Global Payments Reports First Quarter Earnings

Oct 11, 2010, 16:01 ET from Global Payments Inc.

ATLANTA, Oct. 11, 2010 /PRNewswire-FirstCall/ -- Global Payments Inc. (NYSE: GPN) today announced results for its fiscal first quarter ended August 31, 2010.  For the first quarter, revenues grew 7% to $440.1 million compared to $409.9 million in the prior fiscal year.  Normalized diluted earnings per share from continuing operations were $0.67 compared to $0.68 in the prior year (See schedule 2 Normalized income statement).    

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Normalized first quarter results exclude one-time, pretax expenses consisting of employee termination and relocation benefits, certain start-up costs related to the company's Global Service Center in Manila, Philippines, and a one-time, non-cash write-down of a deferred tax asset due to a legislated tax rate change in the United Kingdom.  (See Schedule 4 for reconciliation details).  

On a GAAP basis, the company reported fiscal 2011 first quarter diluted earnings per share from continuing operations of $0.61 compared to $0.68 in the prior quarter (See Schedule 1 for GAAP income statement).  

Chairman and CEO, Paul R. Garcia, stated, "Despite a challenging macroeconomic environment, we delivered solid results and are on target to achieve our full year estimates.  Our first quarter results reflect strong growth in the U.S. and Asia Pacific, and we continue to execute our plans for long-term growth and operating leverage in all of our businesses.

"Based on our current outlook, we continue to expect fiscal 2011 annual revenue of $1,735 million to $1,770 million, or 6% to 8% growth over fiscal 2010, and 2011 annual diluted EPS expectations of $2.68 to $2.77, reflecting 6% to 9% growth over fiscal 2010 normalized EPS from continuing operations.  On a constant currency basis, we expect fiscal 2011 annual revenue growth of 7% to 9% and annual diluted earnings per share growth of 7% to 10% growth over fiscal 2010," said Garcia.

Conference Call

Global Payments will hold a conference call today, October 11, 2010 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 October 25, 2010.  

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 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

GAAP UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

Three Months Ended August 31,

2010

2009

% Change

Revenues

$ 440,138

$ 409,932

7%

Operating expenses:

    Cost of service

151,041

141,204

7%

    Sales, general and administrative

206,990

179,485

15%

358,031

320,689

12%

Operating income

82,107

89,243

(8%)

Other income (expense):

    Interest and other income

1,537

690

123%

    Interest and other expense

(4,841)

(4,141)

17%

(3,304)

(3,451)

(4%)

Income from continuing operations before income taxes

78,803

85,792

(8%)

Provision for income taxes

(24,981)

(25,536)

(2%)

Income from continuing operations

53,822

60,256

(11%)

(Loss) income from discontinued operations, net of tax

(28)

2,188

NM

Net income including noncontrolling interests

53,794

62,444

(14%)

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

(4,426)

(4,613)

(4%)

         Net income attributable to Global Payments

$   49,368

$   57,831

(15%)

Amounts attributable to Global Payments:

   Income from continuing operations

$   49,396

$   55,643

(11%)

   (Loss) income from discontinued operations, net of tax

(28)

2,188

NM

         Net income attributable to Global Payments

$   49,368

$   57,831

(15%)

Basic earnings per share attributable to Global Payments:

   Income from continuing operations

$       0.62

$       0.69

(10%)

   (Loss) income from discontinued operations, net of tax

-

0.03

NM

         Net income

$       0.62

$       0.72

(14%)

Diluted earnings per share attributable to Global Payments:

   Income from continuing operations

$       0.61

$       0.68

(10%)

   (Loss) income from discontinued operations, net of tax

-

0.03

NM

         Net income

$       0.61

$       0.71

(14%)

Weighted average shares outstanding:

         Basic

79,597

80,554

         Diluted

80,339

81,298

NM - Not Meaningful

SCHEDULE 2

NORMALIZED INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO GLOBAL PAYMENTS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

Three Months Ended August 31,

2010

2009

% Change

Normalized(1)

GAAP

Revenues

$  440,138

$ 409,932

7%

Operating expenses:

    Cost of service

150,445

141,204

7%

    Sales, general and administrative

204,396

179,485

14%

354,841

320,689

11%

Operating income

85,297

89,243

(4%)

Other income (expense):

    Interest and other income

1,537

690

123%

    Interest and other expense

(4,841)

(4,141)

17%

(3,304)

(3,451)

(4%)

Income from continuing operations before income taxes

81,993

85,792

(4%)

Provision for income taxes

(23,664)

(25,536)

(7%)

Income from continuing operations including noncontrolling interests

58,329

60,256

(3%)

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

(4,426)

(4,613)

(4%)

Net income from continuing operations attributable to Global Payments

$    53,903

$   55,643

(3%)

Basic earnings per share

$        0.68

$       0.69

(1%)

Diluted earnings per share

$        0.67

$       0.68

(1%)

Weighted average shares outstanding:

         Basic

79,597

80,554

         Diluted

80,339

81,298

(1) Normalized first quarter results 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%.  Results also exclude one-time expenses consisting of employee termination and relocation benefits and $1.1 million of start-up costs related to the company’s Global Service Center in Manila, Philippines.  

SCHEDULE 3

UNAUDITED SEGMENT INFORMATION - CONTINUING OPERATIONS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

Three Months Ended August 31,

2010

2009

Normalized

% Change

Normalized

Non-recurring

Charges (1)

GAAP

GAAP

Revenues:

United States

$    255,630

$                -

$ 255,630

$ 222,767

15%

Canada

81,213

-

81,213

81,225

-

North America Merchant Services

336,843

336,843

303,992

11%

Europe

73,796

-

73,796

80,467

(8%)

Asia-Pacific

29,499

-

29,499

25,473

16%

International Merchant Services

103,295

-

103,295

105,940

(2%)

Total Revenues

$    440,138

$                -

$ 440,138

$ 409,932

7%

Operating Income:

North America Merchant Services

$      68,368

$                -

$   68,368

$   75,921

(10%)

International Merchant Services

31,393

-

31,393

28,749

9%

Corporate

(14,464)

(3,190)

(17,654)

(15,427)

6%

Operating Income

$      85,297

$         (3,190)

$   82,107

$   89,243

(4%)

(1)  Reflects one-time expenses consisting of employee termination and relocation benefits and $1.1 million of start-up costs related to the company’s Global Service Center in Manila, Philippines.

SCHEDULE 4

RECONCILIATION OF NORMALIZED INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO GLOBAL PAYMENTS TO GAAP

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data) 

Three Months Ended August 31,

Year Ended May 31,

2010

2009

2010

Normalized

Non-recurring Charges (1)

Foreign Tax Rate (2)

GAAP

GAAP

Normalized

Termination Benefits (3)

GAAP

Revenues

$ 440,138

$                -

$                      -

$ 440,138

$ 409,932

$ 1,642,468

$            -

$ 1,642,468

Operating expenses:

  Cost of service

150,445

596

-

151,041

141,204

584,609

-

584,609

  Sales, general and administrative

204,396

2,594

-

206,990

179,485

731,997

2,583

734,580

354,841

3,190

358,031

320,689

1,316,606

2,583

1,319,189

Operating income

85,297

(3,190)

-

82,107

89,243

325,862

(2,583)

323,279

Other income (expense):

  Interest and other income

1,537

-

-

1,537

690

4,629

-

4,629

  Interest and other expense

(4,841)

-

-

(4,841)

(4,141)

(17,519)

-

(17,519)

(3,304)

-

-

(3,304)

(3,451)

(12,890)

-

(12,890)

Income from continuing operations before income taxes

81,993

(3,190)

-

78,803

85,792

312,972

(2,583)

310,389

Provision for income taxes

(23,664)

1,162

(2,479)

(24,981)

(25,536)

(88,325)

946

(87,379)

Income from continuing operations

58,329

(2,028)

(2,479)

53,822

60,256

224,647

(1,637)

223,010

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

(4,426)

-

-

(4,426)

(4,613)

(15,792)

-

(15,792)

Net income from continuing operations attributable to Global Payments

$   53,903

$         (2,028)

$              (2,479)

$   49,396

$   55,643

$    208,855

$     (1,637)

$    207,218

Diluted shares

80,339

-

80,339

81,298

82,120

-

82,120

Diluted earnings (loss) per share

$       0.67

$           (0.03)

$                (0.03)

$       0.61

$       0.68

$          2.54

$       (0.02)

$          2.52

(1)  Reflects one-time expenses related to employee termination and relocation benefits and $1.1 million of start-up costs related to our new Global Service Center in Manila, Philippines which will support customer and operational functions and the related income tax benefit.

