UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(mark one)

þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

		for the Quarterly Period Ended June 30, 2011

o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

		for the transition period from                                          to                                         .

Commission File Number: 001-31950

MONEYGRAM INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware		16-1690064
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
2828 N. Harwood St., 15th Floor
Dallas, Texas		75201
(Address of principal executive offices)		(Zip Code)

(214) 999-7552
(Registrant’s telephone number, including area code)

Not applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ   No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o   No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of August 5, 2011, 398,626,743 shares of common stock, $0.01 par value, were outstanding.

 

 

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements			3
Consolidated Balance Sheets			3
Consolidated Statements of Income			4
Consolidated Statements of Comprehensive Income			5
Consolidated Statements of Cash Flows			6
Consolidated Statement of Stockholders’ Deficit			7
Notes to Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			32
Item 3. Quantitative and Qualitative Disclosures About Market Risk			47
Item 4. Controls and Procedures			48
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			49
Item 1A. Risk Factors			50
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			51
Item 6. Exhibits			51
Signatures			52
Exhibit Index			53
Exhibit 10.4
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

MONEYGRAM INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
UNAUDITED

		June 30,				December 31,
(Amounts in thousands, except share data)		2011				2010
ASSETS
Cash and cash equivalents		$	—			$	—
Cash and cash equivalents (substantially restricted)			2,685,666				2,865,941
Receivables, net (substantially restricted)			1,038,766				982,319
Short-term investments (substantially restricted)			517,318				405,769
Available-for-sale investments (substantially restricted)			134,346				160,936
Property and equipment			111,125				115,111
Goodwill			428,691				428,691
Other assets			165,858				156,969
Total assets		$	5,081,770			$	5,115,736
LIABILITIES
Payment service obligations		$	4,142,961			$	4,184,736
Debt			839,166				639,946
Pension and other postretirement benefits			117,762				120,536
Accounts payable and other liabilities			107,297				113,647
Total liabilities			5,207,186				5,058,865
COMMITMENTS AND CONTINGENCIES (NOTE 15)
MEZZANINE EQUITY
Participating Convertible Preferred Stock — Series B, $0.01 par value, none at June 30, 2011 and 800,000 shares authorized, 495,000 shares issued at December 31, 2010			—				628,199
Participating Convertible Preferred Stock — Series B-1, $0.01 par value, none at June 30, 2011 and 500,000 shares authorized, 272,500 shares issued at December 31, 2010			—				371,154
Total mezzanine equity			—				999,353
STOCKHOLDERS’ DEFICIT
Junior Participating Preferred Stock — Series A, $0.01 par value, 2,000,000 shares authorized, none issued			—				—
Participating Convertible Preferred Stock — Series D, $0.01 par value, 200,000 shares authorized, 173,189 issued at June 30, 2011 and none at December 31, 2010, respectively			446,925				—
Common Stock, $0.01 par value, 1,300,000,000 shares authorized, 403,157,310 and 88,556,077 shares issued at June 30, 2011 and December 31, 2010, respectively			4,032				886
Additional paid-in capital			810,739				—
Retained loss			(1,231,986	)			(771,544	)
Accumulated other comprehensive loss			(23,950	)			(31,879	)
Treasury stock: 4,571,677 and 4,935,555 shares at June 30, 2011 and December 31, 2010, respectively			(131,176	)			(139,945	)
Total stockholders’ deficit			(125,416	)			(942,482	)
Total liabilities, mezzanine equity and stockholders’ deficit		$	5,081,770			$	5,115,736

See Notes to Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED

		Three Months Ended June 30,								Six Months Ended June 30,
(Amounts in thousands, except per share data)		2011				2010				2011				2010
REVENUE
Fee and other revenue		$	304,074			$	277,644			$	594,083			$	558,510
Investment revenue			5,879				6,253				9,894				11,891
Total revenue			309,953				283,897				603,977				570,401
EXPENSES
Fee and other commissions expense			135,561				120,248				264,621				242,658
Investment commissions expense			111				216				251				420
Total commissions expense			135,672				120,464				264,872				243,078
Compensation and benefits			57,913				55,225				117,208				112,787
Transaction and operations support			58,594				48,579				109,003				96,165
Occupancy, equipment and supplies			11,637				10,975				23,390				22,144
Depreciation and amortization			11,879				11,876				23,545				24,387
Total operating expenses			275,695				247,119				538,018				498,561
OPERATING INCOME			34,258				36,778				65,959				71,840
Other (income) expense
Net securities (gains) losses			(32,816	)			277				(32,816	)			(2,115	)
Interest expense			22,873				27,440				43,486				51,847
Other			14,856				—				14,856				—
Total other expenses, net			4,913				27,717				25,526				49,732
Income before income taxes			29,345				9,061				40,433				22,108
Income tax expense (benefit)			2,941				2,213				(16	)			4,448
NET INCOME		$	26,404			$	6,848			$	40,449			$	17,660
BASIC AND DILUTED LOSS PER COMMON SHARE		$	(1.37	)		$	(0.31	)		$	(2.26	)		$	(0.57	)
Net loss available to common stockholders:
Net income as reported		$	26,404			$	6,848			$	40,449			$	17,660
Accrued dividends on mezzanine equity			—				(30,667	)			(30,934	)			(60,036	)
Accretion on mezzanine equity			(77,465	)			(1,979	)			(80,023	)			(4,824	)
Additional consideration issued in connection with conversion of mezzanine equity			(366,797	)			—				(366,797	)			—
Cash dividends paid on mezzanine equity			(20,477	)			—				(20,477	)			—
Net loss available to common stockholders			(438,335	)			(25,798	)			(457,782	)			(47,200	)
Weighted-average outstanding common shares and common share equivalents			319,669				83,266				202,305				82,951

See Notes to Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
UNAUDITED

		Three Months Ended June 30,								Six Months Ended June 30,
(Amounts in thousands)		2011				2010				2011				2010
NET INCOME		$	26,404			$	6,848			$	40,449			$	17,660
OTHER COMPREHENSIVE INCOME
Net unrealized gains (losses) on available-for-sale securities:
Net holding gains (losses) arising during the period net of tax expense (benefit) of $0 for the three and six months ended June 30, 2011 and 2010			3,083				(2,509	)			5,028				331
Reclassification adjustment for net realized losses included in net income, net of tax benefit of $0 for the three and six months ended June 30, 2011 and 2010			4				277				4				334
			3,087				(2,232	)			5,032				665
Pension and postretirement benefit plans:
Reclassification of prior service (credit) costs recorded to net income, net of tax (expense) benefit of $(57) and $8 for the three months ended June 30, 2011 and 2010, respectively, and $(114) and $16 for the six months ended June 30, 2011 and 2010, respectively			(92	)			13				(185	)			26
Reclassification of net actuarial loss recorded to net income, net of tax benefit of $620 and $456, for the three months ended June 30, 2011 and 2010, respectively, and $1,242 and $1,002 for the six months ended June 30, 2011 and 2010, respectively			1,012				744				2,024				1,635
Unrealized foreign currency translation gains (losses), net of tax expense (benefit) of $205 and $(1,688) for the three months ended June 30, 2011 and 2010, respectively, and $648 and $(2,594) for the six months ended June 30, 2011 and 2010, respectively			334				(2,755	)			1,058				(4,232	)
Other comprehensive income (loss)			4,341				(4,230	)			7,929				(1,906	)
COMPREHENSIVE INCOME		$	30,745			$	2,618			$	48,378			$	15,754

See Notes to Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED

		Three Months Ended June 30,								Six Months Ended June 30,
(Amounts in thousands)		2011				2010				2011				2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	26,404			$	6,848			$	40,449			$	17,660
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			11,879				11,876				23,545				24,387
Investment impairment charges			4				277				4				334
Net gain on maturities and settlements of investments			(32,820	)			—				(32,820	)			(2,449	)
Net amortization of investment premiums and discounts			(24	)			55				(18	)			149
Asset impairments and net losses upon disposal			4,250				—				3,968				—
Provision for deferred income taxes			—				102				—				102
Signing bonus amortization			8,119				7,042				16,067				14,372
Signing bonus payments			(6,025	)			(1,409	)			(12,803	)			(12,944	)
Loss on debt extinguishment			5,221				—				5,221				—
Amortization of debt discount and deferred financing costs			2,806				5,854				4,397				8,296
Provision for uncollectible receivables			549				1,432				1,898				3,897
Non-cash compensation and pension expense			5,771				8,675				12,693				17,876
Other non-cash items, net			(275	)			1,120				174				1,223
Changes in foreign currency translation adjustments			335				(2,754	)			1,058				(4,232	)
Change in other assets			(12,433	)			(5,357	)			(8,194	)			(6,726	)
Change in accounts payable and other liabilities			16,067				(1,650	)			(3,761	)			(13,575	)
Total adjustments			3,424				25,263				11,429				30,710
Change in cash and cash equivalents (substantially restricted)			90,343				(13,135	)			180,275				585,598
Change in trading investments and related put options (substantially restricted)			—				—				—				29,400
Change in receivables (substantially restricted)			(68,771	)			(88,859	)			(44,746	)			95
Change in payment service obligations			97,696				(100,154	)			(41,775	)			(370,826	)
Net cash provided by (used in) operating activities			149,096				(170,037	)			145,632				292,637
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investments classified as available-for-sale (substantially restricted)			14,281				39,249				31,743				82,572
Proceeds from settlement of investments			19,221				—				19,221				—
Purchases of short-term investments (substantially restricted)			(111,259	)			(513	)			(316,700	)			(500,921	)
Proceeds from maturities of short-term investments (substantially restricted)			5,316				200,000				205,816				200,000
Purchases of property and equipment			(15,217	)			(9,152	)			(24,190	)			(15,476	)
Cash paid for acquisitions, net of cash acquired			(53	)			11				(53	)			(330	)
Net cash (used in) provided by investing activities			(87,711	)			229,595				(84,163	)			(234,155	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt			389,025				—				389,025				—
Transaction costs for issuance and amendment of debt			(17,062	)							(17,062	)
Payments on debt			(191,250	)			(60,000	)			(191,250	)			(60,000	)
Additional consideration issued in connection with conversion of mezzanine equity			(218,333	)			—				(218,333	)			—
Transaction costs for the conversion and issuance of stock			(3,469	)							(3,736	)
Cash dividends paid on mezzanine equity			(20,477	)			—				(20,477	)			—
Proceeds from exercise of stock options			181				442				364				1,518
Net cash used in financing activities			(61,385	)			(59,558	)			(61,469	)			(58,482	)
NET CHANGE IN CASH AND CASH EQUIVALENTS			—				—				—				—
CASH AND CASH EQUIVALENTS — Beginning of period			—				—				—				—
CASH AND CASH EQUIVALENTS — End of period		$	—			$	—			$	—			$	—

See Notes to Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
UNAUDITED

																		Accumulated
										Additional								Other
		Preferred				Common				Paid-In				Retained				Comprehensive				Treasury
(Amounts in thousands)		Stock				Stock				Capital				Loss				Loss				Stock				Total
December 31, 2010		$	—			$	886			$	—			$	(771,544	)		$	(31,879	)		$	(139,945	)		$	(942,482	)
Net income															40,449												40,449
Accrued dividends on mezzanine equity											(2,115	)			(28,819	)											(30,934	)
Accretion on mezzanine equity											(3,071	)			(76,952	)											(80,023	)
Cash dividends paid on mezzanine equity															(20,477	)											(20,477	)
Conversion of mezzanine equity			394,215				2,864				713,232																1,110,311
Additional consideration issued in connection with conversion of mezzanine equity			52,710				282				95,472				(366,797	)											(218,333	)
Employee benefit plans											7,221				(7,846	)							8,769				8,144
Net unrealized gain on available-for-sale securities																			5,032								5,032
Amortization of prior service cost for pension and postretirement benefits, net of tax																			(185	)							(185	)
Amortization of unrealized losses on pension and postretirement benefits, net of tax																			2,024								2,024
Unrealized foreign currency translation adjustment																			1,058								1,058
June 30, 2011		$	446,925			$	4,032			$	810,739			$	(1,231,986	)		$	(23,950	)		$	(131,176	)		$	(125,416	)

See Notes to Consolidated Financial Statements

MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 — Basis of Presentation

The accompanying unaudited consolidated financial statements of MoneyGram International, Inc. (“MoneyGram” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal recurring nature. Operating results for the three and six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for future periods. For further information, refer to the Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Correction of Presentation of Short-term Investments — In connection with the preparation of its consolidated financial statements for the year ended December 31, 2010, the Company corrected the presentation of certain investments in time deposits and certificates of deposit, reflecting the fact that these investments have original maturities in excess of three months but no greater than thirteen months. Accordingly, the related gross purchases and gross maturities of such short-term investments, previously presented within “Change in cash and cash equivalents (substantially restricted)” in operating activities, have been properly presented as cash flows from investing activities in the Consolidated Statement of Cash Flows for the three and six months ended June 30, 2010.

Note 2 — 2011 Recapitalization

Following shareholder approval on May 18, 2011, the Company completed its recapitalization transaction in accordance with the Recapitalization Agreement (the “Recapitalization Agreement”), dated as of March 7, 2011, as amended, by and among the Company, affiliates and co-investors of Thomas H. Lee Partners, L.P. (“THL”) and affiliates of Goldman, Sachs & Co. (“Goldman Sachs,” and collectively with THL, the “Investors”). Pursuant to the Recapitalization Agreement, (i) THL converted all of its shares of Series B Participating Convertible Preferred Stock, par value $0.01 per share (the “B Stock”), into 286.4 million shares of common stock and (ii) Goldman Sachs converted all of its shares of Series B-1 Participating Convertible Preferred Stock, par value $0.01 per share (the “B-1 Stock,” and collectively with the B Stock, the “Series B Stock”), into 157,686 shares of Series D Participating Convertible Preferred Stock, par value $0.01 per share (the “D Stock”), and (iii) THL received 28.2 million additional shares of common stock and $140.8 million in cash, and Goldman Sachs received 15,503 additional shares of D Stock and $77.5 million in cash. Collectively, these transactions are referred to as the 2011 Recapitalization. Under the 2011 Recapitalization, the Investors received a cash dividend payment for amounts earned under the terms of the B and B-1 Stock for the period from March 26, 2011 through May 18, 2011. As a result of the 2011 Recapitalization, all amounts included in mezzanine equity have been converted into components of stockholders’ equity. The Company recognized transaction costs related to the conversion of the Series B Stock of $4.0 million and $5.5 million during the three and six months ended June 30, 2011, respectively, in the “Other” line in the Consolidated Statements of Income.

Following is a summary of the transactional components of the 2011 Recapitalization and their corresponding impacts to Mezzanine Equity and the components of Stockholders’ Deficit in the Consolidated Balance Sheets:

						Stockholders’ Deficit
														Additional
		Mezzanine								Common				Paid-in				Retained				Total
(Amounts in thousands)		Equity				D Stock				Stock				Capital				Loss				Activity
Conversion of B Stock to common stock		$	(716,096	)		$	—			$	2,864			$	713,232			$	—			$	—
Conversion of B-1 Stock to D Stock			(394,215	)			394,215																—
Accretion of unamortized mezzanine equity discounts			76,099																(76,099	)			—
Additional stock consideration paid			—				52,710				282				95,472				(148,464	)			—
Non-cash activity			(1,034,212	)			446,925				3,146				808,704				(224,563	)			—
Additional cash consideration paid			—				—				—				—				(218,333	)			(218,333	)
Cash dividends paid on mezzanine equity			—				—				—				—				(20,477	)			(20,477	)
Cash activity			—				—				—				—				(238,810	)			(238,810	)
Total 2011 Recapitalization impact to Mezzanine Equity and Stockholders’ Deficit		$	(1,034,212	)		$	446,925			$	3,146			$	808,704			$	(463,373	)		$	(238,810	)
Shares issued upon conversion			—				157,686				286,438,367
Additional stock consideration paid			—				15,503				28,162,866
Total new shares issued under the 2011 Recapitalization			—				173,189				314,601,233

Concurrent with entering into the Recapitalization Agreement, MoneyGram Payment Systems Worldwide, Inc. (“Worldwide”) and the Company entered into a Consent Agreement with the holders of the second lien notes (the “second lien notes”), to amend the indenture governing the second lien notes in order to permit the 2011 Recapitalization.

On May 18, 2011, the Company entered into a credit agreement for a new $540 million senior secured credit facility (the “2011 Credit Agreement”) consisting of a $150 million, five-year revolving credit facility and a $390 million, six and one half year term loan. Upon entering into the 2011 Credit Agreement, the Company recognized a debt extinguishment loss of $5.2 million, in the “Other” line in the Consolidated Statements of Income, related to the existing 2008 senior facility. A portion of the net proceeds from the term loan under the 2011 Credit Agreement was used to consummate the 2011 Recapitalization and to refinance the Company’s existing 2008 senior facility. The Company may elect an interest rate for the 2011 Credit Agreement based on either the Bank of America (“BOA”) prime rate plus 225 basis points or the Eurodollar rate plus 325 basis points (with a minimum rate of 1.25 percent).

During the three months ended June 30, 2011, the Company capitalized financing costs of $12.8 million and $5.0 million, respectively, associated with the 2011 Credit Agreement and the second lien notes.

As previously disclosed, the Investors have a Participation Agreement with Walmart Stores, Inc. (“Walmart”), under which the Investors are obligated to pay Walmart certain percentages of any accumulated cash payments received by the Investors in excess of the Investors’ original investment in the Company. While the Company is not a party to, and has no obligations to Walmart or additional obligations to the Investors under the Participation Agreement, the Company must recognize the Participation Agreement in its consolidated financial statements as the Company indirectly benefited from the agreement. A liability and the related expense associated with the Participation Agreement would be recognized by the Company in the period in which it becomes probable that a liquidity event will occur that would require the Investors to make a payment to Walmart (a “liquidity event”). Upon payment by the Investors to Walmart, the liability would be released through a credit to the Company’s additional paid-in capital. The amount of the non-operating expense could be material to the Company’s financial position or results of operations, but would have no impact on the Company’s cash flows. As liquidity events are dependent on many external factors and uncertainties, the Company does not consider a liquidity event to be probable at this time, and has not recognized a liability or expense related to the Participation Agreement. The additional consideration paid to the Investors in connection with the 2011 Recapitalization did not result in a liquidity event as the amounts received by the Investors are less than their original investment in the Company.

Note 3 — Assets in Excess of Payment Service Obligations

The following table shows the amount of assets in excess of payment service obligations at June 30, 2011 and December 31, 2010:

		June 30,				December 31,
(Amounts in thousands)		2011				2010
Cash and cash equivalents (substantially restricted)		$	2,685,666			$	2,865,941
Receivables, net (substantially restricted)			1,038,766				982,319
Short-term investments (substantially restricted)			517,318				405,769
Available-for-sale investments (substantially restricted)			134,346				160,936
			4,376,096				4,414,965
Payment service obligations			(4,142,961	)			(4,184,736	)
Assets in excess of payment service obligations		$	233,135			$	230,229

The Company was in compliance with its contractual and financial regulatory requirements as of June 30, 2011 and December 31, 2010.

Note 4 — Fair Value Measurement

The following table sets forth the Company’s financial assets that are recorded at fair value, with forward contracts displayed on a net basis. At June 30, 2011, the Company has recorded liabilities associated with its forward contracts at a fair value of $0.7 million with no corresponding receivables, for a net liability position of $0.7 million. At December 31, 2010, the Company had recorded liabilities associated with its forward contracts at a fair value of $0.5 million, with corresponding receivables of $1.1 million, for a net asset position of $0.6 million.

		June 30, 2011
(Amounts in thousands)		Level 1				Level 2				Level 3				Total
Available-for-sale investments (substantially restricted):
United States government agencies		$	—			$	8,755			$	—			$	8,755
Residential mortgage-backed securities — agencies			—				95,917				—				95,917
Other asset-backed securities			—				—				29,674				29,674
Total financial assets		$	—			$	104,672			$	29,674			$	134,346

		December 31, 2010
(Amounts in thousands)		Level 1				Level 2				Level 3				Total
Available-for-sale investments (substantially restricted):
United States government agencies		$	—			$	8,641			$	—			$	8,641
Residential mortgage-backed securities — agencies			—				128,585				—				128,585
Other asset-backed securities			—				—				23,710				23,710
Forward contracts			—				582				—				582
Total financial assets		$	—			$	137,808			$	23,710			$	161,518

The tables below provide a roll-forward of the financial assets classified in Level 3 which are measured at fair value on a recurring basis for the three and six months ended June 30, 2011 and 2010.

		Three Months Ended								Six Months Ended
		June 30, 2011								June 30, 2011
						Total								Total
		Other				Level 3				Other				Level 3
		Asset-Backed				Financial				Asset-Backed				Financial
(Amounts in thousands)		Securities				Assets				Securities				Assets
Beginning balance		$	26,340			$	26,340			$	23,710			$	23,710
Realized gains			—				—				—				—
Principal paydowns			(94	)			(94	)			(504	)			(504	)
Other-than-temporary impairments			(4	)			(4	)			(4	)			(4	)
Unrealized gains — instruments still held at the reporting date			5,436				5,436				9,529				9,529
Unrealized losses — instruments still held at the reporting date			(2,004	)			(2,004	)			(3,057	)			(3,057	)
Ending balance		$	29,674			$	29,674			$	29,674			$	29,674

		Three Months Ended								Six Months Ended
		June 30, 2010								June 30, 2010
						Total				Trading								Total
		Other				Level 3				Investments				Other				Level 3
		Asset-Backed				Financial				and Related				Asset-Backed				Financial
(Amounts in thousands)		Securities				Assets				Put Options				Securities				Assets
Beginning balance		$	23,833			$	23,833			$	26,951			$	22,088			$	49,039
Realized gains			—				—				2,449				—				2,449
Principal paydowns			(2,204	)			(2,204	)			(29,400	)			(3,113	)			(32,513	)
Other-than-temporary impairments			(277	)			(277	)			—				(334	)			(334	)
Unrealized gains — instruments still held at the reporting date			1,263				1,263				—				4,314				4,314
Unrealized losses — instruments still held at the reporting date			(1,861	)			(1,861	)			—				(2,201	)			(2,201	)
Ending balance		$	20,754			$	20,754			$	—			$	20,754			$	20,754

Debt — Debt is carried at amortized cost; however, the Company estimates the fair value of debt for disclosure purposes. The fair value of debt is estimated using market quotations, where available, credit ratings, observable market indices and other market data. As of June 30, 2011, the fair value of the Company’s 2011 Credit Agreement is estimated at $340.0 million and the second lien notes is estimated at $525.1 million. See Note 9 — Debt for more information on the Company’s debt.

Note 5 — Investment Portfolio

Components of the Company’s investment portfolio are as follows:

		June 30,				December 31,
(Amounts in thousands)		2011				2010
Cash		$	2,125,138			$	1,042,381
Money markets			560,453				1,818,138
Deposits			75				5,422
Cash and cash equivalents (substantially restricted)			2,685,666				2,865,941
Short-term investments (substantially restricted)			517,318				405,769
Available-for-sale investments (substantially restricted)			134,346				160,936
Total investment portfolio		$	3,337,330			$	3,432,646

Cash and Cash Equivalents (substantially restricted) — Cash and cash equivalents consist of cash, money-market securities and deposits. Cash primarily consists of interest-bearing deposit accounts and non-interest bearing transaction accounts. The Company’s money-market securities are invested in six funds, all of which are AAA rated and consist of United States Treasury bills, notes or other obligations issued or guaranteed by the United States government and its agencies, as well as repurchase agreements secured by such instruments. Deposits consist of a time deposit with an original maturity of three months or less.

Short-term Investments (substantially restricted) — Short-term investments consist of time deposits and certificates of deposit with original maturities of greater than three months but no more than thirteen months, and are issued from financial institutions rated AA or better as of the date of this filing.

Available-for-sale Investments (substantially restricted) — Available-for-sale investments consist of mortgage-backed securities, asset-backed securities and agency debenture securities. After other-than-temporary impairment charges, the amortized cost and fair value of available-for-sale investments are as follows at June 30, 2011:

						Gross				Gross								Net
		Amortized				Unrealized				Unrealized				Fair				Average
(Amounts in thousands, except net average price)		Cost				Gains				Losses				Value				Price
Residential mortgage-backed securities-agencies		$	89,930			$	5,987			$	—			$	95,917			$	107.36
Other asset-backed securities			10,595				19,079				—				29,674				6.16
United States government agencies			7,494				1,261				—				8,755				97.28
Total		$	108,019			$	26,327			$	—			$	134,346			$	23.16

After other-than-temporary impairment charges, the amortized cost and fair value of available-for-sale investments were as follows at December 31, 2010:

						Gross				Gross								Net
		Amortized				Unrealized				Unrealized				Fair				Average
(Amounts in thousands, except net average price)		Cost				Gains				Losses				Value				Price
Residential mortgage-backed securities — agencies		$	121,677			$	7,001			$	(93	)		$	128,585			$	106.37
Other asset-backed securities			10,690				13,020				—				23,710				4.68
United States government agencies			7,273				1,368				—				8,641				96.01
Total		$	139,640			$	21,389			$	(93	)		$	160,936			$	25.27

At June 30, 2011 and December 31, 2010, approximately 78 percent and 85 percent, respectively, of the available-for-sale portfolio are invested in debentures of United States government agencies or securities collateralized by United States government agency debentures. These securities have the implicit backing of the United States government, and the Company expects to receive full par value upon maturity or pay-down, as well as all interest payments. The “Other asset-backed securities” continue to have market exposure, as factored into the fair value estimates, with the average price of an asset-backed security at $0.06 per dollar of par at June 30, 2011.

Gains and Losses and Other-Than-Temporary Impairments — At June 30, 2011 and December 31, 2010, net unrealized gains of $26.3 million and $21.3 million, respectively, are included in the Consolidated Balance Sheets in “Accumulated other comprehensive loss.” During the three and six months ended June 30, 2010, losses of $0.3 million, were reclassified from “Accumulated other comprehensive loss” to “Net securities gains” in connection with other-than-temporary impairments and realized gains and losses recognized during the period. No amounts were reclassified during the three and six months ended June 30, 2011. During the second quarter of 2011, the Company recognized settlements of $32.8 million equal to all of the outstanding principal from two securities classified in its “other asset-backed securities.” These securities had previously been written down to a nominal fair value, resulting in a realized gain of $32.8 million in the second quarter of 2011 recorded in “Net securities gains” in the Consolidated Income Statements. The Company’s final trading investment was called at par during the first quarter of 2010, resulting in a $2.5 million gain recorded in “Net securities gains,” net of the reversal of the related put options. “Net securities gains” were as follows:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(Amounts in thousands)		2011				2010				2011				2010
Realized gains from available-for-sale investments		$	(32,820	)		$	—			$	(32,820	)		$	—
Other-than-temporary impairments from available-for-sale investments			4				277				4				334
Realized gains from trading investments and related put options			—				—				—				(2,449	)
Net securities (gains) losses		$	(32,816	)		$	277			$	(32,816	)		$	(2,115	)

Investment Ratings — In rating the securities in its investment portfolio, the Company uses ratings from Moody’s Investor Service (“Moody’s”), Standard & Poors (“S&P”) and Fitch Ratings (“Fitch”). If the rating agencies have split ratings, the Company uses the highest rating across the rating agencies for disclosure purposes. Securities issued or backed by United States government agencies are included in the AAA rating category. Investment grade is defined as a security having a Moody’s equivalent rating of Aaa, Aa, A or Baa or an S&P or Fitch equivalent rating of AAA, AA, A or BBB. The Company’s investments at June 30, 2011 and December 31, 2010 consisted of the following ratings:

		June 30, 2011												December 31, 2010
		Number of				Fair				Percent of				Number of				Fair				Percent of
(Dollars in thousands)		Securities				Value				Investments				Securities				Value				Investments
AAA, including United States agencies			25			$	104,372				78	%			25			$	136,893				85	%
Below investment grade			63				29,974				22	%			64				24,043				15	%
Total			88			$	134,346				100	%			89			$	160,936				100	%

Had the Company used the lowest rating from the rating agencies in the information presented above, there would be less than a $0.1 million change to investments rated A or better at June 30, 2011, and no change at December 31, 2010.

Contractual Maturities — The amortized cost and fair value of available-for-sale securities at June 30, 2011 and December 31, 2010, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations, sometimes without call or prepayment penalties. Maturities of mortgage-backed and other asset-backed securities depend on the repayment characteristics and experience of the underlying obligations.

		June 30, 2011								December 31, 2010
		Amortized				Fair				Amortized				Fair
(Amounts in thousands)		Cost				Value				Cost				Value
After one year through five years		$	7,494			$	8,755			$	7,273			$	8,641
Mortgage-backed and other asset-backed securities			100,525				125,591				132,367				152,295
Total		$	108,019			$	134,346			$	139,640			$	160,936

Note 6 — Derivative Financial Instruments

The Company uses forward contracts to hedge income statement exposure to foreign currency exchange risk arising from its assets and liabilities denominated in foreign currencies. While these contracts economically hedge foreign currency risk, they are not designated as hedges for accounting purposes. The “Transaction and operations support” line in the Consolidated Statements of Income reflects net foreign currency exchange losses of $2.3 million and $3.8 million for the three and six months ended June 30, 2011, respectively, and losses of $2.1 million and $4.4 million for the three and six months ended June 30, 2010, respectively. These losses reflect changes in foreign currency exchange rates on foreign-denominated receivables and payables from the related forward contracts, and are net of losses on forward contracts of $4.4 million and $12.5 million for the three and six months ended June 30, 2011, respectively, and are net of gains of $5.9 million and $10.1 million for the three and six months ended June 30, 2010, respectively. At June 30, 2011 and December 31, 2010, the Company had $57.1 million and $123.8 million, respectively, of outstanding notional amounts relating to its forward contracts.

At June 30, 2011 and December 31, 2010, the Company reflects the following fair values of derivative forward contract instruments in its Consolidated Balance Sheets:

						Derivative Assets								Derivative Liabilities
		Balance Sheet				June 30,				December 31,				June 30,				December 31,
(Amounts in thousands)		Location				2011				2010				2011				2010
Forward contracts		Other assets				$	—			$	1,117			$	676			$	535

Note 7 — Property and Equipment

Property and equipment consists of the following at June 30, 2011 and December 31, 2010:

		June 30,				December 31,
(Amounts in thousands)		2011				2010
Land		$	594			$	2,907
Office furniture and equipment			35,101				32,633
Leasehold improvements			26,686				23,947
Agent equipment			68,234				67,766
Signage			68,820				62,774
Computer hardware and software			195,961				187,604
			395,396				377,631
Accumulated depreciation			(284,271	)			(262,520	)
Total property and equipment		$	111,125			$	115,111

Depreciation expense for the three and six months ended June 30, 2011 and 2010 is as follows:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(Amounts in thousands)		2011				2010				2011				2010
Office furniture and equipment		$	1,005			$	918			$	1,977			$	1,920
Leasehold improvements			963				975				1,836				2,067
Agent equipment			1,815				2,348				3,619				4,868
Signage			2,381				2,164				4,652				4,462
Computer hardware and software			5,373				4,853				10,783				9,855
Total depreciation expense		$	11,537			$	11,258			$	22,867			$	23,172

The Company is actively pursuing a sale of its land. In connection with this disposition activity, the Company recognized a $2.3 million impairment during the second quarter of 2011 in the “Other” line in the Consolidated Statements of Income.

Note 8 — Intangible Assets

Intangible assets consist of the following at June 30, 2011 and December 31, 2010:

		June 30, 2011												December 31, 2010
		Gross								Net				Gross								Net
		Carrying				Accumulated				Carrying				Carrying				Accumulated				Carrying
(Amounts in thousands)		Value				Amortization				Value				Value				Amortization				Value
Amortized intangible assets:
Customer lists		$	14,851			$	(11,653	)		$	3,198			$	15,592			$	(11,149	)		$	4,443
Non-compete agreements			137				(64	)			73				137				(40	)			97
Trademarks and license			613				(17	)			596				613				(15	)			598
Developed technology			1,519				(1,117	)			402				1,519				(965	)			554
Total intangible assets		$	17,120			$	(12,851	)		$	4,269			$	17,861			$	(12,169	)		$	5,692

In the second quarter of 2011, the Company acquired the agent contracts of a former Spain super-agent for a purchase price of $1.0 million. The acquisition of these agent contracts provides the Company with further network expansion in its money transfer business in its Global Funds Transfer segment. The agent contracts will be amortized over a life of four years.

In connection with disposition activity, the Company recognized an impairment charge of $1.8 million in the second quarter of 2011, for certain agent contracts utilized in our Global Funds transfer segment, as recorded in the “Other” line in the Consolidated Statements of Income.

Intangible asset amortization expense was $0.3 million and $0.7 million for the three and six months ended June 30, 2011, respectively, and $0.6 million and $1.2 million for the three and six months ended June 30, 2010. As of June 30, 2011, the estimated future intangible asset amortization expense is $2.3 million, $0.4 million, $0.3 million, $0.3 million and $0.1 million for 2012, 2013, 2014, 2015 and 2016, respectively.

Note 9 — Debt

Following is a summary of the Company’s outstanding debt at June 30, 2011 and December 31, 2010:

		June 30, 2011								December 31, 2010
						Weighted-								Weighted-
						Average								Average
(Amounts in thousands)		Amount				Interest Rate				Amount				Interest Rate
Senior Tranche A Loan, due 2013		$	—				—			$	100,000				5.75	%
Senior Tranche B Loan, net of unamortized discount, due 2013			—				—				39,946				7.25	%
Senior revolving credit facility, due 2013			—				—				—				—
Senior secured credit facility, net of unamortized discount, due 2017			339,166				4.55	%			—				—
Senior revolving credit facility, due 2016			—				—				—				—
Second lien notes, due 2018			500,000				13.25	%			500,000				13.25	%
Total debt		$	839,166							$	639,946

2008 Senior Facility — The Company may elect an interest rate for the 2008 senior facility at each reset period based on the United States prime bank rate or the Eurodollar rate. During 2011 and 2010, the Company elected the United States prime bank rate as its interest basis. In connection with the 2011 Recapitalization, the 2008 senior facility was terminated.

2011 Credit Agreement — On May 18, 2011, Worldwide entered into the 2011 Credit Agreement of $540.0 million with BOA, as Administrative Agent for a group of lenders. The 2011 Credit Agreement is comprised of a $390.0 million six and one half year term loan maturing on November 2017, and a $150.0 million five-year revolving credit facility, maturing on May 2016. The term loan was issued by Worldwide at a discount of 99.75%, or $1.0 million. The discount is recorded as a reduction in the carrying value of the loan and will be amortized over the life of the debt using the effective interest method. See Note 2- 2011 Recapitalization for further information.

The Company may elect an interest rate for the 2011 Credit Agreement at each reset period based on the BOA prime rate or the Eurodollar rate. The interest rate election may be made individually for the term loan and each draw under the revolving credit facility. The interest rate is either the BOA prime rate plus 225 basis points or the Eurodollar rate plus 325 basis points. Under the terms of the 2011 Credit Agreement, the interest rate determined using the Eurodollar rate has a minimum rate of 1.25 percent. Fees on the daily unused availability under the revolving credit facility are 62.5 basis points. Substantially all of the Company’s non-financial assets are pledged as collateral for the loans under the 2011 Credit Agreement, with the collateral guaranteed by the Company’s material domestic subsidiaries. The non-financial assets of the material domestic subsidiaries are pledged as collateral for these guarantees.

Since inception of the 2011 Credit Agreement, the Company elected the Eurodollar rate as its primary interest basis, with a minimal amount of the term debt at the BOA prime rate. On June 30, 2011, the Company prepaid $50.0 million of the term loan. The prepayment satisfies the $1.0 million mandatory quarterly principal payments through the maturity of the term loan. As of June 30, 2011, the Company has $140.8 million of availability under the revolving credit facility, net of $9.2 million of outstanding letters of credit, which reduce the amount available.

Amortization of the debt discount of $0.2 million and $0.4 million for the three and six months ended June 30, 2011, respectively, and $3.1 million and $3.8 million for the three and six months ended June 30, 2010, respectively, is recorded in “Interest expense” in the Consolidated Statements of Income. Amortization of the debt discount for each of the three and six months ended June 30, 2011 includes a pro-rata write-off of $0.1 million as a result of the term debt prepayment. Amortization of the debt discount for the three and six months ended June 30, 2010 includes a pro-rata write-off of $2.4 million as a result of the Tranche B prepayment.

Second Lien Notes — As part of the Company’s recapitalization transaction in March 2008 (the “2008 Recapitalization”), Worldwide issued $500.0 million of the second lien notes to Goldman Sachs, which will mature in March 2018. The indenture governing the second lien notes was amended in March 2011 to permit the 2011 Recapitalization.

The interest rate on the second lien notes is 13.25 percent per year. Prior to March 25, 2011, the Company had the option to capitalize interest at a rate of 15.25 percent. If interest was capitalized, 0.50 percent of the interest is payable in cash and 14.75 percent is capitalized into the outstanding principal balance. The Company paid the interest through June 30, 2011 and anticipates that it will continue to pay the interest on the second lien notes for the foreseeable future.

Inter-creditor Agreement — In connection with the above financing arrangements, both the lenders under the 2011 Credit Agreement and the trustee on behalf of the holders of the second lien notes entered into an inter-creditor agreement under which the lenders and trustee have agreed to waive certain rights and limit the exercise of certain remedies available to them for a limited period of time, both before and following a default under the financing arrangements.

Debt Covenants and Other Restrictions — Borrowings under the Company’s debt agreements are subject to various covenants that limit the Company’s ability to: incur additional indebtedness; create or incur additional liens; effect mergers and consolidations; make certain acquisitions; sell assets or subsidiary stock; pay dividends and other restricted payments; invest in certain assets; and effect loans, advances and certain other transactions with affiliates. In addition, the 2011 Credit Agreement has a covenant that places limitations on the use of proceeds from borrowings under the facility.

The indenture governing the second lien notes contains a financial covenant requiring the Company to maintain a minimum liquidity ratio of at least 1:1 for certain assets to outstanding payment service obligations. The 2011 Credit Agreement also has financial covenants to maintain the following interest coverage and total leverage ratios:

		Minimum
Interest coverage ratio period		ratio
Present through September 30, 2012		2:1
December 31, 2012 through September 30, 2014		2.15:1
December 31, 2014 through maturity		2.25:1

		Not to
Total leverage ratio period		exceed
Present through September 30, 2012		4.75:1
December 31, 2012 through September 30, 2013		4.625:1
December 31, 2013 through September 30, 2014		4.375:1
December 31, 2014 through September 30, 2015		4:1
December 31, 2015 through September 30, 2016		3.75:1
December 31, 2016 through maturity		3.5:1

At June 30, 2011, the Company was in compliance with all of its financial covenants.

Deferred Financing Costs —During the three months ended June 30, 2011, the Company capitalized financing costs of $12.8 million associated with the 2011 Credit Agreement and $5.0 million for the amendment of the indenture governing the second lien notes. These costs were capitalized in “Other assets” in the Consolidated Balance Sheets and are being amortized over the term of the related debt using the effective interest method.

Amortization of deferred financing costs of $2.6 million and $4.0 million during the three and six months ended June 30, 2011, respectively, and $2.8 million and $4.5 million during the three and six months ended June 30, 2010, respectively, is recorded in “Interest expense” in the Consolidated Statements of Income. Amortization of the deferred financing costs for the three and six months ended June 30, 2011 and 2010 include a pro-rata write-off of $1.1 million as a result of the term debt prepayment and the Tranche B prepayment, respectively. In connection with the termination of the 2008 senior facility on May 18, 2011, the Company recognized a debt extinguishment loss of $5.2 million, associated with the 2008 senior facility in the “Other” line in the Consolidated Statements of Income.

Interest Paid in Cash — The Company paid $20.0 million and $38.7 million of interest for the three months and six months ended June 30, 2011, respectively, and $21.3 million and $43.0 million for the three and six months ended June 30, 2010, respectively.

Maturities — At June 30, 2011, debt totaling $340.0 million will mature in 2017 and $500.0 million will mature in 2018.

Note 10 — Pensions and Other Benefits

Net periodic benefit expense for the Company’s defined benefit pension plan and combined supplemental executive retirement plans (“SERPs”) includes the following components:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(Amounts in thousands)		2011				2010				2011				2010
Interest cost		$	2,841			$	2,969			$	5,682			$	5,938
Expected return on plan assets			(2,056	)			(2,166	)			(4,111	)			(4,332	)
Amortization of prior service cost			7				21				14				42
Recognized net actuarial loss			1,572				1,196				3,144				2,391
Net periodic benefit expense		$	2,364			$	2,020			$	4,729			$	4,039

Benefits paid through the defined benefit pension plan were $2.3 million and $4.5 million for the three and six months ended June 30, 2011, respectively, and $3.1 million and $6.2 million for the three and six months ended June 30, 2010, respectively. The Company made contributions of $1.4 million and $2.3 million to the defined benefit pension plan during the three and six months ended June 30, 2011, respectively. No contributions were made to the defined benefit pension plan during the six months ended June 30, 2010. Benefits paid through, and contributions made to, the combined SERPs were $0.8 million and $1.9 million for the three and six months ended June 30, 2011, respectively, and $1.3 million and $2.4 million for the three and six months ended June 30, 2010, respectively.

The net loss for the defined benefit pension plan and combined SERPs that the Company amortized from “Accumulated other comprehensive loss” into “Net periodic benefit expense” was $1.6 million ($1.0 million, net of tax) and $3.1 million ($1.9 million, net of tax) for the three and six months ended June 30, 2011, respectively, and $1.2 million ($0.7 million, net of tax) and $2.4 million ($1.5 million, net of tax) for the three and six months ended June 30, 2010, respectively. The prior service costs amortized from “Accumulated other comprehensive loss” into “Net periodic benefit expense” for both the defined benefit pension plan and combined SERPs were nominal for the three and six months ended June 30, 2011 and 2010.

Net periodic benefit expense for the Company’s postretirement benefit plans includes the following components:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(Amounts in thousands)		2011				2010				2011				2010
Interest cost		$	13			$	63			$	26			$	127
Amortization of prior service credit			(156	)			—				(313	)			—
Recognized net actuarial loss			61				4				122				7
Net periodic benefit expense		$	(82	)		$	67			$	(165	)		$	134

Benefits paid through, and contributions made to, the postretirement benefit plans were $0.1 million for both the three and six months ended June 30, 2011 and $0.1 million and $0.5 million for the three and six months ended June 30, 2010, respectively.

The net loss amortized from “Accumulated other comprehensive loss” into “Net periodic benefit expense” for the postretirement benefit plans was $0.1 million (less than $0.1 million, net of tax) for the three and six months ended June 30, 2011 and nominal for the three and six months ended June 30, 2010. The prior service credit amortized from “Accumulated other comprehensive loss” into “Net periodic benefit expense” for the postretirement benefit plans was $0.2 million ($0.1 million, net of tax) and $0.3 million and ($0.2 million, net of tax) for the three and six months ended June 30, 2011, respectively, and was nominal for the three and six months ended June 30, 2010.

Contribution expense for the 401(k) defined contribution plan was $0.9 million and $1.7 million for the three and six months ended June 30, 2011, respectively, compared to $0.8 million and $1.6 million for the three and six months ended June 30, 2010, respectively.

Deferred Compensation Plans — In the first quarter of 2011, the MoneyGram International, Inc. Deferred Compensation Plan, a non-qualified, frozen, deferred compensation plan for a select group of management and highly compensated employees, was amended to (a) terminate all employee deferral accounts on the amendment date and pay each participant the balance of the participant’s account in a lump sum no earlier than one year from termination and no later than December 31, 2012; and (b) cash out all non-voluntary, employer deferral accounts if and when the account balance falls below the applicable dollar amount under Section 402(g)(1)(B) of the Internal Revenue Code. In May 2011, the Company made nominal payments under (b). The Company intends to make further payments due under both (a) and (b) on or around March 2012 or as applicable.

Note 11 — Mezzanine Equity

Following is a summary of mezzanine equity activity related to the Company’s Series B Stock during the six months ended June 30, 2011:

(Amounts in thousands)		B Stock				B-1 Stock				Series B Stock
Balance at December 31, 2010		$	628,199			$	371,154			$	999,353
Accrued dividends			19,951				10,983				30,934
Accretion			67,946				12,078				80,024
Conversion			(716,096	)			(394,215	)			(1,110,311	)
Balance at June 30, 2011		$	—			$	—			$	—

In connection with the 2011 Recapitalization, all amounts included in mezzanine equity were converted into components of stockholders’ deficit. Following the closing of the 2011 Recapitalization, no shares of Series B Stock remained issued and outstanding and the Company filed a Certificate of Elimination to eliminate all shares of Series B Stock. See Note 2 — 2011 Recapitalization for further information.

Note 12 — Stockholders’ Deficit

The Company had the following designations of shares authorized, issued and outstanding at June 30, 2011 and December 31, 2010:

		June 30, 2011												December 31, 2010
		Authorized				Issued				Outstanding				Authorized				Issued				Outstanding
Series A junior participating preferred stock			2,000,000				—				—				2,000,000				—				—
B Stock			—				—				—				800,000				495,000				495,000
B-1 Stock			—				—				—				500,000				272,500				272,500
D Stock			200,000				173,189				173,189				200,000				—				—
Common			1,300,000,000				403,157,310				398,585,643				1,300,000,000				88,556,077				83,620,522

Preferred Stock — The Company’s Amended and Restated Certificate of Incorporation provides for the issuance of up to 7,000,000 shares of preferred stock that may be issued in one or more series, with each series to have certain rights and preferences as shall be determined in the unlimited discretion of the Company’s Board of Directors, including, without limitation, voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences.

Series D Participating Convertible Preferred Stock — In connection with the 2011 Recapitalization, the Company issued 173,189 shares of D Stock to Goldman Sachs. Each share of D Stock has a liquidation preference of $0.01 and is convertible into 1,000 shares of common stock only by a stockholder other than Goldman Sachs who receives such shares by means of (i) a widespread public distribution, (ii) a transfer to an underwriter for the purpose of conducting a widespread public distribution, (iii) a transfer in which no transferee (or group of associated transferees) would receive 2 percent or more of any class of voting securities of the Company, or (iv) a transfer to a transferee that would control more than 50 percent of the voting securities of the Company without any transfer from such transferor or its affiliates as applicable (each of (i) — (iv), a “Widely Dispersed Offering”). The D Stock is non-voting while held by Goldman Sachs or any holder who receives such shares by any means other than a Widely Dispersed Offering (a “non-voting holder”). Holders of D Stock other than Goldman Sachs and non-voting holders vote as a single class with the holders of the common stock on an as-converted basis. The D Stock also participates in any dividends declared on the common stock on an as-converted basis.

Common Stock — The Company’s Amended and Restated Certificate of Incorporation provides for the issuance of up to 1,300,000,000 shares of common stock with a par value of $0.01. In connection with the spin-off from Viad Corporation on June 30, 2004, MoneyGram was recapitalized such that there were 88,556,077 shares of MoneyGram common stock issued. The holders of MoneyGram common stock are entitled to one vote per share on all matters to be voted upon by its stockholders. The holders of common stock have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the common stock. The determination to pay dividends on common stock will be at the discretion of the Board of Directors and will depend on the Company’s financial condition, results of operations, cash requirements, prospects and such other factors as the Board of Directors may deem relevant. No dividends have been paid during the six months ended June 30, 2011. The Company’s ability to declare or pay dividends or distributions to the holders of the Company’s common stock is restricted under the Company’s 2011 Credit Agreement and the indenture governing the Company’s second lien notes.

On May 18, 2011, the Company issued an additional 314,601,233 shares of common stock in connection with the 2011 Recapitalization. See Note 2 — 2011 Recapitalization for further information.

Following is a summary of common stock activity during the six months ended June 30, 2011:

(Amounts in thousands)		Common Stock
Balance at December 31, 2010			88,556
Conversion of Series B Preferred Stock to common stock			314,601
Balance at June 30, 2011			403,157

The following is a summary of common stock issued and outstanding:

		June 30,				December 31,
(Amounts in thousands)		2011				2010
Common shares issued			403,157				88,556
Treasury stock			(4,572	)			(4,936	)
Common shares outstanding			398,585				83,620

Treasury Stock — Following is a summary of treasury stock activity during the six months ended June 30, 2011:

		Treasury Stock
(Amounts in thousands)		Shares
Balance at December 31, 2010			4,936
Exercise of stock options			(364	)
Balance at June 30, 2011			4,572

Accumulated Other Comprehensive Loss — The components of “Accumulated other comprehensive loss” are as follows:

		June 30,				December 31,
(Amounts in thousands)		2011				2010
Net unrealized gains on securities classified as available-for-sale		$	26,328			$	21,296
Cumulative foreign currency translation adjustments			6,252				5,194
Prior service credit for pension and postretirement benefits, net of tax			2,219				2,404
Unrealized losses on pension and postretirement benefits, net of tax			(58,749	)			(60,773	)
Accumulated other comprehensive loss		$	(23,950	)		$	(31,879	)

Equity Registration Rights Agreement — The Company and the Investors also entered into a Registration Rights Agreement (the “Equity Registration Rights Agreement”) on March 25, 2008, with respect to the Series B Stock and D Stock, and the common stock owned by the Investors and their affiliates (collectively, the “Registrable Securities”). Under the terms of the Equity Registration Rights Agreement, we are required, after a specified holding period, to use our reasonable best efforts to promptly file with the Securities and Exchange Commission (the “SEC”) a shelf registration statement relating to the offer and sale of the Registrable Securities. We are obligated to keep such shelf registration statement continuously effective under the Securities Act of 1933, as amended (the “Securities Act”), until the earlier of (1) the date as of which all of the Registrable Securities have been sold, (2) the date as of which each of the holders of the Registrable Securities is permitted to sell its Registrable Securities without registration pursuant to Rule 144 under the Securities Act and (3) fifteen years. The holders of the Registrable Securities are also entitled to five demand registrations and unlimited piggyback registrations during the term of the Equity Registration Rights Agreement. On December 14, 2010, we filed a shelf registration statement on Form S-3 with the SEC which permits the offer and sale of the Registrable Securities, as required by the terms of the Equity Registration Rights Agreement. The registration statement also permits the Company to offer and sell up to $500 million of its common stock, preferred stock, debt securities or any combination of these, from time to time, subject to market conditions and the Company’s capital needs. The registration statement was declared effective by the SEC on July 7, 2011.

Note 13 — Stock-Based Compensation

The Company’s 2005 Omnibus Incentive Plan allows for the issuance of common stock under all awards. In May 2011, the stockholders of the Company approved an amendment to the plan to increase the aggregate number of shares reserved for issuance under the 2005 Omnibus Incentive Plan from 47,000,000 shares of common stock to 57,000,000 shares of common stock. As of June 30, 2011, the Company has remaining authorization to issue awards of up to 15,372,321 shares of common stock.

Stock Options — Pursuant to the terms of options granted in 2011, 50 percent of the options become exercisable through the passage of time (the “Time-based Tranche”) and 50 percent of the options become exercisable upon the achievement of certain conditions (the “Performance-based Tranche”). The Time-based Tranche generally becomes exercisable over a five-year period in either (a) an equal number of shares each year or (b) for some issuances in 2009, a tranched vesting schedule whereby 15 percent of the Time-based Tranche vests immediately and then at rates of 10 to 20 percent each year. The Performance-based Tranche becomes exercisable upon the achievement within five years of grant of the earlier of (a) a pre-defined common stock price for any period of 20 consecutive trading days, (b) a change in control of the Company resulting in a pre-defined per share consideration or (c) in the event the Company’s common stock does not trade on a United States exchange or trading market, resulting in the Company’s common stock meeting pre-defined equity values. All options granted in 2011 have a term of 10 years. These terms are consistent with options granted in 2010.

For purposes of determining the fair value of stock option awards, the Company uses the Black-Scholes single option pricing model for the Time-based Tranches and a combination of Monte-Carlo simulation and the Black-Scholes single option pricing model for the Performance-based Tranches. Expected volatility is based on the historical volatility of the price of the Company’s common stock since the Company’s spin-off from Viad Corporation on June 30, 2004. The Company uses the simplified method to estimate the expected term of the award and historical information to estimate the forfeiture rate. As the pattern of changes in the value of the Company’s common stock since late 2007 has been substantially different from historical patterns, the nature of options granted since 2008 is substantially different from historical grants and there have been minimal stock option exercises since 2007, the Company is unable to make a more refined estimate than the use of the simplified method. The expected term represents the period of time that options are expected to be outstanding and the forfeiture rate represents the number of unvested options that will be forfeited by grantees due to termination of employment. In addition, the Company considers any expectations regarding future activity that could impact the expected term and forfeiture rate. The risk-free rate for the Black-Scholes model is based on the United States Treasury yield curve in effect at the time of grant for periods within the expected term of the option, while the risk-free rate for the Monte-Carlo simulation is based on the five-year United States Treasury yield in effect at the time of grant. Compensation cost, net of expected forfeitures, is recognized using a straight-line method over the vesting or service period. The following table provides weighted-average grant-date fair value and assumptions utilized to estimate the grant-date fair value of the 2011 options:

Expected dividend yield			0.0	%
Expected volatility			71.8% - 72.4	%
Risk-free interest rate			2.4 - 2.9	%
Expected life		6.5 years
Weighted-average grant-date fair value per option		$	2.31

Following is a summary of stock option activity for 2011:

										Weighted-
						Weighted-				Average				Aggregate
						Average				Remaining				Intrinsic
						Exercise				Contractual				Value
		Shares				Price				Term				($000)
Options outstanding at December 31, 2010			39,897,474			$	3.31
Granted			6,200,000				3.25
Exercised			(140,000	)			2.30
Forfeited/Expired			(5,286,016	)			5.49
Options outstanding at June 30, 2011			40,671,458			$	3.02			8.29 years				$	31,563
Vested or expected to vest at June 30, 2011			39,179,867			$	3.03			8.27 years				$	30,722
Options exercisable at June 30, 2011			8,068,958			$	4.60			7.01 years				$	7,948