| Segments
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• | Consumer-to-Consumer - The Consumer-to-Consumer operating segment facilitates money transfers between two consumers, primarily through a network of third-party agents. The Company’s multi-currency, real-time money transfer service is viewed by the Company as one interconnected global network where a money transfer can be sent from one location to another, around the world. 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. This segment also includes money transfer transactions that can be initiated through the Company’s websites and account based money transfers. |
• | Consumer-to-Business - The Consumer-to-Business operating segment facilitates bill payments from consumers to businesses and other organizations, including utilities, auto finance companies, mortgage servicers, financial service providers, government agencies and other businesses. The significant majority of the segment’s revenue was generated in the United States during all periods presented. |
• | Business Solutions - The Business Solutions operating segment facilitates payment and foreign exchange solutions, primarily cross-border, cross-currency transactions, for small and medium size enterprises and other organizations and individuals. The majority of the segment’s business relates to exchanges of currency at the spot rate which enables customers to make cross-currency payments. In addition, in certain countries, the Company writes foreign currency forward and option contracts for customers to facilitate future payments. |
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Severance, Outplacement and Related Benefits | Other (b) | Total | |||||||||
Balance, December 31, 2012 | $ | 25.7 | $ | 1.6 | $ | 27.3 | |||||
Expenses (a) | 12.5 | 11.4 | 23.9 | ||||||||
Cash payments | (19.0 | ) | (10.9 | ) | (29.9 | ) | |||||
Non-cash benefit/(expense) (a) | 0.2 | (0.2 | ) | — | |||||||
Balance, September 30, 2013 | $ | 19.4 | $ | 1.9 | $ | 21.3 | |||||
Cumulative expenses incurred to date | $ | 41.4 | $ | 13.4 | $ | 54.8 | |||||
Estimated additional expenses expected to be incurred | 12.0 | 9.0 | 21.0 | ||||||||
Total expenses | $ | 53.4 | $ | 22.4 | $ | 75.8 |
(a) | Expenses include a non-cash benefit for adjustments to stock compensation for awards forfeited by employees. Other expenses also include non-cash write-offs and accelerated depreciation of fixed assets and leasehold improvements. These amounts were recognized outside of the accrual. |
(b) | Other expenses primarily related to the relocation of various operations to new and existing Company facilities and third-party providers including expenses for hiring, training, relocation, travel and professional fees. All such expenses were or will be recorded when incurred. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2013 | 2013 | ||||||
Cost of services | $ | 4.5 | $ | 13.9 | |||
Selling, general and administrative | 1.7 | 10.0 | |||||
Total expenses, pre-tax | $ | 6.2 | $ | 23.9 | |||
Total expenses, net of tax | $ | 4.3 | $ | 16.6 |
Consumer-to-Consumer | Consumer-to-Business | Business Solutions | Other | Total | ||||||||||||||||
2012 expenses | $ | 20.9 | $ | 4.0 | $ | — | $ | 6.0 | $ | 30.9 | ||||||||||
First quarter 2013 | 3.2 | 0.5 | — | 0.5 | 4.2 | |||||||||||||||
Second quarter 2013 | 11.7 | 1.4 | 0.1 | 0.3 | 13.5 | |||||||||||||||
Third quarter 2013 | 5.5 | 0.5 | 0.1 | 0.1 | 6.2 | |||||||||||||||
Cumulative expenses incurred to date | $ | 41.3 | $ | 6.4 | $ | 0.2 | $ | 6.9 | $ | 54.8 |
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Fair Value Measurement Using | Assets/ Liabilities at Fair Value | ||||||||||||||
September 30, 2013 | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | |||||||||||||||
Settlement assets: | |||||||||||||||
State and municipal debt securities | $ | — | $ | 852.1 | $ | — | $ | 852.1 | |||||||
State and municipal variable rate demand notes | — | 691.4 | — | 691.4 | |||||||||||
Other debt securities | — | 11.9 | — | 11.9 | |||||||||||
Other assets: | |||||||||||||||
Short-term bond mutual fund | 100.0 | — | — | 100.0 | |||||||||||
Derivatives | — | 204.7 | — | 204.7 | |||||||||||
Total assets | $ | 100.0 | $ | 1,760.1 | $ | — | $ | 1,860.1 | |||||||
Liabilities: | |||||||||||||||
Notes and other borrowings | $ | — | $ | 4,148.2 | $ | — | $ | 4,148.2 | |||||||
Derivatives | — | 183.4 | — | 183.4 | |||||||||||
Total liabilities | $ | — | $ | 4,331.6 | $ | — | $ | 4,331.6 | |||||||
Fair Value Measurement Using | Assets/ Liabilities at Fair Value | ||||||||||||||
December 31, 2012 | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | |||||||||||||||
Settlement assets: | |||||||||||||||
State and municipal debt securities | $ | — | $ | 1,003.7 | $ | — | $ | 1,003.7 | |||||||
State and municipal variable rate demand notes | — | 463.3 | — | 463.3 | |||||||||||
Other debt securities | — | 47.8 | — | 47.8 | |||||||||||
Other assets: | |||||||||||||||
Derivatives | — | 96.8 | — | 96.8 | |||||||||||
Total assets | $ | — | $ | 1,611.6 | $ | — | $ | 1,611.6 | |||||||
Liabilities: | |||||||||||||||
Notes and other borrowings | $ | — | $ | 4,200.8 | $ | — | $ | 4,200.8 | |||||||
Derivatives | — | 86.1 | — | 86.1 | |||||||||||
Total liabilities | $ | — | $ | 4,286.9 | $ | — | $ | 4,286.9 |
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September 30, 2013 | December 31, 2012 | ||||||
Settlement assets: | |||||||
Cash and cash equivalents | $ | 731.7 | $ | 574.5 | |||
Receivables from selling agents and Business Solutions customers | 1,120.9 | 1,025.3 | |||||
Investment securities | 1,555.4 | 1,514.8 | |||||
$ | 3,408.0 | $ | 3,114.6 | ||||
Settlement obligations: | |||||||
Money transfer, money order and payment service payables | $ | 2,563.9 | $ | 2,297.1 | |||
Payables to agents | 844.1 | 817.5 | |||||
$ | 3,408.0 | $ | 3,114.6 |
September 30, 2013 | Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Net Unrealized Gains | ||||||||||||||
Settlement assets: | |||||||||||||||||||
State and municipal debt securities (a) | $ | 845.7 | $ | 852.1 | $ | 8.2 | $ | (1.8 | ) | $ | 6.4 | ||||||||
State and municipal variable rate demand notes | 691.4 | 691.4 | — | — | — | ||||||||||||||
Other debt securities | 11.8 | 11.9 | 0.1 | — | 0.1 | ||||||||||||||
$ | 1,548.9 | $ | 1,555.4 | $ | 8.3 | $ | (1.8 | ) | $ | 6.5 | |||||||||
Other assets: | |||||||||||||||||||
Short-term bond mutual fund | 100.0 | 100.0 | — | — | — | ||||||||||||||
$ | 1,648.9 | $ | 1,655.4 | $ | 8.3 | $ | (1.8 | ) | $ | 6.5 |
December 31, 2012 | Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Net Unrealized Gains | ||||||||||||||
Settlement assets: | |||||||||||||||||||
State and municipal debt securities (a) | $ | 991.5 | $ | 1,003.7 | $ | 12.5 | $ | (0.3 | ) | $ | 12.2 | ||||||||
State and municipal variable rate demand notes | 463.3 | 463.3 | — | — | — | ||||||||||||||
Other debt securities | 47.7 | 47.8 | 0.1 | — | 0.1 | ||||||||||||||
$ | 1,502.5 | $ | 1,514.8 | $ | 12.6 | $ | (0.3 | ) | $ | 12.3 |
(a) | The majority of these securities are fixed-rate instruments. |
Fair Value | |||
Due within 1 year | $ | 135.3 | |
Due after 1 year through 5 years | 510.9 | ||
Due after 5 years through 10 years | 248.5 | ||
Due after 10 years | 660.7 | ||
$ | 1,555.4 |
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Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Unrealized gains on investment securities, beginning of period | $ | 4.2 | $ | 7.8 | $ | 7.7 | $ | 4.9 | |||||||
Unrealized gains/(losses) | 1.8 | 2.2 | (0.2 | ) | 10.7 | ||||||||||
Tax expense | (0.8 | ) | (0.7 | ) | — | (4.0 | ) | ||||||||
Reclassification of gains into “Other revenues” | (2.0 | ) | (1.4 | ) | (5.6 | ) | (5.1 | ) | |||||||
Tax expense related to reclassifications | 0.8 | 0.5 | 2.1 | 1.9 | |||||||||||
Net unrealized gains/(losses) on investment securities | (0.2 | ) | 0.6 | (3.7 | ) | 3.5 | |||||||||
Unrealized gains on investment securities, end of period | $ | 4.0 | $ | 8.4 | $ | 4.0 | $ | 8.4 | |||||||
Unrealized gains/(losses) on hedging activities, beginning of period | $ | (2.9 | ) | $ | 9.4 | $ | (21.9 | ) | $ | 5.1 | |||||
Unrealized gains/(losses) | (27.0 | ) | (16.7 | ) | 1.2 | (7.2 | ) | ||||||||
Tax (expense)/benefit | 4.0 | 3.1 | (1.3 | ) | 1.9 | ||||||||||
Reclassification of gains into “Transaction fees” | (3.1 | ) | (4.5 | ) | (7.6 | ) | (8.9 | ) | |||||||
Reclassification of gains into “Foreign exchange revenues” | (1.1 | ) | (1.3 | ) | (2.8 | ) | (2.7 | ) | |||||||
Reclassification of losses into “Interest expense” | 0.9 | 0.9 | 2.7 | 2.7 | |||||||||||
Tax benefit related to reclassifications | 0.4 | 0.3 | 0.9 | 0.3 | |||||||||||
Net unrealized losses on hedging activities | (25.9 | ) | (18.2 | ) | (6.9 | ) | (13.9 | ) | |||||||
Unrealized losses on hedging activities, end of period | $ | (28.8 | ) | $ | (8.8 | ) | $ | (28.8 | ) | $ | (8.8 | ) | |||
Foreign currency translation adjustments, beginning of period | $ | (14.2 | ) | $ | (5.3 | ) | $ | (8.5 | ) | $ | (6.3 | ) | |||
Foreign currency translation adjustments | (4.3 | ) | (2.2 | ) | (10.6 | ) | (1.8 | ) | |||||||
Tax benefit | 1.5 | 0.7 | 2.1 | 1.3 | |||||||||||
Net foreign currency translation adjustments | (2.8 | ) | (1.5 | ) | (8.5 | ) | (0.5 | ) | |||||||
Foreign currency translation adjustments, end of period | $ | (17.0 | ) | $ | (6.8 | ) | $ | (17.0 | ) | $ | (6.8 | ) | |||
Defined benefit pension plan adjustments, beginning of period | $ | (125.4 | ) | $ | (118.9 | ) | $ | (129.9 | ) | $ | (122.2 | ) | |||
Reclassification of losses into “Cost of services” | 3.1 | 2.6 | 9.3 | 7.9 | |||||||||||
Tax benefit related to reclassifications and other | (1.2 | ) | (1.0 | ) | (2.9 | ) | (3.0 | ) | |||||||
Net defined benefit pension plan adjustments | 1.9 | 1.6 | 6.4 | 4.9 | |||||||||||
Defined benefit pension plan adjustments, end of period | $ | (123.5 | ) | $ | (117.3 | ) | $ | (123.5 | ) | $ | (117.3 | ) | |||
Accumulated other comprehensive loss, end of period | $ | (165.3 | ) | $ | (124.5 | ) | $ | (165.3 | ) | $ | (124.5 | ) |
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Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Interest cost | $ | 3.0 | $ | 3.7 | $ | 9.1 | $ | 11.0 | |||||||
Expected return on plan assets | (5.2 | ) | (5.2 | ) | (15.6 | ) | (15.6 | ) | |||||||
Amortization of actuarial loss | 3.1 | 2.6 | 9.3 | 7.9 | |||||||||||
Net periodic benefit cost | $ | 0.9 | $ | 1.1 | $ | 2.8 | $ | 3.3 |
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Contracts not designated as hedges: | |||
Euro | $ | 202.1 | |
Canadian dollar | 57.7 | ||
British pound | 54.0 | ||
Other (a) | 155.1 | ||
Contracts designated as hedges: | |||
Euro | $ | 405.3 | |
Canadian dollar | 126.4 | ||
British pound | 90.6 | ||
Swiss franc | 43.9 | ||
Australian dollar | 42.4 | ||
Other | 48.2 |
(a) | Comprised of exposures to 16 different currencies. None of these individual currency exposures is greater than $25 million. |
Derivative Assets | Derivative Liabilities | ||||||||||||||||||
Fair Value | Fair Value | ||||||||||||||||||
Balance Sheet Location | September 30, 2013 | December 31, 2012 | Balance Sheet Location | September 30, 2013 | December 31, 2012 | ||||||||||||||
Derivatives — hedges: | |||||||||||||||||||
