Global Payments Reports First Quarter Earnings

October 4, 2011
Global Payments Reports First Quarter Earnings

ATLANTA, Oct. 4, 2011 /PRNewswire via COMTEX/ --

Global Payments Inc. (NYSE: GPN) today announced results for its fiscal first quarter ended August 31, 2011. For the first quarter, revenues grew 23% to $542.8 million compared to $440.1 million in the prior fiscal year. Cash earnings per share grew 21% to $0.88 compared to $0.73 in the prior year (See Schedule 2 for Cash Earnings). On a GAAP basis, the company reported fiscal 2012 first quarter diluted earnings per share of $0.79 compared to $0.61 in the prior year (See Schedule 1 for GAAP Consolidated Statements of Income).

 

(Logo: http://photos.prnewswire.com/prnh/20010221/ATW031LOGO )

Chairman and CEO Paul R. Garcia stated, "We delivered strong first quarter results, driven by continued solid execution across all of our businesses, and the December 2010 addition of Spain. As a result of our strong performance and the completion of our $100 million share repurchase program, we are raising our earnings expectations for the year. Furthermore, based on our core performance this quarter, we now expect overall total company cash margin expansion of as much as 50 basis points in fiscal 2012."

David E. Mangum, Senior Executive Vice President and CFO, stated, "For the full year of fiscal 2012, our annual revenue expectations remain unchanged at $2,100 million to $2,150 million, or 13% to 16% growth over fiscal 2011. We are increasing our fiscal 2012 diluted earnings per share expectations on a cash basis to a range of $3.46 to $3.54, reflecting 12% to 15% growth over fiscal 2011. We now expect annual fiscal 2012 GAAP diluted earnings per share to be $3.13 to $3.20, reflecting 20% to 23% growth over the prior year. All of these expectations exclude any effect of the Durbin Legislation."

Cash earnings exclude normalized adjustments and acquisition intangible amortization expense from continuing operations. (See Schedule 6 for a Reconciliation of Cash Earnings to GAAP, Schedule 2 for Cash Earnings and Schedule 3 for Segment Information on GAAP and Cash Earnings).

Conference Call

Global Payments will hold a conference call today, October 4, 2011 at 5:00 p.m. ET to discuss financial results and business highlights. Callers may access the conference call via the investor relations page of the Company's Web site at http://www.globalpaymentsinc.com/ by clicking the "Webcast" button; or callers in North America may dial 1-888-895-3550 and callers outside North America may dial 1-706-758-8809. The pass code is "GPN." A replay of the call may be accessed through the Global Payments' Web site through October 29, 2011.

Global Payments Inc. (NYSE:GPN) is a leading provider of electronic transaction processing services for merchants, Independent Sales Organizations (ISOs), financial institutions, government agencies and multi-national corporations located throughout the United States, Canada, Europe and the Asia-Pacific region. Global Payments, a Fortune 1000 company, offers a comprehensive line of processing solutions for credit and debit cards, business-to-business purchasing cards, gift cards, electronic check conversion and check guarantee, verification and recovery including electronic check services, as well as terminal management. Visit http://www.globalpaymentsinc.com/ for more information about the company and its services.

This announcement and comments made by Global Payments' management during the conference call may contain certain forward-looking statements within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including revenue and earnings estimates and management's expectations regarding future events and developments, are forward-looking statements and are subject to significant risks and uncertainties. Important factors that may cause actual events or results to differ materially from those anticipated by such forward-looking statements include the following: foreign currency risks which become increasingly relevant as we expand internationally, the effect of current worldwide economic conditions, including sovereign insolvency situations and a decline in the value of the U.S. dollar, and future performance and integration of recent acquisitions, and other risks detailed in the company's SEC filings, including the most recently filed Form 10-Q or Form 10-K, as applicable. The company undertakes no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.

Contact: Jane M. Elliott 770-829-8234 Voice 770-829-8267 Fax investor.relations@globalpay.com

SCHEDULE 1

 

UNAUDITED GAAP CONSOLIDATED STATEMENTS OF INCOME

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 
   

(In thousands, except per share data)

             
               
   

Three Months Ended August 31,

     
   

2011

 

2010

 

% Change

 
               

Revenues

 

$ 542,771

 

$ 440,138

 

23%

 
               

Operating expenses:

             

Cost of service

 

191,536

 

151,041

 

27%

 

Sales, general and administrative

 

242,625

 

206,990

 

17%

 
   

434,161

 

358,031

 

21%

 
               

Operating income

 

108,610

 

82,107

 

32%

 
               

Other income (expense):

             

Interest and other income

 

2,501

 

1,537

 

63%

 

Interest and other expense

 

(4,087)

 

(4,841)

 

(16%)

 
   

(1,586)

 

(3,304)

 

(52%)

 
               

Income from continuing operations before income taxes

 

107,024

 

78,803

 

36%

 

Provision for income taxes

 

(34,943)

 

(24,981)

 

40%

 

Income from continuing operations

 

72,081

 

53,822

 

34%

 

Loss from discontinued operations, net of tax

 

-

 

(28)

 

NM

 

Net income including noncontrolling interests

 

72,081

 

53,794

 

34%

 

Less: Net income attributable to noncontrolling interests, net of tax

 

(8,107)

 

(4,426)

 

83%

 

Net income attributable to Global Payments

 

$ 63,974

 

$ 49,368

 

30%

 
               

Amounts attributable to Global Payments:

             

Income from continuing operations

 

$ 63,974

 

$ 49,396

 

30%

 

Loss from discontinued operations, net of tax

 

-

 

(28)

 

NM

 

Net income attributable to Global Payments

 

$ 63,974

 

$ 49,368

 

30%

 
               
               

Basic earnings per share attributable to Global Payments:

             

Income from continuing operations

 

$ 0.80

 

$ 0.62

 

29%

 

Loss from discontinued operations, net of tax

 

-

 

-

 

NM

 

Net income attributable to Global Payments

 

$ 0.80

 

$ 0.62

 

29%

 
               

Diluted earnings per share attributable to Global Payments:

             

Income from continuing operations

 

$ 0.79

 

$ 0.61

 

30%

 

Loss from discontinued operations, net of tax

 

-

 

-

 

NM

 

Net income attributable to Global Payments

 

$ 0.79

 

$ 0.61

 

30%

 
               

Weighted average shares outstanding:

             

Basic

 

80,076

 

79,597

     

Diluted

 

80,831

 

80,339

     
               
               

NM - Not Meaningful

 
             

SCHEDULE 2

 

CASH EARNINGS ATTRIBUTABLE TO GLOBAL PAYMENTS

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 
   

(In thousands, except per share data)

             
               
   

Three Months Ended August 31,

     
   

2011

 

2010

 

% Change

 
               

Revenues

 

$ 542,771

 

$ 440,138

 

23%

 
               

Operating expenses:

             

Cost of service

 

178,893

 

142,771

 

25%

 

Sales, general and administrative

 

242,625

 

204,396

 

19%

 
   

421,518

 

347,167

 

21%

 
               

Operating income

 

121,253

 

92,971

 

30%

 
               

Other income (expense):

             

Interest and other income

 

2,501

 

1,537

 

63%

 

Interest and other expense

 

(4,087)

 

(4,841)

 

(16%)

 
   

(1,586)

 

(3,304)

 

(52%)

 
               

Income from continuing operations before income taxes

 

119,667

 

89,667

 

33%

 

Provision for income taxes

 

(38,682)

 

(25,950)

 

49%

 

Income from continuing operations including noncontrolling interests

 

80,985

 

63,717

 

27%

 

Less: Net income attributable to noncontrolling interests, net of tax

 

(10,172)

 

(4,739)

 

115%

 

Net income from continuing operations attributable to Global Payments

 

$ 70,813

 

$ 58,978

 

20%

 
               
               

Basic earnings per share

 

$ 0.88

 

$ 0.74

 

19%

 
               

Diluted earnings per share

 

$ 0.88

 

$ 0.73

 

21%

 
               

Weighted average shares outstanding:

             

Basic

 

80,076

 

79,597

     

Diluted

 

80,831

 

80,339

     
               
               

NM - Not Meaningful

 
               

See Schedule 6 for a reconciliation of cash earnings from continuing operations to GAAP.

 
             

SCHEDULE 3

 

SEGMENT INFORMATION

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 
                                   

(In thousands)

                           
                                   
           

Three Months Ended August 31,

         
           

2011

 

2010

 

% Change

 
           

GAAP

 

Cash
Earnings

 

GAAP

 

Cash
Earnings

 

GAAP

 

Cash
Earnings

 
                                   
 

Revenues:

                           
 

United States

   

$ 287,425

 

$ 287,425

 

$ 255,630

 

$ 255,630

 

12%

 

12%

 
 

Canada

   

91,221

 

91,221

 

81,213

 

81,213

 

12%

 

12%

 
   

North America merchant services

   

378,646

 

378,646

 

336,843

 

336,843

 

12%

 

12%

 
                                   
 

Europe

   

129,414

 

129,414

 

73,796

 

73,796

 

75%

 

75%

 
 

Asia-Pacific

   

34,711

 

34,711

 

29,499

 

29,499

 

18%

 

18%

 
   

International merchant services

   

164,125

 

164,125

 

103,295

 

103,295

 

59%

 

59%

 
                                   
     

Total revenues

   

$ 542,771

 

$ 542,771

 

$ 440,138

 

$ 440,138

 

23%

 

23%

 
                                   
 

Operating income:

                           
 

North America merchant services

   

$ 71,758

 

$ 74,616

 

$ 68,368

 

$ 71,384

 

5%

 

5%

 
 

International merchant services

   

55,658

 

65,443

 

31,393

 

36,051

 

77%

 

82%

 
 

Corporate

   

(18,806)

 

(18,806)

 

(17,654)

 

(14,464)

 

(7%)

 

(30%)

 
     

Operating income

   

$ 108,610

 

$ 121,253

 

$ 82,107

 

$ 92,971

 

32%

 

30%

 
                                   
                                   

See Schedule 7 for reconciliation of cash earnings segment information to GAAP.

 
                                   

SCHEDULE 4

 

CONSOLIDATED BALANCE SHEETS

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 

(In thousands)

         
           
   

August 31,

 

May 31,

 
   

2011

 

2011

 
   

(unaudited)

     
           

ASSETS

         

Current assets:

         

Cash and cash equivalents

 

$ 723,952

 

$ 1,354,285

 

Accounts receivable, net of allowances for doubtful accounts of $422 and $472, respectively

 

177,352

 

166,540

 

Claims receivable, net of allowance for losses of $4,847 and $3,870, respectively

 

1,099

 

914

 

Settlement processing assets

 

288,684

 

280,359

 

Inventory

 

10,454

 

7,640

 

Deferred income taxes

 

2,935

 

2,946

 

Prepaid expenses and other current assets

 

33,103

 

35,291

 

Total current assets

 

1,237,579

 

1,847,975

 
           

Goodwill

 

775,505

 

779,637

 

Other intangible assets, net of accumulated amortization of $208,672 and $197,066, respectively

 

326,994

 

341,500

 

Property and equipment, net of accumulated depreciation of $159,188 and $147,670, respectively

 

255,664

 

256,301

 

Deferred income taxes

 

99,013

 

104,140

 

Other

 

20,403

 

20,978

 
           

Total assets

 

$ 2,715,158

 

$ 3,350,531

 
           

LIABILITIES AND EQUITY

         

Current liabilities:

         

Lines of credit

 

$ 311,072

 

$ 270,745

 

Current portion of long-term debt

 

93,904

 

85,802

 

Accounts payable and accrued liabilities

 

217,978

 

241,578

 

Settlement processing obligations

 

162,116

 

838,565

 

Income taxes payable

 

17,317

 

7,674

 

Total current liabilities

 

802,387

 

