Condensed Consolidated Statemen
| Condensed Consolidated Statements of Income (Unaudited) (USD $) | |||||||||||||||||||
| In Millions, except Per Share data | 3 Months Ended
Jun. 30, 2009 | 3 Months Ended
Jun. 30, 2008 | 6 Months Ended
Jun. 30, 2009 | 6 Months Ended
Jun. 30, 2008 | |||||||||||||||
| Revenues: | |||||||||||||||||||
| Transaction fees | 999.9 | 1081.3 | 1958.4 | 2102.1 | |||||||||||||||
| Foreign exchange revenue | 217.2 | 232.3 | 422.3 | 442.3 | |||||||||||||||
| Commission and other revenues | 37.2 | 33.5 | 74.8 | 68.6 | |||||||||||||||
| Total revenues | 1254.3 | 1347.1 | 2455.5 | 2,613 | |||||||||||||||
| Expenses: | |||||||||||||||||||
| Cost of services | 700.3 | 799.4 | 1369.4 | 1,558 | |||||||||||||||
| Selling, general and administrative | 212.3 | 211.5 | 403.5 | 409.5 | |||||||||||||||
| Total expenses | 912.6 | [1] | 1010.9 | [1] | 1772.9 | [1] | 1967.5 | [1] | |||||||||||
| Operating income | 341.7 | 336.2 | 682.6 | 645.5 | |||||||||||||||
| Other income/(expense): | |||||||||||||||||||
| Interest income | 2.8 | 12.7 | 6.5 | 30.4 | |||||||||||||||
| Interest expense | -39.8 | -43.3 | -79.8 | -88.3 | |||||||||||||||
| Derivative gains/(losses), net | 0.8 | -2.4 | -2.8 | 4.4 | |||||||||||||||
| Other (expense)/income, net | -9.8 | 4.8 | -5.6 | 8.5 | |||||||||||||||
| Total other expense, net | (46) | -28.2 | -81.7 | (45) | |||||||||||||||
| Income before income taxes | 295.7 | 308 | 600.9 | 600.5 | |||||||||||||||
| Provision for income taxes | 75.5 | 76.5 | 156.8 | 161.9 | |||||||||||||||
| Net income | 220.2 | 231.5 | 444.1 | 438.6 | |||||||||||||||
| Earnings per share: | |||||||||||||||||||
| Basic | 0.31 | 0.31 | 0.63 | 0.59 | |||||||||||||||
| Diluted | 0.31 | 0.31 | 0.63 | 0.58 | |||||||||||||||
| Weighted-average shares outstanding: | |||||||||||||||||||
| Basic | 700.6 | 736.5 | 703.8 | 741.6 | |||||||||||||||
| Diluted | 702.7 | 747.5 | 705.2 | 752.2 | |||||||||||||||
| [1]As further described in Note 8, total expenses include amounts paid to related parties of $46.2 million and $79.7 million for the three months ended June 30, 2009 and 2008, respectively, and $99.7 million and $153.0 million for the six months ended June 30, 2009 and 2008, respectively. | |||||||||||||||||||
Condensed Consolidated Balance
| Condensed Consolidated Balance Sheets (Unaudited) (USD $) | ||
| In Millions | 6 Months Ended
Jun. 30, 2009 | 6 Months Ended
Dec. 31, 2008 |
| Assets | ||
| Cash and cash equivalents | 1782.4 | 1295.6 |
| Settlement assets | 1219.7 | 1207.5 |
| Property and equipment, net of accumulated depreciation of $309.4 and $284.0, respectively | 194 | 192.3 |
| Goodwill | 1851.6 | 1674.2 |
| Other intangible assets, net of accumulated amortization of $308.4 and $276.5, respectively | 403.2 | 350.6 |
| Other assets | 408.3 | 858.1 |
| Total assets | 5859.2 | 5578.3 |
| Liabilities: | ||
| Accounts payable and accrued liabilities | 371.4 | 385.7 |
| Settlement obligations | 1219.7 | 1207.5 |
| Income taxes payable | 450.8 | 381.6 |
| Deferred tax liability, net | 260.4 | 270.1 |
| Borrowings | 3049.8 | 3143.5 |
| Other liabilities | 221.5 | 198 |
| Total liabilities | 5573.6 | 5586.4 |
| Commitments and contingencies (Note 7) | - | - |
| Stockholders' equity/(deficiency): | ||
| Preferred stock, $1.00 par value; 10 shares authorized; no shares issued | 0 | 0 |
| Common stock, $0.01 par value; 2,000 shares authorized; 701.4 shares and 709.6 shares issued and outstanding at June 30, 2009 and December 31, 2008, respectively | 7 | 7.1 |
| Capital surplus/(deficiency) | 7.8 | -14.4 |
| Retained earnings | 373.2 | 29.2 |
| Accumulated other comprehensive loss | -102.4 | (30) |
| Total stockholders' equity/(deficiency) | 285.6 | -8.1 |
| Total liabilities and stockholders' equity/(deficiency) | 5859.2 | 5578.3 |
1_Condensed Consolidated Balanc
| Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) | ||
| In Millions, except Per Share data | Jun. 30, 2009
| Dec. 31, 2008
|
| Property and equipment, accumulated depreciation | 309.4 | $284 |
| Other intangible assets, accumulated amortization | 308.4 | 276.5 |
| Preferred stock, par value | $1 | $1 |
| Preferred stock, shares authorized | 10 | 10 |
| Preferred stock, shares issued | 0 | 0 |
| Common stock, par value | 0.01 | 0.01 |
| Common stock, shares authorized | 2,000 | 2,000 |
| Common stock, shares issued | 701.4 | 709.6 |
| Common stock, shares outstanding | 701.4 | 709.6 |
2_Condensed Consolidated Statem
| Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) | ||
| In Millions | 6 Months Ended
Jun. 30, 2009 | 6 Months Ended
Jun. 30, 2008 |
| Cash flows from operating activities | ||
| Net income | 444.1 | 438.6 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation and amortization | 72.8 | 69.3 |
| Stock compensation expense | 16.2 | 13.5 |
| Other non-cash items, net | 28.6 | 12 |
| Increase/(decrease) in cash, excluding the effects of acquisitions, resulting from changes in: | ||
| Other assets | 10.7 | -34.3 |
| Accounts payable and accrued liabilities | (24) | 28.4 |
| Income taxes payable | 67.7 | 37.4 |
| Other liabilities | -9.8 | -4.6 |
| Net cash provided by operating activities | 606.3 | 560.3 |
| Cash flows from investing activities | ||
| Capitalization of contract costs | -5.5 | -40.7 |
| Capitalization of purchased and developed software | -6.5 | -11.3 |
| Purchases of property and equipment | -27.9 | -28.5 |
| Acquisition of business, net of cash acquired | -145.2 | 0 |
| Proceeds from receivable for securities sold | 234.9 | 0 |
| Notes receivable issued to agents | 0 | (1) |
| Repayments of notes receivable issued to agents | 11.1 | 13.7 |
| Net cash provided by/(used in) investing activities | 60.9 | -67.8 |
| Cash flows from financing activities | ||
| Net (repayments)/proceeds of commercial paper | -82.8 | 30.8 |
| Net proceeds from issuance of borrowings | 496.6 | 0 |
| Principal payments on borrowings | (500) | 0 |
| Proceeds from exercise of options | 5.9 | 214.2 |
| Common stock repurchased | -100.1 | (656) |
| Net cash used in financing activities | -180.4 | (411) |
| Net change in cash and cash equivalents | 486.8 | 81.5 |
| Cash and cash equivalents at beginning of period | 1295.6 | 1793.1 |
| Cash and cash equivalents at end of period | 1782.4 | 1874.6 |
| Supplemental cash flow information: | ||
| Interest paid | 83 | 87.9 |
| Income taxes paid | 84.3 | 117.6 |
| Amounts payable related to common stock repurchased | $0 | 26.7 |
Notes to Consolidated Financial
| Notes to Consolidated Financial Statements (Unaudited) | |
| 6 Months Ended
Jun. 30, 2009 USD / shares | |
| Notes to Financial Statements [Abstract] | |
| 1. Business and Basis of Presentation | 1. Business and Basis of Presentation Business 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. Global business payments (formerly consumer-to-business)the 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. As described further in Note 3, Acquisitions, the Company entered into a definitive agreement to acquire Canada-based Custom House, Ltd., a provider of international business-to-business payment services, which will be included in this segment. To reflect the anticipated broadened activity of this segment, the name was changed from consumer-to-business to global business payments. All businesses that have not been classified into the consumer-to-consumer or global business payments 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. The Company also offers Western Union branded Visa and Mastercard prepaid cards and provides certain prepaid services for third parties. 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 equit |
| 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 market price throughout the year, and therefore, reduce the dilutive effect. For the three months ended June30, 2009 and 2008, there were 38.0million and 7.9million, respectively, of outstanding options to purchase shares of Western Union stock excluded from the diluted earnings per share calculation as their effect was anti-dilutive. For the six months ended June30, 2009 and 2008, there were 41.5million and 7.6million, respectively, of outstanding options to purchase shares of Western Union stock excluded from the diluted earnings per share calculation as their effect was anti-dilutive. During the three and six months ended June30, 2009, the average market price of the Companys common stock was lower than the exercise price for most of its outstanding options, resulting in higher anti-dilutive shares than in the comparable prior periods. The following table provides the calculation of diluted weighted-average shares outstanding (in millions): ThreeMonthsEnded June30, SixMonthsEnded June30, 2009 2008 2009 2008 Basic weighted-average shares outstanding 700.6 736.5 703.8 741.6 Common stock equivalents 2.1 11.0 1.4 10.6 Diluted weighted-average shares outstanding 702.7 747.5 705.2 752.2 |
