Global Payments Reports Fourth Quarter and Year-End Earnings

July 26, 2012
Global Payments Reports Fourth Quarter and Year-End Earnings

Data Intrusion Investigation Completed Signs Agreement to Acquire Remaining 44% Interest in Asia-Pacific Joint Venture Board Authorizes $150 Million Share Repurchase Program

ATLANTA, July 26, 2012 /PRNewswire/ -- Global Payments Inc. (NYSE: GPN) today announced results for its fiscal fourth quarter and year ended May 31, 2012. 

 

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

Chairman and CEO Paul R. Garcia said, "I am pleased that in a challenging year we delivered strong results with revenues of $2.2 billion or 18% growth, and cash earnings per share of $3.53 or 15% growth over prior year.  In addition, I am delighted to announce that we recently completed our data intrusion investigation, and we are focused on executing the remediation plan.

"We continue to drive strategies that will produce sustainable long-term growth, so I am pleased to announce that we have signed an agreement to acquire the remaining 44% interest in our merchant services joint venture in Asia-Pacific from HSBC.  Lastly, our Board of Directors has authorized a $150 million share repurchase program, which I believe demonstrates our confidence in the company," Garcia concluded.

Full-Year 2012 Summary

  • Revenues grew 18% to $2,203.8 million compared to $1,859.8 million in 2011.   
  • Cash diluted earnings per share1 from continuing operations grew 15% to $3.53 compared to $3.08 in the prior year.
  • GAAP fiscal 2012 full-year diluted earnings per share from continuing operations of $2.37, compared to $2.61 diluted earnings per share from continuing operations in the prior year.

Fourth Quarter 2012 Summary

  • Revenues grew 15% to $597.0 million compared to $519.8 million in the fourth quarter of 2011.
  • Cash diluted earnings per share1 from continuing operations grew 13% to $0.97 compared to $0.86 in the fourth quarter of 2011.  
  • GAAP diluted earnings per share from continuing operations were $0.06, compared to $0.72 in the fourth quarter of 2011.

Data Intrusion Investigation

With the completion of our data intrusion investigation, GAAP results for the fourth quarter and full-year 2012 include a pre-tax charge of $84.4 million or $0.68 diluted earnings per share.  This charge includes an estimate of charges from the card brands and investigation and remediation expenses.  A qualified security assessor is conducting the independent review required to return the company to the lists of PCI compliant service providers.  

Agreement to Acquire Remaining Interest in Asia-Pacific Joint Venture

In 2006, Global Payments and HSBC formed a joint venture, Global Payments Asia Pacific Limited, to provide payment processing services to merchants in Asia-Pacific, in which Global Payments' ownership was 56%.  Under the terms of the most recent agreement, Global Payments plans to acquire the remaining 44% ownership interest in this joint venture and will pay HSBC a total of USD$242 million. The company plans to use existing cash and lines of credit to complete the transaction and anticipates the deal will close during the second quarter of fiscal 2013.  Assuming an October 1, 2012 close date, the deal is anticipated to be as much as $0.07 accretive to GAAP and cash diluted earnings per share and is included in our fiscal 2013 outlook.

2013 Outlook

For the full-year of fiscal 2013, the company expects annual revenue of $2,360 million to $2,400 million, or 7% to 9% growth over fiscal 2012.  The company expects annual fiscal 2013 diluted earnings per share on a cash basis of $3.59 to $3.66, and includes a benefit of as much as $0.07 related to the Asia-Pacific acquisition. This reflects growth of 2% to 4% over fiscal 2012.  On a constant currency basis, the company expects revenue to grow 8% to 10% and diluted earnings per share on a cash basis to grow 4% to 6%.  Annual fiscal 2013 GAAP diluted earnings per share is expected to be $3.22 to $3.29.  These expectations exclude the impact of any potential share repurchases.

David Mangum, Senior Executive Vice President and CFO, stated, "We completed fiscal 2012 with flexibility in our capital structure.  As we go forward, our primary priority for capital deployment will continue to be organic growth and acquisitions as demonstrated by our purchase of the remaining 44% of our Asia-Pacific joint venture, complemented by share repurchases."

Share Repurchase Authorization

The Board of Directors approved a new $150 million share repurchase authorization of Global Payments' stock.  Under this new program, 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.

Investor Day

Global Payments plans to host an Investor Day in New York City on October 11, 2012, at the New York Stock Exchange.  The company will webcast the Investor Day presentation live from the investor relations page of the company's website at http://www.globalpaymentsinc.com/.  Additional details about the meeting will be available in the coming weeks. 

Conference Call

Global Payments will hold a conference call today, July 26, 2012 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 http://www.globalpaymentsinc.com/ by clicking the "Webcast" button; or callers in North America may dial 1-888-895-3550 and callers outside North America may dial 1-706-758-8809.  The pass code is "GPN."  A replay of the call may be accessed through the Global Payments website through August 9, 2012.   

About Global Payments

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

This announcement and comments made by Global Payments' management during the conference call may contain certain forward-looking statements within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995.  Statements that are not historical facts, including revenue and earnings estimates and management's expectations regarding future events and developments, are forward-looking statements and are subject to significant risks and uncertainties.  Important factors that may cause actual events or results to differ materially from those anticipated by such forward-looking statements include the following: the effect on our results of operations of the remediation efforts resulting from the unauthorized access to our processing system announced in March 2012, and the impact on our results of operations; foreign currency risks which become increasingly relevant as we expand internationally, the effect of current worldwide economic conditions, including sovereign insolvency situations and a decline in the value of the U.S. dollar, developments in the implementation of debit interchange legislation, and future performance and integration of recent acquisitions, and other risks detailed in the company's SEC filings, including the most recently filed Form 10-Q or Form 10-K, as applicable.  The company undertakes no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.

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

 

Investor contacts:
Jane M. Elliott
770-829-8234

Kay Sharpton
770-829-8870
investor.relations@globalpay.com

 

Media contact:
Amy Corn
770-829-8755
media.relations@globalpay.com

 

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,

   
       

2012

 

2011

 

% Change

 

2012

 

2011

 

% Change

       

(unaudited)

               
                             

Revenues

     

$        597,032

 

$         519,754

 

15%

 

$      2,203,847

 

$    1,859,802

 

18%

                             

Operating expenses:

                       

     Cost of service

   

213,071

 

191,440

 

11%

 

784,756

 

665,017

 

18%

     Sales, general and administrative

 

289,712

 

240,171

 

21%

 

1,027,304

 

863,191

 

19%

     Processing system intrusion

 

84,438

 

-

 

NM

 

84,438

 

-

 

NM

       

587,221

 

431,611

 

36%

 

1,896,498

 

1,528,208

 

24%

                             

Operating income

   

9,811

 

88,143

 

(89%)

 

307,349

 

331,594

 

(7%)

                             

Other income (expense):

                       

     Interest and other income

 

2,818

 

3,534

 

(20%)

 

9,946

 

10,774

 

(8%)

     Interest and other expense

 

(4,185)

 

(4,706)

 

(11%)

 

(16,848)

 

(18,161)

 

(7%)

       

(1,367)

 

(1,172)

 

17%

 

(6,902)

 

(7,387)

 

(7%)

                             

Income from continuing operations before income taxes 

 

8,444

 

86,971

 

(90%)

 

300,447

 

324,207

 

(7%)

Benefit (provision) for income taxes

 

3,202

 

(24,587)

 

NM

 

(82,881)

 

(95,076)

 

(13%)

Income from continuing operations

 

11,646

 

62,384

 

(81%)

 

217,566

 

229,131

 

(5%)

Loss from discontinued operations, net of tax

 

-

 

(29)

 

NM

 

-

 

(975)

 

NM

Net income

   

11,646

 

62,355

 

(81%)

 

217,566

 

228,156

 

(5%)

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

 

(6,560)

 

(3,779)

 

74%

 

(29,405)

 

(18,918)

 

55%

          Net income attributable to Global Payments

 

$            5,086

 

$           58,576

 

(91%)

 

$         188,161

 

$       209,238

 

(10%)

                             

Amounts attributable to Global Payments:

                       

    Income from continuing operations

 

$            5,086

 

$           58,605

 

(91%)

 

$         188,161

 

$       210,213

 

(10%)

    Loss from discontinued operations, net of tax

 

-

 

(29)

 

NM

 

-

 

(975)

 

NM

          Net income attributable to Global Payments

 

$            5,086

 

$           58,576

 

(91%)

 

$         188,161

 

$       209,238

 

(10%)

                             
                             

Basic earnings per share attributable to Global Payments:

                       

    Income from continuing operations

 

$              0.06

 

$               0.73

 

(92%)

 

$               2.39

 

$             2.63

 

(9%)

    Loss from discontinued operations, net of tax

 

-

 

-

 

NM

 

-

 

(0.01)

 

NM

          Net income attributable to Global Payments

 

$              0.06

 

$               0.73

 

(92%)

 

$               2.39

 

$             2.62

 

(9%)

                             

Diluted earnings per share attributable to Global Payments:

                       

    Income from continuing operations

 

$              0.06

 

$               0.72

 

(92%)

 

$               2.37

 

$             2.61

 

(9%)

    Loss from discontinued operations, net of tax

 

-

 

-

 

NM

 

-

 

(0.01)

 

NM

          Net income attributable to Global Payments

 

$              0.06

 

$               0.72

 

(92%)

 

$               2.37

 

$             2.60

 

(9%)

                             

Weighted average shares outstanding:

                       

          Basic

   

78,539

 

80,222

     

78,829

 

79,837

   

          Diluted

   

79,192

 

81,045

     

79,431

 

80,478

   
                             
                             

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,

   
       

2012

 

2011

 

% Change

 

2012

 

2011

 

% Change

                             

Revenues

     

$         597,032

 

$       519,754

 

15%

 

$      2,203,847

 

$    1,859,802

 

18%

                             

Operating expenses:

                       

     Cost of service

   

200,051

 

175,897

 

14%

 

734,060

 

619,927

 

18%

     Sales, general and administrative

 

274,390

 

237,087

 

16%

 

1,011,982

 

851,428

 

19%

       

474,441

 

412,984

 

15%

 

1,746,042

 

1,471,355

 

19%

                             

Operating income

   

122,591

 

106,770

 

15%

 

457,805

 

388,447

 

18%

                             

Other income (expense):

                       

     Interest and other income

 

2,818

 

3,534

 

(20%)

 

9,946

 

10,774

 

(8%)

     Interest and other expense

 

(4,185)

 

(4,706)

 

(11%)

 

(16,848)

 

(18,161)

 

(7%)

       

(1,367)

 

(1,172)

 

17%

 

(6,902)

 

(7,387)

 

(7%)

                             

Income from continuing operations before income taxes 

 

121,224

 

105,598

 

15%

 

450,903

 

381,060

 

18%

Provision for income taxes

 

(36,318)

 

(29,432)

 

23%

 

(133,481)

 

(109,459)

 

22%

Income from continuing operations 

 

84,906

 

76,166

 

11%

 

317,422

 

271,601

 

17%

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

 

(8,437)

 

(6,315)

 

34%

 

(37,193)

 

(23,876)

 

56%

Net income from continuing operations attributable to Global Payments

 

$           76,469

 

$         69,851

 

9%

 

$         280,229

 

$       247,725

 

13%

                             
                             

Basic earnings per share

 

$               0.97

 

$             0.87

 

11%

 

$               3.55

 

$             3.10

 

15%

                             

Diluted earnings per share

 

$               0.97

 

$             0.86

 

13%

 

$               3.53

 

$             3.08

 

15%

                             

Weighted average shares outstanding:

                       

          Basic

   

78,539

 

80,222

     

78,829

 

79,837

   

          Diluted

   

79,192

 

81,045

     

79,431

 

80,478

   
                             
                             

NM - Not Meaningful

                       
                             

See Schedules 6 and 7 for a reconciliation of cash earnings from continuing operations to GAAP.

           
                             
 

 

SCHEDULE 3

                         

SEGMENT INFORMATION 

                       

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

                   
                                     

(In thousands)

                         
                                     
               

 Three Months Ended May 31, 

       
               

2012

 

2011

 

 % Change 

               

 GAAP 

 

 Cash Earnings 

 

 GAAP 

 

 Cash Earnings 

 

 GAAP 

 

 Cash Earnings 

                                     
 

Revenues:

                         
 

United States

   

$    351,872

 

$    351,872

 

$    281,500

 

$    281,500

 

25%

 

25%

 

Canada

   

79,015

 

79,015

 

87,140

 

87,140

 

(9%)

 

(9%)

   

North America merchant services

 

430,887

 

430,887

 

368,640

 

368,640

 

17%

 

17%

                                     
 

Europe

   

128,521

 

128,521

 

115,359

 

115,359

 

11%

 

11%

 

Asia-Pacific

   

37,624

 

37,624

 

35,755

 

35,755

 

5%

 

5%

   

International merchant services

 

166,145

 

166,145

 

151,114

 

151,114

 

10%

 

10%

                                     
     

Total revenues

 

$    597,032

 

$    597,032

 

$    519,754

 

$    519,754

 

15%

 

15%

                                     
 

Operating income:

                         
 

North America merchant services

 

$      76,412

 

$      81,194

 

$      69,816

 

$      73,085

 

9%

 

11%

 

International merchant services

 

48,074

 

61,664

 

41,632

 

52,569

 

15%

 

17%

 

Corporate1

   

(114,675)

 

(20,267)

 

(23,305)

 

(18,884)

 

(392%)

 

(7%)

     

Operating income

 

$        9,811

 

$    122,591

 

$      88,143

 

$    106,770

 

(89%)

 

15%

                                     
                                     
               

 Year Ended May 31, 

       
               

2012

 

2011

 

 % Change 

               

 GAAP 

 

 Cash Earnings 

 

 GAAP 

 

 Cash Earnings 

 

 GAAP 

 

 Cash Earnings 

                                     
 

Revenues:

                         
 

United States

   

$ 1,234,818

 

$ 1,234,818

 

$ 1,031,997

 

$ 1,031,997

 

20%

 

20%

 

Canada

   

332,434

 

332,434

 

330,872

 

330,872

 

0%

 

0%

   

North America merchant services

 

1,567,252

 

1,567,252

 

1,362,869

 

1,362,869

 

15%

 

15%

                                     
 

Europe

   

489,300

 

489,300

 

359,567

 

359,567

 

36%

 

36%

 

Asia-Pacific

   

147,295

 

147,295

 

137,366

 

137,366

 

7%

 

7%

   

International merchant services

 

636,595

 

636,595

 

496,933

 

496,933

 

28%

 

28%

                                     
     

Total revenues

 

$ 2,203,847

 

$ 2,203,847

 

$ 1,859,802

 

$ 1,859,802

 

18%

 

18%

                                     
 

Operating income:

                         
 

North America merchant services

 

$    281,305

 

$    295,003

 

$    268,233

 

$    280,880

 

5%

 

5%

 

International merchant services

 

196,137

 

238,487

 

143,911

 

172,956

 

36%

 

38%

 

Corporate1

   

(170,093)

 

(75,685)

 

(80,550)

 

(65,389)

 

(111%)

 

(16%)

     

Operating income

 

$    307,349

 

$    457,805

 

$    331,594

 

$    388,447

 

(7%)

 

18%

                                     

1Fiscal 2012 GAAP amounts include processing system intrusion costs of $84.4 million

           
                                     

See Schedule 8 for reconciliation of cash earnings segment information to GAAP. 

                                     

 

 

SCHEDULE 4

       

CONSOLIDATED BALANCE SHEETS

     

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

     
             

(In thousands)

         
             
       

May 31,

 

May 31,

       

2012

 

2011

             

ASSETS

         

Current assets:

         

Cash and cash equivalents

 

$         781,275

 

$    1,354,285

Accounts receivable, net of allowances for doubtful accounts of $532 and $472, respectively

182,962

 

166,540

Claims receivable, net of allowance for losses of $3,435 and $3,870, respectively

1,029

 

914

Settlement processing assets

 

217,994

 

280,359

Inventory

   

9,864

 

7,640

Deferred income taxes

 

21,969

 

2,946

Prepaid expenses and other current assets

33,646

 

35,291

Total current assets

 

1,248,739

 

1,847,975

             

Goodwill

   

724,687

 

779,637

Other intangible assets, net of accumulated amortization of $233,215 and $197,066, respectively

290,188

 

341,500

Property and equipment, net of accumulated depreciation of $161,911 and $147,670, respectively

305,848

 

256,301

Deferred income taxes

 

97,235

 

104,140

Other

     

21,446

 

20,978

             

Total assets

 

$      2,688,143

 

$    3,350,531

             

LIABILITIES AND EQUITY

     

Current liabilities:

         

Lines of credit

   

$         215,391

 

$       270,745

Current portion of long-term debt

76,420

 

85,802

Accounts payable and accrued liabilities

316,313

 

241,578

Settlement processing obligations

216,878

 

838,565

Income taxes payable

 

12,283

 

7,674

  Total current liabilities

 

837,285

 

1,444,364

             

Long-term debt

   

236,565

 

268,217

Deferred income taxes

 

106,644

 

116,432

Other long-term liabilities

 

62,306

 

49,843

Total liabilities

 

1,242,800

 

1,878,856

             

Commitments and contingencies

     
             

Redeemable noncontrolling interest

144,422

 

133,858

             

Equity:

           

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

-

 

-

Common stock, no par value; 200,000,000 shares authorized; 78,551,297 and

     

 80,334,781 issued and outstanding at May 31, 2012 and 2011, respectively.

     

Paid-in capital

   

358,728

 

419,591

Retained earnings

 

843,456

 

685,624

Accumulated other comprehensive (loss) income 

(30,000)

 

79,320

      Total Global Payments shareholders' equity

1,172,184

 

1,184,535

Noncontrolling interest

 

128,737

 

153,282

Total equity

   

1,300,921

 

1,337,817

             

Total liabilities and equity

$      2,688,143

 

$    3,350,531

             

 

 

SCHEDULE 5

       

CONSOLIDATED STATEMENTS OF CASH FLOWS

       

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

       
                 

(In thousands)

         
                 
           

Year Ended May 31,

           

2012

 

2011

                 

Cash flows from operating activities:

       
 

Net income

   

$             217,566

 

$                228,156

 

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

       
   

Depreciation and amortization of property and equipment

 

48,403

 

40,545

   

Amortization of acquired intangibles

 

50,696

 

41,692

   

Provision for operating losses and bad debts

 

22,417

 

20,577

   

Share-based compensation expense

 

16,391

 

15,885

   

Deferred income taxes

 

(19,498)

 

19,154

   

Loss on disposal of discontinued operations, non-cash

 

-

 

602

   

Other, net

 

(2,775)

 

(3,576)

 

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

       
   

Accounts receivable

 

(16,422)

 

(34,723)

   

Claims receivable

 

(13,519)

 

(14,425)

   

Settlement processing assets and obligations, net

 

(568,335)

 

299,895

   

Inventory

 

(2,394)

 

1,979

   

Prepaid expenses and other assets

 

3,511

 

3,537

   

Accounts payable and other accrued liabilities

 

85,875

 

89,230

   

Income taxes payable

 

4,609

 

1,244

     

Net cash (used in) provided by operating activities

 

(173,475)

 

709,772

                 

Cash flows from investing activities:

       
 

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

 

(44,274)

 

(167,968)

 

Capital expenditures

 

(109,876)

 

(98,537)

 

Disposition of business, net of cash

 

-

 

(2,577)

 

Net decrease in financing receivables

 

2,565

 

2,062

 

Proceeds from sale of investment and contractual rights

 

1,152

 

-

     

Net cash used in investing activities

 

(150,433)

 

(267,020)

                 

Cash flows from financing activities:

       
 

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

 

(55,354)

 

191,558

 

Proceeds from issuance of long-term debt

 

146,374

 

205,298

 

Principal payments under long-term debt

 

(184,235)

 

(280,198)

 

Proceeds from stock issued under employee stock plans

 

11,446

 

18,364

 

Common stock repurchased - share-based compensation plans

 

(4,861)

 

-

 

Tax benefit from employee share-based compensation 

 

1,441

 

9,141

 

Repurchase of common stock

 

(99,604)

 

(14,900)

 

Distribution to noncontrolling interests

 

(27,082)

 

(8,752)

 

Dividends paid

 

(6,311)

 

(6,388)

     

Net cash (used in) provided by financing activities

 

(218,186)

 

114,123

                 

Effect of exchange rate changes on cash

 

(30,916)

 

27,464

                 

(Decrease) increase in cash and cash equivalents

 

(573,010)

 

584,339

Cash and cash equivalents, beginning of period

 

1,354,285

 

769,946

Cash and cash equivalents, end of period

 

$             781,275

 

$             1,354,285

                 

 

 

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, 2012

   

GAAP

Processing System Intrusion

Other2

Cash Earnings Adjustments1

Cash Earnings

             

Revenues

 

$           597,032

$                -

$                  -

$                   -

$          597,032

             

Operating expenses:

           

   Cost of service

 

213,071

-

-

(13,020)

200,051

   Sales, general and administrative

 

289,712

-

(15,322)

-

274,390

   Processing system intrusion

 

84,438

(84,438)

-

-

-

   

587,221

(84,438)

(15,322)

(13,020)

474,441

             

Operating income

 

9,811

84,438

15,322

13,020

122,591

             

Other income (expense):

           

   Interest and other income

 

2,818

-

-

-

2,818

   Interest and other expense

 

(4,185)

-

-

-

(4,185)

   

(1,367)

-

-

-

(1,367)

             

Income from continuing operations before income taxes 

 

8,444

84,438

15,322

13,020

121,224

Benefit (provision) for income taxes

 

3,202

(30,666)

(5,034)

(3,820)

(36,318)

Income from continuing operations

 

11,646

53,772

10,288

9,200

84,906

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

 

(6,560)

-

-

(1,877)

(8,437)

Net income from continuing operations attributable to Global Payments

 

$               5,086

$        53,772

$           10,288

$             7,323

$            76,469

             

Diluted shares

 

79,192

     

79,192

Diluted earnings per share

 

$                 0.06

$            0.68

$               0.13

$               0.10

$                0.97

             
             
   

Three Months Ended May 31, 2011

   

GAAP

Employee Termination and Other3

Foreign Tax Rate

Cash Earnings Adjustments1

Cash Earnings

             

Revenues

 

$           519,754

$                -

$                  -

$                   -

$          519,754

             

Operating expenses:

           

   Cost of service

 

191,440

(1,337)

-

(14,206)

175,897

   Sales, general and administrative

 

240,171

(3,084)

-

-

237,087

   

431,611

(4,421)

-

(14,206)

412,984

             

Operating income

 

88,143

4,421

-

14,206

106,770

             

Other income (expense):

           

   Interest and other income

 

3,534

-

-

-

3,534

   Interest and other expense

 

(4,706)

-

-

-

(4,706)

   

(1,172)

-

-

-

(1,172)

             

Income from continuing operations before income taxes 

 

86,971

4,421

-

14,206

105,598

Provision for income taxes

 

(24,587)

(1,475)

 

(3,370)

(29,432)

Income from continuing operations

 

62,384

2,946

-

10,836

76,166

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

 

(3,779)

-

-

(2,536)

(6,315)

Net income from continuing operations attributable to Global Payments

 

$             58,605

$          2,946

$                  -

$             8,300

$            69,851

             

Diluted shares

 

81,045

     

81,045

Diluted earnings per share

 

$                 0.72

$            0.04

$                  -

$               0.10

$                0.86

             
             

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

             

2Represents one-time charges primarily related to employee termination benefits and two contractual disputes.

             

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

             

We supplemented our reporting of income from continuing operations and the related earnings per share information determined in accordance with GAAP by reporting income from continuing operations and the related earnings per share for the three months ended May 31, 2012 and 2011 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated May 31, 2012 income from continuing operations and earnings per share on a cash basis by excluding costs related to the processing system intrusion, acquisition intangible amortization and one-time charges related to employee termination benefits, two contractual disputes and other immaterial items from our results. We calculated May 31, 2011 income from continuing operations and earnings per share on a cash basis by excluding charges related to employee termination and relocation benefits, certain one-time costs related to our Global Service Center, and acquisition intangible amortization from our results. We exclude these charges in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations. Our income from continuing operations and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, income from continuing operations and earnings per share determined in accordance with GAAP. Our measures of income from continuing operations and earnings per share on a cash earnings basis reflect management's judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.

 

 

SCHEDULE 7

           

RECONCILIATION OF 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, 2012

   

GAAP

Processing System Intrusion

Other2

Cash Earnings Adjustments1

Cash Earnings

             

Revenues

 

$        2,203,847

$                  -

$                  -

$                   -

$       2,203,847

             

Operating expenses:

           

   Cost of service

 

784,756

-

-

(50,696)

734,060

   Sales, general and administrative

 

1,027,304

-

(15,322)

-

1,011,982

   Processing system intrusion

 

84,438

(84,438)

-

-

-

   

1,896,498

(84,438)

(15,322)

(50,696)

1,746,042

             

Operating income

 

307,349

84,438

15,322

50,696

457,805

             

Other income (expense):

           

   Interest and other income

 

9,946

-

-

-

9,946

   Interest and other expense

 

(16,848)

-

-

-

(16,848)

   

(6,902)

-

-

-

(6,902)

             

Income from continuing operations before income taxes 

 

300,447

84,438

15,322

50,696

450,903

Provision for income taxes

 

(82,881)

(30,666)

(5,034)

(14,900)

(133,481)

Income from continuing operations

 

217,566

53,772

10,288

35,796

317,422

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

 

(29,405)

-

 

(7,788)

(37,193)

Net income from continuing operations attributable to Global Payments

 

$           188,161

$          53,772

$           10,288

$           28,008

$          280,229

             

Diluted shares

 

79,431

     

79,431

Diluted earnings per share

 

$                 2.37

$              0.68

$               0.13

$               0.35

$                3.53

             
             
   

Year Ended May 31, 2011

   

GAAP

Employee Termination and Other3

Foreign Tax Rate4

Cash Earnings Adjustments1

Cash Earnings

             

Revenues

 

$        1,859,802

$                  -

$                  -

$                   -

$       1,859,802

             

Operating expenses:

           

   Cost of service

 

665,017

(3,398)

-

(41,692)

619,927

   Sales, general and administrative

 

863,191

(11,763)

-

-

851,428

   

1,528,208

(15,161)

-

(41,692)

1,471,355

             

Operating income

 

331,594

15,161

-

41,692

388,447

             

Other income (expense):

           

   Interest and other income

 

10,774

-

-

-

10,774

   Interest and other expense

 

(18,161)

-

-

-

(18,161)

   

(7,387)

-

-

-

(7,387)

             

Income from continuing operations before income taxes 

 

324,207

15,161

-

41,692

381,060

Provision for income taxes

 

(95,076)

(4,949)

2,479

(11,913)

(109,459)

Income from continuing operations

 

229,131

10,212

2,479

29,779

271,601

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

 

(18,918)

-

-

(4,958)

(23,876)

Net income from continuing operations attributable to Global Payments

 

$           210,213

$          10,212

$             2,479

$           24,821

$          247,725

             

Diluted shares

 

80,478

     

80,478

Diluted earnings per share

 

$                 2.61

$              0.13

$               0.03

$               0.31

$                3.08

             
             

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

             

2Represents one-time charges primarily related to employee termination benefits and two contractual disputes.

             

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

             

4Represents a one-time, non-cash write-down of a deferred tax asset we established in July 2009 when we purchased the remaining 49% of our UK business.  The write-down resulted from a legislated reduction to the tax rate of 1%.  

             

We supplemented our reporting of income from continuing operations and the related earnings per share information determined in accordance with GAAP by reporting income from continuing operations and the related earnings per share for the years ended May 31, 2012 and 2011 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated May 31, 2012 income from continuing operations and earnings per share on a cash basis by excluding costs related to the processing system intrusion, acquisition intangible amortization and one-time charges related to employee termination benefits, two contractual disputes and other immaterial items from our results.  We calculated May 31, 2011 income from continuing operations and earnings per share on a cash basis by excluding charges related to employee termination and relocation benefits, certain one-time costs related to our Global Service Center, the legislated tax rate reduction and acquisition intangible amortization from our results. We exclude these charges in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations. Our income from continuing operations and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, income from continuing operations and earnings per share determined in accordance with GAAP. Our measures of income from continuing operations and earnings per share on a cash earnings basis reflect management's judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.

 

 

SCHEDULE 8

                       

RECONCILIATION OF CASH EARNINGS SEGMENT INFORMATION TO GAAP

           

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

                 
                                   

(In thousands)

                       
                                   
               

 Three Months Ended May 31, 

               

2012

 

2011

               

 GAAP 

Processing System Intrusion

Other2

Cash Earnings Adjustments1

 Cash Earnings 

 

 GAAP 

Employee Termination and Other3

Cash Earnings Adjustments1

 Cash Earnings 

                                   
 

Revenues:

                       
 

United States

   

$      351,872

$                -

$                -

$                       -

$      351,872

 

$      281,500

$               -

$                       -

$      281,500

 

Canada

   

79,015

-

-

-

79,015

 

87,140

-

-

87,140

   

North America merchant services

 

430,887

-

-

-

430,887

 

368,640

-

-

368,640

                                   
 

Europe

   

128,521

-

-

-

128,521

 

115,359

-

-

115,359

 

Asia-Pacific

   

37,624

-

-

-

37,624

 

35,755

-

-

35,755

   

International merchant services

 

166,145

-

-

-

166,145

 

151,114

-

-

151,114

                                   
     

Total revenues

 

$      597,032

$                -

$                -

$                       -

$      597,032

 

$      519,754

$               -

$                       -

$      519,754

                                   
 

Operating income:

                       
 

North America merchant services

 

$        76,412

$                -

$          1,538

$                 3,244

$        81,194

 

$        69,816

$               -

$                 3,269

$        73,085

 

International merchant services

 

48,074

-

3,814

9,776

61,664

 

41,632

-

10,937

52,569

 

Corporate

   

(114,675)

84,438

9,970

-

(20,267)

 

(23,305)

4,421

-

(18,884)

   

Operating income

 

$          9,811

$        84,438

$        15,322

$               13,020

$      122,591

 

$        88,143

$         4,421

$               14,206

$      106,770

                                   
                                   
               

 Year Ended May 31, 

               

2012

 

2011

               

 GAAP 

Processing System Intrusion

Other2

Cash Earnings Adjustments1

 Cash Earnings 

 

 GAAP 

Employee Termination and Other3

Cash Earnings Adjustments1

 Cash Earnings 

                                   
 

Revenues:

                       
 

United States

   

$   1,234,818

$                -

$                -

$                       -

$   1,234,818

 

$   1,031,997

$               -

$                       -

$   1,031,997

 

Canada

   

332,434

-

-

-

332,434

 

330,872

-

-

330,872

   

North America merchant services

 

1,567,252

-

-

-

1,567,252

 

1,362,869

-

-

1,362,869

                                   
 

Europe

   

489,300

-

-

-

489,300

 

359,567

-

-

359,567

 

Asia-Pacific

   

147,295

-

-

-

147,295

 

137,366

-

-

137,366

   

International merchant services

 

636,595

-

-

-

636,595

 

496,933

-

-

496,933

                                   
     

Total revenues

 

$   2,203,847

$                -

$                -

$                       -

$   2,203,847

 

$   1,859,802

$               -

$                       -

$   1,859,802

                                   
 

Operating income:

                       
 

North America merchant services

 

$      281,305

$                -

$          1,538

$               12,160

$      295,003

 

$      268,233

$               -

$               12,647

$      280,880

 

International merchant services

 

196,137

-

3,814

38,536

238,487

 

143,911

-

29,045

172,956

 

Corporate

   

(170,093)

84,438

9,970

-

(75,685)

 

(80,550)

15,161

-

(65,389)

   

Operating income

 

$      307,349

$        84,438

$        15,322

$               50,696

$      457,805

 

$      331,594

$       15,161

$               41,692

$      388,447

                                   
                                   

1 Represents acquisition intangible amortization expense.

         
                                   

2 Represents one-time charges primarily related to employee termination benefits and two contractual disputes.

                                   

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

 

 

SCHEDULE 9

               

OUTLOOK SUMMARY

             

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

           
                           

(In millions, except per share data)

             
                           
               

Fiscal 2012 Actual

   

Fiscal 2013 Outlook

 

% Change FY12

                           
 

Revenue Outlook

               
 

Constant currency1

   

$       2,204

   

$2,385 to $2,425

 

8% to 10%

 

Foreign currency impact2

 

 NA 

   

($25)

   
 

Total Revenues

   

$       2,204

   

$2,360 to $2,400

 

7% to 9%

                           
 

EPS Outlook

               
 

Constant currency1

   

$         3.53

   

 $3.67 to $3.74 

 

4% to 6%

 

Foreign currency impact2

   

 NA 

   

($0.08)

   
 

Cash EPS 

   

$         3.53

   

 $3.59 to $3.66 

 

2% to 4%

 

Acquisition-related intangibles and non-recurring items 3

 

(0.48)

   

($0.37)