MasterCard Incorporated Reports Record Results for the Year Ended December 31, 2005.PURCHASE, N.Y. -- MasterCard MasterCard Worldwide (NYSE: MA) is a mutinational corporation based in Purchase, NY in the United States. Throughout the world, its principal business is to process payments between the banks of merchants and the banks of purchasers that use its "Mastercard" branded debit- and Incorporated: --Double-Digit Net Revenue Growth, Up 13.3% to $2.9 Billion --Record Net Income of $267 Million or $2.67 Per Share --749.3 Million MasterCard Cards Issued Globally, Up 10.5% --More than 24 Million Acceptance Locations MasterCard Incorporated today reported that 2005 was a record year as a result of outstanding performance achieved with the support of its member financial institutions globally. In 2005, net revenue was $2.9 billion, a 13.3% increase versus 2004. This growth was not significantly impacted by currency fluctuations. Net income for the year was a record $267 million, or $2.67 per share on a diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis, compared to $238 million, or $2.38 per share on a diluted basis in 2004. The increase in revenue was due primarily to higher gross dollar volume (GDV GDV gastric dilatation/volvulus. ) on MasterCard branded cards, up 11.9% to $1.7 trillion One thousand times one billion, which is 1, followed by 12 zeros, or 10 to the 12th power. See space/time. (mathematics) trillion - In Britain, France, and Germany, 10^18 or a million cubed. In the USA and Canada, 10^12. , and growth in the number of transactions processed by MasterCard in 2005. GDV growth was fueled by cardholders using the 749.3 million MasterCard cards issued by the company's global customer base at more than 24 million acceptance locations around the world. MasterCard achieved strong international growth, driven primarily by an increase in cross-border travel. Certain pricing changes that went into effect on April 1, 2005 also fueled the increase in revenue. "MasterCard is delivering results that reflect our customer-focused strategy and the value of our key strategic assets -- our brand, our global network and our payments expertise," said Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. W. Selander, president and chief executive officer. "Over the past year, MasterCard's ability to effectively deliver against the needs of our key customers, establish tangible relationships with the merchant community and make inroads inroads Noun, pl make inroads into to start affecting or reducing: my gambling has made great inroads into my savings inroads npl to make inroads into [+ in processing demonstrates the strength of our global business model." Total operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. increased 13.3% in 2005, primarily driven by additional advertising and market development and personnel costs, including additional severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when costs, an adjustment related to the accounting for the company's performance award programs, and the hiring of additional staff to support the company's strategic initiatives. Advertising and market development expenses to promote the company's brands and assist its customers in raising consumer awareness and card usage grew to $1.0 billion, a 10% increase versus 2004. Based on progress in ongoing settlement discussions related to the company's currency conversion litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , certain of which were favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. to MasterCard, the company increased its reserve related to this litigation to $89 million, $75 million of which was recorded in 2005. Other income and expense increased $37 million to $14 million in 2005. Contributing to this improvement was a $12 million increase in interest income from higher cash and investment balances and interest rates earned on those balances. Additionally, the company recognized a $17 million gain related to the settlement of a customer business agreement dispute, and $9 million in gains related to the sale of two investments. The effective tax rate in 2005 was 34.5% versus 26.5% in 2004, due principally to the favorable settlement and reassessment Reassessment The process of re-determining the value of property or land for tax purposes. Notes: Property is usually reassessed on an annual basis. You may request a "reassessment" if you disagree with your assessment. , during 2004, of various tax and audit issues. Commenting on the company's financial performance, Chris CHRIS Chemical Hazards Response Information System (US DoD) CHRIS California Historical Resources Information System CHRIS Computerized Human Resources Information System CHRIS Command Human Resources Intelligence System A. McWilton, chief financial officer, said, "Our financial performance in 2005 demonstrates MasterCard's strength and positioning at the center of a rapidly growing global payments industry."
