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| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| Delaware | 98-0212790 | |
| (State or other jurisdiction | (I.R.S. Employer | |
| of incorporation or organization) | Identification Number) |
| Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
| (Do not check if a smaller reporting company) |
| Item 1. |
Unaudited Condensed Consolidated Financial Statements
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| June 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
| (Unaudited) | (Audited) | |||||||
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Assets
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Current assets:
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||||||||
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Cash and cash equivalents
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$ | 44,250,132 | $ | 56,830,466 | ||||
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Short-term investments
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72,384,019 | 5,342,766 | ||||||
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Accounts receivable, net
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14,984,136 | 12,618,173 | ||||||
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Funds receivable from customers
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7,910,434 | 6,151,518 | ||||||
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Prepaid expenses
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1,331,890 | 913,262 | ||||||
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Deferred tax assets
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12,396,948 | 12,911,256 | ||||||
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Other assets
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5,964,157 | 6,867,767 | ||||||
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Total current assets
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159,221,716 | 101,635,208 | ||||||
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Non-current assets:
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Long-term investments
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50,201,025 | 78,846,281 | ||||||
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Property and equipment, net
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31,316,388 | 20,817,712 | ||||||
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Goodwill, net
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61,356,716 | 60,496,314 | ||||||
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Intangible assets, net
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3,819,064 | 4,141,167 | ||||||
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Deferred tax assets
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1,939,191 | 2,975,118 | ||||||
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Other assets
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671,876 | 771,223 | ||||||
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Total non-current assets
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149,304,260 | 168,047,815 | ||||||
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Total assets
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$ | 308,525,976 | $ | 269,683,023 | ||||
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Liabilities and Shareholders’ Equity
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Current liabilities:
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Accounts payable and accrued expenses
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$ | 20,333,485 | $ | 17,232,103 | ||||
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Funds payable to customers
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58,176,211 | 48,788,225 | ||||||
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Payroll and social security payable
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10,545,802 | 10,786,534 | ||||||
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Taxes payable
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8,061,079 | 11,487,574 | ||||||
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Loans payable and other financial liabilities
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105,498 | 100,031 | ||||||
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Dividends payable
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3,531,337 | — | ||||||
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Total current liabilities
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100,753,412 | 88,394,467 | ||||||
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Non-current liabilities:
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Payroll and social security payable
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3,106,880 | 2,562,343 | ||||||
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Loans payable and other financial liabilities
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125,721 | 188,846 | ||||||
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Deferred tax liabilities
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4,726,032 | 5,167,699 | ||||||
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Other liabilities
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2,184,761 | 1,651,398 | ||||||
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Total non-current liabilities
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10,143,394 | 9,570,286 | ||||||
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Total liabilities
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$ | 110,896,806 | $ | 97,964,753 | ||||
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Commitments and contingencies (Note 8)
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Shareholders’ equity:
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Common stock, $0.001 par value, 110,000,000 shares authorized,
44,141,707 and 44,131,376 shares issued and outstanding at June 30,
2011 and December 31, 2010, respectively
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$ | 44,142 | $ | 44,131 | ||||
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Additional paid-in capital
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120,429,310 | 120,391,622 | ||||||
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Retained earnings
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95,498,168 | 73,681,556 | ||||||
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Accumulated other comprehensive loss
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(18,342,450 | ) | (22,399,039 | ) | ||||
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Total shareholders’ equity
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197,629,170 | 171,718,270 | ||||||
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Total liabilities and shareholders’ equity
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$ | 308,525,976 | $ | 269,683,023 | ||||
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2
| Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
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Net revenues
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$ | 130,837,828 | $ | 98,448,105 | $ | 69,378,160 | $ | 52,510,331 | ||||||||
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Cost of net revenues
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(31,270,822 | ) | (21,304,611 | ) | (16,939,118 | ) | (11,411,561 | ) | ||||||||
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Gross profit
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99,567,006 | 77,143,494 | 52,439,042 | 41,098,770 | ||||||||||||
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Operating expenses:
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Product and technology development
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(10,675,783 | ) | (7,201,240 | ) | (5,518,892 | ) | (3,976,466 | ) | ||||||||
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Sales and marketing
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(28,865,357 | ) | (22,581,944 | ) | (15,636,413 | ) | (11,473,145 | ) | ||||||||
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General and administrative
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(19,183,316 | ) | (13,041,477 | ) | (9,732,340 | ) | (6,834,592 | ) | ||||||||
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Total operating expenses
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(58,724,456 | ) | (42,824,661 | ) | (30,887,645 | ) | (22,284,203 | ) | ||||||||
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Income from operations
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40,842,550 | 34,318,833 | 21,551,397 | 18,814,567 | ||||||||||||
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Other income (expenses):
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Interest income and other financial gains
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4,123,668 | 1,711,529 | 2,249,898 | 917,388 | ||||||||||||
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Interest expense and other financial charges
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(1,509,769 | ) | (6,351,339 | ) | (880,819 | ) | (3,355,921 | ) | ||||||||
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Foreign currency (loss) / gain
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(1,203,369 | ) | 361,494 | (702,714 | ) | (35,478 | ) | |||||||||
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Other income, net
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260,441 | — | 240,097 | — | ||||||||||||
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Net income before income / asset tax expense
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42,513,521 | 30,040,517 | 22,457,859 | 16,340,556 | ||||||||||||
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Income / asset tax expense
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(13,635,062 | ) | (8,745,954 | ) | (7,637,033 | ) | (4,666,593 | ) | ||||||||
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Net income
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$ | 28,878,459 | $ | 21,294,563 | $ | 14,820,826 | $ | 11,673,963 | ||||||||
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| Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
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Basic EPS
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Basic net income per common share
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$ | 0.65 | $ | 0.48 | $ | 0.34 | $ | 0.26 | ||||||||
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Weighted average shares
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44,134,763 | 44,117,364 | 44,138,105 | 44,121,087 | ||||||||||||
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Diluted EPS
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Diluted net income per common share
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$ | 0.65 | $ | 0.48 | $ | 0.34 | $ | 0.26 | ||||||||
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Weighted average shares
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44,149,911 | 44,142,829 | 44,152,296 | 44,145,255 | ||||||||||||
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3
| Accumulated | ||||||||||||||||||||||||||||
| Additional | other | |||||||||||||||||||||||||||
| Comprehensive | Common stock | paid-in | Retained | comprehensive | ||||||||||||||||||||||||
| income | Shares | Amount | capital | Earnings | income / (loss) | Total | ||||||||||||||||||||||
|
Balance as of December 31, 2009
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44,120,269 | $ | 44,120 | $ | 120,257,998 | $ | 17,656,537 | $ | (23,765,418 | ) | $ | 114,193,237 | ||||||||||||||||
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Stock options exercised
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4,626 | 5 | 5,444 | — | — | 5,449 | ||||||||||||||||||||||
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Stock-based compensation — stock options
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— | — | 121 | — | — | 121 | ||||||||||||||||||||||
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Stock-based compensation — restricted shares
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— | — | 37,696 | — | — | 37,696 | ||||||||||||||||||||||
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Stock-based compensation LTRP
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— | — | 73,923 | — | — | 73,923 | ||||||||||||||||||||||
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LTRP shares issued
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3,981 | 4 | (4 | ) | — | — | — | |||||||||||||||||||||
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Net income
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$ | 21,294,563 | — | — | — | 21,294,563 | — | 21,294,563 | ||||||||||||||||||||
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Currency translation adjustment
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(1,468,912 | ) | — | — | — | — | (1,468,912 | ) | (1,468,912 | ) | ||||||||||||||||||
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Unrealized net loss on investments
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(386,935 | ) | — | — | — | — | (386,935 | ) | (386,935 | ) | ||||||||||||||||||
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Realized net gain on investments
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(27,630 | ) | — | — | — | — | (27,630 | ) | (27,630 | ) | ||||||||||||||||||
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Comprehensive income
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$ | 19,411,086 | ||||||||||||||||||||||||||
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Balance as of June 30, 2010
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44,128,876 | $ | 44,129 | $ | 120,375,178 | $ | 38,951,100 | $ | (25,648,895 | ) | $ | 133,721,512 | ||||||||||||||||
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Stock options exercised
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2,500 | 2 | 12,748 | — | — | 12,750 | ||||||||||||||||||||||
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Stock-based compensation — stock options
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— | — | 123 | — | — | 123 | ||||||||||||||||||||||
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Stock-based compensation — restricted shares
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— | — | — | — | — | — | ||||||||||||||||||||||
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Stock-based compensation LTRP
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— | — | 3,573 | — | — | 3,573 | ||||||||||||||||||||||
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Net income
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$ | 34,730,456 | — | — | — | 34,730,456 | — | 34,730,456 | ||||||||||||||||||||
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Currency translation adjustment
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2,817,394 | — | — | — | — | 2,817,394 | 2,817,394 | |||||||||||||||||||||
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Unrealized net gains on investments
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432,462 | — | — | — | — | 432,462 | 432,462 | |||||||||||||||||||||
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Realized net gains on investments
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— | — | — | — | — | — | — | |||||||||||||||||||||
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||||||||||||||||||||||||||||
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Comprehensive income
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$ | 37,980,312 | ||||||||||||||||||||||||||
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||||||||||||||||||||||||||||
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Balance as of December 31, 2010
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44,131,376 | $ | 44,131 | $ | 120,391,622 | $ | 73,681,556 | $ | (22,399,039 | ) | $ | 171,718,270 | ||||||||||||||||
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||||||||||||||||||||||||||||
4
| Accumulated | ||||||||||||||||||||||||||||
| Additional | other | |||||||||||||||||||||||||||
| Comprehensive | Common stock | paid-in | Retained | comprehensive | ||||||||||||||||||||||||
| income | Shares | Amount | capital | Earnings | income / (loss) | Total | ||||||||||||||||||||||
