Global Payments Reports Fourth Quarter and Year-End 2014 Earnings

July 29, 2014

ATLANTA, July 29, 2014 /PRNewswire/ -- Global Payments Inc. (NYSE: GPN), one of the largest worldwide providers of payment solutions, today announced results for its fiscal fourth quarter and year ended May 31, 2014.

GLOBAL PAYMENTS logo.

"I am pleased with Global Payments' strong financial performance for the fourth quarter and full fiscal year.  During fiscal 2014, we grew cash earnings per share 13 percent, returned over $450 million dollars to shareholders and completed a $420 million acquisition to further diversify distribution in our largest market and complement our focus on differentiated technologies.  We achieved key execution milestones, including meaningfully expanding our integrated solutions business in the U.S., delivering solid performance in Canada and adding to our direct distribution channels in Asia," said Jeff Sloan, Chief Executive Officer of Global Payments Inc.  "In fiscal 2015, we will continue to focus on our direct distribution strategy by leveraging our global technology platforms to deliver new, innovative products and services, driving operating margin expansion and delivering double-digit cash earnings per share growth."

Full-Year 2014 Summary

  • Revenues grew 8% to $2.55 billion, compared to $2.38 billion in fiscal 2013.
  • Cash diluted earnings per share[1] grew 13% to $4.12, compared to $3.65 in the prior fiscal year.
  • GAAP full-year diluted earnings per share of $3.37, compared to $2.76 diluted earnings per share in the prior year.

Fourth Quarter 2014 Summary

  • Revenues grew 9% to $674.0 million, compared to $618.4 million in the fourth quarter of fiscal 2013.
  • Cash diluted earnings per share grew 11% to $1.09, compared to $0.98 in the fourth quarter of fiscal 2013.
  • GAAP diluted earnings per share were $0.72, compared to $0.53 in the fourth quarter of 2013.

2015 Outlook
For the full year of fiscal 2015, the company expects annual revenue of $2.69 billion to $2.76 billion, or 6% to 8% growth over fiscal 2014.  The company also expects annual diluted earnings per share on a cash basis of $4.52 to $4.62, reflecting growth of 10% to 12% over fiscal 2014.  Annual fiscal 2015 GAAP diluted earnings per share is expected to be $3.76 to $3.86.

Additional Share Repurchase Authorization
Global Payments' board of directors also expanded its share repurchase authorization by an incremental $200 million, bringing its total current authorization to $320 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.

Conference Call
Global Payments will hold a conference call today, July 29, 2014, 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 on the Global Payments website through August 12, 2014.

About Global Payments
Global Payments Inc. is one of the largest worldwide providers of payment solutions for merchants, value added resellers, enterprise software providers, financial institutions, government agencies, multi-national corporations and independent sales organizations located throughout North America, South America, Europe and the Asia-Pacific region.  Global Payments, a Fortune 1000 company, offers a comprehensive line of solutions and services 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 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 Annual Report on Form 10-K for the fiscal year ended May 31, 2014, 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.

 

Investor contact:

investor.relations@globalpay.com

Media contact:

media.relations@globalpay.com

 

Jane Elliott

 

Amy Corn

 

770-829-8234

 

770-829-8755

 

 

[1] See Schedule 2 for Cash Earnings and Schedules 6 and 7 for Reconciliations of Cash Earnings to GAAP.

 

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,

   
   

2014

 

2013

 

% Change

 

2014

 

2013

 

% Change

                 

Revenues

 

$     673,977

 

$      618,352

 

9.0%

 

$  2,554,236

 

$   2,375,923

 

7.5%

Operating expenses:

                       

Cost of service

 

253,373

 

229,951

 

10.2%

 

952,225

 

862,075

 

10.5%

Sales, general and administrative

 

331,687

 

290,568

 

14.2%

 

1,203,512

 

1,119,860

 

7.5%

Processing system intrusion

 

-

 

28,464

 

NM

 

(7,000)

 

36,775

 

NM

   

585,060

 

548,983

 

6.6%

 

2,148,737

 