Interest rate fair value hedges — Corporate | Other assets | $ | 5.0 | $ | 13.1 | Other liabilities | $ | 6.1 | $ | — | |||||||||
Foreign currency cash flow hedges — Consumer-to-Consumer | Other assets | 9.1 | 10.8 | Other liabilities | 21.3 | 17.6 | |||||||||||||
Total | $ | 14.1 | $ | 23.9 | $ | 27.4 | $ | 17.6 | |||||||||||
Derivatives — undesignated: | |||||||||||||||||||
Foreign currency — Business Solutions | Other assets | $ | 190.2 | $ | 71.9 | Other liabilities | $ | 153.1 | $ | 66.5 | |||||||||
Foreign currency — Consumer-to-Consumer | Other assets | 0.4 | 1.0 | Other liabilities | 2.9 | 2.0 | |||||||||||||
Total | $ | 190.6 | $ | 72.9 | $ | 156.0 | $ | 68.5 | |||||||||||
Total derivatives | $ | 204.7 | $ | 96.8 | $ | 183.4 | $ | 86.1 |
September 30, 2013 | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | Net Amounts Presented in the Condensed Consolidated Balance Sheets | Derivatives Not Offset in the Condensed Consolidated Balance Sheets | Net Amounts | |||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 98.9 | $ | — | $ | 98.9 | $ | (83.9 | ) | $ | 15.0 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 105.8 | |||||||||||||||||||
Total | $ | 204.7 | ||||||||||||||||||
December 31, 2012 | ||||||||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 39.1 | $ | — | $ | 39.1 | $ | (19.6 | ) | $ | 19.5 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 57.7 | |||||||||||||||||||
Total | $ | 96.8 |
September 30, 2013 | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | Net Amounts Presented in the Condensed Consolidated Balance Sheets | Derivatives Not Offset in the Condensed Consolidated Balance Sheets | Net Amounts | |||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 130.3 | $ | — | $ | 130.3 | $ | (83.9 | ) | $ | 46.4 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 53.1 | |||||||||||||||||||
Total | $ | 183.4 | ||||||||||||||||||
December 31, 2012 | ||||||||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 30.5 | $ | — | $ | 30.5 | $ | (19.6 | ) | $ | 10.9 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 55.6 | |||||||||||||||||||
Total | $ | 86.1 |
Gain/(Loss) Recognized in Income on Derivatives | Gain/(Loss) Recognized in Income on Related Hedged Item (a) | Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) | ||||||||||||||||||||||||||||||
Income Statement Location | Amount | Income Statement Location | Amount | Income Statement Location | Amount | |||||||||||||||||||||||||||
Derivatives | September 30, 2013 | September 30, 2012 | Hedged Item | September 30, 2013 | September 30, 2012 | September 30, 2013 | September 30, 2012 | |||||||||||||||||||||||||
Interest rate contracts | Interest expense | $ | 3.1 | $ | 1.1 | Fixed-rate debt | Interest expense | $ | (0.6 | ) | $ | 0.7 | Interest expense | $ | — | $ | — | |||||||||||||||
Total gain/ (loss) | $ | 3.1 | $ | 1.1 | $ | (0.6 | ) | $ | 0.7 | $ | — | $ | — |
Gain/(Loss) Recognized in Income on Derivatives | Gain/(Loss) Recognized in Income on Related Hedged Item (a) | Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) | ||||||||||||||||||||||||||||||
Income Statement Location | Amount | Income Statement Location | Amount | Income Statement Location | Amount | |||||||||||||||||||||||||||
Derivatives | September 30, 2013 | September 30, 2012 | Hedged Item | September 30, 2013 | September 30, 2012 | September 30, 2013 | September 30, 2012 | |||||||||||||||||||||||||
Interest rate contracts | Interest expense | $ | (5.0 | ) | $ | 3.5 | Fixed-rate debt | Interest expense | $ | 12.9 | $ | 2.2 | Interest expense | $ | — | $ | — | |||||||||||||||
Total gain/ (loss) | $ | (5.0 | ) | $ | 3.5 | $ | 12.9 | $ | 2.2 | $ | — | $ | — |
Gain/(Loss) Recognized in OCI on Derivatives (Effective Portion) | Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) (b) | ||||||||||||||||||||||||||
Amount | Income Statement Location | Amount | Income Statement Location | Amount | ||||||||||||||||||||||||
Derivatives | September 30, 2013 | September 30, 2012 | September 30, 2013 | September 30, 2012 | September 30, 2013 | September 30, 2012 | ||||||||||||||||||||||
Foreign currency contracts | $ | (27.0 | ) | $ | (16.7 | ) | Revenue | $ | 4.2 | $ | 5.8 | Derivative gains/(losses), net | $ | 0.3 | $ | 0.5 | ||||||||||||
Interest rate contracts (c) | — | — | Interest expense | (0.9 | ) | (0.9 | ) | Interest expense | — | — | ||||||||||||||||||
Total gain/(loss) | $ | (27.0 | ) | $ | (16.7 | ) | $ | 3.3 | $ | 4.9 | $ | 0.3 | $ | 0.5 |
Gain/(Loss) Recognized in OCI on Derivatives (Effective Portion) | Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) (b) | ||||||||||||||||||||||||||
Amount | Income Statement Location | Amount | Income Statement Location | Amount | ||||||||||||||||||||||||
Derivatives | September 30, 2013 | September 30, 2012 | September 30, 2013 | September 30, 2012 | September 30, 2013 | September 30, 2012 | ||||||||||||||||||||||
Foreign currency contracts | $ | 1.2 | $ | (7.2 | ) | Revenue | $ | 10.4 | $ | 11.6 | Derivative gains/(losses), net | $ | — | $ | 0.1 | |||||||||||||
Interest rate contracts (c) | — | — | Interest expense | (2.7 | ) | (2.7 | ) | Interest expense | — | — | ||||||||||||||||||
Total gain/(loss) | $ | 1.2 | $ | (7.2 | ) | $ | 7.7 | $ | 8.9 | $ | — | $ | 0.1 |
Gain/(Loss) Recognized in Income on Derivatives (d) | |||||||||||||||||
Income Statement Location | Amount | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
Derivatives | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Foreign currency contracts (e) | Selling, general and administrative | $ | (15.3 | ) | $ | (5.8 | ) | $ | (1.9 | ) | $ | (6.1 | ) | ||||
