MASTERCARD INC, 10-Q filed on 10/30/2018
Quarterly Report
v3.10.0.1
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2018
Oct. 25, 2018
Entity Registrant Name MASTERCARD INC  
Trading Symbol MA  
Entity Central Index Key 0001141391  
Current Fiscal Year End Date --12-31  
Entity Filer Category Large Accelerated Filer  
Document Type 10-Q  
Document Period End Date Sep. 30, 2018  
Document Fiscal Year Focus 2018  
Document Fiscal Period Focus Q3  
Amendment Flag false  
Entity Small Business false  
Entity Emerging Growth Company false  
Class A Common Stock    
Entity Common Stock, Shares Outstanding   1,020,931,497
Class B Common Stock    
Entity Common Stock, Shares Outstanding   11,862,884
v3.10.0.1
Consolidated Balance Sheet - USD ($)
$ in Millions
Sep. 30, 2018
Dec. 31, 2017
ASSETS    
Cash and cash equivalents $ 6,871 $ 5,933
Restricted cash for litigation settlement 550 546
Investments 1,622 1,849
Accounts receivable 2,277 1,969
Settlement due from customers 1,335 1,375
Restricted security deposits held for customers 1,034 1,085
Prepaid expenses and other current assets 1,375 1,040
Total Current Assets 15,064 13,797
Property, plant and equipment, net of accumulated depreciation of $813 and $714, respectively 876 829
Deferred income taxes 502 250
Goodwill 2,950 3,035
Other intangible assets, net of accumulated amortization of $1,198 and $1,157, respectively 1,023 1,120
Other assets 2,925 2,298
Total Assets 23,340 21,329
LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS AND EQUITY    
Accounts payable 382 933
Settlement due to customers 1,155 1,343
Restricted security deposits held for customers 1,034 1,085
Accrued litigation 920 709
Accrued expenses 4,745 3,931
Current portion of long-term debt 500 0
Other current liabilities 973 792
Total Current Liabilities 9,709 8,793
Long-term debt 5,858 5,424
Deferred income taxes 50 106
Other liabilities 1,856 1,438
Total Liabilities 17,473 15,761
Commitments and Contingencies
Redeemable Non-controlling Interests 71 71
Stockholders’ Equity    
Additional paid-in-capital 4,526 4,365
Class A treasury stock, at cost, 364 and 342 shares, respectively (24,807) (20,764)
Retained earnings 26,726 22,364
Accumulated other comprehensive income (loss) (670) (497)
Total Stockholders’ Equity 5,775 5,468
Non-controlling interests 21 29
Total Equity 5,796 5,497
Total Liabilities, Redeemable Non-controlling Interests and Equity 23,340 21,329
Class A Common Stock    
Stockholders’ Equity    
Common stock 0 0
Total Equity 0 0
Class B Common Stock    
Stockholders’ Equity    
Common stock 0 0
Total Equity $ 0 $ 0
v3.10.0.1
Consolidated Balance Sheet (Parenthetical) - USD ($)
$ in Millions
Sep. 30, 2018
Dec. 31, 2017
Property, plant and equipment, accumulated depreciation $ 813 $ 714
Other intangible assets, accumulated amortization $ 1,198 $ 1,157
Class A treasury stock, shares 364,000,000 342,000,000
Class A Common Stock    
Common stock, par value $ 0.0001 $ 0.0001
Common stock, authorized 3,000,000,000 3,000,000,000
Common stock, issued 1,386,000,000 1,382,000,000
Common stock, outstanding 1,023,000,000 1,040,000,000
Class B Common Stock    
Common stock, par value $ 0.0001 $ 0.0001
Common stock, authorized 1,200,000,000 1,200,000,000
Common stock, issued 12,000,000 14,000,000
Common stock, outstanding 12,000,000 14,000,000
v3.10.0.1
Consolidated Statement of Operations - USD ($)
shares in Millions, $ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Income Statement [Abstract]        
Net Revenue $ 3,898 $ 3,398 $ 11,143 $ 9,185
Operating Expenses        
General and administrative 1,236 1,136 3,684 3,162
Advertising and marketing 235 203 694 587
Depreciation and amortization 111 118 346 321
Provision for litigation settlements 29 0 371 15
Total operating expenses 1,611 1,457 5,095 4,085
Operating income 2,287 1,941 6,048 5,100
Other Income (Expense)        
Investment income 31 15 79 44
Interest expense (48) (35) (139) (113)
Other income (expense), net (6) 11 1 7
Total other income (expense) (23) (9) (59) (62)
Income before income taxes 2,264 1,932 5,989 5,038
Income tax expense 365 502 1,029 1,350
Net Income $ 1,899 $ 1,430 $ 4,960 $ 3,688
Basic Earnings per Share $ 1.83 $ 1.34 $ 4.75 $ 3.45
Basic Weighted-Average Shares Outstanding 1,037 1,063 1,044 1,071
Diluted Earnings per Share $ 1.82 $ 1.34 $ 4.73 $ 3.43
Diluted Weighted-Average Shares Outstanding 1,043 1,068 1,050 1,075
v3.10.0.1
Consolidated Statement of Comprehensive Income - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Sep. 30, 2018
Sep. 30, 2017
Statement of Comprehensive Income [Abstract]        
Net Income $ 1,899 $ 1,430 $ 4,960 $ 3,688
Other comprehensive income (loss):        
Foreign currency translation adjustments (42) 199 (233) 515
Income tax effect 4 (1) 9 0
Foreign currency translation adjustments, net of income tax effect (38) 198 (224) 515
Translation adjustments on net investment hedge 2 (65) 70 (207)
Income tax effect (1) 23 (16) 75
Translation adjustments on net investment hedge, net of income tax effect 1 (42) 54 (132)
Defined benefit pension and other postretirement plans 0 0 (1) (2)
Income tax effect 0 0 0 1
Defined benefit pension and other postretirement plans, net of income tax effect 0 0 (1) (1)
Investment securities available-for-sale (1) 1 (2) (1)
Income tax effect 0 0 0 1
Investment securities available-for-sale, net of income tax effect (1) 1 (2) 0
Other comprehensive income (loss), net of tax (38) 157 (173) 382
Comprehensive Income $ 1,861 $ 1,587 $ 4,787 $ 4,070
v3.10.0.1
Consolidated Statement of Changes in Equity - USD ($)
$ in Millions
Total
Class A Common Stock
Class B Common Stock
Additional Paid-In Capital
Class A Treasury Stock
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Non- Controlling Interests
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Adoption of new accounting principle | Adoption of revenue standard $ 366         $ 366    
Adoption of new accounting principle | Adoption of intra-entity asset transfers standard (183)         (183)    
Balance at Dec. 31, 2017 5,497 $ 0 $ 0 $ 4,365 $ (20,764) 22,364 $ (497) $ 29
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net income 4,960         4,960    
Activity related to non-controlling interests (8)             (8)
Other comprehensive income (loss), net of tax (173)           (173)  
Cash dividends declared on Class A and Class B common stock, $0.75 per share (781)         (781)    
Purchases of treasury stock (4,048)     0 (4,048)      
Share-based payments 166     161 5      
Balance at Sep. 30, 2018 $ 5,796 $ 0 $ 0 $ 4,526 $ (24,807) $ 26,726 $ (670) $ 21
v3.10.0.1
Consolidated Statement of Changes in Equity (Parenthetical)
9 Months Ended
Sep. 30, 2018
$ / shares
Statement of Stockholders' Equity [Abstract]  
Cash dividends declared on Class A and Class B common stock, per share $ 0.75
v3.10.0.1
Consolidated Statement of Cash Flows - USD ($)
$ in Millions
9 Months Ended
Sep. 30, 2018
Sep. 30, 2017
Operating Activities    
Net income $ 4,960 $ 3,688
Adjustments to reconcile net income to net cash provided by operating activities:    
Amortization of customer and merchant incentives 885 761
Depreciation and amortization 346 321
Share-based compensation 153 137
Deferred income taxes (209) (56)
Other 11 22
Changes in operating assets and liabilities:    
Accounts receivable (317) (321)
Settlement due from customers 39 (105)
Prepaid expenses (1,174) (1,286)
Accrued litigation and legal settlements 202 (12)
Restricted security deposits held for customers (51) 35
Accounts payable (44) 85
Settlement due to customers (186) 54
Accrued expenses 461 380
Net change in other assets and liabilities (185) 138
Net cash provided by operating activities 4,891 3,841
Investing Activities    
Purchases of investment securities available-for-sale (953) (531)
Purchases of investments held-to-maturity (400) (925)
Proceeds from sales of investment securities available-for-sale 491 153
Proceeds from maturities of investment securities available-for-sale 291 371
Proceeds from maturities of investments held-to-maturity 762 872
Purchases of property, plant and equipment (255) (214)
Capitalized software (126) (87)
Acquisition of businesses, net of cash acquired 0 (1,175)
Investment in nonmarketable equity investments (32) (128)
Other investing activities (15) 41
Net cash used in investing activities (237) (1,623)
Financing Activities    
Purchases of treasury stock (4,045) (2,731)
Dividends paid (785) (709)
Proceeds from debt 991 0
Payment of debt 0 (64)
Tax withholdings related to share-based payments (79) (46)
Cash proceeds from exercise of stock options 92 48
Other financing activities (7) 8
Net cash used in financing activities (3,833) (3,494)
Effect of exchange rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents 65 194
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents 886 (1,082)
Cash, cash equivalents, restricted cash and restricted cash equivalents - beginning of period 7,592 8,273
Cash, cash equivalents, restricted cash and restricted cash equivalents - end of period $ 8,478 $ 7,191
v3.10.0.1
Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
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 September 30, 2018 and December 31, 2017, 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 2018 presentation. The Company follows accounting principles generally accepted in the United States of America (“GAAP”).
The balance sheet as of December 31, 2017 was derived from the audited consolidated financial statements as of December 31, 2017. The consolidated financial statements for the three and nine months ended September 30, 2018 and 2017 and as of September 30, 2018 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 nine months ended September 30, 2018 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, 2017 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 nine months ended September 30, 2018 and 2017, activity from non-controlling interests was not material to the respective period results.
Recent Accounting Pronouncements
Implementation costs incurred in a hosting arrangement that is a service contract - In August 2018, the Financial Accounting Standards Board (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 and early adoption is permitted. 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 is in the process of evaluating when it will adopt this guidance and the potential effects this guidance will have on its consolidated financial statements.
Disclosure requirements for defined benefit plans - In August 2018, the FASB issued accounting guidance which modifies disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing, modifying and adding certain disclosures. This guidance is required to be applied retrospectively and is effective for periods ending after December 15, 2020, with early adoption permitted. The Company expects to adopt this guidance effective December 31, 2018.
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 permitted to early adopt the removed or modified disclosures and delay adoption of added disclosures until the effective date. 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 is in the process of evaluating when it will adopt this guidance and the potential effects this guidance will have on its disclosures.
Income taxes - In March 2018, the FASB issued guidance allowing for the recognition of provisional amounts related to the 2017 U.S. tax reform (the “U.S. Tax Reform”) in the event that the accounting was not complete by the end of the period enacted. The provisional amounts can be updated within a one year measurement period with changes recorded as a component of income tax expense during the reporting period. This guidance was effective upon issuance. For a more detailed discussion, refer to Note 13 (Income Taxes) for further discussion.
Comprehensive income - In February 2018, 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 the U.S. Tax Reform. The guidance is effective for periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impacts this guidance will have on its consolidated financial statements and, at this time, does not expect the impacts to be material.
Derivatives and hedging - In August 2017, the FASB issued accounting guidance to improve and simplify existing guidance to allow companies to better reflect their risk management activities in the financial statements. The guidance expands the ability to account for nonfinancial and financial risk components under hedge accounting and eliminates the requirement to separately measure and recognize hedge ineffectiveness and eases requirements of an entity’s assessment of hedge effectiveness. This guidance is effective for periods beginning after December 15, 2018 and early adoption is permitted. The Company currently does not account for its foreign currency derivative contracts under hedge accounting and does not expect the standard to have an impact to the Company. For a more detailed discussion of the Company’s foreign exchange risk management activities, refer to Note 16 (Foreign Exchange Risk Management).
Net periodic pension cost and net periodic postretirement benefit cost - In March 2017, the FASB issued accounting guidance to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. Under this guidance, the service cost component is required to be reported in the same line item as other compensation costs arising from services rendered by employees during the period. The other components of the net periodic benefit costs are required to be presented in the consolidated statement of operations separately from the service cost component and outside of operating income. This guidance is required to be applied retrospectively and is effective for periods beginning after December 15, 2017. The Company adopted this guidance effective January 1, 2018, which did not result in a material impact on the Company’s current year consolidated financial statements. The Company did not apply this guidance retrospectively, as the impact was de minimis to the prior year consolidated financial statements.
Restricted cash - In November 2016, the FASB issued accounting guidance to address diversity in the classification and presentation of changes in restricted cash on the consolidated statement of cash flows. Under this guidance, companies are required to present restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the consolidated statement of cash flows. This guidance is required to be applied retrospectively and is effective for periods beginning after December 15, 2017. The Company adopted this guidance effective January 1, 2018. In accordance with the adoption of this standard, the Company includes restricted cash, which currently consists primarily of restricted cash for litigation settlement and restricted security deposits held for customers in its reconciliation of beginning-of-period and end-of-period amounts shown on the consolidated statement of cash flows.
Intra-entity asset transfers - In October 2016, the FASB issued accounting guidance to simplify the accounting for income tax consequences of intra-entity transfers of assets other than inventory. Under this guidance, companies will be required to recognize the income tax consequences of an intra-entity asset transfer when the transfer occurs. This guidance must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the period of adoption. The guidance is effective for periods beginning after December 15, 2017. The Company adopted this guidance effective January 1, 2018. Refer to Note 13 (Income Taxes) for further discussion. See the section in this note entitled Cumulative Effect of the Adopted Accounting Pronouncements for a summary of the cumulative impact of adopting this standard as of January 1, 2018.
Leases - In February 2016, the FASB issued accounting guidance that will change how companies account for and present lease arrangements. This guidance requires companies to recognize leased assets and liabilities for both financing and operating leases. This guidance is effective for periods after December 15, 2018 and early adoption is permitted. Companies are required to adopt the guidance using a modified retrospective approach by recognizing a cumulative effect adjustment to the opening balance of retained earnings. In July 2018, the FASB provided companies with an option to apply the modified retrospective approach as of either the date of adoption or as of the earliest date presented. The Company expects to adopt this guidance effective January 1, 2019 by applying the modified retrospective approach as of the date of adoption with the available practical expedients. The Company is in the process of evaluating the potential effects this guidance will have on its consolidated financial statements.
Revenue recognition - In May 2014, the FASB issued accounting guidance that provides a single, comprehensive revenue recognition model for all contracts with customers and supersedes most of the existing revenue recognition requirements. Under this guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted this guidance effective January 1, 2018 under the modified retrospective transition method, applying the standard to contracts not completed as of January 1, 2018 and considered the aggregate amount of modifications. See the section in this note entitled Cumulative Effect of the Adopted Accounting Pronouncements for a summary of the cumulative impact of adopting this standard as of January 1, 2018.
This new revenue guidance impacts the timing of certain customer incentives recognized in the Company’s consolidated statement of operations, as they are recognized over the life of the contract. Previously, such incentives were recognized when earned by the customer. The new revenue guidance also impacts the Company’s accounting recognition for certain market development fund contributions and expenditures. Historically, these items were recorded on a net basis in net revenue and will now be recognized on a gross basis, resulting in an increase to both revenues and expenses.
The following tables summarize the impact of the revenue standard on the Company’s consolidated statement of operations for the three and nine months ended September 30, 2018 and consolidated balance sheet as of September 30, 2018:
 
