GLOBAL PAYMENTS INC 10-K

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Item 6 - Selected Financial Data" and "Item 8 - Financial Statements and Supplementary Data." This discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our actual results could differ materially from the results anticipated by our forward-looking statements as a result of many known and unknown factors, including but not limited to, those discussed in "Item 1A - Risk Factors." See "Cautionary Notice Regarding Forward-Looking Statements" located above in "Item 1 - Business." Discussions of our results of operations for the year ended December 31, 2019 compared to the year ended December 31, 2018 that have been omitted under this item can be found in "Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K for the year ended December 31, 2019, which was filed with the United States Securities and Exchange Commission on February 21, 2020. Executive Overview We are a leading pure play payments technology company delivering innovative software and services to our customers globally. Our technologies, services and employee expertise enable us to provide a broad range of solutions that allow our customers to operate their businesses more efficiently across a variety of channels around the world. We operate in three reportable segments: Merchant Solutions, Issuer Solutions and Business and Consumer Solutions. See "Note 16—Segment Information" in the notes to the accompanying consolidated financial statements for additional information about our segments. On September 18, 2019, we consummated our merger with Total System Services, Inc. ("TSYS") (the "Merger") for total purchase consideration of $24.5 billion, primarily funded with shares of our common stock. Prior to the Merger, TSYS was a leading global payments provider, offering seamless, secure and innovative solutions to issuers, merchants and consumers. Consolidated operating results for the year ended December 31, 2020 reflect a full year of the acquired operations of TSYS, while the prior year includes the acquired operations of TSYS only from the acquisition date through December 31, 2019. We continue to focus on merger and integration activities, such as combining business operations, aligning go-to-market strategies, streamlining technology infrastructure, eliminating duplicative corporate and operational support structures and realizing scale efficiencies. We also continue to invest in 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. See "Note 2—Acquisitions" in the notes to the accompanying consolidated financial statements for further discussion of the Merger. Effects of COVID-19 on Our Business In March 2020, the World Health Organization declared the outbreak of the COVID-19 virus a global pandemic. During 2020 and continuing into 2021, the global economy has been, and continues to be, affected by COVID-19. The pandemic has caused and may continue to cause significant disruptions to businesses and markets worldwide as the virus continues to spread or has a resurgence in certain jurisdictions. The pandemic and measures to prevent its spread affected our financial results during 2020. As governments took actions to encourage social distancing and implement shelter-in-place directives, spending and transaction volumes decreased beginning in mid-March 2020. We saw improvement in our financial results and positive trends during the latter half of 2020 as certain state and local governments in the United States and abroad began to gradually ease restrictions, certain businesses reopened and spending increased. While we continue to see signs of economic recovery, the 32 Table of Contents rate of recovery has been affected by the recent reinstatement of restrictions in certain jurisdictions both in the United States and internationally due to a resurgence of the virus. We have taken a number of actions to preserve our available capital and provide financial flexibility in response to the effects of COVID-19 on our business, including temporarily suspending our share repurchase program during the second and third quarters of 2020 and reducing our planned capital investments in the business. We also 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 continue to closely monitor the evolving effects of the COVID-19 pandemic; however, the implications on future global economic conditions and related effects on our business and financial condition are difficult to predict due to uncertainties around the ultimate severity, scope and duration of the pandemic, the availability and effectiveness of treatments or vaccines and the direction or extent of current or future restrictive actions that may be imposed by governments or public health authorities. While we expect the COVID-19 pandemic will continue to have an adverse effect on our revenues and earnings in 2021, we do expect a steady and progressive recovery throughout the year. For a further discussion of trends, uncertainties and other factors that could affect our future operating results related to the effects of the COVID-19 pandemic, see “Item 1A – Risk Factors.” Emerging Trends The payments technology industry continues to grow worldwide and as a result, certain large payment technology companies, including us, have expanded operations globally by pursuing acquisitions and creating alliances and joint ventures. We expect to continue to expand into new markets internationally and increase our scale and improve our competitiveness in existing markets by pursuing additional acquisitions and joint ventures. The industry continues to grow as a result of wider merchant acceptance and increased use of credit and debit cards, advances in payment processing technology and migration to ecommerce, omnichannel and contactless payment solutions. The proliferation of credit and debit cards, as well as other digital payment solutions, has made the acceptance of electronic payments a virtual necessity for many businesses, regardless of size, in order to remain competitive. Further, the expanding digitization of the economy and availability and access to financial services increases the demand for cards and electronic payments, which in turn drives growth in acceptance and transaction volumes. The outbreak of the COVID-19 virus in 2020 introduced numerous economic and operational challenges for many industries and businesses. However, the outbreak has also accelerated the use of electronic payments, the need for development of technologies and electronic-based solutions and expansion of ecommerce, omnichannel and contactless payment solutions. We believe that the number of electronic payment transactions will continue to grow and that an increasing percentage of these will be facilitated through emerging technologies. As a result, we expect an increasing portion of our future capital investment will be allocated to support the development of new and emerging technologies. We also believe new markets will continue to develop in areas that have been previously dominated by paper-based transactions. We expect industries such as education, government and healthcare, as well as recurring payments and business-to-business payments, to continue to see transactions migrate to electronic-based solutions. We anticipate that the continued development of new services and the emergence of new vertical markets will be a factor in the growth of our business and our revenue in the future. For a further discussion of trends, uncertainties and other factors that could affect our continuing operating results, see the section entitled "Risk Factors" in Item 1A in this Annual Report on Form 10-K. Results of Operations