MasterCard 2014 Annual Report Download - page 37

Download and view the complete annual report

Please find page 37 of the 2014 MasterCard annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 102

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102

35
The significant components of our general and administrative expenses for the years ended December 31, 2014, 2013 and 2012
were as follows:
For the Years Ended December 31, Percent Increase (Decrease)
2014 2013 2012 2014 2013
(in millions, except percentages)
Personnel. . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,064 $ 1,739 $ 1,565 19% 11%
Professional fees . . . . . . . . . . . . . . . . . . . . 307 251 237 22% 6%
Data processing and telecommunications. 273 226 201 21% 12%
Foreign exchange activity. . . . . . . . . . . . . (30) 2 27 ** **
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570 431 399 32% 8%
General and administrative expenses . . . . $ 3,184 $ 2,649 $ 2,429 20% 9%
** Not meaningful
• Personnel expense increased in 2014 compared to 2013 primarily due to an increase in the number of
employees from both our acquired businesses and to support the Company’s strategic initiatives.
Additionally, in the fourth quarter of 2014, the Company recorded a restructuring charge of $87 million.
The increase in personnel expenses in 2013 compared to 2012 was due to an increase in the number of
employees to support our strategic initiatives.
• Professional fees consist primarily of third-party services, legal costs to defend our outstanding litigation
and the evaluation of regulatory developments that impact our industry and brand. Professional fees
increased in both 2014 and 2013, primarily due to higher third-party service expenses.
• Data processing and telecommunication expense consists of expenses to support our global payments
network infrastructure, expenses to operate and maintain our computer and telecommunication system.
These expenses increased in both 2014 and 2013 due to capacity growth of our business.
• 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 20 (Foreign
Exchange Risk Management) to the consolidated financial statements included in Part II, Item 8 of this
Report for further discussion. 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, with the associated offset being
recognized as the exposures materialize.
• Other expenses include loyalty and rewards solutions, travel and entertainment, rental expense for our
facilities, litigation settlements not related to the U.S. merchant class litigation, investment related expenses
and other miscellaneous operating expenses. The change in other expenses in 2014 compared to 2013 was
primarily due to the impact of our current year acquisitions and expenses incurred to support strategic
development efforts. The 2013 increase in other expenses versus 2012 was primarily due to increased costs
associated with loyalty and rewards programs, investment related expenses and increased meeting and travel
expenses.
Advertising and Marketing
Our brands, principally MasterCard, are valuable strategic assets that drive acceptance and usage of our products and facilitate
our ability to successfully introduce new service offerings and access new markets globally. Our advertising and marketing strategy
is to increase global MasterCard brand awareness, preference and usage through integrated advertising, sponsorship, promotions,
interactive media and public relations programs on a global scale. We will continue to invest in marketing programs at the regional
and local levels and sponsor diverse events aimed at multiple target audiences. In 2014, advertising and marketing expenses
increased $21 million, or 3%, mainly due to new and renewed sponsorships and increased support of our strategic initiatives.
Advertising and marketing expenses increased $66 million, or 8%, in 2013 mainly due to new and renewed sponsorships and
increased media spend to support our strategic initiatives.