Global Payments Reports Second Quarter Earnings for Fiscal 2013

January 8, 2013
ATLANTA, Jan. 8, 2013 /PRNewswire/ -- Global Payments Inc. (NYSE: GPN), a leading, worldwide provider of electronic transaction processing solutions, today announced results for its fiscal second quarter ended November 30, 2012. 

 

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

Second Quarter 2013 Summary

  • Revenue grew 11% to $588.5 million compared to $530.5 million in the second quarter of 2012.
  • Cash diluted earnings per share[1] grew 8% to $0.93 compared to $0.86 in the second quarter of 2012.
  • GAAP diluted earnings per share were $0.89, compared to $0.78 in the second quarter of 2012.

Chairman and CEO Paul R. Garcia said, "We are pleased with our solid performance in the quarter and the recent completion of the two previously announced acquisitions, Accelerated Payment Technologies in October, and the remaining 44% ownership interest in the Asia-Pacific joint venture from HSBC in December. We have also increased our full-year cash EPS expectation to a range of $3.61 to $3.68.

"Additionally, I am delighted to announce that we have essentially completed our remediation work as anticipated and the required documentation is in the process of being provided to the Qualified Security Assessor for verification. This verification allows the Networks to evaluate the results and return us to the list of PCI compliant service providers," concluded Garcia.

Share Repurchase Authorization

The Board of Directors approved an additional $150 million share repurchase authorization of Global Payments' stock which increased the current $150 million share repurchase authorization to a total of $300 million.  As of January 8, 2013, $287 million remains available.  Under this program, Global Payments may repurchase shares in the open market or as otherwise may be determined by the company, subject to market conditions, business opportunities and other factors.  Repurchased shares will be retired but will be available for future issuance.

David Mangum, Senior Executive Vice President and CFO, stated,  "We are pleased with the increase in the share repurchase authorization and we expect to execute on our buyback plans. With the recently increased financing capacity we completed in the second quarter of 2013, we have significant capital flexibility to drive organic growth, acquisitions and on-going share repurchases."

Acquisition Closings and Funding

Global Payments closed the Accelerated Payment Technologies (APT) acquisition for $413 million on October 1, 2012.  APT is an innovative provider of fully-integrated payment technology solutions for small to medium sized merchants.  The company also closed on a new five-year senior unsecured term loan facility of $700 million and increased its existing senior unsecured revolving credit facility by $150 million.  In addition, effective December 1, 2012, the company completed its previously announced acquisition of the remaining 44% ownership interest in the Asia-Pacific joint venture for $242 million. Global Payments will continue to be HSBC's preferred strategic partner for card acquiring services in Asia-Pacific, covering 11 markets.

2013 Outlook

For the full-year of fiscal 2013, the company continues to expect annual revenue of $2,360 million to $2,400 million, or 7% to 9% growth over fiscal 2012. 

Annual expectations for fiscal 2013 diluted earnings per share on a cash basis are now increased to a range of $3.61 to $3.68, or growth of 2% to 4% over fiscal 2012.  On a constant currency basis, the company continues to expect revenue to grow 8% to 10% and diluted earnings per share on a cash basis to grow 5% to 7%. 

Annual fiscal 2013 GAAP diluted earnings per share, excluding the impact of all intrusion remediation costs, are expected to be in a range of $3.01 to $3.08.

Both cash and GAAP diluted earnings per share expectations exclude the impact of any potential future share repurchases.

For reconciliation of Cash Earnings to GAAP and constant currency, see schedule 9.

Conference Call

Global Payments will hold a conference call today, January 8, 2013 at 5:00 p.m. EST to discuss financial results and business highlights.  Callers may access the conference call via the investor relations page of the company's website at www.globalpaymentsinc.com by clicking the "Webcast" button; or callers in North America may dial 1-888-895-3550 and callers outside North America may dial 1-706-758-8809.  The pass code is "GPN."  A replay of the call may be accessed through the Global Payments website through January 21, 2013.   

About Global Payments

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

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

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

     

Investor contact:  investor.relations@globalpay.com

Media contact:  media.relations@globalpay.com

Jane Elliott                 

Kay Sharpton                                     

Amy Corn

770-829-8234             

770-829-8870                                     

770-829-8755

     

 

SCHEDULE 1

                       

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,

   
       

2012

 

2011

 

% Change

 

2012

 

2011

 

% Change

       

(unaudited)

               
                             

Revenues

     

$        588,538

 

$         530,505

 

11%

 

$      1,178,825

 

$    1,073,276

 

10%

                             

Operating expenses:

                       

     Cost of service

   

210,268

 

185,931

 

13%

 

414,659

 

377,467

 

10%

     Sales, general and administrative

 

276,177

 

247,994

 

11%

 

557,596

 

490,619

 

14%

     Processing system intrusion

 

(14,489)

 

-

 

NM

 

9,500

 

-

 

NM

       

471,956

 

433,925

 

9%

 

981,755

 

868,086

 

13%

                             

Operating income

   

116,582

 

96,580

 

21%

 

197,070

 

205,190

 

(4%)

                             

Other income (expense):

                       

     Interest and other income

 

2,187

 

2,259

 

(3%)

 

4,170

 

4,760

 

(12%)

     Interest and other expense

 

(14,609)

 

(4,878)

 

199%

 

(18,154)

 

(8,965)

 

102%

       

(12,422)

 

(2,619)

 

374%

 

(13,984)

 

(4,205)

 

233%

                             

Income before income taxes 

 

104,160

 

93,961

 

11%

 

183,086

 

200,985

 

(9%)

Provision for income taxes

 

(28,789)

 

(25,812)

 

12%

 

(53,553)

 

(60,755)

 

(12%)

Net income

   

75,371

 

68,149

 

11%

 

129,533

 

140,230

 

(8%)

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

 

(5,188)

 

(6,968)

 

(26%)

 

(12,675)

 

(15,075)

 

(16%)

          Net income attributable to Global Payments

 

$          70,183

 

$           61,181

 

15%

 

$         116,858

 

$       125,155

 

(7%)

                             

Earnings per share attributable to Global Payments:

                       

          Basic

   

$              0.89

 

$               0.78

 

14%

 

$               1.49

 

$             1.58

 

(6%)

          Diluted

   

$              0.89

 

$               0.78

 

14%

 

$               1.48

 

$             1.57

 

(6%)

                             

Weighted average shares outstanding:

                       

          Basic

   

78,751

 

78,348

     

78,669

 

79,207

   

          Diluted

   

79,144

 

78,876

     

79,062

 

79,831

   
                             
                             

NM - Not Meaningful

                       
                             

 

SCHEDULE 2

                       

CASH EARNINGS ATTRIBUTABLE TO GLOBAL PAYMENTS

             

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

               
                             

(In thousands, except per share data)

                 
                             
       

Three Months Ended November 30,

     

Six Months Ended November 30,

   
       

2012

 

2011

 

% Change

 

2012

 

2011

 

% Change

                             

Revenues

     

$         588,538

 

$       530,505

 

11%

 

$      1,178,825

 

$    1,073,276

 

10%

                             

Operating expenses:

                       

     Cost of service

   

195,932

 

173,778

 

13%

 

388,937

 

352,671

 

10%

     Sales, general and administrative

 

276,177

 

247,994

 

11%

 

556,796

 

490,619

 

13%

       

472,109

 

421,772

 

12%

 

945,733

 

843,290

 

12%

                             

Operating income

   

116,429

 

108,733

 

7%

 

233,092

 

229,986

 

1%

                             

Other income (expense):

                       

     Interest and other income

 

2,187

 

2,259

 

(3%)

 

4,170

 

4,760

 

(12%)

     Interest and other expense

 

(6,226)

 

(4,878)

 

28%

 

(9,771)

 

(8,965)

 

9%

       

(4,039)

 

(2,619)

 

54%

 

(5,601)

 

(4,205)

 

33%

                             

Income before income taxes 

 

112,390

 

106,114

 

6%

 

227,491

 

225,781

 

1%

Provision for income taxes

 

(29,385)

 

(29,569)

 

(1%)

 

(65,938)

 

(68,251)

 

(3%)

Net income  

   

83,005

 

76,545

 

8%

 

161,553

 

157,530

 

3%

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

 

(9,419)

 

(8,913)

 

6%

 

(19,171)

 

(19,085)

 

0%

Net income attributable to Global Payments

 

$           73,586

 

$         67,632

 

9%

 

$         142,382

 

$       138,445

 

3%

                             
                             

Basic earnings per share

 

$               0.93

 

$             0.86

 

8%

 

$               1.81

 

$             1.75

 

3%

                             

Diluted earnings per share

 

$               0.93

 

$             0.86

 

8%

 

$               1.80

 

$             1.73

 

4%

                             

Weighted average shares outstanding:

                       

          Basic

   

78,751

 

78,348

     

78,669

 

79,207

   

          Diluted

   

79,144

 

78,876

     

79,062

 

79,831

   
                             
                             

NM - Not Meaningful

                       
                             

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

           
                             

 

SCHEDULE 3

                         

SEGMENT INFORMATION 

                       

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

                   
                                     

(In thousands)

                         
                                     
               

 Three Months Ended November 30, 

       
               

2012

 

2011

 

 % Change 

               

 GAAP 

 

 Cash

Earnings 

 

 GAAP 

 

 Cash

Earnings 

 

 GAAP 

 

 Cash

Earnings

                                     
 

Revenues:

                         
 

United States

   

$    339,998

 

$    339,998

 

$    293,416

 

$    293,416

 

16%

 

16%

 

Canada

   

80,770

 

80,770

 

85,521

 

85,521

 

(6%)

 

(6%)

   

North America merchant services

 

420,768

 

420,768

 

378,937

 

378,937

 

11%

 

11%

                                     
 

Europe

   

131,161

 

131,161

 

115,169

 

115,169

 

14%

 

14%

 

Asia-Pacific

   

36,609

 

36,609

 

36,399

 

36,399

 

1%

 

1%

   

International merchant services

 

167,770

 

167,770

 

151,568

 

151,568

 

11%

 

11%

                                     
     

Total revenues

 

$    588,538

 

$    588,538

 

$    530,505

 

$    530,505

 

11%

 

11%

                                     
 

Operating income:

                         
 

North America merchant services

 

$      67,114

 

$      73,280

 

$      70,673

 

$      73,495

 

(5%)

 

(0%)

 

International merchant services

 

53,987

 

62,157

 

44,494

 

53,825

 

21%

 

15%

 

Corporate1

   

(4,519)

 

(19,008)

 

(18,587)

 

(18,587)

 

76%

 

(2%)

     

Operating income

 

$    116,582

 

$    116,429

 

$      96,580

 

$    108,733

 

21%

 

7%

                                     
                                     
               

 Six Months Ended November 30, 

       
               

2012

 

2011

 

 % Change 

               

 GAAP 

 

 Cash Earnings 

 

 GAAP 

 

 Cash Earnings 

 

 GAAP 

 

 Cash Earnings 

                                     
 

Revenues:

                         
 

United States

   

$    685,896

 

$    685,896

 

$    580,841

 

$    580,841

 

18%

 

18%

 

Canada

   

161,667

 

161,667

 

176,742

 

176,742

 

(9%)

 

(9%)

   

North America merchant services

 

847,563

 

847,563

 

757,583

 

757,583

 

12%

 

12%

                                     
 

Europe

   

259,626

 

259,626

 

244,583

 

244,583

 

6%

 

6%

 

Asia-Pacific

   

71,636

 

71,636

 

71,110

 

71,110

 

1%

 

1%

   

International merchant services

 

331,262

 

331,262

 

315,693

 

315,693

 

5%

 

5%

                                     
     

Total revenues

 

$ 1,178,825

 

$ 1,178,825

 

$ 1,073,276

 

$ 1,073,276

 

10%

 

10%

                                     
 

Operating income:

                         
 

North America merchant services

 

$    134,331

 

$    144,723

 

$    142,431

 

$    148,111

 

(6%)

 

(2%)

 

International merchant services

 

111,127

 

127,201

 

100,152

 

119,268

 

11%

 

7%

 

Corporate1

   

(48,388)

 

(38,832)

 

(37,393)

 

(37,393)

 

(29%)

 

(4%)

     

Operating income

 

$    197,070

 

$    233,092

 

$    205,190

 

$    229,986

 

(4%)

 

1%

                                     

1Fiscal 2013 GAAP amounts include a processing intrusion credit of $14.5 million for the three months ended November 30, 2012 and processing system intrusion costs of $9.5 million for the six months ended November 30, 2012.

                                     

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

                                     

 

SCHEDULE 4

         

CONSOLIDATED BALANCE SHEETS

       

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

       
               

(In thousands)

           
               
       

November 30,

 

May 31,

 
       

2012

 

2012

 
       

(unaudited)

     

ASSETS

           

Current assets:

           

Cash and cash equivalents

 

$         998,261

 

$       781,275

 

Accounts receivable, net of allowances for doubtful accounts of $833 and $532, respectively

183,256

 

182,962

 

Claims receivable, net of allowance for losses of $3,786 and $3,435, respectively

968

 

1,029

 

Settlement processing assets

 

237,640

 

217,994

 

Inventory

   

14,147

 

9,864

 

Deferred income taxes

 

6,464

 

21,969

 

Prepaid expenses and other current assets

49,184

 

33,646

 

Total current assets

 

1,489,920

 

1,248,739

 
               

Goodwill

   

1,059,520

 

724,687

 

Other intangible assets, net of accumulated amortization of $267,956 and $235,296, respectively

416,170

 

290,188

 

Property and equipment, net of accumulated depreciation of $179,846 and $161,911, respectively

338,195

 

305,848

 

Deferred income taxes

 

97,966

 

97,235

 

Other

     

26,950

 

21,446

 
               

Total assets

 

$      3,428,721

 

$    2,688,143

 
               

LIABILITIES AND EQUITY

       

Current liabilities:

           

Lines of credit

   

$         212,399

 

$       215,391

 

Current portion of long-term debt

102,425

 

76,420

 

Commitment to purchase redeemable noncontrolling interest

242,000

 

-

 

Accounts payable and accrued liabilities

244,499

 

316,313

 

Settlement processing obligations

228,711

 

216,878

 

Income taxes payable

 

7,436

 

12,283

 

  Total current liabilities

 

1,037,470

 

837,285

 
               

Long-term debt

   

777,988

 

236,565

 

Deferred income taxes

 

167,365

 

106,644

 

Other long-term liabilities

 

71,097

 

62,306

 

Total liabilities

 

2,053,920

 

1,242,800

 
               

Commitments and contingencies

       
               

Redeemable noncontrolling interest

-

 

144,422

 
               

Equity:

             

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

-

 

-

 

Common stock, no par value; 200,000,000 shares authorized; 78,724,622 and

       

78,551,297 issued and outstanding at November 30, 2012 and May 31, 2012, respectively.

-

 

-

 

Paid-in capital

   

257,554

 

358,728

 

Retained earnings

 

957,978

 

843,456

 

Accumulated other comprehensive income (loss) 

18,432

 

(30,000)

 

      Total Global Payments shareholders' equity

1,233,964

 

1,172,184

 

Noncontrolling interest

 

140,837

 

128,737

 

Total equity

   

1,374,801

 

1,300,921

 
               

Total liabilities and equity

$      3,428,721

 

$    2,688,143

 
               

 

SCHEDULE 5

     

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

     

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

     
             

(In thousands)

       
             
       

Six Months Ended November 30,

       

2012

 

2011

             

Cash flows from operating activities:

     
 

Net income

$   129,533

 

$    140,230

 

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

     
 

 

Depreciation and amortization of property and equipment

26,494

 

23,444

 

 

Amortization of acquired intangibles

25,561

 

24,796

 

 

Share-based compensation expense

9,178

 

8,425

 

 

Provision for operating losses and bad debts

11,970

 

13,061

 

 

Deferred income taxes

30,055

 

5,915

 

 

Other, net

(2,231)

 

(100)

 

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

     
 

 

Accounts receivable

721

 

3,897

 

 

Claims receivable

(6,600)

 

(7,880)

 

 

Settlement processing assets and obligations, net

(11,671)

 

(499,849)

 

 

Inventory

(4,297)

 

(4,212)

 

 

Prepaid expenses and other assets

(11,204)

 

62

 

 

Accounts payable and other accrued liabilities

(67,869)

 

(31,257)

 

 

Income taxes payable

(4,847)

 

9,402

 

 

 

Net cash provided by (used in) operating activities

124,793

 

(314,066)

             

Cash flows from investing activities:

     
 

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

(409,731)

 

(7,000)

 

Capital expenditures

(54,393)

 

(35,146)

 

Net decrease in financing receivables

1,485

 

1,203

 

 

 

Net cash used in investing activities

(462,639)

 

(40,943)

             

Cash flows from financing activities:

     
 

Net payments on short-term lines of credit

(2,992)

 

(45,069)

 

Proceeds from issuance of long-term debt

910,327

 

71,374

 

Principal payments under long-term debt

(343,133)

 

(131,345)

 

Payment of debt issuance costs

(3,987)

 

-

 

Proceeds from stock issued under employee stock plans

7,080

 

(768)

 

Common stock repurchased - share-based compensation plans

(10,224)

 

-

 

Repurchase of common stock

(12,653)

 

(99,604)

 

Tax benefit from employee share-based compensation 

1,791

 

1,436

 

Distribution to noncontrolling interests

(5,740)

 

(4,660)

 

Dividends paid

(3,153)

 

(3,169)

 

 

 

Net cash provided by (used in) financing activities

537,316

 

(211,805)

             

Effect of exchange rate changes on cash

17,516

 

(16,611)

             

Increase (decrease) in cash and cash equivalents

216,986

 

(583,425)

Cash and cash equivalents, beginning of period

781,275

 

1,354,285

Cash and cash equivalents, end of period

$   998,261

 

$    770,860

             

 

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, 2012

   

GAAP

Processing

System

Intrusion

Other2

Cash

Earnings

Adjustments1

Cash Earnings

             

Revenues

 

$           588,538

$                -

$                  -

$                   -

$          588,538

             

Operating expenses:

           

   Cost of service

 

210,268

-

-

(14,336)

195,932

   Sales, general and administrative

 

276,177

-

-

-

276,177

   Processing system intrusion

 

(14,489)

14,489

-

-

-

   

471,956

14,489

-

(14,336)

472,109

             

Operating income

 

116,582

(14,489)

-

14,336

116,429

             

Other income (expense):

           

   Interest and other income

 

2,187

-

-

-

2,187

   Interest and other expense

 

(14,609)

-

8,383

-

(6,226)

   

(12,422)

-

8,383

-

(4,039)

             

Income before income taxes 

 

104,160

(14,489)

8,383

14,336

112,390

Provision for income taxes

 

(28,789)

5,000

(1,383)

(4,213)

(29,385)

Net income  

 

75,371

(9,489)

7,000

10,123

83,005

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

 

(5,188)

-

(2,853)

(1,378)

(9,419)

Net income attributable to Global Payments

 

$             70,183

$         (9,489)

$             4,147

$             8,745

$            73,586

             

Diluted shares

 

79,144

     

79,144

Diluted earnings per share

 

$                 0.89

$           (0.12)

$               0.05

$               0.11

$                0.93

             
             
   

Three Months Ended November 30, 2011

   

GAAP

   

Cash Earnings

Adjustments1

Cash Earnings

             

Revenues

 

$           530,505

   

$                   -

$          530,505

             

Operating expenses:

           

   Cost of service

 

185,931

   

(12,153)

173,778

   Sales, general and administrative

 

247,994

   

-

247,994

   

433,925

   

(12,153)

421,772

             

Operating income

 

96,580

   

12,153

108,733

             

Other income (expense):

           

   Interest and other income

 

2,259

   

-

2,259

   Interest and other expense

 

(4,878)

   

-

(4,878)

   

(2,619)

   

-

(2,619)

             

Income before income taxes 

 

93,961

   

12,153

106,114

Provision for income taxes

 

(25,812)

   

(3,757)

(29,569)

Net income  

 

68,149

   

8,396

76,545

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

 

(6,968)

   

(1,945)

(8,913)

Net income attributable to Global Payments

 

$             61,181

   

$             6,451

$            67,632

             

Diluted shares

 

78,876

     

78,876

Diluted earnings per share

 

$                 0.78

   

$               0.08

$                0.86

             
             

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

             

2Represents HSBC's share of GPAP dividends declared.

             
             

We supplemented our reporting of net income and the related earnings per share information determined in accordance with GAAP by reporting net income and the related earnings per share for the three months ended November 30, 2012 and 2011 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated November 30,2012 net income and earnings per share on a cash basis by excluding credits related to the processing system intrusion and acquisition intangible amortization. We also adjusted the net income attributable to noncontrolling interests to include HSBC's share of second quarter 2013 GPAP net income. We calculated November 30, 2011 net income and earnings per share on a cash basis by excluding acquisition intangible amortization from our results. We exclude these items in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations. Our net income and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, net income and earnings per share determined in accordance with GAAP. Our measures of net 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, 2012

   

GAAP

Processing

System

Intrusion

Other2

Cash Earnings

Adjustments1

Cash Earnings

             

Revenues

 

$        1,178,825

$                  -

$                  -

$                   -

$       1,178,825

             

Operating expenses:

           

   Cost of service

 

414,659

-

(161)

(25,561)

388,937

   Sales, general and administrative

 

557,596

-

(800)

-

556,796

   Processing system intrusion

 

9,500

(9,500)

-

-

-

   

981,755

(9,500)

(961)

(25,561)

945,733

             

Operating income

 

197,070

9,500

961

25,561

233,092

             

Other income (expense):

           

   Interest and other income

 

4,170

-

-

-

4,170

   Interest and other expense

 

(18,154)

-

8,383

-

(9,771)

   

(13,984)

-

8,383

-

(5,601)

             

Income before income taxes 

 

183,086

9,500

9,344

25,561

227,491

Provision for income taxes

 

(53,553)

(3,279)

(1,533)

(7,573)

(65,938)

Net income  

 

129,533

6,221

7,811

17,988

161,553

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

 

(12,675)

-

(3,594)

(2,902)

(19,171)

Net income attributable to Global Payments

 

$           116,858

$            6,221

$             4,217

$           15,086

$          142,382

             

Diluted shares

 

79,062

     

79,062

Diluted earnings per share

 

$                 1.48

$              0.08

$               0.05

$               0.19

$                1.80

             
             
   

Six Months Ended November 30, 2011

   

GAAP

   

Cash Earnings Adjustments1

Cash Earnings

             

Revenues

 

$        1,073,276

   

$                   -

$       1,073,276

             

Operating expenses:

           

   Cost of service

 

377,467

   

(24,796)

352,671

   Sales, general and administrative

 

490,619

   

-

490,619

   

868,086

   

(24,796)

843,290

             

Operating income

 

205,190

   

24,796

229,986

             

Other income (expense):

           

   Interest and other income

 

4,760

   

-

4,760

   Interest and other expense

 

(8,965)

   

-

(8,965)

   

(4,205)

   

-

(4,205)

             

Income before income taxes 

 

200,985

   

24,796

225,781

Provision for income taxes

 

(60,755)

   

(7,496)

(68,251)

Net income  

 

140,230

   

17,300

157,530

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

 

(15,075)

   

(4,010)

(19,085)

Net income attributable to Global Payments

 

$           125,155

   

$           13,290

$          138,445

             

Diluted shares

 

79,831

     

79,831

Diluted earnings per share

 

$                 1.57

$                  -

$                  -

$               0.18

$                1.73

             
             

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

             

2Represents HSBC's share of GPAP dividends declared and one-time charges primarily related to employee termination benefits.

             
             

We supplemented our reporting of net income and the related earnings per share information determined in accordance with GAAP by reporting net income and the related earnings per share for the six months ended November 30, 2012 and 2011 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated November 30,2012 net income and earnings per share on a cash basis by excluding costs related to the processing system intrusion, acquisition intangible amortization and one-time charges related to employee termination benefits. We also adjusted the net income attributable to noncontrolling interests to include HSBC's share of August 2012 through November 2012 GPAP net income. We calculated November 30, 2011 net income and earnings per share on a cash basis by excluding acquisition intangible amortization from our results. We exclude these charges in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations. Our net income and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, net income and earnings per share determined in accordance with GAAP. Our measures of net 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, 

               

2012

 

2011

               

 GAAP 

Processing

System

Intrusion

Other

Cash

Earnings

Adjustments1

 Cash Earnings 

 

 GAAP 

 

Cash

Earnings

Adjustments1

 Cash Earnings 

                                   
 

Revenues:

                       
 

United States

   

$      339,998

$                -

$                -

$                       -

$      339,998

 

$      293,416

 

$                       -

$      293,416

 

Canada

   

80,770

-

-

-

80,770

 

85,521

 

-

85,521

   

North America merchant services

 

420,768

-

-

-

420,768

 

378,937

 

-

378,937

                                   
 

Europe

   

131,161

-

-

-

131,161

 

115,169

 

-

115,169

 

Asia-Pacific

   

36,609

-

-

-

36,609

 

36,399

 

-

36,399

   

International merchant services

 

167,770

-

-

-

167,770

 

151,568

 

-

151,568

                                   
     

Total revenues

 

$      588,538

$                -

$                -

$                       -

$      588,538

 

$      530,505

 

$                       -

$      530,505

                                   
 

Operating income:

                       
 

North America merchant services

 

$        67,114

$                -

 

$                 6,166

$        73,280

 

$        70,673

 

$                 2,822

$        73,495

 

International merchant services

 

53,987

-

 

8,170

62,157

 

44,494

 

9,331

53,825

 

Corporate

   

(4,519)

(14,489)

 

-

(19,008)

 

(18,587)

 

-

(18,587)

   

Operating income

 

$      116,582

$       (14,489)

$                -

$               14,336

$      116,429

 

$        96,580

 

$               12,153

$      108,733

                                   
                                   
               

 Six Months Ended November 30, 

               

2012

 

2011

               

 GAAP 

Processing System Intrusion

Other2

Cash Earnings Adjustments1

 Cash Earnings 

 

 GAAP 

 

Cash Earnings Adjustments1

 Cash Earnings 

                                   
 

Revenues:

                       
 

United States

   

$      685,896

$                -

$                -

$                       -

$      685,896

 

$      580,841

 

$                       -

$      580,841

 

Canada

   

161,667

-

-

-

161,667

 

176,742

 

-

176,742

   

North America merchant services

 

847,563

-

-

-

847,563

 

757,583

 

-

757,583

                                   
 

Europe

   

259,626

-

-

-

259,626

 

244,583

 

-

244,583

 

Asia-Pacific

   

71,636

-

-

-

71,636

 

71,110

 

-

71,110

   

International merchant services

 

331,262

-

-

-

331,262

 

315,693

 

-

315,693

                                   
     

Total revenues

 

$   1,178,825

$                -

$                -

$                       -

$   1,178,825

 

$   1,073,276

 

$                       -

$   1,073,276

                                   
 

Operating income:

                       
 

North America merchant services

 

$      134,331

$                -

$             905

$                 9,487

$      144,723

 

$      142,431

 

$                 5,680

$      148,111

 

International merchant services

 

111,127

-

-

16,074

127,201

 

100,152

 

19,116

119,268

 

Corporate

   

(48,388)

9,500

56

-

(38,832)

 

(37,393)

 

-

(37,393)

   

Operating income

 

$      197,070

$          9,500

$             961

$               25,561

$      233,092

 

$      205,190

 

$               24,796

$      229,986

                                   
                                   

1 Represents acquisition intangible amortization expense.

         
                                   

2 Represents one-time charges primarily related to employee termination benefits.

                                   

 

 

SCHEDULE 9

               

OUTLOOK SUMMARY

             

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

         
                           

(In millions, except per share data)

           
                           
               

Fiscal 2012

Actual

   

Fiscal 2013

Outlook

 

% Change

FY12

                           
 

Revenue Outlook

               
 

Constant currency1

   

$       2,204

   

$2,385 to $2,425

 

8% to 10%

 

Foreign currency impact2

 

 NA  

   

($25)

   
 

Total Revenues

   

$       2,204

   

$2,360 to $2,400

 

7% to 9%

                           
 

EPS Outlook

               
 

Constant currency1

   

$         3.53

   

 $3.69 to $3.76 

 

5% to 7%

 

Foreign currency impact2

 

 NA  

   

($0.08)

   
 

Cash EPS 

   

$         3.53

   

 $3.61 to $3.68 

 

2% to 4%

 

Acquisition-related intangibles and non-recurring items 3

 

(0.48)

   

($0.60)

 

25%

 

Processing system intrusion

 

(0.68)

   

TBD*

 

NM

 

GAAP Diluted EPS 

   

$         2.37

   

 $3.01 to $3.08 

 

27% to 30%

                           

 

We supplement our fiscal 2013 outlook of total revenues and earnings per share information determined in accordance with GAAP by reporting revenues and earnings per share on a "constant currency" basis in this earnings release as a measure to help evaluate performance.  We calculated revenues and earnings per share on a constant currency basis by converting our fiscal 2013 expected revenues and expenses at fiscal 2012 exchange rates.  We exclude the impact of exchange rate fluctuations in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations, and our management uses constant currency measures to evaluate the impact of operational business decisions.  Our revenues and earnings per share reported on a constant currency basis should be considered in addition to, and not as a substitute for, revenues and earnings per share determined in accordance with GAAP. Our measures of revenues and earnings per share on a constant currency basis reflect management's judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.

 

1 Reflects current period and forecasted results on a pro forma basis as if foreign currency rates did not change from the comparable prior year period.

 

2 Reflects the impact of actual and forecasted changes in foreign currency rates from the comparable prior year period. 

 

Fiscal 2013 reflects $0.56 of acquisition-related intangibles and $0.04 of non-recurring items.  Acquisition-related intangibles accounted for $0.35 in fiscal 2012 and non-recurring items $0.13. 

 

* Not able to accurately estimate 2013 charges for processing system intrusion, remediation, true-ups, etc. We currently anticipate that such additional costs may be $25 to $35 million in fiscal 2013 which reflects a $31.5 million reduction of the company's original estimate of fraud losses, fines and other charges resulting in total processing system intrusion costs for six months ended November 30, 2012 of $9.5 million.  Insurance proceeds of up to $28 million may possibly occur in fiscal 2014 rather than 2013.

 

 

NA=Not Applicable

NM=Not Meaningful

 

 

SOURCE Global Payments Inc.