Document
false0001123360 0001123360 2019-10-31 2019-10-31


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): October 31, 2019
 
 
 Commission file number 001-16111

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13172176&doc=9
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, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act
Title of each class
Ticker symbol
Name of exchange on which registered
Common stock, no par value
GPN
New York Stock Exchange
 
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):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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 October 31, 2019, Global Payments Inc. (the "Company") issued a press release announcing its financial results for the quarter ended September 30, 2019. 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
104
Cover Page Interactive Data File (embedded within the Inline XBRL document).








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:
October 31, 2019
By: /s/ Paul M. Todd
 
 
 
Paul M. Todd
 
 
 
Senior Executive Vice President and Chief Financial Officer
 



    






Exhibit


PRESS RELEASE
 
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Global Payments Reports Results for Third Quarter 2019
and Increases 2019 Outlook

ATLANTA, October 31, 2019 -- Global Payments Inc. (NYSE: GPN) today announced results for the third quarter ended September 30, 2019.
"We delivered another terrific quarter of double digit growth, continuing our track record of outstanding execution," said Jeff Sloan, Chief Executive Officer. "We are also delighted to have closed our industry defining partnership with TSYS, and our ongoing integration work provides us with the confidence to now raise our synergy expectations for the combination."
"And we are further advancing our technology-enabled strategies and solidifying our leadership position in payments globally. Our new partnerships with Desjardins, one of Canada’s leading financial institutions, and Citi, among the largest money center banks globally, validate our pure play payments focus," Sloan continued. "We look forward to many more successes at the new Global Payments with our colleagues and partners."

Third Quarter 2019 Summary
GAAP revenues were $1.106 billion, compared to $857.7 million in the third quarter of 2018; diluted earnings per share were $0.54 compared to $1.11 in the prior year; and operating margin was 15.7% compared to 26.0% in 2018.
Adjusted net revenue plus network fees grew 27.4% to $1.306 billion, compared to $1.025 billion in 2018.
Adjusted earnings per share grew 18.1% to $1.70, compared to $1.44 in 2018.
Adjusted operating margin expanded 80 basis points to 33.8%.

“We are excited to have successfully finalized our merger with TSYS, our largest transaction to date,” stated Cameron Bready, President and Chief Operating Officer. “We are already making significant progress on the integration of our two leading pure play payments businesses and now expect to realize annual run-rate revenue synergies of at least $125 million and annual run-rate expense synergies of at least $325 million within three years. We could not be more optimistic about the future ahead as we build on our competitive advantages and payments leadership position.”


1



2019 Outlook
“We are pleased with our outstanding financial results in the third quarter,” said Paul Todd, Senior Executive Vice President and Chief Financial Officer. “We now expect adjusted net revenue plus network fees for 2019 to range from $5.60 billion to $5.63 billion, reflecting growth of 41% to 42% over 2018. We are also increasing our 2019 outlook for adjusted earnings per share to a range of $6.12 to $6.20, reflecting growth of 18% to 20% over 2018,” Todd concluded.

Capital Allocation
Global Payments’ Board of Directors approved a dividend of $0.195 per share payable December 27, 2019 to shareholders of record as of December 13, 2019.

Conference Call
Global Payments’ management will host a conference call today, October 31, 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 pure play payments technology company delivering innovative software and 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 operate their businesses more efficiently across a variety of channels in many markets around the world.
Headquartered in Georgia with over 24,000 employees worldwide, Global Payments is a member of the S&P 500 with worldwide reach spanning over 100 countries throughout North America, Europe, Asia Pacific and Latin America. For more information, visit www.globalpaymentsinc.com and follow Global Payments on Twitter (@globalpayments), LinkedIn and Facebook.


2



Forward-Looking Statements
Certain of the matters discussed in this communication which are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are based on current expectations, estimates and projections about the industry and markets in which Global Payments operates, beliefs of and assumptions made by Global Payments management, and the anticipated outcome and benefits of the merger of Global Payments and TSYS, involve uncertainties that could significantly affect the financial condition, results of operations, business plans and the future performance of Global Payments. Words such as “believes,” “anticipates,” “expects,” “intends,” “targeted,” “estimates,” “forecasts,” “projects,” “plans,” “may,” “could,” “should,” “would,” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying these statements. Such forward-looking statements include, but are not limited to, statements about the strategic rationale and financial benefits of the merger transaction, including expected future financial and operating results and the combined company’s plans, objectives, expectations and intentions. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future —including statements relating to projections of revenue, income or loss, earnings or loss per share, the payment or nonpayment of dividends, capital structure and other financial items; statements of plans and objectives of Global Payments or its management or Board of Directors, including those relating to products or services; and statements of future economic performance — are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict.
Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained, and therefore actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. In addition to factors previously disclosed in Global Payments’ reports filed with the SEC and those identified elsewhere in this communication, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: the outcome of any legal proceedings that may be instituted against Global Payments or its or TSYS’ current or former directors; difficulties, delays and higher than anticipated costs related to integrating the businesses of Global Payments and TSYS, including with respect to implementing systems to prevent a material security breach of any internal systems or to successfully manage credit and fraud risks in business units; failing to fully realize anticipated cost savings and other anticipated benefits of the merger when expected or at all; business disruptions from the merger or integration that will harm Global Payments’ business, including current plans and operations; potential adverse reactions or changes to business relationships resulting from the merger, including as it relates to the businesses’ ability to successfully renew existing client contracts on favorable terms or at all and obtain new clients; failing to comply with the applicable requirements of Visa, Mastercard or other payment networks or card schemes

3



or changes in those requirements; the ability of Global Payments to maintain Visa and MasterCard registration and financial institution sponsorship; the ability of Global Payments to retain and hire key personnel; the diversion of management’s attention from ongoing business operations; uncertainty as to the long-term value of the common stock of Global Payments following the merger, including the dilution caused by Global Payments’ issuance of additional shares of its common stock in connection with the transaction; the continued availability of capital and financing following the merger; the business, economic and political conditions in the markets in which Global Payments operates; increased competition in the markets in which Global Payments operates and our ability to increase our market share in existing markets and expand into new markets; our ability to safeguard our data; risks associated with our indebtedness, foreign currency exchange and interest rate risks; the impact of new or changes in current laws, regulations, credit card association rules or other industry standards, including privacy and, cybersecurity laws and regulations; and events beyond Global Payments’ control, such as acts of terrorism. Any forward-looking statements speak only as of the date of this communication or as of the date they were made, and Global Payments undertakes no obligation to update forward-looking statements. For a more detailed discussion of these factors, also see the information under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Global Payments’ annual report on Form 10-K for the year ended December 31, 2018, under the caption “Risk Factors” in Global Payments’ Registration Statement on Form S-4 filed in connection with our merger with TSYS and in other documents that Global Payments files with the SEC, which are available at www.sec.gov.
As for the forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainties of estimates, forecasts and projections and may be better or worse than projected and such differences could be material. Given these uncertainties, you should not place any reliance on these forward-looking statements.


Investor contact:
investor.relations@globalpay.com
 
Media contact:
media.relations@globalpay.com
 
Winnie Smith
 
 
Emily Edmonds
 
770-829-8478
 
 
404-985-5576


4



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

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2019
 
2018
 
% Change
 
2019
 
2018
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
1,105,941

 
$
857,670

 
28.9
 %
 
$
2,924,131

 
$
2,485,811

 
17.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Cost of service
427,720

 
265,013

 
61.4
 %
 
1,035,225

 
781,943

 
32.4
 %
Selling, general and administrative
504,184

 
369,495

 
36.5
 %
 
1,293,651

 
1,133,799

 
14.1
 %
 
931,904

 
634,508

 
46.9
 %
 
2,328,876

 
1,915,742

 
21.6
 %
 
 
 
 
 


 
 
 
 
 
 
Operating income
174,037

 
223,162

 
(22.0
)%
 
595,255

 
570,069

 
4.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
Interest and other income
11,232

 
3,134

 
258.4
 %
 
20,342

 
17,397

 
16.9
 %
Interest and other expense
(96,161
)
 
(46,356
)
 
107.4
 %
 
(220,858
)
 
(139,681
)
 
58.1
 %
 
(84,929
)
 
(43,222
)
 
96.5
 %
 
(200,516
)
 
(122,284
)
 
64.0
 %
 
 
 
 
 


 
 
 
 
 
 
Income before income taxes
89,108

 
179,940

 
(50.5
)%
 
394,739

 
447,785

 
(11.8
)%
Income tax benefit (expense)
16,623

 
6,089

 
173.0
 %
 
(39,765
)
 
(46,441
)
 
(14.4
)%
Net income
105,731

 
186,029

 
(43.2
)%
 
354,974

 
401,344

 
(11.6
)%
Net income attributable to noncontrolling interests, net of income tax
(10,687
)
 
(9,659
)
 
10.6
 %
 
(27,132
)
 
(24,506
)
 
10.7
 %
Net income attributable to Global Payments
$
95,044

 
$
176,370

 
(46.1
)%
 
$
327,842

 
$
376,838

 
(13.0
)%
 
 
 
 
 
 
 
 
 
 
 
 
Earnings per share attributable to Global Payments:
 
 
 
 
 
 
 
 
 
 
 
    Basic
$
0.54

 
$
1.12

 
(51.8
)%
 
$
2.00

 
$
2.37

 
(15.6
)%
    Diluted
$
0.54

 
$
1.11

 
(51.4
)%
 
$
2.00

 
$
2.36

 
(15.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average number of shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
    Basic
177,039

 
158,168

 
 
 
163,846

 
158,827

 
 
    Diluted
177,543

 
158,706

 
 
 
164,331

 
159,459

 
 















5



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

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2019
 
2018
 
% Change
 
2019
 
2018
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted net revenue plus network fees
$
1,305,786

 
$
1,024,979

 
27.4
%
 
$
3,463,343

 
$
2,931,759

 
18.1
%
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted operating income
$
441,753

 
$
338,703

 
30.4
%
 
$
1,131,079

 
$
928,190

 
21.9
%
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted net income attributable to Global Payments
$
301,106

 
$
227,961

 
32.1
%
 
$
750,033

 
$
614,785

 
22.0
%
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted diluted earnings per share attributable to Global Payments
$
1.70

 
$
1.44

 
18.1
%
 
$
4.56

 
$
3.86

 
18.1
%

----------------------------------------------------------------------------------

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
UNAUDITED SEGMENT INFORMATION
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
 
 
Three Months Ended
 
 
 
 
 
 
 
 
September 30, 2019
 
September 30, 2018
 
 % Change
 
 
GAAP
 
Non-GAAP
 
Non-GAAP
Adjusted Net Revenue Plus Network Fees
 
 GAAP
 
Non-GAAP
 
Non-GAAP
Adjusted Net Revenue Plus Network Fees
 
 GAAP
 
Non-GAAP
 
Non-GAAP
Adjusted Net Revenue Plus Network Fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
734,841

 
$
706,905

 
$
877,118

 
$
643,715

 
$
580,268

 
$
755,816

 
14.2
 %
 
21.8
%
 
16.0%
Europe
 
164,950

 
164,950

 
204,661

 
157,584

 
157,584

 
193,753

 
4.7
 %
 
4.7
%
 
5.6%
Asia-Pacific
 
58,680

 
59,126

 
79,142

 
56,371

 
56,371

 
75,410

 
4.1
 %
 
4.9
%
 
4.9%
TSYS
 
147,470

 
131,236

 
144,865

 
n/a

 
n/a

 
n/a

 
n/a

 
n/a

 
n/a
 
 
$
1,105,941

 
$
1,062,217

 
$
1,305,786

 
$
857,670

 
$
794,223

 
$
1,024,979

 
28.9
 %
 
33.7
%
 
27.4%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
205,728

 
$
312,531

 
 
 
$
174,012

 
$
259,075

 
 
 
18.2
 %
 
20.6
%
 
 
Europe
 
91,332

 
99,441

 
 
 
85,781

 
92,184

 
 
 
6.5
 %
 
7.9
%
 
 
Asia-Pacific
 
24,187

 
26,797

 
 
 
23,692

 
25,438

 
 
 
2.1
 %
 
5.3
%
 
 
Corporate
 
(136,086
)
 
(42,136
)
 
 
 
(60,323
)
 
(37,994
)
 
 
 
125.6
 %
 
10.9
%
 
 
TSYS
 
(11,124
)
 
45,120

 
 
 
n/a

 
n/a

 
 
 
n/a

 
n/a

 
 
 
 
$
174,037

 
$
441,753

 
 
 
$
223,162

 
$
338,703

 
 
 
(22.0
)%
 
30.4
%
 
 


 
 
Nine Months Ended
 
 
 
 
 
 
 
 
September 30, 2019
 
September 30, 2018
 
 % Change
 
 
GAAP
 
Non-GAAP
 
Non-GAAP
Adjusted Net Revenue Plus Network Fees
 
 GAAP
 
Non-GAAP
 
Non-GAAP
Adjusted Net Revenue Plus Network Fees
 
 GAAP
 
Non-GAAP
 
Non-GAAP
Adjusted Net Revenue Plus Network Fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
2,129,182

 
$
2,003,290

 
$
2,503,989

 
$
1,859,545

 
$
1,652,014

 
$
2,150,895

 
14.5
%
 
21.3
%
 
16.4%
Europe
 
468,168

 
468,168

 
573,551

 
456,492

 
456,492

 
554,798

 
2.6
%
 
2.6
%
 
3.4%
Asia-Pacific
 
179,311

 
181,003

 
240,938

 
169,774

 
169,774

 
226,066

 
5.6
%
 
6.6
%
 
6.6%
TSYS
 
147,470

 
131,236

 
144,865

 
n/a

 
n/a

 
n/a

 
n/a

 
n/a

 
n/a
 
 
$
2,924,131

 
$
2,783,697

 
$
3,463,343

 
$
2,485,811

 
$
2,278,280

 
$
2,931,759

 
17.6
%
 
22.2
%
 
18.1%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
547,160

 
$
860,918

 
 
 
$
446,600

 
$
705,811

 
 
 
22.5
%
 
22.0
%
 
 
Europe
 
249,638

 
274,137

 
 
 
239,011

 
260,015

 
 
 
4.4
%
 
5.4
%
 
 
Asia-Pacific
 
74,718

 
83,108

 
 
 
67,043

 
74,556

 
 
 
11.4
%
 
11.5
%
 
 
Corporate
 
(265,137
)
 
(132,204
)
 
 
 
(182,585
)
 
(112,192
)
 
 
 
45.2
%
 
17.8
%
 
 
TSYS
 
(11,124
)
 
45,120

 
 
 
n/a

 
n/a

 
 
 
n/a

 
n/a

 
 
 
 
$
595,255

 
$
1,131,079

 
 
 
$
570,069

 
$
928,190

 
 
 
4.4
%
 
21.9
%
 
 


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.


 

7



SCHEDULE 4
UNAUDITED CONSOLIDATED BALANCE SHEETS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except share data)
 
September 30, 2019
 
December 31, 2018
 
 
 
 
ASSETS
 
  
 
Current assets:
 
  
 
Cash and cash equivalents
$
2,127,616

 
$
1,210,878

Accounts receivable, net
868,133

 
348,400

Settlement processing assets
1,556,307

 
1,600,222

Prepaid expenses and other current assets
440,512

 
216,708

Total current assets
4,992,568

 
3,376,208

Goodwill
23,754,450

 
6,341,355

Other intangible assets, net
13,184,391

 
2,488,618

Property and equipment, net
1,423,271

 
653,542

Deferred income taxes
12,477

 
8,128

Other noncurrent assets
1,844,890

 
362,923

Total assets
$
45,212,047

 
$
13,230,774

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 
 
 
Settlement lines of credit
$
547,624

 
$
700,486

Current portion of long-term debt
33,373

 
115,075

Accounts payable and accrued liabilities
1,849,424

 
1,176,703

Settlement processing obligations
1,852,731

 
1,276,356

Total current liabilities
4,283,152

 
3,268,620

Long-term debt
8,987,704

 
5,015,168

Deferred income taxes
3,352,727

 
585,025

Other noncurrent liabilities
632,746

 
175,618

Total liabilities
17,256,329

 
9,044,431

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

 

Common stock, no par value; 400,000,000 shares authorized at September 30, 2019 and 200,000,000 shares authorized at December 31, 2018; 300,544,949 issued and outstanding at September 30, 2019 and 157,961,982 issued and outstanding at December 31, 2018

 

Paid-in capital
25,904,804

 
2,235,167

Retained earnings
2,297,897

 
2,066,415

Accumulated other comprehensive loss
(428,067
)
 
(310,175
)
Total Global Payments shareholders’ equity
27,774,634

 
3,991,407

Noncontrolling interests
181,084

 
194,936

Total equity
27,955,718

 
4,186,343

Total liabilities and equity
$
45,212,047

 
$
13,230,774



8



SCHEDULE 5
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)
 
Nine Months Ended
 
September 30, 2019
 
September 30, 2018
 
 
 
 
Cash flows from operating activities:
 
 
 
Net income
$
354,974

 
$
401,344

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization of property and equipment
132,043

 
105,734

Amortization of acquired intangibles
345,455

 
263,714

Amortization of capitalized contract costs
47,778

 
37,281

Share-based compensation expense
55,791

 
44,937

Provision for operating losses and bad debts
34,877

 
32,309

Deferred income taxes
(42,990
)
 
(4,973
)
Other, net
6,666

 
(17,185
)
Changes in operating assets and liabilities, net of the effects of business combinations:
 
 
 
Accounts receivable
(80,709
)
 
(27,696
)
Settlement processing assets and obligations, net
623,985

 
(58,693
)
Prepaid expenses and other assets
(148,421
)
 
(117,824
)
Accounts payable and other liabilities
19,940

 
2,058

Net cash provided by operating activities
1,349,389

 
661,006

Cash flows from investing activities:
 
 
 
Acquisitions, net of cash acquired
(334,383
)
 
(769,082
)
Capital expenditures
(201,017
)
 
(156,060
)
Other, net
29,112

 
(2,383
)
Net cash used in investing activities
(506,288
)
 
(927,525
)
Cash flows from financing activities:
 
 
 
Net (repayments of) borrowings from settlement lines of credit
(144,473
)
 
49,381

Proceeds from long-term debt
6,704,838

 
1,606,214

Repayments of long-term debt
(6,097,229
)
 
(1,468,505
)
Payments of debt issuance costs
(32,637
)
 
(12,544
)
Repurchases of common stock
(233,995
)
 
(180,897
)
Proceeds from stock issued under share-based compensation plans
22,008

 
12,571

Common stock repurchased - share-based compensation plans
(49,037
)
 
(44,824
)
Preacquisition dividends paid to former TSYS shareholders
(23,240
)
 

Distributions to noncontrolling interests
(31,632
)
 
(5,686
)
Dividends paid
(4,727
)
 
(4,750
)
Net cash provided by (used in) financing activities
109,876

 
(49,040
)
Effect of exchange rate changes on cash
(36,239
)
 
(29,692
)
Increase (decrease) in cash and cash equivalents
916,738

 
(345,251
)
Cash and cash equivalents, beginning of the period
1,210,878

 
1,335,855

Cash and cash equivalents, end of the period
$
2,127,616

 
$
990,604



9



SCHEDULE 6
UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)

 
 
Three Months Ended September 30, 2019
 
 
GAAP
 
Net Revenue Adjustments(1)
 
Earnings Adjustments(2)
 
Income
Taxes on Adjustments
(3)
 
Non-GAAP
 
Network Fees
 
Non-GAAP Adjusted Net Revenue Plus Network Fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
1,105,941

 
$
(43,724
)
 
$

 
$

 
$
1,062,217

 
$
243,569

 
$
1,305,786

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
$
174,037

 
$
4,002

 
$
263,714

 
$

 
$
441,753

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to Global Payments
 
$
95,044

 
$
4,002

 
$
293,132

 
$
(91,072
)
 
$
301,106

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share attributable to Global Payments
 
$
0.54

 
 
 
 
 
 
 
$
1.70

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
 
177,543

 
 
 
 
 
 
 
177,543

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2018
 
 
GAAP
 
Net Revenue Adjustments(1)
 
Earnings Adjustments(2)
 
Income
Taxes on Adjustments
(3)
 
Non-GAAP
 
Network Fees
 
Non-GAAP Adjusted Net Revenue Plus Network Fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
857,670

 
$
(63,447
)
 
$

 
$

 
$
794,223

 
$
230,756

 
$
1,024,979

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
$
223,162

 
$
1,196

 
$
114,345

 
$

 
$
338,703

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to Global Payments
 
$
176,370

 
$
1,196

 
$
112,896

 
$
(62,501
)
 
$
227,961

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share attributable to Global Payments
 
$
1.11

 
 
 
 
 
 
 
$
1.44

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
 
158,706

 
 
 
 
 
 
 
158,706

 
 
 
 


----------------------------------------------------------------------------------

(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 September 30, 2019 and September 30, 2018, includes $4.0 million and $1.2 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 September 30, 2019, earnings adjustments to operating income included $145.5 million in cost of service (COS) and $118.2 million in selling, general and administrative (SG&A) expenses. Adjustments to COS include amortization of acquired intangibles of $135.0 million and acquisition and integration expenses of $10.5 million. Adjustments to SG&A include share-based compensation expense of $27.9 million and acquisition and integration expenses of $90.4 million.

Net income attributable to Global Payments also reflects the removal of $31.4 million in charges from interest expense associated with the financing of the merger with TSYS. These include fees related to the bridge facility the company entered into to support the merger financing, the write-off of debt issuance fees in connection with the refinancing of our credit facility and interest expense on new secured senior notes attributable to the period between issuance and merger close, net of interest income earned from these funds while in escrow.

For the three months ended September 30, 2018, earnings adjustments to operating income included $88.6 million in COS and $25.8 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $88.0 million and other adjustments of $0.6 million. Adjustments to SG&A include share-based compensation expense of $14.9 million, acquisition and integration expenses of $7.8 million and other adjustments of $3.1 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. Adjustments also include the removal of a $17.0 million benefit related to remeasuring net deferred liabilities at our new blended state rate as a result of the merger with TSYS.

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

10



SCHEDULE 7
UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands, except per share data)

 
 
Nine Months Ended September 30, 2019
 
 
GAAP
 
Net Revenue Adjustments(1)
 
Earnings Adjustments(2)
 
Income
Taxes on Adjustments
(3)
 
Non-GAAP
 
Network Fees
 
Non-GAAP Adjusted Net Revenue Plus Network Fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
2,924,131

 
$
(140,434
)
 
$

 
$

 
$
2,783,697

 
$
679,646

 
$
3,463,343

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
$
595,255

 
$
12,643

 
$
523,181

 
$

 
$
1,131,079

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to Global Payments
 
$
327,842

 
$
12,643

 
$
551,508

 
$
(141,960
)
 
$
750,033

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share attributable to Global Payments
 
$
2.00

 
 
 
 
 
 
 
$
4.56

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
 
164,331

 
 
 
 
 
 
 
164,331

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2018
 
 
GAAP
 
Net Revenue Adjustments(1)
 
Earnings Adjustments(2)
 
Income
Taxes on Adjustments
(3)
 
Non-GAAP
 
Network Fees
 
Non-GAAP Adjusted Net Revenue Plus Network Fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
$
2,485,811

 
$
(207,531
)
 
$

 
$

 
$
2,278,280

 
$
653,479

 
$
2,931,759

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
$
570,069

 
$
7,065

 
$
351,056

 
$

 
$
928,190

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income attributable to Global Payments
 
$
376,838

 
$
7,065

 
$
341,921

 
$
(111,039
)
 
$
614,785

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings per share attributable to Global Payments
 
$
2.36

 
 
 
 
 
 
 
$
3.86

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted weighted average shares outstanding
 
159,459

 
 
 
 
 
 
 
159,459

 
 
 
 

--------------------------------------------------------------------------------

(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 nine months ended September 30, 2019 and September 30, 2018, includes $12.6 million and $7.1 million, respectively, to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.

(2) 
For the nine months ended September 30, 2019, earnings adjustments to operating income included $359.4 million in cost of service (COS) and $163.7 million in selling, general and administrative (SG&A) expenses. Adjustments to COS include amortization of acquired intangibles of $347.1 million and acquisition and integration expenses of $12.4 million. Adjustments to SG&A include share-based compensation expense of $55.8 million and acquisition and integration expenses of $107.9 million.

Net income attributable to Global Payments also reflects the removal of $34.3 million in charges from interest expense associated with the financing of the merger with TSYS. These include fees related to the bridge facility the company entered into to support the merger financing, the write-off of debt issuance fees in connection with the refinancing of our credit facility and interest expense on new secured senior notes attributable to the period between issuance and merger close, net of interest income earned from these funds in escrow.

For the nine months ended September 30, 2018, earnings adjustments to operating income include $269.6 million in COS and $81.4 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $265.4 million and other adjustments of $4.2 million. Adjustments to SG&A include share-based compensation expense of $44.9 million, acquisition and integration expenses of $33.2 million and other adjustments of $3.3 million. Also, earnings adjustments to net income attributable to Global Payments include the removal of 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.

(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. Adjustments also include the removal of a $17.0 million benefit related to remeasuring the net deferred liabilities at our new blended state rate as a result of the merger with TSYS.

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

11



SCHEDULE 8
UNAUDITED RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)

 
 
Three Months Ended September 30, 2019
 
 
GAAP
 
Net Revenue Adjustments (1)
 
Earnings Adjustments(2)
 
Non-GAAP
 
Network Fees
 
Non-GAAP Adjusted Net Revenue Plus Network Fees
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
734,841

 
$
(27,936
)
 
$

 
$
706,905

 
$
170,213

 
$
877,118

Europe
 
164,950

 

 

 
164,950

 
39,711

 
204,661

Asia-Pacific
 
58,680

 
446

 

 
59,126

 
20,016

 
79,142

TSYS
 
147,470

 
(16,234
)
 

 
131,236

 
13,629

 
144,865

 
 
$
1,105,941

 
$
(43,724
)
 
$

 
$
1,062,217

 
$
243,569

 
$
1,305,786

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
205,728

 
$
3,556

 
$
103,247

 
$
312,531

 
 
 
 
Europe
 
91,332

 

 
8,109

 
99,441

 
 
 
 
Asia-Pacific
 
24,187

 
446

 
2,164

 
26,797

 
 
 
 
Corporate
 
(136,086
)
 

 
93,950

 
(42,136
)
 
 
 
 
TSYS
 
(11,124
)
 

 
56,244

 
45,120

 
 
 
 
 
 
$
174,037

 
$
4,002

 
$
263,714

 
$
441,753

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2018
 
 
GAAP
 
Net Revenue Adjustments(1)
 
Earnings Adjustments(2)
 
Non-GAAP
 
Network Fees
 
Non-GAAP Adjusted Net Revenue Plus Network Fees
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
643,715

 
$
(63,447
)
 
$

 
$
580,268

 
$
175,548

 
$
755,816

Europe
 
157,584

 

 

 
157,584

 
36,169

 
193,753

Asia-Pacific
 
56,371

 

 

 
56,371

 
19,039

 
75,410

 
 
$
857,670

 
$
(63,447
)
 
$

 
$
794,223

 
$
230,756

 
$
1,024,979

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
174,012

 
$
1,196

 
$
83,867

 
$
259,075

 
 
 
 
Europe
 
85,781

 

 
6,403

 
92,184

 
 
 
 
Asia-Pacific
 
23,692

 

 
1,746

 
25,438

 
 
 
 
Corporate
 
(60,323
)
 

 
22,329

 
(37,994
)
 
 
 
 
 
 
$
223,162

 
$
1,196

 
$
114,345

 
$
338,703

 
 
 
 


----------------------------------------------------------------------------------

(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 September 30, 2019 and September 30, 2018, includes $4.0 million and $1.2 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 September 30, 2019, earnings adjustments to operating income included $145.5 million in cost of service (COS) and $118.2 million in selling, general and administrative (SG&A) expenses. Adjustments to COS include amortization of acquired intangibles of $135.0 million and acquisition and integration expenses of $10.5 million. Adjustments to SG&A include share-based compensation expense of $27.9 million and acquisition and integration expenses of $90.4 million.

For the three months ended September 30, 2018, earnings adjustments to operating income include $88.6 million in COS and $25.8 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $88.0 million and other adjustments of $0.6 million. Adjustments to SG&A include share-based compensation expense of $14.9 million, acquisition and integration expenses of $7.8 million and other adjustments of $3.1 million.
 
See "Non-GAAP Financial Measures" discussion on Schedule 10.

12



SCHEDULE 9
UNAUDITED RECONCILIATION OF SEGMENT NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In thousands)

 
 
Nine Months Ended September 30, 2019
 
 
GAAP
 
Net Revenue Adjustments (1)
 
Earnings Adjustments(2)
 
Non-GAAP
 
Network Fees
 
Non-GAAP Adjusted Net Revenue Plus Network Fees
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
2,129,182

 
$
(125,892
)
 
$

 
$
2,003,290

 
$
500,699

 
$
2,503,989

Europe
 
468,168

 

 

 
468,168

 
105,383

 
573,551

Asia-Pacific
 
179,311

 
1,692

 

 
181,003

 
59,935

 
240,938

TSYS
 
147,470

 
(16,234
)
 

 
131,236

 
13,629

 
144,865

 
 
$
2,924,131

 
$
(140,434
)
 
$

 
$
2,783,697

 
$
679,646

 
$
3,463,343

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
547,160

 
$
10,951

 
$
302,807

 
$
860,918

 
 
 
 
Europe
 
249,638

 

 
24,499

 
274,137

 
 
 
 
Asia-Pacific
 
74,718

 
1,692

 
6,698

 
83,108

 
 
 
 
Corporate
 
(265,137
)
 

 
132,933

 
(132,204
)
 
 
 
 
TSYS
 
(11,124
)
 

 
56,244

 
45,120

 
 
 
 
 
 
$
595,255

 
$
12,643

 
$
523,181

 
$
1,131,079

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2018
 
 
GAAP
 
Net Revenue Adjustments(1)
 
Earnings Adjustments(2)
 
Non-GAAP
 
Network Fees
 
Non-GAAP Adjusted Net Revenue Plus Network Fees
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
1,859,545

 
$
(207,531
)
 
$

 
$
1,652,014

 
$
498,881

 
$
2,150,895

Europe
 
456,492

 

 

 
456,492

 
98,306

 
554,798

Asia-Pacific
 
169,774

 

 

 
169,774

 
56,292

 
226,066

 
 
$
2,485,811

 
$
(207,531
)
 
$

 
$
2,278,280

 
$
653,479

 
$
2,931,759

 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
 
 
 
 
 
North America
 
$
446,600

 
$
7,065

 
$
252,146

 
$
705,811

 
 
 
 
Europe
 
239,011

 

 
21,004

 
260,015

 
 
 
 
Asia-Pacific
 
67,043

 

 
7,513

 
74,556

 
 
 
 
Corporate
 
(182,585
)
 

 
70,393

 
(112,192
)
 
 
 
 
 
 
$
570,069

 
$
7,065

 
$
351,056

 
$
928,190

 
 
 
 


----------------------------------------------------------------------------------

(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 nine months ended September 30, 2019 and September 30, 2018, includes $12.6 million and $7.1 million, respectively, to eliminate the effect of acquisition accounting fair value adjustments for software-related contract liabilities associated with acquired businesses.

(2) 
For the nine months ended September 30, 2019, earnings adjustments to operating income include $359.4 million in cost of service (COS) and $163.7 million in selling, general and administrative (SG&A) expenses. Adjustments to COS include amortization of acquired intangibles of $347.1 million and acquisition and integration expenses of $12.4 million. Adjustments to SG&A include share-based compensation expense of $55.8 million and acquisition and integration expenses of $107.9 million.

For the nine months ended September 30, 2018, earnings adjustments to operating income include $269.6 million in COS and $81.4 million in SG&A. Adjustments to COS include amortization of acquired intangibles of $265.4 million and other adjustments of $4.2 million. Adjustments to SG&A include share-based compensation expense of $44.9 million, acquisition and integration expenses of $33.2 million and other adjustments of $3.3 million.

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

13



SCHEDULE 10
UNAUDITED OUTLOOK SUMMARY
GLOBAL PAYMENTS INC. AND SUBSIDIARIES
(In billions, except per share data)
 
2018 Actual
 
2019 Outlook(1)
 
% Change
 
 
 
 
 
 
Revenues:
 
 
 
 
 
GAAP revenues