10-QPeriod: Q3 FY2003

GLOBAL PAYMENTS INC Quarterly Report for Q3 Ended Nov 30, 2003

Filed January 14, 2004For Securities:GPN

Summary

Global Payments Inc. (GPN) reported its third-quarter results for the period ending November 30, 2003. The company demonstrated solid revenue growth, with a 15% increase year-over-year for the quarter and an 11% increase for the year-to-date period. This growth was primarily driven by its direct merchant services, with a notable contribution from the recent acquisition of Latin America Money Services (DolEx). Despite a reported increase in restructuring charges and sales, general, and administrative expenses, the company managed to achieve a 9% increase in net income for both the quarter and the year-to-date period, translating to improved earnings per share. The company also highlighted its strengthened liquidity position, with a significant increase in cash and cash equivalents and a new, larger revolving credit facility. Management expressed confidence in its ability to fund operations and future growth initiatives. While facing some headwinds in its Canadian operations and the ongoing Air Canada situation, Global Payments appears to be navigating these challenges effectively and is focused on continued expansion and operational efficiency.

Key Highlights

  • 1Revenue increased by 15% to $148.4 million for the three months ended November 30, 2003, compared to $129.5 million in the prior year.
  • 2Net income rose by 9% to $14.9 million for the three months ended November 30, 2003, compared to $13.6 million in the prior year, with diluted EPS increasing to $0.38 from $0.36.
  • 3The acquisition of Latin America Money Services (DolEx) was completed on November 12, 2003, contributing $3.8 million in revenue in the current quarter.
  • 4Cash and cash equivalents significantly increased to $79.8 million as of November 30, 2003, up from $38.0 million at May 31, 2003.
  • 5A new three-year, $350 million revolving credit facility was established on November 25, 2003, replacing previous credit facilities and providing enhanced liquidity.
  • 6Restructuring charges increased to $3.1 million for the quarter, primarily related to facility closures and staff reductions, impacting operating margins.
  • 7The company anticipates fiscal 2004 revenue between $588 million and $608 million, with diluted EPS projected at $1.65 to $1.72.

Frequently Asked Questions

Revenue growth was primarily driven by increases in the company's direct merchant services offering, experiencing high-teen transaction growth. The recent acquisition of Latin America Money Services (DolEx), which closed on November 12, 2003, also contributed to revenue growth, particularly in the money transfer segment.

Global Payments Inc. has significantly strengthened its liquidity. Cash and cash equivalents increased substantially to $79.8 million from $38.0 million. Furthermore, the company entered into a new, larger $350 million revolving credit facility, which replaces its previous credit lines and provides greater financial flexibility for operations and potential acquisitions.

The DolEx acquisition, completed in November 2003, is recognized under the purchase method of accounting. It contributed $3.8 million to the company's money transfer revenue in the current quarter. The acquisition involved a purchase price of approximately $192 million, financed through a combination of cash, promissory notes (which were subsequently repaid), and stock issuance. The integration of DolEx is expected to be a key component of the company's growth strategy in the money transfer services sector.

A notable contingent liability relates to Air Canada's restructuring. While the company has a reserve for potential chargebacks, the potential exposure is estimated to be between $26-$33 million (U.S.) if Air Canada's restructuring is unsuccessful and it liquidates. Management believes a material loss is unlikely as long as Air Canada continues to honor tickets. Additionally, the company is undergoing restructuring activities which have resulted in charges and are expected to continue into fiscal 2004.