(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) Termination benefits represent amounts due to our former President and Chief Operating Officer pursuant to his termination agreement dated April 21, 2010 and the related income tax benefit.

We supplemented our reporting of income from continuing operations and earnings per share information determined in accordance with GAAP by reporting income from continuing operations and earnings per share for the three months ended August 31, 2010 on a “normalized” 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 non-recurring 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 exclude the impact of non-recurring 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 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 basis reflect management’s judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.

SCHEDULE 5

CONSOLIDATED BALANCE SHEETS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

August 31,

May 31,

2010

2010

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$    578,213

$    769,946

Accounts receivable, net of allowances for doubtful accounts of $384 and $269, respectively

150,777

131,817

Claims receivable, net of allowance for losses of $4,618 and $4,208, respectively

921

664

Settlement processing assets

43,333

13,741

Inventory, net of obsolescence reserves of $887 and $908, respectively

6,731

9,740

Deferred income taxes

4,028

2,752

Prepaid expenses and other current assets

21,266

39,604

     Total current assets

805,269

968,264

Property and equipment, net of accumulated depreciation of $130,407 and $119,402, respectively

202,928

183,938

Goodwill

582,252

569,090

Other intangible assets, net of accumulated amortization of $153,820 and $145,076, respectively

202,908

205,110

Deferred income taxes

93,838

90,470

Other

21,550

22,454

Total assets

$ 1,908,745

$ 2,039,326

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Lines of credit

$      84,135

$      79,187

Notes payable - current portion

137,898

148,169

Accounts payable and accrued liabilities

180,059

173,575

Settlement processing obligations

105,686

265,110

Income taxes payable

233

6,430

     Total current liabilities

508,011

672,471

Notes payable

238,248

272,965

Deferred income taxes

89,858

88,265

Other long-term liabilities

35,317

31,436

     Total liabilities

871,434

1,065,137

Commitments and contingencies

Redeemable noncontrolling interest

105,154

102,672

Shareholders' equity:

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

-

-

Common stock, no par value; 200,000,000 shares authorized; 82,414,198 issued

   and 79,686,461 outstanding at August 31, 2010 and 82,028,945 issued and

  79,646,055 outstanding at May 31, 2010

-

-

Treasury stock, 2,727,737 and 2,382,890 shares at August 31, 2010 and May 31, 2010, respectively

(112,980)

(100,000)

Paid-in capital

462,874

460,747

Retained earnings

592,439

544,772

Accumulated other comprehensive loss

(20,413)

(44,255)

     Total Global Payments Inc. shareholders' equity

921,920

861,264

Noncontrolling interest

10,237

10,253

     Total equity

932,157

871,517

Total liabilities and equity

$ 1,908,745

$ 2,039,326

SCHEDULE 6

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

Three Months Ended August 31,

2010

2009

Cash flows from operating activities:

Net income including noncontrolling interests

$           53,794

$           62,444

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

Depreciation and amortization of property and equipment

9,030

9,002

Amortization of acquired intangibles

7,674

7,920

Share-based compensation expense

3,492

3,004

Provision for operating losses and bad debts

5,246

6,769

Deferred income taxes

3,518

1,596

Other, net

(676)

(158)

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

Accounts receivable

(18,960)

(2,883)

Claims receivable

(4,390)

(4,137)

Settlement processing assets and obligations, net

(190,129)

608,711

Inventory

3,096

(7,381)

Prepaid expenses and other assets

(2,796)

(58)

Payables to money transfer beneficiaries

-

(4,465)

Accounts payable and accrued liabilities

11,353

1,379

Income taxes payable

15,371

14,765

Net cash (used in) provided by operating activities

(104,377)

696,508

Cash flows from investing activities:

Business and intangible asset acquisitions, net of cash acquired

(2,489)

(249)

Capital expenditures

(24,785)

(11,101)

Net decrease in financing receivables

454

-

Proceeds from sale of investment and contractual rights

-

253

Net cash used in investing activities

(26,820)

(11,097)

Cash flows from financing activities:

Net borrowings on lines of credit

4,948

1,948

Proceeds from issuance of notes payable

1,661

300,487

Principal payments under notes payable

(49,467)

(27,487)

Acquisition of redeemable noncontrolling interests

-

(307,675)

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

(474)

4,048

Tax benefit from share-based compensation plans

118

2,599

Repurchase of common stock

(14,900)

-

Dividends paid

(1,586)

(1,616)

Distribution to noncontrolling interests

(2,075)

(13,998)

Net cash used in financing activities

(61,775)

(41,694)

Effect of exchange rate changes on cash

1,239

1,697

(Decrease) increase in cash and cash equivalents

(191,733)

645,414

Cash and cash equivalents, beginning of period

769,946

426,935

Cash and cash equivalents, end of period

$         578,213

$      1,072,349

Reconciliation of operating cash flow to free cash flow:

Q1 FY11

Fiscal 2010

Net cash (used in) provided by operating activities

$       (104,337)

$         465,761

Adjustments:

  Settlement processing assets and obligations, net

190,129

(140,962)

  Payable to money transfer beneficiaries

-

6,107

  Capital expenditures

(24,785)

(56,054)

  Distribution to noncontrolling interests

(2,075)

(20,484)

163,269

(211,393)

Free cash flow

$           58,932

$         254,368

We supplemented our reporting of operating cash flow information determined in accordance with GAAP by reporting free cash flow for the three months ended August 31, 2010 and the fiscal year ended May 31,  2010.  We believe free cash flow is a useful measure of performance and an indication of the strength of our company and our ability to generate cash. We define free cash flow as net cash (used in) provided by operating activities exluding the impact of settlement processing assets and obligations, less capital expenditures and distributions to noncontrolling interests. Fiscal 2010 also excludes the impact of amounts payable to money transfer beneficiaries reported in our disposed money transfer segment. Free cash flow should not be considered a substitute for income or cash flow data prepared in accordance with GAAP and may not be comparable to similarly titled measured used by other companies.  

SCHEDULE 7

CONSTANT CURRENCY SUMMARY

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In millions, except per share data)

Q1 FY11

% change

Fiscal 2010

Fiscal 2011

% Change

Actual

Q1 FY10

Actual

Outlook

FY10

Revenues

Constant currency (1)

$       439

7%

$        1,625

$1,740 to $1,775

7% to 9%

Foreign currency impact (2)

1

0%

17

---

---

Revenues

$       440

7%

$        1,642

$1,735 to $1,770

6% to 8%

Diluted Earnings Per Share

Constant currency (1)

$      0.66

(3%)

$          2.44

$2.71 to $2.79

7% to 10%

Foreign currency impact (2)

0.01

2%

0.10

---

---

Normalized diluted EPS from continuing operations

0.67

(1%)

2.54

$2.68 to $2.77

6% to 9%

Non-recurring charges (3)

(0.06)

(9%)

(0.02)

---

---

Diluted EPS from continuing operations

$      0.61

(10%)

$          2.52

$2.68 to $2.77

6% to 10%

(1) Reflects current period 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 changes in foreign currency rates from the comparable prior year period.

(3) See Schedule 4 for detail of non-recurring charges.

We supplemented our reporting of total revenues and earnings per share information determined in accordance with GAAP by reporting revenues and earnings per share for the three months ended August 31, 2010 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 2011 actual revenues and expenses at fiscal 2010 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.

Contact:

Jane M. Elliott

770-829-8234 Voice

770-829-8267 Fax

investor.relations@globalpay.com

SOURCE Global Payments Inc.



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