MoneyGram 2011 Annual Report Download - page 132

Table of Contents
MoneyGram has also received Civil Investigative Demands from a working group of nine state attorneys general who have initiated an investigation
into whether the Company has taken adequate steps to prevent consumer fraud during the period from 2007 to 2011. The Civil Investigative Demands
seek information and documents relating to the Company’s procedures to prevent fraudulent transfers and consumer complaint information.
MoneyGram continues to cooperate fully with the states in this matter. MoneyGram has submitted the information and documents requested by the
states. No claims have been made against MoneyGram at this time.
Other Matters — The Company is involved in various government inquiries and other matters that arise from time to time. Management does not
believe that after final disposition any of these matters is likely to have a material adverse impact on the Company’s financial condition, results of
operations and cash flows.
Note 16 — Segment Information
The Company’s reporting segments are primarily organized based on the nature of products and services offered and the type of consumer served. The
Company primarily manages its business through two reporting segments, Global Funds Transfer and Financial Paper Products. The Global Funds Transfer
segment provides global money transfers and bill payment services to consumers through a network of agents and, in select markets, company−operated
locations. The Financial Paper Products segment provides money orders to consumers through retail and financial institution locations in the United States
and Puerto Rico, and provides official check services to financial institutions in the United States. One of the Company’s agents of both the Global Funds
Transfer segment and the Financial Paper Products segment accounted for 29 percent, 30 percent and 29 percent of total revenue in 2011, 2010 and 2009,
respectively. Businesses which are not operated within these segments are categorized as “Other,” and primarily relate to discontinued products and
businesses. Segment pre−tax operating income and segment operating margin are used to review operating performance and allocate resources.
Prior to the fourth quarter of 2011, the Company managed the Global Funds Transfer segment as two geographical regions or operating segments, the
Americas and EMEAAP, to coordinate sales, agent management and marketing activities. These operating segments were aggregated into one reporting
segment. As the Company no longer monitors performance and allocates resources by region, the Company has one operating and reporting segment for
Global Funds Transfer.
Segment accounting policies are the same as those described in Note 2 — Summary of Significant Accounting Policies. The Company manages its
investment portfolio on a consolidated level, with no specific investment security assigned to a particular segment. However, investment revenue is
allocated to each segment based on the average investable balances generated by that segment’s sale of payment instruments during the period. Net
securities (gains) losses are not allocated to the segments as the investment portfolio is managed at a consolidated level. While the derivatives portfolio is
also managed on a consolidated level, each derivative instrument is utilized in a manner that can be identified to a particular segment.
Also excluded from operating income for Global Funds Transfer and Financial Paper Products are interest and other expenses related to the Company’s
credit agreements, items related to the Company’s preferred stock, operating income from businesses categorized as “Other,” certain pension and benefit
obligation expenses, director deferred compensation plan expenses, executive severance and related costs, certain legal and corporate costs not related to the
performance of the segments and restructuring and reorganization costs. Unallocated expenses in 2011 include $4.8 million of legal settlements and related
costs for securities litigation associated with our May 2011 Recapitalization, $0.3 million of asset impairments and other net corporate costs of $4.8 million
not allocated to the segments. Unallocated expenses in 2010 include $1.8 million of asset impairments in addition to other net corporate costs of $7.4
million not allocated to the segments. Unallocated expenses in 2009 include $20.3 million of legal reserves related to securities litigation and stockholder
derivative claims, a net curtailment gain on benefit plans of $14.3 million, $7.0 million of asset impairments and $4.4 million of executive severance and
related costs in addition to other net corporate costs of $12.9 million not allocated to the segments.
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