Global Payments Reports Fiscal 2015 Earnings

July 28, 2015

 

Full-Year Fiscal 2015 Revenue Increased 9% and Cash Earnings Per Share Increased 18%

Establishes Fiscal 2016 Growth Targets of High Single Digits for Adjusted Net Revenue and Double Digits for Cash Earnings Per Share

Raises Share Repurchase Authorization to $400 Million

ATLANTA--(BUSINESS WIRE)-- Global Payments Inc. (NYSE: GPN) today announced results for its fiscal fourth quarter and year ended May 31, 2015.

"We are delighted with our strong fourth quarter performance, representing the culmination of a terrific year of execution worldwide. Revenue growth, operating margin and cash earnings per share all exceeded our expectations for fiscal 2015," said Jeff Sloan, Chief Executive Officer. "We expect continued positive momentum in fiscal 2016. Strategically, we have completed the pivot toward direct distribution across our businesses. Financially, we remain committed to continuing our track record of accelerating growth globally. The successful execution of our strategies enables us to raise our expectations for adjusted net revenue growth, operating margin and cash earnings per share growth for the next three to five years."

Full-Year Fiscal 2015 Summary

  • Reported revenues grew 9% to $2.78 billion, compared to $2.55 billion in fiscal 2014.
  • Cash diluted earnings per share grew 18% to $4.85, compared to $4.12 in the prior fiscal year.
  • GAAP diluted earnings per share were $4.12, compared to $3.37 in the prior fiscal year.

Fourth Quarter Fiscal 2015 Summary

  • Reported revenues grew 5% to $706.5 million, compared to $674.0 million in the fourth quarter of fiscal 2014.
  • Cash diluted earnings per share grew 12% to $1.22, compared to $1.09 in the fourth quarter of fiscal 2014.
  • GAAP diluted earnings per share were $0.99, compared to $0.72 in the fourth quarter of fiscal 2014.

Fiscal 2016 Outlook

"We are pleased to introduce a new adjusted net revenue disclosure that better aligns our reporting with how we manage and measure our performance internally," stated Cameron Bready, Executive Vice President and Chief Financial Officer. "We are also modifying our reporting convention for cash earnings to exclude expenses associated with share-based compensation. Going forward, we intend to guide and report based on these metrics, which we believe will provide for improved comparability with our peers."

For fiscal 2016, the company expects annual adjusted net revenue of $2.06 billion to $2.10 billion, or 6% to 8% growth over fiscal 2015 adjusted net revenue. The company also expects annual diluted cash earnings per share of $5.60 to $5.78, representing growth of 11% to 15% over fiscal 2015. Annual fiscal 2016 GAAP revenue is expected to be $2.87 billion to $2.95 billion or 4% to 6% growth over fiscal 2015.

Capital Allocation

Global Payments' Board of Directors expanded its share repurchase authorization by an incremental $300 million, bringing its total current authorization to $403 million. Under the company's new authorization, Global Payments may repurchase shares in the open market or as otherwise may be determined by the company, subject to market conditions, business opportunities and other factors. The company has no obligation to repurchase shares under this program. This authorization has no expiration date and may be suspended or terminated at any time. Repurchased shares will be retired but will be available for future issuance.

Global Payments' Board of Directors approved a quarterly dividend of $0.02 per share payable August 28, 2015 to shareholders of record as of August 14, 2015.

Conference Call

Global Payments' management will host a conference call today, July 28, 2015 at 8:00 a.m. ET 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; or callers in North America may dial 877-674-6428 and callers outside North America may dial 970-315-0457. A replay of the call will be archived on the company's website within two hours of the live call.

Non-GAAP Financial Measures

Global Payments supplemented revenues, income and earnings per share information determined in accordance with GAAP by providing income and related earnings per share on a "cash earnings" basis and adjusted net revenue in this earnings release to assist with evaluating performance. In addition to GAAP measures, management uses these non-GAAP measures to focus on the factors the company believes are pertinent to the daily management of our operations.

Reconciliations of the non-GAAP measures to the most directly comparable GAAP measure are included in the schedules to this release.

About Global Payments

Global Payments Inc. (NYSE: GPN) is a leading worldwide provider of payment technology services that delivers innovative solutions driven by customer needs globally. Our partnerships, technologies and employee expertise enable us to provide a broad range of products and services that allow our customers to accept all payment types across a variety of distribution channels in many markets around the world.

Headquartered in Atlanta, Georgia with more than 4,300 employees worldwide, Global Payments is a Fortune 1000 Company with merchants and partners in 29 countries throughout North America, Europe, the Asia-Pacific region and Brazil. For more information about Global Payments, our Service. Driven. Commerce brand and our technologies, please visit www.globalpaymentsinc.com.

_________________________

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 our potential failure to safeguard our data; our ability to maintain Visa and MasterCard registration and financial institution sponsorship; our reliance on financial institutions to provide clearing services in connection with our settlement activities; our potential failure to comply with card network requirements; increased merchant, referral partner or ISO attrition; our ability to increase our share of existing markets and expand into new markets; political, economic and regulatory changes in the foreign countries in which we operate; system interruptions in service; increases in credit card network fees; future performance, integration and conversion of acquired operations; and other risk factors presented in our most recent Annual Report on Form 10-K and any subsequent SEC filings, which we advise you to review. We undertake no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.

SCHEDULE 1
GAAP CONSOLIDATED STATEMENTS OF INCOME
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
                                       
                                       
      Three Months Ended May 31,     Year Ended May 31,
                  %                 %
      2015     2014     Change     2015     2014     Change
                                       
Revenues     $ 706,549       $ 673,977       4.8 %       $ 2,773,718       $ 2,554,236       8.6 %
                                       
Operating expenses:                                      
Cost of service       254,217         253,373       0.3 %         1,022,107         952,225       7.3 %
Selling, general and administrative       348,732         331,687       5.1 %         1,295,014         1,203,512       7.6 %
Processing system intrusion                     NM                   (7,000 )     NM  
        602,949         585,060       3.1 %         2,317,121         2,148,737       7.8 %
                                       
Operating income       103,600         88,917       16.5 %         456,597         405,499       12.6 %
                                       
                                       
Interest and other income       1,315         2,093       (37.2 )%         4,949         13,663       (63.8 )%
Interest and other expense       (9,647 )       (9,451 )     2.1 %         (44,436 )       (41,812 )     6.3 %
        (8,332 )       (7,358 )     13.2 %         (39,487 )       (28,149 )     40.3 %
                                       
Income before income taxes       95,268         81,559       16.8 %         417,110         377,350       10.5 %
Provision for income taxes       (25,158 )       (23,293 )     8.0 %         (107,995 )       (107,398 )     0.6 %
Net income       70,110         58,266       20.3 %         309,115         269,952       14.5 %
Less: Net income attributable to noncontrolling interests, net of income tax       (4,785 )       (6,641 )     (27.9 )%         (31,075 )       (24,666 )     26.0 %
Net income attributable to Global Payments     $ 65,325       $ 51,625       26.5 %       $ 278,040       $ 245,286       13.4 %
                                       
Earnings per share attributable to Global Payments:                                
Basic     $ 0.99       $ 0.73       35.6 %       $ 4.15       $ 3.40       22.1 %
Diluted     $ 0.99       $ 0.72       37.5 %       $ 4.12       $ 3.37       22.3 %
                                       
Weighted average shares outstanding:                                      
Basic       65,744         70,707                 67,036         72,119        
Diluted       66,196         71,322                 67,461         72,688        
                                       
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 May 31,       Year Ended May 31,      
                  %                 %
      2015     2014     Change     2015     2014     Change
                                       
Revenues     $ 706,549       $ 673,977       4.8 %       $ 2,775,594       $ 2,554,236       8.7 %
                                       
Operating expenses:                                      
Cost of service       235,814         234,856       0.4 %         949,520         889,576       6.7 %
Selling, general and administrative       339,047         317,085       6.9 %         1,286,398         1,184,066       8.6 %
        574,861         551,941       4.2 %         2,235,918         2,073,642       7.8 %
                                       
Operating income       131,688         122,036       7.9 %         539,676         480,594       12.3 %
                                       
                                       
Interest and other income       1,315         2,093       (37.2 )%         4,949         11,540       (57.1 )%
Interest and other expense       (13,243 )       (8,110 )     63.3 %         (48,032 )       (32,327 )     48.6 %
        (11,928 )       (6,017 )     98.2 %         (43,083 )       (20,787 )     107.3 %
                                       
Income before income taxes       119,760         116,019       3.2 %         496,593         459,807       8.0 %
Provision for income taxes       (32,935 )       (30,249 )     8.9 %         (133,683 )       (130,181 )     2.7 %
Net income       86,825         85,770       1.2 %         362,910         329,626       10.1 %
Less: Net income attributable to noncontrolling interests, net of income tax       (5,828 )       (8,075 )     (27.8 )%         (35,604 )       (30,295 )     17.5 %
Net income attributable to Global Payments     $ 80,997       $ 77,695       4.2 %       $ 327,306       $ 299,331       9.3 %
                                       
Earnings per share attributable to Global Payments:                            
Basic     $ 1.23       $ 1.10       11.8 %       $ 4.88       $ 4.15       17.6 %
Diluted     $ 1.22       $ 1.09       11.9 %       $ 4.85       $ 4.12       17.7 %
                                       
Weighted average shares outstanding:                                      
Basic       65,744         70,707                 67,036         72,119        
Diluted       66,196         71,322                 67,461         72,688        
                                       
See Schedules 6 & 7 for a reconciliation of cash earnings to GAAP.
 
SCHEDULE 3
SEGMENT INFORMATION
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
                                     
      Three Months Ended May 31,            
      2015     2014     % Change
            Cash           Cash           Cash
      GAAP     Earnings     GAAP     Earnings     GAAP     Earnings
Revenues:                                    
United States     $ 433,030       $ 433,030       $ 407,153       $ 407,153       6.4 %     6.4 %
Canada       70,014         70,014         74,954         74,954       (6.6 )%     (6.6 )%
North America merchant services       503,044         503,044         482,107         482,107       4.3 %     4.3 %
                                     
Europe       154,827         154,827         153,577         153,577       0.8 %     0.8 %
Asia-Pacific       48,678         48,678         38,293         38,293       27.1 %     27.1 %
International merchant services       203,505         203,505         191,870         191,870       6.1 %     6.1 %
Total revenues     $ 706,549       $ 706,549       $ 673,977       $ 673,977       4.8 %     4.8 %
                                     
Operating income (loss) for segments:                                
North America merchant services     $ 74,233       $ 85,500       $ 70,420       $ 82,722       5.4 %     3.4 %
International merchant services       64,764         76,748         58,094         66,402       11.5 %     15.6 %
Corporate       (35,397 )       (30,560 )       (39,597 )       (27,088 )     (10.6 )%     12.8 %
Operating income     $ 103,600       $ 131,688       $ 88,917       $ 122,036       16.5 %     7.9 %
                                     
      Year Ended May 31,            
      2015     2014     % Change
            Cash           Cash           Cash
      GAAP     Earnings     GAAP     Earnings     GAAP     Earnings
Revenues:                                    
United States     $ 1,655,872       $ 1,655,872       $ 1,488,659       $ 1,488,659       11.2 %     11.2 %
Canada       313,018         313,018         320,333         320,333       (2.3 )%     (2.3 )%
North America merchant services       1,968,890         1,968,890         1,808,992         1,808,992       8.8 %     8.8 %
                                     
Europe       615,966         617,842         587,463         587,463       4.9 %     5.2 %
Asia-Pacific       188,862         188,862         157,781         157,781       19.7 %     19.7 %
International merchant services       804,828         806,704         745,244         745,244       8.0 %     8.2 %
Total revenues     $ 2,773,718       $ 2,775,594       $ 2,554,236       $ 2,554,236       8.6 %     8.7 %
                                     
Operating income (loss) for segments:                                
North America merchant services     $ 293,139       $ 337,980       $ 272,251       $ 308,570       7.7 %     9.5 %
International merchant services       279,711         311,240         240,179         270,551       16.5 %     15.0 %
Corporate1       (116,253 )       (109,544 )       (106,931 )       (98,527 )     8.7 %     11.2 %
Operating income     $ 456,597       $ 539,676       $ 405,499       $ 480,594       12.6 %     12.3 %

1

 

GAAP operating income for the year ended May 31, 2014 includes a credit for insurance proceeds of $7.0 million related to the fiscal 2012 processing system intrusion.

     
    See Schedule 8 for a reconciliation of cash earnings segment information to GAAP.
     
SCHEDULE 4          
CONSOLIDATED BALANCE SHEETS          
GLOBAL PAYMENTS INC. AND SUBSIDIARIES          
(In thousands, except share data)          
           
    May 31, 2015   May 31, 2014
ASSETS          
Current assets:          
Cash and cash equivalents   $ 650,739       $ 581,872  
Accounts receivable, net of allowances for doubtful accounts of $468 and $401, respectively     202,390         214,574  
Claims receivable, net     548         809  
Settlement processing assets     2,394,822         780,917  
Inventory     5,228         6,636  
Deferred income taxes     11,664         12,963  
Prepaid expenses and other current assets     36,904         45,673  
Total current assets     3,302,295         1,643,444  
Goodwill     1,491,833         1,337,285  
Other intangible assets, net     560,136         535,173  
Property and equipment, net     374,143         369,753  
Deferred income taxes     30,578         101,928  
Other     34,563         31,067  
Total assets   $ 5,793,548       $ 4,018,650  
           
LIABILITIES AND EQUITY          
Current liabilities:          
Lines of credit   $ 592,629       $ 440,128  
Current portion of long-term debt     62,500         17,677  

Accounts payable and accrued liabilities

    312,647         290,106  
Settlement processing obligations     2,033,900         451,317  
Income taxes payable     14,228         12,390  
Total current liabilities     3,015,904         1,211,618  
Long-term debt     1,680,000         1,376,002  
Deferred income taxes     214,669         209,099  
Other noncurrent liabilities     19,422         89,132  
Total liabilities     4,929,995         2,885,851  
Commitments and contingencies          
Equity:          
Preferred stock, no par value; 5,000,000 shares authorized and none issued              
Common stock, no par value; 200,000,000 shares authorized; 65,278,838 issued and outstanding at May 31, 2015 and 68,845,643 issued and outstanding at May 31, 2014              
Paid-in capital     148,742         183,023  
Retained earnings     795,226         815,980  
Accumulated other comprehensive loss     (185,992 )       (1,776 )
Total Global Payments shareholders' equity     757,976         997,227  
Noncontrolling interests     105,577         135,572  
Total equity     863,553         1,132,799  
Total liabilities and equity   $ 5,793,548       $ 4,018,650  
SCHEDULE 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
 
      Year Ended May 31,
      2015     2014
Cash flows from operating activities:            
Net income     $ 309,115       $ 269,952  
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation and amortization of property and equipment       64,918         60,124  
Amortization of acquired intangibles       72,587         61,945  
Share-based compensation expense       21,056         29,793  
Provision for operating losses and bad debts       14,506         20,574  
Deferred income taxes       81,079         (1,799 )
Other, net       3,073         (1,484 )

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

           
Accounts receivable       1,248         (18,539 )
Claims receivable       (9,317 )       (11,569 )
Settlement processing assets and obligations, net       (78,794 )       (241,431 )
Inventory       127         4,793  
Prepaid expenses and other assets       14,616         18,995  
Accounts payable and other liabilities       (72,802 )       9,224  
Income taxes payable       3,289         (6,480 )
Net cash provided by operating activities       424,701         194,098  
             
