Table of Contents

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 November 30, 2016March 31, 2017

OR
 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
image1a02a12.gif
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.)
10 Glenlake Parkway, North Tower,3550 Lenox Road, Atlanta, Georgia 3032830321
(Address of principal executive offices) (Zip Code)

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

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrantRegistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "accelerated filer"filer”, “accelerated filer”, “smaller reporting company” and "smaller reporting company"“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company) 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 January 4,May 2, 2017 was 152,263,156.152,484,189.

GLOBAL PAYMENTS INC.
FORM 10-Q
For the quarterly period ended November 30, 2016March 31, 2017

TABLE OF CONTENTS
   Page
PART I - FINANCIAL INFORMATION
ITEM 1. 
  
  
  
  
  
ITEM 2. 
ITEM 3. 
ITEM 4. 
PART II - OTHER INFORMATION
ITEM 1. 
ITEM 1A. 
ITEM 2. 
ITEM 6. 
  



PART 1 - FINANCIAL INFORMATION

ITEM 1—FINANCIAL STATEMENTS

GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)

Three Months EndedThree Months Ended
November 30, 2016 November 30, 2015March 31, 2017 March 31, 2016
      
Revenues$941,821
 $722,350
$919,762
 $626,259
Operating expenses:      
Cost of service468,383
 270,565
455,936
 248,187
Selling, general and administrative368,171
 328,620
358,856
 283,499
836,554
 599,185
814,792
 531,686
Operating income105,267
 123,165
104,970
 94,573
      
Interest and other income1,353
 1,292
1,607
 1,282
Interest and other expense(52,448) (14,126)(41,297) (13,075)
(51,095) (12,834)(39,690) (11,793)
Income before income taxes54,172
 110,331
65,280
 82,780
Provision for income taxes(1,557) (27,253)(12,321) (19,333)
Net income52,615
 83,078
52,959
 63,447
Less: Net income attributable to noncontrolling interests, net of income tax(3,163) (4,307)(4,146) (3,536)
Net income attributable to Global Payments$49,452
 $78,771
$48,813
 $59,911
      
Earnings per share attributable to Global Payments:      
Basic earnings per share$0.32
 $0.61
$0.32
 $0.46
Diluted earnings per share$0.32
 $0.60
$0.32
 $0.46
See Notes to Unaudited Consolidated Financial Statements.
















 


GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)

 Six Months Ended
 November 30, 2016 November 30, 2015
    
Revenues$1,881,313
 $1,471,146
Operating expenses:   
Cost of service931,009
 543,231
Selling, general and administrative723,931
 666,978
 1,654,940
 1,210,209
Operating income226,373
 260,937
    
Interest and other income43,826
 2,434
Interest and other expense(95,524) (27,369)
 (51,698) (24,935)
Income before income taxes174,675
 236,002
Provision for income taxes(29,601) (59,876)
Net income145,074
 176,126
Less: Net income attributable to noncontrolling interests, net of income tax(10,529) (10,708)
Net income attributable to Global Payments$134,545
 $165,418
    
Earnings per share attributable to Global Payments:   
Basic earnings per share$0.88
 $1.27
Diluted earnings per share$0.87
 $1.27
See Notes to Unaudited Consolidated Financial Statements.


GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)

    
 Three Months Ended
 November 30, 2016 November 30, 2015
    
Net income$52,615
 $83,078
Other comprehensive income (loss):   
Foreign currency translation adjustments(58,008) (35,582)
Income tax provision related to foreign currency translation adjustments
 (2,256)
Unrealized gains (losses) on hedging activities7,089
 (3,968)
Reclassification of losses on hedging activities to interest expense1,768
 2,467
Income tax (expense) benefit related to hedging activities(3,328) 562
Other(246) 
Other comprehensive loss, net of tax(52,725) (38,777)
    
Comprehensive income(110) 44,301
Comprehensive loss attributable to noncontrolling interests5,356
 1,965
Comprehensive income attributable to Global Payments$5,246
 $46,266


   
Six Months EndedThree Months Ended
November 30, 2016 November 30, 2015March 31, 2017 March 31, 2016
      
Net income$145,074
 $176,126
$52,959
 $63,447
Other comprehensive income (loss):   
Other comprehensive income:   
Foreign currency translation adjustments(76,789) (72,599)34,336
 44,220
Income tax benefit related to foreign currency translation adjustments
 8,844
Income tax provision related to foreign currency translation adjustments
 (3,250)
Unrealized gains (losses) on hedging activities3,884
 (4,000)827
 (10,818)
Reclassification of losses on hedging activities to interest expense3,665
 4,201
Income tax expense related to hedging activities(2,810) (60)
Reclassification of unrealized losses on hedging activities to net income1,596
 1,955
Income tax (provision) benefit related to hedging activities(910) 3,306
Other(139) 
(217) 
Other comprehensive loss, net of tax(72,189) (63,614)
Other comprehensive income, net of tax35,632
 35,413
      
Comprehensive income72,885
 112,512
88,591
 98,860
Comprehensive income attributable to noncontrolling interests(2,007) (6,336)
Less: comprehensive income attributable to noncontrolling interests(4,867) (10,463)
Comprehensive income attributable to Global Payments$70,878
 $106,176
$83,724
 $88,397
See Notes to Unaudited Consolidated Financial Statements.



GLOBAL PAYMENTS INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
November 30, 2016 May 31, 2016March 31, 2017 December 31, 2016
(Unaudited)  (Unaudited)  
ASSETS    
    
Current assets:    
    
Cash and cash equivalents$995,816
  $1,044,728
$1,261,845
  $1,162,779
Accounts receivable, net of allowances for doubtful accounts of $294 and $353, respectively266,245
  281,612
Claims receivable, net of allowances for doubtful accounts of $4,771 and $4,868, respectively8,772
  6,799
Accounts receivable, net of allowances for doubtful accounts of $1,280 and $1,092 respectively264,042
  275,032
Claims receivable, net of allowances for doubtful accounts of $5,740 and $5,786, respectively7,961
  8,202
Settlement processing assets1,117,666
  1,336,326
751,509
  1,546,854
Prepaid expenses and other current assets186,464
  181,848
113,823
  123,139
Total current assets2,574,963
  2,851,313
2,399,180
  3,116,006
Goodwill4,823,756
  4,829,405
4,859,387
  4,807,594
Other intangible assets, net2,115,842
  2,264,708
1,997,420
  2,085,292
Property and equipment, net520,714
  493,678
551,951
  526,370
Deferred income taxes20,419
 22,719
15,838
 15,789
Other57,420
  48,129
135,940
  113,299
Total assets$10,113,114
  $10,509,952
$9,959,716
  $10,664,350
LIABILITIES AND EQUITY        
Current liabilities:        
Settlement lines of credit$467,293
 $378,436
$276,403
 $392,072
Current portion of long-term debt177,759
 135,542
179,004
 177,785
Accounts payable and accrued liabilities681,356
  696,414
824,319
  804,887
Settlement processing obligations883,447
 1,220,315
813,136
 1,477,212
Total current liabilities2,209,855
  2,430,707
2,092,862
  2,851,956
Long-term debt4,316,391
 4,379,744
4,221,258
 4,260,827
Deferred income taxes695,258
  744,862
636,908
  676,472
Other noncurrent liabilities89,773
  77,235
132,397
  95,753
Total liabilities7,311,277
  7,632,548
7,083,425
  7,885,008
Commitments and contingencies

  



  

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

  
Common stock, no par value; 200,000,000 shares authorized; 152,267,428 issued and outstanding at November 30, 2016 and 154,421,585 issued and outstanding at May 31, 2016
  
Common stock, no par value; 200,000,000 shares authorized; 152,502,543 issued and outstanding at March 31, 2017 and 152,185,616 issued and outstanding at December 31, 2016
  
Paid-in capital1,818,487
  1,976,715
1,826,166
  1,816,278
Retained earnings1,146,844
  1,015,811
1,192,519
  1,137,230
Accumulated other comprehensive loss(309,717)  (246,050)(287,806)  (322,717)
Total Global Payments shareholders’ equity2,655,614
  2,746,476
2,730,879
  2,630,791
Noncontrolling interests146,223
 130,928
145,412
 148,551
Total equity2,801,837
 2,877,404
2,876,291
 2,779,342
Total liabilities and equity$10,113,114
  $10,509,952
$9,959,716
  $10,664,350
See Notes to Unaudited Consolidated Financial Statements.

GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Six Months EndedThree Months Ended
November 30, 2016 November 30, 2015March 31, 2017 March 31, 2016
Cash flows from operating activities:      
Net income$145,074
 $176,126
$52,959
 $63,447
Adjustments to reconcile net income to net cash provided by operating activities:
 

 
Depreciation and amortization of property and equipment45,681
 35,697
24,984
 18,767
Amortization of acquired intangibles166,188
 41,809
84,049
 20,545
Share-based compensation expense16,366
 13,472
8,816
 7,047
Provision for operating losses and bad debts19,024
 11,257
13,482
 6,553
Amortization of capitalized customer acquisition costs12,291
 
8,948
 
Deferred income taxes(52,710) 2,900
(19,391) (2,328)
Gain on sale of investments(41,150) 
Other, net18,784
 2,198
4,692
 2,598
Changes in operating assets and liabilities, net of the effects of acquisitions:
 

 
Accounts receivable9,693
 (4,271)11,929
 52,461
Claims receivable(14,067) (18,723)(6,557) (4,970)
Settlement processing assets and obligations, net(113,359) 208,446
122,948
 66,233
Prepaid expenses and other assets(5,846) (14,097)4,644
 (12,587)
Capitalized customer acquisition costs(4,559) 
Accounts payable and other liabilities(12,426) (744)(12,979) (9,553)
Net cash provided by operating activities193,543
 454,070
293,965
 208,213
Cash flows from investing activities:      
Business acquisitions, net of cash acquired(35,260) (241,934)
Capital expenditures(83,268) (36,246)(46,219) (24,367)
Proceeds from sale of investments37,717
 
Other, net(422) (74)
Net cash used in investing activities(80,811) (278,180)(46,641) (24,441)
Cash flows from financing activities:      
Net borrowings on settlement lines of credit94,757
 101,464
Proceeds from issuance of long-term debt1,289,000
 3,030,175
Principal payments of long-term debt(1,314,799) (2,852,175)
Net payments on settlement lines of credit(117,789) (135,071)
Proceeds from long-term debt149,000
 142,000
Repayments of long-term debt(189,732) (157,000)
Payment of debt issuance costs(9,279) (4,934)(896) (2,099)
Repurchase of common stock(172,405) (71,748)
 (2,901)
Proceeds from stock issued under share-based compensation plans4,882
 6,317
1,149
 179
Common stock repurchased - share-based compensation plans(20,390) (11,579)(167) (527)
Tax benefit from share-based compensation plans13,017
 6,521
Purchase of subsidiary shares from noncontrolling interest
 (7,550)
Distributions to noncontrolling interests(12,365) (8,158)(8) (4,740)
Dividends paid(3,069) (2,602)(1,522) (1,293)
Net cash (used in) provided by financing activities(130,651) 185,731
Net cash used in financing activities(159,965) (161,452)
Effect of exchange rate changes on cash(30,993) (23,903)11,707
 17,849
(Decrease) increase in cash and cash equivalents(48,912) 337,718
Increase in cash and cash equivalents99,066
 40,169
Cash and cash equivalents, beginning of the period1,044,728
 650,739
1,162,779
 587,751
Cash and cash equivalents, end of the period$995,816
 $988,457
$1,261,845
 $627,920
See Notes to Unaudited Consolidated Financial Statements.

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 May 31, 2016154,422
 $1,976,715
 $1,015,811
 $(246,050) $2,746,476
 $130,928
 $2,877,404
Net income    134,545
   134,545
 10,529
 145,074
Other comprehensive loss, net of tax      (63,667) (63,667) (8,522) (72,189)
Stock issued under share-based compensation plans671
 4,882
     4,882
   4,882
Common stock repurchased - share-based compensation plans(267) (20,531) 

   (20,531)   (20,531)
Tax benefit from employee share-based compensation  13,017
     13,017
   13,017
Share-based compensation expense  16,366
     16,366
   16,366
Contribution of subsidiary shares to noncontrolling interest related to a business combination        
 25,653
 25,653
Distributions to noncontrolling interest  

     
 (12,365) (12,365)
Repurchase of common stock(2,559) (171,962) (443)   (172,405)   (172,405)
Dividends paid ($0.02 per share)    (3,069)   (3,069)   (3,069)
Balance at November 30, 2016152,267
 $1,818,487
 $1,146,844
 $(309,717) $2,655,614
 $146,223
 $2,801,837

See Notes to Unaudited Consolidated Financial Statements.