| 3. Acquisitions | 3. Acquisitions Custom House, Ltd. On May6, 2009, the Company entered into a definitive agreement to acquire Canada-based Custom House, Ltd., a provider of international business-to-business payment services, for $370 million, which could be subject to certain pricing adjustments based on a defined range of United States and Canadian dollar exchange rates. The acquisition is expected to close in the third quarter of 2009, subject to regulatory approvals and satisfaction of closing conditions. FEXCO 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 assist the Company in the upcoming implementation of the Payment Services Directive (PSD) in the European Union by providing an initial operating infrastructure platform. The PSD will allow the Company to operate under a single license in the 27 European Union countries and, in those European Union countries where the Company has been limited to working with banks, post-banks and foreign exchange houses, to expand its network to additional classes of trade. 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 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. 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 |
| 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. (the Fund), a money market fund, totaling $298.1 million. Western Union included the value of the receivable 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 2009, the Company received partial distributions totaling $234.9 million from the Fund ($193.6 million and $41.3 million in January and June 2009, respectively). The Company continues to vigorously pursue collection of the remaining balance and believes it has a right to full payment of the remaining amount based on the written and verbal representations from the Manager and the Companys legal position. However, given the increased uncertainty surrounding the numerous third-party legal claims associated with the Fund, the Company reserved $12 million representing the estimated impact of a pro-rata distribution of the Fund. As of June30, 2009, the Company had a remaining receivable balance of $51.2 million, net of the related reserve, which is included in Other assets in the Condensed Consolidated Balance Sheet. If further deterioration occurs in the underlying assets in the Fund, or if the Fund incurs legal and/or administrative costs during the distribution process, the Company may record additional reserves related to the remaining receivable balance, which could negatively affect its financial position, results of operations and cash flows. |
| 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 and six months ended June30, 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 and six months ended June30, 2009. Total Plans The following table summarizes the activity for the related restructuring accrual balances for the six months ended June30, 2009 (in millions): Restructuringaccrual balances at December31, 2008 CashPayments Restructuringaccrual balances at June 30, 2009 Missouri and Texas Closures: Severance and employee related $ 2.7 $ (2.0 ) $ 0.7 Other 0.3 (0.3 ) Total $ 3.0 $ (2.3 ) $ 0.7 Other Reorganizations: Severance and employee related $ 22.1 $ (14.9 ) $ 7.2 Other 0.7 (0.5 ) 0.2 Total $ 22.8 $ (15.4 ) $ 7.4 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, respectively. The Company did not incur any material restructuring and related expenses in the three and six months ended June30, 2009. Restructuring and related expenses reflected |
| 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 were measured and carried at fair value on a recurring basis (in millions): June30, 2009 FairValueMeasurementUsing Assets/ Liabilities at Fair Value Level1 Level2 Level3 Assets: State and municipal debt instruments $ $ 395.9 $ $ 395.9 Debt securities issued by foreign governments 0.2 3.4 3.6 Derivatives 57.0 57.0 Total assets $ 0.2 $ 456.3 $ $ 456.5 Liabilities: Derivatives $ $ 25.5 $ $ 25.5 Total liabilities $ $ 25.5 $ $ 25.5 No non-recurring fair value adjustments were recorded in the three months ended June30, 2009. No non-recurring fair value adjustments were recorded in the six months ended June30, 2009, except those associated with the acquisition of the money transfer business of FEXCO as disclosed in Note 3, Acquisitions. Other Fair Value Measurements The carrying amounts for Western Union financial instruments, including cash and cash equivalents, settlement cash and cash equivalents, settlement receivables and settlement obligations approximate fair value due to their short maturities. Fixed and floating rate notes are carried at their discounted notional amounts, except for portions of notes hedged by interest rate swap agreements. The fair market values of fixed and floating rate notes are based on market quotations as of June30, 2009. The Companys borrowings had a carrying value and fair value of $3,049.8 million and $3,047.9 million, respectively, at June30, 2009 and had a carrying value and fair value of $3,143.5 million and $2,846.7 million, respectively, at December31, 2008 (see Note 13). |
| 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. On June3, 2009, Western Union received a favorable ruling from the Arizona Supreme Court. The court determined that Arizona does not have jurisdiction to seize Western Union money transfers sent from states other than Arizona to recipients in Mexico. The case arose in 2006 when the Arizona Attorney General obtained a warrant to seize Western Union money transfers sent by individuals in Arizona and 28 other states to various locations in Sonora, Mexico. The Company challenged the seizures, and in January 2007, the Arizona superior court quashed the warrant on the grounds that the state did not have jurisdiction over out-of-state money transfers. That decision was subsequently reversed by the Arizona Court of Appeals. In ruling in the Companys favor, the Arizona Supreme Court vacated the Court of Appeals decision and remanded the case to the superior court for proceedings consistent with its opinion. Notwithstanding the outcome of this case, the legal and regulatory environment in Arizona remains challenging. The Company continues to work cooperatively with law enforcement, but remains subject to scrutiny in Arizona by law enforcement and regulatory agencies. The Arizona Attorney General has and continues to make extensive data and document requests of the Company regarding its operations, its agents and its consumers. The Company could become subject to additional civil and possibly criminal actions which could have a material adverse effect on its business and results of operations. The Company vigorously disagrees with any allegation that it has failed to comply with applicable laws. The Company hopes to resolve these issues in a manner reasonably acceptable to all parties, and is exploring a number of alternatives including a possible multi-year agreement with the State of Arizona which may involve funding selected government or other regional programs and certain changes to its anti-money laundering compliance efforts in the area. No financial liability for this matter has been accrued as the outcome and the amounts involved are uncertain. The Company had $87.8 million in outstanding letters of credit and bank guarantees at June30, 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 agree |
| 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 June30, 2009 and 2008 totaled $46.2 million and $79.7 million, respectively, and $99.7 million and $153.0 million for the six months ended June30, 2009 and 2008, 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 were comprised of the following (in millions): June30, 2009 December31, 2008 Settlement assets: Cash and cash equivalents $ 122.9 $ 42.3 Receivables from selling agents 697.3 759.6 Investment securities 399.5 405.6 $ 1,219.7 $ 1,207.5 Settlement obligations: Money transfer and payment service payables $ 809.1 $ 799.5 Payables to agents 410.6 408.0 $ 1,219.7 $ 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 June30, 2009, the 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. Gains and losses on investments are calculated using the specific-identification method and are recognized during the period the investment is sold or when an investment experiences an other-than-temporary decline in value. Proceeds from the sale and maturity of available-for-sale securities during the six months ended June30, 2009 and 2008 were $3,687.4 million and $303.9 million, respectively. During 2008, the Company increased its investment securities primarily through the addition of various state and municipal variable rate demand note securities which can be put (sold at par) typically on a daily basis with settlement periods ranging from the same day to one week, but that have maturity dates ranging from 2010 to 2047. Generally, these securities are used by the Company for short-term liquidity needs and are held for short periods of time, typically less than 30 days. As a result, this has increased the frequency of purchases and proceeds received by the Company. The components of investment securities, all of which are classified as available-for-sale, were as follows (in millions): |
| 10. Comprehensive Income | 10. Comprehensive Income The components of other comprehensive income, net of tax, were as follows (in millions): ThreeMonthsEnded June30, SixMonthsEnded June30, 2009 2008 2009 2008 Net income $ 220.2 $ 231.5 $ 444.1 $ 438.6 Unrealized gains/(losses) on investments securities: Unrealized gains/(losses) 1.0 (0.3 ) 3.0 (0.4 ) Tax (expense)/benefit (0.4 ) 0.1 (1.1 ) 0.1 Reclassification adjustment for losses/(gains) 1.7 (1.7 ) 1.7 Tax (benefit)/expense (0.6 ) 0.6 (0.6 ) Net unrealized gains on investment securities 0.6 0.9 0.8 0.8 Net unrealized (losses)/gains on hedging activities: Unrealized losses (52.7 ) (1.1 ) (20.6 ) (45.2 ) Tax benefit 8.4 0.2 3.8 5.0 Reclassification adjustment for (gains)/losses (15.5 ) 15.6 (32.9 ) 27.2 Tax expense/(benefit) 2.3 (2.2 ) 5.0 (3.9 ) Net unrealized (losses)/gains on hedging activities(b) (57.5 ) 12.5 (44.7 ) (16.9 ) Net foreign currency translation adjustments: Foreign currency translation adjustments (2.0 ) 0.6 (22.3 ) 10.9 Tax benefit/(expense) 0.7 (0.2 ) 7.8 (3.8 ) Reclassification adjustment for disposal of investment(a) (23.1 ) Tax benefit (a) 8.1 Net foreign currency translation adjustments (1.3 ) 0.4 (29.5 ) 7.1 Net unrealized gains/(losses) on pension liability: Unrealized losses (1.0 ) (1.0 ) Tax benefit 0.1 0.1 Reclassification adjustment for gains 0.9 0.7 1.8 1.4 Tax benefit (0.4 ) (0.3 ) (0.8 ) (0.5 ) Net unrealized gains/(losses) on pension liability 0.5 (0.5 ) 1.0 Total other comprehensive income $ 162.5 $ 244.8 $ 371.7 $ 429.6 (a) The six months ended June30, 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. (b) The beginning balance in Accumulated other comprehensive loss at January1, 2009 related to hedging activities was a gain of $45.5 million and the ending balance at June30, 2009 was a gain of $0.8 million. |
| 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 $106.5 million and $107.1 million as of June30, 2009 and December31, 2008, respectively, which were 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 six months ended June30, 2009. Due to the closure of one of its facilities in Missouri (see Note 5) and recent negotiations with the Pension Benefit Guaranty Corporation, the Company will be required to fund approximately $4 million into one of its subsidiarys pension plans in the second half of 2009. Additionally, the Company estimates it will be required to fund approximately $25 million to the plans in 2010. The following table provides the components of net periodic benefit cost for the defined benefit pension plans (in millions): ThreeMonthsEnded June30, SixMonthsEnded June30, 2009 2008 2009 2008 Interest cost $ 5.9 $ 6.0 $ 11.8 $ 12.1 Expected return on plan assets (6.1 ) (6.9 ) (12.3 ) (13.8 ) Amortization of actuarial loss 0.9 0.7 1.8 1.4 Employee termination costs 0.3 2.8 Net periodic benefit cost $ 0.7 $ 0.1 $ 1.3 $ 2.5 The Company recorded $0.3 million and $2.8 million of expense in the three and six months ended June30, 2008, respectively related to the termination of certain retirement eligible union and management plan participants in connection with the restructuring and related activities, as 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 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. The substantial majority of these financial institutions have credit ratings of A- or better from a major credit rating agency. 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 hedged 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, 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 June30, 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 i |
| 13. Borrowings | 13. Borrowings The Companys outstanding borrowings consisted of the following (in millions): June30, 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) 1,034.5 1,044.5 1,042.8 962.9 6.500% notes, net of discount, due 2014 (c) 498.4 533.8 5.930% notes, net of discount, due 2016 (d) 1,013.4 1,007.3 1,014.4 903.5 6.200% notes, net of discount, due 2036 497.5 456.3 497.4 391.4 Other borrowings 6.0 6.0 6.0 6.0 Total borrowings $ 3,049.8 $ 3,047.9 $ 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 June30, 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 $750 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 approximated its carrying value due to the short term nature of the obligations. The fair value of the Term Loan approximated 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 June30, 2009 are $1.0 billion in 2011, $500 million in 2014 and $1.5 billion thereafter. The Companys obligations with respect to its outstanding borrowings as described abov |
| 14. Income Taxes | 14. Income Taxes The Companys effective tax rates on pre-tax income for the three months ended June30, 2009 and 2008 were 25.5% and 24.8%, respectively, and 26.1% and 27.0% for the six months ended June30, 2009 and 2008, 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, in the second quarter of 2008, the Company implemented additional foreign tax efficient strategies consistent with our overall tax planning which impacted its effective tax rate for all subsequent periods. 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 June30, 2009 and December31, 2008, was $414.2 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 $405.2 million and $352.4 million as of June30, 2009 and December31, 2008, respectively, excluding interest and penalties. The Company recognizes interest and penalties with respect to unrecognized tax benefits in Provision for income taxes and records the associated liability in Income taxes payable in its Condensed Consolidated Balance Sheets. The Company recognized $2.2 million and $2.7 million in interest and penalties during the three months ended June30, 2009 and 2008, respectively, and $6.5 million during both the six months ended June30, 2009 and 2008. The Company has accrued $42.4 million and $35.8 |
| 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 six months ended June30, 2009 was as follows (options and aggregate intrinsic value in millions): Six Months Ended June30, 2009 Options Weighted-Average Exercise Price Weighted-Average Remaining ContractualTerm (Years) Aggregate Intrinsic Value Outstanding at January1, 43.6 $ 19.11 Granted 3.5 12.01 Exercised (0.6 ) 12.58 Cancelled/forfeited (1.7 ) 18.89 Outstanding at June30, 44.8 $ 18.64 5.5 $ 29.4 Options exercisable at June30, 36.7 $ 19.03 4.7 $ 14.0 As of June30, 2009 and 2008, approximately 42% and 50%, respectively, of outstanding options to purchase shares of common stock of the Company were held by employees of First Data. The total intrinsic value of stock options exercised during the six months ended June30, 2009 and 2008 were $1.3 million and $86.5 million, respectively. Restricted Stock Awards and Restricted Stock Units A summary of Western Union activity for restricted stock awards and units for the six months ended June30, 2009 is listed below (awards/units in millions): Six Months Ended June 30, 2009 Number Outstanding Weighted-Average Grant-Date FairValue Non-vested at January1, 1.2 $ 20.32 Granted 1.6 12.15 Vested (0.1 ) 17.78 Forfeited (0.1 ) 18.11 Non-vested at June 30, 2.6 $ 15.41 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 stock op |
| 16. Segments | 16. Segments As previously described in Note 1, the Company classifies its businesses into two reportable segments: consumer-to-consumer and global business payments. Operating segments are defined 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 generally offer 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. However, prior results may not be indicative of future periods. The global business payments (formerly consumer-to-business) segment processes payments from consumers to businesses and other organizations that receive consumer payments. As described further in Note 3, Acquisitions, the Company entered into a definitive agreement to acquire Canada-based Custom House, Ltd., a provider of international business-to-business payment services, which will expand the products offered by this segment to include business-to-business payments. Thus, the name was changed from consumer-to-business to global business payments. All businesses that have not been classified into consumer-to-consumer or global business payments 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 and six months ended June30, 2008, the Company incurred expenses of $22.9 million and $47.1 million, respectively, for restructuring and related activities, which were not allocated to the segments. While these items were identifiab |
Document Information
| Document Information | |
| 6 Months Ended
Jun. 30, 2009 USD / shares | |
| Document Information [Text Block] | |
| Form Type | 10-Q |
| Amendment | false |
| Amendment Description | N.A. |
| Report Period | 2009-06-30 |
Entity Information
| Entity Information (USD $) | |||
| 6 Months Ended
Jun. 30, 2009 | Jul. 31, 2009
| Jun. 30, 2008
| |
| Entity [Text Block] | |||
| Trading Symbol | WU | ||
| Company Name | Western Union CO | ||
| Central Index Key (CIK) | 0001365135 | ||
| Company Fiscal Year End Date | --12-31 | ||
| Company Well-known Seasoned Issuer (WKSI) | Yes | ||
| Current with Filings | Yes | ||
| Voluntary Filers | No | ||
| Accelerated Filing Status | Large Accelerated Filer | ||
| Common Stock Shares Outstanding | 701,546,931 | ||
| Public Float | $17,900,000,000 |