The Western Union Company (NYSE: WU) today reported financial
results for the 2010 second quarter.
Financial highlights for the quarter included:
- Revenue of $1.3 billion, an
increase of 2% compared to last year’s second quarter
- Constant currency adjusted
revenue increase of 3%
- Restructuring expenses of $35
million, or $22 million after-tax, related to organizational
changes and other actions described in the Company’s May 27, 2010
press release
- Operating income margin of 24%
(GAAP), or 27% excluding restructuring expenses, compared to 27% in
last year’s second quarter
- EPS of $0.33 (GAAP), or $0.36
excluding restructuring expenses
- EPS of $0.37 on a constant
currency basis, excluding restructuring expenses
- Year-to-date cash provided by
operating activities of $326 million, including a $250 million
reduction due to a first quarter refundable tax deposit
Operational highlights for the quarter included:
- Grew global consumer-to-consumer
(C2C) transactions by 9%, led by accelerating trends in the
Americas region
- The European Union delivered
overall transaction growth despite economic challenges in certain
countries
- Transactions in the Gulf States
declined modestly
- Realized further progress in the
U.S. domestic money transfer business, with 28% domestic
transaction growth in the quarter
- Initiated organizational changes
to improve efficiency and drive long-term growth
- Further advanced strategic
initiatives in electronic channels, including increased
distribution of prepaid cards to over 500,000 cards-in-force
- Signed agreement with Family
Dollar to offer the Western Union® goCASH℠ prepaid in-lane money
transfer service at more than 6,500 stores in the U.S.
- Received authorization to offer
global money transfer services in Japan and launched with Travelex
in July
- Added to European retail
location opportunity through an agreement with OMV to offer money
transfer services at more than 1,800 gas stations across eight
European Union countries
- Expanded banking distribution in
the Philippines by entering an alliance with the Philippine
National Bank, which has the country’s largest offshore bank
network. Other key agent additions included Bandhan Financial
Services, a major microfinance services company in India with over
800 locations across the country, and Yapi Kredi, one of the
largest banks in Turkey with over 800 locations.
- Grew agent locations to
approximately 430,000
- Completed $217 million in share
repurchases and paid $40 million in quarterly dividends
Western Union President and Chief Executive Officer Christina A.
Gold said, “The increased momentum we experienced in the first
quarter has continued into the second, as each of our regions
contributed to solid transaction growth. As I enter my last few
weeks with Western Union I believe the foundation is solid, with a
strong brand, an unmatched global network, and an energized
management team. We are confident the strategies of profitable
growth in money transfer, rapid development of electronic channels,
and expansion of business payments are the right ones to achieve
success.”
Chief Operating Officer and CEO-Elect Hikmet Ersek added, “The
second quarter results demonstrate the benefits of our diversified
geographic portfolio. Although the global economy remains
challenging in many parts of the world, our overall business
continues to improve. Transaction trends increased, and we
delivered solid margins. As a result of our first half performance,
we are raising our earnings per share outlook for the year,
excluding restructuring charges.”
Ersek added, “We plan to build on our momentum by leveraging our
many competitive advantages to enhance our speed and execution, add
new services and channels, and improve our productivity. The
organizational changes we initiated in the quarter are one step
towards improving our efficiencies and driving growth over the
long-term.”
As previously announced, Ersek will become CEO upon Gold’s
retirement on September 1, 2010.
Consolidated
Results
Second quarter consolidated revenue of $1.3 billion increased 2%
from the prior year. Constant currency revenue growth was 3%, or 1%
excluding Custom House. The constant currency growth rate improved
approximately 200 basis points compared to the first quarter,
supported by stronger consumer-to-consumer trends in the Americas
region.
Operating income margin was 24%, or 27% excluding $35 million of
pre-tax restructuring expenses, compared to 27% in last year’s
second quarter. The Company expects to record a total of
approximately $80 million of restructuring charges through 2011, a
majority of which is expected to occur during 2010. The
restructuring charges relate primarily to organizational changes
designed to simplify business processes, move decision-making
closer to the marketplace, and leverage the cost structure. The
Company expects pre-tax savings from the initiatives of
approximately $10 million in 2010, $30 million to $40 million in
2011, and $50 million annualized beginning in 2012. Restructuring
expenses are not reflected in segment operating results.
GAAP earnings per share were $0.33, or $0.36 excluding
restructuring expenses. On a constant currency basis, earnings per
share were $0.37 excluding restructuring expenses. Resolution of
certain tax matters with the U.S. Internal Revenue Service relating
to the 2002-2004 tax years benefited GAAP EPS by approximately
$0.01 in the quarter. EPS in the same period last year was
$0.31.
Consumer-to-Consumer Segment
Results
The consumer-to-consumer segment represented 84% of Western
Union’s revenue at $1.1 billion in the quarter, an increase of 1%,
or 2% on a constant currency basis, compared to the prior year.
Operating income margin was 29%, which compared to 28% in the
second quarter of 2009.
Western Union handled 53 million C2C transactions, a 9% increase
over last year’s second quarter. This represents the third
consecutive quarter of accelerating transaction growth.
For the international portion of C2C, revenue increased 2%, or
4% constant currency adjusted, on transaction growth of 7%. Revenue
from the subset of the international business, those transactions
that originate outside the U.S., increased 1%, or 3% constant
currency adjusted, on transaction growth of 7%.
The Europe, Middle East, Africa and South Asia (EMEASA) region’s
revenue declined 1% while transactions increased 5% compared to
last year’s second quarter. EMEASA revenue was negatively impacted
by currency translation, primarily due to the decline in value of
the Euro. On a constant currency basis, EMEASA revenues increased
in the quarter. Despite economic challenges in certain European
countries, the European Union overall delivered transaction growth.
India recorded increases in revenue of 4% and transactions of 3% in
the quarter, while the Gulf States had moderate transaction
declines.
The Americas region increased revenue 1% on transaction growth
of 12%. The region’s transaction improvement was driven by strong
growth in U.S. domestic money transfer, positive trends in Mexico,
and continued strength in U.S.-originated transactions to the rest
of the world. Domestic transactions increased 28%, while revenue
declined 10%. The repositioning of the U.S. domestic business has
contributed to significant increases in transactions, and the
Company expects domestic revenue growth to follow later in the
year. In Mexico, revenue increased 4% and transactions grew 5%.
