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MONEYGRAM INTERNATIONAL INC (MGI)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 03/01/2007
Filed Period 12/31/2006

Table of contents

  • Page 1
    MONEYGRAM INTERNATIONAL INC (MGI) 10-K Annual report pursuant to section 13 and 15(d) Filed on 03/01/2007 Filed Period 12/31/2006

  • Page 2
    ... is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ No o The market value of common stock held by non-affiliates of the registrant, computed by reference to the last sales price as reported on the New York Stock Exchange as of June 30, 2006, the last business day of the...

  • Page 3
    TABLE OF CONTENTS Page PART I. Item 1. Business Global Funds Transfer Segment Payment Systems Segment Sales and Marketing Product Development and Enhancements Competition Regulation Intellectual Property Relationship with Viad Employees Executive Officers of the Registrant Available Information ...

  • Page 4
    ... control of marketing and promotional activities in the region. A subsidiary called MoneyGram Payment Systems Italy, S.r.l. was established, which operates the former Money Express network comprised of approximately 900 active Italian agents. During 2006, we continued to develop our retail strategy...

  • Page 5
    ... using a credit card or a debit from a bank account and through financial institutions. As of December 31, 2006, we offer this service only to residents of the United States. Finally, we offer our money transfer services through Company owned retail locations. In the United States, we have Company...

  • Page 6
    ... service, customers may contact our call center and a representative will collect the information over the telephone and enter it directly into our central data processing system. The funds are made available for payment to the designated recipient in various currencies throughout our agent network...

  • Page 7
    ... of our bill payment services when fully developed, will offer pay-by-phone, pay-by-IVR, pay by web, ACH processing and check conversion. Consumers may select one-time or recurring ACH and credit and debit card payments to our contracted billers. Payment Systems Segment Our Payment Systems segment...

  • Page 8
    ... continued to offer the MoneyGram Prepaid MasterCard card program in 2006, with the cards available for purchase and reload at designated MoneyGram agent locations throughout the United States. In 2006, we also began the implementation of a full suite of ACH and electronic bill payment services that...

  • Page 9
    ... employees to our compliance team around the world to ensure compliance with regulations of specific countries and regions. We have developed and are constantly enhancing our global compliance program to stay current with the most recent legal and regulatory changes. Anti-Money Laundering Compliance...

  • Page 10
    ... most current legal requirements. In most cases, our money transfer services are offered through third party agents with whom we contract and our ability to directly control our agent compliance is limited. As a money services business, the Company and its agents are required to establish anti-money...

  • Page 11
    ... United States and 294 full-time employees internationally. In addition, we use contractors to support certain of our domestic and international sales and marketing efforts. None of our employees are represented by a labor union and we consider our employee relations to be good. Executive Officers...

  • Page 12
    ... of MoneyGram and General Manager of Payment Systems from June 2004 to November 2005 and as General Manager and Vice President, Global Operations of Travelers from November 1994 to June 2004. Ms. Dutra joined the Company in 1988 as Manager of Payment Services of Travelers Express Company, Inc...

  • Page 13
    ... of our services, which could cause the agent to reduce its number of locations or hours of operation, or cease doing business altogether. A substantial portion of our transaction volume is generated by a limited number of key agents. During 2006 and 2005, our ten largest agents accounted for 31...

  • Page 14
    ... offering their own bill payment services. The Payment Systems segment of our business competes in a concentrated industry with a small number of large competitors. Our competitors in this segment are Integrated Payment Systems, a subsidiary of First Data Corporation, and Federal Home Loan Banks...

  • Page 15
    ... in many countries where we operate, particularly in the EU. We are also subject to financial services regulations, money transfer and payment instrument licensing regulations, currency control regulations, escheat laws, laws covering consumer privacy, data protection and information security and...

  • Page 16
    ... credit and fraud risks from our retail agents. The vast majority of our Global Funds Transfer business is conducted through independent agents that provide our products and services to consumers at their business locations. Our agents receive the proceeds from the sale of our payment instruments...

  • Page 17
    ...interest rates. We derive a substantial portion of our revenue from the investment of funds we receive from the sale of payment instruments, such as official checks and money orders, until these instruments are settled. We generally invest these funds in long-term fixed-income securities. We pay the...

  • Page 18
    ... migrate or work abroad could adversely affect our money transfer remittance volume or growth rate and could each have an adverse effect on our business, financial condition and results of operations. Our business may require cash in amounts greater than the amount of available credit facilities and...

  • Page 19
    ... exposure to foreign currency exchange rates. Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse affect on our business and stock price. Due to our July 1, 2004 spin-off and new status as a public company, 2005 was...

  • Page 20
    ...above. We also have a number of other smaller office locations in New York, Florida, Tennessee and in the United Kingdom, as well as small sales and marketing offices in France, Spain, Germany, Hong Kong, Greece, United Arab Emirates, Russia, Italy, South Africa, Australia, China and the Netherlands...

  • Page 21
    ..., of up to 2,000,000 common shares on the open market. On August 19, 2005, the Company's Board of Directors increased its share buyback authorization by 5,000,000 shares to a total of 7,000,000 shares. These authorizations were announced publicly in our press releases issued on November 18, 2004 and...

  • Page 22
    ... used in 2006 and the S&P 500 Index. Our common stock began trading on the New York Stock Exchange on June 22, 2004 on a when-issued basis in connection with the spin-off. The peer group index of payment services companies in 2006 consists of: Ceridian Corporation, CheckFree Corporation, CSG Systems...

  • Page 23
    ..., see "Management's Discussion and Analysis of Financial Condition and Results of Operations - Basis of Presentation." YEAR ENDED DECEMBER 31, (Amounts in thousands, except per share data) 2006 2005 2004 2003 2002 Operating Results Revenue Global Funds Transfer segment Payment Systems segment Other...

  • Page 24
    ... in this Annual Report on Form 10-K. Our Separation from Viad Corp On July 24, 2003, Viad announced a plan to separate its payment services segment, operated by Travelers, from its other businesses into a new company, and to effect a tax-free distribution of its shares in that company to Viad...

  • Page 25
    ... reporting purposes in accordance with the Emerging Issues Task Force ("EITF") Issue No. 02-11 Accounting for Reverse Spin-offs. The spin-off of New Viad has been accounted for pursuant to Accounting Principles Board ("APB") Opinion No. 29, Accounting for Non-Monetary Transactions. MoneyGram charged...

  • Page 26
    ... of processing fees on rebate checks and controlled disbursements, service charges on aged outstanding money orders and money order dispenser fees. Investment revenue consists of interest and dividends generated through the investment of cash balances received from the sale of official checks, money...

  • Page 27
    ... to agents on the sale of money orders. Fee commissions also include the amortization of capitalized incentive payments to agents. Investment commissions are amounts paid to financial institution customers based on the average outstanding cash balances generated by the sale of official checks, as...

  • Page 28
    ... at a faster rate than internationally originated transactions. Our simplified pricing initiatives include reducing the number of pricing tiers or bands and allow us to manage our price-volume dynamic while streamlining the point of sale process for our agents and customers. Our pricing philosophy...

  • Page 29
    ...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 ($382.6 million, $389.8 and $404.6 million for 2006, 2005...

  • Page 30
    ... of the operating expenses presented in Table 1. Compensation and benefits - Compensation and benefits includes salaries and benefits, management incentive programs, severance costs and other employee related costs. Compensation and benefits increased 30 percent in 2006 compared to 2005, primarily...

  • Page 31
    ... agent in the New York check casher channel. We continue to see a trend among state and federal regulators toward enhanced scrutiny of anti-money laundering compliance. As we continue to add staff resources and enhancements to our technology systems to address this trend, our transaction expenses...

  • Page 32
    ..., the Company formed MoneyGram Payment Systems Italy, a wholly-owned subsidiary, to operate the former Money Express network. The acquisition provides the Company with the opportunity for further network expansion and more control of marketing and promotional activities in the region. The operating...

  • Page 33
    ... unallocated expense represents pension and benefit obligation expense, as well as interim service fees paid to Viad. Table 6 - Global Funds Transfer Segment YEAR ENDED DECEMBER 31, (Amounts in thousands) 2006 2005 2004 2006 vs. 2005 2005 vs. 2004 Money transfer revenue Retail money orders Total...

  • Page 34
    ... money orders to money transfer. Operating income in 2004 included a $4.5 million impairment charge for capitalized technology costs. Table 7 - Payment Systems Segment 2006 vs. 2005 2005 vs. 2004 YEAR ENDED DECEMBER 31, (Amounts in thousands) 2006 2005 2004 Official check outsourcing services...

  • Page 35
    Table of Contents Payment Systems - Total revenue includes investment revenue, securities gains and losses, per-item fees charged to our official check financial institution customers and fees earned on our rebate processing business. Total revenue increased five percent in 2006 compared to 2005 ...

  • Page 36
    ... common stock, payment of dividends and the acquisition of MoneyExpress, as well as changes in our working capital resulting from the timing of normal operating activities. Table 9 - Cash Flows Provided By or Used In Operating Activities YEAR ENDED DECEMBER 31, (Amounts in thousands) 2006 2005 2004...

  • Page 37
    ...-time fee of $0.4 million in August 2006 for the placement of the preferred shares of the QSPE. Table 11 - Cash Flows Used in Financing Activities YEAR ENDED DECEMBER 31, (Amounts in thousands) 2006 2005 2004 Net debt activity Proceeds and tax benefit from exercise of stock options Preferred stock...

  • Page 38
    ... costs have been capitalized and will be amortized over the life of the debt. The remaining availability under the bank credit facility is available for general corporate purposes and to support letters of credit. Loans under the bank credit facility are guaranteed on an unsecured basis by MoneyGram...

  • Page 39
    ...August 2006, Congress approved the Pension Protection Act of 2006, which requires new funding rules for defined benefit plans. We are currently reviewing the impact of this new law. Included in the Consolidated Balance Sheets under "Accounts payable and other liabilities" and "Property and equipment...

  • Page 40
    ... intend to continue paying a quarterly dividend of $0.05 per share in 2007, subject to Board approval, which will be funded through cash generated from operating activities. Viad sold treasury stock in 1992 to its employee equity trust to fund certain existing employee compensation and benefit plans...

  • Page 41
    ... the Company's funding activity, investing activity and use of derivatives. The Company's Board of Directors has a Finance and Investment Committee, consisting of five independent Board members, which oversees its investment, capital, credit and foreign currency policies and strategies. The Board...

  • Page 42
    ... the extent that estimated cash flows are matched over time across various interest rate environments. The third element to our strategy is setting parameters for risk measures to help attain corporate margin objectives. Management develops actions based upon a number of factors that include...

  • Page 43
    ...from issuing money orders or performing money transfers if suspicious activity is noted or remittances are not received according to the agent's contract. The point of sale software requires each location to be re-authorized on a daily basis for transaction processing. Foreign Currency Exchange Risk...

  • Page 44
    ... investment securities are classified as available-for-sale, including securities being held for indefinite periods of time and those securities that may be sold to assist in the clearing of payment service obligations or in the management of securities. These securities are carried at market value...

  • Page 45
    ...using available market information and certain valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates determined may not be indicative of the amounts that could be realized in a current market exchange...

  • Page 46
    ... and management review. Following are the assumptions used to measure the projected benefit obligation as of December 31, and the net periodic benefit cost for the year ended December 31: 2006 2005 2004 Net periodic benefit cost: Discount rate Expected return on plan assets Rate of compensation...

  • Page 47
    ... expected return used to determine the benefit obligation. Changing the expected rate of return by 50 basis points would have increased/decreased 2006 pension expense by $0.6 million. See Note 2 to the Consolidated Financial Statements for further information on key accounting policies for MoneyGram...

  • Page 48
    ... customers, regulatory sanctions and damage to our reputation. • Agent Credit and Fraud Risks. 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. • Third Party Fraud. Fraudulent activity using...

  • Page 49
    ... this Annual Report on Form 10-K. Additionally, in 2006 the Company's Chief Executive Officer certified to the New York Stock Exchange ("NYSE") that he was not aware of any violation by the Company of the NYSE's corporate governance listing standards. No change in the Company's internal control over...

  • Page 50
    ...available in print free of charge to any stockholder who requests them at the address set forth below. We will disclose any amendments to or waivers of our Code of Ethics and our Always Honest Policy for directors or Principal Officers on our website. Item 11. EXECUTIVE COMPENSATION The information...

  • Page 51
    ..."Director Independence," "Policy and Procedures Regarding Transactions with Related Persons" and "Transactions with Related Persons" in our definitive Proxy Statement for our 2007 Annual Meeting of Stockholders is incorporated herein by reference. Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The...

  • Page 52
    ...by the undersigned, thereunto duly authorized. MoneyGram International, Inc. (Registrant) Date: March 1, 2007 By: /s/ Philip W. Milne Philip W. Milne Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below...

  • Page 53
    Douglas L. Rock * Albert M. Teplin * Timothy R. Wallace /s/ Teresa H. Johnson Teresa H. Johnson *As attorney-in-fact 49 Executive Vice President, General Counsel and Secretary Director Director

  • Page 54
    ... on November 22, 2005). †10.6 MoneyGram International, Inc. Amended and Restated Management and Line of Business Incentive Plan (Incorporated by reference from Exhibit 99.01 to Registrant's Current Report on Form 8-K filed on February 21, 2007). †10.7 Deferred Compensation Plan for Directors of...

  • Page 55
    ... 99.01 to Registrant's Current Report on Form 8-K filed on December 7, 2006). †10.15 MoneyGram International, Inc. Supplemental Profit Sharing Plan (Incorporated by reference from Exhibit 99.02 to Registrant's Current Report on Form 8-K filed on August 23, 2005). (The plan listed in Exhibit 10.11...

  • Page 56
    ... Current Report on Form 8-K filed on August 23, 2005). †10.34 Form of MoneyGram International, Inc. 2005 Omnibus Incentive Plan Performance-Based Restricted Stock Agreement (US Version) (Incorporated by reference from Exhibit 10.40 to Registrant's Annual Report on Form 10-K filed on March 1, 2006...

  • Page 57
    ...of Attorney Section 302 Certification of Chief Executive Officer Section 302 Certification of Chief Financial Officer Section 906 Certification of Chief Executive Officer Section 906 Certification of Chief Financial Officer * Filed herewith. †Indicates management contract or compensatory plan or...

  • Page 58
    Table of Contents MoneyGram International, Inc. Annual Report on Form 10-K Items 8 and 15(a) Index to Financial Statements Management's Responsibility Statement Reports of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2006 and 2005 Consolidated ...

  • Page 59
    ... statements are prepared by the Company in accordance with accounting principles generally accepted in the United States of America using, where appropriate, management's best estimates and judgments. The financial information presented throughout the Annual Report is consistent with that in...

  • Page 60
    ... the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company's internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring...

  • Page 61
    ... in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, management's assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the...

  • Page 62
    Table of Contents MONEYGRAM INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, (Amounts in thousands, except share data) 2006 2005 ASSETS Cash and cash equivalents Cash and cash equivalents (substantially restricted) Receivables (substantially restricted) Trading investments (...

  • Page 63
    ..., except per share data) 2006 2005 2004 REVENUE Fee and other revenue Investment revenue Net securities (losses) gains Total revenue Fee commissions expense Investment commissions expense Total commissions expense Net revenue EXPENSES Compensation and benefits Transaction and operations support...

  • Page 64
    Table of Contents MONEYGRAM INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, (Amounts in thousands) 2006 2005 2004 $124,054 $112,946 $ 86,412 NET INCOME OTHER COMPREHENSIVE (LOSS) INCOME Net unrealized losses on available-for-sale securities: Net ...

  • Page 65
    ...classified as available-for-sale Purchases of property and equipment Cash paid for acquisitions Proceeds from the sale of Game Financial Corporation, net of cash sold Other investing activities Net cash provided by (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Payments on debt...

  • Page 66
    ... Common Stock in Treasury (Amounts in thousands, except share data) December 31, 2003 Spin off from Viad Corp Net income Dividends ($0.20 per share) Employee benefit plans Treasury shares acquired Unrealized foreign currency translation adjustment Unrealized loss on available-for-sale securities...

  • Page 67
    ... of money orders, processing of official checks and share drafts, controlled disbursement processing and routine bill payment service. These products and services are offered to consumers and businesses through a network of agents and financial institution customers located around the world. On...

  • Page 68
    ... by (used in) continuing operating activities or stockholders' equity as previously reported. Cash and Cash Equivalents, Receivables and Investments - We generate funds from the sale of money orders, official checks (including cashier's checks, teller checks, and agent checks) and other payment...

  • Page 69
    ... with an investment rating of A or higher in an amount generally equal to the payment service obligation for those regulated payment instruments, namely teller checks, agent checks, money orders, and money transfers. Consequently, a significant amount of cash and cash equivalents, receivables and...

  • Page 70
    ... official check payment instruments, remittances and clearing adjustments; amounts owed to agents for funds paid to consumers on behalf of the Company; amounts owed under our sale of receivables program for collections on sold receivables; amounts owed to investment brokers for purchased securities...

  • Page 71
    ... stated at cost, net of accumulated depreciation. Property and equipment is depreciated using a straight-line method over the assets' estimated useful lives. Estimated useful lives by major asset category are generally as follows: Office furniture and equipment Leasehold improvements Agent equipment...

  • Page 72
    ...) on international money transfer transactions. Foreign exchange revenue is recognized at the time the exchange in funds occurs. - Other revenue consists of processing fees on rebate checks and controlled disbursements, service charges on aged outstanding money orders, money order dispenser fees and...

  • Page 73
    ... Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees. This method defines compensation cost for stock options as the excess, if any, of the quoted market price of the Company's stock at the date of the grant over the amount the employee must pay to acquire the stock. As our stock...

  • Page 74
    ...were reduced by $0.01. Cash used by operating activities and cash provided by financing activities during 2005 increased by $1.8 million as a result of the adoption of SFAS No. 123R. Recent Accounting Pronouncements - In May 2005, the Financial Accounting Standards Board ("FASB") issued SFAS No. 154...

  • Page 75
    ... Company formed MoneyGram Payment Systems Italy, a wholly-owned subsidiary, to operate the former Money Express network. The acquisition provides the Company with the opportunity for further network expansion and more control of marketing and promotional activities in the region. MoneyGram acquired...

  • Page 76
    ... Balance Sheets or the Consolidated Statements of Income. Viad Corp - MoneyGram is considered the divesting entity and treated as the "accounting successor" to Viad for financial reporting purposes. The continuing business of Viad is referred to as "New Viad." The spin off of New Viad was accounted...

  • Page 77
    ... ranging from the year 2029 to 2049, with auction dates typically 28 days after the date the Company purchases the security. The amortized cost and market value of available-for-sale investments at December 31, 2006, by contractual maturity, are shown below. Actual maturities may differ from...

  • Page 78
    ... investments backed by aircraft and manufactured housing collateral. Net securities gains in 2004 included a large gain from the early pay off of a security held in the investment portfolio. At December 31, 2006, the available-for-sale investments had the following aged unrealized losses: Less than...

  • Page 79
    ...-time fee of $0.4 million in August 2006 for the placement of the preferred shares of the QSPE. The Company evaluated the sale of the securities under the accounting guidance of SFAS No. 140 to determine if the transfer of securities to the acquiring party constituted a sale for accounting purposes...

  • Page 80
    ... to purchase or sell financial instruments at specified terms on a specified date or to exchange currency or interest payment streams based on the contract or notional amount. The Company uses derivative instruments primarily to manage exposures to fluctuations in interest rates and foreign currency...

  • Page 81
    .... Note 6. Sale of Receivables The Company has an agreement to sell undivided percentage ownership interests in certain receivables, primarily from our money order agents. In the fourth quarter of 2006, the Company extended the agreement through December 2007 and recognized a one-time fee of...

  • Page 82
    ..., the Company determined that an impairment existed on $4.5 million of software costs related primarily to a joint development project with Concord EFS utilizing ATMs to facilitate money transfers and other discontinued projects. The impairment loss was related to our Global Funds Transfer segment...

  • Page 83
    ... Goodwill acquired in 2006 and 2005 relates to the acquisition of Money Express and ACH Commerce, respectively, and was allocated to the Global Funds Transfer segment. The amount of goodwill expected to be deductible for tax purposes is not significant. The Company performed an annual assessment of...

  • Page 84
    ... and 2005, the interest rate under the bank credit facility was 5.86 percent and 5.02 percent, respectively, exclusive of the effect of commitment fees and other costs, and the facility fee was 0.125 percent. The loans under these facilities are unsecured obligations of MoneyGram, and are guaranteed...

  • Page 85
    ... the money transfer product is licensed by MPSI and therefore, the transaction revenue and related costs should be reflected by MPSI for statutory purposes. Income tax expense related to continuing operations for the year ended: (Amounts in thousands) 2006 2005 2004 Current: Federal State Foreign...

  • Page 86
    ... for 2005 includes $3.5 million of tax benefits from changes in estimates to previously estimated tax amounts resulting from new information received during the year. Deferred income taxes reflect temporary differences between amounts of assets and liabilities for financial reporting purposes and...

  • Page 87
    ... and New Viad of federal, state, local and foreign tax liabilities and tax liabilities resulting from the audit or other adjustment to previously filed tax returns. The Tax Sharing Agreement provides that through the Distribution Date, the results of MoneyGram and its subsidiaries' operations are...

  • Page 88
    ... June 30, 2004, treasury stock represented Viad common stock repurchased and held by Viad. On November 18, 2004, the Board of Directors authorized a plan to repurchase, at the Company's discretion, up to 2,000,000 shares of MoneyGram common stock with the intended effect of returning value to the...

  • Page 89
    ... than pensions for all Viad and non-MoneyGram employees, with the exception of one executive. The Company's funding policy is to make contributions to the postretirement benefits plans as benefits are required to be paid In May 2004, the FASB issued FASB Staff Position ("FSP") FAS 106-2, Accounting...

  • Page 90
    ... assumptions used in calculating the benefit obligation and net benefit cost as of and for the years ended December 31: Pension and SERPs 2006 2005 2004 2006 Postretirement Benefits 2005 2004 Net periodic benefit cost: Discount rate Expected return on plan assets Rate of compensation increase...

  • Page 91
    ... Company's pension, SERP and postretirement plans includes the following components for the years ended December 31: (Amounts in thousands) 2006 Pension and SERPs 2005 2004 2006 Postretirement Benefits 2005 2004 Service cost Interest cost Expected return on plan assets Amortization of prior service...

  • Page 92
    ... ended December 31, 2005, this accounting treatment required a reconciliation of the funded status of the Company's plans to the net amount recognized in the Consolidated Balance Sheet as follows: (Amounts in thousands) Pension and SERPs Postretirement Benefits Funded (unfunded) status Unrecognized...

  • Page 93
    ... account balances. MoneyGram does not have an employee stock ownership plan. Employee Equity Trust - Viad sold treasury stock in 1992 to its employee equity trust to fund certain existing employee compensation and benefit plans. In connection with the spin-off, Viad transferred 1,632,964 shares...

  • Page 94
    ... the Deferred Compensation Plan for Directors of MoneyGram International, Inc., non-employee directors may defer all or part of their retainers, fees and stock awards in the form of stock units or cash. Director deferred accounts are payable upon resignation from the Board. In 2005, the Board of...

  • Page 95
    ... table. Expected volatility is based on the historical volatility of the price of the Company's common stock since the spin-off on June 30, 2004. The Company uses historical information to estimate the expected term and forfeiture rates of options. The expected term represents the period of time...

  • Page 96
    ... valued at the quoted market price of the Company's common stock on the date of grant and expensed using the straight-line method over the vesting or service period of the award. Following is a summary of restricted stock activity: Total Shares Weighted Average Price Restricted stock outstanding at...

  • Page 97
    ... operations or financial position. Credit Facilities: At December 31, 2006, the Company has various reverse repurchase agreements, letters of credit and overdraft facilities totaling $2.3 billion to assist in the management of investments and the clearing of payment service obligations. These credit...

  • Page 98
    ... network of global retail agents and domestic money orders. In addition, Global Funds Transfer provides a full line of bill payment services. The Payment Systems segment primarily provides official check services for financial institutions in the United States, and processes controlled disbursements...

  • Page 99
    ... as reported in the financial statements for the year ended December 31: (Amounts in thousands) 2006 2005 2004 Revenue Global Funds Transfer: Money transfer, including bill payment Retail money order Payment Systems: Official check and outsourcing services Other Other Total revenue Operating Income...

  • Page 100
    ... MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) principally located in the United States. The table below presents revenue by major geographic area for the year ended December 31: (Amounts in thousands) 2006 2005 2004 United States Foreign...

  • Page 101
    Table of Contents MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 2005 Fiscal Quarters (Amounts in thousands, except per share data) First Second Third Fourth Revenues Commission expense Net revenues Operating expenses, excluding commission ...

  • Page 102
    ...Overseas Limited (United Kingdom) • MIL Overseas Nigeria Limited • MoneyGram Overseas (Pty) Limited South Africa • MoneyGram India Private Ltd. MoneyGram of New York LLC (Delaware) MoneyGram Payment Systems Canada, Inc. (Ontario) MoneyGram Payment Systems Italy S.r.l. (Italy) Travelers Express...

  • Page 103
    ... Inc., and management's report on the effectiveness of internal control over financial reporting, dated February 28, 2007, (which report expresses an unqualified opinion), appearing in the Annual Report on Form 10-K of MoneyGram International, Inc. for the year ended December 31, 2006. /s/ DELOITTE...

  • Page 104
    ... and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign the Form 10-K Annual Report of MoneyGram International, Inc. for the fiscal year ended December 31, 2006, and any...

  • Page 105
    ... Milne, certify that: 1. I have reviewed this Annual Report on Form 10-K of MoneyGram International, Inc. for the fiscal year ended December 31, 2006; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the...

  • Page 106
    ...Parrin, certify that: 1. I have reviewed this Annual Report on Form 10-K of MoneyGram International, Inc. for the fiscal year ended December 31, 2006; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the...

  • Page 107
    ... the Annual Report of MoneyGram International, Inc. (the "Company") on Form 10-K for the period ended December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Philip W. Milne, Chairman, President and Chief Executive Officer of the Company, certify...

  • Page 108
    ... with the Annual Report of MoneyGram International, Inc. (the "Company") on Form 10-K for the period ended December 31, 2006, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David J. Parrin, Executive Vice President and Chief Financial Officer of the...