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x
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QUARTERLY 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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•
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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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•
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the Company’s focus on growing its credit, debit, prepaid, commercial and payment transaction processing offerings;
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•
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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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•
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the Company’s focus on building new businesses through technology and strategic efforts and alliances with
respect to electronic commerce, mobile and other initiatives;
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•
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the stability of economies around the globe;
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•
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the Company’s advertising and marketing strategy and investment;
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•
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the Memorandum of Understanding to settle the current U.S. merchant class litigation and the agreement-in-principle to settle all claims brought by the individual merchant plaintiffs, which are subject to execution of settlement agreements for both the merchant class litigation (including the completion of certain appendices to the settlement agreement) and the individual merchant plaintiff class, as well as final court approval of the class settlement and any necessary approvals for the parties;
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•
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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 operations and potential litigation obligations; and
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•
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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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June 30, 2012
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December 31, 2011
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||||
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(in millions, except share data)
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||||||
ASSETS
|
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||||
Cash and cash equivalents
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$
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3,153
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$
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3,734
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Investment securities available-for-sale
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1,803
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|
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1,215
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Accounts receivable
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844
|
|
|
808
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||
Settlement due from customers
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807
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601
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Restricted security deposits held for customers
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726
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|
636
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Prepaid expenses and other current assets
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592
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404
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Deferred income taxes
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358
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|
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343
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Total Current Assets
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8,283
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|
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7,741
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Property, plant and equipment, net
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458
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449
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Deferred income taxes
|
116
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|
|
88
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Goodwill
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1,009
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1,014
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Other intangible assets, net of accumulated amortization of $620 and $557, respectively
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656
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665
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Other assets
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718
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|
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736
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Total Assets
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$
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11,240
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$
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10,693
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LIABILITIES AND EQUITY
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||||
Accounts payable
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$
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330
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$
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360
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Settlement due to customers
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803
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699
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Restricted security deposits held for customers
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726
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636
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Accrued litigation
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790
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|
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770
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Accrued expenses
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1,475
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1,610
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Other current liabilities
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183
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142
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Total Current Liabilities
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4,307
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4,217
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Deferred income taxes
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105
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113
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Other liabilities
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552
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486
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Total Liabilities
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4,964
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4,816
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Commitments and Contingencies
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Stockholders’ Equity
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Class A common stock, $0.0001 par value; authorized 3,000,000,000 shares, 133,196,600 and 132,771,392 shares issued and 119,783,424 and 121,618,059 outstanding, respectively
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—
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—
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Class B common stock, $0.0001 par value; authorized 1,200,000,000 shares, 5,114,123 and 5,245,676 issued and outstanding, respectively
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—
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—
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Additional paid-in-capital
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3,571
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3,519
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Class A treasury stock, at cost, 13,413,176 and 11,153,333 shares, respectively
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(3,311
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)
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(2,394
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)
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Retained earnings
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6,052
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4,745
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Accumulated other comprehensive loss
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(47
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)
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(2
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)
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Total Stockholders’ Equity
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6,265
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5,868
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Non-controlling interests
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11
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9
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Total Equity
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6,276
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5,877
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Total Liabilities and Equity
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$
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11,240
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$
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10,693
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Three Months Ended
June 30, |
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Six Months Ended June 30,
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||||||||||||
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2012
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2011
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2012
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2011
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||||||||
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(in millions, except per share data)
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||||||||||||||
Revenues, net
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$
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1,820
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$
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1,667
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$
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3,578
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$
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3,168
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Operating Expenses
|
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General and administrative
|
591
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540
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1,170
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|
|
1,034
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Advertising and marketing
|
179
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|
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193
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304
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|
|
322
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||||
Depreciation and amortization
|
56
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|
|
49
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|
|
110
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|
|
91
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|
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Provision for litigation settlement
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20
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—
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20
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—
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||||
Total operating expenses
|
846
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|
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782
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1,604
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|
|
1,447
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Operating income
|
974
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885
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|
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1,974
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|
1,721
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Other Income (Expense)
|
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||||||||
Investment income
|
9
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11
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18
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23
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||||
Interest expense
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(3
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)
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(2
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)
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(9
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)
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(12
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)
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Other income (expense), net
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(7
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)
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(2
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)
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(11
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)
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(4
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)
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Total other income (expense)
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(1
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)
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7
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(2
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)
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7
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Income before income taxes
|
973
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|
|
892
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|
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1,972
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|
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1,728
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||||
Income tax expense
|
273
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|
|
284
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|
|
591
|
|
|
558
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|
||||
Net income
|
700
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|
|
608
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|
|
1,381
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|
|
1,170
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|
||||
Loss attributable to non-controlling interests
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—
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|
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—
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|
|
1
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|
|
—
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|
||||
Net Income Attributable to MasterCard
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$
|
700
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|
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$
|
608
|
|
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$
|
1,382
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|
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$
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1,170
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|
|
|
|
|
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||||||||
Basic Earnings per Share
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$
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5.56
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$
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4.77
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$
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10.95
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$
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9.08
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Basic Weighted Average Shares Outstanding
|
126
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|
|
127
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|
|
126
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|
|
129
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||||
Diluted Earnings per Share
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$
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5.55
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|
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$
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4.76
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|
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$
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10.91
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|
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$
|
9.05
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Diluted Weighted Average Shares Outstanding
|
126
|
|
|
128
|
|
|
127
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|
|
129
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|
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Three Months Ended
June 30, |
|
Six Months Ended June 30,
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||||||||||||
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2012
|
|
2011
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2012
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|
2011
|
||||||||
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(in millions)
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||||||||||||||
Net Income
|
$
|
700
|
|
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$
|
608
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|
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$
|
1,381
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|
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$
|
1,170
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
(127
|
)
|
|
43
|
|
|
(50
|
)
|
|
148
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Defined benefit pension and other postretirement plans
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||
Income tax effect
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||||
Defined benefit pension and other postretirement plans, net of income tax effect
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Investment securities available-for-sale
|
3
|
|
|
5
|
|
|
6
|
|
|
6
|
|
||||
Income tax effect
|
(1
|
)
|
|
(2
|
)
|
|
(2
|
)
|
|
(2
|
)
|
||||
Investment securities available-for-sale, net of income tax effect
|
2
|
|
|
3
|
|
|
4
|
|
|
4
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other comprehensive (loss) income, net of tax
|
(125
|
)
|
|
46
|
|
|
(45
|
)
|
|
152
|
|
||||
Comprehensive Income
|
575
|
|
|
654
|
|
|
1,336
|
|
|
1,322
|
|
||||
Loss attributable to non-controlling interests
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Comprehensive Income Attributable to MasterCard
|
$
|
575
|
|
|
$
|
654
|
|
|
$
|
1,337
|
|
|
$
|
1,322
|
|
|
Total
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Loss, 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, 2011
|
$
|
5,877
|
|
|
$
|
4,745
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,519
|
|
|
$
|
(2,394
|
)
|
|
$
|
9
|
|
Net income (loss)
|
1,381
|
|
|
1,382
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||||||
Contribution by non-controlling interest
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||||||
Other comprehensive loss, net of tax
|
(45
|
)
|
|
—
|
|
|
(45
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Cash dividends declared on Class A and Class B common stock, $0.60 per share
|
(75
|
)
|
|
(75
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Purchases of treasury stock
|
(919
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(919
|
)
|
|
—
|
|
||||||||
Issuance of treasury stock for share-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
2
|
|
|
—
|
|
||||||||
Share-based payments
|
41
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41
|
|
|
—
|
|
|
—
|
|
||||||||
Stock units withheld for taxes
|
(38
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(38
|
)
|
|
—
|
|
|
—
|
|
||||||||
Tax benefit for share-based compensation
|
33
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33
|
|
|
—
|
|
|
—
|
|
||||||||
Exercise of stock options
|
18
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18
|
|
|
—
|
|
|
—
|
|
||||||||
Balance at June 30, 2012
|
$
|
6,276
|
|
|
$
|
6,052
|
|
|
$
|
(47
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,571
|
|
|
$
|
(3,311
|
)
|
|
$
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
||||||
|
2012
|
|
2011
|
||||
|
(in millions)
|
||||||
Operating Activities
|
|
|
|
||||
Net income
|
$
|
1,381
|
|
|
$
|
1,170
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
110
|
|
|
91
|
|
||
Share-based payments
|
41
|
|
|
36
|
|
||
Stock units withheld for taxes
|
(38
|
)
|
|
(32
|
)
|
||
Tax benefit for share-based compensation
|
(33
|
)
|
|
(10
|
)
|
||
Deferred income taxes
|
(55
|
)
|
|
94
|
|
||
Other
|
24
|
|
|
13
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(51
|
)
|
|
(22
|
)
|
||
Income taxes receivable
|
(31
|
)
|
|
—
|
|
||
Settlement due from customers
|
(213
|
)
|
|
42
|
|
||
Prepaid expenses
|
(140
|
)
|
|
(73
|
)
|
||
Obligations under litigation settlements
|
20
|
|
|
(300
|
)
|
||
Accounts payable
|
(27
|
)
|
|
34
|
|
||
Settlement due to customers
|
112
|
|
|
(127
|
)
|
||
Accrued expenses
|
(50
|
)
|
|
(84
|
)
|
||
Net change in other assets and liabilities
|
18
|
|
|
61
|
|
||
Net cash provided by operating activities
|
1,068
|
|
|
893
|
|
||
Investing Activities
|
|
|
|
||||
Acquisition of business, net of cash acquired
|
—
|
|
|
(460
|
)
|
||
Purchases of investment securities available-for-sale
|
(1,054
|
)
|
|
(39
|
)
|
||
Purchases of property, plant and equipment
|
(40
|
)
|
|
(35
|
)
|
||
Capitalized software
|
(67
|
)
|
|
(37
|
)
|
||
Proceeds from sales of investment securities available-for-sale
|
104
|
|
|
30
|
|
||
Proceeds from maturities of investment securities available-for-sale
|
386
|
|
|
28
|
|
||
Proceeds from maturities of investment securities held-to-maturity
|
—
|
|
|
301
|
|
||
Investment in nonmarketable equity investments
|
(19
|
)
|
|
(2
|
)
|
||
Net cash used in investing activities
|
(690
|
)
|
|
(214
|
)
|
||
Financing Activities
|
|
|
|
||||
Purchases of treasury stock
|
(919
|
)
|
|
(1,041
|
)
|
||
Dividends paid
|
(57
|
)
|
|
(39
|
)
|
||
Payment of debt
|
—
|
|
|
(21
|
)
|
||
Tax benefit for share-based compensation
|
33
|
|
|
10
|
|
||
Cash proceeds from exercise of stock options
|
18
|
|
|
8
|
|
||
Contribution by non-controlling interest
|
3
|
|
|
—
|
|
||
Net cash used in financing activities
|
(922
|
)
|
|
(1,083
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(37
|
)
|
|
101
|
|
||
Net decrease in cash and cash equivalents
|
(581
|
)
|
|
(303
|
)
|
||
Cash and cash equivalents - beginning of period
|
3,734
|
|
|
3,067
|
|
||
Cash and cash equivalents - end of period
|
$
|
3,153
|
|
|
$
|
2,764
|
|
|
|
|
|
||||
Non-Cash Investing and Financing Activities
|
|
|
|
||||
Fair value of assets acquired, net of cash acquired
|
$
|
—
|
|
|
$
|
549
|
|
Fair value of liabilities assumed related to an acquisition
|
$
|
—
|
|
|
$
|
89
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended June 30,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
|
(in millions, except per share data)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income attributable to MasterCard
|
$
|
700
|
|
|
$
|
608
|
|
|
$
|
1,382
|
|
|
$
|
1,170
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic EPS weighted average shares outstanding
|
126
|
|
|
127
|
|
|
126
|
|
|
129
|
|
||||
Dilutive stock options and stock units
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Diluted EPS weighted average shares outstanding *
|
126
|
|
|
128
|
|
|
127
|
|
|
129
|
|
||||
Earnings per Share
|
|
|
|
|
|
|
|
||||||||
Total Basic
|
$
|
5.56
|
|
|
$
|
4.77
|
|
|
$
|
10.95
|
|
|
$
|
9.08
|
|
Total Diluted
|
$
|
5.55
|
|
|
$
|
4.76
|
|
|
$
|
10.91
|
|
|
$
|
9.05
|
|
|
June 30, 2012
|
||||||||||||||
|
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
|
$
|
—
|
|
|
$
|
422
|
|
|
$
|
—
|
|
|
$
|
422
|
|
U.S. Government and Agency securities
|
—
|
|
|
248
|
|
|
—
|
|
|
248
|
|
||||
Taxable short-term bond funds
|
206
|
|
|
—
|
|
|
—
|
|
|
206
|
|
||||
Corporate securities
|
—
|
|
|
711
|
|
|
—
|
|
|
711
|
|
||||
Asset-backed securities
|
—
|
|
|
188
|
|
|
—
|
|
|
188
|
|
||||
Auction rate securities
|
—
|
|
|
—
|
|
|
41
|
|
|
41
|
|
||||
Other
|
—
|
|
|
43
|
|
|
—
|
|
|
43
|
|
||||
Total recurring fair value measurements
|
$
|
206
|
|
|
$
|
1,612
|
|
|
$
|
41
|
|
|
$
|
1,859
|
|
|
|
|
|
|
|
|
|
||||||||
|
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 recurring fair value measurements
|
$
|
203
|
|
|
$
|
1,014
|
|
|
$
|
70
|
|
|
$
|
1,287
|
|
|
June 30, 2012
|
||||||||||||||
|
Amortized
Cost
|
|
Gross
Unrealized
Gain
|
|
Gross
Unrealized
Loss
1
|
|
Fair
Value
|
||||||||
|
(in millions)
|
||||||||||||||
Municipal securities
|
$
|
411
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
422
|
|
U.S. Government and Agency securities
|
248
|
|
|
—
|
|
|
—
|
|
|
248
|
|
||||
Taxable short-term bond funds
|
207
|
|
|
—
|
|
|
(1
|
)
|
|
206
|
|
||||
Corporate securities
|
710
|
|
|
1
|
|
|
—
|
|
|
711
|
|
||||
Asset-backed securities
|
188
|
|
|
—
|
|
|
—
|
|
|
188
|
|
||||
Auction rate securities
2
|
46
|
|
|
—
|
|
|
(5
|
)
|
|
41
|
|
||||
Other
|
28
|
|
|
—
|
|
|
—
|
|
|
28
|
|
||||
Total
|
$
|
1,838
|
|
|
$
|
12
|
|
|
$
|
(6
|
)
|
|
$
|
1,844
|
|
|
|
|
|
|
|
|
|
||||||||
|
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
2
|
78
|
|
|
—
|
|
|
(8
|
)
|
|
70
|
|
||||
Other
|
20
|
|
|
—
|
|
|
—
|
|
|
20
|
|
||||
Total
|
$
|
1,285
|
|
|
$
|
11
|
|
|
$
|
(11
|
)
|
|
$
|
1,285
|
|
|
Available-For-Sale
|
||||||
|
Amortized
Cost
|
|
Fair Value
|
||||
|
(in millions)
|
||||||
Due within 1 year
|
$
|
754
|
|
|
$
|
754
|
|
Due after 1 year through 5 years
|
770
|
|
|
780
|
|
||
Due after 5 years through 10 years
|
58
|
|
|
59
|
|
||
Due after 10 years
|
49
|
|
|
45
|
|
||
No contractual maturity
|
207
|
|
|
206
|
|
||
Total
|
$
|
1,838
|
|
|
$
|
1,844
|
|
|
June 30, 2012
|
|
December 31, 2011
|
||||
|
(in millions)
|
||||||
Customer and merchant incentives
|
$
|
235
|
|
|
$
|
190
|
|
Investment securities held-to-maturity
|
36
|
|
|
—
|
|
||
Prepaid income taxes
|
90
|
|
|
35
|
|
||
Income taxes receivable
|
50
|
|
|
35
|
|
||
Other
|
181
|
|
|
144
|
|
||
Total prepaid expenses and other current assets
|
$
|
592
|
|
|
$
|
404
|
|
|
June 30, 2012
|
|
December 31, 2011
|
||||
|
(in millions)
|
||||||
Customer and merchant incentives
|
$
|
422
|
|
|
$
|
409
|
|
Nonmarketable equity investments
|
165
|
|
|
160
|
|
||
Auction rate securities available-for-sale, at fair value
|
41
|
|
|
70
|
|
||
Investment securities held-to-maturity
|
—
|
|
|
36
|
|
||
Income taxes receivable
|
31
|
|
|
15
|
|
||
Other
|
59
|
|
|
46
|
|
||
Total other assets
|
$
|
718
|
|
|
$
|
736
|
|
|
June 30, 2012
|
|
December 31, 2011
|
||||
|
(in millions)
|
||||||
Property, plant and equipment
|
$
|
843
|
|
|
$
|
819
|
|
Less accumulated depreciation and amortization
|
(385
|
)
|
|
(370
|
)
|
||
Property, plant and equipment, net
|
$
|
458
|
|
|
$
|
449
|
|
|
June 30, 2012
|
|
December 31, 2011
|
||||
|
(in millions)
|
||||||
Customer and merchant incentives
|
$
|
908
|
|
|
$
|
889
|
|
Personnel costs
|
223
|
|
|
345
|
|
||
Advertising
|
86
|
|
|
144
|
|
||
Income and other taxes
|
135
|
|
|
82
|
|
||
Other
|
123
|
|
|
150
|
|
||
Total accrued expenses
|
$
|
1,475
|
|
|
$
|
1,610
|
|
|
|
Foreign Currency Translation Adjustments
|
|
Defined Benefit Pension and Other Postretirement Plans, Net of Tax
|
|
Investment Securities Available-for-Sale, Net of Tax
|
|
Accumulated Other Comprehensive Loss
|
||||||||
|
|
(in millions)
|
||||||||||||||
Balance at December 31, 2011
|
|
$
|
30
|
|
|
$
|
(32
|
)
|
|
$
|
—
|
|
|
$
|
(2
|
)
|
Current period other comprehensive (loss) income
|
|
(50
|
)
|
|
1
|
|
|
4
|
|
|
(45
|
)
|
||||
Balance at June 30, 2012
|
|
$
|
(20
|
)
|
|
$
|
(31
|
)
|
|
$
|
4
|
|
|
$
|
(47
|
)
|
|
|
|
|
|
|
|
|
|
•
|
Hungary.
In December 2009, the Hungarian Competition Authority (“HCA”) issued a formal decision that MasterCard's (and Visa's) historic domestic interchange fees violated Hungarian competition law and fined each of MasterCard Europe and Visa Europe approximately
$3 million
, which was paid during the fourth quarter of 2009. MasterCard appealed the decision to the Hungarian courts. In October 2010, the Hungarian appeals court stayed the proceeding until MasterCard's appeal to the General Court of the European Union of the European Commission's December 2007 cross-border interchange fee decision is finally decided. If the HCA's decision is not reversed on appeal, it could have a significant adverse impact on the revenues of MasterCard's Hungarian customers and on MasterCard's overall business in Hungary. In June 2012, MasterCard was informed that the HCA has commenced a separate investigation of MasterCard's alleged abuse of dominant position in what it refers to as the domestic bankcard market during the period beginning in December 2010.
|
•
|
Italy.
In November 2010, the Italian Competition Authority (“ICA”) adopted a decision in which it determined that MasterCard Europe's domestic interchange fees violate European Union competition law, fined MasterCard
2.7 million
euro (approximately
$4 million
) and ordered MasterCard to refrain in the future from maintaining interchange fees that are not based on economic justifications linked to efficiency criteria and to eliminate any anticompetitive clauses from its licensing agreements. MasterCard appealed the ICA's infringement decision to the Administrative Court, and the decision was annulled by the Administrative Court in July 2011. The ICA has appealed the Administrative Court's judgment to the Council of State. If the ICA's infringement decision ultimately stands, it could have a significant adverse impact on the revenues of MasterCard's Italian customers and on MasterCard's overall business in Italy.
|
•
|
Poland.
In January 2007, the Polish Office for Protection of Competition and Consumers (the “PCA”) issued a decision that MasterCard's (and Visa Europe's) domestic credit and debit default interchange fees are unlawful under Polish competition law, and imposed fines on MasterCard's (and Visa Europe's) licensed financial institutions the entities responsible for setting the fees. As part of this decision, the PCA decided that MasterCard (and Visa Europe) had not violated the law because they were not responsible for setting the fees. The decision is currently being appealed. If on appeal the PCA's decision is ultimately allowed to stand, it could have a significant adverse impact on the revenues of MasterCard's Polish customers and on MasterCard's overall business in Poland.
|
•
|
United Kingdom
. In February 2007, the Office for Fair Trading of the United Kingdom (the “OFT”) commenced an investigation of MasterCard's current U.K. default credit card interchange fees and so-called “immediate debit” cards to determine whether such fees contravene U.K. and European Union competition law. The OFT had informed MasterCard that it did not intend to issue a Statement of Objections or otherwise commence formal proceedings with respect to the investigation prior to the judgment of the General Court of the European Union with respect to MasterCard's appeal of the December 2007 cross-border interchange fee decision of the European Commission. If the OFT ultimately determines that any of MasterCard's U.K. interchange fees contravene U.K. and European Union competition law, it may issue a new decision and possibly levy fines accruing from the date of its first decision. MasterCard would likely appeal a negative decision by the OFT in any future proceeding to the Competition Appeals Tribunal. Such an OFT decision could lead to the filing of private actions against MasterCard by merchants and/or consumers which, if its appeal of such an OFT decision were to fail, could result in an award or awards of substantial damages and could have a significant adverse impact on the revenues of MasterCard International's U.K. customers and MasterCard's overall business in the U.K.
|
•
|
Central banks and regulators in several jurisdictions have initiated efforts to affect MasterCard and/or Visa's respective interchange rates outside of commencing regulatory proceedings. These efforts include (1) activity in 2012 by the Polish Central Bank to effectively compel MasterCard and Visa to lower their respective interchange rates (or be faced with the possibility of interchange fee legislation) and (2) an information request sent to MasterCard by the French Competition Authority (the “FCA”) in 2009 concerning its domestic interchange rates (which the FCA subsequently suspended and, as MasterCard understands, was intending to wait until the judgment of the General Court of the European Union with respect to MasterCard's appeal of the December 2007 cross-border interchange fee decision of the European Commission before deciding whether to re-engage as to these rates.)
|
•
|
In September 2010, the South African Reserve Bank informed MasterCard that it intends to appoint an independent consultant to make a recommendation on a simplified interchange structure for all payment systems in South Africa, including MasterCard's. Such an interchange structure, if adopted, could have a significant adverse impact on the revenues of MasterCard's South African customers and on MasterCard's overall business in South Africa.
|
•
|
MasterCard is aware that regulatory authorities and/or central banks in certain other jurisdictions including Austria, Brazil, Chile, Colombia, Germany, Israel, Latvia, Lithuania and Russia are reviewing MasterCard's and/or its customers' interchange fees and/or related practices (such as the “honor all cards” rule) and may seek to regulate the establishment of such fees and/or such practices.
|
•
|
Switzerland
. In July 2010, MasterCard received a notice from the Swiss Competition Authority (the “WEKO”) that based upon complaints, the WEKO had opened a pre-investigation of certain of MasterCard's domestic debit acquirer fees to determine whether to open a formal investigation with respect to these fees. In September 2010, the WEKO denied immediate action and interim relief based on the complaints, and in July 2012, MasterCard was informed that the WEKO had closed its pre-investigation and has decided not to open a formal investigation of the fees.
|
|
June 30,
2012 |
|
December 31, 2011
|
||||
|
(in millions)
|
||||||
Gross settlement exposure
|
$
|
40,171
|
|
|
$
|
39,102
|
|
Collateral held for settlement exposure
1
|
(4,087
|
)
|
|
(3,482
|
)
|
||
Net uncollateralized settlement exposure
|
$
|
36,084
|
|
|
$
|
35,620
|
|
|
June 30, 2012
|
|
December 31, 2011
|
||||||||||||
|
Notional
|
|
Estimated Fair
Value
|
|
Notional
|
|
Estimated Fair
Value
|
||||||||
|
(in millions)
|
||||||||||||||
Commitments to purchase foreign currency
|
$
|
51
|
|
|
$
|
1
|
|
|
$
|
21
|
|
|
$
|
—
|
|
Commitments to sell foreign currency
|
1,135
|
|
|
14
|
|
|
279
|
|
|
2
|
|
||||
Balance Sheet Location:
1
|
|
|
|
|
|
|
|
||||||||
Accounts Receivable
|
|
|
$
|
17
|
|
|
|
|
$
|
4
|
|
||||
Other Current Liabilities
|
|
|
(2
|
)
|
|
|
|
(2
|
)
|
|
Three Months Ended
June 30, |
|
Six Months Ended June 30,
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
|
(in millions)
|
||||||||||||||
Foreign currency derivative contracts
1
|
|
|
|
|
|
|
|
||||||||
General and administrative
|
$
|
(4
|
)
|
|
$
|
(1
|
)
|
|
$
|
(10
|
)
|
|
$
|
(12
|
)
|
Revenues
|
1
|
|
|
(2
|
)
|
|
(3
|
)
|
|
(4
|
)
|
||||
Total
|
$
|
(3
|
)
|
|
$
|
(3
|
)
|
|
$
|
(13
|
)
|
|
$
|
(16
|
)
|
•
|
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.
|
|
Three Months Ended
June 30, |
|
Percent Increase (Decrease)
|
|
Six Months Ended June 30,
|
|
Percent Increase (Decrease)
|
||||||||||||
|
2012
|
|
2011
|
|
|
2012
|
|
2011
|
|
||||||||||
|
(in millions, except per share data, percentages and GDV amounts)
|
||||||||||||||||||
Revenues, net
|
$
|
1,820
|
|
|
$
|
1,667
|
|
|
9%
|
|
$
|
3,578
|
|
|
$
|
3,168
|
|
|
13%
|
Total operating expenses
|
846
|
|
|
782
|
|
|
8%
|
|
1,604
|
|
|
1,447
|
|
|
11%
|
||||
Operating income
|
974
|
|
|
885
|
|
|
10%
|
|
1,974
|
|
|
1,721
|
|
|
15%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total other income (expense)
|
(1
|
)
|
|
7
|
|
|
*
|
|
(2
|
)
|
|
7
|
|
|
*
|
||||
Income before income taxes
|
973
|
|
|
892
|
|
|
9%
|
|
1,972
|
|
|
1,728
|
|
|
14%
|
||||
Income tax expense
|
273
|
|
|
284
|
|
|
(4)%
|
|
591
|
|
|
558
|
|
|
6%
|
||||
Net income
|
700
|
|
|
608
|
|
|
15%
|
|
1,381
|
|
|
1,170
|
|
|
18%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Loss attributable to non-controlling interests
|
—
|
|
|
—
|
|
|
*
|
|
1
|
|
|
—
|
|
|
*
|
||||
Net Income Attributable to MasterCard
|
$
|
700
|
|
|
$
|
608
|
|
|
15%
|
|
$
|
1,382
|
|
|
$
|
1,170
|
|
|
18%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Basic Earnings per Share
|
$
|
5.56
|
|
|
$
|
4.77
|
|
|
17%
|
|
$
|
10.95
|
|
|
$
|
9.08
|
|
|
21%
|
Basic Weighted Average Shares Outstanding
|
126
|
|
|
127
|
|
|
(1)%
|
|
126
|
|
|
129
|
|
|
(2)%
|
||||
Diluted Earnings per Share
|
$
|
5.55
|
|
|
$
|
4.76
|
|
|
17%
|
|
$
|
10.91
|
|
|
$
|
9.05
|
|
|
21%
|
Diluted Weighted Average Shares Outstanding
|
126
|
|
|
128
|
|
|
(1)%
|
|
127
|
|
|
129
|
|
|
(2)%
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Effective Income Tax Rate
|
28.0
|
%
|
|
31.8
|
%
|
|
*
|
|
30.0
|
%
|
|
32.3
|
%
|
|
*
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Gross Dollar Volume (“GDV”) on a U.S. dollar Converted Basis (in billions)
1
|
$
|
890
|
|
|
$
|
813
|
|
|
9%
|
|
$
|
1,739
|
|
|
$
|
1,542
|
|
|
13%
|
Processed transactions
2
|
8,537
|
|
|
6,601
|
|
|
29%
|
|
16,254
|
|
|
12,572
|
|
|
29%
|
•
|
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
|
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 merchant 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.
|
•
|
Program management services
provided to prepaid card issuers. This primarily includes foreign exchange margin, commissions, load fees, and ATM withdrawal fees charged to cardholders on the sale and encashment
|
•
|
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.
|
|
Three Months Ended
June 30, |
|
Percent Increase (Decrease)
|
|
Six Months Ended June 30,
|
|
Percent Increase (Decrease)
|
||||||||||||
|
2012
|
|
2011
|
|
|
2012
|
|
2011
|
|
||||||||||
|
(in millions, except percentages)
|
||||||||||||||||||
Domestic assessments
|
$
|
893
|
|
|
$
|
809
|
|
|
10%
|
|
$
|
1,733
|
|
|
$
|
1,532
|
|
|
13%
|
Cross-border volume fees
|
566
|
|
|
511
|
|
|
11%
|
|
1,097
|
|
|
973
|
|
|
13%
|
||||
Transaction processing fees
|
753
|
|
|
630
|
|
|
19%
|
|
1,467
|
|
|
1,220
|
|
|
20%
|
||||
Other revenues
|
269
|
|
|
251
|
|
|
7%
|
|
531
|
|
|
454
|
|
|
17%
|
||||
Gross revenues
|
2,481
|
|
|
2,201
|
|
|
13%
|
|
4,828
|
|
|
4,179
|
|
|
16%
|
||||
Rebates and incentives (contra-revenues)
|
(661
|
)
|
|
(534
|
)
|
|
24%
|
|
(1,250
|
)
|
|
(1,011
|
)
|
|
24%
|
||||
Net revenues
|
$
|
1,820
|
|
|
$
|
1,667
|
|
|
9%
|
|
$
|
3,578
|
|
|
$
|
3,168
|
|
|
13%
|
•
|
GDV increased
15%
and
17%
during the
three and six months ended June 30, 2012
, respectively, when measured in local currency terms, and increased
9%
and
13%
, respectively, when measured on a U.S. dollar-converted basis versus the comparable periods in 2011.
|
•
|
Pricing changes implemented in 2012 and 2011 increased domestic assessments by approximately
1
and
2
percentage points for the
three and six months ended June 30, 2012
, respectively, versus the comparable periods in 2011.
|
•
|
The net impact of foreign currency relating to the translation of domestic assessments from our functional currencies to U.S. dollars reduced domestic assessments revenue growth by approximately
4
and
3
percentage points for the
three and six months ended June 30, 2012
, respectively.
|
•
|
Cross-border volumes increased
17%
and
18%
during the
three and six months ended June 30, 2012
, respectively, when measured in local currency terms, and increased
9%
and
12%
, respectively, when measured on a U.S. dollar-converted basis versus the comparable periods in 2011.
|
•
|
The net impact of foreign currency relating to the translation of cross-border volume fees from our functional currencies to U.S. dollars reduced cross-border volume fees revenue growth by approximately
4
and
2
percentage points for the
three and six months ended June 30, 2012
, respectively.
|
•
|
Processed transactions increased
29%
for each of the
three and six months ended June 30, 2012
, versus the comparable periods in 2011. The growth included the effects of new processing deals entered into over the past year and the impact of debit regulation in the United States. As a result, the mix of processed transactions has shifted to more PIN debit transactions which typically have a lower revenue yield than our historic average.
|
•
|
Various pricing changes implemented in 2012 and 2011 increased transaction processing fees revenue by approximately
3
and
4
percentage points for the
three and six months ended June 30, 2012
, respectively, versus the comparable periods in 2011.
|
•
|
The effects of connectivity fees and other non-switching transactions also contributed to the growth in transaction processing fees for the
three and six months ended June 30, 2012
.
|
•
|
The net impact of foreign currency relating to the translation of transaction processing fees from our functional currencies to U.S. dollars reduced transaction processing fees revenue growth by approximately
5
and
3
percentage points for the
three and six months ended June 30, 2012
, respectively.
|
•
|
Increases in other payment-related services for the three and six months ended June 30, 2012 and revenues from the April 2011 acquisition of Access Prepaid Worldwide (“Access”), without comparable revenues in the first quarter of 2011.
|
•
|
Pricing changes implemented in 2012 and 2011 increased other revenues by approximately
2
and
3
percentage points for the
three and six months ended June 30, 2012
, respectively, versus the comparable periods in 2011.
|
•
|
The net impact of foreign currency relating to the translation of other revenues from our functional currencies to U.S. dollars reduced other revenues growth by approximately
3
percentage points for each of the
three and six months ended June 30, 2012
.
|
•
|
New and renewed agreements and increased volumes.
|
•
|
The net impact of foreign currency relating to the translation of rebates and incentives from our functional currencies to U.S. dollars reduced rebates and incentives growth by approximately
6
and
4
percentage points for the
three and six months ended June 30, 2012
, respectively.
|
|
|
Three Months Ended
June 30, |
|
Percent Increase (Decrease)
|
|
Six Months Ended June 30,
|
|
Percent Increase (Decrease)
|
||||||||||||
|
|
2012
|
|
2011
|
|
|
2012
|
|
2011
|
|
||||||||||
|
|
(in millions, except percentages)
|
||||||||||||||||||
General and administrative
|
|
$
|
591
|
|
|
$
|
540
|
|
|
10%
|
|
$
|
1,170
|
|
|
$
|
1,034
|
|
|
13%
|
Advertising and marketing
|
|
179
|
|
|
193
|
|
|
(7)%
|
|
304
|
|
|
322
|
|
|
(5)%
|
||||
Depreciation and amortizaton
|
|
56
|
|
|
49
|
|
|
13%
|
|
110
|
|
|
91
|
|
|
21%
|
||||
Provision for litigation settlement
|
|
20
|
|
|
—
|
|
|
*
|
|
20
|
|
|
—
|
|
|
*
|
||||
Total operating expenses
|
|
$
|
846
|
|
|
$
|
782
|
|
|
8%
|
|
$
|
1,604
|
|
|
$
|
1,447
|
|
|
11%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total operating expenses as a percentage of net revenues
|
|
47
|
%
|
|
47
|
%
|
|
|
|
45
|
%
|
|
46
|
%
|
|
|
|
Three Months Ended
June 30, |
|
Percent Increase (Decrease)
|
|
Six Months Ended June 30,
|
|
Percent Increase (Decrease)
|
||||||||||||
|
2012
|
|
2011
|
|
|
2012
|
|
2011
|
|
||||||||||
|
(in millions, except percentages)
|
||||||||||||||||||
Personnel
|
$
|
388
|
|
|
$
|
347
|
|
|
12%
|
|
$
|
765
|
|
|
$
|
680
|
|
|
12%
|
Professional fees
|
60
|
|
|
62
|
|
|
(4)%
|
|
108
|
|
|
114
|
|
|
(5)%
|
||||
Data processing and telecommunications
|
49
|
|
|
42
|
|
|
15%
|
|
96
|
|
|
82
|
|
|
17%
|
||||
Foreign exchange activity
|
(8
|
)
|
|
(6
|
)
|
|
27%
|
|
5
|
|
|
(4
|
)
|
|
*
|
||||
Other
|
102
|
|
|
95
|
|
|
9%
|
|
196
|
|
|
162
|
|
|
22%
|
||||
General and administrative expenses
|
$
|
591
|
|
|
$
|
540
|
|
|
10%
|
|
$
|
1,170
|
|
|
$
|
1,034
|
|
|
13%
|
•
|
Personnel expense increased
12%
for each of the
three and six months ended June 30, 2012
, versus the comparable periods in 2011. The increase was primarily due to higher salary and benefits costs, including increased compensation related to an increase in the number of employees to support the Company's strategic initiatives.
|
•
|
Foreign exchange activity includes gains and losses on foreign exchange derivative contracts and the impact of remeasurement of assets and liabilities denominated in foreign currencies. See Note 13 (Foreign Exchange Risk Management) to the consolidated financial statements included in Part I, Item 1 of this Report. Since the Company does not designate foreign currency derivatives as hedging instruments pursuant to the accounting standards for derivative instruments and hedging activities, it records gains and losses on foreign exchange derivatives on a current basis in general and administrative expenses, with the associated offset being recognized as the exposures materialize.
|
•
|
Other expenses include travel and entertainment expenses, rental expense for our facilities, cardholder services expenses, certain operational expenses associated with the operations of Access, and other miscellaneous operating expenses. Other expenses increased for the
three and six months ended June 30, 2012
versus the comparable periods in 2011 primarily due to the increased expenses associated with the Access operations, for which the Company did not have comparable expenses in the first quarter of 2011, and other increased operating expenses associated with expanding business operations.
|
|
Six Months Ended June 30,
|
||||||
|
2012
|
|
2011
|
||||
|
(in millions)
|
||||||
Cash Flow Data:
|
|
|
|
||||
Net cash provided by operating activities
|
$
|
1,068
|
|
|
$
|
893
|
|
Net cash used in investing activities
|
(690
|
)
|
|
(214
|
)
|
||
Net cash used in financing activities
|
(922
|
)
|
|
(1,083
|
)
|
|
June 30,
2012 |
|
December 31, 2011
|
||||
|
(in millions)
|
||||||
Balance Sheet Data:
|
|
|
|
||||
Current assets
|
$
|
8,283
|
|
|
$
|
7,741
|
|
Current liabilities
|
4,307
|
|
|
4,217
|
|
||
Long-term liabilities
|
657
|
|
|
599
|
|
||
Equity
|
6,276
|
|
|
5,877
|
|
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
|
||||||
April 1 – 30
|
|
121,582
|
|
|
$
|
432.25
|
|
|
121,582
|
|
|
$
|
552,195,930
|
|
May 1 – 31
|
|
681,188
|
|
|
$
|
414.71
|
|
|
681,188
|
|
|
$
|
269,698,600
|
|
June 1 – 30
|
|
815,268
|
|
|
$
|
412.11
|
|
|
815,268
|
|
|
$
|
1,433,722,196
|
|
Total
|
|
1,618,038
|
|
|
$
|
414.72
|
|
|
1,618,038
|
|
|
|
|
|
MASTERCARD INCORPORATED
|
||
|
|
(Registrant)
|
||
|
|
|
|
|
Date:
|
August 1, 2012
|
By:
|
|
/S/ AJAY BANGA
|
|
|
|
|
Ajay Banga
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
Date:
|
August 1, 2012
|
By:
|
|
/S/ MARTINA HUND-MEJEAN
|
|
|
|
|
Martina Hund-Mejean
|
|
|
|
|
Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|
Date:
|
August 1, 2012
|
By:
|
|
/S/ ANDREA FORSTER
|
|
|
|
|
Andrea Forster
|
|
|
|
|
Corporate Controller
|
|
|
|
|
(Principal Accounting Officer)
|
|
|
|
Exhibit
Number
|
|
Exhibit Description
|
|
|
|
10.1+
|
|
MasterCard Incorporated 2006 Long Term Plan, amended and restated effective June 5, 2012.
|
|
|
|
10.2+
|
|
2006 Non-Employee Director Equity Compensation Plan, amended and restated effective June 5, 2012.
|
|
|
|
10.3+
|
|
Schedule of Non-Employee Directors' Annual Compensation (effective as of June 5, 2012).
|
|
|
|
10.4+
|
|
Form of Restricted Stock Agreement for awards under 2006 Non-Employee Director Equity Compensation Plan, amended and restated effective June 5, 2012.
|
|
|
|
10.5+
|
|
Amended and Restated MasterCard International Incorporated Executive Severance Plan, amended and restated as of June 5, 2012.
|
|
|
|
10.6+
|
|
Amended and Restated MasterCard International Incorporated Change in Control Severance Plan, amended and restated as of June 5, 2012.
|
|
|
|
10.7
|
|
Memorandum of Understanding, dated July 13, 2012, by and among Counsel for MasterCard Incorporated and MasterCard International Incorporated; Counsel for Visa, Inc., Visa U.S.A. Inc. and Visa International Service Association; Co-Lead Counsel for Class Plaintiffs; and Attorneys for the Defendant Banks
(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed July 16, 2012 (File No. 001-32877)).
|
|
|
|
12.1
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
|
|
15
|
|
Awareness Letter from the Company’s Independent Registered Public Accounting Firm.
|
|
|
|
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
|
ARTICLE I ESTABLISHMENT AND PURPOSE
|
1
|
||
1.1
|
|
Establishment
|
1
|
1.2
|
|
Purposes
|
1
|
ARTICLE II DEFINITIONS
|
1
|
||
2.1
|
|
“Affiliated Employer”
|
1
|
2.2
|
|
“Agreement”
|
1
|
2.3
|
|
“Award”
|
1
|
2.4
|
|
“Beneficiary”
|
2
|
2.5
|
|
“Board of Directors” or “Board”
|
2
|
2.6
|
|
“Cause”
|
2
|
2.7
|
|
“Change in Control”
|
2
|
2.8
|
|
“Code”
|
3
|
2.9
|
|
“Commission”
|
3
|
2.10
|
|
“Committee”
|
3
|
2.11
|
|
“Common Shares”
|
4
|
2.12
|
|
“Company”
|
4
|
2.13
|
|
“Covered Employee”
|
4
|
2.14
|
|
“Disability”
|
4
|
2.15
|
|
“Effective Date”
|
4
|
2.16
|
|
“Exchange Act”
|
4
|
2.17
|
|
“Exercise Price”
|
4
|
2.18
|
|
“Fair Market Value”
|
4
|
2.19
|
|
“Good Reason”
|
5
|
2.20
|
|
“Grant Date”
|
5
|
2.21
|
|
“Incentive Stock Option” or “ISO”
|
5
|
2.22
|
|
“Non-Employee Director”
|
5
|
2.23
|
|
“Non-Qualified Stock Option” or “NQSO”
|
5
|
2.24
|
|
“Option”
|
5
|
2.25
|
|
“Option Period”
|
5
|
2.26
|
|
“Other Stock-Based Award”
|
5
|
2.27
|
|
“Outside Director”
|
5
|
2.28
|
|
“Participant”
|
6
|
2.29
|
|
“Performance Period”
|
6
|
2.30
|
|
“Performance Unit”
|
6
|
2.31
|
|
“Plan”
|
6
|
2.32
|
|
“Public Offering”
|
6
|
2.33
|
|
“Restricted Stock”
|
6
|
2.34
|
|
“Restricted Stock Unit”
|
6
|
2.35
|
|
“Restriction Period”
|
6
|
2.36
|
|
“Retirement”
|
6
|
2.37
|
|
“Rule 16b-3”
|
6
|
2.38
|
|
“Securities Act”
|
6
|
2.39
|
|
“Stock Appreciation Right” or “SAR”
|
6
|
2.40
|
|
“Stock Option”
|
6
|
2.41
|
|
“Termination of Employment”
|
6
|
ARTICLE III ADMINISTRATION
|
7
|
||
3.1
|
|
Committee Structure
|
7
|
3.2
|
|
Committee Actions
|
7
|
3.3
|
|
Committee Authority
|
7
|
3.4
|
|
Committee Determinations and Decisions
|
8
|
ARTICLE IV SHARES SUBJECT TO PLAN
|
9
|
||
4.1
|
|
Number of Shares
|
9
|
4.2
|
|
Release of Shares
|
9
|
4.3
|
|
Restrictions on Shares
|
9
|
4.4
|
|
ISO Restriction
|
10
|
4.5
|
|
Shareholder Rights
|
10
|
4.6
|
|
Adjustment Provision
|
10
|
ARTICLE V ELIGIBILITY
|
11
|
||
5.1
|
|
Eligibility
|
11
|
ARTICLE VI STOCK OPTIONS
|
11
|
||
6.1
|
|
General
|
11
|
6.2
|
|
Grant
|
11
|
6.3
|
|
Required Terms and Conditions
|
12
|
6.4
|
|
Standard Terms and Conditions
|
13
|
6.5
|
|
Termination
|
14
|
6.6
|
|
Notice of Disposition of Common Shares Prior to the Expiration of Specified ISO Holding Periods
|
14
|
ARTICLE VII STOCK APPRECIATION RIGHTS
|
15
|
||
7.1
|
|
General
|
15
|
7.2
|
|
Grant
|
15
|
7.3
|
|
Required Terms and Conditions
|
16
|
7.4
|
|
Standard Terms and Conditions
|
16
|
7.5
|
|
Termination
|
17
|
ARTICLE VIII RESTRICTED STOCK
|
17
|
||
8.1
|
|
General
|
17
|
8.2
|
|
Grant, Awards and Certificates
|
18
|
8.3
|
|
Required Terms and Conditions
|
18
|
8.4
|
|
Standard Terms and Conditions
|
19
|
8.5
|
|
Termination
|
19
|
8.6
|
|
Price
|
19
|
8.7
|
|
Section 83(b) Election
|
20
|
ARTICLE IX RESTRICTED STOCK UNITS
|
20
|
||
9.1
|
|
General
|
20
|
9.2
|
|
Grant
|
20
|
9.3
|
|
Required Terms and Conditions
|
20
|
9.4
|
|
Standard Terms and Conditions
|
21
|
9.5
|
|
Termination
|
22
|
ARTICLE X PERFORMANCE UNITS
|
22
|
||
10.1
|
|
General
|
22
|
10.2
|
|
Earning Performance Unit Awards
|
22
|
10.3
|
|
Performance Period and Vesting in Performance Unit Award
|
22
|
10.4
|
|
Termination of Employment
|
22
|
10.5
|
|
Nontransferability
|
23
|
ARTICLE XI OTHER STOCK-BASED AWARDS
|
23
|
||
11.1
|
|
Other Stock-Based Awards
|
23
|
ARTICLE XII NON-COMPETITION, NON-SOLICITATION, AND RECOUPMENT
|
23
|
||
12.1
|
|
Non-Competition and Non-Solicitation
|
23
|
12.2
|
|
Recoupment Provisions
|
24
|
ARTICLE XIII CHANGE IN CONTROL
|
24
|
||
13.1
|
|
Impact of Event
|
24
|
13.2
|
|
Additional Discretion
|
24
|
ARTICLE XIV PROVISIONS APPLICABLE TO SHARES ACQUIRED UNDER THIS PLAN
|
25
|
||
14.1
|
|
No Company Obligation
|
25
|
ARTICLE XV MISCELLANEOUS
|
25
|
||
15.1
|
|
Amendments and Termination
|
25
|
15.2
|
|
Form of Awards
|
25
|
15.3
|
|
No Reload Rights
|
26
|
15.4
|
|
Loans
|
26
|
15.5
|
|
Unfunded Status of Plan
|
26
|
15.6
|
|
Provisions Relating to Code Section 162(m)
|
26
|
15.7
|
|
Additional Compensation Arrangements
|
31
|
15.8
|
|
Withholding
|
31
|
15.9
|
|
Controlling Law
|
31
|
15.10
|
|
Offset
|
31
|
15.11
|
|
Nontransferability; Beneficiaries
|
32
|
15.12
|
|
No Rights with Respect to Continuance of Employment
|
32
|
15.13
|
|
Awards in Substitution for Awards Granted by Other Corporations
|
32
|
15.14
|
|
Delivery of Stock Certificate
|
33
|
15.15
|
|
Indemnification
|
33
|
15.16
|
|
No Guarantee of Tax Consequences
|
33
|
15.17
|
|
Foreign Employees and Foreign Law Consideration
|
33
|
15.18
|
|
Section 409A Savings Clause
|
34
|
15.19
|
|
No Fractional Shares
|
34
|
15.20
|
|
Severability
|
34
|
15.21
|
|
Successors and Assigns
|
34
|
15.22
|
|
Entire Agreement
|
35
|
15.23
|
|
Term
|
35
|
15.24
|
|
Gender and Number
|
35
|
15.25
|
|
Headings
|
35
|
|
|
|
|
6.6
|
Notice of Disposition of Common Shares Prior to the Expiration of Specified ISO Holding Periods
.
|
(1)
|
any Stock Options and Stock Appreciation Rights outstanding as of the date of such Change in Control and not then exercisable shall become fully exercisable to the full extent of the original grant;
|
(2)
|
the restrictions applicable to any Restricted Stock Awards shall lapse, and such Restricted Stock shall become free of all restrictions and become fully vested and transferable to the full extent of the original grant;
|
(3)
|
the restrictions applicable to any Restricted Stock Unit Awards shall lapse, and such Restricted Stock Units shall be settled; and
|
(4)
|
any Performance Goal or other condition with respect to any Performance Units or any other Awards shall be deemed to have been satisfied in full at the target performance level, and such Award shall be fully distributable six months following Termination of Employment.
|
(1)
|
Awards subject to this Section must vest (or may be granted or vest) contingent on the attainment of one or more objective performance goals unrelated to term of employment. Awards will also be subject to the general vesting provisions provided in the Award Agreement and this Plan.
|
(2)
|
Prior to completion of 25% of the Performance Period or such earlier date as required under Section 162(m) of the Code , the Committee must establish performance goals (in accordance with (5) below) in writing (including but not limited to Committee minutes) for Covered Employees who will receive Awards that are intended as qualified performance-based compensation. The outcome of the goal must be substantially uncertain at the time the Committee actually established the goal.
|
(3)
|
The performance goal must state, in terms of an objective formula or standard, the method for computing the Award payable to the Participant if the performance goal is attained.
|
(4)
|
The terms of the objective formula or standard must prevent any discretion being exercised by the Committee to later increase the amount payable that otherwise would be due upon attainment of the goal, but may allow discretion to decrease the amount payable.
|
(5)
|
The material terms of the performance goal must be disclosed to and subsequently approved in a separate vote by the stockholders before the payout is executed, unless they conform to one or any combination of the following goals/targets each determined in accordance with generally accepted accounting principles or similar objective standards (and/or each as may appear in the annual report to stockholders, Form10-K, or Form10-Q):
|
a)
|
revenue;
|
b)
|
earnings (including earnings before interest, taxes, depreciation, and amortization, earnings before interest and taxes, and earnings before or after taxes);
|
c)
|
operating income;
|
d)
|
net income;
|
e)
|
operating or profit margins;
|
f)
|
earnings per share;
|
g)
|
return on assets;
|
h)
|
return on equity;
|
i)
|
return on invested capital;
|
j)
|
economic value-added;
|
k)
|
stock price;
|
l)
|
gross dollar volume;
|
m)
|
total shareholder return;
|
n)
|
market share;
|
o)
|
book value;
|
p)
|
expense management;
|
q)
|
cash flow; and
|
(6)
|
A combination of the above performance goals may be used with a particular Award Agreement.
|
(7)
|
The Committee in its sole discretion in setting the goals/targets in the time prescribed in paragraph (2) of this Section 15.6 may provide for the making of equitable adjustments (singularly or in combination) to the goals/targets in recognition of unusual or non-recurring events for the following qualifying objective items:
|
a)
|
asset impairments under Statement of Financial Accounting Standards No. 144, as amended or superceded;
|
b)
|
acquisition-related charges;
|
c)
|
accruals for restructuring and/or reorganization program charges;
|
d)
|
merger integration costs;
|
e)
|
any profit or loss attributable to the business operations of any
|
f)
|
tax settlements;
|
g)
|
any extraordinary, unusual in nature, infrequent in occurrence, or other non-recurring items (not otherwise listed) as described in Accounting Principles Board Opinion No. 30, or its successor;
|
h)
|
any extraordinary, unusual in nature, infrequent in occurrence, or other non-recurring items (not otherwise listed) in management's discussion and analysis of financial condition results of operations, selected financial data, financial statements and/or in the footnotes each as appearing in the annual report to stockholders, Form 10-K, or Form 10-Q;
|
i)
|
unrealized gains or losses on investments;
|
j)
|
charges related to derivative transactions contemplated by Statement of Financial Accounting Standards No. 133, as amended or superseded;
|
k)
|
compensation charges related to FASB Accounting Standards Codification Topic 718 – Stock Compensation, or its successor.
|
(8)
|
The Committee must certify in writing prior to payout that the performance goals and any other material terms were in fact satisfied. In the manner required by Section 162(m) of the Code, the Committee shall, promptly after the date on which the necessary financial and other information for a particular Performance Period becomes available, certify the extent to which performance goals have been achieved with respect to any Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code. In addition, the Committee may, in its discretion, reduce or eliminate the amount of any Award payable to any Participant, based on such factors as the Committee may deem relevant.
|
(9)
|
Limitation on Awards.
|
a)
|
If an Option is canceled, the canceled Option continues to be counted against the maximum number of shares for which Options may be granted to the Participant under the Plan, but not towards the total number of shares reserved and available under the Plan pursuant to Section 4.1.
|
b)
|
In no event shall the number of Restricted Stock shares awarded to any one participant for any fiscal year exceed
|
c)
|
During any fiscal year, the maximum number of Common Shares for which Options, Stock Appreciation Rights, Restricted Stock Units, Performance Units, and Other Stock-Based Compensation in the aggregate, may be granted to any Covered Employee shall not exceed 650,000 shares.
|
d)
|
For cash Performance Unit Awards that are intended to be “performance-based compensation” (as that term is used in Code Section 162(m)), the maximum payment for all awards payable for any three-year performance period, at a target level of performance shall be $10,000,000. In the case of higher levels of performance, the maximum payment for all awards for a three-year Performance Period shall be twice that amount. In the case of a longer or shorter Performance Period, correlative adjustments shall be made to the maximum payment. If, after amounts have been earned with respect to Performance Unit Awards, the payment of such amounts is deferred, any additional amounts attributable to earnings during the deferral period shall be disregarded for purposes of this limit. The limitations on Awards under this Section are subject to adjustment as provided in Section 4.6 to the extent consistent with tax deductibility under Section 162(m) of the Code.
|
(10)
|
In the case of an outstanding Award intended to qualify for the performance-based compensation exception under Section 162(m) of the Code, the Committee shall not, without approval of a majority of the shareholders of the Company, amend the Plan or the Award in a manner that would adversely affect the Award’s continued qualification for the performance-based exception.
|
|
|
|
|
|
ANNUAL RETAINER
|
|
AMOUNT
|
||
Service as a Director
|
|
$
|
90,000
|
|
Service as Chairman of the Board
|
|
$
|
125,000
|
|
|
|
|||
COMMITTEE SERVICE RETAINER
|
|
AMOUNT
|
||
Audit Committee Member
|
|
$
|
15,000
|
|
Human Resources and Compensation Committee Member
|
|
$
|
10,000
|
|
Nominating and Corporate Governance Committee Member
|
|
$
|
10,000
|
|
Audit Committee Chairperson
|
|
$
|
25,000
|
|
Human Resources and Compensation Committee Chairperson
|
|
$
|
20,000
|
|
Nominating and Corporate Governance Committee Chairperson
|
|
$
|
20,000
|
|
|
|
|||
EQUITY AWARDS(1)
|
|
AMOUNT
|
||
|
|
|
|
|
Director
|
|
$
|
130,000
|
|
Chairman of the Board
|
|
$
|
180,000
|
|
|
(1)
|
Represents a grant of deferred stock units, restricted stock or other alternative awards under the MasterCard Incorporated 2006 Non-Employee Director Equity Compensation Plan (the “Plan”), as amended and restated as of June 5, 2012. The Plan was initially adopted by stockholders of MasterCard Incorporated (the “Company”) at its annual meeting of stockholders on July 18, 2006. Stockholders approved the amended and restated Plan at the Company’s annual meeting of stockholders on June 5, 2012. Pursuant to the terms of the Plan, as amended and restated, on the date of an annual meeting of stockholders in each year for so long as the Plan remains in effect, each non-employee director (with the exception of the Chairman of the Board) who is elected at such annual meeting or whose term of office will continue after the date of such annual meeting, will automatically be awarded an equivalent number of either deferred stock units, restricted stock or another alternative award.
|
|
|
|
a.
|
the Eligible Member is terminated by the Company without “Cause” (as such term is defined in the “Definitions” section); or
|
b.
|
the Eligible Member terminates his or her employment with the Company for “Good Reason” (as such term is defined in the “Definitions” section);
|
•
|
the Eligible Member’s employment may be terminated at the option of the Eligible Member, effective ninety (90) days after the giving of written notice to the Company by such Eligible Member of the grounds for termination for Good Reason, which grounds, as specified by the Eligible Member, have not been cured by the Company during such ninety (90) day period; provided, however, that such Eligible Member gave notice to the Company of the event(s) constituting Good Reason within sixty (60) days after such event(s).
|
•
|
the Company may waive all or part of the ninety (90) day notice required to be given by the Eligible Member hereunder by giving written notice to such Eligible Member.
|
a.
|
the Eligible Member’s employment is terminated due to death or, at the option of the Company, upon the “Disability” (as such term is defined in the “Definitions” section) of the Eligible Member;
|
b.
|
the Eligible Member elects to voluntarily terminate his or her employment with the Company or a successor for any reason other than for Good Reason (“Voluntary Resignation”) or Mandatory Retirement;
|
c.
|
the Eligible Member’s employment with the Company is terminated for Cause;
|
•
|
the Eligible Member’s employment may be terminated for Cause by the Company, effective upon the giving of written notice by the Company to the Eligible Member of such termination for Cause, or effective upon such other date as specified therein (“Notice of Termination for Cause”). The Company’s Notice of Termination For Cause shall state the date of termination and the basis for the Company’s determination that the Eligible Member’s actions establish Cause hereunder.
|
•
|
if within sixty (60) days subsequent to the termination of the Eligible Member’s employment for death, Disability, Good Reason or Voluntary Resignation or otherwise, the Company determines that the Eligible Member could have been terminated for Cause, such voluntary termination shall be recharacterized as a termination for Cause, upon the giving of written notice to the Eligible Member and the Eligible Member is provided at least five (5) days to provide a written response to the Company. Thereafter, the Company may take appropriate legal action to seek recompense for any Severance Payments improperly paid to the Eligible Member, his estate or beneficiaries hereunder. Following a judicial determination, the prevailing party in any action under this paragraph, shall be entitled to be reimbursed by the non-prevailing party for reasonable legal fees and expenses incurred by the prevailing party in connection with the judicial proceeding seeking to enforce the provisions of this paragraph.
|
•
|
notwithstanding anything to the contrary herein, if the Company has reason to believe that there are circumstances which, if substantiated, would constitute Cause as defined herein, the Company may suspend the Eligible Member from employment immediately upon notice for such period of time as shall be reasonably necessary for the Company to ascertain whether such circumstances are substantiated. During such suspension, the Eligible Member shall continue to be paid the compensation and provided all benefits in accordance with the regular payroll and benefit practices of the Company; provided, however, that if the Eligible Member has been indicted or otherwise formally charged by governmental authorities with any felony, the Company may, in its sole discretion, and without limiting the Company’s discretion to terminate the Eligible Member’s employment for Cause (provided it has grounds to do so under the terms of this “Disqualifying Events” section, paragraph (c), suspend the Eligible Member without continuation of any compensation or benefits (except health benefits, which shall be continued during the period of suspension), pending final disposition of such criminal charge(s). Upon receiving notice of any such suspension, the Eligible Member shall promptly leave the premises of the Company and remain off such premises until further notice from the Company. In the event the Eligible Member is suspended as a result of such charges, but is later acquitted or otherwise exonerated from
|
d.
|
the failure by the Eligible Member to give a timely notice of termination for Good Reason (as described above); or
|
e.
|
the Eligible Member becomes employed by a Company Entity.
|
a.
|
Accrued Payments
|
•
|
“Base Salary” (as such term is defined in the “Definitions” section) earned but not paid prior to the Date of Termination;
|
•
|
payment for all accrued but unused vacation time up to the Date of Termination;
|
•
|
(x) in the event of the Eligible Member’s death, the target annual incentive bonus payable for the year in which the Eligible Member’s death occurs, (y) in the event of termination due to Disability, a pro rata portion (based upon completed calendar months worked prior to the date of Disability) of the target annual incentive bonus payable for the year in which the Eligible Member’s Date of Termination occurs, or (z) in the event of Mandatory Retirement, a pro rata portion (based upon actually completed calendar months worked) of the annual incentive bonus payable for the year in which the Eligible Member’s termination of employment occurs based upon the actual performance of the Company for the applicable performance period (and taking into account the terms of the annual incentive plan, including but not limited to the discretion of the Compensation Committee to reduce such bonus amount) as contemplated in accordance with the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), with such amount payable when the annual incentive bonus is regularly paid to similarly employees for such year;
|
•
|
to the extent not already paid, the annual incentive bonus for the year immediately preceding the year in which the Eligible Member’s Date of Termination, with such amount payable when the annual incentive bonus is regularly paid to similarly employees for such year; and
|
•
|
such additional benefits, if any, to which the Eligible Member is expressly eligible following the termination of the Eligible Member’s employment on account of death, Disability or Mandatory Retirement, as applicable, payable or made available under such terms and conditions as may be provided by the then existing plans, programs and/or arrangements of the Company.
|
•
|
Base Salary earned but not paid prior to the Date of Termination;
|
•
|
payment for all accrued but unused vacation time up to the Date of Termination; and
|
•
|
additional benefits, if any, to which the Eligible Member is expressly eligible following his termination for Cause or by Voluntary Resignation, as applicable, payable or made available under such terms and conditions as may be provided by the then existing plans, programs and/or arrangements of the Company.
|
•
|
a lump sump payment (subject to any previously elected deferrals under the MasterCard Incorporated Deferral Plan), within thirty (30) days following the Date of Termination of all Base Salary earned but not paid prior to the Date of Termination;
|
•
|
a lump sum payment within thirty (30) days following the Date of Termination equal to all accrued but unused vacation time up to the Date of Termination;
|
•
|
a pro rata portion (based upon actually completed calendar months worked) of the annual incentive bonus payable for the year in which the Eligible Member’s Date of Termination occurs based on the actual performance of the Company for the applicable performance period as determined by the Compensation Committee and payable in accordance with the regular bonus pay practices of the Company, as contemplated in accordance with the requirements of Section 162(m) of the Code; and
|
•
|
to the extent not already paid, the annual incentive bonus for the year immediately preceding the year in which the Eligible Member’s Date of Termination occurs, payable in the amount and at the time such bonus would have been paid had the Eligible Member remained employed.
|
b.
|
Severance Payments
|
•
|
take all actions and make all decisions with respect to the eligibility for, and the amount of, severance and benefits payable under the Plan;
|
•
|
formulate, interpret and apply rules, regulations, and policies necessary to administer the Plan in accordance with its terms;
|
•
|
decide questions, including legal or factual questions, with regard to any matter related to the Plan;
|
•
|
construe and interpret the terms and provisions of the Plan and all documents which relate to the Plan and decide any and all matters arising thereunder including the right to remedy possible ambiguities, inconsistencies or omissions;
|
•
|
investigate and make such factual or other determinations as shall be necessary or advisable for the resolution of appeals of adverse determinations under the Plan; and
|
•
|
process, and approve or deny, claims for severance and benefits under the Plan.
|
•
|
Neither the establishment of this Plan, nor any modification thereof, nor the payment of any severance and benefits hereunder, shall be construed as giving to any Eligible Member, or other person, any legal or equitable right against the Company or any current or former officer, director, or employee thereof, and in no event shall the terms and conditions of employment by the Company of any Eligible Member be modified or in any way affected by this Plan.
|
•
|
The records of the Company with respect to employment history, compensation, absences, illnesses, and all other relevant matters shall be conclusive for all purposes of this Plan.
|
•
|
The respective terms and provisions of the Plan shall be construed, whenever possible, to be in conformity with the requirements of ERISA, or any subsequent laws or amendments thereto. To the extent not to conflict with the preceding sentence, the construction and administration of the Plan shall be in accordance with the laws of the state of New York applicable to contracts made and to be performed within the state of New York (without reference to its conflicts of law provisions).
|
•
|
Nothing contained in this Plan shall be held or construed to create any liability upon the Company to retain any employee in its service or to change the employee-at-will status of any employee. All employees shall remain subject to discharge or discipline to the same extent as if the Plan had not been put into effect. An employee’s failure to qualify for or receive a severance and benefits hereunder shall not establish any right to (i) continuation or reinstatement, or (ii) any benefits in lieu of severance and benefits.
|
Terms
|
Definitions
|
Base Salary
|
The Eligible Member’s annual base salary as in effect from time to time.
|
Cause
|
•
the willful failure by the Eligible Member to perform his or her duties or responsibilities (other than due to Disability);
•
the Eligible Member’s engaging in serious misconduct that is injurious to the Company including, but not limited to, damage to its reputation or standing in its industry;
•
the Eligible Member’s having been convicted of, or entered a plea of guilty or nolo contendere to, a crime that constitutes a felony, or a crime that constitutes a misdemeanor involving moral turpitude;
•
the material breach by the Eligible Member of any written covenant or agreement with the Company not to disclose any information pertaining to the Company; or
•
the breach by the Eligible Member of the Code of Conduct, the Supplemental Code of Conduct, any material provision of the Plan, or any material provision of the following the Company policies: non-discrimination, substance abuse, workplace violence, nepotism, travel and entertainment, corporation information security, antitrust/competition law, enterprise risk management, accounting, contracts, purchasing, communications, investor relations, immigration, privacy, insider trading, financial process and reporting procedures, financial approval authority, whistleblower, anti-corruption and other similar the Company policies, whether currently in effect or adopted after the Effective Date of the Plan.
|
Company
|
MasterCard International Incorporated.
|
Company Entity
|
Any entity (including any subsidiary, affiliate or joint venture) in which the Company has a direct or indirect ownership interest of not less than 20%.
|
Disability
|
Disability shall be defined as set forth under the MasterCard Long-Term Disability Benefits Plan, as it may be amended from time to time.
Any dispute concerning whether the Eligible Member is deemed to have suffered a Disability for purposes of the Plan shall be resolved in accordance with the dispute resolution procedures set forth in the MasterCard Long-Term Disability Benefits Plan.
|
Good Reason
|
The occurrence of any of the following without the prior written consent of the Eligible Member:
•
the assignment to a position for which the Eligible Member is not qualified or a materially lesser position than the position held by the Eligible Member (although duties may differ without giving rise to a termination by the Eligible Member for Good Reason);
•
a material reduction in the Eligible Member’s annual Base Salary except that a 10 percent reduction, in the aggregate, over the period of the Eligible Member’s employment shall not be treated as a material reduction;
•
the relocation of the Eligible Member’s principal place of employment to a location more than fifty (50) miles from the Eligible Member’s principal place of employment (unless such relocation does not increase the Eligible Member’s commute by more than twenty (20) miles), except for required travel on the Company’s business to an extent substantially consistent with the Eligible Member’s business travel obligations as of the date of relocation.
|
Mandatory Retirement
|
The last day of the calendar year in which the Eligible Member attains the age of sixty-five (65).
|
MasterCard
|
MasterCard International Incorporated.
|
Plan Administrator
|
Group Head Global Rewards of MasterCard.
|
Date of Termination
|
The date on which the Eligible Member incurs a termination of employment as described in the “Qualification” section or such other date on which an Eligible Member incurs a “separation from service” determined using the default provisions set forth in Section 1.409A-1(h) of the Treasury Regulations. Pursuant to such default provisions, an Eligible Member will be treated as no longer performing services for the Company when the level of services he or she performs for the Company decreases to a level equal to 20% or less of the average level of services performed by such Eligible Member during the immediately preceding 36 months.
|
1.
|
Examine, without charge, all Plan documents and copies of all documents filed by the Company with the Department of Labor. This includes annual reports and Plan descriptions. All such documents are available for review in your Human Resources Department.
|
2.
|
Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of the Plan, including copies of the latest annual report (Form 5500 Series) and an updated summary plan description. The Plan Administrator may charge you a reasonable fee for the copies.
|
3.
|
Receive a summary of the Plan’s annual financial report. Once each year, the Plan Administrator will send you a Summary Annual Report of the Plan’s financial activities at no charge.
|
Topic
|
Description
|
Plan Name
|
Amended and Restated MasterCard International Incorporated Executive Severance Plan
|
Plan Sponsor
|
MasterCard International Incorporated
2000 Purchase Street Purchase, NY 10577 USA |
Source of Contributions to Plan
|
Employer payments from corporate assets
|
Employer Identification Number
|
|
Plan Number
|
______
|
Plan Administrator
|
Group Head Global Rewards
MasterCard International Incorporated 2000 Purchase Street Purchase, NY 10577 USA |
Agent for Receiving Service of Legal Process
|
General Counsel, Chief Franchise Officer & Corporate Secretary
MasterCard International Incorporated 2000 Purchase Street Purchase, NY 10577 USA |
•
|
Employees who are not subject to an employment agreement (or other similar agreement) which addresses their eligibility for severance, and prior to a “Change in Control” (as such term is defined in the “Definitions” section), are nominated by the Chief Executive Officer (“CEO”) of MasterCard for participation in the plan and are selected in writing by the Human Resources and Compensation Committee as eligible to participate in the Plan, provided that the written selection by the Human Resources and Compensation Committee must be made at least six (6) months preceding a Change in Control. Such selection shall be made in the Human Resources and Compensation Committee’s sole and absolute discretion.
|
a.
|
the Eligible Employee is terminated by the Company or by the Company’s successor without “Cause” (as such term is defined in the “Definitions” section), and such termination occurs within six (6) months preceding, or within two (2) years following, a Change in Control, or
|
b.
|
the Eligible Employee terminates his or her employment with the Company or with the Company’s successor for “Good Reason” (as such term is defined in the “Definitions” section), and such termination occurs within six (6) months preceding, or within two (2) years following, a Change in Control.
|
•
|
The Eligible Employee’s employment may be terminated at the option of the Eligible Employee, effective ninety (90) days after the giving of written notice to the Company by
|
•
|
The Company may waive all or part of the ninety (90) day notice required to be given by the Eligible Employee hereunder by giving written notice to such Eligible Employee.
|
a.
|
the Eligible Employee’s employment is terminated due to death or, at the option of the Company, upon the “Disability” (as such term is defined in the “Definitions” section) of the Eligible Employee;
|
b.
|
the Eligible Employee elects to voluntarily terminate his or her employment with the Company or a successor for any reason other than for Good Reason;
|
c.
|
the Eligible Employee’s employment with the Company or a successor is terminated for Cause, at any time preceding or following a Change in Control;
|
•
|
The Eligible Employee’s employment may be terminated for “Cause” by the Company, upon the authority of MasterCard’s CEO, effective upon the giving of written notice by the Company to the Eligible Employee of such termination for “Cause”, or effective upon such other date as specified therein (“Notice of Termination for Cause”). The Company’s Notice of Termination For Cause shall state the date of termination and the basis for the Company’s determination that the Eligible Employee’s actions establish Cause hereunder.
|
d.
|
the failure by the Eligible Employee to give notice of termination for Good Reason (as described above); or
|
e.
|
the Eligible Employee becomes employed by a Company Entity.
|
a.
|
Accrued Payments
|
•
|
a lump sump payment (subject to any previously elected deferrals under the MasterCard Incorporated Deferral Plan), within thirty (30) days following the Date of Termination of all “Base Salary” (as such term is defined in the “Definitions” section) earned but not paid prior to the Date of Termination;
|
•
|
a lump sum payment within thirty (30) days following the Date of Termination equal to all accrued but unused vacation time up to the Date of Termination;
|
•
|
a pro rata portion (based upon actually completed calendar months worked) of the annual incentive bonus payable for the year in which the Eligible Employee’s termination of employment occurs based on the actual performance of the Company for the applicable performance period as determined by the Human Resources and Compensation Committee and payable in accordance with the regular bonus pay practices of the Company, as contemplated in accordance with the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”); and
|
•
|
to the extent not already paid, the annual incentive bonus for the year immediately preceding the year in which the Eligible Employee’s Date of Termination occurs, payable in the amount and at the time such bonus would have been paid had he or she remained employed.
|
b.
|
Change in Control Pay
|
c.
|
Medical Benefits Continuation
|
d.
|
Outplacement Services
|
e.
|
Additional Payments
|
f.
|
Separation Agreement and Release
|
•
|
take all actions and make all decisions with respect to the eligibility for, and the amount of, Change in Control Pay and benefits payable under the Plan;
|
•
|
formulate, interpret and apply rules, regulations, and policies necessary to administer the Plan in accordance with its terms;
|
•
|
decide questions, including legal or factual questions, with regard to any matter related to the Plan;
|
•
|
to construe and interpret the terms and provisions of the Plan and all documents which relate to the Plan and to decide any and all matters arising thereunder including the right to remedy possible ambiguities, inconsistencies or omissions; and
|
•
|
except as specifically provided to the contrary in the “Claims and Appeal Procedures” section, process, and approve or deny, claims for change in control severance payments and benefits under the Plan.
|
•
|
Neither the establishment of this Plan, nor any modification thereof, nor the payment of any change in control severance payments and benefits hereunder, shall be construed as giving to any Eligible Employee, or other person, any legal or equitable right against the Company or any current or former officer, director, or employee thereof, and in no event shall the terms and conditions of employment by the Company of any Eligible Employee be modified or in any way affected by this Plan.
|
•
|
The records of the Company with respect to employment history, compensation, absences, illnesses, and all other relevant matters shall be conclusive for all purposes of this Plan.
|
•
|
The respective terms and provisions of the Plan shall be construed, whenever possible, to be in conformity with the requirements of ERISA, or any subsequent laws or amendments thereto. To the extent not to conflict with the preceding sentence, the construction and administration of the Plan shall be in accordance with the laws of the state of New York applicable to contracts made and to be performed within the state of New York (without reference to its conflicts of law provisions).
|
•
|
Nothing contained in this Plan shall be held or construed to create any liability upon the Company to retain any employee in its service or to change the employee-at-will status of any employee. All employees shall remain subject to discharge or discipline to the same extent as if the Plan had not been put into effect. An employee’s failure to qualify for or receive a change in control severance payments and benefits hereunder shall not establish any right to (i) continuation or reinstatement, or (ii) any benefits in lieu of change in control severance payments and benefits.
|
Terms
|
Definitions
|
Affiliates
|
Any corporation which is included in a controlled group of corporations (within the meaning of Section 414(b) of the Code) which includes MasterCard and any trade or business (whether or not incorporated) which is under common control with MasterCard (within the meaning of Section 414(c) of the Code); provided that for purposes of this definition the ownership test percentage shall be 50% rather than 80%.
|
Base Salary
|
The Eligible Employee’s annual base salary in effect at the time of termination, except in the case of a termination of employment by the Eligible Employee for Good Reason based on a reduction of the Eligible Employee’s annual base salary, “Base Salary” shall mean the annual base salary in effect immediately prior to such reduction.
|
Change in Control
|
A change in control as set forth in the MasterCard Incorporated 2006 Long-Term Incentive Plan as it may be amended from time to time (“LTIP”).
|
Cause
|
• the willful failure by the Eligible Employee to perform his or her duties or responsibilities (other than due to Disability);
• the Eligible Employee’s engaging in serious misconduct that is injurious to the Company including, but not limited to, damage to its reputation or standing in its industry;
• the Eligible Employee’s having been convicted of, or entered a plea of guilty or nolo contendere to, a crime that constitutes a felony, or a crime that constitutes a misdemeanor involving moral turpitude;
• the material breach by the Eligible Employee of any written covenant or agreement with the Company not to disclose any information pertaining to the Company; or
• the breach by the Eligible Employee of the Code of Conduct, the Supplemental Code of Conduct, any material provision of the Plan, or any material provision of the following the Company policies: non-discrimination, substance abuse, workplace violence, nepotism, travel and entertainment, corporation information security, antitrust/competition law, enterprise risk management, accounting, contracts, purchasing, communications, investor relations, immigration, privacy, insider trading, financial process and reporting procedures, financial approval authority, whistleblower, anti-corruption and other similar the Company policies, whether currently in effect or adopted after the Effective Date of the Plan.
|
Company
|
MasterCard and its Affiliates and subsidiaries.
|
Company Entity
|
Any entity (including any subsidiary, affiliate or joint venture) in which the Company has a direct or indirect ownership interest of not less than 20%.
|
Disability
|
Disability shall be defined as set forth under the MasterCard Long-Term Disability Benefits Plan, as it may be amended from time to time.
Any dispute concerning whether the Eligible Employee is deemed to have suffered a Disability for purposes of the Plan shall be resolved in accordance with the dispute resolution procedures set forth in the MasterCard Long-Term Disability Benefits Plan.
|
Good Reason
|
The occurrence of any of the following without the prior written consent of the Eligible Employee:
• the assignment to a position for which the Eligible Employee is not qualified or a materially lesser position than the position held by the Eligible Employee (although duties may differ without giving rise to a termination by the Eligible Employee for Good Reason);
• a material reduction in the Eligible Employee’s annual Base Salary except that a 10 percent reduction, in the aggregate, over the period of the Eligible Employee’s employment shall not be treated as a material reduction; or
• the relocation of the Eligible Employee’s principal place of employment to a location more than fifty (50) miles from the Eligible Employee’s principal place of employment (unless such relocation does not increase the Eligible Employee’s commute by more than twenty (20) miles), except for required travel on the Company’s business to an extent substantially consistent with the Eligible Employee’s business travel obligations as of the date of relocation.
|
MasterCard
|
MasterCard International Incorporated.
|
Participating Employers
|
The Affiliates and subsidiaries of MasterCard that have adopted the Plan upon approval by the Severance Plan Committee.
|
Plan Administrator
|
Group Head Global Rewards of Mastercard.
|
Severance Plan Committee
|
The Severance Plan Committee serves as an advisory committee to the Plan Committee and consists of at least one member of the law, finance and human resources departments of MasterCard.
|
Date of Termination
|
The date on which the Eligible Employee incurs a termination of employment as described in the “Qualification” section or such other date on which an Eligible Employee incurs a “separation from service” determined using the default provisions set forth in Section 1.409A-1(h) of the Treasury Regulations. Pursuant to such default provisions, an Eligible Employee will be treated as no longer performing services for the Company when the level of services he or she performs for the Company decreases to a level equal to 20% or less of the average level of services performed by such Eligible Employee during the immediately preceding 36 months.
|
1.
|
Examine, without charge, all Plan documents and copies of all documents filed by the Company with the Department of Labor. This includes annual reports and Plan descriptions. All such documents are available for review in your Human Resources Department.
|
2.
|
Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of the Plan, including copies of the latest annual report (Form 5500 Series) and an updated summary plan description. The Plan Administrator may charge you a reasonable fee for the copies.
|
3.
|
Receive a summary of the Plan’s annual financial report. Once each year, the Plan Administrator will send you a Summary Annual Report of the Plan’s financial activities at no charge.
|
Topic
|
Description
|
Plan Name
|
Amended and Restated MasterCard International Incorporated Change in Control Severance Plan
|
Plan Sponsor
|
MasterCard International Incorporated
2000 Purchase Street Purchase, NY 10577 USA |
Source of Contributions to Plan
|
Employer payments from corporate assets
|
Employer Identification Number
|
|
Plan Number
|
______
|
Plan Administrator
|
Group Head Global Rewards
MasterCard International Incorporated 2000 Purchase Street Purchase, NY 10577 USA |
Agent for Receiving Service of Legal Process
|
General Counsel, Chief Franchise Officer & Corporate Secretary
MasterCard International Incorporated 2000 Purchase Street Purchase, NY 10577 USA |
|
Six Months Ended June 30, 2012
|
|
Years Ended December 31,
|
||||||||||||||||||||
|
|
2011
|
|
2010
|
|
2009
|
|
2008
|
|
2007
|
|||||||||||||
|
(in millions, except ratios)
|
||||||||||||||||||||||
Pre-tax income (loss) before adjustment for non-controlling interests
|
$
|
1,972
|
|
|
$
|
2,746
|
|
|
$
|
2,757
|
|
|
$
|
2,218
|
|
|
$
|
(383
|
)
|
|
$
|
1,671
|
|
Loss attributable to non-controlling interests and equity investments
|
13
|
|
|
18
|
|
|
1
|
|
|
3
|
|
|
2
|
|
|
1
|
|
||||||
Add: Fixed charges
|
11
|
|
|
29
|
|
|
56
|
|
|
120
|
|
|
109
|
|
|
62
|
|
||||||
Earnings (loss)
|
$
|
1,996
|
|
|
$
|
2,793
|
|
|
$
|
2,814
|
|
|
$
|
2,341
|
|
|
$
|
(272
|
)
|
|
$
|
1,734
|
|
Fixed charges:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense
|
$
|
9
|
|
|
$
|
25
|
|
|
$
|
52
|
|
|
$
|
115
|
|
|
$
|
104
|
|
|
$
|
57
|
|
Portion of rental expense under operating leases deemed to be the equivalent of interest
1
|
2
|
|
|
4
|
|
|
4
|
|
|
5
|
|
|
5
|
|
|
5
|
|
||||||
Total fixed charges
|
$
|
11
|
|
|
$
|
29
|
|
|
$
|
56
|
|
|
$
|
120
|
|
|
$
|
109
|
|
|
$
|
62
|
|
Ratio of earnings to fixed charges
|
181.5
|
|
|
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:
|
August 1, 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:
|
August 1, 2012
|
|
|
|
|
By:
|
/s/ Martina Hund-Mejean
|
|
|
Martina Hund-Mejean
|
|
|
Chief Financial Officer
|
|
August 1, 2012
|
|
/s/ Ajay Banga
|
Ajay Banga
|
President and Chief Executive Officer
|
|
August 1, 2012
|
|
/s/ Martina Hund-Mejean
|
Martina Hund-Mejean
|
Chief Financial Officer
|