fiscal 2015. The calculations of the projected fiscal 2015 effect of each item below are designed to illustrate changes between actual fiscal 2014 results and the Company's guidance for fiscal 2015 based on certain assumptions. These assumptions include using the midpoint of the Company's forecasted effective tax rate of 38.0% on adjusted income before taxes, determining the diluted earnings per share impact of each item by using an estimated fiscal 2015 diluted share outstanding count of 56.2 million and the other assumptions and estimates described below. In addition, the Company has certain shared infrastructure and administrative costs that it does not fully allocate to its various individual businesses. Consequently, the projected amounts shown below may not reflect the actual adjusted net income change attributable to such businesses. Please see "Forward Looking Statements."
- Interest expense related to spin-off: The increase in interest expense reflects debt outstanding for full year 2015 as compared to a partial year in 2014 under a new credit agreement that followed the Company's spin-off from Safeway in April 2014. Full year interest expense resulting from borrowings to finance 2014 acquisitions is considered separately below.
- Foreign exchange rate impact: The Company has incorporated into its guidance further erosion in foreign currency exchange rates during fiscal 2015. The impact is calculated on a constant currency basis (forecasted earnings contribution multiplied by the difference between fiscal 2015 forecasted rates and fiscal 2014 actual rates by country).
- Increase in effective tax rate: The midpoint of the Company's guidance for an effective tax rate on fiscal 2015 adjusted income before income taxes is 38.0% representing a 0.7% increase over the actual rate for fiscal 2014.
Income attributable to full year impact of 2014 acquisitions including income tax benefits attributable to net operating losses (NOLs): The Company acquired three companies in fiscal 2014 related to its incentives and rewards business. Guidance for fiscal 2015 reflects projected adjusted net income attributable to these businesses of
$17.6 millionincluding NOLs expected to be realizable of $11.6 million. The guidance takes into account (a) $3.5 millionof revenues that are deferred for accounting purposes (i.e., which reduced projected adjusted net income by $2.2 millionafter tax due to the accounting treatment of certain revenues), (b) an $8.2 millionincrease in depreciation expense, approximately half of which resulted from purchase price allocation, and (c) $6.6 million of increased interest expense as a result of borrowings related to the acquisitions. This guidance of $17.6 million of projected adjusted net income attributable to the acquired businesses represents an increase in adjusted net income of $12.8 million for fiscal 2015 as compared to fiscal 2014 actual results.
- Benefit from reductions in cash taxes payable related to spin-off: The Company estimates that cash taxes payable will be reduced by the amortization of a basis step-up in connection with Safeway's spin-off of Blackhawk in April 2014. These cash tax benefits are reflected in adjusted net income and adjusted diluted earnings per share. The estimated increase in these benefits in fiscal 2015 over fiscal 2014 is reflected in the table below.
- Dilution from projected increase in outstanding shares: The Company has forecast an increase in the number of shares used for calculating diluted earnings per share from 54.3 million for fiscal 2014 to 56.2 million for fiscal 2015.
- Increase from growth in existing businesses: The balance of the increase in projected adjusted diluted earnings per share (per the Company's guidance) is attributed to projected growth in the existing businesses after taking into account each of the other items described above and reflected in the table below.
|ROLL FORWARD OF NON-GAAP FINANCIAL MEASURES --- (see descriptions and assumptions above)|
Earnings per Share
|As reported for 2014||$ 96.5||$ 1.77|
|Increase in interest expense related to spin-off||(1.1)||(0.02)|
|Foreign exchange rate impact||(1.5)||(0.03)|
|Increase in effective tax rate||(0.9)||(0.02)|
|Earnings attributable to 2014 acquisitions||12.8||0.23|
|Benefit from reductions in cash taxes payable related to spin-off||5.5||0.08|
|Dilution from projected increase in outstanding shares||--||(0.04)|
|Increase from growth in existing businesses||10.2||0.19|
|2015 guidance – midpoint||$ 121.5||$ 2.16|
For further comparability of the Company's projected adjusted operating revenues before the reclassification of certain amounts from sales and marketing expense to partner distribution expense (described in the Company's press releases issued February 26, 2015), the Company is providing the table below that states the projected amount of the reclassified items for fiscal 2015. This reclassification was reflected previously in the Company's fiscal 2014 earnings results released on
|In millions||1Q 2015||2Q 2015||3Q 2015||4Q 2015|
|Pro forma reclassification amount||$ 8.7||$ 7.9||$ 7.8||$ 13.7|
Investor Conference Webcast and Earnings Call
The Company hosted its year-end earnings call and its investor conference on
Use of 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. Reconciliations of non-GAAP financial measures to Blackhawk's financial results as determined in accordance with GAAP are included in the Company's earnings release dated
Forward Looking Statements
This press release may contain certain 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," "projects," "forecasts", "estimates," "plans," "assumptions," "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. Actual results compared to forecasted results will vary, and those variances could be material. Such risks and uncertainties include the following: our ability to generate adequate taxable income to enable us to fully utilize the cash tax benefits resulting from the recent merger between Safeway and
Patrick Cronin(925) 226-9973 firstname.lastname@example.org MEDIA: Teri Llach(925) 226-9028 email@example.com