Edgar Filing: GLOBAL PAYMENTS INC

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended May 31, 2001

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File No. 001-16111

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GLOBAL PAYMENTS INC.
(Exact name of registrant as specified in its charter)

Georgia 58-2567903
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

Four Corporate Square
Atlanta, Georgia 30329-2009
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (404) 728-2661

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of each class on which registered
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Common Stock, No Par Value New York Stock Exchange
Series A Junior Participating Preferred Share Purchase
Rights New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

NONE

(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark if disclosure of delinquent filer pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

The aggregate market value of the registrant's common stock held by non-
affiliates was $1,136,104,922 based upon the last reported sale price on The
New York Stock Exchange on July 31, 2001.

The number of shares of the registrant's common stock outstanding at August
23, 2001 was 36,513,289 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Specifically identified portions of the registrant's proxy statement for
the 2001 annual meeting of shareholders are incorporated by reference in Part
III.

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GLOBAL PAYMENTS INC.
2001 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

Page
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PART I

ITEM 1. BUSINESS...................................................... 2
ITEM 2. PROPERTIES.................................................... 10
ITEM 3. LEGAL PROCEEDINGS............................................. 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 10
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.......................... 11

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS...................................................... 12
ITEM 6. SELECTED FINANCIAL DATA....................................... 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.................................... 13
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.... 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................... 21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE..................................... 41

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............ 42
ITEM 11. EXECUTIVE COMPENSATION........................................ 42
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................... 42
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................ 42

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K..................................................... 43
SIGNATURES.............................................................. 47

SPECIAL CAUTIONARY NOTICE REGARDING
FORWARD-LOOKING STATEMENTS

We believe that it is important to communicate our plans and expectations
about the future to our shareholders and to the public. Some of the statements
we use in this report, and in some of the documents we incorporate by
reference in this report contain forward-looking statements concerning our
business operations, economic performance and financial condition, including
in particular, our business strategy and means to implement the strategy, the
amount of future capital expenditures, our success in developing and
introducing new products and expanding our business, the successful
integration of existing and future acquisitions, and the timing of the
introduction of new and modified products or services. You can sometimes
identify forward looking-statements by our use of the words "believes,"
"anticipates," "expects," "intends" and similar expressions. For these
statements, we claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.

Although we believe that the plans and expectations reflected in or
suggested by our forward-looking statements are reasonable, those statements
are based on a number of assumptions and estimates that are inherently subject
to significant risks and uncertainties, many of which are beyond our control,
cannot be foreseen, and reflect future business decisions that are subject to
change. Accordingly, we cannot guarantee you that our plans and expectations
will be achieved. Our actual revenues, revenue growth and margins, other
results of operation and shareholder values could differ materially from those
anticipated in our forward-looking statements as a result of many known and
unknown factors, many of which are beyond our ability to predict or control.
These factors include, but are not limited to, those set forth in Exhibit 99.1
to this report, those set forth elsewhere in this report and those set forth
in our press releases, reports and other filings made with the Securities and
Exchange Commission. These cautionary statements qualify all of our forward-
looking statements and you are cautioned not to place undue reliance on these
forward-looking statements.

Our forward-looking statements speak only as of the date they are made and
should not be relied upon as representing our plans and expectations as of any
subsequent date. While we may elect to update or revise forward-looking
statements at some time in the future, we specifically disclaim any obligation
to publicly release the results of any revisions to our forward-looking
statements.

PART I

Item 1. Business

General Developments

Spin-off from NDC

We were incorporated as a wholly owned subsidiary of National Data
Corporation, or NDC, under the laws of the state of Georgia on September 1,
2000. On January 31, 2001, NDC, a Delaware corporation, distributed 100% of
the shares of our common stock held by it, or 26,430,192 shares, to the
stockholders of record of NDC's common stock as of January 19, 2001. As a
result of our spin-off from NDC, we were no longer wholly owned and became an
independent public company with our shares of common stock registered on the
New York Stock Exchange.

For a more detailed description of our spin-off from NDC, you should read
our Registration Statement on Form 10 filed with the SEC on September 8, 2000,
and subsequently amended.

Purchase of Merchant Acquiring Business and Ten-Year Marketing Alliance with
Canadian Imperial Bank of Commerce

On March 20, 2001, we acquired substantially all of the net assets of the
merchant acquiring business of Canadian Imperial Bank of Commerce, or CIBC,
and formed a ten-year marketing alliance with CIBC to offer

VISA and debit card payment products and services in Canada. In exchange for
the assets we acquired from CIBC, we issued to CIBC approximately 9.8 million
unregistered shares of our common stock, or 26.25% of our shares outstanding on
a diluted basis with a fair value at the time of issuance equal to
approximately $133.6 million. As a result of this issuance, CIBC is our largest
shareholder and is represented by two persons on our board of directors.

We believe that this acquisition and the related marketing alliance with
CIBC significantly broadens our scope and presence in North America and will
provide the merchants served by CIBC's merchant acquiring business with a
larger array of existing and new payment solutions. The CIBC merchant acquiring
business is comparable to the merchant services we offer and includes card
processing services consisting of credit and debit card authorization and the
capture of related transaction data, settlement and funding services, customer
support services, terminal deployment, merchant statements and risk management.

The revenues of the CIBC merchant acquiring business are generated by
approximately 140,000 merchant locations, which are marketed through a
combination of a direct sales force, referrals from CIBC's approximate 1,200
bank branch locations comprising CIBC's branch network and an independent sales
organization. The merchants served by the business include leading North
American grocers, specialty retailers, home furnishings retailers, automotive
service station chains and department stores.

Extension and Expansion of Comerica Alliance

On May 31, 2001, we expanded our alliance relationship with Comerica Bank
for a purchase price of $20.4 million following the acquisition of Imperial
Bancorp, including its subsidiary Imperial Bank, by Comerica Incorporated in
January 2001. We continue to hold a majority interest in the expanded alliance
that now includes Imperial Bank's merchant portfolio. Additionally, we extended
the term of our original alliance agreement with Comerica Bank through March
2008.

Agreement to Acquire National Bank of Canada's Merchant Acquiring Business

On June 26, 2001, we entered into a definitive agreement to acquire National
Bank of Canada's, or NBC's, merchant services business and to form a ten-year
alliance with NBC in order to market merchant payment-related products and
services to NBC's customers. NBC currently processes over 225 million
transactions per year for over 73,000 merchant locations throughout Canada and
receives referrals from its 600 branch locations. We will pay a purchase price
of approximately $72 million (Canadian), or $47 million (U.S.) at current
Canadian exchange rates, and expect this acquisition to close in our second
quarter of fiscal 2002. We expect this acquisition, in combination with the
CIBC acquisition, to make us the largest publicly-traded, independent
MasterCard and Visa acquirer in Canada and to give us the capability to provide
Canadian businesses with one source for all their Visa, MasterCard, debit and
other payment processing requirements.

Purchase of MasterCard International's Interest in Global Payment Systems LLC

Subsequent to May 31, 2001, we agreed to terms to purchase the 7.5% minority
interest owned by MasterCard International Incorporated in our subsidiary,
Global Payment Systems LLC. This transaction is expected to close by our second
fiscal quarter of 2002 and be non-dilutive to our fiscal 2002 earnings.

Divestiture of Card Issuing Business

In September 2000, we divested our card issuing business for cash
consideration approximately equal to the net book value of the business. The
revenues related to this business were approximately $8.8 million and $2.9
million for the fiscal years ended May 31, 2000 and 2001, respectively.

Business Description

General

As an electronic transaction processor, we enable consumers, corporations,
and government agencies to purchase goods and services through the use of
credit and debit cards. Our role is to serve as an intermediary in the exchange
of information and funds that must occur between merchants and card issuers
before a transaction can be completed. Including our time as part of NDC, we
have provided credit card transaction processing services since 1968. During
that period, we have expanded our business to include debit card, business-to-
business purchasing card, check guarantee, check verification and recovery, and
terminal management services, and collectively refer to these as our merchant
service offerings. In addition, we provide funds transfer services to domestic
and international financial institutions, corporations, and government agencies
in the United States, Canada, and Europe.

Although a card transaction may appear simplistic, a complex process
involving various participants in a series of electronic connections is
necessary to make it possible. Aside from electronic transaction processors,
participants in this process include card issuers, cardholders, merchants, and
card associations. Card issuers are financial institutions that issue credit
cards to approved applicants and are identifiable by their trade name typically
imprinted on the issued cards. The approved applicant is referred to as a
cardholder, and may be any entity for which an issuer wishes to extend a line
of credit, such as a consumer, a corporation, or a government agency.

The term merchant is generally used to refer to any location where a
cardholder uses credit or debit cards, such as retail stores, restaurants,
corporate purchasing departments, universities, and government agencies. The
card may be used at any merchant location that meets the qualification
standards of the card associations, known as MasterCard and VISA, or other card
issuers such as American Express, Discover, Diners Club and debit networks such
as Interac. The card associations consist of members, who generally are
financial institutions, and were essentially created to establish uniform
regulations that govern much of the industry.

Before a merchant accepts a credit or debit card as a payment alternative to
cash, it must receive information from the card issuer that the card is
authentic and that the impending transaction value will not cause the
cardholder to exceed defined limits. The merchant must be compensated for the
value of the purchased good, which also involves the card issuer. The card
issuer then seeks reimbursement from the cardholder in the form of a monthly
credit card bill or by debiting the cardholder bank account. The merchant and
the card issuer, however, generally do not interface directly with each other,
but, instead rely on electronic transaction processors, such as Global
Payments, and card associations to exchange the required information and funds.

As an electronic transaction processor, we serve as an intermediary in the
exchange of credit and debit card transaction information and funds between
merchants and card associations, for credit cards; and merchants and financial
institutions, for debit cards. The card associations then use either a system
known as interchange, in the case of credit cards, or the debit networks to
transfer the information and funds between electronic transaction processors
and card issuers, and complete the link between merchants and card issuers.
Canadian merchant acquiring businesses advance payment to merchants for credit
and debit card transactions before receiving the interchange or debit fee
reimbursement from the card issuers. This business model differs from the
business model followed by electronic processors in the United States, in that,
in the United States, merchant funding primarily occurs after the electronic
processor receives the funds from the card issuer.

We have a high percentage of recurring revenues and expect to process over
2.7 billion transactions per year, of which approximately 25% are debit card
transactions, servicing more than 1.0 million merchant locations, including the
pending acquisition of National Bank of Canada's merchant acquiring business.
Based on this data and on industry publications such as The Nilson Report, we
believe that we are one of the largest electronic transaction processors in the
world. In addition, we are currently a leading mid-market merchant

acquirer in the United States and expect to be the largest, publicly-traded
independent VISA and MasterCard acquirer in Canada, after the acquisition of
the National Bank of Canada merchant acquiring business. While we service all
industry segments, we specialize in the mid-market segment in the United States
and larger volume segments in Canada. We provide services directly to our
merchant customers, as well as to financial institutions and independent sales
organizations who purchase and resell our services to their own portfolio of
merchant customers. Our key markets include merchant customers in the following
vertical industries: governmental, restaurant, universities, gaming, retail and
health care.

We offer end-to-end services, which means that we believe that we have the
ability to fulfill all of our customers' needs with respect to electronic
transaction processing. We market our services through a variety of sales
channels that includes a large, dedicated sales force, independent sales
organizations, independent sales representatives, an internal telesales group,
alliance bank relationships, and financial institutions. We provide our
services primarily using our network telecommunication infrastructure.

Industry Overview and Target Markets

We believe that significant opportunities exist for continued growth in the
application of transaction processing services to the electronic commerce
market. Although a large percentage of retail transactions still utilize cash
and checks, merchants encourage electronically authorized and settled
transactions using credit and debit cards as a more efficient means of
transacting business with their customers. The rapid growth of retail credit
card transactions, as well as the increased utilization of debit cards,
directly correlates with the historic growth of our business. In the United
States, total consumer spending is expected to continue to increase, along with
the percentage using forms of payment other than cash and checks, i.e., credit
and debit cards and other electronic means. We believe over $450 billion of
annual consumer spending is charged using VISA and MasterCard, and tends to
increase during economic, recessionary periods. In Canada, similar consumer
spending trends are expected. We believe over $200 billion (Canadian),
approximately $130 billion (U.S), of annual consumer spending has either VISA,
MasterCard or debit as the form of payment.

We believe that the proliferation of "loyalty" or co-branded cards that
provide consumers with added benefits for card use should contribute to
increased use of credit and debit cards in the future. Finally, as merchants
and consumers continue to use electronic commerce as a means to purchase goods
and services, both the consumer-to-business and business-to-business aspects of
electronic commerce will demand a growing array of transaction processing and
support services. Each of these market trends should increase demand for our
services.

Business-to-business electronic data interchange using purchasing card
technology and associated systems software provides businesses with increased
efficiency and us with strong growth in industries that have not traditionally
utilized credit cards. Purchasing cards and the related business-to-business
electronic data interchange replace the costly, time-consuming paper ordering
and invoicing with inexpensive, real-time electronic payment processing
transactions.

We believe that the number of electronic transactions will continue to grow
in the future and that an increasing percentage of these transactions will be
processed through emerging technologies. These emerging technologies will be a
major factor in accelerating the continued conversion from paper transaction
processing to electronic transaction processing, which will result in greater
growth opportunities for our business.

Payment processing service providers, such as Global Payments, provide high
volume electronic transaction processing and support services directly to
banking institutions and other new entrants into the business. The shift in the
industry from traditional financial institution providers to independent
providers is due in large part to more efficient distribution channels, as well
as increased technological capabilities required for the rapid and efficient
creation, processing, handling, storage, and retrieval of information. These
capabilities have become increasingly complex, requiring significant capital
commitments to develop, maintain, and update the systems necessary to provide
these advanced services at a competitive price.

As a result of the continued growth in our industry, several large merchant
processors, including us, have expanded operations through the creation of
alliances or joint ventures with banks and have acquired new merchant
portfolios from banks that previously serviced these merchant accounts.

Strategy

Our business strategy centers on providing a full range of electronic
transaction processing services in the markets we serve. We believe that this
strategy provides the greatest opportunity for leveraging our existing
infrastructure and maintaining a consistent base of recurring revenues. We
believe that the electronic commerce market presents attractive opportunities
for continued growth. In pursuing our business strategy, we seek both to
increase our penetration of existing markets and to continue to identify and
create new markets and further leverage our infrastructure through the
following:

. development of value-added applications, enhancement of existing
products, and development of new systems and services;

. expansion of distribution channels, primarily direct card and
independent sales organizations, or ISO;

. acquisition, investments, and alliances with companies that have
compatible products, services, development capabilities and distribution
capabilities in the direct card business; and

. systems integrations, primarily consolidation of operating platforms,
across North America.

Products and Services

We operate in one business segment, electronic transaction processing, and
provide products and services through our merchant services and funds transfer
offerings.

Merchant Services

Our merchant services offerings include credit and debit card transaction
processing, business-to-business purchasing card transaction processing, check
guarantee, check verification and recovery, and terminal management services.

Credit card and business-to-business purchasing card processing are
essentially the same service. Credit card processing describes a consumer
acquiring goods or services from a retail location, whereas business-to-
business card processing refers to a corporate purchasing department acquiring
goods, such as office supplies or raw materials, from a corporate vendor. We
also provide certain debit card transaction processing services, which are
similar to credit card transactions, except that the information and funds are
exchanged between the merchant and a cardholder's personal bank account,
instead of between the merchant and a credit card issuer.

Our card processing services can be marketed in several distinct categories:
authorization, electronic draft capture, settlement, retrieval of credit card
receipts, charge back resolution, merchant accounting, risk management, and
support services. We derive revenue for these services primarily based on a
percentage of transaction value or on a specified amount per transaction. We
also typically charge for various processing fees, unrelated to the number of
transactions or the transaction value.

