MasterCard 2014 Annual Report Download - page 32

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30
The following table provides a summary of our operating results for the years ended December 31, 2014, 2013 and 2012:
For the Years Ended December 31, Percent Increase (Decrease)
2014 2013 2012 2014 2013
(in millions, except per share data and percentages)
Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,473 $ 8,346 $ 7,391 14% 13%
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,367 3,843 3,454 14% 11%
Operating income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,106 4,503 3,937 13% 14%
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53.9% 54.0% 53.3% ** **
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,462 1,384 1,174 6% 18%
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.8% 30.8% 29.9% ** **
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,617 $ 3,116 $ 2,759 16% 13%
Diluted earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.10 $ 2.56 $ 2.19 21% 17%
Diluted weighted-average shares outstanding . . . . . . . . . . . . 1,169 1,215 1,258 (4)% (3)%
** Not meaningful.
Business Environment
We process transactions from more than 210 countries and territories and in more than 150 currencies. Net revenue generated in
the United States was 39% of total revenue in each of 2014, 2013 and 2012. No individual country, other than the United States,
generated more than 10% of total revenue in any such period, but differences in market growth, economic health and foreign
exchange fluctuations in certain countries can have an impact on the proportion of revenue generated outside the United States
over time. While the global nature of our business helps protect our operating results from adverse economic conditions in a single
or a few countries, the significant concentration of our revenue generated in the United States makes our business particularly
susceptible to adverse economic conditions in the United States.
The competitive and evolving nature of the global payments industry provides both challenges to and opportunities for the continued
growth of our business. Adverse economic trends (including distress in financial markets, turmoil in specific economies around
the world and additional government intervention) have impacted the environment in which we operate. Certain of our customers,
merchants that accept our brands and cardholders who use our brands, have been directly impacted by these adverse economic
conditions.
MasterCard’s financial results may be negatively impacted by actions taken by individual financial institutions or by governmental
or regulatory bodies. In addition, further political instability or a decline in economic conditions in the countries in which the
Company operates may accelerate the timing of or increase the impact of risks to our financial performance. As a result, our
revenue may be negatively impacted, or the Company may be impacted in several ways. MasterCard continues to monitor political
and economic conditions around the world to identify opportunities for the continued growth of our business and to evaluate the
evolution of the global payments industry. Notwithstanding recent encouraging trends, the extent and pace of economic recovery
in various regions remains uncertain and the overall business environment may present challenges for MasterCard to grow its
business. For a full discussion see “Risk Factors - Business Risk” in Part I, Item 1A of this Report.
In addition, our business and our customers’ businesses are subject to regulation in many countries. Regulatory bodies may seek
to impose rules and price controls on certain aspects of our business and the payments industry. For further discussion, see Note
18 (Legal and Regulatory Proceedings) to the consolidated financial statements included in Part II, Item 8 and our risk factor in
“Risk Factors - Legal and Regulatory Risks” in Part I, Item 1A of this Report. Further, information security risks for global
payments and technology companies such as MasterCard have significantly increased in recent years. Although to date we have
not experienced any material impacts relating to cyber-attacks or other information security breaches, there can be no assurance
that we will be immune to these risks and not suffer such losses in the future. See our risk factor in “Risk Factors - Business
Risks” in Part I, Item 1A of this Report related to a failure or breach of our security systems or infrastructure as a result of cyber-
attacks.
Impact of Foreign Currency Rates
Our overall operating results can be impacted by changes in foreign currency exchange rates, especially the strengthening or
weakening of the U.S. dollar versus the euro and Brazilian real. The functional currency of MasterCard Europe, our principal