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MoneyGram International Inc. Reports Operating Results (10-Q)

November 05, 2010 | About:
10qk

10qk

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MoneyGram International Inc. (MGI) filed Quarterly Report for the period ended 2010-09-30.

Moneygram International Inc. has a market cap of $209.3 million; its shares were traded at around $2.5 with and P/S ratio of 0.2. MGI is in the portfolios of Richard Blum of Blum Capital Partners, RS Investment Management, Louis Moore Bacon of Moore Capital Management, LP, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Fee and other revenue consists of fees on money transfer, bill payment, money order and official check transactions. For the three months ended September 30, 2010, fee and other revenue decreased $6.4 million, or 2 percent, from 2009 due to $2.5 million of lower revenue in the Financial Paper Products segment primarily from lower volumes, a $1.9 million decline in bill payment revenue from lower average fees per transaction due to industry mix and lower volume and $1.9 million of incremental fee and other revenue in 2009 related to discontinued businesses and products. Money transfer fee and other revenue was flat compared to 2009 as volume growth was offset by the lower euro exchange rate and decreased fee revenue from the $50 price band introduced earlier in the year. Money transfer volume growth of 9 percent drove $21.0 million of incremental revenue. Lower average money transfer fees decreased fee and other revenue $9.5 million from the introduction of the $50 price band in the United States, $9.1 million from the lower euro exchange rate and $0.7 million from changes in corridor mix. The $50 price band introduced in late March and April allows consumers to send $50 of principal for a $5 fee at most locations, or for $4.75 at a Walmart location. In addition, fee and other revenue for the three months ended September 30, 2009 benefited from early termination fees of approximately $1.6 million. See Table 6 Global Funds Transfer Segment and Table 7 Financial Paper Products Segment for further information regarding fee and other revenue.

For the nine months ended September 30, 2010, fee and other revenue increased $5.5 million, or 1 percent, from 2009 due to a net $17.9 million increase in money transfer product, partially offset by a $5.4 million decline in bill payment from lower average fee per transaction due to industry mix and lower volume and $7.1 million of incremental fee and other revenue in 2009 related to discontinued businesses and products. Money transfer volume growth of 7 percent drove $48.8 million of incremental revenue, while changes in corridor mix drove incremental revenue of $0.8 million. Fee and other revenue decreased $17.8 million from lower average money transfer fees due to the introduction of the $50 price band in the United States and $12.6 million from the lower euro exchange rate, net of hedging activities. In addition, fee and other revenue for the nine months ended September 30, 2009 benefited from early termination fees of approximately $1.3 million. See Table 6 Global Funds Transfer Segment and Table 7 Financial Paper Products Segment for further information regarding fee and other revenue.

Fee and other commissions expense for the nine months ended September 30, 2010 increased $1.0 million compared to 2009. Incremental fee commissions expense of $14.0 million from money transfer transaction volume growth was partially offset by a $4.6 million decrease due to the decline in the euro exchange rate, a $2.9 million decrease due to lower average commission rates, a $2.0 million decrease in signing bonus expense as certain historical signing bonuses were fully amortized or written off in the prior year, a $2.7 million decrease in other commissions expense for money order and other products and a $1.5 million decrease in bill payment fee commissions from lower average fees due to industry mix.

We did not record any net securities gains or losses for the three months ended September 30, 2010. Net securities gains of $2.1 million for the nine months ended September 30, 2010 reflect a $2.4 million realized gain from the call of a trading investment, net of the reversal of the related put option, partially offset by other-than-temporary impairments on other asset-backed securities of $0.3 million. Net securities gains for the three and nine months ended September 30, 2009 reflect realized gains of $2.4 million and $7.6 million, respectively, from the call of trading investments, net of the reversal of the related put options, and valuation gains of $1.1 million and $3.2 million, respectively, on a put option related to a trading investment. Partially offsetting these gains were $0.8 million and $3.7 million of other-than-temporary impairments on other asset-backed securities for the three and nine months ended September 30, 2009, respectively.

Transaction and operations support Transaction and operations support includes marketing, professional fees and other outside service costs, telecommunications and agent forms related to our products. Transaction and operations support for the three months ended September 30, 2010 decreased $35.6 million, or 43 percent, from 2009. Expenses in 2009 included a $16.5 million accrual for a patent lawsuit, asset impairments of $8.4 million, an additional $6.0 million accrual for a settlement with the Federal Trade Commission and $2.6 million of consultant fees from the implementation of the European Union Payment Services Directive. During the three months ended September 30, 2010, legal expense decreased $3.7 million due to the timing of legal matters and cost savings initiatives resulted in a $1.2 million decrease in our telecommunication costs and agent forms and supplies. We recorded a $1.8 million accrual for various litigation matters, incurred $0.7 million of incremental marketing costs and recorded $0.3 million of expense related to restructuring initiatives. As reflected in each of the amounts discussed above, the decrease in the euro exchange rate decreased transactions and operations support by $1.4 million.

Transaction and operations support for the nine months ended September 30, 2010 decreased $55.1 million, or 28 percent, from 2009. Expenses in 2009 included an $18.0 million accrual for a settlement with the Federal Trade Commission, a $16.5 million accrual for a patent lawsuit, asset impairments of $12.3 million, an incremental provision for loss of $11.6 million primarily from the closure of an international agent during 2009 and consultant fees of $2.6 million due to the implementation of the European Union Payment Services Directive. Cost savings initiatives resulted in a $3.5 million decrease in our telecommunication costs and agent forms and supplies in 2010. Expenses in 2010 include $3.1 million of incremental marketing costs, $1.9 million of additional licensing fees, a $1.8 million accrual for various litigation matters and $0.6 million of expense for costs related to restructuring initiatives. In addition, we recognized a $1.5 million impairment charge related to the July 2010 sale of our corporate aircraft. As reflected in each of the amounts discussed above, the decrease in the euro exchange rate decreased transactions and operations support by $1.6 million.

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