SEE COMPLETE RELEASE
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SEE COMPLETE RELEASE
Download Release
WORD | PDF
Website
www.affiniongroup.com
AFFINION GROUP, INC. ANNOUNCES RESULTS FOR THE THIRD QUARTER
ENDED SEPTEMBER 30, 2008
ACHIEVES THIRD QUARTER ADJUSTED EBITDA OF $85.9 MILLION
TRAILING TWELVE-MONTH ADJUSTED EBITDA OF $310.5 MILLION
NORWALK, Conn., October 30, 2008 - Affinion Group, Inc. ("Affinion" or the "Company" ), a leading global affinity marketer of value-added membership, insurance and package enhancement programs and services to consumers, today announced its financial results for the three month period ended September 30, 2008.
"Our affinity partners are facing an historically difficult economic environment, and our results this quarter show that we have continued to provide those partners with a reliable and growing stream of fee-based income, and succeeded in offering their customers high-quality programs providing peace of mind and timely savings on everyday purchases" said Nathaniel J. Lipman, Affinion's President and Chief Executive Officer. Commenting further on the results, Lipman added, "Given these attributes in our business model, as well as our year-to-date results, we remain comfortable with the attainability of our 2008 Adjusted EBITDA guidance of $305 to $315 million."
Segment Commentary
North America:
Membership products revenue for the third quarter increased $10.5 million, or 6.1%, as higher average revenue per retail member and higher wholesale revenue from programs that were formerly retail were partially offset by lower retail member volumes. Excluding the impact of purchase accounting, net revenue increased $8.1 million, as the Company continues to pursue its strategy of increasing the lifetime value of its overall member base. Membership Segment EBITDA increased $8.1 million in the quarter, primarily due to lower marketing and commission expenses as the Company continued to reduce commissions as a percentage of revenue, partially offset by higher product and employee-related costs. Insurance and Package products revenue increased $5.8 million, or 6.5%, primarily due to a lower cost of insurance and growth in the NetGain! checking account enhancement program, partially offset by decreased revenue from lower Package members. Insurance and Package Segment EBITDA declined $4.2 million in the quarter primarily due to higher marketing and commissions and increased product costs. Loyalty products revenue increased $6.6 million, or 45.8%, due to the growth in programs with existing and new clients, including the fee-based revenue related to a recently acquired points redemption program. Loyalty Segment EBITDA grew $1.2 million due primarily to the increase in revenue, net of higher product and servicing costs.
International:
International revenue increased $11.1 million, or 20.0%, over the third quarter of 2007. Excluding the impacts from purchase accounting, revenue increased 16.9% primarily due to new retail memberships, growth in other retail programs, and a lower cost of insurance associated with certain package and retail programs. Net revenues decreased $0.4 million in the quarter due to the impact of the change in the U.S. dollar. For the quarter, International Segment EBITDA increased $3.7 million over 2007, principally due to the increase in revenue net of higher marketing and commissions, and other costs to support new retail programs, along with $0.8 million as a result of purchase accounting adjustments.
Selected Liquidity Data
Affinion has several debt instruments outstanding, including senior notes, senior subordinated notes, and senior secured credit facilities, which consist of a term loan facility and revolving credit facility. For a more complete description of Affinion's debt instruments, see the note on Table 2.
At September 30, 2008, Affinion had $302.5 million outstanding under its senior notes (net of discounts and premiums), $655.0 million outstanding under its term loan facility, and $351.7 million outstanding under the senior subordinated notes (net of discounts). Under the Company's revolving credit facility, $98.5 million is available for borrowing, after giving effect to the issuance of $1.5 million in letters of credit. The revolving credit facility has been reduced by $24.0 million since June 30, 2008 to a zero balance as of September 30, 2008.
In addition, at September 30, 2008, Affinion had $18.3 million of unrestricted cash on hand.
Guidance
Affinion reaffirms its full year 2008 Adjusted EBITDA guidance of $305 - $315 million.
