Global Payments Reports Second Quarter Earnings

January 6, 2011
Global Payments Reports Second Quarter EarningsATLANTA, Jan. 6, 2011 /PRNewswire/ -- Global Payments Inc. (NYSE: GPN) today announced results for its fiscal second quarter ended November 30, 2010.  For the second quarter, revenues grew 8% to $443.5 million compared to $409.0 million in the prior fiscal year.  Normalized diluted earnings per share from continuing operations for the quarter were $0.70 compared to $0.71 in the prior year (See Schedule 2 Normalized Income Statements).    On a GAAP basis, the company reported fiscal 2011 second quarter diluted earnings per share from continuing operations for the quarter of $0.67 compared to $0.71 in the prior year (See Schedule 1 for GAAP Income Statements).

 

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

Normalized second quarter results exclude pretax expenses consisting of certain start-up and duplicative costs related to the company's Global Service Center in Manila, Philippines and employee termination benefits related to Canada.  (See Schedule 7 for Reconciliation of Normalized and Cash Earnings to GAAP).  

Chairman and CEO Paul R. Garcia stated, "Our performance demonstrates continued execution of our growth strategies in all of our regions.  In aggregate, the businesses performed as we expected during the quarter, with especially strong performance in Asia.  Given our solid performance to date and some benefit from favorable currency exchange rates, we are pleased to increase our organic revenue and earnings expectations for the year.

I am also delighted that we have closed our 'la Caixa' acquisition which will of course generate additional revenues and cash earnings.  Just as importantly, 'la Caixa' provides us a leading market position in Spain from which to drive long term growth."  

David E. Mangum, EVP and CFO, stated, "In an effort to assist investors in reviewing the company's underlying performance, and with the acquisition of 'la Caixa', we are supplementing our financial reporting with earnings per share on a cash basis, which excludes the impact of acquisition-related amortization, special or non-recurring charges, and their related tax effects.  On a cash basis, the company reported fiscal 2011 second quarter diluted earnings per share from continuing operations comparable to the prior year quarter of $0.76." (See Schedule 3 Cash Earnings income statements).

The company expects the "la Caixa" joint venture to add revenue of $25 million to $30 million and to be dilutive to our GAAP and normalized earnings per share by $0.02 to $0.04 for fiscal 2011 and accretive by $0.02 to $0.04 to cash earnings per share.  

For the full year of fiscal 2011, including the addition of the "la Caixa" joint venture, the company now expects revenue of $1,780 million to $1,820 million, or 8% to 11% growth over fiscal 2010, and diluted earnings per share from continuing operations on a cash basis of $2.95 to $3.06, reflecting 5% to 9% growth over fiscal 2010, normalized earnings per share from continuing operations of $2.66 to $2.77, reflecting growth of 5% to 9% and GAAP diluted earnings per share from continuing operations of $2.54 to $2.65 (See Schedule 9 for full details on guidance with and without the impact of "la Caixa").

Conference Call

Global Payments will hold a conference call today, January 6, 2011 at 5:00 p.m. ET to discuss financial results and business highlights.  Callers may access the conference call via the company's Web site at www.globalpaymentsinc.com by clicking the "Webcast" button; or callers in North America may dial 1-888-895-3550 and callers outside North America may dial 1-706-758-8809. The pass code is "GPN."  A replay of the call may be accessed through the Global Payments' Web site through January 18, 2011.  

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 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 of current economic conditions in Spain and their anticipated austerity measures on our ability to drive sales and achieve long-term growth in the market; foreign currency risks which become increasingly relevant as we expand internationally, the effect of current worldwide economic conditions, including a decline in the value of the U.S. dollar, 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.

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,

     
       

2010

 

2009

 

% Change

 

2010

 

2009

 

% Change

 
                               

Revenues

     

$                       443,526

 

$                    408,951

 

8%

 

$                 883,665

 

$                   818,882

 

8%

 
                               

Operating expenses:

                           

    Cost of service

   

154,205

 

144,881

 

6%

 

305,246

 

286,084

 

7%

 

    Sales, general and administrative

 

206,178

 

175,368

 

18%

 

413,168

 

354,853

 

16%

 
       

360,383

 

320,249

 

13%

 

718,414

 

640,937

 

12%

 
                               

Operating income

   

83,143

 

88,702

 

(6%)

 

165,251

 

177,945

 

(7%)

 
                               

Other income (expense):

                           

    Interest and other income

 

4,072

 

690

 

490%

 

5,608

 

1,380

 

306%

 

    Interest and other expense

 

(4,299)

 

(4,423)

 

(3%)

 

(9,140)

 

(8,564)

 

7%

 
       

(227)

 

(3,733)

 

NM

 

(3,532)

 

(7,184)

 

NM

 
                               

Income from continuing operations before income taxes

 

82,916

 

84,969

 

(2%)

 

161,719

 

170,761

 

(5%)

 

Provision for income taxes

   

(24,546)

 

(23,655)

 

4%

 

(49,527)

 

(49,191)

 

1%

 

Income from continuing operations

 

58,370

 

61,314

 

(5%)

 

112,192

 

121,570

 

(8%)

 

(Loss) income from discontinued operations, net of tax

 

(487)

 

4,868

 

NM

 

(515)

 

7,056

 

NM

 

Net income including noncontrolling interests

 

57,883

 

66,182

 

(13%)

 

111,677

 

128,626

 

(13%)

 

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

 

(4,378)

 

(3,347)

 

31%

 

(8,804)

 

(7,960)

 

11%

 

         Net income attributable to Global Payments

 

$                         53,505

 

$                      62,835

 

(15%)

 

$                 102,873

 

$                   120,666

 

(15%)

 
                               

Amounts attributable to Global Payments:

                         

   Income from continuing operations

 

$                         53,992

 

$                      57,967

 

(7%)

 

$                 103,388

 

$                   113,610

 

(9%)

 

   (Loss) income from discontinued operations, net of tax

 

(487)

 

4,868

 

NM

 

(515)

 

7,056

 

NM

 

         Net income attributable to Global Payments

 

$                         53,505

 

$                      62,835

 

(15%)

 

$                 102,873

 

$                   120,666

 

(15%)

 
                               
                               