Results of Operations for the Years Ended December 31, 2005 and 2004
For the Years Ended
December 31,
------------------- -------------
2005 2004 2005 vs. 2004
--------- --------- -------------
(In millions,
except per share
and percent
amounts)
Operations fees $ 1,941 $ 1,637 18.6%
Assessments 997 956 4.3%
--------- ---------
Net revenue 2,938 2,593 13.3%
General and administrative 1,352 1,186 14.0%
Advertising and market development 1,008 916 10.0%
Legal Settlements 75 22 240.9%
Depreciation and amortization 110 122 (9.8%)
--------- ---------
Total operating expenses 2,545 2,246 13.3%
Operating income 393 347 13.3%
Total other income (expense) 14 (23) 160.9%
--------- ---------
Income before income tax expense and
cumulative effect of accounting
change 407 324 25.6%
Income tax expense 140 86 62.8%
--------- ---------
Net income $ 267 $ 238 12.2%
========= =========
Net income per share (basic and
diluted) $ 2.67 $ 2.38 12.2%
Weighted average shares outstanding
(basic and diluted) 100 100 --
Effective income tax rate 34.5% 26.5% **
** Not meaningful
Fourth Quarter 2005 The net loss in the fourth quarter of 2005 was $53 million or $.53 per share on a diluted basis, versus net income of $1.3 million or $.01 per share on a diluted basis in 2004. The fourth quarter is typically a period of low profitability due to heavy advertising, promotions and incentives. Net revenue in the fourth quarter grew 4.7% from $684 million in 2004 to $716 million in 2005. Currency fluctuations negatively impacted revenue growth in the fourth quarter by 1%. Although GDV in the fourth quarter grew 11.9% to $445.8 billion, significant promotional expenditures with customers and merchants which are recorded as offsets to revenue, and tiered pricing arrangements which provide higher discounts for greater volume, limited revenue growth. Operating expenses increased 15.8% from $704 million in 2004 to $815 million in 2005. Contributing to this increase was a $27 million increase to the company's currency conversion litigation reserve and a $20 million increase in the company's actuarially determined severance reserves. Other income and expense increased by $12 million to $11 million in the fourth quarter primarily due to gains on the sale of two investments previously discussed.
Results of Operations for the Quarters Ended December 31, 2005 and
2004
For the Quarters
Ended December 31,
------------------- -------------
2005 2004 2005 vs. 2004
--------- --------- -------------
(In millions,
except per share
and percent
amounts)
Operations fees $ 527 $ 450 17.1%
Assessments 189 234 (19.2%)
--------- ---------
Net revenue 716 684 4.7%
General and administrative 375 339 10.6%
Advertising and market development 386 330 17.0%
Legal Settlements 27 4 **
Depreciation and amortization 27 31 (12.9%)
--------- ---------
Total operating expenses 815 704 15.8%
Operating loss (99) (20) **
Total other income (expense) 11 (1) **
--------- ---------
Loss before income tax benefit and
cumulative effect of accounting
change (88) (21) **
Income tax benefit (35) (22) 59.1%
--------- ---------
Net income (loss) $ (53) $ 1 **
========= =========
Net income (loss) per share (basic
and diluted) $ (.53) $ .01 **
Weighted average shares outstanding
(basic and diluted) 100 100 --
** Not meaningful
Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This press release contains forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. information. Although MasterCard believes that its expectations are based on reasonable assumptions, it can give no assurance that its objectives will be achieved. Important factors that could cause actual results to differ materially from forward-looking information contained in this press release include: global political and economic conditions; MasterCard's ability to achieve its strategic objectives; the performance of MasterCard's member financial institutions and the nature of MasterCard's business relationships with these institutions; substantial and increasingly intense competition in the global payments industry; the success of MasterCard's global advertising, sponsorship, promotion and merchant acceptance initiatives; the functionality and security of MasterCard's transaction processing systems A Transaction Processing System (TPS) is a type of information system. TPSs collect, store, modify, and retrieve the transactions of an organization. A transaction is an event that generates or modifies data that is eventually stored in an information system. ; MasterCard's ability to adapt to industry trends with technological and payment program innovations; the resolution of certain legal proceedings All actions that are authorized or sanctioned by law and instituted in a court or a tribunal for the acquisition of rights or the enforcement of remedies. and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. actions; changing market dynamics and the other risk factors disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). in MasterCard Incorporated's most recent Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. . MasterCard disclaims any obligation to publicly update or revise any forward-looking information. About MasterCard Incorporated MasterCard Incorporated is a leading global payments solutions company that provides a broad variety of innovative services in support of our global members' credit, deposit access, electronic cash, business-to-business  This article or section needs copy editing for grammar, style, cohesion, tone and/or spelling.You can assist by [ editing it] now. and related payment programs. MasterCard, through its principal operating subsidiary An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. , MasterCard International Incorporated, manages a family of well-known well-known adj. 1. Widely known; familiar or famous: a well-known performer. 2. Fully known: well-known facts. , widely accepted payment card brands including MasterCard(R), Maestro (1) (Maestro NT) An earlier name for scheduling software for Windows NT from Tivoli Systems, Inc. When IBM acquired Tivoli in 1996, the program was renamed IBM Tivoli Workload Scheduler. (R) and Cirrus(R) and serves financial institutions, consumers and businesses in over 210 countries and territories. The MasterCard award-winning Adj. 1. award-winning - having received awards; "this award-winning bridge spans a distance of five miles" Priceless price·less adj. 1. Of inestimable worth; invaluable. 2. Highly amusing, absurd, or odd: a priceless remark. (R) advertising campaign is now seen in 105 countries and in 48 languages, giving the MasterCard brand a truly global reach and scope. For more information go to www.mastercardinternational.com or refer to the filings of MasterCard Incorporated with the U.S. Securities and Exchange Commission. |
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