MasterCard Incorporated Reports Third-Quarter 2009 Financial Results

MasterCard Incorporated (NYSE:MA) today announced financial results for the third quarter of 2009. The company reported net income of $456 million, or $3.48 per diluted share, excluding special items, and net income of $452 million, or $3.45 per diluted share, including special items. The company's total operating expenses, 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 GAAP reconciliations.

Net revenue for the third quarter of 2009 was $1.4 billion, a 2.0% increase versus the same period in 2008. On a constant currency basis (excluding the movement of the euro and the Brazilian real relative to the U.S. dollar), net revenue increased 3.9% compared to the same period in 2008. The higher net revenue in the third quarter this year benefited from:

• Pricing changes that contributed approximately 6 percentage points of the net revenue growth; and
• A 7.6% increase in the number of transactions processed to 5.8 billion.

These factors were partially offset by the impact of slightly lower cross border volumes on third-quarter 2009 revenue, compared to the same period in 2008.

MasterCard’s gross dollar volume was relatively flat, up 0.3% on a local currency basis, versus the third quarter of 2008, to $633 billion. Worldwide purchase volume during the quarter was also relatively flat, up 0.4% on a local currency basis, versus the third quarter of 2008, to $480 billion. As of September 30, 2009, the company’s financial-institution customers had issued 964 million MasterCard cards, comparable to the number of cards issued at September 30, 2008.

“We are very pleased with our third-quarter financial results, specifically since we began to see signs of stabilization in parts of our business,” said Robert W. Selander, MasterCard chief executive officer. “Total processed transactions continued to grow at a high single-digit rate, with double-digit growth coming from our Asia Pacific/Middle East/Africa and Latin America regions. At the same time, our overall cross-border volumes are steadying with our Asia Pacific region demonstrating significant growth in the quarter, and the U.S. showing a lower rate of decline. We continued to aggressively manage costs and improve margins, while still investing in key growth areas across our business.

“Overall, our results once again underscore the global trend toward electronic payments, and the strength of our business model,” Selander added. “We continue to make life easier for consumers, businesses and governments, all of whom seek safer, more controllable and more efficient payment alternatives for everyday commerce.”

Special items for the third quarter of 2009 represented $6.2 million pre-tax litigation settlement charges. The special item for the third quarter of 2008 represented an $827.5 million net pre-tax charge related to an antitrust litigation settlement.

Excluding special items, total operating expenses decreased 13.3%, to $685 million, during the third quarter of 2009 compared to the same period in 2008. Currency fluctuations contributed 1.3 percentage points to the rate of decline. The decrease in total operating expenses was driven by:

• A 7.9% decrease in general and administrative expenses, primarily resulting from lower professional fees and travel expenses, along with a benefit from foreign exchange remeasurement, versus the comparable period in 2008. These factors were partially offset by increased personnel costs due to severance of $31 million in the third quarter of 2009. Excluding the impact of severance costs in both periods, general and administrative expenses declined 13.8% for the third quarter of 2009. A favorable foreign currency impact represented 1.1 percentage points of both rates of decline; and
• A 29.4% decrease in advertising and marketing expenses versus the year-ago period, primarily related to reduced investments and continued cost containment initiatives. Favorable currency fluctuations representing approximately 1.5 percentage points contributed to the rate of decline.

Including special items, total operating expenses decreased 57.3%, to $691 million, primarily due to the net litigation settlement that occurred in the third quarter of 2008.

Excluding special items, the operating margin was 49.8% for the third quarter of 2009, up 8.8 percentage points over the year-ago period. Including special items, the operating margin was 49.4% for the third quarter of 2009.

MasterCard's effective tax rate was 32.9% in the third quarter of 2009. For the third quarter of 2008, the effective tax rate was 39.7%, excluding special items, and 34.1% including the special items. The difference in the effective tax rate was primarily due to the charge for the net litigation settlement recorded in the third quarter of 2008.

Year-to-Date 2009 Results

For the nine months ended September 30, 2009, MasterCard reported net income of $1.2 billion, or $8.95 per diluted share, excluding the impact of special items, and net income of $1.2 billion, or $8.92 per diluted share, including special items.

