Western Union(WU) - 2023 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements (Unaudited) This section provides the unaudited condensed consolidated financial statements and their related notes Condensed Consolidated Statements of Income This statement presents the company's revenues, operating income, net income, and diluted EPS Revenues: | Period | 2023 (Millions) | 2022 (Millions) | Change (%) | | :---------------- | :-------------- | :-------------- | :--------- | | Three Months Ended Sep 30 | $1,097.8 | $1,089.6 | 0.75% | | Nine Months Ended Sep 30 | $3,304.7 | $3,383.6 | -2.33% | Net Income: | Period | 2023 (Millions) | 2022 (Millions) | Change (%) | | :---------------- | :-------------- | :-------------- | :--------- | | Three Months Ended Sep 30 | $171.0 | $173.9 | -1.67% | | Nine Months Ended Sep 30 | $499.0 | $661.2 | -24.53% | Diluted EPS: | Period | 2023 | 2022 | Change (%) | | :---------------- | :--- | :--- | :--------- | | Three Months Ended Sep 30 | $0.46 | $0.45 | 2.22% | | Nine Months Ended Sep 30 | $1.33 | $1.70 | -21.67% | Operating Income: | Period | 2023 (Millions) | 2022 (Millions) | Change (%) | | :---------------- | :-------------- | :-------------- | :--------- | | Three Months Ended Sep 30 | $210.9 | $231.8 | -9.02% | | Nine Months Ended Sep 30 | $658.2 | $733.3 | -10.24% | Condensed Consolidated Statements of Comprehensive Income This statement details the company's net income and other comprehensive income components Comprehensive Income: | Period | 2023 (Millions) | 2022 (Millions) | Change (%) | | :---------------- | :-------------- | :-------------- | :--------- | | Three Months Ended Sep 30 | $167.3 | $169.5 | -1.30% | | Nine Months Ended Sep 30 | $482.8 | $592.1 | -18.46% | Unrealized Losses on Investment Securities: | Period | 2023 (Millions) | 2022 (Millions) | | :---------------- | :-------------- | :-------------- | | Three Months Ended Sep 30 | $(13.7) | $(30.0) | | Nine Months Ended Sep 30 | $(5.1) | $(105.3) | Unrealized Gains/(Losses) on Hedging Activities: | Period | 2023 (Millions) | 2022 (Millions) | | :---------------- | :-------------- | :-------------- | | Three Months Ended Sep 30 | $10.0 | $25.6 | | Nine Months Ended Sep 30 | $(11.1) | $54.0 | Condensed Consolidated Balance Sheets This statement presents the company's assets, liabilities, and stockholders' equity at specific dates Total Assets: | Date | Amount (Millions) | | :---------------- | :-------------- | | Sep 30, 2023 | $7,913.7 | | Dec 31, 2022 | $8,496.3 | Total Liabilities: | Date | Amount (Millions) | | :---------------- | :-------------- | | Sep 30, 2023 | $7,300.1 | | Dec 31, 2022 | $8,018.5 | Total Stockholders' Equity: | Date | Amount (Millions) | | :---------------- | :-------------- | | Sep 30, 2023 | $613.6 | | Dec 31, 2022 | $477.8 | Assets Held for Sale: | Date | Amount (Millions) | | :---------------- | :-------------- | | Sep 30, 2023 | $0 | | Dec 31, 2022 | $261.6 | Condensed Consolidated Statements of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities Net Cash Provided by Operating Activities (Nine Months Ended Sep 30): | Year | Amount (Millions) | | :--- | :-------------- | | 2023 | $518.6 | | 2022 | $522.4 | Net Cash (Used in)/Provided by Investing Activities (Nine Months Ended Sep 30): | Year | Amount (Millions) | | :--- | :-------------- | | 2023 | $(76.5) | | 2022 | $366.7 | Net Cash Used in Financing Activities (Nine Months Ended Sep 30): | Year | Amount (Millions) | | :--- | :-------------- | | 2023 | $(835.0) | | 2022 | $(890.3) | Cash and Cash Equivalents, including settlement, and restricted cash at end of period: | Date | Amount (Millions) | | :---------------- | :-------------- | | Sep 30, 2023 | $1,647.8 | | Sep 30, 2022 | $2,109.7 | Condensed Consolidated Statements of Stockholders' Equity This statement outlines changes in the company's equity, including net income, dividends, and share repurchases Total Stockholders' Equity: | Date | Amount (Millions) | | :---------------- | :-------------- | | Sep 30, 2023 | $613.6 | | Dec 31, 2022 | $477.8 | - Key changes in stockholders' equity for the nine months ended September 30, 2023, include net income of $499.0 million, stock-based compensation of $27.2 million, common stock dividends declared of $(266.5) million, share repurchases of $(108.0) million, and other comprehensive loss of $(16.2) million[21] Notes to Condensed Consolidated Financial Statements This section provides detailed explanatory notes to the condensed consolidated financial statements Note 1. Business and Basis of Presentation This note outlines the company's business, operating segments, and the basis of financial statement presentation - The Western Union Company is a leader in global money movement and payment services, providing services through an agent network in over 200 countries and territories, and through Branded Digital channels[25] - The company's operating segments include Consumer-to-Consumer (money transfers) and Business Solutions, which was fully divested on July 1, 2023[29] - As of December 31, 2022, restricted net assets associated with asset limitations and minimum capital requirements totaled approximately $710 million[27] Note 2. Revenue This note details the company's revenue recognition policies and disaggregated revenue information - Revenues are primarily derived from consumer money transfers, with amounts varying based on channel, locations, principal, and foreign exchange rates[36] Revenue by Product Type (Three Months Ended Sep 30): | Product Type | 2023 (Millions) | 2022 (Millions) | | :---------------- | :-------------- | :-------------- | | Consumer Money Transfers | $990.8 | $945.0 | | Foreign Exchange and Payment Services | $0 | $26.0 | | Other Services | $62.1 | $64.0 | | Other revenues | $44.9 | $54.6 | | Total Revenues | $1,097.8 | $1,089.6 | Revenue by Product Type (Nine Months Ended Sep 30): | Product Type | 2023 (Millions) | 2022 (Millions) | | :---------------- | :-------------- | :-------------- | | Consumer Money Transfers | $2,933.8 | $2,913.6 | | Foreign Exchange and Payment Services | $13.0 | $111.7 | | Other Services | $195.2 | $193.8 | | Other revenues | $162.7 | $164.5 | | Total Revenues | $3,304.7 | $3,383.6 | Note 3. Earnings Per Share This note explains the calculation of basic and diluted earnings per share Diluted EPS: | Period | 2023 | 2022 | | :---------------- | :--- | :--- | | Three Months Ended Sep 30 | $0.46 | $0.45 | | Nine Months Ended Sep 30 | $1.33 | $1.70 | - Shares excluded from diluted EPS calculation due to anti-dilutive effect were 9.5 million (Q3 2023) and 8.1 million (Q3 2022) for the three months, and 9.6 million (YTD 2023) and 8.0 million (YTD 2022) for the nine months[46] Note 4. Assets Held for Sale and Related Divestiture This note describes assets classified as held for sale and the details of the Business Solutions divestiture - The final closing of the Business Solutions divestiture occurred on July 1, 2023, resulting in a gain of $18.0 million[50] - The total cash consideration for the Business Solutions sale was $910.0 million[48] Business Solutions Revenues (Nine Months Ended Sep 30): | Year | Amount (Millions) | | :--- | :-------------- | | 2023 | $29.7 | | 2022 | $167.4 | Assets Held for Sale (December 31, 2022): | Category | Amount (Millions) | | :---------------- | :-------------- | | Total assets | $261.6 | | Total liabilities | $182.5 | Note 5. Fair Value Measurements This note provides information on fair value measurements of financial assets and liabilities Total Assets Measured at Fair Value (Sep 30, 2023): | Level | Amount (Millions) | | :---- | :-------------- | | Level 1 | $6.4 | | Level 2 | $1,413.4 | | Total | $1,419.8 | Total Liabilities Measured at Fair Value (Sep 30, 2023): | Level | Amount (Millions) | | :---- | :-------------- | | Level 2 | $5.5 | | Total | $5.5 | - The carrying value of borrowings was $2,309.1 million and fair value was $2,132.0 million as of September 30, 2023[59] - Reverse repurchase agreements, with a carrying value of $100.0 million as of December 31, 2022, were fully redeemed by September 30, 2023[60] Note 6. Commitments and Contingencies This note discloses the company's significant commitments and potential contingent liabilities - Outstanding letters of credit and bank guarantees totaled approximately $160 million as of September 30, 2023[61] - Reasonably possible potential litigation losses in excess of recorded liabilities were approximately $30 million as of September 30, 2023[63] - The company is involved in several legal matters, including a class action lawsuit in Argentina, a class action complaint in the U.S. regarding financial privacy, and judgments in the Democratic Republic of Congo totaling €19.5 million ($20.4 million as of September 30, 2023)[67][68][69] Note 7. Related Party Transactions This note details transactions and balances with related parties Commission Expense to Related Party Agents: | Period | 2023 (Millions) | 2022 (Millions) | | :---------------- | :-------------- | :-------------- | | Three Months Ended Sep 30 | $11.5 | $12.2 | | Nine Months Ended Sep 30 | $33.8 | $36.5 | Note 8. Settlement Assets and Obligations This note describes the company's settlement assets and corresponding obligations Total Settlement Assets and Obligations: | Date | Amount (Millions) | | :---------------- | :-------------- | | Sep 30, 2023 | $3,480.8 | | Dec 31, 2022 | $3,561.7 | Allowance for Credit Losses on Receivables from Agents and Others: | Date | Amount (Millions) | | :---------------- | :-------------- | | Sep 30, 2023 | $20.5 | | Jan 1, 2023 | $11.4 | - Investment securities, primarily highly-rated state and municipal debt securities, had a fair value of $1,383.3 million as of September 30, 2023, with net unrealized losses of $(90.3) million, mainly due to rising U.S. Treasury interest rates[89][92] Contractual Maturities of Available-for-Sale Securities (Sep 30, 2023): | Maturity | Fair Value (Millions) | | :---------------- | :-------------------- | | Due within 1 year | $106.8 | | Due after 1 year through 5 years | $631.9 | | Due after 5 years through 10 years | $397.0 | | Due after 10 years | $247.6 | | Total | $1,383.3 | Note 9. Stockholders' Equity This note provides details on the components and changes in stockholders' equity Accumulated Other Comprehensive Loss (AOCL): | Date | Amount (Millions) | | :---------------- | :-------------- | | Sep 30, 2023 | $(184.1) | | Dec 31, 2022 | $(167.9) | Total Reclassifications from AOCL to Net Income (Nine Months Ended Sep 30): | Year | Amount (Millions) | | :--- | :-------------- | | 2023 | $17.4 | | 2022 | $43.0 | - Cash dividends declared for the first three quarters of 2023 totaled $263.3 million ($0.235 per common share quarterly)[100][220] - During the nine months ended September 30, 2023, 7.8 million shares were repurchased for $100.0 million, with $548.2 million remaining under the current authorization[101][219] Note 10. Derivatives This note explains the company's use of derivative financial instruments for risk management - The company uses derivatives, primarily foreign currency forward contracts, to minimize exposures to foreign currency exchange rates and interest rates[104] - Foreign currency forward contracts with maturities up to 36 months are used as cash flow hedges for forecasted revenues, while short-duration contracts (days to one month) are used for settlement assets and obligations, not designated as accounting hedges[106][107] - Business Solutions derivative operations ceased with the final divestiture on July 1, 2023[111][114] Fair Value of Derivatives (Millions): | Category | Sep 30, 2023 | Dec 31, 2022 | | :---------------- | :----------- | :----------- | | Derivative Assets | $30.1 | $126.1 | | Derivative Liabilities | $5.5 | $98.9 | - An accumulated other comprehensive pre-tax gain of $12.5 million related to foreign currency forward contracts is expected to be reclassified into Revenues within the next 12 months[129] Note 11. Borrowings This note details the company's outstanding debt, including maturities and interest rates Total Borrowings at Carrying Value: | Date | Amount (Millions) | | :---------------- | :-------------- | | Sep 30, 2023 | $2,309.1 | | Dec 31, 2022 | $2,616.8 | - The company repaid $300.0 million of 4.250% unsecured notes due in June 2023[133] - As of September 30, 2023, the weighted-average effective rate on total borrowings was approximately 3.9%[133] Maturities of Notes at Par Value (Sep 30, 2023): | Maturity | Amount (Millions) | | :---------------- | :---------------- | | Due after 1 year through 2 years | $500.0 | | Due after 2 years through 3 years | $600.0 | | Due after 5 years | $1,050.0 | | Total | $2,150.0 | Note 12. Income Taxes This note details income tax expense, effective tax rates, and unrecognized tax benefits Effective Tax Rates: | Period | 2023 | 2022 | | :---------------- | :--- | :--- | | Three Months Ended Sep 30 | 16.3% | 10.2% | | Nine Months Ended Sep 30 | 17.1% | 16.5% | - The total amount of unrecognized tax benefits as of September 30, 2023, was $301.5 million, including interest and penalties[136] - The company is contesting unagreed adjustments at the IRS Appeals level for its 2017 and 2018 consolidated federal income tax returns[138] Note 13. Stock-Based Compensation Plans This note describes the company's stock-based compensation plans and related expenses Stock-Based Compensation Expense (Nine Months Ended Sep 30): | Year | Amount (Millions) | | :--- | :-------------- | | 2023 | $27.2 | | 2022 | $32.6 | - During the nine months ended September 30, 2023, the company granted 1.0 million options and 4.4 million performance-based restricted stock units and restricted stock units[140] - As of September 30, 2023, 7.1 million options were outstanding (4.2 million exercisable) and 7.7 million performance-based restricted stock units and restricted stock units were outstanding[140] Note 14. Segments This note presents financial information by the company's operating segments - The company's business is classified into two segments: Consumer-to-Consumer and Business Solutions, with the latter fully divested on July 1, 2023[141][143] Segment Revenues (Three Months Ended Sep 30): | Segment | 2023 (Millions) | 2022 (Millions) | Change (%) | | :---------------- | :-------------- | :-------------- | :--------- | | Consumer-to-Consumer | $1,019.0 | $982.4 | 3.72% | | Business Solutions | $0 | $42.6 | -100% | | Other | $78.8 | $64.6 | 22.00% | | Total | $1,097.8 | $1,089.6 | 0.75% | Segment Revenues (Nine Months Ended Sep 30): | Segment | 2023 (Millions) | 2022 (Millions) | Change (%) | | :---------------- | :-------------- | :-------------- | :--------- | | Consumer-to-Consumer | $3,029.5 | $3,008.3 | 0.70% | | Business Solutions | $29.7 | $167.4 | -82.26% | | Other | $245.5 | $207.9 | 18.09% | | Total | $3,304.7 | $3,383.6 | -2.33% | - Operating expense redeployment program costs of $4.1 million (three months) and $19.5 million (nine months) ended September 30, 2023, are excluded from segment operating income[149] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition, results of operations, and liquidity Overview This overview summarizes the company's business, strategic focus, and key operational highlights - The Western Union Company is a leading provider of money movement and payment services, operating primarily through its Consumer-to-Consumer segment[155] - The Business Solutions segment was fully divested on July 1, 2023, and its revenues and operating expenses are no longer reported[156] - The company faces various risks, including changes in economic conditions, competition, geopolitical tensions, regulatory compliance, and cybersecurity[153][154] Results of Operations This section analyzes consolidated financial performance, including revenues, expenses, and net income Consolidated Revenues: | Period | 2023 (Millions) | 2022 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :--------- | | Three Months Ended Sep 30 | $1,097.8 | $1,089.6 | 1% | | Nine Months Ended Sep 30 | $3,304.7 | $3,383.6 | (2)% | Operating Income: | Period | 2023 (Millions) | 2022 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :--------- | | Three Months Ended Sep 30 | $210.9 | $231.8 | (9)% | | Nine Months Ended Sep 30 | $658.2 | $733.3 | (10)% | Net Income: | Period | 2023 (Millions) | 2022 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :--------- | | Three Months Ended Sep 30 | $171.0 | $173.9 | (2)% | | Nine Months Ended Sep 30 | $499.0 | $661.2 | (25)% | Diluted EPS: | Period | 2023 | 2022 | % Change | | :---------------- | :--- | :--- | :--------- | | Three Months Ended Sep 30 | $0.46 | $0.45 | 2% | | Nine Months Ended Sep 30 | $1.33 | $1.70 | (22)% | Revenues Overview This overview details the company's revenue performance, including impacts from foreign currency and divestitures Consolidated Revenues (GAAP): | Period | 2023 (Millions) | 2022 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :--------- | | Three Months Ended Sep 30 | $1,097.8 | $1,089.6 | 1% | | Nine Months Ended Sep 30 | $3,304.7 | $3,383.6 | (2)% | Revenue Change, Constant Currency Adjusted, Excluding Business Solutions (Non-GAAP): | Period | % Change | | :---------------- | :--------- | | Three Months Ended Sep 30 | 7% | | Nine Months Ended Sep 30 | 5% | - Foreign currency fluctuations, net of hedges, decreased revenues by $25.6 million for the three months and $101.4 million for the nine months ended September 30, 2023[158][167] Divestiture Impact on Revenues (Business Solutions): | Period | 2023 (Millions) | 2022 (Millions) | | :---------------- | :-------------- | :-------------- | | Three Months Ended Sep 30 | $0 | $42.6 | | Nine Months Ended Sep 30 | $29.7 | $167.4 | - Business originating from Iraq contributed 8% and 6% to revenues for the three and nine months ended September 30, 2023, respectively, but is expected to be significantly reduced in Q4 2023 due to policy changes and agent suspension[161] Operating Expenses Overview This overview analyzes the company's operating expenses and the impact of strategic programs Total Expenses: | Period | 2023 (Millions) | 2022 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :--------- | | Three Months Ended Sep 30 | $886.9 | $857.8 | 3% | | Nine Months Ended Sep 30 | $2,646.5 | $2,650.3 | 0% | Cost of Services: | Period | 2023 (Millions) | 2022 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :--------- | | Three Months Ended Sep 30 | $687.2 | $637.3 | 8% | | Nine Months Ended Sep 30 | $2,015.6 | $1,945.4 | 4% | Selling, General, and Administrative Expenses: | Period | 2023 (Millions) | 2022 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :--------- | | Three Months Ended Sep 30 | $199.7 | $220.5 | (9)% | | Nine Months Ended Sep 30 | $630.9 | $704.9 | (11)% | - The operating expense redeployment program incurred $4.1 million for the three months and $19.5 million for the nine months ended September 30, 2023, totaling $41.3 million through September 30, 2023[170] Total Other Income/(Expense), Net This section details non-operating income and expenses, including gains from divestitures Total Other Income/(Expense), Net: | Period | 2023 (Millions) | 2022 (Millions) | | :---------------- | :-------------- | :-------------- | | Three Months Ended Sep 30 | $(6.6) | $(38.1) | | Nine Months Ended Sep 30 | $(56.5) | $58.8 | - The gain on divestiture of business was $18.0 million for both the three and nine months ended September 30, 2023[163] Income Taxes This section discusses the company's income tax expense and effective tax rates Effective Tax Rates: | Period | 2023 | 2022 | | :---------------- | :--- | :--- | | Three Months Ended Sep 30 | 16.3% | 10.2% | | Nine Months Ended Sep 30 | 17.1% | 16.5% | - Tax contingency reserves totaled $241.9 million as of September 30, 2023, including accrued interest and penalties[175] Earnings Per Share This section provides an analysis of the company's basic and diluted earnings per share Diluted EPS: | Period | 2023 | 2022 | | :---------------- | :--- | :--- | | Three Months Ended Sep 30 | $0.46 | $0.45 | | Nine Months Ended Sep 30 | $1.33 | $1.70 | - Anti-dilutive shares excluded from EPS calculation were 9.5 million (Q3 2023) and 8.1 million (Q3 2022) for the three months, and 9.6 million (YTD 2023) and 8.0 million (YTD 2022) for the nine months[176] Segment Discussion This section provides a detailed financial discussion of each of the company's operating segments Segment Revenues as a Percentage of Consolidated Totals (Three Months Ended Sep 30): | Segment | 2023 | 2022 | | :---------------- | :--- | :--- | | Consumer-to-Consumer | 93 % | 90 % | | Business Solutions | 0 % | 4 % | | Other | 7 % | 6 % | Segment Revenues as a Percentage of Consolidated Totals (Nine Months Ended Sep 30): | Segment | 2023 | 2022 | | :---------------- | :--- | :--- | | Consumer-to-Consumer | 92 % | 89 % | | Business Solutions | 1 % | 5 % | | Other | 7 % | 6 % | Consumer-to-Consumer Segment This section analyzes the Consumer-to-Consumer segment's financial performance, including revenues and transactions Revenues (Consumer-to-Consumer): | Period | 2023 (Millions) | 2022 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :--------- | | Three Months Ended Sep 30 | $1,019.0 | $982.4 | 4% | | Nine Months Ended Sep 30 | $3,029.5 | $3,008.3 | 1% | Transactions (Consumer-to-Consumer): | Period | 2023 (Millions) | 2022 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :--------- | | Three Months Ended Sep 30 | 70.6 | 66.9 | 5% | | Nine Months Ended Sep 30 | 206.5 | 204.8 | 1% | Operating Income (Consumer-to-Consumer): | Period | 2023 (Millions) | 2022 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :--------- | | Three Months Ended Sep 30 | $193.4 | $193.7 | 0% | | Nine Months Ended Sep 30 | $601.9 | $626.5 | (4)% | - Cross-border principal transferred increased to $26.0 billion (Q3 2023) from $23.0 billion (Q3 2022) and to $76.5 billion (YTD 2023) from $70.2 billion (YTD 2022), driven by growth in Iraq, North America, and Latin America[187] - Branded Digital represented approximately 21% of Consumer-to-Consumer revenues for both the three and nine months ended September 30, 2023[186] Business Solutions This section discusses the financial results of the Business Solutions segment, impacted by its divestiture Revenues (Business Solutions): | Period | 2023 (Millions) | 2022 (Millions) | | :---------------- | :-------------- | :-------------- | | Three Months Ended Sep 30 | $0 | $42.6 | | Nine Months Ended Sep 30 | $29.7 | $167.4 | Operating Income (Business Solutions): | Period | 2023 (Millions) | 2022 (Millions) | | :---------------- | :-------------- | :-------------- | | Three Months Ended Sep 30 | $0 | $15.9 | | Nine Months Ended Sep 30 | $3.7 | $51.7 | - The decrease in revenues and operating income is due to the final closing of the Business Solutions divestiture on July 1, 2023[193] Other This section covers revenues and operating income from other business activities Revenues (Other): | Period | 2023 (Millions) | 2022 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :--------- | | Three Months Ended Sep 30 | $78.8 | $64.6 | 22% | | Nine Months Ended Sep 30 | $245.5 | $207.9 | 18% | Operating Income (Other): | Period | 2023 (Millions) | 2022 (Millions) | % Change | | :---------------- | :-------------- | :-------------- | :--------- | | Three Months Ended Sep 30 | $21.6 | $21.6 | 0% | | Nine Months Ended Sep 30 | $72.1 | $73.4 | (2)% | - Revenue growth was primarily driven by increased investment revenues from money order securities and higher local currency revenue per transaction in Argentina due to inflation[198] Capital Resources and Liquidity This section discusses the company's financial resources, liquidity, and cash management strategies Cash and Investment Securities This section details the company's cash, cash equivalents, and investment securities holdings Cash and Cash Equivalents: | Date | Amount (Millions) | | :---------------- | :-------------- | | Sep 30, 2023 | $1,138.2 | | Dec 31, 2022 | $1,291.1 | Investment Securities (within Settlement assets): | Date | Amount (Millions) | | :---------------- | :-------------- | | Sep 30, 2023 | $1,383.1 | | Dec 31, 2022 | $1,333.4 | - Investment securities are primarily highly-rated state and municipal debt securities, held to comply with state licensing requirements[208] Cash Flows from Operating Activities This section analyzes the cash generated or used by the company's primary business operations Net Cash Provided by Operating Activities (Nine Months Ended Sep 30): | Year | Amount (Millions) | | :--- | :-------------- | | 2023 | $518.6 | | 2022 | $522.4 | Financing Resources This section describes the company's debt, credit facilities, and other financing arrangements - Outstanding borrowings at par value were $2,320.0 million as of September 30, 2023, primarily unsecured fixed-rate notes[211] - The company repaid $300.0 million of 4.250% unsecured notes due in June 2023[211] - A $1.5 billion revolving credit facility, expiring in January 2025, supports the commercial paper program; no outstanding borrowings as of September 30, 2023[203][213] - Commercial paper borrowings outstanding were $170.0 million as of September 30, 2023, with a weighted-average annual interest rate of approximately 5.6% and a weighted-average term of approximately 2 days[214] Cash Priorities This section outlines the company's strategic cash allocation for growth, investments, and shareholder returns - The company's objective is to maintain strong liquidity and a capital structure consistent with investment-grade credit ratings[216] - Cash is prioritized for business growth, investments, acquisitions, returning capital to shareholders (dividends and share repurchases), and servicing debt and tax obligations[217] Capital Expenditures This section details the company's investments in property, plant, and equipment Total Capital Expenditures (Nine Months Ended Sep 30): | Year | Amount (Millions) | | :--- | :-------------- | | 2023 | $117.2 | | 2022 | $147.5 | - Capital expenditures include investments in information technology infrastructure[218] Share Repurchases and Dividends This section provides information on the company's share repurchase programs and dividend payments - During the nine months ended September 30, 2023, the company repurchased 7.8 million shares for $100.0 million, with $548.2 million remaining under the $1.0 billion authorization through December 31, 2024[219] - Quarterly cash dividends of $0.235 per common share were declared in each of the first three quarters of 2023, totaling $263.3 million[220] Material Cash Requirements This section identifies significant future cash obligations, including debt, taxes, and commitments - The next scheduled principal payment on outstanding notes is in 2025[221] - Approximately $358 million of the 2017 U.S. federal tax liability remained as of September 30, 2023, with $119.5 million paid in Q2 2023, payable in installments through 2025[222] - Outstanding letters of credit and bank guarantees totaled approximately $160 million as of September 30, 2023[225] - Total unrecognized income tax benefits were $301.5 million as of September 30, 2023, including associated interest and penalties[226] Critical Accounting Policies and Estimates This section highlights key accounting policies and estimates that require significant management judgment - Critical accounting policies and estimates include income taxes, derivative financial instruments, goodwill, and other intangible assets[227][228] - No material changes to these policies were reported since the Annual Report on Form 10-K for the year ended December 31, 2022[227] Risk Management This section describes strategies for managing market, foreign currency, interest rate, and credit risks - The company is exposed to market risks from foreign currency exchange rates and interest rates, and credit risk related to agents and customers[229] - Foreign currency risk is managed through business structure, short-duration forward contracts for settlement, and longer-term forward contracts (up to 36 months) for forecasted revenues[230][231] - A hypothetical 10% strengthening or weakening of the U.S. dollar would result in an approximate $19 million decrease/increase to pre-tax annual income[232] - Interest rate risk is managed by evaluating net asset/liability positions, adjusting the mix of fixed/floating rate debt and investments, and using interest rate swaps[236] - Credit risk is managed through investment diversification, agent credit reviews, and monitoring losses from digital channel transactions (chargebacks, fraud), which are less than 3% of consolidated revenues[238][239][240] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section incorporates by reference the detailed discussion on market risk management from the MD&A - The information required by this Item is incorporated by reference from the 'Risk Management' discussion in Part I, Item 2[241] Item 4. Controls and Procedures This section reports on the effectiveness of disclosure controls and internal control over financial reporting Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures - The Principal Executive Officer and Principal Financial Officer concluded that disclosure controls and procedures were effective as of September 30, 2023[242] Changes in Internal Control over Financial Reporting This section reports on any material changes to internal control over financial reporting during the quarter - No material changes occurred during the fiscal quarter that affected, or are reasonably likely to affect, internal control over financial reporting[243] Review Report of Independent Registered Public Accounting Firm This report provides the independent auditor's review of the condensed consolidated interim financial statements - Ernst & Young LLP concluded that no material modifications are needed for the condensed consolidated interim financial statements to be in conformity with U.S. GAAP[246] - The information in the condensed consolidated balance sheet as of December 31, 2022, is fairly stated in relation to the previously audited consolidated balance sheet[247] PART II OTHER INFORMATION This section includes legal proceedings, risk factors, equity sales, defaults, and other information Item 1. Legal Proceedings This section incorporates by reference the discussion of legal proceedings from the financial statement notes - Information regarding legal proceedings is incorporated by reference from Note 6, Commitments and Contingencies, in Part I, Item 1, Financial Statements[251] Item 1A. Risk Factors This section confirms no material changes to the risk factors previously disclosed in the annual report - No material changes to the risk factors described in the Annual Report on Form 10-K for the year ended December 31, 2022, have occurred[252] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details unregistered sales of equity securities and the use of proceeds from repurchases Stock Repurchases (Quarter Ended Sep 30, 2023): | Metric | Value | | :---------------- | :---------------- | | Total Number of Shares Purchased | 7,820,904 | | Average Price Paid per Share | $12.87 | | Shares Purchased as Part of Publicly Announced Plans | 7,766,204 | - As of September 30, 2023, $548.2 million remained available under the $1.0 billion common stock repurchase authorization through December 31, 2024[254] Item 3. Defaults Upon Senior Securities This section reports on any defaults concerning the company's senior securities - There were no defaults upon senior securities during the period[256] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company's operations - This item is not applicable to the company[257] Item 5. Other Information This section provides other material information not covered elsewhere, including trading plans - None of the company's directors or executive officers adopted, modified, or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the three months ended September 30, 2023[258] Item 6. Exhibits This section lists all exhibits filed or furnished with the Form 10-Q - Key exhibits include certifications from the Chief Executive Officer and Chief Financial Officer, Inline XBRL documents, and a letter from Ernst & Young LLP[261] SIGNATURES This section contains the required signatures for the Form 10-Q filing - The report was signed on October 25, 2023, by Devin B. McGranahan (President and Chief Executive Officer), Matt Cagwin (Chief Financial Officer), and Mark Hinsey (Chief Accounting Officer and Controller)[264]