2,018,710

 

6.4%

                         

Operating income

 

88,917

 

69,369

 

28.2%

 

405,499

 

357,213

 

13.5%

Other income (expense):

                       

Interest and other income

 

2,093

 

3,647

 

(42.6%)

 

13,663

 

10,353

 

32.0%

Interest and other expense

 

(9,451)

 

(8,065)

 

17.2%

 

(41,812)

 

(33,282)

 

25.6%

   

(7,358)

 

(4,418)

 

66.5%

 

(28,149)

 

(22,929)

 

22.8%

                         

Income before income taxes 

 

81,559

 

64,951

 

25.6%

 

377,350

 

334,284

 

12.9%

Provision for income taxes

 

(23,293)

 

(18,585)

 

25.3%

 

(107,398)

 

(95,571)

 

12.4%

Net income

 

58,266

 

46,366

 

25.7%

 

269,952

 

238,713

 

13.1%

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

 

(6,641)

 

(5,561)

 

19.4%

 

(24,666)

 

(22,588)

 

9.2%

Net income attributable to Global Payments

 

$        51,625

 

$         40,805

 

26.5%

 

$     245,286

 

$      216,125

 

13.5%

                         
                         

Earnings per share attributable to Global Payments:

                       

    Basic

 

$            0.73

 

$             0.54

 

35.2%

 

$            3.40

 

$             2.78

 

22.3%

    Diluted

 

$            0.72

 

$             0.53

 

35.8%

 

$            3.37

 

$             2.76

 

22.1%

                         

Weighted average shares outstanding:

                       

    Basic

 

70,707

 

76,034

     

72,119

 

77,767

   

    Diluted

 

71,322

 

76,651

     

72,688

 

78,227

   
                         

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,

   
   

2014

 

2013

 

% Change

 

2014

 

2013

 

% Change

                         

Revenues

 

$       673,977

 

$     618,352

 

9.0%

 

$    2,554,236

 

$  2,375,923

 

7.5%

Operating expenses:

                       

Cost of service

 

234,856

 

214,080

 

9.7%

 

889,576

 

803,952

 

10.7%

Sales, general and administrative

 

317,085

 

285,017

 

11.3%

 

1,184,066

 

1,113,509

 

6.3%

   

551,941

 

499,097

 

10.6%

 

2,073,642

 

1,917,461

 

8.1%

                         
                         

Operating income

 

122,036

 

119,255

 

2.3%

 

480,594

 

458,462

 

4.8%

Other income (expense):

                       

Interest and other income

 

2,093

 

3,647

 

(42.6%)

 

11,540

 

10,353

 

11.5%

Interest and other expense

 

(8,110)

 

(8,065)

 

0.6%

 

(32,327)

 

(24,899)

 

29.8%

   

(6,017)

 

(4,418)

 

36.2%

 

(20,787)

 

(14,546)

 

42.9%

                         

Income before income taxes 

 

116,019

 

114,837

 

1.0%

 

459,807

 

443,916

 

3.6%

Provision for income taxes

 

(30,249)

 

(32,693)

 

(7.5%)

 

(130,181)

 

(126,294)

 

3.1%

Net income

 

85,770

 

82,144

 

4.4%

 

329,626

 

317,622

 

3.8%

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

 

(8,075)

 

(7,042)

 

14.7%

 

(30,295)

 

(32,206)

 

(5.9%)

Net income attributable to Global Payments

 

$         77,695

 

$       75,102

 

3.5%

 

$       299,331

 

$     285,416

 

4.9%

                         
                         

Earnings per share attributable to Global Payments:

                       

    Basic

 

$              1.10

 

$            0.99

 

11.1%

 

$              4.15

 

$            3.67

 

13.1%

    Diluted

 

$              1.09

 

$            0.98

 

11.2%

 

$              4.12

 

$            3.65

 

12.9%

                         

Weighted average shares outstanding:

                       

    Basic

 

70,707

 

76,034

     

72,119

 

77,767

   

    Diluted

 

71,322

 

