Western Union 2008 Annual Report Download - page 37

35
Other Commercial Commitments
We had $77.0 million in outstanding letters of credit and
bank guarantees at December 31, 2008, with expiration
dates through 2015, certain of which contain a one-year
renewal option. The letters of credit and bank guarantees
are primarily held in connection with lease arrangements
and certain agent agreements. We expect to renew the
letters of credit and bank guarantees prior to expiration
in most circumstances.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of results of opera-
tions and financial condition is based on our financial
statements that have been prepared in accordance with
accounting principles generally accepted in the United
States. The preparation of these financial statements
requires that management make estimates and assump-
tions that affect the amounts reported for revenues,
expenses, assets, liabilities and other related disclosures.
Actual results may or may not differ from these estimates.
Our significant accounting policies are discussed in Note 2,
Summary of Significant Accounting Policies, of the notes
to consolidated financial statements.
Our critical accounting policies and estimates, described
below, are very important to the portrayal of our financial
position and our results of operations and applying them
requires our management to make difficult, subjective and
complex judgments. We believe that the understanding
of these key accounting policies and estimates is essential
in achieving more insight into our operating results and
financial condition.
35
Management’s
Discussion and
Analysis of Financial
Condition and
Results of Operations
Contractual Obligations
The following table summarizes our contractual obligations to third parties as of December31, 2008 and the effect
such obligations are expected to have on our liquidity and cash flows in future periods (in millions).
Payments Due by Period
Less than
Total 1Year 1 – 3Years 3 – 5Years After 5Years
Borrowings, including interest (a) $4,593.0 $731.3 $1,299.1 $177.2 $2,385.4
Purchase obligations (b) 160.2 42.3 42.7 30.2 45.0
Foreign currency forward contracts (c) 10.8 8.4 2.4 — —
Operating leases 102.6 23.5 30.4 19.4 29.3
Unrecognized tax benefits (d) 397.0 — — — —
Capitalized contract costs (e) 0.9 0.9 — — —
Estimated pension funding (f) 123.1 — 43.7 39.8 39.6
$5,387.6 $806.4 $1,418.3 $266.6 $2,499.3
(a) We have estimated our interest payments based on i)projected LIBOR rates in calculating interest on commercial paper borrowings and our Term Loan, ii) projected
commercial paper borrowings outstanding throughout 2009, and the assumption that no such amounts will be outstanding beyond 2009, and iii) the assumption that
no debt issuances or renewals will occur upon the maturity dates of our fixed notes and Term Loan. Our Term Loan matures in December 2009 and we plan to refinance
this facility in 2009 with new financing sources.
(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.
(c) Represents the liability position of our foreign currency forward contracts as of December31, 2008, which will fluctuate based on market conditions.
(d) The timing of cash payments on unrecognized tax benefits, including accrued interest and penalties, is inherently uncertain because the ultimate amount and timing
of such liabilities is affected by factors which are variable and outside our control.
(e) Represents accrued and unpaid initial payments for new and renewed agent contracts as of December31, 2008.
(f) We have estimated our pension plan funding requirements, including interest, using assumptions that are consistent with current pension funding rates. The actual
minimum required amounts each year will vary based on the actual discount rate and asset returns when the funding requirement is calculated.