Call-In Information
Affinion will hold an informational call to discuss the results for the three month period ended September 30, 2008 at 8:30 am (EDT) on Thursday, October 30, 2008. The conference call will be broadcast live and can be accessed by dialing 1-866-394-8483 (domestic) or 1-706-758-1455 (international) and entering passcode 69259340. Interested parties should call at least ten (10) minutes prior to the call to register. The Company will also provide an on-line Web simulcast of its conference call at www.affinion.com/ir. A replay of the call will be available through midnight (EDT) November 2, 2008 by dialing 1-800-642-1687 (domestic) or 1-706-645-9291 (international) and entering passcode 69259340.
Important Notes
On October 17, 2005, Affinion Group Inc. completed the acquisition (the "Transactions" ) of the marketing services division (the "Predecessor" ) of Cendant Corporation ("Cendant" ) pursuant to a purchase agreement dated July 26, 2005, as amended. Substantially all of the assets and liabilities of the Predecessor were acquired by Affinion in the Transactions.
The information presented in this release is a comparison of the unaudited consolidated results of operations for the three month period ended September 30, 2008 and unaudited consolidated results of operations for the three month period ended September 30, 2007.
Purchase accounting adjustments made in 2005 as a result of the Transactions had a modest impact on Affinion's results of operations for the three month periods ended September 30, 2008 and 2007. For example, because deferred revenues were reduced in purchase accounting, net revenues recognized for periods following the Transactions were less than they otherwise would have been, with the majority of the impact of the purchase accounting adjustments recognized in 2005 through 2007. The effect of purchase accounting adjustments on Affinion's results of operations for the three month period ended September 30, 2008 as compared to the three month period ended September 30, 2007 was to increase net revenues by $4.3 million and to increase Segment EBITDA by $1.9 million.
Safe Harbor Statement Under the U.S. Private Securities Litigation Reform Act of 1995
This press release may contain statements that are forward looking, as that term is defined by the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in its rules, regulations and releases. These statements include, but are not limited to, discussions regarding industry outlook, Affinion's expectations regarding the performance of its business, its liquidity and capital resources, its guidance for 2008 and the other non-historical statements in the discussion and analysis. These forward-looking statements are based on management's beliefs, as well as assumptions made by, and information currently available to, management. When used in this release, the words "believe", "anticipate", "estimate", "expect", "intend" and similar expressions are intended to identify forward-looking statements. Although management believes that the expectations reflected in these forward-looking statements are reasonable, its can give no assurance that these expectations will prove to have been correct. These statements are subject to certain risks, uncertainties and assumptions, including risks related to general economic and business conditions and international and geopolitical events, a downturn in the credit card industry or changes in the techniques of credit card issuers, market place consolidation among financial institution partners, industry trends, the effects of a decline in travel on Affinion's travel fulfillment business, termination or expiration of one or more agreements with its affinity partners or a reduction of the marketing of its services by one or more of its affinity partners, its substantial leverage, restrictions contained in its debt agreements, its inability to compete effectively and other risks identified and discussed under the caption "Item 1A. Risk Factors" in Affinion's Annual Report on Form 10-K for the year ended December 31, 2007 and the other periodic reports filed by Affinion with the SEC from time to time.
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About Affinion Group
As a global leader with nearly 35 years of experience, Affinion Group (www.affinion.com) enhances the value of its partners' customer relationships by developing and marketing valuable loyalty, membership, checking account, insurance and other compelling products and services. Leveraging its expertise in product development and targeted marketing, Affinion helps generate significant incremental revenue for more than 5,300 affinity partners worldwide, including many of the largest and most respected companies in financial services, retail, travel, and Internet commerce. Based in Norwalk, Conn., the company has approximately 3,300 employees throughout the United States and in 10 countries across Europe, and markets in 14 countries globally. Affinion holds the prestigious ISO 27001 certification for the highest information security practices, is PCI compliant and Cybertrust certified. For more company and investor information visit www.affinion.com.