Affinion Group, Inc. - FORM 10-Q

Attached files

file	filename
EX-31.2 - CERTIFICATION OF THE CHIEF FINANCIAL OFFICER - Affinion Group, Inc.	dex312.htm
EX-31.1 - CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER - Affinion Group, Inc.	dex311.htm
EX-32.2 - CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 1350 - Affinion Group, Inc.	dex322.htm
EX-32.1 - CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 1350 - Affinion Group, Inc.	dex321.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2009.

¨	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: 333-133895

AFFINION GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware

16-1732152

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

100 Connecticut Avenue

Norwalk, CT 06850

(Address, including zip code, of principal executive offices)

(203) 956-1000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed 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 ¨ No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ¨ No ¨

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


Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x	Smaller reporting company ¨
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

The number of shares outstanding of the registrant’s common stock, $0.01 par value, as of October 29, 2009 was 100.

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION		1

Item 1.

Financial Statements		1

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008		1

Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2009 and 2008		2

Unaudited Condensed Consolidated Statements of Changes in Equity (Deficit) for the Nine Months Ended September 30, 2009 and 2008		3

Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008		4

Notes to Unaudited Condensed Consolidated Financial Statements		5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations		27

Item 3.

Quantitative and Qualitative Disclosures about Market Risk.		44

Item 4T.

Controls and Procedures.		45

PART II. OTHER INFORMATION		46

Item 1.

Legal Proceedings.		46

Item 1A.

Risk Factors		46

Item 2.

Unregistered Sales of Equity in Securities and Use of Proceeds.		47

Item 3.

Defaults Upon Senior Securities.		47

Item 4.

Submission of Matters to a Vote of Security Holders.		47

Item 5.

Other Information.		47

Item 6.

Exhibits.		47

SIGNATURES		S-1

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

AFFINION GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2009 AND DECEMBER 31, 2008

(In millions, except share amounts)


	September 30, 2009			December 31, 2008
Assets
Current assets:
Cash and cash equivalents	$	123.2		$	36.3
Restricted cash		35.6			35.6
Receivables (net of allowance for doubtful accounts of $0.6 and $0.8, respectively)		99.1			77.6
Receivables from related parties		9.9			15.6
Profit-sharing receivables from insurance carriers		88.1			98.3
Prepaid commissions		65.1			62.0
Other current assets		51.3			43.0

Total current assets		472.3			368.4
Property and equipment, net		101.5			91.2
Contract rights and list fees, net		36.0			40.7
Goodwill		308.9			307.5
Other intangibles, net		489.4			604.4
Receivables from related parties		2.5			5.3
Other non-current assets		123.1			43.1

Total assets	$	1,533.7		$	1,460.6

Liabilities and Deficit
Current liabilities:
Current portion of long-term debt	$	0.3		$	6.7
Accounts payable and accrued expenses		337.2			268.2
Payables to related parties		14.4			10.0
Deferred revenue		211.6			231.3

Total current liabilities		563.5			516.2
Long-term debt		1,442.2			1,360.6
Deferred income taxes		25.1			20.5
Deferred revenue		31.4			35.4
Other long-term liabilities		71.7			74.4

Total liabilities		2,133.9			2,007.1

Commitments and contingencies (Note 6)
Deficit
Common stock and additional paid-in capital, $0.01 par value, 1,000 shares authorized, and 100 shares issued and outstanding		285.5			311.7
Accumulated deficit		(894.8	)		(855.2	)
Accumulated other comprehensive income		8.1			(3.7	)

Total Affinion Group, Inc. deficit		(601.2	)		(547.2	)
Non-controlling interest in subsidiary		1.0			0.7

Total deficit		(600.2	)		(546.5	)

Total liabilities and deficit	$	1,533.7		$	1,460.6

See accompanying notes to the unaudited condensed consolidated financial statements.

AFFINION GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(In millions)


	For the Three Months Ended						For the Nine Months Ended
	September 30, 2009			September 30, 2008			September 30, 2009			September 30, 2008
Net revenues	$	361.1		$	364.8		$	1,028.6		$	1,058.3

Expenses:
Cost of revenues, exclusive of depreciation and amortization shown separately below:
Marketing and commissions		161.0			160.1			452.9			475.3
Operating costs		88.2			96.7			261.2			277.2
General and administrative		29.2			24.1			85.5			77.9
Depreciation and amortization		51.7			68.4			153.2			205.6

Total expenses		330.1			349.3			952.8			1,036.0

Income from operations		31.0			15.5			75.8			22.3
Interest income		3.5			0.4			4.5			1.4
Interest expense		(39.3	)		(35.6	)		(97.8	)		(87.1	)
Other income (expense), net		(4.8	)		2.8			(11.5	)		2.6

Loss before income taxes and minority interests		(9.6	)		(16.9	)		(29.0	)		(60.8	)
Income tax expense		(6.4	)		(3.1	)		(9.9	)		(8.9	)

Net loss		(16.0	)		(20.0	)		(38.9	)		(69.7	)
Less: net income attributable to non-controlling interest		(0.3	)		(0.3	)		(0.7	)		(0.6	)

Net loss attributable to Affinion Group, Inc.	$	(16.3	)	$	(20.3	)	$	(39.6	)	$	(70.3	)

See accompanying notes to the unaudited condensed consolidated financial statements.

AFFINION GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(in millions)


	Affinion Group, Inc. Equity									Non-Controlling Interest			Total Equity (Deficit)
	Common Stock and Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Non-Controlling Interest			Total Equity (Deficit)
Balance, January 1, 2009	$	311.7		$	(855.2	)	$	(3.7	)	$	0.7		$	(546.5	)
Comprehensive loss
Net income (loss)					(39.6	)					0.7			(38.9	)
Currency translation adjustment								11.8			0.3			12.1

Total comprehensive loss														(26.8	)
Dividend paid to non-controlling interest											(0.7	)		(0.7	)
Return of capital		(26.2	)											(26.2	)

Balance, September 30, 2009	$	285.5		$	(894.8	)	$	8.1		$	1.0		$	(600.2	)


	Affinion Group, Inc. Equity
	Common Stock and Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Non-Controlling Interest			Total Equity (Deficit)
Balance, January 1, 2008	$	348.7		$	(766.5	)	$	12.3		$	0.6		$	(404.9	)
Comprehensive loss
Net income (loss)					(70.3	)					0.6			(69.7	)
Currency translation adjustment								(2.8	)		(0.2	)		(3.0	)

Total comprehensive loss														(72.7	)
Dividend paid to non-controlling interest											(0.4	)		(0.4	)
Return of capital		(37.0	)											(37.0	)

Balance, September 30, 2008	$	311.7		$	(836.8	)	$	9.5		$	0.6		$	(515.0	)

See accompanying notes to the unaudited condensed consolidated financial statements.

AFFINION GROUP, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008

(In millions)


	For the Nine Months Ended
	September 30, 2009			September 30, 2008
Operating Activities
Net loss	$	(38.9	)	$	(69.7	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		153.2			205.6
Amortization of favorable and unfavorable contracts		(1.7	)		(2.3	)
Amortization of debt discount and financing costs		5.7			4.4
Unrealized loss (gain) on interest rate swaps		2.2			(8.1	)
Unrealized foreign currency transaction loss		11.6			—
Stock-based compensation		3.8			2.3
Interest accretion on held-to-maturity debt securities		(2.3	)		—
Deferred income taxes		(6.8	)		3.8
Payment received for assumption of loyalty points program liability		6.7			7.4
Net change in assets and liabilities:
Restricted cash		0.7			0.6
Receivables		(18.9	)		(2.2	)
Receivables from and payables to related parties		1.3			(22.5	)
Profit-sharing receivables from insurance carriers		10.4			(24.4	)
Prepaid commissions		(2.3	)		3.5
Other current assets		(3.1	)		(2.2	)
Contract rights and list fees		(1.7	)		(0.1	)
Other non-current assets		(16.7	)		(1.6	)
Accounts payable and accrued expenses		36.3			31.1
Deferred revenue		(27.4	)		(9.9	)
Income taxes receivable and payable		12.7			(1.5	)
Other long-term liabilities		(4.8	)		(4.4	)
Other, net		(1.1	)		(1.4	)

Net cash provided by operating activities		118.9			108.4

Investing Activities
Capital expenditures		(28.2	)		(25.6	)
Restricted cash		0.2			(1.1	)
Purchase of held-to-maturity debt securities of Affinion Group Holdings, Inc.		(44.8	)		—
Acquisition-related payments, net of cash acquired		(2.3	)		—

Net cash used in investing activities		(75.1	)		(26.7	)

Financing Activities
Proceeds from issuance of senior notes		136.5			—
Deferred financing costs		(4.3	)		—
Repayments under line of credit, net		(57.0	)		(38.5	)
Principal payments on borrowings		(6.7	)		(0.2	)
Dividends paid to parent company		(26.2	)		(37.0	)
Distribution to non-controlling interest of a subsidiary		(0.7	)		(0.4	)

Net cash provided by (used in) financing activities		41.6			(76.1	)

Effect of changes in exchange rates on cash and cash equivalents		1.5			(1.5	)

Net increase in cash and cash equivalents		86.9			4.1
Cash and cash equivalents, beginning of period		36.3			14.2

Cash and cash equivalents, end of period	$	123.2		$	18.3

Supplemental Disclosure of Cash Flow Information:
Interest payments	$	65.2		$	69.5

Income tax payments	$	3.7		$	6.6

Non-cash investing and financing activities:
Accrued capital expenditures	$	5.8		$	0.6

Accrued deferred financing costs	$	0.4		$	—

Capital leases	$	0.7		$	0.7

See accompanying notes to the unaudited condensed consolidated financial statements.

AFFINION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise noted, all dollar amounts are in millions, except per share amounts)

1.	BASIS OF PRESENTATION AND BUSINESS DESCRIPTION

Basis of Presentation — On October 17, 2005, Cendant Corporation (“Cendant”) completed the sale of the Cendant Marketing Services Division (the “Predecessor”) to Affinion Group, Inc. (the “Company” or “Affinion”), a wholly-owned subsidiary of Affinion Group Holdings, Inc. (“Affinion Holdings”) and an affiliate of Apollo Management V, L.P. (“Apollo”), pursuant to a purchase agreement dated July 26, 2005 for approximately $1.8 billion (the “Apollo Transactions”).

All references to Cendant refer to Cendant Corporation, which changed its name to Avis Budget Group, Inc. in August 2006, and its consolidated subsidiaries, particularly in context of its business and operations prior to, and in connection with, the Company’s separation from Cendant.

The accompanying unaudited condensed consolidated financial statements include the accounts and transactions of the Company. In presenting these unaudited condensed consolidated financial statements, management makes estimates and assumptions that affect reported amounts of assets and liabilities and related disclosures, and disclosure of contingent assets and liabilities, at the date of the financial statements, and reported amounts of revenues and expenses during the reporting periods. Estimates, by their nature, are based on judgments and available information at the time. As such, actual results could differ from those estimates. In management’s opinion, the unaudited condensed consolidated financial statements contain all normal recurring adjustments necessary for a fair presentation of interim results reported. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and following the guidance of Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the U.S. Securities and Exchange Commission (the “SEC”). As permitted under such rules, certain notes and other financial information normally required by accounting principles generally accepted in the United States of America have been condensed or omitted; however, the unaudited condensed consolidated financial statements do include such notes and financial information sufficient so as to make the interim information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes of the Company as of December 31, 2008 and 2007, and for the years ended December 31, 2008, 2007 and 2006, included in the Company’s Prospectus dated August 31, 2009, which forms part of the Company’s Registration Statement on Form S-4 (File number 333-160594), as amended (the “Form S-4”) which Form S-4 was declared effective by the SEC on August 31, 2009. The audited consolidated financial statements contained in the Form S-4 differ from those contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 in that they have been retrospectively adjusted to reflect the Company’s adoption of FASB Statement No. 160 “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51,” now contained in Codification Topic 810.

Business Description — The Company provides comprehensive customer engagement and loyalty solutions that enhance or extend the relationship of millions of customers with many of the largest companies in the world. The Company partners with these leading companies to develop and market programs that provide services to their end-customers using its expertise in customer engagement, creative design and product development.

The Company has substantial expertise in deploying various forms of customer engagement communications, such as direct mail, inbound and outbound telephony and the Internet, and in bundling unique benefits to offer products and services to the end-customers of its marketing partners on a highly targeted basis. The Company designs programs that provide a diversity of benefits based on end-customer needs and interests, with a particular focus on programs offering lifestyle and protection benefits and programs which offer savings on purchases. For instance, the Company provides credit monitoring and identity-theft resolution, accidental death and dismemberment insurance (“AD&D”), discount travel services, loyalty points programs, various checking account and credit card enhancement services and other products and services.

•

Affinion North America. Affinion North America comprises the Company’s Membership, Insurance and Package, and Loyalty customer engagement businesses in North America.

•

Membership Products. The Company designs, implements and markets subscription programs that provide members with personal protection benefits and value-added services including credit monitoring and identity-theft resolution services, as well as access to a variety of discounts and shop-at-home conveniences in such areas as retail merchandise, travel, automotive and home improvement.

•

Insurance and Package Products. The Company markets AD&D and other insurance programs and designs and provides checking account enhancement programs to financial institutions.

•

Loyalty Products. The Company designs, implements and administers points-based loyalty programs for financial, travel, auto and other companies. The Company also provides enhancement benefits to major financial institutions in connection with their credit and debit card programs.

•

Affinion International. Affinion International comprises the Company’s Membership, Package and Loyalty customer engagement businesses outside North America. Affinion International also provides loyalty program benefits and operates an accommodation reservation booking business through one of its subsidiaries. The Company expects to leverage its current European operational platform to expand its range of products and services, develop new partner relationships in various industries and grow its geographical footprint.

Recently Issued Accounting Pronouncements

On June 12, 2009, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 166, “Accounting for Financial Assets – an amendment of FASB Statement No. 140” (“SFAS No. 166”), now contained in Codification Topic 860. SFAS No. 166 is a revision to FASB Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities” and will require more information about transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. It eliminates the concept of a “qualifying special-purpose entity”, changes the requirements for derecognizing financial assets, and requires additional disclosures. SFAS No. 166 is effective for financial asset transfers occurring after the beginning of an entity’s first fiscal year that begins after November 15, 2009. Early adoption is prohibited. The Company’s adoption of SFAS No. 166 is not expected to have a material impact on the Company’s consolidated financial position, results of operations and cash flows.

On June 12, 2009, the FASB issued FASB Statement No. 167, “Amendment of FASB Interpretation No. 46(R)” (“SFAS No. 167”), now contained in Codification Topic 810. SFAS No. 167 amends the consolidation guidance applicable to variable interest entities (VIEs). SFAS No. 167 changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. SFAS No. 167 is effective as of the beginning of the first fiscal year that begins after November 15, 2009. Early adoption is prohibited. The Company’s adoption of SFAS No. 167 is not expected to have a material impact on the Company’s consolidated financial position, results of operations and cash flows.

Recently Adopted Accounting Pronouncements

In September 2006, the FASB issued FASB Statement No. 157, “Fair Value Measurements” (“SFAS No. 157”), now contained in Codification Topic 820. SFAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. In February 2008, the FASB issued FASB Staff Position No. FAS 157-2 (“FSP-FAS No. 157-2”), also contained in Codification Topic 820, delaying the effective date of SFAS No. 157 for certain nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008. In February 2007, the FASB issued FASB Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115” (“SFAS No. 159”), now contained in Codification Topic 825. SFAS 159 permits entities to choose to measure many financial instruments and other items at fair value. The fair value option permits entities to choose to measure eligible items at fair value at specified election dates. Unrealized gains and losses on items for which the fair value option has been elected would be recognized in earnings at each subsequent reporting date. Generally, the fair value option may be applied instrument by instrument and is irrevocable unless a new election date occurs. Effective January 1, 2008, the Company adopted SFAS No. 157 and SFAS No. 159. The adoption of SFAS No. 157 and SFAS No. 159 did not have a material impact on the Company’s consolidated financial position, results of operations and cash flows, as the Company did not elect the fair value option available under SFAS No. 159 for any of its financial instruments. Effective January 1, 2009, the Company adopted SFAS No. 157 for certain non-financial assets and non-financial liabilities, which did not have a material impact on the Company’s consolidated financial position, results of operations and cash flows, as the Company did not elect the fair value option available under SFAS No. 159 for any of its nonfinancial assets and nonfinancial liabilities. See Note 9 – Financial Instruments, Derivatives and Fair Value Measures for additional information.

In December 2007, the FASB issued FASB Statement No. 141R, “Business Combinations” (“SFAS No. 141R”), now contained in Codification Topic 805, which replaced SFAS No. 141, “Business Combinations” (“SFAS No. 141”). SFAS No. 141R retains the fundamental requirements in SFAS No. 141 that the acquisition or purchase method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS No. 141R defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. SFAS No. 141R also retains the guidance in SFAS No. 141 for identifying and recognizing intangible assets separately from goodwill. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008 and to deferred taxes related to business combinations for which the acquisition date was prior to the adoption of SFAS No. 141R.

Effective January 1, 2009, the Company adopted FASB Statement No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51” (“SFAS No. 160”), now contained in Codification Topic 810. For consolidated subsidiaries that are less than wholly-owned, the third-party holdings of equity interests are referred to as non-controlling interests. The portion of net income attributable to non-controlling interests for such subsidiaries is presented as net income applicable to non-controlling interests on the consolidated statements of operations, and the portion of stockholder’s equity of such subsidiaries is presented as non-controlling interests on the consolidated balance sheets. The adoption of SFAS No. 160 did not have a material impact on the Company’s financial condition, results of operations or cash flows. However, it did impact the presentation and disclosure of non-controlling (minority) interests in the Company’s consolidated financial statements. As a result of the retrospective presentation and disclosure requirements of SFAS No. 160, certain prior period items in these condensed consolidated financial statements have been reclassified to conform to the required presentation under SFAS No. 160.

In March 2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS No. 161”), now contained in Codification Topic 815. SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities, requiring entities to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities”, and its related interpretations and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company adopted SFAS No. 161 for the interim period ended March 31, 2009. The Company’s adoption of SFAS No. 161 had no impact on its consolidated financial position, results of operations and cash flows.

On April 9, 2009, the FASB issued FASB Staff Position No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP No. FAS 107-1 and APB 28-1”), now contained in Codification Topic 825. FSP No. 107-1 and APB 28-1 requires every publicly traded company to include disclosures about the fair value of its financial instruments whenever it issues summarized financial information for interim reporting periods. FSP No. 107-1 and APB 28-1 is effective for interim periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company adopted FSP No. FAS 107-1 and APB 28-1 for the interim period ended June 30, 2009. The Company’s adoption of FSP FAS 107-1 and APB 28-1 had no impact on its consolidated financial position, results of operations and cash flows.

On May 28, 2009, the FASB issued FASB Statement No. 165, “Subsequent Events” (“SFAS No. 165”), now contained in Codification Topic 855, which provides guidance on management’s assessment of subsequent events. The new standard clarifies that management must evaluate, as of each reporting period, events or transactions that occur after the balance sheet date “through the date that the financial statements are issued or available to be issued.” SFAS No. 165 is effective prospectively for interim or annual financial periods ending after June 15, 2009. The Company adopted SFAS No. 165 for the interim period ended June 30, 2009. The Company’s adoption of SFAS No. 165 had no impact on the Company’s consolidated financial position, results of operations and cash flows. Management’s evaluation of subsequent events was performed through October 29, 2009, the date the financial statements were issued.

In June 2009, the FASB issued FASB Statement No. 168, “The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS No. 168”), now contained in Codification Topic 105. SFAS No. 168 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (“GAAP”) in the United States (“the GAAP hierarchy”). In addition, SFAS No. 168 established the FASB Accounting Standards Codification (“Codification”) as the single source of authoritative generally accepted accounting principles in the United States. The previously existing GAAP hierarchy consisted of four levels of authoritative accounting and reporting guidance (levels A through D), including original pronouncements of the FASB, Emerging Issues Task Force abstracts and other accounting literature. The Codification eliminates this hierarchy and replaced the previously existing GAAP (other than rules and interpretive releases of the SEC) with two levels of literature: authoritative and nonauthoritative.

