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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, N.Y., May 2 /PRNewswire-FirstCall/ -- 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.

(Logo: http://www.newscom.com/cgi-bin/prnh/20061031/MCLOGO )

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 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(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 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.



                           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



                           MASTERCARD INCORPORATED
                         CONSOLIDATED BALANCE SHEETS
                                 (UNAUDITED)

                                                   March 31,    December 31,
                                                      2007          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



                           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              -



                MASTERCARD INCORPORATED OPERATING PERFORMANCE

                               For the 3 Months ended March 31, 2007

    All MasterCard Credit,                            Purchase        Purchase
     Charge and Debit           GDV    Growth  Growth   Vol.   Growth  Trans.
     Programs                  (Bil.)   (USD)  (Local) (Bil.) (Local)  (Mil.)
      Asia Pacific              $69     18.5%   15.1%   $47    20.2%     586
      Canada                     18     12.7%   14.2%    15    13.7%     188
      Europe                    141     25.0%   15.2%   104    15.9%   1,276
      Latin America              34     21.8%   23.9%    16    26.7%     354
      South Asia / Middle
       East / Africa              9     36.0%   47.0%     5    35.3%      81
      United States             237     15.7%   15.7%   187    18.0%   2,924
      Worldwide                 509     19.1%   16.4%   375    18.0%   5,408

     MasterCard Credit & Charge
      Programs
       United States            148      4.3%    4.3%   124     7.7%   1,423
       Worldwide less
        United States           218     20.9%   15.6%   167    18.6%   2,120
       Worldwide                366     13.6%   10.8%   291    13.7%   3,544

     MasterCard Debit Programs
       United States             90     41.0%   41.0%    63    45.3%   1,501
       Worldwide less
        United States            53     28.4%   23.5%    20    14.5%     364
       Worldwide                142     36.1%   34.0%    83    36.3%   1,864



    All MasterCard,
     Credit Charge         Cash             Cash                    Acceptance
     and Debit            Volume  Growth   Trans.  Accounts   Card  Locations
     Programs             (Bil.)  (Local)  (Mil.)   (Mil.)   (Mil.)  (Mil.)
      Asia Pacific         $22     5.8%     123      147      160     6.6
      Canada                 3    16.8%       5       27       33     0.7
      Europe                36    13.4%     223      146      156     7.8
      Latin America         18    21.5%     120       74       89     2.3
      South Asia / Middle
       East / Africa         4    65.3%      35       24       27     0.8
      United States         51     8.1%     240      315      370     6.8
      Worldwide            134    12.1%     746      733      835    25.1

    MasterCard Credit
     & Charge Programs
      United States         24   -10.2%      16      217      267
      Worldwide less
       United States        51     6.7%     242      363      406
      Worldwide             75     0.7%     257      580      673

    MasterCard Debit
     Programs
      United States         27    32.0%     224       98      103
      Worldwide less
       United States        32    29.8%     264       55       59
      Worldwide             59    30.8%     489      153      162


                                  For the 3 Months ended March 31, 2006

    All MasterCard Credit,                           Purchase         Purchase
     Charge and Debit          GDV    Growth  Growth   Vol.   Growth   Trans.
     Programs                 (Bil.)  (USD)   (Local) (Bil.) (Local)   (Mil.)
      Asia Pacific             $58     4.6%     6.9%    $38   14.3%      476
      Canada                    16    24.4%    17.3%     14   18.3%      168
      Europe                   113     7.1%    15.6%     83   15.4%    1,133
      Latin America             28    37.4%    27.9%     13   31.1%      294
      South Asia / Middle
       East / Africa             7    50.5%    53.3%      4   33.5%       64
      United States            205    13.1%    13.1%    158   14.7%    2,343
      Worldwide                427    12.3%    14.3%    310   15.8%    4,478

    MasterCard Credit
     and Charge Programs
      United States            142     7.6%     7.6%    115    9.3%    1,331
      Worldwide less
       United States           181    10.7%    14.5%    135   17.4%    1,820
      Worldwide                322     9.3%    11.4%    250   13.5%    3,151

    MasterCard Debit Programs
      United States             64    27.9%    27.9%     43   31.8%    1,013
      Worldwide less
       United States            41    15.6%    20.0%     17   13.8%      314
      Worldwide                105    22.8%    24.7%     60   26.3%    1,327



    All MasterCard, Credit        Cash             Cash
     Charge and Debit             Volume  Growth   Trans.  Accounts  Card
     Programs                    (Bil.)  (Local)  (Mil.)   (Mil.)   (Mil.)
      Asia Pacific                 $20     -4.7%    103      133      146
      Canada                         3     12.3%      5       24       30
      Europe                        29     16.2%    200      124      134
      Latin America                 15     25.3%    106       65       77
      South Asia / Middle
       East / Africa                 3    102.1%     22       17       20
      United States                 47      8.1%    205      290      344
      Worldwide                    117     10.7%    640      654      751

    MasterCard Credit
     and Charge Programs
      United States                 27      0.4%     16      210      257
      Worldwide less
       United States                45      6.8%    227      322      361
      Worldwide                     72      4.4%    243      531      618


    MasterCard Debit Programs
      United States                 20     20.2%    189       80       86
      Worldwide less
       United States                25     24.5%    208       42       46
      Worldwide                     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.


    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(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 (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.

SOURCE MasterCard Incorporated

CONTACT: Media Relations: Chris Monteiro, chris_monteiro@mastercard.com,
+1-914-249-5826, or Investor Relations: Barbara Gasper,
investor_relations@mastercard.com, +1-914-249-4565, both of MasterCard Incorporated