Global Payments Reports Third Quarter Earnings

April 3, 2014

ATLANTA, April 3, 2014 /PRNewswire/ -- Global Payments Inc. (NYSE: GPN), one of the largest worldwide providers of payment solutions, today announced results for its fiscal third quarter ended February 28, 2014.

 

GLOBAL PAYMENTS logo.

 

President and CEO Jeff Sloan said, "We are very pleased with our third quarter financial performance driven by strong execution across all of our businesses and expanding operating margins in North America.  As a result we are increasing our full-year expectations for diluted earnings per share on a cash basis.  We are also delighted with our strategic accomplishments this quarter including the recent closing of our PayPros acquisition and the substantial expansion of our financing capacity."

Third Quarter 2014 Summary

  • Revenues grew 7% to $616.5 million, compared to $578.7 million in the third quarter of fiscal 2013.
  • Cash diluted earnings per share grew 10% to $0.96, compared to $0.87 in the third quarter of fiscal 2013.
  • GAAP diluted earnings per share were $0.76, compared to $0.75 in the third quarter of 2013.

2014 Outlook
For the full-year of fiscal 2014, the company maintains its expectations for annual revenue of $2.51 billion to $2.56 billion, or 6% to 8% growth over fiscal 2013.  The company is raising its diluted earnings per share on a cash basis and narrowing its range to $4.06 to $4.11, reflecting growth of 11% to 13% over fiscal 2013.  Annual fiscal 2014 GAAP diluted earnings per share are now expected to be $3.48 to $3.53

Additional Share Repurchase Authorization
David E. Mangum, Senior Executive Vice President and CFO, stated, "We are delighted with the new share repurchase authorization which, combined with the remaining authorization, now totals $365 million.  With the recently increased financing capacity, we have significant capital flexibility to drive organic growth, acquisitions and ongoing share repurchases."

Under the company's new authorization, Global Payments may repurchase shares in the open market or as otherwise may be determined by the company, subject to market conditions, business opportunities and other factors.  The company has no obligation to repurchase shares under this program.  This authorization has no expiration date and may be suspended or terminated at any time.  Repurchased shares will be retired but will be available for future issuance. 

Conference Call
Global Payments will hold a conference call today, April 3, 2014 at 5:00 p.m. EDT to discuss financial results and business highlights.  Callers may access the conference call via the investor relations page of the company's website at 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 on the Global Payments website through April 17, 2014.

About Global Payments
Global Payments Inc. is one of the largest worldwide providers of payment solutions for merchants, value added resellers, financial institutions, government agencies, multi-national corporations and independent sales organizations located throughout North America, South America, 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.

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 our potential failure to safeguard our data; 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 merchant, referral partner or ISO attrition; our ability to increase our share of existing markets and expand into new markets; political, economic and regulatory changes in the foreign countries in which we operate; system interruptions in service; increases in credit card network fees; future performance, integration and conversion of acquired operations; and other risk factors presented in our Annual Report on Form 10-K for the fiscal year ended May 31, 2013 and any subsequent Quarterly Reports on Form 10-Q, which we advise you to review. We undertake no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.

 

Investor contact:  investor.relations@globalpay.com 

 Media contact: media.relations@globalpay.com

                             Jane Elliott                         

                         770-829-8755

                             770-829-8234                      

 

 

SCHEDULE 1

UNAUDITED GAAP CONSOLIDATED STATEMENTS OF INCOME

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 

(In thousands, except per share data)

                 
   

Three Months Ended 

February 28,

     

Nine Months Ended 

February 28,

   
   

2014

 

2013

 

% Change

 

2014

 

2013

 

% Change

   

(unaudited)

     

(unaudited)

   

Revenues

 

$     616,452

 

$      578,746

 

6.5%

 

$  1,880,259

 

$   1,757,571

 

7.0%

Operating expenses:

                       

Cost of service

 

232,937

 

217,465

 

7.1%

 

698,852

 

632,124

 

10.6%

Sales, general and administrative

 

286,224

 

271,696

 

5.3%

 

871,825

 

829,292

 

5.1%

Processing system intrusion

 