76,651

     

72,688

 

78,227

   
                         

See Schedules 6 and 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, 

       
   

2014

 

2013

 

 % Change 

   

 GAAP 

 

 Cash Earnings 

 

 GAAP 

 

 Cash Earnings 

 

 GAAP 

 

 Cash Earnings 

                         

Revenues:

                       

United States

 

$     407,153

 

$     407,153

 

$     372,425

 

$     372,425

 

9.3%

 

9.3%

Canada

 

74,954

 

74,954

 

77,115

 

77,115

 

(2.8%)

 

(2.8%)

North America merchant services

 

482,107

 

482,107

 

449,540

 

449,540

 

7.2%

 

7.2%

                         

Europe

 

153,577

 

153,577

 

132,217

 

132,217

 

16.2%

 

16.2%

Asia-Pacific

 

38,293

 

38,293

 

36,595

 

36,595

 

4.6%

 

4.6%

International merchant services

 

191,870

 

191,870

 

168,812

 

168,812

 

13.7%

 

13.7%

                         

Total revenues

 

$     673,977

 

$     673,977

 

$     618,352

 

$     618,352

 

9.0%

 

9.0%

                         

Operating income (loss) for segments:

                       

North America merchant services

 

$       70,420

 

$       82,722

 

$       69,101

 

$       80,229

 

1.9%

 

3.1%

International merchant services

 

58,094

 

66,402

 

48,295

 

57,460

 

20.3%

 

15.6%

Corporate1

 

(39,597)

 

(27,088)

 

(48,027)

 

(18,434)

 

17.6%

 

(46.9%)

Operating income

 

$       88,917

 

$     122,036

 

$       69,369

 

$     119,255

 

28.2%

 

2.3%

                         
                         
   

 Year Ended May 31, 

       
   

2014

 

2013

 

 % Change 

   

 GAAP 

 

 Cash Earnings 

 

 GAAP 

 

 Cash Earnings 

 

 GAAP 

 

 Cash Earnings 

                         

Revenues:

                       

United States

 

$ 1,488,659

 

$ 1,488,659

 

$ 1,394,675

 

$ 1,394,675

 

6.7%

 

6.7%

Canada

 

320,333

 

320,333

 

311,000

 

311,000

 

3.0%

 

3.0%

North America merchant services

 

1,808,992

 

1,808,992

 

1,705,675

 

1,705,675

 

6.1%

 

6.1%

                         

Europe

 

587,463

 

587,463

 

522,593

 

522,593

 

12.4%

 

12.4%

Asia-Pacific

 

157,781

 

157,781

 

147,655

 

147,655

 

6.9%

 

6.9%

International merchant services

 

745,244

 

745,244

 

670,248

 

670,248

 

11.2%

 

11.2%

                         

Total revenues

 

$ 2,554,236

 

$ 2,554,236

 

$ 2,375,923

 

$ 2,375,923

 

7.5%

 

7.5%

                         

Operating income (loss) for segments:

                       

North America merchant services

 

$     272,251

 

$     308,570

 

$     258,910

 

$     288,162

 

5.2%

 

7.1%

International merchant services

 

240,179

 

270,551

 

211,242

 

245,279

 

13.7%

 

10.3%

Corporate1

 

(106,931)

 

(98,527)

 

(112,939)

 

(74,979)

 

5.3%

 

(31.4%)

Operating income

 

$     405,499

 

$     480,594

 

$     357,213

 

$     458,462

 

13.5%

 

4.8%

                         
                         
                         

1GAAP and cash earnings include incremental security spend for the three and twelve months ended May 31, 2014. GAAP earnings for the twelve months ended May 31, 2014 include insurance proceeds of ($7M) related to the FY 2012 data intrusion.  GAAP earnings for the three and twelve months ended May 31, 2013 include a data intrusion charge of $28.5 million and $36.8 million, respectively.

                         

See Schedule 8 for 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, 2014

 

May 31, 2013

         

Assets

       

Current assets:

       

Cash and cash equivalents

 

$       581,872

 

$       680,470

Accounts receivable, net of allowances for doubtful accounts of $401 and $509, respectively

 

214,574

 

189,435

Claims receivable, net

 

809

 

1,156

Settlement processing assets

 

780,917

 

259,204

Inventory

 

6,636

 

11,057

Deferred income taxes

 

12,963

 

6,485

Prepaid expenses and other current assets

 

45,673

 

66,685

Total current assets

 

1,643,444

 

1,214,492

         

Goodwill

 

1,337,285

 

1,044,222

Other intangible assets, net

 

535,173

 

400,848

Property and equipment, net

 

369,753

 

348,064

Deferred income taxes

 

101,928

 

95,178

Other

 

31,067

 

22,252

         

Total assets

 

$    4,018,650

 

$    3,125,056

         

Liabilities and Equity

       

Current liabilities:

       

Lines of credit

 

440,128

 

$       187,461

Current portion of long-term debt

 

17,677

 

72,335

Accounts payable and accrued liabilities

 

290,106

 

262,890

Settlement processing obligations

 

451,317

 

162,558

Income taxes payable

 

12,390

 

18,870

  Total current liabilities

 

1,211,618

 

704,114

         

Long-term debt

 

1,376,002

 

891,134

Deferred income taxes

 

209,099

 

170,723

Other long-term liabilities

 

89,132

 

72,478

Total liabilities

 

2,885,851

 

1,838,449

         

Commitment 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; 68,845,643 and 75,426,099

       

 issued and outstanding at May 31, 2014 and 2013, respectively

 

-

 

-

Paid-in capital

 

183,023

 

202,396

Retained earnings

 

815,980

 

958,751

Accumulated other comprehensive loss

 

(1,776)

 

(15,062)

      Total Global Payments shareholders' equity

 

997,227

 

1,146,085

Noncontrolling interests

 

135,572

 

140,522

Total equity

 

1,132,799

 

1,286,607

         

Total liabilities and equity

 

$    4,018,650

 

$    3,125,056

         

 

 

SCHEDULE 5

   

CONSOLIDATED STATEMENTS OF CASH FLOWS

   

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

   
     

 (In thousands)

 

 

   
         

Year Ended May 31,

         

2014

 

2013

               

Cash flows from operating activities:

       

Net income

 

$         269,952

 

$      238,713

Adjustments to reconcile net income to net cash provided by operating activities:

       
 

Depreciation and amortization of property and equipment

 

60,124

 

55,023

 

Amortization of acquired intangibles

 

61,945

 

56,765

 

Share-based compensation expense

 

29,793

 

18,427

 

Provision for operating losses and bad debts

 

20,574

 

21,659

 

Deferred income taxes

 

(1,799)

 

33,112

 

Other, net

 

(1,484)

 

(4,878)

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

       
 

Accounts receivable

 

(18,539)

 

(5,458)

 

Claims receivable

 

(11,569)

 

(11,858)

 

Settlement processing assets and obligations, net

 

(241,431)

 

(104,007)

 

Inventory

 

4,793

 

(1,187)

 

Prepaid expenses and other assets

 

18,995

 

(22,978)

 

Accounts payable and other accrued liabilities

 

9,224

 

(39,374)

 

Income taxes payable

 

(6,480)

 

6,587

   

Net cash provided by operating activities

 

194,098

 

240,546

               

Cash flows from investing activities:

       
 

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

 

(426,524)

 

(434,016)

 

Capital expenditures

 

(81,411)

 

(98,590)

 

Principal collections on financing receivables

 

2,658

 

2,812

 

Net proceeds from sale of investments and business

 

3,607

 

1,227

   

Net cash used in investing activities

 

(501,670)

 

(528,567)

               

Cash flows from financing activities:

       
 

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

 

252,667

 

(27,930)

 

Proceeds from issuance of long-term debt

 

2,690,000

 

1,135,327

 

Principal payments under long-term debt

 

(2,260,597)

 

(482,349)

 

Acquisition of redeemable noncontrolling interest

 

-

 

