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| 8-K - 8-K - GLOBAL PAYMENTS INC | a8-kfy2014earningsreleasef.htm |
Global Payments Reports Fourth Quarter and Year-End 2014 Earnings
Establishes Fiscal 2015 Cash Earnings Per Share Growth Expectations of 10% to 12%
Board Expands Total Share Repurchase Authorization to $320 Million
ATLANTA, July 29, 2014 -- Global Payments Inc. (NYSE: GPN), one of the largest worldwide providers of payment solutions, today announced results for its fiscal fourth quarter and year ended May 31, 2014.
“I am pleased with Global Payments’ strong financial performance for the fourth quarter and full fiscal year. During fiscal 2014, we grew cash earnings per share 13 percent, returned over $450 million dollars to shareholders and completed a $420 million acquisition to further diversify distribution in our largest market and complement our focus on differentiated technologies. We achieved key execution milestones, including meaningfully expanding our integrated solutions business in the U.S., delivering solid performance in Canada and adding to our direct distribution channels in Asia,” said Jeff Sloan, Chief Executive Officer of Global Payments Inc. “In fiscal 2015, we will continue to focus on our direct distribution strategy by leveraging our global technology platforms to deliver new, innovative products and services, driving operating margin expansion and delivering double-digit cash earnings per share growth.”
Full-Year 2014 Summary
• | Revenues grew 8% to $2.55 billion, compared to $2.38 billion in fiscal 2013. |
• | Cash diluted earnings per share1 grew 13% to $4.12, compared to $3.65 in the prior fiscal year. |
• | GAAP full-year diluted earnings per share of $3.37, compared to $2.76 diluted earnings per share in the prior year. |
Fourth Quarter 2014 Summary
• | Revenues grew 9% to $674.0 million, compared to $618.4 million in the fourth quarter of fiscal 2013. |
• | Cash diluted earnings per share grew 11% to $1.09, compared to $0.98 in the fourth quarter of fiscal 2013. |
• | GAAP diluted earnings per share were $0.72, compared to $0.53 in the fourth quarter of 2013. |
2015 Outlook
For the full year of fiscal 2015, the company expects annual revenue of $2.69 billion to $2.76 billion, or 6% to 8% growth over fiscal 2014. The company also expects annual diluted earnings per share on a cash basis of $4.52 to $4.62, reflecting growth of 10% to 12% over fiscal 2014. Annual fiscal 2015 GAAP diluted earnings per share is expected to be $3.76 to $3.86.
1 See Schedule 2 for Cash Earnings and Schedule 6 and 7 for Reconciliations of Cash Earnings to GAAP.
Additional Share Repurchase Authorization
Global Payments’ board of directors also expanded its share repurchase authorization by an incremental $200 million, bringing its total current authorization to $320 million. Under the company’s new authorization, Global Payments may repurchase shares in the open market or as otherwise may be determined by the company, subject to market conditions, business opportunities and other factors. The company has no obligation to repurchase shares under this program. This authorization has no expiration date and may be suspended or terminated at any time. Repurchased shares will be retired but will be available for future issuance.
Conference Call
Global Payments will hold a conference call today, July 29, 2014, at 5:00 p.m. EDT to discuss financial results and business highlights. Callers may access the conference call via the investor relations page of the company’s website at www.globalpaymentsinc.com by clicking the “Webcast” button; or callers in North America may dial 1-888-895-3550 and callers outside North America may dial 1-706-758-8809. The pass code is “GPN.” A replay of the call may be accessed on the Global Payments website through August 12, 2014.
About Global Payments
Global Payments Inc. is one of the largest worldwide providers of payment solutions for merchants, value added resellers, enterprise software providers, financial institutions, government agencies, multi-national corporations and independent sales organizations located throughout North America, South America, Europe and the Asia-Pacific region. Global Payments, a Fortune 1000 company, offers a comprehensive line of solutions and services for credit and debit cards, business-to-business purchasing cards, gift cards, electronic check conversion and check guarantee, verification and recovery including electronic check services, as well as terminal management. Visit www.globalpaymentsinc.com for more information about the company and its services.
This announcement and comments made by Global Payments' management during the conference call may contain certain forward-looking statements within the meaning of the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including revenue and earnings estimates and management’s expectations regarding future events and developments, are forward-looking statements and are subject to significant risks and uncertainties. Important factors that may cause actual events or results to differ materially from those anticipated by such forward-looking statements include our potential failure to safeguard our data; our ability to maintain Visa and MasterCard registration and financial institution sponsorship; our reliance on financial institutions to provide clearing services in connection with our settlement activities; our potential failure to comply with card network requirements; increased merchant, referral partner or ISO attrition; our ability to increase our share of existing markets and expand into new markets; political, economic and regulatory changes in the foreign countries in which we operate; system interruptions in service; increases in credit card network fees; future performance, integration and conversion of acquired operations; and other risk factors presented in our Annual Report on Form 10-K for the fiscal year ended May 31, 2014, which we advise you to review. We undertake no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.
