Company Quick10K Filing
Quick10K
Mastercard
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$245.31 1,021 $250,560
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-30 Earnings, Exhibits
8-K 2019-06-25 Shareholder Vote, Other Events
8-K 2019-05-28 Other Events, Exhibits
8-K 2019-04-30 Earnings, Exhibits
8-K 2019-02-13 Officers, Exhibits
8-K 2019-01-31 Earnings, Exhibits
8-K 2018-12-04 Regulation FD, Exhibits
8-K 2018-12-01 Officers, Exhibits
8-K 2018-11-15 Enter Agreement
8-K 2018-10-30 Earnings, Exhibits
8-K 2018-09-17 Enter Agreement, Exhibits
8-K 2018-07-26 Earnings, Exhibits
8-K 2018-06-28 Regulation FD
8-K 2018-06-26 Shareholder Vote, Other Events
8-K 2018-04-05 Officers, Exhibits
8-K 2018-04-02 Officers, Exhibits
8-K 2018-02-21 Other Events, Exhibits
8-K 2018-02-01 Earnings, Exhibits
VIA Viacom 13,660
NSP Insperity 4,830
GWB Great Western Bancorp 2,010
MIK Michaels Companies 1,890
JOE St Joe 1,030
NCMI National Cinemedia 603
TESS Tessco Technologies 155
CDTX Cidara Therapeutics 57
HGSH China Hgs Real Estate 45
RSSV Resort Savers 0
MA 2019-06-30
Part I - Financial Information
Item 1. Consolidated Financial Statements (Unaudited)
Note 1. Summary of Significant Accounting Policies
Note 2. Acquisitions
Note 3. Revenue
Note 4. Earnings per Share
Note 5. Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
Note 6. Fair Value and Investment Securities
Note 7. Prepaid Expenses and Other Assets
Note 8. Property, Equipment and Right-Of-Use Assets
Note 9. Accrued Expenses and Accrued Litigation
Note 10. Debt
Note 11. Stockholders' Equity
Note 12. Accumulated Other Comprehensive Income (Loss)
Note 13. Share-Based Payments
Note 14. Income Taxes
Note 15. Legal and Regulatory Proceedings
Note 16. Settlement and Other Risk Management
Note 17. Foreign Exchange Risk Management
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 5. Other Information
Item 6. Exhibits
EX-10.1 exb101-06302019.htm
EX-10.2 exb102-06302019.htm
EX-10.3 exb103-06302019.htm
EX-10.4 exb104-06302019.htm
EX-31.1 exb311-06302019.htm
EX-31.2 exb312-06302019.htm
EX-32.1 exb321-06302019.htm
EX-32.2 exb322-06302019.htm
EX-99.1 exb991-06302019.htm

Mastercard Earnings 2019-06-30

MA 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
Or 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number: 001-32877
 
malogo.jpg
 
Mastercard Incorporated
(Exact name of registrant as specified in its charter)
 
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)
 
(914) 249-2000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange of which registered
Class A Common Stock
 
MA
 
New York Stock Exchange
1.100% Notes due 2022
 
MA22
 
New York Stock Exchange
2.100% Notes due 2027
 
MA27
 
New York Stock Exchange
2.500% Notes due 2030
 
MA30
 
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  


Table of Contents

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer
 
  
Accelerated filer
 
  
 
 
 
 
 
Non-accelerated filer
 
  
Smaller reporting company
 
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 
 
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes      No  
As of July 25, 2019, there were 1,003,110,553 shares outstanding of the registrant’s Class A common stock, par value $0.0001 per share; and 11,448,914 shares outstanding of the registrant’s Class B common stock, par value $0.0001 per share.
 