-

 

(1,189)

 

NM

 

(7,000)

 

8,311

 

(184.2%)

   

519,161

 

487,972

 

6.4%

 

1,563,677

 

1,469,727

 

6.4%

                         

Operating income

 

97,291

 

90,774

 

7.2%

 

316,582

 

287,844

 

10.0%

Other income (expense):

                       

Interest and other income

 

2,944

 

2,536

 

16.1%

 

11,570

 

6,706

 

72.5%

Interest and other expense

 

(16,457)

 

(7,063)

 

133.0%

 

(32,361)

 

(25,217)

 

28.3%

   

(13,513)

 

(4,527)

 

198.5%

 

(20,791)

 

(18,511)

 

12.3%

                         

Income before income taxes 

 

83,778

 

86,247

 

(2.9%)

 

295,791

 

269,333

 

9.8%

Provision for income taxes

 

(23,657)

 

(23,433)

 

1.0%

 

(84,105)

 

(76,986)

 

9.2%

Net income

 

60,121

 

62,814

 

(4.3%)

 

211,686

 

192,347

 

10.1%

Less: Net income attributable to noncontrolling

interests, net of income tax

 

(5,000)

 

(4,352)

 

14.9%

 

(18,025)

 

(17,027)

 

5.9%

Net income attributable to Global Payments

 

$        55,121

 

$         58,462

 

(5.7%)

 

$     193,661

 

$      175,320

 

10.5%

                         
                         

Earnings per share attributable to Global Payments:

                       

    Basic

 

$            0.77

 

$             0.75

 

2.7%

 

$            2.67

 

$             2.24

 

19.2%

    Diluted

 

$            0.76

 

$             0.75

 

1.3%

 

$            2.65

 

$             2.23

 

18.8%

                         

Weighted average shares outstanding:

                       

    Basic

 

71,835

 

77,756

     

72,598

 

78,364

   

    Diluted

 

72,434

 

78,324

     

73,152

 

78,747

   
                         

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  
February 28,

     

Nine Months Ended  
February 28,

   
   

2014

 

2013

 

% Change

 

2014

 

2013

 

% Change

                         

Revenues

 

$       616,452

 

$     578,746

 

6.5%

 

$    1,880,259

 

$  1,757,571

 

7.0%

Operating expenses:

                       

Cost of service

 

218,337

 

200,935

 

8.7%

 

654,720

 

589,872

 

11.0%

Sales, general and administrative

 

286,224

 

271,696

 

5.3%

 

866,981

 

828,492

 

4.6%

   

504,561

 

472,631

 

6.8%

 

1,521,701

 

1,418,364

 

7.3%

                         
                         

Operating income

 

111,891

 

106,115

 

5.4%

 

358,558

 

339,207

 

5.7%

Other income (expense):

                       

Interest and other income

 

2,944

 

2,536

 

16.1%

 

9,447

 

6,706

 

40.9%

Interest and other expense

 

(8,313)

 

(7,063)

 

17.7%

 

(24,217)

 

(16,834)

 

43.9%

   

(5,369)

 

(4,527)

 

18.6%

 

(14,770)

 

(10,128)

 

45.8%

                         

Income before income taxes 

 

106,522

 

101,588

 

4.9%

 

343,788

 

329,079

 

4.5%

Provision for income taxes

 

(30,373)

 

(27,662)

 

9.8%

 

(99,932)

 

(93,601)

 

6.8%

Net income

 

76,149

 

73,926

 

3.0%

 

243,856

 

235,478

 

3.6%

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

 

(6,421)

 

(5,993)

 

7.1%

 

(22,220)

 

(25,164)

 

(11.7%)

Net income attributable to Global Payments

 

$         69,728

 

$       67,933

 

2.6%

 

$       221,636

 

$     210,314

 

5.4%

                         
                         

Earnings per share attributable to Global Payments:

                       

    Basic

 

$              0.97

 

$            0.87

 

11.5%

 

$              3.05

 

$            2.68

 

13.8%

    Diluted

 

$              0.96

 

$            0.87

 

10.3%

 

$              3.03

 

$            2.67

 

13.5%

                         

Weighted average shares outstanding:

                       

    Basic

 

71,835

 

77,756

     

72,598

 

78,364

   

    Diluted

 

72,434

 

78,324

     

73,152

 

78,747

   
                         

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 February 28, 

       
   

2014

 

2013

 

 % Change 

   

 GAAP 

 

 Cash
Earnings 

 

 GAAP 

 

 Cash
Earnings 

 

 GAAP 

 

 Cash
Earnings 

                         

Revenues:

                       

United States

 

$     355,880

 

$     355,880

 

$     336,354

 

$     336,354

 

5.8%

 

5.8%

Canada

 

73,467

 

73,467

 

72,218

 

72,218

 

1.7%

 

1.7%

North America merchant services

 

429,347

 

429,347

 

408,572

 

408,572

 

5.1%

 

5.1%

                         

Europe

 

143,832

 

143,832

 

130,750

 

130,750

 

10.0%

 

10.0%

Asia-Pacific

 

43,273

 

43,273

 

39,424

 

39,424

 

9.8%

 

9.8%

International merchant services

 

187,105

 

187,105

 

170,174

 

170,174

 

9.9%

 

9.9%

                         

Total revenues

 

$     616,452

 

$     616,452

 

$     578,746

 

$     578,746

 

6.5%

 

6.5%

                         

Operating income (loss) for segments:

                       

North America merchant services

 

$       61,695

 

$       68,823

 

$       55,478

 

$       63,210

 

11.2%

 

8.9%

International merchant services

 

58,077

 

65,549

 

51,820

 

60,618

 

12.1%

 

8.1%

Corporate1

 

(22,481)

 

(22,481)

 

(16,524)

 

(17,713)

 

(36.1%)

 

(26.9%)

Operating income

 

$       97,291

 

$     111,891

 

$       90,774

 

$     106,115

 

7.2%

 

5.4%

                         
                         
   

 Nine Months Ended February 28, 

       
   

2014

 

2013

 

 % Change 

   

 GAAP 

 

Cash
Earnings 

 

 GAAP 

 

Cash
Earnings 

 

 GAAP 

 

Cash
Earnings 

                         

Revenues:

                       

United States

 

$ 1,081,506

 

$ 1,081,506

 

$ 1,022,250

 

$ 1,022,250

 

5.8%

 

5.8%

Canada

 

245,379

 

245,379

 

233,885

 

233,885

 

4.9%

 

4.9%

North America merchant services

 

1,326,885

 

1,326,885

 

1,256,135

 

1,256,135

 

5.6%

 

5.6%

                         

Europe

 

433,886

 

433,886

 

390,376

 

390,376

 

11.1%

 

11.1%

Asia-Pacific

 

119,488

 

119,488

 

111,060

 

111,060

 

7.6%

 

7.6%

International merchant services

 

553,374

 

553,374

 

501,436

 

501,436

 

10.4%

 

10.4%

                         

Total revenues

 

$ 1,880,259

 

$ 1,880,259

 

$ 1,757,571

 

$ 1,757,571

 

7.0%

 

7.0%

                         

Operating income (loss) for segments:

                       

North America merchant services

 

$     201,831

 

$     225,848

 

$     189,809

 

$     207,933

 

6.3%

 

8.6%

International merchant services

 

182,085

 

204,149

 

162,947

 

187,819

 

11.7%

 

8.7%

Corporate1

 

(67,334)

 

(71,439)

 

(64,912)

 

(56,545)

 

(3.7%)

 

(26.3%)

Operating income

 

$     316,582

 

$     358,558

 

$     287,844

 

$     339,207

 

10.0%

 

5.7%

                         
                         
                         

1GAAP and cash earnings include incremental security spend for the three and nine months ended February 28, 2014. GAAP earnings for the nine months ended February 28, 2014 include insurance proceeds of ($7M) related to the FY2012 data intrusion.  GAAP earnings for the three and nine months ended February 28, 2013 include a data intrusion (credit)/charge of ($1.2) million and $8.3M, respectively.