Authorization and electronic draft capture are related services that
generally refer to the process whereby the card issuer indicates whether a
particular credit card is authentic and whether the impending transaction value
will cause the cardholder to exceed a defined limit. The authorization process
typically begins when a cardholder presents a card for payment at a merchant
location and the merchant swipes the card's magnetic strip through a point of
sale terminal card reader. The terminal electronically records sales draft
information, such as the credit card identification number, transaction date,
and dollar value of the goods or services purchased, and then automatically
dials a pre-programmed phone number connected to the network of an

electronic transaction processor, such as Global Payments. The electronic
transaction processor then routes the request to the applicable card
association, such as MasterCard or Visa. The card association then routes the
authorization request to the card issuer, who determines a response based on
the status of the cardholder's account. The response is then returned to the
merchant's terminal via the same communication network. This entire
authorization and response process occurs within seconds from the time the
merchant swipes the cardholder's card through the point of sale terminal card
reader.

After a transaction has been authorized, the merchant must be compensated
for the value of the purchased good or service, which is typically described as
settlement. We use our network telecommunication infrastructure and the Federal
Reserve's Automated Clearing House system, or ACH, and the comparable Canadian
ACH system, to ensure that our merchants receive the proper funds due to them
for the value of the goods or services that the cardholder purchased. We also
provide retrieval of credit card receipts and charge back resolution services,
both of which relate to cardholders disputing an amount that has been charged
to their credit card. We not only retrieve the original sales draft from the
merchant location, but also review the dispute and handle the related exchange
of information and funds between the merchant and the card issuer if a charge
is to be reversed.

Our merchant accounting services allow merchants to monitor portfolio
performance, control expenses, disseminate information, and track profitability
through the production and distribution of detailed statements summarizing
electronic transaction processing activity. Our risk management services allow
financial institutions to monitor credit risk, thereby enhancing the
profitability of their merchant portfolios. Our risk management services
include credit underwriting, credit scoring, fraud control, account processing,
and collections. We also provide our customers with various support services,
such as working with merchants to set-up their credit card programs or
resolving issues relating to their terminal card readers.

Check guarantee services include comprehensive check verification, and
guarantee services designed for a merchant's specific needs and risk adversity.
Since this service offering guarantees all checks that are electronically
verified (primarily using point of sale check readers) through our extensive
database, merchants may safely expand their revenue base by applying less
stringent requirements when accepting checks from consumers. If a verified
check is dishonored, our check guarantee service provides the merchant with
reimbursement of the check's face value, and then pursues collection of the
check through our internal collection services. To protect against this risk,
we use verification databases that contain information on historical delinquent
check writing activity and up-to-date consumer bank account status. We derive
revenue for these services primarily by charging the merchant a percentage of
the face value of each guaranteed check.

Check verification and recovery services are similar to those provided in
the check guarantee service, except that this service does not guarantee the
verified checks. This service provides a low-cost, loss-reduction solution for
merchants wishing to quickly measure a customer's check presentment worthiness
at the point of sale, while not having to incur the additional expense of check
guarantee services. We derive revenue for these services primarily from the
service fees collected from delinquent check writers, fees charged to merchants
based on a transaction rate per verified check, and fees charged to merchants
for specialized services, such as electronic re-deposits of dishonored checks.

Our terminal management offering provides a variety of products and services
relating to electronic transaction processing equipment, such as terminal
programming and deployment, set-up and telephone training, maintenance and
equipment replacement, warehousing and inventory control, customer service and
technical support, customized reporting, and conversions. We provide these
services directly to our own portfolio of merchants, as well as indirectly to
merchants on behalf of our financial institution and independent sales
organization customers. We derive revenue from equipment sales and rentals,
programming and deployment fees, and repairs and maintenance services.

Funds Transfer

Our electronic funds transfer product and service offerings include a wide
variety of services such as cash management, account balance reporting,
management information and deposit reporting. These products and services
provide financial, management and operational data to corporate and government
agencies worldwide and allow these organizations to exchange the information
with financial institutions and other service providers. We also provide an
Internet tax filing and payment service that allows financial institutions and
government agencies to offer corporate taxpayers a secure and convenient method
of paying taxes electronically. Security on this tax filing and payment system
is handled through both encryption/decryption and multi-level password access
and operates through a web site that serves as the portal for securely
receiving tax information and delivering the transaction for payment.

Total revenues from our merchant service and funds transfer customers are as
follows:

2001 2000 1999
-------- -------- --------
(in thousands)

Merchant services................................. $334,979 $318,262 $307,317
Funds transfer.................................... 18,216 21,771 22,734
-------- -------- --------
$353,195 $340,033 $330,051
======== ======== ========

Alliances and Direct Investments

Our strategy includes direct investment in or formation of business
alliances with financial institutions and other distributors as well as with
emerging payment technology companies to leverage our existing customer
relationships and infrastructure and to accelerate product time-to-market.
Additionally, we have several alliances with emerging payment technology
companies providing capabilities such as electronic barter and billing through
established vehicles.

Sales and Marketing

We market our products and services to the electronic commerce markets
through a variety of distinct sales channels that include a large, dedicated
sales force, independent sales organizations, independent sales
representatives, an internal telesales group, alliance bank relationships, and
financial institutions. In addition to the 1,700 bank branch locations in
Canada, we have associations with over 200 organizations in the United States
that provide sales leads. We market our products and services throughout the
United States, Canada and Europe. See Note 1 to Notes to Consolidated Financial
Statements.

Additionally, we market directly to customers primarily through print
advertising and direct mail efforts. We participate in major industry tradeshow
and publicity events and actively employ various public relations campaigns. We
intend for this strategy to utilize the lowest delivery cost system available
to successfully acquire target customers.

Employees

As of May 31, 2001, we and our subsidiaries had approximately 1,700
employees. Many of our employees are highly skilled in technical areas specific
to electronic transaction processing, and we believe that our current and
future operations depend substantially on retaining these employees.

Competition

We operate in the payment systems industry. Our primary competitors in this
industry include other independent processors, as well as certain major
national and regional banks, financial institutions and independent sales
organizations. Certain of these companies are privately held, and the majority
of those that are publicly held do not release the information necessary to
precisely quantify our relative competitive

position. Based on industry publications such as The Nilson Report, management
believes, however, that we are one of the largest electronic transaction
processors in the world. According to that report, one of our competitors,
First Data Corporation and its affiliates, is the largest electronic
transaction processor, in the United States. Our primary competitor in Canada
is Moneris Solutions, who has slightly larger card transaction processing sales
volume.

The most significant competitive factors related to our product and services
include: their value-added features, functionality, price, reliability, the
breadth and effectiveness of our distribution channel, and the manner in which
we deliver our services. These competitive factors will continue to change as
new distribution channels and alternative payment solutions are developed by
our competitors and us.

Our primary strategy to distinguish ourselves from our competitors focuses
on offering a variety of electronic transaction processing payment solutions to
our customers. These enhanced services involve vertical market and
sophisticated reporting features that add value to the information obtained
from our electronic commerce transaction processing databases. We believe that
our knowledge of these specific markets, the size and effectiveness of our
dedicated sales force, and our ability to offer specific, integrated solutions
to our customers, including hardware, software, processing, and network
facilities, and our flexibility in packaging these products are positive
factors that enhance our competitive position.

Banking Regulations

Following the acquisition of CIBC's merchant acquiring business, CIBC owns
26.8% of our common stock outstanding. As a result of CIBC's equity interest in
our company, we are considered a subsidiary of CIBC for U.S. bank regulatory
purposes. CIBC is a Canadian Bank with operations in the United States.
Accordingly, CIBC is regulated as a bank holding company under provisions of
the Bank Holding Company Act. In being considered a subsidiary of CIBC, we are
subject to those same regulations. As a general matter, we are able to operate
our merchant services and funds transfer businesses as we have historically,
but our ability to expand into unrelated businesses may be limited unless they
are activities the act allows or the Federal Reserve Board approves.

Bank holding companies may engage in the business of banking, managing and
controlling banks, and in other activities so closely related to managing and
controlling banks as to be a proper incident thereto. The Gramm-Leach-Bliley
legislation was enacted in 1999 and amended the Bank Holding Company Act to
allow greater operational flexibility for bank holding companies that are well-
capitalized, well-managed and meet certain other conditions. Such companies are
referred to as "financial holding companies." CIBC has elected to be a
financial holding company under the act. Financial holding companies may engage
in activities that are financial in nature, or that are incidental or
complimentary to financial activities. The legislation defines securities and
insurance activities as being permissible financial activities, allows certain
merchant banking activities, and establishes a procedure for the Federal
Reserve to add new activities. The Federal Reserve has taken a very cautious
approach to adding new financial activities to this list of permissible
activities for financial holding companies.

The Federal Reserve acts as an umbrella supervisor for financial holding
companies and may establish consolidated capital requirements for such
companies. It has the right to examine all subsidiaries of financial holding
companies which include our company. If a financial holding company falls out
of compliance with the well-managed, well-capitalized, community reinvestment
requirements, the holding company must enter into an agreement with the Federal
Reserve to rectify the situation. The Federal Reserve may refuse to allow the
financial holding company, which would include its subsidiaries, to engage in
new "financial" activities; may require it to cease current "financial"
activities; and may require it to divest its bank.

The merchant services and funds transfer businesses that we conduct are
permissible activities for bank holding companies under U.S. law, and we do not
expect the limitations described above to adversely affect our current
operations. It is possible, however, that these restrictions might limit our
ability to enter other

businesses that we may wish to engage in at some time in the future. It is
also possible that these laws may be amended in the future, or new laws or
regulations adopted, that adversely affect our ability to engage in our
current or additional businesses.

Additionally, CIBC is subject to the Bank Act (Canada), which, among other
things, limits the types of business which CIBC may conduct, directly or
indirectly, and the types of investments which CIBC may make. CIBC's
shareholding in our company is currently permissible pursuant to certain
provisions of the Bank Act. The Bank Act, as such, does not otherwise apply to
us.

Prior to Canada's recent federal election, the Government of Canada had
proposed certain amendments to the Bank Act and related legislation. It is
anticipated that such legislation will be reintroduced in the Canadian
Parliament in substantially the same form next year. Under such legislation,
CIBC will be permitted to continue to hold its interest in us, as long as the
business undertaken by us is consistent with the applicable provisions of the
Bank Act. If we undertake businesses inconsistent with the businesses in which
CIBC is permitted to hold an interest, CIBC may be required, pursuant to the
provisions of the Bank Act, to dispose of its shares prior to the expiration
of the restrictions on re-sale that we have negotiated with CIBC.

We have agreed with CIBC, in effect, that we will not undertake any
business inconsistent with the permitted investment provisions of the Bank
Act. We do not anticipate that compliance with this undertaking will affect,
in any material way, our ability to carry on the merchant services and funds
transfer businesses. Our ability to expand into other businesses will be
governed by the undertaking and the applicable provisions of the Canadian
banking legislation at the relevant time. There is no assurance that the Bank
Act amendments will be reintroduced in substantially the same form as
previously introduced in the Canadian Parliament, or that subsequent
amendments will not adversely affect our ability to carry on our business in
some respects.

Item 2. Properties

Our corporate headquarters are located at Four Corporate Square in Atlanta,
Georgia, where we lease from NDC a five-story, 85,000 square foot building.
This lease expires in 2004. During the fiscal year 2001, our merchant services
business maintained support operations in Hanover, Maryland in a leased 35,000
square foot facility. In the first quarter of fiscal year 2002, in order to
support additional growth and consolidation efforts we moved our merchant
services business to an 85,000 square foot facility that we lease in Owings
Mills, Maryland. In addition, we lease a total of 38 other facilities in the
United States, one in Peterborough, United Kingdom, two in Toronto, Canada,
and seven others throughout Canada under the transition service agreement with
CIBC. We own or lease a variety of computers and other related equipment for
our operational needs. We continue to upgrade and expand our computers and
related equipment in order to increase efficiency, enhance reliability, and
provide the necessary base for business expansion.

We believe that all of our facilities and equipment are suitable and
adequate for our business as presently conducted.

Item 3. Legal Proceedings

We are party to a number of claims and lawsuits incidental to the normal
course of our business. In our opinion, the ultimate outcome of such matters,
in the aggregate, will not have a material adverse impact on our financial
position, liquidity or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of our shareholders during our fourth
quarter ended May 31, 2001.

Item 4A. Executive Officers of the Registrant

Set forth below is information relating to our executive officers. There is
no family relationship between any of our executive officers or directors and
there are no arrangements or understandings between any of our executive
officers or directors and any other person pursuant to which any of them was
elected an officer or director, other than arrangements or understandings with
our directors or officers acting solely in their capacities as such. Our
executive officers serve at the pleasure of our board of directors.

Position with Global Payments
and Principal Business
Name Age Current Position(s) Affiliations for Past Five Years
---- --- ------------------------- --------------------------------

Paul R. Garcia... 49 President and Chief President and Chief Executive
Executive Officer Officer of the Company (since
September 2000); Chief Executive
Officer of NDC eCommerce (July
1999-January 2001); President
and Chief Executive Officer of
Productivity Point International
(March 1997-September 1998);
Group President of First Data
Card Services (1995-1997); Chief
Executive Officer of National
Bancard Corporation (NaBANCO)
(1989-1995).

Thomas M. Dunn... 43 Chief Operating Officer Chief Operating Officer of the
Company (since September 2000);
Chief Operating Officer of NDC
eCommerce (March 1999-January
2001); and General Manager,
Integrated Payment Systems, a
division of NDC eCommerce (June
1996-March 1999); Group Vice
President (August 1992-June
1996).

James G. Kelly... 39 Chief Financial Officer Chief Financial Officer of the
Company (since September 2000);
Chief Financial Officer of NDC
eCommerce (April 2000-January
2001); Managing Director with
Alvarez & Marsal (March 1996-
April 2000); Director with
Alvarez & Marsal (1992-1996) and
Associate with Alvarez & Marsal
(1990-1992); and Manager with
Ernst & Young's mergers and
acquisitions/audit groups (1989-
1990).

Barry W. Lawson.. 54 Chief Information Officer Chief Information Officer of the
Company (since September 2000);
Chief Information Officer of NDC
eCommerce (November 1999-January
2001); CEO Systems and Network
Consultants (April 1996-October
1999); and Chief Operating
Officer of National Bancard
Corporation (NaBANCO) (August
1993-March 1996).

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

Our common stock began trading on the New York Stock Exchange under the
ticker symbol "GPN" on February 1, 2001. The table set forth below provides the
high and low sales prices and dividends paid per share of our common stock for
the third and fourth quarter during the last fiscal year. We expect to continue
to pay our shareholders a dividend per share in amount comparable to that
indicated in the table and to continue to do so on a quarterly basis. However,
any future determination to pay cash dividends will be at the discretion of our
board of directors and will depend upon our results of operations, financial
condition, capital requirements and such other factors as the board of
directors deems relevant.

Dividend
High Low Per Share
------ ------ ---------

Fiscal Year 2001
Third Quarter......................................... $20.90 $18.03 $0.04
Fourth Quarter........................................ 26.50 16.65 0.04

The number of shareholders of record of our common stock as of August 23,
2001 was 3,229.

On March 20, 2001, we completed the acquisition of substantially all of the
assets of the merchant acquiring business of Canadian Imperial Bank of Commerce
and formed a 10-year marketing alliance with CIBC to offer VISA and debit card
payment products and services in Canada. In exchange for the net assets
acquired, we issued approximately 9.8 million of unregistered shares of our
common stock representing 26.25% of our diluted shares outstanding with a fair
value of $133.6 million. This offering of our common shares was completed as a
private placement, exempt from Section 5 of the Securities Act.

Item 6. Selected Financial Data

You should read the selected financial data set forth below in conjunction
with "Item 7: Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Item 8: Financial Statements and Supplementary
Data" included elsewhere in this annual report. The income statement data for
each of the three fiscal years ended May 31, 2001 and the balance sheet data as
of May 31, 2001 and 2000 are derived from the audited consolidated financial
statements included elsewhere in this annual report. The income statement data
for each of the two fiscal years ended May 31, 1999 and the balance sheet data
as of May 31, 1999 are derived from the audited consolidated financial
statements included in our Registration Statement on Form 10 filed with the SEC
on September 8, 2000, as subsequently amended. The income statement data for
the year ended May 31, 1997 and the balance sheet data as of May 31, 1998 and
1997 are derived from the unaudited consolidated financial statements that have
been prepared by management.

For Year Ended May 31,
(In thousands, except per share data)

Normalized(1) Historical
----------------- --------------------------------------------
(unaudited)
2001 2000 2001 2000 1999 1998 1997
-------- -------- -------- -------- -------- -------- --------

Revenue....................... $350,315 $327,183 $353,195 $340,033 $330,051 $291,547 $257,679
Operating income.............. 60,714 59,160 53,046 63,212 76,675 57,974 39,578
Net income.................... 30,949 30,166 23,668 33,047 41,336 31,077 22,633
Basic earnings per share (2).. 1.08 1.13 0.83 1.24 1.53 1.21 0.93
Diluted earnings per
share (3).................... 1.06 1.13 0.82 -- -- -- --
Dividends per share........... 0.08 -- 0.08 -- -- -- --
Total assets.................. 458,604 287,946 458,604 287,946 289,667 276,753 260,134
Line of credit................ 73,000 -- 73,000 -- -- -- --
Due to NDC.................... -- 96,125 -- 96,125 89,375 109,375 71,875
Long-term obligations......... 4,713 7,232 4,713 7,232 15,774 6,616 5,067
Total shareholder's equity.... $271,022 $119,795 $271,022 $119,795 $106,923 $ 83,806 $102,954

--------
(1) During the last year, we have made several adjustments to our results
prepared in conformity with accounting principles generally accepted in the
United States, or GAAP, to disclose a pro forma or "normalized" results of
operation. The normalized results exclude the impact of divested
businesses, other non-recurring items, including restructuring charges and
loss on investment; and certain pro forma costs assuming the spin-off from
National Data Corporation occurred on June 1, 1999. Management believes the
normalized results of operation provide more meaningful comparative
analyses, for the years presented.

(2) Using the ratio of 0.8 of a share of Global Payments common stock for each
share of NDC common stock held. Weighted average shares outstanding are
computed by applying the distribution ratio to the historical NDC weighted
average shares outstanding for all periods presented.

(3) Diluted earnings per share is not presented in the selected financial data
for historical periods prior to fiscal 2001 as Global Payments stock
options did not exist prior to the Distribution Date. Refer to Note 2 of
our Notes to the Consolidated Financial Statements.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis contains forward-looking statements
about our plans and expectations of what may happen in the future. Forward-
looking statements are based on a number of assumptions and estimates that are
inherently subject to significant risks and uncertainties, and our results
could differ materially from the results anticipated by our forward-looking
statements as a result of many known and unknown factors, including but not
limited to those discussed in Exhibit 99.1 to this report. See also "Special
Cautionary Notice Regarding Forward-Looking Statements" at the beginning of
"Item 1. Business."

You should read the following discussion and analysis in conjunction with
"Item 6: Selected Financial Data" and "Item 8: Financial Statements and
Supplementary Data" appearing elsewhere in this report.

General

We believe that we are one of the largest electronic transaction processors
in the world. We are currently a leading mid-market merchant acquirer in the
United States, and expect to be the largest, publicly traded independent VISA
and MasterCard acquirer in Canada, after we complete the acquisition of the
National Bank of Canada merchant acquiring business.

We provide a wide range of end-to-end electronic commerce solutions to
merchants, corporations, financial institutions and government agencies. We
market our products and services through a variety of distinct sales channels
that include a large, dedicated direct sales force, independent sales
organizations, independent sales representatives, an internal telesales group,
alliance bank relationships and financial institutions. We have a high
percentage of recurring revenues and process over 2.7 billion transactions per
year and service more than 1.0 million merchant locations.

We operate in one business segment, electronic transaction processing, and
provide products and services through our merchant services and funds transfer
offerings. Approximately 97% of our current revenue base is from merchant
services offerings. The remaining 3% of our total revenue is from our funds
transfer service offerings.

Merchant services include credit and debit card transaction processing,
business-to-business purchase card transaction processing, check guarantee,
check verification and recovery, and terminal management services. We have two
basic business models. In one model, which we refer to as "direct" merchant
services, we have a salaried and commissioned sales force that sells our end-
to-end services directly to merchants. In the other model, which we refer to as
"indirect" merchant services, we provide products and services to financial

institutions and independent sales organizations that in turn resell to their
merchants. Approximately 80% of our merchant acquiring revenue is direct and
the remaining 20% is indirect, after taking into account each of our recent
acquisitions.

During the last year, we made several adjustments to our results as reported
according to generally accepted accounting principles, or GAAP, to disclose a
pro forma or "normalized" results of operation. The normalized results exclude
the impact of divested businesses and other non-recurring items, such as
restructuring charges and non-cash loss on investment; and certain pro forma
costs assuming the spin-off from NDC occurred on June 1, 1999. For a better
understanding of our normalized results of operations, you should read Exhibit
99.2 to this report which compares the quarterly GAAP reported income statement
to the pro forma or "normalized" income statement for fiscal years 2000 and
2001. The following discussion and analysis will address both GAAP reported
results and normalized results of operations for the comparison of fiscal year
2001 to fiscal year 2000. We believe that the normalized results of operation
will provide you with a more meaningful comparative analysis of our results of
operations.

Components of Income Statement

We derive our revenues from three primary sources: charges based on volumes
and fees for merchant services; charges based on transaction quantity; and
equipment sales, leases and service fees. Revenues generated by these areas
depend upon a number of factors, such as demand for and price of our services,
the technological competitiveness of our product line, our reputation for
providing timely and reliable service, competition within our industry, and
general economic conditions.

Cost of service consists primarily of: the cost of network
telecommunications capability; transaction processing systems; personnel who
develop and maintain applications, operate computer networks and provide
customer support; and depreciation and occupancy costs associated with the
facilities performing these functions. Sales, general and administrative
expenses consist primarily of salaries, wages and related expenses paid to
sales personnel; non-revenue producing customer support functions and
administrative employees and management; commissions to independent
contractors; advertising costs; other selling expenses; employee training
costs; and occupancy of leased space directly related to these functions.

Other income and expense primarily consists of: minority interest in
earnings, interest expense and other miscellaneous items of income and expense.

Our earnings before interest, taxes, depreciation and amortization, or
EBITDA, is defined as operating income plus depreciation and amortization. This
statistic and its results as a percentage of revenue may not be comparable to
similarly titled measures reported by other companies. EBITDA is not a
measurement of financial performance under GAAP and is not presented as a
substitute for net income or cash flow from operating, investing or financing
activities determined in accordance with GAAP. However, we believe this
statistic is a relevant measurement and provides a comparable cash earnings
measure, excluding the impact of the amortization of acquired intangibles and
potential timing differences associated with capital expenditures and the
related depreciation charges.

Results of Operations

Fiscal Year Ended May 31, 2001 Compared to Fiscal Year Ended May 31, 2000

The following table provides comparisons of our results of operations for
the fiscal years ended May 31, 2001 and 2000:

Fiscal Year Ended May 31, 2001
(dollars in millions, except per share data)

Normalized
Divested Non-Recurring Pro Forma Normalized 2001 vs.
GAAP Businesses Items Adjustments Normalized % of Revenue 2000 Change
------ ---------- ------------- ----------- ---------- ------------ -----------

Revenue................. $353.2 $(2.9) $ -- $ -- $350.3 7 %
Operating expenses:
Cost of service........ 192.4 (2.3) (3.0) -- 187.1 53.4 % 8 %
Sales, general and
administrative........ 102.9 (0.7) -- 0.3 102.5 29.3 % 9 %
Restructuring and
other................. 4.9 -- (4.9) -- -- -- --
------ ----- ----- ------ ------ ---- ---
Operating income........ 53.0 0.1 7.9 (0.3) 60.7 17.3 % 3 %
Loss on investment...... (5.0) -- 5.0 -- -- -- --
Other income (expense).. (9.5) -- -- (0.9) (10.4) (3.0)% 3 %
------ ----- ----- ------ ------ ---- ---
Income before income
taxes.................. $ 38.5 $ 0.1 $12.9 $ (1.2) $ 50.3 14.4 % 2 %
====== ===== ===== ====== ====== ==== ===
Basic earnings per
share.................. $ 0.83 $0.00 $0.28 $(0.03) $ 1.08 (4)%
====== ===== ===== ====== ====== ===
Depreciation and
amortization........... $ 21.8 $ 21.8 6.2 % 9 %
EBITDA.................. $ 74.8 $ 82.5 23.6 % 4 %

Fiscal Year Ended May 31, 2000
(dollars in millions, except per share data)

Divested Non-Recurring Pro Forma Normalized
GAAP Businesses Items Adjustments Normalized % of Revenue
------ ---------- ------------- ----------- ---------- ------------

Revenue................. $340.0 $(10.0) $ (2.8) $ -- $327.2
Operating expenses:
Cost of service........ 181.5 (5.8) (1.7) -- 174.0 53.2 %
Sales, general and
administrative........ 95.3 (5.0) -- 3.7 94.0 28.7 %
------ ------ ------ ------ ------ ----
Operating income........ 63.2 0.8 (1.1) (3.7) 59.2 18.1 %
Other income (expense).. (9.4) -- -- (0.7) (10.1) (3.1)%
------ ------ ------ ------ ------ ----
Income before income
taxes.................. $ 53.8 $ 0.8 $ (1.1) $ (4.4) $ 49.1 15.0 %
====== ====== ====== ====== ====== ====
Basic earnings per
share.................. $ 1.24 $ 0.02 $(0.03) $(0.10) $ 1.13
====== ====== ====== ====== ======

Depreciation and
amortization........... $ 20.0 $ 20.0 6.1 %
EBITDA.................. $ 83.2 $ 79.2 24.2 %

GAAP Results of Operations

Our revenue increase of $13.2 million, or 4%, to $353.2 million in fiscal
2001 from $340.0 million in fiscal 2000 was primarily due to the inclusion of
revenues from CIBC's merchant acquiring business in fiscal 2001. The increase
from the acquisition was partially offset by decreases associated with business
divestitures in the last twelve months ($7.1 million) and a non-recurring
product and service mix change ($2.8 million) in fiscal 2000.

Operating income decreased $10.2 million, or 16%, to $53.0 million in fiscal
2001 from $63.2 million in fiscal 2000. As a percentage of revenue, our
operating income margin decreased to 15.0% in fiscal 2001 from 18.6% in fiscal
2000. These decreases are due primarily to a non-recurring charge of $3.0
million in fiscal 2001 a restructuring charge of $4.9 million in fiscal 2001,
and generally, a higher level of investment by us after the spin-off from NDC
in infrastructure, personnel, and our direct sales channels.

Adjustments to GAAP Results of Operations

Divested Businesses

In the third quarter of fiscal 2001, we divested our card issuing business
for cash consideration approximately equal to its net book value. Revenues
related to these services are included within the GAAP revenue results in the
above tables. These revenues were $2.9 million in fiscal 2001 and $8.8 million
in fiscal 2000. In addition, in fiscal 2000, we divested another small product
offering. We have adjusted the GAAP revenue calculation by removing the
revenues associated with these divested businesses and have included these
normalized results of operations in the financial tables above.

Non-Recurring Items

Fiscal 2001

We had pre-tax, non-recurring items totaling $12.9 million in fiscal 2001.
These items comprised $3.0 million related to a change in our operating
guidelines, $4.9 million in restructuring and related charges, and $5.0 million
associated with the write-off of our sole internet investment.

The change in our operating guidelines relates to our aged charge back
receivables in the merchant settlement function. Under our previous guidelines,
we carried a charge back receivable from an issuing bank until its ultimate
disposition. Today, within 25 days of receiving a charge back notice from VISA
or MasterCard, we complete our review of the matter and either charge the
merchant or the issuing bank, pending final disposition if the charge back
remains disputed by either party. Therefore, we no longer hold the receivable
exposure on these pending charge backs, but continue to pursue a favorable
resolution and collections on behalf of our merchants. This change recognized
that some charge backs currently under review may not be collectible, therefore
we have provided for a $3.0 million non-recurring charge in fiscal 2001.

We have continued our efforts to streamline operations through office
consolidation and evaluation of investments. Accordingly, in the fourth quarter
of fiscal 2001, we incurred a $4.9 million restructuring charge related to
office consolidations and severance payments to terminated employees. Refer to
Note 12 to the Consolidated Financial Statements appearing elsewhere in this
report for more details.

Finally, as further described in Note 2 to the Consolidated Financial
Statements, we completed an evaluation of our sole Internet related investment
during the fourth quarter of fiscal 2001. The company has experienced
difficulty securing additional funding in current market conditions and we do
not believe it currently has active business operations. As a result, we
determined the carrying value of the investment was not recoverable and
realized a non-cash loss on investment of $5.0 million.

Fiscal 2000

In the first quarter of fiscal 2000, we experienced a non-recurring product
and service mix change in our terminal management business. This change caused
a $2.8 million increase in revenue and related cost of service of $1.7 million.

Normalized Results of Operations

Our normalized revenue increased $23.1 million, or 7%, to $350.3 million in
fiscal 2001 from $327.2 million in fiscal 2000. This increase was due to the
inclusion of revenues from CIBC's merchant acquiring business and strong volume
and transaction growth in our direct merchant acquiring card processing
services. The increase in revenue in our direct merchant acquiring card
processing services in fiscal 2001was offset by declines in revenues from our
indirect merchant services sources and funds transfer product offerings

in fiscal 2001 compared to fiscal 2000. The decline in funds transfer revenue
was due in part to the divestiture of a product offering. We expect the
declines in indirect merchant services sources and funds transfer product
offerings to continue in fiscal 2002, primarily due to consolidation trends
among financial institutions. We expect the growth in direct merchant card
services revenue to continue due primarily to our recent acquisitions, the
addition of new merchant relationships, and increased usage of credit cards and
debit cards within existing merchant customers.

Normalized cost of service increased $13.1 million, or 8%, to $187.1 million
in fiscal 2001 from $174.0 million in fiscal 2000. The increase in cost of
service is primarily attributed to the inclusion of costs associated with
CIBC's merchant acquiring business in our normalized results for fiscal 2001.
As a percentage of revenue, cost of service was 53% in both fiscal 2001 and
2000.

Normalized sales, general and administrative expenses increased $8.5
million, or 9%, to $102.5 million in fiscal 2001 from $94.0 million in fiscal
2000. As a percentage of revenue, these expenses increased to 29.3% in fiscal
2001 compared to 28.7% in fiscal 2000. These increases were primarily due to
the relatively higher level of investments by us in infrastructure and
personnel, and in direct sales channels after the spin-off from NDC, the
benefit of which is not expected until future periods; and due to expenses
associated with the inclusion of CIBC's merchant acquiring business.

Normalized operating income increased $1.5 million, or 3%, to $60.7 million
in fiscal 2001 from $59.2 million in fiscal 2000. As a percentage of revenue,
our normalized operating margin was 17.3% in fiscal 2001 compared to 18.1% for
2000. We expect to realize synergies from acquisitions as we consolidate
operations and leverage scale. Accordingly, we expect operating income margin
in the range of 18% to 20% in fiscal 2002 and 19% to 21% in fiscal 2003. We are
currently executing plans to convert the CIBC merchant acquiring business to
our back-end United States processing platforms. Once we complete this systems
migration, we can integrate customer service functions.