Foreign currency contracts (f) | Derivative gains/(losses), net | (1.2 | ) | (0.4 | ) | (0.6 | ) | 0.9 | |||||||||
Total loss | $ | (16.5 | ) | $ | (6.2 | ) | $ | (2.5 | ) | $ | (5.2 | ) |
(a) | The gain/(loss) of $(0.6) million and $0.7 million in the three months ended September 30, 2013 and 2012, respectively, was comprised of a loss in value on the debt of $(3.1) million and $(1.1) million, respectively, and amortization of hedge accounting adjustments of $2.5 million and $1.8 million, respectively. The gain of $12.9 million and $2.2 million in the nine months ended September 30, 2013 and 2012, respectively, was comprised of a gain/(loss) in value on the debt of $5.0 million and $(3.5) million, respectively, and amortization of hedge accounting adjustments of $7.9 million and $5.7 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” in the Condensed Consolidated Statements of Income over the life of the related notes. |
(d) | The Company uses foreign currency forward and option contracts as part of its Business Solutions payments operations. 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 gains/(losses) on settlement assets and obligations and cash balances, not including amounts related to derivatives activity as displayed above, were $9.7 million and $(2.3) million for the three and nine months ended September 30, 2013, respectively, and $6.1 million and $4.3 million for the three and nine months ended September 30, 2012, 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. |
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September 30, 2013 | December 31, 2012 | ||||||
Due in less than one year: | |||||||
Commercial paper (a) | $ | — | $ | — | |||
Floating rate notes (b) | — | 300.0 | |||||
6.500% notes (effective rate of 5.6%) due 2014 (c) | 500.0 | 500.0 | |||||
Due in greater than one year (c): | |||||||
Floating rate notes due 2015 (d) | 250.0 | — | |||||
2.375% notes due 2015 (e) | 250.0 | 250.0 | |||||
5.930% notes due 2016 (e) | 1,000.0 | 1,000.0 | |||||
2.875% notes due 2017 (e) | 500.0 | 500.0 | |||||
3.650% notes due 2018 (e) | 400.0 | 400.0 | |||||
5.253% notes due 2020 (e) | 324.9 | 324.9 | |||||
6.200% notes due 2036 (e) | 500.0 | 500.0 | |||||
6.200% notes due 2040 (e) | 250.0 | 250.0 | |||||
Other borrowings | 5.7 | 5.8 | |||||
Total borrowings at par value | 3,980.6 | 4,030.7 | |||||
Fair value hedge accounting adjustments, net (c) | 7.3 | 20.2 | |||||
Unamortized discount, net | (19.2 | ) | (21.7 | ) | |||
Total borrowings at carrying value (f) | $ | 3,968.7 | $ | 4,029.2 |
(a) | Pursuant to the Company’s commercial paper program, the Company may issue unsecured commercial paper notes in an amount not to exceed $1.5 billion outstanding at any time, reduced to the extent of borrowings outstanding on the Company’s Revolving Credit Facility in excess of $150 million. The commercial paper notes may have maturities of up to 397 days from date of issuance. |
(b) | The floating rate notes due in March 2013 were repaid using the Company’s cash, including cash generated from operations and proceeds from the Company’s issuance of the fixed rate notes due 2015 and 2017. |
(c) | 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” in the Condensed Consolidated Statements of Income over the life of the related notes, and cause the effective rate of interest to differ from the notes’ stated rate. |
(d) | On August 22, 2013, the Company issued $250.0 million of aggregate principal amount of unsecured floating rate notes due August 21, 2015 (“2015 Floating Rate Notes”). Interest is payable quarterly at a per annum rate equal to three-month LIBOR plus 1.0% (1.3% at September 30, 2013) and is reset quarterly. See below for additional detail relating to the debt issuance. |
(e) | The difference between the stated interest rate and the effective interest rate is not significant. |
(f) | As of September 30, 2013, the Company’s weighted-average effective rate on total borrowings was approximately 4.8%. |
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Stock options granted: | |||
Weighted-average risk-free interest rate | 1.2 | % | |
Weighted-average dividend yield | 3.7 | % | |
Volatility | 35.3 | % | |
Expected term (in years) | 6.09 | ||
Weighted-average grant date fair value | $ | 3.20 |
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Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Revenues: | |||||||||||||||
Consumer-to-Consumer: | |||||||||||||||
Transaction fees | $ | 861.1 | $ | 889.6 | $ | 2,519.1 | $ | 2,655.2 | |||||||
Foreign exchange revenues | 252.9 | 249.6 | 724.5 | 737.9 | |||||||||||
Other revenues | 14.1 | 12.3 | 43.5 | 38.0 | |||||||||||
1,128.1 | 1,151.5 | 3,287.1 | 3,431.1 | ||||||||||||
Consumer-to-Business: | |||||||||||||||
Transaction fees | 146.1 | 139.7 | 437.0 | 429.5 | |||||||||||
Foreign exchange and other revenues | 6.2 | 7.6 | 22.0 | 22.3 | |||||||||||
152.3 | 147.3 | 459.0 | 451.8 | ||||||||||||
Business Solutions: | |||||||||||||||
Foreign exchange revenues | 92.2 | 85.9 | 264.9 | 248.5 | |||||||||||
Transaction fees and other revenues | 9.4 | 9.5 | 27.8 | 26.3 | |||||||||||
101.6 | 95.4 | 292.7 | 274.8 | ||||||||||||
Other: | |||||||||||||||
Total revenues | 26.8 | 27.4 | 81.3 | 82.4 | |||||||||||
Total consolidated revenues | $ | 1,408.8 | $ | 1,421.6 | $ | 4,120.1 | $ | 4,240.1 | |||||||
Operating income/(loss): | |||||||||||||||
Consumer-to-Consumer | $ | 271.1 | $ | 338.8 | $ | 795.5 | $ | 979.0 | |||||||
Consumer-to-Business | 29.3 | 37.2 | 98.6 | 111.8 | |||||||||||
Business Solutions (a) | (2.8 | ) | (7.5 | ) | (16.3 | ) | (36.8 | ) | |||||||
Other | (2.3 | ) | (2.9 | ) | (8.8 | ) | (10.0 | ) | |||||||
Total consolidated operating income | $ | 295.3 | $ | 365.6 | $ | 869.0 | $ | 1,044.0 |
(a) | During the three and nine months ended September 30, 2013 and 2012, the Company incurred $3.8 million and $13.9 million, respectively, and $10.3 million and $31.2 million, respectively, of integration expenses related to the acquisition of Travelex Global Business Payments (“TGBP”), which was acquired in November 2011. TGBP integration expense consists primarily of severance and other benefits, retention, direct and incremental expense consisting of facility relocation, consolidation and closures; IT systems integration; amortization of a transitional trademark license; and other expenses such as training, travel and professional fees. Integration expense does not include costs related to the completion of the TGBP acquisition, which are included in Other. |
|
|
Severance, Outplacement and Related Benefits | Other (b) | Total | |||||||||
Balance, December 31, 2012 | $ | 25.7 | $ | 1.6 | $ | 27.3 | |||||
Expenses (a) | 12.5 | 11.4 | 23.9 | ||||||||
Cash payments | (19.0 | ) | (10.9 | ) | (29.9 | ) | |||||
Non-cash benefit/(expense) (a) | 0.2 | (0.2 | ) | — | |||||||
Balance, September 30, 2013 | $ | 19.4 | $ | 1.9 | $ | 21.3 | |||||
Cumulative expenses incurred to date | $ | 41.4 | $ | 13.4 | $ | 54.8 | |||||
Estimated additional expenses expected to be incurred | 12.0 | 9.0 | 21.0 | ||||||||
Total expenses | $ | 53.4 | $ | 22.4 | $ | 75.8 |
(a) | Expenses include a non-cash benefit for adjustments to stock compensation for awards forfeited by employees. Other expenses also include non-cash write-offs and accelerated depreciation of fixed assets and leasehold improvements. These amounts were recognized outside of the accrual. |
(b) | Other expenses primarily related to the relocation of various operations to new and existing Company facilities and third-party providers including expenses for hiring, training, relocation, travel and professional fees. All such expenses were or will be recorded when incurred. |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2013 | 2013 | ||||||
Cost of services | $ | 4.5 | $ | 13.9 | |||
Selling, general and administrative | 1.7 | 10.0 | |||||
Total expenses, pre-tax | $ | 6.2 | $ | 23.9 | |||
Total expenses, net of tax | $ | 4.3 | $ | 16.6 |
Consumer-to-Consumer | Consumer-to-Business | Business Solutions | Other | Total | ||||||||||||||||
2012 expenses | $ | 20.9 | $ | 4.0 | $ | — | $ | 6.0 | $ | 30.9 | ||||||||||
First quarter 2013 | 3.2 | 0.5 | — | 0.5 | 4.2 | |||||||||||||||
Second quarter 2013 | 11.7 | 1.4 | 0.1 | 0.3 | 13.5 | |||||||||||||||
Third quarter 2013 | 5.5 | 0.5 | 0.1 | 0.1 | 6.2 | |||||||||||||||
Cumulative expenses incurred to date | $ | 41.3 | $ | 6.4 | $ | 0.2 | $ | 6.9 | $ | 54.8 |
|
Fair Value Measurement Using | Assets/ Liabilities at Fair Value | ||||||||||||||
September 30, 2013 | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | |||||||||||||||
Settlement assets: | |||||||||||||||
State and municipal debt securities | $ | — | $ | 852.1 | $ | — | $ | 852.1 | |||||||
State and municipal variable rate demand notes | — | 691.4 | — | 691.4 | |||||||||||
Other debt securities | — | 11.9 | — | 11.9 | |||||||||||
Other assets: | |||||||||||||||
Short-term bond mutual fund | 100.0 | — | — | 100.0 | |||||||||||
Derivatives | — | 204.7 | — | 204.7 | |||||||||||
Total assets | $ | 100.0 | $ | 1,760.1 | $ | — | $ | 1,860.1 | |||||||
Liabilities: | |||||||||||||||
Notes and other borrowings | $ | — | $ | 4,148.2 | $ | — | $ | 4,148.2 | |||||||
Derivatives | — | 183.4 | — | 183.4 | |||||||||||
Total liabilities | $ | — | $ | 4,331.6 | $ | — | $ | 4,331.6 | |||||||
Fair Value Measurement Using | Assets/ Liabilities at Fair Value | ||||||||||||||
December 31, 2012 | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | |||||||||||||||
Settlement assets: | |||||||||||||||
State and municipal debt securities | $ | — | $ | 1,003.7 | $ | — | $ | 1,003.7 | |||||||
State and municipal variable rate demand notes | — | 463.3 | — | 463.3 | |||||||||||
Other debt securities | — | 47.8 | — | 47.8 | |||||||||||
Other assets: | |||||||||||||||
Derivatives | — | 96.8 | — | 96.8 | |||||||||||
Total assets | $ | — | $ | 1,611.6 | $ | — | $ | 1,611.6 | |||||||
Liabilities: | |||||||||||||||
Notes and other borrowings | $ | — | $ | 4,200.8 | $ | — | $ | 4,200.8 | |||||||
Derivatives | — | 86.1 | — | 86.1 | |||||||||||
Total liabilities | $ | — | $ | 4,286.9 | $ | — | $ | 4,286.9 |
|
September 30, 2013 | December 31, 2012 | ||||||
Settlement assets: | |||||||
Cash and cash equivalents | $ | 731.7 | $ | 574.5 | |||
Receivables from selling agents and Business Solutions customers | 1,120.9 | 1,025.3 | |||||
Investment securities | 1,555.4 | 1,514.8 | |||||
$ | 3,408.0 | $ | 3,114.6 | ||||
Settlement obligations: | |||||||
Money transfer, money order and payment service payables | $ | 2,563.9 | $ | 2,297.1 | |||
Payables to agents | 844.1 | 817.5 | |||||
$ | 3,408.0 | $ | 3,114.6 |
September 30, 2013 | Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Net Unrealized Gains | ||||||||||||||
Settlement assets: | |||||||||||||||||||
State and municipal debt securities (a) | $ | 845.7 | $ | 852.1 | $ | 8.2 | $ | (1.8 | ) | $ | 6.4 | ||||||||
State and municipal variable rate demand notes | 691.4 | 691.4 | — | — | — | ||||||||||||||
Other debt securities | 11.8 | 11.9 | 0.1 | — | 0.1 | ||||||||||||||
$ | 1,548.9 | $ | 1,555.4 | $ | 8.3 | $ | (1.8 | ) | $ | 6.5 | |||||||||
Other assets: | |||||||||||||||||||
Short-term bond mutual fund | 100.0 | 100.0 | — | — | — | ||||||||||||||
$ | 1,648.9 | $ | 1,655.4 | $ | 8.3 | $ | (1.8 | ) | $ | 6.5 |
December 31, 2012 | Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Net Unrealized Gains | ||||||||||||||
Settlement assets: | |||||||||||||||||||
State and municipal debt securities (a) | $ | 991.5 | $ | 1,003.7 | $ | 12.5 | $ | (0.3 | ) | $ | 12.2 | ||||||||
State and municipal variable rate demand notes | 463.3 | 463.3 | — | — | — | ||||||||||||||
Other debt securities | 47.7 | 47.8 | 0.1 | — | 0.1 | ||||||||||||||
$ | 1,502.5 | $ | 1,514.8 | $ | 12.6 | $ | (0.3 | ) | $ | 12.3 |
(a) | The majority of these securities are fixed-rate instruments. |
Fair Value | |||
Due within 1 year | $ | 135.3 | |
Due after 1 year through 5 years | 510.9 | ||
Due after 5 years through 10 years | 248.5 | ||
Due after 10 years | 660.7 | ||
$ | 1,555.4 |
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Unrealized gains on investment securities, beginning of period | $ | 4.2 | $ | 7.8 | $ | 7.7 | $ | 4.9 | |||||||
Unrealized gains/(losses) | 1.8 | 2.2 | (0.2 | ) | 10.7 | ||||||||||
Tax expense | (0.8 | ) | (0.7 | ) | — | (4.0 | ) | ||||||||
Reclassification of gains into “Other revenues” | (2.0 | ) | (1.4 | ) | (5.6 | ) | (5.1 | ) | |||||||
Tax expense related to reclassifications | 0.8 | 0.5 | 2.1 | 1.9 | |||||||||||
Net unrealized gains/(losses) on investment securities | (0.2 | ) | 0.6 | (3.7 | ) | 3.5 | |||||||||
Unrealized gains on investment securities, end of period | $ | 4.0 | $ | 8.4 | $ | 4.0 | $ | 8.4 | |||||||
Unrealized gains/(losses) on hedging activities, beginning of period | $ | (2.9 | ) | $ | 9.4 | $ | (21.9 | ) | $ | 5.1 | |||||
Unrealized gains/(losses) | (27.0 | ) | (16.7 | ) | 1.2 | (7.2 | ) | ||||||||
Tax (expense)/benefit | 4.0 | 3.1 | (1.3 | ) | 1.9 | ||||||||||
Reclassification of gains into “Transaction fees” | (3.1 | ) | (4.5 | ) | (7.6 | ) | (8.9 | ) | |||||||
Reclassification of gains into “Foreign exchange revenues” | (1.1 | ) | (1.3 | ) | (2.8 | ) | (2.7 | ) | |||||||
Reclassification of losses into “Interest expense” | 0.9 | 0.9 | 2.7 | 2.7 | |||||||||||
Tax benefit related to reclassifications | 0.4 | 0.3 | 0.9 | 0.3 | |||||||||||
Net unrealized losses on hedging activities | (25.9 | ) | (18.2 | ) | (6.9 | ) | (13.9 | ) | |||||||
Unrealized losses on hedging activities, end of period | $ | (28.8 | ) | $ | (8.8 | ) | $ | (28.8 | ) | $ | (8.8 | ) | |||
Foreign currency translation adjustments, beginning of period | $ | (14.2 | ) | $ | (5.3 | ) | $ | (8.5 | ) | $ | (6.3 | ) | |||
Foreign currency translation adjustments | (4.3 | ) | (2.2 | ) | (10.6 | ) | (1.8 | ) | |||||||
Tax benefit | 1.5 | 0.7 | 2.1 | 1.3 | |||||||||||
Net foreign currency translation adjustments | (2.8 | ) | (1.5 | ) | (8.5 | ) | (0.5 | ) | |||||||
Foreign currency translation adjustments, end of period | $ | (17.0 | ) | $ | (6.8 | ) | $ | (17.0 | ) | $ | (6.8 | ) | |||
Defined benefit pension plan adjustments, beginning of period | $ | (125.4 | ) | $ | (118.9 | ) | $ | (129.9 | ) | $ | (122.2 | ) | |||
Reclassification of losses into “Cost of services” | 3.1 | 2.6 | 9.3 | 7.9 | |||||||||||
Tax benefit related to reclassifications and other | (1.2 | ) | (1.0 | ) | (2.9 | ) | (3.0 | ) | |||||||
Net defined benefit pension plan adjustments | 1.9 | 1.6 | 6.4 | 4.9 | |||||||||||
Defined benefit pension plan adjustments, end of period | $ | (123.5 | ) | $ | (117.3 | ) | $ | (123.5 | ) | $ | (117.3 | ) | |||
Accumulated other comprehensive loss, end of period | $ | (165.3 | ) | $ | (124.5 | ) | $ | (165.3 | ) | $ | (124.5 | ) |
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Interest cost | $ | 3.0 | $ | 3.7 | $ | 9.1 | $ | 11.0 | |||||||
Expected return on plan assets | (5.2 | ) | (5.2 | ) | (15.6 | ) | (15.6 | ) | |||||||
Amortization of actuarial loss | 3.1 | 2.6 | 9.3 | 7.9 | |||||||||||
Net periodic benefit cost | $ | 0.9 | $ | 1.1 | $ | 2.8 | $ | 3.3 |
|
Contracts not designated as hedges: | |||
Euro | $ | 202.1 | |
Canadian dollar | 57.7 | ||
British pound | 54.0 | ||
Other (a) | 155.1 | ||
Contracts designated as hedges: | |||
Euro | $ | 405.3 | |
Canadian dollar | 126.4 | ||
British pound | 90.6 | ||
Swiss franc | 43.9 | ||
Australian dollar | 42.4 | ||
Other | 48.2 |
(a) | Comprised of exposures to 16 different currencies. None of these individual currency exposures is greater than $25 million. |
Derivative Assets | Derivative Liabilities | ||||||||||||||||||
Fair Value | Fair Value | ||||||||||||||||||
Balance Sheet Location | September 30, 2013 | December 31, 2012 | Balance Sheet Location | September 30, 2013 | December 31, 2012 | ||||||||||||||
Derivatives — hedges: | |||||||||||||||||||
Interest rate fair value hedges — Corporate | Other assets | $ | 5.0 | $ | 13.1 | Other liabilities | $ | 6.1 | $ | — | |||||||||
Foreign currency cash flow hedges — Consumer-to-Consumer | Other assets | 9.1 | 10.8 | Other liabilities | 21.3 | 17.6 | |||||||||||||
Total | $ | 14.1 | $ | 23.9 | $ | 27.4 | $ | 17.6 | |||||||||||
Derivatives — undesignated: | |||||||||||||||||||
Foreign currency — Business Solutions | Other assets | $ | 190.2 | $ | 71.9 | Other liabilities | $ | 153.1 | $ | 66.5 | |||||||||
Foreign currency — Consumer-to-Consumer | Other assets | 0.4 | 1.0 | Other liabilities | 2.9 | 2.0 | |||||||||||||
Total | $ | 190.6 | $ | 72.9 | $ | 156.0 | $ | 68.5 | |||||||||||
Total derivatives | $ | 204.7 | $ | 96.8 | $ | 183.4 | $ | 86.1 |
September 30, 2013 | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | Net Amounts Presented in the Condensed Consolidated Balance Sheets | Derivatives Not Offset in the Condensed Consolidated Balance Sheets | Net Amounts | |||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 98.9 | $ | — | $ | 98.9 | $ | (83.9 | ) | $ | 15.0 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 105.8 | |||||||||||||||||||
Total | $ | 204.7 | ||||||||||||||||||
December 31, 2012 | ||||||||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 39.1 | $ | — | $ | 39.1 | $ | (19.6 | ) | $ | 19.5 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 57.7 | |||||||||||||||||||
Total | $ | 96.8 |
September 30, 2013 | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | Net Amounts Presented in the Condensed Consolidated Balance Sheets | Derivatives Not Offset in the Condensed Consolidated Balance Sheets | Net Amounts | |||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 130.3 | $ | — | $ | 130.3 | $ | (83.9 | ) | $ | 46.4 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 53.1 | |||||||||||||||||||
Total | $ | 183.4 | ||||||||||||||||||
December 31, 2012 | ||||||||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 30.5 | $ | — | $ | 30.5 | $ | (19.6 | ) | $ | 10.9 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 55.6 | |||||||||||||||||||
Total | $ | 86.1 |
Gain/(Loss) Recognized in Income on Derivatives | Gain/(Loss) Recognized in Income on Related Hedged Item (a) | Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) | ||||||||||||||||||||||||||||||
Income Statement Location | Amount | Income Statement Location | Amount | Income Statement Location | Amount | |||||||||||||||||||||||||||
Derivatives | September 30, 2013 | September 30, 2012 | Hedged Item | September 30, 2013 | September 30, 2012 | September 30, 2013 | September 30, 2012 | |||||||||||||||||||||||||
Interest rate contracts | Interest expense | $ | 3.1 | $ | 1.1 | Fixed-rate debt | Interest expense | $ | (0.6 | ) | $ | 0.7 | Interest expense | $ | — | $ | — | |||||||||||||||
Total gain/ (loss) | $ | 3.1 | $ | 1.1 | $ | (0.6 | ) | $ | 0.7 | $ | — | $ | — |
Gain/(Loss) Recognized in Income on Derivatives | Gain/(Loss) Recognized in Income on Related Hedged Item (a) | Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) | ||||||||||||||||||||||||||||||
Income Statement Location | Amount | Income Statement Location | Amount | Income Statement Location | Amount | |||||||||||||||||||||||||||
Derivatives | September 30, 2013 | September 30, 2012 | Hedged Item | September 30, 2013 | September 30, 2012 | September 30, 2013 | September 30, 2012 | |||||||||||||||||||||||||
Interest rate contracts | Interest expense | $ | (5.0 | ) | $ | 3.5 | Fixed-rate debt | Interest expense | $ | 12.9 | $ | 2.2 | Interest expense | $ | — | $ | — | |||||||||||||||
Total gain/ (loss) | $ | (5.0 | ) | $ | 3.5 | $ | 12.9 | $ | 2.2 | $ | — | $ | — |
Gain/(Loss) Recognized in OCI on Derivatives (Effective Portion) | Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) (b) | ||||||||||||||||||||||||||
Amount | Income Statement Location | Amount | Income Statement Location | Amount | ||||||||||||||||||||||||
Derivatives | September 30, 2013 | September 30, 2012 | September 30, 2013 | September 30, 2012 | September 30, 2013 | September 30, 2012 | ||||||||||||||||||||||
Foreign currency contracts | $ | (27.0 | ) | $ | (16.7 | ) | Revenue | $ | 4.2 | $ | 5.8 | Derivative gains/(losses), net | $ | 0.3 | $ | 0.5 | ||||||||||||
Interest rate contracts (c) | — | — | Interest expense | (0.9 | ) | (0.9 | ) | Interest expense | — | — | ||||||||||||||||||
Total gain/(loss) | $ | (27.0 | ) | $ | (16.7 | ) | $ | 3.3 | $ | 4.9 | $ | 0.3 | $ | 0.5 |
Gain/(Loss) Recognized in OCI on Derivatives (Effective Portion) | Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) (b) | ||||||||||||||||||||||||||
Amount | Income Statement Location | Amount | Income Statement Location | Amount | ||||||||||||||||||||||||
Derivatives | September 30, 2013 | September 30, 2012 | September 30, 2013 | September 30, 2012 | September 30, 2013 | September 30, 2012 | ||||||||||||||||||||||
Foreign currency contracts | $ | 1.2 | $ | (7.2 | ) | Revenue | $ | 10.4 | $ | 11.6 | Derivative gains/(losses), net | $ | — | $ | 0.1 | |||||||||||||
Interest rate contracts (c) | — | — | Interest expense | (2.7 | ) | (2.7 | ) | Interest expense | — | — | ||||||||||||||||||
Total gain/(loss) | $ | 1.2 | $ | (7.2 | ) | $ | 7.7 | $ | 8.9 | $ | — | $ | 0.1 |
Gain/(Loss) Recognized in Income on Derivatives (d) | |||||||||||||||||
Income Statement Location | Amount | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
Derivatives | 2013 | 2012 | 2013 | 2012 | |||||||||||||
Foreign currency contracts (e) | Selling, general and administrative | $ | (15.3 | ) | $ | (5.8 | ) | $ | (1.9 | ) | $ | (6.1 | ) | ||||
Foreign currency contracts (f) | Derivative gains/(losses), net | (1.2 | ) | (0.4 | ) | (0.6 | ) | 0.9 | |||||||||
Total loss | $ | (16.5 | ) | $ | (6.2 | ) | $ | (2.5 | ) | $ | (5.2 | ) |
(a) | The gain/(loss) of $(0.6) million and $0.7 million in the three months ended September 30, 2013 and 2012, respectively, was comprised of a loss in value on the debt of $(3.1) million and $(1.1) million, respectively, and amortization of hedge accounting adjustments of $2.5 million and $1.8 million, respectively. The gain of $12.9 million and $2.2 million in the nine months ended September 30, 2013 and 2012, respectively, was comprised of a gain/(loss) in value on the debt of $5.0 million and $(3.5) million, respectively, and amortization of hedge accounting adjustments of $7.9 million and $5.7 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” in the Condensed Consolidated Statements of Income over the life of the related notes. |
