MoneyGram 2009 Annual Report Download - page 37

Table of Contents
lower tier and a $2.0 million decrease from the suspension of the discretionary profit sharing plan. Stock-based compensation increased
$10.5 million from 2009 grants, partially offset by lower expense from historical grants that vested in the first quarter of 2009 and
executive forfeitures. As reflected in each of the amounts discussed above, the change in the euro exchange rate, net of hedging activities,
decreased compensation and benefits by approximately $2.1 million in 2009.
Compensation and benefits increased $36.5 million, or 19 percent, in 2008 compared to 2007, primarily from a $19.5 million increase in
executive severance and related costs, an $8.5 million increase from a 2 percent increase in headcount supporting the growth in the
money transfer business and an $8.5 million increase in incentive compensation. Severance includes $16.5 million of costs related to our
former chief executive officer. Salaries and benefits increased $8.5 million due to higher headcount. Incentive compensation increased
$10.9 million from higher headcount and achieving a higher incentive tier than the prior year, partially offset by a $2.4 million decrease
in stock-based compensation expense as no long-term stock-based incentives were offered during 2008 and several large stock-based
awards were forfeited during the year due to terminations. As reflected in each of the amounts discussed above, the change in the euro
exchange rate, net of hedging activities, increased compensation and benefits by approximately $2.7 million in 2008.
Transaction and operations support — Transaction and operations support expense includes marketing, professional fees and other
outside services, telecommunications and agent forms related to our products. Transaction and operations support costs increased
$64.4 million, or 29 percent, in 2009 compared to 2008. We recorded $54.8 million of legal reserves in 2009 relating to securities
litigation, stockholder derivative claims, a patent lawsuit and a settlement with the Federal Trade Commission. Asset impairments of
$18.3 million were recorded in 2009, an increase of $9.5 million over 2008. The 2009 impairments include a $7.0 million impairment
charge related to the decision to sell our airplane, a $5.2 million impairment of goodwill and other assets from the decision to discontinue
certain bill payment products and the sale of a non-core business, a $3.6 million impairment of intangible assets and a $2.5 million
impairment of goodwill related to our money order product from continued declines in that business. Professional fees increased by
$9.5 million in 2009, primarily due to litigation fees and the implementation of the European Union Payment Services Directive. Our
provision for agent receivables increased by $9.0 million, primarily from the closure of an international agent during the year. As our
agent base and transaction volumes continue to grow, we expect that provision for loss will increase; however, we expect this growth to
be much slower than agent base and transaction growth due to our underwriting and credit monitoring processes. Marketing costs
decreased $12.7 million in 2009 from controlled spending, partially offset by higher costs from agent location growth. In addition,
$9.5 million of costs related to the recapitalization and restructuring of the official check business were recorded in 2008. As reflected in
each of the amounts discussed above, the change in the euro exchange rate, net of hedging activities, decreased transaction and operations
support by approximately $1.7 million in 2009.
Transaction and operations support expense increased $28.8 million, or 15 percent, in 2008 compared to 2007. The recapitalization and
restructuring of the official check business drove professional fees of $9.5 million in 2008. In addition, professional fees increased
$5.1 million in 2008 for costs relating to the growth of the business and various business analyses initiated during the year. In the fourth
quarter of 2008, we recognized a goodwill impairment charge of $8.8 million related to our decision to wind down our external ACH
Commerce business. Costs related to agent forms and supplies increased $2.8 million from our transaction and agent base growth. Our
provision for loss increased $4.6 million in 2008 due to expected increases in uncollectible receivables from agent growth and the impact
of current economic conditions. Marketing costs decreased $3.6 million in 2008 from controlled spending, partially offset by higher costs
from agent location growth and a new marketing campaign to enhance our brand positioning. As reflected in each of the amounts
discussed above, the change in the euro exchange rate, net of hedging activities, increased transaction and operations support by
approximately $1.9 million in 2008.
Occupancy, equipment and supplies — Occupancy, equipment and supplies expense includes facilities rent and maintenance costs,
software and equipment maintenance costs, freight and delivery costs and supplies. Expenses increased $1.4 million, or 3 percent, in 2009
compared to 2008. Software maintenance and office rent increased $2.3 million and $1.5 million, respectively, to support the growth of
the business. The timing of the roll out of new agent locations and controlled spending resulted in a $2.8 million reduction of agent costs.
As reflected in each of the amounts discussed above, the change in the euro exchange rate, net of hedging activities, decreased
occupancy, equipment and supplies expense by approximately $0.4 million in 2009.
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