Normalized basic earnings per share decreased $0.05, or 4%, to $1.08 for
fiscal 2001 from $1.13 in fiscal 2000. This decrease is attributed to the
increase in weighted-average shares outstanding, primarily due to the shares
issued in consideration of the acquisition of CIBC's merchant acquiring
business. A total of 9.8 million shares were issued to CIBC, however only 1.9
million were outstanding for earnings per share calculations due to the partial
period that commenced with the close of the acquisition on March 20, 2001.

Fiscal Year Ended May 31, 2000 Compared to Fiscal Year Ended May 31, 1999

The following table provides comparisons of our GAAP results of operations
for the fiscal years ended May 31, 2000 and 1999:

2000 1999
--------------- ---------------
2000 vs.
% of % of 1999
Actual Revenue Actual Revenue Change
------ ------- ------ ------- --------
(dollars in millions)

Revenue................................ $340.0 $330.1 3 %
Operating expenses:
Cost of service...................... 181.5 53 % 169.8 52 % 7 %
Sales, general and administrative.... 95.3 28 % 83.6 25 % 14 %
------ --- ------ --- ---
Operating income....................... 63.2 19 % 76.7 23 % (18)%
Other income (expense)................. (9.4) (3)% (10.1) (3)% (7)%
------ --- ------ --- ---
Income before income taxes............. $ 53.8 16 % $ 66.6 20 % (19)%
====== === ====== === ===
Depreciation and Amortization.......... $ 20.0 6 % $ 19.9 6 % -- %
EBITDA................................. $ 83.2 24 % $ 96.6 29 % (14)%

Our revenue increase of $9.9 million, or 3%, to $340.0 million in fiscal
2000 from $330.1 million in fiscal 1999 reflects a 4% growth in revenue from
our merchant services product offerings partially offset by a 4% decline in
revenues from funds transfer product offerings compared to the prior year. The
growth in merchant services revenue is due primarily to the addition of new
merchant relationships, and increased usage of credit cards, debit cards and
checks from existing customers.

Cost of service increased $11.7 million, or 7%, to $181.5 million in fiscal
2000 from $169.8 million in fiscal 1999. As a percentage of revenue, cost of
service increased to 53% in fiscal 2000 compared to 52% in fiscal 1999. These
increases are primarily due to a change in the product and service revenue mix
to a higher cost service and investments in infrastructure.

Sales, general and administrative expenses increased $11.7 million, or 14%,
to $95.3 million in fiscal 2000 from $83.6 million in fiscal 1999. As a
percentage of revenue, these expenses increased to 28% for fiscal 2000 compared
to 25% in fiscal 1999. These increases are primarily due to investments in
distribution channel expansion, sales staffing and programs, customer service
improvements, and product development activities, as well as management and
related corporate costs in anticipation of becoming a separate public entity.

Operating income decreased $13.5 million, or 18%, to $63.2 million in fiscal
2000 from $76.7 million in fiscal 1999. As a percentage of revenue, our
operating income margin decreased to 19% in fiscal 2000 from 23% in fiscal
1999. This decline is due primarily to the factors described above.

Total other expense decreased $0.7 million for fiscal 2000 compared to
fiscal 1999. This decrease was primarily the result of decreased interest
expense due to the repayment of a $6.0 million note from a prior acquisition.

Forward-Looking Results of Operations

Revenue

In the year ended May 31, 2001, we reported revenue of $353 million. This
revenue included $2.9 million associated with businesses we divested in fiscal
2001. Excluding these revenues from the reported fiscal 2001 amounts, our
normalized revenue would have been $350 million in fiscal 2001. No pro forma
adjustments associated with the our spin-off from NDC were required with
respect to the fiscal 2001 amounts reported. We believe we are well-positioned
for growth in fiscal 2002, due to factors described above. Accordingly, we
expect fiscal 2002 revenue of between $455 to $462 million, reflecting growth
of 30% to 32% over fiscal 2001 normalized revenue of $350 million. This revenue
growth is primarily due to continued domestic and Canadian expansion in our
direct merchant services offering as well as other factors we described above
in discussion of our results of operations in fiscal 2001 compared to fiscal
2000. We are continuing to evaluate our strategic alternatives for our
secondary businesses; accordingly, these revenue expectations do not consider
the impact of potential future business divestitures.

Earnings Per Share

In the year ended May 31, 2001, we reported basic earnings per share of
$0.83. Our reported basic earnings per share includes the impact of the non-
recurring cost of service charge, the restructuring charge, divestitures and
the non-cash loss on investment and excludes the impact of the pro forma
adjustments associated with management and related corporate costs incurred in
connection with becoming a separate public entity and additional interest
expense as a result of our new line of credit. The impact of each item and an
analysis reconciling to normalized basic earnings per share is included above
in our discussion of the results of operations in fiscal 2001 compared to
fiscal 2000. Excluding these items from our results, our normalized earnings
per basic share would have been $1.08. In fiscal 2002, we anticipate an
increase in basic earnings per share to between $1.24 to $1.29 compared to the
fiscal 2001 normalized amount, reflecting growth of 15% to 19%. On a diluted
basis, we expect earnings per share of $1.19 to $1.24 in fiscal 2002. These
expectations include a $0.10 per share favorable impact of, Statement of
Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets," as described further in Note 2 to the Consolidated Financial
Statements. In addition, we expect our effective tax rate to decrease from
38.5% in fiscal 2001 to 38.2% in fiscal 2002.

Liquidity and Capital Resources

Cash flow generated from operations provides us with a significant source of
liquidity to meet our needs. At May 31, 2001, we had cash and cash equivalents
totaling $6.1 million. Net cash provided by operating activities increased
$37.3 million, or 90%, to $78.6 million for fiscal 2001 from $41.3 million for
fiscal 2000. This increase was driven primarily by the favorable timing of
receipt of the net merchant processing funds and the timing of payments to
third parties for accounts payable and accrued expenses compared to last year.
The merchant processing receivables and payables fluctuate due to the timing of
credit card settlement and funding of merchants and vary from month to month
based on processing volumes. The timing of payments for accounts payable and
accrued expenses is primarily a function of our transitional services
agreements with NDC and CIBC.

Net cash used in investing activities increased, $22.4 million from $33.4
million for fiscal 2001 compared to $11.0 million for fiscal 2000 primarily due
to cash we paid for acquisitions and capital expenditure investments we made in
our infrastructure. As further described in Note 3 to the Consolidated
Financial Statements, in fiscal 2001, we acquired net assets of $167.1 million
for a total consideration of approximately $10.1 million of deferred purchase
price, a fair value of $133.6 million of our common stock and $23.4 million in
cash. The increase in capital expenditures is primarily related to office
consolidation efforts and other infrastructure to support our future growth. In
fiscal 2002, we expect approximately $20 to $25 million in total capital
spending, primarily related to acquisition integration activities and continued
infrastructure support.

Net cash used in financing activities increased $12.9 million to $41.8
million for fiscal 2001 from $28.9 million for fiscal 2000. As a result of our
spin-off from NDC, we were allocated $96.1 million at June 1, 2000, an amount
that reflects our share of NDC's pre-distribution debt used to establish our
initial capitalization. We funded approximately $37 million using cash flow
provided by operations and drew $59 million on our line of credit to fund the
balance of the cash dividend payment to NDC on January 31, 2001. Prior to May
31, 2001, we repaid $6.0 million of the amount drawn on our line of credit. In
addition, we used $20 million from our line of credit in May 2001 to finance
our Comerica Bank-Imperial Bank merchant portfolio acquisition.

We believe that our current level of cash and borrowing capacity under our
committed lines of credit described below, along with future cash flows from
operations, are sufficient to meet the needs of our existing operations and
planned requirements for the foreseeable future. We currently do not have any
material capital commitments, other than commitments under capital and
operating leases discussed in Note 14 of our Consolidated Financial Statements
included in this report, or planned expansions. Over the next two to three
years, we may develop our own hardware and software facilities for the
transaction processing, cash management, file transfer and related
communications functions in an effort to improve productivity and reduce cost
of services. If undertaken, this development would further increase our capital
expenditures above historical levels over the next two to three years. In
addition to the planned capital projects referred to above, we will continue
the planning and development process necessary for us to assume from CIBC the
processing services it currently provides to Canadian merchants. This
development effort will further increase our capital expenditures above
historical levels over the next two years. We regularly evaluate cash
requirements for current operations, commitments, development activities and
acquisitions and we may elect to raise additional funds for these purposes in
the future, either through the issuance of debt or equity or otherwise.

Credit Facilities

Our short-term and long-term liquidity needs depend upon our level of net
income, accounts receivable, accounts payable and accrued expenses. We have a
$125 million revolving line of credit. It was initially used to fund the cash
due to NDC to reflect our share of NDC's pre-distribution debt used to
establish our initial capitalization. This line of credit is also available to
meet our short-term working capital needs and acquisition financing. This line
has a variable interest rate based on market rates and customary origination-
related fees and expenses. The credit agreement contains certain financial and
non-financial covenants customary for financings of this nature. The facility
has a three-year term, expiring in January 2004.

Subsequent to May 31, 2001, we have obtained a commitment for a $25 million
revolving credit facility to finance working capital and other general
corporate purposes for borrowing capacity. We expect to have this facility in
place by the second quarter of fiscal 2002.

With our acquisition of the CIBC merchant acquiring business, we entered
into related agreements to operate the business, including a credit facility.
Canadian merchant acquiring businesses advance payment to merchants for credit
and debit card transactions before receiving the interchange or debit fee
reimbursement from the card issuing banks. This business model differs sharply
from that in the U.S. where merchant funding primarily occurs after we receive
the funds from the card issuing banks. CIBC has provided us with a revolving
credit facility, which will be available to us to fund the approximate two-day
interval between our payment of Canadian merchants and our receipt of the
interchange fee.

The credit facility with CIBC provides us with a line of credit of up to
Cdn$140 million, or approximately US$90 million at current exchange rates, with
an additional overdraft facility available to cover larger advances during
periods of peak usage of credit and debit cards, and carries an interest rate
based on Canadian Dollar LIBOR (C$LIBOR). It contains customary covenants and
events of default. The line of credit is secured by a first priority security
interest in our accounts receivable from VISA Canada/International and will be
guaranteed by our subsidiaries and us. This guarantee is subordinate to our
primary credit facility discussed above. The CIBC credit facility has an
initial term of 364 days expiring March 19, 2002, and it is renewable annually
at CIBC's option.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Based on analysis completed and described below, we do not believe that we
are exposed to material market risk from changes in interest rates and/or
foreign currency rates.

Interest Rate

We have a line of credit which has a variable interest rate based on the
London Interbank Offered Rates, or LIBOR. Accordingly, we are exposed to the
impact of interest rate fluctuations. We have performed an interest rate
sensitivity analysis over the near term with a 10% change in interest rates.
Based on this analysis, we believe that our net income is not subject to
material interest rate risk.

Foreign Currency Risk

We generate a percentage of our net income from foreign operations. We have
performed a foreign exchange sensitivity analysis over the near term with a 10%
change in foreign exchange rates. Although we are vulnerable to fluctuations in
the Canadian dollar and British pound against the United States dollar, based
on this analysis, we believe that our net income is not subject to material
foreign exchange rate risk.

Historically, we have not entered into derivative financial instruments to
mitigate interest rate fluctuation risk or foreign currency exchange rate risk,
as it has not been cost effective. We may use derivative financial instruments
in the future, if we deem it useful in mitigating our exposure to interest rate
or foreign currency exchange rates.

Item 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Global Payments Inc.:

We have audited the accompanying consolidated balance sheets of Global
Payments Inc. (a Georgia corporation) as of May 31, 2001 and May 31, 2000 and
the related consolidated statements of income, changes in shareholders' equity,
and cash flows for each of the three years in the period ended May 31, 2001.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Global Payments Inc. as of
May 31, 2001 and May 31, 2000 and the results of their operations and their
cash flows for each of the three years in the period ended May 31, 2001, in
conformity with accounting principles generally accepted in the United States.

/s/ Arthur Andersen LLP

Atlanta, Georgia
July 17, 2001

CONSOLIDATED STATEMENTS OF INCOME
GLOBAL PAYMENTS INC.

(In thousands, except per share data)

Year Ended May 31,
----------------------------
2001 2000 1999
-------- -------- --------

Revenues.......................................... $353,195 $340,033 $330,051
-------- -------- --------
Operating expenses:
Cost of service................................. 192,389 181,479 169,805
Sales, general and administrative............... 102,878 95,342 83,571
Restructuring and other......................... 4,882 -- --
-------- -------- --------
300,149 276,821 253,376
-------- -------- --------
Operating income.................................. 53,046 63,212 76,675
-------- -------- --------
Other income (expense):
Interest and other income....................... 2,039 796 1,183
Loss on investment.............................. (5,000) -- --
Interest and other expense...................... (6,171) (6,119) (7,448)
Minority interest in earnings................... (5,430) (4,117) (3,809)
-------- -------- --------
(14,562) (9,440) (10,074)
-------- -------- --------
Income before income taxes........................ 38,484 53,772 66,601
Provision for income taxes........................ 14,816 20,725 25,265
-------- -------- --------
Net income...................................... $ 23,668 $ 33,047 $ 41,336
======== ======== ========
Basic earnings per share.......................... $ 0.83 $ 1.24 $ 1.53
======== ======== ========
Diluted earnings per share (See Note 2)........... $ 0.82 -- --
======== ======== ========

The accompanying notes are an integral part of these Consolidated Financial
Statements.

CONSOLIDATED BALANCE SHEETS
GLOBAL PAYMENTS INC.

(In thousands, except share data)

May 31, May 31,
2001 2000
-------- --------

ASSETS
Current assets:
Cash and cash equivalents................................. $ 6,103 $ 2,766
Accounts receivable, net of allowance for doubtful
accounts of $1,198 and $1,231 in 2001 and 2000,
respectively............................................. 39,264 33,945
Claims receivable, net of allowance for losses of $4,445
and $3,679, in 2001 and 2000, respectively............... 126 284
Merchant processing receivable............................ 76,667 32,213
Income tax receivable..................................... 307 980
Inventory................................................. 3,216 3,694
Deferred income taxes..................................... 5,118 --
Prepaid expenses and other current assets................. 5,697 6,343
-------- --------
Total current assets..................................... 136,498 80,225
-------- --------
Property and equipment, net................................ 44,336 28,665
Intangible assets, net..................................... 277,375 173,726
Investment................................................. -- 5,000
Other...................................................... 395 330
-------- --------
Total assets............................................. $458,604 $287,946
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit............................................ $ 73,000 $ --
Due to NDC................................................ -- 96,125
Merchant processing payable............................... 8,829 11,880
Obligations under capital leases.......................... 2,739 2,900
Accounts payable and accrued liabilities.................. 47,916 26,338
Deferred income taxes..................................... -- 410
--
-------- --------
Total current liabilities................................ 132,484 137,653
-------- --------
Obligations under capital leases, net of current portion... 1,974 4,332
Deferred income taxes...................................... 7,237 5,403
Other long-term liabilities................................ 7,035 2,291
-------- --------
Total liabilities........................................ 148,730 149,679
-------- --------
Commitments and contingencies (See Note 14)
Minority interest in equity of subsidiaries................ 38,852 18,472
Shareholders' equity:
NDC equity investment..................................... -- 120,160
Preferred stock, no par value; 5,000,000 shares authorized
and none issued.......................................... -- --
Common stock, no par value; 200,000,000 shares authorized
and 36,477,168 shares issued at May 31, 2001............. -- --
Paid-in capital........................................... 272,243 --
Retained earnings......................................... 2,217 --
Deferred compensation..................................... (2,357) --
Cumulative translation adjustment......................... (1,081) (365)
-------- --------
Total shareholders' equity............................... 271,022 119,795
-------- --------
Total liabilities and shareholders' equity................. $458,604 $287,946
======== ========

The accompanying notes are an integral part of these Consolidated Financial
Statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS
GLOBAL PAYMENTS INC.