Cash flows from investing activities:            
Business, intangible and other asset acquisitions, net of cash acquired       (359,187 )       (426,524 )
Capital expenditures       (92,550 )       (81,411 )
Principal collections on financing receivables       219         2,658  
Net proceeds from sales of investments and business       10,597         3,607  
Net cash used in investing activities       (440,921 )       (501,670 )
             
Cash flows from financing activities:            
Net borrowings on short-term lines of credit       198,884         252,667  
Proceeds from issuance of long-term debt       2,496,842         2,690,000  
Principal repayments of long-term debt       (2,148,907 )       (2,260,597 )
Payment of debt issuance costs               (5,961 )
Repurchase of common stock       (372,387 )       (447,307 )
Proceeds from stock issued under share-based compensation plans       22,550         31,727  
Common stock repurchased - share-based compensation plans       (15,690 )       (5,681 )
Tax benefit from share-based compensation       5,176         6,475  
Distributions to noncontrolling interests       (39,753 )       (36,670 )
Dividends paid       (5,340 )       (5,757 )
Net cash provided by financing activities       141,375         218,896  
Effect of exchange rate changes on cash       (56,288 )       (9,922 )
Increase (decrease) in cash and cash equivalents       68,867         (98,598 )
Cash and cash equivalents, beginning of the period       581,872         680,470  
Cash and cash equivalents, end of the period     $ 650,739       $ 581,872  
                     
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 May 31, 2015
          Cash Earnings       Cash
      GAAP  

Adjustments1

 

Other2

  Earnings
Revenues     $ 706,549     $     $     $ 706,549  
Operating expenses:                  
Cost of service       254,217       (18,403 )           235,814  
Selling, general and administrative       348,732             (9,685 )     339,047  
        602,949       (18,403 )     (9,685 )     574,861  
                   
Operating income       103,600       18,403       9,685       131,688  
                   
Interest and other income       1,315                   1,315  
Interest and other expense       (9,647 )           (3,596 )     (13,243 )
        (8,332 )           (3,596 )     (11,928 )
                   
Income before income taxes       95,268       18,403       6,089       119,760  
Provision for income taxes       (25,158 )     (5,681 )     (2,096 )     (32,935 )
Net income       70,110       12,722       3,993       86,825  
Less: Net income attributable to noncontrolling interests, net of income tax     (4,785 )     (1,043 )           (5,828 )
Net income attributable to Global Payments     $ 65,325     $ 11,679     $ 3,993     $ 80,997  
                   
Diluted shares       66,196               66,196  
Diluted earnings per share     $ 0.99     $ 0.18     $ 0.06     $ 1.22  
                   
      Three Months Ended May 31, 2014
          Cash Earnings       Cash
      GAAP  

Adjustments1

 

Other2

  Earnings
Revenues     $ 673,977     $     $     $ 673,977  
Operating expenses:                  
Cost of service       253,373       (18,392 )     (125 )     234,856  
Selling, general and administrative       331,687             (14,602 )     317,085  
        585,060       (18,392 )     (14,727 )     551,941  
                   
Operating income       88,917       18,392       14,727       122,036  
                   
Interest and other income       2,093                   2,093  
Interest and other expense       (9,451 )           1,341       (8,110 )
        (7,358 )           1,341       (6,017 )
                   
Income before income taxes       81,559       18,392       16,068       116,019  
Provision for income taxes       (23,293 )     (5,719 )     (1,237 )     (30,249 )
Net income       58,266       12,673       14,831       85,770  
                                 
Less: Net income attributable to noncontrolling interests, net of income tax     (6,641 )     (1,434 )           (8,075 )
Net income attributable to Global Payments     $ 51,625     $ 11,239     $ 14,831     $ 77,695  
                   
Diluted shares       71,322               71,322  
Diluted earnings per share     $ 0.72     $ 0.16     $ 0.21     $ 1.09  
1 Represents adjustments to exclude acquisition intangible amortization expense and the related income tax benefit.
   
2 For the three months ended May 31, 2015, the adjustments represent charges related to employee termination benefits, non-cash losses from the retirement of property and equipment, a transaction-related tax associated with our acquisition of Realex, reversal of previously recorded interest expense associated with a previously uncertain tax position and the related income tax effects of each. For the three months ended May 31, 2014, the adjustments represent acceleration of equity awards and other costs associated with the retirement of our former Chairman and CEO, a charge associated with our retained interest in Brazil, an adjustment to the costs associated with the debt refinancing we completed in February 2014, non-cash losses from the retirement of property and equipment, charges related to employee termination benefits and the related income tax effects of each.
   
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 May 31, 2015 and 2014 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 making the adjustments described above. We exclude these items 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 ANNUAL CASH EARNINGS ATTRIBUTABLE TO GLOBAL PAYMENTS TO GAAP
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
                       
                       
      Year Ended May 31, 2015
          Processing            
          System   Cash Earnings      

 

      GAAP   Intrusion  

Adjustments2

 

Other3

 

Cash Earnings

Revenues     $ 2,773,718     $     $     $ 1,876     $   2,775,594  
Operating expenses:                      
Cost of service       1,022,107             (72,587 )             949,520  
Selling, general and administrative       1,295,014                   (8,616 )       1,286,398  
Processing system intrusion                                  
        2,317,121             (72,587 )     (8,616 )       2,235,918  
                       
Operating income       456,597             72,587       10,492         539,676  
                       
Interest and other income       4,949                           4,949  
Interest and other expense       (44,436 )                 (3,596 )       (48,032 )
        (39,487 )                 (3,596 )       (43,083 )
                       
Income before income taxes       417,110             72,587       6,896         496,593  

Provision for income taxes

      (107,995 )           (23,149 )     (2,539 )       (133,683 )
Net income       309,115             49,438       4,357         362,910  
Less: Net income attributable to noncontrolling interests, net of income tax       (31,075 )         (4,529 )             (35,604 )
Net income attributable to Global Payments     $ 278,040     $     $ 44,909     $ 4,357     $   327,306  
                       
Diluted shares       67,461                     67,461  
Diluted earnings per share     $ 4.12     $     $ 0.67     $ 0.06     $   4.85  
                       
      Year Ended May 31, 2014
          Processing            
          System   Cash Earnings        
      GAAP  

Intrusion1

 

Adjustments2

 

Other3

  Cash Earnings
Revenues     $ 2,554,236     $     $     $     $   2,554,236  
Operating expenses:                      
Cost of service       952,225             (61,945 )     (704 )       889,576  
Selling, general and administrative       1,203,512                   (19,446 )       1,184,066  
Processing system intrusion       (7,000 )     7,000                      
        2,148,737       7,000       (61,945 )     (20,150 )       2,073,642  
                       
Operating income (loss)       405,499       (7,000 )     61,945       20,150         480,594  
                       
Interest and other income       13,663                   (2,123 )       11,540  
Interest and other expense       (41,812 )                 9,485         (32,327 )
        (28,149 )                 7,362         (20,787 )
                       
Income (loss) before income taxes       377,350       (7,000 )     61,945       27,512         459,807  
(Provision for) benefit from income taxes       (107,398 )     2,393       (19,825 )     (5,351 )       (130,181 )
Net income (loss)       269,952       (4,607 )     42,120       22,161         329,626  
Less: Net income attributable to noncontrolling interests, net of income tax       (24,666 )           (5,629 )             (30,295 )
Net income (loss) attributable to Global Payments     $ 245,286     $ (4,607 )   $ 36,491     $ 22,161     $   299,331  
                       
Diluted shares       72,688                     72,688  
Diluted earnings (loss) per share     $ 3.37     $ (0.06 )   $ 0.50     $ 0.30     $   4.12  
1 Represents insurance proceeds associated with the fiscal 2012 processing system intrusion and the related income tax provision.
   
2 Represents adjustments to exclude acquisition intangible amortization expense and the related income tax benefit.
   
3 For the year ended May 31, 2015, the revenue adjustment represents select U.K. customer payments related to a vendor outage and the expense adjustments represent charges related to employee termination benefits, non-cash losses from the retirement of property and equipment, a transaction-related tax associated with the acquisition of Realex, certain business tax assessments in the U.S. for prior periods, a gain on the sale of our Russia ATM business, reversal of previously recorded interest expense associated with a previously uncertain tax position and the related income tax effects of each. For the year ended May 31, 2014, the adjustments represent acceleration of equity awards and other costs associated with the retirement of our former Chairman and CEO, a credit related to the sale of an interest in our Brazil business and a subsequent charge associated with our retained interest, costs associated with the debt refinancing we completed in February 2014, non-cash losses from the retirement of property and equipment, charges related to employee termination benefits, HSBC's share of dividends declared and the related income tax effects of each.
   
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 years ended May 31, 2015 and 2014 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 making the adjustments described above. We exclude these items 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 8
RECONCILIATION OF CASH EARNINGS SEGMENT INFORMATION TO GAAP
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
      Three Months Ended May 31,
      2015     2014
          Processing                     Processing            
          System   Cash Earnings                 System   Cash Earnings        
      GAAP   Intrusion  

Adjustments2

 

Other3

  Cash Earnings     GAAP   Intrusion  

Adjustments2

 

Other3

  Cash Earnings
Revenues:                                            
United States     $ 433,030     $   $   $   $ 433,030       $ 407,153     $     $   $   $ 407,153  
Canada       70,014                   70,014         74,954                     74,954  
North America merchant services       503,044                   503,044         482,107                     482,107  
                                             
Europe       154,827                   154,827         153,577                     153,577  
Asia-Pacific       48,678                   48,678         38,293                     38,293  
International merchant services       203,505                   203,505         191,870                     191,870  
Total revenues     $ 706,549     $   $   $   $ 706,549       $ 673,977     $     $   $   $ 673,977  
                                             
Operating income (loss) for segments:                                    
North America merchant services     $ 74,233     $   $ 10,967   $ 300   $ 85,500       $ 70,420     $     $ 10,874   $ 1,428   $ 82,722  
International merchant services       64,764           7,436     4,548     76,748         58,094             7,518     790     66,402  
Corporate       (35,397 )             4,837     (30,560 )       (39,597 )               12,509     (27,088 )
Operating income     $ 103,600     $   $ 18,403   $ 9,685   $ 131,688       $ 88,917     $     $ 18,392   $ 14,727   $ 122,036  
                                             
      Year Ended May 31,
      2015     2014
          Processing                     Processing            
          System   Cash Earnings       Cash         System   Cash Earnings        
      GAAP   Intrusion  

Adjustments2

 

Other3

  Earnings     GAAP  

Intrusion1

 

Adjustments2

 

Other3

  Cash Earnings
Revenues:                                            
United States     $ 1,655,872     $   $   $   $ 1,655,872       $ 1,488,659     $     $   $   $ 1,488,659  
Canada       313,018                   313,018         320,333                     320,333  
North America merchant services       1,968,890                   1,968,890         1,808,992                     1,808,992  
                                             
Europe       615,966               1,876     617,842         587,463                     587,463  
Asia-Pacific       188,862                   188,862         157,781                     157,781  
International merchant services       804,828               1,876     806,704         745,244                     745,244  
Total revenues     $ 2,773,718     $   $   $ 1,876   $ 2,775,594       $ 2,554,236     $     $   $   $ 2,554,236  
                                             
Operating income (loss) for segments:                                    
North America merchant services     $ 293,139     $   $ 44,541   $ 300   $ 337,980       $ 272,251     $     $ 32,374   $ 3,945   $ 308,570  
International merchant services       279,711           28,046     3,483     311,240         240,179             29,571     801     270,551  
Corporate       (116,253 )             6,709     (109,544 )       (106,931 )     (7,000 )         15,404     (98,527 )
Operating income (loss)     $ 456,597     $   $ 72,587   $ 10,492   $ 539,676       $ 405,499     $ (7,000 )   $ 61,945   $ 20,150   $ 480,594  
1 Represents insurance proceeds associated with the fiscal 2012 processing system intrusion.
   
2 Represents adjustments to exclude acquisition intangible amortization expense and the related income tax benefit.
   
3 For the three months ended May 31, 2015, the adjustments represent charges related to employee termination benefits, non-cash losses from the retirement of property and equipment and a transaction-related tax associated with our acquisition of Realex. For the three months ended May 31, 2014 the adjustments represent acceleration of equity awards and other costs associated with the retirement of our former Chairman and CEO, non-cash losses from the retirement of property and equipment, and charges related to employee termination benefits and certain contract settlement and related costs. The adjustments for the year ended May 31, 2015, include the revenue and acquisition-related tax adjustments described for the three-month period, charges related to employee termination benefits, non-cash losses from the retirement of property and equipment and a gain on the sale of a component of our Russia business that leased ATMs to our sponsor bank in Russia. For the year ended May 31, 2014, the adjustments represent acceleration of equity awards and other costs associated with the retirement of our former Chairman and CEO, non-cash losses from the retirement of property and equipment, and charges related to employee termination benefits and resolution of a contract related contingency.
   
We supplemented our reporting of operating income information determined in accordance with GAAP by reporting operating income for the three months and the years ended May 31, 2015 and 2014 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated operating income on a cash basis by making the adjustments described above. We exclude these items in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations. Our operating income reported on a cash earnings basis should be considered in addition to, and not as a substitute for, operating income determined in accordance with GAAP. Our measure of operating income on a cash earnings basis reflects management's judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.
SCHEDULE 9
OUTLOOK SUMMARY
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In billions, except per share data)
                   
      Fiscal 2015     Fiscal 2016      
      Actual     Outlook     % Change
                   

Revenues:

                 
GAAP Revenues     $ 2.77     $2.87 to $2.95     4% to 6%
Adjustments1     (0.82)     (0.83)      
Adjusted Net Revenue     $ 1.95     $2.06 to $2.10     6% to 8%
                   

Earnings Per Share:

                 
GAAP Diluted EPS     $ 4.12     $4.53 to $4.71     10% to 14%
Acquisition-related intangibles assets, share-based compensation expense and non-recurring items2     0.92     1.07     16%

Cash EPS

    $ 5.04     $5.60 to $5.78     11% to 15%
1 Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain wholesale lines of business to reflect economic benefits to the Company and, in fiscal 2015, a revenue adjustment for select U.K. customer payments related to a vendor outage.
 
2 Fiscal 2015 reflects acquisition intangible amortization of $0.67, share-based compensation expense of $0.19 and non-recurring items of $0.06, including a revenue adjustment for select U.K. customer payments related to a vendor outage and expense adjustments for charges related to employee termination benefits, non-cash losses from the retirement of property and equipment, a transaction-related tax associated with the acquisition of Realex, certain business tax assessments in the U.S. for prior periods, a gain on the sale of our Russia ATM business, reversal of previously recorded interest expense associated with a previously uncertain tax position and the related income tax effects of each.
 

NON-GAAP FINANCIAL MEASURES

 
Global Payments supplemented revenues, income and earnings per share information determined in accordance with GAAP by providing income and related earnings per share on a "cash earnings" basis and Adjusted Net Revenue in this earnings release to assist with evaluating performance. In addition to GAAP measures, management uses these non-GAAP measures to focus on the factors we believe are pertinent to the daily management of our operations. Management believes Adjusted Net Revenue more closely reflects the economic benefits to the Company's core business and allows for better comparisons with industry peers. Management uses these non-GAAP metrics, together with other metrics, to set goals for and measure the performance of its business and to determine incentive compensation. Our Adjusted Net Revenue and income and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, revenues, income and earnings per share determined in accordance with GAAP. Our measures of Adjusted Net Revenue, 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.
 
Adjusted Net Revenue excludes gross-up related payments associated with certain wholesale lines of business to reflect economic benefits to the Company. On a GAAP basis, these payments are presented gross in both revenues and operating expenses.
 
