MoneyGram International
Annual Report 2004

Plain-text annual report

Affordable Reliable Convenient 2004 Annual Report 1 A Letter from the CEO MoneyGram 2004 Annual Report A Letter from the CEO Our Purpose: To Our Shareholders: To help people and businesses by providing affordable, reliable, and Welcome to MoneyGram International, Inc. and our first annual report. The convenient payment services year 2004 was remarkable for our business. We successfully completed two Our Corporate Values: Respect, Courage, Passion, Integrity, Teamwork major structural changes, saw significant growth in our money transfer business, and repositioned our Payment Systems official check business. These events and many other accomplishments in 2004 prepare our company for a bright future. Phil Milne President and CEO In March 2004, we sold our Game Financial business, enabling us to sharpen our focus on our core business. In June we completed our spin-off from Viad Corp, and MoneyGram International began “when-issued” trading on the NYSE on June 22. Our total return from the beginning of “when-issued” trading through December 31, 2004, was 8.5 percent, compared to 7.8 percent for the S&P 500. Our employees rose to the challenge of bringing our company public, while never losing sight of our core purpose: to provide people and businesses with affordable, reliable and convenient payment services. At MoneyGram International, our corporate values form the foundation of our organization and have been the basis of our success. Our values of respect, courage, passion, integrity and teamwork define how we interact with all our stakeholders, from our consumers and customer-partners to our shareholders and one another. Every employee is expected to demonstrate these traits every day, as well as comply with the requirements of our corporate code of ethics. We leave 2004 having reached several milestones: • Grew the global money transfer agent network by 22 percent to more than 77,000 agent locations. • Achieved money transfer transaction volume growth of more than 25 percent for 14 consecutive quarters. • Expanded the money transfer business into the financial institution market in the U.S. with the signing of two major domestic banks as money transfer agents. • Enhanced our value proposition to more consumers around the globe by introducing the right currency with the right fee structure. MoneyGram 2004 Annual Report A Letter from the CEO 2 • Broadened distribution channels for global money transfer by introducing Internet money transfers through MoneyGram eMoney Transfer. • Positioned the official check business to capitalize on improving interest rates over the long term and increased fees. To enhance stockholder value in 2005, we plan to: • Continue to expand our agent base and broaden our distribution channels. • Increase our investment in our global branding strategy, technology and people. • Introduce new products and enhancements. • Step up our initiative to cross-sell our Global Funds Transfer products to the financial institution marketplace. • Continue to invest in compliance with regulatory requirements, including money transfer regulations and Sarbanes-Oxley. • Continue to support the communities where we do business through our five-year commitment with Habitat for Humanity to build homes around the world and our MoneyGram Global Giving initiative. We have adopted strong corporate governance policies, adhering to principles that are required by the New York Stock Exchange. A majority of our board of directors is independent and all are experienced business people. I want to thank them for the invaluable support and counsel as we worked through the successful spin-off and launch of MoneyGram International as an independent, publicly traded New York Stock Exchange company. I would like to thank everyone who helped us accomplish so much in 2004. This includes our hard-working employees who share our vision and values, our business partners, our loyal customers and our shareholders. As we look forward to 2005 and beyond, we are driven by our vision to provide affordable, reliable and convenient payment services, and are guided by our values. Thank you for your continued support. Corporate Governance MoneyGram International is committed to fair and ethical business practices that incorporate clear corporate values, strong corporate governance, integrity in financial reporting and strict compliance with laws governing our business activities. The values that are the cornerstone of our corporate culture are respect, courage, passion, integrity and teamwork. MoneyGram has a code of ethics. Our employees are educated to conduct themselves in a manner that demonstrates high standards of business and personal ethics as well as compliance with laws. The majority of our board is independent. MoneyGram’s audit committee, human resources committee, finance and investment committee, and corporate governance and nominating committees are all composed entirely of independent directors. In 2004, we began our Sarbanes-Oxley Section 404 assessment of the design and effectiveness of our internal controls over financial reporting. We will report on internal controls for the year ending December 31, 2005. Sincerely, Philip W. Milne Chief Executive Officer What Guides Us: Our Strategic Focus 3 Global Funds Transfer MoneyGram 2004 Annual Report Global Funds Transfer Group Products & Services: Money Transfer The MoneyGram® International money transfer service allows consumers to send money around the world in as little as 10 minutes. The global network comprised of retailers, international post offices and financial institutions, now has more than 77,000 agents in more than 170 countries. Bill Payment Services ExpressPaymentsm is an urgent bill payment service that consumers can use at any money transfer agent location in the U.S. Typically it is used by consumers who may be late in paying a bill such as a car or mortgage payment. FlashPay® and BuyPay® are routine bill payment services for many unbanked or underbanked consumers. These services are available at selected money order agent locations. Money Orders Travelers Express money orders can be purchased at more than 53,000 agent locations in the U.S. Money orders are commonly used by individuals without checking accounts for paying bills, and they are also used by consumers to pay for Internet purchases. Global Funds Transfer The Global Funds Transfer (GFT) segment encompasses MoneyGram’s fast- growing international money transfer business and urgent bill pay business, as well as money orders and in-person bill payments. MoneyGram is still in the early stages of this product life cycle, and we see excellent opportunity for growth. When the MoneyGram money transfer business was purchased in 1998, there were only 25,000 money transfer agents in the network representing about 100 countries. Today, the network has grown to more than 77,000 agents in more than 170 countries. Global remittances are growing at a steady clip, and the core consumer of our services - the immigrant - continues to move to countries with greater economic opportunity. MoneyGram continues to expand its network and products to provide affordable, reliable and convenient payment services to these consumers, every step along their way. MoneyGram’s eMoney Transfer service, launched in early 2004, is providing our customers with the convenience of the Internet channel with ACH, credit card and debit card payment choices. We will continue to expand payment options for our consumers with the introduction in 2005 of new products utilizing stored value cards and bank account direct deposits. GFT aims to increase its market share through focused value pricing, network expansion and investments in technology and marketing. Pricing: MoneyGram continues to lead the way in providing competitive pricing and remains committed to providing the better value proposition market by market. GFT has carefully positioned its consumer pricing between the higher priced competition in the market and the smaller niche players. It continues to offer the right value by getting the fee and foreign exchange combination right, and paying receive funds in the preferred local currency. Network Expansion: GFT significantly expanded its distribution channels in 2004, adding agent locations in key send markets such as the U.S., Spain and Italy, as well as key receive markets such as China, India, Brazil and Nigeria. GFT also expanded its money transfer network into domestic banking channels with the addition of two major U.S. banks. MoneyGram 2004 Annual Report Global Funds Transfer 4 Technology: In addition to the new products already mentioned, GFT will strive to maintain its leadership in point-of-sale (POS) technology. Our POS systems allow us to interact with our customers and agents via a PC with a dedicated line or dial-up, an agent’s own POS platform or through MoneyGram’s call center. Marketing: MoneyGram understands the importance of brand presence and consistency in its messaging to create a strong relationship with its consumers as they migrate around the globe. We implement marketing tactics to reach out and speak to the customer in his or her native language and build brand loyalty at the local level. Street teams and task forces made up of local people work in their own communities to build awareness and a positive image for MoneyGram and its neighborhood agents. Outdoor signs in high-traffic areas reach consumers where they live, work and play. MoneyGram carefully selects key areas around the world to run broad-based advertising on television, radio, print and other media – to build strong name recognition and ensure that consumers in both the send and receive markets identify MoneyGram as a name they can trust. Flexibility and co-branding with local agents is one of MoneyGram’s strengths. Together we create awareness for MoneyGram and its agents, making each a hometown favorite while continually driving the business growth at a record pace. Through sponsorship programs with Habitat for Humanity, disaster relief programs and other community outreach efforts, MoneyGram demonstrates its strong commitment to giving back to communities around the world. MoneyGram-sponsored Habitat home dedication Quezaltenango, Guatemala March, 2004 This stepped-up marketing approach, additional sales and marketing “feet on the ground” and a sharper focus on receive market activity puts MoneyGram in an excellent position to expand its market share. We continue to remain disciplined in measuring and controlling our marketing expenses. Our increased marketing spending in 2005 will be allocated to tried-and-tested ethnic marketing campaigns and activity in the receive markets. 5 Payment Systems MoneyGram 2004 Annual Report Payment Systems Products & Services: PrimeLink® Official Check Services – PrimeLink is a complete official check outsourcing solution utilized by financial institutions for all of their official check disbursement needs. PrimeLink helps clients reduce costs, enhance revenue, and improve operational efficiency. PrimeLinkPlus® Check Disbursement Service – This state-of-the-art disbursement process utilizes Internet technology to deliver an efficient, financial-institution- controlled check issuance solution to companies who have a business need to issue good fund checks, either locally or remotely. Travelers Express/MoneyGram financial money orders – These money orders are issued by banks, thrifts and credit unions. Financial Institutions can take advantage of the same advanced dispenser technology and online tools as our retail money order agents. MoneyGram Money Transfer Service – For financial institutions that wish to provide a “retail” money transfer service to customers, we offer access to our network and a turnkey installation of our systems. FSMC – FSMC is a subsidiary that processes high volume, low dollar transactions for Fortune 500, commercial and government entities. These payments include consumer rebates, gift certificates, direct mail checks and government benefit payments. Payment Systems MoneyGram International’s Payment Systems segment has been providing financial institutions with payment processing services, primarily official checks and money orders, for more than 30 years. In 2004, the Payment Systems team continued to develop new business and expand existing relationships. Through additional service offerings, Payment Systems was able to leverage this delivery channel as well as retain valuable financial institution customers. An increased emphasis was placed on assisting financial institutions in meeting the needs of their commercial customers. Payment Systems also continues to develop and offer products and operational processes in support of Check 21 and industry trends related to the transition from paper to electronic transactions and imaging services. In implementing these strategies, Payment Systems successfully launched the MoneyGram money transfer service within the financial institution channel. This was a very timely offering due to the growing demand by financial institutions to provide money transfer services to their customers. Through a strategic alliance, Payment Systems also began offering financial institutions new options for enabling their corporate customers to use electronic funds management. These options allow the financial institution to offer products that automate the collection of paper-based items via the ACH network. In addition, the PrimeLinkplus product was enhanced in 2004 to include an online funds verification integration option, enabling financial institutions to verify and secure funds automatically for good fund checks initiated by their corporate client base. FSMC continues to be the industry leader in rebate and fulfillment processing. Technology enhancements, such as FSMC On-Line, created significant efficiencies for our customers. Additionally, FSMC introduced and continues to grow a Canadian rebate program to meet the needs of its global corporate customers. In support of these strategies, Payment Systems continues to expand product and service offerings for this important business segment. These products will enable our corporate and financial institutions clients to meet the evolving needs of their commercial clients, broadening our relationships with this strong and loyal customer base. MoneyGram 2004 Annual Report Corporate Leadership MoneyGram International Board of Directors Robert H. Bohannon, Chairman Phoenix, Arizona Chairman, President & Chief Executive Officer, Viad Corp, tradeshow and exhibit services; travel and recreation services Philip W. Milne Minneapolis, Minnesota President & Chief Executive Officer, MoneyGram International, Inc. Jess T. Hay Dallas, Texas Chairman, Texas Foundation for Higher Education Judith K. Hofer Portland, Oregon Consultant to May Department Stores and former President & Chief Executive Officer, May Merchandising/MDSI, a May Department Stores Company Donald E. Kiernan Naples, Florida Retired Senior Executive Vice President & Chief Financial Officer, SBC Communications, Inc., a telecommunications provider Robert C. Krueger New Braunfels, Texas Business Consultant and former Oxford University professor, U.S. Senator, U.S. Congressman and U.S. Ambassador Linda Johnson Rice Chicago, Illinois President & Chief Executive Officer, Johnson Publishing Company, Inc., Publisher of Ebony and Jet magazines Douglas L. Rock Houston, Texas Chairman & Chief Executive Officer, Smith International, Inc., a producer of oil & gas field equipment Albert M. Teplin Rockville, Maryland Economist and consultant to businesses and governments including the Federal Reserve Timothy R. Wallace Dallas, Texas Chairman, President & Chief Executive Officer, Trinity Industries, Inc., a manufacturer of rail and trucking equipment Executive Officers Philip W. Milne, President & Chief Executive Officer David J. Parrin, Chief Financial Officer Anthony P. Ryan, Vice President General Manager, Global Funds Transfer William J. Putney, Vice President Chief Investment Officer Mary A. Dutra, Vice President General Manager, Payment Systems Teresa H. Johnson, Vice President General Counsel & Secretary Cindy J. Stemper, Vice President Human Resources & Facilities Jean C. Benson, Vice President Controller Theodore F. Ceglia, Vice President Treasurer Other Senior Management David A. Albright, Vice President Chief Information Officer Barbara L. Bilow, Vice President Operations Daniel J. Collins, Vice President Audit Michael Daugherty, Vice President Payment Systems & Marketing Robert Wayne Glaus, Vice President Information Technology Thomas E. Haider, Vice President Government Affairs, Associate General Counsel & Chief Compliance Office John Hempsey, Chief Executive Officer MoneyGram International Limited Ann G. Jackson, Vice President Market Development Mark A. Kruempel, Vice President Operations Daniel J. O’Malley, Vice President Domestic - The Americas Patricia D. Phillips, Vice President Investor Relations & Corporate Communications Stockholder Information Corporate Headquarters MoneyGram International, Inc. 1550 Utica Avenue South Suite 100 Minneapolis, MN 55416 (952) 591-3000 www.moneygram.com Annual Meeting MoneyGram International, Inc. will hold its Annual Meeting of stockholders at 9:00 a.m. on May 10, 2005, at The Grand Hotel, 615 Second Avenue South, Minneapolis, MN 55402 Investor Information Securities analysts and investors seeking additional information about MoneyGram International, Inc. should contact the Investor Relations Department at (952) 591-3840 Transfer Agent To change your address, make inquiries regarding dividend payments or to mail Common Stock certificates for transfer, please contact: Wells Fargo Shareowner Services P.O. Box 64854 St. Paul, MN 55164-0854 (866) 877-6290 www.wellsfargo.com/shareownerservices Common Stock certificates may be delivered to the following offices for transfer: Wells Fargo Shareowner Services 161 North Concord Exchange South St. Paul, MN 55075-1139 Wells Fargo Shareowner Services c/o Depository Trust Co., T.A. Drop 55 Water Street New York, NY 10041-0001 Certifications The Company has included with this Annual Report the Chief Executive Officer and Chief Financial Officer certifications required by Section 302 of the Sarbanes-Oxley Act. The Company has also submitted the required annual Chief Executive Officer certification to the New York Stock Exchange. Corporate Headquarters MoneyGram International, Inc. 1550 Utica Avenue South Suite 100 Minneapolis, MN 55416 (952) 591-3000 www.moneygram.com 

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