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FORM 10-Q
_______________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
to
Commission File Number: 001-32903
DELAWARE
(State or Other Jurisdiction of
Incorporation or Organization)
20-4531180
(I.R.S. Employer
Identification No.)
80112
(Zip Code)
Acceleratedfiler
Non-acceleratedfiler
(Donotcheckifasmaller
reportingcompany)
Smallerreportingcompany
Indicatebycheckmarkwhethertheregistrantisashellcompany(asdefinedinRule12b-2oftheExchangeAct).Yes
No
AsofJuly31,2016,487,733,527sharesoftheregistrant'scommonstockwereoutstanding.
Table of Contents
PAGE
NUMBER
PARTIFINANCIALINFORMATION
Item1.
FinancialStatements(Unaudited)
CondensedConsolidatedStatementsofIncomeforthethreeandsixmonthsendedJune30,2016and2015
CondensedConsolidatedStatementsofComprehensiveIncomeforthethreeandsixmonthsendedJune30,2016and2015
CondensedConsolidatedBalanceSheetsasofJune30,2016andDecember31,2015
CondensedConsolidatedStatementsofCashFlowsforthesixmonthsendedJune30,2016and2015
NotestoCondensedConsolidatedFinancialStatements
Item2.
Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations
Item3.
QuantitativeandQualitativeDisclosuresAboutMarketRisk
Item4.
ControlsandProcedures
ReviewReportofIndependentRegisteredPublicAccountingFirm
PARTIIOTHERINFORMATION
Item1.
LegalProceedings
Item1A.
RiskFactors
Item2.
UnregisteredSalesofEquitySecuritiesandUseofProceeds
Item3.
DefaultsUponSeniorSecurities
Item4.
MineSafetyDisclosures
Item5.
OtherInformation
Item6.
Exhibits
3
3
4
5
6
7
36
54
54
55
56
61
62
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Table of Contents
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
THE WESTERN UNION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in millions, except per share amounts)
2016
Revenues:
Transactionfees
2015
2015
961.3 $
378.8
362.1
Otherrevenues
Totalrevenues
2016
Foreignexchangerevenues
Expenses:
724.3
700.1
35.6
33.2
68.8
67.5
1,375.7
1,383.6
2,673.4
2,704.5
Costofservices
821.9
799.4
1,601.3
1,571.2
Selling,generalandadministrative
293.5
333.4
553.2
610.2
1,115.4
1,132.8
2,154.5
2,181.4
260.3
250.8
518.9
523.1
Totalexpenses
Operatingincome
Otherincome/(expense):
Interestincome
0.7
2.5
1.6
Interestexpense
(41.0)
(43.1)
(81.5)
5.4
(84.9)
Derivativegains,net
1.4
1.9
1.0
Otherincome/(expense),net
1.1
(3.3)
(0.9)
(5.1)
Totalotherexpense,net
(37.8)
(43.9)
(78.9)
(83.6)
Incomebeforeincometaxes
222.5
206.9
440.0
439.5
Provisionforincometaxes
Netincome
Earningspershare:
16.9
17.6
48.7
46.3
205.6 $
189.3 $
391.3 $
393.2
Basic
0.42 $
0.37 $
0.79 $
0.76
Diluted
0.42 $
0.36 $
0.79 $
0.75
Weighted-averagesharesoutstanding:
Basic
490.3
515.2
495.1
518.1
Diluted
493.0
519.8
498.1
522.5
Cashdividendsdeclaredpercommonshare
SeeNotestoCondensedConsolidatedFinancialStatements.
3
0.16 $
0.155 $
0.32 $
0.31
Table of Contents
2016
2015
2016
2015
Netincome
205.6 $
189.3 $
391.3 $
Othercomprehensiveincome/(loss),netoftax(Note7):
Unrealizedgains/(losses)oninvestmentsecurities
393.2
3.5
(6.8)
6.7
Unrealizedgains/(losses)onhedgingactivities
10.7
(38.2)
(27.1)
2.4
Foreigncurrencytranslationadjustments
(1.8)
(1.7)
(4.1)
(4.3)
Definedbenefitpensionplanadjustments
1.7
1.3
3.4
3.1
Totalothercomprehensiveincome/(loss)
14.1
$
Comprehensiveincome
219.7 $
SeeNotestoCondensedConsolidatedFinancialStatements.
4
(45.4)
(21.1)
143.9 $
370.2 $
(5.8)
(4.6)
388.6
Table of Contents
Assets
Cashandcashequivalents
1,162.6 $
1,315.9
3,357.1
3,308.7
Settlementassets
Propertyandequipment,netofaccumulateddepreciationof$568.8and$538.2,respectively
221.7
231.8
3,162.4
3,163.8
Otherintangibleassets,netofaccumulatedamortizationof$931.2and$884.4,respectively
701.5
705.0
Otherassets(Note1)
789.6
724.0
Goodwill
Totalassets
9,394.9 $
Liabilities:
512.4 $
Accountspayableandaccruedliabilities
Settlementobligations
9,449.2
606.6
3,357.1
3,308.7
Incometaxespayable
213.2
211.5
Deferredtaxliability,net
268.1
272.6
3,228.5
3,215.9
501.2
429.0
8,080.5
8,044.3
Borrowings(Note1)
Otherliabilities
Totalliabilities
Commitmentsandcontingencies(Note4)
Stockholders'equity:
Preferredstock,$1.00parvalue;10sharesauthorized;nosharesissued
Commonstock,$0.01parvalue;2,000sharesauthorized;488.0sharesand502.4sharesissuedandoutstandingas
ofJune30,2016andDecember31,2015,respectively
Capitalsurplus
Retainedearnings
Accumulatedothercomprehensiveloss
Totalstockholders'equity
Totalliabilitiesandstockholders'equity
SeeNotestoCondensedConsolidatedFinancialStatements.
5
4.9
5.0
597.3
566.5
877.2
977.3
(165.0)
(143.9)
1,314.4
1,404.9
9,394.9 $
9,449.2
Table of Contents
2016
Netincome
391.3 $
Adjustmentstoreconcilenetincometonetcashprovidedbyoperatingactivities:
2015
393.2
Depreciation
36.3
32.6
Amortization
95.2
94.2
42.3
24.9
Othernon-cashitems,net
Increase/(decrease)incashresultingfromchangesin:
Otherassets
Accountspayableandaccruedliabilities
9.2
(57.6)
(99.5)
(23.1)
Incometaxespayable
5.3
10.9
Otherliabilities
5.5
(9.4)
Netcashprovidedbyoperatingactivities
485.6
465.7
Capitalizationofcontractcosts
(60.0)
(74.7)
Capitalizationofpurchasedanddevelopedsoftware
(21.3)
(20.8)
Purchasesofpropertyandequipment
(27.4)
(26.9)
Purchasesofnon-settlementrelatedinvestments
(34.9)
(100.0)
Proceedsfrommaturityofnon-settlementrelatedinvestments
Purchasesofheld-to-maturitynon-settlementrelatedinvestments
Proceedsfromheld-to-maturitynon-settlementrelatedinvestments
Netcashusedininvestingactivities
11.0
(26.5)
2.0
(157.1)
(222.4)
Cashdividendspaid
(157.4)
(160.0)
Commonstockrepurchased(Note7)
(334.0)
(313.8)
Proceedsfromexerciseofoptionsandother
9.6
77.8
Netcashusedinfinancingactivities
(481.8)
(396.0)
Netchangeincashandcashequivalents
(153.3)
(152.7)
Cashandcashequivalentsatbeginningofperiod
1,315.9
1,783.2
1,162.6 $
1,630.5
Cashandcashequivalentsatendofperiod
Interestpaid
78.4 $
81.7
Incometaxespaid
50.6 $
42.5
SeeNotestoCondensedConsolidatedFinancialStatements.
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Consumer-to-Consumer
- The Consumer-to-Consumer operating segment facilitates money transfers between two consumers, primarily through a
networkofthird-partyagents.TheCompany'smulti-currency,real-timemoneytransferserviceisviewedbytheCompanyasoneinterconnectedglobal
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-thatis,thetransferoffundsfromonecountrytoanother-and,incertaincountries,intra-countrytransfers-thatis,moneytransfersfromone
locationtoanotherinthesamecountry.Thissegmentalsoincludesmoneytransfertransactionsthatcanbeinitiatedthroughwebsitesandmobiledevices.
Consumer-to-Business
-TheConsumer-to-Businessoperatingsegmentfacilitatesbillpaymentsfromconsumerstobusinessesandotherorganizations,
including utilities, auto finance companies, mortgage servicers, financial service providers, government agencies and other businesses. The significant
majorityofthesegment'srevenuewasgeneratedintheUnitedStatesduringallperiodspresented,withtheremainderprimarilygeneratedinArgentina.
Business
Solutions
- The Business Solutions operating segment facilitates payment and foreign exchange solutions, primarily cross-border, crosscurrencytransactions,forsmallandmediumsizeenterprisesandotherorganizationsandindividuals.Themajorityofthesegment'sbusinessrelatesto
exchanges of currency at spot rates, which enable customers to make cross-currency payments. In addition, in certain countries, the Company writes
foreigncurrencyforwardandoptioncontractsforcustomerstofacilitatefuturepayments.
All businesses that have not been classified in the above segments are reported as "Other" and include the Company's money order and other services, in
additiontocostsforthereviewandclosingofacquisitions.
TherearelegalorregulatorylimitationsontransferringcertainassetsoftheCompanyoutsideofthecountrieswheretheseassetsarelocated.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. Asof December 31,2015 , the amount of net assets subject to these limitations totaled approximately $ 300
million,andtherehavebeennomaterialchangestotheselimitationssubsequenttothatdate.
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,includingcertainbankingandotherfinancialservicesregulations.
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.
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2016
Basicweighted-averagesharesoutstanding
Commonstockequivalents
Dilutedweighted-averagesharesoutstanding
2015
2015
490.3
515.2
495.1
518.1
2.7
4.6
3.0
4.4
493.0
519.8
498.1
522.5
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Assets:
Settlementassets:
Stateandmunicipaldebtsecurities
Level 1
Level 2
Level 3
1,015.0 $
Stateandmunicipalvariableratedemandnotes
Corporateandotherdebtsecurities
Otherassets:
237.5
237.5
45.6
45.6
Totalassets
Liabilities:
1,015.0
Derivatives
Assets/
Liabilities at
Fair
Value
428.9
1,727.0 $
428.9
1,727.0
Derivatives
339.2 $
339.2
Totalliabilities
339.2 $
339.2
Assets:
Settlementassets:
Stateandmunicipaldebtsecurities
Level 1
Level 2
Level 3
1,052.5 $
Assets/
Liabilities at
Fair
Value
1,052.5
Stateandmunicipalvariableratedemandnotes
42.9
42.9
Corporateandotherdebtsecurities
67.2
67.2
Otherassets:
Derivatives
396.3
396.3
Totalassets
1,558.9 $
Liabilities:
Derivatives
283.7 $
283.7
Totalliabilities
283.7 $
283.7
10
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2016
Settlementassets:
Cashandcashequivalents
895.5 $
2015
1,075.7
ReceivablesfromsellingagentsandBusinessSolutionscustomers
1,163.5
1,070.4
Investmentsecurities
1,298.1
1,162.6
3,357.1 $
3,308.7
Settlementobligations:
Moneytransfer,moneyorderandpaymentservicepayables
2,453.7 $
Payablestoagents
903.4
$
3,357.1 $
2,428.5
880.2
3,308.7
Investment securities included in"Settlement assets" inthe Company'sCondensedConsolidated Balance Sheetsconsistprimarily ofhighly-rated state and
municipaldebtsecurities,includingfixedratetermnotesandvariableratedemandnotes.Variableratedemandnotesecuritiescanbeput(soldatpar)typicallyon
a daily basis with settlement periods ranging from the same day to one week, but have varying maturities through 2049.Thesesecurities may beusedbythe
Companyforshort-termliquidityneedsandheldforshortperiodsoftime.TheCompanyisrequiredtoholdhighly-rated,investmentgradesecuritiesandsuch
investmentsarerestrictedtosatisfyoutstandingsettlementobligationsinaccordancewithapplicablestateandforeigncountryrequirements.
The substantial majority of the Company'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
investinginhighly-ratedsecuritiesandthroughinvestmentdiversification.
Unrealizedgainsandlossesonavailable-for-salesecuritiesareexcludedfromearningsandpresentedasacomponentofaccumulatedothercomprehensive
loss,netofrelateddeferredtaxes.Gainsandlossesoninvestmentsarecalculatedusingthespecific-identificationmethodandarerecognizedduringtheperiodin
whichtheinvestmentissoldorwhenaninvestmentexperiencesanother-than-temporarydeclineinvalue.Proceedsfromthesaleandmaturityofavailable-for-sale
securitiesduringthesixmonthsendedJune30,2016and2015were$1.2billionand$7.8billion,respectively.Thedeclineinproceedsfromthesaleandmaturity
ofavailable-for-salesecuritiesforthesixmonthsendedJune30,2016comparedtothepriorperiodwasprimarilyduetoreducedsalesofvariableratedemand
notesecurities.
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Settlementassets:
Available-for-salesecurities:
Stateandmunicipaldebtsecurities(a)
993.2 $
1,015.0 $
22.4 $
(0.6) $
237.5
237.5
44.9
45.6
0.7
1,275.6
1,298.1
23.1
0.1
23.2 $
1,311.0 $
1,333.6 $
Amortized
Cost
0.7
22.5
(0.6) $
22.6
Net
Unrealized
Gains/ (Losses)
1,052.5 $
14.2 $
(2.0) $
42.9
42.9
12.2
67.3
67.2
(0.1)
(0.1)
1,150.5
1,162.6
14.2
(2.1)
12.1
Foreigncorporatedebtsecurities
9.3
$
0.1
Gross
Unrealized
Losses
1,040.3 $
Corporateandotherdebtsecurities
Stateandmunicipalvariableratedemandnotes
Held-to-maturitysecurities:
Fair
Value
(0.6)
Gross
Unrealized
Gains
21.8
35.5
Net
Unrealized
Gains
35.4
$
Otherassets:
Stateandmunicipaldebtsecurities(a)
Gross
Unrealized
Losses
Foreigncorporatedebtsecurities
Available-for-salesecurities:
Corporateandotherdebtsecurities
Settlementassets:
Gross
Unrealized
Gains
Held-to-maturitysecurities:
Fair
Value
Stateandmunicipalvariableratedemandnotes
Otherassets:
1,159.8 $
____________
(a)Themajorityofthesesecuritiesarefixedrateinstruments.
19
9.3
1,171.9 $
14.2 $
(2.1) $
12.1
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Duewithin1year
157.5
Dueafter1yearthrough5years
578.1
Dueafter5yearsthrough10years
327.8
Dueafter10years
234.7
$
1,298.1
ActualmaturitiesmaydifferfromcontractualmaturitiesbecauseissuersmayhavetherighttocallorprepaytheobligationsortheCompanymayhavethe
righttoputtheobligationpriortoitscontractualmaturity,aswithvariableratedemandnotes.Variableratedemandnotes,havingafairvalueof$2.9million,
$20.0millionand$214.6millionareincludedinthe"Dueafter1yearthrough5years""Dueafter5yearsthrough10years,"and"Dueafter10years"categories,
respectively,inthetableabove.Thesignificantmajorityoftheheld-to-maturityforeigncorporatedebtsecuritiesareduewithin1year.
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2016
Unrealizedgainsoninvestmentsecurities,beginningofperiod
Unrealizedgains/(losses)
11.0 $
6.2
2015
9.9 $
7.8 $
(9.6)
12.2
2015
8.9
(7.3)
Tax(expense)/benefit
(2.3)
3.6
(4.4)
2.7
Reclassificationofgainsinto"Otherrevenues"
(0.7)
(1.2)
(1.8)
(1.8)
0.3
0.4
0.7
0.6
3.5
(6.8)
6.7
(5.8)
3.1
Taxexpenserelatedtoreclassifications
Netunrealizedgains/(losses)oninvestmentsecurities
Unrealizedgainsoninvestmentsecurities,endofperiod
14.5 $
3.1 $
14.5 $
89.2 $
Unrealizedgainsonhedgingactivities,beginningofperiod
41.4 $
48.6
20.1
(19.8)
(6.2)
38.4
0.2
0.4
2.3
(2.7)
Reclassificationofgainsinto"Transactionfees"
(7.5)
(14.2)
(18.2)
(25.5)
Reclassificationofgainsinto"Foreignexchangerevenues"
(3.4)
(5.9)
(7.8)
(10.3)
0.9
0.9
1.8
1.8
Unrealizedgains/(losses)
Tax(expense)/benefit
Reclassificationoflossesinto"Interestexpense"
Taxexpenserelatedtoreclassifications
Netunrealizedgains/(losses)onhedgingactivities
3.6 $
0.4
0.4
1.0
0.7
10.7
(38.2)
(27.1)
2.4
Unrealizedgainsonhedgingactivities,endofperiod
14.3 $
51.0 $
14.3 $
Foreigncurrencytranslationadjustments,beginningofperiod
51.0
(68.3) $
(51.8) $
(66.0) $
(49.2)
Foreigncurrencytranslationadjustments
(0.6)
(1.7)
(3.9)
(4.3)
Taxexpense
(1.2)
(0.2)
(1.8)
(1.7)
(4.1)
(4.3)
(53.5)
Netforeigncurrencytranslationadjustments
Foreigncurrencytranslationadjustments,endofperiod
(70.1) $
(53.5) $
(70.1) $
Definedbenefitpensionplanadjustments,beginningofperiod
(125.4) $
(125.4) $
(127.1) $
Reclassificationoflossesinto"Costofservices"
2.6
2.8
5.3
5.7
Taxbenefitrelatedtoreclassificationsandother
(0.9)
(1.5)
(1.9)
(2.6)
Netdefinedbenefitpensionplanadjustments
(127.2)
1.7
1.3
3.4
Definedbenefitpensionplanadjustments,endofperiod
(123.7) $
(124.1) $
(123.7) $
(124.1)
Accumulatedothercomprehensiveloss,endofperiod
(165.0) $
(123.5) $
(165.0) $
(123.5)
21
3.1
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Euro
Britishpound
373.6
139.9
Canadiandollar
99.9
Australiandollar
45.8
Swissfranc
42.1
Other
81.8
Contractsnotdesignatedashedges:
Euro
215.6
Britishpound
72.8
Canadiandollar
54.8
Australiandollar
47.7
Singaporedollar
35.6
Indianrupee
28.9
Other(a)
____________________
(a) Comprisedofexposuresto21differentcurrencies.Noneoftheseindividualcurrencyexposuresisgreaterthan$25million.
23
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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. 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). The derivatives written are part of the broader portfolio of
foreign currency positions arising from the Company's cross-currency payments operations, which primarily include spot exchanges of currency in addition to
forwardsandoptions.TheresultingforeignexchangerevenuesfromthetotalportfolioofpositionscompriseBusinessSolutionsforeignexchangerevenues.None
ofthederivativecontractsusedinBusinessSolutionsoperationsaredesignatedasaccountinghedges.Thedurationofthesederivativecontractsatinceptionis
generallylessthanoneyear.
The aggregate equivalent United States dollar notional amount of foreign currency derivative customer contracts held by the Company in its Business
SolutionsoperationsasofJune30,2016wasapproximately$6.0billion.Thesignificantmajorityofcustomercontractsarewritteninmajorcurrenciessuchasthe
Australiandollar,Britishpound,Canadiandollar,andeuro.
Interest
Rate
Hedging
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-basedvariableratepaymentsinordertomanageitsoverallexposuretointerestrates.TheCompanydesignatesthesederivativesasfairvaluehedges.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" in the Condensed
Consolidated Balance Sheets and "Interest expense" in the Condensed Consolidated Statements of Income has been adjusted to include the effects of interest
accruedontheswaps.
TheCompany,attimes,utilizesderivativestohedgetheforecastedissuanceoffixed-ratedebt.Thesederivativesaredesignatedascashflowhedgesofthe
variability 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
"Accumulatedothercomprehensiveloss"intheCondensedConsolidatedBalanceSheets.
TheCompanyheldinterest rate swapsinanaggregate notionalamountof$975.0millionasofJune30,2016andDecember31,2015.Ofthisaggregate
notionalamountheldatJune30,2016,$500.0millionrelatedtonotesduein2017,$300.0millionrelatedtonotesduein2018,and$175.0millionrelatedtonotes
duein2020.
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Derivative Assets
Derivativeshedges:
Balance Sheet
Location
Interestratefairvaluehedges
Otherassets
Foreigncurrencycashflowhedges
Total
Derivativesundesignated:
Otherassets
Total
Totalderivatives
Otherassets
Otherassets
19.6 $
BusinessSolutionsoperations
foreigncurrency(a)
Foreigncurrency
Fair Value
June 30,
2016
$
$
Derivative Liabilities
December 31,
2015
Balance Sheet
Location
7.6
36.8
56.4 $
Otherliabilities
59.7
Otherliabilities
67.3
368.2 $
326.1
4.3
372.5 $
428.9 $
2.9
Otherliabilities
329.0
396.3
Otherliabilities
Fair Value
June 30,
2016
December 31,
2015
0.2 $
8.5
8.7 $
2.4
325.8 $
277.1
4.7
330.5 $
339.2 $
281.3
$
$
2.4
4.2
283.7
____________________
(a) Inmanycircumstances,theCompanyallowsitsBusinessSolutionscustomerstosettlepartoralloftheirderivativecontractspriortomaturity.However,the
offsetting positions originally entered into with financial institution counterparties do not allow for similar settlement. To mitigate this, additional foreign
currencycontractsareenteredintowithfinancialinstitutioncounterpartiestooffsettheoriginaleconomichedgecontracts.Thisfrequentlyresultsinincreases
intheCompany'sderivativeassetsandliabilitiesthatmayexceedthegrowthintheunderlyingderivativesbusiness.
ThefairvaluesofderivativeassetsandliabilitiesassociatedwithcontractsthatincludenettinglanguagethattheCompanybelievestobeenforceablehave
beennettedinthefollowingtablestopresenttheCompany'snetexposurewiththesecounterparties.TheCompany'srightsundertheseagreementsgenerallyallow
for transactions to be settled on a net basis, including upon early termination, which could occur upon the counterparty's default, a change in control, or other
conditions.
Inaddition,certainoftheCompany'sotheragreementsincludenettingprovisions,theenforceabilityofwhichmayvaryfromjurisdictiontojurisdictionand
dependingonthecircumstances.Duetotheuncertaintyrelatedtotheenforceabilityoftheseprovisions,thederivativebalancesassociatedwiththeseagreements
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,theCompanymayrequireitsBusinessSolutionscustomerstomaintaincollateralbalanceswhichmaymitigatetheriskassociatedwithpotential
customerdefaults.
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Net Amounts
Presented
in the Condensed
Consolidated
Balance Sheets
Derivatives Not
Offset
in the Condensed
Consolidated
Balance Sheets
Derivativessubjecttoamasternetting
arrangementorsimilaragreement
260.2 $
260.2 $
(158.2) $
Derivativesthatarenotormaynotbe
subjecttomasternettingarrangementor
similaragreement
168.7
Total
428.9
Derivativessubjecttoamasternetting
arrangementorsimilaragreement
224.3 $
224.3 $
(119.2) $
Derivativesthatarenotormaynotbe
subjecttomasternettingarrangementor
similaragreement
172.0
Total
396.3
Net Amounts
102.0
105.1
Offsetting
of
Derivative
Liabilities
Liabilities
Sheets
Net Amounts
Presented
in the Condensed
Consolidated
Balance Sheets
Derivatives Not
Offset
in the Condensed
Consolidated
Balance Sheets
Derivativessubjecttoamasternetting
arrangementorsimilaragreement
186.2 $
186.2 $
(158.2) $
Derivativesthatarenotormaynotbe
subjecttomasternettingarrangementor
similaragreement
153.0
Total
339.2
Derivativessubjecttoamasternetting
arrangementorsimilaragreement
169.6 $
169.6 $
(119.2) $
Derivativesthatarenotormaynotbe
subjecttomasternettingarrangementor
similaragreement
114.1
Total
283.7
26
Net Amounts
28.0
50.4
Table of Contents
Income Statement
ThefollowingtablessummarizethelocationandamountofgainsandlossesofderivativesintheCondensedConsolidatedStatementsofIncomesegregated
bydesignated,qualifyinghedginginstrumentsandthosethatarenot,forthethreeandsixmonthsendedJune30,2016and2015(inmillions):
FairValueHedges
Thefollowingtablepresentsthelocationandamountofgains/(losses)fromfairvaluehedgesforthethreemonthsendedJune30,2016and2015(inmillions):
Derivatives
Interest
expense
Interestratecontracts
Totalgain/(loss)
Amount
Hedged
Item
4.2
(0.3)
4.2
(0.3)
Income
Statement
Location
Fixedratedebt
Interest
expense
Amount
Income
Statement
Location
Interest
expense
(1.6)
3.5
(1.6)
3.5
Amount
0.1
(0.1)
0.1
(0.1)
Thefollowingtablepresentsthelocationandamountofgains/(losses)fromfairvaluehedgesforthesixmonthsendedJune30,2016and2015(inmillions):
Derivatives
Interest
expense
Interestratecontracts
Totalgain/(loss)
Amount
Hedged
Item
15.4
10.6
15.4
10.6
Income
Statement
Location
Fixedratedebt
Interest
expense
Amount
Income
Statement
Location
Interest
expense
(10.1)
(4.0)
(10.1)
(4.0)
Amount
0.3
0.6
0.3
0.6
CashFlowHedges
Thefollowingtablepresentsthelocationandamountofgains/(losses)fromcashflowhedgesforthethreemonthsendedJune30,2016and2015(inmillions):
Gain/(Loss) Recognized
Gain/(Loss) Reclassified
in OCI on Derivatives
(Effective Portion)
(Effective Portion)
Amount
Derivatives
Foreigncurrency
contracts
Interestrate
contracts(c)
Totalgain/(loss)
20.1
20.1
(19.8)
(19.8)
Income
Statement
Location
Amount
Revenue
Interestexpense
10.9
(0.9)
10.0
27
Income
Statement Location
20.1
Derivative
gains,net
(0.9)
Interestexpense
19.2
Amount
1.0
1.0
0.8
0.8
Table of Contents
Gain/(Loss) Recognized
Gain/(Loss) Reclassified
in OCI on Derivatives
(Effective Portion)
(Effective Portion)
Amount
Derivatives
Foreigncurrency
contracts
Interestrate
contracts(c)
Totalgain/(loss)
(6.2)
(6.2)
Income
Statement
Location
38.4
Revenue
Interestexpense
38.4
Amount
26.0
(1.8)
24.2
Income
Statement Location
35.8
Derivative
gains,net
(1.8)
Interestexpense
34.0
Amount
2.7
2.7
UndesignatedHedges
Thefollowingtablepresentsthelocationandamountofnetgains/(losses)fromundesignatedhedgesforthethreeandsixmonthsendedJune30,2016and
2015(inmillions):
Amount
Three Months Ended
June 30,
Derivatives
Foreigncurrencycontracts(e)
Selling,generalandadministrative
3.1 $
Foreigncurrencycontracts(f)
Derivativegains,net
0.4
Totalgain/(loss)
3.5 $
2016
2015
2015
(11.2) $
(14.5) $
16.1
(0.8)
(0.8)
1.0
(12.0) $
(15.3) $
17.1
____________________
(a)
Thegain/(loss)of$(1.6)millionand$3.5millioninthethreemonthsendedJune30,2016and2015,respectively,consistedofagain/(loss)invalueon
the debt of $(4.3) million and $0.4 million , respectively, and amortization of hedge accounting adjustments of $2.7 million and $3.1 million ,
respectively.Thelossof$10.1millionand$4.0millioninthesixmonthsendedJune30,2016and2015,respectively,consistedofalossinvalueonthe
debtof$15.7millionand$11.2million,respectively,andamortizationofhedgeaccountingadjustmentsof$5.6millionand$7.2million,respectively.
(b)
Theportionofthechangeinfairvalueofaderivativeexcludedfromtheeffectivenessassessmentforforeigncurrencyforwardcontractsdesignatedas
cashflowhedgesrepresentsthedifferencebetweenchangesinforwardratesandspotrates.
(c)
The Company uses derivatives to hedge the forecasted issuance of fixed-rate debt and records the effective portion of the derivative's fair value in
"Accumulated other comprehensive loss" in the Condensed Consolidated Balance Sheets. These amounts are reclassified to "Interest expense" in the
CondensedConsolidatedStatementsofIncomeoverthelifeoftherelatednotes.
(d)
TheCompanyusesforeigncurrencyforwardandoptioncontractsaspartofitsBusinessSolutionspaymentsoperations.Thesederivativecontractsare
excludedfromthistableastheyaremanagedaspartofabroadercurrencyportfoliothatincludesnon-derivativecurrencyexposures.Thegainsandlosses
onthesederivativesareincludedaspartofthebroaderdisclosureofportfoliorevenueforthisbusinessdiscussedabove.
(e)
TheCompanyusesforeigncurrencyforwardcontractstooffsetforeignexchangeratefluctuationsonsettlementassetsandobligationsaswellascertain
foreign currency denominated positions. Foreign exchange gains/(losses) on settlement assets and obligations, cash balances, and other assets and
liabilities,notincludingamountsrelatedtoderivativesactivityasdisplayedaboveandincludedin"Selling,generalandadministrative"intheCondensed
Consolidated Statements of Income were $(9.7)millionand$8.0millionfor the three months ended June 30,2016 and2015, respectively, and $6.7
millionand$(21.5)millionforthesixmonthsendedJune30,2016and2015,respectively.
(f)
ThederivativecontractsusedintheCompany'srevenuehedgingprogramarenotdesignatedashedgesinthefinalmonthofthecontract.
28
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Notes:
5.930%notesdue2016(a)
1,000.0 $
1,000.0
2.875%notesdue2017(a)
500.0
500.0
3.650%notes(effectiverateof4.2%)due2018
400.0
400.0
3.350%notesdue2019(a)
250.0
250.0
5.253%notesdue2020(a)
324.9
324.9
6.200%notesdue2036(a)
500.0
500.0
6.200%notesdue2040(a)
250.0
250.0
5.4
5.5
3,230.3
3,230.4
Otherborrowings
Totalborrowingsatparvalue
Fairvaluehedgeaccountingadjustments,net(b)
17.7
7.6
Unamortizeddiscountanddebtissuancecosts(c)
(19.5)
(22.1)
Totalborrowingsatcarryingvalue(d)
3,228.5 $
3,215.9
____________________
(a)
Thedifferencebetweenthestatedinterestrateandtheeffectiveinterestrateisnotsignificant.
(b)
TheCompanyutilizesinterestrateswapsdesignatedasfairvaluehedgestoeffectivelychangetheinterestratepaymentsonaportionofitsnotesfrom
fixed-ratepaymentstoshort-termLIBOR-basedvariableratepaymentsinordertomanageitsoverallexposuretointerestrates.Thechangesinfairvalue
oftheseinterestrateswapsresultinanoffsettinghedgeaccountingadjustmentrecordedtothecarryingvalueoftherelatednote.Thesehedgeaccounting
adjustmentswillbereclassifiedasreductionstoorincreasesin"Interestexpense"intheCondensedConsolidatedStatementsofIncomeoverthelifeof
therelatednotes,andcausetheeffectiverateofinteresttodifferfromthenotesstatedrate.
(c)
OnJanuary1,2016,theCompanyadoptedanaccountingpronouncementthatrequirescapitalizeddebtissuancecoststobepresentedasareductiontothe
carryingvalueofdebt,withadoptionretrospectiveforperiodspreviouslypresented.Theadoptionofthisstandardresultedinareductionof$9.7million
tothecarryingvalueofborrowingsasofDecember31,2015.
(d)
AsofJune30,2016,theCompanysweighted-averageeffectiverateontotalborrowingswasapproximately4.9%.
ThefollowingsummarizestheCompany'smaturitiesofborrowingsatparvalueasofJune30,2016(inmillions):
Duewithin1year
1,005.4
Dueafter1yearthrough2years
500.0
Dueafter2yearsthrough3years
650.0
Dueafter3yearsthrough4years
324.9
Dueafter5years
750.0
TheCompanysobligationswithrespecttoitsoutstandingNotes,asdescribedabove,rankequally.
30
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31
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Table of Contents
34
Table of Contents
2016
2015
2015
Revenues:
Consumer-to-Consumer:
795.0 $
816.1 $
1,545.6 $
283.4
268.9
534.9
513.0
17.4
16.5
32.7
34.5
1,095.8
1,101.5
2,113.2
2,139.8
Transactionfees
Foreignexchangerevenues
Otherrevenues
Consumer-to-Business:
Transactionfees
Foreignexchangeandotherrevenues
BusinessSolutions:
Foreignexchangerevenues
Transactionfeesandotherrevenues
Other:
Totalrevenues
1,592.3
147.5
151.6
298.2
303.0
6.7
6.3
12.1
12.7
154.2
157.9
310.3
315.7
89.9
87.5
10.9
10.1
20.7
20.2
100.8
97.6
200.0
195.6
179.3
175.4
24.9
26.6
49.9
53.4
Totalconsolidatedrevenues
1,375.7 $
1,383.6 $
2,673.4 $
Operatingincome/(loss):
235.3 $
256.6 $
466.6 $
496.8
17.7
(6.4)
40.6
23.1
BusinessSolutions
5.1
(0.4)
7.5
1.7
Other
2.2
1.0
4.2
260.3 $
250.8 $
518.9 $
Consumer-to-Consumer
Consumer-to-Business(a)
Totalconsolidatedoperatingincome
2,704.5
1.5
523.1
(a)
For the three and six months ended June 30, 2015, Consumer-to-Business operating income/(loss) included $35.3 million of expenses related to a
settlementagreementbetweentheConsumerFinancialProtectionBureauandoneoftheCompany'ssubsidiaries,Paymap,Inc.
35
Table of Contents
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including
related
to
anti-money
laundering
regulations,
anti-fraud
measures,
customer
due
diligence,
agent
and
subagent
due
diligence,
registration
and
monitoring
requirements,
and
consumer
protection
requirements;
liabilities
or
loss
of
business
and
unanticipated
developments
resulting
from
governmental
investigations
and
consent
agreements
with
or
enforcement
actions
by
regulators,
including
those
associated
with
compliance
with
or
failure
to
comply
with
the
settlement
agreement
with
the
State
of
Arizona,
as
amended;
the
potential
impact
on
our
business
from
the
Dodd-Frank
Wall
Street
Reform
and
Consumer
Protection
Act
(the
"Dodd-Frank
Act"),
as
well
as
regulations
issued
pursuant
to
it
and
the
actions
of
the
Consumer
Financial
Protection
Bureau
and
similar
legislation
and
regulations
enacted
by
other
governmental
authorities
related
to
consumer
protection;
liabilities
resulting
from
litigation,
including
class-action
lawsuits
and
similar
matters,
including
costs,
expenses,
settlements
and
judgments;
failure
to
comply
with
regulations
and
evolving
industry
standards
regarding
consumer
privacy
and
data
use
and
security;
effects
of
unclaimed
property
laws;
failure
to
maintain
sufficient
amounts
or
types
of
regulatory
capital
or
other
restrictions
on
the
use
of
our
working
capital
to
meet
the
changing
requirements
of
our
regulators
worldwide;
changes
in
accounting
standards,
rules
and
interpretations
or
industry
standards
affecting
our
business;
and
(iii)
other
events,
such
as:
adverse
tax
consequences
from
our
spin-off
from
First
Data
Corporation;
catastrophic
events;
and
management's
ability
to
identify
and
manage
these
and
other
risks.
Overview
Wearealeadingproviderofmoneymovementandpaymentservices,operatinginthreebusinesssegments:
Consumer-to-Consumer
- The Consumer-to-Consumer operating segment facilitates money transfers between two consumers, primarily through a
networkofthird-partyagents.Ourmulti-currency,real-timemoneytransferserviceisviewedbyusasoneinterconnectedglobalnetworkwhereamoney
transfercanbesentfromonelocationtoanother,aroundtheworld.Ourmoneytransferservicesareavailableforinternationalcross-bordertransfers-that
is, the transfer of funds from one country to another - and, in certain countries, intra-country transfers - that is, money transfers from one location to
anotherinthesamecountry.Thissegmentalsoincludesmoneytransfertransactionsthatcanbeinitiatedthroughwebsitesandmobiledevices.
Consumer-to-Business
-TheConsumer-to-Businessoperatingsegmentfacilitatesbillpaymentsfromconsumerstobusinessesandotherorganizations,
including utilities, auto finance companies, mortgage servicers, financial service providers, government agencies and other businesses. The significant
majorityofthesegment'srevenuewasgeneratedintheUnitedStatesduringallperiodspresented,withtheremainderprimarilygeneratedinArgentina.
Business
Solutions
- The Business Solutions operating segment facilitates payment and foreign exchange solutions, primarily cross-border, crosscurrencytransactions,forsmallandmediumsizeenterprisesandotherorganizationsandindividuals.Themajorityofthesegment'sbusinessrelatesto
exchangesofcurrencyatspotrates,whichenablecustomerstomakecross-currencypayments.Inaddition,incertaincountries,wewriteforeigncurrency
forwardandoptioncontractsforcustomerstofacilitatefuturepayments.
Allbusinessesthathavenotbeenclassifiedintheabovesegmentsarereportedas"Other"andincludeourmoneyorderandotherbusinessesandservices,in
additiontocostsforthereviewandclosingofacquisitions.
Corporate costs, including stock-based compensation and other overhead, are allocated to the segments primarily based on a percentage of the segments'
revenuecomparedtototalrevenue.
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Table of Contents
Results of Operations
ThefollowingdiscussionofourconsolidatedresultsofoperationsandsegmentresultsreferstothethreeandsixmonthsendedJune30,2016comparedtothe
same periods in 2015. The results of operations should be read in conjunction with the discussion of our segment results of operations, which provide more
detaileddiscussionsconcerningcertaincomponentsoftheCondensedConsolidatedStatementsofIncome.Allsignificantintercompanyaccountsandtransactions
betweenoursegmentswereeliminatedandthebelowinformationhasbeenpreparedinconformitywithgenerallyacceptedaccountingprinciplesintheUnited
States of America ("GAAP"). All amounts provided in this section are rounded to the nearest tenth of a million, except as otherwise noted. As a result, the
percentagechangesandmarginsdisclosedhereinmaynotrecalculatepreciselyusingtheroundedamountsprovided.
OuroperatingincomeforthethreeandsixmonthsendedJune30,2015wasimpactedby$35.3millionofexpensesrelatedtorestitution,penalties,andother
costsasaresultofasettlementagreementbetweentheConsumerFinancialProtectionBureauandoneofoursubsidiaries,Paymap,Inc.,whichoperatessolelyin
the United States (the "Paymap Settlement Agreement"). These charges are reflected within "Selling, general and administrative" expenses in our Condensed
ConsolidatedStatementsofIncomeandhavebeenrecognizedwithinourConsumer-to-Businessoperatingsegment.
ThefollowingtablesetsforthourconsolidatedresultsofoperationsforthethreeandsixmonthsendedJune30,2016and2015.
Revenues:
Transactionfees
2016
2015
961.3 $
378.8
Foreignexchangerevenues
Otherrevenues
Totalrevenues
Expenses:
% Change
2015
% Change
988.3
(3)% $
1,880.3 $
1,936.9
(3)%
362.1
5%
724.3
700.1
3%
35.6
33.2
7%
68.8
67.5
2%
1,375.7
1,383.6
(1)%
2,673.4
2,704.5
(1)%
Costofservices
821.9
799.4
3%
1,601.3
1,571.2
2%
Selling,generalandadministrative
293.5
333.4
(12)%
553.2
610.2
(9)%
1,115.4
1,132.8
(2)%
2,154.5
2,181.4
(1)%
260.3
250.8
4%
518.9
523.1
(1)%
Totalexpenses
Operatingincome
Otherincome/(expense):
Interestincome
0.7
2.5
(70)%
1.6
5.4
(70)%
Interestexpense
(41.0)
(43.1)
(5)%
(81.5)
(84.9)
(4)%
Derivativegains,net
1.4
(a)
1.9
1.0
94%
Otherincome/(expense),net
1.1
(3.3)
(a)
(0.9)
(5.1)
(83)%
Totalotherexpense,net
(37.8)
(43.9)
(14)%
(78.9)
(83.6)
(6)%
Incomebeforeincometaxes
222.5
206.9
8%
440.0
439.5
0%
16.9
17.6
(4)%
48.7
46.3
5%
205.6 $
189.3
391.3 $
393.2
0%
Provisionforincometaxes
Netincome
Earningspershare:
Basic
0.42 $
0.37
14% $
0.79 $
0.76
4%
Diluted
0.42 $
0.36
17% $
0.79 $
0.75
5%
Weighted-averagesharesoutstanding:
Basic
Diluted
____________
(a)
9% $
490.3
515.2
495.1
518.1
493.0
519.8
498.1
522.5
Calculationnotmeaningful
38
Table of Contents
Revenues overview
ForboththethreeandsixmonthsendedJune30,2016comparedtothecorrespondingperiodsintheprioryear,consolidatedrevenuesdecreased1%.This
wasprimarilyduetothestrengtheningoftheUnitedStatesdollarcomparedtoforeigncurrencies,whichnegativelyimpactedrevenueby4%forboththethreeand
sixmonthsendedJune30,2016,netoftheimpactofforeigncurrencyhedges.Thisdecreasewaspartiallyoffsetbytransactiongrowthof3%inourConsumer-toConsumersegmentforboththethreeandsixmonthsendedJune30,2016.
FluctuationsintheexchangeratebetweentheUnitedStatesdollarandothercurrencies,netoftheimpactofforeigncurrencyhedges,resultedinareductionto
revenuesforthethreeandsixmonthsendedJune30,2016of$48.9millionand$106.3million,respectively,relativetothecorrespondingperiodsintheprior
year. Foreigncurrency hedges benefited revenues by$10.9millionand$26.0millionforthethreeandsixmonthsendedJune30,2016,respectively.Weuse
foreign currency forwards tohedge certain foreign exchange impacts onourforecasted revenues.Totheextent thesederivatives are effective inmanaging our
foreignexchangerisk,wereflectthehedgeimpactinrevenuesintheperiodthehedgedrevenuesarerecorded.
Operating expenses overview
Enhanced
regulatory
compliance
Thefinancialservicesindustry,includingmoneyservicesbusinesses,continuestobesubjecttoincreasinglystrictlegalandregulatoryrequirements,andwe
regularlyreviewourcomplianceprograms.Inconnectionwiththesereviews,andinlightofgrowingandrapidlyevolvingregulatorycomplexityandheightened
attention of, and increased dialogue with, governmental and regulatory authorities related to our compliance activities, we have made, and continue to make
enhancementstoourprocessesandsystemsdesignedtodetectandpreventmoneylaundering,terroristfinancing,andfraudandotherillicitactivity,alongwith
enhancements to improve consumer protection related to the Dodd-Frank Act and similar regulations outside the United States, and other matters. In coming
periods,weexpecttheseenhancementswillcontinuetoresultinchangestocertainofourbusinesspracticesandincreasedcosts.Someofthesechangeshavehad,
andwebelievewillcontinuetohave,anadverseeffectonourbusiness,financialconditionandresultsofoperations.
Cost
of
services
Costofservicesprimarilyconsistsofagentcommissions,whichrepresentedapproximately60%oftotalcostofservicesforboththe threeandsixmonths
endedJune30,2016.CostofservicesincreasedforboththethreeandsixmonthsendedJune30,2016comparedtothecorrespondingperiodsintheprioryeardue
toincreasedtechnologyexpenses,partiallyoffsetbyadecreaseinagentcommissions,whichgenerallyfluctuatewithrevenues.
Selling,
general
and
administrative
Selling,generalandadministrativeexpensesdecreasedforboththethreeandsixmonthsendedJune30,2016comparedtothecorrespondingperiodsinthe
prioryearduetothePaymapSettlementAgreementof$35.3millionthatwasrecordedinthesecondquarterof2015andreductionsinemployeecompensationand
other costs, partially offset by an accrual related to the United States Federal Trade Commission (the "FTC") matter, as described in Part II, Item I, Legal
Proceedings
.Additionally,forbothperiodspresented,thestrengtheningoftheUnitedStatesdollarcomparedtoforeigncurrenciesresultedinapositiveimpacton
thetranslationofourexpenses.
Operating
income
Consolidated operating income increased 4% and decreased 1% during the three and six months ended June 30, 2016 , respectively, compared to the
correspondingperiodsintheprioryearasaresultofthechangesinrevenueandoperatingexpensesdescribedabove.ThestrengtheningoftheUnitedStatesdollar
comparedtoforeigncurrencies,netoftheimpactofforeigncurrencyhedges,negativelyimpactedoperatingincomebyapproximately9%and8%forthethreeand
sixmonthsendedJune30,2016comparedtothecorrespondingperiodsintheprioryear,respectively.
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Table of Contents
Total
other
expense,
net
ForthethreeandsixmonthsendedJune30,2016comparedtothecorrespondingperiodsintheprioryear,totalotherexpense,netdecreasedby14%and6%,
respectively,duetolowerinterestexpenseprimarilyrelatedtoloweraveragedebtbalancesoutstanding.Averagedebtbalancesoutstandingwere$3,225.2million
and $3,730.3 million for the three months ended June 30, 2016 and2015, respectively, and $3,225.5 million and $3,729.2 million for the sixmonthsended
June30,2016and2015,respectively.ThedecreaseinaveragedebtbalancesoutstandingduringthethreeandsixmonthsendedJune30,2016comparedtothe
correspondingperiodsintheprioryearwasprimarilyduetotherepaymentof$250millionofournotesinAugust2015and$250millionofournotesinDecember
2015.
Income
taxes
Oureffectivetaxratesonpre-taxincomewere7.6%and8.5%forthethreemonthsendedJune30,2016and2015,respectively,and11.1%and10.5%forthe
sixmonthsendedJune30,2016and2015,respectively.ThedecreaseinoureffectivetaxrateforthethreemonthsendedJune30,2016comparedtotheprior
period was primarily due to various discrete items, including the tax-related effects of an accrual for the FTC matter, as discussed earlier, and changes in tax
contingencyreserves,partiallyoffsetbysmallertaxplanningbenefitsinthecurrentperiod.TheincreaseinoureffectivetaxrateforthesixmonthsendedJune30,
2016comparedtothepriorperiodwasprimarilyduetosmallertaxplanningbenefitsinthecurrentperiodandchangesinthecompositionbetweenhigher-taxed
and lower-taxed foreign earnings, partially offset by various discrete items, including the tax-related effects of the FTC matter accrual, and changes in tax
contingencyreserves.
Wecontinuetobenefitfromasignificantproportionofprofitsbeingforeign-derivedandgenerallytaxedatlowerratesthanourcombinedfederalandstatetax
ratesintheUnitedStates.FortheyearendedDecember31,2015,103%ofourpre-taxincomewasderivedfromforeignsources,andwecurrentlyexpectthat
approximately99%ofourpre-taxincomewillbederivedfromforeignsourcesfortheyearendingDecember31,2016.Ourforeignpre-taxincomeissubjecttotax
inmultipleforeignjurisdictions,virtuallyallofwhichhavestatutoryincometaxrateslowerthantheUnitedStates.Whiletheincometaximposedbyanyone
foreigncountryisnotmaterialtous,ouroveralleffectivetaxratecouldbeadverselyaffectedbychangesintaxlaws,bothforeignanddomestic.Certainportions
ofourforeignsourceincomearesubjecttoUnitedStatesfederalandstateincometaxasearnedduetothenatureoftheincome,anddividendrepatriationsofour
foreignsourceincomearegenerallysubjecttoUnitedStatesfederalandstateincometax.
Wehaveestablishedcontingencyreservesforavarietyofmaterial,knowntaxexposures.AsofJune30,2016,thetotalamountoftaxcontingencyreserves
was$114.1million,includingaccruedinterestandpenalties,netofrelateditems.Ourtaxreservesreflectourjudgmentastotheresolutionoftheissuesinvolved
ifsubjecttojudicialrevieworothersettlement.Whilewebelievethatourreservesareadequatetocoverreasonablyexpectedtaxrisks,therecanbenoassurance
that,inallinstances,anissueraisedbyataxauthoritywillberesolvedatafinancialcostthatdoesnotexceedourrelatedreserve.Withrespecttothesereserves,
ourincometaxexpensewouldinclude(i)anychangesintaxreservesarisingfrommaterialchangesinfactsandcircumstances(i.e.newinformation)surroundinga
taxissueduringtheperiodand(ii)anydifferencefromourtaxpositionasrecordedinthefinancialstatementsandthefinalresolutionofataxissueduringthe
period.Suchresolutioncouldmateriallyincreaseordecreaseincometaxexpenseinourconsolidatedfinancialstatementsinfutureperiodsandcouldimpactour
operatingcashflows.
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Table of Contents
Earnings
per
share
DuringthethreemonthsendedJune30,2016and2015,basicearningspersharewere$0.42and$0.37,respectively,anddilutedearningspersharewere
$0.42and$0.36,respectively.DuringthesixmonthsendedJune30,2016and2015,basicearningspersharewere$0.79and$0.76,respectively,anddiluted
earningspersharewere$0.79and$0.75,respectively.OutstandingoptionstopurchaseWesternUnionstockandunvestedsharesofrestrictedstockareexcluded
from basic shares outstanding. Diluted earnings per share reflects the potential dilution that could occur if outstanding stock options at the presented dates are
exercisedandsharesofrestrictedstockhavevested.ForthethreemonthsendedJune30,2016and2015,therewere3.3millionand1.5million,respectively,of
outstandingoptionstopurchasesharesofWesternUnionstockexcludedfromthedilutedearningspersharecalculationunderthetreasurystockmethodastheir
effectwasanti-dilutive.ForthesixmonthsendedJune30,2016and2015,therewere4.6millionand5.2million,respectively,ofoutstandingoptionstopurchase
sharesofWesternUnionstockexcludedfromthedilutedearningspersharecalculationunderthetreasurystockmethodastheireffectwasanti-dilutive.
EarningspershareincreasedforboththethreeandsixmonthsendedJune30,2016comparedtothecorrespondingperiodsintheprioryearduetolower
weighted-averagesharesoutstanding,andearningspershareforthethreemonthsendedJune30,2016werealsopositivelyimpactedbythepreviouslydescribed
factors impacting netincome. Thelowernumber ofshares outstanding wasduetostock repurchases exceeding stockissuances related totheCompany'sstock
compensationprograms.
Segment Discussion
Wemanageourbusinessaroundtheconsumersandbusinessesweserveandthetypesofservicesweoffer.Eachofourthreesegmentsaddressesadifferent
combination of consumer groups, distribution networks and services offered. Our segments are Consumer-to-Consumer, Consumer-to-Business and Business
Solutions.Businessesandservicesnotconsideredpartofthesesegmentsarecategorizedas"Other."
ThefollowingtablesetsforththecomponentsofsegmentrevenuesasapercentageoftheconsolidatedtotalsforthethreeandsixmonthsendedJune30,2016
and2015.
2016
2016
2015
2015
Consumer-to-Consumer
80%
80%
79%
79%
Consumer-to-Business
11%
11%
12%
12%
BusinessSolutions
7%
7%
7%
7%
Other
2%
2%
2%
2%
100%
100%
100%
100%
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Consumer-to-Consumer Segment
ThetablebelowsetsforthourConsumer-to-ConsumersegmentresultsofoperationsforthethreeandsixmonthsendedJune30,2016and2015.
Three Months Ended
June 30,
Revenues:
Transactionfees
2016
Foreignexchangerevenues
Otherrevenues
2015
% Change
2016
2015
1,545.6
% Change
795.0
816.1
(3)% $
1,592.3
283.4
268.9
5%
534.9
513.0
(3)%
4%
17.4
16.5
5%
32.7
34.5
(5)%
Totalrevenues
1,095.8
1,101.5
(1)% $
2,113.2
2,139.8
(1)%
Operatingincome
235.3
256.6
(8)% $
466.6
496.8
(6)%
Operatingincomemargin
Keyindicator:
Consumer-to-Consumertransactions
21%
23%
67.7
65.8
22%
3%
23%
131.4
127.5
3%
WeviewourConsumer-to-Consumermoneytransferserviceasoneinterconnectedglobalnetworkwhereamoneytransfercanbesentfromonelocationto
another,aroundtheworld.Thesegmentincludesfivegeographicregionswhosefunctionsarelimitedtogenerating,managingandmaintainingagentrelationships
andlocalizedmarketingactivities.WeincludeouronlinemoneytransferservicesinitiatedthroughWesternUnionbrandedwebsites("westernunion.com")inour
regions.Bymeansofcommonprocessesandsystems,theseregions,includingwesternunion.com,createaninterconnectednetworkforconsumertransactions,
therebyconstitutingoneglobalConsumer-to-Consumermoneytransferbusinessandoneoperatingsegment.
Significantallocationsaremadeindeterminingthetransactionandrevenuechangesundertheregionalviewinthetablethatfollows.Thegeographicsplitfor
transactionsandrevenue,includingtransactionsinitiatedthroughwesternunion.com,isdeterminedbasedupontheregionwherethemoneytransferisinitiatedand
theregionwherethemoneytransferispaid.Fortransactionsoriginatedandpaidindifferentregions,wesplitthetransactioncountandrevenuebetweenthetwo
regions,witheachregionreceiving50%.Formoneytransfersinitiatedandpaidinthesameregion,100%ofthetransactionsandrevenueareattributedtothat
region.Includedineachregion'stransactionandrevenuepercentagesinthetablesbelowaretransactionsinitiatedthroughwesternunion.comforthethreeandsix
monthsendedJune30,2016.RegionalresultsforthethreeandsixmonthsendedJune30,2015havealsobeenadjustedtoincludetransactionsinitiatedthrough
westernunion.com.PriortoJanuary1,2016,wereportedwesternunion.cominitiatedtransactionsasaseparateregionwith100%ofthecorrespondingtransactions
andrevenueattributedtothatregion.Wherereportedseparatelyinthediscussionbelow,westernunion.comconsistsof100%ofthetransactionsandrevenuethat
areinitiatedthroughwesternunion.com,regardlessofwherethetransactionsarepaidout.
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DuetothesignificanceofourConsumer-to-ConsumersegmenttoouroverallresultsandtheeffectthatforeignexchangefluctuationsagainsttheUnitedStates
dollarcanhaveonourreportedrevenues,constantcurrencyresultshavebeenprovidedinthetablebelow.Constantcurrencyresultsassumeforeignrevenuesare
translatedfromforeigncurrenciestotheU.S.dollar,netoftheeffectofforeigncurrencyhedges,atratesconsistentwiththoseintheprioryear.Constantcurrency
isanon-GAAPfinancialmeasureandisprovidedsothatrevenuecanbeviewedwithouttheeffectoffluctuationsinforeigncurrencyexchangerates,whichis
consistent with how management evaluates our revenue results and trends. We believe that this measure provides management and investors with information
about operating results and trends that eliminates currency volatility and provides greater clarity regarding, and increases the comparability of, our underlying
resultsandtrends.Thisconstantcurrencydisclosureisprovidedinadditionto,andnotasasubstitutefor,thepercentagechangeinrevenueonaGAAPbasisfor
thethreeandsixmonthsendedJune30,2016comparedtothecorrespondingperiodsintheprioryear.Othercompaniesmaycalculateanddefinesimilarlylabeled
itemsdifferently,whichmaylimittheusefulnessofthismeasureforcomparativepurposes.
Thetablebelowsetsforthrevenueandtransactionchangesbygeographicregioncomparedtothecorrespondingperiodsintheprioryear:
Consumer-to-Consumer
regionalgrowth/(decline):
Foreign
Exchange
Translation
Impact
Constant Currency
Revenue
Growth/(Decline) (a) (Non-GAAP)
NorthAmerica
6%
(1)%
7%
EuropeandCIS
(3)%
(2)%
(1)%
MiddleEastandAfrica
(4)%
(1)%
(3)%
AsiaPacific("APAC")
(3)%
(2)%
LatinAmericaandthe
Caribbean("LACA")
0%
(6)%
(1)%
(3)%
TotalConsumer-toConsumer
growth/(decline):
Transaction
Growth/(Decline)
Revenue
Growth/(Decline), as
Reported - (GAAP)
Foreign
Exchange
Translation
Impact
Constant Currency
Revenue
Growth/(Decline) (a) (Non-GAAP)
Transaction
Growth/(Decline)
7%
5%
(1)%
6%
3%
(3)%
(2)%
(1)%
3%
(5)%
(4)%
(2)%
(2)%
(4)%
(1)%
(3)%
(4)%
(3)%
(1)%
(3)%
6%
12%
(2)%
(6)%
4%
11%
2%
3%
(1)%
(2)%
1%
3%
7%
westernunion.com(b)
19%
(1)%
20%
25%
17%
(2)%
19%
25%
____________
(a)
ConstantcurrencyrevenuegrowthassumesthatrevenuesdenominatedinforeigncurrenciesaretranslatedtotheU.S.dollar,netoftheeffectofforeign
currencyhedges,atratesconsistentwiththoseinthepriorperiods.
(b)
Westernunion.comrevenueshavealsobeenincludedineachregion,asdescribedearlier.
ThetablebelowsetsforthregionalrevenuesasapercentageofourConsumer-to-ConsumerrevenueforthethreeandsixmonthsendedJune30,2016and
2015.
2016
Consumer-to-Consumerrevenueasapercentageofsegmentrevenue:
2015
2015
NorthAmerica
28%
27%
28%
27%
EuropeandCIS
26%
26%
26%
26%
MiddleEastandAfrica
20%
21%
20%
21%
APAC
15%
15%
15%
15%
LACA
11%
11%
11%
11%
Westernunion.com,whichisincludedintheregionalpercentagesabove,representedapproximately8%ofourConsumer-to-Consumerrevenueforboththe
threeandsixmonthsendedJune30,2016.Westernunion.comrepresentedapproximately6%ofourConsumer-to-Consumerrevenueforboththethreeandsix
monthsendedJune30,2015.
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Our consumers transferred $20.4 billion and $20.8 billion in Consumer-to-Consumer principal for the three months ended June 30, 2016 and 2015 ,
respectively,ofwhich$18.5billionand$18.8billionrelatedtocross-borderprincipal,forthecorrespondingperiodsdescribedabove.Ourconsumerstransferred
$39.5billionand$40.3billioninConsumer-to-ConsumerprincipalforthesixmonthsendedJune30,2016and2015,respectively,ofwhich$35.8billionand
$36.3billionrelatedtocross-borderprincipal,forthecorrespondingperiodsdescribedabove.
Consumer-to-Consumer
segment
revenues
Consumer-to-Consumermoneytransferrevenuedecreased1%forboththethreeandsixmonthsendedJune30,2016,comparedtothecorrespondingperiods
intheprioryear,ontransactiongrowthof3%forbothperiods.ThestrengtheningoftheUnitedStatesdollarcomparedtoforeigncurrencies,netoftheimpactof
foreigncurrencyhedges,negativelyimpactedrevenueby3%and2%forthethreeandsixmonthsendedJune30,2016,respectively.
FluctuationsintheexchangeratebetweentheUnitedStatesdollarandothercurrencies,netoftheimpactofforeigncurrencyhedges,resultedinareductionto
revenuesof$23.0millionand$53.5millionforthethreeandsixmonthsendedJune30,2016,respectively,relativetothecorrespondingperiodsintheprioryear.
Foreigncurrencyhedgesbenefitedrevenuesby$10.9millionand$26.0millionforthethreeandsixmonthsendedJune30,2016,respectively.
OurNorthAmericaregionexperiencedincreasedrevenueof6%and5%forthethreeandsixmonthsendedJune30,2016,comparedtothecorresponding
periodsintheprioryear,respectively,andtransactiongrowthof7%forboththethreeandsixmonthsendedJune30,2016.Theincreaseinrevenuewasprimarily
duetotransactiongrowthinourUnitedStatesoutboundservices,includingourUnitedStatestoMexicoandLatinAmericacorridors.
OurEuropeandCISregionexperienceddecreasedrevenueof3%forboththethreeandsixmonthsendedJune30,2016,comparedtothecorresponding
periodsintheprioryear,andtransactiongrowthof3%inbothperiods.FluctuationsintheexchangeratebetweentheUnitedStatesdollarandtheeuroandother
currencies,netoftheimpactofforeigncurrencyhedges,negativelyimpactedrevenueby2%forboththethreeandsixmonthsendedJune30,2016.Revenuewas
alsonegativelyimpactedbydeclinesinRussia,partiallyoffsetbygrowthinGermany.
Our Middle East and Africa region experienced decreased revenue of 4% for both the three and six months ended June 30, 2016 , compared to the
correspondingperiodsintheprioryear,andtransactiondeclinesof5%and4%,respectively.FluctuationsintheexchangeratebetweentheUnitedStatesdollar
andothercurrenciesnegativelyimpactedrevenueby1%and2%forthethreeandsixmonthsendedJune30,2016,respectively.DeclinesinNigeriaandLibya
alsocontributedtothedecreaseinrevenue.
Our APAC region experienced decreased revenue of 3% and 4% for the three and six months ended June 30, 2016 , respectively, compared to the
correspondingperiodsintheprioryear,andtransactiondeclinesof3%forboththethreeandsixmonthsendedJune30,2016.Fluctuationsintheexchangerate
betweentheUnitedStatesdollarandothercurrencies,netoftheimpactofforeigncurrencyhedges,negativelyimpactedrevenueby2%and3%forthethreeand
sixmonthsendedJune30,2016,respectively.DeclinesinIndiacontributedtothedecreaseinrevenueforthethreemonthsendedJune30,2016.Additionally,
declinesinthePhilippinesnegativelyimpactedrevenueforthethreeandsixmonthsendedJune30,2016,comparedtothecorrespondingperiodsintheprioryear.
OurLACAregionexperiencedflatrevenueforthethreemonthsendedJune30,2016anddecreasedrevenueof2%forthesixmonthsendedJune30,2016,
comparedtothecorresponding periodsintheprioryear,andtransactiongrowthof12%and11%,respectively. Fluctuations intheexchange ratebetweenthe
UnitedStatesdollarandothercurrencies,primarilytheArgentinepeso,negativelyimpactedrevenueby6%forboththethreeandsixmonthsendedJune30,2016
. Price reductions implemented in Argentina also negatively impacted revenue, partially offset by growth from transactions originated in the United States, as
discussedabove.
ForeignexchangerevenuesinourConsumer-to-Consumersegmentincreased5%and4%,forthethreeandsixmonthsendedJune30,2016,comparedtothe
correspondingperiodsintheprioryear,respectively,primarilyduetoincreasesinforeignexchangespreadswhichwebeganimplementingduringthefirstquarter
of2015thatwerelargelyoffsetbycorrespondingreductionsintransactionfeesincertaincorridors.
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Wehavehistoricallyimplementedandwilllikelycontinuetoimplementpricereductionsfromtimetotimeinresponsetocompetitionandotherfactors.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
transactionvolumesdonotincreasesufficiently.Consumer-to-Consumernetpricingchangeshadaminimaleffectonsegmentrevenueforthethreemonthsended
June30,2016andnegativelyimpactedsegmentrevenueby1%forthesixmonthsendedJune30,2016.
Operating
income
Consumer-to-Consumer operating income declined 8% and 6% for the three and six months ended June 30, 2016 , respectively, compared to the
correspondingperiodsintheprioryear.ResultsforthethreeandsixmonthsendedJune30,2016wereimpactedbyincreasedtechnologyexpensesandanaccrual
relatedtotheFTCmatter,asdescribedinPartII,ItemI,Legal
Proceedings
,partiallyoffsetbyreductionsinemployeecompensationandothercosts.Revenues
andexpenses werealsoimpacted bythestrengthening oftheUnited Statesdollar compared toforeign currencies. Operatingmargins inthesegment werealso
impactedbythesefactors.
Consumer-to-Business Segment
ThetablebelowsetsforthourConsumer-to-BusinesssegmentresultsofoperationsforthethreeandsixmonthsendedJune30,2016and2015.Toassistinan
understandingofthecomparableperiods'results,weareincludingadditionallineitemsinthetablebelowreflectingConsumer-to-Businessoperatingincomeand
operating income margin excluding the effect of the $35.3 million of expenses related to the Paymap Settlement Agreement that were recorded in the second
quarterof2015.Operatingincome,excludingPaymapSettlementAgreementandoperatingincomemargin,excludingPaymapSettlementAgreement,arenonGAAPfinancialmeasuresandareusedbymanagementinevaluatingtheoperatingincomeresultsandtrendsofourConsumer-to-Businesssegment.Webelieve
that,byadjustingoperatingincomeandoperatingincomemargintoexcludetheeffectsofsignificantchargesassociatedwiththesettlementoflitigationthatcan
impactoperatingtrends,managementandinvestorsareprovidedwithmeasuresthatincreasethecomparabilityofourunderlyingoperatingresults.Thisdisclosure
isprovidedinadditionto,andnotasasubstitutefor,operatingincome/(loss)andoperatingincome/(loss)marginonaGAAPbasis.
