|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
13-4172551
|
(State or other jurisdiction of
incorporation or organization)
|
(IRS Employer
Identification Number)
|
|
|
2000 Purchase Street
|
10577
|
Purchase, NY
|
(Zip Code)
|
(Address of principal executive offices)
|
|
Large accelerated filer
|
|
x
|
|
Accelerated filer
|
|
o
|
|
|
|
|
|
||
Non-accelerated filer
|
|
o
(do not check if a smaller reporting company)
|
|
Smaller reporting company
|
|
o
|
|
|
Page
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
the Company’s focus on growing, diversifying and building its business;
|
•
|
the Company’s focus on providing value to merchants, governments, consumers and financial institutions;
|
•
|
the Company’s development of innovative platforms and solutions;
|
•
|
the Company’s focus on ensuring the safety and security of the payments system;
|
•
|
the stability of economies around the globe;
|
•
|
the Company’s advertising and marketing strategy and investment;
|
•
|
the Company’s belief that its existing cash, cash equivalents and investment securities balances, its cash flow generating capabilities, its borrowing capacity and its access to capital resources are sufficient to satisfy its future operating cash needs, capital asset purchases, outstanding commitments and other liquidity requirements associated with its existing operations and potential obligations; and
|
•
|
the manner and amount of purchases by the Company pursuant to its share repurchase program, dependent upon price and market conditions.
|
|
September 30, 2014
|
|
December 31, 2013
|
||||
|
(in millions, except share data)
|
||||||
ASSETS
|
|
|
|
||||
Cash and cash equivalents
|
$
|
4,462
|
|
|
$
|
3,599
|
|
Restricted cash for litigation settlement
|
540
|
|
|
723
|
|
||
Investment securities available-for-sale, at fair value
|
1,857
|
|
|
2,696
|
|
||
Accounts receivable
|
1,071
|
|
|
966
|
|
||
Settlement due from customers
|
1,188
|
|
|
1,351
|
|
||
Restricted security deposits held for customers
|
953
|
|
|
911
|
|
||
Prepaid expenses and other current assets
|
602
|
|
|
471
|
|
||
Deferred income taxes
|
283
|
|
|
233
|
|
||
Total Current Assets
|
10,956
|
|
|
10,950
|
|
||
Property, plant and equipment, net of accumulated depreciation of $433 and $394, respectively
|
553
|
|
|
526
|
|
||
Deferred income taxes
|
102
|
|
|
70
|
|
||
Goodwill
|
1,456
|
|
|
1,122
|
|
||
Other intangible assets, net of accumulated amortization of $651 and $534, respectively
|
705
|
|
|
672
|
|
||
Other assets
|
887
|
|
|
902
|
|
||
Total Assets
|
$
|
14,659
|
|
|
$
|
14,242
|
|
LIABILITIES AND EQUITY
|
|
|
|
||||
Accounts payable
|
$
|
319
|
|
|
$
|
338
|
|
Settlement due to customers
|
1,226
|
|
|
1,433
|
|
||
Restricted security deposits held for customers
|
953
|
|
|
911
|
|
||
Accrued litigation
|
789
|
|
|
886
|
|
||
Accrued expenses
|
2,098
|
|
|
2,101
|
|
||
Other current liabilities
|
464
|
|
|
363
|
|
||
Total Current Liabilities
|
5,849
|
|
|
6,032
|
|
||
Long-term debt
|
1,494
|
|
|
—
|
|
||
Deferred income taxes
|
119
|
|
|
117
|
|
||
Other liabilities
|
649
|
|
|
598
|
|
||
Total Liabilities
|
8,111
|
|
|
6,747
|
|
||
Commitments and Contingencies (Note 13)
|
|
|
|
||||
Stockholders’ Equity
|
|
|
|
||||
Class A common stock, $0.0001 par value; authorized 3,000,000,000 shares, 1,349,345,980 and 1,341,541,110 shares issued and 1,114,440,917 and 1,148,838,370 outstanding, respectively
|
—
|
|
|
—
|
|
||
Class B common stock, $0.0001 par value; authorized 1,200,000,000 shares, 40,060,155 and 45,350,070 issued and outstanding, respectively
|
—
|
|
|
—
|
|
||
Additional paid-in-capital
|
3,843
|
|
|
3,762
|
|
||
Class A treasury stock, at cost, 234,905,063 and 192,702,740 shares, respectively
|
(9,803
|
)
|
|
(6,577
|
)
|
||
Retained earnings
|
12,553
|
|
|
10,121
|
|
||
Accumulated other comprehensive income (loss)
|
(92
|
)
|
|
178
|
|
||
Total Stockholders’ Equity
|
6,501
|
|
|
7,484
|
|
||
Non-controlling interests
|
47
|
|
|
11
|
|
||
Total Equity
|
6,548
|
|
|
7,495
|
|
||
Total Liabilities and Equity
|
$
|
14,659
|
|
|
$
|
14,242
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
|
(in millions, except per share data)
|
||||||||||||||
Net Revenue
|
$
|
2,503
|
|
|
$
|
2,218
|
|
|
$
|
7,057
|
|
|
$
|
6,220
|
|
Operating Expenses
|
|
|
|
|
|
|
|
||||||||
General and administrative
|
797
|
|
|
701
|
|
|
2,207
|
|
|
1,930
|
|
||||
Advertising and marketing
|
203
|
|
|
205
|
|
|
525
|
|
|
520
|
|
||||
Depreciation and amortization
|
83
|
|
|
64
|
|
|
237
|
|
|
187
|
|
||||
Total operating expenses
|
1,083
|
|
|
970
|
|
|
2,969
|
|
|
2,637
|
|
||||
Operating income
|
1,420
|
|
|
1,248
|
|
|
4,088
|
|
|
3,583
|
|
||||
Other Income (Expense)
|
|
|
|
|
|
|
|
||||||||
Investment income
|
8
|
|
|
11
|
|
|
21
|
|
|
30
|
|
||||
Interest expense
|
(11
|
)
|
|
3
|
|
|
(32
|
)
|
|
(7
|
)
|
||||
Other income (expense), net
|
1
|
|
|
(8
|
)
|
|
(5
|
)
|
|
(17
|
)
|
||||
Total other income (expense)
|
(2
|
)
|
|
6
|
|
|
(16
|
)
|
|
6
|
|
||||
Income before income taxes
|
1,418
|
|
|
1,254
|
|
|
4,072
|
|
|
3,589
|
|
||||
Income tax expense
|
403
|
|
|
375
|
|
|
1,256
|
|
|
1,096
|
|
||||
Net Income
|
$
|
1,015
|
|
|
$
|
879
|
|
|
$
|
2,816
|
|
|
$
|
2,493
|
|
|
|
|
|
|
|
|
|
||||||||
Basic Earnings per Share
|
$
|
0.88
|
|
|
$
|
0.73
|
|
|
$
|
2.41
|
|
|
$
|
2.05
|
|
Basic Weighted-Average Shares Outstanding
|
1,157
|
|
|
1,205
|
|
|
1,169
|
|
|
1,215
|
|
||||
Diluted Earnings per Share
|
$
|
0.87
|
|
|
$
|
0.73
|
|
|
$
|
2.40
|
|
|
$
|
2.05
|
|
Diluted Weighted-Average Shares Outstanding
|
1,160
|
|
|
1,209
|
|
|
1,172
|
|
|
1,219
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
|
(in millions)
|
||||||||||||||
Net Income
|
$
|
1,015
|
|
|
$
|
879
|
|
|
$
|
2,816
|
|
|
$
|
2,493
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments
|
(274
|
)
|
|
137
|
|
|
(262
|
)
|
|
65
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Defined benefit pension and other postretirement plans
|
—
|
|
|
(2
|
)
|
|
2
|
|
|
(1
|
)
|
||||
Income tax effect
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||
Defined benefit pension and other postretirement plans, net of income tax effect
|
—
|
|
|
(1
|
)
|
|
2
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Investment securities available-for-sale
|
(8
|
)
|
|
(1
|
)
|
|
(14
|
)
|
|
(9
|
)
|
||||
Income tax effect
|
2
|
|
|
1
|
|
|
4
|
|
|
3
|
|
||||
Investment securities available-for-sale, net of income tax effect
|
(6
|
)
|
|
—
|
|
|
(10
|
)
|
|
(6
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income (loss), net of tax
|
(280
|
)
|
|
136
|
|
|
(270
|
)
|
|
59
|
|
||||
Comprehensive Income
|
$
|
735
|
|
|
$
|
1,015
|
|
|
$
|
2,546
|
|
|
$
|
2,552
|
|
|
Total
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Class A
Treasury
Stock
|
|
Non-
Controlling
Interests
|
||||||||||||||||||
|
|
|
Class A
|
|
Class B
|
|
|||||||||||||||||||||||||
|
(in millions, except per share data)
|
||||||||||||||||||||||||||||||
Balance at December 31, 2013
|
$
|
7,495
|
|
|
$
|
10,121
|
|
|
$
|
178
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,762
|
|
|
$
|
(6,577
|
)
|
|
$
|
11
|
|
Net income
|
2,816
|
|
|
2,816
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Activity related to non-controlling interests
|
36
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
36
|
|
||||||||
Other comprehensive income (loss), net of tax
|
(270
|
)
|
|
—
|
|
|
(270
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Cash dividends declared on Class A and Class B common stock, $0.33 per share
|
(384
|
)
|
|
(384
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Purchases of treasury stock
|
(3,231
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,231
|
)
|
|
—
|
|
||||||||
Share-based payments
|
86
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
81
|
|
|
5
|
|
|
—
|
|
||||||||
Balance at September 30, 2014
|
$
|
6,548
|
|
|
$
|
12,553
|
|
|
$
|
(92
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,843
|
|
|
$
|
(9,803
|
)
|
|
$
|
47
|
|
|
Nine Months Ended September 30,
|
||||||
|
2014
|
|
2013
|
||||
|
(in millions)
|
||||||
Operating Activities
|
|
|
|
||||
Net income
|
$
|
2,816
|
|
|
$
|
2,493
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
237
|
|
|
187
|
|
||
Share-based payments
|
(43
|
)
|
|
27
|
|
||
Deferred income taxes
|
(80
|
)
|
|
(34
|
)
|
||
Other
|
24
|
|
|
48
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(96
|
)
|
|
(67
|
)
|
||
Income taxes receivable
|
(12
|
)
|
|
158
|
|
||
Settlement due from customers
|
86
|
|
|
(192
|
)
|
||
Prepaid expenses
|
(156
|
)
|
|
(44
|
)
|
||
Accrued litigation and legal settlements
|
(97
|
)
|
|
—
|
|
||
Accounts payable
|
(39
|
)
|
|
(76
|
)
|
||
Settlement due to customers
|
(124
|
)
|
|
126
|
|
||
Accrued expenses
|
60
|
|
|
209
|
|
||
Net change in other assets and liabilities
|
106
|
|
|
101
|
|
||
Net cash provided by operating activities
|
2,682
|
|
|
2,936
|
|
||
Investing Activities
|
|
|
|
||||
Purchases of investment securities available-for-sale
|
(1,977
|
)
|
|
(1,936
|
)
|
||
Acquisition of businesses, net of cash acquired
|
(336
|
)
|
|
—
|
|
||
Purchases of property, plant and equipment
|
(97
|
)
|
|
(65
|
)
|
||
Capitalized software
|
(75
|
)
|
|
(88
|
)
|
||
Proceeds from sales of investment securities available-for-sale
|
1,444
|
|
|
1,349
|
|
||
Proceeds from maturities of investment securities available-for-sale
|
1,322
|
|
|
959
|
|
||
Decrease (increase) in restricted cash for litigation settlement
|
184
|
|
|
(1
|
)
|
||
Proceeds from maturities of investment securities held-to-maturity
|
—
|
|
|
36
|
|
||
Other investing activities
|
(17
|
)
|
|
(19
|
)
|
||
Net cash provided by investing activities
|
448
|
|
|
235
|
|
||
Financing Activities
|
|
|
|
||||
Purchases of treasury stock
|
(3,231
|
)
|
|
(1,692
|
)
|
||
Proceeds from debt
|
1,487
|
|
|
—
|
|
||
Dividends paid
|
(388
|
)
|
|
(182
|
)
|
||
Tax benefit for share-based payments
|
53
|
|
|
23
|
|
||
Cash proceeds from exercise of stock options
|
23
|
|
|
22
|
|
||
Other financing activities
|
(39
|
)
|
|
(8
|
)
|
||
Net cash used in financing activities
|
(2,095
|
)
|
|
(1,837
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(172
|
)
|
|
27
|
|
||
Net increase in cash and cash equivalents
|
863
|
|
|
1,361
|
|
||
Cash and cash equivalents - beginning of period
|
3,599
|
|
|
2,052
|
|
||
Cash and cash equivalents - end of period
|
$
|
4,462
|
|
|
$
|
3,413
|
|
|
|
|
|
||||
Non-Cash Investing and Financing Activities
|
|
|
|
||||
Fair value of assets acquired, net of cash acquired
|
$
|
574
|
|
|
$
|
—
|
|
Fair value of liabilities assumed related to acquisitions
|
$
|
134
|
|
|
$
|
—
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
|
(in millions, except per share data)
|
||||||||||||||
Numerator:
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
1,015
|
|
|
$
|
879
|
|
|
$
|
2,816
|
|
|
$
|
2,493
|
|
Denominator:
|
|
|
|
|
|
|
|
||||||||
Basic weighted-average shares outstanding
|
1,157
|
|
|
1,205
|
|
|
1,169
|
|
|
1,215
|
|
||||
Dilutive stock options and stock units
|
3
|
|
|
4
|
|
|
3
|
|
|
4
|
|
||||
Diluted weighted-average shares outstanding
1
|
1,160
|
|
|
1,209
|
|
|
1,172
|
|
|
1,219
|
|
||||
Earnings per Share
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.88
|
|
|
$
|
0.73
|
|
|
$
|
2.41
|
|
|
$
|
2.05
|
|
Diluted
|
$
|
0.87
|
|
|
$
|
0.73
|
|
|
$
|
2.40
|
|
|
$
|
2.05
|
|
|
September 30, 2014
|
||||||||||||||
|
Quoted Prices
in Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Fair
Value
|
||||||||
|
(in millions)
|
||||||||||||||
Municipal securities
|
$
|
—
|
|
|
$
|
147
|
|
|
$
|
—
|
|
|
$
|
147
|
|
U.S. government and agency securities
1
|
—
|
|
|
254
|
|
|
—
|
|
|
254
|
|
||||
Corporate securities
|
—
|
|
|
1,006
|
|
|
—
|
|
|
1,006
|
|
||||
Asset-backed securities
|
—
|
|
|
362
|
|
|
—
|
|
|
362
|
|
||||
Other
2
|
11
|
|
|
71
|
|
|
11
|
|
|
93
|
|
||||
Total
|
$
|
11
|
|
|
$
|
1,840
|
|
|
$
|
11
|
|
|
$
|
1,862
|
|
|
|
|
|
|
|
|
|
||||||||
|
December 31, 2013
|
||||||||||||||
|
Quoted Prices
in Active
Markets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Fair
Value
|
||||||||
|
(in millions)
|
||||||||||||||
Municipal securities
|
$
|
—
|
|
|
$
|
267
|
|
|
$
|
—
|
|
|
$
|
267
|
|
U.S. government and agency securities
1
|
—
|
|
|
560
|
|
|
—
|
|
|
560
|
|
||||
Corporate securities
|
—
|
|
|
1,426
|
|
|
—
|
|
|
1,426
|
|
||||
Asset-backed securities
|
—
|
|
|
364
|
|
|
—
|
|
|
364
|
|
||||
Other
2
|
—
|
|
|
79
|
|
|
11
|
|
|
90
|
|
||||
Total
|
$
|
—
|
|
|
$
|
2,696
|
|
|
$
|
11
|
|
|
$
|
2,707
|
|
|
September 30, 2014
|
||||||||||||||
|
Amortized
Cost
|
|
Gross
Unrealized
Gain
|
|
Gross
Unrealized
Loss
|
|
Fair
Value
|
||||||||
|
(in millions)
|
||||||||||||||
Municipal securities
|
$
|
147
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
147
|
|
U.S. government and agency securities
|
254
|
|
|
—
|
|
|
—
|
|
|
254
|
|
||||
Corporate securities
|
1,005
|
|
|
1
|
|
|
—
|
|
|
1,006
|
|
||||
Asset-backed securities
|
362
|
|
|
—
|
|
|
—
|
|
|
362
|
|
||||
Other
1
|
114
|
|
|
—
|
|
|
(15
|
)
|
|
99
|
|
||||
Total
|
$
|
1,882
|
|
|
$
|
1
|
|
|
$
|
(15
|
)
|
|
$
|
1,868
|
|
|
|
|
|
|
|
|
|
||||||||
|
December 31, 2013
|
||||||||||||||
|
Amortized
Cost
|
|
Gross
Unrealized
Gain
|
|
Gross
Unrealized
Loss
|
|
Fair
Value
|
||||||||
|
(in millions)
|
||||||||||||||
Municipal securities
|
$
|
267
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
267
|
|
U.S. government and agency securities
|
560
|
|
|
—
|
|
|
—
|
|
|
560
|
|
||||
Corporate securities
|
1,425
|
|
|
2
|
|
|
(1
|
)
|
|
1,426
|
|
||||
Asset-backed securities
|
364
|
|
|
—
|
|
|
—
|
|
|
364
|
|
||||
Other
1
|
91
|
|
|
—
|
|
|
(1
|
)
|
|
90
|
|
||||
Total
|
$
|
2,707
|
|
|
$
|
2
|
|
|
$
|
(2
|
)
|
|
$
|
2,707
|
|
|
Available-For-Sale
|
||||||
|
Amortized
Cost
|
|
Fair Value
|
||||
|
(in millions)
|
||||||
Due within 1 year
|
$
|
1,045
|
|
|
$
|
1,046
|
|
Due after 1 year through 5 years
|
796
|
|
|
796
|
|
||
Due after 5 years through 10 years
|
4
|
|
|
4
|
|
||
Due after 10 years
|
12
|
|
|
11
|
|
||
No contractual maturity
|
25
|
|
|
11
|
|
||
Total
|
$
|
1,882
|
|
|
$
|
1,868
|
|
|
September 30,
2014 |
|
December 31,
2013 |
||||
|
(in millions)
|
||||||
Customer and merchant incentives
|
$
|
286
|
|
|
$
|
239
|
|
Prepaid income taxes
|
159
|
|
|
36
|
|
||
Other
|
157
|
|
|
196
|
|
||
Total prepaid expenses and other current assets
|
$
|
602
|
|
|
$
|
471
|
|
|
September 30,
2014 |
|
December 31,
2013 |
||||
|
(in millions)
|
||||||
Customer and merchant incentives
|
$
|
541
|
|
|
$
|
531
|
|
Nonmarketable equity investments
|
163
|
|
|
229
|
|
||
Income taxes receivable
|
92
|
|
|
78
|
|
||
Other
|
91
|
|
|
64
|
|
||
Total other assets
|
$
|
887
|
|
|
$
|
902
|
|
|
September 30,
2014 |
|
December 31,
2013 |
||||
|
(in millions)
|
||||||
Customer and merchant incentives
|
$
|
1,336
|
|
|
$
|
1,286
|
|
Personnel costs
|
365
|
|
|
413
|
|
||
Advertising
|
103
|
|
|
149
|
|
||
Income and other taxes
|
150
|
|
|
95
|
|
||
Other
|
144
|
|
|
158
|
|
||
Total accrued expenses
|
$
|
2,098
|
|
|
$
|
2,101
|
|
|
September 30,
2014 |
|
December 31,
2013 |
||||
|
(in millions)
|
||||||
2.000% Notes due 2019
|
$
|
500
|
|
|
$
|
—
|
|
3.375% Notes due 2024
|
1,000
|
|
|
—
|
|
||
|
1,500
|
|
|
—
|
|
||
Less: Unamortized discount
|
(6
|
)
|
|
—
|
|
||
Long-term debt
|
$
|
1,494
|
|
|
$
|
—
|
|
|
Authorization Dates
|
||||||||||||||
|
December
2013
|
|
February
2013
|
|
June
2012
|
|
Total
|
||||||||
|
(in millions, except average price data)
|
||||||||||||||
Board authorization
|
$
|
3,500
|
|
|
$
|
2,000
|
|
|
$
|
1,500
|
|
|
$
|
7,000
|
|
Dollar value of shares repurchased during the nine months ended September 30, 2013
|
**
|
|
|
$
|
1,088
|
|
|
$
|
604
|
|
|
$
|
1,692
|
|
|
Remaining authorization at December 31, 2013
|
$
|
3,500
|
|
|
$
|
161
|
|
|
$
|
—
|
|
|
$
|
3,661
|
|
Dollar value of shares repurchased during the nine months ended September 30, 2014
|
$
|
3,070
|
|
|
$
|
161
|
|
|
$
|
—
|
|
|
$
|
3,231
|
|
Remaining authorization at September 30, 2014
|
$
|
430
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
430
|
|
Shares repurchased during the nine months ended September 30, 2013
|
**
|
|
|
19.4
|
|
|
11.7
|
|
|
31.1
|
|
||||
Average price paid per share during the nine months ended September 30, 2013
|
**
|
|
|
$
|
56.19
|
|
|
$
|
51.72
|
|
|
$
|
54.50
|
|
|
Shares repurchased during the nine months ended September 30, 2014
|
40.5
|
|
|
1.9
|
|
|
—
|
|
|
42.4
|
|
||||
Average price paid per share during the nine months ended September 30, 2014
|
$
|
75.96
|
|
|
$
|
83.22
|
|
|
$
|
—
|
|
|
$
|
76.30
|
|
Cumulative shares repurchased through September 30, 2014
|
40.5
|
|
|
31.1
|
|
|
31.1
|
|
|
102.7
|
|
||||
Cumulative average price paid per share
|
$
|
75.96
|
|
|
$
|
64.26
|
|
|
$
|
48.16
|
|
|
$
|
63.98
|
|
|
Foreign Currency Translation Adjustments
|
|
Defined Benefit Pension and Other Postretirement Plans
|
|
Investment Securities Available-for-Sale
|
|
Accumulated Other Comprehensive Income (Loss)
|
||||||||
|
(in millions)
|
||||||||||||||
Balance at December 31, 2012
|
$
|
93
|
|
|
$
|
(37
|
)
|
|
$
|
5
|
|
|
$
|
61
|
|
Current period other comprehensive income (loss)
1
|
65
|
|
|
—
|
|
|
(6
|
)
|
|
59
|
|
||||
Balance at September 30, 2013
|
$
|
158
|
|
|
$
|
(37
|
)
|
|
$
|
(1
|
)
|
|
$
|
120
|
|
|
|
|
|
|
|
|
|
||||||||
Balance at December 31, 2013
|
$
|
206
|
|
|
$
|
(29
|
)
|
|
$
|
1
|
|
|
$
|
178
|
|
Current period other comprehensive income (loss)
1
|
(262
|
)
|
|
2
|
|
|
(10
|
)
|
|
(270
|
)
|
||||
Balance at September 30, 2014
|
$
|
(56
|
)
|
|
$
|
(27
|
)
|
|
$
|
(9
|
)
|
|
$
|
(92
|
)
|
|
|
|
|
|
|
|
|
|
Granted in 2014
|
|
Weighted-Average
Grant-Date
Fair Value
|
|
(in thousands)
|
|
|
Non-qualified stock options
|
1,685
|
|
$14
|
Restricted stock units
|
1,332
|
|
$76
|
Performance stock units
|
133
|
|
$78
|
|
September 30,
2014 |
|
December 31,
2013 |
||||
|
(in millions)
|
||||||
Gross settlement exposure
|
$
|
41,827
|
|
|
$
|
40,657
|
|
Collateral held for settlement exposure
|
(3,544
|
)
|
|
(3,167
|
)
|
||
Net uncollateralized settlement exposure
|
$
|
38,283
|
|
|
$
|
37,490
|
|
|
September 30, 2014
|
|
December 31, 2013
|
||||||||||||
|
Notional
|
|
Estimated Fair
Value
|
|
Notional
|
|
Estimated Fair
Value
|
||||||||
|
(in millions)
|
||||||||||||||
Commitments to purchase foreign currency
|
$
|
57
|
|
|
$
|
3
|
|
|
$
|
23
|
|
|
$
|
(1
|
)
|
Commitments to sell foreign currency
|
1,793
|
|
|
(9
|
)
|
|
1,722
|
|
|
1
|
|
||||
Balance sheet location:
|
|
|
|
|
|
|
|
||||||||
Accounts receivable
1
|
|
|
$
|
20
|
|
|
|
|
$
|
13
|
|
||||
Other current liabilities
1
|
|
|
(26
|
)
|
|
|
|
(13
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
|
(in millions)
|
||||||||||||||
Foreign currency derivative contracts
|
|
|
|
|
|
|
|
||||||||
General and administrative
|
$
|
(53
|
)
|
|
$
|
26
|
|
|
$
|
(79
|
)
|
|
$
|
38
|
|
Net revenue
|
—
|
|
|
3
|
|
|
—
|
|
|
2
|
|
||||
Total
|
$
|
(53
|
)
|
|
$
|
29
|
|
|
$
|
(79
|
)
|
|
$
|
40
|
|
•
|
Growing our core businesses globally, both as to our products - credit, debit, prepaid and commercial - and increasing the number of payment transactions we process;
|
•
|
Diversifying our business by seeking new areas of growth in markets around the world by focusing on:
|
•
|
Existing and new markets;
|
•
|
Encouraging consumers and businesses to use MasterCard products for new payment areas, such as transit, parking, person-to-person transfers and paying bills;
|
•
|
Small merchants and merchants who have not historically accepted MasterCard products; and
|
•
|
Financial inclusion for the unbanked and underbanked; and
|
•
|
Building our business by:
|
•
|
Taking advantage of the opportunities presented by the ongoing convergence of the physical and digital worlds; and
|
•
|
Using our data analytics, loyalty solutions and fraud protection and detection services to add value.
|
|
Three Months Ended September 30,
|
|
Percent Increase (Decrease)
|
|
Nine Months Ended September 30,
|
|
Percent Increase (Decrease)
|
||||||||||||
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
|
||||||||||
|
(in millions, except per share data and percentages)
|
||||||||||||||||||
Net revenue
|
$
|
2,503
|
|
|
$
|
2,218
|
|
|
13%
|
|
$
|
7,057
|
|
|
$
|
6,220
|
|
|
13%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating expenses
|
1,083
|
|
|
970
|
|
|
12%
|
|
2,969
|
|
|
2,637
|
|
|
13%
|
||||
Operating income
|
1,420
|
|
|
1,248
|
|
|
14%
|
|
4,088
|
|
|
3,583
|
|
|
14%
|
||||
Operating margin
|
56.7
|
%
|
|
56.3
|
%
|
|
**
|
|
57.9
|
%
|
|
57.6
|
%
|
|
**
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Income tax expense
|
403
|
|
|
375
|
|
|
8%
|
|
1,256
|
|
|
1,096
|
|
|
15%
|
||||
Effective income tax rate
|
28.5
|
%
|
|
29.9
|
%
|
|
**
|
|
30.9
|
%
|
|
30.5
|
%
|
|
**
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
1,015
|
|
|
$
|
879
|
|
|
15%
|
|
$
|
2,816
|
|
|
$
|
2,493
|
|
|
13%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted earnings per share
|
$
|
0.87
|
|
|
$
|
0.73
|
|
|
19%
|
|
$
|
2.40
|
|
|
$
|
2.05
|
|
|
17%
|
Diluted weighted-average shares outstanding
|
1,160
|
|
|
1,209
|
|
|
(4)%
|
|
1,172
|
|
|
1,219
|
|
|
(4)%
|
•
|
Domestic or cross-border transactions;
|
•
|
Signature-based or PIN-based transactions;
|
•
|
Geographic region or country the transaction occurs in;
|
•
|
Volumes/transactions subject to tiered rates;
|
•
|
Processed or not processed by MasterCard;
|
•
|
Amount of usage of our other products or services; and
|
•
|
Amount of rebates and incentives provided to customers.
|
1.
|
Domestic assessments:
Domestic assessments are fees charged to issuers and acquirers based primarily on the dollar volume of activity on cards and other devices that carry our brands where the merchant country and the issuer country are the same. Domestic assessments include items such as card assessments, which are fees charged on the number of cards issued or assessments for specific purposes, such as acceptance development or market development programs.
|
2.
|
Cross-border volume fees:
Cross-border volume fees are charged to issuers and acquirers based on the volume of activity on cards and other devices that carry our brands where the merchant country and the issuer country are different. In general, a cross-border transaction generates higher revenue than a domestic transaction since cross-border fees are higher than domestic fees, and in most cases also include fees for currency conversion.
|
3.
|
Transaction processing fees:
Transaction processing fees are charged for both domestic and cross-border transactions and are primarily based on the number of transactions. Transaction processing fees include charges to issuers for the following:
|
•
|
Transaction Switching fees
for the following products and services:
|
◦
|
Authorization
is the process by which a transaction is routed to the issuer for approval. In certain circumstances such as when the issuer’s systems are unavailable or cannot be contacted, MasterCard or others on behalf of the issuer approve in accordance with either the issuer’s instructions or applicable rules (also known as “stand-in”).
|
◦
|
Clearing
is the exchange of financial transaction information between issuers and acquirers after a transaction has been successfully conducted at the point of interaction. MasterCard clears transactions among customers through our central and regional processing systems.
|
◦
|
Settlement is
facilitating the exchange of funds between parties.
|
•
|
Connectivity fees
are charged to issuers and acquirers for network access, equipment and the transmission of authorization and settlement messages. These fees are based on the size of the data being transmitted through and the number of connections to the Company’s network.
|
4.
|
Other revenues
: Other revenues consist of other payment-related products and services and are primarily associated with the following:
|
•
|
Consulting and research fees
are primarily generated by MasterCard Advisors, the Company’s professional advisory services group.
|
•
|
Fraud products and services
used to prevent or detect fraudulent transactions. This includes fees for warning bulletins provided to issuers and acquirers either electronically or in paper form.
|
•
|
Loyalty and rewards solution fees
are charged to issuers for benefits provided directly to consumers with MasterCard-branded cards, such as insurance, assistance for lost cards, locating ATMs and rewards programs.
|
•
|
Program management services
provided to prepaid card issuers consist of foreign exchange margin, commissions, load fees and ATM withdrawal fees paid by cardholders on the sale and encashment of prepaid cards.
|
•
|
The Company also charges for a variety of other payment-related products and services, including account and transaction enhancement services, rules compliance and publications.
|
5.
|
Rebates and incentives (contra-revenue):
Rebates and incentives are provided to certain MasterCard customers and are recorded as contra-revenue.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||||||||||
|
Growth (USD)
|
|
Growth (Local)
|
|
Growth (USD)
|
|
Growth (Local)
|
|
Growth (USD)
|
|
Growth (Local)
|
|
Growth (USD)
|
|
Growth (Local)
|
||||||||
MasterCard-Branded GDV
1
|
11
|
%
|
|
12
|
%
|
|
14
|
%
|
|
15
|
%
|
|
11
|
%
|
|
13
|
%
|
|
13
|
%
|
|
14
|
%
|
Asia Pacific/Middle East/Africa
|
16
|
%
|
|
16
|
%
|
|
16
|
%
|
|
22
|
%
|
|
15
|
%
|
|
18
|
%
|
|
19
|
%
|
|
22
|
%
|
Canada
|
—
|
%
|
|
5
|
%
|
|
4
|
%
|
|
9
|
%
|
|
(1
|
)%
|
|
6
|
%
|
|
4
|
%
|
|
7
|
%
|
Europe
|
10
|
%
|
|
12
|
%
|
|
19
|
%
|
|
17
|
%
|
|
12
|
%
|
|
13
|
%
|
|
16
|
%
|
|
15
|
%
|
Latin America
|
9
|
%
|
|
15
|
%
|
|
11
|
%
|
|
17
|
%
|
|
6
|
%
|
|
14
|
%
|
|
13
|
%
|
|
16
|
%
|
United States
|
7
|
%
|
|
7
|
%
|
|
9
|
%
|
|
9
|
%
|
|
8
|
%
|
|
8
|
%
|
|
6
|
%
|
|
6
|
%
|
Cross-border Volume Growth
1
|
|
|
15
|
%
|
|
|
|
19
|
%
|
|
|
|
16
|
%
|
|
|
|
18
|
%
|
||||
Processed Transactions Growth
|
|
|
10
|
%
|
|
|
|
16
|
%
|
|
|
|
12
|
%
|
|
|
|
13
|
%
|
|
Three Months Ended September 30,
|
|
Percent Increase (Decrease)
|
|
Nine Months Ended September 30,
|
|
Percent Increase (Decrease)
|
||||||||||||
|
2014
|
|
2013
1
|
|
|
2014
|
|
2013
1
|
|
||||||||||
|
(in millions, except percentages)
|
||||||||||||||||||
Domestic assessments
|
$
|
1,003
|
|
|
$
|
931
|
|
|
8%
|
|
$
|
2,949
|
|
|
$
|
2,716
|
|
|
9%
|
Cross-border volume fees
|
835
|
|
|
738
|
|
|
13%
|
|
2,280
|
|
|
1,985
|
|
|
15%
|
||||
Transaction processing fees
|
1,041
|
|
|
919
|
|
|
13%
|
|
2,972
|
|
|
2,605
|
|
|
14%
|
||||
Other revenues
|
460
|
|
|
336
|
|
|
38%
|
|
1,193
|
|
|
931
|
|
|
28%
|
||||
Gross revenue
|
3,339
|
|
|
2,924
|
|
|
14%
|
|
9,394
|
|
|
8,237
|
|
|
14%
|
||||
Rebates and incentives (contra-revenue)
|
(836
|
)
|
|
(706
|
)
|
|
19%
|
|
(2,337
|
)
|
|
(2,017
|
)
|
|
16%
|
||||
Net revenue
|
$
|
2,503
|
|
|
$
|
2,218
|
|
|
13%
|
|
$
|
7,057
|
|
|
$
|
6,220
|
|
|
13%
|
|
Three Months Ended September 30,
|
||||||||||||||||||||||
|
Volume
|
|
Foreign Currency
1
|
|
Other
|
|
Total
|
||||||||||||||||
|
2014
|
|
2013
2
|
|
2014
|
|
2013
2
|
|
2014
|
|
2013
2
|
|
2014
|
|
2013
2
|
|
|||||||
Domestic assessments
|
11
|
%
|
|
16
|
%
|
|
—
|
%
|
|
—
|
%
|
|
(3
|
)%
|
3
|
(8
|
)%
|
3
|
8
|
%
|
|
8
|
%
|
Cross-border volume fees
|
13
|
%
|
|
14
|
%
|
|
—
|
%
|
|
2
|
%
|
|
—
|
%
|
|
5
|
%
|
|
13
|
%
|
|
21
|
%
|
Transaction processing fees
|
9
|
%
|
|
11
|
%
|
|
—
|
%
|
|
1
|
%
|
|
4
|
%
|
|
1
|
%
|
|
13
|
%
|
|
13
|
%
|
Other revenues
|
**
|
|
|
**
|
|
|
—
|
%
|
|
1
|
%
|
|
38
|
%
|
4
|
13
|
%
|
4
|
38
|
%
|
|
14
|
%
|
Rebates and incentives
|
9
|
%
|
|
5
|
%
|
|
—
|
%
|
|
—
|
%
|
|
10
|
%
|
5
|
3
|
%
|
5
|
19
|
%
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net revenue
|
10
|
%
|
|
14
|
%
|
|
—
|
%
|
|
1
|
%
|
|
3
|
%
|
|
1
|
%
|
|
13
|
%
|
|
16
|
%
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||
|
Volume
|
|
Foreign Currency
1
|
|
Other
|
|
Total
|
||||||||||||||||
|
2014
|
|
2013
2
|
|
2014
|
|
2013
2
|
|
2014
|
|
2013
2
|
|
2014
|
|
2013
2
|
|
|||||||
Domestic assessments
|
12
|
%
|
|
13
|
%
|
|
—
|
%
|
|
—
|
%
|
|
(3
|
)%
|
3
|
(4
|
)%
|
3
|
9
|
%
|
|
9
|
%
|
Cross-border volume fees
|
14
|
%
|
|
15
|
%
|
|
1
|
%
|
|
1
|
%
|
|
—
|
%
|
|
3
|
%
|
|
15
|
%
|
|
19
|
%
|
Transaction processing fees
|
12
|
%
|
|
10
|
%
|
|
—
|
%
|
|
—
|
%
|
|
2
|
%
|
|
—
|
%
|
|
14
|
%
|
|
10
|
%
|
Other revenues
|
**
|
|
|
**
|
|
|
1
|
%
|
|
1
|
%
|
|
27
|
%
|
4
|
12
|
%
|
4
|
28
|
%
|
|
13
|
%
|
Rebates and incentives
|
8
|
%
|
|
6
|
%
|
|
—
|
%
|
|
—
|
%
|
|
8
|
%
|
5
|
2
|
%
|
5
|
16
|
%
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Net revenue
|
12
|
%
|
|
13
|
%
|
|
—
|
%
|
|
—
|
%
|
|
1
|
%
|
|
—
|
%
|
|
13
|
%
|
|
13
|
%
|
|
Three Months Ended September 30,
|
|
Percent Increase (Decrease)
|
|
Nine Months Ended September 30,
|
|
Percent Increase (Decrease)
|
||||||||||||
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
|
||||||||||
|
(in millions, except percentages)
|
||||||||||||||||||
General and administrative
|
$
|
797
|
|
|
$
|
701
|
|
|
14%
|
|
$
|
2,207
|
|
|
$
|
1,930
|
|
|
14%
|
Advertising and marketing
|
203
|
|
|
205
|
|
|
(1)%
|
|
525
|
|
|
520
|
|
|
1%
|
||||
Depreciation and amortization
|
83
|
|
|
64
|
|
|
30%
|
|
237
|
|
|
187
|
|
|
26%
|
||||
Total operating expenses
|
$
|
1,083
|
|
|
$
|
970
|
|
|
12%
|
|
$
|
2,969
|
|
|
$
|
2,637
|
|
|
13%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total operating expenses as a percentage of net revenue
|
43.3
|
%
|
|
43.7
|
%
|
|
|
|
42.1
|
%
|
|
42.4
|
%
|
|
|
|
Three Months Ended September 30,
|
|
Percent Increase (Decrease)
|
|
Nine Months Ended September 30,
|
|
Percent Increase (Decrease)
|
||||||||||||
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
|
||||||||||
|
(in millions, except percentages)
|
||||||||||||||||||
Personnel
|
$
|
511
|
|
|
$
|
452
|
|
|
13%
|
|
$
|
1,446
|
|
|
$
|
1,287
|
|
|
12%
|
Professional fees
|
74
|
|
|
64
|
|
|
16%
|
|
195
|
|
|
162
|
|
|
21%
|
||||
Data processing and telecommunications
|
70
|
|
|
59
|
|
|
19%
|
|
196
|
|
|
165
|
|
|
19%
|
||||
Foreign exchange activity
|
(18
|
)
|
|
14
|
|
|
*
|
|
(20
|
)
|
|
1
|
|
|
*
|
||||
Other
|
160
|
|
|
112
|
|
|
43%
|
|
390
|
|
|
315
|
|
|
24%
|
||||
General and administrative expenses
|
$
|
797
|
|
|
$
|
701
|
|
|
14%
|
|
$
|
2,207
|
|
|
$
|
1,930
|
|
|
14%
|
•
|
Personnel expense increased for the
three and nine months ended September 30, 2014
versus the comparable periods in
2013
, due to an increase in the number of employees to support the Company’s strategic initiatives and the impact of our current year acquisitions.
|
•
|
Professional fees consist primarily of third-party services, legal costs to defend our outstanding litigation and the evaluation of regulatory developments that impact our industry and company. Professional fees for the
three and nine months ended September 30, 2014
, versus the comparable periods in
2013
, increased primarily due to support required for strategic development efforts.
|
•
|
Data processing and telecommunication expense consists of expenses to support our global payments network infrastructure, expenses to operate and maintain our computer systems and other telecommunication systems. These expenses vary with business volume growth, system upgrades and usage.
|
•
|
Foreign exchange activity includes gains and losses on foreign exchange derivative contracts and the impact of remeasurement of assets and liabilities denominated in foreign currencies. See Note 14 (Foreign Exchange Risk Management) to the consolidated financial statements included in Part I, Item 1 of this Report. Since the Company does not designate foreign currency derivatives as hedging instruments pursuant to the accounting standards for derivative
|
•
|
Other expenses include costs to provide loyalty and rewards programs, travel and entertainment, rental expense for our facilities, litigation settlements not related to the U.S. merchant class litigation, investment related expenses and other miscellaneous operating expenses. Other expenses increased for the
three and nine months ended September 30, 2014
versus the comparable periods in
2013
, primarily due to the impact of our current year acquisitions and expenses incurred to support strategic development efforts.
|
|
September 30,
2014 |
|
December 31,
2013 |
||||
|
(in billions)
|
||||||
Cash, cash equivalents and available-for-sale investment securities
1
|
$
|
6.3
|
|
|
$
|
6.3
|
|
Unused line of credit
2
|
3.0
|
|
|
3.0
|
|
|
Nine Months Ended September 30, 2014
|
||||||
|
2014
|
|
2013
|
||||
|
(in millions)
|
||||||
Cash Flow Data:
|
|
|
|
||||
Net cash provided by operating activities
|
$
|
2,682
|
|
|
$
|
2,936
|
|
Net cash provided by investing activities
|
448
|
|
|
235
|
|
||
Net cash used in financing activities
|
(2,095
|
)
|
|
(1,837
|
)
|
|
September 30,
2014 |
|
December 31,
2013 |
||||
|
(in millions)
|
||||||
Balance Sheet Data:
|
|
|
|
||||
Current assets
|
$
|
10,956
|
|
|
$
|
10,950
|
|
Current liabilities
|
5,849
|
|
|
6,032
|
|
||
Long-term liabilities
|
2,262
|
|
|
715
|
|
||
Equity
|
6,548
|
|
|
7,495
|
|
|
Authorization Dates
|
||||||||||||||
|
December
2013
|
|
February
2013
|
|
June
2012
|
|
Total
|
||||||||
|
(in millions, except average price data)
|
||||||||||||||
Board authorization
|
$
|
3,500
|
|
|
$
|
2,000
|
|
|
$
|
1,500
|
|
|
$
|
7,000
|
|
Remaining authorization at December 31, 2013
|
$
|
3,500
|
|
|
$
|
161
|
|
|
$
|
—
|
|
|
$
|
3,661
|
|
Dollar value of shares repurchased during the nine months ended September 30, 2014
|
$
|
3,070
|
|
|
$
|
161
|
|
|
$
|
—
|
|
|
$
|
3,231
|
|
Remaining authorization at September 30, 2014
|
$
|
430
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
430
|
|
Shares repurchased during the nine months ended September 30, 2014
|
40.5
|
|
|
1.9
|
|
|
—
|
|
|
42.4
|
|
||||
Average price paid per share during the nine months ended September 30, 2014
|
$
|
75.96
|
|
|
$
|
83.22
|
|
|
$
|
—
|
|
|
$
|
76.30
|
|
Cumulative shares repurchased through September 30, 2014
|
40.5
|
|
|
31.1
|
|
|
31.1
|
|
|
102.7
|
|
||||
Cumulative average price paid per share
|
$
|
75.96
|
|
|
$
|
64.26
|
|
|
$
|
48.16
|
|
|
$
|
63.98
|
|
Period
|
Total Number
of Shares
Purchased
|
|
Average Price
Paid per Share
(including
commission cost)
|
|
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
|
|
Dollar Value of
Shares that may yet
be Purchased under
the Plans or
Programs
1
|
||||||
July 1 – 31
|
1,766,880
|
|
|
$
|
76.01
|
|
|
1,766,880
|
|
|
$
|
699,906,980
|
|
August 1 – 31
|
2,178,900
|
|
|
$
|
75.47
|
|
|
2,178,900
|
|
|
$
|
535,474,182
|
|
September 1 – 30
|
1,382,300
|
|
|
$
|
76.05
|
|
|
1,382,300
|
|
|
$
|
430,344,885
|
|
Total
|
5,328,080
|
|
|
$
|
75.80
|
|
|
5,328,080
|
|
|
|
|
|
MASTERCARD INCORPORATED
|
||
|
|
(Registrant)
|
||
|
|
|
|
|
Date:
|
October 30, 2014
|
By:
|
|
/S/ AJAY BANGA
|
|
|
|
|
Ajay Banga
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
Date:
|
October 30, 2014
|
By:
|
|
/S/ MARTINA HUND-MEJEAN
|
|
|
|
|
Martina Hund-Mejean
|
|
|
|
|
Chief Financial Officer
|
|
|
|
|
(Principal Financial Officer)
|
|
|
|
|
|
Date:
|
October 30, 2014
|
By:
|
|
/S/ ANDREA FORSTER
|
|
|
|
|
Andrea Forster
|
|
|
|
|
Corporate Controller
|
|
|
|
|
(Principal Accounting Officer)
|
|
|
|
Exhibit
Number
|
|
Exhibit Description
|
|
|
|
|
|
|
10.1*
|
|
Amendment to Omnibus Agreement Regarding Interchange Litigation Judgment Sharing and Settlement Sharing, dated as of August 25, 2014, by and among MasterCard Incorporated, MasterCard International Incorporated, Visa Inc., Visa U.S.A Inc., Visa International Service Association and MasterCard’s customer banks that are parties thereto.
|
|
|
|
10.2*
|
|
Amendment to MasterCard Settlement and Judgment Sharing Agreement, dated as of August 26, 2014, by and among MasterCard Incorporated, MasterCard International Incorporated and MasterCard’s customer banks that are parties thereto.
|
|
|
|
12.1*
|
|
Computation of Ratio of Earnings to Fixed Charges.
|
|
|
|
15*
|
|
Awareness Letter from the Company’s Independent Registered Public Accounting Firm.
|
|
|
|
31.1*
|
|
Certification of Ajay Banga, President and Chief Executive Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2*
|
|
Certification of Martina Hund-Mejean, Chief Financial Officer, pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1*
|
|
Certification of Ajay Banga, President and Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2*
|
|
Certification of Martina Hund-Mejean, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
101.INS*
|
|
XBRL Instance Document
|
|
|
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
Filed or furnished herewith.
|
|
|
Exhibit 10.1
|
1.
|
Each term defined in the Omnibus Agreement shall have the same meaning when used herein.
|
2.
|
In the event of a Settlement in an Opt-Out Action in which the settling Signatory or Signatories provide no Settlement consideration other than (a) a Monetary Portion or (b) modification of rules as required by any of the terms of Paragraphs 40‑52 or Paragraphs 53-65 of the Definitive Class Settlement Agreement in MDL 1720 subject, however, to the terms of the Definitive Class Settlement Agreement and any modifications thereto, that Settlement shall be treated under the Omnibus Agreement as though it were a Settlement in an Individual Plaintiff Action, notwithstanding any contrary provision in the Omnibus Agreement.
|
3.
|
For the avoidance of doubt, in the event of a Partial Settlement in an Opt-Out Action in which the settling Signatory or Signatories provide no Settlement consideration other than (a) a Monetary Portion or (b) modification of rules as required by any of the terms of Paragraphs 40‑52 or Paragraphs 53-65 of the Definitive Class Settlement Agreement in MDL 1720 subject, however, to the terms of the Definitive Class Settlement Agreement and any modifications thereto, that Partial Settlement shall be treated under the Omnibus Agreement as though it were a Partial Settlement in an Individual Plaintiff Action, notwithstanding any contrary provision in the Omnibus Agreement.
|
4.
|
Notwithstanding any contrary provision in the Omnibus Agreement, no Settlement in an Opt-Out Action shall be subject to settlement sharing under Paragraph 2.a of the Omnibus Agreement unless both MasterCard and Visa participate in that Settlement. For the avoidance of doubt, each of the parties hereto that is a party to the Visa JSA agrees that Paragraph 12 of the Visa JSA shall not apply to any Settlement in an Opt-Out Action, regardless of whether that Settlement is subject to settlement sharing under Paragraph 2.a of the Omnibus Agreement.
|
5.
|
The following sentence in Paragraph 4 of the Omnibus Agreement: In the event that any Settling Signatory does not obtain such a Setoff Provision, any such Settling Signatory will continue to have the Judgment-Sharing Payment Obligations (if any) set forth in this Omnibus Agreement as to any claims for which it does not obtain such a Setoff Provision, provided, however, that with respect to a settlement in an Opt-Out Action, and notwithstanding any contrary provision in this Paragraph 4, (i) Visa need not obtain any Setoff Provision beyond that required by the Visa JSA and LSA to satisfy its Judgment-Sharing Payment Obligation under this Omnibus Agreement, (ii) MasterCard need not obtain any Setoff Provision beyond that required by the MasterCard SJSA to satisfy its Judgment-
|
6.
|
In the event (a) that the Definitive Class Settlement Agreement in MDL 1720 (“Class Settlement Agreement”) is terminated pursuant to Paragraphs 96-98 thereof and (b) payments are made pursuant to Paragraph 99(a) of the Class Settlement Agreement, Visa and MasterCard shall make mutually acceptable arrangements so that the Visa Defendants (as defined in the Class Settlement Agreement) shall have received two-thirds and the MasterCard Defendants (as defined in the Class Settlement Agreement) shall have received one-third of the total of (i) the sums paid pursuant to Paragraph 99(a) of the Class Settlement Agreement and (ii) the sums previously paid pursuant to Paragraphs 18-20 of the Class Settlement Agreement.
|
7.
|
To the extent that this Amendment modifies or amends the Visa JSA or the Visa LSA, each of the parties hereto that is a party to the Visa JSA or the Visa LSA consents to such modification or amendment of (a) the Visa JSA pursuant to Paragraphs 17 of the Visa JSA and (b) the Visa LSA pursuant to Section 11(i) of the Visa LSA.
|
8.
|
This Amendment to Omnibus Agreement Regarding Interchange Litigation Judgment Sharing and Settlement Sharing may be executed in multiple counterparts, each of which shall be deemed to be an original, and all such counterparts shall constitute but one instrument.
|
9.
|
This Amendment to Omnibus Agreement Regarding Interchange Litigation Judgment Sharing and Settlement Sharing shall be effective as of the date on which (a) all entities listed on the signature pages hereto have executed it and (b) all entities listed on the signature pages thereto have executed the Amendment to MasterCard Settlement and Judging Sharing Agreement (the “Amendment Effective Date”).
|
10.
|
Each of the undersigned individuals signs on behalf of, and represents and warrants that he or she has the authority and authorization to sign on behalf of and bind, the corporations, banks, companies, or entities identified immediately above his or her signature, and upon the Amendment Effective Date this instrument shall be a valid and binding obligation of each such entity.
|
|
|
Exhibit 10.2
|
1.
|
Each term defined in the Agreement shall have the same meaning when used herein.
|
2.
|
In the event of a Settlement in an Opt-Out Action in which the settling Signatory or Signatories provide no Settlement consideration other than (a) a Monetary Portion or (b) modification of rules as required by any of the terms of Paragraphs 53-65 of the Definitive Class Settlement Agreement in MDL 1720 subject, however, to the terms of the Definitive Class Settlement Agreement and any modifications thereto, that Settlement shall be treated under the Agreement as though it were a Settlement in an Individual Plaintiff Action, notwithstanding any contrary provision in the Agreement.
|
3.
|
For the avoidance of doubt, in the event of a Partial Settlement in an Opt-Out Action in which the settling Signatory or Signatories provide no Settlement consideration other than (a) a Monetary Portion or (b) modification of rules as required by any of the terms of Paragraphs 53-65 of the Definitive Class Settlement Agreement in MDL 1720 subject, however, to the terms of the Definitive Class Settlement Agreement and any modifications thereto, that Partial Settlement shall be treated under the Agreement as though it were a Partial Settlement in an Individual Plaintiff Action, notwithstanding any contrary provision in the Agreement.
|
4.
|
Notwithstanding any contrary provision in the Agreement, a Settlement in an Opt-Out Action that constitutes a Joint Settlement Agreement subject to Paragraph 2.a of the Omnibus Agreement shall be considered a Settlement of All Claims for purposes of Paragraph 3.a of the Agreement.
|
5.
|
This Amendment to the Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, and all such counterparts shall constitute but one instrument.
|
6.
|
This Amendment to the Agreement shall be effective as of the date on which (a) all entities listed on the signature pages hereto have executed it and (b) all entities listed on the signature pages thereto have executed the Amendment to Omnibus Agreement Regarding Interchange Litigation Judgment Sharing and Settlement Sharing (the “Amendment Effective Date”).
|
7.
|
Each of the undersigned individuals signs on behalf of, and represents and warrants that he or she has the authority and authorization to sign on behalf of and bind, the corporations, banks, companies, or entities identified immediately above his or her signature, and upon the Amendment Effective Date this instrument shall be a valid and binding obligation of each such entity.
|
|
Nine Months Ended
|
|
Years Ended December 31,
|
||||||||||||||||||||
|
September 30, 2014
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
||||||||||||
|
(in millions, except ratios)
|
||||||||||||||||||||||
Pre-tax income (loss) before adjustment for non-controlling interests
|
$
|
4,074
|
|
|
$
|
4,502
|
|
|
$
|
3,932
|
|
|
$
|
2,746
|
|
|
$
|
2,757
|
|
|
$
|
2,218
|
|
Loss attributable to non-controlling interests and equity investments
|
18
|
|
|
37
|
|
|
25
|
|
|
18
|
|
|
1
|
|
|
3
|
|
||||||
Add: Fixed charges
|
34
|
|
|
20
|
|
|
25
|
|
|
29
|
|
|
56
|
|
|
120
|
|
||||||
Earnings (loss)
|
$
|
4,126
|
|
|
$
|
4,559
|
|
|
$
|
3,982
|
|
|
$
|
2,793
|
|
|
$
|
2,814
|
|
|
$
|
2,341
|
|
Fixed charges:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense
|
$
|
32
|
|
|
$
|
14
|
|
|
$
|
20
|
|
|
$
|
25
|
|
|
$
|
52
|
|
|
$
|
115
|
|
Portion of rental expense under operating leases deemed to be the equivalent of interest
1
|
2
|
|
|
6
|
|
|
5
|
|
|
4
|
|
|
4
|
|
|
5
|
|
||||||
Total fixed charges
|
$
|
34
|
|
|
$
|
20
|
|
|
$
|
25
|
|
|
$
|
29
|
|
|
$
|
56
|
|
|
$
|
120
|
|
Ratio of earnings to fixed charges
|
121.4
|
|
|
228.0
|
|
|
159.3
|
|
|
96.3
|
|
|
50.3
|
|
|
19.5
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
Date:
|
October 30, 2014
|
|
|
|
|
By:
|
/s/ Ajay Banga
|
|
|
Ajay Banga
|
|
|
President and Chief Executive Officer
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
Date:
|
October 30, 2014
|
|
|
|
|
By:
|
/s/ Martina Hund-Mejean
|
|
|
Martina Hund-Mejean
|
|
|
Chief Financial Officer
|
|
October 30, 2014
|
|
/s/ Ajay Banga
|
Ajay Banga
|
President and Chief Executive Officer
|
|
October 30, 2014
|
|
/s/ Martina Hund-Mejean
|
Martina Hund-Mejean
|
Chief Financial Officer
|