(In thousands)

Year Ended May 31,
-----------------------------
2001 2000 1999
--------- -------- --------

Cash flows from operating activities:
Net income..................................... $ 23,668 $ 33,047 $ 41,336
Adjustments to reconcile net income to net cash
provided by operating activities:
Restructuring and other charges............... 2,197 -- --
Loss on investment............................ 5,000 -- --
Depreciation and amortization................. 10,782 9,688 9,438
Amortization of acquired intangibles and
goodwill..................................... 10,974 10,340 10,515
Deferred income taxes......................... (3,694) 1,786 6,690
Minority interest in earnings................. 5,430 4,117 3,809
Provision for bad debts....................... 6,586 1,019 479
Other, net.................................... (345) 1,500 1,909
Changes in operating assets and liabilities,
net of the effects of acquisitions:
Accounts receivable, net...................... (6,202) 2,423 (4,843)
Merchant processing receivable/payable........ 7,562 (22,280) 1,488
Inventory..................................... 728 (2,112) (739)
Prepaid expenses and other assets............. 1,505 (1,269) (54)
Accounts payable and accrued liabilities...... 14,423 3,037 (9,559)
--------- -------- --------
Net cash provided by operating activities.... 78,614 41,296 60,469
--------- -------- --------
Cash flows from investing activities:
Capital expenditures.......................... (13,601) (6,002) (12,528)
Business acquisitions, net of acquired cash... (23,350) -- (1,484)
Increase in investments....................... -- (5,000) --
Proceeds from divested business............... 3,502 -- --
--------- -------- --------
Net cash used in investing activities........ (33,449) (11,002) (14,012)
--------- -------- --------
Cash flows from financing activities:
Net borrowings from (repayments to) NDC....... (106,197) 6,750 (20,000)
Net proceeds from line of credit.............. 73,000 -- --
Net decrease in NDC equity investment......... -- (21,800) (18,596)
Principal payments under capital lease
arrangements and other long-term debt........ (3,144) (9,457) (3,552)
Stock issued under employees stock plans...... 302 -- --
Dividends paid................................ (1,459) -- --
Distributions to minority interests........... (4,330) (4,377) (4,080)
--------- -------- --------
Net cash used in financing activities........ (41,828) (28,884) (46,228)
--------- -------- --------
Increase in cash and cash equivalents.......... 3,337 1,410 229
Cash and cash equivalents, beginning of year... 2,766 1,356 1,127
--------- -------- --------
Cash and cash equivalents, end of year......... $ 6,103 $ 2,766 $ 1,356
========= ======== ========

The accompanying notes are an integral part of these Consolidated Financial
Statements.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
GLOBAL PAYMENTS INC.

(In thousands, except per share data)

Accumulated
Other Total
Number of NDC Equity Paid-in Retained Comprehensive Deferred Shareholders'
Shares Investment Capital Earnings Loss Compensation Equity
--------- ---------- -------- -------- ------------- ------------ -------------

Balance at May 31,
1998................... -- $ 83,930 $ -- $ -- $ (124) $ -- $ 83,806
====== ========= ======== ======= ======= ======= ========
Comprehensive income
Net income............ 41,336 41,336
Foreign currency
translation
adjustment........... (41) (41)
--------
Total comprehensive
income................ 41,295
--------
Net transactions with
NDC................... (13,224) (13,224)
Net distributions to
NDC................... (4,954) (4,954)
------ --------- -------- ------- ------- ------- --------
Balance at May 31,
1999................... -- 107,088 -- -- (165) -- 106,923
====== ========= ======== ======= ======= ======= ========
Comprehensive income
Net income............ 33,047 33,047
Foreign currency
translation
adjustment........... (200) (200)
--------
Total comprehensive
income................ 32,847
--------
Net transactions with
NDC................... (12,718) (12,718)
Net distributions to
NDC................... (7,257) (7,257)
------ --------- -------- ------- ------- ------- --------
Balance at May 31,
2000................... -- 120,160 -- -- (365) -- 119,795
====== ========= ======== ======= ======= ======= ========
Comprehensive income
Net income............ 19,992 3,676 23,668
Foreign currency
translation
adjustment........... (716) (716)
--------
Total comprehensive
income................ 22,952
--------
Net transactions with
NDC................... (3,647) (3,647)
Net distributions to
NDC................... (2,728) (2,728)
Distribution of common
stock................. 26,687 (133,777) 137,198 (3,421) --
Stock issued under
employee stock plans.. 25 1,465 1,465
Stock issued for
acquisition........... 9,765 133,580 133,580
Dividends paid ($0.04
per share)............ (1,459) (1,459)
Amortization of
deferred
compensation.......... 1,064 1,064
------ --------- -------- ------- ------- ------- --------
Balance at May 31,
2001................... 36,477 $ -- $272,243 $ 2,217 $(1,081) $(2,357) $271,022
====== ========= ======== ======= ======= ======= ========

The accompanying notes are an integral part of these Consolidated Financial
Statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1--Spin-off and Basis of Presentation

In December 1999, National Data Corporation ("NDC") announced its intent to
spin-off the NDC eCommerce business segment into a separate publicly traded
company with its own management and Board of Directors (the "Distribution").
This Distribution occurred on January 31, 2001 (the "Distribution Date") and
was accomplished by forming Global Payments Inc. ("Global Payments" or the
"Company") on September 1, 2000, transferring the stock of the companies which
comprised the NDC eCommerce business segment to Global Payments and then
distributing all of the shares of common stock of Global Payments to NDC's
stockholders. NDC stockholders received 0.8 share of Global Payments for each
NDC share held as of the Distribution Date. After the Distribution, Global
Payments and NDC became two separate public companies.

The consolidated financial statements include the accounts of the Company
and its majority-owned subsidiaries. Prior to the Distribution Date, the
financial statements included the accounts of the subsidiaries of NDC that
comprised its eCommerce business segment. Intercompany transactions have been
eliminated in consolidation. Certain reclassifications have been made to the
fiscal 2000 and 1999 financial statements to conform to the fiscal 2001
presentation. The Company is an integrated provider of high volume electronic
transaction processing and value-added end-to-end information services and
systems to merchants, multinational corporations, financial institutions, and
government agencies. These services are marketed to customers within the
merchant services and the funds transfer businesses through various sales
channels.

The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
131, "Disclosure About Segments of an Enterprise and Related Information." The
Company's chief operating decision making group currently operates one
reportable segment--electronic transaction processing--therefore the majority
of the disclosures required by SFAS No. 131 do not apply to the Company. The
Company's results of operations and its financial condition are not
significantly reliant upon any single customer. Revenues from external
customers from the Company's service offerings are as follows:

2001 2000 1999
-------- -------- --------
(in thousands)

The Company's operations are provided in the United States, Canada, and
Europe. The following is a breakdown of revenues by geographic region:

2001 2000 1999
-------- -------- --------
(in thousands)

United States..................................... $328,054 $332,873 $322,145
Canada............................................ 23,183 4,545 4,116
Europe............................................ 1,958 2,615 3,790
-------- -------- --------
$353,195 $340,033 $330,051
======== ======== ========

The consolidated financial statements have been prepared on the historical
cost basis in accordance with accounting principles generally accepted in the
United States, and present the Company's financial position, results of
operations, and cash flows. Through the Distribution Date of January 31, 2001,
these amounts were derived from NDC's historical financial statements. As
further described in Note 4, certain corporate and interest expenses had been
allocated to the Company that were not previously allocated to NDC's eCommerce
business segment. These allocations were based on an estimate of the proportion
of corporate expenses related to the Company, utilizing such factors as
revenues, number of employees, number of transactions processed and other
applicable factors. In the opinion of management, these allocations have been
made on a reasonable basis. The costs of these services charged to the Company
may not reflect the actual costs the Company would have incurred for similar
services as a stand-alone company.

Note 2--Summary of Significant Accounting Policies

Use of estimates--The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make certain estimates and assumptions. These estimates and
assumptions affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during the
reported period. Actual results could differ from these estimates.

Revenue--Card information and transaction processing services revenue are
primarily based on a percentage of transaction value or on a specified amount
per transaction, and is recognized as such services are performed. Revenue for
processing services provided directly to merchants is recorded net of
interchange fees charged by credit card associations, which are not controlled
by the Company.

Check guarantee services includes the process of electronically verifying
the check being presented to the Company's merchant customer, through an
extensive database. The Company guarantees the face value of the verified and
guaranteed check to the merchant customer. If a verified and guaranteed check
is dishonored, the Company reimburses the merchant for the check's face value,
and pursues collection from the delinquent checkwriter. The Company has the
right to collect the full amount of the check from the checkwriter but has
historically recovered approximately 50% of the guaranteed checks. At the time
revenue is recognized, the Company establishes a claims receivable from the
delinquent checkwriter for the full amount of the guaranteed check and a
valuation allowance for this activity based on historical and projected loss
experience (See Note 14). The expense associated with the valuation allowance
is included in cost of service in the accompanying consolidated statements of
income.

Revenue for the check guarantee offering is primarily derived from a
percentage of the face value of each guaranteed check. The Company recognizes
revenue upon satisfaction of its guarantee obligation to the merchant customer.
The check guarantee offering also earns revenue based on fees collected from
delinquent checkwriters which is recognized when collected, as collectibility
is not reasonably assured until that point.

Check verification services are similar to the services provided in the
check guarantee offering, except the Company does not guarantee the verified
checks. Revenue for this offering is primarily derived from fees collected from
delinquent checkwriters and is recognized when collected, as collectibility is
not reasonably assured until that point. This offering also earns revenue based
on a fixed amount each merchant pays for each check that is verified. This
revenue is recognized when the transaction is processed, since the Company has
no further obligations associated with the transaction.

Terminal management products and services consist of electronic transaction
processing terminal sales and rentals, terminal set-up, telephone training and
technical support. Revenue associated with the terminal sale, set-up and
telephone training is considered a single earnings process and is recognized
when the set-up and telephone training is completed, and the merchant customer
can begin processing transactions. Terminal rental revenues are recognized when
the service is provided. Revenue associated with technical support is
considered an independent earnings process and is recognized based on either a
maintenance agreement, which is recognized on a straight-line basis over the
maintenance contract term, or based on time and materials when the support is
completed.

Cash and cash equivalents--Cash and cash equivalents include cash on hand
and all liquid investments with an initial maturity of three months or less
when purchased.

Inventory--Inventory, which includes microcomputer hardware and peripheral
equipment, and electronic point of sale terminals, is stated at the lower of
cost or market. Cost is determined by using the average cost method.

Merchant processing receivable/payable--The merchant processing
receivable/payable results from timing differences in the Company's settlement
process with merchants and credit card sales processed.

Property and equipment--Property and equipment, including equipment under
capital leases, are stated at cost. Depreciation and amortization are
calculated using the straight-line method. Equipment is depreciated over 2 to 5
year lives. Leasehold improvements and property acquired under capital leases
are amortized over the shorter of the useful life of the asset or the term of
the lease. The costs of purchased and internally developed software used to
provide services to customers or internal administrative services are
capitalized and amortized on a straight-line basis over their estimated useful
lives, not to exceed 5 years. Maintenance and repairs are charged to operations
as incurred.

Intangible assets--Intangible assets primarily represent goodwill, customer
lists/merchant contracts and trademarks associated with acquisitions. Customer
lists/merchant contracts are amortized using the straight-line method over
their estimated useful lives of 10 to 30 years. Trademarks are amortized using
the straight-line method over the estimated useful life of 40 years, which
approximates the legal life. The useful lives for customer lists/merchant
contracts are determined based primarily on information concerning start/stop
dates and yearly attrition. The useful lives of other identifiable intangibles
are generally based on the relative importance of the intangible to the
business being acquired, for valuation purposes, and public recognition of a
name in the case of trademarks, or annual turnover statistics in the case of
assembled workforce.

Goodwill represents the excess of the cost of acquired businesses over the
fair market value of their identifiable net assets. Goodwill is being amortized
on a straight-line basis over periods ranging from 20 to 40 years.

Impairment of long-lived assets--The Company regularly evaluates whether
events and circumstances have occurred that indicate the carrying amount of
property and equipment or goodwill and other intangibles may warrant revision
or may not be recoverable. When factors indicate that long-lived assets should
be evaluated for possible impairment, the Company assesses the recoverability
of long-lived assets by determining whether the carrying value of such long-
lived assets will be recovered through the future undiscounted cash flows
expected from use of the asset and its eventual disposition. In management's
opinion, the long-lived assets, including property and equipment and intangible
assets, are appropriately valued at May 31, 2001 and May 31, 2000.

Investments--The Company holds a $5 million investment in eCharge
Corporation, a private company that offers Internet users secure and convenient
ways to make purchases over the Internet. This investment was recorded at its
historical cost of $5.0 million at May 31, 2000. During the fourth quarter
ending May 31, 2001, the Company completed an evaluation of this sole
investment as it has experienced difficulty securing additional funding in
current market conditions. As a result, management determined the carrying
value of the investment was not recoverable and recognized a loss on investment
of $5.0 million.

Income taxes--Deferred income taxes are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
enacted tax laws and rates (see Note 10).

Fair value of financial instruments--Management considers that the carrying
amounts of financial instruments, including cash and cash equivalents,
receivables, accounts payable and accrued liabilities, and current maturities
of long-term obligations, approximate fair value.

Foreign currency translation--The Company has a foreign subsidiary in Canada
and the United Kingdom, whose functional currency is their local currency.
Gains and losses on transactions denominated in currencies other than the
functional currencies are included in determining net income for the period in
which exchange rates change. The assets and liabilities of foreign subsidiaries
are translated at the year-end rate of exchange, and income statement items are
translated at the average rates prevailing during the year. The resulting
translation adjustment is recorded as a component of shareholders' equity.
Translation gains and losses on intercompany balances of a long-term investment
nature are also recorded as a component of shareholders' equity. The effects of
foreign currency gains and losses arising from these translations of assets and
liabilities are included as a component of other comprehensive income.

Earnings per share--Basic earnings per share is computed by dividing
reported earnings available to common shareholders by weighted average shares
outstanding during the period. Earnings available to common shareholders is the
same as reported net income for all periods presented. For periods prior to the
Distribution Date, weighted average shares outstanding is computed by applying
the distribution ratio of 0.8 of a share of the Company for each NDC share held
to the historical NDC weighted average shares outstanding for the same periods
presented.

Diluted earnings per share is computed by dividing reported earnings
available to common shareholders by weighted average shares outstanding during
the period and the impact of securities that, if exercised, would have a
dilutive effect on earnings per share. All options with an exercise price less
than the average market share price for the period generally are assumed to
have a dilutive effect on earning per share. Diluted earnings per share is not
presented for the years ended May 31, 2000 and 1999, as Global Payments stock
options did not exist prior to the Distribution Date.

The following table sets forth the computation of basic and diluted earnings
for the year ended May 31, 2001:

Income Shares Per Share
------- ------ ---------
(in thousands, except
per share data)

Basic EPS:
Net income.......................................... $23,668 28,616 $0.83
Dilutive effect of stock options.................... -- 300
------- ------
Diluted EPS:
Net income available to common shareholders......... $23,668 28,916 $0.82
======= ====== =====

Impact of new accounting pronouncements--In July 2001, the Financial
Accounting Standards Board published SFAS No. 142, "Goodwill and Other
Intangible Assets." In accordance with the SFAS, the Company has elected to
adopt the standard effective June 1, 2001. The provisions of the SFAS allow
intangibles with an indefinite useful life, such as goodwill, to not be
amortized prospectively and perform annual impairment tests of these intangible
assets. Amortization of goodwill for fiscal 2001 and 2000 was approximately
$3.8 million and $3.4 million, respectively. The Company expects to complete
its first annual impairment tests by November 30, 2001.