(d) | The Company uses foreign currency forward and option contracts as part of its Business Solutions payments operations. 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 gains/(losses) on settlement assets and obligations and cash balances, not including amounts related to derivatives activity as displayed above, were $9.7 million and $(2.3) million for the three and nine months ended September 30, 2013, respectively, and $6.1 million and $4.3 million for the three and nine months ended September 30, 2012, 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. |
|
September 30, 2013 | December 31, 2012 | ||||||
Due in less than one year: | |||||||
Commercial paper (a) | $ | — | $ | — | |||
Floating rate notes (b) | — | 300.0 | |||||
6.500% notes (effective rate of 5.6%) due 2014 (c) | 500.0 | 500.0 | |||||
Due in greater than one year (c): | |||||||
Floating rate notes due 2015 (d) | 250.0 | — | |||||
2.375% notes due 2015 (e) | 250.0 | 250.0 | |||||
5.930% notes due 2016 (e) | 1,000.0 | 1,000.0 | |||||
2.875% notes due 2017 (e) | 500.0 | 500.0 | |||||
3.650% notes due 2018 (e) | 400.0 | 400.0 | |||||
5.253% notes due 2020 (e) | 324.9 | 324.9 | |||||
6.200% notes due 2036 (e) | 500.0 | 500.0 | |||||
6.200% notes due 2040 (e) | 250.0 | 250.0 | |||||
Other borrowings | 5.7 | 5.8 | |||||
Total borrowings at par value | 3,980.6 | 4,030.7 | |||||
Fair value hedge accounting adjustments, net (c) | 7.3 | 20.2 | |||||
Unamortized discount, net | (19.2 | ) | (21.7 | ) | |||
Total borrowings at carrying value (f) | $ | 3,968.7 | $ | 4,029.2 |
(a) | Pursuant to the Company’s commercial paper program, the Company may issue unsecured commercial paper notes in an amount not to exceed $1.5 billion outstanding at any time, reduced to the extent of borrowings outstanding on the Company’s Revolving Credit Facility in excess of $150 million. The commercial paper notes may have maturities of up to 397 days from date of issuance. |
(b) | The floating rate notes due in March 2013 were repaid using the Company’s cash, including cash generated from operations and proceeds from the Company’s issuance of the fixed rate notes due 2015 and 2017. |
(c) | 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” in the Condensed Consolidated Statements of Income over the life of the related notes, and cause the effective rate of interest to differ from the notes’ stated rate. |
(d) | On August 22, 2013, the Company issued $250.0 million of aggregate principal amount of unsecured floating rate notes due August 21, 2015 (“2015 Floating Rate Notes”). Interest is payable quarterly at a per annum rate equal to three-month LIBOR plus 1.0% (1.3% at September 30, 2013) and is reset quarterly. See below for additional detail relating to the debt issuance. |
(e) | The difference between the stated interest rate and the effective interest rate is not significant. |
(f) | As of September 30, 2013, the Company’s weighted-average effective rate on total borrowings was approximately 4.8%. |
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Stock options granted: | |||
Weighted-average risk-free interest rate | 1.2 | % | |
Weighted-average dividend yield | 3.7 | % | |
Volatility | 35.3 | % | |
Expected term (in years) | 6.09 | ||
Weighted-average grant date fair value | $ | 3.20 |
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Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2013 | 2012 | 2013 | 2012 | ||||||||||||
Revenues: | |||||||||||||||
Consumer-to-Consumer: | |||||||||||||||
Transaction fees | $ | 861.1 | $ | 889.6 | $ | 2,519.1 | $ | 2,655.2 | |||||||
Foreign exchange revenues | 252.9 | 249.6 | 724.5 | 737.9 | |||||||||||
Other revenues | 14.1 | 12.3 | 43.5 | 38.0 | |||||||||||
1,128.1 | 1,151.5 | 3,287.1 | 3,431.1 | ||||||||||||
Consumer-to-Business: | |||||||||||||||
Transaction fees | 146.1 | 139.7 | 437.0 | 429.5 | |||||||||||
Foreign exchange and other revenues | 6.2 | 7.6 | 22.0 | 22.3 | |||||||||||
152.3 | 147.3 | 459.0 | 451.8 | ||||||||||||
Business Solutions: | |||||||||||||||
Foreign exchange revenues | 92.2 | 85.9 | 264.9 | 248.5 | |||||||||||
Transaction fees and other revenues | 9.4 | 9.5 | 27.8 | 26.3 | |||||||||||
101.6 | 95.4 | 292.7 | 274.8 | ||||||||||||
Other: | |||||||||||||||
Total revenues | 26.8 | 27.4 | 81.3 | 82.4 | |||||||||||
Total consolidated revenues | $ | 1,408.8 | $ | 1,421.6 | $ | 4,120.1 | $ | 4,240.1 | |||||||
Operating income/(loss): | |||||||||||||||
Consumer-to-Consumer | $ | 271.1 | $ | 338.8 | $ | 795.5 | $ | 979.0 | |||||||
Consumer-to-Business | 29.3 | 37.2 | 98.6 | 111.8 | |||||||||||
Business Solutions (a) | (2.8 | ) | (7.5 | ) | (16.3 | ) | (36.8 | ) | |||||||
Other | (2.3 | ) | (2.9 | ) | (8.8 | ) | (10.0 | ) | |||||||
Total consolidated operating income | $ | 295.3 | $ | 365.6 | $ | 869.0 | $ | 1,044.0 |
(a) | During the three and nine months ended September 30, 2013 and 2012, the Company incurred $3.8 million and $13.9 million, respectively, and $10.3 million and $31.2 million, respectively, of integration expenses related to the acquisition of Travelex Global Business Payments (“TGBP”), which was acquired in November 2011. TGBP integration expense consists primarily of severance and other benefits, retention, direct and incremental expense consisting of facility relocation, consolidation and closures; IT systems integration; amortization of a transitional trademark license; and other expenses such as training, travel and professional fees. Integration expense does not include costs related to the completion of the TGBP acquisition, which are included in Other. |
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