MasterCard Incorporated Reports Third-Quarter 2009 Financial Results
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-- Net income of $456 million, or $3.48 per diluted share, excluding
special items
-- Net income of $452 million, or $3.45 per diluted share, including
special items
-- Net revenue growth of 2.0%, to $1.4 billion
-- Gross dollar volume and purchase volume relatively flat
-- Total operating expenses declined 13.3%, excluding special items
PURCHASE, N.Y.--(BUSINESS WIRE)-- 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(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 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 474,457 515,046 1,428,314 1,498,028
administrative
Advertising and 173,828 246,154 470,275 706,798
marketing
Litigation 6,245 827,500 6,745 2,476,845
settlements
Depreciation and 36,242 28,742 102,950 81,956
amortization
Total operating 690,772 1,617,442 2,008,284 4,763,627
expenses
Operating income 673,503 (279,264 ) 1,791,982 (996,861 )
(loss)
Other Income
(Expense)
Investment income, 10,665 22,626 41,696 163,081
net
Interest expense (24,098 ) (36,319 ) (91,667 ) (67,075 )
Other income 13,324 (715 ) 17,707 72,582
(expense), net
Total other income (109 ) (14,408 ) (32,264 ) 168,588
(expense)
Income (loss) before 673,394 (293,672 ) 1,759,718 (828,273 )
income taxes
Income tax expense 221,254 (100,090 ) 591,489 (334,916 )
(benefit)
Net income (loss) 452,140 (193,582 ) 1,168,229 (493,357 )
Loss attributable to
non-controlling 59 - 302 -
interests
Net Income (Loss)
Attributable to $ 452,199 $ (193,582 ) $ 1,168,531 $ (493,357 )
MasterCard
Basic Earnings $ 3.46 $ (1.48 ) $ 8.95 $ (3.76 )
(Loss) per Share
Basic Weighted
Average Shares 129,936 129,536 129,773 130,342
Outstanding
Diluted Earnings $ 3.45 $ (1.48 ) $ 8.92 $ (3.76 )
(Loss) per Share
Diluted Weighted
Average Shares 130,359 129,536 130,152 130,342
Outstanding
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 260,769 183,245
customers
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 450,915 306,798
$278,269)
Deferred income taxes 358,781 567,567
Goodwill 314,430 297,993
Other intangible assets (less accumulated 410,533 394,282
amortization of $412,170 and $377,570)
Auction rate securities available-for-sale, 196,350 191,760
at fair value
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 260,769 183,245
customers
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 11 10
and 105,126,588 shares issued and 109,725,586
and 98,385,998 outstanding, respectively
Class B common stock, $.0001 par value;
authorized 1,200,000,000 shares, 19,977,657 3 4
and 30,848,778 issued and outstanding,
respectively
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 (1,250,000 ) (1,250,000 )
shares, respectively
Retained earnings (accumulated deficit) 873,424 (236,100 )
Accumulated other comprehensive income:
Cumulative foreign currency translation 254,004 175,040
adjustments
Defined benefit pension and other (40,084 ) (43,207 )
postretirement plans, net of tax
Investment securities available-for-sale, (4,115 ) (22,996 )
net of tax
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 - (85,903 )
securities
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 72,573 47,490
settlements
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 (104,620 ) (495,606 )
available-for-sale
Proceeds from sales and maturities of investment 84,279 851,987
securities, available-for-sale
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 (140,416 ) 231,641
activities
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 32,709 (19,255 )
equivalents
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 Purchase Purchase Cash Cash Acceptance
Credit, GDV Growth Growth Growth Growth Accounts Cards
Volume Trans. Volume Trans. Locations
Charge and (Bil.) (USD) (Local) (Local) (Local) (Mil.) (Mil.)
Debit (Bil.) (Mil.) (Bil.) (Mil.) (Mil.)
Programs
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 45 -6.4% 11.1% 25 12.0% 468 20 10.0% 150 97 119 3.1
America
United 247 -8.0% -8.0% 204 -6.5% 3,674 42 -14.8% 263 295 340 8.1
States
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 133 -18.0% -18.0% 121 -13.9% 1,508 11 -45.4% 9 177 211
States
Worldwide
less 290 -6.9% 1.0% 239 4.1% 2,943 51 -11.6% 231 438 497
United
States
Worldwide 423 -10.7% -5.8% 361 -2.7% 4,452 62 -20.7% 240 615 708
MasterCard
Debit
Programs
United 114 7.2% 7.2% 83 6.9% 2,166 31 7.9% 254 118 130
States
Worldwide
less 97 14.0% 26.5% 36 23.4% 613 61 28.3% 502 118 126
United
States
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 Purchase Purchase Cash Cash
Credit, GDV Growth Growth Growth Growth Accounts Cards
Volume Trans. Volume Trans.
Charge and (Bil.) (USD) (Local) (Local) (Local) (Mil.) (Mil.)
Debit (Bil.) (Mil.) (Bil.) (Mil.)
Programs
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 123 -11.7% 8.5% 68 11.2% 1,371 56 5.3% 429 97 119
America
United 729 -8.6% -8.6% 598 -7.5% 10,618 131 -13.3% 780 295 340
States
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 393 -18.0% -18.0% 354 -14.5% 4,393 39 -40.1% 29 177 211
States
Worldwide
less 796 -11.0% 2.5% 651 5.3% 8,451 145 -8.5% 711 438 497
United
States
Worldwide 1,190 -13.4% -5.3% 1,005 -2.6% 12,844 185 -17.7% 740 615 708
MasterCard
Debit
Programs
United 336 5.6% 5.6% 244 5.0% 6,224 92 7.1% 751 118 130
States
Worldwide
less 253 6.3% 23.3% 92 20.4% 1,655 160 24.9% 1,378 118 126
United
States
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 Purchase Purchase Cash Cash
Credit, GDV Growth Growth Growth Growth Accounts Cards
Volume Trans. Volume Trans.
Charge and (Bil.) (USD) (Local) (Local) (Local) (Mil.) (Mil.)
Debit (Bil.) (Mil.) (Bil.) (Mil.)
Programs
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 48 24.2% 15.6% 26 19.0% 452 23 12.0% 143 90 110
America
United 268 4.7% 4.7% 218 6.7% 3,480 49 -3.1% 260 334 389
States
Worldwide 664 15.3% 12.7% 498 13.6% 6,746 166 10.2% 924 848 963
MasterCard
Credit and
Charge
Programs
United 162 -1.2% -1.2% 141 1.5% 1,596 21 -16.2% 14 219 265
States
Worldwide
less 312 21.4% 17.4% 248 19.6% 2,786 63 9.7% 260 431 486
United
States
Worldwide 473 12.6% 10.3% 389 12.3% 4,382 84 1.9% 275 650 751
MasterCard
Debit
Programs
United 106 15.3% 15.3% 78 17.5% 1,884 28 9.6% 245 115 124
States
Worldwide
less 85 32.8% 24.4% 31 20.4% 480 54 26.8% 404 83 89
United
States
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 Purchase Purchase Cash Cash
Credit, GDV Growth Growth Growth Growth Accounts Cards
Volume Trans. Volume Trans.
Charge and (Bil.) (USD) (Local) (Local) (Local) (Mil.) (Mil.)
Debit (Bil.) (Mil.) (Bil.) (Mil.)
Programs
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 140 26.4% 17.8% 72 20.5% 1,304 67 15.1% 420 90 110
America
United 798 6.6% 6.6% 646 8.3% 10,222 151 -0.1% 771 334 389
States
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 479 1.2% 1.2% 414 3.3% 4,675 65 -10.6% 45 219 265
States
Worldwide
less 895 25.8% 17.6% 711 19.7% 7,897 184 9.9% 758 431 486
United
States
Worldwide 1,374 16.0% 11.3% 1,125 13.1% 12,572 249 3.7% 803 650 751
MasterCard
Debit
Programs
United 318 15.9% 15.9% 232 18.3% 5,547 86 9.7% 726 115 124
States
Worldwide
less 238 33.2% 22.6% 87 17.4% 1,332 151 25.9% 1,123 83 89
United
States
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(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.
GAAP Reconciliations
($ millions except percentages and per share data)
Three Months ended Three Months ended
September 30, 2009 September 30, 2008
Special Special
Actual Non -GAAP Actual Non -GAAP
Items Items
Litigation $ 6 $ (6 ) a $ - $ 828 $ (828 ) a $ -
settlements
Total
operating 691 (6 ) 685 1,617 (828 ) 790
expenses
Operating
income 674 6 680 (279 ) 828 548
(loss)
Operating 49.4 % 49.8 % (20.9 %) 41.0 %
Margin
Income
(loss)
before 673 6 680 (294 ) 828 534
income
taxes
Income
taxes 221 2 224 (100 ) 312 212
(benefit)
Net Income $ 452 $ 4 $ 456 $ (194 ) $ 516 $ 322
(Loss)
Basic Net
Income $ 3.46 $ 0.03 $ 3.49 ($1.48 ) c $ 3.94 $ 2.46 c
(Loss) per
Share
Diluted Net
Income $ 3.45 $ 0.03 $ 3.48 ($1.48 ) c $ 3.94 $ 2.46 c
(Loss) per
Share
Nine Months ended Nine Months ended
September 30, 2009 September 30, 2008
Special Special
Actual Non -GAAP Actual Non -GAAP
Items Items
Litigation $ 7 $ (7 ) a $ - $ 2,477 $ (2,477 ) a $ -
settlements
Total
operating 2,008 (7 ) 2,002 4,764 (2,477 ) 2,287
expenses
Operating
income 1,792 7 1,799 (997 ) 2,477 1,480
(loss)
Operating 47.2 % 47.3 % (26.5 %) 39.3 %
Margin
Other
income 18 - 18 73 (75 ) b (2 )
(expense),
net
Total other
income (32 ) - (32 ) 169 (75 ) 94
(expense)
Income
(loss)
before 1,760 7 1,766 (828 ) 2,402 1,574
income
taxes
Income
taxes 591 2 594 (335 ) 913 578
(benefit)
Net Income $ 1,169 $ 4 $ 1,173 $ (493 ) $ 1,489 $ 996
(Loss)
Basic Net
Income $ 8.95 $ 0.03 $ 8.98 $ (3.76 ) c $ 11.34 $ 7.58 c
(Loss) per
Share
Diluted Net
Income $ 8.92 $ 0.03 $ 8.95 $ (3.76 ) c $ 11.32 $ 7.56 c
(Loss) per
Share
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 Actual Tax Rate Items Non-GAAP Tax Rate
percentages)
Three months ended
September 30, 2008:
Income (loss) before income $ (294 ) 34.1 % $ 828 $ 534 39.7 %
taxes
Income tax expense (100 ) 312 212
(benefit)
Net income (loss) $ (194 ) $ 516 $ 322
Nine months ended September
30, 2008:
Income (loss) before income $ (828 ) 40.4 % $ 2,402 $ 1,574 36.7 %
taxes
Income tax expense (335 ) 913 578
(benefit)
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.
Source: MasterCard Incorporated
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