The Western Union Company (NYSE: WU) today reported financial
results for the 2012 first quarter.
Financial highlights for the quarter included:
- Revenue of $1.4 billion, a reported and
constant currency increase of 9% compared to last year’s first
quarter. Pro forma revenue increase of 4%, or 5% constant currency
including Travelex Global Business Payments (TGBP) in the prior
year period
- Operating margin of 23.9% compared to
24.4% in the prior year. Excluding TGBP integration expenses of $6
million operating margin was 24.3%, compared to 26.3% excluding $24
million of restructuring expenses in the prior year period
- The decrease in operating margin was
primarily due to an increased operating loss in Business Solutions,
including TGBP intangibles amortization, and incremental costs
related to investments, compliance, and timing of certain expenses.
The Company maintains its full year outlook for GAAP operating
margin of approximately 25% and operating margin excluding TGBP
integration costs of approximately 26%
- EBITDA margin excluding TGBP
integration expenses of 28.9%, compared to 29.7% excluding
restructuring expenses in the prior year period
- Cash provided by operating activities
of $215 million, including the impact of tax payments of
approximately $65 million relating to the agreement with the U.S.
Internal Revenue Service announced December 15, 2011
- EPS of $0.40, compared to $0.32 in the
prior year, or $0.35 in the prior year excluding restructuring
expenses. EPS excluding TGBP integration expenses was also
$0.40
Additional highlights for the quarter included:
- Consumer-to-Consumer (C2C) revenue
increase of 4% reported and 5% constant currency, on transaction
growth of 7%
- C2C represented 81% of Company
revenue
- North America region revenue increase
of 5%
- Europe and the CIS region revenue flat
with the prior year period
- Middle East and Africa (MEA) region
revenue increase of 6%
- Asia Pacific (APAC) region revenue
increase of 7%
- Latin America and the Caribbean (LACA)
region revenue increase of 2%
- westernunion.com revenue increase of
39%
- C2C operating margin of 27.7% compared
to 28.6% in the prior year
- Consumer-to-Business (C2B) payments
revenue increase of 1% reported and 3% constant currency
- C2B represented 11% of Company
revenue
- C2B operating margin of 26.5% compared
to 22.6% in the prior year
- Business Solutions revenue of $87
million, compared to $28 million in the prior year
- Business Solutions represented 6% of
Company revenue
- Pro forma revenue increase of 5%, or 4%
constant currency, including TGBP revenue in the prior year
period
- Operating loss of $15 million,
including $14 million of intangibles amortization and $6 million of
TGBP integration expenses, compared to an operating loss of $4
million in the prior year (prior year does not include TGBP)
- Electronic channels revenue increase of
38%
- Electronic channels, which include
westernunion.com, account based money transfer, and mobile money
transfer, represented 3% of total Company revenue (included in the
various segments)
- Prepaid revenue increase of 17%
- Prepaid including third party top-up
represented 1% of Company revenue
- Agent locations of 495,000 as of March
31
- Share repurchases of $147 million (8
million shares at an average price of $17.69 per share) and
dividends declared of $0.10 per share or $62 million in the quarter
(dividend per share increased 25% from prior quarter)
Additional Statistics
Additional key statistics for the quarter and historical trends
can be found in the supplemental tables included with this press
release.
Western Union President and Chief Executive Officer Hikmet
Ersek commented, “Overall, we started off the year in line with
our outlook. Our Consumer-to-Consumer segment growth accelerated
compared to the fourth quarter, as strength in North America and
the Middle East and Africa offset some expected softness in the
Europe and CIS region. We further expanded our global network,
including increasing our U.S. banking and European retail presence,
and in April we reached 500,000 Agent locations across the
world.”
Ersek continued, “While our core is delivering, we are also
making progress on evolving our new businesses. The integration of
Travelex Global Business Payments is on track, as we continue to
establish the foundation for growth in Business Solutions. In
Ventures, our westernunion.com on-line money transfer service
delivered almost 40% revenue growth in the quarter, and is now
available from 23 countries. We also advanced our strategy of
offering more services to more customers with the introduction of
WU Pay. This innovative electronic payments platform allows on-line
shoppers to pay for purchases directly from their bank account or
in cash at Western Union locations. Westernunion.com consumers will
also be able to utilize WU Pay to fund on-line money
transfers.”
Ersek added, “Strong capital deployment remains a priority. In
addition to reinvesting in the business, we returned over $200
million to shareholders through the combination of share repurchase
and dividends, and we plan to remain active with capital deployment
throughout the year.”
2012 Outlook
The Company affirms its full year 2012 financial outlook
provided on February 7:
Revenue
- Constant currency revenue growth in a
range of +6% to +8%, including a +4% benefit from the full year
inclusion of TGBP
- GAAP revenue growth 2% lower than
constant currency
Operating Margins
- GAAP operating margin of approximately
25%
- Operating margin of approximately 26%
excluding TGBP integration costs
- EBITDA margin excluding TGBP
integration costs of approximately 30%
Earnings Per Share
- GAAP EPS in a range of $1.65 to
$1.70
- EPS excluding TGBP integration expenses
of $1.70 to $1.75
Cash Flow from Operations
- Cash flow from operations in a range of
$1.0 billion to $1.1 billion, or $1.2 billion to $1.3 billion
excluding anticipated tax payments of approximately $200 million
relating to the IRS agreement announced on December 15, 2011
Investor Day
The Company will host an Investor Day Meeting on Wednesday, May
9, 2012 in New York City, beginning at 8:30 a.m. Eastern Time.