Basic earnings per share attributable to Global Payments:

                         

   Income from continuing operations

 

$                             0.68

 

$                          0.71

 

(4%)

 

$                       1.30

 

$                         1.40

 

(7%)

 

   (Loss) income from discontinued operations, net of tax

 

(0.01)

 

0.06

 

NM

 

(0.01)

 

0.09

 

NM

 

         Net income attributable to Global Payments

 

$                             0.67

 

$                          0.77

 

(13%)

 

$                       1.29

 

$                         1.49

 

(13%)

 
                               

Diluted earnings per share attributable to Global Payments:

                         

   Income from continuing operations

 

$                             0.67

 

$                          0.71

 

(6%)

 

$                       1.29

 

$                         1.39

 

(7%)

 

   (Loss) income from discontinued operations, net of tax

 

-

 

0.05

 

NM

 

(0.01)

 

0.09

 

NM

 

         Net income attributable to Global Payments

 

$                             0.67

 

$                          0.76

 

(12%)

 

$                       1.28

 

$                         1.48

 

(14%)

 
                               

Weighted average shares outstanding:

                         

         Basic

     

79,701

 

81,236

     

79,642

 

80,890

     

         Diluted

     

80,344

 

82,188

     

80,310

 

81,786

     
                               
                               

NM - Not Meaningful

                           
                             

 

SCHEDULE 2


 
 

NORMALIZED EARNINGS FROM CONTINUING OPERATIONS 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,

     
       

2010

 

2009

 

% Change

 

2010

 

2009

 

% Change

 
       

Normalized(1)

 

GAAP(2)

     

Normalized(1)

 

GAAP(2)

     
                               
                               

Revenues

     

$                       443,526

 

$                    408,951

 

8%

 

$                 883,665

 

$                   818,882

 

8%

 
                               

Operating expenses:

                           

    Cost of service

   

152,975

 

144,881

 

6%

 

303,420

 

286,084

 

6%

 

    Sales, general and administrative

 

203,425

 

175,368

 

16%

 

407,821

 

354,853

 

15%

 
       

356,400

 

320,249

 

11%

 

711,241

 

640,937

 

11%

 
                               

Operating income

   

87,126

 

88,702

 

(2%)

 

172,424

 

177,945

 

(3%)

 
                               

Other income (expense):

                           

    Interest and other income

 

4,072

 

690

 

490%

 

5,608

 

1,380

 

306%

 

    Interest and other expense

 

(4,299)

 

(4,423)

 

(3%)

 

(9,140)

 

(8,564)

 

7%

 
       

(227)

 

(3,733)

 

NM

 

(3,532)

 

(7,184)

 

NM

 
                               

Income from continuing operations before income taxes

 

86,899

 

84,969

 

2%

 

168,892

 

170,761

 

(1%)

 

Provision for income taxes

   

(25,982)

 

(23,655)

 

10%

 

(49,646)

 

(49,191)

 

1%

 

Income from continuing operations including noncontrolling interests

 

60,917

 

61,314

 

(1%)

 

119,246

 

121,570

 

(2%)

 

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

 

(4,378)

 

(3,347)

 

31%

 

(8,804)

 

(7,960)

 

11%

 

Net income from continuing operations attributable to Global Payments

 

$                         56,539

 

$                      57,967

 

(2%)

 

$                 110,442

 

$                   113,610

 

(3%)

 
                               
                               

Basic earnings per share

   

$                             0.71

 

$                          0.71

 

0%

 

$                       1.39

 

$                         1.40

 

(1%)

 
                               

Diluted earnings per share

   

$                             0.70

 

$                          0.71

 

(1%)

 

$                       1.38

 

$                         1.39

 

(1%)

 
                               

Weighted average shares outstanding:

                         

         Basic

     

79,701

 

81,236

     

79,642

 

80,890

     

         Diluted

     

80,344

 

82,188

     

80,310

 

81,786

     
                               
                               

NM - Not Meaningful

                           
                               

1 Normalized results exclude expenses consisting of $1.6 million and $2.3 million during the three and six months ended November 30, 2010, respectively, of start-up costs related to our new Global Service Center in Manila, Philippines and $2.4 million and $4.8 million during the three and six months ended November 30, 2010, respectively, related to employee termination and relocation benefits.  Results for the six months ended November 30, 2010 also exclude a $2.5 million 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%.  See schedule 7 for reconciliation of normalized earnings from continuing operations to GAAP.

 
                               

2 There were no normalized adjustments during the three and six months ended November 30, 2009.

 
                             

 

SCHEDULE 3


 
 

CASH EARNINGS FROM CONTINUING OPERATIONS 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,

     
       

2010

 

2009

 

% Change

 

2010

 

2009

 

% Change

 
                               

Revenues

     

$                       443,526

 

$                    408,951

 

8%

 

$                 883,665

 

$                   818,882

 

8%

 
                               

Operating expenses:

                           

    Cost of service

   

145,003

 

136,539

 

6%

 

287,774

 

269,859

 

7%

 

    Sales, general and administrative

 

203,425

 

175,368

 

16%

 

407,821

 

354,853

 

15%

 
       

348,428

 

311,907

 

12%

 

695,595

 

624,712

 

11%

 
                               

Operating income

   

95,098

 

97,044

 

(2%)

 

188,070

 

194,170

 

(3%)

 
                               

Other income (expense):

                           

    Interest and other income

 

4,072

 

690

 

490%

 

5,608

 

1,380

 

306%

 

    Interest and other expense

 

(4,299)

 

(4,423)

 

(3%)

 

(9,140)

 

(8,564)

 

7%

 
       

(227)

 

(3,733)

 

NM

 

(3,532)

 

(7,184)

 

NM

 
                               

Income from continuing operations before income taxes

 

94,871

 

93,311

 

2%

 

184,538

 

186,986

 

(1%)

 

Provision for income taxes

   

(28,843)

 

(26,914)

 

7%

 

(54,793)

 

(54,916)

 

(0%)

 

Income from continuing operations including noncontrolling interests

 

66,028

 

66,397

 

(1%)

 

129,745

 

132,070

 

(2%)

 

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

 

(4,701)

 

(3,698)

 

27%

 

(9,440)

