Western Union 2006 Annual Report Download - page 58

WESTERN UNION 2006 Annual Report 56
Proceeds from Net Borrowings Under Credit Facilities
During September 2006, we made an initial borrowing
under our Revolving Credit Facility in an aggregate principal
amount equal to $100.0 million in connection with the
spin-off which was fully repaid prior to December 31, 2006.
We also incurred net borrowings of $3.0 million, due
January 2, 2007, through a fixed rate promissory note as
of December 31, 2006.
Proceeds from Exercise of Options
We received $80.8 million in cash proceeds related to
the exercise of 5.4 million stock options subsequent
to the spin-off date of September 29, 2006 through
December 31, 2006. More than 80% of the 5.4 million
shares exercised related to stock options held by First Data
employees.
Cash Dividends to Public Stockholders
During the fourth quarter of 2006, our Board of Directors
declared a quarterly cash dividend of $0.01 per common
share representing $7.7 million which was paid in
December 2006.
Purchase of treasury shares
In September 2006, our Board of Directors authorized
the purchase of up to $1.0 billion of our common stock on
the open market through December 31, 2008. As
of December 31, 2006, 0.9 million shares have been
repurchased for $19.9 million at an average cost of $22.79
per share.
|| Significant Non-Cash
Transactions
On September 29, 2006, we issued to First Data $1.0 billion
aggregate principal amount of the 2016 Notes in partial
consideration for the contribution by First Data to us of its
money transfer and consumer payments businesses in
connection with the spin-off. Immediately after the
Distribution, First Data exchanged the 2016 Notes with
two financial institutions for indebtedness of First Data
that the financial institutions held at that time. The financial
institutions received the proceeds from the subsequent
sale of the 2016 Notes in a private offering.
On September 29, 2006, we also issued 765.3 million
shares of our common stock to First Data in partial
consideration for the contribution by First Data to us of its
money transfer and consumer payments businesses in
connection with the spin-off. First Data then distributed
the 765.3 million shares of our common stock to First
Data’s shareholders.
First Data transferred to us our headquarters in
Englewood, Colorado and certain other fixed assets with
a net book value of $66.5 million, and we transferred to
First Data certain investments with a net book value
of $20.9 million. We also reclassified liabilities totaling
$193.8 million relating to certain tax and employee-related
obligations from “Receivables from First Data, net.”
|| Off-Balance Sheet Arrangements
Other than facility and equipment leasing arrangements,
we have no material off-balance sheet arrangements that
have or are reasonably likely to have a material current
or future effect on our financial condition, revenues
or expenses, results of operations, liquidity, capital
expenditures or capital resources.
|| Pension Plans
We have two frozen defined benefit plans that
together were underfunded by $52.9 million as of
December 31, 2006. In 2006, we did not make a
contribution to these plans, and currently do not anticipate
contributing to these plans in 2007 since, based on
current asset return calculations and minimum funding
requirements, no such contribution is required. We do not
believe that legislation enacted during 2006 relating
to pension plans will have an impact on our funding
requirement until at least 2008. During 2008, in connection
with the adoption of SFAS No. 158, “Employers Accounting
for Defined Benefit Pension and Other Postretirement
Plans, An Amendment of SFAS No. 87, 88, 106 and 132(R)”
(“SFAS No. 158”), the measurement dates for our pension
plans will be changed to December 31 from a present
measurement date of September 30.
|| Contractual Obligations
The following table summarizes our contractual obligations to third parties as of December 31, 2006 and the effect such
obligations are expected to have on our liquidity and cash flows in future periods (in millions).
Payments Due by Period
Total Less than 1 Year 1-3 Years 4-5 Years After 5 Years
Borrowings, including interest
(a) $5,155.3 $508.2 $812.2 $1,282.0 $2,552.9
Operating leases 79.3 20.5 26.0 13.1 19.7
Purchase obligations
(b) 158.1 42.8 59.8 33.0 22.5
$5,392.7 $571.5 $898.0 $1,328.1 $2,595.1
(a) We have estimated our interest payments based on i) projected LIBOR rates in calculating interest on commercial paper borrowings and Floating Rate Notes, ii) projected com-
mercial paper borrowings outstanding throughout 2007, and the assumption that no such amounts will be outstanding on or after December 31, 2007, and iii) the assumption that
no debt issuances or renewals will occur upon the maturity dates of our fixed and floating rate notes.
(b) Many of our contracts contain clauses that allow us to terminate the contract with notice, and with or without a termination penalty. Termination penalties are generally an amount
less than the original obligation. Certain contracts also have an automatic renewal clause if we do not provide written notification of our intent to terminate the contract. Obligations
under certain contracts are usage-based and are, therefore, estimated in the above amounts. Historically, we have not had any significant defaults of our contractual obligations or
incurred significant penalties for termination of our contractual obligations.