MasterCard Incorporated Reports Fourth-Quarter and Full-Year 2012 Financial Results

MasterCard Incorporated Reports Fourth-Quarter and Full-Year 2012 Financial Results

  • Fourth-quarter net income of $605 million, or $4.86 per diluted share

  • Fourth-quarter net revenue increase of 10%, to $1.9 billion

  • Fourth-quarter gross dollar volume up 14% and purchase volume up 13%

PURCHASE, N.Y.--(BUSINESS WIRE)-- MasterCard Incorporated (NYS: MA) today announced financial results for the fourth quarter of 2012. The company reported net income of $605 million, up 18%, and earnings per diluted share of $4.86, up 21%, 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 fourth quarter of 2011. 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 fourth quarter of 2012 was $1.9 billion, a 10% increase versus the same period in 2011. Adjusted for currency, net revenue increased 12%. Net revenue growth was driven by the impact of the following:

  • An increase in processed transactions of 20%, to 9.2 billion;

  • An increase in cross-border volumes of 17%; and

  • A 14% increase in gross dollar volume, on a local currency basis, to $986 billion.


These factors were partially offset by an increase in rebates and incentives, primarily due to new and renewed agreements and increased volumes.

Worldwide purchase volume during the quarter was up 13% on a local currency basis versus the fourth quarter of 2011, to $727 billion. As of December 31, 2012, the company's customers had issued 1.9 billion MasterCard and Maestro-branded cards.

"We are pleased with our fourth-quarter results, which saw double-digit growth in net revenue, cross-border volume and processed transactions," said Ajay Banga, MasterCard president and CEO. "We are gaining traction in our U.S. credit business with some recent wins, continuing to experience momentum in our mobile initiatives around the world, and securing important business in emerging markets like Africa and Brazil."

Total operating expenses increased 3%, to $996 million, during the fourth quarter of 2012 compared to the same period in 2011, excluding the special item. Adjusted for currency, operating expenses increased 4%. The increase in total operating expenses was primarily driven by an increase in the number of employees in support of strategic growth initiatives and the net impact of foreign exchange activity, partially offset by lower advertising and marketing expenses. Including the special item from 2011, total operating expenses decreased 43% from the year-ago period.

Operating income for the fourth quarter of 2012 increased 18% over the year-ago period, excluding the special item, and the company delivered an operating margin of 47.4%.

MasterCard's effective tax rate was 32.4% in the fourth quarter of 2012, versus a rate of 32.3% in the comparable period in 2011, excluding the special item.

During the fourth quarter of 2012, MasterCard repurchased 1.3 million shares of class A common stock at a cost of approximately $613 million. Quarter-to-date through January 25, the company repurchased an additional 322,000 shares at a cost of approximately $165 million, with $440 million remaining under the current repurchase program authorization.

Full-Year 2012 Results

For the year ended December 31, 2012, MasterCard reported net income of $2.8 billion, up 15%, and earnings per diluted share of $22.04, up 18%, in each case versus the year-ago period and excluding special items in both 2011 and 2012. The special item in 2012 was an incremental charge taken in the second quarter related to the U.S. merchant litigations. Including this special item, full-year 2012 net income remained $2.8 billion and earnings per diluted share was $21.94.

Net revenue for full-year 2012 was $7.4 billion, an increase of 10% versus 2011. Adjusted for currency, net revenue increased 13%. Processed transaction growth of 25%, gross dollar volume growth of 15% and cross-border volume growth of 16% contributed to the net revenue growth in the full-year period. These increases were partially offset by an increase in rebates and incentives due to new and renewed customer agreements and increased volumes.

Excluding special items in both years, total operating expenses increased 6%, to $3.4 billion, for 2012 compared to 2011, primarily due to higher personnel costs related to strategic initiatives and partially offset by lower advertising and marketing expenses. Adjusted for currency, total operating expenses increased 8%. Including special items, total operating expenses in 2012 decreased 14%, to $3.5 billion, versus 2011.

Excluding special items, operating income increased 14% for 2012 versus 2011, delivering an operating margin of 53.5% for full-year 2012.

Total other expense was $5 million for full-year 2012 versus total other income of $33 million in 2011. This was primarily driven by lower investment income, increased expenses from investments in joint ventures and the non-recurrence of an adjustment to acquisition-related provisions made last year.

MasterCard's effective tax rate was 29.9% for full-year 2012, versus a rate of 31.8% for full-year 2011, excluding the special item in 2011. Including this special item, the effective tax rate was 30.6% for full-year 2011. The decrease in the 2012 effective tax rate was primarily due to discrete benefits related to additional export incentives and the conclusion of tax examinations in certain jurisdictions, as well as a benefit from a deduction related to the company's authorization software.

For full-year 2012, MasterCard repurchased 4.1 million shares at a cost of approximately $1.7 billion.

Fourth-Quarter and Full-Year Financial Results Conference Call Details

At 9:00 a.m. ET today, the company will host a conference call to discuss its fourth-quarter and full-year 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 33858248. 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 33858248.

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 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 (NYS: 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 ability to continue to gain traction in U.S. credit, maintain momentum in mobile and secure new business 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, 2011, the company's Quarterly Reports on Form 10-Q and Current Reports on Form 8-K that have been filed with the SEC during 2012, 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

December 31,

Twelve Months Ended

December 31,

2012

2011

2012

2011

(in millions, except per share data)

Revenues, net

$

1,895

$

1,728

$

7,391

$

6,714

Operating Expenses

General and administrative

639

597

2,429

2,196

Advertising and marketing

295

319

775

841

Depreciation and amortization

62

52

230

194

Provision for litigation settlement

-

770

20

770

Total operating expenses

996

1,738

3,454

4,001

Operating income (loss)

899

(10

)

3,937

2,713

Other Income (Expense)

Investment income

10

12

37

52

Interest expense

(7

)

(7

)

(20

)

(25

)

Other income (expense), net

(8

)

(7

)

(22

)

6

Total other income (expense)

(5

)

(2

)

(5

)

33

Income (loss) before income taxes

894

(12

)

3,932

2,746

Income tax expense (benefit)

289

(30

)

1,174

842

Net income

605

18

2,758

1,904

Loss attributable to non-controlling interests

-

1

1

2

Net Income Attributable to MasterCard

$

605

$

19

$

2,759

$

1,906

Basic Earnings per Share

$

4.88

$

0.15

$

22.02

$

14.90

Basic Weighted Average Shares Outstanding

124

127

125

128

Diluted Earnings per Share

$

4.86

$

0.15

$

21.94

$

14.85

Diluted Weighted Average Shares Outstanding

125

127

126

128

MASTERCARD INCORPORATED

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

December 31,

December 31,

2012

2011

(in millions, except share data)

ASSETS

Cash and cash equivalents

$

2,052

$

3,734

Restricted cash for litigation settlement

726

Investment securities available-for-sale

2,951

1,215

Accounts receivable

925

808

Settlement due from customers

1,117

601

Restricted security deposits held for customers

777

636

Prepaid expenses and other current assets

681

404

Deferred income taxes

128

343

Total Current Assets

9,357

7,741

Property, plant and equipment, at cost, net

472

449

Deferred income taxes

60

88

Goodwill

1,092

1,014

Other intangible assets, net

672

665

Other assets

809

736

Total Assets

$

12,462

$

10,693

LIABILITIES AND EQUITY

Accounts payable

$

357

$

360

Settlement due to customers

1,064

699

Restricted security deposits held for customers

777

636

Accrued litigation

726

770

Accrued expenses

1,748

1,610

Other current liabilities

234

142

Total Current Liabilities

4,906

4,217

Deferred income taxes

104

113

Other liabilities

523

486

Total Liabilities

5,533

4,816

Commitments and Contingencies

Stockholders' Equity

Class A common stock, $0.0001 par value; authorized 3,000,000,000 shares,
133,604,903 and 132,771,392 shares issued and 118,405,075 and 121,618,059
outstanding, respectively

Class B common stock, $0.0001 par value; authorized 1,200,000,000 shares, 4,838,840
and 5,245,676 issued and outstanding, respectively

Additional paid-in-capital

3,641

3,519

Class A treasury stock, at cost, 15,199,828 and 11,153,333 shares, respectively

(4,139

)

(2,394

)

Retained earnings

7,354

4,745

Accumulated other comprehensive income (loss)

61

(2

)

Total Stockholders' Equity

6,917

5,868

Non-controlling interests

12

9

Total Equity

6,929

5,877

Total Liabilities and Equity

$

12,462

$

10,693

MASTERCARD INCORPORATED

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

For the Years Ended December 31,

2012

2011

2010

(in millions)

Operating Activities

Net income

$

2,758

$

1,904

$