What changed in this filing

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Item 1. Financial Statements

2021-11-02 compared with 2021-08-04 · 355 added, 275 removed, 1100 unchanged (36% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Cost of services

6 unchanged sentences

Other income/(expense), net

Total other income/(expense), net

Total other expense, net

Income before income taxes

7 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Other comprehensive income, net of reclassifications and tax (Note 10):

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 $ 723.9 and $ 1,044.6 , respectively

Assets held for sale (Note 4)

Liabilities and stockholders' equity

4 unchanged sentences

Other liabilities

Liabilities associated with assets held for sale (Note 4)

Total liabilities

6 unchanged sentences

2,000 shares authorized;

407.0 shares and 411.2 shares issued and outstanding as of June 30, 2021 and December 31, 2020 , respectively

403.6 shares and 411.2 shares issued and outstanding as of September 30, 2021 and December 31, 2020 , respectively

Capital surplus

7 unchanged sentences

(in millions)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities

Adjustments to reconcile net income to net cash provided by operating activities:

Gain on the sale of shares held as a minority investor (Note 4)

Gain on the sale of noncontrolling interest in a private company (Note 4)

Other non-cash items, net

9 unchanged sentences

Proceeds from the sale of former corporate headquarters

Proceeds from the sale of shares held as a minority investor (Note 4)

Regulatory deposit made to purchase the ownership interest in stc pay (Note 4)

Proceeds from the sale of noncontrolling interest in a private company (Note 4)

Regulatory deposit made to purchase a noncontrolling interest in stc Bank (Note 4)

Other investing activities

16 unchanged sentences

Income taxes paid

Cash included in Assets held for sale (Note 4)

Restricted cash at end of period (included in Other assets)

19 unchanged sentences

Balance, June 30, 2021

Stock-based compensation

Common stock dividends and dividend equivalents declared ($ 0.235 per share)

Repurchase and retirement of common shares

Shares issued under stock-based compensation plans

Other comprehensive income (Note 10)

Balance, September 30, 2021

Comprehensive

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 10)

Balance, September 30, 2020

See Notes to Condensed Consolidated Financial Statements.

5 unchanged sentences

The Western Union ® brand is globally recognized.

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

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

Each location in the Company’s agent network is capable of providing one or more of the Company’s services.

23 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, 2021 and December 31, 2020 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, 2021 and for all periods presented.

All significant intercompany transactions and accounts were eliminated as of September 30, 2021 and December 31, 2020 and for all periods presented.

These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements within the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

18 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company recognized $ 1,239.1 million and $ 1,055.6 million for the three months ended June 30, 2021 and 2020, respectively, and $ 2,405.4 million and $ 2,178.2 million for the six months ended June 30, 2021 and 2020, respectively, in revenues from contracts with customers.

The Company recognized $ 1,230.3 million and $ 1,214.3 million for the three months ended September 30, 2021 and 2020, respectively, and $ 3,635.7 million and $ 3,392.5 million for the nine months ended September 30, 2021 and 2020, respectively, in revenues from contracts with customers.

There were no material upfront costs incurred to obtain contracts with customers during these same periods.

26 unchanged sentences

Management has determined that the substantial 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, 2021 and 2020 (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, 2021 and 2020 (in millions).

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

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Bill Payments

7 unchanged sentences

Total revenues

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Bill Payments

9 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Bill Payments

7 unchanged sentences

Total revenues

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Bill Payments

13 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 anti-dilutive, were 1.4 million and 2.6 million for the three months ended June 30, 2021 and 2020, respectively, and 1.4 million and 1.8 million for the six months ended June 30, 2021 and 2020, respectively.

For the three months ended September 30, 2021 and 2020, there were 2.2 million and 1.3 million, respectively, and for both the nine months ended September 30, 2021 and 2020, there were 1.7 million 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 the Company’s weighted-average share price during the periods and their effect was anti-dilutive.

THE WESTERN UNION COMPANY

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Basic weighted-average shares outstanding

1 unchanged sentence

Diluted weighted-average shares outstanding

Assets Held for Sale and Investment Activities

Assets Held for Sale

On August 4, 2021, the Company entered into an agreement to sell its Business Solutions business to Goldfinch Partners LLC and The Baupost Group (“Buyer”) for cash consideration of $ 910 million, subject to regulatory and working capital adjustments.

The divestiture is expected to result in a gain on the sale and is subject to regulatory approval and other closing conditions.

The sale is expected to be completed in two closings, with the entirety of the cash consideration due at the first closing.

The first closing is expected to be completed during the first quarter of 2022 and to exclude the operations in the European Union and the United Kingdom.

The second closing, comprised of the operations in the European Union and the United Kingdom, is currently expected by late 2022.

The Company has presented the assets of its Business Solutions business as held for sale, along with the associated liabilities, as it believes completion of the sale is probable.

However, in the event that:

(a) the first closing has not occurred by August 4, 2022, due to a failure to obtain regulatory approvals by that date, and such failure is not primarily caused by the Company’s material breach, or (b) the agreement is terminated prior to August 4, 2022, and at the time of such termination either (i) there is a final order or other legal prohibition (not primarily caused by the Company’s material breach) precluding the first closing, or (ii) there is a material, unresolved breach by Buyer or its affiliates of their undertakings relating to obtaining the regulatory approvals, the Company would be entitled to a termination fee of $ 63.7 million.

Business Solutions revenues were $ 116.8 million and $ 89.1 million for the three months ended September 30, 2021 and 2020, respectively, and $ 312.6 million and $ 266.9 million for the nine months ended September 30, 2021 and 2020, respectively.

Business Solutions direct operating expenses, which exclude corporate allocations, were $ 77.1 million and $ 77.0 million for the three months ended September 30, 2021 and 2020, respectively, and $ 244.5 million and $ 233.3 million for the nine months ended September 30, 2021 and 2020, respectively.

Operating costs directly associated with this divestiture and incurred through the three and nine months ended September 30, 2021 were $ 5.2 million and $ 10.7 million, respectively.

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table reflects the assets held for sale and associated liabilities of the Business Solutions business in the accompanying Condensed Consolidated Balance Sheet (in millions).

These balances are subject to regulatory capital and other requirements and will be finalized upon the closing of the deal.

September 30,

Cash and cash equivalents

Settlement assets

Property and equipment, net of accumulated depreciation of $ 39.9

Other intangible assets, net of accumulated amortization of $ 383.8

Accounts payable and accrued liabilities

Settlement obligations

Other liabilities

Total liabilities

The Company also expects to reclassify approximately $ 17.8 million of unrealized currency translation gains currently included within Accumulated other comprehensive loss (“AOCL”) into net income at the first closing.

Investment Activities

On May 25, 2021, the Company amended its agreement dated November 21, 2020 to acquire an ownership interest in Saudi Digital Payments Company (“stc pay”), a subsidiary of Saudi Telecom Company and one of the Company’s Consumer-to-Consumer digital white label partners.

Under the terms of the amended agreement, the Company has agreed to invest up to $ 200.0 million (“Purchase Price”) for up to a 15 % investment in stc pay (“Investment”), and this transaction is expected to close in the second half of 2021.

For regulatory purposes, the Purchase Price was deposited into an external, restricted account during the second quarter of 2021 in expectation of completing the Investment.

In conjunction with the transaction, the Company and stc pay extended and expanded the terms of their commercial agreement.

The Company expects to measure this Investment at cost, less any impairment, adjusted for any changes resulting from observable price changes in orderly transactions for identical or similar investments in stc pay.

On April 12, 2021, the Company sold a substantial majority of the shares it held as a minority investor in a private company for cash proceeds of $ 50.9 million.

The Company recorded a gain of $ 47.9 million within Other income/(expense), net, during the three months ended June 30, 2021.

The Company entered into an agreement in November 2020, and as subsequently amended, to acquire an ownership interest in stc Bank (formerly Saudi Digital Payments Company), a subsidiary of Saudi Telecom Company and one of the Company’s Consumer-to-Consumer digital white label partners.

Under the terms of the amended agreement, the Company agreed to invest $ 200.0 million for a 15 % investment in stc Bank (“Investment”), and this transaction closed in October 2021.

In conjunction with the transaction, the Company and stc Bank extended and expanded the terms of their commercial agreement.

In April 2021, the Company sold a substantial majority of the noncontrolling interest it held in a private company for cash proceeds of $ 50.9 million.

The Company recorded a gain of $ 47.9 million within Other income/(expense), net, during the nine months ended September 30, 2021.

The Company retains an immaterial equity interest in this private company.

Restructuring-Related Expenses

During the three and six months ended June 30, 2020, the Company incurred $ 5.2 million and $ 15.7 million, respectively, of expenses related to a restructuring initiative approved by the Company’s Board of Directors on August 1, 2019.

All expenses for this initiative had been incurred as of December 31, 2020, and substantially all have been and will continue to be paid in cash.

For the three and six months ended June 30, 2020, $ 0.8 million and $ 1.7 million, respectively, of these expenses were included in Cost of services, and $ 4.4 million and $ 14.0 million, respectively, of these expenses were included in Selling, general, and administrative in the Condensed Consolidated Statements of Income.

