Western Union 2015 Annual Report Download - page 164

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Selling, general and administrative expenses decreased for the year ended December 31, 2014 compared to the prior year due
to benefits from our productivity and cost-savings initiatives and decreased integration costs related to the acquisition of Travelex
Global Business Payments ("TGBP"). During the year ended December 31, 2013, we incurred $19.3 million of integration expenses
related to the acquisition of TGBP, consisting primarily of severance and other benefits, retention, direct and incremental expense
consisting of facility relocation, consolidation and closures; IT systems integration; amortization of a transitional trademark license;
and other expenses such as training, travel and professional fees. These benefits were partially offset by increased compliance
program and legal costs. Additionally, fluctuations in the exchange rate between the United States dollar and other currencies
resulted in a positive impact on the translation of our expenses.
Total other expense, net
Total other expense, net during the year ended December 31, 2015 compared to the prior year decreased by 3% due to lower
interest expense primarily related to lower average debt balances outstanding. Average debt balances outstanding were $3,636.0
million and $3,843.2 million for the years ended December 31, 2015 and 2014, respectively. The decrease in average debt balances
outstanding during the year ended December 31, 2015 compared to the prior year was primarily due to the repayment of $500
million of our notes in February 2014, $250 million of our notes in August 2015, and $250 million of our notes in December 2015.
Total other expense, net was materially consistent for the year ended December 31, 2014 compared to the prior year.
Income taxes
Our effective tax rates on pre-tax income were 11.0%, 12.0% and 13.9% for the years ended December 31, 2015, 2014 and
2013, respectively. The decrease in our effective tax rate for the year ended December 31, 2015 compared to 2014 was primarily
due to various tax planning benefits, some of which are non-recurring, partially offset by changes in the composition of foreign
earnings between higher taxed and lower taxed and the combined effects of various discrete items. The decrease in our effective
tax rate for the year ended December 31, 2014 compared to 2013 is primarily due to the combined effect of various discrete items,
including those related to foreign currency fluctuations on certain income tax attributes, and changes in tax contingency reserves,
partially offset by changes in the composition of earnings between foreign and domestic.
We continue to benefit from a significant proportion of profits being foreign-derived and generally taxed at lower rates than
our combined federal and state tax rates in the United States. For the years ended December 31, 2015, 2014 and 2013, 103%, 96%
and 103%, respectively, of our pre-tax income was derived from foreign sources. Our foreign pre-tax income is subject to tax in
multiple foreign jurisdictions, virtually all of which have statutory income tax rates lower than the United States. While the income
tax imposed by any one foreign country is not material to us, our overall effective tax rate could be adversely affected by changes
in tax laws, both foreign and domestic. Certain portions of our foreign source income are subject to United States federal and state
income tax as earned due to the nature of the income, and dividend repatriations of our foreign source income are generally subject
to United States federal and state income tax.
We have established contingency reserves for a variety of material, known tax exposures. As of December 31, 2015, the total
amount of tax contingency reserves was $113.1 million, including accrued interest and penalties, net of related items. Our tax
reserves reflect our judgment as to the resolution of the issues involved if subject to judicial review or other settlement. While we
believe that our reserves are adequate to cover reasonably expected tax risks, there can be no assurance that, in all instances, an
issue raised by a tax authority will be resolved at a financial cost that does not exceed our related reserve. With respect to these
reserves, our income tax expense would include (i) any changes in tax reserves arising from material changes during the period
in facts and circumstances (i.e. new information) surrounding a tax issue and (ii) any difference from our tax position as recorded
in the financial statements and the final resolution of a tax issue during the period. Such resolution could materially increase or
decrease income tax expense in our consolidated financial statements in future periods and could impact our operating cash flows.
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