Blackhawk Network Q4 Profit Up 36%, But Results Miss View

(RTTNews) - Shares of Blackhawk Network Holdings, Inc. (HAWK) tumbled almost 13 percent in extended trades Wednesday after the prepaid gift cards and payment service provider's results for the fourth quarter missed analysts' estimates. However, the company's profit for the fourth quarter increased 36 percent from last year on double-digit revenue growth.

Bill Tauscher, CEO of Blackhawk Network said, "We are pleased with the progress we made during our first year as a public company. Load value grew to nearly $10 billion in 2013 and consumer demand for prepaid products remained strong despite soft fourth quarter sales at many U.S. retailers."

Blackhawk's fourth-quarter net income was $49.27 million or $0.92 per share, up from $36.35 million or $0.70 per share in the previous-year quarter.

The increase in profit was primarily due to a $13.5 million non-cash credit adjustment to the liability for the contingent portion of the Cardpool acquisition purchase price. This was partially offset by an increase in intangible assets amortization and acquisition expenses related to the InteliSpend and Retailo acquisitions.

Adjusted earnings for the quarter were $0.81, compared to $0.72 per share in the year-ago period. On average, 12 analysts polled by Thomson Reuters expected the company to report earnings of $0.84 per share for the quarter. Analysts' estimates typically exclude one-time items.

Total operating revenues for the quarter rose 15 percent to $521.18 million from $452.90 million in the same period last year. Analysts had a consensus revenue estimate of $539.15 million for the quarter.

The growth in revenues was due primarily to a 13 percent increase in commissions and fees, a 27 percent increase in program, interchange, marketing and other fees due to higher marketing revenues, and a 17 percent increase in product sales.

For fiscal 2013, Blackhawk's net income increased to $54.10 million or $1.02 per share from $48.17 million or $0.93 per share in the previous year. Adjusted earnings per share were $1.09, compared to $0.98 in the prior-year period.

Operating revenues for the year increased 19 percent to $1.14 billion from $959.07 million last year.

Street expected the company to earn $1.12 per share for the year on revenues of $1.15 billion.

Blackhawk will provide a 2014 financial outlook during its earnings call and investor conference scheduled for February 20, 2014.

In a separate statement, supermarket chain Safeway, Inc. (SWY) said it has decided to distribute the remaining 37.8 million shares of Blackhawk that it owns, representing about 72.2 percent of the outstanding Blackhawk shares, to Safeway stockholders.

The company added that it will determine the timing and details of the proposed distribution in the near future, at which time it will make further announcements. Blackhawk is a subsidiary of Safeway.

In anticipation of the distribution of Safeway's ownership, Blackhawk has executed a non-binding term sheet and is currently in talks with a group of banks led by Wells Fargo Bank, N.A., for a credit agreement of up to $475 million.

The facility includes a $175 million 4-year term loan and a revolving credit facility of up to $200 million with up to an additional $100 million during the year-end holiday period for specific settlement related requirements. The new facility is currently expected to close in mid-March 2014.

HAWK closed Wednesday's regular trading session at $28.08, up $1.82 or 6.93 percent on a volume of 621,422 shares. However, in after-hours, the stock declined $3.58 or 12.75 percent to $24.35.