Global Payments Reports Fourth Quarter and Year End Earnings

21 Jul, 2011, 16:01 ET from Global Payments Inc.

ATLANTA, July 21, 2011 /PRNewswire/ -- Global Payments Inc. (NYSE: GPN) today announced results for its fiscal fourth quarter and year ended May 31, 2011.  For the full year, revenues grew 13% to $1,859.8 million compared to $1,642.5 million in the prior fiscal year.  Normalized diluted earnings per share from continuing operations grew 9% to $2.77 compared to $2.54 in the prior year (See Schedule 2 for Normalized Earnings).  On a GAAP basis, the company reported fiscal 2011 full year diluted earnings per share from continuing operations of $2.61 compared to $2.52 in the prior year (See Schedule 1 for GAAP Consolidated Statements of Income).

(Logo: http://photos.prnewswire.com/prnh/20010221/ATW031LOGO )

For the fourth quarter, revenues grew 22% to $519.8 million compared to $425.1 million in the prior year.  Normalized diluted earnings per share from continuing operations grew 31% to $0.76 compared to $0.58 in the prior year quarter.  On a GAAP basis, the company reported fourth quarter diluted earnings per share from continuing operations of $0.72 compared to $0.56 in the prior year quarter.

Normalized fourth quarter and full year results exclude expenses related to certain start-up and duplicative costs for the company's Global Service Center in Manila, Philippines.  These results also exclude certain employee termination and relocation benefits.  (See Schedules 7 and 8 for Reconciliations of Normalized and Cash Earnings to GAAP).  

Chairman and CEO Paul R. Garcia stated, "We are pleased with our strong fiscal year 2011 financial performance which was driven by solid execution of our business strategy across our regions and the December 2010 addition of Spain.  We delivered exceptional results in the fourth quarter, driven by strong performance in North America and outstanding results in our International segment.  Our execution during fiscal 2011 established a basis from which we expect to drive margin expansion of as much as 30 basis points in fiscal 2012."  

David E. Mangum, Senior Executive Vice President and CFO, stated, "On a cash basis, the company reported fiscal 2011 fourth quarter and full year diluted earnings per share from continuing operations of $0.86 and $3.08, respectively, which represents 32% and 10% growth over the respective prior year periods.  

For the full year of fiscal 2012, the company expects annual revenue of $2,100 million to $2,150 million, or 13% to 16% growth over fiscal 2011.  The company expects annual fiscal 2012 diluted earnings per share on a cash basis of $3.35 to $3.43, reflecting 9% to 11% growth over fiscal 2011.  Annual fiscal 2012 GAAP diluted earnings per share is expected to be $3.02 to $3.09," said Mangum.

Cash earnings exclude normalized adjustments and acquisition intangible amortization expense from continuing operations.  (See Schedule 3 for Cash Earnings and Schedule 4 for Segment Information).

Conference Call

Global Payments will hold a conference call today, July 21, 2011 at 5:00 p.m. ET to discuss financial results and business highlights.  Callers may access the conference call via the company's Web site 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 Web site through August 5, 2011.  

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: 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, 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.

SCHEDULE 1 

UNAUDITED 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,

2011

2010

% Change

2011

2010

% Change

Revenues

$     519,754

$ 425,050

22%

$ 1,859,802

$ 1,642,468

13%

Operating expenses:

    Cost of service

191,440

152,322

26%

665,017

584,609

14%

    Sales, general and administrative

240,171

201,243

19%

863,191

734,580

18%

431,611

353,565

22%

1,528,208

1,319,189

16%

Operating income

88,143

71,485

23%

331,594

323,279

3%

Other income (expense):

    Interest and other income

3,534

1,930

83%

10,774

4,629

133%

    Interest and other expense

(4,706)

(4,814)

(2%)

(18,161)

(17,519)

4%

(1,172)

(2,884)

(59%)

(7,387)

(12,890)

(43%)

Income from continuing operations before income taxes

86,971

68,601

27%

324,207

310,389

4%

Provision for income taxes

(24,587)

(17,890)

37%

(95,076)

(87,379)

9%

Income from continuing operations

62,384

50,711

23%

229,131

223,010

3%

Loss  from discontinued operations, net of tax

(29)

(11,679)

NM

(975)

(3,901)

(75%)

Net income including noncontrolling interests

62,355

39,032

60%

228,156

219,109

4%

Less: Net income attributable to noncontrolling interests, net of tax

(3,779)

(4,842)

(22%)

(18,918)

(15,792)

20%

         Net income attributable to Global Payments

$       58,576

$   34,190

71%

$    209,238

$    203,317

3%

Amounts attributable to Global Payments:

   Income from continuing operations

$       58,605

$   45,869

28%

$    210,213

$    207,218

1%

   Loss  from discontinued operations, net of tax

(29)

(11,679)

NM

(975)

(3,901)

(75%)

         Net income attributable to Global Payments

$       58,576

$   34,190

71%

$    209,238

$    203,317

3%

Basic earnings per share attributable to Global Payments:

   Income from continuing operations

$           0.73

$       0.56

30%

$          2.63

$          2.56

3%

   Loss  from discontinued operations, net of tax

-

(0.14)

NM

(0.01)

(0.05)

(80%)

         Net income attributable to Global Payments

$           0.73

$       0.42

74%

$          2.62

$          2.51

4%

Diluted earnings per share attributable to Global Payments:

   Income from continuing operations

$           0.72

$       0.56

29%

$          2.61

$          2.52

4%

   Loss  from discontinued operations, net of tax

-

(0.14)

NM

(0.01)

(0.04)

(75%)

         Net income attributable to Global Payments

$           0.72

$       0.42

71%

$          2.60

$          2.48

5%

Weighted average shares outstanding:

         Basic

80,222

81,203

79,837

81,075

         Diluted

81,045

82,142

80,478

82,120

NM - Not Meaningful

SCHEDULE 2 

NORMALIZED EARNINGS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO GLOBAL PAYMENTS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)  

Three Months Ended May 31,

Year Ended May 31,

2011

2010

% Change

2011

2010

% Change

Revenues

$ 519,754

$ 425,050

22%

$ 1,859,802

$ 1,642,468

13%

Operating expenses:

    Cost of service

190,103

152,322

25%

661,619

584,609

13%

    Sales, general and administrative

237,087

198,660

19%

851,428

731,997

16%

427,190

350,982

22%

1,513,047

1,316,606

15%

Operating income

92,564

74,068

25%

346,755

325,862

6%

Other income (expense):

    Interest and other income

3,534

1,930

83%

10,774

4,629

133%

    Interest and other expense

(4,706)

(4,814)

(2%)

(18,161)

(17,519)

4%

(1,172)

(2,884)

(59%)

(7,387)

(12,890)

(43%)

Income from continuing operations before income taxes

91,392

71,184

28%

339,368

312,972

8%

Provision for income taxes

(26,062)

(18,836)

38%

(97,546)

(88,325)

10%

Income from continuing operations including noncontrolling interests

65,330

52,348

25%

241,822

224,647

8%

Less: Net income attributable to noncontrolling interests, net of tax

(3,779)

(4,842)

(22%)

(18,918)

(15,792)

20%

Net income from continuing operations attributable to Global Payments

$   61,551

$   47,506

30%

$    222,904

$    208,855

7%

Basic earnings per share

$       0.77

$       0.59

31%

$          2.79

$          2.58

8%

Diluted earnings per share

$       0.76

$       0.58

31%

$          2.77

$          2.54

9%

Weighted average shares outstanding:

         Basic

80,222

81,203

79,837

81,075

         Diluted

81,045

82,142

80,478

82,120

Normalized results exclude expenses consisting of $2.6 million and $7.4 million during the three and twelve months ended May 31, 2011, respectively, of start-up costs related to our new Global Service Center in Manila, Philippines and expenses of $1.8 million and $7.8 million during the three and twelve months ended May 31, 2011, respectively, related to employee termination and relocation benefits. During the three and twelve months ended May 31, 2010, normalized results exclude amounts due to our former President and Chief Operating Officer pursuant to his termination agreement dated April 21, 2010. Results for the twelve months ended May 31, 2011 also exclude a $2.5 million 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%.  See Schedules 7 and 8 for reconciliations of normalized earnings from continuing operations to GAAP.

SCHEDULE 3 

CASH EARNINGS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO GLOBAL PAYMENTS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data) 

Three Months Ended May 31,

Year Ended May 31,

2011

2010

% Change

2011

2010

% Change

Revenues

$ 519,754

$ 425,050

22%

$ 1,859,802

$ 1,642,468

13%

Operating expenses:

    Cost of service

175,897

144,146

22%

619,927

551,845

12%

    Sales, general and administrative

237,087

198,660

19%

851,428

731,997

16%

412,984

342,806

20%

1,471,355

1,283,842

15%

Operating income

106,770

82,244

30%

388,447

358,626

8%

Other income (expense):

    Interest and other income

3,534

1,930

83%

10,774

4,629

133%

    Interest and other expense

(4,706)

(4,814)

(2%)

(18,161)

(17,519)

4%

(1,172)

(2,884)

(59%)

(7,387)

(12,890)

(43%)

Income from continuing operations before income taxes

105,598

79,360

33%

381,060

345,736

10%

Provision for income taxes

(29,432)

(21,143)

39%

(109,459)

(98,590)

11%

Income from continuing operations including noncontrolling interests

76,166

58,217

31%

271,601

247,146

10%

Less: Net income attributable to noncontrolling interests, net of tax

(6,315)

(5,177)

22%

(23,876)

(17,142)

39%

Net income from continuing operations attributable to Global Payments

$   69,851

$   53,040

32%

$    247,725

$    230,004

8%

Basic earnings per share

$       0.87

$       0.65

34%

$          3.10

$          2.84

9%

Diluted earnings per share

$       0.86

$       0.65

32%

$          3.08

$          2.80

10%

Weighted average shares outstanding:

         Basic

80,222

81,203

79,837

81,075

         Diluted

81,045

82,142

80,478

82,120

NM - Not Meaningful

Cash earnings exclude normalized adjustments and acquisition intangible amortization expense from continuing operations and the related income tax benefit. See Schedules 7 and 8 for reconciliations of cash earnings from continuing operations to GAAP.

SCHEDULE 4  

SEGMENT INFORMATION CONTINUING OPERATIONS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)  

Three Months Ended May 31,

2011

2010

% Change

GAAP

Normalized

Cash Earnings

GAAP

Normalized

Cash Earnings

GAAP

Normalized

Cash Earnings

Revenues:

United States

$    281,500

$    281,500

$        281,500

$    242,975

$    242,975

$        242,975

16%

16%

16%

Canada

87,140

87,140

87,140

80,720

80,720

80,720

8%

8%

8%

North America merchant services

368,640

368,640

368,640

323,695

323,695

323,695

14%

14%

14%

Europe

115,359

115,359

115,359

72,238

72,238

72,238

60%

60%

60%

Asia-Pacific

35,755

35,755

35,755

29,117

29,117

29,117

23%

23%

23%

International merchant services

151,114

151,114

151,114

101,355

101,355

101,355

49%

49%

49%

Total revenues

$    519,754

$    519,754

$        519,754

$    425,050

$    425,050

$        425,050

22%

22%

22%

Operating income:

North America merchant services

$      69,816

$      69,816

$          73,085

$      64,966

$      64,966

$          67,848

7%

7%

8%

International merchant services

41,632

41,632

52,569

25,346

25,346

30,640

64%

64%

72%

Corporate

(23,305)

(18,884)

(18,884)

(18,827)

(16,244)

(16,244)

(24%)

(16%)

(16%)

Operating income

$      88,143

$      92,564

$        106,770

$      71,485

$      74,068

$          82,244

23%

25%

30%

Year Ended May 31,

2011

2010

% Change

GAAP

Normalized

Cash Earnings

GAAP

Normalized

Cash Earnings

GAAP

Normalized

Cash Earnings

Revenues:

United States

$ 1,031,997

$ 1,031,997

$     1,031,997

$    902,844

$    902,844

$        902,844

14%

14%

14%

Canada

330,872

330,872

330,872

317,272

317,272

317,272

4%

4%

4%

North America merchant services

1,362,869

1,362,869

1,362,869

1,220,116

1,220,116

1,220,116

12%

12%

12%

Europe

359,567

359,567

359,567

315,023

315,023

315,023

14%

14%

14%

Asia-Pacific

137,366

137,366

137,366

107,329

107,329

107,329

28%

28%

28%

International merchant services

496,933

496,933

496,933

422,352

422,352

422,352

18%

18%

18%

Total revenues

$ 1,859,802

$ 1,859,802

$     1,859,802

$ 1,642,468

$ 1,642,468

$     1,642,468

13%

13%

13%

Operating income:

North America merchant services

$    268,233

$    268,233

$        280,880

$    275,386

$    275,386

$        285,989

(3%)

(3%)

(2%)

International merchant services

143,911

143,911

172,956

113,699

113,699

135,860

27%

27%

27%

Corporate

(80,550)

(65,389)

(65,389)

(65,806)

(63,223)

(63,223)

(22%)

(3%)

(3%)

Operating income

$    331,594

$    346,755

$        388,447

$    323,279

$    325,862

$        358,626

3%

6%

8%

See Schedule 9 for reconciliation of normalized and cash earnings segment information to GAAP.

SCHEDULE 5

CONSOLIDATED BALANCE SHEETS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

May 31,

May 31,

2011

2010

ASSETS

Current assets:

Cash and cash equivalents

$ 1,354,285

$    769,946

Accounts receivable, net of allowances for doubtful accounts of $472 and $269, respectively

166,540

131,817

Claims receivable, net of allowance for losses of $3,870 and $4,208, respectively

914

664

Settlement processing assets

280,359

13,741

Inventory

7,640

9,740

Deferred income taxes

2,946

2,752

Prepaid expenses and other current assets

35,291

39,604

Total current assets

1,847,975

968,264

Goodwill

779,637

569,090

Other intangible assets, net of accumulated amortization of $197,066 and $145,076, respectively

341,500

205,110

Property and equipment, net of accumulated depreciation of $147,670 and $119,402, respectively

256,301

183,938

Deferred income taxes

104,140

90,470

Other

20,978

22,454

Total assets

$ 3,350,531

$ 2,039,326

LIABILITIES AND EQUITY

Current liabilities:

Lines of credit

$    270,745

$      79,187

Current portion of long-term debt

85,802

148,169

Accounts payable and accrued liabilities

241,578

173,575

Settlement processing obligations

838,565

265,110

Income taxes payable

7,674

6,430

 Total current liabilities

1,444,364

672,471

Long-term debt

268,217

272,965

Deferred income taxes

116,432

88,265

Other long-term liabilities

49,843

31,436

Total liabilities

1,878,856

1,065,137

Commitments and contingencies

Redeemable noncontrolling interest

133,858

102,672

Equity:

Preferred stock, no par value; 5,000,000 shares authorized and none issued

-

-

Common stock, no par value; 200,000,000 shares authorized; 83,062,518 issued

and 80,334,781 outstanding at May 31, 2011 and 82,028,945 issued and

79,646,055 outstanding at May 31, 2010

-

-

Paid-in capital

502,993

460,747

Retained earnings

715,202

544,772

Treasury stock; 2,727,737 and 2,382,890 shares at May 31, 2011 and May 31, 2010,

respectively

(112,980)

(100,000)

Accumulated other comprehensive income (loss)

79,320

(44,255)

     Total Global Payments shareholders' equity

1,184,535

861,264

Noncontrolling interest

153,282

10,253

Total equity

1,337,817

871,517

Total liabilities and equity

$ 3,350,531

$ 2,039,326

SCHEDULE 6

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

Year Ended May 31,

2011

2010

Cash flows from operating activities:

Net income including noncontrolling interests

$    228,156

$ 219,109

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization of property and equipment

40,545

35,864

Amortization of acquired intangibles

41,692

32,803

Provision for operating losses and bad debts

20,577

25,025

Share-based compensation expense

15,885

18,072

Deferred income taxes

19,154

2,722

Loss on disposal of discontinued operations

602

24,310

Other, net

(3,576)

2,443

Changes in operating assets and liabilities, net of the effects of acquisitions:

Accounts receivable

(34,723)

(11,689)

Claims receivable

(14,425)

(14,936)

Settlement processing assets and obligations, net

299,895

140,962

Inventory

1,979

(4,727)

Prepaid expenses and other assets

3,537

(13,710)

Accounts payable and other accrued liabilities

89,230

18,803

Payables to money transfer beneficiaries

-

(6,107)

Income taxes payable

1,244

(3,183)

Net cash provided by operating activities

709,772

465,761

Cash flows from investing activities:

Business and intangible asset acquisitions, net of cash acquired

(167,968)

(29,513)

Disposition of business, net of cash

(2,577)

60,231

Capital expenditures

(98,537)

(56,054)

Net decrease (increase) in financing receivables

2,062

(179)

Proceeds from sale of investment and contractual rights, net

-

311

Net cash used in investing activities

(267,020)

(25,204)

Cash flows from financing activities:

Net borrowings on lines of credit

191,558

69,013

Proceeds from issuance of long-term debt

205,298

305,744

Principal payments under long-term debt

(280,198)

(75,205)

Acquisition of redeemable noncontrolling interests

-

(307,675)

Proceeds from stock issued under share-based compensation plans, net

18,364

30,248

Repurchase of common stock

(14,900)

(98,080)

Tax benefit from share-based compensation

9,141

7,186

Distribution to noncontrolling interests

(8,752)

(20,484)

Dividends paid

(6,388)

(6,497)

Net cash provided by (used in) financing activities

114,123

(95,750)

Effect of exchange rate changes on cash

27,464

(1,796)

Increase in cash and cash equivalents

584,339

343,011

Cash and cash equivalents, beginning of period

769,946

426,935

Cash and cash equivalents, end of period

$ 1,354,285

$ 769,946

SCHEDULE 7

RECONCILIATION OF QUARTERLY NORMALIZED AND CASH EARNINGS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO GLOBAL PAYMENTS TO GAAP

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

Three Months Ended May 31,

2011

GAAP

Employee Termination and Other(1)

Normalized

Cash Earnings Adjustments(2)

Cash Earnings

Revenues

$ 519,754

$                                               -

$ 519,754

$                -

$       519,754

Operating expenses:

  Cost of service

191,440

(1,337)

190,103

(14,206)

175,897

  Sales, general and administrative

240,171

(3,084)

237,087

-

237,087

431,611

(4,421)

427,190

(14,206)

412,984

Operating income

88,143

4,421

92,564

14,206

106,770

Other income (expense):

  Interest and other income

3,534

-

3,534

-

3,534

  Interest and other expense

(4,706)

-

(4,706)

-

(4,706)

(1,172)

-

(1,172)

-

(1,172)

Income from continuing operations before income taxes

86,971

4,421

91,392

14,206

105,598

Provision for income taxes

(24,587)

(1,475)

(26,062)

(3,370)

(29,432)

Income from continuing operations

62,384

2,946

65,330

10,836

76,166

Less: Net income attributable to noncontrolling interests, net of tax

(3,779)

-

(3,779)

(2,536)

(6,315)

Net income from continuing operations attributable to Global Payments

$   58,605

$                                         2,946

$   61,551

$           8,300

$         69,851

Diluted shares

81,045

81,045

81,045

Diluted earnings per share

$       0.72

$                                           0.04

$       0.76

$             0.10

$             0.86

Three Months Ended May 31,

2010

GAAP

Employee Termination and Other(1)

Normalized

Cash Earnings Adjustments(2)

Cash Earnings

Revenues

$ 425,050

$                                               -

$ 425,050

$                -

$       425,050

Operating expenses:

  Cost of service

152,322

-

152,322

(8,176)

144,146

  Sales, general and administrative

201,243

(2,583)

198,660

-

198,660

353,565

(2,583)

350,982

(8,176)

342,806

Operating income

71,485

2,583

74,068

8,176

82,244

Other income (expense):

  Interest and other income

1,930

-

1,930

-

1,930

  Interest and other expense

(4,814)

-

(4,814)

-

(4,814)

(2,884)

-

(2,884)

-

(2,884)

Income from continuing operations before income taxes

68,601

2,583

71,184

8,176

79,360

Provision for income taxes

(17,890)

(946)

(18,836)

(2,307)

(21,143)

Income from continuing operations

50,711

1,637

52,348

5,869

58,217

Less: Net income attributable to noncontrolling interests, net of tax

(4,842)

-

(4,842)

(335)

(5,177)

Net income from continuing operations attributable to Global Payments

$   45,869

$                                         1,637

$   47,506

$           5,534

$         53,040

Diluted shares

82,142

82,142

82,142

Diluted earnings per share

$       0.56

$                                           0.02

$       0.58

$             0.07

$             0.65

(1) Reflects expenses of $2.6 million during the three months ended May 31, 2011, of start-up costs related to our new Global Service Center in Manila, Philippines and expenses of $1.8 million and $2.6 million during the three months ended May 31, 2011 and 2010, respectively, related to employee termination and relocation benefits, and the related income tax benefits

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

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, 2011 and 2010 on a “normalized”  and "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated income from continuing operations and earnings per share on a normalized basis by excluding charges related to employee termination and relocation benefits, and certain one-time costs related to our Global Service Center.  We calculated income from continuing operations on a cash earnings basis by excluding acquisition intangible amortization expense from our normalized 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 normalized and 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 normalized and 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 ANNUAL NORMALIZED AND CASH EARNINGS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO GLOBAL PAYMENTS TO GAAP

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

Year Ended May 31,

2011

GAAP

Employee Termination and Other(1)

Foreign Tax Rate(2)

Normalized

Cash Earnings Adjustments(3)

Cash Earnings

Revenues

$ 1,859,802

$          -

$                      -

$ 1,859,802

$                -

$    1,859,802

Operating expenses:

  Cost of service

665,017

(3,398)

-

661,619

(41,692)

619,927

  Sales, general and administrative

863,191

(11,763)

-

851,428

-

851,428

1,528,208

(15,161)

-

1,513,047

(41,692)

1,471,355

Operating income

331,594

15,161

-

346,755

41,692

388,447

Other income (expense):

  Interest and other income

10,774

-

-

10,774

-

10,774

  Interest and other expense

(18,161)

-

-

(18,161)

-

(18,161)

(7,387)

-

-

(7,387)

-

(7,387)

Income from continuing operations before income taxes

324,207

15,161

-

339,368

41,692

381,060

Provision for income taxes

(95,076)

(4,949)

2,479

(97,546)

(11,913)

(109,459)

Income from continuing operations

229,131

10,212

2,479

241,822

29,779

271,601

Less: Net income attributable to noncontrolling interests, net of tax

(18,918)

-

-

(18,918)

(4,958)

(23,876)

Net income from continuing operations attributable to Global Payments

$    210,213

$  10,212

$                2,479

$    222,904

$         24,821

$       247,725

Diluted shares

80,478

80,478

80,478

Diluted earnings per share

$          2.61

$     0.13

$                  0.03

$          2.77

$             0.31

$             3.08

Year Ended May 31,

2010

GAAP

Employee Termination and Other(1)

Normalized

Cash Earnings Adjustments(3)

Cash Earnings

Revenues

$ 1,642,468

$        -

$ 1,642,468

$                -

$    1,642,468

Operating expenses:

  Cost of service

584,609

-

584,609

(32,764)

551,845

  Sales, general and administrative

734,580

(2,583)

731,997

-

731,997

1,319,189

(2,583)

1,316,606

(32,764)

1,283,842

Operating income

323,279

2,583

325,862

32,764

358,626

Other income (expense):

  Interest and other income

4,629

-

4,629

-

4,629

  Interest and other expense

(17,519)

-

(17,519)

-

(17,519)

(12,890)

-

(12,890)

-

(12,890)

Income from continuing operations before income taxes

310,389

2,583

312,972

32,764

345,736

Provision for income taxes

(87,379)

(946)

(88,325)

(10,265)

(98,590)

Income from continuing operations

223,010

1,637

224,647

22,499

247,146

Less: Net income attributable to noncontrolling interests, net of tax

(15,792)

-

(15,792)

(1,350)

(17,142)

Net income from continuing operations attributable to Global Payments

$    207,218

$   1,637

$    208,855

$         21,149

$       230,004

Diluted shares

82,120

82,120

82,120

Diluted earnings per share

$          2.52

$     0.02

$                      -

$          2.54

$             0.26

$             2.80

(1) Reflects expenses of $7.4 million during the year ended May 31, 2011, of start-up costs related to our Global Service Center in Manila, Philippines and expenses of $7.8 million and $2.6 million during the years ended May 31, 2011 and 2010, respectively, related to employee termination and relocation benefits, and the related income tax benefits.

(2) 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%.  

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

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, 2011 and 2010 on a “normalized”  and "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated income from continuing operations and earnings per share on a normalized basis by excluding charges related to employee termination and relocation benefits, certain one-time costs related to our new Global Service Center and the legislated tax rate reduction.  We calculated income from continuing operations on a cash earnings basis by excluding acquisition intangible amortization expense from our normalized 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 normalized and 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 normalized and cash earnings basis reflect management’s judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.

SCHEDULE 9  

RECONCILIATION OF  CASH EARNINGS SEGMENT INFORMATION TO GAAP

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)  

Three Months Ended May 31,  

2011

2010

GAAP

Employee Termination and Other(1)

Normalized

Cash Earnings Adjustments (2)

Cash Earnings

GAAP

Employee Termination and Other(1)

Normalized

Cash Earnings Adjustments (2)

Cash Earnings

Revenues:

United States

$    281,500

$                  -

$    281,500

$                -

$        281,500

$    242,975

$                  -

$    242,975

$                -

$        242,975

Canada

87,140

-

87,140

-

87,140

80,720

-

80,720

-

80,720

North America merchant services

368,640

-

368,640

-

368,640

323,695

-

323,695

-

323,695

Europe

115,359

-

115,359

-

115,359

72,238

-

72,238

-

72,238

Asia-Pacific

35,755

-

35,755

-

35,755

29,117

-

29,117

-

29,117

International merchant services

151,114

-

151,114

-

151,114

101,355

-

101,355

-

101,355

Total revenues

$    519,754

$                  -

$    519,754

$                -

$        519,754

$    425,050

$                  -

$    425,050

$                -

$        425,050

Operating income:

North America merchant services

$      69,816

$                  -

$      69,816

$           3,269

$          73,085

$      64,966

$                  -

$      64,966

$           2,882

$          67,848

International merchant services

41,632

-

41,632

10,937

52,569

25,346

-

25,346

5,294

30,640

Corporate

(23,305)

4,421

(18,884)

-

(18,884)

(18,827)

2,583

(16,244)

-

(16,244)

Operating income

$      88,143

$             4,421

$      92,564

$         14,206

$        106,770

$      71,485

$             2,583

$      74,068

$           8,176

$          82,244

Year Ended May 31,  

2011

2010

GAAP

Employee Termination and Other(1)

Normalized

Cash Earnings Adjustments (2)

Cash Earnings

GAAP

Employee Termination and Other(1)

Normalized

Cash Earnings Adjustments (2)

Cash Earnings

Revenues:

United States

$ 1,031,997

$                  -

$ 1,031,997

$                -

$     1,031,997

$    902,844

$                  -

$    902,844

$                -

$        902,844

Canada

330,872

-

330,872

-

330,872

317,272

-

317,272

-

317,272

North America merchant services

1,362,869

-

1,362,869

-

1,362,869

1,220,116

-

1,220,116

-

1,220,116

Europe

359,567

-

359,567

-

359,567

315,023

-

315,023

-

315,023

Asia-Pacific

137,366

-

137,366

-

137,366

107,329

-

107,329

-

107,329

International merchant services

496,933

-

496,933

-

496,933

422,352

-

422,352

-

422,352

Total revenues

$ 1,859,802

$                  -

$ 1,859,802

$                -

$     1,859,802

$ 1,642,468

$                  -

$ 1,642,468

$                -

$     1,642,468

Operating income:

North America merchant services

$    268,233

$                  -

$    268,233

$         12,647

$        280,880

$    275,386

$                  -

$    275,386

$         10,603

$        285,989

International merchant services

143,911

-

143,911

29,045

172,956

113,699

-

113,699

22,161

135,860

Corporate

(80,550)

15,161

(65,389)

-

(65,389)

(65,806)

2,583

(63,223)

-

(63,223)

Operating income

$    331,594

$           15,161

$    346,755

$         41,692

$        388,447

$    323,279

$             2,583

$    325,862

$         32,764

$        358,626

(1) Normalized results exclude expenses consisting of $2.6 million and $7.4 million during the three and twelve months ended May 31, 2011, respectively, of start-up costs related to our new Global Service Center in Manila, Philippines and expenses of $1.8 million and $7.8 million during the three and twelve months ended May 31, 2011, respectively, related to employee termination and relocation benefits. During the three and twelve months ended May 31, 2010, normalized results exclude amounts due to our former President and Chief Operating Officer pursuant to his termination agreement dated April 21, 2010.

(2) Represents acquisition intangible amortization expense from continuing operations.

SCHEDULE 10

OUTLOOK SUMMARY

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In millions, except per share data)

Fiscal 2011 Actual

Fiscal 2012 Outlook

% Change FY11

Revenue Outlook

Revenues

$                 1,860

$2,100 to 2,150

13% to 16%

EPS Outlook

GAAP diluted EPS from continuing operations

$                   2.61

$3.02 to $3.09

16% to 18%

Non-recurring items and acquisition-related intangibles

0.47

 (1)

$0.34

---

Cash EPS from continuing operations

$                   3.08

$3.35 to $3.43

9% to 11%

(1)  Non-recurring items accounted for $0.16 and acquisition-related intangibles accounted for $0.31 in Fiscal 2011 results.

Contact:

Jane M. Elliott

770-829-8234 Voice

770-829-8267 Fax

investor.relations@globalpay.com

SOURCE Global Payments Inc.



RELATED LINKS

http://www.globalpaymentsinc.com