What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-03 compared with 2020-05-06 · 147 added, 106 removed, 137 unchanged (65% of the section changed)

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("TSYS") (the "Merger").

Recent developments relating to the outbreak of the coronavirus pandemic ("COVID-19")

COVID-19 Update

In March 2020, the World Health Organization declared the outbreak of the COVID-19 virus a global pandemic.

This outbreak is causing major disruptions to businesses and markets worldwide as the virus continues to spread.

This outbreak continues to cause major disruptions to businesses and markets worldwide as the virus spreads in certain jurisdictions, and restrictions to control the spread of the virus remain in place.

A number of countries as well as certain states and cities within the United States have enacted temporary closures of businesses, issued quarantine or shelter-in-place orders and taken other restrictive measures in response to COVID-19.

We are closely monitoring the effects of the COVID-19 pandemic.

We are currently operating normally, and, at this time, we do not anticipate any significant operational effects as a result of the pandemic.

Our first quarter performance in January, February and through the first two weeks of March exceeded our internal expectations, excluding an immaterial revenue effect from COVID-19 in our Asia Pacific region.

However, starting in mid-March, the COVID-19 pandemic began to affect our results significantly in North America and Europe as governments took actions to encourage social distancing and implement shelter-in-place directives.

The deterioration in our financial results accelerated toward the end of March as the pandemic spread further and the number of countries and localities adopting restrictive measures meaningfully increased.

We expect that the COVID-19 pandemic will have an adverse effect on our revenues and financial results for the remainder of 2020, although the magnitude and duration of the ultimate effects as a result of the COVID-19 pandemic are not possible to predict at this time.

We have taken and will continue to implement cost-saving actions, such as reductions in employee compensation costs, business travel and marketing initiatives, to help mitigate the financial effects of the COVID-19 pandemic.

We continue to closely monitor the effects of the COVID-19 pandemic;

however, the effects of the outbreak are still evolving, and the ultimate severity and duration of the pandemic and the implications on global economic conditions remains uncertain.

We are continuing to operate normally worldwide, and, at this time, we do not anticipate any significant operational effects as a result of the pandemic.

Starting in mid-March, the COVID-19 pandemic began to significantly affect our financial results as governments took actions to encourage social distancing and implement shelter-in-place directives.

As certain state and local governments in the United States and abroad began to gradually ease restrictions, and certain businesses reopened at reduced capacities, we saw improvement in our financial results and positive trends throughout the latter half of the second quarter.

We expect that the COVID-19 pandemic will continue to have an adverse effect on our revenues and earnings for the remainder of 2020, although the magnitude, duration and ultimate effects of the COVID-19 pandemic are not possible to predict at this time.

We have implemented cost-saving actions, such as reductions in employee compensation costs and discretionary spending, to help mitigate the financial effects of the COVID-19 pandemic.

We have also temporarily suspended activity under our share repurchase program and reduced planned capital investments in the business from our initial expectations prior to the pandemic.

For a further discussion of trends, uncertainties and other factors that could affect our continuing operating results related to the effects of the COVID-19 pandemic, see the section entitled "Risk Factors" in Item 1A in this Quarterly Report on Form 10-Q.

Consolidated Results

Highlights related to our financial condition at March 31, 2020 and results of operations for the three months then ended include the following:

Consolidated revenue increased to $1,903.6 million , compared to $883.0 million for the prior-year period, primarily due to additional revenues from the acquired operations of TSYS.

Consolidated operating income increased to $244.0 million , compared to $199.5 million for the prior-year period.

Operating margin decreased to 12.8% , compared to 22.6% for the prior-year period, primarily due to an increase in acquisition and integration expenses associated with the Merger .

Net income attributable to Global Payments increased to $143.6 million , compared to $112.3 million for the prior-year period, primarily due to additional income from the acquired operations of TSYS, partially offset by increases in acquisition and integration expenses and interest expense.

Diluted earnings per share decreased to $0.48 , compared to $0.71 for the prior-year period, reflecting the additional earnings from the acquired operations of TSYS, as well as an increase in the number of weighted-average number of shares outstanding as a result of issuing common shares as purchase consideration in the Merger.

Financial Highlights

Highlights related to our financial condition at June 30, 2020 and results of operations for the three and six months then ended include the following:

Consolidated revenues for the three and six months ended June 30, 2020 increased to $1,672.0 million and $3,575.6 million , respectively, compared to $935.2 million and $1,818.2 million for the prior-year periods due to additional revenues from the acquired operations of TSYS of $997.0 million and $2,052.0 million , respectively, partially offset by the unfavorable effects of COVID-19 on our revenues.

Consolidated operating income for the three and six months ended June 30, 2020 was $107.6 million and $351.6 million , respectively, compared to $221.7 million and $421.2 million for the prior-year periods.

Operating margin for the three and

six months ended June 30, 2020 was 6.4% and 9.8% , respectively, compared to 23.7% and 23.2% for the prior-year period.

For the three and six months ended June 20, 2020, consolidated operating income and operating margins were negatively impacted by the unfavorable effects of COVID-19 on our revenues.

Net income attributable to Global Payments for the three and six months ended June 30, 2020 was $37.3 million and $180.9 million , respectively, compared to $120.5 million and $232.8 million for the prior-year periods.

The additional income from the acquired operations of TSYS was more than offset by increases in acquisition and integration expenses and interest expense, and the unfavorable effects of COVID-19 on our revenues.

Diluted earnings per share for the three and six months ended June 30, 2020 was $0.12 and $0.60 , compared to $0.77 and $1.48 for the prior-year periods, primarily reflecting the unfavorable effects of COVID-19 on our net income, as well as an increase in the number of weighted-average number of shares outstanding as a result of issuing common shares as purchase consideration in the Merger.

On May 15, 2020, we issued $1.0 billion aggregate principal amount of 2.900% senior unsecured notes due May 2030.

We used the net proceeds from this offering to repay a portion of the outstanding indebtedness on our revolving credit facility and for general corporate purposes.

As of June 30, 2020 , there were no outstanding borrowings under the revolving credit facility.

Results of Operations

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We evaluate performance and allocate resources based on the operating income of each operating segment.

In connection with an organizational realignment implemented after the Merger in the fourth quarter of 2019, the presentation of segment information for the three months ended March 31, 2019 has been recast to align with the segment presentation for the three months ended March 31, 2020 .

In connection with an organizational realignment implemented after the Merger in the fourth quarter of 2019, the presentation of segment information for the three and six months ended June 30, 2019 has been recast to align with the segment presentation for the three and six months ended June 30, 2020 .

For further information about our reportable segments, see "Item 1.

Business—Business Segments" within our Annual Report on Form 10-K for the year ended December 31, 2019, incorporated herein by reference, and "Note 11 —Segment Information" in the notes to the accompanying unaudited consolidated financial statements.

The following table sets forth key selected financial data for the three months ended March 31, 2020 and 2019 , this data as a percentage of total revenues and the changes between the periods in dollars and as a percentage of the prior-year amount.

The income statement data for the three months ended March 31, 2020 and 2019 are derived from the accompanying unaudited consolidated financial statements included in Part I, Item 1 - Financial Statements.

Three Months Ended

March 31, 2020

The following table sets forth key selected financial data for the three months ended June 30, 2020 and 2019 , this data as a percentage of total revenues and the changes between the periods in dollars and as a percentage of the prior-year amount.

The income statement data for the three months ended June 30, 2020 and 2019 is derived from the accompanying unaudited consolidated financial statements included in Part I, Item 1 - Financial Statements.

Three Months Ended June 30, 2020

% of Revenues (1)

Three Months Ended

March 31, 2019

Three Months Ended June 30, 2019

% of Revenues (1)

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Business and Consumer Solutions

Segment revenues

intersegment revenues

Intersegment eliminations

Consolidated revenues

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For further discussion of our acquisitions, see "Note 2 —Acquisitions" in the notes to the accompanying unaudited consolidated financial statements.

(3) During the three months ended March 31, 2020 , operating income for our Merchant Solutions segment reflected the effect of acquisition and integration expenses of $2.2 million .

Operating loss for Corporate included acquisition and integration expenses of $69.7 million and $5.3 million , during the three months ended March 31, 2020 and 2019, respectively.

Consolidated revenues for the three months ended March 31, 2020 increased by 115.6% to $1,903.6 million , compared to $883.0 million in the prior-year period, primarily due to additional revenues of $1,055.0 million from the acquired operations of TSYS, partially offset by the adverse effect on our revenues resulting from the COVID-19 pandemic.

(3) During the three months ended June 30, 2020 and 2019 , operating income for our Merchant Solutions segment reflected the effect of acquisition and integration expenses of $4.4 million and $3.7 million , respectively.

Operating loss for Corporate included acquisition and integration expenses of $80.7 million and $10.5 million during the three months ended June 30, 2020 and 2019 , respectively.

The following table sets forth key selected financial data for the six months ended June 30, 2020 and 2019 , this data as a percentage of total revenues and the changes between the periods in dollars and as a percentage of the prior-year amount.

The income statement data for the six months ended June 30, 2020 and 2019 are derived from the accompanying unaudited consolidated financial statements included in Part I, Item 1 - Financial Statements.

Six Months Ended June 30, 2020

% of Revenues (1)

Six Months Ended June 30, 2019

% of Revenues (1)

(dollar amounts in thousands)

Revenues (2) :

Merchant Solutions

Issuer Solutions

Business and Consumer Solutions

Intersegment eliminations

Consolidated revenues

Consolidated operating expenses (2) :

Cost of service

Selling, general and administrative

Operating expenses

Operating income (loss) (2) :

Merchant Solutions

Issuer Solutions

Business and Consumer Solutions

Corporate (3)

Operating income

Operating margin (2) :

Merchant Solutions

Issuer Solutions

Business and Consumer Solutions

NM = not meaningful.

(1) Percentage amounts may not sum to the total due to rounding.

(2) Revenues, consolidated operating expenses, operating income (loss) and operating margin reflect the effects of acquired businesses from the respective acquisition dates.

For further discussion of our acquisitions, see "Note 2 —Acquisitions" in the notes to the accompanying unaudited consolidated financial statements.

