

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
	Form 10-Q



(Mark One)
þ	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended March 31, ~~2018~~2019.
¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to .

Commission File Number: 001-31950

MONEYGRAM INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)



Delaware		16-1690064
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
2828 N. Harwood St., 15th Floor Dallas, Texas		75201 (Zip Code)
(Address of principal executive offices)

(214) 999-7552

(Registrant’s telephone number, including area ~~code)~~code

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

~~___________________________________~~

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes xþ No ¨

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post such~~ files). Yes xþ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No xþ

Securities Registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	MGI	The NASDAQ Stock Market LLC

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of May ~~4, 2018, 55,536,013~~ 7, 2019, 56,390,754shares of common stock, $0.01 par value, were outstanding.

TABLE OF CONTENTS



	PART I. FINANCIAL INFORMATION
		Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets		-11
Condensed Consolidated Statements of Operations		-22
Condensed Consolidated Statements of Comprehensive (Loss) Income		-33
Condensed Consolidated Statements of Cash Flows		4
Condensed Consolidated Statement of Stockholders’ Deficit		5
Notes to the Condensed Consolidated Financial Statements - unaudited		6
Note 1 — Description of the Business and Basis of Presentation		6
Note 2 — Restructuring and Reorganization Costs		7
Note 3 — Settlement Assets and Payment Service Obligations		8
Note 4 — Fair Value Measurement		9
Note 5 — Investment Portfolio		10
Note 6 — Derivative Financial Instruments		1110
Note 7 — Debt		1110
Note 8 — Pension and Other Benefits		12
Note 9 — Stockholders' Deficit		1312
Note 10 — Stock-Based Compensation		1413
Note 11 — Income Taxes		1514
Note 12 — Commitments and Contingencies		1614
Note 13 — Earnings per Common Share		17
Note 14 — Segment Information		17
Note 15 — Revenue Recognition		18
Note 16 — Leases		19
Note 17 — Condensed Consolidating Financial Statements		20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
Item 3. Quantitative and Qualitative Disclosures About Market Risk		4039
Item 4. Controls and Procedures		4039

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		4140
Item 1A. Risk Factors		4241
Item 6. Exhibits		4344

Signatures		45

~~Table of Contents~~

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

UNAUDITED


(Amounts in millions, except share data)	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
ASSETS
Cash and cash equivalents	$	199.7		$	190.0		$	129.9		$	145.5
Settlement assets	3,483.3			3,756.9			3,416.3			3,373.8
Property and equipment, net	206.3			214.9			187.6			193.9
Goodwill	442.2			442.2			442.2			442.2
Other assets	177.7			168.5			189.3			140.7
Total assets	$	4,509.2		$	4,772.5		$	4,365.3		$	4,296.1
LIABILITIES
Payment service obligations	$	3,483.3		$	3,756.9		$	3,416.3		$	3,373.8
Debt, net	906.3			908.1			899.2			901.0
Pension and other postretirement benefits	94.3			97.3			71.9			76.6
Accounts payable and other liabilities	258.0			255.5			260.2			213.5
Total liabilities	4,741.9			5,017.8			4,647.6			4,564.9
COMMITMENTS AND CONTINGENCIES (NOTE 12)
STOCKHOLDERS’ DEFICIT
Participating convertible preferred stock - series D, $0.01 par value, 200,000 shares authorized, 71,282 issued at March 31, 2018 and December 31, 2017	183.9			183.9
Common stock, $0.01 par value, 162,500,000 shares authorized, 58,823,567 shares issued at March 31, 2018 and December 31, 2017	0.6			0.6
Participating convertible preferred stock - series D, $0.01 par value, 200,000 shares authorized, 71,282 issued at March 31, 2019 and December 31, 2018							183.9			183.9
Common stock, $0.01 par value, 162,500,000 shares authorized, 58,823,567 shares issued at March 31, 2019 and December 31, 2018							0.6			0.6
Additional paid-in capital	1,039.6			1,034.8			1,049.4			1,046.8
Retained loss	(1,367.8		)	(1,336.1		)	(1,411.5		)	(1,403.6		)
Accumulated other comprehensive loss	(59.6		)	(63.0		)	(84.7		)	(67.5		)
Treasury stock: 3,296,003 and 4,585,223 shares at March 31, 2018 and December 31, 2017, respectively	(29.4		)	(65.5		)
Treasury stock: 2,508,798 and 3,207,118 shares at March 31, 2019 and December 31, 2018, respectively							(20.0		)	(29.0		)
Total stockholders’ deficit	(232.7		)	(245.3		)	(282.3		)	(268.8		)
Total liabilities and stockholders’ deficit	$	4,509.2		$	4,772.5		$	4,365.3		$	4,296.1

See Notes to the Condensed Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED


	Three Months Ended March 31,					Three Months Ended March 31,
(Amounts in millions, except per share data)	2018			2017		2019			2018
REVENUE
Fee and other revenue	$	370.1		$	380.3	$	301.0		$	370.1
Investment revenue	9.9			5.8		14.4			9.9
Total revenue	380.0			386.1		315.4			380.0
EXPENSES
Fee and other commissions expense	176.5			186.0		149.6			176.5
Investment commissions expense	3.5			1.3		6.3			3.5
Direct transaction expense	5.5			5.1		5.0			5.5
Total commissions and direct transaction expenses	185.5			192.4		160.9			185.5
Compensation and benefits	79.3			70.2		59.4			79.3
Transaction and operations support	74.8			66.5		52.1			74.8
Occupancy, equipment and supplies	16.6			15.3		15.4			16.6
Depreciation and amortization	18.1			18.3		19.0			18.1
Total operating expenses	374.3			362.7		306.8			374.3
OPERATING INCOME	5.7			23.4		8.6			5.7
Other (income) expenses
Other expenses (income)
Interest expense	12.3			10.8		13.9			12.3
Other non-operating (income) expense	(28.5		)	1.3
Total other (income) expenses	(16.2		)	12.1
Income before income taxes	21.9			11.3
Other non-operating expense (income)						1.6			(28.5		)
Total other expenses (income)						15.5			(16.2		)
(Loss) income before income taxes						(6.9		)	21.9
Income tax expense	14.8			2.5		6.6			14.8
NET INCOME	$	7.1		$	8.8
NET (LOSS) INCOME						$	(13.5	)	$	7.1

EARNINGS PER COMMON SHARE
(LOSS) EARNINGS PER COMMON SHARE
Basic	$	0.11		$	0.14	$	(0.21	)	$	0.11
Diluted	$	0.11		$	0.13	$	(0.21	)	$	0.11

Weighted-average outstanding common shares and equivalents used in computing earnings per share
Weighted-average outstanding common shares and equivalents used in computing (loss) earnings per share
Basic	63.8			62.1		64.8			63.8
Diluted	66.2			66.1		64.8			66.2

See Notes to the Condensed Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

UNAUDITED

Three Months Ended March 31,
(Amounts in millions) 2018 2017
NET INCOME $ 7.1
$ 8.8
OTHER COMPREHENSIVE INCOME
Net change in unrealized holding gains on available-for-sale securities arising during the period (0.2 ) 0.1
Net change in pension liability due to amortization of prior service credit and net actuarial loss, net of tax benefit of $0.2 and $0.4 for the three months ended March 31, 2018 and 2017, respectively 0.9
0.7
Unrealized foreign currency translation adjustments, net of tax expense of $0.6 and $0.0 for the three months ended March 31, 2018 and 2017, respectively 2.7
2.2
Other comprehensive income 3.4
3.0
COMPREHENSIVE INCOME $ 10.5
$ 11.8



	Three Months Ended March 31,
(Amounts in millions)	2019			2018
NET (LOSS) INCOME	$	(13.5	)	$	7.1
OTHER COMPREHENSIVE (LOSS) INCOME
Net change in unrealized holding gains on available-for-sale securities arising during the period	0.2			(0.2		)
Net change in pension liability due to amortization of prior service credit and net actuarial loss, net of tax benefit of $0.1 and $0.2 for the three months ended March 31, 2019 and 2018, respectively	0.8			0.9
Unrealized foreign currency translation adjustments, net of tax benefit (expense) of $0.0 and ($0.6) for the three months ended March 31, 2019 and 2018, respectively	(3.1		)	2.7
Other comprehensive (loss) income	(2.1		)	3.4
COMPREHENSIVE (LOSS) INCOME	$	(15.6	)	$	10.5

See Notes to the Condensed Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED


	Three Months Ended March 31,						Three Months Ended March 31,
(Amounts in millions)	2018			2017			2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	7.1		$	8.8
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Net (loss) income							$	(13.5	)	$	7.1
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	18.1			18.3			19.0			18.1
Signing bonus amortization	14.0			13.0			11.7			14.0
Amortization of debt discount and debt issuance costs	0.8			0.8			0.7			0.8
Non-cash compensation and pension expense	6.2			5.3			4.1			6.2
Signing bonus payments	(11.8		)	(10.2		)	(10.1		)	(11.8		)
Change in other assets	(5.1		)	(8.6		)	(4.0		)	(5.1		)
Change in accounts payable and other liabilities	(0.2		)	(37.1		)	(12.0		)	(0.2		)
Other non-cash items, net	1.4			0.1			4.4			1.4
Net cash provided by (used in) operating activities	30.5			(9.6		)
Net cash provided by operating activities							0.3			30.5
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(12.3		)	(18.6		)	(12.7		)	(12.3		)
Net cash used in investing activities	(12.3		)	(18.6		)	(12.7		)	(12.3		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt	(2.4		)	(2.5		)	(2.5		)	(2.4		)
Payments to tax authorities for stock-based compensation	(6.1		)	—			(0.7		)	(6.1		)
Proceeds from exercise of stock options and other	—			0.9
Net cash used in financing activities	(8.5		)	(1.6		)	(3.2		)	(8.5		)
NET CHANGE IN CASH AND CASH EQUIVALENTS	9.7			(29.8		)	(15.6		)	9.7
CASH AND CASH EQUIVALENTS—Beginning of period	190.0			157.2			145.5			190.0
CASH AND CASH EQUIVALENTS—End of period	$	199.7		$	127.4		$	129.9		$	199.7

See Notes to the Condensed Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF STOCKHOLDERS’ DEFICIT

UNAUDITED



(Amounts in millions)	Preferred Stock		Common Stock		Additional Paid-In Capital		Retained Loss			Accumulated Other Comprehensive Loss			Treasury Stock			Total
January 1, 2019	$	183.9	$	0.6	$	1,046.8	$	(1,403.6	)	$	(67.5	)	$	(29.0	)	$	(268.8	)
Net loss	—		—		—		(13.5		)	—			—			(13.5		)
Stock-based compensation activity	—		—		2.6		(9.5		)	—			9.0			2.1
Cumulative effect of adoption of ASU 2018-02	—		—		—		15.1			(15.1		)	—			—
Other comprehensive loss	—		—		—		—			(2.1		)	—			(2.1		)
March 31, 2019	$	183.9	$	0.6	$	1,049.4	$	(1,411.5	)	$	(84.7	)	$	(20.0	)	$	(282.3	)



(Amounts in millions)	Preferred Stock		Common Stock		Additional Paid-In Capital		Retained Loss			Accumulated Other Comprehensive Loss			Treasury Stock			Total
January 1, 2018	$	183.9	$	0.6	$	1,034.8	$	(1,336.1	)	$	(63.0	)	$	(65.5	)	$	(245.3	)
Net income	—		—		—		7.1			—			—			7.1
Stock-based compensation activity	—		—		4.8		(43.0		)	—			36.1			(2.1		)
Cumulative effect of adoption of ASU 2016-16	—		—		—		4.2			—			—			4.2
Other comprehensive income	—		—		—		—			3.4			—			3.4
March 31, 2018	$	183.9	$	0.6	$	1,039.6	$	(1,367.8	)	$	(59.6	)	$	(29.4	)	$	(232.7	)

See Notes to the Condensed Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

Note 1 — Description of the Business and Basis of Presentation

References to “MoneyGram,” the “Company,” “we,” “us” and “our” are to MoneyGram International, Inc. and its subsidiaries.

Nature of Operations — MoneyGram offers products and services under its two reporting segments: Global Funds Transfer and Financial Paper Products. The Global Funds Transfer segment provides global money transfer services and bill payment services to consumers. We primarily offer services through third-party agents, including retail chains, independent retailers, post offices and other financial institutions. We also offer Digital solutions such as moneygram.com, mobile solutions, account deposit and kiosk-based services. Additionally, we have limited Company-operated retail locations. The Financial Paper Products segment provides official check outsourcing services and money orders through financial institutions and agent locations.

Basis of Presentation — The accompanying unaudited ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements of MoneyGram are prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and ~~Rule 10-01~~Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. ~~In the opinion of management, all adjustments considered necessary for a fair presentation have been included and~~The Condensed Consolidated Balance Sheets are of a normal recurring nature. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for future periods. For further information, referunclassified due to the ~~Consolidated Financial Statements and Notes thereto included in~~timing uncertainty surrounding the ~~Company's Annual Report on Form 10-K for the year ended December 31, 2017.~~

~~In the first quarter~~payment of 2018, the Company changed the presentation of certain operating expenses, which are now presented as part of "Direct transaction expense" on the Condensed Consolidated Statements of Operations. Direct transaction expense includes expenses related to the processing of money transfers, such as customer authentication and funding costs. Prior period amounts have been updated to reflect the change in presentation, which had no impact on operating income, net income, earnings per share, or segments operating results.settlement obligations.

Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on historical experience, future expectations and other factors and assumptions the Company believes to be reasonable under the circumstances. These estimates and assumptions are reviewed on an ongoing basis and are revised when necessary. Changes in estimates are recorded in the period of change. Actual amounts may differ from these estimates.

Recent Accounting Pronouncements and Related Developments — In ~~May 2014,~~February 2016, the Financial Accounting Standards Board ~~(the "FASB"~~("FASB") issued Accounting Standards Update ~~("ASU") 2014-09,~~ ~~Revenue from Contracts with Customers(Topic 606)~~. The new guidance sets forth a five-step revenue recognition model which replaces the current revenue recognition guidance in its entirety and is intended to eliminate numerous industry-specific pieces of revenue recognition guidance and requires more detailed disclosures. To further assist with adoption and implementation of ASU 2014-09, the FASB issued the following ASUs:

~~ASU 2016-08 (Issued March 2016) —~~ ~~Principal versus Agent Consideration (Reporting Revenue Gross versus Net)~~

~~ASU 2016-10 (Issued April 2016) —~~ ~~Identifying Performance Obligations and Licensing~~

~~ASU 2016-12 (Issued May 2016) —~~ ~~Narrow-Scope Improvements and Practical Expedients~~

~~ASU 2016-20 (Issued December 2016) —~~ ~~Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers~~

These ASUs are effective for public entities for interim and annual reporting periods beginning after December 15, 2017. The Company adopted these standards in the first quarter of 2018 using the cumulative effect transition method upon adoption. See Note 15 — ~~Revenue Recognition~~ ~~for more information related to the Company's revenue from contracts with customers.~~

~~In February 2016, the FASB issued ASU~~(ASU) 2016-02, Leases (Topic 842). ASU 2016-02 requires organizations to recognize lease assets and lease liabilities on the balance sheet and to disclose key information about leasing arrangements. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases in the previous lease guidance. The FASB retained the distinction between finance leases and operating leases, leaving the effect of leases in the statement of comprehensive income and the statement of cash flows largely unchanged from previous GAAP. To further assist with adoption and implementation of ASU 2016-02, ~~mandates a modified retrospective~~the FASB issued the following ASUs:

ASU 2018-10 (Issued July 2018) — Codification Improvements to Topic 842, Leases

ASU 2018-11 (Issued July 2018) — Leases (Topic 842): Targeted Improvements

ASU 2018-20 (Issued December 2018) — Leases (Topic 842): Narrow-Scope Improvements for Lessors

ASU 2019-01 (Issued March 2019) — Leases (Topic 842): Codification Improvements

ASU 2018-11 provided entities with an additional transition method to adopt the new lease standard. Under this new transition method, an entity initially applies the new lease standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, if any. The new lease standard is effective for fiscal years beginning after December 15, 2018. ~~Early adoption~~The Company adopted these standards in the first quarter of 2019 utilizing the transition method allowed under ASU 2018-11. See Note 16 — Leases for more information related to the Company's leases.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The new credit impairment standard changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking expected loss model that generally will result in the earlier recognition of allowances for credit losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than as reductions in the amortized cost of the ~~amendment~~securities. To further assist with adoption and implementation of ASU 2016-02, the FASB issued the following ASU:

ASU 2018-19 (Issued November 2018) — Codification Improvements to Topic 326, Financial Instruments - Credit Losses

These ASUs are effective for fiscal years beginning after December 15, 2019 and early adoption is ~~permitted but the Company~~permitted. MoneyGram will not be early adopting ~~this standard. The Company's leases consist primarily of operating leases for buildings, equipment and vehicles. The impact of this ASU on~~these standards. We are still evaluating these ASUs, but we do not believe the ~~Company’s consolidated financial statements is still being evaluated but, due to the nature of the Company's leases, management believes that this standard~~adoption will ~~not~~ have a material impact on ~~the Consolidated Statements of Operations.~~

~~In October 2016, the FASB issued ASU 2016-16,~~ ~~Income Taxes (Topic 740) - Intra-Entity Transfers of Assets Other Than Inventory~~. This standard requires that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Consequently, the amendments in this standard eliminate the exception for an intra-entity transfer of an asset other than inventory. ASU 2016-16 is effective for public companies for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Company adopted this standard in the first quarter of 2018 using the modified retrospective approach. The modified retrospective approach resulted in a cumulative effect of $4.2 million to "Retained loss," consisting of a deferred charge of $1.3 million offset by a recording of deferred tax balances of $5.5 million from "Other assets" on the Condensed Consolidated Balance Sheets.

~~In March 2017, the FASB issued ASU 2017-07,~~ ~~Compensation - Retirement Benefits (Topic 715) - Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.~~ The amendments in the standard require components of net periodic benefit cost, other than service cost, to be presented outside of income from operations. The Company adopted ASU 2017-07 in the first quarter of 2018. Prior to the adoption of this ASU, the Company presented net periodic benefit costs, other than service cost, in "Compensation and benefits" on the Condensed Consolidated Statements of Operations. Upon adoption, these costs were reclassified to "Other non-operating (income) expense" on the Condensed Consolidated Statements of Operations and the prior period was updated to reflect this change. For the three months ended March 31, 2018 and 2017, net periodic benefit cost, other than service cost, were $1.4 million and $1.3 million, respectively.our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) - Reclassification of Certain Tax Effects from Accumulated Other Comprehensive ~~Income.~~ Income. The amendments in the standard allow

a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the ~~Tax~~legislation commonly known as the “Tax Cuts and Jobs ~~Act (the "TCJA"~~Act” (“TCJA”). The Company adopted ASU 2018-02 ~~will~~in the first quarter of 2019 and applied the amendments from the accounting update in the period of adoption. The Company reclassified $15.1 million from Accumulated other comprehensive loss to Retained loss on the Condensed Consolidated Balance Sheets. ASU 2018-02 did not have an impact on the Condensed Consolidated Statements of ~~Operations.~~ Operations or the Condensed Consolidated Statements of Cash Flows. See Note 9 — Stockholders' Deficit for more information.

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Plans - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefits Plans. The amendments in this standard ~~also~~ require that entities now disclose the weighted-average interest credit ratings for cash balance plans and other plans with promised interest credit ratings and an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period, as well as clarify and remove certain ~~disclosures about stranded tax effects. ASU 2018-02~~other disclosures. This standard is effective for ~~all entities for~~ fiscal years ~~beginning~~ending after December 15, ~~2018,~~2020, and, ~~interim periods within those fiscal years. Early~~although early adoption is ~~permitted.~~permitted, MoneyGram will not be early adopting this standard. The impact of this ASU is still being evaluated, but management does not expect this standard to have a material impact on ~~the Condensed Consolidated Balance Sheets.~~our consolidated financial statements.

The Company has determined that there have been no other recently adopted or issued accounting standards that had, or will have, a material impact on its condensed consolidated financial statements.

~~Merger Agreement~~ — On January 26, 2017, MoneyGram International, Inc. entered into an Agreement and Plan of Merger (as amended by the First Amendment to the Agreement and Plan of Merger, dated April 15, 2017, the “Merger Agreement”) with Alipay (UK) Limited, a United Kingdom limited company (“Alipay”), Matrix Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Alipay (“Merger Sub”), and, solely for purposes of certain specified provisions of the Merger Agreement, Alipay (Hong Kong) Holding Limited, a Hong Kong limited company, providing for the merger of Merger Sub with and into the Company, with the Company surviving as a wholly owned subsidiary of Alipay (the “Merger”). The closing of the Merger was subject to certain conditions, including clearance by the Committee on Foreign Investment in the United States (“CFIUS”) under the Defense Production Act of 1950, as amended. On January 2, 2018, the parties to the Merger Agreement were advised that CFIUS clearance of the Merger would not be forthcoming, and after further discussion between the parties, they determined to cease efforts to seek CFIUS approval and entered into a Termination Agreement (the “Termination Agreement”). Pursuant to the Termination Agreement, Alipay paid the Company a termination fee of $30.0 million on January 3, 2018, which is recorded in "Other non-operating (income) expense" on the Condensed Consolidated Statements of Operations. The parties agreed to release each other from certain claims and liabilities arising out of or relating to the Merger Agreement or the transactions contemplated thereby.

Note 2 — Restructuring and Reorganization Costs

In ~~the first quarter of~~ 2018, the Company initiated a restructuring and reorganization program (the "Digital Transformation Program") to modernize the business, reduce operating expenses, focus on improving profitability and better align the organization to deliver new digital touch-points for customers and agents. ~~In connection with the~~The Digital Transformation Program ~~which is expected to be~~was substantially completed by the end of 2018, the Company expects between 250 and 350 employees to be affected, possibly through transfers or terminations, representing approximately 9% to 12% of the Company’s global workforce. The Company expects to incur restructuring and reorganization charges totaling approximately $15.0 million, consisting primarily of severance and outplacement benefits (approximately $11.0 million), real estate lease termination and other associated costs (approximately $3.0 million), and reorganization costs (approximately $1.0 million). A substantial portion of such charges was incurred in the first quarter of ~~2018, and~~2019. As of March 31, 2019, the Company incurred $24.0 million in restructuring and reorganization costs and expects to incur approximately ~~$13.0~~$0.5 million of ~~the charges~~additional costs primarily related to ~~be paid in cash over the course of 2018~~legal and ~~into the first quarter of 2019.~~other costs. The actual timing and costs of the plan may differ from the Company’s current expectations and estimates.

On the Condensed Consolidated Statements of Operations, the severance and outplacement benefits and reorganization costs are recorded in "Compensation and benefits," the real estate lease termination and other associated costs are recorded in "Occupancy, equipment and supplies" and "Depreciation and amortization" and the legal and other costs are recorded in "Transaction and operations support."

The following table is a roll-forward of the restructuring and reorganization costs accrual as of March 31, ~~2018:~~2019:


(Amounts in millions)	Digital Transformation Program			Digital Transformation Program
Balance, December 31, 2017	$	—
Balance, December 31, 2018				$	6.3
Expenses	7.3			3.6
Cash payments	(1.3		)	(4.2		)
Non-cash operating expenses	(1.8		)	(0.1		)
Balance, March 31, 2018	$	4.2
Balance, March 31, 2019				$	5.6

The following table is a summary of the cumulative restructuring and reorganization costs incurred to date in operating expenses and the estimated remaining restructuring and reorganization costs to be incurred as of March 31, ~~2018:~~2019:


(Amounts in millions)	Digital Transformation Program		Digital Transformation Program
Cumulative restructuring costs incurred to date in operating expenses	$	7.3	$	23.5
Estimated additional restructuring costs to be incurred	6.7		0.5
Total restructuring costs incurred and to be incurred	14.0		24.0
Estimated reorganization costs to be incurred	1.0
Total reorganization costs incurred and to be incurred			0.5
Total restructuring and reorganization costs incurred and to be incurred	$	15.0	$	24.5

The following table summarizes the restructuring costs recorded:


	Three months ended March 31,		Three Months Ended March 31,
(Amounts in millions)	2018		2019		2018
Restructuring costs in operating expenses:
Compensation and benefits	$	6.0	$	3.0	$	6.0
Transaction and operations support	1.2		0.3		1.2
Occupancy, equipment and supplies	0.1		0.2		0.1
Depreciation			0.1		—
Total restructuring costs in operating expenses	$	7.3	$	3.6	$	7.3

The following table is a summary of the total cumulative restructuring and reorganization costs incurred to date in operating expenses and the total estimated remaining restructuring ~~and reorganization~~ costs to be incurred by reporting segment:


(Amounts in millions)	Global Funds Transfer		Global Funds Transfer		Other		Total
Balance, December 31, 2017	$	—
First quarter 2018	7.3
Restructuring costs:
Balance, December 31, 2018			$	19.9	$	—	$	19.9
First quarter 2019			3.6		—		3.6
Total cumulative restructuring costs incurred to date in operating expenses	7.3		23.5		—		23.5
Total estimated additional restructuring costs to be incurred	6.7		0.5		—		0.5
Total restructuring costs incurred and to be incurred	$	14.0	24.0		—		24.0
Reorganization costs:
Balance, December 31, 2018			—		0.5		0.5
Total reorganization costs incurred and to be incurred			—		0.5		0.5
Total restructuring and reorganization costs incurred and to be incurred			$	24.0	$	0.5	$	24.5

Note 3 — Settlement Assets and Payment Service Obligations

The Company records payment service obligations relating to amounts payable under money transfers, money orders and consumer payment service arrangements. These obligations are recognized by the Company at the time the underlying transaction occurs. The Company records corresponding settlement assets, which represent funds received or to be received for unsettled money transfers, money orders and consumer payments.

The following table summarizes the amount of ~~Settlement~~settlement assets and ~~Payment~~payment service obligations:


(Amounts in millions)	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Settlement assets:
Settlement cash and cash equivalents	$	1,403.4		$	1,469.9		$	1,381.5		$	1,435.7
Receivables, net	919.2			1,125.8			971.7			777.7
Interest-bearing investments	1,154.0			1,154.2			1,057.4			1,154.7
Available-for-sale investments	6.7			7.0			5.7			5.7
	3,483.3			3,756.9			$	3,416.3		$	3,373.8
Payment service obligations	$	(3,483.3	)	$	(3,756.9	)	$	(3,416.3	)	$	(3,373.8	)

Note 4 — Fair Value Measurement

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or the exit price, in an orderly transaction between market participants on the measurement date.

The following table summarizes the Company’s financial assets and liabilities measured at fair value by hierarchy level on a recurring basis:


(Amounts in millions)	Level 2		Level 3		Total		Level 2		Level 3		Total
March 31, 2018
March 31, 2019
Financial assets:
Available-for-sale investments:
Residential mortgage-backed securities	$	5.4	$	—	$	5.4	$	4.3	$	—	$	4.3
Asset-backed and other securities	—		1.3		1.3		—		1.4		1.4
Forward contracts	0.8		—		0.8		1.2		—		1.2
Total financial assets	$	6.2	$	1.3	$	7.5	$	5.5	$	1.4	$	6.9
Financial liabilities:
Forward contracts	$	—	$	—	$	—	$	—	$	—	$	—

December 31, 2017
December 31, 2018
Financial assets:
Available-for-sale investments:
Residential mortgage-backed securities	$	5.6	$	—	$	5.6	$	4.5	$	—	$	4.5
Asset-backed and other securities	—		1.4		1.4		—		1.2		1.2
Forward contracts	0.2		—		0.2		—		—		—
Total financial assets	$	5.8	$	1.4	$	7.2	$	4.5	$	1.2	$	5.7
Financial liabilities:
Forward contracts	$	1.0	$	—	$	1.0	$	1.2	$	—	$	1.2

The following table provides a roll-forward of the asset-backed and other securities classified as Level 3, which are measured at fair value on a recurring basis:


	Three Months Ended March 31,						Three Months Ended March 31,
(Amounts in millions)	2018			2017			2019
Beginning balance	$	1.4		$	10.6		$	1.2
Principal paydowns	—			(0.1		)
Change in unrealized gains	(0.2		)	0.1			0.2
Net realized gains	0.1			—
Ending balance	$	1.3		$	10.6		$	1.4

Assets and liabilities that are disclosed at fair value — Debt and interest-bearing investments are carried at amortized cost; however, the Company estimates the fair value of debt for disclosure purposes. The fair value of debt is estimated using an observable market quotation (Level 2). The following table is a summary of the Company's fair value and carrying value of debt:


	Fair Value				Carrying Value				Fair Value				Carrying Value
(Amounts in millions)	March 31, 2018		December 31, 2017		March 31, 2018		December 31, 2017		March 31, 2019		December 31, 2018		March 31, 2019		December 31, 2018
Senior secured credit facility	$	910.6	$	910.8	$	911.8	$	914.2	$	847.8	$	737.1	$	901.9	$	904.4

The carrying amounts for the Company's cash and cash equivalents, settlement cash and cash equivalents, interest-bearing investments and payment service obligations approximate fair value as of March 31, ~~2018~~2019 and December 31, ~~2017.~~2018.

Note 5 — Investment Portfolio

The following table shows the components of the investment portfolio:


(Amounts in millions)	March 31, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Cash	$	1,600.6	$	1,654.5	$	1,508.9	$	1,578.7
Money market securities	2.5		5.4		2.5		2.5
Cash and cash equivalents ⁽¹⁾	1,603.1		1,659.9		1,511.4		1,581.2
Interest-bearing investments	1,154.0		1,154.2		1,057.4		1,154.7
Available-for-sale investments	6.7		7.0		5.7		5.7
Total investment portfolio	$	2,763.8	$	2,821.1	$	2,574.5	$	2,741.6

⁽¹⁾For purposes of the disclosure of the investment portfolio as a whole, the cash and cash equivalents balance includes settlement cash and cash equivalents.

The following table is a summary of the amortized cost and fair value of available-for-sale investments:


(Amounts in millions)	Amortized Cost		Gross Unrealized Gains		Fair Value		Amortized Cost		Gross Unrealized Gains		Fair Value
March 31, 2018
March 31, 2019
Residential mortgage-backed securities	$	5.0	$	0.4	$	5.4	$	4.0	$	0.3	$	4.3
Asset-backed and other securities	0.3		1.0		1.3		0.2		1.2		1.4
Total	$	5.3	$	1.4	$	6.7	$	4.2	$	1.5	$	5.7

December 31, 2017
December 31, 2018
Residential mortgage-backed securities	$	5.2	$	0.4	$	5.6	$	4.2	$	0.3	$	4.5
Asset-backed and other securities	0.2		1.2		1.4		0.2		1.0		1.2
Total	$	5.4	$	1.6	$	7.0	$	4.4	$	1.3	$	5.7

As of March 31, ~~2018~~2019 and December 31, ~~2017, 81%~~2018, 75% and ~~80%~~79%, respectively, of the fair value of the available-for-sale portfolio were invested in residential mortgage-backed securities issued by U.S. government agencies. These securities have the implicit backing of the U.S. government and the Company expects to receive full par value upon maturity or pay-down, as well as all interest payments.

Gains and Losses — For the three months ended March 31, 2019 and 2018, the Company had nominal ~~net realized gains and no net realized losses. For the three months ended March 31, 2017, the Company had no~~ net realized gains or losses. The Company had nominal unrealized losses in its available-for-sale portfolio as of March 31, ~~2018~~2019 and December 31, ~~2017. See summary of net unrealized gains included in Accumulated other comprehensive loss in Note 9~~ ~~— Stockholders' Deficit~~.2018.

Contractual Maturities — Actual maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations, sometimes without call or prepayment penalties. Maturities of residential mortgage-backed and asset-backed and other securities depend on the repayment characteristics and experience of the underlying obligations.

Note 6 — Derivative Financial Instruments

The Company uses forward contracts to manage its foreign currency needs and foreign currency exchange risk arising from its assets and liabilities denominated in foreign currencies. While these contracts may mitigate certain foreign currency risk, they are not designated as hedges for accounting purposes and will result in gains and losses. The Company also reports gains and losses from the spread differential between the rate set for its transactions and the actual cost of currency at the time the Company buys or sells in the open market.

The following net gains ~~(losses)~~ related to assets and liabilities denominated in foreign currencies are included in the “Transaction and operations support” line in the Condensed Consolidated Statements of Operations and in the "Net cash provided by operating activities" line in the Condensed Consolidated Statements of Cash Flows:


	Three Months Ended March 31,						Three Months Ended March 31,
(Amounts in millions)	2018			2017			2019			2018
Net realized foreign currency gain	$	0.5		$	3.0
Net loss from the related forward contracts	(0.5		)	(2.0		)
Net realized foreign currency (loss) gain							$	(3.5	)	$	0.5
Net gain (loss) from the related forward contracts							5.1			(0.5		)
Net gains from foreign currency transactions and related forward contracts	$	—		$	1.0		$	1.6		$	—

As of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company had ~~$314.8~~$332.6 million and ~~$311.5~~$300.2 million, respectively, of outstanding notional amounts relating to its foreign currency forward contracts. ~~The~~As of March 31, 2019 and December 31, 2018, the Company reflects the following fair values of derivative forward contract instruments in its Condensed Consolidated Balance Sheets:


		Gross Amount of Recognized Assets				Gross Amount of Offset						Net Amount of Assets Presented in the Condensed Consolidated Balance Sheets					Gross Amount of Recognized Assets				Gross Amount of Offset						Net Amount of Assets Presented in the Consolidated Balance Sheets
(Amounts in millions)	Balance Sheet Location	March 31, 2018		December 31, 2017		March 31, 2018			December 31, 2017			March 31, 2018		December 31, 2017		Balance Sheet Location	March 31, 2019		December 31, 2018		March 31, 2019			December 31, 2018			March 31, 2019		December 31, 2018
Forward contracts	Other assets	$	1.0	$	0.4	$	(0.2	)	$	(0.2	)	$	0.8	$	0.2	Other assets	$	1.9	$	0.2	$	(0.7	)	$	(0.2	)	$	1.2	$	—


		Gross Amount of Recognized Liabilities				Gross Amount of Offset						Net Amount of Liabilities Presented in the Condensed Consolidated Balance Sheets					Gross Amount of Recognized Liabilities				Gross Amount of Offset						Net Amount of Liabilities Presented in the Consolidated Balance Sheets
(Amounts in millions)	Balance Sheet Location	March 31, 2018		December 31, 2017		March 31, 2018			December 31, 2017			March 31, 2018		December 31, 2017		Balance Sheet Location	March 31, 2019		December 31, 2018		March 31, 2019			December 31, 2018			March 31, 2019		December 31, 2018
Forward contracts	Accounts payable and other liabilities	$	0.2	$	1.2	$	(0.2	)	$	(0.2	)	$	—	$	1.0	Accounts payable and other liabilities	$	0.7	$	1.4	$	(0.7	)	$	(0.2	)	$	—	$	1.2

The Company's forward contracts are primarily executed with counterparties governed by International Swaps and Derivatives Association agreements that generally include standard netting arrangements. Asset and liability positions from forward contracts and all other foreign exchange transactions with the same counterparty are net settled upon maturity.

The Company is exposed to credit loss in the event of non-performance by counterparties to its derivative contracts. The Company actively monitors its exposure to credit risk through the use of credit approvals and credit limits, and by selecting major international banks and financial institutions as counterparties. Collateral generally is not required of the counterparties or of the Company. In the unlikely event the counterparty fails to meet the contractual terms of the derivative contract, the Company’s risk is limited to the fair value of the instrument. The Company has not had any historical instances of non-performance by any counterparties, nor does it anticipate any future instances of non-performance.

Note 7 — Debt

The following is a summary of the Company's outstanding debt:


	March 31, 2018					December 31, 2017					March 31, 2019					December 31, 2018
(Amounts in millions, except percentages)	Effective Interest Rate					Effective Interest Rate					Effective Interest Rate					Effective Interest Rate
Senior secured credit facility due 2020	5.55	%	$	911.8		4.94	%	$	914.2		5.75	%	$	901.9		5.59	%	$	904.4
Unamortized debt issuance costs and debt discount			(5.5		)			(6.1		)			(2.7		)			(3.4		)
Total debt, net			$	906.3				$	908.1				$	899.2				$	901.0

The Company's effective interest rate on the senior secured borrowings increased from ~~4.94% as of~~5.59% at December 31, ~~2017~~2018 to ~~5.55% as of~~5.75% at March 31, ~~2018,~~2019 due to an increase in the Eurodollar rate.

Revolving Credit Facility — As of March 31, ~~2018,~~2019, the Company had no outstanding letters of credit and no borrowings under ~~its~~the revolving credit facility, ~~leaving $85.8~~and subsequent to the January 31, 2019 amendment, the Company has $45.0 million of availability ~~thereunder.~~through September 28, 2019. Pursuant to an amendment to ~~the~~our credit agreement, dated ~~December 12, 2016,~~January 31, 2019, among other things, the maximum secured leverage for the first quarter of 2019 increased from 3.500:1 to 4.250:1 and for the second quarter of 2019 increased from 3.500:1 to 4.500:1. In addition, the amendment decreased the aggregate revolving credit commitments ~~were decreased~~ from ~~$150.0~~$85.8 million to ~~$125.0~~$45.0 million and tightened certain negative covenant baskets for the ~~period beginning December 12, 2016 and ending March 27, 2018 (the remainder~~benefit of the ~~original~~revolving lenders only when the pro forma secured leverage ratio of the Company is greater than 3.75:1. The Amendment also provides that in the event the Company’s cash balance exceeds $140.0 million at the end of any month, the Company would be required to use such excess cash to pay any outstanding obligations to the revolving lenders under our credit agreement, and that the Company may not draw on the revolving credit facility ~~term). This amendment also extended~~to the ~~maturity date~~extent that the Company would have a cash balance in excess of ~~the revolving credit commitments of the extending lenders, which represent commitments of $85.8~~$140.0 million ~~in the aggregate, from March 28, 2018~~after giving effect to ~~September 28, 2019.~~such borrowing.

Debt Covenants and Other Restrictions — Borrowings under the existing credit agreement that provides for the senior secured facility due 2020 and the revolving credit facility are subject to various limitations that restrict the Company’s ability to: incur additional indebtedness; create or incur additional liens; effect mergers and consolidations; make certain acquisitions or investments; sell assets or subsidiary stock; pay dividends and other restricted payments; and effect loans, advances and certain other transactions with affiliates. In addition, the revolving credit facility has covenants that place limitations on the use of proceeds from borrowings under the facility.

The revolving credit facility contains certain financial covenants, in addition to the non-financial covenants described above. The Company is required to maintain asset coverage greater than its payment service obligations. Assets used in the determination of the asset coverage covenant are cash and cash equivalents and settlement assets. The Company's assets in excess of payment service obligations used for the asset coverage calculation, which is equal to total cash and cash equivalents and settlement assets less payment service obligations, are ~~$199.7~~$129.9 million and ~~$190.0~~$145.5 million as of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

~~The~~Our existing credit agreement also has quarterly financial covenants to maintain the following interest coverage and secured leverage ratios:



	Interest Coverage Minimum Ratio	Secured Leverage Ratio Not to Exceed
January 1, ~~2018~~2019 through ~~June 30, 2018~~March 31, 2019	2.25:1	~~4.000:~~4.250:1
~~July~~April 1, ~~2018~~2019 through ~~December 31, 2018~~June 30, 2019	2.25:1	~~3.750:1~~
~~January 1, 2019 through maturity~~	~~2.25:1~~	~~3.500:~~4.500:1

As of March 31, ~~2018,~~2019, the Company was in compliance with its financial covenants: our interest coverage ratio was ~~6.38~~4.71 to 1.00 and our secured leverage ratio was ~~3.276~~3.680 to 1.00. We continuously monitor our compliance with our debt covenants.

Second Lien Term Facility — On May 8, 2019, the Company announced that Bank of America, N.A. arranged a $245.0 million senior secured second lien term facility (the “Second Lien Term Facility”) for MoneyGram. The Second Lien Term Facility will be led by BPC Lending I LLC, an affiliate of Beach Point Capital Management, which has committed to provide the full amount of the Second Lien Term Facility. The Carlyle Group, or an affiliate thereof, will be participating in a portion of the Second Lien Term Facility. The Second Lien Term Facility would bear interest at 13.0% per annum, a portion of which would be payable in kind at the Company’s option, as well as provide for customary fees and an original issue discount. The Company expects to use the net proceeds from the Second Lien Term Facility, together with available working capital, to prepay $245.0 million of debt outstanding under the First Lien Term Facility (as defined below).

The closing of the Second Lien Term Facility is conditioned on, among other things, the Company refinancing or extending the maturity date under its existing Revolving Credit Facility and senior secured credit facility (together with the Revolving Credit Facility, the “First Lien Facilities”). The refinancing or extension of the First Lien Facilities, the arrangement of which is expected to commence in the near future, together with obtaining the Second Lien Term Facility, are collectively referred to as the “Refinancing.”

Upon the closing of the Second Lien Term Facility, the Company would issue warrants (the “Warrants”) to the lenders under the Second Lien Term Facility representing 8% of the fully diluted then-outstanding common stock of the Company, assuming full conversion of the Company’s Series D Participating Convertible Preferred Stock (the “fully-diluted common stock”). The Company agreed to deliver a portion of the Warrants in connection with the arrangement of the Second Lien Term Facility (representing 1.5% of the fully diluted common stock (the “Initial Warrants”)). Upon the closing of the Second Lien Term Facility, the Initial Warrants would be applied towards, and be a part of (and not in addition to) the Warrants representing 8.0% of the fully-diluted common stock to be delivered to the lenders upon the closing.

The Initial Warrants are required to be delivered to the lenders upon the earliest of (i) the closing of the Second Lien Term Facility, (ii) July 8, 2019 and (iii) the Company’s termination of the financing arrangement (in each case, regardless of whether the Second

Lien Term Facility is funded). In the event the Second Lien Term Facility closes, each Warrant would be exercisable, in whole or in part, at an exercise price equal to $0.01 per share following either (a) a “change of control,” (b) the repayment in full of all amounts outstanding under the Second Lien Term Facility, (c) the maturity date of the Second Lien Term Facility or (d) the occurrence and continuance of an event of default under the Second Lien Term Facility. If the Second Lien Term Facility does not close, each Initial Warrant would be exercisable, in whole or in part, at an exercise price equal to $0.01 per share upon the earlier of (i) November 7, 2019 and (ii) a "change of control." All Warrants would expire ten years after the closing of the Second Lien Term Facility.

The Second Lien Term Facility would mature upon the earlier of (i) six years after the closing of the Second Lien Term Facility and (ii) twelve months following the stated maturity date of the refinanced or extended First Lien Term Facility, which is currently expected to mature in five years. The Company’s entry into the Second Lien Term Facility is subject to various conditions, including the refinancing or extension of the First Lien Facilities, the negotiation and execution of definitive documentation with respect to the Second Lien Term Facility and the First Lien Facilities and various customary closing conditions. There can be no assurance as to whether or when the Company will reach an agreement to refinance or extend the First Lien Facilities, the Refinancing will be consummated or the terms of the refinanced or extended First Lien Facilities and Second Lien Term Facility to be included in the Refinancing will be revised in material respects prior to its completion.

Note 8 — Pension and Other Benefits

The following table is a summary of net periodic benefit expense for the Company's defined benefit pension plan ("Pension Plan") and supplemental executive retirement plans ("SERPs"), collectively referred to as "Pension":


	Three Months Ended March 31,						Three Months Ended March 31,
(Amounts in millions)	2018			2017			2019			2018
Interest cost	$	1.6		$	1.5		$	1.7		$	1.6
Expected return on plan assets	(1.3		)	(1.3		)	(1.1		)	(1.3		)
Amortization of net actuarial loss	1.1			1.1			0.9			1.1
Net periodic benefit expense	$	1.4		$	1.3		$	1.5		$	1.4

The ~~following table is a summary of~~Company had nominal net periodic benefit ~~income~~expense for the ~~Company's~~three months ended March 31, 2019 and 2018, for its postretirement medical benefit ~~plan ("Postretirement Benefits"):~~

Three Months Ended March 31,
(Amounts in millions) 2018 2017
Amortization of prior service credit $ —
$ (0.1 )
Amortization of net actuarial loss —
0.1
Net periodic benefit income $ —
$ —

plan. Net periodic benefit expense ~~(income)~~ for the Pension and Postretirement Benefits is recorded in "Other non-operating expense (income) ~~expense"~~" on the Condensed Consolidated Statements of Operations.

Note 9 — Stockholders' Deficit

Common Stock — No dividends were paid during the three months ended March 31, ~~2018~~2019 or March 31, ~~2017.~~2018.

Accumulated Other Comprehensive Loss — ~~The following tables are a summary of the changes to Accumulated other comprehensive loss by component:~~

(Amounts in millions) Net unrealized gains on securities classified as available-for-sale, net of tax Cumulative foreign currency translation adjustments, net of tax Pension and Postretirement Benefits adjustments, net of tax Total
January 1, 2018 $ 2.2
$ (10.4 ) $ (54.8 ) $ (63.0 )
Other comprehensive (loss) income before reclassification (0.2 ) 2.7
—
2.5
Amounts reclassified from accumulated other comprehensive loss —
—
0.9
0.9
Net current period other comprehensive (loss) income (0.2 ) 2.7
0.9
3.4
March 31, 2018 $ 2.0
$ (7.7 ) $ (53.9 ) $ (59.6 )

(Amounts in millions) Net unrealized gains on securities classified as available-for-sale, net of tax Cumulative foreign currency translation adjustments, net of tax Pension and Postretirement Benefits adjustments, net of tax Total
January 1, 2017 $ 10.8
$ (19.9 ) $ (44.8 ) $ (53.9 )
Other comprehensive income before reclassification 0.1
2.2
—
2.3
Amounts reclassified from accumulated other comprehensive loss —
—
0.7
0.7
Net current period other comprehensive income 0.1
2.2
0.7
3.0
March 31, 2017 $ 10.9
$ (17.7 ) $ (44.1 ) $ (50.9 )

The following table is a summary of the significant amounts reclassified out of each component of "Accumulated other comprehensive loss":



	Three Months Ended March 31,
(Amounts in millions)	2019			2018			Statement of Operations Location
Pension and Postretirement Benefits adjustments:
Amortization of net actuarial loss	$	0.9		$	1.1		"Other non-operating expense (income)"
Total before tax	0.9			1.1
Tax benefit, net	(0.1		)	(0.2		)
Total reclassified for the period, net of tax	$	0.8		$	0.9

The following table is a summary of the changes to Accumulated other comprehensive ~~loss:~~loss by component:

Three Months Ended March 31,
(Amounts in millions) 2018 2017 Statement of Operations Location
Pension and Postretirement Benefits adjustments:
Amortization of prior service credit $ —
$ (0.1 ) "Compensation and benefits"
Amortization of net actuarial loss 1.1
1.2
"Compensation and benefits"
Total before tax 1.1
1.1

Tax benefit, net (0.2 ) (0.4 )
Total, net of tax $ 0.9
$ 0.7

Total reclassified for the period, net of tax $ 0.9
$ 0.7



(Amounts in millions)	Net Unrealized Gains on Securities Classified as Available-for-sale, Net of Tax		Cumulative Foreign Currency Translation Adjustments, Net of Tax			Pension and Postretirement Benefits Adjustment, Net of Tax			Total
January 1, 2019	$	1.9	$	(24.2	)	$	(45.2	)	$	(67.5	)
Cumulative effect of adoption of ASU 2018-02	—		(3.7		)	(11.4		)	(15.1		)
Other comprehensive income (loss) before reclassification	0.2		(3.1		)	—			(2.9		)
Amounts reclassified from accumulated other comprehensive loss	—		—			0.8			0.8
Net current period other comprehensive income (loss)	0.2		(3.1		)	0.8			(2.1		)
March 31, 2019	$	2.1	$	(31.0	)	$	(55.8	)	$	(84.7	)



(Amounts in millions)	Net Unrealized Gains on Securities Classified as Available-for-sale, Net of Tax			Cumulative Foreign Currency Translation Adjustments, Net of Tax			Pension and Postretirement Benefits Adjustment, Net of Tax			Total
January 1, 2018	$	2.2		$	(10.4	)	$	(54.8	)	$	(63.0	)
Other comprehensive (loss) income before reclassification	(0.2		)	2.7			—			2.5
Amounts reclassified from accumulated other comprehensive loss	—			—			0.9			0.9
Net current period other comprehensive (loss) income	(0.2		)	2.7			0.9			3.4
March 31, 2018	$	2.0		$	(7.7	)	$	(53.9	)	$	(59.6	)

In the first quarter of 2019, the Company adopted ASU 2018-02 and elected to reclassify the stranded tax effects resulting from the TCJA, which changed the U.S. federal corporate income tax rate on the gross deferred tax amounts and related valuation allowances, among other things. The effect from the rate change resulted in a pension and postretirement benefits adjustment reclassification of $11.4 million from Accumulated other comprehensive loss to Retained loss. Additionally, the Company reclassified $3.7 million from cumulative foreign currency translation adjustment to Retained loss related to the rate reduction associated with the taxation of the Company's foreign subsidiaries.

Note 10 — Stock-Based Compensation

The following table is a summary of the Company's stock-based compensation expense:


	Three Months Ended March 31,				Three Months Ended March 31,
(Amounts in millions)	2018		2017		2019		2018
Expense recognized related to stock options	$	—	$	0.3
Expense recognized related to restricted stock units	4.8		3.7
Stock-based compensation expense	$	4.8	$	4.0	$	2.6	$	4.8

Stock Options — The following table is a summary of the Company’s stock option activity:

Shares
Weighted-
Average
Exercise
Price

Weighted-
Average
Remaining
Contractual
Term

Aggregate
Intrinsic
Value
($000,000)
Options outstanding at December 31, 2017 2,019,850
$ 17.72
2.8 years $ 0.6
Forfeited/Expired (136,826 ) 20.78

Options outstanding at March 31, 2018 1,883,024
$ 17.50
2.1 years $ —
Vested or expected to vest at March 31, 2018 1,883,024
$ 17.50
2.1 years $ —
Options exercisable at March 31, 2018 1,883,024
$ 17.50
2.1 years $ —



	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value ($000,000)
Options outstanding at December 31, 2018	1,628,829		$	17.20	1.4 years	$	—
Forfeited/Expired	(422,686	)	12.03
Options outstanding, vested or expected to vest, and exercisable at March 31, 2019	1,206,143		$	19.02	1.6 years	$	—

As of March 31, ~~2018,~~2019, the Company had no unrecognized stock option expense related to outstanding options.

Restricted Stock Units — In ~~March 2018,~~February 2019, the Company ~~issued~~granted time-based ~~and performance-based~~ restricted stock units. The time-based restricted stock units vest in three equal installments on each anniversary of the grant date. The performance-based restricted stock units are subject to performance conditions that must be satisfied. If such performance conditions are satisfied at the conclusion of a one-year performance period, the performance-based restricted stock units will vest in three equal installments on each anniversary of the grant date. With respect to the performance-based restricted stock units, the number of restricted stock units eligible to vest is based on the performance achievement percentage determined by straight line interpolation using the aggregate of 75% based on Adjusted EBITDA and 25% based on constant currency revenue. Adjusted EBITDA is EBITDA (earnings before interest, taxes, depreciation and amortization, including agent signing bonus amortization) adjusted for certain significant items. Achievement of the threshold level of target in the aggregate for both performance conditions will result in a percentage payout of 50% of the performance-based restricted stock units. No performance-based restricted stock units will vest for performance achievement below the thresholds.

The following table is a summary of the Company’s restricted stock unit activity:


	Total Shares		Weighted Average Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value ($000,000)		Total Shares		Weighted-Average Grant-Date Fair Value		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value ($000,000)
Restricted stock units outstanding at December 31, 2017	3,266,912		$	8.78	0.7 years	$	43.1
Restricted stock units outstanding at December 31, 2018								2,272,606		$	9.73	0.8 years	$	4.5
Granted	1,184,182		10.59					1,744,970		2.48
Vested and converted to shares	(1,894,933	)	8.13					(1,004,660	)	8.81
Forfeited	(247,289	)	11.09					(123,683	)	10.82
Restricted stock units outstanding at March 31, 2018	2,308,872		$	10.00	1.5 years	$	19.9
Restricted stock units vested and outstanding at March 31, 2018	32,680		$	6.12		$	0.3
Restricted stock units outstanding at March 31, 2019								2,889,233		$	5.62	1.6 years	$	5.9
Restricted stock units vested and deferred at March 31, 2019								39,869		$	8.15		$	0.1

The following table is a summary of the Company's restricted stock unit compensation information:



	Three Months Ended March 31,
(Amounts in millions)	2019		2018
Weighted-average grant-date fair value of restricted stock units vested during the period	$	8.9	$	15.4
Total intrinsic value of vested and converted shares	$	2.5	$	21.7

As of March 31, ~~2018,~~2019, the Company’s outstanding restricted stock units had unrecognized compensation expense of ~~$20.0~~$13.0 million with a remaining weighted-average vesting period of 1.6 years. Unrecognized restricted stock unit expense and the remaining weighted-average vesting period are presented using the Company’s current estimate of achievement of performance goals. The grant-date fair value of restricted stock units vested and converted was $15.4 million and $13.2 million for the three months ended March 31, 2018 and 2017, respectively.

Note 11 — Income Taxes

For the three months ended March 31, 2019, the Company recognized income tax expense of $6.6 million on a pre-tax loss of $6.9 million primarily due to non-deductible expenses, U.S. taxation of foreign earnings, the reversal of tax benefits on share-based compensation, partially offset by U.S. tax credits net of valuation allowance. Additionally, as a result of the issuance of the final Section 965 regulations by the U.S. Treasury Department and the Internal Revenue Service (the "IRS") on January 15, 2019, the Company recorded a discrete tax expense of $0.7 million for an increase in its one-time transition tax.

For the three months ended March 31, 2018, the Company recognized income tax expense of $14.8 million on pre-tax income of $21.9 million, primarily due to non-deductible expenses, including the accrual related to the deferred prosecution agreement (the "DPA"), as discussed in more detail in Note 12 — Commitments and Contingencies, and the adverse tax consequences related to the new provisions enacted under the TCJA, also known as H.R. 1 - 115^th Congress, ~~as discussed in more detail herein,~~ which result in multiple taxation of a single item of income.

For the three months ended March 31, 2017, the Company recognized income tax expense of $2.5 million on pre-tax income of $11.3 million. The recorded income tax expense for the three months ended March 31, 2017 differs from taxes calculated at the statutory rate primarily due to the recognition of excess tax benefits on stock-based compensation vested during the quarter.

~~On December 22, 2017, the legislation commonly known as the “Tax Cuts and Jobs Act” (the “TCJA”) and also known as H.R. 1 - 115~~^th Congress, which significantly revises the Internal Revenue Code of 1986, as amended, was enacted. The TCJA, among other things, contains significant changes to the U.S. corporate tax laws, including i) a permanent reduction of the corporate income tax rate, ii) a limitation on the deductibility of business interest expense, iii) limitation of the deductions for certain executive compensation and other business expenses, iv) limitation of the deduction for certain net operating losses to 80% of current year taxable income, v) an indefinite net operating loss carryforward, vi) immediate deductions for new investments in certain business assets instead of deductions for depreciation expense over time, vii) modification or repeal of many business deductions and credits (including certain foreign tax credits), viii) a shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a modified territorial system (retaining certain existing rules and containing new rules, such as the global intangible low-taxed income provisions, designed to include in the U.S. income tax base certain income generated in non-U.S. territories whether or not that income has been repatriated to the U.S.), ix) a minimum taxing system related to payments deemed to erode the U.S. tax base referred to as a tax on base erosion payments, and x) a one-time tax on accumulated offshore earnings held in cash and illiquid assets (with the latter taxed at a lower rate). As the provisions under the TCJA interact with previously-existing U.S. tax law, separation of income into baskets and required expense allocations can restrict taxpayer’s ability to credit foreign taxes paid whereby causing double taxation. In addition, routine business expenses can be deemed to erode the U.S. tax base. As such, the TCJA had a material impact on our first quarter 2018 income tax expense.

~~The Company has made reasonable estimates of certain effects related to the TCJA and, therefore, has recorded the below provisional amounts for the year ended December 31, 2017.~~

As a result of the reduction in the U.S. corporate income tax rate from 35% to 21% under the TCJA, the Company revalued its ending net deferred tax liabilities at December 31, 2017 and recognized a provisional $19.8 million tax benefit in the Company’s consolidated statement of income for the year ended December 31, 2017.

The Company recognized a provisional net $3.0 million tax benefit for the remeasurement of previously recorded deferred tax assets and liabilities primarily associated with historical earnings in its foreign subsidiaries.

As of March 31, 2018, the accounting for certain income tax effects of the TCJA is not complete. No new information has been obtained during the quarter ended March 31, 2018, to modify the provisional amount recorded as of December 31, 2017.

We continue to examine the impact the TCJA has on the Company, which could adversely affect our business, financial condition and results of operations. Until the analysis is complete, the Company will account for the tax effects of global intangible low-tax income as a component of income tax expense in the period the tax arises, as opposed to recognizing both the current and deferred tax consequences of the related investments in its foreign subsidiaries. As the Company is still analyzing the effects of the TCJA, we will finalize our accounting policy election in the latter half of 2018.

Unrecognized tax benefits are recorded in “Accounts payable and other liabilities” in the Condensed Consolidated Balance Sheets. As of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, the liability for unrecognized tax benefits was ~~$29.7~~$18.2 million and ~~$28.7~~$17.9 million, respectively, exclusive of interest and penalties. For the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, the net amount of unrecognized tax benefits that if recognized could impact the effective tax rate was ~~$17.8~~$18.2 million and ~~$16.7~~$17.8 million, respectively. The Company accrues interest and penalties for unrecognized tax benefits through “Income tax expense” in the Condensed Consolidated Statements of Operations. For ~~each of~~ the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, the Company's accrual for interest and penalties increased by $0.3 million and $0.6 ~~million.~~million, respectively. As of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company had a liability of ~~$9.5~~$7.6 million and ~~$8.9~~$7.3 million, respectively, accrued for interest and penalties within "Accounts payable and other liabilities." As a result of the Company's litigation related to its securities losses ~~previously~~ discussed in more detail in Note 12 — Commitments and Contingencies, it is possible that there could be a significant decrease to the total amount of unrecognized tax benefits over the next 12 months. However, as of March 31, ~~2018,~~2019, it is not possible to reasonably estimate the expected change to the total amount of unrecognized tax positions over the next 12 months.

Note 12 — Commitments and Contingencies

Legal Proceedings — The matters set forth below are subject to uncertainties and outcomes that are not predictable. The Company accrues for these matters as any resulting losses become probable and can be reasonably estimated. Further, the Company maintains

insurance coverage for many claims and litigation matters. In relation to various legal matters, including those described below, the Company had ~~$95.5~~$57.6 million and ~~$85.5~~$57.5 million of liability recorded in the “Accounts payable and other liabilities” line in the Condensed Consolidated Balance Sheets as of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. A nominal charge ~~and a charge of $0.9 million were~~was recorded for legal proceedings ~~during~~for the three months ended March 31, ~~2018~~2019 and ~~2017, respectively,~~2018, in the “Transaction and operations support” line in the Condensed Consolidated Statements of Operations.

Litigation Commenced Against the Company:

Class Action Securities Litigation —On November 14, 2018, a putative securities class action lawsuit was filed in the United States District Court for the Northern District of Illinois against MoneyGram and certain of its executive officers. The lawsuit asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and alleges that MoneyGram made material misrepresentations regarding its compliance with the stipulated order for permanent injunction and final judgment that MoneyGram entered into with the Federal Trade Commission ("FTC") in October 2009 and with the deferred prosecution agreement that MoneyGram entered into with the U.S. Attorney’s Office for the Middle District of Pennsylvania and the U.S. Department of Justice in November 2012. The lawsuit seeks unspecified damages, equitable relief, interest, and costs and attorneys’ fees. The Company intends to vigorously defend this matter. We are unable to predict the outcome, or the possible loss or range of loss, if any, related to this matter.

Shareholder Derivative Litigation — On February 19 and 20, 2019, two virtually identical shareholder derivative lawsuits were filed in the United States District Court for the Northern District of Texas. The suits, which have since been consolidated, purport to assert claims derivatively on behalf of MoneyGram against MoneyGram’s directors and certain of its executive officers for violations of Sections 10(b), 14(a) and 20(a) of the Securities Exchange Act of 1934 and for common-law breach of fiduciary duty and unjust enrichment. The complaints assert that the individual defendants caused MoneyGram to make material misstatements regarding MoneyGram’s compliance with the stipulated order and deferred prosecution agreement described in the preceding paragraph and breached their fiduciary duties in connection with MoneyGram’s compliance programs. The lawsuit seeks unspecified damages, equitable relief, interest, and costs and attorneys’ fees. The Company intends to vigorously defend this matter. We are unable to predict the outcome, or the possible loss or range of loss, if any, related to this matter.

Books and Records Requests — The Company has received multiple requests from various putative shareholders for inspection of books and records pursuant to Section 220 of the Delaware General Corporation Law relating to the subject matter of the putative class and derivative lawsuits described in the preceding paragraphs. On February 26, 2019, two of these shareholders filed a petition in the Delaware Court of Chancery to compel MoneyGram to produce books and records in accordance with their request. The Company intends to vigorously defend these matters. We are unable to predict the outcome, or the possible loss or range of loss, if any, related to this matter.

It is possible that additional shareholder lawsuits could be filed relating to the subject matter of the class action, derivative actions and Section 220 requests.

Other Matters — The Company is involved in various other claims and litigation that arise from time to time in the ordinary course of the Company's business. Management does not believe that after final disposition any of these matters is likely to have a material adverse impact on the Company's financial condition, results of operations or cash flows.

Government Investigations:

OFAC — In 2015, we initiated an internal investigation to identify any payments processed by the Company that were violations of the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC") sanctions regulations. We notified OFAC of the internal investigation, which was conducted in conjunction with the Company's outside counsel. On March 28, 2017, we filed a Voluntary Self-Disclosure with OFAC regarding the findings of our internal investigation. OFAC is currently reviewing the results of the Company’s investigation. At this time, it is not possible to determine the outcome of this matter, or the significance, if any, to our business, financial condition, or operations, and we cannot predict when OFAC will conclude ~~their~~its review of our Voluntary Self-Disclosure.

Deferred Prosecution Agreement — In November 2012, we announced that a settlement was reached with the U.S. Attorney's Office for the Middle District of Pennsylvania (the "MDPA") and the U.S. ~~DOJ~~Department of Justice, Criminal Division, Money Laundering and Asset Recovery Section (the “U.S. DOJ”) relating to the previously disclosed investigation of transactions involving certain of our U.S. and Canadian agents, as well as fraud complaint data and the consumer anti-fraud program, during the period from 2003 to early 2009. In connection with this settlement, we entered into the DPA with the MDPA and U.S. DOJ (collectively, the "Government") dated November 8,9, 2012.

On November 1, 2017, the Company agreed to a stipulation with the Government that the five-year term of the Company’s DPA be extended for 90 days to February 6, 2018. OnBetween January 31, 2018 and September 14, 2018, the Company agreed to enter into various extensions of the DPA with the Government, ~~that the term of the DPA be extended for an additional 45 days to March 23, 2018; on March 21, 2018, the Company agreed~~ with the ~~Government that the term of the DPA be further extended for an additional 45 days to May 7, 2018; and~~last extension ending on ~~May 7, 2018, the Company agreed with the Government that the term of the DPA be further extended for an additional 45 days to June 21,~~November 6, 2018. ~~Any~~Each extension of the DPA ~~extends~~extended all terms of the DPA, including the term of the monitorship for an equivalent period. The purpose of the extensions is

was to provide the Company and the Government additional time to discuss whether the Company iswas in compliance with the DPA. ~~There can be no assurance~~

On November 8, 2018, the Company announced that it entered into (1) an Amendment to and Extension of Deferred Prosecution Agreement (the “Amended DPA”) with the Government and (2) a Stipulated Order for Compensatory Relief and Modified Order for Permanent Injunction (the “Consent Order”) with the FTC. The motions underlying the Amended DPA and Consent Order focus primarily on the Company’s anti-fraud and anti-money laundering programs, including whether the Company had adequate controls to prevent third parties from using its systems to commit fraud. The Amended DPA amended and extended the original DPA entered into on November 9, 2012 by and between the Company and the Government. The DPA, Amended DPA and Consent Order are collectively referred to herein as the “Agreements.”

Under the Agreements, the Company will, among other things, (1) pay an aggregate amount of $125.0 million to the Government, ~~will~~of which $70.0 million was paid in November 2018 and the remaining $55.0 million must be paid by May 8, 2020, eighteen months after the date of the Amended DPA, and is being made available to reimburse consumers who were the victims of third-party fraud conducted through the Company’s money transfer services, and (2) continue to ~~be able~~retain an independent compliance monitor until May 10, 2021 to ~~negotiate~~review and assess actions taken by the Company under the Agreements to further enhance its compliance program. No separate payment to the FTC is required under the Agreements. If the Company fails to comply with the Agreements, it could face criminal prosecution, civil litigation, significant fines, damage awards or regulatory consequences which could have a mutually satisfactory outcome during the latest extension (or any further short-term extension of the DPA) or that such outcome will not include a further extension of the DPA, financial penalties or additional restrictionsmaterial adverse effect on the ~~Company. Furthermore, there can be no assurance that~~Company's business, financial condition, results of operations and cash flows.

NYDFS — On June 22, 2018, the ~~Government will not seek any other remedy, including criminal prosecution and financial penalties, in lieu~~Company received a request for production of ~~an extension~~documents from the New York Department of Financial Services (the “NYDFS”) related to the subject of the DPA and ~~monitorship.~~

~~The Company has recorded a $95.0 million accrual in connection with a possible resolution~~FTC matters described above. This request followed previous inquiries by the NYDFS regarding certain of ~~this matter,~~our New York based onagents. Following the ~~facts and circumstances known at the time. However,~~June 22, 2018 request for production, the Company ~~is unable~~received and responded to ~~reasonably estimate~~several inquiries from the ~~ultimate loss and no assurance can be given that future costs and payments made~~NYDFS related to this matter. The NYDFS did not indicate what, if any, action it intended to take in connection with this matter, ~~will not materially exceed the amount currently recorded or~~although it is possible that ~~the Government will not also~~it could seek additional information, initiate civil litigation and/or seek to impose ~~non-monetary remedies~~fines, damages or ~~penalties.~~other regulatory consequences, any or all of which could have an adverse effect on the Company’s business, financial condition, results of operations and cash flows. The Company is unable to predict the outcome, or the possible loss or range of loss, if any, that could be associated with this matter.

Other Matters — The Company is involved in various other government inquiries and other matters that arise from time to time. Management does not believe that after final disposition any of these other matters is likely to have a material adverse impact on the Company’s financial condition, results of operations or cash flows.

Actions Commenced by the Company:

Tax Litigation — The IRS completed its examination of the Company’s consolidated income tax returns through 2013 and issued Notices of Deficiency for 2005-2007 and 2009, and an Examination Report for 2008. The Notices of Deficiency and Examination Report disallow, among other items, approximately $900.0 million of ordinary deductions on securities losses in the 2007, 2008 and 2009 tax returns. In May 2012 and December 2012, the Company filed petitions in the U.S. Tax Court challenging the 2005-2007 and 2009 Notices of Deficiency, respectively. In 2013, the Company reached a partial settlement with the IRS allowing ordinary loss treatment on $186.9 million of deductions in dispute. In January 2015, the U.S. Tax Court granted the IRS's motion for

summary judgment upholding the remaining adjustments in the Notices of Deficiency. The Company filed a notice of appeal with the U.S. Tax Court on July 27, 2015 for an appeal to the U.S. Court of Appeals for the Fifth Circuit. Oral arguments were held before the Fifth Circuit on June 7, 2016, and on November 15, 2016, the Fifth Circuit vacated the Tax Court's decision and remanded the case to the Tax Court for further proceedings. The Company filed a motion for summary judgment in the Tax Court on May 31, 2017. On August 23, 2017, the IRS filed a motion for summary judgment and its response to the Company’s motion for summary judgment. The Tax Court ~~has~~ directed the parties to agree to a joint stipulation of facts, ~~to be~~which the parties have filed with the ~~court, at which point the Company expects to file a revised memorandum~~court. Each party has since filed updated memorandums in support of its ~~motion~~motions for summary judgment ~~and~~in the ~~IRS~~Tax Court. The Tax Court is expected to ~~file its cross motion for summary judgment.~~schedule oral argument on this matter in mid-2019.

The January 2015 Tax Court decision was a change in facts which warranted reassessment of the Company's uncertain tax position. Although the Company believes that it has substantive tax law arguments in favor of its position and has appealed the ruling, the reassessment resulted in the Company determining that it is no longer more likely than not that its existing position will be sustained. Accordingly, the Company re-characterized certain deductions relating to securities losses to be capital in nature, rather than ordinary. The Company recorded a full valuation allowance against these losses in the quarter ended March 31, 2015. This change increased "Income tax expense" in the Consolidated Statements of Operations in the quarter ended March 31, 2015 by $63.7 million. During 2015, the Company made payments to the IRS of $61.0 million for federal tax payments and associated interest related to the matter. The November 2016 Fifth Circuit decision to remand the case back to the U.S. Tax Court does not change the Company’s current assessment regarding the likelihood that these deductions will be sustained. Accordingly, no change in the valuation allowance was made as of March 31, ~~2018.~~2019. Pending the outcome of the Tax Court proceeding, the Company may be required to file amended state returns and make additional cash payments of up to ~~$18.7~~$19.7 million on amounts that have previously been accrued.

Note 13 — Earnings per Common Share

For all periods in which it is outstanding, the Series D Participating Convertible Preferred Stock (the "D Stock") is included in the weighted-average number of common shares outstanding utilized to calculate basic earnings per common share because the D Stock is deemed a common stock equivalent. Diluted earnings per common share reflects the potential dilution that could result if securities or incremental shares arising out of the Company’s stock-based compensation plans were exercised or converted into common stock. Diluted earnings per common share assumes the exercise of stock options using the treasury stock method.

The following table is a reconciliation of the weighted-average amounts used in calculating (loss) earnings per share:


	Three Months Ended March 31,		Three Months Ended March 31,
(Amounts in millions)	2018	2017	2019	2018
Basic common shares outstanding	63.8	62.1	64.8	63.8
Shares related to stock options and restricted stock units	2.4	4.0	—	2.4
Diluted common shares outstanding	66.2	66.1	64.8	66.2

Potential common shares are excluded from the computation of diluted earnings per common share when the effect would be anti-dilutive. All potential common shares are anti-dilutive in periods of net loss available to common stockholders. Stock options are anti-dilutive when the exercise price of these instruments is greater than the average market price of the Company’s common stock for the period. The following table summarizes the weighted-average potential common shares excluded from diluted (loss) earnings per common share as their effect would be anti-dilutive:


	Three Months Ended March 31,		Three Months Ended March 31,
(Amounts in millions)	2018	2017	2019	2018
Shares related to stock options	1.9	1.9	1.3	1.9
Shares related to restricted stock units	0.1	0.2	2.5	0.1
Shares excluded from the computation	2.0	2.1	3.8	2.0

Note 14 — Segment Information

The Company’s reporting segments are primarily organized based on the nature of products and services offered and the type of consumer served. The Company has two reporting segments: Global Funds Transfer and Financial Paper Products. SeeNote 1 — — Description of the Business and Basis for Presentation for further discussion on our segments.~~One of the Company's agents~~ Walmart Inc. is our only agent, for

~~the total of~~ both the Global Funds Transfer segment and the Financial Paper Products ~~segments accounted~~segment, that accounts for ~~17% and 18%~~more than 10% of total ~~revenue for~~revenue. For the three months ended March 31, 2019 and 2018, Walmart accounted for 16% and ~~2017, respectively.~~17%, respectively, of total revenue.

The following table is a summary of the total revenue by segment:


	Three Months Ended March 31,				Three Months Ended March 31,
(Amounts in millions)	2018		2017		2019		2018
Global Funds Transfer revenue
Money transfer revenue	$	336.6	$	341.7	$	273.3	$	336.6
Bill payment revenue	20.8		25.1		15.9		20.8
Total Global Funds Transfer revenue	357.4		366.8		289.2		357.4
Financial Paper Products revenue
Money order revenue	13.4		12.5		13.9		13.4
Official check revenue	9.2		6.8		12.3		9.2
Total Financial Paper Products revenue	22.6		19.3		26.2		22.6
Total revenue	$	380.0	$	386.1	$	315.4	$	380.0

The following table is a summary of the operating income by segment and detail of the (loss) income before income taxes:

Three Months Ended March 31,
(Amounts in millions) 2018
2017⁽¹⁾
Global Funds Transfer operating income $ 1.4
$ 25.2
Financial Paper Products operating income 5.6
4.7
Total segment operating income 7.0
29.9
Other operating loss (1.3 ) (6.5 )
Total operating income 5.7
23.4
Interest expense 12.3
10.8
Other non-operating (income) expense (28.5 ) 1.3
Income before income taxes $ 21.9
$ 11.3

(1) In the fourth quarter of 2017, the Company's management determined that there was an error with respect to the allocation of certain expenses between the reporting segments in the first three quarters of 2017. The Company assessed the materiality of the misstatement both quantitatively and qualitatively and determined that the error was immaterial to all prior consolidated financial statements, taken as a whole. Accordingly, prior period amounts have been adjusted to reflect the correction of the error. This correction resulted in a decrease to Global Funds Transfer and Financial Paper Products operating income of $0.9 million and $0.1 million, respectively, and a decrease to Other operating loss of $1.0 million for the three months ended March 31, 2017. There was no impact on total operating income or other financial statement amounts reported.



	Three Months Ended March 31,
(Amounts in millions)	2019			2018
Global Funds Transfer operating income	$	1.1		$	1.4
Financial Paper Products operating income	8.2			5.6
Total segment operating income	9.3			7.0
Other operating loss	(0.7		)	(1.3		)
Total operating income	8.6			5.7
Interest expense	13.9			12.3
Other non-operating expense (income)	1.6			(28.5		)
(Loss) income before income taxes	$	(6.9	)	$	21.9

The following table sets forth assets by segment:


(Amounts in millions)	March 31, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Global Funds Transfer	$	2,235.0	$	2,333.4	$	1,389.6	$	1,287.1
Financial Paper Products	2,060.9		2,229.4		2,914.0		2,950.7
Other	213.3		209.7		61.7		58.3
Total assets	$	4,509.2	$	4,772.5	$	4,365.3	$	4,296.1

Note 15 — Revenue Recognition

In the first quarter of 2018, the Company adopted ASU 2014-09 using the cumulative effect transition method for all contracts. There was no transition impact on the Condensed Consolidated Financial Statements from the adoption of this ASU. The Company earns revenues from consideration specified in contracts with customers and recognizes revenue when it satisfies its performance obligations by transferring control over its services and products to customers. The following table is a ~~description~~summary of the ~~principal activities, separated by reporting segments, from which the Company generates revenues. For more information about the~~ Company's ~~reporting segments, see Note 14 —~~ ~~Segment Information.~~

~~Global Funds Transfer Segment~~

~~Money transfer fee~~ revenue — The Company earns money transfer revenues primarily from consumer transaction fees and the management of currency exchange spreads on money transfer transactions involving different “send” and “receive” currencies. Fees are collected from consumers at the time of transaction. In a cash-to-cash money transfer transaction, both the agent initiating the transaction and the receiving agent earn a commission that is generally a fixed fee or is based on a percentage of the fee charged to the consumer. When a money transfer transaction is initiated at a MoneyGram-owned store, full-service kiosk or via our online platform, typically only the receiving agent earns a commission. Each money transfer is considered a separate agreement between the Company and the consumer and includes only one performance obligation that is satisfied at a point in time, which is when the funds are made available for pick up. Money transfer funds are typically available for pick up within 24 hours of being sent. The consumer is in control of the service, as the consumer picks the "send" and "receive" locations as well as the transaction currency. Normally, the Company provides fee refunds to consumers only if the transaction is canceled within 30 minutes of initiating the transfer and the transfer amount has not been picked up by the receiver. As such, fee refunds are accounted for within the same period as the origination of the transaction and no liability for the amount of expected returns is recorded on the Condensed Consolidated Balance Sheets. The Company recognizes revenues on a gross basis for money transfer services as the Company is considered the principal in these transactions.

~~Bill payment services fee revenue —~~ Bill payment revenues are earned primarily from fees charged to consumers for each transaction completed. Our primary bill payment service offering is our ExpressPayment service, which we offer at substantially all of our money transfer agent and Company-operated locations in the U.S., Canada and Puerto Rico, at certain agent locations in select Caribbean and European countries and through our Digital solutions. Through our bill payment services, consumers can complete urgent bill payments, pay routine bills, or load and reload prepaid debit cards with cash at an agent location, Company-operated locations or through moneygram.com with a credit or debit card. We offer consumers same-day and two or three day payment service options; the service option is dependent upon our agreement with the biller. Each bill payment service is considered a separate agreement with the consumer and includes only one performance obligation that is satisfied at a point in time, when the funds are transferred to the designated institution, which is generally within the same day. The consumer is in control of the service, as the consumer picks out the "send" location and time. MoneyGram does not offer refunds for bill payment services and revenue is recognized on a gross basis as the Company is considered the principal in these transactions.

~~Other revenue —~~ Includes breakage income, fees from royalties, early contract terminations, insufficient funds and other one-time charges. The Company recognizes breakage revenue for unclaimed money transfers when the likelihood of consumer pick-up becomes remote based on historical experience and there is no requirement for remitting balances to government agencies.

~~Financial Paper Products Segment~~

~~Money order fee revenue —~~ Consumers use our money orders to make payments in lieu of cash or personal checks. We generate revenue from money orders by charging per item and other fees, as well as from the investment of funds underlying outstanding money orders. The Company contracts with agents and/or financial institutions for this product and associated services. We sell money orders under the MoneyGram brand and on a private label or on a co-branded basis with certain agents and financial institutions in the U.S. The Company recognizes revenue when an agent sells a money order because the funds are immediately made available to the consumer. As such, each sale of a money order and related service is considered a separate performance obligation that is satisfied at a point in time.

~~Official check outsourcing services fee revenue —~~ Official checks are used by consumers where a payee requires a check drawn on a bank. Financial institutions also use official checks to pay their own obligations. Similar to money orders, the Company generates revenue from official check outsourcing services through U.S. banks and credit unions by charging per item and other fees, as well as from the investment of funds underlying outstanding official checks. The Company’s consumer for official checks is considered the financial institution. The official checks services and products are considered a bundle of services and products that are provided to the financial institution on an ongoing basis. As such, revenue from these services is recognized on a monthly basis. Revenue corresponds directly with the value of MoneyGram's services and/or products completed to date and for which the Company has a right to invoice. Monthly revenue may vary based on the number of official checks issued and other ancillary services provided to the financial institution.

~~Other revenue~~— Includes fees from money order service revenue, proof adjustments, early contract terminations, money order photo and replacement fees and other one-time charges. The Company recognizes service revenue from money orders that have not been redeemed within a one year period from issuance. Proof adjustment fees are generally unresolved and not recouped as they pertain to immaterial bank variances. The Company recognizes as revenue the net proof adjustments amount on a monthly basis.

~~Investment Revenue~~

Investment revenue, which is not within the scope of Topic 606 per ASC 606-10-15-2, is earned from the investment of funds generated from the sale of payment instruments, primarily official checks and money orders, and consists of interest income,

dividend income, income received on our cost recovery securities and amortization of premiums and discounts. Investment revenue varies depending on the level of investment balances and the yield on our investments.

~~In the following table, revenue is~~streams disaggregated by services and products for each segment and timing of revenue recognition for such services and products excluding other revenue:


	Three Months Ended March 31,				Three Months Ended March 31,
(Amounts in millions)	2018		2017		2019		2018
Global Funds Transfer revenue
Money transfer fee revenue	$	330.6	$	338.5	$	269.9	$	330.6
Bill payment services fee revenue	20.8		25.1		15.9		20.8
Other revenue	6.0		3.2		3.4		6.0
Total Global Funds Transfer fee and other revenue	357.4		366.8		289.2		357.4
Financial Paper Products revenue
Money order fee revenue	3.1		3.5		2.3		3.1
Official check outsourcing services fee revenue	2.2		2.4		2.1		2.2
Other revenue	7.4		7.6		7.4		7.4
Total Financial Paper Products fee and other revenue	12.7		13.5		11.8		12.7
Investment revenue	9.9		5.8		14.4		9.9
Total revenue	$	380.0	$	386.1	$	315.4	$	380.0

Timing of revenue recognition:
Services and products transferred at a point in time	$	354.5	$	367.1	$	288.1	$	354.5
Products transferred over time	2.2		2.4		2.1		2.2
Total revenue from services and products	356.7		369.5		290.2		356.7
Investment revenue	9.9		5.8		14.4		9.9
Other revenue	13.4		10.8		10.8		13.4
Total revenue	$	380.0	$	386.1	$	315.4	$	380.0

Due to the short-term nature of the Company's services and products, the amount of contract assets and liabilities on the Condensed Consolidated Balance Sheets ~~for the three months ended~~as of March 31, ~~2018~~2019 and ~~2017~~December 31, 2018, is negligible. Assets for unsettled money transfers, money orders and consumer payments are included in "Settlement assets" with a corresponding liability recorded in "Payment service obligations" on the Condensed Consolidated Balance Sheets. For more information on these assets and liabilities see Note 3 — Settlement Assets and Payment Service Obligations.

Note 16 — Leases

The Company's leases consist primarily of operating leases for buildings, equipment and vehicles. Upon adoption of ASC 842 on January 1, 2019, the Company recognized an operating lease liability of $57.1 million and a Right-of-Use ("ROU") operating asset of $53.9 million. The lease liability is calculated based on the remaining minimum rental payments under current leasing standards for existing operating leases and the ROU asset is calculated the same as the lease liability, but it includes $3.2 million of accrued rent as of December 31, 2018. The ROU asset is presented on the Condensed Consolidated Balance Sheets as part of "Other assets" and the lease liability is included in "Accounts payable and other liabilities." The amortization of the ROU asset and changes in the lease liability are presented as part of "Change in other assets" and "Change in accounts payable and other liabilities," respectively, on the Condensed Consolidated Statements of Cash Flows. As of March 31, 2019, the Company had an ROU asset of $49.6 million and a lease liability of $53.0 million on the Condensed Consolidated Balance Sheets. We elected the package of practical expedients, which permitted us to not reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs. We did not elect the use of the hindsight practical expedient or the practical expedient pertaining to land easements, as the latter was not applicable to us. We also elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we did not recognize ROU assets or lease liabilities. The Company elected the practical expedient to not separate lease and non-lease components for our real estate and vehicle leases.

The Company's various noncancellable operating leases for buildings, equipment and vehicles terminate through 2028. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. As of March 31, 2019, the leases had a weighted-average remaining lease term of 4.6 years. As most of our leases do not provide an implicit rate, the Company utilized the portfolio approach in determining the discount rate. The portfolios were grouped based on lease type and geographical location. As of March 31, 2019, the weighted-average discount rate was 4.5%.

The Company recognizes rent expense for operating leases under the straight-line method over the term of the lease where differences between the monthly cash payments and the lease expense are offset to the ROU asset on the Condensed Consolidated Balance Sheet. Lease expense for buildings and equipment is included in the “Occupancy, equipment and supplies” line on the Condensed Consolidated Statements of Operations, while lease expense for our vehicles is included in the "Compensation and benefits" line. Some of the Company's building leases include rent expense that is associated with an index or a rate. Subsequent changes from the original index or rate would be treated as variable lease expense. Furthermore, future changes to the non-lease components of our real estate and vehicle leases will be treated as variable lease expenses. Tenant improvements are capitalized as leasehold improvements and depreciated over the shorter of the remaining term of the lease or 10 years.

The following table is a summary of the Company’s lease expense for its operating leases:



	Three Months Ended March 31,
(Amounts in millions)	2019
Buildings, equipment and vehicle leases	$	4.1
Short-term lease cost	0.4
Total lease cost	$	4.5

Supplemental cash flow information related to leases was as follows:



	Three Months Ended March 31,
(Amounts in millions)	2019
Cash paid for amounts included in the measurement of operating lease liabilities	$	5.2

Maturities of operating lease liabilities as of March 31, 2019 were as follows:



(Amounts in millions)	Future Minimum Lease Payments
April 1, 2019 to December 31, 2019	$	11.4
2020	14.3
2021	12.0
2022	9.1
2023	5.8
Thereafter	5.3
Total	57.9
Less: present value discount	(4.9		)
Lease liability - operating	$	53.0

Future minimum lease payments for our noncancellable leases as of December 31, 2018, prior to the adoption of the new lease standard discussed in Note 1 — Description of the Business and Basis of Presentation, were as follows:



(Amounts in millions)	Future Minimum Lease Payments
2019	$	17.5
2020	14.7
2021	12.3
2022	9.2
2023	5.8
Thereafter	5.2
Total	$	64.7

Note 17 — Condensed Consolidating Financial Statements

In the event the Company offers debt securities pursuant to aan effective registration statement ~~under the Securities Act of 1933, such~~on Form S-3, these debt securities may be guaranteed by certain of its subsidiaries. Accordingly, the Company is providing condensed consolidating financial information in accordance with Securities and Exchange Commission Regulation S-X Rule 3-10, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. If the Company issues debt securities, the following 100 percent directly or indirectly owned subsidiaries could fully and unconditionally guarantee the debt securities on a joint and several basis: MoneyGram Payment Systems Worldwide, Inc.;, MoneyGram Payment Systems, Inc.; and MoneyGram ~~of New York LLC~~International Payment Systems, Inc. (collectively, the “Guarantors”).

The following information represents Condensed Consolidating Balance Sheets as of March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, along with Condensed Consolidating Statements of Operations and ~~Condensed Consolidating~~ Statements of Cash Flows for the three months ended March 31, ~~2018~~2019 and ~~2017.~~2018. The condensed consolidating financial information presents financial information in separate columns for MoneyGram International, Inc. on a Parent-only basis carrying its investment in subsidiaries under the equity method; Guarantors on a combined basis, carrying investments in subsidiaries that are not expected to guarantee the debt (collectively, the “Non-Guarantors”) under the equity method; Non-Guarantors on a combined basis; and eliminating entries. The eliminating entries primarily reflect intercompany transactions, such as accounts receivable and payable, fee revenue and commissions expense and the elimination of equity investments and income in subsidiaries.

MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF MARCH 31, ~~2018~~2019


(Amounts in millions)	Parent			Subsidiary Guarantors		Non- Guarantors		Eliminations			Consolidated			Parent			Subsidiary Guarantors		Non- Guarantors		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	1.7		$	—	$	198.0	$	—		$	199.7		$	—		$	—	$	129.9	$	—		$	129.9
Settlement assets	—			3,262.9		220.4		—			3,483.3			—			3,349.8		66.5		—			3,416.3
Property and equipment, net	—			191.7		14.6		—			206.3			—			178.4		9.2		—			187.6
Goodwill	—			315.4		126.8		—			442.2			—			440.3		1.9		—			442.2
Other assets	54.8			152.0		160.4		(189.5		)	177.7			66.3			334.8		67.6		(279.4		)	189.3
Equity investments in subsidiaries	821.8			225.9		—		(1,047.7		)	—			762.1			186.4		—		(948.5		)	—
Intercompany receivables	—			592.1		120.3		(712.4		)	—			—			63.4		278.9		(342.3		)	—
Total assets	$	878.3		$	4,740.0	$	840.5	$	(1,949.6	)	$	4,509.2		$	828.4		$	4,553.1	$	554.0	$	(1,570.2	)	$	4,365.3
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Payment service obligations	$	—		$	3,262.9	$	220.4	$	—		$	3,483.3		$	—		$	3,349.8	$	66.5	$	—		$	3,416.3
Debt, net	906.3			—		—		—			906.3			899.2			—		—		—			899.2
Pension and other postretirement benefits	—			94.3		—		—			94.3			—			71.9		—		—			71.9
Accounts payable and other liabilities	2.4			406.2		44.6		(195.2		)	258.0			1.9			280.4		257.3		(279.4		)	260.2
Intercompany liabilities	208.0			154.8		349.6		(712.4		)	—			209.6			88.9		43.8		(342.3		)	—
Total liabilities	1,116.7			3,918.2		614.6		(907.6		)	4,741.9			1,110.7			3,791.0		367.6		(621.7		)	4,647.6
Total stockholders’ (deficit) equity	(238.4		)	821.8		225.9		(1,042.0		)	(232.7		)	(282.3		)	762.1		186.4		(948.5		)	(282.3		)
Total liabilities and stockholders’ (deficit) equity	$	878.3		$	4,740.0	$	840.5	$	(1,949.6	)	$	4,509.2		$	828.4		$	4,553.1	$	554.0	$	(1,570.2	)	$	4,365.3

MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2019



(Amounts in millions)	Parent			Subsidiary Guarantors			Non- Guarantors			Eliminations			Consolidated
REVENUE
Fee and other revenue	$	—		$	236.2		$	87.2		$	(22.4	)	$	301.0
Investment revenue	—			14.2			0.2			—			14.4
Total revenue	—			250.4			87.4			(22.4		)	315.4
EXPENSES
Fee and other commissions expense	—			98.6			51.0			—			149.6
Investment commissions expense	—			6.3			—			—			6.3
Direct transaction expense	—			5.0			—			—			5.0
Total commissions and direct transaction expenses	—			109.9			51.0			—			160.9
Compensation and benefits	—			38.2			21.2			—			59.4
Transaction and operations support	0.5			64.6			9.4			(22.4		)	52.1
Occupancy, equipment and supplies	—			12.1			3.3			—			15.4
Depreciation and amortization	—			24.4			1.7			(7.1		)	19.0
Total operating expenses	0.5			249.2			86.6			(29.5		)	306.8
OPERATING (LOSS) INCOME	(0.5		)	1.2			0.8			7.1			8.6
Other expenses
Interest expense	13.9			—			—			—			13.9
Other non-operating expense	0.1			1.5			—			—			1.6
Total other expenses	14.0			1.5			—			—			15.5
(Loss) income before income taxes	(14.5		)	(0.3		)	0.8			7.1			(6.9		)
Income tax (benefit) expense	(3.3		)	9.3			0.6			—			6.6
(Loss) income after income taxes	(11.2		)	(9.6		)	0.2			7.1			(13.5		)
Equity (loss) income in subsidiaries	(9.4		)	0.2			—			9.2			—
NET (LOSS) INCOME	(20.6		)	(9.4		)	0.2			16.3			(13.5		)
OTHER COMPREHENSIVE INCOME (LOSS)	(2.1		)	(2.1		)	(3.1		)	5.2			(2.1		)
COMPREHENSIVE INCOME (LOSS)	$	(22.7	)	$	(11.5	)	$	(2.9	)	$	21.5		$	(15.6	)

MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2019



(Amounts in millions)	Parent			Subsidiary Guarantors			Non- Guarantors			Eliminations			Consolidated
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES	$	(13.0	)	$	(40.4	)	$	53.7		$	—		$	0.3
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	—			(11.9		)	(0.8		)	—			(12.7		)
Intercompany investments	—			68.5			—			(68.5		)	—
Dividend from subsidiary guarantors	15.5			—			—			(15.5		)	—
Net cash provided by (used in) investing activities	15.5			56.6			(0.8		)	(84.0		)	(12.7		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt	(2.5		)	—			—			—			(2.5		)
Dividend to parent	—			(15.5		)	—			15.5			—
Intercompany financings	—			—			(68.5		)	68.5			—
Payments to tax authorities for stock-based compensation	—			(0.7		)	—			—			(0.7		)
Net cash used in financing activities	(2.5		)	(16.2		)	(68.5		)	84.0			(3.2		)
NET CHANGE IN CASH AND CASH EQUIVALENTS	—			—			(15.6		)	—			(15.6		)
CASH AND CASH EQUIVALENTS—Beginning of period	—			—			145.5			—			145.5
CASH AND CASH EQUIVALENTS—End of period	$	—		$	—		$	129.9		$	—		$	129.9

MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2018



(Amounts in millions)	Parent			Subsidiary Guarantors		Non- Guarantors		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	—		$	—	$	145.5	$	—		$	145.5
Settlement assets	—			3,313.1		60.7		—			3,373.8
Property and equipment, net	—			182.7		11.2		—			193.9
Goodwill	—			440.3		1.9		—			442.2
Other assets	63.1			257.6		33.6		(213.6		)	140.7
Equity investments in subsidiaries	779.8			180.9		—		(960.7		)	—
Intercompany receivables	—			188.5		174.5		(363.0		)	—
Total assets	$	842.9		$	4,563.1	$	427.4	$	(1,537.3	)	$	4,296.1
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Payment service obligations	$	—		$	3,313.1	$	60.7	$	—		$	3,373.8
Debt, net	901.0			—		—		—			901.0
Pension and other postretirement benefits	—			76.6		—		—			76.6
Accounts payable and other liabilities	1.7			247.5		177.9		(213.6		)	213.5
Intercompany liabilities	209.0			146.1		7.9		(363.0		)	—
Total liabilities	1,111.7			3,783.3		246.5		(576.6		)	4,564.9
Total stockholders’ (deficit) equity	(268.8		)	779.8		180.9		(960.7		)	(268.8		)
Total liabilities and stockholders’ (deficit) equity	$	842.9		$	4,563.1	$	427.4	$	(1,537.3	)	$	4,296.1

MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2018


(Amounts in millions)	Parent			Subsidiary Guarantors			Non- Guarantors			Eliminations			Consolidated			Parent			Subsidiary Guarantors			Non- Guarantors			Eliminations			Consolidated
REVENUE
Fee and other revenue	$	—		$	224.2		$	217.7		$	(71.8	)	$	370.1		$	—		$	224.2		$	217.7		$	(71.8	)	$	370.1
Investment revenue	—			9.0			0.9			—			9.9			—			9.0			0.9			—			9.9
Total revenue	—			233.2			218.6			(71.8		)	380.0			—			233.2			218.6			(71.8		)	380.0
EXPENSES
Fee and other commissions expense	—			54.0			122.5			—			176.5			—			54.0			122.5			—			176.5
Investment commissions expense	—			3.5			—			—			3.5			—			3.5			—			—			3.5
Direct transaction expense	—			5.5			—			—			5.5			—			5.5			—			—			5.5
Total commissions and direct transaction expenses	—			63.0			122.5			—			185.5			—			63.0			122.5			—			185.5
Compensation and benefits	—			50.9			28.4			—			79.3			—			50.9			28.4			—			79.3
Transaction and operations support	0.4			93.6			52.6			(71.8		)	74.8			0.4			93.6			52.6			(71.8		)	74.8
Occupancy, equipment and supplies	—			6.6			10.0			—			16.6			—			6.6			10.0			—			16.6
Depreciation and amortization	—			15.9			9.6			(7.4		)	18.1			—			15.9			9.6			(7.4		)	18.1
Total operating expenses	0.4			230.0			223.1			(79.2		)	374.3			0.4			230.0			223.1			(79.2		)	374.3
OPERATING (LOSS) INCOME	(0.4		)	3.2			(4.5		)	7.4			5.7			(0.4		)	3.2			(4.5		)	7.4			5.7
Other expenses (income)
Interest expense	12.3			—			—			—			12.3			12.3			—			—			—			12.3
Other non-operating (income)	—			(28.5		)	—			—			(28.5		)
Other non-operating income																—			(28.5		)	—			—			(28.5		)
Total other expenses (income)	12.3			(28.5		)	—			—			(16.2		)	12.3			(28.5		)	—			—			(16.2		)
(Loss) income before income taxes	(12.7		)	31.7			(4.5		)	7.4			21.9			(12.7		)	31.7			(4.5		)	7.4			21.9
Income tax (benefit) expense	(2.9		)	15.6			2.1			—			14.8			(2.9		)	15.6			2.1			—			14.8
(Loss) income after income taxes	(9.8		)	16.1			(6.6		)	7.4			7.1			(9.8		)	16.1			(6.6		)	7.4			7.1
Equity income in subsidiaries	9.5			(6.6		)	—			(2.9		)	—
Equity income (loss) in subsidiaries																9.5			(6.6		)	—			(2.9		)	—
NET (LOSS) INCOME	(0.3		)	9.5			(6.6		)	4.5			7.1			(0.3		)	9.5			(6.6		)	4.5			7.1
TOTAL OTHER COMPREHENSIVE INCOME	3.6			3.4			2.9			(6.5		)	3.4
OTHER COMPREHENSIVE INCOME																3.6			3.4			2.9			(6.5		)	3.4
COMPREHENSIVE INCOME (LOSS)	$	3.3		$	12.9		$	(3.7	)	$	(2.0	)	$	10.5		$	3.3		$	12.9		$	(3.7	)	$	(2.0	)	$	10.5

MONEYGRAM INTERNATIONAL, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2018


(Amounts in millions)	Parent			Subsidiary Guarantors			Non- Guarantors			Eliminations			Consolidated			Parent			Subsidiary Guarantors			Non- Guarantors			Eliminations			Consolidated
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES	$	(11.6	)	$	(88.4	)	$	130.5		$	—		$	30.5		$	(11.6	)	$	(88.4	)	$	130.5		$	—		$	30.5
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	—			(10.9		)	(1.4		)	—			(12.3		)	—			(10.9		)	(1.4		)	—			(12.3		)
Intercompany investments	—			109.8			—			(109.8		)	—			—			109.8			—			(109.8		)	—
Dividend from subsidiary guarantors	14.0			—			—			(14.0		)	—			14.0			—			—			(14.0		)	—
Net cash provided by (used in) investing activities	14.0			98.9			(1.4		)	(123.8		)	(12.3		)	14.0			98.9			(1.4		)	(123.8		)	(12.3		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt	(2.4		)	—			—			—			(2.4		)	(2.4		)	—			—			—			(2.4		)
Dividend to parent	—			(14.0		)	—			14.0			—			—			(14.0		)	—			14.0			—
Intercompany financings	—			—			(109.8		)	109.8			—			—			—			(109.8		)	109.8			—
Payments to tax authorities for stock-based compensation	—			(6.1		)	—			—			(6.1		)	—			(6.1		)	—			—			(6.1		)
Net cash used in financing activities	(2.4		)	(20.1		)	(109.8		)	123.8			(8.5		)	(2.4		)	(20.1		)	(109.8		)	123.8			(8.5		)
NET CHANGE IN CASH AND CASH EQUIVALENTS	—			(9.6		)	19.3			—			9.7			—			(9.6		)	19.3			—			9.7
CASH AND CASH EQUIVALENTS—Beginning of year	1.7			9.6			178.7			—			190.0
CASH AND CASH EQUIVALENTS—End of year	$	1.7		$	—		$	198.0		$	—		$	199.7
CASH AND CASH EQUIVALENTS—Beginning of period																1.7			9.6			178.7			—			190.0
CASH AND CASH EQUIVALENTS—End of period																$	1.7		$	—		$	198.0		$	—		$	199.7

~~MONEYGRAM INTERNATIONAL, INC.~~

~~CONDENSED CONSOLIDATING BALANCE SHEET~~

~~AS OF DECEMBER 31, 2017~~

(Amounts in millions) Parent
Subsidiary
Guarantors

Non-
Guarantors
Eliminations Consolidated
ASSETS
Cash and cash equivalents $ 1.7
$ 9.6
$ 178.7
$ —
$ 190.0
Settlement assets —
3,491.4
265.5
—
3,756.9
Property and equipment, net —
199.1
15.8
—
214.9
Goodwill —
315.4
126.8
—
442.2
Other assets 49.5
110.3
200.9
(192.2 ) 168.5
Equity investments in subsidiaries 813.8
132.4
—
(946.2 ) —
Intercompany receivables —
546.9
—
(546.9 ) —
Total assets $ 865.0
$ 4,805.1
$ 787.7
$ (1,685.3 ) $ 4,772.5
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Payment service obligations $ —
$ 3,491.4
$ 265.5
$ —
$ 3,756.9
Debt, net 908.1
—
—
—
908.1
Pension and other postretirement benefits —
97.3
—
—
97.3
Accounts payable and other liabilities —
402.6
50.9
(198.0 ) 255.5
Intercompany liabilities 208.0
—
338.9
(546.9 ) —
Total liabilities 1,116.1
3,991.3
655.3
(744.9 ) 5,017.8
Total stockholders’ (deficit) equity (251.1 ) 813.8
132.4
(940.4 ) (245.3 )
Total liabilities and stockholders’ (deficit) equity $ 865.0
$ 4,805.1
$ 787.7
$ (1,685.3 ) $ 4,772.5

~~MONEYGRAM INTERNATIONAL, INC.~~

~~CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)~~

~~FOR THE THREE MONTHS ENDED MARCH 31, 2017~~

(Amounts in millions) Parent
Subsidiary
Guarantors

Non-
Guarantors
Eliminations Consolidated
REVENUE
Fee and other revenue $ —
$ 365.4
$ 94.0
$ (79.1 ) $ 380.3
Investment revenue —
5.8
—
—
5.8
Total revenue —
371.2
94.0
(79.1 ) 386.1
EXPENSES

Fee and other commissions expense —
180.6
48.9
(43.5 ) 186.0
Investment commissions expense —
1.3
—
—
1.3
Direct transaction expense —
5.1
—
—
5.1
Total commissions and direct transaction expenses —
187.0
48.9
(43.5 ) 192.4
Compensation and benefits —
46.7
23.5
—
70.2
Transaction and operations support 0.4
90.1
11.6
(35.6 ) 66.5
Occupancy, equipment and supplies —
11.8
3.5
—
15.3
Depreciation and amortization —
15.5
2.8
—
18.3
Total operating expenses 0.4
351.1
90.3
(79.1 ) 362.7
OPERATING (LOSS) INCOME (0.4 ) 20.1
3.7
—
23.4
Other expenses
Interest expense 10.8
—
—
—
10.8
Other non-operating expense —
1.3
—
—
1.3
Total other expenses 10.8
1.3
—
—
12.1
(Loss) income before income taxes (11.2 ) 18.8
3.7
—
11.3
Income tax (benefit) expense (4.1 ) 6.4
0.2
—
2.5
(Loss) income after income taxes (7.1 ) 12.4
3.5
—
8.8
Equity income in subsidiaries 15.9
3.5
—
(19.4 ) —
NET INCOME 8.8
15.9
3.5
(19.4 ) 8.8
TOTAL OTHER COMPREHENSIVE LOSS 3.0
3.0
2.1
(5.1 ) 3.0
COMPREHENSIVE INCOME $ 11.8
$ 18.9
$ 5.6
$ (24.5 ) $ 11.8

~~MONEYGRAM INTERNATIONAL, INC.~~

~~CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS~~

~~FOR THE THREE MONTHS ENDED MARCH 31, 2017~~

(Amounts in millions) Parent
Subsidiary
Guarantors

Non-
Guarantors
Eliminations Consolidated
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES $ (7.5 ) $ 0.4
$ (2.5 ) $ —
$ (9.6 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment —
(17.5 ) (1.1 ) —
(18.6 )
Intercompany investments —
8.8
(6.2 ) (2.6 ) —
Dividend from subsidiary guarantors 12.6
—
—
(12.6 ) —
Capital contributions to non-guarantors —
(0.4 ) —
0.4
—
Net cash provided by (used in) investing activities 12.6
(9.1 ) (7.3 ) (14.8 ) (18.6 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on debt (2.5 ) —
—
—
(2.5 )
Proceeds from exercise of stock options 0.9
—
—
—
0.9
Dividend to parent —
(12.6 ) —
12.6
—
Intercompany financings (2.6 ) —
—
2.6
—
Capital contributions from subsidiary guarantors —
—
0.4
(0.4 ) —
Net cash (used in) provided by financing activities (4.2 ) (12.6 ) 0.4
14.8
(1.6 )
NET CHANGE IN CASH AND CASH EQUIVALENTS 0.9
(21.3 ) (9.4 ) —
(29.8 )
CASH AND CASH EQUIVALENTS—Beginning of year —
128.8
28.4
—
157.2
CASH AND CASH EQUIVALENTS—End of year $ 0.9
$ 107.5
$ 19.0
$ —
$ 127.4

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The purpose of this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is to provide an understanding of MoneyGram International, Inc.'s (“MoneyGram,” the “Company,” “we,” “us” and “our”) financial condition, results of operations and cash flows by focusing on changes in certain key measures. This MD&A is provided as a supplement to, and should be read in conjunction with, our Condensed Consolidated Financial Statements and related Notes included in this Quarterly Report on Form 10-Q and the Consolidated Financial Statements and Notes included in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. This discussion contains forward-looking statements that involve risks and uncertainties. MoneyGram’s actual results could differ materially from those anticipated due to various factors discussed below under “Cautionary Statements Regarding Forward-Looking Statements” and elsewhere in this Quarterly Report on Form 10-Q.

The comparisons presented in this MD&A refer to the same period in the prior year, unless otherwise noted. This MD&A is organized in the following sections:

Overview

Results of Operations

Liquidity and Capital Resources

Critical Accounting Policies and Estimates

Cautionary Statements Regarding Forward-Looking Statements

~~OVERVIEW~~Overview

MoneyGram is a leading global ~~provider of~~financial technology company that provides innovative services around the world. Our money transfer services connect family and ~~is recognized worldwide as a financial connection~~friends through an omnichannel network designed to ~~friends~~deliver unparalleled choice and ~~family.~~convenience. Whether ~~online,~~ through aour mobile ~~device, at~~application, moneygram.com, integration with mobile wallets, a kiosk, or any one of the thousands of agent locations in ~~a local store,~~more than 200 countries and territories, we connect consumers in ~~any way that is~~ways designed to be convenient for them. We also provide bill payment services, issue money orders and process official checks in the U.S. and in select countries and territories. We primarily offer our services and products through third-party agents ~~including~~and directly to consumers through our Digital solutions. Third-party agents include retail chains, independent retailers, post offices and financial institutions. ~~MoneyGram also has limited Company-operated retail locations. Additionally, we offer~~ Digital solutions ~~which~~ include moneygram.com, mobile solutions, account deposit and kiosk-based services. MoneyGram also has a limited number of Company-operated retail locations.

We manage our revenue and related commissions expense through two reporting segments: Global Funds Transfer and Financial Paper Products. The Global Funds Transfer segment provides global money transfer services in approximately 350,000 agent ~~locations in more than 200 countries and territories.~~locations. Our global money transfer services are our primary revenue driver, accounting for ~~89%~~87% of total revenue for the three months ended March 31, ~~2018.~~2019. The Global Funds Transfer segment also provides bill payment services to consumers through substantially all of our money transfer agent ~~and Company-operated~~ locations, ~~in the U.S., Canada and Puerto Rico,~~ at certain agent locations in select Caribbean and European countries and through our Digital solutions. The Financial Paper Products segment provides money order services to consumers through retail locations and financial institutions located in the U.S. and Puerto Rico, and provides official check services to financial institutions in the U.S. Corporate expenses that are not related to our segments' performance are excluded from operating income for Global Funds Transfer and Financial Paper Products segments.

Business Environment

~~During the three months ended March 31, 2018, worldwide~~Worldwide political and economic conditions remained highly ~~variable,~~dynamic, as evidenced by both economic growth and ~~challenges~~political unrest in key markets, ~~low currency reserves,~~ currency controls in certain countries and a volatile immigration environment. ~~Also, there is continued political unrest and economic weakness in parts of the Middle East and Africa that contributed to the volatility.~~ Given the global ~~reach and~~ extent of the current political and economic conditions, ~~the growth of~~ money transfer volumes and the average face value of money transfers ~~continued~~continue to be highly variable by corridor and ~~country.~~country, but the overall remittance market continues to grow as indicated by the World Bank.

~~We generally compete for~~The competitive environment continues to change as both established players and new, digital-only entrants work to innovate and deliver a superior customer experience to win market share. Our competitors include a small number of large money transfer ~~consumers on the basis of trust, convenience, price, technology~~ and ~~brand recognition. The market for money transfer services remains very competitive, consisting of a few large competitors~~bill payment providers, financial institutions, banks and a large number of small niche ~~competitors.~~ money transfer service providers that serve select regions. We generally compete on the basis of the customer experience, the ability to conduct both digital and cash transactions, price, the quantity and quality of our agent network, commission payments and marketing efforts.

In addition to the changes in the competitive environment, global compliance requirements are becoming increasingly more complex, which has been affecting our top line growth. We continue to enhance our compliance tools to comply with various government and other regulatory programs around the ~~globe.~~

We are making progress on our journey toward becoming a digitally-enabled, customer-centric organization despite competition from new technologies that allow consumers to send and receive money in a variety of ways. We believe that our continued investment in innovative products and services, particularly Digital solutions, such as the global expansion of moneygram.com, mobile solutions and account deposit services, positions the Company to accelerate our digital transformation and diversify our product and service offerings to meet consumers' needs. Digital solutions revenue for the three months ended March 31, 2018 and 2017 was $53.4 million and $51.2 million, respectively, or 16% and 15%, respectively, of money transfer revenue. Moneygram.com revenue grew by $4.2 million, or 21%, over the first quarter of 2017.

In the first quarter of 2018, the Company initiated a restructuring and reorganization program (the "Digital Transformation Program") to reduce operating expenses, focus on improving profitability, and better align the organization to deliver new digital touch-points for customers and agents. In connection with the Digital Transformation Program, which is expected to be completed by the end of 2018, the Company expects between 250 and 350 employees to be affected, possibly through transfers or terminations, representing approximately 9% to 12% of the Company’s global workforce. The Company expects to incur restructuring and reorganization charges totaling approximately $15.0 million, consisting primarily of severance and outplacement benefits (approximately $11.0 million), real estate lease termination and other associated costs (approximately $3.0 million), and reorganization costs (approximately $1.0 million). A substantial portion of such charges was incurred in the first quarter of 2018, and the Company expects approximately $13.0 million of the charges to be paid in cash over the course of 2018 and into the first quarter of 2019. The actual timing and costs of the plan may differ from the Company’s current expectations and estimates.

~~Anticipated Trends~~

This discussion of trends expected to impact our business in the remainder of 2018 is based on information presently available and reflects certain assumptions, including assumptions regarding future economic conditions. Differences in actual economic conditions compared with our assumptions could have a material impact on our results. See “~~Cautionary Statements Regarding Forward-Looking Statements” included further below and “Risk Factors~~” included in Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2017 for additional factors that could cause results to differ materially from those contemplated by the following forward-looking statements.

We continue to see increased opportunities to capitalize on growth and expansion both geographically and through product and service offerings. However, economic and political instability, which can result in currency volatility, liquidity pressure on central banks and pressure on labor markets in certain countries, may continue to impact our business in 2018. Additionally, pricing pressure continues to negatively impact our growth in the U.S. to U.S. channel, along with economic issues in the Middle East and Africa, which have restricted our ability to transact in certain markets.

In the first quarter of 2018, the Company and Walmart Inc. (“Walmart”), our largest agent, announced the launch of Walmart2World, Powered by MoneyGram, a new money transfer service that allows customers to send money from Walmart in the U.S. to any MoneyGram location in more than 200 countries. The Company expects the Walmart2World products to have a negative impact on our top-line growth due to lower revenue per transaction. We also renewed our long-term agreement to offer all MoneyGram products and services at Walmart for two more years.

~~We continue to see a trend among state, federal and international regulators toward enhanced scrutiny of anti-money laundering compliance programs,~~world, as well as ~~consumer~~address corridor specific risks associated with fraud prevention and education. Compliance with laws and regulations is a highly complex and integral part of our day-to-day operations; thus we have continued to increase our compliance personnel headcount and make investments in our compliance-related technology and infrastructure. Additionally, the Company continues to implement various consumer protection initiatives and enhancements to improve the overall customer experience.or money laundering. In ~~the first quarter of~~ 2018, the Company launched new compliance measures ~~that go beyond what is currently required by applicable laws,~~ including new global customer verification standards for all money transfer services, limits on transaction frequency and limits on the total amount of money an individual can send within a certain period of time. ~~As a pioneer~~Additionally, in ~~the implementation of these compliance and fraud prevention measures,~~2018, the Company ~~expects~~and Walmart, our largest agent, announced the launch of Walmart2World, Powered by MoneyGram, a new white-label money transfer service that allows customers to ~~see a negative impact on our top-line and Adjusted EBITDA growth in 2018.~~send money from

Walmart in the U.S. ~~income tax base certain income generated in~~to any non-U.S. territories whether or not that income has been repatriated to the U.S.), ix) a minimum taxing system related to payments deemed to erode the U.S. tax base referred to as a tax on base erosion payments, and x) a one-time tax on accumulated offshore earnings held in cash and illiquid assets (with the latter taxedMoneyGram location. This white label product was introduced at a lower ~~rate). As~~price point than our previous relationship with Walmart, which resulted in lower revenue per transaction. Both of these 2018 initiatives negatively impacted our top-line growth in the provisions under the TCJA interact with previously-existing U.S. tax law, separation of income into baskets and required expense allocations can restrict taxpayer’s ability to credit foreign taxes paid whereby causing double taxation. In addition, routine business expenses can be deemed to erode the U.S. tax base. As such, the TCJA had a material impact on our first quarter ~~2018 income tax expense.~~of 2019 as compared to the first quarter of 2018.

~~As the TCJA is broad~~We have been and ~~complex, we~~ continue to ~~examine~~invest in innovative products and services, such as moneygram.com, mobile solutions including our new application, integration with mobile wallets, account deposit services and kiosk-based services, to position the ~~impact it may have on~~Company to meet consumers' needs. Furthermore, we believe that combining our cash and digital capabilities enables us ~~and it could adversely affect our future effective tax rate, our business, financial condition, cash flows, and results of operations. Given its recent enactment, the regulations~~to differentiate against digital-only competitors who are ~~still forthcoming and other interpretive federal and state guidance is limited. As guidance is published regarding the interpretation~~

not able to serve a significant portion of the ~~TCJA~~remittance market that relies on cash.

We are making progress toward becoming a digitally-enabled, customer-centric organization to better position the Company to compete with new entrants focused solely on digital money transfer solutions. As of March 31, 2019, the Company expanded its native application to be available in 17 countries. Digital solutions revenue for the three months ended March 31, 2019 and 2018 was $44.2 million and $53.4 million, respectively, or ~~if there are legislative modifications~~16% of money transfer revenue. Moneygram.com revenue for the three months ended March 31, 2019 decreased by $3.9 million or ~~amendments,~~16% over 2018.

In the ~~changes could have a material effect~~first quarter of 2018, the Company initiated the Digital Transformation Program to modernize the business, reduce operating expenses, focus on improving efficiency and profitability and better align the ~~Company's federal~~organization to deliver new digital touch-points for customers and ~~state income tax expense~~agents. The Digital Transformation Program was substantially completed in ~~future periods.~~the first quarter of 2019. See "Note 2—~~Income Taxes~~ Restructuring and Reorganization Costs~~" section further below and Note 11 —~~ ~~Income Taxes~~ of the Notes to the Condensed Consolidated Financial Statements for ~~more information on~~additional disclosure related to the ~~impacts~~Digital Transformation Program. The actual timing and costs of the plan may differ from the ~~TCJA.~~Company’s current expectations and estimates. The Company’s operating expenses, excluding commissions and direct transaction expenses, decreased by $42.9 million for the three months ended March 31, 2019, as compared to the three months ended March 31, 2018.

The June 23, 2016 referendum by British voters to exit the European Union (referred to as Brexit), which was followed by Britain providing official notice to leave the European Union in March of 2017, introduced additional uncertainty in global markets and currency exchange rates. We are currently unable to determine the ~~long term~~long-term impact that Brexit will have on us, as any impact will depend, in part, on the outcome of tariff, trade, regulatory and other negotiations. ~~With the effective date of Brexit approaching as~~As the UK is ~~due~~expected to leave the European Union in the ~~first~~second quarter of 2019, the Company ~~anticipates making~~made a number of operational changes ~~during 2018~~ to accommodate any potential business impact.

Anticipated Trends

This discussion of trends expected to impact our business in 2019 is based on information presently available and reflects certain assumptions, including assumptions regarding future economic conditions. Differences in actual economic conditions compared with our assumptions could have a material impact on our results. See “Cautionary Statements Regarding Forward-Looking Statements” and Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q for additional factors that could cause results to differ materially from those contemplated by the following forward-looking statements.

In 2018, MoneyGram focused on positioning the company to better compete by building and expanding customer-centric digital capabilities, modernizing operations and expense structures, de-risking the business to better protect consumers and expanding our product offerings. In 2019, we believe the industry will continue to see a number of trends continue: the growth of digital transactions, the importance of customer experience and geopolitical volatility. To position the Company to respond to these trends, we are focused on our strategy to deliver a differentiated customer experience, capitalize on the strength of our leading digital and physical footprint, accelerate growth in key regions and identify new areas of growth.

We continue to see increased opportunities to capitalize on growth and expansion through product and service offerings. The Company is growing its digital footprint through the introduction of new countries for the moneygram.com platform, new partnerships and the introduction of new ways to send and receive money. Furthermore, the Company is expanding its online presence through the continued growth of its new native application and we expect to have it available in 26 countries in the first half of 2019.

We expect compliance measures, pricing pressure and competition to be a continuous challenge in 2019. Furthermore, economic issues in Africa have restricted our ability to transact in certain markets. Currency volatility, liquidity pressure on central banks and pressure on labor markets in specific countries may also continue to impact our business in 2019.

For our Financial Paper Products segment, we expect the decline in overall paper-based transactions to continue primarily due to continued migration by customers to other payment methods. Our investment revenue, which consists primarily of interest income generated through the investment of cash balances received from the sale of our Financial Paper Products, is dependent on the interest rate environment. The Company would see a positive impact on its investment revenue if interest rates continue to rise. As interest rates also affect the payments we make for interest on our credit facility, our liquidity would be negatively impacted by the continued rise in interest rates. Furthermore, we have begun the process of refinancing our long-term debt, which could also impact our interest expense in 2019.

The Company’s senior secured credit facility of $901.9 million will mature in March 2020. Over the past few months, the Company has been in discussions with its current lenders and other sources of junior capital to support the reduction and refinancing of its existing credit facility. On May 8, 2019, the Company announced that Bank of America, N.A. arranged a $245.0 million senior secured second lien term facility led by Beach Point Capital Management. The net proceeds from this new financing will be used by the Company to prepay its existing senior secured credit facility. See Note 7 — Debt of the Notes to the Condensed Consolidated Financial Statements for additional disclosure related to the Second Lien Term Facility.

Financial Measures and Key Metrics

This Quarterly Report on Form 10-Q includes financial information prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP") as well as certain non-GAAP financial measures that we use to assess our overall performance.

GAAP Measures — We utilize certain financial measures prepared in accordance with GAAP to assess the Company's overall performance. These measures include ~~but are not limited to:~~ fee and other revenue, fee and other commissions expense, fee and other revenue less commissions, operating income and operating margin. Due to our regulatory capital requirements, we deem certain assets as settlement assets. Settlement assets represent funds received or to be received from agents for unsettled money transfers, money orders and customer payments. Settlement assets include settlement cash and cash equivalents, receivables, net, interest-bearing investments and available-for-sale investments. See Note 3 ~~— Settlement Assets and Payment Service Obligations~~ ~~of the Notes to the Condensed Consolidated Financial Statements for additional disclosure.~~

Non-GAAP Measures — Generally, a non-GAAP financial measure is a numerical measure of financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. The non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, financial measures presented in accordance with GAAP. We strongly encourage investors and stockholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure. While we believe that these metrics enhance investors' understanding of our business, these metrics are not necessarily comparable with similarly named metrics of other companies. The following are non-GAAP financial measures we use to assess our overall performance:

EBITDA (Earnings before interest, taxes, depreciation and amortization, including agent signing bonus amortization)

Adjusted EBITDA (EBITDA adjusted for certain significant items) — Adjusted EBITDA does not reflect cash requirements necessary to service interest or principal payments on our indebtedness or tax payments that may result in a reduction in cash available.

Adjusted Free Cash Flow (Adjusted EBITDA less cash interest, cash taxes, cash payments for capital expenditures and cash payments for agent signing bonuses) — Adjusted Free Cash Flow does not reflect cash payments related to the adjustment of certain significant items in Adjusted EBITDA.

Constant Currency — Constant currency metrics assume that amounts denominated in foreign currencies are translated to the U.S. dollar at rates consistent with those in the prior year.

The Company utilizes specific terms related to our business throughout this document, including the following:

Corridor — With regard to a money transfer transaction, the originating "send" location and the designated "receive" location are referred to as a corridor.

Corridor mix — The relative impact of increases or decreases in money transfer transaction volume in each corridor versus the comparative prior period.

Face value — The principal amount of each completed transaction, excluding any fees related to the transaction.

Foreign currency — The impact of foreign currency exchange rate fluctuations on our financial results is typically calculated as the difference between current period activity translated using the current period’s currency exchange rates and the comparable prior-year period’s currency exchange rates. We use this method to calculate the impact of changes in foreign currency exchange rates on revenues, commissions and other operating expenses for all countries where the functional currency is not the U.S. dollar.

RESULTS OF OPERATIONS

The following table is a summary of the results of operations:


	Three Months Ended March 31,					% Change		Three Months Ended March 31,
(Amounts in millions, except percentages)	2018			2017		% Change		2019			2018			2019 vs 2018			% Change
Revenue
Fee and other revenue	$	370.1		$	380.3	(3	)%	$	301.0		$	370.1		$	(69.1	)	(19	)%
Investment revenue	9.9			5.8		71	%	14.4			9.9			4.5			45	%
Total revenue	380.0			386.1		(2	)%	315.4			380.0			(64.6		)	(17	)%
Expenses
Fee and other commissions expense	176.5			186.0		(5	)%	149.6			176.5			(26.9		)	(15	)%
Investment commissions expense	3.5			1.3		NM		6.3			3.5			2.8			80	%
Direct transaction expense	5.5			5.1		8	%	5.0			5.5			(0.5		)	(9	)%
Total commissions and direct transaction expenses	185.5			192.4		(4	)%	160.9			185.5			(24.6		)	(13	)%
Compensation and benefits	79.3			70.2		13	%	59.4			79.3			(19.9		)	(25	)%
Transaction and operations support	74.8			66.5		12	%	52.1			74.8			(22.7		)	(30	)%
Occupancy, equipment and supplies	16.6			15.3		8	%	15.4			16.6			(1.2		)	(7	)%
Depreciation and amortization	18.1			18.3		(1	)%	19.0			18.1			0.9			5	%
Total operating expenses	374.3			362.7		3	%	306.8			374.3			(67.5		)	(18	)%
Operating income	5.7			23.4		(76	)%	8.6			5.7			2.9			51	%
Other (income) expenses
Other expenses (income)
Interest expense	12.3			10.8		14	%	13.9			12.3			1.6			13	%
Other non-operating (income) expense	(28.5		)	1.3		NM
Total other (income) expenses	(16.2		)	12.1		NM
Income before income taxes	21.9			11.3		94	%
Other non-operating expense (income)								1.6			(28.5		)	30.1			NM
Total other expenses (income)								15.5			(16.2		)	31.7			NM
(Loss) income before income taxes								(6.9		)	21.9			(28.8		)	NM
Income tax expense	14.8			2.5		NM		6.6			14.8			(8.2		)	(55	)%
Net income	$	7.1		$	8.8	(19	)%
Net (loss) income								$	(13.5	)	$	7.1		$	(20.6	)	NM

^{NM = Not meaningful}

Revenues

The following table is a summary of the Company's revenues:


	Three Months Ended March 31,								Three Months Ended March 31,
(Amounts in millions, except percentages)	2018		Percent of Total Revenue		2017		Percent of Total Revenue		2019		Percent of Total Revenue		2018		Percent of Total Revenue
Global Funds Transfer fee and other revenue	$	357.4	94	%	$	366.8	95	%	$	289.2	92	%	$	357.4	94	%
Financial Paper Product fee and other revenue	12.7		3	%	13.5		3	%	11.8		4	%	12.7		3	%
Investment revenue	9.9		3	%	5.8		2	%	14.4		5	%	9.9		3	%
Total revenue	$	380.0	100	%	$	386.1	100	%	$	315.4	100	%	$	380.0	100	%

~~Revenue~~For the three months ended March 31, 2019, total revenue declined when compared to the prior reporting period, primarily due to the decline in the Global Funds Transfer fee and other revenue, which ~~was impacted by new compliance measures implemented in~~included the ~~first quarter~~impact of ~~2018,~~de-risking the business, Walmart2World service and pricing pressure due to increased ~~competition and shift in industry mix.~~competition. See the "Segments ~~results~~Results" section below for a detailed discussion of ~~segments revenues. The decline was partially offset~~revenues by ~~an increase in~~segment. For the three months ended March 31, 2019, investment revenue ~~due to~~increased primarily from higher yields ~~and investment balances.~~when compared to the prior reporting period.

Operating Expenses

The following table is a summary of the operating expenses:


	Three Months Ended March 31,								Three Months Ended March 31,
	2018				2017				2019				2018
(Amounts in millions, except percentages)	Dollars		Percent of Total Revenue		Dollars		Percent of Total Revenue		Dollars		Percent of Total Revenue		Dollars		Percent of Total Revenue
Total commissions and direct transaction expenses	$	185.5	49	%	$	192.4	50	%	$	160.9	51	%	$	185.5	49	%
Compensation and benefits	79.3		21		70.2		18		59.4		19	%	79.3		21	%
Transaction and operations support	74.8		20		66.5		17		52.1		17	%	74.8		20	%
Occupancy, equipment and supplies	16.6		4		15.3		4		15.4		5	%	16.6		4	%
Depreciation and amortization	18.1		5		18.3		5		19.0		6	%	18.1		5	%
Total operating expenses	$	374.3	99	%	$	362.7	94	%	$	306.8	97	%	$	374.3	99	%

For the three months ended March 31, ~~2018,~~2019, total operating expenses as a percentage of total revenue ~~increased~~declined when compared to the ~~same~~prior period, ~~in 2017, mainly~~primarily due to ~~an increase in transaction~~realized efficiencies from our restructuring and operations support as a result of an additional $10.0 million accrual related to the deferred prosecution agreement (the "DPA") and an increase in compensation and benefits driven by severance costs, both of which are discussed below.reorganization activities.

Total ~~commissions~~Commissions and ~~direct transaction expenses~~Direct Transaction Expenses

~~Total~~For the three months ended March 31, 2019, total commissions and direct transaction expenses as a percent of revenues ~~decreased for the three months ended March 31, 2018,~~increased when compared to the same period in ~~2017, due to continued rationalization~~2018, primarily from the decrease in money transfer fee and ~~negotiation~~other revenue, partially offset by the decrease in fee and other commissions expense and signing bonus amortization, both of ~~our agent contracts. See~~which are discussed in more detail below in the "Segments ~~results~~Results" ~~section below for a detailed discussion of total commissions and direct transaction expenses.~~section.

Compensation and Benefits

Compensation and benefits include salaries and benefits, management incentive programs, related payroll taxes and other employee related costs. The following table is a summary of the change in compensation and benefits from ~~2017~~2018 to ~~2018:~~2019:


(Amounts in millions)	Three Months Ended		Three Months Ended
For the period ended March 31, 2017	$	70.2
For the period ended March 31, 2018			$	79.3
Change resulting from:
Net salaries, related payroll taxes and cash incentive compensation			(10.3		)
Restructuring and reorganization costs	6.0		(3.0		)
Employee stock-based compensation			(2.2		)
Impact from changes in exchange rates	2.1		(1.8		)
Employee stock-based compensation	0.8
Severance and related costs			(0.6		)
Other	0.2		(2.0		)
For the period ended March 31, 2018	$	79.3
For the period ended March 31, 2019			$	59.4

For the three months ended March 31, ~~2018,~~2019, compensation and benefits ~~increased~~decreased primarily due to a reduction in headcount and the near completion of the restructuring and reorganization ~~costs primarily driven by severance, changes in exchange rates due to a weaker U.S. dollar and higher employee stock-based compensation expense.~~activities.

Transaction and Operations Support

Transaction and operations support primarily includes marketing, professional fees and other outside services, telecommunications, agent support costs, including forms related to our products, non-compensation employee costs, including training, travel and relocation costs, director stock-based compensation expense, bank charges and the impact of foreign exchange rate movements on our monetary transactions, assets and liabilities denominated in a currency other than the U.S. dollar.

The following table is a summary of the change in transaction and operations support from ~~2017~~2018 to ~~2018:~~2019:


(Amounts in millions)	Three Months Ended			Three Months Ended
For the period ended March 31, 2017	$	66.5
For the period ended March 31, 2018				$	74.8
Change resulting from:
Legal expenses	8.4			(11.1		)
Outsourcing, independent contractor and consultant costs	(2.2		)	(3.6		)
Marketing costs	(1.9		)
Provision for loss				(3.0		)
Net gains from foreign currency transactions and related forward contracts				(1.6		)
Restructuring and reorganization costs				(0.9		)
Impact from changes in exchange rates	1.4			(0.9		)
Restructuring and reorganization costs	1.2
Net realized foreign exchange gains	1.0
Travel and entertainment expenses				(0.7		)
Other	0.4			(0.9		)
For the period ended March 31, 2018	$	74.8
For the period ended March 31,2019				$	52.1

For the three months ended March 31, ~~2018,~~2019, transaction and operations support ~~increased~~decreased primarily due to ~~an increase~~a decrease in legal expenses driven by the ~~additional $10.0 million~~ accrual ~~related to~~recorded in the first quarter of 2018 for the DPA ~~which is discussed in more detail in Note 12 —~~ ~~Commitments and Contingencies~~ ~~of the Notes to the Condensed Consolidated Financial Statements. The increase was partially offset by~~matter, a decrease in outsourcing, independent contractor and consultant costs ~~driven by cost saving~~due to cost-savings initiatives and a decrease in ~~marketing costs.~~the provision for loss driven by the implementation of compliance and fraud prevention measures.

Occupancy, Equipment and Supplies

Occupancy, equipment and supplies expense include facilities rent and maintenance costs, software and equipment maintenance costs, freight and delivery costs and supplies.

For the three months ended March 31, ~~2018,~~2019, occupancy, equipment and supplies expense ~~increased as a result of an increase in maintenance costs~~decreased by $1.2 million when compared to the same period in ~~2017.~~2018, primarily due to cost-savings from the Digital Transformation Program and a decrease in software maintenance costs.

Depreciation and Amortization

Depreciation and amortization includes depreciation on computer hardware and software, agent signage, point of sale equipment, capitalized software development costs, office furniture, equipment and leasehold improvements and amortization of intangible assets.

~~Depreciation and amortization remained relatively flat for~~For the three months ended March 31, ~~2018~~2019, depreciation and amortization increased by $0.9 million when compared to the same period in ~~2017.~~2018, primarily due to higher depreciation expense for computer software and accelerated depreciation from certain restructuring and other activities.

Segments Results

Global Funds Transfer

The following table sets forth our Global Funds Transfer segment results of ~~operations:~~operations for the three months ended March 31:


(Amounts in millions)	Three Months Ended March 31,				2018 vs
(Amounts in millions)								Three Months Ended March 31,
(Amounts in millions)	2018		2017		2017			2019		2018		2019 vs 2018
(Amounts in millions)	$	336.6	$	341.7	$	(5.1	)	$	273.3	$	336.6	$	(63.3	)
Bill payment revenue	20.8		25.1		(4.3		)	15.9		20.8		(4.9		)
Total Global Funds Transfer revenue	$	357.4	$	366.8	$	(9.4	)	$	289.2	$	357.4	$	(68.2	)

Fee and other commissions and direct transaction expenses	$	181.7	$	190.7	$	(9.0	)	$	154.3	$	181.7	$	(27.4	)

Money Transfer Fee and Other Revenue

The following table details the changes in money transfer fee and other revenue from ~~2017~~2018 to ~~2018:~~2019:


(Amounts in millions)	Three Months Ended			Three Months Ended
For the period ended March 31, 2017	$	341.7
For the period ended March 31, 2018				$	336.6
Change resulting from:
Money transfer volume	(17.0		)	(37.1		)
Average face value per transaction and pricing				(15.5		)
Impact from changes in exchange rates	13.8			(8.1		)
Corridor mix	(5.4		)	0.1
Average face value per transaction and pricing	0.6
Other	2.9			(2.7		)
For the period ended March 31, 2018	$	336.6
For the period ended March 31, 2019				$	273.3

For the three months ended March 31, ~~2018,~~2019, the decrease in money transfer fee and other revenue was primarily driven by ~~a decrease~~decreases in money transfer ~~transactions~~transaction volume and average face value per transaction and pricing due to ~~newly implemented~~the implementation of compliance measures and Walmart2World service. Additionally, average face value per transaction and pricing was impacted by pricing pressure from increased competition ~~in the U.S. along with weakness in parts of Africa. The decline was partially offset by growth in Europe, Middle East~~ and ~~South America.~~

We also experienced growth in our Digital money transfers. Total Digital money transfer revenue grew 4% over first quarter 2017 as strong moneygram.com growth was partially offset by a decline in revenue from kiosks and global economic trends. Digital represented 16% of total money transfer revenue.introductory pricing for new markets.

Bill Payment Fee and Other Revenue

For the three months ended March 31, ~~2018,~~2019, bill payment fee and other revenue decreased by ~~$4.3~~$4.9 million, or 24%, when compared to the same period in 2018, due to ~~lower transactions resulting from shifts in industry mix.~~increased competition.

Fee and Other Commissions and Direct Transaction Expenses

The following table details the changes in fee and other commissions expense for the Global Funds Transfer segment from ~~2017~~2018 to ~~2018:~~2019:


(Amounts in millions)	Three Months Ended			Three Months Ended
For the period ended March 31, 2017	$	185.6
For the period ended March 31, 2018				$	176.2
Change resulting from:
Money transfer revenue	(9.0		)	(25.4		)
Money transfer corridor and agent mix				5.8
Impact from changes in exchange rates	6.6			(4.3		)
Money transfer corridor and agent mix	(5.1		)
Signing bonuses				(1.8		)
Bill payment revenue and commission rates	(2.1		)	(1.2		)
Signing bonuses	0.2
For the period ended March 31, 2018	$	176.2
For the period ended March 31, 2019				$	149.3

Fort the three months ended March 31, 2019, fee and other commissions decreased by $26.9 million primarily due to decreases in money transfer revenue from the decline in volume and pricing discussed above and the decrease in signing bonus amortization, partially offset by favorable money transfer corridor and agent mix.

For the three months ended March 31, ~~2018, fee and other commissions~~2019, direct transaction expense of $5.0 million decreased ~~$9.4 million. The decline was~~by $0.5 million when compared to the prior period, primarily ~~from decreases in money transfer revenue, money transfer corridor and agent mix, and bill payment revenue and commissions rates, which was partially offset by changes in exchange rates~~ due to a ~~weaker U.S. dollar compared to prior year.~~

~~For the three months ended March 31, 2018, direct transaction expense increased by $0.4 million, primarily due to an increase~~decrease in moneygram.com revenues.

Financial Paper Products

The following table sets forth our Financial Paper Products segment results of operations:


(Amounts in millions)	Three Months Ended March 31,				2018 vs
(Amounts in millions)							Three Months Ended March 31,
(Amounts in millions)	2018		2017		2017		2019		2018		2019 vs 2018
(Amounts in millions)	$	13.4	$	12.5	$	0.9	$	13.9	$	13.4	$	0.5
Official check revenue	9.2		6.8		2.4		12.3		9.2		3.1
Total Financial Paper Products revenue	$	22.6	$	19.3	$	3.3	$	26.2	$	22.6	$	3.6

Commissions expense	$	3.8	$	1.7	$	2.1	$	6.6	$	3.8	$	2.8

Financial Paper Products revenue increased by $3.6 million or 16% during the three months ended March 31, 2019, primarily due to higher yields on our investment portfolio when compared to the prior period.

