it
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended |
OR
☐ | TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to |
Commission File Number: 001-32903
THE WESTERN UNION COMPANY
(Exact name of registrant as specified in its charter)
Delaware | 20-4531180 (I.R.S. Employer Identification No.) | ||
7001 EAST |
Registrant’s telephone number, including area code: (866) (866) 405-5012
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol | Name of each exchange on which registered |
Common Stock, $0.01 Par Value | WU | The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-212b‑2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer☐ Non-accelerated filer ☐
Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-212b‑2 of the Exchange Act). Yes
As of October 31, 2017, 459,292,417July 29, 2022, 385,754,381 shares of the registrant'sregistrant’s common stock were outstanding.
THE WESTERN UNION COMPANY
INDEX
PAGE NUMBER | ||
8 | ||
9 | ||
36 | ||
52 | ||
52 | ||
53 | ||
54 | ||
54 | ||
54 | ||
54 | ||
54 | ||
54 | ||
55 |
2
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
THE WESTERN UNION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in millions, except per share amounts)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues | $ | 1,404.7 | $ | 1,377.8 | $ | 4,086.0 | $ | 4,051.2 | |||||||
Expenses: | |||||||||||||||
Cost of services | 841.1 | 822.9 | 2,484.5 | 2,424.2 | |||||||||||
Selling, general and administrative | 292.0 | 276.6 | 875.6 | 829.8 | |||||||||||
Total expenses | 1,133.1 | 1,099.5 | 3,360.1 | 3,254.0 | |||||||||||
Operating income | 271.6 | 278.3 | 725.9 | 797.2 | |||||||||||
Other income/(expense): | |||||||||||||||
Interest income | 1.3 | 1.1 | 3.8 | 2.7 | |||||||||||
Interest expense | (37.2 | ) | (41.4 | ) | (104.2 | ) | (122.9 | ) | |||||||
Derivative gains, net | 2.0 | 0.3 | 6.8 | 2.2 | |||||||||||
Other income, net | 1.5 | 1.7 | 4.4 | 0.8 | |||||||||||
Total other expense, net | (32.4 | ) | (38.3 | ) | (89.2 | ) | (117.2 | ) | |||||||
Income before income taxes | 239.2 | 240.0 | 636.7 | 680.0 | |||||||||||
Provision for income taxes | 3.6 | 23.1 | 72.9 | 71.8 | |||||||||||
Net income | $ | 235.6 | $ | 216.9 | $ | 563.8 | $ | 608.2 | |||||||
Earnings per share: | |||||||||||||||
Basic | $ | 0.51 | $ | 0.45 | $ | 1.20 | $ | 1.24 | |||||||
Diluted | $ | 0.51 | $ | 0.44 | $ | 1.19 | $ | 1.23 | |||||||
Weighted-average shares outstanding: | |||||||||||||||
Basic | 462.8 | 487.0 | 470.6 | 492.4 | |||||||||||
Diluted | 465.4 | 490.3 | 473.6 | 495.5 | |||||||||||
Cash dividends declared per common share | $ | 0.175 | $ | 0.16 | $ | 0.525 | $ | 0.48 |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenues |
| $ | 1,138.3 |
|
| $ | 1,289.7 |
|
| $ | 2,294.0 |
|
| $ | 2,499.7 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of services |
|
| 653.0 |
|
|
| 755.0 |
|
|
| 1,308.1 |
|
|
| 1,461.0 |
|
Selling, general, and administrative |
|
| 221.3 |
|
|
| 279.8 |
|
|
| 484.4 |
|
|
| 551.0 |
|
Total expenses |
|
| 874.3 |
|
|
| 1,034.8 |
|
|
| 1,792.5 |
|
|
| 2,012.0 |
|
Operating income |
|
| 264.0 |
|
|
| 254.9 |
|
|
| 501.5 |
|
|
| 487.7 |
|
Other income/(expense): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gain on divestiture of business (Note 4) |
|
| — |
|
|
| — |
|
|
| 151.4 |
|
|
| — |
|
Interest income |
|
| 1.8 |
|
|
| 0.3 |
|
|
| 2.4 |
|
|
| 0.7 |
|
Interest expense |
|
| (24.8 | ) |
|
| (25.6 | ) |
|
| (49.6 | ) |
|
| (54.0 | ) |
Other income/(expense), net |
|
| (4.8 | ) |
|
| 30.5 |
|
|
| (7.3 | ) |
|
| 28.6 |
|
Total other income/(expense), net |
|
| (27.8 | ) |
|
| 5.2 |
|
|
| 96.9 |
|
|
| (24.7 | ) |
Income before income taxes |
|
| 236.2 |
|
|
| 260.1 |
|
|
| 598.4 |
|
|
| 463.0 |
|
Provision for income taxes |
|
| 42.2 |
|
|
| 37.6 |
|
|
| 111.1 |
|
|
| 58.7 |
|
Net income |
| $ | 194.0 |
|
| $ | 222.5 |
|
| $ | 487.3 |
|
| $ | 404.3 |
|
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 0.50 |
|
| $ | 0.54 |
|
| $ | 1.25 |
|
| $ | 0.98 |
|
Diluted |
| $ | 0.50 |
|
| $ | 0.54 |
|
| $ | 1.25 |
|
| $ | 0.98 |
|
Weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
|
| 386.7 |
|
|
| 409.3 |
|
|
| 389.9 |
|
|
| 410.5 |
|
Diluted |
|
| 387.6 |
|
|
| 411.5 |
|
|
| 391.0 |
|
|
| 412.9 |
|
See Notes to Condensed Consolidated Financial Statements.
3
THE WESTERN UNION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(in millions)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Net income | $ | 235.6 | $ | 216.9 | $ | 563.8 | $ | 608.2 | |||||||
Other comprehensive loss, net of tax (Note 8): | |||||||||||||||
Unrealized gains/(losses) on investment securities | 0.5 | (2.1 | ) | 10.1 | 4.6 | ||||||||||
Unrealized losses on hedging activities | (17.3 | ) | (12.1 | ) | (75.5 | ) | (39.2 | ) | |||||||
Foreign currency translation adjustments | (4.1 | ) | 0.6 | (5.7 | ) | (3.5 | ) | ||||||||
Defined benefit pension plan adjustments | 2.0 | 1.7 | 5.6 | 5.1 | |||||||||||
Total other comprehensive loss | (18.9 | ) | (11.9 | ) | (65.5 | ) | (33.0 | ) | |||||||
Comprehensive income | $ | 216.7 | $ | 205.0 | $ | 498.3 | $ | 575.2 |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net income |
| $ | 194.0 |
|
| $ | 222.5 |
|
| $ | 487.3 |
|
| $ | 404.3 |
|
Other comprehensive income, net of reclassifications and tax (Note 9): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrealized gains/(losses) on investment securities |
|
| (23.7 | ) |
|
| 2.2 |
|
|
| (75.3 | ) |
|
| (10.8 | ) |
Unrealized gains/(losses) on hedging activities |
|
| 23.1 |
|
|
| (2.7 | ) |
|
| 28.4 |
|
|
| 26.2 |
|
Foreign currency translation adjustments |
|
| — |
|
|
| — |
|
|
| (17.8 | ) |
|
| — |
|
Defined benefit pension plan adjustments |
|
| — |
|
|
| 2.3 |
|
|
| — |
|
|
| 4.8 |
|
Total other comprehensive income/(loss) |
|
| (0.6 | ) |
|
| 1.8 |
|
|
| (64.7 | ) |
|
| 20.2 |
|
Comprehensive income |
| $ | 193.4 |
|
| $ | 224.3 |
|
| $ | 422.6 |
|
| $ | 424.5 |
|
See Notes to Condensed Consolidated Financial Statements.
4
THE WESTERN UNION COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions, except per share amounts)
September 30, 2017 | December 31, 2016 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 1,034.7 | $ | 877.5 | |||
Settlement assets | 3,947.0 | 3,749.1 | |||||
Property and equipment, net of accumulated depreciation of $654.7 and $600.0, respectively | 211.9 | 220.5 | |||||
Goodwill | 3,161.1 | 3,162.0 | |||||
Other intangible assets, net of accumulated amortization of $1,021.7 and $958.2, respectively | 601.1 | 664.2 | |||||
Other assets | 917.8 | 746.3 | |||||
Total assets | $ | 9,873.6 | $ | 9,419.6 | |||
Liabilities and Stockholders' Equity | |||||||
Liabilities: | |||||||
Accounts payable and accrued liabilities (Note 5) | $ | 590.5 | $ | 1,129.6 | |||
Settlement obligations | 3,947.0 | 3,749.1 | |||||
Income taxes payable | 464.5 | 407.3 | |||||
Deferred tax liability, net | 140.9 | 85.9 | |||||
Borrowings | 3,533.4 | 2,786.1 | |||||
Other liabilities | 487.9 | 359.4 | |||||
Total liabilities | 9,164.2 | 8,517.4 | |||||
Commitments and contingencies (Note 5) | |||||||
Stockholders' equity: | |||||||
Preferred stock, $1.00 par value; 10 shares authorized; no shares issued | — | — | |||||
Common stock, $0.01 par value; 2,000 shares authorized; 459.3 shares and 481.5 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively | 4.6 | 4.8 | |||||
Capital surplus | 685.2 | 640.9 | |||||
Retained earnings | 247.9 | 419.3 | |||||
Accumulated other comprehensive loss | (228.3 | ) | (162.8 | ) | |||
Total stockholders' equity | 709.4 | 902.2 | |||||
Total liabilities and stockholders' equity | $ | 9,873.6 | $ | 9,419.6 |
|
| June 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Assets |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 1,201.9 |
|
| $ | 1,208.3 |
|
Settlement assets |
|
| 3,106.6 |
|
|
| 2,843.5 |
|
Property and equipment, net of accumulated depreciation of $649.1 and $650.4, respectively |
|
| 115.6 |
|
|
| 129.4 |
|
Goodwill |
|
| 2,034.6 |
|
|
| 2,034.6 |
|
Other intangible assets, net of accumulated amortization of $727.9 and $731.8, respectively |
|
| 446.1 |
|
|
| 417.1 |
|
Other assets (Note 5) |
|
| 1,193.6 |
|
|
| 737.7 |
|
Assets held for sale (Note 4) |
|
| 688.9 |
|
|
| 1,452.9 |
|
Total assets |
| $ | 8,787.3 |
|
| $ | 8,823.5 |
|
Liabilities and stockholders' equity |
|
|
|
|
|
| ||
Liabilities: |
|
|
|
|
|
| ||
Accounts payable and accrued liabilities |
| $ | 411.5 |
|
| $ | 450.2 |
|
Settlement obligations |
|
| 3,106.6 |
|
|
| 2,843.5 |
|
Income taxes payable |
|
| 851.6 |
|
|
| 870.7 |
|
Deferred tax liability, net |
|
| 169.6 |
|
|
| 203.8 |
|
Borrowings |
|
| 2,695.3 |
|
|
| 3,008.4 |
|
Other liabilities (Note 4) |
|
| 679.5 |
|
|
| 269.4 |
|
Liabilities associated with assets held for sale (Note 4) |
|
| 424.9 |
|
|
| 821.9 |
|
Total liabilities |
|
| 8,339.0 |
|
|
| 8,467.9 |
|
|
|
|
|
|
|
| ||
Commitments and contingencies (Note 6) |
|
|
|
|
|
| ||
|
|
|
|
|
|
| ||
Stockholders' equity: |
|
|
|
|
|
| ||
Preferred stock, $1.00 par value; 10 shares authorized; 0 shares issued |
|
| — |
|
|
| — |
|
Common stock, $0.01 par value; 2,000 shares authorized; 386.1 shares and 393.8 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively |
|
| 3.9 |
|
|
| 3.9 |
|
Capital surplus |
|
| 973.3 |
|
|
| 941.0 |
|
Accumulated deficit |
|
| (412.1 | ) |
|
| (537.2 | ) |
Accumulated other comprehensive loss |
|
| (116.8 | ) |
|
| (52.1 | ) |
Total stockholders' equity |
|
| 448.3 |
|
|
| 355.6 |
|
Total liabilities and stockholders' equity |
| $ | 8,787.3 |
|
| $ | 8,823.5 |
|
See Notes to Condensed Consolidated Financial Statements.
5
THE WESTERN UNION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities | |||||||
Net income | $ | 563.8 | $ | 608.2 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation | 57.5 | 55.0 | |||||
Amortization | 139.6 | 142.9 | |||||
Other non-cash items, net | 130.3 | 62.0 | |||||
Increase/(decrease) in cash resulting from changes in: | |||||||
Other assets | (35.6 | ) | (41.8 | ) | |||
Accounts payable and accrued liabilities (Note 5) | (538.4 | ) | (50.2 | ) | |||
Income taxes payable | 57.6 | 25.6 | |||||
Other liabilities | 48.3 | 20.2 | |||||
Net cash provided by operating activities | 423.1 | 821.9 | |||||
Cash flows from investing activities | |||||||
Capitalization of contract costs | (46.2 | ) | (85.9 | ) | |||
Capitalization of purchased and developed software | (27.4 | ) | (39.7 | ) | |||
Purchases of property and equipment | (48.9 | ) | (51.4 | ) | |||
Purchases of non-settlement related investments and other | (191.6 | ) | (44.1 | ) | |||
Proceeds from maturity of non-settlement related investments and other | 43.5 | 22.7 | |||||
Purchases of held-to-maturity non-settlement related investments | (42.7 | ) | (39.7 | ) | |||
Proceeds from held-to-maturity non-settlement related investments | 27.2 | 4.2 | |||||
Net cash used in investing activities | (286.1 | ) | (233.9 | ) | |||
Cash flows from financing activities | |||||||
Cash dividends paid | (245.3 | ) | (235.1 | ) | |||
Common stock repurchased (Note 8) | (489.3 | ) | (419.8 | ) | |||
Net proceeds from issuance of borrowings | 746.4 | — | |||||
Proceeds from exercise of options and other | 8.4 | 31.7 | |||||
Net cash provided by/(used in) financing activities | 20.2 | (623.2 | ) | ||||
Net change in cash and cash equivalents | 157.2 | (35.2 | ) | ||||
Cash and cash equivalents at beginning of period | 877.5 | 1,315.9 | |||||
Cash and cash equivalents at end of period | $ | 1,034.7 | $ | 1,280.7 | |||
Supplemental cash flow information: | |||||||
Interest paid | $ | 90.0 | $ | 88.4 | |||
Income taxes (refunded)/paid | $ | (22.0 | ) | $ | 46.8 |
|
| Six Months Ended |
| |||||
|
| June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Cash flows from operating activities |
|
|
|
|
|
| ||
Net income |
| $ | 487.3 |
|
| $ | 404.3 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
| ||
Depreciation |
|
| 22.6 |
|
|
| 26.0 |
|
Amortization |
|
| 70.1 |
|
|
| 83.0 |
|
Gain on divestiture of business, excluding transaction costs (Note 4) |
|
| (155.8 | ) |
|
| — |
|
Gain on the sale of noncontrolling interest in a private company (Note 4) |
|
| — |
|
|
| (47.9 | ) |
Other non-cash items, net |
|
| 32.8 |
|
|
| 80.1 |
|
Increase/(decrease) in cash, excluding the effects of divestitures, resulting from changes in: |
|
|
|
|
|
| ||
Other assets |
|
| (131.2 | ) |
|
| (84.5 | ) |
Accounts payable and accrued liabilities |
|
| 19.6 |
|
|
| (29.8 | ) |
Income taxes payable |
|
| (20.5 | ) |
|
| (66.5 | ) |
Other liabilities |
|
| (18.1 | ) |
|
| (15.2 | ) |
Net cash provided by operating activities |
|
| 306.8 |
|
|
| 349.5 |
|
Cash flows from investing activities |
|
|
|
|
|
| ||
Payments for capitalized contract costs |
|
| (26.3 | ) |
|
| (82.2 | ) |
Payments for internal use software |
|
| (42.7 | ) |
|
| (45.2 | ) |
Purchases of property and equipment |
|
| (15.3 | ) |
|
| (17.9 | ) |
Purchases of settlement investments |
|
| (495.3 | ) |
|
| (270.5 | ) |
Proceeds from the sale of settlement investments |
|
| 290.2 |
|
|
| 539.6 |
|
Maturities of settlement investments |
|
| 84.4 |
|
|
| 130.9 |
|
Proceeds from the sale of noncontrolling interest in a private company (Note 4) |
|
| — |
|
|
| 50.9 |
|
Purchase of noncontrolling interest in stc Bank (Note 4) |
|
| — |
|
|
| (200.0 | ) |
Purchases of non-settlement investments |
|
| (400.0 | ) |
|
| — |
|
Proceeds from divestiture, net of cash divested (Note 4) |
|
| 896.4 |
|
|
| — |
|
Other investing activities |
|
| 0.9 |
|
|
| (2.9 | ) |
Net cash provided by investing activities |
|
| 292.3 |
|
|
| 102.7 |
|
Cash flows from financing activities |
|
|
|
|
|
| ||
Cash dividends and dividend equivalents paid |
|
| (184.8 | ) |
|
| (193.5 | ) |
Common stock repurchased (Note 9) |
|
| (185.5 | ) |
|
| (160.5 | ) |
Net proceeds from/(repayments of) commercial paper |
|
| (15.0 | ) |
|
| 185.0 |
|
Net proceeds from issuance of borrowings |
|
| — |
|
|
| 891.7 |
|
Principal payments on borrowings |
|
| (300.0 | ) |
|
| (1,150.0 | ) |
Make-whole premium on early extinguishment of debt |
|
| — |
|
|
| (14.3 | ) |
Proceeds from exercise of options |
|
| 9.4 |
|
|
| 11.6 |
|
Net change in settlement obligations |
|
| (112.1 | ) |
|
| (93.1 | ) |
Other financing activities |
|
| — |
|
|
| 4.0 |
|
Net cash used in financing activities |
|
| (788.0 | ) |
|
| (519.1 | ) |
Net change in cash and cash equivalents, including settlement, and restricted cash |
|
| (188.9 | ) |
|
| (66.9 | ) |
Cash and cash equivalents, including settlement, and restricted cash at beginning of period |
|
| 2,110.9 |
|
|
| 2,143.1 |
|
Cash and cash equivalents, including settlement, and restricted cash at end of period |
| $ | 1,922.0 |
|
| $ | 2,076.2 |
|
See Notes to Condensed Consolidated Financial Statements.
6
THE WESTERN UNION COMPANY
SUPPLEMENTAL CASH FLOW INFORMATION
(Unaudited)
(in millions)
|
| June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Reconciliation of balance sheet cash and cash equivalents to cash flows: |
|
|
|
|
|
| ||
Cash and cash equivalents on balance sheet |
| $ | 1,201.9 |
|
| $ | 1,061.4 |
|
Settlement cash and cash equivalents (Note 8) |
|
| 602.7 |
|
|
| 1,002.6 |
|
Restricted cash in Other assets |
|
| 40.4 |
|
|
| 12.2 |
|
Cash and cash equivalents included in Assets held for sale (Note 4) |
|
| 77.0 |
|
|
| — |
|
Cash and cash equivalents, including settlement, and restricted cash |
| $ | 1,922.0 |
|
| $ | 2,076.2 |
|
|
| Six Months Ended |
| |||||
|
| June 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Supplemental cash flow information: |
|
|
|
|
|
| ||
Interest paid |
| $ | 47.6 |
|
| $ | 52.0 |
|
Income taxes paid |
| $ | 148.9 |
|
| $ | 123.9 |
|
Internal use software capitalized but not yet paid |
| $ | — |
|
| $ | 23.0 |
|
Accrued and unpaid capitalized contract costs |
| $ | 39.8 |
|
| $ | — |
|
See Notes to Condensed Consolidated Financial Statements.
7
THE WESTERN UNION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
| Total |
| ||||||
|
| Common Stock |
|
| Capital |
|
| Accumulated |
|
| Comprehensive |
|
| Stockholders' |
| |||||||||
|
| Shares |
|
| Amount |
|
| Surplus |
|
| Deficit |
|
| Loss |
|
| Equity |
| ||||||
Balance, December 31, 2021 |
|
| 393.8 |
|
| $ | 3.9 |
|
| $ | 941.0 |
|
| $ | (537.2 | ) |
| $ | (52.1 | ) |
| $ | 355.6 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 293.3 |
|
|
| — |
|
|
| 293.3 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 10.7 |
|
|
| — |
|
|
| — |
|
|
| 10.7 |
|
Common stock dividends and dividend equivalents declared ($0.235 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (92.6 | ) |
|
| — |
|
|
| (92.6 | ) |
Repurchase and retirement of common shares |
|
| (8.6 | ) |
|
| (0.1 | ) |
|
| — |
|
|
| (158.9 | ) |
|
| — |
|
|
| (159.0 | ) |
Shares issued under stock-based compensation plans |
|
| 1.9 |
|
|
| 0.1 |
|
|
| 8.8 |
|
|
| — |
|
|
| — |
|
|
| 8.9 |
|
Other comprehensive loss (Note 9) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (64.1 | ) |
|
| (64.1 | ) |
Balance, March 31, 2022 |
|
| 387.1 |
|
|
| 3.9 |
|
|
| 960.5 |
|
|
| (495.4 | ) |
|
| (116.2 | ) |
|
| 352.8 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 194.0 |
|
|
| — |
|
|
| 194.0 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 12.3 |
|
|
| — |
|
|
| — |
|
|
| 12.3 |
|
Common stock dividends and dividend equivalents declared ($0.235 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (89.6 | ) |
|
| — |
|
|
| (89.6 | ) |
Repurchase and retirement of common shares |
|
| (1.1 | ) |
|
| — |
|
|
| — |
|
|
| (21.1 | ) |
|
| — |
|
|
| (21.1 | ) |
Shares issued under stock-based compensation plans |
|
| 0.1 |
|
|
| — |
|
|
| 0.5 |
|
|
| — |
|
|
| — |
|
|
| 0.5 |
|
Other comprehensive loss (Note 9) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.6 | ) |
|
| (0.6 | ) |
Balance, June 30, 2022 |
|
| 386.1 |
|
| $ | 3.9 |
|
| $ | 973.3 |
|
| $ | (412.1 | ) |
| $ | (116.8 | ) |
| $ | 448.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated |
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
| Total |
| ||||||
|
| Common Stock |
|
| Capital |
|
| Accumulated |
|
| Comprehensive |
|
| Stockholders' |
| |||||||||
|
| Shares |
|
| Amount |
|
| Surplus |
|
| Deficit |
|
| Loss |
|
| Equity |
| ||||||
Balance, December 31, 2020 |
|
| 411.2 |
|
| $ | 4.1 |
|
| $ | 885.1 |
|
| $ | (543.1 | ) |
| $ | (159.5 | ) |
| $ | 186.6 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 181.8 |
|
|
| — |
|
|
| 181.8 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 10.8 |
|
|
| — |
|
|
| — |
|
|
| 10.8 |
|
Common stock dividends and dividend equivalents declared ($0.235 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (97.9 | ) |
|
| — |
|
|
| (97.9 | ) |
Repurchase and retirement of common shares |
|
| (3.7 | ) |
|
| — |
|
|
| — |
|
|
| (89.0 | ) |
|
| — |
|
|
| (89.0 | ) |
Shares issued under stock-based compensation plans |
|
| 2.3 |
|
|
| — |
|
|
| 8.1 |
|
|
| — |
|
|
| — |
|
|
| 8.1 |
|
Other comprehensive income (Note 9) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 18.4 |
|
|
| 18.4 |
|
Balance, March 31, 2021 |
|
| 409.8 |
|
|
| 4.1 |
|
|
| 904.0 |
|
|
| (548.2 | ) |
|
| (141.1 | ) |
|
| 218.8 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 222.5 |
|
|
| — |
|
|
| 222.5 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 12.0 |
|
|
| — |
|
|
| — |
|
|
| 12.0 |
|
Common stock dividends and dividend equivalents declared ($0.235 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (97.0 | ) |
|
| — |
|
|
| (97.0 | ) |
Repurchase and retirement of common shares |
|
| (3.0 | ) |
|
| — |
|
|
| — |
|
|
| (75.3 | ) |
|
| — |
|
|
| (75.3 | ) |
Shares issued under stock-based compensation plans |
|
| 0.2 |
|
|
| — |
|
|
| 3.5 |
|
|
| — |
|
|
| — |
|
|
| 3.5 |
|
Other comprehensive income (Note 9) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1.8 |
|
|
| 1.8 |
|
Balance, June 30, 2021 |
|
| 407.0 |
|
| $ | 4.1 |
|
| $ | 919.5 |
|
| $ | (498.0 | ) |
| $ | (139.3 | ) |
| $ | 286.3 |
|
See Notes to Condensed Consolidated Financial Statements.
8
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Business and Basis of Presentation
Business
The Western Union Company ("Western Union" or the "Company") is a leader in global money movement and payment services, providing people and businesses with fast, reliable, and convenient ways to send money and make payments around the world. The Western Union
® brand is globally recognized. TheThe CODM allocates resources and assesses performance using discrete information for these separate components, neither of which is material from either a quantitative or qualitative perspective. Accordingly, the Company no longer reports a separate Consumer-to-Business operating segment, and no new reportable segments result from the impact of these changes. The cash-based and electronic-based bill payments services are therefore included in "Other."
All businesses and other services that have not been classified in the above segments are reported as "Other,"Other, which as noted above, primarily includes the Company's electronic-based and cash-basedCompany’s bill payment services which facilitate bill payments from consumers to businesses and other organizations and which were previously reported in the historical Consumer-to-Business operating segment, andCompany’s money order services. Certain of the Company's money order and other services, in additioncorporate costs such as costs related to strategic initiatives, including costs for the review and closing of acquisitions.mergers, acquisitions, and divestitures, are also included in Other. See Note 1314 for further information regarding the Company'sCompany’s segments.
There are legal or regulatory limitations on transferring certain assets of the Company outside of the countries where these assets are located. However, there are generally no limitations on the use of these assets within those countries. Additionally, the Company must meet minimum capital requirements in some countries in order to maintain operating licenses. As of December 31, 2016,2021, the amount ofCompany's restricted net assets associated with these net asset limitations and minimum capital requirements totaled approximately $320 million, and there have been no material changes to these limitations subsequent to that date.
Various aspects of the Company'sCompany’s services and businesses are subject to United States federal, state, and local regulation, as well as regulation by foreign jurisdictions, including certain banking and other financial services regulations.
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited and were prepared in accordance with the instructions for Form 10-Q10‑Q and Article 10 of Regulation S-X. In compliance with those instructions, certain information
9
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") have been condensed or omitted.
The unaudited condensed consolidated financial statements in this quarterly report are presented on a consolidated basis and include the accounts of the Company and its majority-owned subsidiaries. Results of operations and cash flows for the interim periods are not necessarily indicative of the results that may be expected for the entire year. All significant intercompany transactions and accounts werehave been eliminated as of SeptemberJune 30, 20172022 and December 31, 20162021 and for all periods presented. Beginning in the first quarter of 2017, the Company has reported total "Revenues" in its Condensed Consolidated Statements of Income for all periods presented and no longer presents the subcaptions previously reported, including "Transaction fees," "Foreign exchange revenues," and "Other revenues."
In the opinion of management, these condensed consolidated financial statements include all the normal recurring adjustments necessary to fairly present the Company'sCompany’s condensed consolidated results of operations, financial position, and cash flows as of SeptemberJune 30, 20172022 and for all periods presented. These condensed consolidated financial statements should be read in conjunction with the Company'sCompany’s consolidated financial statements within the Company'sCompany’s Annual Report on Form 10-K10‑K for the year ended December 31, 2016.
Consistent with industry practice, the accompanying Condensed Consolidated Balance Sheets are unclassified due to the short-term nature of the Company'sCompany’s settlement obligations contrasted with the Company'sCompany’s ability to invest cash awaiting settlement in long-term investment securities.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.
Cash Flow Classification Revision
Beginning in the fourth quarter of 2021, the Company adoptedrevised its presentation to include changes in settlement cash associated with settlement obligations as a financing activity and changes in settlement cash from purchases, sales, and maturities of settlement investments as an accounting pronouncement relatedinvesting activity within its Condensed Consolidated Statements of Cash Flows. Previously, the changes in settlement assets and settlement obligations were presented on a net basis within operating activities in the Company’s Condensed Consolidated Statements of Cash Flows.
Prior period amounts have been revised to share-based paymentsconform to employees. This standard requires all excess tax benefits and tax deficienciesthis presentation. These changes in presentation have been concluded to be recognized as income tax expense (benefit) in the income statement and that excess tax benefits be included as an operating activity for the cash flow statement. In addition, these tax benefits must be removed from the dilutive weighted-average shares outstanding calculation as these assumed proceeds will have already been recognized in the income statement. The Company will continue its current practice of estimating forfeitures when calculating compensation expense. The adoption of this standard did not have a materialimmaterial, having no impact on the Company'sCompany’s previously reported net income, financial position, or cash flows from operating activities, as changes in the Company’s settlement assets exactly offset changes in its settlement obligations. However, the revised presentation shows all changes associated with settlement cash in the Condensed Consolidated Statements of Cash Flows instead of in the Notes to the Condensed Consolidated Financial Statements.
10
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table presents the effects of the changes in presentation of these cash flows, compared to the previously reported Condensed Consolidated Statements of Cash Flows (in millions):
|
| Six Months Ended June 30, 2021 |
| |||||||||
|
| As Previously |
|
|
|
|
|
|
| |||
|
| Reported(a) |
|
| Revisions |
|
| As Revised |
| |||
Net cash provided by/(used in): |
|
|
|
|
|
|
|
|
| |||
Operating activities |
| $ | 349.5 |
|
| $ | — |
|
| $ | 349.5 |
|
Investing activities(b) |
|
| (297.3 | ) |
|
| 400.0 |
|
|
| 102.7 |
|
Financing activities(c) |
|
| (426.0 | ) |
|
| (93.1 | ) |
|
| (519.1 | ) |
Net change in cash and cash equivalents, including settlement, and restricted cash |
| $ | (373.8 | ) |
| $ | 306.9 |
|
| $ | (66.9 | ) |
2. Revenue
The Company’s revenues are primarily derived from consideration paid by customers to transfer money. These revenues vary by transaction based upon factors such as channel, send and receive locations, the principal amount sent, whether the money transfer involves different send and receive currencies, the difference between the exchange rate set by the Company to the customer and the rate available in the wholesale foreign exchange market, and speed of service, as applicable. The Company also offers several other services, including foreign exchange and payment services and other bill payment services, for which revenue is impacted by similar factors. For the substantial majority of the Company’s revenues, the Company acts as the principal in transactions and reports revenue on a gross basis, as the Company controls the service at all times prior to transfer to the customer, is primarily responsible for fulfilling the customer contracts, has the risk of loss, and has the ability to establish transaction prices. The Company also provides services to financial institutions and other third parties to enable such entities to offer money transfer services to their own customers under their brands. Generally, in these arrangements, consumers agree to terms and conditions specified by the financial institution or other third party that, among other things, establish pricing paid by the consumer for the service. The Company recognizes revenue on a net basis under these arrangements. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.
The Company recognized $1,080.5 million and $1,239.1 million for the three months ended June 30, 2022 and 2021, respectively, and $2,184.1 million and $2,405.4 million for the six months ended June 30, 2022 and 2021, respectively, in revenues from contracts with customers. There were no material upfront costs incurred to obtain contracts with customers during these same periods. Under the Company’s loyalty programs, which are primarily offered in its money transfer services, the Company must fulfill loyalty program rewards earned by customers. The loyalty program redemption activity has been and continues to be insignificant to the Company’s results of operations, cash flows, orand the Company has immaterial contract liability balances, which primarily relate to its customer loyalty programs and other services. Contract asset balances related disclosures.
The Company analyzes its different services individually to determine whenthe appropriate basis for revenue recognition, is appropriate.as further described below. Revenues from consumer money transfers are included in the Company’s Consumer-to- Consumer segment, revenues from foreign exchange and payment services are included in the Company’s Business Solutions segment, and revenues from consumer bill payment and other services are not included in the Company’s segments and are reported as Other. See Note 14 for further information on the Company’s segments. On August 4, 2021,
11
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
the Company entered into an agreement to sell its Business Solutions business to Goldfinch Partners LLC and The standard requires that an entity recognizes revenueBaupost Group LLC. The sale will be completed in two closings, the first of which occurred on March 1, 2022, with the second expected in the fourth quarter of 2022. See Note 4 for further information regarding this transaction.
Consumer Money Transfers
For the Company’s money transfer services, customers agree to depict the transferCompany’s terms and conditions at the time of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Based on management's analysis of the new standard, for the significant majority of the Company's revenues,initiating a transaction. In a money transfer, the Company has an1 performance obligation as the customer engages the Company to perform one1 integrated service for the customer -which typically occurs within minutes — collect the consumer'scustomer’s money and make funds available for payment generally on the same day, to a designated recipientperson in the currency requested. Accordingly, managementTherefore, the Company recognizes revenue upon completion of the following: (i) the customer’s acknowledgment of the Company’s terms and conditions and payment information has determined thatbeen received by the adoptionCompany, (ii) the Company has agreed to process the money transfer, (iii) the Company has provided the customer a unique transaction identification number, and (iv) funds are available to be picked up by the customer’s designated receiving party. The transaction price is comprised of this standard will not have a material impacttransaction fee and the difference between the exchange rate set by the Company to the customer and the rate available in the wholesale foreign exchange market, as applicable, both of which are readily determinable at the time the transaction is initiated.
Foreign Exchange and Payment Services
For the Company’s foreign exchange and payment services, customers agree to terms and conditions for all transactions, either at the time of initiating a transaction or signing a contract with the Company to provide payment services on the Company's financial positioncustomer’s behalf. In the majority of the Company’s foreign exchange and resultspayment services, the Company makes payments to the recipient to satisfy its performance obligation to the customer, and therefore, the Company recognizes revenue on foreign exchange and payment services when this performance obligation has been fulfilled. Revenues from foreign exchange and payment services are primarily comprised of operations. the difference between the exchange rate set by the Company to the customer and the rate available in the wholesale foreign exchange market.
Consumer Bill Payments and Other
The Company will adoptoffers bill payment and other services that vary by contractual features, including the standard usingtypes and amounts of fixed charges and with respect to how fees are billed and collected. The identification of the modified retrospective approach, applied to all contracts with customers,contract with the cumulative effect of adoption included in retained earnings as of January 1, 2018. Management has completed an analysiscustomer for revenue recognition purposes is consistent with these features for each of the new disclosure requirements ofCompany’s bill payment and other services. As with consumer money transfers, customers engage the standardCompany to perform 1 integrated service — collect money from the consumer and is making minor enhancements to its systemsprocess the transaction, thereby providing billers with real-time or near real-time information regarding consumer payments and processes to comply withsimplifying the new disclosure requirements.
12
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Management has determined that the Financial Accounting Standards Board issuedsubstantial majority of the Company’s revenue is recognized at a new accounting pronouncement regarding classificationpoint in time. The following tables represent the disaggregation of revenue earned from contracts with customers by product type and measurementregion for the three and six months ended June 30, 2022 and 2021 (in millions). The regional split of financial instruments. This new standard provides guidance on how entities measure certain equity investments and present changesrevenue shown in the fair value. This standard requires that entities measure certain equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income. The Company is required to adopt the new standard on January 1, 2018. Management believes that the adoption of this standard will not have a material impact on the Company's financial position, results of operations, or related disclosures.
|
| Three Months Ended June 30, 2022 |
| |||||||||||||||||
|
|
|
|
| Foreign |
|
|
|
|
|
|
|
|
|
| |||||
|
| Consumer |
|
| Exchange |
|
|
|
|
|
|
|
|
|
| |||||
|
| Money |
|
| and Payment |
|
| Consumer |
|
| Other |
|
|
|
| |||||
|
| Transfers |
|
| Services(b) |
|
| Bill Payments |
|
| Services |
|
| Total |
| |||||
Regions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
North America |
| $ | 406.5 |
|
| $ | — |
|
| $ | 18.0 |
|
| $ | 14.4 |
|
| $ | 438.9 |
|
Europe and CIS |
|
| 273.1 |
|
|
| 20.7 |
|
|
| 5.6 |
|
|
| — |
|
|
| 299.4 |
|
Middle East, Africa, and South Asia |
|
| 158.9 |
|
|
| — |
|
|
| 0.1 |
|
|
| — |
|
|
| 159.0 |
|
Latin America and the Caribbean |
|
| 94.1 |
|
|
| — |
|
|
| 27.3 |
|
|
| 2.4 |
|
|
| 123.8 |
|
East Asia and Oceania |
|
| 59.2 |
|
|
| — |
|
|
| 0.2 |
|
|
| — |
|
|
| 59.4 |
|
Revenues from contracts with customers |
| $ | 991.8 |
|
| $ | 20.7 |
|
| $ | 51.2 |
|
| $ | 16.8 |
|
| $ | 1,080.5 |
|
Other revenues (a) |
|
| 35.1 |
|
|
| 15.0 |
|
|
| 1.5 |
|
|
| 6.2 |
|
|
| 57.8 |
|
Total revenues |
| $ | 1,026.9 |
|
| $ | 35.7 |
|
| $ | 52.7 |
|
| $ | 23.0 |
|
| $ | 1,138.3 |
|
|
| Six Months Ended June 30, 2022 |
| |||||||||||||||||
|
|
|
|
| Foreign |
|
|
|
|
|
|
|
|
|
| |||||
|
| Consumer |
|
| Exchange |
|
|
|
|
|
|
|
|
|
| |||||
|
| Money |
|
| and Payment |
|
| Consumer |
|
| Other |
|
|
|
| |||||
|
| Transfers |
|
| Services(b) |
|
| Bill Payments |
|
| Services |
|
| Total |
| |||||
Regions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
North America |
| $ | 787.7 |
|
| $ | 17.9 |
|
| $ | 35.5 |
|
| $ | 28.6 |
|
| $ | 869.7 |
|
Europe and Russia/CIS |
|
| 556.9 |
|
|
| 54.4 |
|
|
| 9.1 |
|
|
| 0.1 |
|
|
| 620.5 |
|
Middle East, Africa, and South Asia |
|
| 321.2 |
|
|
| 0.4 |
|
|
| 0.2 |
|
|
| — |
|
|
| 321.8 |
|
Latin America and the Caribbean |
|
| 182.2 |
|
|
| 0.5 |
|
|
| 51.4 |
|
|
| 4.4 |
|
|
| 238.5 |
|
East Asia and Oceania |
|
| 120.6 |
|
|
| 12.5 |
|
|
| 0.5 |
|
|
| — |
|
|
| 133.6 |
|
Revenues from contracts with customers |
| $ | 1,968.6 |
|
| $ | 85.7 |
|
| $ | 96.7 |
|
| $ | 33.1 |
|
| $ | 2,184.1 |
|
Other revenues (a) |
|
| 57.3 |
|
|
| 39.1 |
|
|
| 2.4 |
|
|
| 11.1 |
|
|
| 109.9 |
|
Total revenues |
| $ | 2,025.9 |
|
| $ | 124.8 |
|
| $ | 99.1 |
|
| $ | 44.2 |
|
| $ | 2,294.0 |
|
|
| Three Months Ended June 30, 2021 |
| |||||||||||||||||
|
|
|
|
| Foreign |
|
|
|
|
|
|
|
|
|
| |||||
|
| Consumer |
|
| Exchange |
|
|
|
|
|
|
|
|
|
| |||||
|
| Money |
|
| and Payment |
|
| Consumer |
|
| Other |
|
|
|
| |||||
|
| Transfers |
|
| Services |
|
| Bill Payments |
|
| Services |
|
| Total |
| |||||
Regions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
North America |
| $ | 417.7 |
|
| $ | 23.5 |
|
| $ | 18.0 |
|
| $ | 14.3 |
|
| $ | 473.5 |
|
Europe and Russia/CIS |
|
| 364.1 |
|
|
| 33.7 |
|
|
| 1.1 |
|
|
| 0.2 |
|
|
| 399.1 |
|
Middle East, Africa, and South Asia |
|
| 166.7 |
|
|
| 0.5 |
|
|
| 0.1 |
|
|
| — |
|
|
| 167.3 |
|
Latin America and the Caribbean |
|
| 92.5 |
|
|
| 0.8 |
|
|
| 18.9 |
|
|
| 2.1 |
|
|
| 114.3 |
|
East Asia and Oceania |
|
| 68.1 |
|
|
| 16.6 |
|
|
| 0.2 |
|
|
| — |
|
|
| 84.9 |
|
Revenues from contracts with customers |
| $ | 1,109.1 |
|
| $ | 75.1 |
|
| $ | 38.3 |
|
| $ | 16.6 |
|
| $ | 1,239.1 |
|
Other revenues (a) |
|
| 18.0 |
|
|
| 24.2 |
|
|
| 3.4 |
|
|
| 5.0 |
|
|
| 50.6 |
|
Total revenues |
| $ | 1,127.1 |
|
| $ | 99.3 |
|
| $ | 41.7 |
|
| $ | 21.6 |
|
| $ | 1,289.7 |
|
13
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
| Six Months Ended June 30, 2021 |
| |||||||||||||||||
|
|
|
|
| Foreign |
|
|
|
|
|
|
|
|
|
| |||||
|
| Consumer |
|
| Exchange |
|
|
|
|
|
|
|
|
|
| |||||
|
| Money |
|
| and Payment |
|
| Consumer |
|
| Other |
|
|
|
| |||||
|
| Transfers |
|
| Services |
|
| Bill Payments |
|
| Services |
|
| Total |
| |||||
Regions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
North America |
| $ | 804.3 |
|
| $ | 44.7 |
|
| $ | 36.6 |
|
| $ | 28.8 |
|
| $ | 914.4 |
|
Europe and Russia/CIS |
|
| 702.8 |
|
|
| 68.0 |
|
|
| 2.2 |
|
|
| 0.6 |
|
|
| 773.6 |
|
Middle East, Africa, and South Asia |
|
| 326.4 |
|
|
| 1.0 |
|
|
| 0.2 |
|
|
| — |
|
|
| 327.6 |
|
Latin America and the Caribbean |
|
| 179.2 |
|
|
| 1.6 |
|
|
| 36.6 |
|
|
| 3.9 |
|
|
| 221.3 |
|
East Asia and Oceania |
|
| 134.8 |
|
|
| 33.2 |
|
|
| 0.5 |
|
|
| — |
|
|
| 168.5 |
|
Revenues from contracts with customers |
| $ | 2,147.5 |
|
| $ | 148.5 |
|
| $ | 76.1 |
|
| $ | 33.3 |
|
| $ | 2,405.4 |
|
Other revenues (a) |
|
| 30.5 |
|
|
| 47.3 |
|
|
| 6.4 |
|
|
| 10.1 |
|
|
| 94.3 |
|
Total revenues |
| $ | 2,178.0 |
|
| $ | 195.8 |
|
| $ | 82.5 |
|
| $ | 43.4 |
|
| $ | 2,499.7 |
|
3. Earnings Per Share
The calculation of basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Outstanding options to purchase Western Union stock and unvested shares of restricted stock are excluded from basic shares outstanding. Diluted earnings per share reflects the potential dilution that could occur if outstanding stock options at the presented dates are exercised and shares of restricted stock have vested, using the treasury stock method. The treasury stock method assumes proceeds from the exercise price of stock options and the unamortized compensation expense of options and restricted stock are available to acquire shares at an average market price throughout the period, and therefore, reduce the dilutive effect.
Shares excluded from the three months ended September 30, 2017diluted earnings per share calculation under the treasury stock method, primarily due to outstanding restricted stock units and 2016, there were 3.3 million and 2.4 million, respectively, of outstanding options to purchase shares of Western Union stock, excluded fromas the diluted earningsassumed proceeds of the restricted stock and options per unit were above the Company’s average share calculation, asprice during the periods and their effect was anti-dilutive. Foranti-dilutive were 8.6 million and 1.4 million for the ninethree months ended SeptemberJune 30, 20172022 and 2016, there were 2.92021, respectively, and 7.9 million and 3.91.4 million respectively, of outstanding options to purchase shares of Western Union stock excluded fromfor the diluted earnings per share calculation, as their effect was anti-dilutive.
The following table provides the calculation of diluted weighted-average shares outstanding (in millions):
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Basic weighted-average shares outstanding |
|
| 386.7 |
|
|
| 409.3 |
|
|
| 389.9 |
|
|
| 410.5 |
|
Common stock equivalents |
|
| 0.9 |
|
|
| 2.2 |
|
|
| 1.1 |
|
|
| 2.4 |
|
Diluted weighted-average shares outstanding |
|
| 387.6 |
|
|
| 411.5 |
|
|
| 391.0 |
|
|
| 412.9 |
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Basic weighted-average shares outstanding | 462.8 | 487.0 | 470.6 | 492.4 | |||||||
Common stock equivalents | 2.6 | 3.3 | 3.0 | 3.1 | |||||||
Diluted weighted-average shares outstanding | 465.4 | 490.3 | 473.6 | 495.5 |
4. Divestitures and Investment Activities
Assets Held for Sale and Related Divestiture
On August 4, 2021, the Company began incurring expenses relatedentered into an agreement to asell its Business Solutions business transformation initiative, referred to asGoldfinch Partners LLC and The Baupost Group LLC (collectively, the WU Way. Although“Buyer”) for cash consideration of $910.0 million. The sale will be completed in 2 closings, the expenses related tofirst of which occurred on March 1, 2022 with the WU Way are specific to that initiative,entirety of the types of expenses related to the WU Way initiative are similar to expenses that the Company has previously incurred and can reasonably be expected to incur in the future. The following table summarizes the activity for the nine months ended September 30, 2017 for the consulting service fees, severance, and other costs related to the business transformation accruals, which are included in "Accounts payable and accrued liabilities" in the Company's Condensed Consolidated Balance Sheets as of September 30, 2017 and December 31, 2016 (in millions):
Consulting Service Fees | Severance and Related Employee Benefits | Other | Total | ||||||||||||
Balance, December 31, 2016 | $ | 9.0 | $ | 3.9 | $ | — | $ | 12.9 | |||||||
Expenses (a) | 23.1 | 30.1 | 6.0 | 59.2 | |||||||||||
Cash payments | (28.8 | ) | (18.1 | ) | (5.9 | ) | (52.8 | ) | |||||||
Non-cash benefit (a) | — | 1.3 | — | 1.3 | |||||||||||
Balance, September 30, 2017 | $ | 3.3 | $ | 17.2 | $ | 0.1 | $ | 20.6 |
14
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
collected at that time and allocated to the closings on a relative fair value basis. The following table presentsfirst closing excluded the above expensesoperations in the European Union and the United Kingdom and resulted in a gain of $151.4 million.In connection with the first closing, the Company reclassified $17.8 million of currency translation gains previously included within Accumulated other comprehensive loss (“AOCL”) as a component of Gain on divestiture of business in the Condensed Consolidated Statements of Income. As of June 30, 2022, the Company has agreed to and paid final working capital adjustments to the Buyer and has classified the proceeds allocated to the European Union and United Kingdom operations of approximately $390 million within Other liabilities in the Condensed Consolidated Balance Sheets. The second closing is currently expected in the fourth quarter of 2022, pending required regulatory approvals, at which time the remainder of the gain will be recognized, subject to regulatory capital adjustments. During the period between the closings, the Company will pay to the Buyer a measure of profit of the European Union and United Kingdom operations, adjusted for the occupancy charges for employees of the Buyer using Company facilities and other items, as contractually agreed, which was $8.1 million and $10.9 million for the three and six months ended June 30, 2022, respectively, and was included in Other income/(expense), net in the Condensed Consolidated Statements of Income. The related income tax expense on this income is also passed to the Buyer.
The Company has presented the remaining assets of its Business Solutions business transformation initiatives as reflectedheld for sale, along with the associated liabilities, as it believes completion of the second closing is probable. However, in the event that the second closing does not occur by February 4, 2023, the Company may, with appropriate notice to the Buyer, otherwise dispose of the European Union and United Kingdom operations, with any profit realized on disposition remitted to the Buyer, and conversely, any loss indemnified by the Buyer. The Buyer has rebranded the sold operations within a new standalone company (now referred to as "Convera").
Business Solutions revenues included in the Condensed Consolidated Statements of Income (in millions):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Cost of services | $ | 4.0 | $ | — | $ | 27.7 | $ | — | |||||||
Selling, general and administrative | 5.9 | 5.0 | 31.5 | 7.1 | |||||||||||
Total expenses, pre-tax | $ | 9.9 | $ | 5.0 | $ | 59.2 | $ | 7.1 | |||||||
Total expenses, net of tax | $ | 7.2 | $ | 3.2 | $ | 39.2 | $ | 4.5 |
The following table summarizesreflects the assets held for sale and associated liabilities of the Business Solutions business transformation expenses incurred by reportable segmentin the accompanying Condensed Consolidated Balance Sheets (in millions). Certain business transformation expenses, primarily consulting expenses,These balances are not identifiablesubject to regulatory capital and other requirements which will be finalized upon the second close.
|
| June 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Cash and cash equivalents |
| $ | 77.0 |
|
| $ | 37.7 |
|
Settlement assets |
|
| 196.9 |
|
|
| 566.0 |
|
Property and equipment, net of accumulated depreciation of $2.5 and $19.3 |
|
| 2.0 |
|
|
| 6.3 |
|
Goodwill |
|
| 229.2 |
|
|
| 532.0 |
|
Other intangible assets, net of accumulated amortization of $78.2 and $360.2 |
|
| 9.8 |
|
|
| 50.4 |
|
Other assets |
|
| 174.0 |
|
|
| 260.5 |
|
Total assets |
| $ | 688.9 |
|
| $ | 1,452.9 |
|
|
|
|
|
|
|
| ||
Accounts payable and accrued liabilities |
| $ | 71.7 |
|
| $ | 61.6 |
|
Settlement obligations |
|
| 196.9 |
|
|
| 566.0 |
|
Other liabilities |
|
| 156.3 |
|
|
| 194.3 |
|
Total liabilities |
| $ | 424.9 |
|
| $ | 821.9 |
|
Investment Activities
The Company entered into an agreement in November 2020, which was subsequently amended, to acquire an ownership interest in stc Bank (formerly Saudi Digital Payments Company), a specific segment,subsidiary of Saudi Telecom Company and have therefore been excluded
15
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
one of the Company’s Consumer-to-Consumer digital white label partners. Under the terms of the amended agreement, the Company agreed to invest $200.0 million for a 15% ownership in stc Bank (“Investment”), and this transaction closed in October 2021. In conjunction with the Investment, the Company and stc Bank extended and expanded the terms of their commercial agreement. The Company assigned a value of $36.0 million to certain rights under the commercial agreement that are included in Other assets in the Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 and are being amortized over the life of the agreement.The Company is measuring the Investment at cost, less any impairment, adjusted for any changes resulting from observable price changes in orderly transactions for identical or similar investments in stc Bank.
