Exhibit 99.1
MoneyGram International Announces Second Quarter 2008 Results
Money Transfer Revenue Grows 23 Percent
MINNEAPOLIS--(BUSINESS WIRE)--MoneyGram International, Inc. (NYSE:MGI), today announced preliminary second quarter 2008 financial results. The second quarter 2008 financial results are preliminary as the Company is finalizing the market valuation of embedded derivatives within the Series B Preferred Stock agreements. For further information, see the “Preliminary Second Quarter 2008 Results” section of this press release. Following are significant items affecting operating results during the second quarter of 2008:
- Fee and other revenue increased 21 percent to $281.9 million in the second quarter of 2008 from $232.5 million in the second quarter of 2007, driven by continued growth in money transfer transaction (including bill payment) volume.
- Global Funds Transfer segment fee and other revenue grew 22 percent in the second quarter of 2008, driven by 23 percent growth in money transfer transaction revenue and 19 percent growth in money transfer transaction (including bill payment) volume.
- We recorded $30.3 million of net securities losses including market-to-market losses in auction rate securities and other-than-temporary impairments on other asset-backed securities. The recapitalization on March 25, 2008, included funds to cover these losses.
- Investment commissions expense reflects a gain of $29.3 million from increases in the fair value of swaps. All swaps were terminated in the second quarter.
- EBITDA (earnings before interest, taxes, depreciation and amortization, and amortization of agent signing bonuses) and Adjusted EBITDA (EBITDA adjusted for net securities losses, swap termination, and severance costs) were $39.5 million and $58.2 million in the second quarter of 2008 compared to $68.8 million and $69.2 million in the second quarter of 2007.
- Interest expense increased to $24.0 million in the second quarter of 2008 from $2.0 million in 2007 due to higher outstanding debt as a result of the recapitalization completed in March 2008, partially offset by a $4.2 million gain from increases in the fair value of swaps.
- Expenses include $17.7 million of executive severance and related costs.
- Net loss of $16.0 million as a result of the aforementioned items.
Anthony Ryan, executive vice president and chief operating officer said, "I want to thank our employees for their efforts and contributions during the second quarter as we continued to execute our purpose; to help people and businesses by providing affordable, reliable, and convenient payment services. We were able to complete another strong quarter in the money transfer business complemented by exceptional growth in our agent network further demonstrating the global growth opportunity ahead of us.”
Mr. Ryan continued, “While we reported a net loss, we measure our financial performance based on certain cash flow metrics, including EBITDA, which was very strong in the second quarter despite the decrease in investment revenue as a result of our newly adopted investment policy and the repositioning of the investment portfolio. Our strong cash flow will support capital spending to rapidly grow our agent network and to invest in the infrastructure to support our 2008 growth plans.”
Segment Highlights
MoneyGram operates in two reportable business segments, Global Funds Transfer and Payment Systems.
Global Funds Transfer
| Three Months Ended | 2008 | Six Months Ended | 2008 | |||||||||||||||||||
| June 30 | vs. | June 30 | vs. | |||||||||||||||||||
| (Amounts in Thousands) | 2008 | 2007 | 2007 | 2008 | 2007 | 2007 | ||||||||||||||||
| Money Transfer (including Bill Payment) | ||||||||||||||||||||||
| Fee and other revenue | $ | 254,715 | $ | 207,926 | 23 | % | $ | 491,600 | $ | 396,776 | 24 | % | ||||||||||
| Investment revenue | 375 | 1,267 | -70 | % | 1,081 | 2,513 | -57 | % | ||||||||||||||
| Net securities (losses) gains | (346 | ) | (3 | ) | NM | (4,081 | ) | 5 | NM | |||||||||||||
| Total Money Transfer revenue | 254,744 | 209,190 | 22 | % | 488,600 | 399,294 | 22 | % | ||||||||||||||
| Retail Money Order and other | ||||||||||||||||||||||
| Fee and other revenue | 16,727 | 14,800 | 13 | % | 33,659 | 29,784 | 13 | % | ||||||||||||||
| Investment revenue | 5,021 | 23,047 | -78 | % | 13,870 | 44,416 | -69 | % | ||||||||||||||
| Net securities (losses) gains | (4,240 | ) | 53 | NM | (44,878 | ) | 232 | NM | ||||||||||||||
| Total Retail Money Order and other revenue | 17,508 | 37,900 | -54 | % | 2,651 | 74,432 | -96 | % | ||||||||||||||
| Total Global Funds Transfer revenue | ||||||||||||||||||||||
| Fee and other revenue | 271,442 | 222,726 | 22 | % | 525,259 | 426,560 | 23 | % | ||||||||||||||
| Investment revenue | 5,396 | 24,314 | -78 | % | 14,951 | 46,929 | -68 | % | ||||||||||||||
| Net securities (losses) gains | (4,586 | ) | 50 | NM | (48,959 | ) | 237 | NM | ||||||||||||||
| Total Global Funds Transfer revenue | 272,252 | 247,090 | 10 | % | 491,251 | 473,726 | 4 | % | ||||||||||||||
| Commissions expense | (128,551 | ) | (105,225 | ) | 22 | % | (245,114 | ) | (200,258 | ) | 22 | % | ||||||||||
| Net revenue | $ | 143,701 | $ | 141,865 | 1 | % | $ | 246,137 | $ | 273,468 | -10 | % | ||||||||||
| Operating (loss) income | $ | 30,620 | $ | 40,792 | -25 | % | $ | 26,948 | $ | 78,343 | -66 | % | ||||||||||
| Operating margin | 11.2 | % | 16.5 | % | 5.5 | % | 16.5 | % | ||||||||||||||
| NM = Not meaningful | ||||||||||||||||||||||
Total revenue for the Global Funds Transfer segment is comprised primarily of fees on money transfers, as well as fees on retail money orders and bill payment products, investment revenue and securities gains and losses. Total revenue increased $25.2 million, or 10 percent, in the second quarter of 2008 over the second quarter of 2007, despite an $18.9 million decrease in investment revenue and net securities losses of $4.6 million that were recorded from the investment portfolio and allocated to this segment. Excluding net securities losses, total segment revenue increased 12 percent.
