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Heartland Payment Systems Reports 26% Increase In Fourth Quarter Adjusted Earnings Per Share

Stocks in this article: HPY

During the three months ended December 31, 2012, the Company incurred approximately $35,000, or less than one cent per share, for legal fees and costs it incurred related to the Processing System Intrusion. During the three months ended December 31, 2011, the Company expensed approximately $0.2 million, or less than one cent per share, related to the Processing System Intrusion. During the full year of 2012, the Company incurred approximately $0.6 million, or $0.01 per share, for legal fees and costs it incurred related to the Processing System Intrusion. During the full year of 2011, the Company expensed approximately $1.0 million, or $0.02 per share, related to the Processing System Intrusion.

Material Limitations Associated with the Use of Non-GAAP Financial Measures - Non-GAAP net income and non-GAAP earnings per share that exclude the impact of share-based compensation expense and the Provision for Processing System Intrusion may have limitations as analytical tools, and these non-GAAP measures should not be considered in isolation from or as a replacement for GAAP financial measures, and should be considered only as supplemental to the Company's GAAP financial measures. Some of the limitations associated with the use of these non-GAAP financial measures are:

  • Share-based compensation expense, and Processing System Intrusion costs and recoveries that are excluded from non-GAAP net income and non-GAAP earnings per share can have a material impact on cash flows, GAAP net income and GAAP earnings per share.
  • Other companies may calculate non-GAAP net income and non-GAAP earnings per share that exclude the impact of similar expenses and recoveries differently than the Company does, limiting the usefulness of those measures for comparative purposes.

Usefulness of Non-GAAP Financial Measures to Investors - The Company believes that presenting non-GAAP net income and non-GAAP earnings per share that exclude the impact of the Provision for Processing System Intrusion and share-based compensation expense in addition to the related GAAP measures provides investors greater transparency to the information used by the Company's management for its financial and operational decision-making and allows investors to see the Company's results through the eyes of management. Additionally, the Company believes that the inclusion of these non-GAAP financial measures provides enhanced comparability in its financial reporting. The Company further believes that providing this information better enables its investors to understand the Company's operating performance and underlying business fundamentals, and to evaluate the methodology used by management to evaluate and measure such performance.

This press release contains non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. Pursuant to Regulation G, a reconciliation of these non-GAAP financial measures with the comparable financial measures calculated in accordance with GAAP for the three months and full years ended December 31, 2012 and 2011 follows:

   
Three Months Ended Year Ended

(In thousands, except per share):

December 31, December 31,

Net income attributable to Heartland

  2012       2011     2012       2011  

Non-GAAP - Adjusted net income attributable to Heartland

$ 17,245   $ 14,181   $ 74,965   $ 50,479  
Less adjustments:
Share-based compensation expense 3,775 4,578 14,187 9,548

Income tax benefit on share-based compensation expense

  (1,505 )   (1,754 )   (5,458 )   (3,635 )
After-tax share-based compensation expense   2,270     2,824     8,729     5,913  

Provision for processing system intrusion costs

35 222 563 1,012

Income tax benefit on provision for processing system intrusion

  (14 )   (85 )   (216 )   (384 )

After-tax provision for processing system intrusion costs

  21     137     347     628  
GAAP - Net income attributable to Heartland $ 14,954   $ 11,220   $ 65,889   $ 43,938  

Earnings per share

 
Non-GAAP - Adjusted net income per share $ 0.44 $ 0.35 $ 1.87 $ 1.26
Less: share-based compensation expense 0.06 0.07 0.22 0.15

Less: provision for processing system intrusion costs

          0.01     0.02  
GAAP - Net income per share $ 0.38   $ 0.28   $ 1.64   $ 1.09  
 

Shares used in computing net income per share

38,878 40,494 40,058 40,233




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