MASTERCARD INCORPORATED
FORM 10-Q

TABLE OF CONTENTS
 
 
Page
 
 
 
 
 
 
 
 
 
 



3

Table of Contents

In this Report on Form 10-Q (“Report”), references to the “Company,” “Mastercard,” “we,” “us” or “our” refer to the business conducted by Mastercard Incorporated and its consolidated subsidiaries, including our operating subsidiary, Mastercard International Incorporated, and to the Mastercard brand.
Forward-Looking Statements
This Report contains forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts may be forward-looking statements. When used in this Report, the words “believe”, “expect”, “could”, “may”, “would”, “will”, “trend” and similar words are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements that relate to the Company’s future prospects, developments and business strategies.
Many factors and uncertainties relating to our operations and business environment, all of which are difficult to predict and many of which are outside of our control, influence whether any forward-looking statements can or will be achieved. Any one of those factors could cause our actual results to differ materially from those expressed or implied in writing in any forward-looking statements made by Mastercard or on its behalf, including, but not limited to, the following factors:
regulation directly related to the payments industry (including regulatory, legislative and litigation activity with respect to interchange rates, surcharging and the extension of current regulatory activity to additional jurisdictions or products)
the impact of preferential or protective government actions
regulation of privacy, data protection, security and the digital economy
regulation that directly or indirectly applies to us based on our participation in the global payments industry (including anti-money laundering, counter terrorist financing, economic sanctions and anti-corruption; account-based payment systems; issuer practice regulation; and regulation of internet and digital transactions)
the impact of changes in tax laws, as well as regulations and interpretations of such laws or challenges to our tax positions
potential or incurred liability and limitations on business related to any litigation or litigation settlements
the impact of competition in the global payments industry (including disintermediation and pricing pressure)
the challenges relating to rapid technological developments and changes
the challenges relating to operating real-time account-based payment system and to working with new customers and end users
the impact of information security incidents, account data breaches, fraudulent activity or service disruptions
issues related to our relationships with our financial institution customers (including loss of substantial business from significant customers, competitor relationships with our customers and banking industry consolidation)
the impact of our relationships with other stakeholders, including merchants and governments
exposure to loss or illiquidity due to our role as guarantor, as well as other contractual obligations
the impact of global economic, political, financial and societal events and conditions
reputational impact, including impact related to brand perception
the inability to attract, hire and retain a highly qualified and diverse workforce, or maintain our corporate culture
issues related to acquisition integration, strategic investments and entry into new businesses
issues related to our Class A common stock and corporate governance structure
Please see a complete discussion of these risk factors in Part I, Item 1A - Risk Factors of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. We caution you that the important factors referenced above may not contain all of the factors that are important to you. Our forward-looking statements speak only as of the date of this Report or as of the date they are made, and we undertake no obligation to update our forward-looking statements.


4

Table of Contents

PART I — FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MASTERCARD INCORPORATED
CONSOLIDATED BALANCE SHEET
(UNAUDITED) 
 
June 30, 2019
 
December 31, 2018
 
(in millions, except per share data)
ASSETS
 
 
 
Cash and cash equivalents
$
5,691

 
$
6,682

Restricted cash for litigation settlement
662

 
553

Investments
809

 
1,696

Accounts receivable
2,607

 
2,276

Settlement due from customers
1,549

 
2,452

Restricted security deposits held for customers
1,061

 
1,080

Prepaid expenses and other current assets
1,786

 
1,432

Total Current Assets
14,165

 
16,171

Property, equipment and right-of-use assets, net of accumulated depreciation of $970 and $847, respectively
1,348

 
921

Deferred income taxes
478

 
570

Goodwill
3,524

 
2,904

Other intangible assets, net of accumulated amortization of $1,250 and $1,175, respectively
1,232

 
991

Other assets
3,984

 
3,303

Total Assets
$
24,731

 
$
24,860

LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY
 
 
 
Accounts payable
$
432

 
$
537

Settlement due to customers
1,330

 
2,189

Restricted security deposits held for customers
1,061

 
1,080

Accrued litigation
935

 
1,591

Accrued expenses
4,752

 
4,747

Current portion of long-term debt

 
500

Other current liabilities
987

 
949

Total Current Liabilities
9,497

 
11,593

Long-term debt
7,806

 
5,834

Deferred income taxes
95

 
67

Other liabilities
2,224

 
1,877

Total Liabilities
19,622

 
19,371

 
 
 
 
Commitments and Contingencies

 

 
 
 
 
Redeemable Non-controlling Interests
74

 
71

 
 
 
 
Stockholders’ Equity

 

Class A common stock, $0.0001 par value; authorized 3,000 shares, 1,389 and 1,387 shares issued and 1,005 and 1,019 outstanding, respectively

 

Class B common stock, $0.0001 par value; authorized 1,200 shares, 11 and 12 issued and outstanding, respectively

 

Additional paid-in-capital
4,675

 
4,580

Class A treasury stock, at cost, 385 and 368 shares, respectively
(29,454
)
 
(25,750
)
Retained earnings
30,517

 
27,283

Accumulated other comprehensive income (loss)
(730
)
 
(718
)
Total Stockholders’ Equity
5,008

 
5,395

Non-controlling interests
27

 
23

Total Equity
5,035

 
5,418

Total Liabilities, Redeemable Non-controlling Interests and Equity
$
24,731

 
$
24,860

The accompanying notes are an integral part of these consolidated financial statements.


5

Table of Contents

MASTERCARD INCORPORATED
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)


 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions, except per share data)
Net Revenue
$
4,113

 
$
3,665

 
$
8,002

 
$
7,245

Operating Expenses
 
 
 
 
 
 
 
General and administrative
1,369

 
1,184

 
2,736

 
2,505

Advertising and marketing
225

 
205

 
417

 
402

Depreciation and amortization
122

 
115

 
239

 
235

Provision for litigation

 
225

 

 
342

Total operating expenses
1,716

 
1,729

 
3,392

 
3,484

Operating income
2,397

 
1,936

 
4,610

 
3,761

Other Income (Expense)
 
 
 
 
 
 
 
Investment income
24

 
31

 
51

 
48

Gains (losses) on equity investments, net
143

 

 
148

 

Interest expense
(51
)
 
(48
)
 
(97
)
 
(91
)
Other income (expense), net
6

 
3

 
10

 
7

Total other income (expense)
122

 
(14
)
 
112

 
(36
)
Income before income taxes
2,519

 
1,922

 
4,722

 
3,725

Income tax expense
471

 
353

 
812

 
664

Net Income
$
2,048

 
$
1,569

 
$
3,910

 
$
3,061

 
 
 
 
 
 
 
 
Basic Earnings per Share
$
2.01

 
$
1.50

 
$
3.82

 
$
2.92

Basic weighted-average shares outstanding
1,020

 
1,043

 
1,023

 
1,047

Diluted Earnings per Share
$
2.00

 
$
1.50

 
$
3.80

 
$
2.91

Diluted weighted-average shares outstanding
1,025

 
1,049

 
1,028

 
1,053


The accompanying notes are an integral part of these consolidated financial statements.


6

Table of Contents

MASTERCARD INCORPORATED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions)
Net Income
$
2,048

 
$
1,569

 
$
3,910

 
$
3,061

Other comprehensive income (loss):
 
 
 
 
 
 
 
Foreign currency translation adjustments
(34
)
 
(352
)
 
(23
)
 
(191
)
Income tax effect

 
7

 
3

 
5

Foreign currency translation adjustments, net of income tax effect
(34
)
 
(345
)
 
(20
)
 
(186
)
 
 
 
 
 
 
 
 
Translation adjustments on net investment hedge
(28
)
 
113

 
8

 
68

Income tax effect
6

 
(27
)
 
(2
)
 
(15
)
Translation adjustments on net investment hedge, net of income tax effect
(22
)
 
86

 
6

 
53

 
 
 
 
 
 
 
 
Defined benefit pension and other postretirement plans
(1
)
 

 
(1
)
 
(1
)
Income tax effect

 

 

 

Defined benefit pension and other postretirement plans, net of income tax effect
(1
)
 

 
(1
)
 
(1
)
 
 
 
 
 
 
 
 
Investment securities available-for-sale

 

 
4

 
(1
)
Income tax effect

 

 
(1
)
 

Investment securities available-for-sale, net of income tax effect

 

 
3

 
(1
)
 
 
 
 
 
 
 
 
Other comprehensive income (loss), net of tax
(57
)
 
(259
)
 
(12
)
 
(135
)
Comprehensive Income
$
1,991

 
$
1,310

 
$
3,898

 
$
2,926


The accompanying notes are an integral part of these consolidated financial statements.



7

Table of Contents

MASTERCARD INCORPORATED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED)
 
Stockholders’ Equity
 
 
 
 
 
Common Stock
 
Additional
Paid-In
Capital
 
Class A
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Non-
Controlling
Interests
 
Total Equity
 
Class A
 
Class B
 
 
 
 
(in millions, except per share data)
Balance at December 31, 2018
$

 
$

 
$
4,580

 
$
(25,750
)
 
$
27,283

 
$
(718
)
 
$
23

 
$
5,418

Net income

 

 

 

 
1,862

 

 

 
1,862

Activity from non-controlling interests

 

 

 

 

 

 
(1
)
 
(1
)
Other comprehensive income, net of tax

 

 

 

 

 
45

 

 
45

Cash dividends declared on Class A and Class B common stock, $0.33 per share

 

 

 

 
(339
)
 

 

 
(339
)
Purchases of treasury stock

 

 

 
(1,790
)
 

 

 

 
(1,790
)
Share-based payments

 

 
(11
)
 
6

 

 

 

 
(5
)
Balance at March 31, 2019

 

 
4,569

 
(27,534
)
 
28,806

 
(673
)
 
22

 
5,190

Net income

 

 

 

 
2,048

 

 

 
2,048

Activity from non-controlling interests

 

 

 

 

 

 
5

 
5

Other comprehensive income, net of tax

 

 

 

 

 
(57
)
 

 
(57
)
Cash dividends declared on Class A and Class B common stock, $0.33 per share

 

 

 

 
(337
)
 

 

 
(337
)
Purchases of treasury stock

 

 

 
(1,920
)
 

 

 

 
(1,920
)
Share-based payments

 

 
106

 

 

 

 

 
106

Balance at June 30, 2019
$

 
$

 
$
4,675

 
$
(29,454
)
 
$
30,517

 
$
(730
)
 
$
27

 
$
5,035


The accompanying notes are an integral part of these consolidated financial statements.


8

Table of Contents

MASTERCARD INCORPORATED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY - (Continued)
(UNAUDITED)
 
Stockholders’ Equity
 
 
 
 
 
Common Stock
 
Additional
Paid-In
Capital
 
Class A
Treasury
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Non-
Controlling
Interests
 
Total Equity
 
Class A
 
Class B
 
 
 
 
(in millions, except per share data)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017
$

 
$

 
$
4,365

 
$
(20,764
)
 
$
22,364

 
$
(497
)
 
$
29

 
$
5,497

Adoption of revenue standard

 

 

 

 
366

 

 

 
366

Adoption of intra-entity asset transfers standard

 

 

 

 
(183
)
 

 

 
(183
)
Net income

 

 

 

 
1,492

 

 

 
1,492

Activity related to non-controlling interests

 

 

 

 

 

 
(1
)
 
(1
)
Other comprehensive income, net of tax

 

 

 

 

 
124

 

 
124

Cash dividends declared on Class A and Class B common stock, $0.25 per share

 

 

 

 
(262
)
 

 

 
(262
)
Purchases of treasury stock

 

 

 
(1,383
)
 

 

 

 
(1,383
)
Share-based payments

 

 
2

 
4

 

 

 

 
6

Balance at March 31, 2018

 

 
4,367

 
(22,143
)
 
23,777

 
(373
)
 
28

 
5,656

Net income

 

 

 

 
1,569

 

 

 
1,569

Activity from non-controlling interests

 

 

 

 

 

 
(6
)
 
(6
)
Other comprehensive income, net of tax

 

 

 

 

 
(259
)
 

 
(259
)
Cash dividends declared on Class A and Class B common stock, $0.25 per share

 

 

 

 
(260
)
 

 

 
(260
)
Purchases of treasury stock

 

 

 
(1,507
)
 

 

 

 
(1,507
)
Share-based payments

 

 
86

 

 

 

 

 
86

Balance at June 30, 2018
$

 
$

 
$
4,453

 
$
(23,650
)
 
$
25,086

 
$
(632
)
 
$
22

 
$
5,279


The accompanying notes are an integral part of these consolidated financial statements.


9

Table of Contents

MASTERCARD INCORPORATED
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
 
Six Months Ended June 30,
 
2019
 
2018
 
(in millions)
Operating Activities
 
 
 
Net income
$
3,910

 
$
3,061

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Amortization of customer and merchant incentives
623

 
578

Depreciation and amortization
239

 
235

(Gains) losses on equity investments, net
(148
)
 

Share-based compensation
130

 
98

Deferred income taxes
65

 
(107
)
Other
12

 
5

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(327
)
 
(195
)
Settlement due from customers
903

 
(158
)
Prepaid expenses
(1,015
)
 
(843
)
Accrued litigation and legal settlements
(641
)
 
231

Restricted security deposits held for customers
(19
)
 
(93
)
Accounts payable
(105
)
 
(86
)
Settlement due to customers
(858
)
 
(109
)
Accrued expenses
(13
)
 
81

Net change in other assets and liabilities
92

 
(174
)
Net cash provided by operating activities
2,848

 
2,524

Investing Activities
 
 
 
Purchases of investment securities available-for-sale
(386
)
 
(705
)
Purchases of investments held-to-maturity
(124
)
 
(242
)
Proceeds from sales of investment securities available-for-sale
935

 
412

Proceeds from maturities of investment securities available-for-sale
219

 
171

Proceeds from maturities of investments held-to-maturity
237

 
646

Purchases of property and equipment
(174
)
 
(172
)
Capitalized software
(150
)
 
(79
)
Purchases of equity investments
(386
)
 
(21
)
Acquisition of businesses, net of cash acquired
(723
)
 

Other investing activities
(2
)
 
(16
)
Net cash used in investing activities
(554
)
 
(6
)
Financing Activities
 
 
 
Purchases of treasury stock
(3,741
)
 
(2,881
)
Dividends paid
(677
)
 
(525
)
Proceeds from debt
1,980

 
991

Payment of debt
(500
)
 

Contingent consideration paid
(199
)
 

Tax withholdings related to share-based payments
(120
)
 
(73
)
Cash proceeds from exercise of stock options
91

 
67

Other financing activities
6

 
5

Net cash used in financing activities
(3,160
)
 
(2,416
)
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents
(26
)
 
74

Net (decrease) increase in cash, cash equivalents, restricted cash and restricted cash equivalents
(892
)
 
176

Cash, cash equivalents, restricted cash and restricted cash equivalents - beginning of period
8,337

 
7,592

Cash, cash equivalents, restricted cash and restricted cash equivalents - end of period
$
7,445

 
$
7,768

The accompanying notes are an integral part of these consolidated financial statements.


10

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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Note 1. Summary of Significant Accounting Policies
Organization
Mastercard Incorporated and its consolidated subsidiaries, including Mastercard International Incorporated (“Mastercard International” and together with Mastercard Incorporated, “Mastercard” or the “Company”), is a technology company in the global payments industry that connects consumers, financial institutions, merchants, governments, digital partners, businesses and other organizations worldwide, enabling them to use electronic forms of payment instead of cash and checks.
Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Mastercard and its majority-owned and controlled entities, including any variable interest entities (“VIEs”) for which the Company is the primary beneficiary. At June 30, 2019 and December 31, 2018, there were no significant VIEs which required consolidation. The Company consolidates acquisitions as of the date in which the Company has obtained a controlling financial interest. Intercompany transactions and balances have been eliminated in consolidation. Certain prior period amounts have been reclassified to conform to the 2019 presentation. The Company follows accounting principles generally accepted in the United States of America (“GAAP”).
The balance sheet as of December 31, 2018 was derived from the audited consolidated financial statements as of December 31, 2018. The consolidated financial statements for the three and six months ended June 30, 2019 and 2018 and as of June 30, 2019 are unaudited, and in the opinion of management, include all normal recurring adjustments that are necessary to present fairly the results for interim periods. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the full year.
The accompanying unaudited consolidated financial statements are presented in accordance with the U.S. Securities and Exchange Commission (“SEC”) requirements for Quarterly Reports on Form 10-Q. Reference should be made to the Mastercard Incorporated Annual Report on Form 10-K for the year ended December 31, 2018 for additional disclosures, including a summary of the Company’s significant accounting policies.
Non-controlling interest amounts are included in the consolidated statement of operations within other income (expense). For the three and six months ended June 30, 2019 and 2018, activity from non-controlling interests was not material to the respective period results.
Recently adopted accounting pronouncements
Comprehensive income - In February 2018, the Financial Accounting Standards Board (the “FASB”) issued accounting guidance that allows for a one-time reclassification from accumulated other comprehensive income (loss) to retained earnings for stranded tax effects resulting from U.S. tax reform. The Company adopted this guidance effective January 1, 2019, electing to retain the stranded tax effects in accumulated other comprehensive income (loss). The adoption did not result in a material impact on the Company’s consolidated financial statements.
Leases - In February 2016, the FASB issued accounting guidance that changed how companies account for and present lease arrangements. This guidance requires companies to recognize lease assets and liabilities for both financing and operating leases on the consolidated balance sheet. The Company adopted this guidance effective January 1, 2019, under the modified retrospective transition method with the available practical expedients.


11

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MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


The following table summarizes the impact of the changes made to the January 1, 2019 consolidated balance sheet for the adoption of the new accounting standard pertaining to leases. The prior periods have not been restated and have been reported under the accounting standard in effect for those periods.
 
Balance at December 31, 2018
 
Impact of lease standard
 
Balance at
January 1, 2019
 
(in millions)
Assets
 
 
 
 
 
Property, equipment and right-of-use assets, net
$
921

 
$
375

 
$
1,296

Liabilities
 
 
 
 
 
Other current liabilities
949

 
72

 
1,021

Other liabilities
1,877

 
303

 
2,180


For a more detailed discussion on lease arrangements, refer to Note 8 (Property, Equipment and Right-of-Use Assets).
Recent accounting pronouncements not yet adopted
Implementation costs incurred in a hosting arrangement that is a service contract - In August 2018, the FASB issued accounting guidance which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for periods beginning after December 15, 2019. Companies are required to adopt this guidance either retrospectively or by prospectively applying the guidance to all implementation costs incurred after the date of adoption. The Company expects to adopt this guidance effective January 1, 2020 by applying the prospective approach as of the date of adoption and is in the process of evaluating the potential effects this guidance will have on its consolidated financial statements and, at this time, does not expect the impacts to be material.
Disclosure requirements for fair value measurement - In August 2018, the FASB issued accounting guidance which modifies disclosure requirements for fair value measurements by removing, modifying and adding certain disclosures. This guidance is effective for periods beginning after December 15, 2019. Companies are required to adopt the guidance for certain added disclosures prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption and all other amendments retrospectively to all periods presented upon their effective date. The Company expects to adopt this guidance effective January 1, 2020 and does not expect the impacts to be material.
Note 2. Acquisitions
During the six months ended June 30, 2019, the Company entered into commitments to acquire businesses for total consideration of $1.2 billion, primarily in cash, all of which have closed as of the filing date of this Report. These acquisitions are expected to complement the Company’s current suite of products and technologies and support the execution of its strategy. Refer to Note 1 (Summary of Significant Accounting Policies) to the consolidated financial statements included in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, for the valuation techniques Mastercard utilizes to fair value the respective components of business combinations. The residual value allocated to goodwill is primarily attributable to the synergies expected to arise after the acquisition date and is not expected to be deductible for local tax purposes.


