DOCUMENT AND ENTITY INFORMATION
DOCUMENT AND ENTITY INFORMATION | 9 Months Ended |
Sep. 30, 2017shares | |
Document and Entity Information [Abstract] | |
Entity Registrant Name | Vantiv, Inc. |
Entity Central Index Key | 1,533,932 |
Document Type | 10-Q |
Document Period End Date | Sep. 30, 2017 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Document Fiscal Year Focus | 2,017 |
Document Fiscal Period Focus | Q3 |
Class A Common Stock | |
Document and Entity Information | |
Entity Common Stock, Shares Outstanding (in shares) | 162,506,630 |
Class B Common Stock | |
Document and Entity Information | |
Entity Common Stock, Shares Outstanding (in shares) | 15,252,826 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Revenue: | ||||
External customers | $ 1,017,030 | $ 897,800 | $ 2,910,601 | $ 2,565,529 |
Related party revenues | 16,735 | 16,219 | 50,130 | 58,330 |
Total revenue | 1,033,765 | 914,019 | 2,960,731 | 2,623,859 |
Network fees and other costs | 479,533 | 423,361 | 1,406,358 | 1,221,510 |
Sales and marketing | 173,779 | 153,248 | 497,082 | 433,730 |
Other operating costs | 79,482 | 72,162 | 234,347 | 219,464 |
General and administrative | 49,607 | 40,727 | 189,632 | 133,831 |
Depreciation and amortization | 82,500 | 66,086 | 236,964 | 199,550 |
Income from operations | 168,864 | 158,435 | 396,348 | 415,774 |
Interest expense—net | (38,521) | (27,474) | (97,441) | (81,321) |
Non-operating income (expenses) | 21,207 | (4,633) | 13,672 | (14,949) |
Income before applicable income taxes | 151,550 | 126,328 | 312,579 | 319,504 |
Income tax expense | 44,645 | 39,324 | 83,519 | 101,591 |
Net income | 106,905 | 87,004 | 229,060 | 217,913 |
Less: Net income attributable to non-controlling interests | (14,787) | (20,708) | (39,280) | (52,552) |
Net income attributable to Vantiv, Inc. | $ 92,118 | $ 66,296 | $ 189,780 | $ 165,361 |
Class A Common Stock | ||||
Net income per share attributable to Vantiv, Inc. Class A common stock: | ||||
Basic (in dollars per share) | $ 0.57 | $ 0.43 | $ 1.18 | $ 1.06 |
Diluted (in dollars per share) | $ 0.57 | $ 0.41 | $ 1.17 | $ 1.04 |
Shares used in computing net income per share of Class A common stock: | ||||
Basic (in shares) | 161,465,849 | 155,740,660 | 161,205,066 | 155,603,265 |
Diluted (in shares) | 162,882,396 | 197,342,169 | 162,617,782 | 197,126,571 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 106,905 | $ 87,004 | $ 229,060 | $ 217,913 |
Other comprehensive gain (loss), net of tax: | ||||
Gain (loss) on cash flow hedge | 811 | 3,572 | 5,690 | (9,654) |
Comprehensive income | 107,716 | 90,576 | 234,750 | 208,259 |
Less: Comprehensive income attributable to non-controlling interests | (14,693) | (21,654) | (40,444) | (49,992) |
Comprehensive income attributable to Vantiv, Inc. | $ 93,023 | $ 68,922 | $ 194,306 | $ 158,267 |
CONSOLIDATED STATEMENTS OF FINA
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 92,638 | $ 139,148 |
Accounts receivable—net | 899,389 | 940,052 |
Related party receivable | 1,639 | 1,751 |
Settlement assets | 135,043 | 152,490 |
Prepaid expenses | 48,073 | 39,229 |
Other | 118,664 | 15,188 |
Total current assets | 1,295,446 | 1,287,858 |
Customer incentives | 64,023 | 67,288 |
Property, equipment and software—net | 470,308 | 348,553 |
Intangible assets—net | 732,431 | 787,820 |
Goodwill | 4,180,307 | 3,738,589 |
Deferred taxes | 1,322,679 | 771,139 |
Other assets | 24,740 | 42,760 |
Total assets | 8,089,934 | 7,044,007 |
Current liabilities: | ||
Accounts payable and accrued expenses | 528,473 | 471,979 |
Related party payable | 3,037 | 3,623 |
Settlement obligations | 788,261 | 801,381 |
Current portion of note payable to related party | 7,557 | 7,557 |
Current portion of note payable | 133,097 | 123,562 |
Current portion of tax receivable agreement obligations to related parties | 261,844 | 191,014 |
Current portion of tax receivable agreement obligations | 54,798 | 60,400 |
Deferred income | 19,349 | 7,907 |
Current maturities of capital lease obligations | 8,000 | 7,870 |
Other | 6,790 | 13,719 |
Total current liabilities | 1,811,206 | 1,689,012 |
Long-term liabilities: | ||
Note payable to related party | 170,097 | 143,577 |
Note payable | 4,421,522 | 2,946,026 |
Tax receivable agreement obligations to related parties | 876,434 | 451,318 |
Tax receivable agreement obligations | 42,510 | 86,640 |
Capital lease obligations | 6,666 | 13,223 |
Deferred taxes | 98,097 | 62,148 |
Other | 46,297 | 44,774 |
Total long-term liabilities | 5,661,623 | 3,747,706 |
Total liabilities | 7,472,829 | 5,436,718 |
Commitments and contingencies (See Note 7 - Commitments, Contingencies and Guarantees) | ||
Equity: | ||
Preferred stock, $0.00001 par value; 10,000,000 shares authorized; no shares issued and outstanding | 0 | 0 |
Paid-in capital | 25,048 | 706,055 |
Retained earnings | 617,683 | 689,512 |
Accumulated other comprehensive loss | (1,671) | (6,197) |
Treasury stock, at cost; 2,849,275 shares at September 30, 2017 and 2,710,195 shares at December 31, 2016 | (82,893) | (73,706) |
Total Vantiv, Inc. equity | 558,168 | 1,315,665 |
Non-controlling interests | 58,937 | 291,624 |
Total equity | 617,105 | 1,607,289 |
Total liabilities and equity | 8,089,934 | 7,044,007 |
Class A Common Stock | ||
Equity: | ||
Class A common stock, $0.00001 par value; 890,000,000 shares authorized; 162,506,630 shares outstanding at September 30, 2017; 161,134,831 shares outstanding at December 31, 2016, Class B common stock, no par value; 100,000,000 shares authorized; 15,252,826 shares issued and outstanding at September 30, 2017; 35,042,826 shares issued and outstanding at December 31, 2016 | 1 | 1 |
Class B Common Stock | ||
Equity: | ||
Class A common stock, $0.00001 par value; 890,000,000 shares authorized; 162,506,630 shares outstanding at September 30, 2017; 161,134,831 shares outstanding at December 31, 2016, Class B common stock, no par value; 100,000,000 shares authorized; 15,252,826 shares issued and outstanding at September 30, 2017; 35,042,826 shares issued and outstanding at December 31, 2016 | $ 0 | $ 0 |
CONSOLIDATED STATEMENTS OF FIN5
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Parenthetical) - $ / shares | Sep. 30, 2017 | Dec. 31, 2016 |
Preferred stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Class A Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Common stock, shares authorized (in shares) | 890,000,000 | 890,000,000 |
Common stock, shares outstanding (in shares) | 162,506,630 | 161,134,831 |
Treasury stock, shares (in shares) | 2,849,275 | 2,710,195 |
Class B Common Stock | ||
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 15,252,826 | 35,042,826 |
Common stock, shares outstanding (in shares) | 15,252,826 | 35,042,826 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Operating Activities: | ||
Net income | $ 229,060 | $ 217,913 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization expense | 236,964 | 199,550 |
Amortization of customer incentives | 18,648 | 18,508 |
Amortization of Debt Issuance Costs | 3,941 | 4,818 |
Unrealized gain on deal contingent forward | (24,365) | 0 |
Share-based compensation expense | 35,068 | 25,892 |
Deferred taxes | 60,000 | 49,900 |
Excess tax benefit from share-based compensation | 0 | (11,193) |
Tax receivable agreements non-cash items | 10,708 | 14,880 |
Other | 2,304 | 433 |
Change in operating assets and liabilities: | ||
Accounts receivable and related party receivable | 46,682 | (67,938) |
Net settlement assets and obligations | 4,327 | (16,558) |
Customer incentives | (17,703) | (30,808) |
Prepaid and other assets | (82,916) | 6,183 |
Accounts payable and accrued expenses | 22,924 | 24,859 |
Payable to related party | (586) | (1,331) |
Other liabilities | (17,390) | (4,713) |
Net cash provided by operating activities | 527,666 | 430,395 |
Investing Activities: | ||
Purchases of property and equipment | (81,882) | (93,822) |
Acquisition of customer portfolios and related assets and other | (38,165) | (2,179) |
Purchase of derivative instruments | 0 | (21,523) |
Cash used in acquisitions, net of cash acquired | (531,534) | 0 |
Net cash used in investing activities | (651,581) | (117,524) |
Financing Activities: | ||
Proceeds from issuance of long-term debt | 1,270,000 | 0 |
Borrowings on revolving credit facility | 5,405,000 | 1,180,000 |
Repayment of revolving credit facility | (5,046,000) | (1,180,000) |
Repayment of debt and capital lease obligations | (107,969) | (98,019) |
Payment of debt issuance costs | (24,148) | 0 |
Proceeds from Issuance of Class A common stock under employee stock plans | 10,847 | 12,340 |
Purchase and cancellation of Class A common stock | (1,268,057) | (25,008) |
Repurchase of Class A common stock (to satisfy tax withholding obligations) | (9,187) | (6,036) |
Settlement of certain tax receivable agreements | (84,878) | (158,115) |
Payments under tax receivable agreements | (55,695) | (53,474) |
Excess tax benefit from share-based compensation | 0 | 11,193 |
Distributions to non-controlling interests | (12,508) | (9,018) |
Other | 0 | (12) |
Net cash provided by (used in) financing activities | 77,405 | (326,149) |
Net decrease in cash and cash equivalents | (46,510) | (13,278) |
Cash and cash equivalents—Beginning of period | 139,148 | 197,096 |
Cash and cash equivalents—End of period | 92,638 | 183,818 |
Cash Payments: | ||
Interest | 94,318 | 76,404 |
Taxes | $ 31,585 | $ 35,709 |
CONSOLIDATED STATEMENTS OF EQUI
CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Thousands | Total | Treasury Stock | Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive (Loss) Income | Non-Controlling Interests | Class A Common Stock | Class A Common StockCommon Stock | Class B Common Stock | Class B Common StockCommon Stock |
Balance at Dec. 31, 2015 | $ 1,225,066 | $ (67,458) | $ 553,145 | $ 476,304 | $ (9,204) | $ 272,278 | $ 1 | $ 0 | ||
Beginning balance (in shares) at Dec. 31, 2015 | 2,593,000 | 155,488,000 | 35,043,000 | |||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Net income | 217,913 | 165,361 | 52,552 | |||||||
Issuance of Class A common stock under employee stock plans, net of forfeitures (in shares) | 1,371,000 | |||||||||
Issuance of Class A common stock under employee stock plans, net of forfeitures, value | 12,340 | 12,340 | ||||||||
Excess tax benefit from employee share-based compensation | 11,193 | 11,193 | ||||||||
Purchase and Cancellation of Class A common stock, share | (457,000) | |||||||||
Purchase and cancellation of Class A common stock, Value | (25,008) | (25,008) | ||||||||
Repurchase of Class A common stock (to satisfy tax withholding obligation) (in shares) | 114,000 | 114,000 | ||||||||
Repurchase of Class A common stock (to satisfy tax withholding obligation), value | (6,036) | $ (6,036) | ||||||||
Settlement/termination of certain tax receivable agreements | 129,538 | 129,538 | ||||||||
Unrealized gain (loss) on hedging activities, net of tax | (9,654) | (7,094) | (2,560) | |||||||
Distribution to non-controlling interests | (9,018) | (9,018) | ||||||||
Share-based compensation | 25,892 | 21,150 | 4,742 | |||||||
Other | (12) | (12) | ||||||||
Reallocation of non-controlling interest of Vantiv Holding due to change in ownership | 7,501 | (7,501) | ||||||||
Ending balance (in shares) at Sep. 30, 2016 | 2,707,000 | 156,288,000 | 35,043,000 | |||||||
Balance at Sep. 30, 2016 | 1,572,214 | $ (73,494) | 709,847 | 641,665 | (16,298) | 310,493 | $ 1 | $ 0 | ||
Balance at Jun. 30, 2016 | (18,924) | |||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Net income | 87,004 | |||||||||
Ending balance (in shares) at Sep. 30, 2016 | 2,707,000 | 156,288,000 | 35,043,000 | |||||||
Balance at Sep. 30, 2016 | 1,572,214 | $ (73,494) | 709,847 | 641,665 | (16,298) | 310,493 | $ 1 | $ 0 | ||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Cumulative effect of accounting change | 491 | 1,299 | (808) | |||||||
Balance at Dec. 31, 2016 | 1,607,289 | $ (73,706) | 706,055 | 689,512 | (6,197) | 291,624 | $ 1 | $ 0 | ||
Beginning balance (in shares) at Dec. 31, 2016 | 2,710,000 | 161,134,831 | 161,135,000 | 35,042,826 | 35,043,000 | |||||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Net income | 229,060 | 189,780 | 39,280 | |||||||
Issuance of Class A common stock under employee stock plans, net of forfeitures (in shares) | 1,511,000 | |||||||||
Issuance of Class A common stock under employee stock plans, net of forfeitures, value | 10,847 | 10,847 | ||||||||
Purchase and Cancellation of Class A common stock, share | (19,790,000) | |||||||||
Purchase and cancellation of Class A common stock, Value | (1,270,589) | (1,009,788) | (260,801) | |||||||
Repurchase of Class A common stock (to satisfy tax withholding obligation) (in shares) | 139,000 | 139,000 | ||||||||
Repurchase of Class A common stock (to satisfy tax withholding obligation), value | (9,187) | $ (9,187) | ||||||||
Settlement/termination of certain tax receivable agreements | 45,347 | 45,347 | ||||||||
Issuance of tax receivable agreements | (24,403) | (24,403) | ||||||||
Unrealized gain (loss) on hedging activities, net of tax | 5,690 | 4,526 | 1,164 | |||||||
Distribution to non-controlling interests | (12,508) | (12,508) | ||||||||
Share-based compensation | 35,068 | 29,619 | 5,449 | |||||||
Reallocation of non-controlling interest of Vantiv Holding due to change in ownership | 266,072 | (266,072) | ||||||||
Ending balance (in shares) at Sep. 30, 2017 | 2,849,000 | 162,506,630 | 162,507,000 | 15,252,826 | 15,253,000 | |||||
Balance at Sep. 30, 2017 | 617,105 | $ (82,893) | 25,048 | 617,683 | (1,671) | 58,937 | $ 1 | $ 0 | ||
Balance at Jun. 30, 2017 | (2,576) | |||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Net income | 106,905 | |||||||||
Ending balance (in shares) at Sep. 30, 2017 | 2,849,000 | 162,506,630 | 162,507,000 | 15,252,826 | 15,253,000 | |||||
Balance at Sep. 30, 2017 | $ 617,105 | $ (82,893) | $ 25,048 | $ 617,683 | $ (1,671) | $ 58,937 | $ 1 | $ 0 |
BASIS OF PRESENTATION AND SUMMA
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business Vantiv, Inc., a Delaware corporation, is a holding company that conducts its operations through its majority-owned subsidiary, Vantiv Holding, LLC (“Vantiv Holding”). Vantiv, Inc. and Vantiv Holding are referred to collectively as the “Company,” “Vantiv,” “we,” “us” or “our,” unless the context requires otherwise. The Company provides electronic payment processing services to merchants and financial institutions throughout the United States of America and operates in two reportable segments, Merchant Services and Financial Institution Services. For more information about the Company’s segments, refer to Note 11 - Segment Information. The Company markets its services through diverse distribution channels, including national, regional and mid-market sales teams, third-party reseller clients and a telesales operation. The Company also has relationships with a broad range of referral partners that include merchant banks, independent software vendors (“ISVs”), value-added resellers (“VARs”), payment facilitators, independent sales organizations (“ISOs”) and trade associations, as well as arrangements with core processors. Basis of Presentation and Consolidation The accompanying consolidated financial statements include those of Vantiv, Inc. and all subsidiaries thereof, including its majority-owned subsidiary, Vantiv Holding, LLC. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and should be read in connection with the Company’s 2016 audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K. The accompanying consolidated financial statements are unaudited; however, in the opinion of management they include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented. Results of operations reported for interim periods are not necessarily indicative of results for the entire year due to seasonal fluctuations in the Company’s revenue as a result of consumer spending patterns. All intercompany balances and transactions have been eliminated. As of September 30, 2017 , Vantiv, Inc. and Fifth Third Bank (“Fifth Third”) owned interests in Vantiv Holding of 91.42% and 8.58% , respectively (see Note 6 - Controlling and Non-controlling Interests for changes in non-controlling interests). The Company accounts for non-controlling interests in accordance with Accounting Standards Codification (“ASC”) 810, Consolidation . Non-controlling interests primarily represent Fifth Third’s minority share of net income or loss of equity in Vantiv Holding. Net income attributable to non-controlling interests does not include expenses incurred directly by Vantiv, Inc., including income tax expense attributable to Vantiv, Inc. Non-controlling interests are presented as a component of equity in the accompanying consolidated statements of financial position. Share Repurchase Program In October 2016, our board of directors authorized a program to repurchase up to $250 million of our Class A common stock. The Company has approximately $243 million of share repurchase authority remaining as of September 30, 2017 under this authorization. Purchases under the programs may be made from time to time in the open market, in privately negotiated transactions, or otherwise. The manner, timing and amount of any purchases will be determined by management based on an evaluation of market conditions, stock price and other factors. The Company’s share repurchase program does not obligate it to acquire any specific number or amount of shares, there is no guarantee as to the exact number or amount of shares that may be repurchased, if any, and the Company may discontinue purchases at any time that it determines additional purchases are not warranted. Sponsorship In order to provide electronic payment processing services, Visa, Mastercard and other payment networks require sponsorship of non-financial institutions by a member clearing bank. The Company has an agreement with Fifth Third (the “Sponsoring Member”) to provide sponsorship services to the Company through December 31, 2024. The Company also has agreements with certain other banks that provide sponsorship into the card networks. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Revenue Recognition The Company has contractual agreements with its clients that set forth the general terms and conditions of the relationship including line item pricing, payment terms and contract duration. Revenues are recognized as earned (i.e., for transaction based fees, when the underlying transaction is processed) in conjunction with ASC 605, Revenue Recognition . ASC 605, Revenue Recognition , establishes guidance as to when revenue is realized or realizable and earned by using the following criteria: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller’s price is fixed or determinable; and (4) collectibility is reasonably assured. The Company follows guidance provided in ASC 605-45, Principal Agent Considerations, which states that the determination of whether a company should recognize revenue based on the gross amount billed to a customer or the net amount retained is a matter of judgment that depends on the facts and circumstances of the arrangement and that certain factors should be considered in the evaluation. The Company recognizes processing revenues net of interchange fees, which are assessed to the Company’s merchant customers on all processed transactions. Interchange rates are not controlled by the Company, which effectively acts as a clearing house collecting and remitting interchange fee settlement on behalf of issuing banks, debit networks, credit card associations and its processing customers. All other revenue is reported on a gross basis, as the Company contracts directly with the end customer, assumes the risk of loss and has pricing flexibility. The Company generates revenue primarily by processing electronic payment transactions. Set forth below is a description of the Company’s revenue by segment. Merchant Services The Company’s Merchant Services segment revenue is primarily derived from processing credit and debit card transactions. Merchant Services revenue is primarily comprised of fees charged to businesses, net of interchange fees, for payment processing services, including authorization, capture, clearing, settlement and information reporting of electronic transactions. The fees charged consist of either a percentage of the dollar volume of the transaction or a fixed fee, or both, and are recognized at the time of the transaction. Merchant Services revenue also includes a number of revenue items that are incurred by the Company and are reimbursable as the costs are passed through to and paid by the Company’s clients. These items primarily consist of Visa, Mastercard and other payment network fees. In addition, for sales through referral partners in which the Company is the primary party to the contract with the merchant, the Company records the full amount of the fees collected from the merchant as revenue. Merchant Services segment revenue also includes revenue from ancillary services such as fraud management, equipment sales and terminal rent. Merchant Services revenue is recognized as services are performed. Financial Institution Services The Company’s Financial Institution Services segment revenues are primarily derived from debit, credit and automated teller machine (“ATM”) card transaction processing, ATM driving and support, and PIN debit processing services. Financial Institution Services revenue associated with processing transactions includes per transaction and account related fees, card production fees and fees generated from the Company’s Jeanie network. Financial Institution Services revenue related to card transaction processing is recognized when consumers use their client-issued cards to make purchases. Financial Institution Services also generates revenue through other services, including statement production, collections and inbound/outbound call centers for credit transactions and other services such as credit card portfolio analytics, program strategy and support, fraud and security management and chargeback and dispute services. Financial Institution Services revenue is recognized as services are performed. Financial Institution Services provides certain services to Fifth Third. Revenues related to these services are included in the accompanying statements of income as related party revenues. Expenses Set forth below is a brief description of the components of the Company’s expenses: • Network fees and other costs primarily consist of pass through expenses incurred by the Company in connection with providing processing services to its clients, including Visa and Mastercard network association fees, payment network fees, third party processing fees, telecommunication charges, postage and card production costs. • Sales and marketing expense primarily consists of salaries and benefits paid to sales personnel, sales management and other sales and marketing personnel, residual payments made to referral partners, and advertising and promotional costs. • Other operating costs primarily consist of salaries and benefits paid to operational and IT personnel, costs associated with operating the Company’s technology platform and data centers, information technology costs for processing transactions, product development costs, software fees and maintenance costs. • General and administrative expenses primarily consist of salaries and benefits paid to executive management and administrative employees, including finance, human resources, product development, legal and risk management, share-based compensation costs, equipment, occupancy and consulting costs. The nine months ended September 30, 2017 includes a charge related to a settlement agreement stemming from legacy litigation of an acquired company. • Non-operating income for the three and nine months ended September 30, 2017 consists of an unrealized gain relating to the change in the fair value of a deal contingent forward entered into in connection with the pending Worldpay Group plc (“Worldpay”) acquisition (see Note 12 - Pending Worldpay Transaction), partially offset by the change in fair value of a tax receivable agreement (“TRA”) entered into as part of the acquisition of Mercury Payment Systems, LLC (“Mercury”). Non-operating expenses for the three and nine months ended September 30, 2016 primarily relate to the change in fair value of a TRA entered into as part of the acquisition of Mercury. (see Note 8 - Fair Value Measurements). Share-Based Compensation The Company expenses employee share-based payments under ASC 718, Compensation—Stock Compensation , which requires compensation cost for the grant-date fair value of share-based payments to be recognized over the requisite service period. The Company estimates the grant date fair value of the share-based awards issued in the form of options using the Black-Scholes option pricing model. The fair value of shares issued under the Employee Stock Purchase Plan (“ESPP”), as restricted stock awards and performance awards is measured based on the market price of the Company’s stock on the grant date. In 2017, the Compensation Committee of the Company’s Board of Directors approved a resolution that stock options, restricted shares and restricted stock units shall vest or become exercisable in three equal annual installments beginning on the first anniversary of the grant date. In March 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-09, Compensation- Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The update simplifies several aspects of the accounting for share-based payment award transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company adopted this ASU on January 1, 2017. Under previous guidance, excess tax benefits and deficiencies from share-based compensation arrangements were recorded in equity when the awards vested or settled. ASU 2016-09 requires prospective recognition of excess tax benefits and deficiencies in the income statement, resulting in the recognition of excess tax benefits of $1.9 million and $16.0 million in income tax expense, rather than in paid-in capital, for the three and nine months ended September 30, 2017 , respectively. Additionally, under ASU 2016-09, excess income tax benefits from share-based compensation arrangements are classified as cash flow from operations, rather than as cash flow from financing activities. The Company has elected to apply the cash flow classification guidance of ASU 2016-09 prospectively, resulting in an increase to operating cash flow of $16.0 million for the nine months ended September 30, 2017 , and the prior year period has not been adjusted. The presentation requirements for cash flows related to employee taxes paid for withheld shares have no impact to the periods presented in our consolidated cash flows statements since such cash flows have historically been presented as a financing activity. Prior to adopting ASU 2016-09 the Company estimated forfeitures as part of share-based compensation expense. Under ASU 2016-09, an entity can make an election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur. The Company has elected to account for forfeitures as they occur. The cumulative-effect of this change in election resulted in an increase to additional paid-in capital of $1.3 million , an increase to deferred tax assets of $0.5 million , and a decrease to retained earnings of $0.8 million at the beginning of 2017. ASU 2016-09 requires excess tax benefits and deficiencies to be prospectively excluded from assumed future proceeds in the calculation of diluted shares, resulting in an increase in diluted weighted average shares outstanding of approximately 364,000 shares and 412,000 shares for the three and nine months ended September 30, 2017 , respectively. For the nine months ended September 30, 2017 and 2016 total share-based compensation expense was $35.1 million and $25.9 million , respectively. Earnings Per Share Basic earnings per share is computed by dividing net income attributable to Vantiv, Inc. by the weighted average shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to Vantiv, Inc., adjusted as necessary for the impact of potentially dilutive securities, by the weighted-average shares outstanding during the period and the impact of securities that would have a dilutive effect on earnings per share. See Note 9 - Net Income Per Share for further discussion. Dividend Restrictions The Company does not intend to pay cash dividends on its Class A common stock in the foreseeable future. Vantiv, Inc. is a holding company that does not conduct any business operations of its own. As a result, Vantiv, Inc.’s ability to pay cash dividends on its common stock, if any, is dependent upon cash dividends and distributions and other transfers from Vantiv Holding. The amounts available to Vantiv, Inc. to pay cash dividends are subject to the covenants and distribution restrictions in its subsidiaries’ loan agreements. As a result of the restrictions on distributions from Vantiv Holding and its subsidiaries, essentially all of the Company’s consolidated net assets are held at the subsidiary level and are restricted as of September 30, 2017 . Income Taxes Vantiv, Inc. is taxed as a C corporation for U.S. income tax purposes and is therefore subject to both federal and state taxation at a corporate level. Income taxes are computed in accordance with ASC 740, Income Taxes , and reflect the net tax effects of temporary differences between the financial reporting carrying amounts of assets and liabilities and the corresponding income tax amounts. The Company has deferred tax assets and liabilities and maintains valuation allowances where it is more likely than not that all or a portion of deferred tax assets will not be realized. To the extent the Company determines that it will not realize the benefit of some or all of its deferred tax assets, such deferred tax assets will be adjusted through the Company’s provision for income taxes in the period in which this determination is made. As of September 30, 2017 and December 31, 2016 , the Company had recorded no valuation allowances against deferred tax assets. The Company’s consolidated interim effective tax rate is based upon expected annual income from operations, statutory tax rates and tax laws in the various jurisdictions in which the Company operates. Significant or unusual items, including adjustments to accruals for tax uncertainties, are recognized in the quarter in which the related event occurs. The Company’s effective tax rates were 26.7% and 31.8% respectively, for the nine months ended September 30, 2017 and 2016 . The effective tax rate for each period reflects the impact of the Company’s non-controlling interests not being taxed at the statutory corporate tax rates. The effective tax rate for the nine months ended September 30, 2017 includes a $16.0 million credit to income tax expense relating to excess tax benefits as a result of the Company’s adoption of ASU 2016-09, Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting . Cash and Cash Equivalents Cash on hand and investments with original maturities of three months or less (that are readily convertible to cash) are considered to be cash equivalents. Accounts Receivable—net Accounts receivable primarily represent processing revenues earned but not collected. For a majority of its customers, the Company has the authority to debit the client’s bank accounts through the Federal Reserve’s Automated Clearing House; as such, collectibility is reasonably assured. The Company records a reserve for doubtful accounts when it is probable that the accounts receivable will not be collected. The Company reviews historical loss experience and the financial position of its customers when estimating the allowance. As of September 30, 2017 and December 31, 2016 , the allowance for doubtful accounts was not material to the Company’s statements of financial position. Customer Incentives Customer incentives represent signing bonuses paid to customers. Customer incentives are paid in connection with the acquisition or renewal of customer contracts, and are therefore deferred and amortized using the straight-line method based on the contractual agreement. Related amortization is recorded as contra-revenue. Property, Equipment and Software—net Property, equipment and software consists of the Company’s facilities, furniture and equipment, software, land and leasehold improvements. These facilities, furniture and equipment and software are depreciated on a straight-line basis over their respective useful lives, which are 15 to 40 years for the Company’s facilities and related improvements, 2 to 10 years for furniture and equipment, 3 to 8 years for software and 3 to 10 years for leasehold improvements or the lesser of the estimated useful life of the improvement or the term of the lease. Also included in property, equipment and software is work in progress consisting of costs associated with software developed for internal use which has not yet been placed in service. Accumulated depreciation as of September 30, 2017 and December 31, 2016 was $379.0 million and $309.7 million , respectively. The Company capitalizes certain costs related to computer software developed for internal use and amortizes such costs on a straight-line basis over an estimated useful life of 5 to 8 years. Research and development costs incurred prior to establishing technological feasibility are charged to operations as such costs are incurred. Once technological feasibility has been established, costs are capitalized until the software is placed in service, at which time the Company begins to amortize such costs over their estimated useful life. Goodwill and Intangible Assets In accordance with ASC 350, Intangibles—Goodwill and Other , the Company tests goodwill for impairment for each reporting unit on an annual basis, or when events occur or circumstances indicate the fair value of a reporting unit is below its carrying value. If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that fair value of the goodwill within the reporting unit is less than its carrying value. The Company performed its most recent annual goodwill impairment test for all reporting units as of July 31, 2017 using market data and discounted cash flow analyses. Based on this analysis, it was determined that the fair value of all reporting units were substantially in excess of the carrying value. There have been no other events or changes in circumstances subsequent to the testing date that would indicate impairment of these reporting units as of September 30, 2017 . Intangible assets consist of acquired customer relationships, trade names, customer portfolios and related assets that are amortized over their estimated useful lives. The Company reviews finite lived intangible assets for possible impairment whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. As of September 30, 2017 , there have been no such events or circumstances that would indicate potential impairment of finite lived intangible assets. Settlement Assets and Obligations Settlement assets and obligations result from Financial Institution Services when funds are transferred from or received by the Company prior to receiving or paying funds to a different entity. This timing difference results in a settlement asset or obligation. The amounts are generally collected or paid the following business day. The settlement assets and obligations recorded by Merchant Services represent intermediary balances due to differences between the amount the Sponsoring Member receives from the card associations and the amount funded to the merchants. Such differences arise from timing differences, interchange expenses, merchant reserves and exception items. In addition, certain card associations limit the Company from accessing or controlling merchant settlement funds and, instead, require that these funds be controlled by the Sponsoring Member. The Company follows a net settlement process whereby, if the settlement received from the card associations precedes the funding obligation to the merchant, the Company temporarily records a corresponding liability. Conversely, if the funding obligation to the merchant precedes the settlement from the card associations, the amount of the net receivable position is recorded by the Company, or in some cases, the Sponsoring Member may cover the position with its own funds in which case a receivable position is not recorded by the Company. Derivatives The Company accounts for derivatives in accordance with ASC 815, Derivatives and Hedging . This guidance establishes accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the statement of financial position at fair value. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and the hedged item will be recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portion of the change in the fair value of the derivative will be recorded in accumulated other comprehensive income (loss) (“AOCI”) and will be recognized in the statement of income when the hedged item affects earnings. The Company does not enter into derivative financial instruments for speculative purposes. Tax Receivable Agreements As of September 30, 2017 , the Company is party to several TRAs in which the Company agrees to make payments to various parties of 85% of the federal, state, local and foreign income tax benefits realized by the Company as a result of certain tax deductions. Payments under the TRAs will be based on the tax reporting positions of the Company and, generally, are only required to the extent the Company realizes cash savings as a result of the underlying tax attributes. Under the agreement between the Company and Fifth Third dated August 7, 2017, in certain specified circumstances, the Company may be required to make payments in excess of such cash savings. The cash savings realized by the Company are computed by comparing the actual income tax liability of the Company to the amount of such taxes the Company would have been required to pay had there been no deductions related to the tax attributes discussed below. The Company will retain the benefit of the remaining 15% of the cash savings associated with the TRAs. The Company has entered into the following three TRAs: • TRAs with investors prior to the Company’s initial public offering (“IPO”) for its use of NPC Group, Inc. net operating losses (“NOLs”) and other tax attributes existing at the IPO date (the “NPC TRA”), all of which is currently held by Fifth Third. • A TRA with Fifth Third (the “Fifth Third TRA”) in which the Company realizes tax deductions as a result of the increases in tax basis from the purchase of Vantiv Holding units or from the exchange of Vantiv Holding units for cash or shares of Class A common stock, as well as the tax benefits attributable to payments made under such TRAs. • A TRA with Mercury shareholders (the “Mercury TRA”) as part of the acquisition of Mercury as a result of the increase in tax basis of the assets of Mercury resulting from the acquisition and the use of the net operating losses and other tax attributes of Mercury that were acquired as part of the acquisition. Obligations recorded pursuant to the TRAs are based on estimates of future taxable income and future tax rates. On an annual basis, the Company evaluates the assumptions underlying the TRA obligations. In connection with the Fifth Third Exchange and share purchase as discussed in Note 6 - Controlling and Non-controlling Interests, the Company recorded a liability of approximately $647.5 million during the quarter ending September 30, 2017 under the tax receivable agreements the Company entered into with Fifth Third Bank at the time of its initial public offering. This liability is based on the closing share price of the Company’s Class A common stock on August 4, 2017. In 2016, the Company entered into a purchase addendum in connection with the Company’s TRA with Fifth Third (the “Fifth Third TRA Addendum”) to terminate and settle a portion of the Company’s obligations owed to Fifth Third under the Fifth Third TRA and the NPC TRA. Under the terms of the Fifth Third TRA Addendum, the Company paid approximately $116.3 million to Fifth Third to settle approximately $330.7 million of obligations under the Fifth Third TRA, the difference of which was recorded as an addition to paid-in capital, net of deferred taxes. In addition to the 2016 Fifth Third TRA settlement discussed above, as of September 30, 2017, the Fifth Third TRA Addendum provides that the Company may be obligated to pay up to a total of approximately $123.9 million to Fifth Third to terminate and settle certain remaining obligations under the Fifth Third TRA and the NPC TRA, totaling an estimated $275.8 million , the difference of which will be recorded as an addition to paid-in capital upon the exercise of the Call Options or Put Options discussed below. In March, June and September 2017, the Company made payments of $15.1 million , $15.6 million , and $16.1 million , respectively, pursuant to the Fifth Third TRA Holders under the terms of the Fifth Third TRA Addendum. These payments resulted in a net gain recorded in equity of approximately $45.3 million after taxes. As of September 30, 2017, the following are the remaining terms of the Fifth Third TRA Addendum. Beginning December 1, 2017, March 1, 2018, June 1, 2018, September 1, 2018 and December 1, 2018, and ending December 10, 2017, March 10, 2018, June 10, 2018, September 10, 2018 and December 10, 2018, respectively, the Company is granted call options (collectively, the “Call Options”) pursuant to which certain additional obligations of the Company under the Fifth Third TRA and the NPC TRA would be terminated and settled in consideration for cash payments of $16.6 million , $25.6 million , $26.4 million , $27.2 million and $28.1 million , respectively. Under the remaining terms of the Fifth Third TRA Addendum, in the unlikely event the Company does not exercise the relevant Call Option, Fifth Third is granted put options beginning December 20, 2017, March 20, 2018, June 20, 2018, September 20, 2018 and December 20, 2018, and ending December 31, 2017, March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018, respectively (collectively, the “Put Options”), pursuant to which certain additional obligations of the Company would be terminated and settled in consideration for cash payments with similar amounts to the Call Options. The full carrying amount of the Fifth Third callable/puttable TRA obligations for the options exercisable within 12 months of the balance sheet date have been classified as current obligations in the accompanying balance sheet ( $216.8 million .) Since Fifth Third is a significant stockholder, a special committee of the Company’s board of directors comprised of independent, disinterested directors authorized the TRA Addendum. During 2015, the Company entered into a Repurchase Addendum to the Mercury Tax Receivable Agreement (the “Mercury TRA Addendum”) with each of the pre-acquisition owners of Mercury ("Mercury TRA Holders"). The Mercury TRA Addendum contains the following provisions to acquire the remaining Mercury TRA: • As of September 30, 2017, the following are the remaining terms under the Mercury TRA Addendum. Beginning December 1 st of each of 2017 and 2018 , and ending June 30 th of 2018 and 2019 , respectively, the Company is granted call options (collectively, the "Call Options") pursuant to which certain additional obligations of the Company under the Mercury TRA would be terminated in consideration for cash payments of $38.0 million and $43.0 million , respectively. • In June 2017 and 2016, the Company exercised the December 2016 and December 2015 Call Options under the Mercury TRA Addendum and made the related $38.1 million and $41.4 million payments to the Mercury TRA Holders. • In the unlikely event the Company does not exercise the relevant Call Option, the Mercury TRA Holders are granted put options beginning July 10th and ending July 25th of each of 2018 and 2019, respectively (collectively, the "Put Options"), pursuant to which certain additional obligations of the Company would be terminated in consideration for cash payments with similar amounts to the Call Options. Except to the extent our obligations under the Mercury TRA, the Fifth Third TRA and the NPC TRA have been terminated and settled in full in accordance with the terms of the Mercury TRA and Fifth Third TRA Addendums, the Mercury TRA, Fifth Third TRA and the NPC TRA will each remain in effect, and the parties thereto will continue to have all rights and obligations thereunder. All TRA obligations are recorded based on the full and undiscounted amount of the expected future payments, except for the Mercury TRA which represents contingent consideration relating to an acquired business, and is recorded at fair value for financial reporting purposes (see Note 8 - Fair Value Measurements). The timing and/or amount of aggregate payments due under the TRAs outside of the call/put struct |
BUSINESS COMBINATIONS
BUSINESS COMBINATIONS | 9 Months Ended |
Sep. 30, 2017 | |
Business Combinations [Abstract] | |
BUSINESS COMBINATIONS | BUSINESS COMBINATIONS Acquisition of Paymetric Holdings, Inc. On May 25, 2017, the Company completed the acquisition of Paymetric Holdings, Inc. (“Paymetric”) by acquiring 100% of the issued and outstanding shares. Paymetric automates business-to-business payment workflows within enterprise systems and tokenizes payments data within these systems in order to enable secure storage of customer information and history. This acquisition helps to further accelerate the Company’s growth. The acquisition was accounted for as a business combination under ASC 805, Business Combinations (“ASC 805”). The purchase price was allocated to the assets acquired and the liabilities assumed based on the estimated fair value at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill, of which approximately $7.8 million is deductible for tax purposes. Goodwill, assigned to Merchant Services, consists primarily of the acquired workforce and growth opportunities, none of which qualify as an intangible asset. The preliminary purchase price allocation is as follows (in thousands): Cash acquired $ 11,864 Current assets 7,243 Property, equipment and software, net 92,121 Intangible assets 47,800 Goodwill 435,032 Other assets 67 Current liabilities (17,702 ) Deferred tax liability (24,492 ) Non-current liabilities (8,535 ) Total purchase price $ 543,398 The above estimated fair values of assets acquired and liabilities assumed are preliminary and are based on the information that was available as of the reporting date to estimate the fair value of assets acquired and liabilities assumed. The Company believes that the information provides a reasonable basis for estimating the fair values of the acquired assets and assumed liabilities, but the potential for measurement period adjustments exists based on the Company’s continuing review of matters related to the acquisition. The Company expects to complete the purchase price allocation as soon as practicable, but no later than one year from the acquisition date. Intangible assets primarily consist of customer relationship assets with a weighted average estimated useful life of 10 years . The Company incurred transaction expenses of approximately $7.1 million during the nine months ended September 30, 2017 in conjunction with the acquisition of Paymetric, which are included in general and administrative expenses on the accompanying consolidated statement of income. From the acquisition date of May 25, 2017 through September 30, 2017, revenue and net income included in the accompanying statement of income for the three months and nine months ended September 30, 2017 attributable to Paymetric is not material. Under the terms of the Paymetric transaction agreement, the Company replaced employee stock options held by certain employees of Paymetric. The number of replacement awards was based on options outstanding at the acquisition date. The weighted average fair value of the replacement awards was $8.0 million and was calculated on the acquisition date using the Black-Scholes option pricing model. The portion of the fair value of the replacement awards related to the services provided prior to the acquisition of $5.9 million was part of the consideration transferred to acquire Paymetric. The remaining portion of the fair value is associated with future service and will be recognized as expense over the future service period. The pro forma results of the Company reflecting the acquisition of Paymetric were not material to our financial results and therefore have not been presented. Acquisition of Moneris Solutions, Inc. On December 21, 2016, the Company completed the acquisition of Moneris Solutions, Inc. (“Moneris USA”) by acquiring 100% of the issued and outstanding shares. Moneris USA is a provider of payment processing solutions offering credit, debit, wireless and online payment services for merchants in virtually every industry segment. This acquisition helps to further accelerate the Company’s growth. The acquisition was accounted for as a business combination under ASC 805. The purchase price was allocated to the assets acquired and the liabilities assumed based on the estimated fair value at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was allocated to goodwill, of which approximately $14.0 million is deductible for tax purposes. Goodwill, assigned to Merchant Services, consists primarily of the acquired workforce and growth opportunities, none of which qualify as an intangible asset. The preliminary purchase price allocation is as follows (in thousands): Cash acquired $ 22,851 Current assets 44,047 Property and equipment 22 Intangible assets 72,000 Goodwill 378,747 Current liabilities (65,966 ) Deferred tax liability (19,192 ) Non-current liabilities (2,881 ) Total purchase price $ 429,628 The above estimated fair values of assets acquired and liabilities assumed are preliminary and are based on the information that was available as of the reporting date to estimate the fair value of assets acquired and liabilities assumed. The Company believes that the information provides a reasonable basis for estimating the fair values of the acquired assets and assumed liabilities, but the potential for measurement period adjustments exists based on the Company’s continuing review of matters related to the acquisition. The Company expects to complete the purchase price allocation as soon as practicable, but no later than one year from the acquisition date. Intangible assets consist of customer relationship assets of $72.0 million with a weighted average estimated useful life of 5 years . The pro forma results of the Company reflecting the acquisition of Moneris USA were not material to our financial results and therefore have not been presented. |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND INTANGIBLE ASSETS | GOODWILL AND INTANGIBLE ASSETS Changes in the carrying amount of goodwill, by business segment, are as follows (in thousands): Merchant Services Financial Institution Services Total Balance as of December 31, 2016 $ 3,163,739 $ 574,850 $ 3,738,589 Goodwill attributable to acquisition of Moneris USA (1) 6,686 — 6,686 Goodwill attributable to acquisition of Paymetric 435,032 — 435,032 Balance as of September 30, 2017 $ 3,605,457 $ 574,850 $ 4,180,307 (1) Amount represents adjustments to goodwill associated with the acquisition of Moneris USA as a result of an update to the purchase price allocation, primarily related to revisions of certain estimates from the preliminary amounts reported as of December 31, 2016. As of September 30, 2017 and December 31, 2016 , the Company’s finite lived intangible assets consisted of the following (in thousands): September 30, 2017 December 31, 2016 Customer relationship intangible assets $ 1,712,681 $ 1,671,581 Customer portfolios and related assets 247,935 178,480 Patents 1,217 955 1,961,833 1,851,016 Less accumulated amortization on: Customer relationship intangible assets 1,112,851 980,595 Customer portfolios and related assets 116,551 82,601 1,229,402 1,063,196 Intangible assets, net $ 732,431 $ 787,820 Customer portfolios and related assets acquired during the nine months ended September 30, 2017 have weighted-average amortization periods of 4.8 years . Amortization expense on intangible assets for the three months ended September 30, 2017 and 2016 was $55.2 million and $49.7 million , respectively. Amortization expense on intangible assets for the nine months ended September 30, 2017 and 2016 was $166.5 million and $149.0 million , respectively. The estimated amortization expense of intangible assets for the remainder of 2017 and the next five years is as follows (in thousands): Three months ending December 31, 2017 $ 55,393 2018 208,917 2019 192,553 2020 112,134 2021 62,906 2022 41,392 |
LONG-TERM DEBT
LONG-TERM DEBT | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
LONG-TERM DEBT | LONG-TERM DEBT As of September 30, 2017 and December 31, 2016 , the Company’s long-term debt consisted of the following (in thousands): September 30, December 31, Term A loan, maturing in October 2021 (1) $ 2,376,773 $ 2,469,375 Term B loan, maturing in October 2023 (2) 759,263 765,000 Incremental Term B loan, maturing in August 2024 (3) 1,270,000 — Leasehold mortgage, expiring on August 10, 2021 (4) 10,131 10,131 Revolving credit facility, expiring in October 2021 (5) 359,000 — Less: Current portion of note payable and current portion of note payable to related party (140,654 ) (131,119 ) Less: Original issue discount (3,197 ) (3,631 ) Less: Debt issuance costs (39,697 ) (20,153 ) Note payable and note payable to related party $ 4,591,619 $ 3,089,603 (1) Interest at a variable base rate (LIBOR) plus a spread rate (175 basis points) (total rate of 2.99% at September 30, 2017 ) and amortizing on a basis of 1.25% per quarter during each of the first twelve quarters (March 2017 through December 2019), 1.875% per quarter during the next four quarters (March 2020 through December 2020) and 2.50% during the next three quarters (March 2021 through September 2021) with a balloon payment due at maturity. (2) Interest at a variable base rate (LIBOR) with a floor of 75 basis points plus a spread rate (250 basis points) (total rate of 3.74% at September 30, 2017 ) and amortizing on a basis of 0.25% per quarter, with a balloon payment due at maturity. (3) Interest at a variable base rate (LIBOR) plus a spread rate (225 base points) (total rate of 3.48% at September 30, 2017 ) and amortizing on a basis of 0.25% per quarter, with a balloon payment due at maturity. (4) Interest payable monthly at a fixed rate of 6.22% . (5) $100 million revolving credit facility borrowing interest at a variable base rate (LIBOR) plus a spread rate (175 basis points) (total rate of 2.95% at September 30, 2017 ); $259 million revolving credit facility borrowing interest at a variable base rate (Prime) with a spread rate (75 basis points) (total rate of 5.0% at September 30, 2017 ). In October, 2016, Vantiv, LLC completed a debt refinancing by entering into a second amended and restated loan agreement (“Second Amended Loan Agreement”). The Second Amended Loan Agreement provided for senior secured credit facilities comprised of an approximately $2.5 billion term A loan, a $765.0 million term B loan and a $650 million revolving credit facility. The maturity date and debt service requirements relating to the term A and term B loans are listed in the table above. The revolving credit facility matures in October 2021 and includes a $100 million swing line facility and a $40 million letter of credit facility. The commitment fee rate for the unused portion of the revolving credit facility is 0.250% (or 0.375% if the total leverage ratio is greater than 3.75 to 1.00) per year. On August 7, 2017, the Company funded the Fifth Third share purchase discussed in Note 6 - Controlling and Non-controlling Interests, by amending the Second Amended Loan Agreement to permit Vantiv LLC to obtain approximately $1.27 billion of additional seven -year term B loans (the Second Amended Loan Agreement, as so amended, the “Existing Loan Agreement”). As a result of this borrowing, the Company capitalized approximately $23.1 million of deferred financing fees during the three months ended September 30, 2017 . There were outstanding borrowings of $359.0 million on the revolving credit facility at September 30, 2017 . There were no outstanding borrowings on the revolving credit facility at December 31, 2016 . As of September 30, 2017 and December 31, 2016 , Fifth Third held $177.7 million and $151.1 million , respectively, of the term A loans and the revolving credit facility, which are presented as note payable to related party on the consolidated statements of financial position. Guarantees and Security The Company’s debt obligations at September 30, 2017 are unconditional and are guaranteed by Vantiv Holding and certain of Vantiv Holding’s existing and subsequently acquired or organized domestic subsidiaries. The refinanced debt and related guarantees are secured on a first-priority basis (subject to liens permitted under the Second Amended Loan Agreement) by substantially all the capital stock (subject to a 65% limitation on pledges of capital stock of foreign subsidiaries and domestic holding companies of foreign subsidiaries) and personal property of Vantiv Holding and any obligors as well as any real property in excess of $25 million in the aggregate held by Vantiv Holding or any obligors (other than Vantiv Holding), subject to certain exceptions. Covenants There are certain financial and non-financial covenants contained in the Existing Loan Agreement for the refinanced debt, which are tested on a quarterly basis. The financial covenants require maintenance of certain leverage and interest coverage ratios. At September 30, 2017 , the Company was in compliance with these financial covenants. |
DERIVATIVES AND HEDGING ACTIVIT
DERIVATIVES AND HEDGING ACTIVITIES | 9 Months Ended |
Sep. 30, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVES AND HEDGING ACTIVITIES | DERIVATIVES AND HEDGING ACTIVITIES Risk Management Objective of Using Derivatives The Company enters into derivative financial instruments to manage differences in the amount, timing and duration of its known or expected cash payments related to its variable-rate debt and the pending Worldpay transaction (see Note 12 - Pending Worldpay Transaction). As of September 30, 2017 and December 31, 2016 , the Company’s derivative instruments consisted of interest rate swaps and interest rate cap agreements. Additionally, during the three months ended September 30, 2017, the Company entered into a deal contingent forward, which is a foreign currency forward contract. The interest rate swaps hedge the variable rate debt by converting floating-rate payments to fixed-rate payments. The interest rate cap agreements cap a portion of the Company’s variable rate debt if interest rates rise above the strike rate on the contract. The foreign currency forward serves as an economic hedge of the pound sterling denominated portion of the purchase price relating to the Worldpay acquisition. As of September 30, 2017 , the interest rate cap agreements had a fair value of $20.8 million , classified within other current and non-current assets on the Company’s consolidated statements of financial position. The interest rate swaps and caps (collectively “interest rate contracts”) are designated as cash flow hedges for accounting purposes. As of September 30, 2017, the foreign currency forward had a fair value of approximately $24.4 million , classified within other current assets on the Company’s consolidated statements of financial position. The foreign currency forward has not been designated as a hedge for accounting purposes. Accounting for Derivative Instruments The Company recognizes derivatives in other current and non-current assets or liabilities in the accompanying consolidated statements of financial position at their fair values. Refer to Note 8 - Fair Value Measurements for a detailed discussion of the fair value of its derivatives. The Company designates its interest rate contracts as cash flow hedges of forecasted interest rate payments related to its variable-rate debt. The Company formally documents all relationships between hedging instruments and underlying hedged transactions, as well as its risk management objective and strategy for undertaking hedge transactions. This process includes linking all derivatives that are designated as cash flow hedges to forecasted transactions. A formal assessment of hedge effectiveness is performed both at inception of the hedge and on an ongoing basis to determine whether the hedge is highly effective in offsetting changes in cash flows of the underlying hedged item. Hedge effectiveness is assessed using a regression analysis. If it is determined that a derivative ceases to be highly effective during the term of the hedge, the Company will discontinue hedge accounting for such derivative. The Company’s interest rate contracts qualify for hedge accounting under ASC 815, Derivatives and Hedging . Therefore, the effective portion of changes in fair value were recorded in AOCI and will be reclassified into earnings in the same period during which the hedged transactions affect earnings. Cash Flow Hedges of Interest Rate Risk The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish these objectives, the Company uses a combination of interest rate swaps and caps as part of its interest rate risk management strategy. As of September 30, 2017 , the Company had a total of 4 outstanding interest rate swaps covering an exposure period from January 2017 through January 2019 with a combined notional balance of $500.0 million . Fifth Third is counterparty to 2 of the 4 outstanding interest rate swaps with a $250 million notional balance for January 2017 to January 2018 and another $250 million notional balance for January 2018 to January 2019. Additionally, as of September 30, 2017 , the Company had a total of 6 interest rate cap agreements with a combined notional balance of $1.0 billion , cap strike rate of 0.75% , covering an exposure period from January 2017 to January 2020. The Company does not offset derivative positions in the accompanying consolidated financial statements. The table below presents the fair value of the Company’s derivative financial instruments designated as cash flow hedges included within the accompanying consolidated statements of financial position (in thousands): Consolidated Statement of September 30, 2017 December 31, 2016 Interest rate contracts Other current assets $ 6,829 $ 2,144 Interest rate contracts Other long-term assets 13,934 21,085 Interest rate contracts Other current liabilities 5,006 9,551 Interest rate contracts Other long-term liabilities 1,479 5,507 Any ineffectiveness associated with such derivative instruments will be recorded immediately as interest expense in the accompanying consolidated statements of income. As of September 30, 2017 , the Company estimates that $4.5 million will be reclassified from accumulated other comprehensive income as an increase to interest expense during the next 12 months. The table below presents the pre-tax effect of the Company’s interest rate contracts on the accompanying consolidated statements of comprehensive income for the three and nine months ended September 30, 2017 and 2016 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Derivatives in cash flow hedging relationships: Amount of gain (loss) recognized in OCI (effective portion) (1) $ 306 $ 1,247 $ 55 $ (22,964 ) Amount of (loss) reclassified from accumulated OCI into earnings (effective portion) (1,057 ) (3,923 ) (8,377 ) (9,010 ) (1) “OCI” represents other comprehensive income. Credit Risk Related Contingent Features As of September 30, 2017 , the fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $6.8 million . The Company has agreements with each of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, then the Company could also be declared in default on its derivative obligations. As of September 30, 2017 , the Company had not posted any collateral related to these agreements. If the Company had breached any of these provisions at September 30, 2017 , it could have been required to settle its obligations under the agreements at their termination value of $6.8 million . Deal Contingent Forward On August 9, 2017, the Company entered into a 1.150 billion Pounds Sterling notional deal contingent forward to hedge a portion of the purchase price relating to the pending Worldpay acquisition (see Note 12 - Pending Worldpay Transaction). The deal contingent forward runs through March 31, 2018 and the change in fair value is reported in non-operating income (expense) in the Company’s Unaudited Consolidated Statements of Income, which is an unrealized gain of approximately $24.4 million for the three months and nine months ended September 30, 2017. |
CONTROLLING AND NON-CONTROLLING
CONTROLLING AND NON-CONTROLLING INTERESTS | 9 Months Ended |
Sep. 30, 2017 | |
Noncontrolling Interest [Abstract] | |
CONTROLLING AND NON-CONTROLLING INTERESTS | The Company has various non-controlling interests that are accounted for in accordance with ASC 810, Consolidation (“ASC 810”) . As discussed in Note 1 - Basis of Presentation and Summary of Significant Accounting Policies , Vantiv, Inc. owns a controlling interest in Vantiv Holding, and therefore consolidates the financial results of Vantiv Holding and its subsidiaries and records non-controlling interest for the economic interests in Vantiv Holding held by Fifth Third. The Exchange Agreement entered into prior to the IPO provides for a 1 to 1 ratio between the units of Vantiv Holding and the common stock of Vantiv, Inc. In May 2014, the Company entered into a joint venture with a bank partner which provides customers a comprehensive suite of payment solutions. Vantiv Holding owns 51% and the bank partner owns 49% of the joint venture. The joint venture is consolidated by the Company in accordance with ASC 810, with the associated non-controlling interest included in “Net income attributable to non-controlling interests” in the consolidated statements of income. As of September 30, 2017 , Vantiv, Inc.’s interest in Vantiv Holding was 91.42% . Changes in units and related ownership interest in Vantiv Holding are summarized as follows: Vantiv, Inc. Fifth Third Total As of December 31, 2016 161,134,831 35,042,826 196,177,657 % of ownership 82.14 % 17.86 % Fifth Third exchange of Vantiv Holding units for shares of Class A common stock 19,790,000 (19,790,000 ) — Purchase and cancellation of Class A common stock (19,790,000 ) — (19,790,000 ) Equity plan activity (1) 1,371,799 — 1,371,799 As of September 30, 2017 162,506,630 15,252,826 177,759,456 % of ownership 91.42 % 8.58 % (1) Includes stock issued under the equity plans net of Class A common stock withheld to satisfy employee tax withholding obligations upon vesting or exercise of employee equity awards and forfeitures of restricted Class A common stock awards. On August 7, 2017, the Company entered into a transaction agreement with Fifth Third Bank pursuant to which Fifth Third Bank agreed to exercise its right to exchange 19,790,000 Class B Units in Vantiv Holding, LLC for 19,790,000 shares of the Company’s Class A common stock and immediately thereafter, the Company purchased those newly issued shares of Class A common stock directly from Fifth Third Bank at a price of $64.04 per share, the closing share price of the Company’s Class A common stock on the New York Stock Exchange on August 4, 2017. The purchased shares were cancelled and are no longer outstanding. As a result of changes in ownership interests in Vantiv Holding, periodic adjustments are made in order to reflect the portion of net assets of Vantiv Holding attributable to non-controlling unit holders based on changes in the proportionate ownership interests in Vantiv Holding during a period. The table below provides a reconciliation of net income attributable to non-controlling interests based on relative ownership interests as discussed above (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Net income $ 106,905 $ 87,004 $ 229,060 $ 217,913 Items not allocable to non-controlling interests: Vantiv, Inc. expenses (1) 14,219 23,628 25,095 58,019 Vantiv Holding net income $ 121,124 $ 110,632 $ 254,155 $ 275,932 Net income attributable to non-controlling interests of Fifth Third (2) $ 14,092 $ 20,155 $ 37,549 $ 50,082 Net income attributable to joint venture non-controlling interest (3) 695 553 1,731 2,470 Total net income attributable to non-controlling interests $ 14,787 $ 20,708 $ 39,280 $ 52,552 (1) Primarily represents income tax expense related to Vantiv, Inc. (2) Net income attributable to non-controlling interests of Fifth Third reflects the allocation of Vantiv Holding’s net income based on the proportionate ownership interests in Vantiv Holding held by the non-controlling unit holders. The net income attributable to non-controlling unit holders reflects the changes in ownership interests summarized in the table above. (3) Reflects net income attributable to the non-controlling interest of the joint venture. |
COMMITMENTS, CONTINGENCIES AND
COMMITMENTS, CONTINGENCIES AND GUARANTEES | 9 Months Ended |
