Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
    
 

FORM 8-K
 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 13, 2019
   
Commission file number 001-16111
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GLOBAL PAYMENTS INC.
(Exact name of registrant as specified in charter)  
Georgia
 
58-2567903
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
3550 Lenox Road, Atlanta, Georgia
 
30326
(Address of principal executive offices)
 
(Zip Code)
 
Registrant's telephone number, including area code:     (770) 829-8000
 
NONE
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐




Item 2.02.     Results of Operations and Financial Condition

On February 13, 2019, Global Payments Inc. (the "Company") issued a press release announcing its financial results for the quarter and year ended December 31, 2018. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K (this "Report") and is incorporated herein by reference.

The information being furnished pursuant to Item 2.02 of this Report, including Exhibit 99.1, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, except as expressly set forth by specific reference in such filing.


Item 9.01.     Financial Statements and Exhibits
(d) Exhibits

Exhibit No.
Description
99.1





Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.




 
 
 
GLOBAL PAYMENTS INC.
 
 
 
 
Date:
February 13, 2019
 
 
 
 
 
By: /s/ Cameron M. Bready
 
 
 
Cameron M. Bready
 
 
 
Senior Executive Vice President and Chief Financial Officer










































Exhibit



PRESS RELEASE
 
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Global Payments Reports Record Annual Results for 2018 and
Establishes 2019 Growth Outlook
 
ATLANTA, February 13, 2019 -- Global Payments Inc. (NYSE: GPN) today announced results for the fourth quarter and year ended December 31, 2018.
“In 2018, we produced the best financial performance in our history, culminating with strong momentum across our businesses in the fourth quarter,” said Jeff Sloan, Chief Executive Officer. “Successful execution of our strategy has created a more diverse, predictable and resilient business model entering 2019.”
“We believe the advantages of our technology-enabled, software-driven strategy will continue to differentiate our company, with a balanced approach across owned SaaS, partnered software and ecommerce and omnichannel assets,” Sloan continued. “The positive outlook for our business is reflected in our absolute and relative growth expectations for 2019.”

Full-Year 2018 Summary
GAAP revenues were $3.37 billion, compared to $3.98 billion in 2017; diluted earnings per share were $2.84 compared to $3.01 in the prior year; and operating margin was 21.9% compared to 14.1% in 2017; 2018 results reflect the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers.
Adjusted net revenue plus network fees grew 15% to $3.97 billion, compared to $3.46 billion in 2017.
Adjusted earnings per share grew 29% to $5.19, compared to $4.01 in 2017.
Adjusted operating margin expanded 130 basis points to 31.7%.

Fourth Quarter 2018 Summary
GAAP revenues were $881 million, compared to $1.05 billion in the fourth quarter of 2017; diluted earnings per share were $0.47 compared to $1.51 in the prior year; and operating margin was 19.0% compared to 14.2% in the fourth quarter of 2017; 2018 results reflect the adoption of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers.
Adjusted net revenue plus network fees grew over 12% to $1.04 billion, compared to $923.7 million in the fourth quarter of 2017.
Adjusted earnings per share grew 24% to $1.33, compared to $1.07 in the fourth quarter of 2017.
Adjusted operating margin expanded 80 basis points to 31.6%.
 

1




2019 Outlook
“We are delighted with our performance in the fourth quarter, despite facing incremental pressure from foreign currency exchange rates, and the record results we achieved in 2018 as we consistently executed on our growth strategy,” stated Cameron Bready, Senior Executive Vice President and Chief Financial Officer. “We could not be more pleased with how our business is positioned as we enter 2019 and the resulting financial outlook for the year. The company expects adjusted net revenue plus network fees to range from $4.43 billion to $4.49 billion, reflecting growth of 12% to 13% over 2018 results and adjusted earnings per share to be in a range of $5.90 to $6.10, reflecting growth of 14% to 18% over 2018. Annual adjusted operating margin for 2019 is expected to expand by up to 70 basis points.”

Capital Allocation
Global Payments’ Board of Directors approved a dividend of $0.01 per share payable March 29, 2019 to shareholders of record as of March 15, 2019.
The Board also approved an increase to the existing authorization for the company's share repurchase program, raising the total available authorization to $750 million.
 
Conference Call
Global Payments’ management will host a conference call today, February 13, 2019 at 8:00 a.m. ET to discuss financial results and business highlights. Callers may access the conference call via the investor relations page of the company’s website at www.globalpaymentsinc.com; or callers in North America may dial 877-674-6428 and callers outside North America may dial 970-315-0457. A replay of the call will be archived on the company's website within two hours of the live call.
 
Non-GAAP Financial Measures
Global Payments supplemented revenues, income, operating income and earnings per share information determined in accordance with GAAP by providing those measures on an adjusted basis, and other measures, in this earnings release to assist with evaluating performance. In addition to GAAP measures, management uses these non-GAAP measures to focus on the factors the company believes are pertinent to the daily management of our operations.
Reconciliations of the non-GAAP measures to the most directly comparable GAAP measure are included in the schedules to this release.

About Global Payments
Global Payments Inc. (NYSE: GPN) is a leading worldwide provider of payment technology and software solutions delivering innovative services to our customers globally. Our technologies, services and employee expertise enable us to provide a broad range of solutions that allow our customers to accept all payment types and operate their businesses more efficiently across a variety of distribution channels in many markets around the world.

2




Headquartered in Atlanta, Georgia with approximately 11,000 employees worldwide, Global Payments is a member of the S&P 500 with customers and partners in 32 countries throughout North America, Europe, the Asia-Pacific region and Brazil. For more information about Global Payments, our Service. Driven. Commerce brand and our technologies, please visit www.globalpaymentsinc.com.
 
Forward-Looking Statements
This announcement and comments made by Global Payments' management during the conference call may contain certain forward-looking statements concerning our business operations, economic performance and financial condition, including in particular: our business strategy and means to implement the strategy, measures of future results of operations, such as revenues, expenses, operating margins, income tax rates, and earnings per share and other operating metrics; our success and timing in developing and introducing new services and expanding our business; statements about the benefits of our acquisitions, including future financial and operating results, the combined company’s plans, objectives, expectations and intentions, and the successful integration of our acquisitions, and other statements that are not historical facts. You can sometimes identify forward-looking statements by our use of the words “believes,” “anticipates,” “expects,” “intends,” “plan,” “forecast,” “guidance” 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, estimates, projections or plans that are inherently subject to significant risks, uncertainties and contingencies, 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 rates and margins, other results of operations 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. Important factors that may cause actual events or results to differ materially from those anticipated by such forward-looking statements include our ability to safeguard our data; increased competition from larger companies and non-traditional competitors; our ability to update our services in a timely manner; our ability to maintain Visa and Mastercard registration and financial institution sponsorship; our reliance on financial institutions to provide clearing services in connection with our settlement activities; our potential failure to comply with card network requirements; potential systems interruptions or failures; software defects or undetected errors; increased attrition of merchants, referral partners or independent sales organizations; our ability to increase our share of existing markets and expand into new markets; development of market trends and technologies; a decline in the use of cards for payment generally; unanticipated increases in chargeback liability; increases in credit card network fees; changes in laws, regulations or network rules or interpretations thereof; foreign currency exchange and interest rate risks; political, economic and regulatory changes in the foreign countries in which we operate; future performance, integration and conversion of acquired operations, including without

3




limitation difficulties and delays in integrating or fully realizing cost savings and other benefits of our acquisitions at all or within the expected time period; fully realizing anticipated annual interest expense savings from refinancing our corporate debt facilities; our loss of key personnel and other risk factors presented in Item 1- Risk Factors of our Report on Form 10-K for the year ended December 31, 2017 and any subsequent SEC filings, which we advise you to review. 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, except as required by law.



Investor contact:
investor.relations@globalpay.com
Media contact:    
media.relations@globalpay.com
 
Winnie Smith
 
Kimberly Mann
 
770-829-8478
 
770-829-8755


4


SCHEDULE 1
GAAP CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)

 
Three Months Ended December 31,
 
Year Ended December 31,
 
2018
 
2017
 
% Change
 
2018
 
2017
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
Revenues(1)
$
880,555

 
$
1,054,253

 
(16.5
)%
 
$
3,366,366

 
$
3,975,163

 
(15.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses(1):
 
 
 
 
 
 
 
 
 
 
 
Cost of service
313,071

 
509,069

 
(38.5
)%
 
1,095,014

 
1,928,037

 
(43.2
)%
Selling, general and administrative
400,498

 
395,609

 
1.2
 %
 
1,534,297

 
1,488,258

 
3.1
 %
 
713,569

 
904,678

 
(21.1
)%
 
2,629,311

 
3,416,295

 
(23.0
)%
 
 
 
 
 

 
 
 
 
 

Operating income
166,986

 
149,575

 
11.6
 %
 
737,055

 
558,868

 
31.9
 %
 
 
 
 
 
 
 
 
 
 
 

Interest and other income
3,323

 
2,875

 
15.6
 %
 
20,719

 
8,662

 
139.2
 %
Interest and other expense
(55,939
)
 
(44,425
)
 
25.9
 %
 
(195,619
)
 
(174,847
)
 
11.9
 %
 
(52,616
)
 
(41,550
)
 
26.6
 %
 
(174,900
)
 
(166,185
)
 
5.2
 %
 
 
 
 
 

 
 
 
 
 

Income before income taxes
114,370

 
108,025

 
5.9
 %
 
562,155

 
392,683

 
43.2
 %
Income tax (provision) benefit
(31,047
)
 
142,280

 
NM

 
(77,488
)
 
101,387

 
NM

Net income
83,323

 
250,305

 
NM

 
484,667

 
494,070

 
NM

Less: Net income attributable to noncontrolling interests, net of income tax
(8,109
)
 
(8,343
)
 
(2.8
)%
 
(32,614
)
 
(25,645
)
 
27.2
 %
Net income attributable to Global Payments
$
75,214

 
$
241,962

 
NM

 
$
452,053

 
$
468,425

 
NM

 
 
 
 
 
 
 
 
 
 
 

Earnings per share attributable to Global Payments:
 
 
 
 
 
 
 
 
 
 

Basic
$
0.48

 
$
1.52

 
NM

 
$
2.85

 
$
3.03

 
NM

Diluted
$
0.47

 
$
1.51

 
NM

 
$
2.84

 
$
3.01

 
NM

 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average number of shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
Basic
158,213

 
159,143

 
 
 
158,672

 
154,652

 
 
Diluted
158,711

 
159,827

 
 
 
159,271

 
155,528

 
 

NM - Not Meaningful

(1) Global Payments adopted Accounting Standards Codification Topic 606, Revenue from Contracts with Customers ("ASC 606") on January 1, 2018. The new accounting standard changed the presentation of certain amounts that we pay to third parties, including payment networks. This change in presentation affected our reported GAAP revenues and operating expenses by the same amount and had no effect on operating income. Also, ASC 606 changed the presentation of revenue for our gaming cash advance solutions and had a de minimis impact on revenue from our European business. For our gaming cash advance solutions, certain amounts we previously presented as operating expenses are now recognized as a reduction of revenue under GAAP. As a result of adopting ASC 606, results for 2018 and 2017 revenues and operating expenses are not comparable, thus the changes from the prior year are not meaningful.




5


SCHEDULE 2
NON-GAAP FINANCIAL MEASURES (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)

 
Three Months Ended December 31,
 
Year Ended December 31,
 
2018
 
2017
 
% Change
 
2018
 
2017
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted net revenue plus network fees
$
1,037,617

 
$
923,743

 
12.3
%
 
$
3,969,376

 
$
3,457,144

 
14.8
%
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted operating income
$
328,256

 
$
284,072

 
15.6
%
 
$
1,256,447

 
$
1,051,333

 
19.5
%
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted net income attributable to Global Payments
$
211,551

 
$
171,260

 
23.5
%
 
$
826,337

 
$
623,976

 
32.4
%
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted diluted earnings per share attributable to Global Payments
$
1.33

 
$
1.07

 
24.3
%
 
$
5.19

 
$
4.01

 
29.4
%


See Schedules 6 and 7 for a reconciliation of each non-GAAP financial measure to the most comparable GAAP measure and Schedule 10 for a discussion of non-GAAP financial measures.


6



SCHEDULE 3
SEGMENT INFORMATION (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
 
 
Three Months Ended December 31
 
 
 
 
 
 
 
 
2018
 
2017
 
 % Change
 
 
GAAP
 
Non-GAAP(1)
 
Non-GAAP
Adjusted Net Revenue Plus Network Fees
(1)(2)
 
GAAP
 
Non-GAAP(1)
 
Non-GAAP
Adjusted Net Revenue Plus Network Fees
(1)(2)
 
 GAAP(3)
 
Non-GAAP(3)
 
Non-GAAP
Adjusted Net Revenue Plus Network Fees
(1)(2)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
662,739

 
$
600,805

 
$
764,786

 
$
766,611

 
$
687,708

 
$
671,671

 
NM

 
NM

 
13.9
%
Europe
 
154,438

 
154,438

 
188,103

 
210,267

 
173,872

 
174,696

 
NM

 
NM

 
7.7
%
Asia-Pacific
 
63,378

 
63,797

 
84,728

 
77,375

 
77,375

 
77,376

 
NM

 
NM

 
9.5
%
 
 
$
880,555

 
$
819,040

 
$
1,037,617

 
$
1,054,253

 
$
938,955

 
$
923,743

 
NM

 
NM

 
12.3
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
North America
 
$
124,030

 
$
247,069

 
 
 
$
112,405

 
$
206,218

 
 
 
10.3
 %
 
19.8
%
 
 
Europe
 
79,381

 
89,645

 
 
 
76,375

 
83,336

 
 
 
3.9
 %
 
7.6
%
 
 
Asia-Pacific
 
26,359

 
29,179

 
 
 
23,952

 
26,365

 
 
 
10.0
 %
 
10.7
%
 
 
Corporate
 
(62,784
)
 
(37,637
)
 
 
 
(63,157
)
 
(31,847
)
 
 
 
(0.6
)%
 
18.2
%
 
 
 
 
$
166,986

 
$
328,256

 
 
 
$
149,575

 
$
284,072

 
 
 
11.6
 %
 
15.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31
 
 
 
 
 
 
 
 
2018
 
2017
 
 % Change
 
 
GAAP
 
Non-GAAP(1)
 
Non-GAAP
Adjusted Net Revenue Plus Network Fees
(1)(2)
 
GAAP
 
Non-GAAP(1)
 
Non-GAAP
Adjusted Net Revenue Plus Network Fees
(1)(2)
 
 GAAP(3)
 
Non-GAAP(3)
 
Non-GAAP
Adjusted Net Revenue Plus Network Fees
(1)(2)
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
2,522,284

 
$
2,252,819

 
$
2,915,681

 
$
2,929,522

 
$
2,595,378

 
$
2,527,899

 
NM

 
NM

 
15.3
%
Europe
 
610,930

 
610,930

 
742,901

 
767,524

 
647,691

 
651,128

 
NM

 
NM

 
14.1
%
Asia-Pacific
 
233,152

 
233,571

 
310,794

 
278,117

 
278,117

 
278,117

 
NM

 
NM

 
11.7
%
 
 
$
3,366,366

 
$
3,097,320

 
$
3,969,376

 
$
3,975,163

 
$
3,521,186

 
$
3,457,144

 
NM

 
NM

 
14.8
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
570,630

 
$
952,881

 
 
 
$
457,009

 
$
780,609

 
 
 
24.9
 %
 
22.1
%
 
 
Europe
 
318,392

 
349,660

 
 
 
272,769

 
302,641

 
 
 
16.7
 %
 
15.5
%
 
 
Asia-Pacific
 
93,402

 
103,735

 
 
 
81,273

 
89,122

 
 
 
14.9
 %
 
16.4
%
 
 
Corporate
 
(245,369
)
 
(149,829
)
 
 
 
(252,183
)
 
(121,039
)
 
 
 
(2.7
)%
 
23.8
%
 
 
 
 
$
737,055

 
$
1,256,447

 
 
 
$
558,868

 
$
1,051,333

 
 
 
31.9
 %
 
19.5
%
 
 

NM - Not Meaningful
 

(1) See Schedules 8 and 9 for a reconciliation of adjusted net revenue, adjusted net revenue plus network fees and adjusted operating income by segment to the most comparable GAAP measures and Schedule 10 for a discussion of non-GAAP financial measures.
 
(2) Global Payments adopted ASC 606 on January 1, 2018. The new accounting standard changed the presentation of certain amounts that we pay to third parties, including payment networks. This change in presentation affected our reported GAAP revenues and operating expenses by the same amount and had no effect on operating income. Also, ASC 606 changed the presentation of revenue for our gaming cash advance solutions and had a de minimis impact on revenue from our European business. For our gaming cash advance solutions, certain amounts we previously presented as operating expenses are now recognized as a reduction of revenue under GAAP.
 
(3) As a result of adopting ASC 606, results for 2018 and 2017 GAAP revenues and adjusted net revenue are not comparable, thus the change from the prior year is not meaningful.


7


SCHEDULE 4
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except share data)
    
 
December 31,
 
2018
 
2017
ASSETS
 
  
 
Current assets:
 
  
 
Cash and cash equivalents
$
1,210,878

 
$
1,335,855

Accounts receivable, net of allowances for doubtful accounts of $3,164 and $1,827, respectively
348,400

 
301,887

Settlement processing assets
1,600,222

 
2,459,292

Prepaid expenses and other current assets
216,708

 
206,545

Total current assets
3,376,208

 
4,303,579

Goodwill
6,341,355

 
5,703,992

Other intangible assets, net
2,488,618

 
2,181,707

Property and equipment, net
653,542

 
588,348

Deferred income taxes
8,128

 
13,146

Other noncurrent assets
362,923

 
207,297

Total assets
$
13,230,774

 
$
12,998,069

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Settlement lines of credit
$
700,486

 
$
635,166

Current portion of long-term debt
115,075

 
100,308

Accounts payable and accrued liabilities
1,176,703

 
1,039,607

Settlement processing obligations
1,276,356

 
2,040,509

Total current liabilities
3,268,620

 
3,815,590

Long-term debt
5,015,168

 
4,559,408

Deferred income taxes
585,025

 
436,879

Other noncurrent liabilities
175,618

 
220,961

Total liabilities
9,044,431

 
9,032,838

Commitments and contingencies
 
 
 
Equity:
 
 
 
Preferred stock, no par value; 5,000,000 shares authorized and none issued

 

Common stock, no par value; 200,000,000 shares authorized; 157,961,982 issued and outstanding at December 31, 2018 and 159,180,317 issued and outstanding at December 31, 2017

 

Paid-in capital
2,235,167

 
2,379,774

Retained earnings
2,066,415

 
1,597,897

Accumulated other comprehensive loss
(310,175
)
 
(183,144
)
Total Global Payments shareholders’ equity
3,991,407

 
3,794,527

Noncontrolling interests
194,936

 
170,704

Total equity
4,186,343

 
3,965,231

Total liabilities and equity
$
13,230,774

 
$
12,998,069



8


SCHEDULE 5
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
 
Year Ended December 31,
 
2018
 
2017
Cash flows from operating activities:
 
 
 
Net income
$
484,667

 
$
494,070

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization of property and equipment
145,128

 
113,273

Amortization of acquired intangibles
377,685

 
337,878

Share-based compensation expense
57,826

 
39,095

Provision for operating losses and bad debts
43,237

 
48,443

Amortization of capitalized customer acquisition costs
51,541

 
45,098

Deferred income taxes
(1,451
)
 
(250,670
)
Other, net
(8,025
)
 
44,070

Changes in operating assets and liabilities, net of the effects of business combinations:
 
 
 
Accounts receivable
(33,386
)
 
(14,096
)
Settlement processing assets and obligations, net
83,478

 
(361,673
)
Prepaid expenses and other assets
(160,800
)
 
(129,427
)
Accounts payable and other liabilities
66,182

 
146,327

Net cash provided by operating activities
1,106,082

 
512,388

Cash flows from investing activities:
 
 
 
Business combinations and other acquisitions, net of cash acquired
(1,259,692
)
 
(562,688
)
Capital expenditures
(213,290
)
 
(181,905
)
Net proceeds from sales of property and equipment

 
37,565

Other, net
(3,305
)
 
(28,997
)
Net cash used in investing activities
(1,476,287
)
 
(736,025
)
Cash flows from financing activities:
 
 
 
Net proceeds from settlement lines of credit
70,783

 
221,532

Proceeds from long-term debt
2,774,214

 
1,994,324

Repayments of long-term debt
(2,304,314
)
 
(1,781,541
)
Payment of debt issuance costs
(16,345
)
 
(9,520
)
Repurchase of common stock
(208,198
)
 
(34,811
)
Proceeds from stock issued under share-based compensation plans
14,318

 
10,115

Common stock repurchased - share-based compensation plans
(31,510
)
 
(31,761
)
Distributions to noncontrolling interests
(5,686
)
 
(9,301
)
Dividends paid
(6,332
)
 
(6,732
)
Net cash provided by financing activities
286,930

 
352,305

Effect of exchange rate changes on cash
(41,702
)
 
44,408

Increase (decrease) in cash and cash equivalents
(124,977
)
 
173,076

Cash and cash equivalents, beginning of the period
1,335,855

 
1,162,779

Cash and cash equivalents, end of the period
$
1,210,878

 
$
1,335,855



9


SCHEDULE 6
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 2018 AND 2017
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
 
Three Months Ended December 31, 2018
 
 
 
 
 
GAAP
 
Net Revenue Adjustment(1)
 
Earnings Adjustments(2)
 
Income Taxes on Adjustments(3)
 
Non-GAAP
 
Network Fees(4)
 
Non-GAAP Adjusted Net Revenue Plus Network Fees
Revenues
$
880,555

 
$
(61,515
)
 
$

 
$

 
$
819,040

 
$
218,577

 
$
1,037,617

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
$
166,986

 
$
4,469

 
$
156,801

 
$

 
$
328,256

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to Global Payments
$
75,214

 
$
4,469

 
$
153,877

 
$
(22,009
)
 
$
211,551

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share attributable to Global Payments
$
0.47

 


 


 


 
$
1.33

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
158,711

 
 
 
 
 
 
 
158,711

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31, 2017
 
 
 
 
 
GAAP
 
Net Revenue Adjustment(1)
 
Earnings Adjustments(2)
 
Income Taxes on Adjustments(3)
 
Non-GAAP
 
Gaming Cash Advance/ Other(4)
 
Non-GAAP Adjusted Net Revenue Plus Network Fees
Revenues
$
1,054,253

 
$
(115,298
)
 
$

 
$

 
$
938,955

 
$
(15,212
)
 
$
923,743

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
$
149,575

 
$
5,226

 
$
129,271

 
$

 
$
284,072

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to Global Payments
$
241,962

 
$
5,226

 
$
127,444

 
$
(203,372
)
 
$
171,260

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share attributable to Global Payments
$
1.51

 


 


 


 
$
1.07

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
159,827

 
 
 
 
 
 
 
159,827

 
 
 
 
(1) 
Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain lines of business to reflect economic benefits to the company. For the three months ended December 31, 2018 and December 31, 2017, includes $4.5 million and $5.2 million, respectively to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.
(2) 
For the three months ended December 31, 2018, earnings adjustments to operating income include $122.8 million in cost of service (COS) and $34.0 million in selling, general and administrative expenses (SG&A). Adjustments to COS include amortization of acquired intangibles of $114.5 million and acquisition and integration expenses of $8.3 million. Adjustments to SG&A include share-based compensation expense of $12.9 million, acquisition and integration expenses of $13.4 million, non-cash asset abandonment charges of $7.6 million associated with technology integrations and other adjustments of $0.1 million.

For the three months ended December 31, 2017, earnings adjustments to operating income include $89.5 million in COS and $39.8 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $89.3 million and other adjustments of $0.2 million. Adjustments to SG&A include share-based compensation expense of $8.3 million and acquisition and integration expenses of $31.5 million.

(3) 
Income taxes on adjustments reflect the tax effect of earnings adjustments to income before income taxes. The tax rate used in determining the tax impact of earnings adjustments is either the jurisdictional statutory rate in effect at the time of the adjustment or the jurisdictional expected annual effective tax rate for the period, depending on the nature and timing of the adjustment.

For the three months ended December 31, 2018, also includes the removal of a $9.7 million income tax expense adjustment related to tax reform and the removal of a tax expense adjustment associated with the vesting of share-based awards. For the three months ended December 31, 2017, includes the removal of a $156.3 million income tax benefit associated with tax reform and the removal of a tax benefit associated with the vesting of share-based awards.

(4) 
Global Payments adopted ASC 606 on January 1, 2018. The new accounting standard changed the presentation of certain amounts that we pay to third parties, including payment networks. This change in presentation affected our reported GAAP revenues and operating expenses by the same amount and had no effect on operating income. For 2017, payment network fees were presented within operating expenses and in 2018 payment network fees were presented as a reduction of revenues. As a result, adjusted net revenue plus network fees for the three months ended December 31, 2018 is presented on a basis that is comparable to the prior year. Adjusted net revenue plus network fees for the three months ended December 31, 2017 includes an adjustment for our gaming cash advance solutions and other de minimis amounts for our European business to present it on a basis that is comparable to the current year.

See "Non-GAAP Financial Measures" discussion on Schedule 10.

10


SCHEDULE 7
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)
YEARS ENDED DECEMBER 31, 2018 AND 2017
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)
 
Year Ended December 31, 2018
 
 
 
 
 
GAAP
 
Net Revenue Adjustment(1)
 
Earnings Adjustments(2)
 
Income Taxes on Adjustments(3)
 
Non-GAAP
 
Network Fees(4)
 
Non-GAAP Adjusted Net Revenue Plus Network Fees
Revenues
$
3,366,366

 
$
(269,046
)
 
$

 
$

 
$
3,097,320

 
$
872,056

 
$
3,969,376

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
$
737,055

 
$
11,534

 
$
507,858

 
$

 
$
1,256,447

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to Global Payments
$
452,053

 
$
11,534

 
$
495,798

 
$
(133,048
)
 
$
826,337

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share attributable to Global Payments
$
2.84

 
 
 
 
 
 
 
$
5.19

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
159,271

 
 
 
 
 
 
 
159,271

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2017
 
 
 
 
 
GAAP
 
Net Revenue Adjustment(1)
 
Earnings Adjustments(2)
 
Income Taxes on Adjustments(3)
 
Non-GAAP
 
Gaming Cash Advance/ Other(4)
 
Non-GAAP Adjusted Net Revenue Plus Network Fees
Revenues
$
3,975,163

 
$
(453,977
)
 
$

 
$

 
$
3,521,186

 
$
(64,042
)
 
$
3,457,144

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
$
558,868

 
$
7,234

 
$
485,231

 
$

 
$
1,051,333

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to Global Payments
$
468,425

 
$
7,234

 
$
484,817

 
$
(336,500
)
 
$
623,976

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share attributable to Global Payments
$
3.01

 


 


 


 
$
4.01

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
155,528

 
 
 
 
 
 
 
155,528

 
 
 
 
 
(1) 
Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain lines of business to reflect economic benefits to the company. For the twelve months ended December 31, 2018 and December 31, 2017, includes $11.5 million and $7.2 million, respectively to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.

(2) 
For the twelve months ended December 31, 2018, earnings adjustments to operating income include $392.4 million in COS and $115.4 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $379.9 million, acquisition and integration expenses of $9.5 million, employee termination benefits of $1.4 million and other adjustments of $1.6 million. Adjustments to SG&A include share-based compensation expense of $57.8 million, acquisition and integration expenses of $46.6 million, employee termination benefits of $3.3 million, non-cash asset abandonment charges of $7.6 million associated with technology integrations and other adjustments of $1.7 million. Net income attributable to Global Payments also reflects adjustments to remove a $9.6 million gain recognized on the reorganization of Interac Association, of which we were a member through one of our Canadian subsidiaries, and a charge of $5.2 million associated with the refinancing of our corporate credit facility.

For the twelve months ended December 31, 2017, earnings adjustments to operating income include $342.2 million in COS and $143.0 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $340.0 million and employee termination benefits of $1.9 million and other adjustments of $0.3 million. Adjustments to SG&A include acquisition and integration expenses of $101.0 million, share-based compensation expense of $39.4 million, and employee termination benefits of $2.6 million. Net income attributable to Global Payments also reflects an adjustment to remove a charge of $6.8 million associated with the refinancing of our corporate credit facility.

(3) 
Income taxes on adjustments reflect the tax effect of earnings adjustments to income before income taxes. The tax rate used in determining the tax impact of earnings adjustments is either the jurisdictional statutory rate in effect at the time of the adjustment or the jurisdictional expected annual effective tax rate for the period, depending on the nature and timing of the adjustment.

For the twelve months ended December 31, 2018, also includes the removal of a $22.9 million income tax benefit related to tax reform and a $4.7 million tax expense associated with certain discrete tax items related to the impact of changes in state effective income tax rates on deferred liabilities. For the twelve months ended December 31, 2017, includes the removal of a $156.3 million tax benefit associated with income tax reform and a $2.4 million tax benefit associated with the elimination of a deferred tax liability.

(4) 
Global Payments adopted ASC 606 on January 1, 2018. The new accounting standard changed the presentation of certain amounts that we pay to third parties, including payment networks. This change in presentation affected our reported GAAP revenues and operating expenses by the same amount and had no effect on operating income. For 2017, payment network fees were presented within operating expenses and in 2018 payment network fees are presented as a reduction of revenues. As a result, adjusted net revenue plus network fees for the twelve months ended December 31, 2018 is presented on a basis that is comparable to the prior year. Adjusted net revenue plus network fees for the twelve months ended December 31, 2017 includes an adjustment for our gaming cash advance solutions and other de minimis amounts for our European business to present it on a basis that is comparable to the current year.
See "Non-GAAP Financial Measures" discussion on Schedule 10.

11


SCHEDULE 8
RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 2018 AND 2017
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
 
Three Months Ended December 31, 2018
 
GAAP
 
Net Revenue Adjustments(1)
 
Earnings Adjustments(2)
 
Non-GAAP
 
Network Fees(3)
 
Non-GAAP Adjusted Net Revenue Plus Network Fees
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
North America
$
662,739

 
$
(61,934
)
 
$

 
$
600,805

 
163,981

 
$
764,786

Europe
154,438

 

 

 
154,438

 
33,665

 
188,103

Asia-Pacific
63,378

 
419

 

 
63,797

 
20,931

 
84,728

 
$
880,555

 
$
(61,515
)
 
$

 
$
819,040

 
$
218,577

 
$
1,037,617

 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
North America
$
124,030

 
$
4,469

 
$
118,570

 
$
247,069

 
 
 
 
Europe
79,381

 

 
10,264

 
89,645

 
 
 
 
Asia-Pacific
26,359

 

 
2,820

 
29,179

 
 
 
 
Corporate
(62,784
)
 

 
25,147

 
(37,637
)
 
 
 
 
 
$
166,986

 
$
4,469

 
$
156,801

 
$
328,256

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31, 2017
 
GAAP
 
Net Revenue Adjustments(1)
 
Earnings Adjustments(2)
 
Non-GAAP
 
Gaming Cash Advance/ Other(3)
 
Non-GAAP Adjusted Net Revenue Plus Network Fees
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
North America
$
766,611

 
$
(78,903
)
 
$

 
$
687,708

 
$
(16,037
)
 
$
671,671

Europe
210,267

 
(36,395
)
 

 
173,872

 
825

 
174,697

Asia-Pacific
77,375

 

 

 
77,375

 

 
77,375

 
$
1,054,253

 
$
(115,298
)
 
$

 
$
938,955

 
$
(15,212
)
 
$
923,743

 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
North America
$
112,405

 
$
5,226

 
$
88,587

 
$
206,218

 
 
 
 
Europe
76,375

 

 
6,961

 
83,336

 
 
 
 
Asia-Pacific
23,952

 

 
2,413

 
26,365

 
 
 
 
Corporate
(63,157
)
 

 
31,310

 
(31,847
)
 
 
 
 
 
$
149,575

 
$
5,226

 
$
129,271

 
$
284,072

 
 
 
 
 
(1) 
Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain lines of business to reflect economic benefits to the company. For the three months ended December 31, 2018 and December 31, 2017, includes $4.5 million and $5.2 million, respectively to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.
(2) 
For the three months ended December 31, 2018, earnings adjustments to operating income include $122.8 million in COS and $34.0 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $114.5 million and acquisition and integration expenses of $8.3 million. Adjustments to SG&A include share-based compensation expense of $12.9 million, acquisition and integration expenses of $13.4 million and non-cash asset abandonment charges of $7.6 million associated with technology integrations and other adjustments of $0.1 million.
For the three months ended December 31, 2017, earnings adjustments to operating income include $89.5 million in COS and $39.8 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $89.3 million and other adjustments of $0.2 million. Adjustments to SG&A include share-based compensation expense of $8.3 million and acquisition and integration expenses of $31.5 million.
(3) 
Global Payments adopted ASC 606 on January 1, 2018. The new accounting standard changed the presentation of certain amounts that we pay to third parties, including payment networks. This change in presentation affected our reported GAAP revenues and operating expenses by the same amount and had no effect on operating income. For 2017, payment network fees were presented within operating expenses and in 2018 payment network fees are presented as a reduction of revenues. As a result, adjusted net revenue plus network fees for the three months ended December 31, 2018 is presented on a basis that is comparable to the prior year. Adjusted net revenue plus network fees for the three months ended December 31, 2017 includes an adjustment for our gaming cash advance solutions and other de minimis amounts for our European business to present it on a basis that is comparable to the current year.

See "Non-GAAP Financial Measures" discussion on Schedule 10.

12


SCHEDULE 9  
RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES (UNAUDITED)  
YEARS ENDED DECEMBER 31, 2018 AND 2017
GLOBAL PAYMENTS INC. AND SUBSIDIARIES  
(In thousands)  
 
Year Ended December 31, 2018
 
GAAP
 
Net Revenue Adjustment(1)
 
Earnings Adjustments(2)
 
Non-GAAP
 
Network Fees(3)
 
Non-GAAP Adjusted Net Revenue Plus Network Fees
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
North America
$
2,522,284

 
$
(269,465
)
 
$

 
$
2,252,819

 
$
662,862

 
$
2,915,681

Europe
610,930

 

 

 
610,930

 
131,971

 
742,901

Asia-Pacific
233,152

 
419

 

 
233,571

 
77,223

 
310,794

 
$
3,366,366

 
$
(269,046
)
 
$

 
$
3,097,320

 
$
872,056

 
$
3,969,376

 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
North America
$
570,630

 
$
11,534

 
$
370,717

 
$
952,881

 
 
 
 
Europe
318,392

 

 
31,268

 
349,660

 
 
 
 
Asia-Pacific
93,402

 

 
10,333

 
103,735

 
 
 
 
Corporate
(245,369
)
 

 
95,540

 
(149,829
)
 
 
 
 
 
$
737,055

 
$
11,534

 
$
507,858

 
$
1,256,447

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2017
 
GAAP
 
Net Revenue Adjustment(1)
 
Earnings Adjustments(2)
 
Non-GAAP
 
Gaming Cash Advance/ Other(3)
 
Non-GAAP Adjusted Net Revenue Plus Network Fees
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
North America
$
2,929,522

 
$
(334,144
)
 
$

 
$
2,595,378

 
$
(67,479
)
 
$
2,527,899

Europe
767,524

 
(119,833
)
 

 
647,691

 
3,437

 
651,128

Asia-Pacific
278,117

 

 

 
278,117

 

 
278,117

 
$
3,975,163

 
$
(453,977
)
 
$

 
$
3,521,186

 
$
(64,042
)
 
$
3,457,144

 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
North America
$
457,009

 
$
7,234

 
$
316,366

 
$
780,609

 
 
 
 
Europe
272,769

 

 
29,872

 
302,641

 
 
 
 
Asia-Pacific
81,273

 

 
7,849

 
89,122

 
 
 
 
Corporate
(252,183
)
 

 
131,144

 
(121,039
)
 
 
 
 
 
$
558,868

 
$
7,234

 
$
485,231

 
$
1,051,333

 
 
 
 
 
(1) 
Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain lines of business to reflect economic benefits to the company. For the twelve months ended December 31, 2018 and December 31, 2017, includes $11.5 million and $7.2 million, respectively, to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.

(2) 
For the twelve months ended December 31, 2018, earnings adjustments to operating income include $392.4 million in COS and $115.4 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $379.9 million, acquisition and integration expenses of $9.5 million, employee termination benefits of $1.4 million and other adjustments of $1.6 million. Adjustments to SG&A include share-based compensation expense of $57.8 million, acquisition and integration expenses of $46.6 million, employee termination benefits of $3.3 million, non-cash asset abandonment charges of $7.6 million associated with technology integrations and other adjustments of $1.7 million.

For the twelve months ended December 31, 2017, earnings adjustments to operating income include $342.2 million in COS and $143.0 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $340.0 million and employee termination benefits of $1.9 million and other adjustments of $0.3 million. Adjustments to SG&A include acquisition and integration expenses of $101.0 million, share-based compensation expense of $39.4 million, and employee termination benefits of $2.6 million.

(3) Global Payments adopted ASC 606 on January 1, 2018. The new accounting standard changed the presentation of certain amounts that we pay to third parties, including payment networks. This change in presentation affected our reported GAAP revenues and operating expenses by the same amount and had no effect on operating income. For 2017, payment network fees were presented within operating expenses and in 2018 payment network fees are presented as a reduction of revenues. As a result, adjusted net revenue plus network fees for the twelve months ended December 31, 2018 is presented on a basis that is comparable to the prior year. Adjusted net revenue plus network fees for the twelve months ended December 31, 2017 includes an adjustment for our gaming cash advance solutions and other de minimis amounts for our European business to present it on a basis that is comparable to the current year.

See "Non-GAAP Financial Measures" discussion on Schedule 10.

13


SCHEDULE 10
OUTLOOK SUMMARY (UNAUDITED)
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In billions, except per share data)
 
 
2018
 
2019 Outlook
 
% Change
Revenues:
 
 
 
 
 
 
GAAP revenues
 

$3.37

 
$3.69 to $3.75

 
10% to 11%
Adjustments(1)
 
(0.27
)
 
(0.20
)
 
 
Adjusted net revenue
 

$3.10

 
$3.49 to $3.55

 
13% to 15%
 
 
 
 
 
 
 
Network fees
 
0.87

 
0.94

 
 
Adjusted net revenue plus network fees
 

$3.97

 
$4.43 to $4.49

 
12% to 13%
 
 
 
 
 
 
 
Earnings Per Share:
 
 
 
 
 
 
GAAP diluted EPS
 

$2.84

 
$3.53 to $3.73

 
24% to 31%
Adjustments(2)
 
2.35

 
2.37

 
 
Adjusted diluted EPS
 

$5.19

 
$5.90 to $6.10

 
14% to 18%

(1) 
Represents adjustments to revenues for gross-up related payments (included in operating expenses) associated with certain lines of business to reflect economic benefit to the company. Amounts also include adjustments to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.

(2) 
Adjustments to 2018 GAAP diluted EPS include software-related contract liability adjustments described above of $0.06, acquisition related amortization expense of $1.85, share-based compensation expense of $0.28, acquisition and integration expense of $0.28, employee termination benefits of $0.01, asset abandonment charges associated with technology integrations of $0.04 and the removal of a income tax benefit of $0.17 associated with tax reform. Also, adjustments to 2018 GAAP diluted EPS includes the effect of these adjustments on noncontrolling interests and income taxes, as applicable.


NON-GAAP FINANCIAL MEASURES
Global Payments supplements revenues, income, operating income and EPS information determined in accordance with U.S. GAAP by providing these measures, and other measures, with certain adjustments (such measures being non-GAAP financial measures) in this document to assist with evaluating our performance. In addition to GAAP measures, management uses these non-GAAP financial measures to focus on the factors the company believes are pertinent to the daily management of our operations. Management believes adjusted net revenue and adjusted net revenue plus network fees more closely reflect the economic benefits to the company's core business and, in the case of adjusted net revenue, allows for better comparisons with industry peers. Management uses these non-GAAP financial measures, together with other metrics, to set goals for and measure the performance of the business and to determine incentive compensation. Adjusted net revenue, adjusted net revenue plus network fees, adjusted operating income, adjusted operating margin, adjusted net income and adjusted EPS should be considered in addition to, and not as substitutes for, revenues, operating income, net income and EPS determined in accordance with GAAP. The non-GAAP financial measures reflect management's judgment of particular items, and may not be comparable to similarly titled measures reported by other companies.

Adjusted net revenue excludes gross-up related payments associated with certain lines of business to reflect economic benefits to the company. On a GAAP basis, these payments are presented gross in both revenues and operating expenses. Adjusted operating income, adjusted net income and adjusted EPS exclude acquisition-related amortization expense, share-based compensation and certain other items specific to each reporting period as more fully described in the accompanying reconciliations in Schedules 6, 7, 8 and 9. Adjusted operating margin is derived by dividing adjusted operating income by adjusted net revenue plus network fees. The tax rate used in determining the net income impact of earnings adjustments is either the jurisdictional statutory rate in effect at the time of the adjustment or the jurisdictional expected annual effective tax rate for the period, depending on the nature and timing of the adjustment.


14