MoneyGram 2008 Annual Report Download - page 42

Table of Contents
Transaction and operations support costs increased $26.9 million, or 16 percent, in 2007 compared to 2006, primarily due to higher costs
from the transaction and agent location growth in the money transfer business, as well as an impairment of $6.4 million of goodwill
related to a component of our Payment Systems segment. See further discussion of the impairment recorded in Note 9 — Intangibles and
Goodwill of the Notes to Consolidated Financial Statements. Professional fees increased $5.3 million primarily due to increased
contractor and consulting fees to support compliance activities and enhancements to our technology systems, as well as increased credit
servicing fees. Provision for loss increased in 2007 by $4.6 million over 2006, with no noticeable trends driving the increase other than
the growth in agents. Marketing costs increased $3.2 million, agent forms and supplies costs increased $2.7 million and licensing fees
increased by $2.5 million, all primarily due to the increase in agent locations. These increases were offset by a $4.1 million decrease in
directors deferred compensation expense from the decline in the price of our common stock. The change in the Euro exchange rate, which
is reflected in each of the amounts discussed above, increased transaction and operations support by approximately $6.0 million
compared to 2006.
Depreciation and amortization — Depreciation and amortization expense includes depreciation on point of sale equipment, agent
signage, computer hardware and software, capitalized software development costs, office furniture, equipment and leasehold
improvements and amortization of intangible assets. Depreciation and amortization increased $4.7 million, or nine percent, in 2008
compared to 2007. Our investment in agent equipment and signage in connection with network growth increased depreciation expense by
$3.3 million, while our investment in computer hardware and capitalized software to enhance our support functions increased
depreciation expense by $0.3 million. Amortization of leasehold improvements increased by $0.9 million primarily from build-outs at our
main offices to support headcount additions and update aging facilities. The change in the Euro exchange rate, which is reflected in each
of the amounts discussed above, increased depreciation and amortization by approximately $0.7 million in 2008.
Depreciation and amortization expense increased $13.0 million, or 33 percent, in 2007 compared to 2006. Depreciation of agent
equipment and signage and amortization of our investment in computer hardware and capitalized software in prior periods increased
$5.3 million, and amortization of purchased software increased $5.1 million. The increase in agent equipment and signage is the result of
agent growth in prior periods, while the increase from hardware and software relates to our investment in our infrastructure to support our
business growth. We believe these investments helped drive the growth in the money transfer product. In addition, amortization of
acquired intangible assets increased by $1.2 million, primarily from the acquisition of PropertyBridge, Inc. ("PropertyBridge") on
October 1, 2007. See further discussion in Note 9 — Intangibles and Goodwill of the Notes to Consolidated Financial Statements.
We are developing a new system to provide improved connections between our agents and our marketing, sales, customer service and
accounting functions. The new system and associated processes are intended to increase the flexibility of our back office and improve
operating efficiencies. In 2008 and 2007, we capitalized software costs of approximately $3.8 million and $3.7 million, respectively,
related to the enhancements to our financial processing systems that will impact future depreciation and amortization.
Occupancy, equipment and supplies — Occupancy, equipment and supplies includes facilities rent and maintenance costs, software and
equipment maintenance costs, freight and delivery costs and supplies. Occupancy, equipment and supplies expenses increased
$1.3 million, or three percent, for 2008 compared to 2007 from higher rent, software maintenance and building operating costs, partially
offset by lower freight and supplies expense. Office rent increased $1.3 million in 2008 due to the expansion of our retail locations and
normal annual increases under our lease agreements. Software maintenance expense increased $0.9 million in 2008 primarily from
purchased licenses to support our growth. Additionally, disposal of fixed assets, building operating costs, maintenance and higher
property taxes increased our expenses by $1.6 million. Partially offsetting these increases is a $2.2 million decline in freight and supplies
expense due to lower shipments from the timing of the roll out of new agents.
Occupancy, equipment and supplies expense increased $8.9 million, or 25 percent, in 2007 compared to 2006, primarily due to software
expense and maintenance, freight and supplies expense and office rent. Software expense and maintenance increased $2.8 million due
primarily to purchased licenses to support our growth and compliance
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