Investor contact: investor.relations@globalpay.com | Media contact: media.relations@globalpay.com |
Jane Elliott | Amy Corn |
770-829-8234 | 770-829-8755 |
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, | ||||||||||||||||||||
2014 | 2013 | % Change | 2014 | 2013 | % Change | ||||||||||||||||
Revenues | $ | 673,977 | $ | 618,352 | 9.0 | % | $ | 2,554,236 | $ | 2,375,923 | 7.5 | % | |||||||||
Operating expenses: | |||||||||||||||||||||
Cost of service | 253,373 | 229,951 | 10.2 | % | 952,225 | 862,075 | 10.5 | % | |||||||||||||
Sales, general and administrative | 331,687 | 290,568 | 14.2 | % | 1,203,512 | 1,119,860 | 7.5 | % | |||||||||||||
Processing system intrusion | — | 28,464 | NM | (7,000 | ) | 36,775 | NM | ||||||||||||||
585,060 | 548,983 | 6.6 | % | 2,148,737 | 2,018,710 | 6.4 | % | ||||||||||||||
Operating income | 88,917 | 69,369 | 28.2 | % | 405,499 | 357,213 | 13.5 | % | |||||||||||||
Other income (expense): | |||||||||||||||||||||
Interest and other income | 2,093 | 3,647 | (42.6 | )% | 13,663 | 10,353 | 32.0 | % | |||||||||||||
Interest and other expense | (9,451 | ) | (8,065 | ) | 17.2 | % | (41,812 | ) | (33,282 | ) | 25.6 | % | |||||||||
(7,358 | ) | (4,418 | ) | 66.5 | % | (28,149 | ) | (22,929 | ) | 22.8 | % | ||||||||||
Income before income taxes | 81,559 | 64,951 | 25.6 | % | 377,350 | 334,284 | 12.9 | % | |||||||||||||
Provision for income taxes | (23,293 | ) | (18,585 | ) | 25.3 | % | (107,398 | ) | (95,571 | ) | 12.4 | % | |||||||||
Net income | 58,266 | 46,366 | 25.7 | % | 269,952 | 238,713 | 13.1 | % | |||||||||||||
Less: Net income attributable to noncontrolling interests, net of income tax | (6,641 | ) | (5,561 | ) | 19.4 | % | (24,666 | ) | (22,588 | ) | 9.2 | % | |||||||||
Net income attributable to Global Payments | $ | 51,625 | $ | 40,805 | 26.5 | % | $ | 245,286 | $ | 216,125 | 13.5 | % | |||||||||
Earnings per share attributable to Global Payments: | |||||||||||||||||||||
Basic | $ | 0.73 | $ | 0.54 | 35.2 | % | $ | 3.40 | $ | 2.78 | 22.3 | % | |||||||||
Diluted | $ | 0.72 | $ | 0.53 | 35.8 | % | $ | 3.37 | $ | 2.76 | 22.1 | % | |||||||||
Weighted average shares outstanding: | |||||||||||||||||||||
Basic | 70,707 | 76,034 | 72,119 | 77,767 | |||||||||||||||||
Diluted | 71,322 | 76,651 | 72,688 | 78,227 | |||||||||||||||||
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, | ||||||||||||||||||||
2014 | 2013 | % Change | 2014 | 2013 | % Change | ||||||||||||||||
Revenues | $ | 673,977 | $ | 618,352 | 9.0 | % | $ | 2,554,236 | $ | 2,375,923 | 7.5 | % | |||||||||
Operating expenses: | |||||||||||||||||||||
Cost of service | 234,856 | 214,080 | 9.7 | % | 889,576 | 803,952 | 10.7 | % | |||||||||||||
Sales, general and administrative | 317,085 | 285,017 | 11.3 | % | 1,184,066 | 1,113,509 | 6.3 | % | |||||||||||||
551,941 | 499,097 | 10.6 | % | 2,073,642 | 1,917,461 | 8.1 | % | ||||||||||||||
Operating income | 122,036 | 119,255 | 2.3 | % | 480,594 | 458,462 | 4.8 | % | |||||||||||||
Other income (expense): | |||||||||||||||||||||
Interest and other income | 2,093 | 3,647 | (42.6 | )% | 11,540 | 10,353 | 11.5 | % | |||||||||||||
Interest and other expense | (8,110 | ) | (8,065 | ) | 0.6 | % | (32,327 | ) | (24,899 | ) | 29.8 | % | |||||||||
(6,017 | ) | (4,418 | ) | 36.2 | % | (20,787 | ) | (14,546 | ) | 42.9 | % | ||||||||||
Income before income taxes | 116,019 | 114,837 | 1.0 | % | 459,807 | 443,916 | 3.6 | % | |||||||||||||
Provision for income taxes | (30,249 | ) | (32,693 | ) | (7.5 | )% | (130,181 | ) | (126,294 | ) | 3.1 | % | |||||||||
Net income | 85,770 | 82,144 | 4.4 | % | 329,626 | 317,622 | 3.8 | % | |||||||||||||
Less: Net income attributable to noncontrolling interests, net of income tax | (8,075 | ) | (7,042 | ) | 14.7 | % | (30,295 | ) | (32,206 | ) | (5.9 | )% | |||||||||
Net income attributable to Global Payments | $ | 77,695 | $ | 75,102 | 3.5 | % | $ | 299,331 | $ | 285,416 | 4.9 | % | |||||||||
Earnings per share attributable to Global Payments: | |||||||||||||||||||||
Basic | $ | 1.10 | $ | 0.99 | 11.1 | % | $ | 4.15 | $ | 3.67 | 13.1 | % | |||||||||
Diluted | $ | 1.09 | $ | 0.98 | 11.2 | % | $ | 4.12 | $ | 3.65 | 12.9 | % | |||||||||
Weighted average shares outstanding: | |||||||||||||||||||||
Basic | 70,707 | 76,034 | 72,119 | 77,767 | |||||||||||||||||
Diluted | 71,322 | 76,651 | 72,688 | 78,227 | |||||||||||||||||
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 May 31, | ||||||||||||||||||||||
2014 | 2013 | % Change | ||||||||||||||||||||
GAAP | Cash Earnings | GAAP | Cash Earnings | GAAP | Cash Earnings | |||||||||||||||||
Revenues: | ||||||||||||||||||||||
United States | $ | 407,153 | $ | 407,153 | $ | 372,425 | $ | 372,425 | 9.3 | % | 9.3 | % | ||||||||||
Canada | 74,954 | 74,954 | 77,115 | 77,115 | (2.8 | )% | (2.8 | )% | ||||||||||||||
North America merchant services | 482,107 | 482,107 | 449,540 | 449,540 | 7.2 | % | 7.2 | % | ||||||||||||||
Europe | 153,577 | 153,577 | 132,217 | 132,217 | 16.2 | % | 16.2 | % | ||||||||||||||
Asia-Pacific | 38,293 | 38,293 | 36,595 | 36,595 | 4.6 | % | 4.6 | % | ||||||||||||||
International merchant services | 191,870 | 191,870 | 168,812 | 168,812 | 13.7 | % | 13.7 | % | ||||||||||||||
Total revenues | $ | 673,977 | $ | 673,977 | $ | 618,352 | $ | 618,352 | 9.0 | % | 9.0 | % | ||||||||||
Operating income (loss) for segments: | ||||||||||||||||||||||
North America merchant services | $ | 70,420 | $ | 82,722 | $ | 69,101 | $ | 80,229 | 1.9 | % | 3.1 | % | ||||||||||
International merchant services | 58,094 | 66,402 | 48,295 | 57,460 | 20.3 | % | 15.6 | % | ||||||||||||||
Corporate1 | (39,597 | ) | (27,088 | ) | (48,027 | ) | (18,434 | ) | 17.6 | % | (46.9 | )% | ||||||||||
Operating income | $ | 88,917 | $ | 122,036 | $ | 69,369 | $ | 119,255 | 28.2 | % | 2.3 | % | ||||||||||
Year Ended May 31, | ||||||||||||||||||||||
2014 | 2013 | % Change | ||||||||||||||||||||
GAAP | Cash Earnings | GAAP | Cash Earnings | GAAP | Cash Earnings | |||||||||||||||||
Revenues: | ||||||||||||||||||||||
United States | $ | 1,488,659 | $ | 1,488,659 | $ | 1,394,675 | $ | 1,394,675 | 6.7 | % | 6.7 | % | ||||||||||
Canada | 320,333 | 320,333 | 311,000 | 311,000 | 3.0 | % | 3.0 | % | ||||||||||||||
North America merchant services | 1,808,992 | 1,808,992 | 1,705,675 | 1,705,675 | 6.1 | % | 6.1 | % | ||||||||||||||
Europe | 587,463 | 587,463 | 522,593 | 522,593 | 12.4 | % | 12.4 | % | ||||||||||||||
Asia-Pacific | 157,781 | 157,781 | 147,655 | 147,655 | 6.9 | % | 6.9 | % | ||||||||||||||
International merchant services | 745,244 | 745,244 | 670,248 | 670,248 | 11.2 | % | 11.2 | % | ||||||||||||||
Total revenues | $ | 2,554,236 | $ | 2,554,236 | $ | 2,375,923 | $ | 2,375,923 | 7.5 | % | 7.5 | % | ||||||||||
Operating income (loss) for segments: | ||||||||||||||||||||||
North America merchant services | $ | 272,251 | $ | 308,570 | $ | 258,910 | $ | 288,162 | 5.2 | % | 7.1 | % | ||||||||||
International merchant services | 240,179 | 270,551 | 211,242 | 245,279 | 13.7 | % | 10.3 | % | ||||||||||||||
Corporate1 | (106,931 | ) | (98,527 | ) | (112,939 | ) | (74,979 | ) | 5.3 | % | (31.4 | )% | ||||||||||
Operating income | $ | 405,499 | $ | 480,594 | $ | 357,213 | $ | 458,462 | 13.5 | % | 4.8 | % | ||||||||||
1 GAAP and cash earnings include incremental security spend for the three and twelve months ended May 31. 2014. GAAP earnings for the twelve months ended May 31, 2014 include insurance proceeds of ($7M) related to the FY 2012 data intrusion. GAAP earnings for the three and twelve months ended May 31, 2013 include a data intrusion charge of $28.5 million and $36.8 million, respectively.
