Global Payments Reports Second Quarter Earnings

January 8, 2015

 

Further Increases Annual Fiscal 2015 Revenue, Margin and Cash EPS Outlook

Raises Share Repurchase Authorization to $300 Million

ATLANTA--(BUSINESS WIRE)-- Global Payments Inc. (NYSE: GPN) today announced results for its fiscal second quarter ended November 30, 2014.

"We are very pleased to deliver another quarter of solid performance across our direct businesses," said Chief Executive Officer Jeff Sloan. "We also continue to successfully expand our worldwide footprint, one of our key strategies to accelerate growth. During the quarter, we completed the acquisition of Ezidebit, a technology company with direct distribution in Australia and New Zealand and an expanding presence throughout Asia. We also announced an agreement to establish a new joint venture with Bank of the Philippine Islands. This partnership will increase our existing distribution in the highly attractive Philippines market. These transactions help fulfill the vision we set forth in 2012 with the purchase of the minority interest in our then joint venture in Asia."

Second Quarter 2015 Summary

  • Revenues grew 10% to $697.3 million, compared to $634.1 million in the second quarter of fiscal 2014.
  • Cash diluted earnings per share1 grew 19% to $1.27, compared to $1.07 in the second quarter of fiscal 2014.
  • GAAP diluted earnings per share were $1.10, compared to $1.02 in the second quarter of fiscal 2014.

2015 Outlook

Cameron Bready, Executive Vice President and Chief Financial Officer, stated, "We experienced strong organic revenue growth and margin expansion during the quarter, despite the strengthening of the U.S. dollar, and we continue to see solid performance from our recent acquisitions. Based on these results and our outlook for the remainder of the fiscal year, we are increasing our revenue, margin and cash earnings per share guidance."

The company is raising its annual fiscal 2015 revenue outlook to $2.75 billion to $2.80 billion, or 8% to 10% growth. In addition, Global Payments is increasing its outlook for annual fiscal 2015 diluted earnings per share on a cash basis to a range of $4.75 to $4.83, reflecting growth of 15% to 17% over fiscal 2014, and annual fiscal 2015 GAAP diluted earnings per share is expected to be in the range of $3.99 to $4.07. The company also now expects annual fiscal 2015 core cash operating margins to expand by as much as 50 basis points.

Capital Allocation

Global Payments' Board of Directors approved a fiscal 2015 second quarter dividend of $0.02 per share payable February 27, 2015 to shareholders of record as of February 13, 2015 and also approved an increase to the existing authorization for the company's share repurchase program, raising the total available authorization to $300 million.

Conference Call

Global Payments' management will host a conference call today, January 8, 2015 at 8:00 a.m. ET to discuss financial results and business highlights. Callers may access the conference call via the investor relations page of the company's website at www.globalpaymentsinc.com; or callers in North America may dial 877-674-6428 and callers outside North America may dial 970-315-0457. A replay of the call will be archived on the company's website within two hours of the live call.

About Global Payments

Global Payments Inc. is one of the largest worldwide providers of payment solutions for merchants, value added resellers, enterprise software providers, financial institutions, government agencies, multi-national corporations and independent sales organizations located throughout North America, Brazil, Europe and the Asia-Pacific region. Global Payments, a Fortune 1000 company, offers a comprehensive line of solutions and services for credit and debit cards, business-to-business purchasing cards, gift cards, electronic check conversion and check guarantee, verification and recovery including electronic check services, as well as terminal management. Visit www.globalpaymentsinc.com for more information about the company and its services.

_________________________

1See Schedule 2 for cash earnings and Schedules 6, 7 and 8 for reconciliations of historical cash earnings to GAAP.

This announcement and comments made by Global Payments' management may contain certain forward-looking statements within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including revenue and earnings estimates and management's expectations regarding future events and developments, are forward-looking statements and are subject to significant risks and uncertainties. Important factors that may cause actual events or results to differ materially from those anticipated by such forward-looking statements include our ability to safeguard our data; increased competition from non-traditional competitors; our ability to update our products and services in a timely manner; potential systems interruptions or failures; software defects or undetected errors; our ability to maintain Visa and MasterCard registration and financial institution sponsorship; our reliance on financial institutions to provide clearing services in connection with our settlement activities; our potential failure to comply with card network requirements; increased attrition of merchants, referral partners or independent sales organizations; our ability to increase our share of existing markets and expand into new markets; unanticipated increases in chargeback liability; increases in credit card network fees; changes in laws, regulations or network rules or interpretations thereof; foreign currency exchange and interest rate risks; political, economic and regulatory changes in the foreign countries in which we operate; future performance, integration and conversion of acquired operations; loss of key personnel; and other risks detailed in our SEC filings, including the most recently filed Annual Report on Form 10-K and subsequently filed Quarterly Report on Form 10-Q. We undertake 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,
    2014         2013       % Change     2014         2013       % Change  
  (unaudited)           (unaudited)      
                                 
Revenues $ 697,291       $ 634,122       10.0 %     $ 1,402,186       $ 1,263,807       10.9 %
                                 
Operating expenses:                                
Cost of service   257,796         235,170       9.6 %       517,635         465,915       11.1 %
Sales, general and administrative   315,511         294,045       7.3 %       636,169         585,601       8.6 %
Processing system intrusion           (7,000 )                     (7,000 )      
    573,307         522,215               1,153,804         1,044,516        
                                 
Operating income   123,984         111,907       10.8 %       248,382         219,291       13.3 %
                                 
Other income (expense):                                
Interest and other income   1,282         5,288       (75.8 )%       2,474         8,626       (71.3 )%
Interest and other expense   (10,350 )       (8,025 )     29.0 %       (21,360 )       (15,904 )     34.3 %
    (9,068 )       (2,737 )     231.3 %       (18,886 )       (7,278 )     159.5 %
                                 
Income before income taxes   114,916         109,170       5.3 %       229,496         212,013       8.2 %
Provision for income taxes   (29,660 )       (29,313 )     1.2 %       (59,806 )       (60,448 )     (1.1 )%
Net income   85,256         79,857       6.8 %       169,690         151,565       12.0 %
Less: Net income attributable to noncontrolling interests, net of income tax   (10,475 )       (5,960 )     75.8 %       (19,543 )       (13,025 )     50.0 %
Net income attributable to Global Payments $ 74,781       $ 73,897       1.2 %     $ 150,147       $ 138,540       8.4 %
                                 
                                 
Earnings per share attributable to Global Payments:                              
Basic $ 1.11       $ 1.02       8.4 %     $ 2.22       $ 1.90       16.7 %
Diluted $ 1.10       $ 1.02       8.6 %     $ 2.20       $ 1.88       16.8 %
                                 
Weighted average shares outstanding:                                
Basic   67,377         72,174               67,764         72,974        
Diluted   67,737         72,706               68,179         73,504        
                                                 
                                                 
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,  
      2014           2013         % Change           2014           2013         % Change    
                                               
Revenues   $ 697,291         $ 634,122         10.0 %       $ 1,402,186         $ 1,263,807         10.9 %  
                                               
Operating expenses:                                              
Cost of service     239,533           220,610         8.6 %         481,518           436,383         10.3 %  
Sales, general and administrative     315,511           290,697         8.5 %         639,110           580,757         10.0 %  
      555,044           511,307         8.6 %         1,120,628           1,017,140         10.2 %  
                                               
Operating income     142,247           122,815         15.8 %         281,558           246,667         14.1 %  
                                               
Other income (expense):                                              
Interest and other income     1,282           3,165         (59.5 )%         2,474           6,503         (62.0 )%  
Interest and other expense     (10,350 )         (8,025 )       29.0 %         (21,360 )         (15,904 )       34.3 %  
      (9,068 )         (4,860 )       86.6 %         (18,886 )         (9,401 )       100.9 %  
                                               
Income before income taxes     133,179           117,955         12.9 %         262,672           237,266         10.7 %  
Provision for income taxes     (35,520 )         (32,873 )       8.1 %         (70,950 )         (69,559 )       2.0 %  
Net income     97,659           85,082         14.8 %         191,722           167,707         14.3 %  
Less: Net income attributable to noncontrolling interests, net of income tax     (11,648 )         (7,197 )       61.8 %         (21,951 )         (15,633 )       40.4 %  
Net income attributable to Global Payments   $ 86,011         $ 77,885         10.4 %       $ 169,771         $ 152,074         11.6 %  
                                               
Earnings per share attributable to Global Payments:                                            
Basic   $ 1.28         $ 1.08         18.3 %       $ 2.51         $ 2.08         20.2 %  
Diluted   $ 1.27         $ 1.07         18.5 %       $ 2.49         $ 2.07         20.4 %  
                                               
Weighted average shares outstanding:                                              
Basic     67,377           72,174                   67,764           72,974            
Diluted     67,737           72,706                   68,179           73,504            
                                               
See Schedules 6 & 7 for a reconciliation of cash earnings to GAAP.  
     
     
SCHEDULE 3  
SEGMENT INFORMATION  
GLOBAL PAYMENTS INC. AND SUBSIDIARIES  
(In thousands)  
                                               
                                               
    Three Months Ended November 30,                  
    2014         2013         % Change    
    GAAP      

Cash
Earnings

  GAAP      

Cash
Earnings

      GAAP      

Cash
Earnings

 
                                               

Revenues:

                                             
United States   $ 404,784         $ 404,784         $ 361,793         $ 361,793         11.9 %       11.9 %  
Canada     83,992           83,992           85,240           85,240         (1.5 )%       (1.5 )%  
North America merchant services     488,776           488,776           447,033           447,033         9.3 %       9.3 %  
                                               
Europe     159,974           159,974           146,866           146,866         8.9 %       8.9 %  
Asia-Pacific     48,541           48,541           40,223           40,223         20.7 %       20.7 %  
International merchant services     208,515           208,515           187,089           187,089         11.5 %       11.5 %  
                                               
Total revenues   $ 697,291         $ 697,291         $ 634,122         $ 634,122         10.0 %       10.0 %  
                                               

Operating income (loss) for segments:

                                             
North America merchant services   $ 74,246         $ 85,419         $ 70,437         $ 77,621         5.4 %       10.0 %  
International merchant services     76,443           83,533           62,467           69,843         22.4 %       19.6 %  
Corporate1     (26,705 )         (26,705 )         (20,997 )         (24,649 )       27.2 %       8.3 %  
Operating income   $ 123,984         $ 142,247         $ 111,907         $ 122,815         10.8 %       15.8 %  
                                               
    Six Months Ended November 30,                  
    2014         2013         % Change    
    GAAP      

Cash
Earnings

  GAAP      

Cash
Earnings

      GAAP      

Cash
Earnings

 
                                               

Revenues:

                                             
United States   $ 818,825         $ 818,825         $ 725,626         $ 725,626         12.8 %       12.8 %  
Canada     173,957           173,957           171,912           171,912         1.2 %       1.2 %  
North America merchant services     992,782           992,782           897,538           897,538         10.6 %       10.6 %  
                                               
Europe     322,762           322,762           290,054           290,054         11.3 %       11.3 %  
Asia-Pacific     86,642           86,642           76,215           76,215         13.7 %       13.7 %  
International merchant services     409,404           409,404           366,269           366,269         11.8 %       11.8 %  
                                               
Total revenues   $ 1,402,186         $ 1,402,186         $ 1,263,807         $ 1,263,807         10.9 %       10.9 %  
                                               

Operating income (loss) for segments:

                                             
North America merchant services   $ 152,183         $ 174,734         $ 140,136         $ 157,025         8.6 %       11.3 %  
International merchant services     150,045           160,670           124,008           138,600         21.0 %       15.9 %  
Corporate1     (53,846 )         (53,846 )         (44,853 )         (48,958 )       20.0 %       10.0 %  
Operating income   $ 248,382         $ 281,558         $ 219,291         $ 246,667         13.3 %       14.1 %  
                                               
                                               
1 GAAP earnings for the three and six months ended November 30, 2013 include insurance proceeds of $7.0 million related to the fiscal 2012 processing system intrusion.  
                                               
See Schedule 8 for reconciliation of cash earnings segment information to GAAP.  
   
   
SCHEDULE 4  
CONSOLIDATED BALANCE SHEETS  
GLOBAL PAYMENTS INC. AND SUBSIDIARIES  
(In thousands, except share data)  
               
               
    November 30, 2014       May 31, 2014  
    (unaudited)          
ASSETS              
Current assets:              
Cash and cash equivalents   $ 644,469         $ 581,872    
Accounts receivable, net of allowances for doubtful accounts of $469 and $401, respectively     197,053           214,574    
Claims receivable, net     577           809    
Settlement processing assets     1,122,321           780,917    
Inventory     8,002           6,636    
Deferred income taxes     12,761           12,963    
Prepaid expenses and other current assets     40,072           45,673    
Total current assets     2,025,255           1,643,444    
Goodwill     1,483,615           1,337,285    
Other intangible assets, net     542,992           535,173    
Property and equipment, net     362,809           369,753    
Deferred income taxes     95,161           101,928    
Other     31,755           31,067    
Total assets   $ 4,541,587         $ 4,018,650    
               
LIABILITIES AND EQUITY              
Current liabilities:              
Lines of credit   $ 530,721         $ 440,128    
Current portion of long-term debt     46,875           17,677    
Accounts payable and accrued liabilities     303,008           290,106    
Settlement processing obligations     781,262           451,317    
Income taxes payable     14,267           12,390    
Total current liabilities     1,676,133           1,211,618    
Long-term debt     1,554,125           1,376,002    
Deferred income taxes     200,848           209,099    
Other long-term liabilities     88,245           89,132    
Total liabilities     3,519,351           2,885,851    
               
Commitments and contingencies              
Equity:              
Preferred stock, no par value; 5,000,000 shares authorized and none issued                  
Common stock, no par value; 200,000,000 shares authorized; 67,031,081 issued and outstanding at November 30, 2014 and 68,845,643 issued and outstanding at May 31, 2014                  
Paid-in capital     144,419           183,023    
Retained earnings     852,972           815,980    
Accumulated other comprehensive loss     (102,726 )         (1,776 )  
Total Global Payments shareholders' equity     894,665           997,227    
Noncontrolling interests     127,571           135,572    
Total equity     1,022,236           1,132,799    
Total liabilities and equity   $ 4,541,587         $ 4,018,650    
                       
                       
SCHEDULE 5  
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS  
GLOBAL PAYMENTS INC. AND SUBSIDIARIES  
(In thousands)  
               
               
    Six Months Ended November 30,  
      2014           2013    
Cash flows from operating activities:              
Net income   $ 169,690         $ 151,565    
Adjustments to reconcile net income to net cash provided by operating activities:              
Depreciation and amortization of property and equipment     33,055           28,439    
Amortization of acquired intangibles     36,117           28,953    
Share-based compensation expense     9,145           11,965    
Provision for operating losses and bad debts     7,432           10,249    
Deferred income taxes     (982 )         6,073    
Other, net     (387 )         (4,345 )  
Changes in operating assets and liabilities, net of the effects of acquisitions:              
Accounts receivable     17,521           (6,353 )  
Claims receivable     (4,881 )         (6,567 )  
Settlement processing assets and obligations, net     (13,778 )         204,307    
Inventory     (1,506 )         2,237    
Prepaid expenses and other assets     5,409           5,761    
Accounts payable and other accrued liabilities     (31,503 )         (21,845 )  
Income taxes payable     1,604           1,244    
Net cash provided by operating activities     226,936           411,683    
Cash flows from investing activities:              
Business, intangible and other asset acquisitions, net of cash acquired     (223,651 )         (2,324 )  
Capital expenditures     (33,290 )         (41,178 )  
Principal collections on financing receivables     219           1,328    
Net proceeds from sales of investments and business     10,528           3,102    
Net cash used in investing activities     (246,194 )         (39,072 )  
Cash flows from financing activities:              
Net borrowings on short-term lines of credit     90,593           259,047    
Proceeds from issuance of long-term debt     1,080,000           810,000    
Principal payments under long-term debt     (872,679 )         (779,380 )  
Repurchase of common stock     (179,724 )         (250,183 )  
Proceeds from stock issued under share-based compensation plans     17,099           27,366    
Common stock repurchased - share-based compensation plans     (15,705 )         (5,260 )  
Tax benefit from share-based compensation plans     3,599           4,415    
Distributions to noncontrolling interests     (15,485 )         (15,593 )  
Dividends paid     (2,693 )         (2,894 )  
Net cash provided by financing activities     105,005           47,518    
Effect of exchange rate changes on cash     (23,150 )         (3,766 )  
Increase in cash and cash equivalents     62,597           416,363    
Cash and cash equivalents, beginning of the period     581,872           680,470    
Cash and cash equivalents, end of the period   $ 644,469         $ 1,096,833    
                       
                       
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, 2014  
      GAAP  

Processing
System
Intrusion

  Other  

Cash Earnings
Adjustments3

 

Cash
Earnings

 
Revenues     $ 697,291     $     $     $     $ 697,291    
Operating expenses:                        
Cost of service       257,796                   (18,263 )     239,533    
Sales, general and administrative       315,511                         315,511    
Processing system intrusion                                  
        573,307                   (18,263 )     555,044    
                         
Operating income       123,984                   18,263       142,247    
                         
Other income (expense):                        
Interest and other income       1,282                         1,282    
Interest and other expense       (10,350 )                       (10,350 )  
        (9,068 )                       (9,068 )  
                         
Income before income taxes       114,916                   18,263       133,179    
Provision for income taxes       (29,660 )                 (5,860 )     (35,520 )  
Net income       85,256                   12,403       97,659    
Less: Net income attributable to noncontrolling interests, net of income tax     (10,475 )                 (1,173 )     (11,648 )  
Net income attributable to Global Payments   $ 74,781     $     $     $ 11,230     $ 86,011    
                         
Diluted shares       67,737                   67,737    
Diluted earnings per share     $ 1.10     $     $     $ 0.17     $ 1.27    
                         
                         
      Three Months Ended November 30, 2013  
      GAAP  

Processing
System
Intrusion1

  Other2  

Cash Earnings
Adjustments3

 

Cash
Earnings

 
Revenues     $ 634,122     $     $     $     $ 634,122    
Operating expenses:                        
Cost of service       235,170                   (14,560 )     220,610    
Sales, general and administrative       294,045             (3,348 )           290,697    
Processing system intrusion       (7,000 )     7,000                      
        522,215       7,000       (3,348 )     (14,560 )     511,307    
                         
Operating income       111,907       (7,000 )     3,348       14,560       122,815    
                         
Other income (expense):                        
Interest and other income       5,288             (2,123 )           3,165    
Interest and other expense       (8,025 )                       (8,025 )  
        (2,737 )           (2,123 )           (4,860 )  
                         
Income before income taxes       109,170       (7,000 )     1,225       14,560       117,955    
(Provision for) benefit from income taxes     (29,313 )     2,393       (1,145 )     (4,808 )     (32,873 )  
Net income (loss)       79,857       (4,607 )     80       9,752       85,082    
Less: Net income attributable to noncontrolling interests, net of income tax     (5,960 )                 (1,237 )     (7,197 )  
Net income (loss) attributable to Global Payments   $ 73,897     $ (4,607 )   $ 80     $ 8,515     $ 77,885    
                         
Diluted shares       72,706                   72,706    
Diluted earnings (loss) per share     $ 1.02     $ (0.07 )   $ 0.00     $ 0.12     $ 1.07    
                         
1 Represents insurance proceeds associated with the fiscal 2012 processing system intrusion.  
                         
2 For the three months ended November 30, 2013, represents one-time charges primarily related to employee termination benefits and a one-time credit related to the gain on the sale of an interest in a business.  
                         
3 Represents adjustments to cost of service to exclude acquisition intangible amortization expense and the related income tax benefit.  
                         
We supplemented our reporting of income and the related earnings per share information determined in accordance with GAAP by reporting income and the related earnings per share for the three months ended November 30, 2014 and 2013 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. In the three months ended November 30, 2014, we calculated income and earnings per share on a cash basis by excluding amounts related to acquisition intangible amortization. In the three months ended November 30, 2013, we calculated income and earnings per share on a cash basis by excluding amounts related to acquisition intangible amortization, the processing system intrusion, one-time charges related to employee termination benefits and a one-time credit related to the gain on the sale of an interest in a business. We exclude these charges in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations. Our income and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, income and earnings per share determined in accordance with GAAP. Our measures of income and earnings per share on a cash earnings basis reflect management's judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.  
   
   
SCHEDULE 7  
RECONCILIATION OF YEAR TO DATE CASH EARNINGS ATTRIBUTABLE TO GLOBAL PAYMENTS TO GAAP  
GLOBAL PAYMENTS INC. AND SUBSIDIARIES  
(In thousands, except per share data)  
                         
      Six Months Ended November 30, 2014  
      GAAP  

Processing
System Intrusion

  Other2  

Cash Earnings
Adjustments3

 

Cash Earnings

 
Revenues     $ 1,402,186     $     $     $     $ 1,402,186    
Operating expenses:                        
Cost of service       517,635                   (36,117 )     481,518    
Sales, general and administrative       636,169             2,941             639,110    
Processing system intrusion                                  
        1,153,804             2,941       (36,117 )     1,120,628    
Operating income       248,382             (2,941 )     36,117       281,558    
Other income (expense):                        
Interest and other income       2,474                         2,474    
Interest and other expense       (21,360 )                       (21,360 )  
        (18,886 )                       (18,886 )  
Income (loss) before income taxes       229,496             (2,941 )     36,117       262,672    
(Provision for) benefit from income taxes       (59,806 )           588       (11,732 )     (70,950 )  
Net income (loss)       169,690             (2,353 )     24,385       191,722    
Less: Net income attributable to noncontrolling interests, net of income tax     (19,543 )                 (2,408 )     (21,951 )  
Net income (loss) attributable to Global Payments     $ 150,147     $     $ (2,353 )   $ 21,977     $ 169,771    
Diluted shares       68,179                   68,179    
Diluted earnings (loss) per share     $ 2.20     $     $ (0.03 )   $ 0.32     $ 2.49    
                         
                         
      Six Months Ended November 30, 2013  
      GAAP  

Processing
System Intrusion1

  Other2  

Cash Earnings
Adjustments3

  Cash Earnings  
                         
Revenues     $ 1,263,807     $     $     $     $ 1,263,807    
Operating expenses:                        
Cost of service       465,915             (579 )     (28,953 )     436,383    
Sales, general and administrative       585,601             (4,844 )           580,757    
Processing system intrusion       (7,000 )     7,000                      
        1,044,516       7,000       (5,423 )     (28,953 )     1,017,140    
Operating income       219,291       (7,000 )     5,423       28,953       246,667    
Other income (expense):                        
Interest and other income       8,626             (2,123 )           6,503    
Interest and other expense       (15,904 )                       (15,904 )  
        (7,278 )           (2,123 )           (9,401 )  
Income (loss) before income taxes       212,013       (7,000 )     3,300       28,953       237,266    
(Provision for) benefit from income taxes       (60,448 )     2,393       (1,934 )     (9,570 )     (69,559 )  
Net income (loss)       151,565       (4,607 )     1,366       19,383       167,707    
Less: Net income attributable to noncontrolling interests, net of income tax     (13,025 )                 (2,608 )     (15,633 )  
Net income (loss) attributable to Global Payments     $ 138,540     $ (4,607 )   $ 1,366     $ 16,775     $ 152,074    
Diluted shares       73,504                   73,504    
Diluted earnings (loss) per share     $ 1.88     $ (0.07 )   $ 0.02     $ 0.24     $ 2.07    
                         
1 Represents insurance proceeds associated with the fiscal 2012 processing system intrusion.      
                         
2 For the six months ended November 30, 2014, represents a gain on the sale of a component of our Russia business that leased ATMs to our sponsor bank in Russia. For the six months ended November 30, 2013, represents one-time charges primarily related to employee termination benefits, resolution of a contract related contingency and a one-time credit related to the gain on the sale of an interest in a business.  
                         
3 Represents adjustments to cost of service to exclude acquisition intangible amortization expense and the related income tax benefit.  
                         
We supplemented our reporting of income and the related earnings per share information determined in accordance with GAAP by reporting income and the related earnings per share for the six months ended November 30, 2014 and 2013 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. For the six months ended November 30, 2014, we calculated income and earnings per share on a cash basis by excluding amounts related to acquisition intangible amortization and a gain on the sale of a component of our Russia business that leased ATMs to our sponsor bank in Russia. In the six months ended November 30, 2013, we calculated income and earnings per share on a cash basis by excluding amounts related to acquisition intangible amortization, the processing system intrusion, one-time charges related to employee termination benefits and resolution of a contract related contingency, and a one-time credit related to the gain on the sale of an interest in a business. We exclude these charges in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations. Our income and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, income and earnings per share determined in accordance with GAAP. Our measures of income and earnings per share on a cash earnings basis reflect management's judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.  
   
   
SCHEDULE 8  
RECONCILIATION OF CASH EARNINGS SEGMENT INFORMATION TO GAAP  
GLOBAL PAYMENTS INC. AND SUBSIDIARIES  
(In thousands)  
                                               
                                               
    Three Months Ended November 30,  
    2014   2013    
    GAAP  

Processing
System
Intrusion

  Other  

Cash Earnings
Adjustments3

  Cash Earnings   GAAP  

Processing
System
Intrusion1

  Other2  

Cash Earnings
Adjustments3

  Cash Earnings  
                                               
Revenues:                                              
United States   $ 404,784     $   $     $   $ 404,784         $ 361,793     $     $   $   $ 361,793    
Canada     83,992                     83,992           85,240                     85,240    
North America merchant services     488,776                     488,776           447,033                     447,033    
                                               
Europe     159,974                     159,974           146,866                     146,866    
Asia-Pacific     48,541                     48,541           40,223                     40,223    
International merchant services     208,515                     208,515           187,089                     187,089    
                                               
Total revenues   $ 697,291     $   $     $   $ 697,291         $ 634,122     $     $   $   $ 634,122    
                                               
Operating income (loss) for segments:                                        
North America merchant services   $ 74,246     $   $     $ 11,173   $ 85,419         $ 70,437     $     $   $ 7,184   $ 77,621    
International merchant services     76,443                 7,090     83,533           62,467                 7,376     69,843    
Corporate     (26,705 )                   (26,705 )         (20,997 )     (7,000 )     3,348         (24,649 )  
Operating income (loss)   $ 123,984     $   $     $ 18,263   $ 142,247         $ 111,907     $ (7,000 )   $ 3,348   $ 14,560   $ 122,815    
                                               
    Six Months Ended November 30,  
    2014   2013    
    GAAP  

Processing
System
Intrusion

  Other2  

Cash Earnings
Adjustments3

  Cash Earnings   GAAP  

Processing
System
Intrusion1

  Other 2  

Cash Earnings
Adjustments3

  Cash Earnings  
                                               
Revenues:                                              
United States   $ 818,825     $   $     $   $ 818,825         $ 725,626     $     $   $   $ 725,626    
Canada     173,957                     173,957           171,912                     171,912    
North America merchant services     992,782                     992,782           897,538                     897,538    
                                               
Europe     322,762                     322,762           290,054                     290,054    
Asia-Pacific     86,642                     86,642           76,215                     76,215    
International merchant services     409,404                     409,404           366,269                     366,269    
                                               
Total revenues   $ 1,402,186     $   $     $   $ 1,402,186         $ 1,263,807     $     $   $   $ 1,263,807    
                                               
Operating income (loss) for segments:                                        
North America merchant services   $ 152,183     $   $     $ 22,551   $ 174,734         $ 140,136     $     $ 2,518   $ 14,371   $ 157,025    
International merchant services     150,045           (2,941 )     13,566     160,670           124,008             10     14,582     138,600    
Corporate     (53,846 )                   (53,846 )         (44,853 )     (7,000 )     2,895         (48,958 )  
Operating income (loss)   $ 248,382     $   $ (2,941 )   $ 36,117   $ 281,558         $ 219,291     $ (7,000 )   $ 5,423   $ 28,953   $ 246,667    
                                               
1 Represents insurance proceeds associated with the fiscal 2012 processing system intrusion.  
                                               
2 For the six months ended November 30, 2014, represents a gain on the sale of a component of our Russia business that leased ATMs to our sponsor bank in Russia. For the three and six months ended November 30, 2013, represents one-time charges primarily related to employee termination benefits and resolution of a contract related contingency.  
                                               
                                               
3 Represents acquisition intangible amortization expense.  
   
SCHEDULE 9
OUTLOOK SUMMARY
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In billions, except per share data)
             
   

Fiscal 2014
Actual

 

Fiscal 2015
Outlook

  % Change FY14
             

Revenue Outlook

           
Total Revenues   $2.55   $2.75 to $2.80   8% to 10%
             

EPS Outlook

           
Cash EPS   $4.12   $4.75 to $4.83   15% to 17%
Acquisition-related intangibles assets, non-recurring items and processing system intrusion1   (0.75)   (0.76)   1 %
GAAP Diluted EPS   $3.37   $3.99 to $4.07   18% to 21%
             
We supplemented our reporting of income and the related earnings per share information determined in accordance with GAAP by reporting income and the related earnings per share for the fiscal years 2015 and 2014 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated income and earnings per share on a cash basis by excluding amounts related to acquisition intangible amortization, the processing system intrusion, acceleration of equity awards and other costs associated with the retirement of our former Chairman and CEO, a credit related to the sale of an interest in our Brazil business and a subsequent charge associated with our retained interest, non-cash losses from the retirement of fixed assets, employee termination benefits, resolution of a contract related contingency, costs associated with debt refinancing and HSBC's share of dividends declared by Global Payments Asia-Pacific. We exclude these charges in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations. Our income and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, income and earnings per share determined in accordance with GAAP. Our measures of income and earnings per share on a cash earnings basis reflect management's judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.
             
1 Fiscal 2015 reflects $0.72 of acquisition intangible amortization and $0.04 of one-time charges. Fiscal 2014 reflects acquisition intangible amortization of $0.51, a processing system intrusion credit of ($0.07) and non-recurring items of $0.31. Other non-recurring items include acceleration of equity awards and other costs associated with the retirement of our former Chairman and CEO, a credit related to the sale of an interest in our Brazil business and a subsequent charge associated with our retained interest, non-cash losses from the retirement of fixed assets, employee termination benefits, resolution of a contract related contingency, costs associated with debt refinancing and HSBC's share of dividends declared by Global Payments Asia-Pacific.

 

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

Source: Global Payments Inc.

 

 

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