Global Payments Reports Third Quarter Earnings

Mar 31, 2011, 16:10 ET from Global Payments Inc.

ATLANTA, March 31, 2011 /PRNewswire/ -- Global Payments Inc. (NYSE: GPN) today announced results for its fiscal third quarter ended February 28, 2011.  For the third quarter, revenues grew 15% to $456.4 million compared to $398.5 million in the prior fiscal year.  Normalized diluted earnings per share from continuing operations for the quarter were $0.63 compared to $0.58 in the prior year (See Schedule 2 Normalized Income Statements).    On a GAAP basis, the company reported fiscal 2011 third quarter diluted earnings per share from continuing operations for the quarter of $0.60 compared to $0.58 in the prior year (See Schedule 1 for GAAP Income Statements).

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

Normalized third quarter results exclude pretax expenses consisting of certain start-up and duplicative costs related to the company's Global Service Center in Manila, Philippines.  These results also exclude certain employee termination and relocation benefits.  (See Schedule 7 for Reconciliation of Normalized and Cash Earnings to GAAP).  

Chairman and CEO Paul R. Garcia stated, "We are pleased with our solid third quarter results, which include our December 2010 acquisition in Spain.  Our businesses performed as we expected during the quarter, and I am delighted that we have successfully completed the back-end settlement platform migration of our UK merchant portfolio to our own platform at the end of February as we anticipated."  

David E. Mangum, EVP and CFO, stated, "On a cash basis, the company reported fiscal 2011 third quarter diluted earnings per share from continuing operations of $0.71 which represents 9% growth over the prior year quarter of $0.65."

Cash Earnings exclude normalized adjustments and acquisition intangible amortization expense from continuing operations.  (See Schedule 3 Cash Earnings Income Statements and Schedule 10 for Cash Earnings by Segment for details).

For the full year of fiscal 2011, including the addition of the "la Caixa" joint venture, the company now expects revenue of $1,800 million to $1,820 million, or 10% to 11% growth over fiscal 2010 which compares to the previous quarter's range of $1,780 million to $1,820 million, or 8% to 10% growth over fiscal 2010.  The company now expects diluted earnings per share from continuing operations on a cash basis of $2.99 to $3.06, reflecting 7% to 9% growth over fiscal 2010, this compares to our previous quarter's expectations of $2.95 to $3.06, or 5% to 9% growth over fiscal 2010.  Normalized earnings per share from continuing operations expectations are now $2.70 to $2.77, reflecting growth of 6% to 9% compared to previous quarter's range of $2.66 to $2.77, or 5% to 9% growth and GAAP diluted earnings per share from continuing operations of $2.58 to $2.65, which previously was $2.54 to $2.65.

Conference Call

Global Payments will hold a conference call today, March 31, 2011 at 5:00 p.m. EDT 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 Global Payments' Web site through April 21, 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: the effect of current economic conditions in Spain and their anticipated austerity measures on our ability to drive sales and achieve long-term growth in the market; 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  

UNAUDITED GAAP CONSOLIDATED STATEMENTS OF INCOME

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data) 

Three Months Ended February 28,

Nine Months Ended February 28,

2011

2010

% Change

2011

2010

% Change

Revenues

$ 456,382

$               398,535

15%

$ 1,340,047

$ 1,217,418

10%

Operating expenses:

    Cost of service

168,332

146,202

15%

473,578

432,287

10%

    Sales, general and administrative

209,851

178,484

18%

623,019

533,337

17%

378,183

324,686

16%

1,096,597

965,624

14%

Operating income

78,199

73,849

6%

243,450

251,794

(3%)

Other income (expense):

    Interest and other income

1,631

1,319

24%

7,239

2,699

168%

    Interest and other expense

(4,315)

(4,141)

4%

(13,455)

(12,704)

6%

(2,684)

(2,822)

(5%)

(6,216)

(10,005)

(38%)

Income from continuing operations before income taxes

75,515

71,027

6%

237,234

241,789

(2%)

Provision for income taxes

(20,962)

(20,298)

3%

(70,489)

(69,489)

1%

Income from continuing operations

54,553

50,729

8%

166,745

172,300

(3%)

(Loss) income from discontinued operations, net of tax

(430)

722

NM

(946)

7,778

NM

Net income including noncontrolling interests

54,123

51,451

5%

165,799

180,078

(8%)

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

(6,334)

(2,990)

112%

(15,138)

(10,951)

38%

         Net income attributable to Global Payments

$   47,789

$                 48,461

(1%)