See Schedule 8 for reconciliation of cash earnings segment information to GAAP.
SCHEDULE 4
CONSOLIDATED BALANCE SHEETS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except share data)
May 31, 2014 | May 31, 2013 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 581,872 | $ | 680,470 | |||
Accounts receivable, net of allowances for doubtful accounts of $401 and $509, respectively | 214,574 | 189,435 | |||||
Claims receivable, net | 809 | 1,156 | |||||
Settlement processing assets | 780,917 | 259,204 | |||||
Inventory | 6,636 | 11,057 | |||||
Deferred income taxes | 12,963 | 6,485 | |||||
Prepaid expenses and other current assets | 45,673 | 66,685 | |||||
Total current assets | 1,643,444 | 1,214,492 | |||||
Goodwill | 1,337,285 | 1,044,222 | |||||
Other intangible assets, net | 535,173 | 400,848 | |||||
Property and equipment, net | 369,753 | 348,064 | |||||
Deferred income taxes | 101,928 | 95,178 | |||||
Other | 31,067 | 22,252 | |||||
Total assets | $ | 4,018,650 | $ | 3,125,056 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Lines of credit | $ | 440,128 | $ | 187,461 | |||
Current portion of long-term debt | 17,677 | 72,335 | |||||
Accounts payable and accrued liabilities | 290,106 | 262,890 | |||||
Settlement processing obligations | 451,317 | 162,558 | |||||
Income taxes payable | 12,390 | 18,870 | |||||
Total current liabilities | 1,211,618 | 704,114 | |||||
Long-term debt | 1,376,002 | 891,134 | |||||
Deferred income taxes | 209,099 | 170,723 | |||||
Other long-term liabilities | 89,132 | 72,478 | |||||
Total liabilities | 2,885,851 | 1,838,449 | |||||
Commitments and Contingencies | |||||||
Equity: | |||||||
Preferred stock, no par value; 5,000,000 shares authorized and none issued | — | — | |||||
Common stock, no par value; 200,000,000 shares authorized; 68,845,643 and 75,426,099 issued and outstanding at May 31, 2014 and 2013, respectively | — | — | |||||
Paid-in capital | 183,023 | 202,396 | |||||
Retained earnings | 815,980 | 958,751 | |||||
Accumulated other comprehensive loss | (1,776 | ) | (15,062 | ) | |||
Total Global Payments shareholders’ equity | 997,227 | 1,146,085 | |||||
Noncontrolling interests | 135,572 | 140,522 | |||||
Total equity | 1,132,799 | 1,286,607 | |||||
Total liabilities and equity | $ | 4,018,650 | $ | 3,125,056 | |||
SCHEDULE 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
Year Ended May 31, | |||||||
2014 | 2013 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 269,952 | $ | 238,713 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization of property and equipment | 60,124 | 55,023 | |||||
Amortization of acquired intangibles | 61,945 | 56,765 | |||||
Share-based compensation expense | 29,793 | 18,427 | |||||
Provision for operating losses and bad debts | 20,574 | 21,659 | |||||
Deferred income taxes | (1,799 | ) | 33,112 | ||||
Other, net | (1,484 | ) | (4,878 | ) | |||
Changes in operating assets and liabilities, net of the effects of acquisitions: | |||||||
Accounts receivable | (18,539 | ) | (5,458 | ) | |||
Claims receivable | (11,569 | ) | (11,858 | ) | |||
Settlement processing assets and obligations, net | (241,431 | ) | (104,007 | ) | |||
Inventory | 4,793 | (1,187 | ) | ||||
Prepaid expenses and other assets | 18,995 | (22,978 | ) | ||||
Accounts payable and other accrued liabilities | 9,224 | (39,374 | ) | ||||
Income taxes payable | (6,480 | ) | 6,587 | ||||
Net cash provided by operating activities | 194,098 | 240,546 | |||||
Cash flows from investing activities: | |||||||
Business, intangible and other asset acquisitions, net of cash acquired | (426,524 | ) | (434,016 | ) | |||
Capital expenditures | (81,411 | ) | (98,590 | ) | |||
Principal collections on financing receivables | 2,658 | 2,812 | |||||
Net proceeds from sale of investments and business | 3,607 | 1,227 | |||||
Net cash used in investing activities | (501,670 | ) | (528,567 | ) | |||
Cash flows from financing activities: | |||||||
Net borrowings (payments) on short-term lines of credit | 252,667 | (27,930 | ) | ||||
Proceeds from issuance of long-term debt | 2,690,000 | 1,135,327 | |||||
Principal payments under long-term debt | (2,260,597 | ) | (482,349 | ) | |||
Acquisition of redeemable noncontrolling interest | — | (242,000 | ) | ||||
Payment of debt issuance costs | (5,961 | ) | (3,987 | ) | |||
Repurchase of common stock | (447,307 | ) | (175,297 | ) | |||
Proceeds from stock issued under share-based compensation plans | 31,727 | 10,543 | |||||
Common stock repurchased - share-based compensation plans | (5,681 | ) | (10,244 | ) | |||
Tax benefit from share-based compensation plans | 6,475 | 1,863 | |||||
Distributions to noncontrolling interests | (36,670 | ) | (16,206 | ) | |||
Dividends paid | (5,757 | ) | (6,198 | ) | |||
Net cash provided by financing activities | 218,896 | 183,522 | |||||
Effect of exchange rate changes on cash | (9,922 | ) | 3,694 | ||||
Decrease in cash and cash equivalents | (98,598 | ) | (100,805 | ) | |||
Cash and cash equivalents, beginning of the period | 680,470 | 781,275 | |||||
Cash and cash equivalents, end of the period | $ | 581,872 | $ | 680,470 | |||
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, 2014 | ||||||||||||||||
GAAP | Processing System Intrusion | Other1 | Cash Earnings Adjustments2 | Cash Earnings | ||||||||||||
Revenues | $ | 673,977 | $ | — | $ | — | $ | — | $ | 673,977 | ||||||
Operating expenses: | ||||||||||||||||
Cost of service | 253,373 | — | (125 | ) | (18,392 | ) | 234,856 | |||||||||
Sales, general and administrative | 331,687 | — | (14,602 | ) | — | 317,085 | ||||||||||
Processing system intrusion | — | — | — | — | — | |||||||||||
585,060 | — | (14,727 | ) | (18,392 | ) | 551,941 | ||||||||||
Operating income | 88,917 | — | 14,727 | 18,392 | 122,036 | |||||||||||
Other income (expense): | ||||||||||||||||
Interest and other income | 2,093 | — | — | — | 2,093 | |||||||||||
Interest and other expense | (9,451 | ) | — | 1,341 | — | (8,110 | ) | |||||||||
(7,358 | ) | — | 1,341 | — | (6,017 | ) | ||||||||||
Income before income taxes | 81,559 | — | 16,068 | 18,392 | 116,019 | |||||||||||
Provision for income taxes | (23,293 | ) | — | (1,237 | ) | (5,719 | ) | (30,249 | ) | |||||||
Net income | 58,266 | — | 14,831 | 12,673 | 85,770 | |||||||||||
Less: Net income attributable to noncontrolling interests, net of income tax | (6,641 | ) | — | — | (1,434 | ) | (8,075 | ) | ||||||||
Net income attributable to Global Payments | $ | 51,625 | $ | — | $ | 14,831 | $ | 11,239 | $ | 77,695 | ||||||
Diluted shares | 71,322 | 71,322 | ||||||||||||||
Diluted earnings per share | $ | 0.72 | $ | — | $ | 0.21 | $ | 0.16 | $ | 1.09 | ||||||
Three Months Ended May 31, 2013 | ||||||||||||||||
GAAP | Processing System Intrusion | Other1 | Cash Earnings Adjustments2 | Cash Earnings | ||||||||||||
Revenues | $ | 618,352 | $ | — | $ | — | $ | — | $ | 618,352 | ||||||
Operating expenses: | ||||||||||||||||
Cost of service | 229,951 | — | (1,197 | ) | (14,674 | ) | 214,080 | |||||||||
Sales, general and administrative | 290,568 | — | (5,551 | ) | — | 285,017 | ||||||||||
Processing system intrusion | 28,464 | (28,464 | ) | — | — | — | ||||||||||
548,983 | (28,464 | ) | (6,748 | ) | (14,674 | ) | 499,097 | |||||||||
Operating income | 69,369 | 28,464 | 6,748 | 14,674 | 119,255 | |||||||||||
Other income (expense): | ||||||||||||||||
Interest and other income | 3,647 | — | — | — | 3,647 | |||||||||||
Interest and other expense | (8,065 | ) | — | — | — | (8,065 | ) | |||||||||
(4,418 | ) | — | — | — | (4,418 | ) | ||||||||||
Income before income taxes | 64,951 | 28,464 | 6,748 | 14,674 | 114,837 | |||||||||||
Provision for income taxes | (18,585 | ) | (8,865 | ) | (1,053 | ) | (4,190 | ) | (32,693 | ) | ||||||
Net income | 46,366 | 19,599 | 5,695 | 10,484 | 82,144 | |||||||||||
Less: Net income attributable to noncontrolling interests, net of income tax | (5,561 | ) | — | — | (1,481 | ) | (7,042 | ) | ||||||||
Net income attributable to Global Payments | $ | 40,805 | $ | 19,599 | $ | 5,695 | $ | 9,003 | $ | 75,102 | ||||||
Diluted shares | 76,651 | 76,651 | ||||||||||||||
Diluted earnings per share | $ | 0.53 | $ | 0.26 | $ | 0.07 | $ | 0.12 | $ | 0.98 | ||||||
1 For the period ended May 31, 2014, represents acceleration of equity awards and other costs associated with the retirement of our former Chairman and CEO, a nonrecurring charge associated with our retained interest in Brazil, an adjustment to the costs associated with the debt refinancing we completed in February 2014, non-cash losses from the retirement of fixed assets and charges related to employee termination benefits. For the prior period, represents one-time charges primarily related to employee termination benefits and certain contract settlement and related costs.
