GLOBAL PAYMENTS INC. 
By 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 GAAP Cash GAAP Cash
Earnings Earnings 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%
Corporate(1) (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%
Corporate(1) (48,388) (38,832) (37,393) (37,393) (29%) (4%)
Operating income $197,070 $233,092 $205,190 $229,986 (4%) 1%
======== ======== ======== ========
(1)Fiscal 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:
26,494 23,444
Depreciation and amortization of property and equipment
25,561 24,796
Amortization of acquired intangibles
9,178 8,425
Share-based compensation expense
11,970 13,061
Provision for operating losses and bad debts
30,055 5,915
Deferred income taxes
(2,231) (100)
Other, net
Changes in operating assets and liabilities, net of the effects
of acquisitions:
721 3,897
Accounts receivable
(6,600) (7,880)
Claims receivable
(11,671) (499,849)
Settlement processing assets and obligations, net
(4,297) (4,212)
Inventory
(11,204) 62
Prepaid expenses and other assets
(67,869) (31,257)
Accounts payable and other accrued liabilities
(4,847) 9,402
Income taxes payable
124,793 (314,066)
Net cash provided by (used in) operating activities
------------
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
(462,639) (40,943)
Net cash used in investing activities
------------
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)
537,316 (211,805)
Net cash provided by (used in) financing activities
------------
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 Other(2) Cash Cash Earnings
System Earnings
Intrusion Adjustments(1)
--------- -------------
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 Cash Earnings
Adjustments(1)
-------------
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
===== ===== =====
(1)Represents adjustments to cost of service to exclude acquisition intangible amortization expense and the related income tax benefit.
(2)Represents 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 Other(2) Cash Earnings Cash Earnings
System Adjustments(1)
Intrusion
---------
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 Adjustments(1) Cash Earnings
---- --------------------------- -------------
Revenues $1,073,276 $ - $1,073,276
-------- ---------- --------------------- ----------
Operating expenses:
Cost of service 377,467 (24,796) 352,671
Sales, general and administrative 490,619 - 490,619
868,086 (24,796) 843,290
------- ------- -------
Operating income 205,190 24,796 229,986
---------------- ------- ------ -------
Other income (expense):
Interest and other income 4,760 - 4,760
Interest and other expense (8,965) - (8,965)
--- ------
(4,205) - (4,205)
------ --- ------
Income 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
===== ==================== ==================== ===== =====
(1)Represents adjustments to cost of service to exclude acquisition intangible amortization expense and the related income tax benefit.
(2)Represents 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 Other Cash Cash Earnings GAAP Cash Cash Earnings
System Earnings Earnings
Intrusion Adjustments(1) Adjustments(1)
--------- ------------- -------------
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 Other(2) Cash Earnings Adjustments(1) Cash Earnings GAAP Cash Earnings Adjustments(1) 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 Fiscal 2013 % Change
Actual Outlook FY12
------ ------- ----
Revenue Outlook
---------------
Constant currency(1) $2,204 $2,385 to $2,425 8% to 10%
Foreign currency impact(2) NA ($25)
Total Revenues $2,204 $2,360 to $2,400 7% to 9%
EPS Outlook
-----------
Constant currency(1) $3.53 $3.69 to $3.76 5% to 7%
Foreign currency impact(2) 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.
3 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.