2.	INTANGIBLE ASSETS

Intangible assets consisted of:


	September 30, 2009
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Amortizable intangible assets:
Member relationships	$	809.1	$	(585.9	)	$	223.2
Affinity relationships		583.8		(350.9	)		232.9
Proprietary databases and systems		56.0		(54.0	)		2.0
Trademarks and tradenames		25.9		(7.1	)		18.8
Patents and technology		25.0		(13.3	)		11.7
Covenants not to compete		1.2		(0.4	)		0.8

	$	1,501.0	$	(1,011.6	)	$	489.4


	December 31, 2008
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Amortizable intangible assets:
Member relationships	$	806.7	$	(509.7	)	$	297.0
Affinity relationships		576.7		(306.2	)		270.5
Proprietary databases and systems		55.9		(53.2	)		2.7
Trademarks and tradenames		25.5		(5.7	)		19.8
Patents and technology		25.0		(11.6	)		13.4
Covenants not to compete		1.2		(0.2	)		1.0

	$	1,491.0	$	(886.6	)	$	604.4

Substantially all of the change in the Company’s carrying amount of goodwill in fiscal 2009 is due to changes in foreign currency exchange rates.

Amortization expense relating to intangible assets was as follows:


	For the Three Months Ended				For the Nine Months Ended
	September 30, 2009		September 30, 2008		September 30, 2009		September 30, 2008
Member relationships	$	25.3	$	32.4	$	75.6	$	96.2
Affinity relationships		13.7		16.8		40.7		50.7
Proprietary databases and systems		0.3		4.6		0.8		13.6
Trademarks and tradenames		0.4		0.5		1.3		1.6
Patents and technology		0.5		0.6		1.7		1.8
Covenants not to compete		0.1		0.1		0.2		0.2

	$	40.3	$	55.0	$	120.3	$	164.1

Based on the Company’s amortizable intangible assets as of September 30, 2009, the Company expects the related amortization expense for fiscal 2009 and the four succeeding fiscal years to be $155.4 million in 2009, $129.8 million in 2010, $111.1 million in 2011, $89.8 million in 2012 and $41.5 million in 2013.

Goodwill attributed to each of the Company’s reporting segments is as follows:


	September 30, 2009		December 31, 2008
Membership products	$	231.1	$	231.1
Insurance and package products		58.3		58.3
International products		19.5		18.1

	$	308.9	$	307.5

The change in the Company’s carrying amount of goodwill in fiscal 2009 is due to changes in foreign currency exchange rates.

3.	CONTRACT RIGHTS AND LIST FEES, NET

Contract rights and list fees consisted of:


	September 30, 2009							December 31, 2008
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Contract rights	$	60.6	$	(39.9	)	$	20.7	$	55.4	$	(28.3	)	$	27.1
List fees		23.9		(8.6	)		15.3		19.5		(5.9	)		13.6

	$	84.5	$	(48.5	)	$	36.0	$	74.9	$	(34.2	)	$	40.7

Amortization expense for the three and nine months ended September 30, 2009 was $4.1 million and $11.4 million, respectively, of which $0.9 million and $2.6 million, respectively, is included in marketing expense and $3.2 million and $8.8 million, respectively, is included in depreciation and amortization expense in the unaudited condensed consolidated statements of operations. Amortization expense for the three and nine months ended September 30, 2008 was $5.0 million and $15.4 million, respectively, of which $0.6 million and $1.8 million, respectively, is included in marketing expense and $4.4 million and $13.6 million, respectively, is included in depreciation and amortization expense in the unaudited condensed consolidated statements of operations. Based on the Company’s contract rights and list fees as of September 30, 2009, the Company expects the related amortization expense for fiscal 2009 and the four succeeding fiscal years to be approximately $15.6 million in 2009, $12.8 million in 2010, $10.3 million in 2011, $2.7 million in 2012 and $2.2 million in 2013.

4.	LONG-TERM DEBT

Long-term debt consisted of:


	September 30, 2009			December 31, 2008
Term loan due 2012	$	648.6		$	655.0
Revolving credit facility		—			57.0
10¹/8% senior notes due 2013, net of unamortized discount of $1.2 and $1.4, respectively, with an effective interest rate of 10.285%		302.8			302.6
10¹/8% senior notes due 2013, net of unamortized discount of $12.5, with an effective interest rate of 12.877%		137.5			—
11¹/2% senior subordinated notes due 2015, net of unamortized discount of $3.2 and $3.6, respectively, with an effective interest rate of 11.75%		352.3			351.9
Capital lease obligations		1.3			0.8

Total debt		1,442.5			1,367.3
Less: current portion of long-term debt		(0.3	)		(6.7	)

Long-term debt	$	1,442.2		$	1,360.6

On October 17, 2005, the Company entered into a senior secured credit facility (“Affinion Credit Facility”). The Affinion Credit Facility is comprised of a term loan that initially totaled $860.0 million due in 2012 and a $100.0 million revolving credit facility terminating in 2011. The revolving credit facility includes letter of credit and swingline sub-facilities.

The Affinion Credit Facility is secured by all of the Company’s outstanding stock held by Affinion Holdings and by substantially all of the assets of the Company, subject to certain exceptions. Through September 30, 2009, the Company had made nine voluntary principal prepayments of the term loan aggregating $205.0 million, in addition to the $6.4 million repayment made in the first quarter of 2009 based on excess cash flow through December 31, 2008 and, therefore, all of the Company’s mandatory repayment obligations have been satisfied, other than future required annual payments, if any, based on excess cash flow, as set forth in the agreement governing the Affinion Credit Facility. The Affinion Credit Facility permits the Company to obtain additional borrowing capacity up to the greater of $175.0 million and an amount equal to Adjusted EBITDA, as set forth in the agreement governing the Affinion Credit Facility, for the most recent four-quarter period. As of September 30, 2009, there were no borrowings under the revolving credit facility. As of December 31, 2008, borrowings outstanding under the revolving credit facility were $57.0 million. As of September 30, 2009, the Company had $98.3 million available for borrowing under the Affinion Credit Facility after giving effect to the issuance of $1.7 million of letters of credit.

On October 17, 2005, the Company issued senior notes (“Senior Notes”), with a face value of $270.0 million, for net proceeds of $266.4 million. The Senior Notes bear interest at 10¹/8% per annum, payable semi-annually on April 15 and October 15 of each year. The Senior Notes mature on October 15, 2013. As discussed in Note 11 – Guarantor/Non-Guarantor Supplemental Financial Information, the Senior Notes are guaranteed by certain subsidiaries of the Company. On May 3, 2006, the Company issued an additional $34.0 million aggregate principal amount of Senior Notes. These Senior Notes were issued as additional notes under the

Senior Notes indenture dated October 17, 2005 and, together with the $270.0 million of Senior Notes originally issued under such indenture, are treated as a single class for all purposes under the indenture, including, without limitation, waivers, amendments, redemptions and offers to purchase.

On April 26, 2006, the Company issued $355.5 million aggregate principal amount of 11¹/2% senior subordinated notes due October 15, 2015 (the “Senior Subordinated Notes”). The Senior Subordinated Notes bear interest at 11¹/2% per annum, payable semi-annually, on April 15 and October 15 of each year. The Senior Subordinated Notes are guaranteed by the same subsidiaries of the Company that guarantee the Affinion Credit Facility, the Senior Notes and the 2009 Senior Notes (defined below) as discussed in Note 11 – Guarantor/Non-Guarantor Supplemental Financial Information.

On September 13, 2006, the Company completed a registered exchange offer and exchanged all of the then-outstanding 10¹/8% Senior Notes due 2013 and all of the then-outstanding 11¹/2 % Senior Subordinated Notes due 2015 into a like principal amount of 10¹/ 8% Senior Notes due 2013 and 11¹/2% Senior Subordinated Notes due 2015, respectively, that have been registered under the Securities Act of 1933, as amended (the “Securities Act”).

On June 5, 2009, the Company issued senior notes (“2009 Senior Notes”), with a face value of $150.0 million, for net proceeds of $136.5 million. The 2009 Senior Notes bear interest at 10¹/8 % per annum, payable semi-annually on April 15 and October 15 of each year. The 2009 Senior Notes mature on October 15, 2013. The Company may redeem all or part of the 2009 Senior Notes at any time on or after October 15, 2009 at redemption prices (generally at a premium) set forth in the indenture governing the 2009 Senior Notes. The 2009 Senior Notes are senior unsecured obligations and rank equally in right of payment with the Company’s existing and future senior obligations and senior to the Company’s existing and future senior subordinated indebtedness. The 2009 Senior Notes are guaranteed by the same subsidiaries of the Company that guarantee the Affinion Credit Facility, the Senior Notes and the Senior Subordinated Notes as discussed in Note 11 – Guarantor/Non-Guarantor Supplemental Financial Information. Although the terms and covenants of the 2009 Senior Notes are substantially identical to those of the Senior Notes, the 2009 Senior Notes are not additional securities under the indenture governing the Senior Notes, were issued under a separate indenture, do not vote as a single class with the Senior Notes and do not necessarily trade with the Senior Notes.

On October 1, 2009, the Company completed a registered exchange offer and exchanged all of the then-outstanding 2009 Senior Notes into a like principal amount of 2009 Senior Notes that have been registered under the Securities Act.

The Affinion Credit Facility, the Senior Notes, the Senior Subordinated Notes and the 2009 Senior Notes all contain restrictive covenants related primarily to the Company’s ability to distribute dividends, redeem or repurchase capital stock, sell assets, issue additional debt or merge with or acquire other companies. The Company and its subsidiaries may pay dividends of up to $35.0 million in the aggregate provided that no default or event of default has occurred or is continuing, or would result from the dividend. Payment of additional dividends requires the satisfaction of various conditions, including meeting defined leverage ratios and a defined fixed charge coverage ratio, and the total dividend paid can not exceed a calculated amount of defined available free cash flow. The covenants in the Affinion Credit Facility also require compliance with a consolidated leverage ratio and an interest coverage ratio. During the nine months ended September 30, 2009, the Company paid cash dividends and an in-kind dividend in the form of Affinion Holdings debt to its parent company, Affinion Holdings, of $25.1 million and $1.1 million, respectively.

As of September 30, 2009, the Company believes it is in compliance with all financial covenants contained in the Affinion Credit Facility and the indentures that govern the Senior Notes, the Senior Subordinated Notes and the 2009 Senior Notes.

5.	INCOME TAXES

The Company’s effective income tax rate for the three and nine months ended September 30, 2009 was (66.3)% and (34.0)%, respectively. These rates differ from the U.S. federal statutory rate of 35% primarily due to the effects of certain state income taxes, foreign taxes, deferred tax liabilities associated with indefinite-lived intangibles and valuation allowances required with respect to the increase in certain net deferred tax assets.

The Company’s effective income tax rate for the three and nine months ended September 30, 2008 was (18.6)% and (14.7)%, respectively. These rates differ from the U.S. federal statutory rate of 35% primarily due to the effects of certain state income taxes, foreign taxes, deferred tax liabilities associated with indefinite-lived intangibles and valuation allowances required with respect to the increase in certain net deferred tax assets.

The Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”), now contained in Codification Topic 740, as of January 1, 2007. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. In accordance with FIN 48, the Company recognized $0.3 million of interest related to uncertain tax positions through the current period. The interest has been included in income tax expense for the current period.

The Company’s income tax returns are periodically examined by various tax authorities. In connection with these examinations, certain tax authorities, including the Internal Revenue Service, may raise issues and impose additional assessments. The Company regularly evaluates the likelihood of additional assessments resulting from these examinations and establishes liabilities,

through the provision for income taxes, for potential amounts that may result therefrom. The recognition of uncertain tax benefits are not expected to have a material impact on the Company’s effective tax rate or results of operations. Jurisdictions which are open to examination include Federal, state, local and foreign, principally Germany and the United Kingdom. The period for which both domestic and foreign tax years are open is based on local laws for each jurisdiction which have not been extended beyond applicable statutes. The Company does not believe that it is reasonably possible that the total amount of unrecognized tax benefits will change significantly within the next 12 months. Any income tax liabilities or refunds relating to periods prior to October 17, 2005 are the responsibility of Cendant as discussed in Note 8 – Related Party Transactions.

6.	COMMITMENTS AND CONTINGENCIES

Litigation

The Company is involved in claims, legal proceedings and governmental inquiries related to employment matters, contract disputes, business practices, trademark and copyright infringement claims and other commercial matters.

The Company is also a party to a number of lawsuits which were brought against it or its affiliates, each of which alleges to be a class action in nature and each of which alleges that the Company violated certain federal or state consumer protection statutes (certain of which are described below). The Company intends to vigorously defend itself against these lawsuits.

On November 15, 2001, a class action complaint (the “2001 Class Action”) was filed in Madison County, Illinois against Trilegiant alleging violations of state consumer protection statutes in connection with the sale of certain membership programs. Motions to dismiss were denied and a class was certified by the court. On February 14, 2008, the parties entered into a definitive settlement agreement that resolves this lawsuit and the August 2005 Suit on a class-wide basis. On February 15, 2008 the court entered an order preliminarily approving the settlement. A final fairness hearing was held on July 18, 2008 at which the court issued a final order approving the settlement. No appeals of the final approval were taken, and therefore the settlement became final and non-appealable on August 18, 2008. Cendant has agreed to indemnify the Company for a significant portion of the settlement, which indemnification obligation has been assumed by Wyndham and Realogy as successors to various segments of Cendant’s business. The settlement payments for which Trilegiant is responsible and does not expect to be indemnified by Cendant are not material in amount and have been accrued for in the unaudited condensed consolidated financial statements.

On November 12, 2002, a class action complaint (the “November 2002 Class Action”) was filed against Sears, Roebuck & Co., Sears National Bank, Cendant Membership Services, Inc., and Allstate Insurance Company in the Circuit Court of Alabama for Greene County alleging, among other things, breach of contract, unjust enrichment, breach of duty of good faith and fair dealing and violations of the Illinois consumer fraud and deceptive practices act. The case was removed to the U.S. District Court for the Northern District of Alabama but was remanded to the Circuit Court of Alabama for Greene County. The Company has filed a motion to compel arbitration, which was granted by the court on January 31, 2008. In granting the Company’s motion, the court further ordered that any arbitration with respect to this matter take place on an individual (and not class) basis. On February 28, 2008, plaintiffs filed a motion for reconsideration of the court’s order. That motion was orally argued on March 27, 2009. The court has yet to rule on plaintiffs’ motion.

On August 9, 2005, a class action suit (the “August 2005 Suit”) was filed against Trilegiant in the U.S. District Court for the Northern District of California, San Francisco Division. The claim asserts violations of the Electronic Funds Transfer Act and various California consumer protection statutes. The suit seeks unspecified actual damages, statutory damages, attorneys’ fees, costs and injunctive relief. As noted in the description of the 2001 Class Action above, the parties have obtained final approval of a class-wide settlement in the 2001 Class Action that resulted in the dismissal of this lawsuit with prejudice on July 18, 2008. Trilegiant was not required to make any payments in connection with the dismissal of this lawsuit other than the settlement payments noted in the description of the 2001 Class Action above.

The Company believes that the amount accrued for the above matters is adequate and the reasonably possible loss beyond the amounts accrued, while not estimable, will not have a material adverse effect on its consolidated financial condition, results of operations, or cash flows based on information currently available. However, litigation is inherently unpredictable and, although the Company believes that accruals are adequate and it intends to vigorously defend itself against such matters, unfavorable resolution could occur, which could have a material adverse effect on its consolidated financial condition, results of operations or cash flows.

Subject to certain limitations, Cendant has agreed to indemnify the Company for actual losses, damages, liabilities, claims, costs and expenses and taxes incurred in connection with certain of the matters described above. Cendant’s indemnification obligations have been assumed by Wyndham and Realogy as successors to various segments of Cendant’s business. See Note 8—Related Party Transactions for a summary of the terms of the indemnification agreements.

Other Contingencies

On May 27, 2009, the U.S. Senate Committee on Commerce, Science, and Transportation (the “Committee”) initiated an investigation into two of the Company’s competitors, Vertrue Inc. and Webloyalty.com, Inc., in connection with their e-commerce marketing practices, including those relating to consumers’ account number acquisition. On July 10, 2009, the Committee expanded

the scope of its investigation to include the Company and requested the Company to provide certain information about the Company’s domestic online marketing practices, including those relating to the acquisition of consumers’ credit or debit card account numbers automatically from the Company’s partners when a consumer enrolls in one of the Company’s programs immediately after making a purchase through one of the Company’s partners’ web sites. For the twelve months ended December 31, 2008, the business methods that are subject to this investigation using such credit or debit account number acquisition methods generated less than 5% of our total consolidated net revenues. Although the Company cannot currently predict the outcome of this investigation or what impact, if any, it may have on our online marketing business, it is in the process of responding to the information requests made by the Committee. We believe that it is likely that there will be a hearing before the Committee by the end of this year.

Surety Bonds and Letters of Credit

In the ordinary course of business, the Company is required to provide surety bonds to various state authorities in order to operate its membership, insurance and travel agency programs. As of September 30, 2009, the Company has provided guarantees for surety bonds totaling approximately $11.2 million and has issued letters of credit totaling $1.8 million.

7.	STOCK-BASED COMPENSATION

In connection with the closing of the Apollo Transactions on October 17, 2005, Affinion Holdings adopted the 2005 Stock Incentive Plan (the “2005 Plan”). The 2005 Plan authorizes the Board of Directors (the “Board”) of Affinion Holdings to grant non-qualified, non-assignable stock options and rights to purchase shares of Affinion Holdings’ common stock to directors and employees of, and consultants to, Affinion Holdings and its subsidiaries. Options granted under the 2005 Plan have an exercise price no less than the fair market value of a share of the underlying common stock on the date of grant. Stock awards have a purchase price determined by the Board. The Board was authorized to grant up to 4.3 million shares of Affinion Holdings’ common stock under the 2005 Plan over a ten year period. On January 30, 2007, the Board adopted an amendment to the 2005 Plan to formally document the aggregate increase of 0.2 million shares previously authorized during 2006 and further increase the number of shares of common stock issuable under the 2005 Plan by 0.4 million to an aggregate of 4.9 million shares. As discussed below, no additional grants may be made under Affinion Holdings’ 2005 Plan on or after November 7, 2007, the effective date of the 2007 Plan, as defined below.

In November 2007, Affinion Holdings adopted the 2007 Stock Award Plan (the “2007 Plan”). The 2007 Plan authorizes the Board to grant awards of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of these awards to directors and employees of, and consultants to, Affinion Holdings and its subsidiaries. Unless otherwise determined by the Board of Directors, options granted under the 2007 Plan will have an exercise price no less than the fair market value of a share of the underlying common stock on the date of grant. Stock awards have a purchase price determined by the Board. The Board was authorized to grant up to 10.0 million shares of Affinion Holdings’ common stock under the 2007 Plan over a ten year period. As of September 30, 2009, there were 8.2 million shares available under the 2007 Plan for future grants.

The Company recognizes compensation expense, net of estimated forfeitures, over the requisite service period, which is the period during which the employee is required to provide services in exchange for the award. The Company has elected to recognize compensation cost for awards with only a service condition and have a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.

Stock Options

During the three and nine months ended September 30, 2009, there were no stock options granted to employees from the 2005 Plan. All options previously granted were granted with an exercise price equal to the estimated fair market value of a share of the underlying common stock on the date of grant. Stock options granted to employees from the 2005 Plan are comprised of three tranches with the following terms:


	Tranche A	Tranche B	Tranche C
Vesting	Ratably over 5 years*	100% after 8 years**	100% after 8 years**
Term of option	10 years	10 years	10 years

*	In the event of a sale of the Company, vesting for tranche A occurs 18 months after the date of sale.

**	Tranche B and C vesting would be accelerated upon specified realized returns to Apollo.

During the three and nine months ended September 30, 2009, 0.2 million and 0.9 million stock options, respectively, were granted to employees from the 2007 Plan with an exercise price of $15.25, equal to the estimated fair market value of a share of the underlying common stock on the date of grant. During the nine months ended September 30, 2008, 0.2 million stock options were granted to employees from the 2007 Plan with an exercise price of $13.02, equal to the estimated fair market value of a share of the underlying common stock on the date of grant. There were no stock options granted to employees from the 2007 Plan during the three months ended September 30, 2008. The stock options granted to employees from the 2007 Plan had the following terms:


Vesting period		Ratably over 4 years
Option term		10 years

During the nine months ended September 30, 2009, 0.1 million stock options were granted to members of the Board of Directors from the 2007 Plan with an exercise price of $15.25, equal to the estimated fair market value of a share of the underlying common stock on the date of grant. These options fully vest on the date of grant and have an option term of 10 years. There were no stock options granted to members of the Board of Directors from the 2007 Plan during the three months ended September 30, 2009. During the three and nine months ended September 30, 2008, there were no stock options granted to members of the Board of Directors from the 2007 Plan.

The fair value of each option award from the 2007 Plan during the three and nine months ended September 30, 2009 was estimated on the date of grant using the Black-Scholes option-pricing model based on the assumptions noted in the following table. Expected volatilities are based on historical volatilities of comparable companies. The expected term of the options granted represents the period of time that options are expected to be outstanding, and is based on the average of the requisite service period and the contractual term of the option.


Expected volatility	66	%
Expected life (in years)	6.25
Risk-free interest rate	2.24	%
Dividend yield	—	%

A summary of option activity for the nine months ended September 30, 2009 is presented below (number of options in thousands):


	2005 Plan – Grants to Employees- Tranche A			2005 Plan – Grants to Employees- Tranche B			2005 Plan – Grants to Employees- Tranche C			Grants to Board of Directors		2007 Plan – Grants to Employees
Outstanding options at January 1, 2009		2,041			1,003			1,003			318		779
Granted		—			—			—			—		710
Exercised		—			—			—			—		—
Forfeited or expired		(134	)		(88	)		(88	)		—		(23	)

Outstanding options at March 31, 2009		1,907			915			915			318		1,466
Granted		—			—			—			108		—
Exercised		—			—			—			—		—
Forfeited or expired		(81	)		(7	)		(7	)		—		(18	)

Outstanding options at June 30, 2009		1,826			908			908			426		1,448
Granted		—			—			—			—		194
Exercised		—			—			—			—		—
Forfeited or expired		(9	)		(1	)		(1	)		—		(7	)

Outstanding options at September 30, 2009		1,817			907			907			426		1,635

Vested or expected to vest at September 30, 2009		1,817			907			907			426		1,635

Exercisable options at September 30, 2009		1,117			—			—			426		184

Weighted average remaining contractual term (in years)		6.3			6.3			6.3			7.7		8.9
Weighted average grant date fair value per option granted in 2009	$	—		$	—		$	—		$	9.44	$	9.44

Based on the estimated fair values of options granted, stock-based compensation expense for the three and nine months ended September 30, 2009 totaled $1.1 million and $3.8 million, respectively. Based on the estimated fair values of options granted, stock-based compensation expense for the three and nine months ended September 30, 2008 totaled $0.7 million and $2.1 million, respectively. As of September 30, 2009, there was $14.1 million of unrecognized compensation cost related to unvested stock options, which will be recognized over a weighted average period of approximately 1.5 years.

Restricted Stock

In January 2007, the Board granted 21,000 shares of restricted stock of Affinion Holdings with a purchase price of $0.01 per share to the Company’s former Chief Financial Officer. This award would have vested 100% upon the earlier of three years of service or a change in control of Affinion Holdings. The fair value of the award was estimated to be $0.2 million, based upon the estimated fair value per share of common stock of Affinion Holdings, and was being amortized on a straight-line basis to general and administrative expense over the service period. In January 2009, this grant was forfeited.

In May 2007, the Board granted 42,000 shares of restricted stock of Affinion Holdings with a purchase price of $0.01 per share to Affinion International’s Chief Financial Officer. This award vests 100% upon the earlier of three years of service or a change in control of Affinion Holdings. The fair value of the award is estimated to be $0.4 million, based upon the estimated fair value per share of common stock of Affinion Holdings, and is being amortized on a straight-line basis to general and administrative expense over the service period.

A summary of restricted stock activity for the three and nine months ended September 30, 2009 is presented below (number of shares of restricted stock in thousands):


	Number of Restricted Shares		Weighted Average Grant Date Fair Value
Outstanding restricted unvested awards at January 1, 2009	63		$	9.52
Granted	—
Vested	—
Forfeited	(21	)

Outstanding restricted unvested awards at March 31, 2009	42		$	9.52
Granted	—
Vested	—
Forfeited	—

Outstanding restricted unvested awards at June 30, 2009	42		$	9.52
Granted	—
Vested	—
Forfeited	—

Outstanding restricted unvested awards at September 30, 2009	42		$	9.52

Weighted average remaining contractual term (in years)	0.7

Based on the estimated fair values of restricted stock granted, stock-based compensation expense for the three and nine months ended September 30, 2009 was less than $0.1 million and a benefit of less than $0.1 million, respectively. Based on the estimated fair values of restricted stock granted, stock-based compensation expense for the three and nine months ended September 30, 2008 was less than $0.1 million and $0.2 million, respectively. As of September 30, 2009, there was $0.1 million of unrecognized compensation cost related to the remaining vesting period of restricted stock granted under the Plan. This cost will be recorded in future periods as stock-based compensation expense over a weighted average period of approximately 0.3 years.

8.	RELATED PARTY TRANSACTIONS

Post-Closing Relationships with Cendant

Cendant has agreed to indemnify the Company, Affinion Holdings and the Company’s affiliates (collectively the “indemnified parties”) for breaches of representations, warranties and covenants made by Cendant, as well as for other specified matters, certain of which are described below. Affinion Holdings and the Company have agreed to indemnify Cendant for breaches of representations, warranties and covenants made in the purchase agreement, as well as for certain other specified matters. Generally, all parties’ indemnification obligations with respect to breaches of representations and warranties (except with respect to the matters described below) (i) are subject to a $0.1 million occurrence threshold, (ii) are not effective until the aggregate amount of losses suffered by the indemnified party exceeds $15.0 million (and then only for the amount of losses exceeding $15.0 million) and (iii) are limited to $275.1 million of recovery. Generally, subject to certain exceptions of greater duration, the parties’ indemnification obligations with respect to representations and warranties survived until April 15, 2007 with indemnification obligations related to covenants surviving until the applicable covenant has been fully performed.

In connection with the purchase agreement, Cendant agreed to specific indemnification obligations with respect to the matters described below.

Excluded Litigation. Cendant has agreed to fully indemnify the indemnified parties with respect to any pending or future litigation, arbitration, or other proceeding relating to accounting irregularities in the former CUC International, Inc. announced on April 15, 1998.

Certain Litigation and Compliance with Law Matters. Cendant has agreed to indemnify the indemnified parties up to specified amounts for: (a) breaches of its representations and warranties with respect to legal proceedings that (1) occur after the date of the purchase agreement, (2) relate to facts and circumstances related to the business of Affinion Group, LLC (“AGLLC”) or Affinion International Holdings Limited (“Affinion International”) and (3) constitute a breach or violation of its compliance with law

representations and warranties, (b) breaches of its representations and warranties with respect to compliance with laws to the extent related to the business of AGLLC or Affinion International and (c) the August 2005 Suit.

Cendant, Affinion Holdings and the Company have agreed that losses up to $15.0 million incurred with respect to these matters will be borne solely by the Company and losses in excess of $15.0 million will be shared by the parties in accordance with agreed upon allocations. The Company has the right at all times to control litigation related to shared losses and Cendant has consultation rights with respect to such litigation.

Other Litigation. Cendant has agreed to indemnify the Company for specified amounts with respect to losses incurred in connection with the 2001 Class Action.

The Company will retain all liability with respect to the November 2002 Class Action and will not be indemnified by Cendant for losses related thereto.

Other Transactions. As publicly announced, as part of a plan to split into four independent companies, Cendant has (i) distributed the equity interests it previously held in its hospitality services business (“Wyndham”) and its real estate services business (“Realogy”) to Cendant stockholders and (ii) sold its travel services business (“Travelport”) to a third party. Cendant continues as a publicly traded company which owns the vehicle rental business (“Avis Budget,” together with Wyndham and Realogy, the “Cendant Entities”). Subject to certain exceptions, Wyndham and Realogy have agreed to share Cendant’s contingent and other liabilities (including its indemnity obligations to the Company described above and other liabilities to the Company in connection with the Apollo Transactions) in specified percentages. If any Cendant Entity defaults in its payment, when due, of any such liabilities, the remaining Cendant Entities are required to pay an equal portion of the amounts in default. Wyndham continues to hold a portion of the preferred stock and warrant issued in connection with the Apollo Transactions, while Realogy was subsequently acquired by an affiliate of Apollo.

The Company entered into agreements pursuant to which the Company continues to have cost-sharing arrangements with Cendant and/or its subsidiaries relating to office space and customer contact centers. These agreements have expiration dates and financial terms that are generally consistent with the terms of the related intercompany arrangements prior to the Apollo Transactions. The revenue earned for such services was less than $0.1 million and $0.1 million for the three and nine months ended September 30, 2009, respectively, and $0.3 million and $1.1 million for the three and nine months ended September 30, 2008, respectively, and is included in net revenues in the accompanying unaudited condensed consolidated statements of operations. The Company incurred expenses of $0.2 million and $0.8 million for the three and nine months ended September 30, 2009, respectively, and $0.1 million and $0.3 million for the three and nine months ended September 30, 2008, respectively, which is included in operating expenses in the accompanying unaudited condensed consolidated statements of operations.

New marketing agreements permit the Company to continue to solicit customers of certain Cendant subsidiaries for the Company’s membership programs through various direct marketing methods. The marketing agreements generally provide for a minimum amount of marketing volume or a specified quantity of customer data to be allotted to the relevant party. The payment terms of the marketing agreements provide for either (1) a fee for each call transferred, (2) a bounty payment for each user that enrolls in one of the Company’s membership programs or (3) a percentage of net membership revenues. These agreements generally expire in December 2010 and are generally terminable by the applicable Cendant party following December 31, 2007, upon six months written notice to the Company. In the event that a Cendant subsidiary terminates an agreement prior to December 31, 2010, then the Cendant subsidiary is required to pay a termination fee based on the projected marketing revenues that would have been generated from such agreement had the marketing agreement been in place through December 31, 2010. The expense incurred for such services was $0.9 million and $2.5 million for the three and nine months ended September 30, 2009, respectively, and $1.1 million and $2.9 million for the three and nine months ended September 30, 2008, respectively, and is included in marketing and commissions in the accompanying unaudited condensed consolidated statements of operations.

Under the loyalty and rewards program administration agreements, the Company continues to administer loyalty programs for certain Cendant subsidiaries. The agreements provide for the Company to earn fees for the following services: an initial fee to implement a new loyalty program, a program administration fee, a redemption fee related to redeemed rewards and a booking fee related to travel bookings by loyalty program members. The loyalty and reward program agreements expire on December 31, 2009. The total amounts included in net revenues in the accompanying unaudited condensed consolidated statements of operations for such services was $2.0 million and $6.0 million for the three and nine months ended September 30, 2009, respectively, and $2.3 million and $9.0 million for the three and nine months ended September 30, 2008, respectively. In connection with these agreements, the Company formed Affinion Loyalty, LLC (“Loyalty”), a special-purpose, bankruptcy-remote subsidiary which is a wholly-owned subsidiary of TLS. Pursuant to the loyalty agreements, TLS has provided a copy of the object code, source code and related documentation of certain of its intellectual property to Loyalty under a non-exclusive limited license. Loyalty entered into an escrow agreement relating to such intellectual property with Cendant and its affiliates in connection with the parties entering into the loyalty and reward agreements. Loyalty sub-licenses such intellectual property to Cendant on a non-exclusive basis but will only provide access to such intellectual property either directly or indirectly through the escrow agent in the event that TLS (1) becomes bankrupt or insolvent, (2) commits a material, uncured breach of a loyalty and reward agreement, or (3) transfers or assigns its intellectual

property in such a way as to prevent it from performing its obligations under any agreement relating to Cendant’s loyalty and rewards programs. Upon access to the escrowed materials, Cendant will be able to use the escrowed materials for a limited term and for only those purposes for which TLS was using it to provide the services under the loyalty and reward agreements prior to the release of the escrowed materials to Cendant.

On June 30, 2008, the Company entered into an Assignment and Assumption Agreement (“AAA”) with Avis Budget, Wyndham and Realogy. Prior to this transaction, the ex-Cendant entities provided certain loyalty program-related benefits and services to credit card holders of a major financial institution and received a fee from this financial institution based on spending by the credit card holders. Under the AAA, the Company assumed all of the liabilities and obligations of the ex-Cendant entities relating to the loyalty program, including the fulfillment of the then-outstanding loyalty program points obligations. In connection with the transaction, on the June 30, 2008 closing date, the Company received cash and receivables with a fair value substantially equivalent to the fair value of the fulfillment obligation relating to the loyalty program points outstanding as of the closing date. The receivables are due and payable to the Company over a three year period following the closing date.

Affinion International entered into an agreement pursuant to which it agreed to continue to use RCI Europe, a subsidiary of Cendant, as its exclusive provider of travel services for the benefit of Affinion International members in the U.K., Germany, Switzerland, Austria, Italy, Belgium, Luxembourg, Ireland and the Netherlands. Pursuant to this agreement, RCI Europe had a right of first refusal to offer travel services in other countries where Affinion International members are located. Affinion International indemnified RCI Europe in the event its profit margin under this arrangement fell below 1.31%. Under the terms of the agreement, RCI Europe elected to terminate the agreement for convenience. As such, the agreement terminated on October 31, 2008. The expense for such services was expense of $2.0 million and $2.8 million for the three and nine months ended September 30, 2008, respectively, and is included in operating costs in the accompanying unaudited condensed consolidated statements of operations.

On August 22, 2008, the Company entered into an agreement to acquire certain assets and assume certain liabilities of RCI Europe. The acquisition closed during the fourth quarter of 2008 for nominal consideration. Under the agreement, the Company acquired all of the assets and assumed all of the liabilities of RCI Europe’s travel services business that served the Company’s customers in Europe. Following this acquisition, the Company provides travel services directly to its customers.

The Company earns referral fees from Wyndham for hotel stays and travel packages. The amount included in net revenues in the accompanying unaudited condensed consolidated statements of operations for such services was $0.3 million and $0.8 million for the three and nine months ended September 30, 2009, respectively, and $0.4 million and $1.4 million for the three and nine months ended September 30, 2008, respectively.

Apollo Agreements

On October 17, 2005, Apollo entered into a consulting agreement with the Company for the provision of certain structuring and advisory services. The consulting agreement will also allow Apollo and its affiliates to provide certain advisory services for a period of twelve years or until Apollo owns less than 5% of the beneficial economic interests of the Company, whichever is earlier. The agreement may be terminated earlier by mutual consent. The Company is required to pay Apollo an annual fee of $2.0 million for these services commencing in 2006. The amounts expensed related to this consulting agreement were $0.5 million for the three months ended September 30, 2009 and 2008 and $1.5 million for the nine months ended September 30, 2009 and 2008 and are included in general and administrative expenses in the accompanying unaudited condensed consolidated statement of operations. If a transaction is consummated involving a change of control or an initial public offering, then, in lieu of the annual consulting fee and subject to certain qualifications, Apollo may elect to receive a lump sum payment equal to the present value of all consulting fees payable through the end of the term of the consulting agreement.

In addition, the Company will be required to pay Apollo a transaction fee if it engages in any merger, acquisition or similar transaction. The Company will also indemnify Apollo and its affiliates and their directors, officers and representatives for potential losses relating to the services to be provided under the consulting agreement.

In July 2006, Apollo acquired one of the Company’s vendors, SOURCECORP Incorporated, that provides document and information services to the Company. The fees incurred for these services were $0.3 million and $0.9 million for the three and nine months ended September 30, 2009, respectively, and $0.3 million and $0.9 million for the three and nine months ended September 30, 2008, respectively, and are included in cost of revenues in the accompanying unaudited condensed consolidated statements of operations.

On June 11, 2009, the Company utilized cash on hand and available funds under its revolving credit facility to purchase $64.0 million face amount of Affinion Holdings’ outstanding debt from an affiliate of Apollo for $44.8 million. These debt securities are classified as held-to-maturity debt securities and are included in other non-current assets on the September 30, 2009 balance sheet at their amortized cost of $48.5 million. As a result of Affinion Holdings’ election to pay interest by adding such interest to the principal amount of the debt for the interest period ended September 1, 2009, the Company increased the carrying amount of the debt securities by $1.3 million. The borrowing under the revolving credit facility was paid down prior to June 30, 2009.

9.	FINANCIAL INSTRUMENTS, DERIVATIVES AND FAIR VALUE MEASURES

The Company entered into an interest rate swap as of December 14, 2005. This swap converts a notional amount of the Company’s floating rate debt into a fixed rate obligation. The notional amount of the swap is $150.0 million through the swap period ending December 31, 2009 and reduces in accordance with a contractual amortization schedule through December 31, 2010 when the swap terminates.

In January 2008, the Company entered into an interest rate swap effective February 21, 2008. This swap converts a notional amount of the Company’s floating rate debt into a fixed rate obligation. The notional amount of the swap is $500.0 million through the swap period ending February 22, 2010 and increases in accordance with a contractual amortization schedule through its termination date of February 21, 2011, such that, in conjunction with the swap entered into in December 2005, $650.0 million of the Company’s variable rate debt has been converted into fixed rate debt through December 31, 2010.

In January 2009, the Company entered into an interest rate swap effective February 21, 2011. The swap has a notional amount of $500.0 million and terminates on October 17, 2012. Under the swap, the Company has agreed to pay a fixed rate of interest of 2.985%, payable on a quarterly basis with the first interest payment due on May 21, 2011, in exchange for receiving floating payments based on a three-month LIBOR on the notional amount for each applicable period. This swap is intended to reduce a portion of the variability of the future interest payments on the Company’s term loan facility for the period after the Company’s previously existing swaps expire.

All three interest rate swaps are recorded at fair value, either as non-current assets or non-current liabilities. The changes in the fair value of the swaps, which are not designated as hedging instruments, are included in interest expense in the accompanying unaudited condensed consolidated statements of operations. For the three and nine months ended September 30, 2009, the Company recorded interest expense of $9.2 million and $12.0 million, respectively, related to the interest rate swaps.

The Company adopted SFAS No. 157, now contained in Codification Topic 820, as of January 1, 2007, which, among other things, requires enhanced disclosures about investments that are measured and reported at fair value. SFAS No. 157 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy in SFAS 157 prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, giving the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. Level 1 inputs to a fair value measurement are quoted market prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.

The fair values of certain financial instruments as of September 30, 2009 are shown in the table below:


	Fair Value Measurements at September 30, 2009
	Fair Value at September 30, 2009			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
	(in millions)
Trading securities (included in other current assets)	$	0.1		$	0.1	$	—		—
Interest rate swaps (included in other long-term liabilities)		(22.2	)		—		(22.2	)	—

The fair value of the trading securities and publicly-traded debt is the published market price per unit multiplied by the number of units held or issued without consideration of transaction costs. The fair value of the non-publicly-traded debt, substantially all of which is variable-rate debt, approximates its face amount due to the variable interest rate which fluctuates with the market. The fair value of the interest rate swaps are based on significant other observable inputs, adjusted for contract restrictions and other terms specific to the interest rate swaps. The counterparties to the interest rate swaps are major financial institutions. The counterparty to the swaps entered into in 2005 and 2008 had a long-term rating of Aa1 by Moody’s, A+ by Standard & Poor’s and AA- by Fitch Ratings as of October 14, 2009. The counterparty to the swap entered into in 2009 had a long-term rating of Aa3 by Moody’s and A+ by Standard & Poor’s and Fitch Ratings as of October 14, 2009. The Company does not expect any losses from non-performance by these counterparties.

10.

SEGMENT INFORMATION

Management evaluates the operating results of each of its reportable segments based upon revenue and “Segment EBITDA,” which is defined as income from operations before depreciation and amortization. The presentation of Segment EBITDA may not be comparable to similarly titled measures used by other companies.

The Segment EBITDA of the Company’s four operating segments does not include general corporate expenses. General corporate expenses include costs and expenses that are of a general corporate nature or managed on a corporate basis, including primarily stock-based compensation expense and consulting fees paid to Apollo. In accordance with Codification Topic 280, general corporate expenses have been excluded from the presentation of the Segment EBITDA for the Company’s four operating segments because they are not reported to the chief operating decision maker for purposes of allocating resources among operating segments or assessing operating segment performance. The accounting policies of the reporting segments are the same as those described in Note 2—Summary of Significant Accounting Policies in the Company’s Form S-4.


Net Revenues
	For the Three Months Ended						For the Nine Months Ended
	September 30, 2009			September 30, 2008			September 30, 2009			September 30, 2008
Affinion North America
Membership products	$	184.8		$	183.1		$	534.5		$	529.7
Insurance and package products		89.7			95.1			257.3			281.9
Loyalty products		19.6			21.0			54.2			51.6
Eliminations		(0.8	)		(1.1	)		(2.8	)		(3.2	)

Total North America		293.3			298.1			843.2			860.0
Affinion International products		67.8			66.7			185.4			198.3

	$	361.1		$	364.8		$	1,028.6		$	1,058.3


Segment EBITDA
	For the Three Months Ended						For the Nine Months Ended
	September 30, 2009			September 30, 2008			September 30, 2009			September 30, 2008
Affinion North America
Membership products	$	38.3		$	38.3		$	104.7		$	93.6
Insurance and package products		27.0			30.3			82.5			99.8
Loyalty products		6.8			6.2			18.1			15.3

Total North America		72.1			74.8			205.3			208.7
Affinion International products		12.7			10.4			28.9			23.7

Total products		84.8			85.2			234.2			232.4
Corporate		(2.1	)		(1.3	)		(5.2	)		(4.5	)

	$	82.7		$	83.9		$	229.0		$	227.9

Provided below is a reconciliation of Segment EBITDA to income from operations:


	For the Three Months Ended						For the Nine Months Ended
	September 30, 2009			September 30, 2008			September 30, 2009			September 30, 2008
Segment EBITDA	$	82.7		$	83.9		$	229.0		$	227.9
Depreciation and amortization		(51.7	)		(68.4	)		(153.2	)		(205.6	)

Income from operations	$	31.0		$	15.5		$	75.8		$	22.3

11.

GUARANTOR/NON-GUARANTOR SUPPLEMENTAL FINANCIAL INFORMATION

The following condensed consolidating information presents, in separate columns, the condensed consolidating balance sheets as of September 30, 2009 and December 31, 2008, and the related condensed consolidating statements of operations for the three and nine months ended September 30, 2009 and 2008 and the related condensed consolidating statement of cash flows for the nine months ended September 30, 2009 and 2008 for (i) the Company (Affinion Group, Inc.) on a parent-only basis, with its investment in subsidiaries recorded under the equity method, (ii) the Guarantor Subsidiaries on a combined basis, (iii) the Non-Guarantor Subsidiaries on a combined basis and (iv) the Company on a consolidated basis. The guarantees are full and unconditional and joint and several obligations of each of the guarantor subsidiaries, all of which are 100% owned by the Company. There are no significant restrictions on the ability of the Company to obtain funds from any of its guarantor subsidiaries by dividends or loan. The supplemental financial information has been presented in lieu of separate financial statements of the guarantors as such separate financial statements are not considered meaningful.

In connection with the adoption of SFAS No. 160, now contained in Codification Topic 810, presentation of certain prior year amounts have been revised to conform with the current year presentation as prescribed by SFAS No. 160.

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET

AS OF SEPTEMBER 30, 2009

(In millions)


	Affinion Group, Inc.			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	35.7		$	56.6	$	30.9	$	—		$	123.2
Restricted cash		—			23.0		12.6		—			35.6
Receivables, net		0.7			52.9		45.5		—			99.1
Receivables from related parties		0.3			8.9		0.7		—			9.9
Profit-sharing receivables from insurance carriers		—			86.0		2.1		—			88.1
Prepaid commissions		—			57.4		7.7		—			65.1
Intercompany loans receivable		12.4			—		—		(12.4	)		—
Other current assets		5.1			24.5		21.7		—			51.3

Total current assets		54.2			309.3		121.2		(12.4	)		472.3
Property and equipment, net		3.4			78.2		19.9		—			101.5
Contract rights and list fees, net		—			18.2		17.8		—			36.0
Goodwill		—			289.5		19.4		—			308.9
Other intangibles, net		—			437.9		51.5		—			489.4
Receivables from related parties		—			2.5		—		—			2.5
Investment in subsidiaries		1,546.2			—		—		(1,546.2	)		—
Intercompany loan receivables		7.5			—		—		(7.5	)		—
Intercompany receivables		—			648.1		—		(648.1	)		—
Other non-current assets		31.1			27.0		65.0		—			123.1

Total assets	$	1,642.4		$	1,810.7	$	294.8	$	(2,214.2	)	$	1,533.7

Liabilities and Deficit
Current liabilities:
Current portion of long-term debt	$	—		$	0.3	$	—	$	—		$	0.3
Accounts payable and accrued expenses		114.2			117.9		105.1		—			337.2
Payables to related parties		8.8			1.9		3.7		—			14.4
Deferred revenue		—			180.1		31.5		—			211.6
Intercompany loans payable		—			—		12.4		(12.4	)		—

Total current liabilities		123.0			300.2		152.7		(12.4	)		563.5
Long-term debt		1,441.2			1.0		—		—			1,442.2
Deferred income taxes		—			21.3		3.8		—			25.1
Deferred revenue		—			20.2		11.2		—			31.4
Intercompany loan payable		—			—		7.5		(7.5	)		—
Intercompany payables		645.6			—		2.5		(648.1	)		—
Other long-term liabilities		33.8			17.6		20.3		—			71.7

Total liabilities		2,243.6			360.3		198.0		(668.0	)		2,133.9

Affinion Group, Inc. deficit		(601.2	)		1,450.4		95.8		(1,546.2	)		(601.2	)
Non-controlling interest in subsidiary		—			—		1.0		—			1.0

Total deficit		(601.2	)		1,450.4		96.8		(1,546.2	)		(600.2	)

Total liabilities and deficit	$	1,642.4		$	1,810.7	$	294.8	$	(2,214.2	)	$	1,533.7

UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2008

(In millions)


	Affinion Group, Inc.			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—		$	2.9	$	33.4	$	—		$	36.3
Restricted cash		—			24.1		11.5		—			35.6
Receivables, net		0.5			48.7		28.4		—			77.6
Receivables from related parties		0.6			14.8		0.2		—			15.6
Profit-sharing receivables from insurance carriers		—			96.9		1.4		—			98.3
Prepaid commissions		—			54.2		7.8		—			62.0
Intercompany loans receivable		34.3			—		—		(34.3	)		—
Other current assets		2.5			25.3		15.2		—			43.0

Total current assets		37.9			266.9		97.9		(34.3	)		368.4
Property and equipment, net		1.8			71.1		18.3		—			91.2
Contract rights and list fees, net		—			16.9		23.8		—			40.7
Goodwill		—			289.5		18.0		—			307.5
Other intangibles, net		—			548.1		56.3		—			604.4
Receivables from related parties		—			5.3		—		—			5.3
Investment in subsidiaries		1,423.2			—		—		(1,423.2	)		—
Intercompany loan receivable		6.8			—		—		(6.8	)		—
Intercompany receivables		—			548.9		4.5		(553.4	)		—
Other non-current assets		23.9			14.7		4.5		—			43.1

Total assets	$	1,493.6		$	1,761.4	$	223.3	$	(2,017.7	)	$	1,460.6

Liabilities and Deficit
Current liabilities:
Current portion of long-term debt	$	6.4		$	0.3	$	—	$	—		$	6.7
Accounts payable and accrued expenses		91.5			117.5		59.2		—			268.2
Payables to related parties		5.1			1.1		3.8		—			10.0
Intercompany loans payable		—			—		34.3		(34.3	)		—
Deferred revenue		—			202.8		28.5		—			231.3

Total current liabilities		103.0			321.7		125.8		(34.3	)		516.2
Long-term debt		1,360.1			0.5		—		—			1,360.6
Deferred income taxes		(7.8	)		20.3		8.0		—			20.5
Deferred revenue		—			25.0		10.4		—			35.4
Intercompany loan payable		—			—		6.8		(6.8	)		—
Intercompany payables		553.4			—		—		(553.4	)		—
Other long-term liabilities		32.1			20.0		22.3		—			74.4

Total liabilities		2,040.8			387.5		173.3		(594.5	)		2,007.1

Affinion Group, Inc. deficit		(547.2	)		1,373.9		49.3		(1,423.2	)		(547.2	)
Non-controlling interest in subsidiary		—			—		0.7		—			0.7

Total deficit		(547.2	)		1,373.9		50.0		(1,423.2	)		(546.5	)

Total liabilities and deficit	$	1,493.6		$	1,761.4	$	223.3	$	(2,017.7	)	$	1,460.6

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009

(In millions)


	Affinion Group, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net revenues	$	—		$	293.2		$	67.9		$	—		$	361.1

Expenses:
Cost of revenues, exclusive of depreciation and amortization shown separately below:
Marketing and commissions		—			138.0			23.0			—			161.0
Operating costs		—			61.5			26.7			—			88.2
General and administrative		4.5			18.1			6.6			—			29.2
Depreciation and amortization		—			43.7			8.0			—			51.7

Total expenses		4.5			261.3			64.3			—			330.1

Income (loss) from operations		(4.5	)		31.9			3.6			—			31.0
Interest income		—			—			3.5			—			3.5
Interest expense		(38.2	)		(0.1	)		(1.0	)		—			(39.3	)
Other expense, net		—			—			(4.8	)		—			(4.8	)

Income (loss) before income taxes and non-controlling interest		(42.7	)		31.8			1.3			—			(9.6	)
Income tax (expense) benefit		(0.9	)		(3.6	)		(1.9	)		—			(6.4	)

		(43.6	)		28.2			(0.6	)		—			(16.0	)
Equity in income of subsidiaries		27.3			—			—			(27.3	)		—

Net income (loss)		(16.3	)		28.2			(0.6	)		(27.3	)		(16.0	)
Less: net income attributable to non-controlling interest		—			—			(0.3	)		—			(0.3	)

Net income (loss) attributable to Affinion Group, Inc.	$	(16.3	)	$	28.2		$	(0.9	)	$	(27.3	)	$	(16.3	)

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009

(In millions)


	Affinion Group, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net revenues	$	—		$	843.2		$	185.4		$	—		$	1,028.6

Expenses:
Cost of revenues, exclusive of depreciation and amortization shown separately below:
Marketing and commissions		—			388.7			64.2			—			452.9
Operating costs		—			183.5			77.7			—			261.2
General and administrative		11.0			56.3			18.2			—			85.5
Depreciation and amortization		—			130.7			22.5			—			153.2

Total expenses		11.0			759.2			182.6			—			952.8

Income (loss) from operations		(11.0	)		84.0			2.8			—			75.8
Interest income		—			—			4.5			—			4.5
Interest expense		(94.5	)		(0.6	)		(2.7	)		—			(97.8	)
Other expense, net		—			0.1			(11.6	)		—			(11.5	)

Income (loss) before income taxes and non-controlling interest		(105.5	)		83.5			(7.0	)		—			(29.0	)
Income tax (expense) benefit		(1.6	)		(6.6	)		(1.7	)		—			(9.9	)

		(107.1	)		76.9			(8.7	)		—			(38.9	)
Equity in income (loss) of subsidiaries		67.5			—			—			(67.5	)		—

Net income (loss)		(39.6	)		76.9			(8.7	)		(67.5	)		(38.9	)
Less: net income attributable to non-controlling interest		—			—			(0.7	)		—			(0.7	)

Net income (loss) attributable to Affinion Group, Inc.	$	(39.6	)	$	76.9		$	(9.4	)	$	(67.5	)	$	(39.6	)

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008

(In millions)


	Affinion Group, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net revenues	$	—		$	298.1		$	66.7		$	—		$	364.8

Expenses:
Cost of revenues, exclusive of depreciation and amortization shown separately below:
Marketing and commissions		—			135.7			24.4			—			160.1
Operating costs		—			65.9			30.8			—			96.7
General and administrative		2.2			19.9			2.0			—			24.1
Depreciation and amortization		—			59.4			9.0			—			68.4

Total expenses		2.2			280.9			66.2			—			349.3

Income (loss) from operations		(2.2	)		17.2			0.5			—			15.5
Interest income		0.1			0.2			0.1			—			0.4
Interest expense		(33.7	)		(0.7	)		(1.2	)		—			(35.6	)
Other income, net		—			—			2.8			—			2.8

Income (loss) before income taxes and non-controlling interest		(35.8	)		16.7			2.2			—			(16.9	)
Income tax expense		(0.4	)		(2.2	)		(0.5	)		—			(3.1	)

		(36.2	)		14.5			1.7			—			(20.0	)
Equity in income (loss) of subsidiaries		15.9			—			—			(15.9	)		—

Net income (loss)		(20.3	)		14.5			1.7			(15.9	)		(20.0	)
Less: net income attributable to non-controlling interest		—			—			(0.3	)		—			(0.3	)

Net income (loss) attributable to Affinion Group, Inc.	$	(20.3	)	$	14.5		$	1.4		$	(15.9	)	$	(20.3	)

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008

(In millions)


	Affinion Group, Inc.			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net revenues	$	—		$	860.0		$	198.3		$	—		$	1,058.3

Expenses:
Cost of revenues, exclusive of depreciation and amortization shown separately below:
Marketing and commissions		—			400.8			74.5			—			475.3
Operating costs		—			185.9			91.3			—			277.2
General and administrative		7.0			58.0			12.9			—			77.9
Depreciation and amortization		—			178.0			27.6			—			205.6

Total expenses		7.0			822.7			206.3			—			1,036.0

Income (loss) from operations		(7.0	)		37.3			(8.0	)		—			22.3
Interest income		0.1			0.9			0.4			—			1.4
Interest expense		(81.9	)		(1.5	)		(3.7	)		—			(87.1	)
Other income, net		—			—			2.6			—			2.6

Income (loss) before income taxes and non-controlling interest		(88.8	)		36.7			(8.7	)		—			(60.8	)
Income tax expense		(0.9	)		(6.4	)		(1.6	)		—			(8.9	)

		(89.7	)		30.3			(10.3	)		—			(69.7	)
Equity in income (loss) of subsidiaries		19.4			—			—			(19.4	)		—

Net income (loss)		(70.3	)		30.3			(10.3	)		(19.4	)		(69.7	)
Less: net income attributable to non-controlling interest		—			—			(0.6	)		—			(0.6	)

Net income (loss) attributable to Affinion Group, Inc.	$	(70.3	)	$	30.3		$	(10.9	)	$	(19.4	)	$	(70.3	)

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009

(In millions)


	Affinion Group, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating Activities
Net loss	$	(39.6	)	$	76.9		$	(8.7	)	$	(67.5	)	$	(38.9	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		0.1			130.6			22.5			—			153.2
Amortization of favorable and unfavorable contracts		—			(1.7	)		—			—			(1.7	)
Amortization of debt discount and financing costs		5.7			—			—			—			5.7
Unrealized loss on interest rate swaps		2.2			—			—			—			2.2
Unrealized foreign currency transaction loss		—			—			11.6			—			11.6
Stock-based compensation		3.8			—			—			—			3.8
Interest accretion on held-to-maturity debt securities		—			—			(2.3	)		—			(2.3	)
Equity in income (loss) of subsidiaries		(67.5	)		—			—			67.5			—
Deferred income taxes		0.1			6.3			(13.2	)		—			(6.8	)
Payment received for assumption of loyalty points program liability		—			6.7			—			—			6.7
Net change in assets and liabilities:
Restricted cash		—			0.8			(0.1	)		—			0.7
Receivables		(0.2	)		(5.0	)		(13.7	)		—			(18.9	)
Receivables from and payables to related parties		0.2			3.5			(2.4	)		—			1.3
Profit-sharing receivables from insurance carriers		—			10.9			(0.5	)		—			10.4
Prepaid commissions		—			(3.2	)		0.9			—			(2.3	)
Other current assets		(1.5	)		1.1			(2.7	)		—			(3.1	)
Contract rights and list fees		—			(1.7	)		—			—			(1.7	)
Other non-current assets		0.2			(17.6	)		0.7			—			(16.7	)
Accounts payable and accrued expenses		21.6			(3.4	)		18.1			—			36.3
Deferred revenue		—			(27.5	)		0.1			—			(27.4	)
Income taxes receivable and payable		(0.1	)		0.1			12.7			—			12.7
Other long-term liabilities		0.3			(0.5	)		(4.6	)		—			(4.8	)
Other, net		0.1			—			(1.2	)		—			(1.1	)

Net cash provided by operating activities		(74.6	)		176.3			17.2			—			118.9

Investing Activities
Capital expenditures		(1.9	)		(20.6	)		(5.7	)		—			(28.2	)
Restricted cash		—			0.2			—			—			0.2
Purchase of held-to-maturity debt securities of Affinion Group Holdings, Inc		—			—			(44.8	)		—			(44.8	)
Acquisition-related payments, net of cash acquired		—			(2.3	)		—			—			(2.3	)

Net cash used in investing activities		(1.9	)		(22.7	)		(50.5	)		—			(75.1	)

Financing Activities
Proceeds from borrowings		136.5			—			—			—			136.5
Deferred financing costs		(4.3	)		—			—			—			(4.3	)
Repayments under line of credit, net		(57.0	)		—			—			—			(57.0	)
Principal payments on borrowings		(6.4	)		(0.3	)		—			—			(6.7	)
Dividends paid to parent company		(26.2	)		—			—			—			(26.2	)
Intercompany loan		21.9			—			(21.9	)		—			—
Intercompany receivables and payables		92.1			(99.2	)		7.1			—			—
Intercompany dividends		0.4			(0.4	)		—			—			—
Capital contribution		(44.8	)		—			44.8			—			—
Distribution to non-controlling interest		—			—			(0.7	)		—			(0.7	)

Net cash provided by financing activities		112.2			(99.9	)		29.3			—			41.6

Effect of changes in exchange rates on cash and cash equivalents		—			—			1.5			—			1.5

Net increase in cash and cash equivalents		35.7			53.7			(2.5	)		—			86.9
Cash and cash equivalents, beginning of period		—			2.9			33.4			—			36.3

Cash and cash equivalents, end of period	$	35.7		$	56.6		$	30.9		$	—		$	123.2

UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008

(In millions)


	Affinion Group, Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating Activities
Net loss	$	(70.3	)	$	30.3		$	(10.3	)	$	(19.4	)	$	(69.7	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		—			178.0			27.6			—			205.6
Amortization of favorable and unfavorable contracts		—			(1.7	)		(0.6	)		—			(2.3	)
Amortization of debt discount and financing costs		4.4			—			—			—			4.4
Unrealized gain on interest rate swaps		(8.1	)		—			—			—			(8.1	)
Stock-based compensation		2.3			—			—			—			2.3
Equity in income (loss) of subsidiaries		(19.4	)		—			—			19.4			—
Deferred income taxes		—			5.8			(2.0	)		—			3.8
Payment received for assumption of loyalty points program liability		—			7.4			—			—			7.4
Net change in assets and liabilities:
Restricted cash		—			0.3			0.3			—			0.6
Receivables		(0.1	)		(4.5	)		2.4			—			(2.2	)
Receivables from and payables to related parties		(0.3	)		(20.1	)		(2.1	)		—			(22.5	)
Profit-sharing receivables from insurance carriers		—			(24.4	)		—			—			(24.4	)
Prepaid commissions		—			1.1			2.4			—			3.5
Other current assets		0.1			(3.6	)		1.3			—			(2.2	)
Contract rights and list fees		—			(0.1	)		—			—			(0.1	)
Other non-current assets		0.2			(1.8	)		—			—			(1.6	)
Accounts payable and accrued expenses		50.3			(11.0	)		(8.2	)		—			31.1
Deferred revenue		—			(14.6	)		4.7			—			(9.9	)
Income taxes receivable and payable		0.1			(1.7	)		0.1			—			(1.5	)
Other long-term liabilities		0.7			(0.4	)		(4.7	)		—			(4.4	)
Other, net		—			(0.3	)		(1.1	)		—			(1.4	)

Net cash provided by operating activities		(40.1	)		138.7			9.8			—			108.4


Investing Activities
Capital expenditures		(1.4	)		(15.7	)		(8.5	)		—			(25.6	)
Acquisition-related payments, net of cash acquired		—			—			(1.1	)		—			(1.1	)

Net cash used in investing activities		(1.4	)		(15.7	)		(9.6	)		—			(26.7	)


Financing Activities
Repayments under line of credit, net		(38.5	)		—			—			—			(38.5	)
Principal payments on borrowings		—			(0.2	)		—			—			(0.2	)
Dividends paid to parent company		(37.0	)		—			—			—			(37.0	)
Intercompany receivables and payables		116.8			(121.8	)		5.0			—			—
Intercompany dividend		0.2			(0.2	)		—			—			—
Distribution to noncontrolling interest of a subsidiary		—			—			(0.4	)		—			(0.4	)

Net cash used in financing activities		41.5			(122.2	)		4.6			—			(76.1	)

Effect of changes in exchange rates on cash and cash equivalents		—			—			(1.5	)		—			(1.5	)

Net decrease in cash and cash equivalents		—			0.8			3.3			—			4.1
Cash and cash equivalents, beginning of period		—			3.0			11.2			—			14.2

Cash and cash equivalents, end of period	$	—		$	3.8		$	14.5		$	—		$	18.3

Item 2.

