What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-05-02 compared with 2021-11-02 · 127 added, 193 removed, 117 unchanged (73% of the section changed)

6 unchanged sentences

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.

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

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

We have grown organically as well as through acquisitions.

We continue to invest in new technology solutions and innovation, infrastructure to support our growing business and the 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, improve speed to market and drive cost efficiencies.

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

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.

Highlights related to our financial condition at September 30, 2021 and results of operations for the three and nine months then ended include the following:

• Consolidated revenues for the three and nine months ended September 30, 2021 increased to $2,202.3 million and $6,329.8 million, respectively, compared to $1,917.8 million and $5,493.4 million, respectively, 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 three and nine months ended September 30, 2021 increased to $400.1 million and $1,037.9 million, respectively, compared to $290.4 million and $642.0 million, respectively, for the prior year.

Operating margin for the three and nine months ended September 30, 2021 increased to 18.2% and 16.4%, respectively, compared to 15.1% and 11.7%, respectively, for the prior year.

The increase in consolidated operating income and operating margin for the three and nine months ended September 30, 2021 is primarily due to the increase in revenues and favorable effects of Merger-related cost synergies.

• 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.

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

COVID-19 Update

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

The pandemic has caused and may continue to cause significant disruptions to businesses and markets worldwide as the virus spreads or has a resurgence 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 have seen improvement in our financial results during the latter half of 2020 and into 2021 as governments began to gradually ease restrictions and provide economic stimulus and vaccine distribution accelerated, leading to an increase in spending and transaction volumes.

While we continue to see signs of economic recovery, which has positively affected our financial results in 2021 to date 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.

We have also recently commenced a strategic evaluation of the consumer portion of our Business and Consumer Solutions segment with the intent to focus on our growing business-to-business portfolio of assets.

Highlights related to our financial condition at March 31, 2022 and results of operations for the three months then ended include the following:

• Consolidated revenues for the three months ended March 31, 2022 increased to $2,156.3 million compared to $1,990.0 million for the prior year.

The increase in consolidated revenues was primarily due to an increase in transaction volumes as a result of growth in customer base, acceleration in the use of digital payment solutions and continued economic recovery from the effects of the COVID-19 pandemic.

• Consolidated operating income for the three months ended March 31, 2022 increased to $375.9 million compared to $275.3 million for the prior year.

Operating margin for the three months ended March 31, 2022 increased to 17.4% compared to 13.8% for the prior year.

The increase in consolidated operating income and operating margin for the three months ended March 31, 2022 was primarily due to the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues, and lower acquisition and integration expenses.

Effect of COVID-19 and Other Global Events

The COVID-19 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 virus variants in certain jurisdictions.

The pandemic and measures to prevent its spread have affected and may continue to affect our financial results in various geographic locations as a result of volatility in spending and transaction volumes as governments implement or ease restrictions in response to the virus.

While we continue to see signs of economic recovery, which has positively affected our financial results, 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.

Certain operating expenses, capital expenditures and other investments in the business have 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, the availability and effectiveness of treatments or vaccines, resurgence risk as new virus variants are identified 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 the section entitled "Risk Factors" in Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2020.

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 virus variants and the direction or extent of current or future restrictive actions that may be imposed by governments or public health authorities.

We also continue to evaluate the potential effects on our business from other economic conditions and global events, including the situation in Ukraine and Russia that began in February 2022.

In response to the invasion of Ukraine by Russia, economic sanctions were imposed on individuals and entities in Russia, including financial institutions, by governments around the world, including the U.S.

and the European Union.

Our business in Russia represents an immaterial portion of our operations and financial results.

In 2021, Russia contributed less than one half of one percent of total consolidated revenues.

We have no team members or operations in Ukraine.

As a result of additional sanctions imposed in April 2022 that will affect our ability to continue normal operations in Russia, we sold our merchant business in Russia effective April 29, 2022.

Based on our current estimates, we expect to recognize a charge of approximately $130 million during the second quarter of 2022 associated with the sale.

The invasion of Ukraine by Russia and the sanctions and other measures imposed in response to this situation have increased the level of economic and political uncertainty in Russia and other areas of the world.

Risks associated with heightened geopolitical and economic instability include, among others, reduction in consumer, government or corporate spending, international sanctions, embargoes, heightened inflation, volatility in global financial markets and foreign currency rates, increased cyber disruptions and higher supply chain costs.

We continue to take actions to comply with all applicable restrictions and sanctions.

