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| 8-K - 8-K - GLOBAL PAYMENTS INC | a8-kq3fy13earningsrelease.htm |
Global Payments Reports Third Quarter Earnings for Fiscal 2013
Reaffirms Fiscal 2013 Annual Revenue and Cash Earnings Expectations
ATLANTA, April 2, 2013 -- Global Payments Inc. (NYSE: GPN), a leading, worldwide provider of electronic transaction processing solutions, today announced results for its fiscal third quarter ended February 28, 2013.
Third Quarter 2013 Summary
• | Revenue grew 8% to $578.7 million compared to $533.5 million in the third quarter of 2012. |
• | Cash diluted earnings per share1 grew 5% to $0.87 compared to $0.83 in the third quarter of 2012. |
• | GAAP diluted earnings per share were $0.75, compared to $0.73 in the third quarter of 2012. |
Chairman and CEO Paul R. Garcia said, “We are pleased with the progress we have made on our strategic initiatives, and we are on track to achieve our full-year earnings expectations in 2013. These initiatives include focusing on expanding distribution channels through our partner of choice strategy, leveraging our technology infrastructure and driving innovation. We recently launched a number of innovative mobility and loyalty products to our worldwide merchants, and we are fully focused on expanding our unparalleled global footprint.”
Data Remediation Expense Update
During the third quarter, the company was returned to the list of PCI DSS compliant service providers and received reports on compliance covering all of the systems that process, store, transmit or otherwise utilize card data. The company expects that net full-year 2013 expenses for the data intrusion will total approximately $20 million. Based on the assumption that the company will receive an additional $10 million of insurance proceeds in fiscal 2014, the company estimates that the total cost for the processing system intrusion since inception will be approximately $95 million.
David Mangum, Senior Executive Vice President and CFO, stated, “Now that the remediation work is behind us, we can turn our undivided attention to driving the business forward. We are grateful to our customers, partners and the card networks for their support as well as the significant efforts of our team.”
1See Schedule 2 for Cash Earnings and Schedules 6 and 7 for Reconciliations of Cash Earnings to GAAP.
2013 Outlook
For the full-year of fiscal 2013, the company continues to expect annual revenue of $2,360 million to $2,400 million, or 7% to 9% growth over fiscal 2012 and expected diluted earnings per share on a cash basis continue to be in a range of $3.64 to $3.71, or growth of 3% to 5% over fiscal 2012.
Annual fiscal 2013 GAAP diluted earnings per share have been revised to include the estimated impact of net intrusion remediation costs of $0.17 per share and are now expected to be in a range of $2.87 to $2.94.
For reconciliation of expected full-year fiscal 2013 Cash Earnings to GAAP and constant currency, see schedule 9.
Conference Call
Global Payments will hold a conference call today, April 2, 2013 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 April 16, 2013.
About Global Payments
Global Payments Inc. (NYSE:GPN) is a leading provider of electronic transaction processing services for merchants, Independent Sales Organizations (ISOs), financial institutions, government agencies and multi-national corporations located throughout the United States, Canada, Europe and the Asia-Pacific region. Global Payments, a Fortune 1000 company, offers a comprehensive line of processing solutions for credit and debit cards, business-to-business purchasing cards, gift cards, electronic check conversion and check guarantee, verification and recovery including electronic check services, as well as terminal management. Visit www.globalpaymentsinc.com for more information about the company and its services.
