EX-99.1 2 a4868238ex991.txt EXHIBIT 99.1 Exhibit 99.1 MoneyGram International Announces First Quarter Results; Increases Guidance for 2005; Money Transfer Volume Grows 36 percent in First Quarter MINNEAPOLIS--(BUSINESS WIRE)--April 20, 2005--MoneyGram International, Inc. (NYSE:MGI): ---------------------------------------------------------------------- ($ in millions) Q1 Q1 % 2005 2004 Change -------------------------- Revenue $227.9 $191.3 19.1% Commissions Expense 110.1 90.2 22.0% Net Revenue 117.8 101.1 16.5% Expenses 82.1 77.0 6.6% Income from Continuing Operations 27.8 19.2 44.6% Income from Discontinued Operations, net of tax - 21.8 NM Net Income 27.8 41.0 -32.2% Earnings per diluted share Income from Continuing Operations $0.32 $0.22 46.6% Income from Discontinued Operations - $0.25 0 Net Income $0.32 $0.47 -31.3% Operating Margin 15.6% 12.6% N/M ---------------------------------------------------------------------- MoneyGram International, Inc. (NYSE:MGI), today announced first quarter 2005 income from continuing operations of $27.8 million, or $0.32 per diluted share, up 47 percent from income from continuing operations of $19.2 million, or $0.22 per diluted share in the first quarter 2004. The company also increased full year 2005 guidance to $1.11 - $1.15, up from previous guidance of $0.99 - $1.03. First quarter 2005 results reflect: -- Global Funds Transfer segment (includes money transfer, money order and urgent bill payment) revenue growth of 22 percent in the first quarter 2005, driven by 36 percent growth of money transfer volume. -- Increased Global Funds Transfer marketing expenditures by over 40 percent from the prior year to further invest in our brand. -- Net investment margin of 1.91 percent, as shown in Table One. Net investment margin was higher than expected due to cash flows of $5.3 million pretax, or nearly $0.04 per diluted share after tax, on previously impaired investments. -- Fee income of $2.2 million pretax, or nearly $0.02 per diluted share after tax, related to a payment received from a customer due to an early contract termination in the Payment Systems segment. -- Increased transaction and operation support expense of $2.2 million or nearly $0.02 per diluted share after tax related to legal matters within the Global Funds Transfer segment. -- The early adoption of Statement of Financial Accounting Standards No. 123R, Share-Based Payments, (expensing of stock options), which resulted in $0.5 million in pretax expense or a half-cent per diluted share after tax. -- Tax expense of $7.9 million (for an effective rate of 22 percent) includes the benefit from $2.1 million, or $0.02 per diluted share, of tax reserves that were no longer needed. -- Repurchase of 1 million shares at an average price of $20.68 per share, resulting in 86.0 million average diluted shares outstanding. Philip Milne, president and chief executive officer said, "We are off to a good start for 2005. Our money transfer business continues to produce strong revenue and transaction volume growth and we continue to be encouraged by the overall trends in this business." Milne continued, "We renewed a multi-year agreement with Wal-Mart for money transfer, urgent bill payment and money order services in the first quarter. And in the second quarter, we expect to introduce the MoneyGram pre-paid debit/stored value card, as well as expand our offerings and distribution channels to money transfer customers. We also will be increasing our marketing and compliance expenditures over the balance of 2005." Segment Highlights MoneyGram operates in two reportable business segments, Global Funds Transfer and Payment Systems. Global Funds Transfer ($ in millions) Q1 Q1 % 2005 2004 Change -------------------------- Revenue $147.1 $121.0 21.6% Commissions Expense 56.8 44.2 28.5% Net Revenue 90.3 76.7 17.7% Operating Income 26.4 21.0 26.0% Operating Margin 18.0% 17.3% NM For the Global Funds Transfer segment, which consists of money transfer (including urgent bill payment) and retail money orders, revenue increased 22 percent to $147.1 million and operating income increased 26 percent to $26.4 million in the first quarter 2005. Both revenue and operating income improved as a result of money transfer transaction growth. Operating margin in the first quarter 2005 was 18.0 percent compared to 17.3 percent in the first quarter 2004. The increase in margin was due to stronger margins in the money transfer business driven by revenue growth and leverage of the expense base. Money transfer transaction volume grew 36 percent compared to first quarter 2004. The money transfer agent network grew 15 percent from the first quarter of 2004 to nearly 79,000 agent locations. Money order transaction volume was down slightly following a trend of declining use of paper-based payment instruments. Payment Systems ($ in millions) Q1 Q1 % 2005 2004 Change -------------------------- Revenue $80.8 $70.4 14.8% Commissions Expense 53.3 46.0 15.9% Net Revenue 27.4 24.3 12.8% Operating Income 13.2 9.2 44.1% Operating Margin 16.4% 13.1% NM The Payment Systems segment includes PrimeLink/Official Check outsourcing services, financial money orders and controlled disbursement processing services. Payment Systems revenue increased 15 percent to $80.8 million in the first quarter 2005. The increase was due to Payment Systems' $4.2 million share of cash flows on previously impaired investments, the $2.2 million early contract termination fee, and a higher overall yield on the investment portfolio. Operating income for the segment was $13.2 million in the first quarter 2005, up 44 percent from $9.2 million in the first quarter 2004. Operating margin for the first quarter 2005 was 16.4 percent, up from 13.1 percent in the first quarter 2004. Both operating income and margins increased as a result of the cash flows on previously impaired securities and the termination fee mentioned above. 2005 Outlook Diluted earnings per share is expected to be in the range of $1.11 - $1.15, up from previous guidance of $0.99 - $1.03. The guidance represents revised full year estimates and is dependent on a variety of factors including interest rate levels. The revised full year estimates include the $2.2 million termination fee received in the first quarter and approximately $12 million in anticipated cash flows on previously impaired investments for the full year (of which $5.3 million was received in the first quarter). Also affecting the guidance are the following items: -- Net revenue (total revenue less total commissions) is expected to be in the range of $465 million to $485 million, up from previous guidance of $450 million to $475 million. -- Net investment margin for the full year is expected to be in the range of 150 to 165 basis points, up from the previous guidance of 130 to 140 basis points. The new guidance includes the effect of actual and anticipated cash flows on previously impaired investments. We expect cash flow recoveries in the second quarter to be at approximately the same level as the first quarter. -- As previously announced, portfolio balances are expected to average $6.5 billion for the year, declining from 2004 due to consolidation of client financial institutions. -- The adoption of Statement of Financial Accounting Standards No. 123R, Share-Based Payment (expensing of stock options) resulting in approximately $2.5 million of expense or $0.02 per diluted share. -- Effective tax rate of 23 to 24 percent, down from our previous guidance of 25 percent primarily due to actual and estimated tax reserve reversals. -- Income from continuing operations before taxes is expected to grow 40 to 45 percent from $89.0 million in income from continuing operations before taxes in 2004 up from previous guidance of 28 to 35 percent. From time to time, events may occur which can result in unanticipated income or losses. Our outlook does not reflect such events. Presentation of 2004 Financial Statements MoneyGram International, Inc. was spun off from Viad Corp on June 30, 2004. MoneyGram is considered the divesting entity and treated as the accounting successor to Viad for financial reporting purposes in accordance with the EITF No. 02-11, "Accounting for Reverse Spinoffs." MoneyGram results in 2004 include one-time debt tender and redemption expenses of $20.7 million, which amounts to $0.22 per diluted share, related to the spin-off in the second quarter 2004. The historical results of MoneyGram through June 30, 2004, include Viad Corp as discontinued operations. In addition, the historical financials include the income and gain from discontinued operations of Game Financial. Company to File Universal Shelf Registration The company also announced that it intends to file a universal shelf registration today with the Securities and Exchange Commission for the issuance of up to $500 million of its securities, including common stock, preferred stock and debt securities. The securities may be sold from time to time in one or more series after the registration statement has become effective. The terms of the securities and any offering of the securities will be determined at the time of the sale. The proceeds received by the company from the sale of any securities will be used for general corporate purposes, which may include, among other things, working capital, capital expenditures, debt repayment, the financing of possible acquisitions or stock repurchases. The securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This news release shall not constitute an offer to sell, or the solicitation of an offer to buy, nor shall there be any sale of these securities in any state in which such offer, solicitation, or sale would be unlawful prior to the registration or qualification under the securities laws of any such state. Description of Tables Table One - Net Investment Revenue Analysis Table Two - Consolidated Statements of Income Table Three - Segment Information Conference Call and Webcast MoneyGram International will have a conference call today at 5:00 p.m. EDT, 4:00 p.m. CDT to discuss first quarter results. Phil Milne, chief executive officer, and Dave Parrin, chief financial officer, will speak on the call. The conference call can be accessed by calling (800) 295-3991 in the U.S. or (617) 614-3924 internationally. The participant passcode is 71109877. The conference call will also be webcast through the company's website at www.moneygram.com. A replay of the conference call and webcast will be available one hour after the call concludes through 5:00 p.m. on April 27, 2005. The replay of the call is available at (888) 286-8010 in the U.S., or (617) 801-6888 internationally, passcode 46454785. The Internet audio cast replay will be available at www.moneygram.com. About MoneyGram International, Inc. MoneyGram International, Inc. is a leading global payment services company and S&P MidCap 400 company. The company's major products and services include global money transfers, money orders and payment processing solutions for financial institutions and retail customers. MoneyGram is a New York Stock Exchange listed company, with over $825 million in revenue in 2004 and nearly 79,000 global money transfer agents in 170 countries. For more information, visit the company's website at www.moneygram.com. Cautionary Information Regarding Forward-Looking Statements The statements contained in this press release regarding the business of MoneyGram International, Inc. that are not historical facts are forward-looking statements and are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances due to a number of factors, including, but not limited to: (a) fluctuations in interest rates that may materially affect revenue derived from investment of funds received from the sale of payment instruments; (b) material changes in the market value of securities we hold; (c) material changes in our need for and the availability of liquid assets; (d) successful management of the credit and fraud risks of retail agents, and the credit risk related to our investment portfolio; (e) continued growth rates approximating recent levels for consumer money transfer transactions and other payment product markets; (f) renewal of material retail agent and financial institution customer contracts, or loss of business from significant agents or customers; (g) technological and competitive changes in the payment services industry; (h) timely and successful implementation of new and/or improved technology, delivery methods, and product offerings including pre-paid debit/stored value cards and new bill payment services; (i) changes in laws, regulations or other industry practices and standards which may require significant systems redevelopment, reduce the market for or value of the company's products or services or render products or services less profitable or obsolete; (j) continued political stability in countries in which MoneyGram has material agent relationships; (k) material lawsuits or investigations; (l) catastrophic events that could materially adversely impact operating facilities, communication systems and technology of MoneyGram, its clearing banks or major customers, or that may have a material adverse impact on current economic conditions or levels of consumer spending; (m) material breach of security of any of our systems; (n) our ability to comply with the requirements of Sarbanes-Oxley Section 404 regarding the effectiveness of internal controls; and (o) other factors more fully discussed in MoneyGram's filings with the Securities and Exchange Commission. Actual results may differ materially from historical and anticipated results. These forward-looking statements speak only as of the date on which such statements are made, and MoneyGram undertakes no obligation to update such statements to reflect events or circumstances arising after such date. TABLE ONE MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES NET INVESTMENT REVENUE ANALYSIS (In thousands) (Unaudited) First Quarter 2005 vs 2005 2004 2004 ----------- ----------- ----------- Components of net investment revenue: Investment revenue $89,502 $76,654 $12,848 Investment commissions expense (1) 57,953 49,745 8,208 ----------------------------------- Net investment revenue $31,549 $26,909 $4,640 =================================== Average balances: Cash equivalents and Investments $6,703,839 $6,584,946 $118,893 Payment service obligations (2) 5,240,596 5,159,649 80,947 Average yields earned and rates paid (3): Investment yield 5.41% 4.68% 0.73% Investment commission rate 4.48% 3.88% 0.60% Net investment margin 1.91% 1.64% 0.27% (1) Investment commissions expense reported includes payments made to financial institution customers based on short term interest rate indices on outstanding balances of official checks sold by that financial institution, as well as costs associated with swaps and the sale of receivables program. (2) Commissions are paid to financial institution customers based upon average outstanding balances generated by the sale of official checks only. The average balance in the table reflects only the payment service obligations for which commissions are paid and does include the average balance of the sold receivables ($408 million and $418 million for the first quarter of 2005 and 2004, respectively) and as these are not recorded in the Consolidated Balance Sheets. (3) Average yields/rates are calculated by dividing the applicable amount shown in the "Components of net investment revenue" section by the applicable amount shown in the "Average balances" section divided by the number of days in the period presented and multiplied by the number of days in the year. The "Net investment margin" is calculated by dividing "Net investment revenue" by the "Cash Equivalents and Investments" average balance divided by the number of days in the period presented and multiplied by the number of days in the year. TABLE TWO MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands except share and per share data) (Unaudited) Three months ended March 31 2005 2004 ------------- ------------- REVENUE: Fee and other revenue $138,519 $113,622 Investment revenue 89,502 76,654 Net securities gains and (losses) (106) 1,045 ------------- ------------- Total revenue 227,915 191,321 Fee commissions expense 52,188 40,503 Investment commissions expense 57,953 49,745 ------------- ------------- Total commissions expense 110,141 90,248 ------------- ------------- Net revenue 117,774 101,073 EXPENSES: Compensation and benefits 29,274 32,741 Transaction and operations support 35,644 28,244 Depreciation and amortization 7,436 7,223 Occupancy, equipment and supplies 8,374 7,596 Interest expense 1,389 1,222 ------------- ------------- Total expenses 82,117 77,026 ------------- ------------- Income from continuing operations before income taxes 35,657 24,047 Income tax expense 7,868 4,833 ------------- ------------- Income from continuing operations 27,789 19,214 Income and gain from discontinued operations, net of tax - 21,779 ------------- ------------- NET INCOME $27,789 $40,993 ============= ============= Basic earnings per share Income from continuing operations $0.33 $0.22 Income from discontinued operations, net of tax - 0.25 ------------- ------------- Earnings per common share $0.33 $0.47 ============= ============= Average outstanding common shares 84,568 86,710 ============= ============= Diluted earnings per share Income from continuing operations $0.32 $0.22 Income from discontinued operations, net of tax - 0.25 ------------- ------------- Earnings per common share $0.32 $0.47 ============= ============= Average outstanding and potentially dilutive common shares 86,038 87,217 ============= ============= TABLE THREE MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES SEGMENT INFORMATION (In thousands) (Unaudited) 2005 ----------- First Quarter ----------- Revenue: Global Funds Transfer $147,146 Payment Systems 80,769 ----------- 227,915 Operating income: Global Funds Transfer 26,429 Payment Systems 13,240 ----------- 39,669 Interest expense 1,389 Other unallocated expenses 2,623 ----------- Income from continuing operations before income taxes $35,657 =========== Operating Margin: Global Funds Transfer 18.0% Payment Systems 16.4% 2004 ------------------------------------------------- First Second Third Fourth Full Quarter Quarter Quarter Quarter Year --------- --------- --------- --------- --------- Revenue: Global Funds Transfer $120,969 $128,165 $137,688 $145,243 $532,065 Payment Systems 70,352 71,655 78,465 73,993 294,465 ------------------------------------------------- 191,321 199,820 216,153 219,236 826,530 Operating income: Global Funds Transfer 20,978 24,777 27,393 29,458 102,606 Payment Systems 9,190 5,848 9,429 2,696 27,163 ------------------------------------------------- 30,168 30,625 36,822 32,154 129,769 Debt tender and redemption costs - 20,661 - - 20,661 Interest expense 1,222 1,905 1,234 1,214 5,575 Other unallocated expenses 4,899 5,042 2,129 2,443 14,513 ------------------------------------------------- Income from continuing operations before income taxes $24,047 $3,017 $33,459 $28,497 $89,020 ================================================= Operating Margin: Global Funds Transfer 17.3% 19.3% 19.9% 20.3% 19.3% Payment Systems 13.1% 8.2% 12.0% 3.6% 9.2% CONTACT: MoneyGram International, Inc., Minneapolis Investor Relations: Tim Gallaher, 952-591-3840 ir@moneygram.com