Exhibit 99.1
MoneyGram International Announces Third Quarter Financial Results
Money Transfer Volume Grows 40 percent in Third Quarter;
Increases Guidance for 2006
MINNEAPOLIS--(BUSINESS WIRE)--October 18, 2006--MoneyGram International,
Inc. (NYSE:MGI):
- ----------------------------------------------------------------------
($ in millions) Q3 Q3 %
2006 2005 Change
-------------------------------
Revenue $296.4 $246.4 20.3%
Commissions Expense 146.7 119.8 22.4%
Net Revenue 149.8 126.6 18.3%
Expenses 107.8 87.7 23.0%
Income from Continuing Operations $30.0 $28.8 4.3%
Income from Discontinued Operations,
net of tax $0.0 $0.7 NM
Net Income $30.0 $29.5 1.7%
Earnings per Diluted Share
Income from Continuing Operations $0.35 $0.33 6.1%
Income from Discontinued Operations,
net of tax $0.00 $0.01 NM
Net Income $0.35 $0.34 2.9%
Operating Margin 14.2% 15.8% N/A
- ----------------------------------------------------------------------
MoneyGram International, Inc. (NYSE:MGI), today announced third quarter
2006 income from continuing operations of $30.0 million, or $0.35 per diluted
share, compared to income from continuing operations of $28.8 million, or $0.33
per diluted share in the third quarter 2005.
Third quarter 2006 results reflect:
-- Global Funds Transfer segment revenue growth of over 27 percent
compared to the third quarter 2005, driven by 40 percent growth of
money transfer transaction volume and 33 percent growth of money
transfer revenue.
-- Fee and other revenue of $200.9 million, up 28 percent from the third
quarter of 2005 driven by the growth in money transfer transaction
volume.
-- Net investment margin of 2.07 percent, as shown in Table One.
For comparative purposes, the third quarter of 2005 included the following
significant item:
- ----------------------------------------------------------------------
($ in millions) except for per share data Q3 2005
--------------
Cash flows from previously impaired investments and
income from limited partnership interests $3.9
--------------
Total income from continuing operations impact $3.9
==============
Total diluted earnings from continuing operations per
share, net of tax impact $0.03
- --------------------------------------------------------==============
Philip Milne, president and chief executive officer said, "We are very
pleased with the continued volume and revenue performance in the money transfer
business. Today's results reflect that consumers increasingly identify our brand
with convenient, reliable and affordable money transfer services. With another
quarter of consistent results behind us, we proactively and strategically
redeployed capital in growth initiatives like marketing and our retail strategy,
in addition to returning cash to shareholders via our share repurchase program."
Segment Highlights
MoneyGram operates in two reportable business segments, Global Funds
Transfer and Payment Systems.
Global Funds Transfer
($ in millions)
Q3 Q3 %
2006 2005 Change
-------------------------------
Revenue $213.5 $167.5 27.4%
Commissions Expense 87.9 63.7 38.0%
Net Revenue 125.5 103.8 21.0%
Operating Income $38.6 $35.2 9.5%
Operating Margin 18.1% 21.0%
For the Global Funds Transfer segment, which consists of money transfer
(including urgent bill payment) and retail money orders, revenue increased over
27 percent to $213.5 million and operating income increased over 9 percent to
$38.6 million in the third quarter of 2006 compared to the same period last
year. Revenue improved primarily as a result of money transfer volume growth and
a higher yield on the investment portfolio related to the money order business.
Growth in operating income was partially offset by increased commission costs,
and expenses primarily in money transfer marketing and retail expansion in
Western Europe. Operating margin in the third quarter 2006 was 18.1 percent
compared to 21.0 percent in the third quarter 2005. The decrease in margin was
primarily due to the increased commission costs and expenses in money transfer
marketing and retail expansion in Western Europe.
Money transfer transaction volume grew 40 percent and money transfer
revenue (see Table Four) grew 33 percent to $176.2 million compared to third
quarter of 2005. Money transfer revenue growth rates are lower than volume
growth rates primarily due to targeted pricing initiatives. The money transfer
agent network grew 24 percent from the third quarter of 2005 to approximately
104,000 agent locations. Money order transaction volume was down approximately 6
percent, following a trend of declining use of paper-based payment instruments.
Payment Systems
($ in millions)
Q3 Q3 %
2006 2005 Change
-----------------------------
Revenue $82.5 $78.9 4.5%
Commissions Expense 58.7 56.1 4.7%
Net Revenue 23.8 22.8 4.2%
Operating Income $7.5 $7.7 (2.3)%
Operating Margin 9.1% 9.8%
The Payment Systems segment includes PrimeLink/Official Check outsourcing
services, money orders sold by financial institutions and controlled
disbursement processing services. Payment Systems revenue increased over 4%
percent to $82.5 million in the third quarter of 2006 compared to the third
quarter of 2005 due to higher short-term interest rates. Operating income for
the segment was $7.5 million in the third quarter of 2006, compared to $7.7
million in the third quarter of 2005. The decrease in operating income was due
to the absence of income from previously impaired investments and from limited
partnership interests in the third quarter of 2006 versus $3.1 million of income
from these items in the third quarter of 2005. Operating margin for the third
quarter of 2006 was down 70 basis points compared to the third quarter of last
year for the same reason as the decrease in operating income.
Share Repurchase
During the third quarter of 2006, MoneyGram International purchased 580,000
shares at an average price of $30.18 per share. The company has 2.4 million
shares remaining under its current share buyback authorization.
2006 Outlook
Diluted earnings per share is expected to be in the range of $1.43 to
$1.46, up from previous guidance of $1.37 to $1.42. The full year estimate
includes approximately $12.4 million pretax income or $0.09 per diluted share
from cash flows from previously impaired investments and income from limited
partnership interests.
-- Net revenue (total revenue less total commissions) is expected to be
in the range of $590 million to $600 million, up from previous
guidance of $565 million to $590 million.
-- Net investment margin is expected to be in the range of 215 to 225
basis points up from previous guidance of 205 basis points to 215
basis points. The guidance includes the effect of cash flows from
previously impaired investments and income from limited partnership
interests.
-- Average portfolio balances are expected to be in the range of $6.2
billion to $6.4 billion for the year, a slight change from previous
guidance of $6.2 billion to $6.5 billion.
-- Income from continuing operations before taxes is expected to be in
the range of $174 million to $178 million, up from previous guidance
of $166 million to $174 million.
This guidance is dependent on a variety of factors, including those listed
below under Cautionary Information Regarding Forward-Looking Statements. From
time to time, events may occur which can result in unanticipated income or
losses. Our outlook does not reflect such events.
Description of Tables
Table One - Net Investment Revenue Analysis
Table Two - Consolidated Statements of Income
Table Three - Segment Information
Table Four - Money Transfer Revenue
Table Five - Unrestricted Assets
Conference Call and Webcast
MoneyGram International will have a conference call today at 5:00 p.m. EDT,
4:00 p.m. CDT to discuss third quarter results. Phil Milne, chief executive
officer, and Dave Parrin, chief financial officer, will speak on the call. The
conference call can be accessed by calling (800) 299-7098 in the U.S. The
participant passcode is 14356327. The conference call will also be webcast
through the company's website at www.moneygram.com. A replay of the conference
call and webcast will be available one hour after the call concludes through
5:00 p.m. EDT on November 3, 2006. The replay of the call is available at (888)
286-8010 in the U.S., or (617) 801-6888 internationally, passcode 20896590. 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
and S&P MidCap 400 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 over $970 million in revenue in 2005 and
approximately 104,000 global money transfer agent locations in 170 countries and
territories. For more information, visit the company's website at
www.moneygram.com.
Cautionary Information Regarding Forward-Looking Statements
The statements contained in this press release regarding the business of
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)
loss of key retail agents or inability to maintain our network in our Global
Funds Transfer segment; (b) loss of large financial institution customers in our
Payment Systems segment; (c) ability to successfully develop and timely
introduce new and enhanced products and services; (d) ability to protect the
intellectual property rights related to our existing and any new or enhanced
products and services; (e) litigation or investigations of us or our agents that
could result in material settlements, fines or penalties; (f) failure to
continue to compete effectively; (g) ability to manage risks relating to U.S.
federal and state regulatory requirements that could result in material
settlements, fines or penalties, or changes in our business operations; (h)
ability for us or our agents to maintain adequate banking relationships; (i)
imposition of additional regulatory requirements in any of the foreign countries
in which we operate; (j) ability to manage risks related to opening of new
retail locations and acquisition of businesses; (k) ability to maintain
effective internal controls; (l) ability to manage credit and fraud risks from
our retail agents; (m) ability to manage credit risk related to our investment
portfolio and our use of derivatives; (n) fluctuations in interest rates; (o)
material changes in the market value of securities we hold; (p) material slow
down or complete disruption in international migration patterns; (q) unexpected
liquidity needs; (r) ability to maintain efficient, secure and uninterrupted
operation of our computer network systems and data centers; (s) ability to
process and settle transactions accurately and efficiently; (t) ability to
manage risks associated with our international sales and operations; (u)
possible delay or prevention of an acquisition of our company which could
inhibit a stockholder's ability to receive a premium on their investment from a
possible sale of our company due to provisions contained in our charter
documents, our rights plan and Delaware law; and (v) other factors more fully
discussed in MoneyGram's filings with the Securities and Exchange Commission.
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
NET INVESTMENT REVENUE ANALYSIS
(Unaudited)
Three months ended
September 30 2006 vs
2006 2005 2005
------------------------------------
(Dollars in thousands)
Components of net investment
revenue:
Investment revenue $96,406 $91,634 $4,772
Investment commissions expense
(1) (63,520) (60,889) (2,631)
------------------------------------
Net investment revenue $32,886 $30,745 $2,141
====================================
Average balances:
Cash equivalents and investments $6,297,739 $6,707,017 ($409,278)
Payment service obligations (2) 4,743,030 5,255,146 (512,116)
Average yields earned and rates
paid (3):
Investment yield 6.07% 5.42% 0.65%
Investment commission rate 5.31% 4.60% 0.71%
Net investment margin 2.07% 1.82% 0.25%
Nine months ended
September 30 2006 vs
2006 2005 2005
--------------------------------
(Dollars in thousands)
Components of net investment
revenue:
Investment revenue $297,882 $272,188 $25,694
Investment commissions expense (1) (185,346) (177,656) (7,690)
--------------------------------
Net investment revenue $112,536 $94,532 $18,004
================================
Average balances:
Cash equivalents and investments $6,357,165 $6,750,129 ($392,964)
Payment service obligations (2) 4,813,544 5,297,765 (484,221)
Average yields earned and rates paid
(3):
Investment yield 6.26% 5.39% 0.87%
Investment commission rate 5.15% 4.48% 0.67%
Net investment margin 2.37% 1.87% 0.50%
(1) Investment commissions expense reported includes payments made to
financial institution customers based on short-term interest rate
indices on outstanding balances of official checks sold by that
financial institution, as well as costs associated with swaps and the
sale of receivables program.
(2) Commissions are paid to financial institution customers based upon
average outstanding balances generated by the sale of official checks
only. The average balance in the table reflects only the payment
service obligations for which commissions are paid and does not
include the average balance of the sold receivables ($390.0 million
and $387.9 million for the third quarter of 2006 and 2005,
respectively, and $385.9 million and $397.3 million for the nine
months ended September 30, 2006 and 2005, respectively) as these are
not recorded in the Consolidated Balance Sheets.
(3) Average yields/rates are calculated by dividing the applicable
amount shown in the "Components of net investment revenue" section by
the applicable amount shown in the "Average balances" section divided
by the number of days in the period presented and multiplied by the
number of days in the year. The "Net investment margin" is calculated
by dividing "Net investment revenue" by the "Cash Equivalents and
Investments" average balance divided by the number of days in the
period presented and multiplied by the number of days in the year.
TABLE TWO
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three months ended Nine months ended
September 30 September 30
2006 2005 2006 2005
----------- ---------- ---------- -----------
(Dollars in thousands, except per share data)
REVENUE:
Fee and other revenue $200,894 $156,375 $556,862 $444,173
Investment revenue 96,406 91,634 297,882 272,188
Net securities losses (869) (1,624) (1,728) (2,060)
----------- ---------- ---------- -----------
Total revenue 296,431 246,385 853,016 714,301
Fee commissions expense 83,144 58,940 226,246 167,344
Investment commissions
expense 63,520 60,889 185,346 177,656
----------- ---------- ---------- -----------
Total commissions
expense 146,664 119,829 411,592 345,000
----------- ---------- ---------- -----------
Net revenue 149,767 126,556 441,424 369,301
EXPENSES:
Compensation and
benefits 44,753 35,180 128,473 97,745
Transaction and
operations support 41,318 34,547 112,615 106,733
Depreciation and
amortization 10,419 8,102 28,197 23,187
Occupancy, equipment and
supplies 9,314 8,156 26,748 25,106
Interest expense 2,003 1,697 5,925 5,694
----------- ---------- ---------- -----------
Total expenses 107,807 87,682 301,958 258,465
----------- ---------- ---------- -----------
Income from continuing
operations before income
taxes 41,960 38,874 139,466 110,836
Income tax expense 11,922 10,076 41,787 28,185
----------- ---------- ---------- -----------
Income from continuing
operations 30,038 28,798 97,679 82,651
Income and gain from
discontinued operations,
net of tax - 740 - 740
----------- ---------- ---------- -----------
Net income $30,038 $29,538 $97,679 $83,391
=========== ========== ========== ===========
Basic earnings per share
Income from continuing
operations $0.36 $0.34 $1.16 $0.97
Income from discontinued
operations, net of tax 0.00 0.01 0.00 0.01
----------- ---------- ---------- -----------
Earnings per common share $0.36 $0.35 $1.16 $0.98
=========== ========== ========== ===========
Average outstanding
common shares 84,298 84,883 84,468 84,748
=========== ========== ========== ===========
Diluted earnings per
share
Income from continuing
operations $0.35 $0.33 $1.13 $0.96
Income from discontinued
operations, net of tax 0.00 0.01 0.00 0.01
----------- ---------- ---------- -----------
Earnings per common share $0.35 $0.34 $1.13 $0.97
=========== ========== ========== ===========
Average outstanding and
potentially dilutive
common shares 85,799 86,019 86,152 85,924
=========== ========== ========== ===========
TABLE THREE
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
2006
---------------------------------------------
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
---------------------------------------------
(Dollars in thousands)
Revenue:
Global Funds Transfer $182,987 $202,038 $213,451
Payment Systems 80,685 90,875 82,468
Operating income:
Global Funds Transfer 39,907 40,801 38,566
Payment Systems 10,323 16,207 7,539
Operating Margin:
Global Funds Transfer 21.8% 20.2% 18.1%
Payment Systems 12.8% 17.8% 9.1%
2005
---------------------------------------------
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
---------------------------------------------
(Dollars in thousands)
Revenue:
Global Funds Transfer $147,146 $159,742 $167,497 $175,232 $649,617
Payment Systems 80,769 80,258 78,888 81,704 321,619
Operating income:
Global Funds Transfer 26,429 29,682 35,230 30,336 121,677
Payment Systems 13,240 11,428 7,717 10,021 42,406
Operating Margin:
Global Funds Transfer 18.0% 18.6% 21.0% 17.3% 18.7%
Payment Systems 16.4% 14.2% 9.8% 12.3% 13.2%
TABLE FOUR
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
MONEY TRANSFER REVENUE
(Unaudited)
Money Transfer Revenue (including Urgent Bill Payment)
---------------------------------------------------------------
Quarter Ended
March 31 June 30 September 30 December 31 Total Year
---------------------------------------------------------------
(Dollars in thousands)
2003 $69,836 $75,840 $80,895 $83,338 $309,909
2004 86,198 95,174 102,764 111,234 395,370
2005 111,296 124,545 132,802 139,083 507,726
2006 144,987 161,917 176,220
TABLE FIVE
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
UNRESTRICTED ASSETS
(Unaudited)
September 30 December 31
2006 2005
------------ -----------
(Dollars in thousands)
Cash and cash equivalents $885,625 $866,391
Receivables 1,602,153 1,325,622
Investments 5,761,583 6,233,333
------------ -----------
8,249,361 8,425,346
Amounts restricted to cover payment service
obligations (7,878,315) (8,059,309)
------------ -----------
Unrestricted assets (1) $371,046 $366,037
============ ===========
(1) We have unrestricted cash and cash equivalents, receivables and
investments to the extent those assets exceed all payment service
obligations. These amounts are generally available; however,
management considers these amounts as providing additional assurance
that regulatory requirements are maintained during the normal
fluctuations in the value of investments.
CONTACT: MoneyGram International, Inc.
Investor Relations:
Tim Gallaher, 952-591-3840
ir@moneygram.com