10-KPeriod: FY2009

GLOBAL PAYMENTS INC Annual Report, Year Ended May 31, 2009

Filed July 28, 2009For Securities:GPN

Summary

Global Payments Inc.'s fiscal year 2009 filing highlights a significant increase in revenue, driven primarily by strategic acquisitions, notably a majority stake in HSBC Merchant Services LLP. However, this top-line growth was overshadowed by a substantial decrease in operating income and net income. This decline was largely attributable to a significant $147.7 million impairment charge related to the company's money transfer business, coupled with the impact of unfavorable foreign currency exchange rates. While the North America segment showed steady revenue growth, its operating margin slightly decreased. The International segment experienced robust revenue and operating income growth, primarily due to the HSBC acquisition. The company also completed the acquisition of ZAO United Card Service in Russia, further expanding its international footprint. Despite the profitability challenges in fiscal year 2009, Global Payments Inc. maintained its focus on strategic growth through acquisitions and leveraging its existing infrastructure, including the development of its G2 technology platform. The company's financial position remained solid, with substantial cash and equivalents and access to credit facilities.

Financial Highlights

23 data points
Beta

Revenue

$1.46B

Net Income

$37.22M

2.5% Net Margin

EPS (Diluted)

$0.23

Free Cash Flow

$342.03M

Financial Statements
Beta
Revenue$1.46B
SG&A Expenses$664.90M
Operating Expenses$1.17B
Operating Income$292.55M
Net Income$37.22M
EPS (Basic)$0.23
EPS (Diluted)$0.23

Key Highlights

  • 1Revenue increased by 26% to $1,601.5 million, primarily driven by the acquisition of HSBC Merchant Services LLP and growth in North America.
  • 2Operating income decreased by 36% to $161.4 million, significantly impacted by a $147.7 million impairment charge in the money transfer business.
  • 3Net income fell by 77% to $37.2 million, with diluted earnings per share dropping to $0.46 from $2.01 in the prior year.
  • 4The International Merchant Services segment saw revenue more than double to $355.5 million and operating income increase substantially due to the HSBC acquisition.
  • 5North America Merchant Services segment revenue grew by 11% to $1,106.9 million, but operating margins decreased slightly.
  • 6The company acquired ZAO United Card Service in Russia for $75.0 million, expanding its European presence.
  • 7Debt levels increased due to funding acquisitions, with a new $300 million term loan agreement entered into shortly after the fiscal year-end.

Frequently Asked Questions

The primary reason for the substantial decrease in net income was a $147.7 million impairment charge recorded in the money transfer business. This impairment charge resulted from a goodwill impairment test, indicating a decline in the expected future cash flows from this segment due to macroeconomic conditions affecting its customer base, such as the downturn in the U.S. construction market and immigration trends.

The acquisition of a 51% stake in HSBC Merchant Services LLP on June 30, 2008, significantly boosted the International Merchant Services segment. This acquisition led to a more than doubling of segment revenue and a substantial increase in operating income and operating margin. It was a key factor in the overall revenue growth for fiscal year 2009.

The company faces a challenging environment for its money transfer business, particularly in the United States. Factors such as a slowing U.S. economy, downturns in the housing and construction markets, and changes in immigration policies have negatively impacted this segment's customer base and projected future cash flows, leading to the significant impairment charge.

Foreign currency exchange rate fluctuations had a negative impact on the company's financial results. For fiscal year 2009, currency rate fluctuations reduced reported revenues by $88.2 million and diluted earnings per share by $0.23. This was due to the translation of revenues and expenses from international operations conducted in local currencies into U.S. dollars.