GLOBAL PAYMENTS INC. 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 endedDecember 31, 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.
Executive Overview
We are a leading pure play payments technology company delivering innovative software and 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 operate their businesses more efficiently across a variety of channels around the world. OnSeptember 18, 2019 , we merged with Total System Services, Inc. ("TSYS") (the "Merger"). COVID-19 Update InMarch 2020 , theWorld Health Organization declared the outbreak of the COVID-19 virus a global pandemic. This outbreak has caused and may continue to cause significant disruptions to businesses and markets worldwide as the virus continues to spread or has a resurgence in certain jurisdictions. We continue to closely monitor the effects of the COVID-19 pandemic; however, the effects of the outbreak are still evolving, and the ultimate severity and duration of the pandemic and the implications on future global economic conditions remains uncertain. We are continuing to operate normally worldwide, and, at this time, we do not anticipate any significant operational effects as a result of the pandemic. Starting in mid-March, the COVID-19 pandemic began to significantly affect our financial results as governments took actions to encourage social distancing and implemented shelter-in-place directives. As certain state and local governments inthe United States and abroad began to gradually ease restrictions during the summer months, and certain businesses reopened, we saw improvement in our financial results and positive trends throughout the latter half of the second quarter and continuing through the third quarter. It is possible that certain state or local authorities inthe United States or governments abroad may re-impose restrictions and closures in response to a resurgence or another wave of the pandemic through the fall and winter. We expect that the COVID-19 pandemic will continue to have an adverse effect on our revenues and earnings for the remainder of 2020, although the magnitude, duration and ultimate effects of the COVID-19 pandemic are not possible to predict at this time. We have implemented cost-saving actions, such as reductions in employee compensation costs and discretionary spending, to help mitigate the financial effects of the COVID-19 pandemic. We also took actions to preserve our available capital and provide financial flexibility, including temporarily suspending our share repurchase program during the second and third quarters and reducing our planned capital investments in the business, as well as the cost-savings actions previously noted. As we continue to see the economy slowly recover from the early effects of the pandemic, we continue to expect our capital expenditures for the year to be below our initial expectations. For a further discussion of trends, uncertainties and other factors that could affect our future operating results related to the effects of the COVID-19 pandemic, see the section entitled "Risk Factors" in Item 1A in this Quarterly Report on Form 10-Q. Financial Highlights
Highlights related to our financial condition at
•Consolidated revenues for the three and nine months endedSeptember 30, 2020 increased to$1,917.8 million and$5,493.4 million , respectively, compared to$1,105.9 million and$2,924.1 million for the prior-year periods primarily due to additional revenues from the acquired operations of TSYS, partially offset by the unfavorable effects of COVID-19 on our revenues. Revenues from the acquired operations of TSYS were$1,067.2 million and$3,119.2 28 -------------------------------------------------------------------------------- Table of Contents million for the three and nine months endedSeptember 30, 2020 , respectively, and$147.5 million for the three and nine months endedSeptember 30, 2019 . •Consolidated operating income for the three and nine months endedSeptember 30, 2020 increased to$290.4 million and$642.0 million , respectively, compared to$174.0 million and$595.3 million for the prior-year periods due to additional income from the acquired operations of TSYS. Operating margin for the three and nine months endedSeptember 30, 2020 was 15.1% and 11.7%, respectively, compared to 15.7% and 20.4% for the prior-year periods. Consolidated operating income and operating margins were negatively affected by the unfavorable effects of COVID-19 on our revenues for the three and nine months endedSeptember 