MasterCard 2008 Annual Report Download - page 125

MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except percent and per share data)
Note 17. Commitments
At December 31, 2008, the Company had the following future minimum payments due under
non-cancelable agreements:
Total
Capital
Leases
Operating
Leases
Sponsorship,
Licensing &
Other
2009 .................................... $372,320 $ 8,435 $ 40,327 $323,558
2010 .................................... 140,659 2,758 18,403 119,498
2011 .................................... 80,823 1,978 11,555 67,290
2012 .................................... 50,099 1,819 9,271 39,009
2013 .................................... 50,012 36,837 7,062 6,113
Thereafter ................................ 21,292 — 19,380 1,912
Total .................................... $715,205 $51,827 $105,998 $557,380
Included in the table above are capital leases with imputed interest expense of $9,483 and a net present
value of minimum lease payments of $42,343. In addition, at December 31, 2008, $92,300 of the future
minimum payments in the table above for leases, sponsorship, licensing and other agreements was accrued.
Consolidated rental expense for the Company’s office space, which is recognized on a straight line basis over the
life of the lease, was approximately $42,905, $35,614 and $31,467 for the years ended December 31, 2008, 2007
and 2006, respectively. Consolidated lease expense for automobiles, computer equipment and office equipment
was $7,694, $7,679 and $8,419 for the years ended December 31, 2008, 2007 and 2006, respectively.
In January 2003, MasterCard purchased a building in Kansas City, Missouri for approximately $23,572. The
building is a co-processing data center which replaced a back-up data center in Lake Success, New York. During
2003, MasterCard entered into agreements with the City of Kansas City for (i) the sale-leaseback of the building
and related equipment which totaled $36,382 and (ii) the purchase of municipal bonds for the same amount
which have been classified as municipal bonds held-to-maturity. The agreements enabled MasterCard to secure
state and local financial benefits. No gain or loss was recorded in connection with the agreements. The leaseback
has been accounted for as a capital lease as the agreement contains a bargain purchase option at the end of the
ten-year lease term on April 1, 2013. The building and related equipment are being depreciated over their
estimated economic life in accordance with the Company’s policy. Rent of $1,819 is due annually and is equal to
the interest due on the municipal bonds. The future minimum lease payments are $45,781 and are included in the
table above. A portion of the building was subleased to the original building owner for a five-year term with a
renewal option. As of December 31, 2008, the future minimum sublease rental income is $4,416.
Note 18. Obligations Under Litigation Settlements
On October 27, 2008, MasterCard and Visa Inc. (“Visa”) entered into a settlement agreement (the “Discover
Settlement”) with Discover Financial Services, Inc. (“Discover”) relating to the U.S. federal antitrust litigation
amongst the parties. The Discover Settlement ended all litigation between the parties for a total of $2,750,000. In
July 2008, MasterCard and Visa had entered into a judgment sharing agreement that allocated responsibility for
any judgment or settlement of the Discover action between the parties. Accordingly, the MasterCard share of the
Discover Settlement was $862,500, which was paid to Discover in November 2008. In addition, in connection
with the Discover Settlement, Morgan Stanley, Discover’s former parent company, paid MasterCard $35,000 in
November 2008, pursuant to a separate agreement. The net impact of $827,500 is included in litigation
settlements for the year ended December 31, 2008.
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