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Index

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to          

Commission File Number: 001-15749

ALLIANCE DATA SYSTEMS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

31-1429215

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

3075 Loyalty Circle

Columbus, Ohio 43219

(Address of principal executive office, including zip code)

(614729-4000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Common stock, par value $0.01 per share

ADS

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ     No    

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes þ     No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ     

Accelerated filer       

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes      No þ

As of April 22, 2021, 49,723,638 shares of common stock were outstanding.

Index

ALLIANCE DATA SYSTEMS CORPORATION

INDEX

    

    

Page
Number

Part I:  FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited)

Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

3

Condensed Consolidated Statements of Income for the three months ended March 31, 2021 and 2020

4

Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020

5

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020

6

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020

7

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

32

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

40

Item 4.

Controls and Procedures

40

Part II:  OTHER INFORMATION

Item 1.

Legal Proceedings

41

Item 1A.

Risk Factors

41

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

41

Item 3.

Defaults Upon Senior Securities

41

Item 4.

Mine Safety Disclosures

41

Item 5.

Other Information

41

Item 6.

Exhibits

42

SIGNATURES

44

2

Index

PART I

Item 1.  Financial Statements.

ALLIANCE DATA SYSTEMS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 

December 31, 

    

2021

    

2020

(in millions, except per share amounts)

ASSETS

Cash and cash equivalents

$

2,858.6

$

3,081.5

Accounts receivable, net, less allowance for doubtful accounts ($5.3 million and $4.0 million at March 31, 2021 and December 31, 2020, respectively)

 

351.9

 

383.8

Credit card and loan receivables:

Credit card and loan receivables – restricted for securitization investors

 

10,221.3

 

11,208.5

Other credit card and loan receivables

 

5,315.3

 

5,575.9

Total credit card and loan receivables

 

15,536.6

 

16,784.4

Allowance for loan loss

 

(1,843.3)

 

(2,008.0)

Credit card and loan receivables, net

 

13,693.3

 

14,776.4

Inventories, net

146.0

164.3

Other current assets

 

519.9

 

534.9

Redemption settlement assets, restricted

 

725.7

 

693.5

Total current assets

 

18,295.4

 

19,634.4

Property and equipment, net

 

296.4

 

310.9

Right of use assets - operating

218.1

233.2

Deferred tax asset, net

 

383.5

 

359.2

Intangible assets, net

 

74.9

 

81.7

Goodwill

 

1,351.1

 

1,369.6

Other non-current assets

 

543.5

 

558.1

Total assets

$

21,162.9

$

22,547.1

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable

$

331.9

$

328.2

Accrued expenses

 

447.1

 

444.7

Current operating lease liabilities

22.7

23.6

Current portion of deposits

 

6,787.4

 

6,553.9

Current portion of non-recourse borrowings of consolidated securitization entities

 

1,862.6

 

1,850.7

Current portion of long-term and other debt

 

101.4

 

101.4

Other current liabilities

 

266.6

 

220.9

Deferred revenue

 

920.4

 

898.5

Total current liabilities

 

10,740.1

 

10,421.9

Deferred revenue

 

102.2

 

105.5

Long-term operating lease liabilities

262.5

276.4

Deposits

 

3,169.5

 

3,238.7

Non-recourse borrowings of consolidated securitization entities

 

1,983.2

 

3,859.2

Long-term and other debt

 

2,681.5

 

2,704.3

Other liabilities

 

459.6

 

419.5

Total liabilities

 

19,398.6

 

21,025.5

Commitments and contingencies (Note 14)

Stockholders’ equity:

Common stock, $0.01 par value; authorized, 200.0 million shares; issued, 117.1 million shares at each of March 31, 2021 and December 31, 2020

 

1.2

 

1.2

Additional paid-in capital

 

3,431.3

 

3,427.2

Treasury stock, at cost, 67.4 million shares at each of March 31, 2021 and December 31, 2020

 

(6,733.9)

 

(6,733.9)

Retained earnings

 

5,108.0

 

4,832.1

Accumulated other comprehensive loss

 

(42.3)

 

(5.0)

Total stockholders’ equity

 

1,764.3

 

1,521.6

Total liabilities and stockholders’ equity

$

21,162.9

$

22,547.1

See accompanying notes to unaudited condensed consolidated financial statements.

