Western Union 2009 Annual Report Download - page 53

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Arizona and requires us to fund a multi-state not-for-profit organization promoting safety and
security along the United States and Mexico border, in which California, Texas and New Mexico will
participate with Arizona (the “settlement accrual”). The settlement agreement was signed on
February 11, 2010. Results for 2008 included $82.9 million in restructuring and related expenses.
• Our operating income margin was 25% during the year ended December 31, 2009, resulting in a
year-over-year decline of 1%. The current year results included the settlement accrual, while the
prior year results included the restructuring and related expenses mentioned above.
• Consolidated net income during 2009 was $848.8 million, representing a decline of 8% from 2008.
The current results included the settlement accrual of $53.9 million, net of tax, while the prior year
results included $51.6 million in restructuring and related expenses, net of tax.
• Our consumers transferred $71 billion in consumer-to-consumer principal, of which $65 billion
related to cross-border principal, which represented a decrease of 3% in both consumer-to-consumer
principal and cross-border principal over the prior year.
• Consolidated cash flows provided by operating activities were $1,218.1 million, a decrease of 3%
over 2008.
• We completed two acquisitions in the year ended December 31, 2009. In February 2009, we
completed the acquisition of the money transfer business of one of our largest agents, European-
based FEXCO, for $243.6 million, including $157.4 million of cash consideration. As described
earlier, we acquired Custom House in September 2009 for cash consideration of $371.0 million.
Factors that we believe are important to our long-term success include accelerating profitable growth in
our existing consumer-to-consumer business, innovating to provide new products and services, including
electronic channels, to our intended consumer, expanding our global business payments segment to other
markets across the world through our cross-border, cross-currency payment service offerings and improving
our profitability by leveraging our scale, reducing costs and effectively utilizing capital. Significant factors
affecting our financial position and results of operations include:
• Transaction volume is the primary generator of revenue in our businesses. Transaction volume in our
consumer-to-consumer segment is affected by, among other things, the size of the international
migrant population and individual needs to transfer funds in emergency situations. As noted
elsewhere in this Annual Report on Form 10-K, a reduction in the size of the migrant population,
interruptions in migration patterns or reduced employment opportunities including those resulting
from any changes in immigration laws, economic development patterns or political events, could
adversely affect our transaction volume. For discussion on how these factors have impacted us in
recent periods, refer to the consumer-to-consumer segment discussion below.
• Revenue is also impacted by changes in the fees we charge consumers, the principal sent per
transaction and by the variance in the exchange rate set by us to the customer and the rate at which
we or our agents are able to acquire currency. We intend to continue to implement future strategic
fee reductions and actions to reduce foreign exchange spreads, where appropriate, taking into account
growth opportunities and including competitive factors. Decreases in our fees or foreign exchange
spreads generally reduce margins, but are done in anticipation that they will result in increased
transaction volumes and increased revenues over time.
• A majority of our cost structure is comprised of agent commissions, which are generally variable and
fluctuate as revenues fluctuate.
• Fluctuations in the exchange rate between the United States dollar and other currencies impact our
transaction fee and foreign exchange revenue. The impact to earnings per share is less than the
revenue impact due to the translation of expenses and our foreign currency hedging program.
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