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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

OR

Commission file number 001-16111

GLOBAL PAYMENTS INC.

(Exact name of registrant as specified in charter)

Registrant’s telephone number, including area code: 404-728-2719

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x  No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes  x  No  ¨

The number of shares of the issuer’s common stock, no par value outstanding as of April 2, 2003 was 37,049,246.

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GLOBAL PAYMENTS INC.

FORM 10-Q

For the quarterly period ended February 28, 2003

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PART I—FINANCIAL INFORMATION

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

GLOBAL PAYMENTS INC.

(In thousands, except per share data)

See Notes to Unaudited Consolidated Financial Statements

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UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

GLOBAL PAYMENTS INC.

(In thousands, except per share data)

See Notes to Unaudited Consolidated Financial Statements.

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CONSOLIDATED BALANCE SHEETS

GLOBAL PAYMENTS INC.

(In thousands, except share data)

See Notes to Unaudited Consolidated Financial Statements.

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UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

GLOBAL PAYMENTS INC.

(In thousands)

See Notes to Unaudited Consolidated Financial Statements.

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NOTES TO UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

FEBRUARY 28, 2003

NOTE 1—BASIS OF PRESENTATION

Global Payments Inc. (“Global Payments” or the “Company”) is an integrated provider of high volume electronic transaction processing and value-added end-to-end information services and systems to merchants, multinational corporations, financial institutions, and government agencies. These services are marketed to customers within the merchant services and the funds transfer businesses through various sales channels.

In December 1999, National Data Corporation, now known as NDCHealth Corporation (“NDC”), announced its intent to spin-off its NDC eCommerce business segment into a separate publicly traded company with its own management and Board of Directors (the “Distribution”). This Distribution occurred on January 31, 2001 (the “Distribution Date”) and was accomplished by forming Global Payments on September 1, 2000, transferring the stock of the companies which comprised the NDC eCommerce business segment to the Company and then distributing all of the shares of common stock of Global Payments to NDC’s stockholders. NDC stockholders received 0.8 share of Global Payments’ stock for each NDC share held as of the Distribution Date. After the Distribution, Global Payments and NDC became two separate public companies.

The unaudited consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. These financial statements have been prepared in accordance with accounting principles generally accepted in the United States, and present the Company’s financial position, results of operations, and cash flows. Intercompany transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate and the information presented is not misleading. It is suggested that these financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended May 31, 2002. In the opinion of management, all adjustments are of a normal and recurring nature and include those necessary for a fair presentation of the financial information for the interim periods reported.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue—Card information, electronic payments, funds transfer and transaction processing services revenues are based on a percentage of processed dollar volume or a specified amount per transaction, and are recognized as such services are performed. Revenues for processing services provided directly to merchants are recorded net of interchange fees charged and controlled by credit card associations.

Check guarantee services include electronic verification of the check being presented to the Company’s merchant customer through an extensive series of databases and a guarantee of the face value of the verified check to the merchant customer. If a verified and guaranteed check is dishonored, the Company reimburses the merchant for the check’s guaranteed value and pursues collection from the delinquent checkwriter. The Company has the right to collect the full amount of the check from the checkwriter but has historically recovered approximately 50% to 55% of the guaranteed, dishonored checks. The Company establishes a claims receivable from the delinquent checkwriter for the full amount of the guaranteed check and a valuation allowance for this activity based on historical and projected loss experience. See “Reserve for Operating Losses” below.

Revenue for the check guarantee offering is primarily derived from a percentage of the face value of each guaranteed check. The Company recognizes revenue upon satisfaction of its guarantee obligation to the merchant customer. This occurs when the merchant is paid either by the Company or the bank. The check guarantee offering also earns revenue based on fees collected from checkwriters of dishonored checks which is recognized when collected, as collectibility is not reasonably assured until that point.

Check verification services are similar to the services provided in the check guarantee offering, except the Company does not guarantee the verified checks. Revenue for this offering is primarily derived from fees collected from delinquent checkwriters and is recognized when collected, as collectibility is not reasonably assured until that point. This offering earns revenue based on a fixed amount each merchant pays for each check that is verified. This revenue is recognized when the transaction is processed, since the Company has no further obligations associated with the transaction.

