EX-99.1 2 a4934511ex99.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 MoneyGram International Announces Second Quarter Results; Money Transfer Volume Grows 39 percent in Second Quarter ---------------------------------------------------------------------- ($ in millions) Q2 Q2 % 2005 2004 Change ------------------------- Revenue $240.0 $199.8 20.1 Commissions Expense 115.0 97.6 17.8 ------- --------- Net Revenue 125.0 102.2 22.4 Expenses 88.7 99.1(a) (10.6) Income (Loss) from Continuing Operations $26.1 $(0.6)(a) NM Earnings (Loss) per Diluted Share from Continuing Operations $0.30 ($0.01)(a) NM Operating Margin 15.1% 1.5% NM (a) - Includes spin-off related expenses of $20.7 million ($19.3 million after tax) or $0.22 per diluted share for debt redemption NM - Not Meaningful ---------------------------------------------------------------------- MoneyGram International, Inc. (NYSE:MGI), today announced second quarter 2005 income from continuing operations of $26.1 million, or $0.30 per diluted share, compared to loss from continuing operations of ($0.6) million, or ($0.01) per diluted share in the second quarter 2004. The 2004 loss includes debt redemption costs of $20.7 million ($19.3 million after tax), or $0.22 per diluted share, related to the spin-off. Second quarter 2005 results reflect: -- Global Funds Transfer segment revenue growth of 25 percent in the second quarter 2005, driven by 39 percent growth of money transfer volume. -- Net investment margin of 1.89 percent, as shown in Table One, including cash flows of $5.8 million, or $0.04 per diluted share after tax, on previously impaired investments. -- Fee and other revenue of $149.3 million, up 22 percent from the second quarter of 2004 driven primarily from the growth in money transfer volume. -- Increased Global Funds Transfer marketing expenditures from the prior year to continue to invest in our brand. -- Interest expense of $2.6 million, including approximately $900,000 of pretax expense (half-cent per diluted share after tax), related to the amendment of our $350 million bank credit facility. Philip Milne, president and chief executive officer said, "In the second quarter, our successful marketing and branding efforts drove money transfer volume growth of 39 percent. Going forward in 2005, we remain excited about offering customers our leading products and services, as well as bringing them new offerings. These include our prepaid debit card that is now being market tested, and directed sends - money transfer to a bank account or a prepaid card, or for home delivery. During the quarter we also achieved two very important client relationship milestones - Wal-Mart named us their Financial Services Supplier of the year, and we re-signed BB&T Bank to our official check platform. Our commitment to providing affordable, reliable and convenient payment products and services to our consumers and business partners continues to drive our results." Segment Highlights MoneyGram operates in two reportable business segments, Global Funds Transfer and Payment Systems. Global Funds Transfer ($ in millions) Q2 Q2 % 2005 2004 Change ------------------------------ Revenue $159.7 $128.2 24.6% Commissions Expense 60.6 48.1 26.1% Net Revenue 99.1 80.1 23.8% Operating Income $29.7 $24.8 19.8% Operating Margin 18.6% 19.3% NM For the Global Funds Transfer segment, which consists of money transfer (including urgent bill payment) and retail money orders, revenue increased 25 percent to $159.7 million and operating income increased 20 percent to $29.7 million in the second quarter of 2005. Both revenue and operating income improved as a result of money transfer volume growth. Operating margin in the second quarter 2005 was 18.6 percent compared to 19.3 percent in the second quarter 2004. The decrease in margin was primarily due to the product shift towards money transfer from the higher margin money order product. Money transfer transaction volume grew 39 percent and money transfer revenue (see Table Four) grew 31 percent to $124.5 million compared to second quarter of 2004. Money transfer revenue growth rates are lower than volume growth rates due to targeted pricing initiatives and product mix. The money transfer agent network grew 14 percent from the second quarter of 2004 to over 81,000 agent locations. Money order transaction volume was down slightly, following a trend of declining use of paper-based payment instruments. Payment Systems ($ in millions) Q2 Q2 % 2005 2004 Change ------------------------------ Revenue $80.3 $71.6 12.0% Commissions Expense 54.4 49.5 9.8% Net Revenue 25.9 22.1 16.9% Operating Income $11.4 $5.8 95.4% Operating Margin 14.2% 8.2% NM The Payment Systems segment includes PrimeLink/Official Check outsourcing services, financial money orders and controlled disbursement processing services. Payment Systems revenue increased 12 percent to $80.3 million in the second quarter 2005. The increase was due to a higher overall yield on the investment portfolio and Payment Systems' $4.6 million portion of cash flows received related to previously impaired securities. Operating income for the segment was $11.4 million in the second quarter 2005, up 95 percent, from $5.8 million in the second quarter 2004. Operating margin for the second quarter 2005 was 14.2 percent, up from 8.2 percent in the second quarter 2004. Both operating income and margins increased primarily as a result of the cash flows received related to previously impaired securities. Bank Credit Facility Amended On June 29, 2005, we amended our $350 million bank credit facility. The amended agreement extends the maturity date of the facility from June 2008 to June 2010 and the scheduled repayment of the $100 million term loan to the facility's maturity. In addition, we obtained more favorable pricing terms, restrictive covenants related to dividends and share buybacks were eliminated, and the dollar value of permissible acquisitions without lender consent was increased. 2005 Outlook Diluted earnings per share for the full year 2005 is expected to be in the range of $1.11 - $1.15, unchanged from previous guidance. This full year estimate includes the $2.2 million termination fee from a customer due to an early contract termination in the Payment Systems segment received in the first quarter of the year and approximately $12 million in anticipated cash flows on previously impaired investments for the full year (of which $11.1 million was received in the first half of the year). Also included in the guidance are the following items: -- Net revenue (total revenue less total commissions) is expected be in the range of $465 million to $485 million, unchanged from previous guidance. -- Net investment margin for the full year is expected to be at the high end of our previously issued range of 150 to 165 basis points. This guidance includes the effect of actual and anticipated cash flows on previously impaired investments. -- Investment portfolio balances are expected to average $6.5 billion for the year, declining from 2004 due to consolidation of client financial institutions, unchanged from previous guidance. -- The adoption of Statement of Financial Accounting Standards No. 123R, Share-Based Payment (expensing of stock options) as of January 1, 2005. -- Income from continuing operations before taxes is expected to increase by 42 to 48 percent from $89.0 million in income from operations before taxes in 2004 compared to previous guidance of 40 to 45 percent. However, we anticipate our effective tax rate to be about 25 percent for the full year, up slightly from previous guidance of 23 - 24 percent. This guidance is dependent on a variety of factors, including those listed below under Cautionary Information Regarding Forward-Looking Statements. 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. Description of Tables Table One - Net Investment Revenue Analysis Table Two - Consolidated Statements of Income Table Three - Segment Information Table Four - Money Transfer Revenue Table Five - Unrestricted Assets 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 second 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) 299-7635 in the U.S. The participant passcode is 55799580. 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. EDT on August 3, 2005. The replay of the call is available at (888) 286-8010 in the U.S., or (617) 801-6888 internationally, passcode 15110751. 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 over 81,000 global money transfer agent locations 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 and commissions paid to financial institution customers; (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; (o) potential patent liability for intellectual property related to our development of new and enhanced products and services and (p) 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 (Unaudited) Three Months Ended June 30 2005 vs 2005 2004 2004 -------------------------------- (Dollars in thousands) Components of net investment revenue: Investment revenue $91,052 $77,580 $13,472 Investment commissions expense (1) (58,813) (53,706) (5,107) -------------------------------- Net investment revenue $32,239 $23,874 $8,365 ================================ Average balances: Cash equivalents and investments $6,839,545 $6,888,115 ($48,570) Payment service obligations (2) 5,397,552 5,510,137 (112,585) Average yields earned and rates paid (3): Investment yield 5.34% 4.53% 0.81% Investment commission rate 4.37% 3.92% 0.45% Net investment margin 1.89% 1.39% 0.50% Six months ended June 30 2005 vs 2005 2004 2004 -------------------------------- (Dollars in thousands) Components of net investment revenue: Investment revenue $180,554 $154,234 $26,320 Investment commissions expense (1) (116,767) (103,451) (13,316) -------------------------------- Net investment revenue $63,787 $50,783 $13,004 ================================ Average balances: Cash equivalents and investments $6,771,692 $6,736,531 $35,161 Payment service obligations (2) 5,319,074 5,334,893 (15,819) Average yields earned and rates paid (3): Investment yield 5.38% 4.60% 0.78% Investment commission rate 4.43% 3.90% 0.53% Net investment margin 1.90% 1.52% 0.38% (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 not include the average balance of the sold receivables ($396 million and $407 million for the second quarter of 2005 and 2004, respectively, and $402 million and $411 million for the six months ended June 30, 2005 and 2004, respectively) 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 (Unaudited) Three months ended Six months ended June 30 June 30 2005 2004 2005 2004 --------- --------- --------- --------- (Dollars in thousands, except share and per share data) REVENUE: Fee and other revenue $149,278 $122,084 $287,798 $235,706 Investment revenue 91,052 77,580 180,554 154,234 Net securities gains and losses (330) 156 (436) 1,201 --------- --------- --------- --------- Total revenue 240,000 199,820 467,916 391,141 Fee commissions expense 56,217 43,925 108,405 84,428 Investment commissions expense 58,813 53,706 116,767 103,451 --------- --------- --------- --------- Total commissions expense 115,030 97,631 225,172 187,879 --------- --------- --------- --------- Net revenue 124,970 102,189 242,744 203,262 EXPENSES: Compensation and benefits 33,292 33,644 62,565 66,389 Transaction and operations support 36,541 27,447 72,185 55,687 Depreciation and amortization 7,648 7,396 15,085 14,619 Occupancy, equipment and supplies 8,576 8,119 16,950 15,715 Interest expense 2,608 1,905 3,997 3,127 Debt tender and redemption costs - 20,661 - 20,661 --------- --------- --------- --------- Total expenses 88,665 99,172 170,782 176,198 --------- --------- --------- --------- Income from continuing operations before income taxes 36,305 3,017 71,962 27,064 Income tax expense 10,242 3,587 18,109 8,420 --------- --------- --------- --------- Income (loss) from continuing operations 26,063 (570) 53,853 18,644 Income (loss) and gain from discontinued operations, net of tax - (497) - 21,282 --------- --------- --------- --------- NET INCOME (LOSS) $26,063 $(1,067) $53,853 $39,926 ========= ========= ========= ========= Basic earnings (loss) per share Income (loss) from continuing operations $0.31 $(0.01) $0.64 $0.21 Income (loss) from discontinued operations, net of tax - - - 0.25 --------- --------- --------- --------- Earnings (loss) per common share $0.31 $(0.01) $0.64 $0.46 ========= ========= ========= ========= Average outstanding common shares 84,784 86,929 84,681 86,819 ========= ========= ========= ========= Diluted earnings (loss) per share Income (loss) from continuing operations $0.30 $(0.01) $0.63 $0.21 Income (loss) from discontinued operations, net of tax - - - 0.25 --------- --------- --------- --------- Earnings (loss) per common share $0.30 $(0.01) $0.63 $0.46 ========= ========= ========= ========= Average outstanding and potentially dilutive common shares 85,629 86,929 85,745 87,306 ========= ========= ========= ========= TABLE THREE MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) 2005 ------------------ First Second Quarter Quarter ------------------ (Dollars in thousands) Revenue: Global Funds Transfer $147,146 $159,742 Payment Systems 80,769 80,258 ------------------ 227,915 240,000 Operating income: Global Funds Transfer 26,429 29,682 Payment Systems 13,240 11,428 ------------------ 39,669 41,110 Interest expense 1,389 2,608 Other unallocated expenses 2,623 2,197 ------------------ Income from continuing operations before income taxes $35,657 $36,305 ================== Operating Margin: Global Funds Transfer 18.0% 18.6% Payment Systems 16.4% 14.2% 2004 --------------------------------------------- First Second Third Fourth Full Quarter Quarter Quarter Quarter Year --------------------------------------------- (Dollars in thousands) 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% TABLE FOUR MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES MONEY TRANSFER REVENUE (Unaudited) Money Transfer Revenue (including Urgent Bill Payment) -------------------------------------------------------------- Quarter Ended March 31 June 30 September 30 December 31 Total Year -------------------------------------------------------------- (Dollars in thousands) 2003 $69,836 $75,840 $80,895 $83,338 $309,909 2004 86,198 95,174 102,764 111,234 395,370 2005 111,296 124,545 TABLE FIVE MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES UNRESTRICTED ASSETS (Unaudited) June 30 December 31 June 30 2005 2004 2004 ----------- ----------- ----------- (Dollars in thousands) Cash and cash equivalents $1,331,492 $927,042 $1,028,814 Receivables 1,315,690 771,966 910,226 Investments 6,146,446 6,335,493 6,369,762 ----------- ----------- ----------- 8,793,628 8,034,501 8,308,802 Amounts restricted to cover payment service obligations (8,421,234) (7,640,581) (7,862,106) ----------- ----------- ----------- Unrestricted assets (1) $372,394 $393,920 $446,696 =========== =========== =========== (1) We have unrestricted cash and cash equivalents, receivables and investments to the extent those assets exceed all payment service obligations. These amounts are generally available; however, management considers these amounts as providing additional assurance that regulatory requirements are maintained during the normal fluctuations in the value of investments. CONTACT: MoneyGram International, Inc., Minneapolis Investor Relations: Tim Gallaher, 952-591-3840 ir@moneygram.com