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MasterCard Incorporated Reports Third-Quarter 2007 Financial Results- Net income up 62.9% to $314 million, or $2.31 per share, on a diluted basis (including $0.51 from gains on partial sale of Redecard investment)
PURCHASE, N.Y., Oct. 31 /PRNewswire-FirstCall/ -. MasterCard Incorporated (NYSE: MA) today announced financial results for third-quarter 2007. For the quarter, the company reported quarterly net income of $314 million, or $2.31 per share on a diluted basis, which includes after-tax gains of $70 million or $0.51 per share on a diluted basis from the partial sale of the company's investment in Redecard S.A. in Brazil. Net revenues for the quarter were a record, at $1.08 billion, a 20.1% increase versus the same period in 2006. Currency fluctuation (driven by the movement of the euro relative to the US dollar) contributed approximately 2.3% of the increase in revenues for the quarter. Fueling the higher revenue in the third quarter versus the same period in 2006 was growth in MasterCard's gross dollar volume (GDV), which increased 12.8% on a local currency basis, to $577 billion; a 13.3% increase in the number of transactions processed to 4.8 billion; and, an increase in cross- border volumes of 20.6%. Worldwide purchase volume rose 14.1%, on a local currency basis, during the quarter to $430 billion, driven by increased cardholder spending on a growing number of MasterCard cards. As of September 30, 2007, the company's customers had issued 878 million MasterCard cards, an increase of 11.3% over the cards issued at September 30, 2006. "Our solid performance illustrates the strength of our diverse, global business," said Robert W. Selander, MasterCard president and chief executive officer. "We continue to benefit from positive secular trends and outstanding growth in international and emerging markets such as South Asia/Middle East/Africa and Latin America. "As a unified global company, one of our strongest assets is our ability to align with our customers anywhere worldwide. As our business continues to grow, we are committed to delivering best-in-class dedicated customer account teams, and to finding the right talent to help MasterCard, and our customers, win in the marketplace," said Selander. Total operating expenses increased 16.3%, to $730 million, in the third quarter of 2007 compared to the same period in 2006. This increase was primarily driven by higher advertising and market development expenses in the quarter, which increased 26.4%, to $264 million, resulting from a change in the timing of 2007 initiatives compared to the same period last year. The first half of 2006 had significant World Cup sponsorship activity versus this year, where a planned shift in spending to the second half of 2007 had been anticipated. General and administrative expenses increased 10.2%, to $433 million, in the third quarter. This increase was primarily driven by personnel costs related to hiring of additional staff and contractors to support the company's customers as well as increased performance incentive accruals. The increase in total operating expenses was also driven by a $10 million cash contribution to the MasterCard Foundation. Currency fluctuation contributed 1.6% of the growth in total operating expenses for the quarter. Total other income was $129 million in the third quarter of 2007 versus $17 million in the same period in 2006. The improvement was driven by a $112 million increase in investment income primarily due to gains realized from the sale of 25% of the company's investment in Redecard S.A. in Brazil. Redecard gains contributed $0.51 per share on a diluted basis to the quarterly earnings per share of $2.31. MasterCard's effective tax rate was 34.8% in the three months ended September 30, 2007, versus 33.9% in the comparable period in 2006. The year- over-year difference was due to an increase in state income tax liabilities for uncertain tax positions as required under provisions of the recently adopted Financial Accounting Standards Board Interpretation No. 48 ("FIN 48"). Year-to-Date 2007 Results For the nine months ended September 30, 2007, MasterCard reported net income of $782 million or $5.73 per share, on a diluted basis, including the impact of special items. Excluding the impact of special items, the company reported net income of $724 million, or $5.31 per share, on a diluted basis. The company's total operating expenses, total other income, effective tax rate, net income and earnings per share, excluding special items, are non-GAAP financial measures that are reconciled to their most directly comparable GAAP measures in the accompanying financial tables. Special items for the nine months ended September 30, 2007 included:
- A $3.4 million reserve recorded for a litigation settlement; and
- $90 million in other income related to a settlement received under an
agreement to discontinue the company's sponsorship of the 2010 and 2014
World Cup soccer events.
Special items for the nine months ended September 30, 2006 included:
- A $395 million non-cash expense, 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
initial public offering in May 2006, which was not deductible for tax
purposes;
- A $23 million reserve recorded for litigation settlements; and
- $7 million in interest income earned on IPO proceeds, ultimately used
for redemption of shares of Class B common stock.
Net revenue for the nine months ended September 30, 2007 was approximately $3 billion, a 20.4% increase versus the same period in 2006. In addition to growth in GDV and processed transactions, this increase was driven by a restructuring of pricing, including cross-border transaction pricing implemented in April 2006. Currency fluctuation contributed approximately 2.3% of the increase in revenues in the year-to-date period. Total operating expenses increased 9.1%, to $2.1 billion, for the nine- month period compared to the same period in 2006, excluding special items for both periods. Including special items, operating expenses decreased 10.6%, to $2.1 billion. Currency fluctuation contributed approximately 1.2% growth in total operating expenses in the year-to-date period. Total other income was $268 million for the nine-month period versus $41 million for the same period in 2006, on a GAAP basis in both periods. The year-over-year difference was driven by a $135 million increase in investment income primarily due to gains realized from the sale of 25% of the company's investment in Redecard S.A. in Brazil. Redecard gains contributed $0.51 per share on a diluted basis to the earnings per share of $5.73 for the nine months ended September 30, 2007. Additionally, other income increased $91 million primarily related to a settlement received under an agreement to discontinue the company's sponsorship of the 2010 and 2014 World Cup soccer events. MasterCard's GAAP effective tax rate was 35.1% in the nine months ended September 30, 2007, versus the non-GAAP rate of 34.6% in the comparable period in 2006. MasterCard's GAAP effective tax rate in 2006 was significantly impacted by the share donation to the MasterCard Foundation. The year-over- year difference, excluding the effects of the donation, was due to the effect of a New York state tax law change and a net increase in the accrual of income tax liabilities for uncertain tax positions as required under provisions of the recently adopted FIN 48. Class A Share Repurchase Update and Additional Class A Share Repurchase In April 2007, the Company's Board of Directors authorized a plan for the Company to repurchase up to $500 million of its Class A common stock in open market transactions during 2007. As of September 30, 2007, approximately 2.0 million shares of Class A common stock had been repurchased at a cost of $277 million. Subsequent to September 30, 2007, the Company repurchased an additional 1.4 million shares of its Class A common stock at a cost of $223 million, completing the initial $500 million repurchase plan. On October 29, 2007, the Company's Board of Directors amended the share repurchase plan to authorize the Company to repurchase an incremental $750 million, for an aggregate of the entire repurchase program of $1.25 billion of Class A common stock in open market transactions on or prior to June 30, 2008. "Our continued strong business results and cash position have enabled us to fund an incremental $750 million Class A repurchase program," said Chris A. McWilton, chief financial officer. "This program demonstrates our commitment to enhance shareholder value and is in addition to the $500 million share repurchase program approved by our Board and completed earlier this year." Class B Share Conversion Update In April 2007, MasterCard announced that its Board of Directors had approved plans for certain accelerated Class B share conversions subject to shareholder approval of changes to the company's corporate charter. In June, after receiving shareholder approval at its Annual Meeting, the company announced that current holders of Class B common stock who elected to participate would be eligible in 2007 to convert up to an aggregate of 13.4 million shares of Class B common stock on a one-for-one basis into shares of Class A common stock for subsequent sale to public investors. The first election window for this conversion program extended from August 4, 2007 through October 5, 2007. As of September 30, 2007, approximately 5.0 million shares of Class B common stock had been converted into Class A common stock as part of the initial conversion program. Subsequent to September 30, 2007, an additional 2.6 million shares of Class B common stock were converted into Class A common stock, for a total of 7.6 million shares converted during the initial share conversion window. In October 2007, the Company's Board of Directors approved a second program for 2007, allowing for the conversion of the balance of the initially approved 13.4 million shares, or up to 5.8 million shares of Class B into Class A common stock. The election window for this conversion program will begin on November 17, 2007 and end no later than December 14, 2007. Third-Quarter 2007 Financial Results Conference Call Details At 9:00 a.m. EDT today, the company will host a conference call to discuss its third-quarter financial results. The dial-in information for this call is 800-291-9234 (within the US) and 617-614-3923 (outside the US) and the passcode is 81716198. A replay will be available for one week following the conference call. The replay can be accessed by dialing 888-286-8010 (within the US) and 617-801-6888 (outside the US) and using passcode 29891515. The live call and replay, along with supporting materials, can also be accessed through the Investor Relations section of the company's website at 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 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 performance illustrating the strength of its diverse,
global business;
- the company's ability to benefit from positive secular trends and
growth in international and emerging markets;
- the company's ability to align with its customers;
- the company's ability to deliver on its commitment of best-in-class
dedicated customer account teams;
- the company's ability to locate appropriate talent to help MasterCard
and its customers;
- the company's business results and cash position enabling it to fund an
incremental repurchase program;
- the company's ability to deliver on its commitment to enhance
shareholder value.
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, the Company's Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that have been 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 Nine Months
Ended September 30, Ended September 30,
2007 2006 2007 2006
(In thousands, except per share data)
Revenues, net $1,082,850 $901,969 $2,994,912 $2,486,911
Operating Expenses
General and administrative 432,848 392,883 1,262,838 1,105,881
Advertising and market
development 264,425 209,187 711,128 698,936
Litigation settlements - - 3,400 23,250
Charitable contributions to
the MasterCard Foundation 10,000 - 10,000 400,285
Depreciation and amortization 22,274 25,139 71,490 75,052
Total operating expenses 729,547 627,209 2,058,856 2,303,404
Operating income 353,303 274,760 936,056 183,507
Other Income (Expense)
Investment income, net 146,322 34,398 219,036 84,089
Interest expense (16,439) (16,757) (41,964) (43,465)
Other income (expense), net (879) (292) 91,268 303
Total other income
(expense) 129,004 17,349 268,340 40,927
Income before income taxes 482,307 292,109 1,204,396 224,434
Income tax expense 167,846 99,105 422,743 215,146
Net Income $314,461 $193,004 $781,653 $9,288
Basic Net Income per Share $2.32 $1.42 $5.76 $.07
Basic Weighted Average Shares
Outstanding 135,357 135,684 135,687 135,312
Diluted Net Income per Share $2.31 $1.42 $5.73 $.07
Diluted Weighted Average
Shares Outstanding 136,228 136,134 136,502 135,511
MASTERCARD INCORPORATED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
2007 2006
(In thousands, except share data)
ASSETS
Cash and cash equivalents $1,687,423 $1,185,080
Investment securities, at fair value:
Trading 5,036 12,261
Available-for-sale 1,585,332 1,286,580
Accounts receivable 536,401 451,261
Settlement due from members 343,598 311,953
Restricted security deposits held for members 126,694 109,897
Prepaid expenses 167,363 130,849
Other current assets 29,483 89,348
Total Current Assets 4,481,330 3,577,229
Property, plant and equipment, at cost
(less accumulated depreciation of
$248,948 and $220,720) 280,370 252,731
Deferred income taxes 290,147 216,782
Goodwill 233,076 217,013
Other intangible assets
(less accumulated amortization of $340,376
and $309,110) 303,911 271,373
Municipal bonds held-to-maturity 192,488 193,477
Prepaid expenses 264,667 235,654
Other assets 88,991 118,211
Total Assets $6,134,980 $5,082,470
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $246,273 $278,656
Settlement due to members 287,929 286,059
Restricted security deposits held for members 126,694 109,897
Obligations under U.S. merchant lawsuit
and other litigation settlements - current 107,235 117,275
Accrued expenses 968,855 936,427
Short-term debt 80,000 -
Deferred income taxes 60,488 -
Other current liabilities 119,268 83,276
Total Current Liabilities 1,996,742 1,811,590
Deferred income taxes 69,888 66,198
Obligations under U.S. merchant lawsuit
and other litigation settlements 387,403 359,640
Long-term debt 149,747 229,668
Other liabilities 353,862 246,395
Total Liabilities 2,957,642 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,
84,833,813 and 79,631,983 shares issued,
respectively 9 8
Class B common stock, $.0001 par value;
authorized 1,200,000,000 shares,
50,341,491 and 55,337,407 shares issued
and outstanding, respectively 5 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 3,261,529 3,289,879
Class A treasury stock, at cost,
2,006,300 shares and no shares,
respectively (277,164) -
Accumulated deficit (226,368) (1,029,196)
Accumulated other comprehensive income,
net of tax:
Cumulative foreign currency translation
adjustments 191,512 119,655
Defined benefit pension and other
postretirement plans (9,675) (11,402)
Investment securities available-for-sale 234,895 (3,065)
Derivatives accounted for as hedges (2,025) (1,526)
Total accumulated other comprehensive income,
net of tax 414,707 103,662
Total Stockholders' Equity 3,172,718 2,364,359
Total Liabilities and Stockholders' Equity $6,134,980 $5,082,470
MASTERCARD INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months
Ended September 30,
2007 2006
(In thousands)
Operating Activities
Net income $781,653 $9,288
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 71,490 75,052
Gain on sale of Redecard S.A.
available-for-sale securities (107,042) -
Charitable contribution of common stock
to the MasterCard Foundation - 394,785
Share based payments 35,909 13,372
Deferred income taxes (8,170) 18,962
Taxes related to share based payments (11,193) -
Excess tax benefit on share based payments (7,598) -
Accretion of imputed interest on litigation
settlement 28,248 31,777
Other 8,855 7,440
Changes in operating assets and liabilities:
Trading securities 7,225 3,814
Accounts receivable (68,655) (90,419)
Settlement due from members (9,499) (10,589)
Prepaid expenses (32,657) 18,146
Other current assets (1,375) 9,503
Prepaid expenses, long-term (19,352) (4,253)
Litigation settlement accruals (10,525) (72,090)
Accounts payable (36,109) 5,695
Settlement due to members (18,038) 13,890
Accrued expenses 72,644 1,026
Net change in other assets and liabilities 41,852 21,384
Net cash provided by operating activities 717,663 446,783
Investing Activities
Purchases of property, plant and equipment (59,339) (38,599)
Capitalized software (52,322) (24,338)
Purchases of investment securities
available-for-sale (2,749,413) (2,525,682)
Proceeds from sales and maturities of
investment securities available-for-sale 2,928,342 2,349,978
Other investing activities 8,551 (881)
Net cash provided by (used in) investing
activities 75,819 (239,522)
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 (53,805) -
Cash proceeds from exercise of stock options 1,083 -
Excess tax benefit on share based payments 7,598 -
Purchases of treasury stock (277,164) -
Net cash (used in) provided by financing
activities (322,288) 649,973
Effect of exchange rate changes on cash
and cash equivalents 31,149 18,632
Net increase in cash and cash equivalents 502,343 875,866
Cash and cash equivalents -
beginning of period 1,185,080 545,273
Cash and cash equivalents - end of period $1,687,423 $1,421,139
MASTERCARD INCORPORATED OPERATING PERFORMANCE
For the 3 Months ended September 30, 2007
Purchase
All MasterCard Credit, GDV Growth Growth Volume Growth
Charge and Debit Programs (Bil.) (USD) (Local)(Bil.)(Local)
Asia Pacific $78 22.3% 17.1% $54 22.2%
Canada 23 21.2% 13.3% 20 14.0%
Europe 171 25.8% 16.1% 126 16.8%
Latin America 39 24.2% 20.2% 20 23.9%
South Asia / Middle East / Africa 11 41.3% 36.8% 6 29.0%
United States 256 7.7% 7.7% 205 9.4%
Worldwide 577 16.6% 12.8% 430 14.1%
MasterCard Credit and Charge
Programs
United States 164 5.3% 5.3% 139 7.1%
Worldwide less United States 258 24.3% 16.4% 201 19.2%
Worldwide 422 16.2% 11.8% 340 13.9%
MasterCard Debit Programs
United States 92 12.1% 12.1% 66 14.7%
Worldwide less United States 63 27.3% 20.8% 24 14.7%
Worldwide 155 17.8% 15.4% 91 14.7%
Purchase Cash Cash
All MasterCard Credit, Trans. Volume Growth Trans. Accounts Cards
Charge and Debit Programs (Mil.) (Bil.) (Local) (Mil.) (Mil.) (Mil.)
Asia Pacific 658 $24 7.2% 141 155 168
Canada 222 3 8.5% 5 28 34
Europe 1,459 45 14.1% 254 159 172
Latin America 393 19 16.7% 129 75 92
South Asia / Middle East /
Africa 87 5 48.0% 39 27 30
United States 3,225 51 1.0% 250 331 382
Worldwide 6,044 147 9.1% 817 775 878
MasterCard Credit and Charge
Programs
United States 1,602 25 -3.5% 18 228 274
Worldwide less United States 2,407 57 7.5% 262 387 434
Worldwide 4,008 82 3.9% 280 615 708
MasterCard Debit Programs
United States 1,624 26 5.9% 232 103 108
Worldwide less United States 412 39 24.9% 305 58 63
Worldwide 2,036 65 16.5% 537 161 170
All MasterCard Credit, Acceptance Locations
Charge and Debit Programs (Mil.)
Asia Pacific 6.8
Canada 0.7
Europe 8.0
Latin America 2.5
South Asia / Middle East / Africa 0.9
United States 7.0
Worldwide 25.9
MasterCard Credit and Charge
Programs
United States
Worldwide less United States
Worldwide
MasterCard Debit Programs
United States
Worldwide less United States
Worldwide
For the 9 Months ended September 30, 2007
Purchase
All MasterCard Credit, GDV Growth Growth Volume Growth
Charge and Debit Programs (Bil.) (USD) (Local)(Bil.)(Local)
Asia Pacific $220 20.3% 16.3% $150 21.1%
Canada 64 17.6% 14.3% 55 14.3%
Europe 469 24.7% 15.2% 347 15.8%
Latin America 111 24.6% 22.1% 55 24.9%
South Asia / Middle East / Africa 30 38.8% 41.5% 17 31.8%
United States 748 10.9% 10.9% 597 13.1%
Worldwide 1,642 17.4% 14.1% 1,220 15.6%
MasterCard Credit and Charge Programs
United States 474 5.1% 5.1% 401 7.4%
Worldwide less United States 718 22.4% 15.8% 555 18.5%
Worldwide 1,191 14.8% 11.3% 956 13.6%
MasterCard Debit Programs
United States 275 22.7% 22.7% 196 26.7%
Worldwide less United States 176 28.3% 22.1% 68 14.4%
Worldwide 450 24.8% 22.4% 264 23.3%
Purchase Cash Cash
All MasterCard Credit, Trans. Volume Growth Trans. Accounts Cards
Charge and Debit Programs (Mil.) (Bil.) (Local) (Mil.) (Mil.) (Mil.)
Asia Pacific 1,869 $70 7.1% 402 155 168
Canada 626 9 14.3% 15 28 34
Europe 4,127 122 13.6% 723 159 172
Latin America 1,122 56 19.4% 375 75 92
South Asia / Middle East /
Africa 252 13 56.0% 111 27 30
United States 9,342 151 3.1% 738 331 382
Worldwide 17,338 422 10.2% 2,363 775 878
MasterCard Credit and Charge
Programs
United States 4,603 73 -6.2% 51 228 274
Worldwide less United States 6,820 163 7.3% 762 387 434
Worldwide 11,423 236 2.8% 813 615 708
MasterCard Debit Programs
United States 4,739 78 13.5% 687 103 108
Worldwide less United States 1,176 108 27.4% 864 58 63
Worldwide 5,915 187 21.2% 1,551 161 170
For the 3 Months ended September 30, 2006
Purchase
All MasterCard Credit, GDV Growth Growth Volume Growth
Charge and Debit Programs (Bil.) (USD) (Local)(Bil.)(Local)
Asia Pacific $63 12.3% 10.7% $42 17.7%
Canada 19 21.2% 13.0% 17 13.7%
Europe 136 16.8% 13.1% 99 13.4%
Latin America 31 25.1% 25.3% 15 27.7%
South Asia / Middle East / Africa 8 38.2% 46.2% 5 34.0%
United States 238 17.1% 17.1% 187 18.5%
Worldwide 495 17.3% 15.8% 365 17.2%
MasterCard Credit and Charge
Programs
United States 155 4.9% 4.9% 129 6.5%
Worldwide less United States 208 16.3% 13.3% 158 16.3%
Worldwide 363 11.2% 9.6% 287 11.7%
MasterCard Debit Programs
United States 82 49.7% 49.7% 58 58.3%
Worldwide less United States 50 22.7% 20.3% 20 13.2%
Worldwide 132 38.3% 37.1% 78 43.7%
Purchase Cash Cash
All MasterCard Credit, Trans. Volume Growth Trans. Accounts Cards
Charge and Debit Programs (Mil.) (Bil.) (Local) (Mil.) (Mil.) (Mil.)
Asia Pacific 546 $22 -0.9% 117 140 153
Canada 199 3 9.1% 5 26 32
Europe 1,281 36 12.3% 228 135 144
Latin America 337 16 23.2% 115 70 83
South Asia / Middle East /
Africa 74 3 68.6% 29 21 24
United States 2,890 50 12.1% 244 301 353
Worldwide 5,327 130 11.9% 738 693 789
MasterCard Credit and Charge
Programs
United States 1,505 26 -2.2% 17 215 261
Worldwide less United States 2,077 50 4.9% 243 342 383
Worldwide 3,582 76 2.3% 260 557 644
MasterCard Debit Programs
United States 1,385 24 32.8% 227 87 93
Worldwide less United States 360 30 25.6% 250 50 53
Worldwide 1,745 54 28.7% 477 136 146
For the 9 Months ended September 30, 2006
Purchase
All MasterCard Credit, GDV Growth Growth Volume Growth
Charge and Debit Programs (Bil.) (USD) (Local)(Bil.)(Local)
Asia Pacific $183 9.0% 9.3% $120 16.1%
Canada 54 23.8% 14.5% 47 15.7%
Europe 376 12.5% 14.3% 277 14.3%
Latin America 89 30.0% 26.6% 42 29.7%
South Asia / Middle East / Africa 22 45.2% 49.6% 13 34.1%
United States 675 16.1% 16.1% 528 17.4%
Worldwide 1,398 15.6% 15.6% 1,026 16.9%
MasterCard Credit and Charge Programs
United States 451 7.1% 7.1% 373 8.4%
Worldwide less United States 587 14.0% 14.0% 442 16.8%
Worldwide 1,038 10.9% 10.9% 816 12.8%
MasterCard Debit Programs
United States 224 40.0% 40.0% 155 46.4%
Worldwide less United States 137 19.6% 20.3% 55 13.8%
Worldwide 361 31.5% 31.8% 210 36.1%
Purchase Cash Cash
All MasterCard Credit, Trans. Volume Growth Trans. Accounts Cards
Charge and Debit Programs (Mil.) (Bil.) (Local) (Mil.) (Mil.) (Mil.)
Asia Pacific 1,532 $63 -1.8% 329 140 153
Canada 559 8 8.2% 14 26 32
Europe 3,648 99 14.1% 649 135 144
Latin America 947 47 24.0% 333 70 83
South Asia / Middle East /
Africa 206 9 81.8% 75 21 24
United States 7,976 147 11.9% 688 301 353
Worldwide 14,869 373 12.1% 2,089 693 789
MasterCard Credit and Charge
Programs
United States 4,318 78 0.9% 49 215 261
Worldwide less United States 5,870 144 6.1% 710 342 383
Worldwide 10,188 222 4.2% 758 557 644
MasterCard Debit Programs
United States 3,658 69 27.5% 640 87 93
Worldwide less United States 1,023 82 25.1% 691 50 53
Worldwide 4,680 151 26.2% 1,331 136 146
Note that columns in the tables above may not add due to rounding; growth represents change from the comparable year-ago period. Footnote 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 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. 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 customers 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 customers 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 customers 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 customers and other practices that may lead to over counting of the underlying data in certain circumstances. In the three and nine months ended September 30, 2007, GDV excludes 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. Data for the comparable periods in 2006 have been updated to be consistent with this approach. Performance information for prior periods may be found in the "Investor Relations" section of MasterCard's website at www.mastercard.com.
Reconciliation to Total Operating Expenses, Total Other Income, Net
Income and Earnings Per Share
($ million) For the nine months ended 9/30/07
Special
Actual Items As Adjusted
Revenues, net $2,995 - $2,995
Operating Expenses
General and administrative 1,263 - 1,263
Advertising and marketing 711 - 711
Litigation settlements 3 3 a -
Charitable contributions to the
MasterCard Foundation 10 - 10 c
Depreciation and amortization 71 - 71
Total operating expenses 2,059 3 2,056
Operating income (expense) 936 3 939
Operating Margin 31.3% - 31.4%
Other Income (Expense)
Investment income, net 219 - 219
Interest expense (42) - (42)
Other income, net 91 90 e 1
Total other income (expense) 268 90 178
Income (loss) before income taxes 1,204 (87) 1,117
Income tax expense (benefit) 423 (30) 393
Net Income (loss) $782 ($57) $724
Basic Net Income (Loss) per Share $5.76 ($0.42) $5.34
Diluted Net Income (Loss) per Share $5.73 ($0.42) $5.31
($ million) For the nine months ended 9/30/06
Special YOY Growth
Actual Items As Adjusted As Adjusted
Revenues, net $2,487 - $2,487 20.4%
Operating Expenses
General and administrative 1,106 - 1,106 14.2%
Advertising and marketing 699 - 699 1.7%
Litigation settlements 23 23 a - NM
Charitable contributions to the
MasterCard Foundation 400 395 b 5 c 100.0%
Depreciation and amortization 75 - 75 (4.7%)
Total operating expenses 2,303 418 1,885 9.1%
Operating income (expense) 184 418 602 56.0%
Operating Margin 7.4% - 24.2% 7.2 ppt.
Other Income (Expense)
Investment income, net 84 (7)d 77 184.4%
Interest expense (43) - (43) 2.3%
Other income, net - - - NM
Total other income (expense) 41 (7) 34 423.5%
Income (loss) before income taxes 224 411 636 75.6%
Income tax expense (benefit) 215 - f 215 82.8%
Net Income (loss) $9 $411 $420 72.4%
Basic Net Income (Loss) per Share $0.07 $3.04 $3.11 71.7%
Diluted Net Income (Loss)
per Share $0.07 $3.04 $3.11 70.7%
a Litigation settlements
b Contribution of stock to the MasterCard Foundation
c Contribution of cash to the MasterCard Foundation
d Interest income on IPO proceeds held for redemption
e Other income related to a settlement agreement to discontinue the
company's sponsorship of the 2010 and 2014 World Cup soccer events
f Net tax effect of all special items for 2006 is negligible
NM = Not meaningful
Note that the figures in the preceding tables may not sum due to rounding
Reconciliation to Effective Tax Rate
Non-
GAAP Non- GAAP
GAAP Effective Stock GAAP Effective
Actual Tax Rate Donation Adjusted Tax Rate
Nine months ended
September 30, 2006:
Income before income taxes $224 95.9% $395 $619 34.6%
Income tax expense(1) 215 214
Net Income $9 $405
(1) Income tax expense has been calculated with and without the impact of
the stock donation to the Foundation.
Note that the figures in the preceding table may not sum due to rounding
For more information about these reconciliations, refer to MasterCard Incorporated's Form 8-K filed with the Securities and Exchange Commission on October 31, 2007. Website: http://www.mastercard.com/ |
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