NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1
—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business, consolidation and presentation
— We are a leading worldwide provider of payment technology services delivering innovative solutions to our customers globally. Our technologies and employee expertise enable us to provide a broad range of services that allow our customers to accept various payment types. We distribute our services across a variety of channels to customers in
30
countries throughout North America, Europe, the Asia-Pacific region and Brazil and operate in
three
reportable segments: North America, Europe and Asia-Pacific.
We were incorporated in Georgia as Global Payments Inc. in
2000
and spun-off from our former parent company in
2001
. Including our time as part of our former parent company, we have been in the payment technology services business since
1967
. Global Payments Inc. and its consolidated subsidiaries are referred to collectively as "Global Payments," the "Company," "we," "our" or "us," unless the context requires otherwise.
These unaudited consolidated financial statements include our accounts and those of our majority-owned subsidiaries, and all intercompany balances and transactions have been eliminated in consolidation. These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). The consolidated balance sheet as of
December 31, 2016
was derived from the audited financial statements included in our Transition Report on Form 10-K for the seven months ended
December 31, 2016
but does not include all disclosures required by GAAP for annual financial statements. As a result of the change in our fiscal year end from May 31 to December 31, we presented our interim financial information for the
three and nine
months ended
September 30, 2016
on the basis of the new fiscal year for comparative purposes.
In the opinion of our management, all known adjustments necessary for a fair presentation of the results of the interim periods have been made. These adjustments consist of normal recurring accruals and estimates that affect the carrying amount of assets and liabilities. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Transition Report on Form 10-K for the seven months ended
December 31, 2016
.
Use of estimates
—
The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that 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 materially from those estimates.
Recently Adopted Accounting Pronouncements
In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, "Compensation - Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting.
" The amendments in this update changed how companies account for certain aspects of share-based payments to employees. We adopted the various amendments in ASU 2016-09 in our unaudited consolidated financial statements effective January 1, 2017 with no material effect at the date of adoption. On a prospective basis, as required, we recognize the income tax effects of the excess benefits or deduction deficiencies of share-based awards in the statement of income when the awards vest or are settled. Previously, these amounts were recorded as an adjustment to additional paid-in capital. In addition, these excess tax benefits or deduction deficiencies from share-based compensation plans, which were previously presented as a financing activity in our consolidated statement of cash flows, are now presented as an operating activity using a retrospective transition method for all periods presented. Finally, we have elected to account for forfeitures of share-based awards with service conditions as they occur.
In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230):
Classification of Certain Cash Receipts and Cash Payments
," which makes clarifications to how cash receipts and cash payments in certain transactions are presented and classified in the statement of cash flows. We adopted ASU 2016-15 on a retrospective basis effective January 1, 2017 with no effect on our unaudited consolidated statements of cash flows for any period presented.
In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350):
Simplifying the Test for Goodwill Impairment
." The ASU eliminates Step 2 from the goodwill impairment test. In computing the implied fair value of
goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. We adopted ASU 2017-04 on a prospective basis effective January 1, 2017. The adoption of this standard had no effect on our unaudited consolidated financial statements.
Recently Issued Pronouncements Not Yet Adopted
Accounting Standard Codification (
"
ASC
"
) 606 - New Revenue Standard
In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)." The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP and permits the use of either the retrospective or modified retrospective transition method. The update requires significant additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments. ASU 2014-09, as amended by ASU 2015-14, "Revenue from Contracts with Customers (Topic 606):
Deferral of the Effective Date
," is effective for years beginning after December 15, 2017, including interim periods, with early adoption permitted for years beginning after December 15, 2016. Since the issuance of ASU 2014-09, the FASB has issued additional interpretive guidance, including new accounting standards updates, that clarifies certain points of the standard and modifies certain requirements.
We have performed a review of the requirements of the new revenue standard and are monitoring the activity of the FASB and the transition resource group as it relates to specific interpretive guidance. We have established a cross-functional implementation team to assess the effects of the new revenue standard in a multi-phase approach. In the first phase, we analyzed customer contracts for our most significant contract categories, applied the five-step model of the new standard to each contract category and compared the results to our current accounting practices. We are nearing completion of the second phase, which includes quantifying the potential effects, assessing additional contract categories and principal agent considerations, revising accounting policies and considering the effects on related disclosures and/or internal control over financial reporting. The third phase, which will complete our adoption and implementation of the new revenue standard, includes activities such as implementing parallel accounting and reporting for areas affected by the new standard, quantifying the cumulative effect adjustment (including tax effects), evaluating and testing modified and newly implemented internal controls and revising financial statement disclosures.
The new standard could change the amount and timing of revenue and expenses to be recognized under certain of our arrangement types. In addition, it could increase the administrative burden on our operations to properly account for customer contracts and provide the more expansive required disclosures. More judgment and estimates may be required within the process of applying the requirements of the new standard than are required under existing GAAP, such as identifying performance obligations in contracts, estimating the amount of variable consideration to include in transaction price, allocating transaction price to each separate performance obligation and estimating expected customer lives. We have not completed our assessment or quantified the effect the new guidance will have on our consolidated financial statements, related disclosures and/or our internal control over financial reporting. This will occur during the third and final phase of our implementation as discussed in the previous paragraph. Our preliminary view is that we expect the amount and timing of revenue to be recognized under ASU 2014-09 for our most significant contract category, core payment services, will be similar to the amount and timing of revenue recognized under our current accounting practices. However, we are still evaluating principal agent considerations for certain amounts that we pay to third parties and currently recognize as a component of operating expense, which could result in such amounts being recorded as a reduction of revenue under ASU 2014-09. This change would not affect operating income. We also expect to be required to capitalize additional costs to obtain contracts with customers, and, in some cases, may be required to amortize these costs and costs that we currently capitalize (such as capitalized customer acquisition costs) over a longer time period. Finally, we expect disclosures about our revenues and related customer acquisition costs will be more extensive.
We plan to adopt ASU 2014-09, as well as other clarifications and technical guidance issued by the FASB related to this new revenue standard, on January 1, 2018. We will likely apply the modified retrospective transition method, which would result in an adjustment to retained earnings for the cumulative effect, if any, of applying the standard to contracts that are not completed at the
date of initial application. Under this method, we would not restate the prior financial statements presented, therefore the new standard requires us to provide additional disclosures of the amount by which each financial statement line item is affected in the current reporting period during 2018, as compared to the guidance that was in effect before the change, and an explanation of the reasons for significant changes, if any.
Other Accounting Standards Updates
In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815):
Targeted Improvements to Accounting for Hedging Activities.
" The ASU expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. In addition, the amendments in this update modify disclosure requirements for presentation of hedging activities. Those modifications include a tabular disclosure related to the effect on the income statement of fair value and cash flow hedges and eliminate the requirement to disclose the ineffective portion of the change in fair value of hedging instruments, if any. The ASU will become effective for us on January 1, 2019. Early application is permitted for all hedging relationships that exist at the date of adoption. We are evaluating the effect of ASU 2017-12 on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, "Business Combinations (Topic 805):
Clarifying the Definition of a Business
." The ASU clarifies the definition of a business, which affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. The new standard is intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses, with the expectation that fewer will qualify as acquisitions (or disposals) of businesses. The ASU will become effective for us on January 1, 2018. These amendments will be applied prospectively from the date of adoption. The effect of ASU 2017-01 will be dependent upon the nature of future acquisitions or dispositions that we make, if any.
In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740):
Intra-Entity Transfers of Assets Other Than Inventory
." The amendments in this update state that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory, such as intellectual property and property and equipment, when the transfer occurs. The amendments in this update will become effective for us on January 1, 2018. The amendments in this update should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We do not expect that the adoption of ASU 2016-16 will have a material effect on our consolidated financial statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326):
Measurement of Credit Losses on Financial instruments
." The amendments in this update change how companies measure and recognize credit impairment for many financial assets. The new expected credit loss model will require companies to immediately recognize an estimate of credit losses expected to occur over the remaining life of the financial assets (including trade receivables) that are in the scope of the update. The update also made amendments to the current impairment model for held-to-maturity and available-for-sale debt securities and certain guarantees. The guidance will become effective for us on January 1, 2020. Early adoption is permitted for periods beginning on or after January 1, 2019. We are evaluating the effect of ASU 2016-13 on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, "Leases." The amendments in this update require lessees to recognize, on the balance sheet, assets and liabilities for the rights and obligations created by leases. In addition, several new disclosures will be required. Although early adoption is permitted, we expect to adopt ASU 2016-02 when it becomes effective for us on January 1, 2019. Adoption will require a modified retrospective transition where the lessees are required to recognize and measure leases at the beginning of the earliest period presented. In September 2017, the FASB issued ASU 2017-13, "Revenue Recognition" (Topic 605), "Revenue from Contracts with Customers" (Topic 606), "Leases" (Topic 840), and "Leases" (Topic 842)
,
which provides additional implementation guidance on the previously issued ASU 2016-02. We have not completed our evaluation of the effect of ASU 2016-02 or ASU 2017-13 on our consolidated financial statements; however, we expect to recognize right of use assets and liabilities for our operating leases in the balance sheet upon adoption.
In January 2016, the FASB issued ASU 2016-01, "Financial Instruments - Overall (Subtopic 825-10):
Recognition and Measurement of Financial Assets and Financial Liabilities
." The amendments in this update address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The amendments in this update supersede the guidance to classify equity securities with readily determinable fair values into different categories (that is, trading or available-for-sale) and require equity securities (including other ownership interests, such as partnerships, unincorporated joint ventures and limited liability
companies) to be measured at fair value with changes in the fair value recognized through earnings. Equity investments that are accounted for under the equity method of accounting or result in consolidation of an investee are not included within the scope of this update. The amendments allow equity investments that do not have readily determinable fair values to be remeasured at fair value either upon the occurrence of an observable price change or upon identification of an impairment. The amendments also require enhanced disclosures about those investments. The guidance will become effective for us on January 1, 2018. We do not expect that the adoption of ASU 2016-01 will have a material effect on our consolidated financial statements and related disclosures.
NOTE
2
—ACQUISITIONS
ACTIVE Network
On
September 1, 2017
, we acquired the communities and sports divisions of Athlaction Topco, LLC ("ACTIVE Network") in a cash-and-stock transaction with Vista Equity Partners. We paid the sellers consideration of
$600 million
in cash, which we funded primarily by drawing on our revolving credit facility, and
6,357,509
shares of our common stock having an estimated fair value of approximately
$572 million
. The acquisition-date fair value of common stock issued to the sellers was determined based on the share price of our common stock as of the acquisition date and the effect of certain transfer restrictions.
This transaction was accounted for as a business combination, which requires that we record the assets acquired and liabilities assumed at fair value as of the acquisition date. The accounting for this acquisition was not complete as of
September 30, 2017
. The fair values of the assets acquired and the liabilities assumed have been determined provisionally and are subject to adjustment as we obtain additional information. In particular, additional time is needed to refine and review the results of the valuation of assets and liabilities and to evaluate the basis differences for assets and liabilities for financial reporting and tax purposes.
The provisional estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed, including a reconciliation to the total purchase consideration, are as follows (in thousands):
|
|
|
|
|
Cash and cash equivalents
|
$
|
42,866
|
|
Property and equipment
|
22,889
|
|
Identified intangible assets
|
471,120
|
|
Other assets
|
80,485
|
|
Deferred income taxes
|
(26,757
|
)
|
Other liabilities
|
(123,047
|
)
|
Total identifiable net assets
|
467,556
|
|
Goodwill
|
704,020
|
|
Total purchase consideration
|
$
|
1,171,576
|
|
ACTIVE Network delivers cloud-based, mission critical enterprise software, including payment technology solutions, to event organizers in the communities and health and fitness verticals. This acquisition aligns with our technology-enabled, software driven strategy and adds an enterprise software business operating in two new vertical markets that we believe offer attractive growth fundamentals. Goodwill of
$704.0 million
arising from the acquisition, included in the North America operating segment, was attributable to expected growth opportunities, potential synergies from combining our existing businesses and an assembled workforce. We expect that approximately
80%
of the goodwill will be deductible for income tax purposes.
We are still evaluating information to separately identify and value the intangible assets acquired. We expect such assets to include primarily customer-related intangible assets and acquired technology as well as other identifiable intangible assets that are similar to those we have identified in previous acquisitions. We estimate the amortization periods for the more significant intangible assets to be in a range of
5
to
15
years.
Heartland
We merged with Heartland Payment Systems, Inc. ("Heartland") in a cash-and-stock transaction on
April 22, 2016
for total purchase consideration of
$3.9 billion
. The following table summarizes the components of the consideration transferred on
April 22, 2016
(in thousands):
|
|
|
|
|
|
Cash consideration paid to Heartland stockholders
|
|
$
|
2,043,362
|
|
Fair value of Global Payments common stock issued to Heartland stockholders
|
|
1,879,458
|
|
Total purchase consideration
|
|
$
|
3,922,820
|
|
This transaction was accounted for as a business combination, which requires that we record the assets acquired and liabilities assumed at fair value as of the acquisition date. The estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed previously determined as of December 31, 2016 and as subsequently revised, including a reconciliation to the total purchase consideration, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
Measurement-Period Adjustments
|
|
Final
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
304,747
|
|
|
$
|
—
|
|
|
$
|
304,747
|
|
Accounts receivable
|
70,385
|
|
|
—
|
|
|
70,385
|
|
Prepaid expenses and other assets
|
103,090
|
|
|
(5,131
|
)
|
|
97,959
|
|
Identified intangible assets
|
1,639,040
|
|
|
—
|
|
|
1,639,040
|
|
Property and equipment
|
106,583
|
|
|
—
|
|
|
106,583
|
|
Debt
|
(437,933
|
)
|
|
—
|
|
|
(437,933
|
)
|
Accounts payable and accrued liabilities
|
(457,763
|
)
|
|
(65
|
)
|
|
(457,828
|
)
|
Settlement processing obligations
|
(36,578
|
)
|
|
(3,727
|
)
|
|
(40,305
|
)
|
Deferred income taxes
|
(518,794
|
)
|
|
18,907
|
|
|
(499,887
|
)
|
Other liabilities
|
(64,938
|
)
|
|
(33,495
|
)
|
|
(98,433
|
)
|
Total identifiable net assets
|
707,839
|
|
|
(23,511
|
)
|
|
684,328
|
|
Goodwill
|
3,214,981
|
|
|
23,511
|
|
|
3,238,492
|
|
Total purchase consideration
|
$
|
3,922,820
|
|
|
$
|
—
|
|
|
$
|
3,922,820
|
|
The measurement-period adjustments were the result of continued refinement of certain estimates, particularly regarding certain tax positions and deferred income taxes.
Goodwill of
$3.2 billion
arising from the merger, included in the North America segment, was attributable to expected growth opportunities, potential synergies from combining our existing businesses and an assembled workforce, and is not deductible for income tax purposes. During the nine months ended
September 30, 2016
, we incurred transaction costs in connection with the merger of
$24.7 million
, which are recorded in selling, general and administrative expenses in the consolidated statements of income.
The following reflects the estimated fair values of the identified intangible assets and the respective weighted-average estimated amortization periods:
|
|
|
|
|
|
|
|
Estimated Fair Values
|
|
Weighted-Average Estimated Amortization Periods
|
|
|
|
|
|
(in thousands)
|
|
(years)
|
|
|
|
|
Customer-related intangible assets
|
$
|
977,400
|
|
|
15
|
Acquired technology
|
457,000
|
|
|
5
|
Trademarks and trade names
|
176,000
|
|
|
7
|
Covenants-not-to-compete
|
28,640
|
|
|
1
|
Total estimated acquired intangible assets
|
$
|
1,639,040
|
|
|
11
|
NOTE
3
—SETTLEMENT PROCESSING ASSETS AND OBLIGATIONS
As of
September 30, 2017
and
December 31, 2016
, settlement processing assets and obligations consisted of the following:
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
Settlement processing assets:
|
|
|
|
Interchange reimbursement
|
$
|
288,923
|
|
|
$
|
150,612
|
|
Receivable from members
|
14,483
|
|
|
71,590
|
|
Receivable from networks
|
1,546,821
|
|
|
1,325,029
|
|
Exception items
|
9,570
|
|
|
6,450
|
|
Merchant reserves
|
(12,565
|
)
|
|
(6,827
|
)
|
|
$
|
1,847,232
|
|
|
$
|
1,546,854
|
|
|
|
|
|
Settlement processing obligations:
|
|
|
|
Interchange reimbursement
|
$
|
74,970
|
|
|
$
|
199,202
|
|
Liability to members
|
(20,340
|
)
|
|
(177,979
|
)
|
Liability to merchants
|
(1,472,221
|
)
|
|
(1,358,271
|
)
|
Exception items
|
11,018
|
|
|
21,194
|
|
Merchant reserves
|
(140,327
|
)
|
|
(158,419
|
)
|
Reserve for operating losses and sales allowances
|
(3,727
|
)
|
|
(2,939
|
)
|
|
$
|
(1,550,627
|
)
|
|
$
|
(1,477,212
|
)
|
NOTE
4
—GOODWILL AND OTHER INTANGIBLE ASSETS
As of
September 30, 2017
and
December 31, 2016
, goodwill and other intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
Goodwill
|
$
|
5,616,414
|
|
|
$
|
4,807,594
|
|
Other intangible assets:
|
|
|
|
Customer-related intangible assets
|
$
|
2,119,873
|
|
|
$
|
1,864,731
|
|
Acquired technologies
|
804,485
|
|
|
547,151
|
|
Trademarks and trade names
|
190,021
|
|
|
188,311
|
|
Contract-based intangible assets
|
162,107
|
|
|
157,882
|
|
|
3,276,486
|
|
|
2,758,075
|
|
Less accumulated amortization:
|
|
|
|
Customer-related intangible assets
|
635,574
|
|
|
487,729
|
|
Acquired technologies
|
179,006
|
|
|
89,633
|
|
Trademarks and trade names
|
44,586
|
|
|
24,142
|
|
Contract-based intangible assets
|
88,611
|
|
|
71,279
|
|
|
947,777
|
|
|
672,783
|
|
|
$
|
2,328,709
|
|
|
$
|
2,085,292
|
|
The following table sets forth the changes in the carrying amount of goodwill for the
nine
months ended
September 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
Europe
|
|
Asia-Pacific
|
|
Total
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
$
|
4,083,252
|
|
|
$
|
455,300
|
|
|
$
|
269,042
|
|
|
$
|
4,807,594
|
|
Goodwill acquired
|
704,020
|
|
|
—
|
|
|
—
|
|
|
704,020
|
|
Effect of foreign currency translation
|
5,559
|
|
|
50,515
|
|
|
18,185
|
|
|
74,259
|
|
Measurement-period adjustments
|
23,511
|
|
|
—
|
|
|
7,030
|
|
|
30,541
|
|
Balance at September 30, 2017
|
$
|
4,816,342
|
|
|
$
|
505,815
|
|
|
$
|
294,257
|
|
|
$
|
5,616,414
|
|
There was
no
accumulated impairment loss as of
September 30, 2017
or
December 31, 2016
.
NOTE
5
—OTHER ASSETS
Through certain of our subsidiaries in Europe, we were a member and shareholder of Visa Europe Limited ("Visa Europe"). On June 21, 2016, Visa Inc. ("Visa") acquired all of the membership interests in Visa Europe, including ours, upon which we recorded a gain of
$41.2 million
included in interest and other income in our consolidated statements of income for the nine months ended
September 30, 2016
. We received up-front consideration comprised of
€33.5 million
(
$37.7 million
equivalent at June 21, 2016) in cash and Series B and C convertible preferred shares whose initial conversion rate equates to Visa common shares valued at
$22.9 million
as of June 21, 2016. However, the preferred shares were assigned a value of zero based on transfer restrictions, Visa's ability to adjust the conversion rate, and the estimation uncertainty associated with those factors. Based on the outcome of potential litigation involving Visa Europe in the United Kingdom and elsewhere in Europe, the conversion rate of the preferred shares could be adjusted down such that the number of Visa common shares we ultimately receive could be as low as zero, and approximately
€25.6 million
(
$28.8 million
equivalent at June 21, 2016) of the up-front cash consideration could be refundable. On the third anniversary of the closing of the acquisition by Visa, we will also receive
€3.1 million
(
$3.5 million
equivalent at June 21, 2016) of deferred consideration (plus compounded interest at a rate of
4.0%
per annum).
NOTE
6
—LONG-TERM DEBT AND LINES OF CREDIT
As of
September 30, 2017
and
December 31, 2016
, long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
December 31, 2016
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
Corporate credit facility:
|
|
|
|
Term loans (face amounts of $3,956,497 and $3,728,857 at September 30, 2017 and December 31, 2016, respectively, less unamortized debt issuance costs of $40,180 and $46,282 at September 30, 2017 and December 31, 2016, respectively)
|
$
|
3,916,317
|
|
|
$
|
3,682,575
|
|
Revolving Credit Facility
|
855,000
|
|
|
756,000
|
|
Capital lease obligations
|
1
|
|
|
37
|
|
Total long-term debt
|
4,771,318
|
|
|
4,438,612
|
|
Less current portion of corporate credit facility (face amounts of $102,129 and $187,274 at September 30, 2017 and December 31, 2016, respectively, less unamortized debt issuance costs of $8,722 and $9,526 at September 30, 2017 and December 31, 2016, respectively) and current portion of capital lease obligations of $1 and $37 at September 30, 2017 and December 31, 2016, respectively
|
93,408
|
|
|
177,785
|
|
Long-term debt, excluding current portion
|
$
|
4,677,910
|
|
|
$
|
4,260,827
|
|
Maturity requirements on long-term debt as of
September 30, 2017
by year are as follows (in thousands):
|
|
|
|
|
Years ending December 31,
|
|
2017
|
$
|
23,821
|
|
2018
|
108,979
|
|
2019
|
141,912
|
|
2020
|
161,144
|
|
2021
|
180,376
|
|
2022
|
3,111,391
|
|
2023 and thereafter
|
1,083,875
|
|
Total
|
$
|
4,811,498
|
|
We are party to a credit facility agreement with Bank of America, N.A., as administrative agent, and a syndicate of financial institutions as lenders and other agents (as amended from time to time, the "Credit Facility Agreement"). On May 2, 2017, we entered into the Fourth Amendment to the Credit Facility Agreement (the "Fourth Amendment"), which increased the total financing capacity available under the Credit Facility Agreement to
$5.2 billion
; however, the aggregate outstanding debt under the Credit Facility Agreement did not change as we repaid certain outstanding amounts under the Term A Loan, the Term A-2 Loan and the Revolving Credit Facility (each as defined below) in connection with the Fourth Amendment. As of
September 30, 2017
, the Credit Facility Agreement provided for secured financing comprised of (i) a
$1.5 billion
term loan (the "Term A Loan"), (ii) a
$1.3 billion
term loan (the "Term A-2 Loan"), (iii) a
$1.2 billion
term loan facility, (the "Term B-2 Loan") and (iv) a
$1.25 billion
revolving credit facility (the "Revolving Credit Facility"). Substantially all of the assets of our domestic subsidiaries are pledged as collateral under the Credit Facility Agreement.
The Credit Facility Agreement provides for an interest rate, at our election, of either London Interbank Offered Rate ("LIBOR") or a base rate, in each case plus a leverage-based margin. As of
September 30, 2017
, the interest rates on the Term A Loan, the Term A-2 Loan and the Term B-2 Loan were
2.99%
,
2.95%
and
3.23%
, respectively.
The Term A Loan and the Term A-2 Loan mature, and the Revolving Credit Facility Agreement expires, on
May 2, 2022
. The Term B-2 Loan matures on
April 22, 2023
. The Term A Loan principal must be repaid in quarterly installments in the amount of
1.25%
of principal through
June 2019
, increasing to
1.875%
of principal through
June 2021
, and increasing to
2.50%
of principal through
March 2022
, with the remaining principal balance due upon maturity in
May 2022
. The Term A-2 Loan principal must be
repaid in quarterly installments of
$1.7 million
through
June 2018
, increasing to quarterly installments of
$8.6 million
through
March 2022
, with the remaining balance due upon maturity in
May 2022
. The Term B-2 Loan principal must be repaid in quarterly installments in the amount of
0.25%
of principal through
March 2023
, with the remaining principal balance due upon maturity in
April 2023
.
The Credit Facility Agreement allows us to issue standby letters of credit of up to
$100 million
in the aggregate under the Revolving Credit Facility. Outstanding letters of credit under the Revolving Credit Facility reduce the amount of borrowings available to us. Borrowings available to us under the Revolving Credit Facility are further limited by the covenants described below under "Compliance with Covenants." The total available commitments under the Revolving Credit Facility at
September 30, 2017
and
December 31, 2016
were
$383.1 million
and
$446.3 million
, respectively. As of
September 30, 2017
, the interest rate on the Revolving Credit Facility was
2.95%
. In addition, we are required to pay a quarterly commitment fee on the unused portion of the Revolving Credit Facility at an applicable rate per annum ranging from
0.20%
to
0.30%
depending on our leverage ratio.
The portion of deferred debt issuance costs related to the Revolving Credit Facility is included in other noncurrent assets, and the portion of deferred debt issuance costs related to the term loans is reported as a reduction to the carrying amount of the term loans. Debt issuance costs are amortized as an adjustment to interest expense over the terms of the respective facilities.
Settlement Lines of Credit
In various markets where we do business, we have lines of credit, which are restricted for use in funding settlement. The settlement lines of credit generally have variable interest rates, are subject to annual review and are denominated in local currency but may, in some cases, facilitate borrowings in multiple currencies. For certain of our settlement lines of credit, the available credit is increased by the amount of cash we have on deposit in specific accounts with the lender. Accordingly, the amount of the outstanding line of credit may exceed the stated credit limit. As of
September 30, 2017
and
December 31, 2016
, a total of
$55.5 million
and
$51.0 million
, respectively, of cash on deposit was used to determine the available credit.
As of
September 30, 2017
and
December 31, 2016
, respectively, we had
$487.5 million
and
$392.1 million
outstanding under these lines of credit with additional capacity of
$669.9 million
as of
September 30, 2017
to fund settlement. The weighted-average interest rate on these borrowings was
2.11%
and
1.90%
at
September 30, 2017
and
December 31, 2016
, respectively. During the three months ended
September 30, 2017
, the maximum and average outstanding balances under these lines of credit were
$627.3 million
and
$334.2 million
, respectively.
Compliance with Covenants
The Credit Facility Agreement contains customary affirmative and restrictive covenants, including, among others, financial covenants based on our leverage and fixed charge coverage ratios, as defined in the agreement. As of
September 30, 2017
, financial covenants under the Credit Facility Agreement required a leverage ratio no greater than: (i)
4.50
to
1.00
as of the end of any fiscal quarter ending during the period from
July 1, 2017
through
June 30, 2018
; (ii)
4.25
to
1.00
as of the end of any fiscal quarter ending during the period from
July 1, 2018
through
June 30, 2019
; and (iii)
4.00
to
1.00
as of the end of any fiscal quarter ending thereafter. The fixed charge coverage ratio is required to be no less than
2.25
to
1.00
.
The Credit Facility Agreement and settlement lines of credit also include various other covenants that are customary in such borrowings. The Credit Facility Agreement includes covenants, subject in each case to exceptions and qualifications, that may restrict certain payments, including in certain circumstances, the payment of cash dividends in excess of our current rate of
$0.01
per share per quarter.
The Credit Facility Agreement also includes customary events of default, the occurrence of which, following any applicable cure period, would permit the lenders to, among other things, declare the principal, accrued interest and other obligations to be immediately due and payable. We were in compliance with all applicable covenants as of and for the
nine
months ended
September 30, 2017
.
Interest Rate Swap Agreements
We have interest rate swap agreements with financial institutions to hedge changes in cash flows attributable to interest rate risk on a portion of our variable-rate debt instruments. Net amounts to be received or paid under the swap agreements are reflected
as adjustments to interest expense. Since we have designated the interest rate swap agreements as portfolio cash flow hedges, unrealized gains or losses resulting from adjusting the swaps to fair value are recorded as components of other comprehensive income, except for any ineffective portion of the change in fair value, which would be immediately recorded in interest expense. During the
three and nine
months ended
September 30, 2017
and
2016
, there was no ineffectiveness. The fair values of the interest rate swaps were determined based on the present value of the estimated future net cash flows using implied rates in the applicable yield curve as of the valuation date. These derivative instruments were classified within Level 2 of the valuation hierarchy.
The table below presents the fair values of our derivative financial instruments designated as cash flow hedges included in the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Financial Instruments
|
|
Balance Sheet Location
|
|
Weighted-Average Fixed Rate of Interest at September 30, 2017
|
|
Range of Maturity Dates
|
|
September 30, 2017
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps (Notional of $1,000 million at September 30, 2017, $250 million at December 31, 2016)
|
|
Other assets
|
|
1.49%
|
|
February 28, 2019 - July 31, 2020
|
|
$
|
2,923
|
|
|
$
|
2,147
|
|
Interest rate swaps (Notional of $300 million at September 30, 2017, $750 million at December 31, 2016)
|
|
Accounts payable and accrued liabilities
|
|
1.91%
|
|
March 31, 2021
|
|
$
|
1,495
|
|
|
$
|
3,175
|
|
The table below presents the effects of our interest rate swaps on the consolidated statements of income and comprehensive income for the
three and nine
months ended
September 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
September 30, 2017
|
|
September 30, 2016
|
|
September 30, 2017
|
|
September 30, 2016
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Amount of gain (loss) recognized in other comprehensive income
|
$
|
341
|
|
|
$
|
3,429
|
|
|
$
|
(2,214
|
)
|
|
$
|
(12,665
|
)
|
Amount reclassified out of other comprehensive income to interest expense
|
$
|
1,172
|
|
|
$
|
1,853
|
|
|
$
|
4,667
|
|
|
$
|
5,733
|
|
As of
September 30, 2017
, the amount in accumulated other comprehensive loss related to our interest rate swaps that is expected to be reclassified into interest expense during the next 12 months was approximately
$1.7 million
.
Interest Expense
Interest expense was
$41.8 million
and
$44.6 million
for the three months ended
September 30, 2017
and
2016
, respectively, and
$130.3 million
and
$95.6 million
for the
nine
months ended
September 30, 2017
and
2016
, respectively.
NOTE 7—INCOME TAX
Our effective income tax rates were
11.7%
and
18.4%
for the three months ended
September 30, 2017
and
September 30, 2016
, respectively. Our effective income tax rates were
14.4%
and
14.7%
for the
nine
months ended
September 30, 2017
and
September 30, 2016
, respectively. Our effective income tax rates differ from the U.S. statutory rate primarily due to income generated in international jurisdictions with lower tax rates. In addition, as a result of adopting ASU 2016-09 on January 1, 2017, as described in "Note
1
— Basis of Presentation and Summary of Significant Accounting Policies," we recognize the income tax effects of the excess benefits or deficiencies of share-based awards in the statement of income when share-based awards vest or are settled, which contributed to lower effective income tax rates in the current year periods. During the
nine
months ended
September 30, 2016
, we recorded an income tax benefit of
$12.7 million
associated with the elimination of certain net deferred tax liabilities associated with undistributed earnings from Canada as a result of management's plans to reinvest these earnings outside the United States indefinitely.
We conduct business globally and file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities around the world, including, without limitation, the United States and the United Kingdom. We are no longer subject to state income tax examinations for years ended on or before
May 31, 2008
, U.S. federal income tax examinations for fiscal years prior to
2013
and U.K. federal income tax examinations for years ended on or before
May 31, 2013
.
NOTE 8—SHAREHOLDERS’ EQUITY
We make repurchases of our common stock mainly through the use of open market purchases and, at times, through accelerated share repurchase programs. As of
September 30, 2017
, we were authorized to repurchase up to
$264.9 million
of our common stock. During the
three and nine
months ended
September 30, 2017
, respectively, through open market repurchase plans, we repurchased and retired
311,593
and
376,309
shares of our common stock, at a cost of
$29.0 million
and
$34.8 million
, or an average cost of
$93.09
and
$92.51
per share, including commissions.
During the
three and nine
months ended
September 30, 2016
, respectively, through open market repurchase plans, we repurchased and retired
484,256
and
1,142,415
shares of our common stock at a cost of
$35.5 million
and
$80.3 million
, or an average cost of
$73.25
and
$70.29
per share, including commissions. In addition to shares repurchased through open market repurchase plans, we repurchased
673,212
shares of our common stock at a cost of
$50.0 million
, or an average cost of
$74.27
per share, including commissions, through an accelerated share repurchase program during the nine months ended
September 30, 2016
.
NOTE 9—SHARE-BASED AWARDS AND OPTIONS
The following table summarizes share-based compensation expense and the related income tax benefit recognized for our share-based awards and stock options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
September 30, 2017
|
|
September 30, 2016
|
|
September 30, 2017
|
|
September 30, 2016
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Share-based compensation expense
|
$
|
9,617
|
|
|
$
|
8,688
|
|
|
$
|
30,771
|
|
|
$
|
26,060
|
|
Income tax benefit
|
$
|
3,523
|
|
|
$
|
2,968
|
|
|
$
|
10,788
|
|
|
$
|
8,679
|
|
Share-Based Awards
The following table summarizes the changes in unvested share-based awards for the
nine
months ended
September 30, 2017
:
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted-Average
Grant-Date
Fair Value
|
|
(in thousands)
|
|
|
|
|
|
|
Unvested at December 31, 2016
|
1,263
|
|
|
|
$49.55
|
|
Granted
|
611
|
|
|
71.77
|
|
Vested
|
(685
|
)
|
|
40.35
|
|
Forfeited
|
(71
|
)
|
|
60.36
|
|
Unvested at September 30, 2017
|
1,118
|
|
|
|
$66.74
|
|
The total fair value of share-based awards vested during the
nine
months ended
September 30, 2017
and
September 30, 2016
was
$27.6 million
and
$22.2 million
, respectively.
For these share-based awards, we recognized compensation expense of
$8.6 million
and
$8.0 million
during the three months ended
September 30, 2017
and
September 30, 2016
, respectively, and
$27.7 million
and
$24.3 million
during the
nine
months ended
September 30, 2017
and
September 30, 2016
, respectively. As of
September 30, 2017
, there was $
53.2 million
of unrecognized compensation expense related to unvested share-based awards that we expect to recognize over a weighted-average period of
2.1
years. Our share-based award plans provide for accelerated vesting under certain conditions.
Stock Options
Stock options are granted with an exercise price equal to
100%
of fair market value of our common stock on the date of grant and have a term of
ten
years. Stock options granted before the year ended May 31, 2015 vest in equal installments on each of the first
four
anniversaries of the grant date. Stock options granted during the year ended May 31, 2015 and thereafter vest in equal installments on each of the first
three
anniversaries of the grant date. During the
nine
months ended
September 30, 2017
and
September 30, 2016
, we granted stock options to purchase
123,958
and
72,733
shares of our common stock. Our stock option plans provide for accelerated vesting under certain conditions.
The following summarizes changes in stock option activity for the
nine
months ended
September 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Term
|
|
Aggregate Intrinsic Value
|
|
(in thousands)
|
|
|
|
(years)
|
|
(in millions)
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2016
|
759
|
|
|
$37.51
|
|
6.0
|
|
$24.5
|
Granted
|
124
|
|
|
79.45
|
|
|
|
|
Exercised
|
(156
|
)
|
|
23.56
|
|
|
|
|
Outstanding at September 30, 2017
|
727
|
|
|
$47.67
|
|
6.6
|
|
$34.4
|
|
|
|
|
|
|
|
|
Options vested and exercisable at September 30, 2017
|
505
|
|
|
$36.49
|
|
5.6
|
|
$29.6
|
We recognized compensation expense for stock options of
$0.7 million
and
$0.5 million
during the three months ended
September 30, 2017
and
September 30, 2016
, respectively, and
$2.0 million
and
$1.2 million
during the
nine
months ended
September 30, 2017
and
September 30, 2016
, respectively. The aggregate intrinsic value of stock options exercised during the
nine
months ended
September 30, 2017
and
September 30, 2016
was
$9.9 million
and
$10.6 million
, respectively. As of
September 30,
2017
, we had
$4.0 million
of unrecognized compensation expense related to unvested stock options that we expect to recognize over a weighted-average period of
2.0
years.
The weighted-average grant-date fair value of each stock option granted during the
nine
months ended
September 30, 2017
was
$23.68
. Fair value was estimated on the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions:
|
|
|
|
Nine Months Ended
|
|
September 30, 2017
|
Risk-free interest rate
|
1.99%
|
Expected volatility
|
30%
|
Dividend yield
|
0.06%
|
Expected term (years)
|
5
|
The risk-free interest rate is based on the yield of a zero coupon U.S. Treasury security with a maturity equal to the expected life of the option from the date of the grant. Our assumption on expected volatility is based on our historical volatility. The dividend yield assumption is calculated using our average stock price over the preceding year and the annualized amount of our most current quarterly dividend per share. We based our assumptions on the expected term of the options on our analysis of the historical exercise patterns of the options and our assumption on the future exercise pattern of options.
NOTE 10—EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income attributable to Global Payments by the weighted-average number of shares outstanding during the period. Earnings available to common shareholders is the same as reported net income attributable to Global Payments for all periods presented.
Diluted earnings per share is computed by dividing net income attributable to Global Payments by the weighted-average number of shares outstanding during the period, including the effect of share-based awards that would have a dilutive effect on earnings per share. All stock options with an exercise price lower than the average market share price of our common stock for the period are assumed to have a dilutive effect on earnings per share.
The following table sets forth the computation of diluted weighted-average number of shares outstanding for the
three and nine
months ended
September 30, 2017
and
September 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
September 30, 2017
|
|
September 30, 2016
|
|
September 30, 2017
|
|
September 30, 2016
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Basic weighted-average number of shares outstanding
|
154,560
|
|
|
153,668
|
|
|
153,138
|
|
|
143,794
|
|
Plus: Dilutive effect of stock options and other share-based awards
|
842
|
|
|
862
|
|
|
941
|
|
|
937
|
|
Diluted weighted-average number of shares outstanding
|
155,402
|
|
|
154,530
|
|
|
154,079
|
|
|
144,731
|
|
NOTE 11—ACCUMULATED OTHER COMPREHENSIVE LOSS
The changes in the accumulated balances for each component of other comprehensive loss, net of tax, were as follows for the three and
nine
months ended
September 30, 2017
and
September 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Translation
|
|
Unrealized Gains (Losses) on Hedging Activities
|
|
Other
|
|
Accumulated Other Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Balance at June 30, 2016
|
$
|
(249,374
|
)
|
|
$
|
(11,377
|
)
|
|
$
|
(4,634
|
)
|
|
$
|
(265,385
|
)
|
Other comprehensive income, net of tax
|
2,505
|
|
|
3,331
|
|
|
23
|
|
|
5,859
|
|
Balance at September 30, 2016
|
$
|
(246,869
|
)
|
|
$
|
(8,046
|
)
|
|
$
|
(4,611
|
)
|
|
$
|
(259,526
|
)
|
|
|
|
|
|
|
|
|
Balance at June 30, 2017
|
$
|
(239,669
|
)
|
|
$
|
51
|
|
|
$
|
(3,841
|
)
|
|
$
|
(243,459
|
)
|
Other comprehensive income, net of tax
|
40,090
|
|
|
843
|
|
|
18
|
|
|
40,951
|
|
Balance at September 30, 2017
|
$
|
(199,579
|
)
|
|
$
|
894
|
|
|
$
|
(3,823
|
)
|
|
$
|
(202,508
|
)
|
Other comprehensive income (loss) attributable to noncontrolling interest, which relates only to foreign currency translation, was approximately
$2.3 million
and
$(0.8) million
for the three months ended
September 30, 2017
and
September 30, 2016
, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Translation
|
|
Unrealized Gains (Losses) on Hedging Activities
|
|
Other
|
|
Accumulated Other Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
$
|
(239,650
|
)
|
|
$
|
(3,732
|
)
|
|
$
|
(3,808
|
)
|
|
$
|
(247,190
|
)
|
Other comprehensive loss, net of tax
|
(7,219
|
)
|
|
(4,314
|
)
|
|
(803
|
)
|
|
(12,336
|
)
|
Balance at September 30, 2016
|
$
|
(246,869
|
)
|
|
$
|
(8,046
|
)
|
|
$
|
(4,611
|
)
|
|
$
|
(259,526
|
)
|
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
$
|
(318,450
|
)
|
|
$
|
(640
|
)
|
|
$
|
(3,627
|
)
|
|
$
|
(322,717
|
)
|
Other comprehensive income (loss), net of tax
|
118,871
|
|
|
1,534
|
|
|
(196
|
)
|
|
120,209
|
|
Balance at September 30, 2017
|
$
|
(199,579
|
)
|
|
$
|
894
|
|
|
$
|
(3,823
|
)
|
|
$
|
(202,508
|
)
|
Other comprehensive income attributable to noncontrolling interest, which relates only to foreign currency translation, was approximately
$15.1 million
and
$3.8 million
for the
nine
months ended
September 30, 2017
and
September 30, 2016
, respectively.
NOTE 12—SEGMENT INFORMATION
We evaluate performance and allocate resources based on the operating income of each operating segment. The operating income of each operating segment includes the revenues of the segment less expenses that are directly related to those revenues. Operating overhead, shared costs and certain compensation costs are included in Corporate in the following table. Interest and other income, interest and other expense and provision for income taxes are not allocated to the individual segments. We do not evaluate the performance of or allocate resources to our operating segments using asset data. The accounting policies of the reportable operating segments are the same as those described in our Transition Report on Form 10-K for the seven months ended
December 31, 2016
and our summary of significant accounting policies in "Note
1
—
Basis of Presentation and Summary of Significant Accounting Policies."
Information on segments and reconciliations to consolidated revenues and consolidated operating income are as follows for the
three and nine
months ended
September 30, 2017
and
September 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
September 30, 2017
|
|
September 30, 2016
|
|
September 30, 2017
|
|
September 30, 2016
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Revenues
(1)
:
|
|
|
|
|
|
|
|
North America
|
$
|
764,902
|
|
|
$
|
718,977
|
|
|
$
|
2,162,911
|
|
|
$
|
1,770,957
|
|
Europe
|
205,203
|
|
|
173,246
|
|
|
557,258
|
|
|
479,620
|
|
Asia-Pacific
|
68,802
|
|
|
59,662
|
|
|
200,741
|
|
|
170,212
|
|
Consolidated revenues
|
$
|
1,038,907
|
|
|
$
|
951,885
|
|
|
$
|
2,920,910
|
|
|
$
|
2,420,789
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
(1)
:
|
|
|
|
|
|
|
|
North America
|
$
|
138,345
|
|
|
$
|
110,983
|
|
|
$
|
344,604
|
|
|
$
|
258,648
|
|
Europe
|
76,214
|
|
|
63,727
|
|
|
196,394
|
|
|
172,293
|
|
Asia-Pacific
|
20,032
|
|
|
14,657
|
|
|
57,321
|
|
|
40,266
|
|
Corporate
(2)
|
(62,120
|
)
|
|
(68,978
|
)
|
|
(189,026
|
)
|
|
(195,085
|
)
|
Consolidated operating income
|
$
|
172,471
|
|
|
$
|
120,389
|
|
|
$
|
409,293
|
|
|
$
|
276,122
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
(1)
:
|
|
|
|
|
|
|
|
North America
|
$
|
95,056
|
|
|
$
|
91,790
|
|
|
$
|
277,219
|
|
|
$
|
189,585
|
|
Europe
|
11,863
|
|
|
11,019
|
|
|
34,926
|
|
|
30,780
|
|
Asia-Pacific
|
4,484
|
|
|
4,450
|
|
|
12,068
|
|
|
12,204
|
|
Corporate
|
2,246
|
|
|
1,296
|
|
|
5,750
|
|
|
3,740
|
|
Consolidated depreciation and amortization
|
$
|
113,649
|
|
|
$
|
108,555
|
|
|
$
|
329,963
|
|
|
$
|
236,309
|
|
(1)
Revenues, operating income and depreciation and amortization reflect the effect of acquired businesses from the respective dates of acquisition. For further discussion, see "Note
2
—
Acquisitions."
(2)
During the
three and nine
months ended
September 30, 2017
, respectively, operating loss for Corporate included acquisition and integration expenses of
$21.5 million
and
$69.5 million
. During the
three and nine
months ended
September 30, 2016
, respectively, operating loss for Corporate included acquisition and integration expenses of
$34.0 million
and
$93.0 million
.
NOTE
13
—COMMITMENTS AND CONTINGENCIES
Leases
In
May 2017
, we received
$37.5 million
from the sale of our operating facility in Jeffersonville, Indiana, which we acquired as part of the Heartland merger, and simultaneously leased the property back for an initial term of
20 years
, followed by
four
optional renewal terms of
5 years
. The arrangement met the criteria to be treated as a sale for accounting purposes, and as a result, we derecognized the associated property. There was no resulting gain or loss on the sale because the proceeds received were equal to the carrying amount of the property. We are
accounting for the lease as an operating lease.