Fair value of derivatives |
The following table summarizes the fair value of derivatives reported in the Condensed Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013 (in millions): | | | | | | | | | | | | | | | | | | | | | | Derivative Assets | | Derivative Liabilities | | | | Fair Value | | | | Fair Value | | Balance Sheet Location | | June 30, 2014 | | December 31, 2013 | | Balance Sheet Location | | June 30, 2014 | | December 31, 2013 | Derivatives — hedges: | | | | | | | | | | | | Interest rate fair value hedges — Corporate | Other assets | | $ | 0.6 |
| | $ | 11.4 |
| | Other liabilities | | $ | 1.6 |
| | $ | 7.8 |
| Foreign currency cash flow hedges — Consumer-to-Consumer | Other assets | | 5.9 |
| | 11.1 |
| | Other liabilities | | 21.1 |
| | 27.7 |
| Total | | | $ | 6.5 |
| | $ | 22.5 |
| | | | $ | 22.7 |
| | $ | 35.5 |
| Derivatives — undesignated: | | | | | | | | | | | | Foreign currency — Business Solutions | Other assets | | $ | 233.1 |
| | $ | 201.2 |
| | Other liabilities | | $ | 218.3 |
| | $ | 186.2 |
| Foreign currency — Consumer-to-Consumer | Other assets | | 0.5 |
| | 0.6 |
| | Other liabilities | | 2.7 |
| | 1.7 |
| Total | | | $ | 233.6 |
| | $ | 201.8 |
| | | | $ | 221.0 |
| | $ | 187.9 |
| Total derivatives | | | $ | 240.1 |
| | $ | 224.3 |
| | | | $ | 243.7 |
| | $ | 223.4 |
|
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Gross and net fair value of derivative assets and liabilities |
The following tables summarize the gross and net fair value of derivative assets and liabilities as of June 30, 2014 and December 31, 2013 (in millions): Offsetting of Derivative Assets | | | | | | | | | | | | | | | | | | | | | | June 30, 2014 | | Gross Amounts of Recognized Assets | | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | | Net Amounts Presented in the Condensed Consolidated Balance Sheets | | Derivatives Not Offset in the Condensed Consolidated Balance Sheets | | Net Amounts | Derivatives subject to a master netting arrangement or similar agreement | | $ | 69.0 |
| | $ | — |
| | $ | 69.0 |
| | $ | (66.8 | ) | | $ | 2.2 |
| Derivatives that are not or may not be subject to master netting arrangement or similar agreement | | 171.1 |
| | | | | | | | | Total | | $ | 240.1 |
| | | | | | | | | | | | | | | | | | | | December 31, 2013 | | | | | | | | | | | Derivatives subject to a master netting arrangement or similar agreement | | $ | 118.4 |
| | $ | — |
| | $ | 118.4 |
| | $ | (93.3 | ) | | $ | 25.1 |
| Derivatives that are not or may not be subject to master netting arrangement or similar agreement | | 105.9 |
| | | | | | | | | Total | | $ | 224.3 |
| | | | | | | | |
Offsetting of Derivative Liabilities | | | | | | | | | | | | | | | | | | | | | | June 30, 2014 | | Gross Amounts of Recognized Liabilities | | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | | Net Amounts Presented in the Condensed Consolidated Balance Sheets | | Derivatives Not Offset in the Condensed Consolidated Balance Sheets | | Net Amounts | Derivatives subject to a master netting arrangement or similar agreement | | $ | 171.5 |
| | $ | — |
| | $ | 171.5 |
| | $ | (66.8 | ) | | $ | 104.7 |
| Derivatives that are not or may not be subject to master netting arrangement or similar agreement | | 72.2 |
| | | | | | | | | Total | | $ | 243.7 |
| | | | | | | | | | | | | | | | | | | | December 31, 2013 | | | | | | | | | | | Derivatives subject to a master netting arrangement or similar agreement | | $ | 146.1 |
| | $ | — |
| | $ | 146.1 |
| | $ | (93.3 | ) | | $ | 52.8 |
| Derivatives that are not or may not be subject to master netting arrangement or similar agreement | | 77.3 |
| | | | | | | | | Total | | $ | 223.4 |
| | | | | | | | |
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Location and amount of gains/(losses) from hedging activities |
Fair Value Hedges The following table presents the location and amount of gains/(losses) from fair value hedges for the three months ended June 30, 2014 and 2013 (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gain/(Loss) Recognized in Income on Derivatives | | | | Gain/(Loss) Recognized in Income on Related Hedged Item (a) | | Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) | | | Income Statement Location | | Amount | | | | Income Statement Location | | Amount | | Income Statement Location | | Amount | Derivatives | | | June 30, 2014 | | June 30, 2013 | | Hedged Item | | | June 30, 2014 | | June 30, 2013 | | | June 30, 2014 | | June 30, 2013 | Interest rate contracts | | Interest expense | | $ | 7.0 |
| | $ | (7.5 | ) | | Fixed-rate debt | | Interest expense | | $ | (4.2 | ) | | $ | 10.2 |
| | Interest expense | | $ | (0.1 | ) | | $ | 0.1 |
| Total gain/ (loss) | | | | $ | 7.0 |
| | $ | (7.5 | ) | | | | | | $ | (4.2 | ) | | $ | 10.2 |
| | | | $ | (0.1 | ) | | $ | 0.1 |
|
The following table presents the location and amount of gains/(losses) from fair value hedges for the six months ended June 30, 2014 and 2013 (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gain/(Loss) Recognized in Income on Derivatives | | | | Gain/(Loss) Recognized in Income on Related Hedged Item (a) | | Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) | | | Income Statement Location | | Amount | | | | Income Statement Location | | Amount | | Income Statement Location | | Amount | Derivatives | | | June 30, 2014 | | June 30, 2013 | | Hedged Item | | | June 30, 2014 | | June 30, 2013 | | | June 30, 2014 | | June 30, 2013 | Interest rate contracts | | Interest expense | | $ | 10.8 |
| | $ | (8.1 | ) | | Fixed-rate debt | | Interest expense | | $ | (4.5 | ) | | $ | 13.5 |
| | Interest expense | | $ | (0.3 | ) | | $ | — |
| Total gain/ (loss) | | | | $ | 10.8 |
| | $ | (8.1 | ) | | | | | | $ | (4.5 | ) | | $ | 13.5 |
| | | | $ | (0.3 | ) | | $ | — |
|
Cash Flow Hedges The following table presents the location and amount of gains/(losses) from cash flow hedges for the three months ended June 30, 2014 and 2013 (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gain/(Loss) Recognized in OCI on Derivatives (Effective Portion) | | Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | | Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) (b) | | | Amount | | Income Statement Location | | Amount | | Income Statement Location | | Amount | Derivatives | | June 30, 2014 | | June 30, 2013 | | | June 30, 2014 | | June 30, 2013 | | | June 30, 2014 | | June 30, 2013 | Foreign currency contracts | | $ | (3.7 | ) | | $ | 4.4 |
| | Revenue | | $ | (3.9 | ) | | $ | 5.7 |
| | Derivative gains/(losses), net | | $ | (1.0 | ) | | $ | (0.1 | ) | Interest rate contracts (c) | | — |
| | — |
| | Interest expense | | (0.9 | ) | | (0.9 | ) | | Interest expense | | — |
| | — |
| Total gain/(loss) | | $ | (3.7 | ) | | $ | 4.4 |
| | | | $ | (4.8 | ) | | $ | 4.8 |
| | | | $ | (1.0 | ) | | $ | (0.1 | ) |
The following table presents the location and amount of gains/(losses) from cash flow hedges for the six months ended June 30, 2014 and 2013 (in millions): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gain/(Loss) Recognized in OCI on Derivatives (Effective Portion) | | Gain/(Loss) Reclassified from Accumulated OCI into Income (Effective Portion) | | Gain/(Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) (b) | | | Amount | | Income Statement Location | | Amount | | Income Statement Location | | Amount | Derivatives | | June 30, 2014 | | June 30, 2013 | | | June 30, 2014 | | June 30, 2013 | | | June 30, 2014 | | June 30, 2013 | Foreign currency contracts | | $ | (1.4 | ) | | $ | 28.2 |
| | Revenue | | $ | (4.0 | ) | | $ | 6.2 |
| | Derivative gains/(losses), net | | $ | (1.6 | ) | | $ | (0.3 | ) | Interest rate contracts (c) | | — |
| | — |
| | Interest expense | | (1.8 | ) | | (1.8 | ) | | Interest expense | | — |
| | — |
| Total gain/(loss) | | $ | (1.4 | ) | | $ | 28.2 |
| | | | $ | (5.8 | ) | | $ | 4.4 |
| | | | $ | (1.6 | ) | | $ | (0.3 | ) |
Undesignated Hedges The following table presents the location and amount of net gains/(losses) from undesignated hedges for the three and six months ended June 30, 2014 and 2013 (in millions): | | | | | | | | | | | | | | | | | | | | Gain/(Loss) Recognized in Income on Derivatives (d) | | Income Statement Location | | Amount | | | | Three Months Ended June 30, | | Six Months Ended June 30, | Derivatives | | | 2014 | | 2013 | | 2014 | | 2013 | Foreign currency contracts (e) | Selling, general and administrative | | $ | 0.8 |
| | $ | 5.7 |
| | $ | (0.8 | ) | | $ | 13.4 |
| Foreign currency contracts (f) | Derivative gains/(losses), net | | (1.0 | ) | | (0.1 | ) | | (1.0 | ) | | 0.6 |
| Total gain/(loss) | | | $ | (0.2 | ) | | $ | 5.6 |
| | $ | (1.8 | ) | | $ | 14.0 |
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____________________ | | (a) | The gain/(loss) of $(4.2) million and $10.2 million in the three months ended June 30, 2014 and 2013, respectively, was comprised of a gain/(loss) in value on the debt of $(6.9) million and $7.5 million, respectively, and amortization of hedge accounting adjustments of $2.7 million for both periods. The gain/(loss) of $(4.5) million and $13.5 million in the six months ended June 30, 2014 and 2013, respectively, was comprised of a gain/(loss) in value on the debt of $(10.5) million and $8.1 million, respectively, and amortization of hedge accounting adjustments of $6.0 million and $5.4 million, respectively. |
| | (b) | The portion of the change in fair value of a derivative excluded from the effectiveness assessment for foreign currency forward contracts designated as cash flow hedges represents the difference between changes in forward rates and spot rates. |
| | (c) | The Company uses derivatives to hedge the forecasted issuance of fixed-rate debt and records the effective portion of the derivative's fair value in "Accumulated other comprehensive loss" in the Condensed Consolidated Balance Sheets. These amounts are reclassified to "Interest expense" in the Condensed Consolidated Statements of Income over the life of the related notes. |
| | (d) | The Company uses foreign currency forward and option contracts as part of its Business Solutions payments operations. These derivative contracts are excluded from this table as they are managed as part of a broader currency portfolio that includes non-derivative currency exposures. The gains and losses on these derivatives are included as part of the broader disclosure of portfolio revenue for this business discussed above. |
| | (e) | The Company uses foreign currency forward contracts to offset foreign exchange rate fluctuations on settlement assets and obligations as well as certain foreign currency denominated positions. Foreign exchange losses on settlement assets and obligations and cash balances, not including amounts related to derivatives activity as displayed above and included in "Selling, general and administrative" in the Condensed Consolidated Statements of Income, were $4.2 million and $5.8 million for the three months ended June 30, 2014 and 2013, respectively, and $5.0 million and $12.0 million for the six months ended June 30, 2014 and 2013, respectively. |
| | (f) | The derivative contracts used in the Company's revenue hedging program are not designated as hedges in the final month of the contract. |
|