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MasterCard Incorporated Reports First-Quarter 2007 Financial Results- Record quarterly net income up 69.6% to $215 million, or $1.57 per share, on a diluted basis
PURCHASE, N.Y., May 2 /PRNewswire-FirstCall/ -- MasterCard Incorporated (NYSE: MA) today announced financial results for the first-quarter 2007. For the quarter, the company reported net income of $215 million, or $1.57 per share, on a diluted basis, the highest quarterly net income ever recorded by the company. Net revenues for the quarter were $915 million, a 23.9% increase versus the same period in 2006. Currency fluctuation (driven by the movement of the euro relative to the US dollar) contributed approximately 2.5% of the increase in revenues for the quarter. Fueling the higher revenue in the first quarter versus the same period in 2006 was growth in MasterCard's gross dollar volume (GDV), which increased 16.4%, on a local currency basis, to $509 billion; a 19.4% increase in the number of transactions processed to 4.2 billion; and, a restructuring of pricing, primarily cross-border transaction fees implemented in April 2006, which contributed approximately 5% of the revenue growth. Worldwide purchase volume rose 18.0%, on a local currency basis, during the quarter to $375 billion, driven by increased cardholder spending on a growing number of MasterCard cards. As of March 31, 2007, the company's customers had issued 835 million MasterCard cards, an increase of 11.3% percent over the cards issued at March 31, 2006. "We are very pleased with our first-quarter financial results, which reflect the highest quarterly net income in MasterCard's history," said Robert W. Selander, MasterCard president and chief executive officer. "These results continue to demonstrate the strength of our business model and growth in electronic forms of payment. Additionally, positive secular trends and business momentum, particularly in international markets, have contributed to a strong start to the year. "This quarter's strong volume growth, especially in markets within the South Asia/Middle East/Africa and Latin America regions, illustrates the success of our strategy and our ability to leverage our unique assets - our unified global structure, world renowned brands and advanced processing network -- worldwide," said Selander. Total operating expenses increased 8.2%, to $601 million during the first quarter of 2007 compared to the same period in 2006. This was primarily driven by an increase in personnel costs related to the hiring of additional staff to strengthen the company's capability to add value to its customers' businesses, and higher professional fees primarily related to legal costs to defend outstanding litigation. Offsetting this increase was a 2.3% decrease in advertising and market development expenses reflecting a shift in planned spending to later quarters this year. Currency fluctuation contributed approximately 1.9% of the increase in expenses for the quarter. Total other income was $22 million in the first quarter 2007 versus $10 million in the first quarter of 2006. The increase was primarily driven by a $16 million increase in investment income due to higher rates earned on higher cash and short-term investment balances. MasterCard's effective tax rate of 36.0% for the three months ended March 31, 2007 versus the 34.3% rate experienced in the same period in 2006, increased primarily due to state income tax expense. First-Quarter 2007 Financial Results Conference Call Details At 9:00 a.m. EDT today, the company will host a conference call to discuss its first-quarter financial results. The dial-in information for this call is 866-700-0133 (within the US) and 617-213-8831 (outside the US) and the passcode is 48239905. A replay of the call will be available for one week following the meeting. The replay can be accessed by dialing 888-286-8010 (within the US) and 617-801-6888 (outside the US) and using passcode 53583938. The live call and 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 demonstrate the strength of its business model
and continued growth in electronic forms of payment
-- continued positive secular trends and business momentum, particularly
in international markets; and
-- the company's ability to illustrate the success of its strategy and
leverage its unified global structure, world renowned brands and
advanced processing network worldwide.
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, 2006 and Current Reports on Form 8-K that it has filed with the SEC during 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
(UNAUDITED)
Three Months
Ended March 31,
2007 2006
(In thousands, except per share data)
Revenues, net $915,103 $738,453
Operating Expenses
General and administrative 398,526 347,837
Advertising and market development 178,451 182,683
Depreciation 12,054 10,650
Amortization 12,134 14,570
Total operating expenses 601,165 555,740
Operating income 313,938 182,713
Other Income (Expense)
Investment income, net 36,248 20,692
Interest expense (14,356) (10,640)
Other income/(expense), net (40) 152
Total other income/(expense) 21,852 10,204
Income before income taxes 335,790 192,917
Income tax expense 120,884 66,173
Net Income $214,906 $126,744
Basic Net Income per Share $1.58 $.94
Basic Weighted Average Shares Outstanding 135,847 134,969
Diluted Net Income per Share $1.57 $.94
Diluted Weighted Average Shares Outstanding 136,594 134,969
MASTERCARD INCORPORATED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
2007 2006
(In thousands, except share data)
ASSETS
Cash and cash equivalents $1,209,819 $1,185,080
Investment securities, at fair value:
Trading 5,050 12,261
Available-for-sale 1,294,300 1,286,580
Accounts receivable 450,372 451,261
Settlement due from members 275,709 311,953
Restricted security deposits held for members 112,371 109,897
Prepaid expenses 163,541 130,849
Other current assets 97,385 89,348
Total Current Assets 3,608,547 3,577,229
Property, plant and equipment, at cost
(less accumulated depreciation of
$227,263 and $220,720) 258,032 252,731
Deferred income taxes 274,434 216,782
Goodwill 220,291 217,013
Other intangible assets (less accumulated
amortization of $320,269 and $309,110) 281,806 271,373
Municipal bonds held-to-maturity 192,989 193,477
Prepaid expenses 263,239 235,654
Other assets 106,815 118,211
Total Assets $5,206,153 $5,082,470
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $231,443 $278,656
Settlement due to members 223,970 286,059
Restricted security deposits held for members 112,371 109,897
Obligations under U.S. merchant lawsuit and
other litigation settlements - current 117,275 117,275
Accrued expenses 802,747 936,427
Other current liabilities 123,937 83,276
Total Current Liabilities 1,611,743 1,811,590
Deferred income taxes 66,822 66,198
Obligations under U.S. merchant lawsuit and
other litigation settlements 368,869 359,640
Long-term debt 229,685 229,668
Other liabilities 323,168 246,395
Total Liabilities 2,600,287 2,713,491
Commitments and Contingencies
Minority interest 4,620 4,620
Stockholders' Equity
Class A common stock, $.0001 par value;
authorized 3,000,000,000 shares,
79,748,393 and 79,631,983 shares issued
and outstanding, respectively 8 8
Class B common stock, $.0001 par value;
authorized 1,200,000,000 shares,
55,337,407 shares issued and outstanding,
respectively 6 6
Class M common stock, $.0001 par value,
authorized 1,000,000 shares, 1,636
and 1,600 shares issued and outstanding,
respectively - -
Additional paid-in capital 3,275,350 3,289,879
Accumulated deficit (793,115) (1,029,196)
Accumulated other comprehensive income,
net of tax:
Cumulative foreign currency translation
adjustments 133,347 119,655
Defined benefit pension and other
postretirement plans (9,683) (11,402)
Investment securities available-for-sale (2,600) (3,065)
Derivatives accounted for as hedges (2,067) (1,526)
Total accumulated other comprehensive
income, net of tax 118,997 103,662
Total Stockholders' Equity 2,601,246 2,364,359
Total Liabilities and Stockholders' Equity $5,206,153 $5,082,470
MASTERCARD INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months
Ended March 31,
2007 2006
(In thousands)
Operating Activities
Net income $214,906 $126,744
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 24,188 25,220
Share based compensation 8,425 -
Deferred income taxes 19,444 6,723
Taxes related to share based compensation (6,000) -
Excess tax benefit on share based compensation (3,761) -
Accretion of imputed interest on litigation
settlements 9,229 10,382
Other 2,396 3,138
Changes in operating assets and liabilities:
Trading securities 7,211 3,958
Accounts receivable 4,037 25,995
Settlement due from members 40,211 20,682
Prepaid expenses (31,694) (24,077)
Other current assets (11,496) 8,909
Prepaid expenses, long-term (25,971) (648)
Accounts payable (48,082) (12,706)
Settlement due to members (65,616) (20,149)
Accrued expenses (78,428) (143,724)
Net change in other assets and liabilities 11,975 10,189
Net cash provided by operating activities 70,974 40,636
Investing Activities
Purchases of property, plant and equipment (16,855) (5,625)
Capitalized software (19,248) (6,852)
Purchases of investment securities
available-for-sale (1,022,330) (739,626)
Proceeds from sales and maturities of
investment securities available-for-sale 1,013,249 654,148
Other investing activities 1,077 (37)
Net cash used in investing activities (44,107) (97,992)
Financing Activities
Dividends paid (12,157) -
Excess tax benefit on share based
compensation 3,761 -
Net cash used in financing activities (8,396) -
Effect of exchange rate changes on cash and
cash equivalents 6,268 6,875
Net increase (decrease) in cash and cash
equivalents 24,739 (50,481)
Cash and cash equivalents - beginning
of period 1,185,080 545,273
Cash and cash equivalents - end of period $1,209,819 $494,792
Non-Cash Financing Activities:
Dividends declaration $20,715 -
MASTERCARD INCORPORATED OPERATING PERFORMANCE
For the 3 Months ended March 31, 2007
All MasterCard Credit, Purchase Purchase
Charge and Debit GDV Growth Growth Vol. Growth Trans.
Programs (Bil.) (USD) (Local) (Bil.) (Local) (Mil.)
Asia Pacific $69 18.5% 15.1% $47 20.2% 586
Canada 18 12.7% 14.2% 15 13.7% 188
Europe 141 25.0% 15.2% 104 15.9% 1,276
Latin America 34 21.8% 23.9% 16 26.7% 354
South Asia / Middle
East / Africa 9 36.0% 47.0% 5 35.3% 81
United States 237 15.7% 15.7% 187 18.0% 2,924
Worldwide 509 19.1% 16.4% 375 18.0% 5,408
MasterCard Credit & Charge
Programs
United States 148 4.3% 4.3% 124 7.7% 1,423
Worldwide less
United States 218 20.9% 15.6% 167 18.6% 2,120
Worldwide 366 13.6% 10.8% 291 13.7% 3,544
MasterCard Debit Programs
United States 90 41.0% 41.0% 63 45.3% 1,501
Worldwide less
United States 53 28.4% 23.5% 20 14.5% 364
Worldwide 142 36.1% 34.0% 83 36.3% 1,864
All MasterCard,
Credit Charge Cash Cash Acceptance
and Debit Volume Growth Trans. Accounts Card Locations
Programs (Bil.) (Local) (Mil.) (Mil.) (Mil.) (Mil.)
Asia Pacific $22 5.8% 123 147 160 6.6
Canada 3 16.8% 5 27 33 0.7
Europe 36 13.4% 223 146 156 7.8
Latin America 18 21.5% 120 74 89 2.3
South Asia / Middle
East / Africa 4 65.3% 35 24 27 0.8
United States 51 8.1% 240 315 370 6.8
Worldwide 134 12.1% 746 733 835 25.1
MasterCard Credit
& Charge Programs
United States 24 -10.2% 16 217 267
Worldwide less
United States 51 6.7% 242 363 406
Worldwide 75 0.7% 257 580 673
MasterCard Debit
Programs
United States 27 32.0% 224 98 103
Worldwide less
United States 32 29.8% 264 55 59
Worldwide 59 30.8% 489 153 162
For the 3 Months ended March 31, 2006
All MasterCard Credit, Purchase Purchase
Charge and Debit GDV Growth Growth Vol. Growth Trans.
Programs (Bil.) (USD) (Local) (Bil.) (Local) (Mil.)
Asia Pacific $58 4.6% 6.9% $38 14.3% 476
Canada 16 24.4% 17.3% 14 18.3% 168
Europe 113 7.1% 15.6% 83 15.4% 1,133
Latin America 28 37.4% 27.9% 13 31.1% 294
South Asia / Middle
East / Africa 7 50.5% 53.3% 4 33.5% 64
United States 205 13.1% 13.1% 158 14.7% 2,343
Worldwide 427 12.3% 14.3% 310 15.8% 4,478
MasterCard Credit
and Charge Programs
United States 142 7.6% 7.6% 115 9.3% 1,331
Worldwide less
United States 181 10.7% 14.5% 135 17.4% 1,820
Worldwide 322 9.3% 11.4% 250 13.5% 3,151
MasterCard Debit Programs
United States 64 27.9% 27.9% 43 31.8% 1,013
Worldwide less
United States 41 15.6% 20.0% 17 13.8% 314
Worldwide 105 22.8% 24.7% 60 26.3% 1,327
All MasterCard, Credit Cash Cash
Charge and Debit Volume Growth Trans. Accounts Card
Programs (Bil.) (Local) (Mil.) (Mil.) (Mil.)
Asia Pacific $20 -4.7% 103 133 146
Canada 3 12.3% 5 24 30
Europe 29 16.2% 200 124 134
Latin America 15 25.3% 106 65 77
South Asia / Middle
East / Africa 3 102.1% 22 17 20
United States 47 8.1% 205 290 344
Worldwide 117 10.7% 640 654 751
MasterCard Credit
and Charge Programs
United States 27 0.4% 16 210 257
Worldwide less
United States 45 6.8% 227 322 361
Worldwide 72 4.4% 243 531 618
MasterCard Debit Programs
United States 20 20.2% 189 80 86
Worldwide less
United States 25 24.5% 208 42 46
Worldwide 45 22.5% 397 122 133
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 ended March 31, 2007 and March 31, 2006 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 Personal Identification Number (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 PIN. The tables include 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. 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 purchase volume and cash volume 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. GDV and cash volume in the Asia Pacific region for the three months ended March 31, 2007 are lower due to management's decision to no longer include commercial funds transfers in China, which are generally transactions that facilitate the transfer of funds between bank branches, but do not involve traditional cash withdrawals or balance transfers, in the calculation of GDV. Data for the comparable period in 2006 has been restated to be consistent with this approach. Performance information for prior periods may be found in the "Investor Relations" section of MasterCard's website at http://www.mastercard.com/. Website: http://www.mastercard.com/ |
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