10-KPeriod: FY2012

GLOBAL PAYMENTS INC Annual Report, Year Ended May 31, 2012

Filed July 27, 2012For Securities:GPN

Summary

Global Payments Inc. (GPN) reported an 18% increase in revenue to $2.20 billion for fiscal year 2012, driven by growth in most of its global markets and a strategic acquisition in Spain. However, the company experienced a 10% decrease in net income to $188.2 million, or $2.37 per diluted share, primarily due to a significant $84.4 million expense related to a processing system intrusion incident. This incident led to a temporary removal from PCI DSS compliant provider lists and incurred substantial costs for investigation, remediation, and potential fraud losses. The North America segment saw a 15% revenue increase, while the International segment experienced a strong 28% revenue growth, highlighting the company's expanding global footprint. Despite revenue growth, operating margins in North America declined slightly, partly due to "ISO channel dilution" and the impact of the Durbin amendment on debit interchange fees. The International segment, conversely, saw an improvement in operating margins. The company also completed three targeted acquisitions in fiscal 2012, further strengthening its international and e-commerce capabilities.

Financial Highlights

24 data points
Beta

Revenue

$2.20B

Net Income

$188.16M

8.5% Net Margin

EPS (Diluted)

$1.19

Free Cash Flow

-$173.47M

Financial Statements
Beta
Revenue$2.20B
SG&A Expenses$1.03B
Operating Expenses$1.90B
Operating Income$307.35M
Net Income$188.16M
EPS (Basic)$1.20
EPS (Diluted)$1.19
Shares Outstanding (Basic)157.66M
Shares Outstanding (Diluted)158.86M

Key Highlights

  • 1Revenue increased by 18% to $2.20 billion in fiscal 2012, primarily driven by international expansion and acquisitions.
  • 2Net income attributable to Global Payments decreased by 10% to $188.2 million, or $2.37 per diluted share.
  • 3A significant processing system intrusion incident incurred $84.4 million in expenses, impacting profitability.
  • 4North America merchant services revenue grew 15%, with operating income increasing, though margins saw a slight decline.
  • 5International merchant services revenue surged by 28%, with a notable improvement in operating margins.
  • 6The company completed three targeted acquisitions during fiscal 2012, expanding its international and e-commerce presence.
  • 7Global Payments continues to operate and sign new merchants despite the system intrusion incident.

Frequently Asked Questions

Revenue growth was primarily driven by strong performance across most of Global Payments' global markets and the impact of its acquisition in Spain in December 2010.

The decrease in net income and diluted earnings per share was mainly due to a significant expense of $84.4 million related to a processing system intrusion incident that occurred in March 2012. This expense included costs for investigation, remediation, and an accrual for estimated fraud losses, fines, and other charges.

The intrusion led to certain card networks removing Global Payments from their list of PCI DSS compliant service providers. The company hired a Qualified Security Assessor to conduct an independent review and is working on remediation to regain compliance. Despite this, the company stated it continued to sign new merchants and process transactions globally.

The North America segment saw a 15% increase in revenue, with a slight decrease in operating margins. The International segment reported a robust 28% revenue increase and an improvement in operating margins, indicating strong growth in overseas markets.

Yes, Global Payments completed three targeted acquisitions in fiscal year 2012: Alfa-Bank's merchant acquiring business in Russia, a merchant acquiring business in Malta, and a U.S. e-commerce portfolio. These acquisitions were made to expand the company's international and e-commerce presence.