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Western Union Reports Fourth Quarter And Full Year Results

“We have a solid strategy for growth. Our foundation is strong, with a valued brand, global network, and worldwide operations and expertise,” said President and Chief Executive Officer Hikmet Ersek. “We are confident the strategic actions we are implementing in 2013 will position us well for the future and drive revenue and profit growth in 2014 and beyond.”

Ersek added, “Strong cash flow generation remains one of the great aspects of our business model. Even as we invest for the future in 2013 we expect to generate and deploy high levels of cash flow for our shareholders. Currently, we anticipate paying dividends and repurchasing shares that combined represent approximately 8% of our current market capitalization.”

2013 Outlook

The Company expects the following outlook for 2013, including the impact of strategic actions intended to drive revenue and profit growth in 2014 and 2015:

  • Low single digit constant currency revenue declines
  • Consumer money transfer pricing investments of approximately 5% of total Company revenue are reflected in the outlook

Consumer-to-Consumer (C2C) Transactions
  • Mid to high single digit Western Union brand C2C transaction increases
  • Overall C2C transaction growth approximately 2 percentage points lower than the Western Union brand due to declines from Vigo and Orlandi Valuta resulting from compliance related actions

Operating Margins
  • GAAP operating margin of approximately 20%
  • EBITDA margin of approximately 24.5%
  • Approximately two-thirds of the GAAP operating margin decline compared to 2012 is attributable to actions being implemented to improve competitive positioning, including the impact of pricing investments, and mix. The remaining one-third is primarily attributable to other growth investments and increased compliance costs

Tax Rate
  • Effective tax rate of approximately 15%

Earnings Per Share
  • GAAP EPS in a range of $1.33 to $1.43, including approximately $0.03 per share of after-tax expense related to TGBP integration activities
  • EPS includes approximately $0.06 per share of after-tax expense related to new cost savings initiatives
  • EPS reflects an increase in Other Expense of approximately $0.04 per share after-tax compared to 2012, primarily due to higher net interest expense and changes in other miscellaneous items

Cash Flow
  • Cash flow from operating activities of approximately $900 million, or approximately $1 billion excluding anticipated final tax payments of approximately $100 million relating to the IRS Agreement. The Company anticipates returning approximately $700 million to shareholders in 2013 through share repurchases and dividends

Cost Savings Initiatives

In order to increase productivity and partially fund spending for future growth, the Company plans to implement additional cost savings initiatives. These actions are expected to have a negative impact on 2013 financial results, but have a positive impact beginning in 2014. The 2013 outlook includes approximately $45 million of expenses related to such initiatives, which is in addition to the $31 million incurred in the fourth quarter of 2012. Expenses relate primarily to severance, outplacement and other related benefits, and other expenses related to relocation of various operations to existing Company facilities and third-party providers. These initiatives are expected to generate approximately $30 million of related cost savings in 2013, and approximately $45 million in 2014. The 2013 outlook also includes approximately $20 million of expenses for TGBP integration activities.

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