MoneyGram 2011 Annual Report Download - page 49

Table of Contents
Operating Margin
The operating margin for the Financial Paper Products segment decreased to 31.3 percent in 2011 from 33.3 percent in 2010 due to volume and investment
revenue declines. The operating margin for the Financial Paper Products segment increased to 33.3 percent in 2010 from 22.3 percent in 2009, reflecting
$6.1 million of goodwill and asset impairment charges in 2009 related to our money order business and lower commissions, partially offset by lower
investment revenue in 2010.
TRENDS EXPECTED TO IMPACT 2012
The discussion of trends expected to impact our business in 2012 is based on information presently available and contains certain assumptions regarding
future economic conditions. Differences in actual economic conditions during 2012 compared with our assumptions could have a material impact on our
results. See “Cautionary Statements Regarding Forward−Looking Statements” and Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10−K for
additional factors that could cause results to differ materially from those contemplated by the following forward−looking statements.
Throughout 2011, global economic conditions remained weak. We cannot predict the duration or extent of the severity of these economic conditions, nor the
extent to which these conditions could negatively affect our business, operating results or financial condition. While the money remittance industry has
generally been resilient during times of economic softness, the current global economic conditions have continued to adversely impact the demand for
money remittances. Given the global economic uncertainty, we have less visibility to the future and believe growth rates could continue to be impacted by
slow economic conditions. In addition, bill payment products available in the United States have not been as resilient as money transfers.
While there is uncertainty around the global economy and the remittance industry, the World Bank, a key source of industry analysis for developing
countries, is projecting seven percent remittance growth in 2012. Our growth has historically exceeded the World Bank projections. Our expansion in key
global growth markets and strong partnership focus with our agents will continue to fuel this growth. Additionally, agent expansion and increasing
productivity in our existing agent locations through marketing support, customer acquisition and new product innovation will drive growth. We believe all
of these efforts will not only help to mitigate the effects of the current global economic conditions, but position us for enhanced market share and growth
when the economy begins to recover.
For our Financial Paper Products segment, we expect the decline in overall paper−based transactions to continue in 2012. As a result of the pricing
initiatives undertaken in prior years, we have reduced the commission rates paid to our official check financial institution customers and instituted certain
per item and other fees for both the official check and money order services. In addition, the historically low interest rate environment has resulted in low or
no commissions being paid to our official check financial institution customers. As a result, we anticipate that the Financial Paper Products segment will
continue to experience financial institution and agent attrition in 2012.
We continue to see a trend among state, federal and international regulators toward enhanced scrutiny of anti−money laundering compliance, as well as
consumer fraud prevention and education. As we continue to revise our processes and enhance our technology systems to meet regulatory trends, our
operating expenses for compliance may increase.
Acquisition and Disposal Activity
Acquisition and disposal activity is set forth in Note 3 — Acquisitions and Disposals of the Notes to Consolidated Financial Statements.
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