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Item 8. Financial Statements and Supplementary Data

2022-02-23 compared with 2021-02-22 · 121 added, 171 removed, 1049 unchanged (22% of the section changed)

4 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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(21) Related Party Transactions

(22) Selected Quarterly Data (Unaudited)

Report of Independent Registered Public Accounting Firm

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We have audited the accompanying consolidated balance sheets of Euronet Worldwide, Inc.

and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S.

I n o ur opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S.

generally accepted accounting principles.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Change in Accounting Principle

As discussed in Note 13 to the consolidated financial statements, the Company has changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases .

Basis for Opinions

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which it relates.

Sufficiency of audit evidence over revenue

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We evaluated the sufficiency of audit evidence obtained over revenue by assessing the results of procedures performed, including the appropriateness of such evidence.

Goodwill impairment analysis for one reporting unit in the Money Transfer segment

As discussed in Note 3 and 9 to the consolidated financial statements, the Company performs goodwill impairment testing on an annual basis and whenever events or changes in circumstances indicate that it is more likely than not (more than 50%) that the fair value of a reporting unit is less than its carrying amount.

The goodwill balance as of December 31, 2020 was $665.8 million.

During the year ended December 31, 2020, the Company recognized an impairment charge of $104.6 million, including a charge of $82.7 million for one reporting unit in the Money Transfer segment.

The fair value of this one reporting unit in the Money Transfer segment was determined using a weighting of a discounted cash flow model and market multiples valuation technique.

We identified the evaluation of the goodwill impairment analysis for this one reporting unit in the Money Transfer segment as a critical audit matter.

Subjective auditor judgment was required in evaluating certain assumptions used to estimate the fair value of the reporting unit, including assumptions related to (1) forecasted revenue growth rates, (2) forecasted operating expense excluding depreciation, amortization, and impairment, (3) discount rate, and (4) earnings before interest, taxes, depreciation, and amortization (EBITDA) market multiple.

Changes to these assumptions could have a significant effect on the fair value determination and assessment of the carrying value of the goodwill.

Specialized skills and knowledge were required in the assessment of the discount rate and EBITDA market multiple.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s goodwill impairment assessment process, including controls related to the development of the significant assumptions.

We evaluated the Company’s forecasted revenue growth rates and forecasted operating expense excluding depreciation, amortization and impairment assumptions by comparing them to external market and industry data.

We compared the Company’s historical forecasted results to actual results to assess the Company’s ability to accurately forecast.

We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating (1) the Company’s discount rate by comparing it against a discount rate range that was independently developed using publicly available third-party market data for comparable entities, and (2) the Company’s EBITDA market multiple, by comparing it against a range of EBITDA multiples developed using publicly available third-party market data for comparable entities.

We have served as the Company's auditor since 2003.

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EURONET WORLDWIDE, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

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Direct operating costs

Acquired contract cost impairment

Salaries and benefits

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Interest expense

Loss from unconsolidated affiliates

Foreign currency exchange (loss) gain, net

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Income tax expense

Net (loss) income

Net (income) loss attributable to noncontrolling interests

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

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

Net income (loss)

Net loss (income) attributable to noncontrolling interests

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

Earnings (loss) per share attributable to Euronet Worldwide, Inc.

stockholders:

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

Year Ended December 31,

Net (loss) income

Other comprehensive income (loss), net of tax:

Net income (loss)

Other comprehensive (loss) income

Translation adjustment

Comprehensive income

Comprehensive (income) loss attributable to noncontrolling interests

Comprehensive income attributable to Euronet Worldwide, Inc.

Comprehensive (loss) income

Comprehensive loss (income) attributable to noncontrolling interests

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

See accompanying notes to the Consolidated Financial Statements.