Sep. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS, CONTINGENCIES AND GUARANTEES | COMMITMENTS, CONTINGENCIES AND GUARANTEES Legal Reserve From time to time, the Company is involved in various litigation matters arising in the ordinary course of its business. While it is impossible to ascertain the ultimate resolution or range of financial liability with respect to these contingent matters, management believes none of these matters, either individually or in the aggregate, would have a material effect upon the Company’s consolidated financial statements, except as described below. On April 17, 2017, the Company entered into a preliminary settlement agreement (the “Agreement”) to settle class action litigation filed by plaintiffs in the United States District Court for the Northern District of Georgia (the “Court”) under the caption Champs Sports Bar & Grill Co.et al. v. Mercury Payment Systems, LLC et al. regarding certain legacy business practices of the defendants, Mercury Payment Systems, LLC (“Mercury”) and Global Payments Direct, Inc., dating back to 2009. The Company acquired Mercury on June 13, 2014. The Company has agreed to settle the lawsuit after engaging in a successful mediation session occurring on February 16, 2017, at which the parties first identified the potential for resolution, and subsequent negotiations between the parties. The parties agreed to such mediation session after a previous mediation session held in December 2016 ended without a potential path toward resolution. Under the terms of the Agreement, in exchange for a release from all claims relating to such legacy business practices from the beginning of the applicable settlement class period through the date of preliminary approval of the settlement, the Company anticipates paying $38 million based on the estimated number of participants who opt-in to the settlement. While the agreement contains no admission of wrongdoing and the Company believes it has meritorious defenses to the claims, the Company agreed to the structure of the settlement, in order to save costs and avoid the risks of on-going litigation. In connection with the settlement, the Company recorded a charge of $38 million in the first quarter of 2017. The Company will pay the settlement amount from available resources. On May 16, 2017, the Court determined the proposed Agreement satisfied the criteria for preliminary approval and issued a preliminary approval order. Pursuant to the terms of the Agreement, the preliminary approval order required that the Company fund an escrow account to pay all future class action claims, legal fees and administrative fees. The Company funded such account on July 5, 2017. On August 29, 2017, a final approval hearing took place and the Agreement was approved. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses the hierarchy prescribed in ASC 820, Fair Value Measurement (“ASC 820”), based upon the available inputs to the valuation and the degree to which they are observable or not observable in the market. The three levels in the hierarchy are as follows: • Level 1 Inputs —Quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the measurement date. • Level 2 Inputs —Inputs other than quoted prices within Level 1 that are observable either directly or indirectly, including but not limited to quoted prices in markets that are not active, quoted prices in active markets for similar assets or liabilities and observable inputs other than quoted prices such as interest rates or yield curves. • Level 3 Inputs —Unobservable inputs reflecting the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. The following table summarizes assets and liabilities measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016 (in thousands): September 30, 2017 December 31, 2016 Fair Value Measurements Using Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets: Interest rate contracts $ — $ 20,763 $ — $ — $ 23,229 $ — Deal contingent forward — 24,365 — — — — — Liabilities: Interest rate contracts $ — $ 6,485 $ — $ — $ 15,058 $ — Mercury TRA — — 97,308 — — 147,040 Interest Rate Contracts The Company uses interest rate contracts to manage interest rate risk. The fair value of interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves. The fair value of the interest rate caps is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected future cash flows of each interest rate cap. This analysis reflects the contractual terms of the interest rate caps, including the period to maturity, and uses observable market inputs including interest rate curves and implied volatilities. In addition, to comply with the provisions of ASC 820, credit valuation adjustments, which consider the impact of any credit enhancements to the contracts, are incorporated in the fair values to account for potential nonperformance risk. In adjusting the fair value of its interest rate contracts for the effect of nonperformance risk, the Company has considered any applicable credit enhancements such as collateral postings, thresholds, mutual puts, and guarantees. Although the Company determined that the majority of the inputs used to value its interest rate contracts fell within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its interest rate contracts utilized Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of September 30, 2017 and December 31, 2016 , the Company assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its interest rate contracts and determined that the credit valuation adjustment was not significant to the overall valuation of its interest rate contracts. As a result, the Company classified its interest rate contract valuations in Level 2 of the fair value hierarchy. See Note 5 - Derivatives and Hedging Activities for further discussion of the Company’s interest rate contracts. Deal Contingent Forward The Company uses a foreign currency contract to manage its foreign currency exposure relating to the pending Worldpay transaction (see Note 12 - Pending Worldpay Transaction). The fair value of the foreign currency forward is determined using the market standard methodology of discounting the projected settlement value of the instrument. The projected settlement value is based on the expectation of future foreign currency rates derived from observed market interest rate curves. In addition, to comply with the provisions of ASC 820, credit valuation adjustments are incorporated in the fair values to account for potential nonperformance risk. In adjusting the fair value of its foreign currency forward contract for the effect of nonperformance risk, the Company has considered any applicable credit enhancements such as collateral postings, thresholds, mutual puts, and guarantees. Although the Company determined that the majority of the inputs used to value its foreign currency contract fell within Level 2 of the fair value hierarchy, certain Level 3 inputs were utilized, including the probability of successfully closing the Worldpay merger and certain other estimates required to compute the credit valuation analysis, such as the estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of September 30, 2017 , the Company assessed the significance of the impact of the Level 3 inputs on the overall valuation of its foreign currency contract and determined that those inputs were in the aggregate not significant to the overall valuation of its foreign currency contract. As a result, the Company classified its foreign currency contract valuation in Level 2 of the fair value hierarchy. See Note 5 - Derivatives and Hedging Activities for further discussion of the Company’s foreign currency contract. Mercury TRA The Mercury TRA is considered contingent consideration as it is part of the consideration payable to the former owners of Mercury. Such contingent consideration is measured at fair value and is based on significant inputs not observable in the market, which is classified in Level 3 of the fair value hierarchy. The Mercury TRA is recorded at fair value based on estimates of discounted future cash flows associated with the estimated payments to the Mercury TRA Holders. The significant unobservable input used in the fair value measurement of the Mercury TRA is the discount rate, which was approximately 14% as of September 30, 2017 and December 31, 2016 . Any significant increase (decrease) in this input would result in a significantly lower (higher) fair value measurement. The liability recorded is re-measured at fair value at each reporting period with the change in fair value recognized in earnings as a non-operating expense. The change in value of the Mercury TRA from December 31, 2016 to September 30, 2017 consists of the increase in fair value of $10.7 million and the decrease from payments of $60.5 million related to the Mercury TRA obligations and the exercised 2016 Call Option. The Company recorded non-operating expenses of $3.1 million and $4.6 million related to the change in fair value during the three months ended September 30, 2017 and 2016 , respectively. The Company recorded non-operating expenses of $10.7 million and $14.9 million related to the change in fair value during the nine months ended September 30, 2017 and 2016 , respectively. The following table summarizes carrying amounts and estimated fair values for the Company’s financial instrument liabilities that are not reported at fair value in our consolidated statements of financial position as of September 30, 2017 and December 31, 2016 (in thousands): September 30, 2017 December 31, 2016 Carrying Amount Fair Value Carrying Amount Fair Value Liabilities: Note payable $ 4,732,273 $ 4,785,387 $ 3,220,722 $ 3,250,025 We consider that the carrying value of cash and cash equivalents, receivables, accounts payable and accrued expenses approximates fair value (level 1) given the short-term nature of these items. The fair value of the Company’s note payable was estimated based on rates currently available to the Company for bank loans with similar terms and maturities and is classified in Level 2 of the fair value hierarchy. |
NET INCOME PER SHARE
NET INCOME PER SHARE | 9 Months Ended |
Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |
NET INCOME PER SHARE | NET INCOME PER SHARE Basic net income per share is calculated by dividing net income attributable to Vantiv, Inc. by the weighted-average shares of Class A common stock outstanding during the period. Diluted net income per share is calculated assuming that Vantiv Holding is a wholly-owned subsidiary of Vantiv, Inc., therefore eliminating the impact of Fifth Third’s non-controlling interest. Pursuant to the Exchange Agreement, the Class B units of Vantiv Holding (“Class B units”), which are held by Fifth Third and represent the non-controlling interest in Vantiv Holding, are convertible into shares of Class A common stock on a one -for-one basis. Based on this conversion feature, diluted net income per share is calculated assuming the conversion of the Class B units on an “if-converted” basis. Due to the Company’s structure as a C corporation and Vantiv Holding’s structure as a pass-through entity for tax purposes, the numerator in the calculation of diluted net income per share is adjusted accordingly to reflect the Company’s income tax expense assuming the conversion of the Fifth Third non-controlling interest into Class A common stock. During the three months and nine months ended September 30, 2017 , approximately 23.6 million and 31.2 million weighted-average Class B units of Vantiv Holding were excluded in computing diluted net income per share because including them would have an antidilutive effect. As the Class B units of Vantiv Holding were not included, the numerator used in the calculation of diluted net income per share was equal to the numerator used in the calculation of basic net income per share for the three months and nine months ended September 30, 2017 . As of September 30, 2017 and 2016 , there were approximately 15.3 million and 35.0 million Class B units outstanding, respectively. In addition to the Class B units discussed above, potentially dilutive securities during the three and nine months ended September 30, 2017 included restricted stock awards, restricted stock units, stock options, performance share awards and ESPP purchase rights. Potentially dilutive securities during the three and nine months ended September 30, 2016 included restricted stock awards, restricted stock units, the warrant held by Fifth Third which allows for the purchase of Class C units of Vantiv Holding, stock options and ESPP purchase rights. The shares of Class B common stock do not share in the earnings or losses of the Company and are therefore not participating securities. Accordingly, basic and diluted net income per share of Class B common stock have not been presented. The following table sets forth the computation of basic and diluted net income per share (in thousands, except share data): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Basic: Net income attributable to Vantiv, Inc. $ 92,118 $ 66,296 $ 189,780 $ 165,361 Shares used in computing basic net income per share: 0 Weighted-average Class A common shares 161,465,849 155,740,660 161,205,066 155,603,265 Basic net income per share $ 0.57 $ 0.43 $ 1.18 $ 1.06 Diluted: Consolidated income before applicable income taxes $ — $ 126,328 $ — $ 319,504 Income tax expense excluding impact of non-controlling interest — 45,478 — 115,021 Net income attributable to Vantiv, Inc. $ 92,118 $ 80,850 $ 189,780 $ 204,483 Shares used in computing diluted net income per share: Weighted-average Class A common shares 161,465,849 155,740,660 161,205,066 155,603,265 Weighted-average Class B units of Vantiv Holding — 35,042,826 — 35,042,826 Warrant — 5,550,050 — 5,428,637 Stock options 739,835 506,635 706,632 547,640 Restricted stock awards, restricted stock units and employee stock purchase plan 645,508 501,998 664,275 504,203 Performance awards 31,204 — 41,809 — Diluted weighted-average shares outstanding 162,882,396 197,342,169 162,617,782 197,126,571 Diluted net income per share $ 0.57 $ 0.41 $ 1.17 $ 1.04 |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | 9 Months Ended |
Sep. 30, 2017 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The activity of the components of accumulated other comprehensive income (loss) related to cash flow hedging and other activities for the three and nine months ended September 30, 2017 and 2016 is presented below (in thousands): Total Other Comprehensive Income (Loss) AOCI Beginning Balance Pretax Activity Tax Effect Net Activity Attributable to non-controlling interests Attributable to Vantiv, Inc. AOCI Ending Balance Three Months Ended September 30, 2017 Net change in fair value recorded in accumulated OCI $ (17,942 ) $ 306 $ (186 ) $ 120 $ 184 $ 304 $ (17,638 ) Net realized loss reclassified into earnings (a) 15,366 1,057 (366 ) 691 (90 ) 601 15,967 Net change $ (2,576 ) $ 1,363 $ (552 ) $ 811 $ 94 $ 905 $ (1,671 ) Three Months Ended September 30, 2016 Net change in fair value recorded in accumulated OCI $ (26,644 ) $ 1,247 $ (386 ) $ 861 $ (227 ) $ 634 $ (26,010 ) Net realized loss reclassified into earnings (a) 7,720 3,923 (1,212 ) 2,711 (719 ) 1,992 9,712 Net change $ (18,924 ) $ 5,170 $ (1,598 ) $ 3,572 $ (946 ) $ 2,626 $ (16,298 ) Nine Months Ended September 30, 2017 Net change in fair value recorded in accumulated OCI $ (17,819 ) $ 55 $ (101 ) $ (46 ) $ 227 $ 181 $ (17,638 ) Net realized loss reclassified into earnings (a) 11,622 8,377 (2,641 ) 5,736 (1,391 ) 4,345 15,967 Net change $ (6,197 ) $ 8,432 $ (2,742 ) $ 5,690 $ (1,164 ) $ 4,526 $ (1,671 ) Nine Months Ended September 30, 2016 Net change in fair value recorded in accumulated OCI $ (14,336 ) $ (22,964 ) $ 7,080 $ (15,884 ) $ 4,210 $ (11,674 ) $ (26,010 ) Net realized loss reclassified into earnings (a) 5,132 9,010 (2,780 ) 6,230 (1,650 ) 4,580 9,712 Net change $ (9,204 ) $ (13,954 ) $ 4,300 $ (9,654 ) $ 2,560 $ (7,094 ) $ (16,298 ) (a) The reclassification adjustment on cash flow hedge derivatives affected the following lines in the accompanying consolidated statements of income: OCI Component Affected line in the accompanying consolidated statements of income Pretax activity (1) Interest expense-net Tax effect Income tax expense OCI attributable to non-controlling interests Net income attributable to non-controlling interests (1) The three and nine months ended September 30, 2017 and 2016 reflect amounts of gain (loss) reclassified from AOCI into earnings, representing the effective portion of the hedging relationships, and are recorded in interest expense-net. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 9 Months Ended |
Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
SEGMENT INFORMATION | SEGMENT INFORMATION The Company’s segments consist of the Merchant Services segment and the Financial Institution Services segment, which are organized by the products and services the Company provides. The Company’s Chief Executive Officer (“CEO”), who is the chief operating decision maker (“CODM”), evaluates the performance and allocates resources based on the operating results of each segment. The Company’s reportable segments are the same as the Company’s operating segments and there is no aggregation of the Company’s operating segments. Below is a summary of each segment: • Merchant Services —Provides merchant acquiring and payment processing services to large national merchants, regional and small-to-mid sized businesses. Merchant services are sold to small to large businesses through diverse distribution channels. Merchant Services includes all aspects of card processing including authorization and settlement, customer service, chargeback and retrieval processing and interchange management. • Financial Institution Services —Provides card issuer processing, payment network processing, fraud protection, card production, prepaid program management, ATM driving and network gateway and switching services that utilize the Company’s proprietary Jeanie debit payment network to a diverse set of financial institutions, including regional banks, community banks, credit unions and regional personal identification number (“PIN”) networks. Financial Institution Services also provides statement production, collections and inbound/outbound call centers for credit transactions, and other services such as credit card portfolio analytics, program strategy and support, fraud and security management and chargeback and dispute services. Segment operating results are presented below (in thousands). The results reflect revenues and expenses directly related to each segment. The Company does not evaluate performance or allocate resources based on segment asset data, and therefore such information is not presented. Segment profit reflects total revenue less network fees and other costs and sales and marketing costs of the segment. The Company’s CODM evaluates this metric in analyzing the results of operations for each segment. Three Months Ended September 30, 2017 Merchant Services Financial Institution Services Total Total revenue $ 916,630 $ 117,135 $ 1,033,765 Network fees and other costs 447,863 31,670 479,533 Sales and marketing 168,022 5,757 173,779 Segment profit $ 300,745 $ 79,708 $ 380,453 Three Months Ended September 30, 2016 Merchant Services Financial Institution Services Total Total revenue $ 793,860 $ 120,159 $ 914,019 Network fees and other costs 389,448 33,913 423,361 Sales and marketing 147,663 5,585 153,248 Segment profit $ 256,749 $ 80,661 $ 337,410 Nine Months Ended September 30, 2017 Merchant Services Financial Institution Services Total Total revenue $ 2,615,341 $ 345,390 $ 2,960,731 Network fees and other costs 1,311,539 94,819 1,406,358 Sales and marketing 479,628 17,454 497,082 Segment profit $ 824,174 $ 233,117 $ 1,057,291 Nine Months Ended September 30, 2016 Merchant Services Financial Institution Services Total Total revenue $ 2,251,033 $ 372,826 $ 2,623,859 Network fees and other costs 1,117,602 103,908 1,221,510 Sales and marketing 416,107 17,623 433,730 Segment profit $ 717,324 $ 251,295 $ 968,619 A reconciliation of total segment profit to the Company’s income before applicable income taxes is as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Total segment profit $ 380,453 $ 337,410 $ 1,057,291 $ 968,619 Less: Other operating costs (79,482 ) (72,162 ) (234,347 ) (219,464 ) Less: General and administrative (49,607 ) (40,727 ) (189,632 ) (133,831 ) Less: Depreciation and amortization (82,500 ) (66,086 ) (236,964 ) (199,550 ) Less: Interest expense—net (38,521 ) (27,474 ) (97,441 ) (81,321 ) Less: Non-operating expenses 21,207 (4,633 ) 13,672 (14,949 ) Income before applicable income taxes $ 151,550 $ 126,328 $ 312,579 $ 319,504 |
PENDING WORLDPAY TRANSACTION
PENDING WORLDPAY TRANSACTION | 9 Months Ended |
Sep. 30, 2017 | |
Subsequent Events [Abstract] | |
PENDING WORLDPAY TRANSACTION | Firm Offer for Worldpay Group PLC On August 9, 2017, the Company issued an announcement pursuant to Rule 2.7 of the U.K. City Code on Takeovers and Mergers disclosing the terms of a recommended offer (the “Offer”) by the Company to acquire the entire issued and to be issued ordinary share capital of Worldpay, a public limited company registered in England and Wales, in a cash and stock transaction (the “Business Combination”). Under the terms of the Offer, Worldpay shareholders will be entitled to receive, for each Worldpay ordinary share held by such shareholders, 55 pence in cash and 0.0672 new shares of the Company’s Class A common stock. As of September 30, 2017, Worldpay has approximately 2.003 billion shares outstanding. The Business Combination is to be effected by means of a court-sanctioned scheme of arrangement between Worldpay and Worldpay shareholders under the UK Companies Act 2006, as amended. In addition to the consideration payable in connection with the Offer, Worldpay shareholders are also entitled to receive an interim dividend of 0.8 pence per Worldpay ordinary share that was paid on October 23, 2017. In addition, Worldpay shareholders will be entitled to receive a special dividend of 4.2 pence per Worldpay ordinary share, which would be conditional on completion of the Business Combination and would be paid to Worldpay shareholders on the register of members of Worldpay at the scheme record time. Effective upon completion of the Business Combination, the combined company will amend its governance documents to adopt the “Worldpay” name. The Company will also seek a secondary standard listing on the Main Market of the London Stock Exchange in relation to the new shares of Company Stock following completion of the Business Combination. The Business Combination is subject to conditions and certain further terms, including, among other things: (i) the approval of the Scheme by a majority in number of Worldpay shareholders representing not less than 75% in value of the Worldpay shareholders, in each case present at the Worldpay shareholders’ meeting; (ii) the sanction of the Scheme by the High Court of Justice in England and Wales; (iii) the Scheme becoming effective no later than March 31, 2018; (iv) the issuance of the new shares of Company Stock to Worldpay shareholders in connection with the Business Combination being duly approved by the affirmative vote of the majority of the votes cast at the Company’s stockholder’s meeting; and (v) the receipt of certain required antitrust, regulatory and other approvals. It is expected that, subject to the satisfaction or waiver of all relevant conditions, the Business Combination will be completed in early 2018. Financing Arrangements In connection with the Worldpay transaction, the Company entered into several amendments to its Existing Loan Agreement set forth below. Incremental Amendment to Existing Loan Agreement and Bridge and Backstop Commitments On August 9, 2017, Vantiv, LLC executed an amendment (the “Incremental Amendment”), to the Existing Loan Agreement (as amended by the Incremental Amendment, the “Loan Agreement”) with various financial institutions and their affiliates. The Incremental Amendment provides Vantiv, LLC with committed funding as follows: • $1.605 billion of additional five -year term Tranche A-4 loans • $1.129 billion of additional seven -year term B loans, which consists of approximately $535 million of outstanding term loans (Tranche B-1) and a $594 million backstop (Tranche B-2) • $350.0 million of additional revolving credit commitments The proceeds of the commitments provided under the Incremental Amendment will be used to, among other things, provide the cash consideration for the Worldpay acquisition, to refinance existing debt of Worldpay including a $594 million backstop for the Worldpay Euro bond, to pay fees and expenses in connection with the foregoing and for working capital and general corporate purposes. The obligations of the lenders party to the Incremental Amendment to provide the increased debt financing contemplated thereunder are subject to the consummation of the Worldpay acquisition. In addition, on August 9, 2017, Vantiv, LLC and various financial institutions and their affiliates entered into a Bridge Commitment Letter, pursuant to which, subject to the satisfaction of the conditions set forth therein, the lenders thereunder agreed to provide an up to a $1.13 billion bridge term loan facility for the benefit of Vantiv, LLC and certain of its subsidiaries. This bridge term loan facility will only be used in the event the Company is not able to raise funds via an anticipated bond offering. Further, on August 9, 2017, Vantiv, LLC, and various financial institutions, collectively, the “Backstop Lenders” entered into the Backstop Commitment Letter (the “Backstop Commitment”), pursuant to which, subject to the conditions set forth therein, the Backstop Lenders agreed to provide the following: • Up to a $1.0 billion revolving credit facility • Up to an approximately $4.01 billion term A loan facility • Up to an approximately $3.2 billion term B loan facility for the benefit of Vantiv, LLC and certain of its subsidiaries Subsequently, the Backstop Commitment has been terminated as a result of the effectiveness of the third amendment and restatement agreement described below. Third Amendment and Restatement Agreement On September 8, 2017, Vantiv, LLC entered into a third amendment and restatement loan agreement (the “Third Amendment and Restatement Agreement”) pursuant to which the Existing Loan Agreement will be amended and restated as follows: • Amended the existing term A loans ( $2.4 billion ) ◦ $181.5 million (Tranche A-3) amended, but did not extend the current maturity date of October 2021 ◦ $2.2 billion (Tranche A-5) amended and extended the maturity date to the fifth anniversary following the funding of the Business Combination • Amended and extended the maturity of, provide for borrowing under additional currencies, and increased by an additional $250.0 million the existing revolving credit facility The effectiveness of the Third Amendment and Restatement Agreement is subject to, among other things, the consummation of the Worldpay acquisition. The Third Amendment and Restatement Agreement requires Vantiv, LLC to maintain a maximum leverage ratio and a minimum interest coverage ratio, each of which will be tested quarterly based on the last four fiscal quarters, commencing on the first full fiscal quarter following the funding of the Worldpay acquisition. The maximum leverage ratio starts at 6.50 :1.00 and becomes more restrictive over time. The minimum interest coverage ratio is 4.00 :1.00 and is constant throughout the term of the agreement. Fourth Amendment to Existing Credit Agreement On October 3, 2017, Vantiv, LLC entered into a Fourth Amendment, which amends the Loan Agreement as follows: • The existing initial term B loan tranche was replaced with a $759.3 million new term Tranche B-3 loan maturing in October 2023 • The existing incremental term B loan tranche was replaced with a $1.27 billion term Tranche B-4 loan maturing August 2024 • The $535 million incremental term Tranche B-1 to be funded in connection with the closing of the Worldpay acquisition will, upon the funding thereof, be modified to have the same economic terms as the new term Tranche B-4 loan and become part of the same class of term Tranche B-4 loans The term B loan tranches amortize in equal quarterly installments of 0.25% per quarter, with balloon payments at maturity. The amortization for the new term Tranche B-3 ( $759.3 million ) will commence on March 31, 2018 and for the new term Tranche B-4 ( $1.27 billion ) on June 30, 2018. Interest on all loans under the senior secured credit facilities is payable either quarterly or at the expiration of any LIBOR interest period applicable thereto. Borrowings under the Credit Agreement accrue interest at a rate equal to, at Vantiv, LLC’s option, a base rate or LIBOR rate plus an applicable margin. The applicable margin for each of the new term Tranche B-3 loan ( $759.3 million ) and new term Tranche B-4 loan ( $1.27 billion ) is 100 basis points in the case of base rate loans (subject to a 0.0% floor) and 200 basis points in the case of LIBOR loans (subject to a 0.0% floor). The applicable margin for the incremental term B-2 loan tranche ( $594 million ) remains 125 basis points in the case of base rate loans (subject to a 0.0% floor) and 225 basis points in the case of LIBOR loans (subject to a 0.0% floor). ****** |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
