GLOBAL PAYMENTS INC - FORM 8-K - EX-99.1

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8-K - FORM 8-K - GLOBAL PAYMENTS INC	d386170d8k.htm

Exhibit 99.1

LOGO

Global Payments Reports Fourth Quarter and Year-End Earnings

Data Intrusion Investigation Completed

Signs Agreement to Acquire Remaining 44% Interest in Asia-Pacific Joint Venture

Board Authorizes $150 Million Share Repurchase Program

ATLANTA, July 26, 2012 — Global Payments Inc. (NYSE: GPN) today announced results for its fiscal fourth quarter and year ended May 31, 2012.

Chairman and CEO Paul R. Garcia said, “I am pleased that in a challenging year we delivered strong results with revenues of $2.2 billion or 18% growth, and cash earnings per share of $3.53 or 15% growth over prior year. In addition, I am delighted to announce that we recently completed our data intrusion investigation, and we are focused on executing the remediation plan.

“We continue to drive strategies that will produce sustainable long-term growth, so I am pleased to announce that we have signed an agreement to acquire the remaining 44% interest in our merchant services joint venture in Asia-Pacific from HSBC. Lastly, our Board of Directors has authorized a $150 million share repurchase program, which I believe demonstrates our confidence in the company,” Garcia concluded.

Full-Year 2012 Summary

•

Revenues grew 18% to $2,203.8 million compared to $1,859.8 million in 2011.

•

Cash diluted earnings per share¹ from continuing operations grew 15% to $3.53 compared to $3.08 in the prior year.

•

GAAP fiscal 2012 full-year diluted earnings per share from continuing operations of $2.37, compared to $2.61 diluted earnings per share from continuing operations in the prior year.

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

Fourth Quarter 2012 Summary

•

Revenues grew 15% to $597.0 million compared to $519.8 million in the fourth quarter of 2011.

•

Cash diluted earnings per share¹ from continuing operations grew 13% to $0.97 compared to $0.86 in the fourth quarter of 2011.

•

GAAP diluted earnings per share from continuing operations were $0.06, compared to $0.72 in the fourth quarter of 2011.

Data Intrusion Investigation

With the completion of our data intrusion investigation, GAAP results for the fourth quarter and full-year 2012 include a pre-tax charge of $84.4 million or $0.68 diluted earnings per share. This charge includes an estimate of charges from the card brands and investigation and remediation expenses. A qualified security assessor is conducting the independent review required to return the company to the lists of PCI compliant service providers.

Agreement to Acquire Remaining Interest in Asia-Pacific Joint Venture

In 2006, Global Payments and HSBC formed a joint venture, Global Payments Asia Pacific Limited, to provide payment processing services to merchants in Asia-Pacific, in which Global Payments’ ownership was 56%. Under the terms of the most recent agreement, Global Payments plans to acquire the remaining 44% ownership interest in this joint venture and will pay HSBC a total of USD$242 million. The company plans to use existing cash and lines of credit to complete the transaction and anticipates the deal will close during the second quarter of fiscal 2013. Assuming an October 1, 2012 close date, the deal is anticipated to be as much as $0.07 accretive to GAAP and cash diluted earnings per share and is included in our fiscal 2013 outlook.

2013 Outlook

For the full-year of fiscal 2013, the company expects annual revenue of $2,360 million to $2,400 million, or 7% to 9% growth over fiscal 2012. The company expects annual fiscal 2013 diluted earnings per share on a cash basis of $3.59 to $3.66, and includes a benefit of as much as $0.07 related to the Asia-Pacific acquisition. This reflects growth of 2% to 4% over fiscal 2012. On a constant currency basis, the company expects revenue to grow 8% to 10% and diluted earnings per share on a cash basis to grow 4% to 6%. Annual fiscal 2013 GAAP diluted earnings per share is expected to be $3.22 to $3.29. These expectations exclude the impact of any potential share repurchases.

David Mangum, Senior Executive Vice President and CFO, stated, “We completed fiscal 2012 with flexibility in our capital structure. As we go forward, our primary priority for capital deployment will

continue to be organic growth and acquisitions as demonstrated by our purchase of the remaining 44% of our Asia-Pacific joint venture, complemented by share repurchases.”

Share Repurchase Authorization

The Board of Directors approved a new $150 million share repurchase authorization of Global Payments’ stock. Under this new 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. 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.

Investor Day

Global Payments plans to host an Investor Day in New York City on October 11, 2012, at the New York Stock Exchange. The company will webcast the Investor Day presentation live from the investor relations page of the company’s website at www.globalpaymentsinc.com. Additional details about the meeting will be available in the coming weeks.

Conference Call

Global Payments will hold a conference call today, July 26, 2012 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 through the Global Payments’ website through August 9, 2012.

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, and the impact on our results of operations; foreign currency risks which become increasingly relevant as we expand internationally, the effect of current worldwide economic conditions, including sovereign insolvency situations and a decline in the value of the U.S. dollar, developments in the implementation of debit interchange legislation, and future performance and integration of recent acquisitions, and other risks detailed in the company’s SEC filings, including the most recently filed Form 10-Q or 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.

Investor contacts:

Jane M. Elliott

770-829-8234

Kay Sharpton

770-829-8870

investor.relations@globalpay.com

Media contact:

Amy Corn

770-829-8755

media.relations@globalpay.com

SCHEDULE 1

GAAP CONSOLIDATED STATEMENTS OF INCOME

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)


	Three Months Ended May 31,									Year Ended May 31,
	2012			2011			% Change			2012			2011			% Change
	(unaudited)
Revenues	$	597,032		$	519,754			15	%	$	2,203,847		$	1,859,802			18	%
Operating expenses:
Cost of service		213,071			191,440			11	%		784,756			665,017			18	%
Sales, general and administrative		289,712			240,171			21	%		1,027,304			863,191			19	%
Processing system intrusion		84,438			—			NM			84,438			—			NM

		587,221			431,611			36	%		1,896,498			1,528,208			24	%

Operating income		9,811			88,143			(89	%)		307,349			331,594			(7	%)
Other income (expense):
Interest and other income		2,818			3,534			(20	%)		9,946			10,774			(8	%)
Interest and other expense		(4,185	)		(4,706	)		(11	%)		(16,848	)		(18,161	)		(7	%)

		(1,367	)		(1,172	)		17	%		(6,902	)		(7,387	)		(7	%)

Income from continuing operations before income taxes		8,444			86,971			(90	%)		300,447			324,207			(7	%)
Benefit (provision) for income taxes		3,202			(24,587	)		NM			(82,881	)		(95,076	)		(13	%)

Income from continuing operations		11,646			62,384			(81	%)		217,566			229,131			(5	%)
Loss from discontinued operations, net of tax		—			(29	)		NM			—			(975	)		NM

Net income		11,646			62,355			(81	%)		217,566			228,156			(5	%)
Less: Net income attributable to noncontrolling interests, net of tax		(6,560	)		(3,779	)		74	%		(29,405	)		(18,918	)		55	%

Net income attributable to Global Payments	$	5,086		$	58,576			(91	%)	$	188,161		$	209,238			(10	%)

Amounts attributable to Global Payments:
Income from continuing operations	$	5,086		$	58,605			(91	%)	$	188,161		$	210,213			(10	%)
Loss from discontinued operations, net of tax		—			(29	)		NM			—			(975	)		NM

Net income attributable to Global Payments	$	5,086		$	58,576			(91	%)	$	188,161		$	209,238			(10	%)

Basic earnings per share attributable to Global Payments:
Income from continuing operations	$	0.06		$	0.73			(92	%)	$	2.39		$	2.63			(9	%)
Loss from discontinued operations, net of tax		—			—			NM			—			(0.01	)		NM

Net income attributable to Global Payments	$	0.06		$	0.73			(92	%)	$	2.39		$	2.62			(9	%)

Diluted earnings per share attributable to Global Payments:
Income from continuing operations	$	0.06		$	0.72			(92	%)	$	2.37		$	2.61			(9	%)
Loss from discontinued operations, net of tax		—			—			NM			—			(0.01	)		NM

Net income attributable to Global Payments	$	0.06		$	0.72			(92	%)	$	2.37		$	2.60			(9	%)

Weighted average shares outstanding:
Basic		78,539			80,222						78,829			79,837
Diluted		79,192			81,045						79,431			80,478

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 May 31,									Year Ended May 31,
	2012			2011			% Change			2012			2011			% Change
Revenues	$	597,032		$	519,754			15	%	$	2,203,847		$	1,859,802			18	%
Operating expenses:
Cost of service		200,051			175,897			14	%		734,060			619,927			18	%
Sales, general and administrative		274,390			237,087			16	%		1,011,982			851,428			19	%

		474,441			412,984			15	%		1,746,042			1,471,355			19	%

Operating income		122,591			106,770			15	%		457,805			388,447			18	%
Other income (expense):
Interest and other income		2,818			3,534			(20	%)		9,946			10,774			(8	%)
Interest and other expense		(4,185	)		(4,706	)		(11	%)		(16,848	)		(18,161	)		(7	%)

		(1,367	)		(1,172	)		17	%		(6,902	)		(7,387	)		(7	%)

Income from continuing operations before income taxes		121,224			105,598			15	%		450,903			381,060			18	%
Provision for income taxes		(36,318	)		(29,432	)		23	%		(133,481	)		(109,459	)		22	%

Income from continuing operations		84,906			76,166			11	%		317,422			271,601			17	%
Less: Net income attributable to noncontrolling interests, net of tax		(8,437	)		(6,315	)		34	%		(37,193	)		(23,876	)		56	%

Net income from continuing operations attributable to Global Payments	$	76,469		$	69,851			9	%	$	280,229		$	247,725			13	%

Basic earnings per share	$	0.97		$	0.87			11	%	$	3.55		$	3.10			15	%

Diluted earnings per share	$	0.97		$	0.86			13	%	$	3.53		$	3.08			15	%

Weighted average shares outstanding:
Basic		78,539			80,222						78,829			79,837
Diluted		79,192			81,045						79,431			80,478

NM – Not Meaningful

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

SCHEDULE 3

SEGMENT INFORMATION

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)


	Three Months Ended May 31,
	2012						2011						% Change
	GAAP			Cash Earnings			GAAP			Cash Earnings			GAAP			Cash Earnings
Revenues:
United States	$	351,872		$	351,872		$	281,500		$	281,500			25	%		25	%
Canada		79,015			79,015			87,140			87,140			(9	%)		(9	%)

North America merchant services		430,887			430,887			368,640			368,640			17	%		17	%

Europe		128,521			128,521			115,359			115,359			11	%		11	%
Asia-Pacific		37,624			37,624			35,755			35,755			5	%		5	%

International merchant services		166,145			166,145			151,114			151,114			10	%		10	%

Total revenues	$	597,032		$	597,032		$	519,754		$	519,754			15	%		15	%

Operating income:
North America merchant services	$	76,412		$	81,194		$	69,816		$	73,085			9	%		11	%
International merchant services		48,074			61,664			41,632			52,569			15	%		17	%
Corporate⁽¹⁾		(114,675	)		(20,267	)		(23,305	)		(18,884	)		(392	%)		(7	%)

Operating income	$	9,811		$	122,591		$	88,143		$	106,770			(89	%)		15	%


	Year Ended May 31,
	2012						2011						% Change
	GAAP			Cash Earnings			GAAP			Cash Earnings			GAAP			Cash Earnings
Revenues:
United States	$	1,234,818		$	1,234,818		$	1,031,997		$	1,031,997			20	%		20	%
Canada		332,434			332,434			330,872			330,872			0	%		0	%

North America merchant services		1,567,252			1,567,252			1,362,869			1,362,869			15	%		15	%

Europe		489,300			489,300			359,567			359,567			36	%		36	%
Asia-Pacific		147,295			147,295			137,366			137,366			7	%		7	%

International merchant services		636,595			636,595			496,933			496,933			28	%		28	%

Total revenues	$	2,203,847		$	2,203,847		$	1,859,802		$	1,859,802			18	%		18	%

Operating income:
North America merchant services	$	281,305		$	295,003		$	268,233		$	280,880			5	%		5	%
International merchant services		196,137			238,487			143,911			172,956			36	%		38	%
Corporate⁽¹⁾		(170,093	)		(75,685	)		(80,550	)		(65,389	)		(111	%)		(16	%)

Operating income	$	307,349		$	457,805		$	331,594		$	388,447			(7	%)		18	%

⁽¹⁾	Fiscal 2012 GAAP amounts include processing system intrusion costs of $84.4 million

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

SCHEDULE 4

CONSOLIDATED BALANCE SHEETS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)


	May 31, 2012			May 31, 2011
ASSETS
Current assets:
Cash and cash equivalents	$	781,275		$	1,354,285
Accounts receivable, net of allowances for doubtful accounts of $532 and $472, respectively		182,962			166,540
Claims receivable, net of allowance for losses of $3,435 and $3,870, respectively		1,029			914
Settlement processing assets		217,994			280,359
Inventory		9,864			7,640
Deferred income taxes		21,969			2,946
Prepaid expenses and other current assets		33,646			35,291

Total current assets		1,248,739			1,847,975

Goodwill		724,687			779,637
Other intangible assets, net of accumulated amortization of $233,215 and $197,066, respectively		290,188			341,500
Property and equipment, net of accumulated depreciation of $161,911 and $147,670, respectively		305,848			256,301
Deferred income taxes		97,235			104,140
Other		21,446			20,978

Total assets	$	2,688,143		$	3,350,531

LIABILITIES AND EQUITY
Current liabilities:
Lines of credit	$	215,391		$	270,745
Current portion of long-term debt		76,420			85,802
Accounts payable and accrued liabilities		316,313			241,578
Settlement processing obligations		216,878			838,565
Income taxes payable		12,283			7,674

Total current liabilities		837,285			1,444,364

Long-term debt		236,565			268,217
Deferred income taxes		106,644			116,432
Other long-term liabilities		62,306			49,843

Total liabilities		1,242,800			1,878,856

Commitments and contingencies

Redeemable noncontrolling interest		144,422			133,858

Equity:
Preferred stock, no par value; 5,000,000 shares authorized and none issued		—			—
Common stock, no par value; 200,000,000 shares authorized; 78,551,297 and 80,334,781 issued and outstanding at May 31, 2012 and 2011, respectively.
Paid-in capital		358,728			419,591
Retained earnings		843,456			685,624
Accumulated other comprehensive (loss) income		(30,000	)		79,320

Total Global Payments shareholders' equity		1,172,184			1,184,535

Noncontrolling interest		128,737			153,282

Total equity		1,300,921			1,337,817

Total liabilities and equity	$	2,688,143		$	3,350,531

SCHEDULE 5

CONSOLIDATED STATEMENTS OF CASH FLOWS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)


	Year Ended May 31,
	2012			2011
Cash flows from operating activities:
Net income	$	217,566		$	228,156
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization of property and equipment		48,403			40,545
Amortization of acquired intangibles		50,696			41,692
Provision for operating losses and bad debts		22,417			20,577
Share-based compensation expense		16,391			15,885
Deferred income taxes		(19,498	)		19,154
Loss on disposal of discontinued operations, non-cash		—			602
Other, net		(2,775	)		(3,576	)
Changes in operating assets and liabilities, net of the effects of acquisitions:
Accounts receivable		(16,422	)		(34,723	)
Claims receivable		(13,519	)		(14,425	)
Settlement processing assets and obligations, net		(568,335	)		299,895
Inventory		(2,394	)		1,979
Prepaid expenses and other assets		3,511			3,537
Accounts payable and other accrued liabilities		85,875			89,230
Income taxes payable		4,609			1,244

Net cash (used in) provided by operating activities		(173,475	)		709,772

Cash flows from investing activities:
Business, intangible and other asset acquisitions, net of cash acquired		(44,274	)		(167,968	)
Capital expenditures		(109,876	)		(98,537	)
Disposition of business, net of cash		—			(2,577	)
Net decrease in financing receivables		2,565			2,062
Proceds from sale of investment and contractual rights		1,152			—

Net cash used in investing activities		(150,433	)		(267,020	)

Cash flows from financing activities:
Net (payments) borrowings on short-term lines of credit		(55,354	)		191,558
Proceeds from issuance of long-term debt		146,374			205,298
Principal payments under long-term debt		(184,235	)		(280,198	)
Proceeds from stock issued under employee stock plans		11,446			18,364
Common stock repurchased—share-based compensation plans		(4,861	)		—
Tax benefit from employee share-based compensation		1,441			9,141
Repurchase of common stock		(99,604	)		(14,900	)
Distribution to noncontrolling interests		(27,082	)		(8,752	)
Dividends paid		(6,311	)		(6,388	)

Net cash (used in) provided by financing activities		(218,186	)		114,123

Effect of exchange rate changes on cash		(30,916	)		27,464

(Decrease) increase in cash and cash equivalents		(573,010	)		584,339
Cash and cash equivalents, beginning of period		1,354,285			769,946

Cash and cash equivalents, end of period	$	781,275		$	1,354,285

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 May 31, 2012
	GAAP			Processing System Intrusion			Other²			Cash Earnings Adjustments¹			Cash Earnings
Revenues	$	597,032		$	—		$	—		$	—		$	597,032
Operating expenses:
Cost of service		213,071			—			—			(13,020	)		200,051
Sales, general and administrative		289,712			—			(15,322	)		—			274,390
Processing system intrusion		84,438			(84,438	)		—			—			—

		587,221			(84,438	)		(15,322	)		(13,020	)		474,441

Operating income		9,811			84,438			15,322			13,020			122,591
Other income (expense):
Interest and other income		2,818			—			—			—			2,818
Interest and other expense		(4,185	)		—			—			—			(4,185	)

		(1,367	)		—			—			—			(1,367	)

Income from continuing operations before income taxes		8,444			84,438			15,322			13,020			121,224
Benefit (provision) for income taxes		3,202			(30,666	)		(5,034	)		(3,820	)		(36,318	)

Income from continuing operations		11,646			53,772			10,288			9,200			84,817
Less: Net income attributable to noncontrolling interests, net of tax		(6,560	)		—			—			(1,877	)		(8,437	)

Net income from continuing operations attributable to Global Payments	$	5,086		$	53,772		$	10,288		$	7,223		$	76,469

Diluted shares		79,192												79,192
Diluted earnings per share	$	0.06		$	0.68		$	0.13		$	0.10		$	0.97


	Three Months Ended May 31, 2011
	GAAP			Employee Termination and Other³			Foreign Tax Rate			Cash Earnings Adjustments¹			Cash Earnings
Revenues	$	519,754		$	—		$	—		$	—		$	519,754
Operating expenses:
Cost of service		191,440			(1,337	)		—			(14,206	)		175,897
Sales, general and administrative		240,171			(3,084	)		—			—			237,087

		431,611			(4,421	)		—			(14,206	)		412,984

Operating income		88,143			4,421			—			14,206			106,770
Other income (expense):
Interest and other income		3,534			—			—			—			3,534
Interest and other expense		(4,706	)		—			—			—			(4,706	)

		(1,172	)		—			—			—			(1,172	)

Income from continuing operations before income taxes		86,971			4,421			—			14,206			105,598
Provision for income taxes		(24,587	)		(1,475	)					(3,370	)		(29,432	)

Income from continuing operations		62,384			2,946			—			10,836			76,166
Less: Net income attributable to noncontrolling interests, net of tax		(3,779	)		—			—			(2,536	)		(6,315	)

Net income from continuing operations attributable to Global Payments	$	58,605		$	2,946		$	—		$	8,300		$	69,851

Diluted shares		81,045												81,045
Diluted earnings per share	$	0.72		$	0.04		$	—		$	0.10		$	0.86

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

²	Represents one-time charges primarily related to employee termination benefits and two contractual disputes.

³	Reflects expenses of start-up costs related to our new Global Service Center in Manila, Philippines and employee termination and relocation benefits and the related income tax benefits.

We supplemented our reporting of income from continuing operations and the related earnings per share information determined in accordance with GAAP by reporting income from continuing operations and the related earnings per share for the three months ended May 31, 2012 and 2011 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated May 31, 2012 income from continuing operations 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, two contractual disputes and other immaterial items from our results. We calculated May 31, 2011 income from continuing operations and earnings per share on a cash basis by excluding charges related to employee termination and relocation benefits, certain one-time costs related to our Global Service Center, and 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 income from continuing operations and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, income from continuing operations and earnings per share determined in accordance with GAAP. Our measures of income from continuing operations 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)


	Year Ended May 31, 2012
	GAAP			Processing System Intrusion			Other²			Cash Earnings Adjustments¹			Cash Earnings
Revenues	$	2,203,847		$	—		$	—		$	—		$	2,203,847
Operating expenses:
Cost of service		784,756			—			—			(50,696	)		734,060
Sales, general and administrative		1,027,304			—			(15,322	)		—			1,011,982
Processing system intrusion		84,438			(84,438	)		—			—			—

		1,896,498			(84,438	)		(15,322	)		(50,696	)		1,746,042

Operating income		307,349			84,438			15,322			50,696			457,805
Other income (expense):
Interest and other income		9,946			—			—			—			9,946
Interest and other expense		(16,848	)		—			—			—			(16,848	)

		(6,902	)		—			—			—			(6,902	)

Income from continuing operations before income taxes		300,447			84,438			15,322			50,696			450,903
Provision for income taxes		(82,881	)		(30,640	)		(5,034	)		(14,900	)		(133,455	)

Income from continuing operations		217,566			53,798			10,288			35,796			317,448
Less: Net income attributable to noncontrolling interests, net of tax		(29,405	)		—						(7,788	)		(37,193	)

Net income from continuing operations attributable to Global Payments	$	188,161		$	53,798		$	10,288		$	28,008		$	280,255

Diluted shares		79,431												79,431
Diluted earnings per share	$	2.37		$	0.68		$	0.13		$	0.35		$	3.53


	Year Ended May 31, 2011
	GAAP			Employee Termination and Other³			Foreign Tax Rate⁴			Cash Earnings Adjustments¹			Cash Earnings
Revenues	$	1,859,802		$	—		$	—		$	—		$	1,859,802
Operating expenses:
Cost of service		665,017			(3,398	)		—			(41,692	)		619,927
Sales, general and administrative		863,191			(11,763	)		—			—			851,428

		1,528,208			(15,161	)		—			(41,692	)		1,471,355

Operating income		331,594			15,161			—			41,692			388,447
Other income (expense):
Interest and other income		10,774			—			—			—			10,774
Interest and other expense		(18,161	)		—			—			—			(18,161	)

		(7,387	)		—			—			—			(7,387	)

Income from continuing operations before income taxes		324,207			15,161			—			41,692			381,060
Provision for income taxes		(95,076	)		(4,949	)		2,479			(11,913	)		(109,459	)

Income from continuing operations		229,131			10,212			2,479			29,779			271,601
Less: Net income attributable to noncontrolling interests, net of tax		(18,918	)		—			—			(4,958	)		(23,876	)

Net income from continuing operations attributable to Global Payments	$	210,213		$	10,212		$	2,479		$	24,821		$	247,725

Diluted shares		80,478												80,478
Diluted earnings per share	$	2.61		$	0.13		$	0.03		$	0.31		$	3.08

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

²	Represents one-time charges primarily related to employee termination benefits and two contractual disputes.

³	Reflects expenses of start-up costs related to our new Global Service Center in Manila, Philippines and employee termination and relocation benefits and the related income tax benefits.

⁴	Represents a one-time, non-cash write-down of a deferred tax asset we established in July 2009 when we purchased the remaining 49% of our UK business. The write-down resulted from a legislated reduction to the tax rate of 1%.

We supplemented our reporting of income from continuing operations and the related earnings per share information determined in accordance with GAAP by reporting income from continuing operations and the related earnings per share for the years ended May 31, 2012 and 2011 on a “cash earnings” basis in this earnings release as a measure to help evaluate performance. We calculated May 31, 2012 income from continuing operations 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, two contractual disputes and other immaterial items from our results. We calculated May 31, 2011 income from continuing operations and earnings per share on a cash basis by excluding charges related to employee termination and relocation benefits, certain one-time costs related to our Global Service Center, the legislated tax rate reduction and 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 income from continuing operations and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, income from continuing operations and earnings per share determined in accordance with GAAP. Our measures of income from continuing operations 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 May 31,
	2012												2011
	GAAP			Processing System Intrusion		Other²		Cash Earnings Adjustments¹		Cash Earnings			GAAP			Employee Termination and Other³		Cash Earnings Adjustments¹		Cash Earnings
Revenues:
United States	$	351,872		$	—	$	—	$	—	$	351,872		$	281,500		$	—	$	—	$	281,500
Canada		79,015			—		—		—		79,015			87,140			—		—		87,140

North America merchant services		430,887			—		—		—		430,887			368,640			—		—		368,640

Europe		128,521			—		—		—		128,521			115,359			—		—		115,359
Asia-Pacific		37,624			—		—		—		37,624			35,755			—		—		35,755

International merchant services		166,145			—		—		—		166,145			151,114			—		—		151,114

Total revenues	$	597,032		$	—	$	—	$	—	$	597,032		$	519,754		$	—	$	—	$	519,754

Operating income:
North America merchant services	$	76,412		$	—	$	1,538	$	3,244	$	81,194		$	69,816		$	—	$	3,269	$	73,085
International merchant services		48,074			—		3,814		9,776		61,664			41,632			—		10,937		52,569
Corporate		(114,675	)		84,438		9,970		—		(20,267	)		(23,305	)		4,421		—		(18,884	)

Operating income	$	9,811		$	84,438	$	15,322	$	13,020	$	122,591		$	88,143		$	4,421	$	14,206	$	106,770


	Year Ended May 31,
	2012												2011
	GAAP			Processing System Intrusion		Other²		Cash Earnings Adjustments¹		Cash Earnings			GAAP			Employee Termination and Other³		Cash Earnings Adjustments¹		Cash Earnings
Revenues:
United States	$	1,234,818		$	—	$	—	$	—	$	1,234,818		$	1,031,997		$	—	$	—	$	1,031,997
Canada		332,434			—		—		—		332,434			330,872			—		—		330,872

North America merchant services		1,567,252			—		—		—		1,567,252			1,362,869			—		—		1,362,869

Europe		489,300			—		—		—		489,300			359,567			—		—		359,567
Asia-Pacific		147,295			—		—		—		147,295			137,366			—		—		137,366

International merchant services		636,595			—		—		—		636,595			496,933			—		—		496,933

Total revenues	$	2,203,847		$	—	$	—	$	—	$	2,203,847		$	1,859,802		$	—	$	—	$	1,859,802

Operating income:
North America merchant services	$	281,305		$	—	$	1,538	$	12,160	$	295,003		$	268,233		$	—	$	12,647	$	280,880
International merchant services		196,137			—		3,814		38,536		238,487			143,911			—		29,045		172,956
Corporate		(170,093	)		84,438		9,970		—		(75,685	)		(80,550	)		15,161		—		(65,389	)

Operating income	$	307,349		$	84,438	$	15,322	$	50,696	$	457,805		$	331,594		$	15,161	$	41,692	$	388,447

¹	Represents acquisition intangible amortization expense.

²	Represents one-time charges primarily related to employee termination benefits and two contractual disputes.

³	Represents start-up costs related to our Global Service Center in Manila, Philippines and expenses related to employee termination and relocation benefits.

SCHEDULE 9

OUTLOOK SUMMARY

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In millions, except per share data)


	Fiscal 2012 Actual			Fiscal 2013 Outlook	% Change FY12
Revenue Outlook
Constant currency¹	$	2,204		$2,385 to $2,425	8% to 10%
Foreign currency impact²		NA		($25)

Total Revenues	$	2,204		$2,360 to $2,400	7% to 9%

EPS Outlook
Constant currency¹	$	3.53		$3.67 to $3.74	4% to 6%
Foreign currency impact²		NA		($0.08)

Cash EPS	$	3.53		$3.59 to $3.66	2% to 4%
Acquisition-related intangibles and non-recurring items³		(0.48	)	($0.37)	(23%)
Processing system intrusion		(0.68	)	TBD*	NM

GAAP Diluted EPS	$	2.37		$3.22 to $3.29	36% to 39%

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 $0.33 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 $55 to $65 million in fiscal 2013. We anticipate that may receive additional recoveries up to $28 million.

NA=Not Applicable

NM=Not Meaningful

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