Terminal management products and services consist of electronic transaction processing terminal sales and rentals, terminal set-up, telephone training and technical support. Revenue associated with the terminal sale, set-up and telephone training is considered a single earnings process and is recognized when the set-up and telephone training is completed, and the merchant customer can begin processing transactions. Terminal rental revenues are recognized when the service is provided. Revenue

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associated with technical support is considered an independent earnings process and is recognized based on either a maintenance agreement, which is recognized on a straight-line basis over the maintenance contract term, or based on time and materials when the support is completed.

Reserve for operating losses—The Company processes credit card transactions for direct merchants. The Company’s merchant customers have the liability for any charges properly reversed by the cardholder. In the event, however, that the Company is not able to collect such amount from the merchants, due to merchant fraud, insolvency, bankruptcy or another reason, the Company may be liable for any such reversed charges. The Company requires cash deposits, guarantees, letters of credit or other types of collateral by certain merchants to minimize any such contingent liability. The Company also utilizes a number of systems and procedures to manage merchant risk.

Despite these efforts, the Company experiences losses due to merchant defaults. As a result, the Company establishes valuation allowances for operational losses based primarily on historical experience and other relevant factors such as economic downturns or increases in merchant fraud. As of February 28, 2003 and May 31, 2002, $2.8 million and $2.1 million, respectively, was reserved for losses associated with merchant card processing and are reflected in the net merchant processing receivable or payable and the Company believes this amount approximates the fair value of the contingent liability. The expense associated with the valuation allowance is included in cost of service in the accompanying consolidated statements of income.

The Company also has a check guarantee business. Similar to the credit card business, the Company charges its merchants a percentage of the gross amount of the check and guarantees payment of the check to the merchant in the event the check is not honored by the checkwriter’s bank. The Company has the right to collect the full amount of the check from the checkwriter but has not historically recovered 100% of the guaranteed checks. The Company establishes a valuation allowance for this activity based on historical and projected loss experiences. As of February 28, 2003 and May 31, 2002, the Company had check guarantee reserves of $3.6 million and $3.2 million, respectively. The estimated check returns and recovery amounts are subject to the risk that actual amounts returned and recovered in the future may differ significantly from estimates used in calculating the valuation allowance.

Net merchant processing receivable or payable—The net merchant processing amount arises from timing differences in the Company’s settlement process with merchants and card sales processed. These timing differences are primarily due to the fluctuations in volume and timing of credit and debit card sales volume funded to merchants and the settlement received from the card associations and debit networks.

The net merchant processing receivable includes outstanding amounts on the Company’s Canadian Imperial Bank of Commerce credit facility. This facility provides a line of credit up to $175 million (Canadian dollars), approximately $117 million U.S. as of February 28, 2003, with additional overdraft facility available to cover larger advances during periods of peak usage of credit and debit cards. Amounts borrowed on this facility are restricted in use to pay merchants and are repaid with funds from the card associations and debit networks received on the following day. At May 31, 2002, there were no amounts outstanding on this facility. At February 28, 2003, there were $45.9 million (Canadian dollars), approximately $30.7 million U.S. outstanding on this facility.

Goodwill and Other intangible assets—On July 20, 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS No. 141”) and No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). SFAS No. 141 requires that all business combinations initiated after June 30, 2001 be accounted for under the purchase method. SFAS No. 142 eliminates the amortization of goodwill and certain other intangible assets and requires that goodwill be evaluated for impairment by applying a fair value-based test. Global Payments adopted SFAS No. 142 in the first quarter of fiscal 2002. In accordance with this new standard, the Company discontinued the amortization of goodwill and certain intangible assets that were determined to have an indefinite life.

Global Payments completed the annual testing for impairment of goodwill during the first quarter ending August 31, 2002 using a discounted cash flow and market approach. The Company determined that the fair value of the reporting units exceeds the carrying amount of the net assets, including goodwill of the respective reporting units. Therefore, no impairment charge to goodwill is required. No other changes in amortization periods were required for other intangible assets.

Other intangible assets primarily represent customer lists and merchant contracts associated with acquisitions. Customer lists and merchant contracts are amortized using the straight-line method over their estimated useful lives of 5 to 30 years. The useful lives for customer lists/merchant contracts are determined based primarily on information concerning start/stop dates and yearly attrition.

The Company had one indefinite life intangible asset, a trademark with a carrying value at June 1, 2001 of $24.6 million. The trademark was acquired on April 1, 1996 with the purchase of 92.5% ownership interest in MasterCard International’s Merchant Automated Point-of-Sale Program, or MAPP. The value of the trademark related to the use of the MAPP name and logo. In connection with the spin-off from NDC, the Company launched a rebranding effort under the Global Payments Inc. name and logo. In addition, effective June 1, 2001, the Company purchased MasterCard’s remaining minority interest, ending all existing marketing alliances with MasterCard under the MAPP brand and began conducting a study related to the future use of the trademark.

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In fiscal 2002, the Company obtained an appraisal from an independent valuation firm of the fair value of the trademark as of June 1, 2001, the implementation date of SFAS No. 142. Based on the lack of continuing use of the MAPP trademark as of June 1, 2001, the fair value of the trademark was determined to be zero. In accordance with SFAS No. 142, the $24.6 million ($16.0 million, net of tax) was written off as of June 1, 2001 and was recorded as a cumulative effect of a change in accounting principle.

Segment disclosure—The Company has adopted Statement of Financial Accounting Standards (“SFAS”) No. 131, “Disclosure About Segments of an Enterprise and Related Information.” The Company’s chief operating decision making group currently operates one reportable segment—electronic transaction processing—therefore the majority of the disclosures required by SFAS No. 131 do not apply to the Company. The Company’s measure of segment profit is operating income. The Company’s results of operations and its financial condition are not significantly reliant upon any single customer. Revenues from external customers from the Company’s service offerings are as follows:

New accounting pronouncement—In December 2002, the Financial Accounting Standards Board issued Statements of Financial Accounting Standard No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” (“SFAS No. 148”). SFAS No. 148 addresses alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, the Statement amends the disclosure requirements of Statements of Financial Accounting Standard No. 123, “Accounting for Stock-Based Compensation” to require prominent disclosure in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. This Statement is effective for financial statements issued for fiscal years ending after December 15, 2002 and interim periods beginning after December 15, 2002. The Company is evaluating the accounting methods under SFAS No. 148 and will adopt this Statement effective March 1, 2003.

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Other” (“FIN No. 45”). FIN No. 45 requires footnote disclosure of the guarantees or indemnification agreements a company issues. With certain exceptions, these agreements will also require a company to prospectively recognize an initial liability for the fair value, or market value, of the obligations it assumes under the guarantee. The initial recognition and initial measurement provisions of this Interpretation are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements of the Interpretation are effective for financial statements of the interim or annual periods ending after December 15, 2002. The adoption of the recognition and measurement provisions of FIN No. 45 did not have a material impact on the Company’s consolidated financial position, results of operations, or cash flows for guarantees issued or modified after December 31, 2002. The disclosure requirements of FIN No. 45 are included in Note 2 of these unaudited interim condensed consolidated financial statements, relative to the Company’s check guarantee services revenue recognition and reserve for operating losses.

NOTE 3—EARNINGS PER SHARE

Basic earnings per share are computed by dividing reported earnings available to common shareholders by weighted average shares outstanding during the period. Earnings available to common shareholders are the same as reported net income for all periods presented.

Diluted earnings per share are computed by dividing reported earnings available to common shareholders by weighted average shares outstanding during the period and the impact of securities that, if exercised, would have a dilutive effect on earnings per share. All options with an exercise price less than the average market share price for the period generally are assumed to have a dilutive effect on earning per share. The dilutive effect of stock options was 0.9 million shares and 1.5 million shares for the three months ended February 28, 2003 and 2002, respectively. For the nine months ended February 28, 2003 and 2002, the dilutive effect of stock options was 0.9 million shares and 1.4 million shares respectively. The diluted share base for the three and nine months ended February 28, 2003 excludes incremental shares of 0.7 million related to employee stock options. These shares were excluded due to their anti-dilutive effect as a result of their option exercise prices being greater than the market price of the common shares. No additional securities were outstanding that could potentially dilute basic earnings per share that were not included in the computation of diluted earnings per share.

