Western Union CO

On January 1, 2019, the Company adopted a new accounting standard, as amended, that requires the Company to record assets and liabilities on the balance sheet for lease-related rights and obligations and disclose key information about its leasing arrangements. The Company elected the effective date method, utilized the modified retrospective approach upon adoption, and elected the package of practical expedients available under the new standard, including the expedients to not reassess whether an existing contract is a lease or contains a lease and whether the lease is an operating or finance lease. This new standard establishes a right-of-use (“ROU”) model that requires the Company to recognize ROU assets and lease liabilities on the balance sheet for all leases with a term longer than 12 months at commencement of the lease. Refer to Note 5 for additional information and the related disclosures.

The Company leases real properties for use as administrative and sales offices, in addition to automobiles and office equipment. The Company determines if a contract contains a lease arrangement at the inception of the contract. For leases in which the Company is the lessee, leases are classified as either finance or operating, with classification affecting the pattern of expense recognition. Operating lease ROU assets are initially measured at the present value of lease payments over the lease term plus initial direct costs, if any. If a lease does not provide a discount rate and the rate cannot be readily determined, an incremental borrowing rate is used to determine the future lease payments. Lease and variable non-lease components within the Company’s lease agreements are accounted for separately. The Company has no material leases in which the Company is the lessor.

Substantially all of the Company’s leasing arrangements are classified as operating leases, for which expense is recognized on a straight-line basis. As of March 31, 2019, the total ROU asset and lease liability were $216.8 million and $261.2 million, respectively, and were included in “Other assets” and “Other liabilities,” respectively, in the Company’s Condensed Consolidated Balance Sheet. The Company’s finance leases were not material as of March 31, 2019. Cash paid for lease liabilities is recorded as cash flows from operating activities in the Company’s Condensed Consolidated Statements of Cash Flows. For the three months ended March 31, 2019, operating lease costs were $15.0 million, which were included in the Company’s Condensed Consolidated Statement of Income. Short term and variable lease costs were not material for the three months ended March 31, 2019.

The Company’s provision for income taxes for the three months ended March 31, 2019 and 2018 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 19.9% and 8.9% for the three months ended March 31, 2019 and 2018, respectively. The increase in the Company’s effective tax rate for the three months ended March 31, 2019 compared to the prior period was primarily due to discrete tax benefits recognized in the three months ended March 31, 2018 and an increase in 2019 forecasted domestic pre-tax income relative to the prior year. The discrete benefits in the three months ended March 31, 2018 included adjustments to the Company's accounting for the implementation of the Tax Act during the first quarter of 2018 which reduced the Company’s effective tax rate by 2.6 percentage points, as certain of the Tax Act’s impacts had been provisionally estimated during the prior period. The Company currently expects that approximately 69% of the Company’s pre-tax income will be derived from foreign sources for the year ending December 31, 2019. Certain portions of the Company’s foreign source income are subject to United States federal and state income tax as earned due to the nature of the income.

**   On February 9, 2017, the Board of Directors authorized $1.2 billion of common stock repurchases through December 31, 2019, of which $369.2 million remained available as of March 31, 2019. On February 28, 2019, the Board of Directors authorized $1.0 billion of common stock repurchases through December 31, 2021, all of which  remained available as of March 31, 2019. In certain instances, management has historically and may continue to establish prearranged written plans pursuant to Rule 10b5‑1. A Rule 10b5‑1 plan permits us to repurchase shares at times when we may otherwise be unable to do so, provided the plan is adopted when we are not aware of material non-public information.

On May 3, 2019, the Company entered into the Second Supplemental Indenture (the “Second Supplemental Indenture”) to the Indenture dated as of November 17, 2006 (as supplemented), between the Company and Wells Fargo Bank, National Association, as trustee.  The Second Supplemental Indenture amends the Company’s (a) 3.350% Notes due 2019, (b) Floating Rate Notes due 2019, (c) 3.600% Notes due 2022, (d) 4.250% Notes due 2023, and (e) 6.200% Notes Due 2040 (collectively, the “Notes”).  The Second Supplemental Indenture provides that, under certain circumstances, the number of rating agencies that must lower the rating of the Notes from investment grade to below investment grade in connection with a change of control to cause a change of control triggering event will be reduced to two or one agency instead of three rating agencies.