Exhibit 99.1
MasterCard Incorporated Reports
First-Quarter 2007 Financial Results
· | Record quarterly net income up 69.6% to $215 million, or $1.57 per share, on a diluted basis |
· | Net revenues up 23.9% to $915 million |
· | Gross dollar volume up 16.4%; purchase volume up 18.0% |
Purchase, NY, May 2, 2007 – MasterCard Incorporated (NYSE:MA) today announced financial results for the first-quarter 2007. For the quarter, the company reported net income of $215 million, or $1.57 per share, on a diluted basis, the highest quarterly net income ever recorded by the company. Net revenues for the quarter were $915 million, a 23.9% increase versus the same period in 2006. Currency fluctuation (driven by the movement of the euro relative to the US dollar) contributed approximately 2.5% of the increase in revenues for the quarter.
Fueling the higher revenue in the first quarter versus the same period in 2006 was growth in MasterCard’s gross dollar volume (GDV), which increased 16.4%, on a local currency basis, to $509 billion; a 19.4% increase in the number of transactions processed to 4.2 billion; and, a restructuring of pricing, primarily cross-border transaction fees implemented in April 2006, which contributed approximately 5% of the revenue growth. Worldwide purchase volume rose 18.0%, on a local currency basis, during the quarter to $375 billion, driven by increased cardholder spending on a growing number of MasterCard cards. As of March 31, 2007, the company’s customers had issued 835 million MasterCard cards, an increase of 11.3% percent over the cards issued at March 31, 2006.
“We are very pleased with our first-quarter financial results, which reflect the highest quarterly net income in MasterCard’s history,” said Robert W. Selander, MasterCard president and chief executive officer. “These results continue to demonstrate the strength of our business model and growth in electronic forms of payment. Additionally, positive secular trends and business momentum, particularly in international markets, have contributed to a strong start to the year.
“This quarter’s strong volume growth, especially in markets within the South Asia/Middle East/Africa and Latin America regions, illustrates the success of our strategy and our ability to leverage our unique assets – our unified global structure, world renowned brands and advanced processing network – worldwide,” said Selander.
Total operating expenses increased 8.2%, to $601 million during the first quarter of 2007 compared to the same period in 2006. This was primarily driven by an increase in
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personnel costs related to the hiring of additional staff to strengthen the company’s capability to add value to its customers’ businesses, and higher professional fees primarily related to legal costs to defend outstanding litigation. Offsetting this increase was a 2.3% decrease in advertising and market development expenses reflecting a shift in planned spending to later quarters this year. Currency fluctuation contributed approximately 1.9% of the increase in expenses for the quarter.
Total other income was $22 million in the first quarter 2007 versus $10 million in the first quarter of 2006. The increase was primarily driven by a $16 million increase in investment income due to higher rates earned on higher cash and short-term investment balances. MasterCard’s effective tax rate of 36.0% for the three months ended March 31, 2007 versus the 34.3% rate experienced in the same period in 2006, increased primarily due to state income tax expense.
First-Quarter 2007 Financial Results Conference Call Details
At 9:00 a.m. EDT today, the company will host a conference call to discuss its first-quarter financial results.
The dial-in information for this call is 866-700-0133 (within the US) and 617-213-8831 (outside the US) and the passcode is 48239905. A replay of the call will be available for one week following the meeting. The replay can be accessed by dialing 888-286-8010 (within the US) and 617-801-6888 (outside the US) and using passcode 53583938.
The live call and replay, along with supporting materials, can also be accessed through the Investor Relations section of the company’s website at 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®, Maestro® and Cirrus®, MasterCard serves consumers and businesses in more than 210 countries and territories. For more information go to www.mastercard.com.
MasterCard Incorporated – Page 3
Forward-Looking Statements
Statements in this press release which are not historical facts, including statements about MasterCard’s plans, strategies, beliefs and expectations, are forward-looking and subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements speak only as of the date they are made. Accordingly, except for the company’s ongoing obligations under the U.S. federal securities laws, the company does not intend to update or otherwise revise the forward-looking information to reflect actual results of operations, changes in financial condition, changes in estimates, expectations or assumptions, changes in general economic or industry conditions or other circumstances arising and/or existing since the preparation of this press release or to reflect the occurrence of any unanticipated events. Such forward-looking statements include, without limitation:
· | the company’s ability to demonstrate the strength of its business model and continued growth in electronic forms of payment; |
· | continued positive secular trends and business momentum, particularly in international markets; and |
· | the company’s ability to illustrate the success of its strategy and leverage its unified global structure, world renowned brands and advanced processing network worldwide. |
Actual results may differ materially from such forward-looking statements for a number of reasons, including those set forth in the company’s filings with the Securities and Exchange Commission (SEC), including the company’s Annual Report on Form 10-K for the year ended December 31, 2006 and Current Reports on Form 8-K that it has filed with the SEC during 2007, as well as reasons including difficulties, delays or the inability of the company to achieve its strategic initiatives set forth above. Factors other than those listed above could also cause the company’s results to differ materially from expected results.
Contacts:
Media Relations: Chris Monteiro, chris_monteiro@mastercard.com, 914-249-5826
Investor Relations: Barbara Gasper, investor_relations@mastercard.com, 914-249-4565
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MASTERCARD INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March 31, | ||||||||
2007 | 2006 | |||||||
(In thousands, except per share data) | ||||||||
Revenues, net | $ | 915,103 | $ | 738,453 | ||||
Operating Expenses | ||||||||
General and administrative | 398,526 | 347,837 | ||||||
Advertising and market development | 178,451 | 182,683 | ||||||
Depreciation | 12,054 | 10,650 | ||||||
Amortization | 12,134 | 14,570 | ||||||
Total operating expenses | 601,165 | 555,740 | ||||||
Operating income | 313,938 | 182,713 | ||||||
Other Income (Expense) | ||||||||
Investment income, net | 36,248 | 20,692 | ||||||
Interest expense | (14,356 | ) | (10,640 | ) | ||||
Other income/(expense), net | (40 | ) | 152 | |||||
Total other income/(expense) | 21,852 | 10,204 | ||||||
Income before income taxes | 335,790 | 192,917 | ||||||
Income tax expense | 120,884 | 66,173 | ||||||
Net Income | $ | 214,906 | $ | 126,744 | ||||
Basic Net Income per Share | $ | 1.58 | $ | .94 | ||||
Basic Weighted Average Shares Outstanding | 135,847 | 134,969 | ||||||
Diluted Net Income per Share | $ | 1.57 | $ | .94 | ||||
Diluted Weighted Average Shares Outstanding | 136,594 | 134,969 | ||||||
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MASTERCARD INCORPORATED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, 2007 | December 31, 2006 | |||||||
(In thousands, except share data) | ||||||||
ASSETS |
| |||||||
Cash and cash equivalents | $ | 1,209,819 | $ | 1,185,080 | ||||
Investment securities, at fair value: | ||||||||
Trading | 5,050 | 12,261 | ||||||
Available-for-sale | 1,294,300 | 1,286,580 | ||||||
Accounts receivable | 450,372 | 451,261 | ||||||
Settlement due from members | 275,709 | 311,953 | ||||||
Restricted security deposits held for members | 112,371 | 109,897 | ||||||
Prepaid expenses | 163,541 | 130,849 | ||||||
Other current assets | 97,385 | 89,348 | ||||||
Total Current Assets | 3,608,547 | 3,577,229 | ||||||
Property, plant and equipment, at cost (less accumulated depreciation of $227,263 and $220,720) | 258,032 | 252,731 | ||||||
Deferred income taxes | 274,434 | 216,782 | ||||||
Goodwill | 220,291 | 217,013 | ||||||
Other intangible assets (less accumulated amortization of $320,269 and $309,110) | 281,806 | 271,373 | ||||||
Municipal bonds held-to-maturity | 192,989 | 193,477 | ||||||
Prepaid expenses | 263,239 | 235,654 | ||||||
Other assets | 106,815 | 118,211 | ||||||
Total Assets | $ | 5,206,153 | $ | 5,082,470 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Accounts payable | $ | 231,443 | $ | 278,656 | ||||
Settlement due to members | 223,970 | 286,059 | ||||||
Restricted security deposits held for members | 112,371 | 109,897 | ||||||
Obligations under U.S. merchant lawsuit and other litigation settlements – current | 117,275 | 117,275 | ||||||
Accrued expenses | 802,747 | 936,427 | ||||||
Other current liabilities | 123,937 | 83,276 | ||||||
Total Current Liabilities | 1,611,743 | 1,811,590 | ||||||
Deferred income taxes | 66,822 | 66,198 | ||||||
Obligations under U.S. merchant lawsuit and other litigation settlements | 368,869 | 359,640 | ||||||
Long-term debt | 229,685 | 229,668 | ||||||
Other liabilities | 323,168 | 246,395 | ||||||
Total Liabilities | 2,600,287 | 2,713,491 | ||||||
Commitments and Contingencies | ||||||||
Minority interest | 4,620 | 4,620 | ||||||
Stockholders’ Equity | ||||||||
Class A common stock, $.0001 par value; authorized 3,000,000,000 shares, 79,748,393 and 79,631,983 shares issued and outstanding, respectively | 8 | 8 | ||||||
Class B common stock, $.0001 par value; authorized 1,200,000,000 shares, 55,337,407 shares issued and outstanding, respectively | 6 | 6 | ||||||
Class M common stock, $.0001 par value, authorized 1,000,000 shares, 1,636 and 1,600 shares issued and outstanding, respectively | — | — | ||||||
Additional paid-in capital | 3,275,350 | 3,289,879 | ||||||
Accumulated deficit | (793,115 | ) | (1,029,196 | ) | ||||
Accumulated other comprehensive income, net of tax: | ||||||||
Cumulative foreign currency translation adjustments | 133,347 | 119,655 | ||||||
Defined benefit pension and other postretirement plans | (9,683 | ) | (11,402 | ) | ||||
Investment securities available-for-sale | (2,600 | ) | (3,065 | ) | ||||
Derivatives accounted for as hedges | (2,067 | ) | (1,526 | ) | ||||
Total accumulated other comprehensive income, net of tax | 118,997 | 103,662 | ||||||
Total Stockholders’ Equity | 2,601,246 | 2,364,359 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 5,206,153 | $ | 5,082,470 | ||||
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MASTERCARD INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31, | ||||||||
2007 | 2006 | |||||||
(In thousands) | ||||||||
Operating Activities | ||||||||
Net income | $ | 214,906 | $ | 126,744 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 24,188 | 25,220 | ||||||
Share based compensation | 8,425 | — | ||||||
Deferred income taxes | 19,444 | 6,723 | ||||||
Taxes related to share based compensation | (6,000 | ) | — | |||||
Excess tax benefit on share based compensation | (3,761 | ) | — | |||||
Accretion of imputed interest on litigation settlements | 9,229 | 10,382 | ||||||
Other | 2,396 | 3,138 | ||||||
Changes in operating assets and liabilities: | ||||||||
Trading securities | 7,211 | 3,958 | ||||||
Accounts receivable | 4,037 | 25,995 | ||||||
Settlement due from members | 40,211 | 20,682 | ||||||
Prepaid expenses | (31,694 | ) | (24,077 | ) | ||||
Other current assets | (11,496 | ) | 8,909 | |||||
Prepaid expenses, long-term | (25,971 | ) | (648 | ) | ||||
Accounts payable | (48,082 | ) | (12,706 | ) | ||||
Settlement due to members | (65,616 | ) | (20,149 | ) | ||||
Accrued expenses | (78,428 | ) | (143,724 | ) | ||||
Net change in other assets and liabilities | 11,975 | 10,189 | ||||||
Net cash provided by operating activities | 70,974 | 40,636 | ||||||
Investing Activities | ||||||||
Purchases of property, plant and equipment | (16,855 | ) | (5,625 | ) | ||||
Capitalized software | (19,248 | ) | (6,852 | ) | ||||
Purchases of investment securities available-for-sale | (1,022,330 | ) | (739,626 | ) | ||||
Proceeds from sales and maturities of investment securities available-for-sale | 1,013,249 | 654,148 | ||||||
Other investing activities | 1,077 | (37 | ) | |||||
Net cash used in investing activities | (44,107 | ) | (97,992 | ) | ||||
Financing Activities | ||||||||
Dividends paid | (12,157 | ) | — | |||||
Excess tax benefit on share based compensation | 3,761 | — | ||||||
Net cash used in financing activities | (8,396 | ) | — | |||||
Effect of exchange rate changes on cash and cash equivalents | 6,268 | 6,875 | ||||||
Net increase (decrease) in cash and cash equivalents | 24,739 | (50,481 | ) | |||||
Cash and cash equivalents – beginning of period | 1,185,080 | 545,273 | ||||||
Cash and cash equivalents – end of period | $ | 1,209,819 | $ | 494,792 | ||||
Non-Cash Financing Activities: | ||||||||
Dividends declaration | $ | 20,715 | — |
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MASTERCARD INCORPORATED OPERATING PERFORMANCE
For the 3 Months ended March 31, 2007 | |||||||||||||||||||||||||||||||
All MasterCard Credit, | GDV (Bil.) | Growth (USD) | Growth (Local) | Purchase Vol. (Bil.) | Growth (Local) | Purchase Trans. (Mil.) | Cash Volume (Bil.) | Growth (Local) | Cash Trans. (Mil.) | Accounts (Mil.) | Cards (Mil.) | Acceptance Locations (Mil.) | |||||||||||||||||||
Asia Pacific | $ | 69 | 18.5 | % | 15.1 | % | $ | 47 | 20.2 | % | 586 | $ | 22 | 5.8 | % | 123 | 147 | 160 | 6.6 | ||||||||||||
Canada | 18 | 12.7 | % | 14.2 | % | 15 | 13.7 | % | 188 | 3 | 16.8 | % | 5 | 27 | 33 | 0.7 | |||||||||||||||
Europe | 141 | 25.0 | % | 15.2 | % | 104 | 15.9 | % | 1,276 | 36 | 13.4 | % | 223 | 146 | 156 | 7.8 | |||||||||||||||
Latin America | 34 | 21.8 | % | 23.9 | % | 16 | 26.7 | % | 354 | 18 | 21.5 | % | 120 | 74 | 89 | 2.3 | |||||||||||||||
South Asia / Middle East / Africa | 9 | 36.0 | % | 47.0 | % | 5 | 35.3 | % | 81 | 4 | 65.3 | % | 35 | 24 | 27 | 0.8 | |||||||||||||||
United States | 237 | 15.7 | % | 15.7 | % | 187 | 18.0 | % | 2,924 | 51 | 8.1 | % | 240 | 315 | 370 | 6.8 | |||||||||||||||
Worldwide | 509 | 19.1 | % | 16.4 | % | 375 | 18.0 | % | 5,408 | 134 | 12.1 | % | 746 | 733 | 835 | 25.1 | |||||||||||||||
MasterCard Credit & Charge Programs | |||||||||||||||||||||||||||||||
United States | 148 | 4.3 | % | 4.3 | % | 124 | 7.7 | % | 1,423 | 24 | -10.2 | % | 16 | 217 | 267 | ||||||||||||||||
Worldwide less United States | 218 | 20.9 | % | 15.6 | % | 167 | 18.6 | % | 2,120 | 51 | 6.7 | % | 242 | 363 | 406 | ||||||||||||||||
Worldwide | 366 | 13.6 | % | 10.8 | % | 291 | 13.7 | % | 3,544 | 75 | 0.7 | % | 257 | 580 | 673 | ||||||||||||||||
MasterCard Debit Programs | |||||||||||||||||||||||||||||||
United States | 90 | 41.0 | % | 41.0 | % | 63 | 45.3 | % | 1,501 | 27 | 32.0 | % | 224 | 98 | 103 | ||||||||||||||||
Worldwide less United States | 53 | 28.4 | % | 23.5 | % | 20 | 14.5 | % | 364 | 32 | 29.8 | % | 264 | 55 | 59 | ||||||||||||||||
Worldwide | 142 | 36.1 | % | 34.0 | % | 83 | 36.3 | % | 1,864 | 59 | 30.8 | % | 489 | 153 | 162 | ||||||||||||||||
For the 3 Months ended March 31, 2006 | |||||||||||||||||||||||||||||||
All MasterCard Credit, | GDV (Bil.) | Growth (USD) | Growth (Local) | Purchase Vol. (Bil.) | Growth (Local) | Purchase Trans. (Mil.) | Cash Volume (Bil.) | Growth (Local) | Cash Trans. (Mil.) | Accounts (Mil.) | Cards (Mil.) | ||||||||||||||||||||
Asia Pacific | $ | 58 | 4.6 | % | 6.9 | % | $ | 38 | 14.3 | % | 476 | $ | 20 | -4.7 | % | 103 | 133 | 146 | |||||||||||||
Canada | 16 | 24.4 | % | 17.3 | % | 14 | 18.3 | % | 168 | 3 | 12.3 | % | 5 | 24 | 30 | ||||||||||||||||
Europe | 113 | 7.1 | % | 15.6 | % | 83 | 15.4 | % | 1,133 | 29 | 16.2 | % | 200 | 124 | 134 | ||||||||||||||||
Latin America | 28 | 37.4 | % | 27.9 | % | 13 | 31.1 | % | 294 | 15 | 25.3 | % | 106 | 65 | 77 | ||||||||||||||||
South Asia / Middle East / Africa | 7 | 50.5 | % | 53.3 | % | 4 | 33.5 | % | 64 | 3 | 102.1 | % | 22 | 17 | 20 | ||||||||||||||||
United States | 205 | 13.1 | % | 13.1 | % | 158 | 14.7 | % | 2,343 | 47 | 8.1 | % | 205 | 290 | 344 | ||||||||||||||||
Worldwide | 427 | 12.3 | % | 14.3 | % | 310 | 15.8 | % | 4,478 | 117 | 10.7 | % | 640 | 654 | 751 | ||||||||||||||||
MasterCard Credit and Charge Programs | |||||||||||||||||||||||||||||||
United States | 142 | 7.6 | % | 7.6 | % | 115 | 9.3 | % | 1,331 | 27 | 0.4 | % | 16 | 210 | 257 | ||||||||||||||||
Worldwide less United States | 181 | 10.7 | % | 14.5 | % | 135 | 17.4 | % | 1,820 | 45 | 6.8 | % | 227 | 322 | 361 | ||||||||||||||||
Worldwide | 322 | 9.3 | % | 11.4 | % | 250 | 13.5 | % | 3,151 | 72 | 4.4 | % | 243 | 531 | 618 | ||||||||||||||||
MasterCard Debit Programs | |||||||||||||||||||||||||||||||
United States | 64 | 27.9 | % | 27.9 | % | 43 | 31.8 | % | 1,013 | 20 | 20.2 | % | 189 | 80 | 86 | ||||||||||||||||
Worldwide less United States | 41 | 15.6 | % | 20.0 | % | 17 | 13.8 | % | 314 | 25 | 24.5 | % | 208 | 42 | 46 | ||||||||||||||||
Worldwide | 105 | 22.8 | % | 24.7 | % | 60 | 26.3 | % | 1,327 | 45 | 22.5 | % | 397 | 122 | 133 |
Note that the figures in the preceding tables may not sum due to rounding; growth represents change from the comparable year-ago period.
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Footnote
Set forth above is information regarding the performance results for the three months ended March 31, 2007 and March 31, 2006 for the payment programs of MasterCard International Incorporated and MasterCard Europe sprl (collectively, “MasterCard”), the principal operating subsidiaries of MasterCard Incorporated.
The tables set forth the gross dollar volume (“GDV”), purchase volume, cash volume and the number of purchase transactions, cash transactions, accounts, cards and acceptance locations on a regional and global basis for MasterCard®-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 (including Personal Identification Number (PIN) point-of-sale) with MasterCard-branded cards for the relevant period; and “cash volume” means the aggregate dollar amount of cash disbursements obtained with MasterCard-branded cards for the relevant period. The number of cards includes virtual cards, which are MasterCard-branded payment accounts in connection with which functional cards are not generally issued. Acceptance locations include merchant locations, ATMs and other locations where cash may be obtained.
The MasterCard payment product is comprised of credit, charge and debit programs, and data relating to each type of program is included in the tables. Debit programs include MasterCard-branded debit programs where the primary means of cardholder validation at the point of sale is for cardholders either to sign a sales receipt or enter a PIN. The tables include information with respect to transactions involving MasterCard-branded cards that are not processed by MasterCard and transactions for which MasterCard does not earn significant revenues, including PIN point-of-sale volumes for MasterCard-branded debit programs in the U.S. region and credit programs in the Asia Pacific region.
Information denominated in U.S. dollars is calculated by applying an established U.S. dollar/local currency exchange rate for each local currency in which MasterCard volumes are reported. These exchange rates are calculated on a quarterly basis using the average exchange rate for each quarter. However, MasterCard reports period-over-period rates of change in purchase volume and cash volume on the basis of local currency information, in order to eliminate the impact of changes in the value of foreign currencies against the U.S. dollar in calculating such rates of change.
The data set forth in the GDV, purchase volume, purchase transactions, cash volume and cash transactions columns is derived from information provided by MasterCard members that is subject to verification by MasterCard and partial cross-checking against information provided by MasterCard’s transaction processing systems. The data set forth in the accounts, cards and acceptance locations columns is derived from information provided by MasterCard members and is subject to certain limited verification by MasterCard. Certain information with respect to acceptance locations is provided by third parties and has not been independently verified by MasterCard. All data is subject to revision and amendment by MasterCard’s members subsequent to the date of its release. A portion of the data set forth in the accounts and cards columns reflects the impact of routine portfolio changes among members and other practices that may lead to over counting of the underlying data in certain circumstances.
GDV and cash volume in the Asia Pacific region for the three months ended March 31, 2007 are lower due to management’s decision to no longer include commercial funds transfers in China, which are generally transactions that facilitate the transfer of funds between bank branches, but do not involve traditional cash withdrawals or balance transfers, in the calculation of GDV. Data for the comparable period in 2006 has been restated to be consistent with this approach.
Performance information for prior periods may be found in the "Investor Relations" section of MasterCard’s website at www.mastercard.com.
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