Document

3550 Lenox Road

(Address of principal executive offices)

(Zip Code)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☑		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019



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

For the transition period from to

Commission file number: 001-16111

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.)

Registrant’s telephone number, including area code: (770) 829-8000



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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



Yes	☐	No	☑

The number of shares of the issuer’s common stock, no par value, outstanding as of October 27, 2019 was 300,548,018.

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GLOBAL PAYMENTS INC.

FORM 10-Q

For the quarterly period ended September 30, 2019

TABLE OF CONTENTS



		Page
PART I - FINANCIAL INFORMATION
ITEM 1.	Unaudited Consolidated Statements of Income for the three and nine months ended September 30, 2019 and 2018	3
	Unaudited Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2019 and 2018	5
	Consolidated Balance Sheets at September 30, 2019 (unaudited) and December 31, 2018	6
	Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018	7
	Unaudited Consolidated Statements of Changes in Equity for the three and nine months ended September 30, 2019 and 2018	9
	Notes to Unaudited Consolidated Financial Statements	10
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	40
ITEM 4.	Controls and Procedures	40
PART II - OTHER INFORMATION
ITEM 1.	Legal Proceedings	42
ITEM 1A.	Risk Factors	42
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
ITEM 6.	Exhibits	44
	Signatures	46

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PART 1 - FINANCIAL INFORMATION

ITEM 1—FINANCIAL STATEMENTS

GLOBAL PAYMENTS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)



	Three Months Ended
	September 30, 2019			September 30, 2018

Revenues	$	1,105,941		$	857,670
Operating expenses:
Cost of service	427,720			265,013
Selling, general and administrative	504,184			369,495
	931,904			634,508
Operating income	174,037			223,162

Interest and other income	11,232			3,134
Interest and other expense	(96,161		)	(46,356		)
	(84,929		)	(43,222		)
Income before income taxes	89,108			179,940
Income tax benefit	16,623			6,089
Net income	105,731			186,029
Net income attributable to noncontrolling interests, net of income tax	(10,687		)	(9,659		)
Net income attributable to Global Payments	$	95,044		$	176,370

Earnings per share attributable to Global Payments:
Basic earnings per share	$	0.54		$	1.12
Diluted earnings per share	$	0.54		$	1.11

See Notes to Unaudited Consolidated Financial Statements.

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GLOBAL PAYMENTS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)



	Nine Months Ended
	September 30, 2019			September 30, 2018

Revenues	$	2,924,131		$	2,485,811
Operating expenses:
Cost of service	1,035,225			781,943
Selling, general and administrative	1,293,651			1,133,799
	2,328,876			1,915,742
Operating income	595,255			570,069

Interest and other income	20,342			17,397
Interest and other expense	(220,858		)	(139,681		)
	(200,516		)	(122,284		)
Income before income taxes	394,739			447,785
Income tax expense	(39,765		)	(46,441		)
Net income	354,974			401,344
Net income attributable to noncontrolling interests, net of income tax	(27,132		)	(24,506		)
Net income attributable to Global Payments	$	327,842		$	376,838

Earnings per share attributable to Global Payments:
Basic earnings per share	$	2.00		$	2.37
Diluted earnings per share	$	2.00		$	2.36

See Notes to Unaudited Consolidated Financial Statements.

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GLOBAL PAYMENTS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)



	Three Months Ended
	September 30, 2019			September 30, 2018

Net income	$	105,731		$	186,029
Other comprehensive income (loss):
Foreign currency translation adjustments	(67,279		)	(15,395		)
Income tax benefit related to foreign currency translation adjustments	144			140
Net unrealized (losses) gains on hedging activities	(40,265		)	1,845
Reclassification of net unrealized losses (gains) on hedging activities to interest expense	1,193			(1,663		)
Income tax benefit (expense) related to hedging activities	9,289			(110		)
Other, net of tax	37			(58		)
Other comprehensive loss	(96,881		)	(15,241		)

Comprehensive income	8,850			170,788
Comprehensive income attributable to noncontrolling interests	(1,967		)	(21,333		)
Comprehensive income attributable to Global Payments	$	6,883		$	149,455



	Nine Months Ended
	September 30, 2019			September 30, 2018

Net income	$	354,974		$	401,344
Other comprehensive income (loss):
Foreign currency translation adjustments	(54,377		)	(80,620		)
Income tax benefit (expense) related to foreign currency translation adjustments	1,695			(224		)
Net unrealized (losses) gains on hedging activities	(96,997		)	12,353
Reclassification of net unrealized gains on hedging activities to interest expense	(1,530		)	(2,830		)
Income tax benefit (expense) related to hedging activities	23,800			(2,420		)
Other, net of tax	165			(59		)
Other comprehensive loss	(127,244		)	(73,800		)

Comprehensive income	227,730			327,544
Comprehensive income attributable to noncontrolling interests	(17,780		)	(36,264		)
Comprehensive income attributable to Global Payments	$	209,950		$	291,280

See Notes to Unaudited Consolidated Financial Statements.

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GLOBAL PAYMENTS INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)



	September 30, 2019			December 31, 2018
	(Unaudited)
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

See Notes to Unaudited Consolidated Financial Statements.

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GLOBAL PAYMENTS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(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		)
Distributions to noncontrolling interests	(31,632		)	(5,686		)
Preacquisition dividends paid to former TSYS shareholders	(23,240		)	—
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

See Notes to Unaudited Consolidated Financial Statements.

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GLOBAL PAYMENTS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands)



	Number of Shares		Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Global Payments Shareholders’ Equity			Noncontrolling Interests			Total Equity
Balance at June 30, 2019	156,675		$	2,126,065		$	2,204,445		$	(339,906	)	$	3,990,604		$	184,512		$	4,175,116
Net income						95,044						95,044			10,687			105,731
Other comprehensive loss									(88,161		)	(88,161		)	(8,720		)	(96,881		)
Stock issued under share-based compensation plans	141		9,057									9,057						9,057
Common stock repurchased - share-based compensation plans	(180	)	(29,584		)							(29,584		)				(29,584		)
Share-based compensation expense			27,877									27,877						27,877
Issuance of common stock in connection with a business combination	143,909		23,771,389									23,771,389						23,771,389
Distributions to noncontrolling interest												—			(5,395		)	(5,395		)
Dividends paid ($0.01 per share)						(1,592		)				(1,592		)				(1,592		)
Balance at September 30, 2019	300,545		$	25,904,804		$	2,297,897		$	(428,067	)	$	27,774,634		$	181,084		$	27,955,718



	Number of Shares		Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Global Payments Shareholders’ Equity			Noncontrolling Interests			Total Equity
Balance at June 30, 2018	158,071		$	2,254,783		$	1,819,213		$	(243,629	)	$	3,830,367		$	185,634		$	4,016,001
Net income						176,369						176,369			9,659			186,028
Other comprehensive income (loss)									(26,916		)	(26,916		)	11,675			(15,241		)
Stock issued under share-based compensation plans	325		6,231									6,231						6,231
Common stock repurchased - share-based compensation plans	(210	)	(25,019		)							(25,019		)				(25,019		)
Share-based compensation expense			14,833									14,833						14,833
Distributions to noncontrolling interest												—			(5,686		)	(5,686		)
Dividends paid ($0.01 per share)						(1,579		)				(1,579		)				(1,579		)
Balance at September 30, 2018	158,186		$	2,250,828		$	1,994,003		$	(270,545	)	$	3,974,286		$	201,282		$	4,175,568

See Notes to Unaudited Consolidated Financial Statements.

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GLOBAL PAYMENTS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands)



	Number of Shares		Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Global Payments Shareholders’ Equity			Noncontrolling Interests			Total Equity
Balance at December 31, 2018	157,962		$	2,235,167		$	2,066,415		$	(310,175	)	$	3,991,407		$	194,936		$	4,186,343
Net income						327,842						327,842			27,132			354,974
Other comprehensive loss									(117,892		)	(117,892		)	(9,352		)	(127,244		)
Stock issued under share-based compensation plans	750		22,008									22,008						22,008
Common stock repurchased - share-based compensation plans	(268	)	(41,190		)							(41,190		)				(41,190		)
Share-based compensation expense			55,791									55,791						55,791
Issuance of common stock in connection with a business combination	143,909		23,771,389									23,771,389						23,771,389
Distributions to noncontrolling interest												—			(31,632		)	(31,632		)
Repurchase of common stock	(1,808	)	(138,361		)	(91,633		)				(229,994		)				(229,994		)
Dividends paid ($0.03 per share)						(4,727		)				(4,727		)				(4,727		)
Balance at September 30, 2019	300,545		$	25,904,804		$	2,297,897		$	(428,067	)	$	27,774,634		$	181,084		$	27,955,718



	Number of Shares		Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total Global Payments Shareholders’ Equity			Noncontrolling Interests			Total Equity
Balance at December 31, 2017	159,180		$	2,379,774		$	1,597,897		$	(183,144	)	$	3,794,527		$	170,704		$	3,965,231
Cumulative effect of adoption of new accounting standard						50,969			(1,843		)	49,126						49,126
Net income						376,838						376,838			24,506			401,344
Other comprehensive income (loss)									(85,558		)	(85,558		)	11,758			(73,800		)
Stock issued under share-based compensation plans	895		12,571									12,571						12,571
Common stock repurchased - share-based compensation plans	(277	)	(32,508		)							(32,508		)				(32,508		)
Share-based compensation expense			44,937									44,937						44,937
Distributions to noncontrolling interest												—			(5,686		)	(5,686		)
Repurchase of common stock	(1,612	)	(153,946		)	(26,951		)				(180,897		)				(180,897		)
Dividends paid ($0.03 per share)						(4,750		)				(4,750		)				(4,750		)
Balance at September 30, 2018	158,186		$	2,250,828		$	1,994,003		$	(270,545	)	$	3,974,286		$	201,282		$	4,175,568

See Notes to Unaudited Consolidated Financial Statements.

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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business, consolidation and presentation— Global Payments Inc. and its consolidated subsidiaries are referred to herein collectively as "Global Payments," the "Company," "we," "our" or "us," unless the context requires otherwise.

On May 27, 2019, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Total System Services, Inc. ("TSYS") providing for the merger of TSYS with and into Global Payments, with Global Payments as the surviving entity (the "Merger"). We consummated the Merger on September 18, 2019. Prior to the Merger, TSYS was a leading global payments provider, offering seamless, secure and innovative solutions to issuers, merchants and consumers. Through our combination with TSYS, we are now a leading pure play payments technology company delivering innovative software and services to our customers globally. See "Note 2—Acquisitions" for more information about the Merger.

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 ("SEC"). The consolidated balance sheet as of December 31, 2018 was derived from the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 but does not include all disclosures required by GAAP for annual financial statements.

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 Annual Report on Form 10-K for the year ended December 31, 2018.

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 February 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, "Leases." ASU 2016-02 requires recognition of assets and liabilities for the rights and obligations created by leases and new disclosures about leases. We adopted ASU 2016-02, as well as other related clarifications and interpretive guidance issued by the FASB, on January 1, 2019 using the optional modified retrospective transition method. Under this transition method, we did not recast the prior period financial statements presented. We elected the transition package of three practical expedients, which among other things, allowed for the carryforward of historical lease classifications. We made an accounting policy election to not recognize assets or liabilities for leases with a term of less than twelve months and to account for all components in a lease arrangement as a single combined lease component for all of our then existing asset classes. In connection with the Merger, we acquired right-of-use assets that represent an additional asset class for computer equipment, for which we account for lease and nonlease components separately.

The adoption of ASU 2016-02 resulted in the measurement and recognition of lease liabilities in the amount of $274.0 million and right-of-use assets in the amount of $236.0 million as of January 1, 2019. Lease liabilities were measured as the present value of remaining lease payments, and the corresponding right-of-use assets were measured at an amount equal to the lease liabilities adjusted by the amounts of certain assets and liabilities, such as prepaid rent and deferred lease obligations, that we previously recognized on the balance sheet prior to the initial application of ASU 2016-02. To calculate the present value of remaining lease payments, we elected to use an incremental borrowing rate based on the remaining lease term at transition.

Recently Issued Pronouncements Not Yet Adopted— In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (A Consensus of the FASB Emerging Issues Task Force)." ASU 2018-15 provides additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract. The new guidance amends the definition of a hosting arrangement and requires a

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customer in a hosting arrangement that is a service contract to capitalize certain implementation costs as if the arrangement was an internal-use software project. The amendments in this update also provide additional presentation and disclosure requirements, including requirements to disclose the nature of an entity’s hosting arrangements that are service contracts, as well as quantitative information about capitalized implementation costs and related amortization expense. The guidance will become effective for us on January 1, 2020. We expect to apply the guidance prospectively to all implementation costs incurred after the date of adoption.

We are finalizing our comparison of the guidance in ASU 2018-15 to our current accounting and financial reporting practices for costs of implementation activities performed in cloud computing arrangements. We are also evaluating the need for changes to our internal controls. We have not yet completed our assessment or quantified the effect, if any, of ASU 2018-15 on our consolidated balance sheet or our statements of income and cash flows; however, our preliminary expectation is that the adoption of this standard will not have a material effect on our consolidated financial statements. We have historically capitalized implementation costs associated with cloud computing arrangements that are service contracts following the guidance in Subtopic 350-40 and expect to continue to do so pursuant to the clarifications provided in the new guidance. We expect to amortize deferred implementation costs to expense on a straight-line basis over the term of the applicable hosting arrangement.

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 instruments measured at amortized cost. The new model for current expected credit losses ("CECL") will require us to recognize an estimate of credit losses expected to occur over the remaining life of the financial instruments that are within the scope of the update, including accounts receivable and settlement processing assets, each of which are short-term in nature. Under current GAAP, credit losses on these financial instruments are not recognized until their occurrence is deemed to be probable. The guidance will become effective for us on January 1, 2020. In general, the new guidance will require modified retrospective application to all outstanding financial assets that are within the scope of the update, with a cumulative-effect adjustment, if any, recorded to retained earnings as of the date of adoption.

We are continuing to evaluate the effect of ASU 2016-13 on our consolidated financial statements, including comparing how we currently measure and recognize our allowance for doubtful accounts on accounts receivable and our reserve for operating losses and sales allowances to how we would make such measurements applying the new CECL model. We have not yet completed our assessment or quantified the effect, if any, of ASU 2016-13 on our consolidated balance sheet or our statements of income and cash flows; however, we believe the adoption of this new standard may require expanded qualitative disclosures about our financial assets and related allowance for credit losses, as well as implementation of new or modified internal controls.

As a result of the Merger, we have expanded our efforts to evaluate the effects of these new standards on the combined company, and we are incorporating TSYS into our evaluation.

NOTE 2—ACQUISITIONS

The transactions described below were accounted for as business combinations, which generally requires that we record the assets acquired and liabilities assumed at fair value as of the acquisition date.

Total System Services, Inc.

Pursuant to the Merger Agreement, we acquired all of the outstanding common stock of TSYS at the closing on September 18, 2019. Upon consummation of the Merger, holders of TSYS common stock received 0.8101 shares of Global Payments common stock for each share of TSYS common stock they owned at the effective time of the Merger (the "Exchange Ratio"). In addition, certain TSYS equity awards held by employees who were not executive officers, pursuant to their terms, vested automatically at closing ("Single-Trigger Awards") and were converted into the right to receive a number of shares of Global Payments common stock determined based on the Exchange Ratio. Also, pursuant to the Merger Agreement, we granted equity awards for approximately 2.2 million shares of Global Payments common stock to certain TSYS equity awards holders ("Replacement Awards"). Each such Replacement Award is subject to the same terms and conditions (including vesting and exercisability or payment terms) as applied to the corresponding TSYS equity award. We apportioned the fair value of the Replacement Awards between purchase consideration and amounts to be recognized in periods following the Merger as share-based compensation expense over the requisite service period of the Replacement Awards.

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The purchase consideration transferred to TSYS shareholders was valued at $23.8 billion. Total purchase consideration also included the amount of borrowings outstanding under TSYS's unsecured revolving credit facility together with accrued interest and fees that we were required to repay upon consummation of the Merger.

The fair value of total purchase consideration was determined as follows (in thousands, except per share data):



Shares of TSYS common stock issued and outstanding (including Single-Trigger Awards)	177,643
Exchange Ratio	0.8101
Shares of Global Payments common stock issued to TSYS shareholders	143,909
Price per share of Global Payments common stock	$	163.74
Fair value of common stock issued to TSYS shareholders⁽¹⁾	23,563,568
Value of Replacement Awards attributable to purchase consideration	207,821
Cash paid to TSYS shareholders in lieu of fractional shares	1,352
Total purchase consideration transferred to TSYS shareholders	23,772,741
Repayment of TSYS's unsecured revolving credit facility (including accrued interest and fees)	702,212
Total purchase consideration	$	24,474,953

⁽¹⁾ Fair value of common stock issued to TSYS shareholders does not equal the product of shares of Global Payments common stock issued to TSYS shareholders and price per share of Global Payments common stock as presented in the table above due to the rounding of the number of shares in thousands.

The provisional estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed as of September 30, 2019, including a reconciliation to the total purchase consideration, were as follows (in thousands):



Cash and cash equivalents	$	446,027
Accounts receivable	443,783
Identified intangible assets	11,020,000
Property and equipment	695,560
Other assets	1,476,290
Accounts payable and accrued liabilities	(594,558		)
Debt	(3,295,284		)
Deferred income tax liabilities	(2,843,643		)
Other liabilities	(313,782		)
Total identifiable net assets	7,034,393
Goodwill	17,440,560
Total purchase consideration	$	24,474,953

As of September 30, 2019, we considered these amounts to be provisional because we were still in the process of gathering and reviewing information to support the valuations of the assets acquired and liabilities assumed. Goodwill arising from the acquisition of $17.4 billion, included in the TSYS segment as of September 30, 2019, was attributable to expected growth opportunities, an assembled workforce and potential synergies from combining the acquired business into our existing business. We expect that substantially all of the goodwill from this acquisition will not be deductible for income tax purposes. Due to the timing of the Merger, we are still in the process of assigning goodwill to our reporting units.

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The following table reflects the provisional estimated fair values of the identified intangible assets of TSYS and the respective aggregated weighted-average estimated amortization periods:



	Estimated Fair Values		Weighted-Average Estimated Amortization Periods

	(in thousands)		(years)
Customer-related intangible assets	$	6,330,000	18
Contract-based intangible assets	1,810,000		20
Acquired technologies	1,810,000		7
Trademarks and trade names	1,070,000		12
Total estimated identified intangible assets	$	11,020,000	14

From the acquisition date through September 30, 2019, TSYS contributed $147.5 million to our consolidated revenues and had an operating loss of approximately $11.1 million. Transaction costs directly related to the Merger were $53.5 million and $65.7 million for the three and nine months ended September 30, 2019, respectively.

The following unaudited pro forma information shows the results of our operations for the three and nine months ended September 30, 2019 and 2018 as if the Merger had occurred on January 1, 2018. The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of what would have occurred if the Merger had occurred as of that date. The unaudited pro forma information is also not intended to be a projection of future results due to the integration of TSYS. The unaudited pro forma information reflects the effects of applying our accounting policies and certain pro forma adjustments to the combined historical financial information of Global Payments and TSYS. The pro forma adjustments include:


•	incremental amortization expense associated with identified intangible assets;


•	a reduction of revenues and operating expenses associated with fair value adjustments made to acquired assets and assumed liabilities, such as contract cost assets and contract liabilities;


•	a reduction of interest expense resulting from financing of the Merger, the repayment of TSYS's secured revolving credit facility and fair value adjustments applied to TSYS debt that we assumed; and


•	the income tax effects of the pro forma adjustments.

In addition, the pro forma net income attributable to Global Payments includes recognition of transaction costs related to the Merger in earnings as of the beginning of the earliest period presented. Accordingly, pro forma net income attributable to Global Payments for the nine months ended September 30, 2018 includes approximately $150 million of transaction costs.



	Three Months Ended September 30, 2019				Three Months Ended September 30, 2018
	Actual		Pro Forma		Actual		Pro Forma

	(in thousands)

Total revenues	$	1,105,941	$	1,993,089	$	857,670	$	1,864,534
Net income attributable to Global Payments	$	95,044	$	219,010	$	176,370	$	240,478



	Nine Months Ended September 30, 2019				Nine Months Ended September 30, 2018
	Actual		Pro Forma		Actual		Pro Forma

	(in thousands)

Total revenues	$	2,924,131	$	5,866,522	$	2,485,811	$	5,469,240
Net income attributable to Global Payments	$	327,842	$	614,317	$	376,838	$	407,899

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SICOM Systems, Inc.

On October 17, 2018, we acquired SICOM Systems, Inc. ("SICOM") for total purchase consideration of $410.2 million, which we funded with cash on hand and incremental debt. SICOM is a provider of end-to-end enterprise, cloud-based software solutions and other technologies to quick service restaurants and food service management companies.

The estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed as of September 30, 2019, including a reconciliation to the total purchase consideration, were as follows (in thousands):



Cash and cash equivalents	$	7,540
Property and equipment	5,838
Identified intangible assets	188,294
Other assets	22,275
Deferred income liabilities	(47,610		)
Other liabilities	(31,350		)
Total identifiable net assets	144,987
Goodwill	265,214
Total purchase consideration	$	410,201

During the nine months ended September 30, 2019, we made an adjustment of $0.4 million to reflect an increase in the total purchase consideration, which resulted in a corresponding increase in goodwill. Goodwill arising from the acquisition of $265.2 million, included in the North America segment, was attributable to expected growth opportunities, an assembled workforce and potential synergies from combining the acquired business into our existing business. We expect that approximately $40 million of the goodwill from this acquisition will be deductible for income tax purposes.

The following table reflects the estimated fair values of the identified intangible assets of SICOM and the respective aggregated weighted-average estimated amortization periods:



	Estimated Fair Values		Weighted-Average Estimated Amortization Periods

	(in thousands)		(years)
Customer-related intangible assets	$	104,900	14
Acquired technologies	65,312		6
Trademarks and trade names	11,202		3
Contract-based intangible assets	6,880		5
Total estimated identified intangible assets	$	188,294	10

AdvancedMD, Inc.

On September 4, 2018, we acquired AdvancedMD, Inc. ("AdvancedMD") for total purchase consideration of $706.9 million, which we funded with cash on hand and incremental debt. AdvancedMD is a provider of cloud-based enterprise software solutions to small-to-medium sized ambulatory care physician practices.

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Cash and cash equivalents	$	7,657
Property and equipment	5,672
Identified intangible assets	419,500
Other assets	11,785
Deferred income tax liabilities	(94,044		)
Other liabilities	(15,647		)
Total identifiable net assets	334,923
Goodwill	371,962
Total purchase consideration	$	706,885

During the nine months ended September 30, 2019, we made measurement-period adjustments of $4.7 million primarily related to a reduction in deferred income tax liabilities, which resulted in a corresponding reduction in goodwill. Goodwill arising from the acquisition of $372.0 million, included in the North America segment, was attributable to expected growth opportunities, an assembled workforce and potential synergies from combining the acquired business into our existing business. We expect that substantially all of the goodwill from this acquisition will not be deductible for income tax purposes.

The following table reflects the estimated fair values of the identified intangible assets of AdvancedMD and the respective aggregated weighted-average estimated amortization periods:



	Estimated Fair Values		Weighted-Average Estimated Amortization Periods

	(in thousands)		(years)
Customer-related intangible assets	$	303,100	11
Acquired technologies	83,700		5
Trademarks and trade names	32,700		15
Total estimated identified intangible assets	$	419,500	10

Valuation of Identified Intangible Assets

For the acquisitions discussed above, the estimated fair values of customer-related and contract-based intangible assets were generally determined using the income approach, which was based on projected cash flows discounted to their present value using discount rates that consider the timing and risk of the forecasted cash flows. The discount rates used represented the average estimated value of a market participant’s cost of capital and debt, derived using customary market metrics. Acquired technologies were valued using the replacement cost method, which required us to estimate the costs to construct an asset of equivalent utility at prices available at the time of the valuation analysis, with adjustments in value for physical deterioration and functional and economic obsolescence. Trademarks and trade names were valued using the "relief-from-royalty" approach. This method assumes that trademarks and trade names have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method required us to estimate the future revenues for the related brands, the appropriate royalty rate and the weighted-average cost of capital.

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NOTE 3—REVENUES

The following tables present a disaggregation of our revenue from contracts with customers by distribution channel for the three and nine months ended September 30, 2019 and 2018:

Three Months Ended September 30, 2019

North America

Europe

Asia-Pacific

TSYS

Total

(in thousands)