3

Index

ALLIANCE DATA SYSTEMS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

March 31, 

    

2021

    

2020

(in millions, except per share amounts)

Revenues

Services

$

39.4

$

46.6

Redemption, net

 

104.9

 

120.9

Finance charges, net

 

940.6

 

1,214.3

Total revenue

 

1,084.9

 

1,381.8

Operating expenses

Cost of operations (exclusive of depreciation and amortization disclosed separately below)

 

497.5

 

499.2

Provision for loan loss

33.4

655.9

General and administrative

 

16.9

 

23.9

Depreciation and other amortization

 

22.9

 

17.4

Amortization of purchased intangibles

 

11.1

 

21.4

Total operating expenses

 

581.8

 

1,217.8

Operating income

 

503.1

 

164.0

Interest expense

Securitization funding costs

 

33.6

 

49.9

Interest expense on deposits

 

45.5

 

60.3

Interest expense on long-term and other debt, net

 

29.6

 

28.4

Total interest expense, net

 

108.7

 

138.6

Income before income taxes

394.4

25.4

Provision (benefit) for income taxes

 

108.2

 

(4.6)

Net income

$

286.2

$

30.0

Net income per share (Note 3):

Basic

$

5.76

$

0.63

Diluted

$

5.74

$

0.63

Weighted average shares (Note 3):

Basic

 

49.7

 

47.6

Diluted

 

49.8

 

47.7

See accompanying notes to unaudited condensed consolidated financial statements.

4

Index

ALLIANCE DATA SYSTEMS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended

March 31, 

    

2021

    

2020

(in millions)

Net income

$

286.2

$

30.0

Other comprehensive loss:

Unrealized (loss) gain on securities available-for-sale 

(9.0)

2.7

Tax benefit (expense)

0.7

(1.1)

Unrealized (loss) gain on securities available-for-sale, net of tax 

 

(8.3)

 

1.6

Unrealized gain on cash flow hedges

1.1

0.4

Tax expense

(0.2)

(0.1)

Unrealized gain on cash flow hedges, net of tax

0.9

0.3

Foreign currency translation adjustments (inclusive of deconsolidation of $3.8 million for the three months ended March 31, 2020 related to the sale of a business)

 

(29.9)

 

(20.1)

Other comprehensive loss, net of tax

 

(37.3)

 

(18.2)

Total comprehensive income, net of tax

$

248.9

$

11.8

See accompanying notes to unaudited condensed consolidated financial statements.

5

Index

ALLIANCE DATA SYSTEMS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Accumulated

Additional

Other

Total

Common Stock

Paid-In

Treasury

Retained

Comprehensive

Stockholders’

Three Months Ended March 31, 2021

    

Shares

    

Amount

    

Capital

    

Stock

    

Earnings

    

Loss

    

Equity

(in millions)

Balance at December 31, 2020

 

117.1

$

1.2

$

3,427.2

$

(6,733.9)

$

4,832.1

$

(5.0)

$

1,521.6

Net income

 

286.2

 

286.2

Other comprehensive loss

 

(37.3)

(37.3)

Stock-based compensation

 

6.8

6.8

Dividends and dividend equivalent rights declared ($0.21 per common share)

(10.3)

(10.3)

Other

 

(2.7)

(2.7)

Balance at March 31, 2021

 

117.1

$

1.2

$

3,431.3

$

(6,733.9)

$

5,108.0

$

(42.3)

$

1,764.3

Accumulated

Additional

Other

Total

Common Stock

Paid-In

Treasury

Retained

Comprehensive

Stockholders’

Three Months Ended March 31, 2020

    

Shares

    

Amount

    

Capital

    

Stock

    

Earnings

    

Loss

    

Equity

(in millions)

Balance at December 31, 2019

 

115.0

$

1.1

$

3,257.7

$

(6,733.9)

$

5,163.3

$

(99.9)

$

1,588.3

Net income

 

 

 

 

 

30.0

 

 

30.0

Cumulative effect adjustment to retained earnings in accordance with ASU 2016-13

(485.0)

(485.0)

Other comprehensive loss

(18.2)

(18.2)

Stock-based compensation

4.7

4.7

Dividends and dividend equivalent rights declared ($0.63 per common share)

(29.5)

(29.5)

Other

0.1

(2.7)

(2.6)

Balance at March 31, 2020

115.0

$

1.2

$

3,259.7

$

(6,733.9)

$

4,678.8

$

(118.1)

$

1,087.7

See accompanying notes to unaudited condensed consolidated financial statements.

6

Index

ALLIANCE DATA SYSTEMS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

March 31, 

    

2021

    

2020

(in millions)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

286.2

$

30.0

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

 

34.0

 

38.8

Deferred income taxes

 

(25.8)

 

(158.7)

Provision for loan loss

 

33.4

 

655.9

Non-cash stock compensation

 

6.8

 

4.7

Amortization of deferred financing costs

 

8.5

 

9.5

Change in other operating assets and liabilities, net of sale of business

154.9

8.6

Other

 

19.2

 

(16.3)

Net cash provided by operating activities

 

517.2

 

572.5

CASH FLOWS FROM INVESTING ACTIVITIES:

Change in redemption settlement assets

 

(13.1)

 

1.0

Change in credit card and loan receivables

 

1,034.6

 

1,446.7

Proceeds from sale of business

 

 

25.4

Proceeds from sale of credit card portfolio

 

289.5

Capital expenditures

 

(12.2)

 

(15.7)

Purchases of other investments

 

(22.3)

 

(14.0)

Maturities/sales of other investments

 

22.1

 

13.2

Other

 

(0.1)

 

0.2

Net cash provided by investing activities

 

1,009.0

 

1,746.3

CASH FLOWS FROM FINANCING ACTIVITIES:

Borrowings under debt agreements

 

 

500.0

Repayments of borrowings

 

(25.4)

 

(275.4)

Non-recourse borrowings of consolidated securitization entities

 

175.0

 

350.0

Repayments/maturities of non-recourse borrowings of consolidated securitization entities

 

(2,039.1)

 

(1,275.0)

Net increase (decrease) in deposits

162.2

(769.4)

Payment of deferred financing costs

 

(0.2)

 

(0.6)

Dividends paid

 

(10.7)

 

(30.3)

Other

 

(2.6)

 

(2.7)

Net cash used in financing activities

 

(1,740.8)

 

(1,503.4)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(1.7)

 

(7.6)

Change in cash, cash equivalents and restricted cash

 

(216.3)

 

807.8

Cash, cash equivalents and restricted cash at beginning of period

 

3,463.2

 

3,958.1

Cash, cash equivalents and restricted cash at end of period

$

3,246.9

$

4,765.9

SUPPLEMENTAL CASH FLOW INFORMATION:

Interest paid

$

103.4

$

138.3

Income taxes paid, net

$

20.5

$

44.6

See accompanying notes to unaudited condensed consolidated financial statements.

7

Index

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited condensed consolidated financial statements included herein have been prepared by Alliance Data Systems Corporation (“ADSC” or, including its consolidated subsidiaries and variable interest entities (“VIEs”), the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 26, 2021.

The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal, recurring adjustments) which are, in the opinion of management, necessary to state fairly the results for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the fiscal year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (1) the reported amounts of assets; (2) liabilities and disclosure of contingent assets and liabilities at the date of the financial statements; and (3) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recently Issued Accounting Standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” This ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts and hedging relationships that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. This ASU is elective and is effective upon issuance for all entities. The Company is evaluating the impact that adoption of ASU 2020-04 will have on its consolidated financial statements.

Recently Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” ASU 2019-12 eliminated certain exceptions within Accounting Standards Codification (“ASC”) 740, “Income Taxes,” and clarified certain aspects of ASC 740 to promote consistency among reporting entities. Most amendments within the standard were required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company’s adoption of this standard on January 1, 2021 did not have a material impact on its consolidated financial statements.

