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 continues to cause major disruptions to businesses and markets worldwide as the virus spreads in certain jurisdictions, and restrictions to control the spread of the virus remain in place. A number of countries as well as certain states and cities withinthe 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. 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 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 implement shelter-in-place directives. As certain state and local governments inthe United States and abroad began to gradually ease restrictions, and certain businesses reopened at reduced capacities, we saw improvement in our financial results and positive trends throughout the latter half of the second quarter. 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 have also temporarily suspended activity under our share repurchase program and reduced planned capital investments in the business from our initial expectations prior to the pandemic. For a further discussion of trends, uncertainties and other factors that could affect our continuing 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 six months ended
increased to
to
additional revenues from the acquired operations of TSYS of
and
effects of COVID-19 on our revenues.
• Consolidated operating income for the three and six months ended
2020 was
margin for the three and
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six months ended
• Net income attributable to
ended
compared to
The additional income from the acquired operations of TSYS was more than
offset by increases in acquisition and integration expenses and interest
expense, and the unfavorable effects of COVID-19 on our revenues.
• Diluted earnings per share for the three and six months ended June 30 ,
2020 was
periods, primarily reflecting the unfavorable effects of COVID-19 on our
net income, 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.
• On May 15, 2020 , we issued $1.0 billion aggregate principal amount of
2.900% senior unsecured notes due May 2030 . We used the net proceeds from
this offering to repay a portion of the outstanding indebtedness on our
revolving credit facility and for general corporate purposes. As of
June 30, 2020 , there were no outstanding borrowings under the revolving
credit facility.
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Results of Operations
We operate in three reportable segments: Merchant Solutions, Issuer Solutions and Business and Consumer Solutions. We evaluate performance and allocate resources based on the operating income of each operating segment. In connection with an organizational realignment implemented after the Merger in the fourth quarter of 2019, the presentation of segment information for the three and six months endedJune 30, 2019 has been recast to align with the segment presentation for the three and six months endedJune 30, 2020 . For further information about our reportable segments, see "Item 1. Business-Business Segments" within our Annual Report on Form 10-K for the year endedDecember 31, 2019 , incorporated herein by reference, and "Note 11-Segment Information" in the notes to the accompanying unaudited consolidated financial statements. The following table sets forth key selected financial data for the three months endedJune 30, 2020 and 2019, this data as a percentage of total revenues and the changes between the periods in dollars and as a percentage of the prior-year amount. The income statement data for the three months endedJune 30, 2020 and 2019 is derived from the accompanying unaudited consolidated financial statements included in Part I, Item 1 - Financial Statements. Three Months Ended June 30, Three Months Ended 2020 % of Revenues(1) June 30, 2019 % of Revenues(1) Change % Change (dollar amounts in thousands) Revenues(2): Merchant Solutions$ 1,001,555 59.9 %$ 929,914 99.4 %$ 71,641 7.7 % Issuer Solutions 470,025 28.1 % 5,238 0.6 % 464,787 NM Business and Consumer Solutions 216,722 13.0 % - - % 216,722 NM Intersegment eliminations (16,350 ) (1.0 )% - - % (16,350 ) NM Consolidated revenues$ 1,671,952 100.0 %$ 935,152 100.0 %$ 736,800 78.8 % Consolidated operating expenses(2): Cost of service$ 893,740 53.5 %$ 302,276 32.3 %$ 591,464 195.7 % Selling, general and administrative 670,638 40.1 % 411,150 44.0 % 259,488 63.1 % Operating expenses$ 1,564,378 93.6 %$ 713,426 76.3 %$ 850,952 119.3 % Operating income (loss)(2): Merchant Solutions$ 175,078 10.5 %$ 283,411 30.3 %$ (108,333 ) (38.2 )% Issuer Solutions 58,027 3.5 % 3,596 0.4 % 54,431 NM Business and Consumer Solutions 48,195 2.9 % - - % 48,195 NM Corporate(3) (173,726 ) (10.4 )% (65,281 ) (7.0 )% (108,445 ) 166.1 % Operating income$ 107,574 6.4 %$ 221,726 23.7 %$ (114,152 ) (51.5 )%
Operating margin(2): Merchant Solutions 17.5 % 30.5 % (13.0 )% Issuer Solutions 12.3 % NM NM Business and Consumer Solutions 22.2 % 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 three months endedJune 30, 2020 and 2019, operating income for our Merchant Solutions segment reflected the effect of acquisition and integration expenses of$4.4 million and$3.7 million , respectively. Operating loss for Corporate included acquisition and integration expenses of$80.7 million and$10.5 million during the three months endedJune 30, 2020 and 2019, respectively. The following table sets forth key selected financial data for the six months endedJune 30, 2020 and 2019, this data as a percentage of total revenues and the changes between the periods in dollars and as a percentage of the prior-year amount. The income statement data for the six months endedJune 30, 2020 and 2019 are derived from the accompanying unaudited consolidated financial statements included in Part I, Item 1 - Financial Statements. Six Months Ended Six Months Ended June 30, 2020 % of Revenues(1) June 30, 2019 % of Revenues(1) Change % Change (dollar amounts in thousands) Revenues(2): Merchant Solutions$ 2,216,824 62.0 %$ 1,807,696 99.4 %$ 409,128 22.6 % Issuer Solutions 973,787 27.2 % 10,494 0.6 % 963,293 NM Business and Consumer Solutions 420,668 11.8 % - - % 420,668 NM Intersegment eliminations (35,729 ) (1.0 )% - - % (35,729 ) NM Consolidated revenues$ 3,575,550 100.0 %$ 1,818,190 100.0 %$ 1,757,360 96.7 % Consolidated operating expenses(2): Cost of service$ 1,827,611 51.1 %$ 607,505 33.4 %$ 1,220,106 200.8 % Selling, general and administrative 1,396,386 39.1 % 789,467 43.4 % 606,919 76.9 % Operating expenses$ 3,223,997 90.2 %$ 1,396,972 76.8 %$ 1,827,025 130.8 % Operating income (loss)(2): Merchant Solutions$ 479,231 13.4 %$ 521,540 14.6 %$ (42,309 ) (8.1 )% Issuer Solutions 117,331 3.3 % 7,035 0.2 % 110,296 NM Business and Consumer Solutions 79,307 2.2 % - - % 79,307 NM Corporate(3) (324,316 ) (9.1 )% (107,357 ) (3.0 )% (216,959 ) 202.1 % Operating income$ 351,553 9.8 %$ 421,218 23.2 %$ (69,665 ) (16.5 )%
Operating margin(2): Merchant Solutions 21.6 % 28.9 % (7.3 )% Issuer Solutions 12.0 % NM NM Business and Consumer Solutions 18.9 % 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 six months endedJune 30, 2020 and 2019, operating income for our Merchant Solutions segment reflected the effect of acquisition and integration expenses of$6.6 million and$8.4 million , respectively. Operating loss for Corporate 29
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included acquisition and integration expenses of
Revenues
Consolidated revenues for the three and six months endedJune 30, 2020 increased by 78.8% and 96.7%, respectively, to$1,672.0 million and$3,575.6 million , compared to$935.2 million and$1,818.2 million in the prior year, primarily due to additional revenues of$997.0 million and$2,052.0 million from the acquired operations of TSYS, partially offset by the adverse effects of COVID-19 on our revenues. Merchant Solutions Segment. Revenues from our Merchant Solutions segment for the three and six months endedJune 30, 2020 increased by 7.7% and 22.6%, respectively, to$1,001.6 million and$2,216.8 million , compared to$929.9 million and$1,807.7 million in the prior year, 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 throughoutNorth America ,Europe andAsia Pacific . We saw improvement in our financial results in May and June as certain state and local governments inthe United States and abroad began to gradually ease restrictions and consumer spending began to gradually increase. Issuer Solutions Segment. Revenues from our Issuer Solutions segment for the three and six months endedJune 30, 2020 were$470.0 million and$973.8 million , respectively, 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 in May and June as state and local governments inthe United States and abroad began to ease restrictions. Business and Consumer Solutions Segment. Revenues from our Business and Consumer segment for the three and six months endedJune 30, 2020 were$216.7 million and$420.7 million , respectively, 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; however, these declines were mitigated by revenues from our customers loading individual stimulus payments and supplementary unemployment insurance distributions resulting from the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"). Additionally, we saw improvements in our financial results later in the second quarter from increases in consumer spending as state and local governments inthe United States began to gradually ease quarantine restrictions.
Operating Expenses
Cost of Service. Cost of service for the three and six months endedJune 30, 2020 increased by 195.7% and 200.8%, respectively, to$893.7 million and$1,827.6 million , compared to$302.3 million and$607.5 million for the prior year, 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 six months endedJune 30, 2020 reflects amortization of acquired intangibles of$314.0 million and$628.3 million , respectively, compared to$103.5 million and$211.0 million , respectively, for the prior year. Cost of service as a percentage of revenues increased to 53.5% and 51.1%, respectively, for the three and six months endedJune 30, 2020 , compared to 32.3% and 33.4% for the prior year, primarily due to the increase in amortization of acquired intangibles. Selling, General and Administrative Expenses. Selling, general and administrative expenses for the three and six months endedJune 30, 2020 increased by 63.1% and 76.9%, respectively, to$670.6 million and$1,396.4 million , compared to$411.2 million and$789.5 million for the prior year. The increase in selling, general and administrative expenses for the three months endedJune 30, 2020 compared to the prior year was primarily due to additional costs associated with the acquired operations of TSYS and included acquisition and integration expenses of$82.2 million , primarily related to the Merger, compared to$13.0 million for the prior year. The increase in selling, general and administrative expenses for the six months endedJune 30, 2020 compared to the prior year was primarily due to additional costs associated with the acquired operations of TSYS and included acquisition and integration expenses of$153.8 million , primarily related to the Merger, compared to$17.6 million for the prior year. Selling, general and administrative expenses as a percentage of revenues was 40.1% and 39.1%, respectively, for the three and six months endedJune 30, 2020 , compared to 44.0% and 43.4% for the prior year. 30
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Corporate. Corporate expenses increased by$108.4 million and$217.0 million , respectively, to$173.7 million and$324.3 million for the three and six months endedJune 30, 2020 , compared to$65.3 million and$107.4 million for the prior year, primarily due to additional expenses associated with the acquired operations of TSYS and an increase in acquisition and integration expenses primarily due to the Merger. During the three and six months endedJune 30, 2020 , Corporate expenses included acquisition and integration expenses of$80.7 million and$150.4 million , respectively, compared to$10.5 million and$11.1 million , respectively, for the prior year. During the three and six months endedJune 30, 2020 , Corporate expenses included charges for employee termination benefits of$24.1 million and$41.7 million , respectively, which included$1.7 million and$4.2 million , respectively, of share-based compensation expense. We expect to incur additional charges as Merger-related integration activities continue in 2020.
Operating Income and Operating Margin
Consolidated operating income for the three and six months endedJune 30, 2020 was$107.6 million and$351.6 million , respectively, compared to$221.7 million and$421.2 million for the prior year. Operating margin for the three and six months endedJune 30, 2020 was 6.4% and 9.8%, respectively, compared to 23.7% and 23.2% for the prior year. Consolidated operating income for the three and six months endedJune 30, 2020 includes additional income from the acquired operations of TSYS of$103.8 million and$219.3 million , respectively. Consolidated operating income for the three and six months endedJune 30, 2020 reflects an increase in amortization of acquired intangibles of$210.5 million and$417.3 million , respectively, and an increase in acquisition and integration expenses of$71.0 million and$137.5 million , respectively, primarily due to the Merger, compared to the prior year. 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.
Other Income/Expense, Net
Interest and other expense for the three and six months endedJune 30, 2020 increased by$17.2 million and$50.8 million , respectively, to$82.9 million and$175.5 million , compared to the prior year, as a result of the increase in our outstanding borrowings. Income Tax Expense Our effective income tax rates for the three months endedJune 30, 2020 and 2019 were 3.0% and 19.9%, respectively. Our effective income tax rates for the six months endedJune 30, 2020 and 2019 were 9.0% and 18.4%, respectively. The changes in our effective tax rates for the three and six months endedJune 30, 2020 from the prior year reflects the effect of tax credits and benefits associated with share-based awards.
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 manage 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, as well as suspension of 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.
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AtJune 30, 2020 , we had cash and cash equivalents totaling$1,825.6 million . Of this amount, we considered$1,207.2 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$1,207.2 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$960.3 million and$247.4 million for the six months endedJune 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$136.5 million during the six months endedJune 30, 2020 and decreased operating cash flows by$41.7 million during the six months endedJune 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. We used net cash in investing activities of$270.3 million and$198.4 million during the six months endedJune 30, 2020 and 2019, respectively, primarily to fund acquisitions and capital expenditures. During the six months endedJune 30, 2020 and 2019, we used cash of$75.1 million and$78.2 million , respectively, for acquisitions. We made capital expenditures of$208.4 million and$133.3 million during the six months endedJune 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 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. We used net cash in financing activities of$510.1 million and$212.5 million during the six months endedJune 30, 2020 and 2019, respectively. Proceeds from long-term debt were$1,867.0 million and$586.0 million for the six months endedJune 30, 2020 and 2019, respectively. Repayments of long-term debt were$1,809.2 million and$569.1 million for the six months endedJune 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 aggregate principle 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. Activity under our settlement lines of credit is affected primarily by timing of month-end and transaction volume. During the six months endedJune 30, 2020 and 2019, we had net repayments of settlement lines of credit of$25.5 million and net borrowings of settlement lines of credit of$32.2 million , respectively. We repurchase our common stock mainly through open market repurchase plans. During the six months endedJune 30, 2020 and 2019, we used$421.2 million and$234.0 million , respectively, to repurchase shares of our common stock. As ofJune 30, 2020 , we had$880.0 million of share repurchase authority remaining under a share repurchase program authorized by the board of directors. We have temporarily suspended activity under our share repurchase program. 32
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We paid dividends to our common shareholders in the amounts of
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 upon 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 aggregate principal amount of 2.900% senior unsecured notes dueMay 2030 and received proceeds of$996.7 million , net of discounts. We incurred debt issuance costs of approximately$8.4 million , including underwriting fees, fees for professional services and registration fees, all of which were capitalized and reflected as a reduction of the related carrying amount of the notes in our consolidated balance sheet atJune 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 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
certain 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 June 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 June 30, 2020 , the interest rate on the term loan facility was 1.55%. 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 our financial leverage covenant. As of June 30, 2020 , the total
available commitments under the revolving credit facility were $2.3 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 ofJune 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 ofJune 30, 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 lines of credit may exceed the stated credit limit. As ofJune 30, 2020 andDecember 31, 2019 , a total of$62.1 million and$74.5 million , respectively, of cash on deposit was used to determine the available credit. As ofJune 30, 2020 andDecember 31, 2019 we had$439.5 million and$463.2 million , respectively, outstanding under these lines of credit with additional capacity to fund settlement of$1,124.6 million as ofJune 30, 2020 . During the six months endedJune 30, 2020 , the maximum and average outstanding balances under these lines of credit were$508.5 million and$282.9 million , respectively. The weighted-average interest rate on these borrowings was 2.11% and 3.16% atJune 30, 2020 andDecember 31, 2019 , respectively. See "Note 5-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 six months endedJune 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 and related services for$293.8 million . We financed$97.6 million of this amount utilizing a two-year vendor financing arrangement. As ofJune 30, 2020 , the estimated remaining purchase commitments for this acquisition were$29.7 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, we evaluated the potential effects on our financial statements as ofJune 30, 2020 and for the three and six months then ended. 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 atJune 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 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 of our reporting units exceeded the fair value as ofJune 30, 2020 . 34
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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 and financial operating results, 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, reinstating of opening 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 and results of operations; 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 will harm our business, including current plans and operations; potential adverse reactions or changes to business relationships resulting from the Merger, including as it relates to the businesses' ability to successfully renew existing client contracts on favorable terms or at all and obtain new clients; 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- 35
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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.
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