MasterCard Incorporated Reports First-Quarter 2012 Financial Results

MasterCard Incorporated (NYSE: MA) today announced financial results for the first quarter of 2012. The company reported net income of $682 million, up 21%, and earnings per diluted share of $5.36, up 25%, in each case versus the year-ago period.

Net revenue was $1.8 billion, a 17% increase versus the same period in 2011. On a constant currency basis, net revenue increased 19% compared to the same period in 2011. Net revenue growth was driven by the impact of the following:
  • An increase in cross-border volumes of 18%;
  • An 18% increase in gross dollar volume on a local currency basis, to $849 billion; and
  • An increase in processed transactions of 29%, to 7.7 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 17% on a local currency basis versus the first quarter of 2011, to $629 billion. As of March 31, 2012, the company’s customers had issued 1.8 billion MasterCard and Maestro-branded cards.

“We had a good start to the year with solid first quarter results driven by an increase in processed transactions, the highest quarterly growth rate since our IPO, as well as positive volume growth in all regions as consumers continue to adopt electronic payments,” said Ajay Banga, MasterCard president and chief executive officer. “We are leveraging opportunities around the world. In the U.S., we have significantly improved our position in debit and now have the capability to process transactions on about half of all U.S. debit cards. Outside of the U.S., the acquisitions of DataCash and Access Prepaid Worldwide are delivering growth, both showing roughly 25% operational increases.”

Total operating expenses increased 14%, to $758 million, during the first quarter of 2012 compared to the same period in 2011. Excluding the impact of foreign currency, operating expenses grew 15%. The increase was primarily driven by higher general and administrative expenses. Excluding the acquisition of Access Prepaid, net revenue grew approximately 16% and operating expenses grew approximately 9%.

MasterCard's effective tax rate was 31.8% in the first quarter of 2012, versus a rate of 32.8% in the comparable period in 2011. The decrease was primarily due to a more favorable geographic mix of earnings this year.

During the first quarter of 2012, MasterCard repurchased 652,500 shares at a cost of approximately $248 million. Quarter-to-date through April 26, the company repurchased an additional 112,300 shares of class A common stock at a cost of approximately $49 million, with $556 million 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 results.

The dial-in information for this call is 800-706-7749 (within the U.S.) and 617-614-3474 (outside the U.S.) and the passcode is 30182060. A replay of the call will be available for one week following the meeting. The replay can be accessed by dialing 888-286-8010 (within the U.S.) and 617-801-6888 (outside the U.S.) and using passcode 62437128.

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.

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.

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 March 31,
2012   2011
(in millions, except per share data)
 
Revenues, net $ 1,758 $ 1,501
Operating Expenses
General and administrative 579 494
Advertising and marketing 125 129
Depreciation and amortization   54     42  
Total operating expenses   758     665  
Operating income 1,000 836
Other Income (Expense)
Investment income 9 12
Interest expense (6 ) (10 )
Other income (expense), net   (4 )   (2 )
Total other income (expense)   (1 )   -  
Income before income taxes 999 836
Income tax expense   318     274  
Net income 681 562
Loss attributable to non-controlling interests   1     -  
Net Income Attributable to MasterCard $ 682   $ 562  
 
Basic Earnings per Share $ 5.38   $ 4.31  
Basic Weighted Average Shares Outstanding   127     130  
Diluted Earnings per Share $ 5.36   $ 4.29  
Diluted Weighted Average Shares Outstanding   127     131  
 
MASTERCARD INCORPORATED
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
       
March 31, December 31,
2012 2011
(in millions, except share data)
ASSETS
Cash and cash equivalents $ 3,684 $ 3,734
Investment securities available-for-sale, at fair value 1,457 1,215
Accounts receivable 812 808
Settlement due from customers 654 601
Restricted security deposits held for customers 649 636
Prepaid expenses and other current assets 510 404
Deferred income taxes   347     343  
Total Current Assets 8,113 7,741
Property, plant and equipment, at cost, net 450 449
Deferred income taxes 93 88
Goodwill 1,042 1,014
Other intangible assets, net of accumulated amortization 682 665
Other assets   751     736  
Total Assets $ 11,131   $ 10,693  
LIABILITIES AND EQUITY
Accounts payable $ 274 $ 360
Settlement due to customers 625 699
Restricted security deposits held for customers 649 636
Accrued litigation 770 770
Accrued expenses 1,575 1,610
Other current liabilities   199     142  
Total Current Liabilities 4,092 4,217
Deferred income taxes 112 113
Other liabilities   548     486  
Total Liabilities 4,752 4,816
Commitments and Contingencies
Stockholders' Equity

Class A common stock, $0.0001 par value; authorized 3,000,000,000 shares, 133,142,745 and 132,771,392 shares issued and 121,345,076 and 121,618,059 outstanding, respectively
- -

Class B common stock, $0.0001 par value; authorized 1,200,000,000 shares, 5,146,301 and 5,245,676 issued and outstanding, respectively
- -
Additional paid-in-capital 3,546 3,519
Class A treasury stock, at cost, 11,797,669 and 11,153,333 shares, respectively (2,642 ) (2,394 )
Retained earnings 5,389 4,745
Accumulated other comprehensive income (loss)   78     (2 )
Total Stockholders' Equity 6,371 5,868
Non-controlling interests   8     9  
Total Equity   6,379     5,877  
Total Liabilities and Equity $ 11,131   $ 10,693  
 
MASTERCARD INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
           
Three Months Ended March 31,
2012 2011
(in millions)
Operating Activities
Net income $ 681 $ 562
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 54 42
Share-based payments 18 15
Stock units withheld for taxes (38 ) (32 )
Tax benefit for share-based compensation (33 ) (7 )
Deferred income taxes (14 ) 55
Other 9 6
Changes in operating assets and liabilities:
Accounts receivable 7 (2 )
Settlement due from customers (43 ) 122
Prepaid expenses (53 ) 60
Obligations under litigation settlements - (150 )
Accounts payable (88 ) 8
Settlement due to customers (88 ) (259 )
Accrued expenses 1 (132 )
Net change in other assets and liabilities   14     67  
Net cash provided by operating activities   427     355  
 
Investing Activities
Purchases of investment securities available-for-sale (398 ) (15 )
Purchases of property, plant and equipment (12 ) (10 )
Capitalized software (39 ) (15 )
Proceeds from sales of investment securities available-for-sale 43 10
Proceeds from maturities of investment securities available-for-sale 111 15
Proceeds from maturities of investment securities held-to-maturity - 150
Investment in nonmarketable equity investments   (7 )   -  
Net cash (used in) provided by investing activities   (302 )   135  
 
Financing Activities
Purchases of treasury stock (248 ) (654 )
Dividends paid (19 ) (20 )
Tax benefit for share-based compensation 33 7
Cash proceeds from exercise of stock options   14     2  
Net cash used in financing activities   (220 )   (665 )
Effect of exchange rate changes on cash and cash equivalents   45     62  
Net decrease in cash and cash equivalents (50 ) (113 )
Cash and cash equivalents - beginning of period   3,734     3,067  
Cash and cash equivalents - end of period $ 3,684   $ 2,954  
 

MASTERCARD INCORPORATED OPERATING PERFORMANCE
 
For the 3 Months ended March 31, 2012
      Purchase     Purchase   Cash     Cash       Acceptance
All MasterCard Credit, GDV Growth Growth Volume Growth Trans. Volume Growth Trans. Accounts Cards Locations
Charge and Debit Programs (Bil.) (USD) (Local) (Bil.) (Local) (Mil.) (Bil.) (Local) (Mil.) (Mil.) (Mil.) (Mil.)
APMEA $ 223 25.1 % 23.6 % $ 151 23.6 % 1,551 $ 72 23.6 % 525 315 341 10.0
Canada 29 8.3 % 10.0 % 26 12.0 % 289 3 -5.4 % 6 40 49 1.0
Europe 242 13.3 % 18.5 % 172 14.4 % 2,359 70 30.3 % 421 230 246 9.5
Latin America   72 16.4 % 23.1 %   44 29.0 % 742   28 15.0 % 173 110 134 4.7
Worldwide less United States 566 17.8 % 20.6 % 393 19.1 % 4,941 172 24.0 % 1,125 696 770 25.2
United States   283 14.0 % 14.0 %   236 13.2 % 4,178   48 18.3 % 302 279 312 8.6
Worldwide 849 16.5 % 18.3 % 629 16.8 % 9,120 220 22.7 % 1,426 975 1,082 33.9
 
MasterCard Credit and Charge Programs
Worldwide less United States 374 17.8 % 19.7 % 319 19.2 % 3,582 56 23.0 % 228 465 527
United States   131 7.2 % 7.2 %   124 8.2 % 1,458   7 -8.4 % 7 147 176

Worldwide
506 14.8 % 16.2 % 443 15.9 % 5,039 63 18.4 % 234 612 703
 
MasterCard Debit Programs
Worldwide less United States 191 17.8 % 22.2 % 75 18.7 % 1,360 117 24.6 % 897 230 243
United States   152 20.7 % 20.7 %   111 19.4 % 2,721   41 24.5 % 295 132 136
Worldwide 343 19.1 % 21.6 % 186 19.1 % 4,081 157 24.6 % 1,192 362 379
 
For the 3 Months ended March 31, 2011
Purchase Purchase Cash Cash
All MasterCard Credit, GDV Growth Growth Volume Growth Trans. Volume Growth Trans. Accounts Cards
Charge and Debit Programs (Bil.) (USD) (Local) (Bil.) (Local) (Mil.) (Bil.) (Local) (Mil.) (Mil.) (Mil.)
APMEA $ 178 27.4 % 20.1 % $ 120 21.5 % 1,295 $ 58 17.2 % 407 277 303
Canada 27 12.4 % 6.4 % 24 7.1 % 257 3 1.2 % 5 39 47
Europe 214 15.5 % 15.2 % 158 12.7 % 2,015 56 22.7 % 341 202 217
Latin America   62 26.9 % 19.9 %   36 25.0 % 605   26 13.7 % 163 101 124
Worldwide less United States 480 20.9 % 17.0 % 337 16.5 % 4,172 144 18.2 % 916 619 691
United States   248 5.9 % 5.9 %   208 7.4 % 3,645   40 -1.2 % 254 264 297
Worldwide 729 15.3 % 13.0 % 545 12.9 % 7,817 184 13.3 % 1,170 882 988
 
MasterCard Credit and Charge Programs
Worldwide less United States 318 17.2 % 13.0 % 272 15.2 % 3,071 46 1.7 % 183 443 504
United States   123 4.9 % 4.9 %   115 4.9 % 1,370   8 4.8 % 7 142 170
Worldwide 441 13.5 % 10.6 % 387 11.9 % 4,441 54 2.1 % 190 585 675
 
MasterCard Debit Programs
Worldwide less United States 163 28.8 % 25.7 % 65 22.4 % 1,100 98 28.0 % 733 176 186
United States   126 7.0 % 7.0 %   93 10.7 % 2,276   33 -2.5 % 247 122 127
Worldwide 288 18.3 % 16.8 % 158 15.2 % 3,376 130 18.7 % 980 298 313
 
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.

Debit transactions on Maestro® and Cirrus®-branded cards, Mondex® transactions and transactions involving brands other than MasterCard are not included in the preceding tables.

For purposes of the table: GDV represents purchase volume plus cash volume and includes the impact of balance transfers and convenience checks; “purchase volume” means the aggregate dollar amount of purchases made with MasterCard-branded cards for the relevant period; and “cash volume” means the aggregate dollar amount of cash disbursements obtained with MasterCard-branded cards for the relevant period. The number of cards includes virtual cards, which are MasterCard-branded payment accounts in connection with which functional cards are not generally issued. Acceptance locations include merchant locations, ATMs and other locations where cash may be obtained.

The MasterCard payment product is comprised of credit, charge and debit programs, and data relating to each type of program is included in the tables. Debit programs include MasterCard-branded debit programs where the primary means of cardholder validation at the point of sale is for cardholders either to sign a sales receipt or enter a PIN. The tables include information with respect to transactions involving MasterCard-branded cards that are not processed by MasterCard and transactions for which MasterCard does not earn significant revenues.

Information denominated in U.S. dollars is calculated by applying an established U.S. dollar/local currency exchange rate for each local currency in which MasterCard volumes are reported. These exchange rates are calculated on a quarterly basis using the average exchange rate for each quarter. MasterCard reports period-over-period rates of change in purchase volume and cash volume on the basis of local currency information, in order to eliminate the impact of changes in the value of foreign currencies against the U.S. dollar in calculating such rates of change.

The data set forth in the GDV, purchase volume, purchase transactions, cash volume and cash transactions columns is provided by MasterCard customers and is subject to verification by MasterCard and partial cross-checking against information provided by MasterCard’s transaction processing systems. The data set forth in the accounts and cards columns is provided by MasterCard customers and is subject to certain limited verification by MasterCard. A portion of the data set forth in the accounts and cards columns reflects the impact of routine portfolio changes among customers and other practices that may lead to over counting of the underlying data in certain circumstances. In order to provide a true indication of how broadly our cards can be used, MasterCard seeks to provide the most accurate acceptance figures possible and to maintain that MasterCard acceptance is unsurpassed worldwide by periodically validating our results with third parties. The data set forth in the acceptance locations column is derived through a proprietary methodology designed to minimize the impact of multiple acquiring in certain markets. This data is based on information provided by our customers and other third parties and is subject to certain limited verification by MasterCard and partial cross-checking against information provided by MasterCard’s transaction processing systems. All data is subject to revision and amendment by MasterCard’s customers subsequent to the date of its release.

Performance information for prior periods can be found in the "Investor Relations" section of MasterCard's website at www.mastercard.com.

Copyright Business Wire 2010

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