8

Index

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

2. REVENUE

The Company’s products and services are reported under two segments—LoyaltyOne and Card Services, as shown below. The following tables present revenue disaggregated by major source:

Corporate/

Three Months Ended March 31, 2021

    

LoyaltyOne

    

Card Services

    

Other

    

Total

(in millions)

Disaggregation of Revenue by Major Source:

Coalition loyalty program

$

66.8

$

$

$

66.8

Short-term loyalty programs

 

106.3

 

 

 

106.3

Servicing fees, net

 

 

(32.3)

 

 

(32.3)

Revenue from contracts with customers

$

173.1

$

(32.3)

$

$

140.8

Finance charges, net

 

 

940.6

 

 

940.6

Investment income

 

3.5

 

 

 

3.5

Total

$

176.6

$

908.3

$

$

1,084.9

Corporate/

Three Months Ended March 31, 2020

    

LoyaltyOne

    

Card Services

    

Other

    

Total

(in millions)

Disaggregation of Revenue by Major Source:

Coalition loyalty program

$

71.3

$

$

$

71.3

Short-term loyalty programs

 

120.3

 

 

 

120.3

Servicing fees, net

 

 

(30.7)

 

 

(30.7)

Other

 

3.3

 

 

0.1

 

3.4

Revenue from contracts with customers

$

194.9

$

(30.7)

$

0.1

$

164.3

Finance charges, net

 

 

1,214.3

 

 

1,214.3

Investment income

 

3.2

 

 

 

3.2

Total

$

198.1

$

1,183.6

$

0.1

$

1,381.8

The following tables present revenue disaggregated by geographic region based on the location of the subsidiary that generally correlates with the location of the customer:

Corporate/

Three Months Ended March 31, 2021

    

LoyaltyOne

    

Card Services

    

Other

    

Total

(in millions)

Disaggregation of Revenue by Geographic Region:

United States

$

1.0

$

908.2

$

$

909.2

Canada

 

79.9

 

0.1

 

 

80.0

Europe, Middle East and Africa

 

79.4

 

 

 

79.4

Asia Pacific

 

14.9

 

 

 

14.9

Other

 

1.4

 

 

 

1.4

Total

$

176.6

$

908.3

$

$

1,084.9

9

Index

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Corporate/

Three Months Ended March 31, 2020

    

LoyaltyOne

    

Card Services

    

Other

    

Total

(in millions)

Disaggregation of Revenue by Geographic Region:

United States

$

2.1

$

1,183.6

$

0.1

$

1,185.8

Canada

 

79.1

 

 

 

79.1

Europe, Middle East and Africa

 

68.6

 

 

 

68.6

Asia Pacific

 

37.0

 

 

 

37.0

Other

 

11.3

 

 

 

11.3

Total

$

198.1

$

1,183.6

$

0.1

$

1,381.8

Contract Liabilities

The Company records a contract liability when cash payments are received in advance of its performance, which applies to the service and redemption of an AIR MILES® reward mile and the reward products for its short-term loyalty programs.

A reconciliation of contract liabilities for the AIR MILES Reward Program is as follows:

Deferred Revenue

    

Service

    

Redemption

    

Total

(in millions)

Balance at January 1, 2021

$

247.2

$

756.8

$

1,004.0

Cash proceeds

 

40.6

 

65.9

 

106.5

Revenue recognized (1)

 

(49.9)

 

(52.2)

 

(102.1)

Other

 

 

0.3

 

0.3

Effects of foreign currency translation

 

3.3

 

10.6

 

13.9

Balance at March 31, 2021

$

241.2

$

781.4

$

1,022.6

Amounts recognized in the consolidated balance sheets:

 

  

 

  

 

  

Deferred revenue (current)

$

139.0

$

781.4

$

920.4

Deferred revenue (non-current)

$

102.2

$

$

102.2

(1)Reported on a gross basis herein.

The deferred redemption obligation associated with the AIR MILES Reward Program is effectively due on demand from the collector base, thus the timing of revenue recognition is based on the redemption by the collector. Service revenue is amortized over the expected life of a mile, with the deferred revenue balance expected to be recognized into revenue in the amount of $113.4 million in 2021, $85.1 million in 2022, $38.8 million in 2023, and $3.9 million in 2024.

Additionally, contract liabilities for the Company’s short-term loyalty programs are recognized in other current liabilities in the Company’s unaudited condensed consolidated balance sheets. The beginning balance as of January 1, 2021 was $66.9 million and the closing balance as of March 31, 2021 was $71.1 million, with the change due to cash payments received in advance of program performance, offset in part by revenue recognized of approximately $83.2 million during the three months ended March 31, 2021.