During the three and nine months ended September 30, 2020, the Company incurred $ 9.1 million and $ 24.8 million, respectively, of expenses related to a restructuring initiative approved by the Company’s Board of Directors on August 1, 2019.

All expenses for this initiative had been incurred as of December 31, 2020, and substantially all have been paid in cash.

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

While certain of the expenses may be identifiable to the Company’s segments, primarily to the Company’s Consumer-to-Consumer segment, the expenses are excluded from the Company’s segment operating income results as they are not included in the measurement of segment operating income provided to the Chief Operating Decision Maker (“CODM”) for purposes of performance assessment and resource allocation.

1 unchanged sentence

however, the types of expenses related to this initiative are similar to expenses that the Company has previously incurred and can reasonably be expected to incur in the future.

As of June 30, 2021 and December 31, 2020, the total restructuring-related accrual was $ 8.5 million and $ 26.2 million, respectively, substantially all of which is expected to be paid by September 30, 2021.

These amounts are included in Accounts payable and accrued liabilities in the Company’s Condensed Consolidated Balance Sheets.

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2020, the total restructuring-related accrual was $ 26.2 million and as of September 30, 2021, the accrual balance was not material.

These amounts are included in Accounts payable and accrued liabilities in the Company’s Condensed Consolidated Balance Sheets.

Fair Value Measurements

3 unchanged sentences

Fair Value Measurement Using

June 30, 2021

September 30, 2021

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

2 unchanged sentences

Total liabilities

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair Value Measurement Using

11 unchanged sentences

Total liabilities

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

There were no material, non-recurring fair value adjustments or transfers between Level 1 and Level 2 measurements during the three and six months ended June 30, 2021 and 2020.

There were no material, non-recurring fair value adjustments or transfers between Level 1 and Level 2 measurements during the three and nine months ended September 30, 2021 and 2020.

Other Fair Value Measurements

2 unchanged sentences

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, 2021, the carrying value and fair value of the Company’s borrowings were $ 2,996.8 million and $ 3,258.4 million, respectively (see Note 12).

As of September 30, 2021, the carrying value and fair value of the Company’s borrowings were $ 2,852.6 million and $ 3,108.7 million, respectively (see Note 12).

As of December 31, 2020, the carrying value and fair value of the Company’s borrowings were $ 3,067.2 million and $ 3,348.0 million, respectively.

1 unchanged sentence

Letters of Credit and Bank Guarantees

The Company had approximately $ 460 million in outstanding letters of credit and bank guarantees as of June 30, 2021 primarily held in connection with safeguarding consumer funds, lease arrangements, and certain agent agreements.

The Company had approximately $ 470 million in outstanding letters of credit and bank guarantees as of September 30, 2021 primarily held in connection with safeguarding consumer funds, lease arrangements, and certain agent agreements.

The Company expects to renew most of its letters of credit and bank guarantees prior to expiration.

3 unchanged sentences

Furthermore, in determining whether disclosure is appropriate, the Company evaluates each legal matter to assess if there is at least a reasonable possibility that a loss or additional losses may have been incurred and whether an estimate of possible loss or range of loss can be made.

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

For those matters that the Company believes there is at least a reasonable possibility that a loss or additional loss may have been incurred and can reasonably estimate the loss or potential loss, the reasonably possible potential litigation losses in excess of the Company’s recorded liability for probable and estimable losses was approximately $ 30 million as of June 30, 2021.

Unless otherwise specified below, the Company believes that there

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

is at least a reasonable possibility that a loss or additional loss may have been incurred for each of the matters described below.

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.

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 (the “Delaware Complaint”).

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

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

On August 1, 2019, Stanley 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 compliance programs, including certain alleged misconduct at issue in a shareholder derivative action he previously filed in in the United States District Court for the District of Colorado, which was subsequently consolidated with multiple pending related derivative actions.

The United States Court of Appeals for the Tenth Circuit affirmed dismissal of the consolidated derivative action on April 16, 2019 on the ground that the plaintiffs did not have standing to proceed on behalf of the Company without making a demand on the Company’s Board of Directors.

The consolidated derivative action is described in further detail in the Company’s prior disclosures.

On August 1, 2019, Mr.

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

The Company’s Board of Directors formed a special committee to evaluate Mr.

Lieblein’s demand together with a related demand sent by another shareholder (collectively, the “Demand Letters”), and the special committee’s investigation was still ongoing at the time Mr.

Lieblein filed the Delaware Complaint.

Lieblein alleges that he filed the Delaware 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’s demand together with a related demand by another shareholder (collectively, the “Demand Letters”).

On January 16, 2020, while the special committee’s investigation was still on-going, Mr.

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 (the “Delaware Complaint”).

Lieblein alleged that he filed the Delaware 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 agreed to stay the action until December 31, 2020, pending completion of the special committee’s investigation.

Within 60 days after December 31, 2020, Mr.

Lieblein was required either to specify whether the Delaware Complaint will serve as the operative complaint in the action or file an amended complaint.

The Delaware Complaint filed by Mr.

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

Lieblein’s shareholder demand and related request for tolling agreements.

It also includes allegations that the officer defendants declined to ensure that the Company implemented effective anti-fraud and AML compliance programs after receiving red flags that those programs were inadequate, allowed Company agents to willfully ignore anti-fraud and AML recording and reporting requirements for a prolonged period, opposed efforts by various regulators to implement effective anti-fraud and AML complaint programs, caused the Company to fail to comply with its obligations under settlements with regulators, and knowingly exposed the Company to criminal and civil sanctions.

The special committee completed its investigation in early December 2020 and, on the basis of its findings, recommended that the Company’s Board of Directors reject the Demand Letters and direct the Company to oppose any effort to assert claims based on or related to the Demand Letters on behalf of the Company, that no action on behalf of the Company should be brought or pursued against any of the current or former officers or directors of the Company based on the Demand Letters, and that none of the corporate governance reforms raised in the Demand Letters is necessary or appropriate.

3 unchanged sentences

Lieblein and the other shareholder that sent the related written demand that their demands have been rejected.

On February 12, 2021, the shareholder who sent the related written demand sent the Company a request to inspect books and records related to the consideration of the Demand Letters pursuant to Section 220 of the Delaware General Corporation Law.

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On February 25, 2021, Mr.

19 unchanged sentences

WUFSA intends to defend itself vigorously.

In April 2019, certain family members of Quinn Schansman filed a complaint seeking damages and other relief against a number of financial institutions, including The Western Union Company and Western Union Financial Services, Inc., in the United States District Court for the Southern District of New York, alleging that the defendants violated the United States Anti-Terrorism Act.

The operative complaint alleges that the defendants provided funding to a terrorist organization by processing money transfers to groups or individuals associated with the Donetsk People’s Republic (“DPR”), a pro-Russian separatist group in eastern Ukraine.

The complaint alleges that DPR downed Malaysian Airlines Flight 17, on which Mr.

Schansman was a passenger.

On September 30, 2021, the Court denied the defendants’ motion to dismiss the operative complaint.

Due to the preliminary stage of this matter, the ultimate outcome and any potential financial impact to the Company cannot be reasonably determined at this time.

The Company intends to defend itself vigorously in this matter.

In addition to the principal matters described above, the Company is a party to a variety of other legal matters that arise in the normal course of the Company’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, 2021 and 2020 totaled $ 14.0 million and $ 12.9 million, respectively, and $ 27.2 million and $ 25.5 million for the six months ended June 30, 2021 and 2020, respectively.

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Commission expense recognized for these agents for the three months ended September 30, 2021 and 2020 totaled $ 14.0 million and $ 14.5 million, respectively, and $ 41.2 million and $ 40.0 million for the nine months ended September 30, 2021 and 2020, respectively.

Settlement Assets and Obligations

3 unchanged sentences

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

June 30, 2021

September 30, 2021

Settlement assets:

4 unchanged sentences

Investment securities

Total settlement assets

Total settlement assets (a)

Settlement obligations:

1 unchanged sentence

Payables to agents

Total settlement obligations

Total settlement obligations (a)

December 31, 2020

10 unchanged sentences

Total settlement obligations

(a) As of September 30, 2021, both Settlement assets and Settlement obligations include $ 570.6 million classified as Assets held for sale and Liabilities associated with assets held for sale (see Note 4).

THE WESTERN UNION COMPANY

3 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.

Receivables from agents and others primarily represent funds collected by such agents, but in transit to the Company, and were $ 1,009.6 million and $ 1,081.2 million as of June 30, 2021 and December 31, 2020, respectively.

Receivables from agents and others primarily represent funds collected by such agents, but in transit to the Company, and were $ 967.2 million and $ 1,081.2 million as of September 30, 2021 and December 31, 2020, respectively.

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 $ 67.2 million and $ 53.9 million as of June 30, 2021 and December 31, 2020, respectively.

Business Solutions receivables totaled $ 89.7 million and $ 53.9 million as of September 30, 2021 and December 31, 2020, respectively.

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

4 unchanged sentences

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

The Company has estimated credit losses based on information known as of June 30, 2021.

The Company has estimated credit losses based on information known as of September 30, 2021.

The following tables summarize the activity in the allowance for credit losses on receivables from agents and others, and Business Solutions customers (in millions):

11 unchanged sentences

Allowance for credit losses as of June 30, 2021

Current period provision for expected credit losses (a)

Write-offs charged against the allowance

Recoveries of amounts previously written off

Impacts of foreign currency exchange rates and other

Allowance for credit losses as of September 30, 2021

THE WESTERN UNION COMPANY

12 unchanged sentences

Allowance for credit losses as of June 30, 2020

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

The Company recognized losses that were not credit related of $ 13.7 million and $ 14.5 million for the three months ended March 31, 2021 and June 30, 2021, respectively, and $ 9.2 million and $ 11.5 million for the three months ended March 31, 2020 and June 30, 2020, respectively.

Current period provision for expected credit losses (a)

Write-offs charged against the allowance

Recoveries of amounts previously written off

Impacts of foreign currency exchange rates and other

Allowance for credit losses as of September 30, 2020

(a) Current period provision for expected credit losses does not include losses from chargebacks or fraud associated with transactions initiated through the Company’s digital channels, as these losses are not credit related.

The Company recognized losses that were not credit related of $ 13.7 million, $ 14.5 million, and $ 13.8 million for the three months ended March 31, 2021, June 30, 2021, and September 30, 2021, respectively, and $ 9.2 million, $ 11.5 million, and $ 9.1 million for the three months ended March 31, 2020, June 30, 2020, and September 30, 2020, respectively.

In addition, from time to time, the Company has made advances to its agents.

1 unchanged sentence

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

As of June 30, 2021 and December 31, 2020, amounts advanced to agents were $ 154.8 million and $ 135.9 million, respectively, and the related allowances for credit losses were immaterial.

As of September 30, 2021 and December 31, 2020, amounts advanced to agents were $ 148.5 million and $ 135.9 million, respectively, and the related allowances for credit losses were immaterial.

Investment Securities

7 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 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

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

The Company’s provision for credit losses on its available-for-sale securities during the three and

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

six months ended June 30, 2021 and 2020 and the related allowance for credit losses as of June 30, 2021 and December 31, 2020 were immaterial.

The Company’s provision for credit losses on its available-for-sale securities during the three and nine months ended September 30, 2021 and 2020 and the related allowance for credit losses as of September 30, 2021 and December 31, 2020 were immaterial.

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

June 30, 2021

September 30, 2021

Gains/(Losses)

5 unchanged sentences

State and municipal variable-rate demand notes

Corporate debt securities

Corporate and other debt securities

United States government agency mortgage-backed securities

14 unchanged sentences

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

The following summarizes the contractual maturities of available-for-sale securities within Settlement assets as of June 30, 2021 (in millions):

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 September 30, 2021 (in millions):

Due within 1 year

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categories, respectively, in the table above.

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stockholders’ Equity

Accumulated Other Comprehensive Loss

The following table details reclassifications out of Accumulated other comprehensive loss (“AOCL”) and into Net income.

The following table details reclassifications out of AOCL and into Net income.

All amounts reclassified from AOCL affect the line items as indicated below and the amounts in parentheses indicate decreases to Net income in the Condensed Consolidated Statements of Income.

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Three Months Ended

Six Months Ended

Nine Months Ended

Income Statement

September 30,

Income for the period (in millions)

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Other income/(expense), net

Income tax expense

Income tax benefit/(expense)

Provision for income taxes

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables summarize the components of AOCL, net of tax on the accompanying Condensed Consolidated Balance Sheets (in millions):

The following tables summarize the components of AOCL, net of tax in the accompanying Condensed Consolidated Balance Sheets (in millions):

Foreign Currency

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Unrealized gains/(losses)

Tax benefit/(expense)

Amounts reclassified from AOCL into earnings, net of tax

As of June 30, 2021

Unrealized gains/(losses)

Tax benefit/(expense)

Amounts reclassified from AOCL into earnings, net of tax

As of September 30, 2021

Foreign Currency

8 unchanged sentences

As of June 30, 2020

On July 22, 2021, the Company’s Board of Directors approved a plan to terminate and settle the Company’s frozen defined benefit pension plan, which was in an overfunded position as of June 30, 2021 and December 31, 2020.

Upon termination and settlement, which is expected in the fourth quarter of 2021 and subject to required notices, filings, and reviews, the pre-tax balance in AOCL will be reclassified as a component of Total other income/(expense), net, with the related income tax effects recorded in Provision for income taxes, in the Condensed Consolidated Statements of Income.

Cash Dividends Paid

The Company’s Board of Directors declared quarterly cash dividends of $ 0.235 per common share in the first and second quarters of 2021, representing $ 192.5 million in total dividends.

Of this amount $ 95.9 million was paid on June 30, 2021 and $ 96.6 million was paid on March 31, 2021.

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.

On July 22, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $ 0.235 per common share, payable on September 30, 2021.

Unrealized gains/(losses)

Tax benefit/(expense)

Amounts reclassified from AOCL into earnings, net of tax

As of September 30, 2020

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Upon termination and settlement, which is expected in the fourth quarter of 2021 and subject to required notices, filings, and reviews, the pre-tax balance in AOCL will be reclassified as a component of Total other expense, net, with the related income tax effects recorded in Provision for income taxes, in the Condensed Consolidated Statements of Income.

Cash Dividends Paid

The Company’s Board of Directors declared quarterly cash dividends of $ 0.235 per common share for each of the first three quarters of 2021, representing $ 287.6 million in total dividends.

Of this amount, $ 95.1 million was paid on September 30, 2021, $ 95.9 million was paid on June 30, 2021, and $ 96.6 million was paid on March 31, 2021.

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.

Share Repurchases

During the six months ended June 30, 2021 and 2020, 6.1 million and 8.5 million shares were repurchased for $ 150.0 million and $ 217.4 million, respectively, excluding commissions, at an average cost of $ 24.42 and $ 25.45 , respectively.

During the nine months ended September 30, 2021 and 2020, 9.6 million and 8.5 million shares were repurchased for $ 225.0 million and $ 217.4 million, respectively, excluding commissions, at an average cost of $ 23.45 and $ 25.45 , respectively.

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

As of June 30, 2021, $ 632.6 million remained available under the share repurchase authorization approved by the Company’s Board of Directors through December 31, 2021.

As of September 30, 2021, $ 557.6 million remained 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, the 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, the 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.

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consequently, there is minimal risk that appropriate derivatives to maintain the hedging program would not be available in the future.

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Foreign Currency Derivatives

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, 2021, 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, 2021, 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The aggregate equivalent United States dollar notional amounts of foreign currency forward contracts as of June 30, 2021 and December 31, 2020 were as follows (in millions):

June 30, 2021

The aggregate equivalent United States dollar notional amounts of foreign currency forward contracts as of September 30, 2021 and December 31, 2020 were as follows (in millions):

September 30, 2021

Contracts designated as hedges:

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British pound

Philippine peso

Russian ruble

Australian dollar

Canadian dollar

Russian ruble

December 31, 2020

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The Company writes derivatives, primarily foreign currency forward contracts and option contracts, mostly with small and medium size enterprises and derives a currency spread from this activity as part of its Business Solutions operations.

On August 4, 2021, the Company entered into an agreement to sell its Business Solutions business, as described in Note 4.

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

The derivatives written are part of the broader portfolio of foreign currency positions arising from the Company’s cross-currency payments operations, which primarily include spot exchanges of currency in addition to forwards and options.

Foreign exchange revenues from the total portfolio of positions included in Revenues in the Company’s Condensed Consolidated Statements of Income were $ 87.4 million and $ 70.0 million for the three months ended June 30, 2021 and 2020, respectively, and $ 171.9 million and $ 157.5 million for the six months ended June 30, 2021 and 2020, respectively.

Foreign exchange revenues from the total portfolio of positions included in Revenues in the Company’s Condensed Consolidated Statements of Income were $ 99.5 million and $ 76.9 million for the three months ended September 30, 2021 and 2020, respectively, and $ 271.4 million and $ 234.4 million for the nine months ended September 30, 2021 and 2020, 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 $ 8.0 billion as of June 30, 2021 and December 31, 2020.

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

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Balance Sheet

The following table summarizes the fair value of derivatives reported in the Company’s Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 (in millions):

The following table summarizes the fair value of derivatives reported in the Company’s Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 (in millions):

Derivative Assets

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Balance Sheet

September 30,

Balance Sheet

September 30,

Derivatives designated as hedges:

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables summarize the gross and net fair value of derivative assets and liabilities as of June 30, 2021 and December 31, 2020 (in millions):

The following tables summarize the gross and net fair value of derivative assets and liabilities as of September 30, 2021 and December 31, 2020 (in millions):

Offsetting of Derivative Assets

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in the Condensed

June 30, 2021

September 30, 2021

Balance Sheets

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in the Condensed

June 30, 2021

September 30, 2021

Balance Sheets

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Income Statement

Cash Flow and Fair Value Hedges

Cash Flow Hedges

The effective portion of the change in fair value of derivatives that qualify as cash flow hedges is recorded in AOCL in the Company’s Condensed Consolidated Balance Sheets.

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

The following 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, 2021 and 2020 (in millions):

Three Months Ended June 30,

Six Months Ended June 30,

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, 2021 and 2020 (in millions):

Three Months Ended September 30,

Nine Months Ended September 30,

Foreign currency derivatives (a)

Interest rate derivatives

(a) Gains/(losses) of $( 0.3 ) million and $( 0.7 ) million for the three months ended June 30, 2021 and 2020, respectively, and $( 1.0 ) million and $ 2.8 million for the six months ended June 30, 2021 and 2020, respectively, represent amounts excluded from the assessment of effectiveness and recognized in other comprehensive income, for which an amortization approach is applied.

The following table presents the location and amounts of pre-tax net gains/(losses) from cash flow hedging relationships recognized in the Condensed Consolidated Statements of Income for the three months ended June 30, 2021 and 2020 (in millions):

Three Months Ended June 30,

(a) Gains/(losses) of $( 0.2 ) million and $( 1.6 ) million for the three months ended September 30, 2021 and 2020, respectively, and $( 1.2 ) million and $ 1.2 million for the nine months ended September 30, 2021 and 2020, respectively, represent amounts excluded from the assessment of effectiveness and recognized in other comprehensive income, for which an amortization approach is applied.

Three Months Ended September 30,

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

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Gains/(losses) reclassified from AOCL into earnings

The following table presents the location and amounts of pre-tax net gains/(losses) from cash flow hedging relationships recognized in the Condensed Consolidated Statements of Income for the six months ended June 30, 2021 and 2020 (in millions):

Six Months Ended June 30,

The following table presents the location and amounts of pre-tax net gains/(losses) from cash flow hedging relationships recognized in the Condensed Consolidated Statements of Income for the nine months ended September 30, 2021 and 2020 (in millions):

Nine Months Ended September 30,

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

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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, 2021 and 2020 (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, 2021 and 2020 (in millions):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Derivatives (a)

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(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 $( 3.2 ) million and $ 3.0 million for the three months ended June 30, 2021 and 2020, respectively, and $( 25.0 ) million and $( 48.0 ) million for the six months ended June 30, 2021 and 2020, 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 $( 25.7 ) million and $ 1.4 million for the three months ended September 30, 2021 and 2020, respectively, and $( 50.7 ) million and $( 46.6 ) million for the nine months ended September 30, 2021 and 2020, 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, 2021 foreign exchange rates, an accumulated other comprehensive pre-tax loss of $ 3.7 million related to the foreign currency forward contracts is expected to be reclassified into Revenues within the next 12 months.

Based on September 30, 2021 foreign exchange rates, an accumulated other comprehensive pre-tax gain of $ 10.5 million related to the foreign currency forward contracts is expected to be reclassified into Revenues within the next 12 months.

THE WESTERN UNION COMPANY

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

June 30, 2021

September 30, 2021

December 31, 2020

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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, 2021 had a weighted-average annual interest rate of approximately 0.2 % and a weighted-average term of approximately 1 day .

The Company’s commercial paper borrowings as of September 30, 2021 had a weighted-average annual interest rate of approximately 0.2 % and a weighted-average term of approximately 1 day .

(b) See the Issuance of 2026 and 2031 Unsecured Notes section below for details of borrowings and repayments in 2021.

(d) As of June 30, 2021, the Company’s weighted-average effective rate on total borrowings was approximately 3.3 % .

(d) As of September 30, 2021, the Company’s weighted-average effective rate on total borrowings was approximately 3.4 % .

Issuance of 2026 and 2031 Unsecured Notes

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Proceeds from the 2026 Notes and 2031 Notes and cash, including cash generated from operations, were used to repay $ 650.0 million of the term loan facility in the first quarter of 2021 and $ 500.0 million of the aggregate principal amount of 3.600 % unsecured notes due in March 2022 (“2022 Notes”) in the second quarter of 2021.

The cost associated with the early termination of the 2022 Notes, including the make-whole premium of $ 14.3 million, was recorded to Other income/(expense), net, during the three months ended June 30, 2021.

The cost associated with the early termination of the 2022 Notes, including the make-whole premium of $ 14.3 million, was recorded to Other income/(expense), net, during the nine months ended September 30, 2021.

THE WESTERN UNION COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following summarizes the Company’s maturities of notes and term loan at par value as of June 30, 2021 (in millions):

The following summarizes the Company’s maturities of notes and term loan at par value as of September 30, 2021 (in millions):

Due within 1 year

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The Company’s obligations with respect to its outstanding borrowings, as described above, rank equally.

The Company’s provision for income taxes for the three and six months ended June 30, 2021 and 2020 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 14.5 % and 16.2 % for the three months ended June 30, 2021 and 2020, respectively, and 12.7 % and 14.3 % for the six months ended June 30, 2021 and 2020, respectively.

The decrease in the Company’s effective tax rate for the three and six months ended June 30, 2021 compared to the prior periods was primarily due to changes in pre-tax earnings, including differences in the composition between high-tax and low-tax jurisdictions.

The decrease in the effective tax rate for the six months ended June 30, 2021 compared to the prior period was also impacted by increased discrete tax benefits in the current period.

The Company’s provision for income taxes for the three and nine months ended September 30, 2021 and 2020 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 20.2 % and 12.4 % for the three months ended September 30, 2021 and 2020, respectively, and 15.6 % and 13.5 % for the nine months ended September 30, 2021 and 2020, respectively.

The increase in the Company’s effective tax rate for the three and nine months ended September 30, 2021 compared to the corresponding periods in the prior year was primarily due to increased deferred tax expense arising from changes to certain of the Company’s permanent reinvestment assertions related to its decision to classify its Business Solutions business as held for sale in the current period.

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

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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, 2021 and December 31, 2020 was $ 340.2 million and $ 340.7 million, respectively, excluding interest and penalties.

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $ 329.1 million and $ 329.2 million as of June 30, 2021 and December 31, 2020, respectively, excluding interest and penalties.

The total amount of unrecognized tax benefits as of September 30, 2021 and December 31, 2020 was $ 341.9 million and $ 340.7 million, respectively, excluding interest and penalties.

The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $ 330.7 million and $ 329.2 million as of September 30, 2021 and December 31, 2020, 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

penalties during the three months ended June 30, 2021 and 2020, respectively, and $ 1.1 million and $ 0.7 million during the six months ended June 30, 2021 and 2020, respectively.

The Company has accrued $ 29.7 million and $ 28.6 million for the payment of interest and penalties as of June 30, 2021 and December 31, 2020, respectively.

penalties during the three months ended September 30, 2021 and 2020, respectively, and $ 3.0 million and $ 1.5 million during the nine months ended September 30, 2021 and 2020, respectively.

The Company has accrued $ 31.6 million and $ 28.6 million for the payment of interest and penalties as of September 30, 2021 and December 31, 2020, 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.

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Stock-Based Compensation Plans

For the three months ended June 30, 2021 and 2020, the Company recognized stock-based compensation expense of $ 12.0 million and $ 5.3 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 ended June 30, 2021 and 2020, the Company recognized stock-based compensation expense of $ 22.8 million and $ 17.8 million, respectively.

During the six months ended June 30, 2021, the Company granted 0.5 million options at a weighted-average exercise price of $ 23.91 and 2.7 million performance-based restricted stock units and restricted stock units at a weighted-average grant date fair value of $ 23.65 .

As of June 30, 2021, the Company had 4.7 million outstanding options at a weighted-average exercise price of $ 19.55 , of which 3.6 million options were exercisable at a weighted-average exercise price of $ 18.48 .

The Company had 7.1 million outstanding performance-based restricted stock units (based on target performance) and restricted stock units at a weighted-average grant date fair value of $ 22.27 as of June 30, 2021.

For the three months ended September 30, 2021 and 2020, the Company recognized stock-based compensation expense of $ 8.4 million and $ 14.2 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 nine months ended September 30, 2021 and 2020, the Company recognized stock-based compensation expense of $ 31.2 million and $ 32.0 million, respectively.

During the nine months ended September 30, 2021, the Company granted 0.5 million options at a weighted-average exercise price of $ 23.91 and 2.9 million performance-based restricted stock units and restricted stock units at a weighted-average grant date fair value of $ 23.53 .

As of September 30, 2021, the Company had 4.7 million outstanding options at a weighted-average exercise price of $ 19.55 , of which 3.6 million options were exercisable at a weighted-average exercise price of $ 18.48 .

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 $ 22.24 as of September 30, 2021.

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

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Corporate costs, including stock-based compensation and other overhead, are allocated to the segments primarily based on a percentage of the segments’ revenue compared to total revenue.

The following table presents the Company’s segment results for the three and six months ended June 30, 2021 and 2020 (in millions):

The following table presents the Company’s segment results for the three and nine months ended September 30, 2021 and 2020 (in millions):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Consumer-to-Consumer

Business Solutions

Business Solutions (a)

Total consolidated revenues

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Consumer-to-Consumer

Business Solutions

Business Solutions (a)

Total segment operating income

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Total consolidated operating income

Sale of Business Solutions Operations

On August 4, 2021, the Company entered into an agreement to sell its Business Solutions business, as described in Notes 1 and 15, to Goldfinch Partners LLC and The Baupost Group for $ 910 million in cash, subject to regulatory and working capital adjustments.

The divestiture is expected to result in a gain on the sale and is subject to regulatory approval and other closing conditions.

The divestiture is expected to be completed in two closings, with cash proceeds due on first closing.

The first closing is expected to be completed during the first quarter of 2022 and to exclude the operations in the European Union and the United Kingdom.

The second closing, comprised of the operations in the European Union and the United Kingdom, is currently expected by late 2022.

(a) On August 4, 2021, the Company entered into an agreement to sell its Business Solutions business, as described in Note 4.

THE WESTERN UNION COMPANY

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We are a leading provider of money movement and payment services, operating in two business segments:

● Consumer-to-Consumer - Our Consumer-to-Consumer operating segment facilitates money transfers, which are sent from our retail agent locations worldwide or through websites and mobile devices, including our fast-growing money transfer transactions conducted and funded through websites and mobile applications marketed under our brands (“westernunion.com”) and transactions initiated on the internet and mobile applications hosted by our third-party white label or co-branded digital partners (together with westernunion.com, “Digital Money Transfer”).

● Consumer-to-Consumer - Our Consumer-to-Consumer operating segment facilitates money transfers, which are sent from our retail agent locations worldwide or through websites and mobile devices, including our fast-growing money transfer transactions conducted and funded through websites and mobile applications marketed under our brands (“westernunion.com”) and transactions initiated on websites and mobile applications hosted by our third-party white label or co-branded digital partners (together with westernunion.com, “Digital Money Transfer”).

Our money transfer service is provided through one interconnected global network.

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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, 2021 compared to the same periods in 2020.

The following discussion of our consolidated results of operations and segment results refers to the three and nine months ended September 30, 2021 compared to the same periods in 2020.

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.

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We expect that our consolidated and segment results will continue to be impacted as long as such factors persist.

Our revenues and operating income for the three and six months ended June 30, 2021 were 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 an increase to revenues of $29.4 million and $30.3 million for the three and six months ended June 30, 2021, respectively, relative to the corresponding periods in the prior year.

Fluctuations in the United States dollar compared to foreign currencies positively impacted operating income by $7.8 million and $19.6 million for the three and six months ended June 30, 2021, respectively, relative to the corresponding periods in the prior year.

On August 4, 2021, we entered into an agreement to sell our Business Solutions business, as described above, to Goldfinch Partners LLC and The Baupost Group for $910 million in cash, subject to regulatory and working capital adjustments.

Our revenues and operating income for the three and nine months ended September 30, 2021 were 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 an increase to revenues of $2.8 million and $33.1 million for the three and nine months ended September 30, 2021, respectively, relative to the corresponding periods in the prior year.

Fluctuations in the United States dollar compared to foreign currencies positively impacted operating income by $4.4 million and $24.0 million for the three and nine months ended September 30, 2021, respectively, relative to the corresponding periods in the prior year.

On August 4, 2021, we entered into an agreement to sell our Business Solutions business, as described above, to Goldfinch Partners LLC and The Baupost Group for cash consideration of $910 million, subject to regulatory and working capital adjustments.

The divestiture is expected to result in a gain on the sale and is subject to regulatory approval and other closing conditions.

The divestiture is expected to be completed in two closings, with cash proceeds due on first closing.

The sale is expected to be completed in two closings, with the entirety of the cash consideration due at the first closing.

The first closing is expected to be completed during the first quarter of 2022 and to exclude the operations in the European Union and the United Kingdom.

The second closing, comprised of the operations in the European Union and the United Kingdom, is currently expected by late 2022.

The following table sets forth our consolidated results of operations for the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30,

Six Months Ended June 30,

Business Solutions revenues were $116.8 million and $89.1 million for the three months ended September 30, 2021 and 2020, respectively, and $312.6 million and $266.9 million for the nine months ended September 30, 2021 and 2020, respectively.

Business Solutions direct operating expenses, which exclude corporate allocations, were $77.1 million and $77.0 million for the three months ended September 30, 2021 and 2020, respectively, and $244.5 million and $233.3 million for the nine months ended September 30, 2021 and 2020, respectively.

Operating costs directly associated with this divestiture and incurred through the three and nine months ended September 30, 2021 were $5.2 million and $10.7 million, respectively.

The following table sets forth our consolidated results of operations for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30,

Nine Months Ended September 30,

(in millions, except per share amounts)

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Other income/(expense), net

Total other income/(expense), net

Total other expense, net

Income before income taxes

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We believe that these measures provide management and investors with information about revenue results and trends that eliminates currency volatility, 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, 2021 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, 2021 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, 2021 and 2020:

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, 2021 and 2020:

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in millions)

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Revenue change, constant currency adjusted - (Non-GAAP)

(a) Fluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges, resulted in an increase to revenues of $29.4 million and $30.3 million for the three and six months ended June 30, 2021, respectively, when compared to foreign currency rates in the corresponding periods in the prior year.

For the three and six months ended June 30, 2021, revenues increased when compared to corresponding periods in the prior year, primarily due to continued recovery from the negative impacts of COVID-19 on our prior year results as previously discussed above.

For the three months ended June 30, 2021, we experienced transaction and revenue growth from our retail locations, and for the three and six months ended June 30, 2021, transactions and revenues from our Digital Money Transfer services, including from white label partnerships, continued to grow.

We believe that our growth in Digital Money Transfer transactions for the six months ended June 30, 2021 was due, in part, to shifts in consumer behavior to send money through digital channels, including as a result of COVID-19.

However, this growth rate decelerated during the second quarter of 2021 as a result of the strong growth in Digital Money Transfer transactions we experienced in the corresponding period in the prior year.

Fluctuations in the exchange rates between the United States dollar and foreign currencies positively impacted revenue by 3% and 1% for the three and six months ended June 30, 2021, compared to the corresponding periods in the prior year.

(a) Fluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges, resulted in an increase to revenues of $2.8 million and $33.1 million for the three and nine months ended September 30, 2021, respectively, when compared to foreign currency rates in the corresponding periods in the prior year.

For the three and nine months ended September 30, 2021, revenues increased 2% and 6%, respectively, when compared to corresponding periods in the prior year, primarily due to continued recovery from the negative impacts of COVID-19 on our prior year results as previously discussed above, including revenue growth from our Business Solutions segment.

For the three and nine months ended September 30, 2021, transactions and revenues from our Digital Money Transfer services, including from white label partnerships, continued to grow.

We believe that our growth in Digital Money Transfer transactions for the nine months ended September 30, 2021 was due, in part, to shifts in consumer behavior to send money through digital channels, including as a result of COVID-19.

However, this growth rate began to decelerate in the second quarter of 2021 and has continued to decelerate into the third quarter as a result of the strong growth in Digital Money Transfer transactions we experienced in the corresponding periods in the prior year.

Fluctuations in the exchange rates between the United States dollar and foreign currencies positively impacted revenue by 1% for the nine months ended September 30, 2021, compared to the corresponding period in the prior year.

Operating Expenses Overview

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We incurred approximately $150 million of total expenses through December 31, 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.

As of December 31, 2020, all expenses associated with this plan have been incurred and substantially all have been and will continue to be paid in cash.

As of December 31, 2020, all expenses associated with this plan have been incurred and substantially all have been paid in cash.

In 2020, the plan generated expense savings of more than $50 million.

For 2021, we continue to expect the plan to generate expense savings of approximately $100 million, compared to our operating model in effect prior to this plan, which is our estimate and subject to change.

For the three and six months ended June 30, 2020, we incurred $5.2 million and $15.7 million of expenses, respectively, related to this plan.

For the three and six months ended June 30, 2020, $0.8 million and $1.7 million,

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, of these expenses were included in Cost of services, and $8.3 million and $22.3 million, respectively, of these expenses were included in Selling, general, and administrative in the Condensed Consolidated Statements of Income.

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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, 2021.

Cost of services increased for the three and six months ended June 30, 2021 compared to the corresponding periods in the prior year due to increases in agent commissions in our Consumer-to-Consumer money transfer business, which generally vary with revenues, information technology costs, and bank fees associated with digital transactions.

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, 2021.

For the three months ended September 30, 2021, cost of services was flat compared to the corresponding period in the prior year.

Decreases in agent commissions in our Consumer-to-Consumer money transfer business were offset by increases in information technology costs and bank fees associated with digital transactions.

For the nine months ended September 30, 2021 compared to the corresponding period in the prior year, cost of services increased primarily due to increases in information technology costs, agent commissions in our Consumer-to-Consumer money transfer business, and bank fees associated with digital transactions.

Selling, General, and Administrative

Selling, general, and administrative expenses increased for the three and six months ended June 30, 2021 compared to the corresponding periods in the prior year due to increases in employee-related expenses, including incentive compensation, marketing costs, and costs related to strategic initiatives, including for the review of mergers, acquisitions, and divestitures, partially offset by a reduction in restructuring-related expenses.

The increase in employee-related expenses was also a result of reduced hiring that we implemented in response to COVID-19 in the prior year periods.

For the six months ended June 30, 2021 compared to the corresponding period in the prior year, these increases were partially offset by fluctuations between the United States dollar and foreign currencies.

Total Other Income/(Expense), Net

Total other income/(expense), net during the three and six months ended June 30, 2021 when compared to the corresponding periods in the prior year benefited from a $47.9 million gain recorded from the sale of a substantial majority of the shares we held as a minority investor in a private company for cash proceeds of $50.9 million and a reduction in interest expense driven by lower average debt balances outstanding and a lower weighted-average interest rate on our outstanding debt.

These benefits were partially offset by costs associated with the repayment of our 3.6% unsecured notes due in 2022.

On July 22, 2021, our Board of Directors approved a plan to terminate and settle our frozen defined benefit pension plan.

Our defined benefit pension plan was in an overfunded position as of June 30, 2021 and December 31, 2020, which prompted us to explore other options with this retirement plan.

Upon termination and settlement, which is expected in the fourth quarter of 2021 and subject to required notices, filings, and reviews, the pre-tax balance in Accumulated other comprehensive loss associated with the defined benefit pension plan, along with any related costs of the settlement, will be recorded as a component of Total other income/(expense), net, with the related income tax effects recorded in Provision for income taxes, in the Condensed Consolidated Statements of Income.

Our provision for income taxes for the three and six months ended June 30, 2021 and 2020 is based on the estimated annual effective tax rate, in addition to discrete items.

Our effective tax rates on pre-tax income were 14.5% and 16.2% for the three months ended June 30, 2021 and 2020, respectively and 12.7% and 14.3% for the six months ended June 30, 2021 and 2020, respectively.

The decrease in our effective tax rate for the three and six months ended June 30, 2021 compared to the prior periods was primarily due to changes in pre-tax earnings, including differences in the composition between high-tax and low-tax jurisdictions.

The decrease in our effective tax rate for the six months ended June 30, 2021 compared to the corresponding period in the prior year was also impacted by increased discrete tax benefits in the current period.

Selling, general and administrative expenses decreased for the three months ended September 30, 2021 compared to the corresponding period in the prior year primarily due to a reduction in marketing costs.

Selling, general, and administrative expenses increased for the nine months ended September 30, 2021 compared to the corresponding period in the prior year due to increases in employee-related expenses, including incentive compensation and as a result of reduced hiring that we implemented in response to COVID-19 in the prior period, marketing costs, and costs related to strategic initiatives, including for the review of mergers, acquisitions, and divestitures, partially offset by a reduction in restructuring-related expenses and fluctuations between the United States dollar and foreign currencies.

Total Other Expense, Net

Total other expense, net during the nine months ended September 30, 2021 when compared to the corresponding periods in the prior year benefited from a $47.9 million gain recorded from the sale of a substantial majority of the noncontrolling interest we held in a private company for cash proceeds of $50.9 million, partially offset by costs associated with the repayment of our 3.6% unsecured notes due in 2022.

Total other expense, net for the three and nine months ended September 30, 2021 compared to the corresponding periods in the prior year benefited from a reduction in interest expense driven by lower average debt balances outstanding and a lower weighted-average interest rate on our outstanding debt.

On July 22, 2021, our Board of Directors approved a plan to terminate and settle our frozen defined benefit pension plan, which was in an overfunded position as of September 30, 2021 and December 31, 2020.

Upon termination and settlement, which is expected in the fourth quarter of 2021 and subject to required notices, filings, and reviews, the pre-tax balance in Accumulated other comprehensive loss associated with the defined benefit pension plan, along with any related costs of the settlement, will be recorded as a component of Total other expense, net, with the related income tax effects recorded in Provision for income taxes, in the Condensed Consolidated Statements of Income.

Our provision for income taxes for the three and nine months ended September 30, 2021 and 2020 is based on the estimated annual effective tax rate, in addition to discrete items.

Our effective tax rates on pre-tax income were 20.2% and 12.4% for the three months ended September 30, 2021 and 2020, respectively, and 15.6% and 13.5% for the nine months ended September 30, 2021 and 2020, respectively.

The increase in our effective tax rate for the three and nine months ended September 30, 2021 compared to the corresponding periods in the prior year was primarily due to increased deferred tax expense arising from changes to certain of our permanent reinvestment assertions related to our decision to classify our Business Solutions business as held for sale in the current period.

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

As of June 30, 2021, the total amount of tax contingency reserves was $311.9 million, including accrued interest and penalties, net of related items.

As of September 30, 2021, the total amount of tax contingency reserves was $315.3 million, including accrued interest and penalties, net of related

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

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Earnings Per Share

During the three months ended June 30, 2021 and 2020, both basic and diluted earnings per share were $0.54 and $0.39, respectively.

During the six months ended June 30, 2021 and 2020, basic earnings per share were $0.98 and $0.82, respectively, and diluted earnings per share were $0.98 and $0.81, respectively.

During the three months ended September 30, 2021 and 2020, basic earnings per share were $0.57 and $0.56, respectively, and diluted earnings per share were $0.57 and $0.55, respectively.

During the nine months ended September 30, 2021 and 2020, basic earnings per share were $1.56 and $1.38, respectively, and diluted earnings per share were $1.55 and $1.37, 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, 2021 and 2020, there were 1.4 million and 2.6 million, respectively, and for the six months ended June 30, 2021 and 2020, there were 1.4 million and 1.8 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, 2021 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.

For the three months ended September 30, 2021 and 2020, there were 2.2 million and 1.3 million, respectively, and for both the nine months ended September 30, 2021 and 2020, there were 1.7 million 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 nine months ended September 30, 2021 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.

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

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On August 4, 2021, we entered into an agreement to sell our Business Solutions business to Goldfinch Partners LLC and The Baupost Group, as further described above.

During the three and six months ended June 30, 2020 we incurred $5.2 million and $15.7 million, respectively, of restructuring-related expenses, 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, 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, 2021 and 2020:

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, 2021 and 2020:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Consumer-to-Consumer

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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, 2021 and 2020:

Three Months Ended June 30,

Six Months Ended June 30,

The following table sets forth our Consumer-to-Consumer segment results of operations for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars and transactions in millions)

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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 six months ended June 30, 2021 and 2020.

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, 2021 and 2020.

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.

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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, 2021

Six Months Ended June 30, 2021

Three Months Ended September 30, 2021

Nine Months Ended September 30, 2021

Growth/(Decline),

Growth/(Decline) (a) -

as Reported -

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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, 2021 and 2020:

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, 2021 and 2020:

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 24% and 22% of our Consumer-to-Consumer revenues for the three months ended June 30, 2021 and 2020, respectively, and 23%, and 19% for the six months ended June 30, 2021 and 2020, respectively.

Our consumers transferred $27.9 billion and $21.9 billion in Consumer-to-Consumer principal for the three months ended June 30, 2021 and 2020, of which $26.6 billion and $20.7 billion related to cross-border principal for the same corresponding periods described above, respectively.

Our consumers transferred $53.6 billion and $42.5 billion in Consumer-to-Consumer principal for the six months ended June 30, 2021 and 2020, of which $51.1 billion and $39.8 billion related to cross-border principal for the same corresponding periods described above, respectively.

The increase in principal and cross-border principal transferred during the three and six months ended June 30, 2021 compared to the corresponding period in the prior year was primarily attributable to growth in Digital Money Transfer and continued recovery in our retail services.

Consumer-to-Consumer principal is the amount of consumer funds transferred to the

designated recipient.

Digital Money Transfer, which is included in the regional percentages above, represented approximately 24% and 21% of our Consumer-to-Consumer revenues for the three months ended September 30, 2021 and 2020, respectively, and 24% and 20% for the nine months ended September 30, 2021 and 2020, respectively.

Our consumers transferred $27.7 billion and $26.9 billion in Consumer-to-Consumer principal for the three months ended September 30, 2021 and 2020, of which $26.5 billion and $25.5 billion related to cross-border principal for the same corresponding periods described above, respectively.

Our consumers transferred $81.3 billion and $69.4 billion in Consumer-to-Consumer principal for the nine months ended September 30, 2021 and 2020, of which $77.6 billion and $65.3 billion related to cross-border principal for the same corresponding periods described above, respectively.

The increase in principal and cross-border principal transferred during the three and nine months ended September 30, 2021 compared to the corresponding periods in the prior year was primarily attributable to growth in Digital Money Transfer.

Consumer-to-Consumer principal is the amount of consumer funds transferred to the designated recipient.

Cross-border principal is the amount of consumer funds transferred to a designated recipient in a country or territory that differs from the country or territory from which the transaction was initiated.

Consumer-to-Consumer principal and cross-border principal are metrics used by management to monitor and better understand the growth in our underlying business relative to competitors, as well as changes in our market share of global remittances.

Consumer-to-Consumer money transfer revenue and transactions both increased 15% for the three months ended June 30, 2021, and revenue increased 9% and transactions increased 12% for the six months ended June 30, 2021 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, positively impacted revenue by 3% and 2% for the three and six months ended June 30, 2021 compared to the corresponding periods in the prior year.

The spread between transaction and revenue growth for the six months ended June 30, 2021 compared to the corresponding period in the prior year was primarily due to growth in Digital Money Transfer, including in our digital white label partnerships, which have a lower revenue per transaction than Western Union branded transactions.

In our Consumer-to-Consumer regions, NA revenue increased for the three and six months ended June 30, 2021 compared to the corresponding periods in the prior year, primarily due to cross-border transaction growth, partially offset by declines in transactions sent and received within the United States and in transactions sent from the United States to Cuba, as these money transfer services were suspended in the fourth quarter of 2020.

For the three and six months ended June 30, 2021 compared to the corresponding periods in the prior year, the EU & CIS region experienced strong revenue growth in France, the United Kingdom, and Russia, and transaction volumes for both the EU & CIS and MEASA regions continued to benefit from growth in Digital Money Transfer, including white label partnerships.

The revenue growth in both the APAC and LACA regions was primarily due to an increase in principal transferred during the three and six months ended June 30, 2021 compared to the corresponding periods in the prior year.

Digital Money Transfer revenue, including westernunion.com, increased during the three and six months ended June 30, 2021 compared to the corresponding periods in the prior year due to an increase in digital transaction volumes, partially offset by price reductions.

Consumer-to-Consumer money transfer revenue was flat and transactions decreased 1% for the three months ended September 30, 2021, and revenue increased 6% and transactions increased 7% for the nine months ended September 30, 2021 compared to the corresponding periods in the prior year.

For the nine months ended September 30, 2021, revenues increased when compared to corresponding periods in the prior year, primarily due to continued recovery from the negative impacts of COVID-19 on our prior year results as previously discussed above.

For the three and nine months ended September 30, 2021, transactions and revenues from our Digital Money Transfer services, including from white label partnerships, continued to grow.

Fluctuations in the United States dollar compared to foreign currencies, net of the impact of foreign currency hedges, positively impacted revenue by 1% and 2% for the three and nine months ended September 30, 2021 compared to the corresponding periods in the prior year.

NA region revenue decreased for the three months ended September 30, 2021 compared to the corresponding period in the prior year, primarily due to a decline in cross-border transaction growth, including transactions sent from the United States to Cuba, as these money transfer services were suspended in the fourth quarter of 2020, and transactions sent and received within the United States.

For the three months ended September 30, 2021 compared to the corresponding period in the prior year, the EU & CIS region experienced transaction volume and revenue declines from our retail services, partially offset by revenue growth in Russia, and transaction volumes for both the EU & CIS and MEASA regions continued to benefit from growth in Digital Money Transfer, including white label partnerships, for both the three and nine months ended September 30, 2021.

The revenue growth in the LACA region was primarily due to an increase in principal transferred during the three and nine months ended September 30, 2021 compared to the corresponding periods in the prior year, including due to the prolonged negative impacts of COVID-19 in this region, including retail agent location closures, during the prior periods.

Price increases in APAC were offset by transaction declines for the three and nine months ended September 30, 2021.

Digital Money Transfer revenue, including westernunion.com, increased during the three and nine months ended September 30, 2021 compared to the corresponding periods in the prior year due to an increase in digital transaction volumes, partially offset by price reductions in the nine months ended September 30, 2021.

We have historically implemented price reductions or price increases throughout many of our global corridors.

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Operating Income

Consumer-to-Consumer operating income increased 10% and 4% for the three and six months ended June 30, 2021 compared to the corresponding periods in the prior year primarily due to the increase in revenues, as discussed above, partially offset by increases in information technology costs, employee-related expenses, including incentive compensation, and marketing costs.

The increase in employee-related expenses was also a result of reduced hiring that we implemented in response to COVID-19 in the prior year periods.

For the six months ended June 30, 2021 compared to the corresponding period in the prior year, operating income also increased due to fluctuations in the United States dollar compared to foreign currencies.

Consumer-to-Consumer operating income decreased 2% for the three months ended September 30, 2021 compared to the corresponding period in the prior year primarily due to increases in information technology costs, partially offset by a decrease in agent commissions.

Consumer-to-Consumer operating income increased 2% for the nine months ended September 30, 2021, compared to the corresponding period in the prior year primarily due to the increase in revenues, as discussed above, and fluctuations in the United States dollar compared to foreign currencies, partially offset by increases in information technology costs, employee-related expenses, including incentive compensation and as a result of reduced hiring that we implemented in response to COVID-19 in the prior year period, and 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, 2021:

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, 2021 and 2020:

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in millions)

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(a) Calculation not meaningful.

Business Solutions revenue increased 25% and 10% for the three and six months ended June 30, 2021 and 2020, respectively, compared to the corresponding periods in the prior year primarily due to an increase in payment services activity.

We believe this increase resulted from the continued recovery from the downturn in economic activity and trade caused by the negative impacts of COVID-19 on our prior year results.

Fluctuations in the exchange rates between the United States dollar and foreign currencies positively impacted revenue by 9% and 7% for the three and six months ended June 30, 2021 compared to the corresponding periods in the prior year.

Business Solutions revenue increased 31% and 17% for the three and nine months ended September 30, 2021, respectively, compared to the corresponding periods in the prior year primarily due to an increase in payment services activity in Europe and North America, and increased hedging activity.

We believe this increase was due, in part, to the continued recovery from the downturn in economic activity and trade caused by the negative impacts of COVID-19 on our prior year results.

Fluctuations in the exchange rates between the United States dollar and foreign currencies positively impacted revenue by 3% and 6% for the three and nine months ended September 30, 2021.

Operating Income

For the three and six months ended June 30, 2021, the increase in operating income and operating income margin when compared to the corresponding period in the prior year was primarily due to the increase in revenues, as discussed above, partially offset by an increase in employee-related expenses, including as a result of reduced hiring that we implemented in response to COVID-19 in the prior year periods.

For the three and nine months ended September 30, 2021, the increase in operating income and operating income margin when compared to the corresponding periods in the prior year was primarily due to the increase in revenues, as discussed above, and a reduction in depreciation and amortization expenses.

Operating income was negatively impacted by an increase in employee-related expenses, including as a result of reduced hiring that we implemented in response to COVID-19 in the prior year periods.

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

The following table sets forth Other results for the three and six months ended June 30, 2021 and 2020:

Three Months Ended June 30,

Six Months Ended June 30,

The following table sets forth Other results for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in millions)

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Operating income margin

Other revenue increased 8% for the three months ended June 30, 2021 compared to the corresponding period in the prior year due to an increase in transaction volumes in our cash-based bill payments services offered at retail locations, in part due to continued recovery from the negative impacts of COVID-19 on our prior year results as previously discussed above, partially offset by the strengthening of the United States dollar against the Argentine peso.

Other revenue decreased 7% for the six months ended June 30, 2021 compared to the corresponding periods in the prior year, primarily due to the strengthening of the United States dollar against the Argentine peso.

For the three months ended September 30, 2021 compared to the corresponding period in the prior year, Other revenues increased due to an increase in transaction volumes in our cash-based bill payments services offered at retail locations, in part due to continued recovery from the negative impacts of COVID-19 on our prior year results as previously discussed above, partially offset by the strengthening of the United States dollar against the Argentine peso.

For the nine months ended September 30, 2021 compared to the corresponding period in the prior year, Other revenues decreased due to the strengthening of the United States dollar against the Argentine peso, partially offset by the increase in transaction volumes in our cash-based bill payment services offered at retail locations.

Operating Income

Other operating income decreased for the three and six months ended June 30, 2021 compared to the corresponding periods in the prior year primarily due to an increase in costs associated with strategic initiatives , including for the review of mergers, acquisitions, and divestitures .

For the six months ended June 30, 2021, Other operating income also decreased compared to the corresponding period in the prior year due to a decrease in revenues, as discussed above.

Other operating income decreased for both the three and nine months ended September 30, 2021 compared to the corresponding periods in the prior year primarily due to an increase in costs associated with strategic initiatives , including for the review of mergers, acquisitions, and divestitures .

For the three months ended September 30, 2021, Other operating income also benefited from an increase in revenues, as discussed above.

Capital Resources and Liquidity

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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, 2021, we had no outstanding borrowings on our Revolving Credit Facility and $265.0 million of outstanding borrowings on the commercial paper program.

As of September 30, 2021, we had no outstanding borrowings on our Revolving Credit Facility and $120.0 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.

These decisions can influence our overall tax rate and impact our total liquidity.

We regularly evaluate, taking tax consequences and other factors into consideration, our United States cash requirements and also the potential uses of cash internationally to determine the appropriate level of dividend repatriations of our foreign source income.

We regularly evaluate, taking tax consequences and other factors into consideration, our United States cash requirements and also the

potential uses of cash internationally to determine the appropriate level of dividend repatriations of our foreign source income.

Cash and Investment Securities

As of June 30, 2021 and December 31, 2020, we had cash and cash equivalents of $1,061.4 million and $1,428.2 million, respectively.

As of September 30, 2021 and December 31, 2020, we had Cash and cash equivalents of $1,046.4 million, which included $43.0 million related to Business Solutions, and $1,428.2 million, respectively.

As described in Part I, Item 1, Financial Statements , Note 4, Assets Held for Sale and Investment Activities, we have agreed to sell our Business Solutions business.

We expect that our use of the net proceeds on the sale, after taxes on the gain from the transaction, will be consistent with our objective to maintain strong liquidity and a capital structure consistent with investment-grade credit ratings, as further described below.

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

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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 $1,557.4 million and $1,990.6 million as of June 30, 2021 and December 31, 2020, 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 $1,437.9 million and $1,990.6 million as of September 30, 2021 and December 31, 2020, 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-"

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

As of June 30, 2021, all investments with a single issuer and each individual security represented less than 10% of our investment securities portfolio.

As of September 30, 2021, 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 slightly increased to $349.5 million during the six months ended June 30, 2021, from $347.8 million in the corresponding period in the prior year.

Cash provided by operating activities increased to $686.0 million during the nine months ended September 30, 2021, from $585.6 million in the corresponding period in the prior year.

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.

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Proceeds from the 2026 Notes and 2031 Notes and cash, including cash generated from operations, were used to repay $650.0 million of the term loan facility in the first quarter of 2021 and $500.0 million of the aggregate principal amount of 3.600% unsecured notes due in March 2022 (“2022 Notes”) in the second quarter of 2021.

As of June 30, 2021, we have outstanding borrowings at par value of $3,015.0 million.

As of September 30, 2021, we have outstanding borrowings at par value of $2,870.0 million.

The significant majority of these outstanding borrowings consist of unsecured fixed-rate notes with maturities ranging from 2023 to 2040.

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

As of June 30, 2021, we had no outstanding borrowings under our Revolving Credit Facility.

As of September 30, 2021, we had no outstanding borrowings under our Revolving Credit Facility.

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

Pursuant to our commercial paper program, we may issue unsecured commercial paper notes in an amount not to exceed $1.5 billion outstanding at any time, reduced to the extent of borrowings outstanding on our Revolving Credit

Our commercial paper borrowings may have maturities of up to 397 days from date of issuance.

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

We had $265.0 million of commercial paper borrowings outstanding as of June 30, 2021.

Our commercial paper borrowings as of June 30, 2021 had a weighted-average annual interest rate of approximately 0.2% and a weighted-average term of approximately 1 day.

During the six months ended June 30, 2021, the average commercial paper balance outstanding was $107.3 million, and the maximum balance outstanding was $510.0 million.

We had $120.0 million of commercial paper borrowings outstanding as of September 30, 2021.

Our commercial paper borrowings as of September 30, 2021 had a weighted-average annual interest rate of approximately 0.2% and a weighted-average term of approximately 1 day.

During the nine months ended September 30, 2021, the average commercial paper balance outstanding was $141.4 million, and the maximum balance outstanding was $575.0 million.

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

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Investment in Saudi Digital Payments Company

On May 25, 2021, we amended our agreement dated November 21, 2020 to acquire an ownership interest in Saudi Digital Payments Company (“stc pay”), a subsidiary of Saudi Telecom Company and one of our Consumer-to-Consumer digital white label partners.

Under the terms of the amended agreement, we have agreed to invest up to $200.0 million (“Purchase Price”) for up to a 15% investment in stc pay (“Investment”), and this transaction is expected to close in the second half of 2021.

For regulatory purposes, the Purchase Price was deposited into an external, restricted account during the second quarter of 2021 in expectation of completing the Investment.

We entered into an agreement in November 2020, and as subsequently amended, to acquire an ownership interest in stc Bank (formerly Saudi Digital Payments Company), a subsidiary of Saudi Telecom Company and one of our Consumer-to-Consumer digital white label partners.

Under the terms of the amended agreement, we agreed to invest $200.0 million for a 15% investment in stc Bank, and this transaction closed in October 2021.

Capital Expenditures

The total aggregate amount paid for contract costs, purchases of property and equipment, and purchased and developed software was $145.3 million and $84.2 million for the six months ended June 30, 2021 and 2020, respectively.

The total aggregate amount paid for contract costs, purchases of property and equipment, and purchased and developed software was $180.2 million and $106.3 million for the nine months ended September 30, 2021 and 2020, 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.

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Share Repurchases and Dividends

During the six months ended June 30, 2021 and 2020, 6.1 million and 8.5 million shares were repurchased for $150.0 million and $217.4 million, respectively, excluding commissions, at an average cost of $24.42 and $25.45, respectively.

As of June 30, 2021, $632.6 million remained 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 $0.235 per common share in the first and second quarters of 2021, representing $192.5 million in total dividends.

On July 22, 2021, our Board of Directors declared a quarterly cash dividend of $0.235 per common share, payable on September 30, 2021.

During the nine months ended September 30, 2021 and 2020, 9.6 million and 8.5 million shares were repurchased for $225.0 million and $217.4 million, respectively, excluding commissions, at an average cost of $23.45 and $25.45, respectively.

As of September 30, 2021, $557.6 million remained 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 $0.235 per common share in each of the first three quarters of 2021, representing $287.6 million in total dividends.

Material Cash Requirements

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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 $541 million remained as of June 30, 2021.

We have elected to pay this liability in periodic installments through 2025 and paid $63.4 million during the second quarter of 2021.

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

Under the terms of the law, we are required to pay the remaining installment payments as summarized in the Capital Resources and Liquidity discussion located in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2020.

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Other Commercial Commitments

We had approximately $460 million in outstanding letters of credit and bank guarantees as of June 30, 2021 primarily held in connection with safeguarding consumer funds, lease arrangements, and certain agent agreements.

We had approximately $470 million in outstanding letters of credit and bank guarantees as of September 30, 2021 primarily held in connection with safeguarding consumer funds, lease arrangements, and certain agent agreements.

We expect to renew most of our letters of credit and bank guarantees prior to expiration.

As of June 30, 2021, our total amount of unrecognized income tax benefits was $368.7 million, including associated interest and penalties.

As of September 30, 2021, our total amount of unrecognized income tax benefits was $372.4 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.

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● Legal contingencies

In our Annual Report on Form 10-K for the year ended December 31, 2020, we disclosed that the fair value of the Business Solutions reporting unit was sensitive to changes in projections for revenue growth rates and EBITDA margins, quantified the decrease in the projected revenue growth rate that would result in the fair value of the reporting unit approximating its carrying value, and described key factors impacting our ability to achieve the projected revenue growth and EBITDA margins.

In our Annual Report on Form 10-K for the year ended December 31, 2020, we disclosed that the fair value of the Business Solutions reporting unit was sensitive to changes in projections for revenue growth rates and Earnings before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) margins, quantified the decrease in the projected revenue growth rate that would result in the fair value of the reporting unit approximating its carrying value, and described key factors impacting our ability to achieve the projected revenue growth and EBITDA margins.

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, 2021, the Business Solutions reporting unit had goodwill of $532.0 million.

As of September 30, 2021, the Business Solutions reporting unit had goodwill of $532.0 million.

Recent Accounting Pronouncements

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We manage foreign exchange risk through the structure of the business and an active risk management process.

We currently settle with the substantial majority of our agents in United States dollars, euros, or Mexican pesos, requiring those agents to obtain local currency to pay recipients, and we generally do not rely on international currency markets to obtain and pay illiquid currencies.

We currently settle with the substantial majority of our agents in United States dollars, Mexican pesos, or euros, requiring those agents to obtain local currency to pay recipients, and we generally do not rely on international currency markets to obtain and pay illiquid currencies.

However, in certain circumstances, we settle in other currencies.

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To mitigate this risk further, we enter into short duration foreign currency forward contracts, generally with maturities from a few days up to one month, to offset foreign exchange rate fluctuations between transaction initiation and settlement.

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.

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.

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

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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 June 30, 2021, 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 $40 million, based on our forecast of unhedged exposure to foreign currency at that date.

As of September 30, 2021, 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 $40 million, based on our forecast of unhedged exposure to foreign currency at that date.

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

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Interest Rates

We invest in several types of interest-bearing assets, with a total value as of June 30, 2021 of approximately $3.1 billion.

We invest in several types of interest-bearing assets, with a total value as of September 30, 2021 of approximately $2.9 billion.

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

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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 in our Condensed Consolidated Balance Sheets.

As of June 30, 2021, we had a total of $300.0 million of borrowings under our term loan that are subject to floating interest rates.

As of September 30, 2021, we had a total of $300.0 million of borrowings under our term loan that are subject to floating interest rates.

The interest on these borrowings is calculated using a selected LIBOR rate plus an interest rate margin of 125 basis points.

Borrowings under our commercial paper program mature in such a short period that the financing is also effectively floating rate.

As of June 30, 2021, there were $265.0 million in outstanding borrowings under our commercial paper program.

Borrowings under our commercial paper program mature in such a short period that the

financing is also effectively floating rate.

As of September 30, 2021, there were $120.0 million in outstanding borrowings under our commercial paper program.

We review our overall exposure to floating and fixed rates by evaluating our net asset or liability position and the duration of each individual position.

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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, 2021, our weighted-average effective rate on total borrowings was approximately 3.3%.

As of September 30, 2021, our weighted-average effective rate on total borrowings was approximately 3.4%.

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, 2020.

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 $6 million based on borrowings that are sensitive to interest rate fluctuations, net of the impact of hedges, on June 30, 2021.

The same 100 basis point increase/decrease in interest rates, if applied to our cash and investment balances on June 30, 2021 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.

At September 30, 2021, 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 $4 million based on borrowings that are sensitive to interest rate fluctuations, net of the impact of hedges.

The same 100 basis point increase/decrease in interest rates, if applied to our cash and investment balances on September 30, 2021 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.

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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