This announcement and comments made by Global Payments' management during the conference call may contain certain forward-looking statements within the meaning of the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including revenue and earnings estimates and management's expectations regarding future events and developments, are forward-looking statements and are subject to significant risks and uncertainties. Important factors that may cause actual events or results to differ materially from those anticipated by such forward-looking statements include the following: the effect on our results of operations of continued security enhancements to our processing system; foreign currency risks which become increasingly relevant as we expand internationally; the effect of current domestic and worldwide economic conditions, including sovereign insolvency situations and a decline in the value of the U.S. dollar, and future performance and integration of acquisitions, and other risks detailed in our SEC filings, including the most recently filed Form 10-K. 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 Kay Sharpton Amy Corn
770-829-8234 770-829-8870 770-829-8755
SCHEDULE 1
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF INCOME
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
Three Months Ended | Nine Months Ended | ||||||||||||||||||||
February 28, 2013 | February 29, 2012 | % Change | February 28, 2013 | February 29, 2012 | % Change | ||||||||||||||||
Revenues | 578,746 | 533,539 | 8 | % | 1,757,571 | 1,606,815 | 9 | % | |||||||||||||
Operating expenses: | |||||||||||||||||||||
Cost of service | 217,465 | 194,218 | 12 | % | 632,124 | 571,685 | 11 | % | |||||||||||||
Sales, general and administrative | 271,696 | 246,973 | 10 | % | 829,292 | 737,593 | 12 | % | |||||||||||||
Processing system intrusion | (1,189 | ) | — | NM | 8,311 | — | NM | ||||||||||||||
487,972 | 441,191 | 11 | % | 1,469,727 | 1,309,278 | 12 | % | ||||||||||||||
Operating income | 90,774 | 92,348 | (2 | )% | 287,844 | 297,537 | (3 | )% | |||||||||||||
Other income (expense): | |||||||||||||||||||||
Interest and other income | 2,536 | 2,368 | 7 | % | 6,706 | 7,128 | (6 | )% | |||||||||||||
Interest and other expense | (7,063 | ) | (3,698 | ) | 91 | % | (25,217 | ) | (12,663 | ) | 99 | % | |||||||||
(4,527 | ) | (1,330 | ) | 240 | % | (18,511 | ) | (5,535 | ) | 234 | % | ||||||||||
Income before income taxes | 86,247 | 91,018 | (5 | )% | 269,333 | 292,002 | (8 | )% | |||||||||||||
Provision for income taxes | (23,433 | ) | (25,328 | ) | (7 | )% | (76,986 | ) | (86,082 | ) | (11 | )% | |||||||||
Net income | 62,814 | 65,690 | (4 | )% | 192,347 | 205,920 | (7 | )% | |||||||||||||
Less: Net income attributable to noncontrolling interests, net of tax | (4,352 | ) | (7,770 | ) | (44 | )% | (17,027 | ) | (22,845 | ) | (25 | )% | |||||||||
Net income attributable to Global Payments | 58,462 | 57,920 | 1 | % | 175,320 | 183,075 | (4 | )% | |||||||||||||
Earnings per share attributable to Global Payments: | |||||||||||||||||||||
Basic | $ | 0.75 | $ | 0.74 | 1 | % | $ | 2.24 | $ | 2.32 | (3 | )% | |||||||||
Diluted | $ | 0.75 | $ | 0.73 | 3 | % | $ | 2.23 | $ | 2.30 | (3 | )% | |||||||||
Weighted average shares outstanding: | |||||||||||||||||||||
Basic | 77,756 | 78,421 | 78,364 | 78,937 | |||||||||||||||||
Diluted | 78,324 | 79,065 | 78,747 | 79,511 | |||||||||||||||||
