Mastercard Inc - FORM 8-K - EX-99.1

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8-K - FORM 8-K - Mastercard Inc	d616801d8k.htm
EX-99.2 - EX-99.2 - Mastercard Inc	d616801dex992.htm

Exhibit 99.1

LOGO

MasterCard Incorporated Reports

Third-Quarter 2013 Financial Results

•

Third-quarter net income of $879 million, or $7.27 per diluted share

•

Third-quarter net revenue increase of 16%, to $2.2 billion

•

Third-quarter gross dollar volume up 15% and purchase volume up 14%

Purchase, NY, October 31, 2013 – MasterCard Incorporated (NYSE: MA) today announced financial results for the third quarter of 2013. The company reported net income of $879 million, up 14%, and earnings per diluted share of $7.27, up 18%, in each case versus the year-ago period.

Net revenue for the third quarter of 2013 was $2.2 billion, a 16% increase versus the same period in 2012. Adjusted for currency, net revenue increased 15%. Net revenue growth was driven by the impact of the following:

•

A 15% increase in gross dollar volume, on a local currency basis, to over $1 trillion;

•

An increase in processed transactions of 16%, to 10 billion; and

•

An increase in cross-border volumes of 19%.

These factors were partially offset by an increase in rebates and incentives.

Worldwide purchase volume during the quarter grew 14% on a local currency basis versus the third quarter of 2012, to $763 billion. As of September 30, 2013, the company’s customers had issued almost 2 billion MasterCard and Maestro-branded cards.

“We had another good quarter with growth across all geographies,” said Ajay Banga, MasterCard president and CEO. “A key component of our strategy involves using our technology and expertise to provide secure acceptance solutions that make it simpler and more convenient for people to pay and be paid. In the quarter, we partnered with technology companies and merchants to develop standards and solutions that ensure safer and more secure transactions and we launched services like Simplify Commerce, our developer-friendly solution which allows merchants to begin accepting mobile and e-Commerce payments, regardless of brand, in a matter of minutes.”

Total operating expenses increased 14%, to $970 million, during the third quarter of 2013 compared to the same period in 2012. Adjusted for currency, operating expenses increased 13%. The increase was primarily driven by higher investments in people and marketing to support strategic initiatives.

Operating income for the third quarter of 2013 increased 17% over the year-ago period and the company delivered an operating margin of 56.3%.

-more-

MasterCard Incorporated – Page 2

MasterCard reported other income of $6 million in the third quarter of 2013 versus other income of $2 million in the third quarter of 2012. The increase was primarily driven by an adjustment to interest expense related to the reversal of tax reserves.

MasterCard’s effective tax rate was 29.9% in the third quarter of 2013, versus a rate of 27.6% in the comparable period in 2012. The increase in the effective tax rate for the period was primarily due to higher tax benefits recognized in the third quarter of 2012.

During the third quarter of 2013, MasterCard repurchased approximately 575,000 shares of Class A common stock at a cost of approximately $345 million, with $912 million remaining under the current repurchase program authorization.

Year-to-Date 2013 Results

For the nine months ended September 30, 2013, MasterCard reported net income of $2.5 billion, up 15% versus the year-ago period and excluding a special item representing a charge related to the U.S. merchant litigations taken in the second quarter of 2012. Including the special item, net income was up 16% versus the year-ago period. Earnings per diluted share was $20.46, up 19% excluding the special item and up 20% including the special item from the second quarter of 2012. These net income and earnings per share growth figures are reconciled to their comparable GAAP measures in the accompanying financial tables.

Net revenue for the nine months ended September 30, 2013 was $6.2 billion, an increase of 13% versus the same period in 2012, both as reported and adjusted for currency. Gross dollar volume growth of 14%, transaction processing growth of 13% and cross-border volume growth of 18% 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 8%, to $2.6 billion, for the nine months ended September 30, 2013, primarily due to higher investments in people related to strategic initiatives. Including the special item, total operating expenses increased 7%.

Excluding the special item, operating income increased 17% for the nine months ended September 30, 2013 versus the same period in 2012, delivering an operating margin of 57.6%.

MasterCard reported $6 million in other income for the nine months ended September 30, 2013 versus $1 million in the same period last year. The increase was primarily driven by an adjustment to interest expense related to the reversal of tax reserves.

MasterCard’s effective tax rate was 30.5% in the nine months ended September 30, 2013 versus a rate of 29.2%, excluding the special item, and 29.1% including the special item, in the comparable 2012 period. The increase was primarily due to higher tax benefits recognized during the nine-month period ending September 30, 2012.

MasterCard Incorporated – Page 3

Third-Quarter Financial Results Conference Call Details

At 9:00 a.m. ET today, the company will host a conference call to discuss its third-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 35746584. 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 35746584.

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

MasterCard (NYSE: 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 Pioneers Blog and subscribe for the latest news on the Engagement Bureau.

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 Company’s ability to use its technology and expertise to make it simpler and more convenient for people to pay and be paid.

MasterCard Incorporated – Page 4

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.

###

Contacts:

Investor Relations: Barbara Gasper, investor_relations@mastercard.com, 914-249-4565

Media Relations: Jim Issokson, james_issokson@mastercard.com, 914-249-6286

MasterCard Incorporated – Page 5

MASTERCARD INCORPORATED

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(in millions, except per share data)
Net Revenue	$	2,218		$	1,918		$	6,220		$	5,496
Operating Expenses
General and administrative		701			620			1,930			1,790
Advertising and marketing		205			176			520			480
Depreciation and amortization		64			58			187			168
Provision for litigation settlement		—			—			—			20

Total operating expenses		970			854			2,637			2,458

Operating income		1,248			1,064			3,583			3,038
Other Income (Expense)
Investment income		11			9			30			27
Interest expense		3			(4	)		(7	)		(13	)
Other income (expense)		(8	)		(3	)		(17	)		(13	)

Total other income (expense)		6			2			6			1

Income before income taxes		1,254			1,066			3,589			3,039
Income tax expense		375			294			1,096			885

Net Income	$	879		$	772		$	2,493		$	2,154

Basic Earnings per Share	$	7.30		$	6.19		$	20.52		$	17.13

Basic Weighted-Average Shares Outstanding		121			125			121			126

Diluted Earnings per Share	$	7.27		$	6.17		$	20.46		$	17.07

Diluted Weighted-Average Shares Outstanding		121			125			122			126

MasterCard Incorporated – Page 6

MASTERCARD INCORPORATED

CONSOLIDATED BALANCE SHEET

(UNAUDITED)


	September 30, 2013			December 31, 2012
	(in millions, except share data)
ASSETS
Cash and cash equivalents	$	3,413		$	2,052
Restricted cash for litigation settlement		727			726
Investment securities available-for-sale, at fair value		2,594			2,951
Accounts receivable		990			925
Settlement due from customers		1,333			1,117
Restricted security deposits held for customers		878			777
Prepaid expenses and other current assets		502			681
Deferred income taxes		122			128

Total Current Assets		10,559			9,357
Property, plant and equipment, net		474			472
Deferred income taxes		89			60
Goodwill		1,101			1,092
Other intangible assets, net of accumulated amortization of $716 and $596, respectively		655			672
Other assets		852			809

Total Assets	$	13,730		$	12,462

LIABILITIES AND EQUITY
Accounts payable	$	280		$	357
Settlement due to customers		1,218			1,064
Restricted security deposits held for customers		878			777
Accrued litigation		727			726
Accrued expenses		2,004			1,748
Other current liabilities		313			234

Total Current Liabilities		5,420			4,906
Deferred income taxes		93			104
Other liabilities		549			523

Total Liabilities		6,062			5,533
Commitments and Contingencies
Stockholders’ Equity
Class A common stock, $0.0001 par value; authorized 3,000,000,000 shares, 134,083,998 and 133,604,903 shares issued and 115,796,250 and 118,405,075 outstanding, respectively		—			—
Class B common stock, $0.0001 par value; authorized 1,200,000,000 shares, 4,577,623 and 4,838,840 issued and outstanding, respectively		—			—
Additional paid-in-capital		3,733			3,641
Class A treasury stock, at cost, 18,287,748 and 15,199,828 shares, respectively		(5,826	)		(4,139	)
Retained earnings		9,630			7,354
Accumulated other comprehensive income (loss)		120			61

Total Stockholders’ Equity		7,657			6,917
Non-controlling interests		11			12

Total Equity		7,668			6,929

Total Liabilities and Equity	$	13,730		$	12,462

MasterCard Incorporated – Page 7

MASTERCARD INCORPORATED

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)


	Nine Months Ended
	September 30,
	2013			2012
	(in millions)
Operating Activities
Net income	$	2,493		$	2,154
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		187			168
Share-based payments		27			(21	)
Deferred income taxes		(34	)		(40	)
Other		48			34
Changes in operating assets and liabilities:
Accounts receivable		(67	)		(112	)
Income taxes receivable		158			(53	)
Settlement due from customers		(192	)		(213	)
Prepaid expenses		(44	)		(122	)
Obligations under litigation settlements		—			20
Accounts payable		(76	)		(36	)
Settlement due to customers		126			140
Accrued expenses		209			129
Net change in other assets and liabilities		101			34

Net cash provided by operating activities		2,936			2,082

Investing Activities
Purchases of investment securities available-for-sale		(1,936	)		(2,123	)
Acquisition of businesses, net of cash acquired		—			(70	)
Purchases of property, plant and equipment		(65	)		(68	)
Capitalized software		(88	)		(96	)
Proceeds from sales of investment securities available-for-sale		1,349			195
Proceeds from maturities of investment securities available-for-sale		959			576
Proceeds from maturities of investment securities held-to-maturity		36			—
Investment in nonmarketable equity investments		(12	)		(25	)
Other investing activities		(8	)		(1	)

Net cash provided by (used in) investing activities		235			(1,612	)

Financing Activities
Purchases of treasury stock		(1,692	)		(1,135	)
Dividends paid		(182	)		(94	)
Tax benefit for share-based compensation		23			46
Cash proceeds from exercise of stock options		22			28
Other financing activities		(8	)		4

Net cash used in financing activities		(1,837	)		(1,151	)

Effect of exchange rate changes on cash and cash equivalents		27			(8	)

Net increase (decrease) in cash and cash equivalents		1,361			(689	)
Cash and cash equivalents - beginning of period		2,052			3,734

Cash and cash equivalents - end of period	$	3,413		$	3,045

MasterCard Incorporated – Page 8

MASTERCARD INCORPORATED OPERATING PERFORMANCE


	For the 3 Months ended September 30, 2013
	GDV (Bil.)		Growth (USD)			Growth (Local)			Purchase Volume (Bil.)		Growth (Local)			Purchase Trans. (Mil.)		Cash Volume (Bil.)		Growth (Local)			Cash Trans. (Mil.)		Accounts (Mil.)		Cards (Mil.)
All MasterCard Credit, Charge and Debit Programs
APMEA	$	291		15.8	%		21.7	%	$	196		21.0	%		2,126	$	95		23.2	%		794		381		410
Canada		34		4.3	%		8.9	%		31		9.6	%		370		3		1.1	%		6		45		55
Europe		322		18.8	%		16.6	%		218		13.6	%		3,244		103		23.4	%		597		293		310
Latin America		83		10.9	%		16.6	%		50		23.6	%		1,150		33		7.1	%		191		120		140

Worldwide less United States		729		15.9	%		18.2	%		496		17.1	%		6,890		233		20.4	%		1,588		840		914
United States		316		8.7	%		8.7	%		267		9.2	%		4,840		49		6.2	%		321		289		326

Worldwide		1,045		13.6	%		15.2	%		763		14.2	%		11,730		282		17.7	%		1,910		1,128		1,240

MasterCard Credit and Charge Programs
Worldwide less United States		439		12.3	%		15.3	%		387		15.9	%		4,672		52		11.3	%		213		492		557
United States		151		6.8	%		6.8	%		144		7.2	%		1,642		7		-1.9	%		7		143		176

Worldwide		590		10.8	%		13.0	%		532		13.4	%		6,314		59		9.5	%		220		635		734

MasterCard Debit Programs
Worldwide less United States		290		21.9	%		22.8	%		109		21.9	%		2,218		181		23.3	%		1,375		347		357
United States		164		10.6	%		10.6	%		123		11.6	%		3,198		42		7.6	%		315		146		150

Worldwide		454		17.5	%		18.1	%		231		16.2	%		5,416		223		20.1	%		1,690		494		506

	For the 9 Months ended September 30, 2013
	GDV (Bil.)		Growth (USD)			Growth (Local)			Purchase Volume (Bil.)		Growth (Local)			Purchase Trans. (Mil.)		Cash Volume (Bil.)		Growth (Local)			Cash Trans. (Mil.)		Accounts (Mil.)		Cards (Mil.)
All MasterCard Credit, Charge and Debit Programs
APMEA	$	837		18.1	%		21.5	%	$	559		19.7	%		5,940	$	279		25.4	%		2,236		381		410
Canada		97		4.5	%		6.7	%		89		7.2	%		1,030		8		1.5	%		18		45		55
Europe		898		15.7	%		14.6	%		616		11.9	%		9,017		282		21.2	%		1,654		293		310
Latin America		246		12.8	%		16.1	%		147		20.4	%		3,253		99		10.2	%		565		120		140

Worldwide less United States		2,079		15.7	%		17.1	%		1,411		15.4	%		19,241		668		20.8	%		4,473		840		914
United States		921		6.4	%		6.4	%		777		7.0	%		13,946		144		3.6	%		940		289		326

Worldwide		3,000		12.7	%		13.6	%		2,188		12.3	%		33,187		812		17.3	%		5,412		1,128		1,240

MasterCard Credit and Charge Programs
Worldwide less United States		1,258		11.8	%		13.9	%		1,108		14.3	%		13,180		150		11.4	%		614		492		557
United States		432		3.9	%		3.9	%		412		4.6	%		4,674		20		-8.1	%		19		143		176

Worldwide		1,690		9.7	%		11.2	%		1,520		11.5	%		17,853		170		8.7	%		633		635		734

MasterCard Debit Programs
Worldwide less United States		821		22.2	%		22.3	%		303		19.8	%		6,061		518		23.8	%		3,858		347		357
United States		489		8.8	%		8.8	%		365		9.8	%		9,273		124		5.7	%		921		146		150

Worldwide		1,310		16.8	%		16.9	%		667		14.1	%		15,333		642		19.8	%		4,779		494		506

	For the 3 Months ended September 30, 2012
	GDV (Bil.)		Growth (USD)			Growth (Local)			Purchase Volume (Bil.)		Growth (Local)			Purchase Trans. (Mil.)		Cash Volume (Bil.)		Growth (Local)			Cash Trans. (Mil.)		Accounts (Mil.)		Cards (Mil.)
All MasterCard Credit, Charge and Debit Programs
APMEA	$	251		18.2	%		21.4	%	$	170		19.4	%		1,762	$	82		26.0	%		618		329		357
Canada		32		4.0	%		5.5	%		30		5.9	%		331		3		1.8	%		6		40		48
Europe		271		4.6	%		14.5	%		188		10.9	%		2,684		82		23.9	%		493		248		263
Latin America		75		4.6	%		17.2	%		45		19.4	%		975		30		14.1	%		179		110		128

Worldwide less United States		629		9.6	%		17.0	%		432		14.5	%		5,752		197		22.8	%		1,296		726		796
United States		290		7.0	%		7.0	%		244		7.4	%		4,404		46		5.0	%		307		267		305

Worldwide		919		8.8	%		13.7	%		677		11.9	%		10,156		243		18.9	%		1,603		993		1,101

MasterCard Credit and Charge Programs
Worldwide less United States		391		7.4	%		13.3	%		344		13.8	%		4,069		47		10.3	%		192		465		526
United States		142		0.9	%		0.9	%		134		3.2	%		1,576		7		-28.8	%		7		141		175

Worldwide		533		5.6	%		9.8	%		479		10.6	%		5,644		54		2.9	%		199		607		701

MasterCard Debit Programs
Worldwide less United States		238		13.4	%		23.5	%		88		17.6	%		1,683		150		27.3	%		1,104		260		270
United States		149		13.6	%		13.6	%		110		13.1	%		2,828		39		15.0	%		300		126		130

Worldwide		387		13.5	%		19.5	%		198		15.1	%		4,511		189		24.5	%		1,404		386		400

	For the 9 Months ended September 30, 2012
	GDV (Bil.)		Growth (USD)			Growth (Local)			Purchase Volume (Bil.)		Growth (Local)			Purchase Trans. (Mil.)		Cash Volume (Bil.)		Growth (Local)			Cash Trans. (Mil.)		Accounts (Mil.)		Cards (Mil.)
All MasterCard Credit, Charge and Debit Programs
APMEA	$	709		20.8	%		22.7	%	$	479		21.5	%		4,983	$	230		25.4	%		1,720		329		357
Canada		93		5.2	%		7.8	%		84		8.8	%		944		8		-1.7	%		17		40		48
Europe		777		7.4	%		16.5	%		546		12.4	%		7,623		231		27.3	%		1,390		248		263
Latin America		218		8.1	%		19.9	%		131		24.3	%		2,823		87		13.9	%		531		110		128

Worldwide less United States		1,797		12.3	%		18.8	%		1,241		16.7	%		16,372		557		23.7	%		3,658		726		796
United States		865		9.9	%		9.9	%		726		9.7	%		12,977		139		11.4	%		911		267		305

Worldwide		2,662		11.5	%		15.8	%		1,967		14.0	%		29,349		695		21.0	%		4,569		993		1,101

MasterCard Credit and Charge Programs
Worldwide less United States		1,125		10.3	%		15.5	%		990		16.2	%		11,687		136		10.6	%		549		465		526
United States		416		3.9	%		3.9	%		394		5.4	%		4,608		21		-18.1	%		21		141		175

Worldwide		1,541		8.5	%		12.1	%		1,384		12.9	%		16,295		157		5.6	%		570		607		701

MasterCard Debit Programs
Worldwide less United States		672		15.6	%		24.7	%		251		18.7	%		4,686		421		28.6	%		3,109		260		270
United States		449		16.2	%		16.2	%		332		15.2	%		8,368		118		19.2	%		890		126		130

Worldwide		1,121		15.9	%		21.2	%		583		16.7	%		13,054		539		26.4	%		3,999		386		400

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

MasterCard Incorporated – Page 9

Footnote

The tables set forth the gross dollar volume (“GDV”), purchase volume, cash volume and the number of purchase transactions, cash transactions, accounts and cards 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 that do not generally have physical cards associated with them.

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. All data is subject to revision and amendment by MasterCard’s customers subsequent to the date of its release.

In 2012, certain MasterCard Debit and Credit Programs in the Europe region have changed due to a reclassification of programs. There is no impact at the All MasterCard Programs level. In addition, Purchase Transactions for certain Credit Programs in the Latin America region have been revised due to changes from several customers. MasterCard revenue is not impacted from these changes. Data for the comparable periods in 2012, 2011 and 2010 have been revised to be consistent with these approaches.

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

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MasterCard Incorporated – Page 10

GAAP Reconciliations

($ in millions, except per share data)


	Nine Months Ended September 30, 2013			Nine Months Ended September 30, 2012
	Actual			Actual			Special Item			Non-GAAP
Provision for litigation settlement	$	—		$	20		$	(20	)	$	—
Total operating expenses		2,637			2,458			(20	)		2,438
Operating income		3,583			3,038			20			3,058
Operating Margin		57.6	%		55.3	%					55.6	%
Income before income taxes		3,589			3,039			20			3,059
Income tax expense		1,096			885			7	^a		892
Net Income		2,493			2,154			13			2,167

Basic Earnings per Share	$	20.52		$	17.13		$	0.10		$	17.23

Diluted Earnings per Share	$	20.46		$	17.07		$	0.11		$	17.18

a-	Tax effect of provision for litigation settlement

Note: Figures may not sum due to rounding

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