(242,000)

 

Payment of debt issuance costs

 

(5,961)

 

(3,987)

 

Repurchase of common stock

 

(447,307)

 

(175,297)

 

Proceeds from stock issued under share-based compensation plans

 

31,727

 

10,543

 

Common stock repurchased - share-based compensation plans

 

(5,681)

 

(10,244)

 

Tax benefit from share-based compensation plans

 

6,475

 

1,863

 

Distributions to noncontrolling interests

 

(36,670)

 

(16,206)

 

Dividends paid

 

(5,757)

 

(6,198)

     

Net cash provided by financing activities

 

218,896

 

183,522

               

Effect of exchange rate changes on cash

 

(9,922)

 

3,694

               

Decrease in cash and cash equivalents

 

(98,598)

 

(100,805)

Cash and cash equivalents, beginning of period

 

680,470

 

781,275

Cash and cash equivalents, end of period

 

$         581,872

 

$      680,470

 

 

 

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, 2014

   

GAAP

 

Processing System Intrusion 

 

Other1

 

Cash

Earnings

Adjustments2

 

Cash Earnings

                     

Revenues

 

$       673,977

 

$                    -

 

$                  -

 

$                  -

 

$       673,977

Operating expenses:

                   

   Cost of service

 

253,373

 

-

 

(125)

 

(18,392)

 

234,856

   Sales, general and administrative

 

331,687

 

-

 

(14,602)

 

-

 

317,085

   Processing system intrusion

 

-

 

-

 

-

 

-

 

-

   

585,060

 

-

 

(14,727)

 

(18,392)

 

551,941

                     

Operating income

 

88,917

 

-

 

14,727

 

18,392

 

122,036

Other income (expense):

                   

   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

 

-

 

16,068

 

18,392

 

116,019

Provision for income taxes

 

(23,293)

 

-

 

(1,237)

 

(5,719)

 

(30,249)

Net income

 

58,266

 

-

 

14,831

 

12,673

 

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

 

$                    -

 

$         14,831

 

$         11,239

 

$         77,695

                     

Diluted shares

 

71,322

             

71,322

Diluted earnings per share

 

$             0.72

 

$                    -

 

$             0.21

 

$             0.16

 

$             1.09

                     
                     
   

Three Months Ended May 31, 2013

   

GAAP

 

Processing System Intrusion

 

Other1

 

Cash Earnings Adjustments2

 

Cash Earnings

                     

Revenues

 

$       618,352

 

$                    -

 

$                  -

 

$                  -

 

$       618,352

Operating expenses:

                   

   Cost of service

 

229,951

 

-

 

(1,197)

 

(14,674)

 

214,080

   Sales, general and administrative

 

290,568

 

-

 

(5,551)

 

-

 

285,017

   Processing system intrusion

 

28,464

 

(28,464)

 

-

 

-

 

-

   

548,983

 

(28,464)

 

(6,748)

 

(14,674)

 

499,097

                     

Operating income

 

69,369

 

28,464

 

6,748

 

14,674

 

119,255

Other income (expense):

                   

   Interest and other income

 

3,647

 

-

 

-

 

-

 

3,647

   Interest and other expense

 

(8,065)

 

-

 

-

 

-

 

(8,065)

   

(4,418)

 

-

 

-

 

-

 

(4,418)

                     

Income before income taxes 

 

64,951

 

28,464

 

6,748

 

14,674

 

114,837

Provision for income taxes

 

(18,585)

 

(8,865)

 

(1,053)

 

(4,190)

 

(32,693)

Net income

 

46,366

 

19,599

 

5,695

 

10,484

 

82,144

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

 

(5,561)

 

-

 

-

 

(1,481)

 

(7,042)

Net income attributable to Global Payments

 

$         40,805

 

$           19,599

 

$           5,695

 

$           9,003

 

$         75,102

                     

Diluted shares

 

76,651

             

76,651

Diluted earnings per share

 

$             0.53

 

$               0.26

 

$             0.07

 

$             0.12

 

$             0.98

                     
                     
                     

1 For the period ended May 31, 2014, represents acceleration of equity awards and other costs associated with the retirement of our former Chairman and CEO, a nonrecurring 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 fixed assets and charges related to employee termination benefits.  For the prior period, represents one-time charges primarily related to employee termination benefits and certain contract settlement and related costs.

                     

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 May 31, 2014 and 2013 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 amounts related to the processing system intrusion, acquisition intangible amortization, acceleration of equity awards and other costs associated with the retirement of our former Chairman and CEO, a nonrecurring charge associated with our retained interest in Brazil, non-cash losses from the retirement of fixed assets, employee termination benefits and an adjustment to the costs associated with the debt refinancing.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 YEAR TO DATE CASH EARNINGS ATTRIBUTABLE TO GLOBAL PAYMENTS TO GAAP

       

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 

 

(In thousands, except per share data)

 

 

 

   
   

Year Ended May 31, 2014

   

GAAP

 

Processing
System Intrusion 1

 

Other2

 

Cash Earnings Adjustments3

 

Cash Earnings

                     

Revenues

 

$   2,554,236

 

$                       -

 

$                  -

 

$                  -

 

$   2,554,236

Operating expenses:

                   

   Cost of service

 

952,225

 

-

 

(704)

 

(61,945)

 

889,576

   Sales, general and administrative

 

1,203,512

 

-

 

(19,446)

 

-

 

1,184,066

   Processing system intrusion

 

(7,000)

 

7,000

 

-

 

-

 

-

   

2,148,737

 

7,000

 

(20,150)

 

(61,945)

 

2,073,642

                     

Operating income

 

405,499

 

(7,000)

 

20,150

 

61,945

 

480,594

Other income (expense):

                   

   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)

 

27,512

 

61,945

 

459,807

(Provision) benefit  for income taxes

 

(107,398)

 

2,393

 

(5,351)

 

(19,825)

 

(130,181)

Net income (loss)

 

269,952

 

(4,607)

 

22,161

 

42,120

 

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)

 

$         22,161

 

$         36,491

 

$       299,331

                     

Diluted shares

 

72,688

             

72,688

Diluted earnings (loss) per share

 

$             3.37

 

$                 (0.07)

 

$             0.31

 

$             0.51

 

$             4.12

                     
                     
   

Year Ended May 31, 2013

   

GAAP

 

Processing System Intrusion

 

Other2

 

Cash Earnings Adjustments3

 

Cash Earnings

                     

Revenues

 

$   2,375,923

 

$                       -

 

$                  -

 

$                  -

 

$   2,375,923

Operating expenses:

                   

   Cost of service

 

862,075

 

-

 

(1,358)

 

(56,765)

 

803,952

   Sales, general and administrative

 

1,119,860

 

-

 

(6,351)

 

-

 

1,113,509

   Processing system intrusion

 

36,775

 

(36,775)

 

-

 

-

 

-

   

2,018,710

 

(36,775)

 

(7,709)

 

(56,765)

 

1,917,461

                     

Operating income

 

357,213

 

36,775

 

7,709

 

56,765

 

458,462

Other income (expense):

                   

   Interest and other income

 

10,353

 

-

 

-

 

-

 

10,353

   Interest and other expense

 

(33,282)

 

-

 

8,383

 

-

 

(24,899)

   

(22,929)

 

-

 

8,383

 

-

 

(14,546)

                     

Income before income taxes 

 

334,284

 

36,775

 

16,092

 

56,765

 

443,916

Provision for income taxes

 

(95,571)

 

(11,913)

 

(2,586)

 

(16,224)

 

(126,294)

Net income

 

238,713

 

24,862

 

13,506

 

40,541

 

317,622

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

 

(22,588)

 

-

 

(3,594)

 

(6,024)

 

(32,206)

Net income attributable to Global Payments

 

$       216,125

 

$              24,862

 

$           9,912

 

$         34,517

 

$       285,416

                     

Diluted shares

 

78,227

             

78,227

Diluted earnings per share

 

$             2.76

 

$                   0.32

 

$             0.13

 

$             0.44

 

$             3.65

                     
                     

1Represents insurance proceeds associated with processing system intrusion charges incurred in FY 2012.

