What changed in this filing

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Item 1. Financial Statements

2020-08-06 compared with 2020-05-07 · 201 added, 115 removed, 482 unchanged (40% of the section changed)

8 unchanged sentences

Settlement assets

Trade accounts receivable, net of credit losses of $3,967 at March 31, 2020 and $3,892 at December 31, 2019

Trade accounts receivable, net of credit losses of $ 4,524 at June 30, 2020 and $ 3,892 at December 31, 2019

Prepaid expenses and other current assets

1 unchanged sentence

Operating right of use lease assets

Property and equipment, net of accumulated depreciation of $411,616 at March 31, 2020 and $410,243 at December 31, 2019

Acquired intangible assets, net of accumulated amortization of $201,810 at March 31, 2020 and $204,853 at December 31, 2019

Other assets, net of accumulated amortization of $47,941 at March 31, 2020 and $46,788 at December 31, 2019

Property and equipment, net of accumulated depreciation of $ 428,909 at June 30, 2020 and $ 410,243 at December 31, 2019

Acquired intangible assets, net of accumulated amortization of $ 161,861 at June 30, 2020 and $ 204,853 at December 31, 2019

Other assets, net of accumulated amortization of $ 50,136 at June 30, 2020 and $ 46,788 at December 31, 2019

LIABILITIES AND EQUITY

19 unchanged sentences

90,000,000 shares authorized;

62,853,785 issued at March 31, 2020 and 62,775,762 issued at December 31, 2019

62,934,954 issued at June 30, 2020 and 62,775,762 issued at December 31, 2019

Additional paid-in-capital

Treasury stock, at cost, 10,648,096 shares at March 31, 2020 and 8,554,908 shares at December 31, 2019

Treasury stock, at cost, 10,646,423 shares at June 30, 2020 and 8,554,908 shares at December 31, 2019

Retained earnings

7 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except share and per share data)

Three Months Ended

Six Months Ended

Operating expenses:

2 unchanged sentences

Selling, general and administrative

Goodwill impairmen t

Depreciation and amortization

Total operating expenses

Operating income

Operating (loss) income

Other income (expense):

2 unchanged sentences

Loss on early retirement of debt

Foreign currency exchange (loss) gain, net

Foreign currency exchange gain (loss), net

Other gain (loss)

Other expense, net

Income before income taxes

(Loss) income before income taxes

Income tax expense

Net (loss) income

Net loss (income) attributable to noncontrolling interests

Net income attributable to Euronet Worldwide, Inc.

Earnings per share attributable to Euronet Worldwide, Inc.

Net (loss) income attributable to Euronet Worldwide, Inc.

(Loss) earnings per share attributable to Euronet Worldwide, Inc.

stockholders:

3 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited, in thousands)

Three Months Ended

Six Months Ended

Net (loss) income

Translation adjustment

Comprehensive (loss) income

Comprehensive loss (income) attributable to noncontrolling interests

Comprehensive (income) loss attributable to noncontrolling interests

Comprehensive (loss) income attributable to Euronet Worldwide, Inc.

10 unchanged sentences

Repurchase and conversions of convertible notes, net of tax

Balance as of March 31, 2019

Balan ce as of March 31, 2019

Net income (loss)

Other comprehensive income

Stock issued under employee stock plans

Share-based compensation

Redemptions and conversions of convertible notes, net of tax

Balan ce as of June 30, 2019

Balance as of December 31, 2019

5 unchanged sentences

Balance as of March 31, 2020

Net (loss) income

Other comprehensive income

Stock issued under employee stock plans

Share-based compensation

Balance as of June 30, 2020

See accompanying notes to the unaudited consolidated financial statements.

14 unchanged sentences

Balance as of March 31, 2019

Net income (loss)

Other comprehensive income

Stock issued under employee stock plans

Share-based compensation

Redemptions and conversions of convertible notes

Balance as of June 30, 2019

Retained Earnings

9 unchanged sentences

Balance as of March 31, 2020

Net (loss) income

Other comprehensive income

Stock issued under employee stock plans

Share-based compensation

Balance as of June 30, 2020

See accompanying notes to the unaudited consolidated financial statements.

3 unchanged sentences

(Unaudited, in thousands)

Three Months Ended

Six Months Ended

Net (loss) income

Adjustments to reconcile net income to net cash provided by operating activities:

3 unchanged sentences

Deferred income taxes

Goodwill impairment

Loss on early retirement of debt

Accretion of convertible debt discount and amortization of debt issuance costs

18 unchanged sentences

Repayments of revolving credit agreements

( 1,425,100 )

Proceeds from long-term debt obligations

14 unchanged sentences

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

( 1 ) GENERAL

Euronet Worldwide, Inc.

7 unchanged sentences

GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

In the opinion of management, such unaudited consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to fairly present the consolidated financial position and the results of operations, comprehensive income and cash flows for the interim periods.

The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2019 , including the notes thereto, set forth in the Company’s 2019 Annual Report on Form 10-K.

5 unchanged sentences

The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year ending December 31, 2020 .

Euronet’s Electronic Funds Transfer ("EFT") Processing Segment experiences its heaviest demand for dynamic currency conversion services during the third quarter of the fiscal year, normally coinciding with the tourism season.

Euronet’s Electronic Funds Transfer ("EFT") Processing Segment normally experiences its heaviest demand for dynamic currency conversion ("DCC") services during the third quarter of the fiscal year, normally coinciding with the tourism season.

Additionally, the EFT Processing and epay Segments are normally impacted by seasonality during the fourth quarter and first quarter of each year due to higher transaction levels during the holiday season and lower levels following the holiday season.

2 unchanged sentences

COVID-19 (coronavirus)

The outbreak of the COVID-19 (coronavirus) pandemic has resulted in travel restrictions across borders, and shelter-in-place orders in most of the countries where the Company operates.

The majority of these orders went into effect in late February 2020 or early March 2020.

These orders have negatively impacted all of our three operating segments.

T he outbreak of the COVID-19 (coronavirus) pandemic has resulted in varying degrees of travel restrictions and shelter-in-place and other social distancing orders in most of the countries where the Company operates during the three months ended June 30, 2020.

Although the majority of these orders went into effect in late February 2020 or early March 2020, new orders are being implemented, or reinstated, as the pandemic spreads around the global and new hot spots flare up.

The EFT Segment has experienced declines in transaction volumes due to these restrictions, especially high-margin cross-border transactions.

Although the epay Segment has experienced revenue growth from increased digital content purchases which can be completed remotely, many of its POS retail locations have been closed, reducing in person transactions.

Our Money Transfer Segment has experienced declines in transaction volumes due to the restrictions noted above, which have also led to the temporary closure of many of our company owned stores and agents.

The Money Transfer Segment has experienced an increase in receivable delinquencies as our agents have been temporarily closed as nonessential services.

In response to the COVID-19 driven impacts, the Company has implemented several key measures to offset the impact across the business, including negotiating certain third party contracts, reducing travel, decreasing planned 2020 capital expenditures, and expanding ATM winterizations (placing them in dormancy status) in more sites and more markets.

The epay Segment experienced the impacts of consumer movement restrictions in certain markets, while other markets were positively impacted where the Company has a higher mix of digital distribution or a higher concentration of retailers that were deemed essential and remained open during the pandemic.

Our Money Transfer Segment has experienced declines in transaction volumes due to the restrictions noted above, which have also led to the temporary closure of many of the locations where our products and services are offered.

In response to the COVID-19 driven impacts, the Company has implemented several key measures to offset the impact across the business, including renegotiating certain third party contracts, reducing travel, decreasing planned 2020 capital expenditures, and expanding ATM winterizations (placing them in dormancy status, terminating, or re-negotiating) in more sites and more markets.

(2) RECENTLY ISSUED AND ADOPTED ACCOUNTING PRONOUNCEMENTS

9 unchanged sentences

Settlement assets consist of cash and cash equivalents, restricted cash, accounts receivable and prepaid expenses and other current assets.

Cash received by Euronet agents and merchants generally become available to the Company within two weeks after initial receipt by the business partner.

Cash received by Euronet agents and merchants generally becomes available to the Company within two weeks after initial receipt by the business partner.

Receivables from business partners represent funds collected by such business partners that are in transit to the Company.

16 unchanged sentences

A portion of the Company's credit losses are recorded in the accounts receivable within settlement assets.

The balance of credit losses related to accounts receivable within settlement assets was $ 28.3 million and $ 24.0 million as of March 31, 2020 and December 31, 2019, respectively.

The balance of credit losses related to accounts receivable within settlement assets was $ 29.0 million and $ 24.0 million as of June 30, 2020 and December 31, 2019, respectively.

The table below reconciles cash and cash equivalents, restricted cash, ATM cash, settlement cash and cash equivalents, and settlement restricted cash as presented within "Cash and cash equivalents and restricted cash" in the Consolidated Statement of Cash Flows.

6 unchanged sentences

( 4 ) STOCKHOLDERS' EQUITY

Earnings Per Share

Basic earnings per share has been computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding during the respective period.

Diluted earnings per share has been computed by dividing earnings available to common stockholders by the weighted average shares outstanding during the respective period, after adjusting for the potential dilution of options to purchase the Company's Common Stock, assumed vesting of restricted stock and the assumed conversion of the Company's convertible debt.

Earnings (Loss) Per Share

Basic earnings (loss) per share has been computed by dividing earnings (loss) available to common stockholders by the weighted average number of common shares outstanding during the respective period.

Diluted earnings (loss) per share has been computed by dividing earnings (loss) available to common stockholders by the weighted average shares outstanding during the respective period, after adjusting for the potential dilution of options to purchase the Company's Common Stock, assumed vesting of restricted stock and the assumed conversion of the Company's convertible debt.

The following table provides the computation of diluted weighted average number of common shares outstanding:

Three Months Ended

Six Months Ended

Computation of diluted weighted average shares outstanding:

1 unchanged sentence

Incremental shares from assumed exercise of stock options and vesting of restricted stock

Incremental shares from assumed conversion of convertible debentures

Diluted weighted average shares outstanding

The table includes all stock options and restricted stock that are dilutive to the Company's weighted average common shares outstanding during the period.

The calculation of diluted earnings per share excludes stock options or shares of restricted stock that are anti-dilutive to the Company’s weighted average common shares outstanding for the three months ended March 31, 2020 and 2019 of approximately 886,000 and 402,000 , respectively.

The Company issued new Convertible Senior Notes ("Convertible Notes") due March 2049 on March 18, 2019 and retired the existing convertible notes ("Retired Convertible Notes") that would have matured in 2044 on May 28, 2019.

The Company's Convertible Notes currently have, and the Retired Convertible Notes had, a settlement feature requiring the Company upon conversion to settle the principal amount of the debt and any conversion value in excess of the principal value ("conversion premium"), for cash or shares of the Company's common stock or a combination thereof, at the Company's option.

The calculation of diluted earnings (loss) per share excludes stock options or shares of restricted stock that are anti-dilutive to the Company’s weighted average common shares outstanding of approximately 2,533,000 and 1,608,000 for the three and six months ended June 30, 2020 , respectively, and approximately 782,000 and 805,000 for the three and six months ended June 30, 2019 , respectively.

The Company issued Convertible Senior Notes ("Convertible Notes") due March 2049 on March 18, 2019.

The Company's Convertible Notes currently have a settlement feature requiring the Company upon conversion to settle the principal amount of the debt and any conversion value in excess of the principal value ("conversion premium"), for cash or shares of the Company's common stock or a combination thereof, at the Company's option.

The Company has stated its intent to settle any conversion of these notes by paying cash for the principal value and issuing common stock for any conversion premium.

Accordingly, the Convertible Notes and the Retired Convertible Notes were included in the calculation of diluted earnings per share if their inclusion was dilutive.

Accordingly, the Convertible Notes were included in the calculation of diluted earnings (loss) per share if their inclusion was dilutive.

The dilutive effect increases the more the market price exceeds the conversion price.

The Retired Convertible Notes had a dilutive effect for the three months ended March 31, 2019 as the $ 142.59 market price per share of common stock as of March 31, 2019 exceeded the $ 72.18 conversion price per share.

The Convertible Notes would only have a dilutive effect if the market price per share of common stock exceeds the conversion price of $ 188.73 per share.

The market price per share per share of common stock was $ 85.72 , therefore, according to ASC Topic 260, Earnings per Share (“ASC 260”) , there was no dilutive effect of the assumed conversion of the debentures as of March 31, 2020 , whereas the dilutive effect was 2,411,194 shares for the three months ended March 31, 2019 .

The market price per share per share of common stock was $ 95.82 on June 30, 2020 and $ 168.24 on June 30, 2019 , t herefore, according to ASC Topic 260, Earnings per Share (“ASC 260”) , there was no dilutive effect of the assumed conversion of the debentures for the three and six months ended June 30, 2020 and 2019.

See Note 8, Debt Obligations, to the Consolidated Financial Statements for more information about the convertible notes.

3 unchanged sentences

On February 26, 2020, the Company put a repurchase program in place to repurchase up to $ 250 million in value, but not more than 5.0 million shares of common stock through February 28, 2022.

For the first quarter of 2020 , the Company repurchased $ 239.8 million in value of Euronet common stock under the repurchase programs.

Repurchases under either program may take place in the open market or in privately negotiated transactions, including derivative transactions, and may be made under a Rule 10b5-1 plan.

For the three months ended June 30, 2020, there were no repurchases of stock under the repurchase programs and for the six months ended June 30, 2020 , the Company repurchased $ 239.8 million in value of Euronet common stock under the repurchase programs.

Repurchases under either current program may take place in the open market or in privately negotiated transactions, including derivative transactions, and may be made under a Rule 10b5-1 plan.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss consists entirely of foreign currency translation adjustments.

The Company recorded foreign currency translation losses of $ 59.8 million for the three months ended March 31, 2020 and $ 16.2 million for the three months ended March 31, 2019 .

There were no reclassifications of foreign currency translation into the consolidated statements of income for the three months ended March 31, 2020 and 2019 .

The Company recorded a foreign currency translation gain of $ 32.2 million and loss of $ 27.6 million for the three and six months ended June 30, 2020 , respectively, and gain of $ 12.2 million and loss of $ 4.0 million for the three and six months ended June 30, 2019, respectively.

There were no reclassifications of foreign currency translation into the consolidated statements of income for the three and six months ended June 30, 2020 and 2019 .

( 5 ) GOODWILL AND ACQUIRED INTANGIBLE ASSETS, NET

A summary of acquired intangible assets and goodwill activity for the three months ended March 31, 2020 is presented below:

A summary of acquired intangible assets and goodwill activity for the six months ended June 30, 2020 is presented below:

(in thousands)

1 unchanged sentence

Other (primarily changes in foreign currency exchange rates)

Balance as of March 31, 2020

Estimated amortization expense on intangible assets with finite lives as of March 31, 2020 , is expected to total $ 16.1 million for the remainder of 2020 , $ 20.8 million for 2021 , $ 19.8 million for 2022 , $ 15.3 million for 2023 , $ 9.3 million for 2024 and $ 6.3 million for 2025 .

The Company’s annual goodwill impairment test is performed during the fourth quarter of its fiscal year.

The annual impairment test for the year ended December 31, 2019 resulted in no impairment charge.

The Company considered the impact of COVID-19 on its operations at the reporting unit level and determined that there was no impairment as of March 31, 2020.

Balance as of June 30, 2020

Of the total goodwill balance of $ 624.3 million as of June 30, 2020 , $ 378.3 million relates to the Money Transfer Segment, $ 127.7 million relates to the epay Segment and the remaining $ 118.3 million relates to the EFT Processing Segment.

Estimated amortization expense on intangible assets with finite lives as of June 30, 2020, is expected to total $ 10.9 million for the remainder of 2020, $ 21.3 million for 2021, $ 20.3 million for 2022, $ 15.7 million for 2023, $ 9.4 million for 2024 and $ 6.4 million for 2025.

2020 Impairment Charges

The COVID- 19 pandemic and subsequent mitigation efforts, which includes global business shutdowns, the closing of borders and the implementation of mandatory social distancing requirements, created an unprecedented disruption to our business during the second quarter of 2020 .

These mitigation efforts coupled with the negative economic impacts to the tourism industry caused a decline in revenues and changes to our forecasts.

The Company tests for goodwill impairment on an annual basis in the fourth quarter each year and whenever events or circumstances dictate an interim impairment test is required.

The Company determined the totality of these events constituted a triggering event that required us to perform an interim goodwill impairment assessment as of June 1, 2020.

The Company concluded a triggering event had occurred for six reporting units, resulting in quantitative impairment tests.

Three reporting units are within the EFT segment, two reporting units are within the Money Transfer segment, and one reporting unit is within the epay segment.

Under the quantitative impairment test, the evaluation of impairment involves comparing the current fair value of each reporting unit to its carrying value, including goodwill.

The Company uses weighted results from the discounted cash flow model ("DCF model") and guideline public company method ("Market Approach model") to estimate the current fair value of its reporting units when testing for impairment, as management believes forecasted cash flows and EBITDA are the best indicators of such fair value.

A number of significant assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including sales volumes and gross margins, tax rates, capital spending, discount rates and working capital changes.

Most of these assumptions vary significantly among the reporting units.

Significant assumptions in the Market Approach model are actual and projected EBITDA, selected market multiple, and the estimated control premium.

If the carrying value of the reporting unit exceeds its fair value, a goodwill impairment loss equal to such excess would be recognized.

The DCF Model and Market Approach Model utilize Level 3 inputs in the fair value hierarchy as they include unobservable inputs that require significant management assumptions.

The Company completed its interim goodwill impairment test during the second quarter of 2020.

It determined, after performing a quantitative review of six reporting units, that the fair value of three of the reporting units exceeded the respective carrying amounts.

For the remaining three reporting units, the quantitative test indicated that the fair value of each of the reporting units was less than the respective carrying amounts.

As a result, the Company recorded a non-cash goodwill impairment charge of $ 104.6 million with respect to the xe, Innova and Pure Commerce reporting units.

$ 21.9 million of the impairment charge was included within the EFT Segment, and $ 82.7 million of the impairment charge was included in the Money Transfer Segment.

We will continue to evaluate our goodwill and long-lived assets for potential triggering events as conditions warrant.

Determining the fair value of reporting units requires significant management judgment in estimating future cash flows and assessing potential market and economic conditions.

It is reasonably possible that the Company’s operations will not perform as expected, or that the estimates or assumptions included in the 2019 annual impairment test could change, which may result in the Company recording material non-cash impairment charges during the year in which these changes take place.

In response to the COVID-19 pandemic, we will continue to monitor the evaluation of global medical experts and scientists.

It is reasonably possible that the Company’s operations will not perform as expected, or that the estimates or assumptions included in the 2019 annual impairment test and 2020 interim impairment test could change, which may result in the Company recording material non-cash impairment charges during the year in which these changes take place.

As information regarding the impact of the COVID-19 pandemic on the Company's business, including intangible assets, becomes available, the impacts to cash flows and the related impact on recovery of intangible assets will be evaluated.

2 unchanged sentences

(in thousands)

March 31, 2020

June 30, 2020

December 31, 2019

4 unchanged sentences

(7) UNEARNED REVENUES

Accounting Standards Codification ("ASC") Topic 606, “Revenue from Contracts with Customers” (“Topic 606”) requires the deferral of incremental costs to obtain customer contracts, known as contract assets, which are then amortized to expense as part of selling, general and administrative expense over the respective periods of expected benefit.

Such costs are not material;

however, the Company has implemented processes and controls to record such costs on an ongoing basis and will disclose them if they become material.

The Company records deferred revenues when cash payments are received or due in advance of its performance.

The increase in the deferred revenue balance for the first quarter of 2020 is primarily driven by $ 19.0 million of cash payments received in the current year for which the Company has not yet satisfied the performance obligations, largely offset by $ 15.7 million of revenues recognized that were included in the deferred revenue balance as of December 31, 2019.

The decrease in the deferred revenue balance for the six months ended June 30, 2020 is primarily driven by $ 26.2 million of cash payments received in the current year for which the Company has not yet satisfied the performance obligations, offset by $ 26.3 million of revenues recognized that were included in the deferred revenue balance as of December 31, 2019.

(8) DEBT OBLIGATIONS

1 unchanged sentence

(in thousands)

March 31, 2020

June 30, 2020

December 31, 2019

13 unchanged sentences

Fees and interest on borrowings are based upon the Company's corporate credit rating and are based, in the case of letter of credit fees, on a margin, and in the case of interest, on a margin over London Inter-Bank Offered Rate (“LIBOR”) or a margin over the base rate, as selected by the Company, with the applicable margin ranging from 1.125 % to 2.0 % (or 0.175 % to 1.0 % for base rate loans).

The unsecured revolving credit agreement allows for borrowings in Australian Dollars, British Pounds Sterling, Canadian Dollars, Czech Koruna, Danish Krone, euros, Hungarian Forints, Japanese Yen, New Zealand Dollars, Norwegian Krone, Polish Zlotys, Swedish Krona, Swiss Francs, and U.S.

The unsecured revolving credit agreement allows for borrowings in Australian dollars, British pounds sterling, Canadian dollars, Czech koruna, Danish krone, euro, Hungarian forints, Japanese yen, New Zealand dollars, Norwegian krone, Polish zlotys, Swedish krona, Swiss francs, and U.S.

The revolving credit facility contains a $ 200 million sublimit for the issuance of letters of credit, a $ 50 million sublimit for U.S.

1 unchanged sentence

The unsecured revolving credit agreement contains customary affirmative and negative covenants, events of default and financial covenants.

The Company was in compliance with all debt covenants, as of March 31, 2020 .

The Company was in compliance with all debt covenants, as of June 30, 2020 .

Convertible Debt

1 unchanged sentence

The Convertible Notes mature in March 2049 unless redeemed or converted prior to such date, and are convertible into shares of Euronet Common Stock at a conversion price of approximately $ 188.73 per share if certain conditions are met (relating to the closing price of Euronet Common Stock exceeding certain thresholds for specified periods).

Holders of the Convertible Notes have the option to require the Company to purchase their notes on each of March 15, 2025, March 15, 2029, March 15, 2034,

March 15, 2039 and March 15, 2044 at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the relevant repurchase date.

On March 18, 2019, the Company provided a notice of redemption to the trustee of the indenture governing the Company's 1.5% Convertible Senior Notes due 2044 (the "Retired Convertible Notes"), pursuant to which the Company would redeem all of the remaining principal amount outstanding of the Retired Convertible Notes on May 28, 2019 (the "Redemption Date") for cash at a redemption price equal to 100% of the principal amount of the Retired Convertible Notes redeemed plus accrued and unpaid interest, if any, to, but excluding, the Redemption Date.

Holders of the Convertible Notes have the option to require the Company to purchase their notes on each of March 15, 2025, March 15, 2029, March 15, 2034, March 15, 2039 and March 15, 2044 at a repurchase price equal to 100 % of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the relevant repurchase date.

On May 28, 2019, the Company redeemed all of the remaining principal amount outstanding of the Company's 1.5 % Convertible Senior Notes due 2044 (the "Retired Convertible Notes") for cash at a redemption price equal to 100 % of the principal amount of the Retired Convertible Notes redeemed plus accrued and unpaid interest, if any, to, but excluding, May 28, 2020.

In accordance with ASC 470-20-30-27, proceeds from the issuance of convertible debt is allocated between debt and equity components so that debt is discounted to reflect the Company's nonconvertible debt borrowing rate.

1 unchanged sentence

The allocation resulted in an increase to additional paid-in capital of $ 99.7 million for the Convertible Notes.

Contractual interest expense for the Convertible Notes was $ 1.0 million for the three months ended March 31, 2020 .

Accretion expense for the Convertible Notes was $ 3.7 million for the three months ended March 31, 2020 .

Contractual interest expense for the Convertible Notes and Retired Convertible Notes was $ 0.2 million and $ 1.5 million , respectively for the three months ended March 31, 2019.

Accretion expense for the Convertible Notes and Retired Convertible Notes was $ 0.6 million and $ 2.9 million , respectively for the three months ended March 31, 2019.

The effective interest rate was 4.4 % for the three months ended March 31, 2020 .

As of March 31, 2020 , the unamortized discount was $ 84.3 million and will be amortized through March 2025.

Contractual interest expense for the Convertible Notes was $ 1.0 million and $ 2.0 million for the three and six months ended June 30, 2020, respectively and $ 1.0 million and $ 1.1 million for the three and six months ended June 30, 2019, respectively .

Accretion expense for the Convertible Notes was $ 3.8 million and $ 7.5 million for the three and six months ended June 30, 2020, respectively and $ 3.6 million and $ 4.2 million for the three and six months ended June 30, 2019, respectively .

Contractual interest expense for the Retired Convertible Notes was $ 1.5 million for both the three and six months ended June 30, 2019.

A ccretion expense for the Retired Convertible Notes was $ 1.8 million and $ 4.6 million for the three and six months ended June 30, 2019, respectively .

The effective interest rate was 4.4 % for the three and six months ended June 30, 2020 .

As of June 30, 2020 , the unamortized discount was $ 80.5 million and will be amortized through March 2025.

1.375% Senior Notes due 2026

On May 22, 2019, the Company completed the sale of € 600 million ( $ 669.9 million ) aggregate principal amount of Senior Notes that expire on May 2026 (the “Senior Notes”).

On May 22, 2019, the Company completed the sale of € 600 million ( $ 669.9 million ) aggregate principal amount of Senior Notes that expire in May 2026 (the “Senior Notes”).

The Senior Notes accrue interest at a rate of 1.375 % per year, payable annually in arrears commencing May 22, 2020, until maturity or earlier redemption.

As of March 31, 2020 , the Company has outstanding € 600 million ( $ 661.6 million ) principal amount of the Senior Notes.

As of June 30, 2020 , the Company has outstanding € 600 million ( $ 673.9 million ) principal amount of the Senior Notes.

In addition, the Company may redeem some or all of these notes on or after February 22, 2026 at their principal amount plus any accrued and unpaid interest.

1 unchanged sentence

Certain of the Company's subsidiaries have available lines of credit and overdraft credit facilities that generally provide for short-term borrowings that are used from time to time for working capital purposes.

As of March 31, 2020 and December 31, 2019 , borrowings under these arrangements were $ 3.6 million and $ 6.2 million , respectively.

As of June 30, 2020 and December 31, 2019 , borrowings under these arrangements were $ 0.9 million and $ 6.2 million , respectively.

Uncommitted Line of Credit

On September 4, 2019, the Company entered into an Uncommitted Loan Agreement with Bank of America which may provide Euronet up to $ 100.0 million under an uncommitted line of credit.

Interest on borrowings is equal to LIBOR plus 0.65 % and the agreement expires September 4, 2020.

As of March 31, 2020 , no amounts were outstanding under the line of credit.

On September 4, 2019, the Company entered into an Uncommitted Loan Agreement with Bank of America which provided Euronet up to $ 100.0 million under an uncommitted line of credit.

Interest on borrowings was equal to LIBOR plus 0.65 % and the agreement was set to expire September 4, 202 0.

During the three months ended June 30, 2020, the Company and Bank of America mutually agreed to terminate the Uncommitted Loan Agreement.

( 9 ) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

9 unchanged sentences

therefore, asset and liability positions from forward contracts and all other foreign exchange transactions with the same counterparty are net settled upon maturity.

As of March 31, 2020 , the Company had

foreign currency forward contracts outstanding in the U.S.

As of June 30, 2020 , the Company had foreign currency forward contracts outstanding in the U.S.

with a notional value of $ 222 million .

The foreign currency forward contracts consist primarily in Australian dollars, Canadian dollars, British pounds, euros and Mexican pesos.

In addition, the Company uses forward contracts, typically with maturities from a few days to less than one year, to offset

foreign exchange rate fluctuations on certain short-term borrowings that are payable in currencies other than the U.S dollar.

As of March 31, 2020 , the Company had foreign currency forward contracts outstanding with a notional value of $ 193 million , primarily in euros.

The foreign currency forward contracts consist primarily in Australian dollars, Canadian dollars, British pounds sterling, euro and Mexican pesos.

In addition, the Company uses forward contracts, typically with maturities from a few days to less than one year, to offset foreign exchange rate fluctuations on certain short-term borrowings that are payable in currencies other than the U.S dollar.

As of June 30, 2020 , the Company had foreign currency forward contracts outstanding with a notional value of $ 332 million , primarily in euro.

Foreign currency exchange contracts - xe Operations

1 unchanged sentence

xe aggregates its foreign currency exposures arising from customer contracts and hedges the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties.

Foreign exchange revenues from xe's total portfolio of positions were $ 18.1 million and $ 18.6 million for the three months ended March 31, 2020 and 2019 , respectively.

Foreign exchange revenues from xe's total portfolio of positions were $ 13.2 million and $ 31.3 million for the three and six months ended June 30, 2020 , respectively, and $ 16.1 million and $ 34.7 million for the three and six months ended June 30, 2019 , respectively.

All of the derivative contracts used in the Company' s xe operations are economic hedges and are not designated as hedges under ASC 815 .

5 unchanged sentences

The aggregate equivalent U.S.

dollar notional amounts of foreign currency derivative customer contracts held by the Company in its xe operations as of March 31, 2020 was approximately $ 1.5 billion .

dollar notional amounts of foreign currency derivative customer contracts held by the Company in its xe operations as of June 30, 2020 was approximately $ 1.5 billion .

The significant majority of customer contracts are written in major currencies such as the euro, U.S.

dollar, British pound, Australian dollar and New Zealand dollar.

dollar, British pounds sterling, Australian dollar and New Zealand dollar.

Balance Sheet Presentation

4 unchanged sentences

Balance Sheet Location

March 31, 2020

June 30, 2020

December 31, 2019

Balance Sheet Location

March 31, 2020

June 30, 2020

December 31, 2019

3 unchanged sentences

Accrued expenses and other current liabilities

The following tables summarize the gross and net fair value of derivative assets and liabilities as of March 31, 2020 and December 31, 2019 (in thousands):

The following tables summarize the gross and net fair value of derivative assets and liabilities as of June 30, 2020 and December 31, 2019 (in thousands):

Offsetting of Derivative Assets

Gross Amounts Not Offset in the Consolidated Balance Sheet

As of March 31, 2020

As of June 30, 2020

Gross Amounts of Recognized Assets

8 unchanged sentences

Gross Amounts Not Offset in the Consolidated Balance Sheet

As of March 31, 2020

As of June 30, 2020

Gross Amounts of Recognized Liabilities

8 unchanged sentences

Income Statement Presentation

The following table summarizes the location and amount of gains and losses on derivatives in the Consolidated Statements of Income for the three months ended March 31, 2020 and 2019 :

The following table summarizes the location and amount of gains and losses on derivatives in the Consolidated Statements of Income for the three and six months ended June 30, 2020 and 2019 :

Amount of Gain Recognized in Income on Derivative Contracts (a)

1 unchanged sentence

Three Months Ended

Six Months Ended

(in thousands)

Foreign currency exchange contracts - Ria Operations

Foreign currency exchange gain, net

Foreign currency exchange (loss) gain, net

(a) The Company enters into derivative contracts such as foreign currency exchange forwards and cross-currency swaps as part of its xe operations.

10 unchanged sentences

The following table details financial assets and liabilities measured and recorded at fair value on a recurring basis:

As of March 31, 2020

As of June 30, 2020

(in thousands)

15 unchanged sentences

The Company estimates the fair value of the Convertible Notes using quoted prices in inactive markets for identical liabilities (Level 2).

As of March 31, 2020 , the fair values of the Convertible Notes and Senior Notes were $ 597.0 million and $ 615.7 million , respectively, with carrying values of $ 440.7 million and $ 661.6 million , respectively.

As of June 30, 2020 , the fair values of the Convertible Notes and Senior Notes were $ 647.2 million and $ 632.3 million , respectively, with carrying values of $ 444.5 million and $ 673.9 million , respectively.

(11) SEGMENT INFORMATION

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The Company currently operates in the following three reportable operating segments:

Through the EFT Processing Segment, the Company processes transactions for a network of ATMs and POS terminals across Europe, the Middle East and Asia Pacific.

The Company provides comprehensive electronic payment solutions consisting of ATM cash withdrawal services, ATM network participation, outsourced ATM and POS management solutions, credit and debit card outsourcing, dynamic currency conversion, domestic and international surcharge and other value added services.

Through the EFT Processing Segment, the Company processes transactions for a network of ATMs and POS terminals across Europe, the Middle East, Asia Pacific and the United States.

Through this segment, the Company also offers a suite of integrated electronic financial transaction software solutions for electronic payment and transaction delivery systems.

8 unchanged sentences

In addition, the Company accounts for non-operating activity, share-based compensation expense, certain intersegment eliminations and the costs of providing corporate and other administrative services in its administrative division, “Corporate Services, Eliminations and Other.” These services are not directly identifiable with the Company’s reportable operating segments.

The following tables present the Company’s reportable segment results for the three months ended March 31, 2020 and 2019 :

For the Three Months Ended March 31, 2020

The following tables present the Company’s reportable segment results for the three and six months ended June 30, 2020 and 2019 :

For the Three Months Ended June 30, 2020

(in thousands)

4 unchanged sentences

Selling, general and administrative

Goodwill impairment

Depreciation and amortization

1 unchanged sentence

Operating income (expense)

For the Three Months Ended March 31, 2019

For the Three Months Ended June 30, 2019

(in thousands)

7 unchanged sentences

Operating income (expense)

For the Six Months Ended June 30, 2020

(in thousands)

Total revenues

Operating expenses:

Direct operating costs

Salaries and benefits

Selling, general and administrative

Goodwill impairment

Depreciation and amortization

Total operating expenses

Operating income (expense)

For the Six Months Ended June 30, 2019

(in thousands)

Total revenues

Operating expenses:

Direct operating costs

Salaries and benefits

Selling, general and administrative

Depreciation and amortization

Total operating expenses

Operating income (expense)

The following table presents the Company’s total assets by reportable segment:

1 unchanged sentence

(in thousands)

March 31, 2020

June 30, 2020

December 31, 2019

7 unchanged sentences

Both segments and regions benefit from synergies achieved through concentration of operations and are influenced by macro-economic, regulatory and political factors in the respective segment and region.

For the Three Months Ended March 31, 2020

For the Three Months Ended June 30, 2020

For the Six Months Ended June 30, 2020

(in thousands)

North America

For the Three Months Ended March 31, 2019

For the Three Months Ended June 30, 2019

For the Six Months Ended June 30, 2019

(in thousands)

1 unchanged sentence

( 12 ) INCOME TAXES

The Company's effective income tax rate was 58.7 % and 31.6 % for the three months ended March 31, 2020 and 2019 , respectively.

The Company's effective income tax rate for the three months ended March 31, 2020 was higher than the applicable statutory income tax rate of 21 % primarily as a result of certain foreign earnings of the Company being subject to higher local statutory income tax rates.

The Company's effective income tax rate for the three months ended March 31, 2019 was higher than the applicable statutory income tax rate of 21 % largely because of the application to the Company of the global intangible low-taxed income ("GILTI") tax provision and certain foreign earnings of the Company being subject to higher local statutory income tax rates.

The Company's effective income tax rate was ( 8.4 ) % and ( 11.1 ) % for the three and six months ended June 30, 2020 , respectively, compared to 31.5 % and 31.6 % for the three and six months ended June 30, 2019 , respectively .

The Company's effective income tax rate for the three and six months ended June 30, 2020 was different than the applicable statutory income tax rate of 21 % primarily due to the non-deductible goodwill impairment charge during the second quarter of 2020 and as a result of an increase in the valuation allowance in certain jurisdictions relating to the reversal of tax benefits recognized in the first quarter of 2020 for net operating losses in those jurisdictions which have a limited history of profitable earnings.

The Company's effe ctive income tax rate for the three and six months ended June 30, 2019 was higher than the applicable statutory income tax rate of 21 % largely because of the application to the Company of the global intangible low-taxed income ("GILTI") tax provision and certain foreign earnings of the Company being subject to higher local statutory income tax rates.

(13) COMMITMENTS

As of March 31, 2020 , the Company had $ 73.0 million of stand-by letters of credit/bank guarantees issued on its behalf, of which $ 49.7 million are outstanding under the Credit Facility.

The remaining stand-by letters of credit/bank guarantees are collateralized by $ 3.9 million by cash deposits held by the respective issuing banks.

As of June 30, 2020 , the Company had $ 74.6 million of stand-by letters of credit/bank guarantees issued on its behalf, of which $ 52.1 million are outstanding under the Credit Facility.

The remaining stand-by letters of credit/bank guarantees are collateralized by $ 4.0 million of cash deposits held by the respective issuing banks.

Under certain circumstances, Euronet grants guarantees in support of obligations of subsidiaries.

As of March 31, 2020 , the Company had granted off balance sheet guarantees for cash in various ATM networks amounting to $ 11.4 million over the terms of the cash supply agreements and performance guarantees amounting to approximately $ 37.5 million over the terms of agreements with the customers.

As of June 30, 2020 , the Company had granted off balance sheet guarantees for cash in various ATM networks amounting to $ 11.8 million over the terms of the cash supply agreements and performance guarantees amounting to approximately $ 39.3 million over the terms of agreements with the customers.

From time to time, the Company enters into agreements with commercial counterparties that contain indemnification provisions, the terms of which may vary depending on the negotiated terms of each respective agreement.

3 unchanged sentences

In connection with contracts with financial institutions in the EFT Processing Segment, the Company is responsible for damage to ATMs and theft of ATM network cash.

As of March 31, 2020 , the balance of such cash used in the Company's ATM networks for which the Company was responsible was approximately $ 509 million .

As of June 30, 2020 , the balance of such cash used in the Company's ATM networks for which the Company was responsible was approximately $ 512 million .

The Company maintains insurance policies to mitigate this exposure;

9 unchanged sentences

The Company has obtained surety bonds in compliance with money transfer licensing requirements of the applicable governmental authorities.

To date, the Company is not aware of any significant claims made by the indemnified parties or third parties to guarantee agreements with the Company and, accordingly, no liabilities were recorded as of March 31, 2020 or December 31, 2019 .

( 14 ) LITIGATION AND CONTINGENCIES

8 unchanged sentences

The present value of lease payments is determined using the incremental borrowing rate based on information available at the lease commencement date.

All leases with fixed payments, including leases with an initial term of 12 months or less, are recorded on the balance sheet.

The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

3 unchanged sentences

The Company also has a unilateral termination right for most of the ATM site leases.

Since the Company is not reasonably certain to exercise the renewal or termination options, the options are not considered in determining the lease terms, and associated payment impacts are excluded from lease payments.

The Company evaluated the likelihood of exercising the renewal and termination options beginning with the adoption of the new accounting lease standard on January 1, 2019, concluding 1) the options were not reasonably certain to be exercised and thus were not considered in determining the lease terms, and associated payment impacts were excluded from lease payments and 2) termination options were reasonably certain not to be exercised and therefore the stated lease payment schedule of the lease was used to determine the lease term.

During the second quarter of 2020, the impact of the COVID-19 pandemic was a significant event that caused a significant change in circumstances and business plans to manage our portfolio of ATM leases.

Specifically we downsized, through the exercise of termination clauses and the reduction of monthly costs by renegotiating payment terms of our ATM leases.

The Company's execution of the business plan to renegotiate terms and downsize the portfolio of ATM leases constituted a reassessment event during the second quarter of 2020.

The reassessment event required the Company to reevaluate the accounting for the portfolio of ATM leases, including lease terms.

Due to the recent increased frequency of ATM site lease terminations, modifications, and greater unpredictability whether or not future lease terminations will be exercised, the Company is no longer able to conclude that termination options are reasonably certain not to be exercised.

This reassessment conclusion impacts the lease term evaluation, instead of determining the lease term based on the stated lease payment schedule of the lease, now the lease term will be evaluated when the Company has the contractual ability to terminate the lease (most leases allow for a termination upon advance notice of between 30 and 90 days of notice).

As a result of the lease term reassessment, $ 211.9 million of right of use assets and $ 211.9 million l ease liabilities were reassessed to have a term shorter than 12 months, thus were subject to the short-term lease exemption and removed from the balance sheet as of June 30, 2020.

Future payments for ATM site leases with termination options, exercisable less than 12 months, are excluded from the right of use asset and lease liability balances.

Payments for ATM site leases with termination options subject to the short-term lease exemption are expensed in the period incurred.

The short-term lease expense for the three months ended June 30, 2020 reasonably reflects the Company’s short-term lease commitments.

Certain of the Company's lease agreements include variable rental payments based on revenues generated from the use of the leased location and certain leases include rental payments adjusted periodically for inflation.

2 unchanged sentences

Future minimum lease payments

Future minimum lease payments under non-cancelable operating leases (with initial lease terms in excess of one year) as of March 31, 2020 are:

As of March 31, 2020

Future minimum lease payments under non-cancelable operating leases (with initial lease terms in excess of one year) as of June 30, 2020 are:

As of June 30, 2020

Maturity of Lease Liabilities (in thousands)

4 unchanged sentences

Present value of lease liabilities

(1) Operating lease payments reflect the Company's current fixed obligations under the operating lease agreements.

Certain ATM site leases contain termination options that grant the Company the option to terminate the lease prior to the stated term of the agreement.

The Company includes the future minimum lease payments for these ATM site leases only to the extent that the termination option is not reasonably certain to be exercised.

Lease expense recognized in the Consolidated Statements of Income is summarized as follows:

1 unchanged sentence

Income Statement Classification

Three Months Ended March 31, 2020

Three Months Ended

June 30, 2020

Three Months Ended

June 30, 2019

Six Months Ended June 30, 2020

Six Months Ended June 30, 2019

Operating lease expense

Selling, general and administrative and Direct operating costs

Variable lease expense

Short-term and variable lease expense

Selling, general and administrative and Direct operating costs

2 unchanged sentences

Lease Term and Discount Rate of Operating Leases

As of March 31, 2020

As of June 30, 2020

Weighted- average remaining lease term (years)

Weighted- average discount rate

W eighted- average discount rate

The following table presents supplemental cash flow and non-cash information related to leases.

Other Information (in thousands)

Three Months Ended March 31, 2020

Six Months Ended

June 30, 2020

Six Months Ended

June 30, 2019

Cash paid for amounts included in the measurement of lease liabilities (a)

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements