| Segments
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• | Consumer-to-Consumer - The Consumer-to-Consumer operating segment facilitates money transfers between two consumers, primarily through a network of third-party agents. The Company's multi-currency, real-time money transfer service is viewed by the Company as one interconnected global network where a money transfer can be sent from one location to another, around the world. This service is available for international cross-border transfers - that is, the transfer of funds from one country to another - and, in certain countries, intra-country transfers - that is, money transfers from one location to another in the same country. This segment also includes money transfer transactions that can be initiated through websites and mobile devices. |
• | Consumer-to-Business - The Consumer-to-Business operating segment facilitates bill payments from consumers to businesses and other organizations, including utilities, auto finance companies, mortgage servicers, financial service providers, and government agencies. The significant majority of the segment's revenue was generated in the United States during all periods presented, with the remainder primarily generated in Argentina. |
• | Business Solutions - The Business Solutions operating segment facilitates payment and foreign exchange solutions, primarily cross-border, cross-currency transactions, for small and medium size enterprises and other organizations and individuals. The majority of the segment's business relates to exchanges of currency at spot rates, which enable customers to make cross-currency payments. In addition, in certain countries, the Company writes foreign currency forward and option contracts for customers to facilitate future payments. |
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Consulting Service Fees | Severance | Other | Total | ||||||||||||
Balance, December 31, 2016 | $ | 9.0 | $ | 3.9 | $ | — | $ | 12.9 | |||||||
Expenses | 10.4 | 2.7 | 1.2 | 14.3 | |||||||||||
Cash payments | (16.9 | ) | (0.5 | ) | (1.2 | ) | (18.6 | ) | |||||||
Balance, March 31, 2017 | $ | 2.5 | $ | 6.1 | $ | — | $ | 8.6 |
Three Months Ended March 31, | |||
2017 | |||
Cost of services | $ | 4.2 | |
Selling, general and administrative | 10.1 | ||
Total expenses, pre-tax | $ | 14.3 | |
Total expenses, net of tax | $ | 9.3 |
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Fair Value Measurement Using | Assets/ Liabilities at Fair Value | ||||||||||||||
March 31, 2017 | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | |||||||||||||||
Settlement assets: | |||||||||||||||
State and municipal debt securities | $ | — | $ | 1,021.3 | $ | — | $ | 1,021.3 | |||||||
State and municipal variable rate demand notes | — | 116.6 | — | 116.6 | |||||||||||
Corporate and other debt securities | — | 26.0 | — | 26.0 | |||||||||||
Other assets: | |||||||||||||||
Derivatives | — | 262.0 | — | 262.0 | |||||||||||
Total assets | $ | — | $ | 1,425.9 | $ | — | $ | 1,425.9 | |||||||
Liabilities: | |||||||||||||||
Derivatives | $ | — | $ | 178.7 | $ | — | $ | 178.7 | |||||||
Total liabilities | $ | — | $ | 178.7 | $ | — | $ | 178.7 | |||||||
Fair Value Measurement Using | Assets/ Liabilities at Fair Value | ||||||||||||||
December 31, 2016 | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | |||||||||||||||
Settlement assets: | |||||||||||||||
State and municipal debt securities | $ | — | $ | 1,002.4 | $ | — | $ | 1,002.4 | |||||||
State and municipal variable rate demand notes | — | 203.4 | — | 203.4 | |||||||||||
Corporate and other debt securities | — | 26.0 | — | 26.0 | |||||||||||
Other assets: | |||||||||||||||
Derivatives | — | 365.6 | — | 365.6 | |||||||||||
Total assets | $ | — | $ | 1,597.4 | $ | — | $ | 1,597.4 | |||||||
Liabilities: | |||||||||||||||
Derivatives | $ | — | $ | 262.3 | $ | — | $ | 262.3 | |||||||
Total liabilities | $ | — | $ | 262.3 | $ | — | $ | 262.3 |
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2017 | 2016 | ||||||
Settlement assets: | |||||||
Cash and cash equivalents | $ | 1,086.9 | $ | 1,190.0 | |||
Receivables from selling agents and Business Solutions customers | 1,201.2 | 1,327.3 | |||||
Investment securities | 1,163.9 | 1,231.8 | |||||
$ | 3,452.0 | $ | 3,749.1 | ||||
Settlement obligations: | |||||||
Money transfer, money order and payment service payables | $ | 2,603.0 | $ | 2,598.2 | |||
Payables to agents | 849.0 | 1,150.9 | |||||
$ | 3,452.0 | $ | 3,749.1 |
March 31, 2017 | Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Net Unrealized Gains | ||||||||||||||
Settlement assets: | |||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||
State and municipal debt securities (a) | $ | 1,020.6 | $ | 1,021.3 | $ | 8.7 | $ | (8.0 | ) | $ | 0.7 | ||||||||
State and municipal variable rate demand notes | 116.6 | 116.6 | — | — | — | ||||||||||||||
