UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended September 30, ~~2018~~

2019



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

For the transition period from to

Commission file number: 001-16111

GLOBAL PAYMENTS ~~INC.~~INC.

(Exact name of registrant as specified in charter)



Georgia		58-2567903
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

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



Securities registered pursuant to Section 12(b) of the Act
Title of each class	Ticker symbol	Name of exchange on which registered
Common stock, no par value	GPN	New York Stock Exchange

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

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

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



Large accelerated filer ☒	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

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

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



Yes	☐	No ☒	☑

The number of shares of the issuer’s common stock, no par value, outstanding as of October ~~28, 2018~~27, 2019 was ~~158,212,663.~~300,548,018.

GLOBAL PAYMENTS INC.

FORM 10-Q

For the quarterly period ended September 30, ~~2018~~2019

TABLE OF CONTENTS



		Page
PART I - FINANCIAL INFORMATION
ITEM 1.	Unaudited Consolidated Statements of Income for the three and nine months ended September 30, ~~2018~~2019 and ~~2017~~2018	3
	Unaudited Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, ~~2018~~2019 and ~~2017~~2018	5
	Consolidated Balance Sheets at September 30, ~~2018~~2019 (unaudited) and December 31, ~~2017~~2018	6
	Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2018~~2019 and ~~2017~~2018	7
	Unaudited Consolidated Statements of Changes in Equity for the three and nine months ended September 30, ~~2018~~2019 and ~~2017~~2018	89
	Notes to Unaudited Consolidated Financial Statements	910
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2731
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	2740
ITEM 4.	Controls and Procedures	3740
PART II - OTHER INFORMATION
ITEM 1.	Legal Proceedings	3842
ITEM 1A.	Risk Factors	3842
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3843
ITEM 6.	Exhibits	3944
	Signatures	4046

PART 1 - FINANCIAL INFORMATION

ITEM 1—FINANCIAL STATEMENTS

GLOBAL PAYMENTS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)


	Three Months Ended						Three Months Ended
	September 30, 2018			September 30, 2017			September 30, 2019			September 30, 2018

Revenues	$	857,670		$	1,038,907		$	1,105,941		$	857,670
Operating expenses:
Cost of service	265,013			493,883			427,720			265,013
Selling, general and administrative	369,495			372,553			504,184			369,495
	634,508			866,436			931,904			634,508
Operating income	223,162			172,471			174,037			223,162

Interest and other income	3,134			2,347			11,232			3,134
Interest and other expense	(46,356		)	(40,764		)	(96,161		)	(46,356		)
	(43,222		)	(38,417		)	(84,929		)	(43,222		)
Income before income taxes	179,940			134,054			89,108			179,940
Benefit from (provision for) income taxes	6,089			(15,692		)
Income tax benefit							16,623			6,089
Net income	186,029			118,362			105,731			186,029
Net income attributable to noncontrolling interests, net of income tax	(9,659		)	(7,622		)	(10,687		)	(9,659		)
Net income attributable to Global Payments	$	176,370		$	110,740		$	95,044		$	176,370

Earnings per share attributable to Global Payments:
Basic earnings per share	$	1.12		$	0.72		$	0.54		$	1.12
Diluted earnings per share	$	1.11		$	0.71		$	0.54		$	1.11

See Notes to Unaudited Consolidated Financial Statements.

GLOBAL PAYMENTS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)


	Nine Months Ended						Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2019			September 30, 2018

Revenues	$	2,485,811		$	2,920,910		$	2,924,131		$	2,485,811
Operating expenses:
Cost of service	781,943			1,418,969			1,035,225			781,943
Selling, general and administrative	1,133,799			1,092,648			1,293,651			1,133,799
	1,915,742			2,511,617			2,328,876			1,915,742
Operating income	570,069			409,293			595,255			570,069

Interest and other income	17,397			5,787			20,342			17,397
Interest and other expense	(139,681		)	(130,422		)	(220,858		)	(139,681		)
	(122,284		)	(124,635		)	(200,516		)	(122,284		)
Income before income taxes	447,785			284,658			394,739			447,785
Provision for income taxes	(46,441		)	(40,893		)
Income tax expense							(39,765		)	(46,441		)
Net income	401,344			243,765			354,974			401,344
Net income attributable to noncontrolling interests, net of income tax	(24,506		)	(17,302		)	(27,132		)	(24,506		)
Net income attributable to Global Payments	$	376,838		$	226,463		$	327,842		$	376,838

Earnings per share attributable to Global Payments:
Basic earnings per share	$	2.37		$	1.48		$	2.00		$	2.37
Diluted earnings per share	$	2.36		$	1.47		$	2.00		$	2.36

See Notes to Unaudited Consolidated Financial Statements.

GLOBAL PAYMENTS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)



	Three Months Ended
	September 30, 2019			September 30, 2018

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

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


	Three Months Ended						Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2019			September 30, 2018

Net income	$	186,029		$	118,362		$	354,974		$	401,344
Other comprehensive income (loss):
Foreign currency translation adjustments	(15,395		)	42,417			(54,377		)	(80,620		)
Income tax benefit related to foreign currency translation adjustments	140			—
Unrealized gains on hedging activities	1,845			341
Reclassification of unrealized (gains) losses on hedging activities to interest expense	(1,663		)	1,172
Income tax provision related to hedging activities	(110		)	(670		)
Other, net	(58		)	18
Other comprehensive income (loss), net of tax	(15,241		)	43,278
Income tax benefit (expense) related to foreign currency translation adjustments							1,695			(224		)
Net unrealized (losses) gains on hedging activities							(96,997		)	12,353
Reclassification of net unrealized gains on hedging activities to interest expense							(1,530		)	(2,830		)
Income tax benefit (expense) related to hedging activities							23,800			(2,420		)
Other, net of tax							165			(59		)
Other comprehensive loss							(127,244		)	(73,800		)

Comprehensive income	170,788			161,640			227,730			327,544
Comprehensive income attributable to noncontrolling interests	(21,333		)	(9,950		)	(17,780		)	(36,264		)
Comprehensive income attributable to Global Payments	$	149,455		$	151,690		$	209,950		$	291,280

Nine Months Ended
September 30, 2018 September 30, 2017

Net income $ 401,344
$ 243,765
Other comprehensive income (loss):
Foreign currency translation adjustments (80,620 ) 133,921
Income tax provision related to foreign currency translation adjustments (224 ) —
Unrealized gains (losses) on hedging activities 12,353
(2,214 )
Reclassification of unrealized (gains) losses on hedging activities to interest expense (2,830 ) 4,667
Income tax provision related to hedging activities (2,420 ) (919 )
Other, net (59 ) (196 )
Other comprehensive income (loss), net of tax (73,800 ) 135,259

Comprehensive income 327,544
379,024
Comprehensive income attributable to noncontrolling interests (36,264 ) (32,352 )
Comprehensive income attributable to Global Payments $ 291,280
$ 346,672

See Notes to Unaudited Consolidated Financial Statements.

GLOBAL PAYMENTS INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)


	September 30, 2018			December 31, 2017			September 30, 2019			December 31, 2018
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	990,604		$	1,335,855		$	2,127,616		$	1,210,878
Accounts receivable, net of allowances for doubtful accounts of $3,495 and $1,827, respectively	321,664			301,887
Accounts receivable, net							868,133			348,400
Settlement processing assets	2,894,226			2,459,292			1,556,307			1,600,222
Prepaid expenses and other current assets	207,496			206,545			440,512			216,708
Total current assets	4,413,990			4,303,579			4,992,568			3,376,208
Goodwill	6,130,921			5,703,992			23,754,450			6,341,355
Other intangible assets, net	2,278,968			2,181,707			13,184,391			2,488,618
Property and equipment, net	640,976			588,348			1,423,271			653,542
Deferred income taxes	9,237			13,146			12,477			8,128
Other noncurrent assets	365,144			207,297			1,844,890			362,923
Total assets	$	13,839,236		$	12,998,069		$	45,212,047		$	13,230,774
LIABILITIES AND EQUITY
Current liabilities:
Settlement lines of credit	$	685,878		$	635,166		$	547,624		$	700,486
Current portion of long-term debt	92,689			100,308			33,373			115,075
Accounts payable and accrued liabilities	1,065,435			1,039,607			1,849,424			1,176,703
Settlement processing obligations	2,423,069			2,040,509			1,852,731			1,276,356
Total current liabilities	4,267,071			3,815,590			4,283,152			3,268,620
Long-term debt	4,707,510			4,559,408			8,987,704			5,015,168
Deferred income taxes	516,357			436,879			3,352,727			585,025
Other noncurrent liabilities	172,730			220,961			632,746			175,618
Total liabilities	9,663,668			9,032,838			17,256,329			9,044,431
Commitments and contingencies
Equity:
Preferred stock, no par value; 5,000,000 shares authorized and none issued	—			—			—			—
Common stock, no par value; 200,000,000 shares authorized; 158,186,371 issued and outstanding at September 30, 2018 and 159,180,317 issued and outstanding at December 31, 2017	—			—
Common stock, no par value; 400,000,000 shares authorized at September 30, 2019 and 200,000,000 shares authorized at December 31, 2018; 300,544,949 issued and outstanding at September 30, 2019 and 157,961,982 issued and outstanding at December 31, 2018							—			—
Paid-in capital	2,250,828			2,379,774			25,904,804			2,235,167
Retained earnings	1,994,003			1,597,897			2,297,897			2,066,415
Accumulated other comprehensive loss	(270,545		)	(183,144		)	(428,067		)	(310,175		)
Total Global Payments shareholders’ equity	3,974,286			3,794,527			27,774,634			3,991,407
Noncontrolling interests	201,282			170,704			181,084			194,936
Total equity	4,175,568			3,965,231			27,955,718			4,186,343
Total liabilities and equity	$	13,839,236		$	12,998,069		$	45,212,047		$	13,230,774

See Notes to Unaudited Consolidated Financial Statements.

GLOBAL PAYMENTS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Nine Months Ended
September 30, 2018 September 30, 2017
Cash flows from operating activities:
Net income $ 401,344
$ 243,765
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment 105,734
80,868
Amortization of acquired intangibles 263,714
249,095
Share-based compensation expense 44,937
30,771
Provision for operating losses and bad debts 32,309
37,203
Amortization of capitalized contract costs 37,281
32,863
Deferred income taxes (4,973 ) (51,093 )
Other, net (17,185 ) 34,190
Changes in operating assets and liabilities, net of the effects of acquisitions:
Accounts receivable (27,696 ) (6,070 )
Settlement processing assets and obligations, net (58,693 ) (232,713 )
Prepaid expenses and other assets (117,824 ) (78,302 )
Accounts payable and other liabilities 2,058
19,546
Net cash provided by operating activities 661,006
360,123
Cash flows from investing activities:
Business and other acquisitions, net of cash acquired (769,082 ) (563,009 )
Capital expenditures (156,060 ) (136,612 )
Proceeds from sales of property and equipment 131
37,520
Other, net (2,514 ) (48,056 )
Net cash used in investing activities (927,525 ) (710,157 )
Cash flows from financing activities:
Net borrowings of settlement lines of credit 49,381
77,397
Proceeds from long-term debt 1,606,214
1,713,324
Repayments of long-term debt (1,468,505 ) (1,386,721 )
Payment of debt issuance costs (12,544 ) (9,520 )
Repurchase of common stock (180,897 ) (32,811 )
Proceeds from stock issued under share-based compensation plans 12,571
7,068
Common stock repurchased - share-based compensation plans (44,824 ) (21,171 )
Distributions to noncontrolling interests (5,686 ) (9,301 )
Dividends paid (4,750 ) (5,141 )
Net cash (used in) provided by financing activities (49,040 ) 333,124
Effect of exchange rate changes on cash (29,692 ) 40,181
(Decrease) increase in cash and cash equivalents (345,251 ) 23,271
Cash and cash equivalents, beginning of the period 1,335,855
1,162,779
Cash and cash equivalents, end of the period $ 990,604
$ 1,186,050



	Nine Months Ended
	September 30, 2019			September 30, 2018
Cash flows from operating activities:
Net income	$	354,974		$	401,344
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment	132,043			105,734
Amortization of acquired intangibles	345,455			263,714
Amortization of capitalized contract costs	47,778			37,281
Share-based compensation expense	55,791			44,937
Provision for operating losses and bad debts	34,877			32,309
Deferred income taxes	(42,990		)	(4,973		)
Other, net	6,666			(17,185		)
Changes in operating assets and liabilities, net of the effects of business combinations:
Accounts receivable	(80,709		)	(27,696		)
Settlement processing assets and obligations, net	623,985			(58,693		)
Prepaid expenses and other assets	(148,421		)	(117,824		)
Accounts payable and other liabilities	19,940			2,058
Net cash provided by operating activities	1,349,389			661,006
Cash flows from investing activities:
Acquisitions, net of cash acquired	(334,383		)	(769,082		)
Capital expenditures	(201,017		)	(156,060		)
Other, net	29,112			(2,383		)
Net cash used in investing activities	(506,288		)	(927,525		)
Cash flows from financing activities:
Net (repayments of) borrowings from settlement lines of credit	(144,473		)	49,381
Proceeds from long-term debt	6,704,838			1,606,214
Repayments of long-term debt	(6,097,229		)	(1,468,505		)
Payments of debt issuance costs	(32,637		)	(12,544		)
Repurchases of common stock	(233,995		)	(180,897		)
Proceeds from stock issued under share-based compensation plans	22,008			12,571
Common stock repurchased - share-based compensation plans	(49,037		)	(44,824		)
Distributions to noncontrolling interests	(31,632		)	(5,686		)
Preacquisition dividends paid to former TSYS shareholders	(23,240		)	—
Dividends paid	(4,727		)	(4,750		)
Net cash provided by (used in) financing activities	109,876			(49,040		)
Effect of exchange rate changes on cash	(36,239		)	(29,692		)
Increase (decrease) in cash and cash equivalents	916,738			(345,251		)
Cash and cash equivalents, beginning of the period	1,210,878			1,335,855
Cash and cash equivalents, end of the period	$	2,127,616		$	990,604

See Notes to Unaudited Consolidated Financial Statements.

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, 2017 159,180
$ 2,379,774
$ 1,597,897
$ (183,144 ) $ 3,794,527
$ 170,704
$ 3,965,231
Net income 376,838
376,838
24,506
401,344
Other comprehensive income (loss), net of tax (85,558 ) (85,558 ) 11,758
(73,800 )
Stock issued under share-based compensation plans 895
12,571
12,571
12,571
Common stock repurchased - share-based compensation plans (277 ) (32,508 )

(32,508 ) (32,508 )
Share-based compensation expense 44,937
44,937
44,937
Distributions to noncontrolling interest —
(5,686 ) (5,686 )
Cumulative effect of adoption of new accounting standard 50,969
(1,843 ) 49,126
49,126
Repurchase of common stock (1,612 ) (153,946 ) (26,951 ) (180,897 ) (180,897 )
Dividends paid ($0.03 per share) (4,750 ) (4,750 ) (4,750 )
Balance at September 30, 2018 158,186
$ 2,250,828
$ 1,994,003
$ (270,545 ) $ 3,974,286
$ 201,282
$ 4,175,568



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

Number of Shares

Paid-in Capital

Retained Earnings
Accumulated Other Comprehensive Loss
Total Global Payments Shareholders’ Equity
Noncontrolling Interests Total Equity
Balance at December 31, 2016 152,186
$ 1,816,278
$ 1,137,230
$ (322,717 ) $ 2,630,791
$ 148,551
$ 2,779,342
Net income 226,463
226,463
17,302
243,765
Other comprehensive income, net of tax 120,209
120,209
15,050
135,259
Stock issued under share-based compensation plans 851
7,068

7,068
7,068
Common stock repurchased - share-based compensation plans (256 ) (24,078 ) (24,078 ) (24,078 )
Share-based compensation expense 30,771
30,771
30,771
Issuance of common stock in connection with a business combination 6,358
572,079
572,079
572,079
Dissolution of a subsidiary

7,998
7,998
(7,998 ) —
Distributions to noncontrolling interest —
(9,301 ) (9,301 )
Repurchase of common stock (376 ) (25,787 ) (9,024 ) (34,811 ) (34,811 )
Dividends paid ($0.03133 per share) (5,141 ) (5,141 ) (5,141 )
Balance at September 30, 2017 158,763
$ 2,376,331
$ 1,357,526
$ (202,508 ) $ 3,531,349
$ 163,604
$ 3,694,953



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

See Notes to Unaudited Consolidated Financial Statements.

GLOBAL PAYMENTS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands)



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



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

See Notes to Unaudited Consolidated Financial Statements.

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 and software solutions delivering innovative services to our customers globally. Our technologies, services and employee expertise enable us to provide a broad range of solutions that allow our customers to accept various payment types and operate their businesses more efficiently. We distribute our services across a variety of channels in 31 countries throughout North America, Europe, the Asia-Pacific region and Brazil and operate in ~~three~~ ~~reportable segments: North America, Europe and Asia-Pacific.~~

~~We were incorporated in Georgia as Global Payments Inc. in~~ ~~2000~~ ~~and spun-off from our former parent company in~~ ~~2001. Including our time as part of our former parent company, we have been in the payment technology services business since~~ ~~1967~~. Global Payments Inc. and its consolidated subsidiaries are referred to herein 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"~~("SEC"). The consolidated balance sheet as of December 31, ~~2017~~2018 was derived from the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 but does not include all disclosures required by GAAP for annual financial statements.

In the opinion of our management, all known adjustments necessary for a fair presentation of the results of the interim periods have been made. These adjustments consist of normal recurring accruals and estimates that affect the carrying amount of assets and liabilities. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Use of estimates— The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates.

Recently Adopted Accounting Pronouncements

~~New Revenue Accounting Standard~~

~~We adopted Accounting Standards Update ("ASU") 2014-09, as well as other clarifications and technical guidance issued by~~— In February 2016, the Financial Accounting Standards Board ("FASB") ~~related to this new revenue standard (collectively codified in Accounting Standards Codification ("ASC") Topic 606:~~ ~~Revenue from Contracts with Customers, "ASC 606" and ASC Subtopic 340-40:~~ ~~Other Assets and Deferred Costs - Contracts with Customers~~, "ASC 340-40"), on January 1, 2018. We elected the modified retrospective transition method, which resulted in a net increase to retained earnings of $51.0 million for the cumulative effect of applying the standard. The primary component of the cumulative-effect adjustment was the result of changes in the accounting for certain costs to obtain customer contracts and the related income tax effects, which resulted in increases to other noncurrent assets and deferred income tax liabilities of $64.6 million and $15.6 million, respectively. Previously, we amortized these assets to expense over the related contract term. Under ASC 340-40, we now amortize these assets over the expected period of benefit, which is generally longer than the initial contract term. Under the new standard, we also capitalized certain costs that were not previously capitalized, including certain commissions and related payroll taxes and certain costs incurred to fulfill a contract before the performance obligation has been satisfied, primarily compensation to employees engaged in customer implementation activities in our technology-enabled businesses.

Under the modified retrospective transition method, we are required to provide additional disclosures during 2018 of the amount by which each financial statement line item is affected in the current reporting period, as compared to the guidance that was in effect before the change, and an explanation of the reasons for significant changes, if any. For the three and nine months ended September 30, 2018, we presented revenue net of certain payments made to third parties, including payment networks. This change in presentation

had the effect of reducing our revenues and operating expenses by the same amounts. As a result, revenues, cost of service and selling, general and administrative expenses were lower than the amounts without the effect of the new accounting standard by $291.3 million, $273.6 million and $17.7 million, respectively, during the three months ended September 30, 2018; and lower than the amounts without the effect of the new accounting standard by $825.5 million, $774.5 million and $51.0 million, respectively, during the nine months ended September 30, 2018. The adoption of ASC 606 did not have a material effect on any other line items in our consolidated statement of income for the three and nine months ended September 30, 2018 or consolidated balance sheet as of September 30, 2018, and had no effect on our cash flows from operating activities, investing activities or financing activities included in our consolidated statement of cash flows for the nine months ended September 30, 2018.

~~Other Recently Adopted Accounting Standards Updates~~

~~In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815):~~ ~~Targeted Improvements to Accounting for Hedging Activities~~." The ASU expands and refines hedge accounting for both nonfinancial and financial risk components and aligns the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. In addition, the amendments in this update modify disclosure requirements for presentation of hedging activities. Those modifications include a tabular disclosure related to the effect on the income statement of fair value and cash flow hedges and eliminate the requirement to disclose the ineffective portion of the change in fair value of hedging instruments, if any. We adopted ASU 2017-12 on January 1, 2018 with no effect on our consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-01, "Business Combinations (Topic 805):~~ ~~Clarifying the Definition of a Business~~." The ASU clarifies the definition of a business, which affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. The new standard is intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses, with the expectation that fewer will qualify as acquisitions (or disposals) of businesses. The ASU became effective for us on January 1, 2018. These amendments have been applied prospectively from the date of adoption. The effect of ASU 2017-01 is dependent upon the nature of future acquisitions or dispositions that we make.

~~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. We adopted ASU 2016-16 on January 1, 2018 using the modified retrospective transition method with no effect on our consolidated financial statements.

~~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. We adopted ASU 2016-01 on January 1, 2018 using the modified retrospective transition method with no material effect on our consolidated financial statements.

~~Recently Issued Pronouncements Not Yet Adopted~~

~~New Lease Accounting Standard~~

~~In February 2016, the FASB~~ issued ASU 2016-02, "Leases." ~~This update~~ASU 2016-02 requires ~~lessees to recognize, on the balance sheet,~~recognition of assets and liabilities for the rights and obligations created by ~~leases. In addition, several~~leases and new disclosures ~~will be required.~~

~~Although early adoption is permitted, we expect to adopt~~about leases. We adopted ASU 2016-02, as well as other related clarifications and interpretive guidance issued by the FASB, ~~when it becomes effective for us~~ on January 1, ~~2019. We plan to elect~~2019 using the optional modified retrospective transition ~~method to apply the provisions of the new standard at the adoption date, which will result in recognition and measurement~~

~~of assets and liabilities for the rights and obligations created by leases in the period of adoption.~~method. Under this transition method, we ~~would~~did not recast the prior period financial statements presented.

We have not completed our evaluation of the effect of ASU 2016-02 on our consolidated financial statements; however, we expect to recognize right of use assets and liabilities for our operating leases in the balance sheet upon adoption. We plan to electelected the transition package of three practical expedients, which among other things, ~~allows~~allowed for the carryforward of historical lease ~~classifications, and we expect to make~~classifications. We made an accounting policy election to not ~~apply the recognition requirements to~~recognize assets or liabilities for leases with a term of less than twelve ~~months.~~

~~Our~~months and to account for all components in a lease arrangement as a single combined lease component for all of our then existing ~~leases consist primarily of real estate leases~~asset classes. In connection with the Merger, we acquired right-of-use assets that represent an additional asset class for ~~office space throughout the markets in~~computer equipment, for which we ~~conduct business. We are currently finalizing~~account for lease and nonlease components separately.

The adoption of ASU 2016-02 resulted in the ~~analysis~~measurement and recognition of ~~our existing~~ lease ~~arrangements~~liabilities in the amount of $274.0 million and right-of-use assets in the amount of $236.0 million as of January 1, 2019. Lease liabilities were measured as the present value of remaining lease payments, and the corresponding right-of-use assets were measured at an amount equal to ~~evaluate~~ the ~~potential effects~~lease liabilities adjusted by the amounts of ~~this new accounting standard~~certain assets and liabilities, such as prepaid rent and deferred lease obligations, that we previously recognized on ~~our consolidated financial statements. We expect to implement new accounting processes and internal controls to meet~~ the requirements for financial reporting and disclosures of our leases and are coordinating with various internal stakeholders to evaluate, design and implement these new processes and controls. We are also implementing a new technology solution to assist with the necessary calculations to support the accounting and disclosure requirements of the new accounting standard. We expect these evaluation and implementation activities will continue throughout the remainder of 2018balance sheet prior to the ~~effective date~~initial application of ~~adoption~~ASU 2016-02. To calculate the present value of remaining lease payments, we elected to use an incremental borrowing rate based on ~~January 1, 2019.~~the remaining lease term at transition.

~~SEC Rules and Other Accounting Standards Updates~~Recently Issued Pronouncements Not Yet Adopted

In August 2018, the SEC issued a final rule that amends certain of its disclosure requirements. The changes are generally intended to reduce or eliminate certain disclosures that have become redundant, duplicative, overlapping, outdated or superseded in light of other disclosures requirements or changes in the information environment. The rule also requires SEC registrants to present changes in stockholders' equity and the amount of dividends per share for each class of shares on a quarterly basis for the current and prior-year periods. The final rule is effective for SEC filings on Forms 10-Q and 10-K made on or after November 5, 2018.

— In August 2018, the FASB issued ASU 2018-15, "~~Intangibles~~"Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (A Consensus of the FASB Emerging Issues Task Force)." ~~This~~ ASU 2018-15 provides additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract. The new guidance amends the definition of a hosting arrangement and requires a

customer in a hosting arrangement that is a service contract to capitalize certain implementation costs as if the arrangement was an internal-use software project. The amendments in this update also provide additional presentation and disclosure requirements, including requirements to disclose the nature of an entity’s hosting arrangements that are service ~~contracts. This ASU is~~contracts, as well as quantitative information about capitalized implementation costs and related amortization expense. The guidance will become effective for ~~annual and interim periods beginning~~us on January 1, 2020. We expect to apply the guidance prospectively to all implementation costs incurred after ~~December 15, 2019.~~ the date of adoption.

We are finalizing our comparison of the guidance in ASU 2018-15 to our current accounting and financial reporting practices for costs of implementation activities performed in cloud computing arrangements. We are also evaluating the need for changes to our internal controls. We have not yet completed our assessment or quantified the effect, if any, of ASU 2018-15 on our consolidated ~~financial statements.~~

~~In August 2018,~~balance sheet or our statements of income and cash flows; however, our preliminary expectation is that the ~~FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820):~~ ~~Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.~~" This ASU provides an update to modify the disclosure requirements on fair value measurements in Topic 820. This ASU is effective for annual and interim periods beginning after December 15, 2019. We are evaluating the effect of ASU 2018-13 on our consolidated financial statements.

~~In February 2018, the FASB issued ASU 2018-02, "Income Statement-Reporting Comprehensive Income:~~ ~~Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income."~~ This ASU provides an option to reclassify stranded tax effects within accumulated other comprehensive income ("AOCI") to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the U.S. Tax Cuts and Jobs Act of 2017 (the "2017 U.S. Tax Act") (or portion thereof) is recorded. This ASU requires disclosure of a description of the accounting policy for releasing income tax effects from AOCI; whether election is made to reclassify the stranded income tax effects from the 2017 U.S. Tax Act; and information about the income tax effects that are reclassified. This ASU is effective for annual and interim periods beginning after December 15, 2018. Although we do not believe adoption of ~~ASU 2018-02~~this standard will not have a material effect on our consolidated financial ~~statements, we~~statements. We have historically capitalized implementation costs associated with cloud computing arrangements that are ~~continuing~~service contracts following the guidance in Subtopic 350-40 and expect to ~~evaluate whether~~continue to ~~elect~~do so pursuant to the ~~option.~~clarifications provided in the new guidance. We expect to amortize deferred implementation costs to expense on a straight-line basis over the term of the applicable hosting arrangement.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The amendments in this update change how companies measure and recognize credit impairment for many financial ~~assets.~~instruments measured at amortized cost. The new model for current expected credit ~~loss model~~losses ("CECL") will require ~~companies~~us to ~~immediately~~ recognize an estimate of credit losses expected to occur over the remaining life of the financial ~~assets (including trade receivables)~~instruments that are inwithin the scope of the ~~update. The~~ update, ~~also made amendments~~including accounts receivable and settlement processing assets, each of which are short-term in nature. Under current GAAP, credit losses on these financial instruments are not recognized until their occurrence is deemed to ~~the current impairment model for held-to-maturity and available-for-sale debt securities and certain guarantees.~~be probable. The guidance will become effective for us on January 1, 2020. ~~Early adoption is permitted for periods beginning on or after January 1, 2019.~~ In general, the new guidance will require modified retrospective application to all outstanding financial assets that are within the scope of the update, with a cumulative-effect adjustment, if any, recorded to retained earnings as of the date of adoption.

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

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

NOTE 2—ACQUISITIONS

~~See "Note 14—Subsequent Events" for a discussion of an additional business acquisition we completed in October 2018.~~

~~AdvancedMD~~

On September 4, 2018, we acquired AdvancedMD, Inc. ("AdvancedMD"), a provider of cloud-based enterprise software solutions to small-to-medium sized ambulatory physician practices in the United States. We believe the acquisition will expand our software-driven payments strategy by enabling us to enter the healthcare vertical market, a large and fragmented market with strong payment fundamentals and attractive growth opportunities.

We paid the seller cash consideration of approximately $700 million, which we funded with cash on hand and by drawing on our Revolving Credit Facility (described in Note 6—Long-Term Debt and Lines of Credit).

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

Total System Services, Inc.

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

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

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



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

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

The provisional estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed as of September 30, ~~2018. The fair values~~2019, including a reconciliation to the total purchase consideration, were as follows (in thousands):



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

As of September 30, 2019, we considered these amounts to be provisional because we were still in the process of gathering and reviewing information to support the valuations of the assets acquired and ~~the~~ liabilities assumed have been determined provisionally and are subject to adjustment as we obtain additional information. In particular, additional time is needed to determine the valuation of assets and liabilities and to evaluate the basis differences for assets and liabilities for financial reporting and tax purposes.

As of September 30, 2018, we provisionally estimated that substantially all of the total identifiable assets were comprised of goodwill and other intangible assets. We expect the intangible assets to be similar in nature to intangible assets we have acquired in other recent acquisitions, including customer-related intangible assets and acquired technology. Further, our methodology for estimating the acquisition-date fair values of identified intangible assets is consistent with the approach we have applied in other recent acquisitions of similar businesses.

assumed. Goodwill arising from the acquisition of $17.4 billion, included in the ~~North America~~TSYS segment as of September 30, 2019, was attributable to expected growth opportunities, an assembled workforce and potential synergies from combining the acquired business into our existing ~~businesses and an assembled workforce. Due to the timing of the transaction, we have not allocated the provisional estimated goodwill of $469 million to a reporting unit.~~business. We expect that substantially all of the goodwill from this acquisition will not be deductible for income tax purposes. Due to the timing of the Merger, we are still in the process of assigning goodwill to our reporting units.

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



	Estimated Fair Values		Weighted-Average Estimated Amortization Periods

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

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

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

incremental amortization expense associated with identified intangible assets;

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

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

the income tax effects of the pro forma adjustments.

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



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

	(in thousands)

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



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

	(in thousands)

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

WeSICOM Systems, Inc.

On October 17, 2018, we acquired ~~the communities and sports divisions of Athlaction Topco, LLC~~SICOM Systems, Inc. ("~~ACTIVE Network"~~SICOM") ~~on September 1, 2017,~~ for total purchase consideration of ~~$1.2 billion. ACTIVE Network delivers~~$410.2 million, which we funded with cash on hand and incremental debt. SICOM is a provider of end-to-end enterprise, cloud-based ~~enterprise~~ software ~~including payment technology~~ solutions and other technologies to ~~event organizers in the communities~~quick service restaurants and health and fitness markets. This acquisition aligns with our technology-enabled, software driven strategy and adds an enterprise software business operating in two additional vertical markets that we believe offer attractive growth fundamentals.food service management companies.

~~The following table summarizes the cash and non-cash components of the consideration transferred on September 1, 2017 (in thousands):~~

Cash consideration paid to ACTIVE Network stockholders $ 599,497
Fair value of Global Payments common stock issued to ACTIVE Network stockholders 572,079
$ 1,171,576

~~We funded the cash consideration primarily by drawing on our Revolving Credit Facility (described in "Note 6~~—Long-Term Debt and Lines of Credit"). The acquisition-date fair value of 6,357,509 shares of our common stock issued to the sellers was determined based on the share price of our common stock as of the acquisition date and the effect of certain transfer restrictions.

~~This transaction was accounted for as a business combination, which requires that we record the assets acquired and liabilities assumed at fair value as of the acquisition date.~~ The estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed as of September 30, 2019, including a reconciliation to the total purchase consideration, ~~are~~were as ~~follows:~~follows (in thousands):



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

December 31, 2017 Measurement-Period Adjustments September 30, 2018

(in thousands)

Cash and cash equivalents $ 42,913
$ —
$ 42,913
Property and equipment 21,985
(133 ) 21,852
Identified intangible assets 410,545
—
410,545
Other assets 87,240
(97 ) 87,143
Deferred income taxes (31,643 ) 4,003
(27,640 )
Other liabilities (144,132 ) (3,349 ) (147,481 )
Total identifiable net assets 386,908
424
387,332
Goodwill 784,668
(424 ) 784,244
Total purchase consideration $ 1,171,576
$ —
$ 1,171,576

~~The measurement-period adjustments were~~During the ~~result~~nine months ended September 30, 2019, we made an adjustment of ~~continued refinement of certain estimates, primarily those regarding~~$0.4 million to reflect an increase in the ~~measurement of certain contingencies and deferred income taxes.~~

total purchase consideration, which resulted in a corresponding increase in goodwill. Goodwill ~~of $784.2 million~~ arising from the acquisition of $265.2 million, included in the North America segment, was attributable to expected growth opportunities, an assembled workforce and potential synergies from combining the acquired business into our existing ~~businesses and an assembled workforce.~~business. We expect that approximately ~~80%~~$40 million of the goodwill from this acquisition will be deductible for income tax purposes.

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



	Estimated Fair Values		Weighted-Average Estimated Amortization Periods

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

Estimated Fair Values Weighted-Average Estimated Amortization Periods

(in thousands) (years)

Customer-related intangible assets $ 189,000
17
Acquired technology 153,300
9
Trademarks and trade names 59,400
15
Covenants-not-to-compete 8,845
3
Total estimated acquired intangible assets $ 410,545
13

AdvancedMD, Inc.

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

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



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

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

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



	Estimated Fair Values		Weighted-Average Estimated Amortization Periods

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

Valuation of Identified Intangible Assets

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

NOTE 3—REVENUES

We are a leading worldwide provider of payment technology and software solutions delivering innovative services to our customers globally. Our technologies, services and employee expertise enable us to provide a broad range of solutions that allow our customers to accept various payment types and operate their businesses more efficiently. We distribute our services across a variety of channels to customers. The following disclosures in this note are applicable for the three and nine months ended September 30, 2018.

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



	Three Months Ended September 30, 2019
	North America		Europe		Asia-Pacific		TSYS		Total

	(in thousands)

Direct:
Relationship-led	$	310,389	$	114,562	$	29,829	$	—	$	454,780
Technology-enabled	369,147		50,388		28,851		—		448,386
	679,536		164,950		58,680		—		903,166
Wholesale	55,305		—		—		—		55,305
	734,841		164,950		58,680		—		958,471
TSYS	—		—		—		147,470		147,470
	$	734,841	$	164,950	$	58,680	$	147,470	$	1,105,941



	Three Months Ended September 30, 2018
	North America		Europe		Asia-Pacific		TSYS		Total

	(in thousands)

Direct:
Relationship-led	$	254,593	$	105,468	$	33,612	$	—	$	393,673
Technology-enabled	317,206		52,116		22,759		—		392,081
	571,799		157,584		56,371		—		785,754
Wholesale	71,916		—		—		—		71,916
	643,715		157,584		56,371		—		857,670
TSYS	—		—		—		—		—
	$	643,715	$	157,584	$	56,371	$	—	$	857,670



	Nine Months Ended September 30, 2019
	North America		Europe		Asia-Pacific		TSYS		Total

	(in thousands)

Direct:
Relationship-led	$	882,026	$	319,781	$	93,990	$	—	$	1,295,797
Technology-enabled	1,061,094		148,387		85,321		—		1,294,802
	1,943,120		468,168		179,311		—		2,590,599
Wholesale	186,062		—		—		—		186,062
	2,129,182		468,168		179,311		—		2,776,661
TSYS	—		—		—		147,470		147,470
	$	2,129,182	$	468,168	$	179,311	$	147,470	$	2,924,131



	Nine Months Ended September 30, 2018
	North America		Europe		Asia-Pacific		TSYS		Total

	(in thousands)

Direct:
Relationship-led	$	725,874	$	300,642	$	101,225	$	—	$	1,127,741
Technology-enabled	896,982		155,850		68,549		—		1,121,381
	1,622,856		456,492		169,774		—		2,249,122
Wholesale	236,689		—		—		—		236,689
	1,859,545		456,492		169,774		—		2,485,811
TSYS	—		—		—		—		—
	$	1,859,545	$	456,492	$	169,774	$	—	$	2,485,811

Three Months Ended September 30, 2018
North America Europe Asia-Pacific Total

(in thousands)

Direct:
Relationship-led $ 254,593
$ 105,468
$ 33,612
$ 393,673
Technology-enabled 317,206
52,116
22,759
392,081
571,799
157,584
56,371
785,754

Wholesale 71,916
—
—
71,916
$ 643,715
$ 157,584
$ 56,371
$ 857,670

Nine Months Ended September 30, 2018
North America Europe Asia-Pacific Total

(in thousands)

Direct:
Relationship-led $ 725,874
$ 300,642
$ 101,225
$ 1,127,741
Technology-enabled 896,982
155,850
68,549
1,121,381
1,622,856
456,492
169,774
2,249,122

Wholesale 236,689
—
—
236,689
$ 1,859,545
$ 456,492
$ 169,774
$ 2,485,811

ASC 606 requires that we determine for each customer arrangement whether revenue should be recognized at a point in time or over time. For the three and nine months ended September 30, 2019 and 2018, substantially all of our revenues were recognized over time.

~~Nature~~Supplemental balance sheet information related to contracts from customers as of ~~our Customer Arrangements~~September 30, 2019 and December 31, 2018 was as follows:



	Balance Sheet Location	September 30, 2019		December 31, 2018

		(in thousands)

Assets:
Capitalized costs to obtain customer contracts, net	Other noncurrent assets	$	216,540	$	194,616
Capitalized costs to fulfill customer contracts, net	Other noncurrent assets	$	24,114	$	12,954

Liabilities:
Contract liabilities, net (current)	Accounts payable and accrued liabilities	$	195,472	$	146,947
Contract liabilities, net (noncurrent)	Other noncurrent liabilities	$	28,039	$	8,595

~~Our payment services customers~~

The increase in contract ~~with us~~liabilities during the nine months ended September 30, 2019 was primarily attributable to contract liabilities assumed in the Merger. Net contract assets were not material at September 30, 2019 or at December 31, 2018.

Revenue recognized for ~~payment services, which we provide in exchange for consideration for completed transactions. Our payment solutions are similar around~~ the ~~world in that we enable our customers to accept card, electronic~~three months ended September 30, 2019 and ~~digital-based payments~~2018 from contract liability balances at the ~~point~~beginning of ~~sale. Our comprehensive services include authorization services (including electronic draft capture), settlement~~each period was $52.0 million and funding services, customer support and help-desk functions, chargeback resolution, payment security services, consolidated billing and statements and on-line reporting. In addition, we may sell or rent point-of-sale terminals or other equipment to customers.

At contract inception, we assess the goods and services promised in our contracts with customers and identify a performance obligation for each promise to transfer to the customer a good or service that is distinct. For our payment services specifically, the nature of our promise to the customer is that we stand ready to process transactions the customer requests on a daily basis over the contract term. Since the timing and quantity of transactions to be processed by us is not determinable, we view payment services to comprise an obligation to stand ready to process as many transactions as the customer requires. Under a stand-ready obligation, the evaluation of the nature of our performance obligation is focused on each time increment rather than the underlying activities. Therefore, we view payment services to comprise a series of distinct days of service that are substantially the same and have the same pattern of transfer to the customer. Accordingly, the promise to stand ready is accounted for as a single-series performance obligation.

~~In order to provide our payment services, we route and clear each transaction through the applicable payment network. We obtain authorization~~$39.2 million, respectively. Revenue recognized for the ~~transaction~~nine months ended September 30, 2019 and ~~request funds settlement~~2018 from contract liability balances at the ~~card issuing financial institution through the payment network. When third parties are involved in the transfer of goods or services to our customer, we consider the nature~~beginning of each ~~specific promised good or service~~period was $122.7 million and apply judgment to determine whether we control the good or service before it is transferred to the customer or whether we are acting as an agent of the third party. To determine whether or not we control the good or service before it is transferred to the customer, we assess indicators including whether we or the third party is primarily responsible for fulfillment and which party has discretion in determining pricing for the good or service, as well as other considerations. Based on our assessment of these indicators, we have concluded that our promise to our customer to provide our payment services is distinct from the services provided by the card issuing financial institutions and payment networks in connection with payment transactions. We do not have the ability to direct the use of and obtain substantially all of the benefits of the services provided by the card issuing financial institutions and payment networks before those services are transferred to our customer, and on that basis, we do not control those services prior to being transferred to our customer. As a result, we present our revenue net of the interchange fees charged by the card issuing financial institutions and the fees charged by the payment networks.$90.2 million, respectively.

The majority of our processing services are priced as a percentage of transaction value or a specified fee per transaction, depending on the card type. We also charge other per occurrence fees based on specific services that may be unrelated to the number of transactions or transaction value. Given the nature of the promise and the underlying fees based on unknown quantities or outcomes of services to be performed over the contract term, the total consideration is determined to be variable consideration. The variable consideration for our payment processing service is usage-based and therefore it specifically relates to our efforts to satisfy our payment services obligation. In other words, the variability is satisfied each day the service is provided to the customer. We directly ascribe variable fees to the distinct day of service to which it relates, and we consider the services performed each

day in order to ascribe the appropriate amount of total fees to that day. Therefore, we measure revenue for our payment processing service on a daily basis based on the services that are performed on that day.

Certain of our technology-enabled customer arrangements contain multiple promises, such as payment services (as aforementioned, a series of distinct days of service), perpetual software licenses, software-as-a-service ("SaaS"), maintenance, installation services, training and equipment, each of which is evaluated to determine whether it represents a separate performance obligation. SaaS arrangements are generally offered on a subscription basis, providing the customers with access to the SaaS platform along with general support and maintenance services. Because these promised services within our SaaS arrangements are delivered concurrently over the contract term, we account for these promises as if they are a single performance obligation that includes a series of distinct services with the same pattern of transfer to the customer. In addition, certain installation services are not considered distinct from the SaaS, and are therefore recognized over the expected period of benefit.

Once we determine the performance obligations and the transaction price, including an estimate of any variable consideration, we then allocate the transaction price to each performance obligation in the contract using a relative standalone selling price method. We determine standalone selling price based on the price at which the good or service is sold separately. If the standalone selling price is not observable through past transactions, we estimate the standalone selling price by considering all reasonably available information, including market conditions, trends or other company- or customer-specific factors. Substantially all of the performance obligations described above are satisfied over time. Only equipment sales, perpetual software licenses and certain professional services are generally transferred to the customer at a point in time. For certain other professional services that represent separate performance obligations, we generally use the input method and recognize revenue based on the number of hours incurred or services performed to date in relation to the total services expected to be required to satisfy the performance obligation.

We satisfy the combined SaaS performance obligation by standing ready to provide access to the SaaS. Consideration for SaaS arrangements may consist of fixed- or usage-based fees. Revenue is recognized over the period for which the services are provided or by directly ascribing any variable fees to the distinct day of service based on the services that are performed on that day.

~~Transaction Price Allocated to Future Performance Obligations~~

ASC 606 requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance ~~obligations; however,~~obligations. The purpose of this disclosure is to provide additional information about the amounts and expected timing of revenue to be recognized from the remaining performance obligations in our existing contracts. The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. However, as permitted by ASC 606, we have elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria. ~~As described above, our most significant~~Accordingly, the total unsatisfied or partially unsatisfied performance obligations ~~consist of variable consideration under a stand-ready series of distinct days of service. Such variable consideration meets~~related to processing services is significantly higher than the ~~specified criteria for~~amounts disclosed in table below.

Estimated revenue expected to be recognized in the ~~disclosure exclusion; therefore, the majority of the aggregate amount of transaction price that is allocated~~future related to performance obligations that have not yet been satisfied is variable consideration that is not required for this disclosure. The aggregate fixed consideration portion of customer contracts with an initial contract duration greater than one year is not material.

~~Accounts Receivable, Contract Assets and Contract Liabilities~~

A contract with a customer creates legal rights and obligations. As we perform under customer contracts, our right to consideration that is unconditional is considered to be accounts receivable. If our right to consideration for such performance is contingent upon a future eventare unsatisfied or satisfaction of additional performance obligations, the amount of revenues we have recognized in excess of the amount we have billed to the customer is recognized as a contract asset. Contract liabilities represent consideration received from customers in excess of revenues recognized. Contract assets and liabilities are presented net at the individual contract level in the consolidated balance sheet and are classified as current or noncurrent based on the nature of the underlying contractual rights and obligations.

~~Net contract liabilities included in accounts payable and accrued liabilities on our consolidated balance sheet were $114.1 million~~partially unsatisfied at September 30, 2018, $116.9 million at July 1, 2018 and $100.6 million at January 1, 2018. Net contract liabilities included in other noncurrent liabilities on our consolidated balance sheet were $7.9 million at September 30, 2018, $8.3 million at July 1, 2018 and $6.0 million at January 1, 2018. Revenues for the three months ended September 30, 2018 included $39.2 million that was in contract liabilities at July 1, 2018. Revenues for the nine months ended September 30, 2018 included $90.2 million that was in contract liabilities at January 1, 2018. Net contract assets were not material at September 30, 2018 or at January 1, 2018.2019 as follows (in thousands):



Year ending December 31,
Remainder of 2019	$	228,002
2020	746,107
2021	608,080
2022	435,065
2023-2029	526,047
Total	$	2,543,301

~~Contract Costs~~

We incur costs to obtain contracts with customers, including employee sales commissions and fees to business partners. At contract inception, we capitalize such costs that we expect to recover and that would not have been incurred if the contract had not been obtained. We also capitalize certain costs incurred to fulfill our contracts with customers that (i) relate directly to the contract, (ii) are expected to generate resources that will be used to satisfy our performance obligation under the contract and (iii) are expected to be recovered through revenue generated under the contract. At September 30, 2018, we had net capitalized costs to obtain and to fulfill contracts of $181.8 million and $9.8 million, respectively, included in other noncurrent assets on our consolidated balance sheet.

Contract costs are amortized on a systematic basis consistent with the transfer to the customer of the goods or services to which the asset relates. A straight-line or proportional amortization method is used depending upon which method best depicts the pattern of transfer of the goods or services to the customer. In addition, these contract costs are evaluated for impairment by comparing, on a pooled basis, the expected future net cash flows from underlying customer relationships to the carrying amount of the capitalized contract costs. At September 30, 2018, none of our capitalized contract costs were impaired.

In order to determine the appropriate amortization period for contract costs, we consider a combination of factors, including customer attrition rates, estimated terms of customer relationships, the useful lives of technology we use to provide goods and services to our customers, whether future contract renewals are expected and if there is any incremental commission to be paid on a contract renewal. We amortize these assets over the expected period of benefit, which, based on the factors noted above, is typically 7 years. Costs to obtain a contract with an expected period of benefit of one year or less are recognized as an expense when incurred. During the three and nine months ended September 30, 2018, amortization of capitalized contract costs was $13.5 million and $37.3 million, respectively.

NOTE 4—~~SETTLEMENT PROCESSING ASSETS AND OBLIGATIONS~~

~~As of September 30, 2018 and December 31, 2017, settlement processing assets and obligations consisted of the following:~~

September 30, 2018 December 31, 2017

(in thousands)

Settlement processing assets:
Interchange reimbursement $ 262,487
$ 304,964
Receivable from members 116,843
104,339
Receivable from networks 2,521,106
2,055,390
Exception items 10,558
7,867
Merchant reserves (16,768 ) (13,268 )
$ 2,894,226
$ 2,459,292

Settlement processing obligations:
Interchange reimbursement $ 93,736
$ 72,053
Liability to members (23,693 ) (20,369 )
Liability to merchants (2,352,216 ) (1,961,107 )
Exception items 6,307
6,863
Merchant reserves (143,020 ) (133,907 )
Reserve for operating losses and sales allowances (4,183 ) (4,042 )
$ (2,423,069 ) $ (2,040,509 )

~~NOTE 5—~~GOODWILL AND OTHER INTANGIBLE ASSETS

As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, goodwill and other intangible assets consisted of the following:



	September 30, 2019		December 31, 2018

	(in thousands)

Goodwill	$	23,754,450	$	6,341,355
Other intangible assets:
Customer-related intangible assets	$	8,812,560	$	2,486,217
Acquired technologies	2,726,862		896,701
Contract-based intangible assets	1,981,156		178,391
Trademarks and trade names	1,357,763		289,588
	14,878,341		3,850,897
Less accumulated amortization:
Customer-related intangible assets	1,032,218		860,715
Acquired technologies	474,904		351,170
Contract-based intangible assets	75,804		67,160
Trademarks and trade names	111,024		83,234
	1,693,950		1,362,279
	$	13,184,391	$	2,488,618

September 30, 2018 December 31, 2017

(in thousands)

Goodwill $ 6,130,921
$ 5,703,992
Other intangible assets:
Customer-related intangible assets $ 2,123,046
$ 2,078,891
Acquired technologies 1,027,842
722,466
Trademarks and trade names 245,814
247,688
Contract-based intangible assets 137,097
171,522
3,533,799
3,220,567
Less accumulated amortization:
Customer-related intangible assets 806,204
685,869
Acquired technologies 310,705
210,063
Trademarks and trade names 73,977
50,849
Contract-based intangible assets 63,945
92,079
1,254,831
1,038,860
$ 2,278,968
$ 2,181,707

The following table sets forth the changes by reportable segment in the carrying amount of goodwill for the nine months ended September 30, ~~2018:~~2019:



	North America			Europe			Asia-Pacific			TSYS		Total

	(in thousands)

Balance at December 31, 2018	$	5,530,087		$	484,761		$	326,507		$	—	$	6,341,355
Effect of foreign currency translation	3,217			(19,533		)	(11,542		)	—		(27,858		)
Goodwill acquired	—			—			—			17,440,560		17,440,560
Measurement-period adjustments	(4,370		)	—			4,763			—		393
Balance at September 30, 2019	$	5,528,934		$	465,228		$	319,728		$	17,440,560	$	23,754,450

North America Europe Asia-Pacific Total

(in thousands)

Balance at December 31, 2017 $ 4,896,491
$ 513,138
$ 294,363
$ 5,703,992
Goodwill acquired 468,798
—
—
468,798
Effect of foreign currency translation (1,891 ) (20,063 ) (19,491 ) (41,445 )
Measurement-period adjustments (424 ) —
—
(424 )
Balance at September 30, 2018 $ 5,362,974
$ 493,075
$ 274,872
$ 6,130,921

There ~~was no~~were 0 accumulated impairment ~~loss~~losses for goodwill as of September 30, ~~2018~~2019 or December 31, ~~2017.~~2018.

NOTE 5—LEASES

Our leases consist primarily of operating real estate leases for office space and data centers in the markets in which we conduct business. We also have operating and finance leases for computer and other equipment. Many of our leases include escalating rental payments and incentives, as well as termination and renewal options. Certain of our lease agreements provide that we pay the cost of property taxes, insurance and maintenance. As described in "Note 1—Basis of Presentation and Summary

of Significant Accounting Policies," we adopted ASU 2016-02 on January 1, 2019. Unless otherwise indicated, the following information in this footnote applies only to periods after December 31, 2018.

We evaluate each of our lease and service arrangements at inception to determine if the arrangement is, or contains, a lease and the appropriate classification of each identified lease. A lease exists if we obtain substantially all of the economic benefits of, and have the right to control the use of, an asset for a period of time. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease agreement. We recognize right-of-use assets and lease liabilities at the lease commencement date based on the present values of fixed lease payments over the term of the lease. Right-of-use assets may also be adjusted to reflect any prepayments made or any incentive payments received. Operating lease costs and depreciation expense for finance leases are recognized as expense on a straight-line basis over the lease term. We consider a termination or renewal option in the determination of the lease term when it is reasonably certain that we will exercise that option. The weighted-average remaining lease term for operating and finance leases at September 30, 2019 was 7.5 years and 5.4 years, respectively. Because our leases generally do not provide a readily determinable implicit interest rate, we use an incremental borrowing rate to measure the lease liability and associated right-of-use asset at the lease commencement date. The incremental borrowing rate used is a fully collateralized rate that considers our credit rating, market conditions and the term of the lease at the lease commencement date. As of September 30, 2019, the weighted-average discount rate used in the measurement of operating and finance lease liabilities was 4.1% and 2.8%, respectively.

The effects of adopting ASU 2016-02 on our balance sheet as of January 1, 2019 are set forth in the table below. Adoption did not have a material effect on any line items in our consolidated statement of income or on our cash flows from operating activities, investing activities or financing activities included in our consolidated statement of cash flows. As of September 30, 2019 and January 1, 2019, right-of-use assets and lease liabilities consisted of the following:



	Balance Sheet Location	September 30, 2019			January 1, 2019

		(in thousands)

Assets:
Operating lease right-of-use assets:
Real estate	Other noncurrent assets	$	368,816		$	231,720
Computer equipment	Other noncurrent assets	85,961			—
Other	Other noncurrent assets	1,215			4,259
Total operating lease right-of-use-assets		455,992			235,979

Finance lease right-of-use assets:
Computer equipment	Property and equipment, net	$	22,020		$	—
Other	Property and equipment, net	4,702			—
		26,722			—
Less accumulated depreciation:
Computer equipment	Property and equipment, net	(470		)	—
Other	Property and equipment, net	(17		)	—
Total accumulated depreciation		(487		)	—
Total finance lease right-of-use assets		26,235			—
Total right-of-use assets⁽¹⁾		$	482,227		$	235,979

Liabilities:
Operating lease liabilities (current)	Accounts payable and accrued liabilities	$	88,280		$	37,339
Operating lease liabilities (noncurrent)	Other noncurrent liabilities	413,111			236,697
Finance lease liabilities (current)	Current portion of long-term debt	6,414			—
Finance lease liabilities (noncurrent)	Long-term debt	27,852			—
Total lease liabilities		$	535,657		$	274,036

⁽¹⁾Approximately 85% of our right-of-use assets are located in the United States.

As of September 30, 2019, maturities of lease liabilities were as follows:



	Operating Leases			Finance Leases

	(in thousands)

Year ending December 31,
Remainder of 2019	$	22,197		$	1,781
2020	106,212			7,328
2021	97,330			7,100
2022	86,099			7,066
2023	57,251			6,674
2024	47,250			6,597
2025 and thereafter	180,794			273
Total lease payments⁽¹⁾	597,133			36,819
Imputed interest	(95,742		)	(2,553		)
Total lease liabilities	$	501,391		$	34,266

⁽¹⁾Total operating lease payments did not include approximately $40 million for operating leases that had not yet commenced at September 30, 2019. We expect the lease commencement dates for these leases to occur later in 2019 and in 2020.

Operating lease costs in our consolidated statement of income for the three months ended September 30, 2019 were $23.4 million, including $20.4 million in selling, general and administrative expenses and $3.0 million in cost of services.Operating lease costs in our consolidated statement of income for the nine months ended September 30, 2019 were $53.3 million, including $47.9 million in selling, general and administrative expenses and $5.4 million in cost of services.Total lease costs for the three and nine months ended September 30, 2019 include variable lease costs of approximately $9.0 million and $14.0 million, respectively, which are primarily comprised of the cost of property taxes, insurance and maintenance. Finance lease costs and lease costs for leases with a term of less than twelve months were not material for the three and nine months ended September 30, 2019.

Cash paid for amounts included in the measurement of operating lease liabilities for the nine months ended September 30, 2019 was $43.0 million, which is included as a component of cash provided by operating activities in the consolidated statement of cash flows. Operating lease liabilities arising from obtaining new or modified right-of-use assets, net of reductions resulting from certain lease modifications, were approximately $23.5 million for the nine months ended September 30, 2019. In connection with the Merger, we acquired right-of-use assets and assumed lease liabilities of $256.6 million and $271.9 million, respectively.

Future minimum payments at December 31, 2018 for noncancelable operating leases were as follows (in thousands):



Year ending December 31:
2019	$	50,095
2020	47,700
2021	40,035
2022	37,055
2023	33,298
2024 and thereafter	225,225
Total future minimum payments⁽¹⁾	$	433,408

⁽¹⁾Future minimum lease payments included approximately $70 million for operating leases that had not commenced at December 31, 2018.

NOTE 6—LONG-TERM DEBT AND LINES OF CREDIT

As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, long-term debt consisted of the following:



	September 30, 2019		December 31, 2018

	(in thousands)

Long-term Debt
3.800% senior notes due April 1, 2021	$	763,194	$	—
3.750% senior notes due June 1, 2023	568,598		—
4.000% senior notes due June 1, 2023	574,170		—
2.650% senior notes due February 15, 2025	991,090		—
4.800% senior notes due April 1, 2026	823,448		—
4.450% senior notes due June 1, 2028	488,081		—
3.200% senior notes due August 15, 2029	1,234,560		—
4.150% senior notes due August 15, 2049	739,410		—
Unsecured term loan facility	1,980,886		—
Unsecured revolving credit facility	783,000		—
Secured term loans (outstanding under our Prior Credit Facility)	—		4,426,243
Secured revolving credit facility (outstanding under our Prior Credit Facility)	—		704,000
Finance lease liabilities	34,266		—
Other borrowings	40,374		—
Total long-term debt	9,021,077		5,130,243
Less current portion	33,373		115,075
Long-term debt, excluding current portion	$	8,987,704	$	5,015,168

September 30, 2018 December 31, 2017

(in thousands)

Credit Facility:
Term loans (face amounts of $3,984,386 and $3,932,677 at September 30, 2018 and December 31, 2017, respectively, less unamortized debt issuance costs of $35,187 and $37,961 at September 30, 2018 and December 31, 2017, respectively) $ 3,949,199
$ 3,894,716
Revolving Credit Facility 851,000
765,000
Total long-term debt 4,800,199
4,659,716
Less current portion of Credit Facility (face amounts of $101,174 and $108,979 at September 30, 2018 and December 31, 2017, respectively, less unamortized debt issuance costs of $8,485 and $8,671 at September 30, 2018 and December 31, 2017, respectively) 92,689
100,308
Long-term debt, excluding current portion $ 4,707,510
$ 4,559,408

The carrying amounts of our senior notes and term loans are presented net of unamortized discount and unamortized debt issuance costs, as applicable. At September 30, 2019, unamortized discount on senior notes was $6.0 million, and unamortized debt issuance costs on senior notes and the unsecured term loan facility were $48.0 million. Unamortized debt issuance costs on our secured term loans at December 31, 2018 were $37.4 million. The portion of unamortized debt issuance costs related to revolving credit facilities is included in other noncurrent assets. At September 30, 2019, unamortized debt issuance costs on the unsecured revolving credit facility were $18.6 million, and, at December 31, 2018, unamortized debt issuance costs on the secured revolving credit facility were $12.9 million. The debt discounts and debt issuance costs are recognized as an increase to interest expense over the terms of the respective debt instruments. Amortization of discounts and debt issuance costs was $3.1 million and $9.2 million, respectively, for the three and nine months ended September 30, 2019. Amortization of debt issuance costs for the three and nine months ended September 30, 2018 was $2.9 million and $8.6 million, respectively.

At September 30, 2019, maturities of long-term debt (excluding finance lease liabilities) were as follows by year (in thousands):



Year ending December 31,
Remainder of 2019	$	11,536
2020	22,953
2021	754,906
2022	50,038
2023	1,300,000
2024	2,533,000
2025 and thereafter	4,200,000
Total	$	8,872,433

See "Note 5—Leases" for more information about our finance lease liabilities, including maturities.

~~Maturity~~Bridge Facility

On May 27, 2019, in connection with our entry into the Merger Agreement described in "Note 2—Acquisitions," we obtained commitments for a $2.75 billion, 364-day senior unsecured bridge facility (the "Bridge Facility"). On July 9, 2019, upon our entry into the Term Loan Facility and the Unsecured Revolving Credit Facility (each as defined below), the aggregate commitments under the Bridge Facility were reduced to approximately $2.1 billion. Concurrently with the issuance of the Senior Notes (as defined below), the remaining aggregate commitments under the Bridge Facility were reduced to 0 and terminated. For the three and nine months ended September 30, 2019, we recognized $8.8 million and $11.7 million, respectively, of fees associated with the Bridge Facility in interest expense.

New Facilities

On July 9, 2019, we entered into a term loan credit agreement ("Term Loan Credit Agreement") and a revolving credit agreement ("Unsecured Revolving Credit Agreement") in each case with Bank of America, N.A., as administrative agent, and a syndicate of financial institutions, as lenders and other agents. The Term Loan Credit Agreement provides for a senior unsecured $2.0 billion term loan facility ("Term Loan Facility"). The Unsecured Revolving Credit Agreement provides for a senior unsecured $3.0 billion revolving credit facility ("Unsecured Revolving Credit Facility," together with the Term Loan Facility, the "New Facilities"). We capitalized debt issuance costs of $12.8 million in connection with the issuances under the New Facilities.

Borrowings under the Term Loan Facility were made in U.S. dollars and borrowings under the Unsecured Revolving Credit Facility are available to be made in U.S. dollars, euros, sterling, Canadian dollars and, subject to certain conditions, certain other currencies at our option. Borrowings in U.S. dollars and certain other London Interbank Offered Rate ("LIBOR")-quoted currencies will bear interest, at our option, at a rate equal to either (1) the rate (adjusted for any statutory reserve requirements for eurocurrency liabilities) for eurodollar deposits in the London interbank market, (2) a floating rate of interest set forth on ~~long-term debt~~the applicable LIBOR screen page designated by Bank of America or (3) the highest of (a) the federal funds effective rate plus 0.5%, (b) the rate of interest as publicly announced by Bank of America as its "prime rate" or (c) LIBOR plus 1.0%, in each case, plus an applicable margin.

As of September 30, ~~2018 by year~~2019, the interest rates on the Term Loan Facility and the Unsecured Revolving Credit Facility were 3.42% and 3.33%, respectively. In addition, we are ~~as follows (in thousands):~~required to pay a quarterly commitment fee with respect to the unused portion of the Unsecured Revolving Credit Facility at an applicable rate per annum ranging from 0.125% to 0.300% depending on our credit rating. Beginning on December 31, 2022, and at the end of each quarter thereafter, the Term Loan Facility must be repaid in quarterly installments in the amount of 2.50% of original principal through the maturity date with the remaining principal balance due upon maturity in September 2024. The Unsecured Revolving Credit Agreement also matures in September 2024.

Years ending December 31,
2018 $ 20,810
2019 119,109
2020 154,979
2021 190,848
2022 262,587
2023 4,087,053
Total $ 4,835,386
We may issue standby letters of credit of up to $250 million in the aggregate under the Unsecured Revolving Credit Facility. Outstanding letters of credit under the Unsecured Revolving Credit Facility reduce the amount of borrowings available to us. The total available commitments under the Unsecured Revolving Credit Facility at September 30, 2019 were $2,198.8 million.

Senior Notes

On August 14, 2019, we completed the public offering and issuance of $3.0 billion aggregate principal amount of senior unsecured notes, consisting of the following: (i) $1.0 billion aggregate principal amount of 2.650% senior notes due 2025; (ii) $1.25 billion aggregate principal amount of 3.200% senior notes due 2029; and (iii) $750 million aggregate principal amount of 4.150% senior notes due 2049 (collectively, the "Senior Notes"). Interest on the Senior Notes is payable semi-annually in arrears on each February 15 and August 15, beginning on February 15, 2020. Each series of the Senior Notes is redeemable, at our option, in whole or in part, at any time and from time-to-time at the redemption prices set forth in the related indenture. We issued the Senior Notes at a total discount of $6.1 million and capitalized related debt issuance costs of $29.3 million.

From August 14, 2019 to the closing date of the Merger, the proceeds from the issuance of the Senior Notes were held in escrow. Upon closing, the funds were released and used together with borrowings under the Term Loan Facility and the Unsecured Revolving Credit Facility and cash on hand to repay TSYS's unsecured revolving credit facility, to refinance certain of our existing indebtedness, to fund cash payments made in lieu of fractional shares payable in accordance with the terms of the Merger Agreement and to pay transaction fees and costs related to the Merger.

In addition, in connection with the Merger, we assumed $3.0 billion aggregate principal amount of senior unsecured notes of TSYS, consisting of the following: (i) $750 million aggregate principal amount of 3.800% senior notes due 2021; (ii) $550 million aggregate principal amount of 3.750% senior notes due 2023; (iii) $550 million aggregate principal amount of 4.000% senior notes due 2023; (iv) $750 million aggregate principal amount of 4.800% senior notes due 2026; and (v) $450 million aggregate principal amount of 4.450% senior notes due 2028. For the 3.800% senior notes due 2021 and the 4.800% senior notes due 2026, interest is payable semi-annually each April 1 and October 1. For the 3.750% senior notes due 2023, the 4.000% senior notes due 2023 and the 4.450% senior notes due 2028, interest is payable semi-annually each June 1 and December 1.

The senior notes assumed in the Merger were measured at fair value of $3.2 billion at the acquisition date, which exceeded their aggregate face value by $169.0 million. The difference between the fair value and face value of the assumed senior notes is recognized over the terms of the respective notes as a reduction of interest expense. The amortization of this fair value adjustment was $1.5 million for the three and nine months ended September 30, 2019.

As of September 30, 2019, our senior notes had an estimated fair value of $6,313.2 million. The estimated fair value of our senior notes was based on quoted market prices in an active market and is considered to be a Level 1 measurement of the valuation hierarchy. The fair value of other long-term debt approximated its carrying amount at September 30, 2019.

Prior Credit Facility

~~We are~~Prior to completion of the Merger, we were 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~~"Prior Credit Facility"). ~~As of September 30, 2018, the~~The Prior Credit Facility provided for secured financing comprised of (i) a $1.5 billion revolving credit ~~facility (the "Revolving Credit Facility");~~facility; (ii) a $1.5 billion term ~~loan (the "Term A Loan"),~~loan; (iii) a $1.37 billion term ~~loan (the "Term A-2 Loan") and~~loan; (iv) a $1.14 billion term ~~loan (the "Term B-2 Loan"). Substantially all~~loan; and (v) a $500 million term loan. Upon the consummation of the ~~assets of our domestic subsidiaries are pledged as collateral~~Merger, all borrowings outstanding and other amounts due under the Prior Credit ~~Facility.~~Facility were repaid with proceeds from the New Facilities and the Prior Credit Facility was terminated. In connection with the extinguishment of the Prior Credit Facility in the three months ended September 30, 2019, we wrote-off related unamortized debt issuance costs of $16.7 million to interest expense.

Compliance with Covenants

The ~~borrowings outstanding~~Term Loan Credit Agreement contains customary conditions to funding, affirmative covenants, negative covenants, financial covenants and events of default. The Unsecured Revolving Credit Facility Agreement contains customary conditions to funding, affirmative covenants, negative covenants and events of default. As of September 30, 2019, financial covenants under ~~our~~the Term Loan Credit ~~Facility~~Agreement required a leverage ratio of 3.50 to 1.00 and an interest coverage ratio of 3.00 to 1.00. We were in compliance with all applicable covenants as of September 30, 2018 reflect activities we completed earlier in 2018, including a reduction to the interest rate margins applicable to our Term A Loan, Term A-2 Loan, Term B-2 Loan and the Revolving Credit Facility, an extension of the maturity dates of the Term A Loan, Term A-2 Loan and the Revolving Credit Facility, and an increase in the total financing capacity under the Credit Facility to approximately $5.5 billion in June 2018. 2019.

~~In October 2018, we entered into an additional term loan in the amount of $500 million. See "Note 14—Subsequent Events" for discussion.~~

The Credit Facility provides for an interest rate, at our election, of either London Interbank Offered Rate ("LIBOR") or a base rate, in each case plus a margin. As of September 30, 2018, the interest rates on the Term A Loan, the Term A-2 Loan and the Term B-2 Loan were 3.74%, 3.66% and 3.99%, respectively. As of September 30, 2018, the interest rate on the Revolving Credit Facility was 3.66%. In addition, we are required to pay a quarterly commitment fee on the unused portion of the Revolving Credit Facility at an applicable rate per annum ranging from 0.20% to 0.30% depending on our leverage ratio.

The Term A Loan and the Term A-2 Loan mature, and the Revolving Credit Facility expires, on January 20, 2023. The Term B-2 Loan matures on April 22, 2023. The Term A Loan and Term A-2 Loan principals must be repaid in quarterly installments in the amount of 0.625% of principal through June 2019, increasing to 1.25% of principal through June 2021, increasing to 1.875% of principal through June 2022 and increasing to 2.50% through December 2022, with the remaining principal balance due upon maturity in January 2023. 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.

We may 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 under the Revolving Credit Facility. Borrowings available to us under the Revolving Credit Facility are further limited by the covenants described below under "Compliance with Covenants." The total available commitments under the Revolving Credit Facility at September 30, 2018 and December 31, 2017 were $636.4 million and $473.3 million, respectively.

The portion of deferred debt issuance costs related to the Revolving Credit Facility is included in other noncurrent assets, and the portion of deferred debt issuance costs related to the term loans is reported as a reduction to the carrying amount of the term loans. Debt issuance costs are amortized as an adjustment to interest expense over the terms of the respective facilities.

Settlement Lines of Credit

In various markets where we do business, we have specialized lines of credit, which are restricted for use in funding settlement. The settlement lines of credit generally have variable interest rates, are subject to annual review and are denominated in local currency but may, in some cases, facilitate borrowings in multiple currencies. For certain of our ~~settlement~~ lines of credit, the available credit is increased by the amount of cash we have on deposit in specific accounts with the lender. Accordingly, the amount of the outstanding line of credit may exceed the stated credit limit. As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, a total of ~~$68.5~~$72.1 million and ~~$59.3~~$70.6 million, respectively, of cash on deposit was used to determine the available credit.

As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively, we had ~~$685.9~~$547.6 million and ~~$635.2~~$700.5 million outstanding under these lines of credit with additional capacity to fund settlement of ~~$759.9~~$871.9 million as of September 30, ~~2018 to fund settlement.~~2019. The weighted-average interest rate on these borrowings was ~~2.81%~~3.34% and ~~1.97%~~2.97% at September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. During the three months ended September 30, ~~2018,~~2019, the maximum and average outstanding balances under these lines of credit were ~~$828.2~~$699.0 million and ~~$409.8~~$426.6 million, respectively.

~~Compliance with Covenants~~

The Credit Facility contains customary affirmative and restrictive covenants, including, among others, financial covenants based on our leverage and interest coverage ratios, as defined in the agreement. As of September 30, 2018, financial covenants under the Credit Facility required a leverage ratio no greater than: (i) 5.00 to 1.00 as of the end of any fiscal quarter ending during the period from April 1, 2018 through June 30, 2019; (ii) 4.75 to 1.00 as of the end of any fiscal quarter ending during the period from July 1, 2019 through June 30, 2020; and (iii) 4.50 to 1.00 as of the end of any fiscal quarter ending thereafter. The interest coverage ratio is required to be no less than 3.25 to 1.00.

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

The Credit Facility 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 September 30, 2018.

~~Interest Rate Swap~~Derivative Agreements

We have interest rate swap agreements with financial institutions to hedge changes in cash flows attributable to interest rate risk on a portion of our variable-rate debt instruments. Net amounts to be received or paid under the swap agreements are reflected as adjustments to interest expense. Since we have designated the interest rate swap agreements as portfolio cash flow hedges,

unrealized gains or losses resulting from adjusting the swaps to fair value are recorded as components of other comprehensive ~~income.~~ income (loss).

In addition, in June 2019, we entered into forward-starting interest rate swap agreements with an aggregate notional amount of $1.0 billion. The forward-starting interest rate swaps, designated as cash flow hedges, were designed to manage the exposure to interest rate volatility in anticipation of the issuance of the Senior Notes. During the period from the commencement of the swaps through the date upon which the Senior Notes were issued, the effective portion of the unrealized losses on the swaps was included in other comprehensive loss. Upon issuance of the Senior Notes, we terminated the forward-starting swap agreements and made settlement payments of $48.3 million, which are included cash flows from operating activities in our consolidated statement of cash flows for the nine months ended September 30, 2019 within the caption labeled "Other, net." We have and will continue to reclassify the effective portion of the realized loss from accumulated other comprehensive loss into interest expense over the terms of the related Senior Notes.

The fair values of the interest rate swaps were determined based on the present value of the estimated future net cash flows using implied rates in the applicable yield curve as of the valuation date. These derivative instruments were classified within Level 2 of the valuation hierarchy.

The table below presents the fair values of our derivative financial instruments, designated as cash flow hedges, included in the consolidated balance sheets:



				Fair Values
Derivative Financial Instruments	Balance Sheet Location	Weighted-Average Fixed Rate of Interest at September 30, 2019	Range of Maturity Dates at September 30, 2019	September 30, 2019		December 31, 2018

				(in thousands)

Interest rate swaps (Notional of $500 million at September 30, 2019 and $750 million at December 31, 2018)	Prepaid expenses and other current assets	1.46%	December 31, 2019 - July 31, 2020	$	950	$	3,200
Interest rate swaps (Notional of $550 million at December 31, 2018)	Other noncurrent assets	NA	NA	$	—	$	8,256
Interest rate swaps (Notional of $1.5 billion at September 30, 2019 and $950 million at December 31, 2018)	Other noncurrent liabilities	2.57%	March 31, 2021 - December 31, 2022	$	55,238	$	14,601

Derivative Financial Instruments Balance Sheet Location Weighted-Average Fixed Rate of Interest at September 30, 2018
Range of Maturity Dates at
September 30, 2018
September 30, 2018 December 31, 2017

(in thousands)

Interest rate swaps (Notional of $500 million at September 30, 2018) Prepaid expenses and other current assets 1.52% February 28, 2019 $ 1,825
$ —
Interest rate swaps (Notional of $800 million at September 30, 2018 and $1,300 million at December 31, 2017) Other noncurrent assets 1.63% December 31, 2019 - March 31, 2021 $ 16,900
$ 9,202

NA - not applicable.

The table below presents the effects of our interest rate swaps on the consolidated statements of income and comprehensive income for the three and nine months ended September 30, ~~2018~~2019 and ~~2017:~~2018:

Three Months Ended Nine Months Ended
September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017

(in thousands)

Amount of unrealized gains (losses) recognized in other comprehensive income (loss) $ 1,845
$ 341
$ 12,353
$ (2,214 )
Amount of unrealized (gains) losses reclassified out of other comprehensive income (loss) to interest expense $ (1,663 ) $ 1,172
$ (2,830 ) $ 4,667



	Three Months Ended						Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018

	(in thousands)

Net unrealized (losses) gains recognized in other comprehensive loss	$	(40,265	)	$	1,845		$	(96,997	)	$	12,353
Net unrealized losses (gains) reclassified out of other comprehensive loss to interest expense	$	1,193		$	(1,663	)	$	(1,530	)	$	(2,830	)

As of September 30, ~~2018,~~2019, the amount of net unrealized ~~gains~~losses 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 ~~$9.9~~$19.1 million.

Interest Expense

Interest expense was approximately ~~$46~~$96 million and ~~$41~~$46 million for the three months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and approximately ~~$140~~$221 million and ~~$130~~$140 million for the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively.

NOTE 7—INCOME TAX

~~On December 22, 2017, the United States enacted the 2017 U.S. Tax Act, which resulted in numerous changes, including a reduction in the U.S. federal~~Our effective income tax rate ~~from 35% to 21% effective January 1, 2018 and the transition of the U.S. federal tax system to a territorial regime. As of September 30, 2018, we have not completed our accounting~~ for the effects of the 2017 U.S. Tax Act; however, we made a reasonable estimate of the effects on our existing deferred tax balances and the one-time transition tax as of December 31, 2017 pursuant to guidance provided in SEC Staff Accounting Bulletin No. 118, which in March 2018 was codified by the FASB in ASU 2018-05 –~~Income Taxes (Topic 740). We have continued to analyze our foreign tax pools and resulting foreign tax credits and, during~~ the three months ended September 30, ~~2018, reduced~~2019 was a benefit of 18.7%, and our ~~estimated transition~~effective income tax rate for the nine months ended September 30, 2019 was 10.1%. Our effective income tax rates for those periods differed from the U.S. statutory rate primarily as a result of:

the reduction of our U.S. deferred tax liability ~~by $23.3~~resulting from the effect of the Merger on the apportionment of income among the states;

excess tax benefits of share-based awards that are recognized upon vesting or settlement;

~~million. We are continuing~~the U.S. tax benefits associated with income derived from foreign sources; and

the recognition of the benefit of uncertain tax positions due to ~~gather additional information to complete our accounting for these items and expect to complete our accounting within~~ the ~~prescribed measurement period.~~effective settlement of the positions.

Our effective income tax rate for the three months ended September 30, 2018 was a benefit of 3.4%~~. Our~~, and our effective income tax rate ~~for the three months ended September 30, 2017 was 11.7%. Our effective income tax rates~~ for the nine months ended September 30, 2018 was 10.4%. During the three and nine months ended September 30, 2018, we reduced our estimated transition tax liability associated with the U.S. Tax Cuts and Jobs Act of 2017 ~~were 10.4% and 14.4%, respectively. Our 2017~~by $23.3 million, which was the primary reason our effective income tax rates for those periods differed from the U.S. statutory rate primarily due to income generated in international jurisdictions with lower tax rates. Our 2018 effective income tax rates differed from the U.S. statutory rate primarily due to changes in estimates of prior year liabilities, including the aforementioned $23.3 million adjustment to the one-time transition tax liability recorded during the three months ended September 30, 2018.rate.

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,~~2010, U.S. federal income tax examinations for ~~fiscal~~ years ~~prior to 2014~~ended on or before May 31, 2016 and U.K. federal income tax examinations for years ended on or before May 31, ~~2014.~~2015.

NOTE 8—SHAREHOLDERS’ EQUITY

We ~~make repurchases of~~repurchase our common stock mainly through open market repurchase plans and, at times, through accelerated share repurchase programs. ~~As of September 30, 2018, we were authorized to repurchase up to $419.1 million of our common stock.~~ During the nine months ended September 30, 2019 and 2018, ~~through open market repurchase plans,~~ we repurchased and retired ~~1,612,174~~1,808,398 shares ~~of our common stock, respectively, at a cost of $180.9 million, or an average cost of $112.19 per share, including commissions.~~

~~During the three~~ and ~~nine months ended September 30, 2017, through open market repurchase plans, we repurchased and retired 311,593 and 376,309~~1,612,174 shares of our common stock at a cost, including commissions, of ~~$29.0~~$230.0 million and ~~$34.8~~$180.9 million, respectively, or ~~an average cost of $93.09 and $92.51~~$127.18 per share ~~including commissions.~~and $112.19 per share. We did not repurchase any shares of our common stock during the three months ended September 30, 2019 and 2018. As of September 30, 2019, we were authorized to repurchase up to $568.0 million of our common stock.

In connection with the completion of the Merger, our Articles of Incorporation were amended to increase the number of authorized shares of Global Payments common stock from 200 million to 400 million.

On October ~~26, 2018,~~24, 2019, our board of directors declared a dividend of ~~$0.01~~$0.195 per share payable on December ~~28, 2018~~27, 2019 to common shareholders of record as of December ~~14, 2018.~~13, 2019.

NOTE 9—SHARE-BASED AWARDS AND STOCK OPTIONS

The following table summarizes share-based compensation expense and the related income tax benefit recognized for our share-based awards and stock options:



	Three Months Ended				Nine Months Ended
	September 30, 2019		September 30, 2018		September 30, 2019		September 30, 2018

	(in thousands)

Share-based compensation expense	$	27,877	$	14,833	$	55,791	$	44,937
Income tax benefit	$	4,396	$	3,614	$	10,633	$	10,276

Three Months Ended Nine Months Ended
September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017

(in thousands)

Share-based compensation expense $ 14,833
$ 9,617
$ 44,937
$ 30,771
Income tax benefit $ 3,614
$ 3,523
$ 10,276
$ 10,788

Share-Based Awards

The following table summarizes the changes in unvested restricted stock and performance awards for the nine months ended September 30, ~~2018:~~2019:



	Shares		Weighted-Average Grant-Date Fair Value

	(in thousands)

Unvested at December 31, 2018	1,084			$108.51
Replacement Awards	894		163.74
Granted	772		141.42
Vested	(490	)	71.92
Forfeited	(88	)	112.47
Unvested at September 30, 2019	2,172			$151.06

Shares
Weighted-Average
Grant-Date
Fair Value

(in thousands)

Unvested at December 31, 2017 1,226

$78.29
Granted 600
107.16
Vested (715 ) 62.89
Forfeited (55 ) 90.40
Unvested at September 30, 2018 1,056
$104.52

The total fair value of restricted stock and performance awards vested during the nine months ended September 30, ~~2018~~2019 and September 30, ~~2017~~2018 was $35.3 million and $45.0 million, ~~and $27.6 million,~~ respectively.

For restricted stock and performance awards, we recognized compensation expense of ~~$13.8~~$20.2 million and ~~$8.6~~$13.8 million during the three months ended September 30, ~~2018~~2019 and September 30, ~~2017,~~2018, respectively, and ~~$41.1~~$45.0 million and ~~$27.7~~$41.1 million during the nine months ended September 30, ~~2018~~2019 and September 30, ~~2017,~~2018, respectively. As of September 30, ~~2018,~~2019, there was ~~$67.7~~$175.1 million of unrecognized compensation expense related to unvested restricted stock and performance awards that we expect to recognize over a weighted-average period of ~~2.1~~2.2 years. Our restricted stock and performance award plans provide for accelerated vesting under certain conditions.

Stock Options

The following table summarizes changes in stock option activity for the nine months ended September 30, ~~2018:~~2019:



	Options		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value

	(in thousands)				(years)	(in millions)

Outstanding at December 31, 2018	598			$59.16	6.2	$27.3
Replacement Awards	1,336		68.96
Granted	109		128.22
Exercised	(221	)	32.54
Outstanding at September 30, 2019	1,822			$73.71	6.8	$155.4

Options vested and exercisable at September 30, 2019	1,217			$57.29	5.9	$123.7

Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value

(in thousands) (years) (in millions)

Outstanding at December 31, 2017 723

$47.79
6.4 $37.9
Granted 103
114.70

Forfeited (9 ) 81.68

Exercised (188 ) 39.40

Outstanding at September 30, 2018 629

$60.75
6.1 $41.8

Options vested and exercisable at September 30, 2018 457

$47.50
5.1 $36.5

We recognized compensation expense for stock options of $7.0 million and $0.7 million during ~~each of~~ the three months ended September 30, 2019 and 2018, respectively, and ~~2017,~~$8.6 million and $2.3 ~~million and $2.0~~ million during the nine months ended September 30, ~~2018~~2019 and ~~September 30, 2017,~~2018, respectively. The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2019 and 2018 ~~and September 30, 2017~~ was ~~$15.9~~$22.9 million and ~~$9.9~~$15.9 million, respectively. As of September 30, ~~2018,~~2019, we had ~~$4.4~~$15.4 million of unrecognized compensation expense related to unvested stock options that we expect to recognize over a weighted-average period of ~~2.0~~1.7 years.

The weighted-average grant-date fair value of ~~each~~ stock ~~option~~options granted, including Replacement Awards, during the nine months ended September 30, 2019 and 2018 was $99.56 and ~~September 30, 2017 was~~ $35.09, ~~and $23.68,~~ respectively. Fair value was estimated on the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions:



	Nine Months Ended
	September 30, 2019	September 30, 2018

Risk-free interest rate	1.72%	2.60%
Expected volatility	31%	29%
Dividend yield	0.04%	0.04%
Expected term (years)	5	5

Nine Months Ended
September 30, 2018 September 30, 2017

Risk-free interest rate 2.60% 1.99%
Expected volatility 29% 30%
Dividend yield 0.04% 0.06%
Expected term (years) 5 5

The risk-free interest rate iswas 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 iswas based on our historical volatility. The dividend yield assumption ~~is calculated~~was determined using our average stock price over the preceding year and the annualized amount of our most current quarterly dividend per share. We based our assumptions on the expected term of the options on our analysis of the historical exercise patterns of the options and our assumption on the future exercise pattern of options.

NOTE 10—EARNINGS PER SHARE

Basic earnings per share ("EPS") iswas computed by dividing net income attributable to Global Payments by the weighted-average number of shares outstanding during the period. Earnings available to common shareholders iswas the same as reported net income attributable to Global Payments for all periods presented.

Diluted EPS 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 EPS. 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 EPS.

The following table sets forth the computation of diluted weighted-average number of shares outstanding for the three and nine months ended September 30, ~~2018~~2019 and ~~2017:~~2018:



	Three Months Ended		Nine Months Ended
	September 30, 2019	September 30, 2018	September 30, 2019	September 30, 2018

	(in thousands)

Basic weighted-average number of shares outstanding	177,039	158,168	163,846	158,827
Plus: Dilutive effect of stock options and other share-based awards	504	538	485	632
Diluted weighted-average number of shares outstanding	177,543	158,706	164,331	159,459

Three Months Ended Nine Months Ended
September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017

(in thousands)

Basic weighted-average number of shares outstanding 158,168
154,560
158,827
153,138
Plus: Dilutive effect of stock options and other share-based awards 538
842
632
941
Diluted weighted-average number of shares outstanding 158,706
155,402
159,459
154,079

NOTE 11—ACCUMULATED OTHER COMPREHENSIVE LOSS

The changes in the accumulated balances for each component of other comprehensive income (loss)~~, net of tax,~~ were as follows for the three and nine months ended September 30, ~~2018~~2019 and ~~September 30, 2017:~~

2018:



	Foreign Currency Translation			Unrealized Gains (Losses) on Hedging Activities			Other			Accumulated Other Comprehensive Loss

	(in thousands)

Balance at June 30, 2019	$	(289,194	)	$	(47,313	)	$	(3,399	)	$	(339,906	)
Other comprehensive income (loss)	(58,415		)	(29,783		)	37			(88,161		)
Balance at September 30, 2019	$	(347,609	)	$	(77,096	)	$	(3,362	)	$	(428,067	)

Balance at June 30, 2018	$	(253,372	)	$	14,030		$	(4,287	)	$	(243,629	)
Other comprehensive income (loss)	(26,930		)	72			(58		)	(26,916		)
Balance at September 30, 2018	$	(280,302	)	$	14,102		$	(4,345	)	$	(270,545	)

Foreign Currency Translation Unrealized Gains on Hedging Activities Other Accumulated Other Comprehensive Loss

(in thousands)

Balance at June 30, 2018 $ (253,372 ) $ 14,030
$ (4,287 ) $ (243,629 )
Other comprehensive income (loss), net of tax (26,930 ) 72
(58 ) (26,916 )
Balance at September 30, 2018 $ (280,302 ) $ 14,102
$ (4,345 ) $ (270,545 )

Balance at June 30, 2017 $ (239,669 ) $ 51
$ (3,841 ) $ (243,459 )
Other comprehensive income, net of tax 40,090
843
18
40,951
Balance at September 30, 2017 $ (199,579 ) $ 894
$ (3,823 ) $ (202,508 )

Other comprehensive income (loss) attributable to noncontrolling interests, which relates only to foreign currency translation, was ~~$11.7~~a loss of $8.7 million and ~~$2.3~~income of $11.7 million for the three months ended September 30, ~~2018~~2019 and ~~September 30, 2017,~~2018, respectively.



	Foreign Currency Translation			Unrealized Gains (Losses) on Hedging Activities			Other			Accumulated Other Comprehensive Loss

	(in thousands)

Balance at December 31, 2018	$	(304,274	)	$	(2,374	)	$	(3,527	)	$	(310,175	)
Other comprehensive income (loss)	(43,335		)	(74,722		)	165			(117,892		)
Balance at September 30, 2019	$	(347,609	)	$	(77,096	)	$	(3,362	)	$	(428,067	)

Balance at December 31, 2017	$	(185,856	)	$	6,999		$	(4,287	)	$	(183,144	)
Cumulative effect of adoption of new accounting standard	(1,843		)	—			—			(1,843		)
Other comprehensive income (loss)	(92,603		)	7,103			(58		)	(85,558		)
Balance at September 30, 2018	$	(280,302	)	$	14,102		$	(4,345	)	$	(270,545	)

Foreign Currency Translation Unrealized Gains (Losses) on Hedging Activities Other Accumulated Other Comprehensive Loss

(in thousands)

Balance at December 31, 2017 $ (185,856 ) $ 6,999
$ (4,287 ) $ (183,144 )
Other comprehensive income (loss), net of tax (92,603 ) 7,103
(58 ) (85,558 )
Cumulative effect of adoption of new accounting standard (1,843 ) —
—
(1,843 )
Balance at September 30, 2018 $ (280,302 ) $ 14,102
$ (4,345 ) $ (270,545 )

Balance at December 31, 2016 $ (318,450 ) $ (640 ) $ (3,627 ) $ (322,717 )
Other comprehensive income (loss), net of tax 118,871
1,534
(196 ) 120,209
Balance at September 30, 2017 $ (199,579 ) $ 894
$ (3,823 ) $ (202,508 )

Other comprehensive income (loss) attributable to noncontrolling interests, which relates only to foreign currency translation, was ~~$11.8~~a loss of $9.4 million and ~~$15.1~~income of $11.8 million for the nine months ended September 30, ~~2018~~2019 and ~~September 30, 2017,~~2018, respectively.

NOTE 12—SEGMENT INFORMATION

~~We operate~~Prior to the completion of the Merger, we operated in ~~three~~3 reportable segments: North America, Europe and Asia-Pacific. As a result of the Merger, we anticipate realigning our executive management and organizational structures. As of September 30, 2019, we were still assessing changes in our internal management reporting structure to incorporate TSYS and the effects it may have on our reportable segments. Because this process was not complete as of September 30, 2019, we have reported the results of operations of TSYS from the acquisition date to September 30, 2019 as a separate reportable segment. In future periods, once the new management and organizational structures have been established, we will report financial information for our new reportable segments and recast prior periods to reflect the change, as necessary.

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~~share-based compensation costs are included in ~~Corporate in the following table.~~Corporate. Interest and other income, interest and other expense and ~~provision for~~ income ~~taxes~~tax expense are not allocated to the individual segments. We do not evaluate the performance of or allocate resources to our operating segments using asset data. The accounting policies of the reportable ~~operating~~ segments are the same as those described in our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 and our summary of significant accounting policies in "Note 1—Basis of Presentation and Summary of Significant Accounting Policies."

Information on segments and reconciliations to consolidated revenues and consolidated operating income was as follows for the three and nine months ended September 30, ~~2018~~2019 and ~~2017:~~2018:



	Three Months Ended						Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018

	(in thousands)

Revenues⁽¹⁾:
North America	$	734,841		$	643,715		$	2,129,182		$	1,859,545
Europe	164,950			157,584			468,168			456,492
Asia-Pacific	58,680			56,371			179,311			169,774
TSYS	147,470			—			147,470			—
Consolidated revenues	$	1,105,941		$	857,670		$	2,924,131		$	2,485,811

Operating income (loss)⁽¹⁾:
North America	$	205,728		$	174,012		$	547,160		$	446,600
Europe	91,332			85,781			249,638			239,011
Asia-Pacific	24,187			23,692			74,718			67,043
TSYS ⁽²⁾	(11,124		)	—			(11,124		)	—
Corporate⁽²⁾	(136,086		)	(60,323		)	(265,137		)	(182,585		)
Consolidated operating income	$	174,037		$	223,162		$	595,255		$	570,069

Depreciation and amortization⁽¹⁾:
North America	$	123,075		$	106,022		$	375,885		$	313,980
Europe	12,876			11,660			38,971			36,180
Asia-Pacific	5,201			4,381			15,382			13,740
TSYS	40,213			—			40,213			—
Corporate	2,381			1,994			7,047			5,548
Consolidated depreciation and amortization	$	183,746		$	124,057		$	477,498		$	369,448

Three Months Ended Nine Months Ended
September 30, 2018 September 30, 2017 September 30, 2018 September 30, 2017

(in thousands)

Revenues^{(1) (2)}:

North America $ 643,715
$ 764,902
$ 1,859,545
$ 2,162,911
Europe 157,584
205,203
456,492
557,258
Asia-Pacific 56,371
68,802
169,774
200,741
Consolidated revenues $ 857,670
$ 1,038,907
$ 2,485,811
$ 2,920,910

Operating income (loss)⁽²⁾:

North America $ 174,012
$ 138,345
$ 446,600
$ 344,604
Europe 85,781
76,214
239,011
196,394
Asia-Pacific 23,692
20,032
67,043
57,321
Corporate⁽³⁾
(60,323 ) (62,120 ) (182,585 ) (189,026 )
Consolidated operating income $ 223,162
$ 172,471
$ 570,069
$ 409,293
��
Depreciation and amortization⁽²⁾:

North America $ 106,022
$ 95,056
$ 313,980
$ 277,219
Europe 11,660
11,863
36,180
34,926
Asia-Pacific 4,381
4,484
13,740
12,068
Corporate 1,994
2,246
5,548
5,750
Consolidated depreciation and amortization $ 124,057
$ 113,649
$ 369,448
$ 329,963

⁽¹⁾As more fully described in "Note 1—Basis of Presentation and Summary of Significant Accounting Policies" and "Note 3—Revenues," we adopted a new revenue accounting standard on January 1, 2018 that results in revenue being presented net of certain fees that we pay to third parties. This change in presentation affected our reported revenues and operating expenses during the three and nine months ended September 30, 2018 by the same amount and had no effect on operating income.

⁽²⁾ Revenues, operating income and depreciation and amortization reflect the ~~effect~~effects of acquired businesses from the respective ~~dates of acquisition.~~acquisition dates. For further discussion of our acquisitions, see "Note 2—Acquisitions."

⁽³⁾⁽²⁾ ~~During the three and nine months ended September 30, 2018, operating~~ Operating loss for Corporate included acquisition and integration expenses of $80.0 million and $8.2 million ~~and $34.6 million, respectively. During~~for the three ~~and nine~~ months ended September 30, ~~2017, operating~~2019 and 2018, respectively. Operating loss for Corporate included acquisition and integration expenses of ~~$21.5~~$99.5 million and ~~$69.5~~$34.6 million, ~~respectively.~~respectively for the nine months ended September 30, 2019 and 2018. Operating loss for TSYS included acquisition and integration expenses of $20.9 million for the three and nine months ended September 30, 2019.

NOTE 13—COMMITMENTS AND CONTINGENCIES

~~Leases~~Legal Matters

~~In May 2017, we sold our operating facility~~Six putative class action lawsuits challenging the Merger were filed. Two of these lawsuits, captioned Peters v. Total System Services, Inc. et al. (Case No. 4:19-cv-00114) and Wolf v. Total System Services, Inc., et al. (Case No. 4:19-cv-00115), were filed in ~~Jeffersonville, Indiana, which we acquired as part~~the United States District Court for the Middle District of Georgia on July 18, 2019. The third lawsuit, captioned Drulias v. Global Payments Inc., et. al (Case No. 60774/2019) was filed in the Supreme Court of the ~~Heartland merger,~~State of New York, County of Westchester on July 19, 2019. The fourth lawsuit, captioned Hickey v. Total System Services, Inc., et al. (Civil Action No. 1:19-cv-03337-LMM) was filed in the United States District Court for ~~$37.5~~the Northern District of Georgia, Atlanta Division, on July 23, 2019. The fifth lawsuit, captioned, Cason v. Total System Services, Inc., et al. (Case No. 1:19-cv-07471) was filed in the United States District Court for the Southern District of New York on August 9, 2019. The sixth lawsuit, captioned, Cheng v. Total System Services, et al. (Case No: 1:19-cv-01513-UNA) was filed in the United States District Court for the District of Delaware on August 13, 2019. The complaints filed in the lawsuits assert, among other matters, claims for filing a materially incomplete registration statement with the SEC. Global Payments and TSYS released supplemental disclosures relating to the Merger in late August 2019, and the Peters lawsuit, the Wolf lawsuit and the Cheng lawsuit have been voluntarily dismissed.

On September 23, 2019, a jury in the Superior Court of Dekalb County, Georgia, awarded Frontline Processing Corp. ("Frontline") $135.2 million in damages, costs and ~~simultaneously leased~~attorney's fees (plus interest) following a trial of a breach of contract dispute between Frontline and Global Payments, wherein Frontline alleged that Global Payments violated provisions of the ~~property back for an initial term of 20 years, followed by four optional renewal terms of five years.~~parties' Referral Agreement and Master Services Agreement. The ~~arrangement met the criteria to be treated as~~Superior Court entered a ~~sale for accounting purposes, and as a result, we derecognized the associated property. There was no resulting gain or loss~~final judgment on the ~~sale because~~verdict in favor of Frontline on September 30, 2019. We believe the ~~proceeds received were equal~~jury verdict is in error and Frontline’s case is completely without merit, and we are appealing the decision to the ~~carrying~~Georgia Court of Appeals. While it is reasonably possible that we will incur some loss between zero and the judgment amount ~~of the property. We are~~ ~~accounting for the lease as an operating lease.~~

~~NOTE 14—SUBSEQUENT EVENTS~~

~~On October 17, 2018,~~plus interest, we ~~drew approximately $415 million from our Revolving Credit Facility to fund our acquisition of SICOM Systems, Inc. ("SICOM"),~~have determined that it is not probable that Global Payments has incurred a ~~provider of enterprise, cloud-based SaaS solutions and other technologies to quick service restaurants and food service management companies.~~

~~On October 18, 2018, we entered into a new term loan~~loss under the Credit Facility in the amount of $500 million (the "Term B-4 Loan"). We used the proceeds from the Term B-4 Loan to pay down a portion of the balance outstanding under our Revolving Credit Facility. Like the other term loans issued under the Credit Facility, interest on the Term B-4 Loan will accrue at an interest rate, at our election, of either LIBOR or a base rate, in each case plus a margin. The Term B-4 Loan principal must be repaid in quarterly installments in the amount of 0.25% of principal through September 2025, with the remaining principal balance due upon maturity in October 2025.

~~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 a Credit Facility 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 September 30, 2018, $5.5 billion was outstanding under these variable-rate debt arrangements and settlement lines of credit.

The interest earned on our invested cash and the interest incurred 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—~~Long-Term Debt and Lines of Credit" in the notes to our accompanying unaudited consolidated financial statements.~~

Based on balances outstanding under variable-rate debt agreements, with consideration given to the related interest rate swaps, and interest-earning cash balances at September 30, 2018, a hypothetical change of 50 basis points in applicable ~~interest rates~~accounting standard (ASC Topic 450, Loss Contingencies) as of September 30, ~~2018 would change our annual interest expense by approximately $20.5 million and change our annual interest income by approximately $2.3 million.~~

~~Foreign Currency Exchange Rate Risk~~

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. We2019. As a result, we have not ~~historically hedged our translation risk~~recorded a liability on ~~foreign currency exposure, but we may do so in~~ the ~~future.~~consolidated balance sheet with respect to this litigation.

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 1I 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 Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. 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

On May 27, 2019, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Total System Services, Inc. ("TSYS") providing for the merger of TSYS with and into Global Payments, with Global Payments as the surviving entity (the "Merger"). We ~~are~~consummated the Merger on September 18, 2019 for total purchase consideration of $24.5 billion. Prior to the Merger, TSYS was a leading ~~worldwide~~global payments provider, ~~of payment~~offering seamless, secure and innovative solutions to issuers, merchants and consumers. Through our combination with TSYS, we are now a leading pure play payments technology ~~services and software solutions~~company delivering innovative ~~solutions~~software and services to our customers globally. Our technologies, services and employee expertise enable us to provide a broad range of services that allow our customers to accept various payment types and operate their businesses more efficiently. We distribute our services across a variety of channels in 31 countries throughout North America, Europe, the Asia-Pacific region and Brazil and operate in three reportable segments: North America, Europe and Asia-Pacific.

On September 1, 2017, we acquired the communities and sports divisions of Athlaction Topco, LLC ("ACTIVE Network"). On September 4, 2018, we acquired AdvancedMD, Inc. ("AdvancedMD"), a provider of cloud-based enterprise software solutions to small-to-medium sized ambulatory physician practices in the United States.

On October 17, 2018, we acquired SICOM Systems, Inc. ("SICOM"), a provider of enterprise, cloud-based SaaS solutions and other technologies to quick service restaurants and food service management companies. See "Note 2—Acquisitions" ~~and "Note 14—Subsequent Events"~~ in the notes to the accompanying unaudited consolidated financial statements for ~~further discussion~~a description of the Merger and other acquisitions and "Note 12—Segment Information" for a description of our ~~acquisitions.~~reportable segments.

As more fully described in "Note 1—Basis of Presentation and Summary of Significant Accounting Policies" and "Note 3—Revenues" in the notes to the accompanying unaudited consolidated financial statements, we adopted a new revenue accounting standard on January 1, 2018 that results in revenue being presented net of certain fees that we pay to third parties, including payment network fees. This change in presentation affected our reported revenues and operating expenses during the three and nine months ended September 30, 2018 by the same amount and had no effect on operating income.

Highlights related to our financial condition and results of operations for the three and nine months ended September 30, ~~2018 are provided below:~~2019 are:

Consolidated revenues ~~were $857.7 million and $2,485.8 million, respectively,~~ for the three and nine months ended September 30, ~~2018,~~2019 increased to $1,105.9 million and $2,924.1 million, respectively, compared to ~~$1,038.9~~$857.7 million and ~~$2,920.9~~$2,485.8 million respectively, for the prior-year periods. Consolidated revenues without the effect of the new revenue accounting standard increased by 10.6% and 13.3% to $1,149.2 million and $3,309.3 million for the three and nine months ended September 30, 2018, compared to $1,038.9 million and $2,920.9 million, respectively, for the prior-year periods, primarily due to ~~organic growth.~~additional revenues from the Merger and businesses acquired in the second half of 2018.

Consolidated operating income ~~was $223.2 million and $570.1 million, respectively,~~ for the three months ended September 30, 2019 decreased to $174.0 million compared to $223.2 million for the prior-year period as a result of the acquisition and integration expenses primarily related to the Merger. Consolidated operating income for the nine months ended September 30, ~~2018,~~2019 increased to $595.3 million compared to ~~$172.5~~$570.1 million ~~and $409.3 million, respectively,~~ for the prior-year ~~periods. Our operating~~period. Operating margin for the three and nine months ended September 30, ~~2018~~2019 was 15.7% and 20.4%, respectively, compared to 26.0% and 22.9%~~, respectively. Without~~ for the ~~effect of the new accounting standard, our operating margin~~prior-year periods.

Net income attributable to Global Payments for the three and nine months ended September 30, ~~2018 was 18.6%~~2019 decreased to $95.0 million and ~~16.3%,~~$327.8 million, respectively, compared to ~~16.6% and 14.0% for the prior-year periods.~~

~~Net income attributable to Global Payments was~~ $176.4 million and $376.8 million ~~respectively,~~for the prior-year periods, reflecting the change in operating income and additional interest expense.

Diluted earnings per share for the three and nine months ended September 30, ~~2018,~~2019 decreased to $0.54 and $2.00, respectively, compared to ~~$110.7 million~~$1.11 and ~~$226.5 million, respectively,~~$2.36 for the prior-year periods.

~~Diluted earnings per share was $1.11 and $2.36, respectively, for the three and nine months ended September 30, 2018, compared to $0.71 and $1.47, respectively, for the prior-year periods.~~

~~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 into new markets and increase our scale and improve our competitiveness in existing markets by pursuing further acquisitions and joint ventures.

We believe 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 September 30, ~~2018~~2019 and ~~2017,~~2018, 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.


	Three Months Ended September 30, 2018			% of Revenue⁽¹⁾		Three Months Ended September 30, 2017			% of Revenue⁽¹⁾		Change			% Change		Three Months Ended September 30, 2019			% of Revenues⁽¹⁾		Three Months Ended September 30, 2018			% of Revenues⁽¹⁾		Change			% Change

	(dollar amounts in thousands)															(dollar amounts in thousands)

Revenues⁽²⁾:
North America	$	643,715		75.1	%	$	764,902		73.6	%	$	(121,187	)	(15.8	)%	$	734,841		66.4	%	$	643,715		75.1	%	$	91,126		14.2	%
Europe	157,584			18.4	%	205,203			19.8	%	(47,619		)	(23.2	)%	164,950			14.9	%	157,584			18.4	%	7,366			4.7	%
Asia-Pacific	56,371			6.6	%	68,802			6.6	%	(12,431		)	(18.1	)%	58,680			5.3	%	56,371			6.6	%	2,309			4.1	%
TSYS																147,470			13.3	%	—			—	%	147,470			NA
Total revenues	$	857,670		100.0	%	$	1,038,907		100.0	%	$	(181,237	)	(17.4	)%	$	1,105,941		100.0	%	$	857,670		100.0	%	$	248,271		28.9	%

Consolidated operating expenses⁽²⁾:
Cost of service	$	265,013		30.9	%	$	493,883		47.5	%	$	(228,870	)	(46.3	)%	$	427,720		38.7	%	$	265,013		30.9	%	$	162,707		61.4	%
Selling, general and administrative	369,495			43.1	%	372,553			35.9	%	(3,058		)	(0.8	)%	504,184			45.6	%	369,495			43.1	%	134,689			36.5	%
Operating expenses	$	634,508		74.0	%	$	866,436		83.4	%	$	(231,928	)	(26.8	)%	$	931,904		84.3	%	$	634,508		74.0	%	$	297,396		46.9	%

Operating income:
Operating income (loss)⁽²⁾:
North America	$	174,012				$	138,345				$	35,667		25.8	%	$	205,728				$	174,012				$	31,716		18.2	%
Europe	85,781					76,214					9,567			12.6	%	91,332					85,781					5,551			6.5	%
Asia-Pacific	23,692					20,032					3,660			18.3	%	24,187					23,692					495			2.1	%
TSYS⁽³⁾																(11,124		)			—					(11,124		)	NA
Corporate⁽³⁾	(60,323		)			(62,120		)			1,797			(2.9	)%	(136,086		)			(60,323		)			(75,763		)	125.6	%
Operating income	$	223,162		26.0	%	$	172,471		16.6	%	$	50,691		29.4	%	$	174,037		15.7	%	$	223,162		26.0	%	$	(49,125	)	(22.0	)%

Operating margin:
Operating margin⁽²⁾:
North America	27.0		%			18.1		%			8.9		%			28.0		%			27.0		%			1.0		%
Europe	54.4		%			37.1		%			17.3		%			55.4		%			54.4		%			1.0		%
Asia-Pacific	42.0		%			29.1		%			12.9		%			41.2		%			42.0		%			(0.8		)%
TSYS																(7.5		)%			NA					NA

NA = not applicable.

⁽¹⁾Percentage amounts may not sum to the total due to rounding.

⁽²⁾~~As more fully described in "Note 1—Basis of Presentation and Summary of Significant Accounting Policies" and "Note 3—~~Revenues," we adopted a new revenue accounting standard on January 1, 2018 that results in revenue being presented net of certain fees that we pay to third parties, including payment network fees. This change in presentation affected our reported revenues consolidated operating expenses, operating income (loss) and operating ~~expenses during~~margin reflect the ~~three months ended September 30, 2018 by~~effects of acquired businesses from the ~~same amount and had no effect on operating income.~~respective acquisition dates. For further discussion of our acquisitions, see "Note 2—Acquisitions" in the notes to the accompanying unaudited consolidated financial statements.

⁽³⁾ O~~perating~~ Operating loss for Corporate included acquisition and integration expenses of $80.0 million and $8.2 million ~~and $21.5 million~~ ~~during~~for the three months ended September 30, 2019 and 2018, respectively. Operating loss for TSYS included acquisition and ~~2017, respectively. These~~integration expenses ~~are included primarily in selling, general and administrative expenses in~~of $20.9 million for the ~~unaudited consolidated statements of income.~~three months ended September 30, 2019.

The following table sets forth key selected financial data for the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, 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.


	Nine Months Ended September 30, 2018			% of Revenue⁽¹⁾		Nine Months Ended September 30, 2017			% of Revenue⁽¹⁾		Change			% Change		Nine Months Ended September 30, 2019			% of Revenues⁽¹⁾		Nine Months Ended September 30, 2018			% of Revenues⁽¹⁾		Change			% Change

	(dollar amounts in thousands)															(dollar amounts in thousands)

Revenues⁽²⁾:
North America	$	1,859,545		74.8	%	$	2,162,911		74.0	%	$	(303,366	)	(14.0	)%	$	2,129,182		72.8	%	$	1,859,545		74.8	%	$	269,637		14.5	%
Europe	456,492			18.4	%	557,258			19.1	%	(100,766		)	(18.1	)%	468,168			16.0	%	456,492			18.4	%	11,676			2.6	%
Asia-Pacific	169,774			6.8	%	200,741			6.9	%	(30,967		)	(15.4	)%	179,311			6.1	%	169,774			6.8	%	9,537			5.6	%
TSYS																147,470			5.0	%	—			—	%	147,470			NA
Total revenues	$	2,485,811		100.0	%	$	2,920,910		100.0	%	$	(435,099	)	(14.9	)%	$	2,924,131		100.0	%	$	2,485,811		100.0	%	$	438,320		17.6	%

Consolidated operating expenses⁽²⁾:
Cost of service	$	781,943		31.5	%	$	1,418,969		48.6	%	$	(637,026	)	(44.9	)%	$	1,035,225		35.4	%	$	781,943		31.5	%	$	253,282		32.4	%
Selling, general and administrative	1,133,799			45.6	%	1,092,648			37.4	%	41,151			3.8	%	1,293,651			44.2	%	1,133,799			45.6	%	159,852			14.1	%
Operating expenses	$	1,915,742		77.1	%	$	2,511,617		86.0	%	$	(595,875	)	(23.7	)%	$	2,328,876		79.6	%	$	1,915,742		77.1	%	$	413,134		21.6	%

Operating income:
Operating income (loss)⁽²⁾:
North America	$	446,600				$	344,604				$	101,996		29.6	%	$	547,160				$	446,600				$	100,560		22.5	%
Europe	239,011					196,394					42,617			21.7	%	249,638					239,011					10,627			4.4	%
Asia-Pacific	67,043					57,321					9,722			17.0	%	74,718					67,043					7,675			11.4	%
TSYS⁽³⁾																(11,124		)			—					(11,124		)	NA
Corporate⁽³⁾	(182,585		)			(189,026		)			6,441			(3.4	)%	(265,137		)			(182,585		)			(82,552		)	45.2	%
Operating income	$	570,069		22.9	%	$	409,293		14.0	%	$	160,776		39.3	%	$	595,255		20.4	%	$	570,069		22.9	%	$	25,186		4.4	%

Operating margin:
Operating margin⁽²⁾:
North America	24.0		%			15.9		%			8.1		%			25.7		%			24.0		%			1.7		%
Europe	52.4		%			35.2		%			17.2		%			53.3		%			52.4		%			0.9		%
Asia-Pacific	39.5		%			28.6		%			10.9		%			41.7		%			39.5		%			2.2		%
TSYS																(7.5		)%			NA					NA

NA = not applicable.

⁽¹⁾Percentage amounts may not sum to the total due to rounding.

⁽²⁾~~As more fully described in "Note 1—Basis of Presentation and Summary of Significant Accounting Policies" and "Note 3—~~Revenues," we adopted a new revenue accounting standard on January 1, 2018 that results in revenue being presented net of certain fees that we pay to third parties, including payment network fees. This change in presentation affected our reported revenues consolidated operating expenses, operating income (loss) and operating ~~expenses during~~margin reflect the ~~nine months ended September 30, 2018 by~~effects of acquired businesses from the ~~same amount and had no effect on operating income.~~respective acquisition dates. For further discussion of our acquisitions, see "Note 2—Acquisitions" in the notes to the accompanying unaudited consolidated financial statements.

⁽³⁾ O~~perating~~ Operating loss for Corporate included acquisition and integration expenses of $99.5 million and $34.6 million, ~~and $69.5 million during~~respectively for the nine months ended September 30, ~~2018~~2019 and ~~2017, respectively. These~~2018. Operating loss for TSYS included acquisition and integration expenses ~~are included primarily in selling, general and administrative expenses in the unaudited consolidated statements~~ of ~~income.~~

~~Revenues~~

As stated above, effective January 1, 2018 our revenues are presented net of certain fees that we pay to third parties, including payment networks. This change in presentation affected our reported revenues and operating expenses$20.9 million for the current-year periods by the same amount and had no effect on operating income. Consolidated revenues without the effect of the new revenue accounting standard increased by 10.6% and 13.3%, respectively, to $1,149.2 million and $3,309.3 million, respectively, for the three and nine months ended September 30, ~~2018, compared to $1,038.9 million and $2,920.9 million, respectively, for the prior-year periods.~~2019.

~~North America Segment. The change in presentation decreased our reported North America segment~~Revenues

Consolidated revenues for the three and nine months ended September 30, ~~2018~~2019 increased by ~~$188.7~~28.9% and 17.6%, respectively, to $1,105.9 million and ~~$545.4~~$2,924.1 million, ~~respectively.~~despite the unfavorable effect of fluctuations in foreign currency exchange rates. For the three and nine months ended September 30, 2019, currency exchange rate fluctuations reduced our consolidated revenues by $11.8 million and $50.8 million, respectively, compared to the prior-year periods, calculated by converting revenues for the current period in local currencies using exchange rates for the prior-year period.

North America Segment. Revenues from our North America segment ~~without the effect of the new revenue accounting standard increased by 8.9% and 11.1%, respectively, to $832.7 million and $2,402.9 million, respectively,~~ for the three and nine months ended September 30, ~~2018. For the three months ended September 30, 2018, the increase in revenue was~~2019 increased by 14.2% and 14.5%, respectively, to $734.8 million and $2,129.2 million, primarily due to organic ~~growth. During the nine months ended September 30, 2018, the increase in~~ revenue ~~was primarily due to the acquisition of ACTIVE Network.~~growth.

Europe Segment. ~~The change in presentation decreased~~Revenues from our ~~reported~~ Europe segment ~~revenues~~ for the three and nine months ended September 30, ~~2018~~2019 increased by ~~$83.5~~4.7% and 2.6%, respectively, to $165.0 million and ~~$223.8~~$468.2 million due to organic growth, partially offset by the unfavorable effect of fluctuations in foreign currency exchange rates of $9.4 million and $35.4 million, respectively.

Asia-Pacific Segment. Revenues from our ~~Europe~~Asia-Pacific segment ~~without the effect of the new revenue accounting standard increased by 17.5% and 22.1%, respectively, to $241.1 million and $680.3 million~~ for the three and nine months ended September 30, ~~2018,~~2019 increased by 4.1% and 5.6%, respectively, to $58.7 million and $179.3 million, primarily due to organic ~~growth.~~

~~Asia-Pacific Segment.~~ ~~The change~~revenue growth, partially offset by the unfavorable effect of fluctuations in ~~presentation decreased our reported Asia-Pacific segment revenues for the three and nine months ended September 30, 2018 by $19.0~~foreign currency exchange rates of $1.4 million and ~~$56.3~~$7.6 million, respectively. Revenues from our Asia-Pacific segment without the effect of the new revenue accounting standard increased by 9.6% and 12.6%, respectively, to $75.4 million and $226.1 million for the three and nine months ended September 30, 2018, primarily due to organic growth.

Operating Expenses

Cost of Service. As described above, effective January 1, 2018, the new revenue accounting standard changed our presentation of certain fees that we pay to third parties, including payment network fees, which decreased cost of services by $273.6 million and $774.5 million, respectively, during the three and nine months ended September 30, 2018. Cost of service ~~without the effect of the new revenue accounting standard increased by 9.3% and 9.9%, respectively, to $539.9 million and $1,559.8 million, respectively,~~ for the three and nine months ended September 30, ~~2018, primarily due~~2019 increased by 61.4% and 32.4%, respectively, to ~~additional costs associated with revenue growth.~~$427.7 million and $1,035.2 million. Cost of service ~~without the effect of the new accounting standard~~ as a percentage of revenues ~~without the effect of the new accounting standard were 47.0%~~was 38.7% and ~~47.1%~~35.4%, respectively, for the three and nine months ended September 30, ~~2018,~~2019, compared to ~~47.5%~~30.9% and ~~48.6%, respectively,~~31.5% for the prior-year periods.

~~Selling, General and Administrative Expenses.~~ ~~As described above, effective January 1, 2018, the new revenue accounting standard changed our presentation~~ The increase in cost of ~~certain fees that we pay to third parties, which decreased selling, general and administrative expenses by $17.7 million and $51.0 million, respectively, during~~service for the three and nine months ended September 30, ~~2018.~~2019 was primarily due to additional costs associated with revenue growth, including those of acquired businesses, and an increase in amortization of acquired intangibles of $15.0 million and $81.7 million, respectively. Cost of service for the three and nine months ended September 30, 2019 also reflects acquisition and integration expenses of $10.4 million and $12.4 million, respectively, which contributed to the increase in cost of service as a percentage of revenues.

Selling, General and Administrative Expenses. Selling, general and administrative expenses ~~without~~for the ~~effect of the new revenue accounting standard~~three and nine months ended September 30, 2019 increased by ~~6.2%~~36.5% and ~~10.6%~~14.1%, respectively, to ~~$395.8~~$504.2 million and ~~$1,208.5 million,~~$1,293.7 million. Selling, general and administrative expenses as a percentage of revenues was 45.6% and 44.2%, respectively, for the three and nine months ended September 30, ~~2018,~~2019, compared to 43.1% and 45.6% for the prior-year periods. The increase in selling, general and administrative expenses for the three and nine months ended September 30, 2019 was primarily due to additional costs to support the growth of our business, ~~partially offset by a reduction in acquisition and integration expenses~~including those of ~~$13.3 million and $34.9 million, respectively.~~acquired businesses. Selling, general and administrative expenses ~~without the effect of the new accounting standard as a percentage of revenues without the effect of the new accounting standard decreased to 34.4% and 36.5%, respectively,~~ for the three and nine months ended September 30, ~~2018, compared to 35.9% and 37.4%, respectively, for the prior-year periods, primarily due to the reduction in~~2019 also reflect acquisition and integration ~~expenses.~~expenses of $90.5 million and $108.0 million, respectively, which contributed to the increase in selling, general and administrative expenses as a percentage of revenues.

Operating Income and Operating Margin

North America Segment. Operating income in our North America segment ~~increased by 25.8% and 29.6%, respectively, to $174.0 million and $446.6 million, respectively,~~ for the three and nine months ended September 30, ~~2018, compared~~2019 increased by 18.2% and 22.5%, respectively, to ~~the prior-year periods,~~$205.7 million and $547.2 million, primarily due to ~~the acquisition of ACTIVE Network.~~revenue growth. Operating margin ~~without the effect of the new accounting~~

~~standard increased to 19.8% and 17.4%, respectively,~~ for the three and nine months ended September 30, ~~2018,~~2019 increased to 28.0% and 25.7%, respectively, compared to ~~18.1%~~27.0% and ~~15.9%, respectively,~~24.0% for the prior-year periods.

Europe Segment. Operating income in our Europe segment ~~increased by 12.6% and 21.7%, respectively, to $85.8 million and $239.0 million, respectively,~~ for the three and nine months ended September 30, ~~2018, compared~~2019 increased by 6.5% and 4.4%, respectively, to ~~the prior-year periods,~~$91.3 million and $249.6 million, primarily due to ~~organic growth.~~revenue growth, partially offset by the unfavorable effect of fluctuations in foreign currency exchange rates of $4.9 million and $16.6 million, respectively. Operating margin without the effect of the new accounting standard decreased to 35.6% for the three months ended September 30, 2018 compared to 37.1% for the prior-year period. Operating margin without the effect of the new accounting standard was 35.2% for the nine months ended September 30, 2018 and 2017.

~~Asia-Pacific Segment. Operating income in our Asia-Pacific segment increased by 18.3% and 17.0%, respectively, to $23.7 million and $67.0 million, respectively,~~ for the three and nine months ended September 30, ~~2018,~~2019 increased to 55.4% and 53.3%, respectively, compared to 54.4% and 52.4% for the prior-year ~~periods, primarily due to organic growth.~~periods.

Asia-Pacific Segment. Operating ~~margin without the effect of the new accounting standard increased to 31.0% and 29.3%~~income in our Asia-Pacific segment for the three and nine months ended September 30, ~~2018, compared~~2019 increased by 2.1% and 11.4%, respectively, to ~~29.1% and 28.6% for the prior-year periods as a result of continued growth in organic revenue.~~

~~Corporate.~~ ~~Corporate expenses decreased by $1.8~~$24.2 million and ~~$6.4~~$74.7 million, ~~respectively,~~primarily due to ~~$60.3 million and $182.6 million, respectively,~~revenue growth. Operating margin for the three and nine months ended September 30, ~~2018,~~2019 was 41.2% and 41.7%, respectively, compared to 42.0% and 39.5% for the prior-year ~~periods, primarily due to a reduction in acquisition and integration~~periods.

Corporate. Corporate expenses ~~of $13.3~~increased by $75.8 million and ~~$34.9~~$82.6 million, respectively, ~~partially offset by higher share-based compensation expense of $5.2~~to $136.1 million and ~~$14.2~~$265.1 million ~~respectively, and additional costs to support the growth of our business.~~

~~Other Income/Expense, Net~~

~~Interest and other income increased by $0.8 million and $11.6 million, respectively,~~ for the three and nine months ended September 30, ~~2018,~~2019, compared to the prior-year ~~periods. The increase during~~periods, primarily due to expenses associated with the Merger. During the three months ended September 30, 2019 and 2018, operating loss for Corporate included acquisition and integration expenses of $80.0 million and $8.2 million, respectively. During the nine months ended September 30, 2019 and 2018, operating loss for Corporate included acquisition and integration expenses of $99.5 million and $34.6 million, respectively.

Other Income/Expense, Net

Interest and other income increased by $8.1 million and $2.9 million, respectively, to $11.2 million and $20.3 million for the three and nine months ended September 30, 2019, compared to the prior-year periods, as a result of interest earned on the net proceeds from the issuance of the Senior Notes while they were in escrow. Interest and other income for the nine months ended September 30, 2018 ~~was due to~~included a gain of ~~approximately~~ $9.6 million recognized on the reorganization of a debit network association of which we were a member through one of our Canadian subsidiaries.

Interest and other expense increased by ~~$5.6~~$49.8 million and ~~$9.3~~$81.2 million, respectively, for the three and nine months ended September 30, ~~2018,~~2019, compared to the prior-year ~~periods, to $46.4 million and $139.7 million, respectively. Interest~~periods. The increases in interest expense for the three and nine months ended September 30, ~~2018 reflects an~~2019 reflect additional interest expense associated with the increase in our ~~outstanding~~ long-term debt, ~~as well as an increase~~including debt of $3,295.3 million that we assumed in the ~~London Interbank Offered Rate ("LIBOR").~~Merger. Further, in connection with financing activities related to the Merger, we incurred fees and charges of $25.5 million and $28.4 million, which were included in interest expense for the three and nine months ended September 30, 2019, respectively. These fees and charges included fees associated with bridge financing and charges for the write-off of unamortized debt issuance costs related to borrowings under our Prior Credit Facility that was extinguished prior to the completion of the Merger.

~~Provision~~Income Tax Expense (Benefit)

Our effective income tax rates for ~~Income Taxes~~

~~During~~ the three months ended September 30, 2019 and 2018 ~~we continued~~were a benefit of 18.7%, and a benefit of 3.4%, respectively. Our effective income tax rates for the nine months ended September 30, 2019 and 2018 were 10.1% and 10.4%, respectively. The changes in our effective tax rates for the three and nine months ended September 30, 2019 from the prior-year periods reflects the effect of discrete items related to ~~analyze~~the Merger during the three months ended September 30, 2019 and the reduction of our ~~foreign tax pools and resulting foreign tax credits and reduced the~~ estimated transition tax liability associated with the U.S. Tax Cuts and Jobs Act of 2017 (the "2017 U.S. Tax Act") by $23.3 million. Our effective tax rate for the three months ended September 30, 2018 was a benefit of 3.4%. Our effective income tax rate for the three months ended September 30, 2017 was 11.7%. Our effective income tax rates for the nine months ended September 30, 2018 and September 30, 2017 were 10.4% and 14.4%, respectively. Our 2018 effective income tax rates reflect the benefit of the aforementioned $23.3 million adjustment to the one-time transition tax liability recorded during the three months ended September 30, 2018.

Liquidity and Capital Resources

In the ordinary course of our business, a significant portion of our liquidity comes from operating cash ~~flows.~~flows and borrowings, including the capacity under our new credit facilities, which are described below. Cash flow from ~~operations~~operating activities is used to make planned capital investments in our business, to pursue acquisitions that meet our corporate objectives, to pay dividends, to pay principal 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 ~~our~~a combination of bank financing, such as ~~term loans~~borrowings under our new credit facilities and ~~our Revolving Credit Facility,~~senior note issuances, for general corporate purposes and to fund acquisitions. In addition, specialized lines of credit are also used in certain of our markets to 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, through the issuance of debt or equity or ~~otherwise.~~by other means.

At September 30, ~~2018,~~2019, we had cash and cash equivalents totaling ~~$990.6~~$2,127.6 million. Of this amount, we consider ~~$431.3~~$961.9 million to be available for general purposes, of which approximately ~~$60~~$26 million is undistributed foreign earnings considered to be indefinitely reinvested outside the United States. Under the 2017 U.S. Tax Act, a company's foreign earnings accumulated under legacy tax laws are deemed repatriated, and the 2017 U.S. Tax Act generally eliminates U.S. federal income taxes on dividends from foreign subsidiaries. The estimate of $60 million is our provisional position under the 2017 U.S. Tax Act. The available cash of ~~$431.3~~$961.9 million does not include the following: (i) settlement-related cash balances, (ii) funds held as collateral for merchant losses ("Merchant Reserves") and (iii) funds held for customers. Settlement-related cash balances represent funds that we hold when the incoming amount from the card networks precedes the funding obligation to the merchant. Settlement-related cash balances are not restricted; however, these funds are generally paid out in satisfaction of settlement processing obligations the following day. Merchant Reserves serve as collateral to minimize contingent liabilities associated with any losses that may occur under the ~~merchant~~merchant's agreement. 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.

Operating activities provided net cash of ~~$661.0~~$1,349.4 million and ~~$360.1~~$661.0 million for the nine months ended September 30, 2019 and 2018, respectively, which reflect net income adjusted for noncash items, including depreciation and ~~September 30, 2017, respectively.~~amortization and changes in operating assets and liabilities. Fluctuations in ~~working capital~~operating assets and liabilities are affected primarily by timing of month-end and transaction volume, especially changes in settlement processing assets and ~~liabilities.~~obligations, and by the effects of businesses we acquire that have different working capital requirements. Changes in settlement processing assets and ~~liabilities decreased~~obligations increased operating cash flows by ~~$58.7 million and $232.7~~$624.0 million during the nine months ended September 30, ~~2018~~2019 and decreased operating cash flows by $58.7 million during the nine months ended September 30, ~~2017, respectively.~~2018. The increase in cash flows from operating activities from the prior-year period was primarily due to the effect of changes in settlement processing assets and obligations. Cash flows from operations during the nine months ended September 30, 2019 also reflect the effect of settlement payments of $48.3 million related to interest rate swaps that we terminated upon the issuance of our Senior Notes.

We used net cash in investing activities of ~~$927.5~~$506.3 million and ~~$710.2~~$927.5 million during the nine months ended September 30, 2019 and 2018, respectively. Cash used for investing activities primarily represents cash used to fund acquisitions, net of cash acquired, and capital expenditures. During the nine months ended September 30, ~~2017, respectively.~~2019, we used cash of $780.4 million for acquisitions, including $703.6 million for the repayment of TSYS's unsecured revolving credit facility (including accrued interest and fees) and for cash paid to TSYS shareholders in lieu of fractional shares, which was partially offset by cash acquired of $446.0 million. During the nine months ended September 30, 2018, we ~~invested approximately $700~~used cash of $776.7 million for acquisitions, which was partially offset by cash acquired of $7.7 million.

We made capital expenditures of $201.0 million and $156.1 million to ~~acquire AdvancedMD. In addition, net cash used in investing activities includes capital expenditures (including internal-use capitalized software development projects).~~purchase property and equipment during the nine months ended September 30, 2019 and 2018, respectively. These investments include software and hardware to support the development of new technologies, continued consolidation and enhancement of our operating platforms and infrastructure to support our growing business. During the year ending December 31, ~~2018,~~2019, we expect aggregate capital expenditures for property and equipment to approximate ~~$210~~$300 million.

Financing activities include borrowings and repayments made under our ~~Credit Facility~~various debt arrangements, as well as borrowings and repayments made under specialized lines of credit to fund daily settlement activities. Our borrowing arrangements are further described in "Note 6—Long-Term Debt and Lines of Credit" in the notes to the accompanying unaudited consolidated financial statements and below under "Long-Term Debt and Lines of Credit." Financing activities also include cash flows associated with common stock repurchase programs and share-based compensation programs, as well as cash distributions made to noncontrolling interests and our shareholders. Cash flows from financing activities provided net cash of $109.9 million during the nine months ended September 30, 2019 and used net cash of $49.0 million during the nine months ended September 30, ~~2018, primarily as a result~~2018.

In connection with financing activities associated with the Merger, we received $2,993.9 million of ~~net borrowings under~~proceeds from the issuance of Senior Notes (defined below) and $2,868.0 million from our New Credit Facility ~~offset by funds~~(defined in "Note 6—Long-Term Debt and Lines of Credit" in the notes to the accompanying unaudited consolidated financial statements). We used these proceeds to ~~repurchase shares~~repay TSYS's unsecured revolving credit facility, to refinance certain of our ~~common stock. Cash flows from financing activities provided net~~existing indebtedness, to fund cash payments made in lieu of ~~$333.1 million during~~fractional shares payable in accordance with the ~~nine months ended September 30, 2017, primarily as a result~~terms of ~~net borrowings under our Credit Facility.~~the Merger Agreement and to pay transaction fees and costs related to the Merger.

~~Proceeds from~~Repayments of long-term debt were ~~$1,606.2~~$6,097.2 million and ~~$1,713.3~~$1,468.5 million for the nine months ended September 30, ~~2018~~2019 and ~~September 30, 2017,~~2018, respectively. Repayments of long-term debt ~~were $1,468.5 million and $1,386.7 million for the nine months ended September 30, 2018 and September 30, 2017, respectively. Proceeds from long-term debt include borrowings~~consist of repayments that we make ~~from time-to-time under our Revolving Credit Facility. Repayments of long-term debt include repayments that we make~~with available cash, from time-to-time, under our Revolving Credit Facility, as well as scheduled principal repayments ~~made under~~we make on our term loans. During the nine months ended ~~September 30, 2018, we repatriated $445.9 million from certain of our foreign subsidiaries and used the cash to reduce outstanding borrowings under our Revolving Credit Facility.~~

~~Because we often receive funding from~~September 30, 2019, repayments of long-term debt also included $5,127.5 million for the ~~payment networks after we fund~~repayment of all outstanding principal under our ~~merchants, we have specialized lines~~Prior Credit Facility (defined in "Note 6—Long-Term Debt and Lines of ~~credit~~Credit" in ~~various markets where we do business~~the notes to ~~fund settlement.~~ the accompanying unaudited consolidated financial statements).

Activity under our settlement lines of credit is affected primarily by timing of month-end and transaction volume. During the nine months ended September 30, ~~2018~~2019, we had net repayments of settlement lines of credit of $144.5 million, and during the nine months ended September 30, ~~2017,~~2018, we had net borrowings offrom settlement lines of credit of $49.4 million, ~~and $77.4 million,~~ respectively.

We ~~make repurchases of~~repurchase our common stock mainly through open market repurchase plans and, at times, through accelerated share repurchase programs. During the nine months ended September 30, 2019 and 2018, we used $234.0 million and $180.9 million, respectively, to repurchase shares of our common stock. As of September 30, ~~2018,~~2019, we had ~~$419.1~~$568.0 million of share repurchase authority remaining under a share repurchase program authorized by the board of directors.

During the nine months ended September 30, 2019, we paid distributions to noncontrolling interest in the amount of $31.6 million, and we funded assumed dividends payable (declared by TSYS's board of directors ~~announced on February 6, 2018,~~prior to ~~repurchase shares~~consummation of ~~our common stock.~~the Merger) to former TSYS shareholders in the amount of $23.2 million. During the nine months ended September 30, 2018, ~~we used $180.9 million~~distributions to ~~repurchase shares of our common stock, compared to $32.8 million in the prior-year period.~~noncontrolling interests were $5.7 million.

We believe that our current level of cash and borrowing capacity under our ~~long-term debt and lines of~~existing credit ~~described below,~~facilities, together with expected 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

Bridge Facility

On May 27, 2019, in connection with our entry into the Merger Agreement, we obtained commitments for a $2.75 billion, 364-day senior unsecured bridge facility (the "Bridge Facility"). On July 9, 2019, upon our entry into the Term Loan Facility and the Unsecured Revolving Credit Facility (each as defined below), the aggregate commitments under the Bridge Facility were reduced to approximately $2.1 billion. Concurrently with the issuance of the Senior Notes (as defined below), the remaining aggregate commitments under the Bridge Facility were reduced to zero and terminated. During the nine months ended September 30, 2019, we paid fees of $11.7 million for the Bridge Facility.

New Facilities

Borrowings under the Term Loan Facility were made in U.S. dollars and borrowings under the Unsecured Revolving Credit Facility are available to be made in U.S. dollars, euros, sterling, Canadian dollars and, subject to certain conditions, certain other currencies at our option. Borrowings in U.S. dollars and certain other London Interbank Offered Rate ("LIBOR")-quoted currencies will bear interest, at our option, at a rate equal to either (1) the rate (adjusted for any statutory reserve requirements for eurocurrency liabilities) for eurodollar deposits in the London interbank market, (2) a floating rate of interest set forth on the applicable LIBOR screen page designated by Bank of America or (3) the highest of (a) the federal funds effective rate plus 0.5%, (b) the rate of interest as publicly announced by Bank of America as its "prime rate" or (c) LIBOR plus 1.0%, in each case, plus an applicable margin.

As of September 30, 2019, the interest rates on the Term Loan Facility and the Unsecured Revolving Credit Facility were 3.42% and 3.33%, respectively. In addition, we are required to pay a quarterly commitment fee with respect to the unused portion of the Unsecured Revolving Credit Facility at an applicable rate per annum ranging from 0.125% to 0.300% depending on our credit rating. Beginning on December 31, 2022, and at the end of each quarter thereafter, the Term Loan Facility must be repaid in quarterly

installments in the amount of 2.50% of original principal through the maturity date with the remaining principal balance due upon maturity in September 2024. The Unsecured Revolving Credit Agreement also matures in September 2024.

We ~~are~~may issue standby letters of credit of up to $250 million in the aggregate under the Unsecured Revolving Credit Facility. Outstanding letters of credit under the Unsecured Revolving Credit Facility reduce the amount of borrowings available to us. The total available commitments under the Unsecured Revolving Credit Facility at September 30, 2019 were $2,198.8 million.

Senior Notes

From August 14, 2019 to the closing date of the Merger, the net proceeds from the issuance of the Senior Notes were held in escrow. Upon closing, the funds were released and used together with borrowings under the Term Loan Facility and the Unsecured Revolving Credit Facility and cash on hand to repay TSYS's unsecured revolving credit facility, to refinance certain of our existing indebtedness, to fund cash payments made in lieu of fractional shares payable in accordance with the terms of the Merger Agreement and to pay transaction fees and costs related to the Merger.

Prior Credit Facility

Prior to completion of the Merger, we were 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~~"Prior Credit Facility"). ~~As of September 30, 2018, the~~The Prior Credit Facility provided for secured financing comprised of (i) a $1.5 billion revolving credit ~~facility (the "Revolving Credit Facility");~~facility; (ii) a $1.5 billion term ~~loan (the "Term A Loan"),~~loan; (iii) a $1.37 billion term ~~loan (the "Term A-2 Loan") and~~loan; (iv) a $1.14 billion term ~~loan (the "Term B-2 Loan"). Substantially all~~loan; and (v) a $500 million term loan. Upon the consummation of the ~~assets of our domestic subsidiaries are pledged as collateral~~Merger, all borrowings outstanding and other amounts due under the Prior Credit ~~Facility.~~Facility were repaid with proceeds from the New Facilities and the Prior Credit Facility was terminated.

Compliance with Covenants

In October 2018, we entered into an additional term loan in the amount of $500 million (the "Term B-4 Loan"). We used the proceeds from the Term B-4 Loan to pay down a portion of the balance outstanding under our Revolving Credit Facility.

The Credit Facility provides for an interest rate, at our election, of either LIBOR or a base rate, in each case plus a margin. As of September 30, 2018, the interest rates on the Term A Loan, the Term A-2 Loan and the Term B-2 Loan were 3.74%, 3.66% and 3.99%, respectively. As of September 30, 2018, the interest rate on the Revolving Credit Facility was 3.66%. In addition, we are required to pay a quarterly commitment fee on the unused portion of the Revolving Credit Facility at an applicable rate per annum ranging from 0.20% to 0.30% depending on our leverage ratio.

The Term A Loan and the Term A-2 Loan mature, and the Revolving Credit Facility expires, on January 20, 2023. The Term B-2 Loan matures on April 22, 2023. The Term B-4 Loan matures on October 18, 2025. The Term A Loan and Term A-2 Loan principals must be repaid in quarterly installments in the amount of 0.625% of principal through June 2019, increasing to 1.25% of principal through June 2021, increasing to 1.875% of principal through June 2022 and increasing to 2.50% through December 2022, with the remaining principal balance due upon maturity` in January 2023. 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 Term B-4 Loan principal must be repaid in quarterly installments in the amount of 0.25% of principal through September 2025, with the remaining principal balance due upon maturity in October 2025.

Settlement Lines of Credit

credit may exceed the stated credit limit. As of September 30, ~~2018~~2019 and December 31, ~~2017,~~2018, a total of ~~$68.5~~$72.1 million and ~~$59.3~~$70.6 million, respectively, of cash on deposit was used to determine the available credit.

~~Compliance with Covenants~~

~~The Credit Facility Agreement contains customary affirmative and restrictive covenants, including, among others, financial covenants based on our leverage and interest coverage ratios as defined in~~ During the ~~agreement. As of~~three months ended September 30, ~~2018, financial covenants~~2019, the maximum and average outstanding balances under the Credit Facility Agreement required a leverage ratio no greater than: (i) 5.00 to 1.00 as of the end of any fiscal quarter ending during the period from April 1, 2018 through June 30, 2019; (ii) 4.75 to 1.00 as of the end of any fiscal quarter ending during the period from July 1, 2019 through June 30, 2020; and (iii) 4.50 to 1.00 as of the end of any fiscal quarter ending thereafter. The interest coverage ratio is required to be no less than 3.25 to 1.00.

~~The Credit Facility Agreement and settlement~~these lines of credit ~~also include various other covenants that are customary in such borrowings. The Credit Facility Agreement includes covenants, subject in each case to exceptions~~were $699.0 million and qualifications that may restrict certain payments, including, in certain circumstances, repurchasing our common stock and paying cash dividends in excess of our current rate of $0.01 per share per quarter.$426.6 million, respectively.

The Credit Facility Agreement also includes customary events of default, the occurrence of which, following any applicable cure period, would permit the lenders to, among other things, declare the principal, accrued interest and other obligations to be immediately due and payable. We were in compliance with all applicable covenants as of September 30, 2018.

See "Note 5—Leases" and "Note 6—Long-Term Debt and Lines of Credit" ~~and "Note 14—Subsequent Events"~~ in the notes to the accompanying unaudited consolidated financial statements for further ~~discussion of~~information about our borrowing ~~arrangements.~~agreements and our lease liabilities.

Commitments and Contractual Obligations

As a result of the Merger and the related financing activities, our commitments and contractual obligations increased from the amounts disclosed in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations—Commitments and Contractual Obligations" in our Annual Report on Form 10-K for the year ended December 31, 2018. As of September 30, 2019, we had long-term debt (including finance lease liabilities) of $9,021.1 million and operating lease liabilities of $501.4 million. See "Note 5—Leases" and "Note 6—Long-Term Debt and Lines of Credit" in the notes to the accompanying unaudited consolidated financial statements for further information about our borrowing agreements and our lease liabilities, including maturity schedules. Additionally, in connection with the Merger, we also assumed purchase commitments of approximately $93 million, which include future payments for noncancelable contractual obligations related to service arrangements with suppliers for fixed or minimum amounts. Payments for the assumed purchase commitments due during the remainder of 2019 are approximately $12 million and purchase commitments due in 2020, 2021, 2022, 2023, 2024 and thereafter are approximately $32 million, $14 million, $9 million, $6 million, $5 million and $15 million, respectively.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our financial condition, revenues, results of operations or capital resources, 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 Annual Report on Form 10-K for the year ended December 31, 2017.resources.

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

From 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 anticipated benefits of the Merger, including our ~~acquisitions, including~~ future financial and operating results, the combined company’s plans, objectives, expectations and intentions and other statements that are not historical facts.

Important factors, among others, that may otherwise cause actual events or results to differ materially from those anticipated by such forward-looking statements include failure to realize the expected benefits of the Merger or difficulties integrating the business of the combined company, higher than anticipated costs related to integrating the businesses, business disruptions or the risk of customer loss related to the Merger, 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; risk associated with our indebtedness; potential systems interruptions or failures; software defects or undetected errors; increased attrition of merchants, referral partners or independent sales organizations; our ability to increase our share of existing markets and expand into new markets; development of ~~anticipated~~ market trends and technologies; a decline in the use of cards for payment generally; unanticipated increases in chargeback liability; increases in credit card network fees; change 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 or fully realizing cost savings and other benefits of our acquisitions at all or within the expected time period; fully realizing anticipated annual interest expense savings from refinancing our ~~Credit Facility;~~credit Facilities; our loss of key personnel and other risk factors presented in "Part II, Item 1-1A - Risk ~~Factors~~Factors" of this Form 10-Q and "Part I, Item 1A - Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 and any ~~subsequent~~other SEC filings, which we advise you to review.

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~~While we may elect to update or revise forward-looking statements at some time in the future, we specifically disclaim any obligation to ~~revise~~publicly release the results of any revisions to our forward-looking statements, except as required by law.

ITEM 3—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a result of ~~these statements~~debt we assumed in the Merger and the financing activities we completed during the quarter ended September 30, 2019, including the issuance of Senior Notes, a larger portion of our debt as of September 30, 2019 had fixed interest rates as compared to ~~reflect future circumstances or~~our debt at December 31, 2018. As a result, and considering the ~~occurrence~~interest rate swap agreements we have to hedge changes in cash flows attributable to interest rate risk on our variable-rate debt instruments, our exposure to interest rate risk has decreased since December 31, 2018. Based on balances outstanding at September 30, 2019, a hypothetical increase of ~~unanticipated events.~~50 basis points in applicable interest rates as of September 30, 2019 would increase our annual interest expense by approximately $6.0 million and increase our annual interest income by approximately $4.6 million.

In addition, as a result of the Merger and other recent acquisitions we have made in the United States, a smaller portion of our business was conducted in foreign currencies during the three and nine months ended September 30, 2019 as compared to the prior year periods. For the three and nine months ended September 30, 2019, currency exchange rate fluctuations reduced our consolidated revenues by $11.8 million and $50.8 million, respectively, compared to the prior year, calculated by converting revenues for the current period in local currencies using exchange rates for the prior-year period.

For a further discussion of our exposure to market risk, refer to Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," contained in our Annual Report on Form 10-K for the year ended December 31, 2018.

ITEM 4—CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of September 30, ~~2018,~~2019, 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, as amended). Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of September 30, ~~2018,~~2019, 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 over Financial Reporting

InWe completed our merger with TSYS on September 2017, we completed the acquisition of ACTIVE Network, 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 ACTIVE Network business.

In September 2018, we completed the acquisition of AdvancedMD. The assets, excluding goodwill, of AdvancedMD constituted approximately 2% of our total consolidated assets as of September 30, 2018. Revenues and operating income of AdvancedMD for the three and nine months ended September 30, 2018 were not material to our consolidated financial statements.

18, 2019. In accordance with our integration efforts, we plan to incorporate ~~the~~TSYS's operations ~~of these acquired businesses~~ into our internal control over financial reporting program within the time ~~period~~ provided by the applicable ~~SEC~~ rules and ~~regulations. There were no other changes in our internal control over financial reporting during~~regulations of the ~~quarter ended September 30, 2018 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.~~U.S. Securities and Exchange Commission.

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. See "Note 13—Commitments and Contingencies" in the notes to the accompanying unaudited consolidated financial statements for information about certain legal matters.

ITEM 1A—RISK FACTORS

~~There~~On September 18, 2019, we completed the Merger with TSYS, pursuant to the Merger Agreement that we entered into with TSYS on May 27, 2019. We face a number of risks and uncertainties relating to the Merger. Because of these risks, we have ~~been no material changes from~~supplemented the risk factors ~~set forth~~previously disclosed in ~~Part I, Item 1A, "Risk Factors" of~~ our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018, to add the following risk factors:

We expect to incur substantial costs related to the Merger and integration.

We have incurred and expect to incur a significant amount of nonrecurring costs associated with the Merger. These costs include financial advisory, legal, accounting, consulting and other advisory fees, severance/employee benefit-related costs, public company filing fees and other regulatory fees, printing costs and other related costs.

We expect to incur substantial costs in connection with the related integration. There are a large number of processes, policies, procedures, operations, technologies and systems that may need to be integrated, including our business operating platforms and other operational matters as well as integrating our purchasing, accounting and finance, sales, payroll, pricing and benefits and other administrative processes. While we have assumed that a certain level of costs will be incurred, there are many factors beyond our control that could affect the total amount or the timing of the integration costs. Moreover, many of the costs that will be incurred are, by their nature, difficult to estimate accurately. These costs could, particularly in the near term, exceed the savings that we expect to achieve from the elimination of duplicative costs and the realization of economies of scale and cost savings. These integration costs may result in significant charges against earnings, and the amount and timing of such charges are uncertain at present.

Combining with TSYS may be more difficult, costly or time consuming than expected and we may fail to realize the anticipated benefits of the Merger.

The success of the Merger will depend, in part, on the ability to realize the anticipated cost savings from combining our business with TSYS. To realize the anticipated benefits and cost savings from the Merger, we must successfully integrate and combine our businesses in a manner that permits those cost savings to be realized. If we are not able to successfully achieve these objectives, the anticipated benefits of the Merger may not be realized fully or at all or may take longer to realize than expected. In addition, the actual cost savings and anticipated benefits of the Merger could be less than anticipated.

Until the completion of the Merger, we operated independently of TSYS. It is possible that the integration process could result in the loss of key employees, the disruption of our ongoing business or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with clients, customers, commercial counterparties and employees or to achieve the anticipated benefits and cost savings of the Merger. Integration efforts may also divert management attention and resources. These integration matters could have an adverse effect on us for an undetermined period after completion of the Merger.

Our future results may suffer if we do not effectively manage our expanded operations.

Following the completion of the Merger, the size of our business increased significantly. Our future success will depend, in part, upon our ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. We may also face increased scrutiny from governmental authorities as a result of the significant increase in the size of its business. There can be no assurances that we will be successful or that we will realize the expected operating efficiencies, cost savings, revenue enhancements or other benefits currently anticipated from the Merger.

We may be unable to retain our personnel successfully.

The success of the Merger will depend in part on our ability to retain the talents and dedication of key employees. It is possible that these employees may decide not to remain with us. If key employees terminate their employment, our business activities may be adversely affected and management’s attention may be diverted from successfully integrating the businesses to hiring suitable replacements, all of which may cause our business to suffer. In addition, we may not be able to locate or retain suitable replacements for any key employees who leave.

Holders of our common stock before the Merger have a reduced ownership percentage and voting interest in us after the Merger and may exercise less influence over management.

Holders of our common stock have the right to vote in the election of the board of directors and on other matters affecting us. Upon completion of the Merger, the former holders of TSYS common stock owned approximately forty-eight percent (48%) of our fully diluted shares and holders of our common stock prior to the completion of the Merger, as a group, owned approximately fifty-two percent (52%) of our fully diluted shares. Because of this, holders of our common stock who owned shares of our common stock prior to the completion of the Merger may have less influence on our management and policies than they had prior to the completion of the Merger.

Issuance of shares of our common stock in connection with the Merger may adversely affect the market price of our common stock.

In connection with the payment of the Merger consideration, we issued approximately 143.9 million shares of our common stock to TSYS shareholders. The issuance of these new shares of our common stock may result in fluctuations in the market price our common stock, including a stock price decrease.

ITEM 2—UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~(a) Unregistered Sales of Equity Securities and Use of Proceeds~~

��

~~None.~~

Information about the shares of our common stock that we repurchased during the quarter ended September 30, ~~2018~~2019 is set forth below:

Period
Total Number of
Shares Purchased ⁽¹⁾
Approximate Average Price Paid per Share 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 ⁽²⁾
(in millions)
July 2018 110,172
$ 112.57
—

August 2018 14,677
116.64
—

September 2018 85,725
127.21
—

Total 210,574
$ 118.81
—
$ 419.1



Period	Total Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share		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 ⁽²⁾
					(in millions)
July 2019	46,869	$	171.40	—	$	568.0
August 2019	1,437	165.63		—	568.0
September 2019	131,243	162.39		—	568.0
Total	179,549	$	164.77	—	$	568.0

⁽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. During the quarter ended September 30, 2019, pursuant to our employee incentive plans, we withheld 97,458 shares, at an average price per share of $165.12 in order to satisfy employees' tax withholding and payment obligations in connection with the vesting of awards of restricted stock. In September 2019, in connection with the Merger and the vesting of the Single-Trigger Awards, we withheld 82,091 shares, at an average price per share of $164.35, in order to satisfy tax withholding and payment obligations.

During the quarter ended September 30, 2018, pursuant to our employee incentive plans, we withheld 210,574 shares at an average price per share of $118.81 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.

⁽²⁾

On February ~~6, 2018,~~13, 2019, we announced that our board of directors approved an increase to our existing share repurchase program authorization, which raised the total available authorization to ~~$600~~$750 million. As of September 30, ~~2018,~~2019, the approximate dollar value of shares that may yet be purchased under our share repurchase program was ~~$419.1~~$568.0 million. The ~~authorizations by the~~ board ~~of directors do~~authorization does not expire, but could be revoked at any time. In addition, we are not required by ~~any of~~ the board’s ~~authorizations~~authorization or otherwise to complete any repurchases by any specific time or at all.

ITEM 6—EXHIBITS

List of Exhibits



2.1		~~Stock Purchase~~Agreement and Plan of Merger ~~Agreement,~~by and between Total System Services, Inc. and Global Payments Inc., dated as of August 2, 2017, by and among Athlaction Topco, LLC, the Vista Blocker Sellers (as defined therein), Vista Equity Partners Management, LLC, as Sellers’ Representative, Global Payments Inc., Athens Merger Sub, LLC and the Vista AIVs and Vista GPs (as defined therein and solely for the limited purposes set forth therein),May 27, 2019, incorporated by reference to Exhibit 2.1 to ~~the Company’s~~Global Payment Inc.'s Current Report on Form 8-K filed on ~~August 8, 2017.~~May 31, 2019. ++
~~2.2~~3.1		Third Amended and Restated Articles of Incorporation of Global Payments Inc., incorporated by reference to Exhibit 4.1 to Global Payment Inc.’s Post-Effective Amendment No. 1 on Form S-8 to the ~~Stock Purchase~~Registration Statement on Form S-4 filed on September 18, 2019.
3.2		Ninth Amended and ~~Merger~~Restated Bylaws of Global Payment's Inc., incorporated by reference to Exhibit 4.2 to Global Payment Inc.’s Post-Effective Amendment No. 1 on Form S-8 to the Registration Statement on Form S-4 filed on September 18, 2019.
4.1		Stockholders Agreement, dated ~~as of~~ August 31, 2017, by and among Global Payments Inc.~~, Athlaction Topco, LLC, Vista Equity Partners Management, LLC, as Sellers’ Representative,~~ and ~~VEP Global Aggregator, LLC,~~the stockholders party thereto, incorporated by reference to Exhibit ~~2.2.~~10.1 to ~~the Company’s~~Global Payments Inc.'s Current Report on Form 8-K filed on September 6, 2017. ++
~~3.1~~4.2		~~Second Amended~~Indenture, dated as of August 14, 2019, between Global Payments Inc. and ~~Restated Articles of Incorporation of the Company,~~U.S. Bank National Association, as trustee, incorporated by reference to Exhibit ~~3.1~~4.1 to ~~the Company’s Annual Report on Form 10-K filed July 25, 2013.~~
~~3.2~~		~~Eighth Amended and Restated Bylaws of the Company, incorporated by reference to Exhibit 3.1 to the Company’s~~Global Payments Inc.’s Current Report on Form 8-K filed on August 14, 2019.
4.3		Supplemental Indenture No. 1, dated as of August 14, 2019, between Global Payments Inc. and U.S. Bank National Association, as trustee, incorporated by reference to Exhibit 4.2 Global Payments Inc.’s Current Report on Form 8-K filed on August 14, 2019.
4.4		Form of Notes (included in Exhibit 4.2).
4.5		Senior Indenture, dated March 17, 2016, between TSYS and Regions Bank, as trustee, incorporated by reference to Exhibit 4.1 of TSYS's Current Report on Form 8-K filed on March 17, 2016.
4.6		Supplemental Indenture No. 1, dated as of September 17, 2019, among Total System Services, Inc., Global Payments Inc. and Regions Bank, incorporated by reference to Exhibit 4.1 to Global Payments Inc.’s Current Report on Form 8-K filed on September 20, 2019.
4.7		Form of 3.800% Senior Note due 2021, incorporated by reference to Exhibit 4.2 of TSYS's Current Report on Form 8-K filed on March 17, 2016.
4.8		Form of 4.000% Senior Note due 2023, incorporated by reference to Exhibit 4.1 of TSYS's Current Report on Form 8-K filed on May ~~4, 2017.~~11, 2018.
4.9		Form of 4.800% Senior Note due 2026, incorporated by reference to Exhibit 4.3 of TSYS's Current Report on Form 8-K filed on March 17, 2016.
4.10		Indenture, dated as of May 22, 2013, between TSYS and Wells Fargo Bank, National Association, as trustee, incorporated by reference to Exhibit 4.1 of TSYS's Current Report on Form 8-K filed on May 22, 2013.
4.11		Supplemental Indenture No. 1, dated as of September 17, 2019, among Total System Services, Inc., Global Payments Inc. and Wells Fargo Bank, National Association, incorporated by reference to Exhibit 4.2 to Global Payments Inc.’s Current Report on Form 8-K filed on September 20, 2019.
4.12		Form of 3.750% Senior Note due 2023, incorporated by reference to Exhibit 4.3 of TSYS's Current Report on Form 8-K filed on May 22, 2013.
10.1*		~~Third Amendment to~~Amended and Restated Employment Agreement, dated as of September 20, 2019, by and between Global Payments Inc. and Jeffrey S. ~~Sloan and the Company, dated August 27, 2018.~~Sloan.
10.2*		~~Amendment to~~Amended and Restated Employment Agreement, dated as of September 20, 2019, by and between Global Payments Inc. and Cameron M. ~~Bready and the Company, dated August 27, 2018.~~Bready.
10.3*		~~Amendment to~~Amended and Restated Employment Agreement, dated as of September 20, 2019, by and between Global Payments Inc. and Guido F. ~~Sacchi and the Company, dated August 27, 2018.~~Sacchi.
10.4*		Amended and Restated Employment Agreement, dated as of September 20, 2019, by and between Global Payments Inc. and David L. Green.
10.5*		Employment Agreement, dated as of September 20, 2019, by and between Global Payments Inc. and Paul M. Todd.
10.6*		Form of Synergy Performance Share Award Agreement.
10.7*		Global Payments Inc. Sixth Amended and Restated Non-Employee Director Compensation Plan, dated October 24, 2019.
10.8		Technical Amendment to ~~Employment~~the Credit Agreement, dated as of May 31, 2019, between ~~David L. Green~~Global Payments Inc. and Bank of America, N.A., as administrative agent.
10.9		Total System Services, Inc. 2017 Omnibus Plan incorporated by reference to Exhibit 10.1 to TSYS’ Current Report on Form 8-K filed on April 28, 2017.



10.10		Total System Services, Inc. 2012 Omnibus Plan, incorporated by reference to Exhibit 10.1 to TSYS’ Current Report on Form 8-K filed on May 4, 2012.
10.11		Total System Services, Inc. 2007 Omnibus Plan, incorporated by reference to Exhibit 10.1 to TSYS’ Current Report on Form 8-K filed on April 25, 2007.
10.12		Amended and Restated NetSpend Holdings, Inc. 2004 Equity Incentive Plan for Options and Restricted Shares Assumed by Total System Services, Inc., incorporated by reference to Exhibit 99.1 to TSYS’ Registration Statement on Form S-8 filed on July 1, 2013.
10.13		Term Loan Credit Agreement, dated as of July 9, 2019, among Global Payments Inc., as Borrower, Bank of America, N.A. as Administrative Agent, and the ~~Company,~~other Lenders party thereto, incorporated by reference to Exhibit 10.1 to Global Payments Inc.'s Current Report on Form 8-K filed on July 16, 2019.
10.14		Credit Agreement, dated ~~August 27, 2018.~~as of July 9, 2019, among Global Payments Inc., as Borrower, the other Borrowers party thereto, Bank of America, N.A., as Administrative Agent, Swing Line Lender and an L/C Issuer and the other Lenders and L/C Issuers party thereto, incorporated by reference to Exhibit 10.2 to Global Payments Inc.'s Current Report on Form 8-K filed on July 16, 2019.
31.1*		Certification of the Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of the Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of the Principal Executive Officer and the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*		The following financial information from the Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2018,~~2019, formatted in Inline XBRL (eXtensible Business Reporting Language) and filed electronically herewith: (i) the Unaudited Consolidated Statements of Income; (ii) the Unaudited Consolidated Statements of Comprehensive 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. The instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

______________________



*		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: October ~~30, 2018~~31, 2019		/s/ ~~Cameron~~Paul M. ~~Bready~~Todd
		~~Cameron~~Paul M. ~~Bready~~Todd
		Senior Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

4046



Cash consideration paid to ACTIVE Network stockholders	$	599,497
Fair value of Global Payments common stock issued to ACTIVE Network stockholders	572,079
	$	1,171,576



Years ending December 31,
2018	$	20,810
2019	119,109
2020	154,979
2021	190,848
2022	262,587
2023	4,087,053
Total	$	4,835,386



Period	Total Number of Shares Purchased ⁽¹⁾	Approximate Average Price Paid per Share		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 ⁽²⁾
					(in millions)
July 2018	110,172	$	112.57	—
August 2018	14,677	116.64		—
September 2018	85,725	127.21		—
Total	210,574	$	118.81	—	$	419.1

3550 Lenox Road

(Address of principal executive offices)

(Zip Code)