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MasterCard Incorporated Reports Fourth-Quarter and Full-Year 2006 Financial Results- Fourth-quarter net income of $0.30 per share, or $41 million - Fourth-quarter net revenues up 17.2% to $839 million - Fourth-quarter gross dollar volume up 13.8%, purchase volume up 16.7% - Quarterly dividend increase of 66.7%, up from 9 cents to 15 cents per share
PURCHASE, N.Y., Feb. 9 /PRNewswire-FirstCall/ -- MasterCard Incorporated (NYSE: MA) today announced financial results for the fourth quarter and full-year 2006. For the fourth quarter, the company reported net income of $41 million, or $0.30 per share. Excluding the impact of litigation settlements, net income for the quarter was $42 million, or $0.31 per share. Net revenues for the quarter were $839 million, a 17.2% increase versus the same period in 2005. Currency fluctuations (driven by the movement of the euro relative to the US dollar) contributed approximately 1.9% of the increase in revenues for the quarter. For the fourth quarter 2006, total net income, earnings per share and total operating expenses, each of which excludes litigation settlements, are non-U.S. GAAP financial measures that are reconciled to their most directly comparable U.S. GAAP measures in the accompanying financial tables. Fueling the higher revenue in the fourth quarter versus the same period in 2005 was growth in MasterCard's gross dollar volume (GDV), which increased 13.8%, on a local currency basis, to $532 billion; a 17.4% increase in the number of transactions processed to 4.4 billion; and a restructuring of cross- border transaction pricing which was implemented in April 2006. Worldwide purchase volume rose 16.7%, on a local currency basis, during the quarter to $391 billion, driven by increased cardholder spending on a growing number of MasterCard cards. As of December 31, 2006, the company's customers had issued 817 million MasterCard cards, an increase of 12.3% percent over the cards issued at December 31, 2005. "Cardholders around the world used their MasterCard cards for transactions totaling almost $2 trillion in 2006 -- doubling the GDV we reported only five years ago, as the pace at which we are driving commerce in markets around the world gains momentum," said Robert W. Selander, MasterCard president and chief executive officer. "Our success in displacing paper-based forms of payment reflects the strength of our brand and network as well as the opportunities to implement innovative payment programs in both emerging and developed economies. "Having invested significantly in our global brand and payments network over the past 40 years, we enter our fifth decade with a leveragable infrastructure that will allow us to provide cutting-edge payment solutions for our financial institution customers as well as merchants, consumers, corporations and governments who are increasingly turning to the convenience and security of electronic payments," Selander noted. "We expect this will enable us to continue to drive value for our shareholders." Total operating expenses decreased 2.6%, to $793 million, during the fourth quarter of 2006 compared to the same period in 2005. Excluding the impact of litigation settlements, operating expenses increased 0.5%. This was primarily driven by a $14.5 million cash contribution to the MasterCard Foundation, as part of MasterCard's previously disclosed intention to contribute up to $40 million in cash to the Foundation over four years; higher professional fees related to legal costs to defend outstanding litigation; and, an increase in personnel costs related to the hiring of additional staff to strengthen our capability to add value to our customers' businesses. Offsetting this increase was an 8.5% decrease in advertising and market development expenses versus the year-ago period due to a shift in the typical annual pattern of marketing spend to support the 2006 World Cup soccer events earlier in the year. Currency fluctuations contributed approximately 1.5% of the increase in expenses for the quarter. Total other income was $24 million in the fourth quarter 2006 versus $10 million in the fourth quarter of 2005. The increase was primarily driven by a $20 million increase in investment income. Full-Year 2006 Results For the year-ended December 31, 2006, MasterCard reported net income of $50 million or $0.37 per share. Excluding the impact of special items, the company reported net income of $457 million, or $3.37 per share. Pre-tax special items for full-year 2006 included:
-- A $395 million non-cash expense in the second quarter of 2006,
resulting from the donation of approximately 13.5 million shares of
Class A common stock to the MasterCard Foundation that occurred
simultaneously with the company's IPO, which was not deductible for tax
purposes;
-- A $25 million reserve for litigation settlements; $23 million was
recorded in the second quarter of 2006 and $2 million was recorded in
the fourth quarter of 2006; and
-- $7 million in interest income in the second quarter of 2006 earned on
the IPO proceeds, which were ultimately used for redemption of shares
of Class B common stock.
The company's full year 2006 net income, earnings per share and total operating expenses, each of which excludes special items, are non-U.S. GAAP financial measures that are reconciled to their most directly comparable U.S. GAAP measures in the accompanying financial tables. Net revenues for the twelve months ended December 31, 2006 were $3.3 billion, a 13.2% increase versus the same period in 2005. Currency fluctuations had a negligible impact on revenues during the year. Total operating expenses increased 21.7%, to $3.1 billion, for the twelve- month period compared to the same period in 2005. Excluding the impact of the charitable donation of common stock to the MasterCard Foundation, litigation settlements, and an adjustment to reflect an accounting methodology change for cash-based executive incentive plans in the third quarter of 2005, total operating expenses increased 9.2%. This was due to increased personnel costs, professional fees and advertising and marketing expenses, as well as a total of $20 million in cash contributed to the MasterCard Foundation in 2006. Currency fluctuations had a negligible impact on operating expenses during this period. Total other income was $65 million for the twelve-month period versus $14 million for the same period in 2005. This change was driven by a $64 million increase in investment income, including the $7 million special item of interest income earned on IPO proceeds which were used for redemption. Interest expense also decreased by $9 million primarily due to a refund of interest assessed in connection with an audit of the company's federal income tax return and a reduction of interest reserve requirements related to the company's tax reserves. MasterCard's effective tax rate of 82.9% for the twelve months ended December 31, 2006 includes the impact of the non-deductible charitable donation of common stock to the MasterCard Foundation. Excluding this donation, the company's tax rate would have been 35.4% vs. 34.5% for the same period in 2005. The company's effective tax rate, excluding the impact of the stock donation, is a non-U.S. GAAP financial measure that is reconciled to the most directly comparable U.S. GAAP measure in the accompanying financial tables. MasterCard Board of Directors Announces Increase in Quarterly Dividend At a meeting on February 6, 2007, the MasterCard Incorporated Board of Directors declared an increase to the quarterly cash dividend to holders of shares of its Class A common stock and Class B common stock. A cash dividend of 15 cents per share, which represents a 66.7% increase over the prior dividend level of 9 cents per share, will be paid on May 10, 2007 to holders of record of its Class A common stock and Class B common stock as of April 9, 2007. "We are pleased that the success of our business and the strength of our capital position has allowed us to increase our dividend, further demonstrating our commitment to drive shareholder value," said Chris A. McWilton, chief financial officer. Fourth-Quarter and Full-Year 2006 Financial Results Conference Call Details At 9:00 a.m. EST today, the company will host a conference call to discuss its fourth quarter and full-year financial results. The dial-in information for this call is 866-383-7989 (within the U.S.) and 617-597-5328 (outside the U.S.) and the passcode is 69019047. A replay of the call will be available for one week following the live call. The replay can be accessed by dialing 888-286-8010 (within the U.S.) and 617-801-6888 (outside the U.S.) and using passcode 82233899. The live call and the replay, along with supporting materials, can also be accessed through the Investor Relations section of the company's website at http://www.mastercard.com/. About MasterCard Incorporated MasterCard Incorporated advances global commerce by providing a critical economic link among financial institutions, businesses, cardholders and merchants worldwide. As a franchisor, processor and advisor, MasterCard develops and markets payment solutions, processes over 16 billion transactions each year, and provides industry-leading analysis and consulting services to financial institution customers and merchants. Through its family of brands, including MasterCard(R), Maestro(R) and Cirrus(R), MasterCard serves consumers and businesses in more than 210 countries and territories. For more information go to http://www.mastercard.com/. Forward-Looking Statements Statements in this press release which are not historical facts, including statements about MasterCard's plans, strategies, beliefs and expectations, are forward-looking and subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements speak only as of the date they are made. Accordingly, except for the company's ongoing obligations under the U.S. federal securities laws, the company does not intend to update or otherwise revise the forward-looking information to reflect actual results of operations, changes in financial condition, changes in estimates, expectations or assumptions, changes in general economic or industry conditions or other circumstances arising and/or existing since the preparation of this press release or to reflect the occurrence of any unanticipated events. Such forward-looking statements include, without limitation: -- the company's ability to drive commerce in markets around the world;
-- the company's success in displacing paper-based forms of payments;
-- the company's ability to implement innovative payment programs in both
emerging and developed economies;
-- the company's ability to leverage its infrastructure to provide
cutting-edge payment solutions for its financial institution customers
as well as merchants, consumers, corporations and governments;
-- the company's strong capital position and commitment to drive value for
its shareholders.
Actual results may differ materially from such forward-looking statements for a number of reasons, including those set forth in the company's filings with the Securities and Exchange Commission (SEC), including the company's Annual Report on Form 10-K for the year ended December 31, 2005, the company's Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that it has filed with the SEC during 2006 and 2007, as well as reasons including difficulties, delays or the inability of the company to achieve its strategic initiatives set forth above. Factors other than those listed above could also cause the company's results to differ materially from expected results. MASTERCARD INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended For the Years Ended
December 31, December 31,
2006 2005 2006 2005
(In thousands, except (In thousands, except
per share data) per share data)
Revenues, net $839,163 $715,918 $3,326,074 $2,937,628
Operating Expenses
General and administrative 399,304 375,215 1,505,185 1,351,082
Advertising and marketing 352,934 385,821 1,051,870 1,008,268
Litigation settlements 1,707 26,970 24,957 75,158
Charitable contributions to
the MasterCard Foundation 14,500 - 414,785 -
Depreciation and amortization 24,730 26,570 99,782 109,936
Total operating expenses 793,175 814,576 3,096,579 2,544,444
Operating income (expense) 45,988 (98,658) 229,495 393,184
Other Income (Expense)
Investment income, net 40,905 21,255 124,994 60,867
Interest expense (17,686) (18,252) (61,151) (70,158)
Other income, net 531 7,447 834 23,445
Total other income 23,750 10,450 64,677 14,154
Income (loss) before income
taxes 69,738 (88,208) 294,172 407,338
Income tax expense (benefit) 28,836 (35,300) 243,982 140,619
Net Income (Loss) $40,902 $(52,908) $50,190 $266,719
Basic Net Income (Loss)
per Share $0.30 $(0.39) $ 0.37 $1.98
Basic Weighted average shares
outstanding 135,700 134,969 135,411 134,969
Diluted Net Income (Loss)
per Share $0.30 $(0.39) $ 0.37 $1.98
Diluted Weighted average shares
outstanding 136,461 134,969 135,779 134,969
MASTERCARD INCORPORATED
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2006 2005
(In thousands, except share data)
ASSETS
Cash and cash equivalents $1,185,080 $545,273
Investment securities, at fair value:
Trading 12,261 22,472
Available-for-sale 1,286,580 714,147
Accounts receivable 451,261 347,754
Settlement due from members 311,953 211,775
Restricted security deposits held for members 109,897 97,942
Prepaid expenses 130,849 167,209
Other current assets 89,348 121,326
Total Current Assets 3,577,229 2,227,898
Property, plant and equipment, at cost (less
accumulated depreciation of $220,720 and
$373,319) 252,731 230,614
Deferred income taxes 216,782 225,034
Goodwill 217,013 196,701
Other intangible assets (less accumulated
amortization of $309,110 and $272,913) 271,373 273,854
Municipal bonds held-to-maturity 193,477 194,403
Prepaid expenses 235,654 201,132
Other assets 118,211 150,908
Total Assets $5,082,470 $3,700,544
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $278,656 $185,021
Settlement due to members 286,059 175,021
Restricted security deposits held for members 109,897 97,942
Obligations under U.S. merchant lawsuit and other
litigation settlements -- current 117,275 189,380
Accrued expenses 936,427 850,657
Other current liabilities 83,276 58,682
Total Current Liabilities 1,811,590 1,556,703
Deferred income taxes 66,198 61,188
Obligations under U.S. merchant lawsuit and
other litigation settlements 359,640 415,620
Long-term debt 229,668 229,489
Other liabilities 246,395 263,776
Total Liabilities 2,713,491 2,526,776
Commitments and Contingencies
Minority interest 4,620 4,620
Stockholders' Equity
Class A common stock, $.0001 par value;
authorized 3,000,000,000 shares, 79,631,983 and
no shares issued and outstanding, respectively 8 -
Class B common stock, $.0001 par value;
authorized 1,200,000,000 shares, 55,337,407 and
134,969,329 shares issued and outstanding,
respectively 6 14
Class M common stock, $.0001 par value, authorized
1,000,000 shares, 1,600 and no shares issued and
outstanding, respectively - -
Additional paid-in capital 3,289,879 974,605
Retained earnings (accumulated deficit) (1,029,196) 145,515
Accumulated other comprehensive income,
net of tax:
Cumulative foreign currency translation
adjustments 96,851 50,818
Defined benefit pension and other postretirement
plans 11,402 -
Investment securities available-for-sale (3,065) (2,543)
Derivatives accounted for as hedges (1,526) 739
Total accumulated other comprehensive income,
net of tax 103,662 49,014
Total Stockholders' Equity 2,364,359 1,169,148
Total Liabilities and Stockholders' Equity $5,082,470 $3,700,544
MASTERCARD INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
2006 2005
(In thousands)
Operating Activities
Net income $50,190 $266,719
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 99,782 109,936
Charitable contribution of common stock to
the MasterCard Foundation 394,785 -
Share based payments 19,181 -
Deferred income taxes 32,267 (54,036)
Other 9,746 12,182
Changes in operating assets and liabilities:
Trading securities 10,211 4,935
Accounts receivable (93,428) (64,189)
Settlement due from members (75,553) (15,496)
Prepaid expenses 42,623 (52,170)
Other current assets 7,813 (17,123)
Prepaid expenses, non-current (30,555) (123,692)
Accounts payable 89,382 4,111
Settlement due to members 89,739 11,471
Litigation settlement accruals, including
accretion of imputed interest (128,085) 7,406
Accrued expenses 86,859 220,789
Net change in other assets and liabilities 45,204 (37,995)
Net cash provided by operating activities 650,161 272,848
Investing Activities
Purchases of property, plant and equipment (61,204) (43,866)
Capitalized software (33,264) (38,137)
Purchases of investment securities available-
for-sale (3,815,115) (2,834,321)
Proceeds from sales and maturities of
investment securities available-for-sale 3,233,725 2,883,709
Acquisition of businesses, net of cash acquired - -
Other investing activities (368) (1,040)
Net cash used in investing activities (676,226) (33,655)
Financing Activities
Cash received from sale of common stock, net
of issuance costs 2,449,910 -
Cash payment for redemption of common stock (1,799,937) -
Dividends paid (12,373) -
Net cash provided by financing activities 637,600 -
Effect of exchange rate changes on cash and
cash equivalents 28,272 (22,916)
Net increase in cash and cash equivalents 639,807 216,277
Cash and cash equivalents - beginning of year 545,273 328,996
Cash and cash equivalents - end of year $1,185,080 $545,273
MASTERCARD INCORPORATED OPERATING PERFORMANCE
For the 3 Months ended December 31, 2006
Purchase Purchase Cash
GDV Growth Volume Growth Transactions Volume
(Billions) (Local) (Billions) (Local) (Millions) (Billions)
All MasterCard
Credit, Charge
and Debit
Programs
Asia / Pacific $77 6.8% $46 17.2% 588 $31
Canada 20 13.2% 18 14.0% 208 3
Europe 145 12.9% 108 13.8% 1,343 37
Latin America 37 24.8% 18 27.5% 374 19
South Asia /
Middle East
Africa 9 38.3% 5 32.0% 82 3
United States 244 14.5% 197 17.1% 3,060 48
Worldwide 532 13.8% 391 16.7% 5,655 140
MasterCard Credit
and Charge
Programs
United States 159 3.0% 135 5.8% 1,593 24
Worldwide 391 7.8% 308 11.5% 3,812 83
MasterCard Debit
Programs
United States 85 44.6% 61 53.4% 1,467 24
Worldwide 140 34.6% 83 40.8% 1,844 57
For the Year ended December 31, 2006
Purchase Purchase Cash
GDV Growth Volume Growth Transactions Volume
(Billions) (Local) (Billions) (Local) (Millions) (Billions)
All MasterCard
Credit, Charge
and Debit
Programs
Asia / Pacific $286 7.7% $166 16.4% 2,121 $120
Canada 75 14.2% 64 15.2% 768 11
Europe 520 13.9% 384 14.1% 4,989 136
Latin America 126 26.1% 60 29.0% 1,320 66
South Asia /
Middle East
Africa 30 46.0% 18 34.0% 288 12
United States 919 15.7% 725 17.3% 11,039 195
Worldwide 1,956 14.9% 1,417 16.9% 20,524 539
MasterCard Credit
and Charge
Programs
United States 610 6.0% 509 7.7% 5,912 102
Worldwide 1,455 9.9% 1,124 12.5% 14,009 331
MasterCard Debit
Programs
United States 309 41.3% 216 48.4% 5,127 93
Worldwide 501 32.5% 292 37.3% 6,516 208
For the 3 Months ended December 31, 2005
Purchase Purchase Cash
GDV Growth Volume Growth Transactions Volume
(Billions) (Local) (Billions) (Local) (Millions) (Billions)
All MasterCard
Credit, Charge
and Debit
Programs
Asia / Pacific $69 10.6% $38 15.1% 479 $31
Canada 17 12.7% 15 14.7% 186 2
Europe 119 14.5% 88 13.4% 1,213 31
Latin America 30 27.1% 14 29.9% 309 16
South Asia /
Middle East
Africa 7 53.3% 4 33.8% 67 2
United States 213 9.0% 168 11.9% 2,434 45
Worldwide 455 12.3% 327 13.7% 4,687 128
MasterCard Credit
and Charge
Programs
United States 154 5.1% 128 9.0% 1,511 26
Worldwide 353 10.4% 270 12.7% 3,439 83
MasterCard Debit
Programs
United States 59 20.8% 40 22.6% 923 19
Worldwide 102 19.3% 57 18.6% 1,247 45
For the Year ended December 31, 2005
Purchase Purchase Cash
GDV Growth Volume Growth Transactions Volume
(Billions) (Local) (Billions) (Local) (Millions) (Billions)
All MasterCard
Credit, Charge
and Debit
Programs
Asia / Pacific $262 8.7% $142 15.0% 1,773 $120
Canada 61 13.7% 52 16.0% 684 9
Europe 453 13.5% 334 13.7% 4,530 119
Latin America 98 32.3% 44 31.2% 1,073 54
South Asia /
Middle East
Africa 22 39.9% 14 28.3% 228 7
United States 795 11.6% 618 14.6% 9,004 177
Worldwide 1,690 13.0% 1,205 15.1% 17,291 485
MasterCard
Credit and
Charge
Programs
United States 576 5.1% 472 9.0% 5,597 104
Worldwide 1,314 9.4% 993 12.6% 12,669 321
MasterCard
Debit
Programs
United States 219 33.4% 146 37.2% 3,407 73
Worldwide 377 28.2% 212 28.5% 4,622 164
For the 3 Months ended December 31, 2006
Cash Acceptance
Growth Transactions Accounts Cards Locations
(Local) (Millions) (Millions) (Millions) (Millions)
All MasterCard
Credit, Charge and
Debit Programs
Asia / Pacific -6.0% 143 143 155 7.2
Canada 8.7% 5 26 32 0.7
Europe 10.2% 229 141 152 7.7
Latin America 22.4% 123 71 86 2.2
South Asia /
Middle East
Africa 49.0% 32 22 25 0.8
United States 5.0% 235 311 366 6.6
Worldwide 6.5% 766 714 817 25.3
MasterCard Credit
and Charge Programs
United States -10.1% 17 211 260
Worldwide -3.9% 281 563 656
MasterCard Debit
Programs
United States 26.1% 219 100 106
Worldwide 26.5% 485 152 161
For the Year ended December 31, 2006
Cash
Growth Transactions Accounts Cards
(Local) (Millions) (Millions) (Millions)
All MasterCard
Credit, Charge and
Debit Programs
Asia / Pacific -2.3% 548 143 155
Canada 8.3% 19 26 32
Europe 13.1% 878 141 152
Latin America 23.5% 456 71 86
South Asia /
Middle East
Africa 69.5% 107 22 25
United States 10.1% 924 311 366
Worldwide 10.0% 2,932 714 817
MasterCard Credit
and Charge Programs
United States -2.0% 65 211 260
Worldwide 1.8% 1,116 563 656
MasterCard Debit
Programs
United States 27.2% 859 100 106
Worldwide 26.3% 1,816 152 161
For the 3 Months ended December 31, 2005
Cash
Growth Transactions Accounts Cards
(Local) (Millions) (Millions) (Millions)
All MasterCard
Credit, Charge and
Debit Programs
Asia / Pacific 5.6% 131 132 144
Canada 1.0% 5 24 30
Europe 17.7% 208 120 129
Latin America 24.8% 109 62 74
South Asia /
Middle East
Africa 105.3% 20 16 18
United States -0.6% 192 279 331
Worldwide 8.9% 663 632 727
MasterCard Credit
and Charge Programs
United States -10.4% 17 208 254
Worldwide 3.6% 283 521 607
MasterCard Debit
Programs
United States 17.3% 175 72 77
Worldwide 20.4% 381 111 121
For the Year ended December 31, 2005
Cash
Growth Transactions Accounts Cards
(Local) (Millions) (Millions) (Millions)
All MasterCard
Credit, Charge and
Debit Programs
Asia / Pacific 2.0% 455 132 144
Canada 1.7% 19 24 30
Europe 12.8% 795 120 129
Latin America 33.3% 398 62 74
South Asia /
Middle East
Africa 70.3% 59 16 18
United States 2.5% 770 279 331
Worldwide 8.2% 2,496 632 727
MasterCard Credit
and Charge
Programs
United States -9.6% 67 208 254
Worldwide 0.3% 1,048 521 607
MasterCard Debit
Programs
United States 26.5% 703 72 77
Worldwide 27.8% 1,448 111 121
Note that the figures in the preceding tables may not sum due to rounding; growth represents change from the comparable year-ago period. Footnote Set forth above is information regarding the performance results for the three months and year ended December 31, 2006 and December 31, 2005 for the payment programs of MasterCard International Incorporated and MasterCard Europe sprl (collectively, "MasterCard"), the principal operating subsidiaries of MasterCard Incorporated. The tables set forth the gross dollar volume ("GDV"), purchase volume, cash volume and the number of purchase transactions, cash transactions, accounts, cards and acceptance locations on a regional and global basis for MasterCard(R)-branded and MasterCard Electronic(TM)-branded cards. Growth rates over prior periods are provided for volume-based data. Debit transactions on Maestro(R) and Cirrus(R)-branded cards, Mondex(R) transactions and transactions involving brands other than MasterCard are not included in the preceding tables. For purposes of the table: GDV represents purchase volume plus cash volume and includes the impact of balance transfers and convenience checks; "purchase volume" means the aggregate dollar amount of purchases made (including PIN point-of-sale) with MasterCard-branded cards for the relevant period; and "cash volume" means the aggregate dollar amount of cash disbursements obtained with MasterCard-branded cards for the relevant period. The number of cards includes virtual cards, which are MasterCard-branded payment accounts in connection with which functional cards are not generally issued. Acceptance locations include merchant locations, ATMs and other locations where cash may be obtained. The MasterCard payment product is comprised of credit, charge and debit programs, and data relating to each type of program is included in the tables. Debit programs include MasterCard-branded debit programs where the primary means of cardholder validation at the point of sale is for cardholders either to sign a sales receipt or enter a Personal Identification Number (PIN). Information denominated in U.S. dollars is calculated by applying an established U.S. dollar/local currency exchange rate for each local currency in which MasterCard volumes are reported. These exchange rates are calculated on a quarterly basis using the average exchange rate for each quarter. However, MasterCard reports period-over-period rates of change in GDV, purchase volume and cash volume solely on the basis of local currency information, in order to eliminate the impact of changes in the value of foreign currencies against the U.S. dollar in calculating such rates of change. The data set forth in the GDV, purchase volume, purchase transactions, cash volume and cash transactions columns is derived from information provided by MasterCard members that is subject to verification by MasterCard and partial cross-checking against information provided by MasterCard's transaction processing systems. The data set forth in the accounts, cards and acceptance locations columns is derived from information provided by MasterCard members and is subject to certain limited verification by MasterCard. Certain information with respect to acceptance locations is provided by third parties and has not been independently verified by MasterCard. All data is subject to revision and amendment by MasterCard's members subsequent to the date of its release. A portion of the data set forth in the accounts and cards columns reflects the impact of routine portfolio changes among members and other practices that may lead to over counting of the underlying data in certain circumstances. The table includes information with respect to transactions involving MasterCard-branded cards that are not processed by MasterCard and transactions for which MasterCard does not earn significant revenues, including PIN point- of-sale volumes for MasterCard-branded debit programs in the U.S. region and credit programs in the Asia/Pacific region. Performance information for prior periods may be found in the "Investor Relations" section of MasterCard's website at http://www.mastercard.com/. Reconciliation to Net Income, Earnings Per Share and Total Operating
Expenses
($ million) For the three months ended 12/31/06
Special As
Actual Items Adjusted
Revenues, net $839 - $839
Operating Expenses
General and administrative 399 - 399
Advertising and marketing 353 - 353
Litigation settlements 2 2 a -
Charitable contributions to the
MasterCard Foundation 14 - 14 b
Depreciation and amortization 25 - 25
Total operating expenses 793 2 791
Operating income (expense) 46 2 48
Operating Margin 5.5% - 5.7%
Other Income (Expense)
Investment income, net 41 - 41
Interest expense (17) - (17)
Other income, net - - -
Total other income 24 - 24
Income (loss) before income taxes 70 2 72
Income tax expense (benefit) 29 1 30
Net Income (loss) $41 1 $42
Basic Net Income (Loss) per Share $0.30 $0.01 $0.31
Diluted Net Income (Loss) per Share $0.30 $0.01 $0.31
For the three months ended YOY
($ million) 12/31/05 Growth
Special As As
Actual Items Adjusted Adjusted
Revenues, net $716 - $716 17.2%
Operating Expenses
General and administrative 375 - 375 6.4%
Advertising and marketing 386 - 386 (8.5%)
Litigation settlements 27 27 a - NM
Charitable contributions to the
MasterCard Foundation - - - NM
Depreciation and amortization 26 - 26 (3.8%)
Total operating expenses 814 27 787 0.5%
Operating income (expense) (98) 27 (71) 167.6%
Operating Margin (13.7%) - (9.9%) NM
Other Income (Expense)
Investment income, net 21 - 21 95.2%
Interest expense (18) - (18) (5.6%)
Other income, net 7 - 7 NM
Total other income 10 - 10 140.0%
Income (loss) before income taxes (88) 27 (61) 218.0%
Income tax expense (benefit) (35) 9 (26) NM
Net Income (loss) ($53) $18 ($35) 218.5%
Basic Net Income (Loss) per Share ($0.39) $0.13 ($0.26) 218.5%
Diluted Net Income (Loss) per Share ($0.39) $0.13 ($0.26) 218.5%
($ million) For the year ended 12/31/06
Special As
Actual Items Adjusted
Revenues, net $3,326 - $3,326
Operating Expenses
General and administrative 1,505 - 1,505
Advertising and marketing 1,052 - 1,052
Litigation settlements 25 25 a -
Charitable contributions to the
MasterCard Foundation 415 395 d 20 b
Depreciation and amortization 100 - 100
Total operating expenses 3,097 420 2,677
Operating income 229 420 649
Operating Margin 6.9% - 19.5%
Other Income (Expense)
Investment income, net 125 (7)e 118
Interest expense (61) - (61)
Other income, net 1 - 1
Total other income (expense) 65 (7) 58
Income before income taxes 294 413 707
Income tax expense 244 6 250
Net Income $50 $407 $457
Basic Net Income per Share $0.37 $3.00 $3.37
Diluted Net Income per Share $0.37 $3.00 $3.37
($ million) For the year ended 12/31/05 YOY
Growth
Special As As
Actual Items Adjusted Adjusted
Revenues, net $2,938 - $2,938 13.2%
Operating Expenses
General and administrative 1,352 19 c 1,333 12.9%
Advertising and marketing 1,008 - 1,008 4.4%
Litigation settlements 75 75 a - NM
Charitable contributions to the
MasterCard Foundation - - - NM
Depreciation and amortization 110 - 110 (9.1%)
Total operating expenses 2,545 94 2,451 9.2%
Operating income 393 94 487 33.3%
Operating Margin 13.4% - 16.6% 2.9 ppt
Other Income (Expense)
Investment income, net 61 - 61 93.4%
Interest expense (70) - (70) (12.9%)
Other income, net 23 (17)f 6 (83.3%)
Total other income (expense) 14 (17) (3) NM
Income before income taxes 407 77 484 46.1%
Income tax expense 140 27 167 49.9%
Net Income $267 $50 $317 44.2%
Basic Net Income per Share $1.98 $0.37 $2.35 43.4%
Diluted Net Income per Share $1.98 $0.37 $2.35 43.4%
a Litigation settlements
b Contribution of cash to the MasterCard Foundation
c Adjustment to reflect accounting methodology change for cash-
based executive incentive plans
d Contribution of common stock to the MasterCard Foundation
e Interest income on IPO proceeds which were used for redemption
f Gains from the settlement of a contractual dispute
NM = not meaningful
Reconciliation to Effective Tax Rate
GAAP Non-GAAP
GAAP Effective Stock Non-GAAP Effective
Actual Tax Rate Donation Adjusted Tax Rate
Twelve months ended
December 31, 2006:
Income before income
taxes $294 82.9% $395 $689 35.4%
Income tax expense (1) 244 244
Net Income $50 $445
(1) Income tax expense has been calculated with and without the impact of
the stock donation to the Foundation.
For more information about these reconciliations, refer to MasterCard Incorporated's Form 8-K furnished with the Securities and Exchange Commission on February 9, 2007. Website: http://www.mastercard.com/ |
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