Corporate and other debt securities | 26.0 | 26.0 | — | — | — | ||||||||||||||
1,163.2 | 1,163.9 | 8.7 | (8.0 | ) | 0.7 | ||||||||||||||
Other assets: | |||||||||||||||||||
Held-to-maturity securities: | |||||||||||||||||||
Foreign corporate debt securities | 39.5 | 39.6 | 0.1 | — | 0.1 | ||||||||||||||
$ | 1,202.7 | $ | 1,203.5 | $ | 8.8 | $ | (8.0 | ) | $ | 0.8 | |||||||||
December 31, 2016 | Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Net Unrealized Losses | ||||||||||||||
Settlement assets: | |||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||
State and municipal debt securities (a) | $ | 1,008.5 | $ | 1,002.4 | $ | 5.0 | $ | (11.1 | ) | $ | (6.1 | ) | |||||||
State and municipal variable rate demand notes | 203.4 | 203.4 | — | — | — | ||||||||||||||
Corporate and other debt securities | 26.0 | 26.0 | — | — | — | ||||||||||||||
1,237.9 | 1,231.8 | 5.0 | (11.1 | ) | (6.1 | ) | |||||||||||||
Other assets: | |||||||||||||||||||
Held-to-maturity securities: | |||||||||||||||||||
Foreign corporate debt securities | 36.2 | 36.2 | 0.1 | (0.1 | ) | — | |||||||||||||
$ | 1,274.1 | $ | 1,268.0 | $ | 5.1 | $ | (11.2 | ) | $ | (6.1 | ) |
(a) | The majority of these securities are fixed rate instruments. |
Fair Value | |||
Due within 1 year | $ | 120.5 | |
Due after 1 year through 5 years | 516.8 | ||
Due after 5 years through 10 years | 296.3 | ||
Due after 10 years | 230.3 | ||
$ | 1,163.9 |
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Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Unrealized gains/(losses) on investment securities, beginning of period | $ | (3.8 | ) | $ | 7.8 | ||
Unrealized gains | 6.8 | 6.0 | |||||
Tax expense | (2.4 | ) | (2.1 | ) | |||
Reclassification of gains into "Revenues" | — | (1.1 | ) | ||||
Tax expense related to reclassifications | — | 0.4 | |||||
Net unrealized gains on investment securities | 4.4 | 3.2 | |||||
Unrealized gains on investment securities, end of period | $ | 0.6 | $ | 11.0 | |||
Unrealized gains on hedging activities, beginning of period | $ | 33.8 | $ | 41.4 | |||
Unrealized losses | (11.2 | ) | (26.3 | ) | |||
Tax benefit | 0.2 | 2.1 | |||||
Reclassification of gains into "Revenues" | (6.6 | ) | (15.1 | ) | |||
Reclassification of losses into "Interest expense" | 0.8 | 0.9 | |||||
Tax expense/(benefit) related to reclassifications | (0.2 | ) | 0.6 | ||||
Net unrealized losses on hedging activities | (17.0 | ) | (37.8 | ) | |||
Unrealized gains on hedging activities, end of period | $ | 16.8 | $ | 3.6 | |||
Foreign currency translation adjustments, beginning of period | $ | (70.7 | ) | $ | (66.0 | ) | |
Foreign currency translation adjustments | 0.4 | (3.3 | ) | ||||
Tax benefit/(expense) | (0.6 | ) | 1.0 | ||||
Net foreign currency translation adjustments | (0.2 | ) | (2.3 | ) | |||
Foreign currency translation adjustments, end of period | $ | (70.9 | ) | $ | (68.3 | ) | |
Defined benefit pension plan adjustments, beginning of period | $ | (122.1 | ) | $ | (127.1 | ) | |
Reclassification of losses into "Cost of services" | 2.8 | 2.7 | |||||
Tax benefit related to reclassifications | (1.0 | ) | (1.0 | ) | |||
Net defined benefit pension plan adjustments | 1.8 | 1.7 | |||||
Defined benefit pension plan adjustments, end of period | $ | (120.3 | ) | $ | (125.4 | ) | |
Accumulated other comprehensive loss, end of period | $ | (173.8 | ) | $ | (179.1 | ) |
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Contracts designated as hedges: | |||
Euro | $ | 380.8 | |
British pound | 130.0 | ||
Canadian dollar | 91.8 | ||
Australian dollar | 47.2 | ||
Swiss franc | 39.4 | ||
Other | 84.5 | ||
Contracts not designated as hedges: | |||
Euro | $ | 222.1 | |
British pound | 72.0 | ||
Canadian dollar | 71.0 | ||
Australian dollar | 42.0 | ||
Indian rupee | 31.2 | ||
Mexican peso | 30.9 | ||
Brazilian real | 25.5 | ||
Other (a) | 128.3 |
(a) | Comprised of exposures to 20 different currencies. None of these individual currency exposures is greater than $25 million. |
Derivative Assets | Derivative Liabilities | ||||||||||||||||||
Fair Value | Fair Value | ||||||||||||||||||
Balance Sheet Location | March 31, 2017 | December 31, 2016 | Balance Sheet Location | March 31, 2017 | December 31, 2016 | ||||||||||||||
Derivatives — hedges: | |||||||||||||||||||
Interest rate fair value hedges | Other assets | $ | 8.3 | $ | 6.7 | Other liabilities | $ | 0.9 | $ | — | |||||||||
Foreign currency cash flow hedges | Other assets | 34.2 | 48.4 | Other liabilities | 3.3 | 1.2 | |||||||||||||
Total | $ | 42.5 | $ | 55.1 | $ | 4.2 | $ | 1.2 | |||||||||||
Derivatives — undesignated: | |||||||||||||||||||
Business Solutions operations — foreign currency (a) | Other assets | $ | 215.8 | $ | 307.2 | Other liabilities | $ | 170.8 | $ | 258.3 | |||||||||
Foreign currency | Other assets | 3.7 | 3.3 | Other liabilities | 3.7 | 2.8 | |||||||||||||
Total | $ | 219.5 | $ | 310.5 | $ | 174.5 | $ | 261.1 | |||||||||||
