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February 02, 2012 08:00 AM Eastern Time
- Quarter net income of $514 million, or $4.03 per diluted share, excluding a special item
- Quarter net income of $19 million, or $0.15 per diluted share, including a special item
- Fourth-quarter net revenue increase of 20.2%, to $1.7 billion
- Fourth-quarter gross dollar volume up 16.3% and purchase volume up 15.2%
PURCHASE, N.Y.--()--MasterCard Incorporated (NYSE: MA) today announced financial results for the fourth quarter of 2011. Excluding a special item, the company reported net income of $514 million, up 23.7%, and earnings per diluted share of $4.03, up 27.5%, in each case versus the year-ago period. Including the special item, a $495 million after-tax charge related to the U.S. merchant litigations, the company reported net income of $19 million, or $0.15 per diluted share. The company's total operating expenses, operating income, effective tax rate, net income and earnings per share, excluding the special item, are non-GAAP financial measures that are reconciled to their most directly comparable GAAP measures in the accompanying financial tables.
“For the full year, despite ongoing economic uncertainties, we posted strong performance ahead of our long-term objectives.”
Net revenue for the fourth quarter of 2011 was $1.7 billion, a 20.2% increase versus the same period in 2010. On a constant currency basis, net revenue increased 20.8% compared to the same period in 2010. Net revenue growth was driven by the impact of the following:
- An increase in cross-border volumes of 17.5%;
- A 16.3% increase in gross dollar volume on a local currency basis, to $863 billion; and
- An increase in processed transactions of 23.2%, to 7.7 billion.
These factors were partially offset by an increase in rebates and incentives primarily due to new and renewed agreements and increased volumes.
Worldwide purchase volume during the quarter was up 15.2% on a local currency basis versus the fourth quarter of 2010, to $648 billion. As of December 31, 2011, the company’s customers had issued 1.8 billion MasterCard and Maestro-branded cards.
“We are pleased with our strong fourth quarter results as we are seeing sustained momentum driven by new deals and the ongoing shift away from paper-based payments,” said Ajay Banga, MasterCard president and chief executive officer. “For the full year, despite ongoing economic uncertainties, we posted strong performance ahead of our long-term objectives.
“Solid execution at the local level continued to result in new business wins in 2011, with a recent agreement from KeyBank that includes PIN debit and our IPS platform, as well as credit and debit deals with nearly 150 U.S.-based independent banks and credit unions. Additionally, we continue to lay the foundation for growth through strategic partnerships with Western Union, Telefónica and Intel to provide consumers in developed and emerging markets with access to more efficient and safer forms of electronic payments,” Banga concluded.
Based on progress to date in mediation related to the U.S. merchant litigations, the company recorded a $770 million pre-tax charge, or $495 million on an after-tax basis, in the fourth quarter of 2011. This special item represents the company’s financial portion of a potential settlement in these cases.
Excluding the special item, total operating expenses increased 11.5%, to $968 million, during the fourth quarter of 2011 compared to the same period in 2010. Currency fluctuations had a minimal impact on operating expense growth. The increase in total operating expenses was driven by:
- A 14.3% increase in general and administrative expenses, primarily due to higher personnel costs in support of strategic growth initiatives and the inclusion of expenses related to acquisitions.
- A 4.8% increase in advertising and marketing expenses to $319 million, primarily due to support of strategic initiatives and sponsorship activities.
Including the special item, total operating expenses for the fourth quarter of 2011 increased 100.1% versus the year-ago period, to $1.7 billion.
Excluding the special item, operating income for the fourth quarter of 2011 increased 33.5% over the year-ago period and the company delivered an operating margin of 44.0%.
In the fourth quarter of 2011, excluding acquisitions, net revenue grew approximately 18%; excluding acquisitions and the special item, operating expenses grew approximately 8%.
MasterCard reported other expense of $2 million in the fourth quarter of 2011 versus other income of $13 million in the fourth quarter of 2010. The change was primarily driven by a decrease in interest income, lower realized gains on sales of investments and equity losses in joint ventures versus the year-ago period.
Excluding the special item, MasterCard's effective tax rate was 32.3% in the fourth quarter of 2011, versus a rate of 28.7% in the comparable period in 2010. The increase was primarily due to a benefit recorded in connection with the repatriation of foreign earnings in the fourth quarter of 2010, partially offset by a more favorable geographic mix of earnings in the current period. Including the special item, the effective tax rate for the fourth quarter of 2011 was a 251.6% benefit, as the charge related to the U.S. merchant litigations is tax deductible in the U.S. and thus impacted the geographic mix of pre-tax income.
During the fourth quarter of 2011, MasterCard repurchased 84,300 shares at a cost of approximately $30 million. Quarter-to-date through January 27, the company repurchased an additional 304,600 shares of class A common stock at a cost of approximately $106 million, with $746 million remaining under the current repurchase program authorization.
Full-Year 2011 Results
For the year ended December 31, 2011, MasterCard reported net income of $2.4 billion, or $18.70 per diluted share, excluding a special item, and net income of $1.9 billion, or $14.85 per diluted share, including the special item. The special item represents the charge related to the U.S. merchant litigations taken in the fourth quarter of 2011.
Net revenue for full-year 2011 was $6.7 billion, an increase of 21.2% versus 2010. On a constant currency basis, net revenue increased 19.5%. Cross-border volume growth of 18.7%, gross dollar volume growth of 16.1% and processed transaction growth of 18.3%, contributed to the net revenue growth in the full-year period. These increases were partially offset by an increase in rebates and incentives due to increased volumes and new and renewed customer agreements.
Excluding the special item, total operating expenses increased 16.0%, to $3.2 billion, for 2011 compared to 2010, primarily due to higher personnel costs related to strategic initiatives and the inclusion of expenses related to acquisitions. Excluding currency fluctuations, total operating expenses increased 14.5%. Including the special item, operating expenses in 2011 increased 43.6%, to $4.0 billion, versus 2010.
For the full-year 2011, excluding acquisitions, net revenue grew approximately 19%; excluding acquisitions and the special item, operating expenses grew approximately 10%.
Excluding the special item, operating income increased 26.6% for 2011 versus 2010 delivering an operating margin of 51.9 % for the full-year period. Including the special item, the operating margin was 40.4% for full-year 2011.
Total other income was $33 million for full-year 2011 versus total other income of $5 million in 2010. This was primarily driven by a decrease in interest expense due to lower interest accretion related to previous litigation settlements.
MasterCard’s effective tax rate, excluding the special item, was 31.8% for full-year 2011, versus a rate of 33.0% for full-year 2010. Including the special item, the effective tax rate was 30.6% for full-year 2011. The decrease in the 2011 effective tax rate was primarily due to a more favorable geographic mix of earnings, including the tax benefit related to the special item, and the recognition of discrete adjustments in 2011 and 2010.
For full-year 2011, MasterCard repurchased 4.4 million shares at a cost of approximately $1.1 billion.
Fourth-Quarter and Full-Year Financial Results Conference Call Details
At 9:00 a.m. ET today, the company will host a conference call to discuss its fourth-quarter and full-year financial results.
The dial-in information for this call is 866-362-4666 (within the U.S.) and 617-597-5313 (outside the U.S.) and the passcode is 24950634. A replay of the call will be available for one week following the meeting. The replay can be accessed by dialing 888-286-8010 (within the U.S.) and 617-801-6888 (outside the U.S.) and using passcode 66051474.
The live call and the replay, along with supporting materials, can also be accessed through the Investor Relations section of the company’s website at mastercard.com.