12

Table of Contents
MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


During the six months ended June 30, 2019, the Company acquired several businesses for total consideration of $784 million. The Company is evaluating and finalizing the purchase accounting. The preliminary estimated fair values of the purchase price allocations in aggregate, as of the acquisition dates, are noted below:
 
(in millions)
Assets:
 
Cash and cash equivalents
$
10

Other current assets
16

Other intangible assets
213

Goodwill
619

Other assets
12

Total assets
870

 
 
Liabilities:
 
Other current liabilities
11

Deferred income taxes
52

Other liabilities
23

Total liabilities
86

 
 
Net assets acquired
$
784


The following table summarizes the identified intangible assets acquired:
 
Acquisition Date
Fair Value
 
Weighted-Average Useful Life
 
(in millions)
 
(in years)
Developed technologies
$
127

 
8.6
Customer relationships
80

 
13.3
Other
6

 
1.7
Other intangible assets
$
213

 
10.2

Pro forma information related to the acquisitions was not included because the impact on the Company’s consolidated results of operations was not considered to be material.


13

Table of Contents
MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


Note 3. Revenue
The Company’s disaggregated net revenue by source and geographic region were as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions)
Revenue by source:
 
 
 
 
 
 
 
Domestic assessments
$
1,680

 
$
1,537

 
$
3,285

 
$
2,995

Cross-border volume fees
1,374

 
1,198

 
2,637

 
2,355

Transaction processing
2,053

 
1,830

 
3,975

 
3,537

Other revenues
962

 
785

 
1,804

 
1,533

Gross revenue
6,069

 
5,350

 
11,701

 
10,420

Rebates and incentives (contra-revenue)
(1,956
)
 
(1,685
)
 
(3,699
)
 
(3,175
)
Net revenue
$
4,113

 
$
3,665

 
$
8,002

 
$
7,245

 
 
 
 
 
 
 
 
Net revenue by geographic region:
 
 
 
 
 
 
 
North American Markets
$
1,430

 
$
1,334

 
$
2,777

 
$
2,581

International Markets
2,629

 
2,288

 
5,135

 
4,590

Other 1
54

 
43

 
90

 
74

Net revenue
$
4,113

 
$
3,665

 
$
8,002

 
$
7,245

1 Includes revenues managed by corporate functions.
Receivables from contracts with customers of $2.5 billion and $2.1 billion as of June 30, 2019 and December 31, 2018, respectively, are recorded within accounts receivable on the consolidated balance sheet. The Company’s customers are billed quarterly or more frequently dependent upon the nature of the performance obligation and the underlying contractual terms. The Company does not typically offer extended payment terms to customers.
Contract assets are included in prepaid expenses and other current assets and other assets on the consolidated balance sheet at June 30, 2019 in the amounts of $51 million and $115 million, respectively. The comparable amounts included in prepaid expenses and other current assets and other assets at December 31, 2018 were $40 million and $92 million, respectively.
Deferred revenue is included in other current liabilities and other liabilities on the consolidated balance sheet at June 30, 2019 in the amounts of $344 million and $104 million, respectively. The comparable amounts included in other current liabilities and other liabilities at December 31, 2018 were $218 million and $101 million, respectively. Revenue recognized from performance obligations satisfied during the three and six months ended June 30, 2019 and 2018 was $182 million and $367 million and $207 million and $368 million, respectively.


14

Table of Contents
MASTERCARD INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) – (Continued)


Note 4. Earnings Per Share
The components of basic and diluted earnings per share (“EPS”) for common shares were as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions, except per share data)
Numerator
 
 
 
 
 
 
 
Net income
$
2,048

 
$
1,569

 
$
3,910

 
$
3,061

Denominator
 
 
 
 
 
 
 
Basic weighted-average shares outstanding
1,020

 
1,043