20 October 2017

MasterCard Q4 net profit up 23%

04 February 2010  |  1402 views  |  0 Source: MasterCard

MasterCard Incorporated (NYSE:MA) today announced financial results for the fourth quarter and full-year 2009.

The company reported fourth quarter net income of $294 million, or $2.24 per diluted share, including an after-tax severance charge of $0.19 per diluted share. The company's total operating expenses, other income, effective tax rate, net income and earnings per share, excluding special items, are non-GAAP financial measures that are reconciled to their most directly comparable GAAP measures in the accompanying GAAP reconciliations.

Net revenue for the fourth quarter of 2009 was $1.3 billion, a 6.0% increase versus the same period in 2008. Currency fluctuations (driven by the movement of the euro and the Brazilian real relative to the U.S. dollar) contributed 3.8 percentage points of the increase in net revenue for the quarter. The higher net revenue in the fourth quarter this year benefited from:

  • Pricing changes of approximately 5 percentage points;
  • An increase in cross-border volumes of 3.9%;
  • A 6.7% increase in the number of transactions processed, to 5.9 billion; and
  • Growth of 5.3% in MasterCard's gross dollar volume, on a local currency basis, to $674 billion.

The net revenue growth was somewhat tempered by an increase in rebates and incentives primarily due to new and renewed customer agreements.

Worldwide purchase volume during the quarter rose 5.7% on a local currency basis, versus the fourth quarter of 2008, to $510 billion. As of December 31, 2009, the company's customers had issued 966 million MasterCard cards, a decline of 1.3% over the cards issued at December 31, 2008.

"In 2009 we took important steps to maintain MasterCard's bottom-line growth, and as a result delivered another quarter and year of solid financial results," said Robert W. Selander, MasterCard chief executive officer. "We remained focused on the needs of our customers, and continued to add value amid a challenging economic environment. For example, we recently announced a significant debit win in the U.S. with SunTrust and the first consumer inControl implementation with Barclaycard in the UK."

Selander commented, "Throughout the year, we greatly improved our expense management and realigned our organization to capitalize on the most promising growth opportunities, from both a geographic and product development standpoint.

"In the fourth quarter, we saw encouraging signs with regard to key aspects of our business as cross-border volumes increased and processed transactions continued to grow. Overall, we are very pleased with our performance, and we look forward to building on that momentum as the global economic climate continues to improve," concluded Selander.

There were no special items for the fourth quarter of 2009. The special item for the fourth quarter of 2008 represented a $6 million charge related to a litigation settlement.

Total operating expenses increased 9.8%, to $830 million, during the fourth quarter of 2009 compared to the same period in 2008, excluding special items. Currency fluctuations contributed 3.2 percentage points of the increase in expenses. The increase in total operating expenses was driven by:

* A 1.6% increase in general and administrative expenses versus the year-ago period, primarily resulting from increased personnel costs due to severance-related charges of $38 million in the fourth quarter of 2009, offset by a benefit from foreign exchange remeasurement. Currency fluctuations represented 2.3 percentage points of the increase. Excluding the impact of severance costs in both periods, general and administrative expenses declined 2.3% for the fourth quarter of 2009; and
* A 25.1% increase in advertising and marketing expenses versus the year-ago period, primarily related to incremental investments to support activities in priority countries. Currency fluctuations represented 5.4 percentage points of the increase.

The operating margin was 36.1% for the fourth quarter of 2009.

Total other expense was $10 million in the fourth quarter of 2009 versus total other expense of $17 million in the fourth quarter of 2008. The decrease was primarily due to lower interest expense of $13 million related to litigation settlements versus the comparable period in 2008.

MasterCard's effective tax rate was 35.8% in the fourth quarter of 2009 versus 46.1% in the comparable period in 2008, excluding special items. The decrease was primarily due to a more favorable mix of earnings, a lower state tax rate and a lower provision for tax reserves in the fourth quarter of 2009.

Full-Year 2009 Results

For the year-ended December 31, 2009, MasterCard reported net income of $1.5 billion, or $11.19 per diluted share, excluding the impact of special items, and net income of $1.5 billion, or $11.16 per diluted share, including special items. The 2009 earnings per share figure includes an after-tax severance charge of $0.69 per diluted share, compared with $0.16 in 2008. The 2008 earnings per share figure includes after-tax gains from the sale of a portion of the company's investment in Redecard S.A. of $0.43 per diluted share.

Special items for the full-year 2009 included charges of $7 million related to litigation settlements.

Special items for the full-year 2008 included:

* Charges of $2.5 billion related to several litigation settlements; and
* A $75 million gain in other income from the termination of a customer business agreement.

Net revenue for the full-year 2009 was $5.1 billion, a 2.1% increase versus 2008. On a constant currency basis, net revenue increased 3.9%. Increased processed transactions of 6.9% and pricing changes of approximately 6 percentage points contributed to the revenue growth in the full-year period. These factors were partially offset by the impact of lower cross-border volume growth on a U.S. dollar basis and higher rebates and incentives for 2009 compared to 2008.

Excluding special items for both periods, total operating expenses decreased 6.9%, to $2.8 billion, for full-year 2009 compared to 2008, primarily due to reduced advertising and marketing expenses versus the year-ago period. Excluding the impact of severance costs in both periods, total operating expenses decreased 10.5%. Currency fluctuations of 1.4 percentage points also contributed to the decline. The decrease in total operating expenses was driven by:

* A 3.1% decrease in general and administrative expenses, primarily resulting from lower professional fees and travel and entertainment expenses; as well as a benefit from foreign exchange remeasurement, versus the comparable period in 2008. The decrease was partially offset by an increase in personnel costs, driven by severance charges. Excluding the impact of severance costs in both periods, general and administrative expenses declined 8.5 % for 2009. Currency fluctuations of 1.2 percentage points also contributed to the decline; and
* A 19.2% decline in advertising and marketing expenses versus full-year 2008 due to cost-containment activities in response to market realities. The impact of foreign currency fluctuations contributed approximately 1.6 percentage points to the decline.

Including special items, total operating expenses in 2009 decreased 48.6%, to $2.8 billion, versus 2008.

Excluding special items, the operating margin was 44.5% for full-year 2009, up 5.5 percentage points over the year-ago period. Including special items, the operating margin was 44.3% for the full-year 2009.

Total other expense was $42 million for full-year 2009 versus total other income of $76 million for the same period in 2008, excluding special items. Investment income decreased due to gains recorded in 2008 from the sale of the remaining Redecard securities. Interest expense increased $12 million versus the year-ago period, primarily due to interest accretion associated with a 2008 litigation settlement. Including special items, total other income was $151 million for full-year 2008.

MasterCard's effective tax rate, excluding special items, was 34.1% for the full-year 2009, versus a rate of 38.8% for the full-year 2008. The decrease was primarily due to a lower deferred tax remeasurement and a decrease in tax reserves in 2009. Including the special items, the effective tax rate was 34.1% for 2009 and 33.7% for 2008.

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