| Notes to Condensed Consolidated Financial Statements (Unaudited) | |
| 3 Months Ended
Mar. 31, 2009
USD / shares
|
| Notes to Financial Statements [Abstract] | |
| 1. Business and Basis of Presentation |
1. Business and Basis of Presentation
The Western Union Company (Western Union or the Company) is a leader in global money transfer, providing people with fast, reliable and convenient ways to send money around the world. The Western Union brand is globally recognized. The Companys services are available through a network of agent locations in more than 200 countries and territories. Each location in the Companys agent network is capable of providing one or more of the Companys services.
The Western Union business consists of the following segments:
Consumer-to-consumermoney transfer services between consumers, primarily through a global network of third-party agents using the Companys multi-currency, real-time money transfer processing systems. This service is available for international cross-border transfersthat is, the transfer of funds from one country to anotherand, in certain countries, intra-country transfersthat is, money transfers from one location to another in the same country.
Consumer-to-businessthe processing of payments from consumers to businesses and other organizations that receive consumer payments, including utilities, auto finance companies, mortgage servicers, financial service providers and government agencies, sometimes referred to as billers, through Western Unions network of third-party agents and various electronic channels. While the Company continues to pursue international expansion of its offerings in selected markets, such as its offerings of walk-in, cash bill payment service in certain countries in Central and South America, the segments revenue was primarily generated in the United States during all periods presented.
All businesses that have not been classified into the consumer-to-consumer or consumer-to-business segments are reported as Other and include the Companys money order and prepaid services businesses. The Companys money orders are issued by Integrated Payment Systems Inc. (IPS), a subsidiary of First Data Corporation (First Data), to consumers at retail locations primarily in the United States and Canada. See Note 9, Settlement Assets and Settlement Obligations for discussion regarding the agreement executed between the Company and IPS on July18, 2008 whereby the Company will assume the responsibility for issuing money orders effective October1, 2009. Western Union also markets a Western Union branded prepaid MasterCard card, a Western Union branded prepaid Visa card, and provides top-up services for third parties that allow consumers to pay in advance for mobile phone and other services.
There are legal or regulatory limitations on transferring certain assets of the Company outside of the countries where these assets are located, or which constitute undistributed earnings of affiliates of the Company accounted for under the equity method of accounting. However, there are generally no limitations on the use of these assets within those countries. As of March31, 2009, the amount of net assets subject to these limitations totaled approximately $177 million.
Various aspects of the Companys services and businesses are subject to United States federal, sta |
| 2. Earnings Per Share |
2. Earnings Per Share
The calculation of basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. 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, using the treasury stock method. The treasury stock method assumes proceeds from the exercise price of stock options, the unamortized compensation expense and assumed tax benefits of options and restricted stock are available to acquire shares at an average price throughout the year, and therefore, reduce the dilutive effect throughout the year.
As of March31, 2009 and 2008, there were 43.1million and 8.2million, respectively, of outstanding options to purchase shares of Western Union stock excluded from the diluted earnings per share calculation under the treasury stock method as their effect was anti-dilutive. The increase in anti-dilutive shares is primarily due to the majority of the Companys outstanding options having an exercise price higher than the Companys average stock price for the three months ended March31, 2009.
The following table provides the calculation of diluted weighted-average shares outstanding (in millions):
ThreeMonthsEnded March 31,
2009 2008
Basic weighted-average shares outstanding 707.1 746.7
Common stock equivalents 0.9 10.1
Diluted weighted-average shares outstanding 708.0 756.8
|
| 3. Acquisitions |
3. Acquisitions
On February24, 2009, the Company acquired the money transfer business of European-based FEXCO, one of the Companys largest agents providing services in a number of European countries, primarily the United Kingdom, Spain, Sweden and Ireland. The acquisition of FEXCOs money transfer business will position the Company to benefit from the upcoming implementation of the Payment Services Directive (PSD) in the European Union. The PSD will make it possible to operate in 27 countries under a single license and allow the Company to expand its distribution beyond banks and post-banks in most of those countries. The acquisition does not impact the Companys revenue, because the Company was already recording 100% of the revenue arising from money transfers originating at FEXCOs subagents. As of the acquisition date, the Company no longer incurs commission costs for transactions related to FEXCO; rather, the Company now only pays commissions directly to former FEXCO subagents, resulting in lower overall commission expense. The Companys operating expenses include costs attributable to FEXCOs operations subsequent to the acquisition date. All acquisition costs have been expensed in Selling, general and administrative in the Companys Condensed Consolidated Statements of Income.
Prior to the acquisition, the Company held a 24.65% interest in FEXCO Group Holdings (FEXCO Group), which was a holding company for both the money transfer business as well as various unrelated businesses. The Company surrendered its 24.65% interest in FEXCO Group as non-cash consideration, which had an estimated fair value of $86.2 million on the acquisition date, and paid 123.1million ($157.4 million) as additional consideration for 100% of the common shares of the money transfer business, resulting in a total purchase price of $243.6 million. The Company recognized no gain or loss in connection with the disposition of its equity interest in the FEXCO Group, because its estimated fair value approximated its carrying value. Pursuant to SFAS No.141R, the Company recorded the assets and liabilities of FEXCO at fair value. The following table summarizes the allocation of purchase price for this acquisition:
Assets:
Cash acquired $ 11.8
Settlement assets 43.0
Property and equipment 3.1
Goodwill 181.4
Other intangible assets 74.9
Other assets 2.3
Total assets $ 316.5
Liabilities:
Accounts payable and accrued liabilities $ 2.7
Settlement obligations 43.0
Income taxes payable 0.2
Deferred tax liability, net 10.0
Other liabilities 17.0
Total liabilities 72.9
Total consideration, including cash acquired $ 243.6
The valuation of assets acquired resulted in $74.9 million of identifiable intangible assets, $64.8 million of which were attributable to the network of subagents, which were valued using an income approach, and $10.1 million relating to other intangibles, which were valued using both income and cost approaches. These fair values, along with the fair value of the Companys 24.65% interest |
| 4. Receivable for Securities Sold |
4. Receivable for Securities Sold
On September15, 2008, Western Union requested redemption of its shares in the Reserve International Liquidity Fund, Ltd., a money market fund, (the Fund) totaling $298.1 million, which was included in Other assets in the Condensed Consolidated Balance Sheet as of December31, 2008. At the time the redemption request was made, the Company was informed by the Reserve Management Company, the Funds investment advisor (the Manager), that the Companys redemption trades would be honored at a $1.00 per share net asset value. In January 2009, the Company received a partial distribution of $193.6 million from the Fund. As of March31, 2009, the Company had a remaining balance of $104.5 million which is included in Other assets in the Condensed Consolidated Balance Sheet. The Company expects to receive and is vigorously pursuing collection of the remaining balance based on the maturities of the underlying investments in the Fund, the written and verbal representations from the Manager to date and the Companys legal position regarding its right to full payment. Nevertheless, due to uncertainty surrounding the outcome of litigation facing the Fund, as well as potential variability in the ultimate amount and timing of the recovery of the remaining balance, the fair value of this financial asset may be less than the related carrying value. There is a risk that the redemption process could be delayed and that the Company could receive less than the $1.00 per share net asset value should pro-rata distribution occur. Based on net asset information provided by the Fund, the Companys exposure related to pro-rata distribution could be approximately $12 million, excluding potential costs incurred by the Fund. |
| 5. Restructuring and Related Expenses |
5. Restructuring and Related Expenses
Missouri and Texas Closures
During 2008, the Company closed substantially all of its facilities in Missouri and Texas and did not renew the Companys collective bargaining agreement with the unionized workers employed at these locations. The decision also resulted in the elimination of certain management positions in these same facilities and resulted, along with other actions, in the Company no longer having employees working in the United States under a collective bargaining agreement.
The Company incurred severance and employee related benefit expenses for all union and certain affected management employees, facility closure expenses and other expenses associated with the relocation of these operations to existing Company facilities and third-party providers, including costs related to hiring, training, relocation, travel and professional fees.
The Company incurred cumulative total expenses of $46.3 million comprised of $13.1 million, $7.3 million, $7.8 million and $18.1 million in severance and other employee related costs, asset write-offs and incremental depreciation, lease terminations and other restructurings expenses, respectively, through December31, 2008. No additional restructuring and related expenses were incurred in the three months ended March31, 2009.
Other Reorganizations
Also during 2008, in addition to the Missouri and Texas closures, the Company restructured some of its operations and relocated or eliminated certain shared service and call center positions. The relocated positions were moved to the Companys existing facilities or outsourced service providers in 2008.
The Company incurred cumulative total expenses of $36.6 million comprised of $31.2 million, $0.6 million and $4.8 million in severance and other employee related costs, asset write-offs and incremental depreciation and other restructuring expenses, respectively, through December31, 2008. No additional restructuring and related expenses were incurred in the three months ended March31, 2009.
Total Plans
The following table summarizes the activity for the related restructuring accrual balances for the three months ended March31, 2009 (in millions):
Restructuringaccrual balances at December31, 2008 CashPayments Restructuringaccrual balances at March31, 2009
Missouri and Texas Closures:
Severance and employee related $ 2.7 $ (1.6 ) $ 1.1
Other 0.3 (0.2 ) 0.1
Total $ 3.0 $ (1.8 ) $ 1.2
Other Reorganizations:
Severance and employee related $ 22.1 $ (9.2 ) $ 12.9
Other 0.7 (0.4 ) 0.3
Total $ 22.8 $ (9.6 ) $ 13.2
Through December31, 2008, the Company recognized cumulative expenses of $62.8 million and $20.1 million in Cost of services and Selling, general and administrative expenses, respectively. The Company did not incur any material restructuring and related expenses in the three months ended March31, 2009. Restructuring and related expenses ref |
| 6. Fair Value Measurements |
6. Fair Value Measurements
SFAS No.157 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. For additional information on how Western Union measures fair value, refer to the Companys Annual Report on Form 10-K for the year ended December31, 2008.
The following table reflects assets and liabilities that are measured and carried at fair value on a recurring basis (in millions):
March31, 2009
FairValueMeasurementUsing Assets/Liabilities at Fair Value
Level1 Level2 Level3
Assets
State and municipal debt instruments $ $ 456.1 $ $ 456.1
Debt investments held with foreign banks 9.9 9.9
Debt securities issued by foreign governments 0.1 3.6 3.7
Derivatives 118.0 118.0
Total assets $ 0.1 $ 587.6 $ $ 587.7
Liabilities
Derivatives $ $ 7.7 $ $ 7.7
Total liabilities $ $ 7.7 $ $ 7.7
No non-recurring fair value adjustments were recorded in the three months ended March31, 2009 except those associated with the acquisition of FEXCO as disclosed in Note 3, Acquisitions. |
| 7. Commitments and Contingencies |
7. Commitments and Contingencies
In the normal course of business, Western Union is subject to claims and litigation. Management of Western Union believes such matters involving a reasonably possible chance of loss will not, individually or in the aggregate, result in a material adverse effect on Western Unions financial position, results of operations and cash flows. Western Union accrues for loss contingencies as they become probable and estimable.
The Company has $87.1 million in outstanding letters of credit and bank guarantees at March31, 2009 with expiration dates through 2015, certain of which contain a one-year renewal option. The letters of credit and bank guarantees are primarily held in connection with lease arrangements and certain agent agreements. The Company expects to renew the letters of credit and bank guarantees prior to expiration in most circumstances.
Pursuant to the separation and distribution agreement with First Data in connection with Western Unions spin-off from First Data on September29, 2006 (Spin-off), First Data and the Company are each liable for, and agreed to perform, all liabilities with respect to their respective businesses. In addition, the separation and distribution agreement also provides for cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of the Companys business with the Company and financial responsibility for the obligations and liabilities of First Datas retained businesses with First Data. The Company also entered into a tax allocation agreement that sets forth the rights and obligations of First Data and the Company with respect to taxes imposed on their respective businesses both prior to and after the Spin-off as well as potential tax obligations for which the Company may be liable in conjunction with the Spin-off (See Note 14). |
| 8. Related Party Transactions |
8. Related Party Transactions
The Company has ownership interests in certain of its agents accounted for under the equity method of accounting. The Company pays these agents, as it does its other agents, commissions for money transfer and other services provided on the Companys behalf. Commissions paid to these agents for the three months ended March31, 2009 and 2008 totaled $53.5 million and $73.3 million, respectively. Commissions paid to FEXCO prior to February24, 2009, the date of the acquisition, were considered related party transactions. |
| 9. Settlement Assets and Settlement Obligations |
9. Settlement Assets and Settlement Obligations
Settlement assets represent funds received or to be received from agents for unsettled money transfers and consumer payments. Western Union records corresponding settlement obligations relating to amounts payable under money transfer and payment service arrangements.
Settlement assets and obligations are comprised of the following (in millions):
March31, 2009 December31, 2008
Settlement assets:
Cash and cash equivalents $ 20.0 $ 42.3
Receivables from selling agents 692.5 759.6
Investment securities 469.7 405.6
$ 1,182.2 $ 1,207.5
Settlement obligations:
Money transfer and payment service payables $ 787.4 $ 799.5
Payables to agents 394.8 408.0
$ 1,182.2 $ 1,207.5
Investment securities consist primarily of high-quality state and municipal debt instruments. Substantially all of the Companys investment securities were marketable securities during the periods presented. The Company is required to maintain specific high-quality, investment grade securities and such investments are restricted to satisfy outstanding settlement obligations in accordance with applicable state regulations. Western Union does not hold financial instruments for trading purposes. All investment securities are classified as available-for-sale and recorded at fair value. Investment securities are exposed to market risk due to changes in interest rates and credit risk. Western Union regularly monitors credit risk and attempts to mitigate its exposure by making high-quality investments. At March31, 2009, the significant majority of the Companys investment securities had credit ratings of AA- or better from a major credit rating agency.
Unrealized gains and losses on available-for-sale securities are excluded from earnings and presented as a component of accumulated other comprehensive income or loss, net of related deferred taxes. As of March31, 2009 and December31, 2008, gross unrealized gains were $2.3 million and $2.5 million, respectively, offset by gross unrealized losses of $0.4 million and $1.0 million, respectively.
On July18, 2008, the Company entered into an agreement with IPS, a subsidiary of First Data, which modified the existing business relationship with respect to the issuance and processing of money orders. Under the terms of the agreement, beginning on October1, 2009 (the Transition Date), IPS will assign and transfer to the Company certain operating assets used by IPS to issue money orders and an amount of cash sufficient to satisfy all outstanding money order liabilities. On the Transition Date, the Company will assume IPSs role as issuer of the money orders, including its obligation to pay outstanding money orders, and will terminate the existing agreement whereby IPS pays Western Union a fixed return on the outstanding money order balances (which vary from day to day but approximate $800 million). Following the Transition Date, Western Union will invest the cash received from IPS in high-quality, investment grade se |
| 10. Comprehensive Income |
10. Comprehensive Income
The components of other comprehensive income, net of tax, are as follows (in millions):
ThreeMonthsEnded March31,
2009 2008
Net income $ 223.9 $ 207.1
Unrealized gain/(loss) on investment securities, net of tax (expense)/benefit of $(0.1) million and $0.0 million, respectively 0.2 (0.1 )
Unrealized gain/(loss) on hedging activities, net of tax (expense)/benefit of $(1.9) million and $3.1 million, respectively (a). 12.8 (29.4 )
Pension liability adjustment, net of tax expense of $0.4 million and $0.2 million, respectively 0.5 0.5
Foreign currency translation adjustment, net of tax benefit/(expense) of $15.2 million and $(3.6) million, respectively (b) (28.2 ) 6.7
Total other comprehensive income $ 209.2 $ 184.8
(a) Unrealized gains on hedging activities of $12.8 million, net of tax, for the three months ended March31, 2009 represent changes in fair value of derivatives of $27.5 million, net of tax, offset by reclassifications into earnings of $14.7 million, net of tax.
(b) The three months ended March 31, 2009 includes the impact to the foreign currency translation account of the surrender of the Companys interest in the FEXCO Group. See Note 3, Acquisitions. |
| 11. Employee Benefit Plans |
11. Employee Benefit Plans
Defined Benefit Plans
The Company has two frozen defined benefit pension plans for which it has a recorded unfunded pension obligation of $106.8 million and $107.1 million as of March31, 2009 and December31, 2008, respectively, included in Other liabilities in the Condensed Consolidated Balance Sheets. No contributions were made to these plans by the Company in 2008 or during the three months ended March31, 2009. Due to the impact of legislation enacted in late 2008, the Company will not be required to contribute to these plans during 2009, but estimates it will be required to fund approximately $20 to $25 million in 2010.
The following table provides the components of net periodic benefit cost for the defined benefit pension plans (in millions):
ThreeMonthsEnded March 31,
2009 2008
Interest cost $ 5.9 $ 6.1
Expected return on plan assets (6.2 ) (6.9 )
Amortization of actuarial loss 0.9 0.7
Employee termination costs 2.5
Net periodic benefit cost $ 0.6 $ 2.4
The Company recorded $2.5 million of expense in the three months ended March31, 2008 related to the termination of certain retirement eligible union and management plan participants in connection with the restructuring and related activities disclosed in Note 5. |
| 12. Derivatives |
12. Derivatives
The Company is exposed to foreign currency risk resulting from fluctuations in exchange rates, primarily the euro, and to a lesser degree the British pound, Canadian dollar, Australian dollar and other currencies, related to forecasted revenues and also on settlement assets and obligations denominated in these and other currencies. Additionally, the Company is exposed to interest rate risk related to changes in market rates both prior to and subsequent to the issuance of debt. The Company uses derivatives to minimize its exposures related to changes in foreign currency exchange rates and interest rates and not to engage in speculative derivative activities. Foreign currency forward contracts and interest rate swaps of varying maturities are used in these risk management activities.
The Company executes derivative financial instruments, which it designates as hedges, with established financial institutions having credit ratings of A or better from major rating agencies. The credit risk inherent in these agreements represents the possibility that a loss may occur from the nonperformance of a counterparty to the agreements. The Company performs a review of the credit risk of these counterparties at the inception of the hedge, on a quarterly basis and as circumstances warrant. The Company also monitors the concentration of its contracts with any individual counterparty. The Company anticipates that the counterparties will be able to fully satisfy their obligations under the agreements, but takes action (including termination of contracts) when doubt arises about the counterparties ability to perform. The Companys foreign currency exposures are in liquid currencies, consequently there is minimal risk that appropriate derivatives to maintain the hedging program would not be available in the future.
The details of each designated hedging relationship are formally documented at the inception of the arrangement, including the risk management objective, hedging strategy, hedged item, specific risks being hedged, the derivative instrument, how effectiveness is being assessed and how ineffectiveness, if any, will be measured. The derivative must be highly effective in offsetting the changes in cash flows or fair value of the hedged item, and effectiveness is evaluated quarterly on a retrospective and prospective basis.
Foreign Currency Hedging
The Companys policy is to use longer-term foreign currency forward contracts, with maturities of up to 36 months at inception and a targeted weighted-average maturity of approximately one year at any point in time, to 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. At March31, 2009, the Companys longer-term foreign currency forward contracts had maturities of a maximum of 24 months with a weighted-average maturity of one year. The Company assesses the effectiveness of these foreign currency forward contracts based on changes in the spot rate of the affected currencies during the period of designation. Accordingly, all changes in the fair value of the hedg |
| 13. Borrowings |
13. Borrowings
The Companys outstanding borrowings consisted of the following (in millions):
March31, 2009 December31, 2008
CarryingValue FairValue(e) CarryingValue FairValue(e)
Due in less than one year:
Commercial paper $ $ $ 82.9 $ 82.9
Term loan (a) 500.0 500.0
Due in greater than one year:
5.400% notes, net of discount, due 2011 (b) 1,040.9 1,012.0 1,042.8 962.9
6.500% notes, net of discount, due 2014 (c) 498.3 506.9
5.930% notes, net of discount, due 2016 (d) 1,013.9 917.2 1,014.4 903.5
6.200% notes, net of discount, due 2036 497.5 387.2 497.4 391.4
Other borrowings 6.0 6.0 6.0 6.0
Total borrowings $ 3,056.6 $ 2,829.3 $ 3,143.5 $ 2,846.7
(a) The term loan due in December 2009 (Term Loan) was paid and financed with the issuance of the 6.500% notes due 2014 (2014 Notes) on February26, 2009.
(b) At March31, 2009 and December31, 2008, the Company held interest rate swaps related to the 5.400% notes due 2011 (2011 Notes) with an aggregate notional amount of $600 million and $550 million, respectively. During 2008, the Company terminated an aggregate notional amount of $195 million of interest rate swaps. The Company received cash, excluding interest, of $10.7 million on the termination of these swaps the offset of which is reflected in Borrowings and will be reclassified as a reduction to Interest expense over the life of the 2011 Notes.
(c) The 2014 Notes were issued on February26, 2009 and the proceeds were used to redeem the Term Loan.
(d) At December31, 2008, the Company held an interest rate swap related to the 5.930% notes due 2016 (2016 Notes) with an aggregate notional amount of $110 million. During the first quarter of 2009, the Company terminated the swap. The Company received cash, excluding interest, of $14.6 million on the termination of this swap, the offset of which is reflected in Borrowings and will be reclassified as a reduction to Interest expense over the life of the 2016 Notes. For further information regarding the interest rate swap, refer to Note 12, Derivatives.
(e) At December31, 2008, the fair value of commercial paper approximates its carrying value due to the short term nature of the obligations. The fair value of the Term Loan approximates its carrying value as it was a variable rate loan and Western Union credit spreads did not move significantly between the date of the borrowing (December 5, 2008) and December31, 2008. The fair value of the fixed rate notes is determined by obtaining quotes from multiple, independent banks and excludes the impact of discounts and related interest rate swaps.
Exclusive of discounts and the fair value of the interest rate swaps, maturities of borrowings as of March31, 2009 are $1.0 billion in 2011, $500 million in 2014 and $1.5 billion thereafter. At March31, 2009, there are no contractual maturities on borrowings during 2009 and 2010 |
| 14. Income Taxes |
14. Income Taxes
The Companys effective tax rates on pre-tax income for the three months ended March31, 2009 and 2008 were 26.6% and 29.2%, respectively. The Company continues to benefit from an increasing proportion of profits being foreign-derived and therefore taxed at lower rates than its combined federal and state tax rates in the United States. In addition, the decreasing effective tax rate in 2009 compared to 2008 is also attributed to the implementation in 2008 of foreign tax efficient strategies consistent with the Companys overall tax planning.
Uncertain Tax Positions
The Company has established contingency reserves for material, known tax exposures, including potential tax audit adjustments with respect to its international operations, which were restructured in 2003. The Companys tax reserves reflect managements judgment as to the resolution of the issues involved if subject to judicial review. While the Company believes its reserves are adequate to cover reasonably expected tax risks, there can be no assurance that, in all instances, an issue raised by a tax authority will be resolved at a financial cost that does not exceed its related reserve. With respect to these reserves, the Companys income tax expense would include (i)any changes in tax reserves arising from material changes during the period in the facts and circumstances (i.e. new information) surrounding a tax issue, and (ii)any difference from the Companys tax position as recorded in the financial statements and the final resolution of a tax issue during the period.
Unrecognized tax benefits represent the aggregate tax effect of differences between tax return positions and the amounts otherwise recognized in the Companys financial statements, and are reflected in Income taxes payable in the Condensed Consolidated Balance Sheets. The total amount of unrecognized tax benefits as of March31, 2009 and December31, 2008, was $386.1 million and $361.2 million, respectively, excluding interest and penalties. A substantial portion of the Companys unrecognized tax benefits relate to the 2003 restructuring of the Companys international operations whereby the Companys income from certain foreign-to-foreign money transfer transactions has been taxed at relatively low foreign tax rates compared to the Companys combined federal and state tax rates in the United States. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $377.2 million and $352.4 million as of March31, 2009 and December31, 2008, respectively, excluding interest and penalties.
The Company recognizes interest and penalties with respect to unrecognized tax benefits in income tax expense and records the associated liability in Income taxes payable in its Condensed Consolidated Balance Sheets. The Company recognized $4.3 million and $3.9 million in interest and penalties during the three months ended March31, 2009 and 2008, respectively. The Company has accrued $39.9 million and $35.8 million for the payment of interest and penalties at March31, 2009 and December31, 2008, respectively.
Subject to the matter referenced in the paragraph below, the Com |
| 15. Stock Compensation Plans |
15. Stock Compensation Plans
2006 LTIP
In February 2009, the Compensation Committee of the Companys board of directors granted the Companys executives long-term incentive awards under the 2006 Long-Term Incentive Plan (2006 LTIP) which consisted of one-third restricted stock units, one-third stock option awards and one-third performance-based cash awards. The performance-based cash awards are based on strategic performance objectives for the next two years and are payable in equal installments on the second and third anniversaries of the award, assuming the applicable performance objectives are satisfied. Based on their contributions to the Company and additional assumed responsibilities, certain executives received an incremental grant of restricted stock units which fully vest on the fourth anniversary of the grant date. Additionally, non-executive employees of the Company participating in the 2006 LTIP received annual equity grants of 50% stock option awards and 50% restricted stock units, representing a change from the 75% stock option awards and 25% restricted stock awards or units previously granted under the 2006 LTIP. The employee stock option awards vest in 25% increments on each of the first through fourth anniversaries of the grant date and restricted stock units vest in full on the third anniversary of the grant date.
Stock Option Activity
A summary of Western Union stock option activity for the three months ended March31, 2009 is as follows (options and aggregate intrinsic value in millions):
Three Months Ended March31, 2009
Options Weighted-Average Exercise Price Weighted-Average Remaining ContractualTerm (Years) Aggregate Intrinsic Value
Outstanding at January1, 43.6 $ 19.11
Granted 3.4 11.88
Exercised (0.4 ) 12.48
Cancelled/forfeited (1.3 ) 18.58
Outstanding at March31, 45.3 $ 18.64 5.9 $ 4.6
Options exercisable at March31, 37.0 $ 19.00 5.2 $ 2.3
As of March31, 2009 and 2008, approximately 43% and 53% of outstanding options to purchase shares of common stock of the Company were held by employees of First Data, respectively.
The total intrinsic value of stock options exercised during the three months ended March31, 2009 and 2008 were $0.7 million and $22.3 million, respectively.
Restricted Stock Awards and Restricted Stock Units
A summary of Western Union activity for restricted stock awards and units for the three months ended March31, 2009 is listed below (awards/units in millions):
Three Months Ended March 31, 2009
Number Outstanding Weighted-Average Grant-Date FairValue
Non-vested at January1, 1.2 $ 20.32
Granted 1.5 11.87
Vested 15.62
Forfeited (0.1 ) 19.01
Non-vested at March 31, 2.6 $ 15.45
Stock-Based Compensation
The following table sets forth the total impact on earnings for stock-based compensation expense recognized in the Condensed Consolidated Statements of Income resulting from s |
| 16. Segments |
16. Segments
As previously described in Note 1, the Company classifies its businesses into two reportable segments: consumer-to-consumer and consumer-to-business. Operating segments are defined by SFAS No.131, Disclosures about Segments of an Enterprise and Related Information, as components of an enterprise which constitute businesses, about which separate financial information is available that is evaluated regularly by the Companys chief operating decision maker (CODM) in deciding where to allocate resources and in assessing performance.
The consumer-to-consumer reporting segment is viewed as one global network where a money transfer can be sent from one location to another, anywhere in the world. The segment, which consists of three regions, is now managed as two areas, primarily to coordinate agent network management and marketing activities. The CODM makes decisions regarding resource allocation and monitors performance based on specific corridors within and across these regions, but also reviews total revenue and operating profit of each region. These regions frequently interact on transactions with consumers and share processes, systems and licenses, thereby constituting one global consumer-to-consumer money transfer network. The regions and corridors offer generally the same services distributed by the same agent network, have the same types of customers, are subject to similar regulatory requirements, are processed on the same system, and have similar economic characteristics, allowing the geographic regions to be aggregated into one reporting segment.
Historically, consumer-to-consumer segment revenue has increased sequentially from the first quarter to the fourth quarter in most years and declined from the fourth quarter to the first quarter of the following year. This seasonal fluctuation is related to the holiday season in various countries during the fourth quarter.
All businesses that have not been classified into consumer-to-consumer or consumer-to-business are reported as Other. These businesses primarily include the Companys money order and prepaid services businesses. Expenses incurred in connection with the development of certain new service offerings, including costs to develop mobile money transfer services, new prepaid service offerings and costs incurred in connection with mergers and acquisitions are included in Other.
During the three months ended March31, 2008, the Company incurred expenses of $24.2 million for restructuring and related activities, which were not allocated to the segments. While these items were identifiable to the Companys segments, they were not included in the measurement of segment operating profit provided to the CODM for purposes of assessing segment performance and decision making with respect to resource allocation. For additional information on restructuring and related activities refer to Note 5.
The following table presents the Companys reportable segment results for the three months ended March31, 2009 and 2008 (in millions):
Three Months Ended March 31,
2009 2008
Revenues:
Consumer-to-Consumer:
Transaction f |