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(in thousands, except share data)

Number of Shares

(Common and Treasury)

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Share-based compensation

Repurchase of shares

Balance as of December 31, 2018

Net income (loss)

Other comprehensive loss

Stock issued under employee stock plans

Share-based compensation

Issuance of convertible notes, net of tax

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Balance as of December 31, 2020

Net income (loss)

Other comprehensive loss

Stock issued under employee stock plans

Share-based compensation

Repurchase of shares

Balance as of December 31, 2021

See accompanying notes to the Consolidated Financial Statements.

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Share-based compensation

Repurchase of shares

Balance as of December 31, 2018

Net income (loss)

Other comprehensive loss

Stock issued under employee stock plans

Share-based compensation

Issuance of convertible notes, net of tax

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Balance as of December 31, 2020

Net income (loss)

Other comprehensive loss

Stock issued under employee stock plans

Share-based compensation

Repurchase of shares

Balance as of December 31, 2021

See accompanying notes to the Consolidated Financial Statements.

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Year Ended December 31,

Net (loss) income

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

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

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Loss on early retirement of debt

Loss from unconsolidated affiliates

Accretion of convertible debt discount and amortization of debt issuance costs

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Repayments of long-term debt obligations

Net (repayments) borrowing from short-term debt obligations

Net borrowings (repayments) from short-term debt obligations

Proceeds from long-term debt obligations

Debt issuance costs

Net cash provided by financing activities

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash and cash equivalents and restricted cash

Increase in cash and cash equivalents and restricted cash

(Decrease) increase in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of period

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Assets and liabilities denominated in currencies other than the functional currency of a subsidiary are remeasured at rates of exchange on the balance sheet date.

Resulting gains and losses on foreign currency transactions are included in the Consolidated Statements of Income.

Resulting gains and losses on foreign currency transactions are included in the Consolidated Statements of Operations.

The majority of our foreign currency exchange gains or losses are due to the remeasurement of intercompany loans which are not considered a long-term investment in nature and are in a currency other than the functional currency of one of the parties to the loan.

The financial statements of foreign subsidiaries where the functional currency is not the U.S.

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dollars using (i) exchange rates in effect at period end for assets and liabilities, and (ii) weighted average exchange rates during the period for revenues and expenses.

Adjustments resulting from translation of such financial statements are reflected in accumulated other comprehensive income (loss) as a separate component of consolidated equity.

Adjustments resulting from translation of such financial statements are reflected in accumulated other comprehensive (loss) income as a separate component of consolidated equity.

Cash equivalents

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See Note 9, Goodwill and Acquired Intangible Assets, Net, to the Consolidated Financial Statements for additional information regarding the impairment of goodwill and other intangible assets.

Other assets include capitalized software development costs and capitalized payments for new or renewed contracts, contract renewals and customer conversion costs.

Other assets include capitalized software development costs and capitalized payments for new or renewed contracts.

Euronet capitalizes initial payments for new or renewed contracts to the extent recoverable through future operations, contractual minimums and/or penalties in the case of early termination.

The Company's accounting policy is to limit the amount of capitalized costs for a given contract to the lesser of the estimated ongoing net future cash flows related to the contract or the termination fees the Company would receive in the event of early termination of the contract by the customer.

ASC Topic 340, Other Assets and Deferred Costs ("ASC 340") 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.

ASC Topic 340, Other Assets and Deferred Costs ("ASC 340") requires the deferral of incremental costs to fulfill customer contracts, known as contract assets, which are then amortized to expense as part of direct operating costs over the respective periods of expected benefit.

D eferred contract costs are reported on our balance sheet within current or non-current other assets based on the expected life of the related contract.

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For the years ended December 31, 2021, 2020 and 2019, we had $ 33.3 million, $ 17.2 million and $ 6.9 million of amortization related to these costs, respectively.

On a quarterly basis we evaluate the carrying amount of contract assets recognized to determine if there are contracts that may have a carrying amount in excess of the remaining future consideration to be received from the contract.

During the fourth quarter of 2021, we identified certain contract assets that had carrying balances greater than the estimated remaining cash flows in the contracts and recorded a corresponding $ 38.6 million non -cash impairment.