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, 2016152,186
 $1,816,278
 $1,137,230
 $(322,717) $2,630,791
 $148,551
 $2,779,342
Net income    48,813
   48,813
 4,146
 52,959
Other comprehensive income, net of tax      34,911
 34,911
 721
 35,632
Stock issued under share-based compensation plans318
 1,149
     1,149
   1,149
Common stock repurchased - share-based compensation plans(1) (77) 

   (77)   (77)
Share-based compensation expense  8,816
     8,816
   8,816
Dissolution of a subsidiary    7,998
   7,998
 (7,998) 
Distributions to noncontrolling interest  

     
 (8) (8)
Dividends paid ($0.01 per share)    (1,522)   (1,522)   (1,522)
Balance at March 31, 2017152,503
 $1,826,166
 $1,192,519
 $(287,806) $2,730,879
 $145,412
 $2,876,291

Number  of Shares 
 
Paid-in Capital 
 
Retained Earnings 
 Accumulated Other Comprehensive Loss 
Total Global Payments Shareholders’ Equity 
 Noncontrolling Interests Total Equity
Number  of Shares 
 
Paid-in Capital 
 
Retained Earnings 
 Accumulated Other Comprehensive Loss 
Total Global Payments Shareholders’ Equity 
 Noncontrolling Interests Total Equity
Balance at May 31, 2015130,558
 $148,742
 $795,226
 $(185,992) $757,976
 $105,577
 $863,553
Balance at December 31, 2015129,274
 $133,345
 $943,879
 $(247,190) $830,034
 $112,176
 $942,210
Net income    165,418
   165,418
 10,708
 176,126
    59,911
   59,911
 3,536
 63,447
Other comprehensive loss, net of tax      (59,242) (59,242) (4,372) (63,614)
Other comprehensive income, net of tax      28,486
 28,486
 6,927
 35,413
Stock issued under employee stock plans644
 6,317
   

 6,317
   6,317
22
 179
   

 179
   179
Common stock repurchased - share-based compensation plans(195) (11,997)   

 (11,997) 

 (11,997)(1) (84)   

 (84) 

 (84)
Tax benefit from employee share-based compensation  6,521
     6,521
   6,521
Tax benefit from employee share-based compensation plans  135
     135
   135
Share-based compensation expense  13,472
     13,472
   13,472
  7,047
     7,047
   7,047
Purchase of subsidiary shares from noncontrolling interest  (11)     (11) (7,539) (7,550)
Contribution of subsidiary shares to noncontrolling interest related to a business combination  4,673
     4,673
 24,727
 29,400
  (820)     (820) (3,925) (4,745)
Distributions to noncontrolling interest        
 (8,158) (8,158)        
 (4,740) (4,740)
Repurchase of common stock(1,645) (35,316) (40,053)   (75,369)   (75,369)(49) (1,307) (1,594)   (2,901)   (2,901)
Dividends paid ($0.02 per share)    (2,602)   (2,602)   (2,602)
Balance at November 30, 2015129,362
 $132,401
 $917,989
 $(245,234) $805,156
 $120,943
 $926,099
Dividends paid ($0.01 per share)    (1,293)   (1,293)   (1,293)
Balance at March 31, 2016129,246
 $138,495
 $1,000,903
 $(218,704) $920,694
 $113,974
 $1,034,668
See Notes to Unaudited Consolidated Financial Statements.



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, partnerships 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 merchants and partners in 30 countries throughout North America, Europe, the Asia-Pacific region and in 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 MayDecember 31, 2016 was derived from the audited financial statements for the year ended May 31, 2016 included in our AnnualTransition Report on Form 10-K for the yearseven months ended MayDecember 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 quarter ended March 31, 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 Annual Report on Form 10-K for the year ended May 31, 2016.

On July 27, 2016, the Board of Directors authorized a change in our fiscal year-end from May 31 to December 31. As a result of the change, we will file a Transition Report on Form 10-K for the seven-month transition periodseven months ended December 31, 2016.

Use of estimatesThe 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 April 2015,March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-05, "Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40)ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Customer's Accounting for Fees Paid in a Cloud Computing ArrangementImprovements to Employee Share-Based Payment Accounting.." The amendments in this update provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer shouldchanged how companies account for certain aspects of share-based payments to employees. We adopted the software license elementvarious amendments in ASU 2016-09 in our unaudited consolidated financial statements effective January 1, 2017 with no material effect. On a prospective basis, as required, we recognize the income tax effects of the arrangement consistent withexcess benefits or deduction deficiencies of share-based awards in the acquisitionstatement of other software licenses. Ifincome 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 cloud computing arrangement does not includefinancing activity in our consolidated statement of cash flows, are now presented as an operating activity using a software license, the customer shouldretrospective 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 arrangement as a service contract. The guidance does not change GAAP for a customer’s accounting for service contracts.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 standard asASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of June 1, 2016a 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 and it was not material toeffective January 1, 2017. The adoption of this standard had no effect on our balance sheet and/or our results of operations or cash flows.unaudited consolidated financial statements.

Recently Issued Accounting 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 clarifyclarifies 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 are reviewinganalyzing customer contracts, and are in the process of applying the five-step model of the new standard to each contactcontract category we have identified and will comparecomparing the results to our current accounting practices. The new standard could change the amount and timing of revenue and expenses to be recognized under certain arrangement types. In addition, it could also 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, if any, 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 design and implementation phases over the remainder of the calendar year. However, 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. 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 in process as of the adoption date. 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 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 could changeis intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses, with the amount and timingexpectation that fewer will qualify as acquisitions (or disposals) of revenue and costs underbusinesses. The ASU will become effective for us on January 1, 2018. Early adoption is permitted for certain arrangement types and could increasetransactions that occur before the administrative burden on our operations to properly account for customer contracts and provideeffective date. We are evaluating the more expansive required disclosures. We have not yet determined what effect if any, the new guidance will haveof ASU 2017-01 on our consolidated financial statements and/or related disclosures.

Other Accounting Standards Updatesstatements.

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 bebecome effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those periods.us on January 1, 2018. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued. 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 are evaluating the effect of ASU 2016-16 on our consolidated financial statements.
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. ASU 2016-15 will be effective for years beginning after December 15, 2017, including interim periods, and will require adoption on a retrospective basis unless it is impracticable to apply, in which case we would be required to apply the amendments prospectively as of the earliest date practicable. Early adoption is permitted. We are evaluating the effect of ASU 2016-15 on our consolidated financial statements and 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 bebecome effective for years beginning after December 15, 2019 and interim periods within those years.us on January 1, 2020. Early adoption is permitted for annual and interim periods in years beginning on or after December 15, 2018.January 1, 2019. We are evaluating the effect of ASU 2016-13 on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." The amendments in this update will change how companies account for certain aspects of share-based payments to employees. Entities will be required to recognize the income tax effects the excess deficiencies or shortfalls of awards in the statement of income when the awards vest or are settled. This update also changes the guidance on employers’ accounting

for an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation and permits entities to elect to recognize forfeitures based on actuals or estimates. Finally, the update eliminates the hypothetical additional paid-in capital pool, permits stock option deductions even if not realized in the current year on a return, requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity and potentially has a dilutive effect on earnings per share ("EPS") to the extent that excess tax benefits have historically been included in the calculation of diluted EPS. We will adopt the various amendments in ASU 2016-09 in our consolidated financial statements for the quarterly period ending March 31, 2017 with an effective date of January 1, 2017. As required, we will use the modified retrospective transition method for amendments related to the timing of when excess tax benefits are recognized by means of a cumulative-effect adjustment to shareholders' equity as of January 1, 2017. In addition, the excess tax benefits from our share-based compensation plans are currently presented as a financing activity in our consolidated statement of cash flows and will be presented as an operating activity using a retrospective transition method. We do not expect the adoption of these amendments will have a material effect on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, "Leases."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. Accounting by lessors will remain largely unchanged. The guidanceIn addition, several new disclosures will be required. Although early adoption is permitted, we expect to adopt ASU 2016-02 when it becomes effective for years, including interim periods, beginning after December 15, 2018, with early adoption permitted.us on January 1, 2019. Adoption will require a modified retrospective transition where the lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented. We are evaluatinghave not completed our evaluation of the effect of ASU 2016-02 on our consolidated financial statements.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 bebecome effective for years beginning after December 15, 2017, including interim periods within those years.us on January 1, 2018. Except for specific aspects of this pronouncement, early adoption of the amendments in this update is not permitted. We are evaluating the effect of ASU 2016-01 on our consolidated financial statements.

NOTE 2—ACQUISITIONS

Heartland

On December 15, 2015, we entered into a merger agreement with Heartland, pursuant to which weWe merged with Heartland Payment Systems, Inc. ("Heartland") in a cash-and-stock transaction that we completed on April 22, 2016 for total purchase consideration of $3.9 billion.

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 initial accounting for these acquisitions was not complete as of November 30, 2016. 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. See Note 4 - Goodwill and Other Intangible Assets for measurement-period adjustments by segment during the six months ended November 30, 2016. 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. Also, we are still in the process of assigning goodwill to our reporting units.


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$304,747
Accounts receivable68,585
Prepaid expenses and other assets106,442
Identified intangible assets1,639,040
Property and equipment106,525
Debt(437,933)
Accounts payable and accrued liabilities(454,225)
Settlement processing obligations(20,978)
Deferred income taxes(553,454)
Other liabilities(58,542)
Total identifiable net assets700,207
Goodwill3,222,613
Total purchase consideration$3,922,820

FIS Gaming Business

On June 1, 2015, we acquired certain assets of Certegy Check Services, Inc., a wholly owned subsidiary ofFidelity National Information Services, Inc. ("FIS"). Under the purchase agreement, we acquired substantially all of the assets of its gaming business related to licensed gaming operators (the "FIS Gaming Business"), including approximately 260 gaming client locations, for $237.5 million, funded from borrowings on our revolving credit facility and cash on hand. We acquired the FIS Gaming Business to expand our direct distribution and service offerings in the gaming industry. This transaction was accounted for as a business combination. We recorded the assets acquired and liabilities assumed at their estimated fair values as of the acquisition date. Transaction costs associated with this business combination were not material. The revenue and earnings of the FIS Gaming Business for the year ended May 31, 2016 were not material nor were the historical revenue and earnings of the acquired business material for the purpose of presenting pro forma information.

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 during the three months ended March 31, 2017 for measurement-period adjustments, including a reconciliation to the total purchase consideration, are as follows (in thousands):follows:
Customer-related intangible assets$143,400
Liabilities(150)
December 31, 2016 Measurement-Period Adjustments March 31, 2017
(in thousands)
     
Cash and cash equivalents$304,747
 $
 $304,747
Accounts receivable70,385
 
 70,385
Prepaid expenses and other assets103,090
 (5,131) 97,959
Identified intangible assets1,639,040
 
 1,639,040
Property and equipment106,583
 
 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 assets143,250
707,839
 (23,511) 684,328
Goodwill94,250
3,214,981
 23,511
 3,238,492
Total purchase consideration$237,500
$3,922,820
 $
 $3,922,820

Goodwill arising fromThe measurement-period adjustments are the acquisition, included in the North America segment, was attributable to expected growth opportunities, including cross-selling opportunities at existingresult of continued refinement of certain estimates, particularly regarding certain tax positions and acquired gaming client locations, operating synergies in the gaming business and assembled workforce. Goodwill associated with this acquisition is deductible fordeferred income tax purposes. The customer-related intangible assets have an estimated amortization period of 15 years.taxes.