Total derivatives | $ | 262.0 | $ | 365.6 | $ | 178.7 | $ | 262.3 |
(a) | In many circumstances, the Company allows its Business Solutions customers to settle part or all of their derivative contracts prior to maturity. However, the offsetting positions originally entered into with financial institution counterparties do not allow for similar settlement. To mitigate this, additional foreign currency contracts are entered into with financial institution counterparties to offset the original economic hedge contracts. This frequently results in changes in the Company's derivative assets and liabilities that may not directly align to the growth in the underlying derivatives business. |
March 31, 2017 | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | Net Amounts Presented in the Condensed Consolidated Balance Sheets | Derivatives Not Offset in the Condensed Consolidated Balance Sheets | Net Amounts | |||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 164.2 | $ | — | $ | 164.2 | $ | (104.9 | ) | $ | 59.3 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 97.8 | |||||||||||||||||||
Total | $ | 262.0 | ||||||||||||||||||
December 31, 2016 | ||||||||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 256.3 | $ | — | $ | 256.3 | $ | (146.4 | ) | $ | 109.9 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 109.3 | |||||||||||||||||||
Total | $ | 365.6 |
March 31, 2017 | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | Net Amounts Presented in the Condensed Consolidated Balance Sheets | Derivatives Not Offset in the Condensed Consolidated Balance Sheets | Net Amounts | |||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 119.2 | $ | — | $ | 119.2 | $ | (104.9 | ) | $ | 14.3 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 59.5 | |||||||||||||||||||
Total | $ | 178.7 | ||||||||||||||||||
December 31, 2016 | ||||||||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 152.6 | $ | — | $ | 152.6 | $ | (146.4 | ) | $ | 6.2 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 109.7 | |||||||||||||||||||
Total | $ | 262.3 |
Gain/(Loss) Recognized in Income on Derivatives | Gain/(Loss) Recognized in Income on Related Hedged Item (a) | Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) | ||||||||||||||||||||||||||||||
Income Statement Location | Amount | Income Statement Location | Amount | Income Statement Location | Amount | |||||||||||||||||||||||||||
Derivatives | March 31, 2017 | March 31, 2016 | Hedged Item | March 31, 2017 | March 31, 2016 | March 31, 2017 | March 31, 2016 | |||||||||||||||||||||||||
Interest rate contracts | Interest expense | $ | (1.2 | ) | $ | 11.2 | Fixed rate debt | Interest expense | $ | 2.5 | $ | (8.5 | ) | Interest expense | $ | — | $ | 0.2 | ||||||||||||||
Total gain/(loss) | $ | (1.2 | ) | $ | 11.2 | $ | 2.5 | $ | (8.5 | ) | $ | — | $ | 0.2 |
Gain/(Loss) Recognized | Gain/(Loss) Reclassified | Gain/(Loss) Recognized in Income on | ||||||||||||||||||||||||||
in OCI on Derivatives | from Accumulated OCI into Income | Derivatives (Ineffective Portion and Amount | ||||||||||||||||||||||||||
(Effective Portion) | (Effective Portion) | Excluded from Effectiveness Testing) (b) | ||||||||||||||||||||||||||
Amount | Income Statement Location | Amount | Income Statement Location | Amount | ||||||||||||||||||||||||
Derivatives | March 31, 2017 | March 31, 2016 | March 31, 2017 | March 31, 2016 | March 31, 2017 | March 31, 2016 | ||||||||||||||||||||||
Foreign currency contracts | $ | (11.2 | ) | $ | (26.3 | ) | Revenue | $ | 6.6 | $ | 15.1 | Derivative gains, net | $ | 2.7 | $ | 1.7 | ||||||||||||
Interest rate contracts (c) | — | — | Interest expense | (0.8 | ) | (0.9 | ) | Interest expense | — | — | ||||||||||||||||||
Total gain/(loss) | $ | (11.2 | ) | $ | (26.3 | ) | $ | 5.8 | $ | 14.2 | $ | 2.7 | $ | 1.7 |
Gain/(Loss) Recognized in Income on Derivatives (d) | |||||||||
Income Statement Location | Amount | ||||||||
Derivatives | March 31, 2017 | March 31, 2016 | |||||||
Foreign currency contracts (e) | Selling, general and administrative | $ | (10.2 | ) | $ | (17.6 | ) | ||
Foreign currency contracts (f) | Derivative gains, net | (0.1 | ) | (1.2 | ) | ||||
Total gain/(loss) | $ | (10.3 | ) | $ | (18.8 | ) |
(a) | The gain/(loss) of $2.5 million and $(8.5) million in the three months ended March 31, 2017 and 2016, respectively, consisted of a gain/(loss) in value on the debt of $1.2 million and $(11.4) million, respectively, and amortization of hedge accounting adjustments of $1.3 million and $2.9 million, respectively. |
(b) | The portion of the change in fair value of a derivative excluded from the effectiveness assessment for foreign currency forward contracts designated as cash flow hedges represents the difference between changes in forward rates and spot rates. |
(c) | The Company uses derivatives to hedge the forecasted issuance of fixed-rate debt and records the effective portion of the derivative's fair value in "Accumulated other comprehensive loss" in the Condensed Consolidated Balance Sheets. These amounts are reclassified to "Interest expense" in the Condensed Consolidated Statements of Income over the life of the related notes. |
(d) | The Company uses foreign currency forward and option contracts as part of its Business Solutions payments operations. These derivative contracts are excluded from this table as they are managed as part of a broader currency portfolio that includes non-derivative currency exposures. The gains and losses on these derivatives are included as part of the broader disclosure of portfolio revenue for this business discussed above. |
(e) | The Company uses foreign currency forward contracts to offset foreign exchange rate fluctuations on settlement assets and obligations as well as certain foreign currency denominated positions. Foreign exchange gains on settlement assets and obligations, cash balances, and other assets and liabilities, not including amounts related to derivatives activity as displayed above and included in "Selling, general and administrative" in the Condensed Consolidated Statements of Income were $10.4 million and $16.4 million for the three months ended March 31, 2017 and 2016, respectively. |
(f) | The derivative contracts used in the Company's revenue hedging program are not designated as hedges in the final month of the contract. |
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March 31, 2017 | December 31, 2016 | ||||||
Commercial paper (a) | $ | 310.0 | $ | — | |||
Notes: | |||||||
2.875% notes due 2017 (b) | 500.0 | 500.0 | |||||
3.650% notes (effective rate of 4.5%) due 2018 | 400.0 | 400.0 | |||||
3.350% notes due 2019 (b) | 250.0 | 250.0 | |||||
5.253% notes due 2020 (b) | 324.9 | 324.9 | |||||
3.600% notes (effective rate of 3.8%) due 2022 (c) | 400.0 | — | |||||
6.200% notes due 2036 (b) | 500.0 | 500.0 | |||||
6.200% notes due 2040 (b) | 250.0 | 250.0 | |||||
Term Loan Facility borrowings (effective rate of 2.4%) | 575.0 | 575.0 | |||||
Total borrowings at par value | 3,509.9 | 2,799.9 | |||||
Fair value hedge accounting adjustments, net (d) | 1.9 | 4.4 | |||||
Unamortized discount and debt issuance costs | (20.9 | ) | (18.2 | ) | |||
Total borrowings at carrying value (e) | $ | 3,490.9 | $ | 2,786.1 |
(a) | Pursuant to the Company's commercial paper program, the Company may issue unsecured commercial paper notes in an amount not to exceed $1.5 billion outstanding at any time, reduced to the extent of borrowings outstanding on the Company's Revolving Credit Facility in excess of $150 million. The commercial paper notes may have maturities of up to 397 days from date of issuance. The Company's commercial paper borrowings as of March 31, 2017 had a weighted-average annual interest rate of approximately 1.2% and a weighted-average term of approximately 3 days. |
(b) | The difference between the stated interest rate and the effective interest rate is not significant. |
(c) | On March 15, 2017, the Company issued $400.0 million of aggregate principal amount of 3.600% unsecured notes due 2022 ("2022 Notes"). |
(d) | The Company utilizes interest rate swaps designated as fair value hedges to effectively change the interest rate payments on a portion of its notes from fixed-rate payments to short-term LIBOR-based variable rate payments in order to manage its overall exposure to interest rates. The changes in fair value of these interest rate swaps result in an offsetting hedge accounting adjustment recorded to the carrying value of the related note. These hedge accounting adjustments will be reclassified as reductions to or increases in "Interest expense" in the Condensed Consolidated Statements of Income over the life of the related notes, and cause the effective rate of interest to differ from the notes’ stated rate. |
(e) | As of March 31, 2017, the Company’s weighted-average effective rate on total borrowings was approximately 3.9%. |
Due within 1 year | $ | 500.0 | |
Due after 1 year through 2 years | 421.6 | ||
Due after 2 years through 3 years | 278.7 | ||
Due after 3 years through 4 years | 375.2 | ||
Due after 4 years through 5 years | 874.4 | ||
Due after 5 years | 750.0 |
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Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Revenues: | |||||||
Consumer-to-Consumer | $ | 1,015.0 | $ | 1,017.4 | |||
Consumer-to-Business | 168.2 | 156.1 | |||||
Business Solutions | 93.6 | 99.2 | |||||
Other | 25.6 | 25.0 | |||||
Total consolidated revenues | $ | 1,302.4 | $ | 1,297.7 | |||
Operating income: | |||||||
Consumer-to-Consumer | $ | 227.6 | $ | 231.3 | |||
Consumer-to-Business | 20.5 | 22.9 | |||||
Business Solutions | 2.3 | 2.4 | |||||
Other | 3.4 | 2.0 | |||||
Total segment operating income | 253.8 | 258.6 | |||||
Business transformation expenses | (14.3 | ) | — | ||||
Total consolidated operating income | $ | 239.5 | $ | 258.6 |
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Consulting Service Fees | Severance | Other | Total | ||||||||||||
Balance, December 31, 2016 | $ | 9.0 | $ | 3.9 | $ | — | $ | 12.9 | |||||||
Expenses | 10.4 | 2.7 | 1.2 | 14.3 | |||||||||||
Cash payments | (16.9 | ) | (0.5 | ) | (1.2 | ) | (18.6 | ) | |||||||
Balance, March 31, 2017 | $ | 2.5 | $ | 6.1 | $ | — | $ | 8.6 |
Three Months Ended March 31, | |||
2017 | |||
Cost of services | $ | 4.2 | |
Selling, general and administrative | 10.1 | ||
Total expenses, pre-tax | $ | 14.3 | |
Total expenses, net of tax | $ | 9.3 |
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Fair Value Measurement Using | Assets/ Liabilities at Fair Value | ||||||||||||||
March 31, 2017 | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | |||||||||||||||
Settlement assets: | |||||||||||||||
State and municipal debt securities | $ | — | $ | 1,021.3 | $ | — | $ | 1,021.3 | |||||||
State and municipal variable rate demand notes | — | 116.6 | — | 116.6 | |||||||||||
Corporate and other debt securities | — | 26.0 | — | 26.0 | |||||||||||
Other assets: | |||||||||||||||
Derivatives | — | 262.0 | — | 262.0 | |||||||||||
Total assets | $ | — | $ | 1,425.9 | $ | — | $ | 1,425.9 | |||||||
Liabilities: | |||||||||||||||
Derivatives | $ | — | $ | 178.7 | $ | — | $ | 178.7 | |||||||
Total liabilities | $ | — | $ | 178.7 | $ | — | $ | 178.7 | |||||||
Fair Value Measurement Using | Assets/ Liabilities at Fair Value | ||||||||||||||
December 31, 2016 | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | |||||||||||||||
Settlement assets: | |||||||||||||||
State and municipal debt securities | $ | — | $ | 1,002.4 | $ | — | $ | 1,002.4 | |||||||
State and municipal variable rate demand notes | — | 203.4 | — | 203.4 | |||||||||||
Corporate and other debt securities | — | 26.0 | — | 26.0 | |||||||||||
Other assets: | |||||||||||||||
Derivatives | — | 365.6 | — | 365.6 | |||||||||||
Total assets | $ | — | $ | 1,597.4 | $ | — | $ | 1,597.4 | |||||||
Liabilities: | |||||||||||||||
Derivatives | $ | — | $ | 262.3 | $ | — | $ | 262.3 | |||||||
Total liabilities | $ | — | $ | 262.3 | $ | — | $ | 262.3 |
|
2017 | 2016 | ||||||
Settlement assets: | |||||||
Cash and cash equivalents | $ | 1,086.9 | $ | 1,190.0 | |||
Receivables from selling agents and Business Solutions customers | 1,201.2 | 1,327.3 | |||||
Investment securities | 1,163.9 | 1,231.8 | |||||
$ | 3,452.0 | $ | 3,749.1 | ||||
Settlement obligations: | |||||||
Money transfer, money order and payment service payables | $ | 2,603.0 | $ | 2,598.2 | |||
Payables to agents | 849.0 | 1,150.9 | |||||
$ | 3,452.0 | $ | 3,749.1 |
March 31, 2017 | Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Net Unrealized Gains | ||||||||||||||
Settlement assets: | |||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||
State and municipal debt securities (a) | $ | 1,020.6 | $ | 1,021.3 | $ | 8.7 | $ | (8.0 | ) | $ | 0.7 | ||||||||
State and municipal variable rate demand notes | 116.6 | 116.6 | — | — | — | ||||||||||||||
Corporate and other debt securities | 26.0 | 26.0 | — | — | — | ||||||||||||||
1,163.2 | 1,163.9 | 8.7 | (8.0 | ) | 0.7 | ||||||||||||||
Other assets: | |||||||||||||||||||
Held-to-maturity securities: | |||||||||||||||||||
Foreign corporate debt securities | 39.5 | 39.6 | 0.1 | — | 0.1 | ||||||||||||||
$ | 1,202.7 | $ | 1,203.5 | $ | 8.8 | $ | (8.0 | ) | $ | 0.8 | |||||||||
December 31, 2016 | Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Net Unrealized Losses | ||||||||||||||
Settlement assets: | |||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||
State and municipal debt securities (a) | $ | 1,008.5 | $ | 1,002.4 | $ | 5.0 | $ | (11.1 | ) | $ | (6.1 | ) | |||||||
State and municipal variable rate demand notes | 203.4 | 203.4 | — | — | — | ||||||||||||||
Corporate and other debt securities | 26.0 | 26.0 | — | — | — | ||||||||||||||
1,237.9 | 1,231.8 | 5.0 | (11.1 | ) | (6.1 | ) | |||||||||||||
Other assets: | |||||||||||||||||||
Held-to-maturity securities: | |||||||||||||||||||
Foreign corporate debt securities | 36.2 | 36.2 | 0.1 | (0.1 | ) | — | |||||||||||||
$ | 1,274.1 | $ | 1,268.0 | $ | 5.1 | $ | (11.2 | ) | $ | (6.1 | ) |
(a) | The majority of these securities are fixed rate instruments. |
March 31, 2017 | Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Net Unrealized Gains | ||||||||||||||
Settlement assets: | |||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||
State and municipal debt securities (a) | $ | 1,020.6 | $ | 1,021.3 | $ | 8.7 | $ | (8.0 | ) | $ | 0.7 | ||||||||
State and municipal variable rate demand notes | 116.6 | 116.6 | — | — | — | ||||||||||||||
Corporate and other debt securities | 26.0 | 26.0 | — | — | — | ||||||||||||||
1,163.2 | 1,163.9 | 8.7 | (8.0 | ) | 0.7 | ||||||||||||||
Other assets: | |||||||||||||||||||
Held-to-maturity securities: | |||||||||||||||||||
Foreign corporate debt securities | 39.5 | 39.6 | 0.1 | — | 0.1 | ||||||||||||||
$ | 1,202.7 | $ | 1,203.5 | $ | 8.8 | $ | (8.0 | ) | $ | 0.8 | |||||||||
December 31, 2016 | Amortized Cost | Fair Value | Gross Unrealized Gains | Gross Unrealized Losses | Net Unrealized Losses | ||||||||||||||
Settlement assets: | |||||||||||||||||||
Available-for-sale securities: | |||||||||||||||||||
State and municipal debt securities (a) | $ | 1,008.5 | $ | 1,002.4 | $ | 5.0 | $ | (11.1 | ) | $ | (6.1 | ) | |||||||
State and municipal variable rate demand notes | 203.4 | 203.4 | — | — | — | ||||||||||||||
Corporate and other debt securities | 26.0 | 26.0 | — | — | — | ||||||||||||||
1,237.9 | 1,231.8 | 5.0 | (11.1 | ) | (6.1 | ) | |||||||||||||
Other assets: | |||||||||||||||||||
Held-to-maturity securities: | |||||||||||||||||||
Foreign corporate debt securities | 36.2 | 36.2 | 0.1 | (0.1 | ) | — | |||||||||||||
$ | 1,274.1 | $ | 1,268.0 | $ | 5.1 | $ | (11.2 | ) | $ | (6.1 | ) |
(a) | The majority of these securities are fixed rate instruments. |
Fair Value | |||
Due within 1 year | $ | 120.5 | |
Due after 1 year through 5 years | 516.8 | ||
Due after 5 years through 10 years | 296.3 | ||
Due after 10 years | 230.3 | ||
$ | 1,163.9 |
|
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Unrealized gains/(losses) on investment securities, beginning of period | $ | (3.8 | ) | $ | 7.8 | ||
Unrealized gains | 6.8 | 6.0 | |||||
Tax expense | (2.4 | ) | (2.1 | ) | |||
Reclassification of gains into "Revenues" | — | (1.1 | ) | ||||
Tax expense related to reclassifications | — | 0.4 | |||||
Net unrealized gains on investment securities | 4.4 | 3.2 | |||||
Unrealized gains on investment securities, end of period | $ | 0.6 | $ | 11.0 | |||
Unrealized gains on hedging activities, beginning of period | $ | 33.8 | $ | 41.4 | |||
Unrealized losses | (11.2 | ) | (26.3 | ) | |||
Tax benefit | 0.2 | 2.1 | |||||
Reclassification of gains into "Revenues" | (6.6 | ) | (15.1 | ) | |||
Reclassification of losses into "Interest expense" | 0.8 | 0.9 | |||||
Tax expense/(benefit) related to reclassifications | (0.2 | ) | 0.6 | ||||
Net unrealized losses on hedging activities | (17.0 | ) | (37.8 | ) | |||
Unrealized gains on hedging activities, end of period | $ | 16.8 | $ | 3.6 | |||
Foreign currency translation adjustments, beginning of period | $ | (70.7 | ) | $ | (66.0 | ) | |
Foreign currency translation adjustments | 0.4 | (3.3 | ) | ||||
Tax benefit/(expense) | (0.6 | ) | 1.0 | ||||
Net foreign currency translation adjustments | (0.2 | ) | (2.3 | ) | |||
Foreign currency translation adjustments, end of period | $ | (70.9 | ) | $ | (68.3 | ) | |
Defined benefit pension plan adjustments, beginning of period | $ | (122.1 | ) | $ | (127.1 | ) | |
Reclassification of losses into "Cost of services" | 2.8 | 2.7 | |||||
Tax benefit related to reclassifications | (1.0 | ) | (1.0 | ) | |||
Net defined benefit pension plan adjustments | 1.8 | 1.7 | |||||
Defined benefit pension plan adjustments, end of period | $ | (120.3 | ) | $ | (125.4 | ) | |
Accumulated other comprehensive loss, end of period | $ | (173.8 | ) | $ | (179.1 | ) |
|
Contracts designated as hedges: | |||
Euro | $ | 380.8 | |
British pound | 130.0 | ||
Canadian dollar | 91.8 | ||
Australian dollar | 47.2 | ||
Swiss franc | 39.4 | ||
Other | 84.5 | ||
Contracts not designated as hedges: | |||
Euro | $ | 222.1 | |
British pound | 72.0 | ||
Canadian dollar | 71.0 | ||
Australian dollar | 42.0 | ||
Indian rupee | 31.2 | ||
Mexican peso | 30.9 | ||
Brazilian real | 25.5 | ||
Other (a) | 128.3 |
(a) | Comprised of exposures to 20 different currencies. None of these individual currency exposures is greater than $25 million. |
Derivative Assets | Derivative Liabilities | ||||||||||||||||||
Fair Value | Fair Value | ||||||||||||||||||
Balance Sheet Location | March 31, 2017 | December 31, 2016 | Balance Sheet Location | March 31, 2017 | December 31, 2016 | ||||||||||||||
Derivatives — hedges: | |||||||||||||||||||
Interest rate fair value hedges | Other assets | $ | 8.3 | $ | 6.7 | Other liabilities | $ | 0.9 | $ | — | |||||||||
Foreign currency cash flow hedges | Other assets | 34.2 | 48.4 | Other liabilities | 3.3 | 1.2 | |||||||||||||
Total | $ | 42.5 | $ | 55.1 | $ | 4.2 | $ | 1.2 | |||||||||||
Derivatives — undesignated: | |||||||||||||||||||
Business Solutions operations — foreign currency (a) | Other assets | $ | 215.8 | $ | 307.2 | Other liabilities | $ | 170.8 | $ | 258.3 | |||||||||
Foreign currency | Other assets | 3.7 | 3.3 | Other liabilities | 3.7 | 2.8 | |||||||||||||
Total | $ | 219.5 | $ | 310.5 | $ | 174.5 | $ | 261.1 | |||||||||||
Total derivatives | $ | 262.0 | $ | 365.6 | $ | 178.7 | $ | 262.3 |
(a) | In many circumstances, the Company allows its Business Solutions customers to settle part or all of their derivative contracts prior to maturity. However, the offsetting positions originally entered into with financial institution counterparties do not allow for similar settlement. To mitigate this, additional foreign currency contracts are entered into with financial institution counterparties to offset the original economic hedge contracts. This frequently results in changes in the Company's derivative assets and liabilities that may not directly align to the growth in the underlying derivatives business. |
March 31, 2017 | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | Net Amounts Presented in the Condensed Consolidated Balance Sheets | Derivatives Not Offset in the Condensed Consolidated Balance Sheets | Net Amounts | |||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 164.2 | $ | — | $ | 164.2 | $ | (104.9 | ) | $ | 59.3 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 97.8 | |||||||||||||||||||
Total | $ | 262.0 | ||||||||||||||||||
December 31, 2016 | ||||||||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 256.3 | $ | — | $ | 256.3 | $ | (146.4 | ) | $ | 109.9 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 109.3 | |||||||||||||||||||
Total | $ | 365.6 |
March 31, 2017 | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | Net Amounts Presented in the Condensed Consolidated Balance Sheets | Derivatives Not Offset in the Condensed Consolidated Balance Sheets | Net Amounts | |||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 119.2 | $ | — | $ | 119.2 | $ | (104.9 | ) | $ | 14.3 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 59.5 | |||||||||||||||||||
Total | $ | 178.7 | ||||||||||||||||||
December 31, 2016 | ||||||||||||||||||||
Derivatives subject to a master netting arrangement or similar agreement | $ | 152.6 | $ | — | $ | 152.6 | $ | (146.4 | ) | $ | 6.2 | |||||||||
Derivatives that are not or may not be subject to master netting arrangement or similar agreement | 109.7 | |||||||||||||||||||
Total | $ | 262.3 |
Gain/(Loss) Recognized in Income on Derivatives | Gain/(Loss) Recognized in Income on Related Hedged Item (a) | Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) | ||||||||||||||||||||||||||||||
Income Statement Location | Amount | Income Statement Location | Amount | Income Statement Location | Amount | |||||||||||||||||||||||||||
Derivatives | March 31, 2017 | March 31, 2016 | Hedged Item | March 31, 2017 | March 31, 2016 | March 31, 2017 | March 31, 2016 | |||||||||||||||||||||||||
Interest rate contracts | Interest expense | $ | (1.2 | ) | $ | 11.2 | Fixed rate debt | Interest expense | $ | 2.5 | $ | (8.5 | ) | Interest expense | $ | — | $ | 0.2 | ||||||||||||||
Total gain/(loss) | $ | (1.2 | ) | $ | 11.2 | $ | 2.5 | $ | (8.5 | ) | $ | — | $ | 0.2 |
Gain/(Loss) Recognized | Gain/(Loss) Reclassified | Gain/(Loss) Recognized in Income on | ||||||||||||||||||||||||||
in OCI on Derivatives | from Accumulated OCI into Income | Derivatives (Ineffective Portion and Amount | ||||||||||||||||||||||||||
(Effective Portion) | (Effective Portion) | Excluded from Effectiveness Testing) (b) | ||||||||||||||||||||||||||
Amount | Income Statement Location | Amount | Income Statement Location | Amount | ||||||||||||||||||||||||
Derivatives | March 31, 2017 | March 31, 2016 | March 31, 2017 | March 31, 2016 | March 31, 2017 | March 31, 2016 | ||||||||||||||||||||||
Foreign currency contracts | $ | (11.2 | ) | $ | (26.3 | ) | Revenue | $ | 6.6 | $ | 15.1 | Derivative gains, net | $ | 2.7 | $ | 1.7 | ||||||||||||
Interest rate contracts (c) | — | — | Interest expense | (0.8 | ) | (0.9 | ) | Interest expense | — | — | ||||||||||||||||||
Total gain/(loss) | $ | (11.2 | ) | $ | (26.3 | ) | $ | 5.8 | $ | 14.2 | $ | 2.7 | $ | 1.7 |
Gain/(Loss) Recognized in Income on Derivatives (d) | |||||||||
Income Statement Location | Amount | ||||||||
Derivatives | March 31, 2017 | March 31, 2016 | |||||||
Foreign currency contracts (e) | Selling, general and administrative | $ | (10.2 | ) | $ | (17.6 | ) | ||
Foreign currency contracts (f) | Derivative gains, net | (0.1 | ) | (1.2 | ) | ||||
Total gain/(loss) | $ | (10.3 | ) | $ | (18.8 | ) |
(a) | The gain/(loss) of $2.5 million and $(8.5) million in the three months ended March 31, 2017 and 2016, respectively, consisted of a gain/(loss) in value on the debt of $1.2 million and $(11.4) million, respectively, and amortization of hedge accounting adjustments of $1.3 million and $2.9 million, respectively. |
(b) | The portion of the change in fair value of a derivative excluded from the effectiveness assessment for foreign currency forward contracts designated as cash flow hedges represents the difference between changes in forward rates and spot rates. |
(c) | The Company uses derivatives to hedge the forecasted issuance of fixed-rate debt and records the effective portion of the derivative's fair value in "Accumulated other comprehensive loss" in the Condensed Consolidated Balance Sheets. These amounts are reclassified to "Interest expense" in the Condensed Consolidated Statements of Income over the life of the related notes. |
(d) | The Company uses foreign currency forward and option contracts as part of its Business Solutions payments operations. These derivative contracts are excluded from this table as they are managed as part of a broader currency portfolio that includes non-derivative currency exposures. The gains and losses on these derivatives are included as part of the broader disclosure of portfolio revenue for this business discussed above. |
(e) | The Company uses foreign currency forward contracts to offset foreign exchange rate fluctuations on settlement assets and obligations as well as certain foreign currency denominated positions. Foreign exchange gains on settlement assets and obligations, cash balances, and other assets and liabilities, not including amounts related to derivatives activity as displayed above and included in "Selling, general and administrative" in the Condensed Consolidated Statements of Income were $10.4 million and $16.4 million for the three months ended March 31, 2017 and 2016, respectively. |
(f) | The derivative contracts used in the Company's revenue hedging program are not designated as hedges in the final month of the contract. |
|
March 31, 2017 | December 31, 2016 | ||||||
Commercial paper (a) | $ | 310.0 | $ | — | |||
Notes: | |||||||
2.875% notes due 2017 (b) | 500.0 | 500.0 | |||||
3.650% notes (effective rate of 4.5%) due 2018 | 400.0 | 400.0 | |||||
3.350% notes due 2019 (b) | 250.0 | 250.0 | |||||
5.253% notes due 2020 (b) | 324.9 | 324.9 | |||||
3.600% notes (effective rate of 3.8%) due 2022 (c) | 400.0 | — | |||||
6.200% notes due 2036 (b) | 500.0 | 500.0 | |||||
6.200% notes due 2040 (b) | 250.0 | 250.0 | |||||
Term Loan Facility borrowings (effective rate of 2.4%) | 575.0 | 575.0 | |||||
Total borrowings at par value | 3,509.9 | 2,799.9 | |||||
Fair value hedge accounting adjustments, net (d) | 1.9 | 4.4 | |||||
Unamortized discount and debt issuance costs | (20.9 | ) | (18.2 | ) | |||
Total borrowings at carrying value (e) | $ | 3,490.9 | $ | 2,786.1 |
(a) | Pursuant to the Company's commercial paper program, the Company may issue unsecured commercial paper notes in an amount not to exceed $1.5 billion outstanding at any time, reduced to the extent of borrowings outstanding on the Company's Revolving Credit Facility in excess of $150 million. The commercial paper notes may have maturities of up to 397 days from date of issuance. The Company's commercial paper borrowings as of March 31, 2017 had a weighted-average annual interest rate of approximately 1.2% and a weighted-average term of approximately 3 days. |
(b) | The difference between the stated interest rate and the effective interest rate is not significant. |
(c) | On March 15, 2017, the Company issued $400.0 million of aggregate principal amount of 3.600% unsecured notes due 2022 ("2022 Notes"). |
(d) | The Company utilizes interest rate swaps designated as fair value hedges to effectively change the interest rate payments on a portion of its notes from fixed-rate payments to short-term LIBOR-based variable rate payments in order to manage its overall exposure to interest rates. The changes in fair value of these interest rate swaps result in an offsetting hedge accounting adjustment recorded to the carrying value of the related note. These hedge accounting adjustments will be reclassified as reductions to or increases in "Interest expense" in the Condensed Consolidated Statements of Income over the life of the related notes, and cause the effective rate of interest to differ from the notes’ stated rate. |
(e) | As of March 31, 2017, the Company’s weighted-average effective rate on total borrowings was approximately 3.9%. |
Due within 1 year | $ | 500.0 | |
Due after 1 year through 2 years | 421.6 | ||
Due after 2 years through 3 years | 278.7 | ||
Due after 3 years through 4 years | 375.2 | ||
Due after 4 years through 5 years | 874.4 | ||
Due after 5 years | 750.0 |
|
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Revenues: | |||||||
Consumer-to-Consumer | $ | 1,015.0 | $ | 1,017.4 | |||
Consumer-to-Business | 168.2 | 156.1 | |||||
Business Solutions | 93.6 | 99.2 | |||||
Other | 25.6 | 25.0 | |||||
Total consolidated revenues | $ | 1,302.4 | $ | 1,297.7 | |||
Operating income: | |||||||
Consumer-to-Consumer | $ | 227.6 | $ | 231.3 | |||
Consumer-to-Business | 20.5 | 22.9 | |||||
Business Solutions | 2.3 | 2.4 | |||||
Other | 3.4 | 2.0 | |||||
Total segment operating income | 253.8 | 258.6 | |||||
Business transformation expenses | (14.3 | ) | — | ||||
Total consolidated operating income | $ | 239.5 | $ | 258.6 |
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