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TheStreet Open House

MasterCard Incorporated Reports Third-Quarter 2012 Financial Results

Stocks in this article: MA

About MasterCard Incorporated

MasterCard (NYSE: MA), www.mastercard.com, is a global payments and technology company. It operates 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 execute on key deals, investments and partnerships globally, including in emerging markets, in order to benefit consumers and support governments around the world to deliver more effective and efficient programs and benefits.

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 September 30,

Nine Months Ended September 30,

2012   2011 2012   2011
(in millions, except per share data)
 
Revenues, net $ 1,918 $ 1,818 $ 5,496 $ 4,986
Operating Expenses
General and administrative 620 565 1,790 1,599
Advertising and marketing 176 200 480 522
Depreciation and amortization 58 51 168 142
Provision for litigation settlement   -     -     20     -  
Total operating expenses   854       816     2,458       2,263  
Operating income 1,064 1,002 3,038 2,723
Other Income (Expense)
Investment income 9 17 27 40
Interest expense (4 ) (6 ) (13 ) (18 )
Other income (expense), net   (3 )   17     (14 )   13  
Total other income (expense)   2     28     -     35  
Income before income taxes 1,066 1,030 3,038 2,758
Income tax expense   294     314     885     872  
Net income 772 716 2,153 1,886
Loss attributable to non-controlling interests   -     1     1     1  
Net Income Attributable to MasterCard $ 772   $ 717   $ 2,154   $ 1,887  
 
Basic Earnings per Share $ 6.19   $ 5.65   $ 17.13   $ 14.71  
Basic Weighted Average Shares Outstanding   125     127     126     128  
Diluted Earnings per Share $ 6.17   $ 5.63   $ 17.07   $ 14.66  
Diluted Weighted Average Shares Outstanding   125     127     126     129  
 

MASTERCARD INCORPORATED

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

   
September 30, 2012 December 31, 2011
(in millions, except share data)
ASSETS
Cash and cash equivalents $ 3,045 $ 3,734
Investment securities available-for-sale 2,594 1,215
Accounts receivable 912 808
Settlement due from customers 815 601
Restricted security deposits held for customers 775 636
Prepaid expenses and other current assets 575 404
Deferred income taxes   356     343  
Total Current Assets 9,072 7,741
Property, plant and equipment, net 465 449
Deferred income taxes 101 88
Goodwill 1,087 1,014
Other intangible assets, net of accumulated amortization 676 665
Other assets   719     736  
Total Assets $ 12,120   $ 10,693  
LIABILITIES AND EQUITY

Accounts payable

$ 319 $ 360
Settlement due to customers 839 699
Restricted security deposits held for customers 775 636
Accrued litigation 790 770
Accrued expenses 1,620 1,610
Other current liabilities   205     142  
Total Current Liabilities 4,548 4,217
Deferred income taxes 103 113
Other liabilities   545     486  
Total Liabilities 5,196 4,816
Commitments and Contingencies
Stockholders' Equity

Class A common stock, $0.0001 par value; authorized 3,000,000,000 shares, 133,420,992 and 132,771,392 shares issued and 119,503,347 and 121,618,059 outstanding, respectively

- -

Class B common stock, $0.0001 par value; authorized 1,200,000,000 shares, 5,010,762 and 5,245,676 issued and outstanding, respectively

- -
Additional paid-in-capital 3,619 3,519
Class A treasury stock, at cost, 13,917,645 and 11,153,333 shares, respectively (3,527 ) (2,394 )
Retained earnings 6,786 4,745
Accumulated other comprehensive income (loss)   34     (2 )
Total Stockholders' Equity 6,912 5,868
Non-controlling interests   12     9  
Total Equity   6,924     5,877  
Total Liabilities and Equity $ 12,120   $ 10,693  
 

MASTERCARD INCORPORATED

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

 
Nine Months Ended September 30,
2012   2011
(in millions)
Operating Activities
Net income $ 2,153 $ 1,886
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 168 142
Share-based payments 66 53
Stock units withheld for taxes (41 ) (33 )
Tax benefit for share-based compensation (46 ) (11 )
Deferred income taxes (40 ) 136
Other 35 7
Changes in operating assets and liabilities:
Accounts receivable (112 ) (100 )
Income taxes receivable (53 ) -
Settlement due from customers (213 ) (16 )
Prepaid expenses (122 ) 39
Obligations under litigation settlements 20 (302 )
Accounts payable (36 ) (8 )
Settlement due to customers 140 (84 )
Accrued expenses 129 163
Net change in other assets and liabilities   34     28  
Net cash provided by operating activities   2,082     1,900  
Investing Activities
Acquisition of businesses, net of cash acquired (70 ) (460 )
Purchases of investment securities available-for-sale (2,123 ) (188 )
Purchases of property, plant and equipment (68 ) (51 )
Capitalized software (96 ) (65 )
Proceeds from sales of investment securities available-for-sale 195 371
Proceeds from maturities of investment securities available-for-sale 576 36
Proceeds from maturities of investment securities held-to-maturity - 301
Investment in nonmarketable equity investments (25 ) (8 )
Other investing activities   (1 )   9  
Net cash used in investing activities   (1,612 )   (55 )
Financing Activities
Purchases of treasury stock (1,135 ) (1,118 )
Dividends paid (94 ) (58 )
Payment of debt - (21 )
Tax benefit for share-based compensation 46 11
Cash proceeds from exercise of stock options 28 15
Contribution by non-controlling interest   4     -  
Net cash used in financing activities   (1,151 )   (1,171 )
Effect of exchange rate changes on cash and cash equivalents   (8 )   12  
Net (decrease) increase in cash and cash equivalents (689 ) 686
Cash and cash equivalents - beginning of period   3,734     3,067  
Cash and cash equivalents - end of period $ 3,045   $ 3,753  
 
Non-Cash Investing and Financing Activities
Fair value of assets acquired, net of cash acquired $ 73   $ 549  
Fair value of liabilities assumed related to acquisitions $ 3   $ 89  
 

MASTERCARD INCORPORATED OPERATING PERFORMANCE

   
For the 3 Months ended September 30, 2012    
All MasterCard Credit, GDV   Growth   Growth   Purchase

Volume

  Growth   Purchase

Trans.

  Cash

Volume

  Growth   Cash

Trans.

  Accounts   Cards Acceptance

Locations

Charge and Debit Programs (Bil.)   (USD)   (Local)   (Bil.)   (Local)   (Mil.)   (Bil.)   (Local)   (Mil.)   (Mil.)   (Mil.)   (Mil.)
APMEA $251 18.0 % 21.2 % $170 19.5 % 1,760 $81 25.2 % 614 331 359 10.3
Canada 32 4.1 % 5.6 % 30 6.0 % 331 3 1.9 % 6 41 50 0.9
Europe 271 4.6 % 14.5 % 188 10.9 % 2,683 82 24.0 % 492 249 265 9.9
Latin America 74 4.0 % 16.4 % 44 18.8 % 968 30 13.1 % 178 115 133 4.9
Worldwide less United States 628 9.4 % 16.8 % 432 14.5 % 5,743 196 22.3 % 1,291 736 808 26.1
United States 290 7.0 % 7.0 % 244 7.4 % 4,399 46 5.2 % 308 279 313 8.8
Worldwide 918 8.7 % 13.5 % 676 11.8 % 10,142 241 18.6 % 1,598 1,015 1,121 34.9
 
MasterCard Credit and Charge Programs
Worldwide less United States 394 7.3 % 13.3 % 346 13.8 % 4,085 48 10.2 % 202 470 532
United States 142 0.9 % 0.9 % 134 3.2 % 1,576 7 -28.7 % 7 148 177
Worldwide 536 5.6 % 9.8 % 480 10.6 % 5,660 55 3.0 % 209 619 710
 
MasterCard Debit Programs
Worldwide less United States 234 13.2 % 23.3 % 86 17.6 % 1,658 147 26.8 % 1,088 266 276
United States 149 13.5 % 13.5 % 110 12.9 % 2,823 39 15.3 % 301 131 135
Worldwide 382 13.3 % 19.3 % 196 15.0 % 4,482 186 24.2 % 1,389 397 411
 
For the 9 Months ended September 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 $707 20.6 % 22.6 % $479 21.6 % 4,981 $228 24.7 % 1,710 331 359
Canada 93 5.2 % 7.8 % 85 8.8 % 944 8 -1.7 % 17 41 50
Europe 776 7.3 % 16.4 % 545 12.4 % 7,617 230 27.3 % 1,389 249 265
Latin America 218 7.6 % 19.5 % 131 24.0 % 2,814 86 13.1 % 528 115 133
Worldwide less United States 1,794 12.1 % 18.6 % 1,241 16.7 % 16,356 553 23.3 % 3,644 736 808
United States 864 9.8 % 9.8 % 726 9.6 % 12,972 138 10.9 % 912 279 313
Worldwide 2,658 11.4 % 15.6 % 1,967 14.0 % 29,327 691 20.6 % 4,556 1,015 1,121
 
MasterCard Credit and Charge Programs
Worldwide less United States 1,134 10.3 % 15.5 % 995 16.2 % 11,739 139 10.5 % 582 470 532
United States 415 3.7 % 3.7 % 394 5.4 % 4,608 21 -20.8 % 20 148 177
Worldwide 1,549 8.4 % 12.1 % 1,389 12.9 % 16,348 160 5.1 % 602 619 710
 
MasterCard Debit Programs
Worldwide less United States 660 15.5 % 24.5 % 246 18.7 % 4,616 414 28.2 % 3,063 266 276
United States 449 16.2 % 16.2 % 332 15.1 % 8,363 118 19.3 % 892 131 135
Worldwide 1,109 15.7 % 21.0 % 578 16.6 % 12,980 531 26.1 % 3,955 397 411
 
For the 3 Months ended September 30, 2011    
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 $212 35.4 % 25.4 % $144 27.2 % 1,483 $68 21.7 % 474 288 313
Canada 31 14.7 % 8.0 % 28 10.7 % 305 3 -13.8 % 6 40 48
Europe 259 25.1 % 17.3 % 185 13.7 % 2,328 74 27.6 % 412 213 228
Latin America 71 31.0 % 25.1 % 43 30.5 % 856 28 17.5 % 170 106 129
Worldwide less United States 574 28.8 % 20.6 % 401 19.7 % 4,971 172 22.6 % 1,062 646 719
United States 271 13.7 % 13.7 % 227 13.5 % 4,043 44 15.1 % 276 271 304
Worldwide 845 23.5 % 18.3 % 629 17.4 % 9,014 216 21.0 % 1,338 917 1,023
 
MasterCard Credit and Charge Programs
Worldwide less United States 367 25.2 % 17.5 % 321 19.6 % 3,644 46 4.9 % 184 446 507
United States 140 7.2 % 7.2 % 130 7.0 % 1,556 10 10.3 % 8 145 175
Worldwide 507 19.6 % 14.5 % 451 15.6 % 5,200 56 5.8 % 192 592 682
 
MasterCard Debit Programs
Worldwide less United States 207 35.8 % 26.4 % 81 20.2 % 1,327 126 30.8 % 878 199 212
United States 131 21.6 % 21.6 % 97 23.5 % 2,487 34 16.6 % 268 126 129
Worldwide 337 29.9 % 24.5 % 178 22.0 % 3,814 160 27.5 % 1,146 325 341
 
For the 9 Months ended September 30, 2011
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 $586 33.1 % 23.5 % $397 25.4 % 4,171 $190 19.7 % 1,324 288 313
Canada 88 14.1 % 7.6 % 80 9.5 % 855 9 -7.3 % 16 40 48
Europe 723 23.9 % 16.7 % 524 13.6 % 6,573 198 25.9 % 1,148 213 228
Latin America 202 31.0 % 23.3 % 119 28.1 % 2,381 83 17.0 % 503 106 129
Worldwide less United States 1,600 27.4 % 19.4 % 1,120 18.7 % 13,980 480 21.1 % 2,990 646 719
United States 787 9.9 % 9.9 % 662 10.8 % 11,675 125 5.3 % 800 271 304
Worldwide 2,387 21.0 % 16.1 % 1,782 15.6 % 25,655 605 17.4 % 3,790 917 1,023
 
MasterCard Credit and Charge Programs
Worldwide less United States 1,028 23.3 % 15.5 % 896 17.9 % 10,292 132 1.8 % 528 446 507
United States 400 5.8 % 5.8 % 374 6.0 % 4,448 26 3.3 % 22 145 175
Worldwide 1,428 17.8 % 12.6 % 1,270 14.1 % 14,740 158 2.0 % 551 592 682
 
MasterCard Debit Programs
Worldwide less United States 572 35.7 % 27.0 % 224 21.9 % 3,688 348 30.5 % 2,462 199 212
United States 387 14.4 % 14.4 % 288 17.6 % 7,227 99 5.8 % 778 126 129
Worldwide 958 26.2 % 21.6 % 512 19.4 % 10,915 446 24.1 % 3,240 325 341
 
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, cards and acceptance locations 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.

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