 

(8,622)

 

9%

 

Net income from continuing operations attributable to Global Payments

 

$                         61,327

 

$                      62,699

 

(2%)

 

$                 120,305

 

$                   123,448

 

(3%)

 
                               
                               

Basic earnings per share

   

$                             0.77

 

$                          0.77

 

0%

 

$                       1.51

 

$                         1.53

 

(1%)

 
                               

Diluted earnings per share

   

$                             0.76

 

$                          0.76

 

0%

 

$                       1.50

 

$                         1.51

 

(1%)

 
                               

Weighted average shares outstanding:

                         

         Basic

     

79,701

 

81,236

     

79,642

 

80,890

     

         Diluted

     

80,344

 

82,188

     

80,310

 

81,786

     
                               
                               

NM - Not Meaningful

                           
                               

Cash earnings exclude acquisition intangible amortization expense from continuing operations and the related income tax benefit. See schedule 7 for reconciliation of cash earnings from continuing operations to GAAP.

 
                             

 

SCHEDULE 4

 

SEGMENT INFORMATION CONTINUING OPERATIONS

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 
                                               

(In thousands)

                                   
                                               
               

Three Months Ended November 30,  

             
               

2010

 

2009

 

% Change

 
               

GAAP

 

Normalized

 

Cash Earnings

 

GAAP

 

Cash Earnings

 

GAAP

 

Normalized to GAAP(1)

 

Cash Earnings

 
                                               
 

Revenues:

                                   
 

United States

   

$              245,671

 

$              245,671

 

$           245,671

 

$             220,934

 

$             220,934

 

11%

 

11%

 

11%

 
 

Canada

       

81,453

 

81,453

 

81,453

 

78,236

 

78,236

 

4%

 

4%

 

4%

 
   

North America merchant services

 

327,124

 

327,124

 

327,124

 

299,170

 

299,170

 

9%

 

9%

 

9%

 
                                               
 

Europe

       

79,881

 

79,881

 

79,881

 

84,143

 

84,143

 

(5%)

 

(5%)

 

(5%)

 
 

Asia-Pacific

   

36,521

 

36,521

 

36,521

 

25,638

 

25,638

 

42%

 

42%

 

42%

 
   

International merchant services

 

116,402

 

116,402

 

116,402

 

109,781

 

109,781

 

6%

 

6%

 

6%

 
                                               
     

Total revenues

   

$              443,526

 

$              443,526

 

$           443,526

 

$             408,951

 

$             408,951

 

8%

 

8%

 

8%

 
                                               
 

Operating income:

                                   
 

North America merchant services

 

$                67,131

 

$                67,131

 

$             70,287

 

$               73,643

 

$               76,305

 

(9%)

 

(9%)

 

(8%)

 
 

International merchant services

 

35,349

 

35,349

 

40,165

 

30,750

 

36,430

 

15%

 

15%

 

10%

 
 

Corporate

     

(19,337)

 

(15,354)

 

(15,354)

 

(15,691)

 

(15,691)

 

(23%)

 

2%

 

2%

 
     

Operating income

   

$                83,143

 

$                87,126

 

$             95,098

 

$               88,702

 

$               97,044

 

(6%)

 

(2%)

 

(2%)

 
                                               

 
                               
               

Six Months Ended November 30

             
               

2010

 

2009

 

% Change

 
               

GAAP

 

Normalized

 

Cash Earnings

 

GAAP

 

Cash Earnings

 

GAAP

 

Normalized to GAAP(1)

 

Cash Earnings

 
                                               
 

Revenues:

                                   
 

United States

   

$              501,302

 

$              501,302

 

$           501,302

 

$             443,699

 

$             443,699

 

13%

 

13%

 

13%

 
 

Canada

       

162,666

 

162,666

 

162,666

 

159,461

 

159,461

 

2%

 

2%

 

2%

 
   

North America merchant services

 

663,968

 

663,968

 

663,968

 

603,160

 

603,160

 

10%

 

10%

 

10%

 
                                               
 

Europe

       

153,677

 

153,677

 

153,677

 

164,610

 

164,610

 

(7%)

 

(7%)

 

(7%)

 
 

Asia-Pacific

   

66,020

 

66,020

 

66,020

 

51,112

 

51,112

 

29%

 

29%

 

29%

 
   

International merchant services

 

219,697

 

219,697

 

219,697

 

215,722

 

215,722

 

2%

 

2%

 

2%

 
                                               
     

Total revenues

   

$              883,665

 

$              883,665

 

$           883,665

 

$             818,882

 

$             818,882

 

8%

 

8%

 

8%

 
                                               
 

Operating income:

                                   
 

North America merchant services

 

$              135,499

 

$              135,499

 

$           141,672

 

$             149,564

 

$             154,473

 

(9%)

 

(9%)

 

(8%)

 
 

International merchant services

 

66,742

 

66,742

 

76,215

 

59,499

 

70,815

 

12%

 

12%

 

8%

 
 

Corporate

     

(36,990)

 

(29,817)

 

(29,817)

 

(31,118)

 

(31,118)

 

(19%)

 

4%

 

4%

 
     

Operating income

   

$              165,251

 

$              172,424

 

$           188,070

 

$             177,945

 

$             194,170

 

(7%)

 

(3%)

 

(3%)

 
                                               
                                               

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

 
                                               

1 There were no normalized adjustments during the three and six months ended November 30, 2009.

 
                                             

 

SCHEDULE 5

 

CONSOLIDATED BALANCE SHEETS

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 

(In thousands)

 
               
       

November 30

 

May 31,

 
       

2010

 

2010

 
       

(Unaudited)

     

ASSETS

             

Current assets:

           

Cash and cash equivalents

 

$                  663,660

 

$                  769,946

 

Accounts receivable, net of allowances for doubtful accounts of $353 and $269, respectively

149,366

 

131,817

 

Claims receivable, net of allowance for losses of $4,308 and $4,208, respectively

909

 

664

 

Settlement processing assets

 

81,192

 

13,741

 

Inventory

     

7,737

 

9,740

 

Deferred income taxes

   

4,027

 

2,752

 

Prepaid expenses and other current assets

21,767

 

39,604

 

Total current assets

 

928,658

 

