MasterCard revenues up in 2006

MasterCard has reported a net income of $50 million or $0.37 per share. However, net income can be viewed as $457 million excluding the impact of special items.

Net revenues amounted to $3.3 billion, a 13.2 percent increase versus the same period in 2005.

Total operating expenses increased 21.7 percent to $3.1 billion. Excluding the impact of the charitable donation of common stock to the MasterCard Foundation, litigation settlements, and an adjustment to reflect an accounting methodology change for cash-based executive incentive plans in the third quarter of 2005, total operating expenses increased 9.2 percent.

Total other income was $65 million versus $14 million for the same period in 2005. This change was driven by a $64-million increase in investment income, including the $7-million special item of interest income earned on IPO proceeds which were used for redemption.

Interest expense also decreased by $9 million primarily due to a refund of interest assessed in connection with an audit of the company’s federal income tax return and a reduction of interest reserve requirements related to the company’s tax reserves.

The pre-tax special items for full-year 2006 included:

• A $395-million non-cash expense in the second quarter of 2006, resulting from the donation of approximately 13.5 million shares of Class A common stock to the MasterCard Foundation that occurred simultaneously with the company’s initial public offering, which was not deductible for tax purposes;

• A $25-million reserve for litigation settlements; $23 million was recorded in the second quarter of 2006 and $2 million was recorded in the fourth quarter of 2006; and,

• A $7-million in interest income in the second quarter of 2006 earned on the IPO proceeds, which were ultimately used for redemption of shares of Class B common stock.

Worldwide purchase volume rose 16.7 percent, 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 Dec. 31, 2006, the company’s customers had issued 817 million MasterCard cards, an increase of 12.3 percent over the cards issued in 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.

"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."