MasterCard Incorporated Reports First-Quarter 2013 Financial Results

MasterCard Incorporated Reports First-Quarter 2013 Financial Results

  • First-quarter net income of $766 million, or $6.23 per diluted share

  • First-quarter net revenue increase of 8%, to $1.9 billion

  • First-quarter gross dollar volume up 12% and purchase volume up 10%

PURCHASE, N.Y.--(BUSINESS WIRE)-- MasterCard Incorporated (NYS: MA) today announced financial results for the first quarter of 2013. The company reported net income of $766 million, up 12%, and earnings per diluted share of $6.23, up 16%, in each case versus the year-ago period.

Net revenue for the first quarter of 2013 was $1.9 billion, an 8% increase versus the same period in 2012. Adjusted for currency, net revenue increased 9%. Net revenue growth was driven by the impact of the following:

  • A 12% increase in gross dollar volume, on a local currency basis, to $947 billion;

  • An increase in cross-border volumes of 16%; and

  • An increase in processed transactions of 12%, to 8.7 billion.


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

Worldwide purchase volume during the quarter was up 10% on a local currency basis versus the first quarter of 2012, to $690 billion. As of March 31, 2013, the company's customers had issued 1.9 billion MasterCard and Maestro-branded cards.

"We are pleased with our first-quarter results as we delivered solid performance that met our expectations despite the mixed global economic environment," said Ajay Banga, MasterCard president and CEO. "Since the start of the year, we have had steady momentum in new business, as well as product innovations. We signed new consumer credit agreements with Bank of America and TD Bank and secured significant wins in our APMEA region with Qantas, South Africa's NedBank, and Japan's Rakuten. We also signed an alliance with the Alibaba Group to explore opportunities in the Chinese market. In addition, we advanced our mobile and digital strategy with the commercial launch of MasterPass."

Total operating expenses increased 6%, to $799 million, during the first quarter of 2013 compared to the same period in 2012. The increase was primarily driven by higher personnel expenses.

Operating income for the first quarter of 2013 increased 11% over the year-ago period and the company delivered an operating margin of 58.1%.

MasterCard's effective tax rate was 30.5% in the first quarter of 2013, versus a rate of 31.8% in the comparable period in 2012. The decrease was primarily due to a more favorable geographic mix of earnings and a benefit from a deduction related to the company's authorization software.

During the first quarter of 2013, MasterCard repurchased approximately 1,480,000 shares of Class A common stock at a cost of approximately $766 million. Quarter-to-date through April 25, the company repurchased an additional 341,500 shares at a cost of approximately $182 million, with $1.7 billion remaining under the current repurchase program authorization.

First-Quarter Financial Results Conference Call Details

At 9:00 a.m. ET today, the company will host a conference call to discuss its first-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 34404423. 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 34404423.

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 presentation of growth rates adjusted for currency 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 business prospects, including the ability to advance its mobile and digital payments strategy through the commercial launch of MasterPass.

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

March 31,

2013

2012

(in millions, except per share data)

Net Revenue

$

1,906

$

1,758

Operating Expenses

General and administrative

608

579

Advertising and marketing

129

125

Depreciation and amortization

62

54

Total operating expenses

799

758

Operating income

1,107

1,000

Other Income (Expense)

Investment income

8

9

Interest expense

(5

)

(6

)

Other income (expense)

(8

)

(3

)

Total other income (expense)

(5

)

-

Income before income taxes

1,102

1,000

Income tax expense

336

318

Net Income

$

766

$

682

Basic Earnings per Share

$

6.25

$

5.38

Basic Weighted-Average Shares Outstanding

123

127

Diluted Earnings per Share

$

6.23

$

5.36

Diluted Weighted-Average Shares Outstanding

123

127

MASTERCARD INCORPORATED

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

March 31, 2013

December 31, 2012

(in millions, except share data)

ASSETS

Cash and cash equivalents

$

1,984

$

2,052

Restricted cash for litigation settlement

724

726

Investment securities available-for-sale, at fair value

3,036

2,951

Accounts receivable

941

925

Settlement due from customers

670

1,117

Restricted security deposits held for customers

812

777

Prepaid expenses and other current assets

488

681

Deferred income taxes

128

128

Total Current Assets

8,783

9,357

Property, plant and equipment, net

468

472

Deferred income taxes

59

60

Goodwill

1,042

1,092

Other intangible assets, net

637

672

Other assets

820

809

Total Assets

$

11,809

$

12,462

LIABILITIES AND EQUITY

Accounts payable

$

262

$

357

Settlement due to customers

624

1,064

Restricted security deposits held for customers

812

777

Accrued litigation

724

726

Accrued expenses

1,703

1,748

Other current liabilities

289

234

Total Current Liabilities

4,414

4,906

Deferred income taxes

99

104

Other liabilities

540

523

Total Liabilities

5,053

5,533

Commitments and Contingencies

Stockholders' Equity

Class A common stock, $0.0001 par value; authorized 3,000,000,000 shares,
133,837,376 and 133,604,903 shares issued and 117,171,534 and 118,405,075 outstanding, respectively

Class B common stock, $0.0001 par value; authorized 1,200,000,000 shares,
4,736,468 and 4,838,840 issued and outstanding, respectively

Additional paid-in-capital

3,648

3,641

Class A treasury stock, at cost, 16,665,842 and 15,199,828 shares, respectively

(4,902

)

(4,139

)

Retained earnings

8,047

7,354

Accumulated other comprehensive income (loss)

(50

)

61

Total Stockholders' Equity

6,743

6,917

Non-controlling interests

13

12

Total Equity

6,756

6,929

Total Liabilities and Equity

$

11,809

$

12,462

MASTERCARD INCORPORATED

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

Three Months Ended

March 31,

2013

2012

(in millions)

Operating Activities

Net income

$

766

$

682

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

62

54

Share-based payments

(23

)

(53

)

Deferred income taxes

(5

)

(14

)

Other

16

8

Changes in operating assets and liabilities:

Accounts receivable

(25

)

7

Income taxes receivable

149

Settlement due from customers

433

(43

)

Prepaid expenses

(7

)

(53

)

Accounts payable

(93

)

(88

)

Settlement due to customers

(423

)

(88

)

Accrued expenses

(30

)

1

Net change in other assets and liabilities

52

14

Net cash provided by operating activities

872

427

Investing Activities

Purchases of investment securities available-for-sale

(934

)

(398

)

Purchases of property, plant and equipment

(20

)

(12

)

Capitalized software

(22

)

(39

)

Proceeds from sales of investment securities available-for-sale

576

43

Proceeds from maturities of investment securities available-for-sale

257

111

Proceeds from maturities of investment securities held-to-maturity

36

Investment in nonmarketable equity investments

(2

)

(7

)

Other investing activities

2

Net cash used in investing activities

(107

)

(302

)

Financing Activities

Purchases of treasury stock

(766

)

(248

)

Dividends paid

(37

)

(19

)

Tax benefit for share-based compensation

14

33

Cash proceeds from exercise of stock options

5

14

Other financing activities

1