Western Union 2011 Annual Report Download - page 56

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 adjust 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 in the near term, 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.
Spin-off from First Data
We were incorporated in Delaware as a wholly-owned subsidiary of First Data on February 17, 2006. On
September 29, 2006, First Data distributed all of its money transfer and consumer payments businesses and its
interest in a Western Union money transfer agent, as well as its related assets, including real estate, through a
tax-free distribution to First Data shareholders (“Spin-off”) through this previously owned subsidiary.
Basis of Presentation
The financial statements in this Annual Report on Form 10-K are presented on a consolidated basis and
include the accounts of our Company and its majority-owned subsidiaries. All significant intercompany
transactions and accounts have been eliminated.
Components of Revenues and Expenses
The following briefly describes the components of revenues and expenses as presented in the Consolidated
Statements of Income. Descriptions of our revenue recognition policies are included in Item 8, Note 2—
“Summary of Significant Accounting Policies” in our Consolidated Financial Statements.
Transaction fees—Transaction fees are charged for sending consumer-to-consumer money transfers and for
global business payments services. Consumer-to-consumer transaction fees generally vary according to the
principal amount of the money transfer and the locations from and to which the funds are sent and received.
Transaction fees represented 77% of our total consolidated revenues for the year ended December 31, 2011.
Foreign exchange revenues—In certain consumer-to-consumer money transfer and global business payments
transactions involving different currencies, we generate revenues based on the difference between the exchange
rate set by us to the customer and the rate at which we or our agents are able to acquire currency. In our
consumer-to-consumer business, foreign exchange revenue is primarily driven by international
consumer-to-consumer cross-currency transactions. Also, as a result of the acquisitions of Custom House, Ltd.
(“Custom House”) and TGBP, our foreign exchange revenues have increased. Foreign exchange revenues
represented 21% of our total consolidated revenues for the year ended December 31, 2011.
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