8-KOther Events

GLOBAL PAYMENTS INC 8-K Report (Jul 17, 2002)

Filed July 17, 2002For Securities:GPN

Summary

This 8-K filing from Global Payments Inc. (GPN), dated July 17, 2002, primarily reports a significant change in accounting principle related to the adoption of SFAS 142, "Goodwill and Other Intangible Assets." Effective June 1, 2001, the company ceased amortizing goodwill and certain indefinite-lived intangible assets. Specifically, GPN recorded a non-cash charge of $24.6 million ($16.0 million net of tax) as a cumulative effect of a change in accounting principle as of June 1, 2001. This charge resulted from the write-down of a MAPP trademark to zero fair value after its acquisition in 1996 and subsequent decision to abandon the trademark following a rebranding and the termination of marketing alliances with MasterCard. This accounting change had a material impact on the company's reported net income and earnings per share for the first quarter ended August 31, 2001. The "as revised" figures show a net loss of $3,125,000 and a diluted EPS of ($0.09), compared to "as reported" figures that would have reflected income before the cumulative effect of $12,874,000 and diluted EPS of $0.34. Investors should note that the "as reported" figures exclude the impact of the SFAS 142 change, while the "as revised" figures include it, reflecting the true financial position under the new accounting standard.

Key Highlights

  • 1Adoption of SFAS 142: Global Payments Inc. is implementing Statement of Financial Accounting Standard No. 142, which stops the amortization of goodwill and certain indefinite-lived intangible assets.
  • 2Impairment of MAPP Trademark: The company wrote down its MAPP trademark, acquired in 1996, to a fair value of zero.
  • 3Non-Cash Charge Recorded: A $24.6 million ($16.0 million net of tax) charge was recognized as a cumulative effect of a change in accounting principle as of June 1, 2001.
  • 4Impact on Net Income: The accounting change resulted in a reported net loss of $3.1 million and diluted EPS of ($0.09) for the first quarter ended August 31, 2001, in contrast to a positive net income if the charge were excluded.
  • 5Rebranding and MasterCard Relationship: The write-down is linked to a rebranding effort under the Global Payments Inc. name and logo, and the termination of marketing alliances with MasterCard.
  • 6Balance Sheet Adjustments: The adoption of SFAS 142 also led to a reduction in total assets and shareholders' equity on the balance sheet.

Frequently Asked Questions

This 8-K filing is primarily to report the adoption of SFAS 142, "Goodwill and Other Intangible Assets," which changed how the company accounts for goodwill and certain intangible assets. This led to a significant non-cash charge related to the impairment of a trademark.

The accounting change resulted in a $24.6 million ($16.0 million net of tax) charge as a cumulative effect of a change in accounting principle. This turned what would have been a net income of $12.9 million into a net loss of $3.1 million for the first quarter ended August 31, 2001, and negatively impacted basic and diluted earnings per share.

The MAPP trademark's fair value was determined to be zero due to the company's decision to legally abandon it. This decision was made in conjunction with a rebranding initiative under the Global Payments Inc. name and logo, and the termination of marketing alliances with MasterCard, meaning the trademark was no longer in use or intended for future use.

The write-down of the trademark reduced the company's total assets by $23,085,000 (from $464,459,000 to $441,374,000) and total shareholders' equity by $16,000,000 (from $284,414,000 to $268,414,000) as of the effective date of the accounting change.