What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-10-29 compared with 2020-08-04 · 357 added, 391 removed, 1145 unchanged (40% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of services

17 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Other comprehensive income, net of reclassifications and tax (Note 11):

2 unchanged sentences

Defined benefit pension plan adjustments

Total other comprehensive income

Total other comprehensive income/(loss)

Comprehensive income

3 unchanged sentences

(in millions, except per share amounts)

September 30,

Cash and cash equivalents

2 unchanged sentences

Other intangible assets, net of accumulated amortization of $ 1,025.9 and $ 961.5 , respectively

Liabilities and stockholders' deficit

Liabilities and stockholders' equity/(deficit)

Accounts payable and accrued liabilities

5 unchanged sentences

Commitments and contingencies (Note 8)

Stockholders' deficit:

Stockholders' equity/(deficit):

Preferred stock, $ 1.00 par value;

3 unchanged sentences

2,000 shares authorized;

411.0 shares and 418.0 shares issued and outstanding as of June 30, 2020 and December 31, 2019 , respectively

411.0 shares and 418.0 shares issued and outstanding as of September 30, 2020 and December 31, 2019 , respectively

Capital surplus

1 unchanged sentence

Accumulated other comprehensive loss

Total stockholders' deficit

Total liabilities and stockholders' deficit

Total stockholders' equity/(deficit)

Total liabilities and stockholders' equity/(deficit)

See Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(in millions)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities

20 unchanged sentences

Cash flows from financing activities

Cash dividends paid

Cash dividends and dividend equivalents paid

Common stock repurchased (Note 11)

19 unchanged sentences

Stockholders'

Equity/(Deficit)

Balance, December 31, 2019

12 unchanged sentences

Balance, June 30, 2020

Stock-based compensation

Common stock dividends and dividend equivalents declared ($0.225 per share)

Repurchase and retirement of common shares

Shares issued under stock-based compensation plans

Other comprehensive loss (Note 11)

Balance, September 30, 2020

Comprehensive

14 unchanged sentences

Balance, June 30, 2019

Stock-based compensation

Common stock dividends ($0.20 per share)

Repurchase and retirement of common shares

Shares issued under stock-based compensation plans

Other comprehensive income (Note 11)

Balance, September 30, 2019

See Notes to Condensed Consolidated Financial Statements.

32 unchanged sentences

Results of operations and cash flows for the interim periods are not necessarily indicative of the results that may be expected for the entire year.

All significant intercompany transactions and accounts were eliminated as of June 30, 2020 and December 31, 2019 and for all periods presented.

In the opinion of management, these condensed consolidated financial statements include all the normal recurring adjustments necessary to fairly present the Company’s condensed consolidated results of operations, financial position, and cash flows as of June 30, 2020 and for all periods presented.

All significant intercompany transactions and accounts were eliminated as of September 30, 2020 and December 31, 2019 and for all periods presented.

These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements within the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

4 unchanged sentences

In March 2020, the World Health Organization declared the outbreak associated with a novel coronavirus a pandemic (“COVID-19”), and governments throughout the world instituted various actions such as lockdowns, stay-at-home orders, travel restrictions, and closures of non-essential businesses in an effort to reduce the spread of COVID-19.

These actions have negatively impacted the Company’s ability to offer its services through a portion of its locations and its retail agent locations, at least temporarily.

As a result, the Company’s revenues for the second quarter of 2020 were negatively impacted by the effects of COVID-19.

Beginning in March 2020, the Company experienced a decrease in transaction volumes, which continued into the second quarter of 2020.

The Company believes this decrease is due in part to economic decline and uncertainty resulting from the outbreak.

These actions negatively impacted the Company’s ability to offer its services, at least temporarily, through a portion of its locations and its retail agent locations during the nine months ended September 30, 2020.

Beginning in March 2020 and continuing into the second and third quarters of 2020, the Company experienced a decrease in transaction volumes from retail locations and a decrease in foreign exchange and payment services activity, which also negatively impacted revenues in these periods, partially offset by revenue growth from westernunion.com and other digital transactions.

The Company believes this decrease is mainly due to economic decline and uncertainty resulting from the outbreak.

The extent to which the COVID-19 outbreak continues to impact the Company’s business, financial condition, results of operations or cash flows will depend on future developments, which are highly uncertain and are difficult to predict.

To the extent the pandemic or the related macro-economic consequences continue, the Company could potentially experience changes in estimates, including increased credit losses or intangible asset impairments in future periods.

Recently Adopted Accounting Pronouncements

11 unchanged sentences

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

The Company recognized $ 1,055.6 million and $ 1,275.0 million for the three months ended June 30, 2020 and 2019, and $ 2,178.2 million and $ 2,550.4 million for the six months ended June 30, 2020 and 2019, respectively, in revenues from contracts with customers.

The Company recognized $ 1,214.3 million and $ 1,238.0 million for the three months ended September 30, 2020 and 2019, and $ 3,392.5 million and $ 3,788.4 million for the nine months ended September 30, 2020 and 2019, respectively, in revenues from contracts with customers.

There are no material upfront costs incurred to obtain contracts with customers.

4 unchanged sentences

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

Revenues from consumer money transfers are included in the Company’s Consumer-to-Consumer segment, revenues from foreign exchange and payment services are included in the Company’s Business Solutions segment, and revenues from consumer bill payments and other services are not included in the Company’s segments and are reported as Other.

See Note 16 for further information on the Company’s segments.

Consumer Money Transfers

7 unchanged sentences

In the majority of the Company’s foreign exchange and payment services, the Company makes payments to the recipient to satisfy its performance obligation to the customer, and therefore, the Company recognizes revenue on foreign exchange and payment services when this performance obligation has been fulfilled.

Revenues from foreign exchange and payment services are primarily comprised of the difference between the exchange rate set by the Company to the customer and the rate available in the wholesale foreign exchange market.

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Consumer Bill Payments

5 unchanged sentences

In May 2019, the Company sold a substantial majority of its United States based electronic bill payments services, as discussed in Note 4.

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Management has determined that the significant majority of the Company’s revenue is recognized at a point in time.

The following tables represent the disaggregation of revenue earned from contracts with customers by product type and region for the three and six months ended June 30, 2020 and 2019 (in millions).

The following tables represent the disaggregation of revenue earned from contracts with customers by product type and region for the three and nine months ended September 30, 2020 and 2019 (in millions).

The regional split of revenue shown in the tables below is based upon where transactions are initiated.

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Bill Payments

7 unchanged sentences

Total revenues (b)

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Bill Payments

9 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended June 30, 2019

Bill Payments (c)

Three Months Ended September 30, 2019

Bill Payments

North America

6 unchanged sentences

Total revenues (b)

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Bill Payments (c)

17 unchanged sentences

to sell its United States based electronic bill payments business known as “Speedpay,” and closed the transaction on May 9, 2019.

Included within North America revenues are Speedpay revenues of $ 37.2 million and $ 125.4 million for the three and six months ended June 30, 2019, respectively.

Included within North America revenues are Speedpay revenues of $ 125.4 million for the nine months ended September 30, 2019.

Earnings Per Share

3 unchanged sentences

The treasury stock method assumes proceeds from the exercise price of stock options and the unamortized compensation expense of options and restricted stock are available to acquire shares at an average market price throughout the period, and therefore, reduce the dilutive effect.

Shares excluded from the diluted earnings per share calculation under the treasury stock method, primarily due to outstanding restricted stock units and options to purchase shares of Western Union stock, as the assumed proceeds of the restricted stock and options per unit were above the Company’s average share price during the periods and their effect was

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

anti-dilutive, were 2.6 million and 2.3 million for the three months ended June 30, 2020 and 2019, respectively, and 1.8 million and 3.4 million for the six months ended June 30, 2020 and 2019, respectively.

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

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

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Basic weighted-average shares outstanding

5 unchanged sentences

The Company received approximately $ 750 million and recorded a pre-tax gain on the sale of approximately $ 523 million, which is included in Gain on divestitures of businesses in the accompanying Condensed Consolidated Statements of Income, in the all-cash transaction that closed on May 9, 2019.

Speedpay revenues and direct operating expenses included in the Company’s results were $ 37.2 million and $ 30.6 million, respectively, for the three months ended June 30, 2019 and $ 125.4 million and $ 98.2 million, respectively, for the six months ended June 30, 2019.

Speedpay revenues and direct operating expenses included in the Company’s results were $ 125.4 million and $ 98.2 million, respectively, for the nine months ended September 30, 2019.

On May 6, 2019, the Company completed the sale of Paymap Inc.

(“Paymap”), which provides electronic mortgage bill payment services, for contingent consideration and immaterial cash proceeds received at closing.

The Company recorded an immaterial pre-tax gain related to this sale for the three and six months ended June 30, 2019.

The Company recorded an immaterial pre-tax gain related to this sale during the nine months ended September 30, 2019.

In the first quarter of 2020, the Company sold its former corporate headquarters and recorded an immaterial pre-tax net gain on the sale.

The proceeds from this sale have been included in Cash flows from investing activities within the Company’s Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020.

The proceeds from this sale have been included in Cash flows from investing activities within the Company’s Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020.

Restructuring-Related Expenses

9 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table summarizes the activity for the six months ended June 30, 2020 for expenses related to the restructuring accruals, which are included in Accounts payable and accrued liabilities in the Company’s Condensed Consolidated Balance Sheets as of June 30, 2020, and the total expenses incurred since the inception of the restructuring plan (in millions):

The following table summarizes the activity for the nine months ended September 30, 2020 for expenses related to the restructuring accruals, which are included in Accounts payable and accrued liabilities in the Company’s Condensed Consolidated Balance Sheets as of September 30, 2020, and the total expenses incurred since the inception of the restructuring plan (in millions):

Severance and

4 unchanged sentences

Non-cash benefits/(charges) (a)

Balance, June 30, 2020

Balance, September 30, 2020

Total expenses incurred-to-date

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of services

2 unchanged sentences

Total expenses, net of tax

The Company leases real properties for use as administrative and sales offices, in addition to automobiles and office equipment.

The Company leases real properties for use as administrative and sales offices, in addition to transportation, office, and other equipment.

The Company determines if a contract contains a lease arrangement at the inception of the contract.

5 unchanged sentences

The Company’s leasing arrangements are classified as operating leases, for which expense is recognized on a straight-line basis.

As of June 30, 2020 and December 31, 2019, total ROU assets were $ 195.0 million and $ 199.7 million, respectively, and operating lease liabilities were $ 234.9 million and $ 242.3 million, respectively.

As of September 30, 2020 and December 31, 2019, total ROU assets were $ 192.8 million and $ 199.7 million, respectively, and operating lease liabilities were $ 236.9 million and $ 242.3 million, respectively.

The ROU assets and operating lease liabilities are included in Other assets and Other liabilities, respectively, in the Company’s Condensed Consolidated Balance Sheets.

Cash paid for operating lease liabilities is recorded as Cash flows from operating activities in the Company’s Condensed Consolidated Statements of Cash Flows.

Operating lease costs, which are included in Total expenses in the Company’s Condensed Consolidated Statements of Income, were $ 12.8 million and $ 14.3 million for the three months ended June 30, 2020 and 2019, respectively, and $ 26.0 million and $ 29.3 million for the six months ended

Operating lease costs, which are included in Total expenses in the Company’s Condensed Consolidated Statements of Income, were $ 13.2 million and $ 13.6 million for the three months ended September 30, 2020 and 2019, respectively, and $ 39.2 million and $ 42.9 million for the nine months

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

June 30, 2020 and 2019, respectively.

Short-term and variable lease costs were not material for the three and six months ended June 30, 2020.

ended September 30, 2020 and 2019, respectively.

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

The Company’s leases have remaining terms from less than 1 year to 11 years .

1 unchanged sentence

However, a significant majority of these options are not reflected in the calculation of the ROU asset and operating lease liability due to uncertainty surrounding the likelihood of renewal.

The following table summarizes the weighted-average lease term and discount rate for operating lease liabilities:

June 30, 2020

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

September 30, 2020

September 30, 2019

Weighted-average remaining lease term (in years)

Weighted-average discount rate

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

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

Due within 1 year

14 unchanged sentences

Fair Value Measurement Using

June 30, 2020

September 30, 2020

Cash and cash equivalents:

Measured at fair value through net income:

Money market funds

Settlement assets:

4 unchanged sentences

State and municipal variable-rate demand notes

Corporate debt securities

Corporate and other debt securities

United States government agency mortgage-backed securities

17 unchanged sentences

Total liabilities

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

Other Fair Value Measurements

The carrying amounts for many of the Company’s financial instruments, including certain cash and cash equivalents, settlement cash and cash equivalents, and settlement receivables and obligations approximate fair value due to their short

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

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other Fair Value Measurements

The Company’s borrowings are classified as Level 2 within the valuation hierarchy, and the aggregate fair value of these borrowings was based on quotes from multiple banks.

Fixed-rate notes are carried in the Company’s Condensed Consolidated Balance Sheets at their original issuance values as adjusted over time to accrete that value to par.

As of June 30, 2020, the carrying value and fair value of the Company’s borrowings were $ 3,085.8 million and $ 3,256.1 million, respectively (see Note 13).

As of September 30, 2020, the carrying value and fair value of the Company’s borrowings were $ 3,036.5 million and $ 3,253.7 million, respectively (see Note 13).

As of December 31, 2019, the carrying value and fair value of the Company’s borrowings were $ 3,229.3 million and $ 3,372.2 million, respectively.

1 unchanged sentence

Letters of Credit and Bank Guarantees

The Company had approximately $ 360 million in outstanding letters of credit and bank guarantees as of June 30, 2020 that are primarily held in connection with safeguarding consumer funds, lease arrangements, and certain agent agreements.

The letters of credit and bank guarantees have expiration dates through 2024 , with many having a one-year renewal option.

The Company had approximately $ 370 million in outstanding letters of credit and bank guarantees as of September 30, 2020 primarily held in connection with safeguarding consumer funds, lease arrangements, and certain agent agreements.

The significant majority of the Company’s letters of credit and bank guarantees have a one-year renewal option.

The Company expects to renew the letters of credit and bank guarantees prior to expiration in most circumstances.

These letters of credit and bank guarantees exclude guarantees that the Company may provide as part of its legal matters, as described below.

Litigation and Related Contingencies

3 unchanged sentences

Unless otherwise specified below, the Company believes that there is at least a reasonable possibility that a loss or additional losses may have been incurred for each of the matters described below.

