Global Payments Reports Second Quarter Earnings

Increases Fiscal 2014 EPS Outlook

ATLANTA, January 8, 2014 -- Global Payments Inc. (NYSE: GPN) today announced results for its fiscal second quarter ended November 30, 2013.

President and CEO Jeff Sloan said, “We are pleased with our results for the quarter driven by strong business performance across all regions, and we now expect double digit cash earnings per share growth for our full-year. We are making substantial progress on our growth initiatives globally, and we remain focused on being the partner of choice.”

Second Quarter 2014 Summary
•
Revenues grew 8% to $634.1 million, compared to $588.5 million in the second quarter of fiscal 2013.
•
Cash diluted earnings per share grew 15% to $1.07, compared to $0.93 in the second quarter of fiscal 2013.
•
GAAP diluted earnings per share were $1.02, compared to $0.89 in the second quarter of 2013.

2014 Outlook
“We are raising our full-year expectations for diluted earnings per share on a cash basis by five cents to a range of $4.03 to $4.10, or growth of 10% to 12% over fiscal 2013,” said David E. Mangum, Senior Executive Vice President and CFO.
Annual fiscal 2014 GAAP diluted earnings per share are now expected to be $3.45 to $3.52.
The company maintains its expectations for annual revenue of $2.51 billion to $2.56 billion, or 6% to 8% growth over fiscal 2013.



1


Conference Call
Global Payments will hold a conference call today, January 8, 2014 at 5:00 p.m. EST to discuss financial results and business highlights. Callers may access the conference call via the investor relations page of the company’s website at www.globalpaymentsinc.com by clicking the “Webcast” button; or callers in North America may dial 1-888-895-3550 and callers outside North America may dial 1-706-758-8809. The pass code is “GPN.” A replay of the call may be accessed through the Global Payments website through January 22, 2014.

About Global Payments
Global Payments Inc. (NYSE: GPN) is a leading provider of electronic transaction processing services for merchants, Independent Sales Organizations (ISOs), financial institutions, government agencies and multi-national corporations located throughout North America, South America, Europe and the Asia-Pacific region.  Global Payments, a Fortune 1000 company, offers a comprehensive line of processing solutions for credit and debit cards, business-to-business purchasing cards, gift cards, electronic check conversion and check guarantee, verification and recovery including electronic check services, as well as terminal management.  Visit www.globalpaymentsinc.com for more information about the company and its services.

This announcement and comments made by Global Payments' management during the conference call may contain certain forward-looking statements within the meaning of the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including revenue and earnings estimates and management’s expectations regarding future events and developments, are forward-looking statements and are subject to significant risks and uncertainties. Important factors that may cause actual events or results to differ materially from those anticipated by such forward-looking statements include the following: the effect on our results of operations of continued security enhancements to our processing system; foreign currency risks which become increasingly relevant as we expand internationally; the effect of current domestic and worldwide economic conditions, future performance and integration of acquisitions, and other risks detailed in our SEC filings, including the most recently filed Form 10-K. We undertake no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.

Investor contact: investor.relations@globalpay.com
Media contact:    media.relations@globalpay.com
Jane Elliott    
Amy Corn
770-829-8234
770-829-8755



















2


SCHEDULE 1
GAAP CONSOLIDATED STATEMENTS OF INCOME
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)

 
Three Months Ended November 30,
 
 
Six Months Ended November 30,
 
 
 
2013
 
2012
 
% Change
2013
 
2012
 
% Change
 
(unaudited)
 
 
(unaudited)
 
 
Revenues
$
634,122

 
$
588,538

 
7.7
 %
$
1,263,807

 
$
1,178,825

 
7.2
 %
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
Cost of service
235,170

 
210,268

 
11.8
 %
465,915

 
414,659

 
12.4
 %
Sales, general and administrative
294,045

 
276,177

 
6.5
 %
585,601

 
557,596

 
5.0
 %
Processing system intrusion
(7,000
)
 
(14,489
)
 
(51.7
)%
(7,000
)
 
9,500

 
(173.7
)%
 
522,215

 
471,956

 
10.6
 %
1,044,516

 
981,755

 
6.4
 %
 
 
 
 
 

 
 
 
 
 
Operating income
111,907

 
116,582

 
(4.0
)%
219,291

 
197,070

 
11.3
 %
 
 
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
 
 
Interest and other income
5,288

 
2,187

 
141.8
 %
8,626

 
4,170

 
106.9
 %
Interest and other expense
(8,025
)
 
(14,609
)
 
(45.1
)%
(15,904
)
 
(18,154
)
 
(12.4
)%
 
(2,737
)
 
(12,422
)
 
(78.0
)%
(7,278
)
 
(13,984
)
 
(48.0
)%
 
 
 
 
 

 
 
 
 
 
Income before income taxes
109,170

 
104,160

 
4.8
 %
212,013

 
183,086

 
15.8
 %
Provision for income taxes
(29,313
)
 
(28,789
)
 
1.8
 %
(60,448
)
 
(53,553
)
 
12.9
 %
Net income
79,857

 
75,371

 
6.0
 %
151,565

 
129,533

 
17.0
 %
Less: Net income attributable to noncontrolling interests, net of income tax
(5,960
)
 
(5,188
)
 
14.9
 %
(13,025
)
 
(12,675
)
 
2.8
 %
Net income attributable to Global Payments
$
73,897

 
$
70,183

 
5.3
 %
$
138,540

 
$
116,858

 
18.6
 %
 
 
 
 
 
 
 
 
 
 
 
Earnings per share attributable to Global Payments:
 
 
 
 
 
 
 
 
 
 
Basic
$
1.02

 
$
0.89

 
14.6
 %
$
1.90

 
$
1.49

 
27.5
 %
Diluted
$
1.02

 
$
0.89

 
14.6
 %
$
1.88

 
$
1.48

 
27.0
 %
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
Basic
72,174

 
78,751

 
 
72,974

 
78,669

 
 
Diluted
72,706

 
79,144

 
 
73,504

 
79,062

 
 







3


SCHEDULE 2
CASH EARNINGS ATTRIBUTABLE TO GLOBAL PAYMENTS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)

 
Three Months Ended November 30,
 
 
Six Months Ended November 30,
 
 
 
2013
 
2012
 
% Change
2013
 
2012
 
% Change
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
634,122

 
$
588,538

 
7.7
 %
$
1,263,807

 
$
1,178,825

 
7.2
 %
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
Cost of service
220,610

 
195,932

 
12.6
 %
436,383

 
388,937

 
12.2
 %
Sales, general and administrative
290,697

 
276,177

 
5.3
 %
580,757

 
556,796

 
4.3
 %
 
511,307

 
472,109

 
8.3
 %
1,017,140

 
945,733

 
7.6
 %
 
 
 
 
 
 
 
 
 
 
 
Operating income
122,815

 
116,429

 
5.5
 %
246,667

 
233,092

 
5.8
 %
 
 
 
 
 
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
 
 
 
 
 
Interest and other income
3,165

 
2,187

 
44.7
 %
6,503

 
4,170

 
55.9
 %
Interest and other expense
(8,025
)
 
(6,226
)
 
28.9
 %
(15,904
)
 
(9,771
)
 
62.8
 %
 
(4,860
)
 
(4,039
)
 
20.3
 %
(9,401
)
 
(5,601
)
 
67.8
 %
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
117,955

 
112,390

 
5.0
 %
237,266

 
227,491

 
4.3
 %
Provision for income taxes
(32,873
)
 
(29,385
)
 
11.9
 %
(69,559
)
 
(65,938
)
 
5.5
 %
Net income
85,082

 
83,005

 
2.5
 %
167,707

 
161,553

 
3.8
 %
Less: Net income attributable to noncontrolling interests, net of income tax
(7,197
)
 
(9,419
)
 
(23.6
)%
(15,633
)
 
(19,171
)
 
(18.5
)%
Net income attributable to Global Payments
$
77,885

 
$
73,586

 
5.8
 %
$
152,074

 
$
142,382

 
6.8
 %
 
 
 
 
 
 
 
 
 
 
 
Earnings per share attributable to Global Payments:
 
 
 
 
 
 
 
 
 
 
Basic
$
1.08

 
$
0.93

 
16.1
 %
$
2.08

 
$
1.81

 
14.9
 %
Diluted
$
1.07

 
$
0.93

 
15.1
 %
$
2.07

 
$
1.80

 
15.0
 %
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
 
 
Basic
72,174

 
78,751

 
 
72,974

 
78,669

 
 
Diluted
72,706

 
79,144

 
 
73,504

 
79,062

 
 

See Schedule 6 and 7 for a reconciliation of cash earnings to GAAP.


4


SCHEDULE 3
SEGMENT INFORMATION
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
 
 
Three Months Ended November 30,
 
 
 
 
 
 
2013
 
2012
 
 % Change
 
 
GAAP
 
 Cash Earnings
 
 GAAP
 
 Cash Earnings
 
 GAAP
 
 Cash Earnings
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
United States
 
$
361,793

 
$
361,793

 
$
339,998

 
$
339,998

 
6.4
 %
 
6.4
 %
Canada
 
85,240

 
85,240

 
80,770

 
80,770

 
5.5
 %
 
5.5
 %
North America merchant services
 
447,033

 
447,033

 
420,768

 
420,768

 
6.2
 %
 
6.2
 %
 
 
 
 
 
 
 
 
 
 

 
 
Europe
 
146,866

 
146,866

 
131,161

 
131,161

 
12.0
 %
 
12.0
 %
Asia-Pacific
 
40,223

 
40,223

 
36,609

 
36,609

 
9.9
 %
 
9.9
 %
International merchant services
 
187,089

 
187,089

 
167,770

 
167,770

 
11.5
 %
 
11.5
 %
 
 
 
 
 
 
 
 
 
 

 
 
Total revenues
 
$
634,122

 
$
634,122

 
$
588,538

 
$
588,538

 
7.7
 %
 
7.7
 %
 
 
 
 
 
 
 
 
 
 

 
 
Operating income (loss) for segments:
 
 
 
 
 
 
 
 
 

 
 
North America merchant services
 
$
70,437

 
$
77,621

 
$
67,114

 
$
73,280

 
5.0
 %
 
5.9
 %
International merchant services
 
62,467

 
69,843

 
53,987

 
62,157

 
15.7
 %
 
12.4
 %
Corporate1
 
(20,997
)
 
(24,649
)
 
(4,519
)
 
(19,008
)
 
(364.6
)%
 
(29.7
)%
Operating income
 
$
111,907

 
$
122,815

 
$
116,582

 
$
116,429

 
(4.0
)%
 
5.5
 %
 
 
Six Months Ended November 30,
 
 
 
 
 
 
2013
 
2012
 
 % Change
 
 
GAAP
 
 Cash Earnings
 
 GAAP
 
 Cash Earnings
 
 GAAP
 
 Cash Earnings
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
United States
 
$
725,626

 
$
725,626

 
$
685,896

 
$
685,896

 
5.8
%
 
5.8
 %
Canada
 
171,912

 
171,912

 
161,667

 
161,667

 
6.3
%
 
6.3
 %
North America merchant services
 
897,538

 
897,538

 
847,563

 
847,563

 
5.9
%
 
5.9
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Europe
 
290,054

 
290,054

 
259,626

 
259,626

 
11.7
%
 
11.7
 %
Asia-Pacific
 
76,215

 
76,215

 
71,636

 
71,636

 
6.4
%
 
6.4
 %
International merchant services
 
366,269

 
366,269

 
331,262

 
331,262

 
10.6
%
 
10.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
$
1,263,807

 
$
1,263,807

 
$
1,178,825

 
$
1,178,825

 
7.2
%
 
7.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss) for segments:
 
 
 
 
 
 
 
 
 
 
 
 
North America merchant services
 
$
140,136

 
$
157,025

 
$
134,331

 
$
144,723

 
4.3
%
 
8.5
 %
International merchant services
 
124,008

 
138,600

 
111,127

 
127,201

 
11.6
%
 
9.0
 %
Corporate1
 
(44,853
)
 
(48,958
)
 
(48,388
)
 
(38,832
)
 
7.3
%
 
(26.1
)%
Operating income
 
$
219,291

 
$
246,667

 
$
197,070

 
$
233,092

 
11.3
%
 
5.8
 %
1 GAAP and cash earnings include incremental security spend for the three and six months ended November 30, 2013. GAAP earnings for the three and six months ended November 30, 2013 include insurance proceeds of ($7M) related to the FY2012 data intrusion. GAAP earnings for the three and six months ended November 30, 2012 include a data intrusion (credit) / charge of ($14.5) million and $9.5M, respectively.

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

5



SCHEDULE 4
CONSOLIDATED BALANCE SHEETS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except share data)
 
November 30, 2013
 
May 31, 2013
 
(Unaudited)
 
 
ASSETS
 
  
 
Current assets:
 
  
 
Cash and cash equivalents
$
1,096,833

 
$
680,470

Accounts receivable, net of allowances for doubtful accounts of $353 and $509, respectively
195,788

 
189,435

Claims receivable, net
662

 
1,156

Settlement processing assets
688,003

 
259,204

Inventory
8,886

 
11,057

Deferred income taxes
6,459

 
6,485

Prepaid expenses and other current assets
61,677

 
66,685

Total current assets
2,058,308

 
1,214,492

Goodwill
1,063,310

 
1,044,222

Other intangible assets, net
379,350

 
400,848

Property and equipment, net
357,880

 
348,064

Deferred income taxes
100,332

 
95,178

Other
22,384

 
22,252

Total assets
$
3,981,564

 
$
3,125,056

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Lines of credit
$
446,508

 
$
187,461

Current portion of long-term debt
72,351

 
72,335

Accounts payable and accrued liabilities
235,361

 
262,890

Settlement processing obligations
798,671

 
162,558

Income taxes payable
20,114

 
18,870

Total current liabilities
1,573,005

 
704,114

Long-term debt
922,545

 
891,134

Deferred income taxes
172,988

 
170,723

Other long-term liabilities
81,342

 
72,478

Total liabilities
2,749,880

 
1,838,449

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

 
—

Common stock, no par value; 200,000,000 shares authorized; 71,908,829 issued and outstanding at November 30, 2013 and 75,426,099 issued and outstanding at May 31, 2013
—

 
—

Paid-in capital
188,281

 
202,396

Retained earnings
896,597

 
958,751

Accumulated other comprehensive income (loss)
2,235

 
(15,062
)
Total Global Payments shareholders’ equity
1,087,113

 
1,146,085

Noncontrolling interest
144,571

 
140,522

Total equity
1,231,684

 
1,286,607

Total liabilities and equity
$
3,981,564

 
$
3,125,056


6


SCHEDULE 5
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
 
Six Months Ended November 30,
 
2013
 
2012
Cash flows from operating activities:
 
 
 
Net income
$
151,565

 
$
129,533

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization of property and equipment
28,439

 
26,494

Amortization of acquired intangibles
28,953

 
25,561

Share-based compensation expense
11,965

 
9,178

Provision for operating losses and bad debts
10,249

 
11,970

Deferred income taxes
6,073

 
30,055

Other, net
(4,345
)
 
(2,231
)
Changes in operating assets and liabilities, net of the effects of acquisitions:
 
 
 
Accounts receivable
(6,353
)
 
721

Claims receivable
(6,567
)
 
(6,600
)
Settlement processing assets and obligations, net
204,307

 
(11,671
)
Inventory
2,237

 
(4,297
)
Prepaid expenses and other assets
5,761

 
(11,204
)
Accounts payable and other accrued liabilities
(21,845
)
 
(67,869
)
Income taxes payable
1,244

 
(4,847
)
Net cash provided by operating activities
411,683

 
124,793

Cash flows from investing activities:
 
 
 
Business, intangible and other asset acquisitions, net of cash acquired
(2,324
)
 
(409,731
)
Capital expenditures
(41,178
)
 
(54,393
)
Net decrease in financing receivables
1,328

 
1,485

    Net proceeds from sales of investment and business
3,102

 
—

Net cash used in investing activities
(39,072
)
 
(462,639
)
Cash flows from financing activities:
 
 
 
Net borrowings (payments) on short-term lines of credit
259,047

 
(2,992
)
Proceeds from issuance of long-term debt
810,000

 
910,327

Principal payments under long-term debt
(779,380
)
 
(343,133
)
Payment of debt issuance costs
—

 
(3,987
)
Repurchase of common stock
(250,183
)
 
(12,653
)
Proceeds from stock issued under share-based compensation plans
27,366

 
7,080

Common stock repurchased - share-based compensation plans
(5,260
)
 
(10,224
)
Tax benefit from share-based compensation plans
4,415

 
1,791

Distributions to noncontrolling interests
(15,593
)
 
(5,740
)
Dividends paid
(2,894
)
 
(3,153
)
Net cash provided by financing activities
47,518

 
537,316

Effect of exchange rate changes on cash
(3,766
)
 
17,516

Increase in cash and cash equivalents
416,363

 
216,986

Cash and cash equivalents, beginning of the period
680,470

 
781,275

Cash and cash equivalents, end of the period
$
1,096,833

 
$
998,261


7


SCHEDULE 6
RECONCILIATION OF QUARTERLY CASH EARNINGS ATTRIBUTABLE TO GLOBAL PAYMENTS TO GAAP
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
 
 
Three Months Ended November 30, 2013
 
 
GAAP
Processing System Intrusion1
Other2
Cash Earnings Adjustments3
Cash Earnings
Revenues
 
$
634,122

$
—

$
—

$
—

$
634,122

Operating expenses:
 
 
 
 
 
 
Cost of service
 
235,170

—

—

(14,560
)
220,610

Sales, general and administrative
 
294,045

—

(3,348
)
—

290,697

Processing system intrusion
 
(7,000
)
7,000

—

—

—

 
 
522,215

7,000

(3,348
)
(14,560
)
511,307

Operating income
 
111,907

(7,000
)
3,348

14,560

122,815

Other income (expense):
 
 
 
 
 
 
Interest and other income
 
5,288

—

(2,123
)
—

3,165

Interest and other expense
 
(8,025
)
—

—

—

(8,025
)
 
 
(2,737
)
—

(2,123
)
—

(4,860
)
Income (loss) before income taxes
 
109,170

(7,000
)
1,225

14,560

117,955

(Provision) benefit for income taxes
 
(29,313
)
2,393

(1,145
)
(4,808
)
(32,873
)
Net income (loss)
 
79,857

(4,607
)
80

9,752

85,082

Less: Net income attributable to noncontrolling interests, net of income tax
 
(5,960
)
—

—

(1,237
)
(7,197
)
Net income (loss) attributable to Global Payments
 
$
73,897

$
(4,607
)
$
80

$
8,515

$
77,885

Diluted shares
 
72,706

 
 
 
72,706

Diluted earnings (loss) per share
 
$
1.02

$
(0.07
)
$
—

$
0.12

$
1.07

 
 
 
 
 
 
 
 
 
Three Months Ended November 30, 2012
 
 
GAAP
Processing System Intrusion
Other2
Cash Earnings Adjustments3
Cash Earnings
 
 
 
 
 
 
 
Revenues
 
$
588,538

$
—

$
—

$
—

$
588,538

Operating expenses:
 
 
 
 
 
 
Cost of service
 
210,268

—

—

(14,336
)
195,932

Sales, general and administrative
 
276,177

—

—

—

276,177

  Processing system intrusion
 
(14,489
)
14,489

—

—

—

 
 
471,956

14,489

—

(14,336
)
472,109

Operating income
 
116,582

(14,489
)
—

14,336

116,429

Other income (expense):
 
 
 
 
 
 
Interest and other income
 
2,187

—

—

—

2,187

Interest and other expense
 
(14,609
)
—

8,383

—

(6,226
)
 
 
(12,422
)
—

8,383

—

(4,039
)
Income (loss) before income taxes
 
104,160

(14,489
)
8,383

14,336

112,390

(Provision) benefit for income taxes
 
(28,789
)
5,000

(1,383
)
(4,213
)
(29,385
)
Net income (loss)
 
75,371

(9,489
)
7,000

10,123

83,005

Less: Net income attributable to noncontrolling interests, net of income tax
 
(5,188
)
—

(2,853
)
(1,378
)
(9,419
)
Net income (loss) attributable to Global Payments
 
$
70,183

$
(9,489
)
$
4,147

$
8,745

$
73,586

Diluted shares
 
79,144

 
 
 
79,144

Diluted earnings (loss) per share
 
$
0.89

$
(0.12
)
$
0.05

$
0.11

$
0.93


1 Represents insurance proceeds associated with processing system intrusion charges incurred in FY 2012.

2 For the period ended November 30, 2013, represents one-time charges primarily related to employee termination benefits and a one-time credit related to the gain on the sale of an interest in a business. For the prior period, represents HSBC's share of GPAP dividends declared and the net income attributable to our Asia-Pacific redeemable noncontrolling interest.

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

We supplemented our reporting of income and the related earnings per share information determined in accordance with GAAP by reporting income and the related earnings per share for the three months ended November 30, 2013 and 2012 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated income and earnings per share on a cash basis by excluding amounts related to the processing system intrusion, acquisition intangible amortization, one-time charges related to employee termination benefits, and a one-time credit related to the gain on the sale of an interest in a business. In November 2012, we also adjusted the net income attributable to noncontrolling interests to include HSBC's share of second quarter 2013 GPAP net income and for HSBC's share of GPAP dividends. We exclude these charges in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations. Our income and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, income and earnings per share determined in accordance with GAAP. Our measures of income and earnings per share on a cash earnings basis reflect management’s judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.



8


SCHEDULE 7
RECONCILIATION OF YEAR TO DATE CASH EARNINGS ATTRIBUTABLE TO GLOBAL PAYMENTS TO GAAP
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
 
 
Six Months Ended November 30, 2013
 
 
GAAP
Processing System Intrusion1
Other2
Cash Earnings Adjustments3
Cash Earnings
Revenues
 
$
1,263,807

$
—

$
—

$
—

$
1,263,807

Operating expenses:
 
 
 
 
 
 
Cost of service
 
465,915

—

(579
)
(28,953
)
436,383

Sales, general and administrative
 
585,601

—

(4,844
)
—

580,757

Processing system intrusion
 
(7,000
)
7,000

—

—

—

 
 
1,044,516

7,000

(5,423
)
(28,953
)
1,017,140

Operating income
 
219,291

(7,000
)
5,423

28,953

246,667

Other income (expense):
 
 
 
 
 
 
Interest and other income
 
8,626

—

(2,123
)
—

6,503

Interest and other expense
 
(15,904
)
—

—

—

(15,904
)
 
 
(7,278
)
—

(2,123
)
—

(9,401
)
Income (loss) before income taxes
 
212,013

(7,000
)
3,300

28,953

237,266

(Provision) benefit for income taxes
 
(60,448
)
2,393

(1,934
)
(9,570
)
(69,559
)
Net income (loss)
 
151,565

(4,607
)
1,366

19,383

167,707

Less: Net income attributable to noncontrolling interests, net of income tax
 
(13,025
)
—

—

(2,608
)
(15,633
)
Net income (loss) attributable to Global Payments
 
$
138,540

$
(4,607
)
$
1,366

$
16,775

$
152,074

Diluted shares
 
73,504

 
 
 
73,504

Diluted earnings (loss) per share
 
$
1.88

$
(0.07
)
$
0.02

$
0.24

$
2.07

 
 
 
 
 
 
 
 
 
Six Months Ended November 30, 2012
 
 
GAAP
Processing System Intrusion
Other2
Cash Earnings Adjustments3
Cash Earnings
 
 
 
 
 
 
 
Revenues
 
$
1,178,825

$
—

$
—

$
—

$
1,178,825

Operating expenses:
 
 
 
 
 
 
Cost of service
 
414,659

—

(161
)
(25,561
)
388,937

Sales, general and administrative
 
557,596

—

(800
)
—

556,796

  Processing system intrusion
 
9,500

(9,500
)
—

—

—

 
 
981,755

(9,500
)
(961
)
(25,561
)
945,733

Operating income
 
197,070

9,500

961

25,561

233,092

Other income (expense):
 
 
 
 
 
 
Interest and other income
 
4,170

—

—

—

4,170

Interest and other expense
 
(18,154
)
—

8,383

—

(9,771
)
 
 
(13,984
)
—

8,383

—

(5,601
)
Income (loss) before income taxes
 
183,086

9,500

9,344

25,561

227,491

Provision for income taxes
 
(53,553
)
(3,279
)
(1,533
)
(7,573
)
(65,938
)
Net income (loss)
 
129,533

6,221

7,811

17,988

161,553

Less: Net income attributable to noncontrolling interests, net of income tax
 
(12,675
)
—

(3,594
)
(2,902
)
(19,171
)
Net income (loss) attributable to Global Payments
 
$
116,858

$
6,221

$
4,217

$
15,086

$
142,382

Diluted shares
 
79,062

 
 
 
79,062

Diluted earnings (loss) per share
 
$
1.48

$
0.08

$
0.05

$
0.19

$
1.80


1 Represents insurance proceeds associated with processing system intrusion charges incurred in FY 2012.

2 For the period ended November 30, 2013, represents one-time charges primarily related to employee termination benefits and resolution of a contract related contingency, and a one-time credit related to the gain on the sale of an interest in a business. For the prior period, represents HSBC's share of GPAP dividends declared and the net income attributable to our Asia-Pacific redeemable noncontrolling interest.

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

We supplemented our reporting of income and the related earnings per share information determined in accordance with GAAP by reporting income and the related earnings per share for the six months ended November 30, 2013 and 2012 on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated income and earnings per share on a cash basis by excluding amounts related to the processing system intrusion, acquisition intangible amortization, one-time charges related to employee termination benefits and resolution of a contract related contingency, and a one-time credit related to the sale of an interest in a business. In the six months ended November 2012, we also adjusted the net income attributable to noncontrolling interests to include HSBC's share of second quarter 2013 GPAP net income and for HSBC's share of GPAP dividends declared. We exclude these charges in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations. Our income and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, income and earnings per share determined in accordance with GAAP. Our measures of income and earnings per share on a cash earnings basis reflect management’s judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.


9



SCHEDULE 8
RECONCILIATION OF CASH EARNINGS SEGMENT INFORMATION TO GAAP
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
 
Three Months Ended November 30,
 
2013
 
2012
 
GAAP
Processing System Intrusion1
Other2
Cash Earnings Adjustments3
Cash Earnings
 
GAAP
Processing System Intrusion
Other2
Cash Earnings Adjustments3
Cash Earnings
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
United States
$
361,793

$
—

$
—

$
—

$
361,793

 
$
339,998

$
—

$
—

$
—

$
339,998

Canada
85,240

—

—

—

85,240

 
80,770

—

—

—

80,770

North America merchant services
447,033

—

—

—

447,033

 
420,768

—

—

—

420,768

 
 
 
 
 
 
 
 
 
 
 
 
Europe
146,866

—

—

—

146,866

 
131,161

—

—

—

131,161

Asia-Pacific
40,223

—

—

—

40,223

 
36,609

—

—

—

36,609

International merchant services
187,089

—

—

—

187,089

 
167,770

—

—

—

167,770

 
 
 


 
 
 
 
 
 
 
 
Total revenues
$
634,122

$
—

$
—

$
—

$
634,122

 
$
588,538

$
—

$
—

$
—

$
588,538

 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss) for segments:
 
 
 
 
 
 
 
 
 
 
 
North America merchant services
$
70,437

$
—

$
—

$
7,184

$
77,621

 
$
67,114

$
—

$
—

$
6,166

$
73,280

International merchant services
62,467

—

—

7,376

69,843

 
53,987

—

—

8,170

62,157

Corporate
(20,997
)
(7,000
)
3,348

—

(24,649
)
 
(4,519
)
(14,489
)
—

—

(19,008
)
Operating income (loss)
$
111,907

$
(7,000
)
$
3,348

$
14,560

$
122,815

 
$
116,582

$
(14,489
)
$
—

$
14,336

$
116,429

 
Six Months Ended November 30,
 
2013
 
2012
 
GAAP
Processing System Intrusion1
Other2
Cash Earnings Adjustments3
Cash Earnings
 
GAAP
Processing System Intrusion
Other2
Cash Earnings Adjustments3
Cash Earnings
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
United States
$
725,626

$
—

$
—

$
—

$
725,626

 
$
685,896

$
—

$
—

$
—

$
685,896

Canada
171,912

—

—

—

171,912

 
161,667

—

—

—

161,667

North America merchant services
897,538

—

—

—

897,538

 
847,563

—

—

—

847,563

 
 
 
 
 
 
 
 
 
 
 
 
Europe
290,054

—

—

—

290,054

 
259,626

—

—

—

259,626

Asia-Pacific
76,215

—

—

—

76,215

 
71,636

—

—

—

71,636

International merchant services
366,269

—

—

—

366,269

 
331,262

—

—

—

331,262

 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$
1,263,807

$
—

$
—

$
—

$
1,263,807

 
$
1,178,825

$
—

$
—

$
—

$
1,178,825

 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss) for segments:
 
 
 
 
 
 
 
 
 
 
 
North America merchant services
$
140,136

$
—

$
2,518

$
14,371

$
157,025

 
$
134,331

$
—

$
905

$
9,487

$
144,723

International merchant services
124,008

—

10

14,582

138,600

 
111,127

—

—

16,074

127,201

Corporate
(44,853
)
(7,000
)
2,895

—

(48,958
)
 
(48,388
)
9,500

56

—

(38,832
)
Operating income (loss)
$
219,291

$
(7,000
)
$
5,423

$
28,953

$
246,667

 
$
197,070

$
9,500

$
961

$
25,561

$
233,092

1 Represents insurance proceeds associated with processing system intrusion charges incurred in FY 2012.

2 Represents one-time charges primarily related to employee termination benefits and resolution of a contract related contingency for the period ending November 30, 2013 and the prior year represents one-time charges primarily related to employee termination benefits.

3 Represents acquisition intangible amortization expense.

10


SCHEDULE 9
OUTLOOK SUMMARY
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In millions, except per share data)
 
 
Fiscal 2013 Actual
 
Fiscal 2014 Outlook
 
% Change FY13
 
 
 
 
 
 
 
Revenue Outlook
 
 
 
 
 
 
Total Revenues
 
$
2,376

 
$2,510 to $2,560

 
6% to 8%

 
 
 
 
 
 
 
EPS Outlook
 
 
 
 
 
 
Cash EPS
 
$
3.65

 
$4.03 to $4.10

 
10% to 12%

Acquisition-related intangible assets, non-recurring items and processing system intrusion1
 
(0.89
)
 
(0.58
)
 
(35
)%
GAAP Diluted EPS
 
$
2.76

 
$3.45 to $3.52

 
25% to 28%


We supplemented our reporting of income and the related earnings per share information determined in accordance with GAAP by reporting income and the related earnings per share on a "cash earnings" basis in this earnings release as a measure to help evaluate performance. We calculated income and earnings per share on a cash basis by excluding costs related to the processing system intrusion, acquisition intangible amortization and one-time charges related to employee termination benefits and certain contract settlement and related costs. We exclude these charges in order to more clearly focus on the factors we believe are pertinent to the daily management of our operations. Our income and earnings per share reported on a cash earnings basis should be considered in addition to, and not as a substitute for, income and earnings per share determined in accordance with GAAP. Our measures of income and earnings per share on a cash earnings basis reflect management’s judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.
1 Fiscal 2014 reflects $0.48 of acquisition-related intangibles and $0.10 of non-recurring items. Acquisition-related intangibles accounted and non-recurring items accounted for $0.57 in fiscal 2013 and processing intrusion costs were $0.32.



11