-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E2eVjJUlnA9t6wYhaw/jadQJyZiKLETLTi8Yws20nQwPNm1c7CKnkeYxs56Y0XOX w3s+IMn5vhrgRLIlujFr/A== 0001157523-05-008940.txt : 20051019 0001157523-05-008940.hdr.sgml : 20051019 20051019160054 ACCESSION NUMBER: 0001157523-05-008940 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20051019 ITEM INFORMATION: Results of Operations and Financial Condition FILED AS OF DATE: 20051019 DATE AS OF CHANGE: 20051019 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONEYGRAM INTERNATIONAL INC CENTRAL INDEX KEY: 0001273931 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 161690064 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-31950 FILM NUMBER: 051145203 BUSINESS ADDRESS: STREET 1: 1550 UTICA AVENUE SOUTH CITY: MINNEAPOLIS STATE: MN ZIP: 55416 BUSINESS PHONE: 9525913000 MAIL ADDRESS: STREET 1: 1550 UTICA AVENUE SOUTH CITY: MINNEAPOLIS STATE: MN ZIP: 55416 8-K 1 a4999006.txt MONEYGRAM INTERNATIONAL, INC. 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): October 19, 2005 MoneyGram International, Inc. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Delaware - -------------------------------------------------------------------------------- (State or Other Jurisdiction of Incorporation) 001-31950 16-1690064 - -------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 1550 Utica Avenue South, Minneapolis, Minnesota 55416 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (952) 591-3000 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) None - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02. Results of Operations and Financial Condition --------------------------------------------- On October 19, 2005, MoneyGram International, Inc. issued a press release reporting financial results for its third quarter ended September 30, 2005, a copy of which is furnished herewith as Exhibit 99.1. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. MONEYGRAM INTERNATIONAL, INC. By: /s/ David J. Parrin ---------------------------------------------- Name: David J. Parrin Title: Vice President, Chief Financial Officer Date: October 19, 2005 EXHIBIT INDEX Exhibit No. Description of Document - ----------- ----------------------- 99.1 Press Release dated October 19, 2005 EX-99.1 2 a4999006ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 MoneyGram International Announces Third Quarter Results; Increases Guidance for 2005; Money Transfer Volume Grows 39 percent in Third Quarter MINNEAPOLIS--(BUSINESS WIRE)--Oct. 19, 2005--MoneyGram International, Inc. (NYSE:MGI): ($ in millions) Q3 Q3 % Except per share data 2005 2004 Change ---------------------- Revenue $246.4 $216.2 14.0 Commissions Expense 119.8 104.3 14.9 Net Revenue 126.6 111.8 13.2 Expenses 87.7 78.4 11.9 Income from Continuing Operations $28.8 $24.5 17.5 Income from Discontinued Operations, net of tax $0.7 $0.0 NM Net Income $29.5 $24.5 20.5 Earnings per Diluted Share Income from Continuing Operations $0.33 $0.28 17.9 Income from Discontinued Operations, net of tax $0.01 $0.00 NM ------- ------- Earnings per Diluted Share $0.34 $0.28 21.4 Operating Margin 15.8% 15.5% NM - Not Meaningful MoneyGram International, Inc. (NYSE:MGI), today announced third quarter 2005 income from continuing operations of $28.8 million, or $0.33 per diluted share, compared to $24.5 million, or $0.28 per diluted share in the third quarter 2004. Third quarter 2004 earnings from continuing operations included net securities gains of $10.9 million and write-offs of $5.2 million, which in the aggregate totaled $0.04 per diluted share. Third quarter 2005 results reflect: -- Global Funds Transfer segment revenue growth of 22 percent in the third quarter 2005. The growth was driven by money transfer transaction volume growth of 39 percent and money transfer revenue growth of 29 percent. -- Net investment margin of 1.82 percent, as shown in Table One, including income of $3.9 million from limited partnership interests, or $0.03 per diluted share after tax. -- Fee and other revenue of $156.4 million, up 22 percent from the third quarter of 2004 driven primarily from the growth in money transfer volume. -- An after tax gain from discontinued operations of $0.7 million or $0.01 per diluted share related to a partial resolution of contingencies from the sale of Game Financial. Philip Milne, president and chief executive officer said, "Our commitment to providing affordable, reliable and convenient payment products and services to our consumers and business partners continued to drive results in the third quarter. This is evident in the strong growth of money transfer transaction volume." Segment Highlights MoneyGram operates in two business segments, Global Funds Transfer and Payment Systems. Global Funds Transfer ($ in millions) Q3 Q3 % 2005 2004 Change ---------------------- Revenue $167.5 $137.7 21.6% Commissions Expense 63.7 51.6 23.5% Net Revenue 103.8 86.1 20.5% Operating Income $35.2 $27.4 28.6% Operating Margin 21.0% 19.9% For the Global Funds Transfer segment, which consists of money transfer (including urgent bill payment) and retail money orders, revenue increased 21.6 percent to $167.5 million and operating income increased 28.6 percent to $35.2 million in the third quarter of 2005. Both revenue and operating income improved as a result of money transfer volume growth. Operating margin in the third quarter of 2005 was 21.0 percent compared to 19.9 percent in the third quarter 2004. The increase in margin was due to the leveraging of expenses through volume growth in money transfer. Money transfer transaction volume grew 39 percent and money transfer revenue (see Table Four) grew 29 percent to $132.8 million compared to the third quarter of 2004. Money transfer revenue growth rates are lower than volume growth rates due to targeted pricing initiatives. Money order transaction volume was down slightly, following a trend of declining use of paper-based payment instruments. As of September 30, MoneyGram has approximately 84,000 money transfer agent locations around the world, an increase of 13 percent over the prior year third quarter. Payment Systems ($ in millions) Q3 Q3 % 2005 2004 Change --------------------- Revenue $78.9 $78.5 0.5% Commissions Expense 56.1 52.7 6.4% Net Revenue 22.8 25.8 (11.5%) Operating Income $7.7 $9.4 (18.2%) Operating Margin 9.8% 12.0% The Payment Systems segment includes PrimeLink/Official Check outsourcing services, financial money orders and controlled disbursement processing services. Payment Systems revenue was relatively flat in the third quarter 2005 compared to 2004. 2005 revenue reflects growth in investment income due to higher yields and $3.1 million of income from limited partnership interests of the total $3.9 million. These benefits were fully offset by a decline in net securities gains of $10.0 million from the third quarter 2004. Operating income was $7.7 million for the third quarter of 2005 versus $9.4 million in the third quarter of 2004. Operating income for the third quarter of 2004 included $8.7 million in net securities gains partially offset by $2.1 million of write-offs, for a net benefit to the operating margin of 8.4 percentage points. The net benefit to the third quarter 2005 operating margin due to the income from limited partnership interests net of securities losses of $1.3 million was 2.3 percentage points. Share Repurchase The company's Board of Directors increased its share buyback authorization by 5 million to 7 million shares, effective August 19, 2005. The company bought back 683,300 shares at an average price of $20.62 per share during the quarter for a total of 2.5 million shares purchased under the authorizations. There are approximately 4.5 million shares remaining under our authorizations. Hurricane Katrina During the third quarter, MoneyGram International donated $125,000 to the Red Cross for Hurricane Katrina rescue efforts. In addition, MoneyGram and its agents offered a no-fee service for donations sent to the Red Cross and worked with the Wal-Mart Foundation to deliver assistance to Wal-Mart associates in critical need in the aftermath of the hurricane. The effects of the recent hurricanes did not materially affect the operations of the company. 2005 Outlook Diluted earnings per share from continuing operations for the full year 2005 is expected to be in the range of $1.22 - $1.25, up from previous guidance of $1.11 - $1.15. This translates to a range of $0.27 - $0.30 for the fourth quarter. The 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, approximately $12 million in cash flows on previously impaired investments for the full year and the $3.9 million of income from limited partnership interests in the third quarter of 2005. Also affecting the guidance are the following items: -- Net revenue (total revenue less total commissions) is expected to be in the range of $490 million to $500 million, up from previous guidance of $465 million to $485 million. -- Net investment margin for the full year is expected to be in the range of 175 to 185 basis points up from previous guidance of 150 to 165 basis points. This guidance includes the effect of cash flows on previously impaired investments and the third quarter income from limited partnership interests. -- Investment portfolio balances are expected to average $6.6 billion for the year, declining from $6.8 billion in 2004 due to consolidation of client financial institutions, up slightly from previous guidance of $6.5 billion. -- 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 57 to 62 percent from $89.0 million in income from operations before taxes in 2004 compared to previous guidance of 42 to 48 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 third 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) 599-9816 in the U.S. The participant passcode is 24566846. 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 November 2, 2005. The replay of the call is available at (888) 286-8010 in the U.S., or (617) 801-6888 internationally, passcode 61476491. 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 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; (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 (Unaudited) Three Months Ended September 30 2005 vs 2005 2004 2004 --------------------------------- (Dollars in thousands) Components of net investment revenue: Investment revenue $91,634 $77,276 $14,358 Investment commissions expense (1) (60,889) (56,712) (4,177) --------------------------------- Net investment revenue $30,745 $20,564 $10,181 ================================= Average balances: Cash equivalents and investments $6,707,017 $6,714,587 ($7,570) Payment service obligations (2) 5,255,146 5,315,246 (60,100) Average yields earned and rates paid (3): Investment yield 5.42% 4.58% 0.84% Investment commission rate 4.60% 4.24% 0.36% Net investment margin 1.82% 1.22% 0.60% Nine Months Ended September 30 2005 vs 2005 2004 2004 --------------------------------- (Dollars in thousands) Components of net investment revenue: Investment revenue $272,188 $231,510 $40,678 Investment commissions expense (1) (177,656) (160,164) (17,492) --------------------------------- Net investment revenue $94,532 $71,346 $23,186 ================================= Average balances: Cash equivalents and investments $6,750,129 $6,729,216 $20,913 Payment service obligations (2) 5,297,765 5,328,344 (30,579) Average yields earned and rates paid (3): Investment yield 5.39% 4.60% 0.79% Investment commission rate 4.48% 4.02% 0.46% Net investment margin 1.87% 1.42% 0.45% (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 ($387.9 million and $400.2 million for the third quarter of 2005 and 2004, respectively, and $397.3 million and $408.2 million for the nine months ended September 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 Nine Months Ended September 30 September 30 2005 2004 2005 2004 --------- --------- --------- --------- (Dollars in thousands, except share and per share data) REVENUE: Fee and other revenue $156,375 $128,000 $444,173 $363,706 Investment revenue 91,634 77,276 272,188 231,510 Net securities gains and losses (1,624) 10,877 (2,060) 12,078 --------- --------- --------- --------- Total revenue 246,385 216,153 714,301 607,294 Fee commissions expense 58,940 47,593 167,344 132,021 Investment commissions expense 60,889 56,712 177,656 160,164 --------- --------- --------- --------- Total commissions expense 119,829 104,305 345,000 292,185 --------- --------- --------- --------- Net revenue 126,556 111,848 369,301 315,109 EXPENSES: Compensation and benefits 35,180 29,320 97,745 95,709 Transaction and operations support 34,547 33,383 106,733 89,069 Depreciation and amortization 8,102 7,439 23,187 22,058 Occupancy, equipment and supplies 8,156 7,012 25,106 22,727 Interest expense 1,697 1,234 5,694 4,361 Debt tender and redemption costs - - - 20,661 --------- --------- --------- --------- Total expenses 87,682 78,388 258,465 254,585 --------- --------- --------- --------- Income from continuing operations before income taxes 38,874 33,460 110,836 60,524 Income tax expense 10,076 8,945 28,185 17,365 --------- --------- --------- --------- Income (loss) from continuing operations 28,798 24,515 82,651 43,159 Income (loss) and gain from discontinued operations, net of tax 740 - 740 21,282 --------- --------- --------- --------- NET INCOME (LOSS) $29,538 $24,515 $83,391 $64,441 ========= ========= ========= ========= Basic earnings (loss) per share Income (loss) from continuing operations $0.34 $0.28 $0.97 $0.50 Income (loss) from discontinued operations, net of tax 0.01 - 0.01 0.24 --------- --------- --------- --------- Earnings (loss) per common share $0.35 $0.28 $0.98 $0.74 ========= ========= ========= ========= Average outstanding common shares 84,883 87,262 84,748 86,968 ========= ========= ========= ========= Diluted earnings (loss) per share Income (loss) from continuing operations $0.33 $0.28 $0.96 $0.50 Income (loss) from discontinued operations, net of tax 0.01 - 0.01 0.24 --------- --------- --------- --------- Earnings (loss) per common share $0.34 $0.28 $0.97 $0.74 ========= ========= ========= ========= Average outstanding and potentially dilutive common shares 86,019 87,588 85,924 87,400 ========= ========= ========= ========= TABLE THREE MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) 2005 ----------------------------- First Second Third Quarter Quarter Quarter ----------------------------- (Dollars in thousands) Revenue: Global Funds Transfer $147,146 $159,742 $167,497 Payment Systems 80,769 80,258 78,888 ----------------------------- 227,915 240,000 246,385 Operating income: Global Funds Transfer 26,429 29,682 35,230 Payment Systems 13,240 11,428 7,717 ----------------------------- 39,669 41,110 42,947 Interest expense 1,389 2,608 1,697 Other unallocated expenses 2,623 2,197 2,376 ----------------------------- Income from continuing operations before income taxes $35,657 $36,305 $38,874 ============================= Operating Margin: Global Funds Transfer 18.0% 18.6% 21.0% Payment Systems 16.4% 14.2% 9.8% 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 111,296 124,545 132,802 TABLE FIVE MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES UNRESTRICTED ASSETS (Unaudited) September 30 December 31 September 30 2005 2004 2004 ------------ ----------- ------------ (Dollars in thousands) Cash and cash equivalents $999,089 $927,042 $788,687 Receivables 1,401,978 771,966 844,956 Investments 6,172,557 6,335,493 6,279,016 ------------ ----------- ------------ 8,573,624 8,034,501 7,912,659 Amounts restricted to cover payment service obligations (8,220,504) (7,640,581) (7,532,691) ------------ ----------- ------------ Unrestricted assets (1) $353,120 $393,920 $379,968 ============ =========== ============ (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 -----END PRIVACY-ENHANCED MESSAGE-----