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
 
Balances excluding revenue standard
 
Impact of revenue standard
 
As reported
 
Balances excluding revenue standard
 
Impact of revenue standard
 
As reported
 
(in millions)
Net Revenue
$
3,798

 
$
100

 
$
3,898

 
$
10,831

 
$
312

 
$
11,143

 
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses
 
 
 
 
 
 
 
 
 
 
 
General and administrative
1,235

 
1

 
1,236

 
3,688

 
(4
)
 
3,684

Advertising and marketing
208

 
27

 
235

 
568

 
126

 
694

 
 
 
 
 
 
 
 
 
 
 
 
Income before income taxes
2,192

 
72

 
2,264

 
5,799

 
190

 
5,989

Income tax expense
351

 
14

 
365

 
987

 
42

 
1,029

Net Income
1,841

 
58

 
1,899

 
4,812

 
148

 
4,960

 
September 30, 2018
 
Balances excluding revenue standard
 
Impact of revenue standard
 
As reported
 
(in millions)
Assets
 
 
 
 
 
Accounts receivable
$
2,222

 
$
55

 
$
2,277

Prepaid expenses and other current assets
1,161

 
214

 
1,375

Deferred income taxes
590

 
(88
)
 
502

Other assets
2,055

 
870

 
2,925

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Accounts payable
1,013

 
(631
)
 
382

Accrued expenses
4,191

 
554

 
4,745

Other current liabilities
1,118

 
(145
)
 
973

Other liabilities
1,078

 
778

 
1,856

 
 
 
 
 
 
Equity
 
 
 
 
 
Retained earnings
26,231

 
495

 
26,726


For a more detailed discussion on revenue recognition, refer to Note 3 (Revenue).
Cumulative Effect of the Adopted Accounting Pronouncements
The following table summarizes the cumulative impact of the changes made to the January 1, 2018 consolidated balance sheet for the adoption of the new accounting standards pertaining to revenue recognition and intra-entity asset transfers. The prior periods have not been restated and have been reported under the accounting standards in effect for those periods. During the second quarter of 2018, there was an adjustment to the impact of adopting the new revenue standard which increased liabilities $88 million with a corresponding tax-effected adjustment to retained earnings. In addition, certain reclassifications were made primarily between other assets, accrued expenses, and other liabilities. These revisions did not result in a material impact to the balances at January 1, 2018 or the consolidated financial statements for the period ended March 31, 2018.
 
