MoneyGram 2007 Annual Report Download - page 120

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Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Other Commitments — The Company has agreements with certain other co-investors to provide funds related to investments in limited
partnership interests. As of December 31, 2007, the total amount of unfunded commitments related to these agreements was $1.6 million.
The Company has entered into a debt guarantee for $1.7 million on behalf of a money order and transfer agent. This debt guarantee will
be reduced as the agent makes payment on its debt to a bank. The term of the debt guarantee is for indefinite period, but is expected that
the agent will pay all outstanding amounts under its debt to the bank by March 2009. The Company accrued a liability of $0.3 million for
the fair value of this debt guarantee. A corresponding deferred asset was recorded and will be amortized on a straight line basis through
March 2009. The amortization expense is recognized as part of "Transaction and operations support" expense in the Consolidated
Statements of (Loss) Income.
Note 15 — Minimum Commission Guarantees
In limited circumstances as an incentive to new or renewing agents, the Company may grant minimum commission guarantees to an
agent for a specified period of time at a contractually specified amount. Under the guarantees, the Company will pay to the agent the
difference between the contractually specified minimum commission and the actual commissions earned by the agent.
As of December 31, 2007, the liability for minimum commission guarantees is $4.4 million. As of December 31, 2007, the maximum
amount that could be paid commission guarantees is $22.9 million over a weighted average remaining term of 2.3 years. The maximum
payment is calculated as the contractually guaranteed minimum commission times the remaining term of the contract and, therefore,
assumes that the agent generates no money transfer transactions during the remainder of its contract. However, under the terms of certain
agent contracts, the Company may terminate the contract if the projected or actual volume of transactions falls beneath a contractually
specified amount. With respect to commission guarantees expiring in 2007 and 2006, the Company paid or will pay $0.8 million and
$3.0 million respectively, under these guarantees, or approximately 14 percent and 40 percent of the estimated maximum payment for the
year, respectively.
Note 16 — Segment Information
The Company conducts its business through two reportable segments: Global Funds Transfer and Payment Systems. The Global Funds
Transfer segment primarily provides money transfer services through a 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. In addition, Payment Systems sells
money orders through financial institutions in the United States. One agent in the Global Funds Transfer segment accounted for 20, 17
and 13 percent of fee and investment revenue in 2007, 2006 and 2005, respectively.
The business segments are determined based upon factors such as the type of customers, the nature of products and services provided and
the distribution channels used to provide those services. Segment pre-tax operating income and segment operating margin are used to
evaluate performance and allocate resources. "Other unallocated expenses" includes corporate overhead and interest expense that is not
allocated to the segments.
The Company manages its investment portfolio on a consolidated level and the specific investment securities are not identifiable to a
particular segment. However, revenues are allocated to the segments based upon allocated average investable balances and an allocated
yield. Average investable balances are allocated to the segments based on the average balances generated by that segment's sale of
payment instruments. The investment yield is generally allocated based on the total average total investment yield. Gains and losses are
allocated based upon the allocation of average investable balances. The derivatives portfolio is also managed on a consolidated level and
the derivative instruments are not specifically identifiable to a particular segment. The total costs associated with the swap
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