Global Payments Reports Third Quarter Earnings and Raises Annual Fiscal 2016 Outlook

ATLANTA--()--Global Payments Inc. (NYSE: GPN) today announced results for its fiscal third quarter ended February 29, 2016.

“We delivered strong financial results for the quarter, accelerating growth across our key markets. We are especially pleased with our performance in North America and Europe, with sequentially higher adjusted net revenue growth in the United States direct channel and the United Kingdom,” said Chief Executive Officer Jeff Sloan. “We also grew margins in each region, highlighting solid execution.”

Sloan continued, “We are delighted with the progress we have made on the partnership with Heartland Payment Systems and look forward to closing the transaction later this month. The combination with Heartland will transform Global Payments into the leading provider of payments technology solutions worldwide.”

Third Quarter 2016 Summary

  • Adjusted net revenue grew 6% to $497.0 million, compared to $467.8 million in the third quarter of fiscal 2015. On a constant currency basis, adjusted net revenue grew 11%.
  • Cash diluted earnings per share grew 17% to $0.70, compared to $0.60 in the third quarter of fiscal 2015. On a constant currency basis, cash diluted earnings per share grew 28%.
  • Cash operating margin expanded to 28.7%, a 50 basis point increase over the third quarter of fiscal 2015. On a constant currency basis, cash operating margin increased 110 basis points.
  • GAAP revenues were $679.9 million, compared to $665.0 million in the third quarter of fiscal 2015, and diluted earnings per share were $0.53, compared to $0.46 in the prior year.

“We exceeded our expectations for organic adjusted net revenue growth, cash operating margin expansion and cash earnings per share growth for the quarter,” stated Cameron Bready, Executive Vice President and Chief Financial Officer. “As a result of this performance and despite the impacts of continued foreign exchange headwinds, we are pleased to again raise our expectations for fiscal 2016.”

Increased Fiscal 2016 Outlook

For the full year of fiscal 2016, the company expects to be at the upper end of its constant currency adjusted net revenue growth expectation of 10% to 12% over fiscal 2015. Global Payments is also raising expectations for margin expansion and cash earnings per share and now expects annual fiscal 2016 cash operating margin to increase by at least 100 basis points on a constant currency basis and earnings per share on a cash basis to range from $2.93 to $3.00, reflecting growth of 16% to 19% over fiscal 2015. The company’s fiscal 2016 outlook does not include any impact from the Heartland acquisition.

Capital Allocation

Global Payments’ Board of Directors approved a fiscal 2016 third quarter dividend of $0.01 per share payable May 27, 2016 to shareholders of record as of May 13, 2016.

In addition, upon the closing of the Heartland Payment Systems transaction, the company intends to resume its normal capital allocation policies, including being a consistent buyer of its stock.

Conference Call

Global Payments’ management will host a conference call today, April 6, 2016 at 8:00 a.m. ET 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; or callers in North America may dial 877-674-6428 and callers outside North America may dial 970-315-0457. A replay of the call will be archived on the company's website within two hours of the live call.

Non-GAAP Financial Measures

Global Payments supplemented revenues, income and earnings per share information determined in accordance with GAAP by providing income and related earnings per share on a "cash earnings" basis and adjusted net revenue in this earnings release to assist with evaluating performance. In addition to GAAP measures, management uses these non-GAAP measures to focus on the factors the company believes are pertinent to the daily management of operations.

Reconciliations of the non-GAAP measures to the most directly comparable GAAP measure are included in the schedules to this release.

About Global Payments

Global Payments Inc. (NYSE: GPN) is a leading worldwide provider of payment technology services that delivers innovative solutions driven by customer needs globally. Our technologies, partnerships and employee expertise enable us to provide a broad range of products and services that allow our customers to accept all payment types across a variety of distribution channels in many markets around the world.

Headquartered in Atlanta, Georgia with approximately 4,500 employees worldwide, Global Payments is a Fortune 1000 Company with merchants and partners in 29 countries throughout North America, Europe, the Asia-Pacific region and Brazil. For more information about Global Payments, our Service. Driven. Commerce brand and our technologies, please visit www.globalpaymentsinc.com.

Forward-Looking Statements

Investors are cautioned that some of the statements we use in this release contain forward-looking statements and are made pursuant to the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of risks and uncertainties and depend upon future events or conditions. Actual events or results might differ materially from those expressed or forecasted in these forward-looking statements. Accordingly, we cannot guarantee you that our plans and expectations will be achieved. Such statements may include, but are not limited to, statements about the benefits of the proposed merger between Global Payments and Heartland, including future financial and operating results, the combined company's plans, objectives, expectations and intentions and other statements that are not historical facts. Important factors, among others, associated with the proposed acquisition of Heartland that could cause actual events or results to differ materially from those anticipated by our forward-looking statements or historical performance include the ability to meet closing conditions to the merger at all or on the expected terms and schedule, including without limitation the approval of Heartland’s stockholders; delay in closing the merger or failure to consummate the merger; difficulties and delays in integrating the Heartland business or fully realizing cost savings and other benefits of the merger at all or within the expected time period; business disruption during the pendency of the merger or following the merger making it more difficult to maintain business and operational relationships, including financial institution sponsorship; loss of key personnel, Global Payments’ and Heartland’s ability to accurately predict future market conditions; and changes in laws, regulations or network rules or interpretations thereof impacting Global Payments or Heartland. Additional factors not directly associated with the proposed acquisition of Heartland but that may otherwise cause events or results to differ materially from those anticipated by our forward-looking statements or historical performance can be found in Global Payments’ Annual Report on Form 10-K for the year ended May 31, 2015, Heartland’s Annual Report on Form 10-K for the year ended December 31, 2015 and each company’s subsequent filings with the SEC. Our forward-looking statements speak only as of the date they are made and should not be relied upon as representing our plans and expectations as of any subsequent date. We undertake 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 Nine Months Ended
February 29, 2016     February 28, 2015     % Change February 29, 2016     February 28, 2015     % Change
 
Revenues $ 679,940 $ 664,983 2.2 % $ 2,151,086 $ 2,067,169 4.1 %
 
Operating expenses:
Cost of service 258,728 250,255 3.4 % 801,959 767,890 4.4 %
Selling, general and administrative 313,407   310,113   1.1 % 980,385   946,282   3.6 %
572,135   560,368   2.1 % 1,782,344   1,714,172   4.0 %
 
Operating income 107,805   104,615   3.0 % 368,742   352,997   4.5 %
 
Interest and other income 1,092 1,160 (5.9 )% 3,526 3,634 (3.0 )%
Interest and other expense (13,300 ) (13,429 ) (1.0 )% (40,669 ) (34,789 ) 16.9 %
(12,208 ) (12,269 ) (0.5 )% (37,143 ) (31,155 ) 19.2 %
 
Income before income taxes 95,597 92,346 3.5 % 331,599 321,842 3.0 %
Provision for income taxes (22,685 ) (23,031 ) (1.5 )% (82,561 ) (82,837 ) (0.3 )%
Net income 72,912 69,315 5.2 % 249,038 239,005 4.2 %

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

(3,851 ) (6,747 ) (42.9 )% (14,559 ) (26,290 ) (44.6 )%
Net income attributable to Global Payments $ 69,061   $ 62,568   10.4 % $ 234,479   $ 212,715   10.2 %
 
Earnings per share attributable to Global Payments1:
Basic $ 0.53 $ 0.47 12.8 % $ 1.81 $ 1.58 14.6 %
Diluted $ 0.53 $ 0.46 15.2 % $ 1.80 $ 1.57 14.6 %
 
Weighted-average shares outstanding1:
Basic 129,287 133,780 129,709 134,952
Diluted 130,160 134,612 130,555 135,782
 

1 Earnings per share data and weighted-average shares outstanding for prior periods have been adjusted for a two-for-one stock split in the form of a stock dividend paid on November 2, 2015.