Note 3--Business Acquisitions

During 2001, the Company acquired the following businesses:

Percentage
Business Date Acquired Ownership
-------- ----------------- ----------

Brennes-Jones Group Merchant Portfolio........ November 21, 2000 100%
Canadian Imperial Bank of Commerce ("CIBC")
Merchant Acquiring Business.................. March 20, 2001 100%
Comerica Bank--Imperial Bank Merchant
Portfolio.................................... May 31, 2001 51%

These acquisitions have been recorded using the purchase method of
accounting, and accordingly, the purchase price has been allocated to the
assets acquired and liabilities assumed based on their estimated fair value as
of the date of acquisition. The operating results are included in the Company's
consolidated statements of income from the date of the acquisition.

The aggregate cash price paid for these acquisitions consisted of $23.4
million as follows:

2001
--------------
(In thousands)

Fair value of assets acquired................................. $ 175,457
Liabilities assumed........................................... (8,445)
Deferred purchase price....................................... (10,082)
Common stock issued (9,764,623 shares)........................ (133,580)
---------
Cash paid for acquisitions.................................... $ 23,350
=========

The excess of cost over tangible assets acquired totaled $117.0 million,
with $52.7 allocated to goodwill and $64.3 to customer lists/merchant
contracts. The depreciable and intangible assets are being amortized over
periods ranging from 2 to 20 years.

The following unaudited pro forma information for the purchase acquisitions
discussed above have been prepared as if these acquisitions, the Distribution
and divestitures had occurred on June 1, 1999. The information is based on
historical results of the separate companies and may not necessarily be
indicative of the results that would have been achieved or of results that may
occur in the future. The pro forma information includes the expense for
amortization of goodwill and other intangible assets resulting from these
transactions and interest expense related to financing costs but does not
reflect any synergies or operating cost reductions that may be achieved from
the combined operations. In addition, the unaudited pro forma information
excludes the impact of non-recurring charges.

2001 2000
-------- --------
(In thousands,
except per share
data)

Revenue...................................................... $445,656 $431,620
Net income................................................... 39,552 36,445
Basic earnings per share..................................... 1.03 1.00

Note 4--Transactions with NDC

The Company was charged with incremental corporate costs through the
Distribution Date in the amount of $4.7 million in fiscal 2001, $5.0 million in
fiscal 2000, and $3.2 million in fiscal 1999. These allocations were based on
an estimate of the proportion of corporate expenses related to the Company,
utilizing such factors as revenues, number of employees, number of transactions
processed and other applicable factors.

In conjunction with the Distribution, the Company and NDC entered into
various agreements that address the allocation of assets and liabilities
between them and that define their relationship after the Distribution,
including the Distribution Agreement, the Tax Sharing and Indemnification
Agreement, the Employee Benefits Agreement, the Lease Agreement for Office
Headquarters, the Intercompany Systems/Network Services Agreement, the Batch
Processing Agreement and the Transition Support Agreement. In addition to the
above, the Company paid NDC $2.4 million in 2001 for transitional services.

The Company was also charged corporate interest expense through January 31,
2001 based on the corporate debt allocations of NDC to the Company at the
Distribution Date. The Company utilized a rollback approach to allocate the
portion of the NDC consolidated group's debt and interest expense for all
historical periods presented. This treatment records the debt allocation
percentage for all historical periods presented. The allocated portion of the
consolidated group's debt is presented as due to NDC on the accompanying
consolidated balance sheets. Interest expense recorded by the Company related
to this debt was $3.1 million in fiscal 2001, $4.6 million in fiscal 2000, and
$5.0 million in fiscal 1999 and is included in interest and other expense. NDC
did not charge any incremental interest expense to the Company after the
Distribution Date.

Note 5--Property and Equipment

As of May 31, 2001 and May 31, 2000, property and equipment consisted of the
following:

2001 2000
------- -------
(In thousands)

Property under capital leases............................... $11,760 $11,838
Equipment................................................... 45,454 30,647
Software.................................................... 20,380 19,594
Leasehold improvements...................................... 2,273 6,410
Furniture and fixtures...................................... 3,041 3,002
Work in progress............................................ 8,749 2,532
------- -------
91,657 74,023
Less: accumulated depreciation and amortization............. 47,321 45,358
------- -------
$44,336 $28,665
======= =======

Note 6--Software Costs

The following table sets forth information regarding the Company's costs
associated with software development for the years ended May 31, 2001, May 31,
2000 and May 31, 1999. These amounts exclude other expenditures for product
improvements, customer requested enhancements, maintenance and Year 2000
remediation.

2001 2000 1999
------ ------ ------
(In thousands)

Total costs associated with software development...... $6,437 $2,623 $1,774
Less: capitalization of internally developed
software............................................. 1,891 884 625
------ ------ ------
Net research and development expense.................. $4,546 $1,739 $1,149
====== ====== ======

The Company capitalizes costs related to the development of certain software
products. In accordance with SFAS No. 86, "Accounting for the Costs of Computer
Software to Be Sold, Leased, or Otherwise Marketed," capitalization of costs
begins when technological feasibility has been established and ends when the
product is available for general release to customers. Amortization is computed
on an individual product basis and has been recognized for those products
available for market based on the products' estimated economic lives, not to
exceed five years.

Additionally, the Company capitalizes costs related to the development of
computer software developed or obtained for internal use in accordance with the
American Institute of Certified Public Accountants Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." Costs incurred in the application development phase are
capitalized and amortized over the useful life, not to exceed five years.

Total unamortized capitalized software costs (purchased and internally
developed) were approximately $8.1 million and $7.9 million as of May 31, 2001
and May 31, 2000, respectively. Total software amortization expense was
approximately $2.9 million, $2.6 million and $1.9 million in fiscal 2001, 2000
and 1999, respectively.

Note 7--Intangible Assets

As of May 31, 2001 and May 31, 2000, intangible assets consisted of the
following:

2001 2000
-------- --------
(In thousands)

Customer lists/merchant contracts......................... $160,114 $ 98,941
Trademarks................................................ 28,273 28,273
Goodwill.................................................. 137,281 83,777
Other intangibles......................................... 32,256 39,956
-------- --------
357,924 250,947
Less: accumulated amortization............................ 80,549 77,221
-------- --------
$277,375 $173,726
======== ========

Note 8--Accounts Payable and Accrued Liabilities

As of May 31, 2001 and May 31, 2000, accounts payable and accrued
liabilities consisted of the following:

2001 2000
------- -------
(In thousands)

Trade accounts payable...................................... $10,133 $ 7,209
Accrued compensation and benefits........................... 7,469 8,043
Accrued pensions............................................ 199 372
Deferred purchase price on acquisition...................... 10,082 --
Accrued restructuring....................................... 2,347 --
Other accrued liabilities................................... 17,686 10,714
------- -------
$47,916 $26,338
======= =======

Note 9--Retirement Benefits

Historically, the Company had participated in the NDC noncontributory
defined benefit pension plan (the "NDC Plan") covering substantially all of
its United States employees who have met the eligibility provisions of the NDC
Plan as of May 31, 1998. During fiscal year 1998, the Company made an
evaluation of its current retirement plan offerings and decided to provide its
employees with a greater emphasis on its deferred compensation 401(k) plan by
substantially increasing the Company's match of participants' contributions.
At the same time, the Company closed the defined benefit pension plan to new
participants beginning June 1, 1998. Benefits are based on years of service
and the employee's compensation during the highest five consecutive years of
earnings of the last ten years of service. Plan provisions and funding meet
the requirements of the Employee Retirement Income Security Act of 1974, as
amended. Effective on the Distribution Date, the Company established the
Global Payments defined benefit pension plan (the "Global Payments Plan") and
NDC transferred to this plan a proportionate share of assets allocable to the
accrued benefits for the Company's participants under the NDC Plan. The
expenses for the NDC Plan were allocated to the Company based on the relative
projected benefit obligations for all the Company's employees compared with
the obligations for all participants. In the opinion of management, the
expenses have been allocated on a reasonable basis and, for fiscal 2001 and
2000, were actuarially determined.

The following table provides a reconciliation of the changes in the benefit
obligations and fair value of assets over the two-year period ending May 31,
2001 and a statement of funded status at May 31 for each year:

Changes in benefit obligations

2001 2000
------ ------
(In
thousands)

Balance at beginning of year................................. $6,119 $6,268
Service cost................................................. -- --
Interest cost................................................ 474 453
Amendments................................................... 31 --
Benefits paid................................................ -- (219)
Actuarial gain............................................... (12) (383)
------ ------
Balance at end of year....................................... $6,612 $6,119
====== ======

Changes in plan assets

2001 2000
------- ------
(In thousands)

Balance at beginning of year................................ $ 6,186 $5,763
Actual return on plan assets................................ (1,155) 642
Employer contributions...................................... -- --
Benefits paid............................................... -- (219)
------- ------
Balance at end of year...................................... $ 5,031 $6,186
======= ======

The accrued pension costs recognized in the Consolidated Balance Sheet were
as follows:

2001 2000
------- -----
(In
thousands)

Funded status.............................................. $(1,581) $ 67
Unrecognized net (gain) loss............................... 1,370 (391)
Unrecognized prior service cost............................ 54 42
Unrecognized net asset at June 1, 1985, being amortized
over 17 years............................................. (42) (90)
------- -----
Accrued pension cost....................................... $ (199) $(372)
======= =====

Net pension expense (income) included the following components for the
fiscal years ending May 31:

2001 2000
----- -----
(In
thousands)

Service cost-benefits earned during the period................ $ -- $ --
Interest cost on projected benefit obligation................. 474 453
Expected return on plan assets................................ (618) (576)
Net amortization and deferral................................. (30) (30)
----- -----
Net pension expense (income).................................. $(174) $(153)
===== =====

Significant assumptions used in determining net pension expense and related
obligations were as follows:

2001 2000
----- -----

Discount rate.................................................. 7.50% 7.75%
Rate of increase in compensation levels........................ 4.33% 4.33%
Expected long-term rate of return on assets.................... 10.00% 10.00%

Information relating to accumulated benefits and plan assets as they may be
allocable to the Company's participants at May 31, 1999 is not available. The
Company's contributions to the plan, and the related pension expenses recorded,
for fiscal 1999 was $0.1 million.

Historically, the Company has participated in the NDC deferred compensation
401(k) plan that is available to substantially all employees with three months
of service. Expenses of $1.0 million, $.6 million, and $.9 million were
allocated to the Company in proportion to total payroll for fiscal 2001(through
January 31, 2001), 2000, and 1999, respectively. Effective February 1, 2001,
the Company established its own 401(k) with substantially the same terms as the
NDC plan with the matching contribution in the form of Global Payments' common
stock. In addition to the expense allocations mentioned above, the Company
contributed $0.3 million to the Global Payments' 401(k) plan in fiscal 2001.

Note 10--Income Taxes

Prior to the Distribution Date, the Company had been included in the
consolidated federal income tax return of NDC. Tax provisions were settled
through the intercompany account and NDC made income tax payments on behalf of
the Company (see Note 15). The Company's provision for income taxes in the
accompanying consolidated statements of income reflects federal and state
income taxes calculated on the Company's separate income.

The provision for income taxes includes:

2001 2000 1999
------- ------- -------
(In thousands)

Current tax expense:
Federal........................................... $17,200 $16,266 $20,146
State............................................. 1,310 780 1,481
------- ------- -------
18,510 17,046 21,627
------- ------- -------
Deferred tax expense (benefit):
Federal........................................... (3,402) 3,389 3,366
State............................................. (292) 290 272
------- ------- -------
(3,694) 3,679 3,638
------- ------- -------
Total.............................................. $14,816 $20,725 $25,265
======= ======= =======

The Company's effective tax rates differ from federal statutory rates as
follows:

2001 2000 1999
---- ---- ----

Federal statutory rate................................ 35.0 % 35.0 % 35.0 %
State income taxes, net of federal income tax
benefit.............................................. 1.7 % 1.3 % 1.7 %
Non-deductible amortization and write-off of
intangible assets.................................... 2.3 % 1.6 % 1.3 %
Tax credits........................................... (0.8)% (0.5)% (0.3)%
Other................................................. 0.3 % 1.1 % 0.2 %
---- ---- ----
Total................................................ 38.5 % 38.5 % 37.9 %
==== ==== ====

Deferred income taxes as of May 31, 2001 and May 31, 2000 reflect the impact
of temporary differences between the amounts of assets and liabilities for
financial accounting and income tax purposes. As of May 31, 2001 and May 31,
2000, principal components of deferred tax items were as follows:

2001 2000
------- -------
(In thousands)

Deferred tax assets:
Accrued restructuring and non-cash loss on investment.... $ 4,233 $ --
Accrued expenses and other............................... 1,912 368
------- -------
6,145 368
------- -------
Deferred tax liabilities:
Property and equipment................................... 1,550 1,692
Acquired intangibles..................................... 6,546 3,903
Prepaid expenses......................................... 168 386
Other.................................................... -- 200
------- -------
8,264 6,181
------- -------
Net deferred tax liability................................ (2,119) (5,813)
Less: Current deferred tax (liability) asset.............. 5,118 (410)
------- -------
Non-current deferred tax liability........................ $(7,237) $(5,403)
======= =======

A valuation allowance is provided when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The Company has
not established valuation allowances for these tax assets.

Note 11--Shareholders' Equity

Stock Options--NDC had certain Stock Option Plans (the "Plan") under which
incentive stock options and non-qualified stock options have been granted to
officers, key employees and directors of NDC. In connection with the separation
of the Company from NDC, stock options under the Plan held by employees of the
Company that were not exercised prior to the date of the Distribution were
replaced with options of Global Payments. In accordance with the provisions of
FASB Interpretation No. 44 ("FIN 44," "Accounting for Certain Transactions
Involving Stock Compensation"), NDC stock options were replaced with Global
Payments stock options in amounts and at exercise prices intended to preserve
the economic benefit of the NDC stock options at such time. No compensation
expense resulted from the replacement of the options. The exercise price of
such options range from $3.26 to $20.90. As a result, options for 2,364,849
shares of Global Payments common stock were issued to replace NDC options under
the Global Payments Inc. 2000 Long-Term Incentive Plan ("The 2000 Plan"). The
Company also has a Non-Employee Director Stock Option Plan ("The Director
Plan"), which provides for grants of options to directors who are not employees
with the Company. A summary of changes in all outstanding options and the
related weighted average exercise price per share is as follows:

The 2000 Plan The Director Plan
------------------------------ ---------------------------
Weighted Weighted
Avg. Exercise Price Avg. Exercise Price
Year Ended May 31, 2001 Shares Per Share Shares Per Share
----------------------- --------- ------------------- ------- -------------------

Balance, beginning of
year................... -- -- -- --
Granted:
Replacement options... 2,364,849 $12.97 -- --
New options........... 103,301 $17.16 23,920 $20.90
Cancelled.............. (8,648) $11.51 -- --
Exercised.............. (18,499) $ 7.18 -- --
--------- ------ ------- ------
Balance, end of year.... 2,441,003 $13.20 23,920 $20.90
Shares available for
future grant........... 3,278,085 376,080

The following table summarizes information about all stock options
outstanding at May 31, 2001:

Options Outstanding Options Exercisable
------------------------------------------------ ------------------------
Range of Weighted Average
Exercise Remaining Contractual Weighted Average Weighted Average
Prices Shares Life in Years Exercise Price Shares Exercise Price
-------- --------- --------------------- ---------------- ------- ----------------

$3.26-$4.73 31,722 1.73 $ 4.48 31,722 $ 4.48
$5.46 67,532 3.00 $ 5.46 67,532 $ 5.46
$8.86-$13.19 1,320,436 7.24 $11.40 385,940 $10.81
$14.66-$19.01 1,010,843 7.73 $16.24 154,673 $17.40
$20.90-$23.86 34,390 9.71 $21.08 -- --
--------- ---- ------ ------- ------
2,464,923 7.29 $13.27 639,867 $11.53

The weighted-average grant-date fair value per share of replacement options
and options granted in 2001 under the 2000 Plan and the Director Plan is
$(10.09) and $11.39, respectively. The negative fair value under the 2000 Plan
resulted from the remeasurement and replacement of outstanding options.

The fair value of each option granted in 2001 is estimated on the date of
grant using the Black-Scholes option-pricing model. The following assumptions
were used for the 2000 Plan: dividend yield, 0%; expected volatility, 45%;
risk-free interest rate, 4.80%; and expected life in years, 0 to 7. The
following assumptions were used for the Director Plan: dividend yield, 0%;
expected volatility, 45%; risk-free interest rate, 5.03%; and expected life in
years, 7.

Employee Stock Purchase Plan--The Company has an Employee Stock Purchase
Plan under which the sale of 1,200,000 shares of its common stock have been
authorized. Employees may designate up to the lesser of $25,000 or 20% of their
annual compensation for the purchase of stock. The price for shares purchased
under the plan is the lower of 85% of market value on the first day or the last
day of the quarterly purchase period. At May 31, 2001, 9,881 shares have been
issued under this plan, with 1,190,119 shares reserved for future issuance.

The weighted-average grant-date fair value per share granted in 2001 under
the Employee Stock Purchase Plan is $4.15.

The fair value of each share granted in 2001 under the Employee Stock
Purchase Plan is estimated on the date of grant using the Black-Scholes option-
pricing model using the following assumptions: dividend yield, 0%; expected
volatility, 45%; risk-free interest rate, 4.68%; and expected life: 3 months.

The Company has chosen the disclosure option under SFAS No. 123, "Accounting
for Stock-Based Compensation" and continues to apply Accounting Principles
Board, ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for options granted under the plans. Had
compensation cost for these plans been recognized based on the fair value of
the options at the replacement date and the grant dates for awards under the
plans consistent with the method of SFAS No. 123, the Company's net income and
earnings per share would have been reduced to the following pro forma amounts:

2001 2000 1999
------- ------- -------
(In thousands, except
per share data)

Net income:
As reported........................................ $23,668 $33,047 $41,366
Pro forma.......................................... $20,695 $31,428 $40,242
Basic earnings per share:
As reported........................................ $ 0.83 $ 1.24 $ 1.53
Pro forma.......................................... $ 0.72 $ 1.18 $ 1.49

Pro forma income for 1999 and 2000 noted above is based on the fair value of
NDC options held by Global Payments' employees.

Restricted Stock--NDC had performance share plans for certain key officers
that provided for distribution of common stock at the end of three-year
measurement periods, in the form of restricted stock. As of the Distribution,
the Company's officers that were participants in the NDC Plan were granted
256,565 restricted shares under the restricted stock program to replace the
awards previously granted under the NDC Plan. Shares awarded under the
restricted stock program are held in escrow and released to the grantee upon
the grantee's satisfaction of conditions of the grantee's restricted stock
agreement. Awards are recorded as deferred compensation, a reduction of
shareholders' equity based on the quoted fair market value of the Company's
common stock at the award date. Compensation expense is recognized ratably
during the escrow period of the award. The compensation cost that was charged
against income for restricted stock was $1.1 million in 2001.

NDC equity investment--NDC's equity investment includes the original
investment in the Company, accumulated income of the Company, and the dividend
to NDC arising from the forgiveness of the net intercompany receivable due from
NDC reflecting transactions described in Note 4. The NDC equity investment as
of May 31, 2000 was $120.2 million.

Note 12--Restructuring and Other

During the fourth quarter of fiscal 2001, the Company completed plans for
the consolidation of six locations into three, including associated management
and staff reductions. Total charges are categorized as follows:

Total Cash Non-cash
------ ------ --------
(In thousands)

Closed or planned closings of facilities.............. $1,416 $1,075 $ 341
Severance and related costs........................... 3,466 1,610 1,856
------ ------ ------
Totals................................................ $4,882 $2,685 $2,197
====== ====== ======

The charges relating to facilities represent locations that are either
already closed or have management approved plans to be closed within the next
four months. These charges include future minimum lease and operating payments,
commencing on the planned exit timing, for all noncancelable leases under
remaining terms of the locations identified, net of current and estimated
future sublease income. The charges also include facility exit costs. Normal
lease payments and operating costs will continue to be charged to operating
expenses prior to actually vacating the specific facilities.

The severance and related costs arise from the Company's actions to reduce
personnel in areas of redundant operations and activities. These charges
reflect specifically identified employees whose employment will be terminated
and were informed in the fourth quarter of fiscal 2001.

The items considered cash items were accrued at the time the charges were
incurred. As of May 31, 2001, $2.3 million of the cash portion of the
restructuring charges remains accrued as a current liability in the accrued
liabilities section of the balance sheet as follows:

Original Payments Remaining
Total to Date Liability
-------- -------- ---------
(In thousands)

Closed or planned closings of facilities......... $1,075 $-- $1,075
Severance and related costs...................... 1,610 338 1,272
------ ---- ------
Totals........................................... $2,685 $338 $2,347
====== ==== ======

Note 13--Related Party Transactions

In connection with the fiscal 2001 purchase of CIBC's merchant acquiring
business, CIBC holds approximately 26.8% of the Company's outstanding common
stock. CIBC provides transition services under an agreement to provide various
support services to the merchant acquiring business for a 24-month period

commencing on the acquisition date of March 20, 2001. The purpose of the
agreement is to facilitate the integration into our existing operations. These
services include customer service, credit and debit card processing and
settlement functions. For the year ending May 31, 2001 the Company incurred
expenses of approximately $11.2 million related to these services.

In connection with the fiscal 1996 purchase of Merchant Automated Point of
Sale Program ("MAPP") from MasterCard International Incorporated, MasterCard
holds a 7.5% minority interest in Global Payment Systems LLC, a partnership
with MasterCard International Incorporated. MasterCard provided certain
services for the MAPP business unit. The original service agreement was for a
period of three years and ended on March 31, 1999. The services agreement was
then amended to allow certain services to be provided through April 1, 2000.
The Company now performs the services formerly provided by MasterCard under
this service agreement internally, accordingly no expenses were incurred in the
year ended May 31, 2001. For the years ended May 31, 2000 and May 31, 1999 the
Company incurred expenses of approximately $0.2 million and $3.0 million,
respectively, related to these services.

Also, during fiscal 1996, the Company formed an alliance with Comerica Bank
and purchased 51% ownership interest in NDPS Comerica Alliance LLC. There are
agreements in place for the Company to reimburse Comerica Bank for any expenses
incurred on behalf of the alliance. For the years ended May 31, 2001, May 31,
2000 and May 31, 1999 the Company incurred expenses of approximately $1.2
million, $.9 million and $.6 million, respectively, related to these services.

Note 14--Commitments and Contingencies

Leases

The Company conducts a major part of its operations using leased facilities
and equipment. Many of these leases have renewal and purchase options and
provide that the Company pay the cost of property taxes, insurance and
maintenance.

Rent expense on all operating leases for fiscal 2001, 2000 and 1999 was
approximately $4.7 million, $5.8 million and $6.3 million, respectively.

Future minimum lease payments for all noncancelable leases at May 31, 2001
were as follows:

Capital Operating
Leases Leases
------- ---------
(In thousands)

2002..................................................... $3,027 $ 7,108
2003..................................................... 1,720 6,928
2004..................................................... 387 5,470
2005..................................................... -- 3,491
2006..................................................... -- 3,206
Thereafter............................................... -- 12,192
------ -------
Total future minimum lease payments...................... 5,134 $38,395
=======
Less: amount representing interest....................... 421
------
Present value of net minimum lease payments.............. 4,713
Less: current portion.................................... 2,739
------
Long-term obligations under capital leases at May 31,
2001.................................................... $1,974
======

Legal

The Company is party to a number of claims and lawsuits incidental to its
business. In the opinion of management, the ultimate outcome of such matters,
individually or in the aggregate, will not have a material adverse impact on
the Company's financial position, liquidity or results of operations.

Line of Credit

The Company has a commitment for a $125 million revolving line of credit. It
funded the payment of the cash due to NDC to reflect its share of NDC's pre-
distribution debt used to establish the Company's initial capitalization. This
line of credit is also used to meet working capital and acquisition needs. This
line has a variable interest rate based on market rates. The credit agreement
contains certain financial and non-financial covenants customary for financings
of this nature. Final maturity will be three years from the Distribution. The
full amount outstanding is due upon demand, therefore the Company classifies
the amount as a current liability. As of May 31, 2001, the Company had $73
million outstanding under this facility. As indicated in Note 4, the Company
utilized a "rollback" approach to allocate the anticipated portion of the NDC
consolidated group's debt and interest expense. Accordingly, as of May 31,
2000, there was $96.1 million allocated and outstanding as due to NDC.

The Company also has a credit facility from CIBC that provides a line of
credit up to $140 million (Canadian dollars), approximately $90 million U.S.,
with an additional overdraft facility available to cover larger advances during
periods of peak usage of credit and debit cards. The facility carries an
interest rate equal to Canadian Dollar LIBOR plus 0.40%. It contains customary
covenants and events of default. This line of credit is secured by a first
priority security interest in our accounts receivable from VISA
Canada/International, and has been guaranteed by our subsidiaries. This
guarantee is subordinate to our primary credit facility. The CIBC credit
facility has an initial term of 364 days expiring March 19, 2002. There are no
amounts outstanding under the CIBC credit facility as of May 31, 2001.

Operations

The Company processes credit card transactions for direct merchant
locations. The Company's merchant customers have the liability for any charges
properly reversed by the cardholder. In the event, however, that the Company is
not able to collect such amount from the merchants, due to merchant fraud,
insolvency, bankruptcy or another reason, the Company may be liable for any
such reversed charges. The Company requires cash deposits and other types of
collateral by certain merchants to minimize any such contingent liability. The
Company also utilizes a number of systems and procedures to manage merchant
risk. In addition, the Company believes that the diversification of its
merchant portfolio among industries and geographic regions minimizes its risk
of loss.

The Company recognizes revenue based on a percentage of the gross amount
charged and has a potential liability for the full amount of the charge. The
Company establishes valuation allowances for operational losses when such
losses are probable and reasonably estimated. In the opinion of management,
such allowances for losses are adequate. Expenses of $8.4 million, $3.0 million
and $2.4 million were recorded for fiscal 2001, 2000 and 1999, respectively,
for these losses.

The Company also has a check guarantee business. Similar to the credit card
business, the Company charges its merchants a percentage of the gross amount of
the check and guarantees payment of the check to the merchant in the event the
check is not honored by the checkwriter's bank. The Company has the right to
collect the full amount of the check from the checkwriter but has not
historically recovered 100% of the guaranteed checks. The Company establishes a
valuation allowance for this activity based on historical and projected loss
experiences. Expenses of $9.9 million, $10.1 million and $8.5 million were
recorded for fiscal 2001, 2000 and 1999, respectively, for these losses.

BIN Agreements

In connection with the Company's acquisition of merchant credit card
operations of banks, the Company has also entered into depository and
processing agreements (the "Agreements") with certain of the banks. These
Agreements allow the Company to use the banks' "Bank Identification Number"
("BIN") to clear credit card transactions through VISA and MasterCard. Certain
agreements contain financial covenants, and the Company was in compliance with
all such covenants as of May 31, 2001 or had obtained a verbal waiver of such
covenants. In management's opinion, the Company would be able to obtain
alternative BIN agreements without material impact to the Company in the event
of the termination of these Agreements.

Put Right

Effective April 1, 2000, MasterCard may put to the Company ("Put Right") all
or any portion of its membership interest in Global Payment Systems LLC.
MasterCard's Put Right shall be exercised by providing Global Payment Systems
LLC with notice specifying the percentage of its membership interest to be put,
the date on which the proposed put price is to be paid, and the proposed put
price. The proposed put price shall be based on the fair market value of Global
Payment Systems LLC on a stand-alone basis. As an alternative to purchasing
MasterCard's membership interest in the event of the exercise of the put right,
Global Payment Systems LLC may elect to dissolve the partnership with
MasterCard receiving a share of the net liquidation proceeds, in proportion to
their membership interest.

Note 15--Supplemental Cash Flow Information

Historically through the Distribution Date, the Company's cash flow had been
calculated with and included in the NDC consolidated group's Supplemental Cash
Flows. The Company's payments for income taxes have been calculated on the
Company's separate income and reflect federal and state income tax payment
allocations as if the Company had been operating on a stand-alone basis (Note
10). The Company has utilized a "rollback" approach to allocate the portion of
the consolidated group's interest payments for all historical periods presented
(Note 4).

Supplemental cash flow disclosures and non-cash investing and financing
activities for the years ended May 31, 2001, May 31, 2000 and May 31, 1999 are
as follows:

2001 2000 1999
-------- ------ -------
(In thousands)

Supplemental cash flow information:
Income taxes paid, net of refunds..................... $ 7,718 $5,816 $28,134
Interest paid......................................... 6,015 8,506 7,070
Supplemental non-cash investing and financing
activities:
Capital leases entered into in exchange for property
and equipment........................................ -- 915 6,710
Common stock issued in consideration for acquisitions.. 133,580 -- --

Note 16--Quarterly Consolidated Financial Information (Unaudited)

Quarter Ended
---------------------------------------------
August 31 November 30 February 28/29 May 31
--------- ----------- -------------- --------
(In thousands, except per share data)

Fiscal Year 2001
Revenue.......................... $87,191 $82,631 $80,674 $102,699
Operating income................. 16,581 15,972 11,966 8,527
Net income....................... 8,649 8,407 5,846 766
Basic earnings per share(1)...... 0.33 0.32 0.22 0.02
Diluted earnings per share(2).... -- -- 0.22 0.02

Fiscal Year 2000
Revenue.......................... $89,828 $84,174 $81,827 $ 84,204
Operating income................. 20,539 15,275 13,420 13,978
Net income....................... 11,204 8,023 6,930 6,890
Basic earnings per share(1)...... 0.41 0.30 0.26 0.26
Diluted earnings per share(2).... -- -- -- --

--------
(1) Using the distribution ratio of 0.8 share of Global Payments Inc. common
stock for each share of NDC common stock held. Weighted average shares
outstanding is computed by applying the distribution ratio to the
historical NDC weighted average shares outstanding through January 31,
2001.

(2) Diluted earnings per share is not presented in the Quarterly Consolidated
Financial Information for periods prior to November 30, 2000, as Global
Payments stock options did not exist prior to the Distribution Date.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE

We have audited in accordance with auditing standards generally accepted in
the United States, the financial statements included in Global Payments Inc.'s
annual report to shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated July 17, 2001. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. The
schedule below is the responsibility of Global Payments' management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

/s/ Arthur Andersen LLP

Atlanta, Georgia
July 17, 2001

GLOBAL PAYMENTS INC.
CONSOLIDATED SCHEDULE II

Valuation & Qualifying Accounts

Column A Column B Column C Column D Column E
-------- ---------- ------------------- ------------- ----------
1 2
Balance at Charged to Uncollectible Balance at
Beginning Costs and Acquired Accounts End
Description of Period Expenses Balances Write-Off of Period
----------- ---------- ---------- -------- ------------- ----------
(In thousands)

Trade Receivable
Allowances
May 31, 1999............ $1,386 $ 1,473 $-- $ 1,657 $1,202
May 31, 2000............ 1,202 1,345 -- 1,316 1,231
May 31, 2001............ 1,231 1,970 -- 2,003 1,198

Allowance for
operational losses--
Merchant card
Processing(1)
May 31, 1999............ 733 2,370 -- 2,218 885
May 31, 2000............ 885 2,985 -- 3,419 451
May 31, 2001............ 451 8,398 -- 7,306 1,543
--------
(1) Included in Merchant
processing receivable

Allowance for claim
losses--Check guarantee
Processing
May 31, 1999............ 3,508 8,521 -- 8,321 3,708
May 31, 2000............ 3,708 10,089 -- 10,118 3,679
May 31, 2001............ 3,679 9,949 -- 9,183 4,445

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

We incorporate by reference in this Item 10 information about our directors
contained under the heading "Proposal 1--Election of Directors; Nominees--
Certain Information Concerning Nominee and Directors" and information about
compliance with Section 16(a) of the Securities and Exchange Act of 1934 by our
directors and executive officers under the heading "Section 16(a) Beneficial
Ownership Reporting Compliance" from our proxy statement to be delivered in
connection with our 2001 Annual Meeting of Shareholders to be held on October
24, 2001. Refer to "Item 4A. Executive Officers of the Registrant" in this
report for information about our executive officers.

Item 11. Executive Compensation

We incorporate by reference in this Item 11 the information relating to
executive compensation contained under the heading "Proposal 1--Election of
Directors; Nominees--Other Information about the Board and its Committees" and
"Compensation and Other Benefits" from our proxy statement to be delivered in
connection with our 2001 Annual Meeting of Shareholders to be held on October
24, 2001. The information contained in the proxy statement under the sections
entitled "Shareholder Return Analysis" and "Report of the Compensation
Committee" are specifically not incorporated by reference in this Item 11.

Item 12. Security Ownership of Certain Beneficial Owners and Management

We incorporate by reference in this Item 12 the information relating to
ownership of our common stock by certain persons contained under the headings
"Election of Directors--Common Stock Ownership of Management" and "--Common
Stock Ownership by Certain Other Persons" from our proxy statement to be
delivered in connection with our 2001 Annual Meeting of Shareholders to be held
on October 24, 2001.

Item 13. Certain Relationships and Related Transactions

We incorporate by reference in this Item 13 the information regarding
certain relationships and related transactions between us and some of our
affiliates contained under the heading "Certain Transactions" from our proxy
statement to be delivered in connection with our 2001 Annual Meeting of
Shareholders to be held on October 24, 2001.

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) 1. Consolidated Financial Statements

Our consolidated financial statements listed below are set forth in Item 8
of this report:

Page
Number
------

Report of Independent Public Accountants............................ 21
Consolidated Statements of Income for the years ended May 31, 2001,
2000 and 1999...................................................... 22
Consolidated Balance Sheets as of May 31, 2001 and 2000............. 23
Consolidated Statements of Cash Flows for the years ended May 31,
2001, 2000 and 1999................................................ 24
Consolidated Statements of Changes in Shareholders' Equity for the
years ended
May 31, 2001, 2000, 1999 and 1998.................................. 25
Notes to Consolidated Financial Statements.......................... 26

(a) 2. Financial Statement Schedules

Schedule 2, Valuation and Qualifying Accounts, is set forth on page 41 of
this report.

All other schedules to our consolidated financial statements have been
omitted because they are not required under the related instruction or are
inapplicable, or because we have included the required information in our
consolidated financial statements or related notes.

(a) 3. Exhibits

The following exhibits either (i) are filed with this report or (ii) have
previously been filed with the Securities and Exchange Commission and are
incorporate in this Item 14 by reference to those prior filings.

2.1 Distribution Agreement, Plan of Reorganization and Distribution dated
January 31, 2001 by and between National Data Corporation and Global
Payments Inc., filed as Exhibit 2.1 to the Registrant's Current Report on
Form 8-K dated January 31, 2001, File No. 001-16111, and incorporated
herein by reference.

3.1 Amended and Restated Articles of Incorporation of Global Payments Inc.,
filed as Exhibit 3.1 to the Registrant's Current Report on Form 8-K dated
January 31, 2001, File No. 001-16111, and incorporated herein by
reference.

3.2 Amended and Restated By-laws of Global Payments Inc., filed as Exhibit
3.2 to the Registrant's Current Report on Form 8-K dated January 31,
2001, File No. 001-16111, and incorporated herein by reference.

4.1 Shareholder Protection Rights Agreement dated January 26, 2001 between
Global Payments Inc. and SunTrust Bank, filed as Exhibit 99.1 to the
Registrant's Current Report on Form 8-K dated February 1, 2001, File No.
001-16111, and incorporated herein by reference.

4.2 Form of certificate representing Global Payments Inc. common stock as
amended, filed as Exhibit 4.4 to the Registrant's Registration Statement
on Form 10 dated December 28, 2000, File No. 001-16111, and incorporated
herein by reference.

10.1 Tax Sharing and Indemnification Agreement by National Data Corporation
and Global Payments Inc. dated as of January 31, 2001, filed as Exhibit
10.1 to the Registrant's Current Report on Form 8-K dated January 31,
2001, File No. 001-16111, and incorporated herein by reference.

10.2 Employee Benefits Agreement between National Data Corporation and Global
Payments Inc. dated as of January 31, 2001, filed as Exhibit 10.2 to the
Registrant's Current Report on Form 8-K dated January 31, 2001, File No.
001-16111, and incorporated herein by reference.

10.3 Transition Support Agreement between National Data Corporation and Global
Payments Inc. dated as of January 31, 2001, filed as Exhibit 10.3 to the
Registrant's Current Report on Form 8-K dated January 31, 2001, File No.
001-16111, and incorporated herein by reference.

10.4 Intercompany Systems/Network Services Agreement between National Data
Corporation and Global Payments Inc. dated as of January 31, 2001, filed
as Exhibit 10.4 to the Registrant's Current Report on Form 8-K dated
January 31, 2001, File No. 001-16111, and incorporated herein by
reference.

10.5 Batch Processing Agreement between National Data Corporation and Global
Payments Inc. dated as of January 31, 2001, filed as Exhibit 10.5 to the
Registrant's Current Report on Form 8-K dated January 31, 2001, File No.
001-16111, and incorporated herein by reference.

10.6 Lease Agreement for Office Headquarters between National Data Corporation
and Global Payments Inc. dated as of January 31, 2001, filed as Exhibit
10.6 to the Registrant's Current Report on Form 8-K dated January 31,
2001, File No. 001-16111, and incorporated herein by reference.

10.7 Sublease Agreement dated as of January 31, 2001 between Global Payment
Systems LLC and National Data Corporation, filed as Exhibit 10.7 to the
Registrant's Current Report on Form 8-K dated January 31, 2001, File No.
001-16111, and incorporated herein by reference.

10.8 Sublease Agreement dated as of January 31, 2001 between National Data
Corporation and National Data Payment Systems, Inc., filed as Exhibit
10.8 to the Registrant's Current Report on Form 8-K dated January 31,
2001, File No. 001-16111, and incorporated herein by reference.

10.9* Amended and Restated 2000 Long-Term Incentive Plan, filed as Exhibit 10.9
to the Registrant's Registration Statement on Form 10 dated December 28,
2000, File No. 001-16111, and incorporated herein by reference.

10.10* 2000 Non-Employee Stock Purchase Plan, filed as Exhibit 99.2 to the
Registrant's Registration Statement on Form S-8 dated January 16, 2001,
File No. 001-16111, and incorporated herein by reference.

10.11* Amended or Restated 2000 Employee Stock Purchase Plan filed as Exhibit
99.3 to the Registrant's Registration Statement on Form S-8 dated
January 16, 2001, File No. 001-16111, and incorporated herein by
reference.

10.12* Form of Global Payments Inc. Supplemental Executive Retirement Plan as
amended, filed as Exhibit 10.12 to the Registrant's Registration
Statement on Form 10 dated December 28, 2000, File No. 001-16111, and
incorporated herein by reference.

10.13* Employment Agreement for Paul R. Garcia, as amended, filed as Exhibit
10.13 to the Registrant's Registration Statement on Form 10 dated
December 28, 2000, File No. 001-16111, and incorporated herein by
reference.

10.14* Employment Agreement for Thomas M. Dunn, as amended, filed as Exhibit
10.14 to the Registrant's Registration Statement on Form 10 dated
December 28, 2000, File No. 001-16111, and incorporated herein by
reference.

10.15* Employment Agreement for James G. Kelly, as amended, filed as Exhibit
10.15 to the Registrant's Registration Statement on Form 10 dated
December 28, 2000, File No. 001-16111, and incorporated herein by
reference.

10.16* Employment Agreement for Barry W. Lawson, as amended, filed as Exhibit
10.16 to the Registrant's Registration Statement on Form 10 dated
December 28, 2000, File No. 001-16111, and incorporated herein by
reference.

10.17 Operating Agreement of Global Payment Systems LLC, dated March 31, 1996,
as amended, filed as Exhibit 10.17 to the Registrant's Registration
Statement on Form 10 dated December 28, 2000, File No. 001-16111, and
incorporated herein by reference.

10.18 Registration Rights Agreements between Global Payment Systems LLC and
MasterCard International Incorporated, dated April 1, 1996 as amended,
filed as Exhibit 10.18 to the Registrant's Registration Statement on Form
10 dated December 28, 2000, File No. 001-16111, and incorporated herein
by reference.

10.19 Asset Purchase Agreement with Canadian Imperial Bank of Commerce, as
amended, filed as Exhibit 10.19 to the Registrant's Registration
Statement on Form 10 dated December 28, 2000, File No. 001-16111, and
incorporated herein by reference.

10.20 Investor Rights Agreement with Canadian Imperial Bank of Commerce as
amended, filed as Exhibit 10.2 to the Registrant's Current Report on Form
8-K dated March 20, 2001, File No. 001-16111, and incorporated herein by
reference.

10.21 Form of Marketing Alliance Agreement with Canadian Imperial Bank of
Commerce as amended, filed as Exhibit 10.3 to the Registrant's Current
Report on Form 8-K dated March 20, 2001, File No. 001-16111, and
incorporated herein by reference.

10.22 Transition Agreement with Canadian Imperial Bank of Commerce, filed as
Exhibit 10.4 to the Registrant's Current Report on Form 8-K dated March
20, 2001, File No. 001-16111, and incorporated herein by reference.

10.23 Stock Purchase Agreement with Canadian Imperial Bank of Commerce filed as
Exhibit 10.5 to the Registrant's Current Report on Form 8-K dated March
20, 2001, File No. 001-16111, and incorporated herein by reference.

10.24 Credit Agreement with Canadian Imperial Bank of Commerce filed as Exhibit
10.6 to the Registrant's Current Report on Form 8-K dated March 20, 2001,
File No. 001-16111, and incorporated herein by reference.

10.25** Credit Agreement dated as of January 31, 2001, among Global Payments
Inc., Bank One, N.A., as Administrative Agent, Wachovia Bank, N.A., as
Documentation Agent, and the Lenders named therein.

10.26** First Amendment dated March 20, 2001 to the Credit Agreement dated as
of January 31, 2001 among Global Payments Inc., Bank One, N.A., as
Administrative Agent, Wachovia Bank, N.A., as Documentation Agent, and
the Lenders named therein.

10.27** Second Amendment dated May 14, 2001, among Global Payments Inc., Bank
One, N.A., as Administrative Agent, Wachovia Bank, N.A., as
Documentation Agent, and the Lenders named therein.

10.28** Third Amendment dated July 25, 2001, among Global Payments Inc., Bank
One, N.A., as Administrative Agent, Wachovia Bank, N.A., as
Documentation Agent, and the Lenders named therein.

21** List of Subsidiaries.

23** Consent of Independent Public Accountants.

99.1** Risk Factors

99.2** Combined Quarterly Statements of Income, are presented for information
purposes for fiscal years 2000 and 2001.
--------
* Compensatory management agreement
** Filed with this report

(b) Reports filed on Form 8-K

March 20, 2001--Item 5--Global Payments Inc. issues press release announcing
completion of the acquisition of Canadian Imperial Bank of Commerce's Merchant
Card Services business and press release announcing third quarter earnings
results. No financial statements were filed with this report.

March 20, 2001--Item 2--Summary of Purchase of Canadian Imperial Bank of
Commerce's Merchant Card Services business. The following financial statements
were filed with this report:

CIBC Merchant Acquiring Business
- Auditors' Report
- Balance Sheets as of January 31, 2001 (unaudited), October 31, 2000 and
October 31, 1999.
- Statements of Income for the Three Months ended January 31, 2001 and
2000 (unaudited) and for the Years ended October 31, 2000, 1999 and
1998.
- Statement of Cash Flows for the Three Months ended January 31, 2001 and
2000 (unaudited) and for the Years ended October 31, 2000, 1999 and
1998.
- Statement of Changes in Shareholders' Equity for the Years ended October
31, 2000, 1999 and 1998.
- Notes to Financial Statements.

Pro Forma financial information.
- Introduction to the Pro Forma Combined Financial Statements.
- Pro Forma Combined Balance Sheet as of February 28, 2001.
- Pro Forma Combined Statements of Income for the Year ended May 31, 2000.
- Pro Forma Combined Statements of Income for the Nine Months ended
February 28, 2001.
- Notes to Pro Forma Combined Financial Statements.

May 1, 2001--Item 5--Global Payments Inc. announced a realignment of its
organization to be effective by the beginning of the company's new fiscal year
and the chief operating officer, Thomas M. Dunn, will be leaving the
organization. No financial statements were filed with this report.

May 31, 2001--Item 5--Global Payments Inc. expanded its alliance relationship
with Comerica Bank that included the purchase of Comerica's Imperial Bank's
merchant portfolio. No financial statements were filed with this report.

(a) Exhibits

See Item 14(a)(3) above.

(b) Financial Statement Schedules

See Item 14(a)(2) above.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Global Payments Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on August
29, 2001.

GLOBAL PAYMENTS INC.

/s/ Paul R. Garcia
By: ___________________________________
Paul R. Garcia President and
Chief Executive Officer
(Principal Executive Officer)

/s/ James G. Kelly
By: ___________________________________
James G. Kelly Chief Financial
Officer
(Principal Financial Officer
and Chief Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by a majority of the Board of Directors of the
Registrant on the dates indicated.

Signature Title Date

/s/ Robert A. Yellowlees Chairman of the August 28, 2001
------------------------------------ Board
Robert A. Yellowlees

/s/ Edwin H. Burba, Jr. Director August 28,2001
------------------------------------
Edwin H. Burba, Jr.

/s/ Paul R. Garcia Director August 29, 2001
------------------------------------
Paul R. Garcia

/s/ Alex W. (Pete) Hart Director August 23, 2001
------------------------------------
Alex W. (Pete) Hart

/s/ William I Jacobs Director August 27, 2001
------------------------------------
William I Jacobs

GLOBAL PAYMENTS INC.

FORM 10-K

INDEX TO EXHIBITS

Exhibit
Numbers Description
------- -----------

10.25 Credit Agreement dated as of January 31, 2001, among Global Payments
Inc., Bank One, N.A., as Administrative Agent, Wachovia Bank, N.A., as
Documentation Agent, and the Lenders named therein.

10.26 First Amendment dated March 20, 2001 to the Credit Agreement dated as
of January 31, 2001 among Global Payments Inc., Bank One, N.A., as
Administrative Agent, Wachovia Bank, N.A., as Documentation Agent, and
the Lenders named therein.

10.27 Second Amendment dated May 14, 2001, among Global Payments Inc., Bank
One, N.A., as Administrative Agent, Wachovia Bank, N.A., as
Documentation Agent, and the Lenders named therein.

10.28 Third Amendment dated July 25, 2001, among Global Payments Inc., Bank
One, N.A., as Administrative Agent, Wachovia Bank, N.A., as
Documentation Agent, and the Lenders named therein.

21 List of Subsidiaries.

23 Consent of Independent Public Accountants.

99.1 Risk Factors

99.2 Combined Quarterly Statements of Income, are presented for information
purposes for fiscal years 2000 and 2001.