MasterCard Earnings Soar, Beat Expectations

MasterCard Incorporated today announced financial results for the fourth quarter and full-year 2006. For the fourth quarter, the company reported net income of $41 million, or $0.30 per share. Excluding the impact of litigation settlements, net income for the quarter was $42 million, or $0.31 per share. Net revenues for the quarter were $839 million, a 17.2% increase versus the same period in 2005. Currency fluctuations (driven by the movement of the euro relative to the US dollar) contributed approximately 1.9% of the increase in revenues for the quarter. For the fourth quarter 2006, total net income, earnings per share and total operating expenses, each of which excludes litigation settlements, are non-U.S. GAAP financial measures that are reconciled to their most directly comparable U.S. GAAP measures in the accompanying financial tables.

Fueling the higher revenue in the fourth quarter versus the same period in 2005 was growth in MasterCard’s gross dollar volume (GDV), which increased 13.8%, on a local currency basis, to $532 billion; a 17.4% increase in the number of transactions processed to 4.4 billion; and a restructuring of cross- border transaction pricing which was implemented in April 2006. Worldwide purchase volume rose 16.7%, on a local currency basis, during the quarter to $391 billion, driven by increased cardholder spending on a growing number of MasterCard cards. As of December 31, 2006, the company’s customers had issued 817 million MasterCard cards, an increase of 12.3% percent over the cards issued at December 31, 2005.

"Cardholders around the world used their MasterCard cards for transactions totaling almost $2 trillion in 2006 — doubling the GDV we reported only five years ago, as the pace at which we are driving commerce in markets around the world gains momentum," said Robert W. Selander, MasterCard president and chief executive officer. "Our success in displacing paper-based forms of payment reflects the strength of our brand and network as well as the opportunities to implement innovative payment programs in both emerging and developed economies.

"Having invested significantly in our global brand and payments network over the past 40 years, we enter our fifth decade with a leveragable infrastructure that will allow us to provide cutting-edge payment solutions for our financial institution customers as well as merchants, consumers, corporations and governments who are increasingly turning to the convenience and security of electronic payments," Selander noted. "We expect this will enable us to continue to drive value for our shareholders."

Total operating expenses decreased 2.6%, to $793 million, during the fourth quarter of 2006 compared to the same period in 2005. Excluding the impact of litigation settlements, operating expenses increased 0.5%. This was primarily driven by a $14.5 million cash contribution to the MasterCard Foundation, as part of MasterCard’s previously disclosed intention to contribute up to $40 million in cash to the Foundation over four years; higher professional fees related to legal costs to defend outstanding litigation; and, an increase in personnel costs related to the hiring of additional staff to strengthen our capability to add value to our customers’ businesses. Offsetting this increase was an 8.5% decrease in advertising and market development expenses versus the year-ago period due to a shift in the typical annual pattern of marketing spend to support the 2006 World Cup soccer events earlier in the year. Currency fluctuations contributed approximately 1.5% of the increase in expenses for the quarter.

Total other income was $24 million in the fourth quarter 2006 versus $10 million in the fourth quarter of 2005. The increase was primarily driven by a $20 million increase in investment income.

The full earnings statement can be found here.