Total fee and other revenue for the Global Funds Transfer segment increased $48.7 million, or 22 percent, in the second quarter of 2008 over the second quarter of 2007, and continues to be driven by the growth in the money transfer business. Money transfer fee and other revenue (including bill payment) grew 23 percent while money transfer transaction volume (including bill payment) increased 19 percent in the second quarter of 2008 as a result of network expansion and targeted pricing initiatives. The higher revenue growth rate versus transaction volume growth is due to changes in product mix (money transfer versus bill payment) and the Euro exchange rate.
Domestic originated transactions (including bill payment), which contribute lower revenue per transaction, increased 20 percent, in the second quarter of 2008, compared to the second quarter of 2007, while internationally originated transactions (outside of North America) increased at a rate of 23 percent from the prior year. Transaction volume to Mexico grew 3 percent in the second quarter of 2008 over the second quarter of 2007, above the market pace as reported by the Banco de Mexico.
The growth in money transfer continues to reflect our strategy of providing consumer choice through network expansion. The money transfer agent base expanded 26 percent, to about 157,000 locations, in the second quarter of 2008 over the second quarter of 2007, primarily due to increases in international agent locations.
Fee and other revenue for retail money order for the second quarter of 2008 increased 13 percent primarily due to the acquisition of Property Bridge, which closed in October 2007. Money order fees were down approximately 4% compared to the second quarter of 2007, consistent with the decline in volume. The decline in volume is expected to continue.
Investment revenue in Global Funds Transfer decreased 78 percent in the second quarter of 2008 compared to the second quarter of 2007, reflecting lower yields from the realignment of the investment portfolio away from asset-backed securities into highly liquid assets.
Commissions expense in the second quarter of 2008 increased 22 percent compared to the same period in 2007, primarily driven by higher money transfer transaction volume, tiered commission rates paid to certain agents and increases in the Euro exchange rate. Higher money transfer transaction volumes increased fee commissions expense by $20.2 million, while higher average commissions per transaction, primarily from tiered commissions, increased commissions by $4.8 million.
Operating income of $30.6 million and operating margin of 11.2 percent for the second quarter of 2008 reflects lower investment revenue, as well as the net securities losses of $4.6 million. Excluding net securities losses, operating income was $35.2 million and operating margin was 12.7 percent for the second quarter of 2008.
Payment Systems
| Three Months Ended | 2008 | Six Months Ended | 2008 | |||||||||||||||||||
| June 30 | vs. | June 30 | vs. | |||||||||||||||||||
| (Amounts in Thousands) | 2008 | 2007 | 2007 | 2008 | 2007 | 2007 | ||||||||||||||||
| Official check and payment processing revenue (losses) | ||||||||||||||||||||||
| Fee and other revenue | $ | 4,679 | $ | 3,384 | 38 | % | $ | 8,111 | $ | 6,640 | 22 | % | ||||||||||
| Investment revenue | 28,637 | 75,563 | -62 | % | 79,785 | 147,809 | -46 | % | ||||||||||||||
| Net securities (losses) gains | (25,284 | ) | (290 | ) | NM | (283,587 | ) | 376 | NM | |||||||||||||
| Total official check and payment processing revenue (losses) | 8,032 | 78,657 | -90 | % | (195,691 | ) | 154,825 | NM | ||||||||||||||
| Other revenue | ||||||||||||||||||||||
| Fee and other revenue | 5,621 | 6,262 | -10 | % | 11,009 | 12,139 | -9 | % | ||||||||||||||
| Investment revenue | 465 | 1,178 | -61 | % | 1,395 | 2,319 | -40 | % | ||||||||||||||
| Net securities (losses) gains | (421 | ) | (5 | ) | NM | (5,045 | ) | 6 | NM | |||||||||||||
| Total other revenue | 5,665 | 7,435 | -24 | % | 7,359 | 14,464 | -49 | % | ||||||||||||||
| Total Payment Systems revenue (losses) | ||||||||||||||||||||||
| Fee and other revenue | 10,300 | 9,646 | 7 | % | 19,120 | 18,779 | 2 | % | ||||||||||||||
| Investment revenue | 29,102 | 76,741 | -62 | % | 81,180 | 150,128 | -46 | % | ||||||||||||||
| Net securities (losses) gains | (25,705 | ) | (295 | ) | NM | (288,632 | ) | 382 | NM | |||||||||||||
| Total Payment Systems revenue (losses) | 13,697 | 86,092 | -84 | % | (188,332 | ) | 169,289 | -211 | % | |||||||||||||
| Commissions expense | 4,839 | (60,374 | ) | -108 | % | (92,719 | ) | (117,602 | ) | -21 | % | |||||||||||
| Net revenue (loss) | $ | 18,536 | $ | 25,718 | -28 | % | $ | (281,051 | ) | $ | 51,687 | -644 | % | |||||||||
| Operating (loss) income | $ | 3,904 | $ | 9,898 | -61 | % | $ | (310,949 | ) | $ | 19,464 | NM | ||||||||||
| Operating margin | 28.5 | % | 11.5 | % | NM | 11.5 | % | |||||||||||||||
| NM = Not meaningful | ||||||||||||||||||||||
Total revenue includes investment revenue, net securities gains and losses, per-item fees charged to official check financial institution customers and fees earned on the rebate processing business. The net revenue in the Payment Systems segment of $18.5 million in the second quarter of 2008 reflects the net securities losses of $25.7 million that were recorded in the investment portfolio and allocated to this segment. In addition, investment revenue decreased $47.6 million, or 62 percent, in the second quarter of 2008 due to the substantial decrease in investment balances and lower yields earned.
In the first quarter of 2008, MoneyGram initiated a restructuring of the official check business by changing the commission structure and exiting certain large customer relationships. The Company has termination agreements with nine of its top ten financial institutions and anticipates the balances associated with these institutions will runoff over twelve to eighteen months. At the end of April, the Company re-priced the commission rate paid to a substantial majority of its other official check financial institution customers. The new lower commission rates took effect mostly on June 1 and the remainder on July 1.
Commission expense decreased 108 percent in the second quarter of 2008, compared to the second quarter of 2007, reflecting a $29.3 million increase in the fair value of swaps and a lower interest rate environment.
Capital Transaction, Unrestricted Assets, Interest and Dividends
As previously announced, MoneyGram completed a capital transaction on March 25, 2008 pursuant to which the Company received $1.5 billion of gross equity and debt capital to support the long-term needs of the business and provide necessary capital due to investment portfolio losses. The equity component consisted of a $767.5 million private placement of participating convertible preferred stock. The debt component consisted of the issuance of $500.0 million of senior secured second lien notes with a ten year maturity. MoneyGram also entered into a senior secured amended and restated credit agreement amending the Company’s existing $350.0 million debt facility to increase the facility by $250.0 million to a total facility size of $600.0 million. The new facility includes $350.0 million in two term loan tranches and a $250.0 million revolving credit facility. The Company has availability under the revolving facility of approximately $100 million.
The net proceeds of the capital transaction were invested in cash and cash equivalents to supplement unrestricted assets, which stood at $348.6 million at the end of the second quarter of 2008. Under the terms of the equity instruments and debt issued in connection with the capital transaction, the Company has a limited ability to pay common stock dividends and, therefore, does not anticipate declaring any common stock dividends for the foreseeable future.
In the second quarter of 2008 the Company elected to pay cash interest on the $500.0 million of senior secured second lien notes and pay-in-kind dividends on the $767.5 million in participating convertible preferred stock.
Non-GAAP Measures
In addition to results presented in accordance with GAAP, this press release and related tables include certain non-GAAP financial measures, including a presentation of EBITDA. The following tables include a full reconciliation of these non-GAAP financial measures to the related GAAP financial measures.
MoneyGram believes these non-GAAP financial measures provide information useful to investors in understanding the underlying operations of the Company and its business and performance trends, as well as in facilitating comparisons with other companies in the money transfer industry. Specifically, MoneyGram believes the exclusion of net securities gains (losses), valuation gains on interest rate swaps and certain severance costs permits evaluation and comparison of results for on-going business operations. This adjusted view is used by management to internally assess the Company’s performance at both a consolidated and segment level, forecast results and allocate resources. Management does not find the GAAP financial measures particularly relevant or useful in evaluating the operating performance of our segments as they do not represent future period recurring costs or are costs outside of the Company’s control at this time.
We believe that EBITDA provides useful information to investors because it is an indicator of the strength and performance of our ongoing business operations, including our ability to fund capital expenditures, acquisitions and operations and to service debt. These calculations are commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare the operating performance and value of companies within our industry. In addition, the Company’s debt agreements require compliance with financial measures based on EBITDA. Finally, EBITDA is a financial measure used by management in reviewing results of operations, forecasting, assessing cash flow and capital, allocating resources and establishing employee incentive programs.
Although MoneyGram believes the above non-GAAP financial measures enhance investors’ understanding of its business and performance, these non-GAAP financial measures should not be considered an alternative to GAAP financial measures.
Preliminary Second Quarter 2008 Results
MoneyGram will be bifurcating embedded derivatives contained in its Series B Preferred Stock. The Company will recognize a liability equal to the fair value of the embedded derivatives, with a corresponding reduction in the value of the Series B Stock recognized in “Mezzanine equity” in the Consolidated Balance Sheets when we file our 10-Q for the quarter ended June 30, 2008. The fair value of the embedded derivatives will be remeasured each period, with changes in the fair value recognized as an unrealized gain or loss in the income statement.
