UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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| | |
x☑ | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 20192020
OR
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| | |
☐ | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-16111
GLOBAL PAYMENTS INC.INC.
(Exact name of registrant as specified in charter)
|
| | |
Georgia | | 58-2567903 |
(State or other jurisdiction of
incorporation or organization) | | (I.R.S. Employer
Identification No.) |
|
| | | | | | |
3550 Lenox Road | , | Atlanta | , | Georgia | | 30326 |
(Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (770) (770) 829-8000 |
| | |
Securities registered pursuant to Section 12(b) of the Act |
Title of each class | TickerTrading symbol | Name of exchange on which registered |
Common stock, no par value | GPN | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☑ No o☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x☑ No o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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| | | | |
Large accelerated filerx | ☑ | | Accelerated filero | ☐ |
Non-accelerated filero | ☐ | | Smaller reporting companyo | ☐ |
Emerging growth company | ☐ | | | 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The number of shares of the issuer’s common stock, no par value, outstanding as of April 30, 2019May 1, 2020 was 157,182,370299,105,721.
GLOBAL PAYMENTS INC.
FORM 10-Q
For the quarterly period ended March 31, 20192020
TABLE OF CONTENTS
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| | | Page |
PART I - FINANCIAL INFORMATION |
ITEM 1. | | | |
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| | | |
ITEM 2. | | | |
ITEM 3. | | | |
ITEM 4. | | | |
PART II - OTHER INFORMATION |
ITEM 1. | | | |
ITEM 1A. | | | |
ITEM 2. | | | |
ITEM 6. | | | |
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PART 1 - FINANCIAL INFORMATION
ITEM 1—FINANCIAL STATEMENTS
GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
| | | Three Months Ended | Three Months Ended |
| March 31, 2019 | | March 31, 2018 | March 31, 2020 | | March 31, 2019 |
| | | | | | |
Revenues | $ | 883,039 |
| | $ | 794,977 |
| $ | 1,903,598 |
| | $ | 883,039 |
|
Operating expenses: | | | | | | |
Cost of service | 305,230 |
| | 252,386 |
| 933,871 |
| | 305,230 |
|
Selling, general and administrative | 378,317 |
| | 386,421 |
| 725,748 |
| | 378,317 |
|
| 683,547 |
| | 638,807 |
| 1,659,619 |
| | 683,547 |
|
Operating income | 199,492 |
| | 156,170 |
| 243,979 |
| | 199,492 |
|
| | | | | | |
Interest and other income | 2,934 |
| | 11,694 |
| 2,506 |
| | 2,934 |
|
Interest and other expense | (59,081 | ) | | (45,605 | ) | (92,644 | ) | | (59,081 | ) |
| (56,147 | ) | | (33,911 | ) | (90,138 | ) | | (56,147 | ) |
Income before income taxes | 143,345 |
| | 122,259 |
| |
Provision for income taxes | (24,140 | ) | | (24,673 | ) | |
Income before income taxes and equity in income of equity method investments | | 153,841 |
| | 143,345 |
|
Income tax expense | | (15,502 | ) | | (24,140 | ) |
Income before equity in income of equity method investments | | 138,339 |
| | 119,205 |
|
Equity in income of equity method investments, net of tax | | 12,269 |
| | — |
|
Net income | 119,205 |
| | 97,586 |
| 150,608 |
| | 119,205 |
|
Net income attributable to noncontrolling interests, net of income tax | (6,864 | ) | | (6,187 | ) | |
Net income attributable to noncontrolling interests, net of tax | | (7,033 | ) | | (6,864 | ) |
Net income attributable to Global Payments | $ | 112,341 |
| | $ | 91,399 |
| $ | 143,575 |
| | $ | 112,341 |
|
| | | | | | |
Earnings per share attributable to Global Payments: | | | | | | |
Basic earnings per share | $ | 0.71 |
| | $ | 0.57 |
| $ | 0.48 |
| | $ | 0.71 |
|
Diluted earnings per share | $ | 0.71 |
| | $ | 0.57 |
| $ | 0.48 |
| | $ | 0.71 |
|
See Notes to Unaudited Consolidated Financial Statements.
GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
|
| | | | | | | |
| Three Months Ended |
| March 31, 2020 | | March 31, 2019 |
| | | |
Net income | $ | 150,608 |
| | $ | 119,205 |
|
Other comprehensive income (loss): | | | |
Foreign currency translation adjustments | (204,111 | ) | | 5,196 |
|
Income tax benefit related to foreign currency translation adjustments | 1,007 |
| | 34 |
|
Net unrealized losses on hedging activities | (47,896 | ) | | (14,509 | ) |
Reclassification of net unrealized losses (gains) on hedging activities to interest expense | 4,671 |
| | (1,830 | ) |
Income tax benefit related to hedging activities | 10,346 |
| | 3,985 |
|
Other, net of tax | 121 |
| | 111 |
|
Other comprehensive loss | (235,862 | ) | | (7,013 | ) |
| | | |
Comprehensive (loss) income | (85,254 | ) | | 112,192 |
|
Comprehensive income attributable to noncontrolling interests | (380 | ) | | (2,284 | ) |
Comprehensive (loss) income attributable to Global Payments | $ | (85,634 | ) | | $ | 109,908 |
|
|
| | | | | | | |
| Three Months Ended |
| March 31, 2019 | | March 31, 2018 |
| | | |
Net income | $ | 119,205 |
| | $ | 97,586 |
|
Other comprehensive income (loss): | | | |
Foreign currency translation adjustments | 5,196 |
| | 13,324 |
|
Income tax benefit related to foreign currency translation adjustments | 34 |
| | 399 |
|
Net unrealized (losses) gains on hedging activities | (14,509 | ) | | 7,682 |
|
Reclassification of net unrealized gains on hedging activities to interest expense | (1,830 | ) | | (169 | ) |
Income tax benefit (provision) related to hedging activities | 3,985 |
| | (1,865 | ) |
Other, net of tax | 111 |
| | (52 | ) |
Other comprehensive income (loss) | (7,013 | ) | | 19,319 |
|
| | | |
Comprehensive income | 112,192 |
| | 116,905 |
|
Comprehensive income attributable to noncontrolling interests | (2,284 | ) | | (17,480 | ) |
Comprehensive income attributable to Global Payments | $ | 109,908 |
| | $ | 99,425 |
|
See Notes to Unaudited Consolidated Financial Statements.
GLOBAL PAYMENTS INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| | | March 31, 2019 | | December 31, 2018 | March 31, 2020 | | December 31, 2019 |
| (Unaudited) | | | (Unaudited) | | |
ASSETS | | | |
| | | |
|
Current assets: | | | |
| | | |
|
Cash and cash equivalents | $ | 1,277,633 |
| | $ | 1,210,878 |
| $ | 1,800,061 |
| | $ | 1,678,273 |
|
Accounts receivable, net of allowances for doubtful accounts of $4,247 and $3,164, respectively | 381,608 |
| | 348,400 |
| |
Accounts receivable, net | | 799,798 |
| | 895,232 |
|
Settlement processing assets | 2,775,371 |
| | 1,600,222 |
| 1,046,288 |
| | 1,353,778 |
|
Prepaid expenses and other current assets | 235,139 |
| | 216,708 |
| 423,523 |
| | 439,165 |
|
Total current assets | 4,669,751 |
| | 3,376,208 |
| 4,069,670 |
| | 4,366,448 |
|
Goodwill | 6,345,998 |
| | 6,341,355 |
| 23,662,373 |
| | 23,759,740 |
|
Other intangible assets, net | 2,405,333 |
| | 2,488,618 |
| 12,814,791 |
| | 13,154,655 |
|
Property and equipment, net | 674,199 |
| | 653,542 |
| 1,441,910 |
| | 1,382,802 |
|
Deferred income taxes | 7,288 |
| | 8,128 |
| 6,778 |
| | 6,292 |
|
Other noncurrent assets | 647,052 |
| | 362,923 |
| 1,854,076 |
| | 1,810,225 |
|
Total assets | $ | 14,749,621 |
| | $ | 13,230,774 |
| $ | 43,849,598 |
| | $ | 44,480,162 |
|
LIABILITIES AND EQUITY | | | | | | |
Current liabilities: | | | | | | |
Settlement lines of credit | $ | 641,906 |
| | $ | 700,486 |
| $ | 375,182 |
| | $ | 463,237 |
|
Current portion of long-term debt | 133,019 |
| | 115,075 |
| 70,551 |
| | 35,137 |
|
Accounts payable and accrued liabilities | 1,161,421 |
| | 1,176,703 |
| 1,636,823 |
| | 1,822,166 |
|
Settlement processing obligations | 2,579,876 |
| | 1,276,356 |
| 953,723 |
| | 1,258,806 |
|
Total current liabilities | 4,516,222 |
| | 3,268,620 |
| 3,036,279 |
| | 3,579,346 |
|
Long-term debt | 5,170,377 |
| | 5,015,168 |
| 9,636,076 |
| | 9,090,364 |
|
Deferred income taxes | 569,169 |
| | 585,025 |
| 3,024,409 |
| | 3,145,641 |
|
Other noncurrent liabilities | 351,392 |
| | 175,618 |
| 632,401 |
| | 609,822 |
|
Total liabilities | 10,607,160 |
| | 9,044,431 |
| 16,329,165 |
| | 16,425,173 |
|
Commitments and contingencies |
|
| |
|
|
|
| |
|
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Equity: | | | | | | |
Preferred stock, no par value; 5,000,000 shares authorized and none issued | — |
| | — |
| — |
| | — |
|
Common stock, no par value; 200,000,000 shares authorized; 157,130,438 issued and outstanding at March 31, 2019 and 157,961,982 issued and outstanding at December 31, 2018 | — |
| | — |
| |
Common stock, no par value; 400,000,000 shares authorized at March 31, 2020 and December 31, 2019; 299,010,257 issued and outstanding at March 31, 2020 and 300,225,590 issued and outstanding at December 31, 2019 | | — |
| | — |
|
Paid-in capital | 2,151,623 |
| | 2,235,167 |
| 25,525,184 |
| | 25,833,307 |
|
Retained earnings | 2,111,798 |
| | 2,066,415 |
| 2,335,407 |
| | 2,333,011 |
|
Accumulated other comprehensive loss | (312,608 | ) | | (310,175 | ) | (539,780 | ) | | (310,571 | ) |
Total Global Payments shareholders’ equity | 3,950,813 |
| | 3,991,407 |
| 27,320,811 |
| | 27,855,747 |
|
Noncontrolling interests | 191,648 |
| | 194,936 |
| 199,622 |
| | 199,242 |
|
Total equity | 4,142,461 |
| | 4,186,343 |
| 27,520,433 |
| | 28,054,989 |
|
Total liabilities and equity | $ | 14,749,621 |
| | $ | 13,230,774 |
| $ | 43,849,598 |
| | $ | 44,480,162 |
|
See Notes to Unaudited Consolidated Financial Statements.
GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) |
| | | | | | | |
| Three Months Ended |
| March 31, 2019 | | March 31, 2018 |
Cash flows from operating activities: | | | |
Net income | $ | 119,205 |
| | $ | 97,586 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization of property and equipment | 41,155 |
| | 33,918 |
|
Amortization of acquired intangibles | 107,475 |
| | 87,825 |
|
Amortization of capitalized contract costs | 15,847 |
| | 10,213 |
|
Share-based compensation expense | 11,418 |
| | 14,898 |
|
Provision for operating losses and bad debts | 12,709 |
| | 9,237 |
|
Deferred income taxes | (5,774 | ) | | 910 |
|
Other, net | 9,043 |
| | (1,937 | ) |
Changes in operating assets and liabilities, net of the effects of business combinations: | | | |
Accounts receivable | (36,493 | ) | | 13,050 |
|
Settlement processing assets and obligations, net | 118,347 |
| | 82,235 |
|
Prepaid expenses and other assets | (76,740 | ) | | (56,906 | ) |
Accounts payable and other liabilities | (86,463 | ) | | (6,488 | ) |
Net cash provided by operating activities | 229,729 |
| | 284,541 |
|
Cash flows from investing activities: | | | |
Acquisitions, net of cash acquired | (74,830 | ) | | — |
|
Capital expenditures | (55,123 | ) | | (43,775 | ) |
Other, net | 13,672 |
| | (1,586 | ) |
Net cash used in investing activities | (116,281 | ) | | (45,361 | ) |
Cash flows from financing activities: | | | |
Net repayments of settlement lines of credit | (55,350 | ) | | (192,517 | ) |
Proceeds from long-term debt | 344,000 |
| | 309,000 |
|
Repayments of long-term debt | (173,060 | ) | | (687,820 | ) |
Payment of debt issuance costs | — |
| | (586 | ) |
Repurchase of common stock | (155,997 | ) | | — |
|
Proceeds from stock issued under share-based compensation plans | 7,848 |
| | 2,613 |
|
Common stock repurchased - share-based compensation plans | (9,507 | ) | | (1,058 | ) |
Distributions to noncontrolling interests | (5,572 | ) | | — |
|
Dividends paid | (1,571 | ) | | (1,593 | ) |
Net cash used in financing activities | (49,209 | ) | | (571,961 | ) |
Effect of exchange rate changes on cash | 2,516 |
| | 2,749 |
|
Increase (decrease) in cash and cash equivalents | 66,755 |
| | (330,032 | ) |
Cash and cash equivalents, beginning of the period | 1,210,878 |
| | 1,335,855 |
|
Cash and cash equivalents, end of the period | $ | 1,277,633 |
| | $ | 1,005,823 |
|
|
| | | | | | | |
| Three Months Ended |
| March 31, 2020 | | March 31, 2019 |
Cash flows from operating activities: | | | |
Net income | $ | 150,608 |
| | $ | 119,205 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization of property and equipment | 83,573 |
| | 41,155 |
|
Amortization of acquired intangibles | 314,245 |
| | 107,475 |
|
Amortization of capitalized contract costs | 18,738 |
| | 15,847 |
|
Share-based compensation expense | 27,822 |
| | 11,418 |
|
Provision for operating losses and bad debts | 37,629 |
| | 12,709 |
|
Noncash lease expense | 25,924 |
| | 8,976 |
|
Deferred income taxes | (47,957 | ) | | (5,774 | ) |
Other, net | (11,757 | ) | | 67 |
|
Changes in operating assets and liabilities, net of the effects of business combinations: | | | |
Accounts receivable | 47,624 |
| | (36,493 | ) |
Settlement processing assets and obligations, net | 12,966 |
| | 118,347 |
|
Prepaid expenses and other assets | (53,540 | ) | | (76,740 | ) |
Accounts payable and other liabilities | (169,301 | ) | | (86,463 | ) |
Net cash provided by operating activities | 436,574 |
| | 229,729 |
|
Cash flows from investing activities: | | | |
Acquisitions, net of cash acquired | (67,196 | ) | | (74,830 | ) |
Capital expenditures | (104,802 | ) | | (55,123 | ) |
Other, net | 2,348 |
| | 13,672 |
|
Net cash used in investing activities | (169,650 | ) | | (116,281 | ) |
Cash flows from financing activities: | | | |
Net repayments of settlement lines of credit | (78,092 | ) | | (55,350 | ) |
Proceeds from long-term debt | 607,000 |
| | 344,000 |
|
Repayments of long-term debt | (110,978 | ) | | (173,060 | ) |
Repurchases of common stock | (421,162 | ) | | (155,997 | ) |
Proceeds from stock issued under share-based compensation plans | 28,283 |
| | 7,848 |
|
Common stock repurchased - share-based compensation plans | (44,253 | ) | | (9,507 | ) |
Distributions to noncontrolling interests | — |
| | (5,572 | ) |
Dividends paid | (58,279 | ) | | (1,571 | ) |
Net cash used in financing activities | (77,481 | ) | | (49,209 | ) |
Effect of exchange rate changes on cash | (67,655 | ) | | 2,516 |
|
Increase in cash and cash equivalents | 121,788 |
| | 66,755 |
|
Cash and cash equivalents, beginning of the period | 1,678,273 |
| | 1,210,878 |
|
Cash and cash equivalents, end of the period | $ | 1,800,061 |
| | $ | 1,277,633 |
|
See Notes to Unaudited Consolidated Financial Statements.
GLOBAL PAYMENTS INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in thousands)
| | | Number of Shares | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Global Payments Shareholders’ Equity | | Noncontrolling Interests | | Total Equity | Number of Shares | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Global Payments Shareholders’ Equity | | Noncontrolling Interests | | Total Equity |
Balance at December 31, 2018 | 157,962 |
| | $ | 2,235,167 |
| | $ | 2,066,415 |
| | $ | (310,175 | ) | | $ | 3,991,407 |
| | $ | 194,936 |
| | $ | 4,186,343 |
| |
Balance at December 31, 2019 | | 300,226 |
| | $ | 25,833,307 |
| | $ | 2,333,011 |
| | $ | (310,571 | ) | | $ | 27,855,747 |
| | $ | 199,242 |
| | $ | 28,054,989 |
|
Cumulative effect of adoption of new accounting standard | | | | | | (5,379 | ) | | | | (5,379 | ) | | | | (5,379 | ) |
Net income | | | | | 112,341 |
| | | | 112,341 |
| | 6,864 |
| | 119,205 |
| | | | | 143,575 |
| | | | 143,575 |
| | 7,033 |
| | 150,608 |
|
Other comprehensive loss | | | | | | | (2,433 | ) | | (2,433 | ) | | (4,580 | ) | | (7,013 | ) | | | | | | | (229,209 | ) | | (229,209 | ) | | (6,653 | ) | | (235,862 | ) |
Stock issued under share-based compensation plans | 542 |
| | 7,848 |
| | | | | | 7,848 |
| | | | 7,848 |
| 1,082 |
| | 28,283 |
| | | | | | 28,283 |
| | | | 28,283 |
|
Common stock repurchased - share-based compensation plans | (79 | ) | | (10,200 | ) | |
|
| | | | (10,200 | ) | | | | (10,200 | ) | (203 | ) | | (37,787 | ) | | | | | | (37,787 | ) | | | | (37,787 | ) |
Share-based compensation expense | | | 11,418 |
| | | | | | 11,418 |
| | | | 11,418 |
| | | 27,822 |
| | | | | | 27,822 |
| | | | 27,822 |
|
Distributions to noncontrolling interest | | | | | | | | | — |
| | (5,572 | ) | | (5,572 | ) | |
Repurchase of common stock | (1,295 | ) | | (92,610 | ) | | (65,387 | ) | | | | (157,997 | ) | | | | (157,997 | ) | |
Dividends paid ($0.01 per share) | | | | | (1,571 | ) | | | | (1,571 | ) | | | | (1,571 | ) | |
Balance at March 31, 2019 | 157,130 |
| | $ | 2,151,623 |
| | $ | 2,111,798 |
| | $ | (312,608 | ) | | $ | 3,950,813 |
| | $ | 191,648 |
| | $ | 4,142,461 |
| |
Repurchases of common stock | | (2,095 | ) | | (326,441 | ) | | (77,521 | ) | | | | (403,962 | ) | | | | (403,962 | ) |
Cash dividends declared ($0.195 per share) | | | | | | (58,279 | ) | | | | (58,279 | ) | | | | (58,279 | ) |
Balance at March 31, 2020 | | 299,010 |
| | $ | 25,525,184 |
| | $ | 2,335,407 |
| | $ | (539,780 | ) | | $ | 27,320,811 |
| | $ | 199,622 |
| | $ | 27,520,433 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Number of Shares | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Global Payments Shareholders’ Equity | | Noncontrolling Interests | | Total Equity |
Balance at December 31, 2017 | 159,180 |
| | $ | 2,379,774 |
| | $ | 1,597,897 |
| | $ | (183,144 | ) | | $ | 3,794,527 |
| | $ | 170,704 |
| | $ | 3,965,231 |
|
Cumulative effect of adoption of new accounting standard | | | | | 50,970 |
| | (1,843 | ) | | 49,127 |
| | | | 49,127 |
|
Net income | | | | | 91,399 |
| | | | 91,399 |
| | 6,187 |
| | 97,586 |
|
Other comprehensive income | | | | | | | 8,026 |
| | 8,026 |
| | 11,293 |
| | 19,319 |
|
Stock issued under share-based compensation plans | 418 |
| | 2,613 |
| | | |
|
| | 2,613 |
| | | | 2,613 |
|
Common stock repurchased - share-based compensation plans | (56 | ) | | (6,411 | ) | | | | | | (6,411 | ) | | | | (6,411 | ) |
Share-based compensation expense | | | 14,898 |
| | | | | | 14,898 |
| | | | 14,898 |
|
Repurchase of common stock | (9 | ) | | (852 | ) | | (128 | ) | | | | (980 | ) | | | | (980 | ) |
Dividends paid ($0.01 per share) | | | | | (1,593 | ) | | | | (1,593 | ) | | | | (1,593 | ) |
Balance at March 31, 2018 | 159,533 |
| | $ | 2,390,022 |
| | $ | 1,738,545 |
| | $ | (176,961 | ) | | $ | 3,951,606 |
| | $ | 188,184 |
| | $ | 4,139,790 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Number of Shares | | Paid-in Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Global Payments Shareholders’ Equity | | Noncontrolling Interests | | Total Equity |
Balance at December 31, 2018 | 157,962 |
| | $ | 2,235,167 |
| | $ | 2,066,415 |
| | $ | (310,175 | ) | | $ | 3,991,407 |
| | $ | 194,936 |
| | $ | 4,186,343 |
|
Net income | | | | | 112,341 |
| | | | 112,341 |
| | 6,864 |
| | 119,205 |
|
Other comprehensive loss | | | | | | | (2,433 | ) | | (2,433 | ) | | (4,580 | ) | | (7,013 | ) |
Stock issued under share-based compensation plans | 542 |
| | 7,848 |
| | | | | | 7,848 |
| | | | 7,848 |
|
Common stock repurchased - share-based compensation plans | (79 | ) | | (10,200 | ) | | | | | | (10,200 | ) | | | | (10,200 | ) |
Share-based compensation expense | | | 11,418 |
| | | | | | 11,418 |
| | | | 11,418 |
|
Distributions to noncontrolling interest |
| |
|
| |
|
| |
|
| | — |
| | (5,572 | ) | | (5,572 | ) |
Repurchases of common stock | (1,295 | ) | | (92,610 | ) | | (65,387 | ) | | | | (157,997 | ) | | | | (157,997 | ) |
Cash dividends declared ($0.01 per share) | | | | | (1,571 | ) | | | | (1,571 | ) | | | | (1,571 | ) |
Balance at March 31, 2019 | 157,130 |
| | $ | 2,151,623 |
| | $ | 2,111,798 |
| | $ | (312,608 | ) | | $ | 3,950,813 |
| | $ | 191,648 |
| | $ | 4,142,461 |
|
See Notes to Unaudited Consolidated Financial Statements.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business, consolidation and presentation—
We are a leading worldwide provider of paymentpure play payments technology andcompany delivering innovative software solutions delivering innovativeand services to our customers globally. Our technologies, services and employee expertise enable us to provide a broad range of solutions that allow our customers to accept various payment types and operate their businesses more efficiently. We distribute our servicesefficiently across a variety of channels in 32 countries throughout North America, Europe,around the Asia-Pacific region and Brazil andworld. We operate in three3 reportable segments: North America, EuropeMerchant Solutions, Issuer Solutions and Asia-Pacific.
We were incorporatedBusiness and Consumer Solutions, which are described in Georgia as Global Payments Inc. in 2000 and spun-off from our former parent company in 2001. Including our time as part of our former parent company, we have been in the payment technology services business since 1967."Note 11—Segment Information." Global Payments Inc. and its consolidated subsidiaries are referred to herein collectively as "Global Payments," the "Company," "we," "our" or "us," unless the context requires otherwise.
These unaudited consolidated financial statements include our accounts and those of our majority-owned subsidiaries, and all intercompany balances and transactions have been eliminated in consolidation. These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The consolidated balance sheet as of December 31, 20182019 was derived from the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 20182019 but does not include all disclosures required by GAAP for annual financial statements.
In the opinion of our management, all known adjustments necessary for a fair presentation of the results of the interim periods have been made. These adjustments consist of normal recurring accruals and estimates that affect the carrying amount of assets and liabilities. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018.2019.
Recent developments relating to the outbreak of the coronavirus pandemic ("COVID-19")
In March 2020, the World Health Organization declared the outbreak of the COVID-19 virus a global pandemic. The pandemic is causing major disruptions to businesses and markets worldwide as the virus continues to spread. A number of countries as well as many states and cities within the United States have enacted temporary closures of businesses, issued quarantine or shelter-in-place orders and taken other restrictive measures in response to COVID-19.
Use of estimates—
The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported period. Actual results could differ materially from those estimates. In particular, the magnitude, duration and effects of the COVID-19 pandemic are difficult to predict at this time, and the ultimate effect could result in additional charges related to the recoverability of assets, including financial assets, long-lived assets and goodwill and other losses. These unaudited consolidated financial statements reflect the financial statement effects of COVID-19 based upon management’s estimates and assumptions utilizing the most currently available information.
Recently Adopted adopted accounting pronouncements
Accounting PronouncementsStandards Update ("ASU") 2018-15— In February 2016,August 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2016-02, "Leases." ASU 2016-02 requires recognition of assets and liabilities for the rights and obligations created by leases and new disclosures about leases. We adopted ASU 2016-02, as well as other related clarifications and interpretive guidance issued by the FASB, on January 1, 2019 using the optional modified retrospective transition method. Under this transition method, we did not recast the prior period financial statements presented. We elected the transition package of three practical expedients, which among other things, allowed for the carryforward of historical lease classifications. We made accounting policy elections not to recognize assets or liabilities for leases with a term of less than twelve months and to account for all components in a lease arrangement as a single combined lease component.
The adoption of ASU 2016-02 resulted in the measurement and recognition of lease liabilities in the amount of $274.0 million and right-of-use assets in the amount of $236.0 million as of January 1, 2019. Lease liabilities were measured as the present value of remaining lease payments, and the corresponding right-of-use assets were measured at an amount equal to the lease liabilities adjusted by the amounts of certain assets and liabilities, such as deferred lease obligations and prepaid rent, that we previously recognized on the balance sheet prior to the initial application of ASU 2016-02. To calculate the present value of remaining lease payments, we elected to use an incremental borrowing rate based on the remaining lease term at transition.
Recently Issued Pronouncements Not Yet Adopted— In August 2018, the FASB issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (A Consensus of the FASB Emerging Issues Task Force)." ASU 2018-15 provides additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract. The new guidance amends the definition of a hosting arrangement and requires a customer in a hosting arrangement that is a service contract to capitalize certain implementation costs as if the arrangement was an internal-use software project.
internal-use software project.We adopted ASU 2018-15 on January 1, 2020, applying the guidance prospectively to all implementation costs incurred after the date of adoption. The adoption of this standard did not have a material effect on our consolidated financial statements. We have historically capitalized implementation costs for internal-use software projectsassociated with cloud computing arrangements that are service contracts following the guidance in Subtopic 350-40 and will continue to do so pursuant to the clarifications provided in the new guidance. We expect to amortize deferred implementation costs to expense on a straight-line basis over the term of the applicable hosting arrangement. The amendments in this update also provide additional presentation and disclosure requirements, including requirements to disclose the nature of an entity’s hosting arrangements that are service contracts as well as quantitative information about capitalized implementation costs and related amortization expense. The guidance will become effective for us on January 1, 2020. Early adoption is permitted for periods beginning on or after January 1, 2019. Entities have the option to apply the guidance prospectively to all implementation costs incurred after the date of adoption or retrospectively.
ASU 2016-13— We are comparing the guidance in ASU 2018-15 to our current accounting practices for costs of implementation activities performed in cloud computing arrangements. We have not yet quantified the effect, if any, of ASU 2018-15 on our consolidated balance sheet or our statements of income and cash flows.
In June 2016, the FASB issuedadopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." on January 1, 2020 using the modified retrospective transition method. The adoption of this standard resulted in a cumulative-effect adjustment to decrease retained earnings by $5.4 million, net of tax. The amendments in this update changechanged how companieswe measure and recognize credit impairment for manycertain financial instruments measured at amortized cost. The new model forUnder the current expected credit losses ("CECL") will require us to immediatelymodel, we recognize an estimate of credit losses expected to occur over the remaining life of theeach pool of financial instruments that are in the scope of the update, includingassets with similar risk characteristics.
We have exposure to credit losses for financial assets such as accounts receivable, andcertain settlement processing assets, eachcheck guarantee claims receivable assets and advances to sales representatives. We utilize a combination of aging or loss-rate methods to develop an estimate of current expected credit losses, depending on the nature and risk profile of the underlying asset pool. A broad range of information is considered in the estimation process, including historical loss information adjusted for current conditions and expectations of future trends. The estimation process also includes consideration of qualitative and quantitative risk factors associated with the age of asset balances, expected timing of payment, contract terms and conditions, changes in specific customer risk profiles or mix of customers, geographic risk, industry or economic trends and relevant environmental factors.
As of March 31, 2020, the total allowance for credit losses was approximately $29.3 million. Financial assets are presented net of the allowance for credit losses in the consolidated balance sheets. The measurement of the allowance for credit losses is recognized through credit loss expense. Depending on the nature of the underlying asset, credit loss expense is included as a component of cost of service or selling, general and administrative expense in the consolidated statements of income. Write-offs are recorded in the period in which the asset is deemed uncollectible. Recoveries are short-termrecorded when received as a direct credit to the credit loss expense in nature. Under current GAAP,the consolidated statements of income. Prior to the adoption of ASU 2016-13, credit losses on these financial instruments are notwere recognized until theirwhen an occurrence iswas deemed to be probable.
Recently issued pronouncements not yet adopted
ASU 2019-12—In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes," which is intended to enhance and simplify various aspects of the accounting for income taxes. The amendments in this update remove certain exceptions to the general principles in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also clarifies and amends existing guidance will becometo improve consistent application of the accounting for franchise taxes, enacted changes in tax laws or rates and transactions that result in a step-up in the tax basis of goodwill. ASU 2019-12 is effective for us on January 1, 2020. Early adoption is permitted forannual and interim periods beginning on or after January 1, 2019. In general, the new guidance will require modified retrospective application to all outstanding financial assets that areDecember 15, 2020, with early adoption permitted in the scope of the update, with a cumulative-effect adjustment, if any recorded to retained earnings as of the date of adoption.interim period. We are evaluating the effect of ASU 2016-132019-12 on our consolidated financial statements, including comparing how we currently measurestatements.
ASU 2020-04—In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)," which provides optional expedients and recognize our allowanceexceptions to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference London Inter-bank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for doubtful accounts on accounts receivablehedging relationships existing as of December 31, 2022 for which an entity has elected certain optional expedients and our reserveare retained through the end of the hedging relationship. The amendments in this update also include a general principle that permits an entity to consider contract modifications due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. If elected, the optional expedients for operating losses and sales allowancescontract modifications must be applied consistently for all eligible contracts or eligible transactions within the relevant Topic or Industry Subtopic within the Codification that contains the guidance that otherwise would be required to how we would make such measurements applying the new CECL model.be applied. The amendments in this update can be adopted anytime beginning March 12, 2020 through December 31, 2022. We have not yet quantifiedare evaluating the effect if any, of ASU 2016-132020-04 on our consolidated balance sheet or our statement of income.financial statements.
NOTE 2—ACQUISITIONS
The transactions described below wereTotal System Services, Inc.
On September 18, 2019, we merged with Total System Services, Inc. ("TSYS") (the "Merger"). We accounted for this transaction as a business combinations,combination, which generally requires that we record the assets acquired and liabilities assumed at fair value as of the acquisition date.
SICOM
On October 17, 2018, we acquired SICOM Systems, Inc. ("SICOM") for total purchase consideration of $410.2 million, which we funded with cash on hand and by drawing on our Revolving Credit Facility (described in "Note 7—Long-Term Debt and Lines of Credit"). SICOM is a provider of end-to-end enterprise, cloud-based software solutions and other technologies to quick service restaurants and food service management companies. SICOM's technologies are complementary to our existing Xenial solutions, and we believe this acquisition will expand our software-driven payments strategy by enabling us to increase our capabilities and expand on our existing presence in the restaurant vertical market.
The provisional estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed as of December 31, 2019 and March 31, 2019,2020, including a reconciliation to the total purchase consideration, were as follows (in thousands):follows:
|
| | | | | | | | | | | | |
| | Provisional Amounts at December 31, 2019 | | Measurement-Period Adjustments | | Provisional Amounts at March 31, 2020 |
| | | | | | |
| | (in thousands) |
| | | | | | |
Cash and cash equivalents | | $ | 446,009 |
| | $ | — |
| | $ | 446,009 |
|
Accounts receivable | | 442,848 |
| | (2,910 | ) | | 439,938 |
|
Identified intangible assets | | 10,980,000 |
| | — |
| | 10,980,000 |
|
Property and equipment | | 644,084 |
| | — |
| | 644,084 |
|
Other assets | | 1,474,825 |
| | (4,940 | ) | | 1,469,885 |
|
Accounts payable and accrued liabilities | | (614,060 | ) | | 236 |
| | (613,824 | ) |
Debt | | (3,295,342 | ) | | 4,787 |
| | (3,290,555 | ) |
Deferred income tax liabilities | | (2,687,849 | ) | | 57,569 |
| | (2,630,280 | ) |
Other liabilities | | (314,415 | ) | | — |
| | (314,415 | ) |
Total identifiable net assets | | 7,076,100 |
| | 54,742 |
| | 7,130,842 |
|
Goodwill | | 17,398,853 |
| | (54,742 | ) | | 17,344,111 |
|
Total purchase consideration | | $ | 24,474,953 |
| | $ | — |
| | $ | 24,474,953 |
|
|
| | | | |
Cash and cash equivalents | | $ | 7,540 |
|
Property and equipment | | 5,838 |
|
Identified intangible assets | | 188,294 |
|
Other assets | | 22,275 |
|
Deferred income taxes | | (48,560 | ) |
Other liabilities | | (31,350 | ) |
Total identifiable net assets | | 144,037 |
|
Goodwill | | 266,164 |
|
Total purchase consideration | | $ | 410,201 |
|
During the three months ended March 31, 2019, we made an adjustment to reflect an increase in the total purchase consideration of $1.0 million. As of March 31, 2019,2020, we considered these balancesamounts to be provisional because we were still in the process of gathering and reviewing information to support the valuations of the assets acquired and liabilities assumed. We made measurement-period adjustments, as shown in the table above, that decreased the amount of provisional goodwill by $54.7 million. The decrease in deferred income tax liabilities for the three months ended March 31, 2020 primarily relates to a refined analysis of the outside bases of partnerships. The effects of the measurement-period adjustments on our consolidated statement of income for the three months ended March 31, 2020 were not material.
GoodwillAs of March 31, 2020, provisional goodwill arising from the acquisition of $266.2 million,$17.3 billion was included in our reportable segments as follows: $7.1 billion in the North AmericaMerchant Solutions segment, $7.9 billion in the Issuer Solutions segment and $2.3 billion in the Business and Consumer Solutions segment. Goodwill was attributable to expected growth opportunities, an assembled workforce and potential synergies from combining the acquired business into our existing businesses. We expect that approximately $40 million of the goodwill from this acquisition will be deductible for income tax purposes.
The following table reflects the estimated fair values of the identified intangible assets of SICOM and the respective aggregated weighted-average estimated amortization periods:
|
| | | | | |
| Estimated Fair Values | | Weighted-Average Estimated Amortization Periods |
| | | |
| (in thousands) | | (years) |
Customer-related intangible assets | $ | 104,900 |
| | 14 |
Acquired technologies | 65,312 |
| | 6 |
Trademarks and trade names | 11,202 |
| | 3 |
Contract-based intangible assets | 6,880 |
| | 5 |
Total estimated acquired intangible assets | $ | 188,294 |
| | 10 |
AdvancedMD
On September 4, 2018, we acquired AdvancedMD, Inc. ("AdvancedMD") for total purchase consideration of $706.9 million, which we funded with cash on hand and by drawing on our Revolving Credit Facility. AdvancedMD is a provider of cloud-based enterprise software solutions to small-to-medium sized ambulatory care physician practices. We believe this acquisition will expand our software-driven payments strategy by enabling us to enter the healthcare vertical market, a large and fragmented market with strong payment fundamentals and attractive growth opportunities.
The provisional estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed as of March 31, 2019, including a reconciliation to the total purchase consideration, were as follows (in thousands):
|
| | | | |
Cash and cash equivalents | | $ | 7,657 |
|
Property and equipment | | 5,672 |
|
Identified intangible assets | | 419,500 |
|
Other assets | | 11,785 |
|
Deferred income taxes | | (93,372 | ) |
Other liabilities | | (15,647 | ) |
Total identifiable net assets | | 335,595 |
|
Goodwill | | 371,290 |
|
Total purchase consideration | | $ | 706,885 |
|
During the three months ended March 31, 2019, we made measurement period adjustments, including a $5.6 million decrease in deferred income tax liabilities, which resulted in a corresponding decrease in goodwill. As of March 31, 2019, we considered these balances to be provisional because we were still in the process of gathering and reviewing information to support the valuation of the assets acquired and liabilities assumed.
Goodwill arising from the acquisition of $371.3 million, included in the North America segment, was attributable to expected growth opportunities, an assembled workforce and potential synergies from combining our existing businesses.business. We expect that substantially all of the goodwill from this acquisition will not be deductible for income tax purposes.
The following tableunaudited pro forma information shows the results of our operations for the three months ended March 31, 2019 as if the Merger had occurred on January 1, 2018. The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of what would have occurred if the Merger had occurred as of that date. The unaudited pro forma information is also not intended to be a projection of future results due to the integration of TSYS. The unaudited pro forma information reflects the estimated fair valueseffects of applying our accounting policies and certain pro forma adjustments to the identified intangible assetscombined historical financial information of AdvancedMDGlobal Payments and the respective aggregated weighted-average estimated amortization periods:TSYS.
|
| | | | | | | |
| Actual | | Pro Forma |
| | | |
| (in thousands) |
| | | |
Total revenues | $ | 883,039 |
| | $ | 1,909,770 |
|
Net income attributable to Global Payments | $ | 112,341 |
| | $ | 187,865 |
|
|
| | | | | |
| Estimated Fair Values | | Weighted-Average Estimated Amortization Periods |
| | | |
| (in thousands) | | (years) |
Customer-related intangible assets | $ | 303,100 |
| | 11 |
Acquired technologies | 83,700 |
| | 5 |
Trademarks and trade names | 32,700 |
| | 15 |
Total estimated acquired intangible assets | $ | 419,500 |
| | 10 |
Valuation of Identified Intangible Assets
For the acquisitions discussed above,three months ended March 31, 2020, the estimated fair valuesacquired operations of customer-related intangible assets were determined usingTSYS contributed $1,055.0 million to our consolidated revenues and $115.5 million to our consolidated operating income.
At March 31, 2020, accounts payable and accrued liabilities in the consolidated balance sheet included obligations totaling $48.3 million for employee termination benefits resulting from Merger-related integration activities. During the three months ended March 31, 2020, we recognized charges for employee termination benefits of $17.6 million, which included $2.6 million of share-based compensation expense. As of March 31, 2020, the cumulative amount of recognized charges for employee termination benefits resulting from Merger-related integration activities was $74.7 million, which included $19.9 million of share-based compensation expense. These charges are recorded within selling, general and administrative expenses in our consolidated statements of income approach, which was based on projected cash flows discounted to their present value using discount rates that consider the timing and risk of the forecasted cash flows. The discount rates used represented the average estimated value of a market participant’s cost of capital and debt, derived using customary market metrics. Acquired technologies were valued using the replacement cost method, which required us to estimate the costs to construct an asset of equivalent utility at prices available at the time of the valuation analysis, with adjustmentsincluded within Corporate expenses for segment reporting purposes. New obligations may arise as Merger-related integration activities continue in value for physical deterioration and functional and economic obsolescence. Trademarks and trade names were valued using the "relief-from-royalty" approach. This method assumes that trademarks and trade names have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method required us to estimate the future revenues for the related brands, the appropriate royalty rate and the weighted-average cost of capital. The discount rates used represented the average estimated value of a market participant’s cost of capital and debt, derived using customary market metrics.2020.
NOTE 3—REVENUES
The following tables present a disaggregation of our revenue from contracts with customers by geography for each of our reportable segments for the three months ended March 31, 2020 and 2019:
|
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2020 |
| Merchant Solutions | | Issuer Solutions | | Business and Consumer Solutions | | Intersegment Revenue | | Total |
| | | | | | | | | |
| (in thousands) |
| | | | | | | | | |
Americas | $ | 1,024,504 |
| | $ | 393,754 |
| | $ | 203,946 |
| | $ | (17,733 | ) | | $ | 1,604,471 |
|
Europe | 135,999 |
| | 108,362 |
| | — |
| | — |
| | 244,361 |
|
Asia Pacific | 54,766 |
| | 1,646 |
| | — |
| | (1,646 | ) | | 54,766 |
|
| $ | 1,215,269 |
| | $ | 503,762 |
| | $ | 203,946 |
| | $ | (19,379 | ) | | $ | 1,903,598 |
|
|
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2019 |
| Merchant Solutions | | Issuer Solutions | | Business and Consumer Solutions | | Intersegment Revenue | | Total |
| | | | | | | | | |
| (in thousands) |
| | | | | | | | | |
Americas | $ | 678,423 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 678,423 |
|
Europe | 137,613 |
| | 5,256 |
| | — |
| | — |
| | 142,869 |
|
Asia Pacific | 61,747 |
| | — |
| | — |
| | — |
| | 61,747 |
|
| $ | 877,783 |
| | $ | 5,256 |
| | $ | — |
| | $ | — |
| | $ | 883,039 |
|
The following table presents a disaggregation of our Merchant Solutions segment revenues by distribution channel for the three months ended March 31, 20192020 and 2018:2019:
|
| | | | | | | |
| March 31, 2020 | | March 31, 2019 |
| | | |
| (in thousands) |
| | | |
Relationship-led | $ | 676,522 |
| | $ | 462,387 |
|
Technology-enabled | 538,747 |
| | 415,396 |
|
| $ | 1,215,269 |
| | $ | 877,783 |
|
|
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2019 |
| North America | | Europe | | Asia-Pacific | | Total |
| | | | | | | |
| (in thousands) |
| | | | | | | |
Direct: | | | | | | | |
Relationship-led | $ | 271,411 |
| | $ | 97,041 |
| | $ | 33,420 |
| | $ | 401,872 |
|
Technology-enabled | 341,241 |
| | 45,828 |
| | 28,327 |
| | 415,396 |
|
| 612,652 |
| | 142,869 |
| | 61,747 |
| | 817,268 |
|
Wholesale | 65,771 |
| | — |
| | — |
| | 65,771 |
|
| $ | 678,423 |
| | $ | 142,869 |
| | $ | 61,747 |
| | $ | 883,039 |
|
|
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2018 |
| North America | | Europe | | Asia-Pacific | | Total |
| | | | | | | |
| (in thousands) |
| | | | | | | |
Direct: | | | | | | | |
Relationship-led | $ | 226,420 |
| | $ | 92,214 |
| | $ | 35,242 |
| | $ | 353,876 |
|
Technology-enabled | 283,358 |
| | 51,063 |
| | 22,429 |
| | 356,850 |
|
| 509,778 |
| | 143,277 |
| | 57,671 |
| | 710,726 |
|
Wholesale | 84,251 |
| | — |
| | — |
| | 84,251 |
|
| $ | 594,029 |
| | $ | 143,277 |
| | $ | 57,671 |
| | $ | 794,977 |
|
Accounting Standards Codification Topic 606, Revenues from Contracts with Customers ("ASC 606606") requires that we determine for each customer arrangement whether revenue should be recognized at a point in time or over time. For the three months ended March 31, 20192020 and 2018,2019, substantially all of our revenues were recognized over time.
Supplemental balance sheet information related to contracts from customers as of March 31, 20192020 and 2018December 31, 2019 was as follows:
|
| | | | | | | | | |
| Balance Sheet Location | | March 31, 2020 | | December 31, 2019 |
| | | | | |
| | | (in thousands) |
| | | | | |
Assets: | | | | | |
Capitalized costs to obtain customer contracts, net | Other noncurrent assets | | $ | 232,030 |
| | $ | 226,945 |
|
Capitalized costs to fulfill customer contracts, net | Other noncurrent assets | | $ | 52,573 |
| | $ | 38,150 |
|
| | | | | |
Liabilities: | | | | | |
Contract liabilities, net (current) | Accounts payable and accrued liabilities | | $ | 187,084 |
| | $ | 193,405 |
|
Contract liabilities, net (noncurrent) | Other noncurrent liabilities | | $ | 42,556 |
| | $ | 35,272 |
|
|
| | | | | | | | | |
| Balance Sheet Location | | March 31, 2019 | | December 31, 2018 |
| | | | | |
| | | (in thousands) |
| | | | | |
Assets: | | | | | |
Capitalized costs to obtain customer contracts, net | Other noncurrent assets | | $ | 201,896 |
| | $ | 194,616 |
|
Capitalized costs to fulfill customer contracts, net | Other noncurrent assets | | $ | 16,282 |
| | $ | 12,954 |
|
| | | | | |
Liabilities: | | | | | |
Contract liabilities, net (current) | Accounts payable and accrued liabilities | | $ | 140,808 |
| | $ | 146,947 |
|
Contract liabilities, net (noncurrent) | Other noncurrent liabilities | | $ | 9,045 |
| | $ | 8,595 |
|
Net contract assets were not material at March 31, 2020 or at December 31, 2019. Revenue recognized for the three months ended March 31, 20192020 and 20182019 from contract liability balances at the beginning of theeach period was $58.5$90.8 million and $40.6$58.5 million, respectively.
ASC 606 requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations. The purpose of this disclosure is to provide additional information about the amounts and expected timing of revenue to be recognized from the remaining performance obligations in our existing contracts. The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at March 31, 2020. However, as permitted, we have elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria. Accordingly, the total unsatisfied or partially unsatisfied performance obligations related to processing services is significantly higher than the amounts disclosed in the table below (in thousands):
|
| | | |
Year ending December 31, | |
| |
Remainder of 2020 | $ | 687,211 |
|
2021 | 795,626 |
|
2022 | 603,497 |
|
2023 | 396,016 |
|
2024 | 245,923 |
|
2025-2029 | 564,501 |
|
Total | $ | 3,292,774 |
|
NOTE 4—SETTLEMENT PROCESSING ASSETS AND OBLIGATIONS
As of March 31, 2019 and December 31, 2018, settlement processing assets and obligations consisted of the following:
|
| | | | | | | |
| March 31, 2019 | | December 31, 2018 |
| | | |
| (in thousands) |
| | | |
Settlement processing assets: | | | |
Interchange reimbursement | $ | 268,329 |
| | $ | 154,978 |
|
Receivable from members | 106,690 |
| | 228,107 |
|
Receivable from networks | 2,406,807 |
| | 1,221,060 |
|
Exception items | 9,885 |
| | 7,636 |
|
Merchant reserves | (16,340 | ) | | (11,559 | ) |
| $ | 2,775,371 |
| | $ | 1,600,222 |
|
| | | |
Settlement processing obligations: | | | |
Interchange reimbursement | $ | 85,322 |
| | $ | 193,235 |
|
Liability to members | (21,004 | ) | | (182,450 | ) |
Liability to merchants | (2,504,918 | ) | | (1,144,249 | ) |
Exception items | 3,274 |
| | 7,146 |
|
Merchant reserves | (136,686 | ) | | (145,826 | ) |
Reserve for operating losses and sales allowances | (5,864 | ) | | (4,212 | ) |
| $ | (2,579,876 | ) | | $ | (1,276,356 | ) |
NOTE 5—GOODWILL AND OTHER INTANGIBLE ASSETS
As of March 31, 20192020 and December 31, 2018,2019, goodwill and other intangible assets consisted of the following:
|
| | | | | | | |
| March 31, 2020 | | December 31, 2019 |
| | | |
| (in thousands) |
| | | |
Goodwill | $ | 23,662,373 |
| | $ | 23,759,740 |
|
Other intangible assets: | | | |
Customer-related intangible assets | $ | 9,176,861 |
| | $ | 9,238,728 |
|
Acquired technologies | 2,745,024 |
| | 2,732,218 |
|
Contract-based intangible assets | 1,970,443 |
| | 1,974,429 |
|
Trademarks and trade names | 1,237,020 |
| | 1,239,471 |
|
| 15,129,348 |
| | 15,184,846 |
|
Less accumulated amortization: | | | |
Customer-related intangible assets | 1,376,969 |
| | 1,225,785 |
|
Acquired technologies | 670,304 |
| | 576,928 |
|
Contract-based intangible assets | 88,788 |
| | 82,225 |
|
Trademarks and trade names | 178,496 |
| | 145,253 |
|
| 2,314,557 |
| | 2,030,191 |
|
| $ | 12,814,791 |
| | $ | 13,154,655 |
|
|
| | | | | | | |
| March 31, 2019 | | December 31, 2018 |
| | | |
| (in thousands) |
| | | |
Goodwill | $ | 6,345,998 |
| | $ | 6,341,355 |
|
Other intangible assets: | | | |
Customer-related intangible assets | $ | 2,493,426 |
| | $ | 2,486,217 |
|
Acquired technologies | 914,127 |
| | 896,701 |
|
Trademarks and trade names | 293,177 |
| | 289,588 |
|
Contract-based intangible assets | 174,297 |
| | 178,391 |
|
| 3,875,027 |
| | 3,850,897 |
|
Less accumulated amortization: | | | |
Customer-related intangible assets | 916,457 |
| | 860,715 |
|
Acquired technologies | 390,868 |
| | 351,170 |
|
Trademarks and trade names | 92,436 |
| | 83,234 |
|
Contract-based intangible assets | 69,933 |
| | 67,160 |
|
| 1,469,694 |
| | 1,362,279 |
|
| $ | 2,405,333 |
| | $ | 2,488,618 |
|
The following table sets forth the changes by reportable segment in the carrying amount of goodwill for the three months ended March 31, 2019:2020:
|
| | | | | | | | | | | | | | | |
| Merchant Solutions | | Issuer Solutions | | Business and Consumer Solutions | | Total |
| | | | | | | |
| (in thousands) |
| | | | | | | |
Balance at December 31, 2019 | $ | 13,415,352 |
| | $ | 7,985,731 |
| | $ | 2,358,657 |
| | $ | 23,759,740 |
|
Goodwill acquired | 34,911 |
| | — |
| | — |
| | 34,911 |
|
Effect of foreign currency translation | (64,218 | ) | | (13,318 | ) | | — |
| | (77,536 | ) |
Measurement-period adjustments | 3,514 |
| | (60,984 | ) | | 2,728 |
| | (54,742 | ) |
Balance at March 31, 2020 | $ | 13,389,559 |
| | $ | 7,911,429 |
| | $ | 2,361,385 |
| | $ | 23,662,373 |
|
|
| | | | | | | | | | | | | | | |
| North America | | Europe | | Asia-Pacific | | Total |
| | | | | | | |
| (in thousands) |
| | | | | | | |
Balance at December 31, 2018 | $ | 5,530,087 |
| | $ | 484,761 |
| | $ | 326,507 |
| | $ | 6,341,355 |
|
Effect of foreign currency translation | 3,786 |
| | (1,035 | ) | | 1,948 |
| | 4,699 |
|
Measurement-period adjustments | (4,092 | ) | | — |
| | 4,036 |
| | (56 | ) |
Balance at March 31, 2019 | $ | 5,529,781 |
| | $ | 483,726 |
| | $ | 332,491 |
| | $ | 6,345,998 |
|
There were no0 accumulated impairment losses for goodwill as of March 31, 20192020 or December 31, 2018.2019.
NOTE 5—LONG-TERM DEBT AND LINES OF CREDIT NOTE 6—LEASES
Our leases consist primarily of operating real estate leases for office space in the markets in which we conduct business. Many of our operating leases include escalating rental payments and incentives, as well as termination and renewal options. Certain of our lease agreements provide that we pay the cost of property taxes, insurance and maintenance. As described in "Note 1—Basis of Presentation and Summary of Significant Accounting Policies," we adopted ASU 2016-02 on January 1, 2019. Unless otherwise indicated, the following information in this footnote applies only to periods after December 31, 2018.
We evaluate each of our lease and service arrangements at inception to determine if the arrangement is, or contains, a lease and the appropriate classification of each identified lease. A lease exists if we obtain substantially all of the economic benefits of and have the right to control the use of an asset for a period of time. Right-of-use assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease agreement. We recognize right-of-use assets and leases liabilities at the lease commencement date based on the present values of fixed lease payments over the term of the lease. Lease costs are recognized as expense on a straight-line basis over the lease term. We consider a termination or renewal option in the determination of the lease term when it is reasonably certain that we will exercise that option. The weighted-average remaining lease term at March 31, 2019 was 10.2 years. Because our leases generally do not provide a readily determinable implicit interest rate, we use an incremental borrowing rate to measure the lease liability and associated right-of-use asset at the lease commencement date. The incremental borrowing rate used is a fully collateralized rate that considers our credit rating, market conditions and the term of the lease at the lease commencement date. The weighted-average discount rate used in the measurement of our lease liabilities as of March 31, 2019 was 5.2%.
The effects of adopting ASU 2016-02 on our balance sheet is set forth in the table below. Adoption did not have a material effect on any line items in our consolidated statement of income or on our cash flows from operating activities, investing activities or financing activities included in our consolidated statement of cash flows. As of March 31, 2019 and January 1, 2019, right-of-use assets and lease liabilities consisted of the following (in thousands):
|
| | | | | | | | | | |
| | Balance Sheet Location | | March 31, 2019 | | January 1, 2019 |
| | | | | | |
| | | | | | |
| | | | | | |
Assets: | | | | | | |
Operating lease right-of-use assets(1) | | Other noncurrent assets | | $ | 225,300 |
| | $ | 235,979 |
|
| | | | | | |
Liabilities: | | | | | | |
Operating lease liabilities (current) | | Accounts payable and accrued liabilities | | $ | 36,394 |
| | $ | 37,339 |
|
Operating lease liabilities (noncurrent) | | Other noncurrent liabilities | | 230,260 |
| | 236,697 |
|
Total operating lease liabilities | | | | $ | 266,654 |
| | $ | 274,036 |
|
(1) Approximately 90% of our operating lease right-of-use assets are located in the United States.
As of March 31, 2020 and December 31, 2019, maturitieslong-term debt consisted of lease liabilities were as follows (in thousands):the following:
|
| | | | | | | |
| March 31, 2020 | | December 31, 2019 |
| | | |
| (in thousands) |
| | | |
3.800% senior notes due April 1, 2021 | $ | 758,797 |
| | $ | 760,996 |
|
3.750% senior notes due June 1, 2023 | 566,062 |
| | 567,330 |
|
4.000% senior notes due June 1, 2023 | 570,874 |
| | 572,522 |
|
2.650% senior notes due February 15, 2025 | 991,844 |
| | 991,423 |
|
4.800% senior notes due April 1, 2026 | 817,799 |
| | 820,623 |
|
4.450% senior notes due June 1, 2028 | 485,883 |
| | 486,982 |
|
3.200% senior notes due August 15, 2029 | 1,235,238 |
| | 1,234,843 |
|
4.150% senior notes due August 15, 2049 | 739,521 |
| | 739,431 |
|
Unsecured term loan facility | 1,982,763 |
| | 1,981,758 |
|
Unsecured revolving credit facility | 1,416,000 |
| | 903,000 |
|
Finance lease liabilities | 30,798 |
| | 32,996 |
|
Other borrowings | 111,048 |
| | 33,597 |
|
Total long-term debt | 9,706,627 |
| | 9,125,501 |
|
Less current portion | 70,551 |
| | 35,137 |
|
Long-term debt, excluding current portion | $ | 9,636,076 |
| | $ | 9,090,364 |
|
|
| | | | |
Year ending December 31, | | |
2019 | | $ | 38,514 |
|
2020 | | 43,533 |
|
2021 | | 34,784 |
|
2022 | | 31,883 |
|
2023 | | 27,914 |
|
2024 | | 26,323 |
|
2025 and thereafter | | 145,594 |
|
Total lease payments(1) | | 348,545 |
|
Imputed interest | | (81,891 | ) |
Total operating lease liabilities | | $ | 266,654 |
|
(1) Total lease payments do not include approximately $81 million for operating leases that had not yet commenced atThe carrying amounts of our senior notes and term loans are presented net of unamortized discount and unamortized debt issuance costs, as applicable. At March 31, 2019. We expect2020, unamortized discount on senior notes was $5.8 million, and unamortized debt issuance costs on senior notes and the lease commencement date for these leasesunsecured term loan facility were $44.9 million. Unamortized debt issuance costs on our senior notes and unsecured term loans at December 31, 2019 were $46.6 million. The portion of unamortized debt issuance costs related to occur laterrevolving credit facilities is included in other noncurrent assets. At March 31, 2020, unamortized debt issuance costs on the unsecured revolving credit facility were $16.7 million, and, at December 31, 2019, unamortized debt issuance costs on the unsecured revolving credit facility were $17.6 million. The amortization of debt discounts and in 2020.
Operating leasedebt issuance costs in our consolidated statementis recognized as an increase to interest expense over the terms of incomethe respective debt instruments. Amortization of discounts and debt issuance costs for the three months ended March 31, 2020 and 2019 were $15.7was $2.8 million including $14.5and $3.1 million, in selling, general and administrative expenses and $1.2 million in cost of services.Total lease costs include variable lease costs of approximately $2.4 million, which are primarily comprised of the cost of property taxes, insurance and maintenance. Lease costs for leases with a term of less than twelve months were which are not material for the three months endedrespectively.
At March 31, 2019.
Cash paid for amounts included in the measurement2020, maturities of operatinglong-term debt (excluding finance lease liabilities for the three months ended March 31, 2019 was $12.5 million, which is included as a component of cash provided by operating activities in the consolidated statement of cash flows. Operating lease liabilities arising from obtaining new or modified right-of-use assets were $1.5 million for the three months ended March 31, 2019.
Future minimum payments at December 31, 2018 for noncancelable operating leasesliabilities) were as follows by year (in thousands):
|
| | | |
Year ending December 31, | |
| |
Remainder of 2020 | $ | 50,726 |
|
2021 | 801,771 |
|
2022 | 58,403 |
|
2023 | 1,300,000 |
|
2024 | 3,166,000 |
|
2025 | 1,000,000 |
|
2026 and thereafter | 3,200,000 |
|
Total | $ | 9,576,900 |
|
|
| | | | |
Year ending December 31: | | |
2019 | | $ | 50,095 |
|
2020 | | 47,700 |
|
2021 | | 40,035 |
|
2022 | | 37,055 |
|
2023 | | 33,298 |
|
2024 and thereafter | | 225,225 |
|
Total future minimum payments(1) | | $ | 433,408 |
|
(1) Future minimum lease payments include approximately $70 million for operating leases that had not commenced at December 31, 2018.Senior Unsecured Credit Facilities
NOTE 7—LONG-TERM DEBT AND LINES OF CREDIT
As of March 31, 2019 and December 31, 2018, long-term debt consisted of the following:
|
| | | | | | | |
| March 31, 2019 | | December 31, 2018 |
| | | |
| (in thousands) |
| | | |
Credit Facility: | | | |
Term loans (face amounts of $4,441,578 and $4,463,643 at March 31, 2019 and December 31, 2018, respectively, less unamortized debt issuance costs of $35,182 and $37,400 at March 31, 2019 and December 31, 2018, respectively) | $ | 4,406,396 |
| | $ | 4,426,243 |
|
Revolving Credit Facility | 897,000 |
| | 704,000 |
|
Total long-term debt | 5,303,396 |
| | 5,130,243 |
|
Less current portion of Credit Facility (face amounts of $142,044 and $124,176 at March 31, 2019 and December 31, 2018, respectively, less unamortized debt issuance costs of $9,086 and $9,101 at March 31, 2019 and December 31, 2018, respectively, and the current portion of capital lease obligations of $62) | 133,019 |
| | 115,075 |
|
Long-term debt, excluding current portion | $ | 5,170,377 |
| | $ | 5,015,168 |
|
Maturity requirements on long-term debt as of March 31, 2019 by year are as follows (in thousands):
|
| | | |
Year ending December 31, | |
2019 | $ | 102,111 |
|
2020 | 159,979 |
|
2021 | 195,848 |
|
2022 | 267,587 |
|
2023 | 4,138,053 |
|
2024 and thereafter | 475,000 |
|
Total | $ | 5,338,578 |
|
Credit Facility
We are party tohave a term loan credit facility agreement ("Term Loan Credit Agreement") and a revolving credit agreement ("Unsecured Revolving Credit Agreement") in each case with Bank of America, N.A., as administrative agent, and a syndicate of financial institutions, as lenders and other agents (as amended from timeagents. The Term Loan Credit Agreement provides for a senior unsecured $2.0 billion term loan facility, and the Unsecured Revolving Credit Agreement provides for a senior unsecured $3.0 billion revolving credit facility.
Borrowings under the term loan facility were made in U.S. dollars and borrowings under the revolving credit facility are available to time,be made in U.S. dollars, euros, sterling, Canadian dollars and, subject to certain conditions, certain other currencies at our option. Borrowings in U.S. dollars and certain other LIBOR quoted currencies will bear interest, at our option, at a rate equal to either (1) the "Credit Facility"). rate (adjusted for any statutory reserve requirements for eurocurrency liabilities) for eurodollar deposits in the London interbank market, (2) a floating rate of interest set forth on the applicable LIBOR screen page designated by Bank of America or (3) the highest of (a) the federal funds effective rate plus 0.5%, (b) the rate of interest as publicly announced by Bank of America as its "prime rate" or (c) LIBOR plus 1.0%, in each case, plus an applicable margin.
As of March 31, 2019, the Credit Facility provided for secured financing comprised of (i) a $1.5 billion revolving credit facility ("Revolving Credit Facility"); (ii) a $1.5 billion term loan ("Term A Loan"), (iii) a $1.37 billion term loan ("Term A-2 Loan"), (iv) a $1.14 billion term loan ("Term B-2 Loan"); and (v) a $500 million term loan ("Term B-4 Loan"). Substantially all of the assets of our domestic subsidiaries are pledged as collateral under the Credit Facility. The total available commitments under the Revolving Credit Facility at March 31, 2019 were $590.5 million.
The Credit Facility provides for an interest rate, at our election, of either London Interbank Offered Rate or a base rate, in each case plus a margin. As of March 31, 2019,2020, the interest rates on the Term A Loan, the Term A-2 Loan, the Term B-2 Loanterm loan facility and the Term B-4 Loanrevolving credit facility were 4.00%, 4.00%, 4.25%2.36% and 4.25%2.02%, respectively. As of March 31, 2019, the interest rate on the Revolving Credit Facility was 3.91%. In addition, we are required to pay a quarterly commitment fee with respect to the unused portion of the Revolving Credit Facilityrevolving credit facility at an applicable rate per annum ranging from 0.20%0.125% to 0.30%0.300% depending on our leverage ratio.
The Term A Loan and the Term A-2 Loan mature, and the Revolving Credit Facility expires,credit rating. Beginning on January 20, 2023. The Term B-2 Loan matures on April 22, 2023. The Term B-4 Loan matures on October 18, 2025. The Term A Loan and Term A-2 Loan principal amounts must each be repaid in quarterly installments in the amount of 0.625% of principal through June 2019, increasing to 1.25% of principal through June 2021, increasing to 1.875% of principal through JuneDecember 31, 2022, and increasing to 2.50%at the end of principal through December 2022, witheach quarter thereafter, the remaining principal balance due upon maturity in January 2023. The Term B-2 Loan principalterm loan facility must be repaid in quarterly installments in the amount of 0.25%2.50% of original principal through March 2023, with the remaining principal
balance due upon maturity in April 2023. The Term B-4 Loan principal must be repaid in quarterly installments in the amount of 0.25% of principal through September 2025,date with the remaining principal balance due upon maturity in October 2025.September 2024. The revolving credit facility also matures in September 2024.
We may issue standby letters of credit of up to $100$250 million in the aggregate under the Revolving Credit Facility.revolving credit facility. Outstanding letters of credit under the Revolving Credit Facilityrevolving credit facility reduce the amount of borrowings available to us. BorrowingsThe total available to uscommitments under the Revolving Credit Facility are further limited byrevolving credit facility at March 31, 2020 were $1.6 billion.
Senior Unsecured Notes
We have $3.0 billion in aggregate principal amount of senior unsecured notes, consisting of the covenants described below under "Compliance with Covenants."
The portionfollowing: (i) $1.0 billion aggregate principal amount of deferred debt issuance costs2.650% senior notes due 2025; (ii) $1.25 billion aggregate principal amount of 3.200% senior notes due 2029; and (iii) $750 million aggregate principal amount of 4.150% senior notes due 2049. Interest on the senior notes is payable semi-annually in arrears on each February 15 and August 15. Each series of the senior notes is redeemable, at our option, in whole or in part, at any time and from time-to-time at the redemption prices set forth in the related toindenture. We have an additional $3.0 billion in aggregate principal amount of senior unsecured notes consisting of the Revolving Credit Facility is included in other noncurrent assets,following: (i) $750 million aggregate principal amount of 3.800% senior notes due 2021; (ii) $550 million aggregate principal amount of 3.750% senior notes due 2023; (iii) $550 million aggregate principal amount of 4.000% senior notes due 2023; (iv) $750 million aggregate principal amount of 4.800% senior notes due 2026; and (v) $450 million aggregate principal amount of 4.450% senior notes due 2028. For the 3.800% senior notes due 2021 and the portion4.800% senior notes due 2026, interest is payable semi-annually each April 1 and October 1. For the 3.750% senior notes due 2023, the 4.000% senior notes due 2023 and the 4.450% senior notes due 2028, interest is payable semi-annually each June 1 and December 1. The difference between the fair value and face value of deferred debt issuance costs related tothese senior notes at the term loansdate the Merger was consummated is reported as a reduction to the carrying amount of the term loans. Debt issuance costs are amortized as an adjustment to interest expenserecognized over the terms of the respective facilities.notes as a reduction of interest expense. The amortization of this fair value adjustment was $9.0 million for the three months ended March 31, 2020.
As of March 31, 2020, our senior notes had a total carrying amount of $6.2 billion and an estimated fair value of $6.2 billion. The estimated fair value of our senior notes was based on quoted market prices in an active market and is considered to be a Level 1 measurement of the valuation hierarchy. The fair value of other long-term debt approximated its carrying amount at March 31, 2020.
Compliance with Covenants
The senior unsecured term loan and revolving credit facility contain customary conditions to funding, affirmative covenants, negative covenants, financial covenants and events of default. As of March 31, 2020, financial covenants under the term loan facility required a leverage ratio of 3.50 to 1.00 and an interest coverage ratio of 3.00 to 1.00. We were in compliance with all applicable covenants as of March 31, 2020.
Settlement Lines of Credit
In various markets where we do business, we have specialized lines of credit, which are restricted for use in funding settlement. The settlement lines of credit generally have variable interest rates, are subject to annual review and are denominated in local currency but may, in some cases, facilitate borrowings in multiple currencies. For certain of our lines of credit, the available credit is increased by the amount of cash we have on deposit in specific accounts with the lender. Accordingly, the amount of the outstanding linelines of credit may exceed the stated credit limit. As of March 31, 20192020 and December 31, 2018,2019, a total of $69.0$58.0 million and $70.6$74.5 million, respectively, of cash on deposit was used to determine the available credit.
As of March 31, 20192020 and December 31, 2018, respectively,2019 we had $641.9$375.2 million and $700.5$463.2 million, respectively, outstanding under these lines of credit with additional capacity to fund settlement of $725.2$1,092.1 million as of March 31, 2019 to fund settlement. The weighted-average interest rate on these borrowings was 2.57% and 2.97% at March 31, 2019 and December 31, 2018, respectively.2020. During the three months ended March 31, 2019,2020, the maximum and average outstanding balances under these lines of credit were $685.4$679.0 million and $390.0$376.4 million, respectively.
Compliance with Covenants
The Credit Facility Agreement contains customary affirmativeweighted-average interest rate on these borrowings was 1.99% and restrictive covenants, including, among others, financial covenants based on our leverage and interest coverage ratios, as defined in the agreement. As of3.16% at March 31, 2020 and December 31, 2019, financial covenants under the Credit Facility Agreement required a leverage ratio no greater than: (i) 5.00 to 1.00 as of the end of any fiscal quarter ending during the period from April 1, 2018 through June 30, 2019; (ii) 4.75 to 1.00 as of the end of any fiscal quarter ending during the period from July 1, 2019 through June 30, 2020; and (iii) 4.50 to 1.00 as of the end of any fiscal quarter ending thereafter. The interest coverage ratio is required to be no less than 3.25 to 1.00.respectively.
The Credit Facility Agreement includes covenants, subject in each case to exceptions and qualifications that may restrict certain payments, including in certain circumstances, the repurchasing of our common stock and paying cash dividends in excess of our current rate of $0.01 per share per quarter. We were in compliance with all applicable covenants as of March 31, 2019.
Interest Rate SwapDerivative Agreements
We have interest rate swap agreements with financial institutions to hedge changes in cash flows attributable to interest rate risk on a portion of our variable-rate debt instruments. Net amounts to be received or paid under the swap agreements are reflected as adjustments to interest expense. Since we have designated the interest rate swap agreements as portfolio cash flow hedges, unrealized gains or losses resulting from adjusting the swaps to fair value are recorded as components of other comprehensive income.income (loss). The fair values of theour interest rate swaps were determined based on the present value of the estimated future net cash flows using implied rates in the applicable yield curve as of the valuation date. These derivative instruments were classified within Level 2 of the valuation hierarchy.
The table below presents the fair values ofinformation about our derivative financial instruments, designated as cash flow hedges, included in the consolidated balance sheets:
|
| | | | | | | | | | | | | | |
| | | | | | | | Fair Values |
Derivative Financial Instruments | | Balance Sheet Location | | Weighted-Average Fixed Rate of Interest at March 31, 2020 | | Range of Maturity Dates at March 31, 2020 | | March 31, 2020 | | December 31, 2019 |
| | | | | | | | | | |
| | | | | | | | (in thousands) |
| | | | | | | | | | |
Interest rate swaps (Notional of $250 million at December 31, 2019) | | Prepaid expenses and other current assets | | NA | | NA | | $ | — |
| | $ | 472 |
|
Interest rate swaps (Notional of $550 million at March 31, 2020) | | Accounts payable and accrued liabilities | | 1.65% | | July 31, 2020 - March 31, 2021 | | $ | 5,365 |
| | $ | — |
|
Interest rate swaps (Notional of $1.25 billion at March 31, 2020 and $1.55 billion at December 31, 2019) | | Other noncurrent liabilities | | 2.73% | | December 31, 2022 | | $ | 84,361 |
| | $ | 45,604 |
|
|
| | | | | | | | | | | | | | |
| | | | | | | | Fair Values |
Derivative Financial Instruments | | Balance Sheet Location | | Weighted-Average Fixed Rate of Interest at March 31, 2019 | | Range of Maturity Dates at March 31, 2019 | | March 31, 2019 | | December 31, 2018 |
| | | | | | | | | | |
| | | | | | | | (in thousands) |
| | | | | | | | | | |
Interest rate swaps (Notional of $250 million at March 31, 2019 and $750 million at December 31, 2018) | | Prepaid expenses and other current assets | | 1.58% | | December 31, 2019 | | $ | 1,602 |
| | $ | 3,200 |
|
Interest rate swaps (Notional of $550 million at March 31, 2019 and December 31, 2018) | | Other noncurrent assets | | 1.65% | | July 31, 2020 - March 31, 2021 | | $ | 5,248 |
| | $ | 8,256 |
|
Interest rate swaps (Notional of $1,250 million at March 31, 2019 and $950 million at December 31, 2018) | | Accounts payable and accrued liabilities | | 2.73% | | December 31, 2022 | | $ | 26,333 |
| | $ | 14,601 |
|
NA = not applicable.
The table below presents the effects of our interest rate swaps on the consolidated statements of income and comprehensive income (loss) for the three months ended March 31, 20192020 and 2018:2019:
|
| | | | | | | |
| Three Months Ended |
| March 31, 2019 | | March 31, 2018 |
| | | |
| (in thousands) |
| | | |
Amount of net unrealized (losses) gains recognized in other comprehensive income (loss) | $ | (14,509 | ) | | $ | 7,682 |
|
Amount of net unrealized gains reclassified out of other comprehensive income (loss) to interest expense | $ | (1,830 | ) | | $ | (169 | ) |
|
| | | | | | | |
| Three Months Ended |
| March 31, 2020 | | March 31, 2019 |
| | | |
| (in thousands) |
| | | |
Net unrealized losses recognized in other comprehensive loss | $ | 47,896 |
| | $ | 14,509 |
|
Net unrealized losses (gains) reclassified out of other comprehensive loss to interest expense | $ | 4,671 |
| | $ | (1,830 | ) |
As of March 31, 2019,2020, the amount of net unrealized gainslosses in accumulated other comprehensive loss related to our interest rate swaps that is expected to be reclassified into interest expense during the next 12 months was approximately $1.3$41.4 million.
Interest Expense
Interest expense was approximately $55.4$81.1 million and $45.5$55.4 million for the three months ended March 31, 20192020 and 2018,2019, respectively.
NOTE 8—6—INCOME TAX
Our effective income tax rate was 16.8%rates for the three months ended March 31, 2020 and 2019 were 10.1% and 20.2% for the three months ended March 31, 2018.16.8%, respectively. Our effective income tax rate for the three months ended March 31, 2020 differed from the U.S. statutory rate primarily as a result of tax credits, excess tax benefits of share-based awards that are recognized upon vesting or settlement and the foreign-derived intangible income deduction. For the three months ended March 31, 2019, differsour effective income tax rate differed from the U.S. statutory rate primarily due to the excess tax benefits of share-based awards that are recognized upon vesting or settlement.
We conduct business globally and file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities around the world, including, without limitation, the United States and the United Kingdom. We are no longer subject to state income tax examinations for years ended on or before May 31, 2010, U.S. federal income tax examinations for years ended on or before MayDecember 31, 20132016 and U.K. federal income tax examinations for years ended on or before May 31, 2014.2016.
NOTE 9—7—SHAREHOLDERS’ EQUITY
We make repurchases ofrepurchase our common stock mainly through open market repurchase plans and, at times, through accelerated share repurchase programs. As ofDuring the three months ended March 31, 2019,2020, we were authorized to repurchase up to $638.0 millionrepurchased and retired 2,094,731 shares of our common stock.stock at a cost, including commissions, of $404.0 million, or $192.85 per share. During the three months ended March 31, 2019, through open market repurchase plans, we repurchased and retired 1,295,282 shares of our common stock at an aggregatea cost, including commissions, of $158.0 million, or an average cost of $121.98 per share.
On February 26, 2020, our board of directors approved an increase to our existing share including commissions. Duringrepurchase program authorization, which raised the three months endedtotal available authorization to $1.0 billion. As of March 31, 2018, through open market2020, the amount that may yet be purchased under our share repurchase plans, we repurchased and retired 8,926 shares of our common stock at a cost of $1.0 million, or an average cost of $109.79 per share, including commissions.program was $880.0 million.
On April 25, 2019,29, 2020, our board of directors declared a dividend of $0.01$0.195 per share payable on June 28, 201926, 2020 to common shareholders of record as of June 14, 2019.12, 2020.
NOTE 10—8—SHARE-BASED AWARDS AND STOCK OPTIONS
The following table summarizes share-based compensation expense and the related income tax benefit recognized for our share-based awards and stock options:
|
| | | | | | | |
| Three Months Ended |
| March 31, 2020 | | March 31, 2019 |
| | | |
| (in thousands) |
| | | |
Share-based compensation expense | $ | 27,822 |
| | $ | 11,418 |
|
Income tax benefit | $ | 6,473 |
| | $ | 2,509 |
|
|
| | | | | | | |
| Three Months Ended |
| March 31, 2019 | | March 31, 2018 |
| | | |
| (in thousands) |
| | | |
Share-based compensation expense | $ | 11,418 |
| | $ | 14,898 |
|
Income tax benefit | $ | 2,509 |
| | $ | 3,285 |
|
Share-Based Awards
The following table summarizes the changes in unvested restricted stock and performance awards for the three months ended March 31, 2019:2020:
|
| | | | | | |
| Shares | | Weighted-Average Grant-Date Fair Value |
| | | |
| (in thousands) | | |
| | | |
Unvested at December 31, 2019 | 1,844 |
| |
| $149.96 |
|
Granted | 546 |
| | 193.36 |
|
Vested | (553 | ) | | 116.66 |
|
Forfeited | (18 | ) | | 152.88 |
|
Unvested at March 31, 2020 | 1,819 |
| |
| $173.12 |
|
|
| | | | | | |
| Shares | | Weighted-Average Grant-Date Fair Value |
| | | |
| (in thousands) | | |
| | | |
Unvested at December 31, 2018 | 1,084 |
| |
| $108.51 |
|
Granted | 458 |
| | 133.13 |
|
Vested | (226 | ) | | 92.19 |
|
Forfeited | (28 | ) | | 99.65 |
|
Unvested at March 31, 2019 | 1,288 |
| |
| $120.33 |
|
The total fair value of restricted stock and performance awards vested during the three months ended March 31, 20192020 and March 31, 20182019 was $64.6 million and $20.8 million, and $13.0 million, respectively.
For restricted stock and performance awards, we recognized compensation expense of $10.1$25.2 million and $13.8$10.1 million during the three months ended March 31, 20192020 and March 31, 2018,2019, respectively. As of March 31, 2019,2020, there was $110.4$216.8 million of unrecognized compensation expense related to unvested restricted stock and performance awards that we expect to recognize over a weighted-average period of 2.4 years. Our restricted stock and performance award plans provide for accelerated vesting under certain conditions.
Stock Options
The following table summarizes changes in stock option activity for the three months ended March 31, 2019:2020:
|
| | | | | | | | | | |
| Options | | Weighted-Average Exercise Price | | Weighted-Average Remaining Contractual Term | | Aggregate Intrinsic Value |
| | | | | | | |
| (in thousands) | | | | (years) | | (in millions) |
| | | | | | | |
Outstanding at December 31, 2019 | 1,755 |
| |
| $74.06 |
| | 6.5 | | $190.3 |
Granted | 125 |
| | 200.42 |
| | | | |
Forfeited | (2 | ) | | 113.48 |
| | | | |
Exercised | (383 | ) | | 64.38 |
| | | | |
Outstanding at March 31, 2020 | 1,495 |
| |
| $87.05 |
| | 6.8 | | $85.5 |
| | | | | | | |
Options vested and exercisable at March 31, 2020 | 1,097 |
| |
| $66.97 |
| | 5.9 | | $84.8 |
|
| | | | | | | | | | |
| Options | | Weighted-Average Exercise Price | | Weighted-Average Remaining Contractual Term | | Aggregate Intrinsic Value |
| | | | | | | |
| (in thousands) | | | | (years) | | (in millions) |
| | | | | | | |
Outstanding at December 31, 2018 | 598 |
| |
| $59.16 |
| | 6.2 | | $27.3 |
Granted | 109 |
| | 128.22 |
| | | | |
Forfeited | — |
| | — |
| | | | |
Exercised | (170 | ) | | 35.91 |
| | | | |
Outstanding at March 31, 2019 | 537 |
| |
| $80.59 |
| | 7.1 | | $30.0 |
| | | | | | | |
Options vested and exercisable at March 31, 2019 | 319 |
| |
| $58.70 |
| | 5.7 | | $24.8 |
We recognized compensation expense for stock options of $1.9 million and $0.7 million during each of the three months ended March 31, 2020 and 2019, and 2018.respectively. The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2020 and 2019 and March 31, 2018 was $15.9$53.6 million and $2.1$15.9 million, respectively. As of March 31, 2019,2020, we had $6.9$14.7 million of unrecognized compensation expense related to unvested stock options that we expect to recognize over a weighted-average period of 2.42.2 years.
The weighted-average grant-date fair value of each stock optionoptions granted, including Replacement Awards, during the three months ended March 31, 2020 and 2019 was $54.85 and March 31, 2018 was $39.60, and $35.09, respectively. Fair value was estimated on the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions:
|
| | | |
| Three Months Ended |
| March 31, 2020 | | March 31, 2019 |
| | | |
Risk-free interest rate | 1.24% | | 2.49% |
Expected volatility | 30% | | 30% |
Dividend yield | 0.39% | | 0.04% |
Expected term (years) | 5 | | 5 |
|
| | | |
| Three Months Ended |
| March 31, 2019 | | March 31, 2018 |
| | | |
Risk-free interest rate | 2.49% | | 2.60% |
Expected volatility | 30% | | 29% |
Dividend yield | 0.04% | | 0.04% |
Expected term (years) | 5 | | 5 |
The risk-free interest rate iswas based on the yield of a zero coupon U.S. Treasury security with a maturity equal to the expected life of the option from the date of the grant. Our assumption on expected volatility iswas based on our historical volatility. The dividend yield assumption is calculatedwas determined using our average stock price over the preceding year and the annualized amount of our most current quarterly dividend per share. We based our assumptions on the expected term of the options on our analysis of the historical exercise patterns of the options and our assumption on the future exercise pattern of options.
NOTE 11—9—EARNINGS PER SHARE
Basic earnings per share ("EPS") iswas computed by dividing net income attributable to Global Payments by the weighted-average number of shares outstanding during the period. Earnings available to common shareholders iswas the same as reported net income attributable to Global Payments for all periods presented.
Diluted EPS is computed by dividing net income attributable to Global Payments by the weighted-average number of shares outstanding during the period, including the effect of share-based awards that would have a dilutive effect on EPS. All stock options with an exercise price lower than the average market share price of our common stock for the period are assumed to have a dilutive effect on EPS. The dilutive share base for the three months ended March 31, 2020 excludes approximately
124,888 shares, related to stock options that would have an antidilutive effect on the computation of diluted earnings per share. There were 0 such shares for the three months ended March 31, 2019.
The following table sets forth the computation of diluted weighted-average number of shares outstanding for the three months ended March 31, 20192020 and 2018:2019:
|
| | | | | |
| Three Months Ended |
| March 31, 2020 | | March 31, 2019 |
| | | |
| (in thousands) |
| | | |
Basic weighted-average number of shares outstanding | 299,388 |
| | 157,519 |
|
Plus: Dilutive effect of stock options and other share-based awards | 1,450 |
| | 499 |
|
Diluted weighted-average number of shares outstanding | 300,838 |
| | 158,018 |
|
|
| | | | | |
| Three Months Ended |
| March 31, 2019 | | March 31, 2018 |
| | | |
| (in thousands) |
| | | |
Basic weighted-average number of shares outstanding | 157,519 |
| | 159,321 |
|
Plus: Dilutive effect of stock options and other share-based awards | 499 |
| | 714 |
|
Diluted weighted-average number of shares outstanding | 158,018 |
| | 160,035 |
|
NOTE 12—10—ACCUMULATED OTHER COMPREHENSIVE LOSS
The changes in the accumulated balances for each component of other comprehensive income (loss) were as follows for the three months ended March 31, 20192020 and 2018:
2019:
|
| | | | | | | | | | | | | | | |
| Foreign Currency Translation Gains (Losses) | | Unrealized Gains (Losses) on Hedging Activities | | Other | | Accumulated Other Comprehensive Loss |
| | | | | | | |
| (in thousands) |
| | | | | | | |
Balance at December 31, 2019 | $ | (241,899 | ) | | $ | (69,319 | ) | | $ | 647 |
| | $ | (310,571 | ) |
Other comprehensive income (loss) | (196,451 | ) | | (32,879 | ) | | 121 |
| | (229,209 | ) |
Balance at March 31, 2020 | $ | (438,350 | ) | | $ | (102,198 | ) | | $ | 768 |
| | $ | (539,780 | ) |
| | | | | | | |
Balance at December 31, 2018 | $ | (304,274 | ) | | $ | (2,374 | ) | | $ | (3,527 | ) | | $ | (310,175 | ) |
Other comprehensive income (loss) | 9,807 |
| | (12,351 | ) | | 111 |
| | (2,433 | ) |
Balance at March 31, 2019 | $ | (294,467 | ) | | $ | (14,725 | ) | | $ | (3,416 | ) | | $ | (312,608 | ) |
|
| | | | | | | | | | | | | | | |
| Foreign Currency Translation | | Unrealized Gains on Hedging Activities | | Other | | Accumulated Other Comprehensive Loss |
| | | | | | | |
| (in thousands) |
| | | | | | | |
Balance at December 31, 2018 | $ | (304,274 | ) | | $ | (2,374 | ) | | $ | (3,527 | ) | | $ | (310,175 | ) |
Other comprehensive income (loss) | 9,807 |
| | (12,351 | ) | | 111 |
| | (2,433 | ) |
Balance at March 31, 2019 | $ | (294,467 | ) | | $ | (14,725 | ) | | $ | (3,416 | ) | | $ | (312,608 | ) |
| | | | | | | |
Balance at December 31, 2017 | $ | (185,856 | ) | | $ | 6,999 |
| | $ | (4,287 | ) | | $ | (183,144 | ) |
Cumulative effect of adoption of new accounting standard | (1,843 | ) | | — |
| | — |
| | (1,843 | ) |
Other comprehensive income (loss) | 2,430 |
| | 5,648 |
| | (52 | ) | | 8,026 |
|
Balance at March 31, 2018 | $ | (185,269 | ) | | $ | 12,647 |
| | $ | (4,339 | ) | | $ | (176,961 | ) |
Other comprehensive income (loss)loss attributable to noncontrolling interests, which relates only to foreign currency translation, was a loss of $4.6$6.7 million and income of $11.3$4.6 million for the three months ended March 31, 20192020 and March 31, 2018,2019, respectively.
NOTE 13—11—SEGMENT INFORMATION
We operate in three3 reportable segments: North America, EuropeMerchant Solutions, Issuer Solutions and Asia-Pacific.Business and Consumer Solutions. We evaluate performance and allocate resources based on the operating income of each operating segment. The operating income of each operating segment includes the revenues of the segment less expenses that are directly related to those revenues. Operating overhead, shared costs and certainshare-based compensation costs are included in Corporate in the following table.Corporate. Interest and other income, interest and other expense, income tax expense and provision forequity in income taxesof equity method investments, net of tax, are not allocated to the individual segments. We do not evaluate the performance of or allocate resources to our operating segments using asset data. The accounting policies of the reportable operating segments are the same as those described in our Annual Report on Form 10-K for the year ended December 31, 20182019 and our summary of significant accounting policies in "Note 1— - Basis of Presentation and Summary of Significant Accounting Policies."
In connection with an organizational realignment implemented during the fourth quarter of 2019, the presentation of segment information for the three months ended March 31, 2019 has been recast to align with the segment presentation for the three months ended March 31, 2020. Information on segments and reconciliations to consolidated revenues, and consolidated operating income and consolidated depreciation and amortization was as follows for the three months ended March 31, 20192020 and 2018:2019:
|
| | | | | | | |
| Three Months Ended |
| March 31, 2020 | | March 31, 2019 |
| | | |
| |
| | | |
Revenues(1): | | | |
Merchant Solutions | $ | 1,215,269 |
| | $ | 877,783 |
|
Issuer Solutions | 503,762 |
| | 5,256 |
|
Business and Consumer Solutions | 203,946 |
| | — |
|
Segment revenues | 1,922,977 |
| | 883,039 |
|
Less: Intersegment Eliminations | (19,379 | ) | | — |
|
Consolidated revenues | $ | 1,903,598 |
| | $ | 883,039 |
|
| | | |
Operating income (loss)(1)(2): | | | |
Merchant Solutions | $ | 304,153 |
| | $ | 238,129 |
|
Issuer Solutions | 59,304 |
| | 3,439 |
|
Business and Consumer Solutions | 31,112 |
| | — |
|
Corporate | (150,590 | ) | | (42,076 | ) |
Consolidated operating income | $ | 243,979 |
| | $ | 199,492 |
|
| | | |
Depreciation and amortization(1): | | | |
Merchant Solutions | $ | 233,021 |
| | $ | 147,385 |
|
Issuer Solutions | 136,737 |
| | 182 |
|
Business and Consumer Solutions | 23,641 |
| | — |
|
Corporate | 4,419 |
| | 1,063 |
|
Consolidated depreciation and amortization | $ | 397,818 |
| | $ | 148,630 |
|
|
| | | | | | | |
| Three Months Ended |
| March 31, 2019 | | March 31, 2018 |
| | | |
| (in thousands) |
| | | |
Revenues(1): | | | |
North America | $ | 678,423 |
| | $ | 594,029 |
|
Europe | 142,869 |
| | 143,277 |
|
Asia-Pacific | 61,747 |
| | 57,671 |
|
Consolidated revenues | $ | 883,039 |
| | $ | 794,977 |
|
| | | |
Operating income (loss)(1): | | | |
North America | $ | 156,146 |
| | $ | 125,404 |
|
Europe | 71,961 |
| | 70,548 |
|
Asia-Pacific | 27,274 |
| | 23,774 |
|
Corporate(2) | (55,889 | ) | | (63,556 | ) |
Consolidated operating income | $ | 199,492 |
| | $ | 156,170 |
|
| | | |
Depreciation and amortization(1): | | | |
North America | $ | 128,237 |
| | $ | 102,525 |
|
Europe | 12,994 |
| | 12,745 |
|
Asia-Pacific | 5,040 |
| | 4,632 |
|
Corporate | 2,359 |
| | 1,841 |
|
Consolidated depreciation and amortization | $ | 148,630 |
| | $ | 121,743 |
|
(1)Revenues, operating income and depreciation and amortization reflect the effecteffects of acquired businesses from the respective dates of acquisition.acquisition dates. For further discussion of our acquisitions, see "Note 2—Acquisitions."
(2)During the three months ended March 31, 20192020, operating income for our Merchant Solutions segment reflected the effect of acquisition and March 31, 2018, operatingintegration expenses of $2.2 million. Operating loss for Corporate included acquisition and integration expenses of $69.7 million and $5.3 million, during the three months ended March 31, 2020 and $18.32019, respectively.
NOTE 12—COMMITMENTS AND CONTINGENCIES
Purchase Obligations
During the three months ended March 31, 2020, our purchase obligations increased as a result of our entry into an arrangement to acquire software and related services for $293.8 million. We financed $97.6 million respectively.of this amount utilizing a two-year vendor financing arrangement. As of March 31, 2020, the estimated remaining purchase commitments that are due for this acquisition are $47.6 million during the remainder of 2020, $64.9 million during 2021, $66.9 million during 2022 and $16.8 million during 2023.
Legal Matters
On September 23, 2019, a jury in the Superior Court of Dekalb County, Georgia, awarded Frontline Processing Corp. ("Frontline") $135.2 million in damages, costs and attorney's fees (plus interest) following a trial of a breach of contract dispute between Frontline and Global Payments, wherein Frontline alleged that Global Payments violated provisions of the parties' Referral Agreement and Master Services Agreement. The Superior Court entered a final judgment on the verdict in favor of Frontline on September 30, 2019. We believe the jury verdict is in error and Frontline’s case is completely without merit, and we are appealing the decision to the Georgia Court of Appeals. While it is reasonably possible that we will incur some loss between zero and the judgment amount plus interest, we have determined that it is not probable that Global Payments has incurred a loss under the applicable accounting standard (Accounting Standards Codification Topic 450, Contingencies) as of March 31, 2020. As a result, we have not recorded a liability on the consolidated balance sheet with respect to this litigation.
ITEM 2—MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes included in Item 1 of Part I of this Quarterly Report and the Management’s Discussion and Analysis of Financial Condition and Results of Operations and consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2018.2019. This discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our actual results could differ materially from the results anticipated by our forward-looking statements. See "Forward-Looking Statements" below for additional information.
Executive Overview
We are a leading worldwide provider of paymentpure play payments technology services and software solutionscompany delivering innovative solutionssoftware and services to our customers globally. Our technologies, services and employee expertise enable us to provide a broad range of servicessolutions that allow our customers to accept various payment types and operate their businesses more efficiently. We distribute our servicesefficiently across
a variety of channels around the world. On September 18, 2019, we merged with Total System Services, Inc. ("TSYS") (the "Merger").
Recent developments relating to the outbreak of the coronavirus pandemic ("COVID-19")
In March 2020, the World Health Organization declared the outbreak of the COVID-19 virus a global pandemic. This outbreak is causing major disruptions to businesses and markets worldwide as the virus continues to spread. A number of countries as well as certain states and cities within the United States have enacted temporary closures of businesses, issued quarantine or shelter-in-place orders and taken other restrictive measures in 32 countries throughoutresponse to COVID-19. We are closely monitoring the effects of the COVID-19 pandemic. We are currently operating normally, and, at this time, we do not anticipate any significant operational effects as a result of the pandemic.
Our first quarter performance in January, February and through the first two weeks of March exceeded our internal expectations, excluding an immaterial revenue effect from COVID-19 in our Asia Pacific region. However, starting in mid-March, the COVID-19 pandemic began to affect our results significantly in North America and Europe as governments took actions to encourage social distancing and implement shelter-in-place directives. The deterioration in our financial results accelerated toward the Asia-Pacific regionend of March as the pandemic spread further and Brazilthe number of countries and operate in three reportable segments: North America, Europe and Asia-Pacific.
On October 17, 2018, we acquired SICOM Systems, Inc. ("SICOM") for total purchase consideration of $410.2 million, which we funded with cash on hand and by drawinglocalities adopting restrictive measures meaningfully increased. We expect that the COVID-19 pandemic will have an adverse effect on our Revolving Credit Facility (describedrevenues and financial results for the remainder of 2020, although the magnitude and duration of the ultimate effects as a result of the COVID-19 pandemic are not possible to predict at this time. We have taken and will continue to implement cost-saving actions, such as reductions in "Note 7—Long-Term Debtemployee compensation costs, business travel and Linesmarketing initiatives, to help mitigate the financial effects of Credit" in the notesCOVID-19 pandemic.
For a further discussion of trends, uncertainties and other factors that could affect our continuing operating results related to the accompanying unaudited consolidated financial statements). SICOM is a providereffects of end-to-end enterprise, cloud-based software solutions and other technologies to quick service restaurants and food service management companies.the COVID-19 pandemic, see the section entitled "Risk Factors" in Item 1A in this Quarterly Report on Form 10-Q.
On September 4, 2018, we acquired AdvancedMD, Inc. ("AdvancedMD") for total purchase consideration of $706.9 million, which we funded with cash on hand and by drawing on our Revolving Credit Facility. AdvancedMD is a provider of cloud-based enterprise software solutions to small-to-medium sized ambulatory care physician practices.Consolidated Results
Highlights related to our financial condition at March 31, 2020 and results of operations for the three months then ended March 31, 2019 are:include the following:
Consolidated revenues were $883.0revenue increased to $1,903.6 million, for the three months ended March 31, 2019, compared to $795.0$883.0 million for the prior-year period, primarily due to additional revenues from businessesthe acquired operations of TSYS.
| |
• | Consolidated operating income increased to $244.0 million, compared to $199.5 million for the prior-year period. Operating margin decreased to 12.8%, compared to 22.6% for the prior-year period, primarily due to an increase in acquisition and integration expenses associated with the Merger. |
Net income attributable to Global Payments increased to $143.6 million, compared to $112.3 million for the prior-year period, primarily due to additional income from the acquired operations of TSYS, partially offset by increases in 2018.acquisition and integration expenses and interest expense.
Diluted earnings per share decreased to $0.48, compared to $0.71 for the prior-year period, reflecting the additional earnings from the acquired operations of TSYS, as well as an increase in the number of weighted-average number of shares outstanding as a result of issuing common shares as purchase consideration in the Merger.
ConsolidatedResults of Operations
We operate in three reportable segments: Merchant Solutions, Issuer Solutions and Business and Consumer Solutions. We evaluate performance and allocate resources based on the operating income was $199.5 millionof each operating segment. In connection with an organizational realignment implemented after the Merger in the fourth quarter of 2019, the presentation of segment information for the three months ended March 31, 2019 comparedhas been recast to $156.2 million foralign with the prior-year period. Our operating marginsegment presentation for the three months ended March 31, 2019 was 22.6%, compared to 19.6%2020. For further information about our reportable segments, see "Item 1. Business—Business Segments" within our Annual Report on Form 10-K for the prior-year period.
Net income attributable to Global Payments was $112.3 million for the three monthsyear ended MarchDecember 31, 2019, compared to $91.4 million for the prior-year period.
Diluted earnings per share was $0.71 for the three months ended March 31, 2019, compared to $0.57 for the prior-year period.
Emerging Trends
The payments industry continues to grow worldwideincorporated herein by reference, and as a result, certain large payment technology companies, including us, have expanded operations globally by pursuing acquisitions and creating alliances and joint ventures. We expect to continue to expand into new markets and increase our scale and improve our competitiveness in existing markets by pursuing further acquisitions and joint ventures.
We believe electronic payment transactions will continue to grow and that an increasing percentage of these will be facilitated through emerging technologies. As a result, we expect an increasing portion of our future capital investment will be allocated to support the development of new and emerging technologies; however, we do not expect our aggregate capital spending to increase materially from our current level of spending as a result of this.
We also believe new markets will continue to develop in areas that have been previously dominated by paper-based transactions. We expect industries such as education, government and healthcare, as well as payment types such as recurring payments and business-to-business payments, to continue to migrate transactions to electronic-based solutions. We anticipate that the continued development of new services and the emergence of new vertical markets will be factors"Note 11—Segment Information" in the growth of our business and our revenue innotes to the future.accompanying unaudited consolidated financial statements.
Results of Operations
The following table sets forth key selected financial data for the three months ended March 31, 20192020 and 2018,2019, this data as a percentage of total revenues and the changes between the periods in dollars and as a percentage of the prior-year amount. The income statement data for the three months ended March 31, 2020 and 2019 are derived from the accompanying unaudited consolidated financial statements included in Part I, Item 1 - Financial Statements.
|
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2019 | | % of Revenues(1) | | Three Months Ended March 31, 2018 | | % of Revenues(1) | | Change | | % Change |
| | | | | | | | | | | |
| (dollar amounts in thousands) |
| | | | | | | | | | | |
Revenues: | | | | | | | | | | | |
North America | $ | 678,423 |
| | 76.8 | % | | $ | 594,029 |
| | 74.7 | % | | $ | 84,394 |
| | 14.2 | % |
Europe | 142,869 |
| | 16.2 | % | | 143,277 |
| | 18.0 | % | | (408 | ) | | (0.3 | )% |
Asia-Pacific | 61,747 |
| | 7.0 | % | | 57,671 |
| | 7.3 | % | | 4,076 |
| | 7.1 | % |
Total revenues | $ | 883,039 |
| | 100.0 | % | | $ | 794,977 |
| | 100.0 | % | | $ | 88,062 |
| | 11.1 | % |
| | | | | | | | | | | |
Consolidated operating expenses: | | | | | | | | | | | |
Cost of service | $ | 305,230 |
| | 34.6 | % | | $ | 252,386 |
| | 31.7 | % | | $ | 52,844 |
| | 20.9 | % |
Selling, general and administrative | 378,317 |
| | 42.8 | % | | 386,421 |
| | 48.6 | % | | (8,104 | ) | | (2.1 | )% |
Operating expenses | $ | 683,547 |
| | 77.4 | % | | $ | 638,807 |
| | 80.4 | % | | $ | 44,740 |
| | 7.0 | % |
| | | | | | | | | | | |
Operating income: | | | | | | | | | | | |
North America | $ | 156,146 |
| |
|
| | $ | 125,404 |
| |
|
| | $ | 30,742 |
| | 24.5 | % |
Europe | 71,961 |
| | | | 70,548 |
| | | | 1,413 |
| | 2.0 | % |
Asia-Pacific | 27,274 |
| | | | 23,774 |
| | | | 3,500 |
| | 14.7 | % |
Corporate(2) | (55,889 | ) | | | | (63,556 | ) | | | | 7,667 |
| | (12.1 | )% |
Operating income | $ | 199,492 |
| | 22.6 | % | | $ | 156,170 |
| | 19.6 | % | | $ | 43,322 |
| | 27.7 | % |
| | | | | | | | | | | |
Operating margin: | | | | | | | | | | | |
North America | 23.0 | % | | | | 21.1 | % |
| | | 1.9 | % | | |
Europe | 50.4 | % | | | | 49.2 | % | | | | 1.2 | % | | |
Asia-Pacific | 44.2 | % | | | | 41.2 | % |
| | | 3.0 | % | | |
|
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2020 | | % of Revenues(1) | | Three Months Ended March 31, 2019 | | % of Revenues(1) | | Change | | % Change |
| | | | | | | | | | | |
| (dollar amounts in thousands) |
| | | | | | | | | | | |
Revenues(2): | | | | | | | | | | | |
Merchant Solutions | $ | 1,215,269 |
| | 63.8 | % | | $ | 877,783 |
| | 99.4 | % | | $ | 337,486 |
| | 38.4 | % |
Issuer Solutions | 503,762 |
| | 26.5 | % | | 5,256 |
| | 0.6 | % | | 498,506 |
| | NM |
|
Business and Consumer Solutions | 203,946 |
| | 10.7 | % | | — |
| | — | % | | 203,946 |
| | NM |
|
Segment revenues | 1,922,977 |
| | 101.0 | % | | 883,039 |
| | 100.0 | % | | 1,039,938 |
| | 117.8 | % |
Less: intersegment revenues | (19,379 | ) | | (1.0 | )% | | — |
| | — | % | | (19,379 | ) | | NM |
|
Consolidated revenues | $ | 1,903,598 |
| | 100.0 | % | | $ | 883,039 |
| | 100.0 | % | | $ | 1,020,559 |
| | 115.6 | % |
| | | | | | | | | | | |
Consolidated operating expenses(2): | | | | | | | | | | | |
Cost of service | $ | 933,871 |
| | 49.1 | % | | $ | 305,230 |
| | 34.6 | % | | $ | 628,641 |
| | 206.0 | % |
Selling, general and administrative | 725,748 |
| | 38.1 | % | | 378,317 |
| | 42.8 | % | | 347,431 |
| | 91.8 | % |
Operating expenses | $ | 1,659,619 |
| | 87.2 | % | | $ | 683,547 |
| | 77.4 | % | | $ | 976,072 |
| | 142.8 | % |
| | | | | | | | | | | |
Operating income (loss)(2): | | | | | | | | | | | |
Merchant Solutions | $ | 304,153 |
| | 16.0 | % | | $ | 238,129 |
| | 27.0 | % | | $ | 66,024 |
| | 27.7 | % |
Issuer Solutions | 59,304 |
| | 3.1 | % | | 3,439 |
| | 0.4 | % | | 55,865 |
| | NM |
|
Business and Consumer Solutions | 31,112 |
| | 1.6 | % | | — |
| | — | % | | 31,112 |
| | NM |
|
Corporate(3) | (150,590 | ) | | (7.9 | )% | | (42,076 | ) | | (4.8 | )% | | (108,514 | ) | | 257.9 | % |
Operating income | $ | 243,979 |
| | 12.8 | % | | $ | 199,492 |
| | 22.6 | % | | $ | 44,487 |
| | 22.3 | % |
| | | | | | | | | | | |
Operating margin(2): | | | | | | | | | | | |
Merchant Solutions | 25.0 | % | | | | 27.1 | % |
| | | (2.1 | )% | | |
Issuer Solutions | 11.8 | % | | | | NM |
| | | | NM |
| | |
Business and Consumer Solutions | 15.3 | % | | | | NM |
|
| | | NM |
| | |
NM = not meaningful.
(1) Percentage amounts may not sum to the total due to rounding.
(2) Revenues, consolidated operating expenses, operating income (loss) and operating margin reflect the effects of acquired businesses from the respective acquisition dates. For further discussion of our acquisitions, see "Note 2—Acquisitions" in the notes to the accompanying unaudited consolidated financial statements.
(3) During the three months ended March 31, 2020, operating income for our Merchant Solutions segment reflected the effect of acquisition and integration expenses of $2.2 million. Operating loss for Corporate included acquisition and integration expenses of $5.3$69.7 million and $18.3$5.3 million, during the three months ended March 31, 2020 and 2019, and 2018, respectively. These expenses are included primarily in selling, general and administrative expenses in the unaudited consolidated statements of income.
Revenues
Consolidated revenues increased by 11.1% to $883.0 million for the three months ended March 31, 2019,2020 increased by 115.6% to $1,903.6 million, compared to $795.0$883.0 million forin the prior-year period, despite the unfavorable effect of fluctuations in foreign currency exchange rates, primarily due to revenue growth inadditional revenues of $1,055.0 million from the acquired operations of TSYS, partially offset by the adverse effect on our North America segment. Forrevenues resulting from the three months ended March 31, 2019, currency exchange rate fluctuations reduced our consolidated revenues by $21.8 million compared to the prior year, calculated by converting revenues for the current period in local currencies using exchange rates for the prior-year period.COVID-19 pandemic.
North America Segment.Merchant Solutions Segment. Revenues from our North AmericaMerchant Solutions segment increased by 14.2% to $678.4 million for the three months ended March 31, 2019,2020 increased by 38.4% to $1,215.3 million, compared to $594.0$877.8 million forin the prior-year period, primarily due to additional revenues from the acquisitionsacquired operations of AdvancedMDTSYS. As revenue from the Merchant Solutions segment is predominantly generated from core merchant acquiring, we experienced significant revenue declines starting in mid-March due to a reduction in consumer spending and SICOM in 2018.closures of certain of our merchant customer businesses, including those who operate restaurants, retail locations, schools and universities and casinos, as well as the cancellation of events involving large groups of people throughout North America and Europe.
EuropeIssuer Solutions Segment. Revenues from our EuropeIssuer Solutions segment were relatively flat at $143 million for the three months ended March 31, 2019, compared2020 was $503.8 million, primarily reflecting revenues from the acquired operations of TSYS. Starting in mid-March, we experienced revenue declines as a result of lower transaction volumes, particularly in our commercial cards due to the prior-year period, despite the unfavorable effect of fluctuations in foreign currency exchange rates of $14.4 million.reduced travel and entertainment spending.
Asia-PacificBusiness and Consumer Solutions Segment. Revenues from our Asia-PacificBusiness and Consumer segment increased by 7.1% to $61.7 million for the three months ended March 31, 2019, compared to $57.72020 was $203.9 million, forreflecting revenues from the prior-year period primarilyacquired operations of TSYS. Our Business and Consumer Solutions segment experienced revenue declines starting in mid-March due to organic growth,decreased consumer spending, lower load activity and fewer new funded accounts. These revenue declines were partially offsetmitigated by the unfavorable effectpositive trends in consumer adoption of fluctuations in foreign currency exchange rates of $3.7 million.our demand deposit account product.
Operating Expenses
Cost of Service. Cost of service increased by 20.9% to $305.2 million for the three months ended March 31, 2019,2020 increased by 206.0% to $933.9 million, compared to $252.4$305.2 million for the prior-year period, primarily due to additional costs associated with the acquired operations of TSYS. Cost of service for the three months ended March 31, 2020 reflects amortization of acquired intangibles of $314.2 million, compared to $107.5 million for the prior-year period. Cost of service as a percentage of revenues was 34.6%increased to 49.1% for the three months ended March 31, 2019,2020, compared to 31.7%34.6% for the prior-year period. These increases wereperiod, primarily due to anthe increase in amortization of acquired intangibles of $19.7 million and to additional costs to support the growth of our business.intangibles.
Selling, General and Administrative Expenses. Expenses. Selling, general and administrative expenses decreased by 2.1% to $378.3 million for the three months ended March 31, 2019,2020 increased by 91.8% to $725.7 million, compared to $386.4$378.3 million for the prior yearprior-year period. The increase in selling, general and administrative expenses was primarily due to additional costs associated with the acquired operations of TSYS, and included acquisition and integration expenses of $71.6 million, primarily related to the Merger, compared to $5.3 million for the prior-year period. Selling, general and administrative expenses as a percentage of revenues was 42.8%38.1% for the three months ended March 31, 2019,2020, compared to 48.6%42.8% for the prior-year period. These decreases were
Corporate. Corporate expenses increased by $108.5 million to $150.6 million for the three months ended March 31, 2020, compared to $42.1 million for the prior-year period, primarily due primarily to a decreaseadditional expenses associated with the acquired operations of TSYS and an increase in acquisition and integration expenses primarily due to the Merger. During the three months ended March 31, 2020, Corporate expenses included acquisition and integration expenses of $13.0$69.7 million, partially offset bycompared to $5.3 million for the prior-year period. Certain of these Merger-related integration activities resulted in the recognition of employee termination benefits. During the three months ended March 31, 2020, we recognized charges of $17.6 million for actions taken, which included $2.6 million of share-based compensation expense. We expect to incur additional costs to support the growth of our business.charges as Merger-related integration activities continue in 2020.
Operating Income and Operating Margin
North America Segment. Operating income in our North America segment increased by 24.5% to $156.1 million for the three months ended March 31, 2019, compared to $125.4 million for the prior-year period, primarily due to revenue growth. Operating margin increased to 23.0% for the three months ended March 31, 2019, compared to 21.1% for the prior-year period.
Europe Segment. Operating income in our Europe segment increased by 2.0% to $72.0 million for the three months ended March 31, 2019, compared to $70.5 million for the prior-year period. Operating margin increased to 50.4% for the three months ended March 31, 2019, compared to 49.2% for the prior-year period.
Asia-Pacific Segment. Operating income in our Asia-Pacific segment increased by 14.7% to $27.3 million for the three months ended March 31, 2019, compared to $23.8 million for the prior-year period, primarily due to revenue growth. Operating margin increased to 44.2% for the three months ended March 31, 2019, compared to 41.2% for the prior-year period, primarily due to a decrease in certainConsolidated operating expenses.
Corporate. Corporate expenses decreased by 12.1% to $55.9 million for the three months ended March 31, 2019, compared to $63.6 million for the prior-year period, primarily due to a decrease in acquisition and integration expenses of $13.0 million, partially offset by additional costs to support the growth of our business.
Other Income/Expense, Net
Interest and other income decreased by $8.8 million for the three months ended March 31, 2019, compared to the prior-year period. Interest and other income for the three months ended March 31, 2018 included a gain2020 increased to $244.0 million, compared to $199.5 million for the prior year due to additional income from the acquired operations of $9.6TSYS of $115.5 million, recognized onpartially offset by the reorganization of a debit network association of which we were a member through one of our Canadian subsidiaries.
Interestincrease in acquisition and other expense increased by $13.5 millionintegration expenses. Operating margin for the three months ended March 31, 2019,2020 decreased to 12.8%, compared to 22.6% for the prior-year period. Consolidated operating income for the three months ended March 31, 2020 reflects an increase in amortization of acquired intangibles of $206.7 million and an increase in acquisition and integration expenses of $66.6 million, primarily due to the Merger, compared to the prior-year period.
Other Income/Expense, Net
Interest and other expense for the three months ended March 31, 2019 primarily reflects2020 increased by $33.6 million to $92.6 million, compared to the prior-year period, as a result of the increase in our outstanding long-term debt.borrowings.
Provision for Income TaxesTax Expense
Our effective income tax rates for the three months ended March 31, 2020 and 2019 were 10.1% and 16.8%, respectively. The change in our effective tax rate for the three months ended March 31, 2019 was 16.8%, compared to 20.2% for2020 from the prior-year period. Our effective incomeperiod reflects the effect of tax rate for the three months ended March 31, 2019 was lower than the prior year primarily due to an increase in the excess taxcredits and benefits ofassociated with share-based awards that are recognized upon vesting or settlement.awards.
Liquidity and Capital Resources
In the ordinary course of our business, a significant portion of our liquidity comes from operating cash flows.flows and borrowings, including the capacity under our credit facilities. Cash flow from operating activities is used to make planned capital investments in our business, to pursue acquisitions that meet our corporate objectives, to pay dividends, to pay principal and interest on our outstanding debt and to repurchase shares of our common stock. Accumulated cash balances are invested in high-quality, marketable short-term instruments.
Our capital plan objectives are to support our operational needs and strategic plan for long-term growth while maintaining a low cost of capital. We use oura combination of bank financing, such as term loansborrowings under our credit facilities and our Revolving Credit Facility,senior note issuances, for general corporate purposes and to fund acquisitions. In addition, specialized lines of credit are also used in certain of our markets to fund merchant settlement prior to receipt of funds from the card network.
We believe that our current level of cash and borrowing capacity under our senior unsecured revolving credit facility, together with expected future cash flows from operations, will be sufficient to meet the needs of our existing operations and planned requirements for the foreseeable future. We have implemented measures to manage liquidity in future periods, including the reductions of planned capital expenditures and repurchases of our common stock. We regularly evaluate our liquidity and capital position relative to cash requirements, and we may elect to raise additional funds in the future through the issuance of debt or equity or by other means.
At March 31, 2019,2020, we had cash and cash equivalents totaling $1,277.6$1,800.1 million. Of this amount, we consider $489.6considered $1,297.8 million to be available for general purposes, of which approximately $25$29.0 million iswas undistributed foreign earnings considered to be indefinitely reinvested outside the United States. The available cash of $489.6$1,297.8 million doesdid not include the following: (i) settlement-related cash balances, (ii) funds held as collateral for merchant losses ("Merchant Reserves") and (iii) funds held for customers. Settlement-related cash balances represent funds that we hold when the incoming amount from the card networks precedes the funding obligation to the merchant. Settlement-related cash balances are not restricted; however, these funds are generally paid out in satisfaction of settlement processing obligations the following day. Merchant Reserves serve as collateral to minimize contingent liabilities associated with any losses that may occur under the merchantmerchant's agreement. While this cash is not restricted in its use, we believe that designating this cash to collateralize Merchant Reserves strengthens our fiduciary standing with our member sponsors and is in accordance with the guidelines set by the card networks. Funds held for customers and the corresponding liability that we record in customer deposits include amounts collected prior to remittance on our customers' behalf.
Operating activities provided net cash of $229.7$436.6 million and $284.5$229.7 million for the three months ended March 31, 20192020 and 2018,2019, respectively, which reflect net income adjusted for non-cashnoncash items, including depreciation and amortization expenses, and changes in operating assets and liabilities. Fluctuations in operating assets and liabilities are affected primarily by timing of month-end and transaction volume, especially changes in settlement processing assets and liabilities, and by the effects of businesses we acquire that have different working capital requirements.obligations. Changes in settlement processing assets and liabilitiesobligations increased operating cash flows by $118.3$13.0 million and $82.2$118.3 million during the three months ended March 31, 20192020 and 2018,2019, respectively. The decreaseincrease in cash flows from operating activities from the prior-year period was primarily due to the timingincrease in earnings before certain noncash items, including amortization of supplier paymentsacquired intangibles and customer receipts.depreciation and amortization of property and equipment.
We used net cash in investing activities of $116.3$169.7 million and $45.4$116.3 million during the three months ended March 31, 20192020 and 2018,2019, respectively. Cash used for investing activities primarily represents cash used to fund acquisitions, net of cash acquired, and capital expenditures. During the three months ended March 31, 2020 and 2019, we used cash of $68.2 million and $74.8 million, to completerespectively, for acquisitions.
We made capital expenditures of $55.1$104.8 million and $43.8$55.1 million to purchase property and equipment during the three months ended March 31, 20192020 and 2018,2019, respectively. These investments include software and hardware to support the development of new technologies, continued consolidation and enhancement of our operating platforms and infrastructure to support our growing business. DuringConsistent with our first quarter, we will continue to make significant capital investments in the year ending December 31, 2019, we expect aggregate capital expenditures for property and equipment to approximate $230 million.business but in light of COVID-19, will do so at a reduced rate from our initial expectations.
Financing activities include borrowings and repayments made under our Credit Facility (described in "Note 7—Long-Term Debt and Lines of Credit" in the notes to the accompanying unaudited consolidated financial statements)various debt arrangements, as well as borrowings and repayments made under specialized lines of credit to fund daily settlement activities. Our borrowing arrangements are further described in "Note 5—Long-Term Debt and Lines of Credit" in the notes to the accompanying unaudited consolidated financial statements and below under "Long-Term Debt and Lines of Credit." Financing activities also include cash flows associated with common stock
repurchase programs and share-based compensation programs, as well as cash distributions made to noncontrolling interests and our shareholders. Cash flows from financing activitiesWe used net cash in financing activities of $49.2$77.5 million and $572.0$49.2 million during the three months ended March 31, 2020 and 2019, and 2018, respectively, primarily as a result of net repayments under our Credit Facility and settlement lines of credit, as well as funds used to repurchase shares of our common stock in 2019.respectively.
Repayments ofProceeds from long-term debt were $173.1$607.0 million and $687.8$344.0 million for the three months ended March 31, 20192020 and 2018,2019, respectively. Repayments of long-term debt were $111.0 million and $173.1 million for the three months ended March 31, 2020 and 2019, respectively. Proceeds from and repayments of long-term debt consist of borrowings and repayments that we make with available cash, from time-to-time, under our Revolving Credit Facility, as well as scheduled principal repayments made underwe make on our term loans.
Activity under our settlement lines of credit is affected primarily by timing of month-end and transaction volume. During the three months ended March 31, 20192020 and 2018,2019, we had net repayments of settlement lines of credit of $55.4$78.1 million and $192.5$55.4 million, respectively.
We make repurchases ofrepurchase our common stock mainly through open market repurchase plans and, at times, through accelerated share repurchase programs.plans. During the three months ended March 31, 2020 and 2019, we used $421.2 million and $156.0 million, respectively, to repurchase shares of our common stock. As of March 31, 2019,2020, we had $638.0$880.0 million of share repurchase authority remaining under a share repurchase program authorized by the board of directors, announced on February 5, 2019.directors.
We paid dividends to our common shareholders in the amounts of $58.3 million and $1.6 million during the three months ended March 31, 2020 and 2019, respectively.
We believe that our current level of cash and borrowing capacity under our long-term debt and lines of credit described below, together with future cash flows from operations, will be sufficient to meet the needs of our existing operations and planned requirements for the foreseeable future.
Long-Term Debt and Lines of Credit
Senior Unsecured Credit Facilities
We are party tohave a term loan credit facility agreement ("Term Loan Credit Agreement") and a revolving credit agreement ("Unsecured Revolving Credit Agreement") in each case with Bank of America, N.A., as administrative agent, and a syndicate of financial institutions, as lenders and other agents (as amended from time to time, the "Credit Facility"). As of March 31, 2019, theagents. The Term Loan Credit Facility providedAgreement provides for secured financing comprised of (i) a $1.5senior unsecured $2.0 billion term loan facility. The Unsecured Revolving Credit Agreement provides for a senior unsecured $3.0 billion revolving credit facility "Revolving Credit Facility"); (ii) a $1.5 billion term loan ("Term A Loan"), (iii) a $1.37 billion term loan ("Term A-2 Loan"), (iv) a $1.14 billionfacility. Borrowings under the term loan facility (Term B-2 Loan");were made in U.S. dollars and (v) a $500 million term loan ("Term B-4 Loan"). Substantially all of the assets of our domestic subsidiaries are pledged as collateralborrowings under the Credit Facility. As of March 31, 2019, the aggregate outstanding balance on the term loans was $4.4 billion,revolving credit facility are available to be made in U.S. dollars, euros, sterling, Canadian dollars and, the outstanding balance on the Revolving Credit Facility was $897.0 million. The total available commitments under the Revolving Credit Facility at March 31, 2019 were $590.5 million.
The Credit Facility provides for an interest rate,subject to certain conditions, certain other currencies at our election, of either theoption. Borrowings in U.S. dollars and certain other London Interbank Offered Rate ("LIBOR")-quoted currencies will bear interest, at our option, at a rate equal to either (1) the rate (adjusted for any statutory reserve requirements for eurocurrency liabilities) for eurodollar deposits in the London interbank market, (2) a floating rate of interest set forth on the applicable LIBOR screen page designated by Bank of America or a base(3) the highest of (a) the federal funds effective rate plus 0.5%, (b) the rate of interest as publicly announced by Bank of America as its "prime rate" or (c) LIBOR plus 1.0%, in each case, plus aan applicable margin. As of March 31, 2019,2020, borrowings outstanding under the term loan facility and the revolving credit facility were $2.0 billion and $1.4 billion, respectively.
We continue to monitor developments related to the anticipated transition from LIBOR to an alternative benchmark reference rate, such as the Secured Overnight Financing Rate ("SOFR"), beginning January 1, 2022. Additionally, we maintain contact with our lenders and other stakeholders to evaluate the potential effects of these changes on our future financing activities.
As of March 31, 2020, the interest rates on the Term A Loan, the Term A-2 Loan, the Term B-2 Loanterm loan facility and the Term B-4 Loanrevolving credit facility were 4.00%, 4.00%2.36% and 4.25% and 4.25%2.02%, respectively. As of March 31, 2019, the interest rate on the Revolving Credit Facility was 3.91%. In addition, we are required to pay a quarterly commitment fee with respect to the unused portion of the Revolving Credit Facilityrevolving credit facility at an applicable rate per annum ranging from 0.20%0.125% to 0.30%,0.300% depending on our leverage ratio.
The Term A Loancredit rating. Beginning on December 31, 2022, and at the end of each quarter thereafter, the Term A-2 Loan mature, and the Revolving Credit Facility expires, on January 20, 2023. The Term B-2 Loan matures on April 22, 2023. The Term B-4 Loan matures on October 18, 2025. The Term A Loan and Term A-2 Loan principal amounts must each be repaid in quarterly installments in the amount of 0.625% of principal through June 2019, increasing to 1.25% of principal through June 2021, increasing to 1.875% of principal through June 2022 and increasing to 2.50% of principal through December 2022, with the remaining principal balance due upon maturity` in January 2023. The Term B-2 Loan principal must be repaid in quarterly installments in the amount of 0.25%2.50% of original principal through March 2023,the maturity date with the remaining principal balance due upon maturity in April 2023.September 2024. The Term B-4 Loan principal must be repaidrevolving credit facility also matures in quarterly installments in the amount of 0.25% of principal through September 2025, with the remaining principal balance due upon maturity in October 2025.2024.
We may issue standby letters of credit of up to $100$250 million in the aggregate under the Revolving Credit Facility.revolving credit facility. Outstanding letters of credit under the Revolving Credit Facilityrevolving credit facility reduce the amount of borrowings available to us. BorrowingsThe total available to uscommitments under the Revolving Credit Facility are further limited byrevolving credit facility at March 31, 2020 were $1,576.5 million.
Senior Unsecured Notes
We have $3.0 billion in aggregate principal amount of senior unsecured notes, consisting of the following: (i) $1.0 billion aggregate principal amount of 2.650% senior notes due 2025; (ii) $1.25 billion aggregate principal amount of 3.200% senior notes due 2029; and (iii) $750.0 million aggregate principal amount of 4.150% senior notes due 2049. Interest on the senior notes is payable semi-annually in arrears on each February 15 and August 15. Each series of the senior notes is redeemable, at our option, in whole or in part, at any time and from time-to-time at the redemption prices set forth in the related indenture. We have an additional $3.0 billion in aggregate principal amount of senior unsecured notes consisting of the following: (i) $750 million aggregate principal amount of 3.800% senior notes due 2021; (ii) $550 million aggregate principal amount of 3.750% senior notes due 2023; (iii) $550 million aggregate principal amount of 4.000% senior notes due 2023; (iv) $750 million aggregate principal amount of 4.800% senior notes due 2026; and (v) $450 million aggregate principal amount of 4.450% senior notes due 2028. For the 3.800% senior notes due 2021 and the 4.800% senior notes due 2026, interest is payable semi-annually each April 1 and October 1. For the 3.750% senior notes due 2023, the 4.000% senior notes due 2023 and the 4.450% senior notes due 2028, interest is payable semi-annually each June 1 and December 1.
Compliance with Covenants
The senior unsecured term loan and revolving credit facility contain customary conditions to funding, affirmative covenants, described belownegative covenants, financial covenants and events of default. As of March 31, 2020, financial covenants under "Compliancethe term loan facility required a leverage ratio of 3.50 to 1.00 and an interest coverage ratio of 3.00 to 1.00. We were in compliance with Covenants."all applicable covenants as of March 31, 2020.
Settlement Lines of Credit
In various markets where we do business, we have specialized lines of credit, which are restricted for use in funding settlement. The settlement lines of credit generally have variable interest rates, are subject to annual review and are denominated in local currency but may, in some cases, facilitate borrowings in multiple currencies. For certain of our lines of credit, the available credit is increased by the amount of cash we have on deposit in specific accounts with the lender. Accordingly, the amount of the outstanding linelines of credit may exceed the stated credit limit. As of March 31, 20192020 and December 31, 2018,2019, a total of $69.0$58.0 million and $70.6$74.5 million, respectively, of cash on deposit was used to determine the available credit.
As of March 31, 20192020 and December 31, 2018,2019, respectively, we had $641.9$375.2 million and $700.5$463.2 million outstanding under these lines of credit with additional capacity to fund settlement of $725.2$1,092.1 million as of March 31, 2019 to fund settlement.2020. During the three months ended March 31, 2020, the maximum and average outstanding balances under these lines of credit were $679.0 million and $376.4 million, respectively. The weighted-average interest rate on these borrowings was 2.57%1.99% and 2.97%3.16% at March 31, 20192020 and December 31, 2018,2019, respectively.
Compliance with Covenants
The Credit Facility Agreement contains customary affirmative and restrictive covenants, including, among others, financial covenants based on our leverage and interest coverage ratios as defined in the agreement. As of March 31, 2019, financial covenants under the Credit Facility Agreement required a leverage ratio no greater than: (i) 5.00 to 1.00 as of the end of any fiscal quarter ending during the period from April 1, 2018 through June 30, 2019; (ii) 4.75 to 1.00 as of the end of any fiscal quarter ending during the period from July 1, 2019 through June 30, 2020; and (iii) 4.50 to 1.00 as of the end of any fiscal quarter ending thereafter. The interest coverage ratio is required to be no less than 3.25 to 1.00. We were in compliance with all applicable covenants as of March 31, 2019.
The Credit Facility Agreement includes covenants, subject in each case to exceptions and qualifications that may restrict certain payments, including, in certain circumstances, the repurchasing of our common stock and paying cash dividends in excess of our current rate of $0.01 per share per quarter.
See "Note 7—5—Long-Term Debt and Lines of Credit" in the notes to the accompanying unaudited consolidated financial statements for further discussioninformation about our borrowing agreements and our lease liabilities.
Commitments and Contractual Obligations
During the three months ended March 31, 2020, our commitments and contractual obligations increased from the amounts disclosed in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations-Commitments and Contractual Obligations" in our Annual Report on Form 10-K for the year ended December 31, 2019. The increase primarily relates to the acquisition of software and related services for $293.8 million. We financed $97.6 million of this amount utilizing a two-year vendor financing arrangement. As of March 31, 2020, the estimated remaining purchase commitments for this acquisition are $47.6 million during the remainder of 2020, $64.9 million during 2021, $66.9 million during 2022 and $16.8 million during 2023.
Effects of the COVID-19 Pandemic on our Critical Accounting Policies
Because of the effects of the COVID-19 pandemic on our business beginning in mid-March, we evaluated the potential effects on our financial statements as of and for the three months ended March 31, 2020. However, the magnitude and duration of the ultimate effect of the COVID-19 pandemic are not possible to predict at this time, and our assessments are therefore subject to material revision.
Goodwill- We considered a variety of factors that might indicate that it is more likely than not that the fair value of any reporting unit is below its carrying amount at March 31, 2020, including general macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of our borrowing arrangements.reporting units, events or changes affecting the composition or carrying amount of the net assets of our reporting units, our share price and other relevant events. For certain of our reporting units that were recently acquired in the Merger, we also considered the expected near term impact of the COVID-19 pandemic on revenues and our cost mitigation efforts as well as longer term performance expectations. Based on the analyses completed, we believe it is not more likely than not that the carrying amount of any our reporting units exceeded the fair value as of March 31, 2020.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our financial condition, revenues, results of operations, liquidity, capital expenditures or capital resources, other than the guarantee services described in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies" in our Annual Report on Form 10-K for the year ended December 31, 2018.resources.
Effect of New Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted
From time-to-time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standards setting bodies that may affect our current and/or future financial statements. See "Note 1—Basis of Presentation and Summary of Significant Accounting Policies" in the notes to the accompanying unaudited consolidated financial statements for a discussion of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.
Forward-Looking Statements
Investors are cautioned that some of the statements we use in this report contain forward-looking statements and are made pursuant to the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, which are based on current expectations, estimates and projections about the industry and markets in which we operate, and beliefs of and assumptions made by our management, involve a number of risks, and uncertainties and depend uponassumptions that could significantly affect the financial condition, results of operations, business plans and the future events or conditions.performance of Global Payments. Actual events or results might differ materially from those expressed or forecasted in these forward-looking statements. Accordingly, we cannot guarantee you that our plans and expectations will be achieved. Such statements may include, but are not limited to, statements about the effects of the COVID-19 pandemic on our business, including estimates of the effects of the pandemic on our revenues and financial operating results, the effects of actions taken by us in response to the pandemic, statements about the anticipated benefits of the Merger, including our acquisitions, including future financial and operating results, the combined company’s plans, objectives, expectations and intentions, statements about our expected financial and operating results, projected future growth of business, and other statements that are not historical facts. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained, and therefore actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.
ImportantIn addition to factors that maypreviously disclosed in Global Payments’ reports filed with the SEC and those identified elsewhere in this communication, the following factors, among others, could cause actual events or results to differ materially from those anticipated by such forward-looking statements includeor historical performance: the effects and duration of global economic, political, market, health and social events or other conditions, including the effects and duration of the COVID-19 pandemic; regulatory measures or voluntary actions, including social distancing, shelter-in-place orders, shutdowns of nonessential businesses and similar measures imposed or undertaken in an effort to combat the spread of the COVID-19 pandemic; management’s assumptions and projections used in their estimates of the timing and severity of the effects of the COVID-19 pandemic on our future revenues and results of operations; our ability to safeguardmeet our data; increased competitionliquidity needs in light of the effects of the COVID-19 pandemic; the outcome of any legal proceedings that may be instituted against Global Payments or its or TSYS’ current or former directors; difficulties, delays and higher than anticipated costs related to integrating the businesses of Global Payments and TSYS, including with respect to implementing systems to prevent a material security breach of any internal systems or to successfully manage credit and fraud risks in business units; failing to fully realize anticipated cost savings and other anticipated benefits of the Merger when expected or at all; business disruptions from larger companiesthe Merger or integration that will harm our business, including current plans and non-traditional competitors, ouroperations; potential adverse reactions or changes to business relationships resulting from the Merger, including as it relates to the businesses’ ability to update our servicessuccessfully renew existing client contracts on favorable terms or at all and obtain new clients; failing to comply with the applicable requirements of Visa, Mastercard or other payment networks or card schemes or changes in a timely manner; ourthose requirements; the ability to maintain Visa and MasterCardMastercard registration and financial institution sponsorship; our reliance on financial institutionsthe ability to provide clearing servicesretain and hire key personnel; the diversion of management’s attention from ongoing business operations; the continued availability of capital and financing following the Merger; the business, economic and political conditions 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;the markets in which we operate; increased attrition of merchants, referral partners or independent sales organizations;competition in the markets in which we operate and our ability to increase our market share ofin existing markets and expand into new markets; development of market trends and technologies; a decline in the use of cards for payment generally; unanticipated increases in chargeback liability; increases in credit card network fees; change in laws, regulations or network rules or interpretations thereof;our ability to safeguard our data; risks associated with our indebtedness, foreign currency exchange and interest rate risks; political, economic and regulatorythe effects of new or changes in the foreign countries in which we operate; future performance, integrationcurrent laws, regulations, credit card association rules or other industry standards, including privacy and conversioncybersecurity laws and regulations; and events beyond our control, such as acts of acquired operations, including without limitation difficulties and delays in integrating or fully realizing cost savingsterrorism, and other benefits of our acquisitions at all or withinfactors included in the expected time period; fully realizing anticipated annual interest expense savings from refinancing our Credit Facility; our loss of key personnel and other risk factors presented“Risk Factors” in Item 1- Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 20182019, and any subsequentin other documents that we file with the SEC, filings, which we advise you to review.
Ourare available at http://www.sec.gov. Any forward-looking statements speak only as of the date of this communication or as of the date they arewere made, and should not be relied upon as representing our plans and expectations as of any subsequent date. While we may electundertake no obligation to update or revise forward-looking statements at some time in the future, we specifically disclaim any obligation to publicly release the results of any revisions to our forward-looking statements, except as required by law.
ITEM 3—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no significant change in our exposure to market risk during the quarter ended March 31, 2019. For a discussion of our exposure to market risk, refer to Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk," contained in our Annual Report on Form 10-K for the year ended December 31, 2018.2019.
ITEM 4—CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of March 31, 2019,2020, management carried out, under the supervision and with the participation of our principal executive officer and principal financial officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on this evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2019,2020, our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and are designed to ensure that information required to be disclosed in those reports is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the quarter ended March 31, 2019,2020, as part of our ongoing integration activities following the Merger, we added internalcontinued to apply our controls relatedand procedures to the automationacquired operations of certain processesTSYS and activities associated with a newly implemented cloud-based accounting andto augment our company-wide controls to address the risks inherent in an acquisition of this magnitude. In response to the COVID-19 pandemic, our teams worldwide have been working remotely since the middle of March. We took precautionary measures to ensure our internal control over financial reporting system.addressed risks working in a remote environment. We also addedare continually monitoring and assessing the COVID-19 potential effects on the design and operating effectiveness of our internal controls in support of the accounting, reporting and disclosure requirements of the new lease accounting standard, which was effective on January 1, 2019. To assist with the necessary calculations to support the accounting and disclosure requirements of the new lease accounting standard, we implemented a new technology solution, as well as related internal controls.control over financial reporting.
PART II—OTHER INFORMATION
ITEM 1—LEGAL PROCEEDINGS
We are party to a number of claims and lawsuits incidental to our business. In our opinion, the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, are not expected to have a material adverse effect on our financial position, liquidity, results of operations or cash flows. See "Note 12—Commitments and Contingencies" in the notes to the accompanying unaudited consolidated financial statements for information about certain legal matters.
ITEM 1A—RISK FACTORS
The following represent material changes to the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2019.
Our business has been and is likely to continue to be negatively affected by the recent COVID-19 outbreak.
The recent outbreak of COVID-19 in many countries and regions, including the United States, Europe and Asia-Pacific, which was declared a pandemic by the World Health Organization on March 11, 2020, continues to adversely affect global commercial activity and has contributed to significant volatility in the financial markets. Starting in mid-March 2020, COVID-19 began to affect our results significantly. The deterioration accelerated toward the end of March and has adversely affected and is likely to have a further negative effect on our near-term financial results due to reduced consumer, business and government spending upon which our revenues depend.
In particular, we may experience financial losses due to a number of operational factors, including:
Merchant temporary closures and failures;
Continued unemployment which may negatively influence consumer spending;
Third-party disruptions, including potential outages at network providers, call centers and other suppliers;
Increased cyber and payment fraud risk related to COVID-19, as cybercriminals attempt to profit from the disruption, given increased online banking, e-commence and other online activity; and
Challenges to the availability and reliability of our solutions and services due to changes to operations, including the possibility of one or more clusters of COVID-19 cases occurring at our data centers, contact centers or operations centers, affecting our employees or affecting the systems or employees of our clients or other third parties on which we depend.
These factors may remain prevalent for a significant period of time and may continue to adversely affect our business, results of operations and financial condition even after the COVID-19 pandemic has subsided. The full effects of the COVID-19 pandemic on our business, results of operations, financial condition and cash flows will depend on future developments, which are highly uncertain and are difficult to predict at this time, including, but not limited to, the duration and spread of the pandemic, its severity, the restrictive actions taken to contain the virus or treat its effects, its effects on our customers and how quickly and to what extent normal economic and operating conditions, operations and demand for our services can resume. It is also likely that the current outbreak or continued spread of COVID-19 will cause an economic slowdown, and it is possible that it could cause a global recession. Accordingly, the ultimate effects on our operations, financial condition and cash flows cannot be determined at this time. Nevertheless, despite the uncertainty of the COVID-19 situation, we expect that the COVID-19 pandemic will have an adverse effect on our revenues and financial results for the remainder of 2020.
Furthermore, the COVID-19 pandemic and the resulting adverse and unpredictable economic conditions are likely to implicate or exacerbate other risks identified in our Annual Report on Form 10-K for the year ended December 31, 2019, which in turn could materially adversely affect our business, financial condition, results of operations and liquidity.
ITEM 2—UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Information about the shares of our common stock that we repurchased during the quarter ended March 31, 20192020 is set forth below:
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Period | Total Number of Shares Purchased (1) | | Approximate Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (2) |
| | | | | | | (in millions) |
January 2019 | 403,663 |
| | $ | 109.02 |
| | 403,593 |
| | $ | 638.8 |
|
February 2019 | 461,059 |
| | 122.78 |
| | 417,378 |
| | 638.4 |
|
March 2019 | 509,235 |
| | 132.71 |
| | 474,311 |
| | 638.0 |
|
Total | 1,373,957 |
| | $ | 122.42 |
| | 1,295,282 |
| | $ | 638.0 |
|
|
| | | | | | | | | | | | | |
Period | Total Number of Shares Purchased (1) | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (2) |
| | | | | | | (in millions) |
January 1-31, 2020 | 934,051 |
| | $ | 194.08 |
| | 930,401 |
| | $ | 473.4 |
|
February 1-29, 2020 | 924,996 |
| | 194.57 |
| | 839,676 |
| | 292.8 |
|
March 1-31, 2020 | 439,042 |
| | 183.37 |
| | 324,654 |
| | 940.0 |
|
Total | 2,298,089 |
| | $ | 192.23 |
| | 2,094,731 |
| | $ | 880.0 |
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| |
(1) | Our board of directors has authorized us to repurchase shares of our common stock through any combination of Rule 10b5-1 open-market repurchase plans, accelerated share repurchase plans, discretionary open-market purchases or privately negotiated transactions. During the quarter ended March 31, 2020, pursuant to our employee incentive plans, we withheld 203,358 shares, at an average price per share of $185.81 in order to satisfy employees' tax withholding and payment obligations in connection with the vesting of awards of restricted stock. |
During the quarter ended March 31, 2019, pursuant to our employee incentive plans, we withheld 78,675 shares at an average price per share of $129.65 in order to satisfy employees' tax withholding and payment obligations in connection with the vesting of awards of restricted stock, which we withheld at fair market value on the vesting date.
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(2) | On February 5, 2019,26, 2020, our board of directors approved an increase to our existing share repurchase program authorization, which raised the total available authorization to $750 million.$1.0 billion. As of March 31, 2019,2020, the approximate dollar value of sharesamount that may yet be purchased under our share repurchase program was $638.0$880.0 million. The board authorization does not expire, but could be revoked at any time. In addition, we are not required by the board’s authorization or otherwise to complete any repurchases by any specific time or at all. |
ITEM 6—EXHIBITS
List of Exhibits
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| | |
2.13.1 | | Stock PurchaseThird Amended and Merger Agreement, dated asRestated Articles of August 2, 2017, by and among Athlaction Topco, LLC, the Vista Blocker Sellers (as defined therein), Vista Equity Partners Management, LLC, as Sellers’ Representative,Incorporation of Global Payments Inc., Athens Merger Sub, LLC and the Vista AIVs and Vista GPs (as defined therein and solely for the limited purposes set forth therein), incorporated by reference to Exhibit 2.14.1 to Global Payment Inc.’s Post-Effective Amendment No. 1 on Form S-8 to the Company’sRegistration Statement on Form S-4 filed on September 18, 2019. |
3.2 | | |
2.23.3 | | Amendment No. 1 to the Stock PurchaseTenth Amended and Merger Agreement, dated asRestated Bylaws of August 31, 2017, by and among Global Payments Inc., Athlaction Topco, LLC, Vista Equity Partners Management, LLC, as Sellers’ Representative, and VEP Global Aggregator, LLC, incorporated by reference to Exhibit 2.2.3.2 to the Company’sGlobal Payment Inc.’s Current Report on Form 8-K filed on September 6, 2017. ++ |
3.1 | | |
3.2 | | |
10.1* | | |
10.2* | | |
10.3* | | |
31.1* | | |
31.2* | | |
32.1* | | |
101* | | The following financial information from the Quarterly Report on Form 10-Q for the quarter ended March 31, 2019,2020, formatted in Inline XBRL (eXtensible Business Reporting Language) and filed electronically herewith: (i) the Unaudited Consolidated Statements of Income; (ii) the Unaudited Consolidated Statements of Comprehensive Income;Income (Loss); (iii) the Consolidated Balance Sheets; (iv) the Unaudited Consolidated Statements of Cash Flows; (v) the Unaudited Consolidated Statements of Changes in Equity; and (vi) the Notes to Unaudited Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
104* | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
______________________
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* | | Filed herewith. |
++ | | Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K and Global Payments Inc. agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted schedule and/or exhibit upon request. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | |
| | Global Payments Inc. |
| | (Registrant) |
| | |
Date: May 2, 20196, 2020 | | /s/ CameronPaul M. BreadyTodd |
| | CameronPaul M. BreadyTodd |
| | Senior Executive Vice President and Chief Financial Officer |
| | (Principal Financial Officer) |
| | |