$    150,661

$    169,127

(11%)

Amounts attributable to Global Payments:

   Income from continuing operations

$   48,219

$                 47,739

1%

$    151,607

$    161,349

(6%)

   (Loss) income from discontinued operations, net of tax

(430)

722

NM

(946)

7,778

NM

         Net income attributable to Global Payments

$   47,789

$                 48,461

(1%)

$    150,661

$    169,127

(11%)

Basic earnings per share attributable to Global Payments:

   Income from continuing operations

$       0.60

$                     0.59

2%

$          1.90

$          1.99

(5%)

   (Loss) income from discontinued operations, net of tax

-

0.01

NM

(0.01)

0.10

NM

         Net income attributable to Global Payments

$       0.60

$                     0.60

0%

$          1.89

$          2.09

(10%)

Diluted earnings per share attributable to Global Payments:

   Income from continuing operations

$       0.60

$                     0.58

3%

$          1.89

$          1.96

(4%)

   (Loss) income from discontinued operations, net of tax

(0.01)

0.01

NM

(0.02)

0.10

NM

         Net income attributable to Global Payments

$       0.59

$                     0.59

0%

$          1.87

$          2.06

(9%)

Weighted average shares outstanding:

         Basic

79,897

81,539

79,711

81,102

         Diluted

80,733

82,636

80,413

82,181

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 February 28,

Nine Months Ended February 28,

2011

2010

% Change

2011

2010

% Change

Normalized(1)

GAAP(2)

Normalized(1)

GAAP(2)

Revenues

$  456,382

$        398,535

15%

$ 1,340,047

$ 1,217,418

10%

Operating expenses:

    Cost of service

167,922

146,202

15%

471,517

432,287

9%

    Sales, general and administrative

206,694

178,484

16%

614,340

533,337

15%

374,616

324,686

15%

1,085,857

965,624

12%

Operating income

81,766

73,849

11%

254,190

251,794

1%

Other income (expense):

    Interest and other income

1,631

1,319

24%

7,239

2,699

168%

    Interest and other expense

(4,315)

(4,141)

4%

(13,455)

(12,704)

6%

(2,684)

(2,822)

(5%)

(6,216)

(10,005)

(38%)

Income from continuing operations before income taxes

79,082

71,027

11%

247,974

241,789

3%

Provision for income taxes

(21,727)

(20,298)

7%

(71,394)

(69,489)

3%

Income from continuing operations including noncontrolling interests

57,355

50,729

13%

176,580

172,300

2%

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

(6,334)

(2,990)

112%

(15,138)

(10,951)

38%

Net income from continuing operations attributable to Global Payments

$    51,021

$          47,739

7%

$    161,442

$    161,349

0%

Basic earnings per share

$        0.64

$              0.59

8%

$          2.03

$          1.99

2%

Diluted earnings per share

$        0.63

$              0.58

9%

$          2.01

$          1.96

3%

Weighted average shares outstanding:

         Basic

79,897

81,539

79,711

81,102

         Diluted

80,733

82,636

80,413

82,181

NM - Not Meaningful

1 Normalized results exclude expenses consisting of $2.4 million and $4.7 million during the three and nine months ended February 28, 2011, respectively, of start-up costs related to our new Global Service Center in Manila, Philippines and expenses of $1.2 million and $6.0 million during the three and nine months ended February 28, 2011, respectively, related to employee termination and relocation benefits.  Results for the nine months ended February 28, 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 Schedule 7 for reconciliation of normalized earnings from continuing operations to GAAP.

2 There were no normalized adjustments during the three and nine months ended February 28, 2010.

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 February 28,

Nine Months Ended February 28,

2011

2010

% Change

2011

2010

% Change

Revenues

$ 456,382

$             398,535

15%

$ 1,340,047

$ 1,217,418

10%

Operating expenses:

    Cost of service

156,082

137,840

13%

444,031

407,699

9%

    Sales, general and administrative

206,694

178,484

16%

614,340

533,337

15%

362,776

316,324

15%

1,058,371

941,036

12%

Operating income

93,606

82,211

14%

281,676

276,382

2%

Other income (expense):

    Interest and other income

1,631

1,319

24%

7,239

2,699

168%

    Interest and other expense

(4,315)

(4,141)

4%

(13,455)

(12,704)

6%

(2,684)

(2,822)

(5%)

(6,216)

(10,005)

(38%)

Income from continuing operations before income taxes

90,922

79,389

15%

275,460

266,377

3%

Provision for income taxes

(25,214)

(22,531)

