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Item 7. Management’s Discussion and Analysis

2022-02-18 compared with 2021-02-19 · 219 added, 194 removed, 254 unchanged (62% of the section changed)

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.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "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, 2020 compared to the year ended December 31, 2019 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, 2020, which was filed with the United States Securities and Exchange Commission on February 19, 2021.

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.

Consolidated operating results for the years ended December 31, 2020 and 2021 each reflect a full year of the acquired operations of TSYS, while consolidated operating results for the year ended December 31, 2019 include the acquired operations of TSYS only from the acquisition date through December 31, 2019.

See "Note 2—Acquisitions" in the notes to the accompanying consolidated financial statements for further discussion of the Merger.

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

Our technologies, services and team member expertise allow us to provide a broad range of solutions that enable our customers to operate their businesses more efficiently across a variety of channels around the world.

We operate in three reportable segments:

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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

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.”

We have grown organically as well as through acquisitions.

We also continue to invest in new technology solutions, infrastructure to support our growing business and the continued consolidation and enhancement of our operating platforms.

These investments include new product development and innovation to further enhance and differentiate our suite of technology and cloud-based solutions available to customers, along with migration of certain underlying technology platforms to cloud environments to enhance performance and drive cost efficiencies.

We also continue to execute on merger and integration activities, primarily related to the Merger, such as combining business operations, streamlining technology infrastructure, eliminating duplicative corporate and operational support structures and realizing scale efficiencies.

Highlights related to our financial condition at December 31, 2021 and results of operations for the year then ended include the following:

• Consolidated revenues for the year ended December 31, 2021 increased to $8,523.8 million, compared to $7,423.6 million for the prior year.

The increase in consolidated revenues is primarily due to an increase in transaction volumes from continued economic recovery as COVID-19 restrictions eased and acceleration in the use of digital payment solutions.

• Consolidated operating income for the year ended December 31, 2021 increased to $1,358.9 million, compared to $894.0 million for the prior year.

Operating margin for the year ended December 31, 2021 increased to 15.9% compared to 12.0% for the prior year.

The increase in consolidated operating income and operating margin for the year ended December 31, 2021 is primarily due to the increase in revenues and favorable effects of Merger-related cost synergies.

• We expanded our business through the execution of several strategic acquisitions.

◦ On June 10, 2021, we acquired Zego, a real estate technology company that provides a comprehensive resident experience management software and digital commerce solutions to property managers, primarily in the United States, for cash consideration of approximately $933 million.

This acquisition aligns with our technology-enabled, software driven strategy and expands our business into a new vertical market.

◦ During the year ended December 31, 2021, we completed other strategic business acquisitions for an aggregate purchase price of approximately $963 million.

Our acquisition of MineralTree, a leading provider of accounts payable automation and B2B payments solutions, expands our target addressable market and provides incremental avenues for growth in one of the most attractive technology markets.

Our acquisitions of the Bankia merchant services business and Worldline's PayOne Austrian acquiring business deepen our presence in Europe and expand the scale of our distribution and technologies.

• Our capital allocation priorities were supported by the successful issuance of new senior unsecured notes.

◦ On November 22, 2021, we issued $2.0 billion aggregate principal amount of senior unsecured notes consisting of the following:

(i) $500.0 million aggregate principal amount of 1.500% senior notes due November 2024;

(ii) $750.0 million aggregate principal amount of 2.150% senior notes due January 2027;

and (iii) $750.0 million aggregate principal amount of 2.900% senior notes due November 2031.

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

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

We used the net proceeds from the 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.

Emerging Trends

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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.

The proliferation of credit and debit cards, as well as other digital payment solutions, has made the acceptance of digital 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 digital payment solutions, which in turn drives growth in acceptance and transaction volumes.

The use of digital payment solutions, the need for development of technologies and digital-based solutions and expansion of ecommerce, omnichannel and contactless payment solutions has accelerated, in part as a result of the COVID-19 pandemic.

We believe that the number of digital 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, including technology modernization, innovation and integration through strategic partnerships.

We also believe new markets will continue to develop and expand 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 B2B payments, to continue to see transactions migrate to digital-based solutions.

We anticipate that the continued development of new services and technologies, the emergence of new vertical markets and continued expansion of technology-enabled ecommerce and omnichannel solutions, including expanded scale and market reach through new innovative cloud-based capabilities and strategic partnerships, 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.

COVID-19 Update

Since early 2020, the global economy has been affected by the COVID-19 pandemic.

The pandemic has caused and may continue to cause significant disruptions to businesses and markets worldwide through the continued spread of the virus, including through a resurgence of COVID-19 cases or emergence of new more contagious or vaccine-resistant virus variants in certain jurisdictions.

Beginning in mid-March 2020, our financial results were affected by decreased spending and transaction volumes, as governments implemented measures 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.

We saw improvement in our financial results during the latter half of 2020 and in 2021, driven by an increase in spending and transaction volumes as a result of an ease in restrictions and distribution of economic stimulus provided by certain governments and continued vaccine distribution.

While we continue to see signs of economic recovery, which has positively affected our financial results in 2021 compared to the prior year, the rate of recovery on a global basis has been and may continue to be affected by additional developments related to COVID-19.

At the onset of the pandemic, we took early actions to preserve our available capital and provide financial flexibility in response to the effects of COVID-19 on our business, including the temporary reduction of certain operating expenses, employee compensation costs, other discretionary spending and planned capital expenditures, adding to the strength of our financial profile.

Certain operating expenses, capital expenditures and other investments in the business have recently returned to more normalized levels.

We expect to continue to make significant capital investments in the business while also continuing to manage other discretionary spending.

We continue to closely monitor 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 continuing uncertainties around the ultimate severity, scope and duration of the pandemic, vaccine administration rates and efficacy, resurgence of COVID-19 cases and emergence of new more contagious or vaccine-resistant virus variants and the direction or extent of current or future restrictive actions that may be imposed by governments or public health authorities.

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.”

Results of Operations

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

markets where we are sponsored.

Revenues are generally recognized in the amount of customer billing, net of interchange fees and payment network fees.

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Revenues are recognized net of fees charged by the payment networks for services they provide in processing transactions routed through them.

Additionally, revenues include fees from B2B payment services and software-as-a-service (“SaaS”) offerings that automate key procurement processes and enable virtual cards and integrated payments options.

We have recently commenced a strategic evaluation of the consumer portion of this segment with the intent to focus on our growing B2B portfolio.

Operating Expenses

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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.

We have equity method investments, including a 45% interest 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.

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Merchant Solutions $ 5,665,557 66.5 % $ 4,688,335 63.2 % $ 977,222 20.8 %

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

Issuer Solutions 2,065,971 24.2 % 1,981,435 26.7 % 84,536 4.3 %

Business and Consumer Solutions 886,443 10.4 % 829,505 11.2 % 56,938 6.9 %

Intersegment eliminations (94,209) (1.1) % (75,717) (1.0) % (18,492) 24.4 %

Consolidated revenues $ 8,523,762 100.0 % $ 7,423,558 100.0 % $ 1,100,204 14.8 %

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Merchant Solutions $ 1,725,990 20.2 % $ 1,162,741 15.7 % $ 563,249 48.4 %

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

Issuer Solutions 301,119 3.5 % 277,651 3.7 % 23,468 8.5 %

Business and Consumer Solutions 167,777 2.0 % 138,630 1.9 % 29,147 21.0 %

Corporate (836,010) (9.8) % (685,069) (9.2) % (150,941) 22.0 %

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Business and Consumer Solutions 18.9 % 16.7 % 2.2 %

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.

(3) Operating loss for Corporate included acquisition and integration expenses of $335.5 million and $313.0 million during the years ended December 31, 2021 and 2020, respectively.

Acquisition and integration expenses were primarily related to the Merger.

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.

During the year ended December 31, 2021, operating loss for Corporate also included $56.8 million of other charges related to facilities exit activities in response to the transition to remote and flexible work arrangements.

Consolidated revenues for the year ended December 31, 2021 increased by 14.8% to $8,523.8 million, compared to $7,423.6 million for the prior year.

Starting in mid-March 2020, COVID-19 began to have an unfavorable effect on transaction volumes and on our revenues.

We saw improvements during the latter half of 2020 and in 2021, and revenues for the year ended December 31, 2021 increased compared to the prior year primarily due to an increase in transaction volumes from continued economic recovery as COVID-19 restrictions eased and acceleration in the use of digital payment solutions.

Merchant Solutions Segment.

Revenues from our Merchant Solutions segment increased to $4,688.3 million, compared

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.

Revenues from our Merchant Solutions segment for the year ended December 31, 2021 increased by 20.8% to $5,665.6 million, compared to $4,688.3 million for the prior year.

Starting in mid-March 2020, COVID-19 began to have an unfavorable effect on our revenues as a result of a reduction in transaction volumes and restrictions on 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 and in 2021 as certain governments eased pandemic-related restrictions and consumer and business spending increased.

Revenues for the year ended December 31, 2021 increased compared to the prior year due to an increase in transaction volumes from continued economic recovery as COVID-19 restrictions eased and acceleration in the use of digital payment solutions.

While we continue to see signs of economic recovery, which has positively affected our financial results in 2021 compared to the prior year, additional developments related to COVID-19 slowed the rate of recovery during the fourth quarter of 2021.

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.

Revenues from our Issuer Solutions segment for the year ended December 31, 2021 increased by 4.3% to $2,066.0 million, compared to $1,981.4 million for the prior year.

Starting in mid-March 2020, COVID-19 began to have 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 and in 2021 as certain governments began to gradually ease pandemic-related restrictions.

The increase in revenues for the year ended December 31, 2021 was primarily due to an increase in transaction volumes from continued economic recovery as COVID-19 restrictions eased and growth in our output services of card and statement production.

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.

Revenues from our Business and Consumer Solutions segment for the year ended December 31, 2021 increased by 6.9% to $886.4 million, compared to $829.5 million for the prior year.

Our Business and Consumer Solutions segment experienced an unfavorable effect on revenues starting in mid-March 2020 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.

We saw improvement in our financial results throughout the latter half of 2020 and in 2021 from increases in consumer spending driven by government stimulus programs and the easing of COVID-19 related restrictions.

Increases in consumer spending and additional spending volumes driven by further individual stimulus payments distributed to our customers by the United States government had a favorable effect on revenues for the year ended December 31, 2021.

Our revenues for the year ended December 31, 2020 also included the favorable effect of revenues from individual stimulus payments and supplementary unemployment insurance distributions to our customers resulting from the Coronavirus Aid, Relief and Economic Security Act.

To a lesser extent, revenues from recently acquired businesses contributed to the increase in revenues for the year ended December 31, 2021.

We do not expect any recurring effect on our revenues in 2022 related to government stimulus payment distributions.

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.

Cost of service for the year ended December 31, 2021 increased by 3.4% to $3,773.7 million, compared to $3,650.7 million for the prior year.

Cost of service as a percentage of revenues decreased to 44.3% for the year ended December 31, 2021, compared to 49.2% for the prior year.

The increase in cost of service is primarily due to higher variable costs associated with the increase in revenues.

The increase in costs of service also reflects an increase in amortization of acquired intangibles, which were $1,295.0 million and $1,256.9 million for the years ended December 31, 2021 and 2020, respectively.

The decrease in cost of service as a percentage of revenues is primarily due to the favorable effects of the increases in revenues, since certain fixed costs do not vary with revenues, and Merger-related cost synergies.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses for the year ended December 31, 2021 increased by 17.8% to $3,391.2 million, compared to $2,878.9 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 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.

Selling, general and administrative expenses as a percentage of revenues was 39.8% for the year ended December 31, 2021, compared to 38.8% for the prior year.

The increase in selling, general and administrative expenses is primarily due to an increase in variable selling and other costs related to the increase in revenues.

The increase in selling, general and administrative expenses as a percentage of revenues is primarily due to higher employee compensation expense, including an increase in share-based compensation expense of $32.0 million, and higher acquisition and integration expenses, which were $340.2 million for the year ended December 31, 2021, compared to $319.5 million for the prior year.

Employee compensation costs were lower in the prior year as a result of certain temporary cost-saving actions taken to help mitigate the financial effects of the COVID-19 pandemic.

Additionally, share-based compensation expense was higher in the current year primarily driven by the vesting of certain performance-based restricted stock units upon achievement of performance measures during the period.

In addition, opportunities were identified during the fourth quarter of 2021 to reduce our facility footprint in certain markets around the world given the success of remote work and flexible arrangements implemented during the COVID-19 pandemic.

Actions taken to exit certain leased facilities resulted in charges of $56.8 million during the year ended December 31, 2021, primarily to reduce the carrying amount of the affected asset groups to estimated fair value.

We continue to evaluate our physical footprint and additional charges may be incurred as these facilities exit activities continue in 2022.

Corporate expenses for the year ended December 31, 2021 increased by $150.9 million to $836.0 million, compared to $685.1 million for the prior year.

The increase for the year ended December 31, 2021 is primarily due to higher employee compensation expense, including an increase in share-based compensation expense of $32.0 million as described

above, higher acquisition and integration expenses, which were $335.5 million for the year ended December 31, 2021 compared to $313.0 million for the prior year, and other charges related to facilities exit activities in the fourth quarter of 2021 as described above.

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

During the years ended December 31, 2021 and 2020, Corporate expenses included charges for employee termination benefits of $43.4 million and $83.3 million, respectively, which included $1.2 million and $6.7 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.

As of December 31, 2021, the cumulative amount of recognized charges for employee termination benefits resulting from Merger-related integration activities was $183.8 million, which included $25.2 million of share-based compensation expense.

Employee termination benefits from Merger-related integration activities are substantially complete as of December 31, 2021.

Operating Income and Operating Margin

Consolidated operating income for the year ended December 31, 2021 increased to $1,358.9 million, compared to $894.0 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.

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.

Operating margin for the year ended December 31, 2021 increased to 15.9%, compared to 12.0% for the prior year.

The increase in consolidated operating income and operating margin for the year ended December 31, 2021 was primarily due to the increases in revenues, the operating margin effect in part being driven by the fact that certain fixed costs do not vary with revenues.

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

We saw improvement in our financial results and positive trends during the latter half of 2020 and in 2021 as a result of the recovery seen across our markets as COVID-19 restrictions eased.

Further, Merger-related cost synergies and lower credit loss expense had a favorable effect on operating income and operating margin for the year ended December 31, 2021.

The increase in consolidated operating income and operating margin for the year ended December 31, 2021 was partially offset by an increase in acquisition and integration expenses of $20.3 million compared to the prior year, charges related to facilities exit activities in the fourth quarter of 2021 as described above and an increase in amortization of acquired intangibles of $38.1 million compared to the prior year.

Operating income and operating margin for the year ended December 31, 2021 also reflects an increase in employee compensation expense compared to the prior year as a result of certain temporary cost-saving actions taken in the prior year to help mitigate the financial effects of the COVID-19 pandemic and higher share-based compensation expense in the current year associated with performance-based awards.

Segment Operating Income and Operating Margin .

Operating income and operating margin in each of our Merchant Solutions, Issuer Solutions and Business and Consumer Solutions segments for the year ended December 31, 2021 increased compared to the prior year due to the increase in revenues.

We saw improvement in our financial results and positive trends during the latter half of 2020 and in 2021 as a result of the recovery seen across our geographic markets as COVID-19 restrictions eased and consumer and business spending increased, in part as a result of government stimulus payments.

Further, across all of our segments, Merger-related cost synergies had a favorable effect on segment operating income and operating margin for the year ended December 31, 2021.

In our Business and Consumer Solutions segment, operating income and operating margin for the year ended December 31, 2021 were favorably affected by spending volumes driven by additional stimulus payments distributed by the United States government in early 2021, and operating income and operating margin for the year ended December 31, 2020 included the favorable effect from our customers loading individual stimulus payments and supplementary unemployment insurance distributions during the second quarter of 2020.

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.

Interest and other income for the year ended December 31, 2021 decreased by $24.2 million to $19.3 million, compared to $43.6 million for the prior year.

Interest and other income for the year ended December 31, 2020 included 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.

Interest and other expense for the year ended December 31, 2021 decreased by $9.9 million to $333.7 million, compared to $343.5 million for the prior year, as a result of lower average interest rates on outstanding borrowings in 2021 as we replaced higher interest rate senior notes with lower interest rates senior notes and the average LIBOR rate year over year was lower.

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.

Our effective income tax rates for the years ended December 31, 2021 and 2020 were 16.2% and 13.0%, respectively.

The increase in our effective tax rate for the year ended December 31, 2021 from the prior year was primarily due to the geographical mix of earnings compared to the prior year and a change in the U.K.

statutory income tax rate that was enacted during the year ended December 31, 2021, which required a remeasurement of deferred tax balances to increase the effective tax rate.

The effective tax rate for the year ended December 31, 2020 also included the effect of a change in the U.K.

statutory income tax rate that took effect during the year, which required a remeasurement of deferred tax balances to increase the effective tax rate;

however, the 2021 U.K.

tax rate change had a more significant effect on our effective tax rate than the 2020 U.K.

tax rate change.

These effects were partially offset by a change in the assessment of the need for a valuation allowance related to foreign net operating losses and foreign tax credit carryforwards during the year ended December 31, 2021.

In addition, the lower effective tax rate in 2020 reflects the effect of permanent differences on lower income before income taxes, since the amounts of certain of our permanent differences do not vary with income before income taxes.

Equity in Income of Equity Method Investments

Equity in income of equity method investments increased to $112.4 million compared to $88.3 million for the prior year, primarily due to increases in transaction volumes and appreciation in fair value of investments held at certain investees.

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.

Net income attributable to Global Payments increased to $965.5 million compared to $584.5 million for the prior year, reflecting the increase in operating income and equity in income of equity method investments.

Diluted Earnings per Share

Diluted earnings per share was $3.29 compared to $1.95 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.

Diluted earnings per share for the year ended December 31, 2021 reflects the increase in net income and a decrease in the weighted-average number of shares outstanding.

Liquidity and Capital Resources

We have numerous sources of capital, including cash on hand and cash flows generated from operations as well as various sources of financing.

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 allocation priorities are 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.

Our significant contractual cash requirements also include ongoing payments for lease liabilities and contractual obligations related to service arrangements with suppliers for fixed or minimum amounts, which primarily relate to software, technology infrastructure and related services.

For additional information regarding our cash commitments and contractual obligations, see "Note 6—Leases," "Note 8—Long-Term Debt and Lines of Credit" and “Note 17—Commitments and Contingencies” in the notes to the accompanying consolidated financial statements.

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.

To supplement cash from operating activities, 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 networks.

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

Early actions taken to preserve our available capital and provide financial flexibility in response to the effects of COVID-19 on our business, including the temporary reduction of certain operating expenses, employee compensation costs, other discretionary spending and planned capital expenditures, added to the strength of our financial profile.

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, 2021, we had cash and cash equivalents totaling $1,979.3 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.

Of this amount, we considered $894.6 million to be available for general purposes, of which $32.7 million is undistributed foreign earnings considered to be indefinitely reinvested outside the United States.

The available cash of $894.6 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.

(i) settlement-related cash balances, (ii) funds held as collateral for merchant losses ("Merchant Reserves") and (iii) funds held for

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.

Settlement-related cash balances are not restricted in their use;

however, these funds are generally paid out in satisfaction of settlement processing obligations 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.

While this cash is not restricted in its use, we believe that designating this cash as a Merchant Reserve strengthens our fiduciary standing with our member sponsors.

Funds held for customers, which are not restricted in their use, include amounts collected before the corresponding obligation is due to be settled to or at the direction of our customers.

Accumulated cash balances are invested in high-quality, marketable short-term instruments.

We also had restricted cash of $143.7 million as of December 31, 2021, 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.

These balances are subject to local regulatory restrictions requiring appropriate segregation and restriction in their use.

Operating activities provided net cash of $2,780.8 million and $2,314.2 million for the years ended December 31, 2021 and 2020, respectively, which reflect net income adjusted for noncash items, including depreciation and amortization, facility exit charges 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 accounts payable and other liabilities balances, and by the effects of businesses we acquire that have different working capital requirements.

The increase in cash flows from operating activities from the prior year was primarily due to an increase in earnings, an increase in accounts payable and other liabilities balances due to timing of month-end and transaction volume, partially offset by an increase in accounts receivable as a result of higher revenues in the current year.

We used net cash in investing activities of $2,293.8 million and $438.3 million during the years ended December 31, 2021 and 2020, 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, 2021, we used cash of $1,904.7 million for acquisitions.

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.

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.

We made capital expenditures of $493.2 million and $436.2 million during the years ended December 31, 2021 and 2020, respectively.

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

These investments also include new product development and innovation to further enhance and differentiate our suite of technology and cloud-based solutions available to customers, along with the migration of certain underlying technology platforms to cloud environments to enhance performance and drive cost efficiencies.

Capital expenditures and other investments in the business have recently returned to more normalized levels, and we expect to continue to make significant capital investments in the business.

We anticipate capital expenditures to grow at a similar rate as our revenue growth for the year ending December 31, 2022.

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.

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 contributions from and distributions to noncontrolling interests.

We used net cash in financing activities of $405.4 million and $1,546.1 million during the years ended December 31, 2021 and 2020, respectively.

Proceeds from long-term debt were $7,057.7 million and $2,401.1 million for the years ended December 31, 2021 and 2020, respectively.

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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.

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

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.

On November 22, 2021, we issued $2.0 billion aggregate principal amount of senior unsecured notes consisting of the following:

(i) $500.0 million aggregate principal amount of 1.5% senior notes due November 2024;

(ii) $750.0 million aggregate principal amount of 2.150% senior notes due January 2027;

and (iii) $750.0 million aggregate principal amount of 2.900% senior notes due November 2031.

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

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

During the 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.

During the year ended December 31, 2021, we had net borrowings from settlement lines of credit of $149.5 million.

During the year ended December 31, 2020, we had net repayments of settlement lines of credit of $133.3 million.

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, 2021 and 2020, we used cash of $2,533.6 million and $631.1 million, respectively, to repurchase shares of our common stock.

The share repurchase activity for the year ended December 31, 2021, included the repurchase of 2,491,161 shares at an average price of $200.71 per share under an ASR agreement we entered into on February 10, 2021 with a financial institution to repurchase an aggregate of $500.0 million of our common stock during the ASR program purchase period, which ended on March 31, 2021.

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.

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On January 27, 2022, our board of directors approved an increase to our existing share repurchase program authorization, which raised the total available authorization to $2.0 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.

We paid dividends to our common shareholders in the amounts of $259.7 million and $233.2 million during the years ended December 31, 2021 and 2020, respectively.

During the year ended December 31, 2021, Global Payments and noncontrolling shareholders made contributions of $209.6 million and $70.0 million, respectively, to certain of our majority-owned subsidiaries based on each shareholder's proportionate ownership, primarily to fund acquisitions that closed in the fourth quarter of 2021.

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.

(“Comercia”) from 51% to 80%, which was funded through a combination of available cash resources and borrowings on our unsecured revolving credit facility.

Additionally, during the year ended December 31, 2020, we made distributions to noncontrolling interests in the amount of $26.2 million.

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.

We have $9.4 billion in aggregate principal amount of senior unsecured notes, which mature at various dates ranging from June 2023 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.

On November 22, 2021, we issued $2.0 billion aggregate principal amount of senior unsecured notes consisting of the following:

(i) $500.0 million aggregate principal amount of 1.500% senior notes due November 2024;

(ii) $750.0 million aggregate principal amount of 2.150% senior notes due January 2027;

and (iii) $750.0 million aggregate principal amount of 2.900% senior notes due November 2031.

We incurred debt issuance costs of approximately $14.4 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, 2021.

Interest on the senior unsecured notes is payable semi-annually in arrears on May 15 and November 15 for the 2024 and 2031 notes and January 15 and July 15 on the 2027 note, commencing May 15, 2022 for the 2024 note and the 2031 note and July 15, 2022 for the 2027 note.

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 the outstanding indebtedness under our revolving credit facility and for general corporate purposes.

On February 26, 2021, we issued $1.1 billion 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 December 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.

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

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, 2021.

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

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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:

On August 14, 2019, we issued $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;

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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;

(i) $750.0 million aggregate principal amount of 3.800% senior notes due 2021, which were redeemed in February 2021;

(ii) $550.0 million aggregate principal amount of 3.750% senior notes due 2023;

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

The difference between the acquisition-date 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 $29.6 million and $36.2 million for the years ended December 31, 2021 and 2020, respectively.

Senior Unsecured Credit Facilities

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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.

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.

In connection with the sunset of certain LIBOR reference rates occurring at the end of 2021, we amended the Unsecured Revolving Credit Agreement in December 2021 to replace the London Interbank Offered Rate as administered by the ICE Benchmark Administration with the Sterling Overnight Index Average Reference Rate and the Euro Interbank Offered Rate for any extension of credit denominated in sterling or euros, respectively.

