MasterCard Incorporated Reports Second-Quarter 2013 Financial Results

  • Second-quarter net income of $848 million, or $6.96 per diluted share
  • Second-quarter net revenue increase of 15%, to $2.1 billion
  • Second-quarter gross dollar volume up 13% and purchase volume up 12%

Business Wire

PURCHASE, N.Y.--(BUSINESS WIRE)--

MasterCard Incorporated (MA) today announced financial results for the second quarter of 2013. The company reported net income of $848 million, up 19%, and earnings per diluted share of $6.96, up 23%, in each case versus the year-ago period, excluding a special item representing a charge related to the U.S. merchant litigations taken in the second quarter of 2012. These net income and earnings per diluted share growth figures are reconciled to their comparable GAAP measures in the accompanying financial tables.

Net revenue for the second quarter of 2013 was $2.1 billion, a 15% increase versus the same period in 2012, both on an as-reported basis and adjusted for currency. Net revenue growth was driven by the impact of the following:

  • A 13% increase in gross dollar volume, on a local currency basis, to just over $1 trillion;
  • An increase in cross-border volumes of 17%; and
  • An increase in processed transactions of 11%, to 9.5 billion.

These factors were partially offset by an increase in rebates and incentives.

Worldwide purchase volume during the quarter grew 12% on a local currency basis versus the second quarter of 2012, to $734 billion. As of June 30, 2013, the company’s customers had issued 1.9 billion MasterCard and Maestro-branded cards.

“We had a very good second quarter supported by increases in volume and transactions in all regions of the world despite slow economic growth globally,” said Ajay Banga, MasterCard president and CEO. “In addition to solid business performance, I am also pleased to report that our financial inclusion initiatives are having a meaningful impact. This year alone, we have launched nine programs in tandem with government entities and other partners in emerging markets which are designed to bring much needed financial access, convenience and security to more than 350 million people globally who previously would not have had access to financial products.”

Total operating expenses increased 5%, to $868 million, during the second quarter of 2013 compared to the same period in 2012, excluding the special item. The increase was primarily driven by higher personnel expenses in support of strategic initiatives. Including the special item from 2012, total operating expenses increased 2% from the year-ago period.

Operating income for the second quarter of 2013 increased 24% over the year-ago period, excluding the special item, and the company delivered an operating margin of 58.6%.

MasterCard's effective tax rate was 31.2% in the second quarter of 2013, versus a rate of 28.0% in the comparable period in 2012, including the special item. The increase was primarily due to higher discrete benefits in 2012.

During the second quarter of 2013, MasterCard repurchased approximately 1.1 million shares of Class A common stock at a cost of approximately $581 million. Quarter-to-date through July 25, the company repurchased an additional 296,000 shares at a cost of approximately $174 million, with $1.1 billion remaining under the current repurchase program authorization.

Year-to-Date 2013 Results

For the six months ended June 30, 2013, MasterCard reported net income of $1.6 billion, up 16%, excluding the special item and up 17%, including the special item from the second quarter of 2012. Earnings per diluted share was $13.19, up 20%, excluding the special item and up 21%, including the special item from the second quarter of 2012.

Net revenue for the six months ended June 30, 2013 was $4.0 billion, an increase of 12% versus the same period in 2012. Gross dollar volume growth of 13%, cross-border volume growth of 17% and transaction processing growth of 12% contributed to the net revenue growth in the year-to-date period. These factors were partially offset by an increase in rebates and incentives.

Excluding the special item, total operating expenses increased 5%, to $1.7 billion, for the six months ended June 30, 2013, primarily due to higher personnel costs related to strategic initiatives. Including the special item, total operating expenses increased 4%.

Excluding the special item, operating income increased 17% for the first half of 2013 versus the first half of 2012, delivering an operating margin of 58.4%.

MasterCard’s effective tax rate was 30.9% in the six months ended June 30, 2013, versus a rate of 30.0%, including and excluding the special item in the comparable period in 2012. The increase was primarily due to higher discrete benefits in 2012.

Second-Quarter Financial Results Conference Call Details

At 9:00 a.m. ET today, the company will host a conference call to discuss its second-quarter financial results. The dial-in information for this call is 888-771-4371 (within the U.S.) and 847-585-4405 (outside the U.S.), and the passcode is 35050120. A replay of the call will be available for one week and can be accessed by dialing 888-843-7419 (within the U.S.) and 630-652-3042 (outside the U.S.), and using passcode 35050120.

The live call and the replay, along with supporting materials, can also be accessed through the Investor Relations section of the company’s website at www.mastercard.com.

Non-GAAP Financial Information

The company’s total operating expenses, operating income, net income and earnings per share, excluding special items, are non-GAAP financial measures that are reconciled to their most directly comparable GAAP measures in the accompanying financial tables.

The presentation of growth rates adjusted for currency also represent a non-GAAP measure and are calculated by remeasuring the prior period’s results using the current period’s exchange rates.

About MasterCard Incorporated

MasterCard (MA), www.mastercard.com, is a technology company in the global payments industry. We operate the world’s fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard’s products and solutions make everyday commerce activities – such as shopping, traveling, running a business and managing finances – easier, more secure and more efficient for everyone. Follow us on Twitter @MasterCardNews, join the discussion on the Cashless Conversations Blog and subscribe for the latest news.

Forward-Looking Statements

Statements in this press release which are not historical facts, including statements about MasterCard’s plans, strategies, beliefs and expectations, are forward-looking and subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements speak only as of the date they are made. Accordingly, except for the company’s ongoing obligations under the U.S. federal securities laws, the company does not intend to update or otherwise revise the forward-looking information to reflect actual results of operations, changes in financial condition, changes in estimates, expectations or assumptions, changes in general economic or industry conditions or other circumstances arising and/or existing since the preparation of this press release or to reflect the occurrence of any unanticipated events. Such forward-looking statements include, without limitation, statements related to the Company’s business prospects, including the ability to deliver financial inclusion initiatives with government entities and other partners in emerging markets.

Actual results may differ materially from such forward-looking statements for a number of reasons, including those set forth in the company’s filings with the Securities and Exchange Commission (SEC), including the company’s Annual Report on Form 10-K for the year ended December 31, 2012, the company’s Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that have been filed with the SEC during 2013, as well as reasons including difficulties, delays or the inability of the company to achieve its strategic initiatives set forth above. Factors other than those listed above could also cause the company’s results to differ materially from expected results.

 

MASTERCARD INCORPORATED

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 
       

Three Months Ended

June 30,

     

Six Months Ended

June 30,

2013       2012 2013       2012
(in millions, except per share data)
Net Revenue $ 2,096 $ 1,820 $ 4,002 $ 3,578
Operating Expenses
General and administrative 621 591 1,229 1,170
Advertising and marketing 186 179 315 304
Depreciation and amortization 61 56 123 110
Provision for litigation settlement   20     20  
Total operating expenses 868   846   1,667   1,604  
Operating income 1,228 974 2,335 1,974
Other Income (Expense)
Investment income 11 9 19 18
Interest expense (5 ) (3 ) (10 ) (9 )
Other income (expense) (1 ) (7 ) (9 ) (10 )
Total other income (expense) 5   (1 )   (1 )
Income before income taxes 1,233 973 2,335 1,973
Income tax expense 385   273   721   591  
Net Income $ 848   $ 700   $ 1,614   $ 1,382  
 
Basic Earnings per Share $ 6.98   $ 5.56   $ 13.23   $ 10.95  
Basic Weighted-Average Shares Outstanding 121   126   122   126  
Diluted Earnings per Share $ 6.96   $ 5.55   $ 13.19   $ 10.91  
Diluted Weighted-Average Shares Outstanding 122   126   122   127  
 
 

MASTERCARD INCORPORATED

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

 
        June 30, 2013       December 31, 2012
(in millions, except share data)
ASSETS
Cash and cash equivalents $ 2,348 $ 2,052
Restricted cash for litigation settlement 724 726
Investment securities available-for-sale, at fair value 2,742 2,951
Accounts receivable 949 925
Settlement due from customers 668 1,117
Restricted security deposits held for customers 840 777
Prepaid expenses and other current assets 565 681
Deferred income taxes 126   128  
Total Current Assets 8,962 9,357
Property, plant and equipment, net 471 472
Deferred income taxes 85 60
Goodwill 1,050 1,092

Other intangible assets, net of accumulated amortization of $663 and $596,

respectively

637 672
Other assets 816   809  
Total Assets $ 12,021   $ 12,462  
LIABILITIES AND EQUITY
Accounts payable $ 259 $ 357
Settlement due to customers 607 1,064
Restricted security deposits held for customers 840 777
Accrued litigation 724 726
Accrued expenses 1,616 1,748
Other current liabilities 281   234  
Total Current Liabilities 4,327 4,906
Deferred income taxes 98 104
Other liabilities 567   523  
Total Liabilities 4,992 5,533
Commitments and Contingencies
Stockholders’ Equity

Class A common stock, $0.0001 par value; authorized 3,000,000,000 shares,

   133,997,233 and 133,604,903 shares issued and 116,280,684 and 118,405,075

   outstanding, respectively

Class B common stock, $0.0001 par value; authorized 1,200,000,000 shares, 4,639,219

   and 4,838,840 issued and outstanding, respectively

Additional paid-in-capital 3,692 3,641
Class A treasury stock, at cost, 17,716,549 and 15,199,828 shares, respectively (5,482 ) (4,139 )
Retained earnings 8,823 7,354
Accumulated other comprehensive income (loss) (15 ) 61  
Total Stockholders’ Equity 7,018 6,917
Non-controlling interests 11   12  
Total Equity 7,029   6,929  
Total Liabilities and Equity $ 12,021   $ 12,462  
 
 

MASTERCARD INCORPORATED

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

 
       

Six Months Ended

June 30,

2013       2012
(in millions)
Operating Activities
Net income $ 1,614 $ 1,382
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 123 110
Share-based payments (1 ) (30 )
Deferred income taxes (32 ) (55 )
Other 29 23
Changes in operating assets and liabilities:
Accounts receivable (36 ) (51 )
Income taxes receivable 158 (31 )
Settlement due from customers 444 (213 )
Prepaid expenses (112 ) (140 )
Obligations under litigation settlements 20
Accounts payable (97 ) (27 )
Settlement due to customers (451 ) 112
Accrued expenses (87 ) (50 )
Net change in other assets and liabilities 62   18  
Net cash provided by operating activities 1,614   1,068  
Investing Activities
Purchases of investment securities available-for-sale (1,311 ) (1,054 )
Purchases of property, plant and equipment (48 ) (40 )
Capitalized software (55 ) (67 )
Proceeds from sales of investment securities available-for-sale 855 104
Proceeds from maturities of investment securities available-for-sale 644 386
Proceeds from maturities of investment securities held-to-maturity 36
Investment in nonmarketable equity investments (6 ) (19 )
Other investing activities 3    
Net cash provided by (used in) investing activities 118   (690 )
Financing Activities
Purchases of treasury stock (1,347 ) (919 )
Dividends paid (110 ) (57 )
Tax benefit for share-based compensation 20 33
Cash proceeds from exercise of stock options 16 18
Other financing activities   3  
Net cash used in financing activities (1,421 ) (922 )
Effect of exchange rate changes on cash and cash equivalents (15 ) (37 )
Net increase (decrease) in cash and cash equivalents 296 (581 )
Cash and cash equivalents - beginning of period 2,052   3,734  
Cash and cash equivalents - end of period $ 2,348   $ 3,153  
 
 

MASTERCARD INCORPORATED OPERATING PERFORMANCE

 
        For the 3 Months ended June 30, 2013

All MasterCard Credit,

GDV     Growth     Growth     Purchase

Volume

    Growth     Purchase

Trans.

    Cash

Volume

    Growth     Cash

Trans.

    Accounts     Cards
Charge and Debit Programs (Bil.)     (USD)     (Local)     (Bil.)     (Local)     (Mil.)     (Bil.)     (Local)     (Mil.)     (Mil.)     (Mil.)
APMEA $279 18.8% 21.0% $184 18.7% 1,982 $94 25.7% 747 373 402
Canada 34 6.1% 7.5% 31 7.9% 354 3 3.2% 6 44 53
Europe 301 14.3% 13.9% 206 11.3% 3,038 95 19.8% 564 280 296
Latin America

84

17.0% 16.6%

49

19.5%

1,079

34

12.7%

193

116

136

Worldwide less United States 697 15.9% 16.6% 471 14.7% 6,453 226 20.8% 1,509 813 887
United States

310

6.5% 6.5%

263

6.7%

4,726

48

5.1%

317

288

325

Worldwide 1,007 12.8% 13.3% 734 11.7% 11,179 274 17.7% 1,826 1,101 1,211
 
MasterCard Credit and Charge Programs
Worldwide less United States 421 11.8% 13.4% 370 13.6% 4,425 51 11.7% 209 487 551
United States

147

3.3% 3.3%

141

4.0%

1,592

6

-8.5%

6

147

180

Worldwide 568 9.5% 10.6% 511 10.8% 6,017 57 9.0% 216 634 732
 
MasterCard Debit Programs
Worldwide less United States 276 22.8% 21.8% 101 18.8% 2,029 176 23.7% 1,300 326 336
United States

163

9.5% 9.5%

122

10.1%

3,133

41

7.6%

310

141

144

Worldwide 440 17.5% 16.9% 223 13.9% 5,162 217 20.3% 1,610 467 480
 
 
For the 6 Months ended June 30, 2013
All MasterCard Credit, GDV Growth Growth Purchase

Volume

Growth Purchase

Trans.

Cash

Volume

Growth Cash

Trans.

Accounts Cards

Charge and Debit Programs

(Bil.)     (USD)     (Local)     (Bil.)     (Local)     (Mil.)     (Bil.)     (Local)     (Mil.)     (Mil.)     (Mil.)
APMEA $547 19.3% 21.4% $362 18.9% 3,812 $185 26.7% 1,445 373 402
Canada 63 4.5% 5.5% 58 6.0% 659 6 1.5% 12 44 53
Europe 576 13.8% 13.4% 397 10.8% 5,765 178 19.8% 1,057 280 296
Latin America

164

13.8% 15.7%

97

18.7%

2,096

67

11.7%

374

116

136

Worldwide less United States 1,349 15.5% 16.4% 914 14.4% 12,332 435 21.0% 2,888 813 887
United States

604

5.1% 5.1%

509

5.7%

9,089

95

2.3%

618

288

325

Worldwide 1,953 12.1% 12.7% 1,423 11.1% 21,421 531 17.1% 3,506 1,101 1,211
 
MasterCard Credit and Charge Programs
Worldwide less United States 819 11.4% 13.1% 720 13.3% 8,504 98 11.3% 401 487 551
United States

281

2.5% 2.5%

268

3.2%

3,032

13

-11.1%

12

147

180

Worldwide 1,099 9.0% 10.2% 988 10.4% 11,536 111 8.2% 413 634 732
 
MasterCard Debit Programs
Worldwide less United States 530 22.4% 22.0% 194 18.5% 3,829 337 24.1% 2,487 326 336
United States

324

7.6% 7.6%

241

8.5%

6,057

83

4.8%

606

141

144

Worldwide 854 16.3% 16.1% 435 12.8% 9,886 419 19.8% 3,093 467 480
 
 
For the 3 Months ended June 30, 2012
All MasterCard Credit, GDV Growth Growth Purchase

Volume

Growth Purchase

Trans.

Cash

Volume

Growth Cash

Trans.

Accounts Cards
Charge and Debit Programs (Bil.)     (USD)     (Local)     (Bil.)     (Local)     (Mil.)     (Bil.)     (Local)     (Mil.)     (Mil.)     (Mil.)
APMEA $235 19.7% 23.4% $158 22.2% 1,669 $76 26.0% 578 317 344
Canada 32 3.4% 7.9% 29 8.9% 324 3 -1.2% 6 39 47
Europe 263 5.2% 16.5% 184 12.0% 2,574 79 28.3% 476 237 253
Latin America

72

3.6% 19.1%

43

24.3%

936

28

12.2%

179

108

131

Worldwide less United States 601 10.1% 18.9% 415 16.7% 5,503 186 24.1% 1,238 701 776
United States

292

9.0% 9.0%

246

8.7%

4,397

45

10.7%

303

266

303

Worldwide 893 9.7% 15.5% 661 13.6% 9,900 232 21.3% 1,541 967 1,079
 
MasterCard Credit and Charge Programs
Worldwide less United States 376 8.4% 15.6% 331 16.3% 3,934 45 10.6% 186 456 517
United States

142

3.8% 3.8%

135

5.2%

1,575

7

-17.6%

7

143

176

Worldwide 519 7.1% 12.1% 466 12.9% 5,509 52 5.7% 193 599 693
 
MasterCard Debit Programs
Worldwide less United States 225 13.0% 24.8% 84 18.1% 1,569 141 29.2% 1,052 244 258
United States

149

14.5% 14.5%

111

13.3%

2,821

38

18.2%

296

124

127

Worldwide 374 13.6% 20.5% 195 15.3% 4,390 179 26.7% 1,348 368 385
 
 
For the 6 Months ended June 30, 2012
All MasterCard Credit, GDV Growth Growth Purchase

Volume

Growth Purchase

Trans.

Cash

Volume

Growth Cash

Trans.

Accounts Cards
Charge and Debit Programs (Bil.)     (USD)     (Local)     (Bil.)     (Local)     (Mil.)     (Bil.)     (Local)     (Mil.)     (Mil.)     (Mil.)
APMEA $458 22.3% 23.5% $309 22.8% 3,220 $149 25.1% 1,103 317 344
Canada 61 5.8% 9.0% 55 10.4% 613 6 -3.3% 11 39 47
Europe 506 9.0% 17.5% 357 13.2% 4,938 149 29.3% 896 237 253
Latin America

144

9.9% 21.3%

87

26.8%

1,844

57

13.9%

352

108

131

Worldwide less United States 1,168 13.8% 19.8% 808 17.9% 10,615 360 24.2% 2,363 701 776
United States

575

11.5% 11.5%

482

10.8%

8,573

93

14.9%

604

266

303

Worldwide 1,743 13.0% 16.9% 1,290 15.2% 19,188 453 22.2% 2,966 967 1,079
 
MasterCard Credit and Charge Programs
Worldwide less United States 734 12.0% 16.7% 646 17.6% 7,618 89 10.8% 358 456 517
United States

274

5.5% 5.5%

260

6.6%

3,033

14

-11.5%

14

143

176

Worldwide 1,009 10.1% 13.4% 906 14.2% 10,651 103 7.1% 371 599 693
 
MasterCard Debit Programs
Worldwide less United States 433 16.9% 25.3% 162 19.2% 2,998 271 29.4% 2,005 244 258
United States

301

17.5% 17.5%

222

16.2%

5,540

79

21.4%

590

124

127

Worldwide 734 17.1% 22.0% 385 17.4% 8,538 350 27.5% 2,595 368 385
 
APMEA = Asia Pacific / Middle East / Africa
Note that the figures in the preceding tables may not sum due to rounding; growth represents change from the comparable year-ago period
 

Footnote

The tables set forth the gross dollar volume (“GDV”), purchase volume, cash volume and the number of purchase transactions, cash transactions, accounts and cards on a regional and global basis for MasterCard®-branded and MasterCard Electronic™-branded cards. Growth rates over prior periods are provided for volume-based data.

Debit transactions on Maestro® and Cirrus®-branded cards, Mondex® transactions and transactions involving brands other than MasterCard are not included in the preceding tables.

For purposes of the table: GDV represents purchase volume plus cash volume and includes the impact of balance transfers and convenience checks; “purchase volume” means the aggregate dollar amount of purchases made with MasterCard-branded cards for the relevant period; and “cash volume” means the aggregate dollar amount of cash disbursements obtained with MasterCard-branded cards for the relevant period. The number of cards includes virtual cards, which are MasterCard-branded payment accounts that do not generally have physical cards associated with them.

The MasterCard payment product is comprised of credit, charge and debit programs, and data relating to each type of program is included in the tables. Debit programs include MasterCard-branded debit programs where the primary means of cardholder validation at the point of sale is for cardholders either to sign a sales receipt or enter a PIN. The tables include information with respect to transactions involving MasterCard-branded cards that are not processed by MasterCard and transactions for which MasterCard does not earn significant revenues.

Information denominated in U.S. dollars is calculated by applying an established U.S. dollar/local currency exchange rate for each local currency in which MasterCard volumes are reported. These exchange rates are calculated on a quarterly basis using the average exchange rate for each quarter. MasterCard reports period-over-period rates of change in purchase volume and cash volume on the basis of local currency information, in order to eliminate the impact of changes in the value of foreign currencies against the U.S. dollar in calculating such rates of change.

The data set forth in the GDV, purchase volume, purchase transactions, cash volume and cash transactions columns is provided by MasterCard customers and is subject to verification by MasterCard and partial cross-checking against information provided by MasterCard’s transaction processing systems. The data set forth in the accounts and cards columns is provided by MasterCard customers and is subject to certain limited verification by MasterCard. A portion of the data set forth in the accounts and cards columns reflects the impact of routine portfolio changes among customers and other practices that may lead to over counting of the underlying data in certain circumstances. All data is subject to revision and amendment by MasterCard’s customers subsequent to the date of its release.

In 2012, certain MasterCard Debit and Credit Programs in the Europe region have changed due to a reclassification of programs. There is no impact at the All MasterCard Programs level. In addition, Purchase Transactions for certain Credit Programs in the Latin America region have been revised due to changes from several customers. MasterCard revenue is not impacted from these changes. Data for the comparable periods in 2012, 2011 and 2010 have been revised to be consistent with these approaches.

Performance information for prior periods can be found in the "Investor Relations" section of MasterCard's website at www.mastercard.com.

 

GAAP Reconciliations

($ in millions, except per share data)

 
       

Three Months Ended

June 30, 2013

   

Three Months Ended

June 30, 2012

Actual Actual     Special Item     Non-GAAP
 
Provision for litigation settlement $ - $ 20 $ (20 ) $ -
 
Total operating expenses 868 846 (20 ) 826
 
Operating income 1,228 974 20 994
 
Operating Margin 58.6 % 53.5 % 54.6 %
 
Income before income taxes 1,233 973 20 993
 
Income tax expense 385 273 7 a 280
 
Net Income 848 700 13 713
 
 
Basic Earnings per Share

 

$6.98

 

$5.56

 

$0.11

 

$5.67

 
Diluted Earnings per Share

 

$6.96

 

$5.55

 

$0.10

 

$5.65

 
a- Tax effect of provision for litigation settlement
 
 
 

Six Months Ended

June 30, 2013

Six Months Ended

June 30, 2012

Actual Actual Special Item Non-GAAP
 
Provision for litigation settlement $ - $ 20 $ (20 ) $ -
 
Total operating expenses 1,667 1,604 (20 ) 1,584
 
Operating income 2,335 1,974 20 1,994
 
Operating Margin 58.4 % 55.2 % 55.7 %
 
Income before income taxes 2,335 1,973 20 1,993
 
Income tax expense 721 591 7 a 598
 
Net Income 1,614 1,382 13 1,395
 
 
Basic Earnings per Share

 

$13.23

 

$10.95

 

$0.10

 

$11.05

 
Diluted Earnings per Share

 

$13.19

 

$10.91

 

$0.10

 

$11.01

 
a- Tax effect of provision for litigation settlement
 
 
Note: Figures may not sum due to rounding
 

Contact:
MasterCard Incorporated
Investor Relations:
Barbara Gasper, 914-249-4565
investor_relations@mastercard.com
or
Media Relations:
Jim Issokson, 914-249-6286
james_issokson@mastercard.com

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