Revenues Merchant Solutions. The majority of our Merchant Solutions segment revenues is generated by services priced as a percentage of transaction value or a specified fee per transaction, depending on card type or the vertical. We also earn software subscription and licensing fees, as well as other fees based on specific value-added services that may be unrelated to the number or value of transactions. These revenues depend upon a number of factors, such as demand for and price of our services, the technological competitiveness of our offerings, our reputation for providing timely and reliable service, competition within our industry and general economic conditions. We provide payment technology and software solutions to customers and fund settlement either directly, in markets where we have direct membership with the payment networks, or through our relationship with a member financial institution in 33 Table of Contents markets where we are sponsored. Revenues are generally recognized in the amount of customer billing, net of interchange fees and payment network fees. We market our services through a variety of relationship-led and technology enabled distribution channels, including a direct sales force, trade associations, agent and enterprise software providers and referral arrangements with value-added resellers ("VARs"). We also sell services to ISOs and financial institutions. In certain of these arrangements, the ISO receives a share of the customer profitability in the form of a monthly residual payment, which is reflected as a component of selling, general and administrative expenses in the consolidated statements of income. Issuer Solutions. Issuer Solutions segment revenues are derived from long-term processing contracts with financial institutions and other financial services providers. Payment processing services revenues are generated primarily from charges based on the number of accounts on file, transactions and authorizations processed, statements generated and/or mailed, managed services, cards embossed and mailed, and other processing services for cardholder accounts on file. Most of these contracts have prescribed annual minimums, penalties for early termination, and service level agreements that may affect contractual fees if specific service levels are not achieved. Issuer Solutions revenues also include loyalty redemption services and professional services. Business and Consumer Solutions. Business and Consumer Solutions segment revenues principally consist of fees collected from cardholders and fees generated by cardholder activity in connection with the programs that we manage. Customers are typically charged a fee for each purchase transaction made using their cards, unless the customer is on a monthly or annual service plan, in which case the customer is instead charged a monthly or annual subscription fee, as applicable. Customers are also charged a monthly maintenance fee after a specified period of inactivity. We also charge fees associated with additional services offered in connection with certain cards, including the use of overdraft features, a variety of bill payment options, card replacement, foreign exchange and card-to-card transfers of funds initiated through our call centers. Revenues are recognized net of fees charged by the payment networks for services they provide in processing transactions routed through them. Operating Expenses Cost of Service Cost of service consists primarily of salaries, wages and related expenses paid to operations and technology-related personnel, including those who monitor our transaction processing systems and settlement functions; the cost of transaction processing systems, including third-party services; the cost of network telecommunications capability; depreciation and occupancy costs associated with the facilities supporting these functions; amortization of intangible assets; amortization of costs to fulfill customer contracts; provisions for operating losses; and, when applicable, integration expenses. Selling, General and Administrative Expenses Selling, general and administrative expenses consist primarily of salaries, wages, commissions and related expenses paid to sales personnel, customer support functions other than those supporting revenue, administrative employees and management; share-based compensation expense; amortization of costs to obtain customer contracts; residuals paid to ISOs; fees paid to VARs, independent contractors and other third parties; other selling expenses; occupancy costs of leased space directly related to these functions; advertising costs; and, when applicable, acquisition and integration expenses. Operating Income and Operating Margin For the purpose of discussing segment operations, we refer to "operating income," which is calculated by subtracting segment direct expenses from segment revenues. Overhead and shared expenses, including share-based compensation, are not allocated to segment operations; they are reported in the caption "Corporate." Similarly, we refer to "operating margin" regarding segment operations, which is calculated by dividing segment operating income by segment revenues. Equity in Income of Equity Method Investments As a result of the Merger, we have equity method investments, including a 45% investment in China UnionPay Data Co., Ltd., which we account for using the equity method of accounting. Equity in income of equity method investments reflects our proportional share of earnings from these investments. 34 Table of Contents Year Ended December 31, 2020 Compared to Year Ended December 31, 2019 The following table sets forth key selected financial data for the years ended December 31, 2020 and 2019, this data as a percentage of total revenues, and the changes between periods in dollars and as a percentage of the prior-period amount. The income statement data for the years ended December 31, 2020 and 2019 are derived from the accompanying consolidated financial statements included in "Item 8 - Financial Statements and Supplementary Data." Year Ended December 31, Year Ended December 31, (dollar amounts in thousands) 2020 % of Revenue (1) 2019 % of Revenue (1) Change % Change Revenues (2) : Merchant Solutions $ 4,688,335 63.2 % $ 4,098,580 83.4 % $ 589,755 14.4 % Issuer Solutions 1,981,435 26.7 % 604,654 12.3 % 1,376,781 NM Business and Consumer Solutions 829,505 11.2 % 227,440 4.6 % 602,065 NM Intersegment eliminations (75,717) (1.0) % (18,782) (0.4) % (56,935) NM Consolidated revenues $ 7,423,558 100.0 % $ 4,911,892 100.0 % $ 2,511,666 51.1 % Consolidated operating expenses (2) : Cost of service $ 3,650,727 49.2 % $ 2,073,803 42.2 % $ 1,576,924 76.0 % Selling, general and administrative 2,878,878 38.8 % 2,046,672 41.7 % 832,206 40.7 % Operating expenses $ 6,529,605 88.0 % $ 4,120,475 83.9 % $ 2,409,130 58.5 % Operating income (loss) (2)(3) : Merchant Solutions $ 1,162,741 15.7 % $ 1,148,975 23.4 % $ 13,766 1.2 % Issuer Solutions 277,651 3.7 % 82,172 1.7 % 195,479 NM Business and Consumer Solutions 138,630 1.9 % 19,473 0.4 % 119,157 NM Corporate (685,069) (9.2) % (459,203) (9.3) % (225,866) 49.2 % Operating income $ 893,953 12.0 % $ 791,417 16.1 % $ 102,536 13.0 % Operating margin (2) : Merchant Solutions 24.8 % 28.0 % (3.2) % Issuer Solutions 14.0 % 13.6 % 0.4 % Business and Consumer Solutions 16.7 % 8.6 % 8.1 % 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, see "Note 2 — Acquisitions" in the notes to the accompanying consolidated financial statements. (3) During the years ended December 31, 2020 and 2019, operating income for our Merchant Solutions segment reflected the effect of acquisition and integration expenses of $7.0 million and $56.1 million. Operating loss for Corporate included acquisition and integration expenses of $313.0 million and $199.5 million during the years ended December 31, 2020 and 2019, respectively. Acquisition and integration expenses were primarily related to the Merger. Revenues Consolidated revenues for the year ended December 31, 2020 increased by 51.1% to $7,423.6 million, compared to $4,911.9 million for the prior year, primarily due to additional revenues from the acquired operations of TSYS. Revenues from the acquired operations of TSYS were $4,205.2 million for the year ended December 31, 2020, compared to $1,215.0 million for the prior year. Starting in mid-March 2020, COVID-19 had an unfavorable effect on our revenues; however, we saw improvements throughout the latter half of 2020. Merchant Solutions Segment. Revenues from our Merchant Solutions segment increased to $4,688.3 million, compared 35 Table of Contents to $4,098.6 million for the prior year, primarily due to additional revenues from the acquired operations of TSYS. Starting in mid-March, COVID-19 had an unfavorable effect on our revenues as a result of a reduction in spending and transaction volumes and closures of certain of our customer businesses throughout North America, Europe and Asia Pacific. We saw improvement in our financial results during the latter half of 2020 as state and local governments in the United States and governments abroad began to gradually ease pandemic-related restrictions and spending increased. While we continue to see signs of economic recovery, the rate of recovery has been affected by the reinstatement of restrictions in certain jurisdictions due to a resurgence of the virus during the fourth quarter. Issuer Solutions Segment. Revenues from our Issuer Solutions segment for the year ended December 31, 2020 was $1,981.4 million, compared to $604.7 million for the prior year, primarily reflecting revenues from the acquired operations of TSYS. Starting in mid-March, COVID-19 had an unfavorable effect on our revenues as a result of lower transaction volumes, particularly related to the processing of commercial cards. We saw improvement in our financial results during the latter half of 2020 as state and local governments in the United States and governments abroad began to gradually ease pandemic-related restrictions. While we continue to see signs of economic recovery, the rate of recovery has been affected by the reinstatement of restrictions in certain jurisdictions due to a resurgence of the virus during the fourth quarter. Business and Consumer Solutions Segment. Revenues from our Business and Consumer Solutions segment for the year ended December 31, 2020 was $829.5 million, compared to $227.4 million for the prior year, reflecting revenues from the acquired operations of TSYS. Our Business and Consumer Solutions segment experienced an unfavorable effect on revenues starting in mid-March due to reduced consumer spending as a result of COVID-19; however, these declines were mitigated by revenues from our customers loading individual stimulus payments and federal supplementary unemployment insurance distributions resulting from the Coronavirus Aid, Relief and Economic Security Act in the second and third quarters. Additionally, we saw improvement in our financial results throughout the latter half of 2020 from increases in consumer spending as state and local governments in the United States began to gradually ease restrictions. Additional stimulus payment distributions in 2021 to provide relief from the effect of the COVID-19 pandemic could have a positive effect on our revenues; however, the ultimate timing and magnitude is difficult to predict. Operating Expenses Cost of Service. Cost of service for the year ended December 31, 2020 increased by 76.0% to $3,650.7 million, compared to $2,073.8 million for the prior year, primarily due to additional costs associated with the acquired operations of TSYS, including the amortization of intangibles. Cost of service for the year ended December 31, 2020 reflects amortization of acquired intangibles of $1,256.9 million, compared to $667.1 million for the prior year. The year ended December 31, 2019 also reflects integration expenses of $41.8 million. Cost of service as a percentage of revenues increased to 49.2% for the year ended December 31, 2020, compared to 42.2% 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 year ended December 31, 2020 increased by 40.7% to $2,878.9 million, compared to $2,046.7 million for the prior year. The increase in selling, general and administrative expenses compared to the prior year was primarily due to additional costs associated with the acquired operations of TSYS. Additionally, selling, general and administrative expenses included acquisition and integration expenses of $319.5 million, compared to $213.8 million for the prior year. Selling, general and administrative expenses as a percentage of revenues decreased to 38.8% for the year ended December 31, 2020, compared to 41.7% for the prior year, primarily due to the favorable effects of Merger-related cost synergies and cost-saving actions taken to mitigate the financial effects of the COVID-19 pandemic. Corporate. Corporate expenses increased by $225.9 million to $685.1 million for the year ended December 31, 2020, compared to $459.2 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 years ended December 31, 2020 and 2019, Corporate expenses included acquisition and integration expenses of $313.0 million and $199.5 million, respectively. Certain of these Merger-related integration activities resulted in the recognition of one-time employee termination benefits. During the years ended December 31, 2020 and 2019, Corporate expenses included charges for employee termination benefits of $83.3 million and $57.1 million, respectively, which included $6.7 million and $17.3 million, respectively, of share-based compensation expense. In addition, during the year ended December 31, 2019, we wrote-off capitalized software and other assets of $40.2 million for legacy Global Payments technology that will no longer be utilized for the combined company. We expect to incur additional charges as Merger-related integration activities continue in 2021. 36 Table of Contents Operating Income and Operating Margin Consolidated operating income for the year ended December 31, 2020 increased to $894.0 million, compared to $791.4 million for the prior year. Operating margin for the year ended December 31, 2020 decreased to 12.0%, compared to 16.1% for the prior year. Consolidated operating income for the year ended December 31, 2020 includes income from the acquired operations of TSYS of $538.0 million compared to $78.7 million for the prior year. Consolidated operating income for the year ended December 31, 2020 reflects an increase in amortization of acquired intangibles and acquisition and integration expenses of $589.8 million and $64.4 million, respectively, compared to the prior year. The unfavorable effects of COVID-19 on our revenues and incremental expenses directly related to COVID-19 also negatively affected consolidated operating income and operating margin compared to the prior year. We saw improvement in our financial results and positive trends throughout the latter half of 2020 as a result of the recovery seen across our markets. Further, Merger-related cost synergies and cost-saving actions taken to mitigate the financial effects of the COVID-19 pandemic had a favorable effect on operating income and operating margin for the year ended December 31, 2020. Merchant Solutions Segment . Operating income in our Merchant Solutions segment was $1,162.7 million for the year ended December 31, 2020, compared to $1,149.0 million for the prior year. Operating income and operating margin in our Merchant Solutions segment reflect additional income from the acquired operations of TSYS, partially offset by the unfavorable effects of COVID-19 on our revenues, which negatively affected operating income and operating margin during 2020. We saw improvement in our financial results and positive trends throughout the latter half of 2020 as a result of the recovery seen across our geographic markets. Further, Merger-related cost synergies and cost-saving actions taken to mitigate the financial effects of the COVID-19 pandemic had a favorable effect on operating income and operating margin for the year ended December 31, 2020. Issuer Solutions and Business and Consumer Solutions Segments . Operating income in our Issuer Solutions and Business and Consumer Solutions segments primarily reflects the additional income from the acquired operations of TSYS. Other Income/Expense, Net Interest and other income for the year ended December 31, 2020 increased by $12.1 million to $43.6 million, compared to the prior year, primarily due to a gain of $27.7 million in connection with the release and conversion of a portion of our Visa convertible preferred shares. See "Note 7—Other Assets" in the notes to the accompanying consolidated financial statements for further discussion of this transaction. Interest and other income for the year ended December 31, 2019 included interest earned on the net proceeds from the issuance of our unsecured senior notes while they were in escrow. Interest and other expense for the year ended December 31, 2020 increased by $38.6 million to $343.5 million, compared to the prior year, as a result of the increase in our average outstanding borrowings. Interest expense for the year ended December 31, 2019 included fees and charges of $30.4 million in connection with financing activities related to the Merger. These fees and charges included fees associated with bridge financing and charges for the write-off of unamortized debt issuance costs related to borrowings under the credit facility that was extinguished prior to the completion of the Merger. Income Tax Expense Our effective income tax rate for the years ended December 31, 2020 and 2019 was 13.0% and 12.0%, respectively. Our effective tax rate for the year ended December 31, 2020 reflects the benefit of tax credits, foreign interest income not subject to tax, excess tax benefits from equity awards and the foreign-derived intangible income deduction. Our effective tax rate for the year ended December 31, 2019 reflects the effect of the discrete benefits related to the Merger, principally the reduction of our U.S. deferred tax liability resulting from the effects of the Merger on the apportionment of income among states, and a benefit from the foreign-derived intangible income deduction and tax credits. Net Income Attributable to Global Payments Net income attributable to Global Payments increased to $584.5 million compared to $430.6 million for the prior-year period, reflecting the change in operating income and additional equity in income of equity method investments. 37 Table of Contents Diluted Earnings per Share Diluted earnings per share was $1.95 compared to $2.16 for the prior year. Diluted earnings per share for the year ended December 31, 2020 reflects the additional income from the acquired operations of TSYS. Additionally, diluted earnings per share for the year ended December 31, 2020 reflects an increase in the weighted-average number of shares outstanding as a result of issuing common shares as purchase consideration in the Merger. Liquidity and Capital Resources In the ordinary course of our business, a significant portion of our liquidity comes from operating cash flows and borrowings, including the capacity under our credit facilities. Cash flow from operating activities is used to make planned capital investments in our business, to pursue acquisitions that meet our corporate objectives, to pay dividends, to pay principal and interest on our outstanding debt and to repurchase shares of our common stock. Accumulated cash balances are invested in high-quality, marketable short-term instruments. Our capital plan objectives are to support our operational needs and strategic plan for long-term growth while maintaining a low cost of capital. We use a combination of bank financing, such as borrowings under our credit facilities and senior note issuances, for general corporate purposes and to fund acquisitions. In addition, specialized lines of credit are also used in certain of our markets to fund merchant settlement prior to receipt of funds from the card network. 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 temporarily implemented measures to preserve liquidity, taking into account the potential effects of COVID-19, including the reduction of certain operating expenses, including compensation costs, other discretionary expenses and planned capital expenditures. We also temporarily suspended repurchases of our common stock during the second and third quarters of 2020. 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 December 31, 2020, we had cash and cash equivalents totaling $1,945.9 million. Of this amount, we consider $1,100.9 million to be available for general purposes, of which $32.3 million is undistributed foreign earnings considered to be indefinitely reinvested outside the United States. The available cash of $1,100.9 million does not include the following: (i) settlement-related cash balances, (ii) funds held as collateral for merchant losses ("Merchant Reserves") and (iii) funds held for customers. Settlement-related cash balances represent funds that we hold when the incoming amount from the card networks precedes the funding obligation to the merchant. Settlement-related cash balances are not restricted; however, these funds are generally paid out in satisfaction of a processing obligation the following day. Merchant Reserves serve as collateral to minimize contingent liabilities associated with any losses that may occur under the merchant's agreement. While this cash is not restricted in its use, we believe that designating this cash to collateralize Merchant Reserves 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 include amounts collected prior to remittance to or at the direction of our customers. We also had restricted cash of $143.9 million as of December 31, 2020, representing amounts deposited by customers for prepaid card transactions. These balances are considered cardholder funds held and are subject to local regulatory restrictions requiring appropriate segregation and restriction in their use. Operating activities provided net cash of $2,314.2 million and $1,391.3 million for the years ended December 31, 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, including changes in settlement processing assets and obligations, and by the effects of businesses we acquire that have different working capital requirements. Changes in settlement processing assets and obligations increased operating cash flows by $125.9 million and $213.7 million during the years ended December 31, 2020 and 2019, respectively. The increase in cash flows from operating activities from the prior year was primarily due to the increase in net earnings before certain noncash items, including amortization of acquired intangibles and depreciation and amortization of property and equipment, primarily as a result of the additional income from the acquired operations of TSYS. We used net cash in investing activities of $438.3 million and $917.1 million during the years ended December 31, 2020 and 2019, respectively. Cash used for investing activities primarily represents cash used to fund acquisitions, net of cash and restricted cash acquired, and capital expenditures. During the year ended December 31, 2020, we used cash of $167.9 million for acquisitions, and recorded a cash inflow of $119.4 million from restricted cash balances acquired during the year. During 38 Table of Contents the year ended December 31, 2019, we used cash of $1,093.6 million for acquisitions. Cash from investing activities for the year ended December 31, 2020 also reflects cash received from the sale of Visa common shares of $27.7 million. We made capital expenditures of $436.2 million and $307.9 million to purchase property and equipment during the years ended December 31, 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, and we anticipate capital expenditures and other investments in the business will slowly return to near pre-COVID levels. However, we continue to monitor the effects of COVID-19 and adjust our future level of capital investments accordingly. 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. Our borrowing arrangements are further described in "Note 8—Long-Term Debt and Lines of Credit" in the notes to the accompanying 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, cash distributions made to our shareholders, and cash distributions to or purchase of shares from noncontrolling interests. Cash flows from financing activities used net cash of $1,546.1 million and $28.7 million during the years ended December 31, 2020 and 2019, respectively. Proceeds from long-term debt were $2,401.1 million and $7,203.9 million for the years ended December 31, 2020 and 2019, respectively. Repayments of long-term debt were $2,342.1 million and $6,484.7 million for the years ended December 31, 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 in aggregate principal amount of senior unsecured notes. We used the net proceeds from this offering to repay a portion of the outstanding indebtedness on our revolving credit facility and for general corporate purposes. For the year ended December 31, 2019, in connection with financing activities associated with the Merger, we received proceeds of $2,973.2 million from the issuance of senior unsecured notes and $2,868.0 million from our senior unsecured credit facility. We used these proceeds to repay TSYS' unsecured revolving credit facility, to refinance certain of our existing indebtedness, to fund cash payments made in lieu of fractional shares payable in accordance with the terms of the Merger and to pay transaction fees and costs related to the Merger. During the year ended December 31, 2019, repayments of long-term debt also included $5,127.5 million for the repayment of all outstanding principal under our secured term loan and revolving credit facility, which we extinguished in connection with the Merger. Activity under our settlement lines of credit is affected primarily by timing of month-end and transaction volume. During the years ended December 31, 2020 and 2019, we had net repayments of settlement lines of credit of $133.3 million and $236.5 million, respectively. We repurchase our common stock, mainly through open market repurchase plans and, at times, through accelerated share repurchase ("ASR") programs. During the years ended December 31, 2020 and 2019, we used cash of $631.1 million and $311.4 million, respectively, to repurchase shares of our common stock. We temporarily suspended repurchases of our common stock during the second and third quarters of 2020, and reactivated our repurchase program in the fourth quarter of 2020. As of December 31, 2020, we had $1,020.0 million of share repurchase authority remaining under a share repurchase program authorized by our board of directors. On January 28, 2021, our board of directors approved an increase to our existing share repurchase program authorization, which raised the total available authorization to $1.5 billion. On February 10, 2021, we entered into an ASR agreement with a financial institution to repurchase an aggregate of $500 million of our common stock. In exchange for an up-front payment of $500 million, the financial institution committed to deliver a number of shares during the ASR program purchase period, which will end on March 31, 2021. On February 12, 2021, 2,090,713 shares were initially delivered to us. We paid dividends to our common shareholders in the amounts of $233.2 million and $63.5 million during the years ended December 31, 2020 and 2019. During the year ended December 31, 2019, we funded assumed dividends payable (declared by TSYS' board of directors prior to consummation of the Merger) to former TSYS shareholders in the amount of $23.2 million. During the years ended December 31, 2020 and 2019, we made distributions to noncontrolling interest in the amounts of $26.2 million and $31.6 million, respectively. During the year ended December 31, 2020, we paid $578.2 million to noncontrolling interest holders to increase our controlling financial interest in Comercia Global Payments Entidad de Pago, S.L. (“Comercia”) from 51% to 80%. We funded the transaction with a combination of available cash resources and borrowings on our unsecured revolving credit facility. 39 Table of Contents Long-Term Debt and Lines of Credit Senior Unsecured Notes We have $7.1 billion in aggregate principal amount of senior unsecured notes, which mature at various dates ranging from April 2021 to August 2049. Interest on the senior notes is payable semi-annually at various dates. Each series of the senior notes is redeemable, at our option, in whole or in part, at any time and from time-to-time at the redemption prices set forth in the related indenture. On May 15, 2020, we issued $1.0 billion in aggregate principal amount of 2.900% senior unsecured notes due May 2030 and received proceeds of $996.7 million. We incurred debt issuance costs of approximately $8.4 million, including underwriting fees, fees for professional services and registration fees, which were capitalized and reflected as a reduction of the related carrying amount of the notes in our consolidated balance sheet at December 31, 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 other outstanding unsecured and unsubordinated indebtedness. We used the net proceeds from the offering to repay a portion of the outstanding indebtedness on our revolving credit facility and for general corporate purposes. On August 14, 2019, we completed the public offering and issuance of $3.0 billion 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, beginning on February 15, 2020. 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 issued the senior notes at a total discount of $6.1 million and capitalized related debt issuance costs of $29.6 million. From August 14, 2019 until the closing of the Merger on September 18, 2019, the proceeds from the issuance of the senior notes were held in escrow. Upon closing, the funds were released and used together with borrowings under the term loan facility and the revolving credit facility, as well as cash on hand, to repay TSYS' unsecured revolving credit facility, refinance certain of our existing indebtedness, fund cash payments made in lieu of fractional shares and pay transaction fees and costs related to the Merger. In addition, in connection with the Merger, we assumed $3.0 billion aggregate principal amount of senior unsecured notes of TSYS, consisting of the following: (i) $750.0 million aggregate principal amount of 3.800% senior notes due 2021; (ii) $550.0 million aggregate principal amount of 3.750% senior notes due 2023; (iii) $550.0 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. Senior Unsecured Credit Facilities We have a term loan credit agreement ("Term Loan Credit Agreement") and a revolving credit agreement ("Unsecured Revolving Credit Agreement") in each case with Bank of America, N.A., as administrative agent, and a syndicate of financial institutions, as lenders and other agents. The Term Loan Credit Agreement provides for a senior unsecured $2.0 billion term loan facility, and the Unsecured Revolving Credit Agreement provides for a senior unsecured $3.0 billion revolving credit facility. Borrowings under the term loan facility were made in U.S. dollars and borrowings under the revolving credit facility are available to be made in U.S. dollars, euros, sterling, Canadian dollars and, subject to certain conditions, certain other currencies at our option. Borrowings in U.S. dollars and certain other London Interbank Offered Rate ("LIBOR")-quoted currencies will bear interest, at our option, at a rate equal to either (1) the rate (adjusted for any statutory reserve requirements for eurocurrency liabilities) for eurodollar deposits in the London interbank market, (2) a floating rate of interest set forth on the applicable LIBOR screen page designated by Bank of America 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 December 31, 2020, borrowings outstanding under the term loan facility and the revolving credit facility were $2.0 billion and $36.0 million, respectively. 40 Table of Contents 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 any future financing activities. As of December 31, 2020, the interest rates on the term loan facility and the revolving credit facility were 1.52% and 1.48%, respectively . In addition, we are required to pay a quarterly commitment fee with respect to the unused portion of the revolving credit facility at an applicable rate per annum ranging from 0.125% to 0.300% depending on our credit rating. Beginning on December 31, 2022, and at the end of each quarter thereafter, the term loan facility must be repaid in quarterly installments in the amount of 2.50% of original principal through the maturity date with the remaining principal balance due upon maturity in September 2024. The revolving credit facility also matures in September 2024. We may issue standby letters of credit of up to $250 million in the aggregate under the revolving credit facility. Outstanding letters of credit under the revolving credit facility reduce the amount of borrowings available to us. The amounts available to borrow under the revolving credit facility are also determined by a financial leverage covenant. As of December 31, 2020, the total available commitments under the revolving credit facility were $2.1 billion. Bridge Facility On May 27, 2019, in connection with our entry into the merger agreement with TSYS, we obtained commitments for a $2.75 billion, 364-day senior unsecured bridge facility (the "Bridge Facility"). On July 9, 2019, upon our entry into the senior unsecured term loan and revolving credit facilities described below, the aggregate commitments under the Bridge Facility were reduced to approximately $2.1 billion. Concurrently with the issuance of our senior unsecured notes, the remaining aggregate commitments under the Bridge Facility were reduced to zero and terminated. During the year ended December 31, 2019, we recognized $11.7 million of fees associated with the Bridge Facility in interest expense. Compliance with Covenants The senior unsecured term loan and revolving credit facilities contain customary conditions to funding, affirmative covenants, negative covenants, financial covenants and events of default. As of December 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 December 31, 2020. Settlement Lines of Credit In various markets where we do business, we have specialized lines of credit, which are restricted for use in funding settlement. The settlement lines of credit generally have variable interest rates, are subject to annual review and are denominated in local currency but may, in some cases, facilitate borrowings in multiple currencies. For certain of our lines of credit, the available credit is increased by the amount of cash we have on deposit in specific accounts with the lender. Accordingly, the amount of the outstanding line of credit may exceed the stated credit limit. As of December 31, 2020 and 2019, a total of $64.5 million an d $74.5 million, respectively, of cash on deposit was used to determine the available credit. As of December 31, 2020, w e had $358.7 million outs tanding under these lines of credit with additional capacity to fund settlement of $1,507.6 million. During the year ended December 31, 2020, the maximum and average outstanding balances under these lines of credit wer e $752.5 million and $341.4 million, respectively. The weighted-average interest rate on these borrowings was 2.35% at December 31, 2020. See "Note 6—Leases" and "Note 8—Long-Term Debt and Lines of Credit" in the notes to the accompanying consolidated financial statements for further information about our borrowing agreements and our lease liabilities. 41 Table of Contents Off-Balance Sheet Arrangements We have not entered into any off-balance sheet arrangements that have, or are reasonably likely to have, a material effect on our financial condition, revenues, results of operations, liquidity, capital expenditures or capital resources, other than the guarantee services described in "Note 1 - Basis of Presentation and Summary of Significant Accounting Policies" in the notes to the accompanying consolidated financial statements. BIN/ICA Agreements We have entered into sponsorship or depository and processing agreements with certain banks. These agreements allow us to use the banks' identification numbers, referred to as Bank Identification Number ("BIN") for Visa transactions and Interbank Card Association ("ICA") number for Mastercard transactions, to clear credit card transactions through Visa and Mastercard. Certain of such agreements contain financial covenants, and we were in compliance with all such covenants as of December 31, 2020. Commitments and Contractual Obligations The following table summarizes estimates of our contractual obligations and commitments as of December 31, 2020: Payments Due by Future Period Total Less than 1 Year 1-3 Years 3-5 Years More Than 5 Years (in thousands) Long-term debt $ 9,151,237 $ 806,834 $ 1,358,403 $ 2,786,000 $ 4,200,000 Interest on long-term debt (1) 2,300,558 307,243 533,413 371,469 1,088,433 Operating lease obligations (2) 633,190 122,002 183,476 122,817 204,895 Settlement lines of credit 358,698 358,698 — — — Purchase obligations (3) 1,279,965 292,865 290,096 169,504 527,500 Finance lease obligations (2) 80,653 25,841 36,296 18,516 — (1) Interest on long-term debt is based on effective rates and amounts borrowed as of December 31, 2020 and includes the estimated effect of interest rate swaps. Since the contractual rates for our long-term debt and settlements on our interest rate swaps are variable, actual cash payments may differ from the estimates provided. (2) Operating lease obligations did not include approximately $147.5 million for operating leases that had not yet commenced at December 31, 2020. Finance lease obligations did not include approximately $18.1 million for finance leases that has not yet commenced as of December 31, 2020. (3) Includes an estimate of future payments for noncancelable contractual obligations related to service arrangements with suppliers for fixed or minimum amounts. The table above excludes other obligations that we may have, such as employee benefit obligations and other noncurrent liabilities reflected in our consolidated balance sheet, because the timing of the related payments is not determinable or because there is no contractual obligation associated with the underlying obligations. Critical Accounting Policies and Estimates Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, which often require the judgment of management in the selection and application of certain accounting principles and methods. We consider the following accounting policies to be critical to understanding our consolidated financial statements because the application of these policies requires significant judgment on the part of management, and as a result, actual future developments may be different from those expected at the time that we make these critical judgments. We have discussed these critical accounting policies with the audit committee of the board of directors. Accounting estimates necessarily require subjective determinations about future events and conditions. Therefore, the following descriptions of our critical accounting policies are forward-looking statements, and actual results could differ materially from the results anticipated by these forward-looking statements. You should read the following in conjunction with "Note 1—Basis of Presentation and Summary of Significant Accounting Policies" of the notes to the accompanying 42 Table of Contents consolidated financial statements and the risk factors contained in "Item 1A - Risk Factors" of this Annual Report on Form 10-K. Business Combinations From time to time, we make strategic acquisitions that may have a material effect on our consolidated results of operations and financial position. The measurement principle for the assets acquired and the liabilities assumed in a business combination is at estimated fair value as of the acquisition date, with certain exceptions. The excess of the total consideration transferred over the amount of the net identifiable assets acquired determined in accordance with the measurement guidance for such items is recorded as goodwill. The estimates we use to determine the fair value of long-lived assets, such as intangible assets, can be complex and require significant judgments. We use information available to us to make fair value determinations and engage independent valuation specialists, when necessary, to assist in the fair value determination of significant acquired long-lived assets. The estimated fair values of customer-related and contract-based intangible assets are generally determined using the income approach, which is based on projected cash flows discounted to their present value using discount rates that consider the timing and risk of the forecasted cash flows. The discount rates used represented a risk adjusted market participant weighted-average cost of capital, derived using customary market metrics. These measures of fair value also require considerable judgments about future events, including forecasted revenue growth rates, forecasted customer attrition rates, contract renewal estimates and technology changes. Acquired technologies are generally valued using the replacement cost method, which requires us to estimate the costs to construct an asset of equivalent utility at prices available at the time of the valuation analysis, with adjustments in value for physical deterioration and functional and economic obsolescence. Trademarks and trade names are generally valued using the "relief-from-royalty" approach. This method assumes that trademarks and trade names have value to the extent that their owner is relieved of the obligation to pay royalties for the benefits received from them. This method requires us to estimate the future revenues for the related brands, the appropriate royalty rate and the weighted-average cost of capital. This measure of fair value requires considerable judgment about the value a market participant would be willing to pay in order to achieve the benefits associated with the trade name. While we use our best estimates and assumptions to determine the fair values of the assets acquired and the liabilities assumed, our estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to our consolidated statements of income. We are also required to estimate the useful lives of intangible assets to determine the period over which to recognize the amount of acquisition-related intangible assets as an expense. Certain assets may be considered to have indefinite useful lives. We periodically review the estimated useful lives assigned to our intangible assets to determine whether such estimated useful lives continue to be appropriate. Goodwill — We perform our annual goodwill impairment test as of October 1 each year. We test goodwill for impairment at the reporting unit level annually and more often if an event occurs or circumstances change that indicate the fair value of a reporting unit is below its carrying amount. We have the option of performing a qualitative assessment of impairment to determine whether any further quantitative assessment for impairment is necessary. The option of whether or not to perform a qualitative assessment is made annually and may vary by reporting unit. Factors we consider in the qualitative assessment include 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, sustained decrease in our share price, and other relevant entity-specific events. If we elect to bypass the qualitative assessment or if we determine, on the basis of qualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, a quantitative test would be required. The quantitative assessment compares the fair value of the reporting unit to its carrying amount, and recognizes an impairment loss for the amount by which a reporting unit’s carrying amount exceeds its fair value, without exceeding the total amount of goodwill allocated to that reporting unit. When applying the quantitative assessment, we determine the fair value of our reporting units based on a weighted average of multiple valuation techniques, principally a combination of an income approach and a market approach. The income approach calculates a value based upon the present value of estimated future cash flows, while the market approach uses earnings multiples of similarly situated guideline public companies. Determining the fair value of a reporting unit involves judgment and the use of significant estimates and assumptions, which include assumptions regarding the revenue growth rates and operating margins used to calculate estimated future cash flows, risk-adjusted discount rates and future economic and market conditions . 43 Table of Contents Our reporting units consist of the following: North America Payment Solutions, Integrated Solutions, Vertical Market Software Solutions, Europe Merchant Solutions, Spain Merchant Solutions, Asia-Pacific Merchant Solutions, Issuer Solutions and Business and Consumer Solutions. As of October 1, 2020, we performed a quantitative assessment of impairment for our Issuer Solutions and Business and Consumer Solutions reporting units and a qualitative assessment for all other reporting units. We determined on the basis of the quantitative assessment of our Issuer Solutions and Business and Consumer Solutions reporting units that the fair value of each reporting unit is equal to or greater than its respective carrying amount. Additionally, we determined on the basis of the qualitative factors that the fair value of other reporting units was not more likely than not less than the respective carrying amounts. Our current year assessments also included consideration of the expected near term effects of the COVID-19 pandemic on revenues and our cost mitigation efforts, as well as longer term performance expectations. We believe that the fair value of each of our reporting units is substantially in excess of its carrying amount, except for Issuer Solutions and Business and Consumer Solutions for which the respective carrying amounts approximate fair value since they were recently acquired in the Merger. Intangible and Long-lived Assets — Intangible assets are amortized over their estimated useful lives. The useful lives for customer-related intangible assets are determined based primarily on forecasted cash flows, which include estimates for the revenues, expenses, and customer attrition associated with the assets. The useful lives of contract-based intangible assets are equal to the terms of the agreements. The useful lives of amortizable trademarks and trade names are based on an estimate of the period over which we will earn revenues for the related brands, including contemplation of any future plans to phase out the trademarks and trade names in the applicable markets. We use the straight-line method of amortization for our amortizable acquired technologies, trademarks and trade names and contract-based intangibles. Amortization for most of our customer-related intangible assets is determined using an accelerated method. Under this accelerated method, the first step in determining the amortization expense for any period is that we divide the expected cash flows for that period that were used in determining the acquisition-date fair value of the asset divided by the expected total cash flows over the estimated life of the asset. We then multiply that ratio by the initial carrying amount of the asset to arrive at the amortization expense for that period. If the cash flow patterns that we experience differ significantly from our initial estimates, we adjust the amortization schedule prospectively. We believe that our accelerated method reflects the expected pattern of the benefit to be derived from the acquired customer relationships. We did not make any significant adjustments to the amortization schedules of our intangible assets during the year ended December 31, 2020. We regularly evaluate whether events and circumstances have occurred that indicate the carrying amount of property and equipment and finite-life intangible assets may not be recoverable. When factors indicate that these long-lived assets should be evaluated for possible impairment, we assess the potential impairment by determining whether the carrying amount of such long-lived assets will be recovered through the future undiscounted cash flows expected from use of the asset and its eventual disposition. The evaluation is performed at the asset group level, which is the lowest level of identifiable cash flows. If the carrying amount of the asset group is determined not to be recoverable and exceeds its fair value, an impairment loss is recorded, measured as the difference between the fair value and the carrying amount. Fair values are determined based on quoted market prices or discounted cash flow analysis as applicable. We regularly evaluate whether events and circumstances have occurred that indicate the useful lives of property and equipment and finite-life intangible assets may warrant revision. Capitalization of Internal-Use Software We develop software that is used in providing services to customers. Capitalization of internal-use software, primarily associated with operating platforms, occurs when we have completed the preliminary project stage, management authorizes the project, management commits to funding the project, it is probable the project will be completed and the project will be used to perform the function intended. The preliminary project stage consists of the conceptual formulation of alternatives, the evaluation of alternatives, the determination of existence of needed technology and the final selection of alternatives. Costs incurred during the preliminary project stage are recognized as expense as incurred. Currently unforeseen circumstances in software development, such as a significant change in the manner in which the software is intended to be used, obsolescence or a significant reduction in revenues due to merchant attrition, could require us to implement alternative plans with respect to a particular effort, which could result in the impairment of previously capitalized software development costs. The carrying amount of internal-use software, including work-in-progress, at December 31, 2020 was $606.3 million. Costs capitalized during the year ended December 31, 2020 totaled $230.3 million. Internal-use software is amortized over its estimated useful life, which is typically 2 to 10 years, in a manner that best reflects the pattern of economic use of the assets. During the fourth quarter of 2019, we preliminarily determined our target technology architecture for the combined company. As a result, we wrote-off capitalized software assets of $31.1 million related to legacy Global Payments technology that will no longer be utilized. 44 Table of Contents Revenue Recognition In accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers ("ASC 606"), we apply judgment in the determination of performance obligations, in particular related to large customer contracts within the Issuer Solutions segment. Performance obligations in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, we must apply judgment to determine whether promised services are capable of being distinct and are distinct in the context of the contract. If these criteria are not met, the promised services are combined and accounted for as a single performance obligation. In addition, a single performance obligation may comprise a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. Income Taxes We determine our provision for income taxes using management's judgments, estimates and the interpretation and application of complex tax laws in each of the jurisdictions in which we operate. Judgment is also required in assessing the timing and amounts of deductible and taxable items. These differences result in deferred tax assets and liabilities in our consolidated balance sheet. We believe our tax return positions are fully supportable; however, we recognize the benefit for tax positions only when it is more likely than not that the position will be sustained based on its technical merits. Issues raised by a tax authority may be resolved at an amount different than the related benefit recognized. When facts and circumstances change (including an effective settlement of an issue or statute of limitations expiration), the effect is recognized in the period of change. The unrecognized tax benefits that exist at December 31, 2020 would affect our provision for income taxes in the future, if recognized. Judgment is required to determine whether or not some portion or all of our deferred tax assets will not be realized. To the extent we determine that we will not realize the benefit of some or all of our deferred tax assets, then these deferred tax assets are adjusted through our provision for income taxes in the period in which this determination is made. Effect of New Accounting Pronouncements - Recently Issued Pronouncements Not Yet Adopted From time-to-time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standards setting bodies that may affect our current and/or future financial statements. Refer to "Note 1—Basis of Presentation and Summary of Significant Accounting Policies" in the notes to the accompanying consolidated financial statements for a discussion of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.