In April 2021, the 5. Fair Value Measurements Fair value, as defined by the relevant accounting standards, represents the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. For additional information on how the Company measures fair value, refer to the table below. These expenses have not been allocated toCompany sold a substantial majority of the Company's segments disclosednoncontrolling interest it held in Note 13. While the expenses shown below are identifiable to the Company's segments, they have been excluded from the measurementa private company for cash proceeds of segment operating income provided to the CODM for purposes$50.9 million. The Company recorded a gain of assessing segment performance and decision making with respect to resource allocation. Three Months Ended
September 30, Nine Months Ended
September 30, 2017 2017 Consumer-to-Consumer $ 3.3 $ 20.9 Business Solutions 2.2 8.9 Other 0.9 8.8 Total $ 6.4 $ 38.6 There were no business transformation expenses attributable to the Company's segments for$47.9 million within Other income/(expense), net, during the three and ninesix months ended SeptemberJune 30, 2016.2021. The Company retains an immaterial equity interest in this private company.4.Company'sCompany’s consolidated financial statements within the Company'sCompany’s Annual Report on Form 10-K10‑K for the year ended December 31, 2016.
The following tables reflectpresent the Company’s assets and liabilities, that werewhich are measured at fair value on a recurring basis, by balance sheet line item (in millions):
|
| Fair Value Measurement Using |
|
| Total |
| ||||||
June 30, 2022 |
| Level 1 |
|
| Level 2 |
|
| Fair Value |
| |||
Assets: |
|
|
|
|
|
|
|
|
| |||
Settlement assets: |
|
|
|
|
|
|
|
|
| |||
Measured at fair value through net income: |
|
|
|
|
|
|
|
|
| |||
Money market funds |
| $ | 6.6 |
|
| $ | — |
|
| $ | 6.6 |
|
Measured at fair value through other comprehensive income (net of expected credit losses recorded through net income): |
|
|
|
|
|
|
|
|
| |||
State and municipal debt securities |
|
| — |
|
|
| 1,256.0 |
|
|
| 1,256.0 |
|
State and municipal variable-rate demand notes |
|
| — |
|
|
| 89.8 |
|
|
| 89.8 |
|
Corporate debt securities |
|
| — |
|
|
| 57.5 |
|
|
| 57.5 |
|
United States government agency mortgage-backed securities |
|
| — |
|
|
| 19.0 |
|
|
| 19.0 |
|
Other assets: |
|
|
|
|
|
|
|
|
| |||
Derivatives |
|
| — |
|
|
| 214.8 |
|
|
| 214.8 |
|
Total assets |
| $ | 6.6 |
|
| $ | 1,637.1 |
|
| $ | 1,643.7 |
|
Liabilities: |
|
|
|
|
|
|
|
|
| |||
Other liabilities: |
|
|
|
|
|
|
|
|
| |||
Derivatives |
| $ | — |
|
| $ | 156.5 |
|
| $ | 156.5 |
|
Total liabilities |
| $ | — |
|
| $ | 156.5 |
|
| $ | 156.5 |
|
16
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
| Fair Value Measurement Using |
|
| Total |
| ||||||
December 31, 2021 |
| Level 1 |
|
| Level 2 |
|
| Fair Value |
| |||
Assets: |
|
|
|
|
|
|
|
|
| |||
Settlement assets: |
|
|
|
|
|
|
|
|
| |||
Measured at fair value through net income: |
|
|
|
|
|
|
|
|
| |||
Money market funds |
| $ | 7.9 |
|
| $ | — |
|
| $ | 7.9 |
|
Measured at fair value through other comprehensive income (net of expected credit losses recorded through net income): |
|
|
|
|
|
|
|
|
| |||
State and municipal debt securities |
|
| — |
|
|
| 1,219.9 |
|
|
| 1,219.9 |
|
State and municipal variable-rate demand notes |
|
| — |
|
|
| 84.8 |
|
|
| 84.8 |
|
Corporate and other debt securities |
|
| — |
|
|
| 57.8 |
|
|
| 57.8 |
|
United States government agency mortgage-backed securities |
|
| — |
|
|
| 36.4 |
|
|
| 36.4 |
|
Other assets: |
|
|
|
|
|
|
|
|
| |||
Derivatives |
|
| — |
|
|
| 247.7 |
|
|
| 247.7 |
|
Total assets |
| $ | 7.9 |
|
| $ | 1,646.6 |
|
| $ | 1,654.5 |
|
Liabilities: |
|
|
|
|
|
|
|
|
| |||
Other liabilities: |
|
|
|
|
|
|
|
|
| |||
Derivatives |
| $ | — |
|
| $ | 183.8 |
|
| $ | 183.8 |
|
Total liabilities |
| $ | — |
|
| $ | 183.8 |
|
| $ | 183.8 |
|
Fair Value Measurement Using | Assets/ Liabilities at Fair Value | ||||||||||||||
September 30, 2017 | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | |||||||||||||||
Settlement assets: | |||||||||||||||
State and municipal debt securities | $ | — | $ | 940.9 | $ | — | $ | 940.9 | |||||||
State and municipal variable rate demand notes | — | 301.4 | — | 301.4 | |||||||||||
Corporate and other debt securities | — | 136.9 | — | 136.9 | |||||||||||
United States Treasury securities | 9.9 | — | — | 9.9 | |||||||||||
Other assets: | |||||||||||||||
Derivatives | — | 355.8 | — | 355.8 | |||||||||||
Time deposit | — | 150.0 | — | 150.0 | |||||||||||
Total assets | $ | 9.9 | $ | 1,885.0 | $ | — | $ | 1,894.9 | |||||||
Liabilities: | |||||||||||||||
Derivatives | $ | — | $ | 341.2 | $ | — | $ | 341.2 | |||||||
Total liabilities | $ | — | $ | 341.2 | $ | — | $ | 341.2 | |||||||
Fair Value Measurement Using | Assets/ Liabilities at Fair Value | ||||||||||||||
December 31, 2016 | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | |||||||||||||||
Settlement assets: | |||||||||||||||
State and municipal debt securities | $ | — | $ | 1,002.4 | $ | — | $ | 1,002.4 | |||||||
State and municipal variable rate demand notes | — | 203.4 | — | 203.4 | |||||||||||
Corporate and other debt securities | — | 26.0 | — | 26.0 | |||||||||||
Other assets: | |||||||||||||||
Derivatives | — | 365.6 | — | 365.6 | |||||||||||
Total assets | $ | — | $ | 1,597.4 | $ | — | $ | 1,597.4 | |||||||
Liabilities: | |||||||||||||||
Derivatives | $ | — | $ | 262.3 | $ | — | $ | 262.3 | |||||||
Total liabilities | $ | — | $ | 262.3 | $ | — | $ | 262.3 |
There were no material, non-recurring fair value adjustments other than approximately $9 million of property and equipment, operating lease right-of-use asset, and other intangible asset impairments associated with the Company's suspension of its operations in Russia and Belarus and the first closing of its Business Solutions divestiture in the six months ended June 30, 2022, as discussed further in Note 14. There were recordedno material, non-recurring fair value adjustments in the three and six months ended June 30, 2021 or transfers between Level 1 and Level 2 measurements during the three and ninesix months ended SeptemberJune 30, 20172022 and 2016.
Other Fair Value Measurements
The carrying amounts for many of the Company'sCompany’s financial instruments, including certain cash and cash equivalents, settlement cash and cash equivalents, and settlement receivables and settlement obligations approximate fair value due to their short maturities. The Company'sCompany’s borrowings are classified as Level 2 ofwithin the valuation hierarchy, and the aggregate fair value of these borrowings was based on quotes from multiple banks and excluded the impact of related interest rate swaps. Fixed ratebanks. Fixed-rate notes are carried in the Company'sCompany’s Condensed Consolidated Balance Sheets at their original issuance values as adjusted over time to accrete that value to par, except for portions of notes hedged by these interest rate swaps, as disclosed in Note 9.par. As of SeptemberJune 30, 2017,2022, the carrying value and fair value of the Company'sCompany’s borrowings were $3,533.4$2,695.3 million and $3,641.6$2,565.8 million, respectively (see Note 10)11). As of December 31, 2016,2021, the carrying value and fair value of the Company'sCompany’s borrowings were $2,786.1$3,008.4 million and $2,888.7$3,217.2 million, respectively.
During the six months ended June 30, 2022, the Company entered into reverse repurchase agreements, a form of secured lending, with broker-dealer affiliates of large U.S. banks, using a portion of the proceeds from the sale of the Company's Business Solutions business. These agreements require the counterparties to pledge marketable securities with a value greater than the amount of cash transferred as collateral, which is held and valued by a third-party custodial bank. These investments generate interest income through the date of repurchase, at which point the purchase price together with the interest due will be paid back to the Company. The Company carries these investments at amortized cost, and as of June 30, 2022, the carrying value of these investments, as reported in Other assets in the Company's Condensed Consolidated Balance Sheets, was $400.0 million, which approximates fair value due to the creditworthiness of the counterparties, the value of the collateral, and the investments' short-term nature and variable interest rate.
17
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
6. Commitments and Contingencies
Letters of Credit and Bank Guarantees
The Company had approximately
$Litigation and Related Contingencies
The Company is subject to certain claims and litigation that could result in losses, including damages, fines, and/or civil penalties, which could be significant, and in some cases, criminal charges. The Company regularly evaluates the status of legal matters to assess whether a loss is probable and reasonably estimable in determining whether an accrual is appropriate. Furthermore, in determining whether disclosure is appropriate, the Company evaluates each legal matter to assess if there is at least a reasonable possibility that a material loss or additional lossmaterial losses may have been incurred andincurred. The Company also evaluates whether an estimate of possible loss or range of loss can be made. Unless otherwise specified below, the Company believes that there is at least a reasonable possibility that a loss or additional loss may have been incurred for each of the matters described below.
For those matters that the Company believes there is at least a reasonable possibility that a loss or additional loss may have been incurred and can reasonably estimate the loss or potential loss, the reasonably possible potential litigation losses in excess of the Company’s recorded liability for probable and estimable losses was approximately $165$30 million as of SeptemberJune 30, 2017.2022. For the remaining matters, management is unable to provide a meaningful estimate of the possible loss or range of loss because, among other reasons: (a)(i) the proceedings are in preliminary stages; (b)(ii) specific damages have not been sought; (c)(iii) damage claims are unsupported and/or unreasonable; (d)(iv) there is uncertainty as to the outcome of pending appeals or motions; (e)(v) there are significant factual issues to be resolved; or (f)(vi) novel legal issues or unsettled legal theories are being asserted.
The outcomes of legal actions are unpredictable and subject to significant uncertainties, and it is inherently difficult to determine whether any loss is probable or even possible. It is also inherently difficult to estimate the amount of any loss and there may be matters for which a loss is probable or reasonably possible but not currently estimable. Accordingly, actual losses may be in excess of the established liability or the range of reasonably possible loss.
Legal Matters
In late November 2016, the Company entered into discussions with the United States Department of Justice (the “DOJ”), the United States Attorney's Office for the Central District of California ("USAO-CDCA"), the United States Attorney’s Office for the Eastern District of Pennsylvania ("USAO-EDPA"), the United States Attorney’s Office for the Middle District of Pennsylvania ("USAO-MDPA"), and the United States Attorney’s Office for the Southern District of Florida (“USAO-SDFL”) to resolve the investigations by the USAO-CDCA, USAO-EDPA, USAO-MDPA, and USAO-SDFL (collectively, the “USAOs”) (collectively, the “USAO Investigations”). On January 19, 2017, the Company announced that it, or its subsidiary Western Union Financial Services, Inc. (“WUFSI”), had entered into (1) a Deferred Prosecution Agreement (the “DPA”) with the DOJ and the USAOs; (2) a Stipulated Order for Permanent Injunction and Final Judgment (the “Consent Order”) with the United States Federal Trade Commission (“FTC”) resolving claims by the FTC alleging unfair acts and practices under the Federal Trade Commission Act and for violations of the FTC Telemarketing Sales Rule; and (3) a Consent to the Assessment ofOctober 2015, Consumidores Financieros Asociación Civil Money Penalty with the Financial Crimes Enforcement Network (“FinCEN”) of the United States Department of Treasury (the “FinCEN Agreement”), to resolve the respective investigations of those agencies. FinCEN provided notice to the Company dated December 16, 2016 of its investigation regarding possible violations of the United States Bank Secrecy Act ("BSA"). On January 31, 2017, the Company entered into assurances of discontinuance/assurances of voluntary compliance with the attorneys general of 49 U.S. states and the District of Columbia named therein to resolve investigations by the state attorneys general, which sought information and documents relating to money transfers sent from the United States to certain countries,para su Defensa, an Argentinian consumer fraud complaints that the Company had received and the Company's procedures to help identify and prevent fraudulent transfers. On April 12, 2017, the Company settled with the one remaining state attorney general under effectively the same terms as the January 31, 2017 agreement with no additional monetary payment required. The agreements with the state attorneys general are collectively referred to herein as the "State AG Agreement." The DPA, Consent Order, FinCEN Agreement, and State AG Agreement are collectively referred to herein as the "Joint Settlement Agreements."
In April 2019, certain family members of Quinn Schansman filed a purported class action complaint seeking damages and other relief against a number of financial institutions, including The Western Union Company and Western Union Financial Services, Inc., in the United States District Court for the CentralSouthern District of California against the Company, its President and Chief Executive Officer, its Chief Financial Officer, and a former executive officer of the Company, asserting claims under sections 10(b) of the Exchange Act and Securities and Exchange Commission rule 10b-5 against all defendants and a claim under section 20(a) of the Exchange Act against the individual defendants. The complaint allegesNew York, alleging that during the purported class period, February 24, 2012 through January 19, 2017, defendants made false or misleading statements or failed to disclose adverse material facts known to them, including those regarding: (1) the effectiveness of the Company’s fraud prevention program and the program’s compliance with applicable law and best practices; (2) the development and enhancement of the Company’s global compliance policies and AML program; and (3) the Company’s compliance with regulatory requirements. On March 6, 2017, the defendants filed a motion to transfer venue ofviolated the case to the United States District Court for the District of Colorado. The Court granted that motion on March 30, 2017, and transferred the case.
18
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
United States Anti-Terrorism Act. The operative complaint alleges that the defendants provided funding to a terrorist organization by processing money transfers to groups or individuals associated with the Donetsk People’s Republic (“DPR”), a pro-Russian separatist group in eastern Ukraine. The complaint alleges that DPR downed Malaysian Airlines Flight 17, on which Mr. Schansman was a passenger. On March 27, 2017, plaintiffs inSeptember 30, 2021, the Martin Herman, Lawrence Henry Smallen and Laura Anne Smallen Revocable Living Trust, and UA Local 13 Pension Fund actions filed motionsCourt denied the defendants’ motion to consolidatedismiss the three cases and to be appointed lead plaintiff.operative complaint. On May 3, 2017,23, 2022, Plaintiffs filed a letter motion to dismiss with prejudice all claims against The Western Union Company and Western Union Financial Services, Inc., which the Court granted the motion to consolidate. On September 6, 2017, the Court appointed Lawrence Henry Smallen and Laura Anne Smallen Revocable Living Trust as the lead plaintiff. On October 5, 2017, the Court dismissed the Martin Herman action at the plaintiff’s request.on June 23, 2022. The consolidated action is in a preliminary stageSchansman family and the Company is unablehave agreed to predict the outcome, or the possible loss or range of loss, if any, which could be associated with it. The Company and the named individuals intend to vigorously defend themselves in this matter.
In addition to the principal matters described above, the Company is a party to a variety of other legal matters that arise in the normal course of the Company'sCompany’s business. While the results of these other legal matters cannot be predicted with certainty, management believes that the final outcome of these matters will not have a material adverse effect either individually or in the aggregate on the Company'sCompany’s financial condition, results of operations, or cash flows.
7. Related Party Transactions
The Company has ownership interests in certain of its agents accounted for under the equity method of accounting. The Company pays these agents commissions for money transfer and other services provided on the Company'sCompany’s behalf. Commission expense recognized for these agents for the three months ended SeptemberJune 30, 20172022 and 20162021 totaled $16.6$12.8 million and $17.5$14.0 million, respectively, and $49.6$24.3 million and $50.2$27.2 million for the ninesix months ended SeptemberJune 30, 20172022 and
8. Settlement Assets and Obligations and Non-Settlement Related Investments
Settlement assets represent funds received or to be received from agents and others for unsettled money transfers, money orders, and consumer payments. The Company records corresponding settlement obligations relating to amounts payable under money transfers, money orders, and consumer payment service arrangements. Settlement assets and obligations also include amounts receivable from, and payable to, customers for the value of their cross-currency payment transactions related to the Business Solutions segment.
Settlement assets and obligations consisted of the following (in millions):
|
| June 30, 2022 |
| |
Settlement assets: |
|
|
| |
Cash and cash equivalents |
| $ | 602.7 |
|
Receivables from agents, Business Solutions customers, and others |
|
| 1,297.2 |
|
Less: Allowance for credit losses |
|
| (18.6 | ) |
Receivables from agents, Business Solutions customers, and others, net |
|
| 1,278.6 |
|
Investment securities |
|
| 1,422.3 |
|
Less: Allowance for credit losses |
|
| (0.1 | ) |
Investment securities, net |
|
| 1,422.2 |
|
Total settlement assets (a) |
| $ | 3,303.5 |
|
Settlement obligations: |
|
|
| |
Money transfer, money order, and payment service payables |
| $ | 2,564.4 |
|
Payables to agents |
|
| 739.1 |
|
Total settlement obligations (a) |
| $ | 3,303.5 |
|
19
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
| December 31, 2021 |
| |
Settlement assets: |
|
|
| |
Cash and cash equivalents |
| $ | 835.5 |
|
Receivables from agents, Business Solutions customers, and others |
|
| 1,198.8 |
|
Less: Allowance for credit losses |
|
| (23.7 | ) |
Receivables from agents, Business Solutions customers, and others, net |
|
| 1,175.1 |
|
Investment securities |
|
| 1,398.9 |
|
Total settlement assets |
| $ | 3,409.5 |
|
Settlement obligations: |
|
|
| |
Money transfer, money order, and payment service payables |
| $ | 2,838.9 |
|
Payables to agents |
|
| 570.6 |
|
Total settlement obligations |
| $ | 3,409.5 |
|
Allowance for Credit Losses
Receivables from agents and others primarily represent funds collected by such agents, but in transit to the Company, and were $1,253.2 million and $1,125.9 million as of June 30, 2022 and December 31, 2021, respectively. Cash received by Western Union agents generally becomes available to the Company within one week after initial receipt by the agent. Western Union has a large and diverse agent base, thereby reducing the credit risk of the Company from any one agent. The Company performs ongoing credit evaluations of its agents’ financial condition and credit worthiness.
Receivables from Business Solutions customers arise from cross-currency payment transactions in the Business Solutions segment. Business Solutions receivables totaled $25.4 million and $49.2 million as of June 30, 2022 and December 31, 2021, respectively. Receivables occur when funds have been paid out to a beneficiary but not yet received from the customer. Collection of these receivables ordinarily occurs within a few days. To mitigate risk associated with potential Business Solutions customer defaults, the Company performs credit reviews on an ongoing basis.
The Company establishes and monitors an allowance for credit losses related to receivables from agents and others, and Business Solutions customers. The Company has estimated the allowance based on its historical collections experience, adjusted for current conditions and forecasts of future economic conditions based on information known as of June 30, 2022.
2017 | 2016 | ||||||
Settlement assets: | |||||||
Cash and cash equivalents | $ | 1,092.6 | $ | 1,190.0 | |||
Receivables from selling agents and Business Solutions customers | 1,465.3 | 1,327.3 | |||||
Investment securities | 1,389.1 | 1,231.8 | |||||
$ | 3,947.0 | $ | 3,749.1 | ||||
Settlement obligations: | |||||||
Money transfer, money order and payment service payables | $ | 2,768.0 | $ | 2,598.2 | |||
Payables to agents | 1,179.0 | 1,150.9 | |||||
$ | 3,947.0 | $ | 3,749.1 |
The following tables summarize the activity in the allowance for credit losses on receivables from agents and others, and Business Solutions customers (in millions):
|
| Agents and |
|
| Business Solutions |
| ||
|
| Others |
|
| Customers |
| ||
Allowance for credit losses as of January 1, 2022 |
| $ | 18.0 |
|
| $ | 5.7 |
|
Current period provision for expected credit losses (a) |
|
| 1.9 |
|
|
| 0.4 |
|
Write-offs charged against the allowance |
|
| (3.1 | ) |
|
| (0.4 | ) |
Recoveries of amounts previously written off |
|
| 1.7 |
|
|
| — |
|
Impacts of foreign currency exchange rates, divestitures, and other |
|
| (0.1 | ) |
|
| (4.2 | ) |
Allowance for credit losses as of March 31, 2022 |
|
| 18.4 |
|
|
| 1.5 |
|
Current period provision for expected credit losses (a) |
|
| 1.8 |
|
|
| 2.1 |
|
Write-offs charged against the allowance |
|
| (1.3 | ) |
|
| (1.4 | ) |
Recoveries of amounts previously written off |
|
| 1.0 |
|
|
| — |
|
Impacts of foreign currency exchange rates and other |
|
| (3.0 | ) |
|
| (0.5 | ) |
Allowance for credit losses as of June 30, 2022 |
| $ | 16.9 |
|
| $ | 1.7 |
|
20
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
| Agents and |
|
| Business Solutions |
| ||
|
| Others |
|
| Customers |
| ||
Allowance for credit losses as of January 1, 2021 |
| $ | 49.3 |
|
| $ | 3.9 |
|
Current period provision for expected credit losses (a) |
|
| 2.3 |
|
|
| 1.5 |
|
Write-offs charged against the allowance |
|
| (3.3 | ) |
|
| (0.4 | ) |
Recoveries of amounts previously written off |
|
| 1.9 |
|
|
| — |
|
Impacts of foreign currency exchange rates and other |
|
| (0.5 | ) |
|
| (0.1 | ) |
Allowance for credit losses as of March 31, 2021 |
|
| 49.7 |
|
|
| 4.9 |
|
Current period provision for expected credit losses (a) |
|
| 3.2 |
|
|
| 1.9 |
|
Write-offs charged against the allowance |
|
| (34.4 | ) |
|
| (0.4 | ) |
Recoveries of amounts previously written off |
|
| 0.6 |
|
|
| — |
|
Impacts of foreign currency exchange rates and other |
|
| (0.6 | ) |
|
| (0.1 | ) |
Allowance for credit losses as of June 30, 2021 |
| $ | 18.5 |
|
| $ | 6.3 |
|
In addition, from time to time, the Company makes advances to its agents. The Company generally owes settlement funds payable to these agents that offset these advances. These amounts advanced to agents are included within Other assets in the accompanying Condensed Consolidated Balance Sheets. As of June 30, 2022 and December 31, 2021, amounts advanced to agents were $151.1 million and $146.9 million, respectively, and the related allowances for credit losses were immaterial.
Investment Securities
Investment securities included in "Settlement assets"Settlement assets in the Company'sCompany’s Condensed Consolidated Balance Sheets consist primarily of highly-rated state and municipal debt securities, including fixed ratefixed-rate term notes and variable ratevariable-rate demand notes. Variable rateVariable-rate demand note securities can be put (sold at par) typically on a daily basis with settlement periods ranging from the same day to one week but have varying maturities through 2050.2052. These securities may be used by the Company for short-term liquidity needs and held for short periods of time. Investment securities are exposed to market risk due to changes in interest rates and credit risk. The Company is required to hold highly-rated, investment grade securities and such investments are restricted to satisfy outstanding settlement obligations in accordance with applicable state and foreign countryregulatory requirements.
The substantial majority of the Company'sCompany’s investment securities are classified as available-for-sale and recorded at fair value. Investment securities are exposed to market risk due to changes in interest rates and credit risk. Western Union regularly monitors credit risk and attempts to mitigate its exposure by investing in highly-rated securities and through investment diversification.
Unrealized gains and losses on available-for-sale securities are excluded from earnings and presented as a component of accumulated other comprehensive loss, net of related deferred taxes. GainsAvailable-for-sale securities with a fair value below the amortized cost basis are evaluated on an individual basis to determine whether the impairment is due to credit-related factors or noncredit-related factors. Factors that could indicate a credit loss exists include but are not limited to: (i) negative earnings performance, (ii) credit rating downgrades, or (iii) adverse changes in the regulatory or economic environment of the asset. Any impairment that is not credit-related is excluded from earnings and presented as a component of accumulated other comprehensive loss, net of related deferred taxes, unless the Company intends to sell the impaired security, or it is more likely than not that the Company will be required to sell the security before recovering its amortized cost basis. Credit-related impairments are recognized immediately as an adjustment to earnings, regardless of whether the Company has the ability or intent to hold the security to maturity and are limited to the difference between fair value and the amortized cost basis. The Company’s provision for credit losses on investments are calculated using the specific-identification method and are recognized during the period in which the investment is sold or when an investment experiences an other-than-temporary decline in value. Proceeds from the sale and maturity ofits available-for-sale securities during the nine months ended September 30, 2017three and 2016 were $4.3 billion and $2.9 billion, respectively. The change in proceeds from the sale and maturity of available-for-sale securities for the nine months ended September 30, 2017 compared to the prior period was primarily due to increased sales of variable rate demand notes securities.
21
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
six months ended June 30, 2022 and 2021 and the related allowance for credit losses as of June 30, 2022 and December 31, 2021 were immaterial.
The components of investment securities are as follows (in millions):
|
|
|
|
|
|
|
| Gross |
|
| Gross |
|
| Net |
| |||||
|
| Amortized |
|
| Fair |
|
| Unrealized |
|
| Unrealized |
|
| Unrealized |
| |||||
June 30, 2022 |
| Cost |
|
| Value |
|
| Gains |
|
| Losses (b) |
|
| Gains/(Losses) |
| |||||
Settlement assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Money market funds |
| $ | 6.6 |
|
| $ | 6.6 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
State and municipal debt securities (a) |
|
| 1,305.7 |
|
|
| 1,256.0 |
|
|
| 1.9 |
|
|
| (51.6 | ) |
|
| (49.7 | ) |
State and municipal variable-rate demand |
|
| 89.8 |
|
|
| 89.8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Corporate debt securities |
|
| 61.9 |
|
|
| 57.5 |
|
|
| — |
|
|
| (4.4 | ) |
|
| (4.4 | ) |
United States government agency |
|
| 19.4 |
|
|
| 19.0 |
|
|
| — |
|
|
| (0.4 | ) |
|
| (0.4 | ) |
Total available-for-sale securities |
|
| 1,476.8 |
|
|
| 1,422.3 |
|
|
| 1.9 |
|
|
| (56.4 | ) |
|
| (54.5 | ) |
Total investment securities |
| $ | 1,483.4 |
|
| $ | 1,428.9 |
|
| $ | 1.9 |
|
| $ | (56.4 | ) |
| $ | (54.5 | ) |
|
|
|
|
|
|
|
| Gross |
|
| Gross |
|
| Net |
| |||||
|
| Amortized |
|
| Fair |
|
| Unrealized |
|
| Unrealized |
|
| Unrealized |
| |||||
December 31, 2021 |
| Cost |
|
| Value |
|
| Gains |
|
| Losses |
|
| Gains/(Losses) |
| |||||
Settlement assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Cash and cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Money market funds |
| $ | 7.9 |
|
| $ | 7.9 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
State and municipal debt securities (a) |
|
| 1,182.6 |
|
|
| 1,219.9 |
|
|
| 39.8 |
|
|
| (2.5 | ) |
|
| 37.3 |
|
State and municipal variable-rate demand |
|
| 84.8 |
|
|
| 84.8 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Corporate and other debt securities |
|
| 58.1 |
|
|
| 57.8 |
|
|
| 0.2 |
|
|
| (0.5 | ) |
|
| (0.3 | ) |
United States government agency mortgage- |
|
| 35.6 |
|
|
| 36.4 |
|
|
| 0.8 |
|
|
| — |
|
|
| 0.8 |
|
Total available-for-sale securities |
|
| 1,361.1 |
|
|
| 1,398.9 |
|
|
| 40.8 |
|
|
| (3.0 | ) |
|
| 37.8 |
|
Total investment securities |
| $ | 1,369.0 |
|
| $ | 1,406.8 |
|
| $ | 40.8 |
|
| $ | (3.0 | ) |
| $ | 37.8 |
|
September 30, 2017 | Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Net Unrealized Gains | ||||||||||||||
Settlement assets: | |||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||
State and municipal debt securities (a) | $ | 931.7 | $ | 940.9 | $ | 12.4 | $ | (3.2 | ) | $ | 9.2 | ||||||||
State and municipal variable rate demand notes | 301.4 | 301.4 | — | — | — | ||||||||||||||
Corporate and other debt securities | 136.4 | 136.9 | 0.6 | (0.1 | ) | 0.5 | |||||||||||||
United States Treasury securities | 9.9 | 9.9 | — | — | — | ||||||||||||||
1,379.4 | 1,389.1 | 13.0 | (3.3 | ) | 9.7 | ||||||||||||||
Other assets: | |||||||||||||||||||
Held-to-maturity securities: | |||||||||||||||||||
Foreign corporate debt securities | 56.7 | 56.8 | 0.1 | — | 0.1 | ||||||||||||||
Time deposit | 150.0 | 150.0 | — | — | — | ||||||||||||||
$ | 1,586.1 | $ | 1,595.9 | $ | 13.1 | $ | (3.3 | ) | $ | 9.8 | |||||||||
December 31, 2016 | Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Net Unrealized Losses | ||||||||||||||
Settlement assets: | |||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||
State and municipal debt securities (a) | $ | 1,008.5 | $ | 1,002.4 | $ | 5.0 | $ | (11.1 | ) | $ | (6.1 | ) | |||||||
State and municipal variable rate demand notes | 203.4 | 203.4 | — | — | — | ||||||||||||||
Corporate and other debt securities | 26.0 | 26.0 | — | — | — | ||||||||||||||
1,237.9 | 1,231.8 | 5.0 | (11.1 | ) | (6.1 | ) | |||||||||||||
Other assets: | |||||||||||||||||||
Held-to-maturity securities: | |||||||||||||||||||
Foreign corporate debt securities | 36.2 | 36.2 | 0.1 | (0.1 | ) | — | |||||||||||||
$ | 1,274.1 | $ | 1,268.0 | $ | 5.1 | $ | (11.2 | ) | $ | (6.1 | ) |
22
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following summarizes the contractual maturities of settlement-related debtavailable-for-sale securities within Settlement assets as of SeptemberJune 30, 20172022 (in millions):
|
| Fair Value |
| |
Due within 1 year |
| $ | 146.6 |
|
Due after 1 year through 5 years |
|
| 581.7 |
|
Due after 5 years through 10 years |
|
| 529.2 |
|
Due after 10 years |
|
| 164.8 |
|
Total |
| $ | 1,422.3 |
|
Fair Value | |||
Due within 1 year | $ | 177.8 | |
Due after 1 year through 5 years | 560.9 | ||
Due after 5 years through 10 years | 230.3 | ||
Due after 10 years | 420.1 | ||
$ | 1,389.1 |
Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay the obligations or the Company may have the right to put the obligation prior to its contractual maturity, as with variable ratevariable-rate demand notes. Variable rateVariable-rate demand notes, having a fair value of $5.6$25.0 million and $295.8$64.8 million are included in the "Due after 5 years through 10 years" and "Due after 10 years" categories, respectively, in the table above. The significant majority of the held-to-maturity foreign corporate debt securities are due within 2 years.
23
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
9. Stockholders’ Equity
Accumulated other comprehensive loss
The following table summarizes the componentsdetails reclassifications out of accumulated other comprehensive loss, net of tax (in millions).AOCL and into Net income. All amounts reclassified from accumulated other comprehensive lossAOCL affect the line items as indicated below withinand the amounts in parentheses indicate decreases to Net income in the Condensed Consolidated Statements of Income.
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Unrealized gains/(losses) on investment securities, beginning of period | $ | 5.8 | $ | 14.5 | $ | (3.8 | ) | $ | 7.8 | ||||||
Unrealized gains/(losses) | 2.6 | (2.1 | ) | 18.0 | 10.1 | ||||||||||
Tax (expense)/benefit | (1.0 | ) | 0.8 | (6.5 | ) | (3.6 | ) | ||||||||
Reclassification of gains into "Revenues" | (1.8 | ) | (1.2 | ) | (2.2 | ) | (3.0 | ) | |||||||
Tax expense related to reclassifications | 0.7 | 0.4 | 0.8 | 1.1 | |||||||||||
Net unrealized gains/(losses) on investment securities | 0.5 | (2.1 | ) | 10.1 | 4.6 | ||||||||||
Unrealized gains on investment securities, end of period | $ | 6.3 | $ | 12.4 | $ | 6.3 | $ | 12.4 | |||||||
Unrealized gains/(losses) on hedging activities, beginning of period | $ | (24.4 | ) | $ | 14.3 | $ | 33.8 | $ | 41.4 | ||||||
Unrealized losses | (21.2 | ) | (1.2 | ) | (68.4 | ) | (7.4 | ) | |||||||
Tax (expense)/benefit | 1.3 | (0.5 | ) | 2.3 | 1.8 | ||||||||||
Reclassification of (gains)/losses into "Revenues" | 2.2 | (11.5 | ) | (11.3 | ) | (37.5 | ) | ||||||||
Reclassification of losses into "Interest expense" | 0.8 | 0.9 | 2.5 | 2.7 | |||||||||||
Tax expense/(benefit) related to reclassifications | (0.4 | ) | 0.2 | (0.6 | ) | 1.2 | |||||||||
Net unrealized losses on hedging activities | (17.3 | ) | (12.1 | ) | (75.5 | ) | (39.2 | ) | |||||||
Unrealized gains/(losses) on hedging activities, end of period | $ | (41.7 | ) | $ | 2.2 | $ | (41.7 | ) | $ | 2.2 | |||||
Foreign currency translation adjustments, beginning of period | $ | (72.3 | ) | $ | (70.1 | ) | $ | (70.7 | ) | $ | (66.0 | ) | |||
Foreign currency translation adjustments | (2.8 | ) | (0.4 | ) | (4.8 | ) | (4.3 | ) | |||||||
Tax (expense)/benefit | (1.3 | ) | 1.0 | (0.9 | ) | 0.8 | |||||||||
Net foreign currency translation adjustments | (4.1 | ) | 0.6 | (5.7 | ) | (3.5 | ) | ||||||||
Foreign currency translation adjustments, end of period | $ | (76.4 | ) | $ | (69.5 | ) | $ | (76.4 | ) | $ | (69.5 | ) | |||
Defined benefit pension plan adjustments, beginning of period | $ | (118.5 | ) | $ | (123.7 | ) | $ | (122.1 | ) | $ | (127.1 | ) | |||
Reclassification of losses into "Cost of services" | 2.8 | 2.7 | 8.5 | 8.0 | |||||||||||
Tax benefit related to reclassifications | (0.8 | ) | (1.0 | ) | (2.9 | ) | (2.9 | ) | |||||||
Net defined benefit pension plan adjustments | 2.0 | 1.7 | 5.6 | 5.1 | |||||||||||
Defined benefit pension plan adjustments, end of period | $ | (116.5 | ) | $ | (122.0 | ) | $ | (116.5 | ) | $ | (122.0 | ) | |||
Accumulated other comprehensive loss, end of period | $ | (228.3 | ) | $ | (176.9 | ) | $ | (228.3 | ) | $ | (176.9 | ) |
|
| Amounts Reclassified from AOCL to Net Income |
| |||||||||||||||
|
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| Income Statement |
| June 30, |
|
| June 30, |
| ||||||||||
Income for the period (in millions) |
| Location |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Accumulated other comprehensive loss components: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gains/(losses) on investment securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Available-for-sale securities |
| Revenues |
| $ | — |
|
| $ | (0.1 | ) |
| $ | (0.1 | ) |
| $ | (0.2 | ) |
Total reclassification adjustments related to investment securities, net of tax |
|
|
|
| — |
|
|
| (0.1 | ) |
|
| (0.1 | ) |
|
| (0.2 | ) |
Gains/(losses) on cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign currency contracts |
| Revenues |
|
| 13.9 |
|
|
| (3.3 | ) |
|
| 14.9 |
|
|
| (9.4 | ) |
Interest rate contracts |
| Interest expense |
|
| — |
|
|
| (0.2 | ) |
|
| (0.1 | ) |
|
| (0.4 | ) |
Interest rate contracts |
| Other income/(expense), net |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.7 |
|
Total reclassification adjustments related to cash flow hedges, net of tax |
|
|
|
| 13.9 |
|
|
| (3.5 | ) |
|
| 14.8 |
|
|
| (9.1 | ) |
Foreign currency translation adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign currency translation |
| Gain on divestiture of business |
|
| — |
|
|
| — |
|
|
| 17.8 |
|
|
| — |
|
Total reclassification adjustments related to foreign currency translation adjustments, net of tax |
|
|
|
| — |
|
|
| — |
|
|
| 17.8 |
|
|
| — |
|
Amortization of components of defined benefit plans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Actuarial loss |
| Other income/(expense), net |
|
| — |
|
|
| (3.0 | ) |
|
| — |
|
|
| (6.1 | ) |
Income tax benefit |
| Provision for income taxes |
|
| — |
|
|
| 0.7 |
|
|
| — |
|
|
| 1.3 |
|
Total reclassification adjustments related to defined benefit plans, net of tax |
|
|
|
| — |
|
|
| (2.3 | ) |
|
| — |
|
|
| (4.8 | ) |
Total reclassifications, net of tax |
|
|
| $ | 13.9 |
|
| $ | (5.9 | ) |
| $ | 32.5 |
|
| $ | (14.1 | ) |
24
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following tables summarize the components of AOCL, net of tax in the accompanying Condensed Consolidated Balance Sheets (in millions):
|
| Investment |
|
| Hedging |
|
| Foreign Currency |
|
|
|
| ||||
|
| Securities |
|
| Activities |
|
| Translation |
|
| Total |
| ||||
As of December 31, 2021 |
| $ | 30.4 |
|
| $ | 18.7 |
|
| $ | (101.2 | ) |
| $ | (52.1 | ) |
Unrealized gains/(losses) |
|
| (63.6 | ) |
|
| 6.2 |
|
|
| — |
|
|
| (57.4 | ) |
Tax benefit |
|
| 11.9 |
|
|
| — |
|
|
| — |
|
|
| 11.9 |
|
Amounts reclassified from AOCL into earnings, net of tax |
|
| 0.1 |
|
|
| (0.9 | ) |
|
| (17.8 | ) |
|
| (18.6 | ) |
As of March 31, 2022 |
|
| (21.2 | ) |
|
| 24.0 |
|
|
| (119.0 | ) |
|
| (116.2 | ) |
Unrealized gains/(losses) |
|
| (28.7 | ) |
|
| 37.3 |
|
|
| — |
|
|
| 8.6 |
|
Tax benefit/(expense) |
|
| 5.0 |
|
|
| (0.3 | ) |
|
| — |
|
|
| 4.7 |
|
Amounts reclassified from AOCL into earnings, net of tax |
|
| — |
|
|
| (13.9 | ) |
|
| — |
|
|
| (13.9 | ) |
As of June 30, 2022 |
| $ | (44.9 | ) |
| $ | 47.1 |
|
| $ | (119.0 | ) |
| $ | (116.8 | ) |
|
| Investment |
|
| Hedging |
|
| Foreign Currency |
|
| Defined Benefit |
|
|
|
| |||||
|
| Securities |
|
| Activities |
|
| Translation |
|
| Pension Plan |
|
| Total |
| |||||
As of December 31, 2020 |
| $ | 58.3 |
|
| $ | (30.5 | ) |
| $ | (101.2 | ) |
| $ | (86.1 | ) |
| $ | (159.5 | ) |
Unrealized gains/(losses) |
|
| (16.0 | ) |
|
| 24.2 |
|
|
| — |
|
|
| — |
|
|
| 8.2 |
|
Tax benefit/(expense) |
|
| 2.9 |
|
|
| (0.9 | ) |
|
| — |
|
|
| — |
|
|
| 2.0 |
|
Amounts reclassified from AOCL into earnings, net of tax |
|
| 0.1 |
|
|
| 5.6 |
|
|
| — |
|
|
| 2.5 |
|
|
| 8.2 |
|
As of March 31, 2021 |
|
| 45.3 |
|
|
| (1.6 | ) |
|
| (101.2 | ) |
|
| (83.6 | ) |
|
| (141.1 | ) |
Unrealized gains/(losses) |
|
| 2.3 |
|
|
| (6.2 | ) |
|
| — |
|
|
| — |
|
|
| (3.9 | ) |
Tax expense |
|
| (0.2 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.2 | ) |
Amounts reclassified from AOCL into earnings, net of tax |
|
| 0.1 |
|
|
| 3.5 |
|
|
| — |
|
|
| 2.3 |
|
|
| 5.9 |
|
As of June 30, 2021 |
| $ | 47.5 |
|
| $ | (4.3 | ) |
| $ | (101.2 | ) |
| $ | (81.3 | ) |
| $ | (139.3 | ) |
On July 22, 2021, the Company’s Board of Directors approved a plan to terminate and settle the Company’s frozen defined benefit pension plan. In the fourth quarter of 2021, the Company settled its defined benefit pension plan. Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 12, Employee Benefit Plans, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for details on the termination and settlement of the Company's frozen defined benefit pension plan.
Cash Dividends Paid
The Company's Board of Directors declared quarterly cash dividends of $0.175$0.235 per common share in each ofboth the first threeand second quarters of 2017,2022 and 2021, representing $245.3$182.5 million and $192.5 million in total dividends. Of this amount, $80.5 million was paid on September 29, 2017, $81.5dividends, respectively. $90.8 million was paid on June 30, 2017 and $83.32022, $91.7 million was paid on March 31, 2017. The Company's Board of Directors declared quarterly cash dividends of $0.16 per common share in each of the first three quarters of 2016, representing $235.1 million in total dividends. Of this amount, $77.7 million was paid on September 30, 2016, $78.12022, $95.9 million was paid on June 30, 20162021, and $79.3$96.6 million was paid on March 31, 2016.
Share Repurchases
During the ninesix months ended SeptemberJune 30, 20172022 and 2016, 24.32021, 9.2 million and 20.96.1 million shares were repurchased for $475.0$171.0 million and $402.2$150.0 million, respectively, excluding commissions, at an average cost of $19.54$18.52 and $19.22, respectively. These amounts represent shares authorized by the Board$24.42, respectively,
25
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
under the share repurchase authorizationauthorizations approved by the Company's Board of Directors, including one which expired on December 31, 2021. On February 10, 2022, the Company's Board of Directors authorized $1.0 billion of common stock repurchases through December 31, 2019.2024. As of June 30, 2022, $829.0 million remained availableunder this share repurchase authorization. The amounts included in the "CommonCommon stock repurchased"repurchased line in the Company'sCompany’s Condensed Consolidated Statements of Cash Flows represent both shares authorized by the Board of Directors for repurchase under publicly announced authorizations as well asand shares withheld from employees to cover tax withholding obligations on restricted stock units that have vested.
10. Derivatives
The Company is exposed to foreign currency exchange risk resulting from fluctuations in exchange rates, primarily the euro, and, to a lesser degree, the British pound, Canadian dollar, Australian dollar, Swiss franc,the British pound, and other currencies, related to forecasted revenues and on settlement assets and obligations, as well as on certain foreign currency denominated cash and other asset and liability positions. The Company is also exposed to risk from derivative contracts, primarily from customer derivatives, arising from its cross-currency Business Solutions paymentspayment operations. Additionally, the Company is exposed to interest rate risk related to changes in market rates both prior to and subsequent to the issuance of debt. The Company useshas used derivatives to (a)to: (i) minimize its exposures related to changes in foreign currency exchange rates and interest rates and (b)(ii) facilitate cross-currency Business Solutions payments by writing derivatives to customers.
The Company executes derivatives with established financial institutions, withinstitutions; the substantial majority of these financial institutions havinghave a credit ratingsrating of "A-" or betterhigher from a major credit rating agency. The Company also writesCustomer derivatives written by the Company’s Business Solutions derivatives mostly withoperations primarily involve small and medium size enterprises. The primary credit risk inherent in derivative agreements represents the possibility that a loss may occur from the nonperformance of a counterparty to the agreements. The Company performs a review of the credit risk of these counterparties at the inception of the contract and on an ongoing basis. The Companybasis, while also monitorsmonitoring the concentration of its contracts with any individual counterparty. The Company anticipates that the counterparties will be able to fully satisfy their obligations under the agreements but takes action when doubt arises about the counterparties'counterparties’ ability to perform. These actions may include requiring Business Solutions customers to post or increase collateral, and for all counterparties, the possible termination of the related contracts. The Company'sCompany’s hedged foreign currency exposures are in liquid currencies; consequently, there is minimal risk that appropriate derivatives to maintain the hedging program would not be available in the future.
Foreign Currency Derivatives
The Company'sCompany’s policy is to use longer-termlonger duration foreign currency forward contracts, with maturities of up to 36 months at inception and a targeted weighted-average maturity of approximately one year, to help mitigate some of the risk that changes in foreign currency exchange rates compared to the United States dollar could have on forecasted revenues denominated in other currencies related to its business. As of SeptemberJune 30, 2017, the Company's longer-term2022, these foreign currency forward contracts had maturities of a maximum of 24 months with a weighted-average maturity of approximately one year.year. These contracts are accounted for as cash flow hedges of forecasted revenue with effectiveness assessed based on changes in the spot rate of the affected currencies during the period of designation. Accordingly, all changes indesignation and thus time value is excluded from the fairassessment of effectiveness. The initial value of the hedges not considered effective or portions of the hedge that are excluded from the measure of effectiveness are recognized immediately in "Derivative gains, net"components is amortized into Revenues within the Company'sCompany’s Condensed Consolidated Statements of Income.
The Company also uses short duration foreign currency forward contracts, generally with maturities ranging from a few days up to one month, to offset foreign exchange rate fluctuations on settlement assets and obligations between initiation and settlement. In addition, forward contracts, typically with maturities of less than one year at inception, are utilized to offset foreign exchange rate fluctuations on certain foreign currency denominated cash and other asset and liability positions. None of these contracts are designated as accounting hedges.
26
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The aggregate equivalent United States dollar notional amounts of foreign currency forward contracts as of
|
| June 30, 2022 |
| |
Contracts designated as hedges: |
|
|
| |
Euro |
| $ | 399.7 |
|
Canadian dollar |
|
| 128.8 |
|
Australian dollar |
|
| 55.3 |
|
Swiss franc |
|
| 45.0 |
|
British pound |
|
| 38.0 |
|
Swedish krona |
|
| 30.4 |
|
Japanese yen |
|
| 26.3 |
|
Other (a) |
|
| — |
|
Contracts not designated as hedges: |
|
|
| |
Euro |
| $ | 550.8 |
|
British pound |
|
| 157.2 |
|
Canadian dollar |
|
| 89.8 |
|
Mexican peso |
|
| 78.0 |
|
Indian rupee |
|
| 52.8 |
|
Australian dollar |
|
| 48.8 |
|
Chinese yuan |
|
| 34.0 |
|
Swedish krona |
|
| 34.0 |
|
Brazilian real |
|
| 30.2 |
|
Other (a) |
|
| 192.7 |
|
|
| December 31, 2021 |
| |
Contracts designated as hedges: |
|
|
| |
Euro |
| $ | 399.9 |
|
Canadian dollar |
|
| 134.0 |
|
Australian dollar |
|
| 58.4 |
|
Swiss franc |
|
| 45.9 |
|
British pound |
|
| 43.8 |
|
Swedish krona |
|
| 30.7 |
|
Japanese yen |
|
| 30.4 |
|
Other (a) |
|
| 0.9 |
|
Contracts not designated as hedges: |
|
|
| |
Euro |
| $ | 755.7 |
|
British pound |
|
| 148.1 |
|
Canadian dollar |
|
| 144.2 |
|
Australian dollar |
|
| 98.1 |
|
Mexican peso |
|
| 96.3 |
|
Philippine peso |
|
| 76.2 |
|
Indian rupee |
|
| 63.4 |
|
Japanese yen |
|
| 46.0 |
|
Russian ruble |
|
| 44.4 |
|
Chinese yuan |
|
| 31.6 |
|
New Zealand dollar |
|
| 26.6 |
|
Swiss franc |
|
| 25.1 |
|
Swedish krona |
|
| 25.1 |
|
Other (a) |
|
| 132.7 |
|
Contracts designated as hedges: | |||
Euro | $ | 381.1 | |
British pound | 122.5 | ||
Canadian dollar | 91.6 | ||
Australian dollar | 50.8 | ||
Swiss franc | 38.0 | ||
Other | 81.0 | ||
Contracts not designated as hedges: | |||
Euro | $ | 238.9 | |
British pound | 73.4 | ||
Canadian dollar | 48.1 | ||
Australian dollar | 41.3 | ||
Mexican peso | 36.0 | ||
Indian rupee | 30.7 | ||
Brazilian real | 27.6 | ||
Other (a) | 135.3 |
27
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Business Solutions Operations
The Company writes derivatives, primarily foreign currency forward contracts and option contracts, mostly with small and medium size enterprises and derives a currency spread from this activity as part of its Business Solutions operations. On August 4, 2021, the Company entered into an agreement to sell its Business Solutions business to Goldfinch Partners LLC and The Baupost Group LLC and completed the first closing on March 1, 2022. See Note 4 for further information regarding this transaction. The Company aggregates its Business Solutions foreign currency exposures arising from customer contracts, including the derivative contracts described above, and hedges the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties (economic hedge contracts).Convera through the end of the second closing of the Business Solutions divestiture. The derivatives written are part of the broader portfolio of foreign currency positions arising from the Company'sCompany’s cross-currency payments operations, which primarily include spot exchanges of currency in addition to forwards and options. Foreign exchange revenues from the total portfolio of positions included in Revenues in the Company’s Condensed Consolidated Statements of Income were $88.1$33.6 million and $85.3$87.4 million for the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and $257.2$112.2 million and $264.6$171.9 million for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. None of the derivative contracts used in Business Solutions operations are designated as accounting hedges. The durationhedges and the majority of these derivative contracts have a duration at inception is generallyof less than one year.year.
The aggregate equivalent United States dollar notional amount of foreign currency derivative customer contracts held by the Company in its Business Solutions operations was approximately $5.0 billion and $8.0 billion as of
Interest Rate Hedging
Periodically, the Company utilizes interest rate swaps to effectively change the interest rate payments on a portion of its notes from fixed-rate payments to short-term, LIBOR-based variable ratevariable-rate payments in order to manage its overall exposure to interest rates.rate fluctuations. The Company designates these derivatives as fair value hedges. The change in fair value of the interest rate swaps is offset by a change in the carrying value of the debt being hedged within "Borrowings"Borrowings in the Condensed Consolidated Balance Sheets and "Interest expense"Sheets. Interest expense in the Condensed Consolidated Statements of Income has been adjusted to include the effects of interest accrued on the swaps.
The Company at times, utilizes derivativesterminated 2 of its treasury locks in the first quarter of 2021, which were associated with the issuance of $600.0 million of aggregate principal amount of 1.350% unsecured notes due March 15, 2026 (“2026 Notes”). The Company received a total of $3.3 million upon termination, of which $2.6 million was deferred as a component of AOCL and will be amortized to hedgeInterest expense in the Condensed Consolidated Statements of Income over the term of the 2026 Notes. As a portion of the forecasted issuanceinterest payments on the 2026 Notes will occur outside the time period originally specified at designation of fixed-rate debt. These derivatives are designatedthe treasury locks as cash flow hedges, of the variability$0.7 million was recognized in the fixed-rate coupon of the debt expected to be issued. The effective portion of the change in fair value of the derivatives is recorded in "Accumulated other comprehensive loss"Other income/(expense), net in the Condensed Consolidated Balance Sheets.
28
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Balance Sheet
The following table summarizes the fair value of derivatives reported in the Company’s Condensed Consolidated Balance Sheets as of
|
| Derivative Assets |
|
| Derivative Liabilities |
| ||||||||||||||
|
|
|
| Fair Value |
|
|
|
| Fair Value |
| ||||||||||
|
| Balance Sheet |
| June 30, |
|
| December 31, |
|
| Balance Sheet |
| June 30, |
|
| December 31, |
| ||||
|
| Location |
| 2022 |
|
| 2021 |
|
| Location |
| 2022 |
|
| 2021 |
| ||||
Derivatives designated as hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign currency cash flow hedges |
| Other assets |
| $ | 56.7 |
|
| $ | 30.6 |
|
| Other liabilities |
| $ | 0.2 |
|
| $ | 2.6 |
|
Total derivatives designated as hedges |
|
|
| $ | 56.7 |
|
| $ | 30.6 |
|
|
|
| $ | 0.2 |
|
| $ | 2.6 |
|
Derivatives not designated as hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Business Solutions operations - foreign currency (a) |
| Other assets |
| $ | 152.3 |
|
| $ | 213.1 |
|
| Other liabilities |
| $ | 152.8 |
|
| $ | 174.1 |
|
Foreign currency |
| Other assets |
|
| 5.8 |
|
|
| 4.0 |
|
| Other liabilities |
|
| 3.5 |
|
|
| 7.1 |
|
Total derivatives not designated as hedges |
|
|
| $ | 158.1 |
|
| $ | 217.1 |
|
|
|
| $ | 156.3 |
|
| $ | 181.2 |
|
Total derivatives |
|
|
| $ | 214.8 |
|
| $ | 247.7 |
|
|
|
| $ | 156.5 |
|
| $ | 183.8 |
|
Derivative Assets | Derivative Liabilities | ||||||||||||||||||
Fair Value | Fair Value | ||||||||||||||||||
Balance Sheet Location | September 30, 2017 | December 31, 2016 | Balance Sheet Location | September 30, 2017 | December 31, 2016 | ||||||||||||||
Derivatives — hedges: | |||||||||||||||||||
Interest rate fair value hedges | Other assets | $ | 8.3 | $ | 6.7 | Other liabilities | $ | 0.6 | $ | — | |||||||||
Foreign currency cash flow hedges | Other assets | 10.1 | 48.4 | Other liabilities | 38.9 | 1.2 | |||||||||||||
Total | $ | 18.4 | $ | 55.1 | $ | 39.5 | $ | 1.2 | |||||||||||
Derivatives — undesignated: | |||||||||||||||||||
Business Solutions operations — foreign currency (a) | Other assets | $ | 333.9 | $ | 307.2 | Other liabilities | $ | 301.1 | $ | 258.3 | |||||||||
Foreign currency | Other assets | 3.5 | 3.3 | Other liabilities | 0.6 | 2.8 | |||||||||||||
Total | $ | 337.4 | $ | 310.5 | $ | 301.7 | $ | 261.1 | |||||||||||
Total derivatives | $ | 355.8 | $ | 365.6 | $ | 341.2 | $ | 262.3 |
The fair values of derivative assets and liabilities associated with contracts that include netting language that the Company believes to be enforceable have been netted in the following tables to present the Company'sCompany’s net exposure with these counterparties. The Company'sCompany’s rights under these agreements generally allow for transactions to be settled on a net basis, including upon early termination, which could occur upon the counterparty'scounterparty’s default, a change in control, or other conditions.
In addition, certain of the Company'sCompany’s other agreements include netting provisions, the enforceability of which may vary from jurisdiction to jurisdiction, and depending on the circumstances. Due to the uncertainty related to the enforceability of these provisions, the derivative balances associated with these agreements are included within "Derivatives that are not or may not be subject to master netting arrangement or similar agreement" in the following tables. In certain circumstances, the Company may require its Business Solutions customers to maintain collateral balances which may mitigate the risk associated with potential customer defaults.
29
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following tables summarize the gross and net fair value of derivative assets and liabilities as of
Offsetting of Derivative Assets
|
|
|
|
| Gross |
|
| Net Amounts |
|
| Derivatives |
|
|
|
| |||||
|
| Gross |
|
| Amounts Offset in |
|
| Presented in |
|
| Not Offset in |
|
|
|
| |||||
|
| Amounts of |
|
| the Condensed |
|
| the Condensed |
|
| the Condensed |
|
|
|
| |||||
|
| Recognized |
|
| Consolidated |
|
| Consolidated |
|
| Consolidated |
|
| Net |
| |||||
June 30, 2022 |
| Assets |
|
| Balance Sheets |
|
| Balance Sheets |
|
| Balance Sheets |
|
| Amounts |
| |||||
Derivatives subject to a master netting arrangement or similar agreement |
| $ | 126.8 |
|
| $ | — |
|
| $ | 126.8 |
|
| $ | (67.0 | ) |
| $ | 59.8 |
|
Derivatives that are not or may not be subject to master netting arrangement or similar agreement |
|
| 88.0 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ | 214.8 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Derivatives subject to a master netting arrangement or similar agreement |
| $ | 163.9 |
|
| $ | — |
|
| $ | 163.9 |
|
| $ | (92.4 | ) |
| $ | 71.5 |
|
Derivatives that are not or may not be subject to master netting arrangement or similar agreement |
|
| 83.8 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ | 247.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017 | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | Net Amounts Presented in the Condensed Consolidated Balance Sheets | Derivatives Not Offset in the Condensed Consolidated Balance Sheets | Net Amounts | |||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 160.2 | $ | — | $ | 160.2 | $ | (141.5 | ) | $ | 18.7 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 195.6 | |||||||||||||||||||
Total | $ | 355.8 | ||||||||||||||||||
December 31, 2016 | ||||||||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 256.3 | $ | — | $ | 256.3 | $ | (146.4 | ) | $ | 109.9 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 109.3 | |||||||||||||||||||
Total | $ | 365.6 |
Offsetting of Derivative Liabilities
|
|
|
|
| Gross |
|
| Net Amounts |
|
| Derivatives |
|
|
|
| |||||
|
| Gross |
|
| Amounts Offset in |
|
| Presented in |
|
| Not Offset in |
|
|
|
| |||||
|
| Amounts of |
|
| the Condensed |
|
| the Condensed |
|
| the Condensed |
|
|
|
| |||||
|
| Recognized |
|
| Consolidated |
|
| Consolidated |
|
| Consolidated |
|
| Net |
| |||||
June 30, 2022 |
| Liabilities |
|
| Balance Sheets |
|
| Balance Sheets |
|
| Balance Sheets |
|
| Amounts |
| |||||
Derivatives subject to a master netting arrangement or similar agreement |
| $ | 113.9 |
|
| $ | — |
|
| $ | 113.9 |
|
| $ | (67.0 | ) |
| $ | 46.9 |
|
Derivatives that are not or may not be subject to master netting arrangement or similar agreement |
|
| 42.6 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ | 156.5 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Derivatives subject to a master netting arrangement or similar agreement |
| $ | 109.6 |
|
| $ | — |
|
| $ | 109.6 |
|
| $ | (92.4 | ) |
| $ | 17.2 |
|
Derivatives that are not or may not be subject to master netting arrangement or similar agreement |
|
| 74.2 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total |
| $ | 183.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017 | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | Net Amounts Presented in the Condensed Consolidated Balance Sheets | Derivatives Not Offset in the Condensed Consolidated Balance Sheets | Net Amounts | |||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 282.9 | $ | — | $ | 282.9 | $ | (141.5 | ) | $ | 141.4 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 58.3 | |||||||||||||||||||
Total | $ | 341.2 | ||||||||||||||||||
December 31, 2016 | ||||||||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 152.6 | $ | — | $ | 152.6 | $ | (146.4 | ) | $ | 6.2 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 109.7 | |||||||||||||||||||
Total | $ | 262.3 |
30
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Income Statement
Cash Flow Hedges
The effective portion of the change in fair value of derivatives that qualify as cash flow hedges is recorded in AOCL in the Company’s Condensed Consolidated Balance Sheets. Generally, amounts are recognized in income when the related forecasted transaction affects earnings.
The following tables summarizetable presents the pre-tax amount of unrealized gains/(losses) recognized in other comprehensive income from cash flow hedges for the three and six months ended June 30, 2022 and 2021 (in millions):
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Foreign currency derivatives (a) |
| $ | 37.3 |
|
| $ | (6.2 | ) |
| $ | 43.5 |
|
| $ | 14.7 |
|
Interest rate derivatives |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3.3 |
|
The following table presents the location and amountamounts of gains and losses of derivativespre-tax net gains/(losses) from cash flow hedging relationships recognized in the Condensed Consolidated Statements of Income segregated by designated, qualifying hedging instruments and those that are not, for the three and ninesix months ended SeptemberJune 30, 20172022 and 20162021 (in millions):
|
| Three Months Ended June 30, | |||||||||||||||
|
| 2022 |
|
| 2021 | ||||||||||||
|
| Revenues |
|
| Interest Expense |
|
| Revenues |
|
| Interest Expense |
|
| ||||
Total amounts presented in the Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded |
| $ | 1,138.3 |
|
| $ | (24.8 | ) |
| $ | 1,289.7 |
|
| $ | (25.6 | ) |
|
Gain/(loss) on cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign currency derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gains/(losses) reclassified from AOCL into earnings |
|
| 13.9 |
|
|
| — |
|
|
| (3.3 | ) |
|
| — |
|
|
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach |
|
| 1.4 |
|
|
| — |
|
|
| 1.6 |
|
|
| — |
|
|
Interest rate derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Losses reclassified from AOCL into earnings |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.2 | ) |
|
31
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
|
| Six Months Ended June 30, |
| |||||||||||||||||
|
| 2022 |
|
| 2021 |
| ||||||||||||||
|
| Revenues |
|
| Interest Expense |
|
| Revenues |
|
| Interest Expense |
|
| Other income/(expense), net |
| |||||
Total amounts presented in the Condensed Consolidated Statements of Income in which the effects of cash flow hedges are recorded |
| $ | 2,294.0 |
|
| $ | (49.6 | ) |
| $ | 2,499.7 |
|
| $ | (54.0 | ) |
| $ | 28.6 |
|
Gain/(loss) on cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Foreign currency derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gains/(losses) reclassified from AOCL into earnings |
|
| 14.9 |
|
|
| — |
|
|
| (9.4 | ) |
|
| — |
|
|
| — |
|
Amount excluded from effectiveness testing recognized in earnings based on an amortization approach |
|
| 2.5 |
|
|
| — |
|
|
| 3.5 |
|
|
| — |
|
|
| — |
|
Interest rate derivatives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Gains/(losses) reclassified from AOCL into earnings |
|
| — |
|
|
| (0.1 | ) |
|
| — |
|
|
| (0.4 | ) |
|
| 0.7 |
|
Undesignated Hedges
The following table presents the location and amount of pre-tax net gains/(losses) from fair valueundesignated hedges in the Condensed Consolidated Statements of Income on derivatives for the three and six months ended June 30, 2022 and 2021 (in millions):
|
|
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
|
|
| June 30, |
|
| June 30, |
| ||||||||||
Derivatives (a) |
| Location |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Foreign currency derivatives (b) |
| Selling, general, and administrative |
| $ | 43.3 |
|
| $ | 1.9 |
|
| $ | 55.0 |
|
| $ | 17.9 |
|
Gain/(Loss) Recognized in Income on Derivatives | Gain/(Loss) Recognized in Income on Related Hedged Item (a) | Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) | ||||||||||||||||||||||||||||||
Income Statement Location | Amount | Income Statement Location | Amount | Income Statement Location | Amount | |||||||||||||||||||||||||||
Derivatives | September 30, 2017 | September 30, 2016 | Hedged Item | September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||||||||||||||||||||
Interest rate contracts | Interest expense | $ | (0.1 | ) | $ | (2.6 | ) | Fixed rate debt | Interest expense | $ | 0.2 | $ | 5.0 | Interest expense | $ | (0.1 | ) | $ | (0.2 | ) | ||||||||||||
Total gain/(loss) | $ | (0.1 | ) | $ | (2.6 | ) | $ | 0.2 | $ | 5.0 | $ | (0.1 | ) | $ | (0.2 | ) |
Gain/(Loss) Recognized in Income on Derivatives | Gain/(Loss) Recognized in Income on Related Hedged Item (a) | Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) | ||||||||||||||||||||||||||||||
Income Statement Location | Amount | Income Statement Location | Amount | Income Statement Location | Amount | |||||||||||||||||||||||||||
Derivatives | September 30, 2017 | September 30, 2016 | Hedged Item | September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | |||||||||||||||||||||||||
Interest rate contracts | Interest expense | $ | (0.6 | ) | $ | 12.8 | Fixed rate debt | Interest expense | $ | 2.6 | $ | (5.1 | ) | Interest expense | $ | (0.1 | ) | $ | 0.1 | |||||||||||||
Total gain/(loss) | $ | (0.6 | ) | $ | 12.8 | $ | 2.6 | $ | (5.1 | ) | $ | (0.1 | ) | $ | 0.1 |
All cash flows associated with derivatives are included in Cash Flow Hedges
Based on June 30, 2017 and 2016 (in millions):
Gain/(Loss) Recognized | Gain/(Loss) Reclassified | Gain/(Loss) Recognized in Income on | ||||||||||||||||||||||||||
in OCI on Derivatives | from Accumulated OCI into Income | Derivatives (Ineffective Portion and Amount | ||||||||||||||||||||||||||
(Effective Portion) | (Effective Portion) | Excluded from Effectiveness Testing) (b) | ||||||||||||||||||||||||||
Amount | Income Statement Location | Amount | Income Statement Location | Amount | ||||||||||||||||||||||||
Derivatives | September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||||||||||||
Foreign currency contracts | $ | (21.2 | ) | $ | (1.2 | ) | Revenues | $ | (2.2 | ) | $ | 11.5 | Derivative gains, net | $ | 2.3 | $ | 0.2 | |||||||||||
Interest rate contracts (c) | — | — | Interest expense | (0.8 | ) | (0.9 | ) | Interest expense | — | — | ||||||||||||||||||
Total gain/(loss) | $ | (21.2 | ) | $ | (1.2 | ) | $ | (3.0 | ) | $ | 10.6 | $ | 2.3 | $ | 0.2 |
Gain/(Loss) Recognized | Gain/(Loss) Reclassified | Gain/(Loss) Recognized in Income on | ||||||||||||||||||||||||||
in OCI on Derivatives | from Accumulated OCI into Income | Derivatives (Ineffective Portion and Amount | ||||||||||||||||||||||||||
(Effective Portion) | (Effective Portion) | Excluded from Effectiveness Testing) (b) | ||||||||||||||||||||||||||
Amount | Income Statement Location | Amount | Income Statement Location | Amount | ||||||||||||||||||||||||
Derivatives | September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | September 30, 2017 | September 30, 2016 | ||||||||||||||||||||||
Foreign currency contracts | $ | (68.4 | ) | $ | (7.4 | ) | Revenues | $ | 11.3 | $ | 37.5 | Derivative gains, net | $ | 7.6 | $ | 2.9 | ||||||||||||
Interest rate contracts (c) | — | — | Interest expense | (2.5 | ) | (2.7 | ) | Interest expense | — | — | ||||||||||||||||||
Total gain/(loss) | $ | (68.4 | ) | $ | (7.4 | ) | $ | 8.8 | $ | 34.8 | $ | 7.6 | $ | 2.9 |
Gain/(Loss) Recognized in Income on Derivatives (d) | |||||||||||||||||
Income Statement Location | Amount | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
Derivatives | 2017 | 2016 | 2017 | 2016 | |||||||||||||
Foreign currency contracts (e) | Selling, general and administrative | $ | (4.0 | ) | $ | 0.2 | $ | (26.3 | ) | $ | (14.3 | ) | |||||
Foreign currency contracts (f) | Derivative gains, net | (0.3 | ) | 0.1 | (0.8 | ) | (0.7 | ) | |||||||||
Total gain/(loss) | $ | (4.3 | ) | $ | 0.3 | $ | (27.1 | ) | $ | (15.0 | ) |
32
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
11. Borrowings
The Company’s outstanding borrowings consisted of the following (in millions):
|
| June 30, 2022 |
|
| December 31, 2021 |
| ||
Commercial paper (a) |
| $ | 260.0 |
|
| $ | 275.0 |
|
Notes: |
|
|
|
|
|
| ||
4.250% notes due 2023 (b) |
|
| 300.0 |
|
|
| 300.0 |
|
2.850% notes due 2025 (b) |
|
| 500.0 |
|
|
| 500.0 |
|
1.350% notes due 2026 (b) |
|
| 600.0 |
|
|
| 600.0 |
|
2.750% notes due 2031 (b) |
|
| 300.0 |
|
|
| 300.0 |
|
6.200% notes due 2036 (b) |
|
| 500.0 |
|
|
| 500.0 |
|
6.200% notes due 2040 (b) |
|
| 250.0 |
|
|
| 250.0 |
|
Term loan facility borrowing (c) |
|
| — |
|
|
| 300.0 |
|
Total borrowings at par value |
|
| 2,710.0 |
|
|
| 3,025.0 |
|
Debt issuance costs and unamortized discount, net |
|
| (14.7 | ) |
|
| (16.6 | ) |
Total borrowings at carrying value (d) |
| $ | 2,695.3 |
|
| $ | 3,008.4 |
|
September 30, 2017 | December 31, 2016 | ||||||
Notes: | |||||||
2.875% notes due 2017 (a) | $ | 500.0 | $ | 500.0 | |||
3.650% notes (effective rate of 4.8%) due 2018 | 400.0 | 400.0 | |||||
3.350% notes due 2019 (a) | 250.0 | 250.0 | |||||
Floating rate notes (effective rate of 2.4%) due 2019 (b) | 250.0 | — | |||||
5.253% notes due 2020 (a) | 324.9 | 324.9 | |||||
3.600% notes (effective rate of 3.7%) due 2022 (c) | 500.0 | — | |||||
6.200% notes due 2036 (a) | 500.0 | 500.0 | |||||
6.200% notes due 2040 (a) | 250.0 | 250.0 | |||||
Term Loan Facility borrowings (effective rate of 2.8%) | 575.0 | 575.0 | |||||
Total borrowings at par value | 3,549.9 | 2,799.9 | |||||
Fair value hedge accounting adjustments, net (d) | 1.8 | 4.4 | |||||
Debt issuance costs and unamortized discount, net | (18.3 | ) | (18.2 | ) | |||
Total borrowings at carrying value (e) | $ | 3,533.4 | $ | 2,786.1 |
Term Loan Facility
On December 18, 2018, the Company entered into an amended and restated term loan facility providing for up to $950.0 million in borrowings and extending the final maturity of the facility to January 2024 (the "Term Loan Facility"). Proceeds from the 2026 Notes and $300.0 million of aggregate principal amount of 2.750% unsecured notes due March 15, 2031 ("2031 Notes"), and cash, including cash generated from operations, were used to repay $650.0 million of the Term Loan Facility in the first quarter of 2021 and $500.0 million of the aggregate principal amount of 3.600% unsecured notes due in March 2022 in the second quarter of 2021. On January 4, 2022, the Company repaid all remaining borrowings owed under the Term Loan Facility for total consideration of $300.0 million, using proceeds from commercial paper and cash, including cash generated from operations. The Company is no longer able to borrow money under this facility.
The following summarizes the Company'sCompany’s maturities of its notes at par value as of SeptemberJune 30, 20172022 (in millions):
Due within 1 year |
| $ | 300.0 |
|
Due after 1 year through 2 years |
|
| — |
|
Due after 2 years through 3 years |
|
| 500.0 |
|
Due after 3 years through 4 years |
|
| 600.0 |
|
Due after 4 years through 5 years |
|
| — |
|
Due after 5 years |
|
| 1,050.0 |
|
Total |
| $ | 2,450.0 |
|
Due within 1 year | $ | 907.2 | |
Due after 1 year through 2 years | 528.8 | ||
Due after 2 years through 3 years | 360.8 | ||
Due after 3 years through 4 years | 503.1 | ||
Due after 4 years through 5 years | 500.0 | ||
Due after 5 years | 750.0 |
The Company’s obligations with respect to its outstanding Notes,borrowings, as described above, rank equally.
12. Income Taxes
The Company'sCompany’s effective tax rates on pre-tax income were 1.5%17.9% and 9.6%14.5% for the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and 11.4%18.6% and 10.6%12.7% for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. The decrease
33
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
increase in the Company’s effective tax rate for the three and six months compared to the corresponding periods in the prior year was primarily due to the sale of the Company's Business Solutions business and the Company's decision to suspend its operations in Russia and Belarus. In addition, the increase in the effective tax rate for the three months ended SeptemberJune 30, 2017 compared to the prior period reflects lower tax expense arising from the related effects in the current period of the discrete tax expense recognized during the first quarter of 2017 from changes in internal ownership of certain international subsidiaries within the consolidated group and additional discrete benefits in the current period for changes in tax contingency reserves. The increase in the Company's effective tax rate for the nine months ended September 30, 20172022 compared to the prior period was due topartially offset by lower discrete tax expenses in the State Regulator Matter accrual discussed in Note 5, for which no tax benefit is currently recorded, and the tax effects from the changes in internal ownership of certaincurrent period. The sale of the Company's international subsidiaries within the consolidated group during the first quarter of 2017 described earlier, partially offset by one-time tax planning benefits. The Company currently expects that approximately 109% of the Company's pre-tax income will be derived from foreign sources for the year ending December 31, 2017. Certain portions of the Company's foreign source income are subject to United States federal and state income tax as earned due to the nature of the income, and dividend repatriations of the Company's foreign source income are generally subject to United States federal and state income tax.