                     

2 For the year ended May 31, 2014, represents 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, cost associated with the debt refinancing we completed in February 2014, non-cash losses from the retirement of fixed assets, charges related to employee termination benefits and HSBC's share of dividends declared.  For the prior year, represents HSBC's share of GPAP dividends declared, one-time charges primarily related to employee termination benefits and certain contract settlement and related costs.

                     

3Represents 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 years ended May 31, 2014 and 2013 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 amounts related to the processing system intrusion, acquisition intangible amortization, acceleration of equity awards and other costs associated with the retirement of our former Chairman and CEO, a nonrecurring charge associated with our retained interest in Brazil, non-cash losses from the retirement of fixed assets, employee termination benefits and resolution of a contract related contingency and an adjustment to the costs associated with the debt refinancing.  In the twelve months ended May 2013, we also adjusted the net income attributable to noncontrolling interests to include HSBC's share of GPAP net income.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 8
RECONCILIATION OF CASH EARNINGS SEGMENT INFORMATION TO GAAP

                       

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

     

 (In thousands)

   
   

 Three Months Ended May 31,  

   

2014

 

2013

   

 GAAP 

 

Processing 
System
Intrusion 

 

Other2

 

Cash

Earnings Adjustments3

 

 Cash Earnings 

 

 GAAP 

 

Processing System Intrusion

 

Other2

 

Cash

Earnings Adjustments3

 

 Cash Earnings 

                                         

Revenues:

                                       

United States

 

$     407,153

 

$               -

 

$               -

 

$               -

 

$      407,153

 

$     372,425

 

$               -

 

$               -

 

$               -

 

$      372,425

Canada

 

74,954

 

-

 

-

 

-

 

74,954

 

77,115

 

-

 

-

 

-

 

77,115

  North America merchant services

 

482,107

 

-

 

-

 

-

 

482,107

 

449,540

 

-

 

-

 

-

 

449,540

                                         

Europe

 

153,577

 

-

 

-

 

-

 

153,577

 

132,217

 

-

 

-

 

-

 

132,217

Asia-Pacific

 

38,293

 

-

 

-

 

-

 

38,293

 

36,595

 

-

 

-

 

-

 

36,595

  International merchant services

 

191,870

 

-

 

-

 

-

 

191,870

 

168,812

 

-

 

-

 

-

 

168,812

                                         

     Total revenues

 

$     673,977

 

$               -

 

$               -

 

$               -

 

$      673,977

 

$     618,352

 

$               -

 

$               -

 

$               -

 

$      618,352

                                         

Operating income (loss) for segments:

                                       

North America merchant services

 

$       70,420

 

$               -

 

$        1,428

 

$      10,874

 

$        82,722

 

$       69,101

 

$               -

 

$        4,688

 

$        6,440

 

$        80,229

International merchant services

 

58,094

 

-

 

790

 

7,518

 

66,402

 

48,295

 

53

 

878

 

8,234

 

57,460

Corporate

 

(39,597)

 

-

 

12,509

 

-

 

(27,088)

 

(48,027)

 

28,411

 

1,182

 

-

 

(18,434)

     Operating income

 

$       88,917

 

$               -

 

$      14,727

 

$      18,392

 

$      122,036

 

$       69,369

 

$      28,464

 

$        6,748

 

$      14,674

 

$      119,255

                                         
                                         
   

 Year Ended May 31,  

   

2014

 

2013

   

 GAAP 

 

Processing

System

Intrusion1

 

Other2

 

Cash

Earnings Adjustments3

 

 Cash Earnings 

 

 GAAP 

 

Processing System Intrusion

 

Other2

 

Cash

Earnings Adjustments3

 

 Cash Earnings 

                                         

Revenues:

                                       

United States

 

$ 1,488,659

 

$               -

 

$               -

 

$               -

 

$   1,488,659

 

