AMENDMENT NO. 1 TO FORM 10
 

As filed with the Securities and Exchange Commission on March 30, 2004
File No. 001-31950


SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10

Amendment No. 1

GENERAL FORM FOR REGISTRATION OF SECURITIES

PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934


MoneyGram International, Inc.

(Exact Name of Registrant as Specified in Its Charter)


     
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
  16-1690064
(I.R.S. Employer
Identification No.)
 
1550 Utica Avenue South
Minneapolis, Minnesota
(Address of Principal Executive Offices)
 
55416
(Zip Code)

(952) 591-3000

(Registrant’s Telephone Number, Including Area Code)

Securities to be registered

pursuant to Section 12(b) of the Act:
     
Title of each class Name of each exchange on which
to be so registered each class is to be registered


Common Stock, par value $0.01 per share
  The New York Stock Exchange
Preferred Share Purchase Rights
  The New York Stock Exchange

Securities to be registered

pursuant to Section 12(g) of the Act:

None




 

INFORMATION REQUIRED IN REGISTRATION STATEMENT

CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT AND
ITEMS OF FORM 10
 
Item 1. Business

      The information required by this item is contained under the sections “Summary,” “Risk Factors,” “Unaudited Pro Forma Consolidated Financial Information of MoneyGram International, Inc.,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Viad Corp,” “Business of MoneyGram” and “Relationship between New Viad and MoneyGram” of this information statement. Those sections are incorporated herein by reference.

 
Item 2. Financial Information

      The information required by this item is contained under the sections “Summary,” “Risk Factors,” “Capitalization of Viad Corp,” “Unaudited Pro Forma Consolidated Financial Information of MoneyGram International, Inc.,” “Selected Historical Consolidated Financial and Other Data of Viad Corp,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Viad Corp” and “Viad Corp Consolidated Financial Statements” of this information statement. Those sections are incorporated herein by reference.

 
Item 3. Properties

      The information required by this item is contained under the section “Business of MoneyGram — Facilities” of this information statement. That section is incorporated herein by reference.

 
Item 4. Security Ownership of Certain Beneficial Owners and Management

      The information required by this item is contained under the sections “Management of MoneyGram — Stock Ownership of Directors and Executive Officers” and “Security Ownership of Certain Beneficial Owners and Management of MoneyGram” of this information statement. Those sections are incorporated herein by reference.

 
Item 5. Directors and Executive Officers

      The information required by this item is contained under the section “Management of MoneyGram” of this information statement. That section is incorporated herein by reference.

 
Item 6. Executive Compensation

      The information required by this item is contained under the section “Management of MoneyGram” of this information statement. That section is incorporated herein by reference.

 
Item 7. Certain Relationships and Related Transactions

      The information required by this item is contained under the sections “Management of MoneyGram” and “Relationship between New Viad and MoneyGram” of this information statement. Those sections are incorporated herein by reference.

 
Item 8. Legal Proceedings

      The information required by this item is contained under the section “Business of MoneyGram — Legal Proceedings” of this information statement. That section is incorporated herein by reference.


 

 
Item 9. Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters

      The information required by this item is contained under the sections “Summary,” “Risk Factors,” “The Spin-Off,” “Capitalization of Viad Corp,” “Dividend Policy of MoneyGram,” “Business of MoneyGram,” “Management of MoneyGram” and “Description of Capital Stock of MoneyGram” of this information statement. Those sections are incorporated herein by reference.

 
Item 10. Recent Sales of Unregistered Securities

      None.

 
Item 11. Description of Registrant’s Securities to Be Registered

      The information required by this item is contained under the sections “Management of MoneyGram” and “Description of Capital Stock of MoneyGram” of this information statement. Those sections are incorporated herein by reference.

 
Item 12. Indemnification of Directors and Officers

      The information required by this item is contained under the section “Indemnification of Directors and Officers of MoneyGram and New Viad” of this information statement. That section is incorporated herein by reference.

 
Item 13. Financial Statements and Supplementary Data

      The information required by this item is contained under the sections “Capitalization of Viad Corp,” “Unaudited Pro Forma Consolidated Financial Information of MoneyGram International, Inc.,” “Selected Historical and Consolidated Financial and Other Data of Viad Corp,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Viad Corp” and “Viad Corp Consolidated Financial Statements” of this information statement. Those sections are incorporated herein by reference.

 
Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

      The information required by this item is contained under the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Viad Corp” of this information statement. This section is incorporated herein by reference.

 
Item 15. Financial Statements and Exhibits

      (a) Financial Statements

      The information required by this item is contained under the section “Viad Corp Consolidated Financial Statements,” beginning on page

F-1 of this information statement. That section is incorporated herein by reference.


 

      (b) Exhibits

      The following documents are filed as exhibits hereto:

         
Exhibit
Number Description


  2.1     Form of Separation and Distribution Agreement.*
  3.1     Form of Amended and Restated Certificate of Incorporation.*
  3.2     Form of Amended and Restated By-laws.*
  4.1     Form of Specimen Certificate for MoneyGram Common Stock.*
  4.2     Form of Preferred Share Purchase Rights Agreement between MoneyGram International, Inc. and Wells Fargo Bank, N.A. as Rights Agent.*
  10.1     Form of Employee Benefits Agreement.*
  10.2     Form of Tax Sharing Agreement.*
  10.3     Form of Interim Services Agreement.*
  10.4     Form of MoneyGram International, Inc. 2004 Omnibus Incentive Plan.*
  10.5     Form of Indemnification Agreement between MoneyGram International, Inc. and Directors of MoneyGram International, Inc.*
  21.1     Subsidiaries of MoneyGram International, Inc.*
  99.1     Information Statement.

To be filed by amendment.


 

SIGNATURE

      Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

  MONEYGRAM INTERNATIONAL, INC.

  By:  /s/ PHILIP W. MILNE
  Name: Philip W. Milne
  Title: President and Chief Executive Officer
March 30, 2004
EX-99.1: INFORMATION STATEMENT
Table of Contents

(VIAD LOGO)

, 2004

Dear Fellow Viad Stockholder:

      On                     , 2004, our board of directors approved a pro rata distribution to Viad stockholders of all of the shares of MoneyGram International, Inc., a wholly-owned subsidiary of Viad Corp that conducts Viad’s global payment services business. If you were a Viad stockholder on                     , 2004, the record date for the distribution, you will become a stockholder of MoneyGram.

      We believe that the spin-off will create two strong and focused businesses with promising opportunities for growth and enhanced stockholder value. As a separate, independent company, MoneyGram will be better positioned to provide consumers and businesses with affordable, reliable and convenient payment services. Our remaining businesses will continue to provide high-quality services addressing the needs of trade show and exhibit customers, as well as unique travel and recreation opportunities in the northern United States and Canada.

      In the distribution, you will receive one share of MoneyGram common stock for each share of Viad common stock that you held at the close of business on the record date.

      Your current shares of Viad common stock will continue to represent your equity ownership in our remaining businesses, which we refer to as “New Viad.” At Viad’s 2004 annual meeting of stockholders, Viad intends to seek stockholder approval for a one-for-four reverse stock split to be effected following the spin-off. If this reverse stock split were to be approved and effected, you would receive one share of Viad common stock for every four shares of Viad common stock that you held at the time it was effected. We expect that shares of MoneyGram common stock will trade on the New York Stock Exchange, Inc. under the ticker symbol “MGI.” Viad common stock will continue to trade under the ticker symbol “VVI.”

      The enclosed information statement is being sent to you to explain the distribution in detail and provide important information regarding MoneyGram and New Viad. We urge you to read it carefully. Please note that stockholder approval is not required for the distribution, and holders of Viad common stock are not required to take any action to participate in the distribution. Thus, we are not asking you for a proxy.

      We look forward to your continued support as a stockholder in Viad and MoneyGram.

  Very truly yours,
 
  Robert H. Bohannon
  Chairman, President and Chief Executive Officer


Table of Contents

(MONEYGRAM LOGO)

, 2004

Dear Fellow MoneyGram Stockholder:

      On behalf of the entire team at MoneyGram International, Inc., I wish to welcome you as a stockholder in our company.

      The board of directors of Viad Corp has approved the distribution to Viad stockholders of all the outstanding shares of MoneyGram common stock. Upon completion of the distribution, MoneyGram International, Inc. will be a separate, independent public company. Following the spin-off, we expect that MoneyGram common stock will be listed on the New York Stock Exchange, Inc. and will trade under the symbol “MGI.”

      We would like to take this opportunity to introduce you to our company. We conduct a leading global payment services business with over 60 years of operating performance, and our mission is to provide consumers and businesses with affordable, reliable and convenient payment services.

      We are very excited about our prospects as an independent company. We are committed to building value for you, our stockholders, by expanding our core businesses through focused growth strategies.

      I invite you to learn more about us and our business by reviewing the enclosed information statement.

      Welcome, again, to our company.

  Very truly yours,
 
  Philip W. Milne
  President and Chief Executive Officer


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Preliminary Information Statement
(Subject to Completion, Dated March 30, 2004)

  (VIAD LOGO)
(MONEYGRAM LOGO)

      Viad Corp is furnishing this information statement to its stockholders in connection with the distribution by Viad to its stockholders of all of the issued and outstanding shares of common stock of MoneyGram International, Inc. The distribution will result in the separation of Viad’s global payment services business from its other businesses. As of the date of this information statement, Viad owns all of the MoneyGram common stock.

      In the distribution, Viad will distribute all of the MoneyGram common stock on a pro rata basis to Viad stockholders. Each of you, as a Viad stockholder, will receive one share of MoneyGram common stock, together with the attached preferred share purchase right, for each share of Viad common stock that you hold at the close of business on                     , 2004, the record date. The distribution will be effective at 11:59 p.m. on                     , 2004. The distribution is intended to be tax-free to Viad and its stockholders for U.S. federal income tax purposes, and Viad has received a favorable ruling from the U.S. Internal Revenue Service to that effect.

      No vote of Viad stockholders is required in connection with the distribution.

      There is no current trading market for MoneyGram common stock. However, we expect that a limited market, commonly known as a when-issued trading market, for MoneyGram common stock will develop on or shortly before the record date for the distribution, and we expect regular way trading of MoneyGram common stock will begin on the first trading day after the distribution. We have applied to the New York Stock Exchange, Inc. to list MoneyGram common stock for trading under the symbol “MGI.”

      At its 2004 annual meeting of stockholders, Viad expects to seek stockholder approval to effect a one-for-four reverse stock split of Viad common stock, which would be effective following the spin-off.

      In reviewing this information statement, you should carefully consider the matters described under “Risk Factors” beginning on page 22.


WE ARE NOT ASKING YOU FOR A PROXY AND

YOU ARE REQUESTED NOT TO SEND US A PROXY.


      Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities, or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.


The date of this information statement is                     , 2004.

Viad first mailed this information statement to its stockholders on                     , 2004.


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QUESTIONS AND ANSWERS

What is the spin-off?

      The spin-off is the method through which Viad Corp will separate its existing businesses into two independent, publicly-traded companies:

  •  MoneyGram International, Inc., consisting of Viad’s global payment services business; and
 
  •  New Viad, consisting of Viad’s convention and event services, exhibit design and construction and travel and recreation services businesses.

See “The Spin-Off.”

Why is Viad separating MoneyGram and New Viad?

      Viad believes that the separation will allow each of MoneyGram’s and New Viad’s management to focus more clearly on each business and create promising opportunities for growth and enhanced stockholder value. Further, the separation will eliminate any competition for capital between Viad’s businesses, which MoneyGram and Viad believe will enhance the businesses’ opportunities for growth. As an independent public company, MoneyGram expects to have direct access to the capital markets, enabling it to issue equity and debt more easily and on more favorable terms. As a “pure-play” payment services company, MoneyGram expects that its ability to pursue acquisitions and joint ventures will be enhanced as a result of having a more focused equity currency. Finally, the separation will enable each of MoneyGram and New Viad to offer its key employees compensation directly linked to the performance of its business, which they expect will enhance their ability to attract, retain and motivate qualified personnel.

What steps will Viad take to complete the spin-off?

      Prior to the spin-off, Travelers Express Company, Inc., a direct, wholly-owned subsidiary of Viad Corp that currently conducts the global payments services business, will be merged with a subsidiary of MoneyGram International, Inc. and MoneyGram will make a cash payment to Viad Corp of $150 million. In addition, Viad expects that Travelers Express Company, Inc. will pay Viad cash dividends in the amount of the net income of Travelers Express Company, Inc. in 2004 to the date of the spin-off. Because we do not currently know when the distribution will occur or how Travelers Express Company, Inc.’s business will perform during that time, we cannot provide an estimate of the amount of the dividend. Viad also expects that, prior to the completion of the spin-off, Travelers Express Company, Inc. will pay Viad tax sharing payments of an aggregate of approximately $35 million.

      Viad and MoneyGram will enter into a separation and distribution agreement, a tax sharing agreement, an employee benefits agreement and an interim services agreement, each of which will govern the relationship between Viad and MoneyGram following the spin-off.

      In connection with the spin-off, Viad expects to redeem all currently outstanding shares of its preferred stock, make tender offers to purchase its outstanding public notes and subordinated debentures and seek to eliminate substantially all of the restrictive covenants in the instruments governing this indebtedness. Viad also expects that all of its outstanding commercial paper and certain other previously existing indebtedness will be repaid at or prior to the time of the spin-off.

What will I receive in the spin-off?

      For every one share of Viad common stock that you hold at the close of business on                     , 2004, you will receive one share of MoneyGram common stock, together with the attached preferred share purchase right. See “The Spin-Off.” Because you will receive one share of MoneyGram common stock for each share of Viad common stock that you hold, Viad will not need to issue or pay cash in lieu of any fractional shares of MoneyGram common stock.

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      In addition, at its 2004 annual meeting of stockholders, Viad expects to seek stockholder approval to effect a one-for-four reverse stock split of Viad common stock, which would be effective following the spin-off. If this reverse stock split is approved and effected, the number of shares of Viad common stock that you hold would be reduced by a factor of four.

What will happen to Viad and my existing Viad common stock as a result of the spin-off?

      After the spin-off, Viad will continue to own and operate its convention and event services, exhibit design and construction and travel and recreation services businesses, which we refer to as “New Viad.” Viad common stock will continue to trade on the New York Stock Exchange, Inc. under the symbol “VVI.”

      At Viad’s 2004 annual meeting of stockholders, Viad expects to seek stockholder approval for a one-for-four reverse stock split, which would be effective following the spin-off. If this reverse stock split were to be approved and effected, you would receive one share of Viad common stock for every four shares of Viad common stock that you held at the time it was effected. As soon as practicable after the reverse stock split, New Viad will notify you as to how and when to surrender your certificates representing shares of New Viad common stock. This reverse stock split would have no effect on shares of MoneyGram common stock or the one-for-one distribution ratio for the distribution.

      Information concerning this reverse stock split is contained in the proxy statement provided to you in connection with Viad’s 2004 annual meeting of stockholders. You do not need to take any action at this time in connection with the reverse stock split.

What is the accounting treatment for the spin-off?

      Despite the fact that MoneyGram International, Inc. is being spun-off from Viad Corp, for accounting purposes, due to the relative significance of MoneyGram International, Inc. to Viad Corp, MoneyGram International, Inc. will be considered the divesting entity. As a result, MoneyGram International, Inc. will be the “accounting successor” to Viad Corp, and we have presented the historical financial information of Viad Corp as the financial information for MoneyGram International, Inc. in this information statement. See “Unaudited Pro Forma Consolidated Financial Information of MoneyGram International, Inc.”

Will I be taxed on the shares of MoneyGram that I receive in the spin-off?

      Viad has received a favorable private letter ruling from the Internal Revenue Service to the effect that, for U.S. federal income tax purposes, the spin-off generally will be tax-free to Viad stockholders. See “The Spin-Off.”

      This tax ruling, however, does not address state, local or foreign tax consequences for Viad stockholders. You should consult your tax advisor as to the particular tax consequences to you of the spin-off.

What do I have to do to participate in the spin-off?

      Nothing, except to have owned Viad common stock on the record date. We intend to use a book-entry system to distribute shares of MoneyGram common stock. This means that your ownership of MoneyGram common stock will be recorded in the records maintained by our transfer agent. MoneyGram stock certificates will not be issued unless you request one. You do not need to, and should not, mail in your certificates of Viad common stock to receive your MoneyGram common stock in the spin-off.

      If the reverse stock split is approved and effected, New Viad will send you a letter of transmittal shortly after that reverse stock split becomes effective instructing you to mail your certificates representing shares of New Viad common stock to New Viad’s transfer agent. You should send these stock certificates only after you have received that letter of transmittal.

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When will the spin-off occur?

      The spin-off will be effective at 11:59 p.m. on                     , 2004.

On which exchange will MoneyGram common stock trade?

      We have applied to list the shares of MoneyGram on the New York Stock Exchange, Inc. under the symbol “MGI.”

When will I be able to buy and sell MoneyGram common stock?

      Regular trading of MoneyGram common stock will begin on                     , 2004. A form of interim trading, called when-issued trading, may occur for MoneyGram common stock on or before                     , 2004. “When-issued” trading reflects the value at which the market expects the MoneyGram common stock to trade after the spin-off. If when-issued trading develops, you will be able to buy and sell MoneyGram common stock before the spin-off. None of these trades, however, will settle until after the spin-off, when regular trading in MoneyGram common stock will begin. If the spin-off does not occur, all when-issued trading will be null and void. If when-issued trading occurs, the listing for MoneyGram common stock will be under the trading symbol “MGI” and accompanied by the letters “wi.” See “The Spin-Off — Trading between the Record Date and the Distribution Date.”

How will New Viad common stock trade?

      Viad common stock will continue to trade on a regular basis through the date of the spin-off.

      We expect that ex-distribution trading for Viad common stock may develop before the spin-off. “Ex-distribution” trading means that you may trade Viad common stock before the spin-off, but on a basis that reflects the value at which the market expects the Viad common stock to trade after the spin-off. If ex-distribution trading develops, you may buy and sell those shares before the spin-off. None of these trades, however, will settle until after the spin-off, when regular trading in Viad common stock has begun. If the spin-off does not occur, all ex-distribution trading will be null and void.

      If ex-distribution trading occurs, the listing for Viad common stock will be accompanied by the letters “wi.”

Will the MoneyGram common stock distributed be freely tradable?

      The shares of MoneyGram common stock to be distributed will be freely tradable, except for shares received by persons that may have a special relationship or affiliation with MoneyGram. See “The Spin-Off — Listing and Trading of MoneyGram and Viad Common Stock.”

What will be the relationship between New Viad and MoneyGram after the spin-off?

      After the spin-off, Viad will not own any MoneyGram common stock, MoneyGram will not own any Viad common stock, and the two companies will be separate, independent public companies. Prior to the spin-off, MoneyGram will enter into the following agreements with Viad:

  •  a separation and distribution agreement;
 
  •  an employee benefits agreement;
 
  •  an interim services agreement; and
 
  •  a tax sharing agreement.

These agreements will outline the specifics of the spin-off itself and govern the ongoing relationship between MoneyGram and Viad after the completion of the spin-off. See “Relationship between New Viad and MoneyGram.”

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Do MoneyGram or New Viad plan to pay dividends?

      Neither MoneyGram nor New Viad has made any determination as to whether it will pay any dividends after the spin-off. Any decision to pay dividends will be at the discretion of the board of directors of MoneyGram and New Viad in accordance with applicable law.

Are there risks to owning New Viad or MoneyGram common stock?

      You should read this entire information statement carefully. MoneyGram’s global payment services business and New Viad’s convention and event services, exhibit design and construction and travel and recreation services businesses are subject to general and specific business risks. In addition, the spin-off presents other risks resulting from the spin-off transaction itself, risks relating to MoneyGram being an independent public company, and risks relating to New Viad’s businesses after the spin-off. These risks are described under “Risk Factors.” We encourage you to read that section carefully when evaluating whether and for how long you should retain your Viad common stock and the MoneyGram common stock you will receive in the spin-off.

Where can Viad stockholders get more information?

      Before the spin-off, you should direct inquiries relating to the spin-off to:

  Viad Corp
       Investor Relations Department
       1850 N. Central Ave. MS# 820
       Phoenix, AZ 85004
       phone: 602-207-2681
       fax: 602-207-2832
       www.viad.com

      After the spin-off, you should direct inquiries relating to your investment in MoneyGram common stock to:

  MoneyGram International, Inc.
       Investor Relations Department
       MoneyGram National Headquarters
       1550 Utica Avenue South
       Minneapolis, MN 55416
       www.moneygram.com

and inquiries relating to your investment in New Viad common stock to:

  Viad Corp
       Investor Relations Department
       1850 N. Central Ave. MS# 820
       Phoenix, AZ 85004
       phone: 602-207-2681
       fax: 602-207-2832
       www.viad.com

      Information on the websites listed above does not constitute part of this information statement.

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TABLE OF CONTENTS

SUMMARY
RISK FACTORS
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
THE SPIN-OFF
DIVIDEND POLICY OF MONEYGRAM
CAPITALIZATION OF VIAD CORP (Accounting Predecessor to MoneyGram International, Inc.)
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF MONEYGRAM INTERNATIONAL, INC. (Accounting Successor to Viad Corp)
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA OF VIAD CORP (Accounting Predecessor to MoneyGram International, Inc.)
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF VIAD CORP (Accounting Predecessor to MoneyGram International, Inc.)
BUSINESS OF MONEYGRAM
MANAGEMENT OF MONEYGRAM
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF MONEYGRAM
DESCRIPTION OF CAPITAL STOCK OF MONEYGRAM
FINANCING ARRANGEMENTS OF MONEYGRAM
DIVIDEND POLICY OF NEW VIAD
CAPITALIZATION OF NEW VIAD
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION OF NEW VIAD
SELECTED HISTORICAL COMBINED FINANCIAL AND OTHER DATA OF NEW VIAD
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF NEW VIAD
BUSINESS OF NEW VIAD
MANAGEMENT OF NEW VIAD
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF NEW VIAD
DESCRIPTION OF CAPITAL STOCK OF NEW VIAD
FINANCING ARRANGEMENTS OF NEW VIAD
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF MONEYGRAM AND NEW VIAD
RELATIONSHIP BETWEEN NEW VIAD AND MONEYGRAM
WHERE YOU CAN FIND MORE INFORMATION ABOUT MONEYGRAM
WHERE YOU CAN FIND MORE INFORMATION ABOUT NEW VIAD
INDEX TO FINANCIAL STATEMENTS
EX-99.1: INFORMATION STATEMENT


Table of Contents

TABLE OF CONTENTS

         
Page

Summary
    1  
Risk Factors
    22  
Special Note About Forward-Looking Statements
    37  
The Spin-Off
    38  
Dividend Policy of MoneyGram
    43  
Capitalization of Viad Corp
    44  
Unaudited Pro Forma Consolidated Financial Information of MoneyGram International, Inc.  
    46  
Selected Historical Consolidated Financial and Other Data of Viad Corp
    58  
Management’s Discussion and Analysis of Financial Condition and Results of Operations of Viad Corp
    60  
Business of MoneyGram
    85  
Management of MoneyGram
    104  
Security Ownership of Certain Beneficial Owners and Management of MoneyGram
    116  
Description of Capital Stock of MoneyGram
    118  
Financing Arrangements of MoneyGram
    123  
Dividend Policy of New Viad
    124  
Capitalization of New Viad
    125  
Unaudited Pro Forma Combined Financial Information of New Viad
    126  
Selected Historical Combined Financial and Other Data of New Viad
    134  
Management’s Discussion and Analysis of Financial Condition and Results of Operations of New Viad
    136  
Business of New Viad
    146  
Management of New Viad
    161  
Security Ownership of Certain Beneficial Owners and Management of New Viad
    170  
Description of Capital Stock of New Viad
    172  
Financing Arrangements of New Viad
    177  
Indemnification of Directors and Officers of MoneyGram and New Viad
    178  
Relationship Between New Viad and MoneyGram
    180  
Where You Can Find More Information About MoneyGram
    188  
Where you Can Find More Information About New Viad
    188  
Index to Financial Statements
    F-1  

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      In this information statement, unless the context requires otherwise, (1) all references to the “spin-off” or the “distribution” are to the pro rata distribution by Viad Corp to its stockholders of all of the issued and outstanding shares of MoneyGram common stock, (2) “Viad” refers to Viad Corp, (3) “MoneyGram” refers to the businesses that are currently conducted by Travelers Express Company, Inc., as if such business were a separate, independent company and, with respect to periods following the spin-off, refers to MoneyGram International, Inc., (4) “we,” “us” and “our” refer to MoneyGram or Viad, as the context requires, and (5) “New Viad” refers to the businesses that will continue to be conducted by Viad following the spin-off and, with respect to periods following the spin-off, refers to Viad Corp. In this information statement, information concerning MoneyGram has been provided by MoneyGram and information concerning New Viad has been provided by Viad.


      MoneyGram®, AgentConnect®, DeltaWorks®, ExpressPaymentsm, Flash Pay®, GameCash®, PrimeLink®, PrimeLinkplus® and Travelers Express® are trademarks of MoneyGram. GES®, GES Canadasm, ExhibitSelectsm, INTERKIT®, GES at Your Service!®, GES Servicentersm, GES National Servicentersm, HANG:RX®, Trade Show Electrical®, Exhibitgroup/ Giltspur®, ExpoTech®, Exhibitgroup®, Maxim®, E’LANsm, EMAX®, egXpresssm, eg@worksm, LUMA2 & Design®, Royal Glacier Tours®, Red Bus designsm, Jammer Amber® and WAM! The Wireless Ambassador® are trademarks of Viad. This information statement also includes references to trademarks, service marks and trade names of other entities.

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SUMMARY

      This summary highlights selected information from this information statement concerning MoneyGram, New Viad and the spin-off. More detailed discussions of the information summarized below are contained elsewhere in this information statement. You should read this entire information statement carefully, including the risk factors and the historical and pro forma financial statements and notes to those statements included in this information statement.

The Spin-Off

      The following is a brief summary of the terms of the spin-off:

 
Distributing Company Viad Corp. After the spin-off, New Viad will not own any shares of MoneyGram common stock.
 
Distributed Company MoneyGram International, Inc., currently a wholly-owned subsidiary of Viad Corp. After the spin-off, MoneyGram will be a separate, independent public company and will not own any shares of New Viad common stock.
 
Shares to Be Distributed Approximately                    shares of MoneyGram common stock, par value $0.01 per share, together with the attached preferred share purchase rights. The shares of MoneyGram common stock to be distributed will constitute all of the outstanding shares of MoneyGram common stock immediately after the spin-off.
 
Distribution Ratio One share of MoneyGram common stock for each share of Viad common stock that you hold at the close of business on the record date for the distribution.
 
Record Date Close of business on                     , 2004
 
Distribution Date                     , 2004
 
Distribution Shortly after the distribution date, the transfer agent will distribute the shares of MoneyGram common stock by crediting these shares to book-entry accounts established by the transfer agent for persons that were Viad stockholders on the record date. You will not be required to make any payment or to surrender or exchange your Viad common stock or take any other action to receive your shares of MoneyGram common stock.
 
Under the separation and distribution agreement between MoneyGram and Viad, Viad may terminate the distribution without liability at any time prior to the time that the distribution is effected. See “The Spin-Off.”
 
Reverse Stock Split At Viad’s 2004 annual meeting of stockholders, Viad expects to seek stockholder approval for a one-for-four reverse stock split, which would be effective immediately after the spin-off. If this reverse stock split were to be approved and effected, you would receive one share of Viad common stock for every four shares of Viad common stock that you held at the time it was effected. If the reverse stock split is approved and effected, New Viad will send you a letter of transmittal shortly after that reverse stock split becomes effective instructing you to mail your certificates representing shares of New Viad common stock to New Viad’s transfer agent. You should send these stock certificates only after you have received that letter of transmittal.

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Transfer Agent Wells Fargo Shareowner Services
 
New York Stock Exchange Symbol for MoneyGram MoneyGram has applied to have MoneyGram common stock listed on the New York Stock Exchange, Inc. under the symbol “MGI.”
 
New York Stock Exchange Symbol for New Viad After the spin-off, New Viad common stock will continue to trade on the New York Stock Exchange, Inc. under the symbol “VVI.”
 
Trading Market We expect when-issued trading for MoneyGram common stock and ex-distribution trading for Viad common stock to occur before the distribution date. See “The Spin-Off — Trading between the Record Date and Distribution Date.”
 
Risk Factors The distribution and ownership of MoneyGram and Viad common stock involve various risks. See “Risk Factors.”
 
Tax Consequences Viad has received a favorable private letter ruling from the Internal Revenue Service to the effect that the spin-off qualifies as a tax-free distribution for U.S. federal income tax purposes. See “The Spin-Off — Material U.S. Federal Income Tax Consequences of the Spin-Off.”
 
Trading of MoneyGram Common
Stock
The shares of MoneyGram common stock to be distributed will be freely transferable, except for shares received by persons that may have a special relationship or affiliation with MoneyGram. See “The Spin-Off — Listing and Trading of MoneyGram and Viad Common Stock.”
 
Relationship Between New Viad and MoneyGram After the Spin-Off After the spin-off, New Viad and MoneyGram will be independent, publicly owned companies. Viad and MoneyGram have entered into several agreements to define their ongoing relationship after the spin-off. See “Relationship between New Viad and MoneyGram.”
 
Stock Options and Restricted Stock Grants At the time of the spin-off, all outstanding options to purchase Viad common stock will be adjusted to consist of options to purchase the same number of shares of New Viad common stock and options to purchase the same number of shares of MoneyGram common stock, and all holders of outstanding shares of Viad restricted stock will receive shares of MoneyGram common stock, which will also be subject to restrictions. See “Relationship between New Viad and MoneyGram — Agreements between Viad and MoneyGram — Employee Benefits Agreement.”
 
Anti-Takeover Effects New Viad would be subject to tax if an acquisition or issuance of New Viad common stock or MoneyGram common stock triggers the application of Section 355(e) of the U.S. Internal Revenue Code of 1986, as amended, or the “Code.” MoneyGram has agreed to indemnify New Viad from any tax resulting from any acquisition or issuance of MoneyGram common stock that triggers the application of Section 355(e). Thus, Section 355(e) of the Code could discourage, delay or prevent a change of control of New Viad or MoneyGram.

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In addition, some provisions of MoneyGram’s amended and restated certificate of incorporation and amended and restated by-laws and Delaware law may also have the effect of making more difficult an acquisition of control of MoneyGram in a transaction not approved by its board of directors. See “Relationship between New Viad and MoneyGram” and “Description of Capital Stock of MoneyGram.”
 
Prior to the spin-off, MoneyGram’s board of directors expects to adopt a rights agreement, with Wells Fargo Bank, N.A. as rights agent, to protect its stockholders from coercive or otherwise unfair takeover tactics. The preferred share purchase rights issuable under the rights agreement will be attached to the shares of MoneyGram common stock that you receive in the spin-off. See “Description of Capital Stock of MoneyGram — The Rights Agreement.”
 
Similarly, some provisions of Viad’s amended and restated certificate of incorporation and by-laws and Delaware law, as well as the existing rights agreement between Viad and Wells Fargo Bank Minnesota, N.A., as rights agent, may have the effect of making more difficult an acquisition of control of New Viad in a transaction not approved by Viad’s board of directors. See “Description of Capital Stock of New Viad.”

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MoneyGram International, Inc.

      MoneyGram is a leading global payment services company. Our mission is to provide consumers and businesses with affordable, reliable and convenient payment services worldwide. We offer our products and services to consumers through our network of agents and our financial institution customers. The diverse array of products and services we offer enables consumers, most of whom are not fully served by traditional financial institutions, to make payments and to transfer money around the world, helping them meet the financial demands of their daily lives.

      Our business, which is conducted through Travelers Express Company, Inc. and its subsidiaries, including MoneyGram Payment Systems, Inc., has been in operation since 1940. In the last six years, we have added important new products and services and have expanded our business domestically and internationally. Following the spin-off, our business will consist of two operating segments: our global funds transfer segment and our payment services segment. Our global funds transfer segment provides consumers with domestic and international money transfers, money orders and bill payment services through our network of agents. Our payment services segment provides official check outsourcing services to financial institutions and related payment solutions to businesses. In both operating segments, our primary sources of revenue are transaction fees and revenue generated from our investment of the funds underlying the payment instruments from the time those funds are remitted to us until the transaction is completed.

      Our primary channel of distribution to consumers of our global funds transfer segment is a worldwide network of agents currently consisting of more than 100,000 locations. Currently, more than 63,000 locations around the world offer our money transfer services and more than 63,500 locations in the United States offer our money orders. Our payment services segment provides official check services through more than 16,000 branch locations of our financial institution customers. Based on the number of our transactions in 2003, we are:

  •  a leading global provider of consumer money transfers, offering our MoneyGram-branded money transfer services in approximately 160 countries around the world;
 
  •  the largest issuer of money orders in the United States, with approximately 295 million money orders issued;
 
  •  the second largest provider of urgent bill payment services in the United States; and
 
  •  the second largest provider of official check outsourcing services to financial institutions in the United States.

      From 1997 through 2003, our business has grown through:

  •  our June 1998 acquisition of MoneyGram Payment Systems, Inc., which today forms the foundation of our consumer money transfer business and has grown from serving approximately 105 countries in 1997 to approximately 160 countries in 2003;
 
  •  increasing the number of consumer money transfer agent locations from approximately 21,000 in 1997 to over 63,000 in 2003;
 
  •  increasing the number of money order agent and financial institution locations from approximately 41,000 in 1997 to over 63,500 in 2003; and
 
  •  increasing our average investable balances, primarily attributable to our official check outsourcing services, from approximately $1.6 billion in 1997 to approximately $7.0 billion in 2003.
 
MoneyGram Competitive Advantages

      We believe that our success results from a combination of key assets and competencies, including:

  •  Strong Value Proposition. We believe that our products and services provide consumers, as well as our agents and financial institution customers, with a recognizable value. We offer consumer money transfer and urgent bill payment services that we believe are generally less expensive than those offered by our primary competitor, First Data Corporation and its subsidiaries, including Western Union. Our services

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  include features that we believe are not typically found with smaller, niche competitors, including delivery in as little as ten minutes, 24 hours a day, seven days a week customer service and receiver choice of delivery location. Our official check outsourcing services provide our financial institution customers with a suite of services, including imaged checks and branch level and internet reporting of activity, generally at a lower cost than the financial institutions would incur if they were to perform these services themselves.
 
 
  •  Advanced Proprietary Technology. We believe that our advanced proprietary technology in each of our operating segments gives us a significant competitive advantage. The technology that we use in our central processing functions is both flexible and scalable and can support increased transaction volume and continued innovation without requiring fundamental change. In addition, our flexible point-of-sale technology options provide our agents with a variety of means to efficiently provide money transfers, bill payment services and money orders.
 
 
  •  Broad Consumer Recognition and Consumer Loyalty. We believe that our key brands — MoneyGram and Travelers Express — are well-known and established, and that the primary consumers of our products and services associate our brands with quality payment services at an affordable price. As a result, we believe that these consumers are loyal to our products and services.
 
 
  •  Extensive Domestic and International Retail Agent Network. Currently, we offer money orders through over 63,500 retail agent and bank locations in the United States, and offer money transfer services through a network of over 63,000 agent locations in approximately 160 countries. Our money transfer agent locations in the United States are focused in ethnic neighborhoods, allowing us to compete effectively for money transfers that are originated in the United States, while our international agent locations include key agents in high-volume markets around the world, including many in remote areas not well served by traditional financial institutions. International money transfers, including money transfers that originate outside of the United States, are a rapidly growing part of the money transfer industry and we believe that our international agent locations provide us with the ability to take advantage of this growth.
 
 
  •  Strong Relationships with Agents and Financial Institution Customers. In our global funds transfer segment, we have long-term contracts with some of the largest and most recognized retail chains, financial institutions and post offices in the world, including: Wal-Mart Stores, Albertson’s, Safeway, Publix, Harris Teeter, Circle K, Ace Cash Express, Bancomer, the United Kingdom Post Office, the Canadian Post Office and the Italian Postal Service. Customers of our payment systems segment include a variety of U.S. financial institutions, such as major retail banks, regional banks, community banks, savings banks and credit unions, including Wachovia, U.S. Bancorp, Compass Bankshares, Huntington, Branch Banking and Trust Company (or BB&T) and Charter One Bank.
 
MoneyGram Growth Strategies

      Our growth strategies include:

  •  Continuing to Provide Consumers, Agents and Financial Institution Customers with a Strong Value Proposition. We believe that the products and services we offer provide consumers, agents and financial institution customers with recognizable value. We intend to continue to capitalize on this value proposition by developing and implementing marketing and other communication programs targeting consumers and businesses that reinforce this value proposition. In addition, we will continue to implement multiple pricing strategies to customize our pricing for different send and receive corridors in response to changes in competition, and we will continue to introduce our multi-currency system, which allows consumers to know the exact amount of currency that will be available for delivery. We also intend to develop loyalty programs that reward our most productive and loyal consumers and agents.
 
  •  Expanding Our Distribution Channels and Creating New Delivery Methods. We intend to take advantage of the growth potential that we believe exists in our industry by expanding our distribution channels, creating new delivery methods and targeting the rapidly growing immigrant populations in host

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  countries. We plan to maintain and expand our existing relationships with agents and enter into relationships with new agents by expanding our international agent base and our relationships with businesses that have not traditionally offered money transfer services through the use of technologies, such as our FormFree system. We intend to support our international expansion by increased staffing at our London office and our nine regional offices around the world. We also believe that there are opportunities to increase our distribution channels and enhance delivery methods by increasing the number of billers that participate in our urgent bill payment services, and in new ways, such as offering our products and services through the internet, ATM networks and self-service kiosks.
 
  •  Delivering New Payment Products and Related Financial Services. We closely monitor consumer trends, and intend to develop new payment products and related financial services to meet consumer needs. The products that we expect to offer in the future are generally consumer focused and are intended to take advantage of existing payment networks such as the automated clearing house and debit networks. We expect these products to include a suite of stored-value card and other electronic payment products.
 
  •  Continuing to Deliver an Integrated, Reliable, Low-Cost Service Platform to Our Consumers, Agents and Financial Institution Customers. We believe that we can increase our transaction volume by making it easier for our agents, financial institution customers and consumers to do business with us. We intend to continue to provide regular enhancements to our point-of-sale platforms that simplify transactions while increasing speed for both the consumer and agent. Additionally, we will seek ways to improve our settlement and reporting mechanisms to our agents and financial institution customers. We also intend to support our consumer value proposition by further reducing our delivery costs by focusing on agent automation and improving our operational efficiency.
 
  •  Pursuing Strategic Acquisitions and Alliances. We intend to actively evaluate strategic acquisitions and alliances and aggressively pursue those opportunities that we believe further our strategic goals. We plan to pursue opportunities that would allow us to acquire new or complementary products and services, expand our distribution channels, broaden our market presence or increase our market penetration.
 
  •  Continuing to Recruit, Retain and Reward Solution-Oriented Employees Who Share Our Corporate Values. We intend to continue recruiting, retaining and rewarding employees and executives at all levels who have the experience and talent necessary to implement our growth strategies. These employees must share our corporate values: respect, courage, passion, integrity and teamwork. We plan to accomplish this goal by actively developing the skills of our employees, creating career opportunities, providing competitive compensation and implementing employee communication programs that celebrate success and recognize contributors and leaders.
 
Risks Relating to MoneyGram

      There are a number of risks associated with an investment in MoneyGram common stock, including:

  •  Our financial condition and results of operation could be adversely affected by fluctuations in interest rates.
 
  •  Our business may require cash in amounts greater than the amount of available credit facilities and liquid assets that we have on hand at a particular time, and if we were forced to ultimately liquidate assets or secure other financing as a result of unexpected liquidity needs, our earnings could be reduced.
 
  •  We are subject to credit risks related to our investment portfolio and our use of derivatives.
 
  •  If our credit ratings were to be downgraded, or if the ratings agencies were to indicate that a lowering may occur, our business would be harmed.
 
  •  We face intense competition, and if we are unable to continue to compete effectively, our business, financial condition and results of operation would be adversely affected.
 
  •  If we lost key retail agents in our global funds transfer segment, our business and results of operations could be adversely affected.
 
  •  If we lost large financial institution customers in our payment systems segment, our business and results of operation could be adversely affected.

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      There are also a number of risks associated with the spin-off, including:

  •  The historical financial information of MoneyGram may not be representative of its results as a separate, independent company.
 
  •  If the spin-off is determined to be a taxable transaction, you could be subject to tax on the value of the MoneyGram common stock you receive in the distribution.
 
  •  If MoneyGram takes actions that cause the spin-off to fail to qualify as a tax-free transaction, it will be required to indemnify New Viad for any resulting taxes and related losses.
 
  •  The ability of MoneyGram to engage in financings and acquisitions and other strategic transactions using equity securities is subject to limitations because of the U.S. federal income tax requirements for a tax-free distribution.
 
  •  MoneyGram could incur significant tax liability if New Viad fails to pay the tax liabilities attributable to it under the tax sharing agreement.

      For more information on these and other risks that we face, including risks relating to our development of new products and services, agent credit and fraud risk, operation of our computer systems and data centers, the amount of money that we move, the anticipated terms of our credit agreements, our expansion plans, our intellectual property, our reliance on third party vendors, litigation that we may face, affecting the payment systems industry generally, challenges of the spin-off as a fraudulent transfer or a legal dividend, potential conflicts of interests involving our management and directors and relating to securities markets and ownership of MoneyGram common stock, see “Risk Factors” beginning on page 22 of this information statement.

     History of MoneyGram

      The businesses conducted by MoneyGram date to 1940 when Travelers Express Company, Inc. began offering what are now known as money orders. Travelers Express Company, Inc. was acquired by a predecessor of Viad Corp in 1965. In 1998, Travelers Express Company, Inc. acquired MoneyGram Payment Systems, Inc., a provider of worldwide money transfers.

      Currently, both MoneyGram International, Inc., which was incorporated in Delaware in December 2003 in connection with the spin-off, and Travelers Express Company, Inc. are direct, wholly owned subsidiaries of Viad. Prior to the completion of the spin-off, Travelers Express Company, Inc. will be merged with a direct, wholly owned subsidiary of MoneyGram International, Inc., with Travelers Express Company, Inc. as the surviving corporation. As a result of the merger, Travelers Express Company, Inc. will become a direct, wholly owned subsidiary of MoneyGram International, Inc.

      *          *          *

      MoneyGram’s principal executive offices are located at 1550 Utica Avenue South, Minneapolis, Minnesota 55416, and our telephone number is (952) 591-3000. Our internet address is www.moneygram.com. The information contained on our website, or connected to that website, is not a part of this information statement or the registration statement of which this information statement is a part. After the registration statement of which this information statement is a part becomes effective, MoneyGram will make available free of charge on www.moneygram.com its annual, quarterly and current reports and amendments to those reports, as soon as reasonably practicable after it electronically files those reports with, or furnishes them to, the Securities and Exchange Commission.

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New Viad

      Following the spin-off, Viad will continue to be a leading provider of high-quality services that address the needs of trade show organizers and exhibitors, as well as travel and recreation services in the United States and Canada. These businesses, which we refer to as “New Viad,” will be operated through three segments:

  •  GES — GES Exposition Services, Inc., GES Exposition Services (Canada) Limited and their respective subsidiaries, which we collectively refer to as “GES,” provide various convention and trade show services throughout North America, such as freight handling, transportation, installation, dismantling and management services to trade show management companies, trade associations and exhibitors. GES also provides certain exhibit design and construction services;
 
  •  Exhibitgroup — the Exhibitgroup/ Giltspur division of New Viad, David H. Gibson Company, Inc., Giltspur Exhibits of Canada, Inc., Viad Holding GmbH, Viad Services Companies Limited and their respective subsidiaries, which we collectively refer to as “Exhibitgroup,” specialize in design, construction, installation and warehousing of convention and trade show exhibits and displays, primarily for corporate customers in North America, and, to a lesser extent, in Europe. Exhibitgroup also provides various trade show services to its corporate customers; and
 
  •  Travel and Recreation Services — Brewster Transport Company Limited, Brewster Tours Inc., and Brewster Inc., which we collectively refer to as “Brewster,” and Glacier Park, Inc., and Waterton Transport Company, Limited, which we collectively refer to as “Glacier Park,” provide tour and charter operations in the Canadian Rockies and operate historic lodges and food services in certain national parks in North America.

      GES is a leading provider of a diverse array of services in connection with the planning, design and execution of conventions, trade shows and special events. The core customers of GES are trade show organizers and exhibitors at the trade shows of these organizers, which are required by the organizer to use GES for certain services. GES also provides services to exhibitors on an elective basis. GES provides services at an estimated 2,000 trade shows and events annually, including some of the most visible and influential events in the trade show industry. GES’s principal services include trade show layout and design, logistics planning and show execution. GES was the primary service provider for seven of the top ten trade shows (based on square footage) in North America in 2002, and was the primary service provider for more than a third of the top 200 trade shows (based on square footage) in North America during 2000 through 2002.

      Exhibitgroup is one of the most experienced and largest exhibit designers and fabricators in the world, with an over 60-year operating history of providing custom exhibit design and construction and related services to large companies. Exhibitgroup is also a highly-specialized exhibit program manager, working closely with its core client base of Fortune 1000 and large private company clients with one-stop management and production of an entire exhibit campaign over a series of trade shows or events. Exhibitgroup’s core competencies include three-dimensional design, custom construction, exhibitor show program management, installation and dismantle services and innovative technology. Exhibitgroup has won over 50 design awards since 1997, including 28 prestigious “Best of Show” awards for exhibits that its clients have presented at particular trade shows.

      Brewster provides a variety of tourism services in the Rocky Mountains of southern Alberta, Canada, including two world-class attractions, the Banff Gondola and the Columbia Icefield, as well as “snocoach” tours, motorcoach services, charter and sightseeing services, hotel operations and travel agencies in Alberta, Canada. Brewster’s services also include package tour agency operations for destinations throughout Canada.

      Glacier Park is the largest concessionaire in Glacier National Park in Montana. Glacier Park operates, among other things, four historic lodges and three motor inns in and around Glacier National Park and Waterton Lakes National Park in southern Alberta, Canada.

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New Viad Competitive Advantages

      We believe that a number of competitive advantages distinguish us from competitors in our various businesses, including:

  •  Leading Market Position. Each of GES and Exhibitgroup occupies a leading position in its industry. We believe that these leadership positions are due largely to strong, experienced and talented personnel, equipment resources, innovative technology and process improvements. These capabilities allow GES and Exhibitgroup to provide what we believe to be top quality products and services at competitive rates and be recognized as world-class providers in their respective marketplaces.
 
  •  Ability to Offer an Integrated Suite of Service Offerings. The distinct yet synergistic services provided by GES and Exhibitgroup allow us to service virtually all needs of exhibit and trade show customers. Exhibitgroup provides one-stop shopping for exhibit program clients, providing all exhibit-related services required in the context of a client’s overall marketing strategy. GES is similarly positioned to address all the needs of the trade show, convention and event customer, from the planning stages to all aspects of execution of a successful trade show.
 
  •  Strong Customer Relationships. GES and Exhibitgroup pride themselves on their level of customer service, which has allowed them to develop long-standing relationships with a wide range of customers in various industries and has resulted in a high percentage of contract renewals. Our highly skilled and experienced team of sales, design and service professionals work hard to understand and bring to life the goals of both long-standing and new design clients and trade show customers.
 
  •  Well-Positioned in Major Trade Show Markets. GES and Exhibitgroup have a well-established presence in North America’s most active convention and event services markets, as well as production facilities and warehouses in strategic locations throughout North America. This geographic presence allows GES and Exhibitgroup to efficiently and simultaneously service customers throughout the United States. Exhibitgroup also has a strong presence in certain markets outside North America, with European operations and strategic global alliances that distinguish Exhibitgroup from its competitors around the world. In addition, GES is the leading participant in the Las Vegas trade show market, which is the premier venue for national trade shows. GES is headquartered and has extensive facilities in Las Vegas, Nevada.
 
  •  Technology Leadership. We believe that both Exhibitgroup and GES are industry leaders and innovators in technologies used to address customers’ needs. From design software to logistics and construction technologies, Exhibitgroup and GES’s technologies are often benchmarks in their respective industries.
 
  •  Operations in Internationally Recognized Travel and Recreation Sites. We believe that Glacier National Park and the Canadian Rockies are internationally recognized as vacation destinations. Glacier National Park is regarded as one of the “jewels” of the U.S. National Park system. The Columbia Icefield and the Canadian Rockies in general are also internationally recognized for their spectacular landscapes and unique tourism opportunities.
 
New Viad Growth Strategies

      Our strategy is to enhance our leadership role in our key markets. To achieve this goal, we have several key business strategies:

  •  Maximizing Revenue Opportunities Through Enhanced Service Offerings and Geographic Expansion. GES intends to drive revenue growth by increasing sales of elective exhibitor services through its Exhibitor Value Program. GES and Exhibitgroup intend to expand their presence in high-growth geographic areas and industries for which trade shows and events are an important marketing tool. Exhibitgroup intends to increase its international revenue by expanding its network of global strategic alliances to service clients worldwide.
 
  •  Leveraging the Relationship between GES and Exhibitgroup. Although GES and Exhibitgroup are distinct businesses, we plan to leverage the core competencies of each to provide customers with additional value, including capitalizing on the growth in corporate specialty events by offering integrated

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  services from GES and Exhibitgroup to the large companies that sponsor these events. We plan to optimize the unique talents of these businesses, with Exhibitgroup designing the event theme and exhibits and GES providing general contractor services to produce the corporate event. For example, in the 2003 Ford Centennial Celebration, Exhibitgroup provided its design expertise to bring the event theme to life and to design specific exhibits and GES acted as the general services contractor to stage the event.
 
  •  Increasing Efficiencies. To increase value to customers and stockholders, we intend to continue centralizing operations. During 2003, Exhibitgroup consolidated production facilities and certain accounting and finance functions, and strategically relocated sales and design offices. GES has developed, and continues to train its staff in, best practice processes for all key elements of show execution, including labor planning, equipment distribution, product delivery and freight management. The end result of these best practices is higher service levels to the trade show organizer and exhibitors and more effective cost controls.
 
  •  Making Selective Investments and Focused Acquisitions. We intend to make selective investments in projects, including technology, and to make acquisitions that we believe will improve financial returns, enhance our range of capabilities and improve client service levels. We plan to refine our planning, inventory management and billing systems, as well as the internal systems that support our operations.

     Risks Relating to New Viad

      There are a number of risks associated with an investment in New Viad common stock, including:

  •  Our businesses and operating results are adversely affected by deterioration in general economic conditions.
 
  •  Our businesses are adversely affected by disruptions in the travel industry, particularly those adversely affecting the hotel and airline industries.
 
  •  Our businesses are seasonal, which causes our results of operations to fluctuate and makes our results of operations particularly sensitive to adverse events during peak periods.
 
  •  Trade show rotation may impact our overall profitability and makes comparisons between periods difficult.
 
  •  Transportation disruptions could adversely affect our business and operating results.
 
  •  Union-represented labor creates an increased risk of work stoppages and higher labor costs.

      There are also a number of risks associated with the spin-off, including:

  •  The historical financial information of New Viad may not be representative of its results as a separate, independent company.
 
  •  If the spin-off is determined to be a taxable transaction, New Viad could be subject to material amounts of taxes.
 
  •  If New Viad takes actions that cause the spin-off to fail to qualify as a tax-free transaction, it will be required to indemnify MoneyGram for any resulting taxes and related losses.
 
  •  The ability of New Viad to engage in financings and acquisitions and other strategic transactions using equity securities is subject to limitations because of the U.S. federal income tax requirements for a tax-free distribution.
 
  •  New Viad could incur significant tax liability if MoneyGram fails to pay the tax liabilities attributable to it under the tax sharing agreement.

      For more information on these and other risks that we face, including risks relating to competition, the loss of large customers, the relationship driven nature or our businesses, liabilities relating to prior and discontinued operations, our credit ratings, our concession agreement for Glacier Park, challenges of the spin-off as a fraudulent transfer or a legal dividend, potential conflicts of interests involving our management and directors and

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relating to securities markets and ownership of New Viad common stock, see “Risk Factors” beginning on page 22 of this information statement.
 
History of New Viad

      Viad Corp has a corporate history dating to 1926 when its predecessor, The Greyhound Corporation, was formed. The Greyhound Corporation was the largest bus company in the world and began a series of diversifying acquisitions in the 1960’s that continued through the 1980’s. These acquisitions included predecessors to both MoneyGram and New Viad, as well as food, and consumer products and airport services businesses.

      In the late 1980’s, Viad Corp separated its bus transportation operations from its other businesses. In connection with this separation, The Dial Corp was formed in December 1991. In 1996, The Dial Corp changed its name to Viad Corp in connection with the disposition of its consumer products businesses.

*     *     *

      New Viad’s principal executive offices will continue to be located at 1850 North Central Avenue, Phoenix, Arizona 85004 with the telephone number of (602) 207-4000. New Viad’s internet address will remain as www.viad.com. New Viad will make available free of charge on www.viad.com its annual, quarterly and current reports, and amendments to those reports, as soon as reasonably practicable after it electronically files this material with, or furnishes it to, the SEC. The information contained on New Viad’s website, or connected to that site, is not a part of this information statement or the registration statement of which this information statement forms a part.

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Relationship between New Viad and MoneyGram

      Prior to the spin-off, New Viad and MoneyGram will enter into a number of agreements that will govern their relationship following the spin-off. These agreements include a separation and distribution agreement, a tax sharing agreement and an employee benefits agreement. The separation and distribution agreement will provide for the principal corporate transactions required to effect the separation of MoneyGram from Viad and the spin-off and other matters governing their relationship following the spin-off. Under the separation and distribution agreement, among other things:

  •  assets, personnel and liabilities currently associated with Viad’s payment services business and other specified liabilities will be allocated to MoneyGram, while all other assets, personnel and liabilities will be allocated to New Viad;
 
  •  Viad agrees to conduct the offers to purchase its outstanding medium-term notes and subordinated debentures, to redeem its outstanding preferred stock and to repay its outstanding commercial paper;
 
  •  Viad agrees to make the distribution on the terms described in this information statement; and
 
  •  MoneyGram indemnifies New Viad against liabilities related to MoneyGram’s business and other specified liabilities, and New Viad indemnifies MoneyGram against liabilities related to New Viad’s business.

      The employee benefits agreement will provide for the allocation of employees, employee benefit plans and associated liabilities and related assets between MoneyGram and Viad. Generally, Viad will remain responsible for compensation and benefit liabilities for employees and former employees assigned to it, and MoneyGram will be responsible for compensation and benefit liabilities for employees and former employees assigned to it. However, MoneyGram will assume specified liabilities relating to employees and former employees of Viad under its primary defined benefit pension plan, supplemental executive retirement plans, deferred compensation plans and specified executive medical benefits.

      The tax sharing agreement will provide for the allocation between Viad and MoneyGram of federal, state, local and foreign tax liabilities for all periods through the spin-off. In general, the tax sharing agreement provides that MoneyGram will be liable for all federal, state, local and foreign tax liabilities, including any such liabilities resulting from the audit of or other adjustment to previously filed tax returns, that are attributable to the business of MoneyGram for all periods through the spin-off, and Viad will be responsible for all other of these taxes through the spin-off. In addition, prior to the spin-off, Travelers Express Company, Inc. will make tax sharing payments of an aggregate of approximately $35 million in respect of certain alternative minimum tax credits and general business tax credits. MoneyGram and New Viad will also enter into an agreement governing the interim services that New Viad will provide to MoneyGram and MoneyGram will provide to New Viad. For a more complete description of the terms of these agreements, see “Relationship between New Viad and MoneyGram — Agreements Between New Viad and MoneyGram.”

Actions Prior to the Spin-Off

      Immediately prior to the spin-off, Travelers Express Company, Inc., a wholly-owned subsidiary of Viad Corp, will be merged with a subsidiary of MoneyGram International, Inc., and MoneyGram International, Inc. will make a cash payment to Viad Corp of $150 million. The amount of this payment was determined based on review of historical cash flows, and the near-term and medium-term expected cash flows of MoneyGram and New Viad subsequent to the spin-off, and is intended to ensure that each of Viad and MoneyGram are adequately capitalized and has the appropriate level of cash resources at the time of the separation, while obtaining an investment grade long term credit rating for MoneyGram. In addition, prior to the spin-off, Travelers Express Company, Inc. will pay Viad cash dividends in the amount of the net income of Travelers Express Company, Inc. in 2004 to the date of the spin-off. Because we do not currently know when the distribution will occur or how Travelers Express Company, Inc.’s business will perform during that time, we cannot provide an estimate of the amount of the dividend. Viad also expects that, prior to the completion of the spin-off, Travelers Express Company, Inc. will pay Viad tax sharing payments of approximately an aggregate of $35 million.

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      In connection with the spin-off, Viad expects to redeem all currently outstanding shares of its preferred stock, make tender offers to purchase its outstanding public notes and subordinated debentures and seek to eliminate substantially all of the restrictive covenants in the instruments governing that indebtedness. See “Relationship between New Viad and MoneyGram — Agreements between New Viad and MoneyGram — Separation and Distribution Agreement.”

      In addition, in connection with the spin-off, Viad expects to repay all of its outstanding commercial paper, and each of MoneyGram and New Viad expect to enter into new credit facilities. See “Financing Arrangements of MoneyGram” and “Financing Arrangements of New Viad”.

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Summary Unaudited Pro Forma Consolidated Financial and Other Data

of MoneyGram International, Inc.
(Accounting Successor to Viad Corp)

      The summary unaudited pro forma consolidated financial data for MoneyGram International, Inc. (accounting successor to Viad Corp) set forth below is derived from the unaudited pro forma consolidated financial information of MoneyGram International, Inc. (accounting successor to Viad Corp) included elsewhere in this information statement. Notwithstanding the legal form of the spin-off, because of the relative significance of MoneyGram International, Inc. to Viad Corp, MoneyGram International, Inc. will be considered the divesting entity and treated as the “accounting successor” to Viad Corp for financial reporting purposes in accordance with Emerging Issues Task Force (EITF) Issue No. 02-11, “Accounting for Reverse Spin-offs” (EITF No. 02-11).

      The following summary unaudited pro forma consolidated financial data at and for the years ended December 31, 2003, 2002 and 2001 reflects the effects of the anticipated Viad preferred stock redemption, debt refinancings and the spin-off. The capital structure that existed when the businesses that will be held by MoneyGram International, Inc. operated as part of Viad Corp is not relevant because it does not reflect MoneyGram International, Inc.’s expected future capital structure as a separate, independent public company. The basic weighted average shares outstanding were calculated by applying the distribution ratio (one share of MoneyGram common stock for every one share of Viad common stock) to Viad Corp’s basic weighted average shares outstanding during each period.

      The pro forma data does not represent what MoneyGram International, Inc.’s financial position or results of operations would have been had MoneyGram International, Inc. operated as a separate, independent public company, nor does the pro forma data give effect to any events other than those discussed in the related notes. The pro forma data also does not project MoneyGram International, Inc.’s financial position or results of operations at any future date or for any future period.

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Year ended December 31,

2003 2002 2001



(in thousands, except per share data)
Statement of Income Data:
                       
Revenues:
                       
Payment services transaction fees
  $ 483,404     $ 431,564     $ 393,093  
Payment services investment income
    318,221       342,055       313,432  
     
     
     
 
Total revenues
  $ 801,625     $ 773,619     $ 706,525  
     
     
     
 
Income from continuing operations(1),(2)
  $ 92,557     $ 87,347     $ 85,956  
     
     
     
 
Unaudited pro forma diluted income from continuing operations per common share(3)
  $ 1.07     $ 1.01     $ 1.00  
     
     
     
 
Average outstanding and potentially dilutive common shares(4)
    86,619       86,716       86,322  
     
     
     
 
Unaudited pro forma basic income from continuing operations per common share(3)
  $ 1.07     $ 1.01     $ 1.01  
     
     
     
 
Average outstanding common shares
    86,223       86,178       85,503  
     
     
     
 
Other Data:
                       
Average investable balances
  $ 6,979,248                  
Approximate number of countries served
    160                  
Approximate number of global funds transfer agent locations
    100,000                  
 
Balance Sheet Data (at end of period):
                       
Total assets(1)
  $ 8,458,377                  
Total debt
    150,848                  
Stockholder’s equity(1)
    491,306                  


(1)  Management anticipates that Viad Corp will incur a one-time pre-tax loss on the retirement of debt and redemption of preferred stock, currently estimated to be $23.0 million, in connection with the spin-off. Further, management expects that one-time pre-tax expenses of approximately $18.0 million, primarily related to investment banking, legal and accounting fees, will be required to complete the spin-off. Of these expenses, approximately $4.0 million is expected to be incurred by MoneyGram International, Inc. and $14.0 million is expected to be incurred by New Viad. These nonrecurring items have not been reflected in the pro forma consolidated statements of income; however, the pro forma consolidated balance sheet has been adjusted to reflect these nonrecurring items.
 
(2)  For an explanation of the pro forma adjustments included in the above information, refer to the Unaudited Pro Forma Consolidated Statements of Income of MoneyGram International, Inc. (Accounting Successor to Viad Corp) included elsewhere in this information statement.
 
(3)  The computation of unaudited pro forma income from continuing operations per common share for the periods presented is based upon Viad Corp’s historical weighted average number of shares of common stock outstanding.
 
(4)  The diluted weighted average common shares is based on Viad Corp’s historical outstanding and potentially dilutive securities for purposes of computing unaudited pro forma diluted income from continuing operations per common share.

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Summary Historical Consolidated Financial and Other Data of

Viad Corp
(Accounting Predecessor to MoneyGram International, Inc.)

      The summary historical financial data of Viad Corp (accounting predecessor to MoneyGram International, Inc.) is derived from audited consolidated financial statements of Viad Corp. Notwithstanding the legal form of the spin-off, because of the relative significance of MoneyGram International, Inc. to Viad Corp, MoneyGram International, Inc. will be considered the divesting entity and treated as the “accounting successor” to Viad Corp for financial reporting purposes in accordance with EITF No. 02-11. As such, the information presented in the following summary for MoneyGram International, Inc. (accounting successor to Viad Corp) generally reflects financial and other information previously filed with the SEC by Viad Corp. If the spin-off were to occur, MoneyGram International, Inc. would report the historical results of operations (subject to certain adjustments) of New Viad as discontinued operations in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Pursuant to SFAS No. 144; however, this presentation is not permitted until the date of the spin-off.

      The statement of income data for the years ended December 31, 2003, 2002 and 2001 and the balance sheet data at December 31, 2003 and 2002 set forth below are derived from the audited consolidated financial statements of Viad Corp included elsewhere in this information statement. The balance sheet data at December 31, 2001 set forth below is derived from audited consolidated financial statements of Viad Corp not included in this information statement.

      The summary historical consolidated financial data is not necessarily indicative of the results of operations or financial position that would have occurred if MoneyGram International, Inc. had been a separate, independent company during the periods presented, nor is it indicative of MoneyGram International, Inc.’s future performance. This historical data should be read together with the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Viad Corp (Accounting Predecessor to MoneyGram International, Inc.)” and Viad Corp’s consolidated financial statements and related notes included elsewhere in this information statement.

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Year ended December 31,

2003 2002 2001



(in thousands, except per share data)
Statement of Income Data:
                       
Revenues
  $ 1,572,093     $ 1,618,105     $ 1,652,022  
     
     
     
 
Income from continuing operations(1)(2)
  $ 112,358     $ 95,625     $ 46,488  
Income from discontinued operations(3)
    1,544              
Changes in accounting principles(4)
          (37,739 )     (1,884 )
     
     
     
 
Net income
  $ 113,902     $ 57,886     $ 44,604  
     
     
     
 
Diluted income per common share
                       
Continuing operations(1)(2)
  $ 1.29     $ 1.09     $ 0.52  
Discontinued operations(3)
    0.02              
Changes in accounting principles(4)
          (0.44 )     (0.02 )
     
     
     
 
Diluted net income per common share
  $ 1.31     $ 0.65     $ 0.50  
     
     
     
 
Average outstanding and potentially dilutive common shares
    86,619       86,716       86,322  
     
     
     
 
Basic income per common share
                       
Continuing operations(1)(2)
  $ 1.29     $ 1.10     $ 0.53  
Discontinued operations(3)
    0.02              
Changes in accounting principles(4)
          (0.44 )     (0.02 )
     
     
     
 
Basic net income per common share
  $ 1.31     $ 0.66     $ 0.51  
     
     
     
 
Average outstanding common shares
    86,223       86,178       85,503  
     
     
     
 
Dividends declared per common share
  $ 0.36     $ 0.36     $ 0.36  
     
     
     
 
Balance Sheet Data (at end of period):
                       
Total assets
  $ 9,222,155     $ 9,675,429     $ 8,375,299  
Total debt
    251,443       361,657       396,828  
$4.75 Redeemable preferred stock subject to mandatory redemption
    6,733       6,704       6,679  
Common stock and other equity
    849,837       677,894       714,481  


(1)  Includes investment impairment losses and interest income adjustments (after-tax) of $19.5 million, or $0.23 per diluted share, in 2003, $18.2 million, or $0.21 per diluted share, in 2002 and $4.6 million, or $0.06 per diluted share, in 2001. Also includes restructuring charges, recoveries and other items (after-tax) of $3.0 million income, or $0.03 per diluted share, in 2003, $12.3 million expense, or $0.14 per diluted share, in 2002 and $58.9 million expense, or $0.68 per diluted share, in 2001.
 
(2)  In January 2002, Viad Corp adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 specifies that goodwill and certain intangible assets with indefinite lives no longer be amortized but instead be subject to periodic impairment testing. Excluding the amortization of previously expensed goodwill and certain intangible assets, income from continuing operations and corresponding diluted income per share would have been $60.7 million ($0.69 diluted income per share) in 2001.
 
(3)  If the spin-off were to occur, MoneyGram International, Inc. (Accounting Successor to Viad Corp) would record the historical results of operations (subject to certain adjustments) of New Viad in discontinued operations upon the completion of the spin-off pursuant to SFAS No. 144, “Accounting for the Impairment or Disposal of Long- Lived Assets.”
 
(4)  In accordance with the adoption of SFAS No. 142, Viad Corp completed the transitional impairment test for goodwill during 2002 and concluded that a transitional impairment loss of $40.0 million ($37.7 million after-

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tax) should be recognized related to goodwill at the Exhibitgroup reporting unit of the Convention and Event Services segment. Effective in the second quarter of 2001, Viad adopted the provisions of EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets” (EITF No. 99-20). Accordingly, Viad Corp recorded a cumulative effect of a change in accounting principle of $3.0 million ($1.9 million after-tax).

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Summary Unaudited Pro Forma Combined Financial and Other Data of New Viad

      The summary unaudited pro forma combined financial data for New Viad set forth below is derived from the unaudited pro forma combined financial information of New Viad included elsewhere in this information statement.

      The following summary unaudited pro forma combined financial data at and for the years ended December 31, 2003, 2002 and 2001 reflects the effects of the anticipated Viad preferred stock redemption, debt refinancing and spin-off. The pro forma data does not represent what New Viad’s financial position or results of operations would have been had New Viad operated as a separate, independent public company, nor does the pro forma data give effect to any events other than those discussed in the related notes. The pro forma data also does not project New Viad’s financial position or results of operations at any future date or for any future period.

                         
Year ended December 31,

2003 2002 2001



(in thousands, except per share data)
Statement of Income Data:
                       
Revenues:
                       
Convention show services
  $ 521,433     $ 568,301     $ 604,148  
Exhibit design and construction
    195,832       217,932       279,896  
Travel and recreation services
    53,203       58,253       61,453  
     
     
     
 
Total revenues
  $ 770,468     $ 844,486     $ 945,497  
     
     
     
 
Income (loss) from continuing operations(1)(2)
  $ 21,073     $ 8,327     $ (40,915 )
     
     
     
 
Unaudited pro forma diluted income (loss) from continuing operations per common share(3)
  $ 0.24     $ 0.10     $ (0.47 )
     
     
     
 
Average outstanding and potentially dilutive common shares(4)
    86,619       86,716       86,322  
     
     
     
 
Unaudited pro forma basic income (loss) from continuing operations per common share(3)
  $ 0.24     $ 0.10     $ (0.48 )
     
     
     
 
Average outstanding common shares
    86,223       86,178       85,503  
     
     
     
 
Balance Sheet Data (at end of period):
                       
Total assets(1)
  $ 667,882                  
Total debt
    50,092                  
Stockholder’s equity(1)
    319,871                  


(1)  Management expects that one-time pre-tax expenses of approximately $18.0 million, primarily related to investment banking, legal and accounting fees, will be required to complete the spin-off. Of these expenses, approximately $4.0 million is expected to be incurred by MoneyGram International, Inc. and $14.0 million is expected to be incurred by New Viad. These nonrecurring items have not been reflected in the pro forma combined statements of income; however, the pro forma combined balance sheet has been adjusted to reflect the incurrence of $14.0 million of these expenses.
 
(2)  For an explanation of the pro forma adjustments included in the above information, refer to the Unaudited Pro Forma Combined Statements of Income of New Viad included elsewhere in this information statement.
 
(3)  The computation of unaudited pro forma income (loss) per common share for the periods presented is based upon Viad’s historical weighted average number of shares of Viad common stock outstanding.
 
(4)  The diluted weighted average common shares is based on Viad Corp’s historical outstanding and potentially dilutive securities for purposes of computing unaudited pro forma diluted income (loss) per common share.

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Summary Historical Combined Financial and Other Data of New Viad

      The following table summarizes historical combined financial data for New Viad. The statement of income data for the years ended December 31, 2003, 2002 and 2001 and the balance sheet data at December 31, 2003 and 2002 set forth below are derived from the audited combined financial statements of New Viad included elsewhere in this information statement. The balance sheet data at December 31, 2001 set forth below is derived from the audited combined financial statements of New Viad not included in this information statement.

      The summary historical combined financial data is not necessarily indicative of the results of operations or financial position that would have occurred if New Viad had been a separate, independent company during the periods presented, nor is it indicative of New Viad’s future performance. This historical data should be read together with the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations of New Viad” and New Viad’s combined financial statements and related notes included elsewhere in this information statement.

                         
Year ended December 31,

2003 2002 2001



(in thousands, except per share data)
Statement of Income Data:
                       
Revenue
  $ 770,468     $ 844,486     $ 945,497  
     
     
     
 
Income (loss) from continuing operations
  $ 21,091     $ 8,395     $ (40,603 )
Change in accounting principle
          (37,739 )      
     
     
     
 
Net income (loss)
  $ 21,091     $ (29,344 )   $ (40,603 )
     
     
     
 
Unaudited pro forma diluted income (loss) per common share(1)
                       
Continuing operations
  $ 0.24     $ 0.10     $ (0.47 )
Change in accounting principle
          (0.44 )      
     
     
     
 
Diluted net income (loss) per common share
  $ 0.24     $ (0.34 )   $ (0.47 )
     
     
     
 
Average outstanding and potentially dilutive common shares(2)
    86,619       86,716       86,322  
     
     
     
 
Unaudited pro forma basic income (loss) per common share(1)
                       
Continuing operations
  $ 0.24     $ 0.10     $ (0.47 )
Change in accounting principle
          (0.44 )      
     
     
     
 
Basic net income (loss) per common share
  $ 0.24     $ (0.34 )   $ (0.47 )
     
     
     
 
Average outstanding common shares
    86,223       86,178       85,503  
     
     
     
 
Balance Sheet Data (at end of period):
                       
Total assets
  $ 681,882     $ 673,356     $ 732,848  
Total debt
    50,092       66,778       73,703  
Stockholder’s equity
    333,871       266,163       333,440  
 
Other Data:
                       
Adjusted EBITDA(3)
  $ 63,873     $ 47,083     $ (18,029 )


(1)  The computation of unaudited pro forma income (loss) per common share for the periods presented is based upon Viad Corp’s historical weighted average number of shares of common stock outstanding.
 
(2)  The diluted weighted average common shares is based on Viad Corp’s historical outstanding and potentially dilutive securities for purposes of computing unaudited pro forma diluted income (loss) per common share.
 
(3)  Adjusted EBITDA is a measure of New Viad’s ability to service debt, fund capital expenditures and finance growth, and should be considered in addition to, but not as a substitute for, other measures of financial performance reported in accordance with accounting principles generally accepted in the United States of

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America (GAAP). This information is supplemental to results presented under GAAP and may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA is defined by New Viad as income from continuing operations before interest expense, income taxes, depreciation and amortization, and changes in accounting principles.

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RISK FACTORS

           You should carefully consider the risks described below and all other information contained in this information statement. If any of the following risks, or other risks and uncertainties that we have not yet identified or that we currently consider to be immaterial, actually occur, the business, prospects, financial condition, results of operations and cash flow of MoneyGram or New Viad could be materially adversely affected. In that event, the market value of the MoneyGram and/or New Viad common stock could decline and you could lose all or part of your investment.

Risks Relating to MoneyGram

 
Our financial condition and results of operations could be adversely affected by fluctuations in interest rates.

           We derive a substantial portion of our revenue from the investment of funds we receive from the sale of payment instruments, such as official checks and money orders, until these instruments are settled. We generally invest these funds in long-term fixed-rate securities.

           We pay the financial institutions to whom we provide official check outsourcing services a commission based on the average balance of funds produced by their sale of official checks. This commission is generally calculated on the basis of a variable rate based on short-term financial indices, such as the federal funds rate. In addition, we have agreements to sell, on a periodic basis, undivided percentage interests in some of our receivables from agents at a price that is discounted based on short-term interest rates. To mitigate the effects of interest rate fluctuations on our commission expense and the net proceeds from our sales of agent receivables, we enter into variable-to-fixed rate swap agreements. These swap agreements require us to pay our counterparty a fixed interest rate on an agreed notional amount, while our counterparty pays us a variable interest rate on that same notional amount.

           Fluctuations in interest rates affect the value and amount of revenue produced by our investment portfolio, the amount of commissions that we pay, the net proceeds from our sale of receivables and the amount that we have to pay under our swap agreements. As a result, as more specifically described below, our “net float income,” which is the difference, or “spread,” between the amount we earn on our investment portfolio and the commissions we pay and the discount on the sale of receivables, net of the effect of the swap agreements, is subject to interest rate risk. Interest rate risk is the potential reduction of net float income as a result of fluctuations in interest rates. We are exposed to interest rate risk because the cash flows from our investment portfolio and our obligations to pay commissions to our financial institution customers, the net discount on our sale of receivables and the related swaps are not perfectly matched through time and across all possible interest rate scenarios.

           As interest rates decrease, borrowers are more likely to prepay fixed-rate debt, resulting in cash flows that are received earlier than expected. Replacing the higher-rate investments that prepay with lower-rate investments could reduce our net float income. Conversely, an increase in interest rates may result in slower than expected prepayments leading to cash flows that are received later than expected. In this case, we have risk that the cost of our commission payments may reprice faster than our investments and at a higher cost, which could also reduce our net float income. An additional component of interest rate risk is market risk that arises from fluctuations in interest rates that may result in changes in the values of investments and derivatives. Rate movements can affect the repricing of assets and liabilities differently, as well as their market value. Stockholders’ equity can be adversely affected by changing interest rates, as after-tax changes in the fair value of securities classified as available-for-sale and after-tax changes in the fair value of our swaps are reflected as increases and decreases to a component of stockholders’ equity. The fair value of our swaps generally increases when the market value of fixed rate, long-term debt investments decline and vice versa.

           The market values of securities we hold may decline due to a variety of factors, including decline in credit rating of the issuer or credit issues related to underlying collateral of the security, general market conditions and increases in interest rates for comparable obligations. If we determine that an unrealized loss on a security is “other-than-temporary,” the loss becomes a realized loss through an impairment charge in the income statement.

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           For a discussion of the effect of recent interest rate fluctuations on our net income and financial condition, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Viad.”

 
  Our business may require cash in amounts greater than the amount of available credit facilities and liquid assets that we have on hand at a particular time, and if we were forced to ultimately liquidate assets or secure other financing as a result of unexpected liquidity needs, our earnings could be reduced.

           We are subject to risks relating to daily liquidity needs, as well as extraordinary events, such as the unexpected loss of a customer. On a daily basis, we receive remittances from our agents and financial institution customers and we must clear and pay the financial instruments that were previously sold and currently are presented for payment. We monitor and maintain a liquidity portfolio along with credit lines and repurchase agreements in order to cover payment service obligations as they are presented. If we were forced to liquidate portfolio assets or secure other financing as a result of unexpected liquidity needs, our earnings could be reduced. In addition, if we were to lose any of our largest or other significant customers, in addition to losing the related revenues, we may have to liquidate investments or seek to borrow for a period of time to fund our obligation to clear the outstanding instruments issued on behalf of that customer at the termination of its contract. We may not be able to plan effectively for every customer contract termination, which could result in sale of investments at a loss of or lower profits than we would otherwise realize due to prevailing market conditions.

           We sell a portion of our receivables, primarily from money order agents, at a discount to a purchasing bank on a daily basis to accelerate cash flow for investment in permissible securities. See “Business of MoneyGram — Regulation.” The agreement governing these receivables sales does not require the purchasing bank to buy all or a portion of these receivables. As a result, the purchasing bank may cease to purchase agent receivables under this program or the terms on which they purchase these receivables may become less favorable to us. If the purchasing banks were to decline to purchase receivables at the same level as in the past, the size of our investment portfolio would decrease and any incremental revenue that would have been generated by the investment of the proceeds of these receivables sales would decline. In this case, we may have to liquidate investments or borrow money for a period of time to meet related money order obligations.

 
We are subject to credit risk related to our investment portfolio and our use of derivatives.

           Approximately 93 percent of our investment portfolio consists of securities that are not issued or guaranteed by the U.S. government. If the issuer of any of these securities were to default in its payment obligations to us or to otherwise experience credit problems, the value of that security would decline, adversely affecting the value of our investment portfolio. At December 31, 2003, we were party to derivative instruments known as swaps having a notional amount of $3.1 billion. These swap agreements are contracts in which we and a counterparty agree to exchange periodic payments based on a fixed or variable rate of interest on a given notional amount, without the exchange of the underlying notional amounts. The notional amount of a swap agreement is used to measure amounts to be paid or received and does not represent the amount of exposure to credit loss. At any point in time, depending upon many factors including the interest rate environment and the fixed and variable rates of the swap agreements, we may owe our counterparty or our counterparty may owe us. If any of our counterparties to these swap agreements were to default in its payment obligation to us, we could be adversely affected.

 
If our credit ratings were to be downgraded, or if the ratings agencies were to indicate that a lowering may occur, our business would be harmed.

           Our ability to maintain an investment grade long-term credit rating is important to our business. If our credit rating were to be downgraded below investment grade, or if ratings agencies were to indicate that a lowering may occur, our business, results of operations and financial condition would be materially adversely affected. Any downgrade of our ratings, or an indication that a downgrade may occur, could damage our customers’ perception of our financial strength. This would adversely affect our relationships with existing and prospective official check customers and clearing banks. Also, a downgrade would increase our costs of borrowing money, adversely affecting our business and results of operations.

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We face intense competition, and if we are unable to continue to compete effectively, our business, financial condition and results of operations would be adversely affected.

           The industries in which we compete are highly competitive. Our primary competition comes from First Data Corporation and its subsidiaries, including Western Union, which has substantially greater transaction volume than we do. First Data and its subsidiaries have a larger agent base, a more established brand name and substantially greater financial and marketing resources than we do.

           In our global funds transfer segment, we compete for agents to provide our products and services to consumers. We compete for agents on the basis of the commissions and other financial consideration, primarily up-front incentive payments, that we offer to them, the variety and branding of products and services that we offer, and the point-of-sale solutions and support that we provide. Because of its greater resources and higher transaction volume, First Data and its subsidiaries may be able to offer key agents, such as large retail chains, foreign postal agencies and financial institutions, higher commissions and other financial consideration than we can. Key agents may choose to align themselves with First Data as a result of greater consumer recognition of the Western Union brand name and larger network of agent locations. Consumers may choose to purchase products and services from agents that use the Western Union brand.

           We also face competition in the money transfer business from niche companies, which provide money transfer services in one or a small number of send and receive corridors. Other new competitors, such as banks, may continue to enter the money transfer business and may use their existing branch locations to deliver money transfer services. In addition, in the future, major retail chains and others, including some that currently serve as our agents, may determine to form their own money transfer or money order businesses and compete with us.

           Finally, the U.S. Postal Service, a competitor in our money order business, is not dependent on third-party agents to provide money order services. In addition, the different cost structure of the U.S. Postal Service may enable it to offer its products and services at lower prices.

           In our payment systems segment, we compete in selling our official check outsourcing services to financial institutions on the basis of price, features of the services offered and financial institutions’ perceptions concerning our financial strength. Our primary competition comes from First Data and its subsidiaries. First Data’s greater financial resources may permit it to provide financial institutions more attractive economic incentives, such as signing bonuses, than we may be able to provide. First Data’s higher credit ratings may also make it more attractive to financial institutions considering outsourcing their official check services, particularly large financial institutions. Due to these factors, large financial institutions may, as a condition to entering into a contract with us, demand that we maintain a certain credit rating or provide additional security for our performance or require that we segregate the portion of our portfolio attributable to their payment instruments.

           If we are unable to continue to compete effectively, our business, financial condition and results of operations would be adversely affected.

 
If we lost key retail agents in our global funds transfer segment, our business and results of operations could be adversely affected.

           We may not be able to retain all of our current retail agents. The competition for chain retail agents is intense, and larger agents are increasingly demanding financial concessions and more information technology customization. The development and equipment necessary to meet agent demands could require substantial capital expenditures. If we were unable to meet these demands, we could lose agents and our volume of money transfers would be substantially reduced and our revenues would decline.

           A substantial portion of our transaction volume is generated by a limited number of key agents. During 2003 and 2002, our ten largest agents accounted for 17 percent and 14 percent, respectively, of our total revenues, and 30 percent and 26 percent, respectively, of the revenues of our global funds transfer segment. One of these agents accounted for four percent and two percent of our total revenues, and eight percent and three percent, during 2003 and 2002, respectively of the revenues of our global funds transfer segment. If any of these key agents were not to renew their contracts with us, or if such agents were to reduce the number of their locations, or cease doing

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business, we might not be able to replace the volume of business conducted through these agents, and our business and results of operations would be adversely affected.

           In addition, many of our high volume agents are in the check cashing industry. There are risks associated with the check cashing industry that could cause this portion of our agent base to decline. Any regulatory action that adversely affects check cashers could also cause this portion of our agent base to decline.

 
If we lost large financial institution customers in our payment systems segment, our business and results of operation could be adversely affected.

           During 2003 and 2002, our ten largest financial institution customers accounted for 17 percent and 19 percent, respectively, of our total revenues and 40 percent and 40 percent, respectively, of the revenues in our payment systems segment. One of our financial institution clients generated approximately four percent and six percent of our total revenues and approximately 12 percent and 12 percent of the revenues in our payment systems segment during 2003 and 2002, respectively. The loss of any of our top financial institution customers could adversely affect our business and results of operations.

 
If we fail to develop and introduce new and enhanced products and services or if alternative payment mechanisms that we do not offer replace the use of money orders and money transfers, our business and prospects could be adversely affected.

           Our future growth will depend, in part, on our ability to continue to develop and successfully introduce new and enhanced methods of providing money transfer, money order, official check, bill payment, cash access and related services that keep pace with competitive introductions, technological changes and the demands and preferences of our agents, financial institution customers and consumers. Many of our competitors offer stored-value cards and other electronic payment mechanisms, including various internet-based payment services, that could be substituted for traditional forms of payment, such as the money orders, bill payment and money transfer services we offer. If these alternative payment mechanisms become widely substituted for our products and services, and we do not develop similar alternative payment mechanisms, our business and prospects could be adversely affected.

 
We face credit and fraud risks from our retail agents.

           The vast majority of our global funds transfer business is conducted through independent agents that provide our products and services to consumers at their business locations. These agents sell our products and services, collect the funds from consumers and are required to remit the proceeds from these transactions to us. As a result, we have credit exposure to our agents, which averages approximately $1.0 billion, representing a combination of money orders, money transfers and bill payment proceeds. This credit exposure is spread across approximately 27,000 agents, of which 25 owe us in excess of $5 million each at any one time.

           We are not insured against credit losses, except in circumstances of agent theft or fraud. If an agent becomes insolvent, files for bankruptcy, commits fraud or otherwise fails to remit money order or money transfer proceeds to us, we must nonetheless pay the money order or complete the money transfer on behalf of the consumer. Moreover, we have made, and may in the future make, secured or unsecured loans to retail agents under limited circumstances or allow agents to retain our funds for a period of time before remitting them to us. The failure of agents owing us large amounts to remit funds to us or to repay such amounts could materially adversely affect our business, results of operations and our financial condition.

           In the past five years we have experienced two significant agent fraud incidents, one involving an agent in the Dominican Republic and the other an agent in Switzerland. Losses before insurance recoveries were $9.4 million in 2000, and $2.3 million in 1998, respectively, in these incidents. These fraud losses were covered by insurance, after we satisfied our co-insurance amount. However, claims filed in respect of these fraud incidents have caused our insurance premiums to increase. If we were to experience significant fraud incidents in the future, our results of operations could be adversely affected.

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Our business is highly dependent on the efficient and uninterrupted operation of our computer network systems and data centers, and any disruption could harm our business.

           Our ability to provide reliable service largely depends on the efficient and uninterrupted operation of our computer network systems and data centers. Any significant interruptions could harm our business and reputation and result in a loss of customers. Our systems and operations could be exposed to damage or interruption from fire, natural disaster, power loss, telecommunications failure, unauthorized entry and computer viruses. Although we have taken steps to prevent a system failure, including the implementation of a disaster recovery plan and redundant computer systems, our measures may not be successful and we may experience problems other than system failures. We may also experience software defects, development delays and installation difficulties, which would harm our business and reputation and expose us to potential liability. Our data applications may not be sufficient to address technological advances, changing market conditions or other developments.

           If we face system interruptions and system failures due to defects in our software, development delays, installation difficulties or for any other reason, our business interruption insurance may not be adequate to compensate us for all losses or damages that we may incur.

 
Our business involves the movement of large sums of money, and, as a result, our business is particularly dependent on our ability to process and settle transactions accurately and efficiently.

           Our business involves the movement of large sums of money. In 2003, for example, we handled items with a face amount of over $400 billion. Our revenues consist primarily of transaction fees that we charge for the movement of this money and investment revenues. These transaction fees represent only a small fraction of the total amount of money that we move. Because we are responsible for large sums of money that are substantially greater than our revenues, the success of our business particularly depends upon our efficient and error-free handling of the money that is remitted to us and that is used to clear payment instruments or complete money transfers. If we were to make a major error in handling a particularly large transaction, or to make small errors in a large number of smaller transactions, and such errors could not be corrected, the amount of loss caused by such error could represent a substantial portion of our revenues, and materially adversely affect our business, results of operations and financial condition.

 
Our attempts to expand by means of acquisitions and strategic alliances may not be successful.

           We intend to expand our operations and market presence by entering into business combinations, joint ventures or other strategic alliances in the United States and internationally. However, we may not have sufficient cash or be able to access the capital markets to fund these acquisitions, and, as a result of restrictions contained in the Tax Sharing Agreement, we may not be able to issue shares to fund these acquisitions. See “Relationship between New Viad and MoneyGram — Tax Sharing Agreement.” We also may be unsuccessful in identifying and completing any of these combinations or alliances.

      Further, any acquisition that we do complete may subject us to a number of risks, including:

       •  difficulties associated with integrating the operations, technology and personnel of any acquired company or companies;
 
       •  disruptions in our business resulting from the allocation of resources to complete any acquisitions;
 
       •  failure of the acquired businesses to achieve anticipated revenues, earnings or cash flow;
 
       •  effects of our financing of the acquisition, such as the incurrence of indebtedness or the dilution of existing stockholders’ interests by issuing stock; and
 
       •  failure of strategic alliances to be successful or for us to realize anticipated benefits in a timely manner.

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If we are unable to protect our intellectual property rights, business, financial condition and results of operation could be adversely affected.

           We rely on a combination of patent, trademark and copyright laws, trade secret protection and confidentiality and license agreements to protect our intellectual property rights. See “Business of MoneyGram — Intellectual Property Rights.” We may be required to spend resources to protect and police these rights, and some rights may not be protected by intellectual property laws, particularly in foreign jurisdictions. Third parties may infringe or misappropriate our proprietary rights. The loss of intellectual property protection or the inability to secure or enforce intellectual property protection could harm our business and prospects.

 
We currently rely on third-party vendors in the conduct of our business, including clearing banks, and we could be adversely affected if we were to lose any material third-party vendor.

           We rely on third-party vendors to conduct our business, including clearing banks and other vendors. Because we are not a bank and therefore cannot be a member of the Federal Reserve Banking System, we must contract with banks for processing and clearing functions for our money orders and official checks. We currently rely on ten principal clearing banks, two of which clear our money orders and eight of which clear our official checks. If any of our clearing banks were to terminate or not renew its contract with us, we could incur costs and experience disruption to our business in replacing that clearing bank. We could also be required to pay any new clearing banks a higher per item fee than we currently do, thereby increasing our cost of doing business. In addition, our business is dependent upon a number of other key vendors, including the manufacturer of our money order dispensers and certain of our telecommunications providers. The loss of any of these key vendors could disrupt our business and we could incur costs in replacing that vendor.

 
Litigation may adversely affect our business, financial condition and results of operations.

           Our business has in the past been, and may in the future continue to be, the subject of class actions, regulatory actions or other litigation. For example, in 2002, we settled a class action lawsuit that alleged that our disclosure surrounding currency exchange spreads was inadequate. The outcome of class action lawsuits and regulatory actions is difficult to assess or quantify. Plaintiffs in these types of lawsuits may seek recovery of very large or indeterminate amounts, and the magnitude of lawsuits and actions may remain unknown for substantial periods of time. The cost to defend future lawsuits may be significant. There may also be adverse publicity associated with lawsuits that could decrease customer acceptance of our services. As a result, litigation may adversely affect our business, financial condition and results of operations.

Risks Relating to the Payment Services Industry

 
We are subject to a number of risks relating to U.S. federal and state regulation of our business.

           In the United States, the money transfer business is subject to a variety of state regulations. We are also subject to U.S. federal anti-money laundering laws, and the requirements of the Office of Foreign Assets Control, which prohibit us from transmitting money to specified countries or on behalf of prohibited individuals. The money transfer business has been subject to increased scrutiny following the events of September 11, 2001. The Patriot Act, enacted following those events, mandates several new anti-money laundering requirements. The federal government or the states may elect to impose additional anti-money laundering requirements. Changes in laws or regulations that impose additional regulatory requirements, including the Patriot Act, could increase our compliance and other costs of doing business, and therefore have an adverse effect on our results of operation. If onerous regulatory requirements were imposed on our agents, they could lead to a loss of agents, which, in turn, could lead to a loss of retail business.

           Failure to comply with the laws and regulatory requirements of federal and state regulatory authorities could result in, among other things, revocation of required licenses or registrations, loss of approved status, termination of contracts with banks or retail representatives, administrative enforcement actions and fines, class action lawsuits, cease and desist orders and civil and criminal liability. The occurrence of one or more of these events could materially adversely affect our business, financial condition and results of operations.

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           If we were to inadvertently transmit money on behalf of, or unknowingly conduct business with, a prohibited individual, we could be required to pay significant damages, including fines and penalties. Likewise, any intentional or negligent violation of anti-money laundering laws by our employees could lead to significant fines and/or penalties, and could limit our ability to conduct business in some jurisdictions.

           Legislation has been proposed in the U.S. Congress and in various states that would require additional disclosures to consumers regarding fees and foreign exchange “spreads” on international money transfers. If enacted, this would require costly upgrades to our computer and point-of-sale systems.

 
We are not registered under the Investment Company Act and if we were required to register, our business, prospects and results of operations would be materially adversely affected.

           The Investment Company Act of 1940 requires the registration of, and imposes restrictions on, certain companies that engage primarily in the business of investing, reinvesting or trading in securities. A company may be classified as an investment company if it owns certain types of securities having a value exceeding 40 percent of its assets and is not primarily engaged in businesses other than investing, reinvesting, owning, holding or trading in securities. We are, and we intend to remain, in the payment services businesses. Thus, we believe that we are primarily engaged in a business other than investing, reinvesting, owning, holding or trading securities. Although the Securities and Exchange Commission has recognized in some cases that companies with more than 40 percent of their assets in investment securities were nonetheless operating businesses and not investment companies, there is no direct precedent relating to the businesses in which we engage. While approximately 84 percent of our assets at December 31, 2003 are held in cash, cash equivalents and investments substantially restricted for payment services obligations and approximately 40 percent of our 2003 revenue was generated from these investments, these activities are undertaken only in connection with our payment services business. Accordingly, we believe that we are not an “investment company” for purposes of the Investment Company Act and are not required to register under that Act. If we were required to register as an investment company, we would become subject to substantial regulations with respect to our capital structure, management, operations and other matters, which would have a material adverse effect on our business, results of operations and prospects.

 
New check technology could cause our investment balances to decline.

           The recently-enacted Check 21 Act is designed to enhance check truncation by speeding up the time in which checks are presented for payment or returned through the banking system if warranted. The Check 21 Act, which becomes effective October 28, 2004, will enable banks to create a new negotiable instrument known as a substitute check that can be transmitted electronically from one bank to another and thereby eliminate the need to transfer the original check. While banks are not required to use substitute checks, it is anticipated that many will take advantage of this new technology in order to reduce their own costs of transporting checks and to eliminate some of the float in the check clearing process. If widely adopted, the new technology could cause the period of time between when a check is issued and the time when that check is presented for payment to decrease, which could adversely affect our business by causing a reduction in our investment balances and related investment revenues for both our official check processing business and our money order business. The staff of the Board of Governors of the Federal Reserve System is preparing implementation regulations for the Check 21 Act that will provide further guidance on how the new law may impact us.

 
Imposition of additional regulatory requirements in any of the foreign countries in which we operate could adversely affect our business.

           International regulation of the money transfer business varies from country to country. Although most countries, other than Germany and the United Kingdom, do not regulate this business to the same degree as the United States, this could change in the future. Various foreign governments could impose additional regulatory requirements on us or impose penalties or charges. Any of these requirements, including anti-money laundering requirements and related scrutiny, could make it more difficult to originate money transfers overseas, increase our costs or decrease our revenues. Any inadvertent violation of a law or regulation by us or one of our agents could subject us to damages, including fines or penalties.

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States may enact laws that negatively impact our business, such as laws that decrease unclaimed property abandonment periods.

           We earn revenue from our investment of the proceeds of money orders and other financial instruments pending presentment for payment by the consumer. We retain these proceeds until the item is paid or we remit the balance, net of our cumulative service charges, as unclaimed property to the state in which these instruments were issued, pursuant to applicable unclaimed property laws. State abandonment periods for money orders and money transfers range from three to seven years, while those for official checks are generally three to five years. We also derive revenues from a service charge that is assessed against our payment instruments that remain outstanding for long periods of time. States may adopt new legislation at any time that decreases the unclaimed property abandonment periods, or eliminates or reduces our ability to collect a service charge. Any such change in state law could adversely affect our results of operations.

 
There are a number of risks associated with our international sales and operations that could harm our business.

           We currently provide money transfer services between and among approximately 160 countries, and our strategy is to expand our international business. Our ability to grow in international markets and our future results could be harmed by a number of factors, including:

       •  failure to manage successfully our exposure to foreign currency exchange rates;
 
       •  changes in political and economic conditions and potential instability in certain regions;
 
       •  changes in regulatory requirements or in foreign policy and the adoption of foreign laws detrimental to our business;
 
       •  burdens of complying with a wide variety of laws and regulations;
 
       •  possible fraud or theft losses, and lack of compliance by international representatives in remote locations and foreign legal systems where collection and enforcement may be difficult or costly;
 
       •  reduced protection for our intellectual property rights;
 
       •  unfavorable tax rules or trade barriers; and
 
       •  inability to secure, train or monitor international agents.

Risks Relating to New Viad and the Industries in Which It Operates

 
Our businesses and operating results are adversely affected by deterioration in general economic conditions.

           Our businesses, which include convention and event services, exhibit design and construction services and travel and recreation services, are highly sensitive to fluctuations in general economic conditions. Operating results for GES and Exhibitgroup depend largely on the number of trade shows held and on the size of exhibitors’ marketing expenditures. These factors also depend on the strengths or weaknesses of particular industries in which exhibitors operate. The number and size of trade shows generally decrease during periods of adverse economic conditions and increase when general economic conditions are positive.

           Further, many exhibitors view a portion of their marketing budget as discretionary, and, as a result, marketing budgets are frequently among the first expenditures reduced by exhibitors when general economic conditions deteriorate, resulting in exhibitors reusing or refurbishing old exhibits rather than purchasing new exhibits. Marketing expenditures often are not increased, and new exhibits not purchased, until general economic conditions improve. As a result, during periods of adverse general economic conditions, the operating results of GES and Exhibitgroup are adversely affected. For example, revenues for these businesses declined an aggregate of approximately 11 percent from 2001 to 2002.

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           Similarly, revenues from our travel and recreation businesses depend largely on the amount of disposable income that consumers have available for travel. This amount decreases during periods of negative general economic conditions.

 
Our businesses are adversely affected by disruptions in the travel industry, particularly those adversely affecting the hotel and airline industries.

           The success of our businesses depends largely on the ability and willingness of people, whether exhibitors, trade show attendees or travelers, to travel, which is in turn dependent upon their ability to find transportation alternatives and accommodations. As a result, factors adversely affecting the travel industry as a whole, and particularly the airline and hotel industries, generally also adversely affect our business and results of operations. Factors that could adversely affect the travel industry as a whole include fuel prices, increased security requirements, weather conditions, airline accidents and international political instability and hostilities. For example, the September 11, 2001 terrorist attacks resulted in, among other things, a reluctance on the part of many people to travel and decreased availability of airline alternatives at affordable prices, significantly affecting the travel and recreation services business generally and resulting in the cancellation of many trade shows. More recently, attendance at trade shows and at some of our Canadian travel and recreation facilities was also negatively affected by fears stemming from the outbreak of severe acute respiratory syndrome, or “SARS.” Unexpected events of this nature in the future, or other events that may have an impact on the availability and pricing of air travel and accommodations, could materially adversely affect our business and results of operations.

 
Our businesses are seasonal, which causes our results of operations to fluctuate and makes our results of operations particularly sensitive to adverse events during peak periods.

           GES and Exhibitgroup both generally report higher revenues during the first and second quarters, and GES and Exhibitgroup report their lowest revenues in the fourth and third quarters, respectively. Our travel and recreation businesses are also seasonal, experiencing peak activity during May through September — these months account for approximately 80 percent of our travel and recreation revenues. Because of the seasonal nature of these businesses, adverse events or conditions occurring during peak periods could particularly affect the operating results of our businesses.

 
Trade show rotation may impact our overall profitability and makes comparisons between periods difficult.

           Convention and event services and exhibit design and construction activity are largely dependent upon the frequency, timing and location of conventions and trade shows. For example, some large trade shows are not held on a yearly basis (they may be held once every two or three years), and some large trade shows may be held at a different time of year than the times at which they have historically been held. In addition, the same trade show may be held in different locations in different years.

           Our results of operations fluctuate significantly as a result of this rotation, making it more difficult for us to make budget and planning decisions. The geographic rotation of trade shows requires us to maintain a high degree of flexibility of resources (including personnel and transportation) and may result in a business generating lower margins in a given period if trade shows shift to higher-cost cities. As a consequence of these factors, the operating results for our key businesses may fluctuate significantly from quarter to quarter or from year to year, making periodic comparisons difficult.

 
Transportation disruptions could adversely affect our business and operating results.

           GES and Exhibitgroup rely on independent transportation carriers to send materials and exhibits to and from trade shows, warehouse facilities and customer facilities. If we are unable to secure the services of these independent transportation carriers at favorable rates, it could have a material adverse effect on our business and results of operations. In addition, disruption of transportation services because of weather-related problems, strikes, lockouts or other events could adversely affect our ability to supply services to customers and could cause cancellation of trade shows, which may have a material adverse effect on our business and operating results.

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Union-represented labor creates an increased risk of work stoppages and higher labor costs.

           A majority of our employees are unionized, and we are party to over 100 collective-bargaining agreements, with approximately one-third requiring renegotiation each year. If labor negotiations force us to increase wages or benefits and thus increase total labor costs, we would either absorb the increased costs, adversely affecting our margins, or pass the costs to the customers, which may lead customers to turn away from us in response to higher prices. In either event, our business and results of operations could be adversely affected.

           Moreover, if we were unable to reach an agreement with a union during the collective bargaining process, the union may call for a strike or other work stoppage. If a strike were to occur, we might be unable to find substitute workers with the necessary skill sets to perform many of our services, and this could adversely affect our business and results of operations.

 
We compete in competitive industries, and increased competition could negatively impact our operating results.

           We compete in industries that are highly competitive. Competition in the convention and event services and exhibit design and construction services industries is on the basis of price and service level, among other things. To the extent competitors seek to gain or retain their market presence through aggressive underpricing strategies, we may be required to lower our prices and rates, thereby adversely affecting operating results. If we are unable to meet the challenges presented by the competitive environment, our results of operations and financial condition may be adversely affected.

 
The failure of a large customer to renew its services contract or the loss of business from convention facilities may adversely impact our revenues.

           Although no single customer accounts for more than nine percent of the revenue of any of our business segments, GES is dependent upon a relatively small number of large trade show customers and Exhibitgroup has a number of large customer accounts. The loss of any of these large customers may adversely affect our results of operations.

           In addition, GES’s revenues may be significantly impacted if certain convention facilities choose to in-source electrical, plumbing and other services that have represented revenue-generating opportunities for GES. When GES is hired as the general services contractor for a trade show, the trade show organizer contractually grants GES an exclusive right to perform these electrical and plumbing services, subject in each case to the convention facility’s option to in-source the services (either by performing the services themselves or by hiring a separate service provider). The operators of many convention facilities are currently under financial pressure as a result of conditions generally affecting their industry, including decreased usage and revenues. As a result, some of these convention facilities may seek to in-source all or a large portion of these services. If a large number of facilities with which we have these relationships seek to move these facilities services in-house, our revenues and operating results would be affected.

 
Our key businesses are relationship driven.

           The convention and event services and exhibit design and construction businesses heavily focus on client relationships, and, specifically, on very close collaboration and interaction between teams from the client and GES or Exhibitgroup, as the case may be. This close relationship requires the account team to become attuned to the client’s desires and expectations in order to provide top-quality service. We have in the past lost, and may in the future lose, important customers if a key member of the account team were to cease employment with us and take that customer that he or she services to a competitor.

 
Liabilities relating to prior and discontinued operations may adversely affect our results of operations.

           Viad and its predecessors have a corporate history spanning over seven decades and involving approximately 2,400 previous subsidiaries in diverse businesses, such as the manufacturing of locomotives, buses, industrial chemicals, fertilizers, pharmaceuticals, leather, textiles, food and fresh meats. Some of these businesses used raw

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materials that have been, and may continue to be, the subject of litigation. Moreover, some of the raw materials used, and the waste produced, by these businesses have been and are the subject of U.S. federal and state environmental regulations, including laws enacted under the Comprehensive Environmental Response, Compensation and Liability Act, or and its state law counterparts. In addition, we may incur other liabilities, resulting from indemnification or warranty claims involving sold subsidiaries as well as from our past operations of those of our predecessors or our or their subsidiaries. Although we believe we have adequate reserves and sufficient insurance coverage to cover these future liabilities, our results of operations could be materially affected if future events or proceedings contradict our current assumptions, and our reserves or insurance become inadequate.
 
We expect that we will no longer have an investment grade credit rating after the spin-off, which may result in increased costs.

           We believe that, following the completion of the spin-off, our debt will not have an investment grade rating. As a result, there is a high probability that our credit-related costs will increase after the spin-off, and this may adversely affect our operating results. In addition, we may experience an increase in certain insurance-related costs, which may also adversely affect our results of operations.

 
Glacier Park’s concession agreement for its operations inside Glacier National Park expires in December 2005, and, if Glacier Park is unsuccessful in renewing this contract, this failure would adversely affect our results of operations.

           Glacier Park operates four lodges, three motor inns and one stand-alone camp store inside Glacier National Park. Two of the lodges, the three motor inns and the camp store are operated through a concession agreement with the U.S. National Park Service. The lodges at Waterton Lakes, Canada, and at East Glacier are not subject to the concession agreement. When this agreement expires in December 2005, Glacier Park will be obligated, if it wants to continue operations, to rebid for the right to retain these concession services. If Glacier Park does not retain these contractual rights, it will receive an amount from the U.S. National Park Service equal to its “possessory interest,” which generally means the value of the structures acquired or constructed, fixtures installed or improvements made to Glacier National Park during the term of this Agreement, based on the reconstruction cost of a new unit of like kind, less depreciation, but not to exceed fair market value. Although we believe that Glacier Park has a preferential right of renewal under applicable federal law (which would allow Glacier Park to retain the business by matching the highest bid offered by any third party), the U.S. National Park Service has taken a contrary position. We expect that the U.S. National Park Service will not recognize Glacier Park’s preferential right of renewal, which may make the concessionaire bidding process more difficult for Glacier Park. If Glacier Park were to lose the concessionaire portion of its business to another bidder, Glacier Park’s results of operations may be adversely affected to the extent of the value of this business over the value of the possessory interest.

Risks Relating to the Separation of MoneyGram from Viad and the Distribution

 
The historical financial information of MoneyGram and New Viad may not be representative of their results as separate, independent companies.

           Historically, the businesses that comprise each of MoneyGram and New Viad have been able to rely, to some degree, on the earnings, assets and cash flow of each other for capital and cash flow requirements. Accordingly, the historical financial information for MoneyGram and New Viad that we have included in this information statement may not reflect what the results of operations, financial condition and cash flows of MoneyGram and New Viad would have been had each been a separate, independent company during the periods presented. This financial information also may not be indicative of what the results of operations, financial condition and cash flows of MoneyGram or New Viad will be in the future.

           For additional information about the past financial performance and the basis of presentation of the historical financial statements, see “Selected Historical Consolidated Financial and Other Data of Viad Corp (Accounting Predecessor to MoneyGram International, Inc.),” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Viad Corp (Accounting Predecessor to MoneyGram International, Inc.),”

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“Selected Historical Combined Financial and Other Data of New Viad,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of New Viad” and the financial statements and related notes of Viad Corp and New Viad included elsewhere in this information statement.
 
If the spin-off is determined to be a taxable transaction, New Viad could be subject to material amounts of taxes and you could be subject to tax on the value of the MoneyGram common stock you receive in the distribution.

           Viad has received a favorable private letter ruling from the Internal Revenue Service to the effect that the distribution will be tax-free to Viad and its stockholders for U.S. federal income tax purposes. Although generally binding on the Internal Revenue Service, this letter ruling is subject to certain factual representations and assumptions. If these factual representations and assumptions were incorrect in any material respect, this letter ruling could be retroactively revoked or modified by the Internal Revenue Service. If, notwithstanding the Internal Revenue Service ruling, the spin-off is determined to be a taxable transaction, Viad could be subject to material amounts of taxes and you could be subject to tax on the value of the MoneyGram common stock you receive in the distribution. See “The Spin-Off — Material U.S. Federal Income Tax Consequences of the Spin-Off.”

 
If either Viad or MoneyGram takes actions that cause the distribution to fail to qualify as a tax-free transaction, the party that causes the distribution to be taxable will be required to indemnify the other for any resulting taxes and related losses.

           Viad has received a favorable private letter ruling from the Internal Revenue Service to the effect that the distribution will be tax-free to Viad and its stockholders for U.S. federal income tax purposes. Under the tax sharing agreement between MoneyGram and New Viad, if either New Viad or MoneyGram takes or fails to take any action (or permits any of their respective affiliates to take or fail to take any action) that causes the distribution to be taxable, or if there is an acquisition of the equity securities or assets of either party (or equity securities or assets of any member of that party’s group) that causes the distribution to be taxable, that party will be required to indemnify the other party for any resulting taxes and related losses.

           In the event that the distribution were taxable to New Viad, New Viad would recognize gain equal to the excess, if any, of the fair market value of MoneyGram common stock distributed on the distribution date over Viad’s tax basis in that MoneyGram common stock, and New Viad would have to pay tax on that gain. The amount of tax would be substantial, and the party causing the distribution to be taxable likely would not have sufficient financial resources to operate its business after paying any resulting taxes and related losses.

 
The ability of MoneyGram and New Viad to engage in financings and acquisitions and other strategic transactions using equity securities is subject to limitations because of the U.S. federal income tax requirements for a tax-free distribution.

           Current tax law generally creates a presumption that the spin-off would be taxable to New Viad (but not to its stockholders) if either MoneyGram or New Viad engages in, or enters into an agreement to engage in, a transaction that would result in a 50 percent or greater change (by vote or by value) in stock ownership during the four-year period beginning on the date that begins two years before the distribution date, unless it is established that the transaction is not pursuant to a plan or series of transactions related to the spin-off. Temporary Treasury regulations currently in effect generally provide that whether an acquisition transaction and a distribution are part of a plan is determined based on all of the facts and circumstances, including, but not limited to, those specific factors listed in the Treasury regulations. In addition, the regulations provide several “safe harbors” for acquisition transactions that are not considered to be part of a plan.

           Each of MoneyGram and New Viad will be subject to restrictions (including restrictions on share issuances, business combinations, sales of assets and similar transactions) that are designed to preserve the tax-free status of the spin-off. These restrictions may prevent MoneyGram and New Viad from entering into transactions that might be advantageous to them, such as issuing equity securities to satisfy financing needs or acquiring businesses or assets by issuing equity securities. Many of MoneyGram’s and New Viad’s competitors are not subject to similar restrictions, and therefore, may have a competitive advantage over MoneyGram and New Viad.

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MoneyGram and New Viad could incur significant tax liability if the other party fails to pay the tax liabilities attributable to it under the tax sharing agreement.

           Under U.S. federal income tax laws, New Viad and MoneyGram are severally liable for New Viad’s federal income taxes attributable to the periods prior to or including the taxable year of Viad during which the spin-off occurs. This means that if either New Viad or MoneyGram fails to pay the taxes for which it is responsible under the tax sharing agreement for those periods, the other party may be liable for any part of, including the whole amount of, these liabilities. Although New Viad and MoneyGram have entered into the Tax Sharing Agreement that allocates responsibility for tax liabilities between New Viad and MoneyGram, MoneyGram remains liable if New Viad does not or is unable to pay its taxes. Certain other jurisdictions may have similar rules. For a discussion of the Tax Sharing Agreement, please see “Relationship between New Viad and MoneyGram — Agreements between Viad and MoneyGram — Tax Sharing Agreement.”

 
The spin-off may be challenged by creditors as a fraudulent transfer or conveyance.

           If a court in a suit by an unpaid creditor or representative of creditors of New Viad, such as a trustee in bankruptcy, or New Viad, as debtor-in-possession, in a reorganization case under Title 11 of the U.S. Bankruptcy Code, were to find that:

       •  the spin-off and the related transactions were undertaken for the purpose of hindering, delaying or defrauding creditors; or
 
       •  New Viad received less than reasonably equivalent value or fair consideration in connection with the spin-off and the transactions related thereto and (1) Viad was insolvent immediately prior to or was rendered insolvent by the spin-off, (2) Viad immediately prior to or as of the effective time of the completion of the spin-off and after giving effect thereto intended or believed that it would be unable to pay its debts as they became due or (3) the capital of Viad immediately prior to or at the effective time of the completion of the spin-off and after giving effect thereto was inadequate to conduct its business;

then that court could determine that the spin-off or the related transactions violated applicable provisions of the U.S. Bankruptcy Code or applicable state fraudulent transfer or conveyance laws. This determination would permit the bankruptcy trustee or debtor-in-possession or unpaid creditors to rescind the spin-off or to require MoneyGram or New Viad, as the case may be, to fund liabilities of the other for the benefit of creditors.

           The measure of insolvency for purposes of the foregoing considerations will vary depending upon the law of the jurisdiction that is being applied. Generally, however, an entity would be considered insolvent if:

       •  the sum of its liabilities, including contingent liabilities, is greater than its assets, at a fair valuation;
 
       •  the present fair saleable value of its assets is less than the amount required to pay the probable liability on its total existing debts and liabilities, including contingent liabilities, as they become absolute and matured; or
 
       •  it is generally not paying its debts as they become due.
 
If the distribution made to effect the spin-off is not a legal dividend, it could be held invalid by a court and harm the financial condition and results of operations of MoneyGram and New Viad.

           The declaration of the distribution of shares of MoneyGram common stock made to effect the spin-off is governed by the Delaware General Corporation Law. Under the Delaware General Corporation Law, there are certain restrictions on when a corporation may distribute its property, including the shares of the common stock of a subsidiary, as a dividend. If the distribution and related transactions, including the merger, are found invalid under Delaware law, a court could seek to have the transactions rescinded. The resulting complications, costs and expenses could harm the financial condition of MoneyGram and New Viad.

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  After the spin-off, most of the management and directors of MoneyGram and New Viad may have conflicts of interest because of their ownership of both MoneyGram and New Viad common stock.

           After the spin-off, most of the management and directors of MoneyGram and New Viad will own shares of both MoneyGram common stock and New Viad common stock because of their prior relationship with Viad. This ownership could create, or appear to create, potential conflicts of interest when MoneyGram’s and New Viad’s directors and executive officers are faced with decisions that could have different implications for MoneyGram and New Viad. For example, potential conflicts of interest could arise in connection with the resolution of any dispute between New Viad and MoneyGram regarding terms of the agreements governing the spin-off and the relationship between Viad and MoneyGram thereafter, including the separation and distribution agreement, the employee benefits agreement, the tax sharing agreement or the interim services agreement. Potential conflicts of interest could also arise if MoneyGram and New Viad entered into any commercial dealings in the future.

      In addition, Robert H. Bohannon will serve as Chairman of the Board of Directors of both New Viad and MoneyGram and will continue to be President and Chief Executive Officer of New Viad. The fact that Mr. Bohannon holds positions with both MoneyGram and New Viad could create, or appear to create, potential conflicts of interest for Mr. Bohannon when faced with decisions such as those described above. Mr. Bohannon may also face conflicts with regard to the allocation of his time between MoneyGram and New Viad.

Risks Relating to the Securities Markets and Ownership of MoneyGram or New Viad Common Stock

 
Provisions of the charter documents of MoneyGram and New Viad and Delaware law may delay or prevent a change in control that you may favor.

           Provisions of the certificate of incorporation and by-laws of each of MoneyGram and New Viad and Delaware law may delay or prevent a change of control of MoneyGram or New Viad that you may consider favorable. These provisions include the following:

       •  no cumulative voting by stockholders for directors;
 
       •  a classified board of directors with three-year staggered terms;
 
       •  the ability of the board of directors to set the size of the board of directors, to create new directorships and to fill vacancies;
 
       •  the ability of the board of directors, without stockholder approval, to issue preferred stock, which may have rights and preferences that are superior to common stock;
 
       •  the ability of the board of directors to amend the by-laws;
 
       •  the prohibition of stockholder action by written consent;
 
       •  the inability of stockholders to call a special meeting;
 
       •  advance notice requirements for stockholder proposals and for nominating candidates to the board of directors, which generally require that stockholder proposals and nominations be provided to us between 90 and 120 days before the anniversary of our last annual meeting in order to be properly brought before a stockholder meeting;
 
       •  a stockholder rights plan, which discourages the unauthorized acquisition of 20 percent or more of the outstanding common stock or an unauthorized exchange or tender offer; and
 
       •  the requirement that certain business combinations with an “interested stockholder” (defined as a holder of ten percent or more of the outstanding voting stock) must be approved by holders of 66 2/3 percent of the voting power of shares not owned by the interested stockholder, unless the business combination is approved by certain “continuing directors” (as defined in our certificate of incorporation) or meets certain requirements regarding price and procedure.

In addition, Section 203 of the Delaware General Corporation Law could have the anti-takeover effects described under “Description of Capital Stock of MoneyGram — Section 203 of the Delaware General Corporation Law”

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and “Description of Capital Stock of New Viad — Section 203 of the Delaware General Corporation Law.” Please see “Description of Capital Stock of MoneyGram” and “Description of Capital Stock of New Viad” for a more detailed description of these agreements and provisions.
 
  The combined value of MoneyGram common stock and New Viad common stock after the spin-off may not equal or exceed the pre-spin-off value of Viad common stock.

           We cannot determine the trading value of MoneyGram common stock or New Viad common stock after the spin-off. The combined trading value of MoneyGram and New Viad common stock after the spin-off may not be equal to or exceed the pre-spin-off value of Viad common stock, taking into account the proposed reverse stock split of New Viad common stock that, if approved by Viad stockholders and effected by New Viad, would be effective following the spin-off.

 
The securities of MoneyGram and New Viad, as separate companies, have no prior market. This may result in fluctuations in stock prices, which may harm each company’s ability to raise capital.

           The common stock of MoneyGram and New Viad, as separate companies, has not been publicly traded, and an active trading market may not develop or be sustained after the completion of the spin-off. Until the market has fully evaluated the businesses of MoneyGram and New Viad, the trading prices of MoneyGram and New Viad common stock may fluctuate significantly. The market price of MoneyGram and New Viad common stock could be subject to significant fluctuations after the spin-off due to factors such as:

       •  actual or anticipated fluctuations in results of operations;
 
       •  failure to be covered by securities analysts, or failure to meet securities analysts’ expectations;
 
       •  success of operating strategies;
 
       •  realization of any of the risks described in this section;
 
       •  in the case of MoneyGram, decline in the stock prices of peer companies; and
 
       •  in the case of New Viad, the absence of comparable public companies in the markets of New Viad’s primary businesses.

           Substantially all of the shares of MoneyGram common stock that will be issued in the distribution will be eligible for immediate resale in the public market, except for shares of MoneyGram common stock held by affiliates of MoneyGram under the rules of the Securities Act of 1933, as amended. We believe that approximately            shares of MoneyGram common stock will be held by affiliates. The shares held by affiliates may only be sold pursuant to an effective registration statement under the Securities Act or an exemption from the registration requirements of the Securities Act, such as the exemptions provided by Sections 4(1) or 4(2) of the Securities Act or Rule 144 thereunder. Rule 144, as currently in effect, generally provides that an affiliate who has held shares of MoneyGram common stock (or the shares of Viad common stock that such shares were issued in respect of) for one year or has held the shares of Viad, may sell such shares in broker’s transactions, subject to quarterly volume limitations. A significant redistribution of MoneyGram common stock could occur in the public markets during the first weeks or months that MoneyGram common stock is traded because of the differing objectives and strategies of investors that acquire these shares in the distribution.

           In addition, following the spin-off, New Viad is likely to be removed from the S&P Mid-Cap 400 index and will have a substantially smaller market capitalization. Because of these facts, there is likely to be a substantial shift in the makeup of New Viad’s stockholder base. As this shift occurs, there are likely to be significant fluctuations in the prices at which Viad common stock trades.

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SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

      Some of the statements made by MoneyGram and New Viad in this information statement under “Summary,” “Risk Factors,” “The Spin-Off,” “Management’s Discussion and Analysis of Financial Condition and Results of Operation of Viad Corp,” “Business of MoneyGram,” “Management’s Discussion and Analysis of Financial Condition and Results of Operation of New Viad,” “Business of New Viad” and elsewhere in this information statement are not statements of historical fact and constitute forward-looking statements. These forward-looking statements are based on management’s current estimates, projections, views and assumptions regarding future events, future business conditions and the outlook for MoneyGram and New Viad based on currently available information.

      Forward-looking statements include statements concerning or based on:

  •  MoneyGram’s and New Viad’s possible or assumed future results of operations and operating cash flows;
 
  •  MoneyGram’s and New Viad’s business strategies and investment policies;
 
  •  MoneyGram’s and New Viad’s financing plans and the availability of short-term borrowing;
 
  •  MoneyGram’s and New Viad’s competitive position;
 
  •  potential growth opportunities available to MoneyGram and New Viad;
 
  •  MoneyGram’s and New Viad’s potential operating performance, achievements, productivity improvements, efficiency and cost reduction efforts;
 
  •  changes in interest and tax rates;
 
  •  benefits to MoneyGram and New Viad resulting from the effects of the spin-off or reverse stock split;
 
  •  effects of competition on MoneyGram and New Viad; and
 
  •  effects of future legislation and regulation on MoneyGram and New Viad.

Forward-looking statements can be identified by forward-looking terminology such as “believe,” “plan,” “expect,” “anticipate,” “intend,” “estimate,” “forecast,” “project,” “predict,” “potential,” “is confident that,” “will likely result,” “continue,” “may,” “will,” “should” or similar expressions or the negative of these terms or similar expressions.

      Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in or implied by forward-looking statements. For example, any of the risks discussed under “Risk Factors” could cause the results of MoneyGram or New Viad to be materially different from those expressed in forward-looking statements. In addition, other factors that could cause the results of MoneyGram or New Viad to be materially different from those expressed in forward-looking statements include:

  •  MoneyGram’s or New Viad’s gain or loss of customers;
 
  •  consumer demand patterns;
 
  •  labor relations;
 
  •  purchasing decisions by customers of MoneyGram or New Viad;
 
  •  industry alliances and consolidation and growth patterns within the industries in which MoneyGram or New Viad operates; and
 
  •  general economic, competitive, governmental, technological and capital marketplace conditions, including further terrorist activities or war.

There may also be other risks that we are unable to predict at this time. Both MoneyGram and New Viad wish to caution readers not to rely on any of these forward-looking statements, which speak only as of the date made. Neither MoneyGram nor New Viad has any intention or obligation to update forward-looking statements after the date of this information statement, whether as a result of new information, future developments or otherwise.

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THE SPIN-OFF

Background of the Spin-Off

      On July 24, 2003, Viad announced a plan to separate its global payment services business from its other businesses by means of a tax-free spin-off transaction. To effect the separation, Travelers Express Company, Inc., which currently conducts the global payment services business, will become a subsidiary of Viad’s newly formed, wholly-owned subsidiary, MoneyGram, and Viad’s board of directors will declare a dividend on Viad common stock consisting of the                      shares of MoneyGram common stock that Viad will own on the distribution date. These shares of MoneyGram common stock will represent all of the outstanding MoneyGram common stock on that date. The dividend will be paid at 11:59 p.m., New York City time, on                     , 2004, in the amount of one share of MoneyGram common stock for each outstanding share of Viad common stock as described below.

      Please note that you will not be required to pay any cash or other consideration for the shares of MoneyGram common stock distributed to you or to surrender or exchange your shares of Viad common stock to receive the dividend of MoneyGram common stock. You will continue to own your shares of Viad common stock, and, if you were a Viad stockholder on the record date for the distribution, you will also receive shares of MoneyGram common stock. The distribution will not otherwise change the number of, or the preferred share purchase rights associated with, outstanding shares of Viad common stock.

Reasons for the Spin-Off

      Viad and MoneyGram believe that the key benefits of the spin-off include:

  •  Direct access to capital markets. As an independent public company, MoneyGram will be able to directly access the capital markets, and issue equity and debt more easily and on more favorable terms in order to finance expansion, growth opportunities and debt repayment.
 
  •  Greater strategic focus. MoneyGram and New Viad each expects to have a sharper focus on its businesses and growth opportunities as a result of their respective boards of directors and management teams concentrating only on their core businesses. MoneyGram and New Viad believe that each will be able to make decisions more quickly, deploy resources more rapidly and efficiently, and operate with more agility than when all of their businesses were part of a larger organization. Further, the separation of MoneyGram from Viad will eliminate any competition for capital among Viad’s various businesses, which MoneyGram and New Viad believe will enhance the businesses’ opportunities for growth.
 
  •  Increased ability to attract, retain and motivate employees. MoneyGram and New Viad believe that incentive compensation arrangements for key employees, directly related to the market performance of their respective common stock, will provide enhanced incentives for performance. The separation will enable each of MoneyGram and New Viad to offer its key employees compensation directly linked to the performance of its business, which they expect to enhance their ability to attract, retain and motivate qualified personnel.
 
  •  Improved ability to undertake acquisitions. After the completion of the spin-off, MoneyGram will be a “pure-play” payment services company. MoneyGram expects that having a more focused equity currency will improve its ability to pursue strategic initiatives, including acquisitions, joint ventures and investments.
 
  •  Better understanding of businesses. The businesses of each of MoneyGram and New Viad will be more easily understood by investors, rating agencies, clearing banks and others after the completion of the spin-off.

The Number of MoneyGram Shares You Will Receive

      For each share of Viad common stock that you owned at 5:00 p.m., New York City time, on                     , 2004, the record date, you will receive one share of MoneyGram common stock, together with the attached

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preferred share purchase right. Because you will receive one share of MoneyGram common stock for each share of Viad common stock that you hold, Viad will not need to issue or pay cash in lieu of any fractional shares of MoneyGram common stock. It is important to note that if you sell your shares of Viad common stock between the record date and the distribution date in the “regular way” market, you will be selling your right to receive the share dividend in the distribution. See “— Trading between the Record Date and Distribution Date.”

Results of the Spin-Off

      After the completion of the spin-off, MoneyGram and New Viad will be separate, independent, public companies. Immediately following the completion of the spin-off, there will be approximately                      beneficial holders of shares of MoneyGram common stock, based on the number of beneficial holders of Viad common stock on                     , 2004, and approximately                    shares of MoneyGram common stock outstanding. There will also be options outstanding to purchase MoneyGram common stock as described in “— Treatment of Employee Stock Options.”

      MoneyGram and Viad will be parties to a number of agreements that govern MoneyGram’s separation from Viad and their future relationship. Under these agreements, among other things:

  •  assets, personnel and liabilities currently associated with Viad’s global funds transfer and payment systems business and other specified assets and liabilities will be allocated to MoneyGram, while all other assets, personnel and liabilities will be allocated to New Viad;
 
  •  MoneyGram will indemnify New Viad against liabilities related to MoneyGram’s business and other specified liabilities and New Viad will indemnify MoneyGram against liabilities related to New Viad’s business;
 
  •  employees, employee benefit plans and associated liabilities and related assets will be allocated between MoneyGram and Viad, with Viad generally remaining responsible for compensation and benefit liabilities for employees and former employees assigned to it, and MoneyGram being responsible for compensation and benefit liabilities for employees and former employees assigned to it and specified liabilities relating to Viad employees and former employees (except that MoneyGram will assume specified liabilities relating to employees and former employees of Viad under its primary defined benefit pension plan, supplemental executive retirement plans, deferred compensation plans and specified executive medical benefits);
 
  •  federal, state, local and foreign tax liabilities for all periods through the spin-off will be allocated between Viad and MoneyGram, with MoneyGram being liable for all federal, state, local and foreign tax liabilities, including any such liabilities resulting from the audit of or other adjustment to previously filed tax returns, that are attributable to the business of MoneyGram for all periods through the spin-off, and Viad being responsible for all other of these taxes through the spin-off.

      For further information on the effects of the spin-off on MoneyGram and New Viad, see “Relationship between New Viad and MoneyGram.”

      In connection with the spin-off, Viad will repay all or a portion of its outstanding commercial paper (or similar indebtedness), of which it currently has approximately $168 million outstanding, with amounts received from MoneyGram or Travelers Express Company, Inc. prior to the spin-off. Viad also intends to seek to repurchase all of its outstanding subordinated debt and medium-term notes and repay industrial revenue bonds for which it is responsible, for an aggregate amount of approximately $68.5 million (which includes an estimated tender premium with respect to the public indebtedness). In addition, Viad intends to redeem its outstanding preferred stock at an aggregate redemption price of $23.7 million. Viad will fund the preferred stock redemption, repurchase of public indebtedness and repayment of industrial revenue bonds, as well as the repayment of any commercial paper not funded with amounts received from MoneyGram, with cash on hand. See “Relationship between New Viad and MoneyGram — The Separation.”

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      The spin-off will not affect the number of outstanding shares of Viad common stock or any rights of Viad stockholders; however, the number of outstanding shares of Viad common stock will change if the reverse stock split is completed. See “— Reverse Stock Split.”

Material U.S. Federal Income Tax Consequences of the Spin-Off

      The following discussion summarizes the material U.S. federal income tax consequences of the spin-off. This discussion is based on the Code, the Treasury regulations promulgated thereunder, judicial opinions, published positions of the Internal Revenue Service, and all other applicable authorities as of the date of this information statement, all of which are subject to change (possibly with retroactive effect).

      The following discussion is limited to holders of Viad common stock that are U.S. persons for federal income tax purposes and may not describe all of the tax consequences that may be relevant to a holder in light of his or her particular circumstances or to holders subject to special rules. In addition, this summary is limited to holders that hold their Viad common stock as a capital asset. This summary may not be applicable to stockholders that received their Viad common stock pursuant to the exercise of employee stock options, or otherwise as compensation. Accordingly, each stockholder should consult his or her tax advisor as to the particular consequences of the spin-off of MoneyGram common stock to that stockholder, including the application of U.S. state, local and foreign tax laws, and as to possible changes in tax laws that may affect the tax consequences described in this information statement.

      Viad has received a favorable private letter ruling from the Internal Revenue Service confirming, among other things, that the spin-off will qualify as tax-free to Viad and its stockholders under Section 355 of the Code and related provisions. Although the rulings relating to the qualification of the spin-off as a tax-free transaction are generally binding on the Internal Revenue Service, the continuing validity of the rulings is subject to factual representations and assumptions. Neither Viad nor MoneyGram is aware of any facts or circumstances that would cause these representations and assumptions to be untrue in any material respect. If the Internal Revenue Service subsequently held the spin-off to be taxable, the consequences described below would not apply and both Viad and holders of Viad common stock that received shares of MoneyGram common stock in the spin-off could be subject to tax. In this case, MoneyGram may have to indemnify New Viad, and New Viad may have to indemnify MoneyGram, for some or all of the resulting taxes and related losses.

      For U.S. federal income tax purposes the principal U.S. federal income tax consequences of the spin-off will be as follows:

  •  no gain or loss will be recognized by, and no amount will be included in the income of, Viad upon the spin-off other than with respect to any “excess loss account” or “intercompany transaction” required to be taken into account under Treasury regulations relating to consolidated returns;
 
  •  no gain or loss will be recognized by, and no amount will be included in the income of, a holder of Viad common stock as a result of the receipt of shares of MoneyGram common stock in the spin-off;
 
  •  a holder of Viad common stock will apportion the tax basis for that holder’s Viad common stock on which MoneyGram stock is distributed between Viad common stock and MoneyGram common stock received in the spin- off in proportion to the relative fair market values of Viad common stock and MoneyGram common stock on the date of the spin-off; and
 
  •  the holding period of the shares of MoneyGram common stock received by a holder of Viad common stock in the spin-off will include the period during which such holder held the Viad common stock on which MoneyGram common stock is distributed.

      Current Treasury regulations require each Viad stockholder that receives MoneyGram common stock pursuant to the spin-off to attach to his or her U.S. federal income tax return, for the year in which the spin-off occurs, a detailed statement setting forth data as may be appropriate in order to show the applicability to the spin-off of Section 355 of the Code. Viad will provide appropriate information to each holder of record of Viad common stock as of the record date.

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Listing and Trading of MoneyGram and Viad Common Stock

      Viad presently owns all of the outstanding shares of MoneyGram common stock. No trading prices are available with respect to these shares. Neither MoneyGram nor Viad can assure you as to the trading price of MoneyGram or New Viad common stock after the spin-off or as to whether their initial combined price will be higher or lower than the price of Viad common stock prior to the spin-off. See “Risk Factors — Risks Relating to the Securities Markets and Ownership of MoneyGram or New Viad Common Stock.”

      MoneyGram has applied to list MoneyGram common stock on the New York Stock Exchange, Inc. under the symbol “MGI.”

      The shares of MoneyGram common stock distributed to Viad stockholders will be freely transferable, except for shares received by persons that may have a special relationship or affiliation with MoneyGram. Persons that may be considered our affiliates after the spin-off generally include individuals or entities that control, are controlled by or are under common control with MoneyGram. This may include some or all of the officers and directors of MoneyGram. Affiliates of MoneyGram will be permitted to sell their shares of MoneyGram common stock only pursuant to an effective registration statement under the Securities Act or an exemption from the registration requirements of the Securities Act, such as the exemptions afforded by Sections 4(1) or 4(2) of the Securities Act or Rule 144 thereunder.

      New Viad common stock will continue to trade on the New York Stock Exchange, Inc. under the symbol “VVI.”

Trading between the Record Date and Distribution Date

      Between the record date and the distribution date, Viad expects that there will be two markets in Viad common stock: a regular way market and an ex-dividend market. Shares of Viad common stock that trade on the regular way market will trade with an entitlement to shares of MoneyGram common stock distributed in the distribution. Shares that trade on the ex-dividend market will trade without an entitlement to shares of MoneyGram common stock distributed in the distribution. Therefore, if you owned shares of Viad common stock at 5:00 p.m., New York City time, on the record date and sell those shares on the regular way market prior to the distribution date, you will also be trading the shares of MoneyGram common stock that would have been distributed to you in the distribution. If you sell those shares of Viad common stock on the ex-dividend market prior to the distribution date, you will still receive the shares of MoneyGram common stock that were to be distributed to you pursuant to your ownership of the shares of Viad common stock. If the spin-off does not occur, all ex-dividend trading will be null and void. If ex-dividend trading occurs, the listing of Viad common stock will be under the symbol “VVI” accompanied by the letters “wi.”

      Between the record date and the distribution date, a when-issued trading market in MoneyGram common stock may develop. The when-issued trading market will be a market for shares of MoneyGram common stock that will be distributed to Viad stockholders on the distribution date. If you owned shares of Viad common stock at 5:00 p.m., New York City time, on the record date, then you are entitled to shares of MoneyGram common stock distributed pursuant to the distribution. You may trade this entitlement to shares of MoneyGram common stock, without the shares of Viad common stock you own, on the when-issued trading market. On the first trading day following the distribution date, when issued trading with respect to MoneyGram common stock will end and regular way trading will begin. If when-issued trading occurs, the listing for MoneyGram common stock will be under the trading symbol “MGI” accompanied by the letters “wi.” If the spin-off does not occur, all when-issued trading will be null and void.

When and How You Will Receive the Dividend

      Viad will pay the dividend on                     , 2004, by releasing its shares of MoneyGram common stock, together with the attached preferred share purchase rights, to be distributed in the distribution to Wells Fargo Shareowner Services, our transfer agent. As part of the distribution, MoneyGram will be adopting a book-entry share transfer and registration system for MoneyGram common stock. Instead of receiving physical share certificates, registered holders of Viad common stock entitled to the distribution will have their shares of MoneyGram common stock distributed on the distribution date credited to book-entry accounts established for

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them by the transfer agent. The transfer agent will mail an account statement to each registered holder stating the number of shares of MoneyGram common stock credited to the holder’s account. After the distribution, you may request:

  •  a transfer of all or a portion of your shares of MoneyGram common stock to a brokerage or other account; and
 
  •  receipt of one or more physical share certificates representing your shares of MoneyGram common stock.

      For those holders of Viad common stock that hold their shares through a broker, bank or other nominee, the transfer agent will credit the shares of MoneyGram common stock to the accounts of those nominees that are registered holders, that, in turn, will credit their customers’ accounts with MoneyGram common stock. MoneyGram and Viad anticipate that brokers, banks and other nominees will generally credit their customers’ accounts with MoneyGram common stock within three to eight days of the distribution date.

Treatment of Employee Stock Options

      As of the distribution date, each Viad option that immediately prior to the distribution date is outstanding and not exercised will be adjusted to consist of two options: (1) an option to purchase shares of Viad common stock and (2) an option to purchase shares of MoneyGram common stock. The exercise price of the Viad stock option will be adjusted by multiplying the exercise price of the old stock option by a fraction, the numerator of which is the closing price of a share of Viad common stock on the first trading day after the distribution date (without the right to receive the distribution) and the denominator of which is that price plus the closing price of a share of MoneyGram common stock on the first trading day after the distribution date. The exercise price of the MoneyGram stock option will equal the exercise price of the old stock option times a fraction, the numerator of which is the closing price of a share of MoneyGram common stock on the first trading day after the distribution date and the denominator of which is that price plus the closing price of a share of Viad common stock on the first trading day after the distribution date. This will result in two options with a combined intrinsic value equal to the intrinsic value of the Viad stock option before taking into account the effect of the distribution. See “Relationship between New Viad and MoneyGram — Agreements between Viad and MoneyGram — Employee Benefits Agreement.”

Reverse Stock Split

      Viad intends to seek the approval of its stockholders at its 2004 annual meeting of stockholders to effect a one-for-four reverse stock split of Viad common stock to be effected following the spin-off. If this reverse stock split were to be approved and effected, you would receive one share of Viad common stock for each four shares of Viad common stock that you held at the time it was effected. Information concerning this reverse stock split is contained in the proxy statement provided to you in connection with Viad’s 2004 annual meeting. You do not need to take any action at this time in connection with the proposed reverse stock split.

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DIVIDEND POLICY OF MONEYGRAM

      In 2003, Viad paid a quarterly dividend of $0.09 per share of Viad common stock. MoneyGram has not yet determined whether it will pay dividends on MoneyGram common stock following the spin-off (and if so, the amount thereof), and MoneyGram may determine not to pay any dividends on MoneyGram common stock following the spin-off. Any future determination to pay dividends on MoneyGram common stock will be at the discretion of MoneyGram’s board of directors and will depend on MoneyGram’s financial condition, results of operations, cash requirements, prospects and such other factors as MoneyGram’s board of directors may deem relevant.

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CAPITALIZATION OF VIAD CORP

(Accounting Predecessor to MoneyGram International, Inc.)

      The following table sets forth the unaudited historical capitalization of Viad Corp (accounting predecessor to MoneyGram International, Inc.) at December 31, 2003, and unaudited pro forma capitalization of MoneyGram International, Inc. (accounting successor to Viad Corp) at December 31, 2003, after giving effect to the anticipated preferred stock redemption, the debt refinancing and the spin-off and related transactions, each as if they occurred on that date. For an explanation of the spin-off and related transactions between MoneyGram and Viad, see “Unaudited Pro Forma Consolidated Financial Information of MoneyGram International, Inc. (Accounting Successor to Viad Corp).”

      This table should be read in conjunction with Viad Corp’s consolidated financial statements and related notes, the “Unaudited Pro Forma Consolidated Financial Information of MoneyGram International, Inc. (Accounting Successor to Viad)” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Viad Corp (Accounting Predecessor to MoneyGram International, Inc.)”

                     
December 31, 2003

Historical Pro Forma


(in thousands, except share
data)
Current portion of long-term debt
  $ 21,211     $ 296  
     
     
 
Long-term debt:
               
 
Long-term debt, less current portion
  $ 230,232     $ 150,552  (1)
     
     
 
$4.75 Preferred stock subject to mandatory redemption, call price of $101, 234,983 shares outstanding historical and none pro forma
    6,733        (1)
     
     
 
Stockholders’ equity:
               
 
Common stock, $1.50 par value, 200,000,000 shares authorized, 99,739,925 issued historical and $0.01 par value, 250,000,000 shares authorized, 88,357,561 issued and outstanding pro forma
    149,610       884  (2)
 
Additional capital
    218,783       52,021  (2)
 
Retained income
    863,944       509,372  (1)(2)
 
Unearned employee benefits and other
    (58,026 )     (35,442 )(2)
 
Accumulated other comprehensive income (loss):
               
   
Unrealized gain on available-for-sale securities
    105,263       104,942  (2)
   
Unrealized loss on derivative financial instruments
    (106,471 )     (106,471 )(2)
   
Cumulative foreign currency translation adjustments
    12,387       4,536  (2)
   
Minimum pension liability adjustment
    (42,749 )     (38,536 )(2)
 
Common stock in treasury, at cost, 11,382,364 shares historical and none pro forma
    (292,904 )      (3)
     
     
 
 
Total Stockholders’ equity
    849,837       491,306  
     
     
 
Total Capitalization
  $ 1,086,802     $ 641,858  
     
     
 


(1)  The pro forma capitalization of MoneyGram International, Inc. assumes that at December 31, 2003:

  •  MoneyGram International, Inc. obtained bank credit facilities of $350.0 million, drew $150.0 million on these facilities and paid that amount to Viad Corp, and Viad Corp used such $150 million to repay all or a portion of its commercial paper as described below.
 
  •  Viad Corp repaid its commercial paper of $168.0 million, repurchased its senior notes and subordinated debt in a total amount of $53.5 million, retired industrial revenue bonds of $9.0 million and redeemed its outstanding preferred stock at an aggregate call price of $23.7 million. The total cash used related to the debt repayment and preferred stock redemption is assumed to be $260.2 million, of which $150.0 million

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  is assumed to be provided by MoneyGram’s borrowings under its new bank facilities described above, $30.0 million is assumed to be provided by borrowings by New Viad under its new credit facilities described in this information statement and $80.2 million is assumed to come from cash on hand (including funds received by Viad from Travelers Express Company, Inc.).
 
  •  An aggregate loss of $23.0 million was recorded in connection with the early retirement of debt and the redemption of preferred stock.

(2)  The pro forma capitalization at December 31, 2003 also reflects the following:

  •  The net assets of New Viad are assumed to be distributed as a dividend at historical cost.
 
  •  An aggregate loss of $23.0 million is assumed to be recorded in connection with the early retirement of debt and the redemption of preferred stock.
 
  •  The elimination of treasury stock described in note (3) below.
 
  •  One-time pre-tax expenses of $4.0 million were incurred in order to complete the spin-off.
 
  •  The allocation of the employee equity trust between MoneyGram International, Inc. and Viad Corp as contemplated by the Employee Benefits Agreement.
 
  •  The change in the par value of MoneyGram common stock from $1.50 per share to $0.01 per share.

(3)  The pro forma capitalization at December 31, 2003 reflects the elimination of Viad treasury stock, which shares will be treasury shares of New Viad.

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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION OF

MONEYGRAM INTERNATIONAL, INC.
(Accounting Successor to Viad Corp)

      On July 24, 2003, Viad Corp announced a plan to separate its global payment services business from its other businesses by means of a tax-free spin-off transaction. To effect the separation, Travelers Express Company, Inc., which currently conducts Viad Corp’s global payment services business, will become a subsidiary of MoneyGram International, Inc., a newly formed, wholly-owned subsidiary of Viad Corp, and Viad will distribute all of the shares of MoneyGram common stock as a dividend on Viad common stock.

      In connection with the spin-off, Viad Corp, MoneyGram International, Inc. and Travelers Express Company, Inc. will engage in the following transactions:

  •  A newly formed, wholly-owned subsidiary of MoneyGram will be merged with and into Travelers Express Company, Inc., which currently conducts Viad Corp’s global payment services business and is a wholly-owned subsidiary of Viad Corp. As a result of the merger, Travelers Express Company, Inc. will become a wholly-owned subsidiary of MoneyGram International, Inc.
 
  •  Prior to the merger, each of Viad Corp and MoneyGram International, Inc. expect to enter into new credit agreements, as described under “Financing Arrangements of MoneyGram” and “Financing Arrangements of New Viad.” Following the spin-off, Viad Corp expects to borrow approximately $30 million under its new credit agreement, and MoneyGram International, Inc. expects to borrow $150 million under its new credit agreement.
 
  •  In connection with the merger, MoneyGram International, Inc. will pay $150 million to Viad Corp. MoneyGram International, Inc. will fund this payment with the borrowing under its new credit agreement. Viad Corp will use all of the proceeds of this cash payment to repay all or a portion of its outstanding commercial paper (or other similar indebtedness). Viad Corp currently has approximately $168 million of commercial paper outstanding.
 
  •  Prior to the merger, Viad Corp intends to seek to repurchase all of its outstanding subordinated debt, medium-term notes and to repay industrial revenue bonds for which it is responsible, for an aggregate amount of approximately $68.5 million (which includes an estimated tender premium with respect to the public indebtedness). In addition, prior to the merger, Viad Corp expects to redeem its outstanding preferred stock (carrying value of $6.7 million) at an aggregate redemption price of $23.7 million. Viad Corp will fund the preferred stock redemption, repurchase of public indebtedness and repayment of the industrial revenue bonds, as well as the repayment of any commercial paper in excess of the $150 million described above, with the proceeds of the borrowings under its new credit agreement and with cash on hand (including funds received from Travelers Express Company, Inc. prior to the merger). The total amount of cash required to fund the repayment of commercial paper, preferred stock redemptions and debt retirement described above is expected to be $260.2 million. Viad Corp expects to record an aggregate pre-tax loss on the debt retirement and preferred stock redemption of $23.0 million at the time that such transactions occur. (Following the spin-off, this loss would be reflected on the financial statements of MoneyGram, as the accounting successor to Viad Corp.)
 
  •  Pursuant to the Employee Benefits Agreement, MoneyGram International, Inc. and Travelers Express Company, Inc. will assume certain employee benefits liabilities of MoneyGram International, Inc. and Viad Corp, and in connection with the assumption of certain liabilities, Viad Corp will transfer certain related assets to Travelers Express Company, Inc. In connection with the transactions contemplated by the Employee Benefits Agreement, the unaudited pro forma consolidated balance sheet of MoneyGram International, Inc. (accounting successor to Viad Corp) reflects the transfer to a trust established by MoneyGram International, Inc. of shares of MoneyGram common stock that will be distributed in the spin-off with respect to the shares of Viad common stock held in the Viad Employee Equity Trust, which will be used to provide employee benefits to employees of MoneyGram International, Inc.

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  •  Pursuant to the Tax Sharing Agreement, tax sharing payments of approximately an aggregate of $35 million will be made from Travelers Express Company, Inc. to Viad Corp in respect of alternative minimum tax credits and general business tax credits.
 
  •  We expect that Viad Corp will incur pre-tax expenses of up to approximately $18 million, primarily related to investment banking, legal and accounting fees, in order to complete the spin-off and related transactions. Of these expenses, approximately $4.0 million is expected to be incurred by MoneyGram International, Inc. and $14.0 million is expected to be incurred by New Viad.
 
  •  We expect that prior to the merger, Travelers Express Company, Inc., will pay cash dividends to Viad Corp in the amount of the net income of Travelers Express Company, Inc. in 2004 to the date of the spin-off. Because we do not currently know when the distribution will occur or how Travelers Express Company, Inc.’s business will perform during that time, we cannot provide an estimate of the amount of the dividend. To the extent not used as described above, that cash will be retained by New Viad or used in connection with its business and operations following the spin-off.

      The transactions described above related to the transfer of employee benefit plan liabilities and related assets and the tax sharing payment are included in New Viad’s historical combined financial statements because these items will be allocated as described pursuant to the Employee Benefits Agreement and the Tax Sharing Agreement. As such, no further pro forma adjustments (except as noted) were made to the unaudited consolidated financial information of MoneyGram International, Inc. (accounting successor to Viad Corp) or the unaudited combined financial information of New Viad related to these items. All other items are reflected in the “pro forma adjustments — other” column in the pro forma unaudited consolidated (combined) financial information, as applicable.

      At the time of the spin-off, the business of MoneyGram will consist solely of the business of Viad’s current Payment Services operations. The continuing business of Viad will consist solely of the businesses of the convention and event services, exhibit design and construction, and travel and recreation services operations including Viad’s centralized corporate functions. The allocation of historical assets, liabilities, revenues and expenses between MoneyGram and New Viad is based on the legal ownership of such items as stipulated in the Separation and Distribution Agreement. In general, the net assets of MoneyGram reflect those net assets historically reported by Viad in the “Payment Services segment,” adjusted for the effects of the tax sharing and employee benefit transfer transactions described above. Similarly, the revenues and expenses of MoneyGram reflect those specific to the payment services operations, also adjusted for the effects of the above transactions. Additionally, the expenses of MoneyGram include allocated corporate overhead expenses which are directly attributable to and incurred on behalf of the Payment Services business. All other assets, liabilities, revenues and expenses are allocated to the businesses comprising New Viad.

      Notwithstanding the legal form of the spin-off, due to the relative significance of MoneyGram International, Inc. to Viad Corp, MoneyGram International, Inc. will be considered the divesting entity and treated as the accounting successor to Viad Corp for financial reporting purposes in accordance with the EITF No. 02-11. The spin-off of New Viad will be accounted for pursuant to Accounting Principles Board (APB) Opinion No. 29, “Accounting for Non-Monetary Transactions (APB No. 29).” Accordingly, the spin-off will be accounted for based upon the recorded amounts of the New Viad assets to be divested. MoneyGram International, Inc. will charge directly to equity as a dividend the historical cost carrying amount of the net assets of New Viad after reduction, if appropriate, for any indicated impairment of value. Management currently believes there is no indicated impairment of value of the net assets of New Viad. Furthermore, if the spin-off transaction were to occur, MoneyGram International, Inc. would report the historical results of operations (subject to certain adjustments) of New Viad in discontinued operations in accordance with the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

      The following unaudited pro forma consolidated statements of income for the years ended December 31, 2003, 2002 and 2001 and the unaudited pro forma consolidated balance sheet at December 31, 2003 present the consolidated results of operations and financial position of MoneyGram International, Inc. (accounting successor to Viad Corp) assuming that the preferred stock redemption, debt refinancing and the transactions contemplated by the spin-off had been completed as of the beginning of 2003, 2002 and 2001 with respect to the unaudited pro

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forma consolidated statements of income for the years ended December 31, 2003, 2002 and 2001, respectively, and at December 31, 2003 with respect to the pro forma consolidated balance sheet at December 31, 2003. In the opinion of management, except as described below, the following unaudited pro forma financial statements include all material adjustments necessary to reflect, on a pro forma basis, the impact of transactions contemplated by the spin-off on the historical financial information of MoneyGram International, Inc. The adjustments are described in the notes to the pro forma consolidated financial information.

      The unaudited pro forma consolidated statements of income only disclose income from continuing operations and related per share data, and do not include the effects of discontinued operations and changes in accounting principles if historically reported by Viad Corp in a particular period. Net income and related per share data is presented for periods in which discontinued operations or changes in accounting principles were not previously reported. Furthermore, the unaudited pro forma consolidated statements of income include only those adjustments directly attributable to the preferred stock redemption, debt refinancing, and transactions that are expected to have a continuing impact on MoneyGram International, Inc. and do not include material nonrecurring charges directly attributable to the spin-off and related transactions. These nonrecurring charges include the currently estimated one-time loss on the retirement of Viad’s debt and redemption of preferred stock of approximately $23.0 million, and the expected one-time expenses of approximately $18.0 million (of which $4.0 million is expected to be incurred by MoneyGram International, Inc. and $14.0 million is expected to be incurred by New Viad), primarily related to investment banking, legal and accounting fees that will be required to complete the spin-off. The unaudited pro forma consolidated balance sheet at December 31, 2003, includes adjustments directly attributable to the spin-off and related transactions regardless of whether they have a continuing impact or are nonrecurring.

      The unaudited pro forma consolidated financial information of MoneyGram International, Inc. (accounting successor to Viad Corp) should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Viad Corp (Accounting Predecessor to MoneyGram International, Inc.)” and the historical consolidated financial statements of Viad Corp and the related notes. The pro forma consolidated financial information has been prepared for informational purposes only and does not reflect the results of operations or financial position of MoneyGram International, Inc. that would have occurred had MoneyGram International, Inc. operated as a separate, independent company for the periods presented. Actual results might have differed from pro forma results if MoneyGram International, Inc. had operated independently. The pro forma consolidated financial information should not be relied upon as being indicative of MoneyGram’s results of operations or financial condition had the debt refinancing and transactions contemplated by the spin-off been completed on the date assumed. The pro forma consolidated financial information also does not project the results of operations or financial position for any future period or date.

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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME

                                     
Year ended December 31, 2003

Adjustments

Historical Historical Pro Forma
Viad Corp New Viad Other MoneyGram(2)




(in thousands, except per share data)
Revenues:
                               
 
Convention show services
  $ 521,433     $ (521,433 )   $     $  
 
Payment services transaction fees
    483,404                   483,404  
 
Payment services investment income
    318,221                   318,221  
 
Exhibit design and construction
    195,832       (195,832 )            
 
Travel and recreation services
    53,203       (53,203 )            
     
     
     
     
 
   
Total revenues
    1,572,093       (770,468 )           801,625  
     
     
     
     
 
Costs and expenses:
                               
 
Costs of services
    1,207,793       (525,266 )     (2,619 )(3)     679,908  
 
Costs of products sold
    193,986       (193,986 )            
 
Corporate activities
    12,571       (15,190 )     2,619 (3)      
 
Other investment income
    (2,922 )     441       1,433 (4)     (1,048 )
 
Interest expense
    8,777       1,080       (3,548 )(5)     6,309  
 
Restructuring recoveries
    (5,015 )     5,015              
 
Minority interests
    110       (110 )            
     
     
     
     
 
   
Total costs and expenses
    1,415,300       (728,016 )     (2,115 )     685,169  
     
     
     
     
 
Income from continuing operations before income taxes
    156,793       (42,452 )     2,115       116,456  
Income tax expense (benefit)
    44,435       (21,361 )     825 (6)     23,899  
     
     
     
     
 
Income from continuing operations(1)
  $ 112,358     $ (21,091 )   $ 1,290     $ 92,557  
     
     
     
     
 
Diluted income per common share
                               
Income from continuing operations
  $ 1.29                     $ 1.07  
     
                     
 
Average outstanding and potentially dilutive common shares
    86,619                       86,619  
     
                     
 
Basic income per common share
                               
Income from continuing operations
  $ 1.29                     $ 1.07  
     
                     
 
Average outstanding common shares
    86,223                       86,223  
     
                     
 


(1)  Viad Corp’s historical results of operations included income from previously discontinued operations of $1.5 million (after-tax).
 
(2)  Management anticipates that Viad Corp will incur a pre-tax loss on the retirement of debt and redemption of preferred stock, currently estimated to be $23.0 million, in connection with the spin-off. Furthermore, management expects that pre-tax expenses of approximately $18.0 million, primarily related to investment banking, legal and accounting fees, will be required to complete the spin-off. Of these expenses, approximately $4.0 million is expected to be incurred by MoneyGram International, Inc. and $14.0 million is expected to be incurred by New Viad. These nonrecurring items have not been reflected in the pro forma consolidated statements of income.
 
(3)  Adjustment reflects reclassification of corporate costs consistent with MoneyGram International, Inc.’s expected classification.

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(4)  Adjustment assumes net decreased interest income on net cash and investments used in connection with the early retirement of Viad Corp’s debt and redemption of preferred stock. The net cash used for the debt retirement and preferred stock redemption is assumed to be $110.2 million, representing the total cash required to fund the above transactions of $260.2 million, less cash proceeds of $150.0 million resulting from MoneyGram’s credit facility borrowing. The interest income adjustment represents a reduction in the historical interest income recorded by Viad, and assumes Viad’s historical investment yield of 1.3% related to these funds is applied to the net cash used of $110.2 million.
 
(5)  Adjustment assumes net decreased interest expense of $3.5 million due to Viad’s debt retirement and preferred stock redemption transactions resulting in a gross reduction of interest expense of $6.7 million, less estimated interest expense incurred of $3.2 million under MoneyGram’s new credit facility borrowing. The assumed gross reduction of interest expense of $6.7 million represents the historical interest expense of Viad consisting of:

  •  $1.9 million related to the commercial paper retirement of $168.0 million (average interest rate of 1.1%),
 
  •  $2.2 million related to the senior debt retirement of $35.0 million (average interest rate of 6.3%),
 
  •  $1.9 million related to the subordinated debt retirement of $18.5 million (average interest rate of 10.5%), and
 
  •  $702,000 related to the retirement and redemption of the industrial revenue bonds and preferred stock.

  The estimated interest expense incurred of $3.2 million related to MoneyGram’s new credit facility assumes a borrowing of $150.0 million at a LIBOR-indexed interest rate of 2.1%, which is based on the average LIBOR rate for the period and the applicable interest rate spreads pursuant to the expected terms of MoneyGram’s new credit facility.

(6)  Adjustment assumes an effective income tax rate of 39 percent.

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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME

                                     
Year ended December 31, 2002

Adjustments

Historical Historical Pro Forma
Viad Corp New Viad Other MoneyGram(2)




(in thousands, except per share data)
Revenues:
                               
 
Convention show services
  $ 568,301     $ (568,301 )   $     $  
 
Payment services transaction fees
    431,564                   431,564  
 
Payment services investment income
    342,055                   342,055  
 
Exhibit design and construction
    217,932       (217,932 )            
 
Travel and recreation services
    58,253       (58,253 )            
     
     
     
     
 
   
Total revenues
    1,618,105       (844,486 )           773,619  
     
     
     
     
 
Costs and expenses:
                               
 
Costs of services
    1,227,244       (574,940 )     2,884  (3)     655,188  
 
Costs of products sold
    215,144       (215,144 )            
 
Corporate activities
    17,114       (14,230 )     (2,884 )(3)      
 
Other investment income
    (10,531 )     1,004       2,976  (4)     (6,551 )
 
Interest expense
    19,268       (4,056 )     (3,168 )(5)     12,044  
 
Restructuring charges
    18,942       (18,502 )           440  
 
Minority interests
    5,636       (384 )           5,252  
     
     
     
     
 
   
Total costs and expenses
    1,492,817       (826,252 )     (192)       666,373  
     
     
     
     
 
Income before income taxes and change in accounting principle
    125,288       (18,234 )     192       107,246  
Income tax expense (benefit)
    29,663       (9,839 )     75 (6)     19,899  
     
     
     
     
 
Income before change in accounting principle(1)
  $ 95,625     $ (8,395 )   $ 117     $ 87,347  
     
     
     
     
 
Diluted income per common share
                               
Income per share before change in accounting principle
  $ 1.09                     $ 1.01  
     
                     
 
Average outstanding and potentially dilutive common shares
    86,716                       86,716  
     
                     
 
Basic income per common share
                               
Income per share before change in accounting principle
  $ 1.10                     $ 1.01  
     
                     
 
Average outstanding common shares
    86,178                       86,178  
     
                     
 


(1)  Viad Corp’s historical results of operations included a transitional goodwill impairment charge related to the adoption of SFAS No. 142 of $37.7 million (after-tax).
 
(2)  Management anticipates that Viad Corp will incur a pre-tax loss on the retirement of debt and redemption of Viad preferred stock, currently estimated to be $23.0 million, in connection with the spin-off. Furthermore, management expects that pre-tax expenses of approximately $18.0 million, primarily related to investment banking, legal and accounting fees, will be required to complete the spin-off. Of these expenses, approximately $4.0 million is expected to be incurred by MoneyGram International, Inc. and $14.0 million is expected to be incurred by New Viad. These nonrecurring items have not been reflected in the pro forma consolidated statements of income.

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(3)  Adjustment reflects reclassification of corporate costs consistent with MoneyGram International, Inc.’s expected classification.
 
(4)  Adjustment assumes decreased interest income on net cash and investments used in connection with the early retirement of Viad Corp’s debt and redemption of preferred stock. The net cash used for the debt retirement and preferred stock redemption is assumed to be $110.2 million, representing the total cash required to fund the above transactions of $260.2 million, less cash proceeds of $150.0 million resulting from MoneyGram’s credit facility borrowing. The interest income adjustment represents a reduction in the historical interest income recorded by Viad, and assumes Viad’s historical investment yield of 2.7% related to these funds is applied to the net cash used of $110.2 million.
 
(5)  Adjustment assumes net decreased interest expense of $3.2 million due to Viad’s debt retirement and preferred stock redemption transactions resulting in a gross reduction of interest expense of $7.2 million, less estimated interest expense incurred of $4.0 million under MoneyGram’s new credit facility borrowing. The assumed gross reduction of interest expense of $7.2 million represents the historical interest expense of Viad consisting of:

  •  $2.9 million related to the commercial paper retirement of $168.0 million (average interest rate of 1.7%),
 
  •  $2.3 million related to the senior debt retirement of $35.0 million (average interest rate of 6.5%),
 
  •  $1.9 million related to the subordinated debt retirement of $18.5 million (average interest rate of 10.5%), and
 
  •  $144,000 related to the retirement and redemption of the industrial revenue bonds and preferred stock.

  The estimated interest expense incurred of $4.0 million related to MoneyGram’s new credit facility assumes a borrowing of $150.0 million at a LIBOR-indexed interest rate of 2.7%, which is based on the average LIBOR rate for the period and the applicable interest rate spreads pursuant to the expected terms of MoneyGram’s new credit facility.

(6)  Adjustment assumes an effective income tax rate of 39 percent.

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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME

                                     
Year ended December 31, 2001

Adjustments

Historical Historical Pro Forma
Viad Corp New Viad Other MoneyGram(2)




(in thousands, except per share data)
Revenues:
                               
 
Convention show services
  $ 604,148     $ (604,148 )   $     $  
 
Payment services transaction fees
    393,093                   393,093  
 
Payment services investment income
    313,432                   313,432  
 
Exhibit design and construction
    279,896       (279,896 )            
 
Travel and recreation services
    61,453       (61,453 )            
     
     
     
     
 
   
Total revenues
    1,652,022       (945,497 )           706,525  
     
     
     
     
 
Costs and expenses:
                               
 
Costs of services
    1,202,311       (616,418 )     (1,616 )(3)     584,277  
 
Costs of products sold
    280,050       (280,050 )            
 
Corporate activities
    12,029       (13,645 )     1,616  (3)      
 
Other investment income
    (5,652 )     529       3,638  (4)     (1,485 )
 
Interest expense
    25,936       (5,607 )     (1,777 )(5)     18,552  
 
Restructuring charges
    62,370       (61,423 )           947  
 
Litigation settlement and costs
    29,274       (29,274 )            
 
Other charges
    5,000                   5,000  
 
Minority interests
    1,326       (661 )           665  
     
     
     
     
 
   
Total costs and expenses
    1,612,644       (1,006,549 )     1,861       607,956  
     
     
     
     
 
Income before income taxes and change in accounting principle
    39,378       61,052       (1,861 )     98,569  
Income tax expense (benefit)
    (7,110 )     20,449       (726 ) (6)     12,613  
     
     
     
     
 
Income before change in accounting principle(1)
  $ 46,488     $ 40,603     $ (1,135 )   $ 85,956  
     
     
     
     
 
Diluted income per common share
                               
Income per share before change in accounting principle
  $ 0.52                     $ 1.00  
     
                     
 
Average outstanding and potentially dilutive common shares
    86,322                       86,322  
     
                     
 
Basic income per common share
                               
Income per share before change in accounting principle
  $ 0.53                     $ 1.01  
     
                     
 
Average outstanding common shares
    85,503                       85,503  
     
                     
 


(1)  Viad Corp’s historical results of operations included a charge related to the adoption of EITF No. 99-20 of $1.9 million (after-tax).
 
(2)  Management anticipates that Viad will incur a pre-tax loss on the retirement of debt and redemption of preferred stock, currently estimated to be $23.0 million, in connection with the spin-off. Furthermore, management expects that pre-tax expenses of approximately $18.0 million, primarily related to investment banking, legal and accounting fees, will be required to complete the spin-off. Of these expenses, approximately $4.0 million is expected to be incurred by MoneyGram International, Inc. and $14.0 million is

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expected to be incurred by New Viad. These nonrecurring items have not been reflected in the pro forma consolidated statements of income.
 
(3)  Adjustment reflects reclassification of corporate costs consistent with MoneyGram International, Inc.’s expected classification.
 
(4)  Adjustment assumes net decreased interest income on net cash and investments used in connection with the early retirement of Viad Corp’s debt and redemption of preferred stock. The net cash used for the debt retirement and preferred stock redemption is assumed to be $110.2 million, representing the total cash required to fund the above transactions of $260.2 million, less cash proceeds of $150.0 million resulting from MoneyGram’s credit facility borrowing. The interest income adjustment represents a reduction in the historical interest income recorded by Viad, and assumes Viad’s historical investment yield of 3.3% related to these funds is applied to the net cash used of $110.2 million.
 
(5)  Adjustment assumes net decreased interest expense of $1.8 million due to Viad’s debt retirement and preferred stock redemption transactions resulting in a gross reduction of interest expense of $8.5 million, less estimated interest expense incurred of $6.7 million under MoneyGram’s new credit facility borrowing. The assumed gross reduction of interest expense of $8.5 million represents the historical interest expense of Viad consisting of:

  •  $4.2 million related to the commercial paper retirement of $168.0 million (average interest rate of 2.5%),
 
  •  $2.2 million related to the senior debt retirement of $35.0 million (average interest rate of 6.4%),
 
  •  $1.9 million related to the subordinated debt retirement of $18.5 million (average interest rate of 10.5%), and
 
  •  $144,000 related to the retirement and redemption of the industrial revenue bonds and preferred stock.

  The estimated interest expense incurred of $6.7 million related to MoneyGram’s new credit facility assumes a borrowing of $150.0 million at a LIBOR-indexed interest rate of 4.5%, which is based on the average LIBOR rate for the period and the applicable interest rate spreads pursuant to the expected terms of MoneyGram’s new credit facility.

(6)  Adjustment assumes an effective income tax rate of 39 percent.

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UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

                                   
December 31, 2003

Adjustments

Historical Historical Pro Forma
Viad Corp New Viad Other MoneyGram




(in thousands, except per share data)
Assets
                               
Current assets:
                               
 
Cash and cash equivalents
  $ 63,853     $ (61,286 )   $ 150,000 (1)   $ 17,561  
                      (260,236 )(2)        
                      30,000 (2)        
                      99,230 (2)        
                      (4,000 )(3)        
 
Other investments in securities
    99,230             (99,230 )(2)      
 
Receivables, net
    45,915       (35,008 )           10,907  
 
Inventories
    35,768       (35,768 )            
 
Deferred income taxes
    45,485       (19,493 )     2,340 (4)     28,332  
 
Other current assets
    34,831       (11,853 )           22,978  
     
     
     
     
 
      325,082       (163,408 )     (81,896 )     79,778  
 
Funds, agent receivables and current maturities of investments substantially restricted for payment service obligations
    1,821,020                   1,821,020  
     
     
     
     
 
 
Total current assets
    2,146,102       (163,408 )     (81,896 )     1,900,798  
Investments substantially restricted for payment service obligations
    5,975,213                   5,975,213  
Property and equipment, net
    250,787       (155,580 )           95,207  
Other investments and assets
    63,431       (25,273 )           38,158  
Deferred income taxes
    101,571       (66,914 )           34,657  
Goodwill
    652,213       (256,687 )           395,526  
Other intangible assets, net
    32,838       (14,020 )           18,818  
     
     
     
     
 
Total Assets
  $ 9,222,155     $ (681,882 )   $ (81,896 )   $ 8,458,377  
     
     
     
     
 

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UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

                                     
December 31, 2003

Adjustments

Historical Historical Pro Forma
Viad Corp New Viad Other MoneyGram




(in thousands, except per share data)
Liabilities and Stockholders’ Equity
                               
Current liabilities:
                               
 
Accounts payable
  $ 57,710     $ (26,942 )   $     $ 30,768  
 
Other current liabilities
    211,097       (139,858 )           71,239  
 
Current portion of long-term debt
    21,211       (3,515 )     (17,400 )(2)     296  
     
     
     
     
 
      290,018       (170,315 )     (17,400 )     102,303  
 
Payment service obligations
    7,525,796                   7,525,796  
     
     
     
     
 
 
Total current liabilities
    7,815,814       (170,315 )     (17,400 )     7,628,099  
Long-term debt
    230,232       (46,577 )     150,000 (1)     150,552  
                      (213,103 )(2)        
                      30,000 (2)        
Pension and other postretirement benefits
    122,703       (21,664 )           101,039  
Derivative financial instruments
    71,093                   71,093  
Other deferred items and insurance liabilities
    122,132       (106,208 )           15,924  
$4.75 Preferred stock subject to mandatory redemption, call price of $101, 234,983 shares outstanding historical and none pro forma
    6,733             (6,733 )(2)      
Minority interests
    3,611       (3,247 )           364  
Common stock and other equity:
                               
 
Common stock, $1.50 par value, 200,000,000 shares authorized, 99,739,925 issued historical and $0.01 par value, 250,000,000 shares authorized, 88,357,561 issued and outstanding pro forma
    149,610             (148,726 )(7)     884  
 
Additional capital
    218,783             148,726 (7)     52,021  
                      (22,584 )(5)        
                      (292,904 )(6)        
 
Retained income
    863,944             (23,000 )(2)     509,372  
                      (4,000 )(3)        
                      2,340 (4)        
                      (329,912 )(7)        
 
Net investment of Viad Corp
          (329,912 )     329,912 (7)      
 
Unearned employee benefits and other
    (58,026 )             22,584 (5)     (35,442 )
 
Accumulated other comprehensive income (loss):
                               
   
Unrealized gain on investments
    105,263       (321 )           104,942  
   
Unrealized loss on derivative financial instruments
    (106,471 )                 (106,471 )
   
Cumulative foreign currency translation adjustments
    12,387       (7,851 )           4,536  
   
Minimum pension liability adjustment
    (42,749 )     4,213             (38,536 )
 
Common stock in treasury, at cost, 11,382,364 shares historical and none pro forma
    (292,904 )           292,904 (6)      
     
     
     
     
 
 
Total common stock and other equity
    849,837       (333,871 )     (24,660 )     491,306  
     
     
     
     
 
Total Liabilities and Stockholders’ Equity
  $ 9,222,155     $ (681,882 )   $ (81,896 )   $ 8,458,377  
     
     
     
     
 


(1)  Adjustment assumes that at December 31, 2003, MoneyGram International, Inc. obtained bank credit facilities providing an aggregate principal amount of up to $350.0 million, drew $150.0 million on its facilities and paid that amount to Viad Corp to be used for the repayment of all or a portion of Viad Corp’s outstanding commercial paper.
 
(2)  Adjustment assumes total cash of $260.2 million is used to repay Viad Corp’s outstanding commercial paper, senior notes, subordinated debt and industrial revenue bonds, and to redeem its outstanding preferred stock. The total assumed cash amount of $260.2 million includes an estimated tender premium related to certain of the retired debt obligations. The aggregate carrying value of the debt obligations to be retired and the

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preferred stock is $237.2 million. Adjustment assumes an aggregate loss on the debt retirement and preferred stock redemption of $23.0 million. Adjustment also reflects the inclusion of the allocated portion of the retired debt above ($30.0 million), which was recorded on New Viad’s balance sheet and is assumed to be refinanced by New Viad. The total amount of investments in securities of $99.2 million are assumed to be reclassified to cash and cash equivalents in connection with the debt repayment and preferred stock redemption.
 
(3)  Management expects that one-time pre-tax expenses of approximately $18.0 million, primarily related to investment banking, legal and accounting fees, will be required to complete the spin-off. Of these expenses, approximately $4.0 million is expected to be incurred by MoneyGram International, Inc. and $14.0 million is expected to be incurred by New Viad. Adjustment reflects MoneyGram International, Inc.’s portion of these expenses.
 
(4)  Adjustment reflects a tax benefit of $2.3 million related to the loss on the early retirement of debt and redemption of preferred stock. An effective tax rate of 39 percent is assumed.
 
(5)  Adjustment reflects the allocation of the employee equity trust arrangement between MoneyGram International, Inc. and New Viad pursuant to the Employee Benefits Agreement.
 
(6)  Adjustment reflects the elimination of treasury stock, which shares will be treasury shares of New Viad.
 
(7)  Adjustment reflects the elimination of Viad Corp’s net equity in New Viad resulting from the distribution and the capitalization of MoneyGram International, Inc. Adjustment also reflects the change in the par value of common stock from $1.50 per share to $0.01 per share for MoneyGram International, Inc.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER

DATA OF VIAD CORP
(Accounting Predecessor to MoneyGram International, Inc.)

      The following table summarizes selected consolidated financial data for Viad Corp (accounting predecessor to Viad Corp). Notwithstanding the legal form of the spin-off, because of the relative significance of MoneyGram International, Inc. to Viad Corp, MoneyGram International, Inc. will be considered the divesting entity and treated as the “accounting successor” to Viad Corp for financial reporting purposes in accordance with EITF No. 02-11. As such, the financial information presented in the following summary for Viad Corp (accounting predecessor to MoneyGram International, Inc.) reflects financial information that previously has been filed with the SEC by Viad Corp. If the spin-off were to occur, MoneyGram International, Inc. would report the historical results of operations (subject to certain adjustments) of New Viad in discontinued operations in accordance with the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Pursuant to SFAS No. 144, this presentation is not permitted until the date of the spin-off.

      The statement of income data for each of the three years ended December 31, 2003, 2002 and 2001 and the balance sheet data at December 31, 2003 and 2002 set forth below are derived from the audited consolidated financial statements of Viad Corp included elsewhere in this information statement. The statement of income data for the years ended December 31, 2000 and 1999 and the balance sheet data at December 31, 2001, 2000 and 1999 set forth below are derived from the audited consolidated financial statements of Viad Corp not included in this information statement.

      The selected historical consolidated financial data is not necessarily indicative of the results of operations or financial position that would have occurred if MoneyGram International, Inc. had been a separate, independent company during the periods presented, nor is it indicative of MoneyGram International, Inc.’s future performance. This historical data should be read together with the information under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Viad Corp” and Viad Corp’s consolidated financial statements and related notes.

                                         
Year ended December 31,

2003 2002 2001 2000 1999





(in thousands, except per share data)
Operations
                                       
Revenues:
                                       
Convention show services
  $ 521,433     $ 568,301     $ 604,148     $ 692,843     $ 642,817  
Payment services transaction fees
    483,404       431,564       393,093       367,733       340,312  
Payment services investment income
    318,221       342,055       313,432       235,429       183,465  
Exhibit design and construction
    195,832       217,932       279,896       339,272       289,951  
Travel and recreation services
    53,203       58,253       61,453       91,531       124,624  
     
     
     
     
     
 
Total revenues
  $ 1,572,093     $ 1,618,105     $ 1,652,022     $ 1,726,808     $ 1,581,169  
     
     
     
     
     
 
Income from continuing operations(1)(2)
  $ 112,358     $ 95,625     $ 46,488     $ 140,819     $ 122,455  
Income from discontinued operations(3)
    1,544                         218,954  
Changes in accounting principles(4)
          (37,739 )     (1,884 )            
     
     
     
     
     
 
Net income
  $ 113,902     $ 57,886     $ 44,604     $ 140,819     $ 341,409  
     
     
     
     
     
 
Diluted income per common share
                                       
Continuing operations(1)(2)
  $ 1.29     $ 1.09     $ 0.52     $ 1.54     $ 1.26  
Discontinued operations(3)
    0.02                         2.27  
Changes in accounting principles(4)
          (0.44 )     (0.02 )            
     
     
     
     
     
 
Diluted net income per common share
  $ 1.31     $ 0.65     $ 0.50     $ 1.54     $ 3.53  
     
     
     
     
     
 

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Year ended December 31,

2003 2002 2001 2000 1999





(in thousands, except per share data)
Average outstanding and potentially dilutive common shares
    86,619       86,716       86,322       90,925       96,396  
     
     
     
     
     
 
Basic income per common share
                                       
Continuing operations(1)(2)
  $ 1.29     $ 1.10     $ 0.53     $ 1.57     $ 1.31  
Discontinued operations(3)
    0.02                         2.35  
Changes in accounting principles(4)
          (0.44 )     (0.02 )            
     
     
     
     
     
 
Basic net income per common share
  $ 1.31     $ 0.66     $ 0.51     $ 1.57     $ 3.66  
     
     
     
     
     
 
Average outstanding common shares
    86,223       86,178       85,503       88,802       93,007  
     
     
     
     
     
 
Dividends declared per common share
  $ 0.36     $ 0.36     $ 0.36     $ 0.36     $ 0.35  
     
     
     
     
     
 
Financial position at year-end
                                       
Total assets
  $ 9,222,155     $ 9,675,429     $ 8,375,299     $ 6,551,492     $ 5,202,169  
Total debt
    251,443       361,657       396,828       447,106       389,272  
$4.75 Preferred stock subject to mandatory redemption
    6,733       6,704       6,679       6,658       6,640  
Common stock and other equity
    849,837       677,894       714,481       750,730       699,892  


(1)  Includes investment impairment losses and interest income adjustments (after-tax) of $19.5 million, or $0.23 per diluted share, in 2003, $18.2 million, or $0.21 per diluted share, in 2002 and $4.6 million, or $0.06 per diluted share, in 2001. Also includes restructuring charges, recoveries and other items (after-tax) of $3.0 million income, or $0.03 per diluted share, in 2003, $12.3 million expense, or $0.14 per diluted share, in 2002, $58.9 million expense, or $0.68 per diluted share, in 2001; $877,000 income, or $0.01 per diluted share, in 2000; and $6.1 million income, or $0.06 per diluted share, in 1999. See Note 2 to the consolidated financial statements of Viad included elsewhere in this information statement.
 
(2)  In January 2002, Viad adopted Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 specifies that goodwill and certain intangible assets with indefinite lives no longer be amortized but instead be subject to periodic impairment testing. Excluding the amortization of previously expensed goodwill and certain intangible assets, income from continuing operations and corresponding diluted income per share would have been $60.7 million, or $0.69 diluted income per share, in 2001, $154.7 million, or $1.69 diluted income per share, in 2000 and $135.1 million, or $1.39 diluted income per share, in 1999. See Note 7 to the consolidated financial statements of Viad included elsewhere in this information statement.
 
(3)  Following the spin-off, MoneyGram International, Inc. (accounting successor to Viad Corp) would record the historical results of operations (subject to certain adjustments) of New Viad in discontinued operations upon completion of the spin-off pursuant to SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”
 
(4)  In accordance with the adoption of SFAS No. 142, Viad completed the transitional impairment test for goodwill during 2002 and concluded that a transitional impairment loss of $40.0 million ($37.7 million after-tax) should be recognized related to goodwill at the Exhibitgroup/ Giltspur reporting unit of the Convention and Event Services segment. Effective in the second quarter of 2001, Viad adopted the provisions of Emerging Issues Task Force Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets.” Accordingly, Viad recorded a cumulative effect of a change in accounting principle of $3.0 million ($1.9 million after-tax).

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS OF VIAD CORP
(Accounting Predecessor to MoneyGram International, Inc.)

      The following discussion should be read in conjunction with Viad Corp’s consolidated financial statements and related notes included in this information statement. This discussion contains forward-looking statements that involve risks and uncertainties. MoneyGram International, Inc.’s (Accounting Successor to Viad Corp) actual results could differ materially from those anticipated due to various factors discussed under “Special Note About Forward-Looking Statements,” “Risk Factors” and elsewhere in this information statement.

Overview

      Viad operates in two reportable business segments as follows:

      Payment Services — through Travelers Express Company, Inc. and related subsidiaries, which we refer to as MoneyGram, revenues are primarily derived from transaction fees and investment and related income by providing various services related to money transfers, money orders, official checks, and urgent and routine bill payment. Fee revenues are driven by transaction volume and contract pricing through a network of agents and customers, including financial institutions. Investment and related income is generated by investing funds received from the sale of payment instruments until such instruments are settled.

      Convention and Event Services — through GES, revenues are generated by providing various convention and tradeshow services such as freight handling, logistics, electrical, installation, dismantling and management services to trade associations, show management companies and exhibitors. Exhibitgroup specializes in the design, construction, refurbishment, installation and warehousing of convention and tradeshow exhibits, primarily for corporate customers.

      Viad also operates certain travel and recreation businesses, Brewster Transport Company Limited and Glacier Park, Inc. These businesses provide tour and charter operations for tourism in the Canadian Rockies and operate historic lodges and provides food services in certain national parks in North America.

      In 2002 and continuing in 2003, Viad faced market challenges and difficult economic conditions. The Payment Services segment experienced increased transaction volume and higher investment balances; however, operating income growth was slowed due to significantly lower interest rates and unprecedented mortgage refinancing activity. The unprecedented mortgage refinancing activity resulted in higher average float balances as greater numbers of official checks were issued. At the same time, the mortgage-backed securities held in the Payment Services investment portfolio experienced accelerated prepayments. Consequently, these funds were invested or reinvested at lower interest rates compared to 2002. Furthermore, the Payment Services segment recorded significant other-than-temporary impairment losses and adjustments on certain investments. The Convention and Event Services segment produced profitable results despite decreased demand for new exhibit construction and tradeshow shrinkage. Overall, Viad improved its financial strength and reduced its total debt obligations. See “— Results of Operations” and “— Liquidity and Capital Resources.”

      The following 2003 financial highlights are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Viad Corp (Consolidated)

  •  Total revenues of $1.57 billion, a decrease of 2.8%
 
  •  Net income of $113.9 million, an increase of 96.8%
 
  •  Diluted income per share of $1.31, an increase of 101.5%
 
  •  Debt decreased by $110.2 million year-over-year

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Payment Services

  •  Revenues of $801.6 million, an increase of 3.6%
 
  •  Segment operating income of $115.0 million, a decrease of 8.4%

Convention and Event Services

  •  Revenues of $717.3 million, a decrease of 8.8%
 
  •  Segment operating income of $44.9 million, an increase of 23.1%

Other Significant Items

  •  In January 2003, the Payment Services segment completed the acquisition of the remaining minority interest in MoneyGram International Limited (“MIL”) for approximately $98.1 million in cash and a dividend of $8.1 million paid by MIL to the seller, Travelex Group Plc. MIL provides international sales and marketing services in connection with the money transfer business primarily in Europe, Africa, Asia and Australia.
 
  •  In March 2004, the Payment Services segment completed the sale of Game Financial Corporation to a subsidiary of Certegy Inc. for approximately $43 million in cash. Game Financial Corporation provides cash access services to casinos and gaming establishments throughout the United States. As a result of the sale, Viad Corp expects to record an after-tax gain of approximately $11 million in the first quarter of 2004 and may record future after-tax gains of $4 million, based on contingencies in the contract.

Spin-off Transaction

      On July 24, 2003, Viad announced a plan to separate its Payment Services segment from its other businesses by means of a tax-free spin-off. To effect the separation, Travelers Express will become a subsidiary of MoneyGram International, Inc., a newly formed, wholly-owned subsidiary of Viad, and Viad will distribute all of the shares of MoneyGram common stock as a dividend on Viad common stock. At the time of the spin-off, the businesses of MoneyGram will consist solely of the payment services business. The continuing business of Viad, which is being referred to as “New Viad,” will consist of the businesses of the convention show services, exhibit design and construction, and travel and recreation services operations, including Viad’s centralized corporate functions located in Phoenix, Arizona.

      In connection with the completion of the spin-off, Viad will repay its commercial paper of approximately $168.0 million, tender for its medium-term notes of $35.0 million and subordinated debentures of $18.5 million, retire its industrial revenue bonds of $9.0 million, and redeem its outstanding preferred stock at an aggregate call price of approximately $23.7 million. MoneyGram intends to negotiate and enter into bank credit facilities in connection with the spin-off. See “Financing Arrangements of MoneyGram.”

      Notwithstanding the legal form of the spin-off, due to the relative significance of MoneyGram to Viad, MoneyGram will be considered the divesting entity and treated as the “accounting successor” to Viad for financial reporting purposes in accordance with Emerging Issues Task Force (“EITF”) Issue No. 02-11, “Accounting for Reverse Spinoffs.” The spin-off of New Viad will be accounted for pursuant to Accounting Principles Board (“APB”) Opinion No. 29, “Accounting for Nonmonetary Transactions.” Accordingly, the spin-off will be accounted for based upon the recorded amounts of the net assets to be divested. MoneyGram will charge directly to equity as a dividend the historical cost carrying amount of the net assets of New Viad after reduction, if appropriate, for any indicated impairment of value. Management currently believes there is no indicated impairment of value of the net assets of New Viad. Furthermore, if the spin-off transaction were to occur, MoneyGram would report the historical results of operations (subject to certain adjustments) of New Viad in discontinued operations in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Pursuant to SFAS No. 144, such presentation is not allowed until the date of the spin-off.

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Non-GAAP Measures

      Included below is a presentation of “float income” which is defined by Viad as Payment Services investment income before taking into account investment gains and losses and impairment charges. Impairment charges only include other-than-temporary impairment losses related to certain structured notes, asset-backed securities and collateralized mortgage obligations. Interest income adjustments related to private equity obligations are excluded from the presentation below. As such, total impairment charges presented elsewhere in this Annual Report may differ from this presentation reflecting the effects of the interest income adjustments related to private equity obligations. Also presented below is “net float income” which is defined by Viad as float income less commission expense. Float income and net float income are non-GAAP measures used by management to analyze the effects that factors such as interest rates and average investment balances have on overall investment portfolio performance. Management believes that the presentation of float income and net float income is a useful measure for investors to consider when evaluating the portfolio management effectiveness with respect to the Payment Services segment.

      Reconciliations of float income to Payment Services investment income and to net float income are as follows:

                         
2003 2002 2001



(in thousands)
Float income
  $ 323,098     $ 351,331     $ 306,145  
Net realized gains and losses
    23,039       16,500       11,906  
Impairment charges
    (27,916 )     (25,776 )     (4,619 )
     
     
     
 
Payment Services investment income
  $ 318,221     $ 342,055     $ 313,432  
     
     
     
 
                         
2003 2002 2001



(in thousands)
Float income
  $ 323,098     $ 351,331     $ 306,145  
Commission expense
    (232,336 )     (240,152 )     (208,273 )
     
     
     
 
Net float income
  $ 90,762     $ 111,179     $ 97,872  
     
     
     
 

      See “Results of Operations — Payment Services” below for a discussion of float income and net float income.

      The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements, which include the accounts of Viad and all of its subsidiaries. All per share figures discussed are stated on the diluted basis.

Results of Operations

     2003 vs. 2002

      Revenues for 2003 decreased 2.8 percent to $1.57 billion from $1.62 billion in 2002. The decline was primarily driven by lower sales in the Convention and Event Services segment due to negative show rotation and weaker demand for the design and construction of new exhibits. The decrease was partially offset by increased revenues in the Payment Services segment resulting from growth in money transfer transaction volume. Income from continuing operations before income taxes was $156.8 million for 2003 compared with $125.3 million for 2002. The increase was primarily due to the restructuring charge recorded in 2002, the restructuring reversal in 2003, lower net interest expense in 2003 as compared to 2002 and lower corporate activities and minority interest expense in 2003. These favorable results aggregating approximately $37 million were offset by lower operating income of $5.4 million, which was largely the result of lower net interest margin on the float portfolio, reflecting the lower interest rate environment, as well as other-than-temporary impairment charges and interest income adjustments in the Payment Services segment.

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      Net income for 2003 was $113.9 million, or $1.31 per share, compared to $57.9 million, or $0.65 per share, for 2002. Net income included the reversal of certain discontinued operations reserves of $2.5 million ($1.5 million after-tax) during 2003.

      Payment Services. Revenues of the Payment Services segment were $801.6 million for 2003, a 3.6 percent increase from comparable 2002 revenues of $773.6 million. The Payment Services segment operating income was $115.0 million, an 8.4 percent decrease from 2002 segment operating income of $125.5 million. Operating margins were 14.3 percent in 2003 compared to 16.2 percent in 2002.

      The Payment Services segment operating income and margin declines were driven by the lower interest rate environment on the Payment Services investment portfolio (float portfolio) and by other-than-temporary impairment charges and interest income adjustments of $32.2 million in 2003 compared to $28.9 million in 2002. The Payment Services segment evaluates investments with an investment grade rating of “A” and below for impairment under EITF Issue No. 99-20 “Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets.” When an adverse change in estimated cash flows occurs and the fair value of a security is less than its carrying value, the investment is written down to fair value. These charges related primarily to structured notes held in the portfolio, and to a lesser extent, certain asset-backed securities and collateralized mortgage obligations. The structured investments consist of an investment grade security, generally a U.S. Treasury strip security combined with an investment in the residual interest in a collateralized debt obligation, or in some cases, a limited partnership interest. Future adverse cash flow changes related to the investments subject to EITF Issue No. 99-20 could result in additional impairment charges. The charges above were partially offset by net realized gains of $23.0 million and $16.5 million in 2003 and 2002, respectively. Additionally, the Payment Services segment recorded a curtailment gain of $2.4 million related to the freezing of the defined benefit pension plan.

      The money transfer business continued to show strong results with total transaction volume growing 32 percent, led by strong international transaction volume and urgent bill payment volume. Internationally originated transactions grew by over 29 percent and domestically originated transactions, including the urgent bill product, grew by 36 percent.

      The money order business continues to contribute significantly to operating margin and cash flows. However, money order volume was down six percent compared to 2002 due to the loss of certain agents, partially offset by strong growth in sales at Wal-Mart.

      Although PrimeLink (official check outsourcing services) was not a strong driver of revenue and operating income due to lower interest rates and impairment charges, it continued to show growth in balances and new signings. Total average investable funds for 2003 were $7.0 billion, up 14 percent from 2002 levels, primarily driven by the PrimeLink official check outsourcing business, which had an increase of average investable balances of over 18 percent. Payment Services investment income represented approximately 40 percent of the total Payment Services revenue in 2003 compared with 44 percent in 2002. Float income is affected by the level of investment balances and the yield on investments. Float income (excluding gains, losses and impairments) and expense associated with the Payment Services segment’s investment portfolio for the years ended December 31 were as follows:

                                                 
2003 2002


Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate(3) Balance Expense Rate(3)






(in thousands)
Investments substantially restricted for payment service obligations(1)
  $ 6,979,248     $ 323,098       4.63 %   $ 6,131,145     $ 351,331       5.73 %
Payment service obligations(2)
    5,615,562       232,336       4.14 %     4,706,324       240,152       5.10 %
             
                     
         
Net float income and margin
          $ 90,762       1.30 %           $ 111,179       1.81 %
             
                     
         

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(1)  The Payment Services segment is regulated by various state agencies, which generally require the Payment Services segment to maintain liquid assets and investments with an investment rating of A or higher, in an amount generally equal to the payment service obligation for regulated payment instruments such as teller and agent checks, money orders and money transfers. In addition, the Payment Services segment has contractual arrangements that generally require maintenance of liquid assets and investments in an amount equal to the payment instruments, namely cashiers checks. Due to these regulations, a substantial amount of funds, agent receivables and investments are not available to satisfy working capital or other financing requirements of the Payment Services segment. The amount of funds, agent receivables and investments that are “restricted,” either for regulatory or contractual purposes, is equal to the total amount of payment service obligations ($7,421,480 and $7,825,954 at December 31, 2003 and 2002, respectively). See note 1 of notes to consolidated financial statements.
 
(2)  Commissions are paid to financial institution customers based upon average outstanding balances generated by the sale of PrimeLink products only. The expense reported includes those payments made to financial institution customers, costs associated with swaps and the sale of receivables program. The average balance in the table reflects only the payment service obligations for which commissions are paid and does not include the average balance of the sold receivables ($428 million and $440 million for 2003 and 2002, respectively) as these are not recorded on the consolidated balance sheets. Commission expense is classified in “Costs of services” in the consolidated statements of income.
 
(3)  “Yield/Rate” percentages are calculated by dividing the applicable amount shown in the “Income/Expense” column by the applicable amount shown in the “Average Balance” column.

      Float income was $323.1 million in 2003 compared to $351.3 million in 2002, a decrease of 8.0 percent. The float income decrease was primarily driven by lower interest rates which drove float income down by $76.8 million, reflecting an average investment yield of 4.63 percent, or a 110 basis point decline from 5.73 percent in 2002. During the same period, the Fed Funds rate declined by 54 basis points and the 5-year U.S. Treasury Note declined by 93 basis points.

      The lower interest rates earned on the portfolio in 2003 compared to 2002 was primarily due to the unprecedented mortgage refinance activity. The Payment Services segment typically maintains between $400 million and $750 million in short-term, liquid balances to fulfill its payment service obligations. The average balance for 2003 was $640 million compared to $539 million for 2002. Unprecedented mortgage refinancing activity drove an increase in the sale of official checks resulting in higher average float balances. These higher balances were invested at lower rates compared to 2002. In addition, refinancing activity drove a significant increase in the prepayments of mortgage-backed debt securities held in the portfolio, resulting in the reinvestment of these funds at lower interest rates. The decline in float income due to lower rates was partially offset by an increase in float income of $48.6 million resulting from higher average float balances. The Payment Services segment had $3.0 billion (or 50 percent) and $3.4 billion (or 57 percent) of its total float portfolio invested in mortgage-backed securities at December 31, 2003 and 2002, respectively.

      Commission expense was $232.3 million in 2003, a decrease of $7.8 million, or 3.3 percent from 2002, primarily driven by lower interest rates. The commission expense decrease attributable to lower interest rates was $54.2 million reflecting an average commission rate of 4.14 percent for 2003, or a 96 basis point decline from 5.10 percent in 2002. The decline in commission expense was due to lower interest rates and was partially offset by higher average balances resulting in higher expense of $46.4 million. Commission expense includes amounts paid to financial institution customers based upon average outstanding balances generated by the sale of PrimeLink products, net payments made to counterparties of swap agreements, and the discount on the sale of receivables. Commissions paid to customers generally are variable based on short-term interest rates; however, a substantial portion of the commission expense has been fixed through the use of interest rate swap agreements. In addition, Viad has an agreement to sell, on a periodic basis, undivided percentage ownership interests in certain receivables primarily from its money order agents. These receivables are sold to commercial paper conduits sponsored by a financial institution. The receivables are sold to accelerate the Payment Services segment’s cash flow for investment in permissible securities and are sold at a discount based upon short-term interest rates. The discount is included in commission expense.

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      Net float income (float income less commission expense) was $90.8 million in 2003, down $20.4 million, or 18.4 percent, from 2002 primarily due to lower interest rates. The decrease in net float income attributable to a decline in float interest rates was $35.8 million, and was partially offset by increased float income of $15.4 million due to balance growth. Net float margin was 1.30 percent, reflecting a 51 basis point decline from 1.81 percent in 2002. As mentioned above, refinancing activities led to an increase in the sale of official checks and, therefore, an increase in float balances. However, a substantial portion of these balances were invested at short-term interest rates equal to or less than the interest rates paid out in commissions to financial institution customers, thus reducing net float margin. Although commissions and the discount on the sale of receivables program benefited from lower short-term interest rates, the fixed-rate swap agreements mitigated a portion of the benefit of reduced interest rates. Operating income and margins were negatively impacted as the pay-fixed interest rate swaps used to fix the cost of variable rate commissions paid to official check banks matured at a slower rate than investments in mortgage-backed securities that prepaid more rapidly than expected. Also contributing to the margin decline was a change in product mix reflecting higher overall growth in the PrimeLink business, which has lower net float margins than the balances generated by the money order business. If interest rates remain low and refinancing activity continues to be strong, revenue and operating income growth could continue to be constrained.

      The impact of changes in average investable balances and interest rates on the float income and commission expense associated with the investment portfolio for the years ended December 31 was as follows:

                         
2003 vs 2002

Yield/
Balance(1) Rate(1) Total



(in thousands)
Float income
  $ 48,599     $ (76,832 )   $ (28,233 )
Commission expense
  $ 46,396     $ (54,212 )   $ (7,816 )
Net float income
  $ 15,379     $ (35,796 )   $ (20,417 )


(1)  The “Balance” column is calculated by annualizing the result of the yield/rate for the prior year’s period multiplied by the change in the investments substantially restricted for payment service obligations. The “Yield/ Rate” column is calculated by annualizing the result of the investments substantially restricted for payment service obligations for the prior year’s period multiplied by the change in the yield/rate. See “Non-GAAP Measures” for further explanation of Float Income and Net Float Income. Net float income for the “Balance” and “Yield/ Rate” columns is not the net of “float income” and “commission expense” as each of these amounts is calculated independently.

      One of the Payment Services segment objectives in managing the float portfolio is to mitigate the risk to earnings created by changing interest rates. To mitigate that risk, interest rate derivatives are entered into that effectively limit exposure to the floating rate commission payments to financial institution customers. These derivatives effectively convert the variable interest rate to a fixed rate. The fair value of Viad’s derivative positions fluctuate with interest rate changes. These fluctuations in the fair value of Viad’s derivatives are reflected as increases or decreases to a component of stockholders’ equity. Changes in the value of the available-for-sale investment portfolio are also reflected as increases or decreases to a component of stockholders’ equity. The change in the fair value of the derivative liability for 2003 resulted in a net increase of $44.1 million in stockholders’ equity, and the net change in the fair value of the available-for-sale investment portfolio resulted in a net increase of $13.6 million in stockholders’ equity. Included in the change related to the available-for-sale portfolio is a $30.2 million increase related to the reclassification of $1.2 billion in investments from held-to-maturity to available-for-sale in the first quarter 2003. Changes in the value of the available-for-sale investment portfolio will generally move in the opposite direction of the derivative values, although they will rarely offset exactly.

      Convention and Event Services. Revenues of the Convention and Event Services segment were $717.3 million in 2003, a decrease of 8.8 percent from the 2002 revenues of $786.2 million. Segment operating income was $44.9 million in 2003 compared to $36.5 million in 2002, up 23.1 percent. Segment operating margins were 6.3 percent and 4.6 percent in 2003 and 2002, respectively.

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      The convention show services business experienced an 8.2 percent decrease in revenues, however, operating income increased during the year. Revenues were $521.4 million in 2003 compared to $568.3 million in 2002. The decline in revenues largely resulted from net negative show rotation, where shows rotating out of 2003, such as the International Manufacturing Technology Show, outweighed the shows rotating into 2003, such as the National Plastics Expositions and Worldwide Food Show. The sequential year-over-year declines in tradeshow attendance, the number of exhibiting companies and convention square footage resulting from weak overall economic conditions since 2001 have led to lower demand for services, cancelled shows and tradeshow shrinkage which contributed to the revenue decline. Furthermore, political instability in the Middle East and threats of terrorism continue to impact travel, which adversely affects the convention and events industry. The improvement in operating income reflects increased operating efficiency and cost containment. Management continues to emphasize cost containment initiatives in response to the current economic environment and uncertainty regarding near-term revenue growth.

      Within the Convention and Event Services segment, the exhibit design and construction business experienced a 10.1 percent decrease in revenues during the year. Exhibit design and construction revenues were $195.8 million in 2003 compared to $217.9 million in 2002. The decline in revenues was driven by weak demand for the design and construction of new exhibits, primarily due to diminished corporate spending and continued softness in the general economy, as many exhibitors elected to reuse or refurbish existing exhibits rather than placing orders for new construction. Visibility in this industry continues to be poor. If the weak demand for the design and construction of new exhibits continues, revenues could decline further and operating income could be similarly affected. Operating income during 2003 was down slightly primarily due to the revenue decline which was partially offset by the effectiveness of management initiatives to improve performance, including restructuring efforts.

      In the fourth quarter 2002, as a result of decreased visibility over revenues and continued uncertainties regarding improvements in the tradeshow industry, Viad approved a restructuring plan resulting in a restructuring charge of $20.5 million ($13.3 million after-tax). Of the total restructuring charge, $19.3 million was included in the consolidated statements of income under the caption “Restructuring charges (recoveries)” and $1.2 million as “Costs of services.” The components of the $20.5 million charge consisted of employee severance and benefits of $2.9 million, facility closure and lease termination costs of $12.8 million (net of estimated sublease income), asset impairments related to fixed assets and inventories of $4.1 million and other charges of $650,000. In the fourth quarter 2003, restructuring recoveries totaling $3.5 million were recorded resulting from changes in estimates of net future cash outflows, mainly related to favorable sublease income at restructured facilities. At December 31, 2003, a remaining liability of $7.3 million related to the 2002 restructuring is included in the consolidated balance sheets.

      Travel and Recreation Services. Revenues of the travel and recreation businesses decreased $5.1 million, or 8.7 percent, to $53.2 million in 2003. Operating income for the travel and recreation businesses was $10.5 million, a decrease of 23.8 percent from $13.7 million in 2002. Operating margins for 2003 and 2002 were 19.7 percent and 23.6 percent, respectively. These businesses were negatively impacted by a continued decline in the world travel market due to ongoing threats of terrorism, the war in Iraq, health issues (SARS, Mad Cow Disease and West Nile virus), Air Canada’s financial difficulties and wildfires in and around Glacier National Park, Montana.

      Since the events of September 11, 2001, worldwide leisure travel has been on a steady decline, directly affecting the travel and recreation businesses with reduced visitation during 2002 and again in 2003. In 2003, these businesses were also severely affected by the announcement in April 2003 that Air Canada, which serves a large portion of visitors to these businesses, was experiencing financial difficulty and had filed for protection under Canada’s “Companies’ Creditors Arrangement Act.” This event reduced the capacity of transportation available for visitors to western Canada. Visitor travel from Asia, long a key market for these businesses, was significantly lower in 2003, primarily due to the outbreak of SARS in Asia in late 2002. A subsequent SARS outbreak in Canada reduced the number of travelers coming to Canada from the United States and Europe.

      Lastly, during the peak summer season of 2003, wildfires in and around Glacier National Park forced the closure and evacuation of many of Viad’s hotels and attractions. Despite the fact that the fires were under control

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in late summer, significant reservation cancellations left the businesses operating far below capacity. Given Glacier National Park’s limited visitation season, the lost business could not be recouped elsewhere.

      The impact of the above reductions in revenue in 2003 from 2002 also impacted operating income. While certain of the costs of these businesses can be pared down for certain fluctuations in visitor attendance, many of the unforeseen events of 2003 left these businesses with excess costs relative to revenue. The forest fires, in particular, forced these businesses to maintain overhead costs to ensure sufficient resources were available to facilitate the closures and subsequent re-openings, and to service the visitors. Thus, while revenues were down 8.7 percent, expenses could not be shed as rapidly, resulting in an operating income decline that far exceeded the revenue decline.

      Corporate Activities. Corporate activities expense decreased $4.5 million from 2002 to 2003. This decrease was due primarily to a decrease in certain administrative expenses in 2003 as compared to 2002. In addition, 2003 included a curtailment gain of $1.4 million related to the freezing of Viad’s defined benefit pension plan.

      Other Investment Income. Investment income decreased $7.6 million due primarily to decreased Corporate investments which were primarily used to repay $100 million of medium-term notes and to fund the MIL minority interest acquisition. This resulted in lower average investment levels which, combined with lower average interest rates, drove the decline. Additionally, 2002 investment income included $3.5 million of interest income associated with a federal income tax refund for the 1994 through 1996 tax years.

      Interest Expense. Interest expense decreased to $8.8 million in 2003 from $19.3 million in 2002 as a result of the debt repayment and lower average interest rates throughout the year and the reversal of $4.6 million of previously accrued interest due to favorable income tax settlements. From 2002 to 2003, Viad’s average outstanding debt balances decreased by approximately $79.2 million while the weighted average interest rate declined by approximately 119 basis points.

      Minority Interests. The decrease in minority interest expense of $5.5 million in 2003 from 2002 was due to the Payment Services segment’s acquisition of the remaining 49 percent interest in MIL.

      Income Taxes. The effective tax rate was 28.3 percent in 2003 compared to a 23.7 percent tax rate in 2002. The relatively low effective rate compared to the statutory federal rate of 35.0 percent was primarily attributable to tax-exempt income from the Payment Services segment. The increase in the effective tax rate year-over-year was due to a lower proportion of tax-exempt income to pre-tax income in 2003 compared to 2002. The higher rate for 2003 resulted from the shift in the mix of investments from nontaxable to taxable investments. Even though nontaxable investments generally have higher after-tax yields than taxable investments, Viad has shifted its mix of nontaxable and taxable investments to balance its alternative minimum tax position.

 
2002 vs. 2001

      During 2002, the Convention and Event Services segment continued to experience a reduction in the number and size of tradeshows and further declines in the demand for the design and construction of new exhibits. This decline was due to diminished corporate spending and the continued downturn in the general economy as many exhibitors elected to reuse or refurbish existing exhibits rather than place new orders. As a result of decreased visibility over future revenues and continued uncertainties regarding improvements in the tradeshow industry, the Convention and Event Services segment revised its forecasted demand and re-evaluated its manufacturing capacity requirements and cost structure during the fourth quarter of 2002. Accordingly, Viad recorded a 2002 fourth quarter restructuring charge totaling $20.5 million ($13.3 million after-tax) of which $1.2 million relating to consulting fees incurred and the write-down of certain inventories was charged to “Costs of services” in the consolidated statements of income. The remaining $19.3 million was classified under “Restructuring charges (recoveries)” in the consolidated statements of income. The restructuring relates to the closure and consolidation of certain facilities, severance and other costs related to the elimination of approximately 230 positions across numerous regions, business functions and job classes. The charge also includes amounts for the disposal (net of estimated proceeds) of certain inventories and fixed assets, facility closure and lease termination costs (net of estimated sublease income) and other exit costs. Viad had substantially completed the restructuring activities at

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December 31, 2003; however, payments due under long-term lease obligations will continue to be made over the remaining terms of the lease agreements. Severance and benefits payments will be made over the varying terms of the individual separation agreements. During 2001, a restructuring charge of $66.1 million ($39.9 million after-tax) was recorded primarily related to the Convention and Event Services segment for which the related restructuring activities had been completed by the end of 2002. At December 31, 2003, a remaining liability of $13.7 million related to the 2001 restructuring is included in the consolidated balance sheets.

      In 2002, Viad adopted SFAS No. 142, “Goodwill and Other Intangible Assets,” which requires that goodwill and certain other intangible assets no longer be amortized, but, instead, be tested for impairment. Concurrent with the adoption of SFAS No. 142, Viad performed the transitional impairment testing of its goodwill and intangible assets with indefinite lives. Viad determined that no impairment existed for other intangible assets, but a transitional impairment loss of $40.0 million ($37.7 million after-tax) was recorded related to goodwill at the Exhibitgroup/Giltspur reporting unit of the Convention and Event Services segment. See “Critical Accounting Policies” for additional discussion related to goodwill impairment testing.

      Revenues for 2002 were $1.62 billion, down slightly from the 2001 revenues of $1.65 billion. The Payment Services segment revenue increased by $67.1 million over the prior year, while the Convention and Event Services segment revenue decreased by $97.8 million over the prior year. Viad also had a slight decline in its travel and recreation services businesses.

      Net income for 2002 was $57.9 million, or $0.65 per share, as compared with the 2001 amount of $44.6 million, or $0.50 per share ($58.8 million, or $0.67 per share when adjusted for SFAS No. 142).

      There were 394,000 additional average outstanding and potentially dilutive common shares in 2002 than in 2001. This was largely driven by significant stock option exercise activity during the first half of 2002, partially offset by the 2002 resumption of the stock repurchase program described in “Liquidity and Capital Resources.”

      Payment Services. Revenues of the Payment Services segment were $773.6 million in 2002, a 9.5 percent increase over revenues of $706.5 million in 2001. Segment operating income was $125.5 million, a 2.5 percent increase over operating income of $122.4 million in 2001 (or down $5.1 million from $130.6 million when adjusted for SFAS No. 142). Operating margins of 16.2 percent in 2002 were down slightly compared to 17.3 percent in 2001 (or down from 18.5 percent when adjusting 2001 for the impact of SFAS No. 142).

      The increase in the Payment Services segment operating income was driven by continued growth in the money transfer business. The Payment Services segment experienced double-digit growth in the number of locations that sell or provide both money orders and money transfer services, including 2,851 U.S. Wal-Mart locations. The money transfer business continued to show strong results with transaction volume growing 33 percent from 2001 to 2002, led by strong international money transfer and urgent bill payment volume. The agent base of the money transfer business expanded by 14 percent over 2001. Growth in the U.S. to Mexico corridor was down slightly over 2001, however the money transfer fixed-price product, Cambio Plus, continued to grow in the high teens on a percentage basis. These results were reduced by the other-than-temporary impairment losses and interest income adjustments of $28.9 million in 2002 as compared to similar losses and adjustments of $7.4 million in 2001 (which excludes a $3.0 million, or $1.9 million after-tax, adjustment for a cumulative effect of a change in accounting principle related to the adoption of EITF Issue No. 99-20).

      The money order business continued to contribute significantly to operating margin and cash flows; however, money order volume and related average investable balances were down slightly compared to 2001 as some agents were eliminated and fewer agents were approved in order to manage the credit quality of the money order business.

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      Average investable funds for 2002 were $6.1 billion, up 23 percent from 2001 levels primarily driven by the official check business. Payment Services investment income represented approximately 44 percent of total Payment Services segment revenue in 2002 and in 2001. Float income is affected by the level of investment balances and the yield on investments. Float income (excluding gains, losses and impairments) and expense associated with the Payment Services segment’s investment portfolio for the years ended December 31 were as follows:

                                                 
2002 2001


Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate(3) Balance Expense Rate(3)






(in thousands)
Investments substantially restricted for payment service obligations(1)
  $ 6,131,145     $ 351,331       5.73 %   $ 4,984,698     $ 306,145       6.14 %
Payment service obligations(2)
    4,706,324       240,152       5.10 %     3,490,246       208,273       5.97 %
             
                     
         
Net float income and margin
          $ 111,179       1.81 %           $ 97,872       1.96 %
             
                     
         


(1)  The Payment Services segment is regulated by various state agencies, which generally require the Payment Services segment to maintain liquid assets and investments with an investment rating of A or higher, in an amount generally equal to the payment service obligation for regulated payment instruments such as teller and agent checks, money orders and money transfers. In addition, the Payment Services segment has contractual arrangements that generally require maintenance of liquid assets and investments in an amount equal to the payment instruments, namely cashiers checks. Due to these regulations, a substantial amount of funds, agent receivables and investments are not available to satisfy working capital or other financing requirements of the Payment Services segment. The amount of funds, agents receivables and investments that are “restricted,” either for regulatory or contractual purposes, is equal to the total amount of payment service obligations ($7,825,954 and $6,649,722 at December 31, 2002 and 2001, respectively). See note 1 of notes to consolidated financial statements.
 
(2)  Commissions are paid to financial institution customers based upon average outstanding balances generated by the sale of official check products only. The expense reported includes those payments made to financial institution customers, costs associated with swaps and the sale of receivables program. The average balance reflects only the payment service obligations for which commissions are paid and does not include the average balance of the sold receivables ($440 million and $444 million for 2002 and 2001, respectively) as these are not recorded on the consolidated balance sheets. Commission expense is classified in “Costs of services” in the consolidated statements of income.
 
(3)  “Yield/ Rate” percentages are calculated by dividing the applicable amount shown in the “Income/ Expense” column by the applicable amount shown in the “Average Balance” column.

      Float income was $351.3 million in 2002 compared to $306.1 million in 2001, an increase of 14.8 percent. The growth was primarily due to higher average float portfolio balances, which increased by $1.1 billion or 23 percent. The float income increase attributable to the balance growth was $70.1 million and was partially offset by an income decrease of $24.9 million due to an interest rate decline reflecting an average investment yield of 5.73 percent, or a 41 basis point decline from 6.14 percent in 2001. During 2002, the 5-year U.S. Treasury Note declined 70 basis points and the Fed Funds rate declined over 200 basis points.

      The Payment Services segment maintains approximately $400 million to $750 million in short-term, highly liquid balances in order to fulfill its payment service obligations. Lower yields were earned on these short-term balances during 2002 due to interest rate declines. In addition, the dramatic decline in interest rates resulted in unprecedented and volatile mortgage refinancing activity during 2002. Refinancing activities caused an increase in the sale of official checks and an increase in float balances. The refinancing activity also drove a significant increase in the prepayments of mortgage-backed debt securities, resulting in the investment of these funds at lower interest rates. The Payment Services segment had $3.4 billion (or 57 percent) and $3.1 billion (or 51 percent) of its total float portfolio invested in mortgage-backed securities as of December 31, 2002 and 2001, respectively.

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      Commission expense was $240.2 million in 2002, an increase of $31.9 million, or 15.3 percent from 2001, primarily due to higher average balances of $1.2 billion. The commission expense increase attributable to the higher average balances was $72.6 million and was partially offset by an expense decrease of approximately $40.7 million due to lower interest rates. Commission expense includes amounts paid to financial institution customers based upon their average outstanding balances generated by the sale of PrimeLink products, net payments made in connection with swap agreements, and the discount on the sale of certain agent receivables. Commissions paid to customers are generally variable based on short-term interest rates; however, a substantial portion of the commission expense has been fixed through the use of interest rate swap agreements. In addition, Viad has an agreement to sell, on a periodic basis, undivided percentage ownership interests in certain receivables primarily from its money order agents. These receivables are sold to commercial paper conduits sponsored by a financial institution. The receivables are sold to accelerate the Company’s cash flow for investment in permissible securities and are sold at a discount based upon short-term interest rates.

      Net float income (float income less commission expense) was $111.2 million in 2002, up $13.3 million or 13.6 percent from 2001, primarily due to increased balances. This increase was partially offset by a decline in interest rates, reflecting a net float margin of 1.81 percent, or a 15 basis point decline from 1.96 percent in 2001. The margin decline was a result of a lower interest rate environment as short-term and float balances earned lower yields and proceeds from prepayments and sales were reinvested at lower yields. As mentioned above, refinancing activities caused an increase in the sale of official checks and therefore an increase in float balances. However, a substantial portion of these balances were invested at short-term interest rates equal to or less than the interest rates paid out in commissions to financial institution customers, thus reducing net float margin. Although commissions and the discount on the sale of receivables program benefited from lower short-term interest rates, the fixed rate derivatives used to mitigate the effects of fluctuations on these expenses have contractual maturities, and therefore, did not benefit from reduced interest rates. Also contributing to the margin decline was a change in product mix reflecting higher overall growth in the official check business, which has lower net float margins relative to the money order business.

      The impact of changes in average investable balances and interest rates on the float income and commission expense associated with the investment portfolio for the years ended December 31 was as follows:

                         
2002 vs 2001

Yield/
Balance(1) Rate(1) Total



(in thousands)
Float income
  $ 70,091     $ (24,905 )   $ 45,186  
Commission expense
  $ 72,567     $ (40,688 )   $ 31,879  
Net float income
  $ 22,408     $ (9,101 )   $ 13,307  


(1)  The “Balance” column is calculated by annualizing the result of the yield/rate for the prior year’s period multiplied by the change in the investments substantially restricted for payment services obligations. The “Yield/ Rate” column is calculated by annualizing the result of the investments substantially restricted for payment service obligations for the prior year’s period multiplied by the change in the yield/rate. See “Non-GAAP Measures” for further explanation of Float Income and Net Float Income. The totals for the balance and rate columns are not the sum of the individual lines as income and expense changes are calculated independently.

      The Payment Services segment uses interest rate derivatives to mitigate its exposure to the floating rate commission payments to financial institution customers. The fair value of these derivatives can fluctuate with interest rate changes, and are reflected as increases or decreases to a component of stockholders’ equity. Changes in the value of the available-for-sale investment portfolio are also reflected as increases or decreases to a component of stockholders’ equity. The change in the fair value of the derivative liability for 2002 was a net decrease of $96.7 million in stockholders’ equity, while the net change in the fair value of the available-for-sale investment portfolio was a net increase of $60.4 million in stockholders’ equity. Changes in the value of the available-for-sale investment portfolio will generally move in the opposite direction of the derivative values

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although they will rarely offset. The main objective in entering into the derivatives is to first mitigate the risk on earnings due to the change in interest rates and secondarily to mitigate the risk to equity.

      Convention and Event Services. Revenues of the Convention and Event Services segment were $786.2 million in 2002, a decrease of 11.1 percent from the revenues of $884.0 million in 2001. Segment operating income was $36.5 million in 2002 compared to $32.6 million in 2001 (or $40.4 million when adjusted for SFAS No. 142). Segment operating margins were 4.6 percent and 3.7 percent in 2002 and 2001, respectively. When adjusting 2001 for the impact of SFAS No. 142, the operating margin would have been 4.6 percent.

      Within the Convention and Event Services segment, the convention show services business experienced a 5.9 percent decrease in revenues, however, operating income increased during the year. Revenues were $568.3 million in 2002 compared to $604.1 million in 2001. The decline in revenues largely reflects lower demand for services and tradeshow shrinkage due to overall weak economic conditions. Since 2001, and throughout 2002, the tradeshow industry experienced sequential declines in tradeshow attendance, the number of exhibiting companies, and convention square footage. Tradeshow activity also reflects industry-specific conditions. Show shrinkage was significant in the technology and telecommunications sectors, while health-related shows had slightly improved and other service industries had stabilized. During 2002, several shows were canceled, scaled-back or lost to competitors. However, these declines were partially offset by new business in 2002 such as the Comdex and International Manufacturing Technology shows, and positive show rotation related to the ConExpo/ ConAg and International Woodworking shows, as these events do not occur every year. Operating income improvements during 2002 primarily reflect improved margins and lower costs as the benefit of a previous restructuring had largely been realized.

      The exhibit design and construction business experienced a 22.1 percent decrease in revenues during the year. Exhibit design and construction revenues were $217.9 million in 2002 compared to $279.9 million in 2001. Revenues were negatively impacted by declines in the demand for the design and construction of new exhibits. This decline was due to diminished corporate spending and the downturn in the general economy as many exhibitors elected to reuse or refurbish existing exhibits rather than placing new orders. Operating income performance was poor during 2002 primarily due to the decline in revenues, excess manufacturing capacity, and certain inefficiencies. As discussed above, due to decreased visibility over revenues and continued uncertainties regarding improvements in the tradeshow industry, the Convention and Event Services segment recorded a restructuring charge of $20.5 million ($13.3 million after-tax). The restructuring plan was primarily focused on cost reductions through centralizing manufacturing capacity from five locations to three and centralizing certain support functions. Viad substantially completed the restructuring activities during 2003, however, payments due under the long-term lease obligations will continue to be made over the remaining terms of the lease agreements. Severance and benefits payments will be made over the varying terms of the individual separation agreements. See “Critical Accounting Policies” for additional discussion of the accounting method related to the 2002 restructuring. During 2001, a restructuring charge of $66.1 million ($39.9 million after-tax) was recorded related to the Convention and Event Services segment for which the related restructuring activities were completed by the end of 2002.

      Travel and Recreation Services. Revenues of the travel and recreation businesses decreased $3.2 million, or 5.2 percent, to $58.3 million in 2002. Operating income for the travel and recreation businesses was $13.7 million, a decrease of 6.5 percent from that of 2001. Operating margins for 2002 and 2001 were 23.6 percent and 23.9 percent, respectively. When adjusting 2001 for the impact of SFAS No. 142, operating income would have been $15.6 million (with a 2002 decrease of 11.6 percent) and the operating margin would have been 25.3 percent. The revenue decrease resulted primarily from a continued decline in the world travel market.

      Corporate Activities. Corporate activities expense increased $5.1 million from 2001 to 2002. This increase was due largely to $2.5 million for legal, investment banking, and other costs incurred in connection with a contemplated initial public offering of Travelers Express. Additional increases related to higher insurance premiums and employee benefit costs in 2002.

      Other Investment Income. Investment income increased $4.9 million in 2002 due primarily to $3.5 million of interest income received associated with a federal income tax refund for the 1994 through 1996 tax years and

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an increase in investment income associated with Corporate investments due to higher average investment levels during 2002, partially offset by lower average interest rates.

      Interest Expense. Interest expense decreased to $19.3 million in 2002 from $25.9 million in 2001 as a result of steadily declining average outstanding debt balances and average interest rates throughout the year. Approximately 42 percent and 38 percent of the average debt outstanding during 2002 and 2001, respectively, were related to short-term borrowings that were subject to variable interest rates.

      Minority Interests. The increase in minority interest expense of $4.3 million in 2002 from 2001 relates to strong growth in the Payment Services segment’s 51 percent interest in MIL. In January 2003, Viad purchased the remaining 49 percent interest in MIL.

      Income Taxes. The 2002 effective tax rate was 23.7 percent, up from an 18.1 percent tax benefit in 2001 predominantly due to the restructuring charges and other items recorded in 2001. Excluding the effect of the 2002 and 2001 restructuring charges and other items, the 2002 effective tax rate was 25.2 percent, up from 22.9 percent in 2001. When adjusted for the impact of SFAS No. 142 the effective tax rate in 2001 would have been 22.2 percent. The relatively low rate compared to the statutory federal rate is primarily attributable to tax-exempt income from Viad’s Payment Services segment. The higher rate for 2002 is due to lower tax-exempt investment income in proportion to total pre-tax income resulting from the shift in the mix of investments from nontaxable to taxable investments.

Liquidity and Capital Resources

      Cash and corporate investments were $163.1 million at December 31, 2003 as compared to $303.6 million at December 31, 2002, with the decrease primarily due to the repayment of $100 million related to certain medium-term senior notes that matured and a capital contribution to Travelers Express to acquire the minority interest share of MIL described below, partially offset by cash generated from 2003 operations. Corporate investments are included in the balance sheet caption “Other investments in securities.”

      In January 2003, MoneyGram Payment Systems, Inc., a subsidiary of Travelers Express, acquired the 49 percent minority interest in MIL from Travelex Group Plc. (“Travelex”). MIL, a London-based joint venture between MoneyGram Payment Systems, Inc. and Travelex, provides international sales and marketing services for MoneyGram Payment Systems, Inc., primarily in Europe, Africa, Asia and Australia. Prior to the acquisition, MoneyGram Payment Systems, Inc. owned a 51 percent interest in MIL. In connection with the transaction, MoneyGram Payment Systems, Inc. paid approximately $98.1 million to Travelex. In addition, MIL paid a dividend to Travelex of approximately $8.1 million concurrent with the transaction.

      Viad’s total debt at December 31, 2003 was $251.4 million compared with $361.7 million at December 31, 2002. The debt-to-capital ratio at December 31, 2003 was 0.23 to 1, compared to 0.34 to 1 at December 31, 2002. Capital is defined by Viad as total debt (excluding $4.75 preferred stock) plus minority interests and common stock and other equity.

      In connection with the completion of the spin-off, Viad will repay its commercial paper of approximately $168.0 million, tender for its senior notes of $35.0 million and subordinated debt of $18.5 million, retire its industrial revenue bonds of $9.0 million, and redeem its outstanding preferred stock at an aggregate call price of approximately $23.7 million. MoneyGram intends to negotiate and enter into bank credit facilities providing availability of up to $350 million, in the form of a revolving credit facility and/or term loan. Of the total $350 million, management expects to borrow $150 million prior to the time of the spin-off, the proceeds of which will be paid to Viad and used by Viad to repay all or a portion of its outstanding commercial paper (or similar indebtedness). The remaining amount of the credit facilities is expected to be available for general corporate purposes and to support letters of credit. MoneyGram expects that the term of the bank credit facilities will be for periods of up to four years and that the facilities will contain customary terms and conditions. However, any such term loan and revolving credit facilities would not become effective until immediately prior to the spin-off. Immediately subsequent to the spin-off and related transactions, MoneyGram is expected to have approximately $150 million of total debt outstanding representing the borrowing described above. There can be no assurance that MoneyGram will be able to negotiate credit facilities on terms acceptable to MoneyGram. Additionally, New

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Viad intends to negotiate and enter into bank credit facilities providing availability of at least $100 million for general corporate purposes and to support letters of credit, of which New Viad expects to borrow approximately $30 million following the spin-off, the proceeds of which will be used for general corporate purposes. Management expects that the term of the bank credit facilities will be for a period of up to three years and that the facilities will contain customary terms and conditions. However, any such revolving credit facility would not become effective until immediately after the spin-off. Following the spin-off and related transactions, New Viad is expected to have approximately $50 million of total debt outstanding representing the $30 million borrowing described above and approximately $20 million of previously existing debt assigned to New Viad pursuant to the spin-off agreements. There can be no assurance that New Viad will be able to negotiate credit facilities on terms acceptable to New Viad. See “Financing Arrangements of MoneyGram” and “Financing Arrangements of New Viad” for status of credit facility negotiations.

      Under a Shelf Registration filed with the Securities and Exchange Commission, Viad can issue up to an aggregate $500 million of debt and equity securities. In 2002, Viad filed an amended Shelf Registration with the Securities and Exchange Commission to update disclosures in the registration statement and to maintain Viad’s financial flexibility. No securities have been issued under the program.

      Viad authorized a stock repurchase program in 1998 for the purpose of replacing Viad common shares issued upon exercise of stock options and in connection with other stock compensation plans, with the intended effect of reducing dilution caused by the issuance of these shares of Viad common stock. This program was on hold for most of 2001 and the first six months of 2002 while cash was conserved given the uncertainty in the economy. In the third quarter of 2002, Viad resumed the 1998 repurchase program and acquired 1.2 million shares for $26.3 million at an average price of $21.89 per share. In the second quarter of 2003, Viad acquired 50,000 shares for $974,000 at a price of $19.47 per share. Prior to the break in the 1998 stock repurchase program, 1.4 million shares of Viad common stock were repurchased in early 2001 for $34.6 million at an average price of $24.45 per share.

      Proceeds from the exercise of stock options, including tax benefits on stock option exercises, totaled $4.5 million and $12.7 million in 2003 and 2002, respectively. The level of future cash generated from stock option exercises may vary depending on Viad’s stock price compared to the option exercise price and the ability of the grantees to exercise stock options.

      With respect to working capital, in order to minimize the effects of borrowing costs on earnings, Viad strives to maintain current assets at the lowest practicable levels while at the same time taking advantage of payment terms offered by trade creditors and obtaining advance deposits from customers for certain projects and services. However, working capital requirements may fluctuate from seasonal factors and changes in levels of receivables and inventories caused by numerous business factors.

      Viad has credit facilities totaling $475 million to support general corporate purposes, various letters of credit and a Canadian credit facility. The $475 million includes a $225 million five-year facility and a $250 million 364-day facility. The interest rate applicable to borrowings under the credit facilities is indexed to the London Interbank Offering Rate, plus appropriate spreads. The facilities also provide for commitment fees. Such spreads and fees would change should Viad’s debt ratings change. For example, a change from Viad’s current BBB/Baa2 debt rating to a non-investment grade rating, would result in an increase of up to 75 basis points in the interest rate applicable to the credit facilities. To date, Viad has not drawn against these facilities, however, if and/ or when a drawing were to occur, the repayment schedule would be determined at that time. These facilities have been primarily used to backstop Viad’s outstanding commercial paper borrowings and support outstanding letters of credit. The committed lenders pursuant to these two credit facilities include twenty-one major financial institutions with Citigroup as the lead administrative agent and arranger. On August 29, 2003, Viad’s 364-day short-term revolving credit facility was amended. The total amount of the lenders’ commitments was increased from $168 million to $250 million under similar terms and the commitment termination date of each eligible lender was extended to August 27, 2004. In addition, a provision was added which requires the absence of material adverse change as a condition of converting any outstanding borrowings to a term loan. Short-term borrowings totaling $168.0 million and $173.0 million at December 31, 2003 and 2002, respectively, have been classified as long-term debt, pursuant to the unused commitments under the applicable long-term and short-term

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credit facilities. Unused commitments (net of amounts used to support short-term borrowings and letters of credit) under the facilities totaled $236.0 million at December 31, 2003. Borrowings under the facilities are subject to various covenants, including a minimum net worth covenant, and a total debt-to-EBITDA financial ratio covenant. If Viad were to default on any other debt obligation outstanding of at least $25 million in aggregate, it would constitute an event of default with respect to the credit facilities under applicable cross default provisions. At December 31, 2003, Viad was in compliance with all of its covenants. Upon completion of the spin-off transaction, these credit facilities will automatically terminate and be replaced with the separate credit facilities described above related to MoneyGram and New Viad.

      The ability of Viad to maintain its investment grade rating is important because it affects the cost of borrowing. In addition, certain financial institution customers of the Payment Services segment require that Viad maintain an investment grade rating. Any ratings downgrade could increase Viad’s cost of borrowing, result in termination of debt or require certain actions to be performed to rectify such a situation. A downgrade could also have a negative effect on Viad’s ability to attract and retain new or existing customers.

      As a result of the announcement on July 24, 2003 of Viad’s intention to spin-off MoneyGram, the rating agencies put Viad on credit watch with negative implications as it is probable that the existing debt of Viad would not be rated investment grade following the separation of MoneyGram. Viad has announced that it will tender for all public debt, pay off all commercial paper and redeem its preferred stock concurrent with the spin-off. Because the commercial paper market is ratings driven, regardless of the reason for the credit watch, this action may result in increased borrowing costs for Viad in the future.

      Capital expenditures for the year ended December 31, 2003 totaled $42.7 million as compared to $40.2 million in 2002. These expenditures primarily related to certain leasehold improvements, information systems and related costs, and manufacturing and other equipment.

      Capital spending has been reduced by obtaining, where appropriate, equipment and other property under operating leases. Cash flows from operations during the past three years have generally been sufficient to fund capital expenditures, acquire businesses and pay cash dividends to stockholders. Although no assurance can be given, Viad expects operating cash flows and short-term borrowings to be sufficient to finance its ongoing business, maintain adequate capital levels, and meet covenant and investment grade rating requirements. Should financing requirements exceed such sources of funds, Viad believes it has adequate external financing sources available, including unused commitments under its credit facilities, to cover any shortfall. Viad had unused commitments (net of amounts used to support short-term borrowings and letters of credit) under its existing credit facilities of $236.0 million at December 31, 2003.

      The following table presents Viad’s contractual obligations at December 31, 2003:

                                           
Payments due by period

Less than After 5
Total 1 year 2-3 years 4-5 years years





(in thousands)
Long-term debt
  $ 243,938     $ 20,500     $ 197,503     $ 1,000     $ 24,935  
Capital lease obligations
    7,505       711       1,279       900       4,615  
Operating leases
    171,312       30,403       51,224       35,903       53,782  
Derivative financial instruments
    173,694       104,316       70,418       167       (1,207 )
Other long-term obligations(1)
    15,147       7,573       7,574              
     
     
     
     
     
 
 
Total contractual cash obligations
  $ 611,596     $ 163,503     $ 327,998     $ 37,970     $ 82,125  
     
     
     
     
     
 


(1)  Other long-term obligations consist of funding commitments of the Payment Services segment related to collateralized private equity obligations. At December 31, 2003, Viad’s aggregate noncancelable purchase obligations were not significant, and were therefore excluded from the above table.

      In December 2002, GES began occupying and commenced lease payments on a newly constructed facility in Las Vegas, Nevada. The leased property provides GES with approximately 882,000 square feet of combined

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warehouse, manufacturing and office space. The lease was accounted for as an operating lease, and as such, is not included on Viad’s consolidated balance sheets. The original lease term is 12 years and the aggregate base rental payments over the lease term are approximately $60 million. At December 31, 2003, approximately $55 million of the remaining aggregate base rental payments remain and are included under the caption “Operating leases” above.

      At December 31, 2003, Viad had certain guarantees to third parties on behalf of its subsidiaries. The fair value of these guarantees are not subject to liability recognition in the consolidated financial statements pursuant to FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”. These parent-subsidiary guarantees primarily relate to leased facilities (included in operating leases in the table above) and credit or loan arrangements with banks, entered into by Viad’s subsidiary operations. Viad would generally be required to make payments to the respective third parties under these guarantees in the event that the related subsidiary could not meet its own payment obligations. The maximum potential amount of future payments that Viad would be required to make under all guarantees existing at December 31, 2003 would be $54.8 million. At December 31, 2003, the aggregate guarantees related to leased facilities were $32.7 million, and expire through January 2015. At December 31, 2003, the aggregate guarantees related to credit or loan arrangements with banks were $22.1 million of which $20.0 million is subject to an ongoing guarantee by a Viad subsidiary commensurate with the subsidiary’s credit facility, and has no expiration date. There are no recourse provisions that would enable Viad to recover from third parties any payments made under the guarantees. Furthermore, there are no collateral or similar arrangements whereby Viad could recover payments.

      The Payment Services segment subsidiaries generate funds from the sale of official checks, money orders and other payment instruments, with the related liabilities classified as “Payment service obligations.” Substantially all of the proceeds of these sales are invested in permissible securities, principally high-quality debt instruments. These investments are restricted by the Payment Services segment to the extent that they represent proceeds from the sale of its payment instruments for use by the subsidiaries to satisfy the liability to pay, upon presentment, the face amount of such payment service obligations. Accordingly, these assets are not generally available to satisfy working capital or other financing requirements of Viad. The securities are included in the consolidated balance sheets under the caption, “Investments substantially restricted for payment service obligations.” Certain additional assets of the Payment Services segment subsidiaries relating to payment service obligations, including cash, funds in transit from agents and securities expected to be sold or maturing within one year, are included under the caption, “Funds, agent receivables and current maturities of investments substantially restricted for payment service obligations.” Although the Payment Services segment investment portfolio exposes Viad to certain credit risks, Viad believes the high quality of the investments reduces this risk. Approximately 93 percent of the investments at December 31, 2003 (and approximately 97 percent of the investments at December 31, 2002) have an investment grade rating of A or higher or are collateralized by federal agency securities. Although Payment Services’ investment portfolio is highly diversified, if any one issuer were unable to pay its obligations or were to enter into bankruptcy, the Payment Services segment may have to sell the investment and reinvest the proceeds in permissible securities and/or could lose a portion or a substantial amount of the investment with such issuer. In addition, deterioration in the debt and/or equity markets could lead to further other-than-temporary impairment losses related to the Payment Services segment’s investment securities in future periods. See “Critical Accounting Policies” for discussion regarding estimates and assumptions related to other-than-temporary declines in the value of securities. Under normal circumstances there is no requirement to sell long-term debt securities prior to their maturity, as the funds from ongoing sales of money orders and other payment instruments and funds from maturing long-term and short-term investments are expected to be adequate to settle payment service obligations as they are presented. Fluctuations in the balances of Payment Services’ assets and obligations result from varying levels of sales of money orders and other payment instruments, the timing of agent receivables, and the timing of the presentment of such instruments.

      The Payment Services segment has agreements with clearing banks that provide processing and clearing functions for money orders and official checks. One clearing bank contract has covenants for the Payment Services segment, that include: maintenance of a minimum level of capital of $500 million, maintenance of total assets restricted for payment services obligations at least equal to total outstanding payment service obligations,

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maintenance of a minimum ratio of total assets held at that bank to instruments clearing through that bank of 105 percent and a cumulative net income requirement of $15 million for every two quarter period. While the Payment Services segment is in compliance with these covenants, maintenance of the covenants may require additional capital contributions to be made by Viad to the Payment Services segment and/or may require the Payment Services segment to change the mix of its investments or increase the level of investment liquidity, which could result in lower rates of return.

      Working in cooperation with certain financial institutions, the Payment Services segment has established separate consolidated entities (special-purpose entities) and processes that provide these financial institutions with additional assurance of the ability to clear their official checks. These processes include maintenance of specified ratios of segregated investments to outstanding payment instruments. This ratio is typically 1 to 1. In some cases, alternative credit support has been purchased by Payment Services that provides backstop funding as additional security for payment of their instruments. However, Payment Services remains liable to satisfy the obligations, both contractually as evidenced in the agreements with the financial institutions, as well as by operation of the Uniform Commercial Code, as issuer and drawer of the official checks. Accordingly, the obligations have been recorded in the consolidated balance sheets under “Payment service obligations.” Under certain limited circumstances, clients have rights to demand liquidation of the segregated assets or to take other similar actions. Such limited circumstances consist of material (and in most cases continued) failure of the Payment Services segment to uphold its warranties and obligations pursuant to its underlying agreements with the financial institution clients. While an orderly liquidation of assets would be required, any of these actions by a client could nonetheless diminish the value of the total investment portfolio, decrease earnings, and result in loss of the client or other customers or prospects. The special purpose entity is offered by the Payment Services segment to certain financial institution clients as a benefit unique in the payment services industry.

      The Payment Services segment has an agreement to sell, on a periodic basis, undivided percentage ownership interests in certain receivables, primarily from its money order agents, in an amount not to exceed $450 million. These receivables are sold to two commercial paper conduits sponsored by a financial institution and represent a small percentage of the total assets in each of these two conduits. Viad’s rights and obligations are limited to the receivables transferred, and are accounted for as sales transactions under SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” The agreement expires in June 2006. See “Off-Balance-Sheet Arrangements” below.

      At December 31, 2003, Viad’s Payment Services segment subsidiaries have various lines of credit, overdraft facilities and reverse repurchase agreements totaling $2.1 billion available to assist in the management of their investments and the clearing of payment service obligations. At December 31, 2003, $2.0 million was outstanding under an overdraft facility. No borrowings were outstanding under these facilities at December 31, 2002.

      The Payment Services segment has agreements with certain investors to provide funds related to investments in collateralized private equity obligations. At December 31, 2003, the total amount of unfunded commitments related to these agreements was $15.1 million.

      Viad sold treasury stock in 1992 to its employee equity trust (the “Trust”) to fund certain existing employee compensation and benefit plans over the scheduled 15-year term of the Trust. For financial reporting purposes, the Trust is consolidated with Viad. The fair market value of the shares held by the Trust, representing unearned employee benefits, is recorded as a deduction from common stock and other equity and is reduced as employee benefits are funded. As of December 31, 2003, 1,872,786 shares remained in the Trust and were available to fund future benefit obligations.

      Viad has certain funded, noncontributory pension plans that cover certain employees. Funding policies provide that payments to defined benefit pension trusts shall be equal to the minimum funding required by applicable regulations. In 2004, Viad expects to contribute $2.2 million to its funded pension plans. Viad has certain unfunded pension and other postretirement benefit plans that require benefit payments over extended periods of time. In 2004, Viad expects to contribute $3.1 million and $2.6 million to its unfunded pension plans and other postretirement benefit plans, respectively, to cover such benefit payments.

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      Viad is subject to various environmental laws and regulations of the United States as well as of the states and other countries in whose jurisdictions Viad has or had operations, and is subject to certain international agreements. As is the case with many companies, Viad faces exposure to actual or potential claims and lawsuits involving environmental matters. Although Viad is a party to certain environmental disputes, Viad believes that any liabilities resulting from these disputes, after taking into consideration amounts already provided for, exclusive of any potential insurance recovery, have been properly reserved for; however, environmental settlements could result in future cash outlays.

Off-Balance-Sheet Arrangements

      Viad has certain arrangements or transactions that are not recorded on the consolidated balance sheets and could materially affect liquidity or require the use of capital resources. At December 31, 2003, these arrangements and transactions include aggregate operating lease commitments of $171.3 million, aggregate guarantees of $54.8 million (representing parent guarantees of subsidiary obligations) and funding commitments related to collateralized private equity obligations of $15.1 million. See “Liquidity and Capital Resources” above.

      The Payment Services segment has an agreement to sell, on a periodic basis, undivided percentage ownership interests in certain receivables, primarily from its money order agents, in an amount not to exceed $450 million. These receivables are sold to commercial paper conduits sponsored by a financial institution and represent a small percentage of the total assets in these conduits. Viad’s rights and obligations are limited to the receivables transferred, and are accounted for as sales transactions under SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” The agreement expires in June 2006. The business purpose of this arrangement is to accelerate cash flow for investment in permissible securities by the Payment Services segment. The receivables are sold at a discount based upon short-term interest rates. Performance under the terms of the agreement is regularly reviewed by Payment Services executive management.

Critical Accounting Policies

      The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated financial statements. The SEC has defined a company’s most critical accounting policies as those that are most important to the portrayal of a company’s financial position and results of operations, and that require a company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this criteria, Viad has identified and discussed with its audit committee the following critical accounting policies and estimates, and the methodology and disclosures related to those estimates:

      Goodwill — SFAS No. 142, “Goodwill and Other Intangible Assets,” requires annual impairment testing of goodwill based on the estimated fair value of Viad’s reporting units. The fair value of Viad’s reporting units is estimated based on discounted expected future cash flows using a weighted average cost of capital rate. Additionally, an assumed terminal value is used to project future cash flows beyond base years. The estimates and assumptions regarding expected cash flows, terminal values and the discount rate require considerable judgment and are based on historical experience, financial forecasts, and industry trends and conditions.

      During 2002, Viad recorded a transitional goodwill impairment loss of $40.0 million ($37.7 million after-tax) related to the Exhibitgroup/ Giltspur reporting unit of the Convention and Event Services segment. Subsequent to the initial adoption of SFAS No. 142, annual impairment tests were performed in 2003 and 2002 resulting in no additional impairment. However, a decline in the expected cash flows or the estimated terminal value in the future could lead to additional goodwill impairment losses. Similarly, an increase in the discount rate (weighted average cost of capital) could also result in additional goodwill impairment.

      Insurance liabilities — Viad is self-insured up to certain limits for workers’ compensation, automobile, product and general liability, property loss and medical claims. Viad has also retained and provided for certain insurance liabilities in conjunction with the sales of businesses. Provisions for losses for claims incurred, including estimated claims incurred but not yet reported, are made based on Viad’s prior historical experience,

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claims frequency and other factors. Viad has purchased insurance for amounts in excess of the self-insured levels. The self-insured retention levels generally range from $200,000 to $500,000 on a per claim basis. A change in the assumptions used could result in an adjustment to recorded liabilities. Viad’s total cash payments in connection with these insurance liabilities were approximately $5.5 million and $6.7 million for the years end December 31, 2003 and 2002, respectively.

      Pension obligations — Viad has trusteed, noncontributory pension plans that cover certain employees. Pension benefits are supplemented, in most cases, by defined matching company stock contributions to employees’ 401(k) plans. In addition, Viad retained the obligations for pension benefits for employees of certain sold businesses. Through December 31, 2000, the principal retirement plan was structured using a traditional defined benefit formula based primarily on final average pay and years of service. Benefits earned under this formula ceased accruing at December 31, 2000, with no change to retirement benefits earned through that date. Effective January 1, 2001, benefits began accruing under a cash accumulation account formula based upon a percentage of pay plus interest. Effective January 1, 2004, benefits under the cash accumulation formula ceased accruing new benefits for service periods subsequent to December 31, 2003 with no change in benefits earned through that date. Funding policies provide that payments to defined benefit pension trusts shall be at least equal to the minimum funding required by applicable regulations. Certain defined pension benefits, primarily those in excess of benefit levels permitted under qualified pension plans, are unfunded. As determined with the assistance of an external actuary, the following assumptions were used at December 31 in determining the projected benefit obligation:

                 
2003 2002


Discount rate
    6.25 %     6.75 %
Expected return on plan assets
    8.75 %     8.75 %

      The weighted average assumptions used to determine the net periodic benefit cost for years ended December 31 were as follows:

                 
2003 2002


Discount rate
    6.75 %     7.25 %
Expected return on plan assets
    8.75 %     10.00 %
Rate of compensation increase
    4.50 %     4.50 %

      Viad’s pension expense was $7.5 million and $3.2 million for 2003 and 2002, respectively, not including the $3.8 million curtailment gain resulting from the freezing of Viad’s defined benefit pension plan. Pension expense is calculated based upon the actuarial assumptions shown above. For 2003, the pension expense consisted of service cost of $3.0 million, interest cost of $12.4 million, amortization of prior service cost of $724,000, recognized net actuarial loss of $2.0 million less an expected return on plan assets of $10.7 million. The fair value of Viad’s pension plan assets decreased slightly to $106.6 million at December 31, 2003 from $107.1 million at December 31, 2002 primarily due to benefits paid in excess of actual returns on plan assets.

      Viad’s discount rate used in determining future pension obligations is measured on November 30 and is based on rates determined by actuarial analysis and Viad management review. Lowering the discount rate by 50 basis points would have increased Viad’s 2003 pension expense by $700,000.

      In developing the expected rate of return, Viad employs a total return investment approach whereby a mix of equities and fixed income securities are used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. Viad’s current asset allocation consists of approximately 55 percent in large capitalization and international equities, approximately 35 percent in fixed income securities such as long-term treasury bonds, intermediate government bonds and global bonds, approximately seven percent in a real estate limited partnership interest and three percent in other securities. The investment portfolio contains a diversified blend of equity and fixed income securities. Furthermore, equity securities are diversified across U.S. and non U.S. stocks. Other assets such as real estate and cash are used judiciously to enhance long-term returns while

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improving portfolio diversification. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews and annual liability measurements.

      Additionally, historical markets are studied and long-term historical relationships between equity securities and fixed income securities are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. The long-term portfolio return also takes proper consideration of diversification and rebalancing. Peer data and historical returns are reviewed for reasonableness and appropriateness.

      Lowering the expected rate of return by 50 basis points would have increased Viad’s 2003 pension expense by $609,000. Viad’s pension assets are primarily invested in marketable securities that have readily determinable current market values. Viad’s investments are rebalanced regularly to stay within the investment guidelines. Viad will continue to evaluate its pension assumptions, including its rate of return, and will adjust these factors as necessary.

      Future actual pension income or expense will depend on future investment performance, changes in future rates and various other factors related to the populations participating in Viad’s pension plans.

      Postretirement benefits other than pensions — Viad and certain of its subsidiaries have defined benefit postretirement plans that provide medical and life insurance for certain eligible employees, retirees and dependents. The related postretirement benefit liabilities are recognized over the period that services are provided to employees. In addition, Viad retained the obligations for these benefits for retirees of certain sold businesses. While the plans have no funding requirements, Viad may fund the plans.

      The assumed health care cost trend rate used in measuring the 2003 accumulated postretirement benefit obligation was ten percent for the year 2004, gradually declining to five percent by the year 2008 and remaining at that level thereafter.

      A one-percentage-point increase in the assumed health care cost trend rate for each year would increase the accumulated postretirement benefit obligation at December 31, 2003 by approximately $4.7 million and the ongoing annual expense by approximately $454,000. A one-percentage-point decrease in the assumed health care cost trend rate for each year would decrease the accumulated postretirement benefit obligation at December 31, 2003 by approximately $4.1 million and the ongoing annual expense by approximately $387,000. See “Recent Accounting Pronouncements” below for a discussion of FASB Staff Position 106-1 related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 which may impact Viad’s accounting for postretirement benefits.

      Weighted average assumptions used to determine net periodic benefit cost for the years ended December 31 were as follows:

                 
2003 2002


Discount rate
    6.75 %     7.25 %
Expected return on plan assets
    3.75 %     3.75 %

      Investment securities — Investment securities are accounted for in accordance with SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” Per SFAS No. 115, investments are classified into one of three categories: held-to-maturity, available-for-sale, or trading. All of Viad’s investment securities are classified as available-for-sale, including securities being held for indefinite periods of time, and those securities that may be sold to assist in the clearing of payment service obligations or in the management of securities. These securities are carried at market value (or fair value), with the net after-tax unrealized gain or loss reported as a separate component of stockholders’ equity under “Accumulated other comprehensive income (loss).” Market value is determined by using available market information. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates determined may not be indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. In general, as interest rates increase, the fair value of the available-for-sale portfolio and stockholders’ equity

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decreases and as interest rates fall, the fair value of the available-for-sale portfolio increases as well as stockholders’ equity.

      Other-than-temporary declines in the value of securities — Viad’s investments consist primarily of mortgage-backed securities, other asset-backed securities, state and municipal government obligations and corporate debt securities. Investments are considered to be impaired when a decline in fair value is judged to be other-than-temporary. Viad employs a methodology that considers available evidence in evaluating potential impairment of its investments including the duration and extent to which the fair value is less than book value, Viad’s ability and intent to hold the investment, the security rating, the underlying collateral and other factors that influence projected future cash flows. When an other-than-temporary impairment occurs, investments are written down to fair market value. Subsequent increases in value are treated as an adjustment of yield.

      As discussed elsewhere in this information statement, Viad recorded other-than-temporary impairment losses and interest income adjustments (excluding the effects of realized gains) of approximately $32.2 million, $28.9 million and $10.4 million for the years ended December 31, 2003, 2002 and 2001, respectively, primarily related to certain structured notes and certain other asset-backed securities and collateralized mortgage obligations held in its Payment Services investment portfolio during the period. Adverse changes in estimated cash flows in the future could result in impairment losses to the extent that the recorded value of such investments exceeds fair value. See notes 4 and 5 of notes to consolidated financial statements.

      Derivative financial instruments — Derivative financial instruments are used as part of Viad’s risk management strategy to manage exposure to fluctuations in interest and foreign currency rates. Viad does not enter into derivatives for speculative purposes. Derivatives are accounted for in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and its related amendments and interpretations. The derivatives are recorded as either assets or liabilities on the balance sheet at fair value, with the change in fair value recognized in earnings or in other comprehensive income depending on the use of the derivative and whether it qualifies for hedge accounting. A derivative that does not qualify, or is not designated, as a hedge will be reflected at fair value, with changes in value recognized through earnings. The estimated fair value of derivative financial instruments has been determined using available market information and certain valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates determined may not be indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts. While Viad intends to continue to meet the conditions to qualify for hedge accounting treatment under SFAS No. 133, if hedges did not qualify as highly effective or if forecasted transactions did not occur, the changes in the fair value of the derivatives used as hedges would be reflected in earnings. Viad does not believe it is exposed to more than a nominal amount of credit risk in its hedging activities as the counterparties are generally well-established, well-capitalized financial institutions.

      Stock-based compensation — As permitted by SFAS No. 123, “Accounting for Stock-Based Compensation” and SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure,” Viad uses the intrinsic value method prescribed by APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for its stock-based compensation plans. Accordingly, Viad does not use the fair value method to value stock options in accordance with SFAS No. 123. See notes to consolidated financial statements for the pro forma impact of stock-based awards using the fair value method of accounting.

      Restructuring charges and other items — As a component of the 2002 restructuring charge of $20.5 million, an accrued liability related to facility closure and lease termination costs of $12.8 million, net of estimated sublease income, was recorded at December 31, 2002. These costs were accounted for pursuant to EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” Under EITF Issue No. 94-3, these costs were considered to have no future economic benefit, and were therefore recorded at the time that Viad management approved and committed to the restructuring plan in the fourth quarter of 2002. The recorded amounts were based on the contractual obligations contained in the leases (net of estimated sublease income) and estimates of incremental costs incurred as a direct result of the restructuring plan.

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      In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 was effective for exit or disposal activities that are initiated after December 31, 2002. Under SFAS No. 146, a liability for the costs associated with an exit or disposal activity is recognized and measured initially at its fair value in the period in which the liability is incurred. The liability would subsequently be adjusted for revisions related to the timing and amount of estimated cash flows and accretion expense, if applicable. If Viad had elected to early adopt the provisions of SFAS No. 146, the majority of the $12.8 million charge related to facility closure and lease termination costs would have been recorded based on the fair value of the liability at the time Viad ceased using the related leased facilities and determined using a present value technique. The remaining portion of the $12.8 million liability would have been recorded at fair value at the time the liability was incurred (when services associated with the activity were received). If Viad had elected to apply the accounting method under SFAS No. 146, the aggregate charge of $12.8 million discussed above would not have been recorded in the fourth quarter of 2002, rather, the fair value of these liabilities, estimated to be $10.9 million, would have been initially recorded in 2003 based on the restructuring plan. Furthermore, accretion expense associated with the lease termination liability would be recognized in future periods over the remaining term of the related lease agreements. The application of SFAS No. 146 would not have changed the method of accounting for other components of the 2002 restructuring charge including severance and other benefits of $2.9 million, asset impairments of $4.1 million and other charges of $650,000.

Recent Accounting Pronouncements

      In November 2002, the EITF reached a consensus on Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables,” effective for Viad for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. EITF Issue No. 00-21 addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities. Viad’s Convention and Event Services segment derives revenues primarily by providing show services to vendors at conventions and from the design and construction of exhibit booths. Exhibit design and construction revenue is generally accounted for using the completed contract method as contracts are typically completed within three months of contract signing. The adoption of EITF Issue No. 00-21 did not have a material impact on Viad’s financial position or results of operations.

      In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”). This interpretation sets forth expanded disclosure requirements in the financial statements about a guarantor’s obligations under certain guarantees that it has issued. It also clarifies that, under certain circumstances, a guarantor is required to recognize a liability for the fair value of the obligation at the inception of the guarantee. Certain types of guarantees, such as product warranties, guarantees accounted for as derivatives, and guarantees related to parent-subsidiary relationships are excluded from the liability recognition provisions of FIN 45, however, they are subject to the disclosure requirements. The initial liability recognition provisions are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. The disclosure requirements of FIN 45 are effective for financial statements for interim or annual periods ending after December 15, 2002. Viad’s guarantees principally relate to a parent’s guarantee of a subsidiary’s obligations to a third party and would, therefore, be excluded from liability recognition at inception. The required disclosures pursuant to FIN 45 are included in the notes to consolidated financial statements. The adoption of FIN 45 did not have a material impact on Viad’s financial position or results of operations.

      In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), an interpretation of Accounting Research Bulletin No. 51, “Consolidated Financial Statements.” FIN 46 prescribes how to identify variable interest entities and how an enterprise assesses its interests in a variable interest entity to decide whether to consolidate that entity. FIN 46 requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved. FIN 46 was effective immediately for variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. The interpretation originally applied in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. In

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October 2003, the FASB issued Staff Position (“FSP”) FIN 46-6, which delayed the effective application date of FIN 46 for those interests until the end of the first interim or annual period ending after December 15, 2003. In December 2003, the FASB issued FIN 46R, which clarifies definitions and the application of the requirements included in FIN 46. Prior to the adoption of FIN 46R, Viad changed the structure of two of its investments in collateralized debt obligations which would have otherwise required consolidation of the underlying asset securitizations under the new rules. Viad exchanged the structured note for each investment (representing the combined interests in the collateralized debt obligation and an investment-grade security) with the trustee and accepted delivery of the individual securities comprising the structured note. As a result, Viad’s ownership interests in the underlying asset securitizations were reduced such that Viad was no longer considered the primary beneficiary, and therefore, consolidation was not required under FIN 46R. Viad has adopted the required elements of FIN 46R as of December 31, 2003. The adoption of FIN 46 and FIN 46R did not have a material effect on Viad’s financial position or results of operations.

      In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 is effective for Viad for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” The adoption of SFAS No. 149 did not have a material impact on Viad’s financial position or results of operations.

      In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS No. 150 is effective for Viad for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The new rules establish standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that financial instruments within its scope be classified as liabilities. Viad adopted SFAS No. 150 on July 1, 2003, and accordingly, reclassified its $4.75 redeemable preferred stock (carrying value of $6.7 million) as a long-term liability in the consolidated financial statements. Furthermore, subsequent to the adoption of SFAS No. 150, dividends on the $4.75 preferred stock have been recorded as interest expense in the consolidated financial statements. The adoption of SFAS No. 150 did not have a material effect on Viad’s financial position or results of operations.

      In January 2004, the FASB issued FSP 106-1 on the accounting for the effect of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Act”) enacted into law on December 8, 2003. Although SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” requires that recently enacted changes in the law that take effect in future periods be considered in current period liability determination, FSP 106-1 permits the deferral of recognition of the effects of the Act until further authoritative guidance is issued. However, FSP 106-1 requires that the one-time election to defer or not defer the accounting for the effects of the Act must be made before net periodic postretirement benefit costs for the period that includes December 8, 2003 are first included in either interim or annual financial statements. As Viad’s measurement date is November 30, the one-time election is not required until first quarter 2004. As a result, the consolidated financial statements do not include the effects of the Act and consequently the impact on the future financial position and results of operations cannot presently be determined.

      In December 2003, the FASB issued a revised version of SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits.” The revised statement, which does not change the methodology underlying the measurement of obligations or calculation of expense associated with pension and other postretirement benefit plans, makes several significant changes to the required disclosures about such plans to provide more information about plan assets, obligations, benefit payments, contributions and net benefit costs. The majority of the additional disclosures are required for financial statements with fiscal years ending after December 15, 2003. The required disclosures pursuant to SFAS No. 132 are included in the notes to consolidated financial statements.

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      In January 2003, the EITF reached a consensus on Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” which set out to provide guidance on the meaning of other-than-temporary impairment and its application to investments classified as either available-for-sale or held-to-maturity under SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities” (including individual securities and investments in mutual funds), and investments accounted for under the cost method or the equity method. In subsequent discussions, the EITF reached a consensus that certain quantitative and qualitative disclosures should be required for debt and marketable equity securities classified as available-for-sale or held-to-maturity under SFAS No. 115 that are impaired at the balance sheet date but for which an other-than-temporary impairment has not been recognized. EITF Issue No. 03-1 became effective for fiscal years ending after December 15, 2003. The required disclosures pursuant to EITF Issue No. 03-1 are included in the notes to consolidated financial statements.

Quantitative and Qualitative Disclosures About Market Risk

      Viad’s market risk exposures relate to fluctuations in interest rates and, to a lesser degree, relate to fluctuations in foreign exchange rates. Interest rate risk is the risk that changing interest rates will adversely affect the market value and earnings of Viad. Foreign exchange risk is the risk that fluctuating exchange rates will adversely affect earnings. Viad’s exposure to these risks is primarily associated with its Payment Services segment business. Certain derivative financial instruments are used as part of Viad’s risk management strategy to manage these exposures. Derivatives are not used for speculative purposes. Viad has exposure to changing rates related to its pension assumptions (including the expected return on plan assets and the discount rate) and the health care cost trend rate.

      Viad is exposed to foreign exchange risk as it has certain receivables and payables denominated in foreign currencies. Viad primarily utilizes forward contracts to mitigate its exposure to fluctuations in foreign exchange rates. Forward contracts relating to the Payment Services segment’s money transfer transactions generally have maturities less than 30 days, and forward contracts relating to other receivables or payables generally have maturities less than 90 days. The forward contracts are recorded on the consolidated balance sheets, and the effect of changes in foreign exchange rates on the foreign-denominated receivables and payables, net of the effect of the related forward contracts, is not significant.

      A portion of Viad’s Payment Services segment business involves the payment of commissions to financial institution customers of its official check program. A Payment Services segment subsidiary also has entered into agreements to sell receivables primarily from its money order agents. The commissions and net proceeds from the agent receivables sales are computed based on short-term variable interest rates that subject Viad to risk arising from changes in these rates. Viad has mitigated a substantial portion of the variable rate risk through swap agreements which convert the variable rate payments to fixed rates.

      Stockholders’ equity can be adversely affected by changing interest rates, as after-tax changes in the fair value of securities classified as available-for-sale and in the fair value of derivative financial instruments are included as a component of stockholders’ equity. The fair value of derivative financial instruments generally increases when the market value of fixed rate, long-term debt investments decline and vice versa. However, an increase or decrease in stockholders’ equity related to changes in the fair value of securities classified as available-for-sale, may not be offset, in whole or in part, by the decrease or increase in stockholders’ equity related to changes in the fair value of derivative financial instruments.

      Viad is also exposed to short-term interest rate risk on certain of its debt obligations. Viad currently does not use derivative financial instruments to hedge cash flows for these obligations.

      Earnings Sensitivity to Interest Rate Changes. Based on a hypothetical ten percent proportionate increase in interest rates from the average level of interest rates during the last twelve months, and taking into consideration expected investment positions, commissions paid to selling agents, growth in new business, effects of the swap agreements and expected borrowing level of variable-rate debt, the increase in pre-tax income would be approximately $1.6 million. A hypothetical ten percent proportionate decrease in interest rates, based on the same set of assumptions, would result in a decrease in pre-tax income of approximately $2.2 million. These amounts are estimated based on a certain set of assumptions about interest rates and portfolio balance growth and

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do not represent expected results. In addition, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of Viad’s results of operations and the financial impact of interest rate fluctuations.

      Fair Value Sensitivity to Interest Rate Changes. The fair value of securities classified as available-for-sale, derivative financial instruments and fixed-rate debt are sensitive to changes in interest rates. A ten percent proportionate increase in interest rates would result in an estimated decrease in the fair value of securities classified as available-for-sale of approximately $39.7 million (reflected as an after-tax decrease in accumulated other comprehensive income of approximately $24.2 million), an estimated increase in the fair value of derivative financial instruments of approximately $16.4 million (reflected as an after-tax increase in accumulated other comprehensive income of approximately $10.0 million) and an estimated off-balance-sheet decrease in the fair value of fixed-rate debt of approximately $190,000 at December 31, 2003. A ten percent proportionate decrease in interest rates would result in an estimated increase in the fair value of securities classified as available-for-sale of approximately $37.9 million (reflected as an after-tax increase in accumulated other comprehensive income of approximately $23.1 million), an estimated decrease in the fair value of derivative financial instruments of approximately $16.9 million (reflected as an after-tax decrease in accumulated other comprehensive income of approximately $10.3 million) and an estimated off-balance-sheet increase in the fair value of fixed-rate debt of approximately $191,000 at December 31, 2003. These amounts are estimated based on a certain set of assumptions about interest rates and portfolio balance growth and are not necessarily indicative of actual current period factors.

      Interest Rate Risk and Market Risk Oversight. Viad has established several levels of risk management oversight and control. An investment committee, comprised of senior officers of Viad and the Payment Services segment, and reporting to the Chief Executive Officer of Viad, routinely reviews investment and risk management strategies and results. Viad maintains formal procedures for entering into derivative transactions and management regularly monitors and reports to the audit committee on such activity. Derivative agreements are with major financial institutions which are currently expected to perform fully under the terms of the agreements, thereby mitigating the credit risk from the transactions in the event of nonperformance by the counterparties. In addition, Viad regularly monitors the credit ratings of the counterparties and the likelihood of default is considered remote.

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BUSINESS OF MONEYGRAM

      MoneyGram is a leading global payment services company. Our mission is to provide consumers with affordable, reliable and convenient payment services. We offer our products and services to consumers and businesses through our network of agents and our financial institution customers. The diverse array of products and services we offer enables consumers, most of whom are not fully served by traditional financial institutions, to make payments and to transfer money around the world, helping them meet the financial demands of their daily lives.

      Our business, which is conducted through Travelers Express Company, Inc. and its subsidiaries, including MoneyGram Payment Systems, Inc., has been in operation since 1940. In the last six years, we have added important new products and services and have expanded our business domestically and internationally. Following the spin-off, our business will consist of two operating segments:     our global funds transfer segment and our payment systems segment. In both operating segments, our primary sources of revenue are transaction fees and revenue generated from our investment of the funds underlying the payment transactions from the time those funds are remitted to us until the transaction is completed.

      Our global funds transfer segment provides money transfer services, money orders and bill payment services. The primary consumers of the products and services offered by our global funds transfer segment can generally be classified in one of the following categories:

  •  “Unbanked consumers” are those consumers who do not have a traditional relationship with a financial institution. Many unbanked consumers are in low-income households, and often are recent immigrants working in unskilled jobs. It has been estimated that approximately 56 million adults in the United States are unbanked.
 
  •  “Underbanked consumers” are those consumers who, while they may have a savings account with a financial institution, do not have a checking account. Underbanked consumers share the same general demographic profile as unbanked consumers.
 
  •  “Convenience users” are those consumers who, while they may have a checking account, prefer to use our products and services on the basis of convenience or value. Convenience users include consumers who may use our urgent bill payment services to pay late bills and consumers who need to quickly transfer money to a distant location, whether domestically or internationally, or who need a third-party payment instrument.

      Our payment systems segment provides financial institutions, such as banks, thrifts and credit unions, with payment processing services, primarily for official checks, and with money orders for sale to their consumers. Official checks, which include bank checks, cashier’s checks, agent checks and teller’s checks, are checks drawn on a financial institution or other third party that are typically used in situations where the payee requires assurance of payment and funds availability. Official checks are used to pay the financial institution’s own obligations or for sale to consumers.

      The following table sets forth revenue and operating income by segment for 2002 and 2003.

                                                                   
2002 2003


Operating Operating
(in millions) Revenues % Income % Revenues % Income %









Global Funds Transfer
  $ 413.0       53 %   $ 99.2       79 %   $ 450.1       56 %   $ 96.8       84 %
Payment Systems
    360.6       47 %     25.9       21 %     351.5       44 %     18.2       16 %
     
     
     
     
     
     
     
     
 
 
Totals
  $ 773.6       100 %   $ 125.1       100 %   $ 801.6       100 %   $ 115.0       100 %
     
     
     
     
     
     
     
     
 

      In our global funds transfer segment, our primary method of distribution to consumers is a network of agents currently consisting of more than 100,000 locations. Currently, more than 63,000 locations around the world offer our money transfer services and more than 63,500 retail agent and bank locations in the United States offer our

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money orders. Our payment systems segment provides official check services through more than 16,000 branch locations of our financial institution customers. Based on the number of our transactions in 2003, we are:

  •  a leading global provider of consumer money transfers on a worldwide basis, offering our MoneyGram-branded money transfer services in approximately 160 countries around the world;
 
  •  the largest issuer of money orders in the United States, with approximately 295 million money orders issued;
 
  •  the second largest provider of urgent bill payment services in the United States; and
 
  •  the second largest provider of official check outsourcing services to financial institutions in the United States.

      From 1997 through 2003, our business has grown through:

  •  our June 1998 acquisition of MoneyGram Payment Systems, Inc., which today forms the foundation of our consumer money transfer business and has grown from serving approximately 105 countries in 1997 to serving approximately 160 countries in 2003;
 
  •  increasing the number of consumer money transfer agent locations from approximately 21,000 in 1997 to over 63,000 by 2003;
 
  •  increasing the number of money order retail agent and bank locations from approximately 41,000 in 1997 to over 63,500 by 2003; and
 
  •  increasing our average investable balances from approximately $1.6 billion in 1997 to approximately $7.0 billion in 2003, which growth is primarily attributable to the growth in the investable balances generated by our official check outsourcing services.

Competitive Advantages

      We believe that our success across both of our business segments results from a combination of key assets and competencies, which form the foundation for our current business and for our future growth.

  •  Strong Value Proposition. We believe that our products and services provide consumers, as well as our agents and financial institution customers, with a recognizable value. We offer consumer money transfer and urgent bill payment services that we believe are generally less expensive than those offered by our primary competitor First Data Corporation and its subsidiaries, including Western Union. Our services include features that we believe are not typically found with smaller, niche competitors, including delivery in as little as ten minutes, 24 hour a day, seven day a week customer service and receiver choice of delivery location. Our official check outsourcing services provide our financial institution customers with a suite of services, including imaged checks and branch level and internet reporting of activity, generally at a lower cost than the financial institutions would incur if they were to perform these services themselves.
 
  •  Advanced Proprietary Technology. We believe that our advanced proprietary technology in each of our operating segments gives us a significant competitive advantage. The technology that we use in our central processing functions is both flexible and scalable and can support increased transaction volume and continued innovation without requiring fundamental change. In addition, our flexible point-of-sale technology options provide our agents with a variety of means to efficiently provide money transfers, bill payment services and money orders.
 
  •  Broad Consumer Recognition and Consumer Loyalty. We believe that our key brands — MoneyGram and Travelers Express — are well-known and established, and that the primary consumers of our products and services associate our brands with quality payment services at an affordable price. As a result, we believe that these consumers are loyal to our products and services.
 
  •  Extensive Domestic and International Retail Agent Network. Currently, we offer money orders through a network of over 63,500 retail agent and bank locations in the United States, and offer money transfer

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  services through over 63,000 agent locations in approximately 160 countries. Our money transfer agent locations in the United States are focused in ethnic neighborhoods, allowing us to compete effectively for money transfers that are originated in the United States, while our international agent locations include key agents in high-volume markets around the world, including many in remote areas not well-served by traditional financial institutions. International money transfers, including money transfers that originate outside of the United States, are a rapidly growing part of the money transfer industry, and we believe that our international agent locations provide us with the ability to take advantage of this growth.
 
  •  Strong Relationships with Agents and Financial Institution Customers. In our global funds transfer segment, we have long-term contracts with some of the largest and most recognized retail chains, financial institutions and post offices in the world, including: Wal-Mart, Albertson’s, Safeway, Publix, Harris Teeter, Circle K, Ace Cash Express, Bancomer, the United Kingdom Post Office, the Canadian Post Office and the Italian Postal Service. Customers of our payment systems segment include a variety of U.S. financial institutions, such as major retail banks, regional banks, community banks, savings banks and credit unions, including Wachovia, U.S. Bancorp, Compass Bankshares, Huntington, Branch Banking and Trust Company and Charter One Bank.

Growth Strategies

      We intend to capitalize upon our existing competitive strengths and the additional flexibility expected to result from our separation from Viad to grow our business in both the global funds transfer segment and the payment systems segment. Our growth strategies include:

  •  Continuing to Provide Consumers, Agents and Financial Institution Customers with a Strong Value Proposition. We believe that the products and services we offer provide consumers, agents and financial institution customers with recognizable value. We intend to continue to capitalize on this value proposition by developing and implementing marketing and other communication programs targeting consumers and businesses that reinforce this value proposition. In addition, we will continue to implement multiple pricing strategies to customize our pricing for different send and receive corridors in response to changes in competition, and we will continue to introduce our multi-currency system, which allows consumers to know the exact amount of currency that will be available for delivery. We also intend to develop loyalty programs that reward our most productive and loyal agents and consumers.
 
  •  Expanding Our Distribution Channels and Creating New Delivery Methods. We intend to take advantage of the growth potential that we believe exists in our industry by expanding our distribution channels, creating new delivery methods and targeting the rapidly growing immigrant populations in host countries. We intend to maintain and expand our existing relationships with agents and enter into relationships with new agents, including expanding our international agent base and entering into relationships with businesses that have not traditionally offered money transfer services through the use of technologies, such as our FormFree system. We intend to support our international expansion by increased staffing at our London office and our nine regional offices around the world. We also believe that there are opportunities to increase our distribution channels and delivery methods by increasing the number of billers that participate in our urgent bill payment services and in new ways, such as offering our products and services through the internet, ATM networks and self-service kiosks.
 
  •  Delivering New Payment Products and Related Financial Services. We closely monitor consumer trends, and intend to develop new payment products and related financial services to meet consumer needs. The products that we expect to offer in the future are generally consumer focused and are intended to take advantage of existing payment networks, such as the automated clearing house and debit networks. We expect these products to include a suite of stored-value card products and a suite of electronic payment products.
 
  •  Continuing to Deliver an Integrated, Reliable, Low-Cost Service Platform to Our Agents, Financial Institution Customers and Consumers. We believe that we can increase our transaction volume by making it easier for our agents, financial institution customers and consumers to do business with us. We intend to continue to provide regular enhancements to our point-of-sale platforms that simplify the

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  transaction while increasing speed for both the consumer and agent. Additionally, we will seek ways to improve our settlement and reporting mechanisms to our agents and financial institution customers. We also intend to support our consumer value proposition by further reducing our delivery costs, by focusing on agent automation and improving our operational efficiency.
 
  •  Pursuing Strategic Acquisitions and Alliances. We intend to actively evaluate strategic acquisitions and alliances and aggressively pursue those opportunities that we believe further our strategic goals. We also intend to investigate opportunities that would allow us to acquire new or complementary products and services, expand our distribution channels, broaden our market presence or increase our market penetration.
 
  •  Continuing to Recruit, Retain and Reward Solution-Oriented Employees Who Share Our Corporate Values. We intend to continue recruiting, retaining and rewarding employees and executives at all levels who have the experience and talent necessary to implement our growth strategies. These employees must share our corporate values: respect, courage, passion, integrity and teamwork. We plan to accomplish this goal by actively developing the skills of our existing employees, creating career opportunities, providing competitive compensation and implementing employee communication programs that celebrate success and recognize contributors and leaders.

Global Funds Transfer Segment

      Our global funds transfer segment focuses primarily on providing financial services to unbanked and underbanked consumers. The following table provides an overview of the primary products and services, brands, customers and distribution channels, end users and sources of revenues in our global funds transfer segment.

                 
Global Funds Transfer Segment

Product or Service Primary Brands Customers/ Channels of Distribution Primary End Users Primary Sources of Revenue





Money transfers
  MoneyGram

Co-branded
  Domestic and international agent base, consisting of:

• Supermarkets and mass merchants

• Financial institutions

• Convenience and drug stores

• Check cashing outlets

• Independent retailers, including currency exchange locations

• International post offices

• Internet
  Primarily unbanked and underbanked consumers

Convenience users who need to send money to a distant location
  Transaction fees

Foreign exchange revenue

Money orders   Travelers Express

Travelers Express
MoneyGram

Private label


Co-branded
  Domestic agent base, consisting of:

• Supermarkets and mass merchants

• Convenience and drug stores

• Check cashing outlets

• Independent retailers
  Primarily unbanked and underbanked consumers

Convenience users who obtain a money order based on payor request
  Transaction fees

Investment revenue

Dispenser fees

Bill payment   ExpressPayment

BuyPay

FlashPay
  Domestic agent base consisting of:

• Supermarkets and mass merchants

• Convenience and drug stores

• Check cashing outlets

• Independent retailers

• Internet
  Convenience users who satisfy an urgent bill

Consumers of BuyPay and FlashPay are often the unbanked and underbanked consumers and use this service as a routine payment vehicle
  Transaction fees

      Money transfers are electronic transfers of funds between consumers from one location to another. Money transfers are used by consumers who want to transfer funds quickly, safely and efficiently to another individual

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within the United States or internationally. Money orders, much like checks, can be presented by the consumer to make a payment or for cash. Our bill payment services allow consumers to make urgent payments or pay routine bills.

      Our money transfer revenues are derived primarily from consumer transaction fees and revenues from currency exchange in connection with international money transfers. In most cases, we receive transaction fees from our agents for each money order sold. In many cases, we also receive monthly dispenser service fees from our agents for the money order dispenser equipment we provide. In addition, we generate income from the investment of funds that are remitted from our agents and which we invest until the money orders are cleared through the banking system, or are escheated to the applicable states. Generally a money order will remain outstanding for fewer than ten days.

 
Industry Overview

      We describe below the industry dynamics affecting each of the products and services that we offer in our global funds transfer segment.

 
Money Transfers

      The core customers of the money transfer industry are frequently unbanked or underbanked consumers. Money transfer services, and, in particular, international money transfer services, are most frequently used by migrant workers and recent immigrants. These migrant workers and immigrants typically move from developing countries to more prosperous host countries and routinely remit a portion of their earnings to family in their country of origin. The typical consumer of these services in host countries sends an average of $300 at a time. For example, a December, 2001 study commissioned by the Inter-American Development Bank estimates that Latino immigrants, most of who earn less than $30,000 per year, send approximately $200 per remittance to their families and home communities an average of seven times per year. Sending and receiving this money is often an emotional experience as it connects the consumer with the families they left behind. The recipients use the vast majority of this money to support their daily living needs.

      It is estimated that there were over 175 million migrant workers or immigrants worldwide in 2002, more than double the number in 1970. According to a recent U.N. report, approximately 35 million foreign-born people live in the United States.

      The market for money transfers can broadly be broken into two components: formal and informal. Formal remittances are made through a licensed money transfer company or a bank. Informal remittances are typically transacted through an unlicensed provider or by an individual who carries the money to the recipient. We estimate that approximately $140 billion were transferred in 2001. Using an average of $300 per transaction worldwide, this would equate to approximately 467 million transfers. It has been estimated that person-to-person transfers of cash will grow an average of seven percent annually until 2010.

      We believe that consumers choose a money transfer service based on a combination of factors, including:

  •  convenience of the location from which the money transfer may be sent;
 
  •  convenience of the location at which the money transfer may be received;
 
  •  consumer’s level of confidence in the service provider;
 
  •  price of the service;
 
  •  speed at which the money transfer is completed; and
 
  •  level of customer service provided.
 
Money Orders

      Money orders are most frequently used by unbanked and underbanked consumers in the United States who purchase money orders through non-bank retail outlets, such as grocery stores, convenience stores and check

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cashing outlets, which are more prevalent in middle- and low-income neighborhoods than branches of financial institutions. These consumers use money orders as a substitute for personal checks drawn on traditional checking accounts. In addition, convenience users, such as middle income consumers, use money orders as a payment mechanism for major monthly payments, such as a mortgage or car payment, for internet purchases, and when the payee, such as a landlord, requires a third-party payment instrument instead of a personal check. In determining what money order to purchase, consumers primarily focus on the convenience of the location at which the money order is available and the cost of the money order.

      It is estimated that approximately 20 percent of all U.S. households do not have a traditional checking account. In some segments of the population, it is estimated that the size of the unbanked and underbanked population is even higher. For example, it is estimated that 50 percent of Hispanic adults in the United States do not have checking accounts.

      It has been estimated that in 2002, approximately 851 million money orders with a total face value of $81 billion were sold. A recent industry report indicated that the number of money orders declined in 2002, and we believe that the money order industry will decline as consumers migrate to electronic payment mechanisms.

 
Bill Payment Services

      Urgent Bill Payment Services. Urgent bill payment consumers, while underserved by traditional financial institutions, differ from the core money transfer and money order consumers as they frequently have banking relationships. For example, the consumer may make an urgent bill payment for delinquent credit card or mortgage debt. Many of these consumers are extremely late in the collection cycle and are directed by the biller or collector to make a payment through an urgent service provider. If the bill is not paid in this fashion, the next step is generally aggressive collection action by the biller. There are also some consumers that use this service as a “just-in-time” payment mechanism to manage their monthly budget.

      Routine Bill Payment Services. The routine bill payment consumer uses these payment services as a substitute for a money order or personal check. The routine bill payment consumer is typically within the current billing period or slightly past due. Convenience and cost are important to the consumer; however, if the payment is past due, the biller will likely direct the consumer’s payment decision. These consumers may be unbanked, underbanked or have a banking relationship. If the payment is made with cash at a physical location, the individual will likely be unbanked or underbanked. If the payment is made by telephone or internet, it will require access to a bank account. Routine bill payments can be distinguished from urgent bill payments since good funds or notification of good funds are not immediately available to the biller. Our current routine bill payment service concentrates on acceptance of cash at a physical location.

 
Products and Services
 
Money Transfer Services

      In June 1998, we acquired MoneyGram Payment Systems, Inc., thereby adding MoneyGram branded international money transfer services to our group of global funds transfer segment services. We currently provide MoneyGram and co-branded money transfer services through over 63,000 agent locations in approximately 160 countries worldwide. By establishing agent locations in both the “send” and “receive” countries, we are able to provide this much-needed service to a loyal and growing group of consumers. The contract that we have with each of our agents specifies the currency in which we and the agent are to settle remittances among the parties. Currency conversions are conducted either by us or the agent on both the remittance of funds from the “sending” agent to us and on the remittance of funds from us to the “receiving” agent, depending on the contractual requirements.

      In a typical money transfer, a consumer goes to an agent location, completes a form and pays the agent the money to be transferred, together with a fee. The agent then enters the transaction data into a point-of-sale money transfer platform, which connects to our central data processing system. The transferred funds are then made available for payment throughout our agent network. The fee paid by the sender is based on the amount to be

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transferred and the location at which the funds are to be received. Both the “send” and “receive” agents receive a commission from the transaction.
 
Money Orders

      Our global funds transfer segment has its roots in the sale of money orders, a business we have been engaged in since 1940. Based on the number of money orders issued in 2002, we have grown to become the nation’s leading issuer of money orders. During 2003, we issued approximately 295 million money orders through our network of more than 63,500 retail agent and bank locations in the United States and Puerto Rico.

      Our money orders are sold under the Travelers Express and Travelers Express MoneyGram brands, on a private label basis with certain of our retail agents and co-branded with certain of our retail agents.

 
Bill Payment Services

      Our ExpressPayment urgent bill payment service is offered through our money transfer agent locations in the United States. Our ExpressPayment urgent bill payment service, which is provided under contract with billers, enables delinquent debtors and just-in-time payers to pay bills at an agent location with same-day credit to a growing group of creditors. Our contracted billers include credit card companies, mortgage companies, auto finance companies, sub-prime lenders, cellular and long distance telephone companies and third-party bill collectors. Our ExpressPayment service has grown as we have added new billers to our network. We work closely with our agents to identify billers in their service areas to target for this service.

      Our FlashPay and BuyPay routine bill payment services are available at selected money order agent locations. These services allow unbanked and underbanked consumers to pay routine bills with cash at a convenient location. We remit the payments by means of wire transfer or check and the consumer’s account is typically credited within one week. These routine bill payment services also afford utilities a method of complying with regulatory requirements that they provide their customers with a given number of locations at which customers may pay their bills.

 
New Product Development

      In 2002, we established a new product and service development group. This group is focused on providing consumers with the new payment products and services that they desire. Through field work and focus groups, we have developed criteria to guide us in developing new products and services. In considering a new product or service, we consider whether the product or service:

  •  focuses on providing value to the consumer;
 
  •  leverages our existing processing abilities; and
 
  •  leverages the existing low-cost electronic processing networks, such as the automated clearing house and prepaid debit networks.

      Our new product development is focused in several key areas, including:

  •  money transfer enhancements, such as allowing money transfers to be sent over the internet, from ATMs and delivered to stored value cards and through direct deposit;
 
  •  urgent bill payment enhancements, including allowing payments to be sent over the internet, providing billers with notification over the internet; and
 
  •  offering entirely new products that leverage our core competencies and meet our financial criteria, such as prepaid debit cards and bill payment over the telephone.
 
Our Global Agent Network

      We sell money orders and provide money transfer services through a global distribution network of independent retail agent locations that contract with us to carry our products and services. Our agents are

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typically required to remit the proceeds from their sale of our money transfers and money orders to us within one to three days, although some longer remittance schedules are granted to agents under certain controlled circumstances. We generally have the right to terminate our agent agreements if we determine that the financial condition of the agent has declined. Our retail agent agreements generally have initial three- to five-year terms, and most have automatic rolling one-year renewal periods thereafter.

      Our retail agents in the United States include a well diversified group of mass merchants, supermarket chains, check cashing agencies, independent retailers, convenience stores and drug stores. We have also recently begun offering our money transfer service over the internet through YAHOO! and our own website, www.moneygram.com.

      Some of our retail agents in the United States provide all of our retail services, while others provide only selected services. Our agents in countries outside the United States provide our money transfer services only. We believe agents benefit from selling our products and services by attracting repeat customers who also purchase other products or services. In addition, our agents derive revenues from consumer fees and generate cash flow from money order sales, pending the remittance of funds to us. In some cases, we provide bonuses or other economic incentives to our agents, and commit to provide advertising and technology support to them. We also provide proprietary point-of-sale platforms to agents.

 
Technology and Service

      We have developed, and are continuing to develop and introduce, proprietary technology for delivery of our products and services to agent locations, which provide our agents with greater efficiency at the point-of-sale, and provide us with sophisticated tools to better manage our business.

      We have also developed proprietary technology in our point-of-sale money order dispensing systems. Our money order dispensing system has several patented features, including printer security, host data transmission from our host computer systems to the dispenser, software downloading capabilities, and host control tools, including remote system management that allows us to disable transaction processing in order to reduce fraud or agent losses. Some of our newest technology is being developed for use in self-service environments, such as ATMs and kiosks.

      Our in-store integration software provides for full point-of-sale software integration at an agent’s location, which allows the agent to provide our products and services through its standard point-of-sale software platforms, including cash registers. The in-store integration software provides for the issuance of money orders, vendor payments, payroll checks and FormFree money transfers. Our in-store integration software reduces transaction time and the need for agent training, as well as streamlining the reconciliation process as a result of direct data input into the agent’s sales and accounting systems.

      We have developed a number of point-of-sale technologies for the delivery of money order and money transfer transactions, which we classify based on the level of service that the agent is required to provide. These technologies include:

  •  fully-assisted point-of-sale platforms in which the agent performs the transaction data entry, such as our DeltaWorks and MoneyWorks platforms and Delta terminals;
 
  •  partially-assisted point-of-sale platforms in which the agent provides limited data entry services, such as our FormFree platform; and
 
  •  self-service platforms, in which the consumer provides all necessary information directly, such as ATMs, kiosks and the internet.
 
Fully-Assisted Platforms

  •  DeltaWorks. DeltaWorks is our advanced point-of-sale Windows-based personal computer platform that provides agents with a single system that combines money order, money transfer and urgent bill payment capabilities, reducing the capital and space required at agent locations and that can be fully networked. We believe DeltaWorks is valued by our large retail agents and is scalable to smaller agents that also

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  appreciate its unique features. Use of the DeltaWorks platform reduces transaction time for agents and consumers by allowing agents to retrieve and display the consumer’s personal information and last five transactions. DeltaWorks also includes software training tools and transaction assistance. The training tools lead the agent’s employees through each possible transaction, including administrative and maintenance functions, thus reducing training costs and improving customer service.
 
  •  AgentConnect. Our proprietary AgentConnect money transfer integration interface enables us to provide large money transfer agents with their own integrated point-of-sale systems for money transfers. Our AgentConnect integration interface reduces transaction time and the need for agent training and streamlines the agent’s reconciliation process.
 
  •  MoneyWorks. Our MoneyWorks DOS-based PC platform allows money transfer agents to have real-time communication with our mainframe computer system for processing money transfers and urgent bill payment services.
 
  •  Delta Terminals. Our Delta terminals provide point-of-sale solutions for money orders, bill payment and FormFree services. These terminals provide dial-up connections with our mainframe computers and a built-in printer for receipts, saving the cost of an additional printer. Our recently introduced Delta T3 terminals allow for processing of money orders and FormFree money transfers and provide for internet protocol communication with our mainframe computers.
 
Partially-Assisted Platforms

  •  FormFree. FormFree is our point-of-sale money transfer and money order system with multi-lingual customer assistance. Through our FormFree technology, a consumer can connect to one of our customer service representatives by telephone at the agent location. The customer service representative then enters the data to complete a transaction directly into the MoneyGram host computer, thus saving time for both the agent and the consumer. The FormFree system is useful for locations that do not offer customer service functions. Customers, in turn, have the advantage of being able to connect to operators who speak a wide variety of languages.
 
Self-Service Platforms

  •  Self-Service Kiosk Delivery Systems. We are developing and testing automated self-service systems for the delivery of money transfers and money orders, as well as an ATM-based money transfer system. We continue to evaluate the operations and acceptance of these systems to determine if they will be economically viable.

      We operate two customer service call centers in the United States and have contracted for additional call center services in the United Kingdom. We provide multi-lingual customer service for both agents and consumers 24 hours per day, 365 days per year, and have implemented interactive voice response technology that reduces consumer hold time and transaction costs.

      Our money order and money transfer systems include the feature of item-by-item reconciliation. This feature allows us to reconcile agent money order issuances and money transfers with remittances and clearings. This technology streamlines the collection process, and reduces exposure to fraud losses and the time spent on items that cannot be reconciled. For example, after matching processed items to the amounts of the reported sale, the system produces reports of any exception items that do not match. This enables us to identify fraudulent transactions, including money orders that are forged or raised in amount. We are able to research and resolve discrepancies and issue stop payment orders on fraudulent items quickly. Item-by-item reconciliation also allows our agents to match our transactions to their internal control and accounting systems easily, which allows for better integration of our products.

      Our money order and money transfer back office technology is highly automated and scalable, which provides increased efficiency and ability to grow as our transaction volume increases. Moreover, we have developed proprietary executive information systems for performing agent forecasting and tracking agent profitability. We are able to determine our profitability on an agent-by-agent basis and price our services in

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accordance with our profit margin guidelines. These systems also allow for daily tracking of transaction forecasts and product profitability.

      We continually work to enhance our services, and have introduced corridor pricing capabilities that enable us to establish different consumer prices for our money transfer services by defined transaction corridors, such as narrowly defined zip code regions or widespread direct marketing areas. We are currently adding additional capabilities, including implementing multi-currency technology that allows us to execute our money transfers between and among an increased number of different currencies. Where implemented, these capabilities allow our agents to settle with us in local currency and allow consumers to know the exact amount that will be received in the local currency of the receiving nation, or in U.S. dollars in certain countries.

 
Sales and Marketing

      We market our products and services through a number of dedicated sales and marketing teams. In the United States, three dedicated sales and marketing teams market money transfer services, money orders and bill payment services to each of our three principal distribution channels: large national agent accounts; smaller, independent accounts; and check cashing outlets. We also have a dedicated sales and marketing team that markets our urgent bill payment services directly to billers. Our international sales and marketing for money transfer services is conducted by dedicated regional sales and marketing teams that are generally located in their regions: Northern Europe; Southern Europe; Eastern Europe; Asia; the Middle East; Africa; and Mexico, Latin America and the Caribbean.

      Our money orders, frequently branded with our retail agent’s name, are primarily marketed to consumers through information provided at the point-of-sale at our agent locations and with the retail newspaper circulars.

      Our money transfer services are marketed to consumers through a variety of direct marketing, radio advertising and print and out of home advertising, including signage at our agent locations worldwide. Our advertising is provided in multiple languages, depending upon the targeted audience, and is intended to reinforce the value proposition provided by our products and services and enhance consumer awareness of our brands. Our localized marketing programs are based on a profile of the targeted consumers and the characteristics of the key ethnic communities in which they live and work. Direct mail to targeted consumers and retail merchandizing within our agent locations are also used to reach diverse consumer segments. Marketing support also includes specialized public relations initiatives, sponsorship at key ethnic events, and strong community presence and affiliation. We also offer a loyalty card called “MoneySaver”, which provides repeat consumers with certain discounts and expedites transaction processing when used in connection with DeltaWorks.

      The sales and marketing teams are segmented to focus on the distinct needs and strategies for each of the channels of agent distribution, namely, chain or national retail accounts, check-cashing businesses, financial institutions and credit unions and independent agent locations. This segmented marketing approach allows us to focus our marketing efforts by store, to better reach the heaviest users of our products and services. In many cases, agents engage in cooperative advertising with us, creating marketing programs that, when approved by us, are jointly developed and funded.

 
Credit Risk Management

      Our global funds transfer segment agents receive the proceeds from the sale of our money transfers, money orders and bill payment services, and we must collect those funds from the agents. Our agents typically have from one to three days to remit the proceeds to us. Some longer remittance schedules are granted to certain agents under controlled circumstances.

      Our global client services group assesses the creditworthiness of each potential agent before accepting it into our distribution network. We monitor the credit risk of all active agents on an ongoing basis. In addition, we frequently take additional steps to minimize the agent credit risk, such as requiring owner guarantees, corporate guarantees and other forms of security, where appropriate.

      We are committed to maintaining credit risk management discipline. This discipline, coupled with the wide dispersion of risk among the large number of agents we serve, the dollar amounts of our risk exposure with each

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agent, the different industries our agents are in, and their geographic dispersion, has led to relatively low credit losses for the business. For 2001 through 2003, including our loss with respect to Dairy Mart as described below, the historical annualized agent net default rate was less than one percent of the average aggregate credit exposure.

      We employ approximately 100 credit professionals who manage agent risk and settlement, and utilize a wide variety of risk management tools including:

  •  Use of guarantors and periodic agent and guarantor credit reviews. We use internally developed risk assessment tools that are tailored to the specific industries of our agents, and where appropriate, we require guarantees from individual business owners. We conduct periodic comprehensive financial reviews and cash flow analysis of our agents that average high volumes of money order sales and, therefore, are required to remit significant funds to us on a regular basis. We also review all guarantors on a frequent basis and evaluate their credit quality with our customized scoring model.
 
  •  Software controls. The software embedded on each point-of-sale terminal can be used to control both the number of individual money orders sold as well as the aggregate dollar amount of money orders sold at individual locations. Sales activity can be transmitted each evening. This is intended to help ensure that all sales made by the agent are reported and subsequently collected according to the terms of our contracts.
 
  •  Monitoring for daily remittance and legal compliance. We monitor our agents’ sales and remittances daily to flag suspicious volumes or transactions. Our software assists us in uncovering irregularities, such as money laundering schemes or agent self-use by identifying unusual amounts or an unusual transaction volume.

      In addition to monitoring tools, we also have the ability to limit our exposure to a particular agent should we detect credit or payment issues. Specifically, we have the ability to remotely prevent agents from issuing our money orders or performing money transfer services by disab