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, | — | — | ||||||||||
Class B common stock, $0.0001 par value; authorized 1,200,000,000 shares, | — | — | ||||||||||
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 | |||||||||||
