Global Payments (GPN) 10-K risk factor changes: FY2017 vs FY2016

Our ability to protect our systems and data from continually evolving cybersecurity risks or other technological risks could affect our reputation among our [removed: merchant clients] [added: customers] and [removed: cardholders] [added: cardholders, adversely affect our continued card network registration or membership] and [added: financial institution sponsorship, and] may expose us to penalties, fines, liabilities and legal claims.

Some of this information is also processed and stored by our [removed: merchants, ISOs,] third-party service providers to whom we outsource certain [removed: functions,] [added: functions] and other agents (which we refer to collectively as our "associated third [removed: parties").][added: parties") as well as merchants and ISOs.]

We have responsibility to the card [removed: networks and] [added: networks,] their member financial [removed: institutions] [added: institutions, and in some instances, our merchants, ISOs and/or individuals,] for our failure or the failure of our associated third parties to protect this information.

Our computer systems [removed: and] [added: and/or] our associated third parties’ computer systems [removed: have been, and] could be [removed: in the future,] subject to penetration, and our data protection measures may not prevent unauthorized access.

Computer viruses [added: and other malware] can be distributed and could infiltrate our systems or those of our associated third parties.

Our defensive measures may not prevent [added: downtime,] unauthorized access or use of sensitive data.

We [removed: could] also [added: could] be subject to liability for claims relating to misuse of personal information in violation of contractual obligations or data privacy laws.

[removed: We] [added: In addition, we] cannot provide assurance that the contractual requirements related to [added: use,] security and privacy that we impose on our [removed: service providers] [added: associated third parties] who have access to this data will be followed or will be adequate to prevent the misuse of this data.

Any misuse [added: or compromise] of personal information or failure to adequately enforce these contractual requirements could result in liability, protracted and costly litigation and, with respect to misuse of personal information of our merchants and consumers, lost revenue and reputational harm.

Any type of security breach, attack or misuse of data described above or otherwise, whether experienced by us or an associated third party, could harm our reputation and deter existing and prospective customers from using our services or from making electronic payments generally, increase our operating expenses in order to contain and remediate the incident, expose us to [removed: unbudgeted] [added: unanticipated] or uninsured liability, disrupt our operations (including potential service interruptions), distract our management, [removed: increase our risk of regulatory scrutiny, result in the imposition of penalties and fines under state, federal and foreign laws or by the card networks, and adversely affect our continued card network registration and financial institution sponsorship.]

Our removal from networks' lists of [removed: PCI DSS] [added: Payment Card Industry Data Security Standard] compliant service providers could mean that existing merchant customers, sales partners or other third parties may cease using or referring our services.

The payment processing industry is highly competitive, and some of our competitors are larger and have greater financial and operational resources than we do, which may give them an advantage [removed: in our market] with respect to the pricing of services offered to [removed: our] customers and the ability to develop new technologies.

Our competitors that are financial institutions or subsidiaries of financial institutions do not incur the costs associated with being sponsored by a direct member for participation in the card [removed: networks] [added: networks, as we do in certain jurisdictions,] and may be able to settle transactions more quickly for merchants than we can.

It is also possible that larger financial institutions could decide to perform in-house some or all of the services [removed: which] [added: that] we currently provide or could provide.

Furthermore, we are facing increasing competition from [removed: non-traditional] [added: nontraditional] competitors, including new entrant technology companies who offer certain innovations in payment methods.

Some of these [removed: non-traditional] [added: nontraditional] competitors have significant financial resources and robust networks and are highly regarded by consumers.

In addition, some [removed: non-traditional] [added: nontraditional] competitors, such as private companies or startup companies, may be less risk averse than we are and, therefore, may be able to respond more quickly to market demands.

If these [removed: non-traditional] [added: nontraditional] competitors gain a greater share of total electronic payments transactions, it could have a material adverse effect on our business, financial condition, results of [removed: operations,] [added: operations] and cash flows.

Any delay in the delivery of new services or the failure to differentiate our services could render [removed: them] [added: our services] less desirable to [removed: our] customers, or possibly even obsolete.

As a result of these factors, our development efforts could result in higher costs that could reduce our earnings in addition to a loss of [removed: revenue] [added: revenues] and earnings if promised new services are not delivered timely to our customers or do not perform as anticipated.

Our revenues from the sale of services to merchants that accept Visa cards and MasterCard cards are dependent upon our continued Visa and MasterCard [removed: registration and] [added: registrations,] financial institution sponsorship and, in some cases, continued membership in certain card networks.

In order to provide our Visa and MasterCard transaction processing services, we must be either a direct [removed: participant] [added: member] or be registered as a merchant processor or service provider of Visa and [removed: MasterCard.][added: MasterCard, respectively.]

[removed: Registration as a merchant processor] or service provider is dependent upon our being sponsored by Members of each [removed: organization.][added: organization in certain jurisdictions.]

If our sponsor [removed: banks] [added: financial institution in any market] should stop providing sponsorship for us, we would need to find another financial institution to provide those services or we would need to attain direct membership with the card networks, either of which could prove to be difficult and expensive.

If we are unable to find a replacement financial institution to provide sponsorship or attain direct membership, we may no longer be able to provide processing services to affected [removed: customers,] [added: customers and potential customers in that market,] which would negatively affect our [removed: revenues] [added: revenues, earnings] and [removed: earnings.][added: cash flows.]

Furthermore, some agreements with our [removed: bank] [added: financial institution] sponsors give them substantial discretion in approving certain aspects of our business practices, including our solicitation, [added: application and qualification procedures for merchants and the terms of our agreements with merchants.]

Our [removed: bank] sponsors' discretionary actions under these agreements could have a material adverse effect on our business, financial condition, results of operations and cash flows.

If we are unable to find a replacement financial institution we may no longer be able to provide processing services to certain customers, which could negatively affect our [removed: revenue] [added: revenues, earnings] and [removed: earnings.][added: cash flows.]

If we fail to comply with the applicable requirements of the card networks, they could seek to fine us, suspend us or terminate our [removed: registrations.][added: registrations or membership.]

If [removed: our merchants or ISOs] [added: we] incur fines or penalties [added: for which our merchants or ISOs are responsible] that we cannot collect or pursue collection from them, we may have to bear the cost of such fines or penalties.

These banks could attempt, by virtue of their influence on the networks, to alter the networks' rules or policies to the detriment of [removed: non-members] [added: non-members,] including [removed: us.][added: us in certain jurisdictions.]

The termination of our registrations or our [added: membership or our] status as a service provider or a merchant processor, or any changes in card association or other network rules or standards, including interpretation and implementation of the rules or standards, that increase the cost of doing business or limit our ability to provide transaction processing services to our customers, could have a material adverse effect on our business, operating results, financial condition and cash flows.

If a merchant or an ISO fails to comply with the applicable requirements of the card associations and networks, we or the merchant [added: or ISO] could be subject to a variety of fines or penalties that may be levied by the card associations or networks.

Our systems [removed: and] [added: or] our third-party providers' systems may fail, which could interrupt our service, cause us to lose business, increase our costs and expose us to liability.

Our services are based on sophisticated software and computing systems that often encounter development [removed: delays] [added: delays,] and the underlying software may contain undetected errors, viruses or defects.

There may be a decline in the use of cards [added: and other electronic payments] as a payment mechanism for consumers or adverse developments with respect to the card industry in general.

If consumers do not continue to use credit or debit cards [added: or other electronic payment methods] as a payment mechanism for their transactions or if there is a change in the mix of payments between cash, [added: checks,] credit cards, and debit cards, which is adverse to us, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

We incur chargeback [removed: liability] [added: losses] when our merchants refuse or cannot reimburse [added: us for] chargebacks resolved in favor of their customers.

[removed: If we are unable to collect] such amounts from the merchant's account or reserve account (if applicable), or if the merchant refuses or is unable, due to closure, bankruptcy or other reasons, to reimburse us for a chargeback, we bear the loss for the amount of the refund paid to the cardholder.

Failure to effectively manage risk and prevent fraud could increase our chargeback [removed: liability] [added: losses] or cause us to incur other liabilities.

We are a regular target of malicious third-party attempts to identify and exploit system vulnerabilities, and/or penetrate or bypass our security measures, in order to gain unauthorized access to our networks and systems or those of our associated third parties.

Such access could lead to the compromise of sensitive, business, personal or confidential information.

As a result, we follow a defense-in-depth model for cybersecurity, meaning we proactively seek to employ multiple methods at different layers to defend our systems against intrusion and attack and to protect the data we collect.

However, we cannot be certain that these measures will be successful and will be sufficient to counter all current and emerging technology threats.

Further, while we select our associated third parties carefully, we do not control their actions.

Any problems experienced by these third parties, including those resulting from breakdowns or other disruptions in the services provided by such parties or cyberattacks and security breaches, could adversely affect our ability to service our merchant customers or otherwise conduct our business.

Regulatory authorities around the world are considering or have enacted a number of legislative and regulatory proposals concerning data protection and use, and the interpretation and application of consumer and data protection laws in the United States, Europe, the Asia-Pacific region and elsewhere is increasingly uncertain.

It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices or operations model, which could result in potential liability for fines, damages or a need to incur substantial costs to modify our operations.

increase our risk of litigation or regulatory scrutiny, result in the imposition of penalties and fines under state, federal and foreign laws or by the card networks, and adversely affect our continued card network registration or membership and financial institution sponsorship.

Registration as a merchant processor

If we are unable to collect

Additionally, we manage a membership discount program that is billed to customers annually on a recurring basis.

Change in regulation of this type of billing could negatively affect our revenue.

We are also subject to a variety of foreign and domestic laws, and their implementing regulations, including, without limitation, Directive 95/46/EC, as implemented in each member state of the European Union and its successor, the General Data Protection Regulation, which becomes effective in May 2018, that govern the collection, processing, storage, use and disclosure of personal information, require notice to individuals of privacy practices, and provide individuals with certain rights to prevent use and disclosure of protected information.

Compliance with these laws and regulations can be costly and time consuming, adding a layer of complexity to business practices and innovation.

As with other regulatory schemes, our failure to comply could result in public or private enforcement action and accompanying litigation costs, losses, fines and penalties.

Some of the countries in which we operate, such as the Russian Federation and the United Kingdom, have undergone significant political, economic and

On June 23, 2016, the United Kingdom held a referendum in which voters approved an exit from the European Union, commonly referred to as "Brexit," and on March 29, 2017, notified the European Union that it intended to exit as provided in Article 50 of the Treaty on European Union.

The terms of the withdrawal are subject to a negotiation period that could last at least two years from the withdrawal notification date.

various laws.

Changes in tax laws or their interpretations could result in changes to enacted tax rates and may require complex computations to be performed that were not previously required, significant judgments to be made in interpretation of the new or revised tax regulations and significant estimates in calculations, as well as the preparation and analysis of information not previously relevant or regularly produced.

As a result of the recently enacted U.S. Tax Cuts and Jobs Act of 2017 (the "2017 U.S. Tax Act"), we remeasured our U.S. deferred tax assets and liabilities based on the rates at which they are now expected to reverse due to the change in the U.S. federal income tax rate.

We also recorded a "transition tax" payable on our previously deferred foreign earnings as a result of a new one-time tax established by the 2017 U.S. Tax Act.

To address the application of U.S. generally accepted accounting principles ("GAAP") in situations in which a registrant does not have the necessary information available, prepared or analyzed in reasonable detail to complete the accounting under the 2017 U.S. Tax Act, the SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118") that provides for the reporting of provisional amounts that may change during a measurement period and the deferral of recognition of any amounts in other instances until a reasonable estimate can be made.

The U.S. Treasury Department, the U.S. Internal Revenue Service and other standard-setting bodies could interpret or issue guidance on how provisions of the 2017 U.S. Tax Act will be applied or otherwise administered that is different from our interpretation.

Changes in the provisional amounts that we recorded could negatively affect our results of operations.

We are or may be subject in various jurisdictions to certain taxes that are not derived based on earnings (e.g. sales, gross receipts, property, value-added and other business taxes).

Application of these taxes is an emerging issue in our industry and the

Our substantial indebtedness could adversely affect us and decrease our business flexibility.

We have a significant amount of indebtedness.

As of December 31, 2017, the outstanding balance under our Credit Facility was $4.7 billion.

While plans and procedures are in place to protect the sensitive data we collect, we cannot be certain that these measures will be successful and will be sufficient to counter all current and emerging technology threats that are designed to breach our systems in order to gain access to confidential information.

Others partner with traditional merchant acquirers to provide tablet-based solutions with payment processing services.

application and qualification procedures for merchants and the terms of our agreements with merchants.

For example, we are subject to the card network rules of Visa, MasterCard and other card networks, Interac, and various debit networks; applicable privacy and information security regulations in the regions where we operate and of the card networks; the

In addition, it is expected that the British government will begin negotiating the terms of the United Kingdom’s future relationship with the European Union.

litigation could subject us to significant liability for damages.

We record deferred income taxes to reflect the effect of temporary differences between the amounts of assets and liabilities for financial accounting and income tax purposes.

Deferred income taxes are determined using enacted tax rates.

As a payment processing company we are or may be subject to taxation by various jurisdictions on our net income or certain portions of our fees charged to customers for our services.

We have increased our indebtedness to finance the acquisition of Heartland, which could adversely affect us, including by decreasing our business flexibility.

We have incurred significant indebtedness, including without limitation approximately $4.78 billion of secured financing in connection with the Heartland transaction, which we used to fund the cash consideration for the Heartland transaction, repay certain of Heartland’s indebtedness and pay related fees and expenses.

Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our [added: actual] results could differ materially from the results anticipated by our forward-looking statements as a result of many known and unknown factors, including but not limited to those discussed in "Item 1A - Risk [removed: Factors" of this Annual Report.][added: Factors." See "Cautionary Notice Regarding Forward-Looking Statements" located above "Item 1 - Business."]

You should read the following discussion and analysis in conjunction with "Item 6 - Selected Financial Data" and "Item 8 - Financial Statements and Supplementary [removed: Data" appearing elsewhere in this Annual Report.][added: Data."]

We are a leading worldwide provider of payment technology services [added: and software solutions] delivering innovative [removed: solutions] [added: services] to our customers globally.

Our technologies, [removed: partnerships] [added: services] and employee expertise enable us to provide a broad range of [removed: services] [added: solutions] that allow our customers to accept various payment [removed: types.][added: types and operate their businesses more efficiently.]

We distribute our services across a variety of channels to [removed: merchants and partners] [added: customers] in 30 countries throughout North America, Europe, the Asia-Pacific region and Brazil and operate in three reportable segments: North America, Europe and Asia-Pacific.

Since our [removed: spin-off in 2001,] [added: spin-off,] we have grown our annual revenues from $353 million [added: for the year ended May 31, 2001] to [removed: $2.9 billion,] [added: $4.0 billion for the year ended December 31, 2017,] through internal expansion of existing operations and through acquisitions.

Our payment solutions are similar around the world in that we enable our [removed: merchant] customers to accept card, electronic, check and digital-based [removed: payments at the point of sale.][added: payments.]

Our comprehensive offerings include terminal sales and deployment, authorization processing, settlement and funding processing, customer support and [removed: help desk] [added: help-desk] functions, chargeback resolution, industry compliance, [removed: Payment Card Industry ("PCI") security,] [added: payment security services,] consolidated billing and statements and on-line reporting.

The majority of [removed: merchant services] [added: our] revenues is generated by services priced as a percentage of transaction value or a specified fee per transaction, depending on the card type or the vertical.

We also earn [added: software licensing and subscription fees and] other fees based on specific [added: value-added] services that [removed: are] [added: may be] unrelated to the number or value of transactions.

Our primary business model is to actively market and provide our payment [added: services, enterprise software solutions and other value-added] services directly to [removed: merchants] [added: our customers] through a variety of distribution channels.

We offer high touch services that provide our [removed: merchants] [added: customers] with reliable and secure [removed: payment] solutions coupled with high quality and responsive support services.

[removed: We] [added: In addition, we] also provide [added: certain of] our services through a wholesale distribution channel where we do not maintain the face-to-face relationship with the [removed: merchant.][added: customer.]

We seek to leverage the continued shift to electronic payments by expanding market share in our existing markets through our distribution channels or through acquisitions in North America, [added: Europe and] the Asia-Pacific region and [removed: Europe, and] investing in and leveraging technology and people, thereby maximizing shareholder value.

Our business [removed: does] [added: has] not [removed: have] [added: had] pronounced seasonality in which more than 30% of our revenues [removed: occur] [added: occurred] in one fiscal quarter.

However, each geographic channel has somewhat higher and lower quarters given the nature of the [added: merchant] portfolio.

We experienced strong business and financial performance around the world during the year ended [removed: May] [added: December] 31, [removed: 2016 ("fiscal 2016").][added: 2017.]

Highlights related to our financial condition and results of operations [added: as of December 31, 2017 and] for [removed: fiscal 2016] [added: the year then ended] include the following:

[removed: | • | Consolidated] [added: For the year ended May 31, 2016,] revenues increased [added: by] 4.5% to $2,898.2 million [removed: from $2,773.7 million in] [added: compared to] the [removed: year ended May 31, 2015 ("fiscal 2015"),] [added: prior year,] reflecting growth in each of our operating [removed: segments and additional revenues from acquired businesses, despite] [added: segments, in spite of] the unfavorable effect of fluctuations in foreign currency exchange [removed: rates of $117.0 million. |][added: rates.]

The merger significantly expanded our small and medium-sized enterprise distribution, merchant base and vertical reach in the United [removed: States, adding a 1,400-person direct sales force, over 300,000 merchants and $130 billion in annual payments volume.][added: States.]

[removed: See] [added: For further discussion, see] "Note [removed: 2 - Acquisitions"] [added: 2—Acquisitions"] in the notes to the accompanying consolidated financial [removed: statements for further discussion of our merger with Heartland.][added: statements.]

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 [added: relationships with gaming clients in] approximately 260 [removed: gaming client locations,] [added: locations as of the acquisition date,] for $237.5 [removed: million, funded from borrowings on our revolving credit facility and cash on hand.][added: million.]

On March 25, 2015, we acquired Pay and Shop [removed: Limited] [added: Limited, which does business as Realex Payments ("Realex"),] for €110.2 million [removed: in cash] ($118.9 million equivalent as of the acquisition [removed: date) funded by borrowings on our revolving credit facility.][added: date).]

[removed: Pay and Shop Limited, which does business as] Realex [removed: Payments,] is a leading European online payment gateway technology provider based in Dublin, Ireland.

This transaction [removed: furthers] [added: furthered] our strategy to provide [removed: omni-channel] [added: omnichannel] solutions that combine gateway services, payment service provisioning and [removed: merchant acquiring] [added: payment technology services] across Europe.

On October 10, 2014, we completed the acquisition [removed: Ezi Holdings Pty Ltd ("Ezidebit")] [added: of Ezidebit] for AUD302.6 million [removed: in cash] ($266.0 million equivalent as of the acquisition date).

See "Note [removed: 2 - Acquisitions"] [added: 2—Acquisitions"] in the notes to the accompanying consolidated financial statements for further discussion of these and other acquisitions.

Through certain of our subsidiaries in Europe, we were a member and shareholder of Visa [removed: Europe Limited ("VE").][added: Europe.]

[removed: In exchange, we] [added: We] received up-front consideration comprised of [removed: approximately] €33.5 million ($37.7 million equivalent at June 21, 2016) in cash and Series B and C convertible preferred shares whose initial conversion [removed: ratio] [added: rate] equates to Visa common shares valued at $22.9 million as of June 21, 2016.

On the third anniversary of the closing of the [removed: acquisition,] [added: acquisition by Visa,] we [removed: will] [added: are contractually entitled to] receive €3.1 million [removed: ($3.4] [added: ($3.5] million at June 21, 2016) of deferred consideration (plus compounded interest at a rate of 4.0% per annum).

The preferred shares will convert into Visa common shares at periodic intervals over a [removed: 12-year] [added: 12\-year] period.

Based on the outcome of potential litigation involving [removed: VE] [added: Visa Europe] in the United Kingdom and elsewhere in Europe, the conversion [removed: factor] [added: rate] of the preferred shares could be adjusted down such that the number of Visa common shares [added: we] ultimately [removed: received] [added: receive] could be as low as zero, and approximately €25.6 million ($28.8 million equivalent at June 21, 2016) of the [added: up-front] cash consideration could be refundable.

The majority of [removed: merchant services] [added: our] revenues is generated by services priced as a percentage of transaction value or a specified fee per transaction, depending on card [removed: type.][added: type or the vertical.]

We also [removed: charge] [added: earn software licensing and subscription fees and] other fees based on specific [added: value-added] services that [removed: are] [added: may be] unrelated to the number or value of transactions.

[removed: In direct merchant acquiring, we] [added: We] provide payment [added: technology] services [added: and software solutions] to [removed: merchants] [added: customers] and fund settlement either directly, in markets where we have direct membership with the payment networks, or through our relationship with a member [removed: bank] [added: financial institution] in markets where we are sponsored.

Revenues [removed: for direct merchant services] are recognized in the amount of [removed: merchant] [added: customer] billing net of [removed: interchange.][added: interchange fees.]

We market our [removed: direct merchant] services through a variety of sales channels, including a direct sales force, trade associations, agent and enterprise software providers and referral arrangements with value-added resellers, which we generally refer to as "direct distribution." We also sell [added: services] through our ISO channel, where the ISO receives a share of the [removed: merchant] [added: customer] profitability in the form of a monthly residual payment, which is reflected as a component of selling, general and administrative expenses in the consolidated statements of income.

Cost of service consists primarily of salaries, wages and related expenses paid to operations and technology-related personnel, including those who monitor our transaction processing systems and settlement functions; [removed: assessments and other fees paid to card networks;] [added: payment network fees;] the cost of transaction processing systems, including third-party services; the cost of network telecommunications capability; depreciation and occupancy costs associated with the facilities performing these functions; amortization of intangible assets and provisions for operating losses.

[removed: Fiscal] Year Ended May 31, 2016 Compared to [removed: Fiscal] Year Ended May 31, 2015

The following table sets forth key selected financial data for the years ended May 31, 2016 and 2015, this data as a percentage of total revenues, and the changes between [removed: fiscal] years in dollars and as a percentage of the prior year amount.

We provide payment technology and software solutions to customers globally.

In addition, we offer a wide array of enterprise software solutions that streamline business operations to customers in numerous vertical markets.

We also provide a variety of value-added services, including analytic and engagement tools, payroll services and reporting that assist our customers with driving demand and operating their businesses more efficiently.

Through our direct sales force worldwide, as well as bank partnerships, we offer our payment technology services, software and other value-added solutions directly to customers in the markets we serve.

In 2016, we changed our fiscal year end from May 31 to December 31.

As a result, the period consisting of the seven months ended December 31, 2016 is considered the "2016 fiscal transition period." When our financial results for the year ended December 31, 2017 and the 2016 fiscal transition period are compared to our financial results for the prior-year periods, the results compare the twelve-month period from January 1, 2017 through December 31, 2017 to the twelve-month period from January 1, 2016 through December 31, 2016 and compare the seven-month period from June 1, 2016 through December 31, 2016 to the seven-month period from June 1, 2015 through December 31, 2015.

The results for the twelve months ended December 31, 2016 and the seven months ended December 31, 2015 are unaudited.

| • | Consolidated revenues increased by 17.9% to $3,975.2 million for the year ended December 31, 2017 from $3,371.0 million for 2016, reflecting growth in each of our operating segments and additional revenues from acquired businesses. |

| • | Consolidated operating income was $558.9 million for the year ended December 31, 2017 compared to $356.3 million for 2016. Our operating margin for the year ended December 31, 2017 was 14.1% compared to 10.6% for 2016. The increase in operating income and operating margin was primarily due to the contribution of revenue growth and a decrease in costs associated with acquisition and integration expenses of $47.5 million. |

| • | Net income attributable to Global Payments was $468.4 million for the year ended December 31, 2017 compared to $201.8 million for 2016, and diluted earnings per share was $3.01 for the year ended December 31, 2017 compared to $1.37 for 2016. |

| • | On December 22, 2017, the United States enacted the 2017 U.S. Tax Act. As a result, we recorded a provisional net income tax benefit of $158.7 million, which increased diluted earnings per share by $1.02 for the year ended December 31, 2017. The 2017 U.S. Tax Act resulted in numerous changes, including a reduction in the U.S. federal tax rate from 35% to 21% effective January 1, 2018 and the transition of the U.S. federal tax system to a territorial regime. As part of this transition, the 2017 U.S. Tax Act imposed a one-time mandatory "transition" tax on foreign earnings not previously subjected to U.S. income tax, payable over eight years. We expect that the reduction in the U.S. federal income tax rate and the new territorial tax regime will have a favorable effect on our earnings and cash flows in future periods. A territorial tax regime rather than a worldwide system will generally allow companies to repatriate future foreign source earnings without incurring additional U.S. income taxes by providing a 100% exemption for the foreign source portion of dividends from certain foreign subsidiaries. |

Emerging Trends

The payments industry continues to grow worldwide and as a result, certain large payment technology companies, including us, have expanded operations globally by pursuing acquisitions and creating alliances and joint ventures.

We expect to continue to expand into new markets internationally or increase our scale and improve our competitiveness in existing markets by pursuing further acquisitions and joint ventures.

We believe that the number of electronic payment transactions will continue to grow and that an increasing percentage of these will be facilitated through emerging technologies.

As a result, we expect an increasing portion of our future capital investment will be allocated to support the development of new and emerging technologies; however, we do not expect our aggregate capital spending to increase materially from our current level of spending as a result of this.

We also believe new markets will continue to develop in areas that have been previously dominated by paper-based transactions.

We expect industries such as education, government and healthcare, as well as payment types such as recurring payments and business-to-business payments, to continue to see transactions migrate to electronic-based solutions.

We anticipate that the continued development of new services and the emergence of new vertical markets will be a factor in the growth of our business and our revenue in the future.

On September 1, 2017, we acquired ACTIVE Network for total purchase consideration of $1.2 billion, consisting of approximately $600 million in cash and 6.4 million shares of our common stock.

ACTIVE Network delivers cloud-based enterprise software, including payment technology solutions, to event organizers in the communities and health and fitness vertical markets.

This acquisition aligns with our technology-enabled, software driven strategy and adds an enterprise software business operating in two additional vertical markets that we believe offer attractive growth fundamentals.

On April 22, 2016, we merged with Heartland in a cash-and-stock transaction for total purchase consideration of $3.9 billion.

On June 21, 2016, Visa acquired all of the membership interests in Visa Europe, including ours, upon which we recorded a gain of $41.2 million included in interest and other income in our consolidated statement of income for the seven months ended December 31, 2016.

However, the preferred shares were assigned a value of zero based on transfer restrictions, Visa's ability to adjust the conversion rate, and the estimation uncertainty associated with those factors.

The fair value of the preferred shares was determined using inputs classified as Level 3 within the fair value hierarchy due to the absence of quoted market prices, lack of liquidity and the fact that inputs used to measure fair value are unobservable and require management’s judgment.

Year Ended December 31, 2017 Compared to Year Ended December 31, 2016

The income statement data for the year ended December 31, 2017 are derived from the audited consolidated financial statements included in Item 8 - Financial Statements and Supplementary Data.

The income statement data for the year ended December 31, 2016 are derived from our unaudited consolidated financial statements for that period.

| | Year Ended December 31, | | | | | | | Year Ended December 31, | | | | | | | | | | | | |

| (dollar amounts in thousands) | 2017 | | | | % of Revenue(1) | | | 2016 | | | | % of Revenue(1) | | | Change | | | | % Change | |

| North America | $ | 2,929,522 | | | 73.7 | % | | $ | 2,475,323 | | | 73.4 | % | | $ | 454,199 | | | 18.3 | % |

| Europe | 767,524 | | | | 19.3 | % | | 655,477 | | | | 19.4 | % | | 112,047 | | | | 17.1 | % |

| Asia-Pacific | 278,117 | | | | 7.0 | % | | 240,176 | | | | 7.1 | % | | 37,941 | | | | 15.8 | % |

| Total revenues | $ | 3,975,163 | | | 100.0 | % | | $ | 3,370,976 | | | 100.0 | % | | $ | 604,187 | | | 17.9 | % |

| Cost of service | $ | 1,928,037 | | | 48.5 | % | | $ | 1,603,532 | | | 47.6 | % | | $ | 324,505 | | | 20.2 | % |

| Selling, general and administrative | 1,488,258 | | | | 37.4 | % | | 1,411,096 | | | | 41.9 | % | | 77,162 | | | | 5.5 | % |

| Operating expenses | $ | 3,416,295 | | | 85.9 | % | | $ | 3,014,628 | | | 89.4 | % | | $ | 401,667 | | | 13.3 | % |

| North America | $ | 457,009 | | | 11.5 | % | | $ | 350,291 | | | 10.4 | % | | $ | 106,718 | | | 30.5 | % |

| Europe | 272,769 | | | | 6.9 | % | | 232,882 | | | | 6.9 | % | | 39,887 | | | | 17.1 | % |

See "Cautionary Notice Regarding Forward-Looking Statements" located above "Item 1 - Business."

In particular, we recently completed our largest business combination to date when we merged with Heartland Payment Systems, Inc. ("Heartland") in April 2016.

Headquartered in Atlanta, Georgia, we are a member of the Standard & Poor's 500 Index ("S&P 500"), and our common stock is traded on the New York Stock Exchange under the symbol "GPN." Global Payments Inc. and its consolidated subsidiaries are referred to collectively as "Global Payments," the "Company," "we," "our" or "us," unless the context requires otherwise.

Through our wholesale channel, we provide payment processing services through third-party sales groups referred to as independent sales organizations ("ISOs").

The ISOs act as a third-party sales group selling merchant acquiring services, with the majority of Global Payments' ISOs marketing direct merchant acquiring.

While there is some variation in seasonality across markets, the first and fourth fiscal quarters are generally the strongest, and the third fiscal quarter tends to be the weakest due to lower volumes processed in the months of January and February.

| | |

| --- | --- |

| • | We completed the most significant business combination in our history when we merged with Heartland in April 2016. As a result of the merger, we now have more than 8,500 employees worldwide and service nearly 2.5 million merchants in 30 countries. |

| • | Net income attributable to Global Payments was $271.7 million in fiscal 2016 compared to $278.0 million in the prior year primarily as a result of expenses of $51.3 million associated with our merger with Heartland and the unfavorable effect of fluctuations in foreign currency on our operating income of $43.6 million. Diluted earnings per share was $2.04 in fiscal 2016 compared to $2.06 in fiscal 2015. |

| • | We completed a 2-for-1 stock split in the form of a stock dividend, and our split-adjusted share price increased 49% during fiscal 2016, while the S&P 500 was flat. |

| • | We joined the S&P 500 during fiscal 2016. Companies included in the index are selected by the S&P Index Committee, a team of analysts and economists at Standard & Poor's. |

On December 15, 2015, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with Heartland pursuant to which we merged with Heartland on April 22, 2016 in a transaction valued at $4.4 billion, including assumed debt of $0.4 billion.

Prior to the merger, Heartland was one of the largest payment services companies in the United States, delivering merchant acquiring services and offering integrated commerce, point-of-sale ("POS"), ecommerce, marketing, payroll and other solutions that are highly complementary to the services offered by Global Payments.

We intend to leverage our scalable, worldwide infrastructure to drive revenue enhancements and technological and operational synergies.

In connection with our merger with Heartland, we entered into an amendment to our existing credit facilities to provide for secured financing of up to $4.78 billion, the incremental proceeds of which were used, among other things, to repay certain portions of Heartland’s existing indebtedness and to finance, in part, the cash consideration and the merger-related costs.

See "Liquidity and Capital Resources-Long-Term Debt and Credit Facilities" below for further discussion of our credit facilities.

This acquisition was funded by a combination of cash on hand and borrowings on our revolving credit facility.

The carrying amount of our member interests in VE at May 31, 2016 was approximately €30, the cost of obtaining the membership interests.

On June 21, 2016, Visa Inc. ("Visa") acquired all of the membership interests in VE, including ours.

Commencing with fiscal 2016, we began reporting based on realigned segments (North America, Europe and Asia-Pacific) due to international investment and a realigned management structure.

As a result, we have presented prior year segment data in a manner that conforms to our current year presentation.

In indirect merchant acquiring, the partner, typically a financial institution or an ISO, is our customer.

We provide payment services to the indirect customer's merchants, but do not provide sponsorship or funds settlement.

We bill the indirect customer fees for transactions and various other services, which are recognized as revenue.

Fiscal Year Ended May 31, 2015 Compared to Fiscal Year Ended May 31, 2014

| North America | $ | 1,968,890 | | | 71.0 | % | | $ | 1,808,992 | | | 70.8 | % | | $ | 159,898 | | | 8.8 | % |

| Europe | 615,966 | | | | 22.2 | % | | 587,463 | | | | 23.0 | % | | 28,503 | | | | 4.9 | % |

| Asia-Pacific | 188,862 | | | | 6.8 | % | | 157,781 | | | | 6.2 | % | | 31,081 | | | | 19.7 | % |

| Total revenues | $ | 2,773,718 | | | 100.0 | % | | $ | 2,554,236 | | | 100.0 | % | | $ | 219,482 | | | 8.6 | % |

| Cost of service | $ | 1,022,107 | | | 36.8 | % | | $ | 952,225 | | | 37.3 | % | | $ | 69,882 | | | 7.3 | % |

| Selling, general and administrative | 1,295,014 | | | | 46.7 | % | | 1,196,512 | | | | 46.8 | % | | 98,502 | | | | 8.2 | % |

| Operating expenses | $ | 2,317,121 | | | 83.5 | % | | $ | 2,148,737 | | | 84.1 | % | | $ | 168,384 | | | 7.8 | % |

| North America | $ | 293,139 | | | | | | $ | 272,251 | | | | | | $ | 20,888 | | | 7.7 | % |

| Europe | 240,014 | | | | | | | 209,334 | | | | | | | 30,680 | | | | 14.7 | % |

| Asia-Pacific | 39,697 | | | | | | | 30,845 | | | | | | | 8,852 | | | | 28.7 | % |

| Corporate | (116,253 | | ) | | | | | (106,931 | | ) | | | | | (9,322 | | ) | | 8.7 | % |

| Operating income | $ | 456,597 | | | 16.5 | % | | $ | 405,499 | | | 15.9 | % | | $ | 51,098 | | | 12.6 | % |

| North America | 14.9 | | % | | | | | 15.0 | | % | | | | | (0.1 | | )% | | | |

| Europe | 39.0 | | % | | | | | 35.6 | | % | | | | | 3.4 | | % | | | |

For [removed: fiscal] [added: the year ended May 31,] 2016, currency rate fluctuations reduced our revenues by $117.0 million and our operating income by $43.6 million as compared to the [removed: prior year,] [added: prior-year period,] calculated by converting [removed: fiscal 2016] revenues and expenses [added: for the year ended May 31, 2016] in local currency using [removed: fiscal 2015] [added: prior-year period] rates.

For the [added: year ended December 31, 2017, the 2016 fiscal transition period and the] years ended May 31, [removed: 2016, 2015] [added: 2016] and [removed: 2014,] [added: 2015,] our transaction gains and losses were insignificant.

The resulting translation adjustment is recorded as a component of other comprehensive income and [removed: is included in shareholders' equity.]

We have [removed: term loans and] a [removed: corporate credit facility that we use] [added: Credit Facility] for general corporate purposes, as well as various lines of credit that we use to fund settlement in certain of our markets.

As of [removed: May] [added: December] 31, [removed: 2016, there was $4.9] [added: 2017, $4.7] billion [added: was] outstanding under these variable-rate debt arrangements and settlement lines of credit.

The interest earned on our [added: invested] cash [removed: investments] and the interest paid on our debt are based on variable interest rates; therefore, the exposure of our net income to a change in interest rates is partially mitigated as an increase in rates would increase both interest income and interest expense, and a reduction in rates would decrease both interest income and interest expense.

We have interest rate swaps that reduce a portion of our exposure to market interest rate risk on our LIBOR-based debt as discussed in "Note [removed: 7 - Long-Term] [added: 7—Long-Term] Debt and [removed: Credit Facilities"] [added: Lines of Credit"] in the notes to our accompanying consolidated financial statements.

Based on balances outstanding under variable-rate debt agreements and [added: invested] cash [removed: investment] balances at [removed: May] [added: December] 31, [removed: 2016,] [added: 2017,] a hypothetical increase of [removed: 100] [added: 50] basis points in applicable interest rates as of [removed: May] [added: December] 31, [removed: 2016] [added: 2017] would increase our annual interest expense by approximately [removed: $42.0] [added: $20.2] million and increase our annual interest income by approximately [removed: $3.3] [added: $3.5] million.

For the year ended December 31, 2017, currency rate fluctuations calculated by converting revenues and expenses for the year ended December 31, 2017 in local currency using prior-year period rates had an immaterial effect on our revenues and operating income.

For the 2016 fiscal transition period, currency rate fluctuations reduced our revenues by $35.3 million and our operating income by $19.8 million as compared to the prior-year period, calculated by converting current period revenues and expenses in local currency using the prior-year period rates.

is included in shareholders' equity.

We are a leading worldwide provider of payment technology [removed: services] [added: and software solutions] delivering innovative [removed: solutions] [added: services] to our customers globally.

Our technologies, [removed: partnerships] [added: services] and employee expertise enable us to provide a broad range of [removed: services] [added: solutions] that allow our customers to accept various payment [removed: types.][added: types and operate their businesses more efficiently.]

We distribute our services across a variety of channels to [removed: merchants and partners] [added: customers] in 30 countries throughout North America, Europe, the Asia-Pacific region and Brazil and operate in three reportable segments: North America, Europe and Asia-Pacific.

Since our [removed: spin-off in 2001,] [added: spin-off,] we have grown our annual revenues from $353 million [added: for the year ended May 31, 2001] to [removed: $2.9 billion,] [added: $4.0 billion for the year ended December 31, 2017,] through internal expansion of existing operations and through acquisitions.

The merger significantly expanded our small and medium-sized enterprise distribution, merchant base and vertical reach in the United [removed: States, adding a 1,400-person direct sales force, over 300,000 merchants and $130 billion in annual payments volume.][added: States.]

See "Note [removed: 2 - Acquisitions"] [added: 2—Acquisitions"] in the notes to the accompanying consolidated financial statements for further discussion of [removed: our merger with Heartland.][added: these and other acquisitions.]

See [removed: "Liquidity] [added: "Management's Discussion] and [added: Analysis - Liquidity and] Capital [removed: Resources-Long-Term] [added: Resources - Long-Term] Debt and [removed: Credit Facilities"] [added: Lines of Credit"] below for further discussion of our credit facilities.

Our payment solutions are similar around the world in that we enable our [removed: merchant] customers to accept card, electronic, check and digital-based [removed: payments at the point of sale.][added: payments.]

Our comprehensive offerings include, but are not limited to, authorization services, settlement and funding services, customer support and help-desk functions, chargeback resolution, terminal [added: rental,] sales and deployment, payment security services, consolidated billing and statements and on-line reporting.

Our value proposition is to provide [added: distinctive] high-quality, [removed: responsive, secure, end-to-end service] [added: responsive and secure services] to all of our customers.

We distribute our services through multiple channels and target customers in many vertical [removed: industries] [added: markets] in 30 countries located throughout North America, Europe, the Asia-Pacific region and [added: in] Brazil.

The majority of [removed: merchant services] revenues is generated by services priced as a percentage of transaction value or a specified fee per transaction, depending on the card type or the [removed: vertical.][added: market.]

We also earn [added: software licensing and subscription fees and] other fees based on specific [added: value-added] services that may be unrelated to the number or value of transactions.

Our primary business model is to actively market and provide our payment [added: services, enterprise software solutions and other value-added] services directly to [removed: merchants] [added: our customers] through a variety of distribution channels.

We offer high touch services that provide our [removed: merchants] [added: customers] with reliable and secure [removed: payment] solutions coupled with high quality and responsive support services.

Many of our payment solutions are technology-enabled in that they incorporate or are incorporated into innovative, technology-driven [removed: solutions] [added: solutions, including enterprise software solutions,] designed to enable merchants to better manage their businesses.

Our primary technology-enabled solutions include integrated [removed: payment solutions,] [added: and vertical markets,] ecommerce and omnichannel and gaming solutions, each as described below.

Our integrated [removed: payment] [added: and vertical market] solutions provide advanced payments technology that is deeply integrated into business enterprise software solutions either owned by us or by our partners.

We grow our business when new merchants implement our enterprise software solutions and when new [removed: and] [added: or] existing merchants enable payments services through enterprise software solutions sold by us or by our partners.

| • | Ezidebit. Through [removed: Ezidebit,] [added: Ezi Holdings Pty Ltd ("Ezidebit"),] we offer integrated payment solutions in the Asia-Pacific region. Ezidebit focuses on recurring payments verticals and, similar to OpenEdge, markets its services through a network of integrated software vendors and direct channels to numerous vertical markets. |

| • | Education Solutions. [removed: In North America, we] [added: We] offer integrated payment solutions specifically designed for all levels of educational institutions. At the university level, we offer integrated commerce solutions, payment services, higher education loan services and open- and closed-loop payment solutions. For kindergarten through 12th grade, we provide ecommerce and in-person payments, cafeteria POS solutions and back-office management software, hardware, technical support and training. |

We offer ecommerce and omnichannel solutions to our customers that seamlessly blend payment gateway services, retail payment acceptance infrastructure and [removed: merchant acquiring] [added: payment technology service] capabilities to allow merchants to accept various payment methods through any channel across our geographical footprint.

We sell ecommerce and omnichannel solutions to customers of all sizes, from small businesses accepting payments [removed: through a website] in a single country, to enterprise and multinational businesses that have complex payment needs and operate retail and online businesses in multiple countries.

Our services allow casino patrons in North America fast access to cash with high limits [removed: so that] [added: to enable] gaming establishments [removed: can] [added: to] increase the flow of money to their gaming floors and reduce risk.

The ISOs act as [removed: a] third-party sales [removed: group] [added: groups] selling [removed: merchant acquiring] [added: our payment technology] services directly to [removed: end user] [added: end-user] merchant customers.

During a typical payment transaction, the merchant and the card issuer do not interface directly with each other, but instead rely on [removed: merchant acquirers,] [added: payments technology companies,] such as Global Payments, to facilitate transaction [removed: processing.][added: processing services, including authorization, electronic draft capture, file transfers to facilitate funds settlement and certain exception-based, back office support services such as chargeback and retrieval resolution.]

To be designated as a certified processor, member clearing [removed: banks] [added: financial institutions] ("Member") sponsor us and require our adherence to the standards of the networks.

A typical payment transaction begins when a cardholder presents a card for payment at a merchant location where the card information is captured by a POS terminal card reader or mobile device card reader, which may be sold or leased to the [removed: merchant,] [added: merchant] and serviced by us.

Alternatively, card and transaction information may be captured and transmitted to our network through a POS device [added: or ecommerce portal] by one of a number of services that we offer directly or through a [removed: VAR.][added: value-added reseller.]

The card reader electronically records sales draft information, such as the card identification number, transaction date and [removed: value of the goods or services purchased.][added: transaction amount.]

After the card and transaction information is [removed: captured by the card reader,] [added: captured,] the [removed: terminal] [added: POS device] automatically connects to our network through the internet or other communication channel in order to receive authorization of the transaction.

For a credit card transaction, authorization services generally refer to the process in which the card issuer indicates whether a particular credit card is authentic and whether the impending transaction [removed: value] [added: amount] will cause the cardholder to exceed defined credit limits.

In a debit card transaction, we obtain authorization for the transaction from the card issuer through the payment network verifying that the cardholder has sufficient funds for the transaction [removed: value.][added: amount.]

The card issuer seeks reimbursement of $100.00 from the cardholder in the cardholder's monthly credit card [removed: bill.][added: statement.]

After the end of the month, we would bill the merchant a percentage of the [removed: transaction,] [added: transaction amount,] or [added: merchant] discount, to cover the full amount of the interchange fee and our [removed: net revenue] [added: fee] from the transaction.

If our discount rate for the merchant in the above example was 2.00%, we would bill the merchant $2.00 [removed: at] [added: after] the end of the month for the transaction, reimburse ourselves for $1.50 in interchange fees and retain $0.50 [removed: or 0.50%] as our [removed: net revenue] [added: fees] for the transaction.

Accordingly, our [removed: net revenue] [added: fee] per transaction varies across our merchant base and is subject to change based on changes in discount rates and interchange rates.

Our profit on the transaction reflects the [removed: net revenue] [added: fee received] less operating expenses, including [removed: assessments and other] [added: payment] network fees, systems cost to process the transaction and commissions paid to our sales force or ISO.

[removed: Assessments are] [added: Payment network] fees [added: are] charged by the card brands based on the value of transactions processed through their networks.

[removed: ][added: ]

Recent Developments

On September 1, 2017, we acquired ACTIVE Network for total purchase consideration of $1.2 billion, consisting of approximately $600 million in cash and 6.4 million shares of our common stock.

ACTIVE Network delivers cloud-based enterprise software, including payment technology solutions, to event organizers in the communities and health and fitness vertical markets.

This acquisition aligns with our technology-enabled, software driven strategy and adds an enterprise software business operating in two additional vertical markets that we believe offer attractive growth fundamentals.

On April 22, 2016, we merged with Heartland Payment Systems, Inc. ("Heartland") in a cash-and-stock transaction for total purchase consideration of $3.9 billion.

On May 2, 2017, we amended our existing corporate credit facility (the "Credit Facility") to increase the total financing capacity available under the Credit Facility to $5.2 billion.

As of December 31, 2017, the Credit Facility provided for secured financing compromised of (i) a $1.5 billion term loan (the "Term A Loan"), (ii) a $1.3 billion term loan (the "Term A-2 Loan"), (iii) a $1.2 billion term loan facility (the "Term B-2 Loan") and (iv) a $1.25 billion revolving credit facility (the "Revolving Credit Facility").

Payment Technology Services and Software Solutions Overview

We provide payment technology and software solutions to customers globally.

In addition, we offer a wide array of enterprise software solutions that streamline business operations to customers in numerous vertical markets.

We also provide a variety of value-added services, including analytic and engagement tools, payroll services and reporting that assist our customers with driving demand and operating their businesses more efficiently.

Through our direct sales force worldwide, as well as bank partnerships, we offer our payment technology services, software and other value-added solutions directly to customers in the markets we serve.

Integrated and Vertical Markets.

| • | ACTIVE Network. Through ACTIVE Network, we deliver cloud-based enterprise software, including payment technology solutions, to event organizers in the communities and health and fitness markets. |

Under some arrangements, we remit the net amount of $98.50 to the merchant, rather than funding the full $100.00 and subsequently billing the merchant at the end of the month.

We have direct sales forces in these markets through which we sell our services

while also leveraging our bank referral relationships.

We expect to continue to expand into new markets internationally or increase our scale and improve our competitiveness in existing markets by pursuing further acquisitions and joint ventures.

As a result, we expect an increasing portion of our future capital investment will be allocated to support the development of new and emerging technologies; however, we do not expect our aggregate capital spending to increase materially from our current level of spending as a result of this.

| | |

| --- | --- |

been unclaimed for a certain period of time.

We recently completed our largest business combination to date when we merged with Heartland Payment Systems, Inc. ("Heartland") in April 2016.

Merger with Heartland

On April 22, 2016, following the approval of Heartland’s stockholders, we completed our merger with Heartland in a transaction valued at $4.4 billion, including assumed debt of $0.4 billion.

As a result, Heartland became a wholly owned subsidiary of Global Payments Inc. Prior to the merger, Heartland was one of the largest payment services companies in the United States, delivering merchant acquiring services and offering integrated commerce, point-of-sale ("POS"), omnichannel, marketing, payroll and other solutions that are highly complementary to the services offered by Global Payments.

We intend to leverage our scalable, worldwide infrastructure to drive revenue enhancements and technological and operational synergies.

Our consolidated statements of income, comprehensive income, cash flows and changes in equity presented in the accompanying consolidated financial statements include the results of Heartland for the period from the acquisition date through May 31, 2016.

On February 26, 2016, we amended our existing credit facilities to provide for secured financing of up to $4.78 billion, the incremental proceeds of which were used, among other things, to repay certain portions of Heartland’s existing indebtedness and to finance, in part, the cash consideration and the merger-related costs.

Merchant Services Overview

Through our direct sales force worldwide, as well as bank partnerships, referral partners and our agent network, we offer rapid merchant boarding, high availability and secure payment acceptance and payment services, risk, fraud and chargeback management, reporting and analytics services, support services and other ancillary services.

Integrated Payment Solutions.

We also provide merchant services (but not funds settlement services) to merchants indirectly through financial institutions and a limited number of ISOs, whereby the financial institution or the ISO is our customer.

A merchant acquirer performs a series of services including authorization, electronic draft capture, file transfers to facilitate funds settlement and certain exception-based, back office support services such as chargeback and retrieval resolution.

Our primary mode of distribution in North America is our direct distribution channels, including our direct sales force.

Russian Federation.

We have a direct sales force in the United Kingdom, Spain, the Republic of Malta and the Russian Federation through which we primarily sell our direct merchant acquiring services while leveraging our bank referral relationships.

In addition, on June 1, 2016, we completed our joint venture with Erste Group Bank AG, a leading financial services provider in Central and Eastern Europe, which expanded our acquiring services into Romania and provided deeper penetration into the Czech Republic and Slovakia.

Financial institutions that offer merchant acquiring services are our primary competitors in Asia-Pacific.

We believe that the electronic payment services industry will continue to consolidate as banks and independent processors that lack the necessary infrastructure, scale and ability to invest look to exit the business.

We have also launched a suite of security services that provide POS, point-to-point encryption, tokenization services, Payment Card Industry Data Security Standard ("PCI DSS") merchant assistance, real-time fraud protection and other services to enhance and simplify security for all merchants and partners.

We continue to expand our forms of payments acceptance

supporting radio frequency identification for contactless payment cards and near-field communication enabled smartphones that contain mobile wallet software.

This allows us to offer customers the ability to accept payments through mobile wallets and the ability for our customers to use a tablet or other mobile device as a POS terminal.

As mobile payments continue to evolve, we intend to continue partnering and developing new services that will leverage the benefits that these new technologies can offer our customers.

| • | Technology Solutions - We provide innovative technology-based solutions that enable our customers to operate their business more efficiently and simplify the payments process, regardless of the channel through which the transaction occurs. We believe our robust technology solutions will continue to differentiate us in the marketplace and will position us for continued growth. |

In addition, the Dodd-Frank Act limits the ability of payment card networks to impose certain restrictions.

Second, it allows merchants to provide discounts or incentives to encourage consumers to pay with cash, checks, debit cards or credit cards.

Heartland, Heartland’s board of directors, Global Payments, Data Merger Sub One, Inc. (a wholly owned subsidiary of Global Payments, which we refer to as "Data Merger Sub One") and Data Merger Sub Two, LLC (a wholly owned subsidiary of Global Payments, which we refer to as "Data Merger Sub Two") were named as defendants in a putative class action lawsuit challenging the proposed merger with Heartland.

The suit was filed on January 8, 2016 in the New Jersey Superior Court, Mercer County, Civil Division, and is captioned Kevin Merchant v.

Heartland Payment Systems, et al, L-45-16.

The complaint alleges, among other things, that the directors of Heartland breached their fiduciary duties to Heartland stockholders by agreeing to sell Heartland for inadequate consideration, agreeing to improper deal protection terms in the merger agreement, failing to properly value Heartland, and filing a materially incomplete registration statement with the Securities and Exchange Commission.

In addition, the complaint alleges that Heartland, Global Payments, Merger Sub One, and Merger Sub Two aided and abetted these purported breaches of fiduciary duty.

On April 12, 2016, solely to avoid the costs, disruption and distraction of further litigation, and without admitting the validity of any allegations made by the plaintiff, Heartland and Global Payments reached an agreement to settle the suit and entered into a Memorandum of Understanding to document the terms and conditions for settlement of the suit.

The proposed settlement is subject to court approval.

If the proposed settlement is approved by the court, it will release all claims that were or could have been brought challenging any aspect of the merger with Heartland or the merger agreement related thereto and any disclosure made in connection therewith, under terms that will be disclosed to stockholders before final approval of the proposed settlement.

The settlement, if approved, is not expected to have a material adverse effect on our financial position, liquidity, results of operations or cash flows.

For the fiscal year ended [removed: May] [added: December] 31, [removed: 2016][added: 2017]

[removed: ][added: ]

See the definitions of “large accelerated filer,” “accelerated [removed: filer” and] [added: filer,”] “smaller reporting company” [added: and “emerging growth company"] in Rule 12b-2 of the Exchange Act.

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter was [removed: $9,112,999,702.][added: $13,694,503,028.]

The number of shares of the registrant's common stock outstanding at [removed: July 26, 2016] [added: February 19, 2018] was [removed: 153,630,063] [added: 159,205,866] shares.

Specifically identified portions of the registrant's proxy statement for the [removed: 2016] [added: 2018] annual meeting of shareholders are incorporated by reference in Part III.

[removed: 2016 FORM 10-K] [added: 2017] ANNUAL REPORT [added: ON FORM 10-K]

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| ITEM 7A. | | [QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET [removed: RISK](#sD27A8CCA694683148E4FE6572AC42698)] [added: RISK](#s4BB9F39CD4ED5DAA9545EB9D3834F66E)] | [removed: [45](#sD27A8CCA694683148E4FE6572AC42698)] [added: [47](#s4BB9F39CD4ED5DAA9545EB9D3834F66E)] |

| ITEM 8. | | [FINANCIAL STATEMENTS AND SUPPLEMENTARY [removed: DATA](#s4CB8F769CD69FC508E1BE6572AD80304)] [added: DATA](#s10F30AEF9EF55ACB8D32B7DBA90AD031)] | [removed: [46](#s4CB8F769CD69FC508E1BE6572AD80304)] [added: [49](#s10F30AEF9EF55ACB8D32B7DBA90AD031)] |

| ITEM 9. | | [CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL [removed: DISCLOSURE](#s2DB8FDCB5917420BCA85E6573208E509)] [added: DISCLOSURE](#sB22EE711E18A505CA1F177AEF3425CE9)] | [removed: [89](#s2DB8FDCB5917420BCA85E6573208E509)] [added: [96](#sB22EE711E18A505CA1F177AEF3425CE9)] |

| ITEM 9A. | | [CONTROLS AND [removed: PROCEDURES](#s02A8C97B6AE09CCEE47FE65732268717)] [added: PROCEDURES](#sB2D70FB5C07A54A79B31E1FE6614E749)] | [removed: [89](#s02A8C97B6AE09CCEE47FE65732268717)] [added: [96](#sB2D70FB5C07A54A79B31E1FE6614E749)] |

| ITEM 10. | | [DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE [removed: GOVERNANCE](#sE54774BDC24B2BA80EE1E6573294B02D)] [added: GOVERNANCE](#sA35B84A7A5C0572D88EB74CC783E7E7B)] | [removed: [91](#sE54774BDC24B2BA80EE1E6573294B02D)] [added: [97](#sA35B84A7A5C0572D88EB74CC783E7E7B)] |

| ITEM 11. | | [EXECUTIVE [removed: COMPENSATION](#s9D225787833239913E39E65732C6176E)] [added: COMPENSATION](#s797AD72F7B205B0DB8C95B7E9E67AAB0)] | [removed: [91](#s9D225787833239913E39E65732C6176E)] [added: [97](#s797AD72F7B205B0DB8C95B7E9E67AAB0)] |

| ITEM 12. | | [SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER [removed: MATTERS](#s8D675B9DD279B331934BE6571E9E8407)] [added: MATTERS](#sFE28B79344185755A762142E0C91F272)] | [removed: [91](#s8D675B9DD279B331934BE6571E9E8407)] [added: [97](#sFE28B79344185755A762142E0C91F272)] |

| ITEM 13. | | [CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR [removed: INDEPENDENCE](#s2AEF58FE587EACF02AB2E65733161ACE)] [added: INDEPENDENCE](#s380F20761AEE5CD0B639C5F4EB9C9F1F)] | [removed: [92](#s2AEF58FE587EACF02AB2E65733161ACE)] [added: [98](#s380F20761AEE5CD0B639C5F4EB9C9F1F)] |

| ITEM 14. | | [PRINCIPAL ACCOUNTING FEES AND [removed: SERVICES](#sE692A4C61E4486B45D15E657333E3AE8)] [added: SERVICES](#sE0ADA45D03375C05BE147BB7E8BCB182)] | [removed: [92](#sE692A4C61E4486B45D15E657333E3AE8)] [added: [98](#sE0ADA45D03375C05BE147BB7E8BCB182)] |

| ITEM 15. | | [EXHIBITS, FINANCIAL STATEMENT [removed: SCHEDULES](#s7B4C6C06119D446676B1E657338E8C9A)] [added: SCHEDULES](#sDED9BFABC40A5D47BB1188B1C177395E)] | [removed: [93](#s7B4C6C06119D446676B1E657338E8C9A)] [added: [99](#sDED9BFABC40A5D47BB1188B1C177395E)] |

CAUTIONARY NOTICE REGARDING [added: FORWARD-LOOKING STATEMENTS]

Some of the statements we use in this report, and in some of the documents we incorporate by reference in this report, contain forward-looking statements concerning our business operations, economic performance and financial condition, including in particular: our business strategy and means to implement the strategy; measures of future results of operations, such as revenues, expenses, operating margins, income tax rates, and earnings per share; other operating metrics such as shares outstanding and capital expenditures; our success and timing in developing and introducing new services and expanding our business; [added: statements about the benefits of our acquisition of the communities] and [added: sports divisions of Athlaction Topco, LLC ("ACTIVE Network"), including future financial and operating results,] the [added: combined company’s plans, objectives, expectations and intentions, and the] successful integration of future acquisitions.

Important factors that may cause actual events or results to differ materially from those anticipated by our forward-looking statements include our ability to safeguard our data; increased competition from larger companies and non-traditional competitors; our ability to update our services in a timely manner; our ability to maintain Visa and MasterCard registration and financial institution sponsorship; our reliance on financial institutions to provide clearing services in connection with our settlement activities; our potential failure to comply with card network requirements; potential systems interruptions or failures; software defects or undetected errors; increased attrition of merchants, referral partners or independent sales organizations; our ability to increase our share of existing markets and expand into new markets; a decline in the use of cards for payment generally; unanticipated increases in chargeback liability; increases in credit card network fees; changes in laws, regulations or network rules or interpretations thereof; foreign currency exchange and interest rate risks; political, economic and regulatory changes in the foreign countries in which we operate; future performance, integration and conversion of acquired operations, including without limitation difficulties and delays in integrating [removed: the Heartland Payment Systems, Inc. business] or fully realizing cost savings and other benefits of [removed: the acquisition] [added: our acquisitions] at all or within the expected time period; [added: fully realizing anticipated annual interest expense savings from refinancing our Credit Facility;] loss of key personnel; and other risk factors presented in Item "1A - Risk Factors of this Annual Report on Form [removed: 10‑K",] [added: 10‑K,"] which we advise you to review.

10-K 1 gpn20171231-10k.htm 10-K

| 3550 Lenox Road, Atlanta, Georgia | | 30326 |

Emerging growth company o

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

| | | [SIGNATURES](#sE376C2FE5F105E17B7D8212654A1130C) | [102](#sE376C2FE5F105E17B7D8212654A1130C) |

EXPLANATORY NOTE REGARDING TRANSITION PERIOD

In 2016, we changed our fiscal year-end from May 31 to December 31.

As a result, we refer to the period consisting of the seven-months ended December 31, 2016 as the "2016 fiscal transition period."

When our financial results for the year ended December 31, 2017 and the 2016 fiscal transition period are compared to our financial results for the prior-year periods, the results compare the twelve-month period from January 1, 2017 through December 31, 2017 to the twelve-month period from January 1, 2016 through December 31, 2016 and compare the seven-month period from June 1, 2016 through December 31, 2016 to the seven-month period from June 1, 2015 through December 31, 2015.

The results for the twelve months ended December 31, 2016 and the seven months ended December 31, 2015 are unaudited.

10-K 1 gpn20160531-10k.htm 10-K

| 10 Glenlake Parkway, North Tower, Atlanta, Georgia | | 30328-3473 |

| ITEM 9B. | | [OTHER INFORMATION](#s9A078D9A1863ED8428F2E65732449688) | [90](#s9A078D9A1863ED8428F2E65732449688) |

| | | [SIGNATURES](#sB54A471BCF2B5D93A59BE65733C0E93D) | [97](#sB54A471BCF2B5D93A59BE65733C0E93D) |

FORWARD-LOOKING STATEMENTS

Our principal facilities in North America are located in Atlanta, Georgia; [added: Dallas, Texas;] Jeffersonville, Indiana; Las Vegas, Nevada; [removed: Owings Mills, Maryland; Pleasant Grove,] [added: Lindon,] Utah; [removed: Princeton, New Jersey;] and Toronto, Canada.

At [removed: May] [added: December] 31, [removed: 2016,] [added: 2017,] we owned [removed: three] [added: four international] facilities and leased 51 domestic properties and [removed: 72] [added: 96] international [removed: properties] [added: properties,] which we use for operational, sales and administrative purposes.

Our common stock trades on the New York Stock Exchange under the ticker symbol "GPN." The [added: following] table [removed: set forth below] provides the intraday high and low [removed: sales] prices [added: of our common stock] and dividends paid per share [removed: of our common stock] for [added: each of] the [removed: four] quarters during [removed: fiscal] [added: the year ended December 31, 2017, the] 2016 [added: fiscal transition period] and [removed: 2015.][added: the year ended May 31, 2016.]

We expect to continue to pay our shareholders a [removed: dividend per share,] [added: dividend,] on a quarterly basis, in an amount comparable to the dividends indicated in the table.

| [added: 2016] Fiscal [removed: 2016:] [added: Transition Period:] | | | | | | | | | | | |

| First Quarter [added: (June 2015 - August 2015)] | $ | 59.29 | | | $ | 50.69 | | | $ | 0.01 | |

| Second Quarter [added: (September 2015 - November 2015)] | 72.91 | | | | 54.03 | | | | 0.01 | | |

| Third Quarter [added: (December 2015 - February 2016)] | 74.64 | | | | 51.29 | | | | 0.01 | | |

| Fourth Quarter [added: (March 2016 - May 2016)] | 78.30 | | | | 58.11 | | | | 0.01 | | |

As of [removed: July 26, 2016,] [added: February 16, 2018,] there were [removed: 2,122] [added: 2,384] shareholders of record.

The information regarding our compensation plans under which equity securities are authorized for issuance is set forth in "Item [removed: 12 - Security] [added: 12—Security] Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" of this Annual Report.

The following graph compares our cumulative shareholder returns with the Standard & Poor's Information Technology Index and the Standard & Poor's 500 Index for the [removed: five] [added: year ended December 31, 2017, the 2016 fiscal transition period, and the] years ended May 31, [removed: 2016.][added: 2016, 2015, 2014 and 2013.]

The line graph assumes the investment of $100 in our common stock, the Standard & Poor's [removed: Information Technology] [added: 500] Index and the Standard & Poor's [removed: 500] [added: Information Technology] Index on May 31, [removed: 2011] [added: 2012] and assumes reinvestment of all dividends.

[removed: ][added: ]

*$100 invested on May 31, [removed: 2011] [added: 2012] in stock or index, including reinvestment of dividends.

| | [added: |] Global Payments | | | | S&P 500 [added: Index] | | | | S&P Information Technology [added: Index] | | |

| May 31, [removed: 2011] [added: 2012] | [added: |] $ | 100.00 | | | $ | 100.00 | | | $ | 100.00 | |

[removed: Under these and other existing authorizations, we] [added: We] repurchased and retired [removed: 2.2 million] [added: 376,309] shares of our common stock at a cost of [removed: $135.9] [added: $34.8] million including commissions, or an average price of [removed: $63.17] [added: $92.51] per share, during the year ended [removed: May] [added: December] 31, [removed: 2016.][added: 2017, as previously authorized; however, we did not repurchase any shares of our common stock during the quarter ended December 31, 2017.]

[removed: In addition to the shares we repurchased on the open market as set forth in the table above, during] [added: During] the quarter ended [removed: May] [added: December] 31, [removed: 2016,] [added: 2017,] pursuant to our employee incentive plans, we [removed: repurchased 2,555] [added: withheld 81,889] shares at an average price [removed: per share] of [removed: $68.77] [added: $96.82] in order to satisfy [removed: employees’] [added: employees'] tax withholding and payment obligations in connection with the vesting of awards of restricted stock, which we [removed: repurchased] [added: withheld] at fair market value on the vesting date.

Further, our Credit Facility may prohibit us from paying quarterly dividends in excess of $0.01 per share.

| Year Ended December 31, 2017: | | | | | | | | | | | |

| First Quarter (January 2017 - March 2017) | $ | 81.63 | | | $ | 69.04 | | | $ | 0.01 | |

| Second Quarter (April 2017 - June 2017) | 93.52 | | | | 76.47 | | | | 0.01 | | |

| Third Quarter (July 2017 - September 2017) | 98.14 | | | | 87.86 | | | | 0.01 | | |

| Fourth Quarter (October 2017 - December 2017) | 104.90 | | | | 95.01 | | | | 0.01 | | |

| First Quarter (June 2016 - August 2016) | $ | 79.93 | | | $ | 67.04 | | | $ | 0.01 | |

| Second Quarter (September 2016 - November 2016) | 79.24 | | | | 64.63 | | | | 0.01 | | |

| June 1, 2016 through December 31, 2016 | 79.93 | | | | 64.63 | | | | 0.02 | | |

| Year Ended May 31, 2016 | | | | | | | | | | | |

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among Global Payments Inc., the S&P 500 Index

and the S&P Information Technology Index

Copyright© 2018 Standard & Poor's, a division of S&P Global.

All rights reserved.

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | |

| May 31, 2013 | | 113.10 | | | | 127.28 | | | | 115.12 | | |

| May 31, 2014 | | 161.90 | | | | 153.30 | | | | 142.63 | | |

| May 31, 2015 | | 246.72 | | | | 171.40 | | | | 169.46 | | |

| May 31, 2016 | | 367.50 | | | | 174.34 | | | | 174.75 | | |

| December 31, 2016 | | 328.42 | | | | 188.47 | | | | 194.08 | | |

| December 31, 2017 | | 474.52 | | | | 229.61 | | | | 269.45 | | |

Our board of directors has authorized us to repurchase shares of our common stock through any combination of Rule 10b5-1 open market repurchase plans, accelerated share repurchase plans, discretionary open-market purchases or privately negotiated transactions.

As of December 31, 2017, the approximate dollar value of shares that may yet be purchased under our share repurchase program was $264.9 million remaining available under the board's authorization announced on January 5, 2017.

On February 6, 2018, the board increased its authorization to repurchase shares of our common stock to $600 million.

The authorizations by the board of directors do not expire, but could be revoked at any time.

In addition, we are not required by any of the board's authorizations or otherwise to complete any repurchases by any specific time or at all.

The amounts presented in the table below have been adjusted to reflect a two-for-one stock split of Global Payments common stock, paid to Global Payments shareholders in the form of a stock dividend on November 2, 2015.

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Fiscal 2015: | | | | | | | | | | | |

| First Quarter | $ | 37.23 | | | $ | 33.67 | | | $ | 0.01 | |

| Second Quarter | 43.36 | | | | 34.30 | | | | 0.01 | | |

| Third Quarter | 46.50 | | | | 38.58 | | | | 0.01 | | |

| Fourth Quarter | 53.03 | | | | 43.84 | | | | 0.01 | | |

Sale of Unregistered Securities

We did not issue any unregistered securities during the year ended May 31, 2016.

Fiscal year ending May 31.

Copyright© 2016 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.

| May 31, 2012 | 81.90 | | | | 99.59 | | | | 107.57 | | |

| May 31, 2013 | 92.63 | | | | 126.75 | | | | 123.83 | | |

| May 31, 2014 | 132.59 | | | | 152.67 | | | | 153.42 | | |

| May 31, 2015 | 202.06 | | | | 170.69 | | | | 182.29 | | |

| May 31, 2016 | 300.97 | | | | 173.62 | | | | 187.97 | | |

As announced on July 28, 2015, our Board of Directors authorized the additional repurchase of up to $300.0 million of our common stock.

Information about the shares of our common stock that we repurchased during the quarter ended May 31, 2016 is set forth below:

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Month | | Number of Shares Purchased | | | Average Price per Share | | | | Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | | Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | |

| | | | | | | | | | | | | (in millions) | | |

| March 2016 | | 10,848 | | | $ | 62.32 | | | 10,848 | | | | | |

| April 2016(1) | | 567,261 | | | 73.24 | | | | 567,261 | | | | | |

| May 2016 | | 5,538 | | | 71.97 | | | | 5,538 | | | | | |

| | | 583,647 | | | $ | 73.02 | | | 583,647 | | | $ | 266.9 | |

(1) On April 25, 2016, we entered into an Accelerated Share Repurchase ("ASR") with a financial institution to repurchase an aggregate of $50 million of our common stock.

In exchange for an up-front payment of $50 million, the financial institution committed to deliver a number of shares during the ASR's purchase period, which ended on June 23, 2016.

On April 26, 2016, 545,777 shares were initially delivered to us.

On June 23, 2016, an additional 127,435 shares were delivered to us.

The total number of shares delivered under this ASR was 673,212 shares at an average price of $74.27 per share.

You should read the selected financial data set forth below in conjunction with (i) "Item 7 ‑ Management's Discussion and Analysis of Financial Condition and Results of Operations," (ii) "Item 8 ‑ Financial Statements and Supplementary Data" [removed: included elsewhere in this Annual Report,] [added: and] (iii) the historical consolidated financial statements of Global Payments and the related notes presented in [removed: its Annual Report on Form 10-K for the year ended May 31, 2015, and (iv) updated portions of Global Payments’] [added: this] Annual Report on Form [removed: 10-K for the year ended May 31, 2015 filed with the SEC in a Current Report on Form 8-K on February 5, 2016 to reflect, for all periods presented, the retrospective effects of a change in reportable segments, the adoption of accounting standards updates and a stock split effected in the form of a dividend paid on November 2, 2015.][added: 10-K.]

The income statement data for the [added: year ended December 31, 2017, the 2016 fiscal transition period and the] years ended May 31, [removed: 2016, 2015,] [added: 2016] and [removed: 2014] [added: 2015] and the balance sheet data as of [removed: May] [added: December] 31, [removed: 2016] [added: 2017] and [removed: 2015] [added: 2016] are derived from the audited consolidated financial statements included elsewhere in this Annual [removed: Report.][added: Report on Form 10-K.]

The income statement data for [removed: fiscal years] [added: the year ended May 31,] 2013 and [removed: 2012 and] the balance sheet data as of May 31, 2014 [removed: and 2013] were derived from [added: audited] consolidated financial statements included in our Annual Report on Form 10-K for the year ended May 31, [removed: 2014.][added: 2015.]

The balance sheet data as of May 31, [removed: 2012 was] [added: 2013 were] derived from [added: the] audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended May 31, [removed: 2013.][added: 2014.]

| | Year Ended [removed: May] [added: December] 31, | | | | [added: Seven Months Ended December 31,] | | | | [added: Year Ended May 31,] | | | | | | | | | | | [added: | | | |]

| | [added: 2017 | | | |] 2016 | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | |

| | (in thousands, except per share data) | | | | | | | | | | | | | | | | | | | [added: | | | |]

| Income statement data: | | | | | | | | | | | | | | | | | | | | [added: | | | |]

| Revenues | $ | [removed: 2,898,150] [added: 3,975,163] | | | $ | [removed: 2,773,718] [added: 2,202,896] | | | $ | [removed: 2,554,236] [added: 2,898,150] | | | $ | [removed: 2,375,923] [added: 2,773,718] | | | $ | [removed: 2,203,847] [added: 2,554,236] | | [added: | $ | 2,375,923 | |]

| Operating income | [removed: 424,944] [added: 558,868] | | | | [removed: 456,597] [added: 237,951] | | | | [removed: 405,499] [added: 424,944] | | | | [removed: 357,213] [added: 456,597] | | | | [removed: 307,349] [added: 405,499] | | | [added: | 357,213 | | |]

| Net income | [removed: 290,217] [added: 494,070] | | | | [removed: 309,115] [added: 137,683] | | | | [removed: 269,952] [added: 290,217] | | | | [removed: 238,713] [added: 309,115] | | | | [removed: 217,566] [added: 269,952] | | | [added: | 238,713 | | |]

| Net income attributable to Global Payments | [removed: 271,666] [added: 468,425] | | | | [removed: 278,040] [added: 124,931] | | | | [removed: 245,286] [added: 271,666] | | | | [removed: 216,125] [added: 278,040] | | | | [removed: 188,161] [added: 245,286] | | | [added: | 216,125 | | |]

| Per share data: | | | | | | | | | | | | | | | | | | | | [added: | | | |]

| Basic earnings per share | $ | [removed: 2.05] [added: 3.03] | | | $ | [removed: 2.07] [added: 0.81] | | | $ | [removed: 1.70] [added: 2.05] | | | $ | [removed: 1.39] [added: 2.07] | | | $ | [removed: 1.19] [added: 1.70] | | [added: | $ | 1.39 | |]

| Diluted earnings per share | [removed: 2.04] [added: 3.01] | | | | [removed: 2.06] [added: 0.81] | | | | [removed: 1.69] [added: 2.04] | | | | [removed: 1.38] [added: 2.06] | | | | [removed: 1.18] [added: 1.69] | | | [added: | 1.38 | | |]

| Dividends per share | 0.04 | | | | [added: 0.02 | | | |] 0.04 | | | | 0.04 | | | | 0.04 | | | | 0.04 | | |

| Balance sheet data (at [removed: year] [added: period] end): | | | | | | | | | | | | | | | | | | | | [added: | | | |]

| Total assets | $ | [removed: 10,509,952] [added: 12,998,069] | | | $ | [removed: 5,779,301] [added: 10,664,350] | | | $ | [removed: 4,002,527] [added: 10,509,952] | | | $ | [removed: 3,114,025] [added: 5,779,301] | | | $ | [removed: 2,665,678] [added: 4,002,527] | | [added: | $ | 3,114,025 | |]

| Settlement lines of credit | [removed: 378,436] [added: 635,166] | | | | [removed: 592,629] [added: 392,072] | | | | [removed: 440,128] [added: 378,436] | | | | [removed: 187,461] [added: 592,629] | | | | [removed: 215,391] [added: 440,128] | | | [added: | 187,461 | | |]

| Long-term debt | [removed: 4,515,286] [added: 4,659,716] | | | | [removed: 1,740,067] [added: 4,438,612] | | | | [removed: 1,390,507] [added: 4,515,286] | | | | [removed: 960,749] [added: 1,740,067] | | | | [removed: 312,953] [added: 1,390,507] | | | [added: | 960,749 | | |]

| Total equity | [removed: 2,877,404] [added: 3,965,231] | | | | [removed: 863,553] [added: 2,779,342] | | | | [removed: 1,132,799] [added: 2,877,404] | | | | [removed: 1,286,607] [added: 863,553] | | | | [removed: 1,445,343] [added: 1,132,799] | | | [added: | 1,286,607 | | |]

See "Note [removed: 2 - Acquisitions"] [added: 2—Acquisitions"] in the notes to the accompanying consolidated financial statements for further discussion of our [removed: merger with Heartland.][added: acquisitions.]

[removed: Operating income, net income, net income attributable to Global Payments and basic and diluted earnings per share in the table above include] [added: (b)] a credit of $7.0 million [removed: (pre-tax)] during the year ended May 31, 2014 and [removed: charges] [added: a charge] of $36.8 million [removed: (pre-tax) and $84.4 million (pre-tax)] for the [removed: years] [added: year] ended May 31, 2013 [removed: and 2012, respectively,] related to a processing system intrusion that occurred in the year ended May 31, 2012.

The income statement data for the year ended May 31, 2014 and the balance sheet data as of May 31, 2016 and 2015 were derived from consolidated financial statements included in our Transition Report on Form 10-K for the fiscal transition period ended December 31, 2016.

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The selected financial data in the table above reflect the effects of acquisitions and borrowings to fund certain of those acquisitions.

Operating income, net income, net income attributable to Global Payments and basic and diluted earnings per share in the table above reflect:

(a) acquisition and integration expenses were $94.6 million for the year ended December 31, 2017, $91.6 million for the 2016 fiscal transition period and $51.3 million for the year ended May 31, 2016; and,

Net income, net income attributable to Global Payments and basic and diluted earnings per share in the table above reflect:

(a) a provisional net income tax benefit of $158.7 million recorded in connection with the 2017 U.S. Tax Act.

See "Note 9—Income Tax" in the notes to the accompanying consolidated financial statements for further discussion; and,

(b) a gain of $41.2 million recorded in connection with the sale of our membership interests in Visa Europe Limited ("Visa Europe") for the seven months ended December 31, 2016.

The financial data reflect the retrospective effects of a stock split and the adoption of accounting standard updates as discussed in "Note 1 - Basis of Presentation and Summary of Significant Accounting Policies" of the notes to the accompanying consolidated financial statements.

| | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

The financial data in the table above as of and for the year ended May 31, 2016 reflect the effects of our merger with Heartland and the issuance of new long-term debt, both of which were completed on April 22, 2016.

To the [added: shareholders and the] Board of Directors [removed: and Stockholders] of [added: Global Payments Inc.]

We have audited the internal control over financial reporting of Global Payments Inc. and subsidiaries (the "Company") as of [removed: May] [added: December] 31, [removed: 2016,] [added: 2017,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway [removed: Commission.][added: Commission (COSO).]

As described in Management’s Report on Internal Control over Financial Reporting, management excluded from its assessment a portion of the internal control over financial reporting at [removed: Heartland Payment Systems Inc. ("Heartland"),] [added: Athlaction Topco, LLC ("ACTIVE Network"),] which was acquired on [removed: April 22, 2016,] [added: September 1, 2017,] and whose financial statements [removed: constituted approximately 4%] [added: constitute less than 1.5%] of consolidated revenues, [removed: 21%] [added: and 4.3%] of consolidated [removed: total] assets (excluding goodwill related to the [removed: Heartland] [added: ACTIVE Network] transaction which was integrated into the Company's systems and control environment), [removed: and less than 0.5% of consolidated net income,] as of and for the year ended [removed: May] [added: December] 31, [removed: 2016.][added: 2017.]

Accordingly, our audit did not include the [removed: portion of] internal control over financial reporting at [removed: Heartland Payment Systems Inc.] [added: ACTIVE Network] that is excluded from management’s assessment.

We conducted our audit in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States).][added: PCAOB.]

A [removed: company's] [added: company’s] internal control over financial reporting is a process designed [removed: by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel] to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Also, projections of any evaluation of [removed: the] effectiveness [removed: of the internal control over financial reporting] to future periods are subject to the risk that [removed: the] controls may become inadequate because [removed: of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.]

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of [removed: May] [added: December] 31, [removed: 2016,] [added: 2017,] based on [removed: the] criteria established in Internal Control - Integrated Framework (2013) issued by [removed: the Committee of Sponsoring Organizations of the Treadway Commission.][added: COSO.]

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United [removed: States),] [added: States) (PCAOB),] the consolidated financial statements and financial statement schedule as of and for the year ended [removed: May] [added: December] 31, [removed: 2016] [added: 2017,] of the Company and our report dated [removed: July 28, 2016] [added: February 22, 2018,] expressed an unqualified opinion on those financial statements and [removed: financial statement schedule.][added: included an explanatory paragraph regarding the Company changing its fiscal year end from May 31 to December 31 in 2016.]

We have audited the accompanying consolidated balance sheets of Global Payments Inc. and subsidiaries (the "Company") as of [removed: May] [added: December] 31, [removed: 2016 and 2015,] [added: 2017] and [added: 2016,] the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for [removed: each of] the [removed: three years in] [added: year ended December 31, 2017,] the [removed: period] [added: seven months] ended [added: December 31, 2016, and the years ended] May 31, [removed: 2016.][added: 2016 and 2015, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").]

These financial statements [removed: and financial statement schedule] are the responsibility of the Company's management.

Our responsibility is to express an opinion on the [added: Company's] financial statements [removed: and financial statement schedule] based on our audits.

We conducted our audits in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States).][added: PCAOB.]

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material [removed: misstatement.][added: misstatement, whether due to error or fraud.]

[removed: An audit includes] [added: Such procedures included] examining, on a test basis, evidence [removed: supporting] [added: regarding] the amounts and disclosures in the financial statements.

[removed: An audit] [added: Our audits] also [removed: includes assessing] [added: included evaluating] the accounting principles used and significant estimates made by management, as well as evaluating the overall [added: presentation of the] financial [removed: statement presentation.][added: statements.]

In our opinion, [removed: such consolidated] [added: the] financial statements present fairly, in all material respects, the financial position of [removed: Global Payments Inc. and subsidiaries] [added: the Company] as of [removed: May] [added: December] 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] and the results of [removed: their] [added: its] operations and [removed: their] [added: its] cash flows for [removed: each of] the [removed: three years in] [added: year ended December 31, 2017,] the [removed: period] [added: seven months] ended [removed: May] [added: December] 31, 2016, [added: and the years ended May 31, 2016 and 2015,] in conformity with [added: the applicable] accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United [removed: States),] [added: States) (PCAOB),] the Company's internal control over financial reporting as of [removed: May] [added: December] 31, [removed: 2016,] [added: 2017,] based on [removed: the] criteria established in Internal [removed: Control-Integrated] [added: Control - Integrated] Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated [removed: July 28, 2016] [added: February 22, 2018] expressed an unqualified opinion on the Company's internal control over financial reporting.

[removed: | |] Year Ended May 31, [removed: | | | | | | | | | | |][added: 2016]

| | [added: 2017 | | | |] 2016 | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| Revenues | $ | [removed: 2,898,150] [added: 3,975,163] | | | $ | [removed: 2,773,718] [added: 2,202,896] | | | $ | [removed: 2,554,236] [added: 2,898,150] | | [added: | $ | 2,773,718 | |]

| Operating expenses: | | | | | | | | | | | | [added: | | | |]

| Cost of service | [removed: 1,147,639] [added: 1,928,037] | | | | [removed: 1,022,107] [added: 1,094,593] | | | | [removed: 952,225] [added: 1,147,639] | | | [added: | 1,022,107 | | |]

| Selling, general and administrative | [removed: 1,325,567] [added: 1,488,258] | | | | [removed: 1,295,014] [added: 870,352] | | | | [removed: 1,196,512] [added: 1,325,567] | | | [added: | 1,295,014 | | |]

| | [removed: 2,473,206] [added: 3,416,295] | | | | [removed: 2,317,121] [added: 1,964,945] | | | | [removed: 2,148,737] [added: 2,473,206] | | | [added: | 2,317,121 | | |]

| Operating income | [removed: 424,944] [added: 558,868] | | | | [removed: 456,597] [added: 237,951] | | | | [removed: 405,499] [added: 424,944] | | | [added: | 456,597 | | |]

| Interest and other income | [removed: 5,284] [added: 8,662] | | | | [removed: 4,949] [added: 44,382] | | | | [removed: 13,663] [added: 5,284] | | | [added: | 4,949 | | |]

| Interest and other expense | [removed: (69,316] [added: (174,847] | | ) | | [removed: (44,436] [added: (108,989] | | ) | | [removed: (41,812] [added: (69,316] | | ) | [added: | (44,436 | | ) |]

| Income before income taxes | [removed: 360,912] [added: 392,683] | | | | [removed: 417,110] [added: 173,344] | | | | [removed: 377,350] [added: 360,912] | | | [added: | 417,110 | | |]

| Provision for income taxes | [removed: (70,695 | | ) | | (107,995] [added: (36,267] | | ) | | [removed: (107,398] [added: (70,089] | | ) |

| Net income | [removed: 290,217] [added: 494,070] | | | | [removed: 309,115] [added: 137,683] | | | | [removed: 269,952] [added: 290,217] | | | [added: | 309,115 | | |]

| Less: Net income attributable to noncontrolling interests | [removed: (18,551] [added: (25,645] | | ) | | [removed: (31,075] [added: (12,752] | | ) | | [removed: (24,666] [added: (18,551] | | ) | [added: | (31,075 | | ) |]

| Net income attributable to Global Payments | $ | [removed: 271,666] [added: 468,425] | | | $ | [removed: 278,040] [added: 124,931] | | | $ | [removed: 245,286] [added: 271,666] | | [added: | $ | 278,040 | |]

| Earnings per share attributable to Global Payments: | | | | | | | | | | | | [added: | | | |]

| Basic earnings per share | $ | [removed: 2.05] [added: 3.03] | | | $ | [removed: 2.07] [added: 0.81] | | | $ | [removed: 1.70] [added: 2.05] | | [added: | $ | 2.07 | |]

| Diluted earnings per share | $ | [removed: 2.04] [added: 3.01] | | | $ | [removed: 2.06] [added: 0.81] | | | $ | [removed: 1.69] [added: 2.04] | | [added: | $ | 2.06 | |]

[removed: | |] Year [removed: End] [added: Ended] May 31, [removed: | | | | | | | | | | |][added: 2015]

| Net income | $ | [removed: 290,217] [added: 494,070] | | | $ | [removed: 309,115] [added: 137,683] | | | $ | [removed: 269,952] [added: 290,217] | | [added: | $ | 309,115 | |]

| Other comprehensive [removed: (loss) income:] [added: income (loss):] | | | | | | | | | | | | [added: | | | |]

| Foreign currency translation adjustments | [removed: (55,858] [added: 146,401] | | [added: | | (92,229 | |] ) | | [removed: (220,641] [added: (55,858] | | ) | | [removed: 17,034] [added: (220,641] | | [added: )] |

Opinion on Internal Control over Financial Reporting

ACTIVE Network did not contribute to net income for the year ended December 31, 2017.

Basis for Opinion

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Definition and Limitations of Internal Control over Financial Reporting

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

February 22, 2018

To the shareholders and the Board of Directors of Global Payments Inc.

Opinion on the Financial Statements

Emphasis of Matter

As discussed in Note 1 to the consolidated financial statements, the Company changed its fiscal year end from May 31 to December 31 in 2016.

Basis for Opinion

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

February 22, 2018

We have served as the Company’s auditors since 2002.

| | (166,185 | | ) | | (64,607 | | ) | | (64,032 | | ) | | (39,487 | | ) |

| Income tax benefit (provision) | 101,387 | | | | (35,661 | | ) | | (70,695 | | ) | | (107,995 | | ) |

| Other comprehensive income (loss), net of tax | (660 | | ) | | 1,030 | | | | (848 | | ) | | (450 | | ) |

| | December 31, 2017 | | | | December 31, 2016 | | |

| Cash and cash equivalents | $ | 1,335,855 | | | $ | 1,162,779 | |

| Settlement processing assets | 2,459,292 | | | | 1,546,854 | | |

| Total current assets | 4,303,579 | | | | 3,116,006 | | |

| Goodwill | 5,703,992 | | | | 4,807,594 | | |

| Other intangible assets, net | 2,181,707 | | | | 2,085,292 | | |

| Property and equipment, net | 588,348 | | | | 526,370 | | |

| Other noncurrent assets | 207,297 | | | | 113,299 | | |

| Total assets | $ | 12,998,069 | | | $ | 10,664,350 | |

| Settlement lines of credit | $ | 635,166 | | | $ | 392,072 | |

| Settlement processing obligations | 2,040,509 | | | | 1,477,212 | | |

| Total current liabilities | 3,815,590 | | | | 2,851,956 | | |

| Long-term debt | 4,559,408 | | | | 4,260,827 | | |

| Deferred income taxes | 436,879 | | | | 676,472 | | |

| Other noncurrent liabilities | 220,961 | | | | 95,753 | | |

| Total liabilities | 9,032,838 | | | | 7,885,008 | | |

| Paid-in capital | 2,379,774 | | | | 1,816,278 | | |

| Retained earnings | 1,597,897 | | | | 1,137,230 | | |

| Accumulated other comprehensive loss | (183,144 | | ) | | (322,717 | | ) |

| Total Global Payments shareholders’ equity | 3,794,527 | | | | 2,630,791 | | |

Global Payments Inc.

Atlanta, Georgia

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.

July 28, 2016

Our audits also included the financial statement schedule listed in the Index at Item 15.

Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

(in thousands, except per share data)

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | (64,032 | | ) | | (39,487 | | ) | | (28,149 | | ) |

See Notes to Consolidated Financial Statements.

| Other | (1,382 | | ) | | (691 | | ) | | 236 | | |

| Income tax benefit (expense) related to other | 534 | | | | 241 | | | | (63 | | ) |

| Claims receivable, net of allowances for doubtful accounts of $4,868 and $2,684, respectively | 6,799 | | | | 548 | | |

| Settlement processing assets | 1,336,326 | | | | 2,394,822 | | |

| Total current assets | 2,851,313 | | | | 3,289,915 | | |

| Goodwill | 4,829,405 | | | | 1,491,833 | | |

| Other intangible assets, net | 2,264,708 | | | | 560,136 | | |

| Property and equipment, net | 493,678 | | | | 374,143 | | |

| Other noncurrent assets | 48,129 | | | | 32,846 | | |

| Total assets | $ | 10,509,952 | | | $ | 5,779,301 | |

| Settlement lines of credit | $ | 378,436 | | | $ | 592,629 | |

| Settlement processing obligations | 1,220,315 | | | | 2,033,900 | | |

| Total current liabilities | 2,430,707 | | | | 3,015,188 | | |

| Long-term debt | 4,379,744 | | | | 1,678,283 | | |

| Deferred income taxes | 744,862 | | | | 202,855 | | |

| Other noncurrent liabilities | 77,235 | | | | 19,422 | | |

| Total liabilities | 7,632,548 | | | | 4,915,748 | | |

| Paid-in capital | 1,976,715 | | | | 148,742 | | |

| Retained earnings | 1,015,811 | | | | 795,226 | | |

| Accumulated other comprehensive loss | (246,050 | | ) | | (185,992 | | ) |

| Total Global Payments shareholders’ equity | 2,746,476 | | | | 757,976 | | |

| Noncontrolling interests | 130,928 | | | | 105,577 | | |

| Total equity | 2,877,404 | | | | 863,553 | | |

| Total liabilities and equity | $ | 10,509,952 | | | $ | 5,779,301 | |

| Other, net | 9,257 | | | | 3,073 | | | | (1,484 | | ) |

| Claims receivable | (29,078 | | ) | | (9,317 | | ) | | (11,569 | | ) |

| Net cash provided by operating activities | 585,001 | | | | 424,701 | | | | 194,098 | | |

| Business, intangible and other asset acquisitions, net of cash acquired | (2,035,657 | | ) | | (359,187 | | ) | | (426,524 | | ) |

| Other | — | | | | 10,816 | | | | 6,265 | | |

As of [removed: May] [added: December] 31, [removed: 2016,] [added: 2017,] management carried out, under the supervision and with the participation of our principal executive officer and principal financial officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934).

Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of [removed: May] [added: December] 31, [removed: 2016,] [added: 2017,] our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and are designed to ensure that information required to be disclosed in those reports is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

[removed: Management] [added: Management's] Report on Internal Control over Financial Reporting

Our management assessed the effectiveness of our internal control over financial reporting as of [removed: May] [added: December] 31, [removed: 2016.][added: 2017.]

As permitted by the SEC rules and [removed: regulations, management’s] [added: regulations management's] assessment did not include the internal control of the acquired operations of [removed: Heartland] [added: ACTIVE Network] which are included in our consolidated financial statements as of [removed: May] [added: December] 31, [removed: 2016] [added: 2017] and for the period from the acquisition date through [removed: May] [added: December] 31, [removed: 2016.][added: 2017.]

In accordance with our integration efforts, we plan to incorporate [removed: Heartland’s] [added: ACTIVE Network's] operations into our internal control over financial reporting program within the time period provided by applicable SEC rules and regulations.

The assets, excluding [removed: goodwill,] [added: goodwill] of [removed: Heartland] [added: ACTIVE Network,] constituted approximately [removed: 21%] [added: 4.3%] of our total consolidated assets as of [removed: May] [added: December] 31, [removed: 2016.][added: 2017.]

[removed: Heartland's] [added: ACTIVE Network's] revenues [removed: and operating income represented approximately 4% and] [added: were] less than [removed: 0.5%] [added: 1.5%] of our total consolidated [removed: revenues] [added: revenues,] and [added: ACTIVE Network did not contribute to our consolidated] operating [removed: income, respectively,] [added: income] for the year ended [removed: May] [added: December] 31, [removed: 2016.][added: 2017.]

Based on the results of its evaluation, which excluded an assessment of the internal control of the acquired operations of [removed: Heartland,] [added: ACTIVE Network,] management believes that as of [removed: May] [added: December] 31, [removed: 2016,] [added: 2017,] our internal control over financial reporting is effective based on those criteria.

[removed: During fiscal year 2016,] [added: On September 1, 2017,] we completed [removed: the] [added: our] acquisition of [removed: Heartland,] [added: ACTIVE Network,] which is being integrated into our North America segment.

As part of our ongoing integration activities, we are continuing to apply our controls and procedures to the [removed: Heartland business] [added: ACTIVE Network] and to augment our company-wide controls to reflect the risks inherent in an acquisition of this magnitude.

There were no other changes in our internal control over financial reporting during the fourth quarter of [removed: fiscal year 2016] [added: calendar 2017] (as defined in Rule [added: 13a-15(f) under the Securities Exchange Act of 1934) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.]

We completed our acquisition of ACTIVE Network on September 1, 2017.

On April 22, 2016, we completed our merger with Heartland, which we have since been integrating into our North America segment.

As part of our integration activities, we have completed the incorporation of Heartland's operations into our internal control over financial reporting program.

We also added internal controls over the disclosures related to the expected accounting and reporting effects of the new revenue accounting standard, which is effective for us as of January 1, 2018, as well as, the provisional effects on our accounting and disclosure for income taxes during the year ended December 31, 2017 as a result of the 2017 U.S. Tax Act and the related accounting guidance issued by the SEC.

PART III

We completed our merger with Heartland on April 22, 2016.

13a-15(f) under the Securities Exchange Act of 1934) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We incorporate by reference in this Item 10 information about our directors, executive officers and our corporate governance contained under the headings "Proposal 1: Election of Directors" and "Biographical Information About Our Executive Officers" and information about compliance with Section 16(a) of the Securities and Exchange Act of 1934 by our directors and executive officers under the heading "Additional Information-Section 16(a) Beneficial Ownership Reporting Compliance" from our proxy statement to be delivered in connection with our [removed: 2016] [added: 2018] Annual Meeting of Shareholders to be held on [removed: September 28, 2016] [added: April 27, 2018] (the [removed: “2016] [added: "2018] Proxy [removed: Statement”).][added: Statement").]

We incorporate by reference in this Item 11 the information relating to executive and director compensation and the report of the Compensation Committee contained under the headings "Compensation, Discussion, and Analysis," and "Corporate Governance-Director Compensation" from our [removed: 2016] [added: 2018] Proxy Statement.

We incorporate by reference in this Item 12 the information relating to ownership of our common stock by certain persons contained under the headings "Common Stock Ownership-Common Stock Ownership of Management" and "Common Stock Ownership-Common Stock Ownership by Certain Other Persons" from our [removed: 2016] [added: 2018] Proxy Statement.

The following table provides certain information as of [removed: May] [added: December] 31, [removed: 2016] [added: 2017] concerning the shares of our common stock that may be issued under existing equity compensation plans.

For more information on these plans, see "Note [removed: 10 - Shareholders'] [added: 10—Shareholders'] Equity" in the notes to the accompanying consolidated financial statements.

Includes [removed: 12,110,609] [added: 11,046,846] shares authorized for issuance under the 2011 Incentive Plan, all of which are available for issuance pursuant to grants of full-value stock awards.

Also includes [removed: 233,740] [added: 50,462] shares authorized under the Amended and Restated 2005 Incentive Plan and [removed: 179,172] [added: 106,836] shares authorized under the 2000 Director Option Plan.

| Equity compensation plans approved by security holders | 722,431 | | | $ | 47.79 | | | 11,810,191 | |

| Total | 722,431 | | | $ | 47.79 | | | 11,810,191 | |

| Equity compensation plans approved by security holders | 811,036 | | | $ | 31.81 | | | 14,985,644 | |

| Total | 811,036 | | | $ | 31.81 | | | 14,985,644 | |

We incorporate by reference in this Item 13 the information regarding certain relationships and related transactions between us and our affiliates and the independence of our directors contained under the headings "Additional Information--Relationships and Related Party Transactions" and "Corporate Governance--Board Independence" from our [removed: 2016] [added: 2018] Proxy Statement.

We incorporate by reference in this Item 14 the information regarding principal accounting fees and services contained under the heading "Proposal [removed: Four:] [added: Three:] Ratification of Reappointment of Auditors" from our [removed: 2016] [added: 2018] Proxy Statement.

[removed: (a)] The following documents are filed as part of this Annual [removed: Report:][added: Report on Form 10-K:]

Our consolidated financial statements listed below are set forth in [removed: “Item] [added: "Item] 8 - Financial Statements and Supplementary [removed: Data”] [added: Data"] of this Annual [removed: Report:][added: Report on Form 10-K:]

| Reports of Independent Registered Public Accounting Firm | [removed: [46](#s7571B4C32F1E6B1A149BE6572AECBBB2)] [added: [49](#s81721693C1CF5CDE8B4235DBD1A91E69)] |

| Consolidated Statements of Income for the [added: year ended December 31, 2017, the seven months ended December 31, 2016 and the] years ended May 31, [removed: 2016, 2015] [added: 2016] and [removed: 2014] [added: 2015] | [removed: [48](#s268CAC8096C5C78DB91BE65711E24CBF)] [added: [52](#sB4AA1773A747518D8DF7FE9981EB9C12)] |

| Consolidated Statements of Comprehensive Income for the [added: year ended December 31, 2017, the seven months ended December 31, 2016 and the] years ended May 31, [removed: 2016, 2015] [added: 2016] and [removed: 2014] [added: 2015] | [removed: [49](#sBBD0658E4222FAC8A59FE65711EC9F92)] [added: [53](#sB00BC4A6AD8A5064B592F3A203A1ACAF)] |

| Consolidated Balance Sheets as of [removed: May] [added: December] 31, [removed: 2016] [added: 2017] and [removed: 2015] [added: 2016] | [removed: [50](#s2D326230F3DAF15C37B7E65711F62C4A)] [added: [54](#s01FB850D8AA25DEBBE115D5DDFB3ACEA)] |

| Consolidated Statements of Cash Flows for the [added: year ended December 31, 2017, the seven months ended December 31, 2016 and the] years ended May 31, [removed: 2016, 2015] [added: 2016] and [removed: 2014] [added: 2015] | [removed: [51](#s46762E4A852ABD3914D0E6571214F619)] [added: [55](#s79570E34C29850C5995B600396D04ADD)] |

| Consolidated Statements of Changes in Equity for the [added: year ended December 31, 2017, the seven months ended December 31, 2016 and the] years ended May 31, [removed: 2016, 2015] [added: 2016] and [removed: 2014] [added: 2015] | [removed: [52](#sC401EB38F7E5880B2B85E657123CD71F)] [added: [56](#s89393BF8398F53D3A4F48C6B5E5D32C9)] |

| Notes to Consolidated Financial Statements | [removed: [55](#sBB4850190B7585DC26D0E6571296F269)] [added: [58](#s6E0216BF0FA85E2A9855626CFCA219A8)] |

| Schedule II, Valuation and Qualifying Accounts | [removed: [88](#s6B94E59ED3F029B241B7E657148AE9AD)] [added: [95](#s3496D6E14F9F5770A4539C324AE36568)] |

The following exhibits either (i) are filed with this Annual Report [added: on Form 10-K] or (ii) have previously been filed with the SEC and are incorporated in this Item 15 by reference to those prior filings.

| [removed: 2.1] [added: 2.1++] | [removed: Agreement] [added: [Agreement] and Plan of Merger, dated as of December 15, 2015, by and among Global Payments Inc., Data Merger Sub One, Inc., Data Merger Sub Two, LLC and Heartland Payment Systems, Inc., incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed December 17, [removed: 2015.++] [added: 2015.](http://www.sec.gov/Archives/edgar/data/1123360/000119312515405555/d104282dex21.htm)] |

| [removed: 2.2] [added: 2.2++] | [removed: Agreement] [added: [Agreement] and Plan of Merger, dated as of January 23, 2014, by and among the Company, Payment Processing, Inc. and, solely for the limited purposes set forth therein, certain additional parties thereto, incorporated by reference to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q filed April 3, [removed: 2014.++] [added: 2014.](http://www.sec.gov/Archives/edgar/data/1123360/000112336014000021/ex21agreementandplanofmerg.htm)] |

| 3.1 | [removed: Second] [added: [Second] Amended and Restated Articles of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K filed July 25, [removed: 2013.] [added: 2013.](http://www.sec.gov/Archives/edgar/data/1123360/000112336013000025/ex31secondamendmentandrela.htm)] |

| [removed: 3.2*] [added: 3.2] | [removed: Seventh] [added: [Eighth] Amended and Restated Bylaws of the Company, incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed [removed: July 28, 2016.] [added: May 4, 2017.](http://www.sec.gov/Archives/edgar/data/1123360/000112336017000026/ex31eighthamendedandrestat.htm)] |

| [removed: 10.1] [added: 10.2] | [added: [First Amendment to the Second] Amended and Restated [added: Credit Agreement, First Amendment to the Second Amended and Restated] Term Loan Agreement, [added: First Amendment to the Company Guaranties and First Amendment to the Subsidiary Guaranties,] dated as of February [removed: 28, 2014,] [added: 26, 2016,] by and among the Company and Global Payments Direct, Inc., as borrowers, Bank of America, N.A., as [removed: administrative agent,] [added: Administrative Agent,] and certain other lenders party thereto, incorporated by reference to Exhibit 10.1 [removed: of] [added: to] the Company’s [removed: Annual] [added: Current] Report on Form [removed: 10-K] [added: 8-K] filed [removed: July 29, 2014.] [added: March 1, 2016.](http://www.sec.gov/Archives/edgar/data/1123360/000112336016000066/ex101creditagreementfebrua.htm)] |

| [removed: 10.2] [added: 10.4] | [added: [Third Amendment dated March 30, 2017, to Second] Amended and Restated Credit Agreement, dated as of [removed: February 28, 2014, by and] [added: July 31, 2015] among the [removed: Company and certain wholly owned subsidiaries of the] Company, [removed: as borrowers,] [added: the other borrowers party thereto, the Guarantors party thereto, the Lenders party thereto, and] Bank of America, N.A., as [removed: administrative agent, swing line lender and letter of credit issuer, and certain other lenders party thereto,] [added: Administrative Agent,] incorporated by reference to Exhibit [removed: 10.2 of] [added: 10.4 to] the Company’s [removed: Annual] [added: Quarterly] Report on Form [removed: 10-K] [added: 10-Q] filed [removed: July 29, 2014.] [added: on May 4, 2017.](http://www.sec.gov/Archives/edgar/data/1123360/000112336017000024/ex104thirdamendmenttocredi.htm)] |