The impairment charge is the result of lower-than-expected customer transaction volume related to these specific contracts, stemming primarily from COVID-19 related disruptions.

This non-cash impairment charge is included in the Money Transfer Segment.

Convertible notes

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The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

In accordance with ASC Topic 740, Income Taxes ("ASC 740"), the Company's policy is to record estimated interest and penalties related to the underpayment of income taxes as income tax expense in the Consolidated Statements of Income.

See Note 14, Income Taxes, to the Consolidated Financial Statements for further discussion regarding these provisions.

Presentation of taxes collected and remitted to governmental authorities

The Company presents taxes collected and remitted to governmental authorities on a net basis in the accompanying Consolidated Statements of Income.

The Company presents taxes collected and remitted to governmental authorities on a net basis in the accompanying Consolidated Statements of Operations.

Fair value measurements

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however, the Company does not designate such instruments as hedges for accounting purposes.

Accordingly, changes in the value of these contracts are recognized immediately as a component of foreign currency exchange gain (loss), net in the Consolidated Statements of Income.

Accordingly, changes in the value of these contracts are recognized immediately as a component of foreign currency exchange gain (loss), net in the Consolidated Statements of Operations.

Cash flows resulting from derivative instruments are included in operating activities in the Company's Consolidated Statements of Cash Flows.

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Transaction-based fees are recognized at the time the transactions are processed and outsourcing management fees are recognized ratably over the contract period.

These fees can be variable based on transaction volume tiered discounts;

however, as all tiered discounts are calculated monthly, the actual discount is recorded on a monthly basis.

Certain of the Company's non-cancelable customer contracts provide for the receipt of up-front fees from the customer and/or decreasing or increasing fee schedules over the agreement term for substantially the same level of services to be provided by the Company.

C ertain of the Company's non-cancelable customer contracts provide for the receipt of up-front fees from the customer and/or decreasing or increasing fee schedules over the agreement term for substantially the same level of services to be provided by the Company.

The Company recognizes revenue under these contracts based on proportional performance of services over the term of the contract.

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The portion of the commission that is paid to retailers is generally recorded as a direct operating cost.

However, in circumstances where the Company is not the principle obligor in the distribution of the electronic payment products, those commissions are recorded as a reduction of revenue.

In selling certain products, the Company is the principle obligor in the arrangements;

accordingly, the gross sales value of the products are recorded as revenue and the purchase cost as direct operating cost.

In selling certain products, the Company is the p rinciple obligor in th e arrangements;

accordingly, the gross sales value of the products is recorded as revenue and the purchase cost as direct operating cost.

Transactions are processed through a network of POS terminals and direct connections to the electronic payment systems of retailers.

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(in thousands)

EFT Processing

Money Transfer

North America

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The new guidance is effective for annual periods beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted.

The Company is currently evaluating the impact the adoption of ASU 2020-06 will have on the Consolidated Financial Statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions for contracts, hedging relationships, and other transactions affected by reference rate reform due to the anticipated cessation of LIBOR on or before December 31, 2021.

This guidance is effective from March 12, 2020 through December 31, 2022 and could impact the accounting for LIBOR provisions in the Company’s unsecured credit agreement.

The Company does not expect that the adoption of this guidance will have a significant impact on its Consolidated Financial Statements.

The Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), as of January 1, 2020, which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts.

This replaced the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost.

The adoption of this standard did not have a significant impact on the Company's Consolidated Financial Statements and related disclosures.

We plan to adopt the new standard during the first quarter of 2022 using the modified retrospective approach and expect to record a $ 99.7 million decrease to additional paid-in capital, a $ 56.8 million decrease in debt discounts and a $ 42.9 million increase in retained earnings.

(4) Settlement Assets and Obligations

Settlement assets represent funds received or to be received from agents for unsettled money transfers and from merchants for unsettled prepaid transactions.

The Company records corresponding settlement obligations relating to amounts payable.