NOTE 3—SETTLEMENT PROCESSING ASSETS AND OBLIGATIONS

As of November 30, 2016March 31, 2017 and MayDecember 31, 2016, settlement processing assets and obligations consisted of the following:
November 30, 2016 May 31, 2016March 31, 2017 December 31, 2016
      
(in thousands)(in thousands)
Settlement processing assets:      
Interchange reimbursement$260,227
 $150,644
$143,782
 $150,612
Liability to Members(120,422) (14,997)
(Liability to) receivable from members(14,266) 71,590
Receivable from networks1,003,108
 1,203,308
623,691
 1,325,029
Exception items5,420
 3,003
5,885
 6,450
Merchant Reserves(30,667) (5,632)
Merchant reserves(7,583) (6,827)
$1,117,666
 $1,336,326
$751,509
 $1,546,854
      
Settlement processing obligations:      
Interchange reimbursement$66,519
 $193,989
$198,220
 $199,202
Liability to Members(33,566) (261,945)
Liability to members(154,331) (177,979)
Liability to merchants(771,239) (1,005,009)(708,914) (1,358,271)
Exception items8,742
 5,827
8,643
 21,194
Merchant Reserves(150,260) (149,667)
Reserves for operating losses and sales allowances(3,643) (3,510)
Merchant reserves(152,510) (158,419)
Reserve for operating losses and sales allowances(4,244) (2,939)
$(883,447) $(1,220,315)$(813,136) $(1,477,212)

NOTE 4—GOODWILL AND OTHER INTANGIBLE ASSETS

As of November 30, 2016March 31, 2017 and MayDecember 31, 2016, goodwill and other intangible assets consisted of the following:  
November 30, 2016 May 31, 2016March 31, 2017 December 31, 2016
      
(in thousands)(in thousands)
      
Goodwill$4,823,756
 $4,829,405
$4,859,387
 $4,807,594
Other intangible assets:      
Customer-related intangible assets$1,867,753
 $1,864,709
$1,854,876
 $1,864,731
Acquired technologies548,007
 549,293
556,400
 547,151
Trademarks and trade names188,360
 188,763
189,212
 188,311
Contract-based intangible assets158,103
 159,890
158,403
 157,882
2,762,223
 2,762,655
2,758,891
 2,758,075
Less accumulated amortization:      
Customer-related intangible assets476,322
 414,979
531,614
 487,729
Acquired technologies79,263
 26,403
118,554
 89,633
Trademarks and trade names21,835
 7,830
31,011
 24,142
Contract-based intangible assets68,961
 48,735
80,292
 71,279
646,381
 497,947
761,471
 672,783
$2,115,842
 $2,264,708
$1,997,420
 $2,085,292


The following table sets forth the changes in the carrying amount of goodwill for the sixthree months ended November 30, 2016:March 31, 2017:
 North America Europe Asia-Pacific Total
        
 (in thousands)
        
Balance at May 31, 2016$4,086,430
 $471,773
 $271,202
 $4,829,405
Goodwill acquired
 28,820
 
 28,820
Effect of foreign currency translation(1,925) (41,863) 2,924
 (40,864)
Measurement-period adjustments6,395
 
 
 6,395
Balance at November 30, 2016$4,090,900
 $458,730
 $274,126
 $4,823,756
 North America Europe Asia-Pacific Total
        
 (in thousands)
        
Balance at December 31, 2016$4,083,252
 $455,300
 $269,042
 $4,807,594
Effect of foreign currency translation676
 8,279
 12,297
 21,252
Measurement-period adjustments23,511
 
 7,030
 30,541
Balance at March 31, 2017$4,107,439
 $463,579
 $288,369
 $4,859,387

There was no accumulated impairment loss as of November 30, 2016March 31, 2017 or MayDecember 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 statement of income for the six months ended November 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, which we account for using the cost method, have been assigned a value of zero as of June 21, 2016, based on transfer restrictions, Visa's ability to adjust the conversion rate, and the estimation uncertainty associated with those factors. The fair value was determined using inputs classified as Level 3 within the fair value hierarchy due to the absence of quoted market prices, lack of liquidity and the fact that inputs used to measure fair value are unobservable and require management’s judgment. The preferred shares will convert into Visa common shares at periodic intervals over a 12-year period. 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 ultimately received 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 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 FACILITIES

As of November 30, 2016March 31, 2017 and MayDecember 31, 2016, long-term debt consisted of the following:
November 30, 2016 May 31, 2016March 31, 2017 December 31, 2016
      
(in thousands)(in thousands)
Term loans (face amounts of $3,730,213 and $3,530,000 at November 30, 2016 and May 31, 2016, respectively, less unamortized debt issuance costs of $47,102 and $51,770 at November 30, 2016 and May 31, 2016, respectively)$3,683,111
 $3,478,230
Corporate credit facility:   
Term loans (face amounts of $3,683,132 and $3,728,857 at March 31, 2017 and December 31, 2016, respectively, less unamortized debt issuance costs of $43,900 and $46,282 at March 31, 2017 and December 31, 2016, respectively)$3,639,232
 $3,682,575
Revolving credit facility811,000
 1,037,000
761,000
 756,000
Capital lease obligations39
 56
30
 37
Total long-term debt4,494,150
 4,515,286
4,400,262
 4,438,612
Less current portion of long-term debt (face amounts of $187,274 and $145,938 at November 30, 2016 and May 31, 2016, respectively, less unamortized debt issuance costs of $9,551 and $10,442 at November 30, 2016 and May 31, 2016, respectively) and current portion of capital lease obligations of $36 and $46 at November 30, 2016 and May 31, 2016, respectively177,759
 135,542
Less current portion of corporate credit facility (face amounts of $188,368 and $187,274 at March 31, 2017 and December 31, 2016, respectively, less unamortized debt issuance costs of $9,394 and $9,526 at March 31, 2017 and December 31, 2016, respectively) and current portion of capital lease obligations of $30 and $37 at March 31, 2017 and December 31, 2016, respectively179,004
 177,785
Long-term debt, excluding current portion$4,316,391
 $4,379,744
$4,221,258
 $4,260,827

Maturity requirements on long-term debt as of November 30, 2016March 31, 2017 by year are as follows (in thousands):
Fiscal years ending May 31, 
Years ending December 31, 
2017$93,637
$141,579
2018187,274
200,974
2019214,674
214,674
2020214,674
214,674
2021214,674
3,158,349
20223,103,724
5,424
2023 and thereafter512,556
508,488
Total$4,541,213
$4,444,162

July 2015 Refinancing

On JulyWe are party to a credit facility agreement (as amended from time to time, the "Credit Facility Agreement"), which, as of March 31, 2015, we entered into2017, provided for secured financing of up to $5.0 billion, comprised of (i) a second amended and restated term loan agreement (the "2015 Term Loan Agreement") and a second amended and restated credit agreement (the "2015 Revolving Credit Facility Agreement" and collectively, the "2015 Credit Facility Agreements") to provide for a $1.75$1.8 billion term loan (the "Term A Loan"), (ii) a $1.5 billion term loan (the "Term A-2 Loan"), (iii) a $542 million term loan (the "Term B Loan") and (iv) a $1.25$1.3 billion revolving credit facility (the "Revolving Credit Facility"), each with a syndicate of financial institutions. We used the proceeds of approximately $2.0 billion to repay the then-outstanding balances on our previously existing term loan and revolving credit facility.

February 2016 Refinancing

On February 26, 2016, we entered into an amendment to the 2015 Credit Facility Agreements (as amended, the "2016 Credit Facility Agreement") to, among other things, (i) accelerate our repayment schedule for the Term A Loan, effective as of February 26, 2016, and (ii) provide security for the Term A Loan and the Revolving Credit Facility and modify the applicable financial covenants and interest rate margins. In addition, the 2016 Credit Facility Agreement provided for a $735 million delayed draw term loan facility (the "Delayed Draw Facility").

We also entered into a $1.045 billion term B loan ("Term B Loan"). The Delayed Draw Facility and Term B Loan were issued on April 22, 2016 in connection with our merger with Heartland, resulting in total financing of approximately $4.78 billion. The incremental proceeds from the new loans were used, among other things, to repay certain portions of Heartland's existing indebtedness and to finance, in part, the cash consideration and the merger-related costs. Substantially all of the assets of our domestic subsidiaries are pledged as collateral under the 2016 Credit Facility Agreement.

October 2016 Refinancing On May 2, 2017, we entered into an amendment to the Credit Facility Agreement, which, among

On October 31, 2016, we entered into the Second Amendment to the 2016 Credit Facility Agreement (the "October 2016 Refinancing"), which (i) increased our borrowing capacity under the Delayed Draw Facility (which we now refer to as "Term A-2 Loan") by $750 million to $1.48 billion, (ii) decreased our outstanding borrowings under the Term B Loan by $500 million to $542 million, (iii) extended the maturity dates for the Term A Loan, the Term A-2 Loan and the Revolving Credit Facility and (iv) decreased the interest rate margin on our term loans and Revolving Credit Facility. The October 2016 Refinancingother things, increased the total financing capacity available under the 2016 Credit Facility Agreement fromto $5.2 billion, as described in more detail in "Note 12 $4.78 billion to $5.03 billion; although, the aggregate outstanding debt did not change as we repaid $250 million outstanding under the Revolving Credit Facility in connection with the October 2016 Refinancing.Subsequent Event."

The 2016 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 November 30, 2016,March 31, 2017, the interest rates on the Term A Loan, the Term A-2 Loan and the Term B Loan were 2.86%3.23%, 2.71%3.20% and 3.11%3.48%, respectively.

The Term A Loan must be repaid in equal quarterly installments of $43.8 million through August 2021, with the remaining principal balance due upon maturity in October 2021. The Term A-2 Loan must be repaid in quarterly installments of $1.7 million, the first installment of which was made in August 2016, increasing to quarterly installments of $8.6 million in August 2018 and

ending in August 2021, with the remaining balance due upon maturity in October 2021. The Term B Loan must be repaid in quarterly installments of $1.4 million, the first installment commencing in December 2016, ending in March 2023, with the remaining principal balance due upon maturity in April 2023.

As of November 30, 2016, the outstanding balance on the Revolving Credit Facility was $811.0 million. The 2016 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." At November 30, 2016 and May 31, 2016, we had outstanding standby letters of credit of $20.5 million and $8.5 million, respectively. The total available commitments under the Revolving Credit Facility at November 30, 2016March 31, 2017 and MayDecember 31, 2016 were $418.5$228.8 million and $204.5$446.3 million, respectively. As of November 30, 2016,March 31, 2017, the interest rate on the Revolving Credit Facility was 2.71%3.20%. In addition, wewe are required to pay a quarterly commitment fee on the unused portion of the Revolving Credit Facility. The Revolving Credit Facility expires in October 2021.

We incurred fees and expenses associated with the July 2015 refinancing, the February 2016 refinancing and October 2016 refinancing of $74.5 million, in the aggregate. The portion of the debt issuance costs related to the Revolving Credit Facility isare included in other noncurrent assets, and the portion of the debt issuance costs related to the Term A Loan, the Term B Loan and the Delayed Draw Facilityterm loans is reported as a reduction to the carrying amount of the debt.term loans. Debt issuance costs are amortized as an adjustment to interest expense over the terms of the respective facilities.

Settlement Lines of Credit

We have lines of credit with banks in various markets where we do business. The lines of credit, which are restricted for use in funding settlement, generally have variable interest rates and are subject to annual review. The settlement lines of credit facilities are generally 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 November 30, 2016March 31, 2017 and MayDecember 31, 2016, a total of $49.641.0 million and $42.9$51.0 million, respectively, of cash on deposit was used to determine the available credit.

As of November 30, 2016March 31, 2017 and MayDecember 31, 2016, respectively, we had $467.3$276.4 million and $378.4$392.1 million outstanding under these lines of credit with additional capacity of $776.6$856.5 million as of November 30, 2016March 31, 2017 to fund settlement. The weighted-average interest rate on these borrowings was 2.05%2.40% and 1.80%1.90% at November 30, 2016March 31, 2017 and MayDecember 31, 2016, respectively.

During the three months ended November 30, 2016,March 31, 2017, the maximum and average outstanding balances under these lines of credit were $691.7$577.9 million and $402.4$310.4 million, respectively.

Compliance with Covenants

The 2016 Credit Facility Agreement contains customary affirmative and restrictive covenants, including, among others, financial covenants based on our leverage and fixed charge coverage ratios. Financialratios, as defined in the agreement. As of March 31, 2017, financial covenants requireunder the Credit Facility Agreement required a leverage ratio no greater than (i) 4.75 to 1.00 as of the end of any fiscal quarter ending during the period from September 1, 2016 through February 28, 2017, (ii) 4.50 to 1.00 as of the end of any fiscal quarter ending during the period from March 1, 2017 through August 31, 2017, (iii)2017; (ii) 4.25 to 1.00 as of the end of any fiscal quarter ending during the period from September 1, 2017 tothrough February 28, 2018 and (iv)(iii) 4.00 to 1.00 as of the end of any fiscal quarter ending thereafter. TheAs of March 31, 2017, the fixed charge coverage ratio iswas required to be no less than 2.25 to 1.00. The 2016 Credit Facility Agreement and settlement lines of credit also include various other covenants that are customary in such borrowings. The 2016 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. In connection with the May 2, 2017 amendment to the Credit Facility Agreement, the required leverage ratios were updated, as described in more detail in "Note 12Subsequent Event."

The 2016 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 sixthree months ended November 30, 2016.March 31, 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. A $500 million notional interest rate swap agreement, which became effective on October 31, 2014, effectively converted $500 million of our variable-rate debt to a fixed rate of 1.52% plus a leverage-based margin and will mature on February 28, 2019. A $250 million notional interest rate swap, which became effective on August 28, 2015, effectively converted $250 million of our variable-rate debt to a fixed rate of 1.34% plus a leverage-based margin and will mature on July 31, 2020.

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 six months ended November 30, 2016,March 31, 2017, 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 withinin the consolidated balance sheets:
   November 30, 2016 May 31, 2016
      
   (in thousands)
      
Interest rate swaps ($250 million notional)Other assets $827
 $
Interest rate swaps ($500 million notional)Accounts payable and accrued liabilities $4,054
 $10,775
Derivative Financial Instruments Balance Sheet Location Weighted-Average Fixed Rate of Interest at March 31, 2017 Range of Maturity Dates March 31, 2017 December 31, 2016
        (in thousands)
Interest rate swaps (Notional of $500 million at March 31, 2017, $250 million at December 31, 2016) Other assets 1.46% December 31, 2019 - July 31, 2020 $3,305
 $2,147
Interest rate swaps (Notional of $800 million at March 31, 2017, $750 million at December 31, 2016) Accounts payable and accrued liabilities 1.67% February 28, 2019 - March 31, 2021 $1,906
 $3,175

The table below presents the effects of our interest rate swaps on the consolidated statements of income and other comprehensive lossincome for the three and six months ended November 30, 2016March 31, 2017 and 2015:2016:
 Three Months Ended Six Months Ended
 November 30, 2016 November 30, 2015 November 30, 2016 November 30, 2015
        
 (in thousands)    
        
Amount of gain (loss) recognized in other comprehensive loss$7,089
 $(3,968) $3,884
 $(4,000)
Amount of loss recognized in interest expense$1,768
 $2,467
 $3,665
 $4,201
 Three Months Ended
 March 31, 2017 March 31, 2016
    
 (in thousands)
    
Amount of gain (loss) recognized in other comprehensive income$827
 $(10,818)
Amount reclassified out of other comprehensive income to interest expense$1,596
 $1,955

At November 30, 2016,As of March 31, 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 $4.4$4.6 million.

Interest Expense

Interest expense was $50.8$41.1 million and $13.4$13.5 million for the three months ended November 30,March 31, 2017 and 2016, and 2015, respectively, and $95.3 million and $26.8 million for the six months ended November 30, 2016 and 2015, respectively.


NOTE 7—6—INCOME TAX

Our effective income tax rates were 2.9%18.9% and 24.7%23.4% for the three months ended November 30,March 31, 2017 and March 31, 2016, and November 30, 2015, respectively. Our effective income tax rates were 16.9% and 25.4% for the six months ended November 30, 2016 and November 30, 2015, 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. We also changed our estimate of the mix of earnings by jurisdiction in determining our annual estimated effective tax rate and our estimate of certain U.S. inclusion items during the three months ended November 30, 2016.

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—7—SHAREHOLDERS’ EQUITY

From time-to-time, weWe make repurchases of our common stock mainly through the use of open market purchases and, at times, through accelerated share repurchase programs ("ASR's").programs. As of November 30, 2016,March 31, 2017, we were authorized to repurchase up to $94.5$299.7 million of our common stock.

During the sixthree months ended November 30,March 31, 2016, 127,435 shares were delivered to us in connection with the completion of an ASR initiated on April 25, 2016. In addition, through open market repurchase plans, we repurchased and retired 1,470,643 and 2,431,35948,816 shares of our common stock at a cost of $104.8 million and $172.4$2.9 million, or an average cost of $71.24 and $70.91$59.37 per share, including commissions, during the three and six months ended November 30, 2016, respectively.

During the six months ended November 30, 2015, 324,742 shares were delivered to us in connection with the completion of an ASR initiated on April 10, 2015. In addition, through open market repurchase plans, we repurchased and retired 625,573 and 1,320,563 shares of our common stock at a cost of $37.5 million and $75.4 million, or an average cost of $59.87 and $57.07 per share, including commissions, during the three and six months ended November 30, 2015, respectively.commissions.

NOTE 9—8—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 Six Months EndedThree Months Ended
November 30, 2016 November 30, 2015 November 30, 2016 November 30, 2015March 31, 2017 March 31, 2016
          
(in thousands)(in thousands)
          
Share-based compensation expense$8,747
 $7,005
 $16,366
 $13,472
$8,816
 $7,047
Income tax benefit$2,206
 $2,279
 $5,778
 $4,637
$3,065
 $2,344
 

Share-Based Awards

The following table summarizes the changes in unvested share-based awards for the sixthree months ended November 30, 2016:March 31, 2017:
Shares 
Weighted-Average
Grant-Date
Fair Value
Shares 
Weighted-Average
Grant-Date
Fair Value
(in thousands)  (in thousands)  
      
Unvested at May 31, 20161,606
 $37.25
Unvested at December 31, 20161,263
 
$49.55
Granted436
 74.29
441
 79.47
Vested(730) 31.38
(3) 42.90
Forfeited(39) 44.87
(24) 56.74
Unvested at November 30, 20161,273
 $49.46
Unvested at March 31, 20171,677
 
$57.30

The total fair value of share-based awards vested during the sixthree months ended November 30,March 31, 2017 and March 31, 2016 and November 30, 2015 was $22.90.1 million and $17.60.2 million, respectively.

For these share-based awards, we recognized compensation expense of $8.18.0 million and $6.46.5 million during the three months ended November 30,March 31, 2017 and March 31, 2016, and November 30, 2015, respectively, and $15.0 million and $12.6 million during the six months ended November 30, 2016 and November 30, 2015, respectively. As of November 30, 2016,March 31, 2017, there was $49.1$72.2 million of unrecognized compensation expense related to unvested share-based awards that we expect to recognize over a weighted-average period of 2.082.38 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 fiscalthe year ended May 31, 2015 vest in equal installments on each of the first four anniversaries of the grant date. Stock options granted during fiscalthe year ended May 31, 2015 and thereafter vest in equal installments on each of the first three anniversaries of the grant date. During each of the sixthree months ended November 30, 2016 and November 30, 2015,March 31, 2017, we granted

stock options to purchase 0.1 million shares of our common stock. There were no stock options.options granted during the three months ended March 31, 2016. Our stock option plans provide for accelerated vesting under certain conditions.

The following summarizes changes in unvested stock option activity for the sixthree months ended November 30, 2016:March 31, 2017: 
Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic ValueOptions Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value
(in thousands)   (years) (in millions)(in thousands)   (years) (in millions)
Outstanding at May 31, 2016811
 $31.81
 5.8 $36.8
Outstanding at December 31, 2016759
 $37.51 6.0 $24.5
Granted73
 74.66
  124
 79.45
 
Forfeited(1) 22.93
  
 
 
Exercised(124) 22.26
  (52) 23.68
 
Outstanding at November 30, 2016759
 $37.51
 6.1 $25.0
Outstanding at March 31, 2017831
 $44.65 6.6 $29.9
         
Options vested and exercisable at November 30, 2016502
 $28.88
 4.8 $20.6
Options vested and exercisable at March 31, 2017449
 $29.49 4.7 $23.0

We recognized compensation expense for stock options of $0.5$0.6 million and $0.4 million during the three months ended November 30,March 31, 2017 and March 31, 2016, and November 30, 2015, respectively, and $0.9 million and $0.6 million during the six months ended November 30, 2016 and November 30, 2015, respectively. The aggregate intrinsic value of stock options exercised during the sixthree months ended November 30,March 31, 2017 and March 31, 2016 and November 30, 2015 was $6.5$2.8 million and $4.8$0.3 million, respectively. As of November 30,

2016,March 31, 2017, we had $1.8$2.5 million of unrecognized compensation expense related to unvested stock options that we expect to recognize over a weighted-average period of 1.92.37 years.

The weighted-average grant-date fair value of each stock option granted during the sixthree months ended November 30, 2016 and November 30, 2015March 31, 2017 was $21.87 and $15.60, respectively.$10.28. Fair value was estimated on the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions:
 Six Months Ended
 November 30, 2016 November 30, 2015
Risk-free interest rate1.05% 1.62%
Expected volatility31.58% 28.65%
Dividend yield0.06% 0.10%
Expected term (years)5 5
Three Months Ended
March 31, 2017
Risk-free interest rate1.99%
Expected volatility30%
Dividend yield0.06%
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—9—EARNINGS PER SHARE

Basic earnings per share is computed by dividing reported 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. There were less than 0.1 million stock options that would

have an antidilutive effect on the computation of diluted earnings per share for the three and six months ended November 30, 2016 and for the six months ended November 30, 2015.March 31, 2017. There were no such antidilutive stock options for the three months ended November 30, 2015.March 31, 2016.

The following table sets forth the computation of diluted weighted-average number of shares outstanding for the three and six months ended November 30, 2016March 31, 2017 and November 30, 2015:March 31, 2016:
Three Months Ended Six Months EndedThree Months Ended
November 30, 2016 November 30, 2015 November 30, 2016 November 30, 2015March 31, 2017 March 31, 2016
          
(in thousands)(in thousands)
          
Basic weighted-average number of shares outstanding153,173
 129,505
 153,539
 129,919
152,304
 129,268
Plus: Dilutive effect of stock options and other share-based awards818
 848
 896
 833
951
 869
Diluted weighted-average number of shares outstanding153,991
 130,353
 154,435
 130,752
153,255
 130,137


NOTE 11—10—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 six months ended November 30, 2016March 31, 2017 and November 30, 2015:March 31, 2016:
 Foreign Currency Translation Unrealized Gains (Losses) on Hedging Activities Other Accumulated Other Comprehensive Loss
        
 (in thousands)
        
Balance at August 31, 2015$(206,124) $(2,794) $(3,809) $(212,727)
Other comprehensive loss(31,568) (939) 
 (32,507)
Balance at November 30, 2015$(237,692) $(3,733) $(3,809) $(245,234)
        
Balance at August 31, 2016$(253,417) $(7,545) $(4,549) $(265,511)
Other comprehensive income (loss)(49,488) 5,529
 (247) (44,206)
Balance at November 30, 2016$(302,905) $(2,016) $(4,796) $(309,717)

Other comprehensive loss attributable to noncontrolling interest, which relates only to foreign currency translation, was approximately $8.5 million and $6.3 million for the three months ended November 30, 2016 and November 30, 2015, respectively.
 Foreign Currency Translation Unrealized Gains (Losses) on Hedging Activities Other Accumulated Other Comprehensive Loss
        
 (in thousands)
        
Balance at May 31, 2015$(178,309) $(3,874) $(3,809) $(185,992)
Other comprehensive income (loss)(59,383) 141
 
 (59,242)
Balance at November 30, 2015$(237,692) $(3,733) $(3,809) $(245,234)
        
Balance at May 31, 2016$(234,638) $(6,755) $(4,657) $(246,050)
Other comprehensive income (loss)(68,267) 4,739
 (139) (63,667)
Balance at November 30, 2016$(302,905) $(2,016) $(4,796) $(309,717)

Other comprehensive loss attributable to noncontrolling interest, which relates only to foreign currency translation, was approximately $8.5 million and $4.4 million for the six months ended November 30, 2016 and November 30, 2015, respectively.
 Foreign Currency Translation Unrealized Gains (Losses) on Hedging Activities Other Accumulated Other Comprehensive Loss
        
 (in thousands)
        
Balance at December 31, 2016$(318,450) $(640) $(3,627) $(322,717)
Other comprehensive income (loss), net of tax33,615
 1,513
 (217) 34,911
Balance at March 31, 2017$(284,835) $873
 $(3,844) $(287,806)
        
Balance at December 31, 2015$(239,650) $(3,732) $(3,808) $(247,190)
Other comprehensive income (loss), net of tax34,043
 (5,557) 
 28,486
Balance at March 31, 2016$(205,607) $(9,289) $(3,808) $(218,704)

NOTE 12—11—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 operating 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 AnnualTransition Report on Form 10-K for the yearseven months ended MayDecember 31, 2016 and our summary of significant accounting policies in "Note 1-Basis1Basis 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 six months ended November 30, 2016March 31, 2017 and November 30, 2015:March 31, 2016:
Three Months Ended Six Months EndedThree Months Ended
November 30, 2016 November 30, 2015 November 30, 2016 November 30, 2015March 31, 2017 March 31, 2016
          
(in thousands)(in thousands)
Revenues(1):
          
North America$701,300
 $511,335
 $1,413,064
 $1,042,192
$687,044
 $427,860
Europe174,904
 158,016
 344,469
 326,373
165,549
 144,119
Asia-Pacific65,617
 52,999
 123,780
 102,581
67,169
 54,280
Consolidated revenues$941,821
 $722,350
 $1,881,313
 $1,471,146
$919,762
 $626,259
          
Operating income (loss)(1):
          
North America$105,746
 $79,121
 $211,446
 $162,635
$94,083
 $65,190
Europe60,875
 62,012
 126,414
 134,745
54,507
 55,778
Asia-Pacific16,658
 11,857
 30,680
 24,089
19,754
 14,559
Corporate(2)
(78,012) (29,825) (142,167) (60,532)(63,374) (40,954)
Consolidated operating income$105,267
 $123,165
 $226,373
 $260,937
$104,970
 $94,573
          
Depreciation and amortization(1):
          
North America$90,964
 $24,222
 $177,880
 $47,965
$92,708
 $24,927
Europe12,188
 9,921
 22,601
 20,265
11,576
 9,621
Asia-Pacific4,476
 3,358
 8,902
 6,415
3,275
 3,666
Corporate1,054
 1,248
 2,486
 2,861
1,474
 1,098
Consolidated depreciation and amortization$108,682
 $38,749
 $211,869
 $77,506
$109,033
 $39,312

(1) Revenues, operating income and depreciation and amortization reflect the effect of acquired businesses from the respective dates of acquisition. Notably, on April 22, 2016, we merged with Heartland as further discussed in "Note 2 - Acquisitions."

(2) During the three and six months ended November 30, 2016,March 31, 2017, operating loss for Corporate included Heartland integration expenses of $36.6$26.1 million, and $67.2 million incurred in connection with the integration of Heartland. These expenseswhich are included in selling, general and administrative expenses in the consolidated statements of income.


NOTE 12—SUBSEQUENT EVENT

On May 2, 2017, we entered into the Fourth Amendment to the Credit Facility Agreement (the "Fourth Amendment"). The Fourth Amendment increased the total financing capacity available under the Credit Facility Agreement to $5.2 billion, consisting of (i) the $1.2 billion Revolving Credit Facility; (ii) the $1.5 billion Term A Loan; (iii) the $1.3 billion Term A-2 Loan; and (iv) a $1.2 billion term loan facility, which replaced the Term B Loan (the "Term B-2 Loan"). The aggregate outstanding debt under the Credit Facility Agreement did not change because we repaid certain outstanding amounts under the Term A Loan, the Term A-2 Loan and the Revolving Credit Facility in connection with the Fourth Amendment.

As amended by the Fourth Amendment, the Credit Facility Agreement provides for an interest rate with respect to borrowings under the Term A Loan, the Term A-2 Loan and the Revolving Credit Facility of (a) in the case of Base Rate Loans (as defined in the Credit Facility Agreement), a base rate plus a margin ranging from 0.25% to 1.00%, in each case depending on our leverage ratio and (b) in the case of Eurocurrency Loans (as defined in the Credit Facility Agreement), a base rate plus a margin ranging from 1.25% to 2.00%, in each case depending on our leverage ratio. As amended by the Fourth Amendment, the Credit Facility Agreement provides for an interest rate with respect to the borrowings under the Term B-2 Loan of a base rate plus a margin of 1.00% in the case of Base Rate Loans and a base rate plus a margin of 2.00% in the case of Eurocurrency Loans. With respect to the Base Rate Loans, the base rate is the highest of (a) the Federal Funds Effective Rate (as defined in the Credit Facility Agreement)

plus 0.50%, (b) the Bank of America prime rate and (c) the applicable Eurocurrency Base Rate (as defined in the Credit Facility Agreement) plus 1.00%. The Credit Facility Agreement also provides for a commitment fee with respect to borrowings under the Revolving Credit Facility at an applicable rate per annum ranging from 0.20% to 0.30% depending on our leverage ratio.

Pursuant to the Fourth Amendment, 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 contains customary affirmative and restrictive covenants, including, among others, financial covenants based on our leverage and fixed charge coverage ratios. The Credit Facility Agreement 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.

Pursuant to the Fourth Amendment, financial covenants require a leverage ratio for the period beginning May 2, 2017 no greater than: (i) 4.75 to 1.00 as of the end of any fiscal quarter ending during the period from May 2, 2017 through June 30, 2017; (ii) 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; (iii) 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 (iv) 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.

ITEM 2—MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in Item 1 of Part 1 of this Quarterly Report and the Management’s Discussion and Analysis of Financial Condition and Results of Operations and consolidated financial statements contained in our AnnualTransition Report on Form 10-K for the yearseven months ended MayDecember 31, 2016. This discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our actual results could differ materially from the results anticipated by our forward-looking statements. See "Forward-Looking Statements" below for additional information.

Executive Overview

We are a leading worldwide provider of payment technology services delivering innovative solutions to our customers globally. Our technologies, partnerships 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 merchants and partners 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.

On December 15, 2015, we entered into a merger agreement with Heartland, pursuant to which weWe merged with Heartland Payments Systems, Inc. ("Heartland") in a cash-and-stock transaction that we completed on April 22, 2016 for total purchase consideration of $3.9 billion. See "Note 2—Acquisitions" in the notes to the accompanying unaudited consolidated financial statements for further discussion of our merger with Heartland.

Highlights related to our financial condition and results of operations for the three and six months ended November 30, 2016March 31, 2017 are provided below:

Consolidated revenues increased by 30.4% and 27.9%46.9% to $941.8$919.8 million and $1.9 billion, respectively, in the three and six months ended November 30, 2016March 31, 2017, compared to $722.4$626.3 million and $1.5 billion for the prior-year periodsperiod, primarily due to the inclusion of Heartland, partially offset by the unfavorable effect of currency fluctuations in foreign markets of $16.0 million and $30.4 million, respectively.$8.2 million.


Consolidated operating income was $105.3$105.0 million and $226.4 million, respectively, for the three and six months ended November 30, 2016March 31, 2017 compared to $123.2$94.6 million, and $260.9 million, respectively, for the prior-year periods.period. Our operating margin for the three and six months ended November 30, 2016March 31, 2017 was 11.2% and 12.0%11.4%, respectively, compared to 17.1% and 17.7%15.1%, respectively, for the prior-year periods.period. The contribution of the revenue growth in local currency was more thanpartially offset by an increase in depreciation and amortization expense of $69.9$69.7 million and $134.4 million, respectively, and Heartland integration expenses of $36.6$26.1 million and $67.2 million, respectively, for the three and six months ended November 30, 2016.

On OctoberMarch 31, 2016, we amended our 2016 Credit Facility Agreement, which among other things reduced the interest rate spread on our term loans and revolving credit facility. We expect this refinancing to yield $10 million to $12 million of annual interest expense savings, net of additional anticipated expense associated with future interest rate hedging activities.

On June 21, 2016, Visa Inc. ("Visa") acquired all of the membership interests in Visa Europe Limited ("Visa Europe"), including ours, and we recorded a gain on the sale of those investments of $41.2 million.
2017.

Net income attributable to Global Payments was $49.5$48.8 million and $134.5 million, respectively, for the three and six months ended November 30, 2016March 31, 2017 compared to $78.8$59.9 million and $165.4 million, respectively, infor the prior-year periods.period. Diluted earnings per share was $0.32 and $0.87, respectively, for the three and six months ended November 30, 2016March 31, 2017 compared to $0.60 and $1.27, respectively,$0.46 in the prior-year periods.period.

Emerging Trends

The payments industry continues to grow worldwide and as a result, certain large payment technology companies, including us, have expanded operations globally by pursuing acquisitions and creating alliances and joint ventures. We expect to continue to expand tointo new markets internationally or increase our scale and improve our competitiveness in existing markets by pursuing further acquisitions and joint ventures in the future.ventures.

We believe that electronic payment transactions will continue to grow and that an increasing percentage of these will be facilitated through emerging technologies.  As a result, we expect an increasing portion of our future capital investment will be allocated to support the development of new and emerging technologies; however, we do not expect our aggregate capital spending to increase materially from our current level of spending as a result of this.

We also believe new markets will continue to develop in areas that have been previously dominated by paper-based transactions. We expect industries such as education, government and healthcare, as well as payment types such as recurring payments and business-to-business payments, to continue to see transactions migrate to electronic-based solutions.  We anticipate that the continued development of new services and the emergence of new vertical markets will be a factor in the growth of our business and our revenue in the future.


Results of Operations

The following table sets forth key selected financial data for the three months ended November 30,March 31, 2017 and March 31, 2016, and November 30, 2015, this data as a percentage of total revenues, and the changes between the periods in dollars and as a percentage of the prior year amount. The income statement data for the three months ended March 31, 2016 are derived from our unaudited consolidated financial statements for that period.
Three Months Ended November 30, 2016 
% of Revenue(1)
 Three Months Ended November 30, 2015 
% of Revenue(1)
 Change % ChangeThree Months Ended March 31, 2017 
% of Revenue(1)
 Three Months Ended March 31, 2016 
% of Revenue(1)
 Change % Change
                      
(dollar amounts in thousands)(dollar amounts in thousands)
Revenues(2):
                      
North America$701,300
 74.5% $511,335
 70.8% $189,965
 37.2 %$687,044
 74.7% $427,860
 68.3% $259,184
 60.6 %
Europe174,904
 18.6% 158,016
 21.9% 16,888
 10.7 %165,549
 18.0% 144,119
 23.0% 21,430
 14.9 %
Asia-Pacific65,617
 7.0% 52,999
 7.3% 12,618
 23.8 %67,169
 7.3% 54,280
 8.7% 12,889
 23.7 %
Total revenues$941,821
 100.0% $722,350
 100.0% $219,471
 30.4 %$919,762
 100.0% $626,259
 100.0% $293,503
 46.9 %
                      
Consolidated operating expenses(2):
                      
Cost of service$468,383
 49.7% $270,565
 37.5% $197,818
 73.1 %$455,936
 49.6% $248,187
 39.6% $207,749
 83.7 %
Selling, general and administrative368,171
 39.1% 328,620
 45.5% 39,551
 12.0 %358,856
 39.0% 283,499
 45.3% 75,357
 26.6 %
Operating expenses$836,554
 88.8% $599,185
 82.9% $237,369
 39.6 %$814,792
 88.6% $531,686
 84.9% $283,106
 53.2 %
                      
Operating income (loss)(2):
                      
North America$105,746
 

 $79,121
   $26,625
 33.7 %$94,083
 

 $65,190
   $28,893
 44.3 %
Europe60,875
   62,012
   (1,137) (1.8)%54,507
   55,778
   (1,271) (2.3)%
Asia-Pacific16,658
   11,857
   4,801
 40.5 %19,754
   14,559
   5,195
 35.7 %
Corporate(3)(78,012)   (29,825)   (48,187) 161.6 %(63,374)   (40,954)   (22,420) 54.7 %
Operating income$105,267
 11.2% $123,165
 17.1% $(17,898) (14.5)%$104,970
 11.4% $94,573
 15.1% $10,397
 11.0 %
                      
Operating margin(2):
                      
North America15.1%   15.5%
  (0.4)%  13.7%   15.2%
  (1.5)%  
Europe34.8%   39.2%   (4.4)%  32.9%   38.7%   (5.8)%  
Asia-Pacific25.4%   22.4%
  3.0 %  29.4%   26.8%
  2.6 %  
(1) Percentage amounts may not sum to the total due to rounding.

(2) Revenues, operating expenses, operating income and operating margin reflect the effect of acquired businesses from the respective dates of acquisition. Notably, on April 22, 2016, we merged with Heartland as further discussed in "Note 2 - Acquisitions" in the notes to the accompanying unaudited consolidated financial statements.

The following table sets forth key selected financial data for(3)During the sixthree months ended November 30, 2016March 31, 2017, operating loss for Corporate included Heartland integration costs of $26.1 million, which are included in selling, general and November 30, 2015, this data as a percentage of total revenues, and the changes between the periods in dollars and as a percentage of the prior year amount.
 Six Months Ended November 30, 2016 
% of Revenue(1)
 Six Months Ended November 30, 2015 
% of Revenue(1)
 Change % Change
            
 (dollar amounts in thousands)
Revenues(2):
           
North America$1,413,064
 75.1% $1,042,192
 70.8% $370,872
 35.6 %
Europe344,469
 18.3% 326,373
 22.2% 18,096
 5.5 %
Asia-Pacific123,780
 6.6% 102,581
 7.0% 21,199
 20.7 %
Total revenues$1,881,313
 100.0% $1,471,146
 100.0% $410,167
 27.9 %
            
Consolidated operating expenses(2):
           
Cost of service$931,009
 49.5% $543,231
 36.9% $387,778
 71.4 %
Selling, general and administrative723,931
 38.5% 666,978
 45.3% 56,953
 8.5 %
Operating expenses$1,654,940
 88.0% $1,210,209
 82.3% $444,731
 36.7 %
            
Operating income (loss)(2):
           
North America$211,446
   $162,635
   $48,811
 30.0 %
Europe126,414
   134,745
   (8,331) (6.2)%
Asia-Pacific30,680
   24,089
   6,591
 27.4 %
Corporate(142,167)   (60,532)   (81,635) 134.9 %
Operating income$226,373
 12.0% $260,937
 17.7% $(34,564) (13.2)%
            
Operating margin(2):
           
North America15.0%   15.6%   (0.6)%  
Europe36.7%   41.3%   (4.6)%  
Asia-Pacific24.8%   23.5%   1.3 %  
(1) Percentage amounts may not sum to the total due to rounding.

(2) Revenues, operatingadministrative expenses operating income and operating margin reflect the effect of acquired businesses from the respective dates of acquisition. Notably, on April 22, 2016, we merged with Heartland as further discussed in "Note 2 - Acquisitions" in the notes to the accompanying unaudited consolidated financial statements.statements of income.

Revenues

For the three months ended November 30, 2016,March 31, 2017, revenues increased by 30.4%$293.5 million, or 46.9%, compared to the prior year, to $941.8$919.8 million, reflecting growth in each of our operating segments, despite the unfavorable effect of currency fluctuations of $16.0 million. For the six months ended November 30, 2016, revenues increased by 27.9% compared to the prior year to $1.9 billion, despite the unfavorable effect of currency fluctuations of $30.4$8.2 million.

North America Segment. For the three and six months ended November 30, 2016,March 31, 2017, revenues from our North America segment increased by $190.0 million and $370.9$259.2 million, or 37.2% and 35.6%60.6%, respectively, compared to the prior year, to $701.3$687.0 million, and $1.4 billion, respectively, primarily due to theour merger with Heartland.

Europe Segment. For the three and six months ended November 30, 2016,March 31, 2017, revenues from our Europe revenuessegment increased $16.9 million and $18.1by $21.4 million, or 10.7% and 5.5%14.9%, respectively, compared to the prior year, to $174.9$165.5 million, and $344.5 million, respectively, primarily due to a joint venture with Erste Group Bank AG ("Erste Group")growth in Central and Eastern Europe that commenced in June 2016,

despitelocal currencies partially offset by the unfavorable effect of currency fluctuations of $16.4 million and $29.0 million, respectively.$10.6 million.

Asia-Pacific Segment. For the three and six months ended November 30, 2016,March 31, 2017, revenues from our Asia-Pacific revenuessegment increased by $12.6 million and $21.2$12.9 million, or 23.8% and 20.7%23.7%, respectively, compared to the prior year, to $65.6$67.2 million, and $123.8 million, respectively, primarily due to organic growth.

Operating Expenses

Cost of Service. CostFor the three months ended March 31, 2017, cost of service increased by 73.1% and 71.4% to $468.4$207.7 million, and $931.0 million, respectively, for the three and six months ended November 30, 2016or 83.7%, compared to the prior year.year, to $455.9 million. As a percentage of revenue,revenues, cost of service increased to 49.7%49.6% for the three months ended November 30, 2016March 31, 2017 from 37.5% for the prior year and to 49.5% for the six months ended November 30, 2016 from 36.9%39.6% for the prior year. The increase in cost of service was driven primarily by an increase in the variable costs associated with our revenue growth, including those related to our merger with Heartland, and by additional intangible asset amortization associated with recently acquired businesses of $64.7 million and $124.4$63.5 million for the three and six months ended November 30, 2016, respectively.March 31, 2017.

Selling, General and Administrative Expenses. Selling,For the three months ended March 31, 2017, selling, general and administrative expenses increased by 12.0% and 8.5% to $368.2$75.4 million, and $723.9 million, respectively, for the three and six months ended November 30, 2016or 26.6%, compared to the prior year.year, to $358.9 million. As a percentage of revenues, selling, general and administrative expenses decreased to 39.1%39.0% for the three months ended November 30, 2016 from 45.5% for the prior year and to 38.5% for the six months ended November 30, 2016March 31, 2017 from 45.3% for the prior year. The increase in selling, general and administrative expenses was primarily due to additional costs to support the growth of our business, including incremental expenses associated with the integration of Heartland. The decrease in selling, general and administrative expenses as a percentage of revenuerevenues is primarily due to synergies achieved in general and administrative expenses from the merger with Heartland.

Operating Income and Operating Margin for Segments

North America Segment. Operating income in our North America segment increased by 33.7% and 30.0%44.3% to $105.7$94.1 million and $211.4 million, respectively, for the three and six months ended November 30, 2016March 31, 2017 compared to the prior year. The increase in operating income was primarily due to revenue growth in our U.S. business offset by expenses associated with the integration of Heartland and additional intangible asset amortization associated with the merger. Operating margin decreased 0.41.5 percentage points for the three months ended November 30, 2016 and 0.6 percentage points for the six months ended November 30, 2016 compared to the prior year periods.March 31, 2017.

Europe Segment. Operating income in our Europe segment decreased by 1.8% and 6.2%2.3% to $60.9$54.5 million and $126.4 million, respectively, for the three and six months ended November 30, 2016March 31, 2017 compared to the prior year, including the effect of unfavorable currency fluctuations of $9.5 million and $16.6 million, respectively.$6.5 million. Operating margin decreased 4.45.8 percentage points for the three months ended November 30, 2016 and 4.6 percentage points for the six months ended November 30, 2016 compared to the prior year periods.March 31, 2017. The decreases in operating income and operating margin waswere primarily driven by the effect of unfavorable currency fluctuations.

Asia-Pacific Segment. Operating income in our Asia-Pacific segment increased by 40.5% and 27.4%35.7% to $16.7$19.8 million and $30.7 million, respectively, for the three and six months ended November 30, 2016March 31, 2017 compared to the prior year. Operating margin increased 3.02.6 percentage points for the three months ended November 30, 2016 and 1.3 percentage points for the six months ended November 30, 2016 compared to the prior year periods.March 31, 2017. The increase in operating income and operating margin was due to organic revenue growth.

Corporate. Corporate expenses increased by 161.6% and 134.9%54.7% to $78.0$63.4 million and $142.2 million, respectively, for the three and six months ended November 30, 2016March 31, 2017 compared to the prior year, primarily due to the merger with Heartland and expenses of $36.6$26.1 million and $67.2 million, respectively, associated with its integration.


Other Income/Expense, Net

Interest and other income for the six months ended November 30, 2016 increased primarily due to a gain of $41.2 million recorded in connection with the sale of our membership interests in Visa Europe. See "Note 5—Other Assets" in the notes to the accompanying unaudited consolidated financial statements for further discussion of this transaction.

Interest and other expense increased $38.3$28.2 million and $68.2 million, respectively, for the three and six months ended November 30, 2016March 31, 2017 compared to the prior year, primarily due to an increase in interest expense incurred resulting from an increase in the outstanding borrowings under our recently expanded credit facilities to fund the merger with Heartland.

Provision for Income Taxes

Our effective income tax rates were 2.9%18.9% and 24.7%23.4% for the three months ended November 30,March 31, 2017 and March 31, 2016, and November 30, 2015, respectively, and 16.9% and 25.4% for the six months ended November 30, 2016.respectively. The decrease in our effective income tax rates israte was primarily due to a higher percentage of income generated in international

jurisdictions with lower tax rates. We also changed our estimaterates (primarily as a result of the mix of earnings by jurisdictionmerger-related expenses incurred in determining our annual estimated effective tax rate and our estimate of certain U.S. inclusion items during the three months ended November 30, 2016.United States).

Liquidity and Capital Resources

In the ordinary course of our business, a significant portion of our liquidity comes from operating cash flows. Cash flow from operations is used to make planned capital investments in our business, to pursue acquisitions that meet our corporate objectives, to pay dividends, and to pay downprincipal and interest on our outstanding debt and to repurchase shares of our common stock. Accumulated cash balances are invested in high-quality, marketable short-term instruments.

Our capital plan objectives are to support our operational needs and strategic plan for long-term growth while maintaining a low cost of capital. We use debtour financing, such as our revolving credit facility and our term loans, for general corporate purposes and to fund acquisitions. In addition, specialized lines of credit are also used in certain of our markets to pre-fund settlement.fund merchant settlement prior to receipt of funds from the card network. We regularly evaluate our liquidity and capital position relative to cash requirements, and we may elect to raise additional funds in the future, either through the issuance of debt, equity or otherwise.

At November 30, 2016,March 31, 2017, we had cash and cash equivalents totaling $995.8$1,261.8 million. Of this amount, we consider $387.4$423.3 million to be available cash. Available cash excludesfor general purposes, which does not include the following: (1) settlement-related cash reserve balances, (2) funds held foras collateral for merchant losses ("Merchant Reserves") and (3) funds held for customers. Settlement-related cash reserve balances represent funds that we hold when the incoming amount from the card networks precedes the funding obligation to the merchant. Settlement-related cash reserve balances are not restricted; however, these funds are generally paid out in satisfaction of settlement processing obligations the following day. At November 30, 2016,March 31, 2017, our cash and cash equivalents included $415.7$322.7 million for settlement-related cash reserve balances. Certain of our funds collected from our merchantsMerchant Reserves serve as collateral to minimize contingent liabilities associated with any losses that may occur under the merchant agreement. At November 30, 2016,March 31, 2017, our cash and cash equivalents included $180.9$160.1 million related to Merchant Reserves. While this cash is not restricted in its use, we believe that designating this cash to collateralize Merchant Reserves strengthens our fiduciary standing with our member sponsors and is in accordance with the guidelines set by the card networks. Funds held for customers and the corresponding liability that we record in customer deposits include amounts collected prior to remittance on our customers' behalf. At November 30, 2016,March 31, 2017, cash and cash equivalents included funds held for customers of $181.4$315.9 million.

Our available cash balance includes $263.4at March 31, 2017 included $342.9 million of cash held by foreign subsidiaries whose earnings are considered indefinitely reinvested outside the United States. These cash balances reflect our capital investments in these subsidiaries and the accumulation of cash flows generated by their operations, net of cash flows used to service debt locally and fund acquisitions outside of the United States. We believe that we are able to maintain a sufficient level of liquidity for our domestic operations and commitments without repatriation of the earnings of these foreign subsidiaries. If we were to repatriate some or all of the cash held by such foreign subsidiaries, we do not believe that the associated income tax liabilities would have a significant effect on our liquidity.


Operating activities provided net cash of $193.5$294.0 million and $454.1$208.2 million for the sixthree months ended November 30,March 31, 2017 and March 31, 2016, and November 30, 2015, respectively. The decreaseincrease in cash flows from operating activities of $260.5$85.8 million was primarily due to a decreasean increase in the change in net settlement processing assets of $321.8 million and payment of Heartland integration costs.$56.7 million. Fluctuations in settlement processing assets and obligations are largely due to timing of month-end and settlement transaction volume.

Net cash used in investing activities was $80.8$46.6 million and $24.4 million during the sixthree months ended November 30,March 31, 2017 and March 31, 2016, and $278.2 million in the prior year. During the six months ended November 30, 2016 and November 30, 2015, respectively, we invested net cash of $35.3 million and $241.9 million in the aggregate to complete business acquisitions. We madereflecting capital expenditures of $83.3$46.2 million and $36.2$24.4 million, during the six months ended November 30, 2016 and November 30, 2015, respectively. During the calendar year ending December 31, 2017, we expect capital expenditures for property and equipment, including internal-use capitalized software development costs, to approximate $160 million.

In addition, during the six months ended November 30, 2016, we received cash of €33.5 million ($37.7 million equivalent at June 21, 2016) in connection with the sale of our membership interests in Visa Europe to Visa.

Net cash used in financing activities was $130.7$160.0 million and $161.5 million during the sixthree months ended November 30, 2016. During the six months ended November 30, 2015, financing activities provided net cash of $185.7 million.

During the six months ended November 30,March 31, 2017 and March 31, 2016, respectively, primarily due to net repayments of principal under long-term borrowing arrangements were $25.8 million compared to net borrowings of $178.0 million in the prior year, reflecting incremental proceeds from the July 2015 refinancing described below.

On October 31, 2016, we amended our 2016 Credit Facility Agreement as further discussed below. Under the terms of the amendment, we increased our aggregate Delayed Draw Facility (which we now refer to as "Term A-2 Loan") by $750 million with the proceeds being used to reduce a portion of the Term B Loan and outstanding Revolving Credit Facility borrowings. Our total borrowings remained unchanged as a result of the amendment. The amendment also reduced the interest rate spread on the Term A Loan, Term A-2 Loan and the Revolving Credit Facility by 25 basis points (subject to adjustment based on an amended leveraged-based pricing grid) and on the Term B Loan by 100 basis points. We expect this refinancing to yield $10 million to $12 million of annual interest expense savings, net of additional anticipated expense associated with future interest rate hedging activities.

Net borrowings on settlement lines of credit were $94.8 million and $101.5 million during the six months ended November 30, 2016 and November 30, 2015, respectively.credit. Fluctuations in our settlement lines of credit balances are largely due to timing of month-end and settlement transaction volume.

We generally pay dividends to our shareholders on a quarterly basis. In addition, we used cashconnection with the change in our fiscal year end from May 31 to December 31, our board of $172.4 million and $71.7 million duringdirectors approved a quarterly dividend of $0.0133 per share, payable June 23, 2017 to shareholders of record as of June 9, 2017. This dividend includes the six months ended November 30,period from December 1, 2016 and November 30, 2015, respectively, to repurchase shares of our common stock.through March 31, 2017.

We believe that our current level of cash and borrowing capacity under our long-term debt facilitiesand lines of credit described below, together with future cash flows from operations will be sufficient to meet the needs of our existing operations and planned requirements for the foreseeable future.

Long-Term Debt and Lines of Credit Facilities

July 2015 RefinancingWe 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 July 31, 2015, we entered into a secondThe Credit Facility Agreement was most recently amended and restated term loan agreementon May 2, 2017 (the "2015 Term Loan Agreement""Fourth Amendment") and, as amended, provides for (i) a second amended and restated credit agreement (the "2015 Revolving Credit Facility Agreement" and collectively, the "2015 Credit Facility Agreements") to provide for a $1.75 billion term loan (the "Term A Loan") and a $1.25$1.2 billion revolving credit facility (the "Revolving Credit Facility"), each with; (ii) a syndicate of financial institutions. We used the proceeds of approximately $2.0$1.5 billion to repay the then-outstanding balances on our previously existing term loan (the "Term A Loan"); (iii) a $1.3 billion term loan (the "Term A-2 Loan"); and revolving credit facility.

February 2016 Refinancing. On February 26, 2016, we entered into an amendment to the 2015 Credit Facility Agreement (as amended, the "2016 Credit Facility Agreement") to, among other things, (i) accelerate our repayment schedule for the Term A Loan, effective as of February 26, 2016, and (ii) provide security for the Term A Loan and the Revolving Credit Facility and modify the applicable financial covenants and interest rate margins. In addition, the 2016 Credit Facility Agreement provided for(iv) a new $735 million delayed draw$1.2 billion term loan facility, (the "Delayed Draw Facility").


We also entered into a $1.045 billion term B loan ("Term B Loan"). The Delayed Draw Facility and Term B Loan were issued on April 22, 2016 in connection with our merger with Heartland, resulting in total financing of approximately $4.78 billion. The incremental proceeds from the new loans were used, among other things, to repay certain portions of Heartland's existing indebtedness and to finance, in part, the cash consideration and the merger-related costs.

October 2016 Refinancing. On October 31, 2016, we entered into the Second Amendment to the 2016 Credit Facility Agreement (the "October 2016 Refinancing"), which (i) increased our borrowing capacity under the Delayed Draw Facility (which we now refer to as "Term A-2 Loan") by $750 million to $1.48 billion, (ii) decreased our outstanding borrowings underreplaced the Term B Loan by $500 million(the "Term B-2 Loan"). The Fourth Amendment increased the total financing capacity under the Credit Facility Agreement on May 2, 2017 from $4.9 billion to $542 million, (iii) extended$5.2 billion, although the maturity dates for outstanding debt under the Credit Facility Agreement did not change because we repaid certain outstanding amounts under the Term A Loan, the Term A-2 Loan and the Revolving Credit Facility in connection with the Fourth Amendment. 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 March 31, 2017, the interest rates on the Term A Loan, the Term A-2 Loan and (iv) decreasedthe Term B Loan (which was superseded by the Term B-2 Loan under the Fourth Amendment) were 3.23%, 3.20% and 3.48%, respectively, and the interest rate margin on ourthe Revolving Credit Facility was 3.20%. As of March 31, 2017, the aggregate outstanding balance on the term loans was $3.7 billion, and the outstanding balance on the Revolving Credit Facility. The October 2016 Refinancing increased was $761.0 million.

As amended by the total financing capacity available underFourth Amendment, the 2016 Credit Facility Agreement from $4.78 billionprovides for an interest rate with respect to $5.03 billion, althoughborrowings under the aggregate outstanding debt did not change as we repaid $250 million outstandingTerm A Loan, the Term A-2 Loan and the Revolving Credit Facility of (a) in the case of Base Rate Loans (as defined in the Credit Facility Agreement), a base rate plus a margin ranging from 0.25% to 1.00%, in each case depending on our leverage ratio and (b) in the case of Eurocurrency Loans (as defined in the Credit Facility Agreement), a base rate plus a margin ranging from 1.25% to 2.00%, in each case depending on our leverage ratio. As amended by the Fourth Amendment, the Credit Facility Agreement provides for an interest rate with respect to the borrowings under the Term B-2 Loan of a base rate plus a margin of 1.00% in the case of Base Rate Loans and a base rate plus a margin of 2.00% in the case of Eurocurrency Loans. With respect to the Base Rate Loans, the base rate is the highest of (a) the Federal Funds Effective Rate (as defined in the Credit Facility Agreement) plus 0.50%, (b) the Bank of America prime rate and (c) the applicable Eurocurrency Base Rate (as defined in the Credit Facility Agreement) plus 1.00%. The Credit Facility Agreement also provides for a commitment fee with respect to borrowings under the Revolving Credit Facility in connection with the October 2016 Refinancing.at an applicable rate per annum ranging from 0.20% to 0.30% depending on our leverage ratio.

Pursuant to the Fourth Amendment, 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 equal quarterly installments in the amount of $43.8 million1.25% of principal through AugustJune 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 October 2021.May 2022. The Term A-2 Loan principal must be repaid in quarterly installments of $1.7 million the first installment of which was made in August 2016,through June 2018, increasing to quarterly installments of $8.6 million in August 2018 and ending in August 2021,through March 2022, with the remaining balance due upon maturity in October 2021.May 2022. The Term BB-2 Loan principal must be repaid in quarterly installments in the amount of $1.4 million, the first installment commencing in December 2016, ending in0.25% of principal through March 2023, with the remaining principal balance due upon maturity in April 2023.

As of November 30, 2016, the outstanding balance on the Revolving Credit Facility was $811.0 million. The 2016 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." At November 30, 2016 and May 31, 2016, we had outstanding issued standby letters of credit of $20.5 million and $8.5 million, respectively. The total available commitments under the Revolving Credit Facility at November 30, 2016 and MayMarch 31, 20162017 were $418.5 million and $204.5 million, respectively. The Revolving Credit Facility expires in October 2021.$228.8 million.

Settlement Lines of Credit

We have lines of credit with banks in various marketsthe United States and Canada as well as several countries in Europe and in the Asia-Pacific region where we do business. The lines of credit, which are restricted for use in funding settlement, generally have variable

interest rates and are subject to annual review. The lines of credit facilities are generally denominated in local currency but may, in some cases, facilitate borrowings in multiple currencies. For certain of our 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 November 30, 2016March 31, 2017 and MayDecember 31, 2016, a total of $49.6$41.0 million and $42.9$51.0 million, respectively, of cash on deposit was used to determine the available credit.

As of November 30, 2016March 31, 2017 and MayDecember 31, 2016, respectively, we had $467.3$276.4 million and $378.4$392.1 million outstanding under these lines of credit with additional capacity of $776.6$856.5 million as of November 30, 2016March 31, 2017 to fund settlement. The weighted-average interest rate on these borrowings was 2.05%2.40% and 1.80%1.90% at November 30, 2016March 31, 2017 and MayDecember 31, 2016, respectively.

Compliance with Covenants

The 2016 Credit Facility Agreement contains customary affirmative and restrictive covenants, including, among others, financial covenants based on our leverage and fixed charge coverage ratios.ratios as defined in the agreement. Pursuant to the Fourth Amendment, financial covenants require a leverage ratio for the period beginning May 2, 2017 no greater than: (i) 4.75 to 1.00 as of the end of any fiscal quarter ending during the period from May 2, 2017 through June 30, 2017; (ii) 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; (iii) 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 (iv) 4.00 to 1.00 as of the end of any fiscal quarter ending thereafter. The 2016fixed charge coverage ratio is required to be no less than 2.25 to 1.00. Refer to "Note 5—Long-Term Debt and Lines of Credit" in the notes to the accompanying unaudited consolidated financial statements for the required leverage ratios as of March 31, 2017.

The Credit Facility Agreement and settlement lines of credit also include various other covenants that are customary in such borrowings. The 2016 Credit Facility Agreement includes covenants, subject in each case to exceptions and qualifications that may restrict certain payments, including, in certain circumstances, the payment ofrepurchasing our common stock and paying cash dividends in excess of our current rate of $0.01 per share per quarter.

The 2016 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 sixthree months ended November 30, 2016.March 31, 2017.

See "Note 6—5—Long-Term Debt and Credit Facilities"Lines of Credit" and "Note 12Subsequent Event" in the notes to the accompanying unaudited consolidated financial statements for further discussion of our borrowing arrangements.

Off-Balance Sheet Arrangements

We have not entered into any transactions with unconsolidated entities whereby we have financial guarantees, subordinated retained interest, derivative instruments, or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market, or credit risk support other than the guarantee services described in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" in our AnnualTransition Report on Form 10-K for the year ended MayDecember 31, 2016.

Critical Accounting Policies
 
Our unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, which often require the judgment of management in the selection and application of certain accounting principles and methods. We discuss our critical accounting policies in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our AnnualTransition Report on Form 10-K for the yearseven-months ended MayDecember 31, 2016.

During the threefirst quarter of 2017, we revised our reporting unit structure within our North America segment to reflect changes made in connection with the integration of Heartland. Under the revised reporting unit structure, we operate two reporting units in our North America segment: (i) Payments and six months ended November 30, 2016,(ii) Integrated Solutions and Vertical Markets. We reassigned the goodwill previously allocated to North America merchant services and Heartland to the two new reporting units using a relative fair value approach. As

a result of the change in reporting units, we did not adopt any new critical accounting policies, did notperformed goodwill impairment tests immediately before and after this change any critical accounting policiesin reporting units and did not change the application of any critical accounting policies from the year ended May 31, 2016.determined that there was no impairment.

Effect of New Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted

From time-to-time,time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standards setting bodies that may affect our current and/or future financial statements. See "Note 1—Basis of Presentation and Summary of Significant Accounting Policies" in the notes to the accompanying unaudited consolidated financial statements for a discussion of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.

Forward-Looking Statements

Investors are cautioned that some of the statements we use in this report contain forward-looking statements and are made pursuant to the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of risks and uncertainties and depend upon future events or conditions. Actual events or results might differ materially from those expressed or forecasted in these forward-looking statements. Accordingly, we cannot guarantee you that our plans and expectations will be achieved. Such statements may include, but are not limited to, statements about the benefits of our merger with Heartland, including future financial and operating results, the combined company’s plans, objectives, expectations and intentions and other statements that are not historical facts. Our forward-looking statements speak only as of the date they are made and should not be relied upon as representing our plans and expectations as of any subsequent date. We undertake no obligation to revise any of these statements to reflect future circumstances or the occurrence of unanticipated events.

Important factors that may cause actual events or results to differ materially from those anticipated by our forward-looking statements include our ability to safeguard our data; increased competition from larger companies and non-traditional competitors; our ability to update our services in a timely manner; our ability to maintain Visa and MasterCard registration and financial institution sponsorship; our reliance on financial institutions to provide clearing services in connection with our settlement activities; our potential failure to comply with card network requirements; potential systems interruptions or failures; software defects or undetected errors; increased attrition of merchants, referral partners or independent sales organizations; our ability to increase our share of existing markets and expand into new markets; a decline in the use of cards for payment generally; unanticipated increases in chargeback liability; increases in credit card network fees; changes in laws, regulations or network rules or interpretations thereof; foreign currency exchange and interest rate risks; political, economic and regulatory changes in the foreign countries in which we operate; future performance, integration and conversion of acquired operations, including without limitation difficulties and delays in integrating the Heartland Payment Systems, Inc. business or fully realizing cost savings and other benefits of the acquisition at all or within the expected time period; fully realizing anticipated annual interest expense savings from refinancing

our corporate debt facilities; our loss of key personnel; and other risk factors presented in Item 1A - Risk Factors of our AnnualTransition Report on Form 10‑K for the yearseven months ended MayDecember 31, 2016.

ITEM 3—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We are exposed to market risk related to changes in interest rates on our long-term debt and cash investments. We invest our excess cash in securities that we believe are highly liquid and marketable in the short term. These investments earn a floating rate of interest and are not held for trading or other speculative purposes.

We have term loans and a corporaterevolving credit facility that we use for general corporate purposes, as well as various lines of credit that we use to fund settlement in certain of our markets. Interest rates on these debt instruments and settlement lines of credit are based on market rates and fluctuate accordingly. As of November 30, 2016,March 31, 2017, there was $5.0$4.7 billion outstanding under these variable-rate debt arrangements and settlement lines of credit.

The interest earned on our cash investments and the interest paid on our debt are based on variable interest rates; therefore, the exposure of our net income to a change in interest rates is partially mitigated as an increase in rates would increase both interest income and interest expense, and a reduction in rates would decrease both interest income and interest expense. Under our current policies, we may selectively use derivative instruments, such as interest rate swaps or forward rate agreements, to manage all or

a portion of our exposure to interest rate changes. We have interest rate swaps that reduce a portion of our exposure to market interest rate risk on our LIBOR-based debt as discussed in "Note 6 - 5Long-Term Debt and Credit Facilities"Lines of Credit" in the notes to theour accompanying unaudited consolidated financial statements.

Based on balances outstanding under variable-rate debt agreements existing interest rate swaps and cash investmentsinvestment balances at November 30, 2016,March 31, 2017, a hypothetical increase of 50 basis points in applicable interest rates as of November 30, 2016March 31, 2017 would increase our annual interest expense by approximately $21.3$17.1 million and increase our annual interest income by approximately $1.5$2.7 million.

Foreign Currency Exchange Rate Risk

A substantial amount of our operations are conducted in foreign currencies. Consequently, a portion of our revenues and expenses may be affected by fluctuations in foreign currency exchange rates. We are also affected by fluctuations in exchange rates on assets and liabilities related to our foreign operations. We have not historically hedged our translation risk on foreign currency exposure, but we may do so in the future.

ITEM 4—CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of November 30, 2016,March 31, 2017, management carried out, under the supervision and with the participation of our principal executive officer and principal financial officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934).  Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of November 30, 2016,March 31, 2017, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and are designed to ensure that information required to be disclosed in those reports is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. 

Changes in Internal Control Overover Financial Reporting
 
In April 2016, we completed theour merger with Heartland, which is being integrated into our North America segment. As part of our ongoing integration activities, we are continuing to apply our controls and procedures to the Heartland business and to augment our company-wide controls to reflect the risks inherent in an acquisition of this magnitude. Otherwise, there were no changes in our internal control over financial reporting during the quarter ended November 30, 2016March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





PART II—OTHER INFORMATION

ITEM 1—LEGAL PROCEEDINGS

We are party to a number of claims and lawsuits incidental to our business. In our opinion, the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, are not expected to have a material adverse effect on our financial position, liquidity, results of operations or cash flows.

Heartland, Heartland’s board of directors, Global Payments, Data Merger Sub One, Inc. (a wholly owned subsidiary of Global Payments, which we refer to as "Data Merger Sub One") and Data Merger Sub Two, LLC (a wholly owned subsidiary of Global Payments, which we refer to as "Data Merger Sub Two") were named as defendants in a putative class action lawsuit challenging the proposed merger with Heartland. The suit was filed on January 8, 2016 in the New Jersey Superior Court, Mercer County, Civil Division, and is captioned Kevin Merchant v. Heartland Payment Systems, et al, L-45-16. The complaint alleges, among other things, that the directors of Heartland breached their fiduciary duties to Heartland stockholders by agreeing to sell Heartland for inadequate consideration, agreeing to improper deal protection terms in the merger agreement, failing to properly value Heartland, and filing a materially incomplete registration statement with the Securities and Exchange Commission. In addition, the complaint alleges that Heartland, Global Payments, Merger Sub One, and Merger Sub Two aided and abetted these purported breaches of fiduciary duty. On April 12, 2016, solely to avoid the costs, disruption and distraction of further litigation, and without admitting the validity of any allegations made by the plaintiff, Heartland and Global Payments reached an agreement to settle the suit and entered into a Memorandum of Understanding to document the terms and conditions for settlement of the suit.  The proposedcourt has approved the parties' settlement is subjectagreement under which Heartland amended its pre-acquisition disclosures and agreed to court approval and a motion for such approval is now pending with the court. If the proposedpay Plaintiffs’ counsel $325,000 in attorney’s fees. The settlement is approved by the court, it will releasereleases all claims that were or could have been brought challenging any aspect of the merger with Heartland or the merger agreement related thereto and any disclosure made in connection therewith, under terms that will be disclosed to stockholders before final approval of the proposed settlement. The settlement, if approved, is not expected to have a material adverse effect on our financial position, liquidity, results of operations or cash flows.thereto.

ITEM 1A - RISK FACTORS

There have been no material changes from the risk factors set forth in Part I, Item 1A, "Risk Factors" of our AnnualTransition Report on Form 10-K for our fiscal yearthe seven months ended MayDecember 31, 2016.

ITEM 2UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Information about the shares of our common stock that we repurchased during the quarter ended November 30, 2016March 31, 2017 is set forth below:
Period
Total Number of
Shares Purchased
(1)
 
Approximate Average Price Paid per Share (2)
 Total Number of
Shares Purchased as Part of
Publicly Announced
Plans or Programs
 
Maximum
Number (or
Approximate
Dollar Value) of
Shares that May Yet Be Purchased Under
the Plans or
Programs
(3)
September 2016105,861
 $74.02
 105,861
  
October 2016648,704
 $73.51
 648,704
  
November 2016716,078
 $68.78
 716,078
  
Total1,470,643
   1,470,643
 $94,505,014
Period
Total Number of
Shares Purchased
(1)
 
Approximate Average Price Paid per Share (2)
 Total Number of
Shares Purchased as Part of
Publicly Announced
Plans or Programs
 
Maximum
Number (or
Approximate
Dollar Value) of
Shares that May Yet Be Purchased Under
the Plans or
Programs
(3)
       (in millions)
January 2017
 $
 
  
February 2017
 $
 
  
March 2017
 $
 
  
Total
   
 $299.7
 
(1) 
Our board of directors has authorized us to repurchase shares of our common stock through any combination of Rule 10b5-1 open-market repurchase plans, accelerated share repurchase plans, discretionary open-market purchases or privately negotiated transactions.
(2) 
Through open marketWe did not repurchase plans, we repurchased and retired 1,470,643any shares of our common stock at a cost of $104.8 million, or an average cost of $71.24 perunder our share including commissions.repurchase program during the three months ended March 31, 2017.
(3) 
The approximate dollar value of shares that may yet be purchased under our share repurchase program, as of November 30, 2016,March 31, 2017, was comprised of $94.5$299.7 million remaining available under the board’s authorization announced on July 28, 2015.January 5, 2017. The authorizations by the board of directors do not expire, but could be revoked at any time. In addition, we are not required by any of the board’s authorizations or otherwise to complete any repurchases by any specific time or at all.


During the quarter ended March 31, 2017, pursuant to our employee incentive plans, we withheld 1,018 shares at an average price per share of $79.38 in order to satisfy employees' tax withholding and payment obligations in connection with the vesting of awards of restricted stock, which we withheld at fair market value on the vesting date.

ITEM 6—EXHIBITS

List of Exhibits
2.1 
10.13.1 Debt Commitment Letter, dated as
10.23.2 
10.310.1* First
10.2*
10.3*
10.4*
10.4*Second Amendment to the Second Amended and Restated Credit Agreement, Second Amendment to the Second Amended and Restated Term Loan Agreement, Second Amendment to the Company Guaranties and Second Amendment to the Subsidiary Guaranties, dated as of October 31, 2016, by and among the Company and Global Payments Direct, Inc., as borrowers, Bank of America, N.A., as administrative agent, and certain other lenders party thereto.
10.5*Fourth Amended and Restated Non-Employee Director Compensation Plan.Administrative Agent.
31.1* 
31.2* 
32.1* 
101* The following financial information from the Quarterly Report on Form 10-Q for the quarter ended November 30, 2016,March 31, 2017, formatted in XBRL (eXtensible Business Reporting Language) and filed electronically herewith: (i) the Unaudited Consolidated Statements of Income; (ii) the Unaudited Consolidated Statements of Comprehensive Income (Loss);Income; (iii) the Consolidated Balance Sheets; (iv) the Unaudited Consolidated Statements of Cash Flows; (v) the Unaudited Consolidated Statements of Changes in Equity; and (vi) the Notes to Unaudited Consolidated Financial Statements.
______________________
* 
Filed herewith.

++ 
Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K and Global Payments Inc. agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedule and/or exhibit upon request.



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


  Global Payments Inc.
  (Registrant)
   
Date: January 9,May 4, 2017 /s/ Cameron M. Bready
  Cameron M. Bready
  Senior Executive Vice President and Chief Financial Officer
  (Principal Financial Officer)
   






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