                         

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)

 
   

February 28, 2014

 

May 31, 2013

   

(unaudited)

   

Assets

       

Current assets:

       

Cash and cash equivalents

 

$    1,013,560

 

$       680,470

Accounts receivable, net of allowances for doubtful accounts of $411 and $509, respectively

 

174,993

 

189,435

Claims receivable, net

 

743

 

1,156

Settlement processing assets

 

283,414

 

259,204

Inventory

 

7,315

 

11,057

Deferred income taxes

 

6,282

 

6,485

Prepaid expenses and other current assets

 

46,948

 

66,685

Total current assets

 

1,533,255

 

1,214,492

         

Goodwill

 

1,064,868

 

1,044,222

Other intangible assets, net

 

364,513

 

400,848

Property and equipment, net

 

364,725

 

348,064

Deferred income taxes

 

103,182

 

95,178

Other

 

25,172

 

22,252

         

Total assets

 

$    3,455,715

 

$    3,125,056

         

Liabilities and Equity

       

Current liabilities:

       

Lines of credit

 

262,055

 

$       187,461

Current portion of long-term debt

 

2,351

 

72,335

Accounts payable and accrued liabilities

 

243,212

 

262,890

Settlement processing obligations

 

171,563

 

162,558

Income taxes payable

 

8,821

 

18,870

  Total current liabilities

 

688,002

 

704,114

         

Long-term debt

 

1,252,056

 

891,134

Deferred income taxes

 

165,697

 

170,723

Other long-term liabilities

 

86,251

 

72,478

Total liabilities

 

2,192,006

 

1,838,449

         

Equity:

       

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

 

-

 

-

Common stock, no par value; 200,000,000 shares authorized; 71,660,707 issued and outstanding

     

 at February 28, 2014 and 75,426,099 issued and outstanding at May 31, 2013

 

-

 

-

Paid-in capital

 

195,308

 

202,396

Retained earnings

 

940,545

 

958,751

Accumulated other comprehensive loss

 

(5,745)

 

(15,062)

      Total Global Payments shareholders' equity

 

1,130,108

 

1,146,085

Noncontrolling interests

 

133,601

 

140,522

Total equity

 

1,263,709

 

1,286,607

         

Total liabilities and equity

 

$    3,455,715

 

$    3,125,056

 

SCHEDULE 5

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 

(In thousands)

 
         

Nine Months Ended February 28,

         

2014

 

2013

               

Cash flows from operating activities:

       

Net income

 

$         211,686

 

$      192,347

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

       
 

Depreciation and amortization of property and equipment

 

43,645

 

40,856

 

Amortization of acquired intangibles

 

43,553

 

42,091

 

Share-based compensation expense

 

17,269

 

14,063

 

Provision for operating losses and bad debts

 

14,203

 

16,681

 

Deferred income taxes

 

3,103

 

27,282

 

Other, net

 

(1,006)

 

(3,692)

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

       
 

Accounts receivable

 

14,442

 

17,706

 

Claims receivable

 

(9,145)

 

(9,235)

 

Settlement processing assets and obligations, net

 

(19,669)

 

(12,028)

 

Inventory

 

3,811

 

(1,535)

 

Prepaid expenses and other assets

 

18,980

 

(34,898)

 

Accounts payable and other accrued liabilities

 

(16,422)

 

(78,375)

 

Income taxes payable

 

(10,049)

 

(6,496)

   

Net cash provided by operating activities

 

314,401

 

204,767

               

Cash flows from investing activities:

       
 

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

 

(2,519)

 

(433,427)

 

Capital expenditures

 

(61,270)

 

(75,016)

 

Net decrease in financing receivables

 

1,997

 

2,158

 

Net proceeds from sales of investments and business

 

3,521

 

-

   

Net cash used in investing activities

 

(58,271)

 

(506,285)

               

Cash flows from financing activities:

       
 

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

 

74,594

 

(48,239)

 

Proceeds from issuance of long-term debt

 

2,390,000

 

1,085,327

 

Principal payments under long-term debt

 

(2,099,869)

 

(439,789)

 

Acquisition of redeemable noncontrolling interest

 

-

 

(242,000)

 

Payment of debt issuance costs

 

(5,961)

 

(3,987)

 

Repurchase of common stock

 

(258,562)

 

(137,653)

 

Proceeds from stock issued under share-based compensation plans

 

29,740

 

9,257

 

Common stock repurchased - share-based compensation plans

 

(5,682)

 

(10,215)

 

Tax benefit from share-based compensation plans

 

4,782

 

1,791

 

Distributions to noncontrolling interests

 

(33,744)

 

(13,656)

 

Dividends paid

 

(4,330)

 

(4,688)

     

Net cash provided by financing activities

 

90,968

 

196,148

               

Effect of exchange rate changes on cash

 

(14,008)

 

7,055

               

Increase (decrease) in cash and cash equivalents

 

333,090

 

(98,315)

Cash and cash equivalents, beginning of period

 

680,470

 

781,275

Cash and cash equivalents, end of period

 

$      1,013,560

 

$      682,960

 

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 February 28, 2014

   

GAAP

 

Processing
System
Intrusion 

 

Other1

 

Cash Earnings
Adjustments2

 

Cash Earnings

                     

Revenues

 

$       616,452

 

$                    -

 

$                  -

 

$                  -

 

$       616,452

Operating expenses:

                   

   Cost of service

 

232,937

 

-

 

-

 

(14,600)

 

218,337

   Sales, general and administrative

 

286,224

 

-

 

-

 

-

 

286,224

   Processing system intrusion

 

-

 

-

 

-

 

-

 

-

   

519,161

 

-

 

-

 

(14,600)

 

504,561

                     

Operating income

 

97,291

 

-

 

-

 

14,600

 

111,891

Other income (expense):

                   

   Interest and other income

 

2,944

 

-

 

-

 

-

 

2,944

   Interest and other expense

 

(16,457)

 

-

 

8,144

 

-

 

(8,313)

   

(13,513)

 

-

 

8,144

 

-

 

(5,369)

                     

Income (loss) before income taxes 

 

83,778

 

-

 

8,144

 

14,600

 

106,522

(Provision) benefit  for income taxes

 

(23,657)

 

-

 

(2,180)

 

(4,536)

 

(30,373)

Net income (loss)

 

60,121

 

-

 

5,964

 

10,064

 

76,149

Less: Net income attributable to noncontrolling

interests, net of income tax

 

(5,000)

 

-

 

-

 

(1,421)

 

(6,421)

Net income (loss) attributable to Global Payments

 

$         55,121

 

$                    -

 

$           5,964

 

$           8,643

 

$         69,728

                     

Diluted shares

 

72,434

             

72,434

Diluted earnings (loss) per share

 

$             0.76

 

$                    -

 

$             0.08

 

$             0.12

 

$             0.96

                     
                     
   

Three Months Ended February 28, 2013

   

GAAP

 

Processing
System
Intrusion

 

Other

 

Cash Earnings
Adjustments2

 

Cash Earnings

                     

Revenues

 

$       578,746

 

$                    -

 

$                  -

 

$                  -

 

$       578,746

Operating expenses:

                   

   Cost of service

 

217,465

 

-

 

-

 

(16,530)

 

200,935

   Sales, general and administrative

 

271,696

 

-

 

-

 

-

 

271,696

   Processing system intrusion

 

(1,189)

 

1,189

 

-

 

-

 

-

   

487,972

 

1,189

 

-

 

(16,530)

 

472,631

                     

Operating income

 

90,774

 

(1,189)

 

-

 

16,530

 

106,115

Other income (expense):

                   

   Interest and other income

 

2,536

 

-

 

-

 

-

 

2,536

   Interest and other expense

 

(7,063)

 

-

 

-

 

-

 

(7,063)

   

(4,527)

 

-

 

-

 

-

 

(4,527)

                     

Income (loss) before income taxes 

 

86,247

 

(1,189)

 

-

 

16,530

 

101,588

(Provision) benefit  for income taxes

 

(23,433)

 

232

 

-

 

(4,461)

 

(27,662)

Net income (loss)

 

62,814

 

(957)

 

-

 

12,069

 

73,926

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

 

(4,352)

 

-

 

-

 

(1,641)

 

(5,993)

Net income (loss) attributable to Global Payments

 

$         58,462

 

$               (957)

 

$                  -

 

$         10,428

 

$         67,933

                     

Diluted shares

 

78,324

             

78,324

Diluted earnings (loss) per share

 

$             0.75

 

$              (0.01)

 

$                  -

 

$             0.13

 

$             0.87

                     
                     
                     

1 For the period ended February 28, 2014, represents HSBC's share of GPAP dividends declared and costs associated with the debt refinancing that was completed on February 28, 2014.

                     

2Represents adjustments to cost of service to exclude acquisition intangible amortization expense from net income 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 February 28, 2014 and 2013 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 the processing system intrusion, acquisition intangible amortization, HSBC's share of dividends declared and costs associated with debt refinancing.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)

 
   

Nine Months Ended February 28, 2014

   

GAAP

 

Processing
System Intrusion 1

 

Other2

 

Cash Earnings
Adjustments3

 

Cash Earnings

                     

Revenues

 

$   1,880,259

 

$                       -

 

$                  -

 

$                  -

 

$   1,880,259

Operating expenses:

                   

   Cost of service

 

698,852

 

-

 

(579)

 

(43,553)

 

654,720

   Sales, general and administrative

 

871,825

 

-

 

(4,844)

 

-

 

866,981

   Processing system intrusion

 

(7,000)

 

7,000

 

-

 

-

 

-

   

1,563,677

 

7,000

 

(5,423)

 

(43,553)

 

1,521,701

                     

Operating income

 

316,582

 

(7,000)

 

5,423

 

43,553

 

358,558

Other income (expense):

                   

   Interest and other income

 

11,570

 

-

 

(2,123)

 

-

 

9,447

   Interest and other expense

 

(32,361)

 

-

 

8,144

 

-

 

(24,217)

   

(20,791)

 

-

 

6,021

 

-

 

(14,770)

                     

Income (loss) before income taxes 

 

295,791

 

(7,000)

 

11,444

 

43,553

 

343,788

(Provision) benefit  for income taxes

 

(84,105)

 

2,393

 

(4,114)

 

(14,106)

 

(99,932)

Net income (loss)

 

211,686

 

(4,607)

 

7,330

 

29,447

 

243,856

Less: Net income attributable to noncontrolling

interests, net of income tax

 

(18,025)

 

-

 

-

 

(4,195)

 

(22,220)

Net income (loss) attributable to Global Payments

 

$       193,661

 

$               (4,607)

 

$           7,330

 

$         25,252

 

$       221,636

                     

Diluted shares

 

73,152

             

73,152

Diluted earnings (loss) per share

 

$             2.65

 

$                 (0.07)

 

$             0.10

 

$             0.35

 

$             3.03

                     
                     
   

Nine Months Ended February 28, 2013

   

GAAP

 

Processing
System Intrusion

 

Other2

 

Cash Earnings
Adjustments3

 

Cash Earnings

                     

Revenues

 

$   1,757,571

 

$                       -

 

$                  -

 

$                  -

 

$   1,757,571

Operating expenses:

                   

   Cost of service

 

632,124

 

-

 

(161)

 

(42,091)

 

589,872

   Sales, general and administrative

 

829,292

 

-

 

(800)

 

-

 

828,492

   Processing system intrusion

 

8,311

 

(8,311)

 

-

 

-

 

-

   

1,469,727

 

(8,311)

 

(961)

 

(42,091)

 

1,418,364

                     

Operating income

 

287,844

 

8,311

 

961

 

42,091

 

339,207

Other income (expense):

                   

   Interest and other income

 

6,706

 

-

 

-

 

-

 

6,706

   Interest and other expense

 

(25,217)

 

-

 

8,383

 

-

 

(16,834)

   

(18,511)

 

-

 

8,383

 

-

 

(10,128)

                     

Income (loss) before income taxes 

 

269,333

 

8,311

 

9,344

 

42,091

 

329,079

Provision for income taxes

 