As of December 31, 2021, borrowings outstanding under the term loan facility were $2.0 billion and there were no outstanding borrowings under the revolving credit facility .

As described in "Note 1 — Basis of Presentation and Summary of Significant Accounting Policies" in the notes to the accompanying consolidated financial statements, we continue to monitor developments related to the upcoming transition from USD LIBOR to an alternative benchmark reference rate after June 30, 2023.

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 .

As of December 31, 2021, the interest rate on the term loan facility was 1.48%.

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

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As of December 31, 2021, the total available commitments under the revolving credit facility were $1.9 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.

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

As of December 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.

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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.

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 line of credit may exceed the stated credit limit.

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

As of December 31, 2021 and 2020, a total of $76.3 million an d $64.5 million, respectively, of cash on deposit was used to determine the available credit.

As of December 31, 2021, w e had $484.2 million outs tanding under these lines of credit with additional capacity to fund settlement of $1,693.2 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.

During the year ended December 31, 2021, the maximum and average outstanding balances under these lines of credit were $1,267.4 million and $487.7 million, respectively.

The weighted-average interest rate on these borrowings was 2.22% at December 31, 2021.

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.

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.

See "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.

BIN/ICA Agreements

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Certain of such agreements contain financial covenants, and we were in compliance with all such covenants as of December 31, 2021.

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

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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.

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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.

The quantitative assessment compares the estimated 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.

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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.

As of October 1, 2021, we performed a quantitative assessment of impairment for our Vertical Market Software Solutions, 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 Vertical Market Software Solutions, Issuer Solutions and Business and Consumer Solutions reporting units that the fair value of each reporting unit is 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.

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, which have smaller excess compared to the other reporting units since they were recently acquired in the Merger.

Our current year assessments, performed as of October 1, 2021, included consideration of the expected effects of the COVID-19 pandemic on revenues and our cost mitigation efforts, as well as longer term performance expectations.

We continue to closely monitor developments related to COVID-19.

The future magnitude, duration and effects of the pandemic are difficult to predict at this time, and it is reasonably possible that future developments could have a negative effect on the estimates and assumptions utilized in our goodwill impairment assessments and could result in material impairment charges in future periods.

There were no changes in reporting units or significant changes in the methodology used to assess goodwill impairment during the year ended December 31, 2021.

We regularly monitor any changes in the business and evaluate whether such changes affect the determination of our reporting units.

Intangible and Long-lived Assets — Intangible assets are amortized over their estimated useful lives.

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The useful lives of contract-based intangible assets are equal to the terms of the agreements.

The useful lives of acquired technologies are based on an estimate of the period over which we expect to receive economic benefit.

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.

We use the straight-line method of amortization for our amortizable acquired technologies, trademarks and trade names and certain contract-based intangibles.

Amortization for most of our customer-related intangible assets and certain contract-based intangibles 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.

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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 believe that our accelerated method reflects the expected pattern of the benefit to be derived.

We did not make any significant adjustments to the amortization schedules of our intangible assets during the year ended December 31, 2021.

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.

We regularly evaluate whether events and circumstances have occurred that indicate the carrying amount of property and equipment, lease right-of-use assets 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.

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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.

As a result of actions taken in the fourth quarter of 2021 to reduce our facilities footprint in certain markets around the world given the success of remote work and flexible arrangements implemented during the COVID-19 pandemic, we recognized charges of $51.3 million, primarily related to certain lease right-of-use assets, leasehold improvements, furniture and fixtures and equipment to reduce the carrying amount of each asset group to estimated fair value.

We continue to evaluate our physical footprint and additional charges may be incurred as these facilities exit activities continue in 2022.

Capitalization of Internal-Use Software

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Internal-use software is amortized over its estimated useful life, which is typically 5 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.

There were no significant changes in the accounting methodology used for capitalization of internal-use software during the year ended December 31, 2021.

During the year ended December 31, 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.

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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

See "Note 10 — Income Tax" in the notes to the accompanying consolidated financial statements for further information regarding the changes in the amount of unrecognized tax benefits and deferred tax valuation allowances during the year ended December 31, 2021.

Effect of New Accounting Pronouncements and Recently Issued Accounting 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.

See "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.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis