NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of March 31, 2019, Worldpay, Inc. owned 100% interest in Worldpay Holding (see Note
8Controlling and Non-Controlling Interests for changes in non-controlling interests) as a result of Fifth Third Banks (Fifth Third) sale of its
remaining interest in Worldpay Holding discussed below.
Fifth Third Stock Sale
In March 2019, Fifth Third exchanged its remaining 10.3 million Class B units in Worldpay Holding for 10.3 million shares of the
Companys Class A common stock and subsequently sold those 10.3 million shares of Worldpay, Inc. Class A common stock pursuant to Rule 144 promulgated under the Securities Act of 1933 as amended (Fifth Third Stock
Sale). The Company did not receive any proceeds from the sale.
As a result of the March 2019 Fifth Third exchange of units of
Worldpay Holding, the Company recorded an estimated additional liability under the Fifth Third Tax Receivable Agreement (TRA) of $327.9 million and an estimated additional deferred tax asset of $502.8 million associated with
the increase in the tax basis. The Company recorded an estimated corresponding increase to paid-in-capital of $174.9 million for the difference in the TRA liability
and the related deferred tax asset.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from
Set forth below is a brief description of the components of the Companys expenses:
Sales and marketing expense primarily consists of compensation, commissions and benefits paid to sales personnel,
sales management and other sales and marketing personnel, amortization of capitalized commission fees, payments made to multiple referral partners, and advertising and promotional costs.
Other operating costs primarily consist of compensation and benefits paid to operational and IT personnel, costs
associated with operating the Companys technology platform and data centers, information technology costs for processing transactions, product development costs, software fees, maintenance costs, occupancy costs and consulting costs.
General and administrative expenses primarily consist of compensation and benefits paid to executive management
and administrative employees, including finance, human resources, product, legal and risk management, share-based compensation costs, office equipment, occupancy costs and consulting costs.
Non-operating income (expense) primarily consists of other income and
expense items outside of the Companys operating activities.
The Company expenses employee share-based payments under ASC 718, CompensationStock Compensation, which requires compensation cost for
the grant-date fair value of share-based payments to be recognized over the requisite service period. The Company estimates the grant date fair value of the share-based awards issued in the form of options using the Black-Scholes option pricing
model. The fair value of shares issued as restricted stock, performance awards and under the Employee Stock Purchase Plan (ESPP) is measured based on the market price of the Companys stock on the grant date.
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