EX-99.1 2 exhibit99122814.htm PRESS RELEASE DATED APRIL 3, 2014 Exhibit 99.1 2.28.14


Global Payments Reports Third Quarter Earnings
Increases Fiscal 2014 EPS Outlook
Expands Share Repurchase Authorization to $365 Million

ATLANTA, April 3, 2014 -- 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.

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."

1




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
 

2



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





3



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.


4



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
 %
1 GAAP 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.

5




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


6



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


7



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.

2 Represents 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.



8



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 Intrusion1
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


1 Represents 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, and 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.

3 Represents 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.


9




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 Intrusion1
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

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

2 Represents 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.

3 Represents acquisition intangible amortization expense.

10



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 intrusion1
 
(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.



11