$  1,394,675

 

$               -

 

$               -

 

$               -

 

$   1,394,675

Canada

 

320,333

 

-

 

-

 

-

 

320,333

 

311,000

 

-

 

-

 

-

 

311,000

  North America merchant services

 

1,808,992

 

-

 

-

 

-

 

1,808,992

 

1,705,675

 

-

 

-

 

-

 

1,705,675

                                         

Europe

 

587,463

 

-

 

-

 

-

 

587,463

 

522,593

 

-

 

-

 

-

 

522,593

Asia-Pacific

 

157,781

 

-

 

-

 

-

 

157,781

 

147,655

 

-

 

-

 

-

 

147,655

  International merchant services

 

745,244

 

-

 

-

 

-

 

745,244

 

670,248

 

-

 

-

 

-

 

670,248

                                         

     Total revenues

 

$ 2,554,236

 

$               -

 

$               -

 

$               -

 

$   2,554,236

 

$  2,375,923

 

$               -

 

$               -

 

$               -

 

$   2,375,923

                                         

Operating income (loss) for segments:

                                       

North America merchant services

 

$     272,251

 

$               -

 

$        3,945

 

$      32,374

 

$      308,570

 

$     258,910

 

$               -

 

$        5,593

 

$      23,659

 

$      288,162

International merchant services

 

240,179

 

-

 

801

 

29,571

 

270,551

 

211,242

 

53

 

878

 

33,106

 

245,279

Corporate

 

(106,931)

 

(7,000)

 

15,404

 

-

 

(98,527)

 

(112,939)

 

36,722

 

1,238

 

-

 

(74,979)

     Operating income (loss)

 

$     405,499

 

$       (7,000)

 

$      20,150

 

$      61,945

 

$      480,594

 

$     357,213

 

$      36,775

 

$        7,709

 

$      56,765

 

$      458,462

                                         
                                         

1Represents insurance proceeds associated with processing system intrusion charges incurred in FY 2012.

                       
                                         

Represents acceleration of equity awards and other costs associated with the retirement of our former CEO and Chairman, non-cash losses from the retirement of fixed assets, and charges related to employee termination benefits and certain contract settlement and related costs.

                 
                                         

3Represents acquisition intangible amortization expense.

                                   
                                         

 

 

SCHEDULE 9

OUTLOOK SUMMARY

 

 

 

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 

(In billions, except per share data)

           
     

Fiscal 2014 Actual

 

Fiscal 2015

Outlook

 

% Change

FY14

               

Revenue Outlook

           

Total Revenues

 

$         2.55

 

$2.69 to $2.76

 

6% to 8%

               

EPS Outlook

           

Cash EPS 

 

$         4.12

 

$4.52 to $4.62

 

10% to 12%

Acquisition-related intangibles assets, non-recurring items and 

         

    processing system intrusion 1

 

(0.75)

 

(0.76)

 

1%

GAAP Diluted EPS 

 

$         3.37

 

 $3.76 to $3.86 

 

12% to 15%

               
               
               

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, 2014 and 2013 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 amounts related to the processing system intrusion, acquisition intangible amortization, acceleration of equity awards and other costs associated with the retirement of our former Chairman and CEO, a nonrecurring charge associated with our retained interest in Brazil, non-cash losses from the retirement of fixed assets, employee termination benefits and resolution of a contract related contingency and an adjustment to the costs associated with the debt refinancing.  In the twelve months ended May 2013, we also adjusted the net income attributable to noncontrolling interests to include HSBC's share of GPAP net income.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 2015 reflects $0.72 of acquisition-related intangibles amortization and $0.04 of one-time charges.  Fiscal 2014  reflects acquisition-related intangibles amortization of $0.51, processing-intrusion of ($0.07), and non-recurring items accounted for $0.31 relating to 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, cost associated with the debt refinancing we completed in February 2014, non-cash losses from the retirement of fixed assets, charges related to employee termination benefits and HSBC's share of dividends declared.

               

 

 

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SOURCE Global Payments Inc.

 

 

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