12%

(80,027)

(77,447)

3%

Income from continuing operations including noncontrolling interests

65,708

56,858

16%

195,433

188,930

3%

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

(8,121)

(3,343)

143%

(17,561)

(11,966)

47%

Net income from continuing operations attributable to Global Payments

$   57,587

$               53,515

8%

$    177,872

$    176,964

1%

Basic earnings per share

$       0.72

$                   0.66

9%

$          2.23

$          2.18

2%

Diluted earnings per share

$       0.71

$                   0.65

9%

$          2.21

$          2.15

3%

Weighted average shares outstanding:

         Basic

79,897

81,539

79,711

81,102

         Diluted

80,733

82,636

80,413

82,181

NM - Not Meaningful

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

  SCHEDULE 4 

SEGMENT INFORMATION CONTINUING OPERATIONS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

  (In thousands) 

Three Months Ended February 28,

2011

2010

% Change

GAAP

Normalized

Cash Earnings

GAAP

Cash Earnings

GAAP

Normalized to GAAP(1)

Cash Earnings

Revenues:

United States

$    249,194

$    249,194

$        249,194

$    216,168

$        216,168

15%

15%

15%

Canada 

81,066

81,066

81,066

77,092

77,092

5%

5%

5%

North America merchant services

330,260

330,260

330,260

293,260

293,260

13%

13%

13%

Europe 

90,531

90,531

90,531

78,174

78,174

16%

16%

16%

Asia-Pacific

35,591

35,591

35,591

27,101

27,101

31%

31%

31%

International merchant services

126,122

126,122

126,122

105,275

105,275

20%

20%

20%

Total revenues

$    456,382

$    456,382

$        456,382

$    398,535

$        398,535

15%

15%

15%

Operating income:

North America merchant services

$      62,916

$      62,916

$          66,122

$      60,855

$          63,667

3%

3%

4%

International merchant services

35,537

35,537

44,171

28,853

34,403

23%

23%

28%

Corporate 

(20,254)

(16,687)

(16,687)

(15,859)

(15,859)

(28%)

(5%)

(5%)

Operating income

$      78,199

$      81,766

$          93,606

$      73,849

$          82,211

6%

11%

14%

Nine Months Ended February 28,

2011

2010

% Change

GAAP

Normalized

Cash Earnings

GAAP

Cash Earnings

GAAP

Normalized to GAAP(1)

Cash Earnings

Revenues:

United States

$    750,495

$    750,495

$        750,495

$    659,868

$        659,868

14%

14%

14%

Canada 

243,733

243,733

243,733

236,552

236,552

3%

3%

3%

North America merchant services

994,228

994,228

994,228

896,420

896,420

11%

11%

11%

Europe 

244,208

244,208

244,208

242,785

242,785

1%

1%

1%

Asia-Pacific

101,611

101,611

101,611

78,213

78,213

30%

30%

30%

International merchant services

345,819

345,819

345,819

320,998

320,998

8%

8%

8%

Total revenues

$ 1,340,047

$ 1,340,047

$     1,340,047

$ 1,217,418

$     1,217,418

10%

10%

10%

Operating income:

North America merchant services

$    198,415

$    198,415

$        207,793

$    210,419

$        218,140

(6%)

(6%)

(5%)

International merchant services

102,279

102,279

120,387

88,353

105,220

16%

16%

14%

Corporate 

(57,244)

(46,504)

(46,504)

(46,978)

(46,978)

(22%)

1%

1%

Operating income

$    243,450

$    254,190

$        281,676

$    251,794

$        276,382

(3%)

1%

2%

See Schedule 8 for reconciliation of normalized and cash earnings segment information to GAAP.

1 There were no normalized adjustments during the three and nine months ended February 28, 2010.

SCHEDULE 5

CONSOLIDATED BALANCE SHEETS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

February 28

May 31,

2011

2010

(Unaudited)

ASSETS

Current assets:

 Cash and cash equivalents

$ 1,329,065

$    769,946

 Accounts receivable, net of allowances for doubtful accounts of $348 and $269, respectively

137,653

131,817

 Claims receivable, net of allowance for losses of $4,196 and $4,208, respectively

861

664

 Settlement processing assets

64,973

13,741

 Inventory

9,834

9,740

 Deferred income taxes

4,288

2,752

 Prepaid expenses and other current assets

23,038

39,604

Total current assets

1,569,712

968,264

Goodwill

765,714

569,090

Other intangible assets, net of accumulated amortization of $181,472 and $145,076, respectively

347,639

205,110

Property and equipment, net of accumulated depreciation of $155,699 and $119,402, respectively

244,349

183,938

Deferred income taxes

101,252

90,470

Other

23,752

22,454

Total assets

$ 3,052,418

$ 2,039,326

LIABILITIES AND EQUITY

Current liabilities:

 Lines of credit

$    188,961

$      79,187

 Current portion of long-term debt

79,771

148,169

 Accounts payable and accrued liabilities

200,179

173,575

 Settlement processing obligations

765,020

265,110

 Income taxes payable

3,987

6,430

 Total current liabilities

1,237,918

672,471

Long-term debt

301,319

272,965

Deferred income taxes

101,702

88,265

Other long-term liabilities

45,571

31,436

Total liabilities

1,686,510

1,065,137

Commitments and contingencies

Redeemable noncontrolling interest

126,559

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; 82,793,925 issued

  and 80,066,188 outstanding at February 28, 2011 and 82,028,945 issued and

  79,646,055 outstanding at May 31, 2010

-

-

 Paid-in capital

484,757

460,747

 Retained earnings

675,182

544,772

 Treasury stock; 2,727,737 and 2,382,890 shares at February 28, 2011 and May 31, 2010,

  respectively

(112,980)

(100,000)

 Accumulated other comprehensive income (loss)

49,283

(44,255)

     Total Global Payments shareholders' equity

1,096,242

861,264

 Noncontrolling interest

143,107

10,253

 Total equity

1,239,349

871,517

Total liabilities and equity

$ 3,052,418

$ 2,039,326

SCHEDULE 6

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

Nine Months Ended February 28,

2011

2010

Cash flows from operating activities:

Net income including noncontrolling interests

$   165,799

$     180,078

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

Depreciation and amortization of property and equipment

29,033

25,798

Amortization of acquired intangibles

27,486

24,627

Share-based compensation expense

11,748

11,843

Provision for operating losses and bad debts

15,301

18,713

Deferred income taxes

3,639

(21,023)

Loss on disposal of discontinued operations

602

15,770

Other, net

(3,362)

947

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

Accounts receivable

(5,836)

1,942

Claims receivable

(11,534)

(11,552)

Settlement processing assets and obligations, net

444,174

51,930

Inventory

(69)

(6,785)

Prepaid expenses and other assets

(7,997)

(2,474)

Payables to money transfer beneficiaries

-

(532)

Accounts payable and other accrued liabilities

45,182

25,607

Income taxes payable

19,125

3,308

Net cash provided by operating activities

733,291

318,197

Cash flows from investing activities:

Business and intangible asset acquisitions, net of cash acquired

(167,775)

(17,059)

Capital expenditures

(77,095)

(36,520)

Preliminary settlement of working capital adjustments from disposition of business

(1,921)

-

Net decrease (increase) in financing receivables

1,514

(649)

Proceeds from sale of investment and contractual rights, net

-

297

Net cash used in investing activities

(245,277)

(53,931)

Cash flows from financing activities:

Net borrowings on lines of credit

109,774

339

Proceeds from issuance of long-term debt

202,155

304,964

Principal payments under long-term debt

(248,996)

(50,958)

Acquisition of redeemable noncontrolling interests

-

(307,675)

Proceeds from stock issued under share-based compensation plans

12,072

20,699

Repurchase of common stock

(14,900)

-

Tax benefit from share-based compensation

1,335

4,579

Distribution to noncontrolling interests

(6,650)

(18,461)

Dividends paid

(4,782)

(4,877)

Net cash provided by (used in) financing activities

50,008

(51,390)

Effect of exchange rate changes on cash

21,097

1,965

Increase in cash and cash equivalents

559,119

214,841

Cash and cash equivalents, beginning of period

769,946

426,935

Cash and cash equivalents of discontinued operations

-

(52,156)

Cash and cash equivalents, end of period

$1,329,065

$     589,620

SCHEDULE 7

RECONCILIATION OF 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 February 28,

2011

2010(4)

GAAP

Employee Termination and Other(1)

Normalized

Cash Earnings Adjustments(3)

Cash Earnings

GAAP

Cash Earnings Adjustments(3)

Cash Earnings

Revenues

$    456,382

$                             -

$    456,382

$                 -

$       456,382

$    398,535

$                 -

$       398,535

Operating expenses:

  Cost of service

168,332

(410)

167,922

(11,840)

156,082

146,202

(8,362)

137,840

  Sales, general and administrative

209,851

(3,157)