(dollars in millions)
Revenues:
Transactionfees
2016
Foreignexchangeandotherrevenues
2015
147.5
6.7
% Change
(3)% $
298.2
6.3
6%
12.1
310.3
40.6
Totalrevenues
(2)% $
Operatingincome/(loss)(GAAP)
17.7
(6.4)
(a)
35.3
28.9
Operatingincome/(loss)margin(GAAP)
Operatingincomemargin,excludingPaymap
SettlementAgreement(Non-GAAP)
____________
(a)Calculationnotmeaningfulornotapplicable
17.7
157.9
2015
151.6
154.2
Operatingincome,excludingPaymapSettlement
Agreement(Non-GAAP)
2016
PaymapSettlementAgreement
40.6
% Change
303.0
(2)%
12.7
(5)%
315.7
(2)%
23.1
(a)
35.3
58.4
12%
(4)%
13%
7%
12%
18%
13%
18%
Revenues
ForboththethreeandsixmonthsendedJune30,2016comparedtothecorrespondingperiodsintheprioryear,Consumer-to-Businessrevenuedecreased2%
. This was primarily due to declines related to foreign currency translation in our bill payments in Argentina, partially offset byincreases in our United States
electronicbillpayments.ThestrengtheningoftheUnitedStatesdollaragainsttheArgentinepesonegativelyimpactedourConsumer-to-Businessrevenuegrowth
by14%forboththethreeandsixmonthsendedJune30,2016.
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Table of Contents
Operating
income/(loss)
ForthethreeandsixmonthsendedJune30,2016comparedtothecorrespondingperiodsintheprioryear,operatingincomeincreased,primarilyduetothe
PaymapSettlementAgreementthatwasrecordedinthesecondquarterof2015,partiallyoffsetbyincreasedtechnologyexpensesandchangesincustomermix.
Thechangesinoperatingmarginsinthesegmentwerealsoduetothesefactors.
Business Solutions
ThefollowingtablesetsforthourBusinessSolutionssegmentresultsofoperationsforthethreeandsixmonthsendedJune30,2016and2015.
(dollars in millions)
Revenues:
Foreignexchangerevenues
2016
Transactionfeesandotherrevenues
2015
87.5
3% $
10.9
10.1
8%
3% $
Totalrevenues
97.6
Operatingincome/(loss)
5.1
(0.4)
5%
0%
2016
89.9
100.8
Operatingincome/(loss)margin
____________
% Change
(a)
(a)
2015
179.3
20.7
175.4
2%
20.2
2%
200.0
195.6
7.5
1.7
4%
% Change
2%
(a)
1%
Calculationnotmeaningful.
Revenues
ForthethreeandsixmonthsendedJune30,2016comparedtothecorrespondingperiodsintheprioryear,BusinessSolutionsrevenueincreased3%and2%,
respectively.FluctuationsintheexchangeratebetweentheUnitedStatesdollarandothercurrenciesnegativelyimpactedrevenuegrowthby3%and4%forthe
threeandsixmonthsendedJune30,2016,respectively.TheincreaseinrevenueforthethreeandsixmonthsendedJune30,2016comparedtothecorresponding
periodsintheprioryearwasprimarilyduetoincreasesinEurope.ForthesixmonthsendedJune30,2016comparedtotheprioryear,theincreaseinrevenuewas
alsoduetoanincreaseinsalesofourhedgingproducts.
Operating
income/(loss)
ForthethreeandsixmonthsendedJune30,2016,operating income increased compared tothe corresponding periods inthe prior year as aresult ofthe
revenueincreasesdescribedaboveandreductionsinemployeecompensationcosts.
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Other
ThefollowingtablesetsforthOtherresultsforthethreeandsixmonthsendedJune30,2016and2015.
(dollars in millions)
Revenues
Operatingincome
____________
(a)
2015
24.9 $
26.6
2.2 $
1.0
% Change
(6)% $
(a)
2015
49.9 $
53.4
4.2 $
1.5
% Change
(7)%
(a)
Calculationnotmeaningful.
Revenues
ForthethreeandsixmonthsendedJune30,2016comparedtothecorrespondingperiodsintheprioryear,Otherrevenuedecreased6%and7%,respectively,
duetodeclinesinourprepaidservices,partiallyoffsetbyincreasesinourmoneyorderbusiness.
Operating
income
For the three and six months ended June 30, 2016 compared to the corresponding periods in the prior year, Other operating income increased due to a
reductionofexpensesinourprepaidservicesandincreasedinvestmentincomeandotherrevenuesinourmoneyorderbusiness.
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Investmentsecurities,classifiedwithin"Settlementassets,"were$1.3billionand$1.2billionasofJune30,2016andDecember31,2015,respectively,and
consistprimarilyofhighly-ratedstateandmunicipaldebtsecurities,includingfixedratetermnotesandvariableratedemandnotes.Thesubstantialmajorityofour
investmentsecuritiesareheldinordertocomplywithstatelicensingrequirementsintheUnitedStatesandarerequiredtohavecreditratingsof"A-"orbetterfrom
amajorcreditratingagency.
Investmentsecuritiesareexposedtomarketriskduetochangesininterestratesandcreditrisk.Weregularlymonitorcreditriskandattempttomitigateour
exposure by investing in highly-rated securities and diversifying our investment portfolio. Our investment securities are also actively managed with respect to
concentration.AsofJune30,2016,allinvestmentswithasingleissuerandeachindividualsecuritywerelessthan10%ofourinvestmentsecuritiesportfolio.
Cash Flows from Operating Activities
Cashprovidedbyoperatingactivitiesincreasedto$485.6millionduringthesixmonthsendedJune30,2016,from$465.7millioninthecomparableperiodin
the prior year. Cash provided by operating activities is impacted by changes to our consolidated net income, in addition to fluctuations in our working capital
balances,amongotherfactors.
Financing Resources
OnApril11,2016,weenteredintoatermloanagreement,whichmaturesinApril2021,providingforanunsecureddelayeddrawtermloanfacilityinan
aggregate amount of $575 million . We may draw term loans under the Term Loan Facility from time to time until October 11, 2016 (the "Commitment
Termination Date"). In addition, we have the option to increase the commitments under the Term Loan Facility, either before or after the Commitment
TerminationDate,inanaggregateamountupto$250million.Anysuchincreaseswouldbesubjecttoobtainingadditionalcommitmentsfromexistingornew
lenders under the Term Loan Facility. We plan to use the proceeds of the term loans to refinance a portion of our issued and outstanding 5.930% notes due
October2016andforgeneralcorporatepurposes;provided,thatnomorethan$450millioninproceedsfromtheloansundertheTermLoanFacilitymaybeused
forpurposesotherthanredeeming,repaying,purchasingorrefinancingournotesdueOctober2016andpayinganyfeesandexpensesinconnectionwiththeTerm
LoanFacilityandotherrelatedloandocuments.
TheTermLoanFacilitycontainscovenants,subjecttocertainexceptions,that,amongotherthings,limitorrestrictourabilitytosellortransferassetsor
mergeorconsolidatewithanothercompany,grantcertaintypesofsecurityinterests,incurcertaintypesofliens,imposerestrictionsonsubsidiarydividends,enter
intosaleandleasebacktransactions,incurcertainsubsidiarylevelindebtedness,oruseproceedsinviolationofanti-corruptionoranti-moneylaunderinglaws.The
TermLoanFacilityrequiresustomaintainaconsolidatedadjustedEBITDAinterestcoverageratioofgreaterthan3:1foreachperiodoffourconsecutivefiscal
quarters.TheTermLoanFacilityalsocontainscustomaryrepresentations,warrantiesandeventsofdefault.
Generally,interestundertheTermLoanFacilityiscalculatedusingaselectedLIBORrateplusaninterestratemarginof150basispoints.Acommitmentfee
of15basispointsontheunusedamountofthecommitmentsunderthefacilityisalsopayablequarterlyuntiltheCommitmentTerminationDate.Boththeinterest
ratemarginandcommitmentfeepercentagearebasedoncertainofourcreditratings,andwillincreaseordecreaseintheeventofcertainupgradesordowngrades
inourcreditratings.
Inadditiontothepaymentofinterest,wearerequiredtomakecertainperiodicamortizationpaymentswithrespecttotheoutstandingprincipaloftheterm
loanscommencingafterthesecondanniversaryoftheclosingoftheTermLoanFacility.ThefinalmaturitydateoftheTermLoanFacilityisApril11,2021.Asof
June30,2016,wehadnooutstandingborrowingsunderourTermLoanFacility.
OurRevolvingCreditFacilityexpiresinSeptember2020andprovidesforunsecuredfinancingfacilitiesinanaggregateamountof$1.65billion,includinga
$250millionletterofcreditsub-facility.InterestdueundertheRevolvingCreditFacilityisfixedforthetermofeachborrowingandispayableaccordingtothe
termsofthatborrowing.Generally,interestiscalculatedusingaselectedLIBORrateplusaninterestratemarginof110basispoints.Afacilityfeeof15basis
pointsisalsopayablequarterlyonthetotalfacility,regardlessofusage.Boththeinterestratemarginandfacilityfeepercentagearebasedoncertainofourcredit
ratings.
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The purpose of our Revolving Credit Facility, which is diversified through a group of 18 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 billion is approximately 11%. As of and during the six months ended June 30, 2016 , 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
Facilitywereeliminated,thecostandavailabilityofborrowingunderthecommercialpaperprogrammaybeimpacted.
Pursuanttoourcommercialpaperprogram,wemayissueunsecuredcommercialpapernotesinanamountnottoexceed$1.5billionoutstandingatanytime,
reduced to the extent of borrowings outstanding on our Revolving Credit Facility in excess of $150 million . Our commercial paper borrowings may have
maturitiesofupto397daysfromdateofissuance.Interestratesforborrowingsarebasedonmarketratesatthetimeofissuance.Wehadnocommercialpaper
borrowingsoutstandingasofJune30,2016.DuringthethreeandsixmonthsendedJune30,2016,theaveragecommercialpaperbalanceoutstandingwas$15.8
million and $12.4 million, respectively, and the maximum balance outstanding was $232.0 million for both periods. Proceeds from our commercial paper
borrowingswereusedforgeneralcorporatepurposesandworkingcapitalneeds.
AsofJune30,2016,wehaveoutstandingborrowingsatparvalueof$3,230.3million.Thesubstantialmajorityoftheseoutstandingborrowingsconsistof
unsecuredfixed-ratenotesandassociatedswapswithmaturitiesrangingfrom2016to2040.
Cash Priorities
Liquidity
Ourobjectiveistomaintainstrongliquidityandacapitalstructureconsistentwithinvestment-gradecreditratings.Wehaveexistingcashbalances,cashflows
fromoperatingactivities,accesstothecommercialpapermarkets,ourRevolvingCreditFacility,andourTermLoanFacilityavailabletosupporttheneedsofour
business.
Capital
Expenditures
The total aggregate amount paid for contract costs, purchases of property and equipment and purchased and developed software was $108.7 million and
$122.4millionforthesixmonthsendedJune30,2016and2015,respectively.Amountspaidfornewandrenewedagentcontractsvarydependingonthetermsof
existing contracts as well as the timing of new and renewed contract signings. Other capital expenditures during these periods included investments in our
informationtechnologyinfrastructureandpurchasedanddevelopedsoftware.
Share
Repurchases
and
Dividends
During the six months ended June 30, 2016 and 2015 , 16.9 million and 15.0 million shares were repurchased for $317.5 million and $306.3 million,
respectively,excludingcommissions,atanaveragecostof$18.81and$20.47pershare,respectively.AsofJune30,2016,$394.3millionremainedavailable
underasharerepurchaseauthorizationapprovedbyourBoardofDirectorsthroughDecember31,2017.
OurBoardofDirectorsdeclaredquarterlycashdividendsof$0.16percommonshareinboththefirstandsecondquartersof2016,representing$157.4million
intotaldividends.
OnJuly14,2016,ourBoardofDirectorsdeclaredaquarterlycashdividendof$0.16percommonsharepayableonSeptember30,2016.
Debt
Service
Requirements
Our2016andfuturedebtservicerequirementswillincludepaymentsonalloutstandingindebtednessincludinganyborrowingsunderourcommercialpaper
program.InOctober2016,our2016Notesof$1.0billionwillmature.WeplantofundthismaturitybyrefinancingaportionofthisdebtthroughourTermLoan
Facilityandcommercialpaperprogramandrepayingaportionusingcash,includingcashgeneratedfromoperations.
Ourabilitytogrowthebusiness,makeinvestmentsinourbusiness,makeacquisitions,returncapitaltoshareholders,includingthroughdividendsandshare
repurchases,andserviceourdebtwilldependonourabilitytocontinuetogenerateexcessoperatingcashthroughouroperatingsubsidiariesandtocontinueto
receivedividendsfromthoseoperatingsubsidiaries,ourabilitytoobtainadequatefinancingandourabilitytoidentifyacquisitionsthatalignwithourlong-term
strategy.
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Incometaxes
Derivativefinancialinstruments
Otherintangibleassets
Goodwill
Legalcontingencies
51
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Risk Management
Weareexposedtomarketrisksarisingfromchangesinmarketratesandprices,includingchangesinforeigncurrencyexchangeratesandinterestratesand
creditriskrelatedtoouragentsandcustomers.Ariskmanagementprogramisinplacetomanagetheserisks.
Foreign
Currency
Exchange
Rates
Weprovideourservicesprimarilythroughanetworkofagentlocationsinmorethan200countriesandterritories.Wemanageforeignexchangeriskthrough
thestructureofthebusinessandanactiveriskmanagementprocess.WecurrentlysettlewiththemajorityofouragentsinUnitedStatesdollarsoreuros,requiring
those agents to obtain local currency to pay recipients, and we generally do not rely on international currency markets to obtain and pay illiquid currencies.
However, in certain circumstances, we settle in other currencies. The foreign currency exposure that does exist is limited by the fact that the majority of
transactionsarepaidbythenextdayaftertheyareinitiated.Tomitigatethisriskfurther,weenterintoshortdurationforeigncurrencyforwardcontracts,generally
withmaturitiesfromafewdaysuptoonemonth,tooffsetforeignexchangeratefluctuationsbetweentransactioninitiationandsettlement.Wealsohaveexposure
tocertainforeigncurrencydenominatedcashandotherassetandliabilitypositionsandmayutilizeforeigncurrencyforwardcontracts,typicallywithmaturitiesof
lessthanoneyearat inception, to offset foreign exchange rate fluctuations on these positions. In certain consumer money transfer, bill payment and Business
Solutions transactions involving different send andreceive currencies, wegenerate revenue based onthe difference between the exchange rate set byusto the
consumer or business and the rate at which we or our agents are able to acquire the currency, helping to provide protection against currency fluctuations. We
attempttopromptlybuyandsellforeigncurrenciesasnecessarytocoverournetpayablesandreceivableswhicharedenominatedinforeigncurrencies.
We use longer-term foreign currency forward contracts to help mitigate risks associated with changes in foreign currency exchange rates on revenues
denominatedprimarilyintheeuro,andtoalesserdegreetheBritishpound,Canadiandollar,Australiandollar,Swissfranc,andothercurrencies.Weusecontracts
withmaturitiesofupto36monthsatinceptiontomitigatesomeoftheimpactthatchangesinforeigncurrencyexchangeratescouldhaveonforecastedrevenues,
withatargetedweighted-averagematurityofapproximatelyoneyear.Webelievetheuseoflonger-termforeigncurrencyforwardcontractsprovidespredictability
offuturecashflowsfromourinternationaloperations.
We have additional foreign exchange risk and associated foreign exchange risk management requirements due to the nature of our Business Solutions
business.Themajorityofthisbusiness'revenueisfromexchangesofcurrencyatspotrates,whichenablecustomerstomakecross-currencypayments.Incertain
countries,thisbusinessalsowritesforeigncurrencyforwardandoptioncontractsforourcustomerstofacilitatefuturepayments.Thedurationofthesederivative
contractsatinceptionisgenerallylessthanoneyear.BusinessSolutionsaggregatesitsforeignexchangeexposuresarisingfromcustomercontracts,includingthe
derivative contracts described above, and hedges the resulting net currency risks by entering into offsetting contracts with established financial institution
counterparties.
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AsofDecember31,2015,ahypotheticaluniform10%strengtheningorweakeninginthevalueoftheUnitedStatesdollarrelativetoallothercurrenciesin
whichournetincomeisgeneratedwouldhaveresultedinadecrease/increasetopre-taxannualincomeofapproximately$25millionbasedonour2016forecastof
Consumer-to-Consumer unhedged exposure to foreign currency at that date. As of June 30, 2016 , the exposure for the next twelve months is not materially
differentbasedonourforecastofunhedgedexposuretoforeigncurrency.Thereareinherentlimitationsinthissensitivityanalysis,primarilyduetothefollowing
assumptions:(a)thatforeignexchangeratemovementsarelinearandinstantaneous,(b)thatfixedexchangeratesbetweencertaincurrencypairsareretained,(c)
thattheunhedgedexposureisstatic,and(d)thatwewouldnothedgeanyadditionalexposure.Asaresult,theanalysisisunabletoreflectthepotentialeffectsof
morecomplexmarketchangesthatcouldarise,whichmaypositivelyornegativelyaffectincome.
Interest
Rates
Weinvestinseveraltypesofinterestbearingassets,withatotalvalueasofJune30,2016of$2.8billion.Approximately$2.0billionoftheseassetsbear
interestatfloatingratesandarethereforesensitivetochangesininterestrates.Theseassetsprimarilyincludecashinbanks,moneymarketinstruments,andstate
andmunicipalvariableratesecuritiesandareincludedinourCondensedConsolidatedBalanceSheetswithin"Cashandcashequivalents"and"Settlementassets."
Totheextenttheseassetsareheldinconnectionwithmoneytransfersandotherrelatedpaymentservicesawaitingredemption,theyareclassifiedas"Settlement
assets."Earningsontheseinvestmentswillincreaseanddecreasewithchangesintheunderlyingshort-terminterestrates.
The remainder of our interest bearing assets primarily consists of highly-rated state and municipal debt securities which are fixed 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
awaitingredemptionclassifiedwithin"Settlementassets"intheCondensedConsolidatedBalanceSheets.Asinterestratesrise,thefairvalueofthesefixed-rate
interest-bearingsecuritieswilldecrease;conversely,adecreasetointerestrateswouldresultinanincreasetothefairvaluesofthesecurities.Wehaveclassified
theseinvestmentsasavailable-for-salewithin"Settlementassets"intheCondensedConsolidatedBalanceSheets,andaccordingly,recordedtheseinstrumentsat
theirfairvaluewiththenetunrealizedgainsandlosses,netoftheapplicabledeferredincometaxeffect,beingaddedtoordeductedfromour"Totalstockholders'
equity"onourCondensedConsolidatedBalanceSheets.
Atotalof$975.0millionofourfixed-rateborrowingsatparvalueareeffectivelyfloatingratedebtthroughinterestrateswapagreements,changingthisfixedratedebttoLIBOR-basedfloatingratedebt,withweighted-averagespreadsofapproximately200basispointsaboveLIBOR.
We review our overall exposure to floating and fixed rates by evaluating our net asset or liability position in each, also considering the duration of the
individual positions. 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). We use
interestrateswapsdesignatedashedgestoincreasethepercentageoffloatingratedebt,subjecttomarketconditions.AsofJune30,2016,ourweighted-average
effectiverateontotalborrowingswasapproximately4.9%.
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$10millionbasedonborrowings,netoftheimpactofhedges,onJune30,2016thataresensitivetointerestratefluctuations.Thesame100basis
pointincrease/decreaseininterestrates,ifappliedtoourcashandinvestmentbalancesonJune30,2016thataresensitivetointerestratefluctuations,wouldresult
in an offsetting increase/decrease to pre-tax income for the next twelve months of approximately $20 million. There are inherent limitations in the sensitivity
analysispresented, primarily duetotheassumption thatinterest rate changeswouldbeinstantaneous. Asaresult,theanalysisisunabletoreflect thepotential
effectsofmorecomplexmarketchanges,includingchangesincreditriskregardingourinvestments,whichmaypositivelyornegativelyaffectincome.Inaddition,
thecurrentmixoffixedversusfloatingratedebtandinvestmentsandthelevelofassetsandliabilitieswillchangeovertime.Wewillalsobefurtherimpactedby
changestofutureinterestratesaswerefinanceourdebtorbyreinvestingproceedsfromthesaleormaturityofourinvestments.
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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,andweattempttodiversifyourinvestmentsamongglobalfinancialinstitutions.
Wearealsoexposedtocreditriskrelatedtoreceivablebalancesfromagentsinthemoneytransfer,walk-inbillpaymentandmoneyordersettlementprocess.
Weperformacreditreviewbeforeeachagentsigningandconductperiodicanalysesofagentsandcertainotherpartieswetransactwithdirectly.Inaddition,we
areexposedtocreditriskdirectlyfromconsumertransactionsparticularlythroughourelectronicchannels,wheretransactionsareoriginatedthroughmeansother
than cash, and therefore are subject to "chargebacks," insufficient funds or other collection impediments, such as fraud, which are anticipated to increase as
electronicchannelsbecomeagreaterproportionofourmoneytransferbusiness.
WeareexposedtocreditriskinourBusinessSolutionsbusinessrelatingto:(a)derivativeswrittenbyustoourcustomersand(b)theextensionoftradecredit
when transactions are paid to recipients prior to our receiving cleared funds from the sending customers. Forthe derivatives, the duration of these contracts at
inceptionisgenerallylessthanoneyear.Thecreditriskassociatedwithourderivativecontractsincreaseswhenforeigncurrencyexchangeratesmoveagainstour
customers,possiblyimpactingtheirabilitytohonortheirobligationstodelivercurrencytousortomaintainappropriatecollateralwithus.Forthosereceivables
wherewehaveofferedtradecredit,collectionordinarilyoccurswithinafewdays.Tomitigatetheriskassociatedwithpotentialcustomerdefaults,weperform
creditreviewsofthecustomeronanongoingbasis,and,forourderivatives,wemayrequirecertaincustomerstopostorincreasecollateral.
Ourlossesassociatedwithbaddebtshavebeenapproximately1%ofourconsolidatedrevenuesinallperiodspresented.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Theinformationunderthecaption"RiskManagement"in"Management'sDiscussionandAnalysisofFinancialConditionandResultsofOperations"inItem
2ofPartIofthisreportisincorporatedhereinbyreference.
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
effectivenessofourcontrolsandproceduresrelatedtoourreportinganddisclosureobligationsasofJune30,2016,whichistheendoftheperiodcoveredbythis
QuarterlyReportonForm10-Q.Basedonthatevaluation,thePrincipalExecutiveOfficerandPrincipalFinancialOfficerhaveconcludedthat,asofJune30,2016
,thedisclosurecontrolsandprocedureswereeffectivetoensurethatinformationrequiredtobedisclosedbyus,includingourconsolidatedsubsidiaries,inthe
reportswefileorsubmitundertheExchangeAct,isrecorded,processed,summarizedandreported,asapplicable,withinthetimeperiodsspecifiedintherulesand
formsoftheSecuritiesandExchangeCommission,andaredesignedtoensurethatinformationrequiredtobedisclosedbyusinthereportsthatwefileorsubmitis
accumulatedandcommunicatedtoourmanagement,includingourPrincipalExecutiveOfficerandPrincipalFinancialOfficer,toallowtimelydecisionsregarding
requireddisclosure.
Changes
in
Internal
Control
over
Financial
Reporting
TherewerenochangesthatoccurredduringthefiscalquartercoveredbythisQuarterlyReportonForm10-Qthathavemateriallyaffected,orarereasonably
likelytomateriallyaffect,ourinternalcontrolsoverfinancialreporting.
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/s/Ernst&YoungLLP
Denver,Colorado
August3,2016
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
United
States
Department
of
Justice
Investigations
OnMarch 20,2012,the Companywasserved withafederal grandjurysubpoenaissuedbytheUnitedStates Attorney's Office fortheCentral District of
California("USAO-CDCA")seekingdocumentsrelatingtoShenZhouInternational("USShenZhou"),aformerWesternUnionagentlocatedinMontereyPark,
California.TheprincipalofUSShenZhouwasindictedin2010andinDecember2013,pledguiltytoonecountofstructuringinternationalmoneytransfersin
violation of United States federal law in U.S. v. Zhi He Wang (SA CR 10-196, C.D. Cal.). Concurrent with the government's service of the subpoena, the
governmentnotifiedtheCompanythatitisatargetofanongoinginvestigationintostructuringandmoneylaundering.SinceMarch20,2012,theCompanyhas
received additional subpoenas from the USAO-CDCA seeking additional documents relating to US Shen Zhou, materials relating to certain other former and
currentagentsandothermaterialsrelatingtotheCompany'santi-moneylaundering("AML")compliancepoliciesandprocedures.Thegovernmenthasinterviewed
several currentandformerWestern Unionemployeesandhasservedgrandjurysubpoenasseekingtestimonyfromseveral currentandformeremployees. The
government'sinvestigationisongoingandtheCompanymayreceiveadditionalrequestsforinformationaspartoftheinvestigation.TheCompanyhasprovided
andcontinuestoprovideinformationanddocumentstothegovernment.Duetotheinvestigativestageofthematterandthefactthatnocriminalchargesorcivil
claimshavebeenbrought,theCompanyisunabletopredicttheoutcomeofthegovernment'sinvestigation,orreasonablyestimatethepossiblelossorrangeof
loss,ifany,whichcouldbeassociatedwiththeresolutionofanypossiblechargesorclaimsthatmaybebroughtagainsttheCompany.Shouldsuchchargesor
claims be brought, the Company could face significant fines, damage awards or regulatory consequences which could have a material adverse effect on the
Company'sbusiness,financialcondition,resultsofoperations,andcashflows.
In March 2012, the Company was served with a federal grand jury subpoena issued by the United States Attorneys Office for the Eastern District of
Pennsylvania("USAO-EDPA")seekingdocumentsrelatingtoHongFaiGeneralContractorCorp.(formerlyknownasYongGeneralConstruction)("HongFai"),
aformerWesternUnionagentlocatedinPhiladelphia,Pennsylvania.SinceMarch2012,theCompanyhasreceivedadditionalsubpoenasfromtheUSAO-EDPA
seekingadditionaldocumentsrelatingtoHongFai.Thegovernment'sinvestigationisongoingandtheCompanymayreceiveadditionalrequestsforinformationas
partoftheinvestigation.TheCompanyhasprovidedandcontinuestoprovideinformationanddocumentstothegovernment.Thegovernmenthasinterviewed
several current and former Western Union employees. In March 2016, the government filed a criminal complaint against the principal of Hong Fai General
ContractorCorp.andinJune2016,hepledguiltytoonecountofmailfraud,twocountsoftransportingillegalaliensandonecountoftaxevasioninviolationof
UnitedStatesfederallawinU.S.v.YongQuanZheng(2:16-cr-00212-ABE.D.Pa.).Duetotheinvestigativestageofthematterandthefactthatnocriminal
chargesorcivilclaimshavebeenbrought,theCompanyisunabletopredicttheoutcomeofthegovernment'sinvestigation,orreasonablyestimatethepossibleloss
orrangeofloss,ifany,whichcouldbeassociatedwiththeresolutionofanypossiblechargesorclaimsthatmaybebroughtagainsttheCompany.Shouldsuch
chargesorclaimsbebrought,theCompanycouldfacesignificantfines,damageawardsorregulatoryconsequenceswhichcouldhaveamaterialadverseeffecton
theCompany'sbusiness,financialcondition,resultsofoperations,andcashflows.
OnNovember25,2013,theCompanywasservedwithafederalgrandjurysubpoenaissuedbytheUnitedStatesAttorneysOfficefortheMiddleDistrictof
Pennsylvania("USAO-MDPA")seekingdocumentsrelatingtocomplaintsmadetotheCompanybyconsumersanywhereintheworldrelatingtofraud-induced
moneytransferssinceJanuary1,2008.Concurrentwiththegovernment'sserviceofthesubpoena,thegovernmentnotifiedtheCompanythatitisthesubjectofthe
investigation.SinceNovember25,2013,theCompanyhasreceivedadditionalsubpoenasfromtheUSAO-MDPAseekingdocumentsrelatingtocertainWestern
Union agents and Western Unions agent suspension and termination policies. The government has interviewed several current and former employees and has
servedgrandjurysubpoenasseekingtestimonyfromseveralcurrentandformeremployees.ThegovernmenthasindicatedthatitbelievesWesternUnionfailedto
timelyterminateorsuspendcertainWesternUnionagentswhoallegedlypaidorforwardedthousandsoffraud-inducedtransactionssentfromtheUnitedStatesto
variouscountriesfromatleast2008to2012.Thegovernment'sinvestigationisongoingandtheCompanymayreceiveadditionalrequestsforinformationaspart
of the investigation. The Company has provided and continues to provide information and documents to the government. Due to the investigative stage of the
matterandthefactthatnocriminalchargesorcivilclaimshavebeenbrought,theCompanyisunabletopredicttheoutcomeofthegovernment'sinvestigation,or
reasonablyestimatethepossiblelossorrangeofloss,ifany,whichcouldbeassociatedwiththeresolutionofanypossiblechargesorclaimsthatmaybebrought
against the Company. Should such charges or claims be brought, the Company could face significant fines, damage awards or regulatory consequences which
couldhaveamaterialadverseeffectontheCompany'sbusiness,financialcondition,resultsofoperations,andcashflows.
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OnMarch6,2014,theCompanywasservedwithafederalgrandjurysubpoenaissuedbytheUnitedStatesAttorneysOfficefortheSouthernDistrictof
Florida (USAO-SDFL) seeking a variety of AML compliance materials, including documents relating to the Companys AML, Bank Secrecy Act (BSA),
Suspicious Activity Report (SAR) and Currency Transaction Report procedures, transaction monitoring protocols, BSA and AML training programs and
publications,AMLcomplianceinvestigationreports,compliance-relatedagentterminationfiles,SARs,BSAaudits,BSAandAML-relatedmanagementreports
andAMLcompliancestaffinglevels.ThesubpoenaalsocallsforBoardmeetingminutesandorganizationcharts.TheperiodcoveredbythesubpoenaisJanuary
1,2007toNovember27,2013.TheCompanyhasreceivedadditionalsubpoenasfromtheUSAO-SDFLandtheBrowardCounty,FloridaSheriffsOfficerelating
totheinvestigation,includingafederalgrandjurysubpoenaissuedbytheUSAO-SDFLonMarch14,2014,seekinginformationabout33agentlocationsinCosta
Rica such as ownership and operating agreements, SARs and AML compliance and BSA filings for the period January 1, 2008 to November 27, 2013.
Subsequently,theUSAO-SDFLservedtheCompanywithseizurewarrantsrequiringtheCompanytoseizeallmoneytransferssentfromtheUnitedStatestotwo
agentlocationslocatedinCostaRicafora10-dayperiodbeginninginlateMarch2014.OnJuly8,2014,thegovernmentservedagrandjurysubpoenacallingfor
recordsrelatingtotransactionssentfromtheUnitedStatestoNicaraguaandPanamabetweenSeptember1,2013andOctober31,2013.Further,thegovernment
recently served Western Union with a subpoena calling for data relating to transactions sent and received by 43 Nicaraguan agents from October 1, 2008 to
October31,2013andtransactionssentfromtheUnitedStatestotheBahamas,Peru,DominicanRepublic,andHaitifromSeptember1,2013toJanuary2,2014
andcertaindocumentsrelatingtothoseagents.ThegovernmentalsoadvisedtheCompanythatitisinvestigatingconcernstheCompanywasawaretherewere
gamingtransactionsbeingsenttoPanama,Nicaragua,Haiti,Philippines,Vietnam,theDominicanRepublic,Peru,Antigua,andtheBahamas(inadditiontoCosta
Rica)andthattheCompanyfailedtotakeproperstepstostoptheactivity.ThegovernmenthasalsonotifiedtheCompanythatitisatargetoftheinvestigation.
ThegovernmenthasinterviewedseveralcurrentandformerWesternUnionemployees.Thegovernment'sinvestigationisongoingandtheCompanymayreceive
additional requests for information or seizure warrants as part of the investigation. The Company has provided and continues to provide information and
documentstothegovernment.Duetotheinvestigativestageofthematterandthefactthatnocriminalchargesorcivilclaimshavebeenbrought,theCompanyis
unabletopredicttheoutcomeofthegovernment'sinvestigation,orreasonablyestimatethepossiblelossorrangeofloss,ifany,whichcouldbeassociatedwiththe
resolution of any possible charges or claims that may be brought against the Company. Should such charges or claims be brought, the Company could face
significantfines,damageawardsorregulatoryconsequenceswhichcouldhaveamaterialadverseeffectontheCompany'sbusiness,financialcondition,resultsof
operations,andcashflows.
Other
Governmental
Investigations
Since2011,WesternUnionhasreceivedcivilinvestigativedemandsfromcertainstateattorneysgeneralwhohaveinitiatedaninvestigationintotheadequacy
of the Company's consumer protection efforts over the last several years. The civil investigative demands seek information and documents relating to money
transferssentfromtheUnitedStatestocertaincountries,consumerfraudcomplaintsthattheCompanyhasreceivedandtheCompany'sprocedurestohelpidentify
andpreventfraudulenttransfers.Duetothestageoftheinvestigation,theCompanyisunabletopredicttheoutcomeoftheinvestigation,orreasonablyestimatethe
possiblelossorrangeofloss,ifany,whichcouldbeassociatedwithanypossiblecivilclaimsthatmightbebroughtbyoneormoreofthestates.Shouldsuch
claimsbebrought,theCompanycouldfacesignificantfines,damageawards,orregulatoryconsequences,orcompulsorychangesinourbusinesspractices,that
couldhaveamaterialadverseeffectonourbusiness,financialcondition,resultsofoperations,andcashflows.
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TheCompanyhashaddiscussionswiththeUnitedStatesFederalTradeCommission(the"FTC")regardingtheCompany'sconsumerprotectionandanti-fraud
programs. On December 12, 2012, the Company received a civil investigative demand from the FTC requesting that the Company produce (i) all documents
relatingtocommunicationswiththemonitor(the"Monitor")appointedpursuanttotheagreementandsettlement(the"SouthwestBorderAgreement")Western
Union Financial Services, Inc. entered into with the State of Arizona on February 11, 2010, as amended, including information the Company provided to the
MonitorandanyreportspreparedbytheMonitor;and(ii)alldocumentsrelatingtocomplaintsmadetotheCompanybyconsumersanywhereintheworldrelating
tofraud-inducedmoneytransferssinceJanuary1,2011.OnApril15,2013,theFTCfiledapetitionintheUnitedStatesDistrictCourtfortheSouthernDistrictof
NewYorkrequestinganordertocompelproductionoftherequesteddocuments.OnJune6,2013,theCourtgrantedinpartanddeniedinparttheFTC'srequest.
OnAugust14,2013,theFTCfiledanoticeofappeal.OnAugust27,2013,WesternUnionfiledanoticeofcross-appeal.OnFebruary21,2014,theCompany
receivedanothercivilinvestigativedemandfromtheFTCrequestingtheproductionofalldocumentsrelatingtocomplaintsmadetotheCompanybyoronbehalf
ofconsumersrelatingtofraud-inducedmoneytransfersthatweresentfromorreceivedintheUnitedStatessinceJanuary1,2004,exceptfordocumentsthatwere
alreadyproducedtotheFTCinresponsetothefirstcivilinvestigativedemand.OnOctober7,2014,theUnitedStatesCourtofAppealsfortheSecondCircuit
enteredasummaryorderreversinginpartandvacatingandremandinginparttheJune6,2013orderenteredbytheUnitedStatesDistrictCourtfortheSouthern
DistrictofNewYork.OnOctober22,2014,theCompanyreceivedanothercivilinvestigativedemandissuedbytheFTCrequestingdocumentsandinformation
since January 1, 2004 relating to the Companys consumer fraud program, its policies and procedures governing agent termination, suspension, probation and
reactivation,itseffortstocomplywithits2005agreementwith47statesandtheDistrictofColumbiaregardingconsumerfraudprevention,andcomplaintsmade
totheCompanybyoronbehalfofconsumersconcerningfraud-inducedmoneytransfersthatweresenttoorfromtheUnitedStates,excludingcomplaint-related
documents that were produced to the FTC in response to the earlier civil investigative demands. The civil investigative demand also seeks various documents
concerning approximately 720 agents, including documents relating to the transactions they sent and paid and the Companys investigations of and
communicationswiththem.OnJuly31,2015,theCompanyreceivedanothercivilinvestigativedemandrequestingdocumentsandinformationrelatingtothetotal
numberofagentandsubagentlocationsin13countriesannuallysince2010,theaverageandmediandollarvaluesformoneytransferssentanywhereintheworld
annuallysince2010,copiesoftheCompanysanti-fraudprograms,knowyouragentpolicy,knowyourcustomerpolicy,representativeagentcontracts,transaction
data,backgroundinvestigationdocumentsandfraudcomplaintsassociatedwithfouragentsinGreece,PeruandMexicoandconsumerfraudreportsnotalready
produced to the FTC. The Company has responded to each of the civil investigative demands it has received from the FTC and may receive additional civil
investigative demands.TheFTCrecentlyadvisedtheCompanyofitsviewthattheCompanyviolatedSection5oftheFederalTradeCommissionActandthe
TelemarketingSalesRulebyfailingtotaketimely,appropriate,andeffectivemeasurestomitigatefraudintheprocessingofmoneytransferssentbyconsumers.
TheCompanyisindiscussions withtheFTCandisseeking toreach anappropriate resolution ofthismatter. TheCompanyhasaccrued $15million towarda
proposedresolutionbaseduponfactsandcircumstancesknowntotheCompanyatthistime.Duetothestageofthediscussions,theCompanyisunabletopredict
thepossiblerangeofadditionallossexceedingtheamountalreadyaccruedforthismatter.TherecanbenoassurancethattheCompanywillreachanagreement
withtheFTC.TheFTCstaffhasadvisedtheCompanythatithasbeendirected torequestauthority fromtheFTCtofileacomplaint against theCompanyin
UnitedStatesfederalcourtifitisnotabletoreachanagreementwiththeCompany.ShouldtheCompanyenterintoasettlementagreementwiththeFTC,orifthe
FTC files a complaint against the Company, the Company could be required to make significant restitution and/or disgorgement payments and changes to its
programs,anyofwhichseparatelyorcombinedcouldhaveamaterialadverseeffectontheCompanysbusiness,financialconditionandresultsofoperations.If
theFTCfilesacomplaintagainsttheCompany,theCompanyintendstodefenditselfvigorously.
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Shareholder
Actions
On January 13, 2014, Natalie Gordon served the Company with a Verified Shareholder Derivative Complaint and Jury Demand that was filed in District
Court,DouglasCounty,ColoradonamingtheCompanysPresidentandChiefExecutiveOfficer,oneofitsformerexecutiveofficers,oneofitsformerdirectors,
andallbutoneofitscurrentdirectorsasindividualdefendants,andtheCompanyasanominaldefendant.Thecomplaintassertsclaimsforbreachoffiduciaryduty
and gross mismanagement against all of the individual defendants and unjust enrichment against the President and Chief Executive Officer and the former
executiveofficerbasedonallegationsthatbetweenFebruary12,2012toOctober30,2012,theindividualdefendantsmadeorcausedtheCompanytoissuefalse
andmisleadingstatementsorfailedtomakeadequatedisclosuresregardingtheeffectsoftheSouthwestBorderAgreement,includingregardingtheanticipated
costs of compliance with the Southwest Border Agreement, potential effects on business operations, and Company projections. Plaintiff also alleges that the
individualdefendantscausedorallowedtheCompanytolackrequisiteinternalcontrols,causedorallowedfinancialstatementstobemisstated,andcausedthe
Companytobesubjecttothecosts,expensesandliabilitiesassociatedwithCityofTaylorPoliceandFireRetirementSystemv.TheWesternUnionCompany,et
al.,a lawsuit that was subsequently renamed and dismissed. Plaintiff further alleges that the Companys President and Chief Executive Officer and the former
executiveofficerreceivedexcessivecompensationbasedontheallegedlyinaccuratefinancialstatements.OnMarch12,2014,theCourtenteredanordergranting
theparties'jointmotiontostayproceedingsinthecaseduringthependencyofcertainoftheshareholderderivativeactionsdescribedbelow.
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In 2014, Stanley Lieblein, R. Andre Klein, City of Cambridge Retirement System, Mayar Fund Ltd, Louisiana Municipal Police Employees' Retirement
System, MARTA/ATU Local 732 Employees Retirement Plan, and The Police Retirement System of St. Louis filed shareholder derivative complaints in the
UnitedStatesDistrictCourtfortheDistrictofColorado(orwereremovedtotheUnitedStatesDistrictCourtfortheDistrictofColorado)namingtheCompanys
President and Chief Executive Officer and certain current and former directors and a former executive officer as individual defendants, and the Company as a
nominal defendant. On January 5, 2015, the court entered an order consolidating the actions and appointing City of Cambridge Retirement System and
MARTA/ATU Local 732 Employees Retirement Plan as co-lead plaintiffs. On February 4, 2015, co-lead plaintiffs filed a verified consolidated shareholder
derivativecomplaintnamingtheCompanysPresidentandChiefExecutiveOfficer,twoofitsformerexecutiveofficersandallbuttwoofitscurrentdirectorsas
individual defendants, and the Company as a nominal defendant. The consolidated complaint asserts separate claims for breach of fiduciary duty against the
directordefendantsandtheofficerdefendants,claimsagainstalloftheindividualdefendantsforviolationsofsection14(a)oftheSecuritiesExchangeActof1934
("ExchangeAct"),corporatewasteandunjustenrichment,andaclaimagainsttheformerexecutiveofficerforbreachoffiduciarydutiesforinsidersellingand
misappropriation of information. The breach of fiduciary duty claim against the director defendants includes allegations that they declined to implement an
effective anti-money laundering compliance system after receiving numerous red flags indicating prolonged willful illegality, obstructed the Southwest Border
Monitor's efforts to impose effective compliance systems on the Company, failed to take action in response to alleged Western Union management efforts to
underminetheMonitor,reappointedthesamedirectorstotheAuditCommitteeandCorporateGovernanceandPublicPolicyCommitteesconstitutingamajorityof
thosecommitteesbetween2006and2014,appointedamajorityofdirectorstotheComplianceCommitteewhoweredirectlyinvolvedinoverseeingthealleged
misconduct as members of the Audit Committee and the Corporate Governance and Public Policy Committee, caused the Company to materially breach the
Southwest Border Agreement, caused the Company to repurchase its stock at artificially inflated prices, awarded the Companys senior executives excessive
compensation despite their responsibility for the Companys alleged willful non-compliance with state and federal anti-money laundering laws, and failed to
preventtheformerexecutiveofficerfrommisappropriatingandprofitingfromnonpublicinformationwhenmakingallegedlyunlawfulstocksales.Thebreachof
fiduciarydutyclaimagainsttheofficerdefendantsincludesallegationsthattheycausedtheCompanyandalloweditsagentstoignoretherecordingandreporting
requirementsoftheBankSecrecyActandparallelanti-moneylaunderinglawsandregulationsforaprolongedperiodoftime,authorizedandimplementedantimoneylaunderingpoliciesandpracticesthattheykneworshouldhaveknowntobeinadequate,causedtheCompanytofailtocomplywiththeSouthwestBorder
Agreementandrefusedtoimplementandmaintainadequateinternalcontrols.Theclaimforviolationsofsection14(a)oftheExchangeActincludesallegations
thattheindividualdefendantscausedtheCompanytoissueproxystatementsin2012,2013and2014containingmateriallyincompleteandinaccuratedisclosuresin particular, by failing to disclose the extent to which the Companys financial results depended on the non-compliance with AML requirements, the Boards
awarenessoftheregulatoryandcriminalenforcementactionsinrealtimepursuanttothe2003ConsentAgreementwiththeCaliforniaDepartmentofFinancial
Institutionsandthatthedirectorswerenotcuringviolationsandpreventingmisconduct,theextenttowhichtheBoardconsideredthefloodofincreasinglysevere
redflagsintheirdetermination tore-nominate certaindirectorstotheAuditCommitteebetween2006and2010,andtheextenttowhichtheBoardconsidered
ongoingregulatoryandcriminalinvestigationsinawardingmulti-milliondollarcompensationpackagestoseniorexecutives.Thecorporatewasteclaimincludes
allegationsthattheindividualdefendantspaidorapprovedthepaymentofundeservedexecutiveanddirectorcompensationbasedontheillegalconductallegedin
the consolidated complaint, which exposed the Company to civil liabilities and fines. The corporate waste claim also includes allegations that the individual
defendants made improper statements and omissions, which forced the Company to expend resources in defending itself in City of Taylor Police and Fire
Retirement System v. The Western Union Company, et al. ,alawsuit that wassubsequently renamed anddismissed, authorized the repurchase ofover $1.565
billion of the Companys stock at prices they knew or recklessly were aware, were artificially inflated, failed to maintain sufficient internal controls over the
Companysmarketingandsalesprocess,failedtoconsidertheinterestsoftheCompanyanditsshareholders,andfailedtoconductthepropersupervision.The
claim for unjust enrichment includes allegations that the individual defendants derived compensation, fees and other benefits from the Company and were
otherwise unjustly enriched by their wrongful acts and omissions in managing the Company. The claim for breach of fiduciary duties for insider selling and
misappropriation of information includes allegations that the former executive sold Company stock while knowing material, nonpublic information that would
havesignificantlyreducedthemarketpriceofthestock.OnMarch16,2015,thedefendantsfiledamotiontodismisstheconsolidatedcomplaint.OnMarch31,
2016,theCourtenteredanordergrantingthedefendantscollectivemotiontodismisswithoutprejudice,denyingasmootaseparatemotiontodismissthatwas
filedbytheformerexecutiveofficer,andstayingtheorderfor30days,withinwhichplaintiffsmayfileanamendedcomplaintthatcuresthedefectsnotedinthe
order. On May 2, 2016, co-lead plaintiffs filed a verified amended consolidated shareholder derivative complaint naming the Companys President and Chief
Executive Officer, eight of its current directors (including the Companys President and Chief Executive Officer, who also serves as a director) and one of its
formerdirectorsasindividualdefendants,andtheCompanyasanominaldefendant.Theamendedcomplaint,amongotherthings,dropstheclaimsagainstthe
formerexecutiveofficernamedinthepriorcomplaint,reallegesandnarrowsthebreachoffiduciarydutyclaims,anddropstheremainingclaims.OnJune15,
2016,defendantsfiledamotiontodismisstheamendedconsolidatedshareholderderivativecomplaint.OnAugust1,2016,plaintiffsfiledanoppositiontothe
motiontodismiss.
60
Table of Contents
Alloftheactionsdescribedaboveunder"ShareholderActions"areinapreliminarystageandtheCompanyisunabletopredicttheoutcome,orreasonably
estimate thepossible lossorrange ofloss,if any,whichcould beassociated withthese actions. TheCompanyandthenamed individuals intend tovigorously
defendthemselvesinallofthesematters.
Other
Matters
OnMarch12,2014,JasonDouglasfiledapurportedclassactioncomplaintintheUnitedStatesDistrictCourtfortheNorthernDistrictofIllinoisassertinga
claimundertheTelephoneConsumerProtectionAct,47U.S.C.227,etseq.,basedonallegationsthatsince2009,theCompanyhassenttextmessagestoclass
memberswirelesstelephoneswithouttheirconsent.Duringthefirstquarterof2015,theCompany'sinsurancecarrierandtheplaintiffreachedanagreementto
createan$8.5millionsettlement fundthatwillbeusedtopayallclassmemberclaims,classcounselsfeesandthecostsofadministering thesettlement. The
agreementhasbeensignedbythepartiesand,onNovember10,2015,theCourtgrantedpreliminaryapprovaltothesettlement.TheCompanyaccruedanamount
equal to the retention under its insurance policy in previous quarters and believes that any amounts in excess of this accrual will be covered by the insurer.