The Asia Pacific (APAC) region increased revenues by 11% on
transaction growth of 14%. China revenue grew 11% as transactions
were up 6% in the quarter.
Global Business Payments
Segment Results
The Global Business Payments segment represented 14% of Western
Union’s revenue in the quarter. Revenue was $179 million, an
increase of 9% compared to the same period in 2009. Custom House,
which was acquired in September of 2009, contributed $28 million of
revenue in the quarter, an increase from $26 million in the first
quarter. Excluding Custom House, segment revenue decreased 8% due
to declines in the U.S. bill payment business. Operating income
margin was 19%, or 25% excluding Custom House, compared to 27% in
the second quarter of the prior year. The Company continues to
invest in Custom House to drive future business-to-business
expansion.
Electronic Channel
Initiatives
The development of electronic channel initiatives continued in
the second quarter. The Company increased its prepaid
cards-in-force to over 500,000 and retail distribution expanded to
over 8,000 locations. Westernunion.com transactions in
international markets increased more than 60% in the quarter.
Account based money transfer, which includes account-to-cash and
cash-to-account service with banks, experienced transaction
increases of over 70% in the quarter. Banks that have agreed to
join the Company’s electronic channel initiative by offering
account based money transfer now total 20.
In mobile money transfer, over 60,000 agent locations in 17
countries have now been enabled to provide cash-to-mobile service.
In addition, a pilot mobile-to-cash service has been initiated in
Malaysia, and Western Union money transfer is now available through
mobile banking in South Africa with Absa, a subsidiary of Barclays
Bank.
Electronic channels, which are included in the C2C and Other
reporting segments, represented 2% of total company revenue in the
quarter.
Capital Deployment &
Liquidity
Western Union’s year-to-date cash flow from operations was $326
million, including a reduction due to a $250 million refundable tax
deposit with the IRS in the first quarter. Capital expenditures in
the second quarter totaled $29 million. In the quarter the Company
repurchased 13.3 million of its shares for $217 million, at an
average price of $16.32 per share, and paid $40 million in
dividends. Year-to-date the Company has repurchased 25.7 million
shares for $417 million, at an average price of $16.25 per share.
As of June 30, 2010 the Company had $583 million remaining under
its current stock repurchase authorization. On June 21, the Company
issued $250 million principal amount of 6.20% notes due 2040.
Outlook
The Company now expects the following full year 2010
results:
- GAAP revenue in a range of -2%
to +1%
- Constant currency revenue growth
2% higher than GAAP (0% to +3%)
- GAAP EPS of $1.24 to $1.29,
including $0.07 of restructuring charges
- EPS excluding restructuring
charges of $1.31 to $1.36
- Constant currency EPS $0.02
higher
- GAAP cash flows from operating
activities of $800 million to $900 million, including a $250
million reduction due to the first quarter refundable tax
deposit
Based on first half performance and current business trends, the
Company has increased its constant currency EPS outlook, excluding
restructuring charges, by $0.04. The outlook for reported EPS,
excluding restructuring charges, has been increased by $0.02 due to
offsets from the negative impact of foreign currency translation.
The restructuring charge is expected to impact GAAP EPS by
approximately $0.07.
The EPS outlook before restructuring charges is benefiting from
higher constant currency revenues, a lower tax rate, and
restructuring savings, partially offset by negative foreign
currency translation and higher interest expense related to the
issuance of $250 million of long-term debt.
The constant currency revenue outlook has increased by 1%
compared to the prior outlook, primarily due to improved results in
the Americas. The GAAP revenue outlook has decreased by 1% due to
an expected negative impact from foreign currency translation,
partially offset by the increase in constant currency revenues. The
outlook assumes no significant changes in the global economy.
Additional
Statistics
Additional key statistics for the quarter and historical trends
can be found in the supplemental table included with this press
release.
Non-GAAP
Measures
Western Union presents a number of non-GAAP measurements because
management believes that these metrics provide meaningful
supplemental information in addition to the GAAP metrics and
provide comparability and consistency to prior periods. These
non-GAAP measurements include revenue change constant currency
adjusted, revenue change constant currency adjusted excluding
Custom House, operating income margin excluding restructuring
expenses, earnings per share excluding restructuring expenses,
earnings per share constant currency adjusted excluding
restructuring expenses, consumer-to-consumer segment revenue change
constant currency adjusted, international consumer-to-consumer
revenue change constant currency adjusted, international
consumer-to-consumer excluding United States originated
transactions revenue change constant currency adjusted, Global
Business Payments revenue change excluding Custom House, Global
Business Payments operating margin excluding Custom House, 2010
revenue outlook constant currency adjusted, 2010 earnings per share
outlook excluding restructuring expenses and additional measures
found in the supplemental schedule included with this press
release.
Reconciliations of non-GAAP to comparable GAAP measures are
available in the accompanying schedules and in the “Investor
Relations” section of the company’s website at
www.westernunion.com.
Restructuring
Western Union incurred $35 million in restructuring expenses in
the second quarter from previously announced actions. In the
quarter, approximately $10 million was included in cost of services
and $25 million was included in selling, general, and
administrative expense. The restructuring expenses were not
included in the operating segments’ results.
Restructuring expenses include expenses related to severance,
outplacement and other employee-related benefits; facility closure
and migration of IT infrastructure; and other expenses related to
relocation of various operations to new or existing company
facilities and third-party providers, including hiring, training,
relocation, travel, and professional fees. Also included in the
facility closure expenses are non-cash expenses related to fixed
asset and leasehold improvement write-offs, and the acceleration of
depreciation.
Currency
Constant currency results assume foreign revenues and expenses
are translated from foreign currencies to the U.S. dollar, net of
the effect of foreign currency hedges, at rates consistent with
those in the prior year. Constant currency results also assume any
benefit or loss caused by foreign exchange fluctuations between
foreign currencies and the U.S. dollar, net of the effect of
foreign currency hedges, would have been consistent with the prior
year. Additionally, the measurement assumes the impact of
fluctuations in foreign currency derivatives not designated as
hedges and the portion of fair value that is excluded from the
measure of effectiveness for those contracts designated as hedges
is consistent with the prior year.
Investor and Analyst
Conference Call and Slide Presentation
The company will host a conference call and webcast, including
slides, at 8:30 a.m. Eastern Time today. To listen to the
conference call live via telephone, dial 866-770-7146 (U.S.) or
+1-617-213-8068 (outside the U.S.) ten minutes prior to the start
of the call. The pass code is 95512056.
The conference call and accompanying slides will be available
via webcast at http://ir.westernunion.com/investor. Registration
for the event is required, so please register at least five minutes
prior to the scheduled start time.
A replay of the call will be available approximately two hours
after the call ends through August 3, 2010, at 888-286-8010 (U.S.)
or +1-617-801-6888 (outside the U.S.). The pass code is 52949326. A
webcast replay will be available at
http://ir.westernunion.com/investor for the same time period.
Please note: All statements made by Western Union officers on
this call are the property of Western Union and subject to
copyright protection. Other than the replay, Western Union has not
authorized, and disclaims responsibility for, any recording, replay
or distribution of any transcription of this call.
Safe Harbor Compliance
Statement for Forward-Looking Statements
This press release contains certain statements that are
forward-looking within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are not guarantees
of future performance and involve certain risks, uncertainties and
assumptions that are difficult to predict. Actual outcomes and
results may differ materially from those expressed in, or implied
by, our forward-looking statements. Words such as “expects,”
“intends,” “anticipates,” “believes,” “estimates,” “guides,”
“provides guidance,” “provides outlook” and other similar
expressions or future or conditional verbs such as “will,”
“should,” “would” and “could” are intended to identify such
forward-looking statements. Readers of this press release by The
Western Union Company (the “Company,” “Western Union,” “we,” “our”
or “us”) should not rely solely on the forward-looking statements
and should consider all uncertainties and risks discussed in the
Risk Factors section and throughout the Annual Report on Form 10-K
for the year ended December 31, 2009. The statements are only as of
the date they are made, and the Company undertakes no obligation to
update any forward-looking statement.
Possible events or factors that could cause results or
performance to differ materially from those expressed in our
forward-looking statements include the following: changes in
immigration laws, patterns and other factors related to migrants;
our ability to adapt technology in response to changing industry
and consumer needs or trends; our failure to develop and introduce
new products, services and enhancements, and gain market acceptance
of such products; the failure by us, our agents or subagents to
comply with our business and technology standards and contract
requirements or applicable laws and regulations, especially laws
designed to prevent money laundering and terrorist financing,
and/or changing regulatory or enforcement interpretations of those
laws; failure to comply with the settlement agreement with the
State of Arizona; the impact on our business of the Dodd-Frank Wall
Street Reform and Consumer Protection Act and the rules promulgated
there-under; changes in United States or foreign laws, rules and
regulations including the Internal Revenue Code of 1986, as
amended, and governmental or judicial interpretations thereof;
changes in general economic conditions and economic conditions in
the regions and industries in which we operate; adverse movements
and volatility in capital markets and other events which affect our
liquidity, the liquidity of our agents or clients, or the value of,
or our ability to recover our investments or amounts payable to us;
political conditions and related actions in the United States and
abroad which may adversely affect our businesses and economic
conditions as a whole; interruptions of United States government
relations with countries in which we have or are implementing
material agent contracts; our ability to resolve tax matters with
the Internal Revenue Service and other tax authorities consistent
with our reserves; mergers, acquisitions and integration of
acquired businesses and technologies into our company, and the
realization of anticipated financial benefits from these
acquisitions; changes in, and failure to manage effectively
exposure to, foreign exchange rates, including the impact of the
regulation of foreign exchange spreads on money transfers and
payment transactions; failure to maintain sufficient amounts or
types of regulatory capital to meet the changing requirements of
our regulators worldwide; our ability to maintain our agent network
and business relationships under terms consistent with or more
advantageous to us than those currently in place; failure to
implement agent contracts according to schedule; deterioration in
consumers’ and clients’ confidence in our business, or in money
transfer providers generally; failure to manage credit and fraud
risks presented by our agents, clients and consumers or
non-performance by our banks, lenders, other financial services
providers or insurers; any material breach of security of or
interruptions in any of our systems; adverse rating actions by
credit rating agencies; liabilities and unanticipated developments
resulting from litigation and regulatory investigations and similar
matters, including costs, expenses, settlements and judgments;
failure to compete effectively in the money transfer industry with
respect to global and niche or corridor money transfer providers,
banks and other money transfer services providers, including
telecommunications providers, card associations, card-based payment
providers and electronic and Internet providers; our ability to
protect our brands and our other intellectual property rights; our
failure to manage the potential both for patent protection and
patent liability in the context of a rapidly developing legal
framework for intellectual property protection; cessation of
various services provided to us by third-party vendors; changes in
industry standards affecting our business; changes in accounting
standards, rules and interpretations; our ability to attract and
retain qualified key employees and to manage our workforce
successfully; significantly slower growth or declines in the money
transfer market and other markets in which we operate; adverse
consequences from our spin-off from First Data Corporation;
decisions to downsize, sell or close units, or to transition
operating activities from one location to another or to third
parties, particularly transitions from the United States to other
countries; decisions to change our business mix; catastrophic
events; and management’s ability to identify and manage these and
other risks.
About Western Union
The Western Union Company (NYSE: WU) is a leader in global
payment services. Together with its Vigo, Orlandi Valuta, Pago
Facil and Custom House branded payment services, Western Union
provides consumers and businesses with fast, reliable and
convenient ways to send and receive money around the world, as well
as send payments and purchase money orders. The Western Union, Vigo
and Orlandi Valuta branded services are offered through a combined
network of approximately 430,000 agent locations in 200 countries
and territories. In 2009, The Western Union Company completed 196
million consumer-to-consumer transactions worldwide, moving $71
billion of principal between consumers, and 415 million business
payments. For more information, visit www.westernunion.com.
WU-F, WU-G
THE WESTERN UNION
COMPANY
KEY STATISTICS
(unaudited)
Notes* 2Q09
3Q09 4Q09 FY2009 1Q10 2Q10
YTD 2Q10 Consolidated Metrics Consolidated
revenue (GAAP) - YoY % change (7 )% (5 )% 2 % (4 )% 3 % 2 % 2 %
Consolidated revenue (constant currency) - YoY % change a (2 )% (2
)% (1 )% (1 )% 1 % 3 % 2 % Agent locations
385,000
400,000 410,000 410,000 420,000
430,000
430,000
Consumer-to-Consumer Segment Revenue (GAAP) - YoY %
change (7 )% (5 )% 2 % (4 )% 3 % 1 % 2 % Revenue (constant
currency) - YoY % change d (2 )% (3 )% (2 )% (2 )% 0 % 2 % 1 %
Operating margin 27.6 % 27.6 % 25.7 % 27.3 % 27.4 % 29.1 % 28.3 %
Transactions - in millions 48.7 50.1 51.4 196.1 49.6 53.1
102.7 Transactions - YoY % change 3 % 3 % 5 % 4 % 8 % 9 % 9 %
Total Principal - $ billions 17.4 18.6 18.8 71.3 17.7 18.6
36.3 Cross-border Principal - $ billions 15.9 17.0 17.1 65.0 16.1
16.8 32.9 Cross-border Principal - YoY % change (8 )% (5 )% 3 % (3
)% 7 % 6 % 6 % Cross-border Principal (constant currency) - YoY %
change f (1 )% (1 )% (1 )% 0 % 4 % 7 % 5 % Principal per
transaction ($ - dollars) 358 371 365 363 357 351 354 Principal per
transaction - YoY % change (11 )% (7 )% (2 )% (7 )% 0 % (2 )% (1 )%
Principal per transaction (constant currency) - YoY % change e (5
)% (4 )% (6 )% (5 )% (3 )% (2 )% (2 )% International revenue
(GAAP) - YoY % change r (5 )% (3 )% 6 % (1 )% 6 % 2 % 4 %
International revenue (constant currency) - YoY % change g, r 1 % 0
% 2 % 1 % 3 % 4 % 3 % International transactions - YoY % change r 8
% 6 % 7 % 8 % 8 % 7 % 8 % International principal per transaction
($ - dollars) r 380 395 390 386 381 376 379 International principal
per transaction - YoY % change r (13 )% (9 )% 0 % (8 )% 1 % (1 )% 0
% International principal per transaction (constant currency) - YoY
% change i, r (6 )% (5 )% (5 )% (5 )% (2 )% 0 % (1 )%
International revenue excl. US origination (GAAP) - YoY % change s
(5 )% (2 )% 8 % (1 )% 7 % 1 % 4 % International revenue excl. US
origination (constant currency) - YoY % change h, s 3 % 1 % 3 % 3 %
4 % 3 % 3 % International transactions excluding US origination -
YoY % change s 12 % 9 % 9 % 11 % 8 % 7 % 8 % EMEASA region
revenue - YoY % change q, y (5 )% (3 )% 6 % (1 )% 5 % (1 )% 2 %
EMEASA region transactions - YoY % change q, y 11 % 8 % 8 % 10 % 6
% 5 % 6 % Americas region revenue - YoY % change q, x (11 )%
(10 )% (7 )% (9 )% (3 )% 1 % (1 )% Americas region transactions -
YoY % change q, x (5 )% (4 )% 0 % (3 )% 8 % 12 % 10 % Domestic
revenue - YoY % change t (12 )% (15 )% (20 )% (14 )% (13 )% (10 )%
(12 )% Domestic transactions - YoY % change t (8 )% (9 )% 5 % (5 )%
18 % 28 % 23 % Mexico revenue - YoY % change u (20 )% (18 )%
(10 )% (15 )% (7 )% 4 % (1 )% Mexico transactions - YoY % change u
(15 )% (13 )% (12 )% (12 )% (3 )% 5 % 1 % APAC region
revenue - YoY % change q, z 0 % 5 % 14 % 5 % 14 % 11 % 12 % APAC
region transactions - YoY % change q, z 19 % 15 % 13 % 18 % 15 % 14
% 14 %
Global Business Payments Segment Revenue - YoY
% change (8 )% (3 )% 4 % (4 )% 4 % 9 % 7 % Segment revenue excl.
Custom House - YoY % change j N/A (7 )% (9 )% (8 )% (10 )% (8 )% (9
)% Operating margin 26.8 % 24.3 % 19.6 % 24.9 % 20.7 % 18.9 % 19.8
% Operating margin excl. Custom House k N/A 26.3 % 25.5 % 26.9 %
26.1 % 25.5 % 25.8 % Transactions - in millions 104.6 105.0 99.3
414.8 98.2 98.0 196.2 Transactions - YoY % change 3 % 2 % (4 )% 1 %
(7 )% (6 )% (7 )%
% of Total Company Revenue
Consumer-to-consumer segment revenue 85 % 85 % 85 % 85 % 84 % 84 %
84 % EMEASA region revenue q, y 45 % 46 % 46 % 45 % 44 % 44 % 44 %
Americas region revenue q, x 32 % 31 % 31 % 32 % 31 % 32 % 32 %
APAC region revenue q, z 8 % 8 % 8 % 8 % 9 % 8 % 8 % Mexico revenue
u 6 % 6 % 5 % 6 % 6 % 6 % 6 % India & China revenue v 7 % 7 % 7
% 7 % 7 % 7 % 7 % Global Business Payments segment revenue 13 % 13
% 14 % 14 % 15 % 14 % 14 % Marketing expense w 5 % 4 % 5 % 5 % 4 %
4 % 4 % * See page 15 of the press release for the
applicable Note references and the reconciliation of non-GAAP
measures.
THE WESTERN UNION COMPANY CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in
millions, except per share amounts) Three Months
Ended Six Months Ended June 30, June 30, 2010 2009
Change 2010 2009 Change
Revenues:
Transaction fees $ 995.5 $ 999.9 0 % $ 1,961.2 $ 1,958.4 0 %
Foreign exchange revenues 249.3 217.2 15 % 487.4 422.3 15 %
Commission and other revenues 28.6 37.2
(23 )% 57.5 74.8 (23 )% Total revenues
1,273.4 1,254.3 2 % 2,506.1 2,455.5 2 %
Expenses:
Cost of services (a) 727.7 700.3 4 % 1,442.3 1,369.4 5 % Selling,
general and administrative (b) 234.7 212.3
11 % 437.0 403.5 8 % Total
expenses 962.4 912.6 5 % 1,879.3
1,772.9 6 % Operating income 311.0
341.7 (9 )% 626.8 682.6 (8 )%
Other income/(expense):
Interest income 0.5 2.8 (82 )% 1.4 6.5 (78 )% Interest expense
(41.1 ) (39.8 ) 3 % (79.9 ) (79.8 ) 0 % Derivative gains/(losses),
net 0.7 0.8 (c) (0.2 ) (2.8 ) (c) Other income/(expense), net
1.2 (9.8 ) (c) 0.2 (5.6 )
(c) Total other expense, net (38.7 ) (46.0 ) (16 )%
(78.5 ) (81.7 ) (4 )% Income before income
taxes 272.3 295.7 (8 )% 548.3 600.9 (9 )% Provision for income
taxes 51.3 75.5 (32 )% 119.4
156.8 (24 )% Net income $ 221.0
$ 220.2 0 % $ 428.9 $ 444.1 (3 )%
Earnings per share: Basic $ 0.33 $ 0.31 6 % $ 0.63 $ 0.63 0
% Diluted $ 0.33 $ 0.31 6 % $ 0.63 $ 0.63 0 %
Weighted-average shares outstanding: Basic 669.3 700.6 675.6
703.8 Diluted 671.6 702.7 677.9 705.2 _______ (a) Cost of
services includes $9.4M of restructuring and related expenses for
the three and six months ended June 30, 2010. (b) Selling, general
and administrative expenses includes $25.1M of restructuring and
related expenses for the three and six months ended June 30, 2010.
(c) Calculation not meaningful
THE WESTERN UNION
COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (in millions, except per share amounts)
June 30, December 31, 2010 2009
Assets Cash
and cash equivalents (a) $ 1,746.8 $ 1,685.2 Settlement assets
2,341.3 2,389.1
Property and equipment, net of
accumulated depreciation of $354.8 and $335.4, respectively
196.1 204.3 Goodwill 2,156.5 2,143.4
Other intangible assets, net of
accumulated amortization of $401.7 and $355.4, respectively
471.8 489.2 Other assets (a) 435.2 442.2
Total assets $ 7,347.7 $ 7,353.4
Liabilities and Stockholders' Equity Liabilities: Accounts
payable and accrued liabilities $ 469.3 $ 501.2 Settlement
obligations 2,341.3 2,389.1 Income taxes payable 305.7 519.0
Deferred tax liability, net 276.6 268.9 Borrowings 3,296.5 3,048.5
Other liabilities 258.6 273.2 Total
liabilities 6,948.0 6,999.9 Stockholders' equity:
Preferred stock, $1.00 par value;
10 shares authorized; no shares issued
- -
Common stock, $0.01 par value;
2,000 shares authorized; 661.6 shares and 686.5 shares issued and
outstanding at June 30, 2010 and December 31, 2009,
respectively
6.6 6.9 Capital surplus 73.2 40.7 Retained earnings 364.9 433.2
Accumulated other comprehensive loss (45.0 ) (127.3 )
Total stockholders' equity 399.7 353.5
Total liabilities and stockholders' equity $ 7,347.7 $
7,353.4 _______ (a) At June 30, 2010, approximately
$890 million was held by entities outside of the United States.
THE WESTERN UNION COMPANYCONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS(Unaudited)(in millions)
Six Months EndedJune 30,
2010 2009
Cash Flows From Operating Activities
Net income $ 428.9 $ 444.1
Adjustments to reconcile net
income to net cash provided by operating activities:
Depreciation 30.1 26.9 Amortization 55.5 45.9 Stock compensation
expense 20.6 16.2 Other non-cash items, net (4.9 ) 28.6
Increase/(decrease) in cash,
excluding the effects of acquisitions, resulting from changes
in:
Other assets 64.2 10.7 Accounts payable and accrued liabilities
(36.3 ) (24.0 ) Income taxes payable (a) (213.5 ) 67.7 Other
liabilities (18.5 ) (9.8 ) Net cash provided by
operating activities 326.1 606.3
Cash Flows From
Investing Activities Capitalization of contract costs (13.0 )
(5.5 ) Capitalization of purchased and developed software (9.8 )
(6.5 ) Purchases of property and equipment (20.8 ) (27.9 )
Acquisition of business, net of cash acquired - (145.2 ) Proceeds
from receivable for securities sold - 234.9 Repayments of notes
receivable issued to agents 16.9 11.1
Net cash (used in)/provided by investing activities (26.7 ) 60.9
Cash Flows From Financing Activities Proceeds from
exercise of options 11.9 5.9 Cash dividends paid (80.1 ) - Common
stock repurchased (417.1 ) (100.1 ) Net repayments of commercial
paper - (82.8 ) Net proceeds from issuance of borrowings 247.5
496.6 Principal payments on borrowings -
(500.0 ) Net cash used in financing activities (237.8 )
(180.4 ) Net change in cash and cash equivalents 61.6
486.8 Cash and cash equivalents at beginning of period
1,685.2 1,295.6 Cash and cash equivalents at
end of period $ 1,746.8 $ 1,782.4 _______ (a)
The Company made a $250 million refundable tax deposit with the IRS
in first quarter 2010.
THE WESTERN UNION
COMPANYSUMMARY SEGMENT DATA(Unaudited)(in
millions) Three Months Ended Six Months
Ended June 30, June 30, 2010 2009 Change 2010
2009 Change Revenues: Consumer-to-Consumer: Transaction fees
$ 843.0 $ 835.6 1 % $ 1,650.0 $ 1,621.2 2 % Foreign exchange
revenues 220.0 216.5 2 % 431.9 420.8 3 % Other revenues 10.1
13.4 (25 )% 21.4 27.2
(21 )% Total Consumer-to-Consumer: 1,073.1 1,065.5 1 %
2,103.3 2,069.2 2 % Global Business Payments: Transaction
fees 142.4 154.2 (8 )% 290.4 317.2 (8 )% Foreign exchange revenues
(a) 29.3 0.7 (c) 55.5 1.5 (c) Other revenues 7.6
9.5 (20 )% 15.2 19.9 (24
)% Total Global Business Payments: 179.3 164.4 9 % 361.1 338.6 7 %
Total Other: 21.0 24.4 (14 )% 41.7 47.7 (13 )%
Total consolidated revenues $ 1,273.4 $
1,254.3 2 % $ 2,506.1 $ 2,455.5 2 %
Operating income/(loss): Consumer-to-Consumer $ 312.4 $ 293.6 6 % $
595.1 $ 580.3 3 % Global Business Payments 33.8 44.1 (23 )% 71.4
94.6 (25 )% Other (0.7 ) 4.0 (c) (5.2 )
7.7 (c) Total segment operating income 345.5 341.7 1
% 661.3 682.6 (3 )% Restructuring and related expenses (b)
(34.5 ) - (c) (34.5 ) - (c)
Total consolidated operating income $ 311.0 $ 341.7
(9 )% $ 626.8 $ 682.6 (8 )% Operating
income/(loss) margin: Consumer-to-Consumer 29.1 % 27.6 % 1.5 % 28.3
% 28.0 % 0.3 % Global Business Payments (a) 18.9 % 26.8 % (7.9 )%
19.8 % 27.9 % (8.1 )% Other (3.3 )% 16.4 % (c) (12.5 )% 16.1 % (c)
Total consolidated operating income margin 24.4 % 27.2 % (2.8 )%
25.0 % 27.8 % (2.8 )% Depreciation and amortization:
Consumer-to-Consumer $ 32.1 $ 30.9 4 % $ 63.1 $ 60.7 4 % Global
Business Payments (a) 9.3 4.8 94 % 17.9 9.5 88 % Other 2.1
1.4 50 % 4.5 2.6
73 % Total segment depreciation and amortization 43.5 37.1 17 %
85.5 72.8 17 % Restructuring and related expenses (b) 0.1
- (c) 0.1 - (c)
Total consolidated depreciation and amortization $ 43.6 $
37.1 18 % $ 85.6 $ 72.8 18 % _______ (a) The
significant change was primarily the result of the Custom House
acquisition. (b) Restructuring expenses are excluded from the
measurement of segment operating profit provided to the Chief
Operating Decision Maker for purposes of assessing segment
performance and decision making with respect to resource
allocation. (c) Calculation not meaningful
THE WESTERN
UNION COMPANYNOTES TO KEY STATISTICS(in millions,
unless indicated otherwise)(unaudited)
Western Union's
management believes the non-GAAP measures presented provide
meaningful supplemental information regarding our operating results
to assist management, investors, analysts, and others in
understanding our financial results and to better analyze trends in
our underlying business, because they provide consistency and
comparability to prior periods. A non-GAAP financial measure
should not be considered in isolation or as a substitute for the
most comparable GAAP financial measure. A non-GAAP financial
measure reflects an additional way of viewing aspects of our
operations that, when viewed with our GAAP results and the
reconciliation to the corresponding GAAP financial measure, provide
a more complete understanding of our business. Users of the
financial statements are encouraged to review our financial
statements and publicly-filed reports in their entirety and not to
rely on any single financial measure. A reconciliation of non-GAAP
measures to the most directly comparable GAAP financial measures is
included below. All adjusted year-over-year changes were
calculated using prior year reported amounts.
2Q09
3Q09 4Q09 FY2009 1Q10 2Q10
YTD 2Q10 Consolidated Metrics (a) Revenues, as
reported (GAAP) $ 1,254.3 $ 1,314.1 $ 1,314.0 $ 5,083.6 $ 1,232.7 $
1,273.4 $ 2,506.1 Foreign currency translation impact (l)
60.1 31.1 (32.4 ) 119.5
(20.0 ) 16.1 (3.9 ) Revenues, constant
currency adjusted $ 1,314.4 $ 1,345.2 $ 1,281.6 $ 5,203.1 $ 1,212.7
$ 1,289.5 $ 2,502.2 Reversal of Custom House revenues (m)
N/A (7.9 ) (22.9 ) (30.8 ) (25.6
) (28.5 ) (54.1 ) Revenues, constant currency
adjusted, excluding Custom House $ 1,314.4 $ 1,337.3
$ 1,258.7 $ 5,172.3 $ 1,187.1 $ 1,261.0
$ 2,448.1 Prior year revenues, as reported (GAAP) $ 1,347.1
$ 1,377.4 $ 1,291.6 $ 5,282.0 $ 1,201.2 $ 1,254.3 $ 2,455.5 Revenue
change, as reported (GAAP) (7 )% (5 )% 2 % (4 )% 3 % 2 % 2 %
Revenue change, constant currency adjusted (2 )% (2 )% (1 )% (1 )%
1 % 3 % 2 % Revenue change, constant currency adjusted, excluding
Custom House (2 )% (3 )% (3 )% (2 )% (1 )% 1 % 0 % (b)
Operating income, as reported (GAAP) $ 341.7 $ 281.5 $ 318.6 $
1,282.7 $ 315.8 $ 311.0 $ 626.8 Reversal of settlement accrual (n)
N/A 71.0 N/A 71.0 N/A N/A N/A Reversal of restructuring and related
expenses (o) N/A N/A N/A
N/A N/A 34.5 34.5
Operating income, excluding settlement accrual and
restructuring $ 341.7 $ 352.5 $ 318.6 $
1,353.7 $ 315.8 $ 345.5 $ 661.3
Operating income margin, as reported (GAAP) 27.2 % 21.4 % 24.2 %
25.2 % 25.6 % 24.4 % 25.0 % Operating income margin, excluding
settlement accrual and restructuring N/A 26.8 % N/A 26.6 % N/A 27.1
% 26.4 % (c) Net income, as reported (GAAP) $ 220.2 $ 181.0
$ 223.7 $ 848.8 $ 207.9 $ 221.0 $ 428.9 Foreign currency
translation impact, net of income tax (l) (4.2 ) (12.0 ) (0.5 )
(7.4 ) (0.7 ) 5.5 4.8 Reversal of settlement accrual, net of income
tax benefit (n) N/A 53.9 N/A 53.9 N/A N/A N/A Reversal of
restructuring and related expenses, net of income tax benefit (o)
N/A N/A N/A N/A
N/A 22.4 22.4 Net