(76,986)

 

(3,048)

 

(1,533)

 

(12,034)

 

(93,601)

Net income (loss)

 

192,347

 

5,263

 

7,811

 

30,057

 

235,478

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

 

(17,027)

 

-

 

(3,594)

 

(4,543)

 

(25,164)

Net income attributable to Global Payments

 

$       175,320

 

$                5,263

 

$           4,217

 

$         25,514

 

$       210,314

                     

Diluted shares

 

78,747

             

78,747

Diluted earnings (loss) per share

 

$             2.23

 

$                   0.07

 

$             0.05

 

$             0.32

 

$             2.67

                     
                     

1Represents insurance proceeds associated with processing system intrusion charges incurred in FY 2012.

                     

2 For the period ended February 28, 2014, represents one-time charges primarily related to employee termination benefits, resolution of a contract related contingency, a one-time credit related to the gain on the sale of an interest in a business, HSBC's share of dividends declared, and costs associated with debt refinancing.  For the prior period, represents HSBC's share of GPAP dividends declared and one-time charges primarily related to employee termination benefits.

                     

3Represents adjustments to cost of service to exclude acquisition intangible amortization expense from net income 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 nine months ended February 28, 2014 and 2013 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 the processing system intrusion, acquisition intangible amortization, one-time charges related to employee termination benefits and resolution of a contract related contingency, a one-time credit related to the sale of an interest in a business, HSBC's share of GPAP dividends declared, and costs associated with debt refinancing.  In the nine months ended February 2013, we also adjusted the net income attributable to noncontrolling interests to include HSBC's share of GPAP net income.  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 February 28,  

   

2014

 

2013

   

 GAAP 

 

Processing System Intrusion 

 

Other

 

Cash Earnings Adjustments3

 

 Cash Earnings 

 

 GAAP 

 

Processing System Intrusion

 

Other

 

Cash Earnings Adjustments3

 

 Cash Earnings 

                                         

Revenues:

                                       

United States

 

$   355,880

 

$               -

 

$               -

 

$               -

 

$   355,880

 

$     336,354

 

$               -

 

$               -

 

$               -

 

$   336,354

Canada

 

73,467

 

-

 

-

 

-

 

73,467

 

72,218

 

-

 

-

 

-

 

72,218

  North America merchant services

 

429,347

 

-

 

-

 

-

 

429,347

 

408,572

 

-

 

-

 

-

 

408,572

                                         

Europe

 

143,832

 

-

 

-

 

-

 

143,832

 

130,750

 

-

 

-

 

-

 

130,750

Asia-Pacific

 

43,273

 

-

 

-

 

-

 

43,273

 

39,424

 

-

 

-

 

-

 

39,424

  International merchant services

 

187,105

 

-

 

-

 

-

 

187,105

 

170,174

 

-

 

-

 

-

 

170,174

                                         

     Total revenues

 

$   616,452

 

$               -

 

$               -

 

$               -

 

$   616,452

 

$     578,746

 

$               -

 

$               -

 

$               -

 

$   578,746

                                         

Operating income (loss) for segments:

                                       

North America merchant services

 

$     61,695

 

$               -

 

$               -

 

$        7,128

 

$     68,823

 

$       55,478

 

$               -

 

$               -

 

$        7,732

 

$     63,210

International merchant services

 

58,077

 

-

 

-

 

7,472

 

65,549

 

51,820

 

-

 

-

 

8,798

 

60,618

Corporate

 

(22,481)

 

-

 

-

 

-

 

(22,481)

 

(16,524)

 

(1,189)

 

-

 

-

 

(17,713)

     Operating income (loss)

 

$     97,291

 

$               -

 

$               -

 

$      14,600

 

$   111,891

 

$       90,774

 

$     (1,189)

 

$               -

 

$      16,530

 

$   106,115

                                         
                                         
   

 Nine Months Ended February 28,  

   

2014

 

2013

   

 GAAP 

 

Processing System Intrusion 1

 

Other2

 

Cash Earnings Adjustments3

 

 Cash Earnings 

 

 GAAP 

 

