Global Payments Reports Second Quarter Earnings

January 5, 2012
Global Payments Reports Second Quarter EarningsATLANTA, Jan. 5, 2012 /PRNewswire/ -- Global Payments Inc. (NYSE: GPN) today announced results for its fiscal second quarter ended November 30, 2011.  For the second quarter, revenues grew 20% to $530.5 million compared to $443.5 million in the prior fiscal year.  Cash earnings per share grew 13% to $0.86 compared to $0.76 in the prior year (See Schedule 2 for Cash Earnings).  On a GAAP basis, the company reported fiscal 2012 second quarter diluted earnings per share of $0.78 compared to $0.67 in the prior year (See Schedule 1 for GAAP Consolidated Statements of Income).

 

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

GAAP and cash earnings per share results include approximately $15 million of revenue and nearly $0.02 of earnings per share related to debit interchange legislation with corresponding unfavorable impact on operating margin.

Chairman and CEO Paul R. Garcia stated, "We delivered solid second quarter results driven by continued steady performances in all of our businesses and the December 2010 addition of Spain.  I am also pleased to announce three targeted merchant portfolio acquisitions which will expand our international footprint and U.S. ecommerce presence.  First, we increased our distribution in Russia by acquiring a merchant business with more than 6,000 merchants from Alfa-Bank.  Secondly, we have agreed to acquire HSBC's merchant business in Malta consisting of nearly 4,000 merchants, which is pending regulatory approval, and thirdly we have signed an agreement to acquire CyberSource's U.S. merchant acquiring portfolio from Visa.  

"I am pleased to note that we continue to expect overall total company cash margin expansion of as much as 50 basis points in fiscal 2012 excluding the effect of recent debit legislation and the acquisitions," continued Mr. Garcia.  

David E. Mangum, Senior Executive Vice President and CFO, stated, "Including the effect of the debit legislation as well as the three recent acquisitions, we are increasing our annual revenue expectations for fiscal 2012 to $2,150 million to $2,200 million, or 16% to 18% growth over fiscal 2011.  We are also increasing fiscal 2012 diluted earnings per share expectations on a cash basis to a range of $3.50 to $3.58, reflecting 14% to 16% growth over fiscal 2011 and annual fiscal 2012 GAAP diluted earnings per share to $3.14 to $3.22, reflecting 20% to 23% growth over the prior year."  (See Schedule 9 for Outlook Summary.)

Cash earnings exclude normalized adjustments and acquisition intangible amortization expense from continuing operations.  (See Schedule 6 and 7 for Reconciliations of Cash Earnings to GAAP, Schedule 2 for Cash Earnings and Schedule 3 for Segment Information on GAAP and Cash Earnings).

Conference Call

Global Payments will hold a conference call today, January 5, 2012 at 5:00 p.m. EST to discuss financial results and business highlights.  Callers may access the conference call via the investor relations page of the Company's Web site at http://www.globalpaymentsinc.com/ by clicking the "Webcast" button; or callers in North America may dial 1-888-895-3550 and callers outside North America may dial 1-706-758-8809.  The pass code is "GPN."  A replay of the call may be accessed through the Global Payments Web site through January 19, 2012.  

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

This announcement and comments made by Global Payments' management during the conference call may contain certain forward-looking statements within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995.  Statements that are not historical facts, including revenue and earnings estimates and management's expectations regarding future events and developments, are forward-looking statements and are subject to significant risks and uncertainties.  Important factors that may cause actual events or results to differ materially from those anticipated by such forward-looking statements include the following: foreign currency risks which become increasingly relevant as we expand internationally, the effect of current worldwide economic conditions, including sovereign insolvency situations and a decline in the value of the U.S. dollar, 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.

Contact:

Jane M. Elliott

 
 

770-829-8234 Voice

 
 

770-829-8267 Fax

 
 

investor.relations@globalpay.com

 
   

 

SCHEDULE 1

 

UNAUDITED GAAP CONSOLIDATED STATEMENTS OF INCOME

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 
   

(In thousands, except per share data)

 
                           
   

Three Months Ended November 30,

     

Six Months Ended November 30,

     
   

2011

 

2010

 

% Change

 

2011

 

2010

 

% Change

 
                           

Revenues

 

$ 530,505

 

$ 443,526

 

20%

 

$ 1,073,276

 

$ 883,665

 

21%

 
                           

Operating expenses:

                         

    Cost of service

 

185,931

 

154,205

 

21%

 

377,467

 

305,246

 

24%

 

    Sales, general and administrative

 

247,994

 

206,178

 

20%

 

490,619

 

413,168

 

19%

 
   

433,925

 

360,383

 

20%

 

868,086

 

718,414

 

21%

 
                           

Operating income

 

96,580

 

83,143

 

16%

 

205,190

 

165,251

 

24%

 
                           

Other income (expense):

                         

    Interest and other income

 

2,259

 

4,072

 

(45%)

 

4,760

 

5,608

 

(15%)

 

    Interest and other expense

 

(4,878)

 

(4,299)

 

13%

 

(8,965)

 

(9,140)

 

(2%)

 
   

(2,619)

 

(227)

 

1054%

 

(4,205)

 

(3,532)

 

19%

 
                           

Income from continuing operations before income taxes

 

93,961

 

82,916

 

13%

 

200,985

 

161,719

 

24%

 

Provision for income taxes

 

(25,812)

 

(24,546)

 

5%

 

(60,755)

 

(49,527)

 

23%

 

Income from continuing operations

 

68,149

 

58,370

 

17%

 

140,230

 

112,192

 

25%

 

Loss  from discontinued operations, net of tax

 

-

 

(487)

 

NM

 

-

 

(515)

 

NM

 

Net income including noncontrolling interests

 

68,149

 

57,883

 

18%

 

140,230

 

111,677

 

26%

 

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

 

(6,968)

 

(4,378)

 

59%

 

(15,075)

 

(8,804)

 

71%

 

         Net income attributable to Global Payments

 

$   61,181

 

$   53,505

 

14%

 

$    125,155

 

$ 102,873

 

22%

 
                           

Amounts attributable to Global Payments:

                         

   Income from continuing operations

 

$   61,181

 

$   53,992

 

13%

 

$    125,155

 

$ 103,388

 

21%

 

   Loss  from discontinued operations, net of tax

 

-

 

(487)

 

NM

 

-

 

(515)

 

NM

 

         Net income attributable to Global Payments

 

$   61,181

 

$   53,505

 

14%

 

$    125,155

 

$ 102,873

 

22%

 
                           
                           

Basic earnings per share attributable to Global Payments:

                         

   Income from continuing operations

 

$       0.78

 

$       0.68

 

15%

 

$          1.58

 

$       1.30

 

22%

 

   Loss  from discontinued operations, net of tax

 

-

 

(0.01)

 

NM

 

-

 

(0.01)

 

NM

 

         Net income attributable to Global Payments

 

$       0.78

 

$       0.67

 

16%

 

$          1.58

 

$       1.29

 

22%

 
                           

Diluted earnings per share attributable to Global Payments:

                         

   Income from continuing operations

 

$       0.78

 

$       0.67

 

16%

 

$          1.57

 

$       1.29

 

22%

 

   Loss  from discontinued operations, net of tax

 

-

 

-

 

NM

 

-

 

(0.01)

 

NM

 

         Net income attributable to Global Payments

 

$       0.78

 

$       0.67

 

16%

 

$          1.57

 

$       1.28

 

23%

 
                           

Weighted average shares outstanding:

                         

         Basic

 

78,348

 

79,701

     

79,207

 

79,642

     

         Diluted

 

78,876

 

80,344

     

79,831

 

80,310

     
                           
                           

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 November 30,

     

Six Months Ended November 30,

     
   

2011

 

2010

 

% Change

 

2011

 

2010

 

% Change

 
                           

Revenues

 

$ 530,505

 

$ 443,526

 

20%

 

$ 1,073,276

 

$ 883,665

 

21%

 
                           

Operating expenses:

                         

    Cost of service

 

173,778

 

145,003

 

20%

 

352,671

 

287,774

 

23%

 

    Sales, general and administrative

 

247,994

 

203,425

 

22%

 

490,619

 

407,821

 

20%

 
   

421,772

 

348,428

 

21%

 

843,290

 

695,595

 

21%

 
                           

Operating income

 

108,733

 

95,098

 

14%

 

229,986

 

188,070

 

22%

 
                           

Other income (expense):

                         

    Interest and other income

 

2,259

 

4,072

 

(45%)

 

4,760

 

5,608

 

(15%)

 

    Interest and other expense

 

(4,878)

 

(4,299)

 

13%

 

(8,965)

 

(9,140)

 

(2%)

 
   

(2,619)

 

(227)

 

1054%

 

(4,205)

 

(3,532)

 

19%

 
                           

Income from continuing operations before income taxes

 

106,114

 

94,871

 

12%

 

225,781

 

184,538

 

22%

 

Provision for income taxes

 

(29,569)

 

(28,843)

 

3%

 

(68,251)

 

(54,793)

 

25%

 

Income from continuing operations including noncontrolling interests

 

76,545

 

66,028

 

16%

 

157,530

 

129,745

 

21%

 

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

 

(8,913)

 

(4,701)

 

90%

 

(19,085)

 

(9,440)

 

102%

 

Net income from continuing operations attributable to Global Payments

 

$   67,632

 

$   61,327

 

10%

 

$    138,445

 

$ 120,305

 

15%

 
                           
                           

Basic earnings per share

 

$       0.86

 

$       0.77

 

12%

 

$          1.75

 

$       1.51

 

16%

 
                           

Diluted earnings per share

 

$       0.86

 

$       0.76

 

13%

 

$          1.73

 

$       1.50

 

15%

 
                           

Weighted average shares outstanding:

                         

         Basic

 

78,348

 

79,701

     

79,207

 

79,642

     

         Diluted

 

78,876

 

80,344

     

79,831

 

80,310

     
                           
   

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 November 30,

         
           

2011

 

2010

 

% Change

 
           

GAAP

 

Cash Earnings

 

GAAP

 

Cash Earnings

 

GAAP

 

Cash Earnings

 
                                   
 

Revenues:

                         
 

United States

 

$    293,416

 

$        293,416

 

$ 245,671

 

$        245,671

 

19%

 

19%

 
 

Canada

   

85,521

 

85,521

 

81,453

 

81,453

 

5%

 

5%

 
   

North America merchant services

 

378,937

 

378,937

 

327,124

 

327,124

 

16%

 

16%

 
                                   
 

Europe

   

115,169

 

115,169

 

79,881

 

79,881

 

44%

 

44%

 
 

Asia-Pacific

 

36,399

 

36,399

 

36,521

 

36,521

 

(0%)

 

(0%)

 
   

International merchant services

 

151,568

 

151,568

 

116,402

 

116,402

 

30%

 

30%

 
                                   
     

Total revenues

 

$    530,505

 

$        530,505

 

$ 443,526

 

$        443,526

 

20%

 

20%

 
                                   
 

Operating income:

                         
 

North America merchant services

 

$      70,673

 

$          73,495

 

$   67,131

 

$          70,287

 

5%

 

5%

 
 

International merchant services

 

44,494

 

53,825

 

35,349

 

40,165

 

26%

 

34%

 
 

Corporate

 

(18,587)

 

(18,587)

 

(19,337)

 

(15,354)

 

4%

 

(21%)

 
     

Operating income

 

$      96,580

 

$        108,733

 

$   83,143

 

$          95,098

 

16%

 

14%

 
                                   
                                   
           

Six Months Ended November 30,

         
           

2011

 

2010

 

% Change

 
           

GAAP

 

Cash Earnings

 

GAAP

 

Cash Earnings

 

GAAP

 

Cash Earnings

 
                                   
 

Revenues:

                         
 

United States

 

$    580,841

 

$        580,841

 

$ 501,302

 

$        501,302

 

16%

 

16%

 
 

Canada

   

176,742

 

176,742

 

162,666

 

162,666

 

9%

 

9%

 
   

North America merchant services

 

757,583

 

757,583

 

663,968

 

663,968

 

14%

 

14%

 
                                   
 

Europe

   

244,583

 

244,583

 

153,677

 

153,677

 

59%

 

59%

 
 

Asia-Pacific

 

71,110

 

71,110

 

66,020

 

66,020

 

8%

 

8%

 
   

International merchant services

 

315,693

 

315,693

 

219,697

 

219,697

 

44%

 

44%

 
                                   
     

Total revenues

 

$ 1,073,276

 

$     1,073,276

 

$ 883,665

 

$        883,665

 

21%

 

21%

 
                                   
 

Operating income:

                         
 

North America merchant services

 

$    142,431

 

$        148,111

 

$ 135,499

 

$        141,672

 

5%

 

5%

 
 

International merchant services

 

100,152

 

119,268

 

66,742

 

76,215

 

50%

 

56%

 
 

Corporate

 

(37,393)

 

(37,393)

 

(36,990)

 

(29,817)

 

(1%)

 

(25%)

 
     

Operating income

 

$    205,190

 

$        229,986

 

$ 165,251

 

$        188,070

 

24%

 

22%

 
                                   

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

 
                                 

 

SCHEDULE 4

       

CONSOLIDATED BALANCE SHEETS

       

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

       

(In thousands)

       
         
 

November 30,

 

May 31,

 
 

2011

 

2011

 
 

(unaudited)

     
         

ASSETS

       

Current assets:

       

Cash and cash equivalents

$      770,860

 

$ 1,354,285

 

Accounts receivable, net of allowances for doubtful accounts of $548 and $472, respectively

162,643

 

166,540

 

Claims receivable, net of allowance for losses of $4,169 and $3,870, respectively

1,024

 

914

 

Settlement processing assets

206,642

 

280,359

 

Inventory

11,790

 

7,640

 

Deferred income taxes

2,893

 

2,946

 

Prepaid expenses and other current assets

34,558

 

35,291

 

Total current assets

1,190,410

 

1,847,975

 
         

Goodwill

741,081

 

779,637

 

Other intangible assets, net of accumulated amortization of $214,435 and $197,066, respectively

299,680

 

341,500

 

Property and equipment, net of accumulated depreciation of $161,672 and $147,670, respectively

258,041

 

256,301

 

Deferred income taxes

96,508

 

104,140

 

Other

28,619

 

20,978

 
         

Total assets

$   2,614,339

 

$ 3,350,531

 
         

LIABILITIES AND EQUITY

       

Current liabilities:

       

Lines of credit

$      225,676

 

$    270,745

 

Current portion of long-term debt

87,962

 

85,802

 

Accounts payable and accrued liabilities

206,420

 

241,578

 

Settlement processing obligations

270,290

 

838,565

 

Income taxes payable

17,076

 

7,674

 

 Total current liabilities

807,424

 

1,444,364

 
         

Long-term debt

203,222

 

268,217

 

Deferred income taxes

115,157

 

116,432

 

Other long-term liabilities

54,788

 

49,843

 

Total liabilities

1,180,591

 

1,878,856

 
         

Commitments and contingencies

       
         

Redeemable noncontrolling interest

139,934

 

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; 78,355,001 issued

       

and outstanding at November 30, 2011 and 80,334,781 issued and

       

outstanding at May 31, 2011

-

 

-

 

Paid-in capital

342,914

 

419,591

 

Retained earnings

790,532

 

685,624

 

Accumulated other comprehensive income

12,909

 

79,320

 

     Total Global Payments shareholders' equity

1,146,355

 

1,184,535

 

Noncontrolling interest

147,459

 

153,282

 

Total equity

1,293,814

 

1,337,817

 
         

Total liabilities and equity

$   2,614,339

 

$ 3,350,531

 
       

 

SCHEDULE 5

           

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

         

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

         
                 
                 

(In thousands)

           
                 
         

Six Months Ended November 30,

 
         

2011

 

2010

 
                 

Cash flows from operating activities:

         
 

Net income including noncontrolling interests

 

$  140,230

 

$ 111,677

 
 

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

         
   

Depreciation and amortization of property and equipment

 

23,444

 

19,082

 
   

Amortization of acquired intangibles

 

24,796

 

15,646

 
   

Provision for operating losses and bad debts

 

13,061

 

10,146

 
   

Share-based compensation expense

 

8,425

 

7,690

 
   

Deferred income taxes

 

5,915

 

3,287

 
   

Other, net

 

(100)

 

(3,556)

 
 

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

         
   

Accounts receivable

 

3,897

 

(17,549)

 
   

Claims receivable

 

(7,880)

 

(8,095)

 
   

Settlement processing assets and obligations, net

 

(499,849)

 

(239,970)

 
   

Inventory

 

(4,212)

 

1,954

 
   

Prepaid expenses and other assets

 

62

 

(4,600)

 
   

Accounts payable and other accrued liabilities

 

(31,257)

 

18,990

 
   

Income taxes payable

 

9,402

 

24,382

 
     

Net cash used in operating activities

 

(314,066)

 

(60,916)

 
                 

Cash flows from investing activities:

         
 

Business and intangible asset acquisitions, net of cash acquired

 

(7,000)

 

(3,488)

 
 

Capital expenditures

 

(35,146)

 

(51,709)

 
 

Preliminary settlement of working capital adjustments from disposition of business

 

-

 

(1,921)

 
 

Net decrease in financing receivables

 

1,203

 

991

 
     

Net cash used in investing activities

 

(40,943)

 

(56,127)

 
                 

Cash flows from financing activities:

         
 

Net (payments) borrowings on lines of credit

 

(45,069)

 

101,694

 
 

Proceeds from issuance of long-term debt

 

71,374

 

4,410

 
 

Principal payments under long-term debt

 

(131,345)

 

(83,331)

 
 

Proceeds from stock issued under employee stock plans, net of repurchases

 

(768)

 

1,962

 
 

Repurchase of common stock

 

(99,604)

 

(14,900)

 
 

Tax benefit from employee share-based compensation

 

1,436

 

118

 
 

Distribution to noncontrolling interests

 

(4,660)

 

(4,385)

 
 

Dividends paid

 

(3,169)

 

(3,180)

 
     

Net cash (used in) provided by financing activities

 

(211,805)

 

2,388

 
                 

Effect of exchange rate changes on cash

 

(16,611)

 

8,369

 
                 

Decrease in cash and cash equivalents

 

(583,425)

 

(106,286)

 

Cash and cash equivalents, beginning of period

 

1,354,285

 

769,946

 

Cash and cash equivalents, end of period

 

$  770,860

 

$ 663,660

 
               

 

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 November 30, 2011

 
   

GAAP

   

Cash Earnings

Adjustments(1)

Cash Earnings

 
               

Revenues

 

$ 530,505

   

$                -

$       530,505

 
               

Operating expenses:

             

  Cost of service

 

185,931

   

(12,153)

173,778

 

  Sales, general and administrative

 

247,994

   

-

247,994

 
   

433,925

   

(12,153)

421,772

 
               

Operating income

 

96,580

   

12,153

108,733

 
               

Other income (expense):

             

  Interest and other income

 

2,259

   

-

2,259

 

  Interest and other expense

 

(4,878)

   

-

(4,878)

 
   

(2,619)

   

-

(2,619)

 
               

Income from continuing operations before income taxes

 

93,961

   

12,153

106,114

 

Provision for income taxes

 

(25,812)

   

(3,757)

(29,569)

 

Income from continuing operations

 

68,149

   

8,396

76,545

 

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

 

(6,968)

   

(1,945)

(8,913)

 

Net income from continuing operations attributable to Global Payments

 

$   61,181

   

$           6,451

$         67,632

 
               

Diluted shares

 

78,876

     

78,876

 

Diluted earnings per share

 

$       0.78

   

$             0.08

$             0.86

 
               
             

 
               
   

Three Months Ended November 30, 2010

 
   

GAAP

Employee

Termination and

Other(2)

Foreign Tax Rate

Cash Earnings

Adjustments(1)

Cash Earnings

 
               

Revenues

 

$ 443,526

$                  -

$                 -

$              -

$       443,526

 
               

Operating expenses:

             

  Cost of service

 

154,205

(1,230)

-

(7,972)

145,003

 

  Sales, general and administrative

 

206,178

(2,753)

-

-

203,425

 
   

360,383

(3,983)

-

(7,972)

348,428

 
               

Operating income

 

83,143

3,983

-

7,972

95,098

 
               

Other income (expense):

             

  Interest and other income

 

4,072

-

-

-

4,072

 

  Interest and other expense

 

(4,299)

-

-

-

(4,299)

 
   

(227)

-

-

-

(227)

 
               

Income from continuing operations before income taxes

 

82,916

3,983

-

7,972

94,871

 

Provision for income taxes

 

(24,546)

(1,436)

 

(2,861)

(28,843)

 

Income from continuing operations

 

58,370

2,547

-

5,111

66,028

 

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

 

(4,378)

-

-

(323)

(4,701)

 

Net income from continuing operations attributable to Global Payments

 

$   53,992

$            2,547

$                 -

$         4,788

$         61,327

 
               

Diluted shares

 

80,344

     

80,344

 

Diluted earnings per share

 

$       0.67

$              0.03

$                 -

$           0.06

$             0.76

 
               
               

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

 
   

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

 
   

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 November 30, 2011 and 2010 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated November 30, 2011 income from continuing operations and earnings per share on a cash basis by excluding acquisition intangible amortization from our results.  We calculated November 30, 2010 income from continuing operations and earnings per share on a cash basis by excluding charges related to employee termination and relocation benefits, certain one-time costs related to our Global Service Center, 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)

             
               
   

Six Months Ended November 30, 2011

 
   

GAAP

   

Cash Earnings

Adjustments(1)

Cash Earnings

 
               

Revenues

 

$ 1,073,276

   

$                -

$    1,073,276

 
               

Operating expenses:

             

  Cost of service

 

377,467

   

(24,796)

352,671

 

  Sales, general and administrative

 

490,619

   

-

490,619

 
   

868,086

   

(24,796)

843,290

 
               

Operating income

 

205,190

   

24,796

229,986

 
               

Other income (expense):

             

  Interest and other income

 

4,760

   

-

4,760

 

  Interest and other expense

 

(8,965)

   

-

(8,965)

 
   

(4,205)

   

-

(4,205)

 
               

Income from continuing operations before income taxes

 

200,985

   

24,796

225,781

 

Provision for income taxes

 

(60,755)

   

(7,496)

(68,251)

 

Income from continuing operations

 

140,230

   

17,300

157,530

 

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

 

(15,075)

   

(4,010)

(19,085)

 

Net income from continuing operations attributable to Global Payments

 

$    125,155

   

$         13,290

$       138,445

 
               

Diluted shares

 

79,831

     

79,831

 

Diluted earnings per share

 

$          1.57

   

$             0.18

$             1.73

 
               
             

 
               
   

Six Months Ended November 30, 2010

 
   

GAAP

Employee

Termination and

Other(2)

Foreign Tax

Rate(3)

Cash Earnings

Adjustments(1)

Cash Earnings

 
               

Revenues

 

$    883,665

$                            -

$                      -

$                -

$       883,665

 
               

Operating expenses:

             

  Cost of service

 

305,246

(1,826)

-

(15,646)

287,774

 

  Sales, general and administrative

 

413,168

(5,347)

-

-

407,821

 
   

718,414

(7,173)

-

(15,646)

695,595

 
               

Operating income

 

165,251

7,173

-

15,646

188,070

 
               

Other income (expense):

             

  Interest and other income

 

5,608

-

-

-

5,608

 

  Interest and other expense

 

(9,140)

-

-

-

(9,140)

 
   

(3,532)

-

-

-

(3,532)

 
               

Income from continuing operations before income taxes

 

161,719

7,173

-

15,646

184,538

 

Provision for income taxes

 

(49,527)

(2,598)

2,479

(5,147)

(54,793)

 

Income from continuing operations

 

112,192

4,575

2,479

10,499

129,745

 

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

 

(8,804)

-

-

(636)

(9,440)

 

Net income from continuing operations attributable to Global Payments

 

$    103,388

$                      4,575

$                2,479

$           9,863

$       120,305

 
               

Diluted shares

 

80,310

     

80,310

 

Diluted earnings per share

 

$          1.29

$                        0.06

$                  0.03

$             0.12

$             1.50

 
               
               

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

 
   

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

 
   

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

 
   

We supplemented our reporting of income from continuing operations and the related earnings per share information determined in accordance with GAAP by reporting income from continuing operations and the related earnings per share for the six months ended November 30, 2011 and 2010 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated November 30, 2011 income from continuing operations and earnings per share on a cash basis by excluding acquisition intangible amortization from our results.  We calculated November 30, 2010 income from continuing operations and earnings per share on a cash basis by excluding charges related to employee termination and relocation benefits, certain one-time costs related to our Global Service Center, the legislated tax rate reduction and acquisition intangible amortization from our results. We exclude these charges in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations. Our income from continuing operations and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, income from continuing operations and earnings per share determined in accordance with GAAP. Our measures of income from continuing operations and earnings per share on a cash earnings basis reflect management’s judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.

 
             

 

SCHEDULE 8 

 

RECONCILIATION OF CASH EARNINGS SEGMENT INFORMATION TO GAAP

     

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

     
                                   

(In thousands)

                         
                                   
           

Three Months Ended November 30,

     
           

2011

 

2010

     
           

GAAP

 

Cash Earnings

Adjustments(1)

Cash Earnings

 

GAAP

Employee

Termination

and Other(2)

Cash Earnings

Adjustments(1)

Cash Earnings

     
                                   
 

Revenues:

                         
 

United States

 

$    293,416

 

$                -

$        293,416

 

$ 245,671

$                  -

$                -

$        245,671

     
 

Canada

   

85,521

 

-

85,521

 

81,453

-

-

81,453

     
   

North America merchant services

 

378,937

 

-

378,937

 

327,124

-

-

327,124

     
                                   
 

Europe

   

115,169

 

-

115,169

 

79,881

-

-

79,881

     
 

Asia-Pacific

 

36,399

 

-

36,399

 

36,521

-

-

36,521

     
   

International merchant services

 

151,568

 

-

151,568

 

116,402

-

-

116,402

     
                                   
     

Total revenues

 

$    530,505

 

$                -

$        530,505

 

$ 443,526

$                  -

$                -

$        443,526

     
                                   
 

Operating income:

                         
 

North America merchant services

 

$      70,673

 

$           2,822

$          73,495

 

$   67,131

$                  -

$           3,156

$          70,287

     
 

International merchant services

 

44,494

 

9,331

53,825

 

35,349

-

4,816

40,165

     
 

Corporate

 

(18,587)

 

-

(18,587)

 

(19,337)

3,983

-

(15,354)

     
   

Operating income

 

$      96,580

 

$         12,153

$        108,733

 

$   83,143

$             3,983

$           7,972

$          95,098

     
                                   
                                   
           

Six Months Ended November 30,

     
           

2011

 

2010

     
           

GAAP

 

Cash Earnings

Adjustments(1)

Cash Earnings

 

GAAP

Employee

Termination and

Other(2)

Cash Earnings

Adjustments(1)

Cash Earnings

     
                                   
 

Revenues:

                         
 

United States

 

$    580,841

 

$                -  

$        580,841

 

$ 501,302

$                  -  

$                -  

$        501,302

     
 

Canada

   

      176,742

 

                  -  

          176,742

 

   162,666

                    -  

                  -  

          162,666

     
   

North America merchant services

 

      757,583

 

                  -  

          757,583

 

   663,968

                    -  

                  -  

          663,968

     
                                   
 

Europe

   

      244,583

 

                  -  

          244,583

 

   153,677

                    -  

                  -  

          153,677

     
 

Asia-Pacific

 

        71,110

 

                  -  

            71,110

 

     66,020

                    -  

                  -  

            66,020

     
   

International merchant services

 

      315,693

 

                  -  

          315,693

 

   219,697

                    -  

                  -  

          219,697

     
                                   
     

Total revenues

 

$ 1,073,276

 

$                -  

$     1,073,276

 

$ 883,665

$                  -  

$                -  

$        883,665

     
                                   
 

Operating income:

                         
 

North America merchant services

 

$    142,431

 

$           5,680

$        148,111

 

$ 135,499

$                  -  

$           6,173

$        141,672

     
 

International merchant services

 

      100,152

 

           19,116

          119,268

 

     66,742

                    -  

             9,473

            76,215

     
 

Corporate

 

      (37,393)

 

                  -  

          (37,393)

 

   (36,990)

               7,173

                  -  

          (29,817)

     
   

Operating income

 

$    205,190

 

$         24,796

$        229,986

 

$ 165,251

$             7,173

$         15,646

$        188,070

     
                                   
                                   

(1) Represents acquisition intangible amortization expense.

     
       

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

     
                                 

 

SCHEDULE 9

               

OUTLOOK SUMMARY

               

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

               
                   

(In millions, except per share data)

               
                   
     

Fiscal 2011

Actual

   

Fiscal 2012

Outlook

 

% Change

FY11

 
                   
 

Revenue Outlook

               
 

Revenues

 

$                 1,860

   

$2,150 to $2,200

 

16% to 18%

 
                   
                   
 

EPS Outlook

               
 

GAAP diluted EPS

 

$                   2.61

   

$3.14 to $3.22

 

20% to 23%

 
 

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

 

0.47

   

$0.36

 

---

 
 

Cash EPS

 

$                   3.08

   

$3.50 to $3.58

 

14% to 16%

 
                   
                   

(1) Fiscal 2012 reflects $0.36 in acquisition-related intangibles and currently no non-recurring items.  Acquisition-related intangibles accounted for $0.31 in fiscal 2011 and non-recurring items $0.16.  

 
                 

 

SOURCE Global Payments Inc.