1,444,364

 
           

Long-term debt

 

285,766

 

268,217

 

Deferred income taxes

 

122,133

 

116,432

 

Other long-term liabilities

 

52,701

 

49,843

 

Total liabilities

 

1,262,987

 

1,878,856

 
           

Commitments and contingencies

         
           

Redeemable noncontrolling interest

 

138,437

 

133,858

 
           

Equity:

         

Preferred stock, no par value; 5,000,000 shares authorized and none issued

 

-

 

-

 

Common stock, no par value; 200,000,000 shares authorized; 78,749,753 issued

         

and outstanding at August 31, 2011 and 83,062,518 issued and 80,334,781

         

outstanding at May 31, 2011

 

-

 

-

 

Paid-in capital

 

350,493

 

518,440

 

Retained earnings

 

736,868

 

699,755

 

Treasury stock; 2,727,737 shares at May 31, 2011

-

 

(112,980)

 

Accumulated other comprehensive income

 

70,350

 

79,320

 

Total Global Payments shareholders' equity

 

1,157,711

 

1,184,535

 

Noncontrolling interest

 

156,023

 

153,282

 

Total equity

 

1,313,734

 

1,337,817

 
           

Total liabilities and equity

 

$ 2,715,158

 

$ 3,350,531

 
         

SCHEDULE 5

 

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 
                 
                 

(In thousands)

           
                 
         

Three Months Ended August 31,

 
         

2011

 

2010

 
                 

Cash flows from operating activities:

         
 

Net income including noncontrolling interests

 

$ 72,081

 

$ 53,794

 
 

Adjustments to reconcile net income to net cash used in operating activities:

         
   

Depreciation and amortization of property and equipment

 

11,573

 

9,030

 
   

Amortization of acquired intangibles

 

12,643

 

7,674

 
   

Provision for operating losses and bad debts

 

6,812

 

5,246

 
   

Share-based compensation expense

 

3,978

 

3,492

 
   

Deferred income taxes

 

7,831

 

3,518

 
   

Other, net

 

441

 

(676)

 
 

Changes in operating assets and liabilities, net of the effects of acquisitions:

         
   

Accounts receivable

 

(10,812)

 

(18,960)

 
   

Claims receivable

 

(4,591)

 

(4,390)

 
   

Settlement processing assets and obligations, net

 

(687,180)

 

(190,129)

 
   

Inventory

 

(2,861)

 

3,096

 
   

Prepaid expenses and other assets

 

2,153

 

(2,796)

 
   

Accounts payable and other accrued liabilities

 

(27,589)

 

11,353

 
   

Income taxes payable

 

9,643

 

15,371

 
     

Net cash used in operating activities

 

(605,878)

 

(104,377)

 
                 

Cash flows from investing activities:

         
 

Business and intangible asset acquisitions, net of cash acquired

 

-

 

(2,489)

 
 

Capital expenditures

 

(12,151)

 

(24,785)

 
 

Net decrease in financing receivables

 

583

 

454

 
     

Net cash used in investing activities

 

(11,568)

 

(26,820)

 
                 

Cash flows from financing activities:

         
 

Net borrowings on lines of credit

 

40,327

 

4,948

 
 

Proceeds from issuance of long-term debt

 

71,029

 

1,661

 
 

Principal payments under long-term debt

 

(44,295)

 

(49,467)

 
 

Proceeds from stock issued under share-based compensation plans, net

 

(2,836)

 

(474)

 
 

Repurchase of common stock

 

(73,222)

 

(14,900)

 
 

Tax benefit from share-based compensation

 

1,420

 

118

 
 

Distribution to noncontrolling interests

 

(2,471)

 

(2,075)

 
 

Dividends paid

 

(1,613)

 

(1,586)

 
     

Net cash used in financing activities

 

(11,661)

 

(61,775)

 
                 

Effect of exchange rate changes on cash

 

(1,226)

 

1,239

 
                 

Decrease in cash and cash equivalents

 

(630,333)

 

(191,733)

 

Cash and cash equivalents, beginning of period

 

1,354,285

 

769,946

 

Cash and cash equivalents, end of period

 

$ 723,952

 

$ 578,213

 
               

SCHEDULE 6

 

RECONCILIATION OF QUARTERLY CASH EARNINGS ATTRIBUTABLE TO GLOBAL PAYMENTS TO GAAP

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 
               
               

(In thousands, except per share data)

             
               
   

Three Months Ended August 31, 2011

 
   

GAAP

   

Cash Earnings
Adjustments(1)

Cash Earnings

 
               

Revenues

 

$ 542,771

   

$ -

$ 542,771

 
               

Operating expenses:

             

Cost of service

 

191,536

   

(12,643)

178,893

 

Sales, general and administrative

 

242,625

   

-

242,625

 
   

434,161

   

(12,643)

421,518

 
               

Operating income

 

108,610

   

12,643

121,253

 
               

Other income (expense):

             

Interest and other income

 

2,501

   

-

2,501

 

Interest and other expense

 

(4,087)

   

-

(4,087)

 
   

(1,586)

   

-

(1,586)

 
               

Income from continuing operations before income taxes

 

107,024

   

12,643

119,667

 

Provision for income taxes

 

(34,943)

   

(3,739)

(38,682)

 

Income from continuing operations

 

72,081

   

8,904

80,985

 

Less: Net income attributable to noncontrolling interests, net of tax

 

(8,107)

   

(2,065)

(10,172)

 

Net income from continuing operations attributable to Global Payments

 

$ 63,974

   

$ 6,839

$ 70,813

 
               

Diluted shares

 

80,831

     

80,831

 

Diluted earnings per share

 

$ 0.79

   

$ 0.09

$ 0.88

 
               
               
   

Three Months Ended August 31, 2010

 
   

GAAP

Employee
Termination
and Other(2)

Foreign Tax
Rate(3)

Cash Earnings
Adjustments(1)

Cash Earnings

 
               

Revenues

 

$ 440,138

$ -

$ -

$ -

$ 440,138

 
               

Operating expenses:

             

Cost of service

 

151,041

(596)

-

(7,674)

142,771

 

Sales, general and administrative

 

206,990

(2,594)

-

-

204,396

 
   

358,031

(3,190)

-

(7,674)

347,167

 
               

Operating income

 

82,107

3,190

-

7,674

92,971

 
               

Other income (expense):

             

Interest and other income

 

1,537

-

-

-

1,537

 

Interest and other expense

 

(4,841)

-

-

-

(4,841)

 
   

(3,304)

-

-

-

(3,304)

 
               

Income from continuing operations before income taxes

 

78,803

3,190

-

7,674

89,667

 

Provision for income taxes

 

(24,981)

(1,162)

2,479

(2,286)

(25,950)

 

Income from continuing operations

 

53,822

2,028

2,479

5,388

63,717

 

Less: Net income attributable to noncontrolling interests, net of tax

 

(4,426)

-

-

(313)

(4,739)

 

Net income from continuing operations attributable to Global Payments

 

$ 49,396

$ 2,028

$ 2,479

$ 5,075

$ 58,978

 
               

Diluted shares

 

80,339

     

80,339

 

Diluted earnings per share

 

$ 0.61

$ 0.03

$ 0.03

$ 0.06

$ 0.73

 
               
               

(1) Represents adjustments to cost of service to exclude acquisition intangible amortization expense from continuing operations and the related income tax benefit.

 
   

(2) Reflects expenses of start-up costs related to our new Global Service Center in Manila, Philippines and employee termination and relocation benefits and the related income tax benefits.

 
   

(3) Represents a one-time, non-cash write-down of a deferred tax asset we established in July 2009 when we purchased the remaining 49% of our UK business. The write-down resulted from a legislated reduction to the tax rate of 1%.

 
   

We supplemented our reporting of income from continuing operations and the related earnings per share information determined in accordance with GAAP by reporting income from continuing operations and the related earnings per share for the three months ended August 31, 2011 and 2010 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated August 31, 2011 income from continuing operations and earnings per share on a cash basis by excluding acquisition intangible amortization from our results. We calculated August 31, 2010 income from continuing operations and earnings per share on a cash basis by excluding charges related to employee termination and relocation benefits, certain one-time costs related to our Global Service Center, the legislated tax rate reduction and acquisition intangible amortization from our results. We exclude these charges in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations. Our income from continuing operations and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, income from continuing operations and earnings per share determined in accordance with GAAP. Our measures of income from continuing operations and earnings per share on a cash earnings basis reflect management's judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.

 
             

SCHEDULE 7

 

RECONCILIATION OF CASH EARNINGS SEGMENT INFORMATION TO GAAP

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 
                     

(In thousands)

           
                     
           

Three Months Ended August 31, 2011

 
           

GAAP

 

Cash Earnings
Adjustments(1)

Cash Earnings

 
                     
 

Revenues:

           
 

United States

 

$ 287,425

 

$ -

$ 287,425

 
 

Canada

   

91,221

 

-

91,221

 
   

North America merchant services

 

378,646

 

-

378,646

 
                     
 

Europe

   

129,414

 

-

129,414

 
 

Asia-Pacific

 

34,711

 

-

34,711

 
   

International merchant services

 

164,125

 

-

164,125

 
                     
     

Total revenues

 

$ 542,771

 

$ -

$ 542,771

 
                     
 

Operating income:

           
 

North America merchant services

 

$ 71,758

 

$ 2,858

$ 74,616

 
 

International merchant services

 

55,658

 

9,785

65,443

 
 

Corporate

 

(18,806)

 

-

(18,806)

 
   

Operating income

 

$ 108,610

 

$ 12,643

$ 121,253

 
                     
           

Three Months Ended August 31, 2010

 
           

GAAP

Employee
Termination
and Other(2)

Cash Earnings
Adjustments(1)

Cash Earnings

 
                     
 

Revenues:

           
 

United States

 

$ 255,630

$ -

$ -

$ 255,630

 
 

Canada

   

81,213

-

-

81,213

 
   

North America merchant services

 

336,843

-

-

336,843

 
                     
 

Europe

   

73,796

-

-

73,796

 
 

Asia-Pacific

 

29,499

-

-

29,499

 
   

International merchant services

 

103,295

-

-

103,295

 
                     
     

Total revenues

 

$ 440,138

$ -

$ -

$ 440,138

 
                     
 

Operating income:

           
 

North America merchant services

 

$ 68,368

$ -

$ 3,016

$ 71,384

 
 

International merchant services

 

31,393

-

4,658

36,051

 
 

Corporate

 

(17,654)

3,190

-

(14,464)

 
   

Operating income

 

$ 82,107

$ 3,190

$ 7,674

$ 92,971

 
                     
                     

(1) Represents acquisition intangible amortization expense.

 
   

(2) Represents start-up costs related to our Global Service Center in Manila, Philippines and expenses related to employee termination and relocation benefits.

 
                   

SCHEDULE 8

 

OUTLOOK SUMMARY

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 
                   

(In millions, except per share data)

               
                   
       

Fiscal 2011
Actual

 

Fiscal 2012
Outlook

 

% Change
FY11

 
                   
 

Revenue Outlook

               
 

Revenues

   

$ 1,860

 

$2,100 to $2,150

 

13% to 16%

 
                   
                   
 

EPS Outlook

               
 

GAAP diluted EPS

   

$ 2.61

 

$3.13 to $3.20

 

20% to 23%

 
 

Acquisition-related intangibles and non-recurring items (1)

   

0.47

 

$0.34

 

---

 
 

Cash EPS

   

$ 3.08

 

$3.46 to $3.54

 

12% to 15%

 
                   
                   

(1) Fiscal 2012 currently reflects $0.34 in acquisition-related intangibles and no non-recurring items. Acquisition-related intangibles accounted for $0.31 in fiscal 2011 and non-recurring items accounted for $0.16.

 
                 

SOURCE Global Payments Inc.