10-QPeriod: Q1 FY2013

GLOBAL PAYMENTS INC Quarterly Report for Q1 Ended Feb 28, 2013

Filed April 2, 2013For Securities:GPN

Summary

This 10-Q filing for Global Payments Inc. for the period ending February 28, 2013, reveals a mixed financial performance. While revenues showed a solid increase of 8% for the quarter and 9% year-to-date, operating income experienced a slight decline of 2% for the quarter and 3% year-to-date. This dip in profitability is largely attributable to the ongoing costs and impact of the processing system intrusion incident identified in early 2012, which incurred significant expenses related to remediation, fraud losses, and fines, despite substantial insurance recoveries. The company completed several strategic acquisitions during the period, including Accelerated Payment Technologies (APT) and Banca Civica, aimed at expanding its direct distribution capabilities and market presence. These acquisitions, along with the ongoing operational integration and a slight increase in borrowing to fund them, contributed to an increase in debt levels. Despite these challenges, the company's liquidity remains adequate, supported by operating cash flows and available credit facilities.

Financial Highlights

48 data points
Beta

Revenue

$578.75M

Net Income

$58.46M

10.1% Net Margin

EPS (Diluted)

$0.38

Total Assets

$3.08B

Cash & Equivalents

$682.96M

Free Cash Flow

$204.77M

Financial Statements
Beta
Revenue$578.75M
SG&A Expenses$271.70M
Operating Expenses$487.97M
Operating Income$90.77M
Net Income$58.46M
EPS (Basic)$0.38
EPS (Diluted)$0.38
Shares Outstanding (Basic)155.51M
Shares Outstanding (Diluted)156.65M

Key Highlights

  • 1Revenues increased by 8% year-over-year for the three months ended February 28, 2013, reaching $578.7 million.
  • 2Year-to-date revenues grew by 9% to $1,757.6 million for the nine months ended February 28, 2013.
  • 3Operating income saw a slight decrease of 2% for the quarter and 3% year-to-date, impacted by costs related to the processing system intrusion.
  • 4The company completed the acquisition of Accelerated Payment Technologies (APT) for $413.0 million and the Banca Civica merchant acquiring business for $22.9 million.
  • 5Total debt increased significantly to $1,122.9 million from $528.4 million in the prior fiscal year-end, largely due to funding acquisitions and debt repayment.
  • 6Comprehensive income attributable to Global Payments decreased significantly to $33.3 million for the quarter, down from $78.3 million in the prior year.
  • 7The company experienced a significant decrease in net income attributable to noncontrolling interests, reflecting the purchase of HSBC's stake in Global Payments Asia-Pacific Limited.

Frequently Asked Questions

Revenue growth was primarily driven by increases in the U.S. and European markets, with contributions from the U.S. ISO channel and the gaming business. Additionally, reduced interchange expenses due to legislation also positively impacted reported revenues.

The processing system intrusion incident, identified in early 2012, has resulted in significant expenses totaling $92.7 million to date. While the company has received substantial insurance recoveries ($20 million in the nine months ended Feb 28, 2013), these costs have negatively impacted operating income and margins. The company has completed remediation and returned to PCI DSS compliance.

The company completed the acquisitions of Accelerated Payment Technologies (APT) and Banca Civica. These acquisitions were funded through debt, leading to a substantial increase in total debt from $528.4 million to $1,122.9 million. While strategically important for expanding distribution and market presence, the increased debt and associated interest expense will impact future profitability.

The company's liquidity appears adequate, with cash and cash equivalents totaling $683.0 million at February 28, 2013. Operating activities provided $204.8 million in cash flow for the nine months ended February 28, 2013, and the company has significant available borrowing capacity under its credit facilities. However, a substantial portion of cash is held by foreign subsidiaries and is considered permanently reinvested.