income, constant currency, settlement accrual, and restructuring
adjusted $ 216.0 $ 222.9 $ 223.2 $ 895.3
$ 207.2 $ 248.9 $ 456.1 Diluted
earnings per share ("EPS"), as reported (GAAP) ($ - dollars) $ 0.31
$ 0.26 $ 0.32 $ 1.21 $ 0.30 $ 0.33 $ 0.63 Impact from restructuring
and related expenses, net of income tax benefit (o) ($ - dollars)
N/A N/A N/A N/A
N/A 0.03 0.04
Diluted EPS, restructuring adjusted ($ - dollars) $ 0.31 $ 0.26 $
0.32 $ 1.21 $ 0.30 $ 0.36 $ 0.67 Diluted EPS change, restructuring
adjusted N/A N/A N/A N/A N/A 16 % N/A Foreign currency translation
impact, net of income tax (l) ($ - dollars) - (0.01 ) - (0.01 ) -
0.01 - Impact from settlement accrual, net of tax benefit (n) ($ -
dollars) N/A 0.07 N/A
0.08 N/A N/A
N/A Diluted EPS, constant currency, settlement
accrual, and restructuring adjusted ($ - dollars) $ 0.31
$ 0.32 $ 0.32 $ 1.28 $ 0.30 $
0.37 $ 0.67 Diluted weighted-average shares
outstanding ($ - dollars) 702.7 701.6 693.2 701.0 684.2 671.6 677.9
Consumer-to-Consumer Segment (d) Revenues, as
reported (GAAP) $ 1,065.5 $ 1,117.8 $ 1,113.7 $ 4,300.7 $ 1,030.2 $
1,073.1 $ 2,103.3 Foreign currency translation impact (l)
55.2 24.4 (36.2 ) 101.3
(21.9 ) 15.0 (6.9 ) Revenues, constant
currency adjusted $ 1,120.7 $ 1,142.2 $ 1,077.5
$ 4,402.0 $ 1,008.3 $ 1,088.1 $ 2,096.4
Prior year revenues, as reported (GAAP) $ 1,145.4 $ 1,178.1
$ 1,094.3 $ 4,471.6 $ 1,003.7 $ 1,065.5 $ 2,069.2 Revenue change,
as reported (GAAP) (7 )% (5 )% 2 % (4 )% 3 % 1 % 2 % Revenue
change, constant currency adjusted (2 )% (3 )% (2 )% (2 )% 0 % 2 %
1 % (e) Principal per transaction, as reported ($ - dollars)
$ 358 $ 371 $ 365 $ 363 $ 357 $ 351 $ 354 Foreign currency
translation impact (l) ($ - dollars) 24 12
(14 ) 12 (11 ) 2
(5 ) Principal per transaction, constant currency adjusted
($ - dollars) $ 382 $ 383 $ 351 $ 375 $
346 $ 353 $ 349 Prior year principal per
transaction, as reported ($ - dollars) $ 402 $ 401 $ 372 $ 392 $
358 $ 358 $ 358 Principal per transaction change, as reported (11
)% (7 )% (2 )% (7 )% 0 % (2 )% (1 )% Principal per transaction
change, constant currency adjusted (5 )% (4 )% (6 )% (5 )% (3 )% (2
)% (2 )% (f) Cross-border principal, as reported ($ -
billions) $ 15.9 $ 17.0 $ 17.1 $ 65.0 $ 16.1 $ 16.8 $ 32.9 Foreign
currency translation impact (l) ($ - billions) 1.1
0.5 (0.7 ) 2.0 (0.5 )
0.1 (0.4 ) Cross-border principal, constant
currency adjusted ($ - billions) $ 17.0 $ 17.5 $ 16.4
$ 67.0 $ 15.6 $ 16.9 $ 32.5
Prior year cross-border principal, as reported ($ - billions) $
17.2 $ 17.8 $ 16.6 $ 67.1 $ 15.0 $ 15.9 $ 30.9 Cross-border
principal change, as reported (8 )% (5 )% 3 % (3 )% 7 % 6 % 6 %
Cross-border principal change, constant currency adjusted (1 )% (1
)% (1 )% 0 % 4 % 7 % 5 % (g) International revenues, as
reported (GAAP) $ 875.0 $ 926.5 $ 943.4 $ 3,559.7 $ 862.0 $ 890.8 $
1,752.8 Foreign currency translation impact (l) 53.5
22.6 (35.8 ) 96.0 (20.8 )
15.7 (5.1 ) International revenues, constant
currency adjusted $ 928.5 $ 949.1 $ 907.6 $
3,655.7 $ 841.2 $ 906.5 $ 1,747.7 Prior
year international revenues, as reported (GAAP) $ 919.5 $ 950.6 $
891.2 $ 3,605.1 $ 814.8 $ 875.0 $ 1,689.8 International revenue
change, as reported (GAAP) (5 )% (3 )% 6 % (1 )% 6 % 2 % 4 %
International revenue change, constant currency adjusted 1 % 0 % 2
% 1 % 3 % 4 % 3 % (h) International excl. US origination
revenues, as reported (GAAP) $ 712.5 $ 765.5 $ 778.0 $ 2,910.8 $
699.8 $ 719.2 $ 1,419.0 Foreign currency translation impact (l)
53.5 22.6 (35.8 ) 96.0
(20.8 ) 15.7 (5.1 )
International excl. US origination revenues, constant currency
adjusted $ 766.0 $ 788.1 $ 742.2 $ 3,006.8
$ 679.0 $ 734.9 $ 1,413.9 Prior year
international excl. US origination revenues, as reported (GAAP) $
747.3 $ 782.2 $ 721.0 $ 2,927.5 $ 654.8 $ 712.5 $ 1,367.3
International excl. US origination revenue change, as reported
(GAAP) (5 )% (2 )% 8 % (1 )% 7 % 1 % 4 % International excl. US
origination revenue change, constant currency adjusted 3 % 1 % 3 %
3 % 4 % 3 % 3 % (i) International principal per transaction,
as reported ($ - dollars) $ 380 $ 395 $ 390 $ 386 $ 381 $ 376 $ 379
Foreign currency translation impact (l) ($ - dollars) 29
14 (16 ) 13 (13 )
3 (5 ) International principal per
transaction, constant currency adjusted ($ - dollars) $ 409
$ 409 $ 374 $ 399 $ 368 $ 379 $
374 Prior year international principal per transaction, as
reported ($ - dollars) $ 436 $ 432 $ 392 $ 421 $ 377 $ 380 $ 379
International principal per transaction change, as reported (13 )%
(9 )% 0 % (8 )% 1 % (1 )% 0 % International principal per
transaction change, constant currency adjusted (6 )% (5 )% (5 )% (5
)% (2 )% 0 % (1 )%
Global Business Payments Segment
(j) Revenues, as reported (GAAP) $ 164.4 $ 171.3 $ 181.8 $ 691.7 $
181.8 $ 179.3 $ 361.1 Reversal of Custom House revenues (m)
N/A (7.9 ) (22.9 ) (30.8 ) (25.6
) (28.5 ) (54.1 ) Revenues, excluding Custom House $
164.4 $ 163.4 $ 158.9 $ 660.9 $ 156.2
$ 150.8 $ 307.0
Prior year revenues, as reported
(GAAP)
$ 179.4 $ 176.4 $ 174.2 $ 719.8 $ 174.2 $ 164.4 $ 338.6 Revenue
change, as reported (GAAP) (8 )% (3 )% 4 % (4 )% 4 % 9 % 7 %
Revenue change, excluding Custom House N/A (7 )% (9 )% (8 )% (10 )%
(8 )% (9 )% (k) Operating income, as reported (GAAP) $ 44.1
$ 41.6 $ 35.7 $ 171.9 $ 37.6 $ 33.8 $ 71.4 Reversal of Custom House
operating loss (m) N/A 1.3 4.9
6.2 3.1 4.6
7.7 Operating income, excluding Custom House $ 44.1 $
42.9 $ 40.6 $ 178.1 $ 40.7 $ 38.4
$ 79.1 Operating income margin, as reported (GAAP)
26.8 % 24.3 % 19.6 % 24.9 % 20.7 % 18.9 % 19.8 % Operating income
margin, excluding Custom House N/A 26.3 % 25.5 % 26.9 % 26.1 % 25.5
% 25.8 %
2010 Revenue Outlook Range
Revenue change (GAAP) (2 )% 1 % Foreign currency translation impact
(p) 2 % 2 % Revenue change, constant currency
adjusted 0 % 3 %
2010 EPS
Outlook Range EPS guidance (GAAP) ($ - dollars) $ 1.24 $
1.29 Impact from restructuring and related expenses, net of income
tax benefit (o) ($ - dollars) 0.07 0.07
EPS guidance, restructuring adjusted ($ - dollars) $ 1.31 $
1.36
Non-GAAP related notes:
(l) Represents the impact from the fluctuation in exchange rates
between all foreign currency denominated amounts and the United
States dollar. Constant currency results exclude any benefit or
loss caused by foreign exchange fluctuations between foreign
currencies and the United States dollar, net of foreign currency
hedges, which would not have occurred if there had been a constant
exchange rate. In addition, to compute constant currency earnings
per share, the Company assumes the impact of fluctuations in
foreign currency derivatives not designated as hedges and the
portion of fair value that is excluded from the measure of
effectiveness for those contracts designated as hedges was
consistent with the prior year. (m) Represents the
incremental impact from the acquisition of Custom House on
consolidated revenue, Global Business Payments segment revenue and
Global Business Payments segment operating income. (n)
Accrual for an agreement to resolve the Company's disputes with the
State of Arizona and certain other states and to fund a multi-state
not-for-profit organization focused on border safety and security
("settlement accrual"). This item has been included in the selling,
general and administrative expense line of the consolidated
statements of income, and was not allocated to the segments.
(o) Restructuring and related expenses consist of direct and
incremental costs associated with restructuring and related
activities, including severance, outplacement and other employee
related benefits; facility closure and migration of our IT
infrastructure; other expenses related to relocation of various
operations to new or existing Company facilities and third-party
providers, including hiring, training, relocation, travel, and
professional fees. Also included in the facility closure expenses
are non-cash expenses related to fixed asset and leasehold
improvement write-offs and acceleration of depreciation. For
purposes of calculating the adjusted non-GAAP 2010 earnings per
share and full year effective tax rate outlook, the estimated 2010
restructuring and related expenses are net of an estimated income
tax benefit of $22 million. Restructuring and related expenses were
not allocated to the segments. (p) Represents the estimated
impact from the fluctuation in exchange rates between all foreign
currency denominated amounts and the United States dollar. Constant
currency results exclude any estimated benefit or loss caused by
foreign exchange fluctuations between foreign currencies and the
United States dollar, net of foreign currency hedges, which would
not have occurred if there had been a constant exchange rate. In
addition, to compute constant currency earnings per share, the
Company assumes the estimated impact of fluctuations in foreign
currency derivatives not designated as hedges and the portion of
fair value that is excluded from the measure of effectiveness for
those contracts designated as hedges is consistent with the prior
year.
Other notes:
(q) Geographic split is determined based upon the region where the
money transfer is initiated and the region where the money transfer
is paid, with each transaction and the related revenue being split
50% between the two regions. For those money transfer transactions
that are initiated and paid in the same region, 100% of the revenue
is attributed to that region. (r) Represents transactions
between and within foreign countries (excluding Canada and Mexico),
transactions originated in the United States or Canada and paid
elsewhere, and transactions originated outside the United States or
Canada and paid in the United States or Canada. Excludes all
transactions between or within the United States and Canada and all
transactions to and from Mexico as reflected in (t) and (u) below.
(s) Represents transactions between and within foreign
countries (excluding Canada and Mexico). Excludes all transactions
originated in the United States and all transactions to and from
Mexico as reflected in (t) and (u) below. (t) Represents all
transactions between and within the United States and Canada.
(u) Represents all transactions to and from Mexico.
(v) Represents all transactions to and from India and China.
(w) Marketing expense includes advertising, events, loyalty
programs and the cost of employees dedicated to marketing
activities. (x) Represents the Americas region of our
consumer-to-consumer segment, which includes North America, Latin
America, the Caribbean and South America. (y) Represents the
Europe, Middle East, Africa and South Asia region of our
consumer-to-consumer segment, including India. (z)
Represents the Asia Pacific region of our consumer-to-consumer
segment.
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