968,264

 
               

Goodwill

     

590,911

 

569,090

 

Other intangible assets, net of accumulated amortization of $164,171 and $145,076, respectively

198,687

 

205,110

 

Property and equipment, net of accumulated depreciation of $142,121 and $119,402, respectively

219,944

 

183,938

 

Deferred income taxes

   

96,080

 

90,470

 

Other

     

22,310

 

22,454

 
               

Total assets

   

$               2,056,590

 

$               2,039,326

 
               

LIABILITIES AND EQUITY

         

Current liabilities:

           

Lines of credit

   

$                  180,881

 

$                    79,187

 

Notes payable - current portion

 

143,094

 

148,169

 

Accounts payable and accrued liabilities

 

177,879

 

173,575

 

Settlement processing obligations

 

94,887

 

265,110

 

Income taxes payable

   

9,244

 

6,430

 

 Total current liabilities

 

605,985

 

672,471

 
               

Notes payable

   

202,610

 

272,965

 

Deferred income taxes

   

95,426

 

88,265

 

Other long-term liabilities

   

38,825

 

31,436

 

Total liabilities

   

942,846

 

1,065,137

 
               

Commitments and contingencies

         
               

Redeemable noncontrolling interest

 

115,279

 

102,672

 
               

Equity:

             

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

-

 

-

 

Common stock, no par value; 200,000,000 shares authorized; 82,472,803 issued

       

and 79,745,066 outstanding at November 30, 2010 and 82,028,945 issued and

       

79,646,055 outstanding at May 31, 2010

-

 

-

 

Paid-in capital

   

469,372

 

460,747

 

Retained earnings

   

636,594

 

544,772

 

Treasury stock; 2,727,737 and 2,382,890 shares at November 30, 2010 and May 31, 2010,

       

respectively

   

(112,980)

 

(100,000)

 

Accumulated other comprehensive loss

 

(4,457)

 

(44,255)

 

     Total Global Payments shareholders' equity

988,529

 

861,264

 

Noncontrolling interest

   

9,936

 

10,253

 

Total equity

   

998,465

 

871,517

 
               

Total liabilities and equity

 

$               2,056,590

 

$               2,039,326

 
             

 

SCHEDULE 6

 

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 
                   
                   

(In thousands)

 
                   
           

Six Months Ended November 30,

 
           

2010

 

2009

 
                   

Cash flows from operating activities:

         
 

Net income including noncontrolling interests

 

$                       111,677

 

$                       128,626

 
 

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

         
   

Depreciation and amortization of property and equipment

 

19,082

 

17,441

 
   

Amortization of acquired intangibles

 

15,646

 

16,264

 
   

Share-based compensation expense

 

7,690

 

7,433

 
   

Provision for operating losses and bad debts

 

10,146

 

13,152

 
   

Deferred income taxes

 

3,287

 

(18,091)

 
   

Estimated loss on disposal of discontinued operations

 

-

 

15,850

 
   

Other, net

   

(3,556)

 

(151)

 
 

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

         
   

Accounts receivable

 

(17,549)

 

(7,869)

 
   

Claims receivable

 

(8,095)

 

(8,052)

 
   

Settlement processing assets and obligations, net

 

(239,970)

 

617,802

 
   

Inventory

   

1,954

 

(7,274)

 
   

Prepaid expenses and other assets

 

(4,600)

 

2,299

 
   

Payables to money transfer beneficiaries

 

-

 

(5,082)

 
   

Accounts payable and other accrued liabilities

 

18,990

 

13,642

 
   

Income taxes payable

 

24,382

 

(768)

 
     

Net cash (used in) provided by operating activities

 

(60,916)

 

785,222

 
                   

Cash flows from investing activities:

         
 

Business and intangible asset acquisitions, net of cash acquired

 

(3,488)

 

(17,059)

 
 

Capital expenditures

 

(51,709)

 

(20,677)

 
 

Preliminary settlement of working capital adjustments from disposition of business

 

(1,921)

 

-

 
 

Net decrease (increase) in financing receivables

 

991

 

(501)

 
 

Proceeds from sale of investment and contractual rights, net

 

-

 

253

 
     

Net cash used in investing activities

 

(56,127)

 

(37,984)

 
                   

Cash flows from financing activities:

         
 

Net borrowings (payments) on lines of credit

 

101,694

 

(351)

 
 

Proceeds from notes payable

 

4,410

 

302,487

 
 

Principal payments under notes payable

 

(83,331)

 

(49,509)

 
 

Acquisition of redeemable noncontrolling interests

 

-

 

(307,675)

 
 

Proceeds from stock issued under share-based compensation plans

 

1,962

 

18,017

 
 

Repurchase of common stock

 

(14,900)

 

-

 
 

Tax benefit from share-based compensation

 

118

 

4,037

 
 

Distribution to noncontrolling interests

 

(4,385)

 

(16,258)

 
 

Dividends paid

   

(3,180)

 

(3,245)

 
     

Net cash provided by (used in) financing activities

 

2,388

 

(52,497)

 
                   

Effect of exchange rate changes on cash

 

8,369

 

6,522

 
                   

(Decrease) increase in cash and cash equivalents

 

(106,286)

 

701,263

 

Cash and cash equivalents, beginning of period

 

769,946

 

426,935

 

Cash and cash equivalents, end of period

 

$                       663,660

 

$                    1,128,198

 
                 

 

SCHEDULE 7

 

RECONCILIATION OF NORMALIZED AND CASH EARNINGS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO GLOBAL PAYMENTS TO GAAP

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 
                         
                         

(In thousands, except per share data)

 
                         
   

Three Months Ended November 30,

 
   

2010

 

2009(4)

 
   

GAAP

Employee Termination and Other(1)

 

Normalized

Cash Earnings Adjustments(3)

Cash Earnings

 

GAAP

Cash Earnings Adjustments(3)

Cash Earnings

 
                         

Revenues

 

$             443,526

$                               -

 

$              443,526

$                              -

$           443,526

 

$           408,951

$                             -

$               408,951

 
                         

Operating expenses:

                       

  Cost of service

 

154,205

(1,230)

 

152,975

(7,972)

145,003

 

144,881

(8,342)

136,539

 

  Sales, general and administrative

 

206,178

(2,753)

 

203,425

-

203,425

 

175,368

-

175,368

 
   

360,383

(3,983)

 

356,400

(7,972)

348,428

 

320,249

(8,342)

311,907

 
                         

Operating income

 

83,143

3,983

 

87,126

7,972

95,098

 

88,702

8,342

97,044

 
                         

Other income (expense):

                       

  Interest and other income

 

4,072

-

 

4,072

-

4,072

 

690

-

690

 

  Interest and other expense

 

(4,299)

-

 

(4,299)

-

(4,299)

 

(4,423)

-

(4,423)

 
   

(227)

-

 

(227)

-

(227)

 

(3,733)

-

(3,733)

 
                         

Income from continuing operations before income taxes

 

82,916

3,983

 

86,899

7,972

94,871

 

84,969

8,342

93,311

 

Provision for income taxes

 

(24,546)

(1,436)

 

(25,982)

(2,861)

(28,843)

 

(23,655)

(3,259)

(26,914)

 

Income from continuing operations

 

58,370

2,547

 

60,917

5,111

66,028

 

61,314

5,083

66,397

 

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

 

(4,378)

-

 

(4,378)

(323)

(4,701)

 

(3,347)

(351)

(3,698)

 

Net income from continuing operations attributable to Global Payments

 

$               53,992

$                         2,547

 

$                56,539

$                        4,788

$             61,327

 

$             57,967

$                       4,732

$                 62,699

 
                         

Diluted shares

 

80,344

   

80,344

 

80,344

 

82,188

 

82,188

 

Diluted earnings per share

 

$                   0.67

$                           0.03

 

$                    0.70

$                          0.06

$                 0.76

 

$                 0.71

$                         0.05

$                     0.76

 
                       

 
       
   

Six Months Ended November 30,

 
   

2010

 

2009(4)

 
   

GAAP

Employee Termination and Other(1)

Foreign Tax Rate(2)

Normalized

Cash Earnings Adjustments(3)

Cash Earnings

 

GAAP

Cash Earnings Adjustments

Cash Earnings

 
                         

Revenues

 

$             883,665

$                               -

$                              -

$              883,665

$                              -

$           883,665

 

$           818,882

$                             -

$               818,882

 
                         

Operating expenses:

                       

  Cost of service

 

305,246

(1,826)

-

303,420

(15,646)

287,774

 

286,084

(16,225)

269,859

 

  Sales, general and administrative

 

413,168

(5,347)

-

407,821

-

407,821

 

354,853

-

354,853

 
   

718,414

(7,173)

-

711,241

(15,646)

695,595

 

640,937

(16,225)

624,712

 
                         

Operating income

 

165,251

7,173

-

172,424

15,646

188,070

 

177,945

16,225

194,170

 
                         

Other income (expense):

                       

  Interest and other income

 

5,608

-

-

5,608

-

5,608

 

1,380

-

1,380

 

  Interest and other expense

 

(9,140)

-

-

(9,140)

-

(9,140)

 

(8,564)

-

(8,564)

 
   

(3,532)

-

-

(3,532)

-

(3,532)

 

(7,184)

-

(7,184)

 
                         

Income from continuing operations before income taxes

 

161,719

7,173

-

168,892

15,646

184,538

 

170,761

16,225

186,986

 

Provision for income taxes

 

(49,527)

(2,598)

2,479

(49,646)

(5,147)

(54,793)

 

(49,191)

(5,725)

(54,916)

 

Income from continuing operations

 

112,192

4,575

2,479

119,246

10,499

129,745

 

121,570

10,500

132,070

 

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

 

(8,804)

-

-

(8,804)

(636)

(9,440)

 

(7,960)

(662)

(8,622)

 

Net income from continuing operations attributable to Global Payments

 

$             103,388

$                         4,575

$                        2,479

$              110,442

$                        9,863

$           120,305

 

$           113,610

$                       9,838

$               123,448

 
                         

Diluted shares

 

80,310

   

80,310

 

80,310

 

81,786

 

81,786

 

Diluted earnings per share

 

$                   1.29

$                           0.06

$                          0.03

$                    1.38

$                          0.12

$                 1.50

 

$                 1.39

$                         0.12

$                     1.51

 
                         
                         

1 Reflects expenses of $1.6 million and $2.3 million during the three and six months ended November 30, 2010, respectively, of start-up costs related to our new Global Service Center in Manila, Philippines and $2.4 million and $4.8 million during the three and six months ended November 30, 2010, respectively, related to employee termination and relocation benefits, and the related income tax benefits.

 
   

2 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%.  

 
   

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

 
   

4 There were no normalized adjustments during the three and six months ended November 30, 2009.

 
   

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 and six months ended November 30, 2010 and 2009 on a “normalized”  and "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated income from continuing operations and earnings per share on a normalized basis by excluding charges related to employee termination and relocation benefits, certain one-time costs related to our new Global Service Center and the legislated tax rate reduction.  We calculated income from continuing operations on a cash earnings basis by excluding acquisition intangible amortization expense from our normalized 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 normalized and 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 normalized and 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 NORMALIZED AND CASH EARNINGS SEGMENT INFORMATION TO GAAP

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 
                                   

(In thousands)

 
                                   
               

Three Months Ended November 30,

 
               

2010

 

2009

 
                                   
               

GAAP

Employee Termination and Other(1)

Normalized

Cash Earnings Adjustments(2)

Cash Earnings

 

GAAP

Cash Earnings Adjustments(2)

Cash Earnings

 
                                   
 

Revenues:

                       
 

United States

   

$                   245,671

$                         -

$                    245,671

$                          -

$               245,671

 

$            220,934

$                          -

$               220,934

 
 

Canada

       

81,453

-

81,453

-

81,453

 

78,236

-

78,236

 
   

North America merchant services

 

327,124

-

327,124

-

327,124

 

299,170

-

299,170

 
                                   
 

Europe

       

79,881

-

79,881

-

79,881

 

84,143

-

84,143

 
 

Asia-Pacific

   

36,521

-

36,521

-

36,521

 

25,638

-

25,638

 
   

International merchant services

 

116,402

-

116,402

-

116,402

 

109,781

-

109,781

 
                                   
     

Total revenues

   

$                   443,526

$                         -

$                    443,526

$                          -

$               443,526

 

$            408,951

$                          -

$               408,951

 
                                   
 

Operating income:

                       
 

North America merchant services

 

$                     67,131

$                         -

$                      67,131

$                    3,156

$                 70,287

 

$              73,643

$                     2,662

$                 76,305

 
 

International merchant services

 

35,349

-

35,349

4,816

40,165

 

30,750

5,680

36,430

 
 

Corporate

     

(19,337)

3,983

(15,354)

-

(15,354)

 

(15,691)

-

(15,691)

 
   

Operating income

   

$                     83,143

$                    3,983

$                      87,126

$                    7,972

$                 95,098

 

$              88,702

$                     8,342

$                 97,044

 
                                 

 
                   
               

Six Months Ended November 30,

 
               

2010

 

2009

 
                                   
               

GAAP

Employee Termination and Other(1)

Normalized

Cash Earnings Adjustments(2)

Cash Earnings

 

GAAP

Cash Earnings Adjustments(2)

Cash Earnings

 
                                   
 

Revenues:

                       
 

United States

   

$                   501,302

$                         -

$                    501,302

$                          -

$               501,302

 

$            443,699

$                          -

$               443,699

 
 

Canada

       

162,666

-

162,666

-

162,666

 

159,461

-

159,461

 
   

North America merchant services

 

663,968

-

663,968

-

663,968

 

603,160

-

603,160

 
                                   
 

Europe

       

153,677

-

153,677

-

153,677

 

164,610

-

164,610

 
 

Asia-Pacific

   

66,020

-

66,020

-

66,020

 

51,112

-

51,112

 
   

International merchant services

 

219,697

-

219,697

-

219,697

 

215,722

-

215,722

 
                                   
     

Total revenues

   

$                   883,665

$                         -

$                    883,665

$                          -

$               883,665

 

$            818,882

$                          -

$               818,882

 
                                   
 

Operating income:

                       
 

North America merchant services

 

$                   135,499

$                         -

$                    135,499

$                    6,173

$               141,672

 

$            149,564

$                     4,909

$               154,473

 
 

International merchant services

 

66,742

-

66,742

9,473

76,215

 

59,499

11,316

70,815

 
 

Corporate

     

(36,990)

7,173

(29,817)

-

(29,817)

 

(31,118)

-

(31,118)

 
   

Operating income

   

$                   165,251

$                    7,173

$                    172,424

$                  15,646

$               188,070

 

$            177,945

$                   16,225

$               194,170

 
                                   
                                   

1 Reflects expenses of $1.6 million and $2.3 million during the three and six months ended November 30, 2010, respectively, of start-up costs related to our new Global Service Center in Manila, Philippines and $2.4 million and $4.8 million during the three and six months ended November 30, 2010, respectively, related to employee termination and relocation benefits. There were no normalized adjustments during the three and six months ended November 30, 2009.

 
                                   

2 Represents acquisition intangible amortization expense from continuing operations.

 
                                 

 

SCHEDULE 9

 

OUTLOOK SUMMARY

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 
                                   

(In millions, except per share data)

 
                                   
               

Fiscal 2010 Actual

 

Fiscal 2011 Outlook Before "la Caixa" JV

 

Fiscal 2011 Outlook "la Caixa" JV

 

Fiscal 2011 Outlook Including "la Caixa" JV

 

% Change FY10

 
                                   
 

Revenue Outlook

                       
 

Revenues

     

$                   1,642

 

$1,755 to $1,790

 

$25 to $30

 

$1,780 to 1,820

 

8% to 11%

 
                                   
                                   
 

EPS Outlook

                       
 

GAAP diluted EPS from continuing operations

 

$                     2.52

 

$2.58 to $2.67

 

($0.04) to ($0.02)

 

$2.54 to $2.65

 

1% to 5%

 
 

Employee Termination1

   

0.02

 

$0.12

 

--

 

$0.12

     
 

Normalized diluted EPS from continuing operations

 

$                     2.54

 

$2.70 to $2.79

 

($0.04) to ($0.02)

 

$2.66 to $2.77

 

5% to 9%

 
 

Acquisition-related intangibles1

 

0.26

 

$0.23

 

$0.06

 

$0.29

 

---

 
 

Cash EPS from continuing operations

 

$                     2.80

 

$2.93 to $3.02

 

$0.02 to $0.04

 

$2.95 to $3.06

 

5% to 9%

 
                                   
                                   

1 See Schedule 12 for detail of Fiscal 2010 charges.

 
                                 

 

SCHEDULE 10

 

CASH EARNINGS PER SHARE - HISTORICAL

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 
                                   

(In thousands, except per share data)


 
 
                                   
       

Three Months Ended

 

Fiscal Year Ended

 

Three Months Ended

 
       

8/31/09

 

11/30/09

 

2/28/10

 

5/31/10

 

5/31/10

 

8/31/10

 

11/30/10

 
                                   

Revenues

     

$                       409,932

 

$          408,951

 

$          398,535

 

$          425,050

 

$            1,642,468

 

$                440,138

 

$                443,526

 
                                   

Operating expenses:

                               

    Cost of service

   

133,320

 

136,539

 

137,840

 

144,146

 

551,845

 

142,771

 

145,003

 

    Sales, general and administrative

   

179,485

 

175,368

 

178,484

 

198,660

 

731,997

 

204,396

 

203,425

 
       

312,805

 

311,907

 

316,324

 

342,806

 

1,283,842

 

347,167

 

348,428

 
                                   

Operating income

   

97,127

 

97,044

 

82,211

 

82,244

 

358,626

 

92,971

 

95,098

 
                                   

Other income (expense):

                               

    Interest and other income

   

690

 

690

 

1,319

 

1,930

 

4,629

 

1,537

 

4,072

 

    Interest and other expense

   

(4,141)

 

(4,423)

 

(4,141)

 

(4,814)

 

(17,519)

 

(4,841)

 

(4,299)

 
       

(3,451)

 

(3,733)

 

(2,822)

 

(2,884)

 

(12,890)

 

(3,304)

 

(227)

 
                                   

Income from continuing operations before income taxes

 

93,676

 

93,311

 

79,389

 

79,360

 

345,736

 

89,667

 

94,871

 

Provision for income taxes

   

(28,002)

 

(26,914)

 

(22,531)

 

(21,143)

 

(98,590)

 

(25,950)

 

(28,843)

 

Income from continuing operations including noncontrolling interests

 

65,674

 

66,397

 

56,858

 

58,217

 

247,146

 

63,717

 

66,028

 

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

 

(4,924)

 

(3,698)

 

(3,343)

 

(5,177)

 

(17,142)

 

(4,739)

 

(4,701)

 

Net income from continuing operations attributable to Global Payments

 

$                         60,750

 

$            62,699

 

$            53,515

 

$            53,040

 

$               230,004

 

$                  58,978

 

$                  61,327

 
                                   

Diluted shares

   

81,298

 

82,188

 

82,636

 

82,142

 

82,120

 

80,339

 

80,344

 

Diluted earnings per share

   

$                             0.75

 

$                0.76

 

$                0.65

 

$                0.65

 

$                     2.80

 

$                      0.73

 

$                      0.76

 
                                   

See Schedules 11, 12 and 13 for reconciliation of normalized and cash earnings from continuing operations to GAAP.

 
                                   

We supplemented our historical 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 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated income from continuing operations on a cash earnings basis by excluding acquisition intangible amortization expense from our normalized 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 11

 

RECONCILIATION OF HISTORICAL CASH EARNINGS PER SHARE TO GAAP - FISCAL 2010 QUARTERLY

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 
                   
                   

(In thousands, except per share data)

 
                   
   

Three Months Ended

 
   

8/31/2009(3)

 

11/30/2009(3)

 
   

GAAP

Cash Earnings Adjustments(1)

Cash Earnings

 

GAAP

Cash Earnings Adjustments(1)

Cash Earnings

 
                   

Revenues

 

$             409,932

$                               -

$               409,932

 

$                         408,951

$                              -

$              408,951

 
                   

Operating expenses:

                 

  Cost of service

 

141,204

(7,884)

133,320

 

144,881

(8,342)

136,539

 

  Sales, general and administrative

 

179,485

-

179,485

 

175,368

-

175,368

 
   

320,689

(7,884)

312,805

 

320,249

(8,342)

311,907

 
                   

Operating income

 

89,243

7,884

97,127

 

88,702

8,342

97,044

 
                   

Other income (expense):

                 

  Interest and other income

 

690

-

690

 

690

-

690

 

  Interest and other expense

 

(4,141)

-

(4,141)

 

(4,423)

-

(4,423)

 
   

(3,451)

-

(3,451)

 

(3,733)

-

(3,733)

 
                   

Income from continuing operations before income taxes

 

85,792

7,884

93,676

 

84,969

8,342

93,311

 

Provision for income taxes

 

(25,536)

(2,466)

(28,002)

 

(23,655)

(3,259)

(26,914)

 

Income from continuing operations

 

60,256

5,418

65,674

 

61,314

5,083

66,397

 

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

 

(4,613)

(311)

(4,924)

 

(3,347)

(351)

(3,698)

 

Net income from continuing operations attributable to Global Payments

 

$               55,643

$                         5,107

$                 60,750

 

$                           57,967

$                        4,732

$                62,699

 
                   

Diluted shares

 

81,298

 

81,298

 

82,188

 

82,188

 

Diluted earnings per share

 

$                   0.68

$                           0.07

$                     0.75

 

$                               0.71

$                          0.05

$                    0.76

 
                 

 
   
   

Three Months Ended 2/28/2010(3)

 

Three Months Ended May 31, 2010

 
   

GAAP

Cash Earnings Adjustments(1)

Cash Earnings

 

GAAP

Employee Termination(2)

Normalized

Cash Earnings Adjustments(1)

Cash Earnings

 
                       

Revenues

 

$             398,535

$                               -

$               398,535

 

$                         425,050

$                              -

$              425,050

$                             -

$                      425,050

 
                       

Operating expenses:

                     

  Cost of service

 

146,202

(8,362)

137,840

 

152,322

-

152,322

(8,176)

144,146

 

  Sales, general and administrative

 

178,484

-

178,484

 

201,243

(2,583)

198,660

-

198,660

 
   

324,686

(8,362)

316,324

 

353,565

(2,583)

350,982

(8,176)

342,806

 
                       

Operating income

 

73,849

8,362

82,211

 

71,485

2,583

74,068

8,176

82,244

 
                       

Other income (expense):

                     

  Interest and other income

 

1,319

-

1,319

 

1,930

-

1,930

-

1,930

 

  Interest and other expense

 

(4,141)

-

(4,141)

 

(4,814)

-

(4,814)

-

(4,814)

 
   

(2,822)

-

(2,822)

 

(2,884)

-

(2,884)

-

(2,884)

 
                       

Income from continuing operations before income taxes

 

71,027

8,362

79,389

 

68,601

2,583

71,184

8,176

79,360

 

Provision for income taxes

 

(20,298)

(2,233)

(22,531)

 

(17,890)

(946)

(18,836)

(2,307)

(21,143)

 

Income from continuing operations

 

50,729

6,129

56,858

 

50,711

1,637

52,348

5,869

58,217

 

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

 

(2,990)

(353)

(3,343)

 

(4,842)

-

(4,842)

(335)

(5,177)

 

Net income from continuing operations attributable to Global Payments

 

$               47,739

$                         5,776

$                 53,515

 

$                           45,869

$                        1,637

$                47,506

$                       5,534

$                        53,040

 
                       

Diluted shares

 

82,636

 

82,636

 

82,142

 

82,142

 

82,142

 

Diluted earnings per share

 

$                   0.58

$                           0.07

$                     0.65

 

$                               0.56

$                          0.02

$                    0.58

$                         0.07

$                            0.65

 
                       
                       

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

 
   

2 Represents amounts due to our former President and Chief Operating Officer pursuant to his termination agreement dated April 21, 2010.  Also reflects the related income tax benefit.

 

3 There were no normalized adjustments during the three months ended August 30, 2009, November 30, 2009 and February 28, 2010.

 
   

We supplemented our historical 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 four quarters of fiscal 2010 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated income from continuing operations on a cash earnings basis by excluding acquisition intangible amortization expense from our normalized 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 12

 

RECONCILIATION OF HISTORICAL CASH EARNINGS PER SHARE TO GAAP - FISCAL 2010

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 
               
               

(In thousands, except per share data)

 
               
   

Fiscal Year Ended May 31 2010,

 
   

GAAP

Employee Termination(1)

Normalized

Cash Earnings Adjustments(2)

Cash Earnings

 
               

Revenues

 

$             1,642,468

$                               -

$             1,642,468

$                              -

$                1,642,468

 
               

Operating expenses:

             

  Cost of service

 

584,609

-

584,609

(32,764)

551,845

 

  Sales, general and administrative

 

734,580

(2,583)

731,997

-

731,997

 
   

1,319,189

(2,583)

1,316,606

(32,764)

1,283,842

 
               

Operating income

 

323,279

2,583

325,862

32,764

358,626

 
               

Other income (expense):

             

  Interest and other income

 

4,629

-

4,629

-

4,629

 

  Interest and other expense

 

(17,519)

-

(17,519)

-

(17,519)

 
   

(12,890)

-

(12,890)

-

(12,890)

 
               

Income from continuing operations before income taxes

 

310,389

2,583

312,972

32,764

345,736

 

Provision for income taxes

 

(87,379)

(946)

(88,325)

(10,265)

(98,590)

 

Income from continuing operations

 

223,010

1,637

224,647

22,499

247,146

 

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

 

(15,792)

-

(15,792)

(1,350)

(17,142)

 

Net income from continuing operations attributable to Global Payments

 

$                207,218

$                         1,637

$                208,855

$                      21,149

$                   230,004

 
               

Diluted shares

 

82,120

 

82,120

 

82,120

 

Diluted earnings per share

 

$                      2.52

$                           0.02

$                      2.54

$                          0.26

$                         2.80

 
               
               
               

1 Represents amounts due to our former President and Chief Operating Officer pursuant to his termination agreement dated April 21, 2010.  Also reflects the related income tax benefit.

 
               

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

 
               

We supplemented our historical 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 fiscal year 2010 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated income from continuing operations on a cash earnings basis by excluding acquisition intangible amortization expense from our normalized 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 13

 

RECONCILIATION OF HISTORICAL CASH EARNINGS PER SHARE TO GAAP - FISCAL 2011 QUARTERLY

 

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 
                 
                 

(In thousands, except per share data)

 
                 
   

Three Months Ended August 31, 2010

 
   

GAAP

Employee Termination and Other(1)

Foreign Tax Rate(2)

Normalized

Cash Earnings Adjustments(3)

Cash Earnings

 
                 

Revenues

 

$                440,138

$                               -

$                              -

$                440,138

$                              -

$                   440,138

 
                 

Operating expenses:

               

  Cost of service

 

151,041

(596)

-

150,445

(7,674)

142,771

 

  Sales, general and administrative

 

206,990

(2,594)

-

204,396

-

204,396

 
   

358,031

(3,190)

-

354,841

(7,674)

347,167

 
                 

Operating income

 

82,107

3,190

-

85,297

7,674

92,971

 
                 

Other income (expense):

               

  Interest and other income

 

1,537

-

-

1,537

-

1,537

 

  Interest and other expense

 

(4,841)

-

-

(4,841)

-

(4,841)

 
   

(3,304)

-

-

(3,304)

-

(3,304)

 
                 

Income from continuing operations before income taxes

 

78,803

3,190

-

81,993

7,674

89,667

 

Provision for income taxes

 

(24,981)

(1,162)

2,479

(23,664)

(2,286)

(25,950)

 

Income from continuing operations

 

53,822

2,028

2,479

58,329

5,388

63,717

 

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

 

(4,426)

-

-

(4,426)

(313)

(4,739)

 

Net income from continuing operations attributable to Global Payments

 

$                  49,396

$                         2,028

$                        2,479

$                  53,903

$                        5,075

$                     58,978

 
                 

Diluted shares

 

80,339

   

80,339

 

80,339

 

Diluted earnings per share

 

$                      0.61

$                           0.03

$                          0.03

$                      0.67

$                          0.06

$                         0.73

 
               

 
       
   

Three Months Ended November 30, 2010

 
   

GAAP

Employee Termination and Other(1)

 

Normalized

Cash Earnings Adjustments(3)

Cash Earnings

 
                 

Revenues

 

$                443,526

$                               -

 

$                443,526

$                              -

$                   443,526

 
                 

Operating expenses:

               

  Cost of service

 

154,205

(1,230)

 

152,975

(7,972)

145,003

 

  Sales, general and administrative

 

206,178

(2,753)

 

203,425

-

203,425

 
   

360,383

(3,983)

 

356,400

(7,972)

348,428

 
                 

Operating income

 

83,143

3,983

 

87,126

7,972

95,098

 
                 

Other income (expense):

               

  Interest and other income

 

4,072

-

 

4,072

-

4,072

 

  Interest and other expense

 

(4,299)

-

 

(4,299)

-

(4,299)

 
   

(227)

-

 

(227)

-

(227)

 
                 

Income from continuing operations before income taxes

 

82,916

3,983

 

86,899

7,972

94,871

 

Provision for income taxes

 

(24,546)

(1,436)

 

(25,982)

(2,861)

(28,843)

 

Income from continuing operations

 

58,370

2,547

 

60,917

5,111

66,028

 

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

 

(4,378)

-

 

(4,378)

(323)

(4,701)

 

Net income from continuing operations attributable to Global Payments

 

$                  53,992

$                         2,547

 

$                  56,539

$                        4,788

$                     61,327

 
                 

Diluted shares

 

80,344

   

80,344

 

80,344

 

Diluted earnings per share

 

$                      0.67

$                           0.03

 

$                      0.70

$                          0.06

$                         0.76

 
                 
                 

1 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.

 
   

2 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%.  

 

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

 
   

We supplemented our historical 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 August 31, 2010 and November 30, 2010 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated income from continuing operations on a cash earnings basis by excluding acquisition intangible amortization expense from our normalized 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.