MasterCard Incorporated Reports Second-Quarter 2013 Financial Results
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%
PURCHASE, N.Y.--(BUSINESS WIRE)-- MasterCard Incorporated (NYS: 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 (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 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 | |||||||||||||