(3) During the six months ended June 30, 2020 and 2019 , operating income for our Merchant Solutions segment reflected the effect of acquisition and integration expenses of $6.6 million and $8.4 million , respectively.

Operating loss for Corporate

included acquisition and integration expenses of $150.4 million and $11.1 million during the six months ended June 30, 2020 and 2019 , respectively.

Consolidated revenues for the three and six months ended June 30, 2020 increased by 78.8% and 96.7% , respectively, to $1,672.0 million and $3,575.6 million , compared to $935.2 million and $1,818.2 million in the prior year, primarily due to additional revenues of $997.0 million and $2,052.0 million from the acquired operations of TSYS, partially offset by the adverse effects of COVID-19 on our revenues.

Merchant Solutions Segmen t.

Revenues from our Merchant Solutions segment for the three months ended March 31, 2020 increased by 38.4% to $1,215.3 million , compared to $877.8 million in the prior-year period, primarily due to additional revenues from the acquired operations of TSYS.

As revenue from the Merchant Solutions segment is predominantly generated from core merchant acquiring, we experienced significant revenue declines starting in mid-March due to a reduction in consumer spending and closures of certain of our merchant customer businesses, including those who operate restaurants, retail locations, schools and universities and casinos, as well as the cancellation of events involving large groups of people throughout North America and Europe.

Revenues from our Merchant Solutions segment for the three and six months ended June 30, 2020 increased by 7.7% and 22.6% , respectively, to $1,001.6 million and $2,216.8 million , compared to $929.9 million and $1,807.7 million in the prior year, primarily due to additional revenues from the acquired operations of TSYS.

We experienced significant revenue declines starting in mid-March related to COVID-19 due to a reduction in consumer spending and closures of certain of our merchant customer businesses throughout North America, Europe and Asia Pacific.

We saw improvement in our financial results in May and June as certain state and local governments in the United States and abroad began to gradually ease restrictions and consumer spending began to gradually increase.

Issuer Solutions Segment.

Revenues from our Issuer Solutions segment for the three months ended March 31, 2020 was $503.8 million , primarily reflecting revenues from the acquired operations of TSYS.

Starting in mid-March, we experienced revenue declines as a result of lower transaction volumes, particularly in our commercial cards due to reduced travel and entertainment spending.

Revenues from our Issuer Solutions segment for the three and six months ended June 30, 2020 were $470.0 million and $973.8 million , respectively, primarily reflecting revenues from the acquired operations of TSYS.

Starting in mid-March, we experienced revenue declines as a result of lower transaction volumes, particularly related to the processing of commercial cards as a result of COVID-19.

We saw improvement in our financial results in May and June as state and local governments in the United States and abroad began to ease restrictions.

Business and Consumer Solutions Segment.

Revenues from our Business and Consumer segment for the three months ended March 31, 2020 was $203.9 million , reflecting revenues from the acquired operations of TSYS .

Our Business and Consumer Solutions segment experienced revenue declines starting in mid-March due to decreased consumer spending, lower load activity and fewer new funded accounts.

These revenue declines were partially mitigated by positive trends in consumer adoption of our demand deposit account product.

Revenues from our Business and Consumer segment for the three and six months ended June 30, 2020 were $216.7 million and $420.7 million , respectively, reflecting revenues from the acquired operations of TSYS .

Our Business and Consumer Solutions segment experienced revenue declines starting in mid-March due to reduced consumer spending;

however, these declines were mitigated by revenues from our customers loading individual stimulus payments and supplementary unemployment insurance distributions resulting from the Coronavirus Aid, Relief and Economic Security Act ("CARES Act").

Additionally, we saw improvements in our financial results later in the second quarter from increases in consumer spending as state and local governments in the United States began to gradually ease quarantine restrictions .

Operating Expenses

Cost of Service.

Cost of service for the three months ended March 31, 2020 increased by 206.0% to $933.9 million , compared to $305.2 million for the prior-year period, primarily due to additional costs associated with the acquired operations of TSYS.

Cost of service for the three months ended March 31, 2020 reflects amortization of acquired intangibles of $314.2 million , compared to $107.5 million for the prior-year period.

Cost of service as a percentage of revenues increased to 49.1% for the three months ended March 31, 2020 , compared to 34.6% for the prior-year period, primarily due to the increase in amortization of acquired intangibles.

Cost of service for the three and six months ended June 30, 2020 increased by 195.7% and 200.8% , respectively, to $893.7 million and $1,827.6 million , compared to $302.3 million and $607.5 million for the prior year, primarily due to additional costs associated with the acquired operations of TSYS, including the amortization of acquired intangibles.

Cost of service for the three and six months ended June 30, 2020 reflects amortization of acquired intangibles of $314.0 million and $628.3 million , respectively, compared to $103.5 million and $211.0 million , respectively, for the prior year.

Cost of service as a percentage of revenues increased to 53.5% and 51.1% , respectively, for the three and six months ended June 30, 2020 , compared to 32.3% and 33.4% for the prior year, primarily due to the increase in amortization of acquired intangibles.

Selling, General and Administrative Expenses .

Selling, general and administrative expenses for the three months ended March 31, 2020 increased by 91.8% to $725.7 million , compared to $378.3 million for the prior-year period.

The increase in selling, general and administrative expenses was primarily due to additional costs associated with the acquired operations of TSYS, and included acquisition and integration expenses of $71.6 million , primarily related to the Merger, compared to $5.3 million for the prior-year period.

Selling, general and administrative expenses as a percentage of revenues was 38.1% for the three months ended March 31, 2020 , compared to 42.8% for the prior-year period.

Corporate expenses increased by $108.5 million to $150.6 million for the three months ended March 31, 2020 , compared to $42.1 million for the prior-year period, primarily due to additional expenses associated with the acquired operations of TSYS and an increase in acquisition and integration expenses primarily due to the Merger.

During the three months ended March 31, 2020 , Corporate expenses included acquisition and integration expenses of $69.7 million , compared to $5.3 million for the prior-year period.

Certain of these Merger-related integration activities resulted in the recognition of employee termination benefits.

During the three months ended March 31, 2020 , we recognized charges of $17.6 million for actions taken, which included $2.6 million of share-based compensation expense.

Selling, general and administrative expenses for the three and six months ended June 30, 2020 increased by 63.1% and 76.9% , respectively, to $670.6 million and $1,396.4 million , compared to $411.2 million and $789.5 million for the prior year.

The increase in selling, general and administrative expenses for the three months ended June 30, 2020 compared to the prior year was primarily due to additional costs associated with the acquired operations of TSYS and included acquisition and integration expenses of $82.2 million , primarily related to the Merger, compared to $13.0 million for the prior year.

The increase in selling, general and administrative expenses for the six months ended June 30, 2020 compared to the prior year was primarily due to additional costs associated with the acquired operations of TSYS and included acquisition and integration expenses of $153.8 million , primarily related to the Merger, compared to $17.6 million for the prior year.

Selling, general and administrative expenses as a percentage of revenues was 40.1% and 39.1% , respectively, for the three and six months ended June 30, 2020 , compared to 44.0% and 43.4% for the prior year.

Corporate expenses increased by $108.4 million and $217.0 million , respectively, to $173.7 million and $324.3 million for the three and six months ended June 30, 2020 , compared to $65.3 million and $107.4 million for the prior year, primarily due to additional expenses associated with the acquired operations of TSYS and an increase in acquisition and integration expenses primarily due to the Merger.

During the three and six months ended June 30, 2020 , Corporate expenses included acquisition and integration expenses of $80.7 million and $150.4 million , respectively, compared to $10.5 million and $11.1 million , respectively, for the prior year.

During the three and six months ended June 30, 2020 , Corporate expenses included charges for employee termination benefits of $24.1 million and $41.7 million , respectively, which included $1.7 million and $4.2 million , respectively, of share-based compensation expense.

We expect to incur additional charges as Merger–related integration activities continue in 2020.

Operating Income and Operating Margin

Consolidated operating income for the three months ended March 31, 2020 increased to $244.0 million , compared to $199.5 million for the prior year due to additional income from the acquired operations of TSYS of $115.5 million , partially offset by the increase in acquisition and integration expenses.

Operating margin for the three months ended March 31, 2020 decreased to 12.8% , compared to 22.6% for the prior-year period.

Consolidated operating income for the three months ended March 31, 2020 reflects an increase in amortization of acquired intangibles of $206.7 million and an increase in acquisition and integration expenses of $66.6 million , primarily due to the Merger, compared to the prior-year period.

Consolidated operating income for the three and six months ended June 30, 2020 was $107.6 million and $351.6 million , respectively, compared to $221.7 million and $421.2 million for the prior year.

Operating margin for the three and six months ended June 30, 2020 was 6.4% and 9.8% , respectively, compared to 23.7% and 23.2% for the prior year.

Consolidated operating income for the three and six months ended June 30, 2020 includes additional income from the acquired operations of TSYS of $103.8 million and $219.3 million , respectively.

Consolidated operating income for the three and six months ended June 30, 2020 reflects an increase in amortization of acquired intangibles of $210.5 million and $417.3 million , respectively, and an increase in acquisition and integration expenses of $71.0 million and $137.5 million , respectively, primarily due to the Merger, compared to the prior year.

The unfavorable effects of COVID-19 on our revenues, and incremental expenses directly related to COVID-19, also contributed to the decrease in consolidated operating income and operating margin compared to the prior year.

Other Income/Expense, Net

Interest and other expense for the three months ended March 31, 2020 increased by $33.6 million to $92.6 million , compared to the prior-year period, as a result of the increase in our outstanding borrowings.

Interest and other expense for the three and six months ended June 30, 2020 increased by $17.2 million and $50.8 million , respectively, to $82.9 million and $175.5 million , compared to the prior year, as a result of the increase in our outstanding borrowings.

Income Tax Expense

Our effective income tax rates for the three months ended March 31, 2020 and 2019 were 10.1% and 16.8% , respectively.

The change in our effective tax rate for the three months ended March 31, 2020 from the prior-year period reflects the effect of tax credits and benefits associated with share-based awards.

Our effective income tax rates for the three months ended June 30, 2020 and 2019 were 3.0% and 19.9% , respectively.

Our effective income tax rates for the six months ended June 30, 2020 and 2019 were 9.0% and 18.4% , respectively.

The changes in our effective tax rates for the three and six months ended June 30, 2020 from the prior year reflects the effect of tax credits and benefits associated with share-based awards.

Liquidity and Capital Resources

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We use a combination of bank financing, such as borrowings under our credit facilities, and senior note issuances for general corporate purposes and to fund acquisitions.

In addition, specialized lines of credit are also used in certain of our markets to fund merchant settlement prior to receipt of funds from the card network.

In addition, specialized lines of credit are also used in certain of our markets to fund merchant settlement prior to receipt of funds from the card networks.

We believe that our current level of cash and borrowing capacity under our senior unsecured revolving credit facility, together with expected future cash flows from operations, will be sufficient to meet the needs of our existing operations and planned requirements for the foreseeable future.

We have implemented measures to manage liquidity in future periods, including the reductions of planned capital expenditures and repurchases of our common stock.

We have implemented measures to manage liquidity in future periods, taking into account the potential effects of COVID-19, including the reduction of certain operating expenses, including compensation costs, other discretionary expenses and planned capital expenditures, as well as suspension of repurchases of our common stock.

We regularly evaluate our liquidity and capital position relative to cash requirements, and we may elect to raise additional funds in the future through the issuance of debt or equity or by other means.

At March 31, 2020 , we had cash and cash equivalents totaling $1,800.1 million .

At June 30, 2020 , we had cash and cash equivalents totaling $1,825.6 million .

Of this amount, we considered $1,207.2 million to be available for general purposes, of which $29.0 million was undistributed foreign earnings considered to be indefinitely reinvested outside the United States.

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Merchant Reserves serve as collateral to minimize contingent liabilities associated with any losses that may occur under the merchant's agreement.

While this cash is not restricted in its use, we believe that designating this cash to collateralize Merchant Reserves strengthens our fiduciary standing with our member sponsors and is in accordance with the guidelines set by the card networks.

While this cash is not restricted in its use, we believe that designating this cash as a Merchant Reserve strengthens our fiduciary standing with our member sponsors and is in accordance with the guidelines set by the card networks.

Funds held for customers and the corresponding liability that we record in customer deposits include amounts collected prior to remittance on our customers' behalf.

Operating activities provided net cash of $436.6 million and $229.7 million for the three months ended March 31, 2020 and 2019 , respectively, which reflect net income adjusted for noncash items, including depreciation and amortization and changes in operating assets and liabilities.

Operating activities provided net cash of $960.3 million and $247.4 million for the six months ended June 30, 2020 and 2019 , respectively, which reflect net income adjusted for noncash items, including depreciation and amortization and changes in operating assets and liabilities.

Fluctuations in operating assets and liabilities are affected primarily by timing of month-end and transaction volume, especially changes in settlement processing assets and obligations.

Changes in settlement processing assets and obligations increased operating cash flows by $13.0 million and $118.3 million during the three months ended March 31, 2020 and 2019, respectively.

The increase in cash flows from operating activities from the prior-year period was primarily due to the increase in earnings before certain noncash items, including amortization of acquired intangibles and depreciation and amortization of property and equipment.

We used net cash in investing activities of $169.7 million and $116.3 million during the three months ended March 31, 2020 and 2019 , respectively.

Cash used for investing activities primarily represents cash used to fund acquisitions, net of cash acquired, and capital expenditures.

During the three months ended March 31, 2020 and 2019, we used cash of $68.2 million and $74.8 million , respectively, for acquisitions.

We made capital expenditures of $104.8 million and $55.1 million to purchase property and equipment during the three months ended March 31, 2020 and 2019 , respectively.

These investments include software and hardware to support the development of new technologies, continued consolidation and enhancement of our operating platforms and infrastructure to support our growing business.

Consistent with our first quarter, we will continue to make significant capital investments in the business but in light of COVID-19, will do so at a reduced rate from our initial expectations.

Financing activities include borrowings and repayments made under our various debt arrangements, as well as borrowings and repayments made under specialized lines of credit to fund daily settlement activities.

Changes in settlement processing assets and obligations increased operating cash flows by $136.5 million during the six months ended June 30, 2020 and decreased operating cash flows by $41.7 million during the six months ended June 30, 2019 .

The increase in cash flows from operating activities from the prior year was primarily due to the increase in earnings after the adjustment for certain noncash items, including amortization of acquired intangibles and depreciation and amortization of property and equipment.

We used net cash in investing activities of $270.3 million and $198.4 million during the six months ended June 30, 2020 and 2019 , respectively, primarily to fund acquisitions and capital expenditures.

During the six months ended June 30, 2020 and 2019, we used cash of $75.1 million and $78.2 million , respectively, for acquisitions.

We made capital expenditures of $208.4 million and $133.3 million during the six months ended June 30, 2020 and 2019 , respectively.

These investments include software and hardware to support the development of new technologies, infrastructure to support our growing business and continued consolidation and enhancement of our operating platforms.

We will continue to make significant capital investments in the business, but we will do so at a reduced rate from our initial expectations prior to the pandemic.

Financing activities include borrowings and repayments under our various debt arrangements, as well as borrowings and repayments made under specialized lines of credit to fund daily settlement activities.

Our borrowing arrangements are further described in "Note 5 —Long-Term Debt and Lines of Credit" in the notes to the accompanying unaudited consolidated financial statements and below under "Long-Term Debt and Lines of Credit." Financing activities also include cash flows associated with common stock repurchase programs and share-based compensation programs, as well as cash distributions made to noncontrolling interests and our shareholders.

We used net cash in financing activities of $77.5 million and $49.2 million during the three months ended March 31, 2020 and 2019, respectively.

Proceeds from long-term debt were $607.0 million and $344.0 million for the three months ended March 31, 2020 and 2019 , respectively.

Repayments of long-term debt were $111.0 million and $173.1 million for the three months ended March 31, 2020 and 2019 , respectively.

We used net cash in financing activities of $510.1 million and $212.5 million during the six months ended June 30, 2020 and 2019 , respectively.

Proceeds from long-term debt were $1,867.0 million and $586.0 million for the six months ended June 30, 2020 and 2019 , respectively.

Repayments of long-term debt were $1,809.2 million and $569.1 million for the six months ended June 30, 2020 and 2019 , respectively.

Proceeds from and repayments of long-term debt consist of borrowings and repayments that we make with available cash, from time-to-time, under our Revolving Credit Facility, as well as scheduled principal repayments we make on our term loans.

On May 15, 2020, we issued $1.0 billion aggregate principle senior unsecured notes.

We used the net proceeds from this offering to repay a portion of the outstanding indebtedness on our revolving credit facility and for general corporate purposes.

Activity under our settlement lines of credit is affected primarily by timing of month-end and transaction volume.

During the three months ended March 31, 2020 and 2019, we had net repayments of settlement lines of credit of $78.1 million and $55.4 million , respectively.

During the six months ended June 30, 2020 and 2019 , we had net repayments of settlement lines of credit of $25.5 million and net borrowings of settlement lines of credit of $32.2 million , respectively.

We repurchase our common stock mainly through open market repurchase plans.

During the three months ended March 31, 2020 and 2019 , we used $421.2 million and $156.0 million , respectively, to repurchase shares of our common stock.

As of March 31, 2020 , we had $880.0 million of share repurchase authority remaining under a share repurchase program authorized by the board of directors.

We paid dividends to our common shareholders in the amounts of $58.3 million and $1.6 million during the three months ended March 31, 2020 and 2019 , respectively.

During the six months ended June 30, 2020 and 2019 , we used $421.2 million and $234.0 million , respectively, to repurchase shares of our common stock.

As of June 30, 2020 , we had $880.0 million of share repurchase authority remaining under a share repurchase program authorized by the board of directors.

We have temporarily suspended activity under our share repurchase program.

We paid dividends to our common shareholders in the amounts of $116.6 million and $3.1 million during the six months ended June 30, 2020 and 2019 , respectively.

Long-Term Debt and Lines of Credit

Senior Unsecured Notes

We have $7.1 billion in aggregate principal amount of senior unsecured notes, which mature at various dates ranging from April 2021 to August 2049.

Interest on the senior notes is payable semi-annually upon various dates.

Each series of the senior notes is redeemable, at our option, in whole or in part, at any time and from time-to-time at the redemption prices set forth in the related indenture.

On May 15, 2020, we issued $1.0 billion aggregate principal amount of 2.900% senior unsecured notes due May 2030 and received proceeds of $996.7 million , net of discounts.

We incurred debt issuance costs of approximately $8.4 million , including underwriting fees, fees for professional services and registration fees, all of which were capitalized and reflected as a reduction of the related carrying amount of the notes in our consolidated balance sheet at June 30, 2020 .

Interest on the notes is payable semi-annually in arrears on May 15 and November 15 of each year, commencing November 15, 2020 .

The notes are unsecured and unsubordinated indebtedness and rank equally in right of payment with all of our outstanding unsecured and unsubordinated indebtedness.

We used the net proceeds from the offering to repay a portion of the outstanding indebtedness on our revolving credit facility and for general corporate purposes.

Senior Unsecured Credit Facilities

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Borrowings in U.S.

dollars and certain other London Interbank Offered Rate ("LIBOR")-quoted currencies will bear interest, at our option, at a rate equal to either (1) the rate (adjusted for any statutory reserve requirements for eurocurrency liabilities) for eurodollar deposits in the London interbank market, (2) a floating rate of interest set forth on the applicable LIBOR screen page designated by Bank of America or (3) the highest of (a) the federal funds effective rate plus 0.5%, (b) the rate of interest as publicly announced by Bank of America as its "prime rate" or (c) LIBOR plus 1.0%, in each case, plus an applicable margin.

As of March 31, 2020 , borrowings outstanding under the term loan facility and the revolving credit facility were $2.0 billion and $1.4 billion , respectively.

dollars and certain other London Interbank Offered Rate ("LIBOR")-quoted currencies will bear interest, at our option, at a rate equal to either (1) the rate (adjusted for any statutory reserve requirements for eurocurrency liabilities) for eurodollar deposits in the London interbank market, (2) a floating rate of interest set forth on the applicable LIBOR screen page designated by Bank of America, N.A., or (3) the highest of (a) the federal funds effective rate plus 0.5%, (b) the rate of interest as publicly announced by Bank of America, N.A., as its "prime rate" or (c) LIBOR plus 1.0%, in each case, plus an applicable margin.

As of June 30, 2020 , borrowings outstanding under the term loan facility were $2.0 billion and there were no borrowings outstanding under the revolving credit facility.

We continue to monitor developments related to the anticipated transition from LIBOR to an alternative benchmark reference rate, such as the Secured Overnight Financing Rate ("SOFR"), beginning January 1, 2022.

Additionally, we maintain contact with our lenders and other stakeholders to evaluate the potential effects of these changes on our future financing activities.

As of March 31, 2020 , the interest rates on the term loan facility and the revolving credit facility were 2.36% and 2.02% , respectively.

As of June 30, 2020 , the interest rate on the term loan facility was 1.55% .

In addition, we are required to pay a quarterly commitment fee with respect to the unused portion of the revolving credit facility at an applicable rate per annum ranging from 0.125% to 0.300% depending on our credit rating.

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Outstanding letters of credit under the revolving credit facility reduce the amount of borrowings available to us.

The total available commitments under the revolving credit facility at March 31, 2020 were $1,576.5 million .

Senior Unsecured Notes

We have $3.0 billion in aggregate principal amount of senior unsecured notes, consisting of the following:

(i) $1.0 billion aggregate principal amount of 2.650% senior notes due 2025;

(ii) $1.25 billion aggregate principal amount of 3.200% senior notes due 2029;

and (iii) $750.0 million aggregate principal amount of 4.150% senior notes due 2049.

Interest on the senior notes is payable semi-annually in arrears on each February 15 and August 15.

Each series of the senior notes is redeemable, at our option, in whole or in part, at any time and from time-to-time at the redemption prices set forth in the related indenture.

We have an additional $3.0 billion in aggregate principal amount of senior unsecured notes consisting of the following:

(i) $750 million aggregate principal amount of 3.800% senior notes due 2021;

(ii) $550 million aggregate principal amount of 3.750% senior notes due 2023;

(iii) $550 million aggregate principal amount of 4.000% senior notes due 2023;

(iv) $750 million aggregate principal amount of 4.800% senior notes due 2026;

and (v) $450 million aggregate principal amount of 4.450% senior notes due 2028.

For the 3.800% senior notes due 2021 and the 4.800% senior notes due 2026, interest is payable semi-annually each April 1 and October 1.

For the 3.750% senior notes due 2023, the 4.000% senior notes due 2023 and the 4.450% senior notes due 2028, interest is payable semi-annually each June 1 and December 1.

The amounts available to borrow under the revolving credit facility are also determined by our financial leverage covenant.

As of June 30, 2020 , the total available commitments under the revolving credit facility were $2.3 billion , and there were no outstanding borrowings under the facility.

Compliance with Covenants

The senior unsecured term loan and revolving credit facility contain customary conditions to funding, affirmative covenants, negative covenants, financial covenants and events of default.

As of March 31, 2020 , financial covenants under the term loan facility required a leverage ratio of 3.50 to 1.00 and an interest coverage ratio of 3.00 to 1.00.

We were in compliance with all applicable covenants as of March 31, 2020 .

As of June 30, 2020 , financial covenants under the term loan facility required a leverage ratio of 3.50 to 1.00 and an interest coverage ratio of 3.00 to 1.00.

We were in compliance with all applicable covenants as of June 30, 2020 .

Settlement Lines of Credit

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Accordingly, the amount of the outstanding lines of credit may exceed the stated credit limit.

As of March 31, 2020 and December 31, 2019 , a total of $58.0 million and $74.5 million , respectively, of cash on deposit was used to determine the available credit.

As of March 31, 2020 and December 31, 2019 , respectively, we had $375.2 million and $463.2 million outstanding under these lines of credit with additional capacity to fund settlement of $1,092.1 million as of March 31, 2020 .

During the three months ended March 31, 2020 , the maximum and average outstanding balances under these lines of credit were $679.0 million and $376.4 million , respectively.

The weighted-average interest rate on these borrowings was 1.99% and 3.16% at March 31, 2020 and December 31, 2019 , respectively.

See "Note 5 —Long-Term Debt and Lines of Credit" in the notes to the accompanying unaudited consolidated financial statements for further information about our borrowing agreements and our lease liabilities.

As of June 30, 2020 and December 31, 2019 , a total of $62.1 million and $74.5 million , respectively, of cash on deposit was used to determine the available credit.

As of June 30, 2020 and December 31, 2019 we had $439.5 million and $463.2 million , respectively, outstanding under these lines of credit with additional capacity to fund settlement of $1,124.6 million as of June 30, 2020 .

During the six months ended June 30, 2020 , the maximum and average outstanding balances under these lines of credit were $508.5 million and $282.9 million , respectively.

The weighted-average interest rate on these borrowings was 2.11% and 3.16% at June 30, 2020 and December 31, 2019 , respectively.

See "Note 5 —Long-Term Debt and Lines of Credit" in the notes to the accompanying unaudited consolidated financial statements for further information about our borrowing agreements.

Commitments and Contractual Obligations

During the three months ended March 31, 2020 , our commitments and contractual obligations increased from the amounts disclosed in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations-Commitments and Contractual Obligations" in our Annual Report on Form 10-K for the year ended December 31, 2019 .

During the six months ended June 30, 2020 , our commitments and contractual obligations increased from the amounts disclosed in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations-Commitments and Contractual Obligations" in our Annual Report on Form 10-K for the year ended December 31, 2019 .

The increase primarily relates to the acquisition of software and related services for $293.8 million .

We financed $97.6 million of this amount utilizing a two-year vendor financing arrangement.

As of March 31, 2020 , the estimated remaining purchase commitments for this acquisition are $47.6 million during the remainder of 2020, $64.9 million during 2021, $66.9 million during 2022 and $16.8 million during 2023.

As of June 30, 2020 , the estimated remaining purchase commitments for this acquisition were $29.7 million during the remainder of 2020, $64.9 million during 2021, $66.9 million during 2022 and $16.8 million during 2023.

Effects of the COVID-19 Pandemic on our Critical Accounting Policies

Because of the effects of the COVID-19 pandemic on our business beginning in mid-March, we evaluated the potential effects on our financial statements as of and for the three months ended March 31, 2020 .

Because of the effects of the COVID-19 pandemic on our business, we evaluated the potential effects on our financial statements as of June 30, 2020 and for the three and six months then ended.

However, the magnitude and duration of the ultimate effect of the COVID-19 pandemic are not possible to predict at this time, and our assessments are therefore subject to material revision.

Goodwill - We considered a variety of factors that might indicate that it is more likely than not that the fair value of any reporting unit is below its carrying amount at March 31, 2020 , including general macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of our reporting units, events or changes affecting the composition or carrying amount of the net assets of our reporting units, our share price and other relevant events.

Goodwill - We considered a variety of factors that might indicate that it is more likely than not that the fair value of any reporting unit is below its carrying amount at June 30, 2020 , including general macroeconomic conditions, industry and market conditions, cost factors, overall financial performance of our reporting units, events or changes affecting the composition or carrying amount of the net assets of our reporting units, our share price and other relevant events.

For certain of our reporting units that were recently acquired in the Merger, we also considered the expected near term impact of the COVID-19 pandemic on revenues and our cost mitigation efforts as well as longer term performance expectations.

Based on the analyses completed, we believe it is not more likely than not that the carrying amount of any our reporting units exceeded the fair value as of March 31, 2020 .

Based on the analyses completed, we believe it is not more likely than not that the carrying amount of any of our reporting units exceeded the fair value as of June 30, 2020 .

Off-Balance Sheet Arrangements

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Accordingly, we cannot guarantee that our plans and expectations will be achieved.

Such statements may include, but are not limited to, statements about the effects of the COVID-19 pandemic on our business, including estimates of the effects of the pandemic on our revenues and financial operating results, the effects of actions taken by us in response to the pandemic, statements about the anticipated benefits of the Merger, including our future financial and operating results, the combined company’s plans, objectives, expectations and intentions, statements about our expected financial and operating results, projected future growth of business, and other statements that are not historical facts.

Examples of forward-looking statements include, but are not limited to, statements we make regarding the effects of the COVID-19 pandemic on our business, including estimates of the effects of the pandemic on our revenues and financial operating results, the effects of actions taken by us in response to the pandemic, the anticipated benefits of the Merger, including our future financial and operating results, the combined company’s plans, objectives, expectations and intentions, our expected financial and operating results, projected future growth of business, or completion of anticipated benefits of strategic initiatives, and other statements that are not historical facts.

Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained, and therefore actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements.

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the effects and duration of global economic, political, market, health and social events or other conditions, including the effects and duration of the COVID-19 pandemic;

regulatory measures or voluntary actions, including social distancing, shelter-in-place orders, shutdowns of nonessential businesses and similar measures imposed or undertaken in an effort to combat the spread of the COVID-19 pandemic;

regulatory measures or voluntary actions, including social distancing, shelter-in-place orders, reinstating of opening restrictions on nonessential businesses and similar measures imposed or undertaken in an effort to combat the spread of the COVID-19 pandemic;

management’s assumptions and projections used in their estimates of the timing and severity of the effects of the COVID-19 pandemic on our future revenues and results of operations;

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and events beyond our control, such as acts of terrorism, and other factors included in the “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, and in other documents that we file with the SEC, which are available at http://www.sec.gov.

Any forward-looking statements speak only as of the date of this communication or as of the date they were made, and we undertake no obligation to update forward-looking statements, except as required by law.

looking statements speak only as of the date of this communication or as of the date they were made, and we undertake no obligation to update forward-looking statements, except as required by law.

ITEM 3—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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What changed 10-Q

Item 2. Management’s Discussion and Analysis