Balance at December 31, 2017
 
Impact of revenue standard
 
Impact of intra-entity asset transfers standard
 
Balance at
January 1, 2018
 
(in millions)
Assets
 
 
 
 
 
 
 
Accounts receivable
$
1,969

 
$
44

 
$

 
$
2,013

Prepaid expenses and other current assets
1,040

 
181

 
(17
)
 
1,204

Deferred income taxes
250

 
(69
)
 
186

 
367

Other assets
2,298

 
690

 
(352
)
 
2,636

Liabilities
 
 
 
 
 
 
 
Accounts payable
933

 
(495
)
 

 
438

Accrued expenses
3,931

 
391

 

 
4,322

Other current liabilities
792

 
(44
)
 

 
748

Other liabilities
1,438

 
628

 

 
2,066

Equity
 
 
 
 
 
 
 
Retained earnings
22,364

 
366

 
(183
)
 
22,547

v3.10.0.1
Acquisitions
9 Months Ended
Sep. 30, 2018
Business Combinations [Abstract]  
Business Combination Disclosure
Acquisitions
In 2017, the Company acquired businesses for total consideration of $1.5 billion. The Company has finalized the purchase accounting for businesses acquired during the nine months ended September 30, 2017. For the final fair values of the purchase price allocations, as of the acquisition dates, refer to Note 2 (Acquisitions) 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, 2017.
v3.10.0.1
Revenue
9 Months Ended
Sep. 30, 2018
Revenue from Contract with Customer [Abstract]  
Revenue
Revenue
Mastercard’s business model involves four participants in addition to the Company: account holders, merchants, issuers (the account holders’ financial institutions) and acquirers (the merchants’ financial institutions). Revenue from contracts with customers is recognized when services are performed in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those services. Revenue recognized from domestic assessments, cross-border volume fees and transaction processing are derived from Mastercard’s payment network services. Revenue is generated by charging fees to issuers, acquirers and other stakeholders for providing switching services, as well as by assessing customers based primarily on the dollar volume of activity, or gross dollar volume, on the cards and other devices that carry the Company’s brands. Revenue is generally derived from transactional information accumulated by Mastercard’s systems or reported by customers. In addition, the Company recognizes revenue from other payment-related products and services in the period in which the related transactions occur or services are performed.
The price structure for Mastercard’s products and services is dependent on the nature of volumes, types of transactions and type of products and services offered to customers. Net revenue can be impacted by the following:
domestic or cross-border transactions
geographic region or country in which the transaction occurs
volumes/transactions subject to tiered rates
processed or not processed by the Company
amount of usage of the Company’s other products or services
amount of rebates and incentives provided to customers
The Company classifies its net revenue into the following five categories:
Domestic assessments are fees charged to issuers and acquirers based primarily on the dollar volume of activity on cards and other devices that carry the Company’s brands where the acquirer country and the issuer country are the same. Revenue from domestic assessments are recorded as revenue in the period it is earned, which is when the related volume is generated on the cards or other devices that carry the Company’s brand.
Cross-border volume fees are charged to issuers and acquirers based on the dollar volume of activity on cards and other devices that carry the Company’s brands where the acquirer country and the issuer country are different. Revenue from cross-border volume are recorded as revenue in the period it is earned, which is when the related volume is generated on the cards or other devices that carry the Company’s brand.
Transaction processing revenue is recognized for both domestic and cross-border transactions in the period in which the related transactions occur. Transaction processing includes the following:
Switched transaction revenue is generated from 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 approve such transactions on behalf of the issuer in accordance with either the issuer’s instructions or applicable rules (also known as “stand-in”).
Clearing is the determination and exchange of financial transaction information between issuers and acquirers after a transaction has been successfully conducted at the point of interaction. Transactions are cleared among customers through Mastercard’s central and regional processing systems.
Settlement is facilitating the exchange of funds between parties.
Connectivity fees are charged to issuers, acquirers and other financial institutions for network access, equipment and the transmission of authorization and settlement messages. These fees are based on the size of the data being transmitted and the number of connections to the Company’s network.
Other processing fees include issuer and acquirer processing solutions; payment gateways for e-commerce merchants; mobile gateways for mobile initiated transactions; and safety and security.
Other revenues consist of value added service offerings that are typically sold with the Company’s payment service offerings and are recognized in the period in which the related services are performed or transactions occur. Other revenues include the following:
Consulting, data analytic and research fees.
Safety and security services fees are for products and services offered to prevent, detect and respond to fraud and to ensure the safety of transactions made primarily on Mastercard products.
Loyalty and rewards solutions fees are charged to issuers for benefits provided directly to consumers with Mastercard-branded cards, such as access to a global airline lounge network, global and local concierge services, individual insurance coverages, emergency card replacement, emergency cash advance services and a 24-hour cardholder service center. Loyalty and reward solution fees also include rewards campaigns and management services.
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.
Bank account-based payment services relating to automated clearing house (“ACH”) transactions and other ACH related services.
Other payment-related products and services, including account and transaction enhancement services, rules compliance and publications.
Rebates and incentives (contra-revenue) are provided to customers that meet certain volume targets and can be in the form of a rebate or other support incentives, which are tied to performance.  Rebates and incentives are recorded as a reduction of revenue when revenue is recognized, ratably over the contractual term.  In addition, Mastercard may make incentive payments to a customer directly related to entering into an agreement, which are generally capitalized and amortized over the life of the agreement on a straight-line basis.
The following table disaggregates the Company’s net revenue by source and geographic region for the three and nine months ended September 30, 2018:
 