2Represents adjustments to cost of service to exclude acquisition intangible amortization expense from net income and the related income tax benefit.
We supplemented our reporting of income and the related earnings per share information determined in accordance with GAAP by reporting income and the related earnings per share for the three months ended May 31, 2014 and 2013 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated income and earnings per share on a cash basis by excluding amounts related to the processing system intrusion, acquisition intangible amortization, acceleration of equity awards and other costs associated with the retirement of our former Chairman and CEO, a nonrecurring charge associated with our retained interest in Brazil, non-cash losses from the retirement of fixed assets, employee termination benefits and an adjustment to the costs associated with the debt refinancing. We exclude these charges in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations. Our income and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, income and earnings per share determined in accordance with GAAP. Our measures of income and earnings per share on a cash earnings basis reflect management's judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.
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, 2014 | ||||||||||||||||
GAAP | Processing System Intrusion1 | Other2 | Cash Earnings Adjustments3 | Cash Earnings | ||||||||||||
Revenues | $ | 2,554,236 | $ | — | $ | — | $ | — | $ | 2,554,236 | ||||||
Operating expenses: | ||||||||||||||||
Cost of service | 952,225 | — | (704 | ) | (61,945 | ) | 889,576 | |||||||||
Sales, general and administrative | 1,203,512 | — | (19,446 | ) | — | 1,184,066 | ||||||||||
Processing system intrusion | (7,000 | ) | 7,000 | — | — | — | ||||||||||
2,148,737 | 7,000 | (20,150 | ) | (61,945 | ) | 2,073,642 | ||||||||||
Operating income | 405,499 | (7,000 | ) | 20,150 | 61,945 | 480,594 | ||||||||||
Other income (expense): | ||||||||||||||||
Interest and other income | 13,663 | — | (2,123 | ) | — | 11,540 | ||||||||||
Interest and other expense | (41,812 | ) | — | 9,485 | — | (32,327 | ) | |||||||||
(28,149 | ) | — | 7,362 | — | (20,787 | ) | ||||||||||
Income (loss) before income taxes | 377,350 | (7,000 | ) | 27,512 | 61,945 | 459,807 | ||||||||||
(Provision) benefit for income taxes | (107,398 | ) | 2,393 | (5,351 | ) | (19,825 | ) | (130,181 | ) | |||||||
Net income (loss) | 269,952 | (4,607 | ) | 22,161 | 42,120 | 329,626 | ||||||||||
Less: Net income attributable to noncontrolling interests, net of income tax | (24,666 | ) | — | — | (5,629 | ) | (30,295 | ) | ||||||||
Net income (loss) attributable to Global Payments | $ | 245,286 | $ | (4,607 | ) | $ | 22,161 | $ | 36,491 | $ | 299,331 | |||||
Diluted shares | 72,688 | 72,688 | ||||||||||||||
Diluted earnings (loss) per share | $ | 3.37 | $ | (0.07 | ) | $ | 0.31 | $ | 0.51 | $ | 4.12 | |||||
Year Ended May 31, 2013 | ||||||||||||||||
GAAP | Processing System Intrusion | Other2 | Cash Earnings Adjustments3 | Cash Earnings | ||||||||||||
Revenues | $ | 2,375,923 | $ | — | $ | — | $ | — | $ | 2,375,923 | ||||||
Operating expenses: | ||||||||||||||||
Cost of service | 862,075 | — | (1,358 | ) | (56,765 | ) | 803,952 | |||||||||
Sales, general and administrative | 1,119,860 | — | (6,351 | ) | — | 1,113,509 | ||||||||||
Processing system intrusion | 36,775 | (36,775 | ) | — | — | — | ||||||||||
2,018,710 | (36,775 | ) | (7,709 | ) | (56,765 | ) | 1,917,461 | |||||||||
Operating income | 357,213 | 36,775 | 7,709 | 56,765 | 458,462 | |||||||||||
Other income (expense): | ||||||||||||||||
Interest and other income | 10,353 | — | — | — | 10,353 | |||||||||||
Interest and other expense | (33,282 | ) | — | 8,383 | — | (24,899 | ) | |||||||||
(22,929 | ) | — | 8,383 | — | (14,546 | ) | ||||||||||
Income before income taxes | 334,284 | 36,775 | 16,092 | 56,765 | 443,916 | |||||||||||
Provision for income taxes | (95,571 | ) | (11,913 | ) | (2,586 | ) | (16,224 | ) | (126,294 | ) | ||||||
Net income | 238,713 | 24,862 | 13,506 | 40,541 | 317,622 | |||||||||||
Less: Net income attributable to noncontrolling interests, net of income tax | (22,588 | ) | — | (3,594 | ) | (6,024 | ) | (32,206 | ) | |||||||
Net income attributable to Global Payments | $ | 216,125 | $ | 24,862 | $ | 9,912 | $ | 34,517 | $ | 285,416 | ||||||
Diluted shares | 78,227 | 78,227 | ||||||||||||||
Diluted earnings per share | $ | 2.76 | $ | 0.32 | $ | 0.13 | $ | 0.44 | $ | 3.65 | ||||||
1 Represents insurance proceeds associated with processing system intrusion charges incurred in FY 2012.
2 For the year ended May 31, 2014, represents acceleration of equity awards and other costs associated with the retirement of our former Chairman and CEO, a credit related to the sale of an interest in our Brazil business and a subsequent charge associated with our retained interest, cost associated with the debt refinancing we completed in February 2014, non-cash losses from the retirement of fixed assets, charges related to employee termination benefits and HSBC's share of dividends declared. For the prior year, represents HSBC's share of GPAP dividends declared, one-time charges primarily related to employee termination benefits and certain contract settlement and related costs.
3 Represents adjustments to cost of service to exclude acquisition intangible amortization expense from net income and the related income tax benefit.
We supplemented our reporting of income and the related earnings per share information determined in accordance with GAAP by reporting income and the related earnings per share for the years ended May 31, 2014 and 2013 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated income and earnings per share on a cash basis by excluding amounts related to the processing system intrusion, acquisition intangible amortization, acceleration of equity awards and other costs associated with the retirement of our former Chairman and CEO, a nonrecurring charge associated with our retained interest in Brazil, non-cash losses from the retirement of fixed assets, employee termination benefits and resolution of a contract related contingency and an adjustment to the costs associated with the debt refinancing. In the twelve months ended May 2013, we also adjusted the net income attributable to noncontrolling interests to include HSBC's share of GPAP net income. We exclude these charges in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations. Our income and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, income and earnings per share determined in accordance with GAAP. Our measures of income and earnings per share on a cash earnings basis reflect management’s judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.
SCHEDULE 8
RECONCILIATION OF CASH EARNINGS SEGMENT INFORMATION TO GAAP
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
Three Months Ended May 31, | |||||||||||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||||||||
GAAP | Processing System Intrusion | Other2 | Cash Earnings Adjustments3 | Cash Earnings | GAAP | Processing System Intrusion | Other2 | Cash Earnings Adjustments3 | Cash Earnings | ||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||
United States | $ | 407,153 | $ | — | $ | — | $ | — | $ | 407,153 | $ | 372,425 | $ | — | $ | — | $ | — | $ | 372,425 | |||||||||||
Canada | 74,954 | — | — | — | 74,954 | 77,115 | — | — | — | 77,115 | |||||||||||||||||||||
North America merchant services | 482,107 | — | — | — | 482,107 | 449,540 | — | — | — | 449,540 | |||||||||||||||||||||
Europe | 153,577 | — | — | — | 153,577 | 132,217 | — | — | — | 132,217 | |||||||||||||||||||||
Asia-Pacific | 38,293 | — | — | — | 38,293 | 36,595 | — | — | — | 36,595 | |||||||||||||||||||||
International merchant services | 191,870 | — | — | — | 191,870 | 168,812 | — | — | — | 168,812 | |||||||||||||||||||||
Total revenues | $ | 673,977 | $ | — | $ | — | $ | — | $ | 673,977 | $ | 618,352 | $ | — | $ | — | $ | — | $ | 618,352 | |||||||||||
Operating income (loss) for segments: | |||||||||||||||||||||||||||||||
North America merchant services | $ | 70,420 | $ | — | $ | 1,428 | $ | 10,874 | $ | 82,722 | $ | 69,101 | $ | — | $ | 4,688 | $ | 6,440 | $ | 80,229 | |||||||||||
International merchant services | 58,094 | — | 790 | 7,518 | 66,402 | 48,295 | 53 | 878 | 8,234 | 57,460 | |||||||||||||||||||||
Corporate | (39,597 | ) | — | 12,509 | — | (27,088 | ) | (48,027 | ) | 28,411 | 1,182 | — | (18,434 | ) | |||||||||||||||||
Operating income | $ | 88,917 | $ | — | $ | 14,727 | $ | 18,392 | $ | 122,036 | $ | 69,369 | $ | 28,464 | $ | 6,748 | $ | 14,674 | $ | 119,255 | |||||||||||
Year Ended May 31, | |||||||||||||||||||||||||||||||
2014 | 2013 | ||||||||||||||||||||||||||||||
GAAP | Processing System Intrusion1 | Other2 | Cash Earnings Adjustments3 | Cash Earnings | GAAP | Processing System Intrusion | Other2 | Cash Earnings Adjustments3 | Cash Earnings | ||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||
United States | $ | 1,488,659 | $ | — | $ | — | $ | — | $ | 1,488,659 | $ | 1,394,675 | $ | — | $ | — | $ | 1,394,675 | |||||||||||||
Canada | 320,333 | — | — | — | 320,333 | 311,000 | — | — | 311,000 | ||||||||||||||||||||||
North America merchant services | 1,808,992 | — | — | — | 1,808,992 | 1,705,675 | — | — | — | 1,705,675 | |||||||||||||||||||||
Europe | 587,463 | — | — | — | 587,463 | 522,593 | — | — | — | 522,593 | |||||||||||||||||||||
Asia-Pacific | 157,781 | — | — | — | 157,781 | 147,655 | — | — | — | 147,655 | |||||||||||||||||||||
International merchant services | 745,244 | — | — | — | 745,244 | 670,248 | — | — | — | 670,248 | |||||||||||||||||||||
Total revenues | $ | 2,554,236 | $ | — | $ | — | $ | — | $ | 2,554,236 | $ | 2,375,923 | $ | — | $ | — | $ | — | $ | 2,375,923 | |||||||||||
Operating income (loss) for segments: | |||||||||||||||||||||||||||||||
North America merchant services | $ | 272,251 | $ | — | $ | 3,945 | $ | 32,374 | $ | 308,570 | $ | 258,910 | $ | — | $ | 5,593 | $ | 23,659 | $ | 288,162 | |||||||||||
International merchant services | 240,179 | — | 801 | 29,571 | 270,551 | 211,242 | 53 | 878 | 33,106 | 245,279 | |||||||||||||||||||||
Corporate | (106,931 | ) | (7,000 | ) | 15,404 | — | (98,527 | ) | (112,939 | ) | 36,722 | 1,238 | — | (74,979 | ) | ||||||||||||||||
Operating income (loss) | $ | 405,499 | $ | (7,000 | ) | $ | 20,150 | $ | 61,945 | $ | 480,594 | $ | 357,213 | $ | 36,775 | $ | 7,709 | $ | 56,765 | $ | 458,462 | ||||||||||
1 Represents insurance proceeds associated with processing system intrusion charges incurred in FY 2012.
2 Represents acceleration of equity awards and other costs associated with the retirement of our former CEO and Chairman, non-cash losses from the retirement of fixed assets, and charges related to employee termination benefits and certain contract settlement and related costs.
3 Represents acquisition intangible amortization expense.
SCHEDULE 9
OUTLOOK SUMMARY
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In billions, except per share data)
Fiscal 2014 Actual | Fiscal 2015 Outlook | % Change FY14 | ||||||||
Revenue Outlook | ||||||||||
Total Revenues | $ | 2.55 | $2.69 to $2.76 | 6% to 8% | ||||||
EPS Outlook | ||||||||||
Cash EPS | $ | 4.12 | $4.52 to $4.62 | 10% to 12% | ||||||
Acquisition-related intangible assets, non-recurring items and processing system intrusion1 | (0.75 | ) | (0.76 | ) | 1 | % | ||||
GAAP Diluted EPS | $ | 3.37 | $3.76 to $3.86 | 12% to 15% | ||||||
We supplemented our reporting of income and the related earnings per share information determined in accordance with GAAP by reporting income and the related earnings per share for the years ended May 31, 2014 and 2013 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated income and earnings per share on a cash basis by excluding amounts related to the processing system intrusion, acquisition intangible amortization, acceleration of equity awards and other costs associated with the retirement of our former Chairman and CEO, a nonrecurring charge associated with our retained interest in Brazil, non-cash losses from the retirement of fixed assets, employee termination benefits and resolution of a contract related contingency and an adjustment to the costs associated with the debt refinancing. In the twelve months ended May 2013, we also adjusted the net income attributable to noncontrolling interests to include HSBC's share of GPAP net income. We exclude these charges in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations. Our income and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, income and earnings per share determined in accordance with GAAP. Our measures of income and earnings per share on a cash earnings basis reflect management’s judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.
1 Fiscal 2015 reflects $0.72 of acquisition-related intangibles amortization and $0.04 of one-time charges. Fiscal 2014 reflects acquisition-related intangibles amortization of $0.51, processing-intrusion of ($0.07), and non-recurring items accounted for $0.31 relating to acceleration of equity awards and other costs associated with the retirement of our former Chairman and CEO, a credit related to the sale of an interest in our Brazil business and a subsequent charge associated with our retained interest, cost associated with the debt refinancing we completed in February 2014, non-cash losses from the retirement of fixed assets, charges related to employee termination benefits and HSBC's share of dividends declared.