Western Union 2014 Annual Report Download - page 215

2014 FORM 10-K
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Credit Ratings and Debt Covenants
The credit ratings on our debt are an important consideration in our overall business, managing our financing costs and
facilitating access to additional capital on favorable terms. Factors that we believe are important in assessing our credit ratings
include earnings, cash flow generation, leverage, available liquidity and the overall business.
Our Revolving Credit Facility contains an interest rate margin and facility fee which are determined based on certain of our
credit ratings. In addition, the interest rates payable on our 2015 Fixed Rate Notes, 2017 Notes and 2019 Notes can be impacted
by our credit ratings. We are also subject to certain provisions in many of our notes and certain of our derivative contracts, which
could require settlement or collateral posting in the event of a change in control combined with a downgrade below investment
grade. We do not have any other terms within our debt agreements that are tied to changes in our credit ratings.
Our Revolving Credit Facility contains certain covenants that, among other things, limit or restrict our ability to sell or transfer
assets or merge or consolidate with another company, grant certain types of security interests, incur certain types of liens, impose
restrictions on subsidiary dividends, enter into sale and leaseback transactions, or incur certain subsidiary level indebtedness,
subject to certain exceptions. Our notes are subject to similar covenants except that only the 2016 Notes, 2020 Notes and the 2036
Notes contain covenants limiting or restricting subsidiary indebtedness and none of our notes are subject to a covenant that limits
our ability to impose restrictions on subsidiary dividends. Our Revolving Credit Facility requires us to maintain a consolidated
adjusted EBITDA interest coverage ratio of greater than 2:1 (ratio of consolidated adjusted EBITDA, defined as net income plus
the sum of (a) interest expense; (b) income tax expense; (c) depreciation expense; (d) amortization expense; (e) any other non-
cash deductions, losses or changes made in determining net income for such period; and (f) extraordinary losses or charges, minus
extraordinary gains, in each case determined in accordance with generally accepted accounting principles in the United States of
America for such period, to interest expense) for each period comprising the four most recent consecutive fiscal quarters. Our
consolidated interest coverage ratio was 8:1 for the year ended December 31, 2014.
For the year ended December 31, 2014, we were in compliance with our debt covenants. A violation of our debt covenants
could impair our ability to borrow and outstanding amounts borrowed could become due, thereby restricting our ability to use our
excess cash for other purposes.
Cash Priorities
Liquidity
Our objective is to maintain strong liquidity and a capital structure consistent with investment-grade credit ratings. We have
existing cash balances, cash flows from operating activities, access to the commercial paper markets and our Revolving Credit
Facility available to support the needs of our business.
Capital Expenditures
The total aggregate amount paid for contract costs, purchases of property and equipment and purchased and developed software
was $179.0 million, $241.3 million and $268.2 million in 2014, 2013 and 2012, 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.
Other capital expenditures during these periods included investments in our information technology infrastructure and purchased
and developed software.
Share Repurchases and Dividends
During the years ended December 31, 2014, 2013 and 2012, 29.3 million, 25.7 million and 51.0 million shares, respectively,
have been repurchased for $488.1 million, $393.6 million and $771.9 million, respectively, excluding commissions, at an average
cost of $16.63, $15.29 and $15.12 per share, respectively. As of December 31, 2014, $11.9 million remained available under the
share repurchase authorization approved by our Board of Directors through June 30, 2015.
On February 10, 2015, the Board of Directors authorized $1.2 billion of common stock repurchases through December 31,
2017.