For those matters that the Company believes there is at least a reasonable possibility that a loss or additional losses may have been incurred and can reasonably estimate the loss or potential loss, the reasonably possible potential litigation losses in excess of the Company’s recorded liability for probable and estimable losses was approximately $ 30 million as of June 30, 2020.

For the remaining matters, management is unable to provide a meaningful estimate of the possible loss or range of loss because, among other reasons:

8 unchanged sentences

Accordingly, actual losses may be in excess of the established liability or the range of reasonably possible loss.

United States Department of Justice, Federal Trade Commission, Financial Crimes Enforcement Network, and State Attorneys General Settlements

In late November 2016, the Company entered into discussions with the United States Department of Justice (the “DOJ”), the United States Attorney’s Office for the Central District of California ("USAO-CDCA"), the United States Attorney’s Office for the Eastern District of Pennsylvania ("USAO-EDPA"), the United States Attorney’s Office for the Middle District of Pennsylvania ("USAO-MDPA"), and the United States Attorney’s Office for the Southern District of Florida (“USAO-SDFL”) to resolve the investigations by the USAO-CDCA, USAO-EDPA, USAO-MDPA, and USAO-

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

SDFL (collectively, the “USAOs”).

On January 19, 2017, the Company announced that it, or its subsidiary Western Union Financial Services, Inc.

(“WUFSI”), had entered into 1) a Deferred Prosecution Agreement (the “DPA”) with the DOJ and the USAOs;

2) a Stipulated Order for Permanent Injunction and Final Judgment (the “FTC Consent Order”) with the United States Federal Trade Commission (“FTC”) resolving claims by the FTC alleging unfair acts and practices under the Federal Trade Commission Act and for violations of the FTC Telemarketing Sales Rule;

and 3) a Consent to the Assessment of Civil Money Penalty with the Financial Crimes Enforcement Network (“FinCEN”) of the United States Department of Treasury (the “FinCEN Agreement”), to resolve the respective investigations of those agencies.

FinCEN provided notice to the Company dated December 16, 2016 of its investigation regarding possible violations of the United States Bank Secrecy Act.

On January 31, 2017, the Company entered into assurances of discontinuance/assurances of voluntary compliance with the attorneys general of 49 U.S.

states and the District of Columbia named therein to resolve investigations by the state attorneys general, which sought information and documents relating to money transfers sent from the United States to certain countries, consumer fraud complaints that the Company had received and the Company’s procedures to help identify and prevent fraudulent transfers.

On April 12, 2017, the Company settled with the one remaining state attorney general under effectively the same terms as the January 31, 2017 agreement with no additional monetary payment required.

The agreements with the state attorneys general are collectively referred to herein as the "State AG Agreement."

The DPA, FTC Consent Order, FinCEN Agreement, and State AG Agreement are collectively referred to herein as the "Joint Settlement Agreements."

Pursuant to the DPA, the USAOs filed a two -count criminal information in the United States District Court for the Middle District of Pennsylvania, charging the Company with aiding and abetting wire fraud and willfully failing to implement an effective anti-money laundering ("AML") program.

The USAOs agreed that if the Company fully complies with all of its obligations under the DPA, the USAOs will, at the conclusion of the DPA’s term, seek dismissal with prejudice of the criminal information filed against the Company.

Under the Joint Settlement Agreements, the Company was required to 1) pay an aggregate amount of $ 586 million to the DOJ to be used to reimburse consumers who were the victims of third-party fraud conducted through the Company’s money transfer services (the “Compensation Payment”);

2) pay an aggregate amount of $ 5 million to the State Attorneys General to reimburse investigative, enforcement, and other costs;

and 3) retain an independent compliance auditor for three years to review and assess actions taken by the Company under the FTC Consent Order to further enhance its oversight of agents and protection of consumers.

The FinCEN Agreement also set forth a civil penalty of $ 184 million, the full amount of which was deemed satisfied by the Compensation Payment.

No separate payment to the FTC was required under the Joint Settlement Agreements.

The Company paid the Compensation Payment and the aggregate amount due to the State Attorneys General during 2017.

The term of the DPA expired on January 19, 2020.

On March 6, 2020, the DOJ filed an unopposed motion to dismiss the criminal information with prejudice in the United States District Court for the Middle District of Pennsylvania, and on March 9, 2020, the Court granted the motion.

On May 16, 2020, the term of the Independent Compliance Auditor (“ICA”) under the FTC Consent Order ended.

On that same date, the ICA issued its final report to the FTC, which concluded that Western Union is in full compliance with the requirements of the FTC Consent Order.

Western Union has continuing obligations under the FTC Consent Order, which is a permanent injunction, as well as the requirement to submit annual reports to the FTC through January 2028.

The Joint Settlement Agreements required, among other things, the Company to adopt certain new or enhanced practices with respect to its compliance program relating to consumer reimbursement, agent due diligence, agent training, monitoring, reporting, and record-keeping by the Company and its agents, consumer fraud disclosures, agent suspensions and terminations, and other items.

The ongoing obligations under the FTC Consent Order and the State AG Agreement have had and could continue to have adverse effects on the Company’s business, including additional costs and potential loss of business.

The Company has faced (as described below) additional actions from other regulators as a result of the Joint Settlement Agreements.

Further, if the Company fails to comply with the continuing obligations under the FTC Consent order and the State AG Agreement, it could face criminal prosecution, civil litigation, significant fines, damage

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

awards or other regulatory consequences.

Any or all of these outcomes could have a material adverse effect on the Company’s business, financial condition, results of operations, and cash flows.

Shareholder Derivative Action

On January 16, 2020, Stanley Lieblein filed a shareholder derivative complaint in the Court of Chancery of the State of Delaware naming the Company’s President and Chief Executive Officer, certain current and former directors, and a former executive officer as individual defendants and the Company as a nominal defendant.

Lieblein had previously filed a shareholder derivative action asserting related claims in the United States District Court for the District of Colorado, which was subsequently consolidated with multiple pending related derivative actions.

Lieblein had previously filed a shareholder derivative action asserting related claims in the United States District Court for the District of Colorado,

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

which was subsequently consolidated with multiple pending related derivative actions.

Following the filing of multiple amended complaints, the United States Court of Appeals for the Tenth Circuit affirmed dismissal of the consolidated derivative action on April 16, 2019 on the ground that the plaintiffs did not have standing to proceed on behalf of the Company without making a demand on the Company’s board of directors.

1 unchanged sentence

On August 1, 2019, Mr.

Lieblein made a written demand on the Company’s board of directors to investigate and address alleged misconduct related to the Company’s anti-fraud and AML compliance programs, including certain alleged misconduct at issue in the consolidated derivative action.

Lieblein made a written demand on the Company’s board of directors to investigate and address alleged misconduct related to the Company’s anti-fraud and anti-money laundering (“AML”) compliance programs, including certain alleged misconduct at issue in the consolidated derivative action.

The Company’s board of directors formed a special committee to evaluate Mr.

2 unchanged sentences

Lieblein alleges that he filed the January 16, 2020 complaint prior to the completion of the special committee’s investigation because of concerns regarding the statute of limitations on some of the claims asserted.

Lieblein has agreed to stay the action pending completion of the special committee’s investigation, or until September 30, 2020, whichever occurs earlier.

Lieblein has agreed to stay the action until December 31, 2020, pending completion of the special committee’s investigation.

The complaint filed by Mr.

8 unchanged sentences

The agreement has been signed by the parties and, on November 10, 2015, the Court granted preliminary approval to the settlement.

On January 9, 2018, plaintiff filed a motion requesting decisions on its

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

pending motion to approve the settlement and motion for attorneys’ fees, costs, and incentive award.

On January 9, 2018, plaintiff filed a motion requesting decisions on its pending motion to approve the settlement and motion for attorneys’ fees, costs, and incentive award.

On August 31, 2018, the Court issued an order approving the settlement, in which the Court modified the class definition slightly and ordered the parties to provide additional notice to the class.

In 2014, the Company accrued an amount equal to the retention under its insurance policy and believes that any amounts in excess of this accrual will be covered by the insurer.

However, if the Company’s insurer is unable to or refuses to satisfy its obligations under the policy or the parties are unable to reach a definitive agreement or otherwise agree on a resolution, the Company’s financial condition, results of operations, and cash flows could be adversely impacted.

As the parties have reached an agreement in this matter, the Company believes that the potential for additional loss in excess of amounts already accrued is remote.

An appeal relating to the Court’s order was taken by an objector, and this appeal was dismissed on April 13, 2020.

The Company and its insurance carrier have funded the settlement and, on October 5, 2020, the Court entered the final order and judgment in the case.

In October 2015, Consumidores Financieros Asociación Civil para su Defensa, an Argentinian consumer association, filed a purported class action lawsuit in Argentina’s National Commercial Court No.

19 against the Company’s subsidiary Western Union Financial Services Argentina S.R.L.

The lawsuit alleges, among other things, that WUFSA’s fees for money transfers sent from Argentina are excessive and that WUFSA does not provide consumers with adequate information about foreign exchange rates.

The lawsuit alleges, among other things, that WUFSA’s

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

fees for money transfers sent from Argentina are excessive and that WUFSA does not provide consumers with adequate information about foreign exchange rates.

The plaintiff is seeking, among other things, an order requiring WUFSA to reimburse consumers for the fees they paid and the foreign exchange revenue associated with money transfers sent from Argentina, plus punitive damages.

9 unchanged sentences

WUFSA intends to defend itself vigorously.

On February 22, 2017, the Company, its President and Chief Executive Officer, its Chief Financial Officer, and a former executive officer of the Company were named as defendants in two purported class action lawsuits, both of which asserted claims under section 10(b) of the Exchange Act and Securities and Exchange Commission rule 10b-5 and section 20(a) of the Exchange Act.

On May 3, 2017, the two cases were consolidated by the United States District Court for the District of Colorado under the caption Lawrence Henry Smallen and Laura Anne Smallen Revocable Living Trust et al.

The Western Union Company et al.

, Civil Action No.

1:17-cv-00474-KLM (D.

On September 6, 2017, the Court appointed Lawrence Henry Smallen and Laura Anne Smallen Revocable Living Trust as the lead plaintiff.

On November 6, 2017, the plaintiffs filed a consolidated amended complaint (“Amended Complaint”) that, among other things, added two other former executive officers as defendants, one of whom subsequently was voluntarily dismissed by the plaintiffs.

The Amended Complaint asserts claims under section 10(b) of the Exchange Act and Securities and Exchange Commission rule 10b-5 and section 20(a) of the Exchange Act, and alleges that, during the purported class period of February 24, 2012, through May 2, 2017, the defendants made false or misleading statements or failed to disclose purported adverse material facts regarding, among other things, the Company’s compliance with AML and anti-fraud regulations, the status and likely outcome of certain governmental investigations targeting the Company, the reasons behind the Company’s decisions to make certain regulatory enhancements, and the Company’s premium pricing.

The defendants filed a motion to dismiss the complaint on January 16, 2018, and on March 27, 2019, the Court dismissed the action in its entirety with prejudice and entered final judgment in the defendants’ favor on March 28, 2019.

On April 26, 2019, plaintiffs filed a notice of appeal to the United States Court of Appeals for the Tenth Circuit.

On June 24, 2019, plaintiffs filed their opening brief on appeal and oral argument was held on January 22, 2020.

Plaintiffs did not appeal the dismissal of one former executive officer and only appealed the district court’s conclusion that the remaining defendants did not make statements concerning the Company’s compliance programs with the requisite intent.

On February 25, 2020, the United States Court of Appeals for the Tenth Circuit affirmed the dismissal of the case.

Plaintiff’s deadline to file a petition for a writ of certiorari from the Supreme Court of the United States was July 27, 2020.

Plaintiff did not file such a petition, and the case has now concluded.

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On February 13, 2017, the Company’s subsidiary, Western Union Payment Services Ireland Limited (“WUPSIL”), was served with a writ of accusation from the National Court of Spain.

The writ charges 98 former Western Union money transfer agents or agent representatives with fraud and money laundering in connection with consumer fraud scams they allegedly perpetrated using Western Union money transfer transactions.

The writ also names WUPSIL as a civil defendant, allegedly responsible under Spanish law to pay any portion of the alleged amount in victim losses that cannot be repaid by any of the criminal defendants who are convicted.

In accordance with Spanish law, on January 4, 2018, the Company, through its subsidiary Western Union International Limited, provided a corporate guarantee in an amount of approximately € 23 million to cover any liability that could theoretically attach to WUPSIL.

On October 3, 2019, WUPSIL reached a settlement agreement with the Spanish prosecutor that extinguishes WUPSIL’s civil liability for the fraud scams at issue by stating that the liability has already been covered by the Compensation Payment under the DPA.

On October 8, 2019, WUPSIL filed a motion requesting release of the corporate guarantee.

On November 4, 2019, the Court issued final judgment in this matter consistent with the settlement agreement.

WUPSIL filed a new motion requesting release of the corporate guarantee on December 2, 2019.

On June 19, 2020, the Court released the corporate guarantee.

This decision is now binding and final and cannot be further appealed or modified.

On March 31, 2017, the Company received a request for the production of documents from the New York State Department of Financial Services (the "NYDFS"), following up on a meeting the Company had with the NYDFS on March 7, 2017.

The requests pertain to the Company’s oversight of one current and two former Western Union agents located in New York state.

The two former agents were identified in the DPA described in the United States Department of Justice, Federal Trade Commission, Financial Crimes Enforcement Network, and State Attorneys General Settlements section above, and were terminated as agents by the Company prior to 2013.

On July 28, 2017, the NYDFS informed the Company that the facts set forth in the DPA regarding the Company’s anti-money laundering programs over the 2004 through 2012 period gave the NYDFS a basis to take additional enforcement action.

On January 4, 2018, the Company’s subsidiary, WUFSI, and the NYDFS agreed to a consent order (the "NYDFS Consent Order"), which resolved the NYDFS investigation into these matters.

Under the NYDFS Consent Order, the Company was required, among other things, to pay to the NYDFS a civil monetary penalty of $ 60 million, which the Company paid on January 12, 2018.

On April 26, 2018, the Company, its WUFSI subsidiary, its President and Chief Executive Officer, and various “Doe Defendants” (purportedly including Western Union officers, directors, and agents) were named as defendants in a purported class action lawsuit asserting claims for alleged violations of civil Racketeer Influenced and Corrupt Organizations Act and the Colorado Organized Crime Act, civil theft, negligence, unjust enrichment, and conversion under the caption Frazier et al.

On April 26, 2018, the Company, its subsidiary, Western Union Financial Services, Inc., its President and Chief Executive Officer, and various “Doe Defendants” (purportedly including Western Union officers, directors, and agents) were named as defendants in a purported class action lawsuit asserting claims for alleged violations of civil Racketeer Influenced and Corrupt Organizations Act and the Colorado Organized Crime Act, civil theft, negligence, unjust enrichment, and conversion under the caption Frazier et al.

The Western Union Company et al., Civil Action No.

1:18-cv-00998-KLM (D.

The complaint alleges that, during the purported class period of January 1, 2004 to the present, and based largely on the admissions and allegations relating to the DPA, the FTC Consent Order, and the NYDFS Consent Order, the defendants engaged in a scheme to defraud customers through Western Union’s money transfer system.

The complaint alleges that, during the purported class period of January 1, 2004 to the present, and based largely on the admissions and allegations relating to the United States Department of Justice, Federal Trade Commission, Financial Crimes Enforcement Network, and State Attorneys General Settlements, as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, the defendants engaged in a scheme to defraud customers through Western Union’s money transfer system.

The plaintiffs filed an amended complaint on July 17, 2018.

3 unchanged sentences

To date, no such individual arbitration requests have been filed.

Due to the stage of the matter, the Company is unable to predict the outcome, or the possible loss or range of loss, if any, which could be associated with it.

The Company and the other defendants intend to vigorously defend themselves in this matter.

On August 27, 2020, the Court issued an order requiring that the parties indicate whether the case should remain administratively closed, subject to reopening, or that the parties file dismissal papers stating that the case may be terminated from the Court’s docket.

That same day, Plaintiffs filed a Notice of Dismissal, indicating that they had dismissed the action and that the case may be terminated from the Court’s docket.

In addition to the principal matters described above, the Company is a party to a variety of other legal matters that arise in the normal course of the Company’s business.

While the results of these other legal matters cannot be predicted with certainty, management believes that the final outcome of these matters will not have a material adverse effect either individually or in the aggregate on the Company’s financial condition, results of operations, or cash flows.

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Related Party Transactions

1 unchanged sentence

The Company pays these agents commissions for money transfer and other services provided on the Company’s behalf.

Commission expense recognized for these agents for the three months ended June 30, 2020 and 2019 totaled $ 12.9 million and $ 14.4 million, respectively, and $ 25.5 million and $ 27.4 million for the six months ended June 30, 2020 and 2019, respectively.

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

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Settlement Assets and Obligations

3 unchanged sentences

Settlement assets and obligations consisted of the following (in millions):

June 30, 2020

September 30, 2020

Settlement assets:

19 unchanged sentences

Total settlement obligations

Receivables from agents represent funds collected by such agents, but in transit to the Company, and were $ 1,171.7 million as of June 30, 2020.

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

Cash received by Western Union agents generally becomes available to the Company within one week after initial receipt by the agent.

2 unchanged sentences

Receivables from Business Solutions customers arise from cross-currency payment transactions in the Business Solutions segment.

Business Solutions receivables totaled $ 61.9 million as of June 30, 2020.

Receivables occur when

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

funds have been paid out to a beneficiary but not yet received from the customer.

Business Solutions receivables totaled $ 69.5 million as of September 30, 2020.

Receivables occur when funds have been paid out to a beneficiary but not yet received from the customer.

Collection of these receivables ordinarily occurs within a few days.

2 unchanged sentences

However, due to the short-term nature of the Company’s receivables and the Company’s historical and expected collections practice, the adoption did not have a material impact on the Company’s financial position or results of operations.

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company separately establishes and monitors an allowance for credit losses related to receivables from agents and Business Solutions customers.

The Company estimates the allowance based on its historical collections experience, adjusted for current conditions and forecasts of future economic conditions, including those related to COVID-19.

Given the short-term nature of these receivables, the Company would not expect the impact of forecasted economic conditions on its allowance for credit loss to be significant.

However, during the three and six months ended June 30, 2020, the Company experienced delays in its collections from certain of its agents in connection with COVID-19 agent location closures and other impacts, and the Company believes these delays were largely temporary as certain agents were not able to remit settlement funds during lockdowns or other stay-at-home orders.

Still, some of the Company’s agents, such as small businesses, may not easily be able to resume operations due to COVID-19.

The Company has estimated credit losses based on information known as of June 30, 2020.

Given the short-term nature of these receivables, the Company does not expect the impact of forecasted economic conditions on its allowance for credit loss to be significant.

The Company has estimated credit losses based on information known as of September 30, 2020.

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

5 unchanged sentences

Impacts of foreign currency exchange rates and other

Allowance for credit losses as of June 30, 2020

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

Allowance for credit losses as of September 30, 2020

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

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

6 unchanged sentences

Unrealized gains on available-for-sale securities are excluded from earnings and presented as a component of accumulated other comprehensive loss, net of related deferred taxes.

Available-for-sale securities with a fair value below the amortized cost basis are evaluated on an individual basis to determine whether the impairment is due to credit-related

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

factors or noncredit-related factors.

Available-for-sale securities with a fair value below the amortized cost basis are evaluated on an individual basis to determine whether the impairment is due to credit-related factors or noncredit-related factors.

Factors that could indicate a credit loss exists include but are not limited to:

2 unchanged sentences

Credit-related impairments are recognized immediately as an adjustment to earnings, regardless of whether the Company has the ability or intent to hold the security to maturity, and are limited to the difference between fair value and the amortized cost basis.

As of and for the three and six months ended June 30, 2020, the Company’s allowance for credit losses and provision for credit losses on its available-for-sale securities were immaterial.

As of and for the three and nine months ended September 30, 2020, the Company’s allowance for credit losses and provision for credit losses on its available-for-sale securities were immaterial.

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

June 30, 2020

September 30, 2020

Gains/(Losses)

Cash and cash equivalents:

Money market funds

Settlement assets:

4 unchanged sentences

State and municipal variable-rate demand notes

Corporate debt securities

Corporate and other debt securities

United States government agency mortgage-backed securities

16 unchanged sentences

(a) The majority of these securities are fixed-rate instruments.

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following summarizes the contractual maturities of available-for-sale securities within Settlement assets as of June 30, 2020 (in millions):

The following summarizes the contractual maturities of available-for-sale securities within Settlement assets as of September 30, 2020 (in millions):

Due within 1 year

2 unchanged sentences

Due after 10 years

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay the obligations or the Company may have the right to put the obligation prior to its contractual maturity, as with variable-rate demand notes.

6 unchanged sentences

These amounts advanced to agents are included within Other assets in the accompanying Condensed Consolidated Balance Sheets.

As of June 30, 2020, amounts advanced to agents were $ 117.9 million, and the related allowance for credit losses was immaterial.

Stockholders’ Deficit

As of September 30, 2020, amounts advanced to agents were $ 124.4 million, and the related allowance for credit losses was immaterial.

Stockholders’ Equity/(Deficit)

Accumulated Other Comprehensive Loss

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Income Statement

September 30,

Income for the period (in millions)

32 unchanged sentences

As of June 30, 2020

Unrealized gains/(losses)

Tax benefit/(expense)

Amounts reclassified from AOCL into earnings, net of tax

As of September 30, 2020

Foreign Currency

9 unchanged sentences

As of June 30, 2019

Unrealized gains

Amounts reclassified from AOCL into earnings, net of tax

As of September 30, 2019

Cash Dividends Paid

The Company’s Board of Directors declared quarterly cash dividends of $ 0.225 per common share in the first and second quarters of 2020, representing $ 184.9 million in total dividends.

Of this amount, $ 92.5 million was paid on June 30, 2020 and $ 92.4 million was paid on March 31, 2020.

The Company’s Board of Directors declared quarterly cash dividends of $ 0.20 per common share in the first and second quarters of 2019, representing $ 172.9 million in total dividends.

Of this amount, $ 85.5 million was paid on June 28, 2019 and $ 87.4 million was paid on March 29, 2019.

On July 15, 2020, the Company’s Board of Directors declared a quarterly cash dividend of $ 0.225 per common share payable on September 30, 2020.

Share Repurchases

During the six months ended June 30, 2020 and 2019, 8.5 million and 17.9 million shares were repurchased for $ 217.4 million and $ 335.5 million, respectively, excluding commissions, at an average cost of $ 25.45 and $ 18.73 , respectively.

These amounts represent shares authorized by the Board of Directors for repurchase under publicly announced authorizations.

During the first quarter of 2020, the Company temporarily paused and has not resumed share repurchases,

The Company’s Board of Directors declared quarterly cash dividends of $ 0.225 per common share for each of the first three quarters of 2020, representing $ 277.4 million in total dividends.

Of this amount, $ 92.5 million was paid on September 30, 2020, $ 92.5 million was paid on June 30, 2020, and $ 92.4 million was paid on March 31, 2020.

The Company’s Board of Directors declared quarterly cash dividends of $ 0.20 per common share for each of the first three quarters of 2019, representing $ 257.1 million in total dividends.

Of this amount, $ 84.2 million was paid on September 30, 2019, $ 85.5 million was paid on June 28, 2019, and $ 87.4 million was paid on March 29, 2019.

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

and as of June 30, 2020, $ 782.6 million remains available under the share repurchase authorization approved by the Company’s Board of Directors through December 31, 2021.

Share Repurchases

During the nine months ended September 30, 2020 and 2019, 8.5 million and 24.4 million shares were repurchased for $ 217.4 million and $ 475.2 million, respectively, excluding commissions, at an average cost of $ 25.45 and $ 19.48 , respectively.

These amounts represent shares authorized by the Board of Directors for repurchase under publicly announced authorizations.

During the first quarter of 2020, the Company temporarily paused and has not resumed share repurchases, and as of September 30, 2020, $ 782.6 million remains available under the share repurchase authorization approved by the Company’s Board of Directors through December 31, 2021.

The amounts included in the Common stock repurchased line in the Company’s Condensed Consolidated Statements of Cash Flows represent both shares authorized by the Board of Directors for repurchase under publicly announced authorizations and shares withheld from employees to cover tax withholding obligations on restricted stock units that have vested.

The Company is exposed to foreign currency exchange risk resulting from fluctuations in exchange rates, primarily the euro, and, to a lesser degree, the Canadian dollar, British pound, and other currencies, related to forecasted revenues and settlement assets and obligations, as well as on certain foreign currency denominated cash and other asset and liability positions.

The Company is exposed to foreign currency exchange risk resulting from fluctuations in exchange rates, primarily the euro, and, to a lesser degree, the British pound, Canadian dollar, and other currencies, related to forecasted revenues and settlement assets and obligations, as well as on certain foreign currency denominated cash and other asset and liability positions.

The Company is also exposed to risk from derivative contracts, primarily from customer derivatives, arising from its cross-currency Business Solutions payment operations.

13 unchanged sentences

The Company’s policy is to use longer duration foreign currency forward contracts, with maturities of up to 36 months at inception and a targeted weighted-average maturity of approximately one year , to help mitigate some of the risk that changes in foreign currency exchange rates compared to the United States dollar could have on forecasted revenues denominated in other currencies related to its business.

As of June 30, 2020, these foreign currency forward contracts had maturities of a maximum of 24 months with a weighted-average maturity of approximately one year .

As of September 30, 2020, these foreign currency forward contracts had maturities of a maximum of 24 months with a weighted-average maturity of approximately one year .

These contracts are accounted for as cash flow hedges of forecasted revenue, with effectiveness assessed based on changes in the spot rate of the affected currencies during the period of designation and thus time value is excluded from the assessment of effectiveness.

1 unchanged sentence

The Company also uses short duration foreign currency forward contracts, generally with maturities ranging from a few days to one month , to offset foreign exchange rate fluctuations on settlement assets and obligations between initiation and settlement.

In addition, forward contracts, typically with maturities of less than one year at inception, are utilized to offset foreign exchange rate fluctuations on certain foreign currency denominated cash and other asset and liability positions.

None of these contracts are designated as accounting hedges.

In addition, forward contracts, typically with maturities of less than one year at inception, are utilized to

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The aggregate equivalent United States dollar notional amounts of foreign currency forward contracts as of June 30, 2020 and December 31, 2019 were as follows (in millions):

June 30, 2020

offset foreign exchange rate fluctuations on certain foreign currency denominated cash and other asset and liability positions.

None of these contracts are designated as accounting hedges.

The aggregate equivalent United States dollar notional amounts of foreign currency forward contracts as of September 30, 2020 and December 31, 2019 were as follows (in millions):

September 30, 2020

Contracts designated as hedges:

1 unchanged sentence

British pound

Australian dollar

Contracts not designated as hedges:

2 unchanged sentences

Australian dollar

(a) Comprised of exposures to various currencies as of June 30, 2020.

None of these individual currency exposures is greater than $ 25 million.

Russian ruble

December 31, 2019

8 unchanged sentences

Brazilian real

(a) Comprised of exposures to various currencies as of December 31, 2019.

(a) Comprised of exposures to various currencies;

none of these individual currency exposures is greater than $ 25 million.

6 unchanged sentences

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 forwards and options.

Foreign exchange revenues from the total portfolio of positions were $ 70.0 million and $ 84.2 million for the three months ended June 30, 2020 and 2019, respectively, and $ 157.5 million and $ 168.9 million for the six months ended June 30, 2020 and 2019, respectively.

None of the derivative contracts used in Business Solutions operations are designated as accounting hedges and the duration of these derivative contracts at inception is generally less than one year .

The aggregate equivalent United States dollar notional amount of derivative customer contracts held by the Company in its Business Solutions operations as of June 30, 2020 and December 31, 2019 was approximately $ 7.5 billion.

Foreign exchange revenues from the total portfolio of positions were $ 76.9 million and $ 88.2 million for the three months ended September 30, 2020 and 2019, respectively, and $ 234.4 million and $ 257.1 million for the nine months ended September 30, 2020 and 2019, respectively.

None of the derivative contracts used in Business Solutions operations are designated as accounting hedges and the majority of these derivative contracts have a duration at inception of less than one year .

The aggregate equivalent United States dollar notional amount of derivative customer contracts held by the Company in its Business Solutions operations was approximately $ 7.5 billion as of both September 30, 2020 and December 31, 2019.

The significant majority of customer contracts are written in the following currencies:

the United States dollar, the Canadian dollar, and the euro.

the United States dollar, the euro, and the Canadian dollar.

Interest Rate Hedging

4 unchanged sentences

On November 15, 2019, the Company terminated its interest rate swaps designated as fair value hedges in connection with the repayment of $ 324.9 million of aggregate principal amount unsecured notes in the fourth quarter of 2019 and received cash of $ 0.9 million.

Therefore, as of June 30, 2020 and December 31, 2019, the Company did not have any interest rate swaps designated as fair value hedges.

Therefore, as of September 30, 2020 and December 31, 2019, the Company did not have any interest rate swaps designated as fair value hedges.

Balance Sheet

The following table summarizes the fair value of derivatives reported in the Company’s Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 (in millions):

The following table summarizes the fair value of derivatives reported in the Company’s Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019 (in millions):

Derivative Assets

1 unchanged sentence

Balance Sheet

September 30,

Balance Sheet

September 30,

Derivatives designated as hedges:

13 unchanged sentences

This frequently results in changes in the Company’s derivative assets and liabilities that may not directly align with the performance in the underlying derivatives business.

The fair values of derivative assets and liabilities associated with contracts that include netting language that the Company believes to be enforceable have been netted in the following tables to present the Company’s net exposure with

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

these counterparties.

The Company’s rights under these agreements generally allow for transactions to be settled on a net basis, including upon early termination, which could occur upon the counterparty’s default, a change in control, or other conditions.

3 unchanged sentences

In certain circumstances, the Company may require its Business Solutions customers to maintain collateral balances which may mitigate the risk associated with potential customer defaults.

The following tables summarize the gross and net fair value of derivative assets and liabilities as of June 30, 2020 and December 31, 2019 (in millions):

The following tables summarize the gross and net fair value of derivative assets and liabilities as of September 30, 2020 and December 31, 2019 (in millions):

Offsetting of Derivative Assets

3 unchanged sentences

in the Condensed

June 30, 2020

September 30, 2020

Balance Sheets

13 unchanged sentences

in the Condensed

June 30, 2020

September 30, 2020

Balance Sheets

10 unchanged sentences

Generally, amounts are recognized in income when the related forecasted transaction affects earnings.

The following table presents the pre-tax amount of unrealized gains/(losses) recognized in other comprehensive income from cash flow hedges for the three and six months ended June 30, 2020 and 2019 (in millions):

The following table presents the pre-tax amount of unrealized gains/(losses) recognized in other comprehensive income from cash flow hedges for the three and nine months ended September 30, 2020 and 2019 (in millions):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Foreign currency derivatives (a)

(a) Gains/(losses) of $( 0.7 ) million and $ 1.2 million, for the three months ended June 30, 2020 and 2019, respectively, and $ 2.8 million and $ 1.7 million for the six months ended June 30, 2020 and 2019, respectively, represent amounts excluded from the assessment of effectiveness that were recognized in other comprehensive income, for which an amortization approach is applied.

(a) Gains/(losses) of $( 1.6 ) million and $( 0.6 ) million for the three months ended September 30, 2020 and 2019, respectively, and $ 1.2 million and $ 1.1 million for the nine months ended September 30, 2020 and 2019, respectively, represent amounts excluded from the assessment of effectiveness that were recognized in other comprehensive income, for which an amortization approach is applied.

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the location and amounts of pre-tax gains/(losses) from fair value and cash flow hedging relationships recognized in the Condensed Consolidated Statements of Income for the three months ended June 30, 2020 and 2019 (in millions):

The following tables present the location and amounts of pre-tax gains/(losses) from fair value and cash flow hedging relationships recognized in the Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2020 and 2019 (in millions):

Three Months Ended

September 30,

Total amounts presented in the Condensed Consolidated Statements of Income in which the effects of fair value or cash flow hedges are recorded

2 unchanged sentences

Interest rate derivatives:

Derivatives designated as hedging instruments

Gain/(loss) on cash flow hedges:

5 unchanged sentences

Gains/(losses) reclassified from AOCL into earnings

The following table presents the location and amounts of pre-tax gains/(losses) from fair value and cash flow hedging relationships recognized in the Condensed Consolidated Statements of Income for the six months ended June 30, 2020 and 2019 (in millions):

Six Months Ended

Nine Months Ended

September 30,

Total amounts presented in the Condensed Consolidated Statements of Income in which the effects of fair value or cash flow hedges are recorded

13 unchanged sentences

Undesignated Hedges

The following table presents the location and amount of pre-tax net gains/(losses) from undesignated hedges in the Condensed Consolidated Statements of Income on derivatives for the three and six months ended June 30, 2020 and 2019 (in millions):

The following table presents the location and amount of pre-tax net gains/(losses) from undesignated hedges in the Condensed Consolidated Statements of Income on derivatives for the three and nine months ended September 30, 2020 and 2019 (in millions):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Derivatives (a)

7 unchanged sentences

(b) The Company uses foreign currency forward contracts to offset foreign exchange rate fluctuations on settlement assets and obligations as well as certain foreign currency denominated positions.

Foreign exchange gains/(losses) on settlement assets and obligations, cash balances, and other assets and liabilities, not including amounts related to derivative activity as displayed above and included in Selling, general, and administrative in the Condensed Consolidated Statements of Income, were $ 3.0 million and $( 4.3 ) million for the three months ended June 30, 2020 and 2019, respectively, and $( 48.0 ) million and $( 15.1 ) million for the six months ended June 30, 2020 and 2019, respectively.

Foreign exchange gains/(losses) on settlement assets and obligations, cash balances, and other assets and liabilities, not including amounts related to derivative activity as displayed above and included in Selling, general, and administrative in the Condensed Consolidated Statements of Income, were $ 1.4 million and $( 23.4 ) million for the three months ended September 30, 2020 and 2019, respectively, and $( 46.6 ) million and $( 38.5 ) million for the nine months ended September 30, 2020 and 2019, respectively.

All cash flows associated with derivatives are included in Cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows.

Based on June 30, 2020 foreign exchange rates, an accumulated other comprehensive pre-tax gain of $ 5.1 million related to the foreign currency forward contracts is expected to be reclassified into Revenues within the next 12 months.

Based on September 30, 2020 foreign exchange rates, an accumulated other comprehensive pre-tax loss of $ 8.8 million related to the foreign currency forward contracts is expected to be reclassified into Revenues within the next 12 months.

THE WESTERN UNION COMPANY

1 unchanged sentence

The Company’s outstanding borrowings consisted of the following (in millions):

June 30, 2020

September 30, 2020

December 31, 2019

11 unchanged sentences

The commercial paper notes may have maturities of up to 397 days from date of issuance.

The Company’s commercial paper borrowings as of June 30, 2020 had a weighted-average annual interest rate of approximately 0.4 % and a weighted-average term of approximately 1 day .

The Company’s commercial paper borrowings as of September 30, 2020 had a weighted-average annual interest rate of approximately 0.3 % and a weighted-average term of approximately 1 day .

(b) The difference between the stated interest rate and the effective interest rate is not significant.

The following summarizes the Company’s maturities of notes and term loan at par value as of June 30, 2020 (in millions):

(c) As of September 30, 2020, the Company’s weighted-average effective rate on total borrowings was approximately 3.6 % .

The following summarizes the Company’s maturities of notes and term loan at par value as of September 30, 2020 (in millions):

Due within 1 year

7 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s provision for income taxes for the three and six months ended June 30, 2020 and 2019 is based on the estimated annual effective tax rate, in addition to discrete items.

The Company’s effective tax rates on pre-tax income were 16.2 % and 17.5 % for the three months ended June 30, 2020 and 2019, respectively, and 14.3 % and 18.1 % for the six months ended June 30, 2020 and 2019, respectively.

The decrease in the Company’s effective tax rate for the three months ended June 30, 2020 compared to the prior period was primarily due to an increase in prior period domestic pre-tax income due to the sales of the Speedpay and Paymap businesses, partially offset by increased discrete expenses in the current period.

The decrease in the Company’s effective tax rate for the six months ended June 30, 2020 compared to the prior period was primarily due to an increase in prior period domestic pre-tax income due to the net gain on the sales of Speedpay and Paymap.

The Company’s provision for income taxes for the three and nine months ended September 30, 2020 and 2019 is based on the estimated annual effective tax rate, in addition to discrete items.

The Company’s effective tax rates on pre-tax income were 12.4 % and 16.8 % for the three months ended September 30, 2020 and 2019, respectively, and 13.5 % and 17.9 % for the nine months ended September 30, 2020 and 2019, respectively.

The decrease in the Company’s effective tax rate for the three and nine months ended September 30, 2020 compared to the prior periods was primarily due to higher prior period domestic pre-tax income due to the sales of the Speedpay and Paymap businesses, partially offset by increased discrete expenses in the current period.

The Company derives its pre-tax income from both foreign and domestic sources.

8 unchanged sentences

Unrecognized tax benefits represent the aggregate tax effect of differences between tax return positions and the amounts otherwise recognized in the Company’s consolidated financial statements and are reflected in Income taxes payable in the Condensed Consolidated Balance Sheets.

The total amount of unrecognized tax benefits as of June 30, 2020 and December 31, 2019 was $ 292.0 million and $ 293.9 million, respectively, excluding interest and penalties.

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $ 281.9 million and $ 283.4 million as of June 30, 2020 and December 31, 2019, respectively, excluding interest and penalties.

The total amount of unrecognized tax benefits as of September 30, 2020 and December 31, 2019 was $ 294.4 million and $ 293.9 million, respectively, excluding interest and penalties.

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $ 283.9 million and $ 283.4 million as of September 30, 2020 and December 31, 2019, respectively, excluding interest and penalties.

The Company recognizes interest and penalties with respect to unrecognized tax benefits in Provision for income taxes in its Condensed Consolidated Statements of Income and records the associated liability in Income taxes payable in its Condensed Consolidated Balance Sheets.

The Company recognized $ 1.9 million and $ 2.5 million of interest and penalties during the three months ended June 30, 2020 and 2019, respectively, and $ 0.7 million and $ 3.4 million during the six months ended June 30, 2020 and 2019.

The Company has accrued $ 27.8 million and $ 27.1 million for the payment of interest and penalties as of June 30, 2020 and December 31, 2019, respectively.

The Company recognized $ 0.8 million and $ 1.2 million of interest and penalties during the three months ended September 30, 2020 and 2019, respectively, and $ 1.5 million and $ 4.5 million during the nine months ended September 30, 2020 and 2019, respectively.

The Company has accrued $ 28.6 million and $ 27.1 million for the payment of interest and penalties as of September 30, 2020 and December 31, 2019, respectively.

The Company and its subsidiaries file tax returns for the United States, for multiple states and localities, and for various non-United States jurisdictions, and the Company has identified the United States as its major tax jurisdiction, as the income tax imposed by any one foreign country is not material to the Company.

The Company’s United States federal income tax returns since 2017 are eligible to be examined.

The Internal Revenue Service commenced an examination of the Company’s U.S.

consolidated income tax returns for 2017 and 2018 in the current quarter.

The anticipated completion date of the examination cannot be estimated at this time.

Stock-Based Compensation Plans

For the three months ended June 30, 2020 and 2019, the Company recognized stock-based compensation expense of $ 5.3 million and $ 11.6 million, respectively, resulting from stock options, restricted stock units, performance-based restricted stock units and deferred stock units in the Condensed Consolidated Statements of Income.

For the six months

For the three months ended September 30, 2020 and 2019, the Company recognized stock-based compensation expense of $ 14.2 million and $ 9.7 million, respectively, resulting from stock options, restricted stock units, performance-based restricted stock units and deferred stock units in the Condensed Consolidated Statements of Income.

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

ended June 30, 2020 and 2019, the Company recognized stock-based compensation expense of $ 17.8 million and $ 25.3 million, respectively.

During the six months ended June 30, 2020, the Company granted 0.5 million options at a weighted-average exercise price of $ 26.20 and 2.4 million performance-based restricted stock units and restricted stock units at a weighted-average grant date fair value of $ 25.93 .

As of June 30, 2020, the Company had 4.9 million outstanding options at a weighted-average exercise price of $ 19.13 , of which 3.8 million options were exercisable at a weighted-average exercise price of $ 18.41 .

The Company had 7.1 million performance-based restricted stock units (based on target performance) and restricted stock units at a weighted-average grant date fair value of $ 20.83 as of June 30, 2020.

months ended September 30, 2020 and 2019, the Company recognized stock-based compensation expense of $ 32.0 million and $ 35.0 million, respectively.

During the nine months ended September 30, 2020, the Company granted 0.5 million options at a weighted-average exercise price of $ 26.20 and 2.5 million performance-based restricted stock units and restricted stock units at a weighted-average grant date fair value of $ 25.87 .

As of September 30, 2020, the Company had 4.9 million outstanding options at a weighted-average exercise price of $ 19.13 , of which 3.8 million options were exercisable at a weighted-average exercise price of $ 18.40 .

The Company had 6.9 million outstanding performance-based restricted stock units (based on target performance) and restricted stock units at a weighted-average grant date fair value of $ 20.86 as of September 30, 2020.

As described in Note 1, the Company classifies its business into two segments:

4 unchanged sentences

The segment includes five geographic regions whose functions are primarily related to generating, managing, and maintaining agent relationships and localized marketing activities.

The Company includes Digital Money Transfer transactions in its regions.

The Company includes Digital Money Transfer transactions in its regions, including transactions from the Company’s arrangements with financial institutions and other third parties to enable such entities to offer money transfer services to their own customers under their brands.

By means of common processes and systems, these regions, including Digital Money Transfer transactions, create an interconnected network for consumer transactions, thereby constituting one global Consumer-to-Consumer money transfer business and one operating segment.

5 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the Company’s reportable segment results for the three and six months ended June 30, 2020 and 2019 (in millions):

The following table presents the Company’s reportable segment results for the three and nine months ended September 30, 2020 and 2019 (in millions):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Consumer-to-Consumer

9 unchanged sentences

In May 2019, the Company sold a substantial majority of its United States based electronic bill payments services, as discussed in Note 4.

Paymap revenues and direct operating expenses included in the Company’s results were $ 1.6 million and $ 0.5 million, respectively, for the three months ended June 30, 2019 and $ 5.3 million and $ 2.2 million, respectively, for the six months ended June 30, 2019.

Speedpay revenues and direct operating expenses included in the Company’s results were $ 125.4 million and $ 98.2 million, respectively, for the nine months ended September 30, 2019.

Paymap revenues and direct operating expenses included in the Company’s results were $ 5.3 million and $ 2.2 million, respectively, for the nine months ended September 30, 2019.

(b) In the first quarter of 2020, the Company changed its expense allocation method so that its corporate data center and network engineering information technology expenses are allocated based on a percentage of relative revenue.

2 unchanged sentences

Further, these technology expenses are becoming increasingly based on data storage utilized and less based on the number of transactions processed.

For the three and six months ended June 30, 2019, this change would have decreased Consumer-to-Consumer operating income and increased Other operating income by $ 11.7 million and $ 24.8 million, respectively.

For the three and nine months ended September 30, 2019, this change would have decreased Consumer-to-Consumer operating income and increased Other operating income by $ 13.0 million and $ 37.8 million, respectively.

Business Solutions was not materially impacted by the change in the allocation method.

51 unchanged sentences

increased costs or loss of business due to regulatory initiatives and changes in laws, regulations and industry practices and standards, including changes in interpretations, in the United States and abroad, affecting us, our agents, or their subagents, or the banks with which we or our agents maintain bank accounts needed to provide our services, including related to anti-money laundering regulations, anti-fraud measures, our licensing arrangements, customer due diligence, agent and subagent due diligence, registration and monitoring requirements, consumer protection requirements, remittances, and immigration;

liabilities, increased costs or loss of business and unanticipated developments resulting from governmental investigations and consent agreements with or enforcement actions by regulators, such as those associated with the settlement agreements with the United States Department of Justice, certain United States Attorney’s Offices, the United States Federal Trade Commission, the Financial Crimes Enforcement Network of the United States Department of Treasury, and various state attorneys general (the "Joint Settlement Agreements");

liabilities, increased costs or loss of business and unanticipated developments resulting from governmental investigations and consent agreements with or enforcement actions by regulators;

liabilities resulting from litigation, including class-action lawsuits and similar matters, and regulatory enforcement actions, including costs, expenses, settlements, and judgments;

failure to comply with regulations and evolving industry standards regarding consumer privacy and data use and security, including with respect to the General Data Protection Regulation in the European Union ("EU") and the California Consumer Privacy Act;

failure to comply with regulations and evolving industry standards regarding consumer privacy, data use, the transfer of personal data between jurisdictions, and information security with respect to the General Data Protection Regulation in the European Union ("EU") and the California Consumer Privacy Act;

failure to comply with the Dodd-Frank Wall Street Reform and Consumer Protection 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 in the United States and abroad related to consumer protection and derivative transactions;

17 unchanged sentences

Results of Operations

The following discussion of our consolidated results of operations and segment results refers to the three and six months ended June 30, 2020 compared to the same periods in 2019.

The following discussion of our consolidated results of operations and segment results refers to the three and nine months ended September 30, 2020 compared to the same periods in 2019.

The results of operations should be read in conjunction with the discussion of our segment results of operations, which provide more detailed discussions concerning certain components of the Condensed Consolidated Statements of Income.

4 unchanged sentences

These actions negatively impacted our ability to offer our services through a portion of our locations and our retail agent locations, at least temporarily during the three and six months ended June 30, 2020.

As a result, our revenues for the second quarter of 2020 were negatively impacted by the effects of COVID-19.

We experienced a significant decline in our Consumer-to-Consumer transactions beginning in the second half of March and continuing into the first half of April, which we believe to be due in part to economic decline and uncertainty resulting from the outbreak.

However, since the second half of April, we generally experienced gradually improving transaction trends in our Consumer-to-Consumer segment throughout the remainder of the second quarter, with significant growth in westernunion.com and other digital transactions, as further described below.

While the duration and severity of this pandemic and the related impacts are uncertain, we expect that our results of operations in the second half of 2020 will continue to be negatively impacted by these effects.

These actions negatively impacted our ability to offer our services, at least temporarily, through a portion of our locations and our retail agent locations during the nine months ended September 30, 2020.

Beginning in March 2020 and continuing into the second and third quarters of 2020, we experienced a decrease in transaction volumes from retail locations and a decrease in foreign exchange and payment services activity, which also negatively impacted revenues in these periods, partially offset by revenue growth from westernunion.com and other digital transactions, as further described below.

We believe this decrease is mainly due to economic decline and uncertainty resulting from the outbreak.

While the duration and severity of this pandemic and the related impacts are uncertain, we expect that our results of operations in the fourth quarter of 2020 will continue to be negatively impacted by these effects.

Further, we expect that to the extent the pandemic or the related macro-economic consequences continue, we will continue to experience negative impacts on our results of operations, including the potential for increased credit losses or intangible asset impairments in future periods.

Our revenues and operating income for the three and six months ended June 30, 2020 were negatively impacted by fluctuations in the United States dollar compared to foreign currencies.

Fluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges, resulted in a reduction to revenues of $46.4 million and $93.7 million for the three and six months ended June 30, 2020 relative to the corresponding periods in the prior year.

Included within these amounts are impacts related to the strengthening of the dollar against the Argentine peso, which resulted in a reduction to revenues of $31.0 million and $67.7 million for the three and six months ended June 30, 2020 relative to the corresponding periods in the prior year.

Fluctuations in the United States dollar compared to foreign currencies negatively impacted operating income by $4.9 million and $28.6 million for the three and six months ended June 30, 2020 relative to the corresponding periods in the prior year.

Included within these amounts are impacts related to the strengthening of the dollar against the Argentine peso, which resulted in a reduction to operating income of $6.6 million and $12.3 million for the three and six months ended June 30, 2020 relative to the corresponding periods in the prior year.

Our revenues and operating income for the three and nine months ended September 30, 2020 were negatively impacted by fluctuations in the United States dollar compared to foreign currencies.

Fluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges, resulted in a reduction to revenues of $41.1 million and $134.8 million for the three and nine months ended September 30, 2020, respectively, relative to the corresponding periods in the prior year.

Included within these amounts are impacts related to the strengthening of the dollar against the Argentine peso, which resulted in a reduction to revenues of $39.2 million and $106.9 million for the three and nine months ended September 30, 2020, respectively, relative to the corresponding periods in the prior year.

Fluctuations in the United States dollar compared to foreign currencies negatively impacted operating income by $10.1 million and $38.7 million for the three and nine months ended September 30, 2020, respectively, relative to the corresponding periods in the prior year.

Included within these amounts are impacts related to the strengthening of the dollar against the Argentine peso, which resulted in a reduction to operating income of $7.6 million and $19.9 million for the three and nine months ended September 30, 2020, respectively, relative to the corresponding periods in the prior year.

On February 28, 2019, we entered into an agreement with ACI Worldwide Corp.

2 unchanged sentences

We received approximately $750 million and recorded a pre-tax gain on the sale of approximately $523 million in the second quarter of 2019 in the all-cash transaction that closed on May 9, 2019.

Speedpay revenues and direct operating expenses included in our results were $37.2 million and $30.6 million, respectively, for the three months ended June 30, 2019 and $125.4 million and $98.2 million, respectively, for the six months ended June 30, 2019.

The following table sets forth our consolidated results of operations for the three and six months ended June 30, 2020 and 2019:

Three Months Ended June 30,

Six Months Ended June 30,

Speedpay revenues and direct operating expenses included in our results were $125.4 million and $98.2 million, respectively, for the nine months ended September 30, 2019.

The following table sets forth our consolidated results of operations for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30,

Nine Months Ended September 30,

(in millions, except per share amounts)

25 unchanged sentences

We believe that these measures provide management and investors with information about revenue results and trends that eliminates currency volatility and divestitures, thereby providing greater clarity regarding, and increasing the comparability of, our underlying results and trends.

These disclosures are provided in addition to, and not as a substitute for, the percentage change in revenue on a GAAP basis for the three and six months ended June 30, 2020 compared to the corresponding periods in the prior year.

These disclosures are provided in addition to, and not as a substitute for, the percentage change in revenue on a GAAP basis for the three and nine months ended September 30, 2020 compared to the corresponding periods in the prior year.

Other companies may calculate and define similarly labeled items differently, which may limit the usefulness of this measure for comparative purposes.

The following table sets forth our consolidated revenue results for the three and six months ended June 30, 2020 and 2019:

Three Months Ended June 30,

Six Months Ended June 30,

The following table sets forth our consolidated revenue results for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in millions)

3 unchanged sentences

Revenue change, constant currency adjusted and excluding divestitures - (Non-GAAP)

(a) Fluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges, resulted in a reduction to revenues of $46.4 million and $93.7 million for the three and six months ended June 30, 2020 when compared to foreign currency rates in the prior year periods.

Included within this amount is an impact related to the strengthening of the dollar against the Argentine peso, which resulted in a reduction to revenues of $31.0 million and $67.7 million for the three and six months ended June 30, 2020 when compared to foreign currency rates in the prior year periods.

(a) Fluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges, resulted in a reduction to revenues of $41.1 million and $134.8 million for the three and nine months ended September 30, 2020, respectively, when compared to foreign currency rates in the prior year periods.

Included within this amount is an impact related to the strengthening of the dollar against the Argentine peso, which resulted in a reduction to revenues of $39.2 million and $106.9 million for the three and nine months ended September 30, 2020, respectively, when compared to foreign currency rates in the prior year periods.

(b) In May 2019, we sold a substantial majority of our United States based electronic bill payments services.

Speedpay revenues included in our results were $37.2 million and $125.4 million for the three and six months ended June 30, 2019.

(“Paymap”), which we sold in May 2019, provides electronic mortgage bill payment services, and related revenues included in our results were $1.6 million and $5.3 million for the three and six months ended June 30, 2019.

For the three and six months ended June 30, 2020, GAAP revenues decreased when compared to the corresponding periods in the prior year primarily due to the impacts from the worldwide actions related to COVID-19, as discussed above, divestitures of the Speedpay and Paymap businesses during the second quarter of 2019, and fluctuations in the exchange rates between the United States dollar and foreign currencies.

Fluctuations in the exchange rates between the United States dollar and foreign currencies negatively impacted revenue by 3% and 4% for the three and six months ended June 30, 2020, respectively.

The decrease in revenues constant currency adjusted and excluding divestitures (Non-GAAP) for the six months ended June 30, 2020 was primarily the result of the impacts from the worldwide actions related to COVID-19, as discussed above.

Speedpay revenues included in our results were $125.4 million for the nine months ended September 30, 2019.

(“Paymap”), which we sold in May 2019, provides electronic mortgage bill payment services, and related revenues included in our results were $5.3 million for the nine months ended September 30, 2019.

For the three and nine months ended September 30, 2020, GAAP revenues decreased when compared to the corresponding periods in the prior year, including as a result of the impacts from the worldwide actions related to COVID-19.

For the three and nine months ended September 30, 2020, we experienced a decrease in transaction volumes from retail locations in our Consumer-to-Consumer segment, partially offset by growth in digital transactions, including from white label partnerships.

The spread between transaction and revenue growth in our Consumer-to-Consumer segment was attributable to mix, primarily growth in our digital white label partnerships, which have a lower revenue per transaction than Western Union branded transactions.

Fluctuations in the exchange rates between the United States dollar and foreign currencies negatively impacted revenue by 3% and 4% for the three and nine months ended September 30, 2020, respectively.

Additionally, GAAP revenues decreased for the nine months ended September 30, 2020, when compared to the corresponding period in the prior year, due to the divestitures of the Speedpay and Paymap businesses during the second quarter of 2019.

The decrease in revenues constant currency adjusted and excluding divestitures (Non-GAAP) for the three and nine months ended September 30, 2020 was primarily the result of the impacts from the worldwide actions related to COVID-19, as discussed above.

Operating Expenses Overview

6 unchanged sentences

We expect to incur approximately $150 million of total expenses through 2020, with approximately $110 million related to severance and employee-related benefits and approximately $40 million related to costs associated with the relocation of various operations to other Company facilities, facility closures, lease terminations, consulting, and other expenses.

Substantially all of these expenses are expected to be paid in cash.

Substantially all of these expenses

are expected to be paid in cash.

We expect the plan to generate expense savings of at least $50 million in 2020 and approximately $100 million in 2021.

The foregoing figures are our estimates and are subject to change.

For the three and six months ended June 30, 2020, we incurred $5.2 million and $15.7 million related to this plan, the majority of which is related to consulting service fees, severance, and other costs.

For the three and six months ended June

30, 2020, $0.8 million and $1.7 million, respectively, is included within Cost of services and $4.4 million and $14.0 million, respectively, is included within Selling, general, and administrative in the Condensed Consolidated Statements of Income.

For the three and six months ended June 30, 2019, we incurred $7.4 million of expenses related to this plan which is included within Selling, general, and administrative.

For the three and nine months ended September 30, 2020, we incurred $9.1 million and $24.8 million, respectively, of expenses related to this plan.

For the three and nine months ended September 30, 2020, $0.8 million and $2.5 million, respectively, are included within Cost of services and $8.3 million and $22.3 million, respectively, are included within Selling, general, and administrative in the Condensed Consolidated Statements of Income.

For the three and nine months ended September 30, 2019, we incurred $91.5 million and $98.9 million, respectively, of expenses related to this plan.

For the three and nine months ended September 30, 2019, $33.9 million is included within Cost of services, and $57.6 million and $65.0 million, respectively, are included within Selling, general, and administrative in the Condensed Consolidated Statements of Income.

Refer to Part I, Item 1, Financial Statements , Note 5, Restructuring-Related Expenses for further discussion.

2 unchanged sentences

Cost of Services

Cost of services primarily consists of agent commissions, which represented approximately 60% of total cost of services for both the three and six months ended June 30, 2020.

Cost of services decreased for the three and six months ended June 30, 2020 compared to the corresponding period in the prior year due to a decrease in agent commissions in our Consumer-to-Consumer money transfer business, which generally vary with revenues, including due to fluctuations in the exchange rate between the United States dollar and foreign currencies, the Speedpay divestiture during the second quarter of 2019, and a decrease in employee-related expense, including as a result of reduced hiring, partially offset by an increase in credit losses.

Cost of services primarily consists of agent commissions, which represented approximately 60% of total cost of services for both the three and nine months ended September 30, 2020.

Cost of services decreased for the three and nine months ended September 30, 2020 compared to the corresponding periods in the prior year due to a decrease in agent commissions in our Consumer-to-Consumer money transfer business, which generally vary with revenues, including due to fluctuations in the exchange rate between the United States dollar and foreign currencies, a decrease in restructuring-related expenses, and a decrease in employee-related expenses, including as a result of reduced hiring, partially offset by an increase in credit losses.

For the nine months ended September 30, 2020 when compared to the corresponding period in the prior year, the decrease in Cost of services was also due to the Speedpay divestiture during the second quarter of 2019.