30, 2020 , and an increase in acquisition and integration expenses, primarily due to the Merger, for the nine months endedSeptember 30, 2020 . However, we saw improvement in our financial results and positive trends throughout the latter half of the second quarter and continuing through the third quarter as a result of the continued recovery across our markets and reductions in costs due to actions we took in response to the pandemic. •Net income attributable toGlobal Payments for the three and nine months endedSeptember 30, 2020 increased to$221.0 million and$401.9 million , respectively, compared to$95.0 million and$327.8 million for the prior-year periods, reflecting the change in operating income and additional equity in income of equity method investments, partially offset by an increase in income tax expense. •Diluted earnings per share for the three and nine months endedSeptember 30, 2020 was$0.74 and$1.34 , respectively, compared to$0.54 and$2.00 for the prior-year periods. Diluted earnings per share for the three and nine months endedSeptember 30, 2020 reflects the additional income from the acquired operations of TSYS. Additionally, diluted earnings per share for the three and nine months endedSeptember 30, 2020 reflects an increase in the weighted-average number of shares outstanding as a result of issuing common shares as purchase consideration in the Merger. 29 -------------------------------------------------------------------------------- Table of Contents Results 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 of 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 and nine months endedSeptember 30, 2019 has been recast to align with the segment presentation for the three and nine months endedSeptember 30, 2020 . For further information about our reportable segments, see "Item 1. Business-Business Segments" within our Annual Report on Form 10-K for the year endedDecember 31, 2019 , incorporated herein by reference, and "Note 12-Segment Information" in the notes to the accompanying unaudited consolidated financial statements. The following table sets forth key selected financial data for the three months endedSeptember 30, 2020 and 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 endedSeptember 30, 2020 and 2019 is derived from the accompanying unaudited consolidated financial statements included in Part I, Item 1 - Financial Statements. Three Months Ended Three Months Ended September 30, 2020 % of Revenues(1) September 30, 2019 % of Revenues(1) $ Change % Change (dollar amounts in thousands) Revenues(2): Merchant Solutions$ 1,243,961 64.9 %$ 1,004,943 90.9 %$ 239,018 23.8 % Issuer Solutions 487,409 25.4 % 75,628 6.8 % 411,781 NM Business and Consumer Solutions 204,106 10.6 % 27,896 2.5 % 176,210 NM Intersegment eliminations (17,661) (0.9) % (2,526) (0.2) % (15,135) NM Consolidated revenues$ 1,917,815 100.0 %$ 1,105,941 100.0 %$ 811,874 73.4 % Consolidated operating expenses(2): Cost of service $ 900,921 47.0 % $ 427,720 38.7 %$ 473,201 110.6 % Selling, general and administrative 726,475 37.9 % 504,184 45.6 % 222,291 44.1 % Operating expenses$ 1,627,396 84.9 % $ 931,904 84.3 %$ 695,492 74.6 % Operating income (loss)(2): Merchant Solutions $ 344,981 18.0 % $ 318,786 28.8 %$ 26,195 8.2 % Issuer Solutions 70,800 3.7 % 5,885 0.5 % 64,915 NM Business and Consumer Solutions 31,052 1.6 % 3,365 0.3 % 27,687 NM Corporate(3) (156,414) (8.2) % (153,999) (13.9) % (2,415) (1.6) % Operating income $ 290,419 15.1 % $ 174,037 15.7 %$ 116,382 66.9 % Operating margin(2): Merchant Solutions 27.7 % 31.7 % (4.0) % Issuer Solutions 14.5 % NM NM Business and Consumer Solutions 15.2 % NM NM NM = not meaningful.
(1) Percentage amounts may not sum to the total due to rounding.
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(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 September 30, 2019 , operating income for our
Merchant Solutions segment reflected the effect of acquisition and integration
expenses of $13.9 million . Operating loss for Corporate included acquisition and
integration expenses of $57.6 million and $86.9 million during the three months
ended September 30, 2020 and 2019, respectively.
The following table sets forth key selected financial data for the nine months
ended September 30, 2020 and 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 nine months ended
September 30, 2020 and 2019 are derived from the accompanying unaudited
consolidated financial statements included in Part I, Item 1 - Financial
Statements.
Nine Months Ended Nine Months Ended
September 30, 2020 % of Revenues(1) September 30, 2019 % of Revenues(1) $ Change % Change
(dollar amounts in thousands)
Revenues(2):
Merchant Solutions $ 3,460,785 63.0 % $ 2,812,640 96.2 % $ 648,145 23.0 %
Issuer Solutions 1,461,196 26.6 % 86,122 2.9 % 1,375,074 NM
Business and Consumer Solutions 624,774 11.4 % 27,896 1.0 % 596,878 NM
Intersegment eliminations (53,390) (1.0) % (2,527) (0.1) % (50,863) NM
Consolidated revenues $ 5,493,365 100.0 % $ 2,924,131 100.0 % $ 2,569,234 87.9 %
Consolidated operating
expenses(2):
Cost of service $ 2,728,532 49.7 % $ 1,035,225 35.4 % $ 1,693,307 163.6 %
Selling, general and
administrative 2,122,862 38.6 % 1,293,651 44.2 % 829,211 64.1 %
Operating expenses $ 4,851,394 88.3 % $ 2,328,876 79.6 % $ 2,522,518 108.3 %
Operating income (loss)(2):
Merchant Solutions $ 824,212 15.0 % $ 840,326 15.3 % $ (16,114) (1.9) %
Issuer Solutions 188,131 3.4 % 12,920 0.2 % 175,211 NM
Business and Consumer Solutions 110,358 2.0 % 3,365 0.1 % 106,993 NM
Corporate(3) (480,730) (8.8) % (261,356) (4.8) % (219,374) (83.9) %
Operating income $ 641,971 11.7 % $ 595,255 20.4 % $ 46,716 7.8 %
Operating margin(2):
Merchant Solutions 23.8 % 29.9 % (6.1) %
Issuer Solutions 12.9 % NM NM
Business and Consumer Solutions 17.7 % 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.
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(3) During the nine months ended September 30, 2020 and 2019, operating income
for our Merchant Solutions segment reflected the effect of acquisition and
integration expenses of $5.7 million and $22.3 million , respectively. Operating
loss for Corporate included acquisition and integration expenses of $208.0
million and $98.0 million during the nine months ended September 30, 2020 and
2019, respectively.
Revenues
Consolidated revenues for the three and nine months ended September 30, 2020
increased by 73.4% and 87.9%, respectively, to $1,917.8 million and $5,493.4
million , compared to $1,105.9 million and $2,924.1 million for the prior-year
periods, primarily due to additional revenues from the acquired operations of
TSYS. Revenues from the acquired operations of TSYS were $1,067.2 million and
$3,119.2 million for the three and nine months ended September 30, 2020 ,
respectively, compared to $147.5 million for the prior-year periods. While
COVID-19 continued to have unfavorable effects on our revenues as compared to
the prior-year periods, we saw improvements throughout the latter half of the
second quarter and continuing through the third quarter.
Merchant Solutions Segment. Revenues from our Merchant Solutions segment for the
three and nine months ended September 30, 2020 increased by 23.8% and 23.0%,
respectively, to $1,244.0 million and $3,460.8 million , compared to $1,004.9
million and $2,812.6 million for the prior-year periods, primarily due to
additional revenues from the acquired operations of TSYS. We experienced
significant revenue declines starting in mid-March related to COVID-19 due to a
reduction in consumer spending and closures of certain of our merchant customer
businesses throughout North America , Europe and Asia Pacific . We saw improvement
in our financial results beginning in May, and continuing through the third
quarter, as state and local governments in the United States and governments
abroad began to gradually ease pandemic-related restrictions and consumer
spending increased.
Issuer Solutions Segment. Revenues from our Issuer Solutions segment for the
three and nine months ended September 30, 2020 were $487.4 million and $1,461.2
million , respectively, compared to $75.6 million and $86.1 million for the
prior-year periods, 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 related to the processing of commercial
cards as a result of COVID-19. We saw improvement in our financial results
beginning in May, and continuing through the third quarter, as state and local
governments in the United States and governments abroad began to gradually ease
pandemic-related restrictions.
Business and Consumer Solutions Segment. Revenues from our Business and Consumer
Solutions segment for the three and nine months ended September 30, 2020 were
$204.1 million and $624.8 million , respectively, compared to $27.9 million for
the prior-year periods, reflecting revenues from the acquired operations of
TSYS. Our Business and Consumer Solutions segment experienced revenue declines
starting in mid-March due to reduced consumer spending as a result of COVID-19;
however, these declines were mitigated by revenues in the second quarter from
our customers loading individual stimulus payments and supplementary
unemployment insurance distributions resulting from the Coronavirus Aid, Relief
and Economic Security Act. Additionally, we saw improvements in our
financial results later in the second quarter, and continuing through the third
quarter, from increases in consumer spending as state and local governments in
the United States began to gradually ease restrictions.
Operating Expenses
Cost of Service. Cost of service for the three and nine months endedSeptember 30, 2020 increased by 110.6% and 163.6%, respectively, to$900.9 million and$2,728.5 million , compared to$427.7 million and$1,035.2 million for the prior-year periods, primarily due to additional costs associated with the acquired operations of TSYS, including the amortization of acquired intangibles. Cost of service for the three and nine months endedSeptember 30, 2020 reflects amortization of acquired intangibles of$313.4 million and$941.7 million , respectively, compared to$134.5 million and$345.5 million , respectively, for the prior-year periods. Cost of service as a percentage of revenues increased to 47.0% and 49.7%, respectively, for the three and nine months endedSeptember 30, 2020 , compared to 38.7% and 35.4% for the prior-year periods, primarily due to the increase in amortization of acquired intangibles.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three and nine months ended
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$504.2 million and $1,293.7 million for the prior-year periods. The increase in
selling, general and administrative expenses for the three months ended
September 30, 2020 compared to the prior year was primarily due to additional
costs associated with the acquired operations of TSYS. Additionally, selling,
general and administrative expenses included acquisition and integration
expenses of $59.8 million compared to $90.5 million for the prior year. The
increase in selling, general and administrative expenses for the nine months
ended September 30, 2020 compared to the prior year was primarily due to
additional costs associated with the acquired operations of TSYS. Additionally,
selling, general and administrative expenses included acquisition and
integration expenses of $213.6 million compared to $108.0 million for the prior
year. Selling, general and administrative expenses as a percentage of revenues
was 37.9% and 38.6%, respectively, for the three and nine months ended
September 30, 2020 , compared to 45.6% and 44.2% for the prior year.
Corporate. Corporate expenses for the three and nine months ended September 30,
2020 increased by $2.4 million and $219.4 million , respectively, to $156.4
million and $480.7 million , compared to $154.0 million and $261.4 million for
the prior-year periods, primarily due to additional expenses associated with the
acquired operations of TSYS and an increase in acquisition and integration
expenses for the nine months ended September 30, 2020 . During the three and nine
months ended September 30, 2020 , Corporate expenses included acquisition and
integration expenses of $57.6 million and $208.0 million , respectively, compared
to $86.9 million and $98.0 million , for the prior-year periods. During the three
and nine months ended September 30, 2020 , Corporate expenses included charges
for employee termination benefits of $8.1 million and $49.8 million ,
respectively, which included $1.9 million and $6.1 million , respectively, of
share-based compensation expense. We expect to incur additional charges over the
next 12 months as Merger-related integration activities continue.
Operating Income and Operating Margin
Consolidated operating income for the three and nine months endedSeptember 30, 2020 was$290.4 million and$642.0 million , respectively, compared to$174.0 million and$595.3 million for the prior-year periods. Operating margin for the three and nine months endedSeptember 30, 2020 was 15.1% and 11.7%, respectively, compared to 15.7% and 20.4% for the prior-year periods. Consolidated operating income for the three and nine months endedSeptember 30, 2020 includes income from the acquired operations of TSYS of$165.8 million and$385.1 million , respectively, compared to a loss of$11.1 million for the prior-year periods. Consolidated operating income for the three and nine months endedSeptember 30, 2020 reflects an increase in amortization of acquired intangibles of$178.9 million and$596.2 million , respectively. Acquisition and integration expenses decreased by$44.1 million and increased by$93.4 million for the three and nine months endedSeptember 30, 2020 , respectively, compared to the prior-year periods. The unfavorable effects of COVID-19 on our revenues and incremental expenses directly related to COVID-19 also contributed to the decrease in consolidated operating income and operating margin compared to the prior year. However, we saw improvement in our financial results and positive trends throughout the latter half of the second quarter and continuing through the third quarter as a result of the continued recovery across our markets and reductions in costs due to actions we took in response to the pandemic.
Other Income/Expense, Net
Interest and other income for the three and nine months endedSeptember 30, 2020 increased by$18.8 million and$14.9 million , respectively, to$30.0 million and$35.3 million , compared to the prior-year periods, primarily due to a gain of$27.3 million recorded in connection with the partial release and conversion of ourVisa convertible preferred shares. See "Note 5-Other Assets" in the notes to the accompanying unaudited consolidated financial statements for further discussion of this transaction. Interest and other expense for the three and nine months endedSeptember 30, 2020 increased by$13.2 million and$37.6 million , respectively, to$83.0 million and$258.5 million , compared to the prior-year periods, as a result of the increase in our outstanding borrowings. Interest expense for the three and nine months endedSeptember 30, 2019 included fees and charges of$25.5 million and$28.4 million , respectively, incurred in connection with financing activities related to the Merger. These fees and charges included fees associated with bridge financing and charges for the write-off of unamortized debt issuance costs related to borrowings under a credit facility extinguished prior to the completion of the Merger. 33 -------------------------------------------------------------------------------- Table of Contents Income Tax Expense Our effective income tax rate for the three months endedSeptember 30, 2020 was 18.0%, and our effective income tax rate for the three months endedSeptember 30, 2019 was a benefit of 18.7%. The increase in our effective tax rate for the three months endedSeptember 30, 2020 from the prior-year period is primarily due to the effect of the discrete benefits in the prior year related to the Merger, principally the reduction of ourU.S. deferred tax liability resulting from the effects of the Merger on the apportionment of income among states, and the effective settlement of uncertain tax positions. Our effective income tax rates for the nine months endedSeptember 30, 2020 and 2019 were 14.1% and 10.1%, respectively. The increase in our effective tax rate for the nine months endedSeptember 30, 2020 from the prior-year period is primarily due to the above noted prior year discrete items, partially offset by an increase in tax credits in the current year.
Liquidity and Capital Resources
In the ordinary course of our business, a significant portion of our liquidity comes from operating cash 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 a combination of bank financing, such as borrowings under our credit facilities, and 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 networks. 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 preserve liquidity in future periods, taking into account the potential effects of COVID-19, including the reduction of certain operating expenses, including compensation costs, other discretionary expenses and planned capital expenditures. We also temporarily suspended repurchases of our common stock during the second and third quarters. 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. AtSeptember 30, 2020 , we had cash and cash equivalents totaling$2,220.8 million . Of this cash and cash equivalent amount, we considered$1,426.1 million to be available for general purposes, of which$29.0 million was undistributed foreign earnings considered to be indefinitely reinvested outsidethe United States . The available cash of$1,426.1 million did 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 merchant's agreement. While this cash is not restricted in its use, we believe that designating this cash as a Merchant Reserve 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$1,544.8 million and$1,349.4 million for the nine months endedSeptember 30, 2020 and 2019, respectively, which reflect net income adjusted for noncash items, including depreciation and amortization 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 obligations. Changes in settlement processing assets and obligations increased operating cash flows by$155.4 million during the nine months endedSeptember 30, 2020 and increased operating cash flows by$624.0 million during the nine months endedSeptember 30, 2019 . The increase in cash flows from operating activities from the prior year was primarily due to the increase in earnings after the adjustment for certain noncash items, including amortization of acquired intangibles and depreciation and amortization of property and equipment. Cash flows from operations during the nine months endedSeptember 30, 2019 also reflect the effect of settlement payments of$48.3 million related to interest rate swaps that we terminated upon the issuance of our senior unsecured notes. 34
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We used net cash in investing activities of$395.0 million and$506.3 million during the nine months endedSeptember 30, 2020 and 2019, respectively, primarily to fund acquisitions and capital expenditures. During the nine months endedSeptember 30, 2020 and 2019, we used cash of$77.2 million and$334.4 million , respectively, for acquisitions. We made capital expenditures of$329.4 million and$201.0 million during the nine months endedSeptember 30, 2020 and 2019, respectively. These investments include software and hardware to support the development of new technologies, infrastructure to support our growing business and continued consolidation and enhancement of our operating platforms. We will continue to make significant capital investments in the business, but we will do so at a reduced rate from our initial expectations prior to the pandemic. Financing activities include borrowings and repayments under our 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 6-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 activities used net cash of$594.6 million during the nine months endedSeptember 30, 2020 and provided net cash of$109.9 million during the nine months endedSeptember 30, 2019 . Proceeds from long-term debt were$1,868.2 million and$6,704.8 million for the nine months endedSeptember 30, 2020 and 2019, respectively. Repayments of long-term debt were$1,829.6 million and$6,097.2 million for the nine months endedSeptember 30, 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 we make on our term loans. OnMay 15, 2020 , we issued$1.0 billion in aggregate principle amount of senior unsecured notes. We used the net proceeds from this offering to repay a portion of the outstanding indebtedness on our revolving credit facility and for general corporate purposes. For the nine months endedSeptember 30, 2019 , in connection with financing activities associated with the Merger, we received$2,993.9 million of proceeds from the issuance of senior unsecured notes and$2,868.0 million from our senior unsecured credit facility. We used these proceeds to repay TSYS's unsecured revolving credit facility, to refinance certain of our existing indebtedness, to fund cash payments made in lieu of fractional shares payable in accordance with the terms of the Merger and to pay transaction fees and costs related to the Merger. Activity under our settlement lines of credit is affected primarily by timing of month-end and transaction volume. During the nine months endedSeptember 30, 2020 and 2019, we had net repayments of settlement lines of credit of$31.1 million and net borrowings of settlement lines of credit of$144.5 million , respectively. We repurchase our common stock mainly through open market repurchase plans and, at times, through accelerated share repurchase programs. During the nine months endedSeptember 30, 2020 and 2019, we used$421.2 million and$234.0 million , respectively, to repurchase shares of our common stock. We temporarily suspended repurchases of our common stock during the second and third quarters. As ofSeptember 30, 2020 , we had$880.0 million of share repurchase authority remaining under a share repurchase program authorized by the board of directors. Additionally, the board of directors increased our share purchase authorization to$1.25 billion onOctober 28, 2020 .
We paid dividends to our common shareholders in the amounts of
During the nine months endedSeptember 30, 2019 , we paid distributions to noncontrolling interest in the amount of$31.6 million , and we funded assumed dividends payable (declared by TSYS's board of directors prior to consummation of the Merger) to former TSYS shareholders in the amount of$23.2 million . 35 -------------------------------------------------------------------------------- Table of Contents Long-Term Debt and Lines of Credit
Senior Unsecured Notes
We have$7.1 billion in aggregate principal amount of senior unsecured notes, which mature at various dates ranging fromApril 2021 toAugust 2049 . Interest on the senior notes is payable semi-annually at various dates. 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. OnMay 15, 2020 , we issued$1.0 billion in aggregate principal amount of 2.900% senior unsecured notes dueMay 2030 and received proceeds of$996.7 million . We incurred debt issuance costs of approximately$8.4 million , including underwriting fees, fees for professional services and registration fees, which were capitalized and reflected as a reduction of the related carrying amount of the notes in our consolidated balance sheet atSeptember 30, 2020 . Interest on the notes is payable semi-annually in arrears onMay 15 andNovember 15 of each year, commencingNovember 15, 2020 . The notes are unsecured and unsubordinated indebtedness and rank equally in right of payment with all of our other outstanding unsecured and unsubordinated indebtedness. We used the net proceeds from the offering to repay a portion of the outstanding indebtedness on our revolving credit facility and for general corporate purposes.
Senior Unsecured Credit Facilities
We have a term loan credit 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. The Term Loan Credit
Agreement provides for a senior unsecured $2 billion term loan facility. The
Unsecured Revolving Credit Agreement provides for a senior unsecured $3 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
be made in U.S. dollars, euros, sterling, Canadian dollars and, subject to
specific conditions, certain other currencies at our option. 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, N.A ., 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, N.A ., as its "prime rate" or (c) LIBOR plus 1.0%, in each case, plus
an applicable margin. As of September 30, 2020 , borrowings outstanding under the
term loan facility were $2.0 billion and there were no borrowings outstanding
under the revolving credit facility.
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 September 30, 2020 , the interest rate on the term loan facility was 1.52%.
In addition, we are required to pay a quarterly commitment fee with respect to
the unused portion of the revolving credit facility at an applicable rate per
annum ranging from 0.125% to 0.300% depending on our credit rating. Beginning on
December 31, 2022 , and at the end of each quarter thereafter, the Term Loan
Facility must be repaid in quarterly installments in the amount of 2.50% of
original principal through the maturity date with the remaining principal
balance due upon maturity in September 2024 . The revolving credit facility also
matures in September 2024 .
We may issue standby letters of credit of up to $250 million in the aggregate
under the revolving credit facility. Outstanding letters of credit under the
revolving credit facility reduce the amount of borrowings available to us. The
amounts available to borrow under the revolving credit facility are also
determined by a financial leverage covenant. As of September 30, 2020 , the total
available commitments under the revolving credit facility were $2.1 billion , and
there were no outstanding borrowings under the facility.
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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 September 30, 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 September 30, 2020 .
Settlement Lines of Credit
In various markets where we do business, we have specialized lines of credit, that 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 lines of credit may exceed the stated credit limit. As ofSeptember 30, 2020 , a total of$58.5 million of cash on deposit was used to determine the available credit. As ofSeptember 30, 2020 andDecember 31, 2019 , we had$439.4 million and$463.2 million , respectively, outstanding under these lines of credit with additional capacity to fund settlement of$1,387.3 million as ofSeptember 30, 2020 . During the three months endedSeptember 30, 2020 , the maximum and average outstanding balances under these lines of credit were$560.7 million and$324.6 million , respectively. The weighted-average interest rate on these borrowings was 2.05% and 3.16% atSeptember 30, 2020 andDecember 31, 2019 , respectively. See "Note 6-Long-Term Debt and Lines of Credit" in the notes to the accompanying unaudited consolidated financial statements for further information about our borrowing agreements.
Commitments and Contractual Obligations
During the nine months endedSeptember 30, 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 endedDecember 31, 2019 . The increase primarily relates to the acquisition of software, technology infrastructure and related services. Additionally, a portion of this amount,$97.6 million , was financed utilizing a two-year vendor financing arrangement. Our estimated purchase obligations as ofSeptember 30, 2020 were$88.7 million during the remainder of 2020,$244.5 million during 2021,$279.2 million during 2022 and 2023,$177.2 million during 2024 and 2025 and$527.4 million thereafter.
Effects of the COVID-19 Pandemic on our Critical Accounting Policies
Because of the effects of the COVID-19 pandemic on our business, we evaluated the potential effects on our financial statements as ofSeptember 30, 2020 and for the three and nine months then ended. However, the future 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 atSeptember 30, 2020 , including general macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of our 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 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 of our reporting units exceeded the fair value as ofSeptember 30, 2020 . 37 -------------------------------------------------------------------------------- Table of Contents 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.
Effect of New Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted
From time-to-time, new accounting pronouncements are issued by theFinancial 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 risks, uncertainties and assumptions that could significantly affect the financial condition, results of operations, business plans and the future performance ofGlobal Payments . Actual events or results might differ materially from those expressed or forecasted in these forward-looking statements. Accordingly, we cannot guarantee that our plans and expectations will be achieved. Examples of forward-looking statements include, but are not limited to, statements we make regarding the effects of the COVID-19 pandemic on our business, including estimates of the effects of the pandemic on our revenues, financial operating results and liquidity, the effects of actions taken by us in response to the pandemic, the anticipated benefits of the Merger, including our future financial and operating results, the combined company's plans, objectives, expectations and intentions, our expected financial and operating results, projected future growth of business, or completion of anticipated benefits of strategic initiatives, 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. In addition to factors previously disclosed inGlobal Payments' reports filed with theSEC and those identified elsewhere in this communication, the following factors, among others, could cause actual results to differ materially from forward-looking statements or 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, operating restrictions on 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, results of operations and liquidity; our ability to meet our liquidity needs in light of the effects of the COVID-19 pandemic; the outcome of any legal proceedings that may be instituted againstGlobal Payments or its or TSYS' current or former directors; difficulties, delays and higher than anticipated costs related to integrating the businesses ofGlobal 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 the Merger or integration that may harm our business, including current plans and operations; failing to comply with the applicable requirements ofVisa , Mastercard or other payment networks or card schemes or changes in those requirements; the ability to maintainVisa and Mastercard registration and financial institution sponsorship; the ability to retain 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 the markets in which we operate; increased competition in the markets in which we operate and our ability to increase our market share in existing markets and expand into new markets; our ability to safeguard our data; risks associated with our indebtedness, foreign currency exchange and interest rate risks; the effects of new or changes in current laws, regulations, credit card association rules or other industry standards, including privacy and cybersecurity laws and regulations; and events beyond our control, such as acts of terrorism, and other factors included in the "Risk Factors" in our Annual Report on Form 10-K for the year endedDecember 31, 2019 , and in other documents that we file with theSEC , which are 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 were made, and we undertake no obligation to update forward-looking statements, except as required by law. 38
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