       

 

SCHEDULE 2

UNAUDITED CASH EARNINGS ATTRIBUTABLE TO GLOBAL PAYMENTS2

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

 
Three Months Ended Nine Months Ended
February 29, 2016     February 28, 2015     % Change February 29, 2016     February 28, 2015     % Change
 
Adjusted net revenue $ 496,969 $ 467,757 6.2 % $ 1,552,224 $ 1,456,634 6.6 %
 
Operating expenses:
Cost of service 221,127 212,764 3.9 % 683,331 652,921 4.7 %
Selling, general and administrative 133,434   122,881   8.6 % 409,710   380,898   7.6 %
354,561   335,645   5.6 % 1,093,041   1,033,819   5.7 %
 
Operating income 142,408   132,112   7.8 % 459,183   422,815   8.6 %
 
Interest and other income 1,092 1,160 (5.9 )% 3,526 3,634 (3.0 )%
Interest and other expense (13,300 ) (13,429 ) (1.0 )% (40,669 ) (34,789 ) 16.9 %
(12,208 ) (12,269 ) (0.5 )% (37,143 ) (31,155 ) 19.2 %
 
Income before income taxes 130,200 119,843 8.6 % 422,040 391,660 7.8 %
Provision for income taxes (34,204 ) (31,844 ) 7.4 % (111,000 ) (106,086 ) 4.6 %
Net income 95,996 87,999 9.1 % 311,040 285,574 8.9 %
Less: Net income attributable to noncontrolling interests, net of income tax (4,914 ) (7,825 ) (37.2 )% (17,429 ) (29,776 ) (41.5 )%
Net income attributable to Global Payments $ 91,082   $ 80,174   13.6 % $ 293,611   $ 255,798   14.8 %
 
Earnings per share attributable to Global Payments1:
Basic $ 0.70 $ 0.60 16.7 % $ 2.26 $ 1.90 18.9 %
Diluted $ 0.70 $ 0.60 16.7 % $ 2.25 $ 1.88 19.7 %
 
Weighted-average shares outstanding1:
Basic 129,287 133,780 129,709 134,952
Diluted 130,160 134,612 130,555 135,782
 
 
 

1 Earnings per share data and weighted-average shares outstanding for prior periods have been adjusted for a two-for-one stock split in the form of a stock dividend paid on November 2, 2015.

 

2 See Schedules 7 and 8 for a reconciliation of adjusted net revenue and cash earnings to the most comparable GAAP measures and Schedule 10 for a discussion of non-GAAP financial measures.

 
           

 

SCHEDULE 3

UNAUDITED SEGMENT INFORMATION

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 
Three Months Ended
February 29, 2016     February 28, 2015 % Change
GAAP    

Adjusted Net

Revenue and

Cash

Earnings1

GAAP    

Adjusted Net

Revenue and

Cash

Earnings1

GAAP

Adjusted Net

Revenue and

Cash

Earnings1

 
Revenues:
North America $ 478,059 $ 311,617 $ 473,063 $ 293,385 1.1 % 6.2 %
Europe 147,002 130,473 138,378 120,830 6.2 % 8.0 %
Asia-Pacific 54,879   54,879   53,542   53,542   2.5 % 2.5 %
Total $ 679,940   $ 496,969   $ 664,983   $ 467,757   2.2 % 6.2 %
 
Operating income:
North America $ 71,379 $ 84,838 $ 66,723 $ 77,746 7.0 % 9.1 %
Europe 59,056 64,902 52,710 59,986 12.0 % 8.2 %
Asia-Pacific 16,025 17,792 12,192 13,836 31.4 % 28.6 %
Corporate (38,655 ) (25,124 ) (27,010 ) (19,456 ) 43.1 % 29.1 %
Total $ 107,805   $ 142,408   $ 104,615   $ 132,112   3.0 % 7.8 %
 
 
Nine Months Ended
February 29, 2016 February 28, 2015 % Change
GAAP

Adjusted Net

Revenue and

Cash

Earnings1

GAAP

Adjusted Net

Revenue and

Cash

Earnings1

GAAP

Adjusted Net

Revenue and

Cash

Earnings1

 
Revenues:
North America $ 1,520,250 $ 977,935 $ 1,465,845 $ 914,219 3.7 % 7.0 %
Europe 473,376 416,829 461,140 402,231 2.7 % 3.6 %
Asia-Pacific 157,460   157,460   140,184   140,184   12.3 % 12.3 %
Total $ 2,151,086   $ 1,552,224   $ 2,067,169   $ 1,456,634   4.0 % 7.0 %
 
Operating income:
North America $ 234,014 $ 274,838 $ 218,906 $ 252,480 6.9 % 8.9 %
Europe 193,801 210,122 184,318 200,691 5.1 % 4.7 %
Asia-Pacific 40,115 46,118 30,629 33,801 31.0 % 36.4 %
Corporate (99,188 ) (71,895 ) (80,856 ) (64,157 ) 22.7 % 12.1 %
Total $ 368,742   $ 459,183   $ 352,997   $ 422,815   4.0 % 9.0 %
 

1 See Schedule 9 for a reconciliation of adjusted net revenue and cash earnings segment information to the most comparable GAAP measures and Schedule 10 for a discussion of non-GAAP financial measures.

       

SCHEDULE 4

UNAUDITED CONSOLIDATED BALANCE SHEETS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except share data)

 

February 29,
2016

May 31, 2015
 
ASSETS
Current assets:
Cash and cash equivalents $ 825,500 $ 650,739
Accounts receivable, net of allowances for doubtful accounts of $621 and $468, respectively 172,848 202,390
Claims receivable, net of allowances for doubtful accounts of $3,902 and $2,684, respectively 7,575 548
Settlement processing assets 1,000,683 2,394,822
Prepaid expenses and other current assets 58,497   41,416  
Total current assets 2,065,103 3,289,915
Goodwill 1,556,904 1,491,833
Other intangible assets, net 645,541 560,136
Property and equipment, net 366,445 374,143
Deferred income taxes 24,549 30,428
Other 40,559   32,846  
Total assets $ 4,699,101   $ 5,779,301  
 
LIABILITIES AND EQUITY
Current liabilities:
Lines of credit $ 189,921 $ 592,629
Current portion of long-term debt 86,402 61,784
Accounts payable and accrued liabilities 285,572 312,647
Settlement processing obligations 1,160,951 2,033,900
Income taxes payable 25,286   14,228  
Total current liabilities 1,748,132 3,015,188
Long-term debt 1,787,675 1,678,283
Deferred income taxes 195,354 202,855
Other noncurrent liabilities 15,190   19,422  
Total liabilities 3,746,351   4,915,748  
Commitments and contingencies
Equity:
Preferred stock, no par value; 5,000,000 shares authorized and none issued
Common stock, no par value; 200,000,000 shares authorized; 129,258,574 issued and outstanding at February 29, 2016 and 130,557,676 issued and outstanding at May 31, 2015
Paid-in capital 136,405 148,742
Retained earnings 981,013 795,226
Accumulated other comprehensive loss (277,301 ) (185,992 )
Total Global Payments shareholders’ equity 840,117 757,976
Noncontrolling interests 112,633   105,577  
Total equity 952,750   863,553  
Total liabilities and equity $ 4,699,101   $ 5,779,301  
   

 

SCHEDULE 5

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 
Nine Months Ended
February 29, 2016     February 28, 2015
Cash flows from operating activities:
Net income $ 249,038 $ 239,005
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment 54,343 48,628
Amortization of acquired intangibles 62,331 54,184
Share-based compensation expense 20,472 14,827
Provision for operating losses and bad debts 15,827 10,530
Deferred income taxes (3,292 ) 13,479
Other, net 2,528 469
Changes in operating assets and liabilities, net of the effects of acquisitions:
Accounts receivable 23,428 32,124
Claims receivable (24,388 ) (7,159 )
Settlement processing assets and obligations, net 523,765 (27,948 )
Prepaid expenses and other assets (26,146 ) (5,687 )
Accounts payable and other liabilities (30,514 ) (36,044 )
Income taxes payable 10,627   10,677  
Net cash provided by operating activities 878,019   347,085  
Cash flows from operating activities:
Business, intangible and other asset acquisitions, net of cash acquired (241,982 ) (232,864 )
Capital expenditures (57,548 ) (56,746 )
Principal collections on financing receivables 219
Net proceeds from sales of investments and business   10,597  
Net cash used in investing activities (299,530 ) (278,794 )
Cash flows from financing activities:
Net (repayments) borrowings on lines of credit (388,120 ) 44,622
Proceeds from issuance of long-term debt 3,186,175 1,593,500
Principal payments of long-term debt (3,050,175 ) (1,378,679 )
Payment of debt issuance costs (4,934 )
Repurchase of common stock (82,832 ) (231,844 )
Proceeds from stock issued under share-based compensation plans 7,279 18,867
Common stock repurchased - share-based compensation plans (11,812 ) (16,175 )
Tax benefit from share-based compensation plans 6,625 3,851
Purchase of subsidiary shares from noncontrolling interest (7,550 )
Distributions to noncontrolling interests (18,568 ) (19,355 )
Dividends paid (3,895 ) (4,035 )
Net cash (used in) provided by financing activities (367,807 ) 10,752  
Effect of exchange rate changes on cash (35,921 ) (50,767 )
Increase in cash and cash equivalents 174,761 28,276
Cash and cash equivalents, beginning of the period 650,739   581,872  
Cash and cash equivalents, end of the period $ 825,500   $ 610,148  
   

SCHEDULE 6

UNAUDITED RECONCILIATION OF FREE CASH FLOW TO GAAP MEASURES

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 
Three Months Ended
February 29, 2016
Net cash provided by operating activities $ 423,949
Changes in settlement processing assets and liabilities, net (315,319 )
Capital expenditures (21,302 )
Distributions to noncontrolling interests (10,410 )
Free Cash Flow1 $ 76,918  
 

 

1Free Cash Flow is a non-GAAP measure. See "Non-GAAP Financial Measures" discussion on Schedule 10.

 

SCHEDULE 7

UNAUDITED RECONCILIATION OF ADJUSTED NET REVENUE AND CASH EARNINGS TO GAAP MEASURES

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

 
    Three Months Ended February 29, 2016
GAAP     Net Revenue Adjustment1     Cash Earnings Adjustments2     Other3    

Adjusted Net

Revenue and

Cash Earnings

Revenues $ 679,940 $ (182,971 ) $ $ $ 496,969
 
Operating expenses:
Cost of service 258,728 (16,529 ) (21,072 ) 221,127
Selling, general and administrative 313,407   (166,442 ) (7,000 ) (6,531 ) 133,434  
572,135   (182,971 ) (28,072 ) (6,531 ) 354,561  
 
Operating income 107,805     28,072   6,531   142,408  
 
Interest and other income 1,092 1,092
Interest and other expense (13,300 )       (13,300 )
(12,208 )       (12,208 )
Income before income taxes 95,597

 

28,072 6,531 130,200
Provision for income taxes (22,685 )

  (9,215 ) (2,304 ) (34,204 )
Net income 72,912 18,857 4,227 95,996

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

(3,851 )   (1,063 )   (4,914 )
Net income attributable to Global Payments $ 69,061   $   $ 17,794   $ 4,227   $ 91,082  
Shares outstanding4 130,160 130,160
Diluted earnings per share4 $ 0.53   $   $ 0.14   $ 0.03   $ 0.70  
 
Three Months Ended February 28, 2015
GAAP Net Revenue Adjustment1 Cash Earnings Adjustments2 Other3

Adjusted Net

Revenue and

Cash Earnings

Revenues $ 664,983 $ (199,102 ) $ $ 1,876 $ 467,757
 
Operating expenses:
Cost of service 250,255 (19,424 ) (18,067 ) 212,764
Selling, general and administrative 310,113   (179,678 ) (5,682 ) (1,872 ) 122,881  
560,368   (199,102 ) (23,749 ) (1,872 ) 335,645  
 
Operating income 104,615     23,749   3,748   132,112  
 
Interest and other income 1,160 1,160
Interest and other expense (13,429 )       (13,429 )
(12,269 )       (12,269 )
Income before income taxes 92,346

23,749 3,748 119,843
Provision for income taxes (23,031 )   (7,782 ) (1,031 ) (31,844 )
Net income 69,315 15,967 2,717 87,999
Less: Net income attributable to noncontrolling interests, net of income tax (6,747 )   (1,078 )   (7,825 )
Net income attributable to Global Payments $ 62,568   $   $ 14,889   $ 2,717   $ 80,174  
Shares outstanding4 134,612 134,612
Diluted earnings per share4 $ 0.46   $   $ 0.11   $ 0.02   $ 0.60  
 

1 Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain wholesale lines of business to reflect economic benefits to the company.

 

2 Represents adjustments to exclude acquisition-related amortization expense and share-based compensation expense and the related income tax benefits of each.

 

3 For the three months ended February 29, 2016, represents acquisition-related costs along with the related income tax effects. For the three months ended February 28, 2015, the revenue adjustment represents select U.K. customer payments related to a vendor outage and the expense adjustment represents certain business tax assessments in the U.S. for prior periods along with the related income tax effects of each.

 

4 Shares outstanding and diluted earnings per share for prior periods have been adjusted for a two-for-one stock split in the form of a stock dividend paid on November 2, 2015.

 

See "Non-GAAP Financial Measures" discussion on Schedule 10.

 

 

 

 

 

 
 
 
 

 

 
 

 

SCHEDULE 8

UNAUDITED RECONCILIATION OF ADJUSTED NET REVENUE AND CASH EARNINGS TO GAAP MEASURES

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands, except per share data)

 
    Nine Months Ended February 29, 2016
GAAP     Net Revenue Adjustment1     Cash Earnings Adjustments2     Other3    

Adjusted Net

Revenue and

Cash Earnings

Revenues $ 2,151,086 $ (598,862 ) $ $ $ 1,552,224
 
Operating expenses:
Cost of service 801,959 (56,547 ) (63,980 ) 1,899 683,331
Selling, general and administrative 980,385   (542,315 ) (20,472 ) (7,888 ) 409,710  
1,782,344   (598,862 ) (84,452 ) (5,989 ) 1,093,041  
Operating income 368,742 84,452 5,989 459,183
 
Interest and other income 3,526 3,526
Interest and other expense (40,669 )       (40,669 )
(37,143 )       (37,143 )
 
Income before income taxes 331,599

84,452 5,989 422,040
Provision for income taxes (82,561 )

  (27,426 ) (1,013 ) (111,000 )
Net income 249,038 57,026 4,976 311,040
Less: Net income attributable to noncontrolling interests, net of income tax (14,559 )   (2,870 )   (17,429 )
Net income attributable to Global Payments $ 234,479   $   $ 54,156   $ 4,976   $ 293,611  
 
Shares outstanding4 130,555 130,555
Diluted earnings per share4 $ 1.80   $   $ 0.41   $ 0.04   $ 2.25  
 
Nine Months Ended February 28, 2015
GAAP Net Revenue Adjustment1 Cash Earnings Adjustments2 Other3

Adjusted Net

Revenue and

Cash Earnings

Revenues $ 2,067,169 $ (612,411 ) $ $ 1,876 $ 1,456,634
 
Operating expenses:
Cost of service 767,890 (60,785 ) (54,184 )

652,921
Selling, general and administrative 946,282   (551,626 ) (14,827 ) 1,069   380,898  
1,714,172   (612,411 ) (69,011 ) 1,069   1,033,819  
Operating income 352,997 69,011 807 422,815
 
Interest and other income 3,634 3,634
Interest and other expense (34,789 )       (34,789 )
(31,155 )       (31,155 )
 
Income before income taxes 321,842 69,011 807 391,660
Provision for income taxes (82,837 )   (22,806 ) (443 ) (106,086 )
Net income 239,005 46,205 364 285,574
Less: Net income attributable to noncontrolling interests, net of income tax (26,290 )   (3,486 )   (29,776 )
Net income attributable to Global Payments $ 212,715   $   $ 42,719   $ 364   $ 255,798  
 
Shares outstanding4 135,782 135,782
Diluted earnings per share4 $ 1.57   $   $ 0.31   $   $ 1.88  

1 Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain wholesale lines of business to reflect economic benefits to the company.

 

2 Represents adjustments to exclude acquisition-related amortization expense and share-based compensation expense and the related income tax benefits of each.

 

3 For the nine months ended February 29, 2016, represents acquisition-related costs, employee termination benefits and recoveries associated with a U.K. vendor outage along with the related income tax effects of each as well as certain other adjustments to the income tax provision.  For the nine months ended February 28, 2015, the revenue adjustment represents select U.K. customer payments related to a vendor outage and the expense adjustments represent certain business tax assessments in the U.S. for prior periods and a gain on the sale of a component of our Russia business that leased ATMs to our sponsor bank in Russia along with the related income tax effects of each.

 

4 Shares outstanding and diluted earnings per share for prior periods have been adjusted for a two-for-one stock split in the form of a stock dividend paid on November 2, 2015.

 

See "Non-GAAP Financial Measures" discussion on Schedule 10.

 

 

 

 

 

 
 
 
 
 
 

 

 
   

 

 

SCHEDULE 9

UNAUDITED RECONCILIATION OF ADJUSTED NET REVENUE AND CASH EARNINGS SEGMENT INFORMATION TO GAAP MEASURES

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In thousands)

 
Three Months Ended
February 29, 2016     February 28, 2015
GAAP     Net Revenue Adjustment1     Cash Earnings Adjustments2     Other3    

Adjusted Net

Revenues and

Cash Earnings

GAAP     Net Revenue Adjustment1     Cash Earnings Adjustments2     Other3    

Adjusted Net

Revenues and

Cash Earnings

 
Revenues:
North America $ 478,059 $ (166,442 ) $ $ $ 311,617 $ 473,063 $ (179,678 ) $ $ $ 293,385
Europe 147,002 (16,529 ) 130,473 138,378 (19,424 ) 1,876 120,830
Asia-Pacific 54,879         54,879   53,542         53,542  
Total revenues $ 679,940   $ (182,971 ) $   $   $ 496,969   $ 664,983   $ (199,102 ) $   $ 1,876   $ 467,757  
 
Operating income:
North America $ 71,379 $ $ 13,459 $ $ 84,838 $ 66,723 $ $ 11,023 $ $ 77,746
Europe 59,056 5,846 64,902 52,710 5,400 1,876 59,986
Asia-Pacific 16,025 1,767 17,792 12,192 1,644 13,836
Corporate (38,655 )   7,000   6,531   (25,124 ) (27,010 )   5,682   1,872   (19,456 )
Operating income $ 107,805   $   $ 28,072   $ 6,531   $ 142,408   $ 104,615   $   $ 23,749   $ 3,748   $ 132,112  
 
 
Nine Months Ended
February 29, 2016 February 28, 2015
GAAP Net Revenue Adjustment1 Cash Earnings Adjustments2 Other3

Adjusted Net

Revenues and

Cash Earnings

GAAP Net Revenue Adjustment1 Cash Earnings Adjustments2 Other3

Adjusted Net

Revenues and

Cash Earnings

 
Revenues:
North America $ 1,520,250 $ (542,315 ) $ $ $ 977,935 $ 1,465,845 $ (551,626 ) $ $ $ 914,219
Europe 473,376 (56,547 ) 416,829 461,140 (60,785 ) 1,876 402,231
Asia-Pacific 157,460         157,460   140,184         140,184  
Total revenues $ 2,151,086   $ (598,862 ) $   $   $ 1,552,224   $ 2,067,169   $ (612,411 ) $   $ 1,876   $ 1,456,634  
 
Operating income:
North America $ 234,014 $ $ 40,599 $ 225 $ 274,838 $ 218,906 $ $ 33,574 $ $ 252,480
Europe 193,801 18,220 (1,899 ) 210,122 184,318 17,438 (1,065 ) 200,691
Asia-Pacific 40,115 5,161 842 46,118 30,629 3,172 33,801
Corporate (99,188 )   20,472   6,821   (71,895 ) (80,856 )   14,827   1,872   (64,157 )
Operating income $ 368,742   $   $ 84,452   $ 5,989   $ 459,183   $ 352,997   $   $ 69,011   $ 807   $ 422,815  
 

1 Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain wholesale lines of business to reflect economic benefits to the company.

 

2 Represents adjustments to exclude acquisition-related amortization expense and share-based compensation expense.  

 

3 For the three months ended February 29, 2016, represents acquisition-related costs.  For the nine months ended February 29, 2016, represents acquisition-related costs, employee termination benefits and recoveries associated with a U.K. vendor outage. For the three months ended February 28, 2015, the revenue adjustment represents select U.K. customer payments related to a vendor outage and the expense adjustment represents certain business tax assessments in the U.S. for prior periods. For the nine months ended February 28, 2015, the revenue adjustment represents select U.K. customer payments related to a vendor outage and the expense adjustments represent certain business tax assessments in the U.S. for prior periods and a gain on the sale of a component of our Russia business that leased ATMs to our sponsor bank in Russia.  

 

See "Non-GAAP Financial Measures" discussion on Schedule 10.

 

           

 

SCHEDULE 10

OUTLOOK SUMMARY

GLOBAL PAYMENTS INC. AND SUBSIDIARIES

(In billions, except per share data)

 
Fiscal 2015 Actual Fiscal 2016 Outlook3 % Change
Revenues:
GAAP Revenues $ 2.77 $2.87 to $2.95 4% to 6%
Adjustments1 (0.82 ) (0.83 )  
Adjusted Net Revenue $ 1.95   $2.06 to $2.10 6% to 8%
 
Earnings Per Share2:
GAAP Diluted EPS $ 2.06 $2.36 to $2.43 15% to 18%

Acquisition-related amortization expense, share-based compensation expense and non-recurring items4

0.46   0.57    
Cash EPS $ 2.52   $2.93 to $3.00 16% to 19%
 
 

1 Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain wholesale lines of business to reflect economic benefits to the company and, in fiscal 2015, a revenue adjustment for select U.K. customer payments related to a vendor outage.

 

2 Earnings per share data for prior periods have been adjusted to reflect a two-for-one stock split in the form of a stock dividend paid on November 2, 2015.

 

3 The Fiscal 2016 Outlook does not include the effect of the announced acquisition of Heartland Payment Systems.

 

4 Fiscal 2015 reflects acquisition related amortization expense of $0.34, share-based compensation expense of $0.09 and non-recurring items of $0.03, including a revenue adjustment for select U.K. customer payments related to a vendor outage and expense adjustments for charges related to employee termination benefits, non-cash losses from the retirement of property and equipment, a transaction-related tax associated with the acquisition of Realex, certain business tax assessments in the U.S. for prior periods, a gain on the sale of our Russia ATM business, reversal of previously recorded interest expense associated with a previously uncertain tax position and the related income tax effects of each.

 

NON-GAAP FINANCIAL MEASURES

Global Payments supplements revenues, income, earnings per share information and cash flows determined in accordance with U.S. GAAP by providing income and related earnings per share on a “cash earnings” basis, Adjusted Net Revenue and Free Cash Flow in this document to assist with evaluating our performance. In addition to GAAP measures, management uses these non-GAAP financial measures to focus on the factors the company believes are pertinent to the daily management of our operations. Management believes Adjusted Net Revenue more closely reflects the economic benefits to the company's core business and allows for better comparisons with industry peers. Management believes Free Cash Flow is a useful measure of our ability to service debt, return capital to shareholders, invest in the business, and demonstrate value creation of our underlying operations. Management uses these non-GAAP financial measures, together with other metrics, to set goals for and measure the performance of the business and to determine incentive compensation. Adjusted Net Revenue, income and earnings per share reported on a cash earnings basis and Free Cash Flow should be considered in addition to, and not as substitutes for, revenues, income, earnings per share and cash flows determined in accordance with GAAP. The measures of Adjusted Net Revenue, income and earnings per share on a cash earnings basis and Free Cash Flow reflect management's judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.

Adjusted Net Revenue excludes gross-up related payments associated with certain wholesale lines of business to reflect economic benefits to the company. On a GAAP basis, these payments are presented gross in both revenues and operating expenses. The company defines Free Cash Flow as cash provided by operating activities, excluding the impact of changes in settlement assets and obligations, less capital expenditures and distributions to noncontrolling interests, each of which is derived from our consolidated statement of cash flows.

Income and the related earnings per share on a cash earnings basis exclude acquisition-related amortization expense, share-based compensation and certain other items specific to each reporting period as more fully described in the accompanying reconciliations in Schedule 7, Schedule 8 and Schedule 9. The tax rate used in determining the net income impact of cash earnings adjustments is either the jurisdictional statutory rate in effect at the time of the adjustment or the jurisdictional expected annual effective tax rate for the period, depending on the nature and timing of the adjustment.

Contacts

Global Payments Inc.
Investor contact:
Andrew Langford, 770-829-8991
investor.relations@globalpay.com
or
Media contact:
Amy Corn, 770-829-8755
media.relations@globalpay.com

Contacts

Global Payments Inc.
Investor contact:
Andrew Langford, 770-829-8991
investor.relations@globalpay.com
or
Media contact:
Amy Corn, 770-829-8755
media.relations@globalpay.com