Accounting Policies [Abstract] | |
Segment | The Company’s segments consist of the Merchant Services segment and the Financial Institution Services segment, which are organized by the products and services the Company provides. The Company’s Chief Executive Officer (“CEO”), who is the chief operating decision maker (“CODM”), evaluates the performance and allocates resources based on the operating results of each segment. The Company’s reportable segments are the same as the Company’s operating segments and there is no aggregation of the Company’s operating segments. Below is a summary of each segment: • Merchant Services —Provides merchant acquiring and payment processing services to large national merchants, regional and small-to-mid sized businesses. Merchant services are sold to small to large businesses through diverse distribution channels. Merchant Services includes all aspects of card processing including authorization and settlement, customer service, chargeback and retrieval processing and interchange management. • Financial Institution Services —Provides card issuer processing, payment network processing, fraud protection, card production, prepaid program management, ATM driving and network gateway and switching services that utilize the Company’s proprietary Jeanie debit payment network to a diverse set of financial institutions, including regional banks, community banks, credit unions and regional personal identification number (“PIN”) networks. Financial Institution Services also provides statement production, collections and inbound/outbound call centers for credit transactions, and other services such as credit card portfolio analytics, program strategy and support, fraud and security management and chargeback and dispute services. |
Principles of Consolidation | Basis of Presentation and Consolidation The accompanying consolidated financial statements include those of Vantiv, Inc. and all subsidiaries thereof, including its majority-owned subsidiary, Vantiv Holding, LLC. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and should be read in connection with the Company’s 2016 audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K. The accompanying consolidated financial statements are unaudited; however, in the opinion of management they include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented. Results of operations reported for interim periods are not necessarily indicative of results for the entire year due to seasonal fluctuations in the Company’s revenue as a result of consumer spending patterns. All intercompany balances and transactions have been eliminated. As of September 30, 2017 , Vantiv, Inc. and Fifth Third Bank (“Fifth Third”) owned interests in Vantiv Holding of 91.42% and 8.58% , respectively (see Note 6 - Controlling and Non-controlling Interests for changes in non-controlling interests). The Company accounts for non-controlling interests in accordance with Accounting Standards Codification (“ASC”) 810, Consolidation . Non-controlling interests primarily represent Fifth Third’s minority share of net income or loss of equity in Vantiv Holding. Net income attributable to non-controlling interests does not include expenses incurred directly by Vantiv, Inc., including income tax expense attributable to Vantiv, Inc. Non-controlling interests are presented as a component of equity in the accompanying consolidated statements of financial position. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. |
Revenue Recognition | Revenue Recognition The Company has contractual agreements with its clients that set forth the general terms and conditions of the relationship including line item pricing, payment terms and contract duration. Revenues are recognized as earned (i.e., for transaction based fees, when the underlying transaction is processed) in conjunction with ASC 605, Revenue Recognition . ASC 605, Revenue Recognition , establishes guidance as to when revenue is realized or realizable and earned by using the following criteria: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller’s price is fixed or determinable; and (4) collectibility is reasonably assured. The Company follows guidance provided in ASC 605-45, Principal Agent Considerations, which states that the determination of whether a company should recognize revenue based on the gross amount billed to a customer or the net amount retained is a matter of judgment that depends on the facts and circumstances of the arrangement and that certain factors should be considered in the evaluation. The Company recognizes processing revenues net of interchange fees, which are assessed to the Company’s merchant customers on all processed transactions. Interchange rates are not controlled by the Company, which effectively acts as a clearing house collecting and remitting interchange fee settlement on behalf of issuing banks, debit networks, credit card associations and its processing customers. All other revenue is reported on a gross basis, as the Company contracts directly with the end customer, assumes the risk of loss and has pricing flexibility. The Company generates revenue primarily by processing electronic payment transactions. Set forth below is a description of the Company’s revenue by segment. Merchant Services The Company’s Merchant Services segment revenue is primarily derived from processing credit and debit card transactions. Merchant Services revenue is primarily comprised of fees charged to businesses, net of interchange fees, for payment processing services, including authorization, capture, clearing, settlement and information reporting of electronic transactions. The fees charged consist of either a percentage of the dollar volume of the transaction or a fixed fee, or both, and are recognized at the time of the transaction. Merchant Services revenue also includes a number of revenue items that are incurred by the Company and are reimbursable as the costs are passed through to and paid by the Company’s clients. These items primarily consist of Visa, Mastercard and other payment network fees. In addition, for sales through referral partners in which the Company is the primary party to the contract with the merchant, the Company records the full amount of the fees collected from the merchant as revenue. Merchant Services segment revenue also includes revenue from ancillary services such as fraud management, equipment sales and terminal rent. Merchant Services revenue is recognized as services are performed. Financial Institution Services The Company’s Financial Institution Services segment revenues are primarily derived from debit, credit and automated teller machine (“ATM”) card transaction processing, ATM driving and support, and PIN debit processing services. Financial Institution Services revenue associated with processing transactions includes per transaction and account related fees, card production fees and fees generated from the Company’s Jeanie network. Financial Institution Services revenue related to card transaction processing is recognized when consumers use their client-issued cards to make purchases. Financial Institution Services also generates revenue through other services, including statement production, collections and inbound/outbound call centers for credit transactions and other services such as credit card portfolio analytics, program strategy and support, fraud and security management and chargeback and dispute services. Financial Institution Services revenue is recognized as services are performed. Financial Institution Services provides certain services to Fifth Third. Revenues related to these services are included in the accompanying statements of income as related party revenues. |
Expenses | Expenses Set forth below is a brief description of the components of the Company’s expenses: • Network fees and other costs primarily consist of pass through expenses incurred by the Company in connection with providing processing services to its clients, including Visa and Mastercard network association fees, payment network fees, third party processing fees, telecommunication charges, postage and card production costs. • Sales and marketing expense primarily consists of salaries and benefits paid to sales personnel, sales management and other sales and marketing personnel, residual payments made to referral partners, and advertising and promotional costs. • Other operating costs primarily consist of salaries and benefits paid to operational and IT personnel, costs associated with operating the Company’s technology platform and data centers, information technology costs for processing transactions, product development costs, software fees and maintenance costs. • General and administrative expenses primarily consist of salaries and benefits paid to executive management and administrative employees, including finance, human resources, product development, legal and risk management, share-based compensation costs, equipment, occupancy and consulting costs. The nine months ended September 30, 2017 includes a charge related to a settlement agreement stemming from legacy litigation of an acquired company. • Non-operating income for the three and nine months ended September 30, 2017 consists of an unrealized gain relating to the change in the fair value of a deal contingent forward entered into in connection with the pending Worldpay Group plc (“Worldpay”) acquisition (see Note 12 - Pending Worldpay Transaction), partially offset by the change in fair value of a tax receivable agreement (“TRA”) entered into as part of the acquisition of Mercury Payment Systems, LLC (“Mercury”). Non-operating expenses for the three and nine months ended September 30, 2016 primarily relate to the change in fair value of a TRA entered into as part of the acquisition of Mercury. (see Note 8 - Fair Value Measurements). |
Share-Based Compensation | Share-Based Compensation The Company expenses employee share-based payments under ASC 718, Compensation—Stock Compensation , which requires compensation cost for the grant-date fair value of share-based payments to be recognized over the requisite service period. The Company estimates the grant date fair value of the share-based awards issued in the form of options using the Black-Scholes option pricing model. The fair value of shares issued under the Employee Stock Purchase Plan (“ESPP”), as restricted stock awards and performance awards is measured based on the market price of the Company’s stock on the grant date. In 2017, the Compensation Committee of the Company’s Board of Directors approved a resolution that stock options, restricted shares and restricted stock units shall vest or become exercisable in three equal annual installments beginning on the first anniversary of the grant date. In March 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-09, Compensation- Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The update simplifies several aspects of the accounting for share-based payment award transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company adopted this ASU on January 1, 2017. Under previous guidance, excess tax benefits and deficiencies from share-based compensation arrangements were recorded in equity when the awards vested or settled. ASU 2016-09 requires prospective recognition of excess tax benefits and deficiencies in the income statement, resulting in the recognition of excess tax benefits of $1.9 million and $16.0 million in income tax expense, rather than in paid-in capital, for the three and nine months ended September 30, 2017 , respectively. Additionally, under ASU 2016-09, excess income tax benefits from share-based compensation arrangements are classified as cash flow from operations, rather than as cash flow from financing activities. The Company has elected to apply the cash flow classification guidance of ASU 2016-09 prospectively, resulting in an increase to operating cash flow of $16.0 million for the nine months ended September 30, 2017 , and the prior year period has not been adjusted. The presentation requirements for cash flows related to employee taxes paid for withheld shares have no impact to the periods presented in our consolidated cash flows statements since such cash flows have historically been presented as a financing activity. Prior to adopting ASU 2016-09 the Company estimated forfeitures as part of share-based compensation expense. Under ASU 2016-09, an entity can make an election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur. The Company has elected to account for forfeitures as they occur. The cumulative-effect of this change in election resulted in an increase to additional paid-in capital of $1.3 million , an increase to deferred tax assets of $0.5 million , and a decrease to retained earnings of $0.8 million at the beginning of 2017. ASU 2016-09 requires excess tax benefits and deficiencies to be prospectively excluded from assumed future proceeds in the calculation of diluted shares, resulting in an increase in diluted weighted average shares outstanding of approximately 364,000 shares and 412,000 shares for the three and nine months ended September 30, 2017 , respectively. For the nine months ended September 30, 2017 and 2016 total share-based compensation expense was $35.1 million and $25.9 million , respectively. |
Earnings Per Share | Earnings Per Share Basic earnings per share is computed by dividing net income attributable to Vantiv, Inc. by the weighted average shares outstanding during the period. Diluted earnings per share is computed by dividing net income attributable to Vantiv, Inc., adjusted as necessary for the impact of potentially dilutive securities, by the weighted-average shares outstanding during the period and the impact of securities that would have a dilutive effect on earnings per share. See Note 9 - Net Income Per Share for further discussion. |
Income Taxes | Income Taxes Vantiv, Inc. is taxed as a C corporation for U.S. income tax purposes and is therefore subject to both federal and state taxation at a corporate level. Income taxes are computed in accordance with ASC 740, Income Taxes , and reflect the net tax effects of temporary differences between the financial reporting carrying amounts of assets and liabilities and the corresponding income tax amounts. The Company has deferred tax assets and liabilities and maintains valuation allowances where it is more likely than not that all or a portion of deferred tax assets will not be realized. To the extent the Company determines that it will not realize the benefit of some or all of its deferred tax assets, such deferred tax assets will be adjusted through the Company’s provision for income taxes in the period in which this determination is made. As of September 30, 2017 and December 31, 2016 , the Company had recorded no valuation allowances against deferred tax assets. The Company’s consolidated interim effective tax rate is based upon expected annual income from operations, statutory tax rates and tax laws in the various jurisdictions in which the Company operates. Significant or unusual items, including adjustments to accruals for tax uncertainties, are recognized in the quarter in which the related event occurs. The Company’s effective tax rates were 26.7% and 31.8% respectively, for the nine months ended September 30, 2017 and 2016 . The effective tax rate for each period reflects the impact of the Company’s non-controlling interests not being taxed at the statutory corporate tax rates. The effective tax rate for the nine months ended September 30, 2017 includes a $16.0 million credit to income tax expense relating to excess tax benefits as a result of the Company’s adoption of ASU 2016-09, Compensation - Stock Compensation (Topic 718) - Improvements to Employee Share-Based Payment Accounting . |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash on hand and investments with original maturities of three months or less (that are readily convertible to cash) are considered to be cash equivalents. |
Accounts Receivable—net | Accounts Receivable—net Accounts receivable primarily represent processing revenues earned but not collected. For a majority of its customers, the Company has the authority to debit the client’s bank accounts through the Federal Reserve’s Automated Clearing House; as such, collectibility is reasonably assured. The Company records a reserve for doubtful accounts when it is probable that the accounts receivable will not be collected. The Company reviews historical loss experience and the financial position of its customers when estimating the allowance. As of September 30, 2017 and December 31, 2016 , the allowance for doubtful accounts was not material to the Company’s statements of financial position. |
Customer Incentives | Customer Incentives Customer incentives represent signing bonuses paid to customers. Customer incentives are paid in connection with the acquisition or renewal of customer contracts, and are therefore deferred and amortized using the straight-line method based on the contractual agreement. Related amortization is recorded as contra-revenue. |
Property and Equipment—net | Property, Equipment and Software—net Property, equipment and software consists of the Company’s facilities, furniture and equipment, software, land and leasehold improvements. These facilities, furniture and equipment and software are depreciated on a straight-line basis over their respective useful lives, which are 15 to 40 years for the Company’s facilities and related improvements, 2 to 10 years for furniture and equipment, 3 to 8 years for software and 3 to 10 years for leasehold improvements or the lesser of the estimated useful life of the improvement or the term of the lease. Also included in property, equipment and software is work in progress consisting of costs associated with software developed for internal use which has not yet been placed in service. Accumulated depreciation as of September 30, 2017 and December 31, 2016 was $379.0 million and $309.7 million , respectively. The Company capitalizes certain costs related to computer software developed for internal use and amortizes such costs on a straight-line basis over an estimated useful life of 5 to 8 years. Research and development costs incurred prior to establishing technological feasibility are charged to operations as such costs are incurred. Once technological feasibility has been established, costs are capitalized until the software is placed in service, at which time the Company begins to amortize such costs over their estimated useful life. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets In accordance with ASC 350, Intangibles—Goodwill and Other , the Company tests goodwill for impairment for each reporting unit on an annual basis, or when events occur or circumstances indicate the fair value of a reporting unit is below its carrying value. If the fair value of a reporting unit is less than its carrying value, an impairment loss is recorded to the extent that fair value of the goodwill within the reporting unit is less than its carrying value. The Company performed its most recent annual goodwill impairment test for all reporting units as of July 31, 2017 using market data and discounted cash flow analyses. Based on this analysis, it was determined that the fair value of all reporting units were substantially in excess of the carrying value. There have been no other events or changes in circumstances subsequent to the testing date that would indicate impairment of these reporting units as of September 30, 2017 . Intangible assets consist of acquired customer relationships, trade names, customer portfolios and related assets that are amortized over their estimated useful lives. The Company reviews finite lived intangible assets for possible impairment whenever events or changes in circumstances indicate that carrying amounts may not be recoverable. As of September 30, 2017 , there have been no such events or circumstances that would indicate potential impairment of finite lived intangible assets. |
Settlement Assets and Obligations | Settlement Assets and Obligations Settlement assets and obligations result from Financial Institution Services when funds are transferred from or received by the Company prior to receiving or paying funds to a different entity. This timing difference results in a settlement asset or obligation. The amounts are generally collected or paid the following business day. The settlement assets and obligations recorded by Merchant Services represent intermediary balances due to differences between the amount the Sponsoring Member receives from the card associations and the amount funded to the merchants. Such differences arise from timing differences, interchange expenses, merchant reserves and exception items. In addition, certain card associations limit the Company from accessing or controlling merchant settlement funds and, instead, require that these funds be controlled by the Sponsoring Member. The Company follows a net settlement process whereby, if the settlement received from the card associations precedes the funding obligation to the merchant, the Company temporarily records a corresponding liability. Conversely, if the funding obligation to the merchant precedes the settlement from the card associations, the amount of the net receivable position is recorded by the Company, or in some cases, the Sponsoring Member may cover the position with its own funds in which case a receivable position is not recorded by the Company. |
Derivatives | Derivatives The Company accounts for derivatives in accordance with ASC 815, Derivatives and Hedging . This guidance establishes accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the statement of financial position at fair value. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and the hedged item will be recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portion of the change in the fair value of the derivative will be recorded in accumulated other comprehensive income (loss) (“AOCI”) and will be recognized in the statement of income when the hedged item affects earnings. The Company does not enter into derivative financial instruments for speculative purposes. |
Tax Receivable Agreements | Tax Receivable Agreements As of September 30, 2017 , the Company is party to several TRAs in which the Company agrees to make payments to various parties of 85% of the federal, state, local and foreign income tax benefits realized by the Company as a result of certain tax deductions. Payments under the TRAs will be based on the tax reporting positions of the Company and, generally, are only required to the extent the Company realizes cash savings as a result of the underlying tax attributes. Under the agreement between the Company and Fifth Third dated August 7, 2017, in certain specified circumstances, the Company may be required to make payments in excess of such cash savings. The cash savings realized by the Company are computed by comparing the actual income tax liability of the Company to the amount of such taxes the Company would have been required to pay had there been no deductions related to the tax attributes discussed below. The Company will retain the benefit of the remaining 15% of the cash savings associated with the TRAs. The Company has entered into the following three TRAs: • TRAs with investors prior to the Company’s initial public offering (“IPO”) for its use of NPC Group, Inc. net operating losses (“NOLs”) and other tax attributes existing at the IPO date (the “NPC TRA”), all of which is currently held by Fifth Third. • A TRA with Fifth Third (the “Fifth Third TRA”) in which the Company realizes tax deductions as a result of the increases in tax basis from the purchase of Vantiv Holding units or from the exchange of Vantiv Holding units for cash or shares of Class A common stock, as well as the tax benefits attributable to payments made under such TRAs. • A TRA with Mercury shareholders (the “Mercury TRA”) as part of the acquisition of Mercury as a result of the increase in tax basis of the assets of Mercury resulting from the acquisition and the use of the net operating losses and other tax attributes of Mercury that were acquired as part of the acquisition. Obligations recorded pursuant to the TRAs are based on estimates of future taxable income and future tax rates. On an annual basis, the Company evaluates the assumptions underlying the TRA obligations. In connection with the Fifth Third Exchange and share purchase as discussed in Note 6 - Controlling and Non-controlling Interests, the Company recorded a liability of approximately $647.5 million during the quarter ending September 30, 2017 under the tax receivable agreements the Company entered into with Fifth Third Bank at the time of its initial public offering. This liability is based on the closing share price of the Company’s Class A common stock on August 4, 2017. In 2016, the Company entered into a purchase addendum in connection with the Company’s TRA with Fifth Third (the “Fifth Third TRA Addendum”) to terminate and settle a portion of the Company’s obligations owed to Fifth Third under the Fifth Third TRA and the NPC TRA. Under the terms of the Fifth Third TRA Addendum, the Company paid approximately $116.3 million to Fifth Third to settle approximately $330.7 million of obligations under the Fifth Third TRA, the difference of which was recorded as an addition to paid-in capital, net of deferred taxes. In addition to the 2016 Fifth Third TRA settlement discussed above, as of September 30, 2017, the Fifth Third TRA Addendum provides that the Company may be obligated to pay up to a total of approximately $123.9 million to Fifth Third to terminate and settle certain remaining obligations under the Fifth Third TRA and the NPC TRA, totaling an estimated $275.8 million , the difference of which will be recorded as an addition to paid-in capital upon the exercise of the Call Options or Put Options discussed below. In March, June and September 2017, the Company made payments of $15.1 million , $15.6 million , and $16.1 million , respectively, pursuant to the Fifth Third TRA Holders under the terms of the Fifth Third TRA Addendum. These payments resulted in a net gain recorded in equity of approximately $45.3 million after taxes. As of September 30, 2017, the following are the remaining terms of the Fifth Third TRA Addendum. Beginning December 1, 2017, March 1, 2018, June 1, 2018, September 1, 2018 and December 1, 2018, and ending December 10, 2017, March 10, 2018, June 10, 2018, September 10, 2018 and December 10, 2018, respectively, the Company is granted call options (collectively, the “Call Options”) pursuant to which certain additional obligations of the Company under the Fifth Third TRA and the NPC TRA would be terminated and settled in consideration for cash payments of $16.6 million , $25.6 million , $26.4 million , $27.2 million and $28.1 million , respectively. Under the remaining terms of the Fifth Third TRA Addendum, in the unlikely event the Company does not exercise the relevant Call Option, Fifth Third is granted put options beginning December 20, 2017, March 20, 2018, June 20, 2018, September 20, 2018 and December 20, 2018, and ending December 31, 2017, March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018, respectively (collectively, the “Put Options”), pursuant to which certain additional obligations of the Company would be terminated and settled in consideration for cash payments with similar amounts to the Call Options. The full carrying amount of the Fifth Third callable/puttable TRA obligations for the options exercisable within 12 months of the balance sheet date have been classified as current obligations in the accompanying balance sheet ( $216.8 million .) Since Fifth Third is a significant stockholder, a special committee of the Company’s board of directors comprised of independent, disinterested directors authorized the TRA Addendum. During 2015, the Company entered into a Repurchase Addendum to the Mercury Tax Receivable Agreement (the “Mercury TRA Addendum”) with each of the pre-acquisition owners of Mercury ("Mercury TRA Holders"). The Mercury TRA Addendum contains the following provisions to acquire the remaining Mercury TRA: • As of September 30, 2017, the following are the remaining terms under the Mercury TRA Addendum. Beginning December 1 st of each of 2017 and 2018 , and ending June 30 th of 2018 and 2019 , respectively, the Company is granted call options (collectively, the "Call Options") pursuant to which certain additional obligations of the Company under the Mercury TRA would be terminated in consideration for cash payments of $38.0 million and $43.0 million , respectively. • In June 2017 and 2016, the Company exercised the December 2016 and December 2015 Call Options under the Mercury TRA Addendum and made the related $38.1 million and $41.4 million payments to the Mercury TRA Holders. • In the unlikely event the Company does not exercise the relevant Call Option, the Mercury TRA Holders are granted put options beginning July 10th and ending July 25th of each of 2018 and 2019, respectively (collectively, the "Put Options"), pursuant to which certain additional obligations of the Company would be terminated in consideration for cash payments with similar amounts to the Call Options. Except to the extent our obligations under the Mercury TRA, the Fifth Third TRA and the NPC TRA have been terminated and settled in full in accordance with the terms of the Mercury TRA and Fifth Third TRA Addendums, the Mercury TRA, Fifth Third TRA and the NPC TRA will each remain in effect, and the parties thereto will continue to have all rights and obligations thereunder. All TRA obligations are recorded based on the full and undiscounted amount of the expected future payments, except for the Mercury TRA which represents contingent consideration relating to an acquired business, and is recorded at fair value for financial reporting purposes (see Note 8 - Fair Value Measurements). The timing and/or amount of aggregate payments due under the TRAs outside of the call/put structures may vary based on a number of factors, including the amount and timing of the taxable income the Company generates in the future and the tax rate then applicable, the use of loss carryovers and amortizable basis. Payments under the TRAs, if necessary, are required to be made no later than January 5th of the second year immediately following the taxable year in which the obligation occurred. The Company made payments under the TRA obligations of approximately $55.7 million and $53.5 million in January 2017 and January 2016, respectively. Unless settled under the terms of the repurchase addenda, the term of the TRAs will continue until all the underlying tax benefits have been utilized or expired. |
New Accounting Pronouncements | New Accounting Pronouncements In August 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities , which amends and simplifies existing guidance to better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. This ASU is effective for the Company in the first quarter of fiscal 2019, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this principle on the Company’s consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments . The update clarifies how cash receipts and cash payments in certain transactions are presented and classified in the statement of cash flows. The effective date of this update is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The update requires retrospective application to all periods presented but may be applied prospectively if retrospective application is impracticable. The Company is currently evaluating the impact of the adoption of this principle on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU amends the existing guidance by recognizing all leases, including operating leases, with a term longer than 12 months on the balance sheet and disclosing key information about the lease arrangements. The effective date of this update is for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The update requires modified retrospective transition, which requires application of the ASU at the beginning of the earliest comparative period presented in the year of adoption. The Company is forming a project team to evaluate the impact of the adoption of this principle on the Company’s consolidated financial statements. The Company anticipates adopting this ASU on January 1, 2019. In May 2014, the FASB issued ASU 2014-09, Revenue From Contracts With Customers . The ASU supersedes the revenue recognition requirements in ASC 605, Revenue Recognition . The new standard provides a five-step analysis of transactions to determine when and how revenue is recognized, based upon the core principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard also requires additional disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard, as amended, is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The amendment allows companies to use either a full retrospective or a modified retrospective approach to adopt this ASU. The Company has formed a project team and is currently assessing the impact of the adoption of this principle on the Company’s consolidated financial statements. Based on the Company’s analysis to date, the Company does not anticipate material changes to the amount and timing of its revenue recognition. The Company expects the primary impact to result from the requirement to capitalize and amortize costs to obtain and fulfill a contract, which are currently expensed as incurred. This analysis is subject to change as the Company continues to refine its assessment of the standard. The Company anticipates adopting this ASU on January 1, 2018 using the modified retrospective approach. |
BUSINESS COMBINATIONS (Tables)
BUSINESS COMBINATIONS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Paymetric Holdings, Inc. | |
Business Acquisition | |
Purchase price allocation | The preliminary purchase price allocation is as follows (in thousands): Cash acquired $ 11,864 Current assets 7,243 Property, equipment and software, net 92,121 Intangible assets 47,800 Goodwill 435,032 Other assets 67 Current liabilities (17,702 ) Deferred tax liability (24,492 ) Non-current liabilities (8,535 ) Total purchase price $ 543,398 |
Moneris Solutions, Inc. | |
Business Acquisition | |
Purchase price allocation | The preliminary purchase price allocation is as follows (in thousands): Cash acquired $ 22,851 Current assets 44,047 Property and equipment 22 Intangible assets 72,000 Goodwill 378,747 Current liabilities (65,966 ) Deferred tax liability (19,192 ) Non-current liabilities (2,881 ) Total purchase price $ 429,628 |
GOODWILL AND INTANGIBLE ASSETS
GOODWILL AND INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | Changes in the carrying amount of goodwill, by business segment, are as follows (in thousands): Merchant Services Financial Institution Services Total Balance as of December 31, 2016 $ 3,163,739 $ 574,850 $ 3,738,589 Goodwill attributable to acquisition of Moneris USA (1) 6,686 — 6,686 Goodwill attributable to acquisition of Paymetric 435,032 — 435,032 Balance as of September 30, 2017 $ 3,605,457 $ 574,850 $ 4,180,307 (1) Amount represents adjustments to goodwill associated with the acquisition of Moneris USA as a result of an update to the purchase price allocation, primarily related to revisions of certain estimates from the preliminary amounts reported as of December 31, 2016. |
Schedule of intangible assets | As of September 30, 2017 and December 31, 2016 , the Company’s finite lived intangible assets consisted of the following (in thousands): September 30, 2017 December 31, 2016 Customer relationship intangible assets $ 1,712,681 $ 1,671,581 Customer portfolios and related assets 247,935 178,480 Patents 1,217 955 1,961,833 1,851,016 Less accumulated amortization on: Customer relationship intangible assets 1,112,851 980,595 Customer portfolios and related assets 116,551 82,601 1,229,402 1,063,196 Intangible assets, net $ 732,431 $ 787,820 |
Schedule of expected amortization expense | The estimated amortization expense of intangible assets for the remainder of 2017 and the next five years is as follows (in thousands): Three months ending December 31, 2017 $ 55,393 2018 208,917 2019 192,553 2020 112,134 2021 62,906 2022 41,392 |
LONG-TERM DEBT (Tables)
LONG-TERM DEBT (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of the Company's debt | As of September 30, 2017 and December 31, 2016 , the Company’s long-term debt consisted of the following (in thousands): September 30, December 31, Term A loan, maturing in October 2021 (1) $ 2,376,773 $ 2,469,375 Term B loan, maturing in October 2023 (2) 759,263 765,000 Incremental Term B loan, maturing in August 2024 (3) 1,270,000 — Leasehold mortgage, expiring on August 10, 2021 (4) 10,131 10,131 Revolving credit facility, expiring in October 2021 (5) 359,000 — Less: Current portion of note payable and current portion of note payable to related party (140,654 ) (131,119 ) Less: Original issue discount (3,197 ) (3,631 ) Less: Debt issuance costs (39,697 ) (20,153 ) Note payable and note payable to related party $ 4,591,619 $ 3,089,603 (1) Interest at a variable base rate (LIBOR) plus a spread rate (175 basis points) (total rate of 2.99% at September 30, 2017 ) and amortizing on a basis of 1.25% per quarter during each of the first twelve quarters (March 2017 through December 2019), 1.875% per quarter during the next four quarters (March 2020 through December 2020) and 2.50% during the next three quarters (March 2021 through September 2021) with a balloon payment due at maturity. (2) Interest at a variable base rate (LIBOR) with a floor of 75 basis points plus a spread rate (250 basis points) (total rate of 3.74% at September 30, 2017 ) and amortizing on a basis of 0.25% per quarter, with a balloon payment due at maturity. (3) Interest at a variable base rate (LIBOR) plus a spread rate (225 base points) (total rate of 3.48% at September 30, 2017 ) and amortizing on a basis of 0.25% per quarter, with a balloon payment due at maturity. (4) Interest payable monthly at a fixed rate of 6.22% . |
DERIVATIVES AND HEDGING ACTIV24
DERIVATIVES AND HEDGING ACTIVITIES (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of fair value of derivative instruments | The table below presents the fair value of the Company’s derivative financial instruments designated as cash flow hedges included within the accompanying consolidated statements of financial position (in thousands): Consolidated Statement of September 30, 2017 December 31, 2016 Interest rate contracts Other current assets $ 6,829 $ 2,144 Interest rate contracts Other long-term assets 13,934 21,085 Interest rate contracts Other current liabilities 5,006 9,551 Interest rate contracts Other long-term liabilities 1,479 5,507 |
Schedule of effect of the Company's interest rate swaps on the consolidated statements of income | The table below presents the pre-tax effect of the Company’s interest rate contracts on the accompanying consolidated statements of comprehensive income for the three and nine months ended September 30, 2017 and 2016 (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Derivatives in cash flow hedging relationships: Amount of gain (loss) recognized in OCI (effective portion) (1) $ 306 $ 1,247 $ 55 $ (22,964 ) Amount of (loss) reclassified from accumulated OCI into earnings (effective portion) (1,057 ) (3,923 ) (8,377 ) (9,010 ) (1) “OCI” represents other comprehensive income. |
CONTROLLING AND NON-CONTROLLI25
CONTROLLING AND NON-CONTROLLING INTERESTS IN VANTIV HOLDING (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Noncontrolling Interest [Abstract] | |
Schedule of changes in units and related ownership interest | Changes in units and related ownership interest in Vantiv Holding are summarized as follows: Vantiv, Inc. Fifth Third Total As of December 31, 2016 161,134,831 35,042,826 196,177,657 % of ownership 82.14 % 17.86 % Fifth Third exchange of Vantiv Holding units for shares of Class A common stock 19,790,000 (19,790,000 ) — Purchase and cancellation of Class A common stock (19,790,000 ) — (19,790,000 ) Equity plan activity (1) 1,371,799 — 1,371,799 As of September 30, 2017 162,506,630 15,252,826 177,759,456 % of ownership 91.42 % 8.58 % (1) Includes stock issued under the equity plans net of Class A common stock withheld to satisfy employee tax withholding obligations upon vesting or exercise of employee equity awards and forfeitures of restricted Class A common stock awards. |
Schedule of reconciliation of net income (loss) attributable to non-controlling interest | The table below provides a reconciliation of net income attributable to non-controlling interests based on relative ownership interests as discussed above (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Net income $ 106,905 $ 87,004 $ 229,060 $ 217,913 Items not allocable to non-controlling interests: Vantiv, Inc. expenses (1) 14,219 23,628 25,095 58,019 Vantiv Holding net income $ 121,124 $ 110,632 $ 254,155 $ 275,932 Net income attributable to non-controlling interests of Fifth Third (2) $ 14,092 $ 20,155 $ 37,549 $ 50,082 Net income attributable to joint venture non-controlling interest (3) 695 553 1,731 2,470 Total net income attributable to non-controlling interests $ 14,787 $ 20,708 $ 39,280 $ 52,552 (1) Primarily represents income tax expense related to Vantiv, Inc. (2) Net income attributable to non-controlling interests of Fifth Third reflects the allocation of Vantiv Holding’s net income based on the proportionate ownership interests in Vantiv Holding held by the non-controlling unit holders. The net income attributable to non-controlling unit holders reflects the changes in ownership interests summarized in the table above. (3) Reflects net income attributable to the non-controlling interest of the joint venture. |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Fair Value Disclosures [Abstract] | |
Schedule of assets and liabilities measured at fair value on recurring basis | The following table summarizes assets and liabilities measured at fair value on a recurring basis as of September 30, 2017 and December 31, 2016 (in thousands): September 30, 2017 December 31, 2016 Fair Value Measurements Using Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets: Interest rate contracts $ — $ 20,763 $ — $ — $ 23,229 $ — Deal contingent forward — 24,365 — — — — — Liabilities: Interest rate contracts $ — $ 6,485 $ — $ — $ 15,058 $ — Mercury TRA — — 97,308 — — 147,040 |
Schedule of carrying amounts and estimated fair values for the Company's liabilities | The following table summarizes carrying amounts and estimated fair values for the Company’s financial instrument liabilities that are not reported at fair value in our consolidated statements of financial position as of September 30, 2017 and December 31, 2016 (in thousands): September 30, 2017 December 31, 2016 Carrying Amount Fair Value Carrying Amount Fair Value Liabilities: Note payable $ 4,732,273 $ 4,785,387 $ 3,220,722 $ 3,250,025 |
NET INCOME PER SHARE (Tables)
NET INCOME PER SHARE (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Earnings Per Share [Abstract] | |
Schedule of computation of basic and diluted net income per share | The following table sets forth the computation of basic and diluted net income per share (in thousands, except share data): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Basic: Net income attributable to Vantiv, Inc. $ 92,118 $ 66,296 $ 189,780 $ 165,361 Shares used in computing basic net income per share: 0 Weighted-average Class A common shares 161,465,849 155,740,660 161,205,066 155,603,265 Basic net income per share $ 0.57 $ 0.43 $ 1.18 $ 1.06 Diluted: Consolidated income before applicable income taxes $ — $ 126,328 $ — $ 319,504 Income tax expense excluding impact of non-controlling interest — 45,478 — 115,021 Net income attributable to Vantiv, Inc. $ 92,118 $ 80,850 $ 189,780 $ 204,483 Shares used in computing diluted net income per share: Weighted-average Class A common shares 161,465,849 155,740,660 161,205,066 155,603,265 Weighted-average Class B units of Vantiv Holding — 35,042,826 — 35,042,826 Warrant — 5,550,050 — 5,428,637 Stock options 739,835 506,635 706,632 547,640 Restricted stock awards, restricted stock units and employee stock purchase plan 645,508 501,998 664,275 504,203 Performance awards 31,204 — 41,809 — Diluted weighted-average shares outstanding 162,882,396 197,342,169 162,617,782 197,126,571 Diluted net income per share $ 0.57 $ 0.41 $ 1.17 $ 1.04 |
ACCUMULATED OTHER COMPREHENSI28
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |
Schedule of activity of the components of accumulated other comprehensive income (loss) | The activity of the components of accumulated other comprehensive income (loss) related to cash flow hedging and other activities for the three and nine months ended September 30, 2017 and 2016 is presented below (in thousands): Total Other Comprehensive Income (Loss) AOCI Beginning Balance Pretax Activity Tax Effect Net Activity Attributable to non-controlling interests Attributable to Vantiv, Inc. AOCI Ending Balance Three Months Ended September 30, 2017 Net change in fair value recorded in accumulated OCI $ (17,942 ) $ 306 $ (186 ) $ 120 $ 184 $ 304 $ (17,638 ) Net realized loss reclassified into earnings (a) 15,366 1,057 (366 ) 691 (90 ) 601 15,967 Net change $ (2,576 ) $ 1,363 $ (552 ) $ 811 $ 94 $ 905 $ (1,671 ) Three Months Ended September 30, 2016 Net change in fair value recorded in accumulated OCI $ (26,644 ) $ 1,247 $ (386 ) $ 861 $ (227 ) $ 634 $ (26,010 ) Net realized loss reclassified into earnings (a) 7,720 3,923 (1,212 ) 2,711 (719 ) 1,992 9,712 Net change $ (18,924 ) $ 5,170 $ (1,598 ) $ 3,572 $ (946 ) $ 2,626 $ (16,298 ) Nine Months Ended September 30, 2017 Net change in fair value recorded in accumulated OCI $ (17,819 ) $ 55 $ (101 ) $ (46 ) $ 227 $ 181 $ (17,638 ) Net realized loss reclassified into earnings (a) 11,622 8,377 (2,641 ) 5,736 (1,391 ) 4,345 15,967 Net change $ (6,197 ) $ 8,432 $ (2,742 ) $ 5,690 $ (1,164 ) $ 4,526 $ (1,671 ) Nine Months Ended September 30, 2016 Net change in fair value recorded in accumulated OCI $ (14,336 ) $ (22,964 ) $ 7,080 $ (15,884 ) $ 4,210 $ (11,674 ) $ (26,010 ) Net realized loss reclassified into earnings (a) 5,132 9,010 (2,780 ) 6,230 (1,650 ) 4,580 9,712 Net change $ (9,204 ) $ (13,954 ) $ 4,300 $ (9,654 ) $ 2,560 $ (7,094 ) $ (16,298 ) (a) The reclassification adjustment on cash flow hedge derivatives affected the following lines in the accompanying consolidated statements of income: OCI Component Affected line in the accompanying consolidated statements of income Pretax activity (1) Interest expense-net Tax effect Income tax expense OCI attributable to non-controlling interests Net income attributable to non-controlling interests (1) The three and nine months ended September 30, 2017 and 2016 reflect amounts of gain (loss) reclassified from AOCI into earnings, representing the effective portion of the hedging relationships, and are recorded in interest expense-net. |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
Segment Reporting [Abstract] | |
Schedule of results of operations for each segment | Segment profit reflects total revenue less network fees and other costs and sales and marketing costs of the segment. The Company’s CODM evaluates this metric in analyzing the results of operations for each segment. Three Months Ended September 30, 2017 Merchant Services Financial Institution Services Total Total revenue $ 916,630 $ 117,135 $ 1,033,765 Network fees and other costs 447,863 31,670 479,533 Sales and marketing 168,022 5,757 173,779 Segment profit $ 300,745 $ 79,708 $ 380,453 Three Months Ended September 30, 2016 Merchant Services Financial Institution Services Total Total revenue $ 793,860 $ 120,159 $ 914,019 Network fees and other costs 389,448 33,913 423,361 Sales and marketing 147,663 5,585 153,248 Segment profit $ 256,749 $ 80,661 $ 337,410 Nine Months Ended September 30, 2017 Merchant Services Financial Institution Services Total Total revenue $ 2,615,341 $ 345,390 $ 2,960,731 Network fees and other costs 1,311,539 94,819 1,406,358 Sales and marketing 479,628 17,454 497,082 Segment profit $ 824,174 $ 233,117 $ 1,057,291 Nine Months Ended September 30, 2016 Merchant Services Financial Institution Services Total Total revenue $ 2,251,033 $ 372,826 $ 2,623,859 Network fees and other costs 1,117,602 103,908 1,221,510 Sales and marketing 416,107 17,623 433,730 Segment profit $ 717,324 $ 251,295 $ 968,619 |
Schedule of reconciliation of total segment profit to the company's income before applicable income taxes | A reconciliation of total segment profit to the Company’s income before applicable income taxes is as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Total segment profit $ 380,453 $ 337,410 $ 1,057,291 $ 968,619 Less: Other operating costs (79,482 ) (72,162 ) (234,347 ) (219,464 ) Less: General and administrative (49,607 ) (40,727 ) (189,632 ) (133,831 ) Less: Depreciation and amortization (82,500 ) (66,086 ) (236,964 ) (199,550 ) Less: Interest expense—net (38,521 ) (27,474 ) (97,441 ) (81,321 ) Less: Non-operating expenses 21,207 (4,633 ) 13,672 (14,949 ) Income before applicable income taxes $ 151,550 $ 126,328 $ 312,579 $ 319,504 |
BASIS OF PRESENTATION AND SUM30
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Consolidation (Details) - Vantiv Holding | Sep. 30, 2017 | Dec. 31, 2016 |
Vantiv. Inc | ||
Ownership Percentage of Vantiv Holding | ||
Ownership percentage by Vantiv, Inc | 91.42% | 82.14% |
Fifth Third | ||
Ownership Percentage of Vantiv Holding | ||
Ownership percentage by noncontrolling interest | 8.58% | 17.86% |
BASIS OF PRESENTATION AND SUM31
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Share Repurchase Program (Details) - Class A Common Stock - October 2016 Authorized Share Repurchase Program - USD ($) $ in Millions | Sep. 30, 2017 | Oct. 25, 2016 |
Share Repurchase Program | ||
Stock repurchase program, authorized amount | $ 250 | |
Stock repurchase program, remaining authorized repurchase amount | $ 243 |
BASIS OF PRESENTATION AND SUM32
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Share Based Compensation (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Share-based Compensation | ||||
Excess tax benefit from compensation expense recognized | $ 1,900 | $ 16,000 | ||
Cumulative effect of accounting change | $ (491) | |||
Share-based compensation expense | $ 35,100 | $ 25,900 | ||
Paid-in Capital | ||||
Share-based Compensation | ||||
Cumulative effect of accounting change | (1,299) | |||
Retained Earnings | ||||
Share-based Compensation | ||||
Cumulative effect of accounting change | 808 | |||
Adjustments for New Accounting Pronouncement | ||||
Share-based Compensation | ||||
Impact on dilutive weighted average shares outstanding due to adoption of ASU 2016-09 | 364,000 | 412,000 | ||
Deferred Tax Asset | ||||
Share-based Compensation | ||||
Cumulative effect of accounting change | $ (500) |
BASIS OF PRESENTATION AND SUM33
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Income Taxes (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | ||||
Valuation allowance against deferred assets | $ 0 | $ 0 | $ 0 | |
Effective income tax rate | 26.70% | 31.80% | ||
Excess tax benefit from compensation expense recognized | $ 1,900,000 | $ 16,000,000 |
BASIS OF PRESENTATION AND SUM34
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Property, Equipment and Software - Net (Details) - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2016 | |
Property, Plant and Equipment | ||
Accumulated depreciation | $ 379 | $ 309.7 |
Building and improvements | Minimum | ||
Property, Plant and Equipment | ||
Estimated useful life | 15 years | |
Building and improvements | Maximum | ||
Property, Plant and Equipment | ||
Estimated useful life | 40 years | |
Furniture and equipment | Minimum | ||
Property, Plant and Equipment | ||
Estimated useful life | 2 years | |
Furniture and equipment | Maximum | ||
Property, Plant and Equipment | ||
Estimated useful life | 10 years | |
Software | Minimum | ||
Property, Plant and Equipment | ||
Estimated useful life | 3 years | |
Software | Maximum | ||
Property, Plant and Equipment | ||
Estimated useful life | 8 years | |
Leasehold improvements | Minimum | ||
Property, Plant and Equipment | ||
Estimated useful life | 3 years | |
Leasehold improvements | Maximum | ||
Property, Plant and Equipment | ||
Estimated useful life | 10 years | |
Software development | Minimum | ||
Property, Plant and Equipment | ||
Estimated useful life | 5 years | |
Software development | Maximum | ||
Property, Plant and Equipment | ||
Estimated useful life | 8 years |
BASIS OF PRESENTATION AND SUM35
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Tax Receivable Agreements (Details) - USD ($) $ in Thousands | Jul. 27, 2016 | Jan. 31, 2017 | Jan. 31, 2016 | Sep. 30, 2017 | Jun. 30, 2017 | Mar. 31, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 |
Tax receivable agreement | |||||||||
Tax receivable agreement payments as percentage of cash savings in tax | 85.00% | 85.00% | |||||||
Tax receivable agreement,cash savings percent | 15.00% | 15.00% | |||||||
Payments made to settle certain tax receivable agreements | $ 84,878 | $ 158,115 | |||||||
Equity gain from termination of certain tax receivable agreements | 45,347 | 129,538 | |||||||
TRA carrying obligation reclassified as current under Fifth Third TRA Call/Puttable Options | $ 261,844 | 261,844 | $ 191,014 | ||||||
Payments under Tax Receivable Agreements | $ 55,700 | $ 53,500 | 55,695 | 53,474 | |||||
Fifth Third | |||||||||
Tax receivable agreement | |||||||||
Payments made to settle certain tax receivable agreements | 116,300 | ||||||||
Tax receivable agreement obligations settled as a result of prepayment | $ 330,700 | ||||||||
Fifth Third | Call Option | |||||||||
Tax receivable agreement | |||||||||
Payments made to settle certain tax receivable agreements | $ 123,900 | 16,100 | $ 15,600 | $ 15,100 | |||||
Tax receivable agreement obligations settled as a result of prepayment | 275,800 | ||||||||
Equity gain from termination of certain tax receivable agreements | 45,300 | ||||||||
Q4 2017 Fifth Third TRA settlement payment under Call Options | 16,600 | ||||||||
Q1 2018 Fifth Third TRA settlement payment under Call Options | 25,600 | ||||||||
Q2 2018 Fifth Third TRA settlement payment under Call Options | 26,400 | ||||||||
Q3 2018 Fifth Third TRA settlement payment under Call Options | 27,200 | ||||||||
Q4 2018 Fifth Third TRA settlement payment under Call Options | $ 28,100 | ||||||||
TRA carrying obligation reclassified as current under Fifth Third TRA Call/Puttable Options | 216,800 | 216,800 | |||||||
Mercury Payment Systems, LLC | |||||||||
Tax receivable agreement | |||||||||
Payments under Tax Receivable Agreements | 60,500 | ||||||||
Mercury Payment Systems, LLC | Call Option | |||||||||
Tax receivable agreement | |||||||||
Payments made to settle certain tax receivable agreements | 38,100 | $ 41,400 | |||||||
2018 cash payment to terminate Mercury TRA under Call Options | 38,000 | 38,000 | |||||||
2019 cash payment to terminate Mercury TRA under Call Options | $ 43,000 | $ 43,000 |
BUSINESS COMBINATIONS (Details)
BUSINESS COMBINATIONS (Details) - USD ($) $ in Thousands | May 25, 2017 | Dec. 21, 2016 | Sep. 30, 2017 | Sep. 30, 2017 | Dec. 31, 2016 |
Purchase Price Allocation | |||||
Goodwill | $ 4,180,307 | $ 4,180,307 | $ 3,738,589 | ||
Paymetric Holdings, Inc. | |||||
Business Acquisition | |||||
Percentage of voting interests acquired | 100.00% | ||||
Business acquisition, transaction expense | $ 7,100 | ||||
Business acquisition, expected tax deductible Goodwill | $ 7,800 | ||||
Purchase Price Allocation | |||||
Cash acquired | 11,864 | ||||
Current assets | 7,243 | ||||
Property and equipment | 92,121 | ||||
Intangibles assets | 47,800 | ||||
Goodwill | 435,032 | ||||
Other assets | 67 | ||||
Current liabilities | (17,702) | ||||
Deferred tax liabilities | (24,492) | ||||
Non-current liabilities | (8,535) | ||||
Total purchase price | $ 543,398 | ||||
Moneris Solutions, Inc. | |||||
Business Acquisition | |||||
Percentage of voting interests acquired | 100.00% | ||||
Business acquisition, expected tax deductible Goodwill | $ 14,000 | ||||
Purchase Price Allocation | |||||
Cash acquired | 22,851 | ||||
Current assets | 44,047 | ||||
Property and equipment | 22 | ||||
Intangibles assets | 72,000 | ||||
Goodwill | 378,747 | ||||
Current liabilities | (65,966) | ||||
Deferred tax liabilities | (19,192) | ||||
Non-current liabilities | (2,881) | ||||
Total purchase price | 429,628 | ||||
Customer relationships intangible assets | |||||
Business Acquisition | |||||
Finite-lived intangible assets acquired, weighted average useful life | 4 years 9 months 19 days | ||||
Customer relationships intangible assets | Paymetric Holdings, Inc. | |||||
Business Acquisition | |||||
Finite-lived intangible assets acquired, weighted average useful life | 10 years | ||||
Customer relationships intangible assets | Moneris Solutions, Inc. | |||||
Business Acquisition | |||||
Finite-lived intangible assets acquired | $ 72,000 | ||||
Finite-lived intangible assets acquired, weighted average useful life | 5 years | ||||
Restricted Stock | Paymetric Holdings, Inc. | |||||
Business Acquisition | |||||
Business acquisition, fair value of replacement awards issued | $ 8,000 | ||||
Business acquisition, replacement awards attributable to pre-combination services | $ 5,900 |
GOODWILL AND INTANGIBLE ASSET37
GOODWILL AND INTANGIBLE ASSETS Goodwill (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2017USD ($) | |
Goodwill | |
Goodwill beginning balance | $ 3,738,589 |
Goodwill ending balance | 4,180,307 |
Merchant Services | |
Goodwill | |
Goodwill beginning balance | 3,163,739 |
Goodwill ending balance | 3,605,457 |
Financial Institution Services | |
Goodwill | |
Goodwill beginning balance | 574,850 |
Goodwill ending balance | 574,850 |
Moneris Solutions, Inc. | |
Goodwill | |
Goodwill, Purchase Accounting Adjustments | 6,686 |
Moneris Solutions, Inc. | Merchant Services | |
Goodwill | |
Goodwill, Purchase Accounting Adjustments | 6,686 |
Moneris Solutions, Inc. | Financial Institution Services | |
Goodwill | |
Goodwill, Purchase Accounting Adjustments | 0 |
Paymetric Holdings, Inc. | |
Goodwill | |
Goodwill, Purchase Accounting Adjustments | 435,032 |
Paymetric Holdings, Inc. | Merchant Services | |
Goodwill | |
Goodwill, Purchase Accounting Adjustments | 435,032 |
Paymetric Holdings, Inc. | Financial Institution Services | |
Goodwill | |
Goodwill, Purchase Accounting Adjustments | $ 0 |
GOODWILL AND INTANGIBLE ASSET38
GOODWILL AND INTANGIBLE ASSETS - Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Finite-Lived Intangible Assets | |||||
Finite-lived intangible assets, gross | $ 1,961,833 | $ 1,961,833 | $ 1,851,016 | ||
Finite-lived intangible assets, accumulated amortization | 1,229,402 | 1,229,402 | 1,063,196 | ||
Intangible assets—net | 732,431 | 732,431 | 787,820 | ||
Amortization expense on finite lived intangible assets | 55,200 | $ 49,700 | 166,500 | $ 149,000 | |
Estimate amortization expense of finite lived intangible assets for the next five years | |||||
Six months ending December 31, 2017 | 55,393 | 55,393 | |||
2,018 | 208,917 | 208,917 | |||
2,019 | 192,553 | 192,553 | |||
2,020 | 112,134 | 112,134 | |||
2,021 | 62,906 | 62,906 | |||
2,022 | 41,392 | 41,392 | |||
Customer relationships intangible assets | |||||
Finite-Lived Intangible Assets | |||||
Finite-lived intangible assets, gross | 1,712,681 | 1,712,681 | 1,671,581 | ||
Finite-lived intangible assets, accumulated amortization | 1,112,851 | $ 1,112,851 | 980,595 | ||
Acquired customer portfolio and related assets weighted average useful life | 4 years 9 months 19 days | ||||
Customer Portfolios and related assets | |||||
Finite-Lived Intangible Assets | |||||
Finite-lived intangible assets, gross | 247,935 | $ 247,935 | 178,480 | ||
Finite-lived intangible assets, accumulated amortization | 116,551 | 116,551 | 82,601 | ||
Patents | |||||
Finite-Lived Intangible Assets | |||||
Finite-lived intangible assets, gross | $ 1,217 | $ 1,217 | $ 955 |
LONG-TERM DEBT (Details)
LONG-TERM DEBT (Details) - USD ($) $ in Thousands | Aug. 07, 2017 | Oct. 14, 2016 | Sep. 30, 2017 | Dec. 31, 2016 | |
Long-term debt | |||||
Less: Current portion of note payable and current portion of note payable to related party | $ (140,654) | $ (131,119) | |||
Less: Original issue discount | (3,197) | (3,631) | |||
Less: Debt issuance costs | (39,697) | (20,153) | |||
Note payable and note payable to related party | 4,591,619 | 3,089,603 | |||
Term A loan | |||||
Long-term debt | |||||
Long-term debt, gross | [1] | 2,376,773 | 2,469,375 | ||
Term A loan first twelve quarters amortization percentage | 1.25% | ||||
Term A loan next four quarters amortization percentage | 1.875% | ||||
Term A loan following three quarters amortization percentage | 2.50% | ||||
Term B loan | |||||
Long-term debt | |||||
Long-term debt, gross | [2] | 759,263 | 765,000 | ||
Term B loan amortization percentage | 0.25% | ||||
Incremental Term B Loan | |||||
Long-term debt | |||||
Long-term debt, gross | [3] | 1,270,000 | |||
Term B loan amortization percentage | 0.25% | ||||
Leasehold Mortgage for corporate headquarters | |||||
Long-term debt | |||||
Long-term debt, gross | [4] | $ 10,131 | $ 10,131 | ||
Leasehold mortgage interest rate (as a percent) | 6.22% | ||||
Revolving credit facility | |||||
Long-term debt | |||||
Revolving credit facility | [5] | $ 359,000 | |||
LIBOR | Term A loan | |||||
Long-term debt | |||||
Spread rate (as a percent) | 1.75% | ||||
Interest rate (as a percent) | 2.99% | ||||
LIBOR | Term B loan | |||||
Long-term debt | |||||
Spread rate (as a percent) | 2.50% | ||||
Interest rate (as a percent) | 3.74% | ||||
LIBOR | Incremental Term B Loan | |||||
Long-term debt | |||||
Spread rate (as a percent) | 2.25% | ||||
Interest rate (as a percent) | 3.48% | ||||
LIBOR | Revolving credit facility | |||||
Long-term debt | |||||
Revolving credit facility | $ 100,000 | ||||
Spread rate (as a percent) | 1.75% | ||||
Interest rate (as a percent) | 2.95% | ||||
Prime Rate | Revolving credit facility | |||||
Long-term debt | |||||
Revolving credit facility | $ 259,000 | ||||
Spread rate (as a percent) | 0.75% | ||||
Interest rate (as a percent) | 5.00% | ||||
Minimum | LIBOR | Term B loan | |||||
Long-term debt | |||||
Spread rate (as a percent) | 0.75% | ||||
[1] | Interest at a variable base rate (LIBOR) plus a spread rate (175 basis points) (total rate of 2.99% at September 30, 2017) and amortizing on a basis of 1.25% per quarter during each of the first twelve quarters (March 2017 through December 2019), 1.875% per quarter during the next four quarters (March 2020 through December 2020) and 2.50% during the next three quarters (March 2021 through September 2021) with a balloon payment due at maturity. | ||||
[2] | Interest at a variable base rate (LIBOR) with a floor of 75 basis points plus a spread rate (250 basis points) (total rate of 3.74% at September 30, 2017) and amortizing on a basis of 0.25% per quarter, with a balloon payment due at maturity. | ||||
[3] | Interest at a variable base rate (LIBOR) plus a spread rate (225 base points) (total rate of 3.48% at September 30, 2017) and amortizing on a basis of 0.25% per quarter, with a balloon payment due at maturity. | ||||
[4] | Interest payable monthly at a fixed rate of 6.22%. | ||||
[5] | $100 million revolving credit facility borrowing interest at a variable base rate (LIBOR) plus a spread rate (175 basis points) (total rate of 2.95% at September 30, 2017); $259 million revolving credit facility borrowing interest at a variable base rate (Prime) with a spread rate (75 basis points) (total rate of 5.0% at September 30, 2017). |
LONG-TERM DEBT Narrative (Deta
LONG-TERM DEBT Narrative (Details) - USD ($) $ in Thousands | Aug. 07, 2017 | Oct. 14, 2016 | Sep. 30, 2017 | Dec. 31, 2016 | |
Long-term debt | |||||
Percentage of capital stock of the entity's domestic and foreign subsidiaries pledged as collateral for borrowings | 65.00% | ||||
Minimum aggregate value of real property held by obligors provided as security on first priority basis | $ 25,000 | ||||
Term A loan | Fifth Third | |||||
Long-term debt | |||||
Note Payable to related party | 177,700 | $ 151,100 | |||
Revolving credit facility | |||||
Long-term debt | |||||
Maximum borrowing capacity | $ 650,000 | ||||
Commitment fees (as a percent) | 0.25% | ||||
Revolving credit facility outstanding balance | [1] | 359,000 | |||
Incremental Term B Loan | |||||
Long-term debt | |||||
Term loans, face amount | $ 1,270,000 | ||||
Incremental Term B Loans, term | 7 years | ||||
Deferred financing fees on issuance of incremental term B loans | $ 23,100 | ||||
Swing line credit facility | |||||
Long-term debt | |||||
Maximum borrowing capacity | $ 100,000 | ||||
Letter of credit facility | |||||
Long-term debt | |||||
Maximum borrowing capacity | 40,000 | ||||
October 2016 debt refinancing | Term A loan | |||||
Long-term debt | |||||
Term loans, face amount | 2,500,000 | ||||
October 2016 debt refinancing | Term B loan | |||||
Long-term debt | |||||
Term loans, face amount | $ 765,000 | ||||
Leverage Ratio Greater than 3.75 | Revolving credit facility | |||||
Long-term debt | |||||
Commitment fees (as a percent) | 0.375% | ||||
[1] | $100 million revolving credit facility borrowing interest at a variable base rate (LIBOR) plus a spread rate (175 basis points) (total rate of 2.95% at September 30, 2017); $259 million revolving credit facility borrowing interest at a variable base rate (Prime) with a spread rate (75 basis points) (total rate of 5.0% at September 30, 2017). |
DERIVATIVES AND HEDGING ACTIV41
DERIVATIVES AND HEDGING ACTIVITIES (Details) $ in Thousands, £ in Millions | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017GBP (£) | Sep. 30, 2017USD ($) | Dec. 31, 2016USD ($) | ||
Cash flow hedges of interest rate risk | ||||||||
Cash flow hedge loss to be reclassified within twelve months | $ 4,500 | |||||||
Derivatives in cash flow hedging relationships: | ||||||||
Amount of (loss) recognized in OCI (effective portion) | [1] | $ 306 | $ 1,247 | 55 | $ (22,964) | |||
Amount of (loss) reclassified from accumulated OCI into earnings (effective portion) | $ (1,057) | $ (3,923) | (8,377) | (9,010) | ||||
Aggregate fair value of derivatives in a net liability position | $ 6,800 | |||||||
Derivative instruments not designated as hedging instruments | ||||||||
Unrealized gain on deal contingent forward | 24,365 | $ 0 | ||||||
Other current assets | ||||||||
Fair value of interest rate contracts designated as cash flow hedges | ||||||||
Fair value of interest rate cap agreements | 6,829 | $ 2,144 | ||||||
Other long-term assets | ||||||||
Fair value of interest rate contracts designated as cash flow hedges | ||||||||
Fair value of interest rate cap agreements | 13,934 | 21,085 | ||||||
Other current liabilities | ||||||||
Fair value of interest rate contracts designated as cash flow hedges | ||||||||
Fair value of hedge liabilities | 5,006 | 9,551 | ||||||
Other long-term liabilities | ||||||||
Fair value of interest rate contracts designated as cash flow hedges | ||||||||
Fair value of hedge liabilities | $ 1,479 | $ 5,507 | ||||||
Interest rate cap | ||||||||
Cash flow hedges of interest rate risk | ||||||||
Number of interest rate derivatives held | 6 | 6 | ||||||
Notional amount | $ 1,000,000 | |||||||
Interest rate cap agreement strike rate | 0.75% | 0.75% | ||||||
Fair value of interest rate contracts designated as cash flow hedges | ||||||||
Fair value of interest rate cap agreements | $ 20,800 | |||||||
Interest rate swaps | ||||||||
Cash flow hedges of interest rate risk | ||||||||
Number of interest rate derivatives held | 4 | 4 | ||||||
Notional amount | $ 500,000 | |||||||
Interest rate swaps | Fifth Third | ||||||||
Cash flow hedges of interest rate risk | ||||||||
Number of interest rate derivatives held | 2 | 2 | ||||||
January 2017 through January 2018 | Interest rate swaps | Fifth Third | ||||||||
Cash flow hedges of interest rate risk | ||||||||
Notional amount | $ 250,000 | |||||||
January 2018 through January 2019 | Interest rate swaps | Fifth Third | ||||||||
Cash flow hedges of interest rate risk | ||||||||
Notional amount | 250,000 | |||||||
Not Designated as Hedging Instrument | Forward Contracts | ||||||||
Cash flow hedges of interest rate risk | ||||||||
Notional amount | £ | £ 1,150 | |||||||
Derivative instruments not designated as hedging instruments | ||||||||
Fair value of foreign currency forward contract | $ 24,400 | |||||||
Unrealized gain on deal contingent forward | $ 24,400 | |||||||
[1] | “OCI” represents other comprehensive income. |
CONTROLLING AND NON-CONTROLLI42
CONTROLLING AND NON-CONTROLLING INTERESTS OWNERSHIP INTEREST IN JOINT VENTURE (Details) | May 31, 2014 | Mar. 21, 2012 |
Joint Venture | ||
Controlling and non-controlling interest in Joint Venture | ||
Ownership percentage by Vantiv, Inc | 51.00% | |
Bank Partner | Joint Venture | ||
Controlling and non-controlling interest in Joint Venture | ||
Ownership percentage by noncontrolling interest | 49.00% | |
Common Stock | ||
Controlling and non-controlling interest in Joint Venture | ||
Conversion ratio for conversion of LLC units into common stock | 1 |
CONTROLLING AND NON-CONTROLLI43
CONTROLLING AND NON-CONTROLLING INTERESTS IN VANTIV HOLDING (Details) - USD ($) $ / shares in Units, $ in Thousands | Aug. 07, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Aug. 04, 2017 | |
Vantiv Holding net income, Including Portion Attributable to Noncontrolling Interest [Abstract] | |||||||
Net income | $ 106,905 | $ 87,004 | $ 229,060 | $ 217,913 | |||
Items not allocable to non-controlling interests: | |||||||
Vantiv, Inc. expense | [1] | 14,219 | 23,628 | 25,095 | 58,019 | ||
Net income attributable to Vantiv Holding | 121,124 | 110,632 | 254,155 | 275,932 | |||
Net Income Attributable to Noncontrolling Interest | |||||||
Net income attributable to non-controlling interests | 14,787 | 20,708 | 39,280 | 52,552 | |||
Fifth Third | |||||||
Net Income Attributable to Noncontrolling Interest | |||||||
Net income attributable to non-controlling interests | [2] | 14,092 | 20,155 | 37,549 | 50,082 | ||
Bank Partner | |||||||
Net Income Attributable to Noncontrolling Interest | |||||||
Net income attributable to non-controlling interests | [3] | $ 695 | $ 553 | $ 1,731 | $ 2,470 | ||
Vantiv Holding | |||||||
Changes in units and related ownership interest | |||||||
Beginning balance (in shares) | 196,177,657 | ||||||
Purchase and Cancellation of Class A common stock, share | (19,790,000) | ||||||
Equity plan activity | [1] | 1,371,799 | |||||
Ending balance (in shares) | 177,759,456 | 177,759,456 | |||||
Vantiv Holding | Vantiv. Inc | |||||||
Changes in units and related ownership interest | |||||||
Beginning balance (in shares) | 161,134,831 | ||||||
Opening percentage of ownership by Vantiv, Inc. | 82.14% | ||||||
Stock Issued During Period, Shares, Conversion of Units | 19,790,000 | ||||||
Purchase and Cancellation of Class A common stock, share | (19,790,000) | ||||||
Equity plan activity | [4] | 1,371,799 | |||||
Ending balance (in shares) | 162,506,630 | 162,506,630 | |||||
Closing percentage of ownership by Vantiv, Inc. | 91.42% | 91.42% | |||||
Vantiv Holding | Fifth Third | |||||||
Changes in units and related ownership interest | |||||||
Beginning balance (in shares) | 35,042,826 | ||||||
Opening percentage of ownership by noncontrolling interest | 17.86% | ||||||
Purchase and Cancellation of Class A common stock, share | (19,790,000) | ||||||
Ending balance (in shares) | 15,252,826 | 15,252,826 | |||||
Closing percentage of ownership by noncontrolling interest | 8.58% | 8.58% | |||||
Class A Common Stock | |||||||
Changes in units and related ownership interest | |||||||
Beginning balance (in shares) | 161,134,831 | ||||||
Stock Issued During Period, Shares, Conversion of Units | 19,790,000 | ||||||
Ending balance (in shares) | 162,506,630 | 162,506,630 | |||||
Class B Common Stock | |||||||
Controlling and non-controlling interests in Vantiv Holding | |||||||
Sale of Stock, Price Per Share | $ 64.04 | ||||||
Changes in units and related ownership interest | |||||||
Beginning balance (in shares) | 35,042,826 | ||||||
Purchase and Cancellation of Class A common stock, share | (19,790,000) | ||||||
Ending balance (in shares) | 15,252,826 | 15,252,826 | |||||
Common Stock | Class A Common Stock | |||||||
Changes in units and related ownership interest | |||||||
Beginning balance (in shares) | 161,135,000 | 155,488,000 | |||||
Purchase and Cancellation of Class A common stock, share | (457,000) | ||||||
Ending balance (in shares) | 162,507,000 | 156,288,000 | 162,507,000 | 156,288,000 | |||
Common Stock | Class B Common Stock | |||||||
Changes in units and related ownership interest | |||||||
Beginning balance (in shares) | 35,043,000 | 35,043,000 | |||||
Purchase and Cancellation of Class A common stock, share | (19,790,000) | ||||||
Ending balance (in shares) | 15,253,000 | 35,043,000 | 15,253,000 | 35,043,000 | |||
[1] | Primarily represents income tax expense related to Vantiv, Inc | ||||||
[2] | Net income attributable to non-controlling interests of Fifth Third reflects the allocation of Vantiv Holding’s net income based on the proportionate ownership interests in Vantiv Holding held by the non-controlling unit holders. The net income attributable to non-controlling unit holders reflects the changes in ownership interests summarized in the table above. | ||||||
[3] | Reflects net income attributable to the non-controlling interest of the joint venture | ||||||
[4] | Includes stock issued under the equity plans net of Class A common stock withheld to satisfy employee tax withholding obligations upon vesting or exercise of employee equity awards and forfeitures of restricted Class A common stock awards. |
COMMITMENTS, CONTINGENCIES AN44
COMMITMENTS, CONTINGENCIES AND GUARANTEES (Details) $ in Millions | 3 Months Ended |
Mar. 31, 2017USD ($) | |
Commitments and Contingencies Disclosure [Abstract] | |
Pre-existing litigation of an acquired company | $ 38 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Jan. 31, 2017 | Jan. 31, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Assets and liabilities measured at fair value on a recurring basis | |||||||
Payments of Mercury TRA | $ 55,700 | $ 53,500 | $ 55,695 | $ 53,474 | |||
Recurring basis | Level 2 | Interest Rate Contract | |||||||
Assets: | |||||||
Fair value of interest rate contracts | $ 20,763 | 20,763 | $ 23,229 | ||||
Liabilities: | |||||||
Fair value of hedge liabilities | 6,485 | 6,485 | $ 15,058 | ||||
Recurring basis | Level 2 | Forward Contracts | |||||||
Assets: | |||||||
Fair value of deal contingent forward | 24,365 | 24,365 | |||||
Mercury Payment Systems, LLC | |||||||
Assets and liabilities measured at fair value on a recurring basis | |||||||
Change in fair value of TRA | 3,100 | $ 4,600 | 10,700 | $ 14,900 | |||
Payments of Mercury TRA | $ 60,500 | ||||||
Mercury Payment Systems, LLC | Recurring basis | Level 3 | |||||||
Assets and liabilities measured at fair value on a recurring basis | |||||||
Fair value of Mercury TRA, discount rate | 14.00% | 14.00% | |||||
Liabilities: | |||||||
Fair value of Mercury TRA | $ 97,308 | $ 97,308 | $ 147,040 |
FAIR VALUE OF THE COMPANY'S LIA
FAIR VALUE OF THE COMPANY'S LIABILITIES (Details) - USD ($) $ in Thousands | Sep. 30, 2017 | Dec. 31, 2016 |
Carrying amount | ||
Liabilities | ||
Notes payable | $ 4,732,273 | $ 3,220,722 |
Fair value | ||
Liabilities | ||
Notes payable | $ 4,785,387 | $ 3,250,025 |
NET INCOME PER SHARE NARRATIVE
NET INCOME PER SHARE NARRATIVE (Details) - shares | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Class A Common Stock | |||||
Earnings Per Share | |||||
Weighted-average Class B units of Vantiv Holding dilutive effect (in shares) | 23,600,000 | 35,042,826 | 31,200,000 | 35,042,826 | |
Vantiv Holding units outstanding (in units) | 162,506,630 | 162,506,630 | 161,134,831 | ||
Class B Units of Vantiv Holding | |||||
Earnings Per Share | |||||
Vantiv Holding units outstanding (in units) | 15,300,000 | 35,000,000 | 15,300,000 | 35,000,000 | |
Subsidiaries | Class B Units of Vantiv Holding | Class A Common Stock | |||||
Earnings Per Share | |||||
Conversion ratio for conversion of Class B units into Class A common stock | 1 | 1 |
NET INCOME PER SHARE (Basic) (D
NET INCOME PER SHARE (Basic) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Earnings Per Share, Basic | ||||
Net income attributable to Vantiv, Inc. | $ 92,118 | $ 66,296 | $ 189,780 | $ 165,361 |
Class A Common Stock | ||||
Earnings Per Share, Basic | ||||
Weighted-average Class A common shares, basic (in shares) | 161,465,849 | 155,740,660 | 161,205,066 | 155,603,265 |
Basic net income per share (in dollars per share) | $ 0.57 | $ 0.43 | $ 1.18 | $ 1.06 |
NET INCOME PER SHARE (Dilutive)
NET INCOME PER SHARE (Dilutive) (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Earnings Per Share, Diluted | ||||
Consolidated income before applicable income taxes | $ 151,550 | $ 126,328 | $ 312,579 | $ 319,504 |
Income tax expense excluding impact of non-controlling interest | 45,478 | 115,021 | ||
Net income attributable to Vantiv, Inc. | $ 92,118 | $ 80,850 | $ 189,780 | $ 204,483 |
Class A Common Stock | ||||
Earnings Per Share, Diluted | ||||
Weighted-average Class A common shares, basic (in shares) | 161,465,849 | 155,740,660 | 161,205,066 | 155,603,265 |
Weighted-average Class B units of Vantiv Holding dilutive effect (in shares) | 23,600,000 | 35,042,826 | 31,200,000 | 35,042,826 |
Warrant dilutive effect (in shares) | 5,550,050 | 5,428,637 | ||
Total diluted weighted-average shares outstanding (in shares) | 162,882,396 | 197,342,169 | 162,617,782 | 197,126,571 |
Diluted net income per share (in dollars per share) | $ 0.57 | $ 0.41 | $ 1.17 | $ 1.04 |
Class A Common Stock | Stock Options | ||||
Earnings Per Share, Diluted | ||||
Class A common stock equivalents included in the computation of diluted net income per share | 739,835 | 506,635 | 706,632 | 547,640 |
Class A Common Stock | Stock Compensation Plan | ||||
Earnings Per Share, Diluted | ||||
Class A common stock equivalents included in the computation of diluted net income per share | 645,508 | 501,998 | 664,275 | 504,203 |
Class A Common Stock | Performance Awards | ||||
Earnings Per Share, Diluted | ||||
Class A common stock equivalents included in the computation of diluted net income per share | 31,204 | 41,809 |
ACCUMULATED OTHER COMPREHENSI50
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||||||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2016 | Dec. 31, 2015 | ||
Net change | $ 811 | $ 3,572 | $ 5,690 | $ (9,654) | |||||
AOCI beginning balance, net of tax | (6,197) | ||||||||
AOCI ending balance, net of tax | (1,671) | (1,671) | |||||||
Balance, net | 617,105 | 1,572,214 | 617,105 | 1,572,214 | $ 1,607,289 | $ 1,225,066 | |||
Accumulated Net Gain (Loss) from Cash Flow Hedges | |||||||||
AOCI beginning balance, net of tax | (17,942) | (26,644) | (17,819) | (14,336) | |||||
AOCI ending balance, net of tax | (17,638) | (26,010) | (17,638) | (26,010) | |||||
AOCI Including Portion Attributable to Noncontrolling Interest | |||||||||
Net change in fair value recorded in accumulated OCI, before reclassifications, before tax | 306 | 1,247 | 55 | (22,964) | |||||
Net realized loss reclassified into earnings, before tax | [1] | 1,057 | 3,923 | 8,377 | 9,010 | ||||
Total pretax activity | 1,363 | 5,170 | 8,432 | (13,954) | |||||
Net change in fair value recorded in accumulated OCI, before reclassifications, tax | (186) | (386) | (101) | 7,080 | |||||
Net realized loss reclassified into earnings, tax | [1] | (366) | (1,212) | (2,641) | (2,780) | ||||
Tax effect | (552) | (1,598) | (2,742) | 4,300 | |||||
Other comprehensive loss, unrealized loss, net of tax | 120 | 861 | (46) | (15,884) | |||||
Net realized loss reclassified into earnings, net of tax | [1] | 691 | 2,711 | 5,736 | 6,230 | ||||
Net change | 811 | 3,572 | 5,690 | (9,654) | |||||
Non-Controlling Interests | |||||||||
Other comprehensive loss, unrealized loss, net of tax | (184) | 227 | (227) | (4,210) | |||||
Net realized loss reclassified into earnings, net of tax | [1] | 90 | 719 | 1,391 | 1,650 | ||||
Net change | (94) | 946 | 1,164 | (2,560) | |||||
Balance, net | 58,937 | 310,493 | 58,937 | 310,493 | 291,624 | 272,278 | |||
AOCI Attributable to Parent | |||||||||
Other comprehensive loss, unrealized loss, net of tax | 304 | 634 | 181 | (11,674) | |||||
Net realized loss reclassified into earnings, net of tax | [1] | 601 | 1,992 | 4,345 | 4,580 | ||||
Net change | 905 | 2,626 | 4,526 | (7,094) | |||||
Balance, net | (1,671) | (16,298) | (1,671) | (16,298) | $ (2,576) | $ (6,197) | $ (18,924) | $ (9,204) | |
Reclassification out of Accumulated Other Comprehensive Income | |||||||||
AOCI beginning balance, net of tax | [1] | 15,366 | 7,720 | 11,622 | 5,132 | ||||
AOCI ending balance, net of tax | [1] | $ 15,967 | $ 9,712 | $ 15,967 | $ 9,712 | ||||
[1] | The reclassification adjustment on cash flow hedge derivatives affected the following lines in the accompanying consolidated statements of income: OCI Component Affected line in the accompanying consolidated statements of incomePretax activity(1) Interest expense-netTax effect Income tax expenseOCI attributable to non-controlling interests Net income attributable to non-controlling interests (1) The three and nine months ended September 30, 2017 and 2016 reflect amounts of gain (loss) reclassified from AOCI into earnings, representing the effective portion of the hedging relationships, and are recorded in interest expense-net. |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Result of operation for each segment | ||||
Total revenue | $ 1,033,765 | $ 914,019 | $ 2,960,731 | $ 2,623,859 |
Network fees and other costs | 479,533 | 423,361 | 1,406,358 | 1,221,510 |
Sales and marketing | 173,779 | 153,248 | 497,082 | 433,730 |
Segment profit | 380,453 | 337,410 | 1,057,291 | 968,619 |
Operating Segments | Merchant Services | ||||
Result of operation for each segment | ||||
Total revenue | 916,630 | 793,860 | 2,615,341 | 2,251,033 |
Network fees and other costs | 447,863 | 389,448 | 1,311,539 | 1,117,602 |
Sales and marketing | 168,022 | 147,663 | 479,628 | 416,107 |
Segment profit | 300,745 | 256,749 | 824,174 | 717,324 |
Operating Segments | Financial Institution Services | ||||
Result of operation for each segment | ||||
Total revenue | 117,135 | 120,159 | 345,390 | 372,826 |
Network fees and other costs | 31,670 | 33,913 | 94,819 | 103,908 |
Sales and marketing | 5,757 | 5,585 | 17,454 | 17,623 |
Segment profit | $ 79,708 | $ 80,661 | $ 233,117 | $ 251,295 |
SEGMENT INFORMATION (Details 2)
SEGMENT INFORMATION (Details 2) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Reconciliation of total segment profit to the company's income before applicable income taxes | ||||
Total segment profit | $ 380,453 | $ 337,410 | $ 1,057,291 | $ 968,619 |
Less: Other operating costs | (79,482) | (72,162) | (234,347) | (219,464) |
Less: General and administrative | (49,607) | (40,727) | (189,632) | (133,831) |
Less: Depreciation and amortization | (82,500) | (66,086) | (236,964) | (199,550) |
Less: Interest expense—net | (38,521) | (27,474) | (97,441) | (81,321) |
Less: Non-operating expenses | (21,207) | 4,633 | (13,672) | 14,949 |
Income before applicable income taxes | $ 151,550 | $ 126,328 | $ 312,579 | $ 319,504 |
PENDING WORLDPAY TRANSACTION (D
PENDING WORLDPAY TRANSACTION (Details) £ / shares in Units, $ in Thousands | Oct. 03, 2017USD ($) | Sep. 08, 2017USD ($) | Aug. 09, 2017USD ($) | Aug. 07, 2017USD ($) | Oct. 14, 2016USD ($) | Sep. 30, 2017USD ($)shares | Jan. 31, 2018GBP (£)£ / sharesshares | Oct. 23, 2017£ / shares | Aug. 08, 2017 | Dec. 31, 2016USD ($)shares | |
Worldpay Group, PLC | |||||||||||
Subsequent Event | |||||||||||
Minimum percent value of shareholder approval to the Worldpay acquisition | 75.00% | ||||||||||
Worldpay Group, PLC | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Amount of cash payable to Worldpay shareholders upon acquisition, | £ | £ 0.55 | ||||||||||
Class A Common Stock | |||||||||||
Subsequent Event | |||||||||||
Common stock, shares outstanding (in shares) | shares | 162,506,630 | 161,134,831 | |||||||||
Class A Common Stock | Worldpay Group, PLC | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Number of Vantiv shares payable to Worldpay shareholders upon acquisition | shares | 0.0672 | ||||||||||
Worldpay Group plc Shares | |||||||||||
Subsequent Event | |||||||||||
Common stock, shares outstanding (in shares) | shares | 2,003,000,000 | ||||||||||
Term A loan | |||||||||||
Subsequent Event | |||||||||||
Long-term debt, gross | [1] | $ 2,376,773 | $ 2,469,375 | ||||||||
Term B loan | |||||||||||
Subsequent Event | |||||||||||
Long-term debt, gross | [2] | 759,263 | $ 765,000 | ||||||||
Term B loan amortization percentage | 0.25% | ||||||||||
Term B loan | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Term B loan amortization percentage | 0.25% | ||||||||||
Revolving credit facility | |||||||||||
Subsequent Event | |||||||||||
Maximum borrowing capacity | $ 650,000 | ||||||||||
Bridge Term Loan | |||||||||||
Subsequent Event | |||||||||||
Additional Term loans, face amount | $ 1,130,000 | ||||||||||
Incremental Term B Loan | |||||||||||
Subsequent Event | |||||||||||
Additional Term loans, face amount | $ 1,270,000 | ||||||||||
Additional Term loans, term | 7 years | ||||||||||
Long-term debt, gross | [3] | $ 1,270,000 | |||||||||
Term B loan amortization percentage | 0.25% | ||||||||||
Vantiv Holding | |||||||||||
Subsequent Event | |||||||||||
Common stock, shares outstanding (in shares) | shares | 177,759,456 | 196,177,657 | |||||||||
Incremental Amendment | Term A loan | |||||||||||
Subsequent Event | |||||||||||
Additional Term loans, face amount | $ 1,605,000 | ||||||||||
Additional Term loans, term | 5 years | ||||||||||
Incremental Amendment | Term B loan | |||||||||||
Subsequent Event | |||||||||||
Additional Term loans, face amount | $ 1,129,000 | ||||||||||
Additional Term loans, term | 7 years | ||||||||||
Incremental Amendment | Revolving credit facility | |||||||||||
Subsequent Event | |||||||||||
Maximum borrowing capacity | $ 350,000 | ||||||||||
Incremental Amendment Tranche B-1 | Term B loan | |||||||||||
Subsequent Event | |||||||||||
Additional Term loans, face amount | 535,000 | ||||||||||
Incremental Amendment Tranche B-1 | Term B loan | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Additional Term loans, face amount | $ 535,000 | ||||||||||
Incremental Amendment Tranche B-2 | Term B loan | |||||||||||
Subsequent Event | |||||||||||
Additional Term loans, face amount | 594,000 | ||||||||||
Backstop Commitment Letter | Revolving credit facility | |||||||||||
Subsequent Event | |||||||||||
Maximum borrowing capacity | 1,000,000 | ||||||||||
Backstop Commitment Letter | Maximum | Term A loan | |||||||||||
Subsequent Event | |||||||||||
Additional Term loans, face amount | 4,010,000 | ||||||||||
Backstop Commitment Letter | Maximum | Term B loan | |||||||||||
Subsequent Event | |||||||||||
Additional Term loans, face amount | $ 3,200,000 | ||||||||||
October 2016 debt refinancing | Term A loan | |||||||||||
Subsequent Event | |||||||||||
Additional Term loans, face amount | 2,500,000 | ||||||||||
Long-term debt, gross | [1] | $ 2,400,000 | |||||||||
October 2016 debt refinancing | Term B loan | |||||||||||
Subsequent Event | |||||||||||
Additional Term loans, face amount | $ 765,000 | ||||||||||
Third Amendment | Revolving credit facility | |||||||||||
Subsequent Event | |||||||||||
Additional capacity of existing revolving credit facility | $ 250,000 | ||||||||||
Third Amendment | Maximum | |||||||||||
Subsequent Event | |||||||||||
Leverage Ratio | 650.00% | ||||||||||
Third Amendment | Minimum | |||||||||||
Subsequent Event | |||||||||||
Interest Coverage Ratio | 400.00% | ||||||||||
Fourth Debt Amendment Tranche B-3 | Term B loan | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Additional Term loans, face amount | [3] | 759,300 | |||||||||
Fourth Debt Amendment Tranche B-4 | Incremental Term B Loan | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Additional Term loans, face amount | [3] | 1,270,000 | |||||||||
Fourth Debt Amendment of Tranche B-2 | Term B loan | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Additional Term loans, face amount | $ 594,000 | ||||||||||
Dividend Paid | Worldpay Group plc Shares | Worldpay Group, PLC | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Interim dividend payable to Worldpay shareholders | £ / shares | £ 0.008 | ||||||||||
Dividend Declared | Worldpay Group plc Shares | Worldpay Group, PLC | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Special dividend payable to Worldpay shareholders | £ / shares | £ 0.042 | ||||||||||
Tranche A-3, maturing in October 2021 | Third Amendment | Term A loan | |||||||||||
Subsequent Event | |||||||||||
Long-term debt, gross | $ 181,500 | ||||||||||
Tranche A-5, maturing on the fifth anniversary following Worldpay acquisition funding | Third Amendment | Term A loan | |||||||||||
Subsequent Event | |||||||||||
Long-term debt, gross | $ 2,200,000 | ||||||||||
LIBOR | Term A loan | |||||||||||
Subsequent Event | |||||||||||
Spread rate (as a percent) | 1.75% | ||||||||||
LIBOR | Term B loan | |||||||||||
Subsequent Event | |||||||||||
Spread rate (as a percent) | 2.50% | ||||||||||
LIBOR | Revolving credit facility | |||||||||||
Subsequent Event | |||||||||||
Spread rate (as a percent) | 1.75% | ||||||||||
LIBOR | Incremental Term B Loan | |||||||||||
Subsequent Event | |||||||||||
Spread rate (as a percent) | 2.25% | ||||||||||
LIBOR | Minimum | Term B loan | |||||||||||
Subsequent Event | |||||||||||
Spread rate (as a percent) | 0.75% | ||||||||||
LIBOR | Fourth Debt Amendment Tranche B-3 | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Spread rate (as a percent) | 2.00% | ||||||||||
LIBOR | Fourth Debt Amendment Tranche B-3 | Minimum | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Spread rate (as a percent) | 0.00% | ||||||||||
LIBOR | Fourth Debt Amendment Tranche B-4 | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Spread rate (as a percent) | 2.00% | ||||||||||
LIBOR | Fourth Debt Amendment Tranche B-4 | Minimum | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Spread rate (as a percent) | 0.00% | ||||||||||
LIBOR | Fourth Debt Amendment of Tranche B-2 | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Spread rate (as a percent) | 2.25% | ||||||||||
LIBOR | Fourth Debt Amendment of Tranche B-2 | Minimum | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Spread rate (as a percent) | 0.00% | ||||||||||
Base Rate | Fourth Debt Amendment Tranche B-3 | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Spread rate (as a percent) | 1.00% | ||||||||||
Base Rate | Fourth Debt Amendment Tranche B-3 | Minimum | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Spread rate (as a percent) | 0.00% | ||||||||||
Base Rate | Fourth Debt Amendment Tranche B-4 | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Spread rate (as a percent) | 1.00% | ||||||||||
Base Rate | Fourth Debt Amendment Tranche B-4 | Minimum | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Spread rate (as a percent) | 0.00% | ||||||||||
Base Rate | Fourth Debt Amendment of Tranche B-2 | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Spread rate (as a percent) | 1.25% | ||||||||||
Base Rate | Fourth Debt Amendment of Tranche B-2 | Minimum | Subsequent Event | |||||||||||
Subsequent Event | |||||||||||
Spread rate (as a percent) | 0.00% | ||||||||||
[1] | Interest at a variable base rate (LIBOR) plus a spread rate (175 basis points) (total rate of 2.99% at September 30, 2017) and amortizing on a basis of 1.25% per quarter during each of the first twelve quarters (March 2017 through December 2019), 1.875% per quarter during the next four quarters (March 2020 through December 2020) and 2.50% during the next three quarters (March 2021 through September 2021) with a balloon payment due at maturity. | ||||||||||
[2] | Interest at a variable base rate (LIBOR) with a floor of 75 basis points plus a spread rate (250 basis points) (total rate of 3.74% at September 30, 2017) and amortizing on a basis of 0.25% per quarter, with a balloon payment due at maturity. | ||||||||||
[3] | Interest at a variable base rate (LIBOR) plus a spread rate (225 base points) (total rate of 3.48% at September 30, 2017) and amortizing on a basis of 0.25% per quarter, with a balloon payment due at maturity. |