206,694

-

206,694

178,484

-

178,484

378,183

(3,567)

374,616

(11,840)

362,776

324,686

(8,362)

316,324

Operating income

78,199

3,567

81,766

11,840

93,606

73,849

8,362

82,211

Other income (expense):

  Interest and other income

1,631

-

1,631

-

1,631

1,319

-

1,319

  Interest and other expense

(4,315)

-

(4,315)

-

(4,315)

(4,141)

-

(4,141)

(2,684)

-

(2,684)

-

(2,684)

(2,822)

-

(2,822)

Income from continuing operations before income taxes

75,515

3,567

79,082

11,840

90,922

71,027

8,362

79,389

Provision for income taxes

(20,962)

(765)

(21,727)

(3,487)

(25,214)

(20,298)

(2,233)

(22,531)

Income from continuing operations

54,553

2,802

57,355

8,353

65,708

50,729

6,129

56,858

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

(6,334)

-

(6,334)

(1,787)

(8,121)

(2,990)

(353)

(3,343)

Net income from continuing operations attributable to Global Payments

$      48,219

$                       2,802

$      51,021

$            6,566

$         57,587

$      47,739

$            5,776

$         53,515

Diluted shares

80,733

80,733

80,733

82,636

82,636

Diluted earnings per share

$          0.60

$                         0.03

$          0.63

$              0.08

$             0.71

$          0.58

$              0.07

$             0.65

Nine Months Ended February 28,

2011

2010(4)

GAAP

Employee Termination and Other(1)

Foreign Tax Rate(2)

Normalized

Cash Earnings Adjustments(3)

Cash Earnings

GAAP

Cash Earnings Adjustments

Cash Earnings

Revenues

$ 1,340,047

$                             -

$                      -

$ 1,340,047

$                 -

$    1,340,047

$ 1,217,418

$                 -

$    1,217,418

Operating expenses:

  Cost of service

473,578

(2,061)

-

471,517

(27,486)

444,031

432,287

(24,588)

407,699

  Sales, general and administrative

623,019

(8,679)

-

614,340

-

614,340

533,337

-

533,337

1,096,597

(10,740)

-

1,085,857

(27,486)

1,058,371

965,624

(24,588)

941,036

Operating income

243,450

10,740

-

254,190

27,486

281,676

251,794

24,588

276,382

Other income (expense):

  Interest and other income

7,239

-

-

7,239

-

7,239

2,699

-

2,699

  Interest and other expense

(13,455)

-

-

(13,455)

-

(13,455)

(12,704)

-

(12,704)

(6,216)

-

-

(6,216)

-

(6,216)

(10,005)

-

(10,005)

Income from continuing operations before income taxes

237,234

10,740

-

247,974

27,486

275,460

241,789

24,588

266,377

Provision for income taxes

(70,489)

(3,384)

2,479

(71,394)

(8,633)

(80,027)

(69,489)

(7,958)

(77,447)

Income from continuing operations

166,745

7,356

2,479

176,580

18,853

195,433

172,300

16,630

188,930

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

(15,138)

-

-

(15,138)

(2,423)

(17,561)

(10,951)

(1,015)

(11,966)

Net income from continuing operations attributable to Global Payments

$    151,607

$                       7,356

$                2,479

$    161,442

$          16,430

$       177,872

$    161,349

$          15,615

$       176,964

Diluted shares

80,413

80,413

80,413

82,181

82,181

Diluted earnings per share

$          1.89

$                         0.09

$                  0.03

$          2.01

$              0.20

$             2.21

$          1.96

$              0.19

$             2.15

1 Reflects expenses of $2.4 million and $4.7 million during the three and nine months ended February 28, 2011, respectively, of start-up costs related to our new Global Service Center in Manila, Philippines and expenses of $1.2 million and $6.0 million during the three and nine months ended February 28, 2011, 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.

4 There were no normalized adjustments during the three and nine months ended February 28, 2010.

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 and nine months ended February 28, 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 8

RECONCILIATION OF NORMALIZED AND CASH EARNINGS SEGMENT INFORMATION TO GAAP

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

Three Months Ended February 28,

2011

2010

GAAP

Employee Termination and Other(1)

Normalized

Cash Earnings Adjustments(2)

Cash Earnings

GAAP

Cash Earnings Adjustments(2)

Cash Earnings

Revenues:

United States

$      249,194

$                   -

$    249,194

$                 -

$        249,194

$      216,168

$                 -

$        216,168

Canada

81,066

-

81,066

-

81,066

77,092

-

77,092

North America merchant services

330,260

-

330,260

-

330,260

293,260

-

293,260

Europe

90,531

-

90,531

-

90,531

78,174

-

78,174

Asia-Pacific

35,591

-

35,591

-

35,591

27,101

-

27,101

International merchant services

126,122

-

126,122

-

126,122

105,275

-

105,275

Total revenues

$      456,382

$                   -

$    456,382

$                 -

$        456,382

$      398,535

$                 -

$        398,535

Operating income:

North America merchant services

$        62,916

$                   -

$      62,916

$            3,206

$          66,122

$        60,855

$            2,812

$          63,667

International merchant services

35,537

-

35,537

8,634

44,171

28,853

5,550

34,403

Corporate

(20,254)

3,567

(16,687)

-

(16,687)

(15,859)

-

(15,859)

Operating income

$        78,199

$              3,567

$      81,766

$          11,840

$          93,606

$        73,849

$            8,362

$          82,211

Nine Months Ended February 28,

2011

2010

GAAP

Employee Termination and Other(1)

Normalized

Cash Earnings Adjustments(2)

Cash Earnings

GAAP

Cash Earnings Adjustments(2)

Cash Earnings

Revenues:

United States

$      750,495

$                   -

$    750,495

$                 -

$        750,495

$      659,868

$                 -

$        659,868

Canada

243,733

-

243,733

-

243,733

236,552

-

236,552

North America merchant services

994,228

-

994,228

-

994,228

896,420

-

896,420

Europe

244,208

-

244,208

-

244,208

242,785

-

242,785

Asia-Pacific

101,611

-

101,611

-

101,611

78,213

-

78,213

International merchant services

345,819

-

345,819

-

345,819

320,998

-

320,998

Total revenues

$   1,340,047

$                   -

$ 1,340,047

$                 -

$     1,340,047

$   1,217,418

$                 -

$     1,217,418

Operating income:

North America merchant services

$      198,415

$                   -

$    198,415

$            9,378

$        207,793

$      210,419

$            7,721

$        218,140

International merchant services

102,279

-

102,279

18,108

120,387

88,353

16,867

105,220

Corporate

(57,244)

10,740

(46,504)

-

(46,504)

(46,978)

-

(46,978)

Operating income

$      243,450

$            10,740

$    254,190

$          27,486

$        281,676

$      251,794

$          24,588

$        276,382

1 Normalized results exclude expenses consisting of $2.4 million and $4.7 million during the three and nine months ended February 28, 2011, respectively, of start-up costs related to our new Global Service Center in Manila, Philippines and expenses of $1.2 million and $6.0 million during the three and nine months ended February 28, 2011, respectively, related to employee termination and relocation benefits. There were no normalized adjustments during the three and nine months ended February 28, 2010.

2 Represents acquisition intangible amortization expense from continuing operations.

SCHEDULE 9

OUTLOOK SUMMARY

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In millions, except per share data)

Fiscal 2010 Actual

Fiscal 2011 Outlook Before "la Caixa" JV

Fiscal 2011 Outlook "la Caixa" JV

Fiscal 2011 Outlook Including "la Caixa" JV

% Change FY10

Revenue Outlook

Revenues

$                 1,642

$1,755 to $1,790

$25 to $30

$1,780 to 1,820

8% to 11%

EPS Outlook

GAAP diluted EPS from continuing operations

$                   2.52

$2.62 to $2.67

($0.04) to ($0.02)

$2.58 to $2.65

2% to 5%

Employee Termination

0.02

$0.12

--

$0.12

Normalized diluted EPS from continuing operations

$                   2.54

$2.74 to $2.79

($0.04) to ($0.02)

$2.70 to $2.77

6% to 9%

Acquisition-related intangibles

0.26

$0.23

$0.06

$0.29

---

Cash EPS from continuing operations

$                   2.80

$2.97 to $3.02

$0.02 to $0.04

$2.99 to $3.06

7% to 9%

SCHEDULE 10

CASH EARNINGS - HISTORICAL SEGMENT INFORMATION

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

Three Months Ended

Fiscal Year Ended

Three Months Ended

8/31/09

11/30/09

2/28/10

5/31/10

5/31/10

8/31/10

11/30/10

2/28/11

Revenues:

United States

$ 222,767

$ 220,934

$ 216,168

$ 242,975

$              902,844

$ 255,630

$ 245,671

$ 249,194

Canada

81,225

78,236

77,092

80,720

317,272

81,213

81,453

81,066

North America merchant services

303,992

299,170

293,260

323,695

1,220,116

336,843

327,124

330,260

Europe

80,467

84,143

78,174

72,238

315,023

73,796

79,881

90,531

Asia-Pacific

25,473

25,638

27,101

29,117

107,329

29,499

36,521

35,591

International merchant services

105,940

109,781

105,275

101,355

422,352

103,295

116,402

126,122

Total revenues

$ 409,932

$ 408,951

$ 398,535

$ 425,050

$           1,642,468

$ 440,138

$ 443,526

$ 456,382

Operating income:

North America merchant services

$   78,168

$   76,305

$   63,667

$   67,848

$              285,989

$   71,384

$   70,287

$   66,122

International merchant services

34,386

36,430

34,403

30,640

135,860

36,051

40,165

44,171

Corporate

(15,427)

(15,691)

(15,859)

(16,244)

(63,223)

(14,464)

(15,354)

(16,687)

Operating income

$   97,127

$   97,044

$   82,211

$   82,244

$              358,626

$   92,971

$   95,098

$   93,606

See Schedules 11, 12 and 13 for reconciliation of normalized and cash earnings segment information to GAAP.

SCHEDULE 11

RECONCILIATION OF HISTORICAL CASH EARNINGS SEGMENT INFORMATION TO GAAP - FISCAL 2010 QUARTERLY

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

Three Months Ended  

August 31, 2009

November 30, 2009

GAAP

Cash Earnings Adjustments(1)

Cash Earnings

GAAP

Cash Earnings Adjustments(1)

Cash Earnings

Revenues:

United States

$ 222,767

$                 -

$        222,767

$ 220,934

$                 -

$        220,934

Canada

81,225

-

81,225

78,236

-

78,236

North America merchant services

303,992

-

303,992

299,170

-

299,170

Europe

80,467

-

80,467

84,143

-

84,143

Asia-Pacific

25,473

-

25,473

25,638

-

25,638

International merchant services

105,940

-

105,940

109,781

-

109,781

Total revenues

$ 409,932

$                 -

$        409,932

$ 408,951

$                 -

$        408,951

Operating income:

North America merchant services

$   75,921

$            2,247

$          78,168

$   73,643

$            2,662

$          76,305

International merchant services

28,749

5,637

34,386

30,750

5,680

36,430

Corporate

(15,427)

-

(15,427)

(15,691)

-

(15,691)

Operating income

$   89,243

$            7,884

$          97,127

$   88,702

$            8,342

$          97,044

Three Months Ended  

February 28, 2010

May 31, 2010

GAAP

Cash Earnings Adjustments(1)

Cash Earnings

GAAP

Employee Termination(2)

Normalized

Cash Earnings Adjustments(1)

Cash Earnings

Revenues:

United States

$ 216,168

$                 -

$        216,168

$ 242,975

$                 -

$        242,975

$                 -

$        242,975

Canada

77,092

-

77,092

80,720

-

80,720

-

80,720

North America merchant services

293,260

-

293,260

323,695

-

323,695

-

323,695

Europe

78,174

-

78,174

72,238

-

72,238

-

72,238

Asia-Pacific

27,101

-

27,101

29,117

-

29,117

-

29,117

International merchant services

105,275

-

105,275

101,355

-

101,355

-

101,355

Total revenues

$ 398,535

$                 -

$        398,535

$ 425,050

$                 -

$        425,050

$                 -

$        425,050

Operating income:

North America merchant services

$   60,855

$            2,812

$          63,667

$   64,966

$                 -

$          64,966

$            2,882

$          67,848

International merchant services

28,853

5,550

34,403

25,346

-

25,346

5,294

30,640

Corporate

(15,859)

-

(15,859)

(18,827)

2,583

(16,244)

-

(16,244)

Operating income

$   73,849

$            8,362

$          82,211

$   71,485

$            2,583

$          74,068

$            8,176

$          82,244

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

2 Represents amounts due to our former President and Chief Operating Officer pursuant to his termination agreement dated April 21, 2010.  Also reflects the related income tax benefit.

There were no normalized adjustments during the three months ended August 30, 2009, November 30, 2009 and February 28, 2010.

