Western Union 2006 Annual Report Download - page 90

WESTERN UNION 2006 Annual Report 88
In November 2006, the Company terminated these
swaps in conjunction with the issuance of the 2011 and
2036 Notes as described in Note 15, by paying cash of
approximately $18.6 million to the counterparties. The
difference in the actual issuance date and the probable
issuance date as stated in our hedge designation
documentation resulted in ineffectiveness of $0.6 million,
which was immediately recognized in “Derivative (losses)/
gains, net” in the Consolidated Statements of Income. No
amounts were excluded from the measure of effectiveness.
The remaining $18.0 million loss on the hedges was included
in “Accumulated other comprehensive loss” and will
be reclassified to “Interest expense” over the life of the
related notes.
The following table summarizes activity in “Accumulated other comprehensive loss” related to all derivatives
designated as cash flow hedges (in millions):
2006 2005 2004
Balance included in “Accumulated other comprehensive loss” at January 1, $ — $— $—
Reclassification into earnings from “Accumulated other comprehensive loss”:
Revenue (1.8) — —
Interest expense 0.2 — —
Total reclassifications (1.6) — —
Changes in fair value of derivatives, net of tax (27.7) — —
Balance included in “Accumulated other comprehensive loss” at December 31, $(29.3) $— $—
As of December 31, 2006, the maximum length
of time over which the Company is hedging its exposure
to the variability in future cash flows associated with
foreign currency risk related to future revenues is
12 months. Therefore, $11.5 million of “Accumulated
other comprehensive loss” related to the foreign currency
forward contracts is expected to be reclassified into revenue
within the next 12 months. Approximately $1.7 million
of losses on the forecasted debt issuance hedges
are expected to be recognized in interest expense during
the next 12 months. No amounts have been reclassified
into earnings as a result of the underlying transaction no
longer being considered probable of occurring within the
specified time period.
|| 15. Borrowings
The Company’s outstanding borrowings at December 31, 2006 consist of the following (in millions):
December 31, 2006
Carrying Value Fair Value
Short-term:
Commercial paper $ 324.6 $ 324.6
Note payable due January 2007 3.0 3.0
Long-term:
Floating rate notes, due 2008 500.0 499.8
5.400% notes, net of discount, due 2011 999.0 986.3
5.930% notes, net of discount, due 2016 999.7 992.2
6.200% notes, net of discount, due 2036 497.2 471.4
Total borrowings $3,323.5 $3,277.3
Exclusive of discounts, maturities of borrowings as
of December 31, 2006 are $327.6 million in 2007,
$500.0 million in 2008, $1.0 billion in 2011 and $1.5 billion
thereafter. There are no contractual maturities on borrowings
during 2009 and 2010.
No borrowings existed at December 31, 2005. The
Company’s obligations under all of its financing facilities,
as described below, rank equally.
Commercial Paper Program
On November 3, 2006, the Company established a
commercial paper program pursuant to which the Company
may issue unsecured commercial paper notes (the
“Commercial Paper Notes”) in an amount not to exceed
$1.5 billion outstanding at any time prior to the commercial
paper program expiration in 2011. The Commercial Paper
Notes may have maturities of up to 397 days from date of
issuance. Interest rates for borrowings are based on market
rates at the time of issuance. The Company’s commercial
paper borrowings at De cember 31, 2006 were
$324.6 million, had a weighted average interest rate
of approximately 5.4% and a weighted-average initial term
of 17 days. At December 31, 2006, $1,175.4 million was
available to borrow under the commercial paper program.