However,iftheCompany'sinsurerisunabletoorrefusestosatisfyitsobligationsunderthepolicyorthepartiesareunabletoreachadefinitiveagreementor
otherwiseagreeonaresolution,theCompany'sfinancialcondition,resultsofoperations,andcashflowscouldbeadverselyimpacted.Asthepartieshavereached
anagreementinthismatter,theCompanybelievesthatthepotentialforadditionallossinexcessofamountsalreadyaccruedisremote.
On February 10, 2015, Caryn Pincus filed a purported class action lawsuit in the United States District Court for the Southern District of Florida against
Speedpay, Inc. (Speedpay), a subsidiary of the Company, asserting claims based on allegations that Speedpay imposed an unlawful surcharge on credit card
transactions and that Speedpay engages in money transmission without a license. The complaint requests certification of a class and two subclasses generally
comprised of consumers in Florida who made a payment through Speedpays bill payment services using a credit card and were charged a surcharge for such
paymentduringthefour-yearandfive-yearperiodspriortothefilingofthecomplaintthroughthedateofclasscertification.OnApril6,2015,Speedpayfileda
motiontodismissthecomplaint.OnApril23,2015,inresponsetothemotiontodismiss,Pincusfiledanamendedcomplaintthataddsclaims(1)undertheFlorida
CivilRemediesforCriminalPracticesAct,whichauthorizescivilremediesforcertaincriminalconduct;and(2)forviolationofthefederalRacketeerInfluenced
andCorruptOrganizationsAct("RICO").OnMay15,2015,Speedpayfiledamotiontodismisstheamendedcomplaint.OnOctober6,2015,theCourtenteredan
orderdenyingSpeedpaysmotiontodismiss.OnOctober20,2015,Speedpayfiledananswertotheamendedcomplaint.OnDecember1,2015,Pincusfileda
secondamendedcomplaintthatrevisedherfactualallegations,butaddednonewclaims.OnDecember18,2015,Speedpayfiledananswertothesecondamended
complaint.OnMay20,2016,SpeedpayfiledamotionforjudgmentonthepleadingsastoPincus'FloridaCivilRemediesforCriminalPracticesActandfederal
RICOclaims.OnJune7,2016,PincusfiledanoppositiontoSpeedpay'smotionforjudgmentonthepleadings.OnJune17,2016,Speedpayfiledareplybriefin
supportofthemotion.Asthisactionisinapreliminarystage,theCompanyisunabletopredicttheoutcome,orthepossiblelossorrangeofloss,ifany,which
couldbeassociatedwiththisaction.Speedpayintendstovigorouslydefenditselfinthismatter.
In addition to the principal matters described above and the matters described in Part I, Item 1, Financial
Statements
, Note 4, "Commitments and
Contingencies,"theCompanyisapartytoavarietyofotherlegalmattersthatariseinthenormalcourseoftheCompany'sbusiness.Whiletheresultsofthese
otherlegalmatterscannotbepredictedwithcertainty,managementbelievesthatthefinaloutcomeofthesematterswillnothaveamaterialadverseeffecteither
individuallyorintheaggregateontheCompany'sfinancialcondition,resultsofoperations,orcashflows.
Item 1A. Risk Factors
Therehavebeennomaterialchangestotheriskfactorsdescribedinour2015AnnualReportonForm10-K.
61
Table of Contents
Total Number of
Shares Purchased*
Average Price
Paid per Share
Remaining Dollar
Value of Shares that
May Yet Be Purchased
Under the Plans or
Programs (In millions)
Period
April1-30
847,336 $
19.86
824,400 $
455.5
May1-31
2,294,053 $
19.19
2,291,100 $
411.5
June1-30
901,724 $
19.12
898,000 $
394.3
Total
____________
4,043,113 $
19.32
4,013,500
TheseamountsrepresentbothsharesauthorizedbytheBoardofDirectorsforrepurchaseunderapubliclyannouncedauthorization,asdescribedbelow,as
wellasshareswithheldfromemployeestocovertaxwithholdingobligationsonrestrictedstockunitsthathavevested.
** OnFebruary10,2015,theBoardofDirectorsauthorized$1.2billionofcommonstockrepurchasesthroughDecember31,2017,ofwhich$394.3million
remainedavailableasofJune30,2016.Incertaininstances,managementhashistoricallyandmaycontinuetoestablishprearrangedwrittenplanspursuantto
Rule10b5-1.ARule10b5-1planpermitsustorepurchasesharesattimeswhenwemayotherwisebeunabletodoso,providedtheplanisadoptedwhenwe
arenotawareofmaterialnon-publicinformation.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Notapplicable.
Item 5. Other Information
None.
Item 6. Exhibits
See"ExhibitIndex"fordocumentsfiledherewithandincorporatedhereinbyreference.
62
Table of Contents
SIGNATURES
PursuanttotherequirementsoftheSecuritiesExchangeActof1934,theRegistranthasdulycausedthisreporttobesignedonitsbehalfbytheundersigned,
thereuntodulyauthorized.
Date:
August3,2016
By:
Hikmet Ersek
President and Chief Executive Officer
(Principal Executive Officer)
/s/HikmetErsek
Date:
August3,2016
By:
Rajesh K. Agrawal
Date:
August3,2016
By:
/s/RajeshK.Agrawal
/s/AmintoreT.X.Schenkel
63
Table of Contents
EXHIBIT INDEX
Exhibit
Number
12
ComputationofRatioofEarningstoFixedCharges
15
LetterfromErnst&YoungLLPRegardingUnauditedInterimFinancialInformation
31.1
CertificationofChiefExecutiveOfficerofTheWesternUnionCompanyPursuanttoRule13a-14(a)undertheSecuritiesExchangeActof1934
31.2
CertificationofChiefFinancialOfficerofTheWesternUnionCompanyPursuanttoRule13a-14(a)undertheSecuritiesExchangeActof1934
32
CertificationofChiefExecutiveOfficerandChiefFinancialOfficerPursuanttoSection1350ofChapter63ofTitle18oftheUnitedStatesCode
101.INS
XBRLInstanceDocument
101.SCH
XBRLTaxonomyExtensionSchemaDocument
101.CAL
XBRLTaxonomyExtensionCalculationLinkbaseDocument
101.DEF
XBRLTaxonomyExtensionDefinitionLinkbaseDocument
101.LAB
XBRLTaxonomyExtensionLabelLinkbaseDocument
101.PRE
XBRLTaxonomyExtensionPresentationLinkbaseDocument
Description
64
Exhibit 12
THE WESTERN UNION COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(unaudited)
(in millions)
Three Months
Ended June 30,
2016
Earnings:
Incomebeforeincometaxes
Six Months
Ended June 30,
2016
2014
2013
2012
222.5 $
440.0 $
941.8 $
968.2 $
926.9 $
1,168.8 $
45.6
86.5
175.6
182.7
198.8
Fixedcharges
Otheradjustments
(3.8)
(0.3)
(6.9)
(3.2)
(0.7)
264.3 $
526.2 $
1,110.5 $
1,147.7 $
1,125.0 $
177.8
5.3
Totalearnings(a)
Fixedcharges:
41.0 $
81.5 $
167.9 $
176.6 $
195.6 $
179.6 $
4.6
5.0
7.7
6.1
3.2
(1.8)
45.6 $
86.5 $
175.6 $
182.7 $
198.8 $
177.8 $
5.8
6.1
6.3
6.3
5.7
7.6
Interestexpense
Otheradjustments
Totalfixedcharges(b)
Ratioofearningstofixedcharges(a/b)
1,351.9 $
2011
1,274.6
182.9
2.6
1,460.1
181.9
1.0
182.9
8.0
Forpurposesofcalculatingtheratioofearningstofixedcharges,earningshavebeencalculatedbyaddingincomebeforeincometaxes,fixedchargesincluded
in the determination of income before income taxes and distributions from equity method investments, and then subtracting income from equity method
investments.Fixedchargesconsistofinterestexpense,andanestimatedinterestportionofrentalexpensesandincometaxcontingencies,whichareincludedasa
componentofincometaxexpense.
Exhibit 15
Letter from Ernst & Young LLP Regarding Unaudited Interim Financial Information
TheBoardofDirectorsandStockholdersofTheWesternUnionCompany
WeareawareoftheincorporationbyreferenceinthefollowingRegistrationStatements:
(1) RegistrationStatements(FormS-3Nos.333-191606and333-191608)ofTheWesternUnionCompany,and
(2) Registration Statement (Form S-8 Nos. 333-137665 and 333-204183) pertaining to The Western Union Company 2006 Long-Term Incentive Plan, The
WesternUnionCompany2006Non-EmployeeDirectorEquityCompensationPlan,TheWesternUnionCompanySupplementalIncentiveSavingsPlan,and
TheWesternUnionCompany2015Long-TermIncentivePlan;
ofourreportdatedAugust3,2016relatingtotheunauditedcondensedconsolidatedinterimfinancialstatementsofTheWesternUnionCompanythatareincluded
initsForm10-QforthequarterendedJune30,2016.
/s/Ernst&YoungLLP
Denver,Colorado
August3,2016
Exhibit 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
I,HikmetErsek,certifythat:
1.IhavereviewedthisQuarterlyReportonForm10-QofTheWesternUnionCompany;
2.Basedonmyknowledge,thisreportdoesnotcontainanyuntruestatementofamaterialfactoromittostateamaterialfactnecessarytomakethe
statementsmade,inlightofthecircumstancesunderwhichsuchstatementsweremade,notmisleadingwithrespecttotheperiodcoveredbythisreport;
3.Basedonmyknowledge,thefinancialstatements,andotherfinancialinformationincludedinthisreport,fairlypresentinallmaterialrespectsthe
financialcondition,resultsofoperationsandcashflowsoftheregistrantasof,andfor,theperiodspresentedinthisreport;
4.Theregistrant'sothercertifyingofficer(s)andIareresponsibleforestablishingandmaintainingdisclosurecontrolsandprocedures(asdefinedin
ExchangeActRules13a-15(e)and15d-15(e))andinternalcontroloverfinancialreporting(asdefinedinExchangeActRules13a-15(f)and15d-15(f))for
theregistrantandhave:
(a)Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobedesignedunderoursupervision,to
ensurethatmaterialinformationrelatingtotheregistrant,includingitsconsolidatedsubsidiaries,ismadeknowntousbyotherswithinthoseentities,
particularlyduringtheperiodinwhichthisreportisbeingprepared;
(b)Designedsuchinternalcontroloverfinancialreporting,orcausedsuchinternalcontroloverfinancialreportingtobedesignedunderour
supervision,toprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternal
purposesinaccordancewithgenerallyacceptedaccountingprinciples;
(c)Evaluatedtheeffectivenessoftheregistrant'sdisclosurecontrolsandproceduresandpresentedinthisreportourconclusionsaboutthe
effectivenessofthedisclosurecontrolsandprocedures,asoftheendoftheperiodcoveredbythisreportbasedonsuchevaluation;and
(d)Disclosedinthisreportanychangeintheregistrant'sinternalcontroloverfinancialreportingthatoccurredduringtheregistrant'smostrecent
fiscalquarter(theregistrant'sfourthfiscalquarterinthecaseofanannualreport)thathasmateriallyaffected,orisreasonablylikelytomaterially
affect,theregistrant'sinternalcontroloverfinancialreporting;and
5.Theregistrant'sothercertifyingofficer(s)andIhavedisclosed,basedonourmostrecentevaluationofinternalcontroloverfinancialreporting,tothe
registrant'sauditorsandtheauditcommitteeoftheregistrant'sboardofdirectors(orpersonsperformingtheequivalentfunctions):
(a)Allsignificantdeficienciesandmaterialweaknessesinthedesignoroperationofinternalcontroloverfinancialreportingwhicharereasonably
likelytoadverselyaffecttheregistrant'sabilitytorecord,process,summarizeandreportfinancialinformation;and
(b)Anyfraud,whetherornotmaterial,thatinvolvesmanagementorotheremployeeswhohaveasignificantroleintheregistrant'sinternalcontrol
overfinancialreporting.
Date: August3,2016
/S/HIKMETERSEK
Hikmet Ersek
Exhibit 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
I,RajeshK.Agrawal,certifythat:
1.IhavereviewedthisQuarterlyReportonForm10-QofTheWesternUnionCompany;
2.Basedonmyknowledge,thisreportdoesnotcontainanyuntruestatementofamaterialfactoromittostateamaterialfactnecessarytomakethe
statementsmade,inlightofthecircumstancesunderwhichsuchstatementsweremade,notmisleadingwithrespecttotheperiodcoveredbythisreport;
3.Basedonmyknowledge,thefinancialstatements,andotherfinancialinformationincludedinthisreport,fairlypresentinallmaterialrespectsthe
financialcondition,resultsofoperationsandcashflowsoftheregistrantasof,andfor,theperiodspresentedinthisreport;
4.Theregistrant'sothercertifyingofficer(s)andIareresponsibleforestablishingandmaintainingdisclosurecontrolsandprocedures(asdefinedin
ExchangeActRules13a-15(e)and15d-15(e))andinternalcontroloverfinancialreporting(asdefinedinExchangeActRules13a-15(f)and15d-15(f))for
theregistrantandhave:
(a)Designedsuchdisclosurecontrolsandprocedures,orcausedsuchdisclosurecontrolsandprocedurestobedesignedunderoursupervision,to
ensurethatmaterialinformationrelatingtotheregistrant,includingitsconsolidatedsubsidiaries,ismadeknowntousbyotherswithinthoseentities,
particularlyduringtheperiodinwhichthisreportisbeingprepared;
(b)Designedsuchinternalcontroloverfinancialreporting,orcausedsuchinternalcontroloverfinancialreportingtobedesignedunderour
supervision,toprovidereasonableassuranceregardingthereliabilityoffinancialreportingandthepreparationoffinancialstatementsforexternal
purposesinaccordancewithgenerallyacceptedaccountingprinciples;
(c)Evaluatedtheeffectivenessoftheregistrant'sdisclosurecontrolsandproceduresandpresentedinthisreportourconclusionsaboutthe
effectivenessofthedisclosurecontrolsandprocedures,asoftheendoftheperiodcoveredbythisreportbasedonsuchevaluation;and
(d)Disclosedinthisreportanychangeintheregistrant'sinternalcontroloverfinancialreportingthatoccurredduringtheregistrant'smostrecent
fiscalquarter(theregistrant'sfourthfiscalquarterinthecaseofanannualreport)thathasmateriallyaffected,orisreasonablylikelytomaterially
affect,theregistrant'sinternalcontroloverfinancialreporting;and
5.Theregistrant'sothercertifyingofficer(s)andIhavedisclosed,basedonourmostrecentevaluationofinternalcontroloverfinancialreporting,tothe
registrant'sauditorsandtheauditcommitteeoftheregistrant'sboardofdirectors(orpersonsperformingtheequivalentfunctions):
(a)Allsignificantdeficienciesandmaterialweaknessesinthedesignoroperationofinternalcontroloverfinancialreportingwhicharereasonably
likelytoadverselyaffecttheregistrant'sabilitytorecord,process,summarizeandreportfinancialinformation;and
(b)Anyfraud,whetherornotmaterial,thatinvolvesmanagementorotheremployeeswhohaveasignificantroleintheregistrant'sinternalcontrol
overfinancialreporting.
Date: August3,2016
/S/RAJESHK.AGRAWAL
Rajesh K. Agrawal
Exhibit 32
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
ThecertificationsetforthbelowisbeingsubmittedinconnectionwiththeQuarterlyReportofTheWesternUnionCompanyonForm10-Qfortheperiod
endedJune30,2016(the"Report")forthepurposeofcomplyingwithRule13a-14(b)orRule15d-14(b)oftheSecuritiesExchangeActof1934(the"Exchange
Act")andSection1350ofChapter63ofTitle18oftheUnitedStatesCode.
HikmetErsekandRajeshK.Agrawalcertifythat,tothebestofeachoftheirknowledge:
1.
TheReportfullycomplieswiththerequirementsofSection13(a)or15(d)oftheExchangeAct;and
2.
TheinformationcontainedintheReportfairlypresents,inallmaterialrespects,thefinancialconditionandresultsofoperationsofTheWestern
UnionCompany.
Date: August3,2016
/s/HIKMETERSEK
Hikmet Ersek
Date: August3,2016
/s/RAJESHK.AGRAWAL
Rajesh K. Agrawal