Global Payments Inc. (GPN) Q4 2010 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Global Payments Fourth Quarter Fiscal 2010 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to your host, Vice President of Investor Relations, Jane Elliott (sic) [Forbes]. Please go ahead.

Joining me on the call are Paul Garcia, Chairman and CEO; Jeff Sloan, President; and David Mangum, EVP and CFO. Before we begin, I’d like to remind you that some of the comments made by management during the conference call contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to vary, which are discussed in our public releases including our most recent 10-K. We caution you not to put undue reliance on forward-looking statements, and forward-looking statements made during this call speak only as of the date of this call. In addition, some of the comments made today on this call may refer to certain measures for full year fiscal 2010, which are not in accordance with GAAP. Management believes these results more clearly reflect comparative operating performance. For a full reconciliation of normalized to GAAP results in accordance with Regulation G, please see our press release filed as an exhibit to our Form 8-K dated today, July 27, 2010, which may be located under the Investor Relations area on our website at www.globalpaymentsinc.com. Now I'd like to introduce Paul Garcia. Paul?

Thank you, Jane, and thanks for joining us this afternoon. For our fiscal 2010 full year, and I should add, in the worst economy we've experienced in 75 years, we delivered solid financial performance with revenue growth of 12% to $1.642 billion and normalized diluted earnings per share from continuing operations of $2.54 or 21% growth compared to last year. Currency rates provided a lift to our financials during the year. And accordingly, full year revenue and normalized EPS growth rates were 11% and 15%, respectively on a constant currency basis. For our fourth quarter, we achieved revenue of $425 million, which represents 16% growth, and normalized diluted EPS from continuing operations of $0.58 or 35% growth over last year. On a constant currency basis, revenue and normalized diluted EPS grew 12% and 14%, respectively. Now I'd like to address several specific initiatives. First, I'm pleased to announce that we signed a new, multi-year referral agreement with CIBC. We remain strong, supportive partners, and we look forward to providing compelling merchant solutions for CIBC for many years to come. In regard to future Visa sponsorship in Canada, we have a number of alternatives including new bank sponsors and direct membership through our own Canadian loan company. We will choose the most advantageous approach to ensure a timely implementation well in advance of the March 2011 conclusion of the CIBC-Visa sponsorship agreement. Next, I'm pleased to announce that we are on schedule to migrate our U.S. platforms to G2, our proprietary front-end authorization system by the end of September. We successfully migrated a number of U.S. merchants over to G2 in a test fashion this summer. And based on the September migration date, we anticipate G2 generating approximately $4 million of cash savings in fiscal 2011, excluding depreciation expense of $2 million. The U.S. migration represents annualized cash savings of $6 million with annual depreciation of about $3 million. We are currently targeting Canada to be converted by the end of fiscal 2012 and the U.K. to be converted by the middle of fiscal 2013. It may be helpful to remind everyone that G2 provides Global Payments with a huge competitive advantage in terms of both economic leverage and product delivery. The significant scale advantages, in addition to the expanding level of savings we expect to achieve as we migrate, will become apparent as we grow volume and transactions over the coming years with very low incremental front-end cost in multiple markets around the world. We also continue to execute our strategy of leveraging our back-end platform, which performs pricing settlement and other back-office functions. We anticipate completing the U.K. migration to our own back-end system at the end of the third quarter of fiscal 2011. We expect this migration to provide overall service flexibility within our merchant operations and substantially greater pricing capabilities. I'm also pleased to announce the opening of our new Global Service Center or GSC in Manila, Philippines. Over the long-term, we anticipate this center will handle many of our customer and operational support functions. The center will initially focus on our international operations, and will eventually supplement services for all of our regions around the world. Lastly, I'm delighted to announce that HSBC recently received approval from the Beijing Bank Card Market Coordination Committee. This is the final step in a multi-year process to secure direct processing of renminbi transactions in China. Consequently, I am pleased to say that we will begin offering CUP card acquiring services to Chinese merchants by the end of the summer. Now here's David to discuss the financial details. David?

Thanks, Paul. I plan to review our fiscal 2010 results and then turn to fiscal 2011 expectations. During the fourth quarter, on a year-over-year basis, the dollar weakened against the Canadian dollar and the British pound. On a sequential basis, however, the U.S. dollar strengthened against the British pound and weakened against the Canadian dollar, about as we expected. U.S. Merchant Services revenue grew 18% for the quarter driven by our ISO channel and overall U.S. transaction growth of 19%. Average ticket amounts were slightly down sequentially from the third quarter and down 6% from last year. Overall, debit growth continues to outstrip credit growth. Total debit represents about 60% of our U.S. transaction base with PIN debit representing less than 10% of total transactions. Canadian transactions grew 7% for the quarter over last year, while average ticket amounts were slightly down sequentially as compared to third quarter and down 2% on a year-over-year basis. In local currency, Canadian revenue declined a little less than 1%. We continue to believe that macroeconomic conditions there remain challenging, resulting in spread compression and pressure on our total North America margins. International Merchant Services delivered revenue growth of 9% in Q4, primarily driven by strong performances in Russia and the Asia-Pacific region. Asia Pacific revenue grew 28% for the quarter due in part to strong growth and dynamic currency conversion. Total normalized company operating margins from continuing operations for the fourth quarter were 17.4%, up from 17.3% last year. Full year 2010 normalized operating margins from continuing operations were 19.8%, essentially flat with last year's 20%, which we regard as solid performance given the challenges we faced this year. Earnings from normalized continuing operations for the fourth quarter benefited a bit from an effective tax rate of 28.8%, which reflects the improved performance of our Asia-Pacific business. Our full year 2010 normalized effective tax rate was about what we expected at 29.5%. We completed the sale of our Money Transfer businesses at the end of May, and received $85 million in proceeds, which we used for our stock-repurchase program. We completed our 100 million share buyback program in the quarter purchasing about 2.4 million shares at an average price of $41.97. For FY 2010, we generated free cash flow of a little over $250 million. We define free cash flow as net operating cash flows excluding the impact of settlement assets and obligations, less capital expenditures and distributions to noncontrolling interests. As of May 31, 2010, we have placed $54.9 million of G2 assets into service, and we expect to begin depreciating the U.S. portion starting in October of 2010. We expect annual U.S. G2 depreciation to be about $3 million initially with $2 million for the partial year in 2011. Turning now to our current expectations for FY 2011. From a foreign-exchange perspective, our outlook for fiscal 2011 assumes that the U.S. dollar remains constant or slightly weakens against the Canadian dollar, and remains constant or slightly strengthens against the British pound, Czech koruna and the Russian ruble. We believe the net effect likely creates a modest headwind for us in 2011. Fluctuations in currency rates, of course, may cause variances to our outlook. For the U.S, we anticipate overall revenue growth to be in the low-double digit range for fiscal 2011. We expect continued strong performance from the ISO channel, though perhaps a slightly slower overall growth rate given the sheer size of that channel, and solid U.S. direct and check and gaming growth. Last month, we lost a merchant from our U.S. Direct business. While less than 1% of U.S. revenue, the account was highly profitable. The loss will remove approximately $0.06 of earnings per share representing two percentage points of earnings growth from overall company diluted earnings per share in fiscal 2011. Our 2011 earnings and growth guidance, of course, incorporates this one-time loss. In Canada, we expect local currency revenue to be about flat with prior year. In total, we expect margins to be down a bit in North America driven by ISO growth and the challenges through which we are working in Canada. For international, first, we anticipate annual revenue growth in the mid- to high teens again for Asia-Pacific. In Europe, as we annualize the Russian acquisition, revenue growth understandably will slow a bit. We expect solid, mid-single digit revenue growth in Russia to offset declines in our business in the Czech Republic where some of the large customer renewals we discussed in fiscal 2010 will not annualize until later in fiscal 2011. In the U.K, we are in the process of exiting some high-risk, low-margin International Acquiring business that came to Global Payments via the original acquisition, to better align with our overall approach to risk management. This will not have a meaningful effect on overall international profitability, but will reduce U.K. local currency revenue growth in 2011 to low- to mid-single digits. Regardless, we anticipate another year of strong double digit profit growth from the U.K. Given the anticipated strength of the U.S. dollar, we expect overall international revenue growth in U.S. dollars to be in the low-single digits. We expect international margins to continue to expand nicely in 2011 due to ongoing scale benefits in Asia, strong operating profit growth in the U.K. and continued progress in Russia. We expect the total company operating margin to be as much as flat with our 2010 margin of about 19.8%. We expect the 2011 effective tax rate to be consistent with 2010, with the first half of the year slightly higher than our full year rate, and we expect LIBOR to increase steadily over the course of the year. We expect diluted shares to approach 81 million for the year. We anticipate spending about $55 million in ongoing capital expenditures primarily for terminals in Canada, the U.K, Asia-Pacific and Russia and infrastructure investments. In addition, we expect to incur one-time capital investments of about $12 million on the Global Service Center and about $17 million on the new data center we discussed last quarter, for a total outlay of as much as $85 million for the year. Our 2011 normalized EPS expectations of $2.68 to $2.77 exclude $14 million or $0.12 of start-up costs relating to the new Global Service Center. For those of you tracking cash earnings, amortization expense for continuing operations after non-controlling interest for the fiscal year 2010 totaled about $30 million. Total normalized stock compensation for the year totaled about $15 million, which excludes amounts related to the money transfer divestiture and certain one-time termination benefits. For fiscal 2011, we expect acquisition-related amortization expense of about $29 million, and stock compensation of about $17 million. Please note that amortization will fluctuate over the course of the year due to currency translation. And now, I'll turn the call back over to Paul.

Thanks, David. Based on our current outlook for continuing operations, we expect fiscal 2011 annual revenue of $1.735 billion to $1.770 billion or 6% to 8% growth over fiscal 2010. This would be 7% to 9% growth on a constant currency basis. We also expect fiscal 2011 diluted EPS from continuing operations of $2.68 to $2.77, reflecting 6% to 9% growth over fiscal 2010, which would be $2.71 to $2.79 or 7% to 10% growth on a constant currency basis over last year. Before we go to questions, I want to take a moment to discuss our long-term opportunities. The adoption of electronic payments around the world continues to fuel both our industry's overall growth and our organic growth. We continue to believe that our mix of businesses in mature markets that yield higher margins and investable cash flows, and in earlier stage, long-term growth markets such as China, Russia and India, provide a solid platform for both near- and long-term growth. As I consider our company's growth prospects, I'm excited about our unique position in Asia, and particularly China; our leadership position in Russia and our market position in the U.K. In addition, the opportunity to expand into new and existing markets is stronger than ever before. Speaking of expansion and based on the inherent operating leverage in our business, which will be further enhanced by the Global Service Center and the roll out of G2, and the full benefit of the back-end U.K. migration, we are confident that FY 2012 and beyond will witness tangible margin expansion. Operator, we will now go to questions.

Ladies and gentlemen, thank you for standing by, and welcome to the Global Payments Fourth Quarter Fiscal 2010 Earnings Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to your host, Vice President of Investor Relations, Jane Elliott (sic) [Forbes]. Please go ahead.

Joining me on the call are Paul Garcia, Chairman and CEO; Jeff Sloan, President; and David Mangum, EVP and CFO. Before we begin, I’d like to remind you that some of the comments made by management during the conference call contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to vary, which are discussed in our public releases including our most recent 10-K. We caution you not to put undue reliance on forward-looking statements, and forward-looking statements made during this call speak only as of the date of this call. In addition, some of the comments made today on this call may refer to certain measures for full year fiscal 2010, which are not in accordance with GAAP. Management believes these results more clearly reflect comparative operating performance. For a full reconciliation of normalized to GAAP results in accordance with Regulation G, please see our press release filed as an exhibit to our Form 8-K dated today, July 27, 2010, which may be located under the Investor Relations area on our website at www.globalpaymentsinc.com. Now I'd like to introduce Paul Garcia. Paul?

Thank you, Jane, and thanks for joining us this afternoon. For our fiscal 2010 full year, and I should add, in the worst economy we've experienced in 75 years, we delivered solid financial performance with revenue growth of 12% to $1.642 billion and normalized diluted earnings per share from continuing operations of $2.54 or 21% growth compared to last year. Currency rates provided a lift to our financials during the year. And accordingly, full year revenue and normalized EPS growth rates were 11% and 15%, respectively on a constant currency basis. For our fourth quarter, we achieved revenue of $425 million, which represents 16% growth, and normalized diluted EPS from continuing operations of $0.58 or 35% growth over last year. On a constant currency basis, revenue and normalized diluted EPS grew 12% and 14%, respectively. Now I'd like to address several specific initiatives. First, I'm pleased to announce that we signed a new, multi-year referral agreement with CIBC. We remain strong, supportive partners, and we look forward to providing compelling merchant solutions for CIBC for many years to come. In regard to future Visa sponsorship in Canada, we have a number of alternatives including new bank sponsors and direct membership through our own Canadian loan company. We will choose the most advantageous approach to ensure a timely implementation well in advance of the March 2011 conclusion of the CIBC-Visa sponsorship agreement. Next, I'm pleased to announce that we are on schedule to migrate our U.S. platforms to G2, our proprietary front-end authorization system by the end of September. We successfully migrated a number of U.S. merchants over to G2 in a test fashion this summer. And based on the September migration date, we anticipate G2 generating approximately $4 million of cash savings in fiscal 2011, excluding depreciation expense of $2 million. The U.S. migration represents annualized cash savings of $6 million with annual depreciation of about $3 million. We are currently targeting Canada to be converted by the end of fiscal 2012 and the U.K. to be converted by the middle of fiscal 2013. It may be helpful to remind everyone that G2 provides Global Payments with a huge competitive advantage in terms of both economic leverage and product delivery. The significant scale advantages, in addition to the expanding level of savings we expect to achieve as we migrate, will become apparent as we grow volume and transactions over the coming years with very low incremental front-end cost in multiple markets around the world. We also continue to execute our strategy of leveraging our back-end platform, which performs pricing settlement and other back-office functions. We anticipate completing the U.K. migration to our own back-end system at the end of the third quarter of fiscal 2011. We expect this migration to provide overall service flexibility within our merchant operations and substantially greater pricing capabilities. I'm also pleased to announce the opening of our new Global Service Center or GSC in Manila, Philippines. Over the long-term, we anticipate this center will handle many of our customer and operational support functions. The center will initially focus on our international operations, and will eventually supplement services for all of our regions around the world. Lastly, I'm delighted to announce that HSBC recently received approval from the Beijing Bank Card Market Coordination Committee. This is the final step in a multi-year process to secure direct processing of renminbi transactions in China. Consequently, I am pleased to say that we will begin offering CUP card acquiring services to Chinese merchants by the end of the summer. Now here's David to discuss the financial details. David?

Thanks, Paul. I plan to review our fiscal 2010 results and then turn to fiscal 2011 expectations. During the fourth quarter, on a year-over-year basis, the dollar weakened against the Canadian dollar and the British pound. On a sequential basis, however, the U.S. dollar strengthened against the British pound and weakened against the Canadian dollar, about as we expected. U.S. Merchant Services revenue grew 18% for the quarter driven by our ISO channel and overall U.S. transaction growth of 19%. Average ticket amounts were slightly down sequentially from the third quarter and down 6% from last year. Overall, debit growth continues to outstrip credit growth. Total debit represents about 60% of our U.S. transaction base with PIN debit representing less than 10% of total transactions. Canadian transactions grew 7% for the quarter over last year, while average ticket amounts were slightly down sequentially as compared to third quarter and down 2% on a year-over-year basis. In local currency, Canadian revenue declined a little less than 1%. We continue to believe that macroeconomic conditions there remain challenging, resulting in spread compression and pressure on our total North America margins. International Merchant Services delivered revenue growth of 9% in Q4, primarily driven by strong performances in Russia and the Asia-Pacific region. Asia Pacific revenue grew 28% for the quarter due in part to strong growth and dynamic currency conversion. Total normalized company operating margins from continuing operations for the fourth quarter were 17.4%, up from 17.3% last year. Full year 2010 normalized operating margins from continuing operations were 19.8%, essentially flat with last year's 20%, which we regard as solid performance given the challenges we faced this year. Earnings from normalized continuing operations for the fourth quarter benefited a bit from an effective tax rate of 28.8%, which reflects the improved performance of our Asia-Pacific business. Our full year 2010 normalized effective tax rate was about what we expected at 29.5%. We completed the sale of our Money Transfer businesses at the end of May, and received $85 million in proceeds, which we used for our stock-repurchase program. We completed our 100 million share buyback program in the quarter purchasing about 2.4 million shares at an average price of $41.97. For FY 2010, we generated free cash flow of a little over $250 million. We define free cash flow as net operating cash flows excluding the impact of settlement assets and obligations, less capital expenditures and distributions to noncontrolling interests. As of May 31, 2010, we have placed $54.9 million of G2 assets into service, and we expect to begin depreciating the U.S. portion starting in October of 2010. We expect annual U.S. G2 depreciation to be about $3 million initially with $2 million for the partial year in 2011. Turning now to our current expectations for FY 2011. From a foreign-exchange perspective, our outlook for fiscal 2011 assumes that the U.S. dollar remains constant or slightly weakens against the Canadian dollar, and remains constant or slightly strengthens against the British pound, Czech koruna and the Russian ruble. We believe the net effect likely creates a modest headwind for us in 2011. Fluctuations in currency rates, of course, may cause variances to our outlook. For the U.S, we anticipate overall revenue growth to be in the low-double digit range for fiscal 2011. We expect continued strong performance from the ISO channel, though perhaps a slightly slower overall growth rate given the sheer size of that channel, and solid U.S. direct and check and gaming growth. Last month, we lost a merchant from our U.S. Direct business. While less than 1% of U.S. revenue, the account was highly profitable. The loss will remove approximately $0.06 of earnings per share representing two percentage points of earnings growth from overall company diluted earnings per share in fiscal 2011. Our 2011 earnings and growth guidance, of course, incorporates this one-time loss. In Canada, we expect local currency revenue to be about flat with prior year. In total, we expect margins to be down a bit in North America driven by ISO growth and the challenges through which we are working in Canada. For international, first, we anticipate annual revenue growth in the mid- to high teens again for Asia-Pacific. In Europe, as we annualize the Russian acquisition, revenue growth understandably will slow a bit. We expect solid, mid-single digit revenue growth in Russia to offset declines in our business in the Czech Republic where some of the large customer renewals we discussed in fiscal 2010 will not annualize until later in fiscal 2011. In the U.K, we are in the process of exiting some high-risk, low-margin International Acquiring business that came to Global Payments via the original acquisition, to better align with our overall approach to risk management. This will not have a meaningful effect on overall international profitability, but will reduce U.K. local currency revenue growth in 2011 to low- to mid-single digits. Regardless, we anticipate another year of strong double digit profit growth from the U.K. Given the anticipated strength of the U.S. dollar, we expect overall international revenue growth in U.S. dollars to be in the low-single digits. We expect international margins to continue to expand nicely in 2011 due to ongoing scale benefits in Asia, strong operating profit growth in the U.K. and continued progress in Russia. We expect the total company operating margin to be as much as flat with our 2010 margin of about 19.8%. We expect the 2011 effective tax rate to be consistent with 2010, with the first half of the year slightly higher than our full year rate, and we expect LIBOR to increase steadily over the course of the year. We expect diluted shares to approach 81 million for the year. We anticipate spending about $55 million in ongoing capital expenditures primarily for terminals in Canada, the U.K, Asia-Pacific and Russia and infrastructure investments. In addition, we expect to incur one-time capital investments of about $12 million on the Global Service Center and about $17 million on the new data center we discussed last quarter, for a total outlay of as much as $85 million for the year. Our 2011 normalized EPS expectations of $2.68 to $2.77 exclude $14 million or $0.12 of start-up costs relating to the new Global Service Center. For those of you tracking cash earnings, amortization expense for continuing operations after non-controlling interest for the fiscal year 2010 totaled about $30 million. Total normalized stock compensation for the year totaled about $15 million, which excludes amounts related to the money transfer divestiture and certain one-time termination benefits. For fiscal 2011, we expect acquisition-related amortization expense of about $29 million, and stock compensation of about $17 million. Please note that amortization will fluctuate over the course of the year due to currency translation. And now, I'll turn the call back over to Paul.

Thanks, David. Based on our current outlook for continuing operations, we expect fiscal 2011 annual revenue of $1.735 billion to $1.770 billion or 6% to 8% growth over fiscal 2010. This would be 7% to 9% growth on a constant currency basis. We also expect fiscal 2011 diluted EPS from continuing operations of $2.68 to $2.77, reflecting 6% to 9% growth over fiscal 2010, which would be $2.71 to $2.79 or 7% to 10% growth on a constant currency basis over last year. Before we go to questions, I want to take a moment to discuss our long-term opportunities. The adoption of electronic payments around the world continues to fuel both our industry's overall growth and our organic growth. We continue to believe that our mix of businesses in mature markets that yield higher margins and investable cash flows, and in earlier stage, long-term growth markets such as China, Russia and India, provide a solid platform for both near- and long-term growth. As I consider our company's growth prospects, I'm excited about our unique position in Asia, and particularly China; our leadership position in Russia and our market position in the U.K. In addition, the opportunity to expand into new and existing markets is stronger than ever before. Speaking of expansion and based on the inherent operating leverage in our business, which will be further enhanced by the Global Service Center and the roll out of G2, and the full benefit of the back-end U.K. migration, we are confident that FY 2012 and beyond will witness tangible margin expansion. Operator, we will now go to questions.

[Operator Instructions] And we'll go first to Tien-Tsin Huang with JP Morgan. Tien-Tsin Huang - JP Morgan Chase & Co: I’ll ask, I guess, on the G2 side, the cost-savings projections that you laid out. I'm curious, what's the calculation for that savings? Is it just the savings from converting to the new platform and sunsetting the old? Does it capture higher incremental margins as volume grows? Maybe if you can just elaborate on that.

Tien-Tsin, this is David. The base calculation for the first year is just what you described. It really is what would have been our run rate expenses for the year on the legacy platforms we expect to shut down over the course of, sort of, October, November, December, post the migration. Those go away and then what comes back in is the lower cost platform. So less resources necessary to run the platform, lower operating costs in general when you think of maintenance and base depreciation on the equipment itself. So that's the initial calculation for the first year. Your question is certainly pressing in that as we go beyond this into the future years is where we really see a lot of the benefit of G2 coming in. We get a real truly compounding effect, increasing returns leveraged from this platform when you begin to put all new volume onto a platform with very low incremental cost. Now if you go out, you heard in Paul’s comments, you go out a year or two, begin to lay all of your Canadian and U.K. volume on top of that, then you’ve got essentially all of your worldwide platforms on one platform. That really is where the true sizable benefits will begin to come in from G2 in the long term. But you're exactly right in characterizing '11 is the year where it's really just a substitution effect of new, slightly lower cost for the old legacy cost. And then follow it up with lower step functions as we go forward. And layer more and more volume on top of the same single platform. Tien-Tsin Huang - JP Morgan Chase & Co: Okay, got it. And then the start-up expenses in the Philippines, I think the $0.12. Is that service center going to ultimately replace your existing service center or is it really more supplemental? I'm trying to gauge if this is an added cost or a part of a broader consolidation effort.

Well, it's part of a broader effort at long-term margin expansion and cost control. So it is not by definition going to replace our existing centers. It will complement our existing centers. But remember, we obviously believe we'll see more and more volume, transactional and dollar volume, which will drive more and more calls to our call center, more and more charge backs, more and more of the activities that's still a center like this. So we think this will add an enormous amount of cost leverage and bold capacity to our infrastructure. So we'll have the ability to both balance our different loads of calls and begin to drive most of our growth to the offshore platform that’ll accommodate cheap incremental costs as well. Tien-Tsin Huang - JP Morgan Chase & Co: Okay, great. On the CIBC front, glad to hear the extension there. Any change in the economics net of the sponsorship change there that we need to consider?

Tien-Tsin, this is Paul, and the answer to that question is no. Tien-Tsin Huang - JP Morgan Chase & Co: Okay, good. That’s a easy and clear answer then. Just for you, Paul, do you have a view on long-term EPS growth for Global Payments? Obviously, there's a lot of moving pieces going on. You laid out your strategy, et cetera. I'm curious if there's a new thinking here that we have on long-term earnings growth for Global?

Well, Tien-Tsin, you're correct to pick up in the first time in our 10-year history, we've actually talked about a fiscal year, a whole year forward. We've never done that before, and we did that intentionally with a lot of circumspection. And the reason is that we feel very comfortable with the margin growth opportunities from G2, from the Global Service Center, from the back-end migrations, particularly the one in the U.K. Obviously, just the inherent leverage within the business and the growth prospects around the world. You add those together, it has to boil down to margin improvements. So we said we feel that strongly, let's just say it. So we said it.

We will go next to Jim Kissane with Bank of America-Merrill Lynch.

Paul, just following up on Tien-Tsin’s question there. Maybe your updated thoughts on financial reform now that it’s been signed. In particular, the interchange regulations?

Jim, we could spend the rest of the call on that. This Durbin Bill, we're speaking specifically about Durbin not Dodd-Frank. The Durbin Bill is in the hands of the Fed now, so we've got to wait and see what they do. But I will tell you, and I've said this to you personally over the years, I believe interchange is going to come down. I’m right. Interchange is coming down. So I think I’ve been validated in that. And I think it was obvious to everyone it had to. There’s too many forces that would conspire to have any other outcome but that. So interchange is coming down. I've also always said that interchange comes down, it's good for all the processors. We're in that bay where that rising tide lifts all those ships. So we’re part of that. So clearly, there's a benefit. Also I hasten to say that even the author of that Bill, Mr. Durbin, has never suggested, in fact, they’ve actually come out and said the opposite, that they do not believe that our industry, the acquiring industry, is anything but highly competitive, and they've actually said that. So no one is suggesting that we be regulated. However, with that said and done, we've got to be cautious about our pronouncements. You've got to be fair in how you would share those savings. It's clear that big merchants, especially those passed through, get it all. Smaller merchants are not going to get as much. Now here's the beauty of that. If somebody gets greedy, I will take their business. If I get greedy, they will take mine. And there are hundreds of service processors out there competing for that. Free enterprise will dictate the answer. I think it'll be a good one at the end of the day for everybody. And I think that's a lift for all of us. And one last thing, this is going to happen. I mean next summer, this is going to happen. We're going to see it out there, and we're going to be talking about it.

That’s helpful. And I guess a quick question or a clarification for David. Just the accounting policies around expensing or capitalizing the Manila facility?

Sure, Jim. There actually is very little capitalized. We're not going to capitalize. There are no development costs, for example, that go into building the facility. It really is the start-up cost to get a facility out there, get it running, get it furnished. So there's some capital around the furniture, but traditional capital with furniture with a regular depreciation life, et cetera. We're not creating intangible assets here, I guess, is probably the easiest way to answer that question.

And since Jeff is there, maybe -- Paul, obviously pipe in here, the M&A environment, maybe the pipeline out there, what valuations look like and your appetite at this point given G2 and the comments you said about the inherent leverage.

It's Jeff. I'm happy to address that. I mean just given my background that’s obviously an area that I spend a lot of time on historically. I would say from our perspective there's a fairly full pipeline of potential transactions that we're seeing currently. I think we're well positioned on almost all those. If you think about what we've done historically and I’ve worked with the company on most of these with CIBC and HSBC, for example. I think we've got a great track record managing integration and execution and getting synergies and additional revenue growth out of deals that we've done before. And I also think our balance sheet is such that we’re in a very good capital position. So I think from our point of view, Jim, we actually see a lot of opportunity there and it also plays into an area where I've spent a lot of time in. In terms of pricing, which is the other element of your question, that's going to vary with the capital markets and with who the buyer group is. I would say we feel very good in the current environment about our ability to compete very effectively for transactions that we're most interested in relative to our historical competition.

And we'll go next to Jason Kupferberg with UBS.

For FY '11 and the top and bottom line growth were obviously about the same here, and you guys talked about a flattish margin profile year-over-year in '11. So what are really the most significant offsets preventing better earnings growth this year? You're getting some G2 savings, unclear if that's necessarily as much as people might have thought, but is it just that you're going to continue to see more mix towards the ISO channel and then I know you have the direct merchant loss in the U.S. that you guys called out, but are there other factors here preventing the operating leverage from starting to come through?

Yes, Jason. I don't think there are any new factors. We really do have an enormous amount of ISO growth that continues to fuel a lot of our North American progress. We talked a little bit about the U.K. on the prepared comments. We'll still grow income there double digits despite exiting some businesses there that don't match our risk profile. The only other element to keep in mind is we’ve talked a lot in the last two or three quarters, we have some issues to work through in Canada. We think they're macro driven, but they relate to retention and new sales and just spread compression in general. It will take us a little while to work through those over the course of the year. So you probably won't see the full progress we might expect on an annual basis from our Canadian entity. But I really, I don't think there are any hidden surprises inside the pieces of the guidance. I think you put your finger on them in your question.

Okay. And then just walk us through the thought process with the Global Service Center in terms of excluding the start-up expenses from the guidance. I mean at a high level, I guess, it sounds like you're investing in a business and that's positive because you're tying that to your expectation for more volume and transaction growth over time. But just how you guys think about from kind of a policy perspective, what to include and exclude?

Right. Well I think from a policy perspective we’re looking at a significant one-time investment with the return over the next three to 10 years and beyond. In fact there's arguably a terminal value return on this thing. So when we think about policy we discuss it, for example, with the board or internally amongst the management team, it really is a validated investment with a significant one-time impact that has great returns over a long period of time. That really is the summary at the end of the day. There's no arcane internal process around this. We've got a capital investment, a pretty significant expense investment with really no offsetting benefit until you get to 2012 and beyond.

Okay. On the regulatory front, I know you guys reiterated that PIN debit is less than 10% of your transactions in the U.S. Would you expect that percentage to increase over time, if Sig. debit interchange rates get lowered, much, much closer to the PIN debit rates due to the Durbin amendment?

You know, Jason, I have to say that I think the bigger pony is in the signature. In a while, I think PIN debit will go down. PIN debit is already highly competitive. I think it'll get less expensive, but I think there's going to be a bigger adjustment in the signature debit side. That's 50% of the volume in the U.S. 50%, and that's pretty much standard across the board. And clearly our expense, but I don't think that's atypical. That's going to be the bigger impact. Now, if I just take the spirit of your question, will you get a shift into more PIN and signature? The card issuers haven't been heard from yet either. I mean they're part of this. They may, I'm not suggesting this, but they may offer additional benefits for people to use a credit card and not necessarily. And so that's another piece of this that needs to work through. So I would say, I would think probably immediately you’re not going to get a lot of switch because I think the merchant only has so much opportunity to actually influence a consumer payment. And that's kind of the big fallacy in this whole discussion, they only have so much opportunity. At the end of the day, the consumers going to pick. And what's in their wallet may be more determined by the financial institutions. So there’s a little more chapter to be played out here.

And, Jason, maybe to augment that with a pure growth side of the answer. If you had a view of our metrics at a more detailed level, which unfortunately you don't, but when you take our transaction growth, we talk about PIN and signature. Although if you look at our full year channels, our PIN debit is growing faster than signature, it's only a hair faster than signature. Debit overall is growing rapidly.

We'll go next to Kartik Mehta with Northcoast Research.

Dave, I just wanted to understand a comment you made on Canada. Is it more economically related, some of the issues you’re running through there? Or is it company-related or something specific, I guess, with Global Payment that's causing some of the headwinds for FY '11?

Kartik, I believe and we believe it starts with macroeconomic. And from there, you start with an environment where it's tough to grow, tough to convince consumers to come into your establishment. You end up in a situation where major merchants can more significantly discount and attract consumers into their stores, which will create a little bit of spread pressure for an acquirer like us given that they’re obviously operating at spreads a fraction of those of the middle and small market merchants. To that, you might see a little bit more attrition, which could be as simple as bankruptcies, and we've seen a number of those in our metrics over time. And then beyond that, overall is sort of the idea of spread compression to the market overall. Final piece of the puzzle is more growing presence of ISOs there, which obviously create a little more competition at the low end of the market. In addition if they’re a piece of our growth, as they are, they obviously come in at a slightly lower margin than the rest of the business. So all in, we start with a root cause of macro challenges in a difficult environment, and you move on to retention and new sales. We actually think our execution is steadily improving. I've talked before about again having to work through a couple of quarters, annualize some of the spread and really have our investments in retention and new sales come to fruition. As an example of that level of execution, we literally, recently renewed our largest customer in Canada. So we think we're making slow-and-steady progress that’ll be tangible as we get to the later part of '11 and into '12.

And let me add, if I may, Kartik, this is Paul, that Jeff Sloan, one of the areas that he’s going to be focusing on right out of the gate here is, in fact, Canada working with their management team. And we have excellent products and excellent services. But there are some things that we can probably do better and we are focused on those, and Jeff will be a great help in bringing clarity to that.

Paul, you talked about the margins in FY '12 and you sound extremely confident. I'm wondering is that confidence the result of what's happening with G2 and the U.K., even though you continue to execute well on the ISO business in North America, and that obviously puts pressure on your margin. So even with that pressure you believe that the other benefits are so great that margin should improve enough by '12?

Yes, Kartik, I think you said that perfectly. The back-end, the GSC, the Global Service Center, and G2, all come together even with the headwind of the ISOs continuing to grow very nicely. And that growth could slow a little bit. It has to, it’s the law of large numbers. But yes, we’ve considered all of that and feel confident enough to make that statement.

And then, maybe, you talked about acquisitions. Are the opportunities more domestic or international now? I know in the past we’ve really focused on international, but I’m just wondering if anything’s changed in that landscape?

The answer is both. There are some -- first of all, I would say that I think there are more opportunities, and that the marketplace is richer and riper now then I remember in years and years and years and years. But they are everywhere. I mean there's some in the U.S. There are opportunities in South America, there are opportunities in Asia and opportunities in Europe. And we are literally pursuing all of them. So Jeff, why don’t you give a little more color?

Yes, Kartik, I would say that the U.S. remains the largest market of opportunity just in terms of the payment pie in front of us. So obviously, we're spending a lot of time there. And there is, I think, a lot of opportunity that we’re seeing currently in the United States in terms of M&A potential. But exactly what Paul said, I also think there’s opportunities globally coming out of the current economic environment for us to really make a difference as we've done in the past with our other financial institution-related transactions to really move the ball forward in the M&A area, and we’re looking at those as well. So as I think, as we think about fiscal ’11 on the M&A side, I think the key thing for us is to make sure that we are seeing the opportunities that are out there which I think we are, and that we’re evaluating the right way, which I also believe that we’re doing. So I think we feel very good about where we are in that business today, and I would look for us to spend a lot of times in those areas.

You talked about pricing for acquisitions and demand for acquisitions. We hear a lot of talk about so much private money or private venture capital on the sideline. Is there more competition for these acquisitions, and could that have an impact on price?

Yes, Kartik, it's a great question. I would say that it's always been a highly competitive market. So not that competition today is really any different, in my experience, than it was the old, last economic cycle. I would say what’s different today, from my point of view, is that our relative position in that marketplace, with the history that we’ve got on the execution side, with our management team, with the deals that we've done and executed, I think, very well on, coupled with where we are from a balance sheet point of view, I do think today, relative to past cycles is very distinctive. So while the competition hasn't changed, in my experience, I think our positioning within the competition has really improved. And I think we're in a very good position in those markets.

I would just add one thing. I think, Kartik, we’re seeing more sponsors, less strategics. That's a bit of a change. And that will be interesting to see how that plays out too.

We'll take our next question from Tim Willi with Wells Fargo.

Two questions, both, I guess, around the competitive environment. Number one, if you could just talk a bit about the customer you identified that was going to cost you about $0.05 to $0.06 a share? Just any thoughts you might share as to why you’re confident that that's more of a one-time event per se as being indicative of any kind of competitive pressure you may see or expect to see in North America?

Yes, a very fair question. What happened is this was a customer that started in a relatively new service as a small customer. And had a small customer rate. This customer grew to be a significant customer, with us for years, and the rate never caught up. We, quite frankly, they were paying a small customer rate and they were becoming a sizable customer. This was not something that we handled well. It came to the customer's attention. They were justifiably angry and kind of fired us with prejudice. So let me be very frank. So that's not -- any of that is not good. However, I will tell you we have scrubbed everything. This is unique scenario. I mean this was a super unique scenario. Because you saw the impact on us, you can imagine the spread being charged to this guy. So it was a super unique scenario. It does not exist. We're not going to be coming to you in future quarters and saying there’s other scenarios like this. So it truly is unique.

Now was this one merchant or was this a selling organization? I can’t remember if you identified the type.

We did say, but it is actually a merchant. I think we did say it was a merchant. It is, let me qualify. It's not an association. It's a merchant.

And then just second around competition, maybe tying it into the M&A discussion with so much activity that appears to be out there. Number one, do you have any observations around the competitive behavior of some of your primary competitors as a whole in North America? Second, if we were to see some of the activity through the books that are being circulated, actually occur. Would history or your knowledge of the industry lead you to believe that there would be any kind of change in the competitive dynamic as it now exists? If we start to hear about properties changing hands and deals getting done, should we think about competitive issues any differently?

Yes, I think there's a couple of things. So I'm going to let the team kind of jump in on this one because this is a very good question. The competitive landscape has changed. So the kind of elephant in the room is the individual with the largest market share is focused on a number of things. They’re still a formidable competitor. But they're not out making a lot of acquisitions, and they're going through some management structure, and that does have an impact, in all fairness. Once again, they're still formidable and I don't wish them ill, but that's just the reality. We’ve another very large competitor, also here in Atlanta. Their CEO just announced that he'd be leaving and he's a very talented guy, quite frankly. And it's a loss for them and it's a gain for where he's going. He’s going in a noncompetitive industry. He’s a very bright guy, but once again, that organization is more than one person and they have some very good talent, and they’ll still remain a tough competitor. The ISO environment, a lot of books floating around ISO. Some are ours, some are not. And not all ISOs are exactly the same. Some are really more like direct merchant acquirers, where others are more traditional ISOs with lots of commission-only sales people. And some of these have been successfully offered, some are in process and some have actually been withdrawn. I think that this market continues to consolidate. I think that by definition changes things. But as I said to the earlier question that was asked, I think we're seeing more sponsors and less strategics. And that in and of itself is pretty unusual. And we believe we’re in a unique position. We're strategic, by definition, we have opportunities to make acquisitions and then consolidate them to our platforms and come up with big savings that a sponsor, by definition, usually can’t. So we’re pretty enthusiastic. You guys want to add something?

Yes, Tim, it’s Jeff. I guess what I would add to that is that consolidation and competition has been the nature of this business for a very long period of time. From our perspective, what will leave you coming out of the marketplace is opportunities like this, or opportunities for us to get bigger in our core business. So we welcome a lot of the competition and consolidation that we're seeing. On your question about the activity changing the nature of how we look at our business, I don't see that at all. I see this really as an opportunity for us to deploy capital, to continue growing in businesses that we're already in, that we know and that we like. I really see it as additional opportunity beyond what we would currently do.

We'll go next to Glenn Greene with Oppenheimer. Glenn Greene - Oppenheimer & Co. Inc.: I guess the first question would be on Europe. It looked like the growth really slowed down, at least year-over-year, and somewhat sequentially as well. Is it the U.K? Is it Czechoslovakia? Is it sort of paring back already some of those lower margin business in the U.K? Just a little bit more color on the slowdown in Europe.

Sure, Glenn. It is, indeed, the list you described. So it is the continued challenges in Czech Republic and I referenced earlier on the call, I think, that we've got a couple more customers renewing and it’ll affect us this year. One for the full year, one for half year, one for about a quarter of the year. In addition to just a challenging economic environment, the Czech Republic, so that's a part of it, and that will obviously carry over into '11. On the U.K. directly, yes, we began to exit, what we call the International Merchants Acquiring Business in the fourth quarter. So that's a headwind for us in Q4 when you look at the business sequentially or year-over-year. In addition, currency hit us pretty hard in the U.K. on the top line, a little on the bottom line as well for that matter in the fourth quarter. So you bring those couple of things into combination and that’s sort of your Europe answer for the fourth quarter. I think I would relate that to ’11 too while we’re on the topic. Just that it will take us a little while to watch that year-over-year growth in the U.K. come back to a very high positive number that we expect by the end of the year because this International Acquiring Business will be fully offered a piece of that, that we expect to go will be fully off in Q1, and of course, we'll have grow-overs in Q1, Q2 and Q3 on the way to getting back to annualizing it in Q4. Glenn Greene - Oppenheimer & Co. Inc.: Any way to sort of directionally size what that businesses is that you're exiting?

There isn't really a good way because at the end of the day we really don’t want to announce the number to the competitor to which it’s going. We obviously spent a lot of time with our customer there who brings us this volume, helping them have a fairly seamless exit to a competitor who is more willing to process some of the business that we historically don't. But it's tough to size. At the end of the day if I take you back to sort of the overall view of the guidance, we’re looking at low- to mid-single digit growth in the U.K. in local currency. Now what that means is this International Acquiring portfolio obviously declined, and our core Card business there is going to grow double digits. So we're pretty happy about that, and it's probably worth me emphasizing it. Double digit revenue growth in the U.K. absent this International Acquiring Merchant base going away. So that's low- to mid-single digits in local currency. We expect currency to hurt us likely in the U.K. over the course of the year when you compare sort of July exit rates to where you think the curve’s going to be come end of next year. We think currency’s going to be a headwind in the U.K. And so, those are the pieces of the U.K. I can’t probably size it much better than that for you, Glenn. Glenn Greene - Oppenheimer & Co. Inc.: No, that’s great. That’s helpful. And then, just a different direction. Just an update on sort of where we stand in terms of ISO renewals and also the pricing environment. What are we to tell ourselves as we go into '11?

Glenn, this is Paul Garcia. So, Glenn, we have renewed all of our big ISOs and they're multiyear renewals. We got that accomplished actually months ago. So that's behind us and we feel very good about it. Glenn Greene - Oppenheimer & Co. Inc.: And then, David, just one more on the service center in the Philippines. Is there a way to think about the ongoing COGS run rate after the start-up costs that I would assume would be incremental?

There isn't a great way, Glenn. As we get toward '12, I can help you more with that. Let us get it started. We'll obviously be pulling it out all year long for you, but we’ll probably have a pretty good exit run rate in Q4 of '11 that’ll tell you how we kind of start into '12 and beyond, and then it would be incremental growth and they’re based on volume, so if it's okay with you, let’s watch as the year goes on and shapes. And I think you’ll have a pretty consistent view that will help you out as we get into the latter half of ’11.

I want to add something here too, Glenn. This obviously is a sensitive subject because it concerns people who are performing these functions in some cases in other places. So this center is initially being constructed. It can be sized. It can expand. And at the end of the day, it'll be less expensive to perform a function there than it is where we perform a function today. So it is part of the margin expansion. And operator, I just want to add one other thing before we go to another question. The first question from Tien-Tsin, he asked were there any change in the economics of CIBC and I said, "no." Now that is correct. There is nothing material. CIBC has approximately 1,000 branches. They refer business to us. We did change the metric which is confidential, but we did satisfy how the customer wanted to be paid and to give them encouragement to give us more and more merchant referrals and we're working with their management team to do that. There were some changes in that, but clearly nothing material.

We'll go next to Dan Perlin with RBC Capital Markets.

So now that you're going to be processing these CUP transactions, can you just remind us how we should be thinking about the margins or the spread around that? Are they going to look more like your direct business or are they going to look more like your ISO business?

Dan, Paul. It's going to be direct so what we have right now in Asia is we're processing CUP in many places, just not yet in mainland. We're also processing lots of Visa-MasterCard transactions in mainland. For example, the Apple stores get lots of plays. Big article in The Times a couple weeks ago about them. And there Apple’s rumored to be opening another 20 in Asia, but the big ones in Shanghai and Beijing are doing exceedingly well. That's our customer. So we make similar spreads on that business. A CUP will be a similar spread to a debit card, not a credit card. So it's a PIN-based debit transaction with similar cents per transactions, very similar to the U.S.

Okay, and then on G2, just so I’m clear, you talk about $4 million cash savings in '11. I think you said depreciation starts in October. My understanding was a big part of the cost-savings comes from the termination of your maintenance kind of service agreement that you had? When does that actually get terminated because it seems like you’re recognizing appreciation in advance of actually terminating that?

Right, so, Dan, we’re recognizing the depreciation from when the platform comes into service to get the matching principle right. You are exactly right though. All the costs, maintenance being one of them, for all the different boxes and the pieces, don’t all automatically come off 10 1. There are effectively duplicate expenses in the October, November, December time frame, and you really don't begin to see costs peel away until the second half of the fiscal year.

Right. And it was also my understanding that the biggest piece of the cost-savings ended up being that maintenance piece. There’s not a lot of headcount reduction. There’s not a lot of incremental resources that really have shifted here. It seems like that was the bigger chunk. So as we think about modeling that out, the big hit’s going to come positive, post December. Is that what you’re saying?

That's exactly right, Dan. I could not have said it better.

So the revenue growth in the U.S. was quite strong on a sequential basis, and that's just a function of ISOs kind of continually ramping up, and you're seeing some improvement in direct? I wasn't clear on that.

Yes, for the fourth quarter, specifically, it's ISO-fueled, it’s some improvement in direct that we think carries into '11 and then it is real improvement in check and gaming. It’s sequential growth in check and gaming for the first time in quite some time, that we think sets us up for a very strong year in check and gaming in 2011.

Did you recently win that Harris contract from GCA?

This is Paul. We don't comment on that. And I will tell you that we are delighted with our business in the check business and the check/gaming business and I will also tell you that I believe, we're taking market share, if any of that is helpful, Dan.

That’s great. It’s the first time I’ve heard you kind of comment on positive results in check and gaming in that context.

Let me hasten to say that business is doing very well, and we are forecasting for it to continue primarily fueled on the gaming side. To put a finer point on it for the last year or so, as you can imagine, there wasn’t a lot of volume in the gaming industry at the end, much less the check industry as well. So Q4 just to say it, again, is the first real tangible sequential revenue growth we've seen in that business for a while. As we look out to '11, we expect more sequential growth and very strong year-over-year growth in that business.

Got it. And then would you care to comment on what you're seeing so far – I guess it’s easier to kind of peg it to the first quarter, like the next month out for U.S. because I know that as I think about May trends, June looked like it was weaker for a lot of other transactions. And I'm just wondering if you saw the same type of trajectory.

Yes, Dan. Our trajectory or our metric trends are very consistent with the overall things you've seen out there, June being a little bit weaker than May. June wasn’t so wicked it was a big surprise and obviously, we're sitting here in July so we’ve been able to incorporate anything that happened in June in our review. The other way to say it at a really much higher level that it was a little weak. It wasn't wildly inconsistent with April and May. And that's kind of how we looked at the rest of the year, whether you’re talking about U.S, Canada or some other markets, if you get to the macro level, we're really not anticipating it being a wildly better or wildly worse environment, when you get to sort of a consumer spend or transactional volume level.

And then one last question for Paul. Paul, do you care to define what you mean by tangible for '12?

Oh, Dan. No. I would say, “You will notice it.”

We'll take our next question from Greg Smith with Duncan-Williams.

You guys discussed dynamic currency conversion helping you out in Asia? And I know Visa made some changes. What's the latest? Is there anything that Visa’s done that's going to negatively impact you or has that issue been settled?

It has not been settled. Some people who really are [indiscernible]. So Visa has put a moratorium. I think it will be settled. I would say, it's a nice piece of business for us. None of the existing business is impacted. But, Greg, what everything in the future that was in the process of being implemented is put on hold while Visa works through this. They say there were some bad actors, we’re not amongst them, who were taking too aggressive of a stance. I think this works through. I think there's probably some revenue share that's going to happen would be my guess. I think this tie’s big enough to do just that, and I think it gets resolved. And I, hopefully by the October call, will have a little more color for you.

Okay. And then, Paul, Brazil, any update on potential opportunities for Global down there?

Yes, I’d say Brazil is probably, Greg, a once-in-a-lifetime opportunity. And you can be sure that we are very focused on that. I'd mentioned the October call just a second ago. We have a strategy in Brazil, it's not quite ready for prime time, but I hope in October to give you a tangible update on just what we're doing in Brazil. There’s the tangible word again, but we are very focused on doing something meaningful there, and I look forward to filling you in on it.

Just to take cash on the balance sheet, David, what was the sort of freely available cash at quarter end?

Right, Greg, it's nearly $270 million. It's about $500 million. It's a combination of settlement funds, reserves and capital that's not entirely ours. So it’s shared with JV partners. It's about almost $270 million of available cash.

And we'll take our next question from Bryan Keane with Crédit Suisse. Bryan Keane - Crédit Suisse AG: I missed some of the call, but I heard the G2 cost saves for fiscal year '11, and I know a lot of us have been waiting a long time for the G2 cost saves so I was hoping to get a little color on beyond that, what’s the potential cost saves?

Well, Bryan, it’s David. Just to reiterate what it looks like for ’11. It’s $4 million of what we would call cash savings offset by $2 million of depreciation for a $2 million impact on '11. On a full year basis, that would be six and three for $3 million impact. As you go out, you go out a year or so, when we layer Canada and the U.K. on top of this, the number obviously gets bigger. The direct tangible immediate number gets bigger. And then, as I’ve said before, the real incremental value, the real version increasing returns leverage for G2 comes in. We’re laying all new volume worldwide onto this platform. So we're off to a fine start in the U.S., relative to the number on an annualized basis. It gets bigger in Canada and the U.K. when we add those in. And then from there, it's a matter of growth on a much more leveragable lower incremental cost platform for the long-term. Bryan Keane - Crédit Suisse AG: Okay, but there’s no -- we're not quantifying it beyond this year, this fiscal year?

And I realize you missed a piece of it, but the dates for Canada and the U.K. are a little bit further out and a little too early to fully quantify. Bryan Keane - Crédit Suisse AG: Okay, and then, just wanted to ask about the North American operating margins. I know there was probably a pretty big gain there from Canada. I know there was $0.06 positive gain on the quarter, but I assume Canada was probably even a little higher than that since you probably had some offsets in Europe. Just wanted to make sure I understood what was in – kind of dragged down that margin a little bit. And then if I heard you correctly, David, did you say that the U.S. margins will actually increase this year while the Canadian margins will drop a little bit and kind of creating that slight offset for next year?

Yes. Actually I didn't say it in quite that way, but that is the net effect. That’s exactly right. The Canadian margins as we invest a little bit and work on our execution in that market, will dip a little bit as they did in 2010. U.S. EBIT will grow. Actually, U.S. dollars EBIT will grow in both markets. But U.S. EBIT will grow and U.S. margins will improve. And remember as we talk about the U.S, it’s often a conversation about business mix. The ISOs are, sort of, as inevitable as death and taxes. The question’s what does our direct business do and it’s growing nicely in the year and then check and gaming which literally we’re expecting double digit growth in check and gaming 2011 with nice leverage. That’s a nice margin business and the net of all that, the mix should bring about nice EBIT growth and then permanent margin in the U.S. EBIT growth in the U.S, the ISOs will swamp that from a margin perspective so all the North American margins will go down, but really solid EBIT growth in the U.S. for the year which we're pretty pleased about. Bryan Keane - Crédit Suisse AG: Okay. And anything in particular in this particular quarter on the margins?

No, not really. So you’re asking about Q4 of ’10 versus Q3, Bryan, relative to just North America? Bryan Keane - Crédit Suisse AG: Or just year-over-year, I guess I was looking at. It’s down about 160 basis points, but I – with that gain, that pretty big gain you have from Canada that's in that number as well. I just would have assumed that the margins would've been a little bit higher.

Yes. I understand. I think that, unfortunately as I mentioned earlier, the ISOs are inescapable and we had a very strong Q4 ISO quarter. A lot of that is fees which become 100% pass-throughs. And so you really won't see the full income benefit you might hope to see on a year-over-year basis.

Bryan, this is Paul Garcia. Let me add something too. We did talk, I don’t know if you caught this part, we did talk about actually expanding margins in FY '12 and beyond, and the reason for that is G2 is one. So we're getting increasing amounts of savings in G2 on a greater volume-base. The global service center which we talked about where we will perform certain services less expensively, more efficiently, and back-end migration. So we do see a bright prospect on the horizon. And then I'm going to just step back for one second again on your question earlier, Bryan, just to make sure we're painfully clear. U.S. EBIT we expect to grow in '11. That does not, by definition, mean U.S. margins go up given the ISO accounting effect and then in Canada on a local currency basis, margins will go down a bit reflecting our investments in the things we're fixing there. Bryan Keane - Crédit Suisse AG: International margins next year seem like they're going to continue to increase and just what are the drivers there?

You're absolutely right. So in terms of international margins, a fair amount of this is cost controls and really being able to continue to integrate successfully the U.K. business. A fair amount of this is more progress in Russia, and then it's scale itself in Asia. So let's pull apart the pieces there for a second. We’re expecting in local currency in the U.K, low- to mid-single digit growth with some FX headwind. We're literally expecting though the cost performances we complete some of the integration process in the U.K. to drive our ability to have a double-digit profit growth there. That will obviously drive incremental margin expansion, if you think about what that means for revenue versus expense. In Russia, if you recall, as we came into the business a little over a year ago it was roughly a break-even business. It’s obviously done better than that over the course of the year. We expect continued improvement. So solid growth wed to solid profit progress in that market. And then Asia's continual stories of ongoing scale. High to mid-teens growth in revenue went to ongoing scale benefits, and achieved very nice progress. All that offset a little bit by challenges in the Czech Republic that we talked about before, they don't get much different for fiscal '11. When you marry those things together, you’re really actually making pretty nice progress. It will be a year of significant and we think steady margin expansion on a quarterly basis over the course of fiscal '11.

We will take the last question from Robert Dodd with Morgan Keegan. Robert Dodd - Morgan Keegan & Company, Inc.: Just a question on the Czech Republic, really. I mean since you’ve acquired that business obviously many years ago, it's been a bit of a struggle or it seems to have been a bit of a struggle to get the renewals in place and to kind of drive the scale there. Are you looking to make incremental investments to maybe get out of, kind of the land lot, the majority of business coming out of Czech and expand there, you had some in Russia et cetera. Is there anything you’ve got in the works to really, kind of, generate a hockey-stick effect in Czech?

This is Paul. That business is in the Indirect business and the problem was that, while it was a great entry point to into a market, we have not been able to morph that into a direct acquiring model. Our customers, we'd be competing with them. We are talking to them about morphing that with us and that's an ongoing dialogue. And then of course, you have the reality of five customers making up the majority of your revenues and profitability. Those contracts come up every three years or so and you get hammered on them. It's a tough model. Unfortunately, it's one I just had there and it's a very small piece of my business. I’m far from giving up on the Czech Republic, but I'm not prepared to double-down either. I wouldn't look for me to be buying more indirect processes. That's unlikely. I will morph that. We're going to grow around it. It's a bit of a headwind, but it's something that we still are growing nicely in Europe even with that. And by the way, these renewals are behind us for a while. But it will once again, come up again. So we are working on a solution.

And, Robert, this is Dave. Just to add a little bit to that. It's a tough model when you’re just renewing large bank customers, but it’s also wed to a tough economy so macro, which is the elephant in the room for everything we discussed relative to Global Payments and probably any other processor right now, is not our friend in that market either.

At this time, we will turn the call over to Mr. Garcia for his closing statements.

Thank you, operator, and thank you all for joining us on our call today. We appreciate as always your support of Global Payments.