XML 27 R10.htm IDEA: XBRL DOCUMENT
v3.6.0.2

ACQUISITIONS | 7 Months Ended
--- | ---
Dec. 31, 2016
Business Combinations [Abstract] |
ACQUISITIONS | ACQUISITIONS Fiscal Year Ended May 31, 2016 Heartland On December 15, 2015, we entered into the Merger Agreement with Heartland, pursuant to which we merged with Heartland in a cash-and-stock transaction that we completed on April 22, 2016. In accordance with the terms and subject to the conditions set forth in the Merger Agreement, as a result of the transaction, each outstanding share of Heartland common stock was converted into the right to receive $53.28 in cash and 0.6687 shares of our common stock, which as of the closing date represented total purchase consideration of $3.9 billion, the cash portion of which was financed with debt. The following table summarizes the cash and non cash components of the consideration transferred on April 22, 2016 (in thousands):
Cash consideration paid to Heartland stockholders |  | $ | 2,043,362 |
Fair value of Global Payments common stock issued to Heartland stockholders |  | 1,879,458 |
Total purchase consideration |  | $ | 3,922,820 |
The merger date fair value of common stock issued to Heartland stockholders and equity award holders was determined based on 38.4 million shares of Heartland common stock, including common stock outstanding and equity awards for which vesting accelerated in accordance with the Merger Agreement, multiplied by the exchange ratio of 0.6687 and the closing share price of Global Payments common stock as of April 22, 2016 of $73.29 per share, as shown in the table below (in thousands, except share data):
Shares of Heartland common stock |  | 38,350 |
Exchange ratio |  | 0.6687 |
Shares of Global Payments common stock issued |  | 25,645 |
Price per share of Global Payments common stock |  | $ | 73.29 |
Fair value of Global Payments common stock issued to Heartland stockholders |  | $ | 1,879,458 |
This transaction was accounted for as a business combination, which requires that we record the assets acquired and liabilities assumed at fair value as of the acquisition date. The initial accounting for this acquisition was complete as of December 31, 2016, except for the fair value of deferred income taxes and certain other assets and liabilities, which are subject to adjustment as we obtain additional information. Additional time is needed particularly to evaluate the basis differences for assets and liabilities for financial reporting and tax purposes. Measurement-period adjustments, which are reflected in the table below, had no material effect on earnings or other comprehensive income for the current or prior periods. The estimated provisional acquisition-date fair values of major classes of assets acquired and liabilities assumed as originally reported as of May 31, 2016 and as subsequently revised during the 2016 fiscal transition period for measurement period adjustments, including a reconciliation to the total purchase consideration, are as follows:
| May 31, 2016 |  | Measurement Period Adjustments |  | December 31, 2016
| (in thousands)
Cash and cash equivalents | $ | 304,747 |  |  | $ | — |  |  | $ | 304,747 |
Accounts receivable | 68,548 |  |  | 1,837 |  |  | 70,385 |
Prepaid expenses and other assets | 106,450 |  |  | (3,360 | ) |  | 103,090 |
Identified intangible assets | 1,639,040 |  |  | — |  |  | 1,639,040 |
Property and equipment | 112,222 |  |  | (5,639 | ) |  | 106,583 |
Debt | (437,933 | ) |  | — |  |  | (437,933 | )
Accounts payable and accrued liabilities | (453,550 | ) |  | (4,213 | ) |  | (457,763 | )
Settlement processing obligations | (20,978 | ) |  | (15,600 | ) |  | (36,578 | )
Deferred income taxes | (553,432 | ) |  | 34,638 |  |  | (518,794 | )
Other liabilities | (58,542 | ) |  | (6,396 | ) |  | (64,938 | )
Total identifiable net assets | 706,572 |  |  | 1,267 |  |  | 707,839 |
Goodwill | 3,216,248 |  |  | (1,267 | ) |  | 3,214,981 |
Total purchase consideration | $ | 3,922,820 |  |  | $ | — |  |  | $ | 3,922,820 |
Prior to the merger, Heartland was one of the largest payment services companies in the United States, delivering payment technology services and offering integrated commerce, omnichannel, vertically-oriented software, cloud-based point-of-sale, analytics, marketing, payroll and other solutions that are highly complementary to the services offered by Global Payments. The merger significantly expanded our small and medium-sized enterprise distribution, merchant base and vertical reach in the United States, adding a 1,400-person direct sales force, over 300,000 merchants and $130 billion in annual payments volume. Goodwill of $3.2 billion arising from the merger, included in the North America segment, was attributable to expected growth opportunities, potential synergies from combining our existing businesses and an assembled workforce, and is not deductible for income tax purposes. During the year ended May 31, 2016, we incurred transaction costs in connection with the merger of $24.4 million, which are recorded in selling, general and administrative expenses in the consolidated statements of income. The following reflects the estimated fair values of the identified intangible assets and the respective weighted-average estimated amortization periods:
| Estimated Fair Values |  | Estimated Weighted-Average Amortization Periods
| (in thousands) |  | (years)
Customer-related intangible assets | $ | 977,400 |  |  | 15
Acquired technology | 457,000 |  |  | 5
Trademarks and trade names | 176,000 |  |  | 7
Covenants-not-to-compete | 28,640 |  |  | 1
Total estimated acquired intangible assets | $ | 1,639,040 |  |  | 11
The estimated fair value of customer-related intangible assets was determined using the income approach, which is based on projected cash flows discounted to their present value using discount rates that consider the timing and risk of the forecasted cash flows. The discount rate used is the average estimated value of a market participant’s cost of capital and debt, derived using customary market metrics. Other significant assumptions include terminal value margin rates, future capital expenditures and future working capital requirements. Acquired technology was valued using the replacement cost method, which required us to estimate the cost to construct an asset of equivalent utility at prices available at the time of the valuation analysis, with adjustments in value for physical deterioration and functional and economic obsolescence. Trademarks and trade names were valued using the relief-from-royalty approach. This method assumes that trademarks and trade names have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method required us to estimate the future revenue for the related brands, the appropriate royalty rate and the weighted-average cost of capital. The discount rate used is the average estimated value of a market participant’s cost of capital and debt, derived using customary market metrics. Heartland's revenues and operating income represented approximately 4% and less than 0.5% of our total consolidated revenues and operating income, respectively, for the fiscal year ended May 31, 2016. The following unaudited pro forma information shows the results of our operations for the fiscal years ended May 31, 2016 and May 31, 2015 as if our merger with Heartland had occurred on June 1, 2014. The unaudited pro forma information reflects the effects of applying our accounting policies and certain pro forma adjustments to the combined historical financial information of Global Payments and Heartland. The pro forma adjustments include incremental amortization and depreciation expense, incremental interest expense associated with new long-term debt, a reduction of revenues and operating expenses associated with fair value adjustments made in applying the acquisition-method of accounting and the elimination of nonrecurring transaction costs directly related to the merger. The unaudited pro forma information is presented for information purposes only and is not necessarily indicative of what would have occurred if the merger had been made as of that date. The unaudited pro forma information is also not intended to be a projection of future results due to the integration of the acquired business.
| Year Ended May 31,
| (Unaudited)
| 2016 |  | 2016 |  | 2015 |  | 2015
| (Actual) |  | (Pro forma) |  | (Actual) |  | (Pro forma)
| (in thousands)
Total revenues | $ | 2,898,150 |  |  | $ | 3,870,368 |  |  | $ | 2,773,718 |  |  | $ | 3,668,851 |
Net income attributable to Global Payments | $ | 271,666 |  |  | $ | 212,511 |  |  | $ | 278,040 |  |  | $ | 149,900 |
FIS Gaming Business On June 1, 2015, we acquired certain assets of Certegy Check Services, Inc., a wholly-owned subsidiary of Fidelity National Information Services, Inc. ("FIS"). Under the purchase arrangement, we acquired substantially all of the assets of its gaming business related to licensed gaming operators (the "FIS Gaming Business"), including relationships with gaming clients in approximately 260 locations, for $237.5 million, funded from borrowings on our revolving credit facility and cash on hand. We acquired the FIS Gaming Business to expand our direct distribution and service offerings in the gaming industry. This transaction was accounted for as a business combination. We recorded the assets acquired and liabilities assumed at their estimated fair values as of the merger date. Transaction costs associated with this business combination were not material. Measurement-period adjustments, which are reflected in the table below, had no material effect on earnings or other comprehensive income for the current or prior periods. The revenue and earnings of the FIS Gaming Business for the year ended May 31, 2016 were not material nor were the historical revenue and earnings of the FIS Gaming Business material for the purpose of presenting pro forma information. The estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed as provisionally determined at the acquisition date and as subsequently revised for measurement period adjustments, including a reconciliation to the total purchase consideration, are as follows:
| As Provisionally Determined |  | Measurement Period Adjustments |  | As Revised
| (in thousands)
Customer-related intangible assets | $ | 135,200 |  |  | $ | 8,200 |  |  | $ | 143,400 |
Liabilities | (150 | ) |  | — |  |  | (150 | )
Total identifiable net assets | 135,050 |  |  | 8,200 |  |  | 143,250 |
Goodwill | 102,450 |  |  | (8,200 | ) |  | 94,250 |
Total purchase consideration | $ | 237,500 |  |  | $ | — |  |  | $ | 237,500 |
Goodwill arising from the acquisition, included in the North America segment, was attributable to expected growth opportunities, including cross-selling opportunities at existing and acquired gaming client locations, operating synergies in the gaming business and assembled workforce. Goodwill associated with this acquisition is deductible for income tax purposes. The customer-related intangible assets have an estimated amortization period of 15 years. Fiscal Year Ended May 31, 2015 Realex Payments On March 25, 2015, we acquired approximately 95% of the outstanding shares of Pay and Shop Limited for €110.2 million in cash ($118.9 million equivalent as of the acquisition date) funded from borrowings on our revolving credit facility. Pay and Shop Limited, which does business as Realex Payments ("Realex"), is a leading European online payment gateway technology provider based in Dublin, Ireland. This transaction furthers our strategy to provide omni-channel solutions that combine gateway services, payment service provisioning and payment technology services across Europe. This transaction was accounted for as a business combination. We recorded the assets acquired, liabilities assumed and noncontrolling interest at their estimated fair values as of the acquisition date. In connection with the acquisition of Realex, we paid a transaction-related tax of $1.2 million. Other acquisition costs were not material. The estimated acquisition date fair values of the assets acquired, liabilities assumed and the noncontrolling interest, including a reconciliation to the total purchase consideration, are as follows (in thousands):
Cash |  | $ | 4,082 |
Customer-related intangible assets |  | 16,079 |
Acquired technology |  | 39,820 |
Trade name |  | 3,453 |
Other intangible assets |  | 399 |
Other assets |  | 6,213 |
Liabilities |  | (3,479 | )
Deferred income tax liabilities |  | (7,216 | )
Total identifiable net assets |  | 59,351 |
Goodwill |  | 66,809 |
Noncontrolling interest |  | (7,280 | )
Total purchase consideration |  | $ | 118,880 |
Goodwill of $66.8 million arising from the acquisition, included in the Europe segment, was attributable to expected growth opportunities in Europe, potential synergies from combining our existing business with gateway services and payment service provisioning in certain markets and an assembled workforce to support the newly acquired technology. Goodwill associated with this acquisition is not deductible for income tax purposes. The customer-related intangible assets have an estimated amortization period of 16 years. The acquired technology has an estimated amortization period of 10 years. The trade name has an estimated amortization period of 7 years. On October 5, 2015, we paid €6.7 million ($7.5 million equivalent as of October 5, 2015) to acquire the remaining shares of Realex, after which we own 100% of the outstanding shares. Ezidebit On October 10, 2014, we completed the acquisition of 100% of the outstanding stock of Ezi Holdings Pty Ltd ("Ezidebit") for AUD 302.6 million in cash ($266.0 million equivalent as of the acquisition date). This acquisition was funded by a combination of cash on hand and borrowings on our revolving credit facility. Ezidebit is a leading integrated payments company focused on recurring payments verticals in Australia and New Zealand. Ezidebit markets its services through a network of integrated software vendors and direct channels to numerous vertical markets. We acquired Ezidebit to establish a direct distribution channel in Australia and New Zealand and to further enhance our existing integrated solutions offerings. This transaction was accounted for as a business combination. We recorded the assets acquired and liabilities assumed at their estimated fair values as of the acquisition date. The estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed, including a reconciliation to the total purchase consideration, are as follows (in thousands):
Cash | $ | 45,826 |
Customer-related intangible assets | 42,721 |
Acquired technology | 27,954 |
Trade name | 2,901 |
Other assets | 2,337 |
Deferred income tax assets (liabilities) | (9,788 | )
Other liabilities | (49,797 | )
Total identifiable net assets | 62,154 |
Goodwill | 203,828 |
Total purchase consideration | $ | 265,982 |
Goodwill of $203.8 million arising from the acquisition, included in the Asia-Pacific segment, was attributable to expected growth opportunities in Australia and New Zealand, as well as growth opportunities and operating synergies in integrated payments in our existing Asia-Pacific and North America markets. Goodwill associated with this acquisition is not deductible for income tax purposes. The customer-related intangible assets have an estimated amortization period of 15 years. The acquired technology has an estimated amortization period of 15 years. The trade name has an estimated amortization period of 5 years. Fiscal Year Ended May 31, 2014 PayPros On March 4, 2014, we completed the acquisition of 100% of the outstanding stock of Payment Processing, Inc. ("PayPros") for $426.5 million in cash. We funded the acquisition with a combination of cash on hand and borrowings under our corporate credit facility. PayPros is a provider of fully-integrated payment solutions for small-to-medium sized merchants in the United States. PayPros delivers its services through a network of technology-based enterprise software partners to vertical markets that are complementary to the markets served by Accelerated Payment Technologies, which we acquired in October 2012. We acquired PayPros to expand our direct distribution capabilities in the United States and to further enhance our existing integrated solutions offerings. This transaction was recorded as a business combination. We recorded the assets acquired and liabilities assumed at their estimated fair values as of the acquisition date. The following table summarizes the fair value of the identifiable assets acquired and liabilities assumed as of the acquisition date (in thousands):
Property and equipment |  | $ | 1,680 |
Customer-related intangible assets |  | 147,500 |
Contract-based intangible assets |  | 30,200 |
Acquired technology |  | 10,800 |
Other assets |  | 3,872 |
Deferred income tax liabilities |  | (38,478 | )
Total identifiable net assets |  | 155,574 |
Goodwill |  | 270,878 |
Total purchase consideration |  | $ | 426,452 |
Goodwill of $270.9 million arising from the acquisition, included in the North America segment, was attributable primarily to operating synergies with the services offered and markets served by PayPros. The goodwill associated with the acquisition is not deductible for income tax purposes. The customer-related intangible assets and the contract-based intangible assets have estimated amortization periods of 13 years. The acquired technology has an estimated amortization period of 7 years. The following unaudited pro forma information shows the results of our operations for the fiscal year ended May 31, 2014 as if the PayPros acquisition had occurred June 1, 2012. The unaudited pro forma information is presented for information purposes only and is not necessarily indicative of what would have occurred if the acquisition had been made as of that date. The unaudited pro forma information is also not intended to be a projection of future results due to the integration of the acquired business.
| Year Ended May 31,
| Unaudited
| 2014 |  | 2014
| (Actual) |  | (Pro forma)
| (in thousands)
Total revenues | $ | 2,554,236 |  |  | $ | 2,628,547 |
Net income attributable to Global Payments | $ | 245,286 |  |  | $ | 241,272 |

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1497-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1490-128463 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1392-128463 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1486-128463 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4845-128472 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1524-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4922-128472 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4934-128472 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4926-128472 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=73530397&loc=SL65897772-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1383-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_BusinessCombinationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration