WESTERN UNION CO, 10-Q filed on 5/4/2011
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2011
Apr. 29, 2011
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
Western Union CO 
 
Entity Central Index Key (CIK)
0001365135 
 
Form Type
10-Q 
 
Report Period
2011-03-31 
 
Amendment Flag
FALSE 
 
Document Fiscal Year Focus
2011 
 
Document Fiscal Period Focus
Q1 
 
Company Fiscal Year End Date
12/31 
 
Company Well-known Seasoned Issuer (WKSI)
Yes 
 
Entity Voluntary Filers
No 
 
Current with Filings
Yes 
 
Accelerated Filing Status
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
632,264,111 
Condensed Consolidated Statements of Income (Unaudited) (USD $)
In Millions, except Per Share data
3 Months Ended
Mar. 31,
2011
2010
Revenues:
 
 
Transaction fees
$ 998 
$ 966 
Foreign exchange revenues
256 
238 
Other revenues
29 
29 
Total revenues
1,283 
1,233 
Expenses:
 
 
Cost of services
745 
715 
Selling, general and administrative
225 
202 
Total expenses
970 
917 
Operating income
313 
316 
Other income/(expense):
 
 
Interest income
Interest expense
(43)
(39)
Derivative gains/(losses), net
(1)
Other income/(expense), net
(1)
Total other expense, net
(38)
(40)
Income before income taxes
275 
276 
Provision for income taxes
65 
68 
Net income
210 
208 
Earnings per share:
 
 
Basic
0.32 
0.30 
Diluted
$ 0.32 
$ 0.30 
Weighted-average shares outstanding:
 
 
Basic
647 
682 
Diluted
652 
684 
Condensed Consolidated Balance Sheets (Unaudited)(USD ($))
In Millions
Mar. 31, 2011
Dec. 31, 2010
Assets
 
 
Cash and cash equivalents
$ 2,216 
$ 2,157 
Settlement assets
2,534 
2,635 
Property and equipment, net of accumulated depreciation of $398.0 and $383.6, respectively
194 
197 
Goodwill
2,159 
2,152 
Other intangible assets, net of accumulated amortization of $466.1 and $441.2, respectively
421 
438 
Other assets
364 
350 
Total assets
7,888 
7,929 
Liabilities:
 
 
Accounts payable and accrued liabilities
529 
520 
Settlement obligations
2,534 
2,635 
Income taxes payable
411 
357 
Deferred tax liability, net
274 
290 
Borrowings
3,583 
3,290 
Other liabilities
277 
255 
Total liabilities
7,607 
7,347 
Stockholders' equity:
 
 
Preferred stock, $1.00 par value; 10 shares authorized; no shares issued
Common stock, $0.01 par value; 2,000 shares authorized; 633.2 shares and 654.0 shares issued and outstanding at March 31, 2011 and December 31, 2010, respectively
Capital surplus
197 
117 
Retained earnings
230 
592 
Accumulated other comprehensive loss
(153)
(133)
Total stockholders' equity
280 
583 
Total liabilities and stockholders' equity
$ 7,888 
$ 7,929 
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)
In Millions, except Per Share data
Mar. 31, 2011
Dec. 31, 2010
Assets
 
 
Accumulated depreciation
$ 398 
$ 384 
Accumulated amortization
466 
441 
Stockholders' equity:
 
 
Preferred stock, par value
Preferred stock, shares authorized
10 
10 
Preferred stock, shares issued
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
2,000 
2,000 
Common stock, shares issued
633 
654 
Common stock, shares outstanding
633 
654 
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Millions
3 Months Ended
Mar. 31,
2011
2010
Cash flows from operating activities
 
 
Net income
$ 210 
$ 208 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Depreciation
15 
15 
Amortization
30 
27 
Stock compensation expense
10 
Other non-cash items, net
(15)
Increase/(decrease) in cash, excluding the effects of acquisitions, resulting from changes in:
 
 
Other assets
(12)
46 
Accounts payable and accrued liabilities
(20)
(36)
Income taxes payable (Note 13)
41 
(202)
Other liabilities
(5)
Net cash provided by operating activities
252 
74 
Cash flows from investing activities
 
 
Capitalization of contract costs
(7)
(4)
Capitalization of purchased and developed software
(3)
(4)
Purchases of property and equipment
(12)
(7)
Repayments of notes receivable issued to agents
17 
Net cash (used in)/provided by investing activities
(22)
Cash flows from financing activities
 
 
Proceeds from exercise of options
72 
Cash dividends paid
(45)
(41)
Common stock repurchased
(498)
(200)
Net proceeds from issuance of borrowings
300 
Net cash used in financing activities
(171)
(232)
Net change in cash and cash equivalents
58 
(155)
Cash and cash equivalents at beginning of period
2,157 
1,685 
Cash and cash equivalents at end of period
2,216 
1,530 
Supplemental cash flow information:
 
 
Interest paid
24 
14 
Income taxes paid (Note 13)
25 
267 
Unsettled repurchases of common stock
27 
Non-cash exchange of 5.400% notes due 2011 for 5.253% notes due 2020
$ 0 
$ 304 
Business and Basis of Presentation
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 movement and payment services, providing people and businesses with fast, reliable and convenient ways to send money and make payments around the world. The Western Union® brand is globally recognized. The Company’s services are available through a network of agent locations in more than 200 countries and territories. Each location in the Company’s agent network is capable of providing one or more of the Company’s services.
 
The Western Union business consists of the following segments:
 
  •   Consumer-to-consumer — money transfer services between consumers, primarily through a global network of third-party agents using the Company’s multi-currency, real-time money transfer processing systems. This service is available for international cross-border transfers — that is, the transfer of funds from one country to another — and, in certain countries, intra-country transfers — that is, money transfers from one location to another in the same country.
 
  •   Global business payments — the processing of payments from consumers or businesses to other businesses. The Company’s business payments services allow consumers to make payments to a variety of organizations including utilities, auto finance companies, mortgage servicers, financial service providers, government agencies and other businesses. Western Union Business Solutions (“Business Solutions”), which is also included in this segment, facilitates cross-border, cross-currency business-to-business payment transactions. The majority of the segment’s revenue was generated in the United States during all periods presented. However, international expansion and other key strategic initiatives have resulted in international revenue continuing to increase in this segment.
 
All businesses that have not been classified into the consumer-to-consumer or global business payments segments are reported as “Other” and primarily include the Company’s money order and prepaid services businesses.
 
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. Additionally, the Company must meet minimum capital requirements in some countries in order to maintain operating licenses. As of March 31, 2011, the amount of net assets subject to these limitations totaled approximately $220 million.
 
Various aspects of the Company’s services and businesses are subject to United States federal, state and local regulation, as well as regulation by foreign jurisdictions, including certain banking and other financial services regulations.
 
Basis of Presentation
 
The accompanying condensed consolidated financial statements are unaudited and were prepared in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X. In compliance with those instructions, certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted.
 
The unaudited condensed consolidated financial statements in this quarterly report are presented on a consolidated basis and include the accounts of the Company and its majority-owned subsidiaries. Results of operations and cash flows for the interim periods are not necessarily indicative of the results that may be expected for the entire year. All significant intercompany transactions and accounts have been eliminated.
 
In the opinion of management, these condensed consolidated financial statements include all the normal recurring adjustments necessary to fairly present the Company’s condensed consolidated results of operations, financial position and cash flows as of March 31, 2011 and for all periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements within the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.
 
Consistent with industry practice, the accompanying Condensed Consolidated Balance Sheets are unclassified due to the short-term nature of the Company’s settlement obligations contrasted with the Company’s ability to invest cash awaiting settlement in long-term investment securities.
 
Use of Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.
Earnings Per Share and Dividends
Earnings Per Share and Dividends
 
2.  Earnings Per Share and Dividends
 
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 March 31, 2011 and 2010, there were 7.8 million and 35.6 million, 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.
 
The following table provides the calculation of diluted weighted-average shares outstanding (in millions):
 
                 
    Three Months
 
    Ended
 
    March 31,  
    2011     2010  
 
Basic weighted-average shares outstanding
    646.9       681.9  
Common stock equivalents
    5.2       2.3  
                 
Diluted weighted-average shares outstanding
    652.1       684.2  
                 
 
 
Cash Dividends Paid
 
During the first quarter of 2011 and 2010, the Company’s Board of Directors declared quarterly cash dividends of $0.07 and $0.06 per common share, respectively, representing $44.7 million and $40.5 million, respectively, in total dividends, which were paid on March 31 of the respective years.
Acquisitions
Acquisitions
 
4.  Acquisitions
 
Angelo Costa, S.r.l.
 
On April 20, 2011, the Company acquired the remaining 70% interest which the Company previously did not own in Angelo Costa S.r.l. (“Costa”), one of the Company’s largest money transfer agents in Europe, for cash consideration of approximately €95 million (approximately $136 million based on currency exchange rates at April 20, 2011). The acquisition will be recognized at 100% of the fair value of Costa, due to the revaluation of the Company’s existing 30% interest to fair value.
 
The acquisition will not impact the Company’s revenue, because the Company was already recording all of the revenue arising from money transfers originating at Costa subagents. As of the acquisition date, the Company no longer incurs commission costs for transactions related to Costa; rather the Company now pays commissions to Costa subagents, resulting in lower overall commission expense. The Company’s operating expenses include costs attributable to Costa’s operations subsequent to the acquisition date.
Fair Value Measurements
Fair Value Measurements
 
5.  Fair Value Measurements
 
Fair value, as defined by the relevant accounting standards, represents 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 the Company measures fair value, refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.
 
The following table reflects assets and liabilities that were measured and carried at fair value on a recurring basis (in millions):
 
                                 
                      Assets/
 
                      Liabilities
 
    Fair Value Measurement Using     at Fair
 
March 31, 2011   Level 1     Level 2     Level 3     Value  
 
Assets:
                               
State and municipal debt securities
  $     $ 877.7     $     $ 877.7  
State and municipal variable rate demand notes
          397.7             397.7  
Agency mortgage-backed securities and other
    0.1       30.0             30.1  
Derivatives
          81.5             81.5  
                                 
Total assets
  $  0.1     $   1,386.9     $  —     $   1,387.0  
                                 
Liabilities:
                               
Derivatives
  $     $ 109.8     $     $ 109.8  
                                 
Total liabilities
  $     $ 109.8     $     $ 109.8  
                                 
 
                                 
                      Assets/
 
                      Liabilities
 
    Fair Value Measurement Using     at Fair
 
December 31, 2010   Level 1     Level 2     Level 3     Value  
 
Assets:
                               
State and municipal debt securities
  $     $ 849.1     $     $ 849.1  
State and municipal variable rate demand notes
          490.0             490.0  
Agency mortgage-backed securities and other
    0.1       29.9             30.0  
Derivatives
          69.8             69.8  
                                 
Total assets
  $  0.1     $   1,438.8     $  —     $   1,438.9  
                                 
Liabilities:
                               
Derivatives
  $     $ 80.9     $     $ 80.9  
                                 
Total liabilities
  $     $ 80.9     $     $ 80.9  
                                 
 
No non-recurring fair value adjustments were recorded during the three months ended March 31, 2011.
 
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-term maturities. The Company’s borrowings had a carrying value and fair value of $3,583.3 million and $3,758.1 million, respectively, at March 31, 2011 and had a carrying value and fair value of $3,289.9 million and $3,473.6 million, respectively, at December 31, 2010 (see Note 12).
Commitments and Contingencies
Commitments and Contingencies
 
6.  Commitments and Contingencies
 
Letters of Credit and Bank Guarantees
 
The Company had approximately $85 million in outstanding letters of credit and bank guarantees at March 31, 2011 with expiration dates through 2015, the majority 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.
 
Litigation and Related Contingencies
 
In the second quarter of 2009, the Antitrust Division of the United States Department of Justice (“DOJ”) served one of the Company’s subsidiaries with a grand jury subpoena requesting documents in connection with an investigation into money transfers, including related foreign exchange rates, from the United States to the Dominican Republic from 2004 through the date of subpoena. The Company is cooperating fully with the DOJ investigation. Due to the stage of the investigation, the Company is unable to predict the outcome of the investigation; or the possible loss or range of loss, if any, which could be associated with the resolution of any possible criminal charges or civil claims that may be brought against the Company. Should such charges or claims be brought, the Company could face significant fines, damage awards or regulatory consequences which could have a material adverse effect on the Company’s business, financial position and results of operations.
 
The Company and one of its subsidiaries are defendants in two purported class action lawsuits: James P. Tennille v. The Western Union Company and Robert P. Smet v. The Western Union Company, both of which are pending in the United States District Court for the District of Colorado. The original complaints asserted claims for violation of various consumer protection laws, unjust enrichment, conversion and declaratory relief, based on allegations that the Company waits too long to inform consumers if their money transfers are not redeemed by the recipients and that the Company uses the unredeemed funds to generate income until the funds are escheated to state governments. The Tennille complaint was served on the Company on April 27, 2009. The Smet complaint was served on the Company on April 6, 2010. On September 21, 2009, the Court granted the Company’s motion to dismiss the Tennille complaint and gave the plaintiff leave to file an amended complaint. On October 21, 2009, Tennille filed an amended complaint. The Company moved to dismiss the Tennille amended complaint and the Smet complaint. On November 8, 2010, the Court denied Western Union’s motion to dismiss as to the plaintiffs’ unjust enrichment and conversion claims. On February 4, 2011, the Court dismissed plaintiffs’ consumer protection claims. On March 11, 2011, the plaintiffs filed an amended complaint that adds a claim for breach of fiduciary duty, various elements to its declaratory relief claim and Western Union Financial Services, Inc. as a defendant. On April 25, 2011, the Company and Western Union Financial Services, Inc. filed a motion to dismiss the breach of fiduciary duty and declaratory relief claims. The plaintiffs have not sought and the Court has not granted class certification. The Company and Western Union Financial Services, Inc. intend to vigorously defend themselves against both lawsuits. However, due to the preliminary stages of these lawsuits, the fact the plaintiffs have not quantified their damage demands, and the uncertainty as to whether they will ever be certified as class actions, the potential outcome cannot be determined.
 
On February 11, 2010, the Company signed an agreement and settlement, which resolved all outstanding legal issues and claims with the State of Arizona and requires the Company to fund a multi-state not-for-profit organization promoting safety and security along the United States and Mexico border, in which California, Texas and New Mexico are participating with Arizona. The accrual includes amounts for reimbursement to the State of Arizona for its costs associated with this matter. In addition, as part of the agreement and settlement, the Company has made and expects to make certain investments in its compliance programs along the United States and Mexico border and has engaged a monitor for those programs, which are expected to cost up to $23 million over the period from signing to 2013.
 
In the normal course of business, the Company is subject to claims and litigation. Management of the Company believes such matters involving a reasonably possible chance of loss will not, individually or in the aggregate, result in a material adverse effect on the Company’s financial position, results of operations and cash flows. The Company accrues for loss contingencies as they become probable and estimable.
 
On January 26, 2006, the First Data Corporation (“First Data”) Board of Directors announced its intention to pursue the distribution of all of its money transfer and consumer payments business and its interest in a Western Union money transfer agent, as well as its related assets, including real estate, through a tax-free distribution to First Data shareholders (the “Spin-off”). The Spin-off resulted in the formation of the Company and these assets and businesses no longer being part of First Data. Pursuant to the separation and distribution agreement with First Data in connection with the 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 Company’s business with the Company and financial responsibility for the obligations and liabilities of First Data’s 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 13).
Related Party Transactions
Related Party Transactions
 
7.  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 Company’s behalf. Commission expense recognized for these agents for the three months ended March 31, 2011 and 2010 totaled $44.0 million and $44.7 million, respectively.
 
The Company has a director who is also a director for a company holding significant investments in two of the Company’s existing agents. These agents had been agents of the Company prior to the director being appointed to the board. The Company recognized commission expense of $13.4 million and $13.5 million for the three months ended March 31, 2011 and 2010, respectively, related to these agents.
Settlement Assets and Obligations
Settlement Assets and Obligations
 
8.  Settlement Assets and Obligations
 
Settlement assets represent funds received or to be received from agents for unsettled money transfers, money orders and consumer payments. Western Union records corresponding settlement obligations relating to amounts payable under money transfers, money orders and consumer payment service arrangements. Settlement assets and obligations also include amounts receivable from and payable to businesses for the value of customer cross-currency payment transactions related to the global business payments segment.
 
Settlement assets and obligations consisted of the following (in millions):
 
                 
    March 31,
    December 31,
 
    2011     2010  
 
Settlement assets:
               
Cash and cash equivalents
  $ 207.7     $ 133.8  
Receivables from selling agents and business-to-business customers
    1,020.4       1,132.3  
Investment securities
    1,305.5       1,369.1  
                 
    $ 2,533.6     $ 2,635.2  
                 
Settlement obligations:
               
Money transfer, money order and payment service payables
  $ 2,051.5     $ 2,170.0  
Payables to agents
    482.1       465.2  
                 
    $   2,533.6     $   2,635.2  
                 
 
Investment securities consist primarily of high-quality state and municipal debt securities, including variable rate demand notes. Variable rate demand note securities 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 varying maturities through 2049. 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. 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 and foreign country requirements. The substantial majority of the Company’s 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 and through investment diversification. At March 31, 2011, the majority of the Company’s 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 both the three months ended March 31, 2011 and 2010 were $3.3 billion.
 
The components of investment securities, all of which are classified as available-for-sale, were as follows (in millions):
 
                                         
                            Net
 
                Gross
    Gross
    Unrealized
 
    Amortized
    Fair
    Unrealized
    Unrealized
    Gains/
 
March 31, 2011   Cost     Value     Gains     Losses     (Losses)  
 
State and municipal debt securities (a)
  $ 872.6     $ 877.7     $ 7.6     $ (2.5 )   $ 5.1  
State and municipal variable rate demand notes
    397.7       397.7                    
Agency mortgage-backed securities and other
    29.9       30.1       0.2             0.2  
                                         
    $   1,300.2     $   1,305.5     $   7.8     $ (2.5 )   $   5.3  
                                         
 
                                         
                            Net
 
                Gross
    Gross
    Unrealized
 
    Amortized
    Fair
    Unrealized
    Unrealized
    Gains/
 
December 31, 2010   Cost     Value     Gains     Losses     (Losses)  
 
State and municipal debt securities (a)
  $ 844.1     $ 849.1     $ 7.0     $ (2.0 )   $ 5.0  
State and municipal variable rate demand notes
    490.0       490.0                    
Agency mortgage-backed securities and other
    29.9       30.0       0.1             0.1  
                                         
    $   1,364.0     $   1,369.1     $   7.1     $   (2.0 )   $   5.1  
                                         
 
 
(a) The majority of these securities are fixed rate instruments.
 
The following summarizes the contractual maturities of investment securities as of March 31, 2011 (in millions):
 
         
    Fair
 
    Value  
 
Due within 1 year
  $ 138.3  
Due after 1 year through 5 years
    680.9  
Due after 5 years through 10 years
    123.0  
Due after 10 years
    363.3  
         
    $   1,305.5  
         
 
Actual maturities may differ from contractual maturities because issuers may have the right to call or prepay the obligations or the Company may have the right to put the obligation prior to its contractual maturity, as with variable rate demand notes. Variable rate demand notes, having a fair value of $9.1 million, $31.5 million, $38.9 million and $318.2 million, are included in the “Due within 1 year,” “Due after 1 year through 5 years,” “Due after 5 years through 10 years” and “Due after 10 years” categories, respectively, in the table above.
Comprehensive Income
Comprehensive Income
 
9.  Comprehensive Income
 
The components of other comprehensive income, net of tax, were as follows (in millions):
 
                 
    Three Months Ended
 
    March 31,  
    2011     2010  
 
Net income
  $ 210.2     $ 207.9  
Unrealized gains/(losses) on investment securities:
               
Unrealized gains
    0.4       2.4  
Tax expense
    (0.1 )     (0.9 )
Reclassification of gains into earnings
    (0.2 )     (0.9 )
Tax expense
    0.1       0.4  
                 
Net unrealized gains on investment securities
    0.2       1.0  
Unrealized gains/(losses) on hedging activities:
               
Unrealized gains/(losses)
    (35.6 )     35.0  
Tax benefit/(expense)
    5.2       (4.2 )
Reclassification of losses into earnings
    6.2       0.4  
Tax benefit
    (1.4 )     (0.4 )
                 
Net unrealized gains/(losses) on hedging activities
    (25.6 )     30.8  
Foreign currency translation adjustments:
               
Foreign currency translation adjustments
    4.5       10.7  
Tax expense
    (1.0 )     (2.4 )
                 
Net foreign currency translation adjustments
    3.5       8.3  
Pension liability adjustments:
               
Reclassification of losses into earnings
    2.0       1.6  
Tax benefit
    (0.7 )     (0.7 )
                 
Net pension liability adjustments
    1.3       0.9  
                 
Total other comprehensive income
  $   189.6     $   248.9  
                 
Employee Benefit Plan
Employee Benefit Plan
 
10.  Employee Benefit Plan
 
The Company has a frozen defined benefit pension plan (the “Plan”) for which it had a recorded unfunded pension obligation of $106.5 million and $112.8 million as of March 31, 2011 and December 31, 2010, respectively, included in “Other liabilities” in the Condensed Consolidated Balance Sheets. The Company is required to fund $22 million to the Plan in 2011. Through April 2011, the Company has made contributions of approximately $10 million to the Plan, including a discretionary contribution of $3 million.
 
The following table provides the components of net periodic benefit cost for the Plan (in millions):
 
                 
    Three Months Ended
 
    March 31,  
    2011     2010  
 
Interest cost
  $ 4.5     $ 5.0  
Expected return on plan assets
    (5.3 )     (5.1 )
Amortization of actuarial loss
    2.0       1.6  
                 
Net periodic benefit cost
  $      1.2     $      1.5  
                 
Derivatives
Derivatives
 
11.  Derivatives
 
The Company is exposed to foreign currency exchange 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 money transfer revenues and on money transfer settlement assets and obligations. The Company is also exposed to risk from derivative contracts written to its customers arising from its cross-currency business-to-business payments operations. 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 (a) minimize its exposures related to changes in foreign currency exchange rates and interest rates and (b) facilitate cross-currency business-to-business payments by writing derivatives to customers.
 
The Company executes derivatives related to its consumer-to-consumer business with established financial institutions, with the substantial majority of these financial institutions having credit ratings of “A-” or better from a major credit rating agency. The Company executes global business payments derivatives mostly with small and medium size enterprises. The credit risk inherent in both the consumer-to-consumer and global business payments 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 contract and on an ongoing basis. 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 Company’s 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.
 
Foreign Currency — Consumer-to-Consumer
 
The Company’s 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 related to its business. At March 31, 2011, the Company’s longer-term foreign currency forward contracts had maturities of a maximum of 24 months with a weighted-average maturity of approximately one year. These contracts are accounted for as cash flow hedges of forecasted revenue, with effectiveness assessed 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 hedges not considered effective or portions of the hedge that are excluded from the measure of effectiveness are recognized immediately in “Derivative gains/(losses), net” within the Company’s Condensed Consolidated Statements of Income.
 
The Company also uses short duration foreign currency forward contracts, generally with maturities from a few days up to one month, to offset foreign exchange rate fluctuations on settlement assets and obligations between initiation and settlement. In addition, forward contracts, typically with maturities of less than one year, are utilized to offset foreign exchange rate fluctuations on certain foreign currency denominated cash positions. None of these contracts are designated as accounting hedges.
 
The aggregate equivalent United States dollar notional amounts of foreign currency forward contracts as of March 31, 2011 were as follows (in millions):
 
         
Contracts not designated as hedges:
       
Euro
  $   230.6  
Argentine peso
    100.0  
British pound
    29.3  
Other
    74.2  
Contracts designated as hedges:
       
Euro
  $ 481.0  
Canadian dollar
    111.2  
British pound
    101.5  
Other
    100.0  
 
 
Foreign Currency — Global Business Payments
 
The Company writes derivatives, primarily foreign currency forward contracts and, to a much smaller degree, option contracts, mostly with small and medium size enterprises (customer contracts) and derives a currency spread from this activity as part of its global business payments operations. In this capacity, the Company facilitates cross-currency payment transactions for its customers but aggregates its global business payments foreign currency exposures arising from customer contracts, including the derivative contracts described above, and hedges the resulting net currency risks by entering into offsetting contracts with established financial institution counterparties (economic hedge contracts). The derivatives written are part of the broader portfolio of foreign currency positions arising from its cross-currency business-to-business payments operation, which primarily include spot exchanges of currency in addition to forwards and options. Foreign exchange revenues from the total portfolio of positions were $27.7 million and $25.4 million in the three months ended March 31, 2011 and 2010, respectively. None of the derivative contracts used in global business payments operations are designated as accounting hedges. The duration of these derivative contracts is generally nine months or less.
 
The aggregate equivalent United States dollar notional amounts of foreign currency derivative customer contracts held by the Company as of March 31, 2011 were approximately $1.7 billion. The significant majority of customer contracts are written in major currencies such as the Canadian dollar, euro, Australian dollar and the British pound.
 
The Company has a forward contract to offset foreign exchange rate fluctuations on a Canadian dollar denominated intercompany loan. This contract, which is not designated as an accounting hedge, had a notional amount of approximately 250 million and 245 million Canadian dollars at March 31, 2011 and December 31, 2010, respectively.
 
Interest Rate Hedging — Corporate
 
The Company utilizes interest rate swaps to effectively change the interest rate payments on a portion of its notes from fixed-rate payments to short-term LIBOR-based variable rate payments in order to manage its overall exposure to interest rates. The Company designates these derivatives as fair value hedges utilizing the short-cut method, which permits an assumption of no ineffectiveness if certain criteria are met. The change in fair value of the interest rate swaps is offset by a change in the carrying value of the debt being hedged within the Company’s “Borrowings” in the Condensed Consolidated Balance Sheets and “Interest expense” in the Condensed Consolidated Statements of Income has been adjusted to include the effects of interest accrued on the swaps.
 
The Company, at times, utilizes derivatives to hedge the forecasted issuance of fixed rate debt. These derivatives are designated as cash flow hedges of the variability in the fixed rate coupon of the debt expected to be issued. The effective portion of the change in fair value of the derivatives is recorded in “Accumulated other comprehensive loss.”
 
At both March 31, 2011 and December 31, 2010, the Company held interest rate swaps in an aggregate notional amount of $1,195 million. Of this aggregate notional amount held at March 31, 2011, $695 million related to notes due in 2011 and $500 million related to notes due in 2014.
 
Balance Sheet
 
The following table summarizes the fair value of derivatives reported in the Condensed Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010 (in millions):
 
                                         
    Derivative Assets     Derivative Liabilities  
        Fair Value         Fair Value  
    Balance Sheet
  March 31,
    December 31,
    Balance Sheet
  March 31,
    December 31,
 
    Location   2011     2010     Location   2011     2010  
 
Derivatives — hedges:
                                       
Interest rate fair value hedges — Corporate
  Other assets   $ 16.3     $ 8.0     Other liabilities   $ 3.2     $ 1.6  
Foreign currency cash flow hedges — Consumer-to-consumer
  Other assets     3.5       14.7     Other liabilities     49.7       31.1  
                                         
Total
      $ 19.8     $ 22.7         $ 52.9     $ 32.7  
                                         
Derivatives — undesignated:
                                       
Foreign currency — Global business payments
  Other assets   $ 61.2     $ 46.9     Other liabilities   $ 51.6     $ 36.2  
Foreign currency — Consumer-to-consumer
  Other assets     0.5       0.2     Other liabilities     5.3       12.0  
                                         
Total
      $ 61.7     $ 47.1         $ 56.9     $ 48.2  
                                         
Total derivatives
      $   81.5     $   69.8         $  109.8     $   80.9  
                                         
 
Income Statement
 
The following tables summarize the location and amount of gains and losses of derivatives in the Condensed Consolidated Statements of Income segregated by designated, qualifying hedging instruments and those that are not, for the three months ended March 31, 2011 and 2010 (in millions):
 
Fair Value Hedges
 
The following table presents the location and amount of gains/(losses) from fair value hedges for the three months ended March 31, 2011 and 2010 (in millions):
 
                                                         
    Gain/(Loss) Recognized in Income on
          Gain/(Loss) Recognized in Income on
 
    Derivatives           Related Hedged Item (a)  
    Income
    Amount           Income
    Amount  
    Statement
    March 31,
    March 31,
          Statement
    March 31,
    March 31,
 
Derivatives   Location     2011     2010     Hedged Items     Location     2011     2010  
 
Interest rate contracts
    Interest expense     $   (0.2 )   $   6.2       Fixed-rate debt       Interest expense     $   7.3     $   0.7  
                                                         
Total gain/(loss)
          $ (0.2 )   $ 6.2                     $ 7.3     $ 0.7  
                                                         
 
 
Cash Flow Hedges
 
The following table presents the location and amount of gains/(losses) from cash flow hedges for the three months ended March 31, 2011 and 2010 (in millions):
 
                                                         
                Gain/(Loss) Reclassified from
                 
    Amount of Gain/(Loss)
    Accumulated OCI
    Gain/(Loss) Recognized in Income on
 
    Recognized in OCI on
    into Income
    Derivatives (Ineffective Portion and Amount
 
    Derivatives (Effective
    (Effective Portion)     Excluded from Effectiveness Testing) (b)  
    Portion)     Income
  Amount     Income
  Amount  
    March 31,
    March 31,
    Statement
  March 31,
    March 31,
    Statement
  March 31,
    March 31,
 
Derivatives   2011     2010     Location   2011     2010     Location   2011     2010  
 
Foreign currency contracts
  $   (35.6 )   $   31.7     Revenue   $   (5.8 )   $   —     Derivative gains/
(losses), net
  $   2.3     $   (1.3 )
Interest rate contracts (c)
          3.3     Interest expense     (0.4 )     (0.4 )   Interest expense            
                                                         
Total gain/(loss)
  $ (35.6 )   $ 35.0         $ (6.2 )   $   (0.4 )       $ 2.3     $ (1.3 )
                                                         
 
Undesignated Hedges
 
The following table presents the location and amount of net gains/(losses) from undesignated hedges for the three months ended March 31, 2011 and 2010 (in millions):
 
                     
    Gain/(Loss) Recognized in Income on Derivatives (d)  
        Amount  
        Three Months Ended
 
        March 31,  
Derivatives   Income Statement Location   2011     2010  
 
Foreign currency contracts (e)
  Selling, general and administrative   $   (22.7 )   $   11.2  
Foreign currency contracts (f)
  Derivative gains/(losses), net     (2.0 )     1.6  
                     
Total gain/(loss)
      $ (24.7 )   $ 12.8  
                     
 
 
(a) The net gain of $7.3 million and $0.7 million in the three months ended March 31, 2011 and 2010, respectively, was comprised of a (loss)/gain in value on the debt of $0.2 million and ($6.2) million, respectively, and amortization of hedge accounting adjustments of $7.1 million and $6.9 million, respectively.
 
(b) The portion of the change in fair value of a derivative excluded from the effectiveness assessment for foreign currency forward contracts designated as cash flow hedges represents the difference between changes in forward rates and spot rates.
 
(c) The Company uses derivatives to hedge the forecasted issuance of fixed rate debt and records the effective portion of the derivative’s fair value in “Accumulated other comprehensive loss” in the Condensed Consolidated Balance Sheets. These amounts are reclassified to “Interest expense” over the life of the related notes.
 
(d) The Company uses foreign currency forward and option contracts as part of its international business-to-business payments operation. These derivative contracts are excluded from this table as they are managed as part of a broader currency portfolio that includes non-derivative currency exposures. The gains and losses on these derivatives are included as part of the broader disclosure of portfolio revenue for this business discussed above.
 
(e) The Company uses foreign currency forward contracts to offset foreign exchange rate fluctuations on settlement assets and obligations as well as certain foreign currency denominated positions. Foreign exchange gain/(loss) on settlement assets and obligations and cash balances for the three months ended March 31, 2011 and 2010, were $20.2 million and ($11.6) million, respectively.
 
(f) The derivative contracts used in the Company’s revenue hedging program are not designated as hedges in the final month of the contract.
 
 
An accumulated other comprehensive pre-tax loss of $28.1 million related to the foreign currency forward contracts is expected to be reclassified into revenue within the next 12 months as of March 31, 2011. Approximately $1.3 million of net losses on the forecasted debt issuance hedges are expected to be recognized in interest expense within the next 12 months as of March 31, 2011. No amounts have been reclassified into earnings as a result of the underlying transaction being considered probable of not occurring within the specified time period.
Borrowings
Borrowings
 
12.  Borrowings
 
The Company’s outstanding borrowings consisted of the following (in millions):
 
                 
    March 31, 2011     December 31, 2010  
 
Due in less than one year (a):
               
5.400% notes (effective rate of 2.7%) due November 2011
  $   696.3     $   696.3  
Due in greater than one year (a):
               
Floating rate notes, due 2013 (b)
    300.0        
6.500% notes (effective rate of 5.4%) due 2014
    500.0       500.0  
5.930% notes due 2016 (c)
    1,000.0       1,000.0  
5.253% notes due 2020 (c)
    324.9       324.9  
6.200% notes due 2036 (c)
    500.0       500.0  
6.200% notes due 2040 (c)
    250.0       250.0  
Other borrowings
    5.9       5.9  
                 
Total borrowings at par value
    3,577.1       3,277.1  
Fair value hedge accounting adjustments, net (a)
    29.3       36.6  
Unamortized discount, net
    (23.1 )     (23.8 )
                 
Total borrowings at carrying value (d)
  $ 3,583.3     $ 3,289.9  
                 
 
 
(a) The Company utilizes interest rate swaps designated as fair value hedges to effectively change the interest rate payments on a portion of its notes from fixed-rate payments to short-term LIBOR-based variable rate payments in order to manage its overall exposure to interest rates. The changes in fair value of these interest rate swaps result in an offsetting hedge accounting adjustment recorded to the carrying value of the related note. These hedge accounting adjustments will be reclassified as reductions to or increases in “Interest expense” over the life of the related notes, and cause the effective rate of interest to differ from the notes’ stated rate.
 
(b) On March 7, 2011, the Company issued $300 million of aggregate principal amount of unsecured floating rate notes due March 7, 2013 (“2013 Notes”). Interest is payable quarterly at a per annum interest rate equal to three-month LIBOR plus 58 basis points (0.9% at March 31, 2011) and is reset quarterly. See below for additional detail relating to the debt issuance.
 
(c) The difference between the stated interest rate and the effective interest rate is not significant.
 
(d) At March 31, 2011, the Company’s weighted-average effective rate on total borrowings was approximately 4.8%.
 
The aggregate fair value of the Company’s borrowings, based on quotes from multiple banks, excluding the impact of related interest rate swaps, was $3,758.1 million and $3,473.6 million at March 31, 2011 and December 31, 2010, respectively.
 
The Company’s maturities of borrowings at par value as of March 31, 2011 are $700 million in November 2011, $300 million in 2013, $500 million in 2014 and $2.1 billion thereafter.
 
The Company’s obligations with respect to its outstanding borrowings, as described above, rank equally.
 
2013 Notes
 
On March 7, 2011, the Company issued $300 million of aggregate principal amount of unsecured floating rate notes due March 7, 2013. Interest with respect to the 2013 Notes is payable quarterly in arrears on each March 7, June 7, September 7 and December 7, beginning June 7, 2011, at a per annum interest rate equal to the three-month LIBOR plus 58 basis points (reset quarterly). The 2013 Notes are subject to covenants that, among other things, limit or restrict the ability of the Company to sell or transfer assets or enter into a merger or consolidate with another company, and limit or restrict the ability of the Company and certain of its subsidiaries to incur certain types of security interests, or enter into sale and leaseback transactions. If a change of control triggering event occurs, each holder of the 2013 Notes may require the Company to repurchase some or all of their notes at a price equal to 101% of the principal amount of their notes, plus any accrued and unpaid interest.
Income Taxes
Income Taxes
 
13.  Income Taxes
 
The Company’s effective tax rates on pre-tax income for the three months ended March 31, 2011 and 2010 were 23.5% and 24.7%, 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, during the three months ended March 31, 2011, the Company’s effective tax rate benefited from the tax effect of expenses related to the Restructuring Plan.
 
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 Company’s tax reserves reflect management’s 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 Company’s 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 Company’s 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 Company’s financial statements, and are reflected in “Income taxes payable” in the Condensed Consolidated Balance Sheets. The total amount of unrecognized tax benefits as of March 31, 2011 and December 31, 2010 was $649.0 million and $618.7 million, respectively, excluding interest and penalties. A substantial portion of the Company’s unrecognized tax benefits relate to the 2003 restructuring of the Company’s international operations whereby the Company’s income from certain foreign-to-foreign money transfer transactions has been taxed at relatively low foreign tax rates compared to the Company’s 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 $584.2 million and $555.5 million as of March 31, 2011 and December 31, 2010, respectively, excluding interest and penalties.
 
The Company recognizes interest and penalties with respect to unrecognized tax benefits in “Provision for income taxes” in its Condensed Consolidated Statements of Income, and records the associated liability in “Income taxes payable” in its Condensed Consolidated Balance Sheets. The Company recognized $3.0 million and $2.4 million in interest and penalties during the three months ended March 31, 2011 and 2010, respectively. The Company has accrued $55.0 million and $52.4 million for the payment of interest and penalties at March 31, 2011 and December 31, 2010, respectively.
 
Subject to the matter referenced in the paragraph below, the Company has identified no other uncertain tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within 12 months, except for recurring accruals on existing uncertain tax positions. The change in unrecognized tax benefits during the three months ended March 31, 2011 is substantially attributable to such recurring accruals.
 
The Company and its subsidiaries file tax returns for the United States, for multiple states and localities, and for various non-United States jurisdictions, and the Company has identified the United States and Ireland as its two major tax jurisdictions. The United States federal income tax returns of First Data, which include the Company, are eligible to be examined for the years 2002 through 2006. The Company’s United States federal income tax returns since the Spin-off are also eligible to be examined. In the second quarter of 2010, the IRS, First Data and the Company reached a resolution of all outstanding issues related to First Data’s United States federal consolidated income tax return for 2002 (which included issues related to the Company). The resolution did not result in a material change to the Company’s financial position. In addition, the IRS completed its examination of the United States federal consolidated income tax returns of First Data for 2003 and 2004, which included the Company, and issued a Notice of Deficiency in December 2008. The Notice of Deficiency alleges significant additional taxes, interest and penalties owed with respect to a variety of adjustments involving the Company and its subsidiaries, and the Company generally has responsibility for taxes associated with these potential Company-related adjustments under the tax allocation agreement with First Data executed at the time of the Spin-off. The Company agrees with a number of the adjustments in the Notice of Deficiency; however, the Company does not agree with the Notice of Deficiency regarding several substantial adjustments representing total alleged additional tax and penalties due of approximately $114 million. As of March 31, 2011, interest on the alleged amounts due for unagreed adjustments would be approximately $37 million. A substantial part of the alleged amounts due for these unagreed adjustments relates to the Company’s international restructuring, which took effect in the fourth quarter of 2003, and, accordingly, the alleged amounts due related to such restructuring largely are attributable to 2004. On March 20, 2009, the Company filed a petition in the United States Tax Court contesting those adjustments with which it does not agree. In September 2010, IRS Counsel referred the case to the IRS Appeals Division for possible settlement. The Company believes its overall reserves are adequate, including those associated with the adjustments alleged in the Notice of Deficiency. If the IRS’ position in the Notice of Deficiency is sustained, the Company’s tax provision related to 2003 and later years would materially increase. An examination of the United States federal consolidated income tax returns of First Data that cover the Company’s 2005 and pre-spin-off 2006 taxable periods is ongoing, as is an examination of the Company’s United States federal consolidated income tax returns for the 2006 post-spin-off period, 2007 and 2008. The Irish income tax returns of certain subsidiaries for the years 2006 and forward are eligible to be examined by the Irish tax authorities, although no examinations have commenced.
 
In the first quarter of 2010, the Company made a $250 million refundable tax deposit relating to potential United States federal tax liabilities, including those arising from the Company’s 2003 international restructuring, which have been previously accrued in the Company’s financial statements. The deposit was recorded as a reduction to “Income taxes payable” in the Condensed Consolidated Balance Sheets and a decrease in cash flows from operating activities in the Condensed Consolidated Statement of Cash Flows. Making the deposit limits the further accrual of interest charges with respect to such potential tax liabilities, to the extent of the deposit.
 
At March 31, 2011, no provision had been made for United States federal and state income taxes on foreign earnings of approximately $2.7 billion, which are expected to be reinvested outside the United States indefinitely. Upon distribution of those earnings to the United States in the form of actual or constructive dividends, the Company would be subject to United States income taxes (subject to an adjustment for foreign tax credits), state income taxes and possible withholding taxes payable to various foreign countries. Determination of this amount of unrecognized deferred United States tax liability is not practicable because of the complexities associated with its hypothetical calculation.
 
Tax Allocation Agreement with First Data
 
The Company and First Data each are liable for taxes imposed on their respective businesses both prior to and after the Spin-off. If such taxes have not been appropriately apportioned between First Data and the Company, subsequent adjustments may occur that may impact the Company’s financial position or results of operations.
 
Also under the tax allocation agreement, with respect to taxes and other liabilities that result from a final determination that is inconsistent with the anticipated tax consequences of the Spin-off (as set forth in the private letter ruling and relevant tax opinion) (“Spin-off Related Taxes”), the Company will be liable to First Data for any such Spin-off Related Taxes attributable solely to actions taken by or with respect to the Company. In addition, the Company will also be liable for half of any Spin-off Related Taxes (i) that would not have been imposed but for the existence of both an action by the Company and an action by First Data or (ii) where the Company and First Data each take actions that, standing alone, would have resulted in the imposition of such Spin-off Related Taxes. The Company may be similarly liable if it breaches certain representations or covenants set forth in the tax allocation agreement. If the Company is required to indemnify First Data for taxes incurred as a result of the Spin-off being taxable to First Data, it likely would have a material adverse effect on the Company’s business, financial position and results of operations. First Data generally will be liable for all Spin-off Related Taxes, other than those described above.
Stock Compensation Plans
Stock Compensation Plans
 
14.  Stock Compensation Plans
 
For the three months ended March 31, 2011 and 2010, the Company recognized stock-based compensation expense of $7.5 million and $10.4 million, respectively, resulting from stock options, restricted stock awards, restricted stock units, performance based restricted stock units and deferred stock units in the Condensed Consolidated Statements of Income. During the three months ended March 31, 2011, the Company granted 1.6 million options at a weighted-average exercise price of $21.05, 1.3 million restricted stock units at a weighted-average grant date fair value of $20.23 and 0.4 million performance based restricted stock units at a weighted-average grant date fair value of $20.18. The performance based restricted stock units are restricted stock awards, primarily granted to the Company’s executives, which require certain strategic performance objectives to be met over the next two years in addition to the three year vesting period. During the three months ended March 31, 2011, the Company had stock option and restricted stock cancellations and forfeitures of 1.3 million and 0.2 million, respectively.
 
As of March 31, 2011, the Company had 33.7 million outstanding options at a weighted-average exercise price of $18.99, and had 27.7 million options exercisable at a weighted-average exercise price of $19.34. Approximately 33% of the outstanding options at March 31, 2011 were held by employees of First Data. The Company had 4.0 million non-vested restricted stock awards and units at a weighted-average grant date fair value of $17.18 as of March 31, 2011.
 
The Company used the following assumptions for the Black-Scholes option pricing model to determine the value of Western Union options granted in the three months ended March 31, 2011:
 
         
Stock options granted:
       
Weighted-average risk-free interest rate
    2.6 %
Weighted-average dividend yield
    1.4 %
Volatility
    30.9 %
Expected term (in years)
    5.8  
Weighted-average grant date fair value
  $   6.07  
 
All assumptions used to calculate the fair value of Western Union’s stock options granted during the three months ended March 31, 2011 were determined on a consistent basis with those assumptions disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.
Segments
Segments
 
15.  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 that engage in business activities, about which separate financial information is available that is evaluated regularly by the Company’s 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, around the world. The segment consists of three regions, which primarily 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.
 
The global business payments segment processes payments from consumers or businesses to other businesses.
 
All businesses that have not been classified into consumer-to-consumer or global business payments are reported as “Other.” These businesses primarily include the Company’s money order and prepaid services businesses.
 
During the three months ended March 31, 2011, the Company incurred expenses of $24.0 million for restructuring and related activities, which were not allocated to segments. While these items were identifiable to the Company’s 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 3.
 
The following table presents the Company’s reportable segment results for the three months ended March 31, 2011 and 2010 (in millions):
 
                 
    Three Months Ended
 
    March 31,  
    2011     2010  
 
Revenues:
               
Consumer-to-consumer:
               
Transaction fees
  $   839.8     $   807.0  
Foreign exchange revenues
    227.4       211.9  
Other revenues
    10.9       11.3  
                 
      1,078.1       1,030.2  
Global business payments:
               
Transaction fees
    145.6       148.0  
Foreign exchange revenues
    28.7       26.2  
Other revenues
    7.8       7.6  
                 
      182.1       181.8  
Other:
               
Transaction fees
    12.6       10.7  
Other revenues
    10.2       10.0  
                 
      22.8       20.7  
                 
Total consolidated revenues
  $   1,283.0     $   1,232.7  
                 
Operating income/(loss):
               
Consumer-to-consumer
  $ 308.6     $ 282.7  
Global business payments
    30.1       37.6  
Other
    (1.8 )     (4.5 )
                 
Total segment operating income
    336.9       315.8  
Restructuring and related expenses (see Note 3)
    (24.0 )      
                 
Total consolidated operating income
  $ 312.9     $ 315.8  
                 
Business and Basis of Presentation (Policies)
 
The Western Union Company (“Western Union” or the “Company”) is a leader in global money movement and payment services, providing people and businesses with fast, reliable and convenient ways to send money and make payments around the world. The Western Union® brand is globally recognized. The Company’s services are available through a network of agent locations in more than 200 countries and territories. Each location in the Company’s agent network is capable of providing one or more of the Company’s services.
 
The Western Union business consists of the following segments:
 
  •   Consumer-to-consumer — money transfer services between consumers, primarily through a global network of third-party agents using the Company’s multi-currency, real-time money transfer processing systems. This service is available for international cross-border transfers — that is, the transfer of funds from one country to another — and, in certain countries, intra-country transfers — that is, money transfers from one location to another in the same country.
 
  •   Global business payments — the processing of payments from consumers or businesses to other businesses. The Company’s business payments services allow consumers to make payments to a variety of organizations including utilities, auto finance companies, mortgage servicers, financial service providers, government agencies and other businesses. Western Union Business Solutions (“Business Solutions”), which is also included in this segment, facilitates cross-border, cross-currency business-to-business payment transactions. The majority of the segment’s revenue was generated in the United States during all periods presented. However, international expansion and other key strategic initiatives have resulted in international revenue continuing to increase in this segment.
 
All businesses that have not been classified into the consumer-to-consumer or global business payments segments are reported as “Other” and primarily include the Company’s money order and prepaid services businesses.
 
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. Additionally, the Company must meet minimum capital requirements in some countries in order to maintain operating licenses. As of March 31, 2011, the amount of net assets subject to these limitations totaled approximately $220 million.
 
Various aspects of the Company’s services and businesses are subject to United States federal, state and local regulation, as well as regulation by foreign jurisdictions, including certain banking and other financial services regulations.
 
Basis of Presentation
 
The accompanying condensed consolidated financial statements are unaudited and were prepared in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X. In compliance with those instructions, certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted.
 
The unaudited condensed consolidated financial statements in this quarterly report are presented on a consolidated basis and include the accounts of the Company and its majority-owned subsidiaries. Results of operations and cash flows for the interim periods are not necessarily indicative of the results that may be expected for the entire year. All significant intercompany transactions and accounts have been eliminated.
 
In the opinion of management, these condensed consolidated financial statements include all the normal recurring adjustments necessary to fairly present the Company’s condensed consolidated results of operations, financial position and cash flows as of March 31, 2011 and for all periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements within the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.
 
Consistent with industry practice, the accompanying Condensed Consolidated Balance Sheets are unclassified due to the short-term nature of the Company’s settlement obligations contrasted with the Company’s ability to invest cash awaiting settlement in long-term investment securities.
 
Use of Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.
 
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.
 
Investment securities consist primarily of high-quality state and municipal debt securities, including variable rate demand notes. Variable rate demand note securities 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 varying maturities through 2049. 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. 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 and foreign country requirements. The substantial majority of the Company’s 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 and through investment diversification. At March 31, 2011, the majority of the Company’s 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 both the three months ended March 31, 2011 and 2010 were $3.3 billion.
 
The Company is exposed to foreign currency exchange 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 money transfer revenues and on money transfer settlement assets and obligations. The Company is also exposed to risk from derivative contracts written to its customers arising from its cross-currency business-to-business payments operations. 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 (a) minimize its exposures related to changes in foreign currency exchange rates and interest rates and (b) facilitate cross-currency business-to-business payments by writing derivatives to customers.
 
The Company’s 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 related to its business. At March 31, 2011, the Company’s longer-term foreign currency forward contracts had maturities of a maximum of 24 months with a weighted-average maturity of approximately one year. These contracts are accounted for as cash flow hedges of forecasted revenue, with effectiveness assessed 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 hedges not considered effective or portions of the hedge that are excluded from the measure of effectiveness are recognized immediately in “Derivative gains/(losses), net” within the Company’s Condensed Consolidated Statements of Income.
 
The Company utilizes interest rate swaps to effectively change the interest rate payments on a portion of its notes from fixed-rate payments to short-term LIBOR-based variable rate payments in order to manage its overall exposure to interest rates. The Company designates these derivatives as fair value hedges utilizing the short-cut method, which permits an assumption of no ineffectiveness if certain criteria are met. The change in fair value of the interest rate swaps is offset by a change in the carrying value of the debt being hedged within the Company’s “Borrowings” in the Condensed Consolidated Balance Sheets and “Interest expense” in the Condensed Consolidated Statements of Income has been adjusted to include the effects of interest accrued on the swaps.
Earnings Per Share and Dividends (Tables)
Schedule of Earnings Per Share, Diluted
 
                 
    Three Months
 
    Ended
 
    March 31,  
    2011     2010  
 
Basic weighted-average shares outstanding
    646.9       681.9  
Common stock equivalents
    5.2       2.3  
                 
Diluted weighted-average shares outstanding
    652.1       684.2  
                 
 
Fair Value Measurements (Tables)
Fair Value Measurement of Assets and Liabilities
 
                                 
                      Assets/
 
                      Liabilities
 
    Fair Value Measurement Using     at Fair
 
March 31, 2011   Level 1     Level 2     Level 3     Value  
 
Assets:
                               
State and municipal debt securities
  $     $ 877.7     $     $ 877.7  
State and municipal variable rate demand notes
          397.7             397.7  
Agency mortgage-backed securities and other
    0.1       30.0             30.1  
Derivatives
          81.5             81.5  
                                 
Total assets
  $  0.1     $   1,386.9     $  —     $   1,387.0  
                                 
Liabilities:
                               
Derivatives
  $     $ 109.8     $     $ 109.8  
                                 
Total liabilities
  $     $ 109.8     $     $ 109.8  
                                 
 
                                 
                      Assets/
 
                      Liabilities
 
    Fair Value Measurement Using     at Fair
 
December 31, 2010   Level 1     Level 2     Level 3     Value  
 
Assets:
                               
State and municipal debt securities
  $     $ 849.1     $     $ 849.1  
State and municipal variable rate demand notes
          490.0             490.0  
Agency mortgage-backed securities and other
    0.1       29.9             30.0  
Derivatives
          69.8             69.8  
                                 
Total assets
  $  0.1     $   1,438.8     $  —     $   1,438.9  
                                 
Liabilities:
                               
Derivatives
  $     $ 80.9     $     $ 80.9  
                                 
Total liabilities
  $     $ 80.9     $     $ 80.9  
                                 
Settlement Assets and Obligations (Tables)
 
                 
    March 31,
    December 31,
 
    2011     2010  
 
Settlement assets:
               
Cash and cash equivalents
  $ 207.7     $ 133.8  
Receivables from selling agents and business-to-business customers
    1,020.4       1,132.3  
Investment securities
    1,305.5       1,369.1  
                 
    $ 2,533.6     $ 2,635.2  
                 
Settlement obligations:
               
Money transfer, money order and payment service payables
  $ 2,051.5     $ 2,170.0  
Payables to agents
    482.1       465.2  
                 
    $   2,533.6     $   2,635.2  
                 
 
                                         
                            Net
 
                Gross
    Gross
    Unrealized
 
    Amortized
    Fair
    Unrealized
    Unrealized
    Gains/
 
March 31, 2011   Cost     Value     Gains     Losses     (Losses)  
 
State and municipal debt securities (a)
  $ 872.6     $ 877.7     $ 7.6     $ (2.5 )   $ 5.1  
State and municipal variable rate demand notes
    397.7       397.7                    
Agency mortgage-backed securities and other
    29.9       30.1       0.2             0.2  
                                         
    $   1,300.2     $   1,305.5     $   7.8     $ (2.5 )   $   5.3  
                                         
 
                                         
                            Net
 
                Gross
    Gross
    Unrealized
 
    Amortized
    Fair
    Unrealized
    Unrealized
    Gains/
 
December 31, 2010   Cost     Value     Gains     Losses     (Losses)  
 
State and municipal debt securities (a)
  $ 844.1     $ 849.1     $ 7.0     $ (2.0 )   $ 5.0  
State and municipal variable rate demand notes
    490.0       490.0                    
Agency mortgage-backed securities and other
    29.9       30.0       0.1             0.1  
                                         
    $   1,364.0     $   1,369.1     $   7.1     $   (2.0 )   $   5.1  
                                         
 
 
(a) The majority of these securities are fixed rate instruments.
 
         
    Fair
 
    Value  
 
Due within 1 year
  $ 138.3  
Due after 1 year through 5 years
    680.9  
Due after 5 years through 10 years
    123.0  
Due after 10 years
    363.3  
         
    $   1,305.5  
         
Comprehensive Income (Tables)
Comprehensive Income
 
                 
    Three Months Ended
 
    March 31,  
    2011     2010  
 
Net income
  $ 210.2     $ 207.9  
Unrealized gains/(losses) on investment securities:
               
Unrealized gains
    0.4       2.4  
Tax expense
    (0.1 )     (0.9 )
Reclassification of gains into earnings
    (0.2 )     (0.9 )
Tax expense
    0.1       0.4  
                 
Net unrealized gains on investment securities
    0.2       1.0  
Unrealized gains/(losses) on hedging activities:
               
Unrealized gains/(losses)
    (35.6 )     35.0  
Tax benefit/(expense)
    5.2       (4.2 )
Reclassification of losses into earnings
    6.2       0.4  
Tax benefit
    (1.4 )     (0.4 )
                 
Net unrealized gains/(losses) on hedging activities
    (25.6 )     30.8  
Foreign currency translation adjustments:
               
Foreign currency translation adjustments
    4.5       10.7  
Tax expense
    (1.0 )     (2.4 )
                 
Net foreign currency translation adjustments
    3.5       8.3  
Pension liability adjustments:
               
Reclassification of losses into earnings
    2.0       1.6  
Tax benefit
    (0.7 )     (0.7 )
                 
Net pension liability adjustments
    1.3       0.9  
                 
Total other comprehensive income
  $   189.6     $   248.9  
                 
Employee Benefit Plan (Tables)
Net Periodic Benefit Cost for the Defined Benefit Pension Plan
 
                 
    Three Months Ended
 
    March 31,  
    2011     2010  
 
Interest cost
  $ 4.5     $ 5.0  
Expected return on plan assets
    (5.3 )     (5.1 )
Amortization of actuarial loss
    2.0       1.6  
                 
Net periodic benefit cost
  $      1.2     $      1.5  
                 
Derivatives (Tables)
         
Contracts not designated as hedges:
       
Euro
  $   230.6  
Argentine peso
    100.0  
British pound
    29.3  
Other
    74.2  
Contracts designated as hedges:
       
Euro
  $ 481.0  
Canadian dollar
    111.2  
British pound
    101.5  
Other
    100.0  
 
 
                                         
    Derivative Assets     Derivative Liabilities  
        Fair Value         Fair Value  
    Balance Sheet
  March 31,
    December 31,
    Balance Sheet
  March 31,
    December 31,
 
    Location   2011     2010     Location   2011     2010  
 
Derivatives — hedges:
                                       
Interest rate fair value hedges — Corporate
  Other assets   $ 16.3     $ 8.0     Other liabilities   $ 3.2     $ 1.6  
Foreign currency cash flow hedges — Consumer-to-consumer
  Other assets     3.5       14.7     Other liabilities     49.7       31.1  
                                         
Total
      $ 19.8     $ 22.7         $ 52.9     $ 32.7  
                                         
Derivatives — undesignated:
                                       
Foreign currency — Global business payments
  Other assets   $ 61.2     $ 46.9     Other liabilities   $ 51.6     $ 36.2  
Foreign currency — Consumer-to-consumer
  Other assets     0.5       0.2     Other liabilities     5.3       12.0  
                                         
Total
      $ 61.7     $ 47.1         $ 56.9     $ 48.2  
                                         
Total derivatives
      $   81.5     $   69.8         $  109.8     $   80.9  
                                         
 
                                                         
    Gain/(Loss) Recognized in Income on
          Gain/(Loss) Recognized in Income on
 
    Derivatives           Related Hedged Item (a)  
    Income
    Amount           Income
    Amount  
    Statement
    March 31,
    March 31,
          Statement
    March 31,
    March 31,
 
Derivatives   Location     2011     2010     Hedged Items     Location     2011     2010  
 
Interest rate contracts
    Interest expense     $   (0.2 )   $   6.2       Fixed-rate debt       Interest expense     $   7.3     $   0.7  
                                                         
Total gain/(loss)
          $ (0.2 )   $ 6.2                     $ 7.3     $ 0.7  
                                                         
 
 
                                                         
                Gain/(Loss) Reclassified from
                 
    Amount of Gain/(Loss)
    Accumulated OCI
    Gain/(Loss) Recognized in Income on
 
    Recognized in OCI on
    into Income
    Derivatives (Ineffective Portion and Amount
 
    Derivatives (Effective
    (Effective Portion)     Excluded from Effectiveness Testing) (b)  
    Portion)     Income
  Amount     Income
  Amount  
    March 31,
    March 31,
    Statement
  March 31,
    March 31,
    Statement
  March 31,
    March 31,
 
Derivatives   2011     2010     Location   2011     2010     Location   2011     2010  
 
Foreign currency contracts
  $   (35.6 )   $   31.7     Revenue   $   (5.8 )   $   —     Derivative gains/
(losses), net
  $   2.3     $   (1.3 )
Interest rate contracts (c)
          3.3     Interest expense     (0.4 )     (0.4 )   Interest expense            
                                                         
Total gain/(loss)
  $ (35.6 )   $ 35.0         $ (6.2 )   $   (0.4 )       $ 2.3     $ (1.3 )
                                                         
 
                     
    Gain/(Loss) Recognized in Income on Derivatives (d)  
        Amount  
        Three Months Ended
 
        March 31,  
Derivatives   Income Statement Location   2011     2010  
 
Foreign currency contracts (e)
  Selling, general and administrative   $   (22.7 )   $   11.2  
Foreign currency contracts (f)
  Derivative gains/(losses), net     (2.0 )     1.6  
                     
Total gain/(loss)
      $ (24.7 )   $ 12.8  
                     
 
 
(a) The net gain of $7.3 million and $0.7 million in the three months ended March 31, 2011 and 2010, respectively, was comprised of a (loss)/gain in value on the debt of $0.2 million and ($6.2) million, respectively, and amortization of hedge accounting adjustments of $7.1 million and $6.9 million, respectively.
 
(b) The portion of the change in fair value of a derivative excluded from the effectiveness assessment for foreign currency forward contracts designated as cash flow hedges represents the difference between changes in forward rates and spot rates.
 
(c) The Company uses derivatives to hedge the forecasted issuance of fixed rate debt and records the effective portion of the derivative’s fair value in “Accumulated other comprehensive loss” in the Condensed Consolidated Balance Sheets. These amounts are reclassified to “Interest expense” over the life of the related notes.
 
(d) The Company uses foreign currency forward and option contracts as part of its international business-to-business payments operation. These derivative contracts are excluded from this table as they are managed as part of a broader currency portfolio that includes non-derivative currency exposures. The gains and losses on these derivatives are included as part of the broader disclosure of portfolio revenue for this business discussed above.
 
(e) The Company uses foreign currency forward contracts to offset foreign exchange rate fluctuations on settlement assets and obligations as well as certain foreign currency denominated positions. Foreign exchange gain/(loss) on settlement assets and obligations and cash balances for the three months ended March 31, 2011 and 2010, were $20.2 million and ($11.6) million, respectively.
 
(f) The derivative contracts used in the Company’s revenue hedging program are not designated as hedges in the final month of the contract.
 
Borrowings (Tables)
Borrowings
 
                 
    March 31, 2011     December 31, 2010  
 
Due in less than one year (a):
               
5.400% notes (effective rate of 2.7%) due November 2011
  $   696.3     $   696.3  
Due in greater than one year (a):
               
Floating rate notes, due 2013 (b)
    300.0        
6.500% notes (effective rate of 5.4%) due 2014
    500.0       500.0  
5.930% notes due 2016 (c)
    1,000.0       1,000.0  
5.253% notes due 2020 (c)
    324.9       324.9  
6.200% notes due 2036 (c)
    500.0       500.0  
6.200% notes due 2040 (c)
    250.0       250.0  
Other borrowings
    5.9       5.9  
                 
Total borrowings at par value
    3,577.1       3,277.1  
Fair value hedge accounting adjustments, net (a)
    29.3       36.6  
Unamortized discount, net
    (23.1 )     (23.8 )
                 
Total borrowings at carrying value (d)
  $ 3,583.3     $ 3,289.9  
                 
 
 
(a) The Company utilizes interest rate swaps designated as fair value hedges to effectively change the interest rate payments on a portion of its notes from fixed-rate payments to short-term LIBOR-based variable rate payments in order to manage its overall exposure to interest rates. The changes in fair value of these interest rate swaps result in an offsetting hedge accounting adjustment recorded to the carrying value of the related note. These hedge accounting adjustments will be reclassified as reductions to or increases in “Interest expense” over the life of the related notes, and cause the effective rate of interest to differ from the notes’ stated rate.
 
(b) On March 7, 2011, the Company issued $300 million of aggregate principal amount of unsecured floating rate notes due March 7, 2013 (“2013 Notes”). Interest is payable quarterly at a per annum interest rate equal to three-month LIBOR plus 58 basis points (0.9% at March 31, 2011) and is reset quarterly. See below for additional detail relating to the debt issuance.
 
(c) The difference between the stated interest rate and the effective interest rate is not significant.
 
(d) At March 31, 2011, the Company’s weighted-average effective rate on total borrowings was approximately 4.8%.
Stock Compensation Plans (Tables)
Fair Value Assumptions, Stock Options Granted [Table]
 
         
Stock options granted:
       
Weighted-average risk-free interest rate
    2.6 %
Weighted-average dividend yield
    1.4 %
Volatility
    30.9 %
Expected term (in years)
    5.8  
Weighted-average grant date fair value
  $   6.07  
Segments (Tables)
Segment Results
 
                 
    Three Months Ended
 
    March 31,  
    2011     2010  
 
Revenues:
               
Consumer-to-consumer:
               
Transaction fees
  $   839.8     $   807.0  
Foreign exchange revenues
    227.4       211.9  
Other revenues
    10.9       11.3  
                 
      1,078.1       1,030.2  
Global business payments:
               
Transaction fees
    145.6       148.0  
Foreign exchange revenues
    28.7       26.2  
Other revenues
    7.8       7.6  
                 
      182.1       181.8  
Other:
               
Transaction fees
    12.6       10.7  
Other revenues
    10.2       10.0  
                 
      22.8       20.7  
                 
Total consolidated revenues
  $   1,283.0     $   1,232.7  
                 
Operating income/(loss):
               
Consumer-to-consumer
  $ 308.6     $ 282.7  
Global business payments
    30.1       37.6  
Other
    (1.8 )     (4.5 )
                 
Total segment operating income
    336.9       315.8  
Restructuring and related expenses (see Note 3)
    (24.0 )      
                 
Total consolidated operating income
  $ 312.9     $ 315.8  
                 
Business and Basis of Presentation (Details) (USD $)
In Millions
Mar. 31, 2011
Business and Basis of Presentation (Numeric) [Abstract]
 
Other Restricted Assets
$ 220 
Earnings Per Share and Dividends (Details) (USD $)
In Millions, except Per Share data
3 Months Ended
Mar. 31,
2011
2010
Earnings Per Share [Abstract]
 
 
Basic weighted-average shares outstanding
647 
682 
Common stock equivalents (in shares)
Diluted weighted-average shares outstanding
652 
684 
Earnings Per Share and Dividends (Numeric) [Abstract]
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)
36 
Cash dividend declared, per share
$ 0.07 
$ 0.06 
Cash dividend declared
45 
41 
Cash dividends paid
$ 45 
$ 41 
Acquisitions (Details) (Business Acquisition, Angelo Costa S.r.l. [Member])
In Millions
Apr. 20, 2011
Apr. 20, 2011
Acquisitions (Numeric) [Abstract]
 
 
Business Acquisition, voting interest acquired
0.70 
 
Business Acquisition, aggregate consideration paid
$ 136 
€ 95 
Business Acquisition, percentage to be recognized at fair value
 
Interest in Acquired Company, prior to acquisition (percentage)
0.30 
 
Fair Value Measurements (Details) (USD $)
In Millions
Mar. 31, 2011
Dec. 31, 2010
Assets:
 
 
State and municipal debt securities
$ 878 
$ 849 
State and municipal variable rate demand notes
398 
490 
Agency mortgage-backed securities and other
30 
30 
Derivatives
82 
70 
Total assets
1,387 
1,439 
Liabilities:
 
 
Derivatives
110 
81 
Total liabilities
110 
81 
Fair Value Measurements (Numeric) [Abstract]
 
 
Borrowings, Carrying Value
3,583 
3,290 
Borrowings, Fair Value
3,758 
3,474 
Level 1 [Member]
 
 
Assets:
 
 
State and municipal debt securities
State and municipal variable rate demand notes
Agency mortgage-backed securities and other
Derivatives
Total assets
Level 2 [Member]
 
 
Assets:
 
 
State and municipal debt securities
878 
849 
State and municipal variable rate demand notes
398 
490 
Agency mortgage-backed securities and other
30 
30 
Derivatives
82 
70 
Total assets
1,387 
1,439 
Level 3 [Member]
 
 
Assets:
 
 
State and municipal debt securities
State and municipal variable rate demand notes
Agency mortgage-backed securities and other
Derivatives
Total assets
Level 1 [Member]
 
 
Liabilities:
 
 
Derivatives
Total liabilities
Level 2 [Member]
 
 
Liabilities:
 
 
Derivatives
110 
81 
Total liabilities
110 
81 
Level 3 [Member]
 
 
Liabilities:
 
 
Derivatives
Total liabilities
$ 0 
$ 0 
Commitments and Contingencies (Details) (USD $)
In Millions
Mar. 31, 2011
Commitments and Contingencies (Numeric) [Abstract]
 
Outstanding letters of credit and bank guarantees
$ 85 
Settlement agreement to invest in compliance
$ 23 
Related Party Transactions (Details) (USD $)
In Millions
3 Months Ended
Mar. 31,
2011
2010
Equity Method Investee [Member]
 
 
Related Party Transactions (Numeric) [Abstract]
 
 
Related party transaction, amounts of transaction
$ 44 
$ 45 
Director [Member]
 
 
Related Party Transactions (Numeric) [Abstract]
 
 
Related party transaction, amounts of transaction
$ 13 
$ 14 
Settlement Assets and Obligations (Details) (USD $)
In Millions
Mar. 31, 2011
Dec. 31, 2010
Settlement assets:
 
 
Cash and cash equivalents
$ 208 
$ 134 
Receivables from selling agents and business-to-business customers
1,020 
1,132 
Investment securities
1,306 
1,369 
Total settlement assets
2,534 
2,635 
Settlement obligations:
 
 
Money transfer, money order and payment service payables
2,052 
2,170 
Payables to agents
482 
465 
Total settlement obligations
$ 2,534 
$ 2,635 
Settlement Assets and Obligations (Details 1) (USD $)
In Millions
3 Months Ended
Mar. 31, 2011
Year Ended
Dec. 31, 2010
Available-for-sale investment securities [Abstract]
 
 
Amortized Cost
$ 1,300 
$ 1,364 
Fair Value
1,306 
1,369 
Gross Unrealized Gains
Gross Unrealized Losses
(3)
(2)
Net Unrealized Gains/(Losses)
State and municipal debt securities [Member]
 
 
Available-for-sale investment securities [Abstract]
 
 
Amortized Cost
873 
844 
Fair Value
878 
849 
Gross Unrealized Gains
Gross Unrealized Losses
(3)
(2)
Net Unrealized Gains/(Losses)
State and municipal variable rate demand notes [Member]
 
 
Available-for-sale investment securities [Abstract]
 
 
Amortized Cost
398 
490 
Fair Value
398 
490 
Gross Unrealized Gains
Gross Unrealized Losses
Net Unrealized Gains/(Losses)
Agency mortgage-backed securities and other [Member]
 
 
Available-for-sale investment securities [Abstract]
 
 
Amortized Cost
30 
30 
Fair Value
30 
30 
Gross Unrealized Gains
Gross Unrealized Losses
Net Unrealized Gains/(Losses)
$ 0 
$ 0 
Settlement Assets and Obligations (Details 2) (USD $)
In Millions
Mar. 31, 2011
Contractual maturities of investment securities [Abstract]
 
Due within 1 year
$ 138 
Due after 1 year through 5 years
681 
Due after 5 years through 10 years
123 
Due after 10 years
363 
Total investment securities
$ 1,306 
Settlement Assets and Obligations (Details Numeric)
3 Months Ended
Mar. 31,
2011
2011
2010
Settlement Assets and Obligations (Numeric) [Abstract]
 
 
 
Variable rate demand notes, maximum maturity year
2049 
 
 
Variable rate demand notes, period of time held
less than 30 days 
 
 
Proceeds from sale and maturity of available-for-sale securities
 
3,300,000,000 
3,300,000,000 
Schedule of Available-for-sale Securities [Line Items]
 
 
 
Due within 1 year
 
138,300,000 
 
Due after 1 year through 5 years
 
680,900,000 
 
Due after 5 years through 10 years
 
123,000,000 
 
Due after 10 years
 
363,300,000 
 
Comprehensive Income (Details) (USD $)
In Millions
3 Months Ended
Mar. 31,
2011
2010
Comprehensive Income [Abstract]
 
 
Net income
$ 210 
$ 208 
Unrealized gains/(losses) on investment securities:
 
 
Unrealized gains
Tax expense
(0)
(1)
Reclassification of gains into earnings
(0)
(1)
Tax expense
Net unrealized gains on investment securities
Unrealized gains/(losses) on hedging activities:
 
 
Unrealized gains/(losses)
(36)