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

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 represen t funds collected by such business partners that are in transit to the Company.

Settlement obligations consist of money transfers and accounts payable to agents and content providers.

Money transfer accounts payable represent amounts to be paid to transferees when they request funds.

Most agents typically settle with transferees first and then obtain reimbursement from the Company.

Money order accounts payable represent amounts not yet presented for payment.

Due to the agent funding and settlement process, accounts payable to agents represent amounts due to agents for money transfers that have not been settled with transferees.

The Company records corresponding settlement obligations relating to accounts payable.

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

The settlement cash held at the Company is primarily generated from the monies remitted by consumers through Company agents and financial institutions in payment of the face value of the payment service or foreign currency purchased and the related fees charged to purchase the currency.

The Company uses its cash and cash equivalents to pay the face value of the the payment service product upon presentation by the recipient.

Cash received by Company 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.

Settlement obligations consist of accrued expenses for money transfers, content providers, and EFT customer deposits and accounts payable to agents and content providers.

Money transfer accrued expenses represent amounts to be paid to transferees when they request funds.

Most agents typically settle with transferees first then obtain reimbursement from the Company.

Money order accrued expenses represent amounts not yet presented for payment.

Due to the agent funding and settlement process, accrued expenses to agents represent amounts due to agents for money transfers that have not been settled with transferees.

(in thousands)

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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

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

The Retired Convertible Notes had a dilutive effect for the year ended December 31, 2018 as the $ 102.38 market price per share of Common Stock as of December 13, 2018 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.

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 December 31, 2020 and December 31, 2019, whereas the dilutive effect was 1,640,477 shares for the year ended December 31, 2018 .

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 December 31, 2021, 2020 and 2019 .

See Note 11, D ebt Obligations, to the Consolidated Financial Statements for more information about the Convertible Notes and Retired Convertible Notes.

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On March 11, 2019, in connection with the issuance of the Convertible Notes, the Board of Directors authorized an additional repurchase program of $ 120 million in value of the Company's common stock through March 11, 2021.

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 share s of common stock through February 28, 2022.

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 years ended December 31, 2020 , 2019 and 2018 the Company repurchased $ 239.8 million, $ 70.9 million, a nd $ 175.0 million , respect ively, in value of Euronet common stock under the repurchase programs.

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.

On December 8, 2021, the Company put a repurchase program in place to repurchase up to $ 300 million in value, but not more than 5.0 million shares of common stock through December 8, 2023.

Repurchases under the programs 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 years ended December 31, 2021, 2020 and 2019 the Company repurchased $ 227.8 million, $ 239.8 million, and $ 70.9 million , respectively, in value of Euronet common stock under the repurchase programs.

Preferred Stock

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As of December 31, 2021 and 2020 , accumulated other comprehensive loss consists entirely of foreign currency translation adjustments.

The Company recorded a foreign currency translation gain of $ 70.8 million, a loss of $ 13.9 million and a loss of $ 56.7 million for the years ended December 31, 2020 , 2019, and 2018, respectively.

There were no reclassifications of foreign currency translation into the Consolidated Statements of Income for the years ended December 31, 2020 , 2019, and 2018.

The Company recorded a foreign currency translation loss of $ 78.5 million, a gain of $ 70.8 million and a loss of $ 13.9 million for the years ended December 31, 2021 , 2020 , and 2019 , respectively.

There were no reclassifications of foreign currency translation into the Consolidated Statements of Operations for the years ended December 31, 2021 , 2020 , and 2019 .

No dividends were paid on any class of the Company's stock during 2021 , 2020 , and 2019 .

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For certain large acquisitions, management engages an appraiser to assist in the valuation process.

Pending Acquisitions

In March 2021, the Company entered into an agreement to purchase the Piraeus Bank Merchant Acquiring business of Piraeus Bank for € 300 million, or approximately $ 360 millio n.

The proposed arrangement will include separate commercial agreements for a long-term strategic partnership with Piraeus Bank for collaborative product distribution, processing and customer referrals.

The acquisition will expand the Company’s omnichannel payments strategy and position the Company in Greece’s growing market for merchant acquiring services.

The closing is targeted for the first half of 2022 and is subject to regulatory approvals, finalization of the commercial agreements, and customary closing conditions.

The Company expects to finance the purchase price using cash on hand.

2019 Acquisitions

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Less accumulated depreciation

Depreciation and amortization expense related to property and equipment, including property and equipment recorded under finance leases, for the years ended December 31, 2020, 2019 and 2018 was $ 96.1 million, $ 83.5 million and $ 75.1 million, respectively.

Depreciation expense related to property and equipment, including property and equipment recorded under finance leases, for the years ended December 31, 2021, 2020 and 2019 was $ 104.7 million, $ 96.1 million and $ 83.5 million, respectively.

(9) Goodwill and Acquired Intangible Assets, Net

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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 th e impairment charge was included within the EFT Segment, and $ 82.7 million o f the i mpairment charge was included in the Money Transfer Segment.

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

During the second half of 2020, the Company recorde d a $ 2.0 million non-ca sh impairment charge for acquired intangible assets, specifically related to customer lists in the xe reporting unit.

During 2018, the Company recorded a non-cash acquired intangible asset impairment charge of $ 7.0 million related to certain trade names as a result of combining HiFX into xe in order to operate the business under one brand name, xe.

Of the total goodwill balance of $ 641.6 million as of December 31, 2021 , $ 392.3 million relates to the Money Transfer Segment, $ 129.1 million relates to the epay Segment and the remaining $ 120.2 million relates to the EFT Processing Segment.

Amortization expense for intangible assets with finite lives was $ 23.1 million , $ 22.9 million and $ 20.4 million for the years ended December 31, 2021 , 2020 and 2019 , respectively.

Estimated annual amortization expense, before income taxes, on intangible assets with finite lives as of December 31, 2020 , is expected to total $ 22.9 million for 2021 , $ 21.8 million for 2022, $ 16.8 million for 2023, $ 9.9 million for 2024, and $ 6.5 million for 2025 .

Estimated annual amortization expense on intangible assets with finite lives as of December 31, 2021 , is expected to total $ 21.7 million for 2022 , $ 16.7 million for 2023, $ 9.9 million for 2024, $ 6.5 million for 2025, and $ 6.1 million for 2026 .

(10) Accrued Expenses and Other Current Liabilities

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Derivative liabilities

Accrued payroll expenses

Current portion of finance lease obligations

Deferred income taxes

(11) Debt Obligations

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Long-term debt obligations

As of December 31, 2020 , aggregate annual maturities of long-term debt are $ 0.8 million in 2021, $ 0.1 million due in 2022, $ 270.4 million due in 2023, no maturities in 2024, and $ 1.2 billion thereafter.

As of December 31, 2021 , aggregate annual maturities of long-term debt are $ 0.8 million in 2022, $ 283.5 million due in 2023 , no maturities in 2024, $ 468.2 million due in 2025, and $ 682.1 million thereafter.

This maturity schedule reflects the revolving credit facility maturing in 2023 and the Convertible Notes maturing in 2025, coinciding with the terms of the initial put option by holders of the Convertible Notes.

It also reflects the maturing of the 1.375 % Senior Note of € 600 million ($ 732.8 million) due in 2026.

It also reflects the maturing of the 1.375 % Senior Notes of € 600 million ($ 682.1 million) due in 2026.

Credit Facility

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Stand-by letters of credit/bank guarantees reduce the Company's borrowing capacity under the Credit Facility and are generally used to secure trade credit and performance obligations.

As of December 31, 2020 and 2019, the stand-by letters of credit interest charges were each 1.1 % per annum, respectively.

As of December 31, 2021 and 2020, the stand-by letters of credit interest charges were each 1.1 % per annum .

Borrowing capacity under the Credit Facility as of December 31, 2021 was $ 689.3 million.

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(i) as of the end of each fiscal quarter ended on March 31, September 30 and December 31, a Consolidated Total Leverage Ratio not to be greater than 3.5 to 1.0;

(ii) as of the end of each fiscal quarter ended on June 30, a Consolidated Total Leverage Ratio not to be greater than 4.0 to 1.0;

(ii) as of the end of each fiscal quarter ended on June 30, a Consolidated Total Leverage Ratio (as defined in the Credit Facility) not to be greater than 4.0 to 1.0;

provided that, not more than two times prior to the expiration date, that a Material Acquisition has been consummated, for any period of four consecutive fiscal quarters following such Material Acquisition, the Consolidated Total Leverage Ratio will be not greater than 4.0 to 1.0 for fiscal quarters ended on March 31, September 30 and December 31 and not greater than 4.5 to 1.0 for fiscal quarters ended on June 30;

provided, further, that following such four consecutive fiscal quarters for which the maximum Consolidated Total Leverage Ratio is increased, the maximum Consolidated Total Leverage Ratio shall revert to the levels set forth in clauses (i) and (ii) above for not fewer than two fiscal quarters before a subsequent Increase Notice is delivered to the syndicate of financial institutions;

and (iii) a Consolidated Interest Coverage Ratio not less than 4.0 to 1.0.

and (iii) a Consolidated Interest Coverage Ratio (as defined in the Credit Facility) not less than 4.0 to 1.0.

Subject to meeting certain leverage ratio and liquidity requirements as contained in the unsecured credit agreement, the Company is permitted to pay dividends, repurchase common stock and repurchase subordinated debt.

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The Company is using the remainder of the net proceeds from the issuance of the Convertible Notes to finance the further growth of the business.

Contractual interest expense for the Retired Convertible Notes $ 1.5 million for the year ended December 31, 2019 and a ccretion expense was $ 4.6 million for the year ended December 31, 2019 .

Contractual interest expense for the Convertible Notes was $ 3.9 million an d $ 3.1 million for the years ended December 31, 2020 and 2019, respectively.

Accretion expense was $ 15.3 million and $ 11.6 million for the years ended December 31, 2020 and 2019, respectively.

Contractual interest expense for the Retired Convertible Notes was $ 1.5 million for the year ended December 31, 2019 and a ccretion expense was $ 4.6 million for the year ended December 31, 2019 .

Contractual interest expense for the Convertible Notes was $ 3.9 million, $ 3.9 million, and $ 3.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Accretion expense was $ 16.0 million, $ 15.3 million and $ 11.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The effective interest rate was 4.4 % for the year ended December 31, 2021.

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

Balance Sheet Presentation

The following table summarizes the fair value of the derivative instruments as recorded in the Consolidated Balance Sheets as of the dates below:

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Other current liabilities

Balance Sheet Presentation

The following tables summarize the gross and net fair value of derivative assets and liabilities as of December 31, 2021 and 2020 (in thousands):

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Income Statement Presentation

The following tables summarize the location and amount of gains on derivatives in the Consolidated Statements of Income for the years ended December 31, 2020 , 2019 and 2018:

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

Location of (Loss) Gain Recognized in Income on Derivative Contracts

The following tables summarize the location and amount of gains on derivatives in the Consolidated Statements of Operations for the years ended December 31, 2021 , 2020 and 2019:

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

Location of Gain (Loss) Recognized in Income on Derivative Contracts

Year Ended December 31,

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Foreign currency exchange contracts - Ria Operations

Foreign currency exchange (loss) gain, net

Foreign currency exchange gain (loss), net

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

1 unchanged sentence

See Note 18, Financial Instruments and Fair Value Measurements, for the determination of the fair values of derivatives.

The Company adopted ASC 842, Leases , on January 1, 2019.

The Compan y ent ers into operating leases for ATM sites, office spaces, retail stores and equipment.

The Company enters into operating leases for ATM sites, office spaces, retail stores and equipment.

The Company's finance leases are immaterial.

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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).

As a result of the lease term reassessment, $ 211.9 million of right of use assets and $ 211.9 mi llion lease 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 beginning June 30, 2020 .

New, amended, and modified ATM site leases with termination options exercisable within 12 months will be excluded from th e right of use lease asset and lease liability balances .

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 was no longer able to conclude that termination options are reasonably certain not to be exercised.

This reassessment conclusion impacted the lease term evaluation, instead of determining the lease term based on the stated lease payment schedule of the lease, the lease term was 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), which impacted the amounts recorded as right of use assets and lease liability balances.

New, amended, and modified ATM site leases with termination options exercisable within 12 months will be excluded from th e right of use lease asset and lease liability balances under the short-term lease exemption.

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 fo r 2020 r easonably reflects the Company’s short-term lease commitments.

The short-term lease expense for 2021 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.

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( 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:

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

Lease Expense (in thousands)

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Tax effect of:

State income tax expense (benefit) at statutory rates

State income tax expense at statutory rates, net of U.S.

federal income tax

Non-deductible expenses

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We calculate our provision for federal, state and international income taxes based on current tax law.

In the fourth quarter of 2018, the Company adjusted its accounting for the tax effects of U.S.

The net provisional tax expense was decreased in that period by approximately $ 12.3 million to $ 29.3 million largely due to changes in the transition tax calculations.

In the fourth quarter of 2019 after additional regulatory guidance was issued by applicable taxing authorities, the Company elected to claim U.S.

In the fourth quarter of 2019 after additional regulatory guidance was issued by applicable taxing authorities relating to the U.S.

Tax Reform, the Company elected to claim U.S.

foreign tax credits, which reduced the net tax expense by $ 25.7 million.

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Goodwill and intangible amortization

C ontract costs

Intercompany notes

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Net deferred tax liabilities

Subsequently recognized tax benefits relating to the valuation allowance for deferred tax assets as of December 31, 2020 are expected to be allocated to income taxes in the Consolidated Statements of Income.

Net deferred tax assets of $ 37.7 million and $ 27.4 million as of December 31, 2021 and 2020, respectively, are recorded within "Other assets" on the Consolidated Balance Sheet.

Subsequently recognized tax benefits relating to the valuation allowance for deferred tax assets as of December 31, 2021 are expected to be allocated to income taxes in the Consolidated Statements of Operations.

As of December 31, 2021, and 2020 , the Company's foreign tax loss carryforwards were $ 267.3 million and $ 197.4 million, respectively, and U.S.

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federal research and expenditure credit carryforwards of $ 3.3 million that will expire periodically from 2034 through 2038.

tax expense has been recognized as a result of the transition tax and GILTI provisions of U.S.

tax expense has been recognized as a result of the transition tax and global intangible low-taxed income, or GILTI, provisions of U.S.

Tax Reform, the Company has not provided additional deferred taxes with respect to items such as certain foreign exchange gains or losses, foreign withholding taxes or additional state taxes, if any, on undistributed earnings attributable to foreign subsidiaries and it is not practical to determine the income tax liability that would be payable if such earnings were not reinvested indefinitely.

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The intrinsic value of these options exercised was $ 27.7 million, $ 41.1 million and $ 30.6 million in the years ended December 31, 2021 , 2020 and 2019 , respectively.

As of December 31, 2020 , unrecognized compensation expense related to nonvested stock options that are expected to vest totaled $ 21.4 million and will be recognized over the next 5 years, with an overall weighted-average period of 2.8 years.

As of December 31, 2021 , unrecognized compensation expense related to nonvested stock options that are expected to vest totaled $ 58.5 million and wi ll be recognized over the next 4 years, with an overall weighted-average period of 2.6 years.

The following table provides the fair value of options granted under the SCP during 2021 , 2020 and 2019 , together with a description of the assumptions used to calculate the fair value using the Black-Scholes-Merton option-pricing model:

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0.5 % to 1.21

0.31 % to 1.17

Dividend yield

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Weighted-average fair value (per share)

(a) At the date of grant, the risk fee rate for stock options awarded in 2019 and 2018 was 1.7 %, and 2.8 %, re spectively.

(b) During 2020, the Company granted 1,350,000 options that were valued using a Monte Carlo simulation (not included in the table above).

(a) At the date of grant, the risk fee rate for stock options awarded in 2019 was 1.7 % .

During 2021, the Company granted approximately 331,000 options that were valued using a Monte Carlo simulation (not included in the table above).

The Monte Carlo simulation calculated a fair value per option of $ 40.30 using the following assumptions:

volatility of 40.0 %, risk-free interest rate of 1.19 %, and a term of 4.5 years.

During 2020, the Company granted 1,350,000 options that were valued using a Monte Carlo simulation (not included in the table above).

The Monte Carlo simulation calculated a fair value per option of $ 26.90 using the following assumptions:

volatility of 37.0 %, risk-free interest rate of 0.33 %, and a term of 5.0 years.

Restricted stock

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The weighted average grant date fair value of restricted stock granted during the years ended December 31, 2021, 2020 and 2019 was $ 115.85 , $ 117.97 and $ 145.93 per share, respectively.

Employee stock purc hase plan

The Company has a qualified Employee Stock Purchase Plan (the "ESPP"), which allows qualified employees (as defined by the plan documents) to participate in the purchase of rights to purchase designated shares of the Company's Common Stock at a price equal to the lower of 85% of the closing price at the beginning or end of each quarterly offering period.

The Company reserved 1,000,000 shares of Common Stock for purchase under the ESPP.

Pursuant to the ESPP, during the years ended December 31, 2020, 2019 and 2018 , the Company issued 32,267 , 16,713 and 21,872 rights, respectively, to purchase shares of Common Stock at a weighted average price per share of $ 71.63 , $ 110.37 and $ 71.08 , respectively.

The grant date fair value of the option to purchase shares at the lower of the closing price at the beginning or end of the quarterly period, plus the actual total discount provided, are recorded as compensation expense.

Total compensation expense recorded was $ 0.6 million, $ 0.4 million, and $ 0.4 million for the years ended December 31, 2020 , 2019 and 2018, respectively.

The following table provides the weighted-average fair value of the ESPP stock purchase rights during the years ended December 31, 2020, 2019 and 2018 and the assumptions used to calculate the fair value using the Black-Scholes-Merton option-pricing model:

Year Ended December 31,

Volatility - weighted average

Volatility - range

37.2 % to 81.1

20.3 % to 28.1

23.5 % to 36.7

Risk-free interest rate - weighted average

Risk-free interest rate - range

0.09 % to 0.16

1.55 % to 2.44

1.73 % to 2.45

Dividend yield

Expected lives

Weighted-average fair value (per share)

(17) Business Segment Information

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

1) 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.

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 surcharges and other value added services.

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

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

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

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Direct operating costs

Acquired contract cost impairment

Salaries and benefits

Selling, general and administrative

Goodwill and acquired intangible assets impairment

Depreciation and amortization

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Selling, general and administrative

Goodwill and acquired intangible assets impairment

Depreciation and amortization

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Selling, general and administrative

Goodwill impairment

Depreciation and amortization

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Interest expense

Income from unconsolidated affiliates

Foreign currency exchange loss, net

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Euronet incurred expenses of $ 0.1 million, $ 0.1 million and $ 0.3 million during the years ended December 31, 2021 , 2020 and 2019, respectively, for the use of this airplane.

(22) Selected Quarterly Data (Unaudited)

(in thousands, except per share data)

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

For the Year Ended December 31, 2019

Operating income

Net income attributable to Euronet Worldwide, Inc.

Earnings per common share:

For the Year Ended December 31, 2020

Operating income (loss)

Net income (loss)

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

Earnings (loss) per common share:

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data