WESTERN UNION CO, 10-Q filed on 10/29/2020
Quarterly Report
v3.20.2
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2020
Oct. 26, 2020
Document and Entity Information    
Document Type 10-Q  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Sep. 30, 2020  
Entity File Number 001-32903  
Entity Registrant Name Western Union CO  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 20-4531180  
Entity Address, Address Line One 7001 EAST BELLEVIEW AVENUE  
Entity Address, City or Town Denver  
Entity Address, State or Province CO  
Entity Address, Postal Zip Code 80237  
City Area Code 866  
Local Phone Number 405-5012  
Title of 12(b) Security Common Stock, $0.01 Par Value  
Trading Symbol WU  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   411,120,751
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q3  
Entity Central Index Key 0001365135  
Amendment Flag false  
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - USD ($)
shares in Millions, $ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
CONDENSED CONSOLIDATED STATEMENTS OF INCOME        
Revenues $ 1,258.5 $ 1,306.9 $ 3,563.2 $ 3,984.4
Type of Revenue us-gaap:ServiceMember us-gaap:ServiceMember us-gaap:ServiceMember us-gaap:ServiceMember
Expenses:        
Cost of services $ 721.7 $ 768.6 $ 2,067.3 $ 2,330.0
Type of Cost of Service us-gaap:ServiceMember us-gaap:ServiceMember us-gaap:ServiceMember us-gaap:ServiceMember
Selling, general, and administrative $ 251.6 $ 340.9 $ 755.7 $ 946.9
Total expenses 973.3 1,109.5 2,823.0 3,276.9
Operating income 285.2 197.4 740.2 707.5
Other income/(expense):        
Gain on divestitures of businesses (Note 4)       524.6
Interest income 0.5 1.1 2.9 4.2
Interest expense (28.2) (36.2) (90.4) (114.5)
Other income/(expense), net 3.5 (0.1) 3.4 2.1
Total other income/(expense), net (24.2) (35.2) (84.1) 416.4
Income before income taxes 261.0 162.2 656.1 1,123.9
Provision for income taxes 32.4 27.2 88.9 201.0
Net income $ 228.6 $ 135.0 $ 567.2 $ 922.9
Earnings per share:        
Basic (USD per share) $ 0.56 $ 0.32 $ 1.38 $ 2.14
Diluted (USD per share) $ 0.55 $ 0.32 $ 1.37 $ 2.13
Weighted-average shares outstanding:        
Basic (shares) 411.6 423.3 412.5 430.3
Diluted (shares) 414.6 426.8 415.5 433.0
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Sep. 30, 2020
Sep. 30, 2019
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME        
Net income $ 228.6 $ 135.0 $ 567.2 $ 922.9
Other comprehensive income, net of reclassifications and tax (Note 11):        
Unrealized gains on investment securities 7.1 5.8 32.3 28.7
Unrealized gains/(losses) on hedging activities (18.2) 14.5 (16.6) 12.5
Defined benefit pension plan adjustments 2.3 2.3 6.7 6.7
Total other comprehensive income/(loss) (8.8) 22.6 22.4 47.9
Comprehensive income $ 219.8 $ 157.6 $ 589.6 $ 970.8
v3.20.2
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Millions
Sep. 30, 2020
Dec. 31, 2019
Assets    
Cash and cash equivalents $ 1,251.4 $ 1,450.5
Settlement assets 3,589.4 3,296.7
Property and equipment, net of accumulated depreciation of $656.9 and $616.5, respectively 156.0 186.9
Goodwill 2,566.6 2,566.6
Other intangible assets, net of accumulated amortization of $1,025.9 and $961.5, respectively 449.3 494.9
Other assets 814.5 762.9
Total assets 8,827.2 8,758.5
Liabilities:    
Accounts payable and accrued liabilities 457.2 601.9
Settlement obligations 3,589.4 3,296.7
Income taxes payable 926.5 1,019.7
Deferred tax liability, net 171.7 152.1
Borrowings 3,036.5 3,229.3
Other liabilities 578.8 498.3
Total liabilities 8,760.1 8,798.0
Commitments and contingencies (Note 8)
Stockholders' equity/(deficit):    
Preferred stock, $1.00 par value; 10 shares authorized; no shares issued
Common stock, $0.01 par value; 2,000 shares authorized; 411.0 shares and 418.0 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively 4.1 4.2
Capital surplus 874.9 841.2
Accumulated deficit (625.3) (675.9)
Accumulated other comprehensive loss (186.6) (209.0)
Total stockholders' equity/(deficit) 67.1 (39.5)
Total liabilities and stockholders' equity/(deficit) $ 8,827.2 $ 8,758.5
v3.20.2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - USD ($)
shares in Millions, $ in Millions
Sep. 30, 2020
Dec. 31, 2019
Assets    
Accumulated Depreciation on Property Plant and Equipment $ 656.9 $ 616.5
Accumulated Amortization on Other Intangible Assets $ 1,025.9 $ 961.5
Stockholders' Equity:    
Preferred stock, par value (USD per share) $ 1.00 $ 1.00
Preferred stock, shares authorized 10.0 10.0
Preferred stock, shares issued 0.0 0.0
Common stock, par value (USD per share) $ 0.01 $ 0.01
Common stock, shares authorized 2,000.0 2,000.0
Common stock, shares issued 411.0 418.0
Common stock, shares outstanding 411.0 418.0
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Millions
9 Months Ended
Sep. 30, 2020
Sep. 30, 2019
Cash flows from operating activities    
Net income $ 567.2 $ 922.9
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation 46.3 56.5
Amortization 123.2 134.2
Gain on divestitures of businesses, excluding transaction costs (Note 4)   (532.1)
Other non-cash items, net 106.4 63.5
Increase/(decrease) in cash, excluding the effects of divestitures, resulting from changes in:    
Other assets (11.5) 19.7
Accounts payable and accrued liabilities (142.7) 67.9
Income taxes payable (97.6) (46.3)
Other liabilities (5.7) (21.0)
Net cash provided by operating activities 585.6 665.3
Cash flows from investing activities    
Payments for capitalized contract costs (51.7) (27.2)
Payments for internal use software (30.1) (27.4)
Purchases of property and equipment (24.5) (38.9)
Proceeds from the sale of former corporate headquarters (Note 4) 44.2  
Proceeds from divestitures of businesses, net of cash divested (Note 4)   711.7
Purchases of non-settlement related investments (4.4) (7.2)
Proceeds from maturity of non-settlement related investments 0.4 19.8
Purchases of held-to-maturity non-settlement related investments   (1.3)
Proceeds from held-to-maturity non-settlement related investments   27.5
Other investing activities (2.6)  
Net cash (used in)/provided by investing activities (68.7) 657.0
Cash flows from financing activities    
Cash dividends and dividend equivalents paid (277.8) (257.1)
Common stock repurchased (Note 11) (238.0) (483.8)
Net (repayments of)/proceeds from commercial paper (195.0) 310.0
Principal payments on borrowings   (500.0)
Proceeds from exercise of options 1.7 28.0
Other financing activities (0.7) (0.9)
Net cash used in financing activities (709.8) (903.8)
Net change in cash, cash equivalents, and restricted cash (192.9) 418.5
Cash, cash equivalents, and restricted cash at beginning of period 1,456.8 979.7
Cash, cash equivalents, and restricted cash at end of period 1,263.9 1,398.2
Supplemental cash flow information:    
Interest paid 75.7 101.4
Income taxes paid 169.1 256.5
Cash paid for lease liabilities 38.5 36.4
Non-cash lease liabilities arising from obtaining right-of-use assets 28.2 269.1
Restricted cash at end of year (included in Other assets) $ 12.5 $ 7.3
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY/(DEFICIT) - USD ($)
shares in Millions, $ in Millions
Adoption of new accounting pronouncements
Accumulated Deficit
Adoption of new accounting pronouncements
Common Stock
Capital Surplus
Accumulated Deficit
Accumulated Other Comprehensive Loss
Total
Beginning balance at Dec. 31, 2018     $ 4.4 $ 755.6 $ (838.8) $ (231.0) $ (309.8)
Beginning balance (shares) at Dec. 31, 2018     441.2        
Increase/(Decrease) in Stockholders' Equity [Roll Forward]              
Net income         173.1   173.1
Stock-based compensation       13.7     13.7
Common stock dividends and dividend equivalents declared         (87.4)   (87.4)
Repurchase and retirement of common shares     $ (0.1)   (184.9)   (185.0)
Repurchase and retirement of common shares (shares)     (10.2)        
Shares issued under stock-based compensation plans       1.8     1.8
Shares issued under stock-based compensation plans (shares)     1.9        
Other comprehensive income (Note 11)           19.4 19.4
Ending balance at Mar. 31, 2019     $ 4.3 771.1 (938.0) (211.6) (374.2)
Ending balance (shares) at Mar. 31, 2019     432.9        
Beginning balance at Dec. 31, 2018     $ 4.4 755.6 (838.8) (231.0) (309.8)
Beginning balance (shares) at Dec. 31, 2018     441.2        
Increase/(Decrease) in Stockholders' Equity [Roll Forward]              
Net income             922.9
Other comprehensive income (Note 11)             47.9
Ending balance at Sep. 30, 2019     $ 4.2 818.6 (659.4) (183.1) (19.7)
Ending balance (shares) at Sep. 30, 2019     419.9        
Beginning balance at Mar. 31, 2019     $ 4.3 771.1 (938.0) (211.6) (374.2)
Beginning balance (shares) at Mar. 31, 2019     432.9        
Increase/(Decrease) in Stockholders' Equity [Roll Forward]              
Net income         614.8   614.8
Stock-based compensation       11.6     11.6
Common stock dividends and dividend equivalents declared         (85.5)   (85.5)
Repurchase and retirement of common shares         (161.0)   (161.0)
Repurchase and retirement of common shares (shares)     (8.3)        
Shares issued under stock-based compensation plans       18.6     18.6
Shares issued under stock-based compensation plans (shares)     1.3        
Other comprehensive income (Note 11)           5.9 5.9
Ending balance at Jun. 30, 2019     $ 4.3 801.3 (569.7) (205.7) 30.2
Ending balance (shares) at Jun. 30, 2019     425.9        
Increase/(Decrease) in Stockholders' Equity [Roll Forward]              
Net income         135.0   135.0
Stock-based compensation       9.7     9.7
Common stock dividends and dividend equivalents declared         (84.2)   (84.2)
Repurchase and retirement of common shares     $ (0.1)   (140.5)   (140.6)
Repurchase and retirement of common shares (shares)     (6.5)        
Shares issued under stock-based compensation plans       7.6     7.6
Shares issued under stock-based compensation plans (shares)     0.5        
Other comprehensive income (Note 11)           22.6 22.6
Ending balance at Sep. 30, 2019     $ 4.2 818.6 (659.4) (183.1) (19.7)
Ending balance (shares) at Sep. 30, 2019     419.9        
Beginning balance at Dec. 31, 2019 $ (0.6) $ (0.6) $ 4.2 841.2 (675.9) (209.0) $ (39.5)
Beginning balance (shares) at Dec. 31, 2019     418.0       418.0
Increase/(Decrease) in Stockholders' Equity [Roll Forward]              
Net income         176.7   $ 176.7
Stock-based compensation       12.5     12.5
Common stock dividends and dividend equivalents declared         (93.3)   (93.3)
Repurchase and retirement of common shares     $ (0.1)   (235.1)   (235.2)
Repurchase and retirement of common shares (shares)     (9.2)        
Shares issued under stock-based compensation plans       1.0     1.0
Shares issued under stock-based compensation plans (shares)     2.1        
Other comprehensive income (Note 11)           28.7 28.7
Ending balance at Mar. 31, 2020     $ 4.1 854.7 (828.2) (180.3) (149.7)
Ending balance (shares) at Mar. 31, 2020     410.9        
Beginning balance at Dec. 31, 2019 $ (0.6) $ (0.6) $ 4.2 841.2 (675.9) (209.0) $ (39.5)
Beginning balance (shares) at Dec. 31, 2019     418.0       418.0
Increase/(Decrease) in Stockholders' Equity [Roll Forward]              
Net income             $ 567.2
Other comprehensive income (Note 11)             22.4
Ending balance at Sep. 30, 2020     $ 4.1 874.9 (625.3) (186.6) $ 67.1
Ending balance (shares) at Sep. 30, 2020     411.0       411.0
Beginning balance at Mar. 31, 2020     $ 4.1 854.7 (828.2) (180.3) $ (149.7)
Beginning balance (shares) at Mar. 31, 2020     410.9        
Increase/(Decrease) in Stockholders' Equity [Roll Forward]              
Net income         161.9   161.9
Stock-based compensation       5.3     5.3
Common stock dividends and dividend equivalents declared         (93.3)   (93.3)
Repurchase and retirement of common shares         (0.6)   (0.6)
Repurchase and retirement of common shares (shares)     (0.1)        
Shares issued under stock-based compensation plans       0.5     0.5
Shares issued under stock-based compensation plans (shares)     0.2        
Other comprehensive income (Note 11)           2.5 2.5
Ending balance at Jun. 30, 2020     $ 4.1 860.5 (760.2) (177.8) (73.4)
Ending balance (shares) at Jun. 30, 2020     411.0        
Increase/(Decrease) in Stockholders' Equity [Roll Forward]              
Net income         228.6   228.6
Stock-based compensation       14.2     14.2
Common stock dividends and dividend equivalents declared         (93.3)   (93.3)
Repurchase and retirement of common shares         (0.4)   (0.4)
Shares issued under stock-based compensation plans       0.2     0.2
Other comprehensive income (Note 11)           (8.8) (8.8)
Ending balance at Sep. 30, 2020     $ 4.1 $ 874.9 $ (625.3) $ (186.6) $ 67.1
Ending balance (shares) at Sep. 30, 2020     411.0       411.0
v3.20.2
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY/(DEFICIT) (Parentheticals) - $ / shares
3 Months Ended
Sep. 30, 2020
Jun. 30, 2020
Mar. 31, 2020
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY/(DEFICIT)            
Common stock dividends (USD per share) $ 0.225 $ 0.225 $ 0.225 $ 0.20 $ 0.20 $ 0.20
v3.20.2
Business and Basis of Presentation
9 Months Ended
Sep. 30, 2020
Business and Basis of Presentation  
Business and Basis of Presentation

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. The Company’s services are primarily available through a network of agent locations in more than 200 countries and territories and through online money transfer transactions conducted and funded through websites and mobile apps marketed under the Company’s brands (“westernunion.com”) and transactions initiated on internet and mobile applications hosted by the Company’s third-party white label or co-branded digital partners (together with westernunion.com, “Digital Money Transfer”). Each location in the Company’s agent network is capable of providing one or more of the Company’s services.

The Western Union business consists of the following segments:

Consumer-to-Consumer - The Consumer-to-Consumer operating segment facilitates money transfers between two consumers, primarily through a network of third-party agents. The Company’s multi-currency money transfer service is provided through one interconnected global network where a money transfer can be sent from one location to another around the world. This service is available for international cross-border transfers and, in certain countries, intra-country transfers. This segment also includes money transfer transactions that can be initiated through websites and mobile devices.
Business Solutions - 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. The majority of the segment’s business relates to exchanges of currency at spot rates, which enable customers to make cross-currency payments. In addition, in certain countries, the Company writes foreign currency forward and option contracts for customers to facilitate future payments.

All businesses and other services that have not been classified in the above segments are reported as Other, which primarily includes the Company’s cash-based and electronic-based bill payment services which facilitate payments from consumers to businesses and other organizations and the Company’s money order services. In May 2019, the Company sold a substantial majority of its United States based electronic bill payments services, as discussed in Note 4. The Company’s other services, in addition to certain corporate costs such as costs related to strategic initiatives, including costs for the review and closing of mergers, acquisitions, and divestitures, are also included in Other. See Note 16 for further information regarding the Company’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, 2019, the amount of these net asset limitations totaled approximately $610 million.

Various aspects of the Company’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-Q and Article 10 of Regulation S-X. In compliance with those instructions, certain

information 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 were eliminated as of September 30, 2020 and December 31, 2019 and for all periods presented.

In the opinion of management, these condensed consolidated financial statements include all the normal recurring adjustments necessary to fairly present the Company’s condensed consolidated results of operations, financial position, and cash flows as of September 30, 2020 and for all periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements within the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

Consistent with industry practice, the accompanying Condensed Consolidated Balance Sheets are unclassified due to the short-term nature of the Company’s settlement obligations contrasted with the Company’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.

In March 2020, the World Health Organization declared the outbreak associated with a novel coronavirus a pandemic (“COVID-19”), and governments throughout the world instituted various actions such as lockdowns, stay-at-home orders, travel restrictions, and closures of non-essential businesses in an effort to reduce the spread of COVID-19. These actions negatively impacted the Company’s ability to offer its services, at least temporarily, through a portion of its locations and its retail agent locations during the nine months ended September 30, 2020. Beginning in March 2020 and continuing into the second and third quarters of 2020, the Company experienced a decrease in transaction volumes from retail locations and a decrease in foreign exchange and payment services activity, which also negatively impacted revenues in these periods, partially offset by revenue growth from westernunion.com and other digital transactions. The Company believes this decrease is mainly due to economic decline and uncertainty resulting from the outbreak. The extent to which the COVID-19 outbreak continues to impact the Company’s business, financial condition, results of operations or cash flows will depend on future developments, which are highly uncertain and are difficult to predict. To the extent the pandemic or the related macro-economic consequences continue, the Company could potentially experience changes in estimates, including increased credit losses or intangible asset impairments in future periods.

Recently Adopted Accounting Pronouncements

On January 1, 2020, the Company adopted a new accounting standard that requires entities to measure expected credit losses for certain financial assets held at the reporting date using a current expected credit loss model, which is based on historical experience, adjusted for current conditions and reasonable and supportable forecasts. Additionally, the standard requires certain credit losses relating to investment securities classified as available-for-sale to be recorded through an allowance for credit losses. The Company recognized the cumulative effect of the new accounting standard as an adjustment to the January 1, 2020 balance of Accumulated deficit in the Condensed Consolidated Balance Sheets, and the adoption of the new accounting standard did not have a material impact on the Company’s January 1, 2020 accumulated deficit. In accordance with the modified retrospective approach, the comparative information has not been restated and continues to be reported under accounting standards in effect for those periods. Refer to Note 10 for additional information on expected credit losses and the related disclosures.

v3.20.2
Revenue
9 Months Ended
Sep. 30, 2020
Revenue  
Revenue

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. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.

The Company recognized $1,214.3 million and $1,238.0 million for the three months ended September 30, 2020 and 2019, and $3,392.5 million and $3,788.4 million for the nine months ended September 30, 2020 and 2019, respectively, in revenues from contracts with customers. There are no material upfront costs incurred to obtain contracts with customers. 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, and the Company has immaterial contract liability balances, which primarily relate to its customer loyalty programs and other services. Contract asset balances related to customers were also immaterial as of the periods presented, as the Company typically receives payment of consideration from its customers prior to satisfying performance obligations under the customer contracts. In addition to revenue generated from contracts with customers, the Company recognizes revenue from other sources, including the sale of derivative financial instruments and investment income generated on settlement assets primarily related to money transfer and money order services.

The Company analyzes its different services individually to determine the appropriate basis for revenue recognition, as further described below.

Consumer Money Transfers

For the Company’s money transfer services, customers agree to the Company’s terms and conditions at the time of initiating a transaction. In a money transfer, the Company has one performance obligation as the customer engages the Company to perform one integrated service which typically occurs within minutes — collect the customer’s money and make funds available for payment to a designated person in the currency requested. Therefore, 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 been received by the Company, (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 a transaction 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 customer’s behalf. In the majority of the Company’s foreign exchange and payment 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 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

The Company offers several different bill payment services that vary by considerations such as: (i) who pays the fee to the Company (consumer or biller), (ii) whether the service is offered to all potential consumers, or only to those for which the Company has a relationship with the biller, and (iii) whether the service utilizes a physical agent network offered for consumers’ convenience, among other factors. The determination of which party is the Company’s customer for revenue recognition purposes is based on these considerations for each of the Company’s bill payment services. For all transactions, the Company’s customers agree to the Company’s terms and conditions, either at the time of initiating a transaction (where the consumer is determined to be the customer for revenue recognition purposes) or upon signing a contract with the Company to provide services on the biller’s behalf (where the biller is determined to be the customer for revenue recognition purposes). As with consumer money transfers, customers engage the Company to perform one integrated service — collect money from the consumer and process the bill payment transaction, thereby providing the billers real-time or near real-time information regarding their customers’ payments and simplifying the billers’ collection efforts. In May 2019, the Company sold a substantial majority of its United States based electronic bill payments services, as discussed in Note 4.

Management has determined that the significant majority of the Company’s revenue is recognized at a point in time. The following tables represent the disaggregation of revenue earned from contracts with customers by product type and region for the three and nine months ended September 30, 2020 and 2019 (in millions). The regional split of revenue shown in the tables below is based upon where transactions are initiated.

Three Months Ended September 30, 2020

    

    

Foreign 

    

    

    

Consumer 

Exchange 

Money 

and Payment 

Consumer 

Other 

Transfers

Services

Bill Payments

Services

Total

Regions:

 

  

 

  

 

  

 

  

 

  

North America

$

414.8

$

23.3

$

17.4

$

14.2

$

469.7

Europe and Russia/CIS

 

358.6

 

30.6

 

0.8

 

0.5

 

390.5

Middle East, Africa, and South Asia

 

169.4

 

0.3

 

0.1

 

 

169.8

Latin America and the Caribbean

 

78.3

 

0.5

 

19.3

 

2.0

 

100.1

East Asia and Oceania

 

69.1

 

14.7

 

0.4

 

 

84.2

Revenues from contracts with customers

$

1,090.2

$

69.4

$

38.0

$

16.7

$

1,214.3

Other revenues (a)

 

16.3

 

19.7

 

2.9

 

5.3

 

44.2

Total revenues (b)

$

1,106.5

$

89.1

$

40.9

$

22.0

$

1,258.5

Nine Months Ended September 30, 2020

    

    

Foreign 

    

    

    

Consumer 

Exchange 

Money 

and Payment 

Consumer 

Other 

Transfers

Services

Bill Payments

Services

Total

Regions:

 

  

 

  

 

  

 

  

 

  

North America

$

1,199.2

$

62.5

$

57.2

$

42.9

$

1,361.8

Europe and Russia/CIS

 

960.7

 

88.3

 

2.1

 

1.4

 

1,052.5

Middle East, Africa, and South Asia

 

464.0

 

1.1

 

0.2

 

 

465.3

Latin America and the Caribbean

 

217.0

 

1.7

 

58.9

 

6.1

 

283.7

East Asia and Oceania

 

183.7

 

44.4

 

1.1

 

 

229.2

Revenues from contracts with customers

$

3,024.6

$

198.0

$

119.5

$

50.4

$

3,392.5

Other revenues (a)

 

73.9

 

68.9

 

10.8

 

17.1

 

170.7

Total revenues (b)

$

3,098.5

$

266.9

$

130.3

$

67.5

$

3,563.2

Three Months Ended September 30, 2019

    

    

Foreign 

    

    

    

Consumer 

Exchange 

Money 

and Payment 

Consumer 

Other 

Transfers

Services

Bill Payments

Services

Total

Regions:

 

  

 

  

 

  

 

  

 

  

North America

$

415.2

$

26.7

$

23.4

$

13.6

$

478.9

Europe and Russia/CIS

 

338.6

 

32.7

 

0.8

 

1.3

 

373.4

Middle East, Africa, and South Asia

 

164.7

 

0.4

 

0.1

 

 

165.2

Latin America and the Caribbean

 

99.2

 

0.8

 

34.2

 

3.9

 

138.1

East Asia and Oceania

 

64.7

 

17.3

 

0.4

 

 

82.4

Revenues from contracts with customers

$

1,082.4

$

77.9

$

58.9

$

18.8

$

1,238.0

Other revenues (a)

 

30.6

 

22.7

 

9.2

 

6.4

 

68.9

Total revenues (b)

$

1,113.0

$

100.6

$

68.1

$

25.2

$

1,306.9

Nine Months Ended September 30, 2019

    

    

Foreign 

    

    

    

Consumer 

Exchange 

Money 

and Payment 

Consumer 

Other 

Transfers

Services

Bill Payments (c)

Services

Total

Regions:

 

  

 

  

 

  

 

  

 

  

North America

$

1,235.0

$

72.1

$

199.6

$

42.2

$

1,548.9

Europe and Russia/CIS

 

1,001.6

 

96.2

 

2.3

 

3.2

 

1,103.3

Middle East, Africa, and South Asia

 

477.9

 

1.4

 

0.3

 

 

479.6

Latin America and the Caribbean

 

293.3

 

2.8

 

100.1

 

11.5

 

407.7

East Asia and Oceania

 

196.6

 

51.2

 

1.1

 

 

248.9

Revenues from contracts with customers

$

3,204.4

$

223.7

$

303.4

$

56.9

$

3,788.4

Other revenues (a)

 

78.4

 

68.1

 

30.0

 

19.5

 

196.0

Total revenues (b)

$

3,282.8

$

291.8

$

333.4

$

76.4

$

3,984.4

(a)Includes revenue from the sale of derivative financial instruments, investment income generated on settlement assets primarily related to money transfer and money order services, and other sources.
(b)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 payments" and "Other services" are not included in the Company’s segments and are reported as Other. See Note 16 for further information on the Company’s segments.
(c)On February 28, 2019, the Company entered into an agreement with ACI Worldwide Corp. and ACW Worldwide, Inc. to sell its United States based electronic bill payments business known as “Speedpay,” and closed the transaction on May 9, 2019. Included within North America revenues are Speedpay revenues of $125.4 million for the nine months ended September 30, 2019.
v3.20.2
Earnings Per Share
9 Months Ended
Sep. 30, 2020
Earnings Per Share  
Earnings Per Share

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 diluted earnings per share calculation under the treasury stock method, primarily due to outstanding restricted stock units and options to purchase shares of Western Union stock, as the assumed proceeds of the

restricted stock and options per unit were above the Company’s average share price during the periods and their effect was anti-dilutive, were 1.3 million and 0.5 million for the three months ended September 30, 2020 and 2019, respectively, and 1.7 million and 2.4 million for the nine months ended September 30, 2020 and 2019, respectively.

The following table provides the calculation of diluted weighted-average shares outstanding (in millions):

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2020

    

2019

    

2020

    

2019

    

Basic weighted-average shares outstanding

 

411.6

 

423.3

 

412.5

 

430.3

Common stock equivalents

 

3.0

 

3.5

 

3.0

 

2.7

Diluted weighted-average shares outstanding

 

414.6

 

426.8

 

415.5

 

433.0

v3.20.2
Divestitures
9 Months Ended
Sep. 30, 2020
Divestitures  
Divestitures

4. Divestitures

On February 28, 2019, the Company entered into an agreement with ACI Worldwide Corp. and ACW Worldwide, Inc. to sell its United States based electronic bill payments business known as “Speedpay,” which had been included as a component of Other in the Company’s segment reporting. The Company received approximately $750 million and recorded a pre-tax gain on the sale of approximately $523 million, which is included in Gain on divestitures of businesses in the accompanying Condensed Consolidated Statements of Income, in the all-cash transaction that closed on May 9, 2019. Speedpay revenues and direct operating expenses included in the Company’s results were $125.4 million and $98.2 million, respectively, for the nine months ended September 30, 2019.

On May 6, 2019, the Company completed the sale of Paymap Inc. (“Paymap”), which provides electronic mortgage bill payment services, for contingent consideration and immaterial cash proceeds received at closing. The Company recorded an immaterial pre-tax gain related to this sale during the nine months ended September 30, 2019.

In the first quarter of 2020, the Company sold its former corporate headquarters and recorded an immaterial pre-tax net gain on the sale. The proceeds from this sale have been included in Cash flows from investing activities within the Company’s Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020.

v3.20.2
Restructuring-Related Expenses
9 Months Ended
Sep. 30, 2020
Restructuring-Related Expenses  
Restructuring-Related Expenses

5. Restructuring-Related Expenses

On August 1, 2019, the Company’s Board of Directors approved a plan to change the Company’s operating model and improve its business processes and cost structure by reorganizing the Company’s senior management, including those managers reporting to the Chief Executive Officer, reducing its headcount, and consolidating various facilities. The Company expects to incur approximately $150 million of total expenses through 2020, with approximately $110 million related to severance and employee-related benefits and approximately $40 million related to costs associated with the relocation of various operations to other Company facilities, facility closures, lease terminations, consulting, and other expenses. Substantially all of these expenses are expected to be paid in cash. The foregoing figures are the Company’s estimates and are subject to change as the plan is anticipated to be completed by the end of 2020.

While certain of the expenses may be identifiable to the Company’s segments, primarily to the Company’s Consumer-to-Consumer segment, the expenses are not included in the measurement of segment operating income provided to the Chief Operating Decision Maker (“CODM”) for purposes of performance assessment and resource allocation. These expenses are therefore excluded from the Company’s segment operating income results. These expenses are specific to this initiative; however, the types of expenses related to this 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, 2020 for expenses related to the restructuring accruals, which are included in Accounts payable and accrued liabilities in the Company’s Condensed Consolidated Balance Sheets as of September 30, 2020, and the total expenses incurred since the inception of the restructuring plan (in millions):

    

Severance and 

    

Facility Relocations

    

Related 

and Closures,

Employee 

Consulting,

Benefits

and Other

Total

Balance, December 31, 2019

$

71.2

$

2.1

$

73.3

Expenses (a)

 

9.4

 

15.4

 

24.8

Cash payments

(48.4)

(14.2)

(62.6)

Non-cash benefits/(charges) (a)

0.2

(1.6)

(1.4)

Balance, September 30, 2020

$

32.4

$

1.7

$

34.1

Total expenses incurred-to-date

$

107.4

$

32.9

$

140.3

(a)Non-cash benefits/(charges) include non-cash write-offs and accelerated depreciation of right-of-use assets and leasehold improvements and a non-cash benefit for adjustments to stock compensation for awards forfeited by employees. These amounts have been removed from the liability balance in the table above as they do not impact the restructuring accruals.

The following table presents restructuring-related expenses as reflected in the Condensed Consolidated Statements of Income (in millions):

Three Months Ended

Nine Months Ended

    

September 30, 

September 30, 

2020

2019

2020

2019

Cost of services

$

0.8

$

33.9

$

2.5

$

33.9

Selling, general, and administrative

 

8.3

 

57.6

 

22.3

 

65.0

Total expenses, pre-tax

$

9.1

$

91.5

$

24.8

$

98.9

Total expenses, net of tax

$

7.4

$

71.7

$

22.1

$

77.7

v3.20.2
Leases
9 Months Ended
Sep. 30, 2020
Leases  
Leases

6. Leases

The Company leases real properties for use as administrative and sales offices, in addition to transportation, office, and other equipment. The Company determines if a contract contains a lease arrangement at the inception of the contract. For leases in which the Company is the lessee, leases are classified as either finance or operating, with classification affecting the pattern of expense recognition. Operating lease right-of-use (“ROU”) assets are initially measured at the present value of lease payments over the lease term plus initial direct costs, if any. If a lease does not provide a discount rate and the rate cannot be readily determined, an incremental borrowing rate is used to determine the future lease payments. Lease and variable non-lease components within the Company’s lease agreements are accounted for separately. The Company has no material leases in which the Company is the lessor.

The Company’s leasing arrangements are classified as operating leases, for which expense is recognized on a straight-line basis. As of September 30, 2020 and December 31, 2019, total ROU assets were $192.8 million and $199.7 million, respectively, and operating lease liabilities were $236.9 million and $242.3 million, respectively. The ROU assets and operating lease liabilities are included in Other assets and Other liabilities, respectively, in the Company’s Condensed Consolidated Balance Sheets. Cash paid for operating lease liabilities is recorded as Cash flows from operating activities in the Company’s Condensed Consolidated Statements of Cash Flows. Operating lease costs, which are included in Total expenses in the Company’s Condensed Consolidated Statements of Income, were $13.2 million and $13.6 million for the three months ended September 30, 2020 and 2019, respectively, and $39.2 million and $42.9 million for the nine months

ended September 30, 2020 and 2019, respectively. Short-term and variable lease costs were not material for the three and nine months ended September 30, 2020 and 2019.

The Company’s leases have remaining terms from less than 1 year to 11 years. Certain of these leases contain escalation provisions and/or renewal options, giving the Company the right to extend the lease by up to 10 years. However, a significant majority of these options are not reflected in the calculation of the ROU asset and operating lease liability due to uncertainty surrounding the likelihood of renewal.  

The following table summarizes the weighted-average lease terms and discount rates for operating lease liabilities:

September 30, 2020

September 30, 2019

Weighted-average remaining lease term (in years)

7.3

7.6

Weighted-average discount rate

5.9

%

6.6

%

The following table represents maturities of operating lease liabilities as of September 30, 2020 (in millions):

Due within 1 year

$

51.9

Due after 1 year through 2 years

45.0

Due after 2 years through 3 years

37.8

Due after 3 years through 4 years

33.3

Due after 4 years through 5 years

29.2

Due after 5 years

91.7

Total lease payments

288.9

Less imputed interest

(52.0)

Total operating lease liabilities

$

236.9

v3.20.2
Fair Value Measurements
9 Months Ended
Sep. 30, 2020
Fair Value Measurements  
Fair Value Measurements

7. 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 Company’s consolidated financial statements within the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

The following tables present the Company’s assets and liabilities which are measured at fair value on a recurring basis, by balance sheet line item (in millions):

Fair Value Measurement Using

Total

September 30, 2020

    

Level 1

    

Level 2

    

Fair Value

Assets:

 

  

 

  

 

  

Cash and cash equivalents:

Measured at fair value through net income:

Money market funds

$

100.0

$

$

100.0

Settlement assets:

 

  

 

  

 

  

Measured at fair value through net income:

 

  

 

  

 

  

Money market funds

16.1

16.1

Measured at fair value through other comprehensive income (net of expected credit losses recorded through net income):

 

  

  

  

State and municipal debt securities

1,331.3

1,331.3

State and municipal variable-rate demand notes

 

 

712.5

 

712.5

Corporate and other debt securities

81.6

81.6

United States government agency mortgage-backed securities

 

 

56.7

 

56.7

Other assets:

 

  

 

 

  

Derivatives

 

 

294.7

 

294.7

Total assets

$

116.1

$

2,476.8

$

2,592.9

Liabilities:

 

  

 

  

 

  

Other liabilities:

Derivatives

$

$

258.2

$

258.2

Total liabilities

$

$

258.2

$

258.2

Fair Value Measurement Using

Total

December 31, 2019

    

Level 1

    

Level 2

    

Fair Value

Assets:

 

  

 

  

 

  

Settlement assets:

 

  

 

  

 

  

Measured at fair value through net income:

 

  

 

  

 

  

Money market funds

$

24.6

$

$

24.6

Measured at fair value through other comprehensive income:

 

  

  

  

State and municipal debt securities

1,257.8

1,257.8

State and municipal variable-rate demand notes

 

 

276.1

 

276.1

United States government agency mortgage-backed securities

67.2

67.2

Corporate debt securities

 

 

52.4

 

52.4

Other United States government agency debt securities

34.9

34.9

United States Treasury securities

 

10.0

 

 

10.0

Other assets:

 

  

 

  

 

  

Derivatives

 

 

204.5

 

204.5

Total assets

$

34.6

$

1,892.9

$

1,927.5

Liabilities:

 

  

 

  

 

  

Other liabilities:

Derivatives

$

$

159.5

$

159.5

Total liabilities

$

$

159.5

$

159.5

No material non-recurring fair value adjustments or transfers between Level 1 and Level 2 measurements were recorded during the three and nine months ended September 30, 2020 and 2019.

Other Fair Value Measurements

The carrying amounts for many of the Company’s financial instruments, including certain cash and cash equivalents, settlement cash and cash equivalents, and settlement receivables and obligations approximate fair value due to their short maturities. The Company’s borrowings are classified as Level 2 within the valuation hierarchy, and the aggregate fair value of these borrowings was based on quotes from multiple banks. Fixed-rate notes are carried in the Company’s Condensed Consolidated Balance Sheets at their original issuance values as adjusted over time to accrete that value to par. As of September 30, 2020, the carrying value and fair value of the Company’s borrowings were $3,036.5 million and $3,253.7 million, respectively (see Note 13). As of December 31, 2019, the carrying value and fair value of the Company’s borrowings were $3,229.3 million and $3,372.2 million, respectively.

v3.20.2
Commitments and Contingencies
9 Months Ended
Sep. 30, 2020
Commitments and Contingencies  
Commitments and Contingencies

8. Commitments and Contingencies

Letters of Credit and Bank Guarantees

The Company had approximately $370 million in outstanding letters of credit and bank guarantees as of September 30, 2020 primarily held in connection with safeguarding consumer funds, lease arrangements, and certain agent agreements. The significant majority of the Company’s letters of credit and bank guarantees have a one-year renewal option. The Company expects to renew the letters of credit and bank guarantees prior to expiration in most circumstances.

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 loss or additional losses may have been incurred and 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 losses 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 losses 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 $30 million as of September 30, 2020. For the remaining matters, management is unable to provide a meaningful estimate of the possible loss or range of loss because, among other reasons: (i) the proceedings are in preliminary stages; (ii) specific damages have not been sought; (iii) damage claims are unsupported and/or unreasonable; (iv) there is uncertainty as to the outcome of pending appeals or motions; (v) there are significant factual issues to be resolved; or (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.

Shareholder Derivative Action

On January 16, 2020, Stanley Lieblein filed a shareholder derivative complaint in the Court of Chancery of the State of Delaware naming the Company’s President and Chief Executive Officer, certain current and former directors, and a former executive officer as individual defendants and the Company as a nominal defendant. Mr. Lieblein had previously filed a shareholder derivative action asserting related claims in the United States District Court for the District of Colorado,

which was subsequently consolidated with multiple pending related derivative actions. Following the filing of multiple amended complaints, the United States Court of Appeals for the Tenth Circuit affirmed dismissal of the consolidated derivative action on April 16, 2019 on the ground that the plaintiffs did not have standing to proceed on behalf of the Company without making a demand on the Company’s board of directors. The consolidated derivative action is described in further detail in Part I, Item I, Financial Statements, Note 8, Commitments and Contingencies in the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2019.

On August 1, 2019, Mr. Lieblein made a written demand on the Company’s board of directors to investigate and address alleged misconduct related to the Company’s anti-fraud and anti-money laundering (“AML”) compliance programs, including certain alleged misconduct at issue in the consolidated derivative action. The Company’s board of directors formed a special committee to evaluate Mr. Lieblein’s demand together with a related shareholder demand. The special committee’s investigation is ongoing. Mr. Lieblein alleges that he filed the January 16, 2020 complaint prior to the completion of the special committee’s investigation because of concerns regarding the statute of limitations on some of the claims asserted. Mr. Lieblein has agreed to stay the action until December 31, 2020, pending completion of the special committee’s investigation.

The complaint filed by Mr. Lieblein on January 16, 2020 includes allegations that the director and officer defendants declined to implement effective anti-fraud and AML compliance systems after receiving numerous red flags indicating prolonged willful illegality, condoned executive officers’ obstruction of efforts by various regulators to impose an effective compliance system on the Company, approved executive compensation packages for management that were not aligned with development of effective anti-fraud and AML compliance programs, allowed management to fail to timely report known or likely impropriety by Company employees or agents to regulatory authorities, failed to require management to adopt a risk assessment for all very high risk areas, refused to remedy the board’s oversight of executive officers, and, in effect, refused Mr. Lieblein’s shareholder demand and related request for tolling agreements.

It also includes allegations that the officer defendants declined to ensure that the Company implemented effective anti-fraud and AML compliance programs after receiving red flags that those programs were inadequate, allowed Company agents to willfully ignore anti-fraud and AML recording and reporting requirements for a prolonged period, opposed efforts by various regulators to implement effective anti-fraud and AML compliance programs, caused the Company to fail to comply with its obligations under settlements with regulators, and knowingly exposed the Company to criminal and civil sanctions. Due to the nature of this matter and the early stage of the proceedings, the Company cannot predict the outcome or potential impact of the matter.

Other Matters

On March 12, 2014, Jason Douglas filed a purported class action complaint in the United States District Court for the Northern District of Illinois asserting a claim under the Telephone Consumer Protection Act, 47 U.S.C. § 227, et seq., based on allegations that since 2009, the Company has sent text messages to class members’ wireless telephones without their consent. During the first quarter of 2015, the Company’s insurance carrier and the plaintiff reached an agreement to create an $8.5 million settlement fund that will be used to pay all class member claims, class counsel’s fees and the costs of administering the settlement. The agreement has been signed by the parties and, on November 10, 2015, the Court granted preliminary approval to the settlement. On January 9, 2018, plaintiff filed a motion requesting decisions on its pending motion to approve the settlement and motion for attorneys’ fees, costs, and incentive award. On August 31, 2018, the Court issued an order approving the settlement, in which the Court modified the class definition slightly and ordered the parties to provide additional notice to the class. An appeal relating to the Court’s order was taken by an objector, and this appeal was dismissed on April 13, 2020. The Company and its insurance carrier have funded the settlement and, on October 5, 2020, the Court entered the final order and judgment in the case.

In October 2015, Consumidores Financieros Asociación Civil para su Defensa, an Argentinian consumer association, filed a purported class action lawsuit in Argentina’s National Commercial Court No. 19 against the Company’s subsidiary Western Union Financial Services Argentina S.R.L. (“WUFSA”). The lawsuit alleges, among other things, that WUFSA’s

fees for money transfers sent from Argentina are excessive and that WUFSA does not provide consumers with adequate information about foreign exchange rates. The plaintiff is seeking, among other things, an order requiring WUFSA to reimburse consumers for the fees they paid and the foreign exchange revenue associated with money transfers sent from Argentina, plus punitive damages. The complaint does not specify a monetary value of the claim or a time period. In November 2015, the Court declared the complaint formally admissible as a class action. The notice of claim was served on WUFSA in May 2016, and in June 2016 WUFSA filed a response to the claim and moved to dismiss it on statute of limitations and standing grounds. In April 2017, the Court deferred ruling on the motion until later in the proceedings. The process for notifying potential class members has been completed and the case proceeded to the evidentiary stage. On June 4, 2020, the case was stayed because the consumer association that filed the lawsuit no longer had the registration needed to assert its claims on behalf of the alleged class. The case will be stayed until (i) the Attorney-General instructs the Prosecutor to continue to litigate the claims on behalf of the plaintiff (during the time the registration of Consumidores Financieros before the Secretary of Commerce remains suspended); or (ii) the parties report to the Court that the plaintiff recovered its legal capacity. Due to the stage of this matter, the Company is unable to predict the outcome or the possible loss or range of loss, if any, associated with this matter. WUFSA intends to defend itself vigorously.

On April 26, 2018, the Company, its subsidiary, Western Union Financial Services, Inc., its President and Chief Executive Officer, and various “Doe Defendants” (purportedly including Western Union officers, directors, and agents) were named as defendants in a purported class action lawsuit asserting claims for alleged violations of civil Racketeer Influenced and Corrupt Organizations Act and the Colorado Organized Crime Act, civil theft, negligence, unjust enrichment, and conversion under the caption Frazier et al. v. The Western Union Company et al., Civil Action No. 1:18-cv-00998-KLM (D. Colo.). The complaint alleges that, during the purported class period of January 1, 2004 to the present, and based largely on the admissions and allegations relating to the United States Department of Justice, Federal Trade Commission, Financial Crimes Enforcement Network, and State Attorneys General Settlements, as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, the defendants engaged in a scheme to defraud customers through Western Union’s money transfer system. The plaintiffs filed an amended complaint on July 17, 2018. The amended complaint is similar to the original complaint, although it adds additional named plaintiffs and additional counts, including claims on behalf of putative California, Florida, Georgia, Illinois, and New Jersey subclasses for alleged violations of the California Unfair Competition Law, the Florida Deceptive and Unfair Trade Practices Act, the Georgia Fair Business Practices Act, the Illinois Consumer Fraud and Deceptive Business Practices Act, and the New Jersey Consumer Fraud Act. On August 28, 2018, the Company and the other defendants moved to stay the action in favor of individual arbitrations with the named plaintiffs, which defendants contend are contractually required. On March 27, 2019, the Court granted that motion and stayed the action pending individual arbitrations with the named plaintiffs. To date, no such individual arbitration requests have been filed. On August 27, 2020, the Court issued an order requiring that the parties indicate whether the case should remain administratively closed, subject to reopening, or that the parties file dismissal papers stating that the case may be terminated from the Court’s docket. That same day, Plaintiffs filed a Notice of Dismissal, indicating that they had dismissed the action and that the case may be terminated from the Court’s docket.

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’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’s financial condition, results of operations, or cash flows.

v3.20.2
Related Party Transactions
9 Months Ended
Sep. 30, 2020
Related Party Transactions  
Related Party Transactions

9. 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’s behalf. Commission expense recognized for these agents for the three months ended September 30, 2020 and 2019 totaled $14.5 million for both periods, and $40.0 million and $41.9 million for the nine months ended September 30, 2020 and 2019, respectively.

v3.20.2
Settlement Assets and Obligations
9 Months Ended
Sep. 30, 2020
Settlement Assets and Obligations  
Settlement Assets and Obligations

10. Settlement Assets and Obligations

Settlement assets represent funds received or to be received from agents 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):

    

September 30, 2020

Settlement assets:

 

  

Cash and cash equivalents

$

345.7

Receivables from agents and Business Solutions customers

 

1,107.2

Less: Allowance for credit losses

(45.6)

Receivables from agents and Business Solutions customers, net

1,061.6

Investment securities

 

2,182.1

Total settlement assets

$

3,589.4

Settlement obligations:

 

  

Money transfer, money order, and payment service payables

$

2,740.4

Payables to agents

 

849.0

Total settlement obligations

$

3,589.4

    

December 31, 2019

Settlement assets:

 

  

Cash and cash equivalents

$

368.2

Receivables from agents and Business Solutions customers, net

 

1,230.1

Investment securities

 

1,698.4

Total settlement assets

$

3,296.7

Settlement obligations:

 

  

Money transfer, money order, and payment service payables

$

2,571.5

Payables to agents

 

725.2

Total settlement obligations

$

3,296.7

Receivables from agents represent funds collected by such agents, but in transit to the Company, and were $992.1 million as of September 30, 2020. 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 $69.5 million as of September 30, 2020. 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.

On January 1, 2020, the Company adopted a new accounting standard related to the estimation of the allowance for credit losses, as discussed in Note 1. However, due to the short-term nature of the Company’s receivables and the Company’s historical and expected collections practice, the adoption did not have a material impact on the Company’s financial position or results of operations.  

The Company separately establishes and monitors an allowance for credit losses related to receivables from agents and Business Solutions customers. The Company estimates the allowance based on its historical collections experience, adjusted for current conditions and forecasts of future economic conditions, including those related to COVID-19. Given the short-term nature of these receivables, the Company does not expect the impact of forecasted economic conditions on its allowance for credit loss to be significant. The Company has estimated credit losses based on information known as of September 30, 2020.

The following table summarizes activity in the allowance for credit losses on receivables from agents and Business Solutions customers (in millions):

Business Solutions

Agents

Customers

Allowance for credit losses as of January 1, 2020

$

20.4

$

4.5

Current period provision for expected credit losses (a)

28.3

2.1

Write-offs charged against the allowance

(8.0)

(2.5)

Recoveries of amounts previously written off

1.8

Impacts of foreign currency exchange rates and other

(1.6)

0.6

Allowance for credit losses as of September 30, 2020

$

40.9

$

4.7

(a)Provision does not include losses from chargebacks or fraud associated with transactions initiated through the Company’s electronic channels, as these losses are not credit related.

Investment securities included in Settlement assets in the Company’s Condensed Consolidated Balance Sheets consist primarily of highly-rated state and municipal debt securities, including fixed-rate term notes and variable-rate demand notes. Variable-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 2057. 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 regulatory requirements.

The Company’s investment securities are classified as available-for-sale and recorded at fair value. Western Union regularly monitors credit risk and attempts to mitigate its exposure by investing in highly-rated securities and through investment diversification.

Unrealized gains on available-for-sale securities are excluded from earnings and presented as a component of accumulated other comprehensive loss, net of related deferred taxes. Available-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. As of and for the three and nine months ended September 30, 2020, the Company’s allowance for credit losses and provision for credit losses on its available-for-sale securities were immaterial.

The components of investment securities are as follows (in millions):

    

    

    

Gross

    

Gross

    

Net

 

Amortized

 

Fair

 

Unrealized

 

Unrealized

 

Unrealized

September 30, 2020

Cost

Value

 

Gains

 

Losses

Gains/(Losses)

Cash and cash equivalents:

Money market funds

$

100.0

$

100.0

$

$

$

Settlement assets: