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MoneyGram International, Inc. (NASDAQ:MGI)

Q3 2007 Earnings Call

October 17, 2007, 5:00 PM ET

Executives

Timothy J. Gallaher - Treasurerand VP, IR

Philip W. Milne - Chairman, President and CEO

David J. Parrin - EVP and CFO

Analysts

Kartik Mehta - FTN Midwest Research

Craig Maurer - Calyon Securities (NYSE:USA) INC

Elizabeth Grausam - Goldman Sachs

David Parker - Merrill Lynch

Mark Sproule - Thomas Weisel Partners

Patrick Burton - Smith Barney Citigroup

Robert P. Napoli - Piper Jaffray

Paul Bartolai - Credit Suisse

Robert Dodd - Morgan Keegan & Company

David Scharf - JMP Securities

Daniel Perlin - Wachovia Securities

Presentation

Operator

Good day ladies and gentlemen, and welcome to the Third Quarter 2007 MoneyGram International Earnings Conference Call. My name is Akia and I will be your operator for today. At this time all participants are on a listen-only mode. We will conduct a question-and-answer session towards the end of the conference. [Operator Instructions]. As a reminder, this call is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Mr. Tim Gallaher, Treasurer and Vice President of Investor Relations. Please proceed, sir.

Timothy J. Gallaher - Treasurerand Vice President, Investor Relations

Thank you. Good afternoon and thank you for joining us on our third quarter 2007 conference call. With me on the call today are Phil Milne, our Chairman and CEO, and Dave Parrin, our CFO. If you have not yet seen our earnings press release, you can find it on our website at www.moneygram.com. I'll remind you that various remarks we make about future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from expectations, plans, and prospects contemplated in any forward-looking statements as a result of various factors including those discussed in our filings with the SEC. I encourage all listeners to read our SEC filings including our 10-Q for the period ended September 30th, 2007, which will be filed with the SEC no later than November 9, 2007.

I'll now hand the call over to Phil Milne to discuss business results. Phil?

Philip W. Milne - Chairman, President and Chief Executive Officer

Thanks Tim and good afternoon everyone. And once again thank you for joining us on our third quarter 2007 conference call. First, I want to thank all of our employees for their efforts and contribution to another strong quarter as we continue to execute at providing affordable, reliable and convenient payment services to our consumers and our business partners.

Our third quarter results continue to demonstrate our growth opportunities in the money transfer business and our commitment to grow the business for the long term. In the third quarter, money transfer volumes including our express payment product increased 25%, which is a solid performance by all measures. These results were on top of a strong third quarter last year that saw money transfer transaction growth of 40% driven by our simplified pricing initiative and competitive takeaways. In line with volume growth our money transfer revenue increased 25% over last year. This was as expected and reflects of success of our pricing initiatives, pricing stability, product mix and a benefit from the stronger euro.

September volumes on a year-over-year percentage growth basis were lighter than those we saw earlier in the quarter, in part due to the calendar this year which had five Sundays versus four in 2006. Sundays are our lightest volume day. August volumes on a percentage basis were stronger due to five Fridays, our heaviest volume day versus four in 2006.

Same-store sales transactions continue to be strong, growing at 17%. Domestically originated money transfers, including express payment grew 26% driven by continued growth across all corridors.

Transactions... transactions originating internationally or outside of North America grew 34%. In Mexico, although our growth rates have declined this year, our volumes continue to outperform the growth rates published by the Banco de Mexico. In the third quarter, our transaction volumes increased 6%, compared to the third quarter of 2006. Economic conditions in the U.S. housing market and immigration concerns continue to dampen the growth. Remember that Mexico is a relatively small portion of our total money transfer business and has accounted for 10% of our total transactions year-to-date in 2007.

Network growth continued to be robust as we increased our locations around the world by 33% year-over-year to 138,000 locations. The network growth in 2007 is the strongest we have ever seen. Also since many of you would like to ask, yesterday's announcement that Wal-Mart Canada selected Western Union was disappointing. Wal-Mart Canada was a non-seller. In our view, their ability to offer urgent bill pay in Canada was a deciding factor. The final decision was made by Wal-Mart's management team in Canada, which is different from the management team we work within the states. In any event, we do not believe this decision has any bearing on our Wal-Mart relationship.

Given our conviction and the value of our money transfer business, we are continuing to focus on the expansion of the networks, our global marketing efforts and infrastructure investments to support the growth. These investments which have had an impact on our margins will provide tangible benefits in the future, marked by continued strong volume and revenue growth and increasing profits.

We complemented our organic growth efforts with the acquisition of PropertyBridge, a leading provider of electronic payment processing services for the real estate management industry. We closed the acquisition on October 1st. PropertyBridge provides best-in-class rental payment solutions to some of the largest property management companies in the U.S. They have a great business and a wonderful team that provides high value-added payment services to the multi-family housing industry. And we think this is a terrific strategic fit for us, as we continue to build out and grow our bill payment business. Most importantly, the management team and key employees of PropertyBridge will remain with the company.

We also announced today that MoneyGram's Board of Directors authorized the hiring of J.P. Morgan to complete a strategic view of the Payment Systems business. During this period we will remain focused and committed to our Payment Systems customers. Future developments regarding the strategic review will be made via press release, SEC filling, or other public disclosures, and we will not provide any additional commentary on this call beyond these comments and disclosures in today's press release.

I am now going to turn the call over to Dave, and he is going to discuss the financial details of the quarter. After Dave takes you through our results, I'll warp up the call and talk about guidance and then we'll head into Q&A. Dave?

David J. Parrin - Executive Vice President and Chief Financial Officer

Thanks Phil. I'll give you an overview of the earnings and we'll talk a little bit more about segments after that.

Net income for the third quarter was $34.3 million or $0.41 per diluted share compared to $30 million or $0.35 per diluted share in the third quarter of 2006. Third quarter revenue was $342 million, up 15% from $296 million last year. Fee and other revenue increased 21% to $243 million from $201 million in the third quarter of last year, driven by growth in money transfer transaction volume. Fee and other revenue represented 71% of total revenue compared to 68% a year ago.

Investment revenue was $102 million compared to $96 million in the third quarter of 2006. Investment commissions were $65 million versus $64 million in the third quarter of 2006. During the quarter, our cash investments and adjustable rate securities, which are primarily tied to LIBOR earned a wider spread due to disruption in the credit markets. In addition, our commissions are primarily based on a fed funds index which led to tiered commissions versus last year.

Net securities losses were $3 million, up from $1 million a year ago. Fee commission expense grew at faster pace than fee revenue due to growth in money transfer versus other products, as well as tiered commissions in money transfer. Notably Wal-Mart will be hitting a new tier in the fourth quarter, so commissions will be up slightly in the fourth quarter. This is the last performance-based commission tier adjustment on the contract.

The increase in net revenue of 14% was attributable to the growth in money transfer business. Expenses other than commissions were $122 million in the quarter compared to $108 million last year, a 13% increase. Expenses increased this quarter to support expansion of the money transfer business including our retail strategy in Europe. The growth in the business continued to require additional investment, signage, compliance, and back office systems.

The operating margin for the company was 14.4% in the third quarter versus 14.2% the third quarter of 2006. And income taxes were $15 million in the quarter, and we continue to expect our effective tax rate to be around 31% for the full year.

Now for the segments, Global Funds Transfer revenue was $257 million in the third quarter of 2007, up 21% from the third quarter of 2006, and now represents 75% of total MoneyGram revenue. Money transfer volume revenue increased... excuse me, money transfer revenue increased 25% and a 25% improvement in volume. And as expected, money transfer revenue and volume growth continue to align as we lap our simplified pricing initiative and the product mix, as well the stronger euro.

GFT commissions grew faster than revenue because of the growth in money transfer versus other products that don't have commissions, as well as higher tiered commission payouts. As a result, net revenue grew 17% over Q3 of 2006 to $147 million.

Operating expenses increased as well, as we continued to grow our global presence. The retail strategy, operation supports for new agent location and infrastructure costs reflect in the segment results. This money is spent in advance of generating any significant revenue. Also affecting GFT operating expenses is the increase in depreciation and amortization, primarily related to our expansion of the money transfer business and global branding efforts.

Signage and point-of-sale depreciations over $1.5 million is higher than it was last year. GFT operating income increased to $46 million in the third quarter 2007 compared to $39 million last year resulting in an operating margin of 17.8% compared to 18.1% last year.

And for the third quarter of 2007, Payment Systems revenue was flat at $84 million and operating income decreased 12% to $7 million. The operating margin for the third quarter of '07 was 7.9% compared to 9.1% in the third quarter of 2006. Lower operating income and margins were the result of higher net securities losses versus a year ago.

In terms of the investment portfolio, it is a highly rated diverse buy and hold portfolio. The securities are purchased for the long term and outside of a small part used for repose, not an integral to our daily liquidity. And we discussed at a recent investor conference, the illiquidity in the market for sub-prime asset backed securities and CDOs has had a significant impact on fair value since June 30th.

This situation manifests itself on lower unrestricted assets. Our position is and has been that the unrestricted assets serve as the cushion to meet the one-to-one qualified assets of payment service obligation ratio. And in fact, it served that purpose. However, by the end of August, the cushion declined to about $80 million. As a matter of prudence at the end of September, we decided to draw the balance of our credit facility to increase our unrestricted assets by $197 million and to fund our acquisition of PropertyBridge. The proceeds of the borrowing are being held in cash and cash equivalents, which increased our unrestricted assets.

Fortunately, the market has improved slightly since August, which further increased our cushion. So at September 30th, unrestricted assets doing at $286 million, providing us the cushion we believe is adequate to manage through this illiquid market. There also has been discussion in news media about methods used to determine the fair value of securities. MoneyGram classified this investment portfolio as available for sale, and we have a very disciplined approach to determine fair value in accordance with generally accepted accounting principles. It is not a new approach, nor the one that allows us to ignore the facts of the marketplace. We can not and do not price the securities at our discretion.

On page 41 of our December 31, 2006 annual report provides a detailed discussion of our approach to valuation. In addition, we have a disciplined approach to valuate whether security in an unrealized loss position is temporarily impaired or permanently impaired. A temporary impairment is reflected on our balance sheet through equity, while the permanent impairment is reflected through our income statement. An important consideration is valuation of the company's intent and ability to hold the securities.

A review of our quarterly financial statements shows that we have recorded other than temporary impairments over time based on this disciplined approach. If you go back to our 10-Q filings that include the discussion about the impairment review process and footnote for the financial statements.

And finally, we purchased 470,000 shares at an average price of $26.56 during the quarter. There are approximately 5.2 million shares less than our authorization. Because we are undergoing the strategic review of our Payment Systems business, we are currently... have suspended buying back shares.

So with that Phil, I will turn it back to you.

Philip W. Milne - Chairman, President and Chief Executive Officer

Thanks Dave. Now I will summarize our guidance for full year 2007 financial results, which specifically exclude any impact from the current strategic review of the Payment Systems business and the PropertyBridge acquisition.

Our net revenue as total revenue less total commissions, is expected to be in the range of $670 million to $685 million. That's narrowed slightly from our previous guidance of $665 million to $690 million. Net investment margin is expected to be in the range of 220 to 230 basis points and that's up from our previous guidance of 200 to 215 basis points.

Average portfolio balances are expected to be in the range of $6.2 billion to $6.3 billion for the year. Income from continuing operations before taxes is expected to be in the range of $184 million to $188 million, and that's from our previous guidance of $185 million to $190 million.

Earnings per diluted share is expected to be in the range of $1.50 to $1.54 and that's a slight change from our previous guidance of $1.49 to $1.55. We continue to expect GFT margins to be around 16% for the full year, and that assumes a lower margin in the fourth quarter primarily due to the timing of expenses such as marketing.

Our long-term financial goals for the company continue to be double-digit revenue and earnings growth, as well as an ROE of 15% to 20%. As I wrap up the formal comments, we continue to believe we have a unique position in the global money transfer market. We are the value player in the large in globe... in growing global remittance business. Our global footprint now exceeds 138,000 locations, and we continue to grow money transfer volume, and revenue at a robust rate, while maintaining in GFT this year.

All in all we weathered quite a strong storm in the third quarter and posted strong financial results. We believe in the strategic direction for money transfer and bill payment, and we will keep you apprised of our review of Payment Systems.

And now with that, we'll open it up to Q&A. Akia?

Question And Answer

Operator

[Operator Instructions]. And your first question comes from the line of Kartik Mehta. Please proceed.

Kartik Mehta - FTN Midwest Research

Good afternoon.

Philip W. Milne - Chairman, President and Chief Executive Officer

Good afternoon, Kartik.

Kartik Mehta - FTN Midwest Research

Phil, I am going to start it off with the money transfer business. Obviously revenue and transaction growth were similar 25% to 25% indicating stable pricing. What I was wondering is if you look at corridors across the world, is it that there is fairly stable pricing all over the world or are there certain corridors where you have been able to increase pricing to offset some competition in other places?

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes. The pricing continues to be a dynamic situation and we have increases and some decreases across the globe. But I think in total if you look across the entire business the pricing has been very, very stable for us.

Kartik Mehta - FTN Midwest Research

I wanted to ask a little bit about the assets obviously, the portfolio and some of the losses that you have, the unrealized losses, are most of your securities still performing or do you... is there a greater amount of securities that are non-performing compared to a quarter ago?

Philip W. Milne - Chairman, President and Chief Executive Officer

No, the securities are still performing, and so that is reflected through the equity with the pricing, but no the portfolio still performing.

Kartik Mehta - FTN Midwest Research

And I know you said you didn't want to talk a little bit about the Payment Systems business, maybe you can take maybe a broad question that. Is the reason to look at the business again as strategic options, was it because of too much volatility in the business or it's because the business fundamentals have changed, and maybe as a result of profitability is changing?

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes. I think at this point Kartik we are really going to leave this as a, we are doing a strategic review. And I think that as we get deeper into it, we'll answer more questions about it. But, I think we are just going to leave it today as a strategic review, it's ongoing. We've hired J.P. Morgan and when we get a direction, we will let everybody know.

Kartik Mehta - FTN Midwest Research

And then a final question Phil, maybe if you look at the money transfer business, obviously the investments you've made in the business have resulted in strong transaction growth and you are obviously gaining market share. If you look at this business as we go into next year, does it require to continue the same type of marketing your investments, maybe increase it or you are at a point where now you can start reaping of economies of scale and maybe some scale back some of the marketing expenses compared to this year?

Philip W. Milne - Chairman, President and Chief Executive Officer

Well Kartik, I think that in a general sense, we of course want to continue to invest in this business. I don't think we are looking at the stair steps that we have had over the last few years. So, things like marketing will probably grow much more in line with the business than some of the stair steps that we've had. But I do want to make the point that we have seen just dynamic growth in this business. We think it's a huge opportunity for us. And we are going to continue to invest in it as we expand across the globe and establish beachheads in critical places.

Kartik Mehta - FTN Midwest Research

Thank you so much.

Philip W. Milne - Chairman, President and Chief Executive Officer

Thank you, Kartik.

Operator

And your next question comes from the line of Craig Maurer of Calyon Securities. Please process.

Philip W. Milne - Chairman, President and Chief Executive Officer

Good afternoon, Craig.

Craig Maurer - Calyon Securities (USA) INC

Hi. How are you?

Philip W. Milne - Chairman, President and Chief Executive Officer

Good. How are you doing?

Craig Maurer - Calyon Securities (USA) INC

Excellent, a couple of questions. Just to follow up on Kartik's question. Specifically you had discussed last quarter that stability had arrived in pricing in Mexico. Does that still hold true?

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes, I think Mexico has been quite stable in pricing, especially from our standpoint.

Craig Maurer - Calyon Securities (USA) INC

Okay, another follow-up. Could you just give us an idea, right now, where your untapped credit facilities lie? Should some of the market prognosticators be right and the stuff gets worse, just want to be sure there is a cushion there?

Philip W. Milne - Chairman, President and Chief Executive Officer

Well, that's why we tapped the credit line, was to provide that cushion and we think that's very adequate for where we are at, where we think the market is going. And do you want anything to add to that, Dave?

David J. Parrin - Executive Vice President and Chief Financial Officer

No.

Craig Maurer - Calyon Securities (USA) INC

So, there is no additional credit facilities beyond that, that you guys have lined up, if you would needed it?

Philip W. Milne - Chairman, President and Chief Executive Officer

As of today, no.

Craig Maurer - Calyon Securities (USA) INC

Okay. The last question I had for you was, you were talking about being the value provider globally. Have you seen any impact from Western Union's decision to grow Vigo in other locals like Italy?

Philip W. Milne - Chairman, President and Chief Executive Officer

No. We haven't seen any impact from that.

Craig Maurer - Calyon Securities (USA) INC

Okay. Easy answer. Thanks a lot, guys.

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes.

Operator

And our next question comes from the line of Liz Grausam. Please proceed.

Elizabeth Grausam - Goldman Sachs

Great, thanks a lot. In the domestic origination channel that being the biggest part of your business, we have seen some pretty significant deceleration. If you could... just for kind of from '06 into '07, if you could help us understand, really what you are seeing in that business. How much of it is related to some of the similar things we are seeing in Mexico, and where you really do see sustainable growth in your domestic origination channel moving into the end of the year and into '08?

Philip W. Milne - Chairman, President and Chief Executive Officer

I think the explanation for the deceleration you talk about is really the fact that we are lapping the simplified pricing initiatives that we did. And also obviously we are growing off a much bigger base. So, I don't think there is anything in those numbers that would suggest that we are having a deceleration due to market conditions. I think it's really the effect of lapping some pre-terrific growth rates and the fact that we are actually going after quite a big, much bigger number.

Elizabeth Grausam - Goldman Sachs

Andthen when we think about your channel growth going forward relative to your agent growth at 33% agent growth, is that mostly in international origination? Would you characterize it or is it a balance really between international and domestic at this point?

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes, I think there is a balance going on. Clearly we have been working hard both here, domestically and internationally, both on the send side and internationally on the receive side in key markets. So I think it's really been a balanced pack.

Elizabeth Grausam - Goldman Sachs

And then on the commission front I know you mentioned you are reaching one last tier with Wal-Mart in the fourth quarter but should... do you expect to start to see in your money transfer business stabilization in the commission rate going into '08 and forward or are we going to continue to see some deterioration there?

David J. Parrin - Executive Vice President and Chief Financial Officer

Well, you know this is Dave Parrin.

Elizabeth Grausam - Goldman Sachs

Hi Dave.

David J. Parrin - Executive Vice President and Chief Financial Officer

I think with this last tier obviously we'll have to go through that next year but I don't think it will be significant thing year-over-year.

Elizabeth Grausam - Goldman Sachs

So sequentially, after the fourth quarter, you feel it's going to be a little more stable than what we've seen over the course of '07?

David J. Parrin - Executive Vice President and Chief Financial Officer

Well, again I, I think we have a tier coming in, in the fourth quarter. So, to given that...

Philip W. Milne - Chairman, President and Chief Executive Officer

And that's a good thing.

David J. Parrin - Executive Vice President and Chief Financial Officer

And that's a good thing. That we may see that continue to rise until we lap it a year from now.

Elizabeth Grausam - Goldman Sachs

And then, just lastly I know you had mentioned that throughout the quarter, maybe September is a little weaker due to some calendar issues versus August. But if you normalize out for the Sundays and the Fridays, did you notice any distinct trends in your money transfer business throughout the quarter or anything that would give you optimism or cause for concern as you move into 4Q, relative to what you saw in 3Q?

David J. Parrin - Executive Vice President and Chief Financial Officer

Well, certainly no cause for concern.

Elizabeth Grausam - Goldman Sachs

Okay, great. Thank you.

Philip W. Milne - Chairman, President and Chief Executive Officer

You're welcome.

Operator

And your next question comes from the line of David Parker of Merrill Lynch. Please proceed.

Philip W. Milne - Chairman, President and Chief Executive Officer

Good afternoon, David.

David Parker - Merrill Lynch

Good afternoon, everyone. I would expect that you could potentially treat the Payment Systems business as a discontinued ops. Can you just let us know what type of earnings contribution that business is currently providing you?

David J. Parrin - Executive Vice President and Chief Financial Officer

Well, we're just starting our strategic review, David. So, I don't know that... I'd characterize it as anything other than an ongoing operation today. If you look at the segment results in the release, you'll see under payment systems that would be the contributions making so.

David Parker - Merrill Lynch

Okay.

David J. Parrin - Executive Vice President and Chief Financial Officer

Does that make any sense?

David Parker - Merrill Lynch

Yes, it does. And I was hoping also that you would just be able to share with us maybe some of the dialogue you've had with some of your bank customers, just how the official check pay customers perceived this credit issue and maybe also some of covenants that you might have with them in terms of the agreement that you have made with them.

Philip W. Milne - Chairman, President and Chief Executive Officer

Well I think any discussions... I am not sure what credit issues you are talking about. But any conversation we have with our bank customers would be confidential under our agreements with them so, you want to... maybe ask me that differently.

David Parker - Merrill Lynch

Well just what are they saying about the issue with the credit crisis? And the investments in your portfolio, are they seeing lower transactions in terms of official checks? Or are they trying to steer the customers away from official checks? I mean what are your bank customers saying in terms of this business?

Philip W. Milne - Chairman, President and Chief Executive Officer

Well I'll just speak to the business itself and no we haven't seen that at all. I mean it has been very much business as usual.

David Parker - Merrill Lynch

Okay and then just on the money transfer side, you've... looking at your agent base, you said that you brought on some non-sellers. How long should we anticipate you ramp it... how long should it take for you to ramp those agents up before we actually see some normal revenue contribution from those agents?

Philip W. Milne - Chairman, President and Chief Executive Officer

That really varies by the type of agents and so that's a hard thing to do. We've talked about that before that if it's in an ethnic neighborhood and couple of locations, those tend to ramp up very quickly. If it's a big one... that's never sold before over large geographic presence that takes quite a while to ramp up. So that's a tough question to answer. Of course we are very excited about the growth that we have had and we think it's going to pay huge dividends for us down the road.

David Parker - Merrill Lynch

Okay, great. Thank you, guys.

Philip W. Milne - Chairman, President and Chief Executive Officer

Thank you.

Operator

And our next question comes from the line Mark Sproule of Thomas Weisel Partners. Please proceed.

Mark Sproule - Thomas Weisel Partners

Thanks.

Philip W. Milne - Chairman, President and Chief Executive Officer

Mark.

David J. Parrin - Executive Vice President and Chief Financial Officer

Mark.

Mark Sproule - Thomas Weisel Partners

How you guys doing?

Philip W. Milne - Chairman, President and Chief Executive Officer

Good and how are you?

Mark Sproule - Thomas Weisel Partners

Not too bad. I imagine you probably want to answer this anyway, but I sort out there nonetheless. Historically you talked about the payment business as a great cash generator, you use it to sort of build up your money transfer business. Is there any change in internal dynamic of how you are looking at that or?

Philip W. Milne - Chairman, President and Chief Executive Officer

A change in the internal dynamics?

Mark Sproule - Thomas Weisel Partners

While the change in... I guess, what fundamentally has changed from your thesis, the reason I mean sort of question had come up before, how the payment business fits with the money transfer platform long term? And obviously now you're taking more of a strategic review, so I guess how that differs from...

Philip W. Milne - Chairman, President and Chief Executive Officer

Mark, actually it's kind of hard to hear you. But I think you are asking is what fundamentally has changed in the business, given in the past we have said it's been a good source of cash well for us, right?

Mark Sproule - Thomas Weisel Partners

Yes.

Philip W. Milne - Chairman, President and Chief Executive Officer

Well now I will give you the answer. Since we are in the strategic review, I am not sure we could really talk about any particular catalyst that's brought us to this point.

Mark Sproule - Thomas Weisel Partners

Okay. I will leave that alone.

Philip W. Milne - Chairman, President and Chief Executive Officer

I am trying to make sure [Indiscernible] for the question.

Mark Sproule - Thomas Weisel Partners

Yes no, no, that's fair. What is the duration of the portfolio? And I know you have been fairly short over the last times. But has that come in shorter these days, or?

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes, we've actually been building up the liquidity in the portfolio, pretty substantially and it's at the end of September it was less than a year. I think the net duration was about 0.7 here, that's as low as it's been since I've been here.

Mark Sproule - Thomas Weisel Partners

Okay. And then with sorry...

Philip W. Milne - Chairman, President and Chief Executive Officer

I am sorry, okay, go ahead.

Mark Sproule - Thomas Weisel Partners

And then within the portfolio in the sub-prime assets, I know you guys have said that they are performing to your expectations still even though from a sort of fair value perspective, they are obviously somewhat impaired --

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes.

Mark Sproule - Thomas Weisel Partners

The older assets, the '04, '03, '04 vintage sub-prime portfolio performed, how has that been versus some of the '06, '07 stuff where there was a lot of early prepayment action [ph]?

Philip W. Milne - Chairman, President and Chief Executive Officer

No issues in the '03's and '04's.

Mark Sproule - Thomas Weisel Partners

Okay.

Philip W. Milne - Chairman, President and Chief Executive Officer

They are performing very well.

Mark Sproule - Thomas Weisel Partners

Okay. And then if I could transition just quickly into money transfer space, obviously you just touched on how some of these locations are in sort of an early stage. Your build-out was significantly greater than I would have expected. Are there certain areas that... or partnerships that you signed during the quarter that weren't expected or certain platforms that were building out significantly larger marketplace wise?

Philip W. Milne - Chairman, President and Chief Executive Officer

Well I think the big one Mark would be the full rollout of the UK post office that we got, because we got them on AgentConnect spring. So that's probably the biggest part of it.

Mark Sproule - Thomas Weisel Partners

Okay.

Philip W. Milne - Chairman, President and Chief Executive Officer

But, we continue to build out in India and China and Africa, here in the states. I mean it's across the board, but probably the single biggest was the UK post office.

Mark Sproule - Thomas Weisel Partners

Okay. And then I know we talked a lot about the sort of volumes semantics in Mexico, but if you looked at channel areas, where else have you... where have you seen the material strength that's offsetting maybe some of the softness in Mexico these days?

Philip W. Milne - Chairman, President and Chief Executive Officer

Well I think we continue to have strength across all the other markets. It's really Mexico that has been the soft one, and we really believe that, that's being driven in a great deal by the weak housing starts here with the lack of construction jobs being the biggest piece of that. But other than that we are just... we are seeing strong growth across all the other corridors.

Mark Sproule - Thomas Weisel Partners

Okay. If I could, there is one last question in, on the PropertyBridge acquisition, clearly a little bit different from your business, but the bill payment, can you talk maybe a little bit about how that bill payment platform might help your sort of broader platform or just extend the offering that you provide? Thanks.

Philip W. Milne - Chairman, President and Chief Executive Officer

We think they've really carved out an interesting niche, and we kind of like these verticals where you can go in and really have a big presence, and narrow or field although the rental market is very large in itself. I mean probably as a slice of the total payments business is small, but we like those types of opportunities. And hopefully, those types of niches we can transport the technology and know how to go out, and go after other ones. So, that's what we really liked about it. Not only was the growth that we see in the rental, but possibly applications in other verticals for that system.

Mark Sproule - Thomas Weisel Partners

Thanks, guys.

Philip W. Milne - Chairman, President and Chief Executive Officer

You're welcome. Thank you.

David J. Parrin - Executive Vice President and Chief Financial Officer

Thank you, Mark.

Operator

Your next question comes from the line of Pat Burton. Please proceed. [Smith Barney Citigroup]

Philip W. Milne - Chairman, President and Chief Executive Officer

Hey, Pat.

David J. Parrin - Executive Vice President and Chief Financial Officer

Hey, Pat.

Philip W. Milne - Chairman, President and Chief Executive Officer

Pat?

Operator

Your line is open sir.

Patrick Burton - Smith Barney Citigroup

Yes, I am here. Can you hear me?

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes, Pat.

Patrick Burton - Smith Barney Citigroup

Sorry. Hi. My question deals with the money order. Sorry about that. Is it still roughly around $1 billion in flow in the other side of the shop, the money orders?

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes. It varies, but yes, it's still roughly about that.

Patrick Burton - Smith Barney Citigroup

Okay. And is this, I assume not part of the strategic review?

Philip W. Milne - Chairman, President and Chief Executive Officer

It is not part of the strategic review. You are correct.

Patrick Burton - Smith Barney Citigroup

Okay. And theoretically, if the other side was to go which your tone is you are not going to tell us. Are these pieces easily separateable?

David J. Parrin - Executive Vice President and Chief Financial Officer

Theoretically, I can't answer to that question.

Philip W. Milne - Chairman, President and Chief Executive Officer

I don't know how to answer that, theoretically is that if could you separate the portfolio, is not [ph] for sure?

Patrick Burton - Smith Barney Citigroup

Like their [indiscernible] thesis sums or anything like that or are they run on separate technology platforms for example?

Philip W. Milne - Chairman, President and Chief Executive Officer

They are on separate technology platforms.

Patrick Burton - Smith Barney Citigroup

They are.

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes.

Patrick Burton - Smith Barney Citigroup

Okay. All right. And in terms of the money transfer business, my understanding is from what you are saying you made long time at that your pricing in Mexico has been very stable. I read into that, then your competitors' pricing, as they've tried to regain share has been down some, but you guys haven't materially followed. Is that accurate?

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes. But I don't... I won't say that anybody doing anything dramatic out there. I mean, you will see FX going up and down here and there. I don't think there is... we have seen anybody do anything dramatic. And I think that's some of the pricing surveys out there really show that... it's been really quite stable. I just was emphasizing that we haven't done anything to change our pricing philosophy.

Unidentified Analyst

Well congratulations on the great money transfer growth again. Thanks.

Philip W. Milne - Chairman, President and Chief Executive Officer

Thanks, Pat.

David J. Parrin - Executive Vice President and Chief Financial Officer

Thanks, Pat.

Operator

And your next question comes from the line Bob Napoli of Piper Jaffray. Please proceed.

Philip W. Milne - Chairman, President and Chief Executive Officer

Good afternoon, Bob.

Robert P. Napoli - Piper Jaffray

Thank you, good afternoon. I was hoping to get a little more color on the agent growth. And I know if you can kind of give some feel for the quality of the agent growth. I mean do you expect the transactions per agent if and where you see the greatest opportunities? Now, you have mentioned a number of markets, I just was wondering if you can maybe give an update on which markets you see as being the most attractive?

Philip W. Milne - Chairman, President and Chief Executive Officer

Well I think that's... I'll go back to what I said earlier, it's been really a balance attack across the global. We are putting on and I want to emphasize. We've really worked hard to put on quality agents, and are not out trying to just sign doors. We've really worked hard to make sure that if we're going to invest our time in our capital, in our training dollars, and all of that, that we believe that we're putting on real quality and productive agents for the future. And we've always seen growth respond to agent location growth. So, I think that being said we are very excited about what's coming on. A big one that we just talked about was UKPO and in a very large send market of Great Britain, so I think that one would be one to highlight. But, other than it's been pretty balanced, and we are really working hard in key receive markets like India, China and Africa, as well as other places, but in Eastern Europe we have been really working hard as well so.

Robert P. Napoli - Piper Jaffray

How about is that your UKPO addition is that something that is kind of fully ramped up and that's helped accelerate the agent growth?

Philip W. Milne - Chairman, President and Chief Executive Officer

Well we added 11,000 locations since mid summer.

Robert P. Napoli - Piper Jaffray

Okay.

Philip W. Milne - Chairman, President and Chief Executive Officer

So, it's pretty significant, and of course from a marketing standpoint as you are marketing in the UK I mean now you can go to any post office which has a huge advantage for us.

Robert P. Napoli - Piper Jaffray

I mean with that growth you would expect the... I mean I guess that would help add agent locations when you get that kind of a send market position to add agents in other countries, so would we see?

Philip W. Milne - Chairman, President and Chief Executive Officer

Absolutely, and that is always key is if you are going out and selling receive agents do you have strong agent base in the send country.

Robert P. Napoli - Piper Jaffray

What percentage of your send comes from outside the U.S.?

David J. Parrin - Executive Vice President and Chief Financial Officer

No, we haven't disclosed anything at that level.

Robert P. Napoli - Piper Jaffray

Okay. Just last question...

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes.

Robert P. Napoli - Piper Jaffray

If I could, just trying to understand the portfolio a little better and kind of the risks and understanding and more about CDOs and I would like to the... there's... they are trading, there is some pretty distract valuations and the CDOs tend to have a bunch of sub-prime 2006 mortgages and I guess... I don't know how to think about when I look at your balance sheet and... if you were to sell the payments business does that entire portfolio go with it and just trying to think about valuation balance sheet?

Philip W. Milne - Chairman, President and Chief Executive Officer

Well I'll go back to that. We are doing the strategic review and that no decisions have been made. Clearly, as we look at the strategic review the portfolio will be wrapped up into that strategic review. Beyond that I don't think that we could even begin to discuss that because we really at the beginning stages of that.

Robert P. Napoli - Piper Jaffray

And on the liquidity side the one-to-one, could you just, I am sorry... I am not sure I totally understand that how much excess liquidity you had at September 30th.

David J. Parrin - Executive Vice President and Chief Financial Officer

Well it's two different things, that's not a liquidity question.

Robert P. Napoli - Piper Jaffray

Okay.

David J. Parrin - Executive Vice President and Chief Financial Officer

Liquidity really comes from the issuance of items, and the daily settlement of those transactions with our banks to cover the items that are clearing. The one-to-one ratio is a bit different in that, it's related to maintaining of adequate asset to cover the liabilities that we have. And as you might imagine those settled over time in those... and time being months and years. So, there are two very separate concepts.

On the unrestricted assets and the way we use that as the cushion to the extent there are market valuation declines that unrestricted asset number essentially absorbs that. And that's exactly what happened. And what we did is, as we build that back up by borrowing against our revolver to give us additional cushion against any further declines, and I think as we said in the comments that there really was pretty stable pricing from August to the end of September, in fact, a few areas actually improved a bit so. At September 30, we are pretty comfortable with our valuations. We are comfortable with the unrestricted asset, the cushion that we have, and I think that our hope is that we are through a lot of that volatility in the marketplace.

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes, and I think it's just important to emphasize that the revolver was not drawing down for liquidity purposes, it was really for the one-to-one test. And we have plenty of liquidity on a day-to-day basis to handle the clearing. So, that really wasn't an issue. It was really the one-to-one. And I just also want to point out that we've had a strong cushion, and we'd always maintain that to get us through periods of time like the last quarter, and I think it performed very well and did exactly what it was supposed to do through that time period.

Robert P. Napoli - Piper Jaffray

Great.Thank you.

Philip W. Milne - Chairman, President and Chief Executive Officer

You're welcome.

Operator

Your next question comes from the line of Paul Bartolai of Credit Suisse. Please proceed.

Paul Bartolai - Credit Suisse

Thanks. Good afternoon.

Philip W. Milne - Chairman, President and Chief Executive Officer

Good afternoon, Paul.

Paul Bartolai - Credit Suisse

I am just looking at the money transfer... funds transfer business, given your guidance, it looks like there is going to be a bit of a sequential dip in the margins. Was the 3Q margin improvement mostly just the timing of spending or is there something else going on there? And what's driving kind of the difference in 4Q?

Philip W. Milne - Chairman, President and Chief Executive Officer

It's a timing issue and that's why we played out in the comments that we think that that will be flattish for the year around at 16%. So, it really is the timing issue.

Paul Bartolai - Credit Suisse

So, it's mostly just cutting back on advertising and just timing [ph] as something like that?

David J. Parrin - Executive Vice President and Chief Financial Officer

No, it's cutting back.

Philip W. Milne - Chairman, President and Chief Executive Officer

No, it's cutting back. Just the timing that it hits... the fourth quarter is important with a lot of holidays and we support that with the spend.

Paul Bartolai - Credit Suisse

Okay. And then if we look at the money transfer volume, I mean it looks like Mexico and domestic slowed a little bit. Can you give us any sense of what we should expect in 4Q? I mean it seems like given what's going on that we would probably expect to see a little bit of a further slowdown?

Philip W. Milne - Chairman, President and Chief Executive Officer

We really don't want to get into the habit of kind of giving intra-quarter updates on money transfer volume. I think we characterize it... I think the question was asked by Liz earlier, and we have no concerns heading into the fourth quarter on the volume side and... so I think we are just fine there.

Paul Bartolai - Credit Suisse

Okay. And can you give us what the... you spoke about the euro, can you give us what the currency benefit was in the quarter?

David J. Parrin - Executive Vice President and Chief Financial Officer

No we haven't disclosed that. And we are not going to I guess.

Paul Bartolai - Credit Suisse

Switching over to the other side of business I guess you mentioned the $3.1 million loss that you took in the quarter. Can you give us the components for that or even specifically just what the realized gain was in the quarter if there was any?

David J. Parrin - Executive Vice President and Chief Financial Officer

I probably could, headed up here, so I guess shuffle a little bit. In the quarter we had about $1.5 million of gains and for six of impairments.

Paul Bartolai - Credit Suisse

Okay. And then you mentioned the yield... their duration down to less than a year. So I guess I am just trying to understand how the gross yield that was still up given you are moving down to the shorter end of the curve. What drove that gross yield improvement? And I guess in the same respect the net yield improvement given I would have thought that swaps rolling off would have hurt that a little bit on the commission side.

David J. Parrin - Executive Vice President and Chief Financial Officer

Actually I think about 50 million roll off and of course it was... it's a relatively small part piece of roll-off I think, and I might be confusing with the fourth quarter on the swaps. Basically Paul, the best way to look at in our analysis is that as we look at the spread, as we have had more cash and overnight in short-term investments, we've gotten the benefit of the spread between LIBOR and fed funds because we pay out on a fed funds basis. So that, that had a pretty good impact on us, pretty positive impact I should say.

Paul Bartolai - Credit Suisse

Okay. And just given everything going on I mean do you anticipate changing or altering the strategy for the portfolio?

Philip W. Milne - Chairman, President and Chief Executive Officer

I think once again that kind of wrapped up in this whole strategic review that we are doing. So, I would wrap that up into that discussion, and as we come to some conclusions, I think we'll probably be able to give you some further enlightenment on that.

Paul Bartolai - Credit Suisse

Okay. And then, I guess, just last one here. I mean, you mentioned what happened during September but as I am sure you have seen in the last couple of weeks, we've had some downgrades to some of the '05 securities [ph] and some of the other stuffs. So I mean any changes since the end of the September any downgrades of your securities that might cause any changes in the unrealized losses or I guess even also what gives you the confidence that we are not going to see any of these turn into realized losses? And what's going on with some of the '05 stuff?

David J. Parrin - Executive Vice President and Chief Financial Officer

Well, we've not seen any of that, that have... had a direct impact on these securities that we own. As you know the process around evaluating securities and the impact of downgrades on is very involved because you've got to look into the collateral. But at this point it's having a no direct impact on deals that we own. If there are some downstream impact in the future, that's really something that we have to evaluate as those things actually occur.

Paul Bartolai - Credit Suisse

Okay, thanks.

Philip W. Milne - Chairman, President and Chief Executive Officer

You are welcome.

Operator

Your next question comes from the line of Robert Dodd of Morgan Keegan. Please proceed.

Robert Dodd - Morgan Keegan & Company

Hi, guys.

Philip W. Milne - Chairman, President and Chief Executive Officer

Good afternoon.

Robert Dodd - Morgan Keegan & Company

Just going to the swaps quickly, I mean we've got the swap portfolios down to about half that level it was a year ago, give or take. I mean what's your strategy in that regard going forward, are you going to ramp that backup or?

David J. Parrin - Executive Vice President and Chief Financial Officer

Well, I think one of things our strategy has been is that we've been buying more variable rate securities. So that's had a big impact on the way we've looked at hedging the portfolio, hedging our interest rate risk, as the swaps have declined. And the other thing is, with the build-up in cash, there is certainly not the same need for having the swaps on because cashes on invested are fairly short. So, we don't have that need.

Robert Dodd - Morgan Keegan & Company

Okay and then, just on the... going back to the 3.1 in net securitized loss or net securities losses. The 4.6 you said were in payments, I just want to clarify...

David J. Parrin - Executive Vice President and Chief Financial Officer

Yes.

Robert Dodd - Morgan Keegan & Company

That was in payments, not realized losses.

David J. Parrin - Executive Vice President and Chief Financial Officer

Yes,That's correct.

Robert Dodd - Morgan Keegan & Company

Okay, all right, thank you. Have you got... the UK post office now I assume is mostly complete because it's... because of your technology.

Philip W. Milne - Chairman, President and Chief Executive Officer

It's fully rolled out.

Robert Dodd - Morgan Keegan & Company

Okay. Do you have any other significant sort of backlog agent cuts or agent rollout to come?

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes, yes we do. We have a terrific backlog actually.

Robert Dodd - Morgan Keegan & Company

Can you give us any color?

Philip W. Milne - Chairman, President and Chief Executive Officer

No, we are not prepared to announce those yet but we have a very, very strong backlog and I think you will see that develop here over the next quarter.

Robert Dodd - Morgan Keegan & Company

Okay, and then last question. I know it's early days on the Wal-Mart money centers and they are not all fully rolled out yet or not even mostly rolled out yet. Can you give us any color on what you are seeing? Are you seeing more traffic to the money sender locations versus when you are at the service location? I mean any color you can give us in that regard.

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes, we do see increased traffic and those are very good for our business. So, the more of those they roll out the better it is for us because it clearly attracts consumers and more services that they come into Wal-Mart for, it tends to be very good for us.

Robert Dodd - Morgan Keegan & Company

Great, thank you.

Philip W. Milne - Chairman, President and Chief Executive Officer

Welcome.

Operator

And your next question comes from David Scharf of JPM [JPM] Securities. Please proceed.

Philip W. Milne - Chairman, President and Chief Executive Officer

David.

David Scharf - JMP Securities

Hi, good afternoon.

Philip W. Milne - Chairman, President and Chief Executive Officer

How are you doing?

David Scharf - JMP Securities

All right, a few things. I am trying to recall, I was jotting down at the beginning of your remarks, could you talked about what may have been the main driver of Wal-Mart Canada's decision? And I thought you said something with respect to urgent bill pay but I think I missed it. Can you repeat the... that commentary.

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes, we don't have an urgent bill payment business in Canada. So we didn't have that to offer. And that's important in there.

David Scharf - JMP Securities

I got you. Okay, secondly in terms of segment information, I know it's not a discontinued operations by any stretch of imagination but you can rest assured everybody is going to be dusting off, how they want to look at the GFT business standalone. How much of the companywide D&A would I normally attribute to the GFT segment?

David J. Parrin - Executive Vice President and Chief Financial Officer

That is just a great question, David. But I really can't answer it for you.

David Scharf - JMP Securities

Okay, worth asking though.

David J. Parrin - Executive Vice President and Chief Financial Officer

Yes.

David Scharf - JMP Securities

Let's talk about India a little. The agent conquered the both yourself and Western Union, it's been pretty dramatic there. They there... I think they've got seven or eight of the 10 largest banks there, as well as the post book. What type of super agents... agencies are you signing up over in India? Can you give a little color upon... about the growth there and what kind of traction?

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes, well we have a couple of banks, I believe and I don't have that information, sitting in front of me. But we do have some banks as well. We have Thomas Cook, who is a super agent and we have I think three or four super agents, Airwings and then Trade Wings. So we have a very balanced, I think attack going on in India, to build a quality agent base. We do have some banks, we are dealing with us, as well over there.

David Scharf - JMP Securities

Okay, when I look at the significant agent conquest lately, would... is it fair to count India among one of those countries and also one where perhaps there is above trend marketing spend or is it in

Philip W. Milne - Chairman, President and Chief Executive Officer

You can certainly count it in the agent growth, I am not... I don't think I would be prepared to tell you about the marketing. I mean we are certainly supporting it with marketing. I don't know that I could characterize it one way or the other, I just don't have that sitting in front of me. But clearly we put feet on the ground there and we are investing in marketing and the signs and all the other activities to support the growth.

David Scharf - JMP Securities

Okay. I came across some articles in the Indian business press and it was related... some others have noted, I think it was related to the Indian Central Bank, potentially putting a moratorium on super agent signing up sub-agents and I think was just within the Western Union Bank or but are you aware of this? Is that something that is impacting MoneyGram as well potentially?

Philip W. Milne - Chairman, President and Chief Executive Officer

I think we saw the same article, but I don't think that above and beyond that, that was very specific to Western Union and I don't think I really want to comment above and beyond that.

David Scharf - JMP Securities

Okay. And just a couple of other things; one, is the weak dollar, does that have any measurable drag on your earnings as it relates to all the marketing spend that's done overseas, ramping up new agents?

David J. Parrin - Executive Vice President and Chief Financial Officer

yes, well I mean the extend, we have euro denominated expenses that we don't have to translate into dollars, yes that would have an impact, but I would say that the net impact to our bottom line of all the euro impact is fairly immaterial.

David Scharf - JMP Securities

Okay, got you. And were you able to comment on how large this PropertyBridge deal was?

David J. Parrin - Executive Vice President and Chief Financial Officer

On the purchase price?

David Scharf - JMP Securities

Yes, as well as just

David J. Parrin - Executive Vice President and Chief Financial Officer

No we didn't. The company just got a great platform, they've got great talent, that's going to be very beneficial to us and that we haven't disclosed the purchase price but it was not very significant.

David Scharf - JMP Securities

Okay. So with the unrealized losses in the quarter, I mean that would reduce your equity by about a couple of hundred million correct?

David J. Parrin - Executive Vice President and Chief Financial Officer

Andit's reflected in our equity, when you see our balance sheet, you will see it's reflected.

David Scharf - JMP Securities

So when we look at what is...

David J. Parrin - Executive Vice President and Chief Financial Officer

I am sorry David, Tim reminds me that you've got to adjust it for taxes, so it's less than the gross amount that net unrealized loss.

David Scharf - JMP Securities

Okay. So that runs through the other comprehensive income and we look at your September 30, equity account in combination with the increased borrowing and the revolver. But does that preach any debt equity covenants?

David J. Parrin - Executive Vice President and Chief Financial Officer

No.

David Scharf - JMP Securities

Okay, got you. Okay, thanks so much.

David J. Parrin - Executive Vice President and Chief Financial Officer

Yes.

Philip W. Milne - Chairman, President and Chief Executive Officer

You are welcome.

Operator

And our last question comes from the line of Dan Perlin. Please proceed.

Philip W. Milne - Chairman, President and Chief Executive Officer

Hi, good afternoon Dan.

David J. Parrin - Executive Vice President and Chief Financial Officer

Hey Dan.

Daniel Perlin - Wachovia Securities

Thanks. Can you guys hear me? I was actually dropped off of the call for about two times, so if you have already given the data, I apologize. Do you have the restricted cash number for the quarter?

David J. Parrin - Executive Vice President and Chief Financial Officer

The unrestricted cash and other investment... unrestricted assets I am sorry.

Daniel Perlin - Wachovia Securities

I got the unrestricted asset, I want the restricted cash and cash equivalents.

David J. Parrin - Executive Vice President and Chief Financial Officer

Okay,no I don't, I don't have that.

Daniel Perlin - Wachovia Securities

What about your receivable balance?

David J. Parrin - Executive Vice President and Chief Financial Officer

We don't disclose it. We don't release our balance sheet information as far as the earnings release, so it's not in there.

Daniel Perlin - Wachovia Securities

From the Q.

David J. Parrin - Executive Vice President and Chief Financial Officer

I am sorry.

Daniel Perlin - Wachovia Securities

When is the Q coming out then?

David J. Parrin - Executive Vice President and Chief Financial Officer

Alright, the Q will be filed by the 9, I think no later than the 9 of November or so.

Daniel Perlin - Wachovia Securities

So,no preview of what maybe those two major key accounts are that would ultimately get us to this magic number of the 315 in your Payment Systems assets, I mean it's pretty important. So, I am not asking for whole balance sheet, just two numbers.

David J. Parrin - Executive Vice President and Chief Financial Officer

Yes. But keep in mind that those assets tend to also move along with the payment service obligation. So, it's somewhat different than what we were talking about in terms of the unrestricted assets.

Daniel Perlin - Wachovia Securities

Isn'tthat... those are two major components that add up to the assets that hopefully matches that. So, it's fine, I'll just wait. One other quick question for you.

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes.

Daniel Perlin - Wachovia Securities

Someone earlier asked you a question about drawing down on your credit facility, and your comment was that you didn't have any more available?

David J. Parrin - Executive Vice President and Chief Financial Officer

We have fully drawn our credit facility. That's correct.

Daniel Perlin - Wachovia Securities

You have fully drawn that down. Okay.

David J. Parrin - Executive Vice President and Chief Financial Officer

Yes.

Daniel Perlin - Wachovia Securities

And then last quarter you mentioned that you had signed up... I think you were going to or at least planning on to signing up in the second half a non-seller agent?

David J. Parrin - Executive Vice President and Chief Financial Officer

Yes.

Daniel Perlin - Wachovia Securities

And that wasn't this Canada, maybe you thought you were going to get?

Philip W. Milne - Chairman, President and Chief Executive Officer

No, no. And we are... I will tell that we are... we'll get that done here in the fourth quarter.

Daniel Perlin - Wachovia Securities

Okay. So, that's coming in the fourth quarter and that's probably part of the reason why margins will compress coupled with so I guess margin the Wal-Mart going up into higher pricing tier?

David J. Parrin - Executive Vice President and Chief Financial Officer

No, I think it's timing expenses, as much... our marketing spend actually as a percentage of our total marketing dollars is tracking very closely to last year in terms of the quarter's and how we are spending it so.

Philip W. Milne - Chairman, President and Chief Executive Officer

And that's really designed to support the heavy holiday periods that we have in the fourth quarter as Thanksgiving...

David J. Parrin - Executive Vice President and Chief Financial Officer

As much as poor financed guy have tried to get the marketing folks to spread that out...

Philip W. Milne - Chairman, President and Chief Executive Officer

That really [multiple speakers] Unfortunately track with the business so,

David J. Parrin - Executive Vice President and Chief Financial Officer

Yes, right.

Daniel Perlin - Wachovia Securities

Okay, good. Well, thanks so much and good luck with the strategic review process.

Philip W. Milne - Chairman, President and Chief Executive Officer

Thank you.

David J. Parrin - Executive Vice President and Chief Financial Officer

Thanks a lot Dan.

Operator

And that is all the time we had for questions. I would like to turn the presentation back over to Mr. Phil Milne. Please proceed sir.

Philip W. Milne - Chairman, President and Chief Executive Officer

Yes. Thank you very much for joining us today. We are proud of the solid quarter we had. And as we said earlier, as we develop anything further on the strategic review, we will share that with you. So, thank you very much and look forward to talking to you at the end of the year the first quarter for the full 2007 results.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect, and have a great day.

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Source: MoneyGram International, Inc. Q3 2007 Earnings Call Transcript
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