Western Union 2013 Annual Report Download - page 239

2013 FORM 10-K
THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
129
The Company also uses short duration foreign currency forward contracts, generally with maturities from a few days up to
one month, to offset foreign exchange rate fluctuations on settlement assets and obligations between initiation and settlement. In
addition, forward contracts, typically with maturities of less than one year at inception, are utilized to offset foreign exchange rate
fluctuations on certain foreign currency denominated cash and other asset positions. None of these contracts are designated as
accounting hedges.
The aggregate equivalent United States dollar notional amounts of foreign currency forward contracts as of December 31,
2013 were as follows (in millions):
Contracts not designated as hedges:
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 237.4
Canadian dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98.0
British pound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.0
Australian dollar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.6
Other (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157.0
Contracts designated as hedges:
Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 392.8
Canadian dollar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125.3
British pound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85.5
Swiss franc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.7
Australian dollar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.2
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49.7
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(a) Comprised of exposures to 15 different currencies. None of these individual currency exposures is greater than $25 million.
Foreign Currency — Business Solutions
The Company writes derivatives, primarily foreign currency forward contracts and option contracts, mostly with small and
medium size enterprises and derives a currency spread from this activity as part of its Business Solutions operations. The Company
aggregates its Business Solutions payments foreign currency exposures arising from customer contracts, including the derivative
contracts described above, and hedges the resulting net currency risks by entering into offsetting contracts with established financial
institution counterparties (economic hedge contracts). The derivatives written are part of the broader portfolio of foreign currency
positions arising from its cross-currency Business Solutions payments operations, which primarily include spot exchanges of
currency in addition to forwards and options. Foreign exchange revenues from the total portfolio of positions were $355.5 million,
$332.0 million, and $154.6 million for the years ended December 31, 2013, 2012 and 2011, respectively. None of the derivative
contracts used in Business Solutions operations are designated as accounting hedges. The duration of these derivative contracts
at inception is generally less than one year.
The aggregate equivalent United States dollar notional amounts of foreign currency derivative customer contracts held by the
Company in its Business Solutions operations as of December 31, 2013 were approximately $5.8 billion. The significant majority
of customer contracts are written in major currencies such as the euro, Canadian dollar, British pound, and the Australian dollar.
Interest Rate Hedging — Corporate
The Company utilizes interest rate swaps to effectively change the interest rate payments on a portion of its notes from fixed-
rate payments to short-term LIBOR-based variable rate payments in order to manage its overall exposure to interest rates. The
Company designates these derivatives as fair value hedges. The change in fair value of the interest rate swaps is offset by a change
in the carrying value of the debt being hedged within "Borrowings" in the Consolidated Balance Sheets and "Interest expense" in
the Consolidated Statements of Income has been adjusted to include the effects of interest accrued on the swaps.