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
 
(in millions)
Revenue by source:
 
 
 
Domestic assessments
$
1,564

 
$
4,559

Cross-border volume fees
1,338

 
3,693

Transaction processing
1,912

 
5,449

Other revenues
819

 
2,352

Gross revenue
5,633

 
16,053

Rebates and incentives (contra-revenue)
(1,735
)
 
(4,910
)
Net revenue
$
3,898

 
$
11,143

 
 
 
 
Net revenue by geographic region:
 
 
 
North American Markets
$
1,361

 
$
3,940

International Markets
2,488

 
7,050

Other 1
49

 
153

Net revenue
$
3,898

 
$
11,143

1 Includes revenues managed by corporate functions.
Receivables from contracts with customers of $2,156 million and $1,873 million as of September 30, 2018 and December 31, 2017, 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 offer extended payment terms to customers.
Contract assets include unbilled consideration typically resulting from executed consulting, data analytic and research services performed for customers in connection with Mastercard’s payment network service arrangements. Collection for these services typically occurs over the contractual term. These contract assets are included in prepaid expenses and other current assets and other assets on the consolidated balance sheet at September 30, 2018 in the amounts of $36 million and $77 million, respectively. The Company did not have contract assets at December 31, 2017.
The Company defers the recognition of revenue when consideration has been received prior to the satisfaction of performance obligations. As these performance obligations are satisfied, revenue is subsequently recognized. Deferred revenue is primarily derived from consulting, data analytic and research services. Deferred revenue is included in other current liabilities and other liabilities on the consolidated balance sheet at September 30, 2018 in the amounts of $260 million and $111 million, respectively. The comparable amounts included in other current liabilities and other liabilities at December 31, 2017 were $230 million and $17 million, respectively. Revenue recognized from performance obligations satisfied during the three and nine months ended September 30, 2018 was $202 million and $570 million, respectively.
The Company’s remaining performance period for its contracts with customers for its payment network services are typically long-term in nature (generally up to 10 years). As a payment network service provider, the Company provides its customers with continuous access to its payment network and stands ready to provide transaction processing and related services over the contractual term. Consideration is variable based upon the number of transactions processed and volume activity on the cards and other devices that carry the Company’s brands. The Company has elected the optional exemption to not disclose the remaining performance obligations related to its payment network services. The Company also earns revenues from other value added services comprised of bank account-based payment services, consulting and research fees, loyalty programs and other payment-related products and services. At September 30, 2018, the estimated aggregate consideration allocated to unsatisfied performance obligations for these other value added services is $940 million, which is expected to be recognized through 2022. The estimated remaining performance obligations related to these revenues are subject to change and are affected by several factors, including termination clauses, modifications and adjustments for currency and are not expected to be material to any future annual period.
v3.10.0.1
Earnings Per Share
9 Months Ended
Sep. 30, 2018
Earnings Per Share [Abstract]  
Earnings Per Share
Earnings Per Share
The components of basic and diluted earnings per share (“EPS”) for common stock were as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(in millions, except per share data)
Numerator
 
 
 
 
 
 
 
Net income
$
1,899

 
$
1,430

 
$
4,960

 
$
3,688

Denominator
 
 
 
 
 
 
 
Basic weighted-average shares outstanding
1,037

 
1,063

 
1,044

 
1,071

Dilutive stock options and stock units
6

 
5

 
6

 
4

Diluted weighted-average shares outstanding 1
1,043

 
1,068

 
1,050

 
1,075

Earnings per Share
 
 
 
 
 
 
 
Basic
$
1.83

 
$
1.34

 
$
4.75

 
$
3.45

Diluted
$
1.82

 
$
1.34

 
$
4.73

 
$
3.43



1 For the periods presented, the calculation of diluted EPS excluded a minimal amount of anti-dilutive share-based payment awards.
v3.10.0.1
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
9 Months Ended
Sep. 30, 2018
Cash and Cash Equivalents [Abstract]  
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
The Company’s cash and cash equivalents include certain investments with daily liquidity and with a maturity of three months or less from the date of purchase. Cash equivalents are recorded at cost, which approximate fair value.
The Company classifies cash and cash equivalents as restricted when the cash is unavailable for withdrawal or usage for general operations. The Company has the following types of restricted cash and restricted cash equivalents balances:
Restricted cash for litigation settlement - The Company has restricted cash for litigation within a qualified settlement fund related to a preliminary settlement agreement for the U.S. merchant class litigation. The funds continue to be restricted for payments until the litigation matter is resolved. Refer to Note 14 (Legal and Regulatory Proceedings).
Restricted security deposits held for customers - The Company requires collateral from certain customers for settlement of their transactions. The majority of collateral for settlement is in the form of standby letters of credit and bank guarantees which are not recorded on the consolidated balance sheet. Additionally, the Company holds cash deposits and certificates of deposit from certain customers of Mastercard as collateral for settlement of their transactions, which are recorded as assets on the consolidated balance sheet. These assets are fully offset by corresponding liabilities included on the consolidated balance sheet. These security deposits are typically held for the duration of the agreement with the customers.
Other restricted cash balances - The Company has other restricted cash balances which include contractually restricted deposits, as well as cash balances that are restricted based on the Company’s intention with regards to usage. These funds are classified on the consolidated balance sheet within prepaid expenses and other currents assets and other assets.
The following table provides a reconciliation of cash, cash equivalents, restricted cash and restricted cash equivalents reported within the statement of financial position that total to the beginning of period and end of period amounts shown in the statement of cash flows.
 
