The Western Union Company (NYSE: WU) today reported financial
results for the 2010 third quarter.
Financial highlights for the quarter included:
- Revenue of $1.3 billion, an increase of
1% compared to last year’s third quarter
- Constant currency adjusted revenue
increase of 3%
- Restructuring expenses of $14 million,
or $10 million after-tax, related to organizational changes and
other actions described in the Company’s May 27, 2010 press
release
- Operating income margin of 26%, or 27%
excluding restructuring expenses
- EPS of $0.36, or $0.37 excluding
restructuring expenses
- EPS of $0.38 on a constant currency
basis, excluding restructuring expenses
- Year-to-date cash provided by operating
activities of $710 million, including a $250 million reduction due
to a first quarter refundable tax deposit
Operational highlights for the quarter included:
- Growth in global consumer-to-consumer
(C2C) transactions of 10%, with continued solid performance in each
region
- Further progress in U.S. domestic money
transfer, with 35% domestic transaction growth
- An increase in the number of prepaid
cards-in-force to over 650,000, and the signing of an agreement
with CCH, a leading provider of software for tax and accounting
professionals, enabling consumers to receive tax refunds on a
Western Union MoneyWise™ Prepaid MasterCard®
- An increase in the number of agent
locations enabled to provide cash-to-mobile service to 70,000.
Further expansion of global mobile presence through a new service
offering allowing State Bank of India account holders to receive
cross-border money transfers in their bank accounts using just
their mobile phones, and a strategic alliance for mobile money
transfer with EnStream in Canada
- The granting of a bank license in
Brazil, and the announcement of plans to expand the Company’s
relationship with DHL into Europe
- Growth in agent locations to
approximately 435,000
Western Union President and Chief Executive Officer Hikmet Ersek
said, “As we highlighted at our September 30 Investor Day meeting,
we are focused on executing against our key strategic priorities of
growing retail channels, expanding electronic channels, developing
our product portfolio, and improving processes and productivity. We
are pleased with the progress we are making towards addressing
these strategic priorities.”
Ersek added, “In the quarter, all of our regions contributed to
the consumer-to-consumer transaction growth, and margins were
strong. We now expect full year earnings per share to be higher
than our previous outlook, even with increased marketing and other
investments in the fourth quarter to propel future growth.”
Consolidated Results
Third quarter consolidated revenue of $1.3 billion increased 1%
from the prior year. Constant currency revenue growth was 3%, or 1%
excluding Custom House.
Operating income margin was 26%, or 27% excluding $14 million of
pre-tax restructuring expenses. Operating margin was 21% in last
year’s third quarter, or 27% excluding the impact from the Arizona
and multi-state settlement accrual (the settlement accrual).
The third quarter 2010 tax rate was 22.7% which compared to
26.6% in the prior year third quarter.
Earnings per share were $0.36, or $0.37 excluding restructuring
expenses. On a constant currency basis, earnings per share were
$0.38 excluding restructuring expenses. Earnings per share in the
same period last year were $0.26, or $0.33 excluding the settlement
accrual.
Consumer-to-Consumer Segment
Results
The consumer-to-consumer segment represented 85% of Western
Union’s revenue at $1.1 billion in the quarter, an increase of 1%,
or 3% on a constant currency basis, compared to the prior year.
This represents the fourth consecutive quarter of accelerating
constant currency revenue growth. Western Union handled 55 million
C2C transactions in the quarter, a 10% increase compared to the
prior year.
Operating income margin was 30%, which compared to 28% in the
third quarter of 2009.
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 4% constant
currency adjusted, on transaction growth of 7%.
The Europe, Middle East, Africa and South Asia (EMEASA) region’s
revenue declined 2% while transactions increased 5% compared to
last year’s third 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 revenue increased.
India revenue and transactions each increased 2% in the
quarter.
The Americas region increased revenue 2% on transaction growth
of 13%. The region’s strong transaction performance was driven by
faster growth in U.S. domestic money transfer and continued
strength in U.S.-originated transactions to the rest of the world.
Domestic transactions increased 35%, while revenue declined 6%.
Mexico revenue declined 1% as transactions grew 2%.
The Asia Pacific (APAC) region increased revenues by 12% on
transaction growth of 15%. China revenue and transactions each grew
6% in the quarter.
Global Business Payments Segment
Results
The Global Business Payments segment represented 13% of Western
Union’s revenue in the quarter. Revenue was $179 million, an
increase of 5% compared to the same period in 2009.
Custom House, which has been rebranded to Western Union Business
Solutions, contributed $27 million of revenue in the third quarter
of 2010 and continues to trend to double digit revenue growth for
the year. In the year ago quarter, the Company recorded $8 million
in Custom House revenue following the September 2009
acquisition.
Excluding Custom House, segment revenue decreased 7% due to
declines in the U.S. bill payment revenue. Operating income margin
was 15%, or 23% excluding Custom House, which compared to 24%, or
26% excluding Custom House, in the prior year third quarter.
Electronic Channel and Prepaid
Initiatives
Westernunion.com transactions in international markets increased
more than 60% in the quarter. Total westernunion.com transactions
increased approximately 20%. Account based money transfer, which
includes account-to-cash and cash-to-account service with banks,
experienced transaction increases of over 50%. Banks that have
agreed to join the Company’s electronic channel initiative by
offering account based money transfer now total 27.
In mobile money transfer 70,000 agent locations in 27 countries
have been enabled to provide cash-to-mobile service. In addition,
consumers may now send money transfers to mobile phone recipients
from westernunion.com sites in six countries. The Company currently
has relationships in place that allow for mobile receipt of money
transfers in select inbound markets.
In prepaid, the Company increased its cards-in-force to over
650,000 with retail distribution available at over 9,000 U.S.
locations.
Electronic channels represented 2% of total company revenue in
the quarter.
Capital Deployment &
Liquidity
Western Union’s year-to-date cash flow from operations was $710
million, including a reduction due to a $250 million refundable tax
deposit with the IRS in the first quarter. Capital expenditures
through the first three quarters totaled $88 million. Year-to-date
the Company has repurchased 31.7 million shares for $514 million,
at an average price of $16.23 per share.
During the third quarter, the Company repurchased 6.0 million of
its shares for $98 million, at an average price of $16.15 per
share, and declared $39 million in dividends (which were paid on
October 14). As of September 30, 2010 the Company had $486 million
remaining under its current stock repurchase authorization.
Outlook
The Company now expects the following full year 2010
results:
- GAAP revenue in a range of +1% to
+2%
- Constant currency revenue growth one
point higher than GAAP (+2% to +3%)
- GAAP EPS of $1.29 to $1.32, including
$0.07 of restructuring charges
- EPS excluding restructuring charges of
$1.36 to $1.39
- Constant currency EPS $0.01 higher
- GAAP cash flows from operating
activities of $900 million to $1 billion, including a $250 million
reduction due to the first quarter refundable tax deposit
Constant currency revenue is expected to be at the higher end of
the previous range. GAAP revenue growth is now projected to be only
one percentage point below constant currency, primarily due to the
recent strengthening of the Euro. Changes in exchange rates have a
significantly greater impact on revenue than profits due to the
Company’s hedging programs.
The Company continues to anticipate 2010 restructuring charges
to impact GAAP EPS by approximately $0.07. The full year tax rate
is now expected to be lower, with a rate between 22% and 23%,
excluding the restructuring charge impact. The GAAP tax rate is
expected to be between 21.5% and 22.5%. The current outlook also
includes increased marketing and other investments in the fourth
quarter to propel future growth.
Based on the performance during the first three quarters,
current business trends, and the above mentioned factors, the
Company has increased the expected ranges for full year earnings
per share compared to the previous outlook. GAAP EPS is now
projected in a range of $1.29 to $1.32, which compares to the
previous outlook of $1.24 to $1.29. Excluding restructuring
charges, the Company expects EPS of $1.36 to $1.39, which compares
to the previous outlook of $1.31 to $1.36.
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 and earnings per share
excluding restructuring expenses, 2009 operating income margin and
earnings per share excluding the settlement accrual, 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 income
margin excluding Custom House, 2010 revenue outlook constant
currency adjusted, 2010 earnings per share outlook excluding
restructuring expenses, 2010 full year tax rate 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 web site at
www.westernunion.com.
Restructuring
Western Union incurred $14 million in restructuring expenses in
the third quarter from previously announced actions. Approximately
$5 million was included in cost of services and $9 million was
included in selling, general, and administrative expense.
Year-to-date, Western Union has incurred $49 million in
restructuring expenses from previously announced actions.
Approximately $14 million was included in cost of services and $35
million was included in selling, general, and administrative
expense.
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.
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.
Third Quarter 2009 Settlement
Accrual
During the third quarter of 2009, the Company recorded a pre-tax
accrual of $71 million related to an anticipated regulatory
settlement which was later finalized. The settlement included
resolution of all outstanding legal issues and claims with the
state of Arizona, as well as a multi-state agreement to fund a
not-for-profit organization. A significant portion of the accrual
related to the funding of this organization, promoting safety and
security along the entire U.S. and Mexico border. In addition, as
part of the agreement, the Company committed to making further
investments in its compliance programs in the U.S.-Mexico border
area over a three year period.
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 4:30 p.m. Eastern Time today. To listen to the
conference call live via telephone, dial 866-770-7125 (U.S.) or
+1-617-213-8066 (outside the U.S.) ten minutes prior to the start
of the call. The pass code is 49666390.
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 November 2, 2010, at 888-286-8010
(U.S.) or +1-617-801-6888 (outside the U.S.). The pass code is
19467504. 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 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 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, 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 435,000 agent locations
in 200 countries and territories. In 2009, The Western Union
Company completed 196 million consumer-to-consumer transactions
worldwide, moving $71 billion of principal between consumers, and
415 million business payments. For more information, visit
www.westernunion.com.
THE WESTERN UNION COMPANY
KEY STATISTICS
(unaudited)
Notes* 3Q09 4Q09
FY2009 1Q10 2Q10 3Q10 YTD 3Q10
Consolidated Metrics Consolidated revenue (GAAP) -
YoY % change (5)% 2 % (4)% 3 % 2 % 1 % 2 % Consolidated revenue
(constant currency) - YoY % change a (2)% (1)% (1)% 1 % 3 % 3 % 2 %
Agent locations 400,000 410,000 410,000 420,000 430,000 435,000
435,000
Consumer-to-Consumer Segment Revenue (GAAP) -
YoY % change (5)% 2 % (4)% 3 % 1 % 1 % 1 % Revenue (constant
currency) - YoY % change d (3)% (2)% (2)% 0 % 2 % 3 % 2 % Operating
margin 27.6 % 25.7 % 27.3 % 27.4 % 29.1 % 29.9 % 28.9 %
Transactions - in millions 50.1 51.4 196.1 49.6 53.1 54.9 157.6
Transactions - YoY % change 3 % 5 % 4 % 8 % 9 % 10 % 9 %
Total Principal ($ - billions) 18.6 18.8 71.3 17.7 18.6 19.5 55.8
Cross-border Principal ($ - billions) 17.0 17.1 65.0 16.1 16.8 17.6
50.5 Cross-border Principal - YoY % change (5)% 3 % (3)% 7 % 6 % 4
% 6 % Cross-border Principal (constant currency) - YoY % change f
(1)% (1)% 0 % 4 % 7 % 6 % 5 % Principal per transaction ($ -
dollars) 371 365 363 357 351 355 354 Principal per transaction -
YoY % change (7)% (2)% (7)% 0 % (2)% (4)% (2)% Principal per
transaction (constant currency) - YoY % change e (4)% (6)% (5)%
(3)% (2)% (3)% (2)% International revenue (GAAP) - YoY %
change r (3)% 6 % (1)% 6 % 2 % 2 % 3 % International revenue
(constant currency) - YoY % change g, r 0 % 2 % 1 % 3 % 4 % 4 % 4 %
International transactions - YoY % change r 6 % 7 % 8 % 8 % 7 % 7 %
8 % International principal per transaction ($ - dollars) r 395 390
386 381 376 384 380 International principal per transaction - YoY %
change r (9)% 0 % (8)% 1 % (1)% (3)% (1)% International principal
per transaction (constant currency) - YoY % change i, r (5)% (5)%
(5)% (2)% 0 % (1)% (1)% International revenue excl. US
origination (GAAP) - YoY % change s (2)% 8 % (1)% 7 % 1 % 1 % 3 %
International revenue excl. US origination (constant currency) -
YoY % change h, s 1 % 3 % 3 % 4 % 3 % 4 % 4 % International
transactions excluding US origination - YoY % change s 9 % 9 % 11 %
8 % 7 % 7 % 8 % EMEASA region revenue - YoY % change q, y
(3)% 6 % (1)% 5 % (1)% (2)% 1 % EMEASA region transactions - YoY %
change q, y 8 % 8 % 10 % 6 % 5 % 5 % 5 % Americas region
revenue - YoY % change q, x (10)% (7)% (9)% (3)% 1 % 2 % 0 %
Americas region transactions - YoY % change q, x (4)% 0 % (3)% 8 %
12 % 13 % 11 % Domestic revenue - YoY % change t (15)% (20)% (14)%
(13)% (10)% (6)% (10)% Domestic transactions - YoY % change t (9)%
5 % (5)% 18 % 28 % 35 % 27 % Mexico revenue - YoY % change u
(18)% (10)% (15)% (7)% 4 % (1)% (1)% Mexico transactions - YoY %
change u (13)% (12)% (12)% (3)% 5 % 2 % 1 % APAC region
revenue - YoY % change q, z 5 % 14 % 5 % 14 % 11 % 12 % 12 % APAC
region transactions - YoY % change q, z 15 % 13 % 18 % 15 % 14 % 15
% 15 %
Global Business Payments Segment Revenue - YoY
% change (3)% 4 % (4)% 4 % 9 % 5 % 6 % Segment revenue excl. Custom
House - YoY % change j (7)% (9)% (8)% (10)% (8)% (7)% (8)%
Operating margin 24.3 % 19.6 % 24.9 % 20.7 % 18.9 % 15.1 % 18.2 %
Operating margin excl. Custom House k 26.3 % 25.5 % 26.9 % 26.1 %
25.5 % 23.2 % 24.9 % Transactions - in millions 105.0 99.3 414.8
98.2 98.0 103.4 299.6 Transactions - YoY % change 2 % (4)% 1 % (7)%
(6)% (2)% (5)%
% of Total Company Revenue
Consumer-to-consumer segment revenue 85 % 85 % 85 % 84 % 84 % 85 %
84 % EMEASA region revenue q, y 46 % 46 % 45 % 44 % 44 % 44 % 44 %
Americas region revenue q, x 31 % 31 % 32 % 31 % 32 % 32 % 32 %
APAC region revenue q, z 8 % 8 % 8 % 9 % 8 % 9 % 8 % Mexico revenue
u 6 % 5 % 6 % 6 % 6 % 6 % 6 % India & China revenue v 7 % 7 % 7
% 7 % 7 % 7 % 7 % Global Business Payments segment revenue 13 % 14
% 14 % 15 % 14 % 13 % 14 % Marketing expense w 4 % 5 % 5 % 4 % 4 %
4 % 4 % * See page 14 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 Nine Months Ended September 30, September
30, 2010 2009 Change 2010 2009 Change
Revenues: Transaction
fees $ 1,036.1 $ 1,040.0 0 % $ 2,997.3 $ 2,998.4 0 % Foreign
exchange revenues 263.1 237.6 11 % 750.5 659.9 14 % Commission and
other revenues 30.4 36.5 (17 )% 87.9 111.3
(21 )% Total revenues 1,329.6 1,314.1 1 % 3,835.7 3,769.6 2
%
Expenses: Cost of services (a) 752.6 742.6 1 %
2,194.9 2,112.0 4 % Selling, general and administrative (b) 225.8
290.0 (22 )% 662.8 693.5 (4 )% Total
expenses 978.4 1,032.6 (5 )% 2,857.7 2,805.5
2 % Operating income 351.2 281.5 25 % 978.0 964.1 1 %
Other income/(expense): Interest income 0.5 1.9 (74
)% 1.9 8.4 (77 )% Interest expense (44.8 ) (39.3 ) 14 % (124.7 )
(119.1 ) 5 % Derivative gains/(losses), net 1.0 0.4
(c
)
0.8 (2.4 )
(c
)
Other income/(expense), net 0.7 2.0
(c
)
0.9 (3.6 )
(c
)
Total other expense, net (42.6 ) (35.0 ) 22 % (121.1 ) (116.7 ) 4 %
Income before income taxes 308.6 246.5 25 % 856.9 847.4 1 %
Provision for income taxes 70.2 65.5 7 % 189.6
222.3 (15 )% Net income $ 238.4 $ 181.0
32 % $ 667.3 $ 625.1 7 %
Earnings per
share: Basic $ 0.36 $ 0.26 38 % $ 1.00 $ 0.89 12 % Diluted $
0.36 $ 0.26 38 % $ 0.99 $ 0.89 11 %
Weighted-average
shares outstanding: Basic 659.1 698.4 670.1 702.0 Diluted 661.3
701.6 672.4 703.9
_______
(a) Cost of services includes restructuring and related expenses of
$4.6M and $14.0M for the three and nine months ended September 30,
2010, respectively. (b) Selling, general and administrative
expenses for the three and nine months ended September 30, 2010
includes restructuring and related expenses of $9.4M and $34.5M,
respectively. Selling, general and administrative expenses for both
the three and nine months ended September 30, 2009 includes an
accrual of $71.0 million for the Arizona and multi-state settlement
agreement (the settlement accrual).
(c) Calculation not meaningful
THE WESTERN UNION COMPANY CONDENSED CONSOLIDATED
BALANCE SHEETS (Unaudited) (in millions, except per
share amounts) September 30, December 31, 2010 2009
Assets Cash and cash equivalents (a) $ 1,996.7 $ 1,685.2
Settlement assets 2,393.4 2,389.1 Property and equipment, net of
accumulated depreciation of $369.8 and $335.4, respectively 195.2
204.3 Goodwill 2,145.3 2,143.4 Other intangible assets, net of
accumulated amortization of $426.1 and $355.4, respectively 462.8
489.2
Other assets
377.0 442.2 Total assets $ 7,570.4 $ 7,353.4
Liabilities and Stockholders' Equity
Liabilities: Accounts payable and accrued liabilities $ 574.5 $
501.2 Settlement obligations 2,393.4 2,389.1 Income taxes payable
363.4 519.0 Deferred tax liability, net 255.3 268.9 Borrowings
3,296.5 3,048.5 Other liabilities 249.5 273.2 Total
liabilities 7,132.6 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;
656.2 shares and 686.5 shares issued and
outstanding atSeptember 30, 2010 and December 31, 2009,
respectively
6.6 6.9 Capital surplus 87.7 40.7 Retained earnings 465.3 433.2
Accumulated other comprehensive loss (121.8 ) (127.3 ) Total
stockholders' equity 437.8 353.5 Total liabilities
and stockholders' equity $ 7,570.4 $ 7,353.4
_______ (a) At September 30, 2010, approximately $897 million was
held by entities outside of the United States.
THE
WESTERN UNION COMPANY CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited) (in millions) Nine
Months Ended
September 30,
2010 2009
Cash Flows From Operating Activities Net
income $ 667.3 $ 625.1 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation 46.0 41.1
Amortization 84.5 70.4 Stock compensation expense 29.2 24.9 Other
non-cash items, net (10.2 ) 14.1
Increase/(decrease) in cash, excluding the
effects of acquisitions, resulting from changes in:
Other assets 49.4 (20.8 ) Accounts payable and accrued liabilities
29.9 88.4 Income taxes payable (a) (153.5 ) 131.2 Other liabilities
(32.7 ) (16.4 ) Net cash provided by operating activities 709.9
958.0
Cash Flows From Investing Activities
Capitalization of contract costs (27.5 ) (18.2 ) Capitalization of
purchased and developed software (23.2 ) (8.6 ) Purchases of
property and equipment (37.1 ) (40.1 ) Acquisition of business, net
of cash acquired (2.3 ) (514.9 ) Proceeds from receivable for
securities sold - 234.9 Repayments of notes receivable issued to
agents 16.9 17.4 Net cash used in investing
activities (73.2 ) (329.5 )
Cash Flows From Financing
Activities Proceeds from exercise of options 19.0 12.7 Cash
dividends paid (80.1 ) - Common stock repurchased (511.2 ) (225.2 )
Net repayments of commercial paper - (82.8 ) Net proceeds from
issuance of borrowings 247.1 496.6 Principal payments on borrowings
- (500.0 ) Net cash used in financing activities (325.2 )
(298.7 ) Net change in cash and cash equivalents 311.5 329.8
Cash and cash equivalents at beginning of period 1,685.2
1,295.6 Cash and cash equivalents at end of period $ 1,996.7
$ 1,625.4 _______ (a) The Company made a $250
million refundable tax deposit with the IRS in first quarter 2010.
THE WESTERN UNION COMPANY SUMMARY SEGMENT DATA
(Unaudited) (in millions) Three Months
Ended Nine Months Ended September 30, September 30, 2010
2009 Change 2010 2009 Change Revenues:
Consumer-to-Consumer:
Transaction fees $ 881.1 $ 875.9 1 % $ 2,531.1 $ 2,497.1 1 %
Foreign exchange revenues 235.4 229.3 3 % 667.3 650.1 3 % Other
revenues 11.8 12.6 (6 )% 33.2 39.8 (17
)% Total Consumer-to-Consumer: 1,128.3 1,117.8 1 % 3,231.6 3,187.0
1 % Global Business Payments: Transaction fees 143.9 153.8
(6 )% 434.3 471.0 (8 )% Foreign exchange revenues (a) 27.7 8.3
(c
)
83.2 9.8
(c
)
Other revenues 7.6 9.2 (17 )% 22.8 29.1
(22 )% Total Global Business Payments: 179.2 171.3 5 % 540.3 509.9
6 % Total Other: 22.1 25.0 (12 )% 63.8 72.7 (12 )%
Total consolidated revenues $ 1,329.6
$ 1,314.1 1 % $ 3,835.7 $ 3,769.6 2 %
Operating income/(loss): Consumer-to-Consumer $ 337.4 $
308.9 9 % $ 932.5 $ 889.2 5 % Global Business Payments 27.0 41.6
(35 )% 98.4 136.2 (28 )% Other 0.8 2.0
(c
)
(4.4 ) 9.7
(c
)
Total segment operating income 365.2 352.5 4 % 1,026.5 1,035.1 (1
)% Settlement accrual (b) - (71.0 )
(c
)
- (71.0 )
(c
)
Restructuring and related expenses (b) (14.0 ) -
(c
)
(48.5 ) -
(c
)
Total consolidated operating income $ 351.2 $ 281.5
25 % $ 978.0 $ 964.1 1 % Operating
income/(loss) margin: Consumer-to-Consumer 29.9 % 27.6 % 2.3 % 28.9
% 27.9 % 1.0 % Global Business Payments (a) 15.1 % 24.3 % (9.2 )%
18.2 % 26.7 % (8.5 )% Other 3.6 % 8.0 %
(c
)
(c
)
13.3 %
(c
)
Total consolidated operating income margin 26.4 % 21.4 % 5.0 % 25.5
% 25.6 % (0.1 )% Depreciation and amortization:
Consumer-to-Consumer $ 33.6 $ 31.2 8 % $ 96.7 $ 91.9 5 % Global
Business Payments (a) 8.9 6.1 46 % 26.8 15.6 72 % Other 2.1
1.4 50 % 6.6 4.0 65 % Total segment
depreciation and amortization 44.6 38.7 15 % 130.1 111.5 17 %
Restructuring and related expenses (b) 0.3 -
(c
)
0.4 -
(c
)
Total consolidated depreciation and amortization $ 44.9 $
38.7 16 % $ 130.5 $ 111.5 17 % _______ (a) The
significant change was primarily the result of the Custom House
acquisition. (b) Restructuring expenses and the settlement accrual
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 COMPANY NOTES 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, with the exception of
the consolidated revenue change, constant currency adjusted,
excluding Custom House and the Global Business Payments revenue
change, excluding Custom House in items (a) and (j) below, which
are calculated using the prior year reported amounts excluding
Custom House.
3Q09 4Q09 FY2009
1Q10 2Q10 3Q10 YTD 3Q10
Consolidated Metrics (a) Revenues, as reported (GAAP) $
1,314.1 $ 1,314.0 $ 5,083.6 $ 1,232.7 $ 1,273.4 $ 1,329.6 $ 3,835.7
Foreign currency translation impact (l) 31.1 (32.4 ) 119.5
(20.0 ) 16.1 22.2 18.3 Revenues,
constant currency adjusted $ 1,345.2 $ 1,281.6 $ 5,203.1 $ 1,212.7
$ 1,289.5 $ 1,351.8 $ 3,854.0 Reversal of Custom House revenues (m)
(7.9 ) (22.9 ) (30.8 ) (25.6 ) (28.5 ) (26.8 ) (80.9 ) Revenues,
constant currency adjusted, excluding Custom House $ 1,337.3
$ 1,258.7 $ 5,172.3 $ 1,187.1 $ 1,261.0
$ 1,325.0 $ 3,773.1 Prior year revenues, as reported
(GAAP) $ 1,377.4 $ 1,291.6 $ 5,282.0 $ 1,201.2 $ 1,254.3 $ 1,314.1
$ 3,769.6 Prior year revenues, excluding Custom House N/A N/A N/A
N/A N/A $ 1,306.2 $ 3,761.7 Revenue change, as reported (GAAP) (5
)% 2 % (4 )% 3 % 2 % 1 % 2 % Revenue change, constant currency
adjusted (2 )% (1 )% (1 )% 1 % 3 % 3 % 2 % Revenue change, constant
currency adjusted, excluding Custom House (3 )% (3 )% (2 )% (1 )% 1
% 1 % 0 % (b) Operating income, as reported (GAAP) $ 281.5 $
318.6 $ 1,282.7 $ 315.8 $ 311.0 $ 351.2 $ 978.0 Reversal of
settlement accrual (n) 71.0 N/A 71.0 N/A N/A N/A N/A Reversal of
restructuring and related expenses (o) N/A N/A N/A
N/A 34.5 14.0 48.5 Operating
income, excluding settlement accrual and restructuring $ 352.5
$ 318.6 $ 1,353.7 $ 315.8 $ 345.5
$ 365.2 $ 1,026.5 Operating income margin, as
reported (GAAP) 21.4 % 24.2 % 25.2 % 25.6 % 24.4 % 26.4 % 25.5 %
Operating income margin, excluding settlement accrual and
restructuring 26.8 % N/A 26.6 % N/A 27.1 % 27.5 % 26.8 % (c)
Net income, as reported (GAAP) $ 181.0 $ 223.7 $ 848.8 $ 207.9 $
221.0 $ 238.4 $ 667.3 Foreign currency translation impact, net of
income tax (l) (12.0 ) (0.5 ) (7.4 ) (0.7 ) 5.5 2.4 7.2 Reversal of
settlement accrual, net of income tax benefit (n) 53.9 N/A 53.9 N/A
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
22.4 9.5 31.9 Net income, constant currency,
settlement accrual, and restructuring adjusted $ 222.9 $
223.2 $ 895.3 $ 207.2 $ 248.9 $ 250.3
$ 706.4 Diluted earnings per share ("EPS"), as
reported (GAAP) ($ - dollars) $ 0.26 $ 0.32 $ 1.21 $ 0.30 $ 0.33 $
0.36 $ 0.99 Impact from restructuring and related expenses, net of
income tax benefit (o) ($ - dollars) N/A N/A N/A
N/A 0.03 0.01 0.05 Diluted EPS,
restructuring adjusted ($ - dollars) $ 0.26 $ 0.32 $ 1.21 $ 0.30 $
0.36 $ 0.37 $ 1.04 Impact from settlement accrual, net of tax
benefit (n) ($ - dollars) 0.07 N/A 0.08 N/A
N/A N/A N/A Diluted EPS, settlement
accrual adjusted ($ - dollars) $ 0.33 $ 0.32 $ 1.29 $ 0.30 $ 0.36 $
0.37 $ 1.04 Foreign currency translation impact, net of income tax
(l) ($ - dollars) (0.01 ) - (0.01 ) - 0.01
0.01 0.01 Diluted EPS, constant currency, settlement
accrual, and restructuring adjusted ($ - dollars) $ 0.32 $
0.32 $ 1.28 $ 0.30 $ 0.37 $ 0.38
$ 1.05 Diluted weighted-average shares outstanding 701.6
693.2 701.0 684.2 671.6 661.3 672.4
Consumer-to-Consumer
Segment (d) Revenues, as reported (GAAP) $ 1,117.8 $ 1,113.7 $
4,300.7 $ 1,030.2 $ 1,073.1 $ 1,128.3 $ 3,231.6 Foreign currency
translation impact (l) 24.4 (36.2 ) 101.3 (21.9 )
15.0 21.2 14.3 Revenues, constant currency
adjusted $ 1,142.2 $ 1,077.5 $ 4,402.0 $
1,008.3 $ 1,088.1 $ 1,149.5 $ 3,245.9
Prior year revenues, as reported (GAAP) $ 1,178.1 $ 1,094.3 $
4,471.6 $ 1,003.7 $ 1,065.5 $ 1,117.8 $ 3,187.0 Revenue change, as
reported (GAAP) (5 )% 2 % (4 )% 3 % 1 % 1 % 1 % Revenue change,
constant currency adjusted (3 )% (2 )% (2 )% 0 % 2 % 3 % 2 %
(e) Principal per transaction, as reported ($ - dollars) $ 371 $
365 $ 363 $ 357 $ 351 $ 355 $ 354 Foreign currency translation
impact (l) ($ - dollars) 12 (14 ) 12 (11 ) 2 7
0 Principal per transaction, constant currency
adjusted ($ - dollars) $ 383 $ 351 $ 375 $ 346
$ 353 $ 362 $ 354 Prior year principal
per transaction, as reported ($ - dollars) $ 401 $ 372 $ 392 $ 358
$ 358 $ 371 $ 363 Principal per transaction change, as reported (7
)% (2 )% (7 )% 0 % (2 )% (4 )% (2 )% Principal per transaction
change, constant currency adjusted (4 )% (6 )% (5 )% (3 )% (2 )% (3
)% (2 )% (f) Cross-border principal, as reported ($ -
billions) $ 17.0 $ 17.1 $ 65.0 $ 16.1 $ 16.8 $ 17.6 $ 50.5 Foreign
currency translation impact (l) ($ - billions) 0.5 (0.7 )
2.0 (0.5 ) 0.1 0.4 - Cross-border
principal, constant currency adjusted ($ - billions) $ 17.5
$ 16.4 $ 67.0 $ 15.6 $ 16.9 $ 18.0
$ 50.5 Prior year cross-border principal, as reported
($ - billions) $ 17.8 $ 16.6 $ 67.1 $ 15.0 $ 15.9 $ 17.0 $ 47.9
Cross-border principal change, as reported (5 )% 3 % (3 )% 7 % 6 %
4 % 6 % Cross-border principal change, constant currency adjusted
(1 )% (1 )% 0 % 4 % 7 % 6 % 5 % (g) International revenues,
as reported (GAAP) $ 926.5 $ 943.4 $ 3,559.7 $ 862.0 $ 890.8 $
944.0 $ 2,696.8 Foreign currency translation impact (l) 22.6
(35.8 ) 96.0 (20.8 ) 15.7 21.7 16.6
International revenues, constant currency adjusted $ 949.1 $
907.6 $ 3,655.7 $ 841.2 $ 906.5 $ 965.7
$ 2,713.4 Prior year international revenues, as
reported (GAAP) $ 950.6 $ 891.2 $ 3,605.1 $ 814.8 $ 875.0 $ 926.5 $
2,616.3 International revenue change, as reported (GAAP) (3 )% 6 %
(1 )% 6 % 2 % 2 % 3 % International revenue change, constant
currency adjusted 0 % 2 % 1 % 3 % 4 % 4 % 4 % (h)
International excl. US origination revenues, as reported (GAAP) $
765.5 $ 778.0 $ 2,910.8 $ 699.8 $ 719.2 $ 774.3 $ 2,193.3 Foreign
currency translation impact (l) 22.6 (35.8 ) 96.0
(20.8 ) 15.7 21.7 16.6 International excl. US
origination revenues, constant currency adjusted $ 788.1 $
742.2 $ 3,006.8 $ 679.0 $ 734.9 $ 796.0
$ 2,209.9 Prior year international excl. US
origination revenues, as reported (GAAP) $ 782.2 $ 721.0 $ 2,927.5
$ 654.8 $ 712.5 $ 765.5 $ 2,132.8 International excl. US
origination revenue change, as reported (GAAP) (2 )% 8 % (1 )% 7 %
1 % 1 % 3 % International excl. US origination revenue change,
constant currency adjusted 1 % 3 % 3 % 4 % 3 % 4 % 4 % (i)
International principal per transaction, as reported ($ - dollars)
$ 395 $ 390 $ 386 $ 381 $ 376 $ 384 $ 380 Foreign currency
translation impact (l) ($ - dollars) 14 (16 ) 13 (13
) 3 8 0 International principal per
transaction, constant currency adjusted ($ - dollars) $ 409
$ 374 $ 399 $ 368 $ 379 $ 392 $
380 Prior year international principal per transaction, as
reported ($ - dollars) $ 432 $ 392 $ 421 $ 377 $ 380 $ 395 $ 384
International principal per transaction change, as reported (9 )% 0
% (8 )% 1 % (1 )% (3 )% (1 )% International principal per
transaction change, constant currency adjusted (5 )% (5 )% (5 )% (2
)% 0 % (1 )% (1 )%
Global Business Payments
Segment (j) Revenues, as reported (GAAP) $ 171.3 $ 181.8 $
691.7 $ 181.8 $ 179.3 $ 179.2 $ 540.3 Reversal of Custom House
revenues (m) (7.9 ) (22.9 ) (30.8 ) (25.6 ) (28.5 ) (26.8 ) (80.9 )
Revenues, excluding Custom House $ 163.4 $ 158.9 $
660.9 $ 156.2 $ 150.8 $ 152.4 $ 459.4
Prior year revenues, as reported (GAAP) $ 176.4 $ 174.2 $
719.8 $ 174.2 $ 164.4 $ 171.3 $ 509.9 Prior year revenues,
excluding Custom House N/A N/A N/A N/A N/A $ 163.4 $ 502.0 Revenue
change, as reported (GAAP) (3 )% 4 % (4 )% 4 % 9 % 5 % 6 % Revenue
change, excluding Custom House (7 )% (9 )% (8 )% (10 )% (8 )% (7 )%
(8 )% (k) Operating income, as reported (GAAP) $ 41.6 $ 35.7
$ 171.9 $ 37.6 $ 33.8 $ 27.0 $ 98.4 Reversal of Custom House
operating loss (m) 1.3 4.9 6.2 3.1 4.6
8.3 16.0 Operating income, excluding Custom
House $ 42.9 $ 40.6 $ 178.1 $ 40.7 $
38.4 $ 35.3 $ 114.4 Operating income margin,
as reported (GAAP) 24.3 % 19.6 % 24.9 % 20.7 % 18.9 % 15.1 % 18.2 %
Operating income margin, excluding Custom House 26.3 % 25.5 % 26.9
% 26.1 % 25.5 % 23.2 % 24.9 %
2010 Revenue
Outlook Range Revenue change (GAAP) 1% 2% Foreign
currency translation impact (p) 1% 1% Revenue change, constant
currency adjusted 2% 3%
2010 EPS Outlook
Range EPS guidance (GAAP) ($ - dollars) $ 1.29 $ 1.32 Impact
from restructuring and related expenses, net of income tax benefit
(o) ($ - dollars) 0.07 0.07 EPS guidance, restructuring adjusted ($
- dollars) $ 1.36 $ 1.39
2010 Full Year Effective Tax
Rate Outlook Range Full year effective tax rate (GAAP)
21.5% 22.5% Impact from restructuring and related expenses, net of
income tax benefit (o) 0.5% 0.5% Full year effective tax rate,
restructuring adjusted 22.0% 23.0%
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; 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 acceleration of depreciation.
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.
WU-F, WU-G
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