We supplemented our historical reporting of segment operating income determined in accordance with GAAP by reporting segment operating income for the four quarters of fiscal 2010 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated segment operating income 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 segment operating income reported on a cash earnings basis should be considered in addition to, and not as a substitute for, segment operating income determined in accordance with GAAP. Our measures of segment operating income 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 12

RECONCILIATION OF HISTORICAL CASH EARNINGS SEGMENT INFORMATION TO GAAP - FISCAL 2010

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

Fiscal Year Ended May 31, 2010

GAAP

Employee Termination(1)

Normalized

Cash Earnings Adjustments(2)

Cash Earnings

Revenues:

United States

$    902,844

$             -

$    902,844

$                 -

$        902,844

Canada

317,272

-

317,272

-

317,272

North America merchant services

1,220,116

-

1,220,116

-

1,220,116

Europe

315,023

-

315,023

-

315,023

Asia-Pacific

107,329

-

107,329

-

107,329

International merchant services

422,352

-

422,352

-

422,352

Total revenues

$ 1,642,468

$             -

$ 1,642,468

$                 -

$     1,642,468

Operating income:

North America merchant services

$    275,386

$             -

$    275,386

$          10,603

$        285,989

International merchant services

113,699

-

113,699

22,161

135,860

Corporate

(65,806)

2,583

(63,223)

-

(63,223)

Operating income

$    323,279

$       2,583

$    325,862

$          32,764

$        358,626

1 Represents amounts due to our former President and Chief Operating Officer pursuant to his termination agreement dated April 21, 2010.  Also reflects the related income tax benefit.

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 historical reporting of segment operating income determined in accordance with GAAP by reporting segment operating income for fiscal year 2010 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated segment operating income 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 segment operating income reported on a cash earnings basis should be considered in addition to, and not as a substitute for, segment operating income determined in accordance with GAAP. Our measures of segment operating income 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 13

RECONCILIATION OF HISTORICAL CASH EARNINGS SEGMENT INFORMATION TO GAAP - FISCAL 2011 QUARTERLY

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

Three Months Ended August 31, 2010

Three Months Ended November 30, 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

$ 255,630

$                   -

$    255,630

$                 -

$        255,630

$ 245,671

$                   -

$    245,671

$                 -

$        245,671

Canada

81,213

-

81,213

-

81,213

81,453

-

81,453

-

81,453

North America merchant services

336,843

-

336,843

-

336,843

327,124

-

327,124

-

327,124

Europe

73,796

-

73,796

-

73,796

79,881

-

79,881

-

79,881

Asia-Pacific

29,499

-

29,499

-

29,499

36,521

-

36,521

-

36,521

International merchant services

103,295

-

103,295

-

103,295

116,402

-

116,402

-

116,402

Total revenues

$ 440,138

$                   -

$    440,138

$                 -

$        440,138

$ 443,526

$                   -

$    443,526

$                 -

$        443,526

Operating income:

North America merchant services

$   68,368

$                   -

$      68,368

$            3,016

$          71,384

$   67,131

$                   -

$      67,131

$            3,156

$          70,287

International merchant services

31,393

-

31,393

4,658

36,051

35,349

-

35,349

4,816

40,165

Corporate

(17,654)

3,190

(14,464)

-

(14,464)

(19,337)

3,983

(15,354)

-

(15,354)

Operating income

$   82,107

$              3,190

$      85,297

$            7,674

$          92,971

$   83,143

$              3,983

$      87,126

$            7,972

$          95,098

Three Months Ended February 28, 2011

GAAP

Employee Termination and Other(1)

Normalized

Cash Earnings Adjustments(2)

Cash Earnings

Revenues:

United States

$ 249,194

$                   -

$    249,194

$                 -

$        249,194

Canada

81,066

-

81,066

-

81,066

North America merchant services

330,260

-

330,260

-

330,260

Europe

90,531

-

90,531

-

90,531

Asia-Pacific

35,591

-

35,591

-

35,591

International merchant services

126,122

-

126,122

-

126,122

Total revenues

$ 456,382

$                   -

$    456,382

$                 -

$        456,382

Operating income:

North America merchant services

$   62,916

$                   -

$      62,916

$            3,206

$          66,122

International merchant services

35,537

-

35,537

8,634

44,171

Corporate

(20,254)

3,567

(16,687)

-

(16,687)

Operating income

$   78,199

$              3,567

$      81,766

$          11,840

$          93,606

1 Reflects expenses of start-up costs related to our new Global Service Center in Manila, Philippines and employee termination and relocation 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 historical reporting of segment operating income determined in accordance with GAAP by reporting segment operating income for the three months ended August 31, 2010, November 30, 2010 and February 28, 2011 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated segment operating income 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 segment operating income reported on a cash earnings basis should be considered in addition to, and not as a substitute for, segment operating income determined in accordance with GAAP. Our measures of segment operating income 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.

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