|
Balance as of December 31, 2010
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44,131,376 | $ | 44,131 | $ | 120,391,622 | $ | 73,681,556 | $ | (22,399,039 | ) | $ | 171,718,270 | ||||||||||||||||
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Stock options exercised
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5,637 | 6 | 10,700 | — | — | 10,706 | ||||||||||||||||||||||
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Stock-based compensation LTRP
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— | — | 26,993 | — | — | 26,993 | ||||||||||||||||||||||
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Dividend Distribution
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— | — | — | (7,061,847 | ) | — | (7,061,847 | ) | ||||||||||||||||||||
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LTRP shares issued
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4,694 | 5 | (5 | ) | — | — | — | |||||||||||||||||||||
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Net income
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$ | 28,878,459 | — | — | — | 28,878,459 | — | 28,878,459 | ||||||||||||||||||||
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Currency translation adjustment
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3,720,681 | — | — | — | — | 3,720,681 | 3,720,681 | |||||||||||||||||||||
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Unrealized net gains on investments
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381,435 | — | — | — | — | 381,435 | 381,435 | |||||||||||||||||||||
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Realized net gain on investments
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(45,527 | ) | — | — | — | — | (45,527 | ) | (45,527 | ) | ||||||||||||||||||
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Comprehensive income
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$ | 32,935,048 | ||||||||||||||||||||||||||
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Balance as of June 30, 2011
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44,141,707 | $ | 44,142 | $ | 120,429,310 | $ | 95,498,168 | $ | (18,342,450 | ) | $ | 197,629,170 | ||||||||||||||||
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5
| Six Months Ended June 30, | ||||||||
| 2011 | 2010 | |||||||
| (Unaudited) | ||||||||
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Cash flows from operations:
|
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Net income
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$ | 28,878,459 | $ | 21,294,563 | ||||
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Adjustments to reconcile net income to net cash provided by
operating activities:
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Depreciation and amortization
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3,305,795 | 2,187,353 | ||||||
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Accrued interest
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(2,353,234 | ) | (37,763 | ) | ||||
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Stock-based compensation expense — stock options
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— | 121 | ||||||
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Stock-based compensation expense — restricted shares
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— | 37,696 | ||||||
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LTRP accrued compensation
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2,303,542 | 1,515,662 | ||||||
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Deferred income taxes
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1,484,213 | (1,099,249 | ) | |||||
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Changes in assets and liabilities:
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||||||||
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Accounts receivable
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(164,556 | ) | (4,578,556 | ) | ||||
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Funds receivable from customers
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(1,779,329 | ) | 247,441 | |||||
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Prepaid expenses
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(393,477 | ) | 51,734 | |||||
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Other assets
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1,067,637 | (1,735,721 | ) | |||||
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Accounts payable and accrued expenses
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(5,766,185 | ) | 5,249,442 | |||||
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Funds payable to customers
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6,718,843 | 4,738,946 | ||||||
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Other liabilities
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430,606 | (1,779,899 | ) | |||||
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Net cash provided by operating activities
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33,732,314 | 26,091,770 | ||||||
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Cash flows from investing activities:
|
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Purchase of investments
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(200,995,988 | ) | (64,252,379 | ) | ||||
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Proceeds from sale and maturity of investments
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171,094,260 | 26,860,341 | ||||||
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Purchases of intangible assets
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(108,823 | ) | (12,733 | ) | ||||
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Purchases of property and equipment
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(13,247,416 | ) | (3,906,287 | ) | ||||
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Net cash used in investing activities
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(43,257,967 | ) | (41,311,058 | ) | ||||
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Cash flows from financing activities:
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Decrease in loans payable
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— | (2,993,985 | ) | |||||
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Dividends distribution
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(3,530,510 | ) | — | |||||
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Stock options exercised
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10,706 | 5,449 | ||||||
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Net cash used in financing activities
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(3,519,804 | ) | (2,988,536 | ) | ||||
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Effect of exchange rate changes on cash and cash equivalents
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465,123 | (26,858 | ) | |||||
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Net decrease in cash and cash equivalents
|
(12,580,334 | ) | (18,234,682 | ) | ||||
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Cash and cash equivalents, beginning of the period
|
56,830,466 | 49,803,402 | ||||||
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Cash and cash equivalents, end of the period
|
$ | 44,250,132 | $ | 31,568,720 | ||||
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Supplemental cash flow information:
|
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Cash paid for interest
|
$ | 26,426 | $ | 5,753,706 | ||||
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Cash paid for income and asset taxes
|
$ | 14,806,871 | $ | 10,377,362 | ||||
6
| 1. |
Nature of Business
|
|
MercadoLibre Inc. (the “Company”) is an e-commerce enabler whose mission is to build the
necessary online and technology tools to allow practically anyone to trade almost anything,
helping to make inefficient markets more efficient in Latin America.
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The Company developed a web-based marketplace in which buyers and sellers are brought together
to browse, buy and sell items such as computers, electronics, collectibles, automobiles,
clothing and a host of practical and miscellaneous items. Additionally, the Company introduced
MercadoPago in 2004, an integrated online payments solution. MercadoPago was designed to
facilitate transactions on the MercadoLibre Marketplace by providing an escrow mechanism that
enables users to send and receive payments online.
|
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Since 2004, the Company introduced an online classifieds platform for motor vehicles, vessels
and aircrafts and since 2006 the real state online classifieds platform. In 2006, the Company
launched eShops, a new platform tailored to attract lower rotation items and increase the
breadth of products offered, the introduction of user generated information guides for buyers
that improve the shopping experience, and the expansion of the online classifieds model by
adding the services category.
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During 2007 the Company also launched a new and improved version of its MercadoPago payments
platform in Chile and Colombia as well as in Argentina during 2008. The new MercadoPago, in
addition to improving the ease of use and efficiency of payments for marketplace purchases,
also allows for payments outside of the Company’s marketplaces. Users are able to transfer
money to other users with MercadoPago accounts and to incorporate MercadoPago as a means of
payments in their independent commerce websites. In this way MercadoPago 3.0 as it has been
called is designed to meet the growing demand for Internet based payments systems in Latin
America. On March 30, 2010, the Company started processing off-MercadoLibre transactions
through its new direct payments product to any site in Brazil which elects to adopt it. On July
16, 2010, the Company launched MercadoPago 3.0 in Brazil for all of its marketplace
transactions. In February 2011, the Company started processing off-platform transactions in
Mexico using its new direct payments product, MercadoPago 3.0, for any site in Mexico that
elects to adopt it, while maintaining the escrow product for on-platform transactions. On April
15, 2011, the Company launched a new and improved version of its MercadoPago payments platform
for all its marketplace transactions in Mexico.
|
|
As of June 30, 2011, the Company, through its wholly-owned subsidiaries, operated online
commerce platforms directed towards Argentina, Brazil, Chile, Colombia, Costa Rica, Dominican
Republic, Ecuador, Mexico, Panama, Peru, Portugal, Uruguay and Venezuela, and online payments
solutions directed towards Argentina, Brazil, Mexico, Venezuela, Chile and Colombia. In
addition, the Company operates a real estate classified platform that covers some areas of
Florida, U.S.A.
|
7
| 2. |
Summary of Significant Accounting Policies
|
|
Basis of presentation
|
|
The accompanying unaudited interim condensed consolidated financial statements are prepared in
conformity with accounting principles generally accepted in the United States of America (U.S.
GAAP) and include the accounts of the Company and its wholly-owned subsidiaries. These
financial statements are stated in US dollars. All intercompany transactions and balances have
been eliminated.
|
|
Substantially all revenues and operating costs are generated in the Company’s foreign
operations, amounting to approximately 99.6% and 99.4% of the consolidated totals during the
six-month periods ended June 30, 2011 and 2010, respectively. Long-lived assets located in the
foreign operations totaled $90,339,470 and $81,834,265 as of June 30, 2011 and December 31,
2010, respectively. Cash and cash equivalents as well as short and long-term investments,
totaling $166,835,176 and $141,019,513 at June 30, 2011 and December 31, 2010, respectively,
are mainly located in the United States of America and Brazil.
|
|
These unaudited interim condensed financial statements reflect the Company’s consolidated
financial position as of June 30, 2011 and December 31, 2010. These statements also show the
Company’s consolidated statement of income for the three- and six-month periods ended June 30,
2011 and 2010, its consolidated statement of shareholders’ equity and its consolidated
statement of cash flows for the six-month periods ended June 30, 2011 and 2010. These
statements include all normal recurring adjustments that management believes are necessary to
fairly state the Company’s financial position, operating results and cash flows.
|
|
Because all of the disclosures required by generally accepted accounting principles in the
United States of America for annual consolidated financial statements are not included herein,
these interim financial statements should be read in conjunction with the audited financial
statements and the notes thereto for the year ended December 31, 2010, contained in the
Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”)
on February 25, 2011. The condensed consolidated statements of income, shareholders’ equity and
cash flows for the periods presented are not necessarily indicative of results expected for any
future period.
|
|
Revenue Recognition
|
|
The Company generates revenues for different services provided. When more than one
service is included in one single arrangement with the customer, the Company recognizes
revenue according to multiple element arrangements accounting, distinguishing between
each of the services provided and allocating revenues based on their respective selling prices.
|
8
| 2. |
Summary of Significant Accounting Policies (Continued)
|
|
Revenue Recognition (Continued)
|
|
Revenues are recognized when evidence of an arrangement exists, the fee is fixed or
determinable, no significant obligation remains and collection of the receivable is reasonably
assured.
|
|
Services are separately recognized as revenue according to the following criteria described for
each type of services:
|
| • |
Services for intermediation between on-line buyers and sellers, for which the company charges
a percentage on the transaction value (“final value fees”), are recognized as revenue once the
sale transaction between the buyer and seller is successfully completed (which occurs upon
confirmation of the sale by the seller).
|
| • |
Services for the use of the Company’s on-line payments solution, for transactions
off-platform ordered by MercadoPago customers. The Company does not charge a separate fee for
on-platform transactions in certain countries. The fee that we charge for all off-marketplace
platform transactions is recorded as revenue once the transaction is completed, at the time
when the payment is processed by the Company. For on-marketplace platform transactions, we
generate revenue in the countries where we offer the service in a way that implies that the
customer has to pay an additional fee for the right to use the payments solution.
|
| • |
Listing and optional feature services, which fees relate to the right of a seller to have the
item offered listed in a preferential way, as well as classified advertising services, are
recorded as revenue ratably during the listing period. Those fees are charged at the time the
listing is uploaded onto the Company’s platform and is not subject to successful sale of the
items listed.
|
| • |
Advertising revenues such as the sale of banners are recognized on accrual basis, and
MercadoClics services or sponsorship of sites are recognized based on per-click values and as
the impressions are delivered.
|
|
Credit Cards Receivables
|
|
Credit cards receivables from customers mainly relate to the Company’s payments solution
and arise due to the time taken to clear transactions through external payment networks or
during a short period of time until those credit cards receivables are sold to financial
institutions.
|
|
The company maintains allowances for doubtful accounts for estimated losses that may result
from the inability of its customers to make required payments. Allowances are based upon
several factors including, but not limited to, historical experience and the current condition
of specific customers.
|
9
| 2. |
Summary of Significant Accounting Policies (Continued)
|
|
Credit Cards Receivables (Continued)
|
|
Credit cards receivables are presented net of the related allowance for doubtful accounts and
chargebacks.
|
|
As of June 30, 2011, there are no past due credit card receivables.
|
|
Foreign Currency Translation
|
|
All of the Company’s foreign operations have determined the local currency to be their
functional currency, except for Venezuela, as described below. Accordingly, these foreign
subsidiaries translate assets and liabilities from their local currencies to U.S. dollars
using year end exchange rates while income and expense accounts are translated at the average
rates in effect during the year. The resulting translation adjustment is recorded as part of
accumulated other comprehensive income (loss), a component of shareholders’ equity. Gains and
losses resulting from transactions denominated in non-functional currencies are recognized in
earnings. Net foreign currency transaction results are included in the consolidated statements
of income under the caption “Foreign currency loss” and amounted to $(702,714) and $(35,478)
for the three-month periods ended June 30, 2011 and 2010, respectively. For the six-month
periods ended June 30, 2011 and 2010, “Foreign currency (loss) / gain” amounted to
$(1,203,369) and $361,494, respectively
|
|
Until September 30, 2009, the Company translated its Venezuelan subsidiaries assets,
liabilities, income and expense accounts at the official rate of 2.15 “Bolivares Fuertes”
per US dollar.
|
|
Starting in the fourth quarter of 2009, as a result of the changes in facts and circumstances
that affected the Company’s ability to convert currency for dividends remittances using the
official exchange rate in Venezuela, the Venezuelan subsidiaries assets, liabilities, income
and expense accounts were translated using the parallel exchange rate resulting in the
recognition in that quarter of a currency translation loss adjustment of $16,977,276 recorded
in accumulated other comprehensive income/(loss). The average exchange rate used for
translating the fourth quarter of 2009 results was 5.67 “Bolivares Fuertes” per US dollar and
the year-end exchange rate used for translating assets and liabilities was 6.05 “Bolivares
Fuertes” per US dollar.
|
|
As of the date of these interim condensed consolidated financial statements the Company did not
buy US dollars at the official rate of 2.15 “Bolivares Fuertes” per US dollar.
|
|
According to US GAAP, we have transitioned our Venezuelan operations to highly inflationary
status as of January 1, 2010 considering the US dollar as the functional currency. See “Highly
inflationary status in Venezuela” below.
|
|
Therefore, no translation effect was accounted for in other comprehensive income since January
1, 2010 related to our Venezuelan operations.
|
10
| 2. |
Summary of Significant Accounting Policies (Continued)
|
|
Foreign Currency Translation (Continued)
|
|
Until May 13, 2010, the only way by which US dollars could be purchased outside the official
currency market was using an indirect mechanism consisting in the purchase and sale of
securities, including national public debt bonds (DPNs) denominated in Bolivares Fuertes and
bonds issued by the government that were denominated in U.S. dollars. This mechanism for
transactions in certain securities created an indirect “parallel” foreign currency exchange
market in Venezuela that enabled entities to obtain foreign currency through financial brokers
without going through Commission for the Administration of Foreign Exchange
(“CADIVI”). Although the parallel exchange rate was higher, and accordingly less
beneficial, than the official exchange rate, some entities used the “parallel” market to
exchange currency because of the delays of CADIVI in approving in a timely manner the exchange
of currency requested by such entities. Until May 13, 2010, our Venezuelan subsidiaries used
this mechanism to buy US dollars and accordingly we used the parallel average exchange rate to
re-measure those foreign currency transactions.
|
|
However, on May 14th, 2010, the Venezuelan government enacted reforms to its exchange
regulations and close-down such parallel market by declaring that foreign-currency-denominated
securities issued by Venezuelan entities were included in the definition of foreign currency,
thus making the Venezuelan Central Bank (BCV) the only institution that could legally
authorize the purchase or sale of foreign currency bonds, thereby excluding non-authorized
brokers from the foreign exchange market.
|
|
Trading of foreign currencies was re-opened as a regulated market on June 9, 2010 with the
Venezuelan Central Bank as the only institution through which foreign currency-denominated
transactions can be brokered. Under the new system, known as the Foreign
Currency Securities Transactions System (SITME), entities domiciled in Venezuela can buy U.S.
dollar—denominated securities only through banks authorized by the BCV to import goods,
services or capital inputs. Additionally, the SITME imposes volume restrictions on an entity’s
trading activity, limiting such activity to a maximum equivalent of $50,000 per day, not to
exceed $350,000 in a calendar month. This limitation is non-cumulative, meaning that an entity
cannot carry over unused volume from one month to the next.
|
|
As a consequence of this new system, commencing on June 9, 2010, we have transitioned from the
parallel exchange rate to the SITME rate and started re-measuring
foreign currency transactions using the SITME rate published by BCV, which was 5.27 “Bolivares Fuertes” per
U.S. dollar as of June 9, 2010.
|
|
For the period beginning on May 14, 2010 and ending on June 8, 2010 (during which there was no
open foreign currency markets) we applied US GAAP guidelines, which state that if
exchangeability between two currencies is temporarily lacking at the transaction date or
balance sheet date, the first subsequent rate at which exchanges could be made shall be used.
|
11
| 2. |
Summary of Significant Accounting Policies (Continued)
|
|
Foreign Currency Translation (Continued)
|
|
Accordingly, the June 9, 2010 exchange rate published by the Venezuelan Central Bank has been
used to re-measure transactions during the abovementioned period. As of June 30, 2011, the
exchange rate used to re-measure transactions is 5.30 “Bolivares Fuertes” per U.S. dollar.
|
|
The following table sets forth the assets, liabilities and net assets of the Company’s
Venezuelan subsidiaries, before intercompany eliminations, as of June 30, 2011 and December
31, 2010.
|
| June 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
|
|
||||||||
|
Venezuelan operations
|
||||||||
|
Assets
|
$ | 21,299,401 | $ | 21,928,340 | ||||
|
Liabilities
|
(7,547,390 | ) | (8,212,581 | ) | ||||
|
Net Assets
|
13,752,011 | 13,715,759 | ||||||
|
As of June 30, 2011, net assets of the Venezuelan subsidiaries (before intercompany
eliminations) amount to approximately 7.0% of our consolidated net assets, and cash and
investments of the Venezuelan subsidiaries held in local currency in Venezuela amount to
approximately 2.9% of our consolidated cash and investments.
|
|
Although, the current mechanisms available to obtain US dollars for dividends distributions to
shareholders outside Venezuela imply increased restrictions, the Company does not expect that
the current restrictions to purchase dollars have a significant adverse effect on its business
plans with regard to the investment in Venezuela.
|
|
Highly inflationary status in Venezuela
|
|
During May 2009, the International Practices Task Force discussed the highly inflationary
status of the Venezuelan economy. Historically, the Task Force has used the Consumer Price
Index (CPI) when considering the inflationary status of the Venezuelan economy.
|
|
The CPI has existed since 1984. However, the CPI covers only the cities of Caracas and
Maracaibo. Commencing on January 1, 2008, the National Consumer Price Index (NCPI) has been
developed to cover the entire country of Venezuela. Since inflation data is not available to
compute a cumulative three year inflation rate for the entire country solely based on the NCPI,
the Company uses a blended rate using the NCPI and CPI to calculate Venezuelan inflation rate.
|
12
| 2. |
Summary of Significant Accounting Policies (Continued)
|
|
Foreign Currency Translation (Continued)
|
|
The cumulative three year inflation rate as of December 31, 2009 was calculated using the CPI
information for periods before January 1, 2008 and NCPI information for the period after
January 1, 2008. The blended CPI/NCPI three-year inflation index (23 months of NCPI and 13
months of CPI) as of November 30, 2009 exceeded 100%. According to US GAAP, calendar year-end
companies should apply highly inflationary accounting as from January 1, 2010. Therefore, the
Company transitioned its Venezuelan operations to highly inflationary status as of January 1,
2010 considering the US dollar as the functional currency.
|
|
Taxes on Revenues
|
|
The Company’s subsidiaries in Brazil, Argentina, Venezuela and Colombia are subject to certain
taxes on revenues which are classified as cost of revenues. Taxes on revenues totaled
$5,288,963 and $3,616,846 for the three-month periods ended June 30, 2011 and 2010,
respectively. Taxes on revenues totaled $9,750,510 and $6,624,934 for the six-month periods
ended June 30, 2011 and 2010, respectively.
|
|
Income and Asset Taxes
|
|
The Company is subject to U.S. and foreign income taxes. The Company accounts for income taxes
following the liability method of accounting which requires the recognition of deferred tax
liabilities and assets for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases of assets and liabilities. Deferred
tax assets are also recognized for tax loss carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect on deferred tax
assets or liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. A valuation allowance is recorded when, based on the available
evidence, it is more likely than not that all or a portion of the Company’s deferred tax assets
will not be realized. The Company’s income tax expense consists of taxes currently payable, if
any, plus the change during the period in the Company’s deferred tax assets and liabilities.
|
|
From fiscal year 2008 to fiscal year 2014, the Company’s Argentine subsidiary is a beneficiary
of a software development law. Part of the benefits obtained from being a beneficiary of the
aforementioned law is a relief of 60% of total income tax determined in each year, until fiscal
year 2014. Aggregate tax benefit totaled $1,356,432 and $1,180,802 for the three-month periods
ended June 30, 2011 and 2010, respectively. Aggregate tax benefit totaled $2,535,435 and
$1,970,487 for the six-month periods ended June 30, 2011 and 2010, respectively. Aggregate per
share effect of the Argentine tax holiday amounts to $0.03 and $0.03 for the three-month
periods ended June 30, 2011 and 2010, respectively. Aggregate per share effect of the Argentine
tax holiday amounts to $0.06 and $0.04 for the six-month periods ended June 30, 2011 and 2010,
respectively. If the Company had not been granted the Argentine tax holiday, the Company would
have pursued an alternative tax
planning strategy and, therefore, the impact of not having this particular benefit would not
necessarily be the abovementioned dollar and per share effect.
|
13
| 2. |
Summary of Significant Accounting Policies (Continued)
|
|
Income and Asset Taxes (Continued)
|
|
As of June 30, 2011 and December 31, 2010, MercadoLibre, Inc has included in the non-current
deferred tax assets line the foreign tax credits related to the dividend distributions received
from its subsidiaries for a total amount of $1,395,465 and $2,436,224, respectively. Those
foreign tax credits will be used to offset the future domestic income tax payable.
|
|
Use of estimates
|
|
The preparation of condensed consolidated financial statements in conformity with generally
accepted accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Estimates are used for, but not limited to accounting for
allowance for doubtful accounts, depreciation, amortization, impairment and
useful lives of long-lived assets, compensation cost related to cash and share-based
compensation and restricted shares, recognition of current and deferred income taxes and
contingencies. Actual results could differ from those estimates.
|
|
Comprehensive Income
|
|
Comprehensive income is comprised of two components, net income and other comprehensive income
(loss), and defined as all other changes in equity of the Company that result from transactions
other than with shareholders. Other comprehensive income (loss) includes the cumulative
translation adjustment relating to the translation of the financial statements of the Company’s
foreign subsidiaries and unrealized gains on investments classified as available-for-sale
securities. Total comprehensive income for the three-month periods ended June 30, 2011 and 2010
amounted to $18,052,267 and $10,420,151, respectively and for the six-month periods ended June
30, 2011 and 2010 amounted to $32,935,048 and $19,411,086 respectively.
|
|
Recent Accounting Pronouncements
|
|
Presentation of Comprehensive Income
|
|
On June 16, 2011 the Financial Accounting Standards Board (“FASB”) issued an amendment to
disclosures about the presentation of the comprehensive income in the financial statements.
The new guidance provides two ways to present the components of the comprehensive income, in
either (a) a continuous statement of comprehensive income, or (b) two separate but consecutive
statements. The amended disclosures about the presentation of the comprehensive income in the
financial statements are effective for fiscal years, and interim periods within those years,
beginning after December 15, 2011. The Company does
not expect to have a significant impact on the presentation of the consolidated financial
statements.
|
14
| 2. |
Summary of Significant Accounting Policies (Continued)
|
|
Recent Accounting Pronouncements (Continued)
|
|
In May 2011, the FASB issued new accounting guidance that amends some fair value measurement
principles and it expands the ASC 820 existing disclosure requirements for fair value
measurements. The new guidance states that the concepts of highest and best use and valuation
premise are only relevant when measuring the fair value of nonfinancial assets and prohibits
the grouping of financial instruments for purposes of determining their fair values
when the unit of account is specified in other guidance. We will adopt this accounting standard
upon its effective date for periods ending on or after December 15, 2011, and do not anticipate
that this adoption will have a significant impact on our financial position or results of
operations.
|
| 3. |
Net Income per Share
|
15
| 3. |
Net Income per Share (Continued)
|
| Three Months Ended June 30, | ||||||||||||||||
| 2011 | 2010 | |||||||||||||||
| Basic | Diluted | Basic | Diluted | |||||||||||||
|
|
||||||||||||||||
|
Net income
|
$ | 14,820,826 | $ | 14,820,826 | $ | 11,673,963 | $ | 11,673,963 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Net income available to common
shareholders attributable to unvested
restricted shares
|
— | — | 1,724 | 1,724 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Net income available to common
shareholders attributable to common stock
|
$ | 14,820,826 | $ | 14,820,826 | $ | 11,672,239 | $ | 11,672,239 | ||||||||
|
|
||||||||||||||||
| Six Months Ended June 30, | ||||||||||||||||
| 2011 | 2010 | |||||||||||||||
| Basic | Diluted | Basic | Diluted | |||||||||||||
|
|
||||||||||||||||
|
Net income
|
$ | 28,878,459 | $ | 28,878,459 | $ | 21,294,563 | $ | 21,294,563 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Net income available to common
shareholders attributable to unvested
restricted shares
|
— | — | 3,583 | 3,583 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Net income available to common
shareholders attributable to common stock
|
$ | 28,878,459 | $ | 28,878,459 | $ | 21,290,980 | $ | 21,290,980 | ||||||||
|
|
||||||||||||||||
| Three Months Ended June 30, | ||||||||||||||||
| 2011 | 2010 | |||||||||||||||
| Basic | Diluted | Basic | Diluted | |||||||||||||
|
|
||||||||||||||||
|
Net income available to common shareholders
per common share
|
$ | 0.34 | $ | 0.34 | $ | 0.26 | $ | 0.26 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Numerator:
|
||||||||||||||||
|
Net income available to common shareholders
|
$ | 14,820,826 | $ | 14,820,826 | $ | 11,672,239 | $ | 11,672,239 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Denominator:
|
||||||||||||||||
|
Weighted average of common stock outstanding
for Basic
earnings per share
|
44,138,105 | 44,138,105 | 44,121,087 | 44,121,087 | ||||||||||||
|
Adjustment for stock options
|
— | 9,487 | — | 14,811 | ||||||||||||
|
Adjustment for shares granted under LTRP
|
— | 4,704 | — | 9,357 | ||||||||||||
|
|
||||||||||||||||
|
Adjusted weighted average of common stock
outstanding
for Diluted earnings per share
|
44,138,105 | 44,152,296 | 44,121,087 | 44,145,255 | ||||||||||||
|
|
||||||||||||||||
16
| 3. |
Net Income per Share (Continued)
|
| Six Months Ended June 30, | ||||||||||||||||
| 2011 | 2010 | |||||||||||||||
| Basic | Diluted | Basic | Diluted | |||||||||||||
|
|
||||||||||||||||
|
Net income available to common shareholders
per common share
|
$ | 0.65 | $ | 0.65 | $ | 0.48 | $ | 0.48 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Numerator:
|
||||||||||||||||
|
Net income available to common shareholders
|
$ | 28,878,459 | $ | 28,878,459 | $ | 21,290,980 | $ | 21,290,980 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Denominator:
|
||||||||||||||||
|
Weighted average of common stock outstanding for
Basic
earnings per share
|
44,134,763 | 44,134,763 | 44,117,364 | 44,117,364 | ||||||||||||
|
Adjustment for stock options
|
— | 10,480 | — | 16,454 | ||||||||||||
|
Adjustment for shares granted under LTRP
|
— | 4,668 | — | 9,011 | ||||||||||||
|
Adjusted weighted average of common stock
outstanding
for Diluted earnings per share
|
44,134,763 | 44,149,911 | 44,117,364 | 44,142,829 | ||||||||||||
|
|
||||||||||||||||
| 4. |
Goodwill and Intangible Assets
|
| June 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
|
Goodwill
|
$ | 61,356,716 | $ | 60,496,314 | ||||
|
|
||||||||
|
Intangible assets with indefinite lives
|
||||||||
|
- Trademarks
|
2,514,136 | 2,460,952 | ||||||
|
Amortizable intangible assets
|
||||||||
|
- Licenses and others
|
2,659,646 | 2,606,402 | ||||||
|
- Non-compete agreement
|
1,281,426 | 1,241,357 | ||||||
|
- Customer list
|
1,623,928 | 1,607,097 | ||||||
|
|
||||||||
|
Total intangible assets
|
$ | 8,079,136 | $ | 7,915,808 | ||||
|
Accumulated amortization
|
(4,260,072 | ) | (3,774,641 | ) | ||||
|
|
||||||||
|
Total intangible assets, net
|
$ | 3,819,064 | $ | 4,141,167 | ||||
|
|
||||||||
17
| 4. |
Goodwill and Intangible Assets (Continued)
|
| Six Months Ended June 30, 2011 | ||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||
| Brazil | Argentina | Chile | Mexico | Venezuela | Colombia | Countries | Total | |||||||||||||||||||||||||
|
Balance, beginning of year
|
$ | 13,130,649 | $ | 23,364,326 | $ | 7,296,888 | $ | 5,025,623 | $ | 4,846,030 | $ | 5,448,068 | $ | 1,384,730 | $ | 60,496,314 | ||||||||||||||||
|
- Effect of exchange
rates change
|
884,011 | (761,757 | ) | (2,182 | ) | 282,382 | — | 409,548 | 48,400 | 860,402 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Balance, end of the period
|
$ | 14,014,660 | $ | 22,602,569 | $ | 7,294,706 | $ | 5,308,005 | $ | 4,846,030 | $ | 5,857,616 | $ | 1,433,130 | $ | 61,356,716 | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| Year Ended December 31, 2010 | ||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||
| Brazil | Argentina | Chile | Mexico | Venezuela | Colombia | Countries | Total | |||||||||||||||||||||||||
|
Balance, beginning of year
|
$ | 12,565,062 | $ | 24,446,463 | $ | 6,734,405 | $ | 4,770,560 | $ | 4,846,030 | $ | 5,100,939 | $ | 1,359,287 | $ | 59,822,746 | ||||||||||||||||
|
- Effect of exchange
rates change
|
565,587 | (1,082,137 | ) | 562,483 | 255,063 | — | 347,129 | 25,443 | 673,568 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Balance, end of the year
|
$ | 13,130,649 | $ | 23,364,326 | $ | 7,296,888 | $ | 5,025,623 | $ | 4,846,030 | $ | 5,448,068 | $ | 1,384,730 | $ | 60,496,314 | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
For year ended 12/31/2011
|
$ | 385,759 | ||
|
For year ended 12/31/2012
|
646,539 | |||
|
For year ended 12/31/2013
|
270,611 | |||
|
For year ended 12/31/2014
|
2,019 | |||
|
|
||||
|
|
$ | 1,304,928 | ||
|
|
||||
| 5. |
Segments
|
18
| 5. |
Segments (Continued)
|
| Three Months Ended June 30, 2011 | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Brazil | Argentina | Mexico | Venezuela | Countries | Total | |||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net revenues
|
$ | 39,932,132 | $ | 12,391,873 | $ | 5,370,095 | $ | 7,234,940 | $ | 4,449,120 | $ | 69,378,160 | ||||||||||||
|
Direct costs
|
(23,926,947 | ) | (5,153,807 | ) | (2,982,020 | ) | (2,847,197 | ) | (2,493,570 | ) | (37,403,541 | ) | ||||||||||||
|
|
||||||||||||||||||||||||
|
Direct contribution
|
16,005,185 | 7,238,066 | 2,388,075 | 4,387,743 | 1,955,550 | 31,974,619 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Operating expenses and
indirect costs of net revenues
|
(10,423,222 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Income from operations
|
21,551,397 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Other income (expenses):
|
||||||||||||||||||||||||
|
Interest income and
other financial gains
|
2,249,898 | |||||||||||||||||||||||
|
Interest expense and
other financial results
|
(880,819 | ) | ||||||||||||||||||||||
|
Foreign currency losses
|
(702,714 | ) | ||||||||||||||||||||||
|
Other income, net
|
240,097 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net income before income / asset
tax expense
|
$ | 22,457,859 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
19
| 5. |
Segments (Continued)
|
| Three Months Ended June 30, 2010 | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Brazil | Argentina | Mexico | Venezuela | Countries | Total | |||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net revenues
|
$ | 30,781,411 | $ | 9,452,261 | $ | 4,669,349 | $ | 4,468,146 | $ | 3,139,164 | $ | 52,510,331 | ||||||||||||
|
Direct costs
|
(15,992,598 | ) | (4,686,452 | ) | (2,830,282 | ) | (2,192,418 | ) | (1,741,164 | ) | (27,442,914 | ) | ||||||||||||
|
|
||||||||||||||||||||||||
|
Direct contribution
|
14,788,813 | 4,765,809 | 1,839,067 | 2,275,728 | 1,398,000 | 25,067,417 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Operating expenses and indirect
costs of net revenues
|
(6,252,850 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Income from operations
|
18,814,567 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Other income (expenses):
|
||||||||||||||||||||||||
|
Interest income and other financial gains
|
917,388 | |||||||||||||||||||||||
|
Interest expense and other financial results
|
(3,355,921 | ) | ||||||||||||||||||||||
|
Foreign currency losses
|
(35,478 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net income before income / asset tax expense
|
$ | 16,340,556 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Six Months Ended June 30, 2011 | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Brazil | Argentina | Mexico | Venezuela | Countries | Total | |||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net revenues
|
$ | 74,655,327 | $ | 22,971,805 | $ | 10,604,428 | $ | 14,005,393 | $ | 8,600,875 | $ | 130,837,828 | ||||||||||||
|
Direct costs
|
(44,002,555 | ) | (9,580,905 | ) | (5,698,379 | ) | (5,916,936 | ) | (4,593,885 | ) | (69,792,660 | ) | ||||||||||||
|
|
||||||||||||||||||||||||
|
Direct contribution
|
30,652,772 | 13,390,900 | 4,906,049 | 8,088,457 | 4,006,990 | 61,045,168 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Operating expenses and indirect costs of net
revenues
|
(20,202,618 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Income from operations
|
40,842,550 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Other income (expenses):
|
||||||||||||||||||||||||
|
Interest income and other financial gains
|
4,123,668 | |||||||||||||||||||||||
|
Interest expense and other financial results
|
(1,509,769 | ) | ||||||||||||||||||||||
|
Foreign currency losses
|
(1,203,369 | ) | ||||||||||||||||||||||
|
Other income, net
|
260,441 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net income before income / asset tax expense
|
$ | 42,513,521 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
| Six Months Ended June 30, 2010 | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Brazil | Argentina | Mexico | Venezuela | Countries | Total | |||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net revenues
|
$ | 57,132,883 | $ | 17,806,507 | $ | 9,139,286 | $ | 7,943,636 | $ | 6,425,793 | $ | 98,448,105 | ||||||||||||
|
Direct costs
|
(30,855,058 | ) | (8,632,236 | ) | (5,630,639 | ) | (4,106,474 | ) | (3,464,689 | ) | $ | (52,689,096 | ) | |||||||||||
|
|
||||||||||||||||||||||||
|
Direct contribution
|
26,277,825 | 9,174,271 | 3,508,647 | 3,837,162 | 2,961,104 | 45,759,009 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Operating expenses and indirect costs of net
revenues
|
(11,440,176 | ) | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Income from operations
|
34,318,833 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Other income (expenses):
|
||||||||||||||||||||||||
|
Interest income and other financial gains
|
1,711,529 | |||||||||||||||||||||||
|
Interest expense and other financial results
|
(6,351,339 | ) | ||||||||||||||||||||||
|
Foreign currency gains
|
361,494 | |||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Net income before income / asset tax expense
|
$ | 30,040,517 | ||||||||||||||||||||||
|
|
||||||||||||||||||||||||
20
| 5. |
Segments (Continued)
|
| June 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
|
US long-lived tangible assets
|
$ | 6,152,698 | $ | 3,617,420 | ||||
|
Other countries long-lived
tangible assets
|
||||||||
|
Argentina
|
14,131,697 | 13,580,175 | ||||||
|
Brazil
|
3,303,186 | 3,264,625 | ||||||
|
Mexico
|
517,919 | 68,878 | ||||||
|
Venezuela
(*)
|
6,789,815 | 206,815 | ||||||
|
Other countries
|
421,073 | 79,799 | ||||||
|
|
||||||||
|
|
$ | 25,163,690 | $ | 17,200,292 | ||||
|
Total long-lived tangible assets
|
$ | 31,316,388 | $ | 20,817,712 | ||||
|
|
||||||||
| (*) |
On June 2, 2011, the Company’s Venezuelan subsidiary acquired an office property of 992
square meters in a building located in Caracas, Venezuela. The purchase price of $6.6 million
was paid in cash
|
| June 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
|
US intangible assets
|
$ | — | $ | 3,507 | ||||
|
Other countries goodwill and intangible
assets
|
||||||||
|
Argentina
|
23,735,108 | 24,825,718 | ||||||
|
Brazil
|
14,019,678 | 13,137,658 | ||||||
|
Mexico
|
5,320,769 | 5,043,335 | ||||||
|
Venezuela
|
6,595,503 | 6,595,866 | ||||||
|
Other countries
|
15,504,722 | 15,031,397 | ||||||
|
|
||||||||
|
|
$ | 65,175,780 | $ | 64,633,974 | ||||
|
Total goodwill and intangible assets
|
$ | 65,175,780 | $ | 64,637,481 | ||||
|
|
||||||||
21
| 6. |
Fair Value Measurement of Assets and Liabilities
|
| Quoted Prices in | Quoted Prices in | |||||||||||||||
| Balances as of | active markets for | Balances as of | active markets for | |||||||||||||
| June 30, | identical Assets | December 31, | identical Assets | |||||||||||||
| Description | 2011 | (Level 1) | 2010 | (Level 1) | ||||||||||||
|
Assets
|
||||||||||||||||
|
Cash and Cash Equivalents:
|
||||||||||||||||
|
Money Market Funds
|
$ | 11,651,812 | $ | 11,651,812 | $ | 14,578,477 | $ | 14,578,477 | ||||||||
|
Investments:
|
||||||||||||||||
|
Asset backed securities
|
19,999,835 | 19,999,835 | 14,319,103 | 14,319,103 | ||||||||||||
|
Sovereign Debt
Securities
|
12,050,647 | 12,050,647 | 13,147,239 | 13,147,239 | ||||||||||||
|
Corporate Debt
Securities
|
19,721,642 | 19,721,642 | 11,381,761 | 11,381,761 | ||||||||||||
|
|
||||||||||||||||
|
Total financial Assets
|
$ | 63,423,936 | $ | 63,423,936 | $ | 53,426,580 | $ | 53,426,580 | ||||||||
|
|
||||||||||||||||
22
| 6. |
Fair Value Measurement of Assets and Liabilities (Continued)
|
| June 30, 2011 | ||||||||||||||||
| Gross | Gross | Gross | ||||||||||||||
| Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
| Cost | Gains | Losses | Fair Value | |||||||||||||
|
Short-term investments
|
||||||||||||||||
|
Sovereign Debt Securities
|
$ | 1,138,586 | $ | — | $ | (312 | ) | $ | 1,138,274 | |||||||
|
Corporate Debt Securities
|
437,786 | — | (4,960 | ) | 432,826 | |||||||||||
|
|
||||||||||||||||
|
Total Short-term
investments
|
$ | 1,576,372 | $ | — | $ | (5,272 | ) | $ | 1,571,100 | |||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Long-term investments
|
||||||||||||||||
|
Sovereign Debt Securities
|
$ | 10,813,741 | $ | 116,443 | $ | (17,811 | ) | $ | 10,912,373 | |||||||
|
Corporate Debt Securities
|
19,164,588 | 144,025 | (19,797 | ) | 19,288,816 | |||||||||||
|
Asset Backed Securities (2)
|
19,639,833 | 383,737 | (23,735 | ) | 19,999,835 | |||||||||||
|
|
||||||||||||||||
|
Total Long-term investments
|
$ | 49,618,162 | $ | 644,205 | $ | (61,343 | ) | $ | 50,201,024 | |||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 51,194,534 | $ | 644,205 | $ | (66,615 | ) | $ | 51,772,124 | |||||||
|
|
||||||||||||||||
| December 31, 2010 | ||||||||||||||||
| Gross | Gross | Gross | ||||||||||||||
| Amortized | Unrealized | Unrealized | Estimated Fair | |||||||||||||
| Cost | Gains | Losses (1) | Value | |||||||||||||
|
Short-term investments
|
||||||||||||||||
|
Corporate Debt Securities
|
$ | 398,752 | $ | 26 | $ | (773 | ) | $ | 398,005 | |||||||
|
|
||||||||||||||||
|
Total short-term
investments
|
$ | 398,752 | $ | 26 | $ | (773 | ) | $ | 398,005 | |||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Long-term investments
|
||||||||||||||||
|
Sovereign Debt Securities
|
$ | 13,282,207 | $ | 98,958 | $ | (233,926 | ) | $ | 13,147,239 | |||||||
|
Corporate Debt Securities
|
10,987,910 | 110,521 | (114,675 | ) | 10,983,756 | |||||||||||
|
Asset Backed Securities
|
14,107,501 | 439,239 | (227,637 | ) | 14,319,103 | |||||||||||
|
|
||||||||||||||||
|
Total long-term
investments
|
$ | 38,377,618 | $ | 648,718 | $ | (576,238 | ) | $ | 38,450,098 | |||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Total
|
$ | 38,776,370 | $ | 648,744 | $ | (577,011 | ) | $ | 38,848,103 | |||||||
|
|
||||||||||||||||
| (1) |
Unrealized losses from securities are primarily attributable to market price
movements. Management does not believe any remaining unrealized losses represent
other-than-temporary impairments based on our evaluation of available evidence including
the credit rating of the investments, as of June 30, 2011 and December 31, 2010.
|
|
| (2) |
Asset backed securities have investment grade credit ratings. These investments are
collateralized by real estate and they are guaranteed by the U.S. Federal Government.
|
23
| 6. |
Fair Value Measurement of Assets and Liabilities (Continued)
|
|
One year or less
|
$ | 1,571,100 | ||
|
One year to two years
|
8,834,616 | |||
|
Two years to three years
|
2,314,297 | |||
|
Three years to four years
|
4,962,506 | |||
|
Four years to five years
|
3,322,803 | |||
|
More than five years
|
30,766,802 | |||
|
|
||||
|
Total
|
$ | 51,772,124 | ||
|
|
||||
| 7. |
Compensation Plan for Outside Directors
|
| 8. |
Commitments and Contingencies
|
24
| 8. |
Commitments and Contingencies (Continued)
|
25
| 8. |
Commitments and Contingencies (Continued)
|
26
| 8. |
Commitments and Contingencies (Continued)
|
27
| 8. |
Commitments and Contingencies (Continued)
|
| 9. |
Long Term Retention Plan
|
| • |
Year 1 (2008): 17%
|
||
| • |
Year 2 (2009): 22%
|
||
| • |
Year 3 (2010): 27%
|
||
| • |
Year 4 (2011): 34%
|
28
| 9. |
Long Term Retention Plan (Continued)
|
| • |
6.25% of the amount is calculated in nominal terms (“the nominal basis share”),
|
||
| • |
6.25% is adjusted by multiplying the nominal amount by the average closing stock
price for the last 60 trading days of the year previous to the payment date and
divided by the average closing stock price for the last 60 trading days of 2008, 2009
and 2010 for the 2009, 2010 and 2011 LTRP, respectively. The average closing stock
price for the 2009, 2010 and 2011 LTRP amounted to $13.81, $45.75 and $65.41,
respectively (“the variable share”).
|
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
|
||||||||||||||||
|
LTRP 2009
|
$ | 490,139 | $ | 449,350 | $ | 1,009,225 | $ | 709,040 | ||||||||
|
LTRP 2010
|
309,495 | 350,670 | 817,471 | 659,991 | ||||||||||||
|
LTRP 2011
|
430,651 | — | 761,485 | — | ||||||||||||
29
| 10. |
Cash dividend distribution
|
30
| Item 2 |
— Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
| • |
our expectations regarding the continued growth of online commerce and Internet usage in Latin America;
|
||
| • |
our ability to expand our operations and adapt to rapidly changing technologies;
|
||
| • |
government regulation;
|
||
| • |
litigation and legal liability;
|
||
| • |
systems interruptions or failures;
|
||
| • |
our ability to attract and retain qualified personnel;
|
||
| • |
consumer trends;
|
||
| • |
security breaches and illegal uses of our services;
|
||
| • |
competition;
|
||
| • |
reliance on third-party service providers;
|
||
| • |
enforcement of intellectual property rights;
|
||
| • |
our ability to attract new customers, retain existing customers and increase revenues;
|
||
| • |
seasonal fluctuations; and
|
||
| • |
political, social and economic conditions in Latin America in general,
and Venezuela and Argentina in particular, including Venezuela’s
status as a highly inflationary economy and new exchange rate system.
|
31
| • |
a brief overview of our company;
|
||
| • |
a discussion of our principal trends and results of operations for the quarters and six-month periods ended June
30, 2011 and 2010;
|
||
| • |
a review of our financial presentation and accounting policies, including our critical accounting policies;
|
||
| • |
a discussion of the principal factors that influence our results of operations, financial condition and liquidity;
|
||
| • |
a discussion of our liquidity and capital resources, a discussion of our capital expenditures and a description
of our contractual obligations; and
|
||
| • |
a discussion of the market risks that we face.
|
32
| • |
the eligible employee will receive a fixed cash payment
equal to 6.25% of his or her 2011 LTRP bonus once a year
for a period of eight years starting in 2012 (the “Annual
Fixed Payment”); and
|
||
| • |
on each date we pay the Annual Fixed Payment to an eligible
employee, he or she will also receive a cash payment (the
“Variable Payment”) equal to the product of (i) 6.25% of
the applicable 2011 LTRP bonus and (ii) the quotient of (a)
divided by (b), where (a), the numerator, equals the
Applicable Year Stock Price (as defined below) and (b), the
denominator, equals the 2010 Stock Price, defined as
$65.41, which was the average closing price of our common
stock on the NASDAQ Global Market during the final 60
trading days of 2010. The “Applicable Year Stock Price”
shall equal the average closing price of our common stock
on the NASDAQ Global Market during the final 60 trading
days of the year preceding the applicable payment date.
|
33
| • |
up front fees;
|
||
| • |
final value fees; and
|
||
| • |
online advertising fees.
|
| • |
commissions charged to sellers for the use of the
MercadoPago platform with respect to transactions that
occur outside of our Marketplace platform;
|
||
| • |
revenues from a financial charge when a buyer elects to pay
in installments through our MercadoPago platform, for both
transactions that occurs on or off our Marketplace
platform.
|
| Six-Month Periods Ended | Three-Month Periods Ended | |||||||||||||||
| June 30, (*) | June 30, (*) | |||||||||||||||
| (% of total consolidated net revenues) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
|
|
||||||||||||||||
|
Brazil
|
57.1 | % | 58.0 | % | 57.6 | % | 58.6 | % | ||||||||
|
Argentina
|
17.6 | 18.1 | 17.9 | 18.0 | ||||||||||||
|
Venezuela
|
10.7 | 8.1 | 10.4 | 8.5 | ||||||||||||
|
Mexico
|
8.1 | 9.3 | 7.7 | 8.9 | ||||||||||||
|
Other Countries
|
6.6 | 6.5 | 6.4 | 6.0 | ||||||||||||
| (*) |
Percentages have been calculated using whole-dollar amounts rather than rounded amounts
that appear in the table.
|
| Six-Month Periods Ended | Change from 2010 | Three-Month Periods Ended | Change from 2010 | |||||||||||||||||||||||||||||
| June 30, | to 2011(*) | June 30, | to 2011(*) | |||||||||||||||||||||||||||||
| 2011 | 2010 | in Dollars | in % | 2011 | 2010 | in Dollars | in % | |||||||||||||||||||||||||
| (in millions, except percentages) | (in millions, except percentages) | |||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Net Revenues:
|
||||||||||||||||||||||||||||||||
|
Brazil
|
$ | 74.7 | $ | 57.1 | $ | 17.6 | 30.7 | % | $ | 39.9 | $ | 30.8 | $ | 9.1 | 29.7 | % | ||||||||||||||||
|
Argentina
|
23.0 | 17.8 | 5.2 | 29.0 | 12.4 | 9.5 | 2.9 | 31.1 | ||||||||||||||||||||||||
|
Venezuela
|
14.0 | 7.9 | 6.1 | 76.3 | 7.2 | 4.5 | 2.7 | 61.9 | ||||||||||||||||||||||||
|
Mexico
|
10.6 | 9.1 | 1.5 | 16.0 | 5.4 | 4.6 | 0.8 | 15.0 | ||||||||||||||||||||||||
|
Other Countries
|
8.5 | 6.5 | 2.0 | 33.8 | 4.5 | 3.1 | 1.4 | 41.7 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total Net Revenues
|
$ | 130.8 | $ | 98.4 | $ | 32.4 | 32.9 | % | $ | 69.4 | $ | 52.5 | $ | 16.9 | 32.1 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| (*) |
Percentages have been calculated using whole-dollar amounts rather than rounded amounts that appear in the table.
|
|
|
The table above may not total due to rounding.
|
34
35
| • |
At the date we changed the translation exchange rate (and as of the date of this report), we have not
obtained dividends remittances at the official exchange rate (and we have not at the date of this
report),
|
||
| • |
The industry in which we operate may not influence our ability to access to the official exchange rate,
|
||
| • |
The Commission for the Administration of Foreign Exchange (“CADIVI”) volume of approvals of the use of
the Official Rate was down 50% on a year-to-year basis as of July 2009.
|
||
| • |
CADIVI has not only delayed approvals but also removed many items from priority lists (current
priorities appear to be food and medicine), causing delays in the repatriation of dividends for many
companies.
|
36
| June 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
|
|
||||||||
|
Venezuelan operations
|
||||||||
|
Assets
|
$ | 21,299,401 | $ | 21,928,340 | ||||
|
Liabilities
|
(7,547,390 | ) | (8,212,581 | ) | ||||
|
Net Assets
|
13,752,011 | 13,715,759 | ||||||
37
38
| Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| (In millions) | 2011 (*) | 2010 (*) | 2011 (*) | 2010 (*) | ||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
|
Net revenues
|
$ | 130.8 | $ | 98.4 | $ | 69.4 | $ | 52.5 | ||||||||
|
Cost of net revenues
|
(31.3 | ) | (21.3 | ) | (16.9 | ) | (11.4 | ) | ||||||||
|
|
||||||||||||||||
|
Gross profit
|
99.6 | 77.1 | 52.4 | 41.1 | ||||||||||||
|
|
||||||||||||||||
|
Operating expenses:
|
||||||||||||||||
|
Product and technology development
|
(10.7 | ) | (7.2 | ) | (5.5 | ) | (4.0 | ) | ||||||||
|
Sales and marketing
|
(28.9 | ) | (22.6 | ) | (15.6 | ) | (11.5 | ) | ||||||||
|
General and administrative
|
(19.2 | ) | (13.0 | ) | (9.7 | ) | (6.8 | ) | ||||||||
|
|
||||||||||||||||
|
Total operating expenses
|
(58.7 | ) | (42.8 | ) | (30.9 | ) | (22.3 | ) | ||||||||
|
|
||||||||||||||||
|
Income from operations
|
40.8 | 34.3 | 21.6 | 18.8 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Other income (expenses):
|
||||||||||||||||
|
Interest income and other financial gains
|
4.1 | 1.7 | 2.2 | 0.9 | ||||||||||||
|
Interest expense and other financial charges
|
(1.5 | ) | (6.4 | ) | (0.9 | ) | (3.4 | ) | ||||||||
|
Foreign currency gains / losses
|
(1.2 | ) | 0.4 | (0.7 | ) | — | ||||||||||
|
Other income, net
|
0.3 | — | 0.2 | — | ||||||||||||
|
|
||||||||||||||||
|
Net income before income / asset tax expense
|
42.5 | 30.0 | 22.5 | 16.3 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Income / asset tax expense
|
(13.6 | ) | (8.7 | ) | (7.6 | ) | (4.7 | ) | ||||||||
|
|
||||||||||||||||
|
Net income
|
$ | 28.9 | $ | 21.3 | $ | 14.8 | $ | 11.7 | ||||||||
|
|
||||||||||||||||
| (*) |
Totals may not add due to rounding
|
| Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| (In millions) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
|
|
||||||||||||||||
|
Number of confirmed registered users at end of the period
1
|
58.4 | 47.4 | 58.4 | 47.4 | ||||||||||||
|
Number of confirmed new registered users during the period
2
|
5.5 | 4.9 | 2.8 | 2.5 | ||||||||||||
|
Gross merchandise volume
3
|
2,021.8 | 1,529.7 | 1,067.8 | 798.1 | ||||||||||||
|
Number of items sold
4
|
22.5 | 17.6 | 11.6 | 9.2 | ||||||||||||
|
Total payment volume
5
|
541.1 | 271.6 | 295.8 | 147.8 | ||||||||||||
|
Total payment transactions
6
|
5.7 | 2.3 | 3.1 | 1.3 | ||||||||||||
|
Capital expenditures
|
13.4 | 3.9 | 10.4 | 2.5 | ||||||||||||
|
Depreciation and amortization
|
3.3 | 2.2 | 1.8 | 1.2 | ||||||||||||
| 1 |
- Measure of the cumulative number of users who have registered on the MercadoLibre
Marketplace and confirmed their registration.
|
|
| 2 |
- Measure of the number of new users who have registered on the MercadoLibre
Marketplace and confirmed their registration.
|
|
| 3 |
- Measure of the total U.S. dollar sum of all transactions completed through the
MercadoLibre Marketplace, excluding motor vehicles, vessels, aircraft and real
estate.
|
|
| 4 |
- Measure of the number of items that were sold/purchased through the MercadoLibre
Marketplace.
|
|
| 5 |
- Measure of the total U.S. dollar sum of all transactions paid for using MercadoPago.
|
|
| 6 |
- Measure of the number of all transactions paid for using MercadoPago.
|
39
| Six-Month Periods Ended | Change from 2010 to | Three-Month Periods Ended | Change from 2010 to | |||||||||||||||||||||||||||||
| June 30, | 2011 (*) | June 30, | 2011 (*) | |||||||||||||||||||||||||||||
| 2011 | 2010 | in Dollars | in % | 2011 | 2010 | in Dollars | in % | |||||||||||||||||||||||||
| (in millions, except percentages) | (in millions, except percentages) | |||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total Net Revenues
|
$ | 130.8 | $ | 98.4 | $ | 32.4 | 32.9 | % | $ | 69.4 | $ | 52.5 | $ | 16.9 | 32.1 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
As a percentage of net revenues (*)
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||||||||
| (*) |
Percentages have been calculated using whole-dollar amounts rather than rounded
amounts that appear in the table.
|
| Six-Month Periods Ended | Change from 2010 | Three-Month Periods Ended | Change from 2010 | |||||||||||||||||||||||||||||
| June 30, | to 2011 (*) | June 30, | to 2011 (*) | |||||||||||||||||||||||||||||
| 2011 | 2010 | in Dollars | in % | 2011 | 2010 | in Dollars | in % | |||||||||||||||||||||||||
| (in millions, except percentages) | (in millions, except percentages) | |||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Net Revenues:
|
||||||||||||||||||||||||||||||||
|
Brazil
|
$ | 74.7 | $ | 57.1 | $ | 17.6 | 30.7 | % | $ | 39.9 | $ | 30.8 | $ | 9.1 | 29.7 | % | ||||||||||||||||
|
Argentina
|
23.0 | 17.8 | 5.2 | 29.0 | 12.4 | 9.5 | 2.9 | 31.1 | ||||||||||||||||||||||||
|
Venezuela
|
14.0 | 7.9 | 6.1 | 76.3 | 7.2 | 4.5 | 2.7 | 61.9 | ||||||||||||||||||||||||
|
Mexico
|
10.6 | 9.1 | 1.5 | 16.0 | 5.4 | 4.6 | 0.8 | 15.0 | ||||||||||||||||||||||||
|
Other Countries
|
8.5 | 6.5 | 2.0 | 33.8 | 4.5 | 3.1 | 1.4 | 41.7 | ||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total Net Revenues
|
$ | 130.8 | $ | 98.4 | $ | 32.4 | 32.9 | % | $ | 69.4 | $ | 52.5 | $ | 16.9 | 32.1 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
| (*) |
Percentages have been calculated using whole-dollar amounts rather than rounded amounts that appear in the table.
|
|
|
The table above may not total due to rounding.
|
40
| Quarter Ended | ||||||||||||||||
| March 31, | June 30, | September 30, | December 31, | |||||||||||||
| (in millions, except percentages) | ||||||||||||||||
| (*) | ||||||||||||||||
|
2011
|
||||||||||||||||
|
Net Revenues
|
$ | 61.5 | $ | 69.4 | n/a | n/a | ||||||||||
|
Percent change from prior quarter
|
-1 | % | 13 | % | ||||||||||||
|
2010
|
||||||||||||||||
|
Net Revenues
|
$ | 45.9 | $ | 52.5 | $ | 56.0 | $ | 62.3 | ||||||||
|
Percent change from prior quarter
|
-6 | % | 14 | % | 7 | % | 11 | % | ||||||||
|
2009
|
||||||||||||||||
|
Net Revenues
|
$ | 32.3 | $ | 40.9 | $ | 50.6 | $ | 49.0 | ||||||||
|
Percent change from prior quarter
|
-3 | % | 27 | % | 24 | % | -3 | % | ||||||||
|
2008
|
||||||||||||||||
|
Net Revenues
|
$ | 28.8 | $ | 34.5 | $ | 40.3 | $ | 33.4 | ||||||||
|
Percent change from prior quarter
|
7 | % | 20 | % | 17 | % | -17 | % | ||||||||
| (*) |
Percentages have been calculated using whole-dollar amounts rather than rounded
amounts that appear in the table.
|
| Six-Month Periods Ended | Change from 2010 to | Three-Month Periods Ended | Change from 2010 to | |||||||||||||||||||||||||||||
| June 30, | 2011 (*) | June 30, | 2011 (*) | |||||||||||||||||||||||||||||
| 2011 | 2010 | in Dollars | in % | 2011 | 2010 | in Dollars | in % | |||||||||||||||||||||||||
| (in millions, except percentages) | (in millions, except percentages) | |||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Total cost of net revenues
|
$ | 31.3 | $ | 21.3 | $ | 10.0 | 46.8 | % | $ | 16.9 | $ | 11.4 | $ | 5.5 | 48.4 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
As a percentage of net revenues (*)
|
23.9 | % | 21.6 | % | 24.4 | % | 21.7 | % | ||||||||||||||||||||||||
| (*) |
Percentages have been calculated using whole-dollar amounts rather than rounded
amounts that appear in the table.
|
| Six-Month Periods Ended | Change from 2010 to | Three-Month Periods Ended | Change from 2010 to | |||||||||||||||||||||||||||||
| June 30, | 2011 (*) | June 30, | 2011 (*) | |||||||||||||||||||||||||||||
| 2011 | 2010 | in Dollars | in % | 2011 | 2010 | in Dollars | in % | |||||||||||||||||||||||||
| (in millions, except percentages) | (in millions, except percentages) | |||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Product and technology development
|
$ | 10.7 | $ | 7.2 | $ | 3.5 | 48.2 | % | $ | 5.5 | $ | 4.0 | $ | 1.5 | 38.8 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
As a percentage of net revenues (*)
|
8.2 | % | 7.3 | % | 8.0 | % | 7.6 | % | ||||||||||||||||||||||||
| (*) |
Percentages have been calculated using whole-dollar amounts rather than rounded
amounts that appear in the table.
|
41
| Six-Month Periods Ended | Change from 2010 to | Three-Month Periods Ended | Change from 2010 to | |||||||||||||||||||||||||||||
| June 30, | 2011 (*) | June 30, | 2011 (*) | |||||||||||||||||||||||||||||
| 2011 | 2010 | in Dollars | in % | 2011 | 2010 | in Dollars | in % | |||||||||||||||||||||||||
| (in millions, except percentages) | (in millions, except percentages) | |||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Sales and marketing
|
$ | 28.9 | $ | 22.6 | $ | 6.3 | 27.8 | % | $ | 15.6 | $ | 11.5 | $ | 4.2 | 36.3 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
As a percentage of net revenues (*)
|
22.1 | % | 22.9 | % | 22.5 | % | 21.8 | % | ||||||||||||||||||||||||
| (*) |
Percentages have been calculated using whole-dollar amounts rather than rounded
amounts that appear in the table.
|
| Six-Month Periods Ended | Change from 2010 to | Three-Month Periods Ended | Change from 2010 to | |||||||||||||||||||||||||||||
| June 30, | 2011 (*) | June 30, | 2011 (*) | |||||||||||||||||||||||||||||
| 2011 | 2010 | in Dollars | in % | 2011 | 2010 | in Dollars | in % | |||||||||||||||||||||||||
| (in millions, except percentages) | (in millions, except percentages) | |||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
General and administrative
|
$ | 19.2 | $ | 13.0 | $ | 6.2 | 47.1 | % | $ | 9.7 | $ | 6.8 | $ | 2.9 | 42.4 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
As a percentage of net revenues (*)
|
14.7 | % | 13.2 | % | 14.0 | % | 13.0 | % | ||||||||||||||||||||||||
| (*) |
Percentages have been calculated using whole-dollar amounts rather than rounded
amounts that appear in the table.
|
42
| Six-Month Periods Ended | Change from 2010 to | Three-Month Periods Ended | Change from 2010 to | |||||||||||||||||||||||||||||
| June 30, | 2011 (*) | June 30, | 2011 (*) | |||||||||||||||||||||||||||||
| 2011 | 2010 | in Dollars | in % | 2011 | 2010 | in Dollars | in % | |||||||||||||||||||||||||
| (in millions, except percentages) | (in millions, except percentages) | |||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Other income (expenses)
|
$ | 1.7 | $ | (4.3 | ) | $ | 6.0 | -139.1 | % | $ | 0.9 | $ | (2.5 | ) | $ | 3.4 | -136.6 | % | ||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
As a percentage of net revenues
|
1.3 | % | -4.3 | % | 1.3 | % | -4.7 | % | ||||||||||||||||||||||||
| (*) |
Percentages have been calculated using whole-dollar amounts rather than rounded
amounts that appear in the table.
|
| Six-Month Periods Ended | Change from 2010 to | Three-Month Periods Ended | Change from 2010 to | |||||||||||||||||||||||||||||
| June 30, | 2011 (*) | June 30, | 2011 (*) | |||||||||||||||||||||||||||||
| 2011 | 2010 | in Dollars | in % | 2011 | 2010 | in Dollars | in % | |||||||||||||||||||||||||
| (in millions, except percentages) | (in millions, except percentages) | |||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
Income and asset tax
|
$ | 13.6 | $ | 8.7 | $ | 4.9 | 55.9 | % | $ | 7.6 | $ | 4.7 | $ | 2.9 | 63.7 | % | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||
|
As a percentage of net revenues (*)
|
10.4 | % | 8.9 | % | 11.0 | % | 8.9 | % | ||||||||||||||||||||||||
| (*) |
Percentages have been calculated using whole-dollar amounts rather than rounded
amounts that appear in the table.
|
43
| Six-Month Periods Ended | Three-Month Periods Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
|
||||||||||||||||
|
Blended tax rate
|
32.1 | % | 29.1 | % | 34.0 | % | 28.6 | % | ||||||||
|
Effective tax rate
|
28.4 | % | 33.4 | % | 28.6 | % | 35.8 | % | ||||||||
| (*) |
Percentages have been calculated using whole-dollar amounts rather than rounded
amounts that appear in the table.
|
| Six-Month Periods Ended | Three-Month Periods Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
|
||||||||||||||||
|
Effective tax rate
by country
|
||||||||||||||||
|
|
||||||||||||||||
|
Argentina
|
16.4 | % | 19.6 | % | 14.9 | % | 22.9 | % | ||||||||
|
Brazil
|
31.5 | % | 37.2 | % | 30.8 | % | 38.4 | % | ||||||||
|
Mexico
|
23.7 | % | 24.6 | % | 27.2 | % | 38.7 | % | ||||||||
|
Venezuela
|
34.4 | % | 32.7 | % | 38.4 | % | 18.9 | % | ||||||||
44
| Six Months Ended June, 30 | ||||||||
| (In millions) | 2011 | 2010 | ||||||
| (in millions) | ||||||||
|
Net cash provided by (used in):
|
||||||||
|
|
||||||||
|
Operating activities
|
$ | 33.7 | $ | 26.1 | ||||
|
Investment activities
|
(43.3 | ) | (41.3 | ) | ||||
|
Financing activities
|
(3.5 | ) | (3.0 | ) | ||||
|
Effect of exchange rate changes on cash and cash equivalents
|
0.5 | — | ||||||
|
|
||||||||
|
Net decrease in cash and cash equivalents
|
$ | (12.6 | ) | $ | (18.2 | ) | ||
|
|
||||||||
45
| Six-Month Periods Ended | Change from 2010 to | |||||||||||||||
| June 30, | 2011 (*) | |||||||||||||||
| 2011 | 2010 | in Dollars | in % | |||||||||||||
| (in millions, except percentages) | ||||||||||||||||
|
|
||||||||||||||||
|
Net Cash provided by:
|
||||||||||||||||
|
|
||||||||||||||||
|
Operating activities
|
$ | 33.7 | $ | 26.1 | $ | 7.6 | 29.3 | % | ||||||||
| (*) |
Percentages have been calculated using whole-dollar amounts rather than rounded amounts that
appear in the table.
|
| Six-Month Periods Ended | Change from 2010 to | |||||||||||||||
| June 30, | 2011 (*) | |||||||||||||||
| 2011 | 2010 | in Dollars | in % | |||||||||||||
| (in millions, except percentages) | ||||||||||||||||
|
|
||||||||||||||||
|
Net Cash used in:
|
||||||||||||||||
|
|
||||||||||||||||
|
Investing activities
|
$ | (43.3 | ) | $ | (41.3 | ) | $ | (2.0 | ) | 4.7 | % | |||||
| (*) |
Percentages have been calculated using whole-dollar amounts rather than rounded amounts
that appear in the table.
|
| Six-Month Periods Ended | Change from 2010 to | |||||||||||||||
| June 30, | 2011 (*) | |||||||||||||||
| 2011 | 2010 | in Dollars | in % | |||||||||||||
| (in millions, except percentages) | ||||||||||||||||
|
|
||||||||||||||||
|
Net Cash used in:
|
||||||||||||||||
|
|
||||||||||||||||
|
Financing activities
|
$ | (3.5 | ) | $ | (3.0 | ) | $ | (0.5 | ) | 17.8 | % | |||||
| (*) |
Percentages have been calculated using whole-dollar amounts rather than rounded amounts that
appear in the table.
|
46
Recent Accounting Pronouncements
Presentation of Comprehensive Income
On June 16, 2011 the Financial Accounting Standards Board (“FASB”) issued an amendment to disclosures about the presentation of the comprehensive income in the financial statements. The new guidance provides two ways to present the components of the comprehensive income, in either (a) a continuous statement of comprehensive income, or (b) two separate but consecutive statements. The amended disclosures about the presentation of the comprehensive income in the financial statements are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company does not expect to have a significant impact on the presentation of the consolidated financial statements.
Fair value measurement and disclosure
In May 2011, the FASB issued new accounting guidance that amends some fair value measurement principles and it expands the ASC 820 existing disclosure requirements for fair value measurements. The new guidance states that the concepts of highest and best use and valuation premise are only relevant when measuring the fair value of nonfinancial assets and prohibits the grouping of financial instruments for purposes of determining their fair values when the unit of account is specified in other guidance. We will adopt this accounting standard upon its effective date for periods ending on or after December 15, 2011, and do not anticipate that this adoption will have a significant impact on our financial position or results of operations.
| Payment due by period | ||||||||||||||||||||
| Less than | 1 to 3 | 3 to 5 | More tan | |||||||||||||||||
| (in millions) | Total | 1 year | years | years | 5 years | |||||||||||||||
|
Capital lease obligations (1)
|
$ | 0.2 | $ | 0.1 | $ | 0.1 | $ | — | $ | — | ||||||||||
|
Operating lease obligations (2)
|
4.2 | 1.0 | 2.3 | 0.8 | 0.1 | |||||||||||||||
|
Purchase obligations
|
5.5 | 4.4 | 1.1 | — | — | |||||||||||||||
|
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
Total
|
$ | 9.9 | $ | 5.5 | $ | 3.5 | $ | 0.8 | $ | 0.1 | ||||||||||
|
|
||||||||||||||||||||
| (1) |
On February 22, 2010, our Argentina subsidiary signed a Company car lease contract to buy
12 cars for certain employees of the Company. The total lease contract amounted to $0.4 million
and matures in July 2013.
|
|
| (2) |
Includes leases of office space.
|
47
| Item 3 |
— Qualitative and Quantitative Disclosure About Market Risk
|
48
| Six-Month Periods Ended | Three-Month Periods Ended | |||||||||||||||
| June 30, (*) | June 30, (*) | |||||||||||||||
| (% of total consolidated net revenues) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
|
|
||||||||||||||||
|
Brazil
|
57.1 | % | 58.0 | % | 57.6 | % | 58.6 | % | ||||||||
|
Argentina
|
17.6 | 18.1 | 17.9 | 18.0 | ||||||||||||
|
Venezuela
|
10.7 | 8.1 | 10.4 | 8.5 | ||||||||||||
|
Mexico
|
8.1 | 9.3 | 7.7 | 8.9 | ||||||||||||
|
Other Countries
|
6.6 | 6.5 | 6.4 | 6.0 | ||||||||||||
| (*) |
Percentages have been calculated using whole-dollar amounts rather than rounded
amounts that appear in the table.
|
| (In millions) | -10% | Actual | +10% | |||||||||
| (1) | (2) | |||||||||||
|
Net revenues
|
$ | 145.3 | $ | 130.8 | $ | 119.0 | ||||||
|
Expenses
|
(99.9 | ) | (90.0 | ) | (81.9 | ) | ||||||
|
|
||||||||||||
|
Income from operations
|
45.4 | 40.8 | 37.1 | |||||||||
|
|
||||||||||||
|
Other income (expenses) and income tax
related to P&L items
|
(11.9 | ) | (10.7 | ) | (9.8 | ) | ||||||
|
Foreign Currency impact related to the remeasurement
of our Net Asset position
|
(5.4 | ) | (1.2 | ) | 2.3 | |||||||
|
|
||||||||||||
|
Net income
|
28.1 | 28.9 | 29.6 | |||||||||
|
|
||||||||||||
|
|
||||||||||||
|
Total Shareholders’ Equity
|
$ | 204.1 | $ | 197.6 | $ | 192.3 | ||||||
|
|
||||||||||||
| (1) |
Appreciation of the subsidiaries local currency against U.S. Dollar
|
|
| (2) |
Depreciation of the subsidiaries local currency against U.S. Dollar
|
49
| • |
eligible employees will receive a fixed cash payment equal
to 6.25% of his or her 2009 and/or 2010 and/or 2011 LTRP
bonus once a year for a period of eight years starting in
2010 and/or 2011 and/or 2012 (the “2009, 2010 and 2011
Annual Fixed Payment”); and
|
||
| • |
on each date we pay the Annual Fixed Payment to an eligible
employee, he or she will also receive a cash payment (the
“2009, 2010 and 2011 Variable Payment”) equal to the
product of (i) 6.25% of the applicable 2009 and/or 2010
and/or 2011 LTRP bonus and (ii) the quotient of (a) divided
by (b), where (a), the numerator, equals the Applicable
Year Stock Price (as defined below) and (b), the
denominator, equals the 2008, 2009 and 2010 Stock Price,
defined as $13.81, $45.75 and $65.41 for the 2009, 2010 and
2011 LTRP, respectively, which was the average closing
price of the Company’s common stock on the NASDAQ Global
Market during the final 60 trading days of 2008, 2009 and
2010, respectively. The “Applicable Year Stock Price” shall
equal the average closing price of the Company’s common
stock on the NASDAQ Global Market during the final 60
trading days of the year preceding the applicable payment
date.
|
50
| As of June 30, 2011 | ||||||||
| MercadoLibre, Inc | 2009, 2010 and 2011 variable | |||||||
| (In US dollars) | Equity Price | payment LTRP liability | ||||||
|
Change in equity price in percentage
|
||||||||
|
|
||||||||
|
40%
|
118.45 | 18,594,357 | ||||||
|
30%
|
109.99 | 17,266,189 | ||||||
|
20%
|
101.53 | 15,938,021 | ||||||
|
10%
|
93.07 | 14,609,852 | ||||||
|
Static (*)
|
84.61 | 13,281,684 | ||||||
|
-10%
|
76.15 | 11,953,516 | ||||||
|
-20%
|
67.69 | 10,625,347 | ||||||
|
-30%
|
59.23 | 9,297,179 | ||||||
|
-40%
|
50.77 | 7,969,010 | ||||||
| (*) |
Average closing stock price for the last 60 trading days of the closing date
|
| Item 4 |
— Controls and Procedures
|
| Item 1 |
— Legal Proceedings
|
51
| Item 1A |
— Risk Factors
|
52
| Item 6 |
— Exhibits
|
| 10.1 |
Agreement dated June 2, 2011, entered into by MercadoLibre
Venezuela S.A. a subsidiary of MercadoLibre, Inc. with
Inversiones 1182450, C.A. to acquire an office property in
Caracas, Venezuela.*
|
|||
|
|
||||
| 31.1 |
Certification of Chief Executive Officer pursuant to Securities
Exchange Act Rule 13a-14, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.*
|
|||
|
|
||||
| 31.2 |
Certification of Chief Financial Officer pursuant to Securities
Exchange Act Rule 13a-14, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.*
|
|||
|
|
||||
| 32.1 |
Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.**
|
|||
|
|
||||
| 32.2 |
Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.**
|
|||
|
|
||||
| 101.INS |
XBRL Instance Document***
|
|||
|
|
||||
| 101.SCH |
XBRL Taxonomy Extension Schema Document***
|
|||
|
|
||||
| 101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document***
|
|||
|
|
||||
| 101.LAB |
XBRL Taxonomy Extension Label Linkbase Document***
|
|||
|
|
||||
| 101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document***
|
|||
| * |
Filed herewith
|
|
| ** |
Furnished herewith
|
|
| *** |
XBRL information is
furnished and not filed or a
part of a registration
statement or prospectus for
purposes of sections 11 or
12 of the Securities and
Exchange Act of 1933, is
deemed not filed for
purposes of section 18 of
the Securities and Exchange
Act of 1934, and otherwise
is not subject to liability
under these sections.
|
53
| MERCADOLIBRE, INC. | ||||
| Registrant | ||||
| Date: August 8, 2011 | By: | /s/ Marcos Galperín | ||
| Marcos Galperín | ||||
| President and Chief Executive Officer | ||||
| By: | /s/ Pedro Arnt | |||
| Pedro Arnt | ||||
| Executive Vice President and Chief Financial Officer | ||||
54
| 10.1 |
Agreement dated June 2, 2011,
entered into by MercadoLibre
Venezuela S.A. a subsidiary of
MercadoLibre, Inc. with
Inversiones 1182450, C.A. to
acquire an office property in
Caracas, Venezuela.*
|
|||
|
|
||||
| 31.1 |
Certification of Chief Executive
Officer pursuant to Securities
Exchange Act Rule 13a-14, as
adopted pursuant to Section 302
of the Sarbanes-Oxley Act of
2002.*
|
|||
|
|
||||
| 31.2 |
Certification of Chief Financial
Officer pursuant to Securities
Exchange Act Rule 13a-14, as
adopted pursuant to Section 302
of the Sarbanes-Oxley Act of
2002.*
|
|||
|
|
||||
| 32.1 |
Certification of Chief Executive
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant
to Section 906 of the
Sarbanes-Oxley Act of 2002.**
|
|||
|
|
||||
| 32.2 |
Certification of Chief Financial
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant
to Section 906 of the
Sarbanes-Oxley Act of 2002.**
|
| * |
Filed herewith
|
|
| ** |
Furnished herewith
|
55
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
No Customers Found
No Suppliers Found
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|