Global Payments Reports First Quarter Earnings

October 1, 2013

ATLANTA, Oct. 1, 2013 /PRNewswire/ -- Global Payments Inc. (NYSE: GPN) today announced results for its fiscal first quarter ended August 31, 2013.  The company delivered revenues of $629.7 million or 7% growth and cash earnings per share of $1.00 or 15% growth over prior year.

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

Chairman Paul R. Garcia said, "We delivered strong first quarter results reflecting solid performance in North America and Europe.  We continue to focus on expanding our global market position and driving our strategic initiatives forward."

First Quarter 2014 Summary

  • Revenues grew 7% to $629.7 million, compared to $590.3 million in the first quarter of fiscal 2013.
  • Cash diluted earnings per share grew 15% to $1.00, compared to $0.87 in the first quarter of fiscal 2013.
  • GAAP diluted earnings per share were $0.87, compared to $0.59 in the first quarter of 2013.

$100 Million Accelerated Share Repurchase
David E. Mangum, Senior Executive Vice President and CFO, stated, "We are pleased with our first quarter results and delighted to announce that we plan to enter into an accelerated share repurchase plan, demonstrating our commitment to executing share repurchases while continuing to drive organic growth and pursue acquisitions."

Global Payments intends to enter into an accelerated share repurchase (ASR) plan this month to repurchase up to $100 million of the company's common stock.  The ASR is part of the Board authorized program to repurchase up to $250 million of the company's common stock. 

2014 Outlook
As a result of the ASR plan, the company has increased its full-year expectations for diluted earnings per share on a cash basis by five cents to a range of $3.98 to $4.05, or growth of 9% to 11% over fiscal 2013.  Annual fiscal 2014 GAAP diluted earnings per share is now expected to be $3.40 to $3.47

The company maintains its expectations for annual revenue of $2.51 billion to $2.56 billion, or 6% to 8% growth over fiscal 2013. 

Conference Call
Global Payments will hold a conference call today, October 1, 2013 at 5:00 p.m. EDT to discuss financial results and business highlights.  Callers may access the conference call via the investor relations page of the company's website at 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 website through October 15, 2013.  

About Global Payments
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 North America, South America, 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 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: the effect on our results of operations of continued security enhancements to our processing system; foreign currency risks which become increasingly relevant as we expand internationally; the effect of current domestic and worldwide economic conditions, including sovereign insolvency situations and a decline in the value of the U.S. dollar, and future performance and integration of acquisitions, and other risks detailed in our SEC filings, including the most recently filed Form 10-K.  We undertake no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.

 

Investor contact:

investor.relations@globalpay.com    

     Media contact:

media.relations@globalpay.com

 

Jane Elliott

 

Amy Corn

 

770-829-8234

 

770-829-8755

 

SCHEDULE 1

GAAP CONSOLIDATED STATEMENTS OF INCOME 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 

(In thousands, except per share data)

             
   

Three Months Ended August 31,

   
   

2013

 

2012

 

% Change

   

(unaudited)

   

Revenues

 

$        629,685

 

$         590,287

 

6.7%

Operating expenses:

           

Cost of service

 

230,745

 

204,391

 

12.9%

Sales, general and administrative

 

291,556

 

281,419

 

3.6%

Processing system intrusion

 

-

 

23,989

 

(100.0%)

   

522,301

 

509,799

 

2.5%

             

Operating income

 

107,384

 

80,488

 

33.4%

Other income (expense):

           

Interest and other income

 

3,338

 

1,983

 

68.3%

Interest and other expense

 

(7,879)

 

(3,545)

 

122.3%

   

(4,541)

 

(1,562)

 

190.7%

             

Income before income taxes 

 

102,843

 

78,926

 

30.3%

Provision for income taxes

 

(31,135)

 

(24,764)

 

25.7%

Net income

 

71,708

 

54,162

 

32.4%

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

 

(7,065)

 

(7,487)

 

(5.6%)

Net income attributable to Global Payments

 

$          64,643

 

$           46,675

 

38.5%

             
             

Earnings per share attributable to Global Payments:

           

    Basic

 

$              0.88

 

$               0.59

 

49.2%

    Diluted

 

$              0.87

 

$               0.59

 

47.5%

             

Weighted average shares outstanding:

           

    Basic

 

73,765

 

78,604

   

    Diluted

 

74,289

 

79,043

   

 

SCHEDULE 2

CASH EARNINGS ATTRIBUTABLE TO GLOBAL PAYMENTS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

             

(In thousands, except per share data)

             
   

Three Months Ended August 31,

   
   

2013

 

2012

 

% Change

             

Revenues

 

$          629,685

 

$        590,287

 

6.7%

Operating expenses:

           

Cost of service

 

215,773

 

193,005

 

11.8%

Sales, general and administrative

 

290,060

 

280,619

 

3.4%

   

505,833

 

473,624

 

6.8%

             
             

Operating income

 

123,852

 

116,663

 

6.2%

Other income (expense):

           

Interest and other income

 

3,338

 

1,983

 

68.3%

Interest and other expense

 

(7,879)

 

(3,545)

 

122.3%

   

(4,541)

 

(1,562)

 

190.7%

             

Income before income taxes 

 

119,311

 

115,101

 

3.7%

Provision for income taxes

 

(36,686)

 

(36,553)

 

0.4%

Net income

 

82,625

 

78,548

 

5.2%

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

 

(8,436)

 

(9,752)

 

(13.5%)

Net income attributable to Global Payments

 

$            74,189

 

$          68,796

 

7.8%

             
             

Earnings per share attributable to Global Payments:

           

    Basic

 

$                1.01

 

$              0.88

 

14.8%

    Diluted

 

$                1.00

 

$              0.87

 

14.9%

             

Weighted average shares outstanding:

           

    Basic

 

73,765

 

78,604

   

    Diluted

 

74,289

 

79,043

   
             

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

 

SCHEDULE 3

SEGMENT INFORMATION 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

                         

(In thousands)

                         
   

 Three Months Ended August 31, 

       
   

2013

 

2012

 

 % Change 

   

 GAAP 

 

 Cash Earnings 

 

 GAAP 

 

 Cash Earnings 

 

 GAAP 

 

 Cash Earnings 

                         

Revenues:

                       

United States

 

$    363,833

 

$    363,833

 

$    345,898

 

$    345,898

 

5.2%

 

5.2%

Canada

 

86,672

 

86,672

 

80,897

 

80,897

 

7.1%

 

7.1%

North America merchant services

 

450,505

 

450,505

 

426,795

 

426,795

 

5.6%

 

5.6%

                         

Europe

 

143,188

 

143,188

 

128,465

 

128,465

 

11.5%

 

11.5%

Asia-Pacific

 

35,992

 

35,992

 

35,027

 

35,027

 

2.8%

 

2.8%

International merchant services

 

179,180

 

179,180

 

163,492

 

163,492

 

9.6%

 

9.6%

                         

Total revenues

 

$    629,685

 

$    629,685

 

$    590,287

 

$    590,287

 

6.7%

 

6.7%

                         

Operating income (loss) for segments:

                       

North America merchant services

 

$      69,699

 

$      79,404

 

$      67,217

 

$      71,443

 

3.7%

 

11.1%

International merchant services

 

61,541

 

68,757

 

57,140

 

65,044

 

7.7%

 

5.7%

Corporate1

 

(23,856)

 

(24,309)

 

(43,869)

 

(19,824)

 

45.6%

 

(22.6%)

Operating income

 

$    107,384

 

$    123,852

 

$      80,488

 

$    116,663

 

33.4%

 

6.2%

                         
                         
                         

1GAAP and cash earnings include incremental security spend for the three months ended August 31, 2013. GAAP earnings for the three months ended August 31, 2012 include a data intrusion charge of $24.0 million.  

                         

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

 

SCHEDULE 4

CONSOLIDATED BALANCE SHEETS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

         

(In thousands, except share data)

         
   

August 31, 2013

 

May 31, 2013

   

(unaudited)

   

Assets

       

Current assets:

       

Cash and cash equivalents

 

$          725,887

 

$          680,470

Accounts receivable, net of allowances for doubtful accounts of $518 and $509, respectively

 

188,633

 

189,435

Claims receivable, net of allowance for losses of $4,248 and $3,144, respectively

 

1,100

 

1,156

Settlement processing assets

 

611,602

 

259,204

Inventory

 

6,677

 

11,057

Deferred income taxes

 

6,317

 

6,485

Prepaid expenses and other current assets

 

49,852

 

66,685

      Total current assets

 

1,590,068

 

1,214,492

         

Goodwill

 

1,047,578

 

1,044,222

Other intangible assets, net

 

387,234

 

400,848

Property and equipment, net

 

355,370

 

348,064

Deferred income taxes

 

96,646

 

95,178

Other

 

22,594

 

22,252

         

      Total assets

 

$       3,499,490

 

$       3,125,056

         

Liabilities and Equity

       

Current liabilities:

       

Lines of credit

 

$          328,487

 

$          187,461

Current portion of long-term debt

 

72,228

 

72,335

Accounts payable and accrued liabilities

 

224,100

 

262,890

Settlement processing obligations

 

400,887

 

162,558

Income taxes payable

 

19,118

 

18,870

        Total current liabilities

 

1,044,820

 

704,114

         

Long-term debt

 

1,000,383

 

891,134

Deferred income taxes

 

173,573

 

170,723

Other long-term liabilities

 

76,025

 

72,478

      Total liabilities

 

2,294,801

 

1,838,449

         

Equity:

       

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

 

-

 

-

Common stock, no par value; 200,000,000 shares authorized; 72,919,576 and 75,426,099 issued and outstanding at August 31, 2013 and May 31, 2013, respectively

       
 

-

 

-

Paid-in capital

 

166,848

 

202,396

Retained earnings

 

917,550

 

958,751

Accumulated other comprehensive loss

 

(17,376)

 

(15,062)

      Total Global Payments shareholders' equity

 

1,067,022

 

1,146,085

Noncontrolling interest

 

137,667

 

140,522

Total equity

 

1,204,689

 

1,286,607

         

      Total liabilities and equity

 

$       3,499,490

 

$       3,125,056

 

SCHEDULE 5

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

               

(In thousands)

               
         

Three Months Ended August 31,

         

2013

 

2012

               

Cash flows from operating activities:

       

Net income

   

$        71,708

 

$         54,162

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

       
 

Depreciation and amortization of property and equipment

 

13,981

 

12,670

 

Amortization of acquired intangibles

 

14,393

 

11,225

 

Share-based compensation expense

 

4,788

 

4,222

 

Provision for operating losses and bad debts

 

5,234

 

6,012

 

Deferred income taxes

 

5,784

 

10,273

 

Other, net

 

(1,891)

 

(941)

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

       
 

Accounts receivable

 

802

 

3,087

 

Claims receivable

 

(3,864)

 

(3,272)

 

Settlement processing assets and obligations, net

 

(115,383)

 

(7,839)

 

Inventory

 

4,448

 

(2,992)

 

Prepaid expenses and other assets

 

16,772

 

(8,513)

 

Accounts payable and other accrued liabilities

 

(40,207)

 

(15,294)

 

Income taxes payable

 

248

 

5,827

   

Net cash (used in) provided by operating activities

 

(23,187)

 

68,627

               

Cash flows from investing activities:

       
 

Business, intangible and other asset acquisitions, net of cash acquired

 

-

 

(190)

 

Capital expenditures

 

(20,263)

 

(29,237)

 

Net decrease in financing receivables

 

665

 

740

 

Proceeds from sale of investment

 

990

 

-

   

Net cash used in investing activities

 

(18,608)

 

(28,687)

               

Cash flows from financing activities:

       
 

Net borrowings (payments) on short-term lines of credit

 

141,026

 

(6,137)

 

Proceeds from issuance of long-term debt

 

440,000

 

50,000

 

Principal payments under long-term debt

 

(331,515)

 

(30,080)

 

Proceeds from stock issued under employee stock plans

 

3,998

 

4,375

 

Common stock repurchased - share-based compensation plans

 

(4,604)

 

(6,348)

 

Repurchase of common stock

 

(143,700)

 

(3,249)

 

Tax benefit from employee share-based compensation 

 

1,213

 

1,733

 

Distribution to noncontrolling interests

 

(12,482)

 

(2,733)

 

Dividends paid

 

(1,456)

 

(1,578)

     

Net cash provided by financing activities

 

92,480

 

5,983

               

Effect of exchange rate changes on cash

 

(5,268)

 

14,133

               

Increase in cash and cash equivalents

 

45,417

 

60,056

Cash and cash equivalents, beginning of period

 

680,470

 

781,275

Cash and cash equivalents, end of period

 

$      725,887

 

$       841,331

 

SCHEDULE 6

RECONCILIATION OF CASH EARNINGS ATTRIBUTABLE TO GLOBAL PAYMENTS TO GAAP

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

                     

(In thousands, except per share data)

                     
   

Three Months Ended August 31, 2013

   

GAAP

 

Processing System Intrusion

 

Other1

 

Cash Earnings Adjustments2

 

Cash Earnings

                     

Revenues

 

$         629,685

 

$                   -

 

$                   -

 

$                   -

 

$         629,685

Operating expenses:

                   

   Cost of service

 

230,745

 

-

 

(579)

 

(14,393)

 

215,773

   Sales, general and administrative

 

291,556

 

-

 

(1,496)

 

-

 

290,060

   Processing system intrusion

 

-

 

-

 

-

 

-

 

-

   

522,301

 

-

 

(2,075)

 

(14,393)

 

505,833

                     

Operating income

 

107,384

 

-

 

2,075

 

14,393

 

123,852

Other income (expense):

                   

   Interest and other income

 

3,338

 

-

 

-

 

-

 

3,338

   Interest and other expense

 

(7,879)

 

-

 

-

 

-

 

(7,879)

   

(4,541)

 

-

 

-

 

-

 

(4,541)

                     

Income before income taxes 

 

102,843

 

-

 

2,075

 

14,393

 

119,311

Provision for income taxes

 

(31,135)

 

-

 

(789)

 

(4,762)

 

(36,686)

Net income

 

71,708

 

-

 

1,286

 

9,631

 

82,625

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

 

(7,065)

 

-

 

-

 

(1,371)

 

(8,436)

Net income attributable to Global Payments

 

$           64,643

 

$                   -

 

$             1,286

 

$             8,260

 

$           74,189

                     

Diluted shares

 

74,289

             

74,289

Diluted earnings per share

 

$               0.87

 

$                   -

 

$               0.02

 

$               0.11

 

$               1.00

                     
                     
   

Three Months Ended August 31, 2012

   

GAAP

 

Processing System Intrusion

 

Other1

 

Cash Earnings Adjustments2

 

Cash Earnings

                     

Revenues

 

$         590,287

 

$                   -

 

$                   -

 

$                   -

 

$         590,287

Operating expenses:

                   

   Cost of service

 

204,391

 

-

 

(161)

 

(11,225)

 

193,005

   Sales, general and administrative

 

281,419

 

-

 

(800)

 

-

 

280,619

   Processing system intrusion

 

23,989

 

(23,989)

 

-

 

-

 

-

   

509,799

 

(23,989)

 

(961)

 

(11,225)

 

473,624

                     

Operating income

 

80,488

 

23,989

 

961

 

11,225

 

116,663

Other income (expense):

                   

   Interest and other income

 

1,983

 

-

 

-

 

-

 

1,983

   Interest and other expense

 

(3,545)

 

-

 

-

 

-

 

(3,545)

   

(1,562)

 

-

 

-

 

-

 

(1,562)

                     

Income before income taxes 

 

78,926

 

23,989

 

961

 

11,225

 

115,101

Provision for income taxes

 

(24,764)

 

(8,279)

 

(150)

 

(3,360)

 

(36,553)

Net income

 

54,162

 

15,710

 

811

 

7,865

 

78,548

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

 

(7,487)

 

-

 

(741)

 

(1,524)

 

(9,752)

Net income attributable to Global Payments

 

$           46,675

 

$           15,710

 

$                  70

 

$             6,341

 

$           68,796

                     

Diluted shares

 

79,043

             

79,043

Diluted earnings per share

 

$               0.59

 

$               0.20

 

$               0.00

 

$               0.08

 

$               0.87

                     
                     

1Represents one-time charges primarily related to employee termination benefits and resolution of a contract related contingency for the period ending August 31, 2013 and the prior year represents one-time charges primarily related to employee termination benefits and the net income attributable to our Asia-Pacific redeemable noncontrolling interest.

                     

2Represents adjustments to cost of service to exclude acquisition intangible amortization expense from net income and the related income tax benefit.

                     

We supplemented our reporting of income and the related earnings per share information determined in accordance with GAAP by reporting income and the related earnings per share for the three months ended August 31, 2013 and 2012 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated income and earnings per share on a cash basis by excluding costs related to the processing system intrusion, acquisition intangible amortization and one-time charges related to employee termination benefits and resolution of a contract related contingency. 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 and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, income and earnings per share determined in accordance with GAAP. Our measures of income 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, 2013 

       

 GAAP 

 

Processing System Intrusion

 

Other1

 

Cash
Earnings Adjustments2

 

 Cash Earnings 

                         

Revenues:

                   

United States

 

$      363,833

 

$                -

 

$                -

 

$                -

 

$      363,833

Canada

 

86,672

 

-

 

-

 

-

 

86,672

 

North America merchant services

 

450,505

 

-

 

-

 

-

 

450,505

                         

Europe

 

143,188

 

-

 

-

 

-

 

143,188

Asia-Pacific

 

35,992

 

-

 

-

 

-

 

35,992

 

International merchant services

 

179,180

 

-

 

-

 

-

 

179,180

                         
   

Total revenues

 

$      629,685

 

$                -

 

$                -

 

$                -

 

$      629,685

                         

Operating income (loss) for segments:

                   

North America merchant services

 

$        69,699

 

$                -

 

$          2,518

 

$          7,187

 

$        79,404

International merchant services

 

61,541

 

-

 

10

 

7,206

 

68,757

Corporate

 

(23,856)

 

-

 

(453)

 

-

 

(24,309)

 

Operating income

 

$      107,384

 

$                -

 

$          2,075

 

$        14,393

 

$      123,852

                         
                         
       

 Three Months Ended August 31, 2012 

       

 GAAP 

 

Processing System Intrusion

 

Other1

 

Cash
Earnings Adjustments2

 

 Cash Earnings 

                         

Revenues:

                   

United States

 

$      345,898

 

$                -

 

$                -

 

$                -

 

$      345,898

Canada

 

80,897

 

-

 

-

 

-

 

80,897

 

North America merchant services

 

426,795

 

-

 

-

 

-

 

426,795

                         

Europe

 

128,465

 

-

 

-

 

-

 

128,465

Asia-Pacific

 

35,027

 

-

 

-

 

-

 

35,027

 

International merchant services

 

163,492

 

-

 

-

 

-

 

163,492

                         
   

Total revenues

 

$      590,287

 

$                -

 

$                -

 

$                -

 

$      590,287

                         

Operating income (loss) for segments:

                   

North America merchant services

 

$        67,217

 

$                -

 

$             905

 

$          3,321

 

$        71,443

International merchant services

 

57,140

 

-

 

-

 

7,904

 

65,044

Corporate

 

(43,869)

 

23,989

 

56

 

-

 

(19,824)

 

Operating income

 

$        80,488

 

$        23,989

 

$             961

 

$        11,225

 

$      116,663

                         
                         

1Represents one-time charges primarily related to employee termination benefits and resolution of a contract related contingency for the period ending August 31, 2013 and the prior year represents one-time charges primarily related to employee termination benefits and the net income attributable to our Asia-Pacific redeemable noncontrolling interest.

                         

2 Represents acquisition intangible amortization expense.

 

SCHEDULE 8

OUTLOOK SUMMARY

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

               

(In millions, except per share data)

               
     

Fiscal 2013 Actual

 

Fiscal 2014

Outlook

 

% Change FY13

               

Revenue Outlook

           

Total Revenues

$        2,376

 

$2,510 to $2,560

 

6% to 8%

               

EPS Outlook

         

Cash EPS 

$          3.65

 

$3.98 to $4.05

 

9% to 11%

Acquisition-related intangibles assets, non-recurring items and processing system intrusion 1

 

(0.89)

 

 

(0.58)

 

 

35%

   

GAAP Diluted EPS 

$          2.76

 

 $3.40 to $3.47 

 

23% to 26%

               
               
               

We supplemented our reporting of income and the related earnings per share information determined in accordance with GAAP by reporting income and the related earnings per share for the three months ended August 31, 2013 and 2012 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated income and earnings per share on a cash basis by excluding costs related to the processing system intrusion, acquisition intangible amortization and one-time charges related to employee termination benefits and resolution of a contract related contingency. 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 and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, income and earnings per share determined in accordance with GAAP. Our measures of income 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.

 

1 Fiscal 2014 reflects $0.48 of acquisition-related intangibles and $0.10 of non-recurring items. Acquisition-related intangibles accounted and non-recurring items accounted for $0.57 in fiscal 2013 and processing intrusion costs were $0.32.

SOURCE Global Payments Inc.

 

 

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