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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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13-4172551
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(State or other jurisdiction of
incorporation or organization)
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(IRS Employer
Identification Number)
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2000 Purchase Street
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10577
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Purchase, NY
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(Zip Code)
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(Address of principal executive offices)
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Large accelerated filer
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x
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Accelerated filer
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o
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Non-accelerated filer
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o
(do not check if a smaller reporting company)
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Smaller reporting company
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o
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Page
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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the Company's focus on personal consumption expenditures, the trend towards electronic forms of payment and growing MasterCard's share in electronic payments, including with innovative solutions and new technology;
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the Company’s focus on growing its credit, debit, prepaid, commercial and payment transaction processing offerings;
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the Company’s focus on diversifying its business (including seeking new areas of growth, expanding acceptance points and maintaining unsurpassed acceptance and successfully working with new business partners);
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the Company’s focus on building new businesses through technology and strategic efforts and alliances with respect to e-Commerce, mobile and other initiatives;
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the Company's focus on chip-enabled technology;
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the stability of economies around the globe;
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the Company’s advertising and marketing strategy and investment;
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the potential reduction in the Company’s tax rate over time;
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the Company's belief that its existing cash balances, its cash flow generating capabilities, its borrowing capacity and its access to capital resources are sufficient to satisfy its future operating cash needs, capital asset purchases, outstanding commitments and other liquidity requirements associated with its existing operations and potential litigation obligations; and
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the manner and amount of purchases by the Company pursuant to its share repurchase program, dependent upon price and market conditions.
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we track trends in personal consumption expenditures;
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we focus on the trend within the global payments industry from paper-based forms of payment, such as cash and checks, toward electronic forms of payment (such as payment card transactions); and
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we seek to grow our share in electronic payments, including with innovative solutions and new technology.
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grow our core businesses globally, including credit, debit, prepaid, commercial and processing payment transactions over the MasterCard Worldwide Network,
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diversify our business by seeking new areas of growth in markets around the world, expanding points of acceptance for our brands throughout the world, seeking to maintain unsurpassed acceptance, and working with new partners such as merchants, government agencies and telecommunications companies, and
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build new businesses through technology and continued strategic efforts and alliances with respect to innovative payment methods such as electronic commerce (e-Commerce) and mobile capabilities.
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Paper-based payments - cash, personal checks, money orders, official checks, travelers cheques and other paper-based means of transferring value;
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Card-based payments - credit cards, charge cards, debit and deferred debit cards (including cash access or Automated Teller Machine (“ATM”) cards), prepaid cards and other types of cards;
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Contactless, mobile and web-based payments - contactless payments, electronic payments through mobile phones and other handheld devices using a variety of applications, and e-Commerce transactions on the Internet and through web browsers; and
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Other Electronic Payments - wire transfers, electronic benefits transfers, bill payments and automated clearing house payments, among others.
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credit or charge cards typically access a credit account that either requires payment of the full balance within a specified period (a charge card) or that permits the cardholder to carry a balance in a revolving credit account (a credit card);
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debit cards typically access a deposit account or other account with accessible funds maintained by the cardholder; and
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prepaid cards typically access previously-funded monetary value.
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“signature” transactions that typically require a cardholder to sign a sales receipt as the primary means of validation at the point of interaction (other than circumstances, such as with respect to low value purchases, where a signature is not necessary),
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“PIN-based” transactions that require the cardholder to use a PIN for verification which can be validated by the issuer at their processing site and
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transactions using chip-enabled cards and point of interaction devices which allow for automatic authentication between the card and device (as well as, depending on the card or device, signature or PIN authentication).
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Transaction Switching - Authorization, Clearing and Settlement.
MasterCard provides transaction switching (authorization, clearing and settlement) through the MasterCard Worldwide Network.
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Authorization
. Authorization refers to the process by which a transaction is routed to the issuer for approval and then a decision whether or not to approve the transaction is made by the issuer or, in certain circumstances such as when the issuer's systems are unavailable or cannot be contacted, by MasterCard or others on behalf of the issuer in accordance with either the issuer's instructions or applicable rules (also known as "stand-in"). Our standards, which may vary across regions, establish the circumstances under which merchants and acquirers must seek authorization of transactions.
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Clearing
. Clearing refers to the exchange of financial transaction information between issuers and acquirers after a transaction has been successfully conducted at the point of interaction. MasterCard clears transactions among customers through our central and regional processing systems. MasterCard clearing solutions can be managed with minimal system development, which has enabled us to accelerate our customers' ability to develop customized programs and services.
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Settlement
. Once transactions have been authorized and cleared, MasterCard helps to settle the transactions by facilitating the exchange of funds between parties. Once clearing is completed, a daily reconciliation is provided to each customer involved in settlement, detailing the net amounts by clearing cycle and a final settlement position. The actual exchange of funds takes place between a settlement bank, designated by the customer and approved by MasterCard, and a settlement bank chosen by MasterCard. Customer settlement occurs in U.S. dollars or in a limited number of other currencies in accordance with our established rules.
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Cross-Border and Domestic Processing.
The MasterCard Worldwide Network provides our customers with a flexible structure that enables them to support processing across regions and for domestic markets. The network processes transactions throughout the world on our branded products where the merchant country and cardholder country are different (cross-border transactions). MasterCard processes transactions denominated in more than 150 currencies through our global system, providing cardholders with the ability to utilize, and merchants to accept, MasterCard cards and other payment devices across multiple country borders. For example, we may process a transaction in a merchant's local currency; however the charge for the transaction would appear on the cardholder's statement in the cardholder's home currency. MasterCard also provides domestic (or intra-country) transaction processing services to customers in every region of the world, which allow customers to facilitate payment transactions between cardholders and merchants throughout a particular country. We process most of the cross-border transactions using MasterCard, Maestro and Cirrus-branded cards and process the majority of MasterCard-branded domestic transactions in the United States, United Kingdom, Canada, Brazil and a select number of other smaller countries. Outside of these countries, most intra-country (as opposed to cross-border) transaction activity conducted with our branded payment products is authorized, cleared and/or settled by our customers or other processors without the involvement of the MasterCard Worldwide Network. We continue to invest in our network and build relationships to expand opportunities for domestic transaction processing. In particular, the Single European Payment Area (“SEPA”) initiative creates an open and competitive market in many European countries that were previously mandated to process domestic debit transactions with domestic processors. As a result, in addition to cross-border transactions, MasterCard now processes some domestic debit transactions in nearly every SEPA country.
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Extended Processing Capabilities.
In addition to transaction switching, MasterCard continually evaluates and invests in ways to strategically extend our processing capabilities in the payment value chain by seeking to provide our customers with an expanded suite of payment processing solutions that meet the unique processing needs of their markets. Examples include:
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MasterCard Integrated Processing Solutions® (IPS).
MasterCard Integrated Processing Solutions (“IPS”) is a debit and prepaid issuer processing platform designed to provide medium to large global issuing customers with a complete processing solution to help create differentiated products and services and allow quick deployment of payments portfolios across banking channels. Through a single processing platform, IPS can, among other things, authorize debit and prepaid transactions, assist issuers in managing risk using fraud detection tools, manage an issuer's card base, and manage and monitor an issuer's ATMs. The proprietary MasterCard Total Portfolio View™ provides a user-friendly customer interface to IPS, delivering aggregate cardholder intelligence across accounts and product lines to provide our customers with a view of information that can help them customize their products and programs. We continue to develop opportunities to further enhance our IPS offerings and global presence.
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Internet Payment Gateways
. MasterCard provides e-Commerce processing solutions through internet payment gateways, which are interfaces between the merchant and its acquirer as a transaction moves to a payments network. Our gateways include our MasterCard Internet Gateway Service (MiGS), which provides gateway
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Strategic Alliances
. We have invested in strategic alliances to pursue opportunities in prepaid and acquirer and third-party processing both through joint ventures and minority investments. These alliances include: (1) Prepay Solutions, a joint venture with Edenred (previously named Accor Services) which supports prepaid processing in Europe, (2) Strategic Payment Services, which provides acquirer processing in Asia Pacific, (3) ElectraCard Services, which provides third-party processing services and software, as well as switching solutions, in Asia Pacific, the Middle East and Africa, (4) Trevica, which provides third-party issuer processing services in Poland and other central and eastern European markets and (5) Mobile Payment Solutions (“MPS”), which provides complete processing solutions for mobile payments around the globe.
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United States
. We offer customized programs to customers in the United States to address specific consumer segments. Our consumer credit programs include Standard (general purpose cards targeted to consumers with basic credit card needs), Gold and Platinum (cards featuring higher credit lines and spending limits and a varying level of enhanced services) and World and World Elite MasterCard® (cards offered to affluent consumers which feature a wider range of enhanced services).
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Regions Outside of the United States.
MasterCard makes available to customers outside of the United States a variety of consumer card programs in selected markets throughout the world. Examples of such programs include MasterCard Electronic™ cards (which offer additional control and risk management features designed to curb fraud and control exposure in high risk markets) and cards targeted to affluent consumers (such as Platinum MasterCard® and MasterCard Black™ cards in Latin America, World and World Elite MasterCard® cards in Europe and Canada and Platinum and World MasterCard® cards in Asia Pacific, Middle East and Africa (“APMEA”)).
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General Services.
All MasterCard credit cards include services, such as lost/stolen card reporting, emergency card replacement and emergency cash advance, which are generally arranged by MasterCard and are provided through third-party service providers.
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MasterCard-branded Debit Card.
MasterCard-branded debit programs issue cards which include functionality for signature authenticated transactions, as well as PIN-based functionality. For the year ended December 31, 2011, our MasterCard-branded debit programs generated approximately $1.2 trillion in GDV globally, representing 36% of our total GDV for this period. As of December 31, 2011, the MasterCard brand mark appeared on approximately 354 million debit cards worldwide, representing 20.1% growth from December 31, 2010. MasterCard-branded debit card programs are offered in the United States, and are also offered as a complement to existing Maestro-branded debit programs.
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Maestro-branded Debit Card.
Maestro is our global PIN-based debit program, and is the only PIN-based solution that operates globally. Some Maestro cards also feature signature functionality. As of December 31, 2011, the Maestro brand mark appeared on approximately 752 million cards worldwide, representing 14.8% growth from December 31, 2010. As of December 31, 2011, Maestro was accepted for purchases at more than 14.1 million merchant locations globally. Our Maestro brand has a leading position among PIN-based debit brands in many markets throughout the world, particularly in Europe. The strong presence of Maestro in Europe positions us well as the SEPA initiative creates a more open and competitive payment market in many European countries that had been previously mandated to process domestic debit transactions with domestic processors. The global acceptance of Maestro contributes to the growth of our debit business and adds value to the services that we provide to our customers.
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MasterCard Global ATM Solutions.
Cirrus is our primary global cash access brand. Any debit, credit or ATM-accessible prepaid card bearing the MasterCard, Maestro or Cirrus logos could have had access to cash and account information at approximately 1.9 million participating ATMs around the world as of December 31, 2011. MasterCard Global ATM Solutions provides domestic (in-country) and cross-border access to cards allowing for varied types of transactions, including cash withdrawal (deposit accounts), cash advance (credit accounts), cash drawdown (prepaid accounts), balance inquiries, account transfers and deposits at ATMs that participate in the MasterCard Worldwide Network.
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government, which includes programs targeted to achieve cost savings and efficiencies by moving traditional paper disbursement methods to electronic solutions in government programs such as Social Security payments, unemployment benefits and others;
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corporate, which includes programs targeted to achieve cost savings and efficiencies by moving traditional paper disbursement methods to electronic solutions in business applications such as payroll, health savings accounts and others; and
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consumer reloadable, which includes programs to address the payment needs of individuals without formal banking relationships, individuals who are not traditional users of credit or debit cards or individuals who want to segment funds for security or convenience purposes, such as travel.
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e-Commerce
. e-Commerce involves the purchase and sale of goods over the Internet. Our initiatives focus on:
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the development of e-Commerce capability through internet payment gateways (including DataCash and MiGS) to support growth in the e-Commerce area,
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the development of programs and services intended to drive GDV and transactions and to improve the consumer experience, including: (1) the development of OpenAPI, our application programming interface through which we can more easily integrate with our customers to deliver our products and solutions; and (2) expanding the use of MasterCard-branded cards for e-Commerce transactions, including by enabling Maestro cards for this purpose, and
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the development of tools to help customers prevent fraud over the Internet.
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Contactless Payment Solutions
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MasterCard PayPass, our “contactless” payment solution, utilizes radio frequency, or near-field communication (NFC) technology, to securely transmit payment details wirelessly through payment devices to PayPass-branded contactless-enabled payment terminals for processing through the MasterCard Worldwide Network. This technology enables consumers simply to tap their payment card or other payment device, such as a key fob, wristband or PayPass tag that adheres to the back of a mobile device on a PayPass-enabled terminal to complete a transaction. Our mobile contactless payment solution, MasterCard Mobile PayPass, is used to enable consumers to use their mobile devices in a similar way through integrated payment solutions. Our PayPass program primarily targets everyday purchases that rely on speed and convenience (such as supermarkets, fast food restaurants, parking, and transit). As of December 31, 2011, PayPass programs have been rolled out in 37 countries worldwide.
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Mobile
. MasterCard works with customers and leading technology companies to develop products and solutions for mobile commerce payments. These initiatives generally focus on:
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Mobile Wallets and Mobile Alliances:
MasterCard works with strategic partners to develop infrastructure and applications to enable smartphones with MasterCard Mobile PayPass, our mobile contactless payment solution, to provide integrated payment solutions, or “digital wallets”, which enable consumers to securely use their phones to make payments and obtain other related services. Recently, MasterCard has partnered with Google, First Data and Citibank in the United States to launch a digital wallet featuring an integrated MasterCard prepaid card. MasterCard has also partnered with our customers in Korea, the United Kingdom and Turkey to launch digital wallets enabled by MasterCard Mobile PayPass. In addition, MasterCard has licensed Mobile PayPass to ISIS (a joint venture formed in the United States by AT&T, Verizon and T-Mobile) and to others to ensure that third-party digital wallets are embedded with MasterCard payment functionality.
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Mobile Money Services:
MasterCard provides various services to customers to enable consumers to pay from any type of mobile phone. These services include linking mobile accounts to virtual MasterCard account numbers to allow subscribers (many of whom do not have traditional payment cards) to shop online, enabling person-to-person transfers (including MasterCard's money transfer solution, MasterCard MoneySend®) on
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Value-Added Services
. MasterCard develops services designed to support and enhance its products and solutions. MasterCard inControl® is an innovative platform featuring an array of advanced authorization, transaction routing and alert controls and virtual card number capabilities that uses the functionality of the MasterCard Worldwide Network and is designed to assist financial institutions in creating new and enhanced payment offerings. MasterCard offers several fraud detection and prevention solutions, including Expert Monitoring System®, a comprehensive suite of services designed to help its customers detect and prevent fraudulent activity.
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EMV and Chip Development
. MasterCard continues to pursue chip technology development in accordance with the EMV (the international standard for chip technology). We continue to work with our customers to help them replace traditional payment cards relying solely on magnetic stripe technology with chip-enabled payment cards that offer additional point-of-interaction functionality and the ability to provide value-added services to the cardholder. We are focused on broad migration towards chip-enabled technology as an opportunity to ensure the global interoperability of MasterCard brands, reduce potential fraud and improve consumers' experience in using electronic payments by providing greater security and control in their payment choices. We intend to continue to take steps to help realize these opportunities in the United States and around the world and maintain our competitive position. These steps include solidifying EMV technology as the foundation of future payment products and services and working with acquirers to develop the necessary infrastructure for a migration to EMV. We are also involved in a number of organizations that facilitate the development and use of EMV and chip-enabled cards globally. This includes participation with others in the industry in a “smart card” standards organization that maintains standards and specifications designed to ensure interoperability and acceptance of chip-based payment applications on a worldwide basis.
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We seek to increase the categories of merchants that accept products carrying our brands. In addition to our focus on expanding acceptance in e-Commerce and mobile commerce environments, we are also focused on using the functionality of the MasterCard Worldwide Network to expand acceptance in quick service businesses (such as fast food restaurants), transportation (such as commuter train systems, buses and taxis), and public sector payments (such as those involving taxes, fees, fines and tolls), among other categories.
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We seek to increase the number of payment channels in which MasterCard programs are accepted, such as by introducing MasterCard acceptance in connection with bill payment applications. We are working with customers to encourage consumers to make bill payments in a variety of categories including rent, utilities and insurance with their MasterCard-branded products.
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We seek to increase usage of our programs at selected merchants by sponsoring a wide range of promotional programs on a global basis. We also enter into arrangements with selected merchants under which these merchants receive performance incentives for the increased use of MasterCard-branded programs or indicating a preference for MasterCard-branded programs when accepting payments from consumers.
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Domestic assessments:
Domestic assessments are fees charged to issuers and acquirers based primarily on the volume of activity on cards that carry our brands where the acquirer country and the issuer country are the same.
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Cross-border volume fees:
Cross-border volume fees are charged to issuers and acquirers based on the volume of activity on cards that carry our brands where the acquirer country and issuer country are different.
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Transaction processing fees:
Transaction processing fees are charged for both domestic and cross-border transactions and are primarily based on the number of transactions.
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Other revenues:
Other revenues for other payment-related services include fees associated with fraud products and services, cardholder service fees, consulting and research fees, compliance and penalty fees, account and transaction enhancement services, holograms and publications.
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Rebates and incentives (contra-revenue):
Rebates and incentives are provided to certain MasterCard customers and are recorded as contra-revenue in the same period that performance occurs.
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Domestic or cross-border
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Signature-based or PIN-based
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Tiered pricing, with rates decreasing as customers meet incremental volume/transaction hurdles
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Geographic region or country
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Retail purchase or cash withdrawal
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Processed or not processed by MasterCard
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Year-over-year growth
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Year ended December 31, 2011
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U.S. $
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Local Currency
2
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Year ended December 31, 2010
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(in billions, except percentages)
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All MasterCard Branded Programs
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Asia Pacific/Middle East/Africa
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$
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805
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30.1
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%
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22.9
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%
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$
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619
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Canada
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119
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11.7
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%
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7.3
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%
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107
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Europe
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979
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21.0
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%
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16.7
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%
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809
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Latin America
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277
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25.5
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%
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22.6
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%
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220
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Worldwide less United States
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2,180
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24.2
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%
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19.1
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%
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1,755
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United States
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1,069
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10.4
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%
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10.4
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%
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968
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Worldwide
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$
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3,249
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19.3
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%
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16.1
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%
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$
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2,723
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All MasterCard Credit and Charge Programs
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Worldwide less United States
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$
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1,521
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21.2
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%
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16.0
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%
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$
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1,255
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United States
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543
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6.0
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%
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6.0
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%
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512
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Worldwide
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$
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2,064
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16.8
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%
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13.2
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%
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$
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1,767
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All MasterCard Debit and Prepaid Programs
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Worldwide less United States
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$
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659
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31.8
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%
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26.8
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%
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$
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500
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United States
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526
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15.4
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%
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15.4
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%
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456
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Worldwide
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$
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1,185
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24.0
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%
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21.5
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%
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$
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956
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Year ended December 31, 2011
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Year-over-year growth
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Year ended December 31, 2010
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(in millions, except percentages)
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Processed Transactions
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27,265
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18.3
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%
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23,052
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General Purpose Payment Card Industry.
Within the general purpose payment card industry, we face substantial and increasingly intense competition worldwide from systems such as Visa (including Plus® Electron and Interlink), American
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Particular Segments.
We face competition with respect to particular segments of the payment card industry, including:
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Debit.
In the debit card sector, we also encounter substantial and increasingly intense competition from ATM and point-of-sale debit networks in various countries, such as Interlink™, Plus and Visa Electron (owned by Visa Inc.), Star® (owned by First Data Corporation), NYCE® (owned by FIS), and Pulse™ (owned by Discover), in the United States; Interac in Canada; EFTPOS in Australia; and Bankserv in South Africa. In addition, in many countries outside of the United States, local debit brands serve as the main brands while our brands are used mostly to enable cross-border transactions, which typically represent a small portion of overall transaction volume.
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PIN-Based Debit Transactions.
In the United States, some of our competitors process a greater number of PIN-based debit transactions at the point of sale than we do. In addition, our business and revenues could be impacted adversely by the tendency among U.S. merchants to migrate from signature-based debit transactions to PIN-based debit transactions because we generally earn less revenue from the latter types of transactions. This tendency may be accelerated as a result of the Board of Governors of the Federal Reserve System (the “Federal Reserve”) implementing regulations associated with the Wall Street Reform and Consumer Protection Act (as defined and described below under “Government Regulation”). In addition, PIN-based debit transactions are more likely to be processed by other domestic ATM/debit point-of-sale networks rather than by us. See “Risk Factors-Business Risks-If we are unable to grow our debit business, particularly in the United States, we may fail to maintain and increase our revenue growth” in Part I, Item 1A of this Report.
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Private-Label.
Private-label cards, which can generally be used to make purchases solely at the sponsoring retail store, gasoline retailer or other types of merchants, also serve as another form of competition.
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End-to-End Payment Networks.
Our competitors include operators of proprietary end-to-end payment networks that have direct acquiring relationships with merchants and direct issuing relationships with cardholders, such as American Express and Discover. These competitors have certain advantages that we do not enjoy. Among other things, these competitors do not require formal interchange fees to balance payment system costs among issuers and acquirers, because they typically have direct relationships with both merchants and cardholders. Interchange fees, which are a characteristic of four-party payments systems such as ours, are subject to increased regulatory and legislative scrutiny worldwide. See “Risk Factors-Legal and Regulatory Risks-Interchange fees and related practices have been receiving significant and increasingly intense legal, regulatory and legislative scrutiny worldwide, and the resulting decisions, regulations and legislation may have a material adverse impact on our revenue, our prospects for future growth and our overall business, financial condition and results of operations” in Part I, Item 1A of this Report. To date, operators of end-to-end payment networks have generally avoided the same regulatory and legislative scrutiny and litigation challenges we face because they do not utilize formal interchange fees. Accordingly, these operators may enjoy a competitive advantage over four-party payments systems.
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Competition for Customer Business
. We compete intensely with other card networks for customer business. Globally, financial institutions typically issue both MasterCard and Visa-branded payment cards, and we compete with Visa for business on the basis of individual card portfolios or programs. Some of our customers also do business with American Express or Discover in the United States, and a number of our large customers now issue American Express and/or Discover-branded cards.
We also compete for new business partners with whom we seek to work, such as merchants, government agencies and telecommunication companies. See “Risk Factors-Business Risks-Our revenues, operating results, prospects for future growth and overall business may suffer because of substantial and increasingly intense competition worldwide in the global payments industry” in Part I, Item 1A of this Report. Our ability to compete in the global payments industry for customer business can be affected by the outcome of litigation, regulatory proceedings and legislative activity. For example, in October 2011, the Federal Reserve implemented regulations, pursuant to the enactment into law of the Wall Street Reform and Consumer Protection Act, prohibiting arrangements under which a debit card or
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Transaction Processors
. We face competition from transaction processors throughout the world, such as First Data Corporation and Total System Services, Inc., some of which are seeking to enhance their networks that link issuers directly with point-of-sale devices for payment card transaction authorization and processing services. Certain of these transaction processors could potentially displace MasterCard as the provider of these payment processing services.
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|
New Entrants and Alternative Payment Systems
. We also compete against relatively new entrants and alternative payment providers, such as PayPal® (a business segment of eBay), which have developed payment systems in e-Commerce and across mobile devices. While PayPal is an established and important player in Internet payments, this is an increasingly competitive area, as evidenced by the proliferation of new online competitors. Among other services, these competitors provide Internet payment services that can be used to buy and sell goods online, and services that support payments to and from deposit accounts or proprietary accounts for Internet, mobile commerce and other applications. A number of these new entrants rely principally on the Internet and potential wireless communication networks to support their services, and may enjoy lower costs than we do. The payment card industry is also facing changes in services and technology related to mobile payments and emerging competition from mobile operators and handset manufacturers. Micro-payments on social networks such as Facebook® are relatively small today but have the potential to grow rapidly, representing the potential for competition from a new payment form.
|
•
|
Pricing.
We face increasingly intense competitive pressure on the prices we charge our customers. We seek to enter into business agreements with customers through which we offer incentives and other support to issue and promote our cards. In order to stay competitive, we may have to increase the amount of rebates and incentives we provide to our customers and merchants, as we have in the last several years. See “Risk Factors-Business Risks-We face increasingly intense competitive pressure on the prices we charge our customers, which may materially and adversely affect our revenue and profitability” in Part I, Item 1A.
|
•
|
Banking Industry Consolidation.
The banking industry has undergone substantial accelerated consolidation over the last several years, and we expect some consolidation to continue in the future. Consolidations have included customers with a substantial MasterCard portfolio being acquired by institutions with a strong relationship with a competitor. Significant ongoing consolidation in the banking industry may result in a substantial loss of business for MasterCard. The continued consolidation in the banking industry, whether as a result of an acquisition of a substantial MasterCard portfolio by an institution with a strong relationship with a competitor or the combination of two institutions with which MasterCard has a strong relationship, would also produce a smaller number of large customers, which generally have a greater ability to negotiate pricing discounts with MasterCard. Consolidations could prompt our customers to renegotiate our business agreements to obtain more favorable terms. This pressure on the prices we charge our customers could materially and adversely affect our revenue and profitability. See “Risk Factors- Business Risks-Additional consolidation or other changes in or affecting the banking industry could result in a loss of business for MasterCard and create pressure on the fees we charge our customers, resulting in lower prices and/or more favorable terms for our customers, which may materially and adversely affect our revenue and profitability” in Part I, Item 1A.
|
•
|
the ability to develop and implement competitive new card programs, systems and technologies in both physical and virtual environments;
|
•
|
In the European Union, in January 2012, the European Commission issued a "Green-Paper" (typically the first step in the European legislative process) identifying a number of concerns with the payments industry, including concerns about interchange fees. In February 2012, representatives of the European Commission stated publicly that the European Commission intends to propose legislation based on some elements included within the Green Paper in early 2013.
|
•
|
In Brazil, in December 2011, the Central Bank of Brazil (together with competition agencies in Brazil) issued a follow-up to its May 2010 report, providing an analysis of the evolution of the payment card industry and market. The report includes indications that it is closely monitoring trends with respect to interchange fees and the cost of acceptance in general, and raises questions about the impact of the no- surcharge rule in the Brazilian consumer protection code.
|
•
|
In Canada, there has been increasing attention by policymakers on payments, and specifically the cost of acceptance, which includes interchange fees. In 2010, the Canadian Department of Finance implemented a voluntary “Code of Conduct” on related issues for payment card industry participants in Canada, by which MasterCard voluntarily agreed to abide. In 2011, the Minister of Finance formed a task force to make non-binding recommendations with respect to the future of Canadian payments, including a focus on the cost of acceptance. The task force issued a preliminary report which included a broad recommendation for greater oversight over retail payments. It is anticipated that the Department of Finance will issue a report in response to the task force's recommendation in early 2012.
|
•
|
In Italy in 2011, the Italian legislature adopted a law requiring companies involved in providing electronic payments (including MasterCard) to negotiate lower merchant discount rates and interchange fees with merchants.
|
•
|
In Nigeria, in August 2011, the Central Bank of Nigeria announced new guidelines related to point of sale card acceptance services, prescribing certain minimum standards and requirements for payments industry participants, including card networks. These guidelines include, among other things, limiting merchant discount rates, which affects the ability to set interchange rates.
|
•
|
In the European Union, in December 2007, the European Commission issued a negative decision (which we have appealed to the General Court of the European Union and we are awaiting a judgment) with respect to our cross-border interchange fees for consumer credit and debit cards under European Union competition rules.
|
•
|
In Australia, the Reserve Bank of Australia enacted regulations in 2002 (which have been subsequently reviewed and not withdrawn) controlling the costs that can be considered in setting interchange fees for four-party payment card systems such as ours.
|
•
|
In the United Kingdom, in February 2007, the Office of Fair Trading commenced a new investigation (which has been suspended pending the outcome of our appeal of the European Commission decision) of our current U.K. credit card interchange fees and so-called “immediate debit” cards to determine whether such fees contravene U.K. and European Union competition law.
|
•
|
In Poland, in January 2007, the Polish Office for Protection of Competition and Consumers issued a decision that our domestic interchange fees are unlawful under Polish competition law, and imposed fines on our licensed financial institutions - the decision is currently being appealed.
|
•
|
In Hungary, MasterCard Europe is appealing the Hungarian Competition Office December 2009 decision (which has been stayed) ruling that MasterCard Europe's historic domestic interchange fees violate Hungarian competition law and fining MasterCard Europe approximately U.S. $3 million.
|
•
|
In Italy, MasterCard Europe appealed the November 2010 decision of the Italian Competition Authority (the “ICA”) ruling that MasterCard Europe's domestic interchange fees violate European Union competition law and fining MasterCard 2.7 million euro - the decision was overturned and MasterCard Europe is awaiting the results of the ICA's appeal.
|
•
|
In Canada, in addition to the legislative activity described above, in December 2010 the Canadian Competition Bureau filed an application with the Canadian Competition Tribunal to strike down rules related to MasterCard's interchange fees, including its “honor all cards” and “no surcharge” rules.
|
•
|
In South Africa, in September 2010, MasterCard was informed by the South African Reserve Bank that it intended to appoint an independent consultant to make a recommendation on a simplified interchange structure for all payment systems in South Africa.
|
•
|
Anti-Money Laundering and Anti-Terrorism
- MasterCard is subject to anti-money laundering regulation, such as Section 352(a) of the USA PATRIOT Act in the United States and an anti-money laundering law enacted in India (which imposes requirements on payment systems, such as MasterCard's, and their customers). In addition, regulations imposed by OFAC impose restrictions on financial transactions with certain countries and with persons and entities included on the SDN List. It is possible that transactions that do not comply with OFAC sanctions may be processed through our payment system, and that our reputation may suffer due to some of our financial institutions' association with these countries or the existence of any such transactions, which in turn could have a material adverse effect on the value of our stock.
|
•
|
Government-Imposed Market Participation Regulations
- Several countries have implemented, or are authorized to implement, payment systems regulation, such as the Indian Payments and Settlement Systems Act 2007, under which payment system operators, such as MasterCard, operate under the authority and broad oversight of the Reserve Bank of India. Increased regulatory focus in this area could result in additional obligations or restrictions with respect to the types of products that we may offer to consumers, the countries in which our cards may be used and the types of cardholders and merchants who can obtain or accept our cards.
|
•
|
Issuer Practice Legislation and Regulation
- Issuer practices legislation and regulation, including the Credit CARD Act (which was signed into law in the United States in May 2009 and is being implemented through regulations issued by the Federal Reserve), are having a significant impact on the disclosures made by our customers and on our customers' account terms and business practices by, among other things, making it more difficult for credit card issuers to price credit cards for future credit risk and significantly affecting the pricing, credit allocation, and business models of most major
|
•
|
Regulation of Internet Transactions
- Regulation of Internet transactions include legislation enacted by the U.S. Congress (and applicable to payment system participants, including MasterCard and our customers in the United States) requiring the coding and blocking of payments for certain types of Internet gambling transactions, as well as various additional legislative and regulatory activities with respect to Internet transactions which are being considered in the United States.
|
•
|
Parties that process our transactions in certain countries may try to eliminate our position as an intermediary in the payment process. For example, merchants could process transactions directly with issuers, or processors could process transactions directly between issuers and acquirers. Large scale consolidation within processors could result in these processors developing bilateral agreements or in some cases processing the entire transaction on their own network, thereby dis-intermediating MasterCard.
|
•
|
Rapid and significant technological changes could occur, resulting in new and innovative payment programs that could place us at a competitive disadvantage and that could reduce the use of MasterCard-branded cards.
|
•
|
Competitors, customers, governments and other industry participants may develop products that compete with or replace value-added services we currently provide to support our transaction processing which could, if significant numbers of cardholders choose to use them, replace our own processing services or could force us to change our pricing or practices for these services.
|
•
|
Participants in the payments industry may merge, create joint ventures or form other business combinations that may strengthen their existing business services or create new payment services that compete with our services.
|
•
|
Declining economies, foreign currency fluctuations and the pace of economic recovery can change consumer spending behaviors; for example, a significant portion of our revenues is dependent on cross-border travel patterns, which may continue to change.
|
•
|
Constriction of consumer and business confidence, such as in recessionary environments and those markets
|
•
|
Our customers may restrict credit lines to cardholders or limit the issuance of new cards to mitigate increasing cardholder defaults.
|
•
|
Uncertainty and volatility in the performance of our customers’ businesses may make estimates of our revenues, rebates, incentives and realization of prepaid assets less predictable.
|
•
|
Our customers may implement cost reduction initiatives that reduce or eliminate payment card marketing or increase requests for greater incentives or greater cost stability.
|
•
|
Our customers may decrease spending for value-added services.
|
•
|
Government intervention, including the effect of laws, regulations and/or government investments in our customers, may have potential negative effects on our business and our relationships with customers or otherwise alter their strategic direction away from our products.
|
•
|
Tightening of credit availability could impact the ability of participating financial institutions to lend to us under the terms of our credit facility.
|
•
|
Our customers may default on their settlement obligations, including due to an increased probability of sovereign defaults in several European countries causing a liquidity crisis for our customers. See Note 21 (Settlement and Other Risk Management) to the consolidated financial statements included in Part II, Item 8 of this Report for further discussion of our settlement exposure.
|
•
|
Our business and prospects, as well as our revenue and profitability, could be materially and adversely affected by consolidation of our customers. See “Additional consolidation or other changes in or affecting the banking industry could result in a loss of business for MasterCard and create pressure on the fees we charge our customers, resulting in lower prices and/or more favorable terms for our customers, which may materially and adversely affect our revenues and profitability” in Part I, Item 1A (Risk Factors) of this Report for further discussion.
|
|
§
|
|
the continuation of unprecedented economic events around the world in financial markets as well as political conditions and other factors unrelated to our operating performance or the operating performance of our competitors;
|
|
§
|
|
quarterly variations in our results of operations or the results of operations of our competitors;
|
|
§
|
|
changes in earnings estimates, investors' perceptions, recommendations by securities analysts or our failure to achieve analysts' earnings estimates;
|
|
§
|
|
the announcement of new products or service enhancements by us or our competitors;
|
|
§
|
|
announcements related to litigation, regulation or legislative activity;
|
|
§
|
|
potential acquisitions by us of other companies; and
|
|
§
|
|
developments in our industry.
|
|
§
|
|
our stockholders are not entitled to the right to cumulate votes in the election of directors;
|
|
|
|
|
|
§
|
|
holders of our Class A common stock are not entitled to act by written consent;
|
|
|
|
|
|
§
|
|
our stockholders must provide timely notice for any stockholder proposals and director nominations;
|
|
|
|
|
|
§
|
|
a vote of 80% or more of all of the outstanding shares of our stock then entitled to vote is required for stockholders to amend any provision of our bylaws;
|
|
|
|
|
|
§
|
|
Our board of directors is divided into three classes - although pursuant to our amended certificate of incorporation, a phase-out of these classes has begun and will be completed in 2013 (when each director will be elected each year, with only two-thirds of our directors to be elected in 2012);
|
|
|
|
|
|
§
|
|
any representative of a competitor of MasterCard or of the Foundation is disqualified from service on our board of directors;
|
|
|
|
|
|
§
|
|
prior to our 2013 annual meeting of stockholders, our directors may be removed only upon the affirmative vote of at least 80% in voting power of all the shares of stock then entitled to vote at an election of directors, voting together as a single class.
|
2011
|
High
|
Low
|
First Quarter
|
$262.38
|
$219.33
|
Second Quarter
|
309.81
|
251.94
|
Third Quarter
|
361.94
|
291.67
|
Fourth Quarter
|
384.99
|
293.01
|
2010
|
High
|
Low
|
First Quarter
|
$269.88
|
$216.43
|
Second Quarter
|
269.22
|
193.76
|
Third Quarter
|
226.30
|
191.00
|
Fourth Quarter
|
260.72
|
215.00
|
2011
|
Dividend per Share
|
First Quarter
|
$0.15
|
Second Quarter
|
0.15
|
Third Quarter
|
0.15
|
Fourth Quarter
|
0.15
|
2010
|
Dividend per Share
|
First Quarter
|
$0.15
|
Second Quarter
|
0.15
|
Third Quarter
|
0.15
|
Fourth Quarter
|
0.15
|
Period
|
|
Total Number
of Shares
Purchased
|
|
Average Price
Paid per Share
(including
commission cost)
|
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
|
|
Dollar Value of
Shares that may yet
be Purchased under
the Plans or
Programs
1
|
||||||
October 1 – 31
|
|
10,900
|
|
|
$
|
303.51
|
|
|
10,900
|
|
|
$
|
878,836,433
|
|
November 1 – 30
|
|
28,600
|
|
|
$
|
348.14
|
|
|
28,600
|
|
|
$
|
868,879,502
|
|
December 1 – 31
|
|
44,800
|
|
|
$
|
365.88
|
|
|
44,800
|
|
|
$
|
852,488,274
|
|
Total
|
|
84,300
|
|
|
$
|
351.80
|
|
|
84,300
|
|
|
|
|
|
Years Ended December 31,
|
||||||||||||||||||
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
||||||||||
|
|
(in millions, except per share data)
|
||||||||||||||||||
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenues, net
|
|
$
|
6,714
|
|
|
$
|
5,539
|
|
|
$
|
5,099
|
|
|
$
|
4,992
|
|
|
$
|
4,068
|
|
Total operating expenses
|
|
4,001
|
|
|
2,787
|
|
|
2,839
|
|
|
5,526
|
|
|
2,959
|
|
|||||
Operating income (loss)
|
|
2,713
|
|
|
2,752
|
|
|
2,260
|
|
|
(534
|
)
|
|
1,108
|
|
|||||
Net income (loss) attributable to MasterCard
|
|
1,906
|
|
|
1,846
|
|
|
1,463
|
|
|
(254
|
)
|
|
1,086
|
|
|||||
Basic earnings (loss) per share
|
|
14.90
|
|
|
14.10
|
|
|
11.19
|
|
|
(1.94
|
)
|
|
7.98
|
|
|||||
Diluted earnings (loss) per share
|
|
14.85
|
|
|
14.05
|
|
|
11.16
|
|
|
(1.94
|
)
|
|
7.96
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets
|
|
$
|
10,693
|
|
|
$
|
8,837
|
|
|
$
|
7,470
|
|
|
$
|
6,476
|
|
|
$
|
6,260
|
|
Long-term debt
|
|
—
|
|
|
—
|
|
|
22
|
|
|
19
|
|
|
150
|
|
|||||
Obligations under litigation settlements, long-term
|
|
—
|
|
|
4
|
|
|
263
|
|
|
1,023
|
|
|
297
|
|
|||||
Equity
|
|
5,877
|
|
|
5,216
|
|
|
3,512
|
|
|
1,932
|
|
|
3,032
|
|
|||||
Cash dividends declared per share
|
|
0.60
|
|
|
0.60
|
|
|
0.60
|
|
|
0.60
|
|
|
0.60
|
|
•
|
Operating expenses - The provision for the Company's estimate for the financial portion of a potential settlement related to the U.S. merchant litigation, based on progress in the mediation process (the "MDL Provision"), has been excluded from operating expenses because MasterCard monitors provisions for material litigation settlements separately from ongoing operations and evaluates ongoing operating performance without these amounts. See "-Operating Expenses" for the table which provides a reconciliation of operating expenses excluding the MDL Provision to the most directly comparable GAAP measure.
|
•
|
Effective income tax rate - The income tax impact associated with the MDL Provision has been excluded to provide a comparison of the effective income tax rate associated with ongoing operations of the business. See "-Income Taxes" for a table which provides a reconciliation of the effective income tax rate excluding the MDL Provision to the most directly comparable GAAP measure.
|
•
|
we track trends in personal consumption expenditures;
|
•
|
we focus on the trend within the global payments industry from paper-based forms of payment, such as cash and checks, toward electronic forms of payment ( such as payment card transactions); and
|
•
|
we seek to grow our share in electronic payments, including with innovative solutions and new technology.
|
•
|
grow our core businesses globally, including credit, debit, prepaid, commercial and processing payment transactions over the MasterCard Worldwide Network,
|
•
|
diversify our business by seeking new areas of growth in markets around the world, expanding points of acceptance for our brands throughout the world, seeking to maintain unsurpassed acceptance, and working with new partners such as merchants, government agencies and telecommunications companies, and
|
•
|
build new businesses through technology and continued strategic efforts and alliances with respect to innovative payment methods, such as electronic commerce (e-Commerce) and mobile capabilities.
|
|
For the Years Ended December 31,
|
|
Percent Increase (Decrease)
|
||||||||||||
|
2011
|
|
2010
|
|
2009
|
|
2011
|
|
2010
|
||||||
|
(in millions, except per share data, percentages and GDV amounts)
|
||||||||||||||
Revenues, net
|
$
|
6,714
|
|
|
$
|
5,539
|
|
|
$
|
5,099
|
|
|
21.2%
|
|
8.6%
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
||||||
General and administrative
|
2,196
|
|
|
1,857
|
|
|
1,942
|
|
|
18.3%
|
|
(4.4)%
|
|||
Advertising and marketing
|
841
|
|
|
782
|
|
|
756
|
|
|
7.6%
|
|
3.5%
|
|||
Provision for litigation settlement
|
770
|
|
|
—
|
|
|
—
|
|
|
**
|
|
**
|
|||
Depreciation and amortization
|
194
|
|
|
148
|
|
|
141
|
|
|
31.1%
|
|
4.8%
|
|||
Total operating expenses
|
4,001
|
|
|
2,787
|
|
|
2,839
|
|
|
43.6%
|
|
(1.8)%
|
|||
Operating income
|
2,713
|
|
|
2,752
|
|
|
2,260
|
|
|
(1.4)%
|
|
21.8%
|
|||
Total other income (expense)
|
33
|
|
|
5
|
|
|
(42
|
)
|
|
**
|
|
**
|
|||
Income before income taxes
|
2,746
|
|
|
2,757
|
|
|
2,218
|
|
|
(0.4)%
|
|
24.3%
|
|||
Income tax expense
|
842
|
|
|
910
|
|
|
755
|
|
|
(7.6)%
|
|
20.5%
|
|||
Net income
|
1,904
|
|
|
1,847
|
|
|
1,463
|
|
|
3.1%
|
|
26.3%
|
|||
Loss (income) attributable to non-controlling interests
|
2
|
|
|
(1
|
)
|
|
—
|
|
|
**
|
|
**
|
|||
Net Income Attributable to MasterCard
|
$
|
1,906
|
|
|
$
|
1,846
|
|
|
$
|
1,463
|
|
|
3.3%
|
|
26.2%
|
Basic Earnings per Share
|
$
|
14.90
|
|
|
$
|
14.10
|
|
|
$
|
11.19
|
|
|
5.7%
|
|
26.0%
|
Basic Weighted Average Shares Outstanding
|
128
|
|
|
131
|
|
|
130
|
|
|
(2.2)%
|
|
0.7%
|
|||
Diluted Earnings per Share
|
$
|
14.85
|
|
|
$
|
14.05
|
|
|
$
|
11.16
|
|
|
5.7%
|
|
25.9%
|
Diluted Weighted Average Shares Outstanding
|
128
|
|
|
131
|
|
|
130
|
|
|
(2.2)%
|
|
0.8%
|
|||
Effective Income Tax Rate
|
30.6
|
%
|
|
33.0
|
%
|
|
34.1
|
%
|
|
**
|
|
**
|
|||
Gross Dollar Volume (“GDV”) on a U.S. dollar Converted Basis (in billions)
1
|
$
|
3,249
|
|
|
$
|
2,723
|
|
|
$
|
2,463
|
|
|
19.3%
|
|
10.7%
|
Processed transactions
2
|
27,265
|
|
|
23,052
|
|
|
22,401
|
|
|
18.3%
|
|
2.9%
|
•
|
Domestic or cross-border
|
•
|
Signature-based (credit and debit) or PIN-based (debit, including automated teller machine (“ATM”) cash withdrawals and retail purchases)
|
•
|
Tiered pricing, with rates decreasing as customers meet incremental volume/transaction hurdles
|
•
|
Geographic region or country
|
•
|
Retail purchase or cash withdrawal
|
•
|
Processed or not processed by MasterCard
|
1.
|
Domestic assessments:
Domestic assessments are fees charged to issuers and acquirers based primarily on the volume of activity on cards that carry our brands where the acquirer country and the issuer country are the same. A portion of these assessments is estimated based on aggregate transaction information collected from our systems and projected customer performance and is calculated by converting the aggregate volume of usage (purchases, cash disbursements, balance transfers and convenience checks) from local currency to the billing currency and then multiplying by the specific price. In addition, domestic assessments include items such as card assessments, which are fees charged on the number of cards issued or assessments for specific purposes, such as acceptance development or market development programs. Acceptance development fees are charged primarily to U.S. issuers based on components of volume, and support our focus on developing merchant relationships and promoting acceptance at the point of sale. Market development fees are charged primarily to issuers and acquirers based on components of volume, and support our focus on building brand awareness and card activation, increasing purchase volumes, cross-
|
2.
|
Cross-border volume fees:
Cross-border volume fees are charged to issuers and acquirers based on the volume of activity on cards that carry our brands where the acquirer country and the issuer country are different. Cross-border volume fees are calculated by converting the aggregate volume of usage (purchases and cash disbursements) from local currency to the billing currency and then multiplying by the specific price. Cross-border volume fees also include fees charged to issuers for performing currency conversion services.
|
3.
|
Transaction processing fees:
Transaction processing fees are charged for both domestic and cross-border transactions and are primarily based on the number of transactions. These fees are calculated by multiplying the number and type of transactions by the specific price for each service. Transaction processing fees include charges for the following:
|
•
|
Transaction Switching – Authorization, Clearing and Settlement.
|
a.
|
Authorization
refers to the process by which a transaction is routed to the issuer for approval and then a decision whether or not to approve the transaction is made by the issuer or, in certain circumstances such as when the issuer's systems are unavailable or cannot be contacted, by MasterCard or others on behalf of the issuer in accordance with either the issuer's instructions or applicable rules (also known as "stand-in"). Our standards, which may vary across regions, establish the circumstances under which merchants and acquirers must seek authorization of transactions. Fees for authorization are primarily paid by issuers.
|
b.
|
Clearing
refers to the exchange of financial transaction information between issuers and acquirers after a transaction has been successfully conducted at the point of interaction. MasterCard clears transactions among customers through our central and regional processing systems. MasterCard clearing solutions can be managed with minimal system development, which has enabled us to accelerate our customers' ability to develop customized programs and services. Fees for clearing are primarily paid by issuers.
|
c.
|
Settlement.
Once transactions have been authorized and cleared, MasterCard helps to settle the transactions by facilitating the exchange of funds between parties. Once clearing is completed, a daily reconciliation is provided to each customer involved in settlement, detailing the net amounts by clearing cycle and a final settlement position. Fees for settlement are primarily paid by issuers.
|
•
|
Connectivity fees
are charged to issuers and acquirers for network access, equipment and the transmission of authorization and settlement messages. These fees are based on the size of the data being transmitted through and the number of connections to the Company’s network.
|
4.
|
Other revenues
: Other revenues for other payment-related services are primarily dependent on the nature of the products or services provided to our customers but are also impacted by other factors, such as contractual agreements. Examples of other revenues are fees associated with the following:
|
•
|
Fraud products and services
used to prevent or detect fraudulent transactions. This includes warning bulletin fees which are charged to issuers and acquirers for listing invalid or fraudulent accounts either electronically or in paper form and for distributing this listing to merchants.
|
•
|
Cardholder services fees
are for benefits provided with MasterCard-branded cards, such as insurance, telecommunications assistance for lost cards and locating automated teller machines.
|
•
|
Consulting and research fees
are primarily generated by MasterCard Advisors, the Company’s professional advisory services group. The Company’s business agreements with certain customers and merchants may include consulting services as an incentive. The contra-revenue associated with these incentives is included in rebates and incentives.
|
•
|
Program management services
provided to prepaid card issuers. This primarily includes foreign exchange margin, commissions, load fees, and ATM withdrawal fees paid by cardholders on the sale and encashment of prepaid cards. See Note 2 (Acquisitions) to the consolidated financial statements included in Part II, Item 8 of this Report for further discussion
.
|
•
|
The Company also charges for a variety of other payment-related services, including rules compliance, account and transaction enhancement services, holograms and publications.
|
5.
|
Rebates and incentives (contra-revenue):
Rebates and incentives are provided to certain MasterCard customers and are recorded as contra-revenue in the same period that performance occurs. Performance periods vary depending on the type of rebate or incentive, including commitments to the agreement term, hurdles for volumes, transactions or issuance of new cards, launch of new programs, or the execution of marketing programs. Rebates and incentives are calculated based on estimated performance, the timing of new and renewed agreements and the terms of the related business agreements.
|
|
For the Years Ended December 31,
|
|
Percent Increase (Decrease)
|
||||||||||||
|
2011
|
|
2010
|
|
2009
|
|
2011
|
|
2010
|
||||||
|
(in millions, except percentages)
|
||||||||||||||
Domestic assessments
|
$
|
3,246
|
|
|
$
|
2,642
|
|
|
$
|
2,382
|
|
|
22.9%
|
|
10.9%
|
Cross-border volume fees
|
2,094
|
|
|
1,927
|
|
|
1,509
|
|
|
8.7%
|
|
27.7%
|
|||
Transaction processing fees
|
2,595
|
|
|
2,198
|
|
|
2,042
|
|
|
18.1%
|
|
7.6%
|
|||
Other revenues
|
1,000
|
|
|
791
|
|
|
784
|
|
|
26.4%
|
|
1.0%
|
|||
Gross revenues
|
8,935
|
|
|
7,558
|
|
|
6,717
|
|
|
18.2%
|
|
12.5%
|
|||
Rebates and incentives (contra-revenues)
|
(2,221
|
)
|
|
(2,019
|
)
|
|
(1,618
|
)
|
|
10.0%
|
|
24.8%
|
|||
Net revenues
|
$
|
6,714
|
|
|
$
|
5,539
|
|
|
$
|
5,099
|
|
|
21.2%
|
|
8.6%
|
•
|
GDV increased
16.1%
in 2011, when measured in local currency terms, and increased
19.3%
when measured on a U.S. dollar-converted basis, versus the comparable periods in 2010. In 2010, GDV increased 9.1% when measured in local currency terms, and increased 10.7% when measured on a U.S. dollar-converted basis, versus 2009.
|
•
|
Pricing changes increased domestic assessments by approximately 5 and 4 percentage points for 2011 and 2010, respectively.
|
•
|
The net impact of foreign currency relating to the translation of domestic assessments from our functional currencies to U.S. dollars favorably impacted domestic assessments revenue growth by approximately
2
percentage points in 2011, and impacted revenue growth by a minimal amount in 2010.
|
•
|
Cross-border volumes increased
18.7%
in 2011 when measured in local currency terms, and increased
24.2%
when measured on a U.S. dollar-converted basis, versus the comparable periods in 2010. In 2010, cross-border volumes increased 15.2% when measured in local currency terms and increased 15.1% when measured on a U.S. dollar-converted basis.
|
•
|
Pricing changes reduced cross-border revenue by approximately 11 percentage points in 2011. This decrease was due to pricing changes related to the pricing structure change implemented in October 2010 and was partially offset by pricing increases implemented during 2010. In 2010, pricing changes represented approximately a net 13 percentage points of cross-border revenue growth. This increase included approximately 18 percentage points related to pricing changes implemented in October 2009, partially offset by a decrease due to the pricing structure change in October 2010. Furthermore, the October 2008 pricing changes which were repealed at the end of June 2009 as part of our interim arrangement with the European Commission had an approximate 2 percentage point negative impact on 2010 cross-border revenue growth.
|
•
|
The net impact of foreign currency relating to the translation of cross-border volume fees from our functional currencies to U.S. dollars favorably impacted cross-border volume fees revenue growth by approximately
1
percentage point in 2011, and unfavorably impacted revenue growth by approximately
2
percentage points in 2010.
|
•
|
Processed transactions increased
18.3%
and
2.9%
during 2011 and 2010, respectively.
|
•
|
The effects of connectivity fees and other non-switching transactions also contributed to the growth in transaction processing fees in 2011. The 2010 growth in transaction processing was partially offset from the effects of prior debit portfolio losses in the U.S. and U.K. Those debit portfolio losses impacted revenue to a lessor extent than the percentage decrease in the transactions due to the pricing of those products and portfolios.
|
•
|
Pricing changes in 2011 had a minimal impact on processed transactions fees, while in 2010, pricing changes implemented in April 2009 represented approximately 3 percentage points of the increase.
|
•
|
The net impact of foreign currency relating to the translation of transaction processing fees from our functional currencies to U.S. dollars favorably impacted transaction processing fees revenue growth by approximately
2
percentage points in 2011, and unfavorably impacted revenue growth by approximately
1
percentage point in 2010.
|
•
|
Revenues from recent acquisitions contributed approximately 13 percentage points to the increase in 2011 without comparable revenues in 2010.
|
•
|
Increased consulting fees, fraud service fees and other payment-related services in 2011.
|
•
|
Pricing changes increased other revenues by approximately 3 percentage points in 2011 and had a minimal impact on 2010.
|
•
|
The net impact of foreign currency relating to the translation of other revenues from our functional currencies to U.S. dollars favorably impacted other revenue growth by approximately
2
percentage points in 2011, and unfavorably impacted revenue growth by approximately
1
percentage point in 2010.
|
•
|
In 2011 and 2010, higher rebates and incentives were driven by increased performance as well as certain new and renewed agreements. The Company intends to continue to enter into and maintain business agreements that provide rebates and incentives to certain customers and merchants.
|
•
|
Pricing changes reduced rebates and incentives growth by approximately 11 percentage points in 2011, primarily due to the pricing structure change implemented in October 2010, as discussed above under “- Cross-border volume fees." In 2010, an increase in cross-border rebates, referred to below, contributed approximately 10 percentage points to the increase in rebates and incentives, partially offset by the effects of the pricing structure change in October 2010. Cross-border pricing actions in October 2009 as discussed above under “- Cross-border volume fees”, included an increase to cross-border rebates to encourage certain behaviors of our customers.
|
•
|
The net impact of foreign currency relating to the translation of rebates and incentives from our functional currencies to U.S. dollars increased rebates and incentives by approximately
1
percentage point in 2011, and had a minimal impact on rebates and incentives in 2010.
|
|
|
For the year ended December 31, 2011
|
|
For the year ended December 31, 2010
|
|
Percent Increase (Decrease)
|
||||||||||||||||||||||||
|
|
Actual
|
|
MDL Provision
|
|
Non-GAAP
|
|
Actual
|
|
MDL Provision
|
|
Non-GAAP
|
|
Actual
|
|
Non-GAAP
|
||||||||||||||
|
|
(in millions, except percentages)
|
||||||||||||||||||||||||||||
General and administrative
|
|
$
|
2,196
|
|
|
$
|
—
|
|
|
$
|
2,196
|
|
|
$
|
1,857
|
|
|
$
|
—
|
|
|
$
|
1,857
|
|
|
18.3
|
%
|
|
18.3
|
%
|
Advertising and marketing
|
|
841
|
|
|
—
|
|
|
841
|
|
|
782
|
|
|
—
|
|
|
782
|
|
|
7.6
|
%
|
|
7.6
|
%
|
||||||
Provision for litigation settlement
|
|
770
|
|
|
(770
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
**
|
|
|
**
|
|
||||||
Depreciation and amortizaton
|
|
194
|
|
|
—
|
|
|
194
|
|
|
148
|
|
|
—
|
|
|
148
|
|
|
31.1
|
%
|
|
31.1
|
%
|
||||||
Total operating expenses
|
|
$
|
4,001
|
|
|
$
|
(770
|
)
|
|
$
|
3,231
|
|
|
$
|
2,787
|
|
|
$
|
—
|
|
|
$
|
2,787
|
|
|
43.6
|
%
|
|
16.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Total operating expenses as a percentage of net revenues
|
|
59.6
|
%
|
|
|
|
48.1
|
%
|
|
50.3
|
%
|
|
|
|
50.3
|
%
|
|
|
|
|
|
For the Years Ended December 31,
|
|
Percent Increase (Decrease)
|
||||||||||||
|
2011
|
|
2010
|
|
2009
|
|
2011
|
|
2010
|
||||||
|
(in millions, except percentages)
|
||||||||||||||
Personnel
|
$
|
1,453
|
|
|
$
|
1,219
|
|
|
$
|
1,365
|
|
|
19.2%
|
|
(10.7)%
|
Professional fees
|
235
|
|
|
204
|
|
|
158
|
|
|
15.4%
|
|
28.9%
|
|||
Telecommunications
|
67
|
|
|
57
|
|
|
69
|
|
|
16.8%
|
|
(16.6)%
|
|||
Data processing
|
104
|
|
|
90
|
|
|
86
|
|
|
15.7%
|
|
4.8%
|
|||
Travel and entertainment
|
84
|
|
|
58
|
|
|
44
|
|
|
43.8%
|
|
31.7%
|
|||
Other
|
253
|
|
|
229
|
|
|
220
|
|
|
10.8%
|
|
3.7%
|
|||
General and administrative expenses
|
$
|
2,196
|
|
|
$
|
1,857
|
|
|
$
|
1,942
|
|
|
18.3%
|
|
(4.4)%
|
•
|
Personnel expense increased
19.2%
in 2011 compared to 2010. The increase was primarily due to higher salary costs, incentives and benefits costs, including increased compensation related to an increase in the number of employees to support the Company's strategic initiatives, including recent acquisitions. Personnel expense decreased
10.7%
in 2010 compared to 2009. The decline was primarily due to lower severance expense of $100 million, due to a realignment of resources in 2009, lower pension and other retirement-related expenses, and lower share-based compensation expense, partially offset by higher short-term incentive compensation expense.
|
•
|
Professional fees consist primarily of third-party consulting services, legal costs to defend our outstanding litigation and the evaluation of regulatory developments that impact our industry and brand. Professional fees increased
15.4%
in 2011 versus 2010 primarily due to the legal costs related to regulatory developments, consulting expenses associated with recent acquisitions and other strategic initiatives. Professional fees increased
28.9%
in 2010 versus 2009 driven by costs including the evaluation and execution of acquisitions, e-Commerce and other strategic initiatives.
|
•
|
Telecommunications and data processing expense consist of expenses to support our global payments network infrastructure, expenses to operate and maintain our computer systems and other telecommunication needs. These expenses vary with business volume growth, system upgrades and usage.
|
•
|
Travel and entertainment expenses are incurred primarily for travel to customer and regional meetings, business development efforts and strategic initiatives. The 2011 increase in travel and entertainment expense versus 2010 was primarily due to higher travel costs from strategic initiatives and business development efforts. The 2010 increase in travel and entertainment versus 2009 was primarily due to business development efforts.
|
•
|
Other expenses include rental expense for our facilities, foreign exchange gains and losses, litigation settlements not related to the MDL Provision and other miscellaneous operating expenses. The 2011 increase in other expenses versus 2010 was primarily due to increased operational expenses in connection with the Company's strategic initiatives, including the recent acquisitions, partially offset by gains from foreign exchange risk management. The 2010 increase in other expenses versus 2009 was primarily due to foreign currency remeasurement and foreign exchange risk management related to the DataCash acquisition and the write-off of an uncollectible receivable.
|
|
|
For the years ended December 31,
|
|||||||||||||||||||
|
|
2011
|
|
2010
|
|
2009
|
|||||||||||||||
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|||||||||
|
|
(in millions, except percentages)
|
|||||||||||||||||||
Income before income tax expense
|
|
$
|
2,746
|
|
|
|
|
$
|
2,757
|
|
|
|
|
$
|
2,218
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Federal statutory tax
|
|
961
|
|
|
35.0
|
%
|
|
965
|
|
|
35.0
|
%
|
|
776
|
|
|
35.0
|
%
|
|||
State tax effect, net of federal benefit
|
|
14
|
|
|
0.5
|
%
|
|
19
|
|
|
0.7
|
%
|
|
25
|
|
|
1.1
|
%
|
|||
Foreign tax effect, net of federal benefit
|
|
(133
|
)
|
|
(4.9
|
)%
|
|
(24
|
)
|
|
(0.9
|
)%
|
|
(22
|
)
|
|
(1.0
|
)%
|
|||
Non-deductible expenses and other differences
|
|
34
|
|
|
1.2
|
%
|
|
23
|
|
|
0.9
|
%
|
|
(18
|
)
|
|
(0.7
|
)%
|
|||
Tax exempt income
|
|
(3
|
)
|
|
(0.1
|
)%
|
|
(5
|
)
|
|
(0.2
|
)%
|
|
(6
|
)
|
|
(0.3
|
)%
|
|||
Foreign repatriation
|
|
(31
|
)
|
|
(1.1
|
)%
|
|
(68
|
)
|
|
(2.5
|
)%
|
|
—
|
|
|
—
|
%
|
|||
Income tax expense
|
|
$
|
842
|
|
|
30.6
|
%
|
|
$
|
910
|
|
|
33.0
|
%
|
|
$
|
755
|
|
|
34.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP to Non-GAAP effective tax rate reconciliation
|
||||||||||
|
For the year ended December, 31 2011
|
||||||||||
|
Actual
|
|
MDL Provision
|
|
Non-GAAP
|
||||||
|
(in millions, except percentages)
|
||||||||||
Income before income taxes
|
$
|
2,746
|
|
|
$
|
770
|
|
|
$
|
3,516
|
|
Income tax expense
|
(842
|
)
|
|
(275
|
)
|
|
(1,117
|
)
|
|||
Loss attributable to non-controlling interests
|
2
|
|
|
—
|
|
|
2
|
|
|||
Net income attributable to MasterCard
|
$
|
1,906
|
|
|
$
|
495
|
|
|
$
|
2,401
|
|
|
|
|
|
|
|
||||||
Effective tax rate
|
30.6
|
%
|
|
|
|
|
31.8
|
%
|
|
2011
|
|
2010
|
|
2009
|
||||||
|
(in millions)
|
||||||||||
Cash Flow Data:
|
|
|
|
|
|
||||||
Net cash provided by operating activities
|
$
|
2,684
|
|
|
$
|
1,697
|
|
|
$
|
1,378
|
|
Net cash used in investing activities
|
(748
|
)
|
|
(641
|
)
|
|
(664
|
)
|
|||
Net cash (used in) provided by financing activities
|
(1,215
|
)
|
|
19
|
|
|
(185
|
)
|
|
2011
|
|
2010
|
|
2009
|
||||||
|
(in millions)
|
||||||||||
Balance Sheet Data:
|
|
|
|
|
|
||||||
Current assets
|
$
|
7,741
|
|
|
$
|
6,454
|
|
|
$
|
5,003
|
|
Current liabilities
|
4,217
|
|
|
3,143
|
|
|
3,167
|
|
|||
Long-term liabilities
|
599
|
|
|
478
|
|
|
791
|
|
|||
Equity
|
5,877
|
|
|
5,216
|
|
|
3,512
|
|
|
Payments Due by Period
|
||||||||||||||||||
|
Total
6
|
|
2012
|
|
2013-2014
|
|
2015-2016
|
|
2017 and
thereafter
|
||||||||||
|
|
|
|
|
(in millions)
|
|
|
|
|
||||||||||
Capital leases
1
|
$
|
51
|
|
|
$
|
6
|
|
|
$
|
45
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Operating leases
2
|
94
|
|
|
22
|
|
|
31
|
|
|
22
|
|
|
19
|
|
|||||
Sponsorship, licensing and other
3, 4, 5
|
600
|
|
|
314
|
|
|
207
|
|
|
73
|
|
|
6
|
|
|||||
Total
|
$
|
745
|
|
|
$
|
342
|
|
|
$
|
283
|
|
|
$
|
95
|
|
|
$
|
25
|
|
1.
|
Mostly related to certain property, plant and equipment. The capital lease for the global technology and operations center located in O’Fallon, Missouri has been excluded from this table, see Note 8 (Property, Plant and Equipment) to the consolidated financial statements included in Part II, Item 8 of this Report. There is a capital lease for the Kansas City, Missouri co-processing data center.
|
2.
|
We enter into operating leases in the normal course of business. Substantially all lease agreements have fixed payment terms based on the passage of time. Some lease agreements provide us with the option to renew the lease or purchase the leased property. Our future operating lease obligations would change if we exercised these renewal options and if we entered into additional lease agreements.
|
3.
|
Amounts primarily relate to sponsorships with certain organizations to promote the MasterCard brand. The amounts included are fixed and non-cancelable. In addition, these amounts include amounts due in accordance with merchant agreements for future marketing, computer hardware maintenance, software licenses and other service agreements. Future cash payments that will become due to our customers under agreements which provide pricing rebates on our standard fees and other incentives in exchange for transaction volumes are not included in the table because the amounts due are indeterminable and contingent until such time as performance has occurred. MasterCard has accrued
$889 million
as of
December 31, 2011
related to customer and merchant agreements.
|
4.
|
Includes current liability of
$2 million
relating to the accounting for uncertainty in income taxes. Due to the high degree of uncertainty regarding the timing of the non-current liabilities for uncertainties in income taxes, we are unable to make reasonable estimates of the period of cash settlements with the respective taxing authority.
|
5.
|
Includes current liability of
$4 million
relating to amounts due in accordance with litigation and regulatory settlements.
|
6.
|
The table does not include the $770 million accrued as of December 31, 2011 related to the MDL Provision; the accrual is an estimate of the Company's financial liability that could result from a settlement based on progress in the mediation process. See Note 20 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part II, Item 8 of this Report for further discussion.
|
Financial Statement Caption/Critical Accounting Estimate
|
|
Assumptions/Approach Used
|
|
Effect if Actual Results Differ from Assumptions
|
|
|
|
|
|
Revenue Recognition
|
||||
|
|
|
|
|
Domestic assessments require an estimate of our customers' quarterly GDV or GEV to recognize quarterly domestic assessments.
In 2011, domestic assessments included an estimate representing 14% and 7% of total domestic assessments and total net revenues, respectively. Domestic assessments included an estimate representing 13% and 6% of total domestic assessments and total net revenues in both 2010 and 2009.
Our revenue recognition policies are fully described in Note 1 (Summary of Significant Accounting Policies) to the consolidated financial statements in Part II, Item 8 of this Report.
|
|
Customers' GDV and GEV are estimated by using historical performance, transactional information accumulated from our systems and discussions with our customers.
Such estimates are subsequently validated against the GDV or GEV reported by our customers. Differences are adjusted in the period the customer reports.
|
|
If customers' actual performance is not consistent with our estimates of their performance, realized revenues may be materially different than initially estimated. Historically, our estimates have differed from the actual performance by less than 5% of the estimates on a quarterly basis.
|
|
|
|
|
|
Rebates and incentives are generally recorded as contra-revenue based on our estimate of each customer's performance in a given period and according to the terms of the related customer agreements. Examples of the customer performance items requiring estimation include GDV or GEV, transactions, issuance of new cards, launch of new programs or the execution of marketing programs.
In addition, certain customer agreements include prepayment of rebates and incentives. Amortization of prepayments and other assets may be on the straight-line basis over the life of the agreement or based on customer performance depending on the terms of the related customer agreements.
|
|
Our estimates of each customer's performance are based on historical customer performance, transactional information accumulated from our systems and discussions with our customers.
Such estimates are subsequently validated by information reported by our customers. Differences are adjusted in the period the customer reports.
|
|
If customers' actual performance is not consistent with our estimates of their performance, contra-revenues may be materially different than initially estimated.
|
|
|
|
|
|
Financial Statement Caption/Critical Accounting Estimate
|
|
Assumptions/Approach Used
|
|
Effect if Actual Results Differ from Assumptions
|
|
|
|
|
|
Legal and Regulatory Matters
|
||||
|
|
|
|
|
We are party to legal and regulatory proceedings with respect to a variety of matters. Except as described in Note 18 (Obligations Under Litigation Settlements) and Note 20 (Legal and Regulatory Proceedings) to the consolidated financial statements in Part II, Item 8 of this Report, MasterCard does not believe that any legal or regulatory proceedings to which it is a party would have a material adverse impact on its business or prospects.
|
|
We evaluate the likelihood of an unfavorable outcome of the legal or regulatory proceedings to which we are party. Our judgments are subjective based on the status of the legal or regulatory proceedings, the merits of our defenses and consultation with in-house and outside legal counsel.
|
|
Due to the inherent uncertainties of the legal and regulatory process in the multiple jurisdictions in which we operate, our judgments may be materially different than the actual outcomes.
|
|
|
|
|
|
Income Taxes
|
||||
|
|
|
|
|
In calculating our effective tax rate, we need to make estimates regarding the timing and amount of taxable and deductible items which will adjust the pretax income earned in various tax jurisdictions.
|
|
Through our interpretation of local tax regulations, adjustments to pretax income for income earned in various tax jurisdictions are reflected within various tax filings.
|
|
Although we believe that our estimates and judgments discussed herein are reasonable, actual results may be materially different than the estimated amounts.
|
|
|
|
|
|
We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized.
|
|
We consider projected future taxable income and ongoing tax planning strategies in assessing the need for the valuation allowance.
|
|
If it is determined that we are able to realize deferred tax assets in excess of the net carrying value or to the extent we are unable to realize a deferred tax asset, we would adjust the valuation allowance with a corresponding increase or decrease to earnings.
|
|
|
|
|
|
We record tax liabilities for uncertain tax positions taken, or expected to be taken, which may not be sustained or may only be partially sustained, upon examination by the relevant taxing authorities.
|
|
We consider all relevant facts and current authorities in the tax law in assessing whether any benefit resulting from an uncertain tax position was more likely than not to be sustained and, if so, how current law impacts the amount reflected within these financial statements.
|
|
If upon examination, we realize a tax benefit which is not fully sustained or is more favorably sustained, this would decrease or increase earnings in the period. In certain situations, the Company will have offsetting tax credits or taxes in other jurisdictions.
|
|
|
|
|
|
We do not record U.S. income tax expense for foreign earnings which we intend to reinvest indefinitely to expand our international operations.
|
|
We consider business plans, planning opportunities, and expected future outcomes in assessing the needs for future expansion and support of our international operations.
|
|
If our business plans change or our future outcomes differ from our expectations, U.S. income tax expense and our effective tax rate could increase or decrease in that period.
|
|
|
|
|
|
|
December 31, 2011
|
|
December 31, 2010
|
||||||||||||
|
Notional
|
|
Estimated Fair
Value
1
|
|
Notional
|
|
Estimated Fair
Value
1
|
||||||||
|
(in millions)
|
||||||||||||||
Commitments to purchase foreign currency
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
38
|
|
|
$
|
1
|
|
Commitments to sell foreign currency
|
279
|
|
|
2
|
|
|
148
|
|
|
(2
|
)
|
|
|
|
|
|
|
Maturity
|
|||||||||||||||||||||||||
|
|
|
|
(in millions)
|
|
(in millions)
|
|||||||||||||||||||||||||
|
|
|
|
Fair Market Value at December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
2017 and there- after
|
|||||||||||||||
Financial Instrument
|
|
Summary Terms
|
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
|||||||||||||||||
Municipal securities
|
|
Fixed / Variable Interest
|
|
$
|
393
|
|
|
$
|
109
|
|
|
$
|
74
|
|
|
$
|
62
|
|
|
$
|
59
|
|
|
$
|
40
|
|
|
$
|
49
|
|
|
Corporate securities
|
|
Fixed / Variable Interest
|
|
325
|
|
|
146
|
|
|
91
|
|
|
88
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
U.S. Government and Agency securities
|
|
Fixed / Variable Interest
|
|
205
|
|
|
176
|
|
|
15
|
|
|
3
|
|
|
4
|
|
|
3
|
|
|
4
|
|
||||||||
Taxable short-term bond funds
|
|
Fixed / Variable Interest
|
1
|
|
203
|
|
1
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Asset-backed securities
|
|
Fixed / Variable Interest
|
|
69
|
|
|
43
|
|
|
24
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Auction rate securities
|
|
Variable Interest
|
|
70
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
70
|
|
||||||||
Other
|
|
Fixed / Variable Interest
|
|
20
|
|
|
16
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total
|
|
|
|
$
|
1,285
|
|
|
$
|
490
|
|
|
$
|
208
|
|
|
$
|
155
|
|
|
$
|
63
|
|
|
$
|
43
|
|
|
$
|
123
|
|
|
|
|
|
|
|
Maturity
|
|||||||||||||||||||||||||
|
|
|
|
(in millions)
|
|
(in millions)
|
|||||||||||||||||||||||||
|
|
|
|
Fair Market Value at December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
2016 and there- after
|
|||||||||||||||
Financial Instrument
|
|
Summary Terms
|
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
|||||||||||||||||
Municipal securities
|
|
Fixed Interest
|
|
$
|
315
|
|
|
$
|
8
|
|
|
$
|
33
|
|
|
$
|
93
|
|
|
$
|
69
|
|
|
$
|
55
|
|
|
$
|
57
|
|
|
Short-term bond funds
|
|
Fixed / Variable Interest
|
1
|
|
516
|
|
1
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Auction rate securities
|
|
Variable Interest
|
|
106
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
106
|
|
||||||||
Total
|
|
|
|
$
|
937
|
|
|
$
|
8
|
|
|
$
|
33
|
|
|
$
|
93
|
|
|
$
|
69
|
|
|
$
|
55
|
|
|
$
|
163
|
|
|
|
Page
|
MasterCard Incorporated
|
|
|
As of December 31, 2011 and 2010 and for the years ended December 31, 2011, 2010 and 2009
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
||
|
|
December 31,
|
||||||
|
2011
|
|
2010
|
||||
|
(in millions, except share data)
|
||||||
ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
3,734
|
|
|
$
|
3,067
|
|
Investment securities available-for-sale, at fair value
|
1,215
|
|
|
831
|
|
||
Investment securities held-to-maturity
|
—
|
|
|
300
|
|
||
Accounts receivable
|
808
|
|
|
650
|
|
||
Settlement due from customers
|
601
|
|
|
497
|
|
||
Restricted security deposits held for customers
|
636
|
|
|
493
|
|
||
Prepaid expenses and other current assets
|
404
|
|
|
400
|
|
||
Deferred income taxes
|
343
|
|
|
216
|
|
||
Total Current Assets
|
7,741
|
|
|
6,454
|
|
||
Property, plant and equipment, at cost, net of accumulated depreciation
|
449
|
|
|
439
|
|
||
Deferred income taxes
|
88
|
|
|
5
|
|
||
Goodwill
|
1,014
|
|
|
677
|
|
||
Other intangible assets, net of accumulated amortization
|
665
|
|
|
530
|
|
||
Auction rate securities available-for-sale, at fair value
|
70
|
|
|
106
|
|
||
Investment securities held-to-maturity
|
36
|
|
|
36
|
|
||
Other assets
|
630
|
|
|
590
|
|
||
Total Assets
|
$
|
10,693
|
|
|
$
|
8,837
|
|
LIABILITIES AND EQUITY
|
|
|
|
||||
Accounts payable
|
$
|
360
|
|
|
$
|
272
|
|
Settlement due to customers
|
699
|
|
|
636
|
|
||
Restricted security deposits held for customers
|
636
|
|
|
493
|
|
||
Obligations under litigation settlements
|
4
|
|
|
298
|
|
||
Accrued litigation
|
770
|
|
|
—
|
|
||
Accrued expenses
|
1,610
|
|
|
1,315
|
|
||
Other current liabilities
|
138
|
|
|
129
|
|
||
Total Current Liabilities
|
4,217
|
|
|
3,143
|
|
||
Deferred income taxes
|
113
|
|
|
74
|
|
||
Other liabilities
|
486
|
|
|
404
|
|
||
Total Liabilities
|
4,816
|
|
|
3,621
|
|
||
Commitments and Contingencies
|
|
|
|
||||
Stockholders’ Equity
|
|
|
|
||||
Class A common stock, $0.0001 par value; authorized 3,000,000,000 shares, 132,771,392 and 129,436,818 shares issued and 121,618,059 and 122,696,228 outstanding, respectively
|
—
|
|
|
—
|
|
||
Class B common stock, $0.0001 par value; authorized 1,200,000,000 shares, 5,245,676 and 8,202,380 issued and outstanding, respectively
|
—
|
|
|
—
|
|
||
Additional paid-in-capital
|
3,519
|
|
|
3,445
|
|
||
Class A treasury stock, at cost, 11,153,333 and 6,740,590 shares, respectively
|
(2,394
|
)
|
|
(1,250
|
)
|
||
Retained earnings
|
4,745
|
|
|
2,915
|
|
||
Accumulated other comprehensive (loss) income:
|
|
|
|
||||
Cumulative foreign currency translation adjustments
|
30
|
|
|
105
|
|
||
Defined benefit pension and other postretirement plans, net of tax
|
(32
|
)
|
|
(12
|
)
|
||
Investment securities available-for-sale, net of tax
|
—
|
|
|
2
|
|
||
Total accumulated other comprehensive (loss) income
|
(2
|
)
|
|
95
|
|
||
Total Stockholders’ Equity
|
5,868
|
|
|
5,205
|
|
||
Non-controlling interests
|
9
|
|
|
11
|
|
||
Total Equity
|
5,877
|
|
|
5,216
|
|
||
Total Liabilities and Equity
|
$
|
10,693
|
|
|
$
|
8,837
|
|
|
For the Years Ended December 31,
|
||||||||||
|
2011
|
|
2010
|
|
2009
|
||||||
|
(in millions, except per share data)
|
||||||||||
Revenues, net
|
$
|
6,714
|
|
|
$
|
5,539
|
|
|
$
|
5,099
|
|
Operating Expenses
|
|
|
|
|
|
||||||
General and administrative
|
2,196
|
|
|
1,857
|
|
|
1,942
|
|
|||
Advertising and marketing
|
841
|
|
|
782
|
|
|
756
|
|
|||
Provision for litigation settlement
|
770
|
|
|
—
|
|
|
—
|
|
|||
Depreciation and amortization
|
194
|
|
|
148
|
|
|
141
|
|
|||
Total operating expenses
|
4,001
|
|
|
2,787
|
|
|
2,839
|
|
|||
Operating income
|
2,713
|
|
|
2,752
|
|
|
2,260
|
|
|||
Other Income (Expense)
|
|
|
|
|
|
||||||
Investment income
|
52
|
|
|
57
|
|
|
58
|
|
|||
Interest expense
|
(25
|
)
|
|
(52
|
)
|
|
(115
|
)
|
|||
Other income (expense), net
|
6
|
|
|
—
|
|
|
15
|
|
|||
Total other income (expense)
|
33
|
|
|
5
|
|
|
(42
|
)
|
|||
Income before income taxes
|
2,746
|
|
|
2,757
|
|
|
2,218
|
|
|||
Income tax expense
|
842
|
|
|
910
|
|
|
755
|
|
|||
Net income
|
1,904
|
|
|
1,847
|
|
|
1,463
|
|
|||
Loss (income) attributable to non-controlling interests
|
2
|
|
|
(1
|
)
|
|
—
|
|
|||
Net Income Attributable to MasterCard
|
$
|
1,906
|
|
|
$
|
1,846
|
|
|
$
|
1,463
|
|
|
|
|
|
|
|
||||||
Basic Earnings per Share
|
$
|
14.90
|
|
|
$
|
14.10
|
|
|
$
|
11.19
|
|
Basic Weighted Average Shares Outstanding
|
128
|
|
|
131
|
|
|
130
|
|
|||
Diluted Earnings per Share
|
$
|
14.85
|
|
|
$
|
14.05
|
|
|
$
|
11.16
|
|
Diluted Weighted Average Shares Outstanding
|
128
|
|
|
131
|
|
|
130
|
|
|
For the Years Ended December 31,
|
||||||||||
|
2011
|
|
2010
|
|
2009
|
||||||
|
(in millions)
|
||||||||||
Operating Activities
|
|
|
|
|
|
||||||
Net income
|
$
|
1,904
|
|
|
$
|
1,847
|
|
|
$
|
1,463
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
194
|
|
|
148
|
|
|
141
|
|
|||
Share based payments
|
80
|
|
|
63
|
|
|
88
|
|
|||
Stock units withheld for taxes
|
(33
|
)
|
|
(126
|
)
|
|
(28
|
)
|
|||
Tax benefit for share based compensation
|
(12
|
)
|
|
(85
|
)
|
|
(39
|
)
|
|||
Accretion of imputed interest on litigation settlements
|
5
|
|
|
35
|
|
|
86
|
|
|||
Deferred income taxes
|
(175
|
)
|
|
248
|
|
|
337
|
|
|||
Other
|
14
|
|
|
6
|
|
|
5
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Accounts receivable
|
(162
|
)
|
|
(115
|
)
|
|
122
|
|
|||
Income taxes receivable
|
—
|
|
|
(50
|
)
|
|
190
|
|
|||
Settlement due from customers
|
(114
|
)
|
|
(61
|
)
|
|
54
|
|
|||
Prepaid expenses
|
27
|
|
|
(48
|
)
|
|
(113
|
)
|
|||
Obligations under litigation settlements
|
(303
|
)
|
|
(603
|
)
|
|
(939
|
)
|
|||
Accrued litigation
|
770
|
|
|
—
|
|
|
—
|
|
|||
Accounts payable
|
67
|
|
|
(19
|
)
|
|
34
|
|
|||
Settlement due to customers
|
74
|
|
|
186
|
|
|
(66
|
)
|
|||
Accrued expenses
|
296
|
|
|
265
|
|
|
82
|
|
|||
Net change in other assets and liabilities
|
52
|
|
|
6
|
|
|
(39
|
)
|
|||
Net cash provided by operating activities
|
2,684
|
|
|
1,697
|
|
|
1,378
|
|
|||
Investing Activities
|
|
|
|
|
|
||||||
Acquisition of business, net of cash acquired
|
(460
|
)
|
|
(498
|
)
|
|
(3
|
)
|
|||
Purchases of property, plant and equipment
|
(77
|
)
|
|
(61
|
)
|
|
(57
|
)
|
|||
Capitalized software
|
(100
|
)
|
|
(90
|
)
|
|
(83
|
)
|
|||
Purchases of investment securities available-for-sale
|
(899
|
)
|
|
(329
|
)
|
|
(333
|
)
|
|||
Purchases of investment securities held-to-maturity
|
—
|
|
|
—
|
|
|
(300
|
)
|
|||
Proceeds from sales of investment securities available-for-sale
|
485
|
|
|
297
|
|
|
98
|
|
|||
Proceeds from maturities of investment securities available-for-sale
|
63
|
|
|
110
|
|
|
36
|
|
|||
Proceeds from maturities of investment securities held-to-maturity
|
300
|
|
|
—
|
|
|
—
|
|
|||
Investment in nonmarketable equity investments
|
(74
|
)
|
|
(67
|
)
|
|
(18
|
)
|
|||
Other investing activities
|
14
|
|
|
(3
|
)
|
|
(4
|
)
|
|||
Net cash used in investing activities
|
(748
|
)
|
|
(641
|
)
|
|
(664
|
)
|
|||
Financing Activities
|
|
|
|
|
|
||||||
Purchases of treasury stock
|
(1,148
|
)
|
|
—
|
|
|
—
|
|
|||
Payment of debt
|
(21
|
)
|
|
—
|
|
|
(149
|
)
|
|||
Dividends paid
|
(77
|
)
|
|
(79
|
)
|
|
(79
|
)
|
|||
Tax benefit for share based compensation
|
12
|
|
|
85
|
|
|
39
|
|
|||
Investment in (redemption of) non-controlling interest
|
—
|
|
|
2
|
|
|
(5
|
)
|
|||
Cash proceeds from exercise of stock options
|
19
|
|
|
11
|
|
|
9
|
|
|||
Net cash (used in) provided by financing activities
|
(1,215
|
)
|
|
19
|
|
|
(185
|
)
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
(54
|
)
|
|
(63
|
)
|
|
21
|
|
|||
Net increase in cash and cash equivalents
|
667
|
|
|
1,012
|
|
|
550
|
|
|||
Cash and cash equivalents - beginning of period
|
3,067
|
|
|
2,055
|
|
|
1,505
|
|
|||
Cash and cash equivalents - end of period
|
$
|
3,734
|
|
|
$
|
3,067
|
|
|
$
|
2,055
|
|
|
Total
|
|
Retained
Earnings (Accumulated Deficit)
|
|
Accumulated
Other
Comprehensive
(Loss) Income, Net of Tax
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Class A
Treasury
Stock
|
|
Non-
Controlling
Interests
|
||||||||||||||||||
|
|
|
Class A
|
|
Class B
|
|
|||||||||||||||||||||||||
|
(in millions, except per share data)
|
||||||||||||||||||||||||||||||
Balance at December 31, 2008
|
$
|
1,932
|
|
|
$
|
(236
|
)
|
|
$
|
109
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,304
|
|
|
$
|
(1,250
|
)
|
|
$
|
5
|
|
Redemption of non-controlling interest
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
||||||||
Investment in majority owned entity
|
8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8
|
|
||||||||
Net income
|
1,463
|
|
|
1,463
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Other comprehensive income, net of tax
|
85
|
|
|
—
|
|
|
85
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Cash dividends declared on Class A and Class B common stock, $0.60 per share
|
(79
|
)
|
|
(79
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Share based payments
|
88
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
88
|
|
|
—
|
|
|
—
|
|
||||||||
Stock units withheld for taxes
|
(28
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(28
|
)
|
|
—
|
|
|
—
|
|
||||||||
Tax benefit for share based compensation
|
39
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
|
—
|
|
|
—
|
|
||||||||
Conversion of Class B to Class A common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Exercise of stock options
|
9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
—
|
|
||||||||
Balance at December 31, 2009
|
3,512
|
|
|
1,148
|
|
|
194
|
|
|
—
|
|
|
—
|
|
|
3,412
|
|
|
(1,250
|
)
|
|
8
|
|
||||||||
Investment in majority owned entity
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||||
Net income
|
1,847
|
|
|
1,846
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||||
Other comprehensive loss, net of tax
|
(99
|
)
|
|
—
|
|
|
(99
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Cash dividends declared on Class A and Class B common stock, $0.60 per share
|
(79
|
)
|
|
(79
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Share based payments
|
63
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
63
|
|
|
—
|
|
|
—
|
|
||||||||
Stock units withheld for taxes
|
(126
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(126
|
)
|
|
—
|
|
|
—
|
|
||||||||
Tax benefit for share based compensation
|
85
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
85
|
|
|
—
|
|
|
—
|
|
||||||||
Conversion of Class B to Class A common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Exercise of stock options
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
—
|
|
||||||||
Balance at December 31, 2010
|
5,216
|
|
|
2,915
|
|
|
95
|
|
|
—
|
|
|
—
|
|
|
3,445
|
|
|
(1,250
|
)
|
|
11
|
|
||||||||
Net income (loss)
|
1,904
|
|
|
1,906
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||||
Other comprehensive loss, net of tax
|
(97
|
)
|
|
—
|
|
|
(97
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Cash dividends declared on Class A and Class B common stock, $0.60 per share
|
(76
|
)
|
|
(76
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Purchases of treasury stock
|
(1,148
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,148
|
)
|
|
—
|
|
||||||||
Issuance of treasury stock for share based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
4
|
|
|
—
|
|
||||||||
Share based payments
|
80
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
80
|
|
|
—
|
|
|
—
|
|
||||||||
Stock units withheld for taxes
|
(33
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
—
|
|
||||||||
Tax benefit for share based compensation
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
—
|
|
||||||||
Conversion of Class B to Class A common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Exercise of stock options
|
19
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
19
|
|
|
—
|
|
|
—
|
|
||||||||
Balance at December 31, 2011
|
$
|
5,877
|
|
|
$
|
4,745
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,519
|
|
|
$
|
(2,394
|
)
|
|
$
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
||||||||||
|
2011
|
|
2010
|
|
2009
|
||||||
|
(in millions)
|
||||||||||
Net Income
|
$
|
1,904
|
|
|
$
|
1,847
|
|
|
$
|
1,463
|
|
Other comprehensive (loss) income:
|
|
|
|
|
|
||||||
Foreign currency translation adjustments
|
(75
|
)
|
|
(107
|
)
|
|
37
|
|
|||
|
|
|
|
|
|
||||||
Defined benefit pension and postretirement plans
|
(31
|
)
|
|
5
|
|
|
45
|
|
|||
Income tax effect
|
11
|
|
|
(2
|
)
|
|
(17
|
)
|
|||
|
(20
|
)
|
|
3
|
|
|
28
|
|
|||
|
|
|
|
|
|
||||||
Investment securities available-for-sale
|
(11
|
)
|
|
17
|
|
|
33
|
|
|||
Income tax effect
|
4
|
|
|
(6
|
)
|
|
(12
|
)
|
|||
|
(7
|
)
|
|
11
|
|
|
21
|
|
|||
|
|
|
|
|
|
||||||
Reclassification adjustment for investment securities available-for-sale
|
8
|
|
|
(9
|
)
|
|
(2
|
)
|
|||
Income tax effect
|
(3
|
)
|
|
3
|
|
|
1
|
|
|||
|
5
|
|
|
(6
|
)
|
|
(1
|
)
|
|||
|
|
|
|
|
|
||||||
Other comprehensive (loss) income, net of tax
|
(97
|
)
|
|
(99
|
)
|
|
85
|
|
|||
Comprehensive Income
|
1,807
|
|
|
1,748
|
|
|
1,548
|
|
|||
Loss (income) attributable to non-controlling interests
|
2
|
|
|
(1
|
)
|
|
—
|
|
|||
Comprehensive Income Attributable to MasterCard
|
$
|
1,809
|
|
|
$
|
1,747
|
|
|
$
|
1,548
|
|
§
|
Level 1-inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
§
|
Level 2-inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in inactive markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
|
§
|
Level 3-inputs to the valuation methodology are unobservable and significant to the fair value measurement.
|
|
Fair Value at April 15, 2011
|
||
|
(in millions)
|
||
Current assets
|
$
|
50
|
|
Property, plant and equipment
|
2
|
|
|
Intangible assets
|
164
|
|
|
Goodwill
|
354
|
|
|
Total assets acquired
|
570
|
|
|
Current liabilities
|
(56
|
)
|
|
Non-current liabilities
|
(33
|
)
|
|
Total liabilities assumed
|
(89
|
)
|
|
Net assets acquired
|
$
|
481
|
|
|
Fair Value at April 15, 2011
|
|
Weighted-Average Useful Life
|
||
|
(in millions)
|
|
(in years)
|
||
Customer relationships
|
$
|
132
|
|
|
8
|
Developed technologies
|
17
|
|
|
4
|
|
Tradenames
|
15
|
|
|
6
|
|
Total intangible assets
|
$
|
164
|
|
|
|
|
Fair Value at October 22, 2010
|
||
|
(in millions)
|
||
Current assets
|
$
|
48
|
|
Property, plant and equipment
|
3
|
|
|
Intangible assets
|
129
|
|
|
Goodwill
|
402
|
|
|
Other assets
|
7
|
|
|
Total assets acquired
|
589
|
|
|
Current liabilities
|
(24
|
)
|
|
Non-current liabilities
|
(31
|
)
|
|
Total liabilities assumed
|
(55
|
)
|
|
Net assets acquired
|
$
|
534
|
|
|
|
|
Fair Value at October 22, 2010
|
|
Weighted-Average Useful Life
|
||
|
(in millions)
|
|
(in years)
|
||
Customer relationships
|
$
|
74
|
|
|
7
|
Developed technologies
|
42
|
|
|
5
|
|
Tradenames
|
11
|
|
|
5
|
|
Non-compete agreements
|
2
|
|
|
1
|
|
Total intangible assets
|
$
|
129
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
||||||
|
(in millions, except per share data)
|
||||||||||
Numerator:
|
|
|
|
|
|
||||||
Net income attributable to MasterCard
|
$
|
1,906
|
|
|
$
|
1,846
|
|
|
$
|
1,463
|
|
Less: Net income allocated to Unvested Units
|
—
|
|
|
3
|
|
|
9
|
|
|||
Net income attributable to MasterCard allocated to common shares
|
$
|
1,906
|
|
|
$
|
1,843
|
|
|
$
|
1,454
|
|
Denominator:
|
|
|
|
|
|
||||||
Basic EPS weighted average shares outstanding
|
128
|
|
|
131
|
|
|
130
|
|
|||
Dilutive stock options and stock units
|
—
|
|
|
—
|
|
|
—
|
|
|||
Diluted EPS weighted average shares outstanding **
|
128
|
|
|
131
|
|
|
130
|
|
|||
Earnings per Share
|
|
|
|
|
|
||||||
Total Basic
|
$
|
14.90
|
|
|
$
|
14.10
|
|
|
$
|
11.19
|
|
Total Diluted
|
$
|
14.85
|
|
|
$
|
14.05
|
|
|
$
|
11.16
|
|
|
2011
|
|
2010
|
|
2009
|
|
|||||||||
|
(in millions)
|
|
|||||||||||||
Cash paid for income taxes
|
$
|
911
|
|
|
$
|
540
|
|
|
$
|
457
|
|
|
|||
Cash paid for interest
|
—
|
|
|
3
|
|
|
11
|
|
|
||||||
Cash paid for legal settlements (Notes 18 and 20)
|
303
|
|
|
607
|
|
|
946
|
|
|
||||||
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|||||||||
Dividends declared but not yet paid
|
19
|
|
|
20
|
|
|
20
|
|
|
||||||
Municipal bonds cancelled
|
—
|
|
|
—
|
|
|
154
|
|
1
|
|
|||||
Revenue bonds received
|
—
|
|
|
—
|
|
|
(154
|
)
|
2
|
|
|||||
Assets recorded pursuant to capital lease
|
14
|
|
|
—
|
|
|
154
|
|
2
|
|
|||||
Capital lease obligation relating to MDFB
|
—
|
|
|
—
|
|
|
(154
|
)
|
2
|
|
|||||
Fair value of assets acquired, net of cash acquired
|
549
|
|
3
|
|
553
|
|
3
|
|
17
|
|
|
||||
Fair value of liabilities assumed related to acquisitions and investments in affiliates
|
89
|
|
3
|
|
55
|
|
3
|
|
15
|
|
4
|
|
|||
Fair value of non-controlling interest acquired
|
—
|
|
|
2
|
|
|
8
|
|
|
||||||
|
|
|
|
|
|
|
|
December 31, 2011
|
||||||||||||||
|
Quoted Prices
in Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Fair
Value
|
||||||||
|
(in millions)
|
||||||||||||||
Municipal securities
1
|
$
|
—
|
|
|
$
|
393
|
|
|
$
|
—
|
|
|
$
|
393
|
|
U.S. Government and Agency securities
|
—
|
|
|
205
|
|
|
—
|
|
|
205
|
|
||||
Taxable short-term bond funds
|
203
|
|
|
—
|
|
|
—
|
|
|
203
|
|
||||
Corporate securities
|
—
|
|
|
325
|
|
|
—
|
|
|
325
|
|
||||
Asset-backed securities
|
—
|
|
|
69
|
|
|
—
|
|
|
69
|
|
||||
Auction rate securities
|
—
|
|
|
—
|
|
|
70
|
|
|
70
|
|
||||
Other
|
—
|
|
|
22
|
|
|
—
|
|
|
22
|
|
||||
Total
|
$
|
203
|
|
|
$
|
1,014
|
|
|
$
|
70
|
|
|
$
|
1,287
|
|
|
|
|
|
|
|
|
|
||||||||
|
December 31, 2010
|
||||||||||||||
|
Quoted Prices
in Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Fair
Value
|
||||||||
|
(in millions)
|
||||||||||||||
Municipal securities
1
|
$
|
—
|
|
|
$
|
315
|
|
|
$
|
—
|
|
|
$
|
315
|
|
Taxable short-term bond funds
|
516
|
|
|
—
|
|
|
—
|
|
|
516
|
|
||||
Auction rate securities
|
—
|
|
|
—
|
|
|
106
|
|
|
106
|
|
||||
Other
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||
Total
|
$
|
516
|
|
|
$
|
314
|
|
|
$
|
106
|
|
|
$
|
936
|
|
|
December 31, 2011
|
||||||||||||||
|
Amortized
Cost
|
|
Gross
Unrealized
Gain
|
|
Gross
Unrealized
Loss
1
|
|
Fair
Value
|
||||||||
|
(in millions)
|
||||||||||||||
Municipal securities
|
$
|
382
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
393
|
|
U.S. Government and Agency securities
|
205
|
|
|
—
|
|
|
—
|
|
|
205
|
|
||||
Taxable short-term bond funds
|
206
|
|
|
—
|
|
|
(3
|
)
|
|
203
|
|
||||
Corporate securities
|
325
|
|
|
—
|
|
|
—
|
|
|
325
|
|
||||
Asset-backed securities
|
69
|
|
|
—
|
|
|
—
|
|
|
69
|
|
||||
Auction rate securities
|
78
|
|
|
—
|
|
|
(8
|
)
|
|
70
|
|
||||
Other
|
20
|
|
|
—
|
|
|
—
|
|
|
20
|
|
||||
Total
|
$
|
1,285
|
|
|
$
|
11
|
|
|
$
|
(11
|
)
|
|
$
|
1,285
|
|
|
|
|
|
|
|
|
|
||||||||
|
December 31, 2010
|
||||||||||||||
|
Amortized
Cost
|
|
Gross
Unrealized
Gain
|
|
Gross
Unrealized
Loss
1
|
|
Fair
Value
|
||||||||
|
(in millions)
|
||||||||||||||
Municipal securities
|
$
|
305
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
315
|
|
Taxable short-term bond funds
|
511
|
|
|
5
|
|
|
—
|
|
|
516
|
|
||||
Auction rate securities
|
118
|
|
|
—
|
|
|
(12
|
)
|
|
106
|
|
||||
Total
|
$
|
934
|
|
|
$
|
15
|
|
|
$
|
(12
|
)
|
|
$
|
937
|
|
|
Significant
Unobservable
Inputs (Level 3)
|
||
|
(in millions)
|
||
Fair value, December 31, 2009
|
$
|
180
|
|
Calls, at par
|
(94
|
)
|
|
Recovery of unrealized losses due to issuer calls
|
13
|
|
|
Increase in fair value
|
7
|
|
|
Fair value, December 31, 2010
|
106
|
|
|
Calls, at par
|
(40
|
)
|
|
Recovery of unrealized losses due to issuer calls
|
4
|
|
|
Fair value, December 31, 2011
|
$
|
70
|
|
|
December 31, 2011
|
|
December 31, 2010
|
||||
|
(in millions)
|
||||||
Carrying value
|
$
|
36
|
|
|
$
|
336
|
|
Gross unrecorded gains
|
1
|
|
|
2
|
|
||
Fair value
|
$
|
37
|
|
|
$
|
338
|
|
|
Available-For-Sale
|
|
Held-To-Maturity
|
||||||||||||
|
Amortized
Cost
|
|
Fair Value
|
|
Carrying
Value
|
|
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Due within 1 year
|
$
|
490
|
|
|
$
|
490
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Due after 1 year through 5 years
|
461
|
|
|
469
|
|
|
36
|
|
|
37
|
|
||||
Due after 5 years through 10 years
|
54
|
|
|
56
|
|
|
—
|
|
|
—
|
|
||||
Due after 10 years
|
74
|
|
|
67
|
|
|
—
|
|
|
—
|
|
||||
No contractual maturity
|
206
|
|
|
203
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
1,285
|
|
|
$
|
1,285
|
|
|
$
|
36
|
|
|
$
|
37
|
|
|
Par Amount
|
|
% of Total
|
|||
|
(in millions)
|
|
|
|||
Due within 10 years
|
$
|
4
|
|
|
5
|
%
|
Due year 11 through year 20
|
7
|
|
|
9
|
%
|
|
Due year 21 through year 30
|
67
|
|
|
86
|
%
|
|
Total
|
$
|
78
|
|
|
100
|
%
|
|
2011
|
|
2010
|
|
2009
|
||||||
|
(in millions)
|
||||||||||
Interest income
|
$
|
44
|
|
|
$
|
48
|
|
|
$
|
56
|
|
Investment securities available-for-sale:
|
|
|
|
|
|
||||||
Gross realized gains
|
10
|
|
|
9
|
|
|
2
|
|
|||
Gross realized losses
|
(2
|
)
|
|
—
|
|
|
—
|
|
|||
Total investment income, net
|
$
|
52
|
|
|
$
|
57
|
|
|
$
|
58
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
||||
|
(in millions)
|
||||||
Customer and merchant incentives
|
$
|
190
|
|
|
$
|
215
|
|
Prepaid income taxes
|
35
|
|
|
50
|
|
||
Income taxes receivable
|
35
|
|
|
—
|
|
||
Other
|
144
|
|
|
135
|
|
||
Total prepaid expenses and other current assets
|
$
|
404
|
|
|
$
|
400
|
|
|
2011
|
|
2010
|
||||
|
(in millions)
|
||||||
Customer and merchant incentives
|
$
|
409
|
|
|
$
|
386
|
|
Nonmarketable equity investments
|
160
|
|
|
107
|
|
||
Income taxes receivable
|
15
|
|
|
50
|
|
||
Other
|
46
|
|
|
47
|
|
||
Total other assets
|
$
|
630
|
|
|
$
|
590
|
|
|
2011
|
|
2010
|
||||
|
(in millions)
|
||||||
Building and land
|
$
|
413
|
|
|
$
|
402
|
|
Equipment
|
298
|
|
|
265
|
|
||
Furniture and fixtures
|
53
|
|
|
50
|
|
||
Leasehold improvements
|
55
|
|
|
54
|
|
||
Property, plant and equipment
|
819
|
|
|
771
|
|
||
Less accumulated depreciation and amortization
|
(370
|
)
|
|
(332
|
)
|
||
Property, plant and equipment, net
|
$
|
449
|
|
|
$
|
439
|
|
|
|
2011
|
|
2010
|
||||
|
|
(in millions)
|
||||||
Beginning balance
|
|
$
|
677
|
|
|
$
|
309
|
|
Goodwill acquired during the year
|
|
354
|
|
|
402
|
|
||
Foreign currency translation
|
|
(17
|
)
|
|
(34
|
)
|
||
Ending balance
|
|
$
|
1,014
|
|
|
$
|
677
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
||||||||||||||||||||
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Capitalized software
|
|
$
|
765
|
|
|
$
|
(502
|
)
|
|
$
|
263
|
|
|
$
|
683
|
|
|
$
|
(447
|
)
|
|
$
|
236
|
|
Trademarks and tradenames
|
|
46
|
|
|
(26
|
)
|
|
20
|
|
|
33
|
|
|
(22
|
)
|
|
11
|
|
||||||
Customer relationships
|
|
218
|
|
|
(26
|
)
|
|
192
|
|
|
91
|
|
|
(5
|
)
|
|
86
|
|
||||||
Other
|
|
4
|
|
|
(3
|
)
|
|
1
|
|
|
4
|
|
|
(1
|
)
|
|
3
|
|
||||||
Total
|
|
1,033
|
|
|
(557
|
)
|
|
476
|
|
|
811
|
|
|
(475
|
)
|
|
336
|
|
||||||
Unamortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Customer relationships
|
|
189
|
|
|
—
|
|
|
189
|
|
|
194
|
|
|
—
|
|
|
194
|
|
||||||
Total
|
|
$
|
1,222
|
|
|
$
|
(557
|
)
|
|
$
|
665
|
|
|
$
|
1,005
|
|
|
$
|
(475
|
)
|
|
$
|
530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
||||||
|
|
(in millions)
|
||||||||||
Amortization
|
|
$
|
117
|
|
|
$
|
78
|
|
|
$
|
65
|
|
Capitalized software impairments
|
|
1
|
|
|
2
|
|
|
3
|
|
|||
Intangible asset impairments (other than capitalized software)
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2011
|
|
2010
|
||||
|
(in millions)
|
||||||
Customer and merchant incentives
|
$
|
889
|
|
|
$
|
666
|
|
Personnel costs
|
345
|
|
|
307
|
|
||
Advertising
|
144
|
|
|
162
|
|
||
Income and other taxes
|
82
|
|
|
76
|
|
||
Other
|
150
|
|
|
104
|
|
||
Total accrued expenses
|
$
|
1,610
|
|
|
$
|
1,315
|
|
|
Pension Plans
|
|
Postretirement Plan
|
||||||||||||
|
2011
|
|
2010
|
|
2011
|
|
2010
|
||||||||
|
(in millions)
|
||||||||||||||
Change in benefit obligation
|
|
|
|
|
|
|
|
||||||||
Benefit obligation at beginning of year
|
$
|
240
|
|
|
$
|
235
|
|
|
$
|
60
|
|
|
$
|
60
|
|
Service cost
|
14
|
|
|
16
|
|
|
1
|
|
|
1
|
|
||||
Interest cost
|
12
|
|
|
12
|
|
|
3
|
|
|
3
|
|
||||
Plan participants' contributions
|
—
|
|
|
1
|
|
|
1
|
|
|
1
|
|
||||
Actuarial (gain) loss
|
(4
|
)
|
|
19
|
|
|
15
|
|
|
(2
|
)
|
||||
Benefits paid
|
(18
|
)
|
|
(26
|
)
|
|
(3
|
)
|
|
(3
|
)
|
||||
Curtailment
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
—
|
|
||||
Projected benefit obligation at end of year
|
$
|
244
|
|
|
$
|
240
|
|
|
$
|
77
|
|
|
$
|
60
|
|
|
|
|
|
|
|
|
|
||||||||
Change in plan assets
|
|
|
|
|
|
|
|
||||||||
Fair value of plan assets at beginning of year
|
$
|
236
|
|
|
$
|
214
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Actual return on plan assets
|
—
|
|
|
27
|
|
|
—
|
|
|
—
|
|
||||
Employer contributions
|
25
|
|
|
20
|
|
|
2
|
|
|
2
|
|
||||
Plan participants' contributions
|
—
|
|
|
1
|
|
|
1
|
|
|
1
|
|
||||
Benefits paid
|
(18
|
)
|
|
(26
|
)
|
|
(3
|
)
|
|
(3
|
)
|
||||
Fair value of plan assets at end of year
|
$
|
243
|
|
|
$
|
236
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
||||||||
Funded status
|
|
|
|
|
|
|
|
||||||||
Fair value of plan assets at end of year
|
$
|
243
|
|
|
$
|
236
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Projected benefit obligation at end of year
|
244
|
|
|
240
|
|
|
77
|
|
|
60
|
|
||||
Funded status at end of year
|
$
|
(1
|
)
|
|
$
|
(4
|
)
|
|
$
|
(77
|
)
|
|
$
|
(60
|
)
|
|
|
|
|
|
|
|
|
||||||||
Amounts recognized on the consolidated balance sheet consist of:
|
|
|
|
|
|
|
|
||||||||
Prepaid expenses, long term
|
$
|
3
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accrued expenses
|
—
|
|
|
(5
|
)
|
|
(4
|
)
|
|
(3
|
)
|
||||
Other liabilities, long term
|
(4
|
)
|
|
(3
|
)
|
|
(73
|
)
|
|
(57
|
)
|
||||
|
$
|
(1
|
)
|
|
$
|
(4
|
)
|
|
$
|
(77
|
)
|
|
$
|
(60
|
)
|
|
|
|
|
|
|
|
|
||||||||
Amounts recognized in accumulated other comprehensive income consist of:
|
|
|
|
|
|
|
|
||||||||
Net actuarial loss (gain)
|
$
|
50
|
|
|
$
|
37
|
|
|
$
|
1
|
|
|
$
|
(15
|
)
|
Prior service credit
|
(2
|
)
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
||||
|
$
|
48
|
|
|
$
|
33
|
|
|
$
|
1
|
|
|
$
|
(15
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average assumptions used to determine end of year benefit obligations
|
|
|
|
|
|
|
|
||||||||
Discount rate
|
4.25
|
%
|
|
5.00
|
%
|
|
4.25
|
%
|
|
5.25
|
%
|
||||
Rate of compensation increase
|
|
|
|
|
|
|
|
||||||||
Qualified Plan
|
5.37
|
%
|
|
5.37
|
%
|
|
*
|
|
*
|
||||||
Non-Qualified Plan
|
5.00
|
%
|
|
5.00
|
%
|
|
*
|
|
*
|
||||||
Postretirement Plan
|
*
|
|
*
|
|
5.37
|
%
|
|
5.37
|
%
|
|
|
2011
|
|
2010
|
||||
|
|
(in millions)
|
||||||
Projected benefit obligation
|
|
$
|
4
|
|
|
$
|
9
|
|
Accumulated benefit obligation
|
|
4
|
|
|
8
|
|
||
Fair value of plan assets
|
|
—
|
|
|
—
|
|
|
2011
|
|
2010
|
||
Health care cost trend rate assumed for next year
|
7.00
|
%
|
|
7.50
|
%
|
Rate to which the cost trend rate is expected to decline (the ultimate trend rate)
|
5.00
|
%
|
|
5.00
|
%
|
Year that the rate reaches the ultimate trend rate
|
2016
|
|
|
2016
|
|
|
|
Pension Plans
|
|
Postretirement Plan
|
||||||||||||||||||||
|
|
2011
|
|
2010
|
|
2009
|
|
2011
|
|
2010
|
|
2009
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
Service cost
|
|
$
|
14
|
|
|
$
|
16
|
|
|
$
|
18
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
2
|
|
Interest cost
|
|
12
|
|
|
12
|
|
|
14
|
|
|
3
|
|
|
3
|
|
|
4
|
|
||||||
Expected return on plan assets
|
|
(19
|
)
|
|
(17
|
)
|
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Curtailment gain
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Settlement gain
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Actuarial loss (gain)
|
|
2
|
|
|
3
|
|
|
8
|
|
|
(1
|
)
|
|
(1
|
)
|
|
—
|
|
||||||
Prior service credit
|
|
(2
|
)
|
|
(2
|
)
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Enhanced termination benefits
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||||
Net periodic benefit cost
|
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
24
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
10
|
|
|
|
Pension Plans
|
|
Postretirement Plan
|
||||||||||||||||||||
|
|
2011
|
|
2010
|
|
2009
|
|
2011
|
|
2010
|
|
2009
|
||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||
Curtailment gain
|
|
$
|
—
|
|
|
$
|
(10
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Settlement gain
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Current year actuarial loss (gain)
|
|
15
|
|
|
8
|
|
|
(32
|
)
|
|
15
|
|
|
(2
|
)
|
|
(8
|
)
|
||||||
Amortization of actuarial (loss) gain
|
|
(2
|
)
|
|
(3
|
)
|
|
(8
|
)
|
|
1
|
|
|
1
|
|
|
—
|
|
||||||
Amortization of prior service credit
|
|
2
|
|
|
2
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total recognized in other comprehensive income (loss)
|
|
$
|
16
|
|
|
$
|
(3
|
)
|
|
$
|
(37
|
)
|
|
$
|
16
|
|
|
$
|
(1
|
)
|
|
$
|
(8
|
)
|
Total recognized in net periodic benefit cost and other comprehensive income (loss)
|
|
$
|
22
|
|
|
$
|
3
|
|
|
$
|
(13
|
)
|
|
$
|
19
|
|
|
$
|
2
|
|
|
$
|
2
|
|
|
|
Pension Plans
|
|
Postretirement Plan
|
||||
|
|
(in millions)
|
||||||
Actuarial loss
|
|
$
|
4
|
|
|
$
|
—
|
|
Prior service credit
|
|
(2
|
)
|
|
—
|
|
||
Total
|
|
$
|
2
|
|
|
$
|
—
|
|
|
|
Pension Plans
|
|
Postretirement Plan
|
||||||||||||||
|
|
2011
|
|
2010
|
|
2009
|
|
2011
|
|
2010
|
|
2009
|
||||||
Discount rate
|
|
5.00
|
%
|
|
5.50
|
%
|
|
6.00
|
%
|
|
5.25
|
%
|
|
5.75
|
%
|
|
6.00
|
%
|
Expected return on plan assets
|
|
8.00
|
%
|
|
8.00
|
%
|
|
8.00
|
%
|
|
*
|
|
*
|
|
*
|
|||
Rate of compensation increase
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Qualified Plan
|
|
5.37
|
%
|
|
5.37
|
%
|
|
5.37
|
%
|
|
*
|
|
*
|
|
*
|
|||
Non-Qualified Plan
|
|
5.00
|
%
|
|
5.00
|
%
|
|
5.00
|
%
|
|
*
|
|
*
|
|
*
|
|||
Postretirement Plan
|
|
*
|
|
*
|
|
*
|
|
5.37
|
%
|
|
5.37
|
%
|
|
5.37
|
%
|
|
1% increase
|
|
1% decrease
|
||||
|
(in millions)
|
||||||
Effect on postretirement obligation
|
$
|
8
|
|
|
$
|
(7
|
)
|
|
December 31, 2011
|
||||||||||||||
|
Quoted Prices in Active Markets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
|
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Mutual funds:
|
|
|
|
|
|
|
|
||||||||
Money market
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2
|
|
Domestic small cap equity
|
19
|
|
|
—
|
|
|
—
|
|
|
19
|
|
||||
International equity
|
16
|
|
|
—
|
|
|
—
|
|
|
16
|
|
||||
Common and collective funds:
|
|
|
|
|
|
|
|
||||||||
Domestic large cap equity
|
—
|
|
|
59
|
|
|
—
|
|
|
59
|
|
||||
Domestic fixed income
|
—
|
|
|
147
|
|
|
—
|
|
|
147
|
|
||||
Total
|
$
|
37
|
|
|
$
|
206
|
|
|
$
|
—
|
|
|
$
|
243
|
|
|
|
|
|
|
|
|
|
||||||||
|
December 31, 2010
|
||||||||||||||
|
Quoted Prices in Active Markets (Level 1)
|
|
Significant Other Observable Inputs (Level 2)
|
|
Significant Unobservable Inputs (Level 3)
|
|
Fair Value
|
||||||||
|
(in millions)
|
||||||||||||||
Mutual funds:
|
|
|
|
|
|
|
|
||||||||
Money market
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
Domestic small cap equity
|
36
|
|
|
—
|
|
|
—
|
|
|
36
|
|
||||
International equity
|
35
|
|
|
—
|
|
|
—
|
|
|
35
|
|
||||
Common and collective funds:
|
|
|
|
|
|
|
|
||||||||
Domestic large cap equity
|
—
|
|
|
94
|
|
|
—
|
|
|
94
|
|
||||
Domestic fixed income
|
—
|
|
|
68
|
|
|
—
|
|
|
68
|
|
||||
Total
|
$
|
74
|
|
|
$
|
162
|
|
|
$
|
—
|
|
|
$
|
236
|
|
|
|
|
|
Postretirement Plan
|
||||||||||||
|
|
Pension Plans
|
|
Benefit Payments
|
|
Expected Subsidy Receipts
|
|
Net Benefit Payments
|
||||||||
|
|
(in millions)
|
||||||||||||||
2012
|
|
$
|
17
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
4
|
|
2013
|
|
22
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||
2014
|
|
21
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||
2015
|
|
22
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||
2016
|
|
19
|
|
|
4
|
|
|
—
|
|
|
4
|
|
||||
2017 - 2021
|
|
94
|
|
|
24
|
|
|
1
|
|
|
23
|
|
Class
|
|
Par Value Per Share
|
|
Authorized Shares (in millions)
|
|
Dividend and Voting Rights
|
|
A
|
|
$0.0001
|
|
3,000
|
|
|
One vote per share
Dividend rights |
B
|
|
$0.0001
|
|
1,200
|
|
|
Non-voting
Dividend rights |
Preferred
|
|
$0.0001
|
|
300
|
|
|
No shares issued or outstanding at December 31, 2011 and 2010, respectively. Dividend and voting rights are to be determined by the Board of Directors of the Company upon issuance.
|
|
|
2011
|
|
2010
|
||||||||
|
|
Equity Ownership
|
|
General Voting Power
|
|
Equity Ownership
|
|
General Voting Power
|
||||
Public Investors (Class A stockholders)
|
|
85.7
|
%
|
|
89.3
|
%
|
|
83.5
|
%
|
|
89.1
|
%
|
Principal or Affiliate Customers (Class B stockholders)
|
|
4.1
|
%
|
|
—
|
|
|
6.3
|
%
|
|
—
|
|
The MasterCard Foundation (Class A stockholders)
|
|
10.2
|
%
|
|
10.7
|
%
|
|
10.2
|
%
|
|
10.9
|
%
|
|
|
2011
|
|
2010
|
|
2009
|
||||||
Risk-free rate of return
|
|
2.6
|
%
|
|
2.7
|
%
|
|
2.5
|
%
|
|||
Expected term (in years)
|
|
6.25
|
|
|
6.25
|
|
|
6.17
|
|
|||
Expected volatility
|
|
33.7
|
%
|
|
32.7
|
%
|
|
41.7
|
%
|
|||
Expected dividend yield
|
|
0.2
|
%
|
|
0.3
|
%
|
|
0.4
|
%
|
|||
Weighted-average fair value per option granted
|
|
$
|
89.11
|
|
|
$
|
84.62
|
|
|
$
|
71.03
|
|
|
Options
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Contractual Term
|
|
Aggregate Intrinsic Value
|
||||||
|
(in thousands)
|
|
|
|
(in years)
|
|
(in millions)
|
||||||
Outstanding at January 1, 2011
|
736
|
|
|
$
|
156
|
|
|
|
|
|
|||
Granted
|
166
|
|
|
$
|
241
|
|
|
|
|
|
|||
Exercised
|
(130
|
)
|
|
$
|
138
|
|
|
|
|
|
|||
Forfeited/expired
|
(6
|
)
|
|
$
|
218
|
|
|
|
|
|
|||
Outstanding at December 31, 2011
|
766
|
|
|
$
|
177
|
|
|
7.1
|
|
|
$
|
150
|
|
Exercisable at December 31, 2011
|
364
|
|
|
$
|
130
|
|
|
5.8
|
|
|
$
|
89
|
|
Options vested and expected to vest at December 31, 2011
1
|
473
|
|
|
$
|
145
|
|
|
6.2
|
|
|
$
|
108
|
|
|
Units
|
|
Weighted-Average Grant-Date Fair Value
|
|
Weighted Average Remaining Contractual Term
|
|
Aggregate Intrinsic Value
|
||||||
|
(in thousands)
|
|
|
|
(in years)
|
|
(in millions)
|
||||||
Outstanding at January 1, 2011
|
417
|
|
|
$
|
193
|
|
|
|
|
|
|||
Granted
|
242
|
|
|
$
|
257
|
|
|
|
|
|
|||
Converted
|
(13
|
)
|
|
$
|
211
|
|
|
|
|
|
|||
Forfeited/expired
|
(32
|
)
|
|
$
|
202
|
|
|
|
|
|
|||
Outstanding at December 31, 2011
|
614
|
|
|
$
|
217
|
|
|
1.3
|
|
|
$
|
229
|
|
RSUs vested at December 31, 2011
1
|
61
|
|
|
$
|
191
|
|
|
0.8
|
|
|
$
|
23
|
|
|
|
|
|
|
|
|
|
|
Units
|
|
Weighted-Average Grant-Date Fair Value
|
|
Weighted Average Remaining Contractual Term
|
|
Aggregate Intrinsic Value
|
||||||
|
(in thousands)
|
|
|
|
(in years)
|
|
(in millions)
|
||||||
Outstanding at January 1, 2011
|
485
|
|
|
$
|
192
|
|
|
|
|
|
|||
Granted
|
49
|
|
|
$
|
224
|
|
|
|
|
|
|||
Converted
|
(381
|
)
|
|
$
|
192
|
|
|
|
|
|
|||
Forfeited/expired
|
(2
|
)
|
|
$
|
190
|
|
|
|
|
|
|||
Outstanding at December 31, 2011
|
151
|
|
|
$
|
203
|
|
|
0.9
|
|
|
$
|
56
|
|
PSUs vested at December 31, 2011
1
|
69
|
|
|
$
|
194
|
|
|
0.7
|
|
|
$
|
26
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2009
|
||||||
|
(in millions)
|
||||||||||
Compensation expense: Stock Options, RSUs and PSUs
|
$
|
79
|
|
|
$
|
62
|
|
|
$
|
87
|
|
Income tax benefit recognized for equity awards
|
28
|
|
|
22
|
|
|
30
|
|
|||
Income tax benefit related to options exercised
|
7
|
|
|
9
|
|
|
7
|
|
|||
Additional paid-in-capital balance attributed to equity awards
|
151
|
|
|
156
|
|
|
197
|
|
|
Total
|
|
Capital
Leases
1
|
|
Operating
Leases
|
|
Sponsorship,
Licensing &
Other
|
||||||||
|
(in millions)
|
||||||||||||||
2012
|
$
|
336
|
|
|
$
|
6
|
|
|
$
|
22
|
|
|
$
|
308
|
|
2013
|
177
|
|
|
43
|
|
|
17
|
|
|
117
|
|
||||
2014
|
106
|
|
|
2
|
|
|
14
|
|
|
90
|
|
||||
2015
|
77
|
|
|
—
|
|
|
12
|
|
|
65
|
|
||||
2016
|
18
|
|
|
—
|
|
|
10
|
|
|
8
|
|
||||
Thereafter
|
25
|
|
|
—
|
|
|
19
|
|
|
6
|
|
||||
Total
|
$
|
739
|
|
|
$
|
51
|
|
|
$
|
94
|
|
|
$
|
594
|
|
|
|
|
|
|
|
|
|
1
|
Excludes non-cash transactions relating to the Company's Winghaven facility. See Note 4 (Supplemental Cash Flows) for more information.
|
|
|
2011
|
|
2010
|
|
2009
|
||||||
|
|
|
|
(in millions)
|
|
|
||||||
Current
|
|
|
|
|
|
|
||||||
Federal
|
|
$
|
619
|
|
|
$
|
379
|
|
|
$
|
160
|
|
State and local
|
|
30
|
|
|
17
|
|
|
18
|
|
|||
Foreign
|
|
369
|
|
|
301
|
|
|
240
|
|
|||
|
|
1,018
|
|
|
697
|
|
|
418
|
|
|||
Deferred
|
|
|
|
|
|
|
||||||
Federal
|
|
(155
|
)
|
|
225
|
|
|
308
|
|
|||
State and local
|
|
(6
|
)
|
|
8
|
|
|
21
|
|
|||
Foreign
|
|
(15
|
)
|
|
(20
|
)
|
|
8
|
|
|||
|
|
(176
|
)
|
|
213
|
|
|
337
|
|
|||
Total income tax expense
|
|
$
|
842
|
|
|
$
|
910
|
|
|
$
|
755
|
|
|
|
2011
|
|
2010
|
|
2009
|
||||||
|
|
|
|
(in millions)
|
|
|
||||||
United States
|
|
$
|
1,415
|
|
|
$
|
2,198
|
|
|
$
|
1,482
|
|
Foreign
|
|
1,331
|
|
|
559
|
|
|
736
|
|
|||
Total income before income taxes
|
|
$
|
2,746
|
|
|
$
|
2,757
|
|
|
$
|
2,218
|
|
|
|
2011
|
|
2010
|
|
2009
|
|||||||||||||||
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|||||||||
|
|
(in millions, except percentages)
|
|||||||||||||||||||
Income before income tax expense
|
|
$
|
2,746
|
|
|
|
|
$
|
2,757
|
|
|
|
|
$
|
2,218
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Federal statutory tax
|
|
961
|
|
|
35.0
|
%
|
|
965
|
|
|
35.0
|
%
|
|
776
|
|
|
35.0
|
%
|
|||
State tax effect, net of federal benefit
|
|
14
|
|
|
0.5
|
%
|
|
19
|
|
|
0.7
|
%
|
|
25
|
|
|
1.1
|
%
|
|||
Foreign tax effect, net of federal benefit
|
|
(133
|
)
|
|
(4.9
|
)%
|
|
(24
|
)
|
|
(0.9
|
)%
|
|
(22
|
)
|
|
(1.0
|
)%
|
|||
Non-deductible expenses and other differences
|
|
34
|
|
|
1.2
|
%
|
|
23
|
|
|
0.9
|
%
|
|
(18
|
)
|
|
(0.7
|
)%
|
|||
Tax exempt income
|
|
(3
|
)
|
|
(0.1
|
)%
|
|
(5
|
)
|
|
(0.2
|
)%
|
|
(6
|
)
|
|
(0.3
|
)%
|
|||
Foreign repatriation
|
|
(31
|
)
|
|
(1.1
|
)%
|
|
(68
|
)
|
|
(2.5
|
)%
|
|
—
|
|
|
—
|
%
|
|||
Income tax expense
|
|
$
|
842
|
|
|
30.6
|
%
|
|
$
|
910
|
|
|
33.0
|
%
|
|
$
|
755
|
|
|
34.1
|
%
|
|
|
Assets (Liabilities)
|
||||||||||||||
|
|
2011
|
|
2010
|
||||||||||||
|
|
Current
|
|
Non-current
|
|
Current
|
|
Non-current
|
||||||||
|
|
(in millions)
|
||||||||||||||
Accrued liabilities
|
|
$
|
279
|
|
|
$
|
26
|
|
|
$
|
133
|
|
|
$
|
4
|
|
Deferred compensation and benefits
|
|
21
|
|
|
77
|
|
|
34
|
|
|
30
|
|
||||
Stock based compensation
|
|
22
|
|
|
23
|
|
|
27
|
|
|
26
|
|
||||
Intangible assets
|
|
(10
|
)
|
|
(106
|
)
|
|
(6
|
)
|
|
(92
|
)
|
||||
Property, plant and equipment
|
|
—
|
|
|
(108
|
)
|
|
—
|
|
|
(107
|
)
|
||||
State taxes and other credits
|
|
35
|
|
|
60
|
|
|
36
|
|
|
62
|
|
||||
Other items
|
|
(13
|
)
|
|
20
|
|
|
(8
|
)
|
|
26
|
|
||||
Valuation allowances
|
|
—
|
|
|
(17
|
)
|
|
—
|
|
|
(18
|
)
|
||||
Total deferred taxes
1
|
|
$
|
334
|
|
|
$
|
(25
|
)
|
|
$
|
216
|
|
|
$
|
(69
|
)
|
|
|
2011
|
|
2010
|
|
2009
|
||||||
|
|
|
|
(in millions)
|
|
|
||||||
Beginning balance
|
|
$
|
165
|
|
|
$
|
146
|
|
|
$
|
163
|
|
Additions:
|
|
|
|
|
|
|
||||||
Current year tax positions
|
|
34
|
|
|
22
|
|
|
19
|
|
|||
Prior year tax positions
|
|
23
|
|
|
15
|
|
|
10
|
|
|||
Reductions:
|
|
|
|
|
|
|
||||||
Prior year tax positions, due to changes in judgments
|
|
(2
|
)
|
|
(12
|
)
|
|
(18
|
)
|
|||
Settlements with tax authorities
|
|
(1
|
)
|
|
(6
|
)
|
|
(16
|
)
|
|||
Expired statute of limitations
|
|
(5
|
)
|
|
—
|
|
|
(12
|
)
|
|||
Ending balance
|
|
$
|
214
|
|
|
$
|
165
|
|
|
$
|
146
|
|
|
December 31,
2011 |
|
December 31, 2010
|
||||
|
(in millions)
|
||||||
MasterCard-branded transactions:
|
|
|
|
||||
Gross Settlement Exposure
|
$
|
34,624
|
|
|
$
|
29,695
|
|
Collateral held for Settlement Exposure
|
(3,482
|
)
|
|
(3,062
|
)
|
||
Net uncollateralized Settlement Exposure
|
$
|
31,142
|
|
|
$
|
26,633
|
|
Uncollateralized Settlement Exposure attributable to non-compliant customers
|
$
|
479
|
|
|
$
|
279
|
|
Cirrus and Maestro transactions:
|
|
|
|
||||
Gross Settlement Exposure
|
$
|
4,478
|
|
|
$
|
3,210
|
|
|
December 31, 2011
|
|
December 31, 2010
|
||||||||||||
|
Notional
|
|
Estimated Fair
Value
1
|
|
Notional
|
|
Estimated Fair
Value
1
|
||||||||
|
(in millions)
|
||||||||||||||
Commitments to purchase foreign currency
|
$
|
21
|
|
|
$
|
—
|
|
|
$
|
38
|
|
|
$
|
1
|
|
Commitments to sell foreign currency
|
279
|
|
|
2
|
|
|
148
|
|
|
(2
|
)
|
||||
Balance Sheet Location:
|
|
|
|
|
|
|
|
||||||||
Accounts Receivable
|
|
|
$
|
4
|
|
|
|
|
$
|
1
|
|
||||
Other Current Liabilities
|
|
|
(2
|
)
|
|
|
|
(2
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2011
|
|
2010
|
|
2009
|
||||||
|
(in millions)
|
||||||||||
Foreign Currency Derivative Contracts
1
|
|
|
|
|
|
||||||
General and administrative
|
$
|
(6
|
)
|
|
$
|
(17
|
)
|
|
$
|
(12
|
)
|
Revenues
|
(3
|
)
|
|
(3
|
)
|
|
(6
|
)
|
|||
Total
|
$
|
(9
|
)
|
|
$
|
(20
|
)
|
|
$
|
(18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
2011 Quarter Ended
|
|
|
|
||||||||||||||||
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
1
|
|
|
2011 Total
|
||||||||||
|
|
(in millions, except per share amounts)
|
|||||||||||||||||||
Revenues, net
|
|
$
|
1,501
|
|
|
$
|
1,667
|
|
|
$
|
1,818
|
|
|
$
|
1,728
|
|
|
|
$
|
6,714
|
|
Operating income (loss)
|
|
836
|
|
|
885
|
|
|
1,002
|
|
|
(10
|
)
|
|
|
2,713
|
|
|||||
Net income attributable to MasterCard
|
|
562
|
|
|
608
|
|
|
717
|
|
|
19
|
|
|
|
1,906
|
|
|||||
Basic earnings per share
|
|
$
|
4.31
|
|
|
$
|
4.77
|
|
|
$
|
5.65
|
|
|
$
|
0.15
|
|
|
|
$
|
14.90
|
|
Basic weighted average shares outstanding
|
|
130
|
|
|
127
|
|
|
127
|
|
|
127
|
|
|
|
128
|
|
|||||
Diluted earnings per share
|
|
$
|
4.29
|
|
|
$
|
4.76
|
|
|
$
|
5.63
|
|
|
$
|
0.15
|
|
|
|
$
|
14.85
|
|
Diluted weighted average shares outstanding
|
|
131
|
|
|
128
|
|
|
127
|
|
|
127
|
|
|
|
128
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
2010 Quarter Ended
|
|
|
|
||||||||||||||||
|
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31
|
|
|
2010 Total
|
||||||||||
|
|
(in millions, except per share amounts)
|
|||||||||||||||||||
Revenues, net
|
|
$
|
1,308
|
|
|
$
|
1,365
|
|
|
$
|
1,428
|
|
|
$
|
1,438
|
|
|
|
$
|
5,539
|
|
Operating income
|
|
700
|
|
|
717
|
|
|
766
|
|
|
569
|
|
|
|
2,752
|
|
|||||
Net income attributable to MasterCard
|
|
455
|
|
|
458
|
|
|
518
|
|
|
415
|
|
|
|
1,846
|
|
|||||
Basic earnings per share
|
|
$
|
3.47
|
|
|
$
|
3.50
|
|
|
$
|
3.96
|
|
|
$
|
3.17
|
|
|
|
$
|
14.10
|
|
Basic weighted average shares outstanding
|
|
130
|
|
|
131
|
|
|
131
|
|
|
131
|
|
|
|
131
|
|
|||||
Diluted earnings per share
|
|
$
|
3.46
|
|
|
$
|
3.49
|
|
|
$
|
3.94
|
|
|
$
|
3.16
|
|
|
|
$
|
14.05
|
|
Diluted weighted average shares outstanding
|
|
131
|
|
|
131
|
|
|
131
|
|
|
131
|
|
|
|
131
|
|
1
|
Consolidated Financial Statements
|
2
|
Consolidated Financial Statement Schedules
|
3
|
The following exhibits are filed as part of this Report or, where indicated, were previously filed and are hereby incorporated by reference:
|
|
|
|
|
MASTERCARD INCORPORATED
|
|
|
|
|
(Registrant)
|
|
|
|
|
|
Date:
|
February 16, 2012
|
By:
|
|
/s/ AJAY BANGA
|
|
|
|
|
Ajay Banga
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
Date:
|
February 16, 2012
|
By:
|
|
/s/ AJAY BANGA
|
|
|
|
|
Ajay Banga
|
|
|
|
|
President and Chief Executive Officer; Director
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
Date:
|
February 16, 2012
|
By:
|
|
/s/ MARTINA HUND-MEJEAN
|
|
|
|
|
Martina Hund-Mejean
|
|
|
|
|
Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|
Date:
|
February 16, 2012
|
By:
|
|
/s/ ANDREA FORSTER
|
|
|
|
|
Andrea Forster
|
|
|
|
|
Corporate Controller
|
|
|
|
|
(Principal Accounting Officer)
|
|
|
|
|
|
Date:
|
February 16, 2012
|
By:
|
|
/s/ SILVIO BARZI
|
|
|
|
|
Silvio Barzi
|
|
|
|
|
Director
|
|
|
|
|
|
Date:
|
February 16, 2012
|
By:
|
|
/s/ DAVID R. CARLUCCI
|
|
|
|
|
David R. Carlucci
|
|
|
|
|
Director
|
|
|
|
|
|
Date:
|
February 16, 2012
|
By:
|
|
/s/ STEVEN J. FREIBERG
|
|
|
|
|
Steven J. Freiberg
|
|
|
|
|
Director
|
|
|
|
|
|
Date:
|
February 16, 2012
|
By:
|
|
/s/ RICHARD HAYTHORNTHWAITE
|
|
|
|
|
Richard Haythornthwaite
|
|
|
|
|
Chairman of the Board; Director
|
|
|
|
|
|
Date:
|
February 16, 2012
|
By:
|
|
/s/ NANCY J. KARCH
|
|
|
|
|
Nancy J. Karch
|
|
|
|
|
Director
|
|
|
|
|
|
Date:
|
February 16, 2012
|
By:
|
|
/s/
MARC OLIVIÉ
|
|
|
|
|
Marc Olivié
|
|
|
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
Date:
|
February 16, 2012
|
By:
|
|
/s/ RIMA QURESHI
|
|
|
|
|
Rima Qureshi
|
|
|
|
|
Director
|
|
|
|
|
|
Date:
|
February 16, 2012
|
By:
|
|
/s/ JOSÉ OCTAVIO REYES LAGUNES
|
|
|
|
|
José Octavio Reyes Lagunes
|
|
|
|
|
Director
|
|
|
|
|
|
Date:
|
February 16, 2012
|
By:
|
|
/s/ MARK SCHWARTZ
|
|
|
|
|
Mark Schwartz
|
|
|
|
|
Director
|
|
|
|
|
|
Date:
|
February 16, 2012
|
By:
|
|
/s/ JACKSON TAI
|
|
|
|
|
Jackson Tai
|
|
|
|
|
Director
|
|
|
|
|
|
Date:
|
February 16, 2012
|
By:
|
|
/s/ EDWARD SUNING TIAN
|
|
|
|
|
Edward Suning Tian
|
|
|
|
|
Director
|
|
|
|
Exhibit
Number
|
|
Exhibit Description
|
|
|
|
3.1(a)
|
|
Amended and Restated Certificate of Incorporation of MasterCard Incorporated (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed September 23, 2010 (File No. 001-32877)).
|
|
|
|
3.1(b)
|
|
Amended and Restated Bylaws of MasterCard Incorporated (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed September 23, 2010 (File No. 001-32877)).
|
|
|
|
3.2(a)
|
|
Amended and Restated Certificate of Incorporation of MasterCard International Incorporated (incorporated by reference to Exhibit 3.2 (a) to the Company's Quarterly Report on Form 10-Q filed August 2, 2006 (File No. 001-32877)).
|
|
|
|
3.2(b)
|
|
Amended and Restated Bylaws of MasterCard International Incorporated (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q filed November 3, 2009 (File No. 001-32877)).
|
|
|
|
10.1
|
|
$2,750,000,000 Credit Agreement, dated as of November 22, 2010, among MasterCard Incorporated, the several lenders from time to time parties thereto, Citibank, N.A., as managing administrative agent, and JPMorgan Chase Bank, N.A. as administrative agent (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed November 23, 2010 (File No. 001-32877)).
|
|
|
|
10.2
|
|
Lease, dated as of April 1, 2003, between MasterCard International, LLC and City of Kansas City, Missouri relating to the Kansas City facility (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q filed August 8, 2003 (File No. 000-50250)).
|
|
|
|
10.3+
|
|
Employment Agreement between MasterCard International Incorporated and Ajay Banga, dated as of July 1, 2010 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed July 8, 2010 (File No. 001-32877)).
|
|
|
|
10.4+
|
|
Employment Agreement between Noah J. Hanft and MasterCard International dated December 30, 2008 (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed January 2, 2009 (File No. 001-32877)).
|
|
|
|
10.5+
|
|
Employment Agreement between Chris A. McWilton and MasterCard International dated December 30, 2008 (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed January 2, 2009 (File No. 001-32877)).
|
|
|
|
10.6+
|
|
Employment Agreement between Martina Hund-Mejean and MasterCard International dated December 30, 2008 (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed January 2, 2009 (File No. 001-32877)).
|
|
|
|
10.7+
|
|
Description of Employment Arrangement with Gary Flood (incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K filed February 18, 2010 (File No. 001-32877)).
|
|
|
|
10.8+*
|
|
Offer Letter between Ann Cairns and MasterCard International Incorporated, dated June 15, 2011.
|
|
|
|
10.8.1+*
|
|
Contract of Employment between MasterCard UK Management Services Limited and Ann Cairns, dated July 6, 2011.
|
|
|
|
10.8.2+*
|
|
Deed of Employment between MasterCard UK Management Services Limited and Ann Cairns, dated July 6, 2011.
|
|
|
|
10.9+
|
|
MasterCard International Incorporated Supplemental Executive Retirement Plan, as amended and restated effective January 1, 2008 (incorporated by reference to Exhibit 10.18 to the Company's Annual Report on Form 10-K filed February 19, 2009 (File No. 001-32877)).
|
|
|
|
10.10+
|
|
MasterCard International Senior Executive Annual Incentive Compensation Plan, as amended and restated effective September 21, 2010 (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed November 2, 2010 (File No. 001-32877)).
|
|
|
|
10.11+
|
|
MasterCard International Incorporated Restoration Program, as amended and restated January 1, 2007 unless otherwise provided (incorporated by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K filed February 19, 2009 (File No. 001-32877)).
|
|
|
|
10.12+
|
|
MasterCard Incorporated Deferral Plan, as amended and restated effective December 1, 2008 for account balances established after December 31, 2004 (incorporated by reference to Exhibit 10.25 to the Company's Annual Report on Form 10-K filed February 19, 2009 (File No. 001-32877)).
|
|
|
|
10.13+
|
|
MasterCard Incorporated 2006 Long Term Incentive Plan, amended and restated effective October 13, 2008 (incorporated by reference to Exhibit 10.26 to the Company's Annual Report on Form 10-K filed February 19, 2009 (File No. 001-32877)).
|
|
|
|
10.14+
|
|
Form of Restricted Stock Unit Agreement for awards under 2006 Long Term Incentive Plan (effective for awards granted on and subsequent to March 1, 2011) (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed May 3, 2011 (File No. 001-32877)).
|
|
|
|
10.15+
|
|
Form of Stock Option Agreement for awards under 2006 Long Term Incentive Plan (effective for awards granted on and subsequent to March 1, 2011) (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed May 3, 2011 (File No. 001-32877)).
|
|
|
|
10.16+
|
|
Form of Performance Unit Agreement for awards under 2006 Long Term Incentive Plan (effective for awards granted on and subsequent to March 1, 2011) (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed May 3, 2011 (File No. 001-32877)).
|
|
|
|
10.17+*
|
|
Form of MasterCard Incorporated Long Term Incentive Plan Non-Competition and Non-Solicitation Agreement for named executive officers.
|
|
|
|
10.18+
|
|
MasterCard International Incorporated Executive Severance Plan, effective as of August 1, 2009 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed July 31, 2009 (File No. 001-32877)).
|
|
|
|
10.19+
|
|
MasterCard International Incorporated Change in Control Severance Plan, effective as of August 1, 2009 (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed July 31, 2009 (File No. 001-32877)).
|
|
|
|
10.20+
|
|
Schedule of Non-Employee Directors' Annual Compensation (effective as of January 1, 2010) (incorporated by reference to Exhibit 10.25 to the Company's Annual Report on Form 10-K filed February 18, 2010 (File No. 001-32877)).
|
|
|
|
10.21+
|
|
2006 Non-Employee Director Equity Compensation Plan, amended and restated as of December 1, 2008 (incorporated by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K filed February 19, 2009 (File No. 001-32877)).
|
|
|
|
10.22+
|
|
Form of Deferred Stock Unit Agreement for awards under 2006 Non-Employee Director Equity Compensation Plan (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed November 1, 2006 (File No. 001-32877)).
|
|
|
|
10.23
|
|
Form of Indemnification Agreement between MasterCard Incorporated and certain of its directors (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed May 2, 2006 (File No. 000-50250)).
|
|
|
|
10.24
|
|
Form of Indemnification Agreement between MasterCard Incorporated and certain of its director nominees (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed May 2, 2006 (File No. 000-50250)).
|
|
|
|
10.25
|
|
Deed of Gift between MasterCard Incorporated and The MasterCard Foundation (incorporated by reference to Exhibit 10.28 to Pre-Effective Amendment No. 5 to the Company's Registration Statement on Form S-1 filed May 3, 2006 (File No. 333-128337)).
|
|
|
|
10.26
|
|
Settlement Agreement, dated as of June 4, 2003, between MasterCard International Incorporated and Plaintiffs in the class action litigation entitled In Re Visa Check/MasterMoney Antitrust Litigation (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed August 8, 2003 (File No. 000-50250)).
|
|
|
|
10.27
|
|
Stipulation and Agreement of Settlement, dated July 20, 2006, between MasterCard Incorporated, the several defendants and the plaintiffs in the consolidated federal class action lawsuit titled In re Foreign Currency Conversion Fee Antitrust Litigation (MDL 1409), and the California state court action titled Schwartz v. Visa Int'l Corp., et al. (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed November 1, 2006 (File No. 001-32877)).
|
|
|
|
10.28
|
|
Release and Settlement Agreement, dated June 24, 2008, by and among MasterCard Incorporated, MasterCard International Incorporated and American Express (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed August 1, 2008. (File No. 001-32877)).
|
|
|
|
10.29**
|
|
Judgment Sharing Agreement between MasterCard and Visa in the Discover Litigation, dated July 29, 2008, by and among MasterCard Incorporated, MasterCard International Incorporated, Visa Inc., Visa U.S.A. Inc. and Visa International Service Association (incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed August 1, 2008. (File No. 001-32877)).
|
|
|
|
10.30
|
|
Release and Settlement Agreement dated as of October 27, 2008 by and among MasterCard, Discover and Visa (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed November 4, 2008. (File No. 001-32877)).
|
|
|
|
10.31
|
|
Agreement dated as of October 27, 2008, by and among MasterCard International Incorporated, MasterCard Incorporated, Morgan Stanley, Visa Inc., Visa U.S.A. Inc. and Visa International Association (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed November 4, 2008. (File No. 001-32877)).
|
|
|
|
10.32
|
|
Agreement to Prepay Future Payments at a Discount, dated as of July 1, 2009, by and between MasterCard International incorporated and Co-lead Counsel, acting collectively as binding representative and agent of the Plaintiffs (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 10-K filed July 2, 2009 (File No. 001-32877)).
|
|
|
|
10.33
|
|
Omnibus Agreement Regarding Interchange Litigation Judgment Sharing and Settlement Sharing, dated as of February 7, 2011, by and among MasterCard Incorporated, MasterCard International Incorporated, Visa Inc., Visa U.S.A. Inc., Visa International Service Association and MasterCard's customer banks that are parties thereto (incorporated by reference to Exhibit 10.33 to Amendment No.1 to the Company's Annual Report on Form 10-K/A filed on November 23, 2011).
.
|
|
|
|
10.34**
|
|
MasterCard Settlement and Judgment Sharing Agreement, dated as of February 7, 2011, by and among MasterCard Incorporated, MasterCard International Incorporated and MasterCard's customer banks that are parties thereto (incorporated by reference to Exhibit 10.34 to Amendment No.1 to the Company's Annual Report on Form 10-K/A filed on November 23, 2011).
.
|
|
|
|
12.1*
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
|
|
21*
|
|
List of Subsidiaries of MasterCard Incorporated.
|
|
|
|
23.1*
|
|
Consent of PricewaterhouseCoopers LLP.
|
|
|
|
31.1*
|
|
Certification of Ajay Banga, President and Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2*
|
|
Certification of Martina Hund-Mejean, Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1*
|
|
Certification of Ajay Banga, President and Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2*
|
|
Certification of Martina Hund-Mejean, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
101.INS*
|
|
XBRL Instance Document
|
|
|
|
101.SCH*
|
|
XBRL Taxonomy Extension Scheme Document
|
|
|
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
+
|
Management contracts or compensatory plans or arrangements.
|
*
|
Filed herewith.
|
**
|
Exhibit omits certain information that has been filed separately with the U.S. Securities and Exchange Commission and has been granted confidential treatment.
|
▪
|
theft
|
▪
|
damage to Company property
|
▪
|
fraud
|
▪
|
if you are convicted of any other arrestable offence (other than a road traffic offence for which a non-custodial penalty is imposed)
|
▪
|
incapacity for work due to being under the influence of alcohol or illegal drugs
|
▪
|
the loading onto the Company hardware of unlicensed or illegal software
|
▪
|
deliberate breach of the Company's policy on the use of computer systems and software
|
▪
|
physical assault
|
▪
|
gross insubordination
|
▪
|
unauthorised use or disclosure of confidential information
|
▪
|
repeated material breach by you of your obligations to the Company
|
▪
|
if you become bankrupt or make any arrangement or composition with your creditors
|
▪
|
become of unsound mind or a patient under the Mental Health Act 1983.
|
1.
|
ANNUAL REMUNERATION
|
1.1
|
Your salary will be £336,000
per annum (“Salary") payable two weeks in arrears and two weeks in advance in equal monthly instalments normally on the 15th day of each calendar month by credit transfer into your bank account.
|
1.2
|
Payment in respect of a period less than a month will be apportioned in proportion to the number of days worked as a proportion of the total number of working days that month.
|
1.3
|
You are entitled to participate in the Company's Flexible Benefits Plan as may be amended from time to time. The Company reserves the right to amend or vary the flexible benefits available and/or the terms of the Flexible Benefits Plan.
|
1.4
|
Your salary will be reviewed by the Company annually, typically in February during the common review cycle. Further information is contained in the Employee Handbook at section 3.5.
|
2.1
|
Subject to the terms of the plan in force from time to time, you will be eligible to participate in the MasterCard Annual Incentive Compensation Plan (“AICP”). Payouts for this bonus are based on a combination of corporate, business unit and individual performance. This position currently has a targeted payout of 115% of salary (with an award cap of 250% of incentive target).
|
3.3
|
Healthcare Benefits
|
4.
|
FLEXIBLE BENEFITS
|
6.
|
NOTICE PERIOD
|
(1)
|
MASTERCARD UK MANAGEMENT SERVICES LIMITED
whose office in London is at 10 Upper Bank Street, Canary Wharf, London, E14 5NP ("
Company
"); and
|
(2)
|
ANN CAIRNS
(the "
Executive
");
|
a)
|
The Executive undertakes that he will not either during his employment or at anytime afterwards without the Company's prior written consent:
|
(1)
|
disclose any confidential information concerning the business of the Company or of any customer, supplier or other person having dealings with the Company other than to a person or organisation who has signed a Confidentiality Agreement in favour of the Company and to whom the Company has authorised such confidential information may be disclosed in the ordinary course of the Executive's work with or for the Company; or
|
(2)
|
use any confidential information for any purpose other than in the ordinary course of the executive's work with the Company; or
|
(3)
|
make misleading use of or misrepresentation of the Company's name for publicity or marketing purposes.
|
b)
|
These restrictions on use and disclosure shall not apply to any confidential information which:
|
(1)
|
is in the public domain or which subsequently enters the public domain other than through unauthorised disclosure by the Executive or anyone else; or
|
(2)
|
was in the Executive's possession prior to the time of its disclosure by the Company; or
|
(3)
|
was received by the Executive from another person lawfully in possession of it and is not in breach of any confidential relationship with the Company; or
|
(1)
|
not to copy or reproduce by any means any confidential information other than as authorised by the Company in the ordinary course of his work with the Company; and
|
(2)
|
on request from the Company to return, or destroy all documents, papers or records containing confidential information.
|
d)
|
Each restriction in this clause is enforceable independently of each of the others and its validity is not affected if any of the others is invalid. If any of those restrictions is void but would be valid if some part of the restriction were modified, the restriction in question applies with such modification as may be necessary to make it valid.
|
a)
|
In this clause 3, the following definitions apply:-
|
(1)
|
"
Intellectual Property Rights
" means (i) copyright, patents, know-how, confidential information, database rights, and rights in trade marks and designs (whether registered or unregistered), (ii) applications for registration, and the right to apply for registration, for any of the same, and (iii) all other intellectual property rights and equivalent or similar forms of protection existing anywhere in the world;
|
(2)
|
"
IP Materials
" means all documents, software, photographic or graphic works of any type, and other materials in any medium or format which are created by the Executive or on his behalf in the course of performing his obligations under the Contract of Employment and which are protected by or relate to Intellectual Property Rights.
|
b)
|
To the extent that ownership of Intellectual Property Rights does not vest in the Company by operation of law, the Executive hereby assigns to the Company all Intellectual Property Rights which arise during the course of his employment (including all present and future copyright, and copyright revivals and extensions). This assignment shall take effect upon the creation of each of the Intellectual Property Rights.
|
c)
|
The Executive agrees to sign all documents and do all other acts which the Company requests (at its expense) to enable the Company to enjoy the full benefit of this clause 3. This includes joining in any application, which may be made in the Company's sole name for registration of any Intellectual Property Rights (such as a patent, trademark or registered design).
|
d)
|
The Executive may only use the Intellectual Property Rights and IP Materials during the performance of his employment, and he shall not disclose any Intellectual Property Rights or IP Materials to any third party without the express prior written consent of the Company.
|
e)
|
The Executive shall immediately transfer to the Company all IP Materials in his possession or under his control when this agreement expires or terminates for any reason, or at any time when the Company requests transfer. No copies or other records of any IP Materials may be retained by the Executive except with the prior written consent of the Company.
|
f)
|
The Executive must promptly disclose to the Company all copyright works, inventions, designs or other works incorporating any Intellectual Property Rights originated, conceived, written or made by the Executive either alone or with others (except only those works originated, conceived, written or made wholly outside the course of his employment with the Company and wholly unconnected with his employment) and shall until such rights shall be fully and absolutely vested in the Company in accordance with this clause 3 hold them in trust for the Company.
|
g)
|
The Executive hereby irrevocably and unconditionally waives in favour of the Company all and any moral rights in IP Materials to which he would otherwise be entitled to under the law of any relevant jurisdiction.
|
h)
|
The Executive hereby appoints the Company as his attorney in his name and on his behalf to execute and sign such instruments and do all things as necessary and generally to use the Executive's name for the purpose of giving to the Company or its nominee the full benefit of the provisions of this clause 3 and a certificate in writing signed by any Director or the Secretary of the Company that any instrument or act falls within the authority hereby conferred, shall be conclusive evidence that such is the case so far as any third party is concerned.
|
a)
|
The Executive will not, for a period of 6 months after the termination of his employment, solicit or endeavour to entice away from the Company the business or custom of a Restricted Customer directly or indirectly on behalf of any Competitive Business.
|
b)
|
The Executive will not, for a period of 6 months after the termination of his employment, provide goods or services to or otherwise have any business dealings with any Restricted Customer directly or indirectly on behalf of any Competitive Business.
|
c)
|
The Executive will not, for a period of 6 months after the termination of the Executive's employment, offer employment to or otherwise endeavour to entice away from the Company any Restricted Employee.
|
d)
|
The obligations imposed on the Executive by this clause 4 extend to the Executive acting not only on his own account but also on behalf of any other firm, company or other person and shall apply whether the Executive acts directly or indirectly
|
e)
|
If the Company exercises its right to suspend the Executive's duties and powers under clause 12 of the Contract of Employment during any period after notice of termination of the Executive's employment has been given by the Company or the Executive, the aggregate of the period of the suspension and the period after the termination of the Executive's employment for which the covenant in this paragraph applies will not exceed 6 months and, if the aggregate of the two periods would exceed 6 months, the period after the termination of the Executive's employment for which the covenant in this paragraph applies will be reduced accordingly.
|
EXECUTED as a deed by
|
)
|
|
|
|
)
|
|
|
MASTERCARD UK MANAGEMENT
|
|
|
|
SERVICES LIMITED
|
)
|
|
|
acting by
|
)
|
|
/s/ Susan Bonning
|
and
|
)
|
|
|
|
)
|
|
Susan Bonning
|
|
|
|
|
|
|
|
|
SIGNED as a deed by
|
)
|
|
|
|
)
|
|
/s/ Ann Cairns
|
in the presence of:
|
)
|
|
|
|
|
|
|
|
|
|
|
Witness' signature:
|
/s/ Vincent Verbiest
|
||
|
|
||
Name:
|
V. Verbiest
|
||
|
|
|
|
Address:
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2011
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
||||||||||
|
(in millions, except ratios)
|
||||||||||||||||||
Pre-tax income (loss) before adjustment for non-controlling interests
|
$
|
2,746
|
|
|
$
|
2,757
|
|
|
$
|
2,218
|
|
|
$
|
(383
|
)
|
|
$
|
1,671
|
|
Loss (income) attributable to non-controlling interests and equity investments
|
18
|
|
|
1
|
|
|
3
|
|
|
2
|
|
|
1
|
|
|||||
Add: Fixed charges
|
29
|
|
|
56
|
|
|
120
|
|
|
109
|
|
|
62
|
|
|||||
Earnings (loss)
|
$
|
2,793
|
|
|
$
|
2,814
|
|
|
$
|
2,341
|
|
|
$
|
(272
|
)
|
|
$
|
1,734
|
|
Fixed charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense
|
$
|
25
|
|
|
$
|
52
|
|
|
$
|
115
|
|
|
$
|
104
|
|
|
$
|
57
|
|
Portion of rental expense under operating leases deemed to be the equivalent of interest
1
|
4
|
|
|
4
|
|
|
5
|
|
|
5
|
|
|
5
|
|
|||||
Total fixed charges
|
$
|
29
|
|
|
$
|
56
|
|
|
$
|
120
|
|
|
$
|
109
|
|
|
$
|
62
|
|
Ratio of earnings to fixed charges
|
96.3
|
|
|
50.3
|
|
|
19.5
|
|
|
-
2
|
|
|
28.0
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
Date:
|
February 16, 2012
|
|
|
|
|
By:
|
/s/ Ajay Banga
|
|
|
Ajay Banga
|
|
|
President and Chief Executive Officer
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
Date:
|
February 16, 2012
|
|
|
|
|
By:
|
/s/ Martina Hund-Mejean
|
|
|
Martina Hund-Mejean
|
|
|
Chief Financial Officer
|
|
February 16, 2012
|
|
/s/ Ajay Banga
|
Ajay Banga
|
President and Chief Executive Officer
|
|
February 16, 2012
|
|
/s/ Martina Hund-Mejean
|
Martina Hund-Mejean
|
Chief Financial Officer
|