In fiscal 2015, income and the related earnings per share on a cash earnings basis exclude the amortization expense of acquired intangibles and certain other items specific to each reporting period as more fully described in the accompanying reconciliations. Beginning in fiscal 2016, we modified our cash earnings measures to also exclude share-based compensation. The accompanying reconciliations in Schedule 6, Schedule 7 and Schedule 8 show the cash earnings measures calculated without the impact of excluding share-based compensation. The reconciliations in this Schedule 9 and in the accompanying Schedule 10 and Schedule 11 show Adjusted Net Revenue and the modified cash earnings measures which exclude share-based compensation. We expect to discuss financial results using Adjusted Net Revenue and the modified cash earnings convention in future periods. The tax rate used in determining the net income impact of cash earnings adjustments is either the jurisdictional statutory rate in effect at the time of the adjustment or the jurisdictional expected annual effective tax rate for the period, depending on the nature and timing of the adjustment.
 
SCHEDULE 10
RECONCILIATION OF ADJUSTED NET REVENUE AND CASH EARNINGS SEGMENT INFORMATION TO GAAP
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
                       
      For the Year Ended May 31, 2015
                      Adjusted Net
          Net Revenue   Cash Earnings       Revenue and
      GAAP  

Adjustment1

 

Adjustments2

 

Other3

  Cash Earnings
Revenues:                      
United States     $ 1,655,872     $ (740,556 )   $     $     $ 915,316  
Canada       313,018                         313,018  
North America merchant services       1,968,890       (740,556 )                 1,228,334  
                       
Europe       615,966       (82,146 )           1,876       535,696  
Asia-Pacific       188,862                         188,862  
International merchant services       804,828       (82,146 )           1,876       724,558  

Total revenues

    $ 2,773,718     $ (822,702 )   $     $ 1,876     $ 1,952,892  
                       
Operating income (loss) for segments:                      
North America merchant services     $ 293,139     $     $ 44,541     $ 300     $ 337,980  
International merchant services       279,711             28,046       3,483       311,240  
Corporate       (116,253 )           20,331       6,709       (89,213 )
Operating income       456,597             92,918       10,492       560,007  
                       
Interest and other income       4,949                         4,949  
Interest and other expense       (44,436 )                 (3,596 )     (48,032 )
        (39,487 )                 (3,596 )     (43,083 )
                       
Income before income taxes       417,110             92,918       6,896       516,924  
Provision for income taxes       (107,995 )           (30,729 )     (2,539 )     (141,263 )
Net income       309,115             62,189       4,357       375,661  
Less: Net income attributable to noncontrolling interests, net of income tax       (31,075 )           (4,529 )           (35,604 )
Net income attributable to Global Payments     $ 278,040     $     $ 57,660     $ 4,357     $ 340,057  
                       
Diluted shares       67,461                   67,461  
Diluted earnings per share     $ 4.12     $     $ 0.86     $ 0.06     $ 5.04  
1 Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain wholesale lines of business to reflect economic benefits to the Company.
 
2 Represents adjustments to exclude acquisition intangible amortization expense, stock compensation expense and the related income tax benefits of each.
 
3 For the year ended May 31, 2015, the revenue adjustment represents select U.K. customer payments related to a vendor outage and the expense adjustments represent charges related to employee termination benefits, non-cash losses from the retirement of property and equipment, a transaction-related tax associated with the acquisition of Realex, certain business tax assessments in the U.S. for prior periods, a gain on the sale of our Russia ATM business, reversal of previously recorded interest expense associated with a previously uncertain tax position and the related income tax effects of each.
 
See "Non-GAAP Financial Measures" discussion on Schedule 9.
 
SCHEDULE 11
RECONCILIATION OF ADJUSTED NET REVENUE AND CASH EARNINGS SEGMENT INFORMATION TO GAAP
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
                                             
    Three Months Ended  
    August 31, 2014       November 30, 2014
                      Adjusted Net                     Adjusted Net
        Net Revenue   Cash Earnings         Revenue and         Net Revenue   Cash Earnings       Revenue and
    GAAP  

Adjustment1

 

Adjustments2

 

Other3

    Cash Earnings     GAAP  

Adjustment1

 

Adjustments2

  Other   Cash Earnings
Revenues:                                            
United States   $ 414,042     $ (188,731 )   $     $     $ 225,311       $ 404,784     $ (183,217 )   $     $     $ 221,567  
Canada     89,965                         89,965         83,992                         83,992  
North America merchant services     504,007       (188,731 )                 315,276         488,776       (183,217 )                 305,559  
                                             
Europe     162,787       (20,952 )                 141,835         159,974       (20,409 )                 139,565  
Asia-Pacific     38,101                         38,101         48,541                         48,541  
International merchant services     200,888       (20,952 )                 179,936         208,515       (20,409 )                 188,106  
Total revenues   $ 704,895     $ (209,683 )   $     $     $ 495,212       $ 697,291     $ (203,626 )   $     $     $ 493,665  
                                             
Operating income (loss) for segments:                                      
North America merchant services   $ 77,937     $     $ 11,378     $     $ 89,315       $ 74,246     $     $ 11,173     $     $ 85,419  
International merchant services     73,602             6,476       (2,941 )     77,137         76,443             7,090             83,533  
Corporate     (27,141 )           4,066             (23,075 )       (26,705 )           5,079             (21,626 )
Operating income (loss)     124,398             21,920       (2,941 )     143,377         123,984             23,342             147,326  
                                             
