What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-04 compared with 2020-10-29 · 150 added, 403 removed, 338 unchanged (62% of the section changed)

4 unchanged sentences

Three Months Ended

September 30, 2020 September 30, 2019

Revenues $ 1,917,815 $ 1,105,941

Operating expenses:

Cost of service

900,921 427,720

Selling, general and administrative

726,475 504,184

1,627,396 931,904

Operating income 290,419 174,037

Interest and other income 29,983 11,232

Interest and other expense ( 82,976 ) ( 96,161 )

( 52,993 ) ( 84,929 )

Income before income taxes and equity in income of equity method investments 237,426 89,108

Income tax (expense) benefit ( 42,834 ) 16,623

Income before equity in income of equity method investments 194,592 105,731

Equity in income of equity method investments, net of tax 35,638 —

Net income 230,230 105,731

Net income attributable to noncontrolling interests, net of tax ( 9,259 ) ( 10,687 )

Net income attributable to Global Payments $ 220,971 $ 95,044

Earnings per share attributable to Global Payments:

Basic earnings per share $ 0.74 $ 0.54

Diluted earnings per share $ 0.74 $ 0.54

See Notes to Unaudited Consolidated Financial Statements.

GLOBAL PAYMENTS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

Nine Months Ended

September 30, 2020 September 30, 2019

March 31, 2021 March 31, 2020

Revenues $ 1,990,007 $ 1,903,598

24 unchanged sentences

Three Months Ended

September 30, 2020 September 30, 2019

March 31, 2021 March 31, 2020

Net income $ 198,410 $ 150,608

7 unchanged sentences

Other, net of tax 7,775 121

Other comprehensive income (loss) 115,993 ( 96,881 )

Comprehensive income 346,223 8,850

Comprehensive income attributable to noncontrolling interests ( 18,010 ) ( 1,967 )

Comprehensive income attributable to Global Payments $ 328,213 $ 6,883

Nine Months Ended

September 30, 2020 September 30, 2019

Net income $ 420,282 $ 354,974

Other comprehensive income (loss):

Foreign currency translation adjustments ( 10,844 ) ( 54,377 )

Income tax benefit related to foreign currency translation adjustments 1,160 1,695

Net unrealized losses on hedging activities ( 53,332 ) ( 96,997 )

Reclassification of net unrealized losses (gains) on hedging activities to interest expense 25,786 ( 1,530 )

Income tax benefit related to hedging activities 6,677 23,800

Other, net of tax ( 3,288 ) 165

Other comprehensive loss ( 16,074 ) ( 235,862 )

Comprehensive income 386,441 227,730

Comprehensive income attributable to noncontrolling interests ( 25,898 ) ( 17,780 )

Comprehensive income attributable to Global Payments $ 360,543 $ 209,950

Comprehensive income (loss) 182,336 ( 85,254 )

Comprehensive loss (income) attributable to noncontrolling interests 4,245 ( 380 )

Comprehensive income (loss) attributable to Global Payments $ 186,581 $ ( 85,634 )

See Notes to Unaudited Consolidated Financial Statements.

2 unchanged sentences

(in thousands, except share data)

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

Current assets:

25 unchanged sentences

Common stock, no par value;

400,000,000 shares authorized at September 30, 2020 and December 31, 2019;

299,286,847 issued and outstanding at September 30, 2020 and 300,225,590 issued and outstanding at December 31, 2019

400,000,000 shares authorized at March 31, 2021 and December 31, 2020;

295,157,603 issued and outstanding at March 31, 2021 and 298,332,459 issued and outstanding at December 31, 2020

Paid-in capital 24,403,323 24,963,769

9 unchanged sentences

(in thousands)

Nine Months Ended

September 30, 2020 September 30, 2019

Three Months Ended

March 31, 2021 March 31, 2020

Cash flows from operating activities:

5 unchanged sentences

Share-based compensation expense 37,165 27,822

Provision for operating losses and bad debts 98,967 34,877

Provision for operating losses and credit losses 23,405 37,629

Noncash lease expense 27,066 25,924

9 unchanged sentences

Cash flows from investing activities:

Acquisitions, net of cash acquired ( 77,180 ) ( 334,383 )

Business combinations and other acquisitions, net of cash acquired ( 11,074 ) ( 67,196 )

Capital expenditures ( 86,159 ) ( 104,802 )

2 unchanged sentences

Cash flows from financing activities:

Net repayments of settlement lines of credit ( 31,069 ) ( 144,473 )

Net borrowings from (repayments of) settlement lines of credit 108,488 ( 78,092 )

Proceeds from long-term debt 1,987,005 607,000

4 unchanged sentences

Common stock repurchased - share-based compensation plans ( 39,437 ) ( 44,253 )

Distributions to noncontrolling interests ( 6,955 ) ( 31,632 )

Preacquisition dividends paid to former TSYS shareholders — ( 23,240 )

Dividends paid ( 57,574 ) ( 58,279 )

Net cash (used in) provided by financing activities ( 594,635 ) 109,876

Effect of exchange rate changes on cash ( 12,558 ) ( 36,239 )

Increase in cash and cash equivalents 542,549 916,738

Cash and cash equivalents, beginning of the period 1,678,273 1,210,878

Cash and cash equivalents, end of the period $ 2,220,822 $ 2,127,616

See Notes to Unaudited Consolidated Financial Statements.

GLOBAL PAYMENTS INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands)

Number of Shares

Paid-in Capital

Retained Earnings

Accumulated Other Comprehensive Loss Total Global Payments Shareholders’ Equity Noncontrolling Interests Total Equity

Balance at June 30, 2020 299,244 $ 25,570,582 $ 2,314,423 $ ( 459,146 ) $ 27,425,859 $ 207,130 $ 27,632,989

Net income 220,971 220,971 9,259 230,230

Other comprehensive income 107,242 107,242 8,751 115,993

Stock issued under share-based compensation plans 50 8,423 8,423 8,423

Common stock repurchased - share-based compensation plans ( 7 ) ( 682 ) ( 682 ) ( 682 )

Share-based compensation expense 42,276 42,276 42,276

Distributions to noncontrolling interest — ( 6,955 ) ( 6,955 )

Cash dividends declared ($ 0.195 per share)

( 58,432 ) ( 58,432 ) ( 58,432 )

Balance at September 30, 2020 299,287 $ 25,620,599 $ 2,476,962 $ ( 351,904 ) $ 27,745,657 $ 218,185 $ 27,963,842

Number of Shares

Paid-in Capital

Retained Earnings

Accumulated Other Comprehensive Loss Total Global Payments Shareholders’ Equity

Noncontrolling Interests Total Equity

Balance at June 30, 2019 156,675 $ 2,126,065 $ 2,204,445 $ ( 339,906 ) $ 3,990,604 $ 184,512 $ 4,175,116

Net income 95,044 95,044 10,687 105,731

Other comprehensive loss ( 88,161 ) ( 88,161 ) ( 8,720 ) ( 96,881 )

Stock issued under share-based compensation plans 141 9,057 9,057 9,057

Common stock repurchased - share-based compensation plans ( 180 ) ( 29,584 ) ( 29,584 ) ( 29,584 )

Share-based compensation expense 27,877 27,877 27,877

Issuance of common stock in connection with a business combination 143,909 23,771,389 23,771,389 23,771,389

Distributions to noncontrolling interest — ( 5,395 ) ( 5,395 )

Cash dividends declared ($ 0.01 per share)

( 1,592 ) ( 1,592 ) ( 1,592 )

Balance at September 30, 2019 300,545 $ 25,904,804 $ 2,297,897 $ ( 428,067 ) $ 27,774,634 $ 181,084 $ 27,955,718

Net cash used in financing activities ( 369,022 ) ( 77,481 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 21,141 ) ( 67,655 )

Increase in cash, cash equivalents and restricted cash 112,303 121,788

Cash, cash equivalents and restricted cash, beginning of the period 2,089,771 1,678,273

Cash, cash equivalents and restricted cash, end of the period $ 2,202,074 $ 1,800,061

See Notes to Unaudited Consolidated Financial Statements.

1 unchanged sentence

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands)

(in thousands, except per share data)

Number of Shares

3 unchanged sentences

Balance at December 31, 2020 298,332 $ 24,963,769 $ 2,570,874 $ ( 202,273 ) $ 27,332,370 $ 154,674 $ 27,487,044

Cumulative effect of adoption of new accounting standard ( 5,379 ) ( 5,379 ) ( 5,379 )

Net income 196,681 196,681 1,729 198,410

Other comprehensive (loss) income ( 41,333 ) ( 41,333 ) 7,492 ( 33,841 )

Other comprehensive loss ( 10,100 ) ( 10,100 ) ( 5,974 ) ( 16,074 )

Stock issued under share-based compensation plans 1,003 17,705 17,705 17,705

1 unchanged sentence

Share-based compensation expense 37,165 37,165 37,165

Distributions to noncontrolling interest — ( 6,955 ) ( 6,955 )

Repurchase of common stock ( 2,095 ) ( 326,441 ) ( 77,521 ) ( 403,962 ) ( 403,962 )

Dividends paid ($ 0.585 per share)

Repurchases of common stock ( 3,955 ) ( 573,787 ) ( 209,169 ) ( 782,956 ) ( 782,956 )

Cash dividends declared ($ 0.195 per common share)

( 57,574 ) ( 57,574 ) ( 57,574 )

Balance at September 30, 2020 299,287 $ 25,620,599 $ 2,476,962 $ ( 351,904 ) $ 27,745,657 $ 218,185 $ 27,963,842

Balance at March 31, 2021 295,158 $ 24,403,323 $ 2,500,812 $ ( 212,373 ) $ 26,691,762 $ 150,429 $ 26,842,191

Number of Shares

4 unchanged sentences

Balance at December 31, 2019 300,226 $ 25,833,307 $ 2,333,011 $ ( 310,571 ) $ 27,855,747 $ 199,242 $ 28,054,989

Cumulative effect of adoption of new accounting standard ( 5,379 ) ( 5,379 ) ( 5,379 )

Net income 143,575 143,575 7,033 150,608

3 unchanged sentences

Share-based compensation expense 27,822 27,822 27,822

Issuance of common stock in connection with a business combination 143,909 23,771,389 23,771,389 23,771,389

Distributions to noncontrolling interest — ( 31,632 ) ( 31,632 )

Repurchase of common stock ( 1,808 ) ( 138,361 ) ( 91,633 ) ( 229,994 ) ( 229,994 )

Dividends paid ($ 0.03 per share)

Repurchases of common stock ( 2,095 ) ( 326,441 ) ( 77,521 ) ( 403,962 ) ( 403,962 )

Cash dividends declared ($ 0.195 per common share)

( 58,279 ) ( 58,279 ) ( 58,279 )

Balance at September 30, 2019 300,545 $ 25,904,804 $ 2,297,897 $ ( 428,067 ) $ 27,774,634 $ 181,084 $ 27,955,718

Balance at March 31, 2020 299,010 $ 25,525,184 $ 2,335,407 $ ( 539,780 ) $ 27,320,811 $ 199,622 $ 27,520,433

See Notes to Unaudited Consolidated Financial Statements.

1 unchanged sentence

NOTE 1— BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business, consolidation and presentation

We are a leading pure play payments technology company delivering innovative software and services to our customers globally.

Business, consolidation and presentation - 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.

8 unchanged sentences

These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020.

COVID-19 Update

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

The pandemic continues to cause major disruptions to businesses and markets worldwide as the virus spreads or has a resurgence in certain jurisdictions.

A number of countries as well as many states and cities within the United States have implemented measures in an effort to contain the virus, including physical distancing, travel restrictions, border closures, limitations on public gatherings, work from home and closure of or restrictions on nonessential businesses.

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.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported period.

COVID-19 Update - 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.

Measures have been implemented by governments worldwide in an effort to contain the virus, including lockdowns, physical distancing, travel restrictions, limitations on public gatherings, work from home and restrictions on nonessential businesses.

Certain government actions to gradually ease restrictions, provide economic stimulus and distribute vaccines have resulted in signs of economic recovery.

However, the effects of the pandemic are still evolving, and its ultimate severity and duration, and the implications on future global economic conditions, remain uncertain.

Use of estimates - The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reported period.

Actual results could differ materially from those estimates.

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Recently adopted accounting pronouncements

Accounting Standards Update ("ASU") 2018-15 — In August 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (A Consensus of the FASB Emerging Issues Task Force)." ASU 2018-15 provides additional guidance on the accounting for costs of implementation activities performed in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract.

The new guidance amends the definition of a hosting arrangement and requires a customer in a hosting arrangement that is a service contract to capitalize certain implementation costs following the internal-use software capitalization criteria within Accounting Standards Codification ("ASC") Subtopic 350-40.

We adopted ASU 2018-15 on January 1, 2020, applying the guidance prospectively to all implementation costs incurred on or after the date of adoption.

The adoption of this standard did not have a material effect on our consolidated financial statements.

We have historically capitalized implementation costs associated with cloud computing arrangements that are service contracts following the guidance in Subtopic 350-40 and will continue to do so pursuant to the clarifications provided in the new guidance.

We amortize capitalized implementation costs to expense on a straight-line basis over the term of the applicable hosting arrangement.

ASU 2016-13 — We adopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments " on January 1, 2020 using the modified retrospective transition method.

The adoption of this standard resulted in a cumulative-effect adjustment to decrease retained earnings by $ 5.4 million, net of tax.

The amendments in this update changed how we measure and recognize credit impairment for certain financial instruments measured at amortized cost.

Under the current expected credit losses model required by ASU 2016-13, we recognize at asset inception and each subsequent reporting date an estimate of credit losses expected to occur over the remaining life of each pool of financial assets with similar risk characteristics.

We have exposure to credit losses for financial assets such as accounts receivable, certain settlement processing assets, check guarantee claims receivable assets and advances to sales representatives.

We utilize a combination of aging or loss-rate methods to develop an estimate of current expected credit losses, depending on the nature and risk profile of the underlying asset pool.

A broad range of information is considered in the estimation process, including historical loss information adjusted for current conditions and expectations of future trends.

The estimation process also includes consideration of qualitative and quantitative risk factors associated with the age of asset balances, expected timing of payment, contract terms and conditions, changes in specific customer risk profiles or mix of customers, geographic risk, industry or economic trends and relevant environmental factors.

As of September 30, 2020, the total allowance for credit losses was approximately $ 36.9 million.

Financial assets are presented net of the allowance for credit losses in the consolidated balance sheets.

The measurement of the allowance for credit losses is recognized through credit loss expense.

Depending on the nature of the underlying asset, credit loss expense is included as a component of cost of service or selling, general and administrative expense in the consolidated statements of income.

Write-offs are recorded in the period in which the asset is deemed to be uncollectible.

Recoveries are recorded when received as a direct credit to the credit loss expense in the consolidated statements of income.

Prior to the adoption of ASU 2016-13, credit losses on these financial instruments were recognized when an occurrence was deemed to be probable.

Recently issued pronouncements not yet adopted

ASU 2019-12 — In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740):

Accounting Standards Update ("ASU") 2019-12 — In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, "Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes ," which is intended to enhance and simplify various aspects of the accounting for income taxes.

The amendments in this update remove certain exceptions to the general principles in ASC Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The amendments in this update remove certain exceptions to the general principles in Accounting Standards Codification ("ASC") Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

ASU 2019-12 also clarifies and amends existing guidance to improve consistency in application of the accounting for franchise taxes, enacted changes in tax laws or rates and transactions that result in a step-up in the tax basis of goodwill.

ASU 2019-12 is effective for annual and interim periods beginning after December 15, 2020, with early adoption permitted in any interim period.

We are evaluating the effect of ASU 2019-12 on our consolidated financial statements.

Based upon the analysis performed to date, we do not believe the adoption of ASU 2019-12 will have a material effect on our consolidated financial statements.

ASU 2020-04 — In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848)," which provides optional expedients and exceptions to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The adoption of ASU 2019-12 on January 1, 2021 did not have a material effect on our consolidated financial statements.

Recently issued pronouncements not yet adopted

ASU 2020-04 — In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting ," which provides optional expedients and exceptions to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference London Inter-bank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of reference rate reform.

3 unchanged sentences

The amendments in this update were effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022.

We are evaluating the effect of ASU 2020-04 on our consolidated financial statements.

NOTE 2— ACQUISITIONS

Total System Services, Inc.

On September 18, 2019, we merged with Total System Services, Inc.

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

We accounted for this transaction as a business combination, which generally requires that we record the assets acquired and liabilities assumed at fair value as of the acquisition date.

The estimated acquisition-date fair values of major classes of assets acquired and liabilities assumed, including a reconciliation to the total purchase consideration, were as follows:

Provisional Amounts at

December 31, 2019 Measurement-Period Adjustments Final Amounts at

September 30, 2020

(in thousands)

Cash and cash equivalents $ 446,009 $ — $ 446,009

Accounts receivable 442,848 ( 2,660 ) 440,188

Identified intangible assets 10,980,000 978 10,980,978

Property and equipment 644,084 ( 978 ) 643,106

Other assets 1,474,825 ( 2,969 ) 1,471,856

Accounts payable and accrued liabilities ( 614,060 ) ( 11,899 ) ( 625,959 )

Debt ( 3,295,342 ) 4,787 ( 3,290,555 )

Deferred income tax liabilities ( 2,687,849 ) 52,598 ( 2,635,251 )

Other liabilities ( 314,415 ) ( 173 ) ( 314,588 )

Total identifiable net assets 7,076,100 39,684 7,115,784

Goodwill 17,398,853 ( 39,684 ) 17,359,169

Total purchase consideration $ 24,474,953 $ — $ 24,474,953

During the nine months ended September 30, 2020, we made measurement-period adjustments, as shown in the table above, that decreased the amount of provisional goodwill by $ 39.7 million.

The decrease in deferred income tax liabilities for the nine months ended September 30, 2020 primarily relates to a refined analysis of the outside bases of partnerships.

The effects of the measurement-period adjustments on our consolidated statements of income for the three and nine months ended September 30, 2020 were not material.

As of September 30, 2020, goodwill arising from the acquisition of $ 17.4 billion was included in our reportable segments as follows:

$ 7.1 billion in the Merchant Solutions segment, $ 7.9 billion in the Issuer Solutions segment and $ 2.4 billion in the

Business and Consumer Solutions segment.

Goodwill was attributable to expected growth opportunities, an assembled workforce and potential synergies from combining the acquired business into our existing business.

Substantially all of the goodwill from this acquisition is not deductible for income tax purposes.

The following unaudited pro forma information shows the results of our operations for the three and nine months ended September 30, 2019 as if the Merger had occurred on January 1, 2018.

The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of what would have occurred if the Merger had occurred as of that date.

The unaudited pro forma information is also not intended to be a projection of future results due to the integration of TSYS.

The unaudited pro forma information reflects the effects of applying our accounting policies and certain pro forma adjustments to the combined historical financial information of Global Payments and TSYS.

Three Months Ended

September 30, 2019 Nine Months Ended

September 30, 2019

Actual Pro Forma Actual Pro Forma

(in thousands)

Total revenues $ 1,105,941 $ 1,993,089 $ 2,924,131 $ 5,866,522

Net income attributable to Global Payments $ 95,044 $ 219,010 $ 327,842 $ 614,317

For the three and nine months ended September 30, 2020, the acquired operations of TSYS contributed $ 1,067.2 million and $ 3,119.2 million, respectively, to our consolidated revenues and $ 165.8 million and $ 385.1 million, respectively, to our consolidated operating income.

At September 30, 2020, accounts payable and accrued liabilities in the consolidated balance sheet included obligations totaling $ 26.3 million for employee termination benefits resulting from Merger-related integration activities.

During the three months ended September 30, 2020, we recognized charges for employee termination benefits of $ 8.1 million, which included $ 1.9 million of share-based compensation expense.

During the nine months ended September 30, 2020, we recognized charges for employee termination benefits of $ 49.8 million, which included $ 6.1 million of share-based compensation expense.

As of September 30, 2020, the cumulative amount of recognized charges for employee termination benefits resulting from Merger-related integration activities was $ 106.9 million, which included $ 23.4 million of share-based compensation expense.

These charges are recorded within selling, general and administrative expenses in our consolidated statements of income and included within Corporate expenses for segment reporting purposes.

New obligations may arise and related expenses may be incurred as Merger-related integration activities continue over the next 12 months.

A portion of our indebtedness bears interest at a variable rate based on LIBOR.

Furthermore, we have entered into hedging instruments to manage our exposure to fluctuations in the LIBOR benchmark interest rate.

We are evaluating the effect of the discontinuance of LIBOR on our outstanding debt and hedging instruments and the related effect of ASU 2020-04 on our consolidated financial statements.

NOTE 2— REVENUES

The following tables present a disaggregation of our revenues from contracts with customers by geography for each of our reportable segments for the three and nine months ended September 30, 2020 and 2019:

Three months ended September 30, 2020

Solutions Issuer

Solutions Business and

Solutions Intersegment

Eliminations Total

(in thousands)

Americas $ 1,039,039 $ 370,938 $ 204,106 $ ( 15,097 ) $ 1,598,986

Europe 154,262 113,907 — — 268,169

Asia Pacific 50,660 2,564 — ( 2,564 ) 50,660

$ 1,243,961 $ 487,409 $ 204,106 $ ( 17,661 ) $ 1,917,815

Three months ended September 30, 2019

Solutions Issuer

Solutions Business and

Solutions Intersegment

Eliminations Total

(in thousands)

Americas $ 786,659 $ 55,091 $ 27,896 $ ( 2,310 ) $ 867,336

Europe 159,592 20,321 — — 179,913

Asia Pacific 58,692 216 — ( 216 ) 58,692

$ 1,004,943 $ 75,628 $ 27,896 $ ( 2,526 ) $ 1,105,941

Nine Months Ended September 30, 2020

The following tables present a disaggregation of our revenues from contracts with customers by geography for each of our reportable segments for the three months ended March 31, 2021 and 2020:

Three months ended March 31, 2021

Solutions Issuer

7 unchanged sentences

$ 1,267,872 $ 500,251 $ 243,585 $ ( 21,701 ) $ 1,990,007

Nine Months Ended September 30, 2019

Three months ended March 31, 2020

Solutions Issuer

7 unchanged sentences

$ 1,215,269 $ 503,762 $ 203,946 $ ( 19,379 ) $ 1,903,598

The following table presents a disaggregation of our Merchant Solutions segment revenues by distribution channel for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

The following table presents a disaggregation of our Merchant Solutions segment revenues by distribution channel for the three months ended March 31, 2021 and 2020:

Three Months Ended

March 31, 2021 March 31, 2020

(in thousands)

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ASC Topic 606, Revenues from Contracts with Customers ("ASC 606"), requires that we determine for each customer arrangement whether revenue should be recognized at a point in time or over time.

For the three and nine months ended September 30, 2020 and 2019, substantially all of our revenues were recognized over time.

Supplemental balance sheet information related to contracts from customers as of September 30, 2020 and December 31, 2019 was as follows:

Balance Sheet Location September 30, 2020 December 31, 2019

For the three months ended March 31, 2021 and 2020, substantially all of our revenues were recognized over time.

Supplemental balance sheet information related to contracts from customers as of March 31, 2021 and December 31, 2020 was as follows:

Balance Sheet Location March 31, 2021 December 31, 2020

(in thousands)

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Contract liabilities, net (noncurrent) Other noncurrent liabilities $ 49,740 $ 52,944

Net contract assets were not material at September 30, 2020 or at December 31, 2019.

Revenue recognized for the three months ended September 30, 2020 and 2019 from contract liability balances at the beginning of each period was $ 69.7 million and $ 52.0 million.

Revenue recognized for the nine months ended September 30, 2020 and 2019 from contract liability balances at the beginning of each period was $ 195.3 million and $ 122.7 million.

Net contract assets were not material at March 31, 2021 or at December 31, 2020.

Revenue recognized for the three months ended March 31, 2021 and 2020 from contract liability balances at the beginning of each period was $ 85.9 million and $ 90.8 million, respectively.

ASC 606 requires disclosure of the aggregate amount of the transaction price allocated to unsatisfied performance obligations.

The purpose of this disclosure is to provide additional information about the amounts and expected timing of revenue to be recognized from the remaining performance obligations in our existing contracts.

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at September 30, 2020.

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at March 31, 2021.

However, as permitted, we have elected to exclude from this disclosure any contracts with an original duration of one year or less and any variable consideration that meets specified criteria.

4 unchanged sentences

Total $ 3,412,075

NOTE 4— GOODWILL AND OTHER INTANGIBLE ASSETS

As of September 30, 2020 and December 31, 2019, goodwill and other intangible assets consisted of the following:

September 30, 2020 December 31, 2019

(in thousands)

Goodwill $ 23,745,340 $ 23,759,740

Other intangible assets:

Customer-related intangible assets $ 9,231,143 $ 9,238,728

Acquired technologies 2,743,679 2,732,218

Contract-based intangible assets 1,976,577 1,974,429

Trademarks and trade names 1,238,495 1,239,471

15,189,894 15,184,846

Less accumulated amortization:

Customer-related intangible assets 1,729,192 1,225,785

Acquired technologies 852,219 576,928

Contract-based intangible assets 109,833 82,225

Trademarks and trade names 246,970 145,253

2,938,214 2,030,191

$ 12,251,680 $ 13,154,655

The following table sets forth the changes by reportable segment in the carrying amount of goodwill for the nine months ended September 30, 2020:

Solutions Issuer

Solutions Business and

Solutions Total

(in thousands)

Balance at December 31, 2019 $ 13,415,352 $ 7,985,731 $ 2,358,657 $ 23,759,740

Goodwill acquired 23,000 — — 23,000

Effect of foreign currency translation 4,264 ( 1,980 ) — 2,284

Measurement-period adjustments ( 3,875 ) ( 42,298 ) 6,489 ( 39,684 )

Balance at September 30, 2020 $ 13,438,741 $ 7,941,453 $ 2,365,146 $ 23,745,340

There were no accumulated impairment losses for goodwill as of September 30, 2020 or December 31, 2019.

NOTE 5 - OTHER ASSETS

Through certain of our subsidiaries in Europe, we were a member and shareholder of Visa Europe Limited ("Visa Europe").

On June 21, 2016, Visa Inc.

("Visa") acquired all of the membership interests in Visa Europe and we received consideration in the form of cash and Series B and C convertible preferred shares of Visa.

We assigned the preferred shares received a value of zero based on transfer restrictions, Visa's ability to adjust the conversion rate and the estimation uncertainty associated with those factors.

Based on the outcome of any current or potential litigation involving Visa Europe in the United Kingdom and elsewhere in Europe, the conversion rate of the preferred shares could be adjusted down such that the number of Visa common shares we receive could be as low as zero .

The Series B and C convertible preferred shares become convertible in stages based on developments in the litigation and become fully convertible no later than 2028 (subject to a holdback to cover any then pending claims).

On September 24, 2020, in connection with the first mandatory release assessment, a portion of the Series B and C convertible preferred shares were converted by Visa.

We recognized a gain of $ 27.3 million reported in interest and other income in our consolidated statements of income for the three and nine months ended September 30, 2020 based on the fair value of the shares received.

The shares were recorded at fair value within prepaid expenses and other current assets in our consolidated balance sheet at September 30, 2020, and subsequently sold in October.

As of September 30, 2020, the remaining Series B and C convertible preferred shares continue to be carried at an assigned value of zero based on the aforementioned factors.

NOTE 3— LONG-TERM DEBT AND LINES OF CREDIT

As of September 30, 2020 and December 31, 2019, long-term debt consisted of the following:

September 30, 2020 December 31, 2019

As of March 31, 2021 and December 31, 2020, long-term debt consisted of the following:

March 31, 2021 December 31, 2020

(in thousands)

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993,532 993,110

1.200 % senior notes due March 1, 2026

4.800 % senior notes due April 1, 2026

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2.900 % senior notes due May 15, 2030

989,318 989,025

4.150 % senior notes due August 15, 2049

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The carrying amounts of our senior notes and term loans in the table above are presented net of unamortized discount and unamortized debt issuance costs, as applicable.

At September 30, 2020, unamortized discount on senior notes was $ 8.7 million, and unamortized debt issuance costs on senior notes and the unsecured term loan facility were $ 49.4 million.

Unamortized debt issuance costs on our senior notes and unsecured term loans at December 31, 2019 were $ 46.6 million.

At March 31, 2021, unamortized discount on senior notes was $ 9.3 million, and unamortized debt issuance costs on senior notes and the unsecured term loan facility were $ 53.8 million.

At December 31, 2020, unamortized discount on senior notes was $ 8.5 million, and unamortized debt issuance costs on our senior notes and the unsecured term loan facility were $ 47.4 million.

The portion of unamortized debt issuance costs related to revolving credit facilities is included in other noncurrent assets.

At September 30, 2020, unamortized debt issuance costs on the unsecured revolving credit facility were $ 14.7 million, and, at December 31, 2019, unamortized debt issuance costs on the unsecured revolving credit facility were $ 17.6 million .

The amortization of debt discounts and debt issuance costs is recognized as an increase to interest expense over the terms of the respective debt instruments.

Amortization of discounts and debt issuance costs for the three and nine months ended September 30, 2020 was $ 3.1 million and $ 8.9 million, respectively.

Amortization of discounts and debt issuance costs for the three and nine months ended September 30, 2019 was $ 3.1 million and $ 9.2 million, respectively.

At September 30, 2020, future maturities of long-term debt (excluding finance lease liabilities) were as follows by year (in thousands):

At March 31, 2021, unamortized debt issuance costs on the unsecured revolving credit facility were $ 12.6 million, and, at December 31, 2020, unamortized debt issuance costs on the unsecured revolving credit facility were $ 13.8 million.

At March 31, 2021, future maturities of long-term debt (excluding finance lease liabilities) were as follows by year (in thousands):

Year ending December 31,

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Senior Unsecured Notes

We have $ 7.1 billion in aggregate principal amount of senior unsecured notes, as presented in the table above.

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.

The difference between the acquisition fair value and face value of senior notes assumed in the Merger is recognized over the terms of the respective notes as a reduction of interest expense.

The amortization of this fair value adjustment was $ 9.0 million and $ 27.1 million, respectively, for the three and nine months ended September 30, 2020.

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 September 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.

On February 26, 2021, we issued $ 1.1 billion in aggregate principal amount of 1.200 % senior unsecured notes due March 2026.

We incurred debt issuance costs of approximately $ 8.6 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 March 31, 2021.

Interest on the notes is payable semi-annually in arrears on March 1 and September 1 of each year, commencing September 1, 2021.

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.

As of September 30, 2020, our senior notes had a total carrying amount of $ 7.1 billion and an estimated fair value of $ 7.7 billion.

We used the net proceeds from this offering to fund the redemption in full of the 3.800 % senior unsecured notes due April 2021, to repay a portion of the outstanding indebtedness under our revolving credit facility and for general corporate purposes.

As of March 31, 2021, our senior notes had a total carrying amount of $ 7.5 billion and an estimated fair value of $ 7.8 billion.

The estimated fair value of our senior notes was based on quoted market prices in an active market and is considered to be a Level 1 measurement of the valuation hierarchy.

The fair value of other long-term debt approximated its carrying amount at September 30, 2020.

Senior Unsecured Credit Facilities

We have a term loan credit agreement ("Term Loan Credit Agreement") and a revolving credit agreement ("Unsecured Revolving Credit Agreement") in each case with Bank of America, N.A., as administrative agent, and a syndicate of financial institutions, as lenders and other agents.

The Term Loan Credit Agreement provides for a senior unsecured $ 2 billion term loan facility, and the Unsecured Revolving Credit Agreement provides for a senior unsecured $ 3 billion revolving credit facility.

Borrowings under the term loan facility were made in U.S.

dollars and borrowings under the revolving credit facility are available to be made in U.S.

dollars, euros, sterling, Canadian dollars and, subject to specific conditions, certain other currencies at our option.

Borrowings in U.S.

dollars and certain other 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 as its "prime rate" or (c) LIBOR plus 1.0 %, in each case, plus an applicable margin.

As of September 30, 2020, the interest rate on the term loan facility was 1.52 %.

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 September 30, 2020, the total available commitments under the revolving credit facility were $ 2.1 billion and there were no outstanding borrowings.

The fair value of other long-term debt approximated its carrying amount at March 31, 2021.

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 September 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 September 30, 2020.

Settlement Lines of Credit

In various markets where we do business, we have specialized lines of credit, that are restricted for use in funding settlement.

The settlement lines of credit generally have variable interest rates, are subject to annual review and are denominated in local currency but may, in some cases, facilitate borrowings in multiple currencies.

For certain of our lines of credit, the available credit is increased by the amount of cash we have on deposit in specific accounts with the lender.

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

As of September 30, 2020, a total of $ 58.5 million of cash on deposit was used to determine the available credit.

As of September 30, 2020 and December 31, 2019, we had $ 439.4 million and $ 463.2 million, respectively, outstanding under these lines of credit with additional capacity to fund settlement of $ 1,387.3 million as of September 30, 2020.

During the three months ended September 30, 2020, the maximum and average outstanding balances under these lines of credit were $ 560.7 million and $ 324.6 million, respectively.

The weighted-average interest rate on these borrowings was 2.05 % and 3.16 % at September 30, 2020 and December 31, 2019, respectively.

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, 2021, 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, 2021.

Derivative Agreements

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The table below presents information about our derivative financial instruments, designated as cash flow hedges, included in the consolidated balance sheets:

Derivative Financial Instruments Balance Sheet Location Weighted-Average Fixed Rate of Interest at September 30, 2020 Range of Maturity Dates at

September 30, 2020 September 30, 2020 December 31, 2019

Derivative Financial Instruments Balance Sheet Location Weighted-Average Fixed Rate of Interest at March 31, 2021 Range of Maturity Dates at

March 31, 2021 March 31, 2021 December 31, 2020

(in thousands)

Interest rate swaps (Notional of $ 300 million at December 31, 2020)

Prepaid expenses and other current assets NA NA $ — $ 472

Interest rate swaps (Notional of $ 300 million at September 30, 2020)

Accounts payable and accrued liabilities 1.91 % March 31, 2021 $ 2,662 $ —

Interest rate swaps (Notional of $ 1.55 billion at September 30, 2020 and $ 1.55 billion at December 31, 2019)

Accounts payable and accrued liabilities NA NA $ — $ 1,330

Interest rate swaps (Notional of $ 1,250 million at March 31, 2021 and December 31, 2020)

Other noncurrent liabilities 2.73 % December 31, 2022 $ 56,357 $ 65,490

NA = not applicable.

The table below presents the effects of our interest rate swaps on the consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

The table below presents the effects of our interest rate swaps on the consolidated statements of income and statements of comprehensive income for the three months ended March 31, 2021 and 2020:

Three Months Ended

March 31, 2021 March 31, 2020

(in thousands)

Net unrealized gains (losses) recognized in other comprehensive income (loss) $ 994 $ ( 47,896 )

Net unrealized losses (gains) reclassified out of other comprehensive income (loss) to interest expense $ 11,133 $ 1,193 $ 25,786 $ ( 1,530 )

As of September 30, 2020, the amount of net unrealized losses in accumulated other comprehensive loss related to our interest rate swaps that is expected to be reclassified into interest expense during the next 12 months was $ 40.9 million.

Net unrealized losses reclassified out of other comprehensive income (loss) to interest expense $ 10,838 $ 4,671

As of March 31, 2021, the amount of net unrealized losses in accumulated other comprehensive loss related to our interest rate swaps that is expected to be reclassified into interest expense during the next 12 months was $ 38.3 million.

Interest Expense

Interest expense was $ 82.1 million and $ 96.0 million for the three months ended September 30, 2020 and 2019, respectively, and $ 244.3 million and $ 221.0 million for the nine months ended September 30, 2020 and 2019, respectively.

Interest expense was $ 81.2 million and $ 81.1 million for the three months ended March 31, 2021 and 2020, respectively.

NOTE 4— INCOME TAX

Our effective income tax rates for the three and nine months ended September 30, 2020 were 18.0 % and 14.1 %, respectively.

Our effective income tax rate for the three months ended September 30, 2020 differed from the U.S.

statutory rate primarily due to tax credits, foreign interest income not subject to tax, the foreign-derived intangible income deduction, changes in uncertain tax positions and the tax effect of the U.K.

statutory income tax rate change that took effect during the quarter.

Our effective income tax rate for the nine months ended September 30, 2020 differed from the U.S.

statutory rate primarily due to tax credits, foreign interest income not subject to tax, the foreign-derived intangible income deduction and excess tax benefits of share-based awards.

Our effective income tax rate for the three months ended September 30, 2019 was a benefit of 18.7 %, and our effective income tax rate for the nine months ended September 30, 2019 was 10.1 %.

Our effective income tax rates for those periods differed from the U.S.

statutory rate primarily due to the reduction of our U.S.

deferred tax liability resulting from the effects of the Merger on the apportionment of income among states, excess tax benefits of share-based awards, the U.S.

tax benefits associated with income derived from foreign sources and the benefits related to the effective settlement of uncertain tax positions.

We conduct business globally and file income tax returns in the U.S.

federal jurisdiction and various state and foreign jurisdictions.

In the normal course of business, we are subject to examination by taxing authorities around the world.

We are no longer subject to state income tax examinations for years ended on or before May 31, 2007, U.S.

federal income tax examinations for years ended on or before May 31, 2016 and U.K.

federal income tax examinations for years ended on or before May 31, 2016.

Our effective income tax rate for the three months ended March 31, 2021 was 10.5 %.

Our effective income tax rate for the three months ended March 31, 2021 differed from the U.S.

statutory rate primarily as a result of a change in the assessment of the need for a valuation allowance related to foreign tax credit carryforwards, foreign interest income not subject to tax, tax credits, the foreign-derived intangible income deduction and excess tax benefits of share-based awards.

Our effective income tax rate for the three months ended March 31, 2020 was 10.1 %.

Our effective income tax rate for the three months ended March 31, 2020 differed from the U.S.

statutory rate primarily as a result of tax credits, excess tax benefits of share-based awards and the foreign-derived intangible income deduction.

NOTE 5— SHAREHOLDERS’ EQUITY

We repurchase our common stock mainly through open market repurchase plans and, at times, through accelerated share repurchase programs.

During the three months ended September 30, 2020 and 2019, there were no repurchases.

During the nine months ended September 30, 2020 and 2019, we repurchased and retired 2,094,731 and 1,808,398 shares of our common stock at a cost, including commissions, of $ 404.0 million and $ 230.0 million, or $ 192.85 per share and $ 127.18 per share, respectively.

On October 28, 2020, our board of directors approved an increase to our existing share repurchase program authorization, which raised the total available authorization to $ 1.25 billion.

As of September 30, 2020, the amount that may yet be purchased under our share repurchase program was $ 880.0 million.

On October 28, 2020, our board of directors declared a dividend of $ 0.195 per share payable on December 31, 2020 to common shareholders of record as of December 17, 2020.

We repurchase our common stock mainly through open market repurchase plans and, at times, through accelerated share repurchase ("ASR") programs.

During the three months ended March 31, 2021 and 2020, we repurchased and retired 3,955,400 and 2,094,731 shares of our common stock at a cost, including commissions, of $ 783.0 million and $ 404.0 million, or $ 198.00 per share and $ 192.85 per share, respectively.

As of March 31, 2021, the remaining amount available under our share repurchase program was $ 901.0 million.

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 ended on March 31, 2021.

The total number of shares delivered under this ASR program was 2,491,161 shares at an average price of $ 200.71 per share.

On April 29, 2021, our board of directors declared a dividend of $ 0.195 per share payable on June 25, 2021 to common shareholders of record as of June 11, 2021.

NOTE 6— SHARE-BASED AWARDS AND STOCK OPTIONS

The following table summarizes share-based compensation expense and the related income tax benefit recognized for our share-based awards and stock options:

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Three Months Ended

March 31, 2021 March 31, 2020

(in thousands)

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Share-Based Awards

The following table summarizes the changes in unvested restricted stock and performance awards for the nine months ended September 30, 2020:

The following table summarizes the changes in unvested restricted stock and performance awards for the three months ended March 31, 2021:

Shares Weighted-Average

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Forfeited ( 14 ) 181.58

Unvested at September 30, 2020 1,742 $ 173.10

The total fair value of restricted stock and performance awards vested during the nine months ended September 30, 2020 and September 30, 2019 was $ 77.9 million and $ 35.3 million, respectively.

For restricted stock and performance awards, we recognized compensation expense of $ 38.9 million and $ 20.2 million during the three months ended September 30, 2020 and 2019, respectively, and $ 94.9 million and $ 45.0 million during the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, there were $ 187.7 million of unrecognized compensation expense related to unvested restricted stock and performance awards that we expect to recognize over a weighted-average period of 2.1 years.

Unvested at March 31, 2021 1,790 $ 181.40

The total fair value of restricted stock and performance awards vested during the three months ended March 31, 2021 and March 31, 2020 was $ 86.1 million and $ 64.6 million, respectively.

For restricted stock and performance awards, we recognized compensation expense of $ 33.5 million and $ 25.2 million during the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, there was $ 289.4 million of unrecognized compensation expense related to unvested restricted stock and performance awards that we expect to recognize over a weighted-average period of 1.1 years.

Stock Options

The following table summarizes stock option activity for the nine months ended September 30, 2020:

The following table summarizes stock option activity for the three months ended March 31, 2021:

Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value

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Granted 112 196.06

Forfeited ( 2 ) 113.48

Exercised ( 163 ) 70.51

Outstanding at September 30, 2020 1,371 $ 90.64 6.4 $ 122.0

Options vested and exercisable at September 30, 2020 974 $ 69.50 5.6 $ 105.3

We recognized compensation expense for stock options of $ 2.4 million and $ 7.0 million during the three months ended September 30, 2020 and 2019, respectively, and $ 6.5 million and $ 8.6 million for the nine months ended September 30, 2020 and 2019, respectively.

The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2020 and 2019 was $ 69.8 million and $ 22.9 million, respectively.

As of September 30, 2020, we had $ 10.5 million of unrecognized compensation expense related to unvested stock options that we expect to recognize over a weighted-average period of 1.8 years.

The weighted-average grant-date fair value of stock options granted during the nine months ended September 30, 2020 and 2019 was $ 54.85 and $ 39.60 , respectively.

Outstanding at March 31, 2021 1,202 $ 106.19 6.5 $ 114.7

Options vested and exercisable at March 31, 2021 925 $ 85.79 5.8 $ 107.1

We recognized compensation expense for stock options of $ 2.4 million and $ 1.9 million during the three months ended March 31, 2021 and 2020, respectively.

The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2021 and 2020 was $ 20.6 million and $ 53.6 million, respectively.

As of March 31, 2021, we had $ 14.1 million of unrecognized compensation expense related to unvested stock options that we expect to recognize over a weighted-average period of 2.3 years.

The weighted-average grant-date fair value of stock options granted during the three months ended March 31, 2021 and 2020 was $ 65.99 and $ 54.85 , respectively.

Fair value was estimated on the date of grant using the Black-Scholes valuation model with the following weighted-average assumptions:

Nine Months Ended

September 30, 2020 September 30, 2019

Three Months Ended

March 31, 2021 March 31, 2020

Risk-free interest rate 0.59 % 1.24 %

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Diluted EPS is computed by dividing net income attributable to Global Payments by the weighted-average number of shares outstanding during the period, including the effect of share-based awards that would have a dilutive effect on EPS.

stock options with an exercise price lower than the average market share price of our common stock for the period are assumed to have a dilutive effect on EPS.

The dilutive share base for the three and nine months ended September 30, 2020 excluded approximately 124,888 shares, related to stock options that would have an antidilutive effect on the computation of diluted earnings per share.

There were no such shares for the three and nine months ended September 30, 2019.

The following table sets forth the computation of diluted weighted-average number of shares outstanding for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

All stock options with an exercise price lower than the average market share price of our common stock for the period are assumed to have a dilutive effect on EPS.

The dilutive share base for the three months ended March 31, 2020 excluded approximately

124,888 shares related to stock options that would have an antidilutive effect on the computation of diluted earnings per share.

There were no such shares for the three months ended March 31, 2021.

The following table sets forth the computation of diluted weighted-average number of shares outstanding for the three months ended March 31, 2021 and 2020:

Three Months Ended

March 31, 2021 March 31, 2020

(in thousands)

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Diluted weighted-average number of shares outstanding 297,671 300,838

NOTE 11— ACCUMULATED OTHER COMPREHENSIVE LOSS

The changes in the accumulated balances for each component of other comprehensive income (loss) were as follows for the three and nine months ended September 30, 2020 and 2019:

Foreign Currency Translation Gains (Losses) Unrealized Gains (Losses) on Hedging Activities Other Accumulated Other Comprehensive Loss

NOTE 8 - SUPPLEMENTAL BALANCE SHEET INFORMATION

Cash, cash equivalents and restricted cash

A reconciliation of cash, cash equivalents and restricted cash in the consolidated statements of cash flows as of March 31, 2021 and December 31, 2020 to the amounts in the consolidated balance sheets is as follows:

March 31, 2021 December 31, 2020

(in thousands)

Balance at June 30, 2020 $ ( 361,133 ) $ ( 98,903 ) $ 890 $ ( 459,146 )

Other comprehensive income (loss) 102,058 8,715 ( 3,531 ) 107,242

Balance at September 30, 2020 $ ( 259,075 ) $ ( 90,188 ) $ ( 2,641 ) $ ( 351,904 )

Balance at June 30, 2019 $ ( 289,194 ) $ ( 47,313 ) $ ( 3,399 ) $ ( 339,906 )

Other comprehensive (loss) income ( 58,415 ) ( 29,783 ) 37 ( 88,161 )

Balance at September 30, 2019 $ ( 347,609 ) $ ( 77,096 ) $ ( 3,362 ) $ ( 428,067 )

Other comprehensive income (loss) attributable to noncontrolling interests, which relates only to foreign currency translation, was income of $ 8.8 million and a loss of $ 8.7 million for the three months ended September 30, 2020 and 2019, respectively.

Cash and cash equivalents $ 2,082,414 $ 1,945,868

Restricted cash included in prepaid expenses and other current assets 119,660 143,903

Cash, cash equivalents and restricted cash shown in the statement of cash flows $ 2,202,074 $ 2,089,771

Accounts payable and accrued liabilities

At March 31, 2021 and December 31, 2020, accounts payable and accrued liabilities in the consolidated balance sheet included obligations totaling $ 43.5 million and $ 48.4 million, respectively, for employee termination benefits resulting from merger-related integration activities.

During the three months ended March 31, 2021, we recognized charges for employee termination benefits of $ 25.2 million, which included $ 0.5 million of share-based compensation expense.

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

As of March 31, 2021, the cumulative amount of recognized charges for employee termination benefits resulting from merger-related integration activities was $ 165.6 million, which included $ 24.5 million of share-based compensation expense.

These charges are recorded within selling, general and administrative expenses in our consolidated statements of income and included within Corporate expenses for segment reporting purposes.

New obligations may arise and related expenses may be incurred as merger-related integration activities continue in 2021.

NOTE 9— ACCUMULATED OTHER COMPREHENSIVE LOSS

The changes in the accumulated balances for each component of other comprehensive income (loss) were as follows for the three months ended March 31, 2021 and 2020:

Foreign Currency Translation Gains (Losses) Unrealized Gains (Losses) on Hedging Activities Other Accumulated Other Comprehensive Loss

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Balance at December 31, 2020 $ ( 114,227 ) $ ( 81,543 ) $ ( 6,503 ) $ ( 202,273 )

Other comprehensive loss ( 17,176 ) ( 20,869 ) ( 3,288 ) ( 41,333 )

Balance at September 30, 2020 $ ( 259,075 ) $ ( 90,188 ) $ ( 2,641 ) $ ( 351,904 )

Other comprehensive (loss) income ( 26,843 ) 8,968 7,775 ( 10,100 )

Balance at March 31, 2021 $ ( 141,070 ) $ ( 72,575 ) $ 1,272 $ ( 212,373 )

Balance at December 31, 2019 $ ( 241,899 ) $ ( 69,319 ) $ 647 $ ( 310,571 )

Other comprehensive (loss) income ( 196,451 ) ( 32,879 ) 121 ( 229,209 )

Balance at September 30, 2019 $ ( 347,609 ) $ ( 77,096 ) $ ( 3,362 ) $ ( 428,067 )

Other comprehensive income (loss) attributable to noncontrolling interests, which relates only to foreign currency translation, was income of $ 7.5 million and a loss of $ 9.4 million for the nine months ended September 30, 2020 and 2019, respectively.

Balance at March 31, 2020 $ ( 438,350 ) $ ( 102,198 ) $ 768 $ ( 539,780 )

Other comprehensive loss attributable to noncontrolling interests, which relates only to foreign currency translation, was $ 6.0 million and $ 6.7 million for the three months ended March 31, 2021 and 2020, respectively.

NOTE 10— SEGMENT INFORMATION

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The accounting policies of the reportable operating segments are the same as those described in our Annual Report on Form 10-K for the year ended December 31, 2020 and our summary of significant accounting policies in "Note 1 - Basis of Presentation and Summary of Significant Accounting Policies."

In connection with an organizational realignment implemented during the fourth quarter of 2019, the presentation of segment information for the three and nine months ended September 30, 2019 has been recast to align with the current segment presentation.

Information on segments and reconciliations to consolidated revenues, consolidated operating income and consolidated depreciation and amortization was as follows for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2019 September 30, 2020 September 30, 2019

Three Months Ended

March 31, 2021 March 31, 2020

(in thousands)

Revenues (1) :

Merchant Solutions $ 1,267,872 $ 1,215,269

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Consolidated depreciation and amortization $ 425,573 $ 397,818

(1) Revenues, operating income and depreciation and amortization reflect the effects of acquired businesses from the respective acquisition dates.

For further discussion of our acquisitions, see "Note 2 — Acquisitions."

(2) Operating loss for Corporate included acquisition and integration expenses of $ 57.6 million and $ 86.9 million during the three months ended September 30, 2020 and 2019, respectively.

Operating loss for Corporate included acquisition and integration expense of $ 208.0 million and $ 98.0 million during the nine months ended September 30, 2020 and 2019, respectively.

Operating income for our Merchant Solutions segment reflected the effect of acquisition and integration expenses of $ 13.9 million for the three months ended September 30, 2019 and $ 5.7 million and $ 22.3 million for the nine months ended September 30, 2020 and 2019, respectively.

(1) Operating loss for Corporate included acquisition and integration expenses of $ 90.1 million and $ 69.7 million during the three months ended March 31, 2021 and 2020, respectively.

NOTE 11— COMMITMENTS AND CONTINGENCIES

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We have contractual obligations related to service arrangements with suppliers for fixed or minimum amounts.

Future minimum payments at September 30, 2020 for purchase obligations were as follows (in thousands):

Future minimum payments at March 31, 2021 for purchase obligations were as follows (in thousands):

Year ending December 31:

2 unchanged sentences

Total future minimum payments $ 2,064,291

During the nine months ended September 30, 2020, we entered into a new agreement to acquire software and related services, of which $ 97.6 million was financed utilizing a two -year vendor financing arrangement.

Legal Matters

We are party to a number of claims and lawsuits incidental to our business.

In our opinion, the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, are not expected to have a material adverse effect on our financial position, liquidity, results of operations or cash flows.

On September 23, 2019, a jury in the Superior Court of Dekalb County Georgia, awarded Frontline Processing Corp.

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Our appeal is pending.

While it is reasonably possible that we will incur some loss between zero and the judgment amount plus interest, we have determined that it is not probable that Global Payments has incurred a loss under the applicable accounting standard (ASC Topic 450, Contingencies ) as of September 30, 2020.

As a result, we have not recorded a liability on the consolidated balance sheet with respect to this litigation.

NOTE 12— SUBSEQUENT EVENT

On May 4, 2021, we announced our plan to acquire Zego (Powered by PayLease), a leading property technology company that modernizes the resident experience with a comprehensive management software platform.

Pursuant to the terms and subject to the conditions set forth in the purchase agreement, we will pay the seller cash consideration of approximately $ 925 million, which we plan to fund with cash on hand and our revolving credit facility.

We expect the acquisition to close by the end of the second quarter of 2021, subject to regulatory approval and customary closing conditions.

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

What changed 10-Q

Item 1. Financial Statements