Additional information including event details and location,
registration instructions, and Web participation directions is
available on the company's investor relations website at
http://ir.westernunion.com. A webcast replay will be available
following the event.
Non-GAAP Measures
Western Union presents a number of non-GAAP financial measures
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 financial measures include revenue change constant
currency adjusted, pro forma revenue change TGBP adjusted, pro
forma revenue change TGBP and constant currency adjusted, operating
income margin excluding restructuring and TGBP integration expense,
EBITDA margin excluding restructuring and TGBP integration expense,
earnings per share restructuring, IRS agreement and TGBP
integration expense adjusted, Consumer-to-Consumer segment revenue
change constant currency adjusted, Consumer-to-Business segment
revenue change constant currency adjusted, Business Solutions
segment pro forma revenue change TGBP adjusted, Business Solutions
segment pro forma revenue change TGBP and constant currency
adjusted, 2012 revenue change outlook constant currency adjusted,
2012 operating income margin outlook TGBP integration expense
adjusted, 2012 EBITDA margin outlook TGBP integration expense
adjusted, 2012 earnings per share outlook TGBP integration expense
adjusted, 2012 operating cash flow outlook IRS agreement adjusted,
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.
EBITDA
Earnings before Interest, Taxes, Depreciation and Amortization
(EBITDA) results from taking operating income and adjusting for
depreciation and amortization expenses. The 2012 EBITDA has been
adjusted to exclude TGBP integration expense, and the 2011 EBITDA
has been adjusted to exclude restructuring expenses and TGBP
integration expense. EBITDA results provide an additional
performance measurement calculation which helps neutralize the
income statement effect of assets acquired in prior periods.
TGBP Integration
The Company expects approximately $50 million of integration
expense for TGBP in 2012, of which approximately $6 million were
incurred in the first quarter. 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; and other
expenses such as training, travel and professional fees.
Integration expense does not include costs related to the
completion of the TGBP acquisition.
Restructuring
The company did not incur any restructuring expenses in the
first quarter of 2012. The Company recorded $24 million of
restructuring charges in the first quarter of 2011. Approximately
$7 million was included in cost of services and $17 million was
included in selling, general, and administrative expense. The
restructuring charges relate primarily to organizational changes
designed to simplify business processes, move decision-making
closer to the marketplace, and create operating efficiencies. The
Company realized pre-tax savings from the initiatives of
approximately $55 million in 2011, and expects $70 million
annualized beginning in 2012. Restructuring expenses are not
reflected in segment operating results.
Restructuring expenses include expenses related to severance,
outplacement and other 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 and amortization.
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 866-450-8367 (U.S.) or
+1-412-317-5427 (outside the U.S.) ten minutes prior to the start
of the call. The pass code is 4289188.
The conference call and accompanying slides will be available
via webcast at http://ir.westernunion.com. 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 May 3, 2012, at 877-344-7529 (U.S.) or
+1-412-317-0088 (outside the U.S.). The pass code is 4289188. A
webcast replay will be available at http://ir.westernunion.com 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 throughout the
Annual Report on Form 10-K for the year ended
December 31, 2011, including those described under “Risk
Factors”. 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: (i) events
related to our business and industry, such as: deterioration in
consumers' and clients' confidence in our business, or in money
transfer and payment service providers generally; changes in
general economic conditions and economic conditions in the regions
and industries in which we operate, including global economic
downturns and financial market disruptions; political conditions
and related actions in the United States and abroad which may
adversely affect our business and economic conditions as a whole;
interruptions of United States government relations with countries
in which we have or are implementing material agent contracts;
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;
changes in immigration laws, interruptions in immigration 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 services and
enhancements, and gain market acceptance of such services; mergers,
acquisitions and integration of acquired businesses and
technologies into our Company, and the realization of anticipated
financial benefits from these acquisitions; 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; 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; 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; any material breach of security or safeguards of or
interruptions in any of our systems; our ability to attract and
retain qualified key employees and to manage our workforce
successfully; our ability to maintain our agent network and
business relationships under terms consistent with or more
advantageous to us than those currently in place; adverse rating
actions by credit rating agencies; 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; changes in tax laws and unfavorable resolution of tax
contingencies; cessation of various services provided to us by
third-party vendors; material changes in the market value or
liquidity of securities that we hold; restrictions imposed by our
debt obligations; significantly slower growth or declines in the
money transfer market and other markets in which we operate;
changes in industry standards affecting our business; (ii) events
related to our regulatory and litigation environment, such as: the
failure by us, our agents or their subagents to comply with laws
and regulations designed to detect and prevent money laundering,
terrorist financing, fraud and other illicit activity; changes in
United States or foreign laws, rules and regulations including the
Internal Revenue Code, governmental or judicial interpretations
thereof and industry practices and standards; liabilities resulting
from a failure of our agents or subagents to comply with laws and
regulations; increased costs due to regulatory initiatives and
changes in laws, regulations and industry practices and standards
affecting our agents; liabilities and unanticipated developments
resulting from governmental investigations and consent agreements
with, or enforcement actions by, regulators, including those
associated with compliance with, or a 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, the rules promulgated there-under and the creation
of the Consumer Financial Protection Bureau; liabilities resulting
from litigation, including class-action lawsuits and similar
matters, including costs, expenses, settlements and judgments;
failure to comply with regulations regarding consumer privacy and
data use and security; effects of unclaimed property laws; failure
to maintain sufficient amounts or types of regulatory capital to
meet the changing requirements of our regulators worldwide; changes
in accounting standards, rules and interpretations; and (iii) other
events, such as: adverse consequences from our spin-off from First
Data Corporation; 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 Western Union Business Solutions branded payment
services, Western Union provides consumers and businesses with
fast, reliable and convenient ways to send and receive money around
the world, to send payments and to purchase money orders. As of
March 31, 2012, the Western Union, Vigo and Orlandi Valuta branded
services were offered through a combined network of approximately
495,000 agent locations in 200 countries and territories. In 2011,
The Western Union Company completed 226 million
consumer-to-consumer transactions worldwide, moving $81 billion of
principal between consumers, and 425 million business payments. For
more information, visit www.westernunion.com.
WU-F, WU-G
THE WESTERN UNION COMPANY KEY STATISTICS
(Unaudited)
Notes* 1Q11 2Q11 3Q11 4Q11
FY2011 1Q12
Consolidated Metrics
Consolidated revenues (GAAP) - YoY % change 4 % 7 % 6 % 5 % 6 % 9 %
Consolidated revenues (constant currency) - YoY % change a 4 % 5 %
5 % 6 % 5 % 9 % Agent locations 455,000 470,000 485,000 485,000
485,000 495,000
Consumer-to-Consumer (C2C) Segment
Revenues (GAAP) - YoY % change 5 % 8 % 6 % 3 % 5 % 4 % Revenues
(constant currency) - YoY % change e 5 % 5 % 4 % 3 % 4 % 5 %
Operating margin 28.6 % 28.6 % 29.0 % 28.0 % 28.6 % 27.7 %
Transactions (in millions) 52.84 56.31 57.64 59.00 225.79 56.37
Transactions - YoY% change 7 % 6 % 5 % 5 % 6 % 7 % Total
principal ($ - billions) 19.0 20.6 21.1 20.6 81.3 19.5 Principal
per transaction ($ - dollars) 360 365 366 349 360 346 Principal per
transaction - YoY % change 1 % 4 % 3 %
(2)
%
1 %
(4)
%
Principal per transaction (constant currency) - YoY % change f 1 %
0 % 0 %
(1)
%
0 %
(3)
%
Cross-border principal ($ - billions) 17.1 18.6 19.0 18.5
73.2 17.5 Cross-border principal - YoY % change 7 % 10 % 8 % 2 % 7
% 2 % Cross-border principal (constant currency) - YoY % change g 6
% 6 % 5 % 3 % 5 % 3 % Europe and CIS region revenues - YoY %
change t, u 1 % 8 % 3 %
(1)
%
3 % 0 % Europe and CIS region transactions - YoY % change t, u 3 %
3 % 0 %
(1)
%
1 % 1 % North America region revenues - YoY % change t, v 4
% 3 % 5 % 2 % 3 % 5 % North America region transactions - YoY %
change t, v 9 % 7 % 6 % 5 % 7 % 6 % Middle East and Africa
region revenues - YoY % change t, w 1 % 6 % 5 % 2 % 4 % 6 % Middle
East and Africa region transactions - YoY % change t, w 3 % 3 % 3 %
4 % 3 % 9 % APAC region revenues - YoY % change t, x 12 % 14
% 10 % 6 % 10 % 7 % APAC region transactions - YoY % change t, x 10
% 10 % 7 % 9 % 9 % 6 % LACA region revenues - YoY % change
t, y 11 % 8 % 5 % 3 % 7 % 2 % LACA region transactions - YoY %
change t, y 5 % 5 % 5 % 5 % 5 % 8 % westernunion.com region
revenues - YoY % change t, z 24 % 40 % 43 % 39 % 37 % 39 %
westernunion.com region transactions - YoY % change t, z 19 % 29 %
33 % 35 % 29 % 41 % International revenues (GAAP) - YoY %
change aa 5 % 8 % 5 % 2 % 5 % 4 % International revenues (constant
currency) - YoY % change h, aa 5 % 5 % 4 % 3 % 4 % 4 %
International transactions - YoY % change aa 5 % 5 % 4 % 5 % 5 % 6
% International principal per transaction ($ - dollars) aa 390 399
401 381 393 378 International principal per transaction - YoY %
change aa 2 % 6 % 4 %
(1)
%
3 %
(3)
%
International principal per transaction (constant currency) - YoY %
change i, aa 2 % 1 % 1 %
(1)
%
1 %
(2)
%
International revenues excl. US origination (GAAP) - YoY %
change bb 5 % 10 % 6 % 2 % 6 % 4 % International revenues excl. US
origination (constant currency) - YoY % change j, bb 5 % 5 % 4 % 3
% 4 % 4 % International transactions excl. US origination - YoY %
change bb 6 % 6 % 5 % 5 % 6 % 7 % Electronic channels
revenues - YoY % change cc 24 % 39 % 40 % 36 % 35 % 38 %
Consumer-to-Business (C2B) Segment Revenues (GAAP) - YoY %
change
(2)
%
2 % 2 % 2 % 1 % 1 % Revenues (constant currency) - YoY % change k
(1)
%
2 % 3 % 3 % 2 % 3 % Operating margin 22.6 % 24.6 % 21.0 % 27.3 %
23.9 % 26.5 %
Business Solutions (B2B) Segment
Revenues (GAAP) - YoY % change 13 % 15 % 31 % ** ** **
Revenues (constant currency) - YoY %
change
l 8 % 7 % 22 % ** ** ** Operating margin
(15.4)
%
(5.7)
%
(4.8)
%
(2.8)
%
(6.0)
%
(17.0)
%
% of Total Company Revenue Consumer-to-Consumer
segment revenues 84 % 84 % 84 % 83 % 84 % 81 % Europe and CIS
region revenues t, u 23 % 24 % 24 % 23 % 24 % 22 % North America
region revenues t, v 22 % 22 % 22 % 21 % 22 % 21 % Middle East and
Africa region revenues t, w 16 % 15 % 16 % 16 % 15 % 15 % APAC
region revenues t, x 12 % 12 % 12 % 12 % 12 % 12 % LACA region
revenues t, y 9 % 9 % 8 % 9 % 9 % 9 % westernunion.com region
revenues t, z 2 % 2 % 2 % 2 % 2 % 2 % Consumer-to-Business segment
revenues 12 % 12 % 12 % 11 % 11 % 11 % Business Solutions segment
revenues 2 % 2 % 2 % 5 % 3 % 6 % Electronic channels revenues cc 3
% 3 % 3 % 3 % 3 % 3 % Prepaid revenues dd 1 % 1 % 1 % 1 % 1 % 1 %
Marketing expense ee 3.4 % 4.1 % 4.5 % 4.4 % 4.1 %
3.8
%
* See page 14 of the press release for the applicable Note
references and the reconciliation of non-GAAP financial measures.
** Calculation of growth percentage is not meaningful due to
the impact of the TGBP acquisition in November 2011.
THE
WESTERN UNION COMPANY CONDENSED CONSOLIDATED STATEMENTS OF
INCOME (Unaudited) (in millions, except per share
amounts) Three Months Ended March 31, 2012
2011 Change
Revenues: Transaction fees $ 1,040.9 $ 998.0 4 %
Foreign exchange revenues 322.6 256.1 26 % Other revenues
29.9 28.9 3 % Total revenues 1,393.4 1,283.0 9
%
Expenses: Cost of services 783.0 745.4 5 % Selling,
general and administrative 277.9 224.7
24 % Total expenses (a) 1,060.9 970.1 9
% Operating income 332.5 312.9 6 %
Other
income/(expense): Interest income 1.5 1.2 25 % Interest expense
(44.4 ) (43.4 ) 2 % Derivative gains, net 1.6 1.9
(16)
%
Other income/(expense), net (1.1 ) 2.1
(b)
Total other expense, net (42.4 ) (38.2 ) 11 %
Income before income taxes 290.1 274.7 6 % Provision for income
taxes 42.8 64.5
(34)
%
Net income $ 247.3 $ 210.2 18 %
Earnings per share: Basic $ 0.40 $ 0.32 25 % Diluted $ 0.40
$ 0.32 25 %
Weighted-average shares outstanding:
Basic 619.1 646.9 Diluted 621.9 652.1 _______
(a) Total expenses includes TGBP
integration expense of $0.2 million in cost of services and
$6.2million in selling, general and administrative for the three
months ended March 31, 2012 andrestructuring and related expenses
of $6.9 million in cost of services and $17.1 million in
selling,general and administrative for the three months ended March
31, 2011.
(b) Calculation not meaningful.
THE WESTERN UNION
COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (in millions, except per share amounts)
March 31, December 31, 2012 2011
Assets Cash
and cash equivalents (a) $ 1,395.9 $ 1,370.9 Settlement assets
3,185.1 3,091.2 Property and equipment, net of accumulated
depreciation of $445.2 and $429.7, respectively 196.3 198.1
Goodwill 3,166.3 3,198.9 Other intangible assets, net of
accumulated amortization of $433.6 and $462.5, respectively 878.3
847.4 Other assets 375.9 363.4 Total
assets $ 9,197.8 $ 9,069.9
Liabilities and
Stockholders' Equity Liabilities: Accounts payable and accrued
liabilities $ 498.3 $ 535.0 Settlement obligations 3,185.1 3,091.2
Income taxes payable 259.6 302.4 Deferred tax liability, net 392.0
389.7 Borrowings 3,633.7 3,583.2 Other liabilities 261.7
273.6 Total liabilities 8,230.4 8,175.1
Stockholders' equity: Preferred stock, $1.00 par value; 10 shares
authorized; no shares issued - - Common stock, $0.01 par value;
2,000 shares authorized; 613.9 shares and 619.4 shares issued and
outstanding as of March 31, 2012 and December 31, 2011,
respectively 6.1 6.2 Capital surplus 298.9 247.1 Retained earnings
794.9 760.0 Accumulated other comprehensive loss (132.5 )
(118.5 ) Total stockholders' equity 967.4
894.8 Total liabilities and stockholders' equity $
9,197.8 $ 9,069.9 _______ (a) Approximately
$723 million was held by entities outside of the United States as
of March 31, 2012.
THE WESTERN UNION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in millions) Three Months
Ended
March 31,
2012 2011
Cash Flows From Operating Activities Net
income $ 247.3 $ 210.2 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation 15.3 15.0
Amortization 48.6 29.7 Other non-cash items, net 1.6 (7.2 )
Increase/(decrease) in cash, excluding the
effects of acquisitions, resulting from changes in:
Other assets (10.1 ) (11.5 ) Accounts payable and accrued
liabilities (35.7 ) (20.2 ) Income taxes payable (a) (40.1 ) 41.0
Other liabilities (11.9 ) (5.4 ) Net cash provided by
operating activities 215.0 251.6
Cash Flows From
Investing Activities Capitalization of contract costs (55.8 )
(7.1 ) Capitalization of purchased and developed software (5.8 )
(2.5 ) Purchases of property and equipment (14.2 )
(12.3 ) Net cash used in investing activities (75.8 ) (21.9 )
Cash Flows From Financing Activities Proceeds from
exercise of options 41.2 72.3 Cash dividends paid (61.6 ) (44.7 )
Common stock repurchased (146.8 ) (498.4 ) Net proceeds from
commercial paper 53.0 - Net proceeds from issuance of borrowings
- 299.5 Net cash used in financing
activities (114.2 ) (171.3 ) Net change in
cash and cash equivalents 25.0 58.4 Cash and cash equivalents at
beginning of period 1,370.9 2,157.4
Cash and cash equivalents at end of period $ 1,395.9 $
2,215.8 _______
(a) The Company made tax payments of
approximately $65 million in the first quarter of 2012 due to the
December 2011agreement with the United States Internal Revenue
Services ("IRS") resolving substiantially all of the issues related
tothe restructuring of our international operations in 2003 ("IRS
Agreement").
THE WESTERN UNION COMPANY SUMMARY SEGMENT DATA
(Unaudited) (in millions) Three
Months Ended March 31, 2012 2011 Change Revenues:
Consumer-to-Consumer (C2C): Transaction fees $ 872.0 $ 839.8 4 %
Foreign exchange revenues 239.4 227.4 5 % Other revenues
13.2 10.9 21 % Total Consumer-to-Consumer:
1,124.6 1,078.1 4 % Consumer-to-Business (C2B): Transaction
fees $ 147.7 $ 144.7 2 % Foreign exchange revenues 0.8 0.9
(11)
%
Other revenues 6.6 7.6
(13)
%
Total Consumer-to-Business: 155.1 153.2 1 % Business
Solutions (B2B) (a): Transaction fees $ 6.5 $ 0.9
(d)
Foreign exchange revenues 80.1 26.8
(d)
Other revenues 0.3 0.2
(d)
Total Business Solutions: 86.9 27.9
(d)
Other: Total revenues: $ 26.8 $ 23.8 13 %
Total consolidated revenues $ 1,393.4 $ 1,283.0 9 %
Operating income/(loss): Consumer-to-Consumer $ 311.3 $
308.6 1 % Consumer-to-Business 41.1 34.6 19 % Business Solutions
(b) (14.8 ) (4.3 )
(d)
Other (5.1 ) (2.0 )
(d)
Total segment operating income 332.5 336.9
(1)
%
Restructuring and related expenses (c) - (24.0
)
(d)
Total consolidated operating income $ 332.5 $ 312.9 6
% Operating income margin: Consumer-to-Consumer 27.7
% 28.6 %
(0.9)
%
Consumer-to-Business 26.5 % 22.6 % 3.9 % Business Solutions
(17.0)
%
(15.4)
%
(1.6)
%
Total consolidated operating income margin 23.9 % 24.4 %
(0.5)
%
Depreciation and amortization: Consumer-to-Consumer $ 42.8 $
33.2 29 % Consumer-to-Business 3.9 5.2
(25)
%
Business Solutions 15.2 4.4
(d)
Other 2.0 1.3 54 % Total segment
depreciation and amortization 63.9 44.1 45 % Restructuring and
related expenses (c) - 0.6
(d)
Total consolidated depreciation and amortization $ 63.9 $
44.7 43 % _______
(a) The significant change in Business
Solutions revenues for the three months ended March 31, 2012was
primarily the result of the acquisition of Travelex Global Business
Payments on November 7, 2011.
(b) Business Solutions operating loss includes $6.4 million
related to TGBP integration expense in the first quarter of 2012.
(c) Restructuring and related expenses are
excluded from the measurement of segment operatingprofit provided
to the Chief Operating Decision Maker for purposes of assessing
segmentperformance and decision making with respect to resource
allocation.
(d) Calculation not meaningful.
THE WESTERN UNION COMPANYNOTES
TO KEY STATISTICS(in millions, unless indicated
otherwise)(Unaudited)
Western Union's management believes the non-GAAP financial
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
financial 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, unless
indicated otherwise.
1Q11 2Q11
3Q11 4Q11 FY2011 1Q12
Consolidated Metrics (a) Revenues, as reported (GAAP) $
1,283.0 $ 1,366.3 $ 1,410.8 $ 1,431.3 $ 5,491.4 $ 1,393.4 Foreign
currency translation impact (m) 2.3 (32.5 ) (18.2 ) 10.4
(38.0 ) 8.1 Revenues, constant currency adjusted $
1,285.3 $ 1,333.8 $ 1,392.6 $ 1,441.7 $
5,453.4 $ 1,401.5 Prior year revenues, as reported
(GAAP) $ 1,232.7 $ 1,273.4 $ 1,329.6 $ 1,357.0 $ 5,192.7 $ 1,283.0
Pro forma prior year revenues, TGBP adjusted (n) N/A N/A N/A N/A
N/A $ 1,338.0 Revenue change, as reported (GAAP) 4 % 7 % 6 % 5 % 6
% 9 % Revenue change, constant currency adjusted 4 % 5 % 5 % 6 % 5
% 9 % Pro forma revenue change, TGBP adjusted N/A N/A N/A N/A N/A 4
% Pro forma revenue change, TGBP and constant currency adjusted N/A
N/A N/A N/A N/A 5 % (b) Operating income, as reported (GAAP)
$ 312.9 $ 350.7 $ 363.0 $ 358.4 $ 1,385.0 $ 332.5 Reversal of
restructuring and related expenses (o) 24.0 8.9 13.9 - 46.8 -
Reversal of TGBP integration expense (p) N/A N/A N/A
4.8 4.8 6.4 Operating income, excl.
restructuring and TGBP integration expense $ 336.9 $ 359.6
$ 376.9 $ 363.2 $ 1,436.6 $ 338.9
Operating income margin, as reported (GAAP) 24.4 % 25.7 %
25.7 % 25.0 % 25.2 % 23.9 % Operating income margin, excl.
restructuring 26.3 % 26.3 % 26.7 % 25.0 % 26.1 % 23.9 % Operating
income margin, excl. restructuring and TGBP integration expense N/A
N/A N/A 25.4 % 26.2 % 24.3 % (c) Operating income, as
reported (GAAP) $ 312.9 $ 350.7 $ 363.0 $ 358.4 $ 1,385.0 $ 332.5
Reversal of depreciation and amortization (q) 44.7 46.6
45.9 55.4 192.6 63.9 EBITDA (q)
$ 357.6 $ 397.3 $ 408.9 $ 413.8 $ 1,577.6 $ 396.4 Reversal of
restructuring and related expenses (o) 23.4 8.2 13.9 - 45.5 -
Reversal of TGBP integration expense (p) N/A N/A N/A
4.8 4.8 6.4 EBITDA, excl. restructuring
and TGBP integration expense $ 381.0 $ 405.5 $ 422.8
$ 418.6 $ 1,627.9 $ 402.8 EBITDA margin
27.9 % 29.1 % 29.0 % 28.9 % 28.7 % 28.4 % EBITDA margin, excl.
restructuring and TGBP integration expense 29.7 % 29.7 % 30.0 %
29.2 % 29.6 % 28.9 % (d) Net income, as reported (GAAP) $
210.2 $ 263.2 $ 239.7 $ 452.3 $ 1,165.4 $ 247.3 Reversal of
restructuring and related expenses, net of income tax benefit (o)
16.4 5.9 9.7 - 32.0 - Net
income, restructuring adjusted $ 226.6 $ 269.1 $ 249.4 $ 452.3 $
1,197.4 $ 247.3 Reversal of IRS Agreement tax provision benefit (r)
N/A N/A N/A (204.7 ) (204.7 ) - Net
income, restructuring and IRS Agreement adjusted $ 226.6 $ 269.1 $
249.4 $ 247.6 $ 992.7 $ 247.3 Reversal of TGBP integration expense,
net of income tax benefit (p) N/A N/A N/A 3.1
3.1 4.3 Net income, restructuring, IRS
Agreement and TGBP integration expense adjusted $ 226.6 $
269.1 $ 249.4 $ 250.7 $ 995.8 $ 251.6
Diluted earnings per share ("EPS"), as reported (GAAP) ($ -
dollars) $ 0.32 $ 0.41 $ 0.38 $ 0.73 $ 1.84 $ 0.40 Impact from
restructuring and related expenses, net of income tax benefit (o)
($ - dollars) 0.03 0.01 0.02 - 0.05
- Diluted EPS, restructuring adjusted ($ - dollars) $
0.35 $ 0.42 $ 0.40 $ 0.73 $ 1.89 $ 0.40 Impact from IRS Agreement
tax provision benefit (r) ($ - dollars) N/A N/A N/A
(0.33 ) (0.32 ) - Diluted EPS, restructuring and IRS
Agreement adjusted ($ - dollars) $ 0.35 $ 0.42 $ 0.40 $ 0.40 $ 1.57
$ 0.40 Impact from TGBP integration expense, net of income tax
benefit (p) ($ - dollars) N/A N/A N/A -
- - Diluted EPS, restructuring, IRS Agreement
and TGBP integration expense adjusted ($ - dollars) $ 0.35 $
0.42 $ 0.40 $ 0.40 $ 1.57 $ 0.40
Diluted weighted-average shares outstanding 652.1 635.8 627.1 621.7
634.2 621.9
Consumer-to-Consumer Segment (e) Revenues, as reported
(GAAP) $ 1,078.1 $ 1,155.1 $ 1,193.3 $ 1,181.9 $ 4,608.4 $ 1,124.6
Foreign currency translation impact (m) 2.2 (31.4 ) (17.9 )
8.0 (39.1 ) 5.2 Revenues, constant currency adjusted
$ 1,080.3 $ 1,123.7 $ 1,175.4 $ 1,189.9
$ 4,569.3 $ 1,129.8 Prior year revenues, as reported
(GAAP) $ 1,030.2 $ 1,073.1 $ 1,128.3 $ 1,151.8 $ 4,383.4 $ 1,078.1
Revenue change, as reported (GAAP) 5 % 8 % 6 % 3 % 5 % 4 % Revenue
change, constant currency adjusted 5 % 5 % 4 % 3 % 4 % 5 %
(f) Principal per transaction, as reported ($ - dollars) $ 360 $
365 $ 366 $ 349 $ 360 $ 346 Foreign currency translation impact (m)
($ - dollars) (1 ) (14 ) (11 ) 2 (6 ) 3 Principal per
transaction, constant currency adjusted ($ - dollars) $ 359
$ 351 $ 355 $ 351 $ 354 $ 349
Prior year principal per transaction, as reported ($ - dollars) $
357 $ 351 $ 355 $ 356 $ 355 $ 360 Principal per transaction change,
as reported 1 % 4 % 3 %
(2)
%
1 %
(4)
%
Principal per transaction change, constant currency adjusted 1 % 0
% 0 %
(1)
%
0 %
(3)
%
(g) Cross-border principal, as reported ($ - billions) $
17.1 $ 18.6 $ 19.0 $ 18.5 $ 73.2 $ 17.5 Foreign currency
translation impact (m) ($ - billions) - (0.8 ) (0.6 ) 0.2
(1.2 ) 0.2 Cross-border principal, constant currency
adjusted ($ - billions) $ 17.1 $ 17.8 $ 18.4 $
18.7 $ 72.0 $ 17.7 Prior year cross-border
principal, as reported ($ - billions) $ 16.1 $ 16.8 $ 17.6 $ 18.1 $
68.6 $ 17.1 Cross-border principal change, as reported 7 % 10 % 8 %
2 % 7 % 2 % Cross-border principal change, constant currency
adjusted 6 % 6 % 5 % 3 % 5 % 3 % (h) International revenues,
as reported (GAAP) $ 901.7 $ 962.9 $ 995.7 $ 995.5 $ 3,855.8 $
936.9 Foreign currency translation impact (m) 2.6 (30.7 )
(17.4 ) 7.5 (38.0 ) 4.9 International revenues,
constant currency adjusted $ 904.3 $ 932.2 $ 978.3
$ 1,003.0 $ 3,817.8 $ 941.8 Prior year
international revenues, as reported (GAAP) $ 862.0 $ 890.8 $ 944.0
$ 972.4 $ 3,669.2 $ 901.7 International revenue change, as reported
(GAAP) 5 % 8 % 5 % 2 % 5 % 4 % International revenue change,
constant currency adjusted 5 % 5 % 4 % 3 % 4 % 4 % (i)
International principal per transaction, as reported ($ - dollars)
$ 390 $ 399 $ 401 $ 381 $ 393 $ 378 Foreign currency translation
impact (m) ($ - dollars) (2 ) (18 ) (13 ) 3 (8 ) 4
International principal per transaction, constant currency adjusted
($ - dollars) $ 388 $ 381 $ 388 $ 384 $
385 $ 382 Prior year international principal per
transaction, as reported ($ - dollars) $ 381 $ 376 $ 384 $ 386 $
382 $ 390 International principal per transaction change, as
reported 2 % 6 % 4 %
(1)
%
3 %
(3)
%
International principal per transaction change, constant currency
adjusted 2 % 1 % 1 %
(1)
%
1 %
(2)
%
(j) International excl. US origination revenues, as reported
(GAAP) $ 732.2 $ 788.6 $ 822.2 $ 815.5 $ 3,158.5 $ 759.6 Foreign
currency translation impact (m) 2.6 (30.7 ) (17.4 ) 7.5
(38.0 ) 4.9 International excl. US origination
revenues, constant currency adjusted $ 734.8 $ 757.9
$ 804.8 $ 823.0 $ 3,120.5 $ 764.5 Prior
year international excl. US origination revenues, as reported
(GAAP) $ 699.8 $ 719.2 $ 774.3 $ 797.6 $ 2,990.9 $ 732.2
International excl. US origination revenues change, as reported
(GAAP) 5 % 10 % 6 % 2 % 6 % 4 % International excl. US origination
revenues change, constant currency adjusted 5 % 5 % 4 % 3 % 4 % 4 %
Consumer-to-Business Segment (k) Revenues, as reported
(GAAP) $ 153.2 $ 153.5 $ 155.3 $ 153.9 $ 615.9 $ 155.1 Foreign
currency translation impact (m) 1.3 1.1 1.5
2.5 6.4 2.9 Revenues, constant currency
adjusted $ 154.5 $ 154.6 $ 156.8 $ 156.4
$ 622.3 $ 158.0 Prior year revenues, as
reported (GAAP) N/A N/A N/A N/A $ 610.7 $ 153.2 Revenue change, as
reported (GAAP)
(2)
%
2 % 2 % 2 % 1 % 1 % Revenue change, constant currency adjusted
(1)
%
2 % 3 % 3 % 2 % 3 %
Business Solutions Segment (l)
Revenues, as reported (GAAP) $ 27.9 $ 31.4 $ 33.6 $ 68.2 $ 161.1 $
86.9 Foreign currency translation impact (m) (1.3 ) (2.2 ) (2.1 )
(0.1 ) (5.7 ) (0.1 ) Revenues, constant currency adjusted $ 26.6
$ 29.2 $ 31.5 $ 68.1 $ 155.4 $
86.8 Prior year revenues, as reported (GAAP) N/A N/A N/A N/A
$ 106.7 $ 27.9 Pro forma prior year revenues, TGBP adjusted (n) N/A
N/A N/A N/A N/A $ 82.9 Revenue change, as reported (GAAP) 13 % 15 %
31 %
**
** ** Revenue change, constant currency adjusted 8 % 7 % 22 %
**
** ** Pro forma revenue change, TGBP adjusted N/A N/A N/A N/A N/A 5
% Pro forma revenue change, TGBP and constant currency adjusted N/A
N/A N/A N/A N/A 4 %
2012 Outlook Metrics Range
Revenue change (GAAP) 4 % 6 % Foreign currency translation impact
(s) 2 % 2 % Revenue change, constant currency adjusted 6 % 8 %
Operating income margin (GAAP) 25 % TGBP integration
expense impact (p) 1 % Operating income margin, TGBP integration
expense adjusted 26 % Operating income margin (GAAP)
25 % Depreciation and amortization impact (q) 4 % TGBP integration
expense impact (p) 1 % EBITDA margin, TGBP integration expense
adjusted 30 %
Range EPS guidance (GAAP) ($ - dollars)
$ 1.65 $ 1.70 TGBP integration expense impact, net of tax benefit
(p) ($ - dollars) 0.05 0.05 EPS guidance, TGBP
integration expense adjusted ($ - dollars) $ 1.70 $ 1.75
Range Operating cash flow (GAAP) ($ -
billions) $ 1.0 $ 1.1 Payments on IRS Agreement (r) ($ - billions)
0.2 0.2 Operating cash flow, IRS Agreement adjusted
($ - billions) $ 1.2 $ 1.3
Non-GAAP related
notes:
(m) 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 pro forma calculations, also includes the
currency impact of $0.3 million for the three months ended March
31, 2012 associated with the acquisition of Travelex Global
Business Payments ("TGBP"). (n) Represents the pro forma
incremental impact of TGBP on Consolidated and Business Solutions
segment revenues. Pro forma revenues presents the results of
operations of the Company and its Business Solutions segment as
they may have appeared had the acquisition of TGBP occurred as of
January 1, 2011. The pro forma information is provided for
illustrative purposes only and does not purport to present what the
actual results of operations would have been had the acquisition
actually occurred on the date indicated. The results of operations
for TGBP have been included in Consolidated and Business Solutions
segment revenues from November 7, 2011, the date of acquisition.
(o) Restructuring and related expenses consist of direct and
incremental expenses including the impact from fluctuations in
exchange rates associated with restructuring and related
activities, consisting of severance, outplacement and other related
benefits; facility closure and migration of the Company's IT
infrastructure; and other expenses related to the 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 and amortization. Restructuring and related expenses
were not allocated to the segments. (p) 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; and
other expenses such as training, travel and professional fees.
Integration expense does not include costs related to the
completion of the TGBP acquisition. (q) Earnings before
Interest, Taxes, Depreciation and Amortization (EBITDA) results
from taking operating income and adjusting for depreciation and
amortization expenses. (r) Represents the impact from the
tax benefit in December 2011 due to the agreement with the IRS
resolving substantially all issues related to the restructuring of
our international operations in 2003 of $204.7 million.
Additionally, represents the impact of the anticipated tax payments
of approximately $190 million related to the agreement with the IRS
discussed above. (s) 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.
Other
Notes:
(t)
Geographic split is determined based upon the region where the
money transfer is initiated and the region where the money transfer
is paid. For transactions originated and paid in different regions,
the Company splits the transaction count and revenue between the
two regions, with each region receiving 50%. For money transfers
initiated and paid in the same region, 100% of the revenue and
transactions are attributed to that region. For money transfers
initiated through the Company’s websites (“westernunion.com”), 100%
of the revenue and transactions are attributed to that business.
(u) Represents the Europe and the Commonwealth of
Independent States ("CIS") region of our Consumer-to-Consumer
segment. (v) Represents the North America region, including
the United States, Mexico, and Canada, of our Consumer-to-Consumer
segment. (w) Represents the Middle East and Africa region of
our Consumer-to-Consumer segment. (x) Represents the APAC
region of our Consumer-to-Consumer segment, including India, China,
and South Asia. (y) Represents the Latin America and the
Caribbean region ("LACA") of our Consumer-to-Consumer segment.
(z) Represents transactions initiated on westernunion.com
which are primarily paid out at Western Union agent locations in
the respective regions. (aa)
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.
(bb) 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. (cc) Represents revenue generated from electronic
channels, which include westernunion.com, account based money
transfer and mobile money transfer (included in the various
segments). (dd) Represents revenue from prepaid services.
This revenue is included within Other. (ee) Marketing
expense includes advertising, events, costs to administer loyalty
programs, and the cost of employees dedicated to marketing
activities.
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