MoneyGram International Announces First Quarter 2009 Results

May 7, 2009
MoneyGram International Announces First Quarter 2009 Results

MINNEAPOLIS--(BUSINESS WIRE)--May. 7, 2009-- MoneyGram International, Inc. (NYSE:MGI) reported today that in the first quarter of 2009 net income was $11.8 million, global agent network expanded 18 percent year over year and money transfer and bill payment transaction volume increased 4 percent year over year. The company also announced that it ended the quarter with unrestricted assets of $420.8 million, up from $391.0 million at Dec. 31, 2008.

“MoneyGram remains focused on profitably growing the business through expanded distribution and product innovation,” said Pamela H. Patsley, MoneyGram International executive chairman. “During the quarter, we increased our presence in key markets with the signing of M. Lhuillier in the Philippines, which added 1,200 agent locations in the country, and through an important win with Bank of China in Beijing. We also recently announced that we will begin offering MoneyGram services through two key agents in India, Punjab National Bank and Allahabad Bank, which will add nearly 6,000 locations in this important market. In addition, our agreements with NetSpend and Visa are just two examples of our continued efforts to expand our product offerings. Through these agreements, MoneyGram now offers prepaid load capabilities in our 40,000 agent locations across the United States.”

First-quarter 2009 total revenue of $279.9 million compares with total revenue of $17.1 million, which includes $307.3 million of net securities losses, in the first quarter of 2008. Total fee and other revenue increased to $268.1 million in the current quarter from $262.8 million in the first quarter of 2008, driven by money transfer fee and other revenue of $242.1 million in the first quarter 2009 versus $236.9 million in the prior period.

Net income of $11.8 million for the first quarter of 2009 compares with a net loss of $360.9 million for the same period in 2008, which included $307.3 million of net securities losses and a $57.0 million loss on swaps related to commissions payable in the official check business as a result of the Company’s restructuring initiatives.

EBITDA (earnings before interest, taxes, depreciation and amortization, and amortization of agent signing bonuses) was $62.3 million and Adjusted EBITDA (EBITDA adjusted for net securities gains and severance-related costs) was $65.9 million in the first quarter of 2009 compared with Adjusted EBITDA of $69.5 million in the comparable period last year. The first quarter of 2009 Adjusted EBITDA includes $11.3 million of net investment revenue compared with $21.7 million in the comparable period last year. This decline in net investment revenue is a result of our planned realignment of the investment portfolio and the lower interest rate environment.

Anthony Ryan, MoneyGram International president and chief executive officer, said, “While MoneyGram continues to deliver growth in our core money transfer business, our rate of growth has slowed, reflecting the challenges of the current economic environment. In 2009, we are focused on increasing our market share profitably through strategic network expansion and by offering a compelling value to our consumers across the globe. We will continue to deploy our capital prudently and look for operating efficiencies as we seek to create long-term shareholder value.”

Global Funds Transfer Results
Total revenue for the Global Funds Transfer segment increased to $259.7 million in the first quarter of 2009 from $219.0 million in the comparable period last year, which included $44.4 million of net securities losses. Money transfer fee and other revenue including bill payment increased 2 percent, or when adjusted for the change in the value of the euro, increased 5 percent. The segment reported first quarter operating income of $36.7 million and an operating margin of 14.1 percent.

Money transfer transactions including bill payment originated in the United States and Canada increased 5 percent in the first quarter of 2009, while transactions originated internationally (outside of North America) increased 2 percent from the prior year. The continued economic pressures in Spain had a significant impact on our international transaction growth. Excluding Spain, international transactions increased 12 percent from the prior year.

In the first quarter, MoneyGram’s transaction volume to Mexico decreased by 2 percent, outperforming the declining industry-wide remittance volume into Mexico as measured by Banco de Mexico, which was down 4 percent during the quarter.

Payment Systems Results
First quarter 2009 net revenue in the Payment Systems segment of $17.9 million includes net investment revenue of $8.4 million. This compares with a net loss of $299.6 million in the first quarter of 2008, which reflects $262.9 million in net securities losses and a $57.0 million loss on swaps. The segment reported operating income of $7.3 million in the first quarter of 2009.

Non-GAAP Measures
In addition to results presented in accordance with GAAP, this press release and related tables include certain non-GAAP financial measures, including a presentation of EBITDA and Adjusted EBITDA. The following tables include a full reconciliation of these non-GAAP financial measures to the related GAAP financial measures.

MoneyGram believes these non-GAAP financial measures provide information useful to investors in understanding the underlying operations of the Company and its business and performance trends, as well as in facilitating comparisons with other companies in the money transfer industry. Specifically, MoneyGram believes the exclusion of net securities gains (losses) and valuation loss on embedded derivatives permits evaluation and comparison of results for ongoing business operations. This adjusted view is used by management to internally assess the Company’s performance at both a consolidated and segment level, forecast results and allocate resources. Management does not find the GAAP financial measures particularly relevant or useful in evaluating the operating performance of our segments as they do not represent future period recurring costs or are costs outside of the Company’s control at this time.

We believe that EBITDA and Adjusted EBITDA provide useful information to investors because they are an indicator of the strength and performance of ongoing business operations, including our ability to fund capital expenditures, acquisitions and operations and to service debt. These calculations are commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare the operating performance and value of companies within our industry. In addition, the Company’s debt agreements require compliance with financial measures based on EBITDA and Adjusted EBITDA. Finally, EBITDA and Adjusted EBITDA are financial measures used by management in reviewing results of operations, forecasting, assessing cash flow and capital, allocating resources and establishing employee incentive programs.

Although MoneyGram believes the above non-GAAP financial measures enhance investors’ understanding of its business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP financial measures.

Description of Tables

Table One – Consolidated Statements of Income (Loss)
Table Two - Consolidated Balance Sheets
Table Three – Unrestricted Assets
Table Four – Consolidated Statements of Income (Loss) (as Adjusted)
Table Five – Global Funds Transfer Segment Results (as Adjusted)
Table Six – Payment Systems Segment Results (as Adjusted)
Table Seven – EBITDA and Adjusted EBITDA

Conference Call
MoneyGram International will have a conference call today at 5:00 p.m. ET, 4:00 p.m. CT to discuss the first quarter of 2009. Pamela H. Patsley, executive chairman, and Anthony Ryan, president and chief executive officer, will speak on the call. The conference call can be accessed by calling (800) 890-4043 in the U.S. The participant confirmation number is 9514272. A replay of the conference call will be available one hour after the call concludes through 5:00 p.m. ET on May 14, 2009. The replay of the call is available at (888) 203-1112 for U.S. callers or 1-719-457-0820 for international callers. The confirmation code will be 9514272.

About MoneyGram International, Inc.
MoneyGram International, Inc. is a leading global payment services company. The Company's major products and services include global money transfers, money orders and payment processing solutions for financial institutions and retail customers. MoneyGram is a New York Stock Exchange listed company with approximately 180,000 global money transfer agent locations in 190 countries and territories. For more information, visit the Company's website at www.moneygram.com.

Forward Looking Statements
The statements contained in this press release regarding MoneyGram International, Inc. that are not historical facts are forward-looking statements and are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances due to a number of factors, including, but not limited to: (a) our substantial dividend and debt service obligations and our covenant requirements which could impact our ability to obtain additional financing and to operate and grow our business; (b) the continued volatility and disruption of global capital and credit markets which may adversely affect our liquidity and our agents’ liquidity, our access to credit and capital and our agents’ access to credit and capital and our earnings on our investment portfolio; © negative economic conditions generally and in geographic areas or industries that are important to our business which may cause a decline in our money transfer growth rate and transaction volume; (d) a material slow down or complete disruption of international migration patterns which could adversely affect our money transfer volume and growth rate; (e) a loss of material retail agent relationships or a reduction in transaction volume from them; (f) our ability to develop and implement successful pricing strategies for our services; (g) stockholder lawsuits and other litigation or government investigations of the Company or its agents which could result in material costs, settlements, fines or penalties; (h) our ability to maintain sufficient banking relationships; (i) our ability to attract and retain key employees; (j) our ability to maintain capital sufficient to pursue our growth strategy, fund key strategic initiatives and meet evolving regulatory requirements; (k) our ability to successfully and timely implement new or enhanced technology and infrastructure, delivery methods and product and service offerings and to invest in products, services and infrastructure; (l) our ability to adequately protect our brand and our other intellectual property rights and to avoid infringing on third-party intellectual property rights; (m) competition from large competitors, niche competitors or new competitors that may enter the markets in which we operate; (n) the impact of laws, regulatory requirements, and other industry practices in the U.S. and abroad, including changes in laws, regulations or other industry practices and standards that may increase our costs of doing business or reduce the market for or value of our services; (o) our offering of money transfer services through agents in regions that are politically volatile or, in a limited number of cases, are subject to certain Office of Foreign Assets Control (“OFAC”) restrictions which could result in contravention of U.S. law or regulations by us or our agents which could subject us to fines and penalties and cause us reputational harm; (p) a breakdown, catastrophic event, security breach, privacy breach, improper operation or other event impacting our systems or processes or our vendors’, agents’ or financial institution customers’ systems or processes, which could result in financial loss, loss of customers, regulatory sanctions and damage to our brand and reputation; (q) our ability to scale our technology to match our business and transactional growth; ® our ability to manage our credit exposure to retail agents and financial institution customers which exposure may increase during an economic downturn; (s) our ability to mitigate fraud risks from consumers and agents which risks may increase during an economic downturn; (t) our ability to successfully manage risks associated with running Company-owned retail locations and acquiring new businesses; (u) our ability to successfully manage risks associated with our international sales and operations including the potential for political, economic or other instability in countries that are important to our business; (v) our compliance with the internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002; (w) the outcome of positions we take with respect to federal, state, local and international taxation; (x) additional risk factors described in our other filings with the Securities and Exchange Commission from time to time.

TABLE ONE
MONEYGRAM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
     
 
Three Months Ended
March 31, 2009 vs
(Amounts in thousands, except per share data)   2009   2008   2008
 
REVENUE
Fee and other revenue $ 268,144 $ 262,797 $ 5,347
Investment revenue 11,691 61,565 (49,874 )
Net securities gains (losses)     56       (307,300 )     307,356  
Total revenue 279,891 17,062 262,829
Fee commissions expense 118,544 117,232 1,312
Investment commissions expense     399       96,889       (96,490 )
Total commissions expense     118,943       214,121       (95,178 )
Net revenue (losses)     160,948       (197,059 )     358,007  
 
EXPENSES
Compensation and benefits 51,632 52,299 (667 )
Transaction and operations support 44,484 52,029 (7,545 )
Depreciation and amortization 14,362 14,218 144
Occupancy, equipment and supplies 11,026 11,222 (196 )
Interest expense 27,040 14,789 12,251
Debt extinguishment loss     -       1,499       (1,499 )
Total expenses     148,544       146,056       2,488  
Income (loss) before income taxes 12,404 (343,115 ) 355,519
Income tax expense     563       17,740       (17,177 )
NET INCOME (LOSS)   $ 11,841     $ (360,855 )   $ 372,696  
 
Basic and diluted loss per common share $ (0.20 ) $ (4.40 ) $ 4.20

TABLE TWO
MONEYGRAM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
   
March 31, December 31,
(Amounts in thousands, except share data)   2009   2008
ASSETS
Cash and cash equivalents $ - $ -
Cash and cash equivalents (substantially restricted) 3,904,783 4,077,381
Receivables, net (substantially restricted) 1,117,184 1,264,885
Trading investments (substantially restricted) 19,840 21,485
Available-for-sale investments (substantially restricted) 415,827 438,774
Property and equipment 149,192 156,263
Intangible assets 13,524 14,548
Goodwill 436,349 434,337
Other assets     196,328       234,623  
Total assets   $ 6,253,027     $ 6,642,296  
 
LIABILITIES
Payment service obligations $ 5,067,167 $ 5,437,999
Debt 978,952 978,881
Pension and other postretirement benefits 131,272 130,900
Accounts payable and other liabilities 88,599 121,586
Deferred tax liabilities     12,627       12,454  
Total liabilities     6,278,617       6,681,820  
 
MEZZANINE EQUITY
Participating Convertible Preferred Stock-Series B, $0.01 par value,
800,000 shares authorized, 495,000 shares issued and outstanding 477,084 458,408
Participating Convertible Preferred Stock-Series B-1, $0.01 par value,
500,000 shares authorized, 272,500 shares issued and outstanding     293,347       283,804  
Total mezzanine equity     770,431       742,212  
 
STOCKHOLDERS' DEFICIT

Preferred shares - undesignated, $0.01 par value, 5,000,000
 authorized, none issued

- -

Preferred shares - junior participating, $0.01 par value, 2,000,000
 authorized, none issued

- -
Common shares, $0.01 par value, 250,000,000 shares authorized,
88,556,077 shares issued 886 886
Additional paid-in capital 34,149 62,324
Retained loss (637,413 ) (649,254 )
Unearned employee benefits (161 ) (424 )
Accumulated other comprehensive loss (40,479 ) (42,707 )
Treasury stock: 6,030,525 and 5,999,175 shares at March 31, 2009 and
December 31, 2008, respectively     (153,003 )     (152,561 )
Total stockholders' deficit     (796,021 )     (781,736 )
Total liabilities, mezzanine equity and stockholders' deficit   $ 6,253,027     $ 6,642,296  

TABLE THREE
MONEYGRAM INTERNATIONAL, INC.
UNRESTRICTED ASSETS
(Unaudited)
   
 
March 31, December 31,
(Amounts in thousands)   2009   2008
 
Cash and cash equivalents $ 3,904,783 $ 4,077,381
Receivables, net 1,117,184 1,264,885
Government agency securities     390,573       409,246  
5,412,540 5,751,512
Amounts restricted to cover payment service obligations     (5,067,167 )     (5,437,999 )
Excess unrestricted assets, excluding trading investments,
put options and other asset-backed securities 345,373 313,513
 
Trading investments 19,840 21,485
Put options on trading investments 30,287 26,505
Other asset-backed securities     25,254       29,528  
 
Excess unrestricted assets   $ 420,754     $ 391,031  

TABLE FOUR
MONEYGRAM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS) (AS ADJUSTED)
(Unaudited)
           
   
Reported Q1 Adjusted Reported Q1 Adjusted
(Amounts in thousands)   Q1 2009   Adjustments     Q1 2009 Q1 2008   Adjustments     Q1 2008
 
REVENUE
Fee and other revenue $ 268,144 $ - $ 268,144 $ 262,797 $ - $ 262,797
Investment revenue 11,691 - 11,691 61,565 - 61,565
Net securities gains (losses)     56     (56 )

(1)

    -   (307,300 )     307,300  

(2)

    -
Total revenue 279,891 (56 ) 279,835 17,062 307,300 324,362
Fee commissions expense 118,544 - 118,544 117,232 - 117,232
Investment commissions expense     399     -         399   96,889       (57,008 )

(3)

    39,881
Total commissions expense     118,943     -         118,943   214,121       (57,008 )       157,113
Net revenue     160,948     (56 )       160,892   (197,059 )     364,308         167,249
 
EXPENSES
Compensation and benefits 51,632 (3,459 )

(4)

48,173 52,299 - 52,299
Transaction and operations support 44,484 (150 )

(5)

44,334 52,029 (7,733 )

(6)

44,296
Depreciation and amortization 14,362 - 14,362 14,218 - 14,218
Occupancy, equipment and supplies 11,026 - 11,026 11,222 - 11,222
Interest expense 27,040 - 27,040 14,789 (6,217 )

(3)

8,572
Debt extinguishment loss     -     -         -   1,499       (1,499 )

(7)

    -
Total expenses     148,544     (3,609 )       144,935   146,056       (15,449 )       130,607
Income (loss) before income taxes   $ 12,404   $ 3,553       $ 15,957 $ (343,115 )   $ 379,757       $ 36,642

(1)

  Other-than-temporary impairments on available-for-sale investments, unrealized losses on trading investments and valuation gain on put options related to trading investments.

(2)

  Net realized losses on sale of securities, other-than-temporary impairments on available-for-sale investments and unrealized losses on trading investments.

(3)

  Losses on interest rate swaps.

(4)

 

Executive severance and related net costs.

(5)

  Executive search fees.

(6)

  Transaction costs related to the recapitalization.

(7)

  Debt extinguishment loss related to the recapitalization.

TABLE FIVE
MONEYGRAM INTERNATIONAL, INC.
GLOBAL FUNDS TRANSFER SEGMENT RESULTS (AS ADJUSTED)
(Unaudited)
           
   
Reported Q1 Adjusted Reported Q1 Adjusted
(Amounts in thousands)   Q1 2009   Adjustments     Q1 2009 Q1 2008   Adjustments     Q1 2008
 
Money transfer revenue
Fee and other revenue $ 242,119 $ - $ 242,119 $ 236,885 $ - $ 236,885
Investment revenue - - - 706 - 706
Net securities losses - - - (3,735 ) 3,735

(2)

-
Retail money order and other
Fee and other revenue 15,843 - 15,843 16,932 - 16,932
Investment revenue 1,722 - 1,722 8,849 - 8,849
Net securities gains (losses)     8       (8 )

(1)

    -     (40,638 )     40,638

(2)

    -  
Total Global Funds Transfer revenue 259,692 (8 ) 259,684 218,999 44,373 263,372
 
Commissions expense     117,903       -         117,903     116,563       -       116,563  
Net revenue   $ 141,789     $ (8 )     $ 141,781   $ 102,436     $ 44,373     $ 146,809  
 
Operating income (loss)   $ 36,725     $ (8 )     $ 36,717   $ (3,672 )   $ 44,373     $ 40,701  
 
Operating margin 14.1 %   14.1 % (1.7 %)   15.5 %

(1)

  Other-than-temporary impairments on available-for-sale investments, unrealized losses on trading investments and valuation gain on put options related to trading investments.

(2)

  Net realized losses on sale of securities, other-than-temporary impairments on available-for-sale investments and unrealized losses on trading investments.

TABLE SIX
MONEYGRAM INTERNATIONAL, INC.
PAYMENT SYSTEMS SEGMENT RESULTS (AS ADJUSTED)
(Unaudited)
           
   
Reported Q1 Adjusted Reported Q1 Adjusted
(Amounts in thousands)   Q1 2009   Adjustments     Q1 2009 Q1 2008   Adjustments     Q1 2008
 
Fee and other revenue $ 10,157 $ - $ 10,157 $ 8,820 $ - $ 8,820
Investment revenue 8,763 - 8,763 52,078 - 52,078
Net securities gains (losses)     49       (49 )

(1)

    -     (262,927 )     262,927  

(2)

    -  
Total Payment Systems revenue (losses) 18,969 (49 ) 18,920 (202,029 ) 262,927 60,898
 
Commissions expense     1,040       -         1,040     97,558       (57,008 )

(3)

    40,550  
Net revenue (losses)   $ 17,929     $ (49 )     $ 17,880   $ (299,587 )   $ 319,935       $ 20,348  
 
Operating income (loss)   $ 7,252     $ (49 )     $ 7,203   $ (314,853 )   $ 319,935       $ 5,082  
 
Operating margin 38.2 %   38.1 % NM   8.3 %
 
NM = Not meaningful

(1)

  Other-than-temporary impairments on available-for-sale investments, unrealized losses on trading investments and valuation gain on put options related to trading investments.

(2)

  Net realized losses on sale of securities, other-than-temporary impairments on available-for-sale investments and unrealized losses on trading investments.

(3)

  Losses on interest rate swaps.

TABLE SEVEN
MONEYGRAM INTERNATIONAL, INC.
EBITDA AND ADJUSTED EBITDA
(Unaudited)
         
 
(Amounts in thousands)        

  Q1 2009  

 

  Q1 2008  

 
Income (loss) before income taxes $ 12,404 $ (343,115 )
Interest expense 27,040 14,789
Depreciation and amortization 14,362 14,218
Amortization of agent signing bonuses           8,529       8,091  
EBITDA 62,335 (306,017 )
 
Net securities (gains) losses (1) (56 ) 307,300
Losses on interest rate swaps - 58,990
Severance and related net costs 3,609 -
Recapitalization costs - 7,733
Debt extinguishment loss           -       1,499  
Adjusted EBITDA         $ 65,888     $ 69,505  

(1)

  2009 represents other-than-temporary impairments on available-for-sale investments, unrealized losses on trading investments and valuation gain on put options related to trading investments. 2008 represents net realized losses on sale of securities, other-than-temporary impairments on available-for-sale investments and unrealized losses on trading investments.

Source: MoneyGram International, Inc.

MoneyGram International, Inc.
Lynda Michielutti, 952-591-3846
ir@moneygram.com

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