Contract Costs

The Company recognizes an asset for the incremental costs of obtaining or fulfilling a contract with the retailer for a credit card program agreement to the extent it expects to recover those costs, in accordance with ASC 340-40, “Other Assets and Deferred Costs.” Contract costs are deferred and amortized on a straight-line basis that is consistent with the transfer of services, which is generally the term of the contract. Depending on the nature of the contract costs, the amortization is recorded as a reduction to revenue, or costs of operations, in the Company’s unaudited condensed consolidated statements of income. As of March 31, 2021 and December 31, 2020, the remaining unamortized contract

10

Index

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

costs were $296.9 million and $311.1 million, respectively, and are included in other current assets and other non-current assets in the Company’s unaudited condensed consolidated balance sheets.

3. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted net income per share of common stock:

Three Months Ended March 31, 

    

2021

    

2020

(in millions, except per share amounts)

Numerator:

Net income

$

286.2

$

30.0

Denominator:

Weighted average shares, basic

 

49.7

 

47.6

Weighted average effect of dilutive securities:

Net effect of dilutive unvested restricted stock (1)

 

0.1

 

0.1

Denominator for diluted calculation

 

49.8

 

47.7

Basic net income per share:

$

5.76

$

0.63

Diluted net income per share:

$

5.74

$

0.63

(1)For the three months ended March 31, 2021 and 2020, 0.2 million and 0.3 million of restricted stock units, respectively, were excluded from the calculation of weighted average dilutive common shares as the effect would have been anti-dilutive.

4. ACQUISITION

On September 28, 2020, the Company acquired 3.5 million preferred Series D Shares of Lon Inc., a Delaware corporation (“Bread”), for approximately $25.0 million, which represented an approximate 6% ownership interest in Bread. Bread is a technology-driven digital payments company, offering an omnichannel solution for retailers and platform capabilities to bank partners. On December 3, 2020, the Company acquired the remaining interest in Bread. In accordance with ASC 805, the Company’s approximate 6% interest was remeasured at fair value when control of Bread was obtained on December 3, 2020; no gain or loss was recognized on the remeasurement.

Consideration for the 100% ownership of Bread consisted of cash of $275.0 million, equity of $149.2 million with the issuance of 1.9 million shares of the Company’s common stock, and deferred cash consideration of $75.0 million due December 2021, subject to customary closing purchase price adjustments. Consideration, net of cash and restricted cash acquired, was $491.0 million.

11

Index

ALLIANCE DATA SYSTEMS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The following table summarizes the allocation of the consideration and the respective fair values of the assets acquired and liabilities assumed in the Bread transaction as of the acquisition date, net of cash acquired:

  

    

As of
December 3, 2020

(in millions)

Installment loan receivables

$

111.7

Accounts receivable

0.2

Other current assets

0.6

Property and equipment

0.3

Developed technology

90.7

Right of use assets - operating

3.6

Deferred tax asset, net

7.0

Intangible assets

11.3

Goodwill

369.6

Total assets acquired

 

595.0

Accounts payable

 

2.0

Accrued expenses

 

2.9

Operating lease liabilities

 

3.5

Non-recourse borrowings of consolidated securitization entities

 

95.6

Total liabilities assumed

 

104.0

Net assets acquired, net of cash and restricted cash

$

491.0

5. DISPOSITION

On January 10, 2020, the Company sold Precima®, a provider of retail strategy and customer data applications and analytics, to Nielsen Holdings plc for total consideration of $43.8 million. The purchase and sale agreement provided for $10.0 million in contingent consideration based upon the occurrence of specified events and performance of the business, with two earnout determinations in September 2020 and September 2021, respectively. In September 2020, the Company received cash of $5.0 million upon the earnout determination date. At March 31, 2021, the Company estimated the fair value of the remaining contingent purchase price at approximately $1.5 million, which is included in the total consideration below. Precima was included in the Company’s LoyaltyOne segment. The pre-tax gain was recorded in cost of operations in the Company’s unaudited condensed consolidated statements of income for the three months ended March 31, 2020.