--Company recorded another charge related to data breach
--Company signed an agreement with Discover to offer PayPal
acceptance to its U.S. merchants
--International growth has been key
(Adds details about data breach in paragraphs 7-9.)
By Anna Prior
Global Payments Inc.'s (GPN) fiscal first-quarter earnings fell
27% as the payment-processing company was hit by continued
remediation charges related to a security breach earlier in the
year.
"We are executing on our fiscal 2013 goals and initiatives while
we make steady progress on the data intrusion remediation,"
Chairman and Chief Executive Paul R. Garcia said Thursday.
The company also said it has signed an agreement with Discover
Financial Services (DFS) to offer PayPal acceptance to Global
Payments's U.S. merchant base.
Increased competition in the payment space from fast-growing
mobile-payments provider Square has led to industry incumbents
looking for more ways to expand. Last month, Global Payments agreed
to buy payments-technology company Accelerated Payment Technologies
for $413 million in cash. And in July, the firm said it had agreed
to acquire the remaining 44% interest in its merchant services
joint venture in the Asian-Pacific region, Global Payments Asia
Pacific Ltd., from HSBC Holdings PLC (HBC, HSBA.LN, 0005.HK) for
$242 million. The company said Thursday it expects to close both
deals in the second quarter.
Strength in international markets has bolstered Global Payment's
recent results, helping to offset rising operating expenses tied to
its stepped-up infrastructure investments and expansion efforts. In
the most recent quarter, operating expenses rose 17%.
Chief Financial Officer David Mangum said during a conference
call Thursday that costs tied to a data breach disclosed in late
March would total $55 million to $65 million during fiscal 2013,
including a pretax charge of $24 million in the fiscal first
quarter. Net expenses tied to the breach after $28 million of
expected insurance proceeds are applied should total $25 million to
$35 million, Mr. Mangum said.
The company took a charge of $84 million in the fiscal fourth
quarter related to the breach, which involved unauthorized access
to its North American processing system. Global Payments has said
it believes no more than 1.5 million card numbers were "exported,"
or taken from its processing network, though it supplied a large
number of card numbers to card-payments networks for
monitoring.
Information accessed included card numbers and other details
that can be used to create counterfeit cards but didn't contain
cardholder names, addresses or Social Security numbers, the company
said.
For the quarter ended Aug. 31, Global Payments reported a profit
of $46.7 million, or 59 cents a share, down from $64 million, or 79
cents a share, a year earlier. Cash earnings slipped to 87 cents
from 88 cents. Revenue rose 8.8% to $590.3 million.
Analysts polled by Thomson Reuters had recently projected a
per-share profit of 87 cents and revenue of $583.6 million.
In the larger North American market, revenue rose 13%.
International merchant services revenue edged down 0.4%.
Global Payments affirmed its full-year outlook.
Shares closed at $43.80 and were flat after hours. The stock has
fallen 7.6% since the start of the year.
-Andrew R. Johnson contributed to this article.
Write to Anna Prior at anna.prior@dowjones.com
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