December 31,
 
2017
 
2016
 
(in millions)
Cash and cash equivalents
$
5,933

 
$
6,721

Restricted cash and restricted cash equivalents
 
 
 
Restricted cash for litigation settlement
546

 
543

Restricted security deposits held for customers
1,085

 
991

Prepaid expenses and other current assets
28

 
3

Other assets

 
15

Cash, cash equivalents, restricted cash and restricted cash equivalents - beginning of period 1
$
7,592

 
$
8,273

 
 
 
 
 
September 30,
 
2018
 
2017
 
(in millions)
Cash and cash equivalents
$
6,871

 
$
5,559

Restricted cash and restricted cash equivalents
 
 
 
Restricted cash for litigation settlement
550

 
545

Restricted security deposits held for customers
1,034

 
1,026

Prepaid expenses and other current assets
23

 
61

Cash, cash equivalents, restricted cash and restricted cash equivalents - end of period 1
$
8,478

 
$
7,191

1 As shown on the consolidated statement of cash flows.
v3.10.0.1
Fair Value
9 Months Ended
Sep. 30, 2018
Financial Instruments, Financial Liabilities, Balance Sheet Groupings [Abstract]  
Fair Value and Investment Securities
Fair Value and Investment Securities
Financial Instruments – Recurring Measurements
The Company classifies its fair value measurements of financial instruments into a three-level hierarchy (the “Valuation Hierarchy”). There were no transfers made among the three levels in the Valuation Hierarchy during the nine months ended September 30, 2018.
The distribution of the Company’s financial instruments measured at fair value on a recurring basis within the Valuation Hierarchy were as follows:
 
September 30, 2018
 
December 31, 2017
 
Quoted Prices
in Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
 
Quoted Prices
in Active
Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
 
(in millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available for sale 1:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Municipal securities
$

 
$
16

 
$

 
$
16

 
$

 
$
17

 
$

 
$
17

Government and agency securities
52

 
91

 

 
143

 
81

 
104

 

 
185

Corporate securities

 
959

 

 
959

 

 
876

 

 
876

Asset-backed securities

 
180

 

 
180

 

 
70

 

 
70

Equity securities
1

 

 

 
1

 
1

 

 

 
1

Derivative instruments 2:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency derivative assets

 
37

 

 
37

 

 
6

 

 
6

Deferred compensation plan 3:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred compensation assets
61

 

 

 
61

 
55

 

 

 
55

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative instruments 2:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency derivative liabilities
$

 
$
(5
)
 
$

 
$
(5
)
 
$

 
$
(30
)
 
$

 
$
(30
)
Deferred compensation plan 4:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred compensation liabilities
(62
)
 

 

 
(62
)
 
(54
)
 

 

 
(54
)

1 The Company’s U.S. government securities and marketable equity securities are classified within Level 1 of the Valuation Hierarchy as the fair values are based on unadjusted quoted prices for identical assets in active markets. The fair value of the Company’s available-for-sale municipal securities, government and agency securities, corporate securities and asset-backed securities are based on observable inputs such as quoted prices, benchmark yields and issuer spreads for similar assets in active markets and are therefore included in Level 2 of the Valuation Hierarchy.
2 The Company’s foreign currency derivative asset and liability contracts have been classified within Level 2 of the Valuation Hierarchy as the fair value is based on observable inputs such as broker quotes relating to foreign currency exchange rates for similar derivative instruments. See Note 16 (Foreign Exchange Risk Management) for further details.
3 The Company has a nonqualified deferred compensation plan where assets are invested primarily in mutual funds held in a rabbi trust, which is restricted for payments to participants of the plan. The Company has elected to use the fair value option for these mutual funds, which are measured using quoted prices of identical instruments in active markets and are included in prepaid expenses and other current assets on the consolidated balance sheet.
4 The deferred compensation liabilities are measured at fair value based on the quoted prices of instruments identical to the investment vehicles selected by the participants. They are included in other liabilities on the consolidated balance sheet.
Settlement and Other Guarantee Liabilities
The Company estimates the fair value of its settlement and other guarantees using market assumptions for relevant though not directly comparable undertakings, as the latter are not observable in the market given the proprietary nature of such guarantees. At September 30, 2018 and December 31, 2017, the carrying value and fair value of settlement and other guarantee liabilities were not material and accordingly are not included in the Valuation Hierarchy table above. Settlement and other guarantee liabilities are classified within Level 3 of the Valuation Hierarchy as their valuation requires substantial judgment and estimation of factors that are not observable in the market. See Note 15 (Settlement and Other Risk Management) for additional information regarding the Company’s settlement and other guarantee liabilities.
Financial Instruments - Non-Recurring Measurements
Held-to-Maturity Securities
Investments on the consolidated balance sheet include both available-for-sale and short-term held-to-maturity securities. Held-to-maturity securities are not measured at fair value on a recurring basis and are not included in the Valuation Hierarchy table above. At September 30, 2018 and December 31, 2017, the Company held $323 million and $700 million, respectively, of held-to-maturity securities due within one year. The cost of these securities approximates fair value.
Nonmarketable Equity Investments
The Company’s nonmarketable equity investments are measured at fair value at initial recognition and for impairment testing. In addition, nonmarketable equity investments accounted for under the cost method of accounting are adjusted for changes resulting from observable price changes in orderly transactions for the identical or similar investments of the same issuer. Nonmarketable equity investments are classified within Level 3 of the Valuation Hierarchy due to the absence of quoted market prices, the inherent lack of liquidity, and the fact that inputs used to measure fair value are unobservable and require management’s judgment. The Company uses discounted cash flows and market assumptions to estimate the fair value of its nonmarketable equity investments when certain events or circumstances indicate that impairment may exist. These investments are included in other assets on the consolidated balance sheet and in Note 7 (Prepaid Expenses and Other Assets).
Debt
The Company estimates the fair value of its long-term debt based on market quotes. These debt instruments are not traded in active markets and are classified within Level 2 of the Valuation Hierarchy. At September 30, 2018, the carrying value and fair value of total long-term debt outstanding (including the current portion) was $6.4 billion. At December 31, 2017, the carrying value and fair value of long-term debt was $5.4 billion and $5.7 billion, respectively.
Other Financial Instruments
Certain financial instruments are carried on the consolidated balance sheet at cost, which approximates fair value due to their short-term, highly liquid nature. These instruments include cash and cash equivalents, restricted cash, accounts receivable, settlement due from customers, restricted security deposits held for customers, accounts payable, settlement due to customers and other accrued liabilities.
Non-Financial Instruments
Certain assets are measured at fair value on a nonrecurring basis for purposes of initial recognition and impairment testing. The Company’s non-financial assets measured at fair value on a nonrecurring basis include property, plant and equipment, goodwill and other intangible assets. These assets are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.
The contingent consideration attributable to acquisitions made in 2017 is primarily based on the achievement of 2018 revenue targets. This contingent consideration liability is included in other current liabilities on the consolidated balance sheet and is classified within Level 3 of the Valuation Hierarchy due to the absence of quoted market prices. The activity of the Company’s contingent consideration liability for the nine months ended September 30, 2018 was as follows:
 
(in millions)
Balance at December 31, 2017
$
219

Net change in valuation
14

Payments
(5
)
Foreign currency translation
(7
)
Balance at September 30, 2018
$
221


Amortized Costs and Fair Values – Available-for-Sale Investment Securities
The major classes of the Company’s available-for-sale investment securities, for which unrealized gains and losses are recorded as a separate component of other comprehensive income (loss) on the consolidated statement of comprehensive income, and their respective amortized cost basis and fair values as of September 30, 2018 and December 31, 2017 were as follows:
 
 
September 30, 2018
 
December 31, 2017
 
Amortized
Cost
 
Gross
Unrealized
Gain
 
Gross
Unrealized
Loss
 
Fair
Value
 
Amortized
Cost
 
Gross
Unrealized
Gain
 
Gross
Unrealized
Loss
 
Fair
Value
 
(in millions)
Municipal securities
$
16

 
$

 
$

 
$
16

 
$
17

 
$

 
$

 
$
17

Government and agency securities
143

 

 

 
143

 
185

 

 

 
185

Corporate securities
959

 
1

 
(1
)
 
959

 
875

 
2

 
(1
)
 
876

Asset-backed securities
180

 

 

 
180

 
70

 

 

 
70

Equity securities

 
1

 

 
1

 

 
1

 

 
1

Total
$
1,298

 
$
2

 
$
(1
)
 
$
1,299

 
$
1,147

 
$
3

 
$
(1
)
 
$
1,149


The Company’s available-for-sale investment securities held at September 30, 2018 and December 31, 2017 primarily carried a credit rating of A- or better. The municipal securities are primarily comprised of state tax-exempt bonds and are diversified across states and sectors. Government and agency securities include U.S. government bonds, U.S. government sponsored agency bonds and foreign government bonds with similar credit quality to that of the U.S. government bonds. Corporate securities are comprised of commercial paper and corporate bonds. The asset-backed securities are investments in bonds which are collateralized primarily by automobile loan receivables.
Investment Maturities
The maturity distribution based on the contractual terms of the Company’s investment securities at September 30, 2018 was as follows:
 
Available-For-Sale
 
Amortized
Cost
 
Fair Value
 
(in millions)
Due within 1 year
$
356

 
$
356

Due after 1 year through 5 years
942

 
942

Due after 5 years through 10 years

 

Due after 10 years

 

No contractual maturity 1

 
1

Total
$
1,298

 
$
1,299


1 Equity securities have been included in the no contractual maturity category, as these securities do not have stated maturity dates.
Investment Income
Investment income primarily consists of interest income generated from cash, cash equivalents and investments. Gross realized gains and losses are recorded within investment income on the consolidated statement of operations. The gross realized gains and losses from the sales of available-for-sale securities for the three and nine months ended September 30, 2018 and 2017 were not significant.
v3.10.0.1
Prepaid Expenses and Other Assets
9 Months Ended
Sep. 30, 2018
Prepaid Expense and Other Assets [Abstract]  
Prepaid Expenses and Other Assets
Prepaid Expenses and Other Assets
Prepaid expenses and other current assets consisted of the following:
 
September 30,
2018
 
December 31,
2017
 
(in millions)
Customer and merchant incentives
$
700

 
$
464

Prepaid income taxes
71

 
77

Other
604

 
499

Total prepaid expenses and other current assets
$
1,375

 
$
1,040


Other assets consisted of the following:
 
September 30,
2018
 
December 31,
2017
 
(in millions)
Customer and merchant incentives
$
2,248

 
$
1,434

Nonmarketable equity investments
279

 
249

Prepaid income taxes

 
352

Income taxes receivable
201

 
178

Other
197

 
85

Total other assets
$
2,925

 
$
2,298


Customer and merchant incentives represent payments made or amounts to be paid to customers and merchants under business agreements. Costs directly related to entering into such an agreement are generally deferred and amortized over the life of the agreement. Amounts to be paid for these incentives and the related liability were included in accrued expenses and other liabilities. The increase in customer and merchant incentives and the decrease in prepaid income taxes at September 30, 2018 from December 31, 2017 are primarily due to the impact from the adoption of the new accounting standards pertaining to revenue recognition and intra-entity asset transfers, respectively. See Note 1 (Summary of Significant Accounting Policies) for additional information on the cumulative impact of the adoption of these accounting pronouncements.
Nonmarketable equity investments represent the Company’s cost and equity method investments.
v3.10.0.1
Accrued Expenses
9 Months Ended
Sep. 30, 2018
Accrued Liabilities, Current [Abstract]  
Accrued Expenses and Accrued Litigation
Accrued Expenses and Accrued Litigation
Accrued expenses consisted of the following:
 
September 30,
2018
 
December 31,
2017
 
(in millions)
Customer and merchant incentives
$
3,367

 
$
2,648

Personnel costs
599

 
613

Advertising
84

 
88

Income and other taxes
336

 
194

Other
359

 
388

Total accrued expenses
$
4,745

 
$
3,931


As of September 30, 2018 and December 31, 2017, the Company’s provision for litigation was $920 million and $709 million, respectively. These amounts are not included in the accrued expenses table above and are separately reported as accrued litigation on the consolidated balance sheet. See Note 14 (Legal and Regulatory Proceedings) for additional information regarding the Company’s accrued litigation.
v3.10.0.1
Debt (Notes)
9 Months Ended
Sep. 30, 2018
Debt Disclosure [Abstract]  
Debt Disclosure
Debt
Total debt outstanding consisted of the following at September 30, 2018 and December 31, 2017:
Notes
 
Issuance
Date
 
Interest Payment Terms
 
Maturity
Date
 
Aggregate Principal Amount
 
Stated
Interest Rate
 
Effective
Interest Rate
 
September 30,
2018
 
December 31,
2017
 
 
 
 
 
 
 
 
(in millions, except percentages)
2018 USD Notes
 
February 2018
 
Semi-annually
 
2028
 
$
500

 
3.500
%
 
3.598
%
 
$
500

 
$

 
 
 
 
 
 
2048
 
500

 
3.950
%
 
3.990
%
 
500

 

 
 
 
 
 
 
 
 
$
1,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2016 USD Notes
 
November 2016
 
Semi-annually
 
2021
 
$
650

 
2.000
%
 
2.236
%
 
650

 
650

 
 
 
 
 
 
2026
 
750

 
2.950
%
 
3.044
%
 
750

 
750

 
 
 
 
 
 
2046
 
600

 
3.800
%
 
3.893
%
 
600

 
600

 
 
 
 
 
 
 
 
$
2,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2015 Euro Notes
 
December 2015
 
Annually
 
2022
 
700

 
1.100
%
 
1.265
%
 
813

 
839

 
 
 
 
 
 
2027
 
800

 
2.100
%
 
2.189
%
 
929

 
958

 
 
 
 
 
 
2030
 
150

 
2.500
%
 
2.562
%
 
174

 
180

 
 
 
 
 
 
 
 
1,650

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2014 USD Notes
 
March 2014
 
Semi-annually
 
2019
 
$
500

 
2.000
%
 
2.178
%
 
500

 
500

 
 
 
 
 
 
2024
 
1,000

 
3.375
%
 
3.484
%
 
1,000

 
1,000

 
 
 
 
 
 
 
 
$
1,500

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6,416

 
5,477

Less: Unamortized discount and debt issuance costs
 
(58
)
 
(53
)
Total debt outstanding
 
6,358

 
5,424

Less: Current portion1 
 
(500
)
 

Long-term debt
 
$
5,858

 
$
5,424

1 Relates to the current portion of the 2014 USD Notes, due in April 2019, classified as current portion of long-term debt on the consolidated balance sheet.
In February 2018, the Company issued $500 million principal amount of notes due February 2028 and $500 million principal amount of notes due February 2048 (collectively the “2018 USD Notes”). The net proceeds from the issuance of the 2018 USD Notes, after deducting the original issue discount, underwriting discount and offering expenses, were $991 million.
The net proceeds, after deducting the original issue discount, underwriting discount and offering expenses, from the issuance of the 2016 USD Notes, the 2015 Euro Notes and the 2014 USD Notes, were $1.969 billion, $1.723 billion and $1.484 billion, respectively.
None of the outstanding debt, described above, is subject to financial covenants and may be redeemed in whole, or in part, at the Company’s option at any time for a specified make-whole amount. These notes are senior unsecured obligations and would rank equally with any future unsecured and unsubordinated indebtedness. The proceeds of the notes are to be used for general corporate purposes.
In November 2015, the Company established a commercial paper program (the “Commercial Paper Program”) under which it is authorized to issue up to $3.75 billion in outstanding notes, with maturities up to 397 days from the date of issuance. The Commercial Paper Program is available in U.S. dollars.
In conjunction with the Commercial Paper Program, the Company entered into a committed unsecured $3.75 billion revolving credit facility (the “Credit Facility”). Borrowings under the Credit Facility are available in U.S. dollars and/or euros. In October 2017, the Company extended the Credit Facility for an additional year to October 2022. The extension did not result in any material changes to the terms and conditions of the Credit Facility. The facility fee and borrowing cost under the Credit Facility are based upon the Company’s credit rating. At September 30, 2018, the applicable facility fee was 8 basis points on the average daily commitment (whether or not utilized). In addition to the facility fee, interest on borrowings under the Credit Facility would be charged at the London Interbank Offered Rate (“LIBOR”) plus an applicable margin of 79.5 basis points, or an alternative base rate. The Credit Facility contains customary representations, warranties, events of default and affirmative and negative covenants, including a financial covenant limiting the maximum level of consolidated debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”). The Company was in compliance in all material respects with the covenants of the Credit Facility at September 30, 2018. The majority of Credit Facility lenders are customers or affiliates of customers of the Company.
Borrowings under the Commercial Paper Program and the Credit Facility are used to provide liquidity for general corporate purposes, including providing liquidity in the event of one or more settlement failures by the Company’s customers. The Company may borrow and repay amounts under the Commercial Paper Program and Credit Facility from time to time. The Company had no borrowings under the Credit Facility and the Commercial Paper Program at September 30, 2018 and December 31, 2017.
In March 2018, the Company filed a universal shelf registration statement (replacing a previously filed shelf registration statement that was set to expire) to provide additional access to capital, if needed. Pursuant to the shelf registration statement, the Company may from time to time offer to sell debt securities, guarantees of debt securities, preferred stock, Class A common stock, depository shares, purchase contracts, units or warrants in one or more offerings.
v3.10.0.1
Stockholders' Equity
9 Months Ended
Sep. 30, 2018
Equity [Abstract]  
Stockholders' Equity
Stockholders’ Equity
The Company’s Board of Directors has approved share repurchase programs authorizing the Company to repurchase its Class A common stock. These programs become effective after the completion of the previously authorized share repurchase program.
The following table summarizes the Company’s share repurchase authorizations of its Class A common stock through September 30, 2018, as well as historical purchases:
 
 
 
 
 
 
 
 
Board authorization dates
December
2017
 
December
2016
 
December
2015