Interest and other income     1,192                         1,192         1,282                         1,282  
Interest and other expense     (11,010 )                       (11,010 )       (10,350 )                       (10,350 )
      (9,818 )                       (9,818 )       (9,068 )                       (9,068 )
                                             
Income (loss) before income taxes     114,580             21,920       (2,941 )     133,559         114,916             23,342             138,258  
(Provision) benefit for income taxes     (30,146 )           (7,336 )     588       (36,894 )       (29,660 )           (7,688 )           (37,348 )
Net income (loss)     84,434             14,584       (2,353 )     96,665         85,256             15,654             100,910  
Less: Net income attributable to noncontrolling interests, net of income tax     (9,068 )           (1,235 )           (10,303 )       (10,475 )           (1,173 )           (11,648 )
Net income (loss) attributable to Global Payments   $ 75,366     $     $ 13,349     $ (2,353 )   $ 86,362       $ 74,781     $     $ 14,481     $     $ 89,262  
                                             
Diluted shares     68,617                     68,617         67,737                   67,737  
Diluted earnings (loss) per share   $ 1.10     $     $ 0.19     $ (0.03 )   $ 1.26       $ 1.10     $     $ 0.21     $     $ 1.32  
                                             
    Three Months Ended  
    February 28, 2015       May 31, 2015
                      Adjusted Net                     Adjusted Net
        Net Revenue   Cash Earnings         Revenue and         Net Revenue   Cash Earnings       Revenue and
    GAAP  

Adjustment1

 

Adjustments2

 

Other4

    Cash Earnings     GAAP  

Adjustment1

 

Adjustments2

 

Other5

  Cash Earnings
Revenues:                                            
United States   $ 404,016     $ (179,678 )   $     $     $ 224,338       $ 433,030     $ (188,930 )   $     $     $ 244,100  
Canada     69,047                         69,047         70,014                         70,014  
North America merchant services     473,063       (179,678 )                 293,385         503,044       (188,930 )                 314,114  
                                             
Europe     138,378       (19,424 )           1,876       120,830         154,827       (21,361 )                 133,466  
Asia-Pacific     53,542                         53,542         48,678                         48,678  
International merchant services     191,920       (19,424 )           1,876       174,372         203,505       (21,361 )                 182,144  
Total revenues   $ 664,983     $ (199,102 )   $     $ 1,876     $ 467,757       $ 706,549     $ (210,291 )   $     $     $ 496,258  
                                             
Operating income (loss) for segments:                                      
North America merchant services   $ 66,723     $     $ 11,023     $     $ 77,746       $ 74,233     $     $ 10,967     $ 300     $ 85,500  
International merchant services     64,902             7,044       1,876       73,822         64,764             7,436       4,548       76,748  
Corporate     (27,010 )           5,682       1,872       (19,456 )       (35,397 )           5,504       4,837       (25,056 )
Operating income   $ 104,615     $     $ 23,749     $ 3,748     $ 132,112       $ 103,600     $     $ 23,907     $ 9,685     $ 137,192  
                                             
Interest and other income   $ 1,160     $     $     $

 

 

$ 1,160       $ 1,315     $     $     $     $ 1,315  
Interest and other expense     (13,429 )          

 

 

      (13,429 )       (9,647 )                 (3,596 )     (13,243 )
      (12,269 )                

      (12,269 )       (8,332 )                 (3,596 )     (11,928 )
                                             
Income before income taxes     92,346             23,749       3,748       119,843         95,268             23,907       6,089       125,264  
Provision for income taxes     (23,031 )           (7,782 )     (1,031 )     (31,844 )       (25,158 )           (7,923 )     (2,096 )     (35,177 )
Net income     69,315             15,967       2,717       87,999         70,110             15,984       3,993       90,087  
Less: Net income attributable to noncontrolling interests, net of income tax     (6,747 )           (1,078 )           (7,825 )       (4,785 )           (1,043 )           (5,828 )
Net income attributable to Global Payments   $ 62,568     $     $ 14,889     $ 2,717     $ 80,174       $ 65,325     $     $ 14,941     $ 3,993     $ 84,259  
                                             
Diluted shares     67,306                     67,306         66,196                   66,196  
Diluted earnings per share   $ 0.93     $     $ 0.22     $ 0.04     $ 1.19       $ 0.99     $     $ 0.23     $ 0.06     $ 1.27  

1 Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain wholesale lines of business to reflect economic benefits to the Company.

   
2 Represents adjustments to exclude acquisition intangible amortization expense, stock compensation expense and the related income tax benefits of each.
   
3 Represents a gain on the sale of a component of our Russia business that leased ATMs to our sponsor bank in Russia.
   
4 The revenue adjustment represents select U.K. customer payments related to a vendor outage and the expense adjustment represents certain business tax assessments in the U.S. for prior periods.
   
5 The adjustments represent charges related to employee termination benefits, non-cash losses from the retirement of property and equipment, a transaction-related tax associated with our acquisition of Realex, reversal of previously recorded interest expense associated with a previously uncertain tax position and the related income tax effects of each.
   
See "Non-GAAP Financial Measures" discussion on Schedule 9.

 

Global Payments Inc.
Investor contact:
Jane Elliott, 770-829-8234
investor.relations@globalpay.com
or
Media contact:
Amy Corn, 770-829-8755
media.relations@globalpay.com

Source: Global Payments Inc.

 

 

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