For the three months ended March 31, ~~2018,~~2019, commissions expense for Financial Paper Products ~~revenue~~ increased by $2.8 million when compared to the same period in 2018, due to ~~the increase in investment revenues driven by higher yields and investment balances, partially offset by the decline in fee and other revenue due to the migration of consumers to other products.~~

~~Commissions expense for the Financial Paper Product increased by $2.1 million for the three months ended March 31, 2018 over the prior period. The increase was driven by~~ an increase in investment ~~commission expense due to higher interest rates, partially offset by the decline in fee and other~~ commissions expense.

Operating Income and Operating Margin

The following table provides a summary overview of operating income and operating margin:


	Three Months Ended March 31,									Three Months Ended March 31,
(Amounts in millions, except percentages)	2018			2017			Change			2019			2018
Operating income:
Global Funds Transfer	$	1.4		$	25.2		$	(23.8	)	$	1.1		$	1.4
Financial Paper Products	5.6			4.7			0.9			8.2			5.6
Total segment operating income	7.0			29.9			(22.9		)	9.3			7.0
Other	(1.3		)	(6.5		)	5.2			(0.7		)	(1.3		)
Total operating income	$	5.7		$	23.4		$	(17.7	)	$	8.6		$	5.7

Total operating margin	1.5		%	6.1		%				2.7		%	1.5		%
Global Funds Transfer	0.4		%	6.9		%				0.4		%	0.4		%
Financial Paper Products	24.8		%	24.4		%				31.3		%	24.8		%

For the three months ended March 31, ~~2018,~~2019, the ~~Company experienced a decrease in~~ Global Funds Transfer segment operating income slightly declined and the operating margin remained flat when compared to the three months ended March 31, 2018. The decline in operating income was due to the decline in money transfer fee and other revenue, which was offset by decreases in operating expenses primarily due ~~the additional $10.0 million accrual related~~ to the ~~DPA matter and restructuring and reorganization costs incurred in~~realization of the ~~first quarter of 2018. Our~~2018 cost-savings initiatives.

For the three months ended March 31, 2019, the Financial Paper Products segment operating income and margin increased when compared to the three months ended March 31, 2018, primarily due to the increase in investment revenue. Other operating loss decreased when compared to the same period in 2017 primarily due to the prior year period including costs related to a proposed merger with Ant Financial that was terminated in January of 2018. See Note 1 — ~~Description of Business and Basis of Presentation~~ ~~of the Notes to the Condensed Consolidated Financial Statements for more information about the terminated merger.~~

~~Other (Income) Expenses~~

For the three months ended March 31, ~~2018, interest expense increased $1.5 million as a result of higher interest rates~~2019, other operating loss decreased when compared to the ~~same~~three months ended March 31, 2018, due to ongoing cost-savings initiatives.

Other Expenses (Income)

Total other expenses for the three months ended March 31, 2019, were $15.5 million compared to other income of $16.2 million for the three months ended March 31, 2018. The prior period ~~in 2017.~~other income included a $30.0 million payment related to the terminated merger with Ant Financial.

Income Taxes

For the three months ended March 31, ~~2018,~~2019, the Company ~~had other non-operating~~recognized income tax expense of ~~$28.5~~$6.6 million ~~which included $30.0~~on a pre-tax loss of $6.9 million ~~related~~primarily due to non-deductible expenses, U.S. taxation of foreign earnings, the ~~terminated merger.~~reversal of tax benefits on share-based compensation, partially offset by U.S. tax credits net of valuation allowance. Additionally, as a result of the issuance of the final Section 965 regulations by the U.S. Treasury Department and the IRS on January 15, 2019, the Company recorded a discrete tax expense of $0.7 million for an increase in its one-time transition tax.

~~Income Taxes~~

For the three months ended March 31, 2018, the Company recognized income tax expense of $14.8 million on pre-tax income of $21.9 million, primarily due to the recording of the accrual, which is nondeductible for tax purposes, made in conjunction with the DPA, as discussed in more detail in Note 12 — Commitments and Contingencies of the Notes to the Condensed Consolidated Financial Statements, and the adverse tax consequences related to the new provisions enacted under the TCJA, also known as

H.R. 1 - 115^th Congress, which result in multiple taxation of a single item of income. ~~See Note 11 —~~ ~~Income Taxes~~ ~~of the Notes to the Condensed Consolidated Financial Statements for more information on the TCJA and the Company's income tax expense.~~

EBITDA, Adjusted EBITDA, Adjusted Free Cash Flow and Constant Currency

We believe that EBITDA (earnings before interest, taxes, depreciation and amortization, including agent signing bonus amortization), Adjusted EBITDA (EBITDA adjusted for certain significant items), Adjusted Free Cash Flow (Adjusted EBITDA less cash interest, cash taxes, cash payments for capital expenditures and cash payments for agent signing bonuses) and constant currency measures (which assume that amounts denominated in foreign currencies are translated to the U.S. dollar at rates consistent with those in the prior year) provide useful information to investors because they are indicators of the strength and performance of our ongoing business operations. These calculations are commonly used as a basis for investors, analysts and other interested parties to evaluate and compare the operating performance and value of companies within our industry. In addition, our debt agreements require compliance with covenants that incorporate a financial ~~measures~~measure similar to Adjusted EBITDA.

EBITDA, Adjusted EBITDA, Adjusted Free Cash Flow and constant currency are financial and performance measures used by management in reviewing results of operations, forecasting, allocating resources and establishing employee incentive programs. We also present Adjusted EBITDA growth, constant currency adjusted, which provides information to investors regarding MoneyGram's performance without the effect of foreign currency exchange rate fluctuations year-over-year.

Although we believe that EBITDA, Adjusted EBITDA, Adjusted Free Cash Flow and constant currency measures enhance investors' understanding of our business and performance, these non-GAAP financial measures should not be considered in isolation or as substitutes for the accompanying GAAP financial measures. These metrics are not necessarily comparable with similarly named metrics of other companies.

The following table is a reconciliation of our non-GAAP financial measures to the related GAAP financial measures:


	Three Months Ended March 31,									Three Months Ended March 31,
(Amounts in millions)	2018			2017			Change			2019			2018
Income before income taxes	$	21.9		$	11.3		$	10.6
(Loss) income before income taxes										$	(6.9	)	$	21.9
Interest expense	12.3			10.8			1.5			13.9			12.3
Depreciation and amortization	18.1			18.3			(0.2		)	19.0			18.1
Signing bonus amortization	14.0			13.0			1.0			11.7			14.0
EBITDA	66.3			53.4			12.9			37.7			66.3
Significant items impacting EBITDA:
(Income) costs related to the terminated merger with Ant Financial ⁽¹⁾	(29.3		)	2.8			(32.1		)
Legal and contingent matters ⁽²⁾	11.4			1.2			10.2
Direct monitor costs										4.1			3.1
Restructuring and reorganization costs	7.3			—			7.3			3.5			7.3
Stock-based, contingent and incentive compensation	4.8			4.0			0.8			2.6			4.8
Direct monitor costs	3.1			2.8			0.3
Compliance enhancement program	2.6			2.1			0.5			1.5			2.6
Legal and contingent matters ⁽¹⁾										0.6			11.4
Severance and related costs	0.4			—			0.4			0.1			0.4
Costs (income) related to the terminated merger with Ant Financial ⁽²⁾										—			(29.3		)
Adjusted EBITDA	$	66.6		$	66.3		$	0.3		$	50.1		$	66.6

Adjusted EBITDA growth, as reported	—		%
Adjusted EBITDA growth, constant currency adjusted	(4		)%
Adjusted EBITDA change, as reported										(25		)%
Adjusted EBITDA change, constant currency adjusted										(22		)%

Adjusted EBITDA	$	66.6		$	66.3		$	0.3		$	50.1		$	66.6
Cash payments for interest	(11.5		)	(10.0		)	(1.5		)	(12.8		)	(11.5		)
Cash payments for taxes, net of refunds	(1.6		)	(0.7		)	(0.9		)	(1.2		)	(1.6		)
Cash payments for capital expenditures	(12.3		)	(18.6		)	6.3			(12.7		)	(12.3		)
Cash payments for agent signing bonuses	(11.8		)	(10.2		)	(1.6		)	(10.1		)	(11.8		)
Adjusted Free Cash Flow	$	29.4		$	26.8		$	2.6		$	13.3		$	29.4
(1) Income includes the $30.0 million merger termination fee, and costs include, but are not limited to, legal, bank and consultant fees.
(2) 2018 primarily consists of an additional $10.0 million accrual related to the DPA.
(1) Three months ended March 31, 2018 includes an accrual of $10.0 million related to the resolution of the DPA matter.										(1) Three months ended March 31, 2018 includes an accrual of $10.0 million related to the resolution of the DPA matter.
(2) Costs include, but are not limited to, legal, bank and consultant fees and income includes the $30.0 million merger termination fee.										(2) Costs include, but are not limited to, legal, bank and consultant fees and income includes the $30.0 million merger termination fee.

The Company generated EBITDA of $37.7 million and $66.3 million and Adjusted EBITDA of $50.1 million and $66.6 million for the three months ended March 31, 2019 and 2018, respectively. Adjusted EBITDA declined when compared to the same period in 2018 because of the decrease in fee and other revenue, partially offset by decreases in fee and other commissions expense, net salaries, related payroll taxes and cash incentive compensation and outsourcing, and independent contractor and consultant costs as a result of the realization of cost-savings initiatives implemented in 2018.

For the three months ended March 31, ~~2018,~~2019, EBITDA decreased primarily because the ~~Company generated EBITDA~~prior period included $30.0 million of ~~$66.3 million and Adjusted EBITDA of $66.6 million. Adjusted EBITDA remained relatively flat when compared to the first quarter of 2017. EBITDA increased primarily due to the other non-operating~~ income ~~of $30.0 million~~ related to the terminated merger with Ant ~~Financial, partially offset by the increase in legal and contingent matters due to the additional DPA accrual and restructuring and reorganization costs.~~Financial.

For the three months ended March 31, ~~2018,~~2019, Adjusted Free Cash Flow ~~increased~~decreased by ~~$2.6~~$16.1 million when compared to the same period in ~~2017.~~2018. The ~~increase~~decline was primarily ~~a result of a~~due to the decrease in ~~cash payments for capital expenditures, partially offset by increases in cash payments for agent signing bonuses and interest.~~Adjusted EBITDA.

See "Results of Operations" and "Analysis of Cash Flows" sections for additional information regarding these changes.

LIQUIDITY AND CAPITAL RESOURCES

We have various resources available for purposes of managing liquidity and capital needs, including our investment portfolio, credit facilities and letters of credit. We refer to our cash and cash equivalents, settlement cash and cash equivalents, interest-bearing investments and available-for-sale investments collectively as our “investment portfolio.” The Company utilizes cash and cash equivalents in various liquidity and capital assessments.

Cash and Cash Equivalents, Settlement Assets and Payment Service Obligations

The following table shows the components of the Company's cash and cash equivalents and settlement assets:


(Amounts in millions)	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Cash and cash equivalents	$	199.7		$	190.0		$	129.9		$	145.5
Settlement assets:
Settlement cash and cash equivalents	1,403.4			1,469.9			1,381.5			1,435.7
Receivables, net	919.2			1,125.8			971.7			777.7
Interest-bearing investments	1,154.0			1,154.2			1,057.4			1,154.7
Available-for-sale investments	6.7			7.0			5.7			5.7
	3,483.3			3,756.9			$	3,416.3		$	3,373.8
Payment service obligations	$	(3,483.3	)	$	(3,756.9	)	$	(3,416.3	)	$	(3,373.8	)

Our primary sources of liquidity include cash flows generated by the sale of our payment instruments, our cash and cash equivalents and interest-bearing investment balances, and proceeds from our investment ~~portfolio and credit capacity under our credit facilities.~~portfolio. Our primary operating liquidity needs are related to the settlement of payment service obligations to our agents and financial institution customers, general operating expenses and debt service.

To meet our payment service obligations at all times, we must have sufficient highly liquid assets and be able to move funds globally on a timely basis. On average, we receive in and pay out a similar amount of funds on a daily basis to collect and settle the principal amount of our payment instruments sold and related fees and commissions with our end consumers and agents. This pattern of cash flows allows us to settle our payment service obligations through existing cash balances and ongoing cash generation rather than liquidating investments or utilizing our revolving credit facility. We have historically generated, and expect to continue generating, sufficient cash flows from daily operations to fund ongoing operational needs.

We preposition cash in various countries and currencies to facilitate settlement of transactions. We also maintain funding capacity beyond our daily operating needs to provide a cushion through the normal fluctuations in our payment service obligations, as well as to provide working capital for the operational and growth requirements of our business. We believe we have sufficient liquid assets and funding capacity to operate and grow our business for the next 12 months. Should our liquidity needs exceed our operating cash flows, we believe that external financing sources, including availability under our credit ~~facilities,~~facility, will be sufficient to meet our anticipated funding requirements.

Cash and Cash Equivalents and Interest-bearing Investments

To ensure we maintain adequate liquidity to meet our payment service obligations at all times, we keep a significant portion of our investment portfolio in cash and cash equivalents and interest-bearing investments at financial institutions rated A- or better by two of the following three rating agencies: Moody’s Investor Service ("Moody's"), Standard & Poor's ("S&P") and Fitch Ratings, Inc. ("Fitch"); and in AAA rated U.S. government money market funds. If the rating agencies have split ratings, the Company uses the lower of the highest two out of three ratings across the agencies for disclosure purposes. If the institution has only two ratings, the Company uses the lower of the two ratings for disclosure purposes. As of March 31, ~~2018,~~2019, cash and cash equivalents ~~(including~~

(including unrestricted and settlement cash and cash equivalents) and interest-bearing investments totaled ~~$2.8~~$2.6 billion. Cash and cash equivalents consist of interest-bearing deposit accounts, ~~non-interest bearing~~non-interest-bearing transaction accounts and money market securities; interest-bearing investments consist of time deposits and certificates of deposit with maturities of up to 24 months.

Available-for-sale Investments

Our investment portfolio includes ~~$6.7~~$5.7 million of available-for-sale investments as of March 31, ~~2018.~~2019. U.S. government agency residential mortgage-backed securities ~~compose $5.4~~comprise $4.3 million of our available-for-sale investments, while asset-backed and other securities compose the remaining ~~$1.3~~$1.4 million.

Credit Facilities

As of March 31, ~~2018,~~2019, the Company had an outstanding balance of ~~$911.8~~$901.9 million on its senior secured borrowings. The Company's effective interest rate on senior secured borrowings increased from ~~4.94%~~5.59% as of December 31, ~~2017~~2018 to ~~5.55%~~5.75% as of March 31, ~~2018,~~2019, due to ~~an increase~~increases in the Eurodollar rate. As of March 31, ~~2018,~~2019, the Company had no borrowings and no outstanding letters of credit ~~or borrowings~~ under the revolving credit facility, ~~leaving $85.8~~and subsequent to the January 31, 2019 amendment, the Company has $45.0 million of ~~borrowing capacity thereunder, and was in compliance with its financial covenants.~~availability. See Note 7 — Debt of the Notes to the Condensed Consolidated Financial Statements for additional disclosure related to the Company's credit facilities and financial covenants.

On May 8, 2019, the Company announced that Bank of America, N.A. arranged a $245.0 million senior secured second lien term facility led by Beach Point Capital Management. The Carlyle Group will be participating in a portion of the second lien term facility. The net proceeds from this new financing will be used by the Company to prepay its existing senior secured credit facility. See Note 7 — Debt of the Notes to the Condensed Consolidated Financial Statements for additional disclosure related to the Second Lien Term Facility.

Credit Ratings

As of March 31, ~~2018,~~2019, our credit ratings from Moody’s and S&P were B1B2 with a ~~stable~~negative outlook and B+B with a stable outlook, respectively. Our credit facilities, regulatory capital requirements and other obligations will not be impacted by a future change in our credit ratings.

Analysis of Cash Flows


	Three Months Ended March 31,						Three Months Ended March 31,
(Amounts in millions)	2018			2017			2019			2018
Net cash provided by (used in) operating activities	$	30.5		$	(9.6	)
Net cash provided by operating activities							$	0.3		$	30.5
Net cash used in investing activities	(12.3		)	(18.6		)	(12.7		)	(12.3		)
Net cash used in financing activities	(8.5		)	(1.6		)	(3.2		)	(8.5		)
Net change in cash and cash equivalents	$	9.7		$	(29.8	)	$	(15.6	)	$	9.7

Cash Flows from Operating Activities

For the three months ended March 31, ~~2018,~~2019, cash provided by operating activities ~~increased~~decreased primarily due to the decrease in net income and an increase in prepaid additions for software and maintenance when compared to the prior period. Additionally, the three months ended March 31, 2018, included $30.0 million ~~payment~~of income related to the terminated merger with Ant Financial and a decrease spent on outsourcing, independent contractor and consultant as part of ongoing cost savings initiatives. The increase was partially offset by an increase in signing bonus payments of $1.6 million driven by the timing of agent expansion and retention efforts, and an increase in payments for interest of $1.5 million.Financial.

Cash Flows from Investing Activities

~~For~~Items impacting net cash used in investing activities for the three months ended March 31, 2019 and 2018, ~~net cash used in investing activities decreased by $6.3 million primarily due to a decrease in~~included capital expenditures ~~when compared to the same period in 2017.~~of $12.7 million and $12.3 million, respectively.

Cash Flows from Financing Activities

~~For~~During the three months ended March 31, ~~2018,~~2019, net cash used in financing activities, ~~was $8.5~~which included $2.5 million ~~primarily for~~of principal payments on debt and $0.7 million of payments to tax authorities for stock-based ~~compensation. For~~compensation, decreased by $5.3 million when compared to the prior reporting period. The decrease was driven by lower payments to tax authorities for stock-based compensation during the three months ended March 31, ~~2017, net cash used~~2019 due to the decrease in ~~financing activities was $1.6 million, primarily for principal payments on debt, partially offset by proceeds from exercise of~~the Company's stock ~~options and other.~~price when compared to the prior period.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with GAAP requires estimates and assumptions that affect the reported amounts and related disclosures in the Condensed Consolidated Financial Statements. Actual results could differ from those estimates. On a regular basis, management reviews its accounting policies, assumptions and estimates to ensure that our financial statements are presented fairly and in accordance with GAAP. Our significant accounting policies are discussed in Note 2 —

Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Critical accounting policies are those policies that management believes are very important to the portrayal of our financial position and results of operations, and that require management to make estimates that are difficult, subjective or complex. There were no changes to our critical accounting policies and estimates during the quarter ended March 31, ~~2018.~~2019. For further information regarding our critical accounting policies and estimates, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and the documents incorporated by reference herein may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements with respect to, among other things, the financial condition, results of operations, plans, objectives, future performance and business of MoneyGram and its subsidiaries. Statements preceded by, followed by or that include words such as “believes,” “estimates,” “expects,” “projects,” “plans,” “anticipates,” "intends," “continues,” “will,” “should,” “could,” “may,” “would,” "goals" and other similar expressions are intended to identify some of the forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are included, along with this statement, for purposes of complying with the safe harbor provisions of the Act. These forward-looking statements involve risks and uncertainties. Actual results may differ materially from those contemplated by the forward-looking statements due to, among others, the risks and uncertainties described in Part I, Item 1A under the caption "~~Risk Factors~~" of our Annual Report on Form 10-K for the year ended December 31, 2017, as well as the various factors described herein. These forward-looking statements speak only as of the date they are made, and MoneyGram undertakes no obligation to publicly update or revise any forward-looking statements for any reason, whether as a result of new information, future events or otherwise, except as required by federal securities law. These forward-looking statements are based on management’s current expectations, beliefs and assumptions as of the date of his report and are subject to certain risks, uncertainties and changes in circumstances due to a number of factors. These factors include, but are not limited to:

our ability to compete effectively;

our ability to maintain key agent or biller relationships, or a reduction in business or transaction volume from these relationships, including with our largest agent, Walmart, through its introduction of additional competing ~~white label~~white-label money transfer products or ~~otherwise;~~otherwise, and due to increased costs or loss of business as a result of higher compliance standards;

a security or privacy breach in systems, networks or databases on which we rely;

current and proposed regulations addressing consumer privacy and data use and security;

our ability to manage fraud risks from consumers or agents;

~~the ability of us and our agents to comply with U.S. and international laws and regulations;~~

litigation and regulatory proceedings involving us or our agents, which could result in material settlements, fines or penalties, revocation of required licenses or registrations, termination of contracts, other administrative actions or lawsuits and negative publicity;

our ability to close the Second Lien Term Facility, extend or refinance the First Lien Facilities, and complete the Refinancing or comply with the terms thereof;

possible uncertainties relating to compliance with and the impact of the Amended DPA;

~~current and proposed regulations addressing consumer privacy~~disruptions to our computer systems and data ~~use~~centers and ~~security;~~our ability to effectively operate and adapt our technology;

our ability to successfully develop and timely introduce new and enhanced products and services and our investments in new products, services or infrastructure changes;

our substantial debt service obligations, significant debt covenant requirements and credit rating and our ability to maintain sufficient capital;

~~continued~~ weakness in economic conditions, in both the U.S. and global markets;

a significant change, material slow down or complete disruption of international migration patterns;

our ability to manage risks associated with our international sales and ~~operations;~~operations, including exchange rates among currencies;

our offering of money transfer services through agents in regions that are politically volatile or, in a limited number of cases, that may be subject to certain ~~U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”)~~OFAC restrictions;

major bank failure or sustained financial market illiquidity, or illiquidity at our clearing, cash management and custodial financial institutions;

the ability of us and our agents to maintain adequate banking relationships;

~~a security or privacy breach in systems, networks or databases on which we rely;~~

~~disruptions to our computer systems and data centers and our ability to effectively operate and adapt our technology;~~

changes in tax laws or unfavorable outcomes of tax positions we take, or a failure by us to establish adequate reserves for tax events;

~~a significant change, material slow down or complete disruption of international migration patterns;~~

our ability to manage credit risks from our agents and official check financial institution customers;

our ability to adequately protect our brand and intellectual property rights and to avoid infringing on the rights of others;

our ability to attract and retain key employees;

our ability to manage risks related to the operation of retail locations and the acquisition or start-up of businesses;

any restructuring actions and cost reduction initiatives that we undertake may not deliver the expected results and these actions may adversely affect our business;

our ability to maintain effective internal controls;

our capital structure and the special voting rights provided to the designees of Thomas H. Lee Partners, L.P. on our Board of Directors; and

the risks and uncertainties described in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of ~~the Company's~~our Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, as well as any additional risk factors that may be described in our other filings with the ~~Securities and Exchange Commission ("SEC")~~SEC from time to time.

These forward-looking statements speak only as of the date they are made, and MoneyGram undertakes no obligation to publicly update or revise any forward-looking statements for any reason, whether as a result of new information, future events or otherwise, except as required by federal securities law.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risk since December 31, ~~2017.~~2018. For further information on market risk, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report (the “Evaluation Date”), the Company carried out an evaluation, under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective. Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed by the Company in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and include, without limitation, controls and procedures designed to ensure that information that the Company is required to disclose in such reports is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

During the first quarter of 2019, the Company implemented controls and processes relating to adoption of ASC Topic 842 - Leases. Throughout the implementation, the Company evaluated the impact of the adoption of the new standard on its internal control over financial reporting and made changes to controls where necessary to maintain the effectiveness of internal control over financial reporting in all material respects. There were no other changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the quarter ended March 31, ~~2018~~2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The matters set forth below are subject to uncertainties and outcomes that are not predictable. The Company accrues for these matters as any resulting losses become probable and can be reasonably estimated. Further, the Company maintains insurance coverage for many claims and litigation matters.

Litigation Commenced Against the Company:

Class Action Securities Litigation —On November 14, 2018, a putative securities class action lawsuit was filed in the United States District Court for the Northern District of Illinois against MoneyGram and certain of its executive officers. The lawsuit asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and alleges that MoneyGram made material misrepresentations regarding its compliance with the stipulated order for permanent injunction and final judgment that MoneyGram entered into with the Federal Trade Commission in October 2009 and with the deferred prosecution agreement that MoneyGram entered into with the U.S. Attorney’s Office for the Middle District of Pennsylvania and the U.S. Department of Justice in November 2012. The lawsuit seeks unspecified damages, equitable relief, interest, and costs and attorneys’ fees. The Company intends to vigorously defend this matter. We are unable to predict the outcome, or the possible loss or range of loss, if any, related to this matter.

It is possible that additional shareholder lawsuits could be filed relating to the subject matter of the class action, derivative actions and Section 220 requests.

Government Investigations:

OFAC — In 2015, we initiated an internal investigation to identify any payments processed by the Company that were violations of OFAC sanctions regulations. We notified OFAC of the ongoing internal investigation, which was conducted in conjunction with the Company's outside counsel. On March 28, 2017, we filed a Voluntary Self-Disclosure with OFAC regarding the findings of our internal investigation. OFAC is currently reviewing the results of the Company’s investigation. At this time, it is not possible to determine the outcome of this matter, or the significance, if any, to our business, financial condition or results of operations, and we cannot predict when OFAC will conclude ~~their~~its review of our Voluntary Self-Disclosure.

Deferred Prosecution Agreement — In November 2012, we announced that a settlement was reached with the U.S. Attorney's Office for the Middle District of Pennsylvania (the ~~“MDPA”~~"MDPA") and the U.S. Department of Justice, Criminal Division, Money Laundering and Asset Recovery Section (the “U.S. DOJ”) relating to the previously disclosed investigation of transactions involving certain of our U.S. and Canadian agents, as well as fraud complaint data and the consumer anti-fraud program, during the period from 2003 to early 2009. In connection with this settlement, we entered into the DPA with the MDPA and U.S. DOJ ~~(the “Government”~~(collectively, the "Government") dated November 8,9, 2012.

On November 1, 2017, the Company agreed to a stipulation with the Government that the five-year term of the Company’s DPA be extended for 90 days to February 6, 2018. OnBetween January 31, 2018 and September 14, 2018, the Company agreed to enter into various extensions of the DPA with the Government, ~~that the term of the DPA be extended for an additional 45 days to March 23, 2018; on March 21, 2018, the Company agreed~~ with the ~~Government that the term of the DPA be further extended for an additional 45 days to May 7, 2018; and~~last extension ending on ~~May 7, 2018, the Company agreed with the Government that the term of the DPA be further extended for an additional 45 days to June 21,~~November 6, 2018. ~~Any further~~Each extension of the DPA ~~extends~~extended all terms of the DPA, including the term of the monitorship for an equivalent period. The purpose of the extensions is

was to provide the Company and the Government additional time to discuss whether the Company iswas in compliance with the DPA. ~~There can be no assurance~~

On November 8, 2018, the Company announced that it entered into (1) an Amendment to and Extension of Deferred Prosecution Agreement (the “Amended DPA”) with the Government and (2) a Stipulated Order for Compensatory Relief and Modified Order for Permanent Injunction (the “Consent Order”) with the Federal Trade Commission (“FTC”). The motions underlying the Amended DPA and Consent Order focus primarily on the Company’s anti-fraud and anti-money laundering programs, including whether the Company had adequate controls to prevent third parties from using its systems to commit fraud. The Amended DPA amended and extended the original DPA entered into on November 9, 2012 by and between the Company and the Government. The DPA, Amended DPA and Consent Order are collectively referred to herein as the “Agreements.”

~~FTC~~ ~~— On April 4, 2018, we received a civil investigative demand from the Federal Trade Commission (the “FTC”) requesting documents and information relating to~~other regulatory consequences, any or all of which could have an adverse effect on the Company’s ~~anti-fraud program. We are evaluating the scope~~business, financial condition, results of ~~this demand~~operations, and ~~cooperating with the FTC. At this time, it~~cash flows. The Company is ~~not possible~~unable to predict the ~~eventual scope, duration~~outcome, or ~~outcome~~the possible loss or range of ~~this investigation or its effect,~~loss, if any, ~~on our business, financial condition or results of operations.~~that could be associated with this matter.

Other Matters — The Company is involved in various other government inquiries and other matters that arise from time to time. Management does not believe that any of these other matters is likely to have a material adverse impact on the Company’s financial condition, results of operations or cash flows.

Actions Commenced by the Company:

Tax Litigation — The Internal Revenue Service (the “IRS”) completed its examination of the Company’s consolidated income tax returns through 2013 and issued Notices of Deficiency for 2005-2007 and 2009 and an Examination Report for 2008. The Notices of Deficiency and Examination Report disallow, among other items, approximately $900.0 million of ordinary deductions on securities losses in the 2007, 2008 and 2009 tax returns. In May 2012 and December 2012, the Company filed petitions in the U.S. Tax Court challenging the 2005-2007 and 2009 Notices of Deficiency, respectively. In 2013, the Company reached a partial settlement with the IRS allowing ordinary loss treatment on $186.9 million of deductions in dispute. In January 2015, the U.S.

Tax Court granted the IRS's motion for summary judgment upholding the remaining adjustments in the Notices of Deficiency. During 2015, the Company made payments to the IRS of $61.0 million for federal tax payments and associated interest related to the matter. The Company believes that it has substantive tax law arguments in favor of its position. The Company filed a notice of appeal with the U.S. Tax Court on July 27, 2015 for an appeal to the U.S. Court of Appeals for the Fifth Circuit. Oral arguments were held before the Fifth Circuit on June 7, 2016, and on November 15, 2016, the Fifth Circuit vacated the Tax Court’s decision and remanded the case to the Tax Court for further proceedings. The Company filed a motion for summary judgment in the Tax Court on May 31, 2017. On August 23, 2017, the IRS filed a motion for summary judgment and its response to the Company’s motion for summary judgment. The Tax Court ~~has~~ directed the parties to agree to a joint stipulation of facts, ~~to be~~which the parties have filed with the ~~court, at which point the Company expects to file~~court. Each party has filed a revised memorandum in support of its motion for summary judgment ~~and~~in the ~~IRS~~Tax Court. The Tax Court is expected to ~~file its cross motion for summary judgment.~~schedule oral argument on this matter in mid-2019. Pending the outcome of the appeal, the Company may be required to file amended state returns and make additional cash payments of up to ~~$18.7~~$19.7 million on amounts that have previously been accrued.

See discussion of Legal Proceedings in Note 12 — Commitments and Contingencies of the Notes to the Condensed Consolidated Financial Statements ~~for additional disclosure.~~included in Part I, Item 1 of this report.

ITEM 1A. RISK FACTORS

Except as set forth below, there have been no material changes in the Company's risk factors from those described in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. For further information, refer to Part I, Item 1A, "Risk Factors," in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Our substantial debt service obligations, significant debt maturities, significant debt covenant requirements, low market capitalization and our credit rating could impair our access to capital and financial condition and adversely affect our ability to refinance our existing indebtedness and operate and grow our business.

We ~~face possible uncertainties relating to compliance with~~have substantial interest expense on our debt and ~~the extension and impact of the deferred prosecution agreement entered into with the U.S. federal government.~~

~~In November 2012, we announced~~our ratings are below “investment grade.” We also have a significant debt maturity in March 2020. This requires that we ~~had entered into~~access capital markets that are subject to higher volatility and are costlier than those that support higher-rated companies. Since a ~~five-year DPA~~significant portion of our cash flow from operations is dedicated to debt service, a reduction or interruption in cash flow could result in an event of default or significantly restrict our access to capital. There is no assurance that we will be able to refinance our debt obligations, comply with ~~the Government relating to the period from 2003 to early 2009. Pursuant to the DPA, the Government filed a two-count criminal Information~~our debt covenants or obtain additional capital. Furthermore, refinancing our debt on less favorable terms than in the ~~U.S. District Court for~~existing credit facility could also have a significant impact on our cash flow from operations. Our ratings below investment grade also create the ~~Middle District of Pennsylvania. Under the DPA, the Company has agreed, among other things, to retain an independent compliance monitor~~potential for a ~~period~~cost of ~~five years. On November 1, 2017,~~capital that is higher than other companies with which we compete. Further, our debt is subject to floating interest rates. Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. Fluctuations in interest rates or changes in the Company agreed to a stipulation with the Government that the term of the Company’s DPA be extended for 90 days to February 6, 2018. On January 31, 2018, the Company agreed with the Government that the term of the DPA be extended for an additional 45 days to March 23, 2018; on March 21, 2018, the Company agreed with the Government that the term of the DPA be further extended for an additional 45 days to May 7, 2018; and on May 7, 2018, the Company agreed with the Government that the term of the DPA be further extended for an additional 45 days to June 21, 2018. Any extension of the DPA extends all terms of our debt or our inability to refinance our existing debt could have an adverse effect on our financial position and results of operations.

We are also subject to capital requirements imposed by various regulatory bodies throughout the ~~DPA, including the term~~world. We may need access to external capital to support these regulatory requirements in order to maintain our licenses and our ability to earn revenue in these jurisdictions. Our low market capitalization could limit our ability to access capital and our ability to refinance or refinance on comparable terms. An interruption of ~~the monitorship for an equivalent period. The purpose of the extensions is~~our access to ~~provide the Company and the Government additional time~~capital could impair our ability to ~~discuss whether the Company is in compliance with the DPA.~~ conduct business if our regulatory capital falls below requirements.

There can be no assurance ~~that~~as to whether or when the Company will reach an agreement to refinance or extend the First Lien Facilities, the Refinancing will be consummated or the terms of the refinanced or extended First Lien Facilities and Second Lien Term Facility to be included in the Refinancing will not be revised in material respects prior to its completion.

On May 8, 2019, the Company announced that Bank of America, N.A. arranged a $245.0 million senior secured second lien term facility. See Note 7 —Debt of the Notes to the Condensed Consolidated Financial Statements included in Part I, Item 1 of this report.

The consummation of the Refinancing, including the negotiation of definitive agreements for the Second Lien Term Facility and the ~~Government will be able to negotiate a mutually satisfactory outcome during the latest extension (or during any further short-term~~refinancing or extension of, and the ~~DPA) or that such outcome will not include a further extension~~negotiation of definitive agreements for, the First Lien Facilities, is subject to various conditions, some of which are beyond our control. In addition, the terms of the ~~DPA, financial penalties~~refinanced or ~~additional restrictions~~extended First Lien Facilities and Second Lien Term Facility to be included in the Refinancing may change in the process of obtaining the Refinancing, and any changes may be on terms that are less favorable to the Company. The terms of any agreement with the Government could impose significant additional costs upon the Company related to compliance and other required terms, which could have an adverse impact on the Company's operations. Furthermore,Thus, there can be no assurance ~~that~~as to whether or when the ~~Government~~Company will reach an agreement to refinance or extend the First Lien Facilities, the Refinancing will be consummated or the terms of the refinanced or extended First Lien Facilities and the Second Lien Term Facility to be included in the Refinancing will not ~~seek any other remedy, including criminal prosecution and financial penalties,~~be revised in ~~lieu of an extension~~material respects prior to its completion.

Our debt service obligations will be higher following the consummation of the DPA and the monitorship. A prosecution of the Company by the Government or the imposition of significant financial penalties could lead to a severe material adverse effect upon the Company’s ability to conduct its business. Furthermore, neither the DPA nor any agreement with the Government would resolve any inquiries from other governmental agencies,Refinancing, which could ~~result in additional costs, expenses~~materially and ~~fines.~~

The Company has recorded a $95.0 million accrual in connection with a possible resolution of this matter, based on the facts and circumstances known at the time. However, the Company is unable to reasonably estimate the ultimate loss and no assurance can be given that future costs and payments made in connection with this matter will not materially exceed the amount currently recorded or that the government will not also seek to impose non-monetary remedies or penalties.

If we lose key agents, our business with key agents is reduced or we are unable to maintain our agent network under terms consistent with those currently in place, our business, financial condition and results of operations could be adversely affected.

Most of our revenue is earned through our agent network. In addition, our international agents may have subagent relationships in which we are not directly involved. If agents or their subagents decide to leave our network, our revenue and profits could be adversely affected. Agent loss may occur for a number of reasons, including competition from other money transfer providers, an agent’s dissatisfaction with its relationship with us or the revenue earned from the relationship, or an agent’s unwillingness or inability to comply with our standards or legal requirements, including those related to compliance with anti-money laundering regulations, anti-fraud measures or agent monitoring. Agents may also generate fewer transactions or reduce locations for reasons unrelated to our relationship with them, including increased competition in their business, general economic conditions, regulatory costs or other reasons. In addition, we may not be able to maintain our agent network under terms consistent with those already in place. Larger agents may demand additional financial concessions or may not agree to enter into exclusive arrangements, which

~~could increase competitive pressure. The inability to maintain our agent contracts on terms consistent with those already in place, including in respect of exclusivity rights, could~~ adversely affect our ~~business,~~ financial condition and results of operations.

~~A substantial portion~~The terms of ~~our agent network locations, transaction volume~~the Refinancing, including the Second Lien Term Facility and ~~revenue is attributable to~~the extended or ~~generated~~refinanced First Lien Facilities, will provide for higher effective interest rates than under the Company’s existing senior secured and revolving credit facilities, which will increase the interest expense payable by the Company and could cause a ~~limited number of key agents. During~~decrease in the ~~three months ended March 31, 2018, our ten largest agents accounted for 35% of our total revenue. Our largest agent, Walmart, accounted for 17%~~Company’s cash flows and ~~18% of total revenue for the three months ended March 31, 2018~~materially and 2017, respectively. The current term of our contract with Walmart expires on March 30, 2020. If our contracts with our key agents, including Walmart, are not renewed or are terminated, or are renewed but on less favorable terms, or if such agents generate fewer transactions or reduce their locations, our business, financial condition and results of operations could be adversely affected. In addition, the introduction of additional competitive products by Walmart or our other key agents, including competing white label products, could reduce our business with those key agents and intensify industry competition, which could adversely affect ~~our business,~~the Company’s financial condition and results of operations. ~~For example,~~In addition, under the terms of the Second Lien Term Facility and the extended or refinanced First Lien Facilities, we will be subject to more restrictive covenants than under the Company’s existing senior secured and revolving credit facilities that will reduce our flexibility to, among other things, incur additional indebtedness, make restricted payments, sell assets, make investments and acquisitions, pledge assets as collateral and enter into transactions with affiliates. Failure to comply with such covenants could result in a default under the extended or refinanced First Lien Facilities and the Second Lien Term Facility, and as a result, the commitments of the lenders thereunder may be terminated and the maturity of amounts owed may be accelerated.

The issuance of shares of our common stock issuable upon exercise of the Warrants will dilute the ownership interest of our existing stockholders and could adversely affect the prevailing market price of our common stock.

In connection with the arrangement of the Second Lien Term Facility, the Company ~~expects that~~agreed to deliver the ~~Walmart2World products, which was launched by~~Initial Warrants (representing 1.5% of the currently outstanding fully diluted common stock) to the lenders under the Second Lien Term Facility. Upon the closing of the Second Lien Term Facility, the Company ~~and Walmart~~would deliver the remaining Warrants representing 6.5% of the fully diluted common stock (for a total of Warrants representing 8% of the currently outstanding fully diluted common stock).

The exercise of some or all of the Warrants will dilute the ownership interests of existing stockholders. In addition, any sales in the ~~first quarter~~public market of ~~2018,~~the common stock issuable upon such exercise or any anticipated sales upon exercise of the Warrants could

adversely affect prevailing market prices of our common stock. These factors also could make it more difficult for us to raise funds through future offerings of common stock, and could adversely impact the terms under which we could obtain additional equity capital. Following the occurrence of an exercise trigger for the Warrants, we have no control over whether or when the holders will ~~have a negative impact on our top-line growth due to lower revenue per transaction.~~exercise their Warrants.

ITEM 6. EXHIBITS

The following exhibits are filed or incorporated by reference herein in response to Item 601 of Regulation S-K. The Company files Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K pursuant to the Exchange Act under Commission File No. 1-31950.



Exhibit Number	Description
2.1†	Agreement and Plan of Merger, dated January 26, 2017, by and among MoneyGram International, Inc., Alipay (UK) Limited, Matrix Acquisition Corp. and, solely for purposes of certain specified provisions thereof, Alipay (Hong Kong) Holding Limited (Incorporated by reference from Exhibit 2.1 to Registrant’s Current Report on Form 8-K filed January 26, 2017).
2.2†	First Amendment to the Agreement and Plan of Merger, dated April 15, 2017, by and among MoneyGram International, Inc., Alipay (UK) Limited, Matrix Acquisition Corp. and Alipay (Hong Kong) Holding Limited (Incorporated by reference from Exhibit 2.1 to Registrant’s Current Report on Form 8-K filed April 17, 2017).
3.1	Amended and Restated Certificate of Incorporation of MoneyGram International, Inc., dated June 28, 2004 (Incorporated by reference from Exhibit 3.1 to Registrant's Annual Report on Form 10-K filed on March 15, 2010).
3.2	Certificate of Amendment of Amended and Restated Certificate of Incorporation of MoneyGram International, Inc., dated May 12, 2009 (Incorporated by reference from Exhibit 3.1 to Registrant’s Annual Report on Form 10-K filed March 15, 2010).
3.3	Certificate of Amendment of Amended and Restated Certificate of Incorporation of MoneyGram International, Inc., dated May 18, 2011 (Incorporated by reference from Exhibit 3.1 to Registrant's Current Report on Form 8-K filed May 23, 2011).
3.4	Certificate of Amendment of Amended and Restated Certificate of Incorporation of MoneyGram International, Inc., dated November 14, 2011 (Incorporated by reference from Exhibit 3.1 to Registrant's Current Report on Form 8-K filed November 14, 2011).
3.5	Amended and Restated Bylaws of MoneyGram International, Inc., as amended and restated October 28, 2015 (Incorporated by reference from Exhibit 3.5 to Registrant’s Quarterly Report on Form 10-Q filed on November 2, 2015).
3.6	Amendment to the Amended and Restated Bylaws of MoneyGram International, Inc., dated March 2, 2016 (Incorporated by reference from Exhibit 3.6 to Registrant’s Annual Report on Form 10-K filed on March 2, 2016).
3.7	Amended and Restated Certificate of Designations, Preferences and Rights of Series D Participating Convertible Preferred Stock of MoneyGram International, Inc., dated May 18, 2011 (Incorporated by reference from Exhibit 3.2 to Registrant's Current Report on Form 8-K filed May 23, 2011).
10.1	~~Termination~~Amendment No. 4 to Amended and Restated Credit Agreement and its related cover amendment, dated January 31, 2019, relating to Amended and Restated Credit Agreement dated ~~as of January 2, 2018, by and among~~March 28, 2013 between MoneyGram International, Inc., ~~Alipay (UK) Limited, Matrix Acquisition Corp.~~the lenders from time to time party thereto and ~~Alipay (Hong Kong) Holding Limited~~Bank of America, N.A. as Administrative Agent. (Incorporated by reference from Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed ~~January 2, 2018)~~February 1, 2019).
~~10.2~~	Amended and Restated Employment Agreement, dated March 2, 2018, by and between MoneyGram International, Inc. and W. Alexander Holmes (Incorporated by reference from Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed March 5, 2018).
10.3*	~~2018 Global Time-Based Restricted Stock Unit Award Agreement, dated March 1, 2018, between MoneyGram International, Inc. and W. Alexander Holmes.~~
10.4*	~~2018 Global Performance-Based Restricted Stock Unit Award Agreement, dated March 1, 2018, between MoneyGram International, Inc. and W. Alexander Holmes.~~
10.5*	~~2018 Global Performance-Based Cash Award Agreement, dated March 1, 2018, between MoneyGram International, Inc. and W. Alexander Holmes.~~



10.610.2+	Amendment No. ~~8 to Amended and Restated Master Trust Agreement, effective as of March 30, 2018, by and between MoneyGram Payment Systems, Inc. and Walmart Inc.~~
~~10.7*+~~	~~Amendment No. 9~~10 to Amended and Restated Master Trust Agreement, effective as of April ~~13, 2018,~~2, 2019, by and between MoneyGram Payment Systems, Inc. and Walmart Inc.
31.1*	Section 302 Certification of Chief Executive Officer
31.2*	Section 302 Certification of Chief Financial Officer
32.1**	Section 906 Certification of Chief Executive Officer
32.2**	Section 906 Certification of Chief Financial Officer
101*	The following financial statements, formatted in Extensible Business Reporting Language (“XBRL”): (i) Condensed Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017; (ii) Condensed Consolidated Statements of Operationsmaterials from MoneyGram's Quarterly Report on Form 10-Q for the three months ended March 31, ~~2018 and 2017;~~2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive (Loss) Income, ~~for the three months ended March 31, 2018 and 2017;~~ (iv) Condensed Consolidated Statements of ~~Cash Flows for the three months ended March 31, 2018 and 2017;~~Stockholders’ Deficit, (v) Condensed Consolidated ~~Statement~~Statements of ~~Stockholders' Deficit for the three months ended March 31, 2018;~~Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements.
*	Filed herewith.
**	Furnished herewith.
†	Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplementally copies of any of the omitted schedules upon request by the SEC; provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act (“Rule 24b-2”) for any schedules so furnished.
+	~~Confidential information has~~Portions of this exhibit have been omitted ~~from this Exhibit~~because they are both (i) not material and ~~has been filed separately with the SEC pursuant to a confidential treatment request under Rule 24b-2.~~(ii) would be competitively harmful if publicly disclosed.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	MoneyGram International, Inc.
	(Registrant)

May ~~8, 2018~~10, 2019	By:	/s/ JOHN D. STONEHAM
		John D. Stoneham
		Corporate Controller
		(Principal Accounting Officer)

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