Unrecognized tax benefits represent the aggregate tax effect of differences between tax return positions and the amounts otherwise recognized in the Company's consolidated financial statements, and are reflected in "IncomeIncome taxes payable"payable in the Condensed Consolidated Balance Sheets. The total amount of unrecognized tax benefits as of SeptemberJune 30, 20172022 and December 31, 20162021 was $333.9$371.8 million and $352.0$376.3 million, respectively, excludingincluding interest and penalties, withpenalties. As previously disclosed in Part II, Item 8, Financial Statements and Supplementary Data, Note 11, Income Taxes, in the decrease primarily relatedCompany's Annual Report on Form 10-K, the Company continues to a statute of limitations expiration. Thebelieve that it is reasonably possible that its total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was
The Company’s tax filings are subject to examination by U.S. federal, state, and penalties.
13. Stock-Based Compensation Plans
For the three and nine months ended SeptemberJune 30, 2017,2022 and 2021, the Company recognized stock-based compensation expense of $12.1$12.3 million and $36.1$12.0 million, respectively, resulting primarily from stock options, restricted stock units, and performance-based restricted stock units and deferred stock units in the Condensed Consolidated Statements of Income. For the three and ninesix months ended SeptemberJune 30, 2016,2022 and 2021, the Company recognized stock-based compensation expense of $9.8$23.0 million and $31.8$22.8 million, respectively.
During the ninesix months ended SeptemberJune 30, 2017,2022, the Company granted 0.40.6 million options at a weighted-average exercise price of $19.99$18.62 and 3.4 million performance-based restricted stock units and restricted stock units at a weighted-average grant date fair value of $17.67.$20.19. As of SeptemberJune 30, 2017,2022, the Company had 7.76.4 million outstanding options at a weighted-average exercise price of $17.63,$18.68, of which 6.53.6 million options were exercisable at a weighted-average exercise price of $17.40.$19.16. The Company had 7.77.4 million outstanding performance-based restricted stock units (based on target performance) and restricted stock units at a weighted-average grant date fair value of $17.31$21.53 as of SeptemberJune 30, 2017. The majority of stock units do not provide for the payment of dividend equivalents. For those units, their value is reduced by the net present value of the foregone dividend equivalent payments.2022.
14. Segments
As further described in Note 1, the Company made changes toclassifies its operating and reportable segments in the second quarter of 2017, and the historical Consumer-to-Business operating segment is no longer a separate operating segment. The Company currently consists of two reportablebusiness into 2 segments: Consumer-to-Consumer and Business Solutions. Operating segments are defined as components of an enterprise that engage in business activities, about which separate financial information is available that is evaluated regularly by the Company's CODMCompany’s Chief Operating Decision Maker ("CODM") in deciding where to allocateallocating resources and in assessing performance.
The Consumer-to-Consumer operating segment facilitates money transfers between two2 consumers. The Company's money transfer service is viewed by the Company as one interconnected global network where a money transfer can be sent from one location to another, around the world. The segment includes five5 geographic regions whose functions are primarily related to generating, managing, and maintaining agent relationships and localized marketing activities. The Company includes Digital Money Transfer transactions in its onlineregions, including transactions from the Company’s arrangements with financial institutions and other third parties to enable such entities to offer money transfer services initiated through Western Union branded websites ("westernunion.com") in its regions.to their own customers under their brands. By means of common processes and systems, these regions, including westernunion.com,Digital Money Transfer transactions, create anone interconnected global network for consumer transactions, thereby constituting one global Consumer-to-Consumer money transfer business and one operating segment.
The Business Solutions operating segment facilitates payment and foreign exchange solutions, primarily cross-border, cross-currency transactions, for small and medium size enterprises, and other organizations and individuals.
34
THE WESTERN UNION COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Baupost Group LLC. The sale will be completed in two closings, the first of which occurred on March 1, 2022, with the second expected in the fourth quarter of 2022. See Note 4 for further information regarding this transaction.
All businesses and other services that have not been classified in the above segments are reported as "Other,"Other, which primarily includes the Company's electronic-based and cash-basedCompany’s bill payment services which facilitate bill payments from consumers to businesses and other organizations and which were previously reported in the historical Consumer-to-Business operating segment, and the Company'sCompany’s money order and other services.
Corporate costs, including stock-based compensation and other overhead, are allocated to the segments primarily based on a percentage of the segments'segments’ revenue compared to total revenue.
The following table presents the State Regulator MatterCompany’s segment results for the nine months ended September 30, 2017 and the Joint Settlement Agreement expenses for both the three and ninesix months ended SeptemberJune 30, 20172022 and 2016, respectively, were not allocated2021 (in millions):
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Consumer-to-Consumer |
| $ | 1,026.9 |
|
| $ | 1,127.1 |
|
| $ | 2,025.9 |
|
| $ | 2,178.0 |
|
Business Solutions (a) |
|
| 35.7 |
|
|
| 99.3 |
|
|
| 124.8 |
|
|
| 195.8 |
|
Other |
|
| 75.7 |
|
|
| 63.3 |
|
|
| 143.3 |
|
|
| 125.9 |
|
Total consolidated revenues |
| $ | 1,138.3 |
|
| $ | 1,289.7 |
|
| $ | 2,294.0 |
|
| $ | 2,499.7 |
|
Operating income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Consumer-to-Consumer |
| $ | 225.6 |
|
| $ | 233.8 |
|
| $ | 432.8 |
|
| $ | 439.9 |
|
Business Solutions (a) |
|
| 8.3 |
|
|
| 10.9 |
|
|
| 35.8 |
|
|
| 23.5 |
|
Other |
|
| 30.3 |
|
|
| 10.2 |
|
|
| 51.8 |
|
|
| 24.3 |
|
Total segment operating income |
|
| 264.2 |
|
|
| 254.9 |
|
|
| 520.4 |
|
|
| 487.7 |
|
Russia/Belarus exit costs (b) |
|
| (0.2 | ) |
|
| — |
|
|
| (11.2 | ) |
|
| — |
|
Business Solutions exit costs (b) |
|
| — |
|
|
| — |
|
|
| (7.7 | ) |
|
| — |
|
Total consolidated operating income |
| $ | 264.0 |
|
| $ | 254.9 |
|
| $ | 501.5 |
|
| $ | 487.7 |
|
35
THE WESTERN UNION COMPANY
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS (Continued)
Item 2.
The following table presentsdiscussion should be read in conjunction with the Company's reportable segment results for the three and nine months ended
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues: | |||||||||||||||
Consumer-to-Consumer | $ | 1,107.7 | $ | 1,098.9 | $ | 3,210.0 | $ | 3,212.1 | |||||||
Business Solutions | 99.4 | 97.2 | 289.6 | 297.2 | |||||||||||
Other (a) | 197.6 | 181.7 | 586.4 | 541.9 | |||||||||||
Total consolidated revenues | $ | 1,404.7 | $ | 1,377.8 | $ | 4,086.0 | $ | 4,051.2 | |||||||
Operating income: | |||||||||||||||
Consumer-to-Consumer | $ | 259.8 | $ | 276.2 | $ | 757.3 | $ | 759.4 | |||||||
Business Solutions | 9.0 | 3.9 | 16.6 | 11.5 | |||||||||||
Other (a) | 20.7 | 18.2 | 68.2 | 63.4 | |||||||||||
Total segment operating income | 289.5 | 298.3 | 842.1 | 834.3 | |||||||||||
State Regulator Matter (Note 5) | — | — | (49.0 | ) | — | ||||||||||
Joint Settlement Agreements (Note 5) | (8.0 | ) | (15.0 | ) | (8.0 | ) | (30.0 | ) | |||||||
Business transformation expenses (Note 3) | (9.9 | ) | (5.0 | ) | (59.2 | ) | (7.1 | ) | |||||||
Total consolidated operating income | $ | 271.6 | $ | 278.3 | $ | 725.9 | $ | 797.2 |
Possible events or factors that could cause results or performance to differ materially from those expressed in our forward-looking statements include the following: (i) events related to our business and industry, such as: changes in general economic conditions and economic conditions in the regions and industries in which we operate, including global economic downturns and trade downturns,disruptions, or significantly slower growth or declines in the money transfer, payment service, and other markets in which we operate, including downturns or declines related to interruptions in migration patterns or other events, such as public health emergencies, epidemics, or pandemics, such as COVID-19, civil unrest, war, terrorism, natural disasters, or non-performance by our banks, lenders, insurers, or other financial services providers; failure to compete effectively in the money transfer and payment service industry, including among other things, with respect to price, with global and niche or corridor money transfer providers, banks and other money transfer and payment service providers, including electronic,digital, mobile and Internet-basedinternet-based services, card associations, and card-based payment providers, and with digital currencies and related exchanges and protocols, and other innovations in technology and business models; geopolitical tensions, political conditions, and related actions, in the United Statesincluding trade restrictions and abroadgovernment sanctions, which may adversely affect our business and economic conditions as a whole, including interruptions of United States or other government relations with countries in which we have or are implementing significant business relationships with agents, clients, or clients;other partners; deterioration in customer confidence in our business, or in money transfer and payment service providers generally; failure to maintain our agent network and business relationships under terms consistent with or more advantageous to us than those currently in place; our ability to adopt new technology and develop and gain market acceptance of new and enhanced services in response to changing industry and consumer needs or trends; mergers, acquisitions, and the integration of acquired businesses and technologies into our Company, divestitures, and the failure to realize anticipated financial benefits from these transactions, and events requiring us to write down our goodwill; decisions to change our business mix; changes in, and failure to manage effectively, exposure to foreign exchange rates, including the impact of the regulation of foreign exchange spreads on money transfers and payment transactions; changes in tax laws, or their interpretation, any subsequent regulation, and potential related state income tax impacts, and unfavorable resolution of tax contingencies; any material breach of security, including cybersecurity, or safeguards of or interruptions in any of our systems or those of our vendors or other third parties; cessation of or defects in various services provided to us by third-party vendors; mergers, acquisitions and integration of acquired businesses and technologies into our Company, and the failure to realize anticipated financial benefits from these acquisitions, and events requiring us to write down our goodwill; failure to manage credit and fraud risks presented by our agents, clients and consumers; failure to maintain our agent network and business relationships under terms consistent with or more advantageous to us than those currently in place, including due to increased costs or loss of business as a result of increased compliance requirements or difficulty for us, our agents or their subagents in establishing or maintaining relationships with banks needed to conduct our services; decisions to change our business mix; changes in tax laws, or their interpretation, and unfavorable resolution of tax contingencies; adverse rating actions by credit rating agencies; our ability to realize the anticipated benefits from business transformation, productivity and cost-savings, and other relatedrestructuring-related initiatives, which may include decisions to downsize or to transition operating activities from one location to another, and to minimize any disruptions in our workforce that may result from those initiatives; failure to manage credit and fraud risks presented by our agents, clients, and consumers; adverse rating actions by credit rating agencies; our ability to protect our brandstrademarks, patents, copyrights, and our other intellectual property rights, and to defend ourselves against potential intellectual property infringement claims; our ability to attract and retain qualified key employees and to manage our workforce successfully; material changes in the market value or liquidity of securities that we hold; restrictions imposed by our debt obligations; (ii) events related to our regulatory and litigation environment, such as: liabilities or loss of business resulting from a failure by us, our agents, or their subagents to comply with laws and regulations and regulatory or judicial interpretations thereof, including laws and regulations designed to
36
protect consumers, or detect and prevent money laundering, terrorist financing, fraud, and other illicit activity; increased costs or loss of business due to regulatory initiatives and changes in laws, regulations, and industry practices and standards, including changes in interpretations, in the United States the European Union and globally,abroad, affecting us, our agents or their subagents, or the banks with which we or our agents maintain bank accounts needed to provide our services,
Overview
We are a leading provider of money movement and payment services, operating in two business segments:
All businesses and other services that have not been classified in the above segments are reported as "Other,"Other, which primarily includes our electronic-based and cash-based bill payment services which facilitate bill payments from consumers to businesses and other organizations and which were previously reported in the historical Consumer-to-Business operating segment, and our money order and other services, in additionservices. Certain of our corporate costs such as costs related to strategic initiatives, including costs for the review and closing of acquisitions.mergers, acquisitions, and divestitures, are also included in Other. Additional information on our reportable segments is further describedprovided in the Segment Discussion below.
37
Results of Operations
The following discussion of our consolidated results of operations and segment results refers to the three and ninesix months ended SeptemberJune 30, 20172022 compared to the same periods in 2016.2021. The results of operations should be read in conjunction with the discussion of our segment results of operations, which provide more detailed discussions concerning certain components of the Condensed Consolidated Statements of Income. All significant intercompany accounts and transactions between our segments have been eliminated and theeliminated. The below information has been prepared in conformity with generally accepted accounting principles in the United States of America ("GAAP"). unless otherwise noted. All amounts provided in this section are rounded to the nearest tenth of a million, except as otherwise noted. As a result, the percentage changes and margins disclosed herein may not recalculate precisely using the rounded amounts provided. Beginning in the first quarter of 2017, we have reported total "Revenues" in our Condensed Consolidated Statements of Income for all periods presented and no longer present the subcaptions previously reported, including "Transaction fees," "Foreign exchange revenues," and "Other revenues."
Our revenues and operating income for the three and ninesix months ended SeptemberJune 30, 20172022 were negatively impacted by the strengthening offluctuations in the United States dollar compared to foreign currencies. The strengthening ofFluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges, resulted in a reductiondecreases to revenues of $42.1 million and $75.3 million for the three and ninesix months ended SeptemberJune 30, 2017 of $7.7 million and $66.8 million, respectively, and negatively impacted operating income by $8.9 million and $30.7 million,2022, respectively, relative to the corresponding periods in the prior year. Additionally, ourFluctuations in the United States dollar compared to foreign currencies positively impacted operating income by $4.2 million and $8.1 million for the ninethree and six months ended SeptemberJune 30, 2017 was negatively impacted by a $49 million accrual related2022, respectively, relative to the State Regulator Matter described furthercorresponding periods in the prior year.
On August 4, 2021, we entered into an agreement to sell our Business Solutions business to Goldfinch Partners LLC and The Baupost Group LLC (collectively, the “Buyer”) for cash consideration of $910.0 million. The sale will be completed in two closings, the first of which occurred on March 1, 2022 with the entirety of the cash consideration collected and allocated to the closings on a relative fair value basis. The first closing excluded the operations in the European Union and the United Kingdom and resulted in a gain of $151.4 million. The second closing is currently expected to occur in the fourth quarter of 2022, pending required regulatory approvals, at which time the remainder of the gain will be recognized, subject to regulatory capital adjustments. The Buyer has rebranded the sold operations within a new standalone company (now referred to as "Convera"). Refer to Part I, Item 1,
Financial Statements,NoteBusiness Solutions revenues included in our Condensed Consolidated Statements of Income were $35.7 million and $99.3 million and direct operating expenses, excluding corporate allocations were $27.8 million and $85.1 million for the three months ended June 30, 2022 and 2021, respectively. Business Solutions revenues were $124.8 million and $195.8 million and direct operating expenses, excluding corporate allocations were $90.4 million and $166.9 million for the six months ended June 30, 2022 and 2021, respectively. Divestiture costs directly associated with this transaction were $0.8 million and $4.0 million for the three and six months ended June 30, 2022, respectively.
In March 2022, we suspended our operations in Russia and Belarus, which are included in our Consumer-to-Consumer segment, due to the Russia/Ukraine conflict (the "Conflict"). Revenues associated with the Russia and Belarus operations, including transactions sent from, into, and within these countries for the three months ended June 30, 2021 were approximately $36 million, and for the six months ended June 30, 2022 and 2021 and the year ended December 31, 2021, were approximately $28 million, $66 million, and $145 million, respectively. The Conflict has had and is expected to continue to have broader implications to our overall business, including reduced transaction activity in Ukraine. We expect that our results of operations will continue to be negatively impacted by this Conflict for the remainder of 2022 and possibly thereafter.
38
The following table sets forth our consolidated results of operations for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016.
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||
(in millions, except per share amounts) |
| 2022 |
|
| 2021 |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| % Change |
| ||||||
Revenues |
| $ | 1,138.3 |
|
| $ | 1,289.7 |
|
|
| (12 | )% |
| $ | 2,294.0 |
|
| $ | 2,499.7 |
|
|
| (8 | )% |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Cost of services |
|
| 653.0 |
|
|
| 755.0 |
|
|
| (14 | )% |
|
| 1,308.1 |
|
|
| 1,461.0 |
|
|
| (10 | )% |
Selling, general, and administrative |
|
| 221.3 |
|
|
| 279.8 |
|
|
| (21 | )% |
|
| 484.4 |
|
|
| 551.0 |
|
|
| (12 | )% |
Total expenses |
|
| 874.3 |
|
|
| 1,034.8 |
|
|
| (16 | )% |
|
| 1,792.5 |
|
|
| 2,012.0 |
|
|
| (11 | )% |
Operating income |
|
| 264.0 |
|
|
| 254.9 |
|
|
| 4 | % |
|
| 501.5 |
|
|
| 487.7 |
|
|
| 3 | % |
Other income/(expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gain on divestiture of business |
|
| — |
|
|
| — |
|
| (a) |
|
| 151.4 |
|
|
| — |
|
| (a) |
| |||
Interest income |
|
| 1.8 |
|
|
| 0.3 |
|
| (a) |
|
|
| 2.4 |
|
|
| 0.7 |
|
| (a) |
| ||
Interest expense |
|
| (24.8 | ) |
|
| (25.6 | ) |
|
| (3 | )% |
|
| (49.6 | ) |
|
| (54.0 | ) |
|
| (8 | )% |
Other income/(expense), net |
|
| (4.8 | ) |
|
| 30.5 |
|
| (a) |
|
|
| (7.3 | ) |
|
| 28.6 |
|
| (a) |
| ||
Total other income/(expense), net |
|
| (27.8 | ) |
|
| 5.2 |
|
| (a) |
|
|
| 96.9 |
|
|
| (24.7 | ) |
| (a) |
| ||
Income before income taxes |
|
| 236.2 |
|
|
| 260.1 |
|
|
| (9 | )% |
|
| 598.4 |
|
|
| 463.0 |
|
|
| 29 | % |
Provision for income taxes |
|
| 42.2 |
|
|
| 37.6 |
|
|
| 12 | % |
|
| 111.1 |
|
|
| 58.7 |
|
|
| 89 | % |
Net income |
| $ | 194.0 |
|
| $ | 222.5 |
|
|
| (13 | )% |
| $ | 487.3 |
|
| $ | 404.3 |
|
|
| 21 | % |
Earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Basic |
| $ | 0.50 |
|
| $ | 0.54 |
|
|
| (7 | )% |
| $ | 1.25 |
|
| $ | 0.98 |
|
|
| 28 | % |
Diluted |
| $ | 0.50 |
|
| $ | 0.54 |
|
|
| (7 | )% |
| $ | 1.25 |
|
| $ | 0.98 |
|
|
| 28 | % |
Weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Basic |
|
| 386.7 |
|
|
| 409.3 |
|
|
|
|
|
| 389.9 |
|
|
| 410.5 |
|
|
|
| ||
Diluted |
|
| 387.6 |
|
|
| 411.5 |
|
|
|
|
|
| 391.0 |
|
|
| 412.9 |
|
|
|
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
(in millions, except per share amounts) | 2017 | 2016 | % Change | 2017 | 2016 | % Change | |||||||||||||||
Revenues | $ | 1,404.7 | $ | 1,377.8 | 2 | % | $ | 4,086.0 | $ | 4,051.2 | 1 | % | |||||||||
Expenses: | |||||||||||||||||||||
Cost of services | 841.1 | 822.9 | 2 | % | 2,484.5 | 2,424.2 | 2 | % | |||||||||||||
Selling, general and administrative | 292.0 | 276.6 | 6 | % | 875.6 | 829.8 | 6 | % | |||||||||||||
Total expenses | 1,133.1 | 1,099.5 | 3 | % | 3,360.1 | 3,254.0 | 3 | % | |||||||||||||
Operating income | 271.6 | 278.3 | (2 | )% | 725.9 | 797.2 | (9 | )% | |||||||||||||
Other income/(expense): | |||||||||||||||||||||
Interest income | 1.3 | 1.1 | 23 | % | 3.8 | 2.7 | 42 | % | |||||||||||||
Interest expense | (37.2 | ) | (41.4 | ) | (10 | )% | (104.2 | ) | (122.9 | ) | (15 | )% | |||||||||
Derivative gains, net | 2.0 | 0.3 | (a) | 6.8 | 2.2 | (a) | |||||||||||||||
Other income, net | 1.5 | 1.7 | (a) | 4.4 | 0.8 | (a) | |||||||||||||||
Total other expense, net | (32.4 | ) | (38.3 | ) | (15 | )% | (89.2 | ) | (117.2 | ) | (24 | )% | |||||||||
Income before income taxes | 239.2 | 240.0 | 0 | % | 636.7 | 680.0 | (6 | )% | |||||||||||||
Provision for income taxes | 3.6 | 23.1 | (84 | )% | 72.9 | 71.8 | 2 | % | |||||||||||||
Net income | $ | 235.6 | $ | 216.9 | 9 | % | $ | 563.8 | $ | 608.2 | (7 | )% | |||||||||
Earnings per share: | |||||||||||||||||||||
Basic | $ | 0.51 | $ | 0.45 | 13 | % | $ | 1.20 | $ | 1.24 | (3 | )% | |||||||||
Diluted | $ | 0.51 | $ | 0.44 | 16 | % | $ | 1.19 | $ | 1.23 | (3 | )% | |||||||||
Weighted-average shares outstanding: | |||||||||||||||||||||
Basic | 462.8 | 487.0 | 470.6 | 492.4 | |||||||||||||||||
Diluted | 465.4 | 490.3 | 473.6 | 495.5 |
Revenues overview
Revenues are primarily derived from consideration paid by customers to transfer money. These revenues vary by transaction based upon factors such as channel, send and receive locations, the principal amount sent, whether the money transfer involves different send and receive currencies, the difference between the exchange rate we set to the customer and the rate available in the wholesale foreign exchange market, and speed of service, as applicable. We also offer several other services, including foreign exchange and payment services and other bill payment services, for which revenue is impacted by similar factors, including payments from consumers or businesses to other businesses, foreign exchange and payment services, and retail money order services.
Due to the significance of the effect that foreign exchange fluctuations against the United States dollar can have on our reported revenues, constant currency results have been provided in the table below for consolidated revenues. Additionally, due to the significance of our Consumer-to-Consumer segment to our overall results, we have also provided constant currency results for our Consumer-to-Consumer segment revenues. Constant currency results assume foreign revenues are translated from foreign currencies to the United States dollar, net of the effect of foreign currency hedges, at rates consistent with those in the prior year. We have also disclosed the impact of our Business Solutions divestiture on our revenues in the table below. Constant currency measures and measures that exclude the impact of divestitures are non-GAAP financial measures and are provided so that revenue can be viewed without the effect of fluctuations in foreign currency exchange rates and divestitures of our businesses, which is consistent with how management evaluates our revenue results and trends. We believe that these measures provide management and investors with information about revenue results and trends that eliminates currency volatility and providesdivestitures, thereby providing greater clarity regarding, and increasesincreasing the comparability of, our underlying results and trends. This constant currency disclosure isThese disclosures are provided in addition to, and not as a substitute for, the percentage change in revenue on a GAAP basis for the three and ninesix months ended SeptemberJune 30, 20172022 compared to the corresponding periods in the prior year. Other companies may calculate and define similarly labeled items differently, which may limit the usefulness of this measure for comparative purposes.
39
The following table sets forth our consolidated revenue results for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016.
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||
(dollars in millions) |
| 2022 |
|
| 2021 |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| % Change |
| ||||||
Revenues, as reported - (GAAP) |
| $ | 1,138.3 |
|
| $ | 1,289.7 |
|
|
| (12 | )% |
| $ | 2,294.0 |
|
| $ | 2,499.7 |
|
|
| (8 | )% |
Foreign currency impact (a) |
|
|
|
|
|
|
|
| 4 | % |
|
|
|
|
|
|
|
| 3 | % | ||||
Divestitures impact (b) |
|
|
|
|
|
|
|
| 4 | % |
|
|
|
|
|
|
|
| 2 | % | ||||
Revenue change, constant currency adjusted, excluding Business Solutions - (Non-GAAP) |
|
|
|
|
|
|
|
| (4 | )% |
|
|
|
|
|
|
|
| (3 | )% |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
(dollars in millions) | 2017 | 2016 | % Change | 2017 | 2016 | % Change | |||||||||||||||
Revenues, as reported - (GAAP) | $ | 1,404.7 | $ | 1,377.8 | 2 | % | $ | 4,086.0 | $ | 4,051.2 | 1 | % | |||||||||
Foreign currency impact (a) | 1 | % | 2 | % | |||||||||||||||||
Revenue change, constant currency adjusted - (Non-GAAP) | 3 | % | 3 | % |
For the three and six months ended June 30, 2022, revenues decreased 12% and 8%, respectively, when compared to the corresponding periods in the prior year due to a transaction decline in our Consumer-to-Consumer segment, including as a result of the suspension of our operations in Russia and Belarus, as well as the first closing of the divestiture of our Business Solutions business, as described above. Fluctuations in the exchange rates between the United States dollar and foreign currencies negatively impacted revenue by 1% and 2% for the three and nine months ended September 30, 2017, respectively. The increase in non-GAAP revenues constant currency adjusted was the result of transaction growth in our Consumer-to-Consumer segment of 2%4% and 3% for the three and ninesix months ended SeptemberJune 30, 2017 and growth in our Argentina cash-based and United States electronic bill payments services.
Operating expenses overview
Enhanced regulatory compliance
The financial services industry, including money services businesses, continues to be subject to increasingly strict legal and regulatory requirements, and we continue to focus on and regularly review our compliance programs. In connection with these reviews, and in light of growing and rapidly evolving regulatory complexity and heightened attention of, and increased dialogue with, governmental and regulatory authorities related to our compliance activities, we have made, and continue to make, enhancements to our processes and systems designed to detect and prevent money laundering, terrorist financing, and fraud and other illicit activity, along withand enhancements designed to improve consumer protection, including related to the Joint Settlement Agreements described further in Part I, Item 1,
Cost of services
Cost of services primarily consists of agent commissions, which represented approximately 60% of total cost of services for both the three and ninesix months ended SeptemberJune 30, 2017.2022. For the three and six months ended June 30, 2022, Cost of services increased for both the three and nine months ended September 30, 2017decreased compared to the corresponding periods in the prior year due to increased bank fees, primarily in our growing United States electronic bill payments services, and severance and related employee benefits and other expenses related to a business transformation initiative referred to as the WU Way, as further discussed below. Additionally, the nine months ended September 30, 2017 were positively impacted by a decrease in Consumer-to-Consumer money transfer agent commissions.
Selling, General, and Administrative
Selling, general, and administrative expenses increaseddecreased for the three and six months ended June 30, 2022 compared to the corresponding periods in the prior year due to increased employeea decrease associated with the Business Solutions divestiture, as discussed above, a decrease in employee-related expenses, including incentive compensation, and marketing expenses,fluctuations between the United States dollar and an accrual for an additional $8 million of expenses relatedforeign currencies. For the six months ended June 30, 2022 compared to the independent compliance auditor required bycorresponding
40
period in the Joint Settlement Agreements,prior year, the decrease was also due to a decrease in marketing costs, partially offset by a $15 million accrual relatedexit costs associated with the suspension of our Russian and Belarus operations and the Business Solutions divestiture, as discussed below.
Total Other Income/(Expense), Net
Total other income/(expense), net during the three and six months ended June 30, 2022 when compared to the Joint Settlement Agreements that was recordedcorresponding periods in the third quarterprior year were impacted by the prior year gain of 2016. For$47.9 million recorded from the ninesale of a substantial majority of shares we held as a noncontrolling investor in a private company and the expense associated with payment obligations to the Buyer of the Business Solutions business for a measure of the profits, as contractually agreed, from the European Union and United Kingdom operations subsequent to the first closing, which will continue until the second closing. Total other income/(expense), net for the six months ended SeptemberJune 30, 20172022, when compared to the corresponding period in the prior year, selling, general and administrative expenses increased due toalso benefited from the State Regulator Matter accrual of $49 million discussed above, WU Way-related severance and related employee benefits, consulting service fees and other expenses, and increased employee incentive compensation expenses, partially offset by a $30 million accrual related togain on the Joint Settlement Agreements recorded in 2016. Additionally, the strengtheningfirst closing of the United States dollar compared to foreign currencies resultedBusiness Solutions divestiture and a reduction in a positive impactinterest expense driven by lower average debt balances outstanding.
Income Taxes
Our effective tax rates on the translation of our expensespre-tax income were 17.9% and 14.5% for the ninethree months ended SeptemberJune 30, 2017.
As of SeptemberJune 30, 2017,2022, the total amount of tax contingency reserves was $347.4$316.0 million, including accrued interest and penalties, net of related items,items. As previously disclosed in Part II, Item 8, Financial Statements and reflects a reduction recognized during the three months ended September 30, 2017 relatedSupplementary Data, Note 11, Income Taxes, in our Annual Report on Form 10-K, we continue to statute of limitations expirations
Earnings per share
During the three months ended SeptemberJune 30, 20172022 and 2016,2021, basic earnings per share were $0.51 and $0.45, and diluted earnings per share were $0.51$0.50 and $0.44$0.54, respectively. During the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, basic earnings per share were $1.20 and $1.24, and diluted earnings per share were $1.19$1.25 and $1.23,$0.98, respectively. Outstanding options to purchase Western Union stock and unvested shares of restricted stock are excluded from basic shares outstanding. Diluted earnings per share reflects the potential dilution that could occur if outstanding stock options at the presented dates are exercised and shares of restricted stock have vested. For the three months ended SeptemberJune 30, 20172022 and 2016,2021 there were 3.38.6 million and 2.41.4 million, respectively, and for the six months ended June 30, 2022 and 2021, there were 7.9 million and 1.4 million, respectively, of outstanding options to purchase shares of Western Union stock excluded from the diluted earnings per share calculation under the treasury stock method, as their effect was anti-dilutive. For the nine months ended September 30, 2017 and 2016, there were 2.9 million and 3.9 million, respectively, of outstandingprimarily due to options to purchase shares of Western Union stock excluded fromand outstanding restricted stock units, as the diluted earningsassumed proceeds of the options and restricted stock per unit were above our weighted-average share calculation underprice during the treasury stock method asperiods and their effect was anti-dilutive.
Earnings per share for both the three and ninesix months ended SeptemberJune 30, 20172022 compared to the corresponding periods in the prior year were impacted by the previously described factors impacting net income and a lower weighted-averagenumber of shares outstanding. The lower number of shares outstanding was due to stock repurchases exceeding stock issuances related to the Company'sunder our stock compensation programs.
Segment Discussion
We manage our business around the consumers and businesses we serve and the types of services we offer. Each of our segments addresses a different combination of consumer groups, distribution networks, and services offered. Our reportable segments are Consumer-to-Consumer and Business Solutions.
41
business to the operating and reportable segmentsbe sold in the second quarter of 2017. Priorclosing continue to these changes,be included in Revenues and Operating income after the first closing. However, between the first and second closing, we had organizedwill pay the business into the following operating segments: Consumer-to-Consumer, Consumer-to-Business, and Business Solutions. AsBuyer a result of these leadership and organizational structure changes, the componentsmeasure of the historical Consumer-to-Business operating segment have been divided between two executives,profits from these operations, adjusted for other charges, and this expense is recognized in Other income/(expense), net in the Condensed Consolidated Statements of Income.
During the six months ended June 30, 2022, we incurred $11.2 million and $7.7 million of exit costs associated with the majoritysuspension of our cash-based bill payments services under one executiveRussia and Belarus operations and the majority of our electronic-based bill payments services under the other executive. The CODM allocates resources and assesses performance using discrete information for these separate components, neither of which is material from either a quantitative or qualitative perspective. Accordingly, we no longer report a separate Consumer-to-Business operating segment, and no new reportable segments result from the impact of these changes. The cash-based and electronic-based bill payments services are therefore included in "Other" along with other businesses and services not classified in the Consumer-to-Consumer or Business Solutions segments. This new operating segment structure is based upon the financial information provided to the CODM for decision-making and is consistent with our overall business strategy. Segment results for the three and nine months ended September 30, 2016 in the discussion and tables below have been adjusted to conform to these changes in reportable segments.
The following table sets forth the components of segment revenues as a percentage of the consolidated totals for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016.
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Consumer-to-Consumer | 79 | % | 80 | % | 79 | % | 79 | % | |||
Business Solutions | 7 | % | 7 | % | 7 | % | 7 | % | |||
Other | 14 | % | 13 | % | 14 | % | 14 | % | |||
100 | % | 100 | % | 100 | % | 100 | % |
|
| Three Months Ended |
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| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Consumer-to-Consumer |
|
| 90 | % |
|
| 87 | % |
|
| 88 | % |
|
| 87 | % |
Business Solutions |
|
| 3 | % |
|
| 8 | % |
|
| 6 | % |
|
| 8 | % |
Other |
|
| 7 | % |
|
| 5 | % |
|
| 6 | % |
|
| 5 | % |
|
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
|
| 100 | % |
Consumer-to-Consumer Segment
The following table below sets forth our Consumer-to-Consumer segment results of operations for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016.
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
(dollars and transactions in millions) | 2017 | 2016 | % Change | 2017 | 2016 | % Change | |||||||||||||||
Revenues | $ | 1,107.7 | $ | 1,098.9 | 1 | % | $ | 3,210.0 | $ | 3,212.1 | 0 | % | |||||||||
Operating income | $ | 259.8 | $ | 276.2 | (6 | )% | $ | 757.3 | $ | 759.4 | 0 | % | |||||||||
Operating income margin | 23 | % | 25 | % | 24 | % | 24 | % | |||||||||||||
Key indicator: | |||||||||||||||||||||
Consumer-to-Consumer transactions | 69.2 | 67.8 | 2 | % | 204.4 | 199.2 | 3 | % |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||
(dollars and transactions in millions) |
| 2022 |
|
| 2021 |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| % Change |
| ||||||
Revenues |
| $ | 1,026.9 |
|
| $ | 1,127.1 |
|
|
| (9 | )% |
| $ | 2,025.9 |
|
| $ | 2,178.0 |
|
|
| (7 | )% |
Operating income |
| $ | 225.6 |
|
| $ | 233.8 |
|
|
| (4 | )% |
| $ | 432.8 |
|
| $ | 439.9 |
|
|
| (2 | )% |
Operating income margin |
|
| 22 | % |
|
| 21 | % |
|
|
|
|
| 21 | % |
|
| 20 | % |
|
|
| ||
Key indicator: |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Consumer-to-Consumer transactions |
|
| 68.2 |
|
|
| 78.0 |
|
|
| (13 | )% |
|
| 137.9 |
|
|
| 151.0 |
|
|
| (9 | )% |
Our Consumer-to-Consumer money transfer service as one interconnected global network where afacilitates money transfer can betransfers sent from one location to another, around the world.our retail agent locations worldwide and our Digital Money Transfer services. The segment includes five geographic regions whose functions are primarily related to generating, managing, and maintaining agent relationships and localized marketing activities. We include Digital Money Transfer transactions in our onlineregions, including transactions from our arrangements with financial institutions and other third parties to enable such entities to offer money transfer services initiated through Western Union branded websites ("westernunion.com") in our regions.to their own customers under their brands. By means of common processes and systems, these regions, including westernunion.com,Digital Money Transfer transactions, create anone interconnected global network for consumer transactions, thereby constituting one global Consumer-to-Consumer money transfer business and one operating segment. Due
Transaction volume is the primary generator of revenue in our Consumer-to-Consumer segment. A Consumer-to-Consumer transaction constitutes the transfer of funds to leadership and organizational structure changes within the Company, the regions within this segment were reorganized asa designated recipient utilizing one of January 1, 2017:
42
The table below sets forth revenue and transaction changes by geographic region compared to the corresponding periodssame period in the prior year. Additionally, due to the significance of our Consumer-to-Consumer segment to our overall results, we have also provided constant currency results for our Consumer-to-Consumer segment revenues. Consumer-to-Consumer segment constant currency revenue growth/(decline) is a non-GAAP financial measure, as further discussed in "Revenues overview"Revenues Overview above.
|
| Three Months Ended June 30, 2022 |
| Six Months Ended June 30, 2022 | ||||||||||||
|
| Revenue Growth / (Decline) as |
| Foreign |
| Constant |
| Transaction Growth / (Decline) |
| Revenue Growth / (Decline) as |
| Foreign |
| Constant |
| Transaction Growth / (Decline) |
Consumer-to-Consumer regional growth/(decline): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America (United States & Canada) ("NA") |
| (2)% |
| 0% |
| (2)% |
| (6)% |
| (2)% |
| 0% |
| (2)% |
| (6)% |
Europe and Russia/CIS ("EU & CIS") |
| (21)% |
| (5)% |
| (16)% |
| (30)% |
| (18)% |
| (5)% |
| (13)% |
| (19)% |
Middle East, Africa, and South Asia ("MEASA") |
| (4)% |
| (1)% |
| (3)% |
| (3)% |
| (1)% |
| (1)% |
| 0% |
| 1% |
Latin America and the Caribbean ("LACA") |
| 2% |
| (2)% |
| 4% |
| 4% |
| 2% |
| (3)% |
| 5% |
| 3% |
East Asia and Oceania ("APAC") |
| (10)% |
| (4)% |
| (6)% |
| (11)% |
| (8)% |
| (4)% |
| (4)% |
| (12)% |
Total Consumer-to-Consumer segment: |
| (9)% |
| (3)% |
| (6)% |
| (13)% |
| (7)% |
| (2)% |
| (5)% |
| (9)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Digital Money Transfer(b) |
| (6)% |
| (3)% |
| (3)% |
| (20)% |
| (1)% |
| (2)% |
| 1% |
| (9)% |
westernunion.com(b) |
| (1)% |
| (2)% |
| 1% |
| (3)% |
| 1% |
| (2)% |
| 3% |
| (1)% |
Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2017 | ||||||||||||||||||||||
Revenue Growth/(Decline), as Reported - (GAAP) | Foreign Exchange Translation Impact | Constant Currency Revenue Growth/(Decline) (a) - (Non-GAAP) | Transaction Growth/(Decline) | Revenue Growth/(Decline), as Reported - (GAAP) | Foreign Exchange Translation Impact | Constant Currency Revenue Growth/(Decline) (a) - (Non-GAAP) | Transaction Growth/(Decline) | ||||||||||||||||
Consumer-to-Consumer regional growth/(decline): | |||||||||||||||||||||||
NA | 1 | % | 0 | % | 1 | % | 2 | % | 2 | % | (1 | )% | 3 | % | 4 | % | |||||||
EU & CIS | 2 | % | 1 | % | 1 | % | 7 | % | 0 | % | (2 | )% | 2 | % | 8 | % | |||||||
MEASA | (8 | )% | 0 | % | (8 | )% | (11 | )% | (11 | )% | (1 | )% | (10 | )% | (12 | )% | |||||||
APAC | (1 | )% | (2 | )% | 1 | % | 0 | % | (3 | )% | (2 | )% | (1 | )% | (1 | )% | |||||||
LACA | 19 | % | (3 | )% | 22 | % | 17 | % | 22 | % | (1 | )% | 23 | % | 17 | % | |||||||
Total Consumer-to-Consumer growth/(decline): | 1 | % | 0 | % | 1 | % | 2 | % | 0 | % | (1 | )% | 1 | % | 3 | % | |||||||
westernunion.com (b) | 23 | % | 0 | % | 23 | % | 24 | % | 23 | % | (1 | )% | 24 | % | 26 | % |
The table below sets forth regional revenues as a percentage of our Consumer-to-Consumer revenue for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016.
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Consumer-to-Consumer revenue as a percentage of segment revenue: | |||||||||||
NA | 36 | % | 37 | % | 37 | % | 36 | % | |||
EU & CIS | 31 | % | 31 | % | 31 | % | 31 | % | |||
MEASA | 16 | % | 17 | % | 16 | % | 18 | % | |||
APAC | 8 | % | 8 | % | 8 | % | 8 | % | |||
LACA | 9 | % | 7 | % | 8 | % | 7 | % |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Consumer-to-Consumer revenue as a percentage of segment revenue: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
NA |
|
| 40 | % |
|
| 37 | % |
|
| 39 | % |
|
| 37 | % |
EU & CIS |
|
| 28 | % |
|
| 33 | % |
|
| 29 | % |
|
| 33 | % |
MEASA |
|
| 16 | % |
|
| 15 | % |
|
| 17 | % |
|
| 15 | % |
LACA |
|
| 10 | % |
|
| 9 | % |
|
| 9 | % |
|
| 9 | % |
APAC |
|
| 6 | % |
|
| 6 | % |
|
| 6 | % |
|
| 6 | % |
Digital Money Transfer, which is included in the regional percentages above, represented approximately 10%25% and 24% of our Consumer-to-Consumer revenuerevenues for both the three and nine months ended SeptemberJune 30, 2017. Westernunion.com represented approximately 8% of our Consumer-to-Consumer revenue2022 and 2021, respectively, and 25% and 23% for both the three and ninesix months ended SeptemberJune 30, 2016.
Our consumers transferred $21.0$24.5 billion and $20.3$27.9 billion in Consumer-to-Consumer principal for the three-month periodsthree months ended SeptemberJune 30, 20172022 and 2016, respectively,2021, of which $19.0$23.4 billion and $18.4$26.6 billion respectively, related to cross-border principal for the same corresponding periods described above.above, respectively. Our consumers transferred $60.5$49.3 billion and $59.8$53.6 billion in Consumer-to-Consumer principal for the nine-month periodssix months ended SeptemberJune 30, 20172022 and 2016, respectively,2021, of which $55.0$47.2 billion and $54.2$51.1 billion respectively, related to cross-border principal for the same corresponding periods described above.
43
monitor and better understand the growth in our underlying business relative to competitors, as well as changes in our market share of 2%global remittances.
Revenues
Consumer-to-Consumer money transfer revenue and 3%transactions decreased 9% and 13% respectively, for the three and nine months ended SeptemberJune 30, 2017, respectively. The strengthening2022 compared to the corresponding period in the prior year, and decreased 7% and 9%, respectively, for the six months ended June 30, 2022, compared to the corresponding period in the prior year, including due to the suspension of our operations in Russia and Belarus. Fluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges, negatively impacted revenue by $1.8 million3% and $46.7 million,2% for the three and ninesix months ended SeptemberJune 30, 2017, respectively, relative2022 compared to the corresponding periods in the prior year. Foreign currency hedges negatively impacted
In our Consumer-to-Consumer regions, the decrease in NA revenue by $2.2 million for the three months ended September 30, 2017 and benefited revenues by $11.3 million for the nine months ended September 30, 2017. Constant currency revenue growth and transaction growth was driven primarily by continued growth in westernunion.com. Consumer-to-Consumer money transfer revenue was positively impacted by net price increases of 1% for the nine months ended September 30, 2017.
We have historically implemented andprice reductions or price increases throughout many of our global corridors. We will likely continue to implement price reductionschanges from time to time in response to competition and other factors. Price reductions generally reduce margins and adversely affect financial results in the short term and may also adversely affect financial results in the long term if transaction volumes do not increase sufficiently.
Operating income
Consumer-to-Consumer operating income decreased 6% during4% and 2% for the three and six months ended SeptemberJune 30, 2017 and remained flat during the nine months ended September 30, 2017,2022 compared to the corresponding periods in the prior year. Results foryear, primarily due to the three months ended September 30, 2017 were negatively impacted by an increasedecreases in employee incentive compensation and marketing expenses. Results for the nine months ended September 30, 2017 were negatively impacted by the strengthening of the United States dollar compared to foreign currencies and an increase in employee incentive compensation expenses,revenues, as discussed above, partially offset by a decreasedecreases in agent commissions. Operating marginscommissions and chargebacks and other losses, which generally vary with revenues, and employee-related expenses. For the six months ended June 30, 2022, the decrease to Consumer-to-Consumer operating income was also partially offset by the timing of investments in the segment were also impacted by these factors.
Business Solutions Segment
The following table sets forth our Business Solutions segment results of operations for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016.
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
(dollars in millions) | 2017 | 2016 | % Change | 2017 | 2016 | % Change | |||||||||||||||
Revenues | $ | 99.4 | $ | 97.2 | 2 | % | $ | 289.6 | $ | 297.2 | (3 | )% | |||||||||
Operating income | $ | 9.0 | $ | 3.9 | (a) | $ | 16.6 | $ | 11.5 | 45 | % | ||||||||||
Operating income margin | 9 | % | 4 | % | 6 | % | 4 | % |
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||
(dollars in millions) |
| 2022 |
|
| 2021 |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| % Change |
| ||||||
Revenues |
| $ | 35.7 |
|
| $ | 99.3 |
|
|
| (64 | )% |
| $ | 124.8 |
|
| $ | 195.8 |
|
|
| (36 | )% |
Operating income |
| $ | 8.3 |
|
| $ | 10.9 |
|
|
| (23 | )% |
| $ | 35.8 |
|
| $ | 23.5 |
|
|
| 53 | % |
Operating income margin |
|
| 23 | % |
|
| 11 | % |
|
|
|
|
| 29 | % |
|
| 12 | % |
|
|
|
Revenues
Business Solutions revenue decreased 64% and 36% for the three and ninesix months ended SeptemberJune 30, 2017, Business Solutions revenue increased 2% and decreased 3%2022, respectively, compared to the corresponding periods in the prior year respectively.primarily due to the first closing of the sale of our Business Solutions business, which occurred on March 1, 2022, as described further above. Fluctuations in the exchange raterates between the United States dollar and otherforeign currencies positively impacted revenue by 1% for the three months ended September 30, 2017 and negatively impacted revenue by 2%4% and 3% for the ninethree and six months ended SeptemberJune 30, 2017. Additionally, the termination of a partner contract effective during the fourth quarter of 2016 negatively impacted revenue as2022, respectively, compared to the corresponding periods in the prior period.
For the three and ninesix months ended SeptemberJune 30, 2017,2022, operating income increasedwhen compared to the corresponding periods in the prior year due towas impacted by the first closing of the sale of our Business Solutions business, partially offset by a reduction in depreciation and amortization expenseexpenses, including as a result of classifying our Business Solutions business as held for sale in August 2021. In addition, for the six months ended June 30, 2022 compared to the corresponding period in the prior year, operating income was impacted by decreases in employee-related expenses, including incentive compensation.
Effective January 1, 2022, we stopped allocating corporate costs to our Business Solutions segment, given our agreement to sell this business.
Other
Other primarily consists of our cash-based bill payments businesses in Argentina and operating expense efficiencies, partially offset by increased information technology expenses.
The following table sets forth Other results for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016. Other primarily includes our electronic-based and cash-based bill payment services which facilitate bill payments from consumers to businesses and other organizations.
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| ||||||||||||||||||
(dollars in millions) |
| 2022 |
|
| 2021 |
|
| % Change |
|
| 2022 |
|
| 2021 |
|
| % Change |
| ||||||
Revenues |
| $ | 75.7 |
|
| $ | 63.3 |
|
|
| 19 | % |
| $ | 143.3 |
|
| $ | 125.9 |
|
|
| 14 | % |
Operating income |
| $ | 30.3 |
|
| $ | 10.2 |
|
| (a) |
|
| $ | 51.8 |
|
| $ | 24.3 |
|
| (a) |
| ||
Operating income margin |
|
| 40 | % |
|
| 16 | % |
|
|
|
|
| 36 | % |
|
| 19 | % |
|
|
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
(dollars in millions) | 2017 | 2016 | % Change | 2017 | 2016 | % Change | |||||||||||||||
Revenues | $ | 197.6 | $ | 181.7 | 9 | % | $ | 586.4 | $ | 541.9 | 8 | % | |||||||||
Operating income | $ | 20.7 | $ | 18.2 | 13 | % | $ | 68.2 | $ | 63.4 | 7 | % | |||||||||
Operating income margin | 10 | % | 10 | % | 12 | % | 12 | % |
Revenues
For the three and ninesix months ended SeptemberJune 30, 2017,2022 compared to the corresponding periods in the prior year, Other revenuerevenues increased 9% and 8%, respectively. This was primarily due to transaction growth in our United States electroniccash-based bill payments andservices offered at retail locations in Argentina, cash-based bill payments. Theas well as growth in our business-to-consumer payments, partially offset by the strengthening of the United States dollar against foreign currencies, primarily the Argentine peso, negatively impacted our peso.
Operating Income
Other revenue growth by 4% and 3%operating income increased for the three and ninesix months ended SeptemberJune 30, 2017, respectively.
Capital Resources and Liquidity
Our primary source of liquidity has been cash generated from our operating activities, primarily from net income and fluctuations in working capital. Our working capital is affected by the timing of payments for employee and agent incentives, interest payments on our outstanding borrowings and timing of income tax payments, among other items. Many of our annual employee incentive compensation and agent incentive payments are made in the first quarter following the year they were incurred. The significant majority of our interest payments are due in the second and fourth quarters which resultsquarters. The annual payments resulting from the United States tax reform legislation enacted in a decrease2017 (the “Tax Act”) include amounts related to the United States taxation of certain previously undistributed earnings of foreign subsidiaries. These payments are typically due in the amountsecond quarter of cash provided by operating activities in those quarters and a corresponding increase to the first and third quarters.
45
Our future cash flows could be impacted by a variety of factors, some of which are out of our control, includingcontrol. These factors include, but are not limited to, changes in economic conditions, especially those impacting migrant populations, changes in income tax laws or the status of income tax audits, including the resolution of outstanding tax matters, and the settlement or resolution of legal contingencies.
Substantially all of our cash flows from operating activities have been generated from subsidiaries. Most of these cash flows are generated from our regulated subsidiaries. Our regulated subsidiaries may transfer all excess cash to the parent company for general corporate use, except for assets subject to legal or regulatory restrictions, including: (1)(i) requirements to maintain cash and other qualifying investment balances, free of any liens or other encumbrances, related to the payment of certain of our money transfer and other payment obligations, (2)(ii) other legal or regulatory restrictions, including statutory or formalized minimum net worth requirements, and (3)(iii) restrictions on transferring assets outside of the countries where these assets are located.
We currently believe we have adequate liquidity to meet our business needs, serviceincluding payments under our debt obligations, pay dividends, and repurchase sharesother obligations, through our existing cash balances, our ability to generate cash flows through operations, and our $1.65$1.5 billion revolving credit facility ("Revolving Credit Facility"), which expires in September 2020January 2025 and supports our $1.5 billion commercial paper program. Our commercial paper program enables us to issue unsecured commercial paper notes in an amount not to exceed $1.5 billion outstanding at any time, reduced to the extent of any borrowings outstanding on our Revolving Credit Facility in excess of $150 million.Facility. As of SeptemberJune 30, 2017,2022, we had no outstanding borrowings underon our Revolving Credit Facility orand $260.0 million of outstanding borrowings on the commercial paper program.
To help ensure availability of our worldwide cash where needed, we utilize a variety of planning and financial strategies, including decisions related to the amounts, timing, and manner by which cash is repatriated or otherwise made available from our international subsidiaries. These decisions can influence our overall tax rate and impact our total liquidity. Additionally,We regularly evaluate our overall liquidity may be impacted by existing regulations and changes to these regulations or their interpretations that, if fully enacted or implemented, could require us to register as a swap dealer and post collateral in connection with our derivative financial instruments used to hedge our exposures arising in connection with changes to foreign currency exchange rates.
Cash and Investment Securities
As of June 30, 2022 and December 31, 2021, we had Cash and cash equivalents of $1,278.9 million and $1,246.0 million, which includes $77.0 million and $37.7 million related to Business Solutions, respectively. As described in Part I, Item 1, Financial Statements, Note 4, Divestitures and Investment Activities, we collected the entirety of the cash consideration related to the sale of our Business Solutions business, subject to regulatory approval and other closing conditions. We invested a portion of these proceeds temporarily in reverse repurchase agreements, as discussed in Part 1, Item 1, Financial Statements, Note 5, Fair Value Measurements. We believe that the longer-term use of the Business Solutions proceeds will be consistent with our objective to maintain strong liquidity and a capital structure consistent with investment-grade credit ratings, as further described below.
In many cases, we receive funds from money transfers and certain other payment services before we settle the payment of those transactions. These funds, referred to as "Settlement assets"Settlement assets on our Condensed Consolidated Balance Sheets, are not used to support our operations. However, we earn income from investing these funds. We maintain a portion of these settlement assets in highly liquid investments, classified as "CashCash and cash equivalents"equivalents within "SettlementSettlement assets," to fund settlement obligations.
Investment securities, classified within "SettlementSettlement assets" on the Condensed Consolidated Balance Sheets, were
Investment securities are exposed to market risk due to changes in interest rates and credit risk. We regularly monitor credit risk and attempt to mitigate our exposure by investing in highly-rated securities and diversifying our investment
46
portfolio. Our investment securities are also actively managed with respect to concentration. As of SeptemberJune 30, 2017,2022, all investments with a single issuer and each individual security wererepresented less than 10% of our investment securities portfolio.
Cash Flows from Operating Activities
Cash provided by operating activities decreased to $423.1$306.8 million during the ninesix months ended SeptemberJune 30, 2017,2022, from $821.9$349.5 million in the comparablecorresponding period in the prior year. Cash provided by operating activities for the nine months ended September 30, 2017 was negatively impacted by cash payments of $591 million due under the Joint Settlement Agreements, in addition to payments related to our business transformation initiative, as discussed in Part I, Item 1,
Financing Resources
On December 18, 2018, we entered into an amended and restated term loan facility providing for up to $950.0 million in borrowings and extending the year ending December 31, 2017,final maturity of the facility to January 2024 (the "Term Loan Facility"). In the first quarter of 2021, we expect thatrepaid $650.0 million of the Term Loan Facility. On January 4, 2022, we repaid all remaining borrowings owed under the Term Loan Facility for total consideration of $300.0 million, using proceeds from our commercial paper and cash, provided by operating activities will continueincluding cash generated from operations. We are no longer able to be negatively impacted by payments related to our business transformation initiative.
On March 15, 2017,9, 2021, we issued $400.0$600.0 million and $300.0 million of aggregate principal amount of 1.350% and 2.750% unsecured notes due March 15, 2022. We used the net proceeds from the sale of the notes for general corporate purposes, including to fund a portion of the payments due under the Joint Settlement Agreements. On August 22, 2017, we issued an additional $100.0 million of aggregate principal amount of unsecured notes due2026 (“2026 Notes”) and March 15, 2022, for an aggregate principal total of $500.0 million unsecured notes ("2022 Notes"2031 (“2031 Notes”). The notes issued on August 22, 2017 are part of the same series and, accordingly, have the same terms and conditions as the notes issued on March 15, 2017; however, the notes issued on August 22, 2017 were issued at a premium of 101.783% and we received $1.57 million of accrued interest upon issuance. We expect to use the net proceeds from the August 22, 2017 sale of the notes, excluding the accrued interest received, for general corporate purposes, including to repay a portion of the 2017 notes that will mature in December 2017., respectively. Interest with respect to the 2022 Notesthese notes is payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2017, based on the per annum rate of 3.600%. The interest rate payable on the 2022 Notes will be increased if the debt rating assigned to the note is downgraded by an applicable credit rating agency, beginning at a downgrade below investment grade. However, in no event will the interest rate on the 2022 Notes exceed 5.60% per annum. The interest rate payable on the 2022 Notes may also be adjusted downward for debt rating upgrades subsequent to any debt rating downgrades but may not be adjusted below 3.600% per annum. The 2022 Notes are subject to covenants that, among other things, limit or restrict our ability to sell or transfer assets or merge or consolidate with another company, and limit or restrict our ability and certain of our subsidiaries' ability to incur certain types of security interests, or enter into sale and leaseback transactions.2021. If a change of control triggering event occurs, holders of the 20222026 Notes and 2031 Notes may require us to repurchase some or all of their notes at a price equal to 101% of the principal amount of their notes, plus any accrued and unpaid interest. We may redeem the 20222026 Notes and the 2031 Notes, in whole or in part, at any time prior to February 15, 20222026 and December 15, 2030, respectively, at the greater of par or a price based on the applicable treasury rate plus 15 and 25 basis points.points, respectively. We may redeem the 20222026 Notes and the 2031 Notes at any time after February 15, 20222026 and December 15, 2030, respectively, at a price equal to par, plus accrued interest.
Proceeds from the 2026 Notes and 2031 Notes and cash, including cash generated from operations, were used to repay $650.0 million of the term loan facility in the first quarter of 2021 and $500.0 million of the aggregate principal amount of 3.600% unsecured floating rate notes due May 22, 2019 (“Floating Rate Notes”). We expectin March 2022 in the second quarter of 2021.
As of June 30, 2022, we have outstanding borrowings at par value of $2,710.0 million. The substantial majority of these outstanding borrowings consist of unsecured fixed-rate notes with maturities ranging from 2023 to use the net proceeds from the sale of the Floating Rate Notes for general corporate purposes, including to repay a portion of the 2017 notes that will mature in December 2017. Interest with respect to the Floating Rate Notes is payable quarterly on each February 22, May 22, August 22 and November 22, beginning November 22, 2017, at a per annum interest rate equal to the three-month LIBOR plus 80 basis points (reset quarterly). The Floating Rate Notes are subject to covenants that, among other things, limit or restrict our ability to sell or transfer assets or merge or consolidate with another company, and limit or restrict our ability and certain of our subsidiaries' ability to incur certain types of security interests, or enter into sale and leaseback transactions. If a change of control triggering event occurs, holders of the Floating Rate Notes may require us to repurchase some or all of their notes at a price equal to 101% of the principal amount of their notes, plus any accrued and unpaid interest. We may not redeem the Floating Rate Notes prior to maturity.
Our Revolving Credit Facility expires in September 2020 and provides for unsecured financing facilities in an aggregate amount of $1.65$1.5 billion, including a $250$250.0 million letter of credit sub-facility. Interest due under the Revolving Credit Facility is fixed for the term of each borrowing and is payable according to the terms of that borrowing. Generally, interest is calculated using a selected LIBOR rate plus an interest rate margin of 110 basis points. A facility fee is also payable quarterly at an annual rate of 15 basis points is also payable quarterly on the total facility, regardless of usage. Both the interest rate margin and facility fee percentage are based on certain of our credit ratings.
The purpose of our Revolving Credit Facility, which is diversified through a group of 1819 participating institutions, is to provide general liquidity and to support our commercial paper program, which we believe enhances our short-term credit rating. The largest commitment from any single financial institution within the total committed balance of $1.65$1.5 billion is approximately 11%. As of the three and nine months ended SeptemberJune 30, 2017,2022, we had no outstanding borrowings under our Revolving Credit Facility. If the amount available to borrow under the Revolving Credit Facility decreased, or if the Revolving Credit Facility were eliminated, the cost and availability of borrowing under the commercial paper program may be impacted.
Pursuant to our commercial paper program, we may issue unsecured commercial paper notes in an amount not to exceed $1.5 billion outstanding at any time, reduced to the extent of borrowings outstanding on our Revolving Credit Facility in excess
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Table of $150 million.Contents
Facility. Our commercial paper borrowings may have maturities of up to 397 days from date of issuance. Interest rates for borrowings are based on market rates at the time of issuance. We had no$260.0 million of commercial paper borrowings outstanding as of June 30, 2022. Our commercial paper borrowings as of SeptemberJune 30, 2017.2022 had a weighted-average annual interest rate of approximately 1.9% and a weighted-average term of approximately 1 day. During the three and ninesix months ended SeptemberJune 30, 2017,2022, the average commercial paper balance outstanding was $39.4$221.7 million, and $90.9 million, respectively, and the maximum balance outstanding was $445.0 million and $610.0 million, respectively.$725.0 million. Proceeds from our commercial paper borrowings were used for general corporate purposes and working capital needs.
Cash Priorities
Liquidity
Our objective is to maintain strong liquidity and a capital structure consistent with investment-grade credit ratings. We have existing cash balances, cash flows from operating activities, access to the commercial paper markets, and our Revolving Credit Facility available to support the needs of our business.
Our ability to grow the business, make investments in our business, make acquisitions, return capital to shareholders, including through dividends and share repurchases, and service our debt and tax obligations will depend on our ability to continue to generate excess operating cash through our operating subsidiaries and to continue to receive dividends from those operating subsidiaries, our ability to obtain adequate financing and our ability to identify acquisitions that align with our long-term strategy.
Capital Expenditures
The total aggregate amount paid for contract costs, purchases of property and equipment, and purchased and developed software was $84.3 million and $145.3 million for the six months ended June 30, 2022 and 2021, respectively. Amounts paid for new and renewed agent contracts vary depending on the terms of existing contracts as well as the timing of new and renewed contract signings. Other capital expenditures during these periods included investments in our information technology infrastructure.
Share Repurchases and Dividends
During the six months ended June 30, 2022 and 2021, 9.2 million and 6.1 million shares were repurchased for $171.0 million and $150.0 million, respectively, excluding commissions, at an average cost of $18.52 and $24.42, respectively, under the share repurchase authorizations approved by our Board of Directors, including one which expired on December 31, 2021. On February 10, 2022, our Board of Directors authorized $1.0 billion of common stock repurchases through December 31, 2024. As of June 30, 2022, $829.0 million remained available under this share repurchase program.
Our Board of Directors declared a quarterly cash dividend of $0.235 per common share in the first and second quarters of 2022, representing $182.5 million in total dividends. On July 19, 2022, our Board of Directors declared a quarterly cash dividend of $0.235 per common share, payable on September 30, 2022.
Material Cash Requirements
Debt Service Requirements
Our 2022 and future debt service requirements will include payments on all outstanding indebtedness, including any borrowings under our commercial paper program. Our next scheduled principal payment on our outstanding notes is in 2023.
2017 United States Federal Tax Liability
The Tax Act imposed a tax on certain of our previously undistributed foreign earnings. This tax charge, combined with our other 2017 United States taxable income and tax attributes, resulted in a 2017 United States federal tax liability
48
of approximately $800 million, of which approximately $478 million remained as of June 30, 2022. We have elected to pay this liability in periodic installments through 2025 and paid $63.7 million during the second quarter of 2022. Under the terms of the law, we are required to pay the remaining installment payments as summarized in the Capital Resources and Liquidity discussion located in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10‑K for the year ended December 31, 2021. These payments have affected and will continue to adversely affect our cash flows and liquidity and may adversely affect future share repurchases.
Operating Leases
We lease real properties for use as administrative and sales offices, in addition to transportation, office, and other equipment. Refer to Part II, Item 8, Financial Statements and Supplementary Data, Note 13, Leases, in our Annual Report on Form 10-K for the year ended December 31, 2021 for details on our leasing arrangements, weincluding future maturities of our operating lease liabilities.
We have no material off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Other Commercial Commitments
We had approximately
As of SeptemberJune 30, 2017,2022, our total amount of unrecognized income tax benefits was $354.1$371.8 million, including associated interest and penalties. The timing of any related cash payments for substantially all of these liabilities is inherently uncertain because the ultimate amount and timing of such liabilities are affected by factors which are variable and outside our control.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts and disclosures in the financial statements and accompanying notes. Actual results could differ from those estimates. Our Critical Accounting Policies and Estimates disclosed in "Management'sPart II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K10‑K for the year ended December 31, 2016,2021, for which there were no material changes, included:
Risk Management
We are exposed to market risks arising from changes in market rates and prices, including changes in foreign currency exchange rates and interest rates and credit risk related to our agents and customers. A risk management program is in place to manage these risks.
We provide our services primarily through a network of agent locations in more than
200 countries and territories. We manage foreign exchange risk through the structure of the business and an active risk management process. We currently settle with theWe use longer-term foreign currency forward contracts to help mitigate risks associated with changes in foreign currency exchange rates on revenues denominated primarily in the euro, and, to a lesser degree, the British pound, Canadian dollar, Australian dollar, Swiss franc,the British pound, and other currencies. We use contracts with maturities of up to 36 months at inception to mitigate some of the impact that changes in foreign currency exchange rates could have on forecasted revenues, with a targeted weighted-average maturity of approximately one year. We believe the use of longer-term foreign currency forward contracts provides predictability of future cash flows from our international operations.
We have additional foreign exchange risk and associated foreign exchange risk management requirements due to the nature of our Business Solutions business. The majorityOur Business Solutions business writes derivatives as part of this business' revenue isthe broader portfolio of foreign currency positions arising from our cross-currency payments operations, which primarily include spot exchanges of currency at spot rates, which enable customersin addition to make cross-currency payments. Inforwards and options in certain countries, this business also writes foreign currency forward and option contracts for our customers to facilitate future payments.countries. The durationmajority of these derivative contracts have a duration at inception is generallyof less than one year. Business Solutions aggregates its foreign exchange exposures arising from customer contracts, including the derivative contracts described above, and hedges the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties.
As of December 31, 2016,June 30, 2022, a hypothetical uniform 10% strengthening or weakening in the value of the United States dollar relative to all other currencies in which our net income is generated would have resulted in a decrease/increase to pre-tax annual income of approximately $25
Interest Rates
We invest in several types of interest-bearing assets, with a total value as of SeptemberJune 30, 20172022 of $
50
The remainder of our interest-bearing assets primarily consists of highly-rated state and municipal debt securities, which are fixed ratefixed-rate term notes. These investments may include investments made from cash received from our money order services, money transfer business, and other related payment services awaiting redemption and are classified within "Settlement assets"Settlement assets in the Condensed Consolidated Balance Sheets. As interest rates rise, the fair value of these fixed-rate interest-bearing securities will decrease; conversely, a decrease to interest rates would result in an increase to the fair values of the securities. We have classified these investments as available-for-sale within "Settlement assets"Settlement assets in the Condensed Consolidated Balance Sheets, and accordingly, recorded these instruments at their fair value with the net unrealized gains and losses, net of the applicable deferred income tax effect, being added to or deducted from our "Total stockholders' equity" onTotal stockholders’ equity in our Condensed Consolidated Balance Sheets.
Borrowings under our commercial paper program mature in such a short period that the financing is also effectively floating rate.
We review our overall exposure to floating and fixed rates by evaluating our net asset or liability position in each, also consideringand the duration of theeach individual positions.position. We manage this mix of fixed versus floating exposure in an attempt to minimize risk, reduce costs, and improve returns. Our exposure to interest rates can be modified by changing the mix of our interest-bearing assets as well as adjusting the mix of fixed versus floating rate debt. The latter is accomplished primarily through the use of interest rate swaps and the decision regarding terms of any new debt issuances (i.e., fixed versus floating). WeFrom time to time, we use interest rate swaps designated as hedges to increasevary the percentage of fixed to floating rate debt, subject to market conditions. As of SeptemberJune 30, 2017,2022, our weighted-average effective rate on total borrowings was approximately
At June 30, 2022, a hypothetical 100 basis point increase/decrease in interest rates would result in a decrease/increase to pre-tax income for the next twelve months of approximately $18$3 million based on borrowings net of the impact of hedges, on September 30, 2017 that are sensitive to interest rate fluctuations.fluctuations, net of the impact of hedges. The same 100 basis point increase/decrease in interest rates, if applied to our cash and investment balances on SeptemberJune 30, 20172022 that are sensitive tobear interest rate fluctuations,at floating rates, would result in an offsetting increase/decrease to pre-tax income for the next twelve months of approximately $18$19 million. There are inherent limitations in the sensitivity analysis presented, primarily due to the assumptionassumptions that interest rate changes would be instantaneous.instantaneous and consistent across all geographies in which our interest-bearing assets are held and our liabilities are payable. As a result, the analysis is unable to reflect the potential effects of more complex market changes, including changes in credit risk regarding our investments, which may positively or negatively affect income. In addition, the mix of fixed versus floating rate debt and investments and the level of assets and liabilities will change over time, including the impact from commercial paper borrowings that may be outstanding in future periods. We will also be further impacted by changes to future interest rates as we refinance our debt or by reinvesting proceeds from the sale or maturity of our investments.
Credit Risk
To manage our exposures to credit risk with respect to investment securities, money market fund investments, derivatives, and other credit risk exposures resulting from our relationships with banks and financial institutions, we regularly review investment concentrations, trading levels, credit spreads, and credit ratings, and we attempt to diversify our investments among global financial institutions.
We are also exposed to credit risk related to receivable balances from agents in the money transfer, walk-in bill payment, and money order settlement process. We perform a credit review before each agent signing and conduct periodic analyses of agents and certain other parties we transact with directly. In addition, we are exposed to credit risklosses directly from consumer transactions, particularly through our electronicdigital channels, where transactions are originated through means other than cash and are therefore are subject to "chargebacks," insufficient funds or other collection impediments, such as fraud, which are anticipated to increase as electronicdigital channels become a greater proportion of our money transfer business.
51
We are exposed to credit risk in our Business Solutions business relating to: (a)(i) derivatives written by us, primarily to our customers, and (b)(ii) the extension of trade credit when transactions are paid to recipients prior to our receiving cleared funds from the sending customers. For the derivatives, the duration of these contracts at inception is generally less than one year. The credit risk associated with our derivative contracts increases when foreign currency exchange rates move against our customers, possibly impacting their ability to honor their obligations to deliver currency to us or to maintain appropriate collateral with us. For those receivables where we have offeredextended trade credit, collection ordinarily occurs within a few days. To mitigate the risk associated with potential customer defaults, we perform credit reviews of the customer on an ongoing basis, and, for our derivatives, we may require certain customers to post or increase collateral.
Our losses associated with bad debts have been approximately 1%less than 2% of our consolidated revenues in all periods presented.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The information under the caption "Risk Management"Risk Management in "Management'sPart I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Item 2 of Part IOperations of this report is incorporated herein by reference.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of the Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of our controls and procedures related to our reporting and disclosure obligations (as defined by Rules 13a-15(e) and 15d-15(e) within the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of SeptemberJune 30, 2017,2022, which is the end of the period covered by this Quarterly Report on Form 10-Q.10‑Q. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that, as of SeptemberJune 30, 2017,2022, the disclosure controls and procedures were effective to ensure that information required to be disclosed by us, including our consolidated subsidiaries, in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported, as applicable, within the time periods specified in the rules and forms of the Securities and Exchange Commission, and are designed to ensure that information required to be disclosed by us in the reports that we file or submit is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q10‑Q that have materially affected, or are reasonably likely to materially affect, our internal controlscontrol over financial reporting.
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Review Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of The Western Union Company
Results of Review of Interim Financial Statements
We have reviewed the condensed consolidated balance sheet of The Western Union Company (the Company) as of SeptemberJune 30, 2017,2022, the related condensed consolidated statements of income, and comprehensive income, and stockholders’ equity for the three-monththree and nine-month periodssix months ended SeptemberJune 30, 20172022 and 2016, and2021, the related condensed consolidated statements of cash flows for the nine-month periodssix months ended SeptemberJune 30, 20172022 and 2016. These2021, and the related notes (collectively referred to as the “condensed consolidated interim financial statements”). Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements are the responsibility of the Company's management.
We conducted our reviewhave previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States). (PCAOB), the consolidated balance sheet of the Company as of December 31, 2021, the related consolidated statements of income, comprehensive income, cash flows, and stockholders’ equity for the year then ended, and the related notes and schedule (not presented herein); and in our report dated February 24, 2022, we expressed an unqualified audit opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
These financial statements are the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the SEC and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial informationstatements consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States),PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ Ernst & Young LLP | |
Denver, Colorado | |
August 3, 2022 |
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The complaint asserts claims for breach of fiduciary duty and gross mismanagement against all of the individual defendants and unjust enrichment against the President and Chief Executive Officer and the former executive officer based on allegations that between February 12, 2012 to October 30, 2012, the individual defendants made or caused the Company to issue false and misleading statements or failed to make adequate disclosures regarding the effects of a settlement agreement signed on February 11, 2010 between Western Union Financial Services, Inc. (“WUFSI”) and the State of Arizona regarding WUFSI's AML compliance programs along the United States and Mexico border ("Southwest Border Agreement"), including regarding the anticipated costs of compliance with the Southwest Border Agreement, potential effects on business operations, and Company projections. Plaintiff also alleges that the individual defendants caused or allowed the Company to lack requisite internal controls, caused or allowed financial statements to be misstated, and caused the Company to be subjectinformation required by this Item 1 is incorporated herein by reference to the costs, expenses and liabilities associated with
Item 1A. Risk Factors
There have been no material changes to the risk factors described in our Annual Report on Form 10-K10‑K for the year ended December 31, 2016, except as described below.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table sets forth stock repurchases for each of the three months of the quarter ended SeptemberJune 30, 2017:
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| Approximate Dollar |
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| Total Number of Shares |
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| Value of Shares that |
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| Purchased as Part of |
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| May Yet Be Purchased |
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| Total Number of |
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| Average Price |
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| Publicly Announced |
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| Under the Plans or |
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Period |
| Shares Purchased (a) |
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| Paid per Share |
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| Plans or Programs (b) |
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| Programs (in millions) |
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April 1 - 30 |
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| 1,108,250 |
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| $ | 18.95 |
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| 1,106,407 |
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| $ | 829.0 |
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May 1 - 31 |
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| 2,301 |
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| $ | 16.96 |
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| — |
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| $ | 829.0 |
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June 1 - 30 |
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| 2,676 |
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| $ | 17.14 |
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| — |
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| $ | 829.0 |
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Total |
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| 1,113,227 |
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| 1,106,407 |
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Period | Total Number of Shares Purchased* | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs** | Remaining Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (In millions) | ||||||||||
July 1 - 31 | 446,297 | $ | 19.08 | 415,717 | $ | 1,047.6 | ||||||||
August 1 - 31 | 3,006,884 | $ | 19.10 | 3,002,614 | $ | 990.3 | ||||||||
September 1 - 30 | 1,863,221 | $ | 18.85 | 1,841,841 | $ | 955.5 | ||||||||
Total | 5,316,402 | $ | 19.01 | 5,260,172 |
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
See "Exhibit Index"Exhibit Index for documents filed or furnished herewith and incorporated herein by reference.
EXHIBIT INDEX
Exhibit | Description | |
15 | Letter from Ernst & Young LLP Regarding Unaudited Interim Financial Information | |
31.1 | ||
31.2 | ||
32 | ||
101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
The Western Union Company (Registrant) | |||
Date: August 3, 2022 | By: | /s/ | |
Devin B. McGranahan | |||
President and Chief Executive Officer (Principal Executive Officer) | |||
Date: August 3, 2022 | By: | /s/ | |
Raj Agrawal | |||
Chief Financial Officer | |||
Date: August 3, 2022 | By: | /s/ | |
Mark Hinsey | |||
Chief Accounting Officer and Controller (Principal Accounting Officer) |
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