MoneyGram 2010 Annual Report Download - page 113

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Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As described in Note 11 — Mezzanine Equity, the Company's Series B Stock `contains a conversion option allowing the stockholder to
convert the Series B Stock into shares of common stock. As the Certificate of Designation for the Series B Stock does not explicitly state
that a net-cash settlement is not required in the event the Company has insufficient shares of common stock to effect a conversion,
guidance from the Securities and Exchange Commission (the "SEC") requires the Company to presume a net-cash settlement would be
required. As a result, the conversion option met the definition of an embedded derivative requiring bifurcation and liability accounting
treatment to the extent the Company did not have sufficient shares to effect a full conversion. As of March 31, 2008 and June 30, 2008,
the Company had a shortfall of committed and authorized common stock, requiring the Company to recognize an embedded derivative.
On August 11, 2008, the Investors and the Company formally clarified that the provisions of the Series B Stock do not allow the
Investors to require the Company to net-cash settle the conversion option if the Company does not have sufficient shares of common
stock to effect a conversion. Effective with this agreement, the Series B Stock conversion option no longer met the criteria for an
embedded derivative requiring bifurcation and liability accounting treatment. Accordingly, the Company remeasured the liability through
August 11, 2008 and then recorded the liability to "Additional paid-in capital" in the third quarter of 2008. The increase in the fair value
of the liability from the issuance of the B Stock through August 11, 2008 of $16.0 million was recognized in the "Valuation loss on
embedded derivatives" line in the Consolidated Statements of Income (Loss). There will be no further impact to the Company's
Consolidated Statements of Income (Loss) as no further remeasurement of the conversion option is required.
The Series B Stock also contains a change of control redemption option which, upon exercise, requires the Company to cash settle the par
value of the Series B Stock and any accumulated unpaid dividends at a 1 percent premium. As the cash settlement is made at a premium,
the change of control redemption option meets the definition of an embedded derivative requiring bifurcation and liability accounting
treatment. The fair value of the change of control redemption option was de minimus as of December 31, 2010 and 2009.
Note 7 — Property and Equipment
Property and equipment consists of the following at December 31:
(Amounts in thousands) 2010 2009
Land $ 2,907 $ 2,907
Office furniture and equipment 32,633 38,871
Leasehold improvements 23,947 21,378
Agent equipment 67,766 78,973
Signage 62,774 51,584
Computer hardware and software 187,604 186,601
377,631 380,314
Accumulated depreciation (262,520) (252,342)
Total property and equipment $ 115,111 $ 127,972
F-28