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

This Report is prepared by Affinion Group, Inc. Unless otherwise indicated or the context otherwise requires, in this Report all references to “Affinion,” the “Company,” “we,” “our” and “us” refer to Affinion Group, Inc. and its subsidiaries on a consolidated basis.

The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our unaudited condensed consolidated financial statements and related notes thereto presented in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes as of December 31, 2008 and 2007, and for the years ended December 31, 2008, 2007 and 2006, included in our Prospectus dated August 31, 2009, which forms part of our Registration Statement on Form S-4 (File number 333-160594), as amended (the “Form S-4”), which Form S-4 was declared effective by the SEC on August 31, 2009. The audited consolidated financial statements contained in the Form S-4 differ from those contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 in that they have been retrospectively adjusted to reflect the Company’s adoption of FASB Statement No. 160 “Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51,” now contained in Codification Topic 810.

Disclosure Regarding Forward-Looking Statements

Our disclosure and analysis in this Form 10-Q may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Private Securities Litigation Reform Act of 1995, that are subject to risks and uncertainties. Forward-looking statements give our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. All statements other than statements of historical facts included in this Form 10-Q that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements.

These forward-looking statements are largely based on our expectations and beliefs concerning future events, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control.

Although we believe our estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this Form 10-Q are not guarantees of future performance, and we cannot assure any reader that those statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to the factors listed under “Item 1A. Risk Factors” in our Form 10-K and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of this Form 10-Q. All forward-looking statements speak only as of the date of this Form 10-Q. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise, except as required by law. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

Introduction

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is provided as a supplement to the unaudited condensed consolidated financial statements and the related notes thereto included elsewhere herein to help provide an understanding of our financial condition, results of our operations and changes in our financial condition. The MD&A is organized as follows:

•

Overview. This section provides a general description of our business and operating segments, as well as recent developments that we believe are important in understanding our results of operations and financial condition and in anticipating future trends.

•

Results of operations. This section provides an analysis of our results of operations for the three and nine months ended September 30, 2009 and 2008. This analysis is presented on both a consolidated basis and on an operating segment basis.

•

Financial condition, liquidity and capital resources. This section provides an analysis of our cash flows for the nine months ended September 30, 2009 and 2008 and our financial condition as of September 30, 2009, as well as a discussion of our liquidity and capital resources.

•

Critical accounting policies. This section discusses certain significant accounting policies considered to be important to our financial condition and results of operations and which require significant judgment and estimates on the part of

management in their application. In addition, we refer you to our audited consolidated financial statements as of December 31, 2008 and 2007, and for the years ended December 31, 2008, 2007 and 2006, included in our Form S-4 for a summary of our significant accounting policies.

Overview

Description of Business

We are a global leader in providing comprehensive customer engagement solutions that enhance or extend the relationship of millions of customers with many of the largest and most respected companies in the world. We partner with these leading companies to develop and market programs that provide valuable services to their end-customers using our expertise in customer engagement, creative design and product development. These programs and services enable our marketing partners to strengthen their customer relationships, as well as generate significant incremental revenue, generally in the form of commission payments paid by us, as well as strengthen their relationship with their end-customers, which can lead to increased acquisition of new customers, longer retention of existing customers, improved customer satisfaction rates and the increased use of other services provided by our marketing partners.

We have substantial expertise in deploying various forms of customer engagement communications, such as direct mail, inbound and outbound telephony and the Internet, and in bundling unique benefits to offer valuable products and services to the end-customers of our marketing partners on a highly targeted basis. We design programs that provide a diversity of benefits that we believe are likely to attract and engage end-customers based on their needs and interests, with a particular focus on programs offering lifestyle and protection benefits and programs which offer considerable savings on everyday purchases. For instance, we provide credit monitoring and identity-theft resolution, accidental death and dismemberment insurance (“AD&D”), discount travel services, loyalty points programs, various checking account and credit card enhancement services and other products and services. We believe we are a market leader in each of our product areas and that our portfolio of products and services is the broadest in the industry. Our scale, combined with our 35 years of experience, unique proprietary database, proven marketing techniques and strong partner relationships, position us to perform well and grow in a variety of market conditions.

As of September 30, 2009, we had approximately 61 million customers enrolled in our membership, insurance and package programs worldwide and approximately 96 million customers who received credit or debit card enhancement services or loyalty points-based management services.

We organize our business into two operating units:

•

Affinion North America. Affinion North America comprises our Membership, Insurance and Package, and Loyalty customer engagement businesses in North America.

•

Membership Products. We design, implement and market subscription programs that provide members with personal protection benefits and value-added services including credit monitoring and identity-theft resolution services as well as access to a variety of discounts and shop-at-home conveniences in such areas as retail merchandise, travel, automotive and home improvement.

•

Insurance and Package Products. We market AD&D and other insurance programs and design and provide checking account enhancement programs to financial institutions.

•

Loyalty Products. We design, implement and administer points-based loyalty programs and, as of September 30, 2009, managed approximately 468 billion points with an estimated redemption value of approximately $4.6 billion for financial, travel, auto and other companies. We also provide enhancement benefits to major financial institutions in connection with their credit and debit card programs.

•

Affinion International. Affinion International comprises our Membership, Package and Loyalty customer engagement businesses outside North America. Affinion International also provides loyalty program benefits and operates an accommodation reservation booking business through one of its subsidiaries. We expect to leverage our current European operational platform to expand our range of products and services, develop new marketing partner relationships in various industries and grow our geographical footprint.

We offer all of our products and services through both retail and wholesale arrangements. On a wholesale basis, currently we primarily provide services and benefits derived from our credit card registration, credit monitoring and identity-theft resolution products. In our retail arrangements, we incur marketing expenses to acquire new customers for our subscription-based membership, insurance and package enhancement products with the objective of building highly profitable and predictable recurring future revenue streams and cash flows. For our membership, insurance and package enhancement products, these marketing costs are expensed when the costs are incurred as the campaign is launched.

Our membership programs are offered under a variety of terms and conditions. Members are usually offered incentives (e.g. free credit reports or other premiums) and one to three month risk-free trial periods to encourage them to use the benefits of

membership before they are billed. We do not recognize any revenue during the trial period and expense the cost of all incentives and program benefits and servicing costs as incurred.

Customers of our membership programs typically pay their membership fees either annually or monthly. Our membership products may have significant timing differences between the receipt of membership fees for annual members and revenue recognition. Historically, memberships were offered primarily under full money back terms whereby a member could receive a full refund upon cancellation at any time during the current membership term. These revenues are recognized upon completion of the membership term when they are no longer refundable. Depending on the length of the trial period, this revenue may not be recognized for up to 16 months after the related marketing spend is incurred and expensed. Currently, annual memberships are primarily offered under pro-rata arrangements in which the member is entitled to a prorated refund for the unused portion of the membership term. This allows us to recognize revenue ratably over the annual membership term. During 2008 and the nine months ended September 30, 2009, approximately 65% and 77%, respectively, of our new member enrollments were in monthly payment programs. Revenue is recognized monthly under both annual pro rata and monthly memberships, allowing for a better matching of revenues and related servicing and benefit costs when compared to annual full money back memberships. Memberships generally remain under the billing terms in which they were originated.

We generally utilize the brand names, customer contacts and billing vehicles (credit or debit card, checking account, mortgage or other type of billing arrangement) of our marketing partners in our marketing campaigns. We usually compensate our marketing partners either through commissions based on revenues we receive from members or up-front payments, commonly referred to as bounties. The commission rates which we pay to our marketing partners differ depending on the arrangement we have with the particular marketing partner and the type of media we utilize for a given marketing campaign. For example, marketing campaigns utilizing direct mail and online channels generally have lower commission rates than other marketing channels which we use.

We serve as an agent and third-party administrator for the marketing of AD&D and our other insurance products. Free trial periods and incentives are generally not offered with our insurance programs. Insurance program participants typically pay their insurance premiums either monthly or quarterly. Insurance revenues are recognized ratably over the insurance period and there are no significant differences between cash flows and related revenue recognition. We earn revenue in the form of commissions collected on behalf of the insurance carriers and participate in profit-sharing relationships with the carriers that underwrite the insurance policies that we market. Our estimated share of profits from these arrangements is reflected as profit-sharing receivables from insurance carriers on the accompanying unaudited consolidated balance sheets and any changes in estimated profit sharing are periodically recorded as an adjustment to net revenue. Revenue from insurance programs is reported net of insurance costs in the accompanying unaudited consolidated statements of operations.

In our wholesale arrangements, we provide products and services as well as customer service and fulfillment related to such products and services supporting our marketing partners programs that they offer to their customers. Our marketing partners are typically responsible for customer acquisition, retention and collection and generally pay us one-time implementation fees and on-going monthly service fees based on the number of members enrolled in their programs. Implementation fees are recognized ratably over the contract period while monthly service fees are recognized in the month earned. Wholesale revenues also include revenues from transactional activities associated with our programs such as the sales of additional credit reports and discount shopping and travel purchases by members. The revenues from such transactional activities are recognized in the month earned.

We have made significant progress in increasing the flexibility of our business model by transitioning our operations from a highly fixed-cost structure to a more variable-cost structure by combining similar functions and processes, consolidating facilities and outsourcing a significant portion of our call center and other back-office processing. This added flexibility better enables us to redeploy our marketing expenditures globally across our operations to maximize returns.

Factors Affecting Results of Operations and Financial Condition

Competitive Environment

As a leader in providing customer engagement solutions, we compete with many other organizations, including certain of our marketing partners, to obtain a share of the customers’ business. As the majority of our customer engagement solutions involve direct marketing, we derive our leads from customer contacts, which our competitors seek access to, and we must generate sufficient earnings per lead for our marketing partners to compete effectively for access to their customer contacts.

We compete with companies of varying size, financial strength and availability of resources. Our competitors include marketing solutions providers, financial institutions, insurance companies, consumer goods companies, internet companies and others, as well as direct marketers offering similar programs. Some of our competitors are larger than we are, with more resources, financial and otherwise.

We expect this competitive environment to continue in the foreseeable future.

Financial Industry Trends

Historically, financial institutions have represented a significant majority of our marketing partner base. In the past few years, a number of our existing financial institution marketing partners have been acquired by, or merged with, other financial institutions. Several recent examples include Bank of America Corporation and Countrywide Financial Corp., JPMorgan Chase & Co. and Washington Mutual, Inc. and Wells Fargo & Co. and Wachovia Corporation. As we generally have relationships with either the acquirer, the target or, as in most cases, both the acquirer and the target, this industry consolidation has not, to date, had a material long-term impact on either our marketing opportunities or our margins, but has created delays in new program launches while the merging institutions focus on consolidating their internal operations.

In certain circumstances, our financial marketing partners have sought to source and market their own in-house programs, most notably programs that are analogous to our credit card registration, credit monitoring and identity-theft resolution services. As we have sought to maintain our market share and to continue these programs with our marketing partners, in some circumstances, we have shifted from a retail marketing arrangement to a wholesale arrangement which has lower net revenue, but unlike our retail arrangement, has no related commission expense. As a result, we have experienced a revenue reduction in our membership business. This trend has also caused some reductions in our profit margins, most notably in the in-bound telemarketing channel.

Internationally, our package products have been primarily offered by some of the largest financial institutions in Europe. As these banks attempt to increase their own net revenues and margins, we have experienced significant price reductions when our agreements come up for renewal from what we had previously been able to charge these institutions for our programs. We expect this pricing pressure on our international package offerings to continue in the future.

Regulatory Environment

We are subject to federal and state regulation as well as regulation by foreign authorities in other jurisdictions. Certain regulations that govern our operations include: federal, state and foreign marketing laws; federal, state and foreign privacy laws; and federal, state and foreign insurance and consumer protection regulations. Federal regulations are primarily enforced by the FTC and the FCC. State regulations are primarily enforced by individual state attorneys general. Foreign regulations are enforced by a number of regulatory bodies in the relevant jurisdictions.

These regulations primarily impact the means we use to market our programs, which can reduce the acceptance rates of our solicitation efforts, and impact our ability to obtain updated information from our members and end-customers. In our insurance products, these regulations limit our ability to implement pricing changes.

We incur significant costs to ensure compliance with these regulations; however, we have been and are party to lawsuits, including class action lawsuits, and state attorney general and U.S. Senate Committee on Commerce, Science and Transportation investigations involving our business practices which also increase our costs of doing business.

Seasonality

Historically, seasonality has not had a significant impact on our business. Our revenues are more affected by the timing of marketing programs which can change from year to year depending on the opportunities available and pursued.

Results of Operations

Supplemental Data

The following table provides data for selected business segments (member and insured amounts in thousands except per average member amounts and percentages).


	Three Months Ended September 30,						Nine Months Ended September 30,
	2009			2008			2009			2008
Affinion North America
Membership Products -
Retail
Average Members ⁽¹⁾		7,247			7,750			7,331			7,934
% Monthly Members		53.3	%		43.0	%		50.5	%		41.2	%
% Annual Members		46.7	%		57.0	%		49.5	%		58.8	%
Annualized Net Revenue Per Average Member ⁽²⁾	$	81.50		$	82.75		$	79.77		$	76.80
Wholesale
Average Members ⁽¹⁾		2,335			2,833			2,408			3,076
Portion for service formerly retail and other ⁽³⁾		1,938			2,158			1,976			2,253
Average Retail Members including wholesale formerly retail and other ⁽³⁾		9,185			9,908			9,307			10,187


	Three Months Ended September 30,				Nine Months Ended September 30,
	2009		2008		2009		2008
Insurance and Package Products -
Insurance
Average Basic Insured ⁽¹⁾		23,686		22,831		23,439		23,508
Average Supplemental Insured		4,522		4,771		4,564		4,838
Annualized Net Revenue Per Supplemental Insured ⁽²⁾	$	59.61	$	58.44	$	55.82	$	57.47
Package
Average Members ⁽¹⁾		6,554		5,485		6,166		5,561
Annualized Net Revenue Per Average Member ⁽²⁾	$	10.45	$	13.84	$	11.47	$	13.67

Affinion International
International Products -
Package
Average Members ⁽¹⁾		16,434		16,343		16,209		16,155
Annualized Net Revenue Per Average Package Member ⁽²⁾	$	7.79	$	8.88	$	7.39	$	9.17
Other Retail Membership
Average Members ⁽¹⁾		1,392		1,693		1,484		1,755
Annualized Net Revenue Per Average Member ⁽²⁾	$	39.09	$	38.26	$	34.46	$	38.24
New Retail Membership
Average Members ⁽¹⁾		607		498		603		444
Annualized Net Revenue Per Average Member ⁽²⁾	$	102.35	$	100.83	$	89.20	$	101.75
Global Membership Products –
Retail
Average Members ⁽¹⁾⁽⁴⁾		7,854		8,248		7,934		8,378
Annualized Net Revenue Per Average Member ⁽²⁾	$	83.11	$	83.84	$	80.49	$	78.12
Average Retail Members including wholesale formerly retail and other ⁽³⁾⁽⁴⁾		9,792		10,406		9,910		10,631

(1)

Average Members and Average Basic Insured for the period are each calculated by determining the average members or insureds, as applicable, for each month (adding the number of members or insureds, as applicable, at the beginning of the month with the number of members or insureds, as applicable, at the end of the month and dividing that total by two) for each of the months in the period and then averaging that result for the period. A member’s or insured’s, as applicable, account is added or removed in the period in which the member or insured, as applicable, has joined or cancelled.

(2)

Annualized Net Revenue Per Average Member and Annualized Net Revenue Per Supplemental Insured are each calculated by taking the revenues as reported for the period and dividing it by the average members or insureds, as applicable, for the period. Quarterly periods are then multiplied by four to annualize this amount for comparative purposes. Upon cancellation of a member or an insured, as applicable, the member’s or insured’s, as applicable, revenues are no longer recognized in the calculation.

(3)

Certain programs historically offered as retail arrangements are currently offered as wholesale arrangements where the Company receives lower annualized price points and pays no related commission expense. Additionally, more recently, the Company has entered into other relationships with new and existing affinity partners, including arrangements where the affinity partner offers the Company’s membership programs at point of sale retail locations to their customers and the Company receives lower annualized price points and pays no related commission expense.

(4)	Includes International Operations New Retail Average Members.

Over the last several years, the strategic focus for our membership operations has been on increasing overall profitability and generating higher revenue from each member, rather than on growing the size of the membership base. This has resulted in lower average members, partially offset by higher average revenues per member. In addition, we have obtained these members at lower commission rates and lower variable costs, which has resulted in a higher contribution per member. Over the last year, we increased our average revenue per subscriber, with continued growth anticipated as we replenish older members at legacy price points with new members at higher, market rates.

Wholesale members include members where we typically receive a monthly service fee to support programs offered by our marketing partners. Certain programs historically offered as retail arrangements have switched to wholesale arrangements with lower annualized price points and no commission expense.

Basic insureds typically receive $1,000 of AD&D coverage at no cost to the consumer since the marketing partner pays the cost of this coverage. Supplemental insureds are customers who have elected to pay premiums for higher levels of coverage. In 2008, we were successful in increasing the average revenue per supplemental insured due in part to our marketing efforts to increase coverage levels from our existing base of insureds and by offering higher coverage levels to new insureds which has more than offset

the decline in the total number of supplemental insureds. In 2009, our customer base continues to migrate to higher insurance coverage limits. However, higher claims experience negatively affected cost of insurance resulting in a slight decrease in average revenue per supplemental insured.

The reduction in domestic package members has continued to stabilize, with the majority of the growth in the three and nine months ended September 30, 2009 due to a new wholesale relationship we began last year.

Segment EBITDA

Segment EBITDA consists of income from operations before depreciation and amortization. Segment EBITDA is the measure management uses to evaluate segment performance and we present Segment EBITDA to enhance your understanding of our operating performance. We use Segment EBITDA as one criterion for evaluating our performance relative to that of our peers. We believe that Segment EBITDA is an operating performance measure, and not a liquidity measure, that provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles and ages of related assets among otherwise comparable companies. However, Segment EBITDA is not a measurement of financial performance under U.S. GAAP, and Segment EBITDA may not be comparable to similarly titled measures of other companies. You should not consider Segment EBITDA as an alternative to operating or net income determined in accordance with U.S. GAAP, as an indicator of operating performance or as an alternative to cash flows from operating activities determined in accordance with U.S. GAAP, or as an indicator of cash flows, or as a measure of liquidity.

Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

The following table summarizes our consolidated results of operations for the three months ended September 30, 2009 and 2008:


	Three Months Ended September 30, 2009			Three Months Ended September 30, 2008			Increase (Decrease)
Net revenues	$	361.1		$	364.8		$	(3.7	)

Expenses:
Cost of revenues, exclusive of depreciation and amortization shown separately below:
Marketing and commissions		161.0			160.1			0.9
Operating costs		88.2			96.7			(8.5	)
General and administrative		29.2			24.1			5.1
Depreciation and amortization		51.7			68.4			(16.7	)

Total expenses		330.1			349.3			(19.2	)

Income from operations		31.0			15.5			15.5
Interest income		3.5			0.4			3.1
Interest expense		(39.3	)		(35.6	)		(3.7	)
Other income (expense), net		(4.8	)		2.8			(7.6	)

Loss before income taxes and non-controlling interest		(9.6	)		(16.9	)		7.3
Income tax expense		(6.4	)		(3.1	)		(3.3	)

Net loss		(16.0	)		(20.0	)		4.0
Less: net income attributable to non-controlling interest		(0.3	)		(0.3	)		—

Net loss attributable to Affinion Group, Inc.	$	(16.3	)	$	(20.3	)	$	4.0

Summary of Operating Results for the Three Months Ended September 30, 2009

The following is a summary of changes affecting our operating results for the three months ended September 30, 2009.

Net revenues for the three months ended September 30, 2009 were $361.1 million as compared to $364.8 million for the three months ended September 30, 2008, reflecting a decline of $3.7 million, or 1.0%. The decrease in net revenues was primarily due to declines in our Insurance and Package products business, primarily from a continuing higher cost of insurance and lower net revenue per average Package member. International products net revenues increased $1.1 million, or 1.6%, which included a $7.6 million decrease related to foreign currency. Excluding the effect of foreign currency, International products net revenue would have increased $8.7 million, or 13.0%, primarily from growth in our new retail business. The impact of the foreign currency was calculated by holding the foreign currency rates constant from the third quarter of 2008.

Segment EBITDA decreased $1.2 million, as lower net revenues and higher general and administrative expenses were only partially offset by lower operating costs.

Purchase accounting adjustments made in connection with the purchase of the Cendant Marketing Services Division by the Company and its parent, Affinion Group Holdings, Inc. (“Holdings”) for approximately $1.8 billion in October 2005 (the “Transactions”) had a less significant impact on our results of operations for the three months ended September 30, 2009 as compared to September 30, 2008. These entries, which are non-cash in nature, increased net revenues by $4.8 million and income from operations by $18.4 million. The effect of purchase accounting adjustments, which are primarily related to deferred revenue and the related prepaid commissions and service liability, for the three months ended September 30, 2009 as compared to September 30, 2008 increased net revenues by $4.8 million, marketing and commissions expense by $2.0 million and operating costs by $0.3 million. We recorded $15.9 million less depreciation and amortization expense for the three months ended September 30, 2009, which positively affected results of operations.

Three Months Ended September 30, 2009 Compared to Three Months Ended September 30, 2008

The following section provides an overview of our consolidated results of operations for the three months ended September 30, 2009 as compared to the three months ended September 30, 2008.

Net Revenues. During the three months ended September 30, 2009, we reported net revenues of $361.1 million, a decrease of $3.7 million, or 1.0%, as compared to net revenues of $364.8 million in the comparable 2008 period. Net revenues excluding the impact of purchase accounting decreased $8.5 million, or 2.3%. Insurance and Package products net revenues decreased $5.4 million, Membership products net revenues decreased $2.8 million and Loyalty products net revenues decreased $1.4 million, while International products net revenues increased $0.8 million. Insurance and Package products decreased primarily due to higher cost of insurance primarily as a result of higher claims experience along with lower Package revenues primarily from lower fee-based revenues from our NetGain product and lower annualized revenue per average Package member, partially offset by higher Package members. Net revenues of Membership products decreased as higher other revenues related to a contract termination settlement was more than offset by lower retail member volumes and lower average revenue per retail member. Loyalty products net revenues decreased primarily from contract renewal renegotiations with existing clients partially offset by a new program launch in the third quarter of 2009. International products net revenues increased primarily due to the impact from businesses acquired in the fourth quarter of 2008 and growth in new retail products. Partially offsetting the $8.5 million decrease was an increase of approximately $4.8 million, or 1.3%, primarily due to an adjustment to deferred revenue related to the Transactions in 2005. Deferred revenue was originally written down as part of purchase accounting. The majority of the negative impact of this adjustment was recognized in 2005 through 2007.

Marketing and Commissions Expense. Marketing and commissions expense increased by $0.9 million, or 0.6%, to $161.0 million for the three months ended September 30, 2009 from $160.1 million for the three months ended September 30, 2008. Excluding the $2.0 million increase from purchase accounting, marketing and commissions expense was $1.1 million, or 0.7%, lower primarily due to the effect of the stronger U.S. dollar. Lower commission expense in our Membership products business was substantially offset by higher commissions in our International products business as a result of the growth in new retail products.

Operating Costs. Operating costs decreased by $8.5 million, or 8.8%, to $88.2 million for the three months ended September 30, 2009 from $96.7 million for the three months ended September 30, 2008. Excluding the $0.3 million increase as a result of purchase accounting, operating costs were $8.8 million, or 9.1%, lower than in 2008, primarily due to lower product, servicing and employee-related costs associated with the lower net revenues and the effect of the stronger U.S. dollar.

General and Administrative Expense. General and administrative expense increased by $5.1 million, or 21.2%, to $29.2 million for the three months ended September 30, 2009 from $24.1 million for the three months ended September 30, 2008, principally due to increases in our International business due to higher employee-related costs and our Membership business primarily due to higher legal costs associated with a U.S. Senate Committee on Commerce, Science and Technology investigation initiated in the third quarter of 2009 (see Note 6 to the unaudited condensed consolidated financial statements).

Depreciation and Amortization Expense. Depreciation and amortization expense decreased by $16.7 million for the three months ended September 30, 2009 to $51.7 million from $68.4 million for the three months ended September 30, 2008, primarily due to recording higher amortization expense in 2008 on the fair value of intangible assets resulting from the Transactions as the majority of the intangibles are amortized on an accelerated basis. This amortization expense is based upon an allocation of values to intangible assets and is being amortized over lives ranging from 3 years to 15 years. Depreciation and amortization expense further decreased due to lower amortization of previously acquired contract rights and member relationships due to their accelerated amortization.

Interest Income. Interest income increased by $3.1 million for the three months ended September 30, 2009 to $3.5 million as compared to $0.4 million for the three months ended September 30, 2008 primarily due to the accretion on held-to-maturity debt securities issued by the Company’s parent, Affinion Group Holdings, Inc. (“Holdings”).

Interest Expense. Interest expense increased by $3.7 million, or 10.4%, to $39.3 million for the three months ended September 30, 2009 from $35.6 million for the three months ended September 30, 2008, primarily due to a less favorable impact on

interest rate swaps in 2009 as compared to 2008 of approximately $1.0 million, along with $3.8 million of additional interest accrued on the 10 1/8% Senior Notes due 2013 issued in June 2009 (the “2009 Senior Notes”), partially offset by lower net interest accrued on our term loan and revolving credit facility of approximately $1.3 million as a result of lower rates and lower utilization.

Other Income (Expense), net. In the third quarter of 2009, the Company recorded unrealized foreign exchange losses of $4.8 million related to intercompany borrowings as compared to foreign exchange gains recorded on intercompany borrowings of $2.8 million in the third quarter of 2008.

Income Tax Expense. Income tax expense increased by $3.3 million for the three months ended September 30, 2009 as compared to the three months ended September 30, 2008, primarily due to the increase in current foreign and state tax liabilities offset by a decrease in deferred tax liabilities attributable to foreign operations.

Operating Segment Results

Net revenues and Segment EBITDA by operating segment are as follows:


	Three Months Ended September 30,
	Net Revenues									Segment EBITDA⁽¹⁾
	2009			2008			Increase (Decrease)			2009			2008			Increase (Decrease)
	(in millions)
Affinion North America
Membership products	$	184.8		$	183.1		$	1.7		$	38.3		$	38.3		$	—
Insurance and package products		89.7			95.1			(5.4	)		27.0			30.3			(3.3	)
Loyalty products		19.6			21.0			(1.4	)		6.8			6.2			0.6
Eliminations		(0.8	)		(1.1	)		0.3			—			—			—

Total North America		293.3			298.1			(4.8	)		72.1			74.8			(2.7	)

Affinion International
International products		67.8			66.7			1.1			12.7			10.4			2.3

Total products		361.1			364.8			(3.7	)		84.8			85.2			(0.4	)
Corporate		—			—			—			(2.1	)		(1.3	)		(0.8	)

Total	$	361.1		$	364.8		$	(3.7	)		82.7			83.9			(1.2	)

Depreciation and amortization											(51.7	)		(68.4	)		16.7

Income from operations										$	31.0		$	15.5		$	15.5

(1)	See Segment EBITDA above and Note 10 to the unaudited condensed consolidated financial statements for a discussion of Segment EBITDA and a reconciliation of Segment EBITDA to income from operations.

Affinion North America

Membership Products. Membership products net revenues increased by $1.7 million, or 0.9%, to $184.8 million for the three months ended September 30, 2009 as compared to $183.1 million for the three months ended September 30, 2008. Excluding the $4.5 million benefit of purchase accounting, net revenues decreased by $2.8 million, or 1.5%, as higher other revenues related to a contract termination settlement of $11.9 million was more than offset by the impact of lower retail member volumes and lower average revenue per retail member.

Segment EBITDA was unchanged for the three months ended September 30, 2009 as compared to the three months ended September 30, 2008. Excluding the $2.6 million benefit of purchase accounting, Segment EBITDA decreased $2.6 million, as the impact of the lower net revenues of $2.8 million and higher legal costs associated with a U.S. Senate Committee on Commerce, Science and Technology investigation initiated in the third quarter of 2009 of approximately $1.4 million, more than offset lower operating costs of $2.3 million primarily due to lower product, servicing and employee-related costs associated with the lower net revenues.

Insurance and Package Products. Insurance and package products reported net revenues of $89.7 million for the three months ended September 30, 2009, a decrease of $5.4 million, or 5.7%, as compared to the three months ended September 30, 2008. Insurance revenue decreased approximately $2.2 million, principally due to higher cost of insurance as a result of higher claims experience. Package revenue decreased approximately $3.2 million, primarily from lower fee-based revenues from our NetGain product and lower annualized revenue per average Package member which more than offset the effect of higher Package members.

Segment EBITDA decreased by $3.3 million for the three months ended September 30, 2009 as compared to the three months ended September 30, 2008, primarily due to the lower net revenues, partially offset by lower employee-related expenses.

Loyalty Products. Revenues from Loyalty products decreased by $1.4 million, or 6.7%, for the three months ended September 30, 2009 to $19.6 million as compared to $21.0 million for the three months ended September 30, 2008. Net revenues decreased $3.3 million, primarily from contract renewal renegotiations with existing clients and lower fee-based revenues which were partially offset by $1.9 million from a new program launch in the third quarter of 2009.

Segment EBITDA increased by $0.6 million for the three months ended September 30, 2009 as compared to the three months ended September 30, 2008, primarily due to the new program launch, net of product and servicing costs.

Affinion International

International Products. International products net revenues increased by $1.1 million, or 1.6%, to $67.8 million for the three months ended September 30, 2009 as compared to $66.7 million for the three months ended September 30, 2008. Net revenues excluding the $0.3 million benefit from purchase accounting increased by $0.8 million, or 1.2%, primarily due to increased revenue of $12.1 million from member growth in new retail and businesses acquired in the fourth quarter of 2008. This was substantially offset by a $7.6 million reduction as a result of the stronger U.S. dollar, lower net revenues in our Package business of approximately $1.6 million primarily due to changes in deal terms and $1.4 million from lower net revenues associated with certain package and retail programs.

Segment EBITDA increased by $2.3 million for the three months ended September 30, 2009 as compared to the three months ended September 30, 2008. Increases from member growth in new retail and the net effect of acquired businesses were partially offset by higher general and administrative expenses primarily from higher employee related costs and costs associated with certain merger and acquisition related activities, in addition to the negative effect of the stronger U.S. dollar.

Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008

The following table summarizes our consolidated results of operations for the nine months ended September 30, 2009 and 2008:


	Nine Months Ended September 30, 2009			Nine Months Ended September 30, 2008			Increase (Decrease)
Net revenues	$	1,028.6		$	1,058.3		$	(29.7	)

Expenses:
Cost of revenues, exclusive of depreciation and amortization shown separately below:
Marketing and commissions		452.9			475.3			(22.4	)
Operating costs		261.2			277.2			(16.0	)
General and administrative		85.5			77.9			7.6
Depreciation and amortization		153.2			205.6			(52.4	)

Total expenses		952.8			1,036.0			(83.2	)

Income from operations		75.8			22.3			53.5
Interest income		4.5			1.4			3.1
Interest expense		(97.8	)		(87.1	)		(10.7	)
Other income (expense), net		(11.5	)		2.6			(14.1	)

Loss before income taxes and non-controlling interest		(29.0	)		(60.8	)		31.8
Income tax expense		(9.9	)		(8.9	)		(1.0	)

Net loss		(38.9	)		(69.7	)		30.8
Less: net income attributable to non-controlling interest		(0.7	)		(0.6	)		(0.1	)

Net loss attributable to Affinion Group, Inc.	$	(39.6	)	$	(70.3	)	$	30.7

Summary of Operating Results for the Nine Months Ended September 30, 2009

The following is a summary of changes affecting our operating results for the nine months ended September 30, 2009.

Net revenues for the nine months ended September 30, 2009 were $1,028.6 million as compared to $1,058.3 million for the nine months ended September 30, 2008, reflecting a decline of $29.7 million, or 2.8%. The decrease in net revenues was primarily due to declines in both North American and International products, as a higher cost of insurance and the stronger of the U.S. dollar more

than offset increases in other areas, particularly growth in new retail business in International and new businesses acquired in the fourth quarter of 2008. Included in the total decline from the nine months ended September 30, 2008 is a reduction in net revenue of $37.3 million attributable to the stronger U.S. dollar, which was calculated by holding the foreign currency rates constant from the comparable 2008 periods.

Segment EBITDA increased $1.1 million, as lower global marketing and commissions expense and lower operating costs more than offset the impact of the lower net revenues and increased general and administrative expenses.

Purchase accounting adjustments made in the Transactions had a less significant impact on our results of operations for the nine months ended September 30, 2009 as compared to September 30, 2008. These entries, which are non-cash in nature, increased net revenues by $15.6 million and income from operations by $55.6 million. The effect of purchase accounting adjustments, which are primarily related to deferred revenue and the related prepaid commissions and service liability, for the nine months ended September 30, 2009 as compared to September 30, 2008 increased net revenues by $15.6 million, marketing and commissions expense by $7.0 million and operating costs by $1.2 million. We recorded $48.2 million less depreciation and amortization expense for the nine months ended September 30, 2009 which positively affected results of operations.

Nine Months Ended September 30, 2009 Compared to Nine Months Ended September 30, 2008

The following section provides an overview of our consolidated results of operations for the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008.

Net Revenues. During the nine months ended September 30, 2009, we reported net revenues of $1,028.6 million, a decrease of $29.7 million, or 2.8%, as compared to net revenues of $1,058.3 million in the comparable 2008 period. Net revenues excluding the impact of purchase accounting decreased by $45.3 million, or 4.3%. International products net revenues decreased by $14.8 million, Insurance and Package products net revenues decreased by $24.7 million and Membership products net revenues decreased by $8.6 million while Loyalty products net revenues increased by $2.4 million. International products net revenues decreased primarily due to the impact of the stronger U.S. dollar along with lower Package revenues as a result of changes in deal terms, and lower other retail products revenue, primarily from lower members. These decreases in International products were partially offset by increased revenues from businesses acquired in the fourth quarter of 2008 and growth in new retail products. Insurance and Package products decreased primarily due to higher cost of insurance as a result of higher claims experience along with lower Package revenues, primarily from lower annualized revenue per average Package member partially offset by higher Package members. Net revenues of our Membership products decreased as higher other revenues related to a contract termination settlement and contractually obligated volume commitments along with higher net revenue from higher average revenue per retail member was more than offset by the impact of lower retail member volumes. Loyalty products net revenues increased primarily from higher fee-based revenue related to a points redemption program acquired on June 30, 2008 and a new program launch in the third quarter of 2009, partially offset by decreases from contract renewal renegotiations with existing clients. Partially offsetting the $45.3 million decrease was an increase of approximately $15.6 million, or 1.5%, primarily due to an adjustment to deferred revenue related to the Transactions in 2005. Deferred revenue was originally written down as part of purchase accounting. The majority of the negative impact of this adjustment was recognized in 2005 through 2007.

Marketing and Commissions Expense. Marketing and commissions expense decreased by $22.4 million, or 4.7%, to $452.9 million for the nine months ended September 30, 2009 from $475.3 million for the nine months ended September 30, 2008. Excluding the $7.0 million increase from purchase accounting, marketing and commissions expense was $29.4 million, or 6.2%, lower primarily due to the timing of marketing program launches along with lower commission expense primarily from the continuing shift to lower commission media in our Membership business and the strengthening of the U.S. dollar which more than offset increased commissions related to revenue growth in new retail.

Operating Costs. Operating costs decreased by $16.0 million, or 5.8%, to $261.2 million for the nine months ended September 30, 2009 from $277.2 million for the nine months ended September 30, 2008. Excluding the $1.2 million increase as a result of purchase accounting, operating costs were $17.2 million, or 6.2%, lower than in 2008, primarily due to the strengthening of the U.S. dollar and lower product, servicing and employee-related costs primarily attributable to the lower net revenues in our Membership business.

General and Administrative Expense. General and administrative expense increased by $7.6 million, or 9.8%, to $85.5 million for the nine months ended September 30, 2009 from $77.9 million for the nine months ended September 30, 2008, principally due to increases in our International and Membership businesses. Higher employee-related costs, the majority of which relates to businesses acquired in the fourth quarter of 2008, and higher legal costs primarily related to a U.S. Senate Committee on Commerce, Science and Technology investigation initiated in the third quarter of 2009 more than offset lower costs due to the effect of the stronger U.S. dollar.

Depreciation and Amortization Expense. Depreciation and amortization expense decreased by $52.4 million for the nine months ended September 30, 2009 to $153.2 million from $205.6 million for the nine months ended September 30, 2008, primarily due to recording higher amortization expense in 2008 on the fair value of intangible assets resulting from the Transactions as the

majority of the intangibles are amortized on an accelerated basis. This amortization expense is based upon an allocation of values to intangible assets and is being amortized over lives ranging from 3 years to 15 years. Depreciation and amortization expense further decreased due to lower amortization of previously acquired contract rights due to their accelerated amortization.

Interest Income. Interest income increased by $3.1 million for the nine months ended September 30, 2009 to $4.5 million as compared to $1.4 million for the nine months ended September 30, 2008, primarily due to the accretion on held-to-maturity debt securities issued by Holdings.

Interest Expense. Interest expense increased by $10.7 million, or 12.3%, to $97.8 million for the nine months ended September 30, 2009 from $87.1 million for the nine months ended September 30, 2008, primarily due to a less favorable impact on interest rate swaps in 2009 as compared to 2008 of approximately $10.3 million along with $4.9 million of additional interest accrued on the 10 1/8% senior notes issued in June 2009, partially offset by lower net interest accrued on our term loan and revolving credit facility of approximately $4.0 million, as a result of lower interest rates and lower utilization.

Other Income( Expense), net. In the first nine months of 2009, the Company recorded unrealized foreign exchange losses of $11.5 million related to intercompany borrowings as compared to unrealized foreign exchange gains of $2.6 million in the first nine months of 2008.

Income Tax Expense. Income tax expense increased by $1.0 million for the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008, primarily due to the increase in the current foreign and state tax liabilities offset by a decrease in deferred tax liabilities attributable to foreign operations.

Operating Segment Results

Net revenues and Segment EBITDA by operating segment are as follows:


	Nine Months Ended September 30,
	Net Revenues									Segment EBITDA⁽¹⁾
	2009			2008			Increase (Decrease)			2009			2008			Increase (Decrease)
	(in millions)
Affinion North America
Membership products	$	534.5		$	529.7		$	4.8		$	104.7		$	93.6		$	11.1
Insurance and package products		257.3			281.9			(24.6	)		82.5			99.8			(17.3	)
Loyalty products		54.2			51.6			2.6			18.1			15.3			2.8
Eliminations		(2.8	)		(3.2	)		0.4			—			—			—

Total North America		843.2			860.0			(16.8	)		205.3			208.7			(3.4	)

Affinion International
International products		185.4			198.3			(12.9	)		28.9			23.7			5.2

Total products		1,028.6			1,058.3			(29.7	)		234.2			232.4			1.8
Corporate		—			—			—			(5.2	)		(4.5	)		(0.7	)

Total	$	1,028.6		$	1,058.3			(29.7	)		229.0			227.9			1.1

Depreciation and amortization											(153.2	)		(205.6	)		52.4

Income from operations										$	75.8		$	22.3		$	53.5

(1)	See Segment EBITDA above and Note 10 to the unaudited condensed consolidated financial statements for a discussion of Segment EBITDA and a reconciliation of Segment EBITDA to income from operations.

Affinion North America

Membership Products. Membership products net revenues increased by $4.8 million, or 0.9%, to $534.5 million for the nine months ended September 30, 2009 as compared to $529.7 million for the nine months ended September 30, 2008. Excluding the $13.4 million benefit of purchase accounting, net revenues decreased by $8.6 million, or 1.6%, as higher other revenues related to a contract termination settlement of $11.9 million and contractually obligated volume commitments along with higher net revenue from higher average revenue per retail member was more than offset by the impact of lower retail member volumes.

Segment EBITDA increased by $11.1 million for the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008. Excluding the $6.9 million benefit of purchase accounting, Segment EBITDA increased $4.2 million, as lower marketing and commissions of $11.9 million and lower operating costs of $5.2 million more than offset the effect of lower net revenues of $8.6 million and higher general and administrative costs of $4.3 million. The lower marketing and commissions were primarily due to the timing of program launches and lower commissions from the continuing shift in marketing to lower commission media, while the lower operating costs were primarily due to the lower product, servicing and employee-related costs associated with

the lower net revenues. General and administrative expenses increased primarily due to higher legal costs principally due to a U.S. Senate Committee on Commerce, Science and Technology investigation initiated in the third quarter of 2009.

Insurance and Package Products. Insurance and package products reported net revenues of $257.3 million for the nine months ended September 30, 2009, a decrease of $24.6 million, or 8.7%, as compared to the nine months ended September 30 2008. Insurance revenue decreased approximately $17.6 million, principally due to higher cost of insurance as a result of higher claims experience. Package revenue decreased approximately $7.1 million, primarily from lower annualized revenue per average Package member and lower fee-based net revenues from our NetGain product, partially offset by higher Package members.

Segment EBITDA decreased by $17.3 million for the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008, primarily due to the lower net revenues, partially offset by lower marketing and commissions expense.

Loyalty Products. Revenues from Loyalty products increased by $2.6 million, or 5.0%, for the nine months ended September 30, 2009 to $54.2 million as compared to $51.6 million for the nine months ended September 30, 2008. Net revenues increased $8.8 million from higher fee-based revenue related to a points redemption program acquired at the end of the second quarter of 2008 and a new program launch in the third quarter, partially offset by a decrease of $6.4 million, primarily from contract renewal renegotiations with existing clients.

Segment EBITDA increased by $2.8 million for the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008, primarily due to fee-based revenue growth and the new program launch, net of product and servicing costs.

Affinion International

International Products. International products net revenues decreased by $12.9 million, or 6.5%, to $185.4 million for the nine months ended September 30, 2009 as compared to $198.3 million for the nine months ended September 30, 2008. Net revenues excluding the $1.9 million benefit from purchase accounting decreased $14.8 million, or 7.5%, primarily due to the $37.3 million impact of the stronger U.S. dollar, partially offset by increased revenue of $34.2 million from growth in new retail and businesses acquired in the fourth quarter of 2008. Net revenues in our Package business decreased approximately $6.1 million as a result of changes in deal terms. In addition, net revenues from other retail products declined $2.5 million, primarily due to a reduction in members and $3.0 million from lower net revenues associated with certain package and retail programs.

Segment EBITDA increased by $5.2 million for the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008. Increases from growth in new retail and the net effect of acquired businesses were partially offset by the net negative impact of the stronger U.S. dollar and higher cost of insurance associated with certain package and retail programs. An increase in general and administrative expenses, primarily from employee related costs, further reduced Segment EBITDA.

Financial Condition, Liquidity and Capital Resources

Financial Condition – September 30, 2009 and December 31, 2008


	September 30, 2009			December 31, 2008			Increase (Decrease)
	(in millions)
Total assets	$	1,533.7		$	1,460.6		$	73.1
Total liabilities		2,133.9			2,007.1			126.8
Total equity (deficit)		(600.2	)		(546.5	)		(53.7	)

Total assets increased by $73.1 million due to (i) an increase in cash and cash equivalents of $86.9 million, primarily as a result of a debt offering completed in June 2009, partially offset by the repayment of the outstanding balance under the revolving credit facility, (ii) an increase in other non-current assets of $80.0 million, principally due to the purchase of a portion of the outstanding debt of Holdings at a cost of $44.8 million (September 30, 2009 amortized cost of $48.5 million), an increase in non-current deferred income taxes of $11.8 million and an increase in long-term receivables of $11.8 million, principally due to unbilled receivables related to contract termination settlement payments and contractually obligated volume commitments and (iii) an increase in receivables of $21.5 million principally due to businesses acquired in the fourth quarter of 2008. These increases were partially offset by (i) a decrease in intangible assets of $115.0 million, principally due to amortization expense of $120.3 million (substantially all of the intangible assets were acquired as a result of the Transactions—see Notes 1 and 2 to our unaudited condensed consolidated financial statements) and (ii) a decrease in profit-sharing receivables from insurance carriers of $10.2 million due to the timing of receipts from the insurance carriers.

Total liabilities increased by $126.8 million primarily due to (i) an increase in debt of $75.2 million primarily as a result of an offering of senior notes with a face amount of $150.0 million (September 30, 2009 carrying amount net of discount of $137.5 million), partially offset by net repayments under the line of credit of $57.0 million and a mandatory prepayment of the term loan facility based

on excess cash flow of $6.4 million and (ii) an increase in accounts payable and accrued expenses of $69.0 million, principally due to businesses acquired in the fourth quarter of 2008 and increased income tax liabilities in certain state and foreign tax jurisdictions due to changes in tax legislation or in which previously available net operating loss carryforwards have been fully utilized.

Total equity (deficit) decreased by $53.7 million, due to a net loss of $38.9 million, dividend payments to the Company’s parent of $26.2 million and a dividend payment to the non-controlling interest of a subsidiary of $0.7 million, partially offset by foreign currency translation effect of $12.1 million.

Liquidity and Capital Resources

Our primary sources of liquidity on both a short-term and long-term basis are cash on hand and cash generated through operating and financing activities. Our primary cash needs are for working capital, capital expenditures and general corporate purposes, and to service our indebtedness. We believe that, based on our current operations and anticipated growth, our cash on hand, cash flows from operating activities and borrowing availability under our revolving credit facility will be sufficient to meet our liquidity needs for the next twelve months and in the foreseeable future.

Cash Flows – Nine Months Ended September 30, 2009 and 2008

At September 30, 2009, we had $123.2 million of cash and cash equivalents on hand, an increase of $104.9 million from $18.3 million at September 30, 2008. The following table summarizes our cash flows and compares changes in our cash and cash equivalents on hand to the same period in the prior year.


	Nine Months Ended September 30,
	2009			2008			Change
	(in millions)
Cash provided by (used in):
Operating activities	$	118.9		$	108.4		$	10.5
Investing activities		(75.1	)		(26.7	)		(48.4	)
Financing activities		41.6			(76.1	)		117.7
Effect of exchange rate changes		1.5			(1.5	)		3.0

Net change in cash and cash equivalents	$	86.9		$	4.1		$	82.8

Operating Activities

During the nine months ended September 30, 2009, we generated $10.5 million more cash from operating activities than during the nine months ended September 30, 2008. Segment EBITDA increased by $1.1 million for the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008 (see “Results of Operations”). In addition, the timing of realization of profit-sharing receivables due from insurance carriers resulted in $34.8 million more cash during the nine months ended September 30, 2009 compared to the comparable period of the prior year and the timing of settlement of receivables from and payables to related parties generated $23.8 million more cash during the nine months ended September 30, 2009 compared to the comparable period of the prior year. The additional cash generated was partially offset by the change in deferred revenue resulting in $17.5 million less cash from operations during the nine months ended September 30, 2009 compared to the comparable period of 2008, the impact of timing of collection of receivables which resulted in a decrease in operating cash flows for the nine months ended September 30, 2009 of $16.7 million compared to the comparable period of the prior year and $15.1 million less cash was generated from other non-current assets during the nine months ended September 30, 2009 compared to 2008, principally due to an increase in long-term receivables. The operating cash flow impact of receivables reflects the impact of seasonality on the businesses acquired in the fourth quarter of 2008.

Investing Activities

We used $48.4 million more cash in investing activities during the nine months ended September 30, 2009 as compared to the comparable period of the prior year, principally due to the purchase of held-to-maturity debt securities for $44.8 million. In addition, during the nine months ended September 30, 2009 we made acquisition-related payments totaling $2.3 million and had capital expenditures of $28.2 million, compared to capital expenditures of $25.6 million during the comparable period of the prior year.

Financing Activities

We generated $117.7 million more cash from financing activities during the nine months ended September 30, 2009 as compared to the comparable period of the prior year. During the nine months ended September 30, 2009, we issued $150.0 million face amount of 10¹ /8% senior notes for proceeds net of discount of $136.5 million and incurred financing costs of $4.3 million. We also utilized $57.0 million to fully pay down our revolving credit facility and had principal payments of $6.7 million on our long-term debt during the nine months ended September 30, 2009. During the nine months ended September 30, 2008, we paid down

$38.5 million on our line of credit and $0.2 million on our long-term debt. In addition, we paid dividends to Holdings during the nine months ended September 30, 2009 and 2008 of $26.2 million and $37.0 million, respectively.

Credit Facilities and Long-Term Debt

Following the completion of the Transactions we became a highly leveraged company, having incurred substantial debt. As of September 30, 2009, we had approximately $1.4 billion in indebtedness. Payments required to service this indebtedness have substantially increased our liquidity requirements as compared to prior years.

As part of the Transactions, we (a) issued $270.0 million principal amount of 10¹/8% senior notes due October 15, 2013 (the “senior notes”) ($266.4 million net of discount), (b) entered into our new senior secured credit facilities consisting of a term loan facility in the principal amount of $860.0 million (which amount does not reflect the $205.0 million in principal prepayments that we made through September 30, 2009 and the $6.4 million annual repayment based on excess cash flows through December 31, 2008) and a revolving credit facility in an aggregate amount of up to $100.0 million and (c) entered into a senior subordinated bridge loan facility in the principal amount of $383.6 million. At September 30, 2009, we had $304.0 million ($302.8 million net of premiums and discounts) outstanding under the senior notes issued in 2005, $648.6 million outstanding under the term loan facility, $355.5 million ($352.3 million net of discounts) outstanding under the senior subordinated notes and $150.0 million ($137.5 million net of discounts) outstanding under the senior notes issued in 2009. At September 30, 2009 there were no outstanding borrowings under the revolving credit facility and the Company had $98.3 million available under the revolving credit facility after giving effect to the issuance of $1.7 million of letters of credit.

Any borrowings under the revolving credit facility are available to fund our working capital requirements, capital expenditures and for other general corporate purposes. The senior secured credit facility also generally requires us to prepay borrowings under the term loan with proceeds from asset dispositions, excess cash flow beginning in July 2006 and the net cash proceeds from certain debt issued in the future. The remaining balance of the term loan is due and payable in full in 2012. The revolving credit facility is available until 2011. The term loan provides, at our option, for interest rates of a) adjusted LIBOR plus 2.50% or b) the higher of i) Credit Suisse, Cayman Island Branch’s prime rate and ii) the Federal Funds Effective Rate plus 0.5% (“ABR”), in each case plus 1.50%. The revolving credit facility provides, at our option, for interest rates of adjusted LIBOR plus 2.50% or ABR, plus 1.50% subject to downward adjustment based on our senior secured bank leverage ratio, as set forth in the agreement governing the revolving credit facility.

On October 17, 2005, we issued $270.0 million aggregate principal amount of senior notes and applied the gross proceeds of $266.4 million to finance a portion of the Transactions. On May 3, 2006, we issued an additional $34.0 million aggregate principal amount of senior notes and applied the gross proceeds, together with cash on hand, to repay the then remaining outstanding borrowings under our bridge loan facility. The interest on our senior notes is payable semi-annually. We may redeem some or all of the senior notes at any time on or after October 15, 2009 at the redemption prices (generally at a premium) set forth in the indenture governing the senior notes. The senior notes are unsecured obligations. The senior notes are guaranteed by the same subsidiaries that guarantee our $960.0 million senior secured credit facility, our senior subordinated notes and our 2009 senior notes (as defined below). The senior notes contain restrictive covenants related primarily to our ability to distribute dividends, redeem or repurchase capital stock, sell assets, issue additional debt or merge with or acquire other companies.

Our senior subordinated bridge loan facility has since been refinanced with the proceeds from the offering of senior subordinated notes (as defined below) and additional senior notes. On April 26, 2006 we issued $355.5 million aggregate principal amount of 11¹/2% senior subordinated notes due October 15, 2015 (the “senior subordinated notes”) and applied the gross proceeds of $350.5 million to repay $349.5 million of outstanding borrowings under our senior subordinated loan facility, plus accrued interest, and used cash on hand to pay fees and expenses associated with such issuance. The interest on our senior subordinated notes is payable semi-annually. We may redeem some or all of the senior subordinated notes at any time on or after October 15, 2010 at the redemption prices (generally at a premium) set forth in the agreement governing the senior subordinated notes. The senior subordinated notes are unsecured obligations. The senior subordinated notes are guaranteed by the same subsidiaries that guarantee our $960.0 million senior secured credit facility, our senior notes and our 2009 senior notes. The senior subordinated notes contain restrictive covenants related primarily to our ability to distribute dividends, redeem or repurchase capital stock, sell assets, issue additional debt or merge with or acquire other companies.

On June 5, 2009, we issued $150.0 million aggregate principal amount of 10 1/8% senior notes due October 15, 2013 (the “2009 senior notes”) for net proceeds of $136.5 million in a private placement transaction. The interest on our 2009 senior notes is payable semi-annually on April 15 and October 15 of each year. We may redeem some or all of the 2009 senior notes at any time on or after October 15, 2009 at the redemption prices (generally at a premium) set forth in the agreement governing the 2009 senior notes. The 2009 senior notes are unsecured obligations. The 2009 senior notes are guaranteed by the same subsidiaries that guarantee our $960.0 million senior secured credit facility, our senior notes and our senior subordinated notes. The 2009 senior notes contain restrictive covenants related primarily to our ability to distribute dividends, redeem or repurchase capital stock, sell assets, issue additional debt or merge with or acquire other companies. Although the terms and covenants of the 2009 senior notes are substantially identical to those of the senior notes, the 2009 senior notes are not additional securities under the indenture governing the senior notes,

were issued under a separate indenture, do not vote as a single class with the senior notes and do not necessarily trade with the senior notes. On October 1, 2009, we completed a registered exchange offer and exchanged all of the then-outstanding 2009 Senior Notes into a like principal amount of 2009 senior notes that have been registered under the Securities Act.

Covenant Compliance

Our senior secured credit facility and the indentures that govern our senior notes, our senior subordinated notes and our 2009 senior notes contain various restrictive covenants. They prohibit us from prepaying indebtedness that is junior to such debt (subject to certain exceptions). Our credit facility requires us to maintain a specified minimum interest coverage ratio and a maximum consolidated leverage ratio. The interest coverage ratio as defined in the credit facility (Adjusted EBITDA, as defined, to interest expense, as defined) must be greater than 1.90 to 1.0 at September 30, 2009. The consolidated leverage ratio as defined in the credit facility (total debt, as defined, to Adjusted EBITDA, as defined) must be less than 5.25 to 1.0 at September 30, 2009. In addition, our credit facility, among other things, restricts our ability to incur indebtedness or liens, make investments or declare or pay any dividends. The indentures governing the senior notes, the senior subordinated notes and the 2009 senior notes, among other things: (a) limit our ability and the ability of our subsidiaries to incur additional indebtedness, incur liens, pay dividends or make certain other restricted payments and enter into certain transactions with affiliates; (b) place restrictions on the ability of certain of our subsidiaries to pay dividends or make certain payments to us; and (c) place restrictions on our ability and the ability of our subsidiaries to merge or consolidate with any other person or sell, assign, transfer, convey or otherwise dispose of all or substantially all of our assets. However, all of these covenants are subject to significant exceptions.

We have the ability to incur additional debt, subject to limitations imposed by our credit facility, and the indentures governing our senior notes, our senior subordinated notes and our 2009 senior notes. Under our indentures governing the senior notes, the senior subordinated notes and the 2009 senior notes, in addition to specified permitted indebtedness, we will be able to incur additional indebtedness as long as on a pro forma basis our fixed charge coverage ratio (the ratio of Adjusted EBITDA to consolidated fixed charges) is at least 2.0 to 1.0. As discussed above, since the Transactions, our cash flow has allowed us to make nine voluntary principal prepayments of the term loan through September 30, 2009 aggregating $205.0 million, in addition to the $6.4 million annual repayment required based on excess cash flow through December 31, 2008.

Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures

Adjusted EBITDA consists of income from operations before depreciation and amortization further adjusted to exclude non-cash and unusual items and other adjustments permitted in our debt agreements to test the permissibility of certain types of transactions, including debt incurrence. We believe that the inclusion of Adjusted EBITDA is appropriate as a liquidity measure. Adjusted EBITDA is not a measurement of liquidity or financial performance under U.S. GAAP and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. You should not consider Adjusted EBITDA as an alternative to cash flows from operating activities determined in accordance with U.S. GAAP, as an indicator of cash flows, as a measure of liquidity, as an alternative to operating or net income determined in accordance with U.S. GAAP or as an indicator of operating performance.

Set forth below is a reconciliation of our consolidated net cash provided by operating activities for the twelve months ended September 30, 2009 to Adjusted EBITDA.


	Twelve Months Ended September 30, 2009^(a)
	(in millions)
Net cash provided by operating activities	$	113.6
Interest expense, net		148.8
Income tax expense		8.5
Amortization of favorable and unfavorable contracts		2.4
Amortization of debt discount and financing costs		(7.2	)
Unrealized loss on interest rate swaps		(26.2	)
Deferred income taxes		9.1
Interest accretion on held-to-maturity debt securities		2.3
Payment received for assumption of loyalty points program liability		(6.7	)
Changes in assets and liabilities		63.0
Effect of the Transactions, reorganizations, certain legal costs and net cost savings^(b)		(2.5	)
Other, net^(c)		8.0

Adjusted EBITDA^(d)	$	313.1

(a)	Represents consolidated financial data for the year ended December 31, 2008, minus consolidated financial data for the nine months ended September 30, 2008, plus consolidated financial data for the nine months ended September 30, 2009.

(b)	Eliminates the effect of the Transactions, prior business reorganizations, non-recurring revenue and gains, legal expenses for certain legal matters and certain severance costs.

(c)	Eliminates stock-based compensation, foreign currency gains and losses relating to unusual, non-recurring intercompany transactions, consulting fees paid to Apollo and certain other costs.

(d)

Adjusted EBITDA does not give pro forma effect to our acquisition of a travel business from RCI Europe and our acquisition of Loyaltybuild Limited, a loyalty program benefit provider and accommodation reservation booking business that were completed in the fourth quarter of 2008. However, we do make such accretive pro forma adjustment as if such acquisitions had occurred on October 1, 2008 in calculating the Adjusted EBITDA under our senior secured credit facility and the indentures governing our senior notes, senior subordinated notes and 2009 senior notes.

Set forth below is a reconciliation of our consolidated net loss for the twelve months ended September 30, 2009 to Adjusted EBITDA as required by our senior secured credit facility agreement and the indentures governing our senior notes, our senior subordinated notes and our 2009 senior notes.


	Twelve Months Ended September 30, 2009 ^(a)
	(in millions)
Net loss attributable to Affinion Group, Inc.	$	(58.0	)
Interest expense, net		148.8
Income tax expense		8.5
Non-controlling interest		0.8
Other income, net		(2.2	)
Depreciation and amortization		207.8
Effect of the Transactions, reorganizations and non-recurring revenues and gains^(b)		(7.1	)
Certain legal costs ^(c)		—
Net cost savings ^(d)		4.6
Other, net ^(e)		9.9

Adjusted EBITDA^(f)	$	313.1

Interest coverage ratio ^(g)		2.79
Consolidated leverage ratio ^(h)		4.32
Fixed charge coverage ratio ⁽ⁱ⁾		2.57

(a)	Represents consolidated financial data for the year ended December 31, 2008, minus consolidated financial data for the nine months ended September 30, 2008, plus consolidated financial data for the nine months ended September 30, 2009.

(b)	Effect of the Transactions, reorganizations and non-recurring revenues and gains—eliminates the effects of the Transactions.

(c)	Certain legal costs—represents legal costs, net of reimbursements, for certain litigation matters.

(d)	Net cost savings—represents the elimination of severance costs incurred.

(e)

Other, net—represents: (i) net changes in other reserves, (ii) the elimination of stock-based compensation expense, (iii) the elimination of foreign currency gains and losses relating to unusual, non-recurring intercompany transactions, (iv) consulting fees paid to Apollo, and (v) other non-recurring costs related to acquisitions.

(f)

(g)	The interest coverage ratio is defined in our senior secured credit facility (Adjusted EBITDA, as defined, to interest expense, as defined). The interest coverage ratio must be greater than 1.90 to 1.0 at September 30, 2009.

(h)	The consolidated leverage ratio is defined in our senior secured credit facility (total debt, as defined, to Adjusted EBITDA, as defined). The consolidated leverage ratio must be less than 5.25 to 1.0 at September 30, 2009.

(i)

The fixed charge coverage ratio is defined in the indentures governing the senior notes, the senior subordinated notes and the 2009 senior notes. (Consolidated Cash Flows, as defined, which is equivalent to Adjusted EBITDA (as defined in the Affinion Credit Facility), to fixed charges, as defined). Under the terms of the indentures governing the senior notes, the senior subordinated notes and the 2009 senior notes, the fixed charge coverage ratio must be at least 2.0 to 1.0 in order to enter into certain specified transactions.

Affinion Group Holdings, Inc.’s Dependence on Us to Service its Obligations

On January 31, 2007, Holdings entered into a five-year senior unsecured term loan facility (the “Holdings Loan Agreement”) with Deutsche Bank Trust Company Americas (“Deutsche Bank”), Bank of America, N.A., and certain other banks as the initial

lenders, with Deutsche Bank Securities Inc. and Banc of America Securities LLC (“BAS”) as the joint lead arrangers and book-running managers, Deutsche Bank as administrative agent, and BAS as syndication agent. The principal amount of the Holdings Loan Agreement is $350.0 million. As of September 30, 2009, loans under the Holdings Loan Agreement accrue cash interest at the rate of six-month LIBOR plus 6.75%, but the interest rate is subject to additional increases over time and further increases if, in lieu of paying cash interest, the interest is paid by adding such interest to the principal amount of the loans. Holdings has the independent ability to pay such non-cash payment in kind interest in lieu of cash interest. Interest is payable semi-annually on March 1 and September 1. Holdings made a payment-in-kind election for the interest period ended September 1, 2009, so the cash required to service its debt in 2009, net of the impact of the three interest rate swaps entered into by Holdings discussed below, is approximately $17.2 million. In August 2009, Holdings made a payment-in-kind election for the interest period ending March 1, 2010. In addition, the Holdings preferred stock entitles its holders to receive dividends of 8.5% per annum (payable, at Holdings’ option, in either cash or in kind) and ranks senior to shares of all other classes or series of stock with respect to rights upon a liquidation or sale of Holdings at a price of the then-current face amount, plus any accrued and unpaid dividends. As a holding company with no significant assets other than the ownership of 100% of our common stock, Holdings depends on our cash flows to pay its cash debt service and to pay cash dividends, if any, on its preferred stock.

On January 23, 2008 and January 25, 2008, Holdings entered into two separate two-year interest rate swap agreements, with the interest rate swap agreements having a combined notional amount of $300.0 million. Under the January 23, 2008 interest rate swap agreement, which has a notional amount of $200.0 million, Holdings has agreed to pay a fixed interest rate of 2.79%, payable on a semi-annual basis, for the period beginning on March 1, 2008 through March 1, 2010, with the first interest payment due on September 1, 2008, in exchange for receiving floating payments based on a six-month LIBOR on the same $200.0 million notional amount for the same period. Under the January 25, 2008 interest rate swap agreement, which has a notional amount of $100.0 million, Holdings has agreed to pay a fixed interest rate of 3.19%, payable on a semi-annual basis, for the period beginning on March 1, 2008 through March 1, 2010, with the first interest payment due on September 1, 2008, in exchange for receiving floating payments based on a six-month LIBOR on the same $100.0 million notional amount for the same period.

On September 15, 2008, Holdings entered into a two-year interest rate swap agreement, with a notional amount of $50.0 million. Under the interest rate swap agreement, Holdings has agreed to pay a fixed interest rate of 3.17%, payable on a semi-annual basis, for the period beginning on September 1, 2008 through September 1, 2010, with the first interest payment due on March 2, 2009, in exchange for receiving floating payments based on a six-month LIBOR on the same $50.0 million notional amount for the same period.

As described above, we expect that Holdings will rely on distributions from us in order to pay cash amounts due, if any, in respect of the Holdings Loan Agreement and to pay cash dividends, if any, on its preferred stock. However, our ability to make distributions to Holdings is restricted by covenants contained in our senior secured credit facility and the indentures governing our senior notes, our 2009 senior notes and our senior subordinated notes and by Delaware law. To the extent we make distributions to Holdings, the amount of cash available to us to pay principal of, and interest on, our outstanding debt, including our credit facility, our senior notes, our 2009 senior notes and our senior subordinated notes, will be reduced, and we would have less cash available for other purposes, which could negatively impact our financial condition, our results of operations and our ability to maintain or expand our business. A failure to pay principal of, or interest on, our debt, including our credit facility, our senior notes, our 2009 senior notes and our senior subordinated notes, would constitute an event of default under the applicable debt agreements, giving the holders of that debt the right to accelerate its maturity. If any of our debt is accelerated, we may not have sufficient cash available to repay it in full and we may be unable to refinance such debt on satisfactory terms or at all.

Debt Repurchases

During the first quarter of 2009, we purchased $2.6 million of Holdings’ indebtedness under the Holdings Loan Agreement for $1.2 million and made a payment-in-kind dividend to Holdings. During the second quarter of 2009, utilizing cash on hand and available funds under the Affinion Credit Facility (the balance of which was paid down prior to September 30, 2009), we purchased $64.0 million face amount of Holdings’ outstanding indebtedness under the Holdings Loan Agreement from an affiliate of Apollo for $44.8 million, which we continue to hold. This purchase was effected through a newly-formed non-guarantor subsidiary, Affinion Investments, LLC. We or our affiliates may, from time to time, purchase any of our or additional portions of Holdings’ indebtedness. Any such future purchases may be made through open market or privately negotiated transactions with third parties or pursuant to one or more tender or exchange offers or otherwise, upon such terms and at such prices as we or any such affiliates may determine.

Critical Accounting Policies

In presenting our unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, we are required to make estimates and assumptions that affect the amounts reported therein. We believe that the estimates, assumptions and judgments involved in the accounting policies related to revenue recognition, accounting for marketing costs, valuation of goodwill and intangible assets, and valuation of tax assets and liabilities could potentially affect our reported results and as such, we consider these to be our critical accounting policies. Several of the estimates and assumptions we are required to make relate to matters that are inherently uncertain, as they pertain to future events. However, certain

events outside our control cannot be predicted and, as such, they cannot be contemplated in evaluating such estimates and assumptions. We believe that the estimates and assumptions used when preparing our unaudited condensed consolidated financial statements were the most appropriate at the time. In addition, we refer you to our audited consolidated financial statements as of December 31, 2008 and 2007, and for the years ended December 31, 2008, 2007 and 2006, included in our Form 10-K for a summary of our significant accounting policies.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk.

Following is a description of our risk management policies.

Interest Rate Swaps

We entered into an interest swap as of December 14, 2005. This swap converts a notional amount of the Company’s floating rate credit facility into a fixed rate obligation. The notional amount of the swap is $150.0 million at September 30, 2009 and reduces in accordance with a contractual amortization schedule through December 31, 2010 when the swap terminates. In January 2008, the Company entered into a second interest rate swap effective February 21, 2008, which interest rate swap terminates February 21, 2011.

This swap had an initial notional amount of $450.0 million, increasing to $500.0 million on February 21, 2009 and $600.0 million on February 21, 2010. Under the second swap, the Company has agreed to pay a fixed rate of interest of 2.86% in exchange for receiving floating payments based on a three-month LIBOR on the notional amount for each applicable period. The effect of this swap, in conjunction with the Company’s existing interest rate swap, is to convert substantially all of the variable rate debt to a fixed rate obligation.

In January 2009, the Company entered into an interest rate swap effective February 21, 2011. The swap has a notional amount of $500.0 million and terminates on October 17, 2012. Under the swap, the Company has agreed to pay a fixed rate of interest of 2.985% in exchange for receiving floating payments based on a three-month LIBOR on the notional amount for each applicable period. This swap is intended to reduce a portion of the variability of the future interest payments on the Company’s term loan facility for the period after the Company’s previously existing swaps expire.

The interest rate swaps are recorded at fair value either as non-current assets or long-term liabilities. The swaps are not designated as hedging instruments and therefore the changes in the fair value of the interest rate swaps are recognized currently in earnings in the accompanying unaudited consolidated statements of operations.

The following table provides information about the Company’s financial instruments that are sensitive to changes in interest rates. The table presents principal cash flows and related weighted-average interest rates by expected maturity for the Company’s long-term debt as of September 30, 2009 (dollars are in millions unless otherwise indicated):


	2009			2010			2011			2012			2013			2014 and Thereafter			Total		Fair Value At September 30, 2009
Fixed rate debt	$	0.1		$	0.2		$	0.3		$	0.3		$	454.2		$	355.6		$	810.7	$	833.0
Average interest rate		11.41	%		11.41	%		11.41	%		11.41	%		11.41	%		11.41	%
Variable rate debt	$	—		$	—		$	—		$	648.6		$	—		$	—		$	648.6	$	648.6
Average interest rate ^(a)		2.75	%		2.75	%		2.75	%		2.75	%		—			—
Variable to fixed-interest rate swaps ^(b)																					$	22.2
Average pay rate		3.05	%		3.03	%		2.97	%		2.99	%
Average receive rate		0.41	%		0.76	%		2.20	%		3.14	%

(a)	Average interest rate is based on rates in effect at September 30, 2009.

(b)	The fair value of the interest rate swaps is included in other long-term liabilities at September 30, 2009.

We do not use derivatives for trading or speculative purposes.

Credit Risk and Exposure

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of receivables, profit-sharing receivables from insurance carriers and prepaid commissions. We manage such risk by evaluating the financial position and creditworthiness of such counterparties. As of September 30, 2009, approximately $86.0 million of the profit-sharing receivable was due from one insurance carrier. Receivables and profit-sharing receivables from insurance carriers are from various marketing, insurance and business partners and we maintain an allowance for losses, based upon expected collectibility. Commission advances are periodically evaluated as to recovery.

Item 4T.

Controls and Procedures.

Evaluation of Disclosure Control and Procedures. The Company, under the direction of the Chief Executive Officer and the Chief Financial Officer, has established disclosure controls and procedures (“Disclosure Controls”) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The Disclosure Controls are also intended to ensure that such information is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our Disclosure Controls or our “internal controls over financial reporting” (“Internal Controls”) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Notwithstanding the foregoing, our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.

As of September 30, 2009, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934. Based upon their evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of September 30, 2009, the Company’s disclosure controls and procedures are effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting. There have not been any changes in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings.

Information required by this Item is contained in Note 6 to our unaudited condensed consolidated financial statements within Part I of this Form 10-Q.

Item 1A.

Risk Factors

There have been no material changes with respect to the Company’s risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2008 except as described below.

Our business is increasingly subject to U.S. and foreign governmental regulation, which could impede our ability to market our programs and services and reduce our profitability.

We market our programs and services through various distribution media, including direct mail, online marketing, point-of-sale marketing, telemarketing and other methods. These media are regulated at both federal and state levels and we believe that these media will be subject to increasing regulation, particularly in the area of consumer privacy. Such regulation may limit our ability to solicit or sign up new customers or to offer products or services to existing customers.

Our U.S. membership and insurance products are subject to extensive regulation and oversight by the Federal Trade Commission (the “FTC”), the Federal Communications Commission (the “FCC”), state attorneys general and other state regulatory agencies, including state insurance regulators. Our programs and services involve the use of nonpublic personal information that is subject to federal consumer privacy laws, such as the Financial Modernization Act of 1999, also known as the Gramm-Leach-Bliley Act (“GLB”), and various state laws governing consumer privacy, such as California’s SB 1, SB 1386 and others. Additionally, telemarketing of our programs and services is subject to federal and state telemarketing regulations, including the FTC’s Telemarketing Sales Rule, the FCC’s Telephone Consumer Protection Act and implementing regulations, as well as various state telemarketing laws and regulations. Furthermore, our insurance products are subject to various state laws and regulations governing the business of insurance, including, without limitation, laws and regulations governing the administration, underwriting, marketing, solicitation or sale of insurance programs. Additional federal or state laws, including subsequent amendments to existing laws, could impede our ability to market our programs and services and reduce our revenues and profitability.

The telemarketing industry has become subject to an increasing amount of federal and state regulation as well as general public scrutiny. For example, the Federal Telephone Consumer Protection Act of 1991 limits the hours during which telemarketers may call customers and prohibits the use of automated telephone dialing equipment to call certain telephone numbers. The Federal Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994 and FTC regulations prohibit deceptive, unfair or abusive practices in telemarketing sales. The FTC’s 2003 Amendment to its Telemarketing Sales Rule created a national “Do-Not-Call” Registry, which became effective October 1, 2003, and certain states have enacted separate “Do-Not-Call” Registries. Both the FTC and state attorneys general have authority to prevent telemarketing activities deemed by them to be “unfair or deceptive acts or practices.” Further, some states have enacted laws, and others are considering enacting laws, targeted directly at regulating telemarketing practices, including the creation of “Do-Not-Call” Registries, and any such laws could adversely affect or limit our operations. Additionally, individuals in the U.K. and other European countries have rights to prevent direct marketing to them by telephone, fax or email.

Likewise, in the U.K. and the European Union, our marketing operations are subject to regulation, including data protection legislation restricting the use and transmission of customers’ personal information, regulation of unsolicited marketing using electronic communications and financial services regulation of insurance intermediaries. In particular, in the U.K., the sale of our insurance products is regulated by the Financial Services Authority.

Compliance with these federal, state and foreign regulations is generally our responsibility, and we could be subject to a variety of enforcement and/or private actions for any failure to comply with such regulations. Any changes to such regulations or the interpretation or enforcement thereof could materially increase our compliance costs. The risk of our noncompliance with any rules and regulations enforced by a federal or state consumer protection authority or an enforcement agency in a foreign jurisdiction may subject us or our management to fines or various forms of civil or criminal prosecution, any of which could impede our ability to market our programs and services and reduce our revenues and profitability. Certain types of noncompliance may also result in giving our marketing partners the right to terminate certain of our contracts. Also, the media often publicizes perceived noncompliance with consumer protection regulations and violations of notions of fair dealing with customers, and our industry is susceptible to peremptory charges by the media and others of regulatory noncompliance and unfair dealing. In addition, consumer complaints with respect to our industry have resulted and may result in state and federal regulatory and other investigations. For example, on May 27, 2009, the U.S. Senate Committee on Commerce, Science, and Transportation (the “Committee”) initiated an investigation into two of our competitors, Vertrue Inc. and Webloyalty.com, Inc., in connection with their e-commerce marketing practices. On July 10, 2009, the Committee expanded the scope of its investigation to include Affinion and requested us to provide certain information about our online marketing practices. We believe that it is likely that there will be a hearing before the Committee by the end of this year. At this time, we cannot predict the timing or outcome of the investigation or what impact, if any, it may have on our online marketing business. Over the past several years, there has also been proposed legislation in several states that may interfere

with our marketing practices. For example, over the past several years many states have proposed legislation that would allow customers to limit the amount of unsolicited direct mail they receive. To date, we are not aware of any state that has actually passed legislation that would create a “Do-Not-Mail” registry or which would otherwise allow customers to restrict the amount of unsolicited direct mail that they receive. We believe there are four states that are currently considering some form of “Do-Not-Mail” legislation. If such legislation is passed in one or more states, it could impede our ability to market our programs and services and reduce our revenues and profitability.

Item 2.

Unregistered Sales of Equity in Securities and Use of Proceeds.

None.

Item 3.

Defaults Upon Senior Securities.

None.

Item 4.

Submission of Matters to a Vote of Security Holders.

None.

Item 5.

Other Information.

None.

Item 6.

Exhibits.


Exhibit Number		Description

31.1*		Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) or 15d-14(a).

31.2*		Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) or 15d-14(a).

32.1*		Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.

32.2*		Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.

*	Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	AFFINION GROUP, INC.

Date: October 30, 2009	By:	/s/ Todd H. Siegel
		Todd H. Siegel
		Executive Vice President and Chief Financial Officer

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Affinion Group, Inc. - FORM 10-Q - October 30, 2009

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