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The following tables set forth the computation of basic and diluted earnings per share for the three and nine months ended February 28, 2003 and 2002:

NOTE 4—COMPREHENSIVE INCOME

The components of comprehensive income for the three and nine months ended February 28, 2003 and 2002 are as follows:

NOTE 5—RESTRUCTURING AND OTHER

The Company recorded restructuring and other charges in the two fiscal years ended May 31, 2002 and 2001. During the fourth quarter of fiscal 2002, the Company completed plans for the closing of four locations including associated management and staff reductions of 150 personnel. Total charges of $11.0 million for the year ended May 31, 2002 were categorized as follows:

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During the fourth quarter of fiscal 2001, the Company completed plans for the closing of six locations including associated management and staff reductions. Total charges of $4.9 million for the year ended May 31, 2001 were categorized as follows:

The charges relating to facilities represent locations that are either already closed or have management approved plans to be closed within twelve months of incurring the charges. These charges included future minimum lease and operating payments for all non-cancelable leases commencing on the planned exit date, and lasting for the remaining terms of the leases, net of current and estimated future sublease income. The charges also include facility exit costs incurred when the facilities are vacated. Normal lease payments, operating costs and depreciation will continue to be charged to operating expenses prior to actually vacating the specific facilities.

The severance and related costs arise from the Company’s actions to reduce personnel in areas of redundant operations and activities. These operations relate to the facility consolidation, recent acquisitions and integration of acquisition functions. The charges reflect specifically identified employees whose employment will be terminated and were informed by the time the charges were incurred. The non-cash costs associated with the severance and related costs reflect compensation expense due to the acceleration of the vesting of certain stock options for those employees that were terminated and had options outstanding.

The other costs incurred in the year ended May 31, 2002 relate to the book value of certain current assets that were deemed to be unrecoverable after the purchase of MasterCard’s remaining minority interest in Global Payment Systems, LLC in June 2001.

The cash items were accrued at the time the charges were incurred. As of February 28, 2003, $2.5 million of the cash portion of the restructuring charges from fiscal 2002 and 2001 remains accrued as a current liability in the accrued liabilities section of the balance sheets as follows:

NOTE 6—SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow disclosures for the nine months ended February 28, 2003 and 2002 are as follows:

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation

For an understanding of the significant factors that influenced our results, the following discussion should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this report. This management’s discussion and analysis should also be read in conjunction with the management’s discussion and analysis and consolidated financial statements included in our Form 10-K for the fiscal year ended May 31, 2002.

General

We are a leading merchant acquirer in North America, concentrated on the small to mid-market merchants in the United States and Canada and have acquired some large market merchants in Canada. We provide a broad range of end-to-end electronic transaction processing solutions to merchants, corporations, financial institutions and government agencies. Our portfolio of merchants is well diversified and includes general retail, restaurants, professional services, utilities, specialty retail and others. Our products and services are marketed through a variety of distinct sales channels that include a large, dedicated direct sales force, independent sales organizations, independent sales representatives, an internal telesales group, trade associations, alliance bank relationships and financial institutions.

We operate in one business segment, electronic transaction processing, and provide products and services through our merchant services and funds transfer offerings. Approximately 98% of our current revenue base is from merchant services offerings. The remaining 2% of our total revenue is from our funds transfer service offerings.

Merchant services include credit and debit card transaction processing, business-to-business purchase card transaction processing, check guarantee, check verification and recovery, and terminal management services. We have two basic business models. In one model, which we refer to as “direct” merchant services, we have a salaried and commissioned sales force and independent sales organizations, or ISOs, that sell our end-to-end services directly to merchants. In the other model, which we refer to as “indirect” merchant services, we provide unbundled products and services primarily to financial institutions that in turn resell to their merchants. In accordance with our forecasts, our indirect merchant services revenue is currently declining and represents approximately 15% to 20% of our total merchant services revenue.

Components of Income Statement

We derive our revenue from two primary sources: (1) approximately half of our revenue is derived from charges based on a percentage of processed dollar volume and (2) approximately half of our revenue is derived from charges based on transaction quantity, equipment sales, leases, merchant fees, statement fees, as well as all other fees that do not relate to processed dollar volume. Revenue generated by these areas depend upon a number of factors, such as demand for and price of our services, the technological competitiveness of our product offerings, our reputation for providing timely and reliable service, competition within our industry, and general economic conditions.

Cost of service consists primarily of: the cost of network telecommunications capability; transaction processing systems; personnel who develop and maintain applications, operate computer networks and provide customer support; depreciation and occupancy costs associated with the facilities performing these functions; and provisions for operating losses.

Sales, general and administrative expenses consist primarily of salaries, wages and related expenses paid to sales personnel; non-revenue producing customer support functions and administrative employees and management; commissions to independent contractors and ISOs; advertising costs; other selling expenses; employee training costs; and occupancy of leased space directly related to these functions.

Other income and expense primarily consists of: minority interest in earnings, interest income and expense and other miscellaneous items of income and expense.

Results of Operations

In the third quarter ending February 28, 2003, revenue increased $9.3 million or 8% to $124.6 million from $115.3 million in the prior year’s comparable period. In the nine months ending February 28, 2003, revenue increased $39.9 million or 12% to $381.8 million from $341.9 million in the prior year’s comparable period. Revenue growth was primarily driven by the revenue growth in our direct business. This transaction growth compares favorably to market trends of our competitors, demonstrating that we continue to gain market share in both our domestic direct and ISO sales channels. In addition, our domestic average dollar value of transaction and net revenue per transaction have remained stable for the quarter, which we believe is a result of our diversified mid-market segmentation. The number of Canadian transactions is continuing to grow this year in the high

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single digits. In addition, our Canadian average dollar value of transaction and net revenue per transaction have held relatively constant as we continue to further penetrate the Canadian market and successfully cross-sell between our Visa and MasterCard portfolio.

Our revenue growth was partially offset by expected declines in our indirect and funds transfer businesses. Revenue from the funds transfer business declined 15% to $2.8 million in the three months ending February 28, 2003 compared to the same period in the prior year, partially due to the consolidation of our UK operations and discontinuance of new business development activities through our UK operations, previously announced during our fiscal 2002 fourth quarter. We also eliminated non-recurring product revenue from our funds transfer business.

Cost of service decreased by $1.4 million or 2% from $64.1 million in the three months ending February 28, 2002 to $62.7 million in the three months ending February 28, 2003. As a percentage of revenue, cost of service decreased to 50% in the three months ending February 28, 2003 from 56% in the prior year’s comparable period. This decrease in cost of service was primarily due to the integration of our recent acquisitions and the implementation of cost reduction initiatives.

Cost of service increased by $7.6 million or 4% from $186.4 million in the nine months ending February 28, 2002 to $194.0 million in the nine months ending February 28, 2003. As a percentage of revenue, cost of service decreased to 51% in the nine months ending February 28, 2003 from 55% in the prior year’s comparable period.

The increase in cost of service expenses for the nine months ending February 28, 2003 from the prior year’s comparable period was primarily due to variable direct costs associated with the revenue increase, acquisitions that have not annualized, and non-recurring conversion costs, such as duplicate labor, relating to the National Bank back-end conversion, completed in early October 2002. The decrease in cost of service as a percentage of revenue was due to benefits of consolidation and acquisition integration activities.

Sales, general and administrative expenses increased $7.0 million or 21% to $40.1 million in the three months ending February 28, 2003 from $33.1 million in the prior year’s comparable period. As a percentage of revenue, these expenses increased to 32% for the three months ending February 28, 2003 compared to 29% for the three months ending February 28, 2002.

Sales, general and administrative expenses increased $22.9 million or 24% to $116.9 million in the nine months ending February 28, 2003 from $94.0 million in the prior year’s comparable period. As a percentage of revenue, these expenses increased to 31% for the nine months ending February 28, 2003 compared to 28% for the nine months ending February 28, 2002.

The increase in sales, general and administrative expenses for the three and nine months ending February 28, 2003 compared to the prior year comparable periods was due to the higher level of sales infrastructure, personnel and related costs to grow revenue, the inclusion of acquired merchant portfolios and growth in commission payments to ISOs. The increase in sales, general and administrative expenses as a percentage of revenue was due to the increase in ISO related commission payments. The ISO business generally produces lower margins than the other direct business due to the ongoing commission payments to the ISOs.

Operating income was $21.8 million for the third quarter of fiscal 2003 compared to $18.0 million for the same period in fiscal 2002. This resulted in an increase in operating margin from 15.6% for the three months ending February 28, 2002 to 17.5% for the three months ending February 28, 2003.

Operating income was $70.9 million for the nine months ending February 28, 2003 compared to $61.5 million in the prior year’s comparable period. This resulted in an increase in operating margin from 18.0% for the nine months ending February 28, 2002 to 18.6% for the nine months ending February 28, 2003.

The changes in operating income and operating margins are due to the revenue and cost factors described above. The fixed cost nature of the business resulted in higher income in fiscal 2003 than in fiscal 2002.

Net income increased $1.8 million or 18% to $12.1 million in the three months ending February 28, 2003 from $10.3 million in the prior year’s comparable period, resulting in a $0.05 increase in diluted earnings per share to $0.32 from $0.27.

For the nine months ending February 28, 2003, income before a cumulative effect of a change in accounting principle increased $5.5 million, or 16% to $40.3 million at February 28, 2003 from $34.8 million at February 28, 2002. Our effective tax rate is expected to be 37.4% in fiscal 2003 as compared to 38.2% in fiscal 2002 as a result of the impact of our recent acquisitions and tax planning initiatives. Diluted earnings per share before the cumulative effect of a change in accounting principle increased to $1.07 for the nine months ending February 28, 2003 compared to $0.92 for the same period in the prior year.

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In fiscal 2002, we recorded a charge of $16.0 million, net of tax, for the cumulative effect of a change in accounting principle related to an indefinite life intangible asset, a trademark, with a carrying value of $24.6 million at June 1, 2002. The trademark was acquired on April 1, 1996 with the purchase of 92.5% ownership interest in MasterCard International’s Merchant Automated Point-of-Sale Program, or MAPP. The value of the trademark related to the use of the MAPP name and logo. In connection with the spin-off from NDC, we launched a rebranding effort under the Global Payments Inc. name and logo. In addition, effective June 1, 2001, we purchased MasterCard’s remaining minority interest, ending all existing marketing alliances with MasterCard and began conducting a study related to the future use of the trademark. In fiscal 2002, we completed an appraisal with an independent valuation firm of the fair value of the trademark as of June 1, 2001, the implementation date of SFAS No. 142. Based on the lack of continuing use of the MAPP trademark as of June 1, 2001, the fair value of the trademark was determined to be zero. In accordance with SFAS No. 142, the $24.6 million ($16.0 million, net of tax) was written off as of June 1, 2001 and was recorded as a cumulative effect of a change in accounting principle.

Liquidity and Capital Resources

We generate significant cash flow from operations. At February 28, 2003, we had cash and cash equivalents totaling $29.4 million. Net cash provided by operating activities decreased $72.6 million, or 57%, to $54.3 million for the nine months ending February 28, 2003 from $127.0 million for the comparable period in the prior year. Excluding the impact of the change in net merchant processing, our strong cash flow was due to the growth in our domestic direct merchant services business, the National Bank portfolio acquisition, and a reduction in capital expenditures due to the timing of capital projects. The change in net merchant processing was primarily due to the change in working capital associated with our Canadian merchant processing during the nine months ended February 28, 2003. Our Canadian credit facility was amended in December 2002 to provide our CIBC merchants in Canada with “same-day value”. Prior to this amendment, CIBC provided the funding directly to support the same-day value practice. Since the amendment in December 2002, we are providing the merchants with same-day value, resulting in a net receivable balance due from the debit networks and card associations. See additional discussion under Credit Facilities, below.

Net cash used in investing activities decreased 83% from $68.4 million to $13.9 million for the nine months ending February 28, 2003 from $82.3 million for the comparable period in the prior year. This decrease was primarily due to a decline in business development activities relating to acquisitions in the nine months ending February 28, 2003 compared to the same period in the prior year. In fiscal 2003, we expect approximately $15 million to $20 million in total capital spending, primarily related to continued office consolidations, acquisition integrations, systems infrastructure, acquisition of Canadian merchant terminals and product development.

Net cash used in financing activities for the nine months ending February 28, 2003 was $30.3 million. This compares to $33.3 million provided by financing activities for the same period in the prior year. During the nine months ending February 28, 2003, we paid the remaining $22 million on our line of credit. We periodically use our lines of credit, reflecting the funding of timing differences between merchant funding and receipts from card associations and the debit networks.

We believe that our current level of cash and borrowing capacity under our committed lines of credit described below, together with future cash flows from operations, are sufficient to meet the needs of our existing operations and planned requirements for the foreseeable future. We currently do not have any material capital commitments, other than commitments under capital and operating leases or planned expansions. Our contractual obligations on our operating and capital leases have not materially changed from the amounts disclosed in our Form 10-K for the fiscal year ended May 31, 2002. Over the next two to three years, we may develop our own hardware and software facilities for transaction processing, cash management, file transfer and related communications functions in an effort to improve productivity and reduce cost of services. If undertaken, this development would further increase our capital expenditures above historical levels over the next two to three years.

We regularly evaluate cash requirements for current operations, commitments, development activities and acquisitions and we may elect to raise additional funds for these purposes in the future, either through the issuance of debt, equity or otherwise.

Credit Facilities

We have a commitment for a $125 million revolving line of credit. It was initially used to fund the cash due to NDC to reflect our share of debt incurred by NDC prior to our spin-off to establish our initial capitalization. This line of credit is also available to meet working capital needs and to finance acquisitions. This line has a variable interest rate based on market rates. The credit agreement contains certain financial and non-financial covenants and events of default customary for financings of this nature. The facility has a three-year term, expiring in January 2004. The full amount outstanding is due upon demand and, therefore, we classify the amount as a current liability. As of May 31, 2002, we had $22 million outstanding under this facility and no amounts outstanding at February 28, 2003.

On October 1, 2001, we obtained a commitment for a $25 million revolving credit facility to finance working capital needs and other general corporate purposes. This line has a variable interest rate based on market rates. The credit agreement contains

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certain financial and non-financial covenants and events of default customary for financings of this nature. The credit facility originally had a sixteen-month term, expiring in January 2003. Prior to its expiration, we executed an amendment with the lender to extend the term of this facility for an additional twelve months through January 2004. At February 28, 2003 and May 31, 2002, there were no amounts outstanding on this credit facility.

We also have a credit facility from the Canadian Imperial Bank of Commerce, or CIBC, that provides a line of credit up to $175 million (Canadian dollars), approximately $117 million U.S. as of February 28, 2003, with an additional overdraft facility available to cover larger advances during periods of peak usage of credit and debit cards. This line has a variable interest rate based on market rates and it contains certain financial and non-financial covenants and events of default customary for financings of this nature. This line of credit is secured by a first priority security interest in our accounts receivable from VISA Canada/International, and has been guaranteed by our subsidiaries. This guarantee is subordinate to our primary credit facility. On December 10, 2002, we executed a third amendment to this credit facility which extended the term of the facility for an additional 364 days through December 9, 2003 and provided for the incurrence of interest costs in connection with offering merchants “same day value” for their deposits. Same day value, which has been an accepted industry practice in Canada for more than ten years, is the practice of giving merchants same day value for their sales transactions, even though their deposits are made at a later date. Essentially, the merchant’s deposits are backdated to the date of the applicable sales transaction. Under the terms of the credit agreement prior to the execution of the third amendment, CIBC credited the merchants’ deposit account for their sales transactions on the day of the transaction and we reimbursed CIBC when we received the corresponding funding from the card association and debit network. In order to continue offering “same day value” to our merchants in Canada, we expect to draw on our facility with CIBC and pay merchants in advance of the date we receive the corresponding funding from the card association and debit network resulting in a net merchant processing receivable. This practice, along with the recent interest rate increases in Canada, may increase our interest expense in fiscal 2003. At May 31, 2002, there were no amounts outstanding on this facility. At February 28, 2003, there were $45.9 million (Canadian dollars) outstanding on this credit facility. This amount is included as of component of the net merchant processing receivable on the balance sheet. The amount borrowed is restricted in use to pay merchants and will be received from the card associations and debit network on the following day.

Forward-Looking Results of Operations

During fiscal 2003, we intend to continue to focus on growing our domestic and Canadian presence, build our ISO sales channel, provide customer satisfaction, assess opportunities for profitable acquisition growth, pursue enhanced products and services for our customers, and leverage our existing business model. Consistent with this strategy, we are reaffirming our full year revenue guidance for fiscal 2003 revenue of between $495 million and $514 million, or 7% to 11% growth, compared to $463 million in fiscal 2002. Our expectation for fiscal 2003 diluted earnings per share is $1.39 t o $1.42 or 13% to 15% growth compared to normalized diluted earnings per share of $1.23 in fiscal 2002. Although we consider the lower ranges of this guidance to be conservative, it does not reflect the potential impact that may result from the economic effects of any terrorist attacks, the ongoing military action in the Middle East or any other future revenue and earnings risk factors as listed below. Normalized diluted earnings per share for fiscal 2002 excludes the earnings per share impact of the change in accounting principle, $(0.42), and excludes the earnings per share impact of the restructuring and other charge, $(0.18), from reported diluted earnings per share of $0.63. The earnings per share target reflects our expectation of achieving operating margin of 18.0% to 18.5% in fiscal 2003.

We currently process card transactions for Air Canada. Our revenue from this relationship represents less than 1% of our consolidated revenue. Air Canada has recently filed for protection under the Companies’ Creditors Arrangement Act, which generally allows a company to reorganize while it continues normal operations. Based on publicly available information, Air Canada has received U.S. $700 million of debtor-in-possession financing and the court order provides that the airline shall honor all airline tickets in the usual and ordinary course of business. Based on information currently available to us, we believe a material loss is unlikely and we are not revising our guidance for fiscal 2003.

Special Cautionary Notice Regarding Forward-Looking Statements

We believe that it is important to communicate our plans and expectations about the future to our shareholders and to the public. Investors are cautioned that some of the statements we use in this report, and in some of the documents we incorporate by reference in this report contain forward-looking statements and are made pursuant to the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of risks and uncertainties, are predictive in nature, and depend upon or refer to future events or conditions. You can sometimes identify forward looking-statements by our use of the words “believes,” “anticipates,” “expects,” “intends,” “plans” and similar expressions. Actual events or results might differ materially from those expressed or forecasted in these forward-looking statements.

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Although we believe that the plans and expectations reflected in or suggested by our forward-looking statements are reasonable, those statements are based on a number of assumptions, estimates, projections or plans that are inherently subject to significant risks, uncertainties, and contingencies that are subject to change. Accordingly, we cannot guarantee you that our plans and expectations will be achieved. Our actual revenues, revenue growth and margins, other results of operation and shareholder values could differ materially from those anticipated in our forward-looking statements as a result of many known and unknown factors. These factors include, but are not limited to, the following:

For additional information regarding these and other risk factors, please refer to Exhibit 99.1 to our Annual Report on Form 10-K for the year ended May 31, 2002, as well as those set forth in our press releases, reports and other filings made with the Securities and Exchange Commission, and those set forth from time to time in our analyst calls and discussions. These cautionary statements qualify all of our forward-looking statements and you are cautioned not to place undue reliance on these forward-looking statements.

Our forward-looking statements speak only as of the date they are made and should not be relied upon as representing our plans and expectations as of any subsequent date. While we may elect to update or revise forward-looking statements at some time in the future, we specifically disclaim any obligation to publicly release the results of any revisions to our forward-looking statements. You are advised, however, to consult any further disclosures we make in our reports filed with the Securities and Exchange Commission and in our press releases.

Where to Find More Information

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We file annual and quarterly reports, proxy statements and other information with the Securities and Exchange Commission or SEC. You may read and print materials that we have filed with the SEC from their website at www.sec.gov. In addition, certain of our SEC filings, including our annual report on Form 10-K, our quarterly reports on Form 10-Q and current reports on Form 8-K can be viewed and printed from the investor information section of our website at www.globalpaymentsinc.com free of charge. Copies of our filings are also available by writing or calling us using the address or phone number on the cover of this Form 10-Q.

Our SEC filings may also be viewed and copied at the following SEC public reference room, and at the offices of The New York Stock Exchange, where our common stock is quoted under the symbol “GPN.”

SEC Public Reference Room

450 Fifth Street, N.W., Room 1200

Washington, DC 20549

(You may call the SEC at 1-800-SEC-0330 for further information on the public reference room.)

New York Stock Exchange Offices

20 Broad Street

New York, NY 10005

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes related to our exposure to changes in interest rates and/or foreign currency rates from the information reported in our Form 10-K for the fiscal year ended May 31, 2002.

Item 4. Controls and Procedures

We concluded an evaluation of the effectiveness of our disclosure controls and procedures on March 25, 2003. Our evaluation tested controls and other procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities and Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Based on our evaluation, as of March 25, 2003, information required to be disclosed in our reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer as appropriate, in a manner that allows timely decisions regarding required disclosure.

There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to March 25, 2003.

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PART II – OTHER INFORMATION

Item 1. Pending Legal Proceedings

The Company is a party to a number of claims and lawsuits incidental to its business. In the opinion of management, the ultimate outcome of such matters, in the aggregate, will not have a material adverse impact on the Company’s financial position, liquidity or results of operations.

Item 6. Exhibits and Reports Filed on Form 8-K

No reports on Form 8-K were filed during the quarter ended February 28, 2003.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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Certifications

I, Paul R. Garcia, certify that:

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I, James G. Kelly, certify that:

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