MasterCard Incorporated today reported that 2004 was a record year as a result of outstanding performance achieved with the support of its member financial institutions globally.
Net income for the year was a record $238 million, or $2.38 per share, compared to a net loss of $386 million, or $3.86 per share for 2003. The 2003 loss was related to the settlement of the U.S. merchant lawsuit, which unfavorably impacted 2003 net income by $469 million, or $4.69 per share. In 2004, compared to 2003, net revenue increased 14%, adjusted for the impact of favorable currency fluctuation, to $2.6 billion.
The increase in revenue was due primarily to higher gross dollar volume (GDV), up 10.6% to $1.5 trillion, and growth in the number of transactions processed by MasterCard in 2004. GDV growth was fueled by cardholders using the 679.5 million MasterCard cards issued by MasterCard's global membership at more than 24 million acceptance locations around the world. MasterCard achieved particularly strong international growth, driven primarily by an increase in cross-border travel and improving economies.
"MasterCard's strong global business model is delivering excellent results that reflect our unwavering focus on our customers and the value of a key strategic asset, our brand," said Robert Selander, president and chief executive officer. "MasterCard's far-reaching global footprint is supported by unsurpassed worldwide merchant acceptance and an ever-increasing array of payment programs that consumers and businesses worldwide rely on daily. With these assets and our solid financial discipline, MasterCard has benefited from recent improvements in the global economy and remains well positioned to take advantage of future growth opportunities."
Mr. Selander continued, "We are confident that MasterCard's customer-centric strategy sets us apart from the competition. We have begun to implement initiatives to expand this approach to a broader group of financial institutions, and moving forward, we will continue to leverage our expertise in products, consulting services, brand marketing, technology and processing to expand the value-added services we provide to our customers."
Operating expenses as a percentage of total revenue were reduced to 86% from 93% in 2003, excluding the impact of the U.S. merchant lawsuit and other legal settlements, resulting from an emphasis on cost control and streamlining of operations. Overall operating expenses increased 7% in 2004, excluding the impact of the U.S. merchant lawsuit and other legal settlements. The increase includes the impact of additional advertising expenditures and acquisitions made during 2004. Our effective tax rate in 2004 was 26.5% versus 36.1% in 2003, due principally to the favorable settlement of various tax audits.
Commenting on the company's financial condition, Chris McWilton, chief financial officer, said, "We have maintained excellent liquidity and made significant progress towards restoring our equity to levels we achieved before the U.S. merchant settlement, without any special assessments or prepayment arrangements with our members. We have a strong base of cash and equity, both of which are essential to sustainable, long-term growth and confidence in our payments network."