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 | Nine Months Ended | ||||||||||||||||||||
February 28, 2013 | February 29, 2012 | % Change | February 28, 2013 | February 29, 2012 | % Change | ||||||||||||||||
Revenues | $ | 578,746 | $ | 533,539 | 8 | % | $ | 1,757,571 | $ | 1,606,815 | 9 | % | |||||||||
Operating expenses: | |||||||||||||||||||||
Cost of service | 200,935 | 181,338 | 11 | % | 589,872 | 534,009 | 10 | % | |||||||||||||
Sales, general and administrative | 271,696 | 246,973 | 10 | % | 828,492 | 737,593 | 12 | % | |||||||||||||
472,631 | 428,311 | 10 | % | 1,418,364 | 1,271,602 | 12 | % | ||||||||||||||
Operating income | 106,115 | 105,228 | 1 | % | 339,207 | 335,213 | 1 | % | |||||||||||||
Other income (expense): | |||||||||||||||||||||
Interest and other income | 2,536 | 2,368 | 7 | % | 6,706 | 7,128 | (6 | )% | |||||||||||||
Interest and other expense | (7,063 | ) | (3,698 | ) | 91 | % | (16,834 | ) | (12,663 | ) | 33 | % | |||||||||
(4,527 | ) | (1,330 | ) | 240 | % | (10,128 | ) | (5,535 | ) | 83 | % | ||||||||||
Income before income taxes | 101,588 | 103,898 | (2 | )% | 329,079 | 329,678 | — | % | |||||||||||||
Provision for income taxes | (27,662 | ) | (28,912 | ) | (4 | )% | (93,601 | ) | (97,163 | ) | (4 | )% | |||||||||
Net income | 73,926 | 74,986 | (1 | )% | 235,478 | 232,515 | 1 | % | |||||||||||||
Less: Net income attributable to noncontrolling interests, net of tax | (5,993 | ) | (9,671 | ) | (38 | )% | (25,164 | ) | (28,756 | ) | (12 | )% | |||||||||
Net income attributable to Global Payments | $ | 67,933 | $ | 65,315 | 4 | % | $ | 210,314 | $ | 203,759 | 3 | % | |||||||||
Basic earnings per share | $ | 0.87 | $ | 0.83 | 5 | % | $ | 2.68 | $ | 2.58 | 4 | % | |||||||||
Diluted earnings per share | $ | 0.87 | $ | 0.83 | 5 | % | $ | 2.67 | $ | 2.56 | 4 | % | |||||||||
Weighted average shares outstanding: | |||||||||||||||||||||
Basic | 77,756 | 78,421 | 78,364 | 78,937 | |||||||||||||||||
Diluted | 78,324 | 79,065 | 78,747 | 79,511 | |||||||||||||||||
See Schedules 6 and 7 for a reconciliation of cash earnings to GAAP.
SCHEDULE 3
SEGMENT INFORMATION
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
Three Months Ended | ||||||||||||||||||||||
February 28, 2013 | February 29, 2012 | % Change | ||||||||||||||||||||
GAAP | Cash Earnings | GAAP | Cash Earnings | GAAP | Cash Earnings | |||||||||||||||||
Revenues: | ||||||||||||||||||||||
United States | $ | 336,354 | $ | 336,354 | $ | 302,105 | $ | 302,105 | 11 | % | 11 | % | ||||||||||
Canada | 72,218 | 72,218 | 76,677 | 76,677 | (6 | )% | (6 | )% | ||||||||||||||
North America merchant services | 408,572 | 408,572 | 378,782 | 378,782 | 8 | % | 8 | % | ||||||||||||||
Europe | 130,750 | 130,750 | 116,196 | 116,196 | 13 | % | 13 | % | ||||||||||||||
Asia-Pacific | 39,424 | 39,424 | 38,561 | 38,561 | 2 | % | 2 | % | ||||||||||||||
International merchant services | 170,174 | 170,174 | 154,757 | 154,757 | 10 | % | 10 | % | ||||||||||||||
Total revenues | $ | 578,746 | $ | 578,746 | $ | 533,539 | $ | 533,539 | 8 | % | 8 | % | ||||||||||
Operating income: | ||||||||||||||||||||||
North America merchant services | $ | 55,478 | $ | 63,210 | $ | 62,462 | $ | 65,697 | (11 | )% | (4 | )% | ||||||||||
International merchant services | 51,820 | 60,618 | 47,911 | 57,556 | 8 | % | 5 | % | ||||||||||||||
Corporate1 | (16,524 | ) | (17,713 | ) | (18,025 | ) | (18,025 | ) | 8 | % | 2 | % | ||||||||||
Operating income | $ | 90,774 | $ | 106,115 | $ | 92,348 | $ | 105,228 | (2 | )% | 1 | % | ||||||||||
Nine Months Ended | ||||||||||||||||||||||
February 28, 2013 | February 29, 2012 | % Change | ||||||||||||||||||||
GAAP | Cash Earnings | GAAP | Cash Earnings | GAAP | Cash Earnings | |||||||||||||||||
Revenues: | ||||||||||||||||||||||
United States | $ | 1,022,250 | $ | 1,022,250 | $ | 882,946 | $ | 882,946 | 16 | % | 16 | % | ||||||||||
Canada | 233,885 | 233,885 | 253,419 | 253,419 | (8 | )% | (8 | )% | ||||||||||||||
North America merchant services | 1,256,135 | 1,256,135 | 1,136,365 | 1,136,365 | 11 | % | 11 | % | ||||||||||||||
Europe | 390,376 | 390,376 | 360,779 | 360,779 | 8 | % | 8 | % | ||||||||||||||
Asia-Pacific | 111,060 | 111,060 | 109,671 | 109,671 | 1 | % | 1 | % | ||||||||||||||
International merchant services | 501,436 | 501,436 | 470,450 | 470,450 | 7 | % | 7 | % | ||||||||||||||
Total revenues | $ | 1,757,571 | $ | 1,757,571 | $ | 1,606,815 | $ | 1,606,815 | 9 | % | 9 | % | ||||||||||
Operating income: | ||||||||||||||||||||||
North America merchant services | $ | 189,809 | $ | 207,933 | $ | 204,893 | $ | 213,808 | (7 | )% | (3 | )% | ||||||||||
International merchant services | 162,947 | 187,819 | 148,063 | 176,824 | 10 | % | 6 | % | ||||||||||||||
Corporate1 | (64,912 | ) | (56,545 | ) | (55,419 | ) | (55,419 | ) | (17 | )% | (2 | )% | ||||||||||
Operating income | $ | 287,844 | $ | 339,207 | 297,537 | $ | 335,213 | (3 | )% | 1 | % | |||||||||||
1 Fiscal 2013 GAAP amounts include a processing intrusion credit of $1.2 million for the three months ended February 28, 2013 and processing intrusion costs of $8.3 million for the nine months ended February 28, 2013.
See Schedule 8 for reconciliation of cash earnings segment information to GAAP.
SCHEDULE 4
CONSOLIDATED BALANCE SHEETS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
February 28, 2013 | May 31, 2012 | ||||||
(Unaudited) | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 682,960 | $ | 781,275 | |||
Accounts receivable, net of allowances for doubtful accounts of $478 and $532, respectively | 166,271 | 182,962 | |||||
Claims receivable, net of allowances for losses of $3,438 and $3,435, respectively | 897 | 1,029 | |||||
Settlement processing assets | 208,471 | 217,994 | |||||
Inventory | 11,349 | 9,864 | |||||
Deferred income taxes | 6,350 | 21,969 | |||||
Prepaid expenses and other current assets | 70,564 | 33,646 | |||||
Total current assets | 1,146,862 | 1,248,739 | |||||
Goodwill | 1,051,614 | 724,687 | |||||
Other intangible assets, net | 412,995 | 290,188 | |||||
Property and equipment, net of accumulated depreciation of $185,722 and $161,911, respectively | 341,573 | 305,848 | |||||
Deferred income taxes | 93,626 | 97,235 | |||||
Other | 29,554 | 21,446 | |||||
Total assets | $ | 3,076,224 | $ | 2,688,143 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Lines of credit | $ | 167,152 | $ | 215,391 | |||
Current portion of long-term debt | 72,332 | 76,420 | |||||
Accounts payable and accrued liabilities | 227,367 | 316,313 | |||||
Settlement processing obligations | 201,190 | 216,878 | |||||
Income taxes payable | 5,787 | 12,283 | |||||
Total current liabilities | 673,828 | 837,285 | |||||
Long-term debt | 883,462 | 236,565 | |||||
Deferred income taxes | 162,389 | 106,644 | |||||
Other long-term liabilities | 71,307 | 62,306 | |||||
Total liabilities | 1,790,986 | 1,242,800 | |||||
Commitments and contingencies | |||||||
Redeemable noncontrolling interest | — | 144,422 | |||||
Equity: | |||||||
Preferred stock, no par value; 5,000,000 shares authorized and none issued | — | — | |||||
Common stock, no par value; 200,000,000 shares authorized; 76,749,164 and 78,551,297 issued and outstanding at February 28, 2013 and May 31, 2012, respectively | — | — | |||||
Paid-in capital | 207,666 | 358,728 | |||||
Retained earnings | 946,195 | 843,456 | |||||
Accumulated other comprehensive income (loss) | (6,774 | ) | (30,000 | ) | |||
Total Global Payments shareholders’ equity | 1,147,087 | 1,172,184 | |||||
Noncontrolling interest | 138,151 | 128,737 | |||||
Total equity | 1,285,238 | 1,300,921 | |||||
Total liabilities and equity | $ | 3,076,224 | $ | 2,688,143 | |||
SCHEDULE 5
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
Nine Months Ended | |||||||
February 28, 2013 | February 29, 2012 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 192,347 | $ | 205,920 | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||
Depreciation and amortization of property and equipment | 40,856 | 35,821 | |||||
Amortization of acquired intangibles | 42,091 | 37,676 | |||||
Share-based compensation expense | 14,063 | 12,796 | |||||
Provision for operating losses and bad debts | 16,681 | 18,833 | |||||
Deferred income taxes | 27,282 | 5,858 | |||||
Other, net | (3,692 | ) | (949 | ) | |||
Changes in operating assets and liabilities, net of the effects of acquisitions: | |||||||
Accounts receivable | 17,706 | 10,502 | |||||
Claims receivable | (9,235 | ) | (11,744 | ) | |||
Settlement processing assets and obligations, net | (12,028 | ) | (523,802 | ) | |||
Inventory | (1,535 | ) | (4,773 | ) | |||
Prepaid expenses and other assets | (34,898 | ) | (2,388 | ) | |||
Accounts payable and other accrued liabilities | (78,375 | ) | (22,211 | ) | |||
Income taxes payable | (6,496 | ) | 11,615 | ||||
Net cash provided by (used in) operating activities | 204,767 | (226,846 | ) | ||||
Cash flows from investing activities: | |||||||
Business, intangible and other asset acquisitions, net of cash acquired | (433,427 | ) | (44,245 | ) | |||
Capital expenditures | (75,016 | ) | (71,084 | ) | |||
Net decrease in financing receivables | 2,158 | 1,862 | |||||
Net cash used in investing activities | (506,285 | ) | (113,467 | ) | |||
Cash flows from financing activities: | |||||||
Net payments on short-term lines of credit | (48,239 | ) | (55,029 | ) | |||
Proceeds from issuance of long-term debt | 1,085,327 | 71,374 | |||||
Principal payments under long-term debt | (439,789 | ) | (162,482 | ) | |||
Payment of debt issuance cost | (3,987 | ) | — | ||||
Acquisition of redeemable noncontrolling interests | (242,000 | ) | — | ||||
Proceeds from stock issued under share-based compensation plans | 9,257 | 9,630 | |||||
Common stock repurchased - share-based compensation plans | (10,215 | ) | (4,847 | ) | |||
Repurchase of common stock | (137,653 | ) | (99,604 | ) | |||
Tax benefit from employee share-based compensation | 1,791 | 2,036 | |||||
Distributions to noncontrolling interest | (13,656 | ) | (24,334 | ) | |||
Dividends paid | (4,688 | ) | (4,740 | ) | |||
Net cash provided by (used in) financing activities | 196,148 | (267,996 | ) | ||||
Effect of exchange rate changes on cash | 7,055 | (10,243 | ) | ||||
Decrease in cash and cash equivalents | (98,315 | ) | (618,552 | ) | |||
Cash and cash equivalents, beginning of the period | 781,275 | 1,354,285 | |||||
Cash and cash equivalents, end of the period | $ | 682,960 | $ | 735,733 | |||
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, 2013 | |||||||||||||
GAAP | Processing System Intrusion | Cash Earnings Adjustments1 | 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 before income taxes | 86,247 | (1,189 | ) | 16,530 | 101,588 | ||||||||
Provision for income taxes | (23,433 | ) | 232 | (4,461 | ) | (27,662 | ) | ||||||
Net income | 62,814 | (957 | ) | 12,069 | 73,926 | ||||||||
Less: Net income attributable to noncontrolling interests, net of tax | (4,352 | ) | — | (1,641 | ) | (5,993 | ) | ||||||
Net income attributable to Global Payments | $ | 58,462 | $ | (957 | ) | $ | 10,428 | $ | 67,933 | ||||
Diluted shares | 78,324 | 78,324 | |||||||||||
Diluted earnings per share | $ | 0.75 | $ | (0.01 | ) | $ | 0.13 | $ | 0.87 | ||||
Three Months Ended February 29, 2012 | |||||||||||||
GAAP | Cash Earnings Adjustments1 | Cash Earnings | |||||||||||
Revenues | $ | 533,539 | $ | — | $ | 533,539 | |||||||
Operating expenses: | |||||||||||||
Cost of service | 194,218 | (12,880 | ) | 181,338 | |||||||||
Sales, general and administrative | 246,973 | — | 246,973 | ||||||||||
441,191 | (12,880 | ) | 428,311 | ||||||||||
Operating income | 92,348 | 12,880 | 105,228 | ||||||||||
Other income (expense): | |||||||||||||
Interest and other income | 2,368 | — | 2,368 | ||||||||||
Interest and other expense | (3,698 | ) | — | (3,698 | ) | ||||||||
(1,330 | ) | — | (1,330 | ) | |||||||||
Income before income taxes | 91,018 | 12,880 | 103,898 | ||||||||||
Provision for income taxes | (25,328 | ) | (3,584 | ) | (28,912 | ) | |||||||
Net income | 65,690 | 9,296 | 74,986 | ||||||||||
Less: Net income attributable to noncontrolling interests, net of tax | (7,770 | ) | (1,901 | ) | (9,671 | ) | |||||||
Net income attributable to Global Payments | $ | 57,920 | $ | 7,395 | $ | 65,315 | |||||||
Diluted shares | 79,065 | 79,065 | |||||||||||
Diluted earnings per share | $ | 0.73 | $ | 0.10 | $ | 0.83 | |||||||
1 Represents adjustments to cost of service to exclude acquisition intangible amortization expense and the related income tax benefit.
We supplemented our reporting of net income and the related earnings per share information determined in accordance with GAAP by reporting net income and the related earnings per share for the three months ended February 28, 2013 and February 29, 2012 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated February 28, 2013 net income and earnings per share on a cash basis by excluding credits related to the processing system intrusion and acquisition intangible amortization. We calculated February 29, 2012 net income and earnings per share on a cash basis by excluding acquisition intangible amortization from our results. We exclude these items in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations. Our net income and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, net income and earnings per share determined in accordance with GAAP. Our measures of net income and earnings per share on a cash earnings basis reflect management's judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.