The extent to which the effects of the invasion of Ukraine by Russia will affect the global economy and our operations outside of Russia is difficult to predict at this time.

However, a significant escalation or expansion of the scope or of the related economic disruption could have an adverse effect on our business and financial results.

We also continue to monitor other potential effects on our financial statements as a result of these global developments, including fluctuations in foreign currency.

Certain of our operations are conducted in foreign currencies.

Recently, the US dollar has strengthened against certain foreign currencies in the markets in which we operate.

Consequently, a portion of our revenues and expenses may be affected by fluctuations in foreign currency exchange rates.

For the three months ended March 31, 2022, currency exchange rate fluctuations decreased our consolidated revenues by approximately $14.7 million and decreased our operating income by approximately $4.7 million, calculated by converting revenues and operating income for the current year in local currencies using exchange rates for the prior year.

A continuation or worsening of conditions could result in adverse effect on our future financial results;

however, we are unable to predict the extent of the potential effect on our financial results.

For a further discussion of trends, uncertainties and other factors that could affect our future operating results, see “Item 1A – Risk Factors” included in Item 1 of this Quarterly Report and the section entitled "Risk Factors" in Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2021.

Results of Operations

4 unchanged sentences

Business—Business Segments" within our Annual Report on Form 10-K for the year ended December 31, 2021, incorporated herein by reference, and "Note 12—Segment Information" in the notes to the accompanying unaudited consolidated financial statements.

The following table sets forth key selected financial data for the three months ended September 30, 2021 and 2020, this data as a percentage of total revenues and the changes between the periods in dollars and as a percentage of the prior-year amount.

The income statement data for the three months ended September 30, 2021 and 2020 is derived from the accompanying unaudited consolidated financial statements included in Part I, Item 1 - Financial Statements.

The following table sets forth key selected financial data for the three months ended March 31, 2022 and 2021, this data as a percentage of total revenues and the changes between the periods in dollars and as a percentage of the prior-year amount.

The income statement data for the three months ended March 31, 2022 and 2021 is derived from the accompanying unaudited consolidated financial statements included in Part I, Item 1 - Financial Statements.

Three Months Ended

September 30, 2021 % of Revenues (1)

March 31, 2022 % of Revenues (1)

Three Months Ended

September 30, 2020 % of Revenues (1)

$ Change % Change

(dollar amounts in thousands)

Revenues (2) :

Merchant Solutions $ 1,495,898 67.9 % $ 1,243,961 64.9 % $ 251,937 20.3 %

Issuer Solutions 522,166 23.7 % 487,409 25.4 % 34,757 7.1 %

Business and Consumer Solutions 207,670 9.4 % 204,106 10.6 % 3,564 1.7 %

Intersegment eliminations (23,397) (1.1) % (17,661) (0.9) % (5,736) 32.5 %

Consolidated revenues $ 2,202,337 100.0 % $ 1,917,815 100.0 % $ 284,522 14.8 %

Consolidated operating expenses (2) :

Cost of service $ 944,172 42.9 % $ 900,921 47.0 % $ 43,251 4.8 %

Selling, general and administrative 858,082 39.0 % 726,475 37.9 % 131,607 18.1 %

Operating expenses $ 1,802,254 81.8 % $ 1,627,396 84.9 % $ 174,858 10.7 %

Operating income (loss) (2)(3) :

Merchant Solutions $ 488,407 22.2 % $ 344,981 18.0 % $ 143,426 41.6 %

Issuer Solutions 77,692 3.5 % 70,800 3.7 % 6,892 9.7 %

Business and Consumer Solutions 35,233 1.6 % 31,052 1.6 % 4,181 13.5 %

Corporate (201,249) (9.1) % (156,414) (8.2) % (44,835) 28.7 %

Operating income $ 400,083 18.2 % $ 290,419 15.1 % $ 109,664 37.8 %

Operating margin (2) :

Merchant Solutions 32.6 % 27.7 % 4.9 %

Issuer Solutions 14.9 % 14.5 % 0.4 %

Business and Consumer Solutions 17.0 % 15.2 % 1.8 %

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

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

(3) Operating loss for Corporate included acquisition and integration expenses of $70.7 million and $57.6 million during the three months ended September 30, 2021 and 2020, respectively.

The following table sets forth key selected financial data for the nine months ended September 30, 2021 and 2020, this data as a percentage of total revenues and the changes between the periods in dollars and as a percentage of the prior-year amount.

The income statement data for the nine months ended September 30, 2021 and 2020 is derived from the accompanying unaudited consolidated financial statements included in Part I, Item 1 - Financial Statements.