The Company is finalizing the value of this embedded derivative; however, the preliminary fair value estimate of the liability is approximately $25 million as of June 30, 2008. The change in the fair value (reduction in the liability) during the second quarter is estimated to be approximately $12 million and will be reflected as a gain in our second quarter Consolidated Statements of (Loss) Income when we file our Quarterly Report on Form 10-Q for the quarter ended June 30, 2008. As the fair value estimates are still preliminary, the embedded derivatives are not reflected in Table One – Consolidated Statements of Income or Table Two – Consolidated Balance Sheet. The embedded derivatives will not affect the non-GAAP adjusted measures reflected in the Tables described below.
The Company and the Investors expect to enter into a separate binding agreement that clarifies the provisions of the Series B Preferred Stock that give rise to the embedded derivatives. This agreement when finalized, is expected to allow us to eliminate the option liability and the fair value accounting in the third quarter of 2008.
Description of Tables
Table One – Consolidated Statements of Income
Table Two - Consolidated Balance Sheet
Table Three – Portfolio Composition
Table Four – Unrestricted Assets
Table Five – Second Quarter Statements of Income (as Adjusted)
Table Six – Segment Results (as Adjusted)
Table Seven – EBITDA and Adjusted EBITDA
Table Eight – Credit Ratios
Table Nine – Common Shares, as Converted
Conference Call and Webcast
MoneyGram International will have a conference call and webcast including slides today at 5:00 p.m. EDT, 4:00 p.m. CDT to discuss the second quarter of 2008. Tony Ryan, chief operating officer, and Dave Parrin, chief financial officer, will speak on the call. The conference call can be accessed by calling (800) 638-5495 in the U.S. The participant passcode is 41540169. The conference call and accompanying slides will be available via webcast through the company’s website at www.moneygram.com. A replay of the conference call and webcast with accompanying slides will be available one hour after the call concludes through 5:00 p.m. EDT on August 21, 2008. The replay of the call is available at (888) 286-8010 for U.S. callers or 617-801-6888 for international callers, passcode 79394478. The Internet audio cast replay will be available at www.moneygram.com.
About MoneyGram International, Inc.
MoneyGram International, Inc. is a leading global payment services company. The company's major products and services include global money transfers, money orders and payment processing solutions for financial institutions and retail customers. MoneyGram is a New York Stock Exchange listed company with approximately 157,000 global money transfer agent locations in 180 countries and territories. For more information, visit the company's website at www.moneygram.com.
Forward Looking Statements
The statements contained in this press release regarding MoneyGram International, Inc. that are not historical facts are forward-looking statements and are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances due to a number of factors, including, but not limited to: (a) our substantial dividend and debt service obligations, as well as covenant requirements, adversely impact our ability to pay dividends on our common stock, to obtain additional financing and to operate and grow our business; (b) we may be unable to renew material retail agent customer contracts, or we may experience a loss of business from significant agents or customers; (c) we may be unable to operate our Payment Systems segment profitably pursuant to our new official check strategy and portfolio realignment; (d) stockholder lawsuits and other litigation or government investigations of the Company or its agents could result in material settlements, fines or penalties; (e) we may be unable to maintain existing or establish new banking relationships, including the Company’s clearing bank relationships, which could adversely affect our business, results of operation and our financial condition; (f) we may be unable to attract and retain key employees; (g) we may be unable to maintain sufficient capital to pursue our growth strategy and fund key strategic initiatives, such as product development and acquisitions; (h) we may be unable to successfully and timely implement new or enhanced technology and infrastructure, delivery methods and product and service offerings and we may invest in new products or services and infrastructure that are not successful; (i) we may be unable to successfully and timely implement new or enhanced technology and infrastructure, delivery methods and product and service offerings and we may invest in new products or services and infrastructure that are not successful; (j) we may be unable to compete against our large competitors, niche competitors or new competitors that may enter the markets in which we operate; (k) failure by us or our agents to comply with the laws and regulatory requirements in the U.S. and abroad, or changes in laws, regulations or other industry practices and standards could have an adverse effect on our results of operations; (l) offering money transfer transactions through agents in regions that are politically volatile or, in a limited number of cases, are subject to certain Office of Foreign Assets Control (“OFAC”) restrictions could cause contravention of U.S. law or regulations, subject us to fines and penalties and cause us reputational harm; (m) if we suffer system interruptions and system failures due to defects in our software, development delays and installation difficulties, or we suffer a material security breach of our systems, our business could be harmed; (n) in the event of a breakdown, catastrophic event, security breach, improper operation or any other event impacting our systems or processes or our vendors’ systems or processes, or improper action by our employees, agents, customer financial institutions or third-party vendors, we could suffer financial loss, loss of customers, regulatory sanctions and damage to our reputation; (o) we may be unable to scale our technology to match our business and transactional growth; (p) we may face credit and fraud exposure if we are unable to collect funds from our agents who receive the proceeds from the sale of our payment instruments; (q) inability by us to manage reputational damage to the Company’s brand due to the events leading to the Capital Transaction, as well as fraudulent or other unintended uses of our services could reduce the use and acceptance of our services; (r) opening new Company-owned retail locations and acquiring businesses subjects us to new risks and may cause a diversion of capital and management’s attention from our core business; (s) changes in immigration laws or other circumstances that discourage international migration could adversely affect our money transfer remittance volume or growth rate; (t) our business and results of operation may be adversely affected by political, economic or other instability in countries in which we have material agent relationships; (u) if we were unable to maintain compliance with the internal control provisions of Section 404 of the Sarbanes-Oxley Act of 2002 this could have a material adverse effect on our business and stock price; (v) additional risk factors may be described in our other filings with the Securities and Exchange Commission from time to time.
Actual results may differ materially from historical and anticipated results. These forward-looking statements speak only as of the date on which such statements are made, and MoneyGram undertakes no obligation to update such statements to reflect events or circumstances arising after such date.
| TABLE ONE | |||||||||||||||||||||||
| MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF (LOSS) INCOME | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Three months ended | Six months ended | ||||||||||||||||||||||
| June 30 | 2008 vs | June 30 | 2008 vs | ||||||||||||||||||||
| (Amounts in thousands, except per share data) | 2008 | 2007 | 2007 | 2008 | 2007 | 2007 | |||||||||||||||||
| REVENUE | |||||||||||||||||||||||
| Fee and other revenue | $ | 281,881 | $ | 232,533 | $ | 49,348 | $ | 544,678 | $ | 445,666 | $ | 99,012 | |||||||||||
| Investment revenue | 34,498 | 101,107 | (66,609 | ) | 96,063 | 197,161 | (101,098 | ) | |||||||||||||||
| Net securities (losses) gains | (30,291 | ) | (381 | ) | (29,910 | ) | (337,591 | ) | 483 | (338,074 | ) | ||||||||||||
| Total revenue | 286,088 | 333,259 | (47,171 | ) | 303,150 | 643,310 | (340,160 | ) | |||||||||||||||
| Fee commissions expense | 129,098 | 100,279 | 28,819 | 246,330 | 190,291 | 56,039 | |||||||||||||||||
| Investment commissions expense | (5,385 | ) | 65,320 | (70,705 | ) | 91,504 | 127,568 | (36,064 | ) | ||||||||||||||
| Total commissions expense | 123,713 | 165,599 | (41,886 | ) | 337,834 | 317,859 | 19,975 | ||||||||||||||||
| Net revenue (losses) | 162,375 | 167,660 | (5,285 | ) | (34,684 | ) | 325,451 | (360,135 | ) | ||||||||||||||
| EXPENSES | |||||||||||||||||||||||
| Compensation and benefits | 68,136 | 50,363 | 17,773 | 120,435 | 100,394 | 20,041 | |||||||||||||||||
| Transaction and operations support | 51,335 | 44,238 | 7,097 | 103,364 | 83,852 | 19,512 | |||||||||||||||||
| Depreciation and amortization | 14,288 | 12,211 | 2,077 | 28,506 | 23,891 | 4,615 | |||||||||||||||||
| Occupancy, equipment and supplies | 12,391 | 10,985 | 1,406 | 23,613 | 21,402 | 2,211 | |||||||||||||||||
| Interest expense | 24,008 | 1,983 | 22,025 | 38,797 | 3,941 | 34,856 | |||||||||||||||||
| Debt extinguishment loss | - | - | - | 1,499 | - | 1,499 | |||||||||||||||||
| Total expenses | 170,158 | 119,780 | 50,378 | 316,214 | 233,480 | 82,734 | |||||||||||||||||
| (Loss) income before income taxes | (7,783 | ) | 47,880 | (55,663 | ) | (350,898 | ) | 91,971 | (442,869 | ) | |||||||||||||
| Income tax expense | 8,259 | 15,521 | (7,262 | ) | 25,999 | 29,773 | (3,774 | ) | |||||||||||||||
| NET (LOSS) INCOME | $ | (16,042 | ) | $ | 32,359 | $ | (48,401 | ) | $ | (376,897 | ) | $ | 62,198 | $ | (439,095 | ) | |||||||
| Basic (loss) earnings per common share | $ | (0.49 | ) | $ | 0.39 | $ | (0.88 | ) | $ | (4.88 | ) | $ | 0.75 | $ | (5.63 | ) | |||||||
| Diluted (loss) earnings per common share | $ | (0.49 | ) | $ | 0.38 | $ | (0.87 | ) | $ | (4.88 | ) | $ | 0.74 | $ | (5.62 | ) | |||||||
| TABLE TWO | |||||||||
| MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||
| (Unaudited) | |||||||||
| June 30, | December 31, | ||||||||
| (Amounts in thousands, except share data) | 2008 | 2007 | |||||||
| ASSETS | |||||||||
| Cash and cash equivalents | $ | - | $ | - | |||||
| Cash and cash equivalents (substantially restricted) | 4,486,064 | 1,552,949 | |||||||
| Receivables, net (substantially restricted) | 1,959,438 | 1,408,220 | |||||||
| Trading investments (substantially restricted) | 35,210 | 62,105 | |||||||
| Available for sale investments (substantially restricted) | 504,404 | 4,187,384 | |||||||
| Property and equipment | 160,676 | 171,008 | |||||||
| Derivative financial instruments | - | 1,647 | |||||||
| Intangible assets | 15,297 | 17,605 | |||||||
| Goodwill | 438,839 | 438,839 | |||||||
| Other assets | 178,540 | 95,254 | |||||||
| Total assets | $ | 7,778,468 | $ | 7,935,011 | |||||
| LIABILITIES | |||||||||
| Payment service obligations | $ | 6,636,557 | $ | 7,762,470 | |||||
| Debt | 978,804 | 345,000 | |||||||
| Derivative financial instruments | - | 30,370 | |||||||
| Pension and other postretirement benefits | 88,650 | 85,451 | |||||||
| Deferred tax liabilities | 18,281 | 11,459 | |||||||
| Accounts payable and other liabilities | 203,375 | 188,778 | |||||||
| Total liabilities | 7,925,667 | 8,423,528 | |||||||
| MEZZANINE EQUITY | |||||||||
Participating Convertible Preferred Stock-Series B, $0.01 par value, 800,000 shares authorized, 495,000 shares issued and outstanding | 474,002 | - | |||||||
Participating Convertible Preferred Stock-Series B-1, $0.01 par value, 500,000 shares authorized, 272,500 shares issued and outstanding | 264,494 | - | |||||||
| Total mezzanine equity | 738,496 | - | |||||||
| STOCKHOLDERS' DEFICIT | |||||||||
Preferred shares - undesignated, $0.01 par value, 5,000,000 authorized, none issued | - | - | |||||||
Preferred shares - junior participating, $0.01 par value, 2,000,000 authorized, none issued | - | - | |||||||
Common shares, $0.01 par value, 250,000,000 shares authorized, 88,556,077 shares issued | 886 | 886 | |||||||
| Additional paid-in capital | 49,624 | 73,077 | |||||||
| Retained loss | (764,766 | ) | (387,479 | ) | |||||
| Unearned employee benefits | (963 | ) | (3,280 | ) | |||||
| Accumulated other comprehensive loss | (17,915 | ) | (21,715 | ) | |||||
Treasury stock: 6,000,173 and 5,910,458 shares at June 30, 2008 and December 31, 2007, respectively | (152,561 | ) | (150,006 | ) | |||||
| Total stockholders' deficit | (885,695 | ) | (488,517 | ) | |||||
| Total liabilities, mezzanine equity and stockholders' deficit | $ | 7,778,468 | $ | 7,935,011 | |||||
| TABLE THREE | |||||||||
| MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||
| INVESTMENT PORTFOLIO COMPOSITION | |||||||||
| (Unaudited) | |||||||||
| (Amounts in thousands) | June 30, 2008 | March 31, 2008 | December 31, 2007 | ||||||
| Cash and cash equivalents | $ | 4,486,064 | $ | 4,654,341 | $ | 1,552,949 | |||
| Trading investments (1) | 35,210 | 56,413 | 62,105 | ||||||
| Available-for-sale investments: | |||||||||
| Obligations of states and political sub-divisions | - | - | 597,379 | ||||||
| Commercial mortgage-backed securities | - | - | 253,823 | ||||||
| Government agency securities (2) | 448,532 | 476,473 | 1,786,805 | ||||||
| Other asset-backed securities (3) | 55,872 | 64,580 | 1,318,242 | ||||||
| Corporate debt securities | - | - | 218,367 | ||||||
| Preferred and common stock | - | - | 12,768 | ||||||
| Total available-for-sale investments | 504,404 | 541,053 | 4,187,384 | ||||||
| Total investment portfolio | $ | 5,025,678 | $ | 5,251,807 | $ | 5,802,438 | |||
(1) Auction rate preferred securities are classified as trading. | |||||||||
(2) Investments included in this category consist solely of investments collateralized by U.S. government agencies at June 30 and March 31, 2008. | |||||||||
(3) Other asset-backed securities consist of collateralized debt obligations that were written down but not sold in connection with the portfolio restructuring; total par value of $762 million. | |||||||||
| TABLE FOUR | ||||||||
| MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||||
| UNRESTRICTED ASSETS | ||||||||
| (Unaudited) | ||||||||
| June 30 | March 31 | |||||||
| (Amounts in thousands) | 2008 | 2008 | ||||||
| Cash and cash equivalents | $ | 4,486,064 | $ | 4,654,341 | ||||
| Receivables, net | 1,959,438 | 1,783,241 | ||||||
| Government agency securities | 448,532 | 476,473 | ||||||
| 6,894,034 | 6,914,055 | |||||||
| Amounts restricted to cover payment service obligations | (6,636,557 | ) | (6,656,163 | ) | ||||
Excess unrestricted assets, excluding auction rate and other asset-backed securities | 257,477 | 257,892 | ||||||
| Trading investments (auction rate securities) | 35,210 | 56,413 | ||||||
| Other asset-backed securities | 55,872 | 64,580 | ||||||
| 91,082 | 120,993 | |||||||
| Adjusted excess unrestricted assets | $ | 348,559 | $ | 378,885 | ||||
| TABLE FIVE | |||||||||||||||||||||||||
| MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF (LOSS) INCOME (AS ADJUSTED) | |||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||
| As Reported | Adjusted | As Reported | Adjusted | ||||||||||||||||||||||
| (Amounts in thousands) | Q2 2008 | Adjustments | Q2 2008 | Q2 2007 | Adjustments | Q2 2007 | |||||||||||||||||||
| REVENUE | |||||||||||||||||||||||||
| Fee and other revenue | $ | 281,881 | $ | - | $ | 281,881 | $ | 232,533 | $ | - | $ | 232,533 | |||||||||||||
| Investment revenue | 34,498 | - | 34,498 | 101,107 | - | 101,107 | |||||||||||||||||||
| Net securities losses | (30,291 | ) | 30,291 | (1) | - | (381 | ) | 381 | (1) | - | |||||||||||||||
| Total revenue | 286,088 | 30,291 | 316,379 | 333,259 | 381 | 333,640 | |||||||||||||||||||
| Fee commissions expense | 129,098 | - | 129,098 | 100,279 | - | 100,279 | |||||||||||||||||||
| Investment commissions expense | (5,385 | ) | 29,273 | (2) | 23,888 | 65,320 | - | 65,320 | |||||||||||||||||
| Total commissions expense | 123,713 | 29,273 | 152,986 | 165,599 | - | 165,599 | |||||||||||||||||||
| Net revenue | 162,375 | 1,018 | 163,393 | 167,660 | 381 | 168,041 | |||||||||||||||||||
| EXPENSES | |||||||||||||||||||||||||
| Compensation and benefits | 68,136 | (16,524 | ) | (3) | 51,612 | 50,363 | - | 50,363 | |||||||||||||||||
| Transaction and operations support | 51,335 | (1,129 | ) | (3) | 50,206 | 44,238 | - | 44,238 | |||||||||||||||||
| Depreciation and amortization | 14,288 | - | 14,288 | 12,211 | - | 12,211 | |||||||||||||||||||
| Occupancy, equipment and supplies | 12,391 | - | 12,391 | 10,985 | - | 10,985 | |||||||||||||||||||
| Interest expense | 24,008 | 4,235 | (2) | 28,243 | 1,983 | - | 1,983 | ||||||||||||||||||
| Total expenses | 170,158 | (13,418 | ) | 156,740 | 119,780 | - | 119,780 | ||||||||||||||||||
| (Loss) income before income taxes | $ | (7,783 | ) | $ | 14,436 | $ | 6,653 | $ | 47,880 | $ | 381 | $ | 48,261 | ||||||||||||
(1) Represents realized gains (losses) on securities, other-than-temporary impairments on available-for-sale investments and unrealized losses on trading investments. | |||||||||||||||||||||||||
| (2) Mark-to-market valuation gain on interest rate swaps, which were terminated in June 2008. | |||||||||||||||||||||||||
| (3) Executive severance and related costs. | |||||||||||||||||||||||||
| TABLE SIX | ||||||||||||||||||||||||||||
| MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES | ||||||||||||||||||||||||||||
| SEGMENT RESULTS (AS ADJUSTED) | ||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||
| GLOBAL FUNDS TRANSFER SEGMENT | ||||||||||||||||||||||||||||
| As Reported | As Adjusted | As Reported | As Adjusted | |||||||||||||||||||||||||
| (Amounts in thousands) | Q2 2008 | Adjustments | Q2 2008 | Q2 2007 | Adjustments | Q2 2007 | ||||||||||||||||||||||
| Money Transfer Revenue | ||||||||||||||||||||||||||||
| Fee and other revenue | $ | 254,715 | $ | - | $ | 254,715 | $ | 207,926 | $ | - | $ | 207,926 | ||||||||||||||||
| Investment revenue | 375 | 375 | 1,267 | 1,267 | ||||||||||||||||||||||||
| Net securities losses | (346 | ) | 346 | (1) | - | (3 | ) | 3 | (1) | - | ||||||||||||||||||
| Retail Money Order and other | ||||||||||||||||||||||||||||
| Fee and other revenue | 16,727 | 16,727 | 14,800 | 14,800 | ||||||||||||||||||||||||
| Investment revenue | 5,021 | 5,021 | 23,047 | 23,047 | ||||||||||||||||||||||||
| Net securities (losses) gains | (4,240 | ) | 4,240 | (1) | - | 53 | (53 | ) | (1) | - | ||||||||||||||||||
| Total Global Funds Transfer Revenue | 272,252 | 4,586 | 276,838 | 247,090 | (50 | ) | 247,040 | |||||||||||||||||||||
| Commissions Expense | (128,551 | ) | - | (128,551 | ) | (105,225 | ) | - | (105,225 | ) | ||||||||||||||||||
| Net Revenue | $ | 143,701 | $ | 4,586 | $ | 148,287 | $ | 141,865 | $ | (50 | ) | $ | 141,815 | |||||||||||||||
| Operating income | $ | 30,620 | $ | 4,586 | $ | 35,206 | $ | 40,792 | $ | (50 | ) | $ | 40,742 | |||||||||||||||
| Operating Margin | 11.2 | % | 12.7 | % | 16.5 | % | 16.5 | % | ||||||||||||||||||||
| PAYMENT SYSTEMS SEGMENT | ||||||||||||||||||||||||||||
| As Reported | As Adjusted | As Reported | As Adjusted | |||||||||||||||||||||||||
| (Amounts in thousands) | Q2 2008 | Adjustments | Q2 2008 | Q2 2007 | Adjustments | Q2 2007 | ||||||||||||||||||||||
| Fee and other revenue | $ | 10,300 | $ | - | $ | 10,300 | $ | 9,646 | $ | - | $ | 9,646 | ||||||||||||||||
| Investment revenue | 29,102 | - | 29,102 | 76,741 | - | 76,741 | ||||||||||||||||||||||
| Net securities losses | (25,705 | ) | 25,705 | (1) | - | (295 | ) | 295 | (1) | - | ||||||||||||||||||
| Total Payment Systems Revenue | 13,697 | 25,705 | 39,402 | 86,092 | 295 | 86,387 | ||||||||||||||||||||||
| Commissions Expense | 4,839 | (29,273 | ) | (2) | (24,434 | ) | (60,374 | ) | - | (60,374 | ) | |||||||||||||||||
| Net Revenue | $ | 18,536 | $ | (3,568 | ) | $ | 14,968 | $ | 25,718 | $ | 295 | $ | 26,013 | |||||||||||||||
| Operating income | $ | 3,904 | $ | (3,568 | ) | $ | 336 | $ | 9,898 | $ | 295 | $ | 10,193 | |||||||||||||||
| Operating Margin | 28.5 | % | 0.9 | % | 11.5 | % | 11.8 | % | ||||||||||||||||||||
(1) Represents realized gains (losses) on securities, other-than-temporary impairments on available-for-sale investments and unrealized losses on trading investments. | ||||||||||||||||||||||||||||
| (2) Mark-to-market valuation gain on interest rate swaps, which were terminated in June 2008. | ||||||||||||||||||||||||||||
| TABLE SEVEN | |||||||
| MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES | |||||||
| EBITDA AND ADJUSTED EBITDA | |||||||
| (Unaudited) | |||||||
| (Amounts in thousands) | Q2 2008 | Q2 2007 | |||||
| (Loss) income before income taxes | $ | (7,783 | ) | $ | 47,880 | ||
| Interest expense | 24,008 | 1,983 | |||||
| Depreciation and amortization | 14,288 | 12,211 | |||||
| Amortization of agent signing bonuses | 9,007 | 6,752 | |||||
| EBITDA (1) | 39,520 | 68,826 | |||||
| Net securities losses (2) | 30,291 | 381 | |||||
| Swap valuation gains (3) | (29,273 | ) | - | ||||
| Severance and related costs (4) | 17,653 | - | |||||
| Adjusted EBITDA | $ | 58,191 | $ | 69,207 | |||
(1) EBITDA represents earnings before interest, taxes, depreciation and amortization, and amortization of agent signing bonuses. |
(2) Represents realized gains (losses) on securities, other-than-temporary impairments on available-for-sale investments and unrealized losses on trading investments. |
| (3) Mark-to-market valuation gain on interest rate swaps, which were terminated in June 2008. |
| (4) Executive severance and related costs. |
| TABLE EIGHT | ||||
| MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES | ||||
| CREDIT RATIOS | ||||
| (Unaudited) | ||||
| INTEREST COVERAGE RATIO | ||||
| As of | ||||
| (Amounts in thousands, except ratios) | June 30, 2008 | |||
| Cash interest expense (1) | ||||
| Senior Credit Facility | $ | 9,176 | ||
| Second Lien Notes | 17,483 | |||
| Total cash interest expense | $ | 26,659 | ||
| Adjusted EBITDA | $ | 58,191 | ||
| Adjusted EBITDA / Cash Interest Expense | 2.2 | x | ||
| SENIOR SECURED DEBT RATIO | ||||
| As of | ||||
| (Amounts in thousands, except ratios) | June 30, 2008 | |||
| Outstanding debt | ||||
| Senior Credit Facility (2) | $ | 494,375 | ||
| Second Lien Notes | 500,000 | |||
| Total debt | $ | 994,375 | ||
| Adjusted EBITDA, annualized (3) | $ | 232,764 | ||
| Total debt / Adjusted EBITDA, annualized (3) | 4.3 | x | ||
| (1) Represents interest paid in cash in the second quarter of 2008. Amount excludes swap valuation | |
| gains of $4.2 million and amortization of discount on debt and deferred financing costs of $1.6 million. | |
| (2) This amount represents the principal due at maturity and does not include the unamortized discount | |
| on the debt of $16.2 million included in the "Debt" line in the Consolidated Balance Sheets. | |
| (3) For illustrative purposes only. Bank credit agreement requires ratio to be calculated on the most | |
| recently ended four fiscal quarters beginning with the March 31, 2009 quarter. | |
| TABLE NINE | ||||
| MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES | ||||
| COMMON SHARES, AS CONVERTED | ||||
| (Unaudited) | ||||
| (Amounts in thousands, except per share data) | ||||
| COMMON SHARES, AS CONVERTED | ||||
| Preferred stock, as converted at March 31, 2008 | 307,729 | |||
| Q2 2008 paid-in-kind dividend on preferred stock | 9,598 | |||
| Preferred stock, as converted at June 30, 2008 (1) | 317,327 | |||
| Common shares outstanding at June 30 2008 (2) | 82,464 | |||
| Common shares at June 30, 2008, as converted | 399,791 | |||
| CALCULATION OF PAID-IN-KIND DIVIDEND | ||||
| Preferred shares value at March 31, 2008 | 769,322 | |||
| Multiplied by the dividend rate (3) | 3.13 | % | ||
| Value of preferred dividend for Q2 2008 | 23,994 | |||
| Divided by the conversion price | $ | 2.50 | ||
| Equivalent common shares | 9,598 | |||
(1) Preferred shares are excluded from earnings per share calculations as they are anti-dilutive. |
(2) For earnings per share purposes, weighted average outstanding shares for the period are used compared to actual outstanding shares. For Q2 2008, these two numbers are the same as there was no share activity. |
(3) The quarterly dividend rate is calculated by applying an actual/365 convention to the pay-in-kind annual dividend rate of 12.5 percent. |
CONTACT:
MoneyGram International, Inc.
Investor Relations:
Don Duffy, 952-591-3840
ir@moneygram.com