Net revenue for the nine months ended September 30, 2009, was $3.8 billion, a 0.9% increase versus the same period in 2008. On a constant currency basis, net revenue increased 4.4%. Increased processed transactions of 7.0% and pricing changes of approximately 6 percentage points contributed to the revenue growth in the year-to-date period. These factors were partially offset by the impact of slightly lower cross border volumes on revenue for the nine months ended September 30, 2009, relative to the comparable period last year.

Total operating expenses decreased 12.5%, to $2.0 billion, for the nine-month period compared to the same period in 2008, excluding special items for both periods. Currency fluctuations contributed 2.5 percentage points of this decrease. Including special items, operating expenses decreased 57.8%.

Total net other expense was $32 million for the nine-month period versus total net other income of $169 million for the same period in 2008, including special items. The decrease in other income was primarily driven by gains from the sale of Redecard securities and the termination of a customer business agreement in 2008.

MasterCard’s effective tax rate, excluding special items, was 33.6% in the nine months ended September 30, 2009, versus a rate of 36.7% in the comparable period in 2008. Including the special items, the effective tax rate was 33.6% for the 2009 period, and 40.4% for the 2008 period. The difference in the effective tax rate was primarily due to the impact of the charge for litigation settlements in 2008.

Third-Quarter 2009 Financial Results Conference Call Details

At 9:00 a.m. EST today, the company will host a conference call to discuss its third-quarter 2009 financial results.

The dial-in information for this call is 866-700-6293 (within the U.S.) and 617-213-8835 (outside the U.S.) and the passcode is 63207343. 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 88640718.

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 approximately 21 billion transactions each year, and provides industry-leading analysis and consulting services to financial-institution customers and merchants. Powered by the MasterCard Worldwide Network and through its family of brands, including MasterCard®, Maestro® and Cirrus®, 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 potential stabilization of the company’s business, in light of overall economic conditions;
• The company’s future investments in key growth areas; and
• The company’s ability to continue to benefit from the ongoing shift toward electronic payments.

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, 2008, the company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that have been filed with the SEC during 2009, 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								Nine Months Ended
			September 30,								September 30,
				2009				2008				2009				2008
			(In thousands, except per share data)
Revenues, net			$	1,364,275			$	1,338,178			$	3,800,266			$	3,766,766
Operating Expenses
General and administrative				474,457				515,046				1,428,314				1,498,028
Advertising and marketing				173,828				246,154				470,275				706,798
Litigation settlements				6,245				827,500				6,745				2,476,845
Depreciation and amortization				36,242				28,742				102,950				81,956
	Total operating expenses			690,772				1,617,442				2,008,284				4,763,627
Operating income (loss)				673,503				(279,264	)			1,791,982				(996,861	)
Other Income (Expense)
Investment income, net				10,665				22,626				41,696				163,081
Interest expense				(24,098	)			(36,319	)			(91,667	)			(67,075	)
Other income (expense), net				13,324				(715	)			17,707				72,582
	Total other income (expense)			(109	)			(14,408	)			(32,264	)			168,588
Income (loss) before income taxes				673,394				(293,672	)			1,759,718				(828,273	)
Income tax expense (benefit)				221,254				(100,090	)			591,489				(334,916	)
Net income (loss)				452,140				(193,582	)			1,168,229				(493,357	)
Loss attributable to non-controlling interests				59				-				302				-
Net Income (Loss) Attributable to MasterCard			$	452,199			$	(193,582	)		$	1,168,531			$	(493,357	)
Basic Earnings (Loss) per Share			$	3.46			$	(1.48	)		$	8.95			$	(3.76	)
Basic Weighted Average Shares Outstanding				129,936				129,536				129,773				130,342
Diluted Earnings (Loss) per Share			$	3.45			$	(1.48	)		$	8.92			$	(3.76	)
Diluted Weighted Average Shares Outstanding				130,359				129,536				130,152				130,342

MASTERCARD INCORPORATED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
			September 30,				December 31,
			2009				2008
			(In thousands, except share data)
ASSETS
Cash and cash equivalents			$	2,316,391			$	1,505,160
Investment securities, at fair value:
	Available-for-sale			629,678				588,095
Municipal bonds held-to-maturity				-				154,000
Accounts receivable				503,472				639,482
Income taxes receivable				-				198,308
Settlement due from customers				427,075				513,191
Restricted security deposits held for customers				260,769				183,245
Prepaid expenses				268,213				213,612
Deferred income taxes				277,967				283,795
Other current assets				69,102				32,619
Total Current Assets				4,752,667				4,311,507
Property, plant and equipment, at cost (less accumulated depreciation of $311,497 and $278,269)				450,915				306,798
Deferred income taxes				358,781				567,567
Goodwill				314,430				297,993
Other intangible assets (less accumulated amortization of $412,170 and $377,570)				410,533				394,282
Auction rate securities available-for-sale, at fair value				196,350				191,760
Municipal bonds held-to-maturity				36,400				37,450
Prepaid expenses				322,014				302,095
Other assets				97,258				66,397
Total Assets			$	6,939,348			$	6,475,849
LIABILITIES AND EQUITY
Accounts payable			$	277,715			$	253,276
Settlement due to customers				424,383				541,303
Restricted security deposits held for customers				260,769				183,245
Obligations under litigation settlements				614,220				713,035
Accrued expenses				1,048,064				1,032,061
Short-term debt				-				149,380
Other current liabilities				166,181				118,151
Total Current Liabilities				2,791,332				2,990,451
Deferred income taxes				76,186				74,518
Obligations under litigation settlements				396,117				1,023,263
Long-term debt				21,690				19,387
Other liabilities				428,787				436,255
Total Liabilities				3,714,112				4,543,874
Commitments
Stockholders' Equity
Class A common stock, $.0001 par value; authorized 3,000,000,000 shares, 116,466,176 and 105,126,588 shares issued and 109,725,586 and 98,385,998 outstanding, respectively				11				10
Class B common stock, $.0001 par value; authorized 1,200,000,000 shares, 19,977,657 and 30,848,778 issued and outstanding, respectively				3				4
Class M common stock, $.0001 par value; authorized 1,000,000 shares, 1,803 and 1,728 shares issued and outstanding, respectively				-				-
Additional paid-in-capital				3,384,280				3,304,604
Class A treasury stock, at cost, 6,740,590 shares, respectively				(1,250,000	)			(1,250,000	)
Retained earnings (accumulated deficit)				873,424				(236,100	)
Accumulated other comprehensive income:
	Cumulative foreign currency translation adjustments			254,004				175,040
	Defined benefit pension and other postretirement plans, net of tax			(40,084	)			(43,207	)
	Investment securities available-for-sale, net of tax			(4,115	)			(22,996	)
Total accumulated other comprehensive income				209,805				108,837
Total Stockholders' Equity				3,217,523				1,927,355
Non-controlling interests				7,713				4,620
Total Equity				3,225,236				1,931,975
Total Liabilities and Equity			$	6,939,348			$	6,475,849

MASTERCARD INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
				Nine Months Ended
				September 30,
				2009				2008
				(In thousands)
Operating Activities
Net income (loss)				$	1,168,229			$	(493,357	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Depreciation and amortization				102,950				81,956
	Gain on sale of Redecard S.A. available-for-sale securities				-				(85,903	)
	Share based payments				69,487				44,217
	Stock units withheld for taxes				(27,884	)			(66,095	)
	Tax benefit for share based compensation				(32,249	)			(48,901	)
	Impairment of assets				15,991				10,600
	Accretion of imputed interest on litigation settlements				72,573				47,490
	Deferred income taxes				204,298				(531,454	)
	Other				(13,044	)			9,482
	Changes in operating assets and liabilities:
		Trading securities			-				2,561
		Accounts receivable			162,364				(75,851	)
		Income taxes receivable			190,000				(256,469	)
		Settlement due from customers			94,664				74,875
		Prepaid expenses			(58,332	)			(134,762	)
		Other current assets			(43,789	)			(9,759	)
		Obligations under litigation settlements			(784,463	)			2,361,248
		Accounts payable			20,859				(31,871	)
		Settlement due to customers			(124,564	)			(58,448	)
		Accrued expenses			25,347				41,914
		Net change in other assets and liabilities			51,480				49,111
Net cash provided by operating activities					1,093,917				930,584
Investing Activities
	Purchases of property, plant and equipment				(37,319	)			(51,250	)
	Capitalized software				(59,112	)			(71,267	)
	Purchases of investment securities available-for-sale				(104,620	)			(495,606	)
	Proceeds from sales and maturities of investment securities, available-for-sale				84,279				851,987
	Investment in affiliates				(16,043	)			-
	Acquisition of business, net of cash acquired				(2,913	)			-
	Other investing activities				(4,688	)			(2,223	)
Net cash provided by (used in) investing activities					(140,416	)			231,641
Financing Activities
	Dividends paid				(59,019	)			(59,576	)
	Exercise of stock options				5,791				9,335
	Tax benefit for share based compensation				32,249				48,901
	Purchase of treasury stock				-				(649,468	)
	Payment of debt				(149,380	)			(80,000	)
	Redemption of non-controlling interest				(4,620	)			-
Net cash used in financing activities					(174,979	)			(730,808	)
Effect of exchange rate changes on cash and cash equivalents					32,709				(19,255	)
Net increase in cash and cash equivalents					811,231				412,162
Cash and cash equivalents - beginning of period					1,505,160				1,659,295
Cash and cash equivalents - end of period				$	2,316,391			$	2,071,457

MASTERCARD INCORPORATED OPERATING PERFORMANCE
		For the 3 Months ended September 30, 2009
All MasterCard Credit, Charge and Debit Programs		GDV (Bil.)		Growth (USD)		Growth (Local)		Purchase Volume (Bil.)		Growth (Local)		Purchase Trans. (Mil.)		Cash Volume (Bil.)		Growth (Local)		Cash Trans. (Mil.)		Accounts (Mil.)		Cards (Mil.)		Acceptance Locations (Mil.)
APMEA		$127		15.4%		18.2%		$86		16.2%		1,080		$41		22.5%		302		239		262		8.7
Canada		24		-10.2%		-5.2%		22		-2.7%		263		3		-20.4%		5		37		45		0.8
Europe		190		-9.7%		0.2%		143		1.6%		1,746		48		-3.8%		276		183		197		8.7
Latin America		45		-6.4%		11.1%		25		12.0%		468		20		10.0%		150		97		119		3.1
United States		247		-8.0%		-8.0%		204		-6.5%		3,674		42		-14.8%		263		295		340		8.1
Worldwide		633		-4.7%		0.3%		480		0.4%		7,231		154		-0.3%		997		851		964		29.4
MasterCard Credit and Charge Programs
United States		133		-18.0%		-18.0%		121		-13.9%		1,508		11		-45.4%		9		177		211
Worldwide less United States		290		-6.9%		1.0%		239		4.1%		2,943		51		-11.6%		231		438		497
Worldwide		423		-10.7%		-5.8%		361		-2.7%		4,452		62		-20.7%		240		615		708
MasterCard Debit Programs
United States		114		7.2%		7.2%		83		6.9%		2,166		31		7.9%		254		118		130
Worldwide less United States		97		14.0%		26.5%		36		23.4%		613		61		28.3%		502		118		126
Worldwide		211		10.2%		15.2%		119		11.4%		2,779		92		20.7%		757		236		255
APMEA = Asia Pacific / Middle East / Africa
		For the 9 Months ended September 30, 2009
All MasterCard Credit, Charge and Debit Programs		GDV (Bil.)		Growth (USD)		Growth (Local)		Purchase Volume (Bil.)		Growth (Local)		Purchase Trans. (Mil.)		Cash Volume (Bil.)		Growth (Local)		Cash Trans. (Mil.)		Accounts (Mil.)		Cards (Mil.)
APMEA		$343		8.2%		16.9%		$231		15.8%		3,021		$112		19.3%		827		239		262
Canada		67		-15.2%		-3.1%		58		-1.1%		742		8		-14.8%		15		37		45
Europe		516		-13.6%		2.0%		386		2.9%		4,972		130		-0.7%		818		183		197
Latin America		123		-11.7%		8.5%		68		11.2%		1,371		56		5.3%		429		97		119
United States		729		-8.6%		-8.6%		598		-7.5%		10,618		131		-13.3%		780		295		340
Worldwide		1,778		-7.9%		-0.1%		1,341		0.0%		20,723		437		-0.4%		2,869		851		964
MasterCard Credit and Charge Programs
United States		393		-18.0%		-18.0%		354		-14.5%		4,393		39		-40.1%		29		177		211
Worldwide less United States		796		-11.0%		2.5%		651		5.3%		8,451		145		-8.5%		711		438		497
Worldwide		1,190		-13.4%		-5.3%		1,005		-2.6%		12,844		185		-17.7%		740		615		708
MasterCard Debit Programs
United States		336		5.6%		5.6%		244		5.0%		6,224		92		7.1%		751		118		130
Worldwide less United States		253		6.3%		23.3%		92		20.4%		1,655		160		24.9%		1,378		118		126
Worldwide		588		5.9%		12.5%		336		8.9%		7,879		253		17.8%		2,129		236		255
		For the 3 Months ended September 30, 2008
All MasterCard Credit, Charge and Debit Programs		GDV (Bil.)		Growth (USD)		Growth (Local)		Purchase Volume (Bil.)		Growth (Local)		Purchase Trans. (Mil.)		Cash Volume (Bil.)		Growth (Local)		Cash Trans. (Mil.)		Accounts (Mil.)		Cards (Mil.)
APMEA		$110		24.5%		23.1%		$75		24.5%		900		$35		20.2%		231		211		232
Canada		27		16.5%		16.0%		24		15.2%		255		4		21.5%		6		33		39
Europe		211		24.1%		17.9%		155		18.3%		1,659		56		16.9%		284		180		194
Latin America		48		24.2%		15.6%		26		19.0%		452		23		12.0%		143		90		110
United States		268		4.7%		4.7%		218		6.7%		3,480		49		-3.1%		260		334		389
Worldwide		664		15.3%		12.7%		498		13.6%		6,746		166		10.2%		924		848		963
MasterCard Credit and Charge Programs
United States		162		-1.2%		-1.2%		141		1.5%		1,596		21		-16.2%		14		219		265
Worldwide less United States		312		21.4%		17.4%		248		19.6%		2,786		63		9.7%		260		431		486
Worldwide		473		12.6%		10.3%		389		12.3%		4,382		84		1.9%		275		650		751
MasterCard Debit Programs
United States		106		15.3%		15.3%		78		17.5%		1,884		28		9.6%		245		115		124
Worldwide less United States		85		32.8%		24.4%		31		20.4%		480		54		26.8%		404		83		89
Worldwide		191		22.5%		19.2%		109		18.3%		2,364		82		20.3%		649		198		213
		For the 9 Months ended September 30, 2008
All MasterCard Credit, Charge and Debit Programs		GDV (Bil.)		Growth (USD)		Growth (Local)		Purchase Volume (Bil.)		Growth (Local)		Purchase Trans. (Mil.)		Cash Volume (Bil.)		Growth (Local)		Cash Trans. (Mil.)		Accounts (Mil.)		Cards (Mil.)
APMEA		$317		27.1%		21.8%		$216		23.6%		2,541		$101		18.1%		644		211		232
Canada		79		22.8%		13.8%		67		13.9%		710		11		13.0%		16		33		39
Europe		598		28.2%		17.8%		442		18.2%		4,674		156		16.6%		802		180		194
Latin America		140		26.4%		17.8%		72		20.5%		1,304		67		15.1%		420		90		110
United States		798		6.6%		6.6%		646		8.3%		10,222		151		-0.1%		771		334		389
Worldwide		1,930		17.8%		13.3%		1,444		14.2%		19,451		487		10.8%		2,653		848		963
MasterCard Credit and Charge Programs
United States		479		1.2%		1.2%		414		3.3%		4,675		65		-10.6%		45		219		265
Worldwide less United States		895		25.8%		17.6%		711		19.7%		7,897		184		9.9%		758		431		486
Worldwide		1,374		16.0%		11.3%		1,125		13.1%		12,572		249		3.7%		803		650		751
MasterCard Debit Programs
United States		318		15.9%		15.9%		232		18.3%		5,547		86		9.7%		726		115		124
Worldwide less United States		238		33.2%		22.6%		87		17.4%		1,332		151		25.9%		1,123		83		89
Worldwide		556		22.7%		18.7%		319		18.1%		6,878		237		19.5%		1,850		198		213

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®-branded and MasterCard Electronic™-branded cards. Growth rates over prior periods are provided for volume-based data.

Debit transactions on Maestro® and Cirrus®-branded cards, Mondex® 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.

GAAP Reconciliations
($ millions except percentages and per share data)
		Three Months ended															Three Months ended
		September 30, 2009															September 30, 2008
		Actual					Special Items					Non -GAAP					Actual					Special Items					Non -GAAP
Litigation settlements		$	6				$	(6	)	a		$	-				$	828				$	(828	)	a		$	-
Total operating expenses			691					(6	)				685					1,617					(828	)				790
Operating income (loss)			674					6					680					(279	)				828					548
Operating Margin			49.4	%									49.8	%				(20.9	%)									41.0	%
Income (loss) before income taxes			673					6					680					(294	)				828					534
Income taxes (benefit)			221					2					224					(100	)				312					212
Net Income (Loss)		$	452				$	4				$	456				$	(194	)			$	516				$	322
Basic Net Income (Loss) per Share		$	3.46				$	0.03				$	3.49					($1.48	)	c		$	3.94				$	2.46		c
Diluted Net Income (Loss) per Share		$	3.45				$	0.03				$	3.48					($1.48	)	c		$	3.94				$	2.46		c
		Nine Months ended															Nine Months ended
		September 30, 2009															September 30, 2008
		Actual					Special Items					Non -GAAP					Actual					Special Items					Non -GAAP
Litigation settlements		$	7				$	(7	)	a		$	-				$	2,477				$	(2,477	)	a		$	-
Total operating expenses			2,008					(7	)				2,002					4,764					(2,477	)				2,287
Operating income (loss)			1,792					7					1,799					(997	)				2,477					1,480
Operating Margin			47.2	%									47.3	%				(26.5	%)									39.3	%
Other income (expense), net			18					-					18					73					(75	)	b			(2	)
Total other income (expense)			(32	)				-					(32	)				169					(75	)				94
Income (loss) before income taxes			1,760					7					1,766					(828	)				2,402					1,574
Income taxes (benefit)			591					2					594					(335	)				913					578
Net Income (Loss)		$	1,169				$	4				$	1,173				$	(493	)			$	1,489				$	996
Basic Net Income (Loss) per Share		$	8.95				$	0.03				$	8.98				$	(3.76	)	c		$	11.34				$	7.58		c
Diluted Net Income (Loss) per Share		$	8.92				$	0.03				$	8.95				$	(3.76	)	c		$	11.32				$	7.56		c
a – Litigation Settlements
b – Gain from the termination of a customer business agreement
c – Amounts have been revised in accordance with the adoption of a new earnings per share accounting standard related to instruments granted in share-based payment transactions on January 1, 2009.

Note that the figures in the preceding tables may not sum due to rounding.

Reconciliation to Effective Tax Rate
						Actual											Non-GAAP
						Effective			Special								Effective
(In millions, except percentages)		Actual				Tax Rate			Items				Non-GAAP				Tax Rate
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
Nine months ended September 30, 2008:
Income (loss) before income taxes		$	(828	)		40.4	%		$	2,402			$	1,574			36.7	%
Income tax expense (benefit)			(335	)						913				578
Net income (loss)		$	(493	)					$	1,489			$	996

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 November 3, 2009.