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SMALL BUSINESS
MasterCard Incorporated Reports Third-Quarter 2008 Financial Results
- Quarterly net income of
- Quarterly net loss of
- Quarterly net revenue growth of 23.6%, to
- Gross dollar volume up 12.3%; purchase volume up 13.3%
(Logo: http://www.newscom.com/cgi-bin/prnh/20061031/MCLOGO )
Net revenue for the third quarter of 2008 was
- Growth in MasterCard's gross dollar volume, which increased 12.3%, on a local currency basis, to
$662 billion ; - A 13.0% increase in the number of transactions processed, to 5.4 billion;
- An increase in cross-border volumes of 18.0%; and
- Pricing changes, which contributed approximately 5 percentage points of the net revenue growth.
Worldwide purchase volume during the quarter rose 13.3% on a local currency basis, versus the third quarter of 2007, to
"We are very pleased with our third-quarter performance and our ability to deliver strong financial results given the declining global economy," said
Selander also noted: "As we are not immune from the long-term effects of the current economic environment, we have significantly accelerated the focus on our cost structure, while making sure we remain prudent in allocating resources to those investments that will enable us to drive growth worldwide, today and in the future. Our focus on our customers has never been more important as we work side by side with financial institutions to help them continue to develop the value of their payments businesses. Our account teams and MasterCard Advisors are helping our customers address risk management, reduce write-offs, improve segmentation efforts, and deliver more relevant messages to cardholders.
"Looking ahead, the long-term opportunity for MasterCard remains unchanged -- to displace cash and checks, and continue to advance commerce globally, creating long-term value for our customers, merchants and shareholders alike," said Selander.
The special item for the third quarter of 2008 represented:
- An
$827.5 million net pre-tax charge related to the antitrust litigation settlement between MasterCard and Discover Financial Services, which was announced onOctober 27, 2008 . On an after-tax basis, this equates to approximately$515.5 million .
Excluding the special item, total operating expenses increased 8.3%, to
- A 14.1% increase in general and administrative expenses, primarily resulting from higher personnel expenses due to new personnel and higher contractor costs, foreign currency transaction losses and increased litigation expenses. Currency fluctuations represented approximately 2.0 percentage points of the increase; and
- A 1.1% increase in advertising and marketing expenses versus the year-ago period, with approximately 3.0 percentage points of the increase primarily related to the impact of foreign currency fluctuations.
Including the special item, total operating expenses for the third quarter of 2008 increased 121.7% versus the year-ago period, to
Excluding the special item, the operating margin was 41.0% for the third quarter of 2008, up 8.4 percentage points over the year-ago period. Including the special item, the operating margin was a negative 20.9% for the third quarter of 2008.
Total other expense was
Excluding the special item, MasterCard's effective tax rate was 39.7% in the third quarter of 2008, versus 34.8% in the comparable period in 2007. The increase was primarily due to a tax charge for the remeasurement of deferred tax assets as a result of a change in the company's estimated effective state tax rate. Including the special item, the effective tax rate was 34.1% benefit and 34.8% expense for the third quarters of 2008 and 2007, respectively. The decrease in the effective tax rate was primarily due to the tax benefit related to the charge for the Discover settlement, partially offset by the tax charge for the remeasurement of deferred tax assets.
Year-to-Date 2008 Results
For the nine months ended
Special items for the nine months ended
$75 million pre-tax gain from the termination of a customer business agreement;- A
$1.65 billion pre-tax charge related to the antitrust litigation settlement between MasterCard and American Express; and - An
$827.5 million net pre-tax charge related to the Discover litigation settlement.
Special items for the nine months ended
- 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.
Net revenue for the nine months ended
Excluding special items for both periods, total operating expenses increased 11.3%, to
Excluding special items, the operating margin was 39.3% for the nine months ended
Total other income was
MasterCard's effective tax rate, excluding special items, was 36.6% in the nine months ended
Third-Quarter 2008 Financial Results Conference Call Details
At
The dial-in information for this call is 800-299-7635 (within the U.S.) and 617-786-2901 (outside the U.S.) and the passcode is 66633880. A replay of the call will be available for one week thereafter. 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 73000963.
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 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 18 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 ability to benefit from the continued migration of consumers, businesses, and governments to various forms of electronic payments;
- the company's ability to navigate through the current economic environment;
- the company's ability to manage and refine its cost structure to drive current and future growth;
- the company's ability to align and work with customers to help them continue to develop the value of their payments businesses;
- the company's ability to advance commerce globally and displace cash and checks; and
- the company's ability to deliver on its commitments to create long-term value for customers, merchants and 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
MASTERCARD INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Nine Months
Ended September 30, Ended September 30,
2008 2007 2008 2007
(In thousands, except per share data)
Revenues, net $1,338,178 $1,082,850 $3,766,766 $2,994,912
Operating Expenses
General and
administrative 493,740 432,848 1,435,089 1,262,838
Advertising
and marketing 267,460 264,425 769,737 711,128
Litigation
settlements 827,500 - 2,476,845 3,400
Charitable
contributions to
the MasterCard
Foundation - 10,000 - 10,000
Depreciation and
amortization 28,742 22,274 81,956 71,490
Total operating
expenses 1,617,442 729,547 4,763,627 2,058,856
Operating income
(loss) (279,264) 353,303 (996,861) 936,056
Other Income
(Expense)
Investment
income, net 22,626 146,322 163,081 219,036
Interest expense (36,319) (16,439) (67,075) (41,964)
Other income
(expense), net (715) (879) 72,582 91,268
Total other
Income (expense) (14,408) 129,004 168,588 268,340
Income (loss)
before income taxes (293,672) 482,307 (828,273) 1,204,396
Income tax expense
(benefit) (100,090) 167,846 (334,916) 422,743
Net Income (Loss) $(193,582) $314,461 $(493,357) $781,653
Basic Net Income
(Loss) per Share $(1.49) $2.32 $(3.79) $5.76
Basic Weighted
Average Shares
Outstanding 129,536 135,357 130,342 135,687
Diluted Net Income
(Loss) per Share $(1.49) $2.31 $(3.79) $5.73
Diluted Weighted
Average Shares
Outstanding 129,536 136,228 130,342 136,502
MASTERCARD INCORPORATED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
2008 2007
(In thousands, except share data)
ASSETS
Cash and cash equivalents $2,071,457 $1,659,295
Investment securities, at fair value:
Trading - 2,561
Available-for-sale 679,645 1,308,126
Municipal bonds held-to-maturity 154,000 -Accounts receivable 610,760 532,633
Income taxes receivable 256,469 -
Settlement due from customers 625,185 712,558
Restricted security deposits held for
customers 142,359 142,052
Prepaid expenses 261,334 156,258
Deferred income taxes 228,944 44,525
Other current assets 40,490 33,733
Total Current Assets 5,070,643 4,591,741
Property, plant and equipment, at cost
(less accumulated depreciation of
$280,439 and $250,888) 299,791 290,200
Deferred income taxes 654,481 263,143
Goodwill 239,297 239,626
Other intangible assets (less
accumulated amortization of $377,624
and $347,977) 370,964 320,758
Investment securities
available-for-sale, at fair value 219,015 -
Municipal bonds held-to-maturity 37,450 192,489
Prepaid expenses 299,664 274,962
Other assets 81,670 87,122
Total Assets $7,272,975 $6,260,041
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $224,255 $252,391
Settlement due to customers 535,966 604,212
Restricted security deposits held for
customers 142,359 142,052
Obligations under litigation
settlements 1,569,623 107,235
Accrued expenses 1,061,297 1,071,557
Short-term debt 149,380 80,000
Other current liabilities 117,503 105,895
Total Current Liabilities 3,800,383 2,363,342
Deferred income taxes 76,181 71,278
Obligations under litigation
settlements 1,243,551 297,201
Long-term debt 19,586 149,824
Other liabilities 363,523 346,469
Total Liabilities 5,503,224 3,228,114
Commitments and Contingencies
Minority interest 4,620 4,620
Stockholders' Equity
Class A common stock, $.0001 par
value; authorized 3,000,000,000
shares, 105,125,863 and 91,243,433
shares issued and 98,385,273 and
87,321,541 outstanding, respectively 10 9
Class B common stock, $.0001 par
value; authorized 1,200,000,000
shares, 30,848,778 and 43,948,778
shares issued and outstanding,
respectively 4 5
Class M common stock, $.0001 par
value, authorized 1,000,000 shares,
1,713 and 1,664 shares issued and
outstanding, respectively - -
Additional paid-in capital 3,309,413 3,312,380
Class A treasury stock, at cost,
6,740,590 and 3,921,892 shares,
respectively (1,250,000) (600,532)
Retained earnings (accumulated
deficit) (475,559) 37,699
Accumulated other comprehensive income:
Cumulative foreign currency
translation adjustments 197,603 216,651
Defined benefit pension and other
postretirement plans, net of tax (3,133) (3,555)
Investment securities
available-for-sale, net of tax (13,207) 64,650
Total accumulated other comprehensive
income 181,263 277,746
Total Stockholders' Equity 1,765,131 3,027,307
Total Liabilities and Stockholders'
Equity $7,272,975 $6,260,041
MASTERCARD INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months
Ended September 30,
2008 2007
(In thousands)
Operating Activities
Net income (loss) $(493,357) $781,653
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 81,956 71,490
Gain on sale of Redecard S.A.
available-for-sale securities (85,903) (107,042)
Share based payments 44,217 35,909
Stock units settled in cash for taxes (66,095) (11,193)
Tax benefit for share based compensation (48,901) (7,598)
Impairment of investments 10,600 -
Accretion of imputed interest on litigation
settlements 47,490 28,248
Deferred income taxes (531,454) (8,170)
Other 9,482 8,855
Changes in operating assets and liabilities:
Trading securities 2,561 7,225
Accounts receivable (75,851) (68,655)
Income taxes receivable (256,469) -
Settlement due from customers 74,875 (9,499)
Prepaid expenses (105,880) (32,657)
Other current assets (9,759) (1,375)
Prepaid expenses, non-current (28,882) (19,352)
Litigation settlement accruals 2,361,248 (10,525)
Accounts payable (31,871) (36,109)
Settlement due to customers (58,448) (18,038)
Accrued expenses 41,914 72,644
Net change in other assets and liabilities 49,111 41,852
Net cash provided by operating activities 930,584 717,663
Investing Activities
Purchases of property, plant and equipment (51,250) (59,339)
Capitalized software (71,267) (52,322)
Purchases of investment securities
available-for-sale (495,606) (2,749,413)
Proceeds from sales and maturities of investment
securities available-for-sale 851,987 2,928,342
Other investing activities (2,223) 8,551
Net cash provided by investing activities 231,641 75,819
Financing Activities
Dividends paid (59,576) (53,805)
Cash proceeds from exercise of stock options 9,335 1,083
Tax benefit for share based compensation 48,901 7,598
Payment of debt (80,000) -
Purchase of treasury stock (649,468) (277,164)
Net cash used in financing activities (730,808) (322,288)
Effect of exchange rate changes on cash and cash
equivalents (19,255) 31,149
Net increase in cash and cash equivalents 412,162 502,343
Cash and cash equivalents - beginning of
period 1,659,295 1,185,080
Cash and cash equivalents - end of period $2,071,457 $1,687,423
MASTERCARD INCORPORATED OPERATING PERFORMANCE
For the 3 Months ended September 30, 2008 Purchase Purchase GDV Growth Growth Volume Growth Trans. (Bil.) (USD) (Local)(Bil.)(Local) (Mil.) All MasterCard Credit, Charge and Debit Programs Asia Pacific $95 23.6% 21.3% $68 24.6% 803 Canada 27 16.5% 16.0% 23 15.2% 255 Europe 209 23.0% 16.8% 154 17.1% 1,637 Latin America 48 24.0% 15.5% 26 18.9% 452 South Asia / Middle East / Africa 14 27.2% 32.9% 7 24.9% 98 United States 268 4.7% 4.7% 218 6.6% 3,479 Worldwide 662 14.8% 12.3% 497 13.3% 6,724
MasterCard Credit and Charge Programs United States 162 -1.3% -1.3% 141 1.5% 1,596 Worldwide less United States 311 21.1% 17.1% 248 19.2% 2,775 Worldwide 472 12.4% 10.1% 388 12.1% 4,371
MasterCard Debit Programs United States 106 15.3% 15.3% 78 17.5% 1,884 Worldwide less United States 84 30.3% 22.1% 30 17.6% 469 Worldwide 190 21.4% 18.2% 108 17.5% 2,352
For the 3 Months ended September 30, 2008 Acceptance Cash Cash Acc- Loc- Volume Growth Trans ounts Cards ations (Bil.)(Local) (Mil.)(Mil.)(Mil.)(Mil.) All MasterCard Credit, Charge and Debit Programs Asia Pacific $27 13.9% 176 176 192 7.6 Canada 4 21.5% 6 33 39 0.8 Europe 55 15.9% 279 183 197 8.2 Latin America 23 11.9% 143 90 110 3.0 South Asia / Middle East / Africa 7 42.9% 52 35 40 1.0 United States 49 -3.3% 260 344 392 7.8 Worldwide 165 9.5% 914 861 970 28.4
MasterCard Credit and Charge Programs United States 21 -16.6% 14 229 269 Worldwide less United States 63 9.6% 257 431 486 Worldwide 84 1.6% 272 660 755
MasterCard Debit Programs United States 28 9.6% 245 115 123 Worldwide less United States 53 24.8% 397 86 92 Worldwide 82 19.0% 643 201 215
For the 9 Months ended September 30, 2008 Purchase Purchase GDV Growth Growth Volume Growth Trans. (Bil.) (USD) (Local)(Bil.) (Local) (Mil.) All MasterCard Credit, Charge and Debit Programs Asia Pacific $276 26.1% 19.8% $195 23.4% 2,260 Canada 79 22.8% 13.8% 67 13.9% 710 Europe 596 27.8% 17.4% 441 17.8% 4,652 Latin America 139 26.2% 17.7% 72 20.3% 1,302 South Asia / Middle East / Africa 39 29.5% 32.1% 21 25.5% 282 United States 797 6.5% 6.5% 646 8.3% 10,221 Worldwide 1,926 17.6% 13.1% 1,442 14.0% 19,427
MasterCard Credit and Charge Programs United States 479 1.2% 1.2% 414 3.3% 4,675 Worldwide less United States 893 25.7% 17.5% 710 19.6% 7,886 Worldwide 1,373 15.9% 11.2% 1,124 13.0% 12,561
MasterCard Debit Programs United States 318 15.8% 15.8% 232 18.3% 5,545 Worldwide less United States 236 31.5% 21.0% 86 16.4% 1,321 Worldwide 554 22.0% 18.0% 318 17.8% 6,867
For the 9 Months ended September 30, 2008 Cash Cash Acc- Volume Growth Trans. ounts Cards (Bil.) (Local) (Mil.) (Mil.) (Mil.) All MasterCard Credit, Charge and Debit Programs Asia Pacific $80 11.9% 483 176 192 Canada 11 13.0% 16 33 39 Europe 155 16.2% 798 183 197 Latin America 67 15.0% 418 90 110 South Asia / Middle East / Africa 19 40.2% 147 35 40 United States 151 -0.2% 771 344 392 Worldwide 484 10.3% 2,633 861 970
MasterCard Credit and Charge Programs United States 65 -10.8% 44 229 269 Worldwide less United States 183 10.1% 754 431 486 Worldwide 249 3.7% 798 660 755
MasterCard Debit Programs United States 86 9.7% 726 115 123 Worldwide less United States 150 23.9% 1,109 86 92 Worldwide 236 18.3% 1,835 201 215
For the 3 Months ended September 30, 2007 Purchase Purchase GDV Growth Growth Volume Growth Trans. (Bil.) (USD) (Local)(Bil.) (Local) (Mil.) All MasterCard Credit, Charge and Debit Programs Asia Pacific $77 21.5% 16.3% $54 22.1% 658 Canada 23 21.2% 13.3% 20 14.1% 222 Europe 170 26.0% 16.3% 125 17.0% 1,446 Latin America 39 24.3% 20.3% 20 23.9% 393 South Asia / Middle East / Africa 11 40.9% 36.4% 6 29.0% 88 United States 256 7.7% 7.7% 205 9.4% 3,225 Worldwide 576 16.6% 12.8% 430 14.1% 6,031
MasterCard Credit and Charge Programs United States 164 5.4% 5.4% 139 7.1% 1,602 Worldwide less United States 256 24.7% 16.8% 201 19.2% 2,408 Worldwide 420 16.4% 12.0% 340 14.0% 4,009
MasterCard Debit Programs United States 92 12.1% 12.1% 66 14.7% 1,623 Worldwide less United States 64 25.2% 18.7% 24 15.1% 399 Worldwide 156 17.1% 14.7% 90 14.8% 2,022
For the 3 Months ended September 30, 2007 Cash Cash Acc- Volume Growth Trans. ounts Cards (Bil.) (Local) (Mil.) (Mil.) (Mil.) All MasterCard Credit, Charge and Debit Programs Asia Pacific $24 5.1% 138 155 168 Canada 3 8.0% 5 28 34 Europe 45 14.5% 250 158 171 Latin America 19 16.8% 129 75 92 South Asia / Middle East / Africa 5 47.0% 38 27 31 United States 51 1.2% 250 330 384 Worldwide 146 8.9% 811 772 879
MasterCard Credit and Charge Programs United States 25 -3.4% 18 230 275 Worldwide less United States 55 8.6% 244 377 425 Worldwide 80 4.6% 262 606 700
MasterCard Debit Programs United States 26 6.1% 232 100 108 Worldwide less United States 40 20.9% 317 66 71 Worldwide 66 14.6% 548 166 179
For the 9 Months ended September 30, 2007 Purchase Purchase GDV Growth Growth Volume Growth Trans. (Bil.) (USD) (Local)(Bil.) (Local) (Mil.) All MasterCard Credit, Charge and Debit Programs Asia Pacific $219 19.6% 15.6% $150 21.1% 1,869 Canada 64 17.6% 14.3% 55 14.4% 626 Europe 466 24.8% 15.3% 345 15.9% 4,088 Latin America 110 24.3% 21.8% 54 24.8% 1,120 South Asia / Middle East / Africa 30 38.6% 41.3% 17 31.8% 253 United States 748 10.9% 10.9% 597 13.1% 9,342 Worldwide 1,638 17.3% 14.0% 1,218 15.6% 17,297
MasterCard Credit and Charge Programs United States 474 5.1% 5.1% 401 7.4% 4,604 Worldwide less United States 710 22.9% 16.4% 555 18.6% 6,820 Worldwide 1,184 15.1% 11.6% 956 13.6% 11,424
MasterCard Debit Programs United States 275 22.7% 22.7% 196 26.7% 4,738 Worldwide less United States 179 24.9% 18.7% 66 14.5% 1,135 Worldwide 454 23.5% 21.1% 262 23.4% 5,873
For the 9 Months ended September 30, 2007 Cash Cash Acc- Volume Growth Trans. ounts Cards (Bil.) (Local) (Mil.) (Mil.) (Mil.) All MasterCard Credit, Charge and Debit Programs Asia Pacific $69 5.1% 394 155 168 Canada 9 13.8% 15 28 34 Europe 121 13.8% 715 158 171 Latin America 56 19.0% 374 75 92 South Asia / Middle East / Africa 13 55.6% 111 27 31 United States 152 3.2% 738 330 384 Worldwide 420 9.8% 2,346 772 879
MasterCard Credit and Charge Programs United States 73 -6.1% 51 230 275 Worldwide less United States 156 9.1% 705 377 425 Worldwide 229 3.7% 756 606 700
MasterCard Debit Programs United States 79 13.6% 687 100 108 Worldwide less United States 113 21.3% 904 66 71 Worldwide 191 18.0% 1,591 166 179
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. 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 provided by MasterCard customers and 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 and cards columns is provided by MasterCard customers and is subject to certain limited verification by MasterCard. 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 order to provide a true indication of how broadly our cards can be used, MasterCard seeks to provide the most accurate acceptance figures possible and to maintain that MasterCard acceptance is unsurpassed worldwide by periodically validating our results with third parties. The data set forth in the acceptance locations column is derived through a proprietary methodology designed to minimize the impact of multiple acquiring in certain markets. This data is based on information provided by our customers and other third parties and is subject to certain limited verification by MasterCard and partial cross-checking against information provided by MasterCard's transaction processing systems. All data is subject to revision and amendment by MasterCard's customers subsequent to the date of its release.
Performance information for prior periods can 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 three months ended 9/30/08
Special As
Actual Items Adjusted
Revenues, net $1,338 $- $1,338
Operating Expenses
General and administrative 494 - 494
Advertising and marketing 267 - 267
Litigation settlements 828 828 a -
Charitable contributions to the
MasterCard Foundation - - -
Depreciation and amortization 29 - 29
Total operating expenses 1,617 828 790
Operating income (loss) (279) 828 548
Operating Margin (20.9%) - 41.0%
Other Income (Expense)
Investment income, net 23 - 23
Interest expense (36) - (36)
Other income, net (1) - (1)
Total other income (expense) (14) - (14)
Income (loss) before income taxes (294) 828 534
Income tax expense (benefit) (100) 312 212
Net Income (Loss) $(194) $516 $322
Basic Net Income (Loss) per Share $(1.49) $3.97 $2.48
Diluted Net Income (Loss) per Share $(1.49) $3.96 $2.47
For the three months ended 9/30/07
($ million) YOY Growth
Special As As
Actual Items Adjusted Adjusted
Revenues, net $1,083 $- $1,083 23.6%
Operating Expenses
General and administrative 433 - 433 14.1%
Advertising and marketing 264 - 264 1.1%
Litigation settlements - - - -
Charitable contributions to the
MasterCard Foundation 10 - 10 NM
Depreciation and amortization 22 - 22 29.0%
Total operating expenses 730 - 730 8.3%
Operating income (loss) 353 - 353 55.2%
Operating Margin 32.6% - 32.6% 8.4 ppt.
Other Income (Expense)
Investment income, net 146 - 146 (84.5%)
Interest expense (16) - (16) 120.9%
Other income, net (1) (1) (18.7%)
Total other income (expense) 129 - 129 (111.2%)
Income (loss) before income taxes 482 - 482 10.7%
Income tax expense (benefit) 168 - 168 26.3%
Net Income (Loss) $314 $- $314 2.3%
Basic Net Income (Loss) per Share $2.32 $- $2.32 6.9%
Diluted Net Income (Loss) per Share $2.31 $- $2.31 6.9%
($ million) For the nine months ended 9/30/08
Special As
Actual Items Adjusted
Revenues, net $3,767 $- $3,767
Operating Expenses
General and administrative 1,435 - 1,435
Advertising and marketing 770 - 770
Litigation settlements 2,477 2,477 a -
Charitable contributions to the
MasterCard Foundation - - -
Depreciation and amortization 82 - 82
Total operating expenses 4,764 2,477 2,287
Operating income (loss) (997) 2,477 1,480
Operating Margin (26.5%) - 39.3%
Other Income (Expense)
Investment income, net 163 - 163
Interest expense (67) - (67)
Other income, net 73 75 b (2)
Total other income (expense) 169 75 94
Income (loss) before income taxes (828) 2,402 1,574
Income tax expense (benefit) (335) 913 578
Net Income (Loss) $(493) $1,489 $996
Basic Net Income (Loss) per Share $(3.79) $11.43 $7.64
Diluted Net Income (Loss) per Share $(3.79) $11.38 $7.59
For the nine months ended 9/30/07
($ million) YOY Growth
Special As As
Actual Items Adjusted Adjusted
Revenues, net $2,995 - $2,995 25.8%
Operating Expenses
General and administrative 1,263 - 1,263 13.6%
Advertising and marketing 711 - 711 8.2%
Litigation settlements 3 3 a - NM
Charitable contributions to the
MasterCard Foundation 10 - 10 (100.0%)
Depreciation and amortization 71 - 71 14.6%
Total operating expenses 2,059 3 2,056 11.3%
Operating income (loss) 936 3 939 57.5%
Operating Margin 31.3% - 31.4% 7.9 ppt.
Other Income (Expense)
Investment income, net 219 - 219 (25.5%)
Interest expense (42) - (42) 59.8%
Other income, net 91 90 c 1 NM
Total other income (expense) 268 90 178 (47.5%)
Income (loss) before income taxes 1,204 (87) 1,117 40.8%
Income tax expense (benefit) 423 (30) 393 47.2%
Net Income (Loss) $782 $(57) $724 37.3%
Basic Net Income (Loss) per Share $5.76 $(0.42) $5.34 43.1%
Diluted Net Income (Loss) per Share $5.73 $(0.42) $5.31 42.9%
(a) Litigation settlements
(b) Gain from the termination of a customer business agreement
(c) Other income related to a settlement agreement to discontinue the
company's sponsorship of the 2010 and 2014 World Cups
NM - Not meaningful
Note that the figures in the preceding tables may not sum due to rounding
Reconciliation to Effective Tax Rate
Adjusted
GAAP Non- Effective
GAAP Effective Litigation GAAP Tax Rate
Actual Tax Rate Settlements Adjusted Non-GAAP
(In millions, except percentages)
Three months ended September 30, 2008:
Income (loss) before
income taxes $(294) 34.1% $828 $534 39.7%
Income tax expense
(benefit) (100) 312 212
Net income (loss) $(194) $516 $322
Adjusted
GAAP Non- Effective
GAAP Effective Litigation GAAP Tax Rate
Actual Tax Rate Settlements Adjusted Non-GAAP
(In millions, except percentages)
Nine months ended September 30, 2008:
Income (loss) before
income taxes $(828) 40.4% $2,477 $1,649 36.6%
Income tax expense
(benefit) (335) 939 604
Net income (loss) $(493) $1,538 $1,045
Note that the figures in the preceding tables 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
SOURCE MasterCard Incorporated
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