Processing System Intrusion

 

Other2

 

Cash Earnings Adjustments3

 

 Cash Earnings 

                                         

Revenues:

                                       

United States

 

$1,081,506

 

$               -

 

$               -

 

$               -

 

$1,081,506

 

$ 1,022,250

 

$               -

 

$               -

 

$               -

 

$1,022,250

Canada

 

245,379

 

-

 

-

 

-

 

245,379

 

233,885

 

-

 

-

 

-

 

233,885

  North America merchant services

 

1,326,885

 

-

 

-

 

-

 

1,326,885

 

1,256,135

 

-

 

-

 

-

 

1,256,135

                                         

Europe

 

433,886

 

-

 

-

 

-

 

433,886

 

390,376

 

-

 

-

 

-

 

390,376

Asia-Pacific

 

119,488

 

-

 

-

 

-

 

119,488

 

111,060

 

-

 

-

 

-

 

111,060

  International merchant services

 

553,374

 

-

 

-

 

-

 

553,374

 

501,436

 

-

 

-

 

-

 

501,436

                                         

     Total revenues

 

$1,880,259

 

$               -

 

$               -

 

$               -

 

$1,880,259

 

$ 1,757,571

 

$               -

 

$               -

 

$               -

 

$1,757,571

                                         

Operating income (loss) for segments:

                                       

North America merchant services

 

$   201,831

 

$               -

 

$        2,518

 

$      21,499

 

$   225,848

 

$     189,809

 

$               -

 

$           905

 

$      17,219

 

$   207,933

International merchant services

 

182,085

 

-

 

10

 

22,054

 

204,149

 

162,947

 

-

 

-

 

24,872

 

187,819

Corporate

 

(67,334)

 

(7,000)

 

2,895

 

-

 

(71,439)

 

(64,912)

 

8,311

 

56

 

-

 

(56,545)

     Operating income (loss)

 

$   316,582

 

$       (7,000)

 

$        5,423

 

$      43,553

 

$   358,558

 

$     287,844

 

$       8,311

 

$           961

 

$      42,091

 

$   339,207

                                         
                                         

1Represents insurance proceeds associated with processing system intrusion charges incurred in FY 2012.

                       
                                         

2Represents one-time charges primarily related to employee termination benefits and resolution of a contract related contingency for the period ending February 28, 2014 and the prior year represents one-time charges primarily related to employee termination benefits.

                   
                                         

3Represents acquisition intangible amortization expense.

                               

 

SCHEDULE 9

OUTLOOK SUMMARY

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

 

(In millions, except per share data)

 
     

Fiscal 2013
Actual

 

Fiscal 2014
Outlook

 

% Change
FY13

               

Revenue Outlook

           

Total Revenues

 

$       2,376

 

$2,510 to $2,560

 

6% to 8%

               

EPS Outlook

           

Cash EPS 

 

$         3.65

 

$4.06 to $4.11

 

11% to 13%

Acquisition-related intangibles assets, non-recurring items and 

         

    processing system intrusion 1

 

(0.89)

 

(0.58)

 

(35%)

GAAP Diluted EPS 

 

$         2.76

 

 $3.48 to $3.53 

 

26% to 28%

               
               
               

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 nine months ended February 28, 2014 and 2013 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 the processing system intrusion, acquisition intangible amortization, one-time charges related to employee termination benefits and resolution of a contract related contingency, a one-time credit related to the sale of an interest in a business, HSBC's share of GPAP dividends declared, and costs associated with debt refinancing. In the nine months ended February 2013, we also adjusted the net income attributable to noncontrolling interests to include HSBC's share of GPAP net income. 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 2014 reflects $0.48 of acquisition-related intangibles amortization and $0.10 of one-time charges (refer to Schedule 7, footnote 2 for details).  Acquisition-related intangibles amortization and non-recurring items accounted for $0.57 in fiscal 2013 and processing intrusion costs were $0.32.  Intangible amortization does not include amortization related to the recent March 4, 2014 PayPros acquisition as the allocation of the purchase price has not yet been finalized.

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SOURCE Global Payments Inc.

 

 

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