Nine Months Ended

September 30, 2021 % of Revenues (1)

Nine Months Ended

September 30, 2020 % of Revenues (1)

March 31, 2021 % of Revenues (1)

$ Change % Change

21 unchanged sentences

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

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

(3) Operating loss for Corporate included acquisition and integration expenses of $237.7 million and $208.0 million during the nine months ended September 30, 2021 and 2020, respectively.

Consolidated revenues for the three and nine months ended September 30, 2021 increased by 14.8% and 15.2%, respectively, to $2,202.3 million and $6,329.8 million, respectively, compared to $1,917.8 million and $5,493.4 million, respectively, for the prior year.

Starting in mid-March 2020, COVID-19 began to have an unfavorable effect on transaction volumes and on our revenues for the three and nine months ended September 30, 2020.

We saw improvements throughout the latter half of 2020 and into 2021, and revenues for the three and nine months ended September 30, 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.

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

During the first quarter of 2022, the recently acquired operations of MineralTree were reassigned to the Issuer Solutions segment to reflect how the business will be managed going forward.

(3) Operating loss for Corporate included acquisition and integration expenses of $48.2 million and $90.1 million during the three months ended March 31, 2022 and 2021, respectively.

Consolidated revenues for the three months ended March 31, 2022 increased by 8.4% to $2,156.3 million compared to $1,990.0 million for the prior year.

The increase in revenues for the three months ended March 31, 2022 was primarily due to an increase in transaction volumes as a result of growth in customer base, acceleration in the use of digital payment solutions and continued economic recovery from the effects of the COVID-19 pandemic.

While we continue to see signs of economic recovery, which has positively affected our financial results in the first quarter of 2022 compared to the first quarter of 2021, the rate of recovery on a global basis has been and may continue to be affected by additional developments related to COVID-19.

Merchant Solutions Segment.

Revenues from our Merchant Solutions segment for the three and nine months ended September 30, 2021 increased by 20.3% and 21.1%, respectively, to $1,495.9 million and $4,190.5 million, respectively, compared to $1,244.0 million and $3,460.8 million, respectively, 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 into the first half of 2021 as certain governments began to gradually ease pandemic-related restrictions and consumer and business spending increased.

Revenues for the three and nine months ended September 30, 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.

Revenues from our Merchant Solutions segment for the three months ended March 31, 2022 increased by 16.2% to $1,473.0 million compared to $1,267.9 million for the prior year.

Issuer Solutions Segment.

Revenues from our Issuer Solutions segment for the three and nine months ended September 30, 2021 increased by 7.1% and 4.6%, respectively, to $522.2 million and $1,528.3 million, respectively, compared to $487.4 million and $1,461.2 million, respectively, 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 into 2021 as certain governments began to gradually ease pandemic-related restrictions.

The increase in revenues for the three and nine months ended September 30, 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.

Revenues from our Issuer Solutions segment for the three months ended March 31, 2022 increased by 2.2% to $511.5 million compared to $500.3 million for the prior year.

The increase in revenues for the three months ended March 31, 2022 was primarily due to an increase in transaction volumes from continued economic recovery from the effects of the COVID-19 pandemic and the inclusion of the recently acquired MineralTree business within the Issuer Solutions Segment beginning with the first quarter of 2022.

Business and Consumer Solutions Segment.

Revenues from our Business and Consumer Solutions segment for the three and nine months ended September 30, 2021 increased by 1.7% and 8.6%, respectively, to $207.7 million and $678.6 million, respectively, compared to $204.1 million and $624.8 million, respectively, 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.

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

Increases in consumer spending had a favorable effect on revenues for the three and nine months ended September 30, 2021.

Additional spending volumes driven by further individual stimulus payments distributed to our customers by the United States government also had a favorable effect on revenues for the nine months ended September 30, 2021.

Our revenues for the nine months ended September 30, 2020 included the favorable effect of revenues in the second quarter of 2020 from individual stimulus payments and supplementary unemployment insurance distributions to our customers resulting from the Coronavirus Aid, Relief and Economic Security Act.

Revenues from our Business and Consumer Solutions segment for the three months ended March 31, 2022 were $195.8 million compared to $243.6 million for the prior year.

Revenues for the three months ended March 31, 2021 were favorably affected by additional spending volumes driven by individual stimulus payments and supplementary unemployment amounts distributed to our customers by the U.S.

government in the first quarter of 2021, which did not recur in the first quarter of 2022.

Operating Expenses

Cost of Service.

Cost of service for the three and nine months ended September 30, 2021 increased by 4.8% and 2.8%, respectively, to $944.2 million and $2,805.7 million, respectively, compared to $900.9 million and $2,728.5 million, respectively, for the prior year.

Cost of service as a percentage of revenues decreased to 42.9% and 44.3% for the three and nine months ended September 30, 2021, respectively, compared to 47.0% and 49.7%, respectively, for the prior year period.

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 $319.9 million and $313.4 million for the three months ended September 30, 2021 and 2020, respectively, and $973.9 million and $941.7 million for the nine months ended September 30, 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 and Merger-related cost synergies.

Cost of service for the three months ended March 31, 2022 increased by 3.4% to $957.2 million compared to $925.2 million for the prior year.

Cost of service as a percentage of revenues decreased to 44.4% for the three months ended March 31, 2022 compared to 46.5% for the prior year.

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

The decrease in cost of service as a percentage of revenues was primarily due to the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues.

Cost of service includes amortization of acquired intangibles, which were $329.0 million and $329.2 million for the three months ended March 31, 2022 and 2021, respectively.

Selling, General and Administrative Expenses .

Selling, general and administrative expenses for the three and nine months ended September 30, 2021 increased by 18.1% and 17.1%, respectively, to $858.1 million and $2,486.2 million, respectively, compared to $726.5 million and $2,122.9 million, respectively, for the prior year.

Selling, general and administrative expenses as a percentage of revenues were 39.0% and 39.3% for the three and nine months ended September 30, 2021, respectively, compared to 37.9% and 38.6%, respectively, 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 an increase in share-based compensation expense of $23.3 million and $41.0 million for the three and nine months ended September 30, 2021, respectively.

The increase in share-based compensation expense was primarily driven by the vesting of certain performance-based restricted stock units upon achievement of performance measures during the period.

Higher acquisition and integration expenses also contributed to the increase in selling, general and administrative expenses as a percentage of revenues.

Selling, general and administrative expenses included acquisition and integration expenses of $71.6 million and $59.8 million for the three months ended September 30, 2021 and 2020, respectively, and $241.6 million and $213.6 million for the nine months ended September 30, 2021 and 2020, respectively.

Corporate expenses for the three and nine months ended September 30, 2021 increased by $44.8 million and $107.5 million, respectively, to $201.2 million and $588.2 million, respectively, compared to $156.4 million and $480.7 million, respectively, for the prior year.

The increase for the three and nine months ended September 30, 2021 is primarily due to higher employee compensation expense, including an increase in share-based compensation expense of $23.3 million and $41.0 million, respectively.

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.

Corporate expenses also included higher acquisition and integration expenses, which were $70.7 million and $237.7 million for the three and nine months ended September 30, 2021, respectively, compared to $57.6 million and $208.0 million, respectively, for the prior year.

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

During the three months ended September 30, 2021 and 2020, Corporate expenses included charges for employee termination benefits of $4.7 million and $8.1 million, respectively, which included $1.9 million of share-based compensation expense for the three months ended September 30, 2020.

During the nine months ended September 30, 2021 and 2020, Corporate expenses included charges for employee termination benefits of $43.0 million and $49.8 million, respectively, which included $1.2 million and $6.1 million, respectively, of share-based compensation expense.

As of September 30, 2021, the cumulative amount of recognized charges for employee termination benefits resulting from Merger-related integration activities was $183.4 million, which included $25.2 million of share-based compensation expense.

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

Selling, general and administrative expenses for the three months ended March 31, 2022 increased by 4.3% to $823.1 million compared to $789.5 million for the prior year.

Selling, general and administrative expenses as a percentage of revenues decreased to 38.2% for the three months ended March 31, 2022 compared to 39.7% for the prior year.

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

The decrease in selling, general and administrative expenses as a percentage of revenues is primarily due to the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues, and lower acquisition and integration expenses in the current year.

Selling, general and administrative expenses included acquisition and integration expenses of $51.0 million and $91.8 million for the three months ended March 31, 2022 and 2021, respectively.

Corporate expenses for the three months ended March 31, 2022 decreased by $34.8 million to $160.3 million compared to $195.1 million for the prior year.

The decrease for the three months ended March 31, 2022 was primarily due to lower acquisition and integration expenses, which were $48.2 million for the three months ended March 31, 2022 compared to $90.1 million for the three months ended March 31, 2021.

Operating Income and Operating Margin

Consolidated operating income for the three and nine months ended September 30, 2021 increased to $400.1 million and $1,037.9 million, respectively, compared to $290.4 million and $642.0 million, respectively, for the prior year.

Operating margin for the three and nine months ended September 30, 2021 increased to 18.2% and 16.4%, respectively, compared to 15.1% and 11.7%, respectively, for the prior year.

The increase in consolidated operating income and operating margin for the

three and nine months ended September 30, 2021 was primarily due to the increases in 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 throughout the latter half of 2020 and into the first half of 2021 as a result of the recovery seen across our markets as COVID-19 restrictions eased.

Further, Merger-related cost synergies had a favorable effect on operating income and operating margin for the three and nine months ended September 30, 2021.

The increase in consolidated operating income and operating margin for the three and nine months ended September 30, 2021 was partially offset by an increase in amortization of acquired intangibles of $6.5 million and $32.3 million, respectively, and an increase in acquisition and integration expenses of $14.8 million and $27.9 million, respectively, compared to the prior year.

Operating income and operating margin for the three and nine months ended September 30, 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.

Consolidated operating income for the three months ended March 31, 2022 increased to $375.9 million compared to $275.3 million for the prior year.

Operating margin for the three months ended March 31, 2022 increased to 17.4% compared to 13.8% for the prior year.

The increase in consolidated operating income and operating margin was primarily due to the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues, and lower acquisition and integration expenses.

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 three and nine months ended September 30, 2021 increased compared to the prior year due to the increase in revenues.

We saw improvement in our financial results and positive trends throughout the latter half of 2020 and into 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 three and nine months ended September 30, 2021.

In our Business and Consumer Solutions segment, operating income and operating margin for the nine months ended September 30, 2021 were favorably affected by spending volumes driven by additional stimulus payments distributed by the United States government in early 2021, primarily in the first quarter of 2021, and operating income and operating margin for the nine months ended September 30, 2020 included the favorable effect from our customers loading individual stimulus payments and supplementary unemployment insurance distributions during the second quarter of 2020.

Operating income and operating margin in our Merchant Solutions segment for the three months ended March 31, 2022 increased compared to the three months ended March 31, 2021 primarily due to the favorable effect of the increase in revenues, since certain fixed costs do not vary with revenues, and continued management of discretionary spending, slightly offset by incremental expenses related to continued investment in new product, innovation and our technology environments.

In our Issuer Solutions segment, operating income and operating margin for the three months ended March 31, 2022 decreased compared to the three months ended March 31, 2021 primarily due to the recently acquired operations of MineralTree.

In our Business and Consumer Solutions segment, operating income and operating margin for the three months ended March 31, 2021 were favorably affected by additional stimulus payments and supplementary unemployment amounts distributed by the U.S.

government in the first quarter of 2021, which did not recur in the first quarter of 2022.

Other Income/Expense, Net

Interest and other income for the three and nine months ended September 30, 2021 decreased by $23.7 million and $19.3 million, respectively, to $6.3 million and $16.0 million, respectively, compared to $30.0 million and $35.3 million, respectively, for the prior year.

The decrease was primarily due to the recognition of a gain during the three months ended September 30, 2020 of $27.3 million in connection with the partial release and conversion of our Visa convertible preferred shares.

See "Note 5—Other Assets" in the notes to the accompanying unaudited consolidated financial statements for further discussion of this transaction .

Interest and other expense for the three months ended March 31, 2022 increased to $93.3 million compared to $83.1 million for the prior year, as a result of the increase in our average outstanding borrowings and higher average interest rates on outstanding borrowings, as the average LIBOR rate was higher during the three months ended March 31, 2022 as compared to the three months ended March 31, 2021.

Income Tax Expense

Our effective income tax rates for the three months ended September 30, 2021 and 2020 were 15.5% and 18.0%, respectively, and our effective income tax rates for the nine months ended September 30, 2021 and 2020 were 16.3% and 14.1%, respectively.

The decrease in our effective tax rate for the three months ended September 30, 2021 from the prior year is primarily due to the effect on the prior year effective rate of changes in uncertain tax positions and a change in the U.K.

statutory income tax rate that took effect during the three months ended September 30, 2020, which required a remeasurement of deferred tax balances to increase the effective tax rate.

The increase in our effective tax rate for the nine months ended September 30, 2021 from the prior year is primarily due to the effect of higher income before income taxes compared to the prior year and a change in the U.K.

statutory income tax rate that took effect during the nine months ended September 30, 2021, which required a remeasurement of deferred tax balances to increase the effective rate.

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 tax credit carryforwards in the current year.

Our effective income tax rate for the three months ended March 31, 2022 was 18.4%, and our effective income tax rate for the three months ended March 31, 2021 was 10.5%.

The increase in our effective tax rate for the three months ended March 31, 2022 was primarily the result of a change in the assessment of the need for a valuation allowance related to foreign credit carryforwards that favorably affected the rate for the three months ended March 31, 2021, and a lower tax benefit on share-based awards in the current year.

Net Income Attributable to Global Payments

Net income attributable to Global Payments increased to $296.7 million and $757.0 million for the three and nine months ended September 30, 2021, respectively, compared to $221.0 million and $401.9 million, respectively, for the prior year, reflecting the increase in operating income and additional equity in income of equity method investments.

Equity in income of equity method investments increased primarily due to increases in transaction volumes and appreciation in fair value of investments held at certain investees.

Net income attributable to Global Payments increased to $244.7 million for the three months ended March 31, 2022 compared to $196.7 million for the prior year, reflecting the increase in operating income.

Diluted Earnings per Share

Diluted earnings per share were $1.01 and $2.56 for the three and nine months ended September 30, 2021, respectively, compared to $0.74 and $1.34, respectively, for the prior year.

Diluted earnings per share for the three and nine months ended September 30, 2021 reflects the increase in net income and a decrease in the weighted-average number of shares outstanding.

Diluted earnings per share was $0.87 for the three months ended March 31, 2022 compared to $0.66 for the prior year.

Diluted earnings per share for the three months ended March 31, 2022 reflects the increase in net income and the 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 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.

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.

Commitments under our borrowing arrangements are further described in "Note 5—Long-Term Debt and Lines of Credit" in the notes to the accompanying unaudited consolidated financial statements and below under "Long-Term Debt and Lines of Credit." For additional information regarding our other cash commitments and contractual obligations, see "Note 6—Leases," and “Note 17—Commitments and Contingencies” in our Annual Report on Form 10-K for the year ended December 31, 2021.

Our capital plan objectives are to support our operational needs and strategic plan for long-term growth while optimizing our cost of capital and financial position.

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 the needs of our existing operations and planned requirements for the foreseeable future.

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 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.

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 September 30, 2021, we had cash and cash equivalents totaling $2,347.7 million.

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

At March 31, 2022, we had cash and cash equivalents totaling $2,045.3 million.

Of this amount, we considered $797.3 million to be available for general purposes, of which $33.1 million is undistributed foreign earnings considered to be indefinitely reinvested outside the United States.

2 unchanged sentences

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;

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 as a Merchant Reserve strengthens our fiduciary standing with our member sponsors and is in accordance with the guidelines set by the card networks.

Funds held for customers and the corresponding liability include amounts collected prior to remittance to or at the direction of our customers.

We also had restricted cash of $120.9 million as of September 30, 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 $2,027.6 million and $1,544.8 million for the nine months ended September 30, 2021 and 2020, respectively, which reflect net income adjusted for noncash items, including depreciation and amortization and

changes in operating assets and liabilities.

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.

We also had restricted cash of $134.4 million as of March 31, 2022, representing amounts deposited by customers for prepaid card transactions.

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

Operating activities provided net cash of $630.0 million and $599.4 million for the three months ended March 31, 2022 and 2021, 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 accounts payable and other liabilities balances.

The increase in cash flows from operating activities from the prior year was primarily due to the increase in earnings, 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 $1,295.9 million and $395.0 million during the nine months ended September 30, 2021 and 2020, respectively, primarily to fund acquisitions and capital expenditures.

During the nine months ended September 30, 2021 and 2020, we used cash of $946.4 million and $77.2 million, respectively, for acquisitions.

We made capital expenditures of $350.7 million and $329.4 million during the nine months ended September 30, 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.

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 also expect cash outlays of approximately $900 million in connection with acquisitions anticipated to close in the fourth quarter of 2021 for which we have executed purchase agreements as of September 30, 2021.

The increase in cash flows from operating activities from the prior year was primarily due to an increase in earnings and an increase in accounts payable and other liabilities balances due to timing of month-end and transaction volume, partially offset by an increase in prepaid expenses and other assets as a result of additional capitalized contract costs, capitalized implementation costs associated with cloud computing arrangements and timing associated with other prepaid services.

We used net cash in investing activities of $160.8 million and $96.9 million during the three months ended March 31, 2022 and 2021, respectively, primarily to fund acquisitions and capital expenditures.

During the three months ended March 31, 2022 and 2021, we used cash of $4.7 million and $11.1 million, respectively, for acquisitions.

We made capital expenditures of $156.1 million and $86.2 million during the three months ended March 31, 2022 and 2021, respectively.

These investments include software and hardware to support the development of new technologies, infrastructure to support our growing business and the 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.

We expect to continue to make significant capital investments in the business, and we anticipate capital expenditures to remain as a similar percentage of revenues for the year ending December 31, 2022 as compared to the year ended December 31, 2021.

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

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

We used net cash in financing activities of $310.2 million and $594.6 million during the nine months ended September 30, 2021 and 2020, respectively.

Proceeds from long-term de bt were $3,910.0 million and $1,868.2 million for the nine months ended September 30, 2021 and 2020, respectively.

Repayments of long-term debt were $2,434.8 million and $1,829.6 million for the nine months ended September 30, 2021 and 2020, respectively.

We used net cash in financing activities of $376.3 million and $369.0 million during the three months ended March 31, 2022 and 2021, respectively.

Proceeds from long-term de bt were $1,529.2 million and $1,987.0 million for the three months ended March 31, 2022 and 2021, respectively.

Repayments of long-term debt were $1,176.5 million and $1,575.4 million for the three months ended March 31, 2022 and 2021, respectively.

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

1 unchanged sentence

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

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

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

During the nine months ended September 30, 2021, we had net borrowings from settlement lines of credit of $244.9 million.

During the nine months ended September 30, 2020, we had net repayments of settlement lines of credit of $31.1 million.

During the three months ended March 31, 2022 and 2021, we had net borrowings from settlement lines of credit of $16.5 million and $108.5 million, respectively.

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

During the nine months ended September 30, 2021 and 2020, we used $1,833.7 million and $421.2 million, respectively, to repurchase shares of our common stock.

The activity for the nine months ended September 30, 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 million of our common stock during the ASR program purchase period, which ended on March 31, 2021.

As of September 30, 2021, we had $949.2 million of share repurchase authority remaining under our share repurchase program.

We paid dividends to our common shareholders in the amounts of $188.2 million and $175.0 million during the nine months ended September 30, 2021 and 2020, respectively.

During the nine months ended September 30, 2021, Global Payments and a noncontrolling shareholder made contributions of $185.3 million and $46.3 million, respectively, to one of our majority-owned subsidiaries, Comercia Global Payments Entidad de Pago, S.L.

(“Comercia”).

Contributions were made to Comercia based on each shareholder's proportionate ownership to fund an acquisition by Comercia that closed in the fourth quarter of 2021.

During the three months ended March 31, 2022 and 2021, we used $649.7 million and $803.0 million, respectively, to repurchase shares of our common stock.

The activity for the three months ended March 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 million of our common stock during the ASR program purchase period, which ended on March 31, 2021.

As of March 31, 2022, we had $1,707.0 million of share repurchase authority remaining under our share repurchase program.

We paid dividends to our common shareholders in the amounts of $70.2 million and $57.6 million during the three months ended March 31, 2022 and 2021, respectively.

Additionally, during the three months ended March 31, 2022, we made distributions to noncontrolling interests in the amount of $5.5 million.

Long-Term Debt and Lines of Credit

3 unchanged sentences

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 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 September 30, 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.

Senior Unsecured Credit Facilities

As of September 30, 2021, borrowings outstanding under the term loan and revolving credit facility were $2.0 billion and $1.2 billion, respectively.

As of March 31, 2022, borrowings outstanding under the term loan and revolving credit facility were $2.0 billion and $0.4 billion, respectively.

We may issue standby letters of credit of up to $250 million in the aggregate under the revolving credit facility.

1 unchanged sentence

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

As of September 30, 2021, the total available commitments under the revolving credit facility were $1.8 billion.

As of March 31, 2022, the total available commitments under the revolving credit facility were $1.7 billion.

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, 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 September 30, 2021.

As of March 31, 2022, 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, 2022.

Settlement Lines of Credit

3 unchanged sentences

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

As of September 30, 2021, a total of $75.6 million of cash on deposit was used to determine the available credit.

As of September 30, 2021, we had $588.3 million outstanding under these lines of credit with additional capacity to fund settlement of $1.5 billion.

During the nine months ended September 30, 2021, the maximum and average outstanding balances under these lines of credit were $1.3 billion and $493.3 million, respectively.

The weighted-average interest rate on these borrowings was 1.90% at September 30, 2021.

As of March 31, 2022, a total of $79.3 million of cash on deposit was used to determine the available credit.

As of March 31, 2022, we had $497.3 million outstanding under these lines of credit with additional capacity to fund settlement of $1.7 billion.

During the three months ended March 31, 2022, the maximum and average outstanding balances under these lines of credit were $814.7 million and $442.3 million, respectively.

The weighted-average interest rate on these borrowings was 2.29% at March 31, 2022.

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

Commitments and Contractual Obligations

During the nine months ended September 30, 2021, our commitments and contractual obligations increased from the amounts disclosed in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations-Commitments and Contractual Obligations" in our Annual Report on Form 10-K for the year ended December 31, 2020.

The increase primarily relates to the acquisition of software, technology infrastructure and related services.

Our estimated purchase obligations as of September 30, 2021 were $182.4 million during the remainder of 2021, $261.0 million during 2022, $333.7 million during 2023 and 2024, $345.2 million during 2025 and 2026 and $771.0 million thereafter for a total of $1,893.3 million.

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.

Effect of New Accounting Pronouncements and Recently Issued Accounting Pronouncements Not Yet Adopted

8 unchanged sentences

our success and timing in developing and introducing new services and expanding our business;

and statements about the benefits of our acquisitions, including future financial and operating results, the company’s plans, objectives, expectations and intentions, and the successful integration of our future acquisitions or completion of anticipated benefits and strategic initiatives.

and statements about the benefits of our acquisitions, including future financial and operating results, the company’s plans, objectives, expectations and intentions, and the successful integration of our acquisitions or completion of anticipated benefits and strategic initiatives.

You can sometimes identify forward-looking statements by our use of the words "believes," "anticipates," "expects," "intends," "plan," "forecast," "guidance" and similar expressions.

3 unchanged sentences

Our actual revenues, revenue growth rates and margins, other results of operations and shareholder values could differ materially from those anticipated in our forward-looking statements as a result of many known and unknown factors, many of which are beyond our ability to predict or control.

Important factors, among others, that may otherwise cause actual events or results to differ materially from those anticipated by such forward-looking statements or historical performance include the effects of global economic, political, market, health and social events or other conditions, including the effects and duration of the COVID-19 pandemic and actions taken in response;

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

Important factors, among others, that may otherwise cause actual events or results to differ materially from those anticipated by such forward-looking statements or historical performance include the effects of global economic, political, market, health and social events or other conditions, including the effects and duration of, and actions taken in response to, the COVID-19 pandemic and the evolving situation involving Ukraine and Russia;

our ability to meet our liquidity needs in light of the effects of the COVID-19 pandemic or otherwise;

the outcome of any legal proceedings that may be instituted against the Company or our directors;

difficulties, delays and higher than anticipated costs related to integrating the businesses of Global Payments and TSYS, including with respect to implementing controls to prevent a material security breach of any internal systems or to successfully manage credit and fraud risks in business units;

failing to fully realize anticipated cost savings and other anticipated benefits of the Merger when expected or at all;

business disruptions from the Merger integration that may harm our business, including current plans and operations;

difficulties, delays and higher than anticipated costs related to integrating the businesses of Global Payments and Total System Services, Inc., including with respect to implementing controls to prevent a material security breach of any internal systems or to successfully manage credit and fraud risks in business units;

the effect of a security breach or operational failure on the Company's business;

failing to comply with the applicable requirements of Visa, Mastercard or other payment networks or card schemes or changes in those requirements;

the ability to maintain Visa and Mastercard registration and financial institution sponsorship;

the ability to retain

and hire key personnel;

the ability to retain, develop and hire key personnel;

the diversion of management’s attention from ongoing business operations;

3 unchanged sentences

risks associated with our indebtedness, foreign currency exchange and interest rate risks;

the effects of new or changes in current laws, regulations, credit card association rules or other industry standards, including privacy and cybersecurity laws and regulations;

and events beyond our control and other factors presented in "Item 1A - Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2020, which we advise you to review.

our ability to meet environmental, social and governance targets, goals and commitments;

the potential effects of climate change including natural disasters;

the effects of new or changes in current laws, regulations, credit card association rules or other industry standards on us or our partners and customers, including privacy and cybersecurity laws and regulations;

and other events beyond our control, and other factors presented in "Item 1A - Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2021 and this Quarterly Report on Form 10-Q, which we advise you to review.

These cautionary statements qualify all of our forward-looking statements, and you are cautioned not to place undue reliance on these forward-looking statements.

4 unchanged sentences

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 2. Management’s Discussion and Analysis