SCHEDULE 7
RECONCILIATION OF YEAR TO DATE CASH EARNINGS ATTRIBUTABLE TO GLOBAL PAYMENTS TO GAAP
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
Nine Months Ended February 28, 2013 | ||||||||||||||||
GAAP | Processing System Intrusion | Other2 | Cash Earnings Adjustments1 | 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 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 | 192,347 | 5,263 | 7,811 | 30,057 | 235,478 | |||||||||||
Less: Net income attributable to noncontrolling interests, net of 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 per share | $ | 2.23 | $ | 0.07 | $ | 0.05 | $ | 0.32 | $ | 2.67 | ||||||
Nine Months Ended February 29, 2012 | ||||||||||||||||
GAAP | Cash Earnings Adjustments1 | Cash Earnings | ||||||||||||||
Revenues | $ | 1,606,815 | $ | — | $ | 1,606,815 | ||||||||||
Operating expenses: | ||||||||||||||||
Cost of service | 571,685 | (37,676 | ) | 534,009 | ||||||||||||
Sales, general and administrative | 737,593 | — | 737,593 | |||||||||||||
1,309,278 | (37,676 | ) | 1,271,602 | |||||||||||||
Operating income | 297,537 | 37,676 | 335,213 | |||||||||||||
Other income (expense): | ||||||||||||||||
Interest and other income | 7,128 | — | 7,128 | |||||||||||||
Interest and other expense | (12,663 | ) | — | (12,663 | ) | |||||||||||
(5,535 | ) | — | (5,535 | ) | ||||||||||||
Income before income taxes | 292,002 | 37,676 | 329,678 | |||||||||||||
Provision for income taxes | (86,082 | ) | (11,081 | ) | (97,163 | ) | ||||||||||
Net income | 205,920 | 26,595 | 232,515 | |||||||||||||
Less: Net income attributable to noncontrolling interests, net of tax | (22,845 | ) | (5,911 | ) | (28,756 | ) | ||||||||||
Net income attributable to Global Payments | $ | 183,075 | $ | 20,684 | $ | 203,759 | ||||||||||
Diluted shares | 79,511 | 79,511 | ||||||||||||||
Diluted earnings per share | $ | 2.30 | $ | 0.26 | $ | 2.56 | ||||||||||
1 Represents adjustments to cost of service to exclude acquisition intangible amortization expense and the related income tax benefit.
2 Represents HSBC's share of GPAP dividends declared and one-time charges primarily related to employee termination benefits.
We supplemented our reporting of net income and the related earnings per share information determined in accordance with GAAP by reporting net income and the related earnings per share for the nine months ended February 28, 2013 and February 29, 2012 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated February 28, 2013 net income and earnings per share on a cash basis by excluding costs related to the processing system intrusion, acquisition intangible amortization, the dividend paid to HSBC that was classified as interest expense, and one-time charges related to employee termination benefits. We also adjusted the net income attributable to noncontrolling interests to include HSBC's share of August 2012 through November 2012 GPAP net income. We calculated February 29, 2012 net income and earnings per share on a cash basis by excluding acquisition intangible amortization from our results. We exclude these charges in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations. Our net income and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, net income and earnings per share determined in accordance with GAAP. Our measures of net income and earnings per share on a cash earnings basis reflect management's judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.
SCHEDULE 8
RECONCILIATION OF CASH EARNINGS SEGMENT INFORMATION TO GAAP
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
Three Months Ended February 28, 2013 | Three Months Ended February 29, 2012 | ||||||||||||||||||||||||
GAAP | Processing System Intrusion | Other | Cash Earnings Adjustments1 | Cash Earnings | GAAP | Cash Earnings Adjustments1 | Cash Earnings | ||||||||||||||||||
Revenues: | |||||||||||||||||||||||||
United States | $ | 336,354 | $ | — | $ | — | $ | — | $ | 336,354 | $ | 302,105 | $ | — | $ | 302,105 | |||||||||
Canada | 72,218 | — | — | — | 72,218 | 76,677 | — | 76,677 | |||||||||||||||||
North America merchant services | 408,572 | — | — | — | 408,572 | 378,782 | — | 378,782 | |||||||||||||||||
Europe | 130,750 | — | — | — | 130,750 | 116,196 | — | 116,196 | |||||||||||||||||
Asia-Pacific | 39,424 | — | — | — | 39,424 | 38,561 | — | 38,561 | |||||||||||||||||
International merchant services | 170,174 | — | — | — | 170,174 | 154,757 | — | 154,757 | |||||||||||||||||
Total revenues | $ | 578,746 | $ | — | $ | — | $ | — | $ | 578,746 | $ | 533,539 | $ | — | $ | 533,539 | |||||||||
Operating income: | |||||||||||||||||||||||||
North America merchant services | $ | 55,478 | $ | — | $ | — | $ | 7,732 | $ | 63,210 | 62,462 | $ | 3,235 | $ | 65,697 | ||||||||||
International merchant services | 51,820 | — | — | 8,798 | 60,618 | 47,911 | 9,645 | 57,556 | |||||||||||||||||
Corporate | (16,524 | ) | (1,189 | ) | — | — | (17,713 | ) | (18,025 | ) | — | (18,025 | ) | ||||||||||||
Operating income | $ | 90,774 | $ | (1,189 | ) | $ | — | $ | 16,530 | $ | 106,115 | 92,348 | $ | 12,880 | $ | 105,228 | |||||||||
Nine Months Ended February 28, 2013 | Nine Months Ended February 29, 2012 | ||||||||||||||||||||||||
GAAP | Processing System Intrusion | Other2 | Cash Earnings Adjustments1 | Cash Earnings | GAAP | Cash Earnings Adjustments1 | Cash Earnings | ||||||||||||||||||
Revenues: | |||||||||||||||||||||||||
United States | $ | 1,022,250 | $ | — | $ | — | $ | — | $ | 1,022,250 | $ | 882,946 | $ | — | $ | 882,946 | |||||||||
Canada | 233,885 | — | — | — | 233,885 | 253,419 | — | 253,419 | |||||||||||||||||
North America merchant services | 1,256,135 | — | — | — | 1,256,135 | 1,136,365 | — | 1,136,365 | |||||||||||||||||
Europe | 390,376 | — | — | — | 390,376 | 360,779 | — | 360,779 | |||||||||||||||||
Asia-Pacific | 111,060 | — | — | — | 111,060 | 109,671 | — | 109,671 | |||||||||||||||||
International merchant services | 501,436 | — | — | — | 501,436 | 470,450 | — | 470,450 | |||||||||||||||||
Total revenues | $ | 1,757,571 | $ | — | $ | — | $ | — | $ | 1,757,571 | $ | 1,606,815 | $ | — | $ | 1,606,815 | |||||||||
Operating income: | |||||||||||||||||||||||||
North America merchant services | $ | 189,809 | $ | — | $ | 905 | $ | 17,219 | $ | 207,933 | $ | 204,893 | $ | 8,915 | $ | 213,808 | |||||||||
International merchant services | 162,947 | — | — | 24,872 | 187,819 | 148,063 | 28,761 | 176,824 | |||||||||||||||||
Corporate | (64,912 | ) | 8,311 | 56 | — | (56,545 | ) | (55,419 | ) | — | (55,419 | ) | |||||||||||||
Operating income | $ | 287,844 | $ | 8,311 | $ | 961 | $ | 42,091 | $ | 339,207 | $ | 297,537 | $ | 37,676 | $ | 335,213 | |||||||||
1 Represents acquisition intangible amortization expense.
2 Represents one-time charges primarily related to employee termination benefits.
SCHEDULE 9
OUTLOOK SUMMARY
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In millions, except per share data)
Fiscal 2012 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 | $3.70 to $3.77 | 5% to 7% | ||||
Foreign currency impact2 | NA | $(0.06) | ||||||
Cash EPS | $ | 3.53 | $3.64 to $3.71 | 3% to 5% | ||||
Acquisition-related intangible assets, non-recurring items and processing system intrusion3 | (1.16 | ) | $(0.77) | (34)% | ||||
GAAP Diluted EPS | $ | 2.37 | $2.87 to $2.94 | 21% to 24% | ||||
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 $0.60 of acquisition-related intangibles and non-recurring items and $0.17 of processing system intrusion costs. Acquisition-related intangibles accounted and non-recurring items accounted for $0.48 in fiscal 2012 and processing intrusion costs $0.68.
NA=Not Applicable