Selling, General, and Administrative

Selling, general, and administrative expenses decreased for the three and six months ended June 30, 2020 compared to the corresponding period in the prior year due to decreases in employee-related expenses, including incentive compensation and as a result of reduced hiring and savings from our restructuring plan.

In addition, selling, general, and administrative expenses benefited from decreases in marketing costs and costs related to strategic initiatives, including for the review and closing of mergers, acquisitions, and divestitures.

For the six months ended June 30, 2020, these decreases were partially offset by the impacts of the strengthening of the United States dollar against foreign currencies.

Selling, general, and administrative expenses decreased for the three and nine months ended September 30, 2020 compared to the corresponding periods in the prior year due to decreases in employee-related expenses, including incentive compensation and as a result of reduced hiring and savings from our restructuring plan, and a decrease in restructuring-related expenses.

In addition, for the nine months ended September 30, 2020, Selling, general, and administrative expenses also decreased due to reduced marketing costs and decreases in costs related to strategic initiatives, including for the review and closing of mergers, acquisitions, and divestitures, partially offset by the strengthening of the United States dollar against foreign currencies.

Total Other Income/Expense, Net

Total other income/expense, net during the three and six months ended June 30, 2019 was impacted by the non-recurring gain on the sale of our United States based electronic bill payments business, known as Speedpay.

In addition, total other income/expense, net during the three and six months ended June 30, 2020 compared to the corresponding periods benefited from a reduction in interest expense driven by a lower weighted-average interest rate on our outstanding debt.

Our provision for income taxes for the three and six months ended June 30, 2020 and 2019 is based on the estimated annual effective tax rate, in addition to discrete items.

Our effective tax rates on pre-tax income were 16.2% and 17.5% for the three months ended June 30, 2020 and 2019, respectively, and 14.3% and 18.1% for the six months ended June 30, 2020 and 2019, respectively.

The decrease in our effective tax rate for the three months ended June 30, 2020 compared to the prior period was primarily due to an increase in prior period domestic pre-tax income due to the sales of the Speedpay and Paymap businesses, partially offset by increased discrete expenses in the current period.

The decrease in our effective tax rate for the six months ended June 30, 2020 compared to the prior period was primarily due to an increase in prior period domestic pre-tax income due to the net gain on the sales of Speedpay and Paymap.

Total other income/expense, net during the nine months ended September 30, 2019 was impacted by the non-recurring gain on the sale of our United States based electronic bill payments business known as Speedpay.

In addition, total other income/expense, net during the three and nine months ended September 30, 2020 compared to the corresponding periods in the prior year benefited from a reduction in interest expense driven by a lower weighted-average interest rate on our outstanding debt.

Our provision for income taxes for the three and nine months ended September 30, 2020 and 2019 is based on the estimated annual effective tax rate, in addition to discrete items.

Our effective tax rates on pre-tax income were 12.4% and 16.8% for the three months ended September 30, 2020 and 2019, respectively, and 13.5% and 17.9% for the nine months ended September 30, 2020 and 2019, respectively.

The decrease in our effective tax rate for the three and nine months ended September 30, 2020 compared to the prior periods was primarily due to higher prior period domestic pre-tax income

due to the sales of the Speedpay and Paymap businesses, partially offset by increased discrete expenses in the current period.

We have established contingency reserves for a variety of material, known tax exposures.

As of June 30, 2020, the total amount of tax contingency reserves was $308.2 million, including accrued interest and penalties, net of related items.

As of September 30, 2020, the total amount of tax contingency reserves was $310.9 million, including accrued interest and penalties, net of related items.

Our tax reserves reflect our judgment as to the resolution of the issues involved if subject to judicial review or other settlement.

1 unchanged sentence

With respect to these reserves, our income tax expense would include:

(i) any changes in tax reserves arising from material changes in facts and circumstances (i.e., new information) surrounding a tax issue during the period,

and (ii) any difference from our tax position as recorded in the financial statements and the final resolution of a tax issue during the period.

(i) any changes in tax reserves arising from material changes in facts and circumstances (i.e., new information) surrounding a tax issue during the period, and (ii) any difference from our tax position as recorded in the financial statements and the final resolution of a tax issue during the period.

Such resolution could materially increase or decrease income tax expense in our consolidated financial statements in future periods and could impact our operating cash flows.

Earnings Per Share

During the three months ended June 30, 2020 and 2019, basic earnings per share were $0.39 and $1.43, respectively, and diluted earnings per share were $0.39 and $1.42, respectively.

During the six months ended June 30, 2020 and 2019, basic earnings per share were $0.82 and $1.82, respectively, and diluted earnings per share were $0.81 and $1.81, respectively.

During the three months ended September 30, 2020 and 2019, basic earnings per share were $0.56 and $0.32, respectively, and diluted earnings per share were $0.55 and $0.32, respectively.

During the nine months ended September 30, 2020 and 2019, basic earnings per share were $1.38 and $2.14, respectively, and diluted earnings per share were $1.37 and $2.13, respectively.

Outstanding options to purchase Western Union stock and unvested shares of restricted stock are excluded from basic shares outstanding.

Diluted earnings per share reflects the potential dilution that could occur if outstanding stock options at the presented dates are exercised and shares of restricted stock have vested.

For the three months ended June 30, 2020 and 2019, there were 2.6 million and 2.3 million, respectively, and for the six months ended June 30, 2020 and 2019, there were 1.8 million and 3.4 million, respectively, of shares excluded from the diluted earnings per share calculation under the treasury stock method, primarily due to outstanding restricted stock units and options to purchase shares of Western Union stock, as the assumed proceeds of the restricted stock and options per unit were above our weighted-average share price during the periods and their effect was anti-dilutive.

Earnings per share for both the three and six months ended June 30, 2020 compared to the corresponding periods in the prior year were impacted by the previously described factors impacting net income, primarily as a result of the gain on the sale of Speedpay, in addition to a lower number of shares outstanding.

For the three months ended September 30, 2020 and 2019, there were 1.3 million and 0.5 million, respectively, and for the nine months ended September 30, 2020 and 2019, there were 1.7 million and 2.4 million, respectively, of shares excluded from the diluted earnings per share calculation under the treasury stock method, primarily due to outstanding restricted stock units and options to purchase shares of Western Union stock, as the assumed proceeds of the restricted stock and options per unit were above our weighted-average share price during the periods and their effect was anti-dilutive.

Earnings per share for the three and nine months ended September 30, 2020 compared to the corresponding periods in the prior year were impacted by the previously described factors impacting net income and a lower number of shares outstanding.

Earnings per share for the nine months ended September 30, 2019 were impacted by the gain on the sale of Speedpay in the second quarter of 2019.

The lower number of shares outstanding is due to stock repurchases exceeding stock issuances related to our stock compensation programs.

3 unchanged sentences

Our segments are Consumer-to-Consumer and Business Solutions.

During the three and six months ended June 30, 2020, we incurred $5.2 million and $15.7 million, respectively, of restructuring-related expenses, and we incurred $7.4 million during the three and six months ended June 30, 2019, as further discussed above.

During the three and nine months ended September 30, 2020, we incurred $9.1 million and $24.8 million, respectively, of restructuring-related expenses, and we incurred $91.5 million and $98.9 million, respectively, during the three and nine months ended September 30, 2019, as further discussed above.

While certain of these expenses may be identifiable to our segments, primarily to our Consumer-to-Consumer segment, they have been excluded from the measurement of segment operating income provided to the Chief Operating Decision Maker for purposes of assessing segment performance and decision making with respect to resource allocation.

The following table sets forth the components of segment revenues as a percentage of the consolidated totals for the three and six months ended June 30, 2020 and 2019:

The following table sets forth the components of segment revenues as a percentage of the consolidated totals for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Consumer-to-Consumer

4 unchanged sentences

Further, these technology expenses are becoming increasingly based on data storage utilized and less based on the number of transactions processed.

For the three and six months ended June 30, 2019, this change would have decreased

Consumer-to-Consumer operating income and increased Other operating income by $11.7 million and $24.8 million, respectively.

Business Solutions was not materially impacted by the change in the allocation method.

Consumer-to-Consumer Segment

The following table sets forth our Consumer-to-Consumer segment results of operations for the three and six months ended June 30, 2020 and 2019:

The following table sets forth our Consumer-to-Consumer segment results of operations for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(dollars and transactions in millions)

5 unchanged sentences

The segment includes five geographic regions whose functions are primarily related to generating, managing, and maintaining agent relationships and localized marketing activities.

We include Digital Money Transfer transactions in our regions.

We include Digital Money Transfer transactions in our regions¸ including transactions from our arrangements with financial institutions and other third parties to enable such entities to offer money transfer services to their own customers under their brands.

The geographic split for transactions and revenue in the table that follows, including Digital Money Transfer transactions, is determined entirely based upon the region where the money transfer is initiated.

Included in each region’s transaction and revenue percentages in the tables below are Digital Money Transfer transactions for the three and six months ended June 30, 2020 and 2019.

The geographic split for transactions and revenue in the table that follows, including Digital Money Transfer transactions, is determined based upon the region where the money transfer is initiated.

Included in each region’s transaction and revenue percentages in the tables below are Digital Money Transfer transactions for the three and nine months ended September 30, 2020 and 2019.

Where reported separately in the discussion below, Digital Money Transfer, and its subset westernunion.com, consist of 100% of the transactions conducted and funded through those respective channels.

1 unchanged sentence

Consumer-to-Consumer segment constant currency revenue growth/(decline) is a non-GAAP financial measure, as further discussed in Revenues Overview above.

Three Months Ended June 30, 2020

Six Months Ended June 30, 2020

Three Months Ended September 30, 2020

Nine Months Ended September 30, 2020

(Decline), as

15 unchanged sentences

As noted above, westernunion.com is a subset of Digital Money Transfer and is included in the regions and Digital Money Transfer revenues.

The table below sets forth regional revenues as a percentage of our Consumer-to-Consumer revenue for the three and six months ended June 30, 2020 and 2019:

The table below sets forth regional revenues as a percentage of our Consumer-to-Consumer revenue for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Consumer-to-Consumer revenue as a percentage of segment revenue:

Digital Money Transfer, which is included in the regional percentages above, represented approximately 22% and 13% of our Consumer-to-Consumer revenues for the three months ended June 30, 2020 and 2019, respectively, and 19% and 13% for the six months ended June 30, 2020 and 2019, respectively.

Our consumers transferred $21.9 billion and $22.2 billion in Consumer-to-Consumer principal for the three months ended June 30, 2020 and 2019, of which $20.7 billion and $20.5 billion related to cross-border principal for the same corresponding periods described above, respectively.

Our consumers transferred $42.5 billion and $43.1 billion in

Consumer-to-Consumer principal for the six months ended June 30, 2020 and 2019, of which $39.8 billion and $39.6 billion related to cross-border principal for the same corresponding periods described above, respectively.

Consumer-to-Consumer money transfer revenue decreased 12% and 8% for the three and six months ended June 30, 2020, primarily due to a transaction decline of 8% and 5% for the three and six months ended June 30, 2020 compared to the corresponding periods in the prior year.

Fluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges, negatively impacted revenue by 1% for both the three and six months ended June 30, 2020 compared to the corresponding periods in the prior year.

Constant currency revenue decreased 11% and 7% for the three and six months ended June 30, 2020 compared to the corresponding periods in the prior year.

As discussed further below, these decreases were primarily due to revenue declines from our retail business as a result of COVID-19, partially offset by growth in Digital Money Transfer.

The decline in transactions compared to the prior year was primarily a result of COVID-19, which caused governments around the world to institute various protective measures in an effort to slow the spread of the virus.

These measures, which include lockdowns, stay-at-home orders, travel restrictions, and closures of non-essential businesses, have negatively impacted our ability to offer services through some of our retail agent locations across all of our regions.

The COVID-19 outbreak and associated public health measures have also resulted in a decline in economic activity that has negatively impacted our transaction volumes for the three and six months ended June 30, 2020.

Digital Money Transfer, which is included in the regional percentages above, represented approximately 21% and 14% of our Consumer-to-Consumer revenues for the three months ended September 30, 2020 and 2019, respectively, and 20% and 13% for the nine months ended September 30, 2020 and 2019, respectively.

Our consumers transferred $26.9 billion and $22.4 billion in Consumer-to-Consumer principal for the three months ended September 30, 2020 and 2019 of which $25.5 billion and $20.6 billion related to cross-border principal for the same corresponding periods described above, respectively.

Our consumers transferred $69.4 billion and $65.5 billion in Consumer-to-Consumer principal for the nine months ended September 30, 2020 and 2019, of which $65.3 billion and $60.2 billion related to cross-border principal for the same corresponding periods described above, respectively.

Consumer-to-Consumer money transfer revenue decreased 1% and transactions increased 6% for the three months ended September 30, 2020 compared to the corresponding period in the prior year, and revenue decreased 6% and transactions declined 2% for the nine months ended September 30, 2020 compared to the corresponding period in the prior year, including as a result of the impacts from the worldwide actions related to COVID-19.

For both periods, revenues were impacted by a decrease in transaction volumes from retail locations, partially offset by growth in digital transactions, including from white label partnerships.

The spread between transaction and revenue growth was attributable to mix, primarily growth in our digital white label partnerships, which have a lower revenue per transaction than Western Union branded transactions.

Fluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges, negatively impacted revenue by 1% and 2% for the three and nine months ended September 30, 2020, respectively, compared to the corresponding periods in the prior year.

Constant currency revenue was flat and decreased 4% for the three and nine months ended September 30, 2020, respectively, compared to the corresponding periods in the prior year.

Revenues compared to the prior year were negatively impacted by COVID-19, which caused governments around the world to institute various protective measures in an effort to slow the spread of the virus.

These measures, which include lockdowns, stay-at-home orders, travel restrictions, and closures of non-essential businesses, negatively impacted our ability to offer services through some of our retail agent locations across all of our regions.

The COVID-19 outbreak and associated public health measures also resulted in a decline in economic activity that negatively impacted our revenues for the three and nine months ended September 30, 2020.

In the later part of March 2020, we started to experience a decrease in Consumer-to-Consumer transactions as a result of COVID-19.

1 unchanged sentence

We believe that our growth in Digital Money Transfer transactions was due, in part, to shifts in consumer behavior to send money through digital channels, including as a result of COVID-19.

Since the second half of April, we generally experienced gradually improving transaction trends throughout the remainder of the second quarter.

In our Consumer-to-Consumer regions, the decrease in NA revenue for the three and six months ended June 30, 2020 compared to the corresponding periods in the prior year was primarily the result of declines in money transfers sent and received in the United States.

The decrease in EU & CIS and MEASA revenues for the three and six months ended June 30, 2020 compared to the corresponding periods in the prior year was driven by transaction declines in retail money transfers, partially offset by transaction growth from digital white label partnerships.

Finally, the decrease in LACA revenue for the three and six months ended June 30, 2020, compared to the corresponding periods in the prior year, was primarily due to transaction declines caused by COVID-19-related government protective measures, including agent location closures, in the region.

We expect that total Consumer-to-Consumer revenues in the second half of 2020 will continue to be negatively impacted by the effects of COVID-19.

The significant majority of agent locations that had been closed as a result of COVID-19 have resumed offering our services as of September 30, 2020, although certain of our retail locations remain closed.

In our Consumer-to-Consumer regions, the decrease in NA revenue for the nine months ended September 30, 2020 compared to the corresponding period in the prior year was primarily the result of declines in money transfers sent and received in the United States.

Revenues in the EU & CIS and MEASA regions for the three and nine months ended September 30, 2020 compared to the corresponding periods in the prior year were impacted by transaction declines in retail money transfers, partially offset by transaction growth from Digital Money Transfer, including white label partnerships.

For the three and nine months ended September 30, 2020, the revenue decreases in LACA, which generates a higher proportion of revenues from retail locations compared to our other regions, were primarily due to transaction declines caused by continued COVID-19-related government protective measures, including agent location closures in the region.

For the three and nine months ended September 30, 2020 compared to the corresponding periods in the prior year, westernunion.com revenues, which have been included in the regions as described above, were negatively impacted by net price reductions.

We expect that total Consumer-to-Consumer revenues in the fourth quarter of 2020 will continue to be negatively impacted by the effects of COVID-19.

The duration and severity of the pandemic as well as the responses of government authorities to the pandemic, the macro economic consequences, and the impacts on consumer behavior are uncertain.

2 unchanged sentences

We will likely continue to implement price changes from time to time in response to competition and other factors.

Price reductions generally reduce margins and adversely affect financial results in the short term and may also adversely affect financial results in the long term if transaction volumes do not increase sufficiently.

Price reductions generally reduce margins and adversely affect financial results in the short term and may also adversely affect

financial results in the long term if transaction volumes do not increase sufficiently.

Price increases may adversely affect transaction volumes, as consumers may not use our services if we fail to price them appropriately.

Operating Income

Consumer-to-Consumer operating income decreased 15% and 13% for the three and six months ended June 30, 2020 compared to the corresponding periods in the prior year.

Results for the three and six months ended June 30, 2020 were negatively impacted by the decrease in revenues and increased allocations of certain information technology expenses, as previously discussed above, partially offset by decreases in employee-related expenses, including incentive compensation and as a result of reduced hiring and savings from our restructuring plan, as well as decreases in marketing costs.

six months ended June 30, 2020 compared to the corresponding period, Consumer-to-Consumer operating income was negatively impacted by the strengthening of the United States dollar against certain foreign currencies.

Consumer-to-Consumer operating income increased 3% for the three months ended September 30, 2020 compared to the corresponding period in the prior year due to decreases in employee-related expenses, including incentive compensation and as a result of reduced hiring and savings from our restructuring plan, partially offset by increased allocations of certain information technology expenses, as previously discussed, and an increase in credit losses.

For the nine months ended September 30, 2020, Consumer-to-Consumer operating income decreased 7% compared to the corresponding period in the prior year due to the decrease in revenues, increased allocations of certain information technology expenses, an increase in credit losses, and the strengthening of the United States dollar against certain foreign currencies, partially offset by decreases in employee-related expenses, as described above, and a decrease in marketing costs.

Business Solutions

The following table sets forth our Business Solutions segment results of operations for the three and six months ended June 30, 2020 and 2019:

Three Months Ended June 30,

Six Months Ended June 30,

The following table sets forth our Business Solutions segment results of operations for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in millions)

1 unchanged sentence

Operating income margin

Business Solutions revenue decreased 17% and 7% for the three and six months ended June 30, 2020 compared to the corresponding periods in the prior year primarily due to a decline in payment services activity, generally across all geographic regions.

We believe this decrease was due to a downturn in economic conditions and trade, which primarily resulted from the effects of COVID-19.

Fluctuations in the exchange rates between the United States dollar and foreign currencies negatively impacted revenue by 2% for both the three and six months ended June 30, 2020.

For the six months ended June 30, 2020, this decrease was partially offset by hedging activity, which generally varies with currency volatility.

We expect that to the extent the COVID-19 pandemic or the related macro-economic consequences continue, we will continue to experience declines in cross-currency payments and reductions to segment revenues in future periods.

Business Solutions revenue decreased 11% and 9% for the three and nine months ended September 30, 2020, respectively, compared to the corresponding periods in the prior year, primarily due to a decline in payment services activity, generally across all geographic regions.

For the three months ended September 30, 2020, revenues also decreased due to a decline in hedging activity.

We believe these decreases were due to a downturn in economic conditions and trade, which primarily resulted from the effects of COVID-19.

Fluctuations in the exchange rates between the United States dollar and foreign currencies positively impacted revenue by 2% and negatively impacted revenue by 1% for the three and nine months ended September 30, 2020, respectively.

We expect that Business Solutions revenues in the fourth quarter of 2020 will continue to be negatively impacted by the effects of COVID-19, and to the extent the COVID-19 pandemic or the related macro-economic consequences continue, our results will continue to be adversely impacted.

Operating Income

For the three and six months ended June 30, 2020, operating income and operating income margin decreased when compared to the corresponding periods in the prior year due to the impact of revenue declines, as discussed above, partially offset by a reduction in employee-related expenses.

For the three and nine months ended September 30, 2020, operating income and operating income margin decreased when compared to the corresponding periods in the prior year due to the impact of revenue declines, as discussed above, partially offset by a reduction in employee-related expenses.

Other primarily consists of our cash-based bill payments businesses in Argentina and the United States, in addition to our money order services.

As previously described, we entered into an agreement on February 28, 2019 to sell Speedpay and closed the transaction on May 9, 2019.

Speedpay revenues and direct operating expenses included in our results were $37.2 million and $30.6 million, respectively, for the three months ended June 30, 2019.

Speedpay revenues and direct operating expenses included in our results were $125.4 million and $98.2 million, respectively, for the six months ended June 30, 2019.

Speedpay revenues and direct operating expenses included in our results were $125.4 million and $98.2 million, respectively, for the nine months ended September 30, 2019.

On May 6, 2019, we completed the sale of Paymap for contingent consideration and immaterial cash proceeds received at closing.

Paymap revenues and direct operating expenses included in our results were $1.6 million and $0.5 million, respectively, for the three months ended June 30, 2019.

Paymap revenues and direct operating expenses included in our results were $5.3 million and $2.2 million, respectively, for the six months ended June 30, 2019.

The following table sets forth Other results for the three and six months ended June 30, 2020 and 2019:

Three Months Ended June 30,

Six Months Ended June 30,

Paymap revenues and direct operating expenses included in our results were $5.3 million and $2.2 million, respectively, for the nine months ended September 30, 2019.

The following table sets forth Other results for the three and nine months ended September 30, 2020 and 2019:

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in millions)

1 unchanged sentence

Operating income margin

(a) Calculation not meaningful.

Other revenue decreased 56% and 57% for the three and six months ended June 30, 2020, compared to the corresponding periods in the prior year primarily due to the impact of the sale of Speedpay, declines in our cash-based bill payments services offered at retail locations, and the strengthening of the United States dollar against the Argentine peso.

The decrease for the three and six months ended June 30, 2020 was partially offset by an increase in local currency revenue per transaction, primarily due to inflation.

Other revenue decreased 33% and 52% for the three and nine months ended September 30, 2020, compared to the corresponding periods in the prior year due to declines in our cash-based bill payments services offered at retail locations and the strengthening of the United States dollar against the Argentine peso.

For the nine months ended September 30, 2020 when compared to the corresponding period in the prior year, the decrease in other revenue was primarily due to the impact of the sale of Speedpay in the second quarter of 2019.

The decrease in revenue for the three and nine months ended September 30, 2020 was partially offset by an increase in local currency revenue per transaction, primarily due to inflation.

We believe that Other revenues will continue to be negatively impacted by the effects of COVID-19 to the extent the pandemic or the related macro-economic consequences continue, as we may continue to experience decreases in our cash-based bill payments services.

Operating Income

Other operating income increased for the three and six months ended June 30, 2020 compared to the corresponding periods in the prior year due to the change in allocated information technology expenses, as previously discussed, and a decrease in costs related to strategic initiatives, including for the review and closing of mergers, acquisitions, and divestitures, partially offset by a decrease in revenues, net of a reduction in direct expenses from the Speedpay and Paymap divestitures, and a decrease in revenues from our cash-based bill payments services.

Other operating income increased for the three and nine months ended September 30, 2020 compared to the corresponding periods in the prior year due to the change in allocated information technology expenses, as previously discussed, partially offset by a decrease in revenues from our cash-based bill payments services.

For the nine months ended September 30, 2020 compared to the corresponding period in the prior year, Other operating income was also impacted by a decrease in revenues, net of a reduction in direct expenses from the Speedpay and Paymap divestitures, and a decrease in costs related to strategic initiatives, including for the review and closing of mergers, acquisitions, and divestitures.

Capital Resources and Liquidity

4 unchanged sentences

These payments are typically due in the second quarter of each year through 2025;

however, due to the Coronavirus Aid, Relief, and Economic Security Act signed into law on March 27, 2020, the due date for the 2020 payment was extended and paid in July 2020.

however, due to the Coronavirus Aid, Relief, and Economic Security Act signed into law on March 27, 2020, the due date for the 2020 payment was extended and payment was made in July 2020.

Our future cash flows could be impacted by a variety of factors, some of which are out of our control.

These factors include, but are not limited to, changes in economic conditions, especially those impacting migrant populations and including as a result of COVID-19 related impacts, changes in income tax laws or the status of income tax audits, including the resolution of outstanding tax matters, and the settlement or resolution of legal contingencies.

During the six months ended June 30, 2020, we experienced some delays in collections of agent receivables due to COVID-19 agent location closures and other impacts.

These delays have been largely temporary as certain agents were not able to remit settlement funds to us during lockdowns or other stay-at-home orders;

however, some of our agents, such as small businesses, may not easily be able to resume operations due to COVID-19.

These delays, along with a potential reduction in cash generated from our operating activities, may have a negative impact on our liquidity in future periods.

The duration and severity of COVID-19 and related impacts are uncertain, but we believe we are taking appropriate measures to attempt to address liquidity-related considerations by evaluating, monitoring, and assessing the creditworthiness and credit risk ratings of our agents and customers.

2 unchanged sentences

Our regulated subsidiaries may transfer all excess cash to the parent company for general corporate use, except for assets subject to legal or regulatory restrictions, including:

(i) requirements to maintain cash and other qualifying investment balances, free of any liens or other encumbrances, related to the payment of certain of our money transfer and other payment obligations, (ii) other legal or regulatory restrictions, including statutory or formalized minimum net worth requirements, and (iii) restrictions on transferring assets outside of the countries where these assets are located.

(i) requirements

to maintain cash and other qualifying investment balances, free of any liens or other encumbrances, related to the payment of certain of our money transfer and other payment obligations, (ii) other legal or regulatory restrictions, including statutory or formalized minimum net worth requirements, and (iii) restrictions on transferring assets outside of the countries where these assets are located.

Assuming that our operations are not significantly affected by the COVID-19 pandemic for a protracted period, we currently believe we have adequate liquidity to meet our business needs, including payments under our debt and other obligations, through our existing cash balances, our ability to generate cash flows through operations, and our $1.5 billion revolving credit facility ("Revolving Credit Facility"), which expires in January 2025 and supports our commercial paper program.

Our commercial paper program enables us to issue unsecured commercial paper notes in an amount not to exceed $1.5 billion outstanding at any time, reduced to the extent of any borrowings outstanding on our Revolving Credit Facility.

As of June 30, 2020, we had no outstanding borrowings on our Revolving Credit Facility and $100.0 million of outstanding borrowings on the commercial paper program.

As of September 30, 2020, we had no outstanding borrowings on our Revolving Credit Facility and $50.0 million of outstanding borrowings on the commercial paper program.

To help ensure availability of our worldwide cash where needed, we utilize a variety of planning and financial strategies, including decisions related to the amounts, timing, and manner by which cash is made available from our international subsidiaries.

2 unchanged sentences

Cash and Investment Securities

As of June 30, 2020 and December 31, 2019, we had cash and cash equivalents of $1,181.6 million and $1,450.5 million, respectively.

As of September 30, 2020 and December 31, 2019, we had cash and cash equivalents of $1,251.4 million and $1,450.5 million, respectively.

In many cases, we receive funds from money transfers and certain other payment services before we settle the payment of those transactions.

2 unchanged sentences

We maintain a portion of these settlement assets in highly liquid investments, classified as Cash and cash equivalents within Settlement assets, to fund settlement obligations.

Investment securities, classified within Settlement assets on the Condensed Consolidated Balance Sheets, were $1.9 billion and $1.7 billion as of June 30, 2020 and December 31, 2019, respectively, and consist primarily of highly-rated state and municipal debt securities, including fixed-rate term notes and variable-rate demand notes.

Investment securities, classified within Settlement assets on the Condensed Consolidated Balance Sheets, were $2.2 billion and $1.7 billion as of September 30, 2020 and December 31, 2019, respectively, and consist primarily of highly-rated state and municipal debt securities, including fixed-rate term notes and variable-rate demand notes.

The substantial majority of our investment securities are held in order to comply with state licensing requirements in the United States and are required to have credit ratings of "A-"

3 unchanged sentences

Our investment securities are also actively managed with respect to concentration.

As of June 30, 2020, all investments with a single issuer and each individual security represented less than 10% of our investment securities portfolio.

As of September 30, 2020, all investments with a single issuer and each individual security represented less than 10% of our investment securities portfolio.

Cash Flows from Operating Activities

Cash provided by operating activities decreased to $347.8 million during the six months ended June 30, 2020, from $402.6 million in the corresponding period in the prior year, primarily as a result of increased incentive and other employee benefit payments, payments related to our restructuring plan, and timing of payments to our agents and vendors.

Cash provided by operating activities decreased to $585.6 million during the nine months ended September 30, 2020, from $665.3 million in the corresponding period in the prior year, primarily as a result of the timing of accruals and payments related to our restructuring plan, increased incentive and other employee benefit payments, and timing of payments to our vendors, partially offset by lower income tax payments and an increase in operating income.

Cash provided by operating activities can be impacted by changes to our consolidated net income, in addition to fluctuations in our working capital balances, among other factors.

Financing Resources

As of June 30, 2020, we have outstanding borrowings at par value of $3,100.0 million.

As of September 30, 2020, we have outstanding borrowings at par value of $3,050.0 million.

The majority of these outstanding borrowings consist of unsecured fixed-rate notes with maturities ranging from 2022 to 2040.

2 unchanged sentences

Interest due under the Revolving Credit Facility is fixed for the term of each borrowing and is payable according to the terms of that borrowing.

Generally, interest is calculated using a selected

LIBOR rate plus an interest rate margin of 110 basis points.

Generally, interest is calculated using a selected LIBOR rate plus an interest rate margin of 110 basis points.

A facility fee is also payable quarterly at an annual rate of 15 basis points on the total facility, regardless of usage.

2 unchanged sentences

The largest commitment from any single financial institution within the total committed balance of $1.5 billion is approximately 11%.

As of June 30, 2020, we had no outstanding borrowings under our Revolving Credit Facility.

As of September 30, 2020, we had no outstanding borrowings under our Revolving Credit Facility.

If the amount available to borrow under the Revolving Credit Facility decreased, or if the Revolving Credit Facility were eliminated, the cost and availability of borrowing under the commercial paper program may be impacted.

2 unchanged sentences

Interest rates for borrowings are based on market rates at the time of issuance.

We had $100.0 million of commercial paper borrowings outstanding as of June 30, 2020.

Our commercial paper borrowings as of June 30, 2020 had a weighted-average annual interest rate of approximately 0.4% and a weighted-average term of approximately 1 day.

During the six months ended June 30, 2020, the average commercial paper balance outstanding was $224.8 million, and the maximum balance outstanding was $690.0 million.

We had $50.0 million of commercial paper borrowings outstanding as of September 30, 2020.

Our commercial paper borrowings as of September 30, 2020 had a weighted-average annual interest rate of approximately 0.3% and a weighted-average term of approximately 1 day.

During the nine months ended September 30, 2020, the average commercial paper balance outstanding was $229.3 million, and the maximum balance outstanding was $690.0 million.

Proceeds from our commercial paper borrowings were used for general corporate purposes and working capital needs.

5 unchanged sentences

Capital Expenditures

The total aggregate amount paid for contract costs, purchases of property and equipment, and purchased and developed software was $84.2 million and $75.0 million for the six months ended June 30, 2020 and 2019, respectively.

The total aggregate amount paid for contract costs, purchases of property and equipment, and purchased and developed software was $106.3 million and $93.5 million for the nine months ended September 30, 2020 and 2019, respectively.

Amounts paid for new and renewed agent contracts vary depending on the terms of existing contracts as well as the timing of new and renewed contract signings.

1 unchanged sentence

Share Repurchases and Dividends

During the six months ended June 30, 2020 and 2019, 8.5 million and 17.9 million shares were repurchased for $217.4 million and $335.5 million, respectively, excluding commissions, at an average cost of $25.45 and $18.73, respectively.

During the first quarter of 2020, we temporarily paused and have not resumed share repurchases, and as of June 30, 2020, $782.6 million remains available under the share repurchase authorization approved by our Board of Directors through December 31, 2021.

Our Board of Directors declared quarterly cash dividends of $0.225 per common share in the first and second quarters of 2020, representing $184.9 million in total dividends.

On July 15, 2020, our Board of Directors declared a quarterly cash dividend of $0.225 per common share payable on September 30, 2020.

During the nine months ended September 30, 2020 and 2019, 8.5 million and 24.4 million shares were repurchased for $217.4 million and $475.2 million, respectively, excluding commissions, at an average cost of $25.45 and $19.48, respectively.

During the first quarter of 2020, we temporarily paused and have not resumed share repurchases, and as of September 30, 2020, $782.6 million remains available under the share repurchase authorization approved by our Board of Directors through December 31, 2021.

Our Board of Directors declared quarterly cash dividends of $0.225 per common share in each of the first three quarters of 2020, representing $277.4 million in total dividends.

Debt Service Requirements

2 unchanged sentences

The Tax Act imposed a tax on certain of our previously undistributed foreign earnings.

This tax charge, combined with our other 2017 United States taxable income and tax attributes, resulted in a 2017 United States federal tax liability of approximately $800 million, of which approximately $668 million remained as of June 30, 2020.

We have elected to pay this liability in periodic installments through 2025.

3 unchanged sentences

As previously discussed, on August 1, 2019, our Board of Directors approved a plan to change our operating model and improve our business processes and cost structure by reorganizing our senior management, including those managers reporting to our Chief Executive Officer, reducing our headcount, and consolidating various facilities.

As of June 30, 2020, the accrual balance related to our restructuring plan was approximately $44 million.

As of September 30, 2020, the accrual balance related to our restructuring plan was approximately $34 million.

We plan to pay these restructuring accruals, and any additional restructuring accruals, using our existing cash balances and cash generated from operations.

2 unchanged sentences

Other Commercial Commitments

We had approximately $360 million in outstanding letters of credit and bank guarantees as of June 30, 2020 primarily held in connection with safeguarding consumer funds, lease arrangements, and certain agent agreements.

The letters of credit and bank guarantees have expiration dates through 2024, with many having a one-year renewal option.

We had approximately $370 million in outstanding letters of credit and bank guarantees as of September 30, 2020 primarily held in connection with safeguarding consumer funds, lease arrangements, and certain agent agreements.

The significant majority of our letters of credit and bank guarantees have a one-year renewal option.

We expect to renew the letters of credit and bank guarantees prior to expiration in most circumstances.

These letters of credit and bank guarantees exclude guarantees that we may provide as part of our legal matters described in Part I, Item 1, Financial Statements , Note 8, Commitments and Contingencies.

As of June 30, 2020, our total amount of unrecognized income tax benefits was $318.3 million, including associated interest and penalties.

As of September 30, 2020, our total amount of unrecognized income tax benefits was $321.5 million, including associated interest and penalties.

The timing of related cash payments for substantially all of these liabilities is inherently uncertain because the ultimate amount and timing of such liabilities are affected by factors which are variable and outside our control.

2 unchanged sentences

Actual results could differ from those estimates.

Our Critical Accounting Policies and Estimates disclosed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of

Operations in our Annual Report on Form 10-K for the year ended December 31, 2019, for which there were no material changes, included:

Our Critical Accounting Policies and Estimates disclosed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2019, for which there were no material changes, included:

● Income taxes, including income tax contingencies

5 unchanged sentences

The reporting unit's fair value continues to be sensitive to changes in projected revenue growth rates and EBITDA margins, which are impacted by these same factors.

As of June 30, 2020, the Business Solutions reporting unit had goodwill of $532.0 million.

As of September 30, 2020, the Business Solutions reporting unit had goodwill of $532.0 million.

Recent Accounting Pronouncements

11 unchanged sentences

We also have exposure to certain foreign currency denominated cash and other asset and liability positions and may utilize foreign currency forward contracts, typically with maturities of less than one year at inception, to offset foreign exchange rate fluctuations on these positions.

In certain consumer money transfer, bill payment and Business Solutions transactions involving different send and receive currencies, we generate revenue based on the difference between the exchange rate set by us to the consumer or business and the rate available in the wholesale foreign exchange market, helping to provide protection against currency fluctuations.

fluctuations.

We attempt to promptly buy and sell foreign currencies as necessary to cover our net payables and receivables which are denominated in foreign currencies.

We use longer-term foreign currency forward contracts to help mitigate risks associated with changes in foreign currency exchange rates on revenues denominated primarily in the euro, and to a lesser degree the Canadian dollar, British pound, and other currencies.

We use contracts with maturities of up to 36 months at inception to mitigate some of the

impact that changes in foreign currency exchange rates could have on forecasted revenues, with a targeted weighted-average maturity of approximately one year.

We use longer-term foreign currency forward contracts to help mitigate risks associated with changes in foreign currency exchange rates on revenues denominated primarily in the euro, and to a lesser degree, the British pound, Canadian dollar, and other currencies.

We use contracts with maturities of up to 36 months at inception to mitigate some of the impact that changes in foreign currency exchange rates could have on forecasted revenues, with a targeted weighted-average maturity of approximately one year.

We believe the use of longer-term foreign currency forward contracts provides predictability of future cash flows from our international operations.

We have bill payment, money transfer, and other operations in Argentina, which together represented less than 5% of our total consolidated revenues for the three and six months ended June 30, 2020 and 2019.

We have bill payment, money transfer, and other operations in Argentina, which together represented less than 5% of our total consolidated revenues for the three and nine months ended September 30, 2020 and 2019.

The strengthening of the United States dollar against the Argentine peso has had adverse impacts on our historical results of operations and cash flows, as our Argentine peso-denominated revenue and operating income have been reduced when translated into United States dollars for inclusion in our financial statements.

5 unchanged sentences

In certain countries, this business also writes foreign currency forward and option contracts for our customers to facilitate future payments.

The duration of these derivative contracts at inception is generally less than one year.

The majority of these derivative contracts have a duration at inception of less than one year.

Business Solutions aggregates its foreign exchange exposures arising from customer contracts, including the derivative contracts described above, and hedges the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties.

As of December 31, 2019, a hypothetical uniform 10% strengthening or weakening in the value of the United States dollar relative to all other currencies in which our net income is generated would have resulted in a decrease/increase to pre-tax annual income of approximately $45 million, based on our forecast of unhedged exposure to foreign currency at that date.

As of June 30, 2020, we were continuing to evaluate our foreign currency denominated revenues and expenses for the next twelve months, which we expect could change materially due to the effects of COVID-19.

As of September 30, 2020, we were continuing to evaluate our foreign currency denominated revenues and expenses for the next twelve months, which we expect could change materially due to the effects of COVID-19.

There are inherent limitations in this sensitivity analysis, primarily due to the following assumptions:

2 unchanged sentences

Interest Rates

We invest in several types of interest-bearing assets, with a total value as of June 30, 2020 of approximately $2.8 billion.

Approximately $1.5 billion of these assets bear interest at floating rates and are therefore sensitive to changes in interest rates.

We invest in several types of interest-bearing assets, with a total value as of September 30, 2020 of approximately $3.1 billion.

Approximately $1.7 billion of these assets bear interest at floating rates.

These assets primarily include cash in banks, money market instruments, and state and municipal variable rate securities and are included in our Condensed Consolidated Balance Sheets within Cash and cash equivalents and Settlement assets.

2 unchanged sentences

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 awaiting redemption classified within Settlement assets in the Condensed Consolidated Balance Sheets.

These investments may include investments made from cash received from our money order services, money transfer business, and other related payment services awaiting redemption classified within

Settlement assets in the Condensed Consolidated Balance Sheets.

As interest rates rise, the fair value of these fixed-rate interest-bearing securities will decrease;

conversely, a decrease to interest rates would result in an increase to the fair values of the securities.

We have classified these investments as available-for-sale within Settlement assets in the Condensed Consolidated Balance Sheets, and accordingly, recorded these instruments at their fair value with the net unrealized gains and losses, net of the applicable deferred income tax effect, being added to or deducted from our Total stockholders’ deficit on our Condensed Consolidated Balance Sheets.

As of June 30, 2020, we had a total of approximately $1.1 billion of borrowings subject to floating interest rates.

We have classified these investments as available-for-sale within Settlement assets in the Condensed Consolidated Balance Sheets, and accordingly, recorded these instruments at their fair value with the net unrealized gains and losses, net of the applicable deferred income tax effect, being added to or deducted from our Total stockholders’ equity/(deficit) on our Condensed Consolidated Balance Sheets.

As of September 30, 2020, we had a total of approximately $1.0 billion of borrowings subject to floating interest rates.

Interest on $950.0 million borrowed under our Term Loan Facility is calculated using a selected LIBOR rate plus an interest rate margin of 125 basis points.

5 unchanged sentences

From time to time, we use interest rate swaps designated as hedges to vary the percentage of fixed to floating rate debt, subject to market conditions.

As of June 30, 2020, our weighted-average effective rate on total borrowings was approximately 3.5%.

As of September 30, 2020, our weighted-average effective rate on total borrowings was approximately 3.6%.

For further detail on our variable rate borrowings, see risk factor “ We have substantial debt and other obligations that could restrict our operations ” in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019.

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 $11 million based on borrowings that are sensitive to interest rate fluctuations, net of the impact of hedges, on June 30, 2020.

The same 100 basis point increase/decrease in interest rates, if applied to our cash and investment balances on June 30, 2020 that are sensitive to interest rate fluctuations, would result in an offsetting increase/decrease to pre-tax income for the next twelve months of approximately $15 million.

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 $10 million based on borrowings that are sensitive to interest rate fluctuations, net of the impact of hedges, on September 30, 2020.

The same 100 basis point increase/decrease in interest rates, if applied to our cash and investment balances on September 30, 2020 that bear interest at floating rates, would result in an offsetting increase/decrease to pre-tax income for the next twelve months of approximately $17 million.

There are inherent limitations in the sensitivity analysis presented, primarily due to the assumptions that interest rate changes would be instantaneous and consistent across all geographies in which our interest-bearing assets are held and our liabilities are payable.

6 unchanged sentences

These delays have been largely temporary as certain agents were not able to remit settlement funds to us during lockdowns or other stay-at-home orders.

however, some of our agents, such as small businesses, may not easily be able to resume operations due to COVID-19.

In addition, we are exposed to losses directly from consumer transactions, particularly through our electronic channels, where transactions are originated through means other than cash and are therefore subject to "chargebacks,"

4 unchanged sentences

The credit risk associated with our derivative contracts increases when foreign currency exchange rates move against our customers, possibly impacting their ability to honor their obligations to deliver currency to us or to maintain appropriate collateral with us.

For those receivables where we have extended trade credit, collection ordinarily occurs

within a few days.

However, the collection of our derivative assets and receivables may be affected by COVID-19 as a result of restrictions on the operations of our customers and any financial impacts our customers may face.

For those receivables where we have extended trade credit, collection ordinarily occurs within a few days.

To mitigate the risk associated with potential customer defaults, we perform credit reviews of the customer on an ongoing basis, and, for our derivatives, we may require certain customers to post or increase collateral.

3 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements