MasterCard Inc (MA)

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MasterCard Incorporated Reports First-Quarter 2008 Financial Results
- Net income of $398 million, or $3.01 per share, on a diluted basis
- Excluding a special item of $49 million, or $0.37 per share
- Including gains from sales of an investment security of $56 million, or $0.42 per share
- On a GAAP basis, net income of $447 million, or $3.38 per diluted share
- Net revenue growth of 29.2%, to $1.2 billion
- Gross dollar volume up 14.1%, purchase volume up 15.0%
PURCHASE, N.Y., April 29 /PRNewswire-FirstCall/ -- MasterCard Incorporated (NYSE: MA) today announced financial results for the first quarter of 2008. The company reported net income of $398 million, or $3.01 per share on a diluted basis, excluding a special item related to a $49 million after-tax gain from the termination of a customer business agreement. Including this special item, net income was $447 million, or $3.38 per share, on a diluted basis. Net income also incorporates after-tax gains of $56 million, or $0.42 per share on a diluted basis, from the remaining sales of the company's investment in Redecard S.A. in Brazil. The company's total other income, net income and earnings per share, excluding the special item, are non-GAAP financial measures that are reconciled to their most directly comparable GAAP measures in the accompanying financial tables.

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Net revenue for the first quarter of 2008 was $1.2 billion, a 29.2% increase versus the same period in 2007. Currency fluctuations (driven by movement of the euro and the Brazilian real relative to the U.S. dollar) contributed 5.1% of the increase in net revenue for the quarter. Fueling the higher net revenue in the first quarter versus the same period in 2007 were:

-- Growth in MasterCard's gross dollar volume, which increased 14.1%, on a
local currency basis, to $611 billion;
-- A 15.7% increase in the number of transactions processed, to 4.9
billion;
-- An increase in cross-border volumes of 23.6%; and
-- Pricing changes, primarily an increase in cross-border acquiring fees
implemented in January 2008, which contributed approximately 6
percentage points of the revenue growth.


Worldwide purchase volume during the quarter rose 15.0%, on a local currency basis, versus the first quarter of 2007, to $453 billion, driven by increased cardholder spending on a growing number of MasterCard cards. As of March 31, 2008, the company's financial-institution customers had issued 935 million MasterCard cards, an increase of 12.1% over the cards issued at March 31, 2007.

'We are very pleased with our first-quarter financial results, which reflect the strong positioning of our unified global business,' said Robert W. Selander, MasterCard president and chief executive officer. 'Regions outside the U.S., such as Latin America and South Asia, Middle East and Africa, are driving significant growth, and cross-border volumes remain healthy as cardholders continue to travel and prefer the use of electronic over paper- based forms of payment.

'MasterCard continues to see growth in the U.S. region despite continued economic uncertainty,' Selander stated. 'In this challenging economic environment, we are working closely with our customers to deliver the value and insights they have come to expect to help them meet their business objectives. We are committed to accelerating the global expansion of electronic payments, and are making investments to ensure we are properly aligned with our customers and merchants wherever they do business,' said Selander.

Total operating expenses increased 10.9%, to $666 million, during the first quarter of 2008 compared to the same period in 2007. Currency fluctuations contributed 3.3% of the increase in expenses for the first quarter of 2008. Growth in total operating expenses was driven by:

-- A 10.9% increase in general and administrative expenses resulting from
higher personnel costs, which were partially offset by foreign exchange
settlement gains. The increase in personnel costs was primarily
associated with the hiring of additional staff and contractors, mainly
in technology, customer-facing and product positions; currency
fluctuations represented 2.9 percentage points of the increase, and
-- An 11.6% increase in advertising and marketing expenses versus the
year-ago period, primarily due to the timing of expenses for European
sponsorship activity as well as investment in high-growth markets;
currency fluctuations represented 4.4 percentage points of the
increase.


Total other income was $173 million in the first quarter of 2008 versus $22 million in the first quarter of 2007, including the $75 million pre-tax gain from the termination of a customer business agreement. Excluding this special item, total other income increased $76 million versus the first quarter of 2007. This increase was driven primarily by $86 million in pre-tax gains from remaining sales of the company's investment in Redecard S.A. in Brazil, partially offset by other investment losses.

MasterCard's effective tax rate was 35.1% in the three months ended March 31, 2008, versus 36.0% in the comparable period in 2007. The company's tax rate was lower in the first quarter of 2008 due to tax reserves not increasing at the same level of the increase in pre-tax income.

Class A Share Repurchase Update

In April 2007, the MasterCard Board of Directors authorized a plan for the company to repurchase up to $500 million of its Class A common stock in open market transactions during 2007. On October 29, 2007, the Board amended the share repurchase plan to authorize the company to repurchase an incremental $750 million (an aggregate for the entire repurchase program of $1.25 billion) of its Class A common stock in open market transactions through June 30, 2008.

During the first quarter, approximately 1.5 million shares of Class A common stock had been repurchased at a cost of $294 million. As of April 29, 2008, the company repurchased approximately 557,000 additional shares of its Class A common stock at a cost of $129 million, for a total of $1.02 billion of the approved $1.25 billion completed.

First-Quarter 2008 Financial Results Conference Call Details

At 9:00 a.m. EDT today, the company will host a conference call to discuss its first-quarter 2008 financial results.

The dial-in information for this call is 888-713-4205 (within the U.S.) and 617-213-4862 (outside the U.S.